Stock-based compensation

12 Months Ended

Dec. 31, 2019

Disclosure Text Block

Stock-based Compensation

Note 37 - Stock-based compensation

Incentive Plan

The Popular, Inc. 2004 Omnibus Incentive Plan (the “Incentive Plan”) permits the issuance of several types of stock based compensation for employees and directors of the Corporation and/or any of its subsidiaries. Participants in the Incentive Plan are designated by the Compensation Committee of the Board of Directors (or its delegate as determined by the Board). Under the Incentive Plan, the Corporation has issued restricted stock and performance shares for its employees and restricted stock and restricted stock units (“RSU”) to its directors.

The restricted shares for employees, will become vested based on the employees’ continued service with Popular. Unless otherwise stated in an agreement, the compensation cost associated with the shares of restricted stock is determined based on a two-prong vesting schedule. The first part is vested ratably over five years commencing at the date of grant (the “graduated vesting portion”) and the second part is vested at termination of employment after attaining 55 years of age and 10 years of service (the “retirement vesting portion”). The graduated vesting portion is accelerated at termination of employment after attaining 55 years of age and 10 years of service. The vesting schedule for restricted shares granted on or after 2014 was modified as follows, the first part is vested ratably over four years commencing at the date of the grant (the “graduated vesting portion”) and the second part is vested at termination of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service (the “retirement vesting portion”). The graduated vesting portion is accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service.

The performance share awards consist of the opportunity to receive shares of Popular, Inc.’s common stock provided that the Corporation achieves certain goals during a three-year performance cycle. The goals will be based on two metrics weighted equally: the Relative Total Shareholder Return (“TSR”) and the Absolute Earnings per Share (“EPS”) goals. The TSR metric is considered to be a market condition under ASC 718. For equity settled awards based on a market condition, the fair value is determined as of the grant date and is not subsequently revised based on actual performance. The EPS performance metric is considered to be a performance condition under ASC 718. The fair value is determined based on the probability of achieving the EPS goal as of each reporting period. The TSR and EPS metrics are equally weighted and work independently. The number of shares that will ultimately vest ranges from 50% to a 150% of target based on both market (TSR) and performance (EPS) conditions. The performance shares vest at the end of the three-year performance cycle. If a participant terminate employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service, the performance shares shall continue outstanding and vest at the end of the performance cycle.

The following table summarizes the restricted stock and performance shares activity under the Incentive Plan for members of management.

(Not in thousands)	Shares		Weighted-average grant date fair value
Non-vested at January 1, 2017	383,982	$	26.35
Granted	212,200		42.57
Performance Shares Quantity Adjustment	(232,989)		29.10
Vested	(67,853)		48.54
Non-vested at December 31, 2017	295,340	$	30.75
Granted	239,062		45.81
Performance Shares Quantity Adjustment	234,076		33.09
Vested	(372,271)		35.83
Forfeited	(14,021)		37.35
Non-vested at December 31, 2018	382,186	$	36.41
Granted	218,169		55.55
Performance Shares Quantity Adjustment	15,061		55.72
Vested	(270,051)		44.73
Non-vested at December 31, 2019	345,365	$	41.68

During the year ended December 31, 2019, 152,773 shares of restricted stock (2018 - 166,648; 2017 - 138,516) were awarded to management under the Incentive Plan. During the year ended December 31, 2019, 65,396 performance shares (2018 - 72,414; 2017 - 73,684) were awarded to management under the Incentive Plan.

During the year ended December 31, 2019, the Corporation recognized $7.7 million of restricted stock expense related to management incentive awards, with a tax benefit of $1.2 million (2018 - $6.9 million, with a tax benefit of $1.1 million; 2017 - $5.6 million, with a tax benefit of $1.1 million). During the year ended December 31, 2019, the fair market value of the restricted stock vested was $13.7 million at grant date and $18.9 million at vesting date. This triggers a windfall of $1.9 million that was recorded as a reduction on income tax expense. During the year ended December 31, 2019 the Corporation recognized $4.6 million of performance shares expense, with a tax benefit of $0.3 million (2018 - $5.6 million, with a tax benefit of $0.4 million; 2017 - $1.2 million, with a tax benefit of $0.1 million). The total unrecognized compensation cost related to non-vested restricted stock awards to members of management at December 31, 2019 was $8.8 million and is expected to be recognized over a weighted-average period of 2.4 years.

The following table summarizes the restricted stock and RSU activity under the Incentive Plan for members of the Board of Directors:

(Not in thousands)	Restricted stock		Weighted-average grant date fair value	RSU		Weighted-average grant date fair value
Non-vested at January 1, 2017	-		-	-		-
Granted	25,771	$	38.42	-	$	-
Vested	(25,771)		38.42	-		-
Forfeited	-		-	-		-
Non-vested at December 31, 2017	-		-	-		-
Granted	25,159	$	46.71	-	$	-
Vested	(25,159)		46.71	-		-
Forfeited	-		-	-		-
Non-vested at December 31, 2018	-		-	-		-
Granted	1,052	$	49.25	27,449	$	57.64
Vested	(1,052)		49.25	(27,449)		57.64
Forfeited	-		-	-		-
Non-vested at December 31, 2019	-		-	-		-

Effective on May 2019, all equity awards granted to the directors may be paid in either restricted stocks or RSU, at the directors’ election. For the year 2019, all directors elected RSU. The directors’ equity awards will vest and become non-forfeitable on the grant date of such award. At the director’s option, the shares of common stocks underlying the RSU award shall be delivered to the director after its retirement, either on a fix date or in annual installments. To the extent that cash dividends are paid on the Corporation’s outstanding common stocks, the director will receive an additional number of RSU that reflect reinvested dividend equivalent.

During the year ended December 31, 2019, the Corporation granted 1,052 shares of restricted stock to members of the Board of Directors of Popular, Inc. (2018 - 25,159; 2017 – 25,771) and 27,449 RSUs were granted to members of the Board of Directors of Popular, Inc., which became vested at grant date. No RSU were granted to the members of the Board of Directors of Popular, Inc. for the years ended December 31, 2018 and 2017. During 2019, the Corporation recognized $52 thousand of restricted stock expense related to these restricted stock grants, with a tax benefit of $6 thousand (2018 - $1.6 million, with a tax benefit of $0.2 million; 2017 - $1.3 million, with a tax benefit of $0.1 million) and $1.6 million of restricted stock expense related to these RSU, with a tax benefit of $0.2 million. No restricted stock expense was recognized for years ended December 31, 2018 and 2017 related to RSU. The fair value at vesting date of the restricted stock shares and RSU vested during the year ended December 31, 2019 for directors was $52 thousand and $1.6 million respectively.