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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
Filed by the Registrant þ
Filed by a Party other than the Registrant o¨
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| þ | Preliminary Proxy Statement | |||||
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||||
| ¨ | Definitive Proxy Statement | |||||
| ¨ | Definitive Additional Materials | |||||
| ¨ | Soliciting Material Pursuant to §240.14a-12 | |||||
Popular, Inc. | ||||||
| (Name of Registrant as Specified In Its Charter) | ||||||
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||||||
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2012
P o p u l a r, I n c . P r o x y S t a t e m e n t
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Event Date: April 27, 2012 Official notification of matters to be brought to vote at | ||||||
Popular, Inc. 209 Muñoz Rivera Avenue San Juan, Puerto Rico 00918 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held on April 27, 2012 To the Stockholders of Popular, Inc.: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Meeting”) of Popular, Inc. (the “Corporation”) for 2012 will be held at 9:00 a.m., local time, on April 27, 2012, on the third floor of the Centro Europa Building, 1492 Ponce de León Avenue, San Juan, Puerto Rico, to consider and act upon the following matters: (1) To elect three directors assigned to “Class 1” of the Board of Directors of the Corporation for a three-year term and one director assigned to “Class 2” for a one-year term; (2) To authorize and approve an amendment to our Restated Certificate of Incorporation to effect a reverse stock split of our outstanding common stock, par value $0.01 per share (“Common Stock”), of 1-for-10, together with a corresponding reduction in the number of authorized shares of our Common Stock; (3) To approve an advisory vote of the Corporation’s executive compensation program; (4) To ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Corporation for 2012; (5) To approve the adjournment or postponement of the Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the Meeting to approve the proposal set forth in Item 2; and (6) To consider such other business as may be properly brought before the Meeting or any adjournments thereof. At present, management knows of no other business to be brought before the Meeting. Only stockholders of record at the close of business on February 27, 2012 are entitled to notice of and to vote at the Meeting. This year we are using the Internet as our primary means of furnishing proxy materials to most of our stockholders, in accordance with the U.S. Securities and Exchange Commission rules. Rather than sending stockholders a paper copy of our proxy materials, we are sending them a Notice of Internet Availability of Proxy Materials that contains instructions for accessing the materials and voting via the Internet. We believe this method of distribution will make the proxy distribution process more efficient, less costly and will reduce our impact on the environment. This Proxy Statement and our 2011 Annual Report are available at:www.popular.comandwww.proxyvote.com.Stockholders may request a copy of the proxy materials in printed form by following the procedures set forth in the Notice of Internet Availability of Proxy Materials. We encourage you to attend the Meeting, but even if you cannot attend, it is important that your shares are represented and voted. Whether or not you plan to attend, please vote as soon as possible so that the Corporation may be assured of the presence of a quorum at the Meeting. You may vote via the Internet, by telephone or, if you received a paper proxy card in the mail, by mailing the completed proxy card. The instructions on the Notice of Internet Availability of Proxy Materials or your proxy card describe how to use these convenient services. In San Juan, Puerto Rico, on March , 2012. By Order of the Board of Directors,
SAMUEL T. CÉSPEDES Secretary |
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POPULAR, INC. 20102012 PROXY STATEMENT
TO BE HELD ON MAY 4, 2010APRIL 27, 2012
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Popular, Inc. (the “Corporation”) for use at the Annual Meeting of Stockholders of the Corporation (the “Meeting”) to be held on May 4, 2010,April 27, 2012, beginning at 9:00 a.m., local time, on the third floor of the Centro Europa Building, 1492 Ponce de León Avenue, San Juan, Puerto Rico, and at any postponements or adjournments thereof.
This year we are using the Internet as our primary means of furnishing our proxy materials to most of our stockholders. Rather than sending those stockholders a paper copy of our proxy materials, we are sending them a Notice of Internet Availability of Proxy Materials that contains instructions for accessing the materials and voting via the Internet and by phone. The notice also contains information on how to request a paper copy of the proxy materials by mail. We believe this method of distribution will make the proxy distribution process more efficient, less costly and will reduce our impact on the environment.
The Notice of Internet Availability of Proxy Materials, as well as any Proxy Statement and the enclosed form of the proxy card were first sent to stockholders on or about March 15, 2010.
What information is contained in this Proxy Statement? The information in this Proxy Statement relates to the proposals to be voted on at the Meeting, the voting process, the Board of Directors of the Corporation (the “Board”), Board committees, the compensation of directors and executive officers and other required information. What is the purpose of the Meeting? At the Meeting, stockholders will act upon the matters outlined in the accompanying Notice of Meeting, the election of the the approval of an advisory vote the ratification of the Corporation’s independent registered public accounting firm for the adjournment or postponement of the In addition, management will report on the affairs of the Corporation. Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of the proxy materials? Pursuant to rules adopted by the U.S. Securities and Exchange Commission (the “SEC”), the Corporation has elected to provide access to its proxy materials over the Internet. Accordingly, the Corporation is sending a Notice of Internet Availability of Proxy Materials to most of our stockholders. All stockholders 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. The Corporation encourages you to take advantage of the availability of the proxy materials on the Internet in order to help reduce the costs and environmental impact of the Meeting. Why didn’t I receive a notice in the mail regarding Internet availability of proxy materials? We are providing some of our stockholders, including stockholders 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 Notice of Availability of the Proxy Materials by e-mail to some stockholders, including those 1 POPULAR, INC. 2012 PROXY STATEMENT stockholders who have previously elected delivery of the proxy materials electronically. Those stockholders should have received an e-mail containing a link to the website where those materials are available and a link to the proxy voting website. What The proxy materials include this Proxy Statement How many votes do I have? You will have one vote for every share of the Corporation’s How many votes can all stockholders cast? Stockholders may cast one vote for each of the Corporation’s 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 nomineeABOUT THE MEETINGincluding including:five directors, four directors;amendmentsauthorization and approval of an amendment to Article Fifth of theour Restated Certificate of Incorporation to eliminate the provision that the authorized capitaleffect a reverse stock may be increased or decreased bysplit of our outstanding common stock, par value $0.01 per share (“Common Stock”), of 1-for-10, together with a majority vote and to increasecorresponding reduction in the number of authorized shares of common stock from 700,000,000 to 1,700,000,000, our Common Stock;related toof the Corporation’s executive compensation program;20102012; and a proposal to approve Meeting. Meeting, if necessary or appropriate, to solicit additional proxies.should I receive?is included in the proxy materials?You should receivethe Notice of Annual Meeting of Stockholders, the proxy card and the Corporation’s 2009 annual reportAnnual Report on Form 10-K with the audited financial statements for the year ended December 31, 2009,2011, duly certified by PricewaterhouseCoopers LLP, as independent registered public accounting firm. The proxy materials also include the Notice of Annual Meeting of Stockholders. If you receive or request that paper copies of these materials be sent to you by mail, these materials will also include the proxy card.common stock, par value $0.01 per share (“Common Stock”),Stock you owned as of the close of business on March 5, 2010,February 27, 2012, the record date for the Meeting (the “Record Date”). [ ] 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 voted in person may be voted until 9:00 a.m., local time, on the day of the Meeting. 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 29, 2010.24, 2012. indicates on the proxy card that it 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 will know as soon as possible that enough votes will be present for us to hold the Meeting.1 POPULAR, INC. 2010 PROXY STATEMENT
To be elected, directors must receive a majority of the votes cast (the number of shares voted FOR“FOR” a director nominee must exceed the number of votes cast AGAINST the“AGAINST” that nominee). For additional information relating to the election of directors, see “Proposal 1: Election of Directors .”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.
The affirmative vote of the holders of two-thirds of the outstanding Common Stock is required for the approval of the amendment to the Restated Certificate of Incorporation to effect the reverse stock split and the reduction in the number of authorized shares of Common Stock. Abstentions and broker non-votes will not be voted for this proposal, therefore, they will have the same legal effect as votes cast against the proposed amendment. Additionally, the failure to vote will have the same effect as a vote against the nominee.
For the advisory vote related to executive compensation, the ratification of the independent registered public accounting firm, the proposal to approve the adjournment or postponement of the Meeting, 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 thissuch 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.
Can I vote if I participate in anone of the Corporation’s employee stock plan?plans?
Yes. Your proxy cardvote 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.
2 POPULAR, INC. 2012 PROXY STATEMENT
How does the Board recommend that I vote?
The Board recommends that you vote FORas follows:
“FOR” each nominee to the Board; FOR
“FOR” the amendment to Article Fifth of theour Restated Certificate of Incorporation to eliminateeffect a reverse stock split of our outstanding Common Stock of 1-for-10, together with a corresponding reduction in the provision that the authorized capital stock of the Corporation may be increased or decreased by a majority vote; FOR the amendment to Article Fifth of the Restated Certificate of Incorporation to increase the authorized number of authorized shares of Common Stock from 700,000,000 to 1,700,000,000; FORStock;
“FOR” the advisory vote related to executive compensation; FOR
“FOR” the ratification of the Corporation’s independent registered public accounting firm for the year 2010;2012; and FOR
“FOR” the adjournment ofor postponement of the Meeting, if necessary or appropriate, to approve the amendment to Article Fifth of the Restated Certificate of Incorporation.solicit additional proxies.
How do I vote?
You can vote either in person at the Meeting or by proxy without attending the Meeting.
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;
vote by telephone by calling the toll-free number found on the Notice of Internet Availability of Proxy Materials or proxy card; or
vote by mail if you want to votereceive or request paper copies of the proxy materials, by filling out the proxy card and sending it back in person at the Meeting, and you hold your Common Stock through a securities broker or nominee (that is, in street name), you must obtain a proxy from your broker or nominee and bring that proxy to the Meeting.
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.
Who will bear the costscost of soliciting proxies for the Meeting?
The cost of soliciting proxies for the Meeting will be borne by the Corporation. 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 $7,500,$8,000, plus reimbursement of reasonableout-of-pocket expenses.
Can I change my vote?
Yes, you may change your vote.vote at any time before the Meeting. To do so, justyou may cast a new vote by telephone or over the Internet, send in a new proxy card with a later date, or cast a new vote by telephone or over the Internet, or send a written notice of revocation to the President or Secretary of Popular, Inc., (751), P.O. Box 362708, San Juan, Puerto Rico00936-2708, 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.
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 copiesNotices of thisInternet Availability of Proxy Statement andMaterials or multiple proxy cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate Notices of Internet Availability or proxy cardcards for each brokerage account in which you hold shares. Please complete, sign, date and returnYou should exercise your vote in connection with each proxy card that you receive.
3 POPULAR, INC. 2012 PROXY STATEMENT
Could other matters be decided at the Meeting?
The Board does not intend to present any businessmatters at the Meeting other than thatthose described in the Notice of Meeting. 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. However, if any new matter requiring the vote of the stockholders 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 stockholders to their proxies in connection with general matters.
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.
Electronic Delivery of Annual Meeting Materials
You will help the Corporation 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 atwww.proxyvote.com.
* * *
The following table presents certain information 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 Name and Address of Beneficial Owner Valinor Management, LLC(2) 510 Madison Avenue, 25th Floor New York, NY 10022 Paulson & Co. Inc.(3) 1251 Avenue of the Americas New York, NY 10020 (1) For purposes of this table, “beneficial ownership” is determined in accordance withRule 13d-3 under the 1934 Act. (2) Based solely on (3) 4 POPULAR, INC. PRINCIPAL STOCKHOLDERSFollowing is thetoby the Corporation to beneficially own more than five percent (5%) of the outstanding Common Stock. Name and Address of Amount and Nature of Beneficial Owner Beneficial Ownership(1) Percent of Class(2) Wellington Management Company, LLP 47,754,863 7.47 %(3) 75 State Street
Boston, MA 02109 Amount and Nature of
Beneficial Ownership(1) Percent of Class 80,077,203 7.81 % 65,770,600 6.42 % 639,540,105information contained in a Schedule 13G/A filed with the SEC on February 10, 2012 by Valinor Management, LLC (“Valinor”) reflecting its Common Stock holdings as of January 31, 2012. According to this statement, Valinor beneficially owns 80,077,203 shares of Common Stock outstanding as of February 3, 2010.Stock. On February 12, 2010, Wellington Management Company, LLP (“Wellington”) filed Based solely on information contained in a Schedule 13G/A13G filed with the Securities and Exchange CommissionSEC on February 14, 2012 by Paulson & Co. Inc. (“SEC”Paulson”) reflecting theirits Common Stock holdings as of December 31, 2009.2011. According to this statement, Wellington,Paulson in its capacity as investment advisor, may be deemedhas sole power to beneficially own 47,754,863vote or direct the vote and to dispose or direct the disposition of 65,770,600 shares of Common Stock which are heldowned by Paulson’s advisory clients. Paulson disclaims beneficial ownership of record by Wellington clients.3such shares.20102012 PROXY STATEMENT
The following table sets forth the beneficial ownership of the Corporation’s Common Stock and preferred stock as of February 3, 2010,1, 2012, for each director and nominee for director and each Named Executive Officer, (“NEO”) defined as the executive officers included in the Summary Compensation Table included in the “Compensation Discussion and Analysis” section of this Proxy Statement, and by all directors, executive officers, the Corporate Secretary and the Principal Accounting Officer as a group.
Common Stock
| Amount and Nature of | ||||||||
| Beneficial | Percent of | |||||||
| Name | Ownership(1) | Class | ||||||
| Alejandro M. Ballester | 45,675 | (2) | .01 | |||||
| Richard L. Carrión | 3,376,263 | (3) | .53 | |||||
| María Luisa Ferré | 6,577,875 | (4) | 1.03 | |||||
| Michael T. Masin | 93,440 | .01 | ||||||
| Manuel Morales Jr. | 500,253 | (5) | .08 | |||||
| Frederic V. Salerno | 124,917 | .02 | ||||||
| William J. Teuber Jr. | 82,677 | .01 | ||||||
| Carlos A. Unanue | 930,902 | (6) | .15 | |||||
| José R. Vizcarrondo | 530,802 | (7) | .08 | |||||
| David H. Chafey Jr. | 673,013 | .11 | ||||||
| Jorge A. Junquera | 647,969 | (8) | .10 | |||||
| Carlos J. Vázquez | 522,693 | (9) | .08 | |||||
| Brunilda Santos de Álvarez | 161,790 | .03 | ||||||
| All directors, executive officers, the Corporate Secretary and the Principal Accounting Officer as a group (17 persons as a group) | 14,561,758 | 2.28 | ||||||
| Name | Amount and Nature of Beneficial Ownership(1) | Percent of Class(2) | ||||||
Alejandro M. Ballester | 165,378 | (3) | * | |||||
Richard L. Carrión | 4,129,279 | (4) | * | |||||
María Luisa Ferré | 6,644,126 | (5) | * | |||||
David Goel | 14,661,767 | (6) | 1.43 | % | ||||
C. Kim Goodwin | 134,049 | * | ||||||
Manuel Morales Jr. | 566,727 | (7) | * | |||||
William J. Teuber Jr. | 163,618 | * | ||||||
Carlos A. Unanue | 1,002,050 | (8) | * | |||||
José R. Vizcarrondo | 898,690 | (9) | * | |||||
Ignacio Alvarez | 232,739 | (10) | * | |||||
Amílcar Jordán(Former Executive Officer) | 118,519 | (11) | * | |||||
Jorge A. Junquera | 971,539 | * | ||||||
Eli Sepúlveda | 130,280 | * | ||||||
Carlos J. Vázquez | 717,690 | (12) | * | |||||
All directors, executive officers, the Corporate Secretary and the Principal Accounting Officer as a group (22 persons as a group) | 31,640,515 | 3.01 | % | |||||
Preferred Stock
| Amount and Nature of Beneficial | Percent | |||||||||||||||
| Name | Title of Security | Ownership(1) | of Class | |||||||||||||
| María Luisa Ferré | 8.25 | % | Preferred Stock | 4,175 | (10) | .37 | ||||||||||
| All directors, executive officers, Corporate Secretary and the Principal Accounting Officer as a group (17 persons as a group) | 8.25 | % | Preferred Stock | 4,175 | .37 | |||||||||||
| Name | Title of Security | Amount and Nature of Beneficial | Percent Of Class(2) | |||||||
María Luisa Ferré | 8.25% Preferred Stock | 4,175 | (13) | * | ||||||
All directors, executive officers, the Corporate Secretary and the Principal Accounting Officer as a group (22 persons as a group) | 8.25% Preferred Stock | 4,175 | * | |||||||
(1) For purposes of this table, “beneficial ownership” is determined in accordance withRule 13d-3 under the 1934 Act, pursuant to which a person or group of persons is deemed to have “beneficial ownership” of a security if that person has the right to acquire beneficial ownership of such security within 60 days. Therefore, it includes the number of shares of Common Stock that could be purchased by exercising stock options that were exercisable as of February 3, 20101, 2012 or within 60 days after that date, as follows: Ms. Ferré, 16,122; Mr. Morales, 16,122; Mr. Salerno, 6,058; Mr. Vizcarrondo, 1,274; Mr. Chafey, 206,106; Mr. Junquera, 181,374; Ms. Santos de Álvarez, 92,747;Mr. Jordán, 38,816; Mr. Sepúlveda, 29,997; and Mr. Vázquez, 221,762, which represent 831,030701,026 shares for all directors, executive officers, the Corporate Secretary and the Principal Accounting Officer as a group. Also, it includes shares granted under the Popular, Inc. 2004 Omnibus Incentive Plan and the Senior Executive Long-Term
5 POPULAR, INC. 2012 PROXY STATEMENT
Incentive Plan, subject to transferability restrictions and/or forfeiture upon failure to meet vesting conditions, as follows: Mr. Ballester, 74,704; Mr. Carrión, 129,997;491,136; Ms. Ferré, 49,348; Mr. Masin, 63,440;115,599; Ms. Goodwin, 34,049; Mr. Morales, 74,846; Mr. Salerno, 86,398;150,539; Mr. Teuber, 80,397;161,337; Mr. Unanue, 71,142; Mr. Vizcarrondo, 48,254;114,710; Mr. Chafey, 46,523;Alvarez, 42,370; Mr. Junquera, 34,117; Ms. Santos de Álvarez, 18,609;282,702; Mr. Sepúlveda, 58,868; and Mr. Vázquez, 11,630,195,292, which represent 675,0812,184,965 shares for all directors, executive officers, the Corporate Secretary, and the Principal Accounting Officer as a group.
(2) This amount includes 17,037 “*” indicates ownership of less than 1% of the outstanding shares of Common Stock or 8.25% Non-Cumulative Monthly Income Preferred Stock, 2008 Series B, outstanding.
(3) Includes 32,037 shares owned by hisMr. Ballester’s wife and children.
(3)(4) Mr. Carrión owns 1,473,7792,283,457 shares and also has indirect investment power over 56,887225 shares owned by his childrenyoungest son and 34,077 shares owned by his wife. Mr. Carrión has 1,070,7741,080,774 shares pledged as collateral. Mr. Carrión has a 17.89% ownership interest in Junior Investment Corporation, which owns 10,125,882 shares, of which 1,811,520 are included in the table as part of Mr. Carrión’s holdings. Junior Investment Corporation has 4,633,796 shares pledged as collateral.
(4)(5) Ms. Ferré has direct or indirect investment and voting power over 6,577,8756,644,126 shares. Ms. Ferré owns 56,355122,604 shares and has indirect investment and voting power over 3,081,082 shares owned by FRG, Inc., 437,400437,401 shares owned by The Luis A. Ferré Foundation, 2,970 shares owned by RANFE, Inc., and 2,961,6462,961,647 shares owned by GFR Media LLC (formerly El Día, Inc.). All the shares owned by The Luis A. Ferré Foundation have been pledged as collateral. Ms. Ferré’s husband owns 22,300 shares.
(6) Mr. Goel is the Managing General Partner for Matrix Capital Management Company, LLC, which has sole discretionary investment and voting power over 14,661,767 shares of Common Stock.
(5)(7) This amount includes Includes 386,365 shares owned by Mr. Morales’s mother over which he has voting power as attorney-in-fact.
(8) (6) This amount includesIncludes 757,312 shares held by Mr. Unanue’s 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 640,000 shares, of which 53,312 are included in the table as part of Mr. Unanue’s holdings and over which he disclaims beneficial ownership.
(9) (7) This amount includes 278,629Includes 579,461 shares owned by DMI Pension Trust and 35,00035,600 owned by Forever Dependent, LLC, where Mr. Vizcarrondo serves as trustee and member of the investment committee and over which he disclaims beneficial ownership.
(10) (8) This amount includes 24,868Includes 135,079 shares owned byas to which Mr. Junquera’s son and daughter over which heAlvarez has voting power and disclaims beneficial ownership.a 50% undivided interest pending liquidation of the estate of his deceased spouse.
(11) Mr. Jordán is a former Named Executive Officer. His employment with the Corporation terminated on September 1, 2011.
(9)(12) This amount includes Includes 187,600 shares held by various family members, over which Mr. Vázquez has investment authority.
(13) (10) The amount shown in the table reflectsReflects shares owned by herMs. Ferré’s husband.
Section 16(a) of the 1934 Act requires the Corporation’s directors and executive officers to file with the SEC reports of ownership and changes in ownership of Common Stock. Officers and directors are required by SEC regulations to furnish the Corporation with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such reports furnished to the Corporation or written representations that no other reports were required, the Corporation believes that, with respect to * * * 6 POPULAR, INC. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE2009,2011, all filing requirements applicable to its officers and directors were satisfied, except for the following reports which were filed late: two reports each covering one transaction by Ms. Ferré; one report covering two transactions by each of Mr. Bermúdez, Mr. Junquera and Mr. Vizcarrondo in connection with the Corporation’s Exchange Offer on August 20, 2009; and one report covering four transactions by Mr. CarrióGilberto Monzón, also in connection with the Exchange Offer.which was filed late.520102012 PROXY STATEMENT
The Restated Certificate of Incorporation and the Amended and Restated By-laws of the Corporation establish a classified Board pursuant to which the Board 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. Each director serves for a term ending on the date of the third annual meeting of stockholders following the annual meeting at which such director was elected or until his or her successor has been duly elected and qualified. At the Meeting, three directors assigned to “Class 2”1” are to be elected to serve until the 2015 annual meeting of stockholders or until their respective successors are duly elected and qualified. In addition, one director assigned to “Class 2” will be elected to serve until the 2013 annual meeting of stockholders or until their respective successors shall have been duly elected and qualified. In addition, as described below, two directors assigned to “Class 1” are to be elected to serve until the 2012 annual meeting of stockholders or until their respective successors shall have beenhis successor is duly elected and qualified. The remaining fourfive directors of the Corporation will continue to serve as directors, as follows: until the 20122013 annual meeting of stockholders of the Corporation, in the case of the directordirectors assigned to “Class 1,2,” and until the 20112014 annual meeting of stockholders, in the case of those threethe directors assigned to “Class 3,” or in each case until their successors are duly elected and qualified.
