FIRST BANCORP /PR/, 424B4, 1999-04-29

FIRST BANCORP /PR/
424B4, 1999-04-29
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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<PAGE> 1

FILED PURSUANT TO RULE 424(B)(4)
REGISTRATION NUMBER 333-75229
PROSPECTUS

3,600,000 SHARES
(FIRST BANCORP CORPORATION LOGO)

7.125% NONCUMULATIVE PERPETUAL MONTHLY INCOME

PREFERRED STOCK, SERIES A

PRICE TO PUBLIC: $25 PER SHARE

First BanCorp. is offering to the public 3,600,000 shares of its 7.125%
Noncumulative Perpetual Monthly Income Preferred Stock, Series A. The Series A
Preferred Stock has the following characteristics:

- Annual dividends of $1.78125 per share, payable monthly, if declared by
the board of directors. Missed dividends never have to be paid.

- Redeemable at First BanCorp's option beginning on April 30, 2004.

- No mandatory redemption or stated maturity.

There is currently no public market for the Series A Preferred Stock. The
New York Stock Exchange has approved the Series A Preferred Stock for listing
under the symbol "FBPPrA," subject to official notice of issuance.

INVESTING IN THESE SECURITIES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.

<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>

Public Offering Price................................ $ 25.00 $90,000,000

Underwriting Discount................................ $ 0.7875 $ 2,835,000

Proceeds to First BanCorp............................ $24.2125 $87,165,000
</TABLE>

First BanCorp has also granted the underwriters an over-allotment option to
purchase up to 540,000 additional shares.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE OR
COMMONWEALTH OF PUERTO RICO SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED
BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY, AND ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

PAINEWEBBER INCORPORATED OF PUERTO RICO
KEEFE, BRUYETTE & WOODS, INC. POPULAR SECURITIES SANTANDER SECURITIES
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY INC.

The date of this prospectus is April 29, 1999
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1

Risk Factors.......................... 5

Dividends Will Not Be Paid Unless
Declared By the Board of
Directors........................ 5

Missed Dividends Never Have To Be
Paid............................. 5

Banking Regulations May Restrict
First BanCorp's Ability to Pay
Dividends........................ 5

Payment of Dividends May Be
Restricted by FirstBank's Ability
to Pay Dividends to First
BanCorp.......................... 5

Increases in Interest Rates May
Negatively Affect First BanCorp's
Profitability.................... 5

Increases in Provisions for Loan
Losses Would Adversely Affect
First BanCorp's Profitability and
Financial Condition.............. 6

First BanCorp Is Exposed To Greater
Risk Because Its Business Is
Concentrated In Puerto Rico...... 6

First BanCorp's Business Would Be
Disrupted If Its Computer Systems
Cannot Work Properly With Year
2000 Data........................ 6
</TABLE>

Forward-Looking Statements............ 6

Recent Developments................... 7

Use of Proceeds....................... 8

Capitalization........................ 9

Selected Financial Data............... 10

Summary of Certain Terms of the Series
A Preferred Stock................... 12

Description of Capital Stock.......... 18

Taxation.............................. 20

Underwriting.......................... 28

Incorporation of Certain Documents by
Reference........................... 29

Available Information................. 30

Legal Matters......................... 30

Experts............................... 30
</TABLE>

Prospective investors may rely only on the information incorporated by
reference or contained in this prospectus. Neither First BanCorp nor any
underwriter has authorized anyone to provide prospective investors with
information different from that incorporated by reference or contained in this
prospectus. This prospectus is not an offer to sell nor is it seeking an offer
to buy these securities in any jurisdiction where the offer or sale is not
permitted. The information contained in this prospectus is correct only as of
the date of this prospectus, regardless of the time of the delivery of this
prospectus or any sale of these securities.

i
<PAGE> 3

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus, including the information incorporated by
reference into this prospectus and the "Risk Factors" section beginning on page
5.

Unless otherwise stated, all information in this prospectus assumes that
the underwriters will not exercise their over-allotment option to purchase any
of the 540,000 shares subject to that option.

THE COMPANY

First BanCorp. is a bank holding company organized in connection with the
bank holding company reorganization of FirstBank Puerto Rico. The holding
company reorganization was completed on October 1, 1998. First BanCorp is
subject to regulation and supervision by the Federal Reserve Board. FirstBank is
First BanCorp's only direct subsidiary.

First BanCorp is engaged in the banking business and provides a wide range
of financial services for retail and institutional clients. First BanCorp
operates its banking business under the regulations of the Federal Deposit
Insurance Corporation and the Office of the Commissioner of Financial
Institutions of Puerto Rico. At December 31, 1998, First BanCorp had
consolidated total assets of approximately $4.017 billion, consolidated total
deposits of approximately $1.775 billion and consolidated shareholders' equity
of approximately $270 million.

First BanCorp's principal executive offices are located at 1519 Ponce de
Leon Avenue, San Juan, Puerto Rico, 00908, and its telephone number is (787)
729-8200.

1
<PAGE> 4

THE OFFERING

Series A Preferred Stock
Offered.................. 3,600,000 shares; 4,140,000 shares if the
underwriters exercise their over-allotment option
in full.

Offering Price............. $25 per share.

Liquidation Preference..... If First BanCorp is liquidated or dissolved, you
will be entitled to receive $25 per share plus
accrued dividends for the current month from any
assets available for distribution. You will be
paid before any of First BanCorp's assets are
distributed to holders of common stock or any
stock ranking junior to the Series A Preferred
Stock.

Dividends.................. Dividends will be paid on the last day of each
month beginning on May 31, 1999. The board of
directors must approve each dividend payment and
any payment it does not approve never has to be
paid. The annual dividend rate is equal to 7.125%
of the liquidation preference per share.

No Voting Rights........... You will not have any voting rights, except as
described on page 15 of this prospectus.

Redemption at First
BanCorp's Option........... Series A Preferred Stock may be redeemed beginning
on April 30, 2004 at First BanCorp's option.
Redemption prices are discussed on page 13 of
this prospectus.

No Maturity Date or
Mandatory Redemption....... The Series A Preferred Stock does not have a
maturity date. First BanCorp is not required to
provide for the retirement of the Series A
Preferred Stock by mandatory redemption or
sinking fund payments.

Rank....................... The Series A Preferred Stock ranks senior to the
common stock of First BanCorp for purposes of
dividend rights and the distribution of assets
upon liquidation. First BanCorp may not issue
preferred stock ranking senior to the Series A
Preferred Stock without the approval of holders
of at least two-thirds of the Series A Preferred
Stock.

New York Stock Exchange
Symbol................... FBPPrA

2
<PAGE> 5

SUMMARY FINANCIAL DATA

You should read the summary financial information presented below together
with First BanCorp's consolidated financial statements and notes which are
incorporated by reference into this prospectus and with the historical financial
information of First BanCorp included under "Selected Financial Data" beginning
on page 10 of this prospectus.

Net income for the year ended December 31, 1996 reflects a one-time
industry-wide deposit insurance assessment of the FDIC's Savings Association
Insurance Fund of $9,115,000 before tax. Excluding this unusual item, net income
for the year ended December 31, 1996 would have amounted to $44,348,791 or $1.44
per share. Net income for the year ended December 31, 1994 reflects an
extraordinary loss net of the estimated tax of $428,874 due to the early
cancellation of $50.0 million in notes payable that were repurchased from the
FDIC. Excluding this extraordinary loss, net income for the year ended December
31, 1994 would have amounted to $30,984,831 or $1.01 per share.

The return on average assets ratio is computed by dividing net income by
average total assets for the period. The return on average equity ratio is
computed by dividing net income by average stockholders' equity for the period.
Both ratios have been computed using daily averages.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income.................. $ 166,168 $ 154,731 $ 143,496 $ 111,650 $ 103,635
Provision for loan losses............ $ 76,000 $ 55,676 $ 31,582 $ 30,894 $ 17,674
Gain on sale of investments and
trading............................ $ 30,192 $ 12,133 $ 3,502 $ 22,679 $ 782
Other income-excluding gain on sale
of investments and trading......... $ 28,048 $ 27,733 $ 26,113 $ 25,589 $ 17,387
Net income........................... $ 51,812 $ 47,528 $ 37,634 $ 49,101 $ 30,556
Cash dividends paid.................. $ 8,871 $ 7,197 $ 6,140 $ 2,486 $ 0
BALANCE SHEET DATA:
Total assets......................... $4,017,352 $3,327,436 $2,822,147 $2,432,816 $2,174,692
Stockholder's equity................. $ 270,368 $ 236,379 $ 191,142 $ 171,202 $ 120,015
SELECTED RATIOS:
Net income to average total assets... 1.48% 1.63% 1.48% 2.22% 1.53%
Net income to average total equity... 20.54% 22.30% 20.49% 33.19% 29.07%
</TABLE>

3
<PAGE> 6

CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS

The ratios shown below measure First BanCorp's ability to generate
sufficient earnings to pay the fixed charges or expenses of its debt. First
BanCorp had no outstanding preferred stock during any of the periods covered by
the ratios shown below. The ratios of earnings to combined fixed charges were
computed by dividing earnings by combined fixed charges and expenses of its
debt.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed Charges
Including Interest on Deposits........................... 1.36x 1.43x 1.44x 1.62x 1.55x
Excluding Interest on Deposits........................... 1.65x 1.95x 2.17x 2.58x 3.16x
</TABLE>

For purposes of computing the consolidated ratios of earnings to combined
fixed charges, earnings consist of pre-tax income from continuing operations
plus fixed charges and amortization of capitalized interest, less interest
capitalized. Fixed charges consist of interest expensed and capitalized,
amortization of debt issuance costs, and First BanCorp's estimate of the
interest component of rental expense. Ratios are presented both including and
excluding interest on deposits.

4
<PAGE> 7

RISK FACTORS

You should carefully consider the following factors and other information
in this prospectus, including the information incorporated by reference in this
prospectus, before deciding to invest in the Series A Preferred Stock.

DIVIDENDS WILL NOT BE PAID UNLESS DECLARED BY THE BOARD OF DIRECTORS

Monthly dividends will only be paid if declared by First BanCorp's board of
directors. The board of directors is not obligated or required to declare
monthly dividends.

