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
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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 three directors. Populars directors are elected for a term of three years by a majority of the votes cast in an uncontested election. The table below sets forth information with respect to our three 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.
Name | Age | Principal Occupation | Director Since | |||
María Luisa Ferré |
53 | President & CEO of Grupo Ferré Rangel | 2004 | |||
C. Kim Goodwin |
57 | Private Investor | 2011 | |||
William J. Teuber, Jr. |
65 | Private Investor | 2004 |
Proposal 2
Advisory Vote to Approve Executive Compensation
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 2016 Executive Compensation Tables and Compensation Information. We hold this advisory vote on an annual basis.
Proposal 3
Ratification of Auditors
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 2017. Information on fees paid to PricewaterhouseCoopers LLP during 2016 and 2015 appears on the Proposal 3: Ratification of Appointment of Independent Registered Public Accounting Firm section of this Proxy Statement.
For additional information about the meeting please refer to the General Information About the Meeting section of this Proxy Statement.
2017 Proxy Statement | 1
Proxy Statement Summary
2016 Financial Performance and Executive Compensation Highlights
Financial Performance
During 2016, we demonstrated the strength of our franchise while we continued to operate in a challenging economic environment in Puerto Rico, our main market. We generated strong revenues, improved overall credit quality, continued to achieve robust U.S. loan growth and obtained regulatory approval for important capital distribution actions. Our net interest income after provision for loan losses for 2016 grew by 7.2%, while total operating expenses decreased by 2.5%. Our stock price appreciated by 55% during the year, significantly higher than our U.S. peers.
2016 Business Performance |
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Net Income | Adjusted Net Income(1) | Credit Quality: Non-Performing Assets | Capital Levels: Common Equity Tier 1 Ratio | |||||||||||||||||||||||||||||||||||||||||||
75.8% | 4.5% | 40 basis points | 30 basis points | |||||||||||||||||||||||||||||||||||||||||||
decrease | decrease | improvement | improvement |
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2016 | 2016 | 2016 | 2016 | |||||||||||||||||||||||||||||||||||||||||||
$216.7M | $358.1M | 2.0% | 16.5% | |||||||||||||||||||||||||||||||||||||||||||
2015 | 2015 | 2015 | 2015 | |||||||||||||||||||||||||||||||||||||||||||
$895.3M | $374.8M | 2.4% | 16.2% | |||||||||||||||||||||||||||||||||||||||||||
GAAP basis | Non-GAAP basis (adjusted for certain transactions) | Non-performing assets as a percentage of total assets |
Common Equity Tier 1 Ratio | |||||||||||||||||||||||||||||||||||||||||||
(1) A reconciliation of the non-GAAP financial measures to net income under GAAP is provided in Appendix A to this Proxy Statement.
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Net Income and Adjusted Net Income
Our net income reported under GAAP for 2016 was affected by two adverse arbitration awards related to our commercial loss-share agreement with the FDIC, which resulted in a pre-tax charge of $171.8 million. Also, during 2015 we had recorded a partial reversal of the valuation allowance on our deferred tax assets from our U.S. operations for approximately $589.0 million, which resulted in an income tax benefit that did not recur in 2016. When we view our results on an adjusted net income basis, which is a non-GAAP measure used by management to provide meaningful information about the underlying performance of our ongoing operations, we experienced a much lower decrease than that reflected in our GAAP results. The decrease in our adjusted net income was mainly due to our U.S. operations, which did not benefit from the low income tax rate and credit recoveries experienced in 2015.
Credit Quality
Despite the difficult economic environment in Puerto Rico, credit quality improved as reflected in a decrease in the ratio of non-performing assets to total assets, from 2.4% at year-end 2015 to 2.0% at year-end 2016.
2 | Popular, Inc.
Proxy Statement Summary
Capital Levels
Our capital levels remained strong and well above our peer banks and applicable regulatory requirements, with a year-end Common Equity Tier 1 capital ratio equal to 16.5%. During 2016, we distributed $62.2 million in cash dividends on our common stock. We obtained regulatory approval to increase our quarterly common stock dividend from $0.15 to $0.25 per share, commencing in the second quarter of 2017, as well as approval to commence a common stock repurchase program of up to $75 million in 2017.
Puerto Rico Business
During 2016, we continued to grow our client base and currently serve 1.7 million customers, or 65% of Puerto Ricos banked population. Popular continues to holdand in most categories improvedour leading market share position. A rise in government and non-public deposits increased total deposits by 11% in Puerto Rico for 2016. Our focus remains on strengthening the relationship and satisfaction of our clients in part by providing innovative solutions as part of our digital transformation. In this regard, as of December 2016, 39% of deposit transactions in Puerto Rico were captured through digital channels.
United States Business
We had another strong year of organic growth in our U.S. business, generating commercial loan growth of 28% and deposit increases of 15%. We solidified our commercial banking franchise as well as our position as a strong player in two specialty lending segments: community association banking and managed care and assisted living financing. We also continued the transformation of our retail network, an important strategy to our ongoing efforts to improve the profitability of our U.S. operation. Two new branches were added and an additional eight were transformed, yielding efficiency improvements in these branches. As of December 2016, digital self-service transactions represented 35% of all deposits.
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
✓ | Focus on variable, incentive-based pay |
| 62%-72% of total NEO pay |
✓ | Combination of short-term (cash) and long-term (equity) incentives |
✓ | Equity awards promote company performance and retention of high-performing talent |
✓ | Total compensation opportunity targeted at median of our peer group |
✓ | No special retirement or severance programs |
✓ | Limited perquisites |
2017 Proxy Statement | 3
Proxy Statement Summary
Strong governance
✓ | Incentive risk mitigation through balanced compensation design and strong internal control framework |
✓ | No speculative transactions in Popular securities nor pledging of common stock (except for certain grandfathered loans) |
✓ | Clawback guideline |
✓ | Annual say-on-pay advisory vote |
✓ | Independent compensation consultant |
✓ | Compensation Governance Framework which includes internal guidelines covering compensation programs and incentive design |
Executive alignment with long-term shareholder value
✓ | Stock ownership requirements |
✓ | Extended equity vesting (including a portion at retirement) |
✓ | Double-trigger equity vesting upon change in control |
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 compensation is at-risk, subject to company and individual performance: 72% of total compensation for the Chief Executive Officer (CEO), 66% for the President and Chief Operating Officer (COO) and 62% for the other NEOs.
Each element, at target, as a % of base pay
4 | Popular, Inc.
Proxy Statement Summary
2016 Compensation Program and Pay Decisions
Base Salary
There were no increases in annualized base salaries to any NEO in 2016.
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, with a target of 100% of base pay in the case of the CEO, 90% of base pay in the case of the President and COO, and 80% of base pay in the case of other NEOs. Actual payouts can range from zero to 1.5 times the target award. After considering corporate net income performance, individual annual goal achievements and leadership contributions, the Compensation Committee granted annual cash incentive awards at 107.2% of base pay for the CEO, 96.7% for the President and COO, 81.0% for the Chief Financial Officer (CFO), 86.9% for the Chief Legal Officer (CLO) and 86.3% for the Chief Risk Officer (CRO).
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 this 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. The target incentive opportunity under the long-term incentive component is 160% of base pay in the case of the CEO, 100% of base pay in the case of the President and COO and 80% of base pay in the case of other NEOs. The actual long-term incentive awards range from zero to 1.5 times the target award. The 2016 long-term incentive awards were granted in January 2016 considering 2015 performance, during which we strengthened our operational and financial results, recording an adjusted net income from continuing operations of $374.8 million. Upon consideration of the corporate and individual performance factors, the Compensation Committee granted equity awards in 2016 of 180% of base pay for the CEO, 112.5% of base pay for the President and COO and 90% of base pay for other NEOs.
Our executive compensation programs are discussed in more detail in the Compensation Discussion and Analysis and 2016 Executive Compensation Tables and Compensation Information sections of this Proxy Statement.
2017 Proxy Statement | 5
Corporate Governance, Directors and Executive Officers
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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.
6 | Popular, Inc.
Corporate Governance
Board of Directors Independence
Lead Director Responsibilities
✓ | Preside over all meetings of the Board at which the Chairman and CEO is not present. |
✓ | Preside over executive sessions of the independent directors. |
✓ | Act as liaison between the independent directors and the Chairman and CEO. |
✓ | 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 and CEO, as appropriate, the results of such sessions and other private discussions among outside directors. |
✓ | Assist the Chairman and CEO 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 and CEO, meeting agendas and information sent to the Board. |
✓ | Approve, in collaboration with the Chairman and CEO, 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 and CEO 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. |
2017 Proxy Statement | 7
Corporate Governance
Board Meetings and Executive Sessions
8 | Popular, Inc.
Corporate Governance
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 2016 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 2016: 10 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, 2016 |
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. |
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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 2016: 5
Charter last revised: January 19, 2017 |
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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2017 Proxy Statement | 9
Corporate Governance
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 2016: 12
Charter last revised: February 24, 2017 |
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 María Luisa Ferré (Chair) William J. Teuber, Jr. Carlos A. Unanue
Independence: Each member of the committee is independent
Meetings in 2016: 6
Charter last revised: December 14, 2016 |
Primary Responsibilities:
Discharges the Boards responsibilities, subject to review by the full Board, relating to:
compensation of Populars 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 2016, 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 2016, 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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10 | Popular, Inc.
Corporate Governance
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 |
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 |
María 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 Committee |
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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2017 Proxy Statement | 11
Corporate Governance
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. |
12 | Popular, Inc.
Corporate Governance
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 | 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 |
2017 Proxy Statement | 13
Corporate Governance
Nomination Process
14 | Popular, Inc.
Corporate Governance
Proposals of Shareholders to be Presented at the 2018 Annual Meeting of Shareholders
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:
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✓ | Code of Ethics
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✓ | Compensation Committee Charter
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✓ | Audit Committee Charter
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✓ | Risk Committee Charter
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✓ | Corporate Governance and Nominating Committee Charter
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✓ ✓ |
Corporate Governance Guidelines
Insider Trading Policy
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2017 Proxy Statement | 15
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 3 Directors (Terms Expiring 2017)
Director since 2004
Age 53
Committees
Compensation
Corporate |
María Luisa Ferré
Background
President and CEO of Grupo Ferré Rangel, a diversified family holding company with leading operations in media, real estate, health services, telemarketing and distribution in Puerto Rico, the United States and Chile, since 1999. President and CEO FRG, Inc., the holding company for GFR Media, LLC, the entity that publishes El Nuevo Día, Primera Hora and Indice, Puerto Rico newspapers, 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 and Indice since 2012. President and Trustee of the Luis A. Ferré Foundation since 2003. Trustee and Vice President of the Ferré Rangel Foundation since 1999.