The persons named as proxies in the accompanying proxy card have advised the Corporation that, unless otherwise instructed, they intend to vote at the Meeting the shares covered by the proxies FOR“FOR” the election of the fivethree nominees, named below, and that if any one or more of such nominees should become unavailable for election they intend to vote such shares FOR“FOR” the election of such substitute nominees as the Board may propose. The Corporation has no knowledge that any nominee will become unavailable for election.
The Corporation’s Amended and 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“FOR” a director nominee must exceed the number of votes cast AGAINST“AGAINST” that nominee). All nominees for election at the Meeting are currently serving on the Board.Board, except for Mr. Goel, who is being nominated for the first time. Mr. Goel will be filling the vacancy created by Mr. Masin’s resignation effective December 31, 2011. If stockholders do not elect a nominee who is serving as a director, Puerto Rico corporation law provides that the director would continue to serve on the Board as a “holdover director.” Under the Corporation’s Amended and Restated BylawsBy-laws and Corporate Governance Guidelines, an incumbent director who is not elected by a majority of the votes cast shallmust tender his or her resignation to the Board. In that situation, the Corporation’s 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 Committee’s recommendation and publicly disclose its decision.
The Board met 2112 times during 2009.2011. All directors attended 82%75% or more meetings of the Board and the meetings of committees of the Board on which such directors served.
7 POPULAR, INC. 2012 PROXY STATEMENT
Nominees for Election Class 1 Directors (terms expiring NOMINEES FOR ELECTION AS DIRECTORS AND OTHER DIRECTORS2012)2015)
| NAME AND AGE | PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE, DIRECTORSHIPS AND QUALIFICATIONS | ||
Alejandro M. Ballester, age Member of the Board since 2010
| President of Ballester Hermanos, Inc., a major food and beverage distributor in Puerto Rico, since 2007 and Senior Vice President from 2005 to 2007. Member of the Board of Directors of Mr. Ballester has a comprehensive understanding of Puerto Rico’s consumer products and distribution industries acquired through | ||
Richard L. Carrión, age | |||
 | ||
Member of the Board since 1990 
|
 |
 |
 | ||
 |
 | Chairman of the Board since 1993. CEO of the Corporation since 1994 and President from 1991 to January Wyeth from 2000 to 2006. Mr. Carrión’s |
8 POPULAR, INC. 2012 PROXY STATEMENT
| NAME AND AGE | PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE, DIRECTORSHIPS AND QUALIFICATIONS | |
Carlos A. Unanue, age 48 Member of the Board since 2010
| President of Goya de Puerto Rico, Inc. since 2003 and of Goya Santo Domingo, S.A. since 1994, food processors and distributors. Mr. Unanue has 25 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 foodstuff, as well as to the food processing and canned foodstuff manufacturing business. Through his work with Goya Foods, Mr. Unanue has developed a profound understanding of the Corporation’s 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 the Corporation’s 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. | |
Nominee for Election Class 2 Director (term expiring 2013) | ||
David Goel, age 42
| Co-founder and Managing General Partner of Matrix Capital Management Company, LLC since 1999. Equity Analyst at Tiger Management L.L.C., a $23 billion investment fund, from 1996 to 1999. Associate at General Atlantic Partners from 1995 to 1996. Technology Financial Analyst at Morgan Stanley & Co. from 1993 to 1995. Trustee of the Museum of Fine Arts, Boston since 2010. Vice Chairman and Board Member of the Citi Performing Arts Center since 2009. Trustee of The Meadowbrook School of Weston, MA since 2009. Member of Investment Board of Philips Exeter Academy since 2003. During his 19-year career as a | |
9 POPULAR, INC. 2012 PROXY STATEMENT
Class 2 Directors (terms expiring 2013) | ||
NAME AND AGE | PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE, DIRECTORSHIPS AND QUALIFICATIONS | |
Manuel Morales Jr., age 66 Member of the Board since 1990
| President of Parkview Realty, Inc. since 1985, the Atrium Office Center, Inc. since 1996 and Atrium Business Center since 1995, privately held companies engaged in real estate leasing. Member of the Board of Trustees of Fundación Banco Popular, Inc. since 1981. Member of the Board of Trustees of the Caribbean Environmental Development Institute since 1994 and of Fundación Angel Ramos, Inc. since 1998. Mr. Morales has been a director of the Bank, the Corporation’s principal banking subsidiary, since 1978 and of the Corporation since 1990, and therefore brings to the Board the benefit of the institutional knowledge and prior experiences that are relevant to the Board’s decision making processes. He has previously served as chairman of the Audit Committee of the Corporation. Throughout the years, Mr. Morales has demonstrated a firm commitment to the Corporation and has developed an intrinsic understanding of the Corporation’s core businesses, markets and areas of risks and opportunities. Mr. Morales’s experience in the management and ownership of various real estate leasing businesses in Puerto Rico with aggregate assets of approximately $9 million and average annual revenues of $5 million as of December 31, 2011, gives him an in depth understanding of the economic conditions of a business segment that is important for the Corporation’s commercial banking division in Puerto Rico. Mr. Morales has served as Director and Chairman of the Board of the Puerto Rico Chamber of Commerce, Director of the Better Business Bureau and Trustee of some of the most renowned educational, philanthropic and charitable institutions in Puerto Rico, including Fundación Banco Popular, Inc. | |
José R. Vizcarrondo, age 50 Member of the Board since 2004
| President, CEO and partner of Desarrollos Metropolitanos, L.L.C., a privately held general construction company, since 2004. Member of the Trust Committee of the Bank since 2004. Member of the Board of Directors of the Puerto Rico Chapter of the National Association of Home Builders since 2002. Member of the Board of Directors of Hogar Cuna San Cristóbal Foundation since 2002, a non-profit foundation. As President, CEO and partner of Desarrollos Metropolitanos, L.L.C., one of the principal companies dedicated to the development and construction of residential, commercial, industrial, and institutional projects in Puerto Rico, Mr. Vizcarrondo has developed extensive experience with respect to the business environment in Puerto Rico, particularly in the real estate and construction industries in which he has worked for the past 27 years. His knowledge of the construction industry is of benefit to the Board as it provides a better understanding of the real estate industry, which has experienced a material deterioration in recent years and represents a material risk to the Corporation. Desarrollos Metropolitanos is a privately held business with assets of approximately $33 million and annual revenues of approximately $30 million as of December 31, 2011. Mr. Vizcarrondo serves as Director of the Puerto Rico Chapter of the National Association of Home Builders, and therefore provides important experience regarding one of the key industries served by the Bank. | |
10 POPULAR, INC. 2012 PROXY STATEMENT
Class 3 Directors (terms expiring 2014) | ||
NAME AND AGE | PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE, DIRECTORSHIPS AND QUALIFICATIONS | |
María Luisa Ferré, age 48 Member of the Board since 2004
| President and CEO of Grupo Ferré Rangel since 1999 and FRG, Inc. since 2001, the holding company for GFR Media, LLC (formerly El Día, Inc.) and Editorial Primera Hora, Inc., Puerto Rico newspapers. Publisher and Chairwoman of the Board of Directors of GFR Media, LLC and Editorial Primera Hora, Inc. since 2006. Member of the Board of Directors of El Nuevo Día, Inc. since 2003. President and Trustee of the Luis A. Ferré Foundation since 2003. Trustee and Vice President of the Ferré Rangel Foundation since 1999. Ms. Ferré is the President and CEO of Grupo Ferré Rangel, a privately owned business and the largest communications and media group in Puerto Rico with consolidated assets of approximately $451 million and annual revenues of approximately $316 million as of December 31, 2011. Grupo Ferré Rangel also has a real estate division in Puerto Rico and the United States and a distribution company. She holds positions as director and officer of numerous entities related to the Grupo Ferré Rangel and is the Publisher and Chairwoman of the Board of Directors of the entity that publishes Puerto Rico’s most widely read and influential newspaper. As a result of these experiences, Ms. Ferré thoroughly understands the Corporation’s 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 communication needs of the Corporation. She serves as director and trustee of philanthropic and charitable organizations related to fine arts and education. | |
C. Kim Goodwin, age 52 Member of the Board since 2011
| Private investor since 2008. Managing Director and Head of Equities (Global), Asset Management Division of Credit Suisse Group, a major financial services company, from September 2006 to July 2008. Chief Investment Officer — Equities of State Street Research Management, a money management firm from September 2002 to January 2005. Former Director of CheckFree Corporation, a provider of information management and electronic commerce solutions acquired by Fiserv, Inc. in 2007. Director of Akamai Technologies, Inc., a technology and Internet corporation with more than $1.1 billion in annual revenues as of December 31, 2011, since October 2008, and prior to that from January 2004 to November 2006. Trustee Director of various equity funds within the Allianz Global Investors family of funds, since 2010. Ms. Goodwin’s experience as a senior investment officer at several global financial services firms provides the Board with valuable insight into the perspective of institutional investors. Her analytical skills and understanding of global financial markets are also valuable assets for a financial services firm such as the Corporation. Ms. Goodwin also provides the Corporation with valuable insight in the area of the use of technology by financial firms. | |
11 POPULAR, INC. 2012 PROXY STATEMENT
NAME AND AGE | PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE, DIRECTORSHIPS AND QUALIFICATIONS | |
William J. Teuber Jr., age 60 Member of the Board since 2004
| Vice Chairman of EMC Corporation since 2006, Executive Vice President since 2001 and Chief Financial Officer from 1997 to 2006. Trustee of the College of the Holy Cross since September 2009. 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, a world leader in information infrastructure technology and solutions with over $20 billion in revenues during the year ended December 31, 2011. At EMC he has demonstrated vast management and leadership skills as he led EMC’s worldwide finance operation and was responsible for all of its financial reporting, balance sheet management, foreign exchange, audit, tax and investor relations function. Currently Mr. Teuber assists the Chairman, President and Chief Executive Officer of EMC in the day-to-day management of EMC, and leads EMC Customer Operations, the company’s worldwide sales and distribution organization, which allows Mr. Teuber to provide the Board with a unique global perspective. | |
n Member Ù Chairman r Financial Expert Alejandro M. Ballester Richard L. Carrión Carlos A. Unanue Class 2 Manuel Morales Jr. José R. Vizcarrondo Class 3 María Luisa Ferré C. Kim Goodwin William J. Teuber Jr.MEMBERSHIP IN BOARD COMMITTEESName Audit Compensation Corp. Gov. &
NominatingRisk §Class 1Member 5Chairmann 
FinancialExpertn n n Corp. Gov. &Ù Name Audit CompensationNominatingRisk n Ù n n r Ù Class 1Alejandro M. Ballester§§ Richard L. CarrióÙr n Carlos A. Unanue§§Class 2Michael T. Masin§§§Manuel Morales Jr5José R. Vizcarrondo§Class 3María Luisa Ferré5§§Frederic V. Salerno5n §§William J. Teuber Jr§ §511 POPULAR, INC. 2010 PROXY STATEMENT
Under the terms of the compensation package for non-employee directors of the Corporation in effect since July 2004, each non-employee director receives an annual retainer of $20,000, while directors that are elected as chairmen of any Board committee receive an additional $5,000 annual retainer of $25,000.retainer. The retainer may be paid in either cash or restricted stock under the 2004 Omnibus Plan, at the director’s election. The directors also receive an annual grant of $35,000 payable in the form of restricted stock under the 2004 Omnibus Plan. SuchThese payments represent compensation for the twelve-month period commencing on the date of the annual meeting of stockholders.
In addition, during 2009 non-employee directors receivedreceive $1,000 for each Board or committee meeting attended and the lead director receives an annual $10,000 grant, all payable in either cash or restricted stock at the director’s election. All restricted stock awards are subject to risk of forfeiture and restrictions on transferability until retirement of the director, when the awards
12 POPULAR, INC. 2012 PROXY STATEMENT
become vested. DividendsAny dividends paid on the restricted stock during the vesting period are reinvested in shares of Common Stock. All currentDuring 2011, all members of the Board have elected to receive the annual retainer and meeting fees in restricted stock instead of cash.
The Corporate Governance and Nominating Committee has primary responsibility for recommending director compensation levels, subject to approval by the full Board. The role of executive officers in this process is limited to assisting the Corporate Governance and Nominating Committee in gathering information regarding peer institutions. In December 2010, the Corporate Governance and Nominating Committee engaged Pearl Meyer & Partners, a compensation consultant, to perform an analysis of the Corporation’s outside director compensation. Compensation was compared to peer banks of 18 publicly traded companies, similar in asset size to the Corporation. The outside consultant concluded that average director compensation approximates the market median, however, because the Board meets more frequently than its peers, the overall total compensation was below market, primarily as a reflection of lower retainer and meeting fees. The Board decided that, although director compensation was below market, it was not appropriate, at the time, to revise outside director compensation in light of the current financial results of the Corporation. In January 2012, considering again the 2010 analysis, the Board decided not to revise director compensation.
The Corporation reimburses directors for travel expenses incurred in connection with attending Board, committee and stockholder meetings, participation in continuing director education programs and for other Corporation-related business expenses (including the travel expenses of spouses if they are specifically invited to attend the event for appropriate business purposes). The following table provides compensation information for the Corporation’s non-employee directors during 2009.
Fees Earned or Paid in Cash ($)(a) Stock Awards Option Awards Non-Equity Incentive Plan Compensation ($) Nonqualified Deferred Compensation Earnings ($) All Other Compensation Alejandro M. Ballester María Luisa Ferré C. Kim Goodwin Michael T. Masin(c) Manuel Morales Jr. Frederic V. Salerno(d) William J. Teuber Jr. Carlos Unanue José R. Vizcarrondo (a) Represents the cash value of fees (b) Represents the payment of an annual grant of $35,000 payable in shares of restricted stock under the 2004 Omnibus Plan. (c) Retired as a director (d) Retired as a director effective April 28, 2011. Each non-employee director must own Common Stock with a dollar value equal to five times his or her annual retainer. * * * 13 POPULAR, INC. 20092011 NON-EMPLOYEE DIRECTOR SUMMARY COMPENSATION TABLE Non-Equity Incentive Nonqualified Fees Earned Stock Option Plan Deferred All Other or Paid in Awards Awards Compensation Compensation Compensation Name Cash ($)(a) ($)(b) ($) ($) Earnings ($) ($) Total ($) Juan J. Bermúdez $ 71,000 $ 35,000 - - - - $ 106,000 María Luisa Ferré 59,000 35,000 - - - - 94,000 Michael T. Masin 65,000 35,000 - - - - 100,000 Manuel Morales Jr. 59,000 35,000 - - - - 94,000 Francisco M. Rexach Jr. 77,000 35,000 - - - - 112,000 Frederic V. Salerno 82,000 35,000 - - - - 117,000 William J. Teuber Jr. 76,000 35,000 - - - - 111,000 José R. Vizcarrondo 57,000 35,000 - - - - 92,000 Name
($)(b)
($)
($) Total ($) $ 70,000 $ 35,000 - - - - $ 105,000 59,000 35,000 - - - - 94,000 62,000 35,000 - - - - 97,000 60,000 35,000 - - - - 95,000 59,000 35,000 - - - - 94,000 15,000 - - - - - 15,000 85,000 35,000 - - - - 120,000 62,000 35,000 - - - - 97,000 60,000 35,000 - - - - 95,000 paid toearned by non-employee directors for attending the Corporation’s Board and committee meetings, and the annual retainer. The amount includes $431,000 (Mr. Bermúdez, $25,000; Ms. Ferré, $57,000; Mr. Masin, $65,000; Mr. Morales, $59,000; Mr. Rexach, $25,000; Mr. Salerno, $82,000; Mr. Teuber, $76,000; and Mr. Vizcarrondo, $43,000) which represents the cash value of the annual retainer and a $10,000 grant in the case of the lead director. During 2011 all members of the Board or committee meeting fees for those non-employee directors that elected to receive shares ofsuch compensation in restricted stock in lieuinstead of a cash payment.cash.Effective June 9, 2004, eachnot employed by the Corporationeffective December 31, 2011.Such anNon-employee directors are required to achieve that ownership level was required to be achieved by June 9, 2007 for directors serving on June 9, 2004 and within three years of being named or elected as a director for directors named or elected after June 9, 2004.director. Each director and nominee for director is currently in compliance with his or her Common Stock ownership requirements.1220102012 PROXY STATEMENT
The Corporation maintains a corporate governance section on its websitewww.popular.com, where investors may find copies of its principal governance documents. The corporate governance section of the Corporation’s website contains, among others, the following documents:
Code of Ethics
Audit Committee Charter
Corporate Governance & Nominating Committee Charter
Corporate Governance Guidelines
Compensation Committee Charter
Excessive or Luxury Expenditures Policy
The Corporation has a majority of independent directors. The Board has determined that the following directors have no material relationship with the Corporation and are independent under the director independence standards of The Nasdaq Stock Market BOARD OF DIRECTORSDIRECTORS’ INDEPENDENCEInc. (“Nasdaq”).
Alejandro M. Ballester | María Luisa Ferré | |
C. Kim Goodwin | Manuel Morales Jr. | |
William J. Teuber Jr. | ||
Carlos A. Unanue |
As part of the process to determine Ms. Ferré’s independence, the Board considered payments made by the Corporation hasin the ordinary course of business to various entities related to Ms. Ferré in connection with advertising activities of the Corporation. In determining Mr. Morales’s independence, the Board considered the Bank’s restructuring of a majorityseries of independent directors. loan relationships with Mr. Morales and an entity controlled by him, as described under the “Other Relationships, Transactions and Events” section of this Proxy Statement.
During 2009,2011, the independent directors met in executive or private sessions without the Corporation’s management after every regularly scheduled Board meeting.
The Corporation does not have a policy on whether the Chairman and Chief Executive Officer (“CEO”) positions should be separate or combined. Since 1994, Mr. Carrión has served as the Corporation’s Chairman and CEO. The Board believes that this leadership structure best serves the interests of the Corporation as it allows for a clearly defined leadership The Corporation’s Corporate Governance Guidelines preside over all meetings of the Board at which the Chairman is not present; preside over executive sessions of the independent directors; act as the liaison between the independent directors and the Chairman of the Board 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 CEO, as appropriate, the results of such sessions and other private discussions among outside directors; 14 POPULAR, INC. BOARD LEADERSHIP STRUCTURE AND RISK OVERSIGHTstructurerole and for increased efficiency and a tighter leadership coordination. It also allows the CEO to work more closely and collegially with the members of the Board to establish the direction of the Corporation. The Board continually evaluates the Corporation’s leadership structure and could in the future decide not to combine the Chairman and CEO positions if it understands that doing so would serve the best interests of the Corporation.On February 18, 2010, the Board amended its to require the designation of a lead director when the Chairman of the Board is not an independent director. The lead director is an independent director elected annually by a majority of the independent members of the Board. On February 18, 2010,17, 2012, Mr. SalernoTeuber was electedappointed to continue as the lead director of the Corporation.director. The Corporate Governance Guidelines provide that the lead director will have the following responsibilities:• preside over all meetings of the Board at which the Chairman is not present;• preside over executive sessions of the independent directors;• has authority to call meeting of independent directors;• act as the liaison between the independent directors and the Chairman of the Board and CEO;• ensure that independent directors have adequate opportunities to meet in executive sessions and communicate to the CEO, as appropriate, the results of such sessions and other private discussions among outside directors;• assist the Chairman and the remainder of the Board in assuring 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 CEO, meeting agendas and information sent to the Board;1320102012 PROXY STATEMENT
assist the Chairman and the remainder of the Board in assuring 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 CEO, meeting agendas and information sent to the Board;
approve, in collaboration with the 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 Board’s spokesperson if the Chairman is unable to act;
interview Board candidates;
recommend to the Corporate Governance and Nominating Committee nominees to Board committees and sub-committees as may come to the lead director’s attention;
ensure the Board works as a cohesive team;
make such recommendations to the Board as the lead director shall deem appropriate for the retention of consultants who will report to the Board; and
retain consultants, with the approval of the Board, as the lead director and the Board deem appropriate.
The Board has a significant role in the risk oversight of the Corporation. The Board has a Risk Management Committee that is responsible for the review, approval and monitoring of the Corporation’s risk management policies that measure, limit and manage the Corporation’s operational and credit risks, while seeking to maintain the effectiveness and efficiency of the operating and business processes. The Committee also participates in the review and approval of the Corporation’s allowance for loan losses on a quarterly basis. In order to carry out its responsibilities, the Risk Management Committee regularly meets with management to assess the major risks of the Corporation, including credit, liquidity, market, strategic and operational risks. The Corporation’s Chief Risk ManagerOfficer as well as the CEO, President and Chief OperatingFinancial Officer and Chief FinancialLegal Officer participate in the meetings of the Risk Management Committee and inform the Committee of specific risk analyses, as well as general business risks relating to the environment in which the Corporation operates and the Corporation’s general risk profile. After each meeting, the Risk Management Committee reports to the Board in full. Whenever it is deemed appropriate, management gives presentations to the Board in full in connection with specific risk related issues such as those related to compliance.
The Audit Committee assists the Board in the oversight of accounting and financial reporting principles and policies, internal controls and procedures, and controls over financial reporting. The Audit Committee reviews reports from management, independent auditors, internal auditors, compliance, legal counsel, regulators and outside experts, as considered appropriate, that include risks the Corporation faces and the Corporation’s risk management function. Internal Audit presents to the Audit Committee for evaluation and approval its annual risk assessment, which identifies the areas to be included in the annual audit plan. In connection with the oversight of internal controls over financial reporting, management keeps the Audit Committee informed of any notable deficiencies and material weaknesses. Any significant deficiencies and material weaknesses are reported to the full Board. The Audit Committee meets periodically with management to discuss risk related matters. After each meeting, the Audit Committee reports to the Board in full.
The Corporation encourages directors to participate in continuing director education programs. To assist the Board in remaining current with its board duties, committee responsibilities and the many important developments impacting our business, the Corporation participates in the NYSE-Corporate Board Member Board Education Program. This program offers our directors access to a wide range of in-person, peer-based and webinar educational programs on corporate governance, committee duties, board leadership and industry developments.
