DEF 14A of Ofg Bancorp
Filed Mar 26, 2024 · FY20230001030469-24-000010
PROPOSAL 1: ELECTION OF DIRECTORS
PROPOSAL 1: ELECTION OF DIRECTORS Our Board of Directors consists of one class of nine directors elected annually until the end of their one-year term and until their successors are duly elected and qualified. Our Board currently has one vacancy and will have two vacancies after the end of Mr. Julian Inclán's current term effective the date of the annual meeting. Mr. Inclán is retiring from the Board of Directors after 15 years of service and as part of a Board approved succession plan pursuant to which Mr. José R. Fernández will be appointed Chairperson of the Board at the regularly scheduled Board meeting to be held after the annual meeting of shareholders. Mr. Fernández has served on our Board of Directors for 20 years and as Vice Chairperson for 14 years. As part of that succession plan, Mr. Néstor de Jesús will be appointed as the Lead Independent Director. Mr. Néstor de Jesús has served on the Board for 8 years and as Chairperson of the Board's Risk and Compliance Committee for 7 years. Our bylaws provide that directors in uncontested elections will be elected by a majority of the votes cast by our shareholders, rather than a plurality of the votes cast. Our Director Resignation Policy requires that any director that does not receive the majority of votes cast by our shareholders in an uncontested election submit his or her resignation to our Board of Directors promptly after the certification of the voting results. Thereafter, our Board of Directors will have 90 days to evaluate the resignation, and if the resignation is not accepted, will disclose the reasons therefore to our shareholders. There are no arrangements or understandings between us and any person pursuant to which such person has been elected as a director. No director is related to any of our directors or executive officers, by blood, marriage or adoption (excluding those that are more remote than first cousin). Set forth below is certain information with respect to each nominee.
PROPOSAL 1: ELECTION OF DIRECTORS
| José R. Fernández San Juan, PR Director since 2005 Non-Independent Age: 60 | Mr. Fernández is the President, CEO and a Vice Chairperson of the Board of Directors of the Company and Oriental Bank. He is also the Chairperson of the Boards of Directors of all of our other subsidiaries, and the President of Oriental Insurance LLC and Oriental International Bank, Inc. During his 20-year tenure as CEO, Mr. Fernández has successfully led the transformation of OFG Bancorp into one of Puerto Rico’s leading banking and financial services companies. In that time, Mr. Fernández spearheaded three major acquisitions, Eurobank (2010), BBVA Puerto Rico (2012) and Scotiabank de Puerto Rico (2019). Since the acquisition of Scotiabank, Mr. Fernández has led the Company’s digital strategy which has resulted in the introduction of innovative customer-facing digital technology, providing unparalleled levels of convenience and value-added service. These improvements have yielded record years of loan production, earnings and stockholder returns. His outstanding track record recently earned him recognition as the 2023 Community Banker of the Year by the American Banker. Mr. Fernández is also a member of the Business Advisory Council of the University of Notre Dame’s Mendoza Business School, the Advisory Board of the Puerto Rico Conservation Trust, and the Board of Trustees of the Hispanic Society Museum and Library. From 2011 to 2016, he was appointed to the Community Depository Institutions Advisory Council established by the Federal Reserve Bank of New York. Mr. Fernández holds a bachelor’s degree from the University of Notre Dame and an M.B.A. from the Ross School of Business at the University of Michigan. Our Corporate Governance and Nominating Committee recommended Mr. Fernández as a nominee, and our Board of Directors concluded that he should continue to serve as a director of the Company based on his extensive knowledge of our business, his 30 years of experience in the financial services industry, and his instrumental role in our continued success. As our CEO and Vice Chairperson, Mr. Fernández has consistently demonstrated an ability to exercise sound business judgment and prudent management skills. Furthermore, his active involvement in community and civic affairs represents an ethical character that we seek in our leaders and company culture. |
PROPOSAL 1: ELECTION OF DIRECTORS
| Board and Committees | Meeting | Attendance | | Board (Vice Chair) | 5 of 5 | 100% |
PROPOSAL 1: ELECTION OF DIRECTORS
| Qualifying Common Stock | Total Value | Multiple of Compensation | Applicable Minimum Multiple Requirement | | 544,400 | $20,404,100 | 21.82 | 5 |
PROPOSAL 1: ELECTION OF DIRECTORS
| Jorge Colón-Gerena San Juan, PR Director since 2014 Independent Age: 57 | Mr. Colón-Gerena is the President, CEO and principal shareholder of various restaurant franchise operations that have the exclusive rights in Puerto Rico to the Wendy’s, Applebee’s, Sizzler, Longhorn, Olive Garden and Red Lobster franchises. He also serves on the Boards of Directors of our primary bank subsidiary, Oriental Bank, and the Center for a New Economy, an economic policy think-tank. Mr. Colón-Gerena holds a bachelor’s degree in Arts & Sciences from the Interamerican University, San Juan, Puerto Rico, and has completed executive management courses at Northwestern University and Harvard Business School. Our Corporate Governance and Nominating Committee recommended Mr. Colón-Gerena as a nominee, and our Board of Directors concluded that he should continue to serve as a director of the Company based on his extensive experience in retail food service franchises, which complements the diversity of experience of our Board. |
PROPOSAL 1: ELECTION OF DIRECTORS
| Board and Committees | Meeting | Attendance | | Board | 5 of 5 | 100% | | Audit | 8 of 9 | 89% | | Compensation (Chair) | 3 of 3 | 100% |
PROPOSAL 1: ELECTION OF DIRECTORS
Stock Ownership Policy Compliance as of December 31, 2023:
PROPOSAL 1: ELECTION OF DIRECTORS
| Qualifying Common Stock | Total Value | Multiple of Compensation | Applicable Minimum Multiple Requirement | | 105,500 | $3,954,140 | 54.92 | 4 |
PROPOSAL 1: ELECTION OF DIRECTORS
| Néstor de Jesús Guaynabo, PR Director since 2016 Independent Age: 72 | Mr. de Jesús was an investment banker for 30 years and served as the Director of the Puerto Rico Office of Barclays Capital. He has also served on the Board of Directors and as Chair of the Audit Committee of the Government Development Bank for Puerto Rico. He is currently a member of the Board of Directors of our principal bank subsidiary, Oriental Bank, serving as a member of the Board Credit Committee. Mr. de Jesús is also a member of the Boards of Directors of Rovira Biscuit Corporation and Rovira Foods Inc.. Mr. de Jesús holds a bachelor’s degree in Economics from the Wharton School of the University of Pennsylvania and an M.B.A. from the Ross School of Business at the University of Michigan. Our Corporate Governance and Nominating Committee recommended Mr. de Jesús as a nominee, and our Board of Directors concluded that he should continue to be a director of the Company based on his prior investment banking experience, his experience as a director of a major Puerto Rico public instrumentality, and his extensive financial expertise, which make him highly qualified to fulfill his responsibilities as a director of the Company. |
PROPOSAL 1: ELECTION OF DIRECTORS
| Board and Committees | Meeting | Attendance | | Board | 5 of 5 | 100% | | Corporate Governance and Nominating (Vice-Chair) | 3 of 3 | 100% | | Risk and Compliance (Chair) | 4 of 4 | 100% |
PROPOSAL 1: ELECTION OF DIRECTORS
| Qualifying Common Stock | Total Value | Multiple of Compensation | Applicable Minimum Multiple Requirement | | 23,390 | $876,657 | 11.10 | 4 |
PROPOSAL 1: ELECTION OF DIRECTORS