Qualifications
Ms. Ferré has 18 years of experience as the President and CEO of Grupo Ferré Rangel, the largest communications and media group in Puerto Rico, with consolidated assets of approximately $365 million and annual net revenues of approximately $205 million as of December 31, 2016. She holds positions as director and officer of numerous entities related to Grupo Ferré Rangel. 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. |
16 | Popular, Inc.
Directors and Executive Officers
Director since 2011
Age 57
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 $82.71 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. |
Director since 2004
Age 65
Lead Director
Committees
Audit(Chair and Financial Expert)
Risk
Compensation
CorporateGovernance & Nominating |
William J. Teuber, Jr.
Background
Private investor since October 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 and of Pivotal Software, Inc., a subsidiary of EMC, from April 2013 to September 2016. Trustee of the College of the Holy Cross since September 2009.
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. |
2017 Proxy Statement | 17
Directors and Executive Officers
Class 1 Directors (Terms Expiring 2018)
Director since 2010
Age 50
Committees
Audit
CorporateGovernance & 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 26 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, 2016, Ballester Hermanos had approximately $105 million in assets and annual revenues of approximately $300 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 34% of the firms revenues. During 2009, he was a director of 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 64
Chairman since 1993
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Richard L. Carrión
Background
CEO of Popular since 1994 and President from 1991 to January 2009 and from May 2010 to September 2014. Chairman of BPPR since 1993 and CEO since 1989. President of BPPR from 1985 to 2004 and from May 2010 to September 2014. Chairman and CEO of Popular North America, Inc. and other direct and indirect wholly-owned subsidiaries of Popular. 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.
Qualifications
Mr. Carrións 41 years of banking experience, 32 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 | Popular, Inc.
Directors and Executive Officers
Director since 2010
Age 53
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 30 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 51
Committees
CorporateGovernance & Nominating
Risk |
Joaquín E. Bacardí, III
Background
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
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. |
2017 Proxy Statement | 19
Directors and Executive Officers
Director since 2013
Age 67
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. Executive Vice President Strategy, Development and Planning of Verizon Communications, Inc. from June 2003 to December 2012. Director of Harman International Industries, Incorporated, an audio and infotainment equipment company, since June 2013 and of Intelsat, S.A., a communications satellite services provider, since September 2013.
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 47
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, since January 2014 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 24-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 18-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 | Popular, Inc.
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: 64
Mr. Carrión has been Chairman of the Board since 1993. He has served as CEO of Popular since 1994 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: 58
Mr. Alvarez has been President of Popular, BPPR and Popular Community Bank and Chief Operating Officer of Popular and BPPR since October 2014. Prior to that he was Executive Vice President and Chief Legal Officer of Popular from June 2010 to September 2014. He has been a Director of BPPR and Popular Community Bank since October 2014 and a member of the Board of Trustees of Fundación Banco Popular, Inc. and of Popular Community Bank Foundation, Inc. since November 2015. He has served as a member of the Board of Regents of Georgetown University since October 2008. |
Camille Burckhart Age: 37
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. |
2017 Proxy Statement | 21
Directors and Executive Officers
|
Javier D. Ferrer Age: 55
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. |
|
Lidio V. Soriano Age: 48
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: 58
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. |
|
Manuel Chinea Age: 51
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 and of the Board of Directors of the Hispanic Federation, since June 2016. |
22 | Popular, Inc.
Directors and Executive Officers
Juan O. Guerrero Age: 57
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 a Member of the Board of Directors of Puerto Rico Baseball Academy and High School from September 2012 to December 2016. |
Gilberto Monzón Age: 57
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. |
Eduardo J. Negrón Age: 52
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. |
Néstor Obie Rivera Age: 70
Mr. Rivera has been Executive Vice President of BPPR in charge of the Retail Banking and Operations Group since April 2004. He has served as a Member of the Board of Directors of EVERTEC, Inc. since April 2012. |
Eli S. Sepúlveda Age: 54
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 joined the Board of Managers of the Puerto Rico Idea Seed Fund, LLC on December 2016. |
2017 Proxy Statement | 23
Directors and Executive Officers
Certain Relationships and Transactions
24 | Popular, Inc.
Directors and Executive Officers
2017 Proxy Statement | 25
Directors and Executive Officers
26 | Popular, Inc.
Executive and Director Compensation
|
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 compensation decisions regarding our named executive officers (NEOs).
For 2016, Populars NEOs were: | ||
Richard L. Carrión |
Chairman of the Board of Directors and Chief Executive Officer (CEO) | |
Ignacio Alvarez |
President and Chief Operating Officer (COO) | |
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) |
Popular reports its financial results in accordance with generally accepted accounting principles in the United States (GAAP). A reconciliation of the non-GAAP financial measures below is provided in Appendix A 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 2016, we demonstrated the strength of our franchise while we continued to operate in a challenging economic environment in Puerto Rico, our main market. We generated strong revenues, improved overall credit quality, continued to achieve robust U.S. loan growth and obtained regulatory approval for important capital distribution actions. Our net interest income after provision for loan losses for 2016 grew by 7.2%, while total operating expenses decreased by 2.5%. Our stock price appreciated by 55% during the year, significantly higher than our U.S. peers.
2016 Business Performance |
||||||||||||||||||||||||||||||||||||||||||||||
Net Income | Adjusted Net Income | Credit Quality: Non-Performing Assets | Capital Levels: Common Equity Tier 1 Ratio | |||||||||||||||||||||||||||||||||||||||||||
75.8% | 4.5% | 40 basis points | 30 basis points | |||||||||||||||||||||||||||||||||||||||||||
decrease | decrease | improvement | improvement |
|||||||||||||||||||||||||||||||||||||||||||
2016 | 2016 | 2016 | 2016 | |||||||||||||||||||||||||||||||||||||||||||
$216.7M | $358.1M | 2.0% | 16.5% | |||||||||||||||||||||||||||||||||||||||||||
2015 | 2015 | 2015 | 2015 | |||||||||||||||||||||||||||||||||||||||||||
$895.3M | $374.8M | 2.4% | 16.2% | |||||||||||||||||||||||||||||||||||||||||||
GAAP basis | Non-GAAP basis (adjusted for certain transactions) | Non-performing assets as a percentage of total assets |
Common Equity Tier 1 Ratio | |||||||||||||||||||||||||||||||||||||||||||
Our net income reported under GAAP for 2016 was affected by two adverse arbitration awards related to our commercial loss-share agreement with the FDIC, which resulted in a pre-tax charge of $171.8 million. Also, during 2015 we had recorded a partial reversal of the valuation allowance on our deferred tax assets from our U.S. operations for approximately $589.0 million, which resulted in an income tax benefit that did not recur in
2017 Proxy Statement | 27
Compensation Discussion and Analysis
2016. When we view our results on an adjusted net income basis, which is a non-GAAP measure used by management to provide meaningful information about the underlying performance of our ongoing operations, we experienced a much lower decrease than that reflected in our GAAP results. The decrease in our adjusted net income was mainly due to our U.S. operations, which did not benefit from the low income tax rate and credit recoveries experienced in 2015.
Populars main accomplishments during 2016 included the following:
Populars stock price increased by 55% during 2016, significantly higher than our U.S. peers and the KBW Nasdaq Bank Index, likely reflecting the previously described achievements as well as macroeconomic and political developments in Puerto Rico and the United States. Populars stock price moved close to those reference groups in the first half of the year. After June, the stock price of Popular and other Puerto Rico banks increased significantly, probably related to the enactment of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), which reduced the markets perception of uncertainty regarding public debt restructuring and a path to economic recovery. After the November U.S. presidential election, the price of bank stocks generally rose due to expectations of reduced corporate taxes, a roll back in regulations and higher infrastructure spending.
Credit Quality Capital Strategy Puerto Rico Business United States Business Employee Engagement Social Commitment Despite the difficult economic and fiscal environment in our main markets, credit quality improved in 2016 both for Puerto Rico and the mainland United States. This translated into total non-performing assets that improved from $843 million (2.4% of assets) at year-end 2015 to $774 million (2.0% of assets) at year-end 2016. Our capital levels remained strong and well above our peer banks and regulatory requirements, with year-end Common Equity Tier 1 capital equal to 16.5%. We obtained regulatory approval to increase our quarterly common stock dividend from $0.15 to $0.25/share and execute a stock repurchase program of up to $75 million. We continued to grow our client base and currently serve 1.7 million customers or 65% of Puerto Ricos banked population. Popular continues to holdand in most categories improvedour leading market share position. A rise in government and non-public deposits increased total deposits by 11% in Puerto Rico for 2016. We were also able to grow businesses such as auto financing and continued to foster entrepreneurship through programs such as Start-Up Popular. Our focus remains on strengthening the relationship and satisfaction of our clients by providing innovative solutions as part of our digital transformation. In this regard, Puerto Ricos digital deposits reached 39% of all deposits in December 2016. We had another strong year of organic growth in our US business, generating commercial loan growth of 28% and deposit increases of 15%. We solidified our commercial banking franchise as well as our position as strong players in two specialty lending segments: community association banking and healthcare financing. We also continued the transformation of our retail network, a strategy that is key to our ongoing efforts to improve the profitability of our US operation. Two new branches were added and an additional eight were transformed, yielding efficiency improvements in these branches. At the end of 2016, digital self-service transactions represented 35% of all deposits. We continue to attract, develop and retain the best talent in the markets we serve. We successfully maintained high levels of employee engagement through our focus on enhanced technical and leadership training programs, increased internal career mobility, strong performance management and initiatives that promoted physical, emotional and financial wellness. In 2016, our charitable foundations impacted over 20,000 individuals through more than 100 nonprofit organizations, reaching donations of $2.8 million in Puerto Rico (27% above 2015) and $320,000 in the mainland United States to promote education and community development. Our Social Innovation and Collaboration Center housed 20 nonprofit and startup organizations and offered over 100 forums and workshops, including coaching for nonprofit sector leaders. Through the Multisector AllianceEchar Pa Lantewe provided professional development to several thousand students and educators, thus accelerating the development of global entrepreneurship and a culture of innovation in Puerto Rico to help restore economic growth.
28 | Popular, Inc.
Compensation Discussion and Analysis
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.