MISSED DIVIDENDS NEVER HAVE TO BE PAID

If the board of directors does not declare a dividend for a particular
month, those dividends never have to be paid.

BANKING REGULATIONS MAY RESTRICT FIRST BANCORP'S ABILITY TO PAY DIVIDENDS

First BanCorp may not be able to pay dividends in the future if it does not
earn sufficient operational income. Federal Reserve Board policy is that a bank
holding company should pay dividends only out of its current operating earnings.

PAYMENT OF DIVIDENDS MAY BE RESTRICTED BY FIRSTBANK'S ABILITY TO PAY DIVIDENDS
TO FIRST BANCORP

Payment of dividends by First BanCorp may be restricted by FirstBank's
ability to pay dividends to First BanCorp. First BanCorp's only present source
of cash flow to pay dividends consists of dividends from FirstBank because First
BanCorp is a bank holding company with no operations of its own. FirstBank's
ability to pay dividends to First BanCorp may be restricted under certain
circumstances by Puerto Rico and Federal banking laws and regulations. In
addition, FirstBank is a party to certain contracts that may prevent it from
paying dividends to First BanCorp if it does not comply with certain terms and
conditions set forth in those contracts. For example, FirstBank issued its
7 5/8% subordinated capital notes due 2005 under an agreement that prohibits it
from paying dividends if the aggregate amount of dividends paid on its capital
stock exceeds certain limits tied to earnings and proceeds from the sale of
capital stock. As of December 31, 1998, FirstBank could have paid up to $110.8
million in dividends under that agreement.

INCREASES IN INTEREST RATES MAY NEGATIVELY AFFECT FIRST BANCORP'S PROFITABILITY

Increases in interest rates are the primary market risk affecting First
BanCorp. Interest rates are highly sensitive to many factors, such as
governmental monetary policies and domestic and international economic and
political conditions, that are beyond the control of First BanCorp.

Increases in interest rates may negatively affect the following areas of
First BanCorp's business:

- the net interest income;
- the value of holdings of securities; and
- the number of loans originated, particularly mortgage loans.

Increases in Interest Rates May Reduce Net Interest Income. Increases in
short-term interest rates may reduce net interest income, which is the principal
component of First BanCorp's earnings. Net interest income is the difference
between the amount received by First BanCorp on its interest-earning assets and
the interest paid by First BanCorp on its interest-bearing liabilities. Many of
First BanCorp's assets, like some portions of its loans and its mortgage-backed
securities, are long-term assets with fixed interest rates. In contrast, most of
First BanCorp's liabilities are short-term. When interest rates rise, First
BanCorp must pay more in interest on its liabilities while the interest earned
on its assets does not rise as quickly. This may cause First BanCorp's profits
to decrease.

Increases in Interest Rates May Reduce the Value of First BanCorp's
Holdings of Securities. Increases in interest rates may reduce the value of
First BanCorp's financial assets and have an adverse impact on its
5
<PAGE> 8

earnings and financial condition. First BanCorp owns a substantial portfolio of
mortgage-backed securities and other debt securities with fixed interest rates.
The market value of an obligation with a fixed interest rate generally decreases
when prevailing interest rates rise. A reduction in the value of First BanCorp's
financial assets may also reduce the ability of First BanCorp to record gains
from the sale of its investments and trading.

Increases in Interest Rates May Reduce Demand for Mortgage and Other
Loans. Higher interest rates increase the cost of mortgage and other loans to
consumers and businesses and may reduce demand for such loans, which hurts First
BanCorp's profits. Reduced demand for mortgage and other loans results in
reduced originations by First BanCorp and lower loan origination income.

INCREASES IN PROVISIONS FOR LOAN LOSSES WOULD ADVERSELY AFFECT FIRST BANCORP'S
PROFITABILITY AND FINANCIAL CONDITION

An increase in provisions for loan losses by First BanCorp would have an
adverse effect on First BanCorp's profitability and financial condition. First
BanCorp establishes provisions for loan losses, which lead to reductions in its
income from operations, in order to maintain its allowance for future loan
losses at a level which is deemed appropriate by its management based upon an
assessment of the quality of its loan portfolio. First BanCorp may be forced in
the future, as it has done in recent years, to increase its provisions for loan
losses as a result of various economic and other factors that have led to an
increase in its non-performing assets and actual loan losses.

FIRST BANCORP IS EXPOSED TO GREATER RISK BECAUSE ITS BUSINESS IS CONCENTRATED IN
PUERTO RICO

Because substantially all of the various types of loans originated by First
BanCorp are originated in Puerto Rico, First BanCorp is exposed to a greater
risk of delinquency and default on these loans resulting from adverse economic,
political or business developments and natural hazard risks affecting Puerto
Rico. If any such developments or risks adversely affect Puerto Rico, First
BanCorp's profitability may decrease.

FIRST BANCORP'S BUSINESS WOULD BE DISRUPTED IF ITS COMPUTER SYSTEMS CANNOT WORK
PROPERLY WITH YEAR 2000 DATA

First BanCorp could experience a significant disruption to its business
operations that could have an adverse effect on its profitability if its
computer systems and the computer systems provided by third party vendors on
which it relies are not able to properly use date calculations in the year 2000.
First BanCorp is taking steps that it believes are adequate to make sure this
does not happen. However, First BanCorp cannot assure you that these efforts
will be completely successful. Problems suffered by providers of basic services,
such as telephone, water, sewer and electricity could also have an adverse
impact on First BanCorp's daily operations. First BanCorp is in the process of
revising its existing business interruption contingency plans to address any
disruptions of these basic services.

FORWARD-LOOKING STATEMENTS

This prospectus, including information incorporated in this prospectus by
reference, contains certain "forward-looking statements" concerning First
BanCorp's operations, performance and financial condition, including its future
economic performance, plans and objectives and the likelihood of success in
developing and expanding its business. These statements are based upon a number
of assumptions and estimates which are subject to significant uncertainties,
many of which are beyond the control of First BanCorp. The words "may," "would,"
"could," "will," "expect," "anticipate," "believe," "intend," "plan," "estimate"
and similar expressions are meant to identify these forward-looking statements.
Actual results may differ materially from those expressed or implied by these
forward-looking statements.

6
<PAGE> 9

RECENT DEVELOPMENTS

UNAUDITED FIRST QUARTER RESULTS

On April 12, 1999, First BanCorp released its unaudited earnings for the
quarter ended March 31, 1999. First BanCorp reported net income of $14.1 million
or $0.48 per diluted share for the quarter ended March 31, 1999, compared to net
income of $12.4 million or $0.42 per diluted share for the quarter ended March
31, 1998. First BanCorp reported net interest income of $44.6 million for the
quarter ended March 31, 1999, compared to net interest income of $40.6 million
for the quarter ended March 31, 1998.

First BanCorp had consolidated total assets of approximately $4.045
billion, consolidated total deposits of approximately $1.847 billion and
consolidated shareholders' equity of approximately $249.2 million as of March
31, 1999, compared to consolidated total assets of approximately $3.394 billion,
consolidated total deposits of approximately $1.616 billion and consolidated
shareholders' equity of approximately $236.6 million as of March 31, 1998. At
December 31, 1998, First BanCorp had consolidated total assets of approximately
$4.017 billion, consolidated total deposits of approximately $1.775 billion and
consolidated shareholders' equity of approximately $270.4 million.

ANNOUNCEMENT OF PROJECT "THE NEXT 50"

On March 25, 1999, First BanCorp announced plans to simplify and streamline
its operations in order to make First BanCorp more efficient, responsive and
convenient in serving its customers. The project, known as "The Next 50," given
the beginning of its next fifty years of business, will be implemented by First
BanCorp during the next 18 months. The project involved the full time
participation of 45 employees and of outside consultants, who generated more
than 500 items of improvement to First BanCorp's operations. Once these items of
improvement are fully implemented by First BanCorp, they are expected to add
approximately $12 million in annualized recurring pre-tax earnings through cost
reductions and revenue enhancements. First BanCorp has estimated that the total
after-tax costs relating to the project will be approximately $2.8 million,
which amount will be recorded by First BanCorp as the required conditions for
accounting purposes enable it to record these costs. It is expected that these
costs will be recorded during the quarter ending June 30, 1999.

FIRSTBANK PUERTO RICO ACQUISITION AGREEMENT WITH ROYAL BANK OF CANADA

On April 26, 1999, First BanCorp and Royal Bank of Canada announced that
FirstBank Puerto Rico had entered into a definitive agreement to acquire Royal
Bank of Canada's business unit in Puerto Rico. Royal Bank of Canada's business
unit in Puerto Rico reported assets of $181 million as of December 31, 1998. The
closing of the acquisition is subject to various conditions including regulatory
approvals. It is anticipated that the transaction will be accounted as a
purchase transaction. First BanCorp expects that the acquisition transaction
will close during the third quarter of 1999.

7
<PAGE> 10

USE OF PROCEEDS

The net proceeds to First BanCorp after deducting expenses from the sale of
shares of Series A Preferred Stock are estimated at approximately $86,865,000.
If the underwriters' over-allotment option is exercised in full, the net
proceeds are estimated at $99,939,750. First BanCorp intends to use the net
proceeds for general corporate purposes, which may include:

- making capital contributions and loans to its subsidiaries;

- funding possible acquisitions of banking and other financial
institutions;

- funding possible passive portfolio equity and debt investments in other
companies as permitted by applicable banking laws and regulations;

- increasing working capital; and

- carrying out repurchases of its common stock under a common stock
repurchase program.

First BanCorp has no current agreements regarding any possible acquisitions
or passive portfolio investments except for the definitive agreement to acquire
Royal Bank of Canada's business unit in Puerto Rico.

8
<PAGE> 11

CAPITALIZATION

The following table shows the consolidated capitalization of First BanCorp
at December 31, 1998, on an actual basis and as adjusted to give effect to the
issuance of the shares of Series A Preferred Stock offered by this prospectus.
In addition to the indebtedness reflected below, First BanCorp had total
deposits of $1.775 billion at December 31, 1998. The table also assumes that the
underwriters do not exercise their over-allotment option. This table should be
read together with First BanCorp's Consolidated Financial Statements and related
notes incorporated by reference into this prospectus.