Any stockholder who desires to contact the Board or any of its members may do so by writing to: Popular, Inc., Board of Directors (751), P.O. Box 362708, San Juan, PR00936-2708. Alternatively, a stockholder may contact the Corporation’s Audit Committee or any of its members telephonically by calling the toll-free number(866) 737-6813 or electronically through www.popular.com/ethicspoint-en. Communications received by the Audit Committee that are not related to accounting or 15 POPULAR, INC. 2012 PROXY STATEMENT auditing matters, may in its discretion be forwarded by the Audit Committee or any of its members, to other committees of the Board or the Corporation’s management for review.STOCKHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS
The Board has standing Audit, Risk Management, Compensation and Corporate Governance and Nominating Audit Committee The Audit Committee consists of three or more members of the Board. The members of the Audit Committee each have been determined by the Board to be independent as required by the director independence rules of Nasdaq. The Audit Committee’s primary purpose is to assist the Board in its oversight of the accounting and financial reporting processes of the Corporation. The Audit Committee operates pursuant to a charter that was last amended and restated by the Board on December STANDING COMMITTEESand Compensation Committees,committees, all of which operate under a written charter.charters.Currently, the Audit Committee is comprised of four non-employee directors, all of whom are independent. The Audit Committee held eleven12 meetings during 2009.2011. Earnings releases,Form 10-K andForm 10-Q filings were discussed in eight of such meetings.19, 2007.14 POPULAR, INC. 2010 PROXY STATEMENT
The Board has determined that Frederic V. Salerno and William J. Teuber Jr. and C. Kim Goodwin are the financial experts, as defined by Item 407(d)(5) ofRegulation S-K, and are independent within the meaning of the director independence rules of Nasdaq. For a brief listing of Messrs. Salerno’sMr. Teuber’s and Teuber’sMs. Goodwin’s relevant experience, please refer to the Board of“Nominees for Election as Directors and other Directors” section.
Risk Management Committee
The Risk Management Committee consists of three or more members of the Board. The Risk Management Committee held ten12 meetings during 2009.2011. The purpose of the Risk Management Committee is to assist the Board in the monitoring of policies and procedures that measure, limit and manage the Corporation’s risks while seeking to maintain the effectiveness and efficiency of the operating and businesses processes. It also assists the Board in the review and approval of the Corporation’s risk management policies and processes.
Compensation Committee
The Compensation Committee consists of at least three or more members of the Board, each of whom the Board has determined has no material relationship with the Corporation and each of whom is otherwise independent under the Nasdaq’s director independence rules. The Compensation Committee held sixfive meetings during 2009. 2011.
The Compensation Committee acts pursuant to a written charter that was most recently amended on October 17, 2011. Under its charter, the Compensation Committee:
in consultation with senior management, establishes the Corporation’s general compensation philosophy, and oversees the development and implementation of executive compensation programs and related policies, as well as the review and approval of the overall goal and purpose of the Compensation Committee isCorporation’s incentive compensation program;
reviews and approves the corporate goals and objectives related to discharge the Board’s responsibilities (subjectCEO’s compensation, conducts the CEO’s annual performance review, and establishes the CEO’s compensation based on the annual performance review;
reviews annually with the CEO the performance of other NEOs;
reviews and approves compensation programs and awards applicable to review by the full Board) relating to compensationNEOs and members of the Corporation’s NEOs andSenior Management Team, as well as the compensation structure for all other executives;
reviews with the CEO plans for executive officers, evaluateofficer development and succession;
recommends to the Board cash and equity-based plans, retirement plans, deferred compensation plans and welfare benefit plans;
oversees, in consultation with management, compliance with federal, state and local laws and regulations as they affect compensation matters;
16 POPULAR, INC. 2012 PROXY STATEMENT
reviews and approves, subject to any legal limitations, any severance or similar termination payments proposed to be made to any current or former executive officer of the Corporation;
in accordance with Emergency Economic Stabilization Act of 2008 requirements, at least every six months evaluates and reviews with the Chief Risk Officer the compensation plans for senior executive officersthe Senior Executive Officers (as defined in the “Compensation and take anyDiscussion Analysis” section of this Proxy Statement) and other employees in light of the risks they may pose to the Corporation;
takes necessary actions to ensure that such plans do not encourage them to take unnecessary and excessivelimit any risks that may threaten the valueidentified as a result of the Corporation,risk-related reviews;
reviews and review and discussdiscusses with management the Corporation’s Compensation Discussion and Analysis, and produceproduces an annual report on executive compensation for inclusion in the Corporation’s proxy statement.Proxy Statement.
evaluates and reports annually to the Board on the Compensation Committee’s own performance.
The Compensation Committee Charter provides that when appropriate and as permitted under applicable law, the Committee may delegate all or a portion of its duties and responsibilities to a subcommittee comprised of one or more members of the Committee, the Board or members of management.
Please refer to the “Compensation Discussion and Analysis” section for a description of the Corporation’s processes and procedures for the consideration and determination of executive compensation.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is or has been an officer or employee of the Corporation. No NEO of the Corporation served on any board of directors’ compensation committee of any other company for which any of the directors of the Corporation served as NEO at any time during 2009.2011. Other than disclosed in the “Other Relationships, Transactions and Events” section, none of the members of the Compensation Committee had any relationship with the Corporation requiring disclosure under Item 404 of the SEC’sRegulation S-K.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee consists of three or more members of the Board, each of whom the Board has determined has no material relationship with the Corporation and each of whom is otherwise independent under Nasdaq’s director independence rules. The Corporate Governance and Nominating Committee held fourfive meetings during 2009.
The Corporate Governance and Nominating Committee acts pursuant to a written charter that was most recently amended on January 27, 2012. The purpose of the Corporate Governance and Nominating Committee is as follows:
identify and recommend individuals to the Board for nomination as members of the Board and its committees;
identify and recommend individuals to the Board for nomination as CEO of the Corporation;
identify and recommend individuals to the Board for nomination as Chairman of the Corporation;
promote the effective functioning of the Board and its committees; and
develop and recommend to the Board a set of corporate governance principles applicable to the Corporation.
The Corporate Governance and Nominating Committee Charter does not include specific qualities or skills that a person must possess to be nominated as a director. The charter provides that, in nominating candidates, the Committee will take into consideration such factors as it deems appropriate which may include judgment, skill, diversity, experience with business and other organizations, the interplay of the candidate’s experience with experience of the Board members, and the extent to which the candidate would be a desirable addition to the Board and any committees of the Board. Under the Corporation’s Corporate Governance Guidelines, the Board should, based on the recommendations of the Corporate Governance and Nominating Committee, select new nominees for the position of independent director considering the following criteria: personal qualities and characteristics, accomplishments and reputation in the business community; 17 POPULAR, INC. 2012 PROXY STATEMENT current knowledge and contacts in the communities in which the Corporation does business and in the Corporation’s industry or other industries relevant to the Corporation’s business; ability and willingness to commit adequate time to Board and committees matters; the fit of the individual’s 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 the Corporation; and diversity of viewpoints, background, experience and other demographic factors. In practice, the Board has determined that for a community based financial institution such as the Corporation it is more important to look for candidates with board management experience than for persons with a specific skill set. The Corporate Governance and Nominating Committee does not have a specific diversity policy with respect to the director nomination process. Rather, the Committee considers diversity in the broader sense of how a candidate’s viewpoints, experience, skills, background and other demographics could assist the Board in light of the Board’s composition at the time. The Corporate Governance and Nominating Committee will consider nominees recommended by stockholders. Generally, nominees are recommended by the Chairman of the Board and CEO or existing directors. There are no differences in the manner in which the Corporate Governance and Nominating Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder. The Corporate Governance and Nominating Committee Stockholders who wish to submit nominees for director for consideration by the Corporate Governance and Nominating Committee for election at the Corporation’s NOMINATION OF DIRECTORS• personal qualities and characteristics, accomplishments and reputation in the business community;• current knowledge and contacts in the communities in which the Corporation does business and in the Corporation’s industry or other industries relevant to the Corporation’s business;• ability and willingness to commit adequate time to Board and committees matters;• the fit of the individual’s 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 the Corporation; and• diversity of viewpoints, background, experience and other demographics factors.did not receive any recommendationreceived three recommendations for the nomination of a new director to fill the vacancy created by the resignation of Mr. Masin. The first two recommendations came from stockholders and the third recommendation came from the Corporation’s Chairman of the Board, President and CEO. The Committee determined not to accept the first of the stockholder candidates, without going into his qualifications, because the candidate would have been limited to serving for one year as a “Class 2” director in light of the Meeting.prohibition contained in the Corporation’s Corporate Governance Guidelines regarding directors serving past age 72. Upon review of the qualifications of the remaining two candidates – that of a second stockholder, who recommended himself, and of Mr. Goel, who was recommended by the Chairman of the Board, President and CEO – the Committee decided to nominate Mr. Goel as candidate for new director.20112013 annual meeting of stockholders may do so by submitting in writing advance notice to the Corporation of nominations not more than 180 days nor less than 90 days in advance of the anniversary date of the preceding year’s annual meeting. In the case of a special meeting or in the event that the date of the annual meeting is more than 30 days before or after such anniversary date, notice by the stockholder must be delivered not earlier than the 15th day following the day on which notice is mailed, or a public announcement is first made by the Corporation of the date of such meeting. Under the Corporation’s Amended and Restated By-Laws, stockholder’s nomination must be accompanied by certain information, including the nominees’ names and a brief description of the nominees’ judgment, skills, diversity and experience with businesses and other organizations. Such information must be addressed to the Secretary of the Board of Directors (751) at Popular, Inc., 209 Muñoz Rivera Avenue, Hato Rey,San Juan, Puerto Rico, 00918.At its January 25, 2010 meeting, the Corporate Governance and Nominating Committee approved the nominations of Alejandro M. Ballester and Carlos A. Unanue for election at the Meeting as Class 1 directors. At its December 22, 2009 meeting, the Corporate Governance and Nominating Committee approved the nomination of Michael T. Masin, Manuel Morales Jr. and José R. Vizcarrondo for election at the Meeting as Class 2 directors.
The Board has adopted a Code of Ethics (the “Code”) to be followed by the Corporation’s employees, officers (including the CEO, Chief Financial Officer and Corporate Comptroller) and directors to achieve conduct that reflects the Corporation’s ethical principles. Certain portions of the Code deal with activities of directors, particularly with respect to transactions in the securities of the Corporation and potential conflicts of interest. Directors, NEOs, executive officers and employees are required to be familiar with and comply with the Code. The Code provides that any waivers for NEOs, executive officers, or directors may be made only by the independent members of the Board and must be promptly disclosed to the stockholders. During * * * 18 POPULAR, INC. CODE OF ETHICS2009,2011, the Corporation did not receive nor grant any request from directors, NEOs or executive officers for waivers under the provisions of the Code. The Code was last amendedrevised on July 17, 2009September 16, 2011 and is available on the Corporate Governance section of the Corporation’s website,www.popular.com.The Corporation will post on its website any amendments to the Code or any waivers to the CEO, Chief Financial Officer, Corporate Comptroller or directors.1620102012 PROXY STATEMENT
The following information sets forth the names of the executive officers of the Corporation, as of February 18, 2010, including their age, business experience and directorships during the past five years, andas well as the period during which each such person has served as executive officer of the Corporation.
Richard L. Carrión, age
| Chairman of the Board since 1993. CEO of the Corporation since 1994 and President from 1991 to January | ||
 | |||
Jorge A. Junquera, age
| Senior Executive Vice President of the Corporation since 1997. Chief Financial Officer of the Corporation and the Bank and Supervisor of the Financial Management Group of the Corporation since 1996. President and Director of Popular International Bank, Inc., a direct wholly-owned subsidiary of the Corporation, since 1996. Director of the Bank until 2000 and from 2001 to present. Director of Popular North America, Inc. since 1996 and of other indirect wholly-owned subsidiaries of the Corporation. | ||
 | |||
 | |||
 | |||
Carlos J. Vázquez, age
| President of Banco Popular North America since September 2010. Executive Vice President of the Corporation since February 2010 and from 1997 to April 2004. Senior Executive Vice President of the Bank since 2004. Supervisor in charge of Individual Credit Operations in Puerto Rico and Individual Banking in the United | ||
Ignacio Alvarez, age 53
| Executive Vice President and Chief Legal Officer of the Corporation since June 2010. Partner of Pietrantoni Méndez & Alvarez LLP, a San Juan, Puerto Rico based law firm, from September 1992 to June 2010. Member of the Board of Regents of Georgetown University since October 2008. | ||
19 POPULAR, INC. 2012 PROXY STATEMENT
Eli Sepúlveda, age 49
| Executive Vice President of the Corporation since February 2010 and of the Bank since December 2009. Supervisor in charge of the Commercial Credit Group in Puerto Rico since January 2010. Senior Vice President in charge of the Commercial Credit Division of the Bank from June 2008 to December 2009. President of Popular Auto, Inc., an indirect subsidiary of the Corporation, from 2004 to 2008. | |
Juan Guerrero, age 52
| Executive Vice President of the Bank in charge of the Financial and Insurance Services Group since 2004. Director of | |
Gilberto Monzón, age 52
| Executive Vice President of the Bank in charge of the Individual Credit Group since October 2010. Executive Vice President of Popular Mortgage from July 1998 to October 2010 in charge of mortgage origination and servicing. | |
Eduardo J. Negrón, age 47
| Executive Vice President of the Corporation since 2008. Supervisor in charge of the Administration Group since December 2010, of the People Group from 2009 to 2010 and of the Corporate People and Communications Group from 2008 to 2009. Senior Vice President, Deputy Chief Legal Officer and Director of Government Affairs from 2005 to 2008. Member of the Board of Trustees and Treasurer of | |
20 POPULAR, INC. 2012 PROXY STATEMENT
Néstor Obie Rivera, age 65
| Executive Vice President of the Bank in charge of the Retail Banking and Operations Group since April 2004. Senior Vice President of the Bank in charge of the Retail Banking Division from 1988 to 2004. | |
Lidio Soriano, age 43
| Executive Vice President and Chief Risk Officer of the Corporation since August 2011. Independent consultant from May 2010 to July 2011. Chief Financial Officer and Senior Financial Officer of W Holding, Inc. and Westernbank Puerto Rico form October 2008 to April 2010. Executive Vice President and head of Retail Banking and Mortgage Divisions of Oriental Financial Group, Inc. from October 2007 to October 2008. | |
* * *
Mr. Richard L. Carrión, Chairman of the Board, President and CEO of the Corporation, is the uncle of Mr. José R. Vizcarrondo, a director of the Corporation.
* * *
Our Audit Committee has adopted Procedural Guidelines with Respect to Related Person Transactions (the “Related Person Transaction Guidelines”) to identify and evaluate potential conflicts of interest, independence factors and disclosure obligations arising out of financial transactions, arrangements and relationships between the Company and its related persons. Pursuant to the Related Person Transaction Guidelines, the Corporation’s policy is to enter into or ratify related person transactions only when the Board of Directors, acting through the Audit Committee, determines that the related person transaction in question is in, or is not inconsistent with, the best interest of the Corporation and its stockholders. When the Corporation or any of its subsidiaries intends to enter into a related person transaction, a Related Person Transaction Request Form is submitted to the Audit Committee for review. Such form contains, among other things, an explanation of the proposed transaction, benefits to the Corporation and an assessment of whether the proposed related person transaction is on terms that are comparable to the terms available to an unrelated third party or to employees generally. In the event the Corporation becomes aware of a related person transaction that has not been approved following the Related Person Transaction Guidelines, the Audit Committee considers all relevant facts and circumstances regarding the related person transaction and evaluates all options available to the Corporation including ratification, revision or termination. The Audit Committee also examines the facts and circumstances pertaining to the failure of reporting such related person transaction to the Committee, as required by the Related Person Transaction Guidelines, and may take such action it deems appropriate. The Guidelines contain a list of categories of transactions involving related persons, including loans made in the ordinary course of business, which are pre-approved under the Guidelines and do not need to be brought to the Audit Committee for pre-approval. 21 POPULAR, INC. 2012 PROXY STATEMENT During During 2011 the In During 2004, the Banco Popular Foundation, Inc. (“Banco Popular Foundation”), an Illinoisnot-for-profit corporation, was created to strengthen the social and economic well-being of the communities served by Banco Popular North America. The Banco Popular Foundation is Banco Popular North America’s philanthropic arm and provides support to charitable organizations for community development and education. During OTHER RELATIONSHIPS, TRANSACTIONS AND EVENTS2009,2011, the Corporation engaged, in the ordinary course of business, the legal services of the law firm McConnell Valdés LLC, of which Mr. Samuel T. Céspedes, Secretary of the Board of Directors of the Corporation and the Bank, is a Senior Counsel. The fees paid to McConnell Valdés LLC for fiscal year 20092011 amounted to approximately $1,468,947, which include approximately $11,941 paid by$2,776,000.Corporation’s clients in connection with commercial loan transactions. During 2009, the Corporation also engaged, in the ordinary course of business, the legal services of Pietrantoni Méndezthe law firm Reichard & Álvarez LLP,Escalera, of which Mr. Ignacio Álvarez and Mr. Antonio Santos, husband and brother, respectively,Héctor Reichard, father-in-law of Ms. Brunilda Santos de Álvarez, formerEduardo J. Negrón, Executive Vice President & Chief Legal Officer of the Corporation, are partners.is a Partner. The fees paid to Pietrantoni, MéndezReichard & Álvarez LLPEscalera for the fiscal year 20092011 amounted to approximately $1,751,628, which include $582,508 paid by the Corporation’s clients in connection with commercial loan transactions and $40,789 paid by investment companies managed by the Bank. In addition, Pietrantoni Méndez & Álvarez LLP leases office space in the Corporation’s headquarters building, which is owned by the Bank, and engages the Bank as trustee of its retirement plan. During 2009, Pietrantoni Méndez & Álvarez LLP made lease payments to the Bank of approximately $953,513 and paid the Bank approximately $30,908 for its services as trustee.$180,000. The engagement of the aforementioned law firms was approved by the Audit Committee, as required by the policy regarding the Procedural Guidelines with Respect to Related Person Transactions adopted by the Audit Committee of the Corporation on May 7, 2004 and amended on December 16, 2008 (the “Related Party Transactions Policy”).Transaction Guidelines.December 2005, the Bank entered into a commitment to contribute a total of $500,000 to the Fundación Luis A. Ferré during a period of five years in connection with the remodeling of the Ponce Museum of Art premises. The last payment in the amount of $100,000 was made in December 2009. María Luisa Ferré, a director of the Corporation, is the President and a Trustee of the foundation. During 2009, the Bank also made a contribution of $35,000 to the Fundación Luis A. Ferré in connection with the sponsorship of the Ponce Museum of Art Benefit Gala. These contributions were approved by the Audit Committee as required by the Related Party Transactions Policy.In 2009,2011, the Corporation and its subsidiaries contributed approximately $592,028$556,000 to Fundación Banco Popular, Inc. (the “Fundación”) in connection with the matching of employee contributions. The Fundación is a Puerto Riconot-for-profit corporation created to improve quality of life in Puerto Rico. As the Bank’s philanthropic arm it provides a scholarship fund for employees’ children and supports education and community development projects. Richard L. Carrión (Chairman, President and CEO of the Corporation), David H. Chafey Jr. (President and Chief Operating Officer of the Corporation), Manuel Morales Jr. (director of the Corporation), Eduardo J. Negrón (Executive Vice President of the Corporation) and Alfonso Ballester father(father of Alejandro M. Ballester, director of the Corporation,Corporation) are members of the Fundación’s Board of Trustees. The Bank appoints five of the nine members of the Board of Trustees. The remaining four trustees are appointed by the Fundación. The Corporation provides significant human and operational resources to support the activities of the Fundación. The Bank and the Puerto Rico employees of the Corporation (through voluntary personal donations) are the main source of funds of the Fundación.2009,2011, Banco Popular North America made a contribution to the Banco Popular Foundation of $54,309approximately $46,000 in connection with the matching of employee contributions. Richard L. Carrión (Chairman, President and CEO of the Corporation), Carlos J. Vázquez and David H. Chafey Jr. (President and Chief Operating Officer)Eduardo J. Negrón (both Executive Vice Presidents of the Corporation) are members of the boardBoard of directorsDirectors of the Banco Popular Foundation. Banco Popular North America provides significant human and operational resources to support the activities of the Banco Popular Foundation.Certain directors and NEOs have immediate family members who are employed by subsidiaries of the Corporation. The compensation of these family members is established in accordance with the pertinent subsidiary’s employment and compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions. Set forth below is information on those family members of directors and NEOs of the Corporation who are employed by the Corporation’s subsidiaries and received a total compensation in excess of $120,000 during 2009.19 POPULAR, INC. 2010 PROXY STATEMENT
The Bank provided a loan facility to finance the acquisition and completion of the residential construction project. The facility consisted of a term loan in the amount of $10 million and a revolving line of credit that could not exceed $13 million at any time outstanding. The facility has a fixed interest rate of 4.5%. The loan is collateralized by the real estate acquired and neither Mr. José R. Vizcarrondo nor Mr. Julio Vizcarrondo Jr. is personally liable for the loan. The loans were placed in non-accrual status on September 30, 2010 and remain in non-accrual status as of December 31, 2011. At December 31, 2010, the Corporation had recognized a loss of $8.6 million out of an outstanding principal balance of $15.7 million of the loan facilities made to the LLC. During 2011, the Corporation made advances on the facilities amounting to $4.3 million and received principal payments amounting to $2.1 million. As of December 31, 2011, the carrying value of the loan amounted to $6.8 million, which was net of a valuation allowance of $2.3 million.