Highlights of Our Executive Compensation Program
2017 Proxy Statement | 29
Compensation Discussion and Analysis
2016 Executive Compensation Program
Target Incentive Opportunity
% of Base Pay
Short-Term Annual (Cash) Incentive
CEO | President/ COO |
Other NEOs | ||||||||||||
Popular, Inc. Net Income
|
30%
|
27.5%
|
25%
| |||||||||||
Annual Goals (Financial/Non-Financial)
|
50%
|
45.0%
|
40%
| |||||||||||
Leadership
|
20%
|
17.5%
|
15%
| |||||||||||
Total Short-Term
|
100%
|
90%
|
80%
| |||||||||||
Long-Term (Equity) Incentive
| ||||||||||||||
CEO | President/ COO |
Other NEOs | ||||||||||||
Performance Shares ( 1⁄2 Total Shareholder Return and 1⁄2 Earnings per Share)
|
80%
|
50%
|
40%
| |||||||||||
Restricted Stock
|
80%
|
50%
|
40%
| |||||||||||
Total Long-Term
|
160%
|
100%
|
80%
| |||||||||||
Grand Total
|
260%
|
190%
|
160%
| |||||||||||
The following key features of our executive compensation program reflect our focus on 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, we 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 incentive risk reviews in conjunction with Populars CRO. | |
✓ |
Engage an independent compensation consultant who advises and reports directly to the Compensation Committee. | |
✓ |
Require significant stock ownership from our executive officers. Our CEO and other NEOs have a requirement of six times and three times their base salaries, respectively. |
30 | Popular, Inc.
Compensation Discussion and Analysis
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, 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 loans). | |
× |
No employment or change of control agreements with our NEOs. | |
× |
No unusual or excessive perquisites for executives. |
Compensation Objectives and Components
Short-term Incentive Annual cash award linked to corporate and business unit results, individual goals and leadership competencies. Long-term Incentive Annual equity grant that rewards performance and aligns Populars NEOs with the interests of our shareholders. 100% Cash Incentive Aligned with pay-performance; based on Populars 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.
2017 Proxy Statement | 31
Compensation Discussion and Analysis
The following comparative chart illustrates the breakdown of our NEOs total target compensation opportunity. A significant portion of compensation is at-risk, subject to company and individual performance: 72% of total compensation for the CEO, 66% for the President and COO and 62% for the other NEOs.
Pay Mix in the Compensation Program
Each element, at target, as a % of base pay
32 | Popular, Inc.
Compensation Discussion and Analysis
Attract and Retain Highly Qualified Executives
Key Compensation Components
Fixed |
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. |
||||||||
Variable |
Short-Term Cash Incentive | |||||||
Annual incentive opportunity is targeted near the market median.
Actual pay depends on the achievement of performance goals (financial, operational, strategic and individual).
Short-term incentive represents a balance of performance measures that are aligned with Populars annual goals and business strategy.
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 Proxy Statement | 33
Compensation Discussion and Analysis
2016 Compensation Program and Pay Decisions
Base Salary
The Committee did not grant base salary increases to any NEO in 2016, upon confirming that base pay was market competitive and appropriate with respect to each NEOs role and responsibilities. Base pay differences between 2015 and 2016 indicated in the Summary Compensation Table are attributable to the following: (i) the calendar year 2016 contained 27 biweekly pay periods, as compared to 26 biweekly pay periods in 2015; (ii) the NEOs (except Mr. Carrión and Mr. Ferrer) received 2015 base pay increases effective as of March 2, 2015, thereby reflecting a portion of 2015 total base pay at the prior rate.
Short- and Long-Term Incentive Compensation Opportunity
Incentive opportunities under the executive compensation program for 2016, as a percent of base pay, were unchanged from 2015 incentive opportunities and were as follows:
Component | Level Of Achievement |
CEO | President/COO | Other NEOs | ||||
<Threshold
|
0%
|
0%
|
0%
| |||||
Corporate Net Income | Threshold (85%)
|
15%
|
12.5%
|
10%
| ||||
Target
|
30%
|
27.5%
|
25%
| |||||
Max (115%)
|
45%
|
42.5%
|
40%
| |||||
<Threshold
|
0%
|
0%
|
0%
| |||||
Individual Annual
Goals (financial/non-financial) |
Threshold
|
25%
|
22.5%
|
20%
| ||||
Target
|
50%
|
45.0%
|
40%
| |||||
Max
|
75%
|
67.5%
|
60%
| |||||
Min
|
0%
|
0%
|
0%
| |||||
Leadership | Target
|
20%
|
17.5%
|
15%
| ||||
Max
|
30%
|
25.0%
|
20%
| |||||
<Threshold
|
0%
|
0%
|
0%
| |||||
Total Short-Term Incentive | Threshold
|
40%
|
35.0%
|
30%
| ||||
Target
|
100%
|
90.0%
|
80%
| |||||
Max
|
150%
|
135.0%
|
120%
| |||||
<Threshold
|
0%
|
0%
|
0%
| |||||
Equity IncentivePerformance Shares | Min
|
40%
|
25%
|
20%
| ||||
Target
|
80%
|
50.0%
|
40%
| |||||
Max
|
120%
|
75%
|
60%
| |||||
<Threshold
|
0%
|
0%
|
0%
| |||||
Equity IncentiveRestricted Stock | Threshold
|
40%
|
25%
|
20%
| ||||
Target
|
80%
|
50.0%
|
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%
| |||||
Consolidated Total | Threshold
|
120%
|
85%
|
70%
| ||||
Target
|
260%
|
190%
|
160%
| |||||
Max
|
390%
|
285%
|
240%
|
34 | Popular, Inc.
Compensation Discussion and Analysis
Short-Term Annual Cash Incentive for 2016 (paid in 2017)
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 generally range from zero to 1.5 times the target award, depending on performance. Certain threshold levels of performance are required to be achieved for any payouts to be awarded.
The Committee assessed and awarded the 2016 short-term cash incentive as follows:
Corporate Net Income Component
In 2016, we achieved after-tax net income of $216.7 million and an adjusted after-tax net income of $358.1 million. We use the adjusted (non-GAAP) measure for compensation purposes as we believe it better reflects the underlying performance of our ongoing operations (refer to Appendix A for reconciliation to GAAP results). This level of adjusted after-tax net income represented 89.2% of the targeted net income of $401.4 million. Based on these results, the Committee approved a partial award as follows: 19.2% of base pay for the CEO, 16.7% for the President and COO and 14.2% for the other NEOs, reflecting below-target payouts based on net income performance.
Individual Annual Goals Component
In this individual performance component of the executive compensation program, the Committee assessed the overall achievements and effectiveness of each NEO, taking into account financial and non-financial considerations (as highlighted below) and granted the following award:
NEO % of Base Pay Earned |
Considerations | |
Richard L. Carrión 58.0% |
Drove business initiatives to strengthen our operations in Puerto Rico and in the mainland United States. Further solidified our competitive position in Puerto Rico, growing our customer base and increasing our market share in most categories. Achieved strong loan growth in the United States, increasing the portfolio by 17%.
Supervised Populars risk management function, focusing on the most significant risks facing Popular, including credit, operational, legal, strategic and compliance risks. Non-performing assets declined from 2.4% of assets to 2.0%. Net charge-offs decreased from 0.98% of loans to 0.76%. Enhanced Populars cybersecurity program by making targeted investments to address vulnerabilities and strengthen existing controls.
Supported the implementation of our technology strategy, including the streamlining and modernization of core banking systems and the migration of transactions to digital channels. Deposits made through our ATMs and mobile devices reached 39% of all deposits in Puerto Rico and 35% in the United States by the end of 2016.
Spearheaded efforts to attract, develop and retain talent, revamping recruitment processes, systems and criteria, expanding and renovating trainings, promoting internal mobility and emphasizing a performance-based culture. Turnover declined from 7.9% to 7.5% in Puerto Rico and from 22.0% to 20.3% in the United States. Promoted wellness initiatives, including health and financial well-being, and championed Populars Diversity and Inclusion Program.
Served as Populars lead representative in its relationship with key external stakeholders, including regulators, investors and government officials. Maintained open communication and offered support in matters related to Puerto Ricos fiscal and economic challenges.
Led the completion of the Dodd-Frank Act Stress Test and the capital plan, which brought about an increase in our quarterly common stock dividend from $0.15 per share to $0.25 per share, effective in the second quarter of 2017, and the approval of a share repurchase program of up to $75 million to be executed during 2017. |
2017 Proxy Statement | 35
Compensation Discussion and Analysis
NEO % of Base Pay Earned |
Considerations | |
Ignacio Alvarez 55.0% |
Directed efforts to manage the bank through Puerto Ricos fiscal and economic situation, including reducing direct credit exposure to the government and negotiating arrangements to provide new deposit and cash management services to public entities.
Delivered solid business results in Puerto Rico, maintaining strong credit quality and increasing our market-leading position in principal business segments, while growing in segments such as auto loans (up 5%) where we are not currently the leader. Led strategic initiatives to continue building customer relationships and promoting investment and entrepreneurship in Puerto Rico.
In the U.S., managed strategic loan growth (up 17%), without departing from our desired risk appetite, and guided our retail network expansion to drive deposit growth.
Directed corporate-wide strategies to increase customer use of digital channels, with digital self-service deposits reaching 39% of all deposits in Puerto Rico and 35% in the United States as of December 2016.
Led initiatives to increase collaboration between Puerto Rico and U.S. teams, resulting in consolidated functions (e.g., training) and additional business opportunities. Executed initiative to reduce discretionary expenses in 2016, while investing in technology, compliance and back-office infrastructure, and managed 2017 budget process with the business units.
Guided various efforts to promote Populars high-performance organization in the areas of performance management and talent mobility, physical, emotional and financial wellness, and leadership development.
| |
Carlos J. Vázquez 46.8% |
Directed financial aspects of Populars capital plan and Dodd-Frank Act Stress Test, resulting in regulatory approval of capital distribution strategy elements (dividend increase and stock repurchase).
Led organizational enhancements to the Finance function, yielding major efficiency improvements in accounting and management reporting tools and processes.
Supported analysis, structuring and negotiation of asset acquisition and business growth initiatives.
Optimized Populars liquidity through securing increased borrowing facilities, reduction of wholesale funding, effective management of repurchase agreement (REPO) portfolio and reinvestment of cash resources.
Guided investor outreach initiatives that expanded investor understanding of Popular. Achieved increased analyst coverage. Popular stock was added to the KBW Regional Bank Index.
| |
Javier D. Ferrer 52.7% |
Advised the Chairman and CEO, President and COO and the Board on capital plan matters, asset acquisition and business growth, governmental affairs, regulatory issues and corporate governance matters.
Supported strategic initiatives and key projects of the other members of the executive team.
Led the implementation of a corporate intellectual property protection strategy, including redefining and enhancing Populars policies and procedures.
Contributed to the evaluation, structuring and negotiation of several material transactions with public sector entities and major commercial credit relationships in Puerto Rico.
Continued to strengthen the legal and governance functions, while launching simplification efforts.
Guided a regulatory change management program which included a risk-based monitoring process of changes to laws and regulations affecting Popular.
| |
Lidio V. Soriano 52.1% |
Guided the policies, procedures and controls which yielded an improvement in Populars main credit quality indicators, including the reduction in the non-performing assets ratio 2.4% at year-end 2015 to 2.0% at year-end 2016.