<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-Term Borrowings
Advances from Federal Home Loan Bank of N.Y. ............... $ 2,600 $ 2,600
Federal Funds purchased and securities sold under agreements
to repurchase............................................. 1,623,698 1,623,698
Other short term borrowings................................. 86,595 86,595
Notes payable............................................... 62,600 62,600
---------- ----------
Total Short-Term Borrowings............................ $1,775,493 $1,775,493
========== ==========
Long-Term Borrowings
Notes Payable............................................... $ 55,500 $ 55,500
Subordinated notes.......................................... 99,496 99,496
---------- ----------
Total Long-Term Borrowings............................. $ 154,996 $ 154,996
========== ==========
Stockholders' Equity
Preferred Stock, $1 par value, 50,000,000 shares authorized;
none outstanding and 4,400,000 shares of Series A
Preferred Stock, as adjusted.............................. $ 0 $ 3,600
Common stock, $1.00 par value, 250,000,000 shares
authorized; issued 29,599,552 and outstanding
29,499,552................................................ 29,600 29,600
Treasury Stock (100,000 shares at par)...................... (100) (100)
Additional Paid-in Capital.................................. 23,576 106,841
Capital Reserve............................................. 30,000 30,000
Legal Surplus............................................... 53,454 53,454
Retained Earnings........................................... 125,088 125,088
Accumulated other comprehensive income-unrealized gain on
securities available for sale net of tax.................. 8,750 8,750
---------- ----------
Total Stockholders' Equity............................. $ 270,368 $ 357,233
========== ==========
</TABLE>

9
<PAGE> 12

SELECTED FINANCIAL DATA

The following table shows certain selected consolidated financial and
operating data of First BanCorp on a historical basis for each of the five years
in the period ended December 31, 1998. This information should be read together
with First BanCorp's Consolidated Financial Statements and the related notes
incorporated by reference in this prospectus. First BanCorp has made certain
reclassifications to data for years prior to 1998 to conform to 1998
classifications. Certain amounts shown on a per share basis were recalculated,
when applicable, to retroactively consider the effect of common stock splits.

The return on average assets ratio is computed by dividing net income by
average assets for the period. The return on average equity ratio is computed by
dividing net income by average stockholders' equity for the period. The average
equity to average assets ratio is computed by dividing average assets for the
period by average stockholders' equity. The efficiency ratio is computed by
dividing the amount of other operating expenses by the sum of net interest
income and other income, excluding the gain on sale of investments and trading,
and excluding the gain on sale of a subsidiary that was sold in 1995. All ratios
have been computed using daily averages and on a taxable equivalent basis.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE RESULTS)
<S> <C> <C> <C> <C> <C>
CONDENSED INCOME STATEMENTS:
Total interest income..................... $321,298 $285,160 $256,523 $208,488 $180,309
Total interest expense.................... 155,130 130,429 113,027 96,838 76,674
-------- -------- -------- -------- --------
Net interest income....................... 166,168 154,731 143,496 111,650 103,635
Provision for loan losses................. 76,000 55,676 31,582 30,894 17,674
-------- -------- -------- -------- --------
Net interest income after provision for
loan losses............................ 90,168 99,055 111,914 80,756 85,961
Gain on sale of investments and trading... 30,192 12,133 3,502 22,679 782
Other income -- excluding gains on sale of
investments and trading................ 28,048 27,733 26,113 25,589 17,387
Other operating expenses.................. 91,798 83,268 82,498 65,628 60,760
Unusual item -- SAIF assessment........... -- -- 9,115 -- --
-------- -------- -------- -------- --------
Income before income tax provision and
extraordinary item..................... 56,610 55,653 49,915 63,396 43,370
Provision for income tax.................. 4,798 8,125 12,281 14,295 12,385
-------- -------- -------- -------- --------
Income before extraordinary item.......... 51,812 47,528 37,634 49,101 30,985
Extraordinary item........................ -- -- -- -- (429)
-------- -------- -------- -------- --------
Net income................................ $ 51,812 $ 47,528 $ 37,634 $ 49,101 $ 30,556
======== ======== ======== ======== ========
</TABLE>

10
<PAGE> 13

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE RESULTS)
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE RESULTS DILUTED:
Income before extraordinary item... $ 1.74 $ 1.58 $ 1.22 $ 1.58 $ 1.01
Extraordinary item................. -- -- -- -- (.02)
Net income per common share........ $ 1.74 $ 1.58 $ 1.22 $ 1.58 $ 0.99
Cash dividends declared............ $ 0.30 $ 0.24 $ 0.20 $ 0.08 $ 0
Average shares outstanding......... 29,586 30,036 30,794 30,592 29,977
Average shares diluted............. 29,858 30,204 30,952 31,118 30,859
BALANCE SHEET DATA:
Loans and loans held for sale (net
of unearned interest)........... $2,120,054 $1,959,301 $1,896,074 $1,556,606 $1,501,273
Allowance for possible loan
losses.......................... 67,854 57,712 55,254 55,009 37,413
Investments........................ 1,800,489 1,276,900 830,980 785,747 595,555
Total assets....................... 4,017,352 3,327,436 2,822,147 2,432,816 2,174,692
Deposits........................... 1,775,045 1,594,635 1,703,926 1,518,367 1,493,445
Borrowings......................... 1,930,488 1,461,582 889,669 700,610 538,080
Total stockholders' equity......... 270,368 236,379 191,142 171,202 120,015
Book value per common share, end of
year............................ 9.17 7.93 6.32 5.51 3.99
REGULATORY CAPITAL RATIOS:
Total capital to risk weighted
assets.......................... 17.39% 17.26% 15.25% 16.17% 9.76%
Tier 1 capital to risk weighted
assets.......................... 11.55% 11.07% 9.32% 9.93% 8.50%
Tier 1 capital to average assets... 6.59% 7.44% 6.65% 6.82% 5.74%
SELECTED FINANCIAL RATIOS:
Net income to average total
assets.......................... 1.48% 1.63% 1.48% 2.22% 1.53%
Interest rate spread............... 4.76% 5.30% 5.46% 5.07% 5.23%
Net interest income to average
earning assets.................. 5.27% 5.83% 6.03% 5.59% 5.65%
Net yield on average earning
assets.......................... 9.83% 10.45% 10.63% 10.12% 9.63%
Net cost on average interest
bearing liabilities............. 5.07% 5.15% 5.17% 5.05% 4.40%
Net income to average total
equity.......................... 20.54% 22.30% 20.49% 33.19% 29.07%
Average total equity to average
total assets.................... 7.22% 7.32% 7.23% 6.68% 5.27%
Dividend payout ratio.............. 17.12% 15.14% 16.32% 5.06% --
Efficiency ratio................... 46.46% 45.45% 47.66% 47.71% 49.88%
</TABLE>

11
<PAGE> 14

SUMMARY OF CERTAIN TERMS OF THE SERIES A PREFERRED STOCK

The following summary contains a description of the material terms of the
Series A Preferred Stock. The summary is subject to and qualified in its
entirety by reference to First BanCorp's Certificate of Incorporation and to the
Certificate of Designation creating the Series A Preferred Stock (the
"Certificate of Designation"), copies of which are incorporated by reference as
exhibits to the registration statement of which this prospectus is a part.

DIVIDENDS

If declared at the option of First BanCorp's board of directors, holders of
record of the Series A Preferred Stock will be entitled to receive cash
dividends in the amount of $1.78125 per share each year, which is equivalent to
7.125% of the liquidation preference of $25.00 per share. First BanCorp is not
required to declare or pay dividends on the Series A Preferred Stock, even if it
has funds available for the payment of such dividends. Dividends may only be
paid out of funds that are legally available for this purpose.

Dividends on the Series A Preferred Stock will accrue from its date of
original issuance and will be payable on the last day of each month in United
States dollars beginning on May 31, 1999. Payment of dividends will be made to
the holders of record of the Series A Preferred Stock as they appear on the
books of First BanCorp on the second Business Day immediately preceding the
relevant date of payment. In the case of the dividend payable on May 31, 1999,
this dividend will cover the period from the date of issuance of the Series A
Preferred Stock to May 31, 1999. If any date on which dividends are payable is
not a Business Day, then payment of the dividend will be made on the next
Business Day without any interest or other payment in respect of the delay. If
December 31 of any year is not a Business Day, then the dividend payable on such
date will be made on the immediately preceding Business Day. A "Business Day" is
a day other than a Saturday or Sunday or a general banking holiday in San Juan,
Puerto Rico or New York, New York.

Dividends on the Series A Preferred Stock will be noncumulative. If the
board of directors does not declare a dividend for any monthly dividend period
on the Series A Preferred Stock, then the holders of Series A Preferred Stock
will not have a right to receive a dividend for that monthly dividend period,
whether or not dividends on the Series A Preferred Stock are declared for any
future monthly dividend period.

Dividends for any monthly dividend period will be paid in equal
installments in the amount of $0.1484375 per share. The aggregate payment made
to each holder will be rounded to the next lowest cent. The amount of dividends
payable for any period shorter than a full monthly dividend period will be
computed on the basis of the actual number of days elapsed in that period.

Dividend payments will be mailed to the record holders of the Series A
Preferred Stock at their addresses appearing on the register for the Series A
Preferred Stock.

The terms of the Series A Preferred Stock do not permit First BanCorp to
declare, set apart or pay any dividend or make any other distribution of assets
on, or redeem, purchase, set apart or otherwise acquire shares of common stock
or of any other class of stock of First BanCorp ranking junior to the Series A
Preferred Stock as to the payment of dividends or as to the distribution of
assets upon liquidation, dissolution or winding up of First BanCorp, unless
certain conditions are met. Those conditions are (1) all accrued and unpaid
dividends on the Series A Preferred Stock for the twelve monthly dividend
periods ending on the immediately preceding dividend payment date shall have
been paid or are paid contemporaneously, (2) the full monthly dividend on the
Series A Preferred Stock for the then current month has been or is
contemporaneously declared and paid or declared and set apart for payment, and
(3) First BanCorp has not defaulted in the payment of the redemption price of
any shares of Series A Preferred Stock called for redemption. See "Redemption at
the Option of First BanCorp." The above limitations do not apply to stock
dividends or other distributions made in stock of First BanCorp ranking junior
to the Series A Preferred Stock as to the payment of dividends and as to the
distribution of assets. The above limitations also do not apply to conversions
or exchanges for stock of First BanCorp ranking junior to the Series A Preferred
Stock as to the payment of dividends and as to the distribution of assets.