Mr. Morales, a director of the Corporation, has a series of loan relationships with the Bank, which were restructured in December 2011. The restructuring was approved by the Board of Directors of the Bank. The first consists of a personal line of credit in the amount of $800,000, of which $749,162 was outstanding at the time of the restructuring. As part of the restructuring, the credit facility was converted from a one-year renewable line of credit to a three-year term loan. Principal repayments on the term loan are based on a ten-year amortization schedule with a fixed balloon payment on the maturity date. The restructured facility bears a fixed interest rate of 6% while the interest rate previously applicable to the line of credit
22 POPULAR, INC. 2012 PROXY STATEMENT
was a floating rate equal to the prime rate plus 2% subject to a minimum rate of 5%. Entities controlled by Mr. Morales also had two lines of credit aggregating $1.0 million with the Bank. The facilities were divided between an $800,000 revolving line of credit and a $200,000 non-revolving line of credit, of which $759,000 and $25,000 were outstanding, respectively, at the time of the restructuring. As part of the restructuring, the revolving line of credit facility was reduced to $300,000 and the remaining balances were repaid from the proceeds of a new $484,000 three-year term loan. The interest rate on the revolving line of credit was not changed and is equal to the prime rate plus 2% subject to a minimum rate of 5%. The principal repayments on the term loan are based on a ten year amortization schedule with a fixed balloon payment on the maturity date. The term loan bears interest at a fixed rate equal to 6%. While Mr. Morales and the entities controlled by him were current on their payment obligations to the Bank as of the date of the restructuring, the new credit facilities were classified as troubled debt restructurings because the ten-year amortization schedules for the term loans could be viewed as an accommodation to a borrower to ensure continued compliance with its obligations.
In October 2007, a corporation in which a brother of Jose R. Vizcarrondo owns a 50% equity interest, obtained a $3.9 million loan from the Bank to acquire a parcel of property on which it intended to develop a residential project in San Juan, Puerto Rico. Mr. Vizcarrondo’s brother and sister-in- law personally guaranteed the loan. The borrower also obtained a $250,000 unsecured line of credit from the Bank. The loan was made in the ordinary course of business, on substantially the same terms, including interest rate and collateral, as those prevailing for comparable loan transactions with third parties at that time. The project was never constructed as a result of a series of legal challenges regarding the zoning approvals and went into default in January 2009. The Bank commenced foreclosure and collection proceedings against both the borrower and the guarantors in April 2010. As of December 31, 2011, the loan was classified as held for sale. The loan is not accruing interest. As of December 31, 2011, the carrying value of the loan amounted to $2.0 million.
In June 2006, a sister and brother-in-law of Mr. Carlos Unanue, a director of the Corporation, obtained a $828,000 mortgage loan from Popular Mortgage, Inc., a subsidiary of the Bank (“Popular Mortgage”), secured by a residential property. The loan was a fully amortizing 30-year loan with a fixed annual rate of 7%. Mr. Unanue was not a director of the Corporation at the time the loan was made. The loan was made in the ordinary course of business, on substantially the same terms, including interest rate and collateral, as those prevailing for comparable loan transactions with third parties at that time. The borrowers became delinquent on their payments commencing in July 2010 and after exhausting various collection and loss mitigation efforts the Bank commenced foreclosure procedures in November 2010. The balance due on the loan as of December 31, 2011, including accumulated interest, was approximately $890,000. As of December 31, 2011, the Corporation had recorded a loss of approximately $65,000 on this loan.
In November 2007, a brother-in-law and sister of Mr. Carrión, Chairman, President and CEO of the Corporation, obtained a $1.35 million mortgage loan from Popular Mortgage, secured by a residential property. The loan was a fully amortizing 30-year loan with a fixed annual rate of 7%. The loan was made in the ordinary course of business, on substantially the same terms, including interest rate and collateral, as those prevailing for comparable loan transactions with third parties at that time. The borrowers became delinquent on their payments commencing in September 2009 and after exhausting various collection and loss mitigation efforts the Bank commenced foreclosure procedures in October 2011. The balance due on the loan as of December 31, 2011, including accumulated interest, was approximately $1.58 million. As of December 31, 2011, the Corporation had recorded a loss of approximately $500,000 on this loan.
The Bank has had other loan transactions with the Corporation’s directors and officers, and with their associates, and proposes to continue such transactions in the ordinary course of its business, on substantially the same terms, including interest rates and collateral, as those prevailing for comparable loan transactions with third parties. Theparties, except as disclosed above. Except as discussed above, the extensions of credit have not involved and do not currently involve more than normal risks of collection or present other unfavorable features.
* * *
On February 17, 2012, the Board 23 POPULAR, INC. 2012 PROXY STATEMENT Restated Certificate of Incorporation with the Puerto Rico Department of State or at such later date and time specified in that certificate of amendment (the “Effective Time”). The Corporation will issue a press release announcing the Effective Time of the EFFECT OF REVERSE STOCK SPLIT AND AUTHORIZED STOCK REDUCTION A reverse stock split is a reduction in the In connection with the reverse stock split, we would amend our Restated Certificate of Incorporation to PROPOSAL 2: AMENDMENT TO ARTICLE FIFTH OF THEOUR RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE THE PROVISION THAT THE AUTHORIZED CAPITALEFFECT A REVERSE STOCK SPLIT OF OUR OUTSTANDING COMMON STOCK OF 1-FOR-10, TOGETHER WITH A CORRESPONDING REDUCTION IN THE CORPORATION MAY BE INCREASED OR DECREASED BY THE AFFIRMATIVE VOTENUMBER OF A MAJORITYAUTHORIZED SHARES OF THE STOCKHOLDERS ENTITLED TO VOTEOUR COMMON STOCKTherecommends the approval by stockholders of the proposaladopted a resolution to amend Article Fifth of the Corporation’sour Restated Certificate of Incorporation to eliminateeffect a reverse stock split of our outstanding Common Stock of 1-for-10, together with a corresponding reduction in our authorized shares of Common Stock. If the provision thatamendment is adopted, it will become effective upon the authorized capital stock of any class or classes of stock of the Corporation may be increased or decreased by the affirmative votefiling of a majoritycertificate of the stockholders entitled to vote. This change would be effective upon filing an amendment to the ourCommonwealthreverse stock split before filing the certificate of amendment with the Puerto Rico.Rico Department of State. The full text of the proposed amendment to our Restated Certificate of Incorporation is set forth in Annex A to this Proxy Statement. Althoughtext in Annex A assumes the approvalnumber of the proposal to increase the authorizedoutstanding shares of a class of a corporation’s common stock, which may be accomplished by reclassifying and converting all outstanding shares of common stock into a proportionately fewer number of shares of common stock. For example, in a 1-for-10 reverse stock split, as proposed, a stockholder holding 1,000 shares of our Common Stock before the reverse stock split would hold 100 shares of our Common Stock after the reverse stock split. Each stockholder’s proportionate ownership of the Corporationissued and outstanding shares of our Common Stock would remain the same, except for minor changes that may result from 700,000,000cash payments in lieu of fractional shares of our Common Stock. By way of example, a stockholder who owns a number of shares that, prior to 1,700,000,000 (see “Proposal 3: Amendmentthe reverse stock split, represented 1% of our outstanding shares of Common Stock would continue to Article Fifthown 1% of our outstanding shares of Common Stock after the reverse stock split.Increasereduce correspondingly the Number of Authorized Shares of Common Stock”), the amendment to eliminate the provision that the capital stock of the corporation may be increased or decreased by a majority vote, if approved by stockholders, will become effective, even if the other proposal to amend Article Fifth is not approved.The Board believes it is appropriate at this time to eliminate the provision in Article Fifth that the authorized capital stock of the Corporation may be increased or decreased by the affirmative vote of a majority of the stockholders entitled to vote. The effect of this amendment would be to bring the voting provisions of Article Fifth under the general voting provisions in Article Tenth of the Corporation’s Restated Certificate of Incorporation, which require the affirmative vote of the holders of not less than two-thirds of the total number of outstanding shares of the Corporation to amend any provision of the Restated Certificate of Incorporation (except for the amendment to any provision of Article Tenth itself, which requires the affirmative vote of not less than 75% of the total number of outstanding shares of the Corporation). If approved, any changes in the authorized capital stock of any class or classes of stock of the Corporation would require the affirmative vote of the holders of two-thirds of the total number of outstanding shares of the Corporation.The resolutions attached to this Proxy Statement as Annex A will be submitted for approval by stockholders at the Meeting. The affirmative vote of two-thirds of the holders of shares of our authorized Common Stock ofStock. If the Corporationreverse stock split is necessary to adopt the proposed amendment in accordance with the terms of Article Tenth of the Restated Certificate of Incorporation. Proxies will be voted FOR the resolutions unless otherwise instructed by the stockholders.Broker non-votes and abstentions will have the same effect as votes cast against the proposed amendment.The Board has declared the desirability of the adoption of this amendment and recommends a vote FOR the resolutions.20 POPULAR, INC. 2010 PROXY STATEMENT
REASONS FOR REVERSE STOCK SPLIT
If approved, the 1-for-10 reverse stock split is expected to lead our Common Stock to trade at approximately ten times the price per share at which it trades prior to the Restated Certificate of Incorporation with the Department of Stateeffectiveness of the Commonwealthreverse stock split. We believe that the anticipated increase in the market price per share resulting from a reverse stock split will help make our Common Stock more attractive to a broader range of Puerto Rico. The textinvestors for the following reasons:
| Ÿ | Many brokerage firms and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Also, some of those policies and practices may make the processing of trades in low-priced stocks economically unattractive to brokers. |
| Ÿ | Because brokers’ commissions on low-priced stocks represent a higher percentage of the stock price than commissions on higher-priced stocks, the current price of our Common Stock can result in transaction costs representing a higher percentage of the total share value than would be the case if the share price was substantially higher. |
| Ÿ | Certain broker-dealers have established a minimum price for the shares of stock that may be used as collateral for securities transactions, including margin. The expected increase in the per-share price of our Common Stock should alleviate some of these issues. |
We cannot assure, however, that the price of our Common Stock after the reverse stock split will reflect the 1-for-10 reverse split ratio, that the price per share following the Effective Time of the proposed amendment is set forth in Annex A to this Proxy Statement.
ODD LOTS
A reverse stock split may result in some stockholders owning “odd-lots” of less than 100 shares of Common Stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other transaction costs in odd-lot transactions are generally somewhat higher on a per-share basis than those for “round lots”.
24 POPULAR, INC. 2012 PROXY STATEMENT
ACCOUNTING CONSEQUENCES
The reverse stock split will not affect the par value of a share of our Common Stock. As a result of the corresponding authorized stock reduction, however, at the Effective Time of the reverse stock split, the stated capital attributable to Common Stock on our balance sheet will be reduced by dividing the amount of the stated capital prior to the reverse stock split by 10 (including a retroactive adjustment of prior periods), and the additional paid-in capital will be credited with the amount by which the stated capital is reduced. Reported per share net income or loss (both basic and diluted) and dividends per common share, if declared in the future, will be higher because there will be fewer shares of Common Stock if approved by stockholders,outstanding. Basic earnings per share data will become effective, even if the other proposal to amend Article Fifth is not approved.
TREATMENT OF FRACTIONAL SHARES
No fractional shares of Common Stock will be issued as a result of continued recessionary conditionsthe reverse stock split. Our transfer agent will aggregate fractional shares into whole shares of our Common Stock and will sell them in the open market at prevailing prices on behalf of holders who otherwise would be entitled to receive fractional share interests. Such persons will then receive a cash payment for the amount of their allocable share of the total sale proceeds. The amount of such payment will depend on the prices at which the aggregated fractional shares are sold by our transfer agent in the open market shortly after the Effective Time. Shareholders holding fewer than ten shares of our Common Stock would receive cash for all their shares held before the reverse stock split and would cease to be shareholders of the Corporation following the reverse stock split. Shareholders should be aware that, under the escheat laws of the various jurisdictions where stockholders reside, Puerto Rico, where we are domiciled and where the funds will be deposited, amounts due for fractional interests that are not timely claimed after the effective time may be required to be paid to the designated agent for each such jurisdiction. Thereafter, stockholders otherwise entitled to receive such funds may have to seek to obtain them directly from the state to which they were paid.
TREATMENT OF OPTIONS AND RESTRICTED STOCK
The reverse stock split, if implemented, will affect the outstanding options to purchase our Common Stock and restricted shares of Common Stock. Our equity incentive plans include provisions requiring adjustments to the following in the event of a reverse stock split: (i) the number of shares of our Common Stock covered by the plans; (ii) the number of shares of our Common Stock subject to outstanding awards granted under the plans; and (iii) the exercise prices of outstanding options granted under the plans. For example, in our 1-for-10 reverse stock split, each outstanding option to purchase Common Stock would thereafter evidence the right to purchase that number of shares of our Common Stock equal to one-tenth of the number of shares of our Common Stock previously covered by the option (fractional shares will be rounded to the nearest whole share and no cash payment will be made in respect to such rounding) and the United States. exercise price per share would be ten times the previous exercise price. Further, the number of shares of our Common Stock reserved for issuance (including the maximum number of shares that may be subject to options) under our existing equity incentive plans will be reduced to one-tenth of the number of shares currently included in such plans.
EXCHANGE OF STOCK CERTIFICATES
The economic pressure, capitalcombination of, and credit markets turmoil, and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business activity generally. The resulting economic pressure on consumers and lack of confidence in, the financial markets has adversely affected the financial services industry and the Corporation’s financial condition and resultsnumber of operations, as well as its capital position. During 2009, the Corporation carried out a series of actions designed to improve its U.S. operations, address credit quality, contain controllable costs, maintain well-capitalized ratios and improve capital and liquidity positions. These actions included completion of an exchange offer which resulted in the issuance of over 357 million in newour outstanding shares of Common Stock as a result of the reverse stock split will occur automatically on the Effective Time without any action on the part of our shareholders and without regard to the date that stock certificates representing the shares prior to the reverse stock split are physically surrendered for new stock certificates.
As soon as practicable after the Effective Time, transmittal forms will be mailed to each holder of record of certificates for shares of our Common Stock to be used in forwarding such certificates for surrender and exchange for preferred stock and trust preferred securities duringcertificates representing the third quarternumber of 2009. Asshares of our Common Stock such shareholder is entitled to receive as a result of the reverse stock split. Our transfer agent will act as exchange agent for purposes of February 19, 2010,implementing the Corporation had 639,540,105 millionexchange of the stock certificates. The transmittal forms will be accompanied by instructions specifying other details of the exchange. Upon receipt of such transmittal form, each shareholder should surrender the certificates representing shares issued and outstanding and approximately 36,913,613 shares available for issuance.
25 POPULAR, INC. 2012 PROXY STATEMENT
transfer agent. No new certificates will be issued to allow ita shareholder or cash payments made until the shareholder has surrendered his or her outstanding certificate(s) together with the properly completed and executed transmittal form to move promptlythe exchange agent. Shareholders should not send in their stock certificates until they receive a transmittal form from our transfer agent.
At the Effective Time, each certificate representing shares of our Common Stock will be deemed for all corporate purposes to raise additional capitalevidence ownership of the adjusted number of shares of our post-reverse split Common Stock. Stockholders should not destroy any stock certificate(s) and should not submit any certificate(s) until requested to do so.
BENEFICIAL HOLDERS OF COMMON STOCK (I.E., STOCKHOLDERS WHO HOLD IN STREET NAME)
Upon completion of the proposed reverse stock split, we will treat shares held by stockholders through a bank, broker, custodian or other nominee, in the short termsame manner as registered stockholders whose shares are registered in their names. Banks, brokers, custodians or other nominees will be instructed to effect the reverse stock split for their beneficial holders holding our Common Stock in street name. However, these banks, brokers, custodians or other nominees may have different procedures for processing the reverse stock split and making payment for fractional shares. If a stockholder holds shares of our Common Stock with a bank, broker, custodian or other nominee and has any questions in this regard, the stockholder is encouraged to provide additional shares for future issuances should further capital needs arise.
REGISTERED “BOOK-ENTRY” HOLDERS OF COMMON STOCK (I.E., STOCKHOLDERS THAT ARE REGISTERED ON THE TRANSFER AGENT’S BOOKS AND RECORDS BUT DO NOT HOLD STOCK CERTIFICATES)
Certain of the Corporation and its stockholders that the Corporation have a sufficient numberregistered holders of authorized but unissued shares of Common Stock available for possible use in the future for:
If a stockholder holds registered shares in book- entry form with the transfer agent, after the Effective Time he or she will automatically receive any cash payment in lieu of fractional shares or other distributions, if any, that may be declared and equity,payable to holders of record following completion of the reverse stock split.
MATERIAL TAX CONSEQUENCES
The following discussion summarizes the U.S. federal and may have a dilutive effectPuerto Rico income tax consequences of the proposed reverse stock split. The statements that follow are based on the voting powerexisting provisions of existing stockholders if the preferential rights provided in Article Sixthsuch statutes and regulations, and judicial decisions and administrative pronouncements, all of which are subject to change (even with retroactive effect).
This discussion is not intended to be, nor should it be relied on as, a comprehensive analysis of the Corporation’s Restated Certificate of Incorporation are waived bytax issues arising from or relating to the Corporation’s Board, whichproposed reverse stock split. Furthermore, this discussion does not attempt to discuss all income tax consequences to stockholders that may be done only withsubject to special income tax treatment under the unanimous approvalPuerto Rico Internal Revenue Code of 2011, as amended (the “Puerto Rico Code”), such as partnerships, special partnerships, corporations of individuals and tax exempt organizations, or under the U.S. Internal Revenue Code of 1986, as amended (the “Code”), such as controlled foreign corporations, passive foreign investments companies and personal holding companies.
In addition, we have not and will not seek a ruling from the Internal Revenue Service or from the Puerto Rico Treasury Department regarding the U.S. federal and Puerto Rico income tax consequences of the Board. The termsproposed reverse stock split. Therefore, the income tax consequences discussed below are not binding on the Internal Revenue Service and/or the Puerto Rico Treasury Department and there can be no assurance that such income tax consequences, if challenged, would be sustained.
Accordingly, stockholders are advised to consult their own tax advisors for more detailed information regarding the effect of any Common Stock issuance willthe proposed reverse stock split on them under applicable U.S. federal, State, Puerto Rico, local and foreign income tax laws that may be determined by the Board and depend upon the purpose for the issuance, market conditions and other factors existing at the time. The increase in authorized shares of Common Stock has not been proposed in connection with
26 POPULAR, INC. 20102012 PROXY STATEMENT
| Ÿ | The reverse stock split will qualify as a tax-free recapitalization under both the Code and the Puerto Rico Code. Accordingly, except for any cash received in lieu of fractional shares, a stockholder will not recognize any gain or loss for U.S. federal and/or Puerto Rico income tax purposes as a result of the receipt of the post-reverse stock split Common Stock pursuant to the reverse stock split. |
| Ÿ | The shares of post-reverse split Common Stock in the hands of a stockholder will have an aggregate basis for computing gain or loss on a subsequent disposition equal to the aggregate basis of the shares of pre-reverse split Common Stock held by that stockholder immediately prior to the reverse stock split, reduced by the basis allocable to any fractional shares which the stockholder is treated as having sold for cash, as discussed in the fourth bullet point below. |
| Ÿ | A stockholder’s holding period for the post-reverse split Common Stock will include the holding period of the pre-reverse split Common Stock. |
| Ÿ | Stockholders who receive cash for fractional shares will be treated for U.S. federal and Puerto Rico income tax purposes as having sold their fractional shares and will recognize a gain or loss in an amount equal to the difference between the cash received and the portion of their basis for the pre-reverse split Common Stock allocated to the fractional shares. Such gain or loss will be a capital gain or loss if the stock was held as a capital asset, and such gain or loss will be a long-term gain or loss to the extent that the stockholder’s holding period exceeds 12 months for U.S. federal income tax purposes and six months for Puerto Rico income tax purposes. |
| Ÿ | Stockholders who do not hold fractional shares and only receive post-reverse split Common Stock for their pre-reverse split Common Stock pursuant to the reverse stock split should not recognize any gain or loss for U.S. federal and/or Puerto Rico income tax purposes as a result of the reverse stock split. |
| Ÿ | Any gain or loss from the sale of fractional shares as discussed above realized by a stockholder who is not a resident of Puerto Rico will not be subject to income taxation in Puerto Rico and any gain or loss from the sale of fractional shares realized by a stockholder that is a bona-fide resident of Puerto Rico for the entire taxable year within the meaning of Sections 933 and 937 of the Code will not be subject to U.S. federal income taxation. |
| Ÿ | U.S. federal and Puerto Rico information reporting requirements will apply with respect to the cash proceeds to be received by the non-corporate stockholders in lieu of fractional shares and U.S. federal backup withholding (currently at the rate of 28%) will apply to such reportable amounts if said non-corporate stockholder fails to furnish a proper taxpayer identification number, to certify that such holders are not subject to U.S. federal backup withholding, or to otherwise comply with the applicable requirements of the U.S. federal backup withholding rules. |
NO APPRAISAL RIGHTS
Under applicable Puerto Rico corporate law, stockholders of the Corporationour shareholders are not entitled to appraisal rights with respect to the proposed amendment to Article Fifth of theour Restated Certificate of Incorporation to increaseeffect the amountreverse stock split together with a corresponding reduction in the number of authorized shares of Common Stock.
REQUIRED VOTE
The affirmative vote of two thirds of the holders of two-thirds of the shares of our outstanding Common Stock is required for the approval of this proposed amendment to our Restated Certificate of Incorporation to effect the reverse stock split and reduce the number of authorized shares of Common Stock of the Corporation is necessary to adopt the proposed amendment in accordance with the terms of Article Tenth of the Restated Certificate of Incorporation.Stock. Proxies will be voted FOR“FOR” the resolutionsproposed amendment unless otherwise instructed by the stockholders.Broker Since abstentions and broker non-votes and abstentionswill not be counted for these proposals, they will have the same legal effect as votes cast against the proposed amendment. amendment. Additionally, the failure to vote will have the same effect as a negative vote.
The Board has declared the desirabilityapproved this amendment to our Restated Certificate of the adoption of this amendmentIncorporation and recommends a vote FOR the resolutions.