Directed the implementation of key milestones in critical Compliance and Risk Management technology projects, enabling Popular to further strengthen anti-money laundering, customer risk data, cyber/information security and operational risk management.
Supported the review and development of models and processes related to stress testing and loan loss estimation, among others.
Reinforced the Risk Management talent profile in the area of compliance analytics. |
Leadership Component
36 | Popular, Inc.
Compensation Discussion and Analysis
The following table summarizes the 2016 short-term cash incentive granted to the NEOs by the Committee, based on achievement of the corporate, individual and leadership goals described above:
NEO | Corporate Net (% of Base Pay) |
Individual (% of Base Pay) |
Leadership (% of Base Pay) |
Total (% of Base Pay) |
Total Award($) | |||||||||||||||
Richard L. Carrión
|
|
19.2
|
%
|
|
58.0
|
%
|
|
30.0
|
%
|
|
107.2
|
%
|
|
$1,500,800
|
| |||||
Ignacio Alvarez
|
|
16.7
|
|
|
55.0
|
|
|
25.0
|
|
|
96.7
|
|
|
691,405
|
| |||||
Carlos J. Vázquez
|
|
14.2
|
|
|
46.8
|
|
|
20.0
|
|
|
81.0
|
|
|
546,750
|
| |||||
Javier D. Ferrer
|
|
14.2
|
|
|
52.7
|
|
|
20.0
|
|
|
86.9
|
|
|
477,950
|
| |||||
Lidio V. Soriano
|
|
14.2
|
|
|
52.1
|
|
|
20.0
|
|
|
86.3
|
|
|
431,500
|
|
Long-Term Incentive for 2016 (granted February 2016)
2017 Proxy Statement | 37
Compensation Discussion and Analysis
Upon consideration of these factors, the Committee granted equity awards to the NEOs, based on percentage of base pay, with the grant date fair market value indicated in the table below. They will vest as previously described to the extent that the corresponding service and performance conditions are met.
Restricted Stock | Performance Shares | Total Grant Date Fair Value | ||||||||||||||||
NEO | % | $ | % | $ | % | $ | ||||||||||||
Richard L. Carrión
|
100.0%
|
$
|
1,400,000
|
|
80.0%
|
$
|
1,120,000
|
|
180.0%
|
|
$2,520,000
|
| ||||||
Ignacio Alvarez
|
62.5
|
|
446,875
|
|
50.0
|
|
357,500
|
|
112.5
|
|
804,375
|
| ||||||
Carlos J. Vázquez
|
50.0
|
|
337,500
|
|
40.0
|
|
270,000
|
|
90.0
|
|
607,500
|
| ||||||
Javier D. Ferrer
|
50.0
|
|
275,000
|
|
40.0
|
|
220,000
|
|
90.0
|
|
495,000
|
| ||||||
Lidio V. Soriano
|
50.0
|
|
250,000
|
|
40.0
|
|
200,000
|
|
90.0
|
|
450,000
|
|
Determination and Assessment of Executive Compensation
38 | Popular, Inc.
Compensation Discussion and Analysis
2017 Proxy Statement | 39
Compensation Discussion and Analysis
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. | |
CEO* |
Works with the Committee to ensure that the compensation programs are aligned with Populars strategic objectives. Discusses corporate strategy and business goals with the Committee, and provides 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. |
* All discussions on decisions involving CEO compensation are made in executive session without the participation of the CEO or other members of management.
Role of the Compensation Consultant
40 | Popular, Inc.
Compensation Discussion and Analysis
Compensation Information and Peer Group
Peer Group
| ||
Associated Banc-Corp
|
First Niagara Financial Group Inc.
| |
BOK Financial Corporation
|
First Republic Bank
| |
City National Corporation
|
Huntington Bancshares Incorporated
| |
Comerica Incorporated
|
KeyCorp
| |
Commerce BancShares, Inc.
|
M&T Bank Corporation
| |
Cullen/Frost Bankers Inc.
|
Regions Financial Corp.
| |
East West Bancorp Inc.
|
Synovus Financial Corp.
| |
First Citizens BancShares, Inc.
|
Zions Bancorporation
| |
First Horizon National Corporation
|
2017 Proxy Statement | 41
Compensation Discussion and Analysis
Other Aspects of Our Executive Compensation Program
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
María Luisa Ferré, Chair
David E. Goel
William J. Teuber, Jr.
Carlos A. Unanue
42 | Popular, Inc.
2016 Executive Compensation Tables and Compensation Information
The following table summarizes the compensation of our NEOs for the year ended December 31, 2016, 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 Chairman and Chief Executive Officer |
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 | |||||||||||||||||||||||
2014 | 1,400,000 | 408,523 | 1,750,000 | 875,000 | 885,277 | 331,679 | 5,650,479 | |||||||||||||||||||||||
Ignacio Alvarez President and Chief Operating Officer |
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 | |||||||||||||||||||||||
2014 | 615,000 | 179,395 | 760,673 | 324,875 | | 11,681 | 1,891,624 | |||||||||||||||||||||||
Carlos J. Vázquez Executive Vice President and Chief Financial Officer |
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 | |||||||||||||||||||||||
2014 | 650,000 | 189,668 | 805,762 | 296,113 | 147,860 | 8,883 | 2,098,286 | |||||||||||||||||||||||
Javier D. Ferrer Executive Vice President and Chief Legal Officer |
2016 2015 |
|
571,154 550,000 |
|
|
22,927 22,922 |
|
|
495,000 550,000 |
|
|
477,950 583,697 |
|
|
|
|
|
14,296 10,162 |
|
|
1,581,327 1,716,781 |
| ||||||||
Lidio V. Soriano Executive Vice President and Chief Risk Officer |
2016 2015 |
|
519,231 476,923 |
|
|
20,858 20,853 |
|
|
450,000 500,000 |
|
|
526,500 617,300 |
|
|
|
|
|
12,524 8,734 |
|
|
1,529,113 1,623,810 |
|
(a) | Includes salaries before deductions. Base pay differences between 2015 and 2016 are attributable to the following: (i) the calendar year 2016 contained 27 biweekly pay periods, as compared to 26 biweekly pay periods in 2015; (ii) the NEOs (except Mr. Carrión and Mr. Ferrer) received 2015 base pay increases effective as of March 2, 2015, thereby reflecting a portion of 2015 total base pay at the prior rate. Annual salary for 2016 amounted to: R. Carrión, $1,400,000; I. Alvarez, $715,000; C. Vázquez, $675,000; J. Ferrer, $550,000 and L. Soriano, $500,000. |
(b) | Includes Populars customary Christmas bonus provided to its Puerto Rico-based employees, equal to 4.17% of base pay. With regard to 2014, the amounts reported in this column included one-third of the cash portion of the transition award granted on September 25, 2014, subject to a one-year clawback, as follows: R. Carrión, $350,000; I. Alvarez, $153,750; and C. Vázquez, $162,500. |
(c) | The awards reported in the Stock Awards column were provided in the form of restricted stock and performance shares, granted on January 27, 2016. The value in the column above represents the fair market 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 ($24.61). 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, $1,400,000; I. Alvarez, $446,875; C. Vázquez, $337,500; J. Ferrer, $275,000; and L. Soriano, $250,000. |
The performance shares vest after the end of a 3-year performance cycle (2016-2018). 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; and L. Soriano, $200,000. The maximum 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; and L. Soriano, $300,000. |
(d) | The amounts reported in the Non-Equity Incentive Plan Compensation column reflect: (i) the amounts earned by each NEO under Populars annual Short-Term Incentive Plan, as follows: R. Carrión, $1,500,800; I. Alvarez, $691,405; C. Vázquez, $546,750; J. Ferrer, $477,950; and L. Soriano, $431,500. NEOs were eligible to participate in a 2016 annual cash incentive opportunity based on the achievement of their annual corporate, business unit and individual goals. The 2016 Compensation Programs and Pay Decisions section of the Compensation Discussion and Analysis describes how the 2016 Short-Term Incentive Plan awards to the NEOs were determined; |
2017 Proxy Statement | 43
2016 Executive Compensation Tables and Compensation Information
and (ii) one-third of the cash portion of the transition award granted on September 25, 2014, whose time- and performance-based vesting conditions were satisfied as determined by the Committee, as follows: R. Carrión, $350,000; I. Alvarez, $153,750; C. Vázquez, $162,500; and L. Soriano, $95,000. Mr. Ferrer was not eligible to receive a transition award. |
(e) | No additional benefits in the defined benefit Retirement and Restoration Plans were earned in 2016, 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, 2016. With respect to 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. The net decreases were as follows: R. Carrión, $102,699 and C. Vázquez, $357. Messrs. Alvarez, Ferrer and Soriano are not eligible to participate in the Plan. |
Similarly, the 2015 change in present value of accrued benefits was negative and therefore not reflected in the table. In 2014, Popular indicated in this column its increased pension benefit liability due to the effect of the decrease in the market interest rate used to determine Populars pension benefit liability and the accounting recognition of improved life expectancy, evidenced by Populars adoption of updated mortality tables used in actuarial valuations. |
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 | |||||
Non Work-Related Security (i) |
X | |||||||||
Company-Owned Vehicle |
X | X | X | X | X | |||||
Other (ii) |
X |
(i) | The incremental cost to Popular for Mr. Carrións personal security was $235,988. |
(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 |
$7,950 | |
Ignacio Alvarez |
7,950 | |
Carlos J. Vázquez |
7,950 | |
Javier D. Ferrer |
7,950 | |
Lidio V. Soriano |
7,500 |
44 | Popular, Inc.