*****
PROPOSAL 1: ELECTION OF DIRECTORS
| Annette Franqui Miami, FL Independent Age: 62 | Annette Franqui is a Founding Partner, President and Chief Investment Officer of Forrestal Capital, a business and investment advisory firm formed in 2003 to service the original Latin American founding families of Panamerican Beverages (Panamco). Forrestal Capital invests primarily in direct private equity and venture capital transactions in diverse industries. Ms. Franqui is also a member of the Board of Directors of Arcos Dorados Holdings Inc. (NYSE:ARCO) and a member of its Compensation and Nomination Committee. Previously, she served as the Chief Financial Officer for Panamco and as a Managing Director at J.P. Morgan. Ms. Franqui served as Chairperson of the Board of Directors of AARP until June 2023 and had previously served as a Director and member of its Audit and Finance Committee since 2014. Our Corporate Governance and Nominating Committees recommended Ms. Franqui as a nominee, and our Board of Directors concluded that she should serve as a director of the Company based on her abundant and diverse experience serving on boards of directors, which makes her highly qualified to serve on our Board. |
PROPOSAL 1: ELECTION OF DIRECTORS
| Board and Committees | Meeting | Attendance | | Board | 5 of 5 | 100% | | Compensation (Chair) | 3 of 3 | 100% | | Corporate Governance and Nominating | 3 of 3 | 100% |
PROPOSAL 1: ELECTION OF DIRECTORS
Stock Ownership Policy Compliance as of December 31, 2023:
PROPOSAL 1: ELECTION OF DIRECTORS
| Qualifying Common Stock | Total Value | Multiple of Compensation | Applicable Minimum Multiple Requirement | | 600 | $22,488 | 0.37 | — |
PROPOSAL 1: ELECTION OF DIRECTORS
| Susan Harnett Denver, CO Director since 2019 Independent Age: 67 | Ms. Harnett is a member of the Board’s Risk and Compliance Committee, Chair of the Nomination and Governance Committee and served on the Audit Committee until April 2021. She has been a senior advisor to digital startups and mentor at New York’s FinTech Innovation Lab since 2015. She is a founding limited partner in How Women Invest. Her board certifications include becoming a Certified Corporate Director by National Association of Corporate Directors (NACD) and a Certified Risk Director from the DCRO Institute. Ms. Harnett served on the Board of Directors of Life Storage, Inc. (NYSE: LSI), before it was sold to Extra Space Storage Inc. (NYSE: EXR) in July 2023. She currently serves on the Board of Directors of Extra Space Storage Inc. and Sphere 3D Corp. (NASDAQ: ANY), while holding key roles as a member of the Audit Committee and Chair of the Compensation Committee for the latter. Her professional credentials include she was COO of North America for QBE Insurance Group Limited. The majority of her career was spent at Citigroup in domestic, international and global roles. The last three positions during her tenure with Citi included President of Local Consumer Lending (2011-2012), Head of Global Business Performance (2008-2011), CEO of Citibank Germany (2004-2007). She served as an independent director and Audit Committee member of First Niagara Financial Group, a $40 billion in assets publicly traded bank, from 2015 until its acquisition by KeyCorp in 2016. She served on the Boards of QBE Insurance, CitiFinancial, and Visa Canada. She was Chair of Citi’s Management Board in Germany and of the Global Perspectives Advisory Group of Marquette University’s College of Business. Our Corporate Governance and Nominating Committees recommended Ms. Harnett as a nominee, and our Board of Directors concluded that she should continue to serve as a director of the Company based on her significant experience leading domestic and international financial service organizations through periods of major transformation often involving the reengineering of operations, technology, data, products, services, and marketing, as well as M&A and integration, which make her highly qualified to serve on our Board. |
PROPOSAL 1: ELECTION OF DIRECTORS
| Board and Committees | Meeting | Attendance | | Board | 5 of 5 | 100% | | Corporate Governance and Nominating (Chair) | 3 of 3 | 100% | | Risk and Compliance (Vice Chair) | 4 of 4 | 100% |
PROPOSAL 1: ELECTION OF DIRECTORS
| Qualifying Common Stock | Total Value | Multiple of Compensation | Applicable Minimum Multiple Requirement | | 5,500 | $206,140 | 3.17 | 4.00 |
PROPOSAL 1: ELECTION OF DIRECTORS
| Angel Vázquez San Juan, PR Director since April 2023 Independent Age: 56 | Angel Vázquez has been the President of Pan Pepin Inc. since January 2021. Before this, he served as the President of B. Fernández & Hnos. Inc., starting in 2003. In addition to his corporate roles, Mr. Vázquez has been actively involved in the non-profit sector, serving on the Boards of Directors of the Fundación Biblioteca Rafael Hernández Colón and SER de Puerto Rico. He also held positions on the Board of Trustees of the DGI Investment Trust from 2021 to 2023 and on Oriental Bank's Trust Committee from 2011 to 2021. Mr. Vázquez completed his academic pursuits in finance, earning a BBA from the University of Texas, Arlington. Our Corporate Governance and Nominating Committees recommended Mr. Vázquez as a nominee, and our Board of Directors concluded that he should serve as a director of the Company based on his extensive experience in management and serving in diverse boards of directors, which makes him highly qualified to fulfill his responsibilities as a director of the Company. |
PROPOSAL 1: ELECTION OF DIRECTORS
| Board and Committees | Meeting | Attendance | | Board | 4 of 4 | 100% | | Audit | 5 of 6 | 83% | | Risk and Compliance | 2 of 2 | 100% |
PROPOSAL 1: ELECTION OF DIRECTORS
| Qualifying Common Stock | Total Value | Multiple of Compensation | Applicable Minimum Multiple Requirement | | — | — | — | — |
PROPOSAL 1: ELECTION OF DIRECTORS
*****
PROPOSAL 1: ELECTION OF DIRECTORS
| Rafael Vélez Dorado, PR Director since October 2021 Independent Age: 50 | Rafael Vélez is the Founder and President of Atabey Capital (2016), a private equity advisement firm, and Campo Alegre (2016), a 500-acre pineapple farm in Puerto Rico. Previously from 2007 until 2019, he was the Founder and President of Putney Capital Management with offices in Santo Domingo, Dominican Republic and Puerto Rico, a non-discretionary advisor to an investment fund with investments in the energy, agroindustry and construction material sectors in the Caribbean and North of Latin American region. From 2004 to 2012, he was the founding partner of Barreto & Vélez, a CPA firm specialized in advising clients manage inherent risks through sound corporate governance practices. Mr. Vélez also serves as Board member of the Boys & Girls Club of Puerto Rico as well as YPO Puerto Rico and is a member of the Georgetown Latin American Policy Association. Our Corporate Governance and Nominating Committees recommended Mr. Vélez as a nominee, and our Board of Directors concluded that he should continue to serve as a director of the Company based on his vast accounting and investment experience, which makes him highly qualified to fulfill his responsibilities as a director of the Company. |
PROPOSAL 1: ELECTION OF DIRECTORS
| Board and Committees | Meeting | Attendance | | Board | 5 of 5 | 100% | | Audit | 4 of 4 | 100% |
PROPOSAL 1: ELECTION OF DIRECTORS
| Qualifying Common Stock | Total Value | Multiple of Compensation | Applicable Minimum Multiple Requirement | | 9,375 | $351,375 | 4.88 | 1.33 |
PROPOSAL 1: ELECTION OF DIRECTORS
If any person named as a nominee is unable or unwilling to stand for election at the time of the annual meeting, the proxy holders will nominate and vote for a replacement nominee or nominees recommended by our Board of Directors. At this time, the Board knows of no reason why any of the nominees listed above may not be able to serve as a director if elected. Our Board of Directors recommends that you vote “FOR ALL” in this proposal.