12
<PAGE> 15

If First BanCorp is unable to pay in full the dividends on the Series A
Preferred Stock and on any other shares of stock of equal rank as to the payment
of dividends with the Series A Preferred Stock, all dividends declared upon the
Series A Preferred Stock and any such other shares of stock will be declared pro
rata. In this event, each share of Series A Preferred Stock and of the other
classes of stock of equal rank will receive dividends in the same proportion as
the $25.00 per share liquidation preference of the Series A Preferred Stock
bears to the per share liquidation preference of the other classes of equally
ranked stock.

For a discussion of the tax treatment of distributions to stockholders see
"Taxation," "Puerto Rico Taxation," and "United States Taxation."

NO CONVERSION OR EXCHANGE RIGHTS

The Series A Preferred Stock will not be convertible into or exchangeable
for any other securities of First BanCorp.

REDEMPTION AT THE OPTION OF FIRST BANCORP

First BanCorp may not redeem the shares of the Series A Preferred Stock
prior to April 30, 2004. On and after that date, First BanCorp may redeem the
Series A Preferred Stock for cash, at its option, in whole or in part, at the
redemption prices shown below plus accrued and unpaid dividends for the then
current monthly dividend period to the redemption date. The redemption prices
for the twelve month periods beginning on April 30, 2004 are shown below.

<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
2004........................................................ $25.50
2005........................................................ 25.25
2006 and thereafter......................................... 25.00
</TABLE>

In the event that First BanCorp elects to redeem less than all of the
outstanding shares of the Series A Preferred Stock, the shares to be redeemed
will be allocated pro rata or by lot as may be determined by the board of
directors, or by any other method as the board of directors may consider fair.
Any method chosen by First BanCorp will conform to any rule or regulation of any
national or regional stock exchange or automated quotation system on which the
shares of the Series A Preferred Stock may at the time be listed or eligible for
quotation.

First BanCorp will mail a notice of any proposed redemption to the holders
of record of the shares of Series A Preferred Stock to be redeemed, at their
address of record, not less than 30 nor more than 60 days prior to the
redemption date. The notice of redemption to each holder of shares of Series A
Preferred Stock will specify the number of shares of Series A Preferred Stock to
be redeemed, the redemption date and the redemption price payable to the holder
upon redemption, and shall state that from and after the redemption date
dividends will cease to accrue. If First BanCorp redeems less than all the
shares owned by a holder, the notice shall also specify the number of shares of
Series A Preferred Stock of the holder which are to be redeemed and the numbers
of the certificates representing such shares. Any notice mailed in accordance
with these procedures shall be conclusively presumed to have been properly
given, whether or not the stockholder receives this notice. The failure by First
BanCorp to give this notice by mail, or any defect in the notice, to the holders
of any shares designated for redemption shall not affect the validity of the
proceedings for the redemption of any other shares of Series A Preferred Stock.

If the redemption notice is properly mailed and First BanCorp pays the
redemption price, from and after the redemption date, all dividends on the
shares of Series A Preferred Stock called for redemption shall cease to accrue
and all rights of the holders of the shares being redeemed as stockholders of
First BanCorp shall cease on the redemption date. Holders will retain the right
to receive the redemption price upon presentation of their stock certificates.
If First BanCorp redeems less than all the shares represented by any
certificate, a new certificate representing the unredeemed shares shall be
issued without cost to the holder.

13
<PAGE> 16

At its option, First BanCorp may, on or prior to the redemption date,
irrevocably deposit the entire amount payable upon redemption of the shares of
the Series A Preferred Stock to be redeemed with a bank or trust company
designated by First BanCorp having its principal office in New York, New York,
San Juan, Puerto Rico, or any other city in which First BanCorp shall at that
time maintain a transfer agent with respect to its capital stock, and having a
combined capital and surplus of at least $50,000,000. The depositary will hold
this amount in trust for payment to the holders of the shares of the Series A
Preferred Stock to be redeemed. If the deposit is made and the funds deposited
are immediately available to the holders of the shares of the Series A Preferred
Stock to be redeemed, First BanCorp will no longer have any obligation to make
payment of the amount payable upon redemption of the shares of the Series A
Preferred Stock to be redeemed. Following the deposit, except as discussed in
the next paragraph, holders of these shares shall look only to the depositary
for payment.

Any funds remaining unclaimed at the end of two years after the redemption
date for which these funds were deposited shall be returned to First BanCorp.
After the funds are returned to First BanCorp, the holders of shares called for
redemption shall look only to First BanCorp for the payment of the redemption
price. Any interest accrued on any funds deposited with the depositary will
belong to First BanCorp and shall be paid to it on demand.

After the redemption of any shares of the Series A Preferred Stock, the
redeemed shares will have the status of authorized but unissued shares of
preferred stock, without designation as to series, until these shares are once
more designated as part of a particular series by the board of directors of
First BanCorp.

Certain Regulatory Considerations Affecting Redemptions

Under current regulations, First BanCorp may not redeem the Series A
Preferred Stock, without the prior approval of the Federal Reserve Board.
Ordinarily, the Federal Reserve Board will not permit a redemption unless (1)
the shares are redeemed with the proceeds of a sale of common stock or perpetual
noncumulative preferred stock, or (2) the Federal Reserve Board determines that
First BanCorp's condition and circumstances warrant the reduction of a source of
permanent capital.

Also, under Puerto Rico law, First BanCorp may not redeem any shares of its
capital stock unless the assets remaining after the redemption are sufficient to
pay any debts for which payment has not otherwise been provided.

LIQUIDATION PREFERENCE

Upon any liquidation, dissolution, or winding up of First BanCorp, the
record holders of shares of Series A Preferred Stock will be entitled to receive
out of the assets of First BanCorp available for distribution to shareholders,
before any distribution is made to holders of common stock or any other equity
securities of First BanCorp ranking junior upon liquidation to the Series A
Preferred Stock, the amount of $25.00 per share plus an amount equal to any
accrued and unpaid dividends for the current monthly dividend period to the date
of payment.

If First BanCorp is liquidated or dissolved and the amounts payable with
respect to the Series A Preferred Stock and any other shares of stock of equal
rank upon liquidation are not paid in full, the holders of the Series A
Preferred Stock and of the other shares will share ratably in any such
distribution of assets in proportion to the full liquidation preferences to
which each would otherwise be entitled. After payment of the full amount of the
liquidation preference to which they are entitled, the holders of shares of
Series A Preferred Stock will not be entitled to any further participation in
any distribution of assets of First BanCorp.

A consolidation or merger of First BanCorp with any other corporation, or
any sale, lease or conveyance of all or any part of the property or business of
First BanCorp, shall not be deemed to be a liquidation, dissolution, or winding
up of First BanCorp.

14
<PAGE> 17

VOTING RIGHTS

Holders of the Series A Preferred Stock will not be entitled to receive
notice of or attend or vote at any meeting of stockholders of First BanCorp,
except as described below.

If First BanCorp does not declare and pay dividends in full on the Series A
Preferred Stock for eighteen monthly dividend periods, whether consecutive or
not, the holders of outstanding shares of the Series A Preferred Stock, together
with the holders of any other shares of stock having the right to vote for the
election of directors solely in the event of any failure to pay dividends,
acting as a single class, will be entitled to appoint two additional members of
the board of directors of First BanCorp. They will also have the right to remove
any member so appointed from office and appoint another person in place of such
member. To make this appointment, the holders of a majority in liquidation
preference of these shares must send written notice to First BanCorp of the
appointment or pass a resolution adopted by a majority of holders at a separate
general meeting of those holders called for this purpose.

Not later than 30 days after the right of holders of Series A Preferred
Stock to elect directors arises, if written notice by a majority of the holders
has not been given as provided for in the preceding sentence, the board of
directors of First BanCorp or an authorized board committee is required to call
a separate general meeting for this purpose. If the board of directors fails to
convene this meeting within the 30-day period, the holders of 10% of the
outstanding shares of the Series A Preferred Stock and any such other stock will
be entitled to convene the meeting.

The provisions of the Certificate of Incorporation and By-laws of First
BanCorp relating to the convening and conduct of general meetings of
stockholders will apply to any separate general meeting of this type. Any member
of the board of directors appointed as described above shall vacate office if
First BanCorp resumes the payment of dividends in full on the Series A Preferred
Stock and each other series of stock having similar voting rights for twelve
consecutive monthly dividend periods, subject always to the revesting of the
right of holders of the Series A Preferred Stock, together with the holders of
any other shares of stock having the right to vote for the election of directors
solely in the event of any failure to pay dividends, acting as a single class,
to elect two directors as provided above in the event of any subsequent failure
on the part of First BanCorp to pay dividends at the stated rate for eighteen
monthly dividend periods, whether consecutive or not.

The Certificate of Incorporation of First BanCorp requires a minimum of
five members of the board of directors and a maximum of fifteen members and that
the number of members must always be an odd number. The actual number of
directors is established by a resolution adopted by the absolute majority of the
members of First BanCorp's board of directors. As of the date of this
prospectus, First BanCorp's board of directors consisted of eleven members.

Any change or cancellation of the rights and preferences of the Series A
Preferred Stock will require the approval of holders of at least two thirds of
the outstanding aggregate liquidation preference of the Series A Preferred
Stock. This approval can by evidenced either by a consent in writing or by a
resolution passed at a meeting of the holders of the Series A Preferred Stock.
The authorization or issuance of any shares of First BanCorp ranking senior to
the Series A Preferred Stock as to dividend rights or rights on liquidation or
similar events, will be considered a change requiring the consent of the Series
A Preferred Stock. Conversely, the authorization or issuance of shares ranking,
as to dividend rights or rights on liquidation or similar events, on a parity or
junior to the Series A Preferred Stock, will not be considered a change or
abrogation of the rights of the Series A Preferred Stock and the consent of the
holders of the Series A Preferred Stock will not be required in connection with
this action.