2016 Executive Compensation Tables and Compensation Information
The following table details all equity and non-equity plan-based awards granted to each of the NEOs during fiscal year 2016.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (a)
|
Estimated Future Payouts Under Equity Incentive Plan Awards (b)
|
All Other
|
Grant date
|
|||||||||||||||||||||||||||||||||
Name
|
Grant Date
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
Threshold (#)
|
Target (#)
|
Maximum (#)
|
|||||||||||||||||||||||||||||
Richard L. Carrión |
$2,520,000 | |||||||||||||||||||||||||||||||||||
2016 Short-Term Cash Incentive |
$560,000 | $1,400,000 | $2,100,000 | |||||||||||||||||||||||||||||||||
Restricted Stock |
27-Jan-16 | 56,888 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
27-Jan-16
|
|
|
22,755
|
|
|
45,510
|
|
|
68,265
|
|
||||||||||||||||||||||||
Ignacio Alvarez |
804,375 | |||||||||||||||||||||||||||||||||||
2016 Short-Term Cash Incentive |
250,250 | 643,500 | 965,250 | |||||||||||||||||||||||||||||||||
Restricted Stock |
27-Jan-16 | 18,159 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
27-Jan-16
|
|
|
7,263
|
|
|
14,527
|
|
|
21,790
|
|
||||||||||||||||||||||||
Carlos J. Vázquez |
607,500 | |||||||||||||||||||||||||||||||||||
2016 Short-Term Cash Incentive |
202,500 | 540,000 | 810,000 | |||||||||||||||||||||||||||||||||
Restricted Stock |
27-Jan-16 | 13,714 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
27-Jan-16
|
|
|
5,486
|
|
|
10,971
|
|
|
16,457
|
|
||||||||||||||||||||||||
Javier D. Ferrer |
495,000 | |||||||||||||||||||||||||||||||||||
2016 Short-Term Cash Incentive |
165,000 | 440,000 | 660,000 | |||||||||||||||||||||||||||||||||
Restricted Stock |
27-Jan-16 | 11,175 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
27-Jan-16
|
|
|
4,470
|
|
|
8,939
|
|
|
13,409
|
|
||||||||||||||||||||||||
Lidio V. Soriano |
450,000 | |||||||||||||||||||||||||||||||||||
2016 Short-Term Cash Incentive |
150,000 | 400,000 | 600,000 | |||||||||||||||||||||||||||||||||
Restricted Stock |
27-Jan-16 | 10,159 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
27-Jan-16
|
|
|
4,063
|
|
|
8,127
|
|
|
12,190
|
|
(a) | This section includes the 2016 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 2016 performance were as follows: R. Carrión, $1,500,800; I. Alvarez, $691,405; C. Vázquez, $546,750; J. Ferrer, $477,950; and L. Soriano, $431,500. |
(b) | This section includes the performance shares awarded on January 27, 2016. The number of shares was determined based on the closing price of Populars common stock on the grant date of January 27, 2016 ($24.61). 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 equivalent 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 January 27, 2016; the number of shares was determined based on the closing price of Populars common stock on the grant date of January 27, 2016 ($24.61). 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. |
(d) | The amounts reported in this column represent the grant date fair value of both performance shares and restricted stock. |
2017 Proxy Statement | 45
2016 Executive Compensation Tables and Compensation Information
Outstanding Equity Awards at Fiscal Year End
The following table sets forth certain information with respect to the value of all unexercised options and restricted stock previously awarded to the NEOs (based on the closing price of Populars common stock as of December 30, 2016, the last trading day of 2016, which was $43.82).
Stock Awards
|
||||||||||||||||
Name
|
Number of Shares
|
Market Value of Shares or Units of Stock That
|
Equity Incentive Plan Awards:
|
Equity Incentive Plan Awards: Market or Payout Value of Have Not Vested ($)
|
||||||||||||
Richard L. Carrión
|
|
110,164
|
|
|
$4,827,386
|
|
|
79,074
|
|
|
$3,465,023
|
| ||||
Ignacio Alvarez
|
|
31,015
|
|
|
1,359,077
|
|
|
25,241
|
|
|
1,106,061
|
| ||||
Carlos J. Vázquez
|
|
24,025
|
|
|
1,052,776
|
|
|
19,064
|
|
|
835,384
|
| ||||
Javier D. Ferrer
|
|
19,087
|
|
|
836,392
|
|
|
15,533
|
|
|
680,656
|
| ||||
Lidio V. Soriano
|
|
17,352
|
|
|
760,365
|
|
|
14,121
|
|
|
618,782
|
|
(a) | Vesting dates of shares or units of stock that have not vested: |
2005 Award (i)
|
2006 Award (i)
|
2015 Award (ii)
|
2016 Award (iii)
|
Total
|
||||||||||||||||
Richard L. Carrión
|
|
6,069
|
|
|
6,931
|
|
|
40,276
|
|
|
56,888
|
|
|
110,164
|
| |||||
Ignacio Alvarez
|
|
|
|
|
|
|
|
12,856
|
|
|
18,159
|
|
|
31,015
|
| |||||
Carlos J. Vázquez
|
|
|
|
|
601
|
|
|
9,710
|
|
|
13,714
|
|
|
24,025
|
| |||||
Javier D. Ferrer
|
|
|
|
|
|
|
|
7,912
|
|
|
11,175
|
|
|
19,087
|
| |||||
Lidio V. Soriano
|
|
|
|
|
|
|
|
7,193
|
|
|
10,159
|
|
|
17,352
|
|
(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) | 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. |
(b) | Vesting dates of unearned shares, units or other rights that have not vested: |
2015 Performance
|
2016
|
Total
|
||||||||||
Richard L. Carrión
|
|
33,564
|
|
|
45,510
|
|
|
79,074
|
| |||
Ignacio Alvarez
|
|
10,714
|
|
|
14,527
|
|
|
25,241
|
| |||
Carlos J. Vázquez
|
|
8,092
|
|
|
10,972
|
|
|
19,064
|
| |||
Javier D. Ferrer
|
|
6,593
|
|
|
8,940
|
|
|
15,533
|
| |||
Lidio V. Soriano
|
|
5,994
|
|
|
8,127
|
|
|
14,121
|
|
(i) | The number of performance shares shown in the table above is based on achievement of target performance. The shares will vest on February 27, 2018, subject to Populars achievement of certain performance goals during the 20152017 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 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. |
46 | Popular, Inc.
2016 Executive Compensation Tables and Compensation Information
Option Exercises and Stock Vested Table for 2016
The following table includes certain information with respect to the vesting of stock awards during 2016.
Stock Awards | ||||||||
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) (a) |
|||||||
Richard L. Carrión |
52,586 | $1,615,350 | ||||||
Ignacio Alvarez |
21,600 | 669,560 | ||||||
Carlos J. Vázquez |
21,923 | 683,469 | ||||||
Javier D. Ferrer |
1,978 | 52,793 | ||||||
Lidio V. Soriano |
13,130 | 407,937 |
(a) | Value represents the number of shares that vested multiplied by the closing market value of our common stock on the applicable vesting date. |
Popular offers comprehensive retirement benefits to all eligible employees, including NEOs, as summarized below:
Puerto Rico
Retirement Plan
2017 Proxy Statement | 47
2016 Executive Compensation Tables and Compensation Information
Pension Benefits
The following table sets forth certain information with respect to the value of retirement payments accrued as of December 31, 2016 under Populars retirement plans for the NEOs eligible to participate under such plans. Messrs. Alvarez, Ferrer and Soriano are not eligible to participate in the Retirement Plan or Benefit Restoration Plan.
Name | Plan Name |
Number of Years of Credited Service Through Freeze Date |
Present Value of Accumulated Benefit ($) (a) |
Payments During Last Fiscal Year ($) |
||||||||||
Richard L. Carrión |
Retirement Plan | 32.917 | $1,323,257 | | ||||||||||
Benefit Restoration Plan | 5,765,923 | | ||||||||||||
Carlos J. Vázquez |
Retirement Plan | 8.750 | 328,891 | | ||||||||||
Benefit Restoration Plan | 869,970 | |
(a) | This column represents the present value of all future expected pension benefit payments. Values were determined using year-end ASC 715 assumptions with the exception that payments are assumed to begin at the earliest possible retirement date at which benefits are unreduced. Each participating NEO has reached the aforementioned unreduced retirement eligibility. |
Normal retirement is upon reaching age 65 and completion of 5 years of service. The normal retirement benefit is equal to the sum of (a) 1.10% of the average final compensation multiplied by the years of credit up to a maximum of 10 years, plus (b) 1.45% for each additional year of credit up to a maximum of 20 additional years. Participants become eligible for early retirement upon the earlier of: (a) attainment of age 50 with sum of age and years of service equal or greater than 75, or (b) attainment of age 55 with 10 or more years of service. |
Puerto Rico Savings and Investment Plan
Puerto Rico Nonqualified Deferred Compensation Plan
Nonqualified Deferred Compensation
The following table shows nonqualified deferred compensation activity and balances attributable to NEOs:
Name | Executive Contribution in Last FY (2016) (a) |
Registrant Contribution in Last FY (2016) |
Aggregate Earnings in Last FY (2016) (b) |
Aggregate Distributions |
Aggregate Balance at Last FYE (12/31/2016) |
|||||||||||||||
Ignacio Alvarez |
| | $4,002 | | $71,141 | |||||||||||||||
Carlos J. Vázquez |
$8,375 | | 3,976 | | 59,906 |
(a) | Amounts reported in this column are included in the Salary column of the Summary Compensation Table. |
(b) | Based on notional earnings and losses from notional investments made by participants in a slate of investment options available under the plan. |
48 | Popular, Inc.
2016 Executive Compensation Tables and Compensation Information
2017 Proxy Statement | 49
2016 Executive Compensation Tables and Compensation Information
Potential Payments Upon Termination or Change in Control
The following table and footnotes describe certain potential payments that each NEO would receive upon termination of employment or a change of control as of December 31, 2016. The table does not include:
| Compensation or benefits previously earned by the NEO or equity awards that are fully vested; |
| The value of pension benefits that are disclosed in the Pension Benefits table above; and |
| The amounts payable under deferred compensation plans that are disclosed in the Nonqualified Deferred Compensation Plan table above. |
Long-Term Incentive Plan ($)(b) | ||||||||||||||||
Name and Termination Scenarios(a) | Total ($) | Restricted Stock | Performance Shares | Senior Executive Long-Term Incentive Plan(f) |
||||||||||||
Richard L. Carrión |
||||||||||||||||
Retirement(c) |
$ | 5,064,589 | $4,827,386 | | $237,202 | |||||||||||
Death & Disability |
8,529,611 | 4,827,386 | 3,465,023 | 237,202 | ||||||||||||
Change of Control(d) |
8,529,611 | 4,827,386 | 3,465,023 | 237,202 | ||||||||||||
Resignation(e) |
5,064,589 | 4,827,386 | | 237,202 | ||||||||||||
Termination With Cause |
237,202 | | | 237,202 | ||||||||||||
Termination Without Cause |
6,709,854 | 4,827,386 | 1,645,266 | 237,202 | ||||||||||||
Ignacio Alvarez |
||||||||||||||||
Retirement(c) |
| | | | ||||||||||||
Death & Disability |
2,465,138 | 1,359,077 | 1,106,061 | | ||||||||||||
Change of Control(d) |
2,465,138 | 1,359,077 | 1,106,061 | | ||||||||||||
Resignation |
| | | | ||||||||||||
Termination With Cause |
| | | | ||||||||||||
Termination Without Cause |
1,229,167 | 703,985 | 525,183 | | ||||||||||||
Carlos J. Vázquez |
||||||||||||||||
Retirement(c) |
1,052,776 | 1,052,776 | | | ||||||||||||
Death & Disability |
1,888,160 | 1,052,776 | 835,384 | | ||||||||||||
Change of Control(d) |
1,888,160 | 1,052,776 | 835,384 | | ||||||||||||
Resignation(e) |
1,052,776 | 1,052,776 | | | ||||||||||||
Termination With Cause |
| | | | ||||||||||||
Termination Without Cause |
1,449,434 | 1,052,776 | 396,659 | | ||||||||||||
Javier D. Ferrer |
||||||||||||||||
Retirement(c) |
| | | | ||||||||||||
Death & Disability |
1,517,048 | 836,392 | 680,656 | | ||||||||||||
Change of Control(d) |
1,517,048 | 836,392 | 680,656 | | ||||||||||||
Resignation |
| | | | ||||||||||||
Termination With Cause |
| | | | ||||||||||||
Termination Without Cause |
720,797 | 397,610 | 323,187 | | ||||||||||||
Lidio V. Soriano |
||||||||||||||||
Retirement(c) |
| | | | ||||||||||||
Death & Disability |
1,379,147 | 760,365 | 618,782 | | ||||||||||||
Change of Control(d) |
1,379,147 | 760,365 | 618,782 | | ||||||||||||
Resignation |
| | | | ||||||||||||
Termination With Cause |
| | | | ||||||||||||
Termination Without Cause |
646,490 | 352,677 | 293,813 | |
(a) | The annual performance incentive is not guaranteed; therefore, if termination of employment takes place before the date the award is paid, the NEO would not be entitled to receive the award. |
50 | Popular, Inc.