INFORMATION WITH RESPECT TO A DIRECTOR WHOSE TERM OF OFFICE WILL END AT THE ANNUAL MEETING AND CERTAIN EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
| Julian S. Inclán Dorado, PR Director since 2008 Independent Age: 76 | Mr. Inclán is the CEO and Chairman of the Board of American Paper Corporation, a distributor of fine papers, office supplies and graphic art supplies, and whose subsidiary, Design Hub, is the agent for a major office contract furniture manufacturer and the importer and designer of customer home furniture units. He previously also served as President of American Paper Corporation from September 1994 to January 2013. He is also the Managing Partner, President and Administrator of various real estate development and investment companies. Mr. Inclán also serves as Chairperson of the Board of Directors of Oriental Bank. He holds an M.B.A. from Columbia University. |
Executive Summary
| WHAT WE DO | | WHAT WE DON’T DO | | | | Performance based variable compensation | | NO short-selling, hedging or pledging of | | | Benchmarking against a relevant peer group | | Company securities | | | Independent external compensation consultant | | NO supplemental executive retirement plans | | | Clawback of variable cash and equity | | NO severance benefits exceeding 3x base salary | | | compensation for malfeasance | | and annual cash bonus | | | Annual risk assessment of compensation program | | NO excise tax gross-ups | | | Double-trigger vesting for all outstanding equity | | NO repricing, buyout or exchange of underwater | | | awards in connection with change in control | | stock options | | | Stock ownership requirements | | NO guaranteed bonuses | | | Annual say on pay vote | | NO uncapped incentives | | | | | NO excessive perquisites | | | | | NO equity compensation plans with evergreen | | | | | provisions |
Determination of Compensation Decisions
Determination of Compensation Decisions The Company’s Compensation Committee, senior management and independent compensation consultant play key roles in making compensation decisions with respect to our executives. The Role of the Compensation Committee. The Compensation Committee of our Board of Directors plays a key role in the development and oversight of our compensation program. It consists entirely of independent directors and operates under a written charter approved by our Board of Directors, which is publicly available at www.ofgbancorp.com. The Compensation Committee recommends for approval by the Board of Directors the employment agreement that governs the compensation of our CEO Mr. Fernández, approves the corporate scorecard used to determine all or a significant portion of the annual cash bonus for our NEOs, and grants equity awards to all executives under our long-term incentive plan. As appropriate, it looks to our senior management and independent compensation consultants for support in its work. While the Compensation Committee values input and advice from these and other sources, it exercises its independent judgment in reaching its decisions. The Compensation Committee approves base salary increases and the incentive compensation of the CEO. His compensation level is guided by the terms of his Employment Agreement. The Compensation Committee may increase his salary after the first year, and his target performance bonus under our annual bonus plan and his target long-term incentive are based on a percentage of his base salary established by the Compensation Committee. In conducting its annual evaluation of the CEO’s performance, the Compensation Committee considers the CEO’s contributions to the overall performance of the Company, including his individual performance. It also reviews our key operating results along with the accomplishment of our key strategic initiatives and considers the standard of living in San Juan, Puerto Rico, where our main offices are located. As part of this process, the Compensation Committee reviews all relevant information or data, including the results of our CEO’s performance scorecard and compensation levels for chief executive officers at peer group companies and the operating environment in which the Company does business. Furthermore, the Chairpersons of our Board of Directors and Compensation Committee meet periodically with our CEO to discuss his performance. The progress results of these meetings are reported to our Board of Directors. The CEO does not participate in any decision regarding his compensation. Our Compensation Committee also considers other relevant factors in making compensation decisions or recommendations for our CEO, including salary data for comparable positions at peer group companies in Puerto Rico and the U.S., and compensation levels at the Company. Determining Goals. The Compensation Committee is responsible for establishing both short and long-term goals that guide both our cash bonus award and the level of achievement of performance shares. For the Compensation Committee to perform its goal-setting functions, the following process is followed. Prior to the beginning of the year, the Board reviews and approves the Company’s strategic plan, and senior executives and department or division heads meet and discuss the Company’s strategic plan and the goals for the Company in the upcoming year that will form part of the Company scorecard. At the beginning of the year, the Board reviews and approves an annual budget for the Company on a consolidated basis and separately for its banking subsidiary. The Compensation Committee then reviews and assesses performance goals presented by management and determines the structure of the annual goals for the Company scorecard and the goals over a three-year performance cycle for determining the payout of performance shares. For certain executives, the Company scorecard determines the payout of their annual bonus awards, whereas for others, the Company scorecard is multiplied by the business unit performance goal adjustment to determine 90% of the cash bonus, and the remaining 10% of their cash bonus is based on individual performance evaluations. In the case of one executive, half of his bonus is based on the Company scorecard and the other half is based on his business unit scorecard. Performance share goals include minimum performance thresholds that must be met to earn any award, as well as performance levels required to achieve maximum payouts. Performance goals for the business units that impact the annual cash bonus are established by the CEO with the support of the Finance and Human Resources Departments. The level of achievement of such goals that form part of the Company scorecard plays an essential role in the determination of the annual cash bonus awards. On a quarterly basis, senior management and our Board of Directors review our actual financial performance against the goals set for the year. In addition, our Board of Directors