FIRST BANCORP /PR/ - 10-Q Quarterly Report

Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes [X] No [ ]

Number of shares of the registrant’s common stock outstanding as of August 8, 2003


			PAGE

PART I.		FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited):
		Unaudited Consolidated Statements of Financial Condition		3
		Unaudited Consolidated Statements of Income		4
		Unaudited Consolidated Statements of Cash Flows		5
		Unaudited Consolidated Statements of Changes in Stockholders’ Equity		6
		Unaudited Consolidated Statements of Comprehensive Income		7
		Notes to Unaudited Consolidated Financial Statements		8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		36
	Item 4.	Controls and Procedures		37
PART II.		OTHER INFORMATION
	Item 1.	Legal Proceedings		38
	Item 2.	Changes in Securities		38
	Item 3.	Defaults Upon Senior Securities		38
	Item 4.	Submission of Matters to a Vote of Security Holders		38
	Item 5.	Other Information		38
	Item 6.	Exhibits and Reports on Form 8-K		38
SIGNATURES				39

Forward Looking Statements. When used in this Form 10-Q or future filings by First BanCorp. (First BanCorp or the “Corporation”) with the Securities and Exchange Commission, in the Corporation’s press releases or other public or shareholder communication, or in oral statements made with the approval of an authorized executive officer, the words or phrases “would be”, “will allow”, “intends to”, “will likely result”, “are expected to”, “will continue”, “is anticipated”, “estimated”, “project”, “believe”, or similar expressions are intended to identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

The future results of the Corporation could be affected by subsequent events and could differ materially from those expressed in forward-looking statements. If future events and actual performance differ from the Corporation’s assumptions, the actual results could vary significantly from the performance projected in the forward-looking statements.

The Corporation wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including regional and national conditions, substantial changes in levels of market interest rates, credit and other risks of lending and investment activities, competitive and regulatory factors and legislative changes, could affect the Corporation’s financial performance and could cause the Corporation’s actual results for future periods to differ materially from those anticipated or projected. The Corporation does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.


			June 30, 2003			December 31, 2002

Assets
Cash and due from banks			$	81,421,116		$	108,305,943

Money market instruments, including $358,310,785 (2002-$222,992,538) pledged that can be repledged				535,357,363			273,659,553
Securities purchased under agreements to resell				282,000,000

		Total money market instruments		817,357,363			273,659,553

Investment securities available for sale, at market:
	Securities pledged that can be repledged			1,282,153,209			2,379,786,252
	Other investment securities			220,948,575			336,987,292

		Total investment securities available for sale		1,503,101,784			2,716,773,544

Investment securities held to maturity, at cost:
	Securities pledged that can be repledged			566,068,492			541,047,654
	Other investment securities			463,551,300			161,558,730

		Total investment securities held to maturity		1,029,619,792			702,606,384

Federal Home Loan Bank (FHLB) stock				42,595,400			35,629,500

Loans, net of allowance for loan losses of $120,562,918 (2002 - $111,911,470)				6,176,202,090			5,515,185,610
Loans held for sale, at lower of cost or market				2,251,900			10,753,585

	Total loans			6,178,453,990			5,525,939,195

Other real estate owned				2,752,385			2,938,249
Premises and equipment, net				83,214,835			87,595,569
Accrued interest receivable				33,204,256			39,282,010
Due from customers on acceptances				196,555			304,346
Other assets				162,396,602			150,818,003

		Total assets	$	9,934,314,078		$	9,643,852,296

Liabilities and Stockholders’ Equity
Liabilities:
	Non-interest bearing deposits		$	587,647,823		$	447,076,347
	Interest bearing deposits			4,845,994,323			5,035,841,381
	Federal funds purchased and securities sold under agreements to repurchase			2,363,556,877			2,793,539,832
	Advances from FHLB			713,000,000			373,000,000
	Bank acceptances outstanding			196,555			304,346
	Payable for unsettled investment trade			375,000,000
	Accounts payable and other liabilities			110,905,663			112,851,285

				8,996,301,241			8,762,613,191
	Subordinated notes			82,816,771			82,815,105

				9,079,118,012			8,845,428,296

Commitments and contingencies

Stockholders’ equity:
	Preferred stock, authorized 50,000,000 shares; issued and outstanding 14,420,000 shares at $25 liquidation value per share			360,500,000			360,500,000

	Common stock, $1 par value, authorized 250,000,000 shares; issued 44,926,435 shares (2002-44,875,435)			44,926,435			44,875,435
	Less: Treasury stock (at par value)			(4,920,900	)		(4,920,900	)