2016 Executive Compensation Tables and Compensation Information
(b) | Values of equity grants are based on $43.82, the closing price of Populars common stock as of December 30, 2016 (the last trading day of 2016). Termination provisions based on type of termination prior to vesting: |
Regular Restricted Stock |
Performance Shares | |||
Retirement |
Become Vested | Contingent Vesting | ||
Death & Disability |
Become Vested | Become Vested | ||
Change of Control |
Become Vested | Become Vested | ||
Resignation |
Forfeiture | Forfeiture | ||
Termination With Cause |
Forfeiture | Forfeiture | ||
Termination Without Cause |
Prorated Vesting | Prorated Vesting |
(c) | For grants prior to January 2014, retirement is defined as termination of employment on or after attaining age 55 and completing 10 years of service (except when termination is for cause). For grants after January 2014, the retirement definition was modified to be termination of employment on or after attaining the earlier of: (x) age 55 and completing 10 years of service, or (y) age 60 and 5 years of service (except when termination is for cause). |
(d) | Outstanding awards granted in 2005 and 2006 are subject to a single trigger requirement for accelerated vesting in the event of change of control. Outstanding awards granted in 2015 and 2016 were subject to double trigger in the event of a change of control. The following amounts are subject to single trigger: R. Carrión, $569,660; and C. Vázquez, $26,336. The following amounts are subject to double trigger: R. Carrión, $7,722,749; I. Alvarez, $2,465,138; C. Vázquez, $1,861,824; J. Ferrer, $1,517,048; and L. Soriano, $1,379,147. |
(e) | For Mr. Carrión and Mr. Vázquez, any resignation would be considered retirement since they are retirement-eligible. The other NEOs are not retirement eligible as of December 31, 2016. |
(f) | The Senior Executive Long-Term Incentive Plan was a performance-based plan with a three-year performance period. Awards were made under the plan in 1997, 1998 and 1999 based on Populars performance during the respective preceding three-year performance periods. The plan had financial targets such as return on equity and stock appreciation. The plan gave NEOs the choice of receiving the incentive in cash or common stock. If they chose common stock, the compensation was deferred in the form of common stock until termination of employment. These are dollar values using the number of shares awarded at the time, the dividends (in shares) received multiplied by the closing price of Populars common stock on December 30, 2016, the last trading day of 2016, which was $43.82. |
2017 Proxy Statement | 51
Compensation of Non-Employee Directors
52 | Popular, Inc.
Compensation of Non-Employee Directors
2016 Non-Employee Director Summary Compensation Table
The following table provides compensation information for Populars non-employee directors during 2016:
Name | Fees or Paid in Cash |
Stock Awards ($)(b) |
Option Awards ($) |
Non-Equity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) | |||||||||||||||||||||
Joaquín E. Bacardí, III |
$68,000 | $ | 100,000 | | | | | $ | 168,000 | |||||||||||||||||||
Alejandro M. Ballester |
80,000 | 100,000 | | | | | 180,000 | |||||||||||||||||||||
John W. Diercksen |
70,000 | 100,000 | | | | | 170,000 | |||||||||||||||||||||
María Luisa Ferré |
79,000 | 100,000 | | | | | 179,000 | |||||||||||||||||||||
David E. Goel |
66,000 | 100,000 | | | | | 166,000 | |||||||||||||||||||||
C. Kim Goodwin |
85,000 | 100,000 | | | | | 185,000 | |||||||||||||||||||||
William J. Teuber, Jr. |
92,000 | 120,000 | | | | | 212,000 | |||||||||||||||||||||
Carlos A. Unanue |
71,000 | 100,000 | | | | | 171,000 |
(a) | Represents the cash value of the $50,000 annual retainer and the committee chair retainers. It also includes the cash value of the fees paid to non-employee directors during 2016 for attending Populars Board and committee meetings from November 2015 to April 25, 2016, when the revised director compensation was not in effect yet. Committee meeting fees are not part of the revised director compensation. During 2016, all members of the Board, except Messrs. Ballester and Goel and Ms. Ferré, elected to receive the annual retainer and meeting fees in restricted stock instead of cash. |
(b) | Represents the 2016 annual award of restricted stock with a grant date fair value (determined in accordance with FASB ASC Topic 718) of $100,000 under the Populars 2004 Omnibus Incentive Plan. In the case of Mr. Teuber, it includes the Lead Director restricted stock grant. The following represents the shares of common stock granted to each director as of December 31, 2016 under Populars 2004 Omnibus Incentive Plan, subject to transferability restrictions and/or forfeiture upon failure to meet vesting conditions: Mr. Bacardí, 14,043; Mr. Ballester, 17,130; Mr. Diercksen, 13,669; Ms. Ferré, 29,924; Mr. Goel, 7,908; Ms. Goodwin, 27,307; Mr. Teuber, 43,609; Mr. Unanue, 29,944. |
Director Stock Ownership Requirements
2017 Proxy Statement | 53
Security Ownership of Certain Beneficial Owners and Management
|
The following table presents certain information as of December 31, 2016, with respect to any person, including any group, as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the 1934 Act), who is known by Popular to beneficially own more than five percent (5%) of its outstanding common stock.
Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership(1) |
Percent of Class | ||||||
The Vanguard Group(2) 100 Vanguard Blvd. Malvern, PA 19355 |
9,763,166 | 9.40% | ||||||
T. Rowe Price Associates, Inc.(3) 100 E. Pratt Street Baltimore, Maryland 21202 |
6,483,097 | 6.20% | ||||||
Hotchkins and Wiley Capital Management, LLC(4) 725 S. Figueroa Street 39th Fl, Los Angeles, CA 90017 |
5,489,451 | 5.29% |
(1) | For purposes of this table, beneficial ownership is determined in accordance with Rule 13d-3 under the 1934 Act. |
(2) | Based solely on information contained in a Schedule 13G/A filed with the SEC on February 13, 2017 by The Vanguard Group reflecting its common stock holdings as of December 31, 2016. The Vanguard Group indicates that it has sole voting power with respect to 61,072 shares of Populars common stock, shared voting power with respect to 10,490 shares of Populars common stock, sole dispositive power with respect to 9,696,946 shares of Populars common stock, and shared dispositive power with respect to 66,220 shares of Populars common stock. |
(3) | Based solely on information contained in a Schedule 13G filed with the SEC on February 7, 2016 by T. Rowe Price Associates, Inc. (Price Associates) reflecting its common stock holdings as of December 31, 2016. Price Associates indicates that it has sole voting power with respect to 1,423,469 shares of Populars common stock and sole dispositive power with respect to 6,483,097 shares of Populars common stock. Popular has been informed by Price Associates that the securities are owned by various individuals and institutional investors for which Price Associates serves as investment adviser with power to direct investments and/or sole power to vote securities. For purposes of the reporting requirements of the 1934 Act, Price Associates is deemed to be a beneficial owner of such securities. However, Price Associates has informed Popular that it expressly disclaims that it is, in fact, the beneficial owner of such securities. |
(4) | Based solely on information contained in a Schedule 13G filed with the SEC on February 10, 2017 by Hotchkins and Wiley Capital Management, LLC reflecting its common stock holdings as of December 31, 2016. Hotchkins and Wiley Capital Management, LLC indicates that it has sole voting power with respect to 5,031,671 shares of Populars common stock and sole dispositive power with respect to 5,489,451 shares of Populars common stock. |
54 | Popular, Inc.
Principal Shareholders
Shares Beneficially Owned by Directors and Executive Officers of Popular
The following table sets forth the beneficial ownership of Populars common stock and preferred stock as of February 27, 2017 for each director and nominee for director and each NEO, and by all directors, NEOs, executive officers and the Principal Accounting Officer and Comptroller as a group.