receives quarterly reports detailing our actual financial performance compared to these goals. Such reports are discussed in the corresponding Board meetings. Each annual cash bonus performance goal is assigned a weight. For 2021, performance goals did not have a minimum or maximum level of achievement. Executives must achieve a minimum rating on their individual performance evaluations to be eligible for any annual cash bonus. Each target bonus is expressed as a percentage of the executive’s base salary. The Role of Senior Management. Our CEO, with the assistance of our Human Resources Director and an independent compensation consultant, establishes the base salary and target cash bonus award of all other executives of the Company and recommends to our Compensation Committee equity awards for other executives. In making compensation decisions, our CEO, with the assistance of our Human Resources Director, considers several factors, such as the scope, complexity and degree of challenge of each executive’s responsibilities, as well as his or her performance, skills, experience and succession potential. In the past, he has also considered in making decisions, among other information, industry compensation and benefits studies prepared by an independent compensation consultant. On a quarterly basis, our Finance Department assesses the progress of the goals set for the year and, at the end of the year, evaluate their results. These assessments are reviewed by the CEO who together with our Director of Human Resources and such executive’s direct supervisor undertakes an evaluation of each executive’s performance based, in part, on objective measures set forth in the performance scorecard. The CEO considers the financial performance of the Company, the performance of each department or division, and the individual performance of each executive relative to the goals set for the year and evaluates the compensatory recommendations provided by our Human Resources Director. In the interest of fairness, he may also take into consideration subjective or non-formulaic factors. The Role of the Compensation Consultant and the Peer Group. Our Compensation Committee engaged Pearl Meyer, an independent compensation consultant, to review the Company’s compensation practices with respect to our NEOs relative to our peers and develop recommendations that align better with our shareholders’ expectations for our compensation program in 2023. As part of this process, they updated the peer group of financial institutions for the Company and prepared a comparison of the compensation of our NEOs with persons in comparable positions at peer financial institutions. Our consultant also developed recommendations for the Compensation Committee’s consideration based on their findings.
Determination of Compensation Decisions
Pearl Meyer reports directly to the Compensation Committee and does not provide any other services to the Company. The Compensation Committee has analyzed whether the work of Pearl Meyer has raised any conflicts of interest, taking into consideration the following factors, among others: (i) the provision of other services to the Company by Pearl Meyer; (ii) the amount of fees from the Company paid to Pearl Meyer as a percentage of their respective total revenues; (iii) Pearl Meyer’s policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of Pearl Meyer or the individual compensation advisors employed by Pearl Meyer with an executive officer of the Company; (v) any business or personal relationship of the individual compensation advisors with any member of the Compensation Committee; and (vi) any stock of the Company owned by Pearl Meyer or the individual compensation advisors employed by Pearl Meyer. The Compensation Committee has determined, based on its analysis of the above factors, among others, that the work of Pearl Meyer and the individual compensation advisors employed by Pearl Meyer as compensation consultants to the Company has not created any conflicts of interest. The Role of Peer Market Data The peer group was proposed for the Company by Pearl Meyer and approved by our Compensation Committee. Establishing a peer group for the Company is particularly challenging given that the Puerto Rico financial services market is significantly different from the United States and the economy does not generally move in tandem with the economy in the United States. Although Puerto Rico has recently shown signs of an economic recovery, for most of the past 19 years, Puerto Rico has been suffering through a prolonged recession and government fiscal crisis while the United States has seen economic growth and a fiscally stable government. Moreover, during such period the financial services market in Puerto Rico has undergone a dramatic consolidation resulting in only three publicly traded financial services companies that operate in Puerto Rico, one of which is not an appropriate peer due to its significantly larger size. The significant exodus of people from the island of Puerto Rico during these crises has also significantly limited the pool of available talent. Our peer group was selected considering the total asset size of the companies and the regional markets in which they operate relative to the asset size and regional markets of OFG Bancorp. The peer group for our compensation decisions consisted of the following companies:
Analysis of Compensation Decisions
Annual Cash Bonus. In 2023, the cash bonus target of Mr. Fernández was increased as a percentage of his base salary in connection with the extension of his Employment Agreement described below. Mr. Kumar's cash bonus target was decreased to better align his compensation with his new role. The table below shows the bonus opportunities at target-level performance for 2022 and 2023.
Analysis of Compensation Decisions
| | 2022 Target Bonus | | 2023 Target Bonus | | | Name | % | Amount ($) | % | Amount ($) | | José R. Fernández | 90 % | 841,500 | 100 % | 935,000 | | Ganesh Kumar | 80 % | 560,000 | 70 % | 385,000 | | Maritza Arizmendi | 70 % | 280,000 | 70 % | 308,000 | | César Ortiz | 40 % | 112,800 | 40 % | 118,368 | | Mari Evelyn Rodríguez | — | — | 50 % | 175,000 |
Analysis of Compensation Decisions
To determine the bonus payout for our CEO, Mr. Fernández, and our CFO, Ms. Arizmendi, the target bonus opportunity is multiplied by the result of the corporate scorecard. For the other executives, it is also multiplied by the business unit performance goal adjustment to determine 90% of their cash bonus, and the remaining 10% of their cash bonus is based on their individual performance evaluation. For Mr. Kumar, half of his target bonus opportunity is multiplied by the result of the corporate scorecard, and the other half is multiplied by the result of the scorecard for the U.S. Loan Program. The table below shows the cash bonuses of the NEOs for their performance in 2023.
