FIRST BANCORP. (NASDAQ:FBNC) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain OfficersItem5.02
5.02 (e)Compensatory Arrangements of Certain Officers
On June29, 2017, the independent members of the Board of Directors (the Board) of First BanCorp. (the Corporation), upon the recommendation of the Compensation and Benefits Committee (the Compensation Committee), approved a new executive compensation program that will apply to the Corporations executive officers as a result of the sale by the United States Department of the Treasury (the Treasury) on May10, 2017 of its remaining 10,291,553 shares of the Corporations common stock. The new compensation program applicable to the Corporations executives will be effective beginning July1, 2017. The compensation program is intended to align executive compensation with the Corporations performance and with current market competitive conditions while also discouraging the Corporations executives from taking unnecessary or excessive risks that could adversely affect the Corporations financial condition or performance. In addition, on June29, 2017, the Board determined the payout target criteria for the 2017 short-term and long-term incentive awards, made transition awards and adopted stockholder ownership requirements applicable to executive officers.
As a result of the Treasurys sale, the Corporation is no longer subject to the compensation-related restrictions under TARP, which substantially limited the Corporations ability to award short-term and long-term incentives to the Corporations executives. In addition, upon the Treasurys sale, certain of the Corporations officers were required to forfeit to TARP compensation-related restrictions approximately 2.9million shares of restricted stock they received throughout the period the Corporation was subject to TARP. The new compensation program was established by the Compensation Committee with the advice and guidance of its independent compensation consultant, Pearl Meyer. Following is a discussion about the pay for performance and market competitiveness goals followed by a discussion about the compensation program, transition awards and the executive officer stockholder ownership requirements.
New Executive Compensation Program
Pay for Performance. The compensation structure reflects the belief that executive compensation must, to a large extent, be at risk so that the amount earned depends on the achievement of rigorous corporate, business unit and individual performance objectives designed to enhance stockholder value. Actual incentive payouts will be larger if target performance is exceeded and smaller if target performance is not achieved.
Market Competitiveness. The Board will target total executive compensation, consisting of base salaries, and annual and long-term target incentive opportunities within the 50th and the 75th percentile range of survey and peer group compensation data with individual decisions within that range based upon market competitiveness, the Corporations performance, individual performance, experience, and responsibilities and other factors the Board deems relevant. While the philosophy is to set total compensation for executives within the 50th and the 75th percentile range of the comparative compensation data, variances from that range may result from the Boards assessment of competitive or recruiting pressures in the market for executive talent.
Base Salary: The new compensation program for executive officers maintains the current levels of cash salary through calendar year 2017.The payment of additional salary amounts currently paid in the form of stock will continue through the second quarter of 2018 and will be eliminated at such time.
Short-Term Incentive: Executives will be eligible to receive bonuses under the program based on a percentage of their base salary and the achievement of the following performance criteria:
| Corporate Profitability Measures: Adjusted Net Income; Pre-tax Pre-provision Net Income |
| Corporate Asset Quality Risk Management: Non-performing Assets; Classified Asset Ratio |
| Individual performance, including annual goals |
The short-term performance metrics are established for three different possible payout levels (minimum threshold, target and maximum). If the target performance metrics established by the Board are fully met, the target payout amount would be met. Actual earned awards may range from 0 to 1.5 times the target award based on performance. Approximately 20% to 25% of an executives total direct compensation is expected to consist of a target annual award opportunity.
2017 Short-Term Incentive: The Board approved target payouts in 2018 of the short-term incentive based upon 2017 performance at the following percentages of base salary for the named executive officers:
| TargetOpportunityasa | ||
| NamedExecutiveOfficer | PercentageofBaseSalary | |
| Aurelio Aleman, President and CEO | 80% | |
| Orlando Berges, Executive Vice President and CFO | 50% | |
| Calixto Garcia-Velez, Executive Vice President | 50% | |
| Cassan Pancham, Executive Vice President | 40% | |
| Donald Kafka, Executive Vice President and COO | 50% |
Given the applicability of TARP-related compensation restrictions during the portion of 2017 prior to the Treasurys sale of its remaining shares of the Corporations common stock, the amount of the actual earned cash award for 2017 will be prorated for the last six months of 2017.
Long-Term Incentive: Provides a variable pay opportunity for long-term performance through a combination of performance shares and restricted stock. The equity long-term incentive program is designed to reinforce the long-term alignment of the Corporations executives with the interests of our stockholders. The aggregate value of the performance shares and restricted stock will be determined based upon a qualitative assessment of the achievement by executives of their individual goals for the prior year and at three different possible aggregate equity valuation levels (minimum threshold, target and maximum). If the individuals target performance is fully met, the target equity valuation would be met. The value of the actual equity awards may range from 0 to 1.5 times the target value based on individual performance. Approximately 20% to 25% of an executives total direct compensation is expected to consist of a target long term equity award opportunity.