Common Stock
Name | Amount and Nature of Beneficial Ownership(1) |
Percent of Class(2) | ||||||||||
Joaquín E. Bacardí, III |
28,871 | * | ||||||||||
Alejandro M. Ballester |
23,805 | (3) | * | |||||||||
Richard L. Carrión |
451,915 | (4) | * | |||||||||
John W. Diercksen |
13,937 | * | ||||||||||
María Luisa Ferré |
75,530 | (5) | * | |||||||||
David E. Goel |
8,063 | * | ||||||||||
C. Kim Goodwin |
37,916 | * | ||||||||||
William J. Teuber, Jr. |
55,059 | * | ||||||||||
Carlos A. Unanue |
123,715 | (6) | * | |||||||||
Ignacio Alvarez |
81,702 | (7) | * | |||||||||
Javier D. Ferrer |
26,455 | (8) | * | |||||||||
Lidio V. Soriano |
53,933 | * | ||||||||||
Carlos J. Vázquez |
93,318 | (9) | * | |||||||||
All directors, NEOs, executive officers and the Principal Accounting Officer and Comptroller as a group (21 persons in total) | 1,318,214 | 1.27% |
Preferred Stock
Name | Title of Security | Amount and Nature of Beneficial Ownership(1) |
Percent of Class(2) | ||||||||||||
María Luisa Ferré |
8.25% Preferred Stock | 4,175 | (10) | * | |||||||||||
All directors, NEOs, executive officers and the Principal Accounting Officer and Comptroller as a group (21 persons in total) | 8.25% Preferred Stock | 4,175 | * |
(1) | For purposes of the table above, beneficial ownership is determined in accordance with Rule 13d-3 under the 1934 Act. With respect to common stock, it includes shares of common stock granted under Populars 2004 Omnibus Incentive Plan and the Senior Executive Long-Term Incentive Plan, subject to transferability restrictions and/or forfeiture upon failure to meet vesting conditions, as follows: Mr. Bacardí, 14,043; Mr. Ballester, 17,130; Mr. Carrión, 110,814; Mr. Diercksen, 13,669; Ms. Ferré, 29,924; Mr. Goel, 7,908; Ms. Goodwin, 27,307; Mr. Teuber, 43,609; Mr. Unanue, 29,944; Mr. Alvarez, 31,231; Mr. Ferrer, 19,215; Mr. Soriano, 17,468; and Mr. Vázquez, 24,181, which represent in the aggregate 482,081 shares for all directors, NEOs, executive officers and the Principal Accounting Officer and Comptroller as a group. |
(2) | * indicates ownership of less than 1% of the outstanding shares of common stock or 8.25% Non-Cumulative Monthly Income Preferred Stock, Series B (8.25% Preferred Stock), as applicable. As of February 27, 2017 there were 103,805,156 shares of common stock outstanding and 1,120,665 shares of 8.25% Preferred Stock outstanding. |
(3) | Includes 1,285 shares owned by Mr. Ballesters children. |
(4) | Mr. Carrión owns 366,529 shares and also has indirect investment power over 23 shares owned by his youngest son and 3,408 shares held by the estate of Mr. Carrions deceased spouse. Mr. Carrión has 53,151 shares pledged as collateral. Mr. Carrión has a 16.99% ownership interest in Junior Investment Corporation, a family investment vehicle, which owns 482,266 shares, of which 81,955 are included in the table as part of Mr. Carrións holdings. Junior Investment Corporation has 463,379 shares pledged as collateral. |
(5) | Ms. Ferré has direct or indirect investment and voting power over 75,530 shares. Ms. Ferré owns 31,494 shares and has indirect investment and voting power over 43,739 shares owned by The Luis A. Ferré Foundation and 297 shares owned by RANFE, Inc. |
2017 Proxy Statement | 55
Principal Shareholders
(6) | Includes 75,731 shares held by Mr. Unanues mother, over which Mr. Unanue disclaims beneficial ownership. Mr. Unanue has an 8.33% interest in Island Can Corporation, of which he is General Manager, and which owns 64,000 shares, of which 5,331 are included in the table as part of Mr. Unanues holdings and over which he disclaims beneficial ownership. |
(7) | Includes 3,097 shares owned by Mr. Alvarezs son. |
(8) | Includes 1,167 shares owned by Mr. Ferrers wife over which he disclaims beneficial ownership. |
(9) | Includes 486 shares held by a family member, over which Mr. Vázquez has investment authority. |
(10) | Reflects shares owned by Ms. Ferrés husband. |
Section 16(A) Beneficial Ownership Reporting Compliance
56 | Popular, Inc.
|
||||
Election of Directors | ||||
Populars Restated Certificate of Incorporation and Restated By-Laws establish a classified Board which is divided into three classes as nearly equal in number as possible, with each class having at least three members and with the term of office of one class expiring each year. At the meeting, the three directors assigned to Class 3 will be elected to serve until the 2020 annual meeting of shareholders or until their respective successors are duly elected and qualified. The remaining six directors of Popular will continue to serve as directors, as follows: the three directors assigned to Class 1, until the 2018 annual meeting of shareholders of Popular, and the three directors assigned to Class 2, until the 2019 annual meeting of shareholders, or in each case until their successors are duly elected and qualified.
The persons named as proxies have advised Popular that, unless otherwise instructed, they intend to vote at the meeting the shares covered by the proxies FOR the election of the three nominees, and that if any one or more of such nominees should become unavailable for election they intend to vote such shares FOR the election of such substitute nominees as the Board may propose. Popular has no knowledge that any nominee will become unavailable for election.
Populars Restated By-Laws require that each director receive a majority of the votes cast with respect to such director in uncontested elections (the number of shares voted FOR a director nominee must exceed the number of votes cast AGAINST that nominee). All nominees are currently serving on the Board. If shareholders do not elect a nominee who is serving as a director, Puerto Rico corporation law provides that the director continues to serve on the Board as a holdover director. Under Populars Restated By-Laws and Corporate Governance Guidelines, an incumbent director who is not elected by a majority of the votes cast must tender his or her resignation to the Board. In that situation, Populars Corporate Governance and Nominating Committee would make a recommendation to the Board about whether to accept or reject the resignation, or whether to take other action. The Board would act on the Corporate Governance and Nominating Committees recommendation and publicly disclose its decision.
The Class 3 nominees for election as director at the 2017 Annual Meeting of Shareholders are: María Luisa Ferré, C. Kim Goodwin, and Willian J. Teuber, Jr. Refer to the Nominees for Election as Directors and Other Directors section of this Proxy Statement for information on the directors experience and qualifications. | ||||
|
Our Board recommends that you vote FOR each nominee to the Board.
|
2017 Proxy Statement | 57
|
||||
Advisory Vote to Approve Executive Compensation | ||||
The Dodd-Frank Wall Street Reform and Consumer Protection Act and SEC regulations require a separate, nonbinding say on pay shareholder vote to approve the compensation of executives. The compensation paid to our NEOs and Populars overall executive compensation policies and procedures are described in the Compensation Discussion and Analysis section and the tabular disclosure (together with the accompanying narrative disclosure) in this Proxy Statement.
This proposal gives you as a shareholder the opportunity to endorse or not endorse the compensation paid to Populars NEOs through the following resolution:
RESOLVED, that the shareholders of Popular approve the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis Section and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.
Because your vote is advisory, it will not be binding upon the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee will consider the outcome of the vote when evaluating the effectiveness of our compensation policies and procedures and in connection with its future executive compensation determinations.
The approval of the advisory vote on executive compensation requires the affirmative vote of the holders of a majority of shares represented in person or by proxy and entitled to vote on that matter. At our annual shareholders meeting held in April 2016, the vast majority of Populars voting shareholders (97.72% of shares voted) expressed support for our executive compensation policies and procedures.
| ||||
|
Our Board recommends that you vote FOR this proposal.
|
58 | Popular, Inc.
|
||||||||||||||||||
Ratification of Appointment of Independent Registered Public Accounting Firm
|
| |||||||||||||||||
The Audit Committee intends to appoint PricewaterhouseCoopers LLP as the independent registered public accounting firm of Popular for 2017. PricewaterhouseCoopers LLP has served as independent registered public accounting firm of BPPR since 1971 and of Popular since 1991.
The following table summarizes the fees billed to Popular by PricewaterhouseCoopers LLP for the years ended December 31, 2016 and 2015:
|
|
|||||||||||||||||
December 31, 2016 | December 31, 2015 | |||||||||||||||||
Audit Fees |
$6,541,513 | $6,822,022 | ||||||||||||||||
Audit-Related Fees (a) |
843,434 | 839,098 | ||||||||||||||||
Tax Fees (b) |
43,000 | 118,022 | ||||||||||||||||
All Other Fees (c) |
9,605 | 45,485 | ||||||||||||||||
$7,437,552 | $7,824,627 | |||||||||||||||||
(a) Includes fees for assurance services such as audits of pension plans, compliance-related audits, accounting consultations and Statement on Standards for Attestation Engagements No. 16 reports.
(b) Includes fees associated with tax return preparation and tax consulting services.
(c) Includes software licensing fees.
|
| |||||||||||||||||
The Audit Committee has established controls and procedures that require the pre-approval of all audit and permissible non-audit services provided by PricewaterhouseCoopers LLP. The Audit Committee may delegate to one or more of its members the authority to pre-approve any audit or permissible non-audit services. Under the pre-approval controls and procedures, audit services for Popular are negotiated annually. In the event that any additional audit services are required by Popular, a proposed engagement letter is obtained from the auditors and evaluated by the Audit Committee or the member(s) of the Audit Committee with authority to pre-approve auditor services. Any decisions to pre-approve such audit and non-audit services and fees are to be reported to the full Audit Committee at its next regular meeting. The Audit Committee has considered that the provision of the services covered by this paragraph is compatible with maintaining the independence of the independent registered public accounting firm of Popular. During 2016, fees for all services provided by PricewaterhouseCoopers LLP were approved by the Audit Committee.
Neither Populars Restated Certificate of Incorporation nor its Restated By-Laws require that the shareholders ratify the appointment of PricewaterhouseCoopers LLP as Populars independent registered public accounting firm. If the shareholders do not ratify the appointment, the Audit Committee will reconsider whether or not to appoint PricewaterhouseCoopers LLP, but may nonetheless appoint such firm. Even if the appointment is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such change would be in the best interest of Popular and its shareholders.
|
|
|||||||||||||||||
Representatives of PricewaterhouseCoopers LLP will attend the meeting and will be available to respond to any appropriate questions that may arise. They will also have the opportunity to make a statement if they so desire.
|
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The ratification of the appointment of PricewaterhouseCoopers LLP as Populars auditors requires the affirmative vote of the holders of a majority of shares represented in person or by proxy and entitled to vote on that matter. | ||||||||||||||||||
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Our Board recommends that you vote FOR ratification.
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2017 Proxy Statement | 59
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60 | Popular, Inc.
General Information about the Meeting
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What information is contained in this Proxy Statement?
The information in this Proxy Statement relates to the matters to be acted upon at the meeting, the voting process, the Board of Directors, Board committees, the compensation of directors and executive officers and other required information.
What is the purpose of the meeting?
At the meeting, shareholders will act upon the matters outlined in the accompanying Notice of Meeting, including:
| the election of three Class 3 directors for a three-year term; |
| the approval, on an advisory basis, of our executive compensation; |
| the ratification of the appointment of Populars independent registered public accounting firm for 2017; and |
| consider such other business as may be properly brought before the meeting or any adjournments thereof. |
In addition, management will report on the affairs of Popular.
Could other matters be decided at the meeting?
The Board does not intend to present any matters at the meeting other than those described in the Notice of Meeting. However, if any new matter requiring the vote of the shareholders is properly presented before the meeting, proxies may be voted with respect thereto in accordance with the best judgment of proxy holders, under the discretionary power granted by shareholders to their proxies in connection with general matters. The Board at this time knows of no other matters which may come before the meeting and the Chairman of the meeting will declare out of order and disregard any matter not properly presented.
What documents do I need to be admitted to the meeting?
Only Popular shareholders may attend the meeting. You will need a valid photo identification, such as a drivers license or passport and proof of stock ownership as of the close of business on February 27, 2017, the record date for the meeting (the Record Date). The use of mobile phones, pagers, recording or photographic equipment, tablets, or computers is not permitted.