	Common stock outstanding			40,005,535			39,954,535

	Additional paid-in capital			676,042
	Capital reserve			70,000,000			70,000,000
	Legal surplus			149,345,178			149,345,178
	Retained earnings			188,644,428			145,243,124
	Accumulated other comprehensive income, net of tax of $1,188,346 (2002-$11,127,054)			46,024,883			33,381,163

				855,196,066			798,424,000

		Total liabilities and stockholders’ equity	$	9,934,314,078		$	9,643,852,296


			Three Months Ended						Six Months Ended

			June 30,			June 30,			June 30,			June 30,
			2003			2002			2003			2002

Interest income:
	Loans		$	97,285,361		$	84,794,833		$	191,240,496		$	168,289,311
	Investments			25,068,915			51,086,925			63,531,262			104,055,022
	Dividends on FHLB stock			470,895			466,163			972,012			719,452

		Total interest income		122,825,171			136,347,921			255,743,770			273,063,785

Interest expense:
	Deposits			27,277,414			33,736,063			56,217,131			66,279,582
	Short term borrowings			29,980,398			32,393,483			59,858,562			65,599,497
	Long term borrowings			1,663,972			1,695,112			3,327,944			3,390,224

		Total interest expense		58,921,784			67,824,658			119,403,637			135,269,303

		Net interest income		63,903,387			68,523,263			136,340,133			137,794,482

Provision for loan losses				12,599,900			14,500,499			29,163,800			34,300,998

Net interest income after provision for loan losses				51,303,487			54,022,764			107,176,333			103,493,484

Other income:
	Other fees on loans			4,995,444			5,465,426			10,001,227			10,728,121
	Service charges on deposit accounts			2,369,675			2,354,493			4,944,692			4,832,597
	Mortgage banking activities			1,583,573			895,838			1,942,260			1,309,744
	Gain (loss) on sale of investments, net			10,135,252			(211,329	)		23,821,599			616,518
	Derivatives losses			(678,278	)		(2,253,522	)		(114,471	)		(2,253,522	)
	Other operating income			4,590,801			4,746,834			8,573,038			8,255,051

		Total other income		22,996,467			10,997,740			49,168,345			23,488,509

Other operating expenses:
	Employees’ compensation and benefits			18,314,240			14,437,748			36,524,322			28,817,733
	Occupancy and equipment			8,831,484			6,862,318			17,715,320			13,689,546
	Business promotion			2,706,577			2,455,271			5,423,178			5,098,128
	Taxes, other than income taxes			1,759,539			1,643,889			3,507,455			3,286,719
	Insurance			813,358			721,654			1,750,533			1,359,219
	Other			6,849,628			5,727,087			13,824,478			11,445,240

		Total other operating expenses		39,274,826			31,847,967			78,745,286			63,696,585

Income before income tax provision				35,025,128			33,172,537			77,599,392			63,285,408
Income tax provision				5,754,430			6,193,483			11,900,398			10,656,836

Net income			$	29,270,698		$	26,979,054		$	65,698,994		$	52,628,572

Net income available to common stockholders			$	22,519,699		$	20,228,052		$	52,196,996		$	39,724,295

Net income per common share- basic:
Earnings per common share-basic			$	0.56		$	0.51		$	1.30		$	0.99

Net income per common share-diluted:
Earnings per common share-diluted			$	0.55		$	0.50		$	1.28		$	0.99

Dividends declared per common share			$	0.11		$	0.10		$	0.22		$	0.20


			Six Months			Six Months
			Ended			Ended
			June 30, 2003			June 30, 2002

Cash flows from operating activities:
	Net income		$	65,698,994		$	52,628,572

	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation		7,571,655			5,649,614
		Core deposit intangible amortization		1,198,310			459,631
		Provision for loan losses		29,163,800			34,300,998
		Deferred income tax benefit		(4,998,731	)		(6,400,930	)
		Gain on sale of investments, net		(23,821,599	)		(616,518	)
		Derivative loss		114,471			2,253,522
		Gain on sale of loans		(1,888,253	)		(1,224,159	)
		Increase in accrued income tax payable		3,464,206			4,645,560
		Decrease in accrued interest receivable		6,077,754			2,789,347
		(Decrease) increase in accrued interest payable		(517,498	)		4,949,898
		Amortization of deferred net loan cost (fees)		(88,227	)		(1,000,656	)
		Net originations of loans held for sale		(9,478,628	)		(16,620,907	)
		Decrease in other assets		9,841,552			2,951,689
		(Decrease) increase in other liabilities		(2,368,082	)		8,542,718

		Total adjustments		14,270,730			40,679,807


Puerto Rico		66-0561882

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1519 Ponce de León Avenue, Stop 23
Santurce, Puerto Rico		00908

(Address of principal office)		(Zip Code)


For the Quarter ended		Commission File No. 001-14793
June 30, 2003