Analysis of Compensation Decisions
| Name | Target Bonus % | Performance Score1 | Performance Bonus ($)1 | Other Bonus ($)1 | | José R. Fernández | 100% | 127.09 | 1,188,300 | — | | Ganesh Kumar | 70% | 121.00 | 465,900 | — | | Maritza Arizmendi | 70% | 127.09 | 391,500 | — | | César Ortiz | 40% | 143.49 | 167,700 | — | | Mari Evelyn Rodríguez | 50% | 141.32 | 244,500 | — |
Analysis of Compensation Decisions
1. For purposes of this table, the performance score was rounded to the nearest hundredth and the performance bonus is rounded up to the next hundred dollars. The performance score for Mr. Ortiz and Ms. Rodríguez reflects the results of their business unit performance goal adjustment but not their individual performance evaluation. No discretionary or special cash bonuses were earned or paid in 2023 to the NEOs. Long-Term Incentive Compensation Our long-term incentive compensation is designed to ensure that executives have a continuing stake in our success and to encourage executives to focus on performance goals that will enhance the value of our franchise and capital stock. Such incentives are also designed to retain key executives, reward risk management, and link executive performance to the creation of franchise and shareholder value. NEOs receive 50% of long-term incentive value in the form of performance shares, where vesting is contingent on meeting tangible book value and average return on tangible common equity goals over a three-year performance cycle. The remaining 50% of long-term incentive value is granted in the form of restricted units with a third of the restricted units vesting annually on a three-year vesting schedule. We believe that this framework reflects peer group market practices and that it strengthens the link between executive performance and shareholder value. The value of the equity awards granted to Mr. Fernández are based on a percentage of his base salary. The value of the equity awards granted to our other NEOs is also based on a percentage of their base salaries, but also takes into account the recommendations of our CEO. In 2024, the Compensation Committee approved equity awards to the NEOs for their performance in 2023 as follows:
Analysis of Compensation Decisions
| | | Performance Shares | | | Restricted Units | | | | % of Base Salary | % Target of Base Salary | | Name | | Target Value ($) | | Target Amount | Value ($) | | Amount | Total Value ($) | | | | José R. Fernández | Fernandez Martinez | 562,226 | 2007 OPIP Performance Shares | 15,450 | 562,226 | 2007 OPIP Restricted | 15,450 | 1,124,451 | 120% | 120% | | Ganesh Kumar | Kumar | 192,867 | 2007 OPIP Performance Shares | 5,300 | 192,867 | 2007 OPIP Restricted | 5,300 | 385,734 | 70% | 70% | | Maritza Arizmendi | Arizmendi Diaz | 154,658 | 2007 OPIP Performance Shares | 4,250 | 154,658 | 2007 OPIP Restricted | 4,250 | 309,315 | 70% | 70% | | César Ortiz | Ortiz Marcano | 78,239 | 2007 OPIP Performance Shares | 2,150 | 78,239 | 2007 OPIP Restricted | 2,150 | 156,477 | 53% | 50% | | Mari E. Rodríguez | | 78,239 | | 2,150 | 78,239 | | 2,150 | 156,477 | 50% | 50% |
Analysis of Compensation Decisions
Half of the performance shares vest based on the achievement of growth in the Company’s tangible book value over a three-year performance cycle ending on December 31, 2026. The other half vest based on the Company’s average return on average tangible common equity over that same period. The Compensation Committee decided to continue its practice from prior years of tying the vesting of the performance shares to two metrics, consistent with market practice among the Company’s peers. When it first determined the appropriate metrics, the Compensation Committee, with the assistance of our independent compensation consultant, evaluated various metrics, such as tangible book value, earnings per share, return on equity, return on assets and total shareholder return. The Compensation Committee selected tangible book value and average return on average tangible common equity. As such, our Compensation Committee determined that these performance metrics were the best to align our executive’s interest with our long-term shareholders. Performance goals were established considering the Company’s three-year strategic plan. The tangible book value of the Company as of December 31, 2023 was $23.13 and the target tangible book value for December 31, 2026 is $30.37. The results of the tangible book value performance metric are adjusted to account for changes to tangible book value caused by distributions to shareholders and other extraordinary events, such as increases or decreases to the regular quarterly common dividend, the adoption and execution of stock repurchase programs, and mergers and acquisitions. For each of the two metrics, executives will begin receiving 50% of the performance shares as common stock of the Company for reaching the threshold level of achievement for the metric in question and will receive up to 100% for reaching the target level of achievement and up to 150% for reaching the maximum level of achievement. No shares are awarded if the threshold level of achievement is not attained, and shares are awarded based on straight line interpolation if the metric is achieved between the threshold and the target or between the target and the maximum. The threshold, target and maximum level of achievement of the growth in the Company’s tangible book value and average return on tangible common equity established for the performance shares are as follows:
CEO Special Retention Award
CEO Special Retention Award As part of the Company's long-term executive retention and succession planning, our Compensation Committee recommended and our Board approved the amendment and restatement of our CEO Mr. Fernández's Employment Agreement (the "2024 Employment Agreement"). The 2024 Employment Agreement provides for a one-time special equity award of 40,442 restricted stock units and 40,442 performance shares to Mr. Fernández on January 1, 2024, among other adjustments to his compensation, to retain his services for an additional three-year period from January 1, 2024 through December 31, 2026. The special award granted to Mr. Fernández reflects the Board's desire for him to continue to lead the Company for a further significant number of years. In making the special award, the Board considered the importance of Mr. Fernández's continuing, 20-year stewardship of the Company through extraordinarily challenging economic circumstances in Puerto Rico, leadership continuity, and management succession planning amidst a highly competitive landscape for executive leadership talent. The Board also took into account other factors, including the Company's strong performance under Mr. Fernández's leadership since 2004, his exemplary leadership, and his significant contributions to the Company’s success during his tenure. The nature of this special award reflects the critical importance to the Company of retaining Mr. Fernández in light of his anticipated appointment as Chairperson of the Board of Directors and his continued leadership and support of the Company's longer-term succession plans. The equity award is not part of Mr. Fernández's regular annual compensation and will not be awarded on a recurring basis. The performance shares awarded will require the successful achievement of the Company performance share goals established for the 2024-2026 performance cycle. Apart from certain limited exceptions, vesting is subject to Mr. Fernández's continuous leadership of, or employment with, the Firm. Any shares received from vesting of the equity award are also subject to the Company’s Stock Ownership Policy requirements applicable to the CEO and the Compensation Recoupment Policy. In addition to the one-time equity award, the 2024 Employment Agreement increased Mr. Fernández's target bonus percentage from 90% to 100% starting with the 2023 bonus payable in 2024 and increased his 2024 annual base salary to $981,750.
Other Compensation Practices
Other Compensation Practices Stock Ownership Requirements. Pursuant to our Officers and Directors Stock Ownership Policy, we require our NEOs (among other officers) to own a minimum amount of our equity stock (based on the higher of the market or book value of the stock) equal to five times annual base salary in the case of our CEO, Mr. Fernández, three times annual base salary in the case of our other NEOs and certain other executive officers, and two times annual base salary in the case of other key officers. Our executives are required to comply in periods ranging from 2 to 4 years after they receive their first equity award following their appointment. Anti-hedging and Pledging Policy. Our Insider Trading and Blackout Policy prohibits our employees from entering into any transaction to hedge or offset any decrease in the market value of our securities and from pledging any of our securities. Clawback Policy. Our Compensation Recoupment Policy requires that executive officers who received incentive-based compensation (e.g., bonus, annual incentive or other performance-based cash or equity compensation awards) during the three-year period prior to an accounting restatement of the Company’s financial statements due to a material non-compliance with financial reporting requirements under the applicable securities laws, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, return to the Company the amount of such compensation that the executive would have otherwise not received but for the misstated financial statements. Change-in-Control Compensation Agreements. An important objective of our compensation program is not only the recruitment of seasoned executives but also their retention and commitment to our long-term success. Therefore, to promote their retention and reduce any concerns that they may be adversely affected in the event of a change-in-control of the Company, we have entered into a change-in-control compensation agreement with Mr. Fernández and Mr. Kumar pursuant to which the executive is entitled to a cash payment equal to two times the sum of his annual base salary and last cash bonus if there is a change in control and as a result thereof or within one year thereafter his employment is terminated. The following table presents the estimated cash compensation under their respective change-in-control compensation agreements based on their salaries and bonuses for 2022. No such payout has been required to date under any such agreement by the Company.