No vote of the holders of the Series A Preferred Stock will be required for
First BanCorp to redeem or purchase and cancel the Series A Preferred Stock in
accordance with the Certificate of Incorporation of First BanCorp or the
Certificate of Designation for the Series A Preferred Stock.

First BanCorp will cause a notice of any meeting at which holders of the
Series A Preferred Stock are entitled to vote to be mailed to each record holder
of the Series A Preferred Stock. Each notice will contain (1) the date of the
meeting, (2) a description of any resolution to be proposed for adoption at the
meeting, and (3) instructions for deliveries of proxies.
15
<PAGE> 18

Certain Regulatory Issues Related to Voting Rights

Under regulations adopted by the Federal Reserve Board, if the holders of
shares of Series A Preferred Stock become entitled to vote for the election of
directors as described above, the Series A Preferred Stock could be deemed a
"class of voting securities." In this instance, a holder, other than a natural
person, of 25% or more of the Series A Preferred Stock could then be subject to
regulation as a bank holding company in accordance with the Bank Holding Company
Act. A holder, other than a natural person, of 5% that otherwise exercises a
"controlling influence" over First BanCorp could also be subject to regulation
under the Bank Holding Company Act. In addition, at any time the Series A
Preferred Stock is deemed a class of voting securities, (1) any other bank
holding company may be required to obtain the approval of the Federal Reserve
Board to acquire or retain 5% or more of the outstanding shares of Series A
Preferred Stock, and (2) any person other than a bank holding company may be
required to file with the Federal Reserve Board under the Change in Bank Control
Act to acquire or retain 10% or more of such series.

Section 12 of the Puerto Rico Banking Law requires that the Commissioner of
Financial Institutions of Puerto Rico approve any change of control involving a
bank organized under the Banking Law. The Banking Law requires that the
Commissioner be informed not less than 60 days prior to any transfer of voting
stock of a Puerto Rico bank that results in any person owning, directly or
indirectly, more than 5% of the outstanding voting stock of the bank. For the
purposes of Section 12 of the Banking Law, the term "control" means the power
to, directly or indirectly, direct or influence decisively the administration or
the norms of the bank. The Commissioner has made an administrative determination
that these provisions of the Banking Law are applicable to a change in control
of First BanCorp.

Pursuant to the Banking Law, if the Commissioner receives notice of a
proposed transaction that may result in a change of control of First BanCorp,
the Commissioner is required to investigate and determine whether a change of
control has occurred. The Commissioner will issue an authorization for the
transfer of control of First BanCorp if the results of its investigations are in
its judgment satisfactory. The decision of the Commissioner is final and
unreviewable.

RANK

The Series A Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding up and dissolution, rank:

- senior to all classes of common stock of First BanCorp, and to all other
equity securities issued by First BanCorp the terms of which specifically
provide that those equity securities will rank junior to the Series A
Preferred Stock;

- on a parity with all other equity securities issued by First BanCorp the
terms of which specifically provide that those equity securities will
rank equal to the Series A Preferred Stock; and

- junior to all equity securities issued by First BanCorp the terms of
which specifically provide that those equity securities will rank senior
to the Series A Preferred Stock.

For this purpose, the term "equity securities" does not include debt
securities convertible into or exchangeable for equity securities.

First BanCorp may not issue shares ranking, as to dividend rights or rights
on liquidation, winding up and dissolution, senior to the Series A Preferred
Stock, except with the consent of the holders of at least two-thirds of the
outstanding aggregate liquidation preference of the Series A Preferred Stock.
See "Voting Rights" above.

TRANSFER AGENT; DIVIDEND DISBURSING AGENT; REGISTRAR

The Bank of New York will initially act as the transfer agent, dividend
disbursing agent and registrar for the Series A Preferred Stock. Holders of the
Series A Preferred Stock may contact The Bank of New York, at the following
address: The Bank of New York, 101 Barclay Street 22W, New York, New York 10286,
telephone number (212) 495-1784.
16
<PAGE> 19

The transfer of a share of Series A Preferred Stock may be registered upon
the surrender of the certificate evidencing the share of Series A Preferred
Stock to be transferred, together with the form of transfer endorsed on it duly
completed and executed, at the office of the transfer agent and registrar.

Registration of transfers of shares of Series A Preferred Stock will be
effected without charge by or on behalf of First BanCorp, but upon payment of
any tax or other governmental charges which may be imposed in relation to it or
the giving of an indemnity as the transfer agent and registrar may require.

First BanCorp will not be required to register the transfer of a share of
Series A Preferred Stock after the share has been called for redemption.

REPLACEMENT OF LOST CERTIFICATES

If any certificate for a share of Series A Preferred Stock is mutilated or
alleged to have been lost, stolen or destroyed, the holder may request a new
certificate representing the same share. First BanCorp will issue a new
certificate subject to delivery of the old certificate or, if alleged to have
been lost, stolen or destroyed, compliance with the conditions as to evidence of
ownership, indemnity and the payment of out-of-pocket expenses of First BanCorp
as First BanCorp may determine.

NO PREFERENTIAL RIGHTS TO PURCHASE ADDITIONAL SECURITIES

Holders of the Series A Preferred Stock will have no preemptive or
preferential rights to purchase or subscribe for any securities of First
BanCorp.

NO REPURCHASE AT THE OPTION OF THE HOLDERS

Holders of the Series A Preferred Stock will have no right to require First
BanCorp to redeem or repurchase any shares of Series A Preferred Stock.

NO MANDATORY REDEMPTION OR SINKING FUNDING OBLIGATION

The shares of Series A Preferred Stock are not subject to any mandatory
redemption, sinking fund or similar obligation.

PURCHASE OF SHARES BY FIRST BANCORP

First BanCorp may, at its option, purchase shares of the Series A Preferred
Stock from holders thereof from time to time, by tender, in privately negotiated
transactions or otherwise.

17
<PAGE> 20

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL

First BanCorp is authorized to issue 250,000,000 shares of common stock,
$1.00 par value, and 50,000,000 shares of preferred stock, $1.00 par value. The
following is a summary of certain rights and privileges of the common stock and
preferred stock. Statements in this summary are qualified in their entirety by
reference to First BanCorp's Certificate of Incorporation and to the General
Corporation Law of Puerto Rico.

COMMON STOCK

As of March 15, 1999, there were 29,145,552 issued and outstanding shares
of common stock of First BanCorp. As of that date, a total of 3,124,518 of First
BanCorp's authorized but unissued shares of common stock were reserved for
issuance in connection with FirstBank's 1997 Stock Option Plan. The common stock
is listed on the New York Stock Exchange under the symbol "FBP." The holders of
the common stock are entitled to one vote for each share held of record on all
matters submitted to a vote of stockholders. Each share of common stock has the
same relative rights as, and is identical in all respects with, each other share
of common stock. There are no cumulative voting rights for the election of
directors.

In the event of the liquidation, dissolution or distribution of assets of
First BanCorp, the holders of common stock are entitled to share ratably in the
assets legally available for distribution to common stockholders. The common
stock has no redemption, conversion or sinking fund privileges.

Subject to any dividend preferences which may be established with respect
to any series of preferred stock, the holders of common stock are entitled to
receive, pro rata, dividends when and as declared by the board of directors out
of funds legally available for the payment of dividends.

Holders of common stock do not have preemptive rights to subscribe for or
purchase additional securities of First BanCorp. The Bank of New York is the
transfer agent and registrar for the common stock.

PREFERRED STOCK

First BanCorp's Certificate of Incorporation authorizes the board of
directors to approve the issuance of shares of preferred stock with such
designations and preferences as the board of directors may from time to time
determine. The board of directors is authorized, generally without stockholder
approval, to fix the designation, voting powers, preferences, limitations or
restrictions, and relative rights of any series of First BanCorp's preferred
stock at the time of issuance. As of the date of this prospectus, none of the
authorized shares of First BanCorp's preferred stock is issued and outstanding.

RESTRICTIONS OF ACQUISITION OF FIRST BANCORP

Certain provisions of First BanCorp's Certificate of Incorporation and
By-Laws may have the effect of discouraging unilateral tender offers or other
attempts to take over and acquire First BanCorp. The following discussion is a
general summary of those provisions of First BanCorp's Certificate of
Incorporation and By-Laws which may be deemed to have a potential
"anti-takeover" effect. Reference should be made in each case to First BanCorp's
Certificate of Incorporation and By-Laws, copies of which are incorporated by
reference as exhibits to the registration statement of which this prospectus is
a part.

Classified Board of Directors. First BanCorp's Certificate of
Incorporation contains provisions relating to the board of directors and
provides, among other things, that the board of directors shall be divided into
three classes as nearly equal in number as possible with the term of office of
each class expiring each year. Said provision provides a greater likelihood of
continuity, knowledge and experience on the board of directors because at any
one time, one third of the board of directors would be in its second year of
service and one third of the board of directors would be in its third year of
service. In addition, said provision would cause any person who may be
attempting to take over First BanCorp to have to deal with the current board of
directors

18
<PAGE> 21

because such person, even if it owns a majority of the shares, would be unable
to change the majority of the board of directors in any one annual meeting of
shareholders.

Vacancies on the Board of Directors. First BanCorp's Certificate of
Incorporation provides that any vacancy occurring in the board of directors,
including an increase in the number of authorized directors, may be filled by
the affirmative vote of a majority of the directors then in office, though less
than a quorum of the board of directors, and a director elected to fill a
vacancy shall serve for the remainder of the term to which the director has been
elected and until such director's successor shall have been elected and
qualified.

Removal of Directors. Both the Certificate of Incorporation and By-Laws of
First BanCorp provide that at a meeting of stockholders called expressly for the
removal of directors, any director may be removed for cause by a vote of 75% of
the shares then entitled to vote at an election of directors. Notwithstanding
the above, directors may be removed if required by regulatory authorities or by
law.

