FIRST BANCORP /PR/ - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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


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

First BanCorp.

(Exact name of registrant as specified in its charter)


Puerto Rico		66-0561882

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

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

(Address of principal office)		(Zip Code)

Registrant’s telephone number, including area code:

(787) 729-8200

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 November 7, 2003

40,010,535

CONTENTS


			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			37
	Item 4. Controls and Procedures			38
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings			39
	Item 2. Changes in Securities			39
	Item 3. Defaults Upon Senior Securities			39
	Item 4. Submission of Matters to a Vote of Security Holders			39
	Item 5. Other Information			39
	Item 6. Exhibits and Reports on Form 8-K			39
SIGNATURES				41

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.

FIRST BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)


					September 30, 2003			December 31, 2002

Assets
Cash and due from banks					$	75,145,238		$	108,305,943

Money market instruments, including $140,000,000 (2002-$222,992,538) pledged that can be repledged						430,257,311			273,659,553
Federal funds sold and securities purchased under agreements to resell						159,000,000

				Total money market instruments		589,257,311			273,659,553

Investment securities available for sale, at market:
		Securities pledged that can be repledged				1,070,924,271			2,379,786,252
		Other investment securities				216,982,499			336,987,292

				Total investment securities available for sale		1,287,906,770			2,716,773,544

Investment securities held to maturity, at cost:
		Securities pledged that can be repledged				2,418,663,539			541,047,654
		Other investment securities				813,451,967			161,558,730

				Total investment securities held to maturity		3,232,115,506			702,606,384

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

Loans, net of allowance for loan losses of $123,023,664 (2002 - $111,911,470)						6,568,240,345			5,515,185,610
Loans held for sale, at lower of cost or market						15,544,053			10,753,585

				Total loans		6,583,784,398			5,525,939,195

Other real estate owned						3,999,081			2,938,249
Premises and equipment, net						82,819,631			87,595,569
Accrued interest receivable						42,462,560			39,282,010
Due from customers on acceptances						180,488			304,346
Other assets						148,505,488			150,818,003

				Total assets	$	12,088,771,871		$	9,643,852,296

	Liabilities & Stockholders’ Equity
Liabilities:
	Non-interest bearing deposits				$	495,170,106		$	447,076,347
	Interest bearing deposits					6,017,278,902			5,035,841,381
	Federal funds purchased and securities sold under agreements to repurchase					3,587,877,555			2,793,539,832
	Advances from FHLB					742,000,000			373,000,000
	Bank acceptance outstanding					180,488			304,346
	Accounts payable and other liabilities					109,683,561			112,851,285

						10,952,190,612			8,762,613,191
	Subordinated Notes					82,817,604			82,815,105

						11,035,008,216			8,845,428,296

	Commitments and contingencies

Stockholders’ equity:
	Preferred Stock, authorized 50,000,000 shares: issued and outstanding 22,004,000 shares at $25.00 liquidation value per share (2002-14,420,000)					550,100,000			360,500,000

	Common stock, $1.00 par value, authorized 250,000,000 shares; issued 44,931,435 shares (2002-44,875,435)					44,931,435			44,875,435
	Less: Treasury Stock (at par value)					(4,920,900	)		(4,920,900	)

	Common stock outstanding					40,010,535			39,954,535

	Capital Reserve					70,000,000			70,000,000
	Legal Surplus					149,345,178			149,345,178
	Retained earnings					203,283,622			145,243,124
	Accumulated other comprehensive income, net of tax of $909,872 (2002-$11,127,054)					41,024,320			33,381,163

						1,053,763,655			798,424,000

			Total liabilities and stockholders’ equity		$	12,088,771,871		$	9,643,852,296

The accompanying notes are an integral part of these statements.

FIRST BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


		Three Months Ended					Nine Months Ended

		September 30,		September 30,			September 30,		September 30,
		2003		2002			2003		2002

Interest income:
	Loans	$	98,762,336	$	87,434,587		$	290,002,832	$	255,723,899
	Investments		34,621,600		41,771,436			98,152,862		145,826,457
	Dividends on FHLB stock		234,367		400,000			1,206,379		1,119,452

Total interest income			133,618,303		129,606,023			389,362,073		402,669,808

Interest expense:
	Deposits		28,036,230		33,650,069			84,253,361		99,929,651
	Short term borrowings		32,022,005		33,922,767			91,880,567		99,522,264
	Long term borrowings		1,663,972		1,695,112			4,991,916		5,085,335