Other Compensation Practices
| Name | Change-in-Control Cash Compensation ($) | | | José R. Fernández | | 6,369,900 | | Ganesh Kumar | | 2,031,800 |
COMPENSATION RISK ASSESSMENT
COMPENSATION RISK ASSESSMENT Our compensation program is a key component of the Company’s overall compliance and pay-for-performance culture. The Board’s Compensation Committee, with the assistance of our internal risk management staff, regularly reviews this program and does not believe that the risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on the Company. We believe that our approach to setting goals and targets with payouts at multiple levels of performance and the evaluation of annual performance results assist in mitigating excessive risk-taking that could harm our value or reward poor judgment by our executives. Several features of our compensation program reflect sound risk management practices, including our Compensation Recoupment Policy and our Directors and Officers Stock Ownership Policy, which are described above under the heading “Compensation Discussion and Analysis.” We allocate compensation among base salary and incentive compensation (bonus and equity awards) to target opportunities in such a way as to not encourage excessive risk-taking. Furthermore, although the performance measures that determine bonus and equity awards for certain business unit leaders are based in part on the achievements of their respective business units, the measures that determine payouts for all our executives include company-wide metrics. Such metrics, which are not controlled or overly influenced by the results of any single business unit, are given greater weight in the case of NEOs. This is based on our belief that applying company-wide metrics encourages decision-making that is consistent with our philosophy and that is in the best long-term interests of the Company and its shareholders. Moreover, the mix of equity awards in our incentive program, which includes full value awards such as restricted stock units, and the minimum stock ownership requirements applicable to our top executives also mitigate risk. In addition, the multi-year vesting of our equity awards properly accounts for the time horizon of risk. Finally, each employee’s compliance with our internal policies and procedures, including ethics standards, is an important element of our annual bonus determinations.
Summary Compensation Table
Summary Compensation Table The following table summarizes the total compensation earned in each of the last three years by the Named Executive Officers.
Summary Compensation Table
| Name | Year | Salary ($) | Bonus ($) | Stock Awards ($)1 | Non-Equity Incentive Plan Compensation ($)2 | All Other Compensation ($) | | Total ($) | | José R. Fernández | 2023 | 935,000 | — | 1,197,394 | 1,188,300 | 168,781 | 3 | 3,489,475 | | President & Chief Executive Officer | 2022 | 935,000 | — | 1,129,545 | 872,200 | 124,762 | | 3,061,507 | | | 2021 | 935,000 | — | 1,082,452 | 878,700 | 124,685 | | 3,020,837 | | Ganesh Kumar | 2023 | 550,000 | — | 747,268 | 465,900 | 145,013 | 4 | 1,908,181 | | Chief Strategy Officer, U.S. Business | 2022 | 700,000 | — | 373,634 | 523,100 | 121,521 | | 1,718,255 | | | 2021 | 700,000 | — | 729,764 | 585,000 | 120,239 | | 2,135,003 | | Maritza Arizmendi | 2023 | 432,892 | — | 300,084 | 391,500 | 64,478 | 5 | 1,188,954 | | Chief Financial Officer | 2022 | 393,750 | — | 264,955 | 289,600 | 53,334 | | 1,001,639 | | | 2021 | 375,000 | — | 273,896 | 235,400 | 26,361 | | 910,657 | | César Ortiz | 2023 | 292,442 | — | 132,390 | 169,846 | 42,620 | 6 | 637,298 | | Chief Risk Officer | 2022 | 273,807 | — | 80,881 | 123,100 | 38,215 | | 516,003 | | | 2021 | 263,989 | — | 131,320 | 83,300 | 17,465 | | 496,074 | | Mari Evelyn Rodríguez | 2023 | 234,231 | — | 351,540 | 244,500 | 11,506 | 7 | 841,776 | | Chief Retail Banking Officer | | | | | | | | |
Summary Compensation Table
1. The value of equity awards is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. For a discussion of the assumptions that we made in the valuation of the option awards, please refer to the notes to our audited financial statements. The Company does not grant option awards. 2. The non-equity incentive plan payments for each year were made in the first quarter of the following year and intended as compensation for performance of the NEOs during the previous year, except for a $600 advance paid during the fourth quarter as a Christmas bonus. 3. This amount represents $99,997 for reasonable personal expenses in the performance of Mr. Fernández’s duties, $44,392 for dividends paid on performance shares, our matching contribution pursuant to our 401(k)/1081.01(d) Plan, and payment of medical, life and disability insurance premiums. 4. This amount represents $100,499 for reasonable personal expenses in the performance of Mr. Kumar’s duties, $20,700 for dividends paid on performance shares, our matching contribution pursuant to our 401(k)/1081.01(d) Plan, and payment of medical, life and disability insurance premiums. 5. This amount represents $41,000 for reasonable personal expenses in the performance of Ms. Arizmendi’s duties, $10,350 for dividends paid on performance shares, our matching contribution pursuant to our 401(k)/1081.01(d) Plan, and payment of medical, life and disability insurance premiums. 6. This amount represents $20,000 for reasonable personal expenses in the performance of Mr. Ortiz’s duties, our matching contribution pursuant to our 401(k)/1081.01(d) Plan, and payment of medical, life and disability insurance premiums. 7. This amount represents the payment of reasonable personal expenses in the performance of Ms. Rodríguez's duties, and medical, life and disability insurance premiums. The median of the annual total compensation of all employees of the Company, except the CEO, in 2023 was $33,531.89, and the ratio of the median of the annual total compensation of all employees of the Company to the Annual total compensation of the CEO in 2023 was 1:73. The median employee was selected as of December 31, 2023 based on the total cash compensation (i.e., base salary and bonus) paid to employees during 2023.