27 POPULAR, INC. 2012 PROXY STATEMENT
In February 2009, Congress enacted the American Recovery and Reinvestment Act of 2009 (the “ARRA”). The ARRA imposes a number of requirements on financial institutions, such as the Corporation, that received an investment under the Capital Purchase Program of the United States Treasury’s Troubled Asset Relief Program (“TARP”). One of the requirements is that at each annual meeting of stockholders during the period in which any obligation arising from TARP financial assistance remains outstanding, TARP recipients must allow a separate, nonbinding “say on pay” stockholder vote to approve the compensation of executives. The Corporation’s overall executive compensation policies and procedures are described in the Compensation Discussion and Analysis and the tabular disclosure regarding NEO compensation (together with the accompanying narrative disclosure) in this Proxy Statement. These compensation policies and procedures promote a performance-based culture by providing for higher pay for superior performance, and align the interests of These policies and procedures are also designed to attract and retain highly-talented executives who are critical to the successful implementation of the Corporation’s strategic business plan. The Corporation The Compensation Committee, which is comprised entirely of independent directors under Nasdaq’s director independence rules, oversees our executive compensation program and monitors our policies so they continue to emphasizepay-for-performance and incentive programs that reward executives for results that are consistent with stockholder interests. This proposal gives you as a stockholder the opportunity to endorse or not endorse the Corporation’s executive pay policies and procedures through the following resolution: “RESOLVED, that the stockholders approve the overall executive compensation policies and procedures employed by the Corporation, as described in the Compensation Discussion and Analysis 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 may take into account the outcome of the vote when considering future executive compensation arrangements. The Board * * *PROPOSAL 4:3: ADVISORY VOTE RELATED TO APPROVE THE CORPORATION’S EXECUTIVE COMPENSATION PROGRAM Such vote is also required pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and recent regulations issued by the SEC.shareholdersstockholders and executives by linking a substantial portion of compensation to the Corporation’s performance, without encouraging executives to take unnecessary andor excessive risks.feelsviews this compensation program, as described in the Compensation Discussion and Analysis of this Proxy Statement, isas consistent with the goal of building long-term value for stockholders.“” unanimously recommends a vote FOR“FOR” the approval of the compensation policies and procedures employed by the Corporation as described in this Proxy Statement.22 POPULAR, INC. 2010 PROXY STATEMENT
The Board intends to retain the services of PricewaterhouseCoopers LLP as the independent public auditors of the Corporation for the year 2010.2012. PricewaterhouseCoopers LLP has served as independent public auditors of the Bank since 1971 and of the Corporation since May 1991.
Neither the Corporation’s Restated Certificate of Incorporation nor its By-LawsAmended and Restated By-laws require that the stockholders ratify the selection of PricewaterhouseCoopers LLP as the Corporation’s independent auditors. If the shareholdersstockholders do not ratify the selection, the Board and the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP, but may nonetheless retain such independent auditors. Even if the selection is ratified, the Board and the Audit Committee, in their discretion, may change the appointment at any time during the year if they determine that such change would be in the best interest of the Corporation and its stockholders.
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.
28 POPULAR, INC. 2012 PROXY STATEMENT
The ratification of the selection of PricewaterhouseCoopers LLP as the Corporation’s 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.
The Board recommends that you vote FOR“FOR” the ratification of PricewaterhouseCoopers LLP as the Corporation’s independent registered public accounting firm for 2010.
The following is a description of the fees billed to the Corporation by PricewaterhouseCoopers LLP for the years ended December 31, Audit Fees Audit-Related Fees(a) Tax Fees(b) All Other Fees(c) (a) Includes fees for assurance services such as audits of pension plans, compliance-related audits, accounting consultations and SAS 70 reports. (b) Includes fees associated with tax return preparation and tax consulting services. (c) Includes software 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 or another firm. 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 the Corporation are negotiated annually. In the event that any additional audit services not included in the annual negotiation or permissible non-audit services are required by the Corporation, a proposed engagement letter is obtained from the auditor 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 the Corporation. During 29 POPULAR, INC. DISCLOSURE OF AUDITORS’ FEES20092011 and 2008: December 31, 2009 December 31, 2008 Audit Fees $ 3,930,500 $ 4,563,000 Audit-Related Fees(a) 1,030,750 1,533,500 Tax Fees(b) 56,000 66,000 All Other Fees(c) 32,000 56,000 $ 5,049,250 $ 6,218,500 2010: December 31, 2011 December 31, 2010 $ 4,689,925 $ 4,915,940 937,441 2,889,907 40,000 90,200 20,000 20,000 $ 5,687,366 $ 7,916,047 For the year 2010, includes $722,200 which were paid by EVERTEC, Inc. after the Corporation sold 51% of EVERTEC to an unrelated third party.licenselicensing fees.2009,2011, fees for all auditor feesservices provided by PricewaterhouseCoopers LLP were pre-approved by the Audit Committee.2320102012 PROXY STATEMENT
In the performance of its oversight function, the Audit Committee has considered and discussed the audited financial statements of the Corporation for the fiscal year ended December 31, 20092011 with management and PricewaterhouseCoopers LLP, the Corporation’s independent registered public accounting firm. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by Statement onunder Auditing Standards No. 61, as amended “Communication with Audit Committees.”(AICPA Professional Standard, Vol. 1, AU Section 380) as adopted by the by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T. Finally, the Audit Committee has received the written disclosures and the letter from PricewaterhouseCoopers LLP required by Independence Standards Board Standard No. 1, as amended, “Independence Discussionthe PCAOB regarding the independent accountant’s communications with Audit Committees,”the audit committee concerning independence, has considered whether the provision of non-audit services by the independent registered public accounting firm to the Corporation is compatible with maintaining the auditors’ independence, and has discussed with the independent registered public accounting firm its independence from the Corporation and its management. These considerations and discussions, however, do not assure that the audit of the Corporation’s financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”),PCAOB, that the financial statements are presented in accordance with Generally Accepted Accounting Principles (“GAAP”) or that the Corporation’s registered public accountants are in fact “independent.”
As set forth in the Audit Committee Charter, the management of the Corporation is responsible for the preparation, presentation and integrity of the Corporation’s financial statements. Furthermore, management and the Internal Audit Division are responsible for maintaining appropriate accounting and financial reporting principles and policies, and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. PricewaterhouseCoopers LLP is responsible for auditing the Corporation’s financial statements and expressing an opinion as to their conformity with GAAP in the United States of America.
The members of the Audit Committee are not engaged professionally in the practice of auditing or accounting and are not employees of the Corporation. The Corporation’s management is responsible for its accounting, financial management and internal controls. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures to set auditor independence standards.
Based on the Audit Committee’s consideration of the audited financial statements and the discussions referred to above with management and the independent registered public accounting firm, and subject to the limitations on the role and responsibilities of the Audit Committee set forth in the Charter and those discussed above, the Audit Committee recommended to the Board that the Corporation’s audited financial statements be included in the Corporation’s Annual Report onForm 10-K for the year ended December 31, 20092011 for filing with the SEC.
Submitted by:
William J. Teuber Jr.
Alejandro M. Ballester
C. Kim Goodwin
Carlos A. Unanue
* * *
PROPOSAL 5: ADJOURNMENT OR POSTPONEMENT OF THE MEETING
The Board is requesting that the stockholders approve the adjournment of the Meeting, if necessary or appropriate, in order to allow for the solicitation of additional proxies, in the event that there are not sufficient votes at the time of the Meeting to adopt Proposal 2, which relates to the amendment of the Corporation’s Restated Certificate of Incorporation to effect a reverse stock split of our outstanding Common Stock of 1-for-10, together with a corresponding reduction in the number of authorized shares of our Common Stock.
If our stockholders approve the adjournment proposal, the Meeting could be adjourned and management could use the additional time to solicit proxies in favor of the adoption of Proposal 2, including the solicitation of proxies from stockholders that have previously voted against Proposal 2.
The Board recommends a vote“FOR” the proposal to approve the adjournment of the Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the Meeting to approve Proposal 2.
30 POPULAR, INC. 20102012 PROXY STATEMENT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with management and In accordance with the requirements related to the Corporation’s participation in the United States Treasury Department’s Capital Purchase Program (“CPP”) under the Emergency Economic Stabilization Act of 2008 (“EESA”), the Compensation Committee certifies that at its June and December 2011 meetings it The risk assessment conducted with the In addition, the Corporation selected for a more detailed analysis those plans that could have the potential to promote excessive risk taking, The Compensation Committee will continue to review the Corporation’s compensation plans with the Submitted by: María Luisa Ferré (Chairperson) William J. Teuber Jr. Carlos A. Unanue 31 POPULAR, INC. 2012 PROXY STATEMENT COMPENSATION DISCUSSION AND ANALYSIS Executive Summary Business Highlights The year 2011 represented a turnaround for Popular. The Corporation achieved operational profitability for the first time since 2006 by successfully executing its plans during an extended economic downturn. Initiatives taken by leadership have resulted in our ability to maintain strong margins, produce strong and stable top line revenue and continue to reduce credit costs. Despite the difficult economic and credit environment, the Corporation was able to maintain strong leadership in Puerto Rico and position itself for long-term prosperity. Highlights during the year include: Addition of high-quality assets with the purchase of approximately $518 million of performing residential mortgage loans and the acquisition of Citibank’s Puerto Rico AAdvantage portfolio corresponding to $130 million. Achievement of a significant reduction in credit risk through the sale of approximately $128 million in net book value of construction and commercial real estate non-performing loans in Puerto Rico and $457 million in unpaid principal balance of non-conventional mortgages in Banco Popular North America. Restoration of Banco Popular North America’s profitability a year ahead of schedule. Completion of Banco Popular North America’s rebranding efforts in California and Florida, as part of the implementation of its community banking strategy. Implementation of significant changes to the Corporation’s credit risk and administration processes resulting in improved credit quality. Strengthening of the Corporation’s customer service by means of improved surveys and metrics, linkage to incentives, and improvement in operational processes. Execution of efficiency efforts through the redesign of critical processes in addition to cost savings from the voluntary retirement window offered to eligible employees during the fourth quarter. The Compensation Committee Compensation Highlights – Background The Corporation’s executive compensation program is designed to enable us to attract, motivate and retain the talent needed to successfully maneuver through these challenging times. The program provides a mix of salary, benefits and performance incentives. However, while subject to the United States Treasury Department’s Capital Purchase Program (“CPP”), our mix and level of compensation is restricted for certain key executives. The Corporation is not permitted to pay cash performance incentives, although cash salary and restricted stock (capped at 1/3 of total compensation) are allowed. As a result, while under the CPP, we continue to balance our desire to align pay and performance within these guidelines. Our programs and pay decisions are designed to focus our executives on the turnaround initiatives while aligning their interests with those of our stockholders. Through its Compensation Committee, the Corporation manages NEO compensation in a conservative and prudent manner, with decisions considering role, scope and complexity, individual performance, market competitiveness, the Corporation’s financial performance and CPP restrictions. An analysis conducted in 2010 and updated in 2011 by the Compensation Committee’s independent consultant Pearl Meyer & Partners REPORT OF THE COMPENSATION COMMITTEEbased on that review and discussions, recommended to the Board that the following CD&A be included in this Proxy Statement. has reviewed with the Corporation’s SeniorChief Risk Officer (“SRO”CRO”), with the 2009support of its independent compensation consultant Pearl Meyer & Partners, the 2011 compensation arrangements for the Senior Executive Officers (“SEOs”) (the SEOs for 2011 are the Named Executive Officers discussed in the CD&A) and has made all reasonable efforts to ensure that such arrangements do not encourage SEOs to take unnecessary and excessive risks that may threaten the value of the Corporation. The Compensation Committee has also reviewed with the SROCRO the employee compensation programs in place during 2009,2011, and has made all reasonable efforts to limit any unnecessary risks these programs may pose to the Corporation, and eliminate any features of these programs that could encourage the manipulation of reported earnings of the Corporation to enhance the compensation of any employee.While that analysis revealed thatSEOs’CRO included the evaluation of the Corporation’s compensation arrangementsand incentive plans from the perspective of the broader control framework and the employee compensation programs do not encourage them to take unnecessary or excessive risks or to manipulate reported earnings, the Corporation continues to enhancedesign and strengthen the control framework surrounding alloperation of its compensation programs. Some of the actions being taken include more extensive documentation of the compensation processes, as well as a formal mechanism to regularly reviewspecific plans. The assessment validated the adequacy of plan documentation, the incentiveintegration of the principles contained in the Interagency Guidance on Sound Compensation Practices, and compensation plans with the participationinvolvement of the Corporation’s Risk Management and Finance Groups, among others.The risk analysis performed with the SRO entailed the evaluation of the compensation and incentive plans for the operations of the Corporation and its subsidiaries, from whichGroups.-mostly pertainingwhich typically pertain to credit and/or transaction volume. Specifically, during 2011 a detailed analysis was performed with particular focus on incentive plans related areas- for a more profound and detailed analysis.to the commercial credit functions. The review of the selected plans focused on plan operation, the types of potential risk (credit, interest rate, market, liquidity, operational, compliance, strategic and reputational) and the manner in which the incentive design and internal controls mitigated those activitiesrisks. Plans for credit functions were evaluated to ensure the inclusion of factors that if incentivized directly or indirectly bybalance production, credit administration and risk management. The evaluation showed that the compensationincentive plans, and in the absence of effectiveconjunction with risk management controls, could expose the Corporation to undesired levels of additional risks. These activities were: loan growth, sale of loans with recourse, sale of financial assets, increase in trading activity and boosting of net interest margin.As mentioned above, the evaluation of the compensation programs revealedprocesses, do not contain any features that they do notwould encourage SEOs or employees to take unnecessary andor excessive risks that may threaten the value of the Corporation. The evaluation concluded thatrisks. All the compensation plans,programs in conjunction with internal controls, have distinct features that discouragethe Corporation are designed to adequately balance risks and mitigate unnecessary or excessive risks, including a balance between cash-basedrewards through appropriate use of short-term incentives (cash) and stock-based long-term incentives;incentives (stock); thresholds and caps to limit payouts in any given year;payouts; mix of financial and non-financial components; balance between earnings and credit quality metrics; use of restricted stock with long vesting periods;link to company performance; and competitive base pay practices.As part of the processSROCRO every six months the Compensation Committee will analyze the 2010 incentive compensation arrangements as they are established and will continue to ensure that the Corporation complies with those provisions of the EESA or any other law or regulation related to compensation arrangements applicable to financial institutions participating in the CPP.Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ retainedbelieves that the servicesretention and engagement of our Named Executive Officers (“NEOs”) throughout the recent difficult times have been crucial in our turnaround.to assist in this endeavor, as well as in the evaluation of the review and analysis processes regarding theshowed that our NEOs’ compensation plans performed by the SRO.Submitted by:María Luisa Ferré (Chairperson since January 2010)Michael T. MasinWilliam J. Teuber Jr.José R. Vizcarrondo25 POPULAR, INC. 2010 PROXY STATEMENT
During 2011, the Corporation’s NEOs (Richard L.(with the exception of Mr. Sepúlveda) were only eligible for incentive compensation in the form of restricted stock equivalent to a maximum of 50% of prior-year base pay, pursuant to the Corporation’s participation
32 POPULAR, INC. 2012 PROXY STATEMENT
in the CPP. In February 2011, the Compensation Committee granted restricted stock to NEOs subsequent to its evaluation of each NEO’s 2010 contributions to the improvements in the Corporation’s capital position, liquidity and asset growth. The award was in the form of restricted stock compliant with CPP limitations and restrictions with an additional profitability hurdle required for future transferability of shares. Even with the base salary increase and restricted stock grant, the NEOs’ total compensation remained below market. The Compensation Committee considered that this was appropriately aligned with the Corporation’s performance.
In addition, executives are expected to meet stock ownership guidelines in order to further ensure that their interests are aligned with those of the stockholders. The CEO and other NEOs have a stock ownership goal, to be reached within five years from October 1, 2011, of six times and three times their base salary, respectively, as detailed in the “Stock Ownership Retention Requirements” section of this CD&A. Collectively, the current NEOs hold significant investments in the Corporation’s stock. The CEO in particular has a high level of ownership in the Corporation. As of January 31, 2012, Mr. Carrión David H. Chafey Jr., Jorge A. Junquera, Carlos J. Vázquezowned 4,129,280 shares with a market value of $6,482,971.
Ensuring and Brunilda Santos de Álvarez*)sustaining a proper pay-performance relationship is a key objective for the Compensation Committee. As such, the Compensation Committee’s independent consultant conducts regular analyses to monitor the CEO’s pay-performance relationship. The Compensation Committee relies on benchmark data provided by the independent compensation consultant to compare CEO pay and the Corporation’s performance relative to its peer group (represented by 18 financial institutions in 2011). Below is a summary of the various perspectives analyzed:
| Ÿ | Actual pay delivered – Mr. Carrión’s actual 2010 pay was below the 25th percentile of the peer group. This reflected a combination of CPP restrictions, as well as the performance of the Corporation. |
| Ÿ | Total pay opportunity (base salary plus target bonus and grant date value of stock awards): Mr. Carrión’s 3-year total pay opportunity (2008 – 2010) ranked in the 8th percentile compared to peers. |
| Ÿ | Realizable pay (base salary plus actual bonus plus current value of stock awards and in-the-money options): Mr. Carrión’s potential realizable pay ranked at the 5th percentile compared to peers. |
| Ÿ | Performance (3-year Total Shareholder Return from 2008—2010): The Corporation’s 3-year Total Shareholder Return was ranked in the 13th percentile compared to peers. |
While the Corporation’s results have been in turnaround status, the CEO’s total compensation has declined duringremained significantly below market (at or below the last two years. Short-term incentives have decreased over time,market 30th percentile, even considering 2011 pay decisions concerning base salary increases and noCPP-compliant restricted stock has been granted forgrants). The Compensation Committee feels the past three years. Moreover, in response to the continued decline in financial marketsCEO’s total compensation structure (i.e., high ownership) and the adverse impact of deteriorating economic conditions on the Corporation’s financiallevels (i.e., below market) are appropriately aligned with our performance during 2009 the Corporation also made several changes to its compensation program designed to produce significant cost savings, which included the following:
MembersOverview and RoleMeetings
The Compensation Committee establishes the Corporation’s general compensation philosophy and oversees the compensation program for the Corporation’s executive officers, including the NEOs. It also reviews and approves the overall goalgoals and purpose of the Corporation’s incentive compensation system. The
During 2011, the Compensation Committee currently has fourmet five times. The CEO, the CRO and members each of whom during 2009:
Each Compensation Committee meeting has an agenda established in accordance with the annual calendar set by the Compensation Committee Chair, after consultation with management. Additional discussion topics related to external or internal events are added to the agenda as they arise. The Compensation Committee receives and reviews materials in advance of each of its meetings, including information on management’s analyses and recommendations. Depending on the meeting’s agenda, those materials may include:
| Ÿ | |
calculations and reports on levels of achievement of individual and corporate performance objectives; |
| Ÿ | |
information on the NEOs’ stock ownership and option holdings; |
33 POPULAR, INC. 2012 PROXY STATEMENT
| Ÿ | |
tally sheets setting forth the NEOs’ total compensation, including base salary and incentives; |
| Ÿ | |
information regarding compensation programs and compensation levels at peer group |
| Ÿ | |
information on succession for key executive positions, including NEOs; |
| Ÿ | |
reports on human resources matters such as workforce composition, headcount, turnover, total compensation, other related costs and expenses, and training and development; and |
| Ÿ | |
information and recommendations provided by compensation consultants regarding executive compensation programs and pay levels. |
In approving the compensation program for NEOs, the Compensation Committee considersconsiders: pay levels and programs at comparable financial institutions (as described below in the section entitled “Benchmarking”),; the Corporation’s short and long-term financial performance,performance; the risks to the Corporation whichthat may be posed by the compensation programprogram; and individual performanceperformance. These factors are considered in order to develop a strong relationship among executive performance, compensation and shareholder returns.
Although the Compensation Committee exercises its independent judgment in reaching compensation decisions, it utilizes the advice provided by its independent consultants,compensation consultant Pearl Meyer & Partners and by the Corporation’s PeopleAdministration (Human Resources) Group, the Chief Legal Officer, the Corporate Comptroller, the SROCRO and the CEO in assessing, designing and recommending compensation programs, plans and awards for NEOs. In particular:
| Ÿ | |
independent consultant Pearl Meyer & Partners |
| Ÿ | |
the |
| Ÿ | |
the Chief Legal Officer counsels on legal matters regarding compensation programs; |
| Ÿ | |
the Corporate Comptroller evaluates and advises on the programs’ accounting and tax implications; |
| Ÿ | |
the |
| Ÿ | |
the CEO works with the Compensation Committee |
Compensation Consultant
Since 2010, the Compensation Committee has retained the services of compensation consultant Pearl Meyer & Partners to serve as independent advisor to the Committee and review the Corporation’s executive compensation program’s competitiveness and the pay-performance relationship in light of the CPP-related restrictions. In 2011, Pearl Meyer & Partners attended several Compensation Committee meetings, provided updates and guidance to the Compensation Committee on relevant legislation, market trends, best practices in compensation governance and other requested compensation matters. The compensation consultant’s recommendations were thoroughly reviewed and considered by the Compensation Committee for certain executive compensation modifications approved in 2011. Pearl Meyer & Partners reports directly to the Compensation Committee with regard to the foregoing matters, and neither Pearl Meyer & Partners nor any of its affiliates has any other relationship with, or provides any other services to, the Corporation.
Benchmarking
The CorporationCompensation Committee periodically assesses the competitiveness of its pay practices for NEOs through internal staff research and external studies conducted by the Committee’s independent executive compensation consultants.consultant and supplemented by internal staff
34 POPULAR, INC. 2012 PROXY STATEMENT
research. In order to obtain a general understanding of current compensation market practices, of similarly situated companies, internal staff regularly reviews publicly available industry survey information of its peer financial institutions (e.g., proxies and executive compensation data provided by sources such as SNL Financial and Towers Watson)Watson surveys). The CorporationCompensation Committee also considers executive compensation information from the largest financial institutions in its headquarters market of Puerto Rico.
The Compensation Committee utilizes the information from internal and external analyses to setassess the appropriateness of compensation levels so that NEO compensation falls generally within the desired range of comparative pay of the peer group companies when the Corporation achieves the targeted performance levels.(relative to market and performance) and to set program guidelines such as base salary ranges, incentive targets and equity compensation. An individual’s relative compensation with respect to the peer group willmay vary according to a number of circumstances, including the executive’s role, the Corporation’s financial performance, and individual qualifications and performance as assessed by the Compensation Committee.
2009 Decisions
The peers are:
Associated Banc-Corp | Huntington Bancshares Incorporated | |
BOK Financial Corporation | M&T Bank Corporation* | |
City National Corporation | Marshall & Ilsley Corporation | |
Comerica Incorporated | New York Community Bancorp, Inc. | |
Commerce Bancshares, Inc. | People’s United Financial, Inc. | |
First BanCorp. | Synovus Financial Corp. | |
First Citizens BancShares, Inc. | TCF Financial Corporation | |
First Horizon National Corporation | Webster Financial Corporation | |
Hudson City Bancorp, Inc. | Zions Bancorporation |
*Merged with BMO Financial Group in July 2011
Pearl Meyer & Partners also included data from other industry databases and surveys, including Mercer Financial Services Survey and Pearl Meyer & Partners’ own database of financial services companies’ proxy data. Data and competitiveness were assessed for base salary, cash incentives, total cash compensation, equity incentives and total direct compensation.