Total interest expense			61,722,207		69,267,948			181,125,844		204,537,250

Net interest income			71,896,096		60,338,075			208,236,229		198,132,558

Provision for loan losses			12,599,900		14,000,499			41,763,700		48,301,497

Net interest income after provision for loan losses			59,296,196		46,337,576			166,472,529		149,831,061

Other income:
	Other fees on loans		5,281,997		4,698,037			15,283,224		15,426,158
	Service charges on deposit accounts		2,202,101		2,116,506			7,146,793		6,949,103
	Mortgage banking activities		431,881		1,861,021			2,374,141		3,170,765
	Net gain on sale of investments		4,384,041		7,485,130			28,205,640		8,101,648
	Derivative gain (loss)		1,153,744		(1,208,460	)		1,039,273		(3,461,982	)
	Other operating income		5,681,887		4,010,991			14,254,924		12,266,039

Total other income			19,135,651		18,963,225			68,303,995		42,451,731

Other operating expenses:
	Employees’ compensation and benefits		18,194,723		14,317,494			54,719,045		43,135,227
	Occupancy and equipment		9,041,531		7,036,096			26,756,851		20,725,642
	Business promotion		2,691,220		2,411,415			8,114,398		7,509,543
	Taxes, other than income taxes		1,920,356		1,770,308			5,427,811		5,057,027
	Insurance		725,673		689,250			2,476,206		2,048,469
	Other		7,285,249		6,443,238			21,109,727		17,888,477

Total other operating expenses			39,858,752		32,667,801			118,604,038		96,364,385

Income before income tax provision			38,573,095		32,633,000			116,172,486		95,918,407
Income tax provision			6,888,693		5,276,102			18,789,091		15,932,937

Net income		$	31,684,402	$	27,356,898		$	97,383,395	$	79,985,470

Net income available to common stockholders		$	24,933,402	$	20,605,902		$	77,130,398	$	60,330,198

Net income per common share – basic:
Earnings per common share-basic		$	0.62	$	0.52		$	1.92	$	1.51

Net income per common share – diluted:
Earnings per common share-diluted		$	0.61	$	0.51		$	1.89	$	1.49

Dividends declared per common share		$	0.11	$	0.10		$	0.33	$	0.30

The accompanying notes are an integral part of these statements.

FIRST BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended			Nine Months Ended
	September 30, 2003			September 30, 2002

Cash flows from operating activities:
Net income	$	97,383,395		$	79,985,470

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		11,351,082			8,246,455
Core deposit intangible amortization		1,797,465			689,446
Provision for loan losses		41,763,700			48,301,497
Deferred income tax benefit		(5,794,061	)		(8,904,206	)
Gain on sale of investments, net		(28,205,640	)		(8,101,648	)
Derivative (gain) loss		(1,039,273	)		3,461,982
Gain on sale of loans		(2,335,089	)		(3,016,794	)
(Decrease) increase in accrued income tax payable		(3,483,644	)		3,505,114
(Increase) decrease in accrued interest receivable		(3,180,550	)		4,284,150
Increase (decrease) in accrued interest payable		3,717,912			(58,537	)
Amortization of deferred net loan cost (fees)		(576,348	)		(760,531	)
Net originations of loans held for sale		(25,022,681	)		(29,510,630	)
Decrease in other assets		13,969,172			18,925,153
(Decrease) increase in other liabilities		(12,107,027	)		11,300,286

Total adjustments		(9,144,982	)		48,361,737

Net cash provided by operating activities		88,238,413			128,347,207

Cash flows from investing activities:
Principal collected on loans		1,056,259,575			670,222,045
Loans originated		(1,258,655,612	)		(858,368,313	)
Purchase of loans		(960,137,000	)		(544,115,855	)
Proceeds from sale of loans		68,193,170			74,655,459
Proceeds from sale of investments securities		1,354,072,521			1,681,236,889
Purchase of securities held to maturity		(10,598,957,484	)		(12,801,322,983	)
Purchase of securities available for sale		(185,564,450	)		(8,806,724,403	)
Principal repayments and maturities of securities held to maturity		8,002,957,694			11,819,965,210
Principal repayments of securities available for sale		352,410,227			7,834,557,915
Additions to premises and equipment		(6,575,144	)		(10,195,323	)
Purchase of FHLB stock		(6,965,900	)		(12,738,900	)

Net cash used in investing activities		(2,182,962,403	)		(9