You will have one vote for every share of Populars common stock, par value $0.01 per share, you owned as of the close of business on the Record Date.
How many votes can all shareholders cast?
Shareholder may cast one vote for each of Populars 103,805,156 shares of common stock that were outstanding on the Record Date. The shares covered by any proxy that is properly executed and received before 11:59 p.m., Eastern Time, the day before the meeting will be voted. Shares may also be voted in person at the meeting.
2017 Proxy Statement | 61
Voting Procedure and Reports
How do I vote?
You can vote either in person at the meeting or by proxy.
To vote by proxy, you must either:
| vote over the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials or proxy card; |
| use the QR Code; |
| vote by telephone by calling the toll-free number found on your proxy card; or |
| vote by mail if you receive or request paper copies of the proxy materials, by filling out the proxy card and sending it back in the envelope provided. To avoid delays in ballot taking and counting, and in order to ensure that your proxy is voted in accordance with your wishes, compliance with the following instructions is respectfully requested: when signing a proxy as attorney, executor, administrator, trustee, guardian, authorized officer of a corporation, or on behalf of a minor, please give full title. If shares are registered in the name of more than one record holder, all record holders must sign. |
If you want to vote in person at the meeting, and you hold your common stock through a securities broker or nominee (i.e., in street name), you must obtain a proxy from your broker or nominee and bring that proxy to the meeting.
How many votes must be present to hold the meeting?
A majority of the votes that can be cast must be present either in person or by proxy to hold the meeting. Proxies received but marked as abstentions or broker non-votes will be included in the calculation of the number of shares considered to be present at the meeting for purposes of determining whether the majority of the votes that can be cast are present. A broker non-vote occurs when a broker or other nominee does not have discretionary authority to vote on a particular matter. Votes cast by proxy or in person at the meeting will be counted by Broadridge Financial Solutions, Inc., an independent third party. We urge you to vote by proxy even if you plan to attend the meeting so that we know as soon as possible that enough votes will be present for us to hold the meeting.
What vote is required and how are abstentions and broker non-votes treated?
To be elected, director nominees must receive a majority of the votes cast (the number of shares voted FOR a director nominee must exceed the number of votes cast AGAINST that nominee). For additional information relating to the election of directors, see Proposal 1: Election of Directors. Broker non-votes and abstentions will not be counted as either a vote cast for or a vote cast against the nominee and, therefore, will have no effect on the results for the election of directors.
For the advisory vote related to executive compensation, the ratification of the appointment of our independent registered public accounting firm and any other item voted upon at the meeting, the affirmative vote of the holders of a majority of the shares represented in person or by proxy and entitled to vote on such item will be required for approval. Abstentions will have the same effect as a negative vote and broker non-votes will not be counted in determining the number of shares necessary for approval.
62 | Popular, Inc.
Voting Procedure and Reports
Can I vote if I participated in one of Populars employee stock plans?
Yes. Your vote will serve to instruct the trustees or independent fiduciaries how to vote your shares in the Popular, Inc. Puerto Rico Savings and Investment Plan and the Popular, Inc. USA 401(k) Savings and Investment Plan. Shares held under the Popular, Inc. Puerto Rico Savings and Investment Plan and the Popular, Inc. USA 401(k) Savings and Investment Plan may be voted by proxy properly executed and received before 11:59 p.m., Eastern Time, on April 21, 2017.
Where can I find the voting results of the annual meeting?
We will report the voting results on a Current Report on Form 8-K filed with the SEC no later than May 2, 2017.
How does the Board recommend that I vote?
The Board recommends that you vote as follows:
| FOR each nominee to the Board; |
| FOR the advisory vote related to executive compensation; and |
| FOR the ratification of the appointment of Populars independent registered public accounting firm for 2017. |
What happens if the meeting is postponed or adjourned?
Your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted.
Yes, you may change your vote at any time before the meeting. To do so, you may cast a new vote by telephone or over the Internet, send in a new proxy card with a later date, or send a written notice of revocation to the President or CLO and Secretary of Popular, Inc. (751), P.O. Box 362708, San Juan, Puerto Rico 00936-2708, delivered before the proxy is exercised. If you attend the meeting and want to vote in person, you may request that your previously submitted proxy not be used.
Why did I receive a notice in the mail regarding internet availability of proxy materials instead of a full set of the proxy materials?
Pursuant to rules adopted by the SEC, we have elected to provide access to Populars proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials to most of our shareholders. We believe this method of distribution makes the proxy distribution process more efficient, less costly and reduces our impact on the environment. All shareholders will have the ability to access the proxy materials on the website referred to in the Notice of Internet Availability of Proxy Materials or request to receive a paper copy of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice of Internet Availability of Proxy Materials. We encourage you to take advantage of the availability of the proxy materials on the Internet.
The Notice of Internet Availability of Proxy Materials, as well as this Proxy Statement and proxy card, were first sent to shareholders on or about March 9, 2017.
2017 Proxy Statement | 63
Proxy Materials
Why didnt I receive notice in the mail regarding internet availability of proxy materials?
We are providing some of our shareholders, including shareholders who have previously asked to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of a Notice of Internet Availability of Proxy Materials. In addition, we are providing a Notice of Internet Availability of Proxy Materials by e-mail to some shareholders, including those shareholders who have previously elected delivery of the proxy materials electronically. Those shareholders should have received an e-mail containing a link to the website where the materials are available and a link to the proxy voting website.
What should I do if I receive more than one set of voting materials?
You may receive more than one set of voting materials, including multiple Notices of Internet Availability of Proxy Materials or multiple proxy cards. For example, if you hold your shares in more than one brokerage account, you may receive separate Notices of Internet Availability of Proxy Materials or proxy cards for each brokerage account in which you hold shares. You should exercise your vote in connection with each set of voting materials as they represent different shares.
There are several shareholders in my address. Why did we receive only one set of proxy materials?
In accordance with a notice sent to certain street name shareholders who share a single address, shareholders at a single address will receive only one copy of this Proxy Statement and our 2016 Annual Report, or Notice of Internet Availability of Proxy Materials, as applicable. This practice, known as householding, is designed to reduce our printing and postage costs. We currently do not household for shareholders of record.
If your household received a single set of proxy materials, but you would prefer to receive a separate copy of this Proxy Statement and our 2016 Annual Report or Notice of Internet Availability of Proxy Materials, you may call 1-866-540-7059, or send a written request to Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, NY 11717 and we will promptly deliver a separate copy of this Proxy Statement and our 2016 Annual Report or Notice of Internet Availability of Proxy Materials.
You may request or discontinue householding in the future by contacting the broker, bank or similar institution through which you hold your shares.
What is included in the proxy materials?
The proxy materials include this Proxy Statement and Populars Annual Report on Form 10-K with the audited financial statements for the year ended December 31, 2016, duly certified by PricewaterhouseCoopers LLP, as independent registered public accounting firm. The proxy materials also include the Notice of Annual Meeting of Shareholders. If you receive or request that paper copies of these materials be sent to you by mail, the materials will also include a proxy card.
Who will bear the cost of soliciting proxies for the meeting?
This proxy is solicited by Popular on behalf of the Board. The cost of soliciting proxies for the meeting will be borne by us. In addition to solicitation by mail, proxies may be solicited personally, by telephone or otherwise. The Board has engaged the firm of Georgeson Inc. to aid in the solicitation of proxies. The cost is estimated at $8,000, plus reimbursement of reasonable out-of-pocket expenses. Our directors, officers and employees may also solicit proxies but will not receive any additional compensation for their services. Proxies and proxy material will also be distributed at our expense by brokers, nominees, custodians and other similar parties.
64 | Popular, Inc.
Proxy Materials
Electronic Delivery of Annual Meeting Materials
You will help us protect the environment and save postage and printing expenses in future years by consenting to receive the annual report and proxy materials via the Internet. You may sign up for this service after voting on the Internet at www.proxyvote.com. If you choose to receive future proxy materials by email, you will receive an email message next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials electronically will remain in effect until you terminate it.
The above Notice of Meeting and Proxy Statement are sent by order of the Board of Directors of Popular, Inc.
In San Juan, Puerto Rico, March 9, 2017.
Chairman of the Board and Chief Executive Officer |
Executive Vice President, Chief Legal Officer and Secretary |
You may request a copy, free of charge, of Populars Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC (without exhibits), through our website, www.popular.com, or by calling (787) 765-9800 or writing to Comptroller, Popular, Inc., P.O. Box 362708, San Juan, PR 00936-2708.
2017 Proxy Statement | 65
Popular, Inc. Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures
Popular prepares its Consolidated Financial Statements using accounting principles generally accepted in the U.S. (U.S. GAAP or the reported basis). In addition to analyzing Populars results on a reported basis, management monitors adjusted net income of Popular and excludes the impact of certain transactions on the results of its operations. Management believes that adjusted net income provides meaningful information about the underlying performance of Populars ongoing operations. Adjusted net income is a non-GAAP financial measure. Refer to the following tables for a reconciliation of net income to adjusted net income for the years ended December 31, 2016 and 2015.
Adjusted Net Income for the Year Ended December 31, 2016
(Non-GAAP)
(In thousands) | Pre-tax | Income tax effect |
Impact on net income |
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U.S. GAAP Net income |
$216,691 | |||||||||||
Non-GAAP Adjustments: |
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Impact of EVERTEC restatement[1] |
2,173 | | 2,173 | |||||||||
Bulk sale of WB loans and OREO[2] |
(891 | ) | 347 | [4] | (544 | ) | ||||||
FDIC arbitration award[3] |
171,757 | (41,108 | )[4] | 130,649 | ||||||||
Goodwill impairment charge[5] |
3,801 | | 3,801 | |||||||||
Other FDICLSA adjustments[6] |
8,806 | (2,380 | )[4] | 6,426 | ||||||||
Income from discontinued operations[7] |
(2,015 | ) | 880 | (1,135 | ) | |||||||
Adjusted net income (Non-GAAP) |
$358,061 |
[1] | Represents Populars proportionate share of the cumulative impact of EVERTEC restatement and other corrective adjustments to its financial statements, as disclosed in EVERTECs 2015 Annual Report on Form 10-K. Due to the preferential tax rate on the income from EVERTEC, the tax effect of this transaction was insignificant to Popular. |
[2] | Represents the impact of the bulk sale of Westernbank loans and OREO. |
[3] | Represents the arbitration decision denying BPPRs request for reimbursement in certain shared loss claims. |
[4] | Gains and losses related to assets acquired from Westernbank as part of the FDIC assisted transaction are subject to the capital gains tax rate of 20%. Other items related to the FDIC loss-sharing agreements are subject to the statutory tax rate of 39%. |