Approval of Business Combinations. The Certificate of Incorporation of
First BanCorp requires in cases of certain business combinations, such as
mergers, consolidations, reclassifications of securities and sale or other
transfer of all or substantially all of the assets of First BanCorp, that such
transactions must be approved by the affirmative vote of holders of not less
than 75% of the total number of outstanding shares of First BanCorp, subject to
certain limited exceptions described in Article Tenth of the Certificate of
Incorporation of First BanCorp.

Amendment of Certificate of Incorporation. Amendments to First BanCorp's
Certificate of Incorporation require the approval of not less than a majority of
the total number of outstanding shares of capital stock of First BanCorp and, if
such amendment concerns the article of the Certificate of Incorporation which
governs the removal of directors and the approval of certain business
combinations, the approval of not less than 75% of the total number of
outstanding shares of capital stock of First BanCorp.

Special Meetings of Stockholders. First BanCorp's By-Laws provide that
special meetings of stockholders, for any purpose or purposes, may be called by
the President or by the board of directors.

19
<PAGE> 22

TAXATION

GENERAL

In the opinion of Fiddler Gonzalez & Rodriguez, LLP, counsel to First
BanCorp, the following discussion summarizes the material Puerto Rico and United
States tax considerations relating to the purchase, ownership, sale, exchange
and redemption of Series A Preferred Stock.

This discussion does not intend to describe all of the tax considerations
that may be relevant to a particular investor in light of that person's
particular circumstances and does not describe any tax consequences arising
under the laws of any state, locality or taxing jurisdiction other than Puerto
Rico and the United States. This discussion is based on the tax laws of Puerto
Rico and the United States as in effect on the date of this prospectus, and
regulations, administrative pronouncements and judicial decisions available on
or before such date and now in effect. All of the foregoing are subject to
change, which change could apply retroactively and could affect the continued
validity of this summary.

YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE APPLICATION TO YOUR
PARTICULAR SITUATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE
APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX.

PUERTO RICO TAXATION

The following discussion does not intend to cover all aspects of Puerto
Rico taxation that may be relevant to a purchaser of Series A Preferred Stock in
light of the purchaser's particular circumstances, or to purchasers subject to
special rules of taxation, such as life insurance companies, special
partnerships, Subchapter N corporations, registered investment companies, and
certain pension trusts.

For purposes of the discussion below, the term "Puerto Rico corporation" is
used to refer to a corporation organized under the laws of Puerto Rico and the
term "foreign corporation" is used to refer to a corporation organized under the
laws of a jurisdiction other than Puerto Rico.

OWNERSHIP AND DISPOSITION OF SERIES A PREFERRED STOCK

Taxation of Dividends.

General. Distributions of cash or other property made by First BanCorp on
the Series A Preferred Stock will be treated as dividends to the extent that
First BanCorp has current or accumulated earnings and profits. To the extent
that a distribution exceeds First BanCorp's current and accumulated earnings and
profits, the distribution will be applied against and reduce the adjusted tax
basis of the Series A Preferred Stock in the hands of the holder. The excess of
any distribution of this type over the adjusted tax basis will be treated as
gain on the sale or exchange of the Series A Preferred Stock and will be subject
to income tax as described below.

The following discussion regarding the income taxation of dividends on
Series A Preferred Stock received by individuals not residents of Puerto Rico
and foreign corporations not engaged in a trade or business in Puerto Rico
assumes that dividends will constitute income from sources within Puerto Rico.
Generally, a dividend paid by a Puerto Rico corporation will constitute income
from sources within Puerto Rico unless the corporation has derived less than 20%
of its gross income from sources within Puerto Rico for the three taxable years
preceding the year of the declaration of the dividend or for such part of such
period as the corporation has been in existence. First BanCorp has represented
that it has derived more than 20% of its gross income from Puerto Rico sources
on an annual basis since its incorporation in 1998.

Individual Residents of Puerto Rico and Puerto Rico Corporations. In
general, individuals who are residents of Puerto Rico will be subject to a
special 10% income tax (the "10% Special Tax") on dividends paid on the Series A
Preferred Stock. This tax is generally required to be withheld by First BanCorp.
An individual may elect for this withholding not to apply, and in that case he
or she will be required to include the amount of the dividend as ordinary income
and will be subject to income tax thereon at the normal income tax rates, which
may be up to 33%.

20
<PAGE> 23

Puerto Rico corporations will be subject to income tax on dividends paid on
the Series A Preferred Stock at the normal corporate income tax rates, subject
to the dividend received deduction discussed below. In the case of a Puerto Rico
corporation, no withholding will be imposed on dividends paid on the Series A
Preferred Stock. The dividend received deduction will be equal to 85% of the
dividend received, but the deduction may not exceed 85% of the corporation's net
taxable income. Based on the applicable maximum Puerto Rico normal corporate
income tax rate of 39%, the maximum effective income tax rate on these dividends
will be 5.85% after accounting for the dividend received deduction.

As a practical matter, dividends on the Series A Preferred Stock held in
street name through foreign financial institutions or other securities
intermediaries not engaged in trade or business in Puerto Rico will generally be
subject to a separate 10% withholding tax imposed on foreign corporations. See
"-- Foreign Corporations." Accordingly, individuals resident of Puerto Rico who
desire to file an election out of the applicable 10% Special Tax and applicable
withholding tax should have their shares of Series A Preferred Stock issued and
registered in their own names. Similarly, Puerto Rico corporations that own
shares of Series A Preferred Stock and wish to avoid the withholding imposed on
foreign corporations should have their shares issued and registered in their own
names in order to ensure that no withholding is made on dividends.

United States Citizens Not Residents of Puerto Rico. Dividends paid on the
Series A Preferred Stock to a United States citizen who is not a resident of
Puerto Rico will be subject to the 10% Special Tax which will be withheld by
First BanCorp. These individuals may elect for the withholding not to apply, and
in that case he or she will be required to include the amount of the dividend as
ordinary income and will be subject to income tax thereon at the normal income
tax rates, which may be up to 33%. Notwithstanding this election, a separate 10%
withholding tax will be required on the amount of the dividend unless the
individual timely files with First BanCorp a withholding exemption certificate
to the effect that the individual's gross income from sources within Puerto Rico
during the taxable year does not exceed $1,300 if single or $3,000 if married.
Withholding exemption certificates will only be accepted by First BanCorp or its
agent from individuals who have the shares of Series A Preferred Stock
registered in their names. Individuals who hold shares of Series A Preferred
Stock in street name will not be eligible to file with First BanCorp or its
agent withholding exemption certificates.

Individuals Not Citizens of the United States and Not Residents of Puerto
Rico. Dividends paid on the Series A Preferred Stock to any individual who is
not a citizen of the United States and who is not a resident of Puerto Rico will
generally be subject to a 10% tax which will be withheld at source by First
BanCorp.

Foreign Corporations. The income taxation of dividends paid on the Series
A Preferred Stock to a foreign corporation will depend on whether or not the
corporation is engaged in a trade or business in Puerto Rico.

A foreign corporation that is engaged in a trade or business in Puerto Rico
will be subject to the normal corporate income tax rates applicable to Puerto
Rico corporations on their net income that is effectively connected with the
trade or business in Puerto Rico. This income will include net income from
sources within Puerto Rico and certain items of net income from sources outside
Puerto Rico that are effectively connected with the trade or business in Puerto
Rico. Net income from sources within Puerto Rico will include dividends on the
Series A Preferred Stock. A foreign corporation that is engaged in a trade or
business in Puerto Rico will be entitled to claim the 85% dividend received
deduction discussed above in connection with Puerto Rico corporations.

In general, foreign corporations that are engaged in a trade or business in
Puerto Rico are also subject to a 10% branch profits tax. However, dividends on
the Series A Preferred Stock received by these corporations will be excluded
from the computation of the branch profits tax liability of these corporations.

A foreign corporation that is not engaged in a trade or business in Puerto
Rico will be subject to a 10% withholding tax on dividends received on the
Series A Preferred Stock.

Partnerships. Partnerships are generally taxed in the same manner as
corporations. Accordingly, the preceding discussion with respect to corporations
is equally applicable in the case of most partnerships.

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<PAGE> 24

Taxation of Gains upon Sales or Exchanges Other Than Redemptions.

General. The sale or exchange of Series A Preferred Stock will give rise
to gain or loss equal to the difference between the amount realized on the sale
or exchange and the tax basis of the Series A Preferred Stock in the hands of
the holder. Any gain or loss that is required to be recognized will be a capital
gain or loss if the Series A Preferred Stock is held as a capital asset by the
holder and will be a long-term capital gain or loss if the stockholder's holding
period of the Series A Preferred Stock exceeds six months.

Individual Residents of Puerto Rico and Puerto Rico Corporations. Gain on
the sale or exchange of Series A Preferred Stock by an individual resident of
Puerto Rico or a Puerto Rico corporation will generally be required to be
recognized as gross income and will be subject to income tax. If the stockholder
is an individual and the gain is a long-term capital gain, the gain will be
taxable at a maximum rate of 20%.

If the stockholder is a Puerto Rico corporation and the gain is a long-term
capital gain, the gain will qualify for an alternative tax rate of 25%.

United States Citizens Not Residents of Puerto Rico. A United States
citizen who is not a resident of Puerto Rico will not be subject to Puerto Rico
income tax on the sale or exchange of Series A Preferred Stock if the gain
resulting therefrom constitutes income from sources outside Puerto Rico.
Generally, gain on the sale or exchange of Series A Preferred Stock will be
considered to be income from sources outside Puerto Rico if all rights, title
and interest in or to the Series A Preferred Stock are transferred outside
Puerto Rico, and if the delivery or surrender of the instruments that evidence
the Series A Preferred Stock is made to an office of a paying or exchange agent
located outside Puerto Rico. If the gain resulting from the sale or exchange
constitutes income from sources within Puerto Rico, an amount equal to 20% of
the payments received will be withheld at the source; and if the gain
constitutes a long-term capital gain, it will be subject to a tax at a maximum
rate of 20%. The amount of tax withheld at source will be creditable against the
shareholder's Puerto Rico income tax liability.