The Board has determined that 60% of the long-term incentive award value based upon prior year performance will be in performance shares and 40% will be in restricted stock with the following terms:
| Performance SharesThe payout of the performance shares will depend upon the achievement of a pre-established corporate tangible book value per share goal at the end of a three-year period. All of the performance shares will vest if performance is at the pre-established performance goal level or above. To the extent that performance is below the target but at or above a pre-defined minimum threshold, a proportionate amount of the performance shares will vest. No performance shares will vest if performance is below the threshold. |
| Restricted StockRestricted stock will vest over a three-year period as follows: fifty percent (50%)of the shares will vest on the second anniversary date of the grant of the award and the remaining fifty percent (50%)will vest on the third anniversary date of the grant of the award. |
2017 Long-Term Incentive: The Board approved target values for the long-term incentive to be issued in 2018 at the following percentages of base salary for the named executive officers, subject to the qualitative assessment of 2017 performance, as described above:
| Target Value as a | ||
| NamedExecutiveOfficer | PercentageofBaseSalary | |
| Aurelio Alemn, President and CEO | 115% | |
| Orlando Berges, Executive Vice President and CFO | 45% | |
| Calixto Garca-Vlez, Executive Vice President | 40% | |
| Cassan Pancham, Executive Vice President | 50% | |
| Donald Kafka, Executive Vice President and COO | 50% |
2017 Transition Compensation
To transition from the current compensation structure to the new compensation structure described above and to motivate the executives continued commitment to the successful execution of the Corporations strategic objectives, the Board approved a one-time cash Transition Award ranging from 30% to 50% of the executives current base salary (depending on the position) of certain executives, to be paid out over a four-quarter period subject to their continued employment with the Corporation.
The total amount of the Transition Award made to each applicable named executive officer is indicated below:
| Named Executive Officer | TransitionAward | |
| Aurelio Alemn, President and CEO | $815,150 | |
| Orlando Berges, Executive Vice President and CFO | $300,000 | |
| Calixto Garca-Vlez, Executive Vice President | $181,500 | |
| Cassan Pancham, Executive Vice President | $180,000 |
Executive Officer Stock Ownership Guidelines
The Board also approved Executive Officer Stock Ownership Guidelines that are intended to reinforce executive officers focus on long-term shareholder value creation as follows:
| Position | TargetOwnershipGuidelines | |
| Chief Executive Officer | 3xbasesalary | |
| Other Executive Officer | 1x base salary |
Total value is to be determined based on the higher of the market value of the stock, including unvested time-based restricted stock, at the time the executive received the stock or at the time of calculation of the value. The Chief Executive Officer and other executives must comply with the stock ownership requirement within three years of the effective date of the policy or five years from the date of hire or appointment to these positions, whichever happens last, and continue to comply with the requirements throughout their tenures as officers of the Corporation.
| Item5.03 | Financial Statements and Exhibits. |
On June29, 2017, the Board of Directors of the Corporation approved an amendment to Article Second of the Corporations Amended and Restated Articles of Incorporation to change its resident agent in Puerto Rico. The amendment became effective on June 30, 2017 upon the filing with the Secretary of State of Puerto Rico of a Certificate of Amendment.
A copy of the Certificate of Amendment is filed as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated into this Item5.03 by reference.
| Item9.01 | Financial Statements and Exhibits. |
| (a) | Exhibits |
| Exhibit No. | Description | |
| 3.1 | First BanCorp. Certificate of Amendment |
FIRST BANCORP /PR/ ExhibitEX-3.1 2 d604360dex31.htm EX-3.1 EX-3.1 Exhibit 3.1 Government of Puerto Rico CERTIFICATE OF AMENDMENT I,…To view the full exhibit click here About FIRST BANCORP. (NASDAQ:FBNC)
First Bancorp is the bank holding company for First Bank (the Bank). The Company’s principal activity is the ownership and operation of First Bank. The Company engages in a range of banking activities, including the acceptance of deposits and the making of loans. The Company offers credit cards, debit cards, letters of credit, safe deposit box rentals and electronic funds transfer services, including wire transfers. In addition, the Company offers Internet banking, mobile banking, cash management and bank-by-phone capabilities to its customers. The Company also offers a mobile check deposit feature for its mobile banking customers that allows them to deposit checks through their smartphone. The Company offers remote deposit capture for its business customers. The Company conducts business from approximately 90 branches. The Bank’s subsidiaries include First Bank Insurance Services, Inc. (First Bank Insurance) and First Troy SPE, LLC.