| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
José Rafael Fernández entered into an amendment (the “Amendment”) to his employment agreement (the “Agreement”) with OFG Bancorp (the “Company”) effective December 19, 2018, to decrease his annual target bonus from 100% to 75% of his annual base salary and to decrease the potential annual incentive award under the Company’s equity based compensation plan from 85% to 80% of his base salary. This Amendment was part of a restructuring of Mr. Fernández’s compensation to better align his incentive compensation with long-term shareholder value creation by increasing the focus of his compensation on long-term performance-based equity incentives. Mr. Fernández is the President and Chief Executive Officer of the Company and the Vice Chairman of its Board of Directors (the “Board”). The Amendment is effective as of December 19, 2018, commencing with the bonus payable in 2019 for the calendar year 2018, and the Agreement was originally effective as of March 1, 2018 and ends on June 30, 2021.
As provided in the Agreement, Mr. Fernández will report directly to the Board and will have overall responsibility for the business and affairs of the Company. During the term of the Agreement and in any election of directors in which his term as director is set to expire, the Board will nominate and recommend to the shareholders of the Company his election as a Board member and, if elected, will appoint him as its Vice Chairman.
The Agreement provides that Mr. Fernández will be compensated as follows: (i) annual base salary of $865,000, which may be increased by the Board’s Compensation Committee; (ii) annual target bonus of 75% of his annual base salary payable on or before March 31 of each year pursuant to the Company’snon-equity incentive bonus plan; (iii) annual expense allowance of $85,000 for hiscar-related expenses, membership expenses for social, business or professional organizations, and any other expenses which in his judgment are reasonably appropriate for the performance of his duties as President and Chief Executive Officer of the Company; (iv) a10-year term life insurance policy in the amount of $3,000,000 covering his life and having as beneficiaries his spouse and heirs or other beneficiaries designated by him; (v) 25 days of paid vacation per year; (vi) the remaining balance, $425,000, of a special bonus of $850,000 granted pursuant to his prior employment agreement will be payable in three equal semi-annual installments commencing on July 1, 2018; and (vii) additional incentive compensation under the Company’s equity-based compensation plan, as approved by the Company’s Compensation Committee, up to an annual amount equal to 80% of his annual base salary, but he may elect to receive the award in deferred cash equivalence if he is in compliance with the Company’s Stock Ownership Policy. It also provides that Mr. Fernández will be entitled to participate in any equity-based compensation plan, profit-sharing plan or other plans, benefits and privileges offered by the Company to its employees and executives to the extent that he is otherwise eligible and qualifies to participate in and receive such benefits or privileges.
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