Individuals Not Citizens of the United States and Not Residents of Puerto
Rico. An individual who is not a citizen of the United States and who is not a
resident of Puerto Rico will be subject to the rules described above under
"-- United States Citizens Not Residents of Puerto Rico." However, if the gain
resulting from the sale or exchange of Series A Preferred Stock constitutes
income from sources within Puerto Rico, an amount equal to 25% of the payments
received will be withheld at the source; provided, that if the gain resulting
from the sale or exchange represents a capital gain from sources within Puerto
Rico, the individual will generally be subject to tax on this gain at a fixed
rate of 29%. The amount of tax withheld at source will be creditable against the
shareholder's Puerto Rico income tax liability.

Foreign Corporations. A foreign corporation that is engaged in a trade or
business in Puerto Rico will generally be subject to Puerto Rico corporate
income tax on any gain realized on the sale or exchange of Series A Preferred
Stock if the gain is (1) from sources within Puerto Rico or (2) from sources
outside Puerto Rico and effectively connected with a trade or business in Puerto
Rico. Any such gain will qualify for an alternative tax of 25% if it qualifies
as a long-term capital gain.

In general, foreign corporations that are engaged in a trade or business in
Puerto Rico will also be subject to a 10% branch profits tax. In the computation
of this tax, any gain realized by these corporations on the sale or exchange of
Series A Preferred Stock and that is subject to Puerto Rico income tax will be
taken into account. However, a deduction will be allowed in the computation for
any income tax paid on the gain realized on the sale or exchange.

A foreign corporation that is not engaged in a trade or business in Puerto
Rico will generally be subject to a corporate income tax rate of 29% on any
capital gain realized on the sale or exchange of Series A Preferred Stock if the
gain is from sources within Puerto Rico. Gain on the sale or exchange of Series
A Preferred Stock will generally not be considered to be from sources within
Puerto Rico if all rights, title and interest in or to the Series A Preferred
Stock are transferred outside Puerto Rico, and if the delivery or surrender of
the instruments that evidence the Series A Preferred Stock is made to an office
of a paying or exchange agent located outside Puerto Rico. If the gain resulting
from the sale or exchange constitutes income from sources within Puerto Rico, an
amount equal to 25% of the payments received will be withheld at the source and
be
22
<PAGE> 25

creditable against the shareholder's Puerto Rico income tax liability. In the
case of such foreign corporation, no income tax will be imposed if the gain
constitutes income from sources outside Puerto Rico.

Partnerships. Partnerships are generally taxed as corporations.
Accordingly, the discussion with respect to corporations is equally applicable
to most partnerships.

Taxation of Redemptions.

A redemption of shares of the Series A Preferred Stock for cash will be
treated as a distribution taxable as a dividend to the extent of First BanCorp's
current or accumulated earnings and profits if the redemption is essentially
equivalent to a dividend. Under regulations issued by the Department of the
Treasury of Puerto Rico (1) a redemption of stock that completely terminates a
shareholder's interest in a corporation does not constitute a dividend, and (2)
certain pro rata redemptions among all the shareholders will be treated as a
dividend. In situations not described by these regulations, the Department of
the Treasury of Puerto Rico will generally follow principles applied by United
States courts and the United States Internal Revenue Service under the United
States Internal Revenue Code, as amended to date (the "Code"), in determining
whether a distribution is essentially equivalent to a dividend. The Department
of the Treasury of Puerto Rico, however, is not bound by such principles and is
free to adopt a different rule.

If the redemption of the Series A Preferred Stock is not treated as a
dividend, it will generally generate gain or loss that will be measured as
provided above under "-- Taxation of Gains upon Sales or Exchanges Other Than
Redemptions" for a sale or exchange of Series A Preferred Stock. Gain on the
redemption of Series A Preferred Stock will generally be recognized and will be
subject to income tax. If the stockholder of the Series A Preferred Stock is an
individual resident of Puerto Rico and the gain is a long-term capital gain, the
gain will be taxable at a maximum rate of 20%. If the stockholder is a Puerto
Rico corporation and the gain is a long-term capital gain, the gain will qualify
for the alternative tax rate of 25%.

If the stockholder of the Series A Preferred Stock is an individual who is
not a resident of Puerto Rico or a foreign corporation or foreign partnership,
any gain realized by the holder on the redemption of the Series A Preferred
Stock that is not taxable as a dividend may be subject to Puerto Rico income tax
if the gain constitutes income from sources within Puerto Rico or is effectively
connected with a trade or business conducted by the holder in Puerto Rico. The
Puerto Rico income tax law does not provide clear rules in this area. As a
result thereof, these prospective shareholders should be aware that gain
realized from a redemption of the Series A Preferred Stock may be treated as
income from sources within Puerto Rico or income effectively connected with a
trade or business in Puerto Rico and subject to income tax accordingly.

ESTATE AND GIFT TAXATION

The transfer of Series A Preferred Stock by inheritance or gift by an
individual who is a resident of Puerto Rico at the time of his or her death or
at the time of the gift will not be subject to estate and gift tax if the
individual is a citizen of the United States who acquired his or her citizenship
solely by reason of birth or residence in Puerto Rico. Other individuals should
consult their own tax advisors in order to determine the appropriate treatment
for Puerto Rico estate and gift tax purposes of the transfer of the Series A
Preferred Stock by death or gift.

MUNICIPAL LICENSE TAXATION

Individuals and corporations that are not engaged in a trade or business in
Puerto Rico will not be subject to municipal license tax on dividends paid on
the Series A Preferred Stock or on any gain realized on the sale, exchange or
redemption of the Series A Preferred Stock.

A corporation or partnership, Puerto Rico or foreign, that is engaged in a
trade or business in Puerto Rico will generally be subject to municipal license
tax on dividends paid on the Series A Preferred Stock and on the gain realized
on the sale, exchange or redemption of the Series A Preferred Stock if the
dividends or gain are attributable to that trade or business. The municipal
license tax is imposed on the volume of business of the

23
<PAGE> 26

taxpayer, and the tax rates range from a maximum of 1.5% for financial
businesses to a maximum of 0.5% for other businesses.

PROPERTY TAXATION

The Series A Preferred Stock will not be subject to property tax.

UNITED STATES TAXATION

The following discussion is limited to the United States federal tax
consequences of the ownership and disposition of the Series A Preferred Stock by
U.S. Holders, as defined below, and corporations organized under the laws of
Puerto Rico ("PR Corporations"). This discussion is based on the Code, existing
and proposed regulations of the U.S. Department of the Treasury promulgated
thereunder, administrative pronouncements and judicial decisions, all of which
are subject to change, even with retroactive effect. This discussion deals only
with Series A Preferred Stock held by initial purchasers as capital assets
within the meaning of Section 1221 of the Code. It does not discuss all of the
tax consequences that may be relevant to a purchaser in light of that person's
particular circumstances or to purchasers subject to special rules, such as
entities that are taxed under the Code as partnerships, Subchapter S
corporations, life insurance companies, tax exempt entities, dealers in
securities, financial institutions, or to persons whose functional currency is
not the U.S. dollar.

As used herein, the term "U.S. Holder" means a beneficial owner of Series A
Preferred Stock that does not own directly, constructively or by attribution,
10% or more of the voting stock of the First BanCorp and is, for United States
federal income tax purposes:

- a citizen or resident of the United States,

- a corporation organized under the laws of a state of the United States,

- a corporation organized under the laws of the United States or of any
political subdivision thereof, or

- an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.

The term "U.S. Holder" does not include individual Puerto Rico residents
who are not citizens or residents of the United States nor does it include PR
Corporations. As used herein, the term "Puerto Rico U.S. Holder" means an
individual U.S. Holder who is a bona fide resident of Puerto Rico during the
entire taxable year.

OWNERSHIP AND DISPOSITION OF SERIES A PREFERRED STOCK

Taxation of Dividends.

General. Dividends on the Series A Preferred Stock will constitute gross
income from sources outside the United States if less than 25% of the gross
income from all sources of First BanCorp for the three-year period ending with
the close of its taxable year preceding the declaration of such dividends (or
for such part of such period as First BanCorp has been in existence) was
effectively connected with a trade or business within the United States. Since
its incorporation in 1998, First BanCorp has not been engaged in a trade or
business in the United States, and therefore less than 25% of First BanCorp's
gross income has been effectively connected with the conduct of a trade or
business in the United States. Additionally, First BanCorp expects that in the
future less than 25% of its gross income will be effectively connected with the
conduct of a trade or business within the United States. Accordingly, dividends
on the Series A Preferred Stock distributed by First BanCorp will constitute
gross income from sources outside the United States so long as First BanCorp
continues to meet such gross income test.

U.S. Holders other than Puerto Rico U.S. Holders. Subject to the
discussion under "-- Passive Foreign Investment Company Rules" below,
distributions made with respect to the Series A Preferred Stock, including the
amount of any Puerto Rico taxes withheld on the distribution, will be includable
in the gross

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<PAGE> 27

income of a U.S. Holder, other than a Puerto Rico U.S. Holder, as foreign source
gross income to the extent the distributions are paid out of current or
accumulated earnings and profits of First BanCorp as determined for United
States federal income tax purposes. These dividends will not be eligible for the
dividends received deduction generally allowed to U.S. Holders that are
corporations. To the extent, if any, that the amount of any distribution by
First BanCorp exceeds its current and accumulated earnings and profits as
determined under United States federal income tax principles, the excess will be
treated first as a tax-free return of the U.S. Holder's tax basis in the Series
A Preferred Stock and thereafter as capital gain.

Subject to certain conditions and limitations contained in the Code, the
Puerto Rico income tax imposed on dividends distributed by First BanCorp in
accordance with Puerto Rico law will be eligible for credit against the U.S.
Holder's United States federal income tax liability. See "Puerto Rico
Taxation -- Ownership and Disposition of Series A Preferred Stock -- Taxation of
Dividends" above. For purposes of calculating a U.S. Holder's United States
foreign tax credit limitation, dividends distributed by First BanCorp will
generally constitute foreign source "passive income" or, in the case of certain
U.S. Holders (those predominantly engaged in the active conduct of a banking,
financing or similar business), foreign source "financial services income."