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table presents the estimated possible payouts under our non-equity incentive awards, which reflect cash incentives pursuant to our annual bonus plan. f
Grants of Plan-Based Awards
| | | Estimated Future Payouts under Non-Equity Incentive Plan Awards1 | | | Estimated Future Payouts under Equity Incentive Plan Awards | | | Number of Shares of Units | Grant Date Fair Value of Equity Awards | | Name | Grant Date | Threshold ($) | Target ($) | Max ($) | Threshold ($) | Target ($) | Max ($) | (#) | ($)2 | | José R. Fernández | | | 935,000 | | | | | | | | | 2/21/2023 | | | | | | | 20,350 | 598,697 | | | 2/21/2023 | | | | $299,349 | $598,697 | $898,046 | 20,350 | 598,697 | | Ganesh Kumar | | | 385,000 | | | | | | | | | 2/21/2023 | | | | | | | 12,700 | 373,634 | | | 2/21/2023 | | | | $186,817 | $373,634 | $560,451 | 12,700 | 373,634 | | Maritza Arizmendi | | | 308,000 | | | | | | | | | 2/21/2023 | | | | | | | 5,100 | 150,042 | | | 2/21/2023 | | | | $75,021 | $150,042 | $225,063 | 5,100 | 150,042 | | César Ortiz | | | 295,920 | | | | | | | | | 2/21/2023 | | | | | | | 2,250 | 66,195 | | | 2/21/2023 | | | | $33,098 | $66,195 | $99,293 | 2,250 | 66,195 | | Mari Evelyn Rodríguez | | | 175,000 | | | | | | | | | 5/1/2023 | | | | | | | 10,500 | 263,655 | | | 5/1/2023 | | | | $43,943 | $87,885 | $131,828 | 3,500 | 87,885 |
Grants of Plan-Based Awards
1. Pursuant to our non-equity incentive plan, there are no threshold or maximum payouts. 2. Grant date fair value of awards computed in accordance with FASB ASC Topic 718.
Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year End The following table presents information concerning restricted stock units and performance shares of Named Executive Officers that were outstanding and subject to the restricted period or the performance cycle as of December 31, 2023. As of that date, there were no option awards outstanding to our NEOs.
Outstanding Equity Awards at Fiscal Year End
| Name | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | Number of Unearned Shares or Units of Stock That Have Not Vested (#) | Market Value of Unearned Shares or Units of Stock That Have Not Vested ($) | | José R. Fernández | 147,642 | 1 | 5,533,622 | — | — | | Ganesh Kumar | 94,818 | 2 | 3,553,779 | — | — | | Maritza Arizmendi | 36,426 | 3 | 1,365,246 | — | — | | César Ortiz | 15,184 | 4 | 569,096 | — | — | | Mari Evelyn Rodríguez | 15,750 | 5 | 590,310 | — | — |
Outstanding Equity Awards at Fiscal Year End
1. The restricted periods lapse annually in thirds commencing on February 21, 2024 for 20,350 restricted units, annually in halves commencing on February 22, 2024 for 13,500 restricted units, and on February 17, 2024 for 9,617 restricted units. The performance cycles end on December 31, 2023 for 28,850 performance shares, on December 24, 2024 for 20,250 performance shares, and on December 31, 2025 for 20,350 performance shares. 2. The restricted periods lapse annually in thirds commencing on February 21, 2024 for 12,700 restricted units, annually in halves commencing on February 22, 2024 for 8,434 restricted units, and on February 17, 2024 for 6,484 restricted units. The performance cycles end on December 31, 2023 for 19,450 performance shares, on December 31, 2024 for 12,650 performance shares, and on December 31, 2025 for 12,700 performance shares. 3. The restricted periods lapse annually in thirds commencing on February 21, 2024 for 5,100 restricted units, annually in halves commencing on February 22, 2024 for 3,167 restricted units, and on February 17, 2024 for 2,434 restricted units granted in 2021. The performance cycles end on December 31, 2023 for 7,300 performance shares, on December 31, 2024 for 4,750 performance shares, and on December 31, 2025 for 5,100 performance shares. 4. The restricted periods lapse annually in thirds commencing on February 21, 2024 for 2,225 restricted units, annually in halves commencing on February 22, 2024 for 967 restricted units, and on February 17, 2024 for 1,167 restricted units. The performance cycles end on December 31, 2023 for 3,500 performance shares, on December 31, 2024 for 1,450 performance shares, and on December 31, 2025 for 2,250 performance shares. 5. The restricted periods lapse annually in thirds commencing on May 1, 2024 for 10,500 restricted units. The performance cycle ends on December 31, 2025 for 3,500 performance shares.
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table only presents information for the Named Executive Officers who acquired stock upon the exercise of an option award and upon the lapse of the restricted period of a restricted unit award in 2023.
Option Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise | Value Realized on Exercise ($)1 | Number of Shares Acquired on Vesting | Value Realized on Vesting ($) | | José R. Fernández | 98,600 | 1,174,536 | 55,684 | 1,618,649 | | Ganesh Kumar | 75,800 | 1,138,518 | 29,033 | 844,484 | | Maritza Arizmendi | 12,000 | 203,280 | 13,183 | 383,229 | | César Ortiz | — | — | 4,767 | 138,584 | | Mari Evelyn Rodríguez | — | — | — | — |
Option Exercises and Stock Vested
1. The value is based on the closing price of a share of the Company’s common stock on the exercise date minus the exercise price of the option.
Non-Qualified Deferred Compensation
Non-Qualified Deferred Compensation The following table presents information concerning the deferral of compensation by the Named Executive Officers on a basis that is not tax-qualified.
Non-Qualified Deferred Compensation
| Name | Executive Contributions in Last FY ($)1 | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($)2 | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | | José R. Fernández | — | — | 79,176 | 1,496,040 | 1,496,917 | | Ganesh Kumar | — | — | 94,371 | 1,769,292 | 1,770,531 | | César Ortiz | 600 | — | 1,945 | 55,574.45 | 54,995 |
Non-Qualified Deferred Compensation
1. Such executive contributions are reported in the Summary Compensation Table. 2. These earnings are not reported in the Summary Compensation Table. The Company offers our executive officers a non-qualified deferred compensation plan, where such executives are allowed to defer taxable income. The plan is not intended to meet the requirements of Section 1081.01 of the Puerto Rico Internal Revenue Code, and therefore, does not meet the funding, employee coverage, and other requirements which “qualified retirement plans” must satisfy thereunder. However, the plan is intended to constitute an unfunded arrangement maintained “primarily for the purposes of providing deferred compensation for a select group of management or highly compensated employees” for purposes of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. Under the plan, the executive’s current taxable income is reduced by the amount being deferred, which may be up to 100% of his or her salary and bonus. The compensation due from the Company to the executive pursuant to the non-qualified plan may increase or decrease in value based on the performance of certain notional investment options selected by the executive. The deferred compensation obligations due to the executive may increase in value without current income tax to the individual. Taxes are due when the funds are withdrawn at the then current income tax rate applicable to the individual, which may be lower than his or her current income tax bracket.