In 2011, at the Compensation Committee’s consultant, including pay-performance comparisons betweenrequest, Pearl Meyer & Partners updated the Corporation and its peer group, revealedcompensation study conducted in 2010. The study reaffirmed the findings of the prior year’s study by indicating that total direct compensation of the Corporation’s NEOs was significantly lower than local and national industry peers. This finding, in conjunction with the Corporation’s reduction of perquisites and freeze of benefits in its retirement pension and pre-tax savings plans, had placed its executivescontinued to be in a low competitive position.
In addition, the compensation consultant conducted a pay-performance assessment that compared the Corporation’s 3-year Total Shareholder Return and total CEO pay opportunity and realizable pay (i.e., current value of actual pay) with those of the peer group. The results indicated that the Corporation’s performance and CEO pay were below the 25th percentile among its peers, indicating alignment. Even after considering 2011 pay decisions, the 3-year comparison of CEO pay and performance remained below the 25th percentile of the peer group.
35 POPULAR, INC. 20102012 PROXY STATEMENT
Although subject to the CPP restrictions on incentive compensation for covered employees, the Corporation continues to promote its compensation philosophy to the extent possible given the permitted compensation components. The Corporation’s total compensationoverarching philosophy is designed to align pay with individual and corporate performance, based on the individual’s contribution to the Corporation’swhile balancing short-term results and long-term growth objectives, in a manner consistent with the goal ofperspectives, building long-term value for shareholders without encouraging executives to take unnecessaryour stockholders and excessive risks. Because ofsupporting sound risk management. Despite the generalCPP’s prohibition on bonuses and other incentive compensation under the CPP, for 2009 the Corporation was unable to award or pay some of the types of compensation that it typically would have paid or awarded to reward performance. Despite the prohibition on bonuses and other incentive compensation, the Corporation’sduring 2011, our compensation program’s goals continue to be to:
| Ÿ | |
promote |
| Ÿ | |
attract and retain |
| Ÿ | |
reward contributions and results in attaining key operating objectives over which the executives have control or influence; |
| Ÿ | |
encourage teamwork and collaboration among the executive team; and |
| Ÿ | |
promote appropriate behaviors among executives so that they are not motivated to take excessive risks. |
The objectives described above are achieved through a performance-based compensation analysisprogram. Annually, the Corporation conducts a compensation program assessment which begins with a review of the Corporation’sits strategic objectives and business plans, and is followed by an analysis of each NEO’s scope of responsibility, market competitive assessments of comparable positions at the peer institutions, and the relationship between pay and performance.performance (the Corporation relative to peers and executives relative to their performance goals). The Compensation Committee evaluates whether the Corporation’sour compensation programs meet the Corporation’s goals by monitoring engagement and retention of executives, and by assessing the relationship between company and individual performance and actual payouts, subject to CPP-related restrictions. Furthermore, in conjunction with the semi-annual review of the compensation plans with the CRO, the Compensation Committee monitors and evaluates whether the design of incentive plans fosters a mentality of prudent risk taking, sound business decisions and promotes the Corporation’s financial well being.
The Compensation Committee retainedmay modify payments or adjust the servicescompensation program annually in light of economic or business results, regulatory requirements or the results of the annual stockholder advisory vote on executive compensation. For example, the short-term cash incentive opportunity for executives not covered by CPP-related restrictions has been reduced by 15-25% since 2009 to exclude any award related to the Corporation’s results until higher levels of profitability are attained.
The compensation program offered to NEOs is balanced and comprises the following components:
Component | Purpose/Description | |
Base Pay | Ÿ Reflects each executive’s role, competitive market practices and individual performance | |
Short-Term Cash Incentive | Ÿ Rewards the achievement of annual financial performance goals and the execution of key strategic projects aligned with the Corporation’s future growth and profitability Ÿ This component is not offered to CPP-covered executives | |
Long-Term Equity Incentive | Ÿ Focuses executives on long-term performance, aligns with shareholders through payment in the Corporation’s Common Stock Ÿ Promotes retention of critical executive talent Ÿ Rewards company performance, individual goal achievement and demonstration of the Corporation’s leadership competencies Ÿ CPP restrictions only allow restricted stock values no greater than 1/3 of executive’s annual total compensation | |
Benefits | Ÿ Provides welfare and retirement benefits offered on a substantially similar basis to all employees of the Corporation | |
Perquisites | Ÿ Provides benefits for certain roles in consideration of role and market practice Ÿ Does not represent a significant portion of the Corporation’s total compensation program | |
36 POPULAR, INC. 2012 PROXY STATEMENT
Pursuant to the Corporation’s participation in the CPP, an advisory vote related to executive compensation was conducted in the last three years. The majority of our stockholders approved the Corporation’s overall executive compensation policies and procedures, which are centered on promoting a performance-based culture and aligning the interests of stockholders and executives by linking a substantial portion of compensation consultant Pearl Meyer & Partners to review the Corporation’s financial performance, without encouraging unnecessary or excessive risk taking. The stockholders’ validation of our executive compensation program in light of the CPP-related restrictions, as well as the process utilized for the compensation risk analysis. Pearl Meyer & Partners reports directly to the Compensation Committee and has no other relationship with and provides no other services to the Corporation. The compensation consultant’s findings were thoroughly reviewed and consideredwas taken into consideration by the Compensation Committee as it developed strategic objectives, business plans and compensation elements related to 2011 compensation around the standards mentioned above. Base pay decisions for certain executive2011 took into consideration competitive market data and the need to provide fair pay in order to keep NEOs focused on the Corporation’s continued progress and performance. Incentive awards for 2011 were based on Corporate performance (i.e., net income, credit quality, efficiency, liquidity and capitalization), as well as on the NEOs’ strategic and personal objectives (such as critical product or technology infrastructure development, achievement of business reorganization, and managerial and operational process improvements).
Compensation Components and 2011 Pay Decisions
The Corporation’s compensation modifications approved in February 2010.
Base Salary
Base salaries are generally designedestablished to be competitive with comparable positions in peer group companiesat similar sized institutions, and to provide fair compensation for their roles and enablethat enables the Corporation to attract and retain qualified executives. Base salaries vary based on the Compensation Committee’san assessment of theeach NEO’s role, qualifications, experience, responsibilities, leadership potential, individual goals, performance and competitive pay practices. Base salaries are reviewed annually, but are not necessarily increased.
In February 2009, the Corporation’s management took several actions to generate cost savings due to the economic situation and the Corporation’s financial results. Among them,2011, the Compensation Committee approved management’s recommendation for a 10% reductionincreases in cash base salary for Mr. Chafey and a 7.5% reduction in base salarysalaries for the other NEOs effective March 2009.(other than the CEO) ranging between 2% and 6% of their base salary. These increases were considered critical to providing fair compensation and allowing our NEOs to remain focused on the Corporation’s turnaround. Later in the year, the Compensation Committee decided to further evaluate the market competitiveness of Mr. Carrión’s base salary was reduced by 10% effective September 2005 and had not been increased since then. Base pay reductions were also implemented for the other executives (group heads and division managers)Sepúlveda’s compensation in light of the Corporation.
| 2008 | 2009 | |||||||||
| David H. Chafey Jr. President & Chief Operating Officer | $ | 767,250 | $ | 690,525 | ||||||
| Jorge A. Junquera Senior Executive Vice President & CFO | $ | 565,950 | $ | 523,500 | ||||||
| Carlos J. Vázquez Executive Vice President | $ | 480,000 | $ | 444,000 | ||||||
| Brunilda Santos de Álvarez Executive Vice President | $ | 400,000 | $ | 370,000 | ||||||
With regard to the CEO, upon consideration of the market information provided by the compensation consultant in 2011, the Compensation Committee noted that the CEO’s total direct compensation remained significantly below market for similar roles combining Chairman, President and CEO. After careful review of market pay information and the CEO’s level of responsibilities (including the role assumed during 2010 as President of the Corporation), and considering the CEO’s already substantial equity ownership position in the Corporation, each Decemberin February 2011 the Compensation Committee approved an increase in base salary to all$1,400,000; the increase was disclosed in the CD&A section of its Puerto Rico-based employees. These increases effectively restorethe Corporation’s 2011 Proxy Statement. After this adjustment, the CEO’s total direct compensation was positioned at the 30th percentile of the Corporation’s peer group of financial institutions. The compensation consultant’s pay-for-performance analysis showed that, even after the 2011 increase in the CEO’s base salary, the three-year historical Total Shareholder Return and the three-year historical CEO total pay (opportunity and realizable pay) remained below the 25th percentile of the peer market.
37 POPULAR, INC. 2012 PROXY STATEMENT
After the above changes, the NEOs’ 2011 annualized base pay to the levels maintained in 2007. The Compensation Committee will continue to monitor economic conditionswas as follows: Richard L. Carrión (CEO and market pay practices on an ongoing basis. The NEOs’ base pay after these modifications is as follows:
| Base Salary | ||||||
| Richard L. Carrión Chairman & CEO | $ | 855,833 | ||||
| David H. Chafey Jr. President & Chief Operating Officer | $ | 799,219 | ||||
| Jorge A. Junquera Senior Executive Vice President & CFO | $ | 589,532 | ||||
| Carlos J. Vázquez Executive Vice President | $ | 500,000 | ||||
| Brunilda Santos de Álvarez Executive Vice President | $ | 416,667 | ||||
In 2011 the Corporation’s NEOs (other than Mr. Sepúlveda) were not eligible to participate in the Corporation’s typical annual incentive plan. They were only eligible to receive restricted stock awards as prescribed by the CPP therules. The Corporation’s incentive program for NEOs covered by the CPP-related restrictions is solely in the form of restricted stock thereby aligning executivewhose terms comply with those outlined in the CPP. All NEOs are covered by the CPP-related restrictions in 2012.
Short-Term Cash Incentive
The Corporation’s NEOs who are not covered by the CPP-related restrictions (i.e., Mr. Sepúlveda in 2011) are eligible to receive a cash incentive based on their degree of achievement of annual performance goals and the execution of their leadership role. The award may range from 0% to 85% of base pay, with a target award equal to 50% of base pay. Since 2009, the Compensation Committee has implemented this reduced target award (previously 75% of base pay) to exclude the component related to the Corporation’s results until higher levels of profitability are attained. In determining eligible NEOs’ awards, the Compensation Committee considers their performance related to financial objectives, customer satisfaction, implementation of key projects to grow the business or generate efficiencies, and the demonstration of the Corporation’s leadership competencies.
Long-Term Restricted Stock
The Corporation believes that long-term restricted stock is an effective means to align NEO compensation with the Corporation’sCorporation��s long-term profitabilityfinancial success and the optimal useinterests of shareholder capital.
Awards are allocated each year in consideration of the performance and contribution of the Corporation and its NEOs, which are approvedassessed by the Compensation Committee on a discretionary basis. InAs described below, in making these awards, the Compensation Committee takes into consideration several financial goals (includingCorporate performance (e.g. net income, credit quality, efficiency, liquidity and capitalization), as well as strategic and personal objectives (such as critical product or technology infrastructure development, achievement of business reorganization, and managerial and operational process improvements). Awards are subject to a clawback provision if they are found to have been based on any materially inaccurate financial results or performance metric criteria.
The Compensation Committee grants equity each year based on its assessment of the Corporation’s results and each NEO’s performance during the prior year. Thus, our disclosure below discusses our 2011 equity grants (based on 2010 performance) and 2012 equity grants (based on 2011 performance). We believe that showing multiple years’ grants and performance information provides a more comprehensive view of our compensation program.
2011 Decisions
2009 DecisionsShort-Term Cash Incentive
Mr. Sepúlveda received a 2011 short-term incentive equal to $125,000 (30% of his 2011 base pay compared to the target incentive of 50%) in consideration of his leadership and contributions toward the Corporation’s enhancement of processes related to commercial credit origination and administration, and the sale of a portion of the commercial loan portfolio. The actual incentive earned was below target mainly due to the fact that certain goals related to Puerto Rico commercial credit quality were not achieved.
38 POPULAR, INC. 2012 PROXY STATEMENT
Long-Term Restricted Stock
Although the typical long-term target awards of the Corporation’s executives (75% of base pay for NEOs other than the CEO, and 200% of base pay for the CEO) were reduced while under CPP, the Compensation Committee continued to consider the performance and contribution of each NEO to the strategic objectives of the Corporation to determine awards. In addition to the required CPP vesting requirements, the Compensation Committee continued its practice to require an additional profitability threshold for vesting of any grants.
In February 2011, the Corporation’s NEOs were granted restricted stock consistent with CPP requirements. Each NEO was granted shares equivalent to 50% of prior-year earned base pay in light of the reduced total incentive opportunity under CPP restrictions and in consideration of the Corporation’s and each NEO’s performance during 2010. During 2010, the Corporation’s NEOs shared the common overarching goal of strengthening the Corporation’s financial condition by increasing capital, liquidity and assets. The NEOs directed their concerted effort toward achieving this goal, with the following 2010 results:
| Ÿ | Raised $1.15 billion in new capital through a share offering. |
| Ÿ | Submitted the winning bid for the assets of the former Westernbank in the largest FDIC-assisted transaction of 2010, with the successful integration of operations and high levels of customer and deposit retention. Through this transaction, the Corporation assumed approximately $8.3 billion in assets and $2.4 billion in deposits. |
| Ÿ | Negotiated the sale of a majority interest in the Corporation’s technology and transaction processing subsidiary EVERTEC, yielding $576 million in additional Tier 1 Capital. The transaction generated a net gain of $531 million and net cash proceeds of $528 million. |
The above actions positioned the Corporation solidly for future growth and the successes evident in 2011. Furthermore, each NEO successfully achieved significant individual goals, including the following:
| NEO | Award Grant Value | Number of ($ Grant / $3.37 per share) | Rationale – Individual Goals | |||||||
Richard L. Carrión Chairman, President and CEO | $ | 419,130 | 124,371 | Led management through the execution of the above-referenced achievements. Significant improvement in credit quality resulted in lower than expected net charge offs and provision. Decision taken in December 2010 to derisk balance sheet by selling the majority of the Puerto Rico construction portfolio and the non-earning portion of the U.S. non-conventional mortgage portfolio. Enhanced the organizational structure in Puerto Rico and Banco Popular North America (“BPNA”) by simplifying and strengthening key areas.
| ||||||
Jorge A. Junquera Senior Executive Vice President and CFO | $ | 289,686 | 85,960 | Executed financial aspects of capitalization and liquidity initiatives, finishing the year above well-capitalized levels and resolving the liquidity issues at the holding companies. Achieved substantial improvement in the net interest margin through several cost reduction initiatives.
| ||||||
Carlos J. Vázquez Executive Vice President and President, Banco Popular North America | $ | 258,962 | 76,843 | Contributed to the significant improvement in the Bank’s Consumer Credit profitability, credit quality, analytics, efficiency in technological platform and processes. Enhanced BPNA's branch network and efficiency. Consolidated and strengthened BPNA's senior management team.
| ||||||
Ignacio Alvarez Executive Vice President | $ | 142,789 | 42,370 | Assisted in the development of a strategy to package and market a substantial portion of the Corporation's construction loan portfolio. Supervised the monitoring of the potential impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the corporate governance structure of the Corporation.
| ||||||
Eli Sepúlveda Executive Vice President | $ | 161,349 | 47,878 | Oversaw the integration of the Westernbank’s commercial credit operations in Puerto Rico (2010 FDIC assisted transaction). Played a critical role in the acquisition by leading the groups responsible for ensuring a smooth transition. Directed the efforts aimed at the early detection of problem loans in order to minimize losses and improve credit quality.
| ||||||
Former Executive Officer: | ||||||||||
Amílcar Jordán Executive Vice President | $ | 204,744 | 60,755 | Implemented Enterprise Risk Management function and the completion of an off-island disaster recovery strategy. | ||||||
39 POPULAR, INC. 2012 PROXY STATEMENT
2012 Awards for 2011 Performance
As described above, given the Compensation Committee’s practice of awarding equity grants based on prior year’s performance, the equity grants in the Summary Compensation Table reflect awards granted in 2011 based on 2010 performance. In this section, we provide additional disclosure of our grants in 2012 (which reflect 2011 performance) to offer a broader perspective of the Corporation’s total compensation decisions. The grants below will be included in next year’s Proxy Statement.
In 2011, the Corporation’s financial results reflected the strong positioning achieved in 2010. The Corporation attained operational profitability for the first time since 2006 by successfully executing its plans during an extended economic downturn. Initiatives taken by leadership have resulted in our ability to maintain strong margins, produce strong and stable top line revenue and continue to reduce credit costs. Despite the difficult economic and credit environment, the Corporation was able to maintain a leading market position in Puerto Rico and further position the Corporation for long-term prosperity. Banco Popular North America attained profitability levels a year ahead of schedule.
In February 2012, the Corporation’s NEOs were granted dueeach awarded equity equivalent to 50% of prior-year base pay in light of the reduced total incentive opportunity under CPP restrictions and in recognition of the Corporation’s financial performance and the continued economic instability.
| NEO | Award Grant Value | Rationale – Individual Goals | ||||
Richard L. Carrión Chairman, President and CEO | $ | 658,150 | Led the Corporation in the generation of $151.3 million in profit, regaining operational profitability for the first time since 2006. Guided improvements in credit quality in BPNA and the Puerto Rico consumer business, while refocusing efforts on the Puerto Rico commercial business. Strengthened the Corporation’s customer service by improving metrics, link to incentives and operational processes. Led major efficiency efforts including the redesign of critical processes, Puerto Rico branch consolidation and implementation of the voluntary retirement program.
| |||
Jorge A. Junquera Senior Executive Vice President and CFO | $ | 309,750 | Developed and executed key financial aspects of plans to strengthen the Corporation’s capitalization and liquidity. Provided financial guidance for the 2011 improvements in net interest margin. Supported the sale and purchase of assets related to the commercial and consumer businesses. Achieved stronger cash liquidity levels.
| |||
Carlos J. Vázquez Executive Vice President and President, Banco Popular North America | $ | 305,100 | Led the successful restoration of BPNA's profitability a year ahead of schedule. Executed BPNA's rebranding efforts in California and Florida, as part of the implementation of its community banking strategy. Significantly improved BPNA’s credit quality results in the consumer and commercial businesses.
| |||
Ignacio Alvarez Executive Vice President | $ | 284,750 | Contributed significantly to the sale of portions of the Corporation's construction and commercial loan portfolios. Guided efficiency initiatives in the mortgage and commercial businesses. Developed and administrated the Loss Sharing Agreement Office with the FDIC. Updated the Board on Corporate Governance matters and other regulatory developments.
| |||
Eli Sepúlveda Executive Vice President | $ | 191,600 | Reviewed and redesigned the Bank’s commercial lending critical processes by rolling out a more efficient operating model. Supported and completed the sale of a significant portion of non-performing construction and commercial loans. Enhanced processes and practices related to commercial credit origination and administration. Strengthened the service culture by improving customer satisfaction levels in the Commercial Lending business group.
| |||
The Corporation’s NEOs participate in the same benefitbenefits programs as the Corporation’s general employee population. The NEOs are eligible for certain perquisites, which do not constitute a significant portion of their total compensation package. Such benefits are periodically reviewed based on market trends and regulatory developments. During 2009,2011, perquisites such as the use of company-owned automobiles, periodic comprehensive medical examinations and personal tickets to events sponsored by the Corporation, or its subsidiaries, were offered on a limited basis to NEOs. Effective March 31, 2009, clubClub memberships for NEOs and other executives were eliminated.
The Corporation owns an apartment in New York City, which is used by the CEO primarily for business purposes during his frequent visits to New York in support of the Corporation’s United States operations and other company-related affairs.
For detailed information about the value of the NEOs’ personal benefits and perquisites, refer to the Summary Compensation Table.
40 POPULAR, INC. 2012 PROXY STATEMENT
Tax Deductibility of Executive Compensation
As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the U.S. Internal Revenue Code, as amended by Section 302 of the EESA, which provides that while the Corporation participates in the CPP, it may not deduct compensation of more than $500,000 that is paid to the CEO, CFO or the three other most highly compensated executive officers. It is the Compensation Committee’s intention to have applicable compensation payable to the NEOs be deductible for U.S. federal income tax purposes, unless there are valid compensatory reasons for paying non-deductible amounts in order to ensure competitive levels of total compensation.
In addition, for NEOs resident in Puerto Rico, compensation is deductible for income tax purposes if it is reasonable. It is the Compensation Committee’s intention to have compensation paid to the Corporation’s NEOs resident in Puerto Rico be deductible, unless there are valid compensatory reasons for paying non-deductible amounts in order to ensure competitive levels of total compensation.
Stock Ownership/Retention Requirements
The Corporation hadhas stock ownership requirements applicable to NEOs, in effect since January 1, 2005, which required the CEO to own shares of Common Stock with an aggregate value equal to at least five times his base salary. NEOs David H. Chafey Jr., Jorge A. Junquera and Brunilda Santos de Álvarez were required to own Common Stock with an aggregate value equal to at least three times their base salary, while NEO Carlos J. Vázquez was required to own Common Stock with an aggregate value equal to at least one time his base salary.
Collectively, current NEOs hold significant investments in the Corporation’s stock. The CEO and emerging market practices.
Clawback Requirement
Any bonuses that were paid to employees covered by CPP restrictions were required to be made subject to a clawback in the event the bonus payment was based on materially inaccurate financial statements (including statements of earnings, revenues or gains) or any other materially inaccurate performance metric criteria.
