Stock-based compensation

9 Months Ended

Sep. 30, 2021

Disclosure of compensation related costs sharebased payments [Abstract]

Stock-based Compensation

Note 29 - Stock-based compensation

Incentive Plan

On May 12, 2020, the shareholders of the Corporation approved the Popular, Inc. 2020 Omnibus Incentive Plan, which permits the Corporation to issue several types of stock-based compensation to employees and directors of the Corporation and/or any of its subsidiaries (the “2020 Incentive Plan”). The 2020 Incentive Plan replaced the Popular, Inc. 2004 Omnibus Incentive Plan, which was in effect prior to the adoption of the 2020 Incentive Plan (the “2004 Incentive Plan” and, together with the 2020 Incentive Plan, the “Incentive Plan”). Participants under the Incentive Plan are designated by the Talent and 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 to its employees and restricted stock and restricted stock units (“RSUs”) to its directors.

The restricted stock granted under the Incentive Plan to employees becomes 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 attainment of 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 and prior to 2021 was modified as follows, the graduated vesting portion is vested ratably over four years commencing at the date of the grant and the retirement vesting portion 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 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. Restricted stock granted on or after 2021 will vest ratably in equal annual installments over a period of 4 years or 3 years, depending on the classification of the employee.

The performance share awards granted under the Incentive Plan 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. For grants issued on 2020 and 2021, the EPS goal is substituted by the Absolute Return on Average Assets (“ROA”) goal and the Absolute Return on Average Tangible Common Equity (“ROATCE”) respectively. 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, ROA and ROATCE metrics are considered to be a performance condition under ASC 718. The fair value is determined based on the probability of achieving the EPS, ROA or ROATCE goal as of each reporting period. The TSR and EPS, ROA or ROATCE 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, ROA and ROATCE) 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, 2019	345,365	$	41.68
Granted	253,943		42.49
Performance Shares Quantity Adjustment	(7)		48.79
Vested	(234,421)		42.64
Forfeited	(6,368)		44.26
Non-vested at December 31, 2020	358,512	$	41.23
Granted	191,479		69.38
Performance Shares Quantity Adjustment	54,306		54.21
Vested	(272,990)		55.15
Forfeited	(2,429)		42.52
Non-vested at September 30, 2021	328,878	$	47.90

During the quarter ended September 30, 2021, no shares of restricted stock (September 30, 2020 – 266) were awarded to management under the Incentive Plan. During the quarters ended September 30, 2021 and 2020, no performance shares were awarded to management under the Incentive Plan. For the nine months ended September 30, 2021, 120,105 shares of restricted stock (September 30, 2020 – 213,511) and 71,374 performance shares (September 30, 2020 - 64,815) were awarded to management under the Incentive Plan.

During the quarter ended September 30, 2021, the Corporation recognized $1.3 million of restricted stock expense related to management incentive awards, with a tax benefit of $0.3 million (September 30, 2020 - $1.0 million, with a tax benefit of $0.2 million). For the nine months ended September 30, 2021, the Corporation recognized $7.5 million of restricted stock expense related to management incentive awards, with a tax benefit of $1.4 million (September 30, 2020 - $6.7 million, with a tax benefit of $1.1 million). For the nine months ended September 30, 2021, the fair market value of the restricted stock and performance shares vested was $7.1 million at grant date and $10.5 million at vesting date. This differential triggers a windfall of $2.5 million that was recorded as a reduction on income tax expense. During the quarter ended September 30, 2021 the Corporation recognized $0.3 million of performance shares expense, with a tax benefit of $12 thousand (September 30, 2020 - $0.3 million, with a tax benefit of $24 thousand). For the nine months ended September 30, 2021, the Corporation recognized $4.9 million of performance shares expense, with a tax benefit of $0.5 million (September 30, 2020 - $3.1 million, with a tax benefit of $0.3 million). The total unrecognized compensation cost related to non-vested restricted stock awards and performance shares to members of management at September 30, 2021 was $10.5 million and is expected to be recognized over a weighted-average period of 2.0 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 units		Weighted-Average Grant Date Fair Value per Unit
Non-vested at December 31, 2019	$	-	$	-
Granted		43,866		35.47
Vested		(43,866)		35.47
Forfeited		-		-
Non-vested at December 31, 2020	$	-	$	-
Granted		20,079		78.19
Vested		(20,079)		78.19
Forfeited		-		-
Non-vested at September 30, 2021	$	-	$	-

The equity awards granted to members of the Board of Directors of Popular, Inc. (the “Directors”) will vest and become non-forfeitable on the grant date of such award. Effective in May 2019, all equity awards granted to the Directors may be paid in either restricted stock or RSUs at each Directors election. If RSUs are elected, the Directors may defer the delivery of the shares of common stock underlying the RSU award until their retirement. To the extent that cash dividends are paid on the Corporation’s outstanding common stock, the Directors holding RSUs will receive an additional number of RSUs that reflect a reinvested dividend equivalent.

For 2021 and 2020, all Directors elected RSUs. During the quarter ended September 30, 2021, 545 RSUs were granted to the Directors (September 30, 2020 - 783) and the Corporation recognized expense related to these RSUs of $42 thousand with a tax benefit of $8 thousand (September 30, 2020 - $28 thousand with a tax benefit of $5 thousand). For the nine months ended September 30, 2021, the Corporation granted 20,079 RSUs to the Directors (September 30, 2020 - 43,084) and the Corporation recognized $1.9 million of expense related to these RSUs, with a tax benefit of $0.3 million, (September 30, 2020 - $1.5 million, with a tax benefit of $0.3 million). The fair value at vesting date of the RSUs vested during the nine months ended September 30, 2021 for the Directors was $1.6 million.