Pay versus Performance Table
Pay versus Performance Table The following table presents the compensation of our CEO, which is our principal executive officer, and our other NEOs, together with the cumulative shareholder return of the Company and the S&P U.S. BMI Banks Index, the Company’s net income and the Company’s tangible book value, which is in our assessment the most important financial performance measure used to link compensation actually paid our NEOs for the most recently completed fiscal year.
Pay versus Performance Table
| | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Table Total for PEO ($)1 | Compensation Actually Paid to PEO ($)1 | Average Summary Compensation Table Total for Non-PEO NEOs2 | Average Compensation Actually Paid to Non-PEO NEOs2 | Total Shareholder Return | Peer Group Total Shareholder Return | Net Income ($000) | Company Selected Measure: Earnings per Share ($) | | 2023 | 3,489,475 | 6,543,352 | 1,144,052 | 1,674,912 | 174.51 | 107.32 | 181,172 | 3.85 | | 2022 | 3,061,507 | 3,454,638 | 984,232 | 1,324,122 | 124.45 | 98.38 | 166,239 | 3.46 | | 2021 | 3,020,837 | 4,895,781 | 1,030,974 | 1,653,106 | 116.81 | 118.61 | 146,151 | 2.85 | | 2020 | 2,782,700 | 2,757,366 | 896,370 | 918,979 | 80.21 | 87.24 | 74,327 | 1.32 |
Pay versus Performance Table
1. Our CEO, Mr. José R. Fernández, was the PEO in each year. In 2020, 2021, 2022, and 2023, $4,265,707, $4,113,982, $4,475,595, and $4,505,720, respectively, were deducted from the Summary Compensation Table Totals, which represent the grant date fair value of the equity awards he received in the corresponding fiscal year, and the fair value of unvested equity awards and dividends accrued on unvested performance shares as of the end of the immediately preceding fiscal year; and $4,240,373, $5,988,926, $4,868,726, and $6,392,586, respectively, were added, which represent the fair value as of the vesting date of awards that vest during the corresponding fiscal year and the fair value of all unvested equity awards and dividends accrued on unvested performance shares as of the end of the corresponding fiscal year . 2. Mr. Ganesh Kumar, Ms. Maritza Arizmendi, and Mr. César Ortiz were Non-PEO NEOs in each year. The fourth Non-PEO NEOs was Ms. Mari E. Rodríguez in 2023, Mr. Patrick Haggarty in 2022, and Mr. José Cabrera in 2020 and 2021. In 2020, 2021, 2022, and 2023, $841,687, $946,806, $1,128,567, and $1,197,314, respectively, were the averages deducted from the Summary Compensation Table Totals, which represent the grant date fair value of the equity awards received in the corresponding fiscal year and the fair value of unvested equity awards and dividends accrued on unvested performance shares as of the end of the immediately preceding fiscal year; and $864,296, $1,507,653, $1,226,607, and $2,246,340, respectively, were the averages added, which represent the fair value as of the vesting date of awards that vest during the corresponding fiscal year and the fair value of all unvested equity awards and dividends accrued on unvested performance shares as of the end of the corresponding fiscal year . The following graph presents the relationship between executive compensation actually paid by the Company to our CEO and the average compensation actually paid to the NEOs other than our CEO and the of the Company’s cumulative total shareholder return over the past four years. It also compares our Company’s cumulative total shareholder return with that of our peer group over the same period. The following graph presents the relationship between compensation actually paid by the Company to our CEO and the average compensation actually paid to the NEOs other than our CEO and the Company’s net income over the past four years. The following graph presents the relationship between compensation actually paid by the Company to our CEO and the average compensation actually paid to the NEOs other than our CEO and the Company’s earnings per share over the past four years. The most important financial performance metrics used by the Company in our most recent fiscal year to link our NEOs compensation to our Company’s performance are earnings per share, tangible book value, average return on average tangible common equity, market share operating income, and efficiency ratio.
Director Compensation
Director Compensation Each director’s compensation is generally designed to be competitive with comparable compensation paid to directors at peer group companies in Puerto Rico and the U.S. However, each director’s actual compensation varies based on whether he or she is a Chairperson of our Board of Directors or any of its committees. It also varies depending on the number of meetings attended and on his or her membership in Board committees. The following table presents information concerning the compensation of our directors for 2023.
Director Compensation
| Directors | Fees Earned or Paid in Cash ($) | | Stock Awards ($)1 | | Option Awards ($)1 | All Other Compensation ($) | Total ($) | | Julian S. Inclán | 137,000 | | 63,700 | 2 | — | — | 200,700 | | Jorge Colón-Gerena | 72,000 | | 43,316 | 3 | — | — | 115,316 | | Néstor de Jesús | 79,000 | | 43,316 | 4 | — | — | 122,316 | | Annette Franqui | 60,000 | | 15,288 | 5 | — | — | 75,288 | | Susan Harnett | 65,000 | | 43,316 | 6 | — | — | 108,316 | | Rafael Vélez | 72,000 | | 43,316 | 7 | — | — | 115,316 | | Angel Vázquez | 58,333 | | — | | | | 58,333 | | Edwin Pérez | 133,479 | 8 | | | | | 133,487 |
Director Compensation
1. Aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718. 2. The aggregate amount of restricted stock units outstanding at the end of 2023 is 8,100. 3. The aggregate amount of restricted stock units outstanding at the end of 2023 is 5,500. 4. The aggregate amount of restricted stock units outstanding at the end of 2023 is 5,500. 5. The aggregate amount of restricted stock units outstanding at the end of 2023 is 600. 6. The aggregate amount of restricted stock units outstanding at the end of 2023 is 5,500. 7. The aggregate amount of restricted stock units outstanding at the end of 2023 is 2,100. 8. In May 2023, Mr. Edwin Pérez was awarded a cumulative sum encompassing deferred service fees in connection with the end of his service as director. The Compensation Committee approved the compensation program for our directors. Pursuant to such program, each non-employee director receives an annual retainer of $60,000, except for the Chairperson of the Board, who receives an annual retainer of $130,000. Non-employee directors serving on Oriental Bank’s Board of Directors receive a fee of $1,000 for each Board meeting attended. Furthermore, the Chairpersons of the Audit Committee and the Risk and Compliance Committee receive an additional annual retainer of $12,000, and the other members of such committees (other than the Board and Committee Chairpersons) receive an additional annual retainer of $5,000. Such retainers are payable in equal monthly installments in advance. The Compensation Committee also established that each non-employee director will be awarded restricted units with a value of $40,000, except for the Chairperson of the Board, who will be awarded restricted units with a value of $60,000. The President and CEO, who is Vice Chairperson of the Board, does not receive director’s fees and is compensated exclusively pursuant to his Employment Agreement, which is described above under the subheading “CEO Employment Agreement.”