41 POPULAR, INC. 20102012 PROXY STATEMENT
The following Summary Compensation Table outlines, for fiscal year 2011, cash compensation awarded, the aggregate grant date fair value of stock and stock option awards granted, if any, during the fiscal year, accrued pension benefits and other non-cash compensation.
| Non-Equity | Change in | |||||||||||||||||||||||||||||||||||
| Stock | Option | Incentive Plan | Pension | All Other | ||||||||||||||||||||||||||||||||
| Name and Principal | Salary | Bonus | Awards ($) | Awards ($) | Compensation | Value | Compensation | Total | ||||||||||||||||||||||||||||
| Position | Year | ($)(a) | ($)(b) | (c) | (d) | ($)(e) | ($)(f) | ($)(g) | ($) | |||||||||||||||||||||||||||
| Richard L. Carrión | 2009 | $ | 741,600 | $ | 600 | — | — | — | $ | 49,146 | $ | 285,162 | $ | 1,076,508 | ||||||||||||||||||||||
| Chairman and CEO | 2008 | 741,600 | 31,060 | — | — | — | 318,816 | 304,146 | 1,395,622 | |||||||||||||||||||||||||||
| 2007 | 741,600 | 31,055 | — | — | $ | 25,779 | 465,180 | 260,677 | 1,524,291 | |||||||||||||||||||||||||||
| David H. Chafey Jr.* | 2009 | 711,182 | 600 | — | — | — | 244,694 | 52,080 | 1,008,556 | |||||||||||||||||||||||||||
| President & Chief | 2008 | 761,885 | 32,109 | — | — | — | 911,342 | 97,556 | 1,802,892 | |||||||||||||||||||||||||||
| Operating Officer | 2007 | 697,500 | 29,198 | — | — | 374,694 | 757,508 | 81,197 | 1,940,097 | |||||||||||||||||||||||||||
| Jorge A. Junquera | 2009 | 534,932 | 600 | — | — | — | 17,877 | 22,717 | 576,126 | |||||||||||||||||||||||||||
| Senior Executive | 2008 | 563,876 | 23,766 | — | — | — | 72,718 | 55,979 | 716,339 | |||||||||||||||||||||||||||
| Vice President & CFO | 2007 | 539,000 | 22,638 | — | — | 153,487 | — | 55,096 | 770,221 | |||||||||||||||||||||||||||
| Carlos J. Vázquez | 2009 | 453,692 | — | — | — | — | 66,798 | 19,104 | 539,594 | |||||||||||||||||||||||||||
| Executive Vice President | ||||||||||||||||||||||||||||||||||||
| Brunilda Santos de | 2009 | 378,077 | 600 | — | — | — | 138,010 | 9,638 | 526,325 | |||||||||||||||||||||||||||
| Álvarez / Executive | 2008 | 391,846 | 16,752 | — | — | — | 199,286 | 19,205 | 627,089 | |||||||||||||||||||||||||||
| Vice President | 2007 | 294,000 | 12,330 | — | — | 83,720 | 16,211 | 19,609 | 425,870 | |||||||||||||||||||||||||||
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 | 2011 | 1,316,282 | — | 419,130 | — | 527,334 | 289,565 | 2,552,311 | ||||||||||||||||||||||||||||
Chairman, President and CEO | 2010 | 838,260 | — | 370,800 | — | 297,631 | 289,037 | 1,795,728 | ||||||||||||||||||||||||||||
| 2009 | 741,600 | 600 | — | — | 49,146 | 285,162 | 1,076,508 | |||||||||||||||||||||||||||||
Jorge A. Junquera | 2011 | 619,543 | — | 289,686 | — | 382,330 | 25,093 | 1,316,652 | ||||||||||||||||||||||||||||
Senior Executive | 2010 | 579,372 | — | 267,500 | — | 212,151 | 44,129 | 1,103,152 | ||||||||||||||||||||||||||||
Vice President and CFO | 2009 | 534,932 | 600 | — | — | 17,877 | 22,717 | 576,126 | ||||||||||||||||||||||||||||
Carlos J. Vázquez | 2011 | 610,154 | — | 258,962 | — | 165,796 | 104,589 | 1,139,501 | ||||||||||||||||||||||||||||
Executive Vice President | 2010 | 517,923 | — | 226,800 | — | 118,557 | 57,409 | 920,689 | ||||||||||||||||||||||||||||
and President, Banco Popular North America | 2009 | 453,692 | — | — | — | 66,798 | 19,104 | 539,594 | ||||||||||||||||||||||||||||
Ignacio Alvarez | 2011 | 569,462 | — | 142,789 | — | — | 7,762 | 720,013 | ||||||||||||||||||||||||||||
| Executive Vice President and Chief Legal Officer | 2010 | 285,577 | 184,167 | — | 228,462 | — | 3,055 | 701,261 | ||||||||||||||||||||||||||||
Eli Sepúlveda | 2011 | 383,204 | 17,625 | 161,349 | 125,000 | 88,672 | 23,925 | 799,775 | ||||||||||||||||||||||||||||
Executive Vice President | ||||||||||||||||||||||||||||||||||||
Former Executive Officer: | ||||||||||||||||||||||||||||||||||||
Amílcar Jordán* | 2011 | 315,294 | — | 204,744 | — | — | 1,144,565 | 1,664,603 | ||||||||||||||||||||||||||||
Executive Vice President | 2010 | 409,487 | — | 189,000 | — | 234,860 | 23,419 | 856,766 | ||||||||||||||||||||||||||||
* On January 9, 2009, Mr. Chafey was appointed President and Chief Operating OfficerJordán’s employment with the Corporation terminated on September 1, 2011. The compensation shown in this table includes required statutory termination-related payments pursuant to the terms of the Corporation. During 2008, he served as Senior Executive Vice President.
(a) Includes salaries before deductions.
(b) As established by CPP restrictions, this year This includes the Corporation’s customary Christmas bonus payment provided by the Corporation each December to all of its Puerto Rico-based employees, was reduced to the maximum amount required by Puerto Rico law to be awarded to a regular employee. For previous years, the amount was equal to 4.2%4.17% of base pay, in accordanceor pursuant to CPP limitations, as applicable. In 2011, Mr. Sepúlveda was the only NEO eligible for the Christmas bonus.
(c) Restricted stock compliant with CPP restrictions was granted on February 18, 2011, with the general practice applicable to employeesfair market value determined based on the closing price of the Corporation’s Puerto Rico companies.
(d) Stock options were granted to some executives between 2002 and 2005. Since that time, no additional awards have been granted under this program.
(f)(e) Present values for changes in pension value were determined using year-end Statement of Financial Accounting Standard No. 87 “Employers’ Accounting for Pensions” (“SFAS 87”) assumptions with the following exception: payments are assumed to begin at the earliest possible retirement date at which benefits are unreduced. These vary for NEOs depending on their initial employment date. The earliest possible retirement ageFor all NEOs, with unreduced benefits for Ms. Santos de Álvarezthe exception of Mr. Alvarez who is not a participant of the age of 60; for all other NEOs,Retirement Plan, the minimum age to receive retirement benefits with no reductions is 55. Also, in order to receive full benefits, each NEO mustis assumed to continue employment until his or her retirement date. Effective April 30, 2009, the Retirement Plan was frozen for all additional benefit accruals under the retirement plan were frozen for the eligible participants.
42 POPULAR, INC. 20102012 PROXY STATEMENT
| Types of Perquisites Received | Richard L. Carrión | Jorge A. Junquera | Carlos J. Vázquez | Ignacio Alvarez | Eli Sepúlveda | |||||||||||||||
Non Work-related Security | x | |||||||||||||||||||
Company-Owned Vehicle | x | x | ||||||||||||||||||
| x | x | |||||||||||||||||||
Tickets to Sponsored Events | x | x | x | x | ||||||||||||||||
Cash-Based Car Allowance | x | |||||||||||||||||||
Housing Allowance | x | |||||||||||||||||||
The incremental cost to the Corporation for Mr. Carrión’s personal security was $201,018.$195,102.
The incremental cost to the Corporation for the use of company-owned vehicles by Messrs. Carrión Chafey and Junquera was $66,624, $40,382$72,913 and $24,005,$19,266, respectively.
The cost of the apartment to the Corporation during 2009of Mr. Vázquez’s car and housing allowances was approximately $50,700. Since this apartment is primarily used for business purposes, this amount is not included as additional compensation.
| Corporation’s Match to Savings Plan ($) | ||||
| Richard L. Carrión | $ | 5,705 | ||
| David H. Chafey Jr. | 6,845 | |||
| Jorge A. Junquera | 5,353 | |||
| Carlos J. Vázquez | 10,800 | |||
| Brunilda Santos de Álvarez | 4,077 | |||
The following table details all equity-based and non-equity plan-based awards granted to each of the NEOs during fiscal year 2011. All Other Stock Awards: Number of Shares of Stock or Units (#) All Other Option Awards: Number of Securities Underlying Options (#) Exercise or Base Price of Options Awards ($/SH) Grant Date Threshold ($) Target ($) Maximum ($) Threshold ($) Target ($) Maximum ($) Richard L. Carrión Restricted Stock ($) Jorge A. Junquera Restricted Stock ($) Carlos J. Vázquez Restricted Stock ($) Ignacio Alvarez Restricted Stock ($) Eli Sepúlveda Restricted Stock ($) (a) For Mr. Sepúlveda, the actual amount paid was $125,000. (b) As mentioned above, the NEOs were only eligible for restricted stock awards as prescribed by the CPP rules, with the exception of Mr. Sepúlveda. Restricted stock compliant with CPP restrictions was granted on February 18, 2011, with the fair market value determined based on the closing price of the Corporation’s 43 POPULAR, INC. GRANTS OF PLAN-BASED AWARDSDue Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(a) Estimated Future Payouts
Under Equity Incentive
Plan Awards(b) Name 2/18/11 — — — — $ 419,130 — — — — 2/18/11 — — — — 289,686 — — — — 2/18/11 — — — — 258,962 — — — — 2/18/11 — — — — 142,789 — — — — 2/18/11 $ 125,000 $ 210,000 $ 357,000 161,349 — — — — financial performance during 2009, non-equity and equity incentive award opportunities were not achieved and no grants of plan-based awards were made.35Common Stock on said date.20102012 PROXY STATEMENT
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 Corporation’s Common Stock price of $2.26$1.39 as of December 31, 2009)2011).
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| Equity | Equity | Equity Incentive | ||||||||||||||||||||||||||||||||||
| Incentive Plan | Incentive Plan | Plan Awards: | ||||||||||||||||||||||||||||||||||
| Awards: | Awards: | Market or Payout | ||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Number of | Value of | ||||||||||||||||||||||||||||||||
| Securities | Securities | Securities | Number of | Unearned | Unearned | |||||||||||||||||||||||||||||||
| Underlying | Underlying | Underlying | Option | Shares or | Market Value of | Shares, Units | Shares, Units or | |||||||||||||||||||||||||||||
| Unexercised | Unexercised | Unexercised | Exercise | Option | Units of Stock | Shares or Units of | or Other Rights | Other Rights | ||||||||||||||||||||||||||||
| Options | Options | Unearned | Price | Expiration | That Have Not | Stock That Have | That Have Not | That Have Not | ||||||||||||||||||||||||||||
| Name | (#) Exercisable | (#) Unexercisable | Options (#) | ($) | Date | Vested (#) | Not Vested ($) | Vested (#) | Vested ($) | |||||||||||||||||||||||||||
| Richard L. Carrión(1) | - | - | - | - | - | 129,997 | $ | 293,793 | 31,344 | $ | 70,837 | |||||||||||||||||||||||||
| David H. Chafey Jr. | 50,602 | - | - | $ | 14.42 | 2/14/2012 | 50,854 | 114,930 | 14,740 | 33,312 | ||||||||||||||||||||||||||
| 78,196 | - | - | $ | 16.75 | 3/13/2013 | - | - | - | - | |||||||||||||||||||||||||||
| 77,308 | - | - | $ | 24.05 | 1/16/2014 | - | - | - | - | |||||||||||||||||||||||||||
| Jorge A. Junquera | 44,530 | - | - | $ | 14.42 | 2/14/2012 | 37,293 | 84,282 | 11,391 | 25,744 | ||||||||||||||||||||||||||
| 68,812 | - | - | $ | 16.75 | 3/13/2013 | - | - | - | - | |||||||||||||||||||||||||||
| 68,032 | - | - | $ | 24.05 | 1/16/2014 | - | - | - | - | |||||||||||||||||||||||||||
| Carlos J. Vázquez | 37,952 | - | - | $ | 14.42 | 2/14/2012 | 11,630 | 26,284 | 10,870 | 24,566 | ||||||||||||||||||||||||||
| 58,647 | - | - | $ | 16.75 | 3/13/2013 | - | - | - | - | |||||||||||||||||||||||||||
| 57,982 | - | - | $ | 24.05 | 1/16/2014 | - | - | - | - | |||||||||||||||||||||||||||
| 53,745 | 13,436 | $ | 27.20 | 2/16/2015 | ||||||||||||||||||||||||||||||||
| Brunilda Santos de Álvarez | 22,771 | - | - | $ | 14.42 | 2/14/2012 | 20,342 | 45,973 | 6,213 | 14,041 | ||||||||||||||||||||||||||
| 35,188 | - | - | $ | 16.75 | 3/13/2013 | - | - | - | - | |||||||||||||||||||||||||||
| 34,788 | - | - | $ | 24.05 | 1/16/2014 | - | - | - | - | |||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||||||
Richard L. Carrión(a) | — | — | — | — | — | 438,187 | $ | 609,080 | — | — | ||||||||||||||||||||||||||||
Jorge A. Junquera | 44,530 | — | — | $ | 14.42 | 2/14/2012 | 249,511 | 346,820 | — | — | ||||||||||||||||||||||||||||
| 68,812 | — | — | 16.75 | 3/13/2013 | — | — | — | — | ||||||||||||||||||||||||||||||
| 68,032 | — | — | 24.05 | 1/16/2014 | — | — | — | — | ||||||||||||||||||||||||||||||
Carlos J. Vázquez | 37,952 | — | — | 14.42 | 2/14/2012 | 195,292 | 271,455 | — | — | |||||||||||||||||||||||||||||
| 58,647 | — | — | 16.75 | 3/13/2013 | — | — | — | — | ||||||||||||||||||||||||||||||
| 57,982 | — | — | 24.05 | 1/16/2014 | — | — | — | — | ||||||||||||||||||||||||||||||
| 67,182 | — | — | 27.20 | 2/16/2015 | — | — | — | — | ||||||||||||||||||||||||||||||
Ignacio Alvarez | — | — | — | — | — | �� | 42,370 | 58,894 | — | — | ||||||||||||||||||||||||||||
Eli Sepúlveda | 4,588 | — | — | 14.42 | 2/14/2012 | 58,869 | 81,828 | — | — | |||||||||||||||||||||||||||||
| 5,859 | — | — | 16.75 | 3/13/2013 | — | — | — | — | ||||||||||||||||||||||||||||||
| 7,795 | — | — | 24.05 | 1/16/2014 | — | — | — | — | ||||||||||||||||||||||||||||||
| 11,757 | — | — | 27.20 | 2/16/2015 | — | — | — | — | ||||||||||||||||||||||||||||||
| (a) Mr. | Carrión has not received stock option awards. |
The following table includes certain information with respect to the options exercised by the NEOs and the vesting of stock awards during Number of Shares Acquired on Vesting (#) Value Realized on Vesting ($)(a) Richard L. Carrión Jorge A. Junquera Carlos J. Vázquez Ignacio Alvarez Eli Sepúlveda Former Executive Officer: Amílcar JordánOPTION EXERCISES AND STOCK VESTED TABLE FOR 200920112009.2011. No stock options were exercised by any of the Corporation’s NEOs during 2009. Option Awards Stock Awards Number of Shares Acquired through Value Realized on Number of Shares Value Realized Name Exercise (#) Exercise ($) Acquired on Vesting (#) on Vesting ($)(1) Richard L. Carrión - - - - David H. Chafey Jr. - - 4,332 $ 19,276 Jorge A. Junquera - - 3,177 14,136 Carlos J. Vázquez - - 2,807 4,435 Brunilda Santos de Álvarez - - 1,733 7,711 2011. Stock Awards Name 0 — 3,177 $ 9,943 2,807 $ 9,488 0 — 555 $ 1,874 1,733 $ 5,423 (1)(a) Stock price used for vesting calculation was $4.45 (closing$3.13 (the Common Stock price of theon January 20, 2011, vesting date). The stock price used for vesting calculations for Mr. Vázquez and Mr. Sepúlveda was $3.38 (the Corporation’s Common Stock price on January 20, 2009February 17, 2011, vesting date). For Carlos J. Vázquez, the stock price used was $1.58 (closing price of the Corporation’s Common Stock on February 20, 2009).36 POPULAR, INC. 2010 PROXY STATEMENT
The Corporation offers comprehensive retirement benefits to all eligible employees, including NEOs. These retirement benefits are summarized below.
44 POPULAR, INC. 2012 PROXY STATEMENT
Puerto Rico
Retirement Plan
In 2009,December 2011, the Bank’sBank implemented a voluntary retirement window in its non-contributory, defined benefit retirement plan (“Retirement Plan”). This cost saving initiative resulted in 369 acceptances, with annual cost savings from this reduction in headcount estimated to be approximately $15 million. The Corporation’s NEOs were not eligible to participate in the window.
The Retirement Plan was frozen in 2009 with regards to all future benefit accruals after April 30, 2009. The Corporation took this action to generate significant cost savings in light of the severe economic downturn and decline in the Corporation’s financial performance. This measure continues in effect and will be reviewed periodically in light of prevailing economic conditions and the Corporation’s financial performance. The Retirement Plan had previously been closed to new hires and was frozen as of December 31, 2005 to employees who were under 30 years of age or were credited with fewer than 10 years of benefit service (approximately 60% of plan participants at the time).
The Retirement Plan’s benefit formula is based on a percentage of average final compensation and years of service. Normal retirement age under the Retirement Plan is age 65 with five years of service and, in general, benefits are paid for life in the form of a single life annuity plus supplemental death benefits, and are not reduced for Social Security or other payments received by the participants. Pension costs are funded in accordance with minimum funding standards under the Employee Retirement Income Security Act of 1974 (“ERISA”). The Retirement Plan is qualified in accordance with the U.S. Internal Revenue Code, which establishes limits on compensation and benefits.
The Corporation has adopted two Benefit restoration plansRestoration Plans (“Restoration Plans”), which are not qualified in accordance with the U.S. Internal Revenue Code and are designed to restore benefits that would otherwise have been received by an eligible employee under the Retirement Plan but for the limitations imposed by the U.S. Internal Revenue Code. The Corporation has adopted two Benefit Restoration Plans (“Restoration Plans”), whose benefits are equal to the difference between the benefits that an eligible employee would be entitled to receive under the Retirement Plan but for such IRS limits or exclusions from compensation and the benefits actually received under the Retirement Plan. The Restoration Plans do not offer credit for years of service not actually worked, preferential benefit formulas or accelerated vesting of pension benefits, beyond the provisions of the Retirement Plan. The restoration benefits of employees who are residents of Puerto Rico are funded through an ERISA pension trust that is tax qualified in accordance with the Puerto Rico Internal Revenue Code of 1994. In addition, the Bank contributes to an irrevocable trust to maintain a source of funds for payment of benefit restoration liabilities to all non-Puerto Rico resident participants. The aforementioned Retirement Plan freeze applies to the respective Restoration Plans as well.
Pension Benefits
The following table sets forth certain information with respect to the value of retirement paymentsbenefits accrued as of December 31, 2011 under the Corporation’s retirement plans for the NEOs eligible to participate under such plans.
| Present Value of | ||||||||||||||||
| Number of Years of | Accumulated | Payments During Last | ||||||||||||||
| Name | Plan Name | Credited Service | Benefit ($)(a) | Fiscal Year ($) | ||||||||||||
| Richard L. Carrión | Retirement Pension Plan | 32.917 | $ | 1,161,243 | - | |||||||||||
| Benefit Restoration Plan | 5,059,984 | - | ||||||||||||||
| David H. Chafey Jr. | Retirement Pension Plan | 28.667 | 1,123,994 | - | ||||||||||||
| Benefit Restoration Plan | 6,223,925 | - | ||||||||||||||
| Jorge A. Junquera | Retirement Pension Plan | 37.833 | 1,089,486 | - | ||||||||||||
| Benefit Restoration Plan | 4,305,673 | - | ||||||||||||||
| Carlos J. Vázquez | Retirement Pension Plan | 8.750 | 217,980 | - | ||||||||||||
| Benefit Restoration Plan | 576,595 | - | ||||||||||||||
| Brunilda Santos de Álvarez | Retirement Pension Plan | 23.666 | 543,442 | - | ||||||||||||
| Benefit Restoration Plan | 740,241 | - | ||||||||||||||
| Name* | Plan Name | Number of Years of Credited Service | Present Value of Accumulated | Payments During Last Fiscal year ($) | ||||||||||
Richard L. Carrión | Retirement Plan | 32.917 | $ | 1,315,229 | - | |||||||||
| Restoration Plan | 5,730,963 | - | ||||||||||||
Jorge A. Junquera | Retirement Plan | 37.833 | 1,209,534 | - | ||||||||||
| Restoration Plan | 4,780,106 | - | ||||||||||||
Carlos J. Vázquez | Retirement Plan | 8.750 | 295,356 | - | ||||||||||
| Restoration Plan | 781,266 | - | ||||||||||||
Eli Sepúlveda | Retirement Plan | 17.583 | 482,595 | - | ||||||||||
| Restoration Plan | — | - | ||||||||||||
* Mr. Alvarez is not a participant of the Retirement Plan or Restoration Plan.
(a) Present values of pension benefits were determined using year-end SFAS 87 assumptions with the following exception: payments are assumed to begin at the earliest possible retirement date at which benefits are unreduced. These vary for NEOs, depending on their initial employment situation. The earliest possible retirement age with unreduced benefits for Ms. Santos de ÁlvarezEach NEO is the age of 60, while for all other NEOs the minimum ageassumed to receive retirement benefits without reductions is 55. Also, in order to receive full benefits, each NEO must continue employment until such retirement date. Effective April 30, 2009,The Retirement Plan and the related Restoration Plan were frozen for all additional benefit accruals effective April 30, 2009 for eligible participants under the Retirement Plan were frozen.
45 POPULAR, INC. 20102012 PROXY STATEMENT
The Popular, Inc. Puerto Rico Savings and Investment Plan allows Puerto Rico-based employees of the Corporation and its subsidiaries who have completed 30 days of service to voluntarily electdefer, subject to deferthe maximum amount permitted by applicable tax laws, up to 70% of their total annual cash compensation on a pre-tax basis and to contribute up to 10% of their total annual cash compensation on an after-tax basis. Both contribution levels are subject to maximum contribution limits as determined by applicable laws. Prior to April 2009, the Corporation matched 100% of the firstemployee pre-tax contributions up to three percent of totalthe participant’s annual cash compensation, contributed on a pre-tax basis by the participant, plus 50% of the next two percent contributed. Employees become vested in the company match 20% per year during the first five years of service. The Corporation suspended its matching contributions to the Puerto Rico Savings and Investment Plan as part of the actions taken in 2009 to control costs during the economic crisis. This measure continues in effect and will be reviewed periodically in light of prevailing economic conditions and the Corporation’s financial performance.