Puerto Rico U.S. Holders. In general, and subject to the discussion under
"-- Passive Foreign Investment Company Rules" below, distributions of dividends
made by First BanCorp on the Series A Preferred Stock to a Puerto Rico U.S.
Holder will constitute gross income from sources within Puerto Rico, will not be
includable in the stockholder's gross income and will be exempt from United
States federal income taxation. In addition, for United States federal income
tax purposes, no deduction or credit will be allowed that is allocable to or
chargeable against amounts so excluded from the Puerto Rico U.S. Holder's gross
income.

PR Corporations. In general, distributions of dividends made by First
BanCorp on the Series A Preferred Stock to a PR Corporation will not, in the
hands of the PR Corporation, be subject to United States income tax if the
dividends are not effectively connected with a United States trade or business
of the PR Corporation. The Code provides special rules for PR Corporations that
are "Controlled Foreign Corporations," "Personal Holding Companies," "Foreign
Personal Holding Companies," or "Passive Foreign Investment Companies."

Taxation of Capital Gains upon Sales or Exchanges Including Redemptions.

U.S. Holders other than Puerto Rico U.S. Holders. A U.S. Holder, other
than a Puerto Rico U.S. Holder, will recognize gain or loss on the sale or other
disposition of Series A Preferred Stock, including redemptions treated as sales
or exchanges of the Series A Preferred Stock under Section 302 of the Code, in
an amount equal to the difference between the U.S. Holder's adjusted tax basis
in the Series A Preferred Stock and the amount realized on the sale or other
disposition. Subject to the discussion under "-- Passive Foreign Investment
Company Rules" below, the gain or loss will be a capital gain or loss. U.S.
Holders should consult their own tax advisors concerning the treatment of
capital gains and losses. Redemptions of the Series A Preferred Stock that are
not treated as sales or exchanges under Section 302 of the Code will generally
be subject to income tax under the Code as dividends.

Gain recognized by a U.S. Holder on the sale or other disposition of Series
A Preferred Stock generally will be treated as United States source income.

Puerto Rico U.S. Holders. In general, and subject to the discussion under
"-- Passive Foreign Investment Company Rules" below, gain from the sale or
exchange of the Series A Preferred Stock, including redemptions treated as sales
or exchanges of the Series A Preferred Stock under Section 302 of the Code, by a
Puerto Rico U.S. Holder that is a resident of Puerto Rico for purposes of
Section 865 of the Code (1) will constitute income from sources within Puerto
Rico, (2) will not be includable in the stockholder's gross income and (3) will
be exempt from United States federal income taxation. Also, no deduction or
credit will be allowed that is allocable to or chargeable against amounts so
excluded from the Puerto Rico U.S. Holder's gross income. Redemptions of the
Series A Preferred Stock that are not treated as sales or exchanges under
Section 302 of the Code will generally be subject to income tax under the Code
as dividends.
25
<PAGE> 28

PR Corporations. In general, any gain derived by a PR Corporation from the
sale or exchange of the Series A Preferred Stock will not, in the hands of the
PR Corporation, be subject to United States income tax if the gain is not
effectively connected with a United States trade or business of the PR
Corporation. The Code provides special rules for PR Corporations that are
"Controlled Foreign Corporations," "Personal Holding Companies," "Foreign
Personal Holding Companies," or "Passive Foreign Investment Companies."
Redemptions of the Series A Preferred Stock that are not treated as sales or
exchanges under Section 302 of the Code will generally be subject to income tax
under the Code as dividends.

Backup Withholding. Certain noncorporate U.S. Holders may be subject to
backup withholding at the rate of 31% on dividends paid or the proceeds of a
sale, exchange or redemption of Series A Preferred Stock. Generally, backup
withholding applies only when the taxpayer fails to furnish or certify a proper
taxpayer identification number or when the payor is notified by the IRS that the
taxpayer has failed to report payments of interest and dividends properly. U.S.
Holders should consult their own tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining any applicable
exemption.

PASSIVE FOREIGN INVESTMENT COMPANY RULES

The Code provides special rules for distributions received by U.S. Holders
on stock of a Passive Foreign Investment Company ("PFIC") as well as amounts
received from the sale or other disposition of PFIC stock. For purposes of these
rules pledges are considered dispositions.

Based upon certain proposed Treasury Regulations under the PFIC provisions
of the Code (the "Proposed Regulations"), First BanCorp believes that it has not
been a PFIC for any of its prior taxable years and expects to conduct its
affairs in a manner so that it will not meet the criteria to be considered a
PFIC in the foreseeable future. If, contrary to First BanCorp's expectation, the
Series A Preferred Stock were considered to be shares of a PFIC for any fiscal
year, a U.S. Holder would generally be subject to special rules, regardless of
whether First BanCorp remains a PFIC, with respect to (1) any "excess
distribution" by First BanCorp to the U.S. Holder and (2) any gain realized on
the sale, pledge or other disposition of Series A Preferred Stock. An "excess
distribution" is, generally, any distributions received by the U.S. Holder on
the Series A Preferred Stock in a taxable year that are greater than 125% of the
average annual distributions received by the U.S. Holder in the three preceding
taxable years, or the U.S. Holder's holding period for the Series A Preferred
Stock if shorter.

Under these rules, (1) the excess distribution or gain would be allocated
ratably over the U.S. Holder's holding period for the Series A Preferred Stock,
(2) the amount allocated to the current taxable year and any taxable year prior
to the first taxable year in which First BanCorp is a PFIC would be taxed as
ordinary income, and (3) the amount allocated to each of the other taxable years
would be subject to tax at the highest rate of tax in effect for the applicable
class of taxpayer for that year, and an interest charge for the deemed deferral
benefit would be imposed on the resulting tax attributable to each such year.

As an alternative to these rules, if First BanCorp were a PFIC and
effective for taxable years of U.S. Holders beginning after December 31, 1997,
U.S. Holders may, in certain circumstances, elect a mark-to-market treatment
with respect to their Series A Preferred Stock, provided that the Series A
Preferred Stock will constitute "marketable stock" for purposes of these rules.

In general, the Proposed Regulations provide that Puerto Rico U.S. Holders
would be subject to the rule described in (3) above only to the extent that any
excess distribution or gain is allocated to a taxable year during which the
individual held the Series A Preferred Stock and was not a bona fide resident of
Puerto Rico during the entire taxable year or, in certain cases, a portion
thereof.

Under current law, if First BanCorp is a PFIC in any year, a U.S. Holder
who beneficially owns Series A Preferred Stock during that year must make an
annual return on IRS Form 8621 that describes any distributions received from
First BanCorp and any gain realized on the disposition of Series A Preferred
Stock.

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<PAGE> 29

ESTATE AND GIFT TAXATION

The transfer of Series A Preferred Stock by inheritance or gift by an
individual who is a resident of Puerto Rico at the time of his or her death or
at the time of the gift will not be subject to U.S. federal estate and gift tax
if the individual is a citizen of the United States who acquired his or her
citizenship solely by reason of birth or residence in Puerto Rico. Other
individuals should consult their own tax advisors in order to determine the
appropriate treatment for U.S. federal estate and gift tax purposes of the
transfer of the Series A Preferred Stock by death or gift.

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<PAGE> 30

UNDERWRITING

Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), First BanCorp has agreed to sell to each of the
underwriters named below, and each of the underwriters severally has agreed to
purchase from First BanCorp, the aggregate number of shares of Series A
Preferred Stock set forth opposite its name below.

<TABLE>
<CAPTION>
NUMBERS OF
UNDERWRITERS SHARES(1)
- ------------ ----------
<S> <C>
PaineWebber Incorporated of Puerto Rico..................... 2,362,000
Keefe, Bruyette & Woods, Inc................................ 50,000
Popular Securities, Inc..................................... 360,000
Prudential Securities....................................... 108,000
Salomon Smith Barney, Inc................................... 360,000
Santander Securities Corporation of Puerto Rico............. 360,000
---------
Total............................................. 3,600,000
</TABLE>

- ---------------------

(1) Assumes no exercise of the underwriters' over-allotment option.

Under the terms and conditions of the Underwriting Agreement, First BanCorp
is obligated to sell, and the underwriters are obligated to purchase, all of the
shares of Series A Preferred Stock shown in the table above, if any of the
shares of Series A Preferred Stock are purchased.

The underwriters propose to offer the shares of Series A Preferred Stock to
the public initially at the public offering price set forth on the cover page of
this prospectus and to certain selected dealers at the public offering price
less a concession not to exceed $0.375 per share. After the offering to the
public, the public offering price and the concession to selected dealers may be
changed by the underwriters.

First BanCorp has granted the underwriters an option exercisable for 30
days from the date of this prospectus, to purchase up to 540,000 additional
shares of Series A Preferred Stock to cover over-allotments, if any, at the
initial public offering price, less the underwriting discounts, as shown on the
cover page of this prospectus. If the underwriters exercise this option, then
each of the underwriters will have a firm commitment, subject to certain
conditions contained in the Underwriting Agreement, to purchase a number of
option shares proportionate to the underwriter's initial commitment as indicated
in the table above. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the shares of Series A
Preferred Stock offered hereby.

The following table shows the per share and total underwriting discount and
commissions to be paid to the underwriters by First BanCorp as well as the
proceeds received by First BanCorp from the offering, before deducting expenses.
The amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase up to an additional 540,000 shares.

<TABLE>
<CAPTION>
TOTAL,
ASSUMING
FULL EXERCISE OF
OVER-ALLOTMENT
PER SHARE TOTAL OPTION
--------- ------------ ----------------
<S> <C> <C> <C>
Public Offering Price................................... $ 25.00 $ 90,000,000 $103,500,000
Underwriting Discount................................... 0.7875 2,835,000 3,260,250
Proceeds to First BanCorp............................... 24.2125 87,165,000 100,239,750
</TABLE>

Until the distribution of the Series A Preferred Stock is completed, rules
of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for and purchase the Series A Preferred Stock. As an
exception to these rules, the underwriters may engage in certain transactions
that stabilize the price of the Series A Preferred Stock. These transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Series A Preferred Stock.

If the underwriters create a short position in the Series A Preferred Stock
in connection with the offering, i.e., if the underwriters sell more shares of
Series A Preferred Stock than are set forth on the cover page of this

28
<PAGE> 31

prospectus, they may reduce that short position by purchasing shares of Series A
Preferred Stock in the open market. The underwriters may also