Stock-based compensation

3 Months Ended

Mar. 31, 2019

Disclosure Text Block

Stock-based Compensation

Note 31 - Stock-based compensation

In April 2004, the Corporation’s shareholders adopted the Popular, Inc. 2004 Omnibus Incentive Plan (the “Incentive Plan”). The Incentive Plan permits the granting of incentive awards in the form of Annual Incentive Awards, Long-term Performance Unit Awards, Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Units or Performance Shares. Participants in the Incentive Plan are designated by the Compensation Committee of the Board of Directors (or its delegate as determined by the Board). Employees and directors of the Corporation and/or any of its subsidiaries are eligible to participate in the Incentive Plan.

Under the Incentive Plan, the Corporation has issued restricted shares and performance shares, which 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 and the second part is vested at termination of employment after attainment of 55 years of age and 10 years of service.  The five-year vesting part 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 and the second part is vested at termination of employment after attainment of the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service.  The four year vesting part 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 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 terminates 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 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	149,986		55.05
Performance Shares Quantity Adjustment	22,973		55.51
Vested	(177,913)		46.12
Non-vested at March 31, 2019	377,232	$	40.40

During the quarter ended March 31,2019, 84,590shares of restricted stock (March 31,2018 - 84,616) and 65,396 performance shares (March 31,2018 - 72,414) were awarded to management under the Incentive Plan.

During the quarter ended March 31,2019, the Corporation recognized $ 3.8million of restricted stock expense related to management incentive awards, with a tax benefit of $ 0.4million (March 31,2018 - $ 2.7million, with a tax benefit of $ 0.3million). For the quarter ended March 31,2019, the fair market value of the restricted stock and performance shares vested was $5million at grant date and $9.8million at vesting date. This differential triggers a windfall, of $1.8million that was recorded as a reduction in income tax expense. For the quarterended March 31,2019, theCorporation recognized $3.6million of performance shares expense, with a tax benefit of $0.3million (March 31,2018 - $2.6million, with a tax benefit of $0.3million). The total unrecognized compensation cost related to non-vested restricted stock awards and performance shares to members of management at March 31,2019 was $ 8.9million and is expected to be recognized over a weighted-average period of 2.4 years.

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

(Not in thousands)	Restricted Stock		Weighted-Average Grant Date Fair Value
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
Vested	(1,052)		49.25
Forfeited	-		-
Non-vested at March 31, 2019	-	$	-

During the quarter ended March 31,2019, the Corporation granted 1,052 shares of restricted stock to members of the Board of Directors of Popular, Inc. No shares of restricted stock were granted to members of the Board of Directors of Popular, Inc. during the quarter ended March 31,2018. During this period, the Corporation recognized $0.1million of restricted stock expense, with a tax benefit of $6thousand(March 31,2018 - $0.3million, with a tax benefit of $39thousand). The fair value at vesting date of the restricted stock vested during the quarter ended March 31,2019 for directors was $ 0.1million.