Puerto Rico Nonqualified Deferred Compensation Plan
The Popular, Inc. Puerto Rico Nonqualified Deferred Compensation Plan allows certain Puerto Rico-based employees of Popularthe Corporation and its affiliatessubsidiaries to defer receipt of a portion of their compensation in excess of the amounts allowed to be deferred under the Popular, Inc. Puerto Rico Savings and Investment Plan. The Plan is an unfunded plan of deferred compensation for a select group of management or highly compensated employees intended to be exempt from the provisions of Parts 2, 3 and 4 Title I, Subtitle B of ERISA. The Plan is not intended to be a tax qualified retirement plan under Section 11651081 of the Puerto Rico Internal Revenue Code of 1994.
A participant may defer up to 80% of his or her total annual cash compensation under the plan. Benefits are normally distributed upon termination of employment, death or disability. Mr.Messrs. Vázquez, Alvarez and Sepúlveda currently participatesparticipate in this plan.
The following table shows non-qualified deferred compensation activity and balances relatedattributable to plans in which certain NEOs participate:
| Executive | Registrant | Aggregate | Aggregate | |||||||||||||||||
| Contribution | Contribution | Earnings | Withdrawals/ | Aggregate Balance | ||||||||||||||||
| Name | In Last FY | in Last FY | in Last FY | Distributions | at Last FYE | |||||||||||||||
| Carlos J. Vázquez | $ | 7,897 | - | $ | 2,921 | - | $ | 12,601 | ||||||||||||
| Name | Executive Contribution | Registrant Contribution | Aggregate Earnings | Aggregate Withdrawals/ Distributions | Aggregate Balance at | |||||||||||||||
Carlos J. Vázquez | $ | 0 | $ | 0 | ($ | 300 | ) | $ | 0 | $ | 19,973 | |||||||||
Ignacio Alvarez | $ | 30,854 | $ | 0 | ($ | 64 | ) | $ | 0 | $ | 30,789 | |||||||||
Eli Sepúlveda | $ | 0 | $ | 0 | ($ | 1,726 | ) | $ | 0 | $ | 64,987 | |||||||||
United States
Retirement Plan of Banco Popular North America
Effective December 31, 2007, the Corporation terminated its non-contributory, defined benefit retirement plan, which covered substantially all salaried employees of Banco Popular North America hired before June 30, 2004. These actions were also applicable to the related benefit restoration plan.
USA Savings and Investment Plan
The Popular, Inc. 401(k) USA Savings and Investment Plan allows all regularU.S.-based employees of the Corporation’s subsidiaries are eligible to participate in a 401(k) plan upon completion ofwho have completed 30 days of service. Participants mayservice to defer, upsubject to the maximum amount permitted by applicable tax laws.laws, up to 70% of their total annual cash compensation on a pre-tax basis. Prior to April 2009, the Corporation matched 100% of employee pre-tax contributions up to four percent of the participant’s annual cash compensation. The Corporation suspended its matching contributions to the United StatesPopular, Inc. 401(k) planUSA Savings and Investment Plan as part of the actions taken in 2009 to control costs during the economic crisis. This measure continues in effect and will be reviewed periodically in light of prevailing economic conditions and the Corporation’s financial performance.
Popular North America, Inc. Deferral Plan
The Popular North America, Inc. (“PNA”) Deferral Plan is an unfunded plan of deferred compensation for a select group of management or highly compensated employees of PNA or its subsidiaries. Under this Plan, a participant may elect to defer up to 80% of his or her annual cash compensation. The Plan is intended to be exempt from the provisions of Parts 2, 3 and 4 Title I, Subtitle B of ERISA and to comply with the requirements of Section 409A of the United States Internal Revenue Code relating to non-qualified deferred compensation. Benefits are normally payable upon termination of employment, death or disability. Enrollment in the plan has not yet commenced.
46 POPULAR, INC. 2012 PROXY STATEMENT
Employment andChange-in-Control Agreements
The Corporation does not have employment agreements orchange-in-control agreements with its CEO and other NEOs. Nevertheless, the Corporation’s 2004 Omnibus Plan provides that in the event of a change of control of the Corporation, all outstanding options and stock appreciation rights become fully exercisable, and restrictions on outstanding restricted stock and restricted unitsunit’s lapse. In addition, under thesaid Plan outstanding long-term performance unit awards and performance share awards are to be paid in full at target within 30 days of the change of control. Participants may opt to
For purposes of the 2004 Omnibus Plan, “change of control” occurs in general if: (i) any “person” (within the meaning of Section 3(a)(9) of the 1934 Act and excluding the Corporation, its subsidiaries or any employee benefit plan sponsored or maintained by the Corporation or its subsidiaries) acquires direct or indirect ownership of 50% or more of the combined voting power of the then outstanding securities of the Corporation as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise; or (ii) the stockholders of the Corporation approve (a) any consolidation or merger of the Corporation in which the Corporation is not the surviving corporation (other than a merger of the Corporation in which the holders of Common Stock immediately prior to the merger have the same or substantially the same proportionate ownership of the surviving corporation immediately after the merger), or (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation to an entity which is not a wholly-owned subsidiary of the Corporation.
Notwithstanding the foregoing, while Popularthe Corporation is a CPP participant, it is subject to certain limitations on the payments and benefits (including accelerated vesting) that may be accorded to NEOs in the event of a change of control.
Payments Made Upon Termination of Employment
Amílcar Jordán
The employment of Mr. Jordán, the Corporation’s former Executive Vice President for the Corporate Risk Management Group, ended effective September 1, 2011. On August 15, 2011 he entered into an agreement with the Corporation, which provided for the payment of the statutory severance payment of $1,034,929.62 based on his 24 years of service as required pursuant to Puerto Rico’s Law 80 of May 30, 1976. A total of 171,325.82 shares of outstanding unvested restricted stock were forfeited by Mr. Jordán upon his termination of employment.
General
Regardless of the circumstances pursuant to which NEOs terminate their employment with the Corporation, they are entitled to receive certain amounts earned during their employment. Such amounts include:
| Ÿ | |
Amounts contributed to the Corporation’s Savings and Investment Plan, including the vested portion of the employer-sourced funds. |
| Ÿ | |
Benefits accumulated under the Retirement Plan, including retiree medical and the Retirement Restoration Plan. |
| Ÿ | |
Awards under the Senior Executive Long-Term Incentive Plan granted in years1997-1999 in the form of deferred stock. |
| Ÿ | |
Any balances in the non-qualified deferred compensation plans. |
The following additional payments may be made if the termination is due to retirement:
| Ÿ | |
Non-equity compensation awards earned for the time worked. |
47 POPULAR, INC. 2012 PROXY STATEMENT
| Ÿ | |
All restricted stock and stock options become fully vested at the time of retirement, with the exception of restricted stock issued pursuant to CPP limitations, which do not permit the accelerated vesting of such shares upon retirement. 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. |
| Ÿ | |
For performance shares, based on the Corporation’s results during the performance cycle, a payment will be made at the end of the performance cycle. |
If termination is due to resignation:
| Ÿ | |
Vested stock options under the 2001 Stock Option Plan can be exercised for a period of six months after termination of employment. However, stock options, restricted stock and performance shares granted under the 2004 Omnibus Incentive Plan are forfeited upon termination of employment. |
| Ÿ | |
Vested stock options under the 2001 Stock Option Plan can be exercised for a period of six months after termination of employment. Stock options granted under the 2004 Omnibus Incentive Plan may be exercised at any time prior to the expiration of the term of the option or the 90th day following termination of employment, whichever period is shorter. |
| Ÿ | |
Restricted stock vesting will be pro-rated for the period of active service in the applicable vesting period. Performance shares will be pro-rated for the period of active service in the applicable performance cycle, calculated as if the target number of performance shares had been earned. |
Notwithstanding the above, while Popularthe Corporation is a participant in the CPP, the NEOs are subject to the standards for compensation established under the Interim Final Rule promulgated pursuant to the EESA, as amended by ARRA, which prohibits certain payments and benefits, such as accelerated vesting on termination of employment without cause, retirement or due to a change in control.
Post-Termination Compensation
The following table details the compensation that each NEO would receive upon termination of employment.
Non-Equity Cash Incentive ($)(a) | Restricted Stock ($)(b)(1) | |||||||||||||||||||||||||
| Name | Retirement, Death, Disability or Change in Control | Resignation, Termination With Cause or Without Cause | Retirement | Death, Disability or Change in Control | Resignation or Termination With Cause | Termination Without Cause | ||||||||||||||||||||
Richard L. Carrión | — | — | 180,696 | 609,080 | — | 180,696 | ||||||||||||||||||||
Jorge A. Junquera | — | — | 43,007 | 346,820 | — | 43,007 | ||||||||||||||||||||
Carlos J. Vázquez | — | — | 8,362 | 271,455 | — | — | ||||||||||||||||||||
Ignacio Alvarez | — | — | — | 58,894 | — | — | ||||||||||||||||||||
Eli Sepúlveda | — | — | 963 | 81,828 | — | — | ||||||||||||||||||||
| Stock Options ($)(c) | Long Term Incentive ($)(d) | Retirement Plan (Pension) and Retirement Restoration Plan(e) | Defined Contribution Plan(f) | Non-qualified Plans(g) | ||||||||||||||||||||||||
| Name | Retirement, Death, Disability, Change in Control, Resignation, Termination With Cause or Without Cause | Retirement, Death, Disability, Change in Control, Resignation, Termination With Cause or Without Cause | Retirement, Death, Disability, Change in Control, Resignation, Termination With Cause or Without Cause | Retirement, Death, Disability, Termination With Cause or Without Cause | Retirement, Death, Disability, Termination With Cause or Without Cause | |||||||||||||||||||||||
Richard L. Carrión | — | 73,749 | 7,046,192 | 1,154,052 | — | |||||||||||||||||||||||
Jorge A. Junquera | — | 46,232 | 5,989,640 | 967,056 | — | |||||||||||||||||||||||
Carlos J. Vázquez | — | — | 1,076,622 | 455,515 | 19,973 | |||||||||||||||||||||||
Ignacio Alvarez | — | — | — | 16,233 | 30,789 | |||||||||||||||||||||||
Eli Sepúlveda | — | — | 482,595 | 262,557 | 64,987 | |||||||||||||||||||||||
48 POPULAR, INC. 2012 PROXY STATEMENT
1
| Non-Equity | ||||||||||||||||||||||||||||||||||||
| Cash Incentive($)(a) | Restricted Stock($)(b) | Performance Shares ($)(c) | ||||||||||||||||||||||||||||||||||
| Retirement, | Retirement, | |||||||||||||||||||||||||||||||||||
| Death, | Resignation, | Death, | Death, | |||||||||||||||||||||||||||||||||
| Disability or | Termination | Disability or | Resignation or | Termination | Disability or | Resignation or | Termination | |||||||||||||||||||||||||||||
| Change in | With Cause or | Change in | Termination | Without | Change in | Termination | Without | |||||||||||||||||||||||||||||
| Name | Control | Without Cause | Control | With Cause | Cause | Retirement | Control | With Cause | Cause | |||||||||||||||||||||||||||
| Richard L. Carrión | - | - | $ | 293,793 | - | $ | 293,793 | $ | 70,837 | $ | 141,675 | - | $ | 94,450 | ||||||||||||||||||||||
| David H. Chafey Jr. | - | - | 114,930 | - | 114,930 | 33,312 | 66,625 | - | 44,416 | |||||||||||||||||||||||||||
| Jorge A. Junquera | - | - | 84,283 | - | 84,283 | 25,744 | 51,485 | - | 34,323 | |||||||||||||||||||||||||||
| Carlos J. Vázquez | - | - | 26,284 | - | 18,282 | 24,566 | 49,130 | - | 32,754 | |||||||||||||||||||||||||||
| Brunilda Santos de Álvarez | - | - | 45,973 | - | 28,014 | 14,041 | 28,083 | - | 18,722 | |||||||||||||||||||||||||||
| Long Term | ||||||||||||||||||||
| Incentive ($)(e) | Defined Contribution | |||||||||||||||||||
| Retirement, Death, | Retirement Plan (Pension) and | ($)Plan(g) | Non-qualified Plans ($)(h) | |||||||||||||||||
| Stock Options ($)(d) | Disability, | Retirement Restoration Plan ($)(f) | Retirement, Death, | Retirement, Death, | ||||||||||||||||
| Retirement, Death, | Change in Control, | Disability, | Disability, | |||||||||||||||||
| Disability, Change in | Resignation, | Change in Control, | Change in Control, | |||||||||||||||||
| Control, Resignation, | Termination With | Retirement, Death, Disability, | Resignation, | Resignation, | ||||||||||||||||
| Termination | Cause | Change in Control, Resignation, | Termination | Termination | ||||||||||||||||
| With Cause | or Without | Termination With Cause | With Cause or | With Cause or | ||||||||||||||||
| Name | or Without Cause | Cause | or Without Cause | Without Cause | Without Cause | |||||||||||||||
| Richard L. Carrión | - | $ | 52,949 | $ | 6,221,227 | $ | 187,507 | - | ||||||||||||
| David H. Chafey Jr. | - | 32,936 | 7,347,919 | 155,693 | - | |||||||||||||||
| Jorge A. Junquera | - | 33,191 | 5,395,159 | 170,391 | - | |||||||||||||||
| Carlos J. Vázquez | - | - | 794,575 | 68,935 | $ | 12,601 | ||||||||||||||
| Brunilda Santos de Álvarez | - | - | 1,283,683 | 35,291 | - | |||||||||||||||
(a) Non-equity cash award was not paid to NEOs (other than Mr. Sepúlveda) for 20092011 performance relatedpursuant to the short-term incentive. As previously mentioned, in accordance with CPP restrictions therestrictions. The NEOs are only eligible for base salary and restricted stock.
(b) All restricted stock would vest immediately upon termination of employment due to retirement, death, disability or change in control. These calculations use the closing price of the Popular, Inc. Common Stock as of December 31, 2009 ($2.26).
(c) The performance shares award is based on the Corporation’s three-year average return on equity during the performance cycle. The award is paid at the end of the performance cycle.
All vested and unvested stock options would be forfeited as ofon the date of termination of employment, if termination is with cause. In the event of termination without cause, all vested stock options may be exercised prior to the expiration of the options or the 90th day following termination of employment, whichever period is shorter.
(e)(d) 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 the Corporation’s 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 Common Stock on December 31, 20092011 ($2.26)1.39).
(f)(e) This is the present value of the immediate benefit for those NEOs who already qualify for such benefit. These calculations use the same assumptions as the Pension Benefits table.
(g)(f) The defined contribution is the balance as of December 31, 20092011 for each NEO. It includes the NEO’s contributions and the employer match. It also includes, where applicable, the amount accumulated in the Deferred Profit Sharing Plan. The Deferred Profit Sharing Plan was frozen on December 31, 2005 and balances were subsequently transferred to the NEOs’ respective Savings and Investment Plan accounts.
(h)(g) For Mr. Vázquez, Mr. Alvarez and Mr. Sepúlveda, payment includes the balance under the Popular, Inc. Puerto Rico NonqualifiedNon-qualified Deferred Compensation Plan.
* * *
Stockholder requests to have a proposal included in the Corporation’s Proxy Statement should be directed to the attention of the Corporation’s Chief Legal Officer at the address of the Corporation set forth onin the cover pageNotice of Annual Meeting included in this Proxy Statement. The deadline for submission of a proposal for inclusion in the Corporation’s proxy statement for the 20112013 annual meeting of stockholders is November 16, 2010.__, 2012. Subject to the immediately preceding sentence, under the Corporation’s Amended and Restated By-Laws, if a stockholder wishes to submit a matter for consideration at the 20112013 annual meeting of stockholders (including any stockholder proposal or director nomination), but which will not be included in the proxy statement for such meeting, a stockholder must submit such matter in writing to the Corporate Secretary at the Corporation’s principal executive offices, 209 Muñoz Rivera Ave., San Juan, Puerto Rico, 00918, not more than 180 days nor less than 90 days in advance of the anniversary date of the preceding year’s annual meeting. In the case of a special meeting or in the event that the date of the 20112013 annual meeting of stockholders is more than 30 days before the anniversary date, notice by a stockholder must be delivered not earlier than the 15th day following the day on which notice is mailed, or a public announcement is first made by the Corporation of the date of such meeting, whichever occurs first. Stockholders may obtain a copy of the Corporation’s Amended and Restated By-laws by writing to the Corporate Secretary at the address set forth above.
The above Notice of Meeting and Proxy Statement are sent by order ifof the Board of Directors of Popular, Inc.
49 POPULAR, INC. 2012 PROXY STATEMENT
In San Juan, Puerto Rico, March , 2010.
 |  | |
Chairman of the Board, President and Chief Executive Officer | Secretary |
YOU MAY REQUEST A COPY, FREE OF CHARGE, OF THE CORPORATION’S ANNUAL REPORT ONFORM 10-K FOR THE YEAR ENDED DECEMBER 31, 20092011, AS FILED WITH THE SEC (WITHOUT EXHIBITS), THROUGH OUR WEBSITE, www.popular.com,WWW.POPULAR.COM, OR BY CALLING(787) 765-9800 OR WRITING TO MS. ILEANA GONZÁLEZ, SENIOR VICE PRESIDENT,COMPTROLLER, POPULAR, INC., P.O. BOX 362708, SAN JUAN, PR00936-2708.
50 POPULAR, INC. 20102012 PROXY STATEMENT
PROPOSED AMENDMENTS TO ARTICLE FIFTH OF THE RESTATED CERTIFICATE OF INCORPORATION
If the reverse stock split proposal is approved, the Corporation’s Restated Certificate of Incorporation of the Corporationwill be and it hereby is, amended in its entirety to read as follows:
| a. | By amending the second paragraph of Article FIFTH as follows: |
“FIFTH: The minimum amount of capital with which the Corporation shall commence business shall be $1,000.00.
| b. | By adding at the end of Article FIFTH a new paragraph, which shall read in its entirety as follows: |
“Upon the filing and effectiveness (the “Effective Time”) of this amendment to the powers, preferences and rights, andCorporation’s Certificate of Incorporation pursuant to the qualifications, limitations or restrictions thereof,Puerto Rico General Corporations Law, each 10 shares of the PreferredCommon Stock (the “Old Common Stock”) issued and outstanding immediately prior to the Effective Time shall be as follows:
POPULAR, INC. 2012 PROXY STATEMENT
C/O PROXY SERVICES P.O. BOX 9142 FARMINGDALE, NY 11735-9544 | IF YOU WISH TO VOTE BY TELEPHONE, INTERNET OR MAIL, PLEASE READ THE INSTRUCTIONS BELOW. | |||||||||||||||||||||||||||||
Popular, Inc. encourages you to take advantage of the convenient ways to vote for matters to be covered at the 2012 Annual Meeting of Stockholders. Please take the opportunity to use one of the three voting methods outlined below to cast your ballot. | ||||||||||||||||||||||||||||||
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and follow the simple instructions the Vote Voice provides you. | ||||||||||||||||||||||||||||||
VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | ||||||||||||||||||||||||||||||
VOTE BY MAIL Please mark, sign, date and return this proxy card promptly using the enclosed postage prepaid envelope. No postage is required if mailed in the United States, Puerto Rico or the U.S. Virgin Islands. | ||||||||||||||||||||||||||||||
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
| KEEP THIS PORTION FOR YOUR RECORDS |
| DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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2012 Annual Meeting Proxy Card | ||||||||||||||||||||||||||||||||||||
The Board of Directors recommends a voteFOR proposals 1-5 | ||||||||||||||||||||||||||||||||||||
(1) | To elect three directors of the Corporation for a three-year term | For | Against | Abstain | For | Against | Abstain | |||||||||||||||||||||||||||||
1a. Alejandro M. Ballester | ¨ | ¨ | ¨ | (2) | Amendment to the Corporation’s Restated Certificate of Incorporation to effect a 1-for-10 reverse stock split, together with a corresponding reduction in the number of authorized shares of common stock | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||
1b. Richard L. Carrión | ¨ | ¨ | ¨ | (3) | Advisory vote to approve the Corporation’s executive compensation program | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||
1c. Carlos A. Unanue To elect one director of the Corporation for a | ¨ | ¨ | ¨ | (4) | To ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Corporation for 2012 | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||
1d. David Goel | ¨ | ¨ | ¨ | (5) | To approve the adjournment or postponement of the meeting, if necessary or appropriate, to solicit additonal proxies | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” ALL ITEMS IDENTIFIED ABOVE. | Such other business as may properly come before the Meeting or any adjournment thereof | |||||||||||||||||||||||||||||||||||
PLEASE SIGN AS YOUR NAME APPEARS ON THIS FORM. IF SHARES ARE HELD JOINTLY, ALL OWNERS SHOULD SIGN. CORPORATION PROXIES SHOULD BE SIGNED BY AN AUTHORIZED OFFICER. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC. SHOULD SO INDICATE WHEN SIGNING. | ||||||||||||||||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||||||||||||||||||||||||||
Important Notice Regarding the proper officersAvailability of Proxy Materials for the Corporation be,Annual Meeting:
The 2012 Notice and herebyProxy Statement and the Annual Report on Form 10-K are authorized and directed to take all actions, execute all instruments, and make all payments that are necessary or desirable,available at their discretion, to make effective the foregoing amendment to the Restated Certificate of Incorporation of the Corporation, including without limitation on filing a certificate of such amendment with the Secretary of State of the Commonwealth of Puerto Rico.
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This Proxy is Solicited on Behalf of the Board of Directors. The undersigned hereby appoints Richard L. Carrión, Jorge A. Junquera and Ignacio Alvarez or any one or more of them as proxies, each with the power to appoint his substitute, and authorizes them to represent and to vote as designated on the reverse side all the shares of common stock of Popular, Inc. held of record by the undersigned on February 27, 2012, at the Annual Meeting of Stockholders to be held at the Centro Europa Building, 1492 Ponce de León Avenue, Third Floor, San Juan, Puerto Rico, on April 27, 2012, at 9:00 a.m., local time, or at any adjournments thereof. The proxies are further authorized to vote such shares upon any other business that may properly come before the Meeting or any adjournments thereof. | ||||||||||||||
