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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2022

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

NOTE 14 – STOCK-BASED COMPENSATION

On May 24, 2016, the Corporation’s stockholders approved the amendment and restatement of the First BanCorp. Omnibus Incentive Plan, as amended (the “Omnibus Plan”), to, among other things, increase the number of shares of common stock reserved for issuance under the Omnibus Plan, extend the term of the Omnibus Plan to May 24, 2026, and re-approve the material terms of the performance goals under the Omnibus Plan for purposes of the then-effective Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended. The Omnibus Plan provides for equity-based and non equity-based compensation incentives (the “awards”) through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, other stock-based awards, and cash-based awards. The Omnibus Plan authorizes the issuance of up to 14,169,807 shares of common stock, subject to adjustments for stock splits, reorganizations and other similar events. As of March 31, 2022, there were 3,845,904 authorized shares of common stock available for issuance under the Omnibus Plan. The Corporation’s Board of Directors, based on the recommendation of the Corporation’s Compensation and Benefits Committee, has the power and authority to determine those eligible to receive awards and to establish the terms and conditions of any awards, subject to various limits and vesting restrictions that apply to individual and aggregate awards.

Restricted Stock

Under the Omnibus Plan, the Corporation may grant restricted stock to plan participants, subject to forfeiture upon the occurrence of certain events until the dates specified in the participant’s award agreement. While the restricted stock is subject to forfeiture and does not contain non-forfeitable dividend rights, participants may exercise full voting rights with respect to the shares of restricted stock granted to them. The restricted stock granted under the Omnibus Plan is typically subject to a vesting period. During the first quarter of 2022, the Corporation awarded to an independent director 3,048 shares of restricted stock that are subject to one-year vesting from the date of grant. In addition, during the first quarter of 2022, the Corporation awarded 296,392 shares of restricted stock to employees; fifty percent (50%) of those shares vest on the two-year anniversary of the grant date and the remaining 50% vest on the three-year anniversary of the grant date. Included in those 296,392 shares of restricted stock were 6,084 shares granted to retirement-eligible employees. The total expense determined for the restricted stock awarded to retirement-eligible employees was charged against earnings as of the grant date. Common shares issued during the first quarter of 2022 in connection with restricted stock awards were reissued from treasury shares. During the first quarter of 2021, the Corporation awarded to an independent director 3,552 shares of restricted stock that were subject to one-year vesting from the date of grant. In addition, during the first quarter of 2021, the Corporation awarded 288,649 shares of restricted stock to employees; 50% of those shares vest on the two-year anniversary of the grant date and the remaining 50% vest on the three-year anniversary of the grant date. Included in those 288,649 shares of restricted stock were 19,271 shares granted to retirement-eligible employees. The fair value of the shares of restricted stock granted in the first quarter of 2022 and 2021 was based on the market price of the Corporation’s outstanding common stock on the date of the respective grant.

The following table summarizes the restricted stock activity in the first quarter of 2022 under the Omnibus Plan:

	Quarter Ended
	March 31, 2022
	Number of
	shares of		Weighted-Average
	restricted		Grant Date
	stock		Fair Value

Unvested shares outstanding at beginning of period	1,148,775	$	6.61
Granted	299,440		13.15
Forfeited	(3,092)		6.69
Vested	(487,198)		5.72
Unvested shares outstanding as of March 31, 2022	957,925	$	9.10

For each of the quarters ended March 31, 2022 and 2021, the Corporation recognized $0.9 million of stock-based compensation expense related to restricted stock awards. As of March 31, 2022, there was $6.1 million of total unrecognized compensation cost related to unvested shares of restricted stock. The weighted average period over which the Corporation expects to recognize such cost was 2.0 years as of March 31, 2022.

Stock-based compensation accounting guidance requires the Corporation to reverse compensation expense for any awards that are forfeited due to employee or director turnover. Changes in the estimated forfeiture rate may have a significant effect on stock-based compensation, as the Corporation recognizes the effect of adjusting the rate for all expense amortization in the period in which the forfeiture estimate is changed. If the actual forfeiture rate is higher than the estimated forfeiture rate, an adjustment is made to increase the estimated forfeiture rate, which will decrease the expense recognized in the financial statements. If the actual forfeiture rate is lower than the estimated forfeiture rate, an adjustment is made to decrease the estimated forfeiture rate, which will increase the expense recognized in the financial statements.

Performance Units

Under the Omnibus Plan, the Corporation may award performance units to Omnibus Plan participants. During the first quarter of 2022, the Corporation granted 166,669 units to executives, with each unit representing the value of one share of the Corporation’s common stock. The performance units granted in 2022 are for the performance period beginning January 1, 2022 and ending on December 31, 2024. These awards do not contain non-forfeitable rights to dividend equivalent amounts and can only be settled in shares of the Corporation’s common stock. The performance units will vest on the third anniversary of the effective date of the awards, subject to the achievement of a pre-established tangible book value per share target as of December 31, 2024. All the performance units will vest if performance is at the pre-established performance target level or above. However, the participants may vest with respect to 50% of the awards to the extent that performance is below the target but not less than 80% of the pre-established performance target level (the “80% minimum threshold”), which is measured based upon the growth in the tangible book value during the performance cycle. If performance is between the 80% minimum threshold and the pre-established performance target level, the participants will vest on a proportional amount. No performance units will vest if performance is below the 80% minimum threshold. During the quarter ended March 31, 2022, the Corporation reissued, from treasury shares, 189,645 shares of common stock related to performance units granted in 2019 that met the pre-established target and vested in the first quarter.

During the first quarter of 2021, the Corporation awarded 160,485 performance units to executives. The performance units will vest on the third anniversary of the effective date of the awards and are subject to a pre-established performance target level as described above. In addition, the Corporation issued 304,408 shares of common stock related to performance units granted in 2018 that met the pre-established target and vested in the first quarter of 2021.

The following table summarizes the performance units activity in the first quarter of 2022 under the Omnibus Plan:

		Quarter Ended
(Number of units)		March 31, 2022
Performance units at beginning of year		814,899
Additions		166,669
Vested		(189,645)
Performance units as of March 31, 2022		791,923

The fair values of the performance units awarded were based on the market price of the Corporation’s outstanding common stock on the respective date of the grant. For the quarters ended March 31, 2022 and 2021, the Corporation recognized $0.3 million and $0.5 million, respectively, of stock-based compensation expense related to performance units. As of March 31, 2022, there was $4.0 million of total unrecognized compensation cost related to unvested performance units that the Corporation expects to recognize over the next three years. The total amount of compensation expense recognized reflects management’s assessment of the probability that the pre-established performance goal will be achieved. The Corporation will recognize a cumulative adjustment to compensation expense in the then-current period to reflect any changes in the probability of achievement of the performance goals.

Shares withheld

During the quarter ended March 31, 2022, the Corporation withheld 201,930 shares (first quarter of 2021 –194,471 shares) of the restricted stock and performance units that vested during such period to cover the officers’ payroll and income tax withholding liabilities; these shares are held as treasury shares. The Corporation paid in cash any fractional share of salary stock to which an officer was entitled. In the consolidated financial statements, the Corporation presents shares withheld for tax purposes as common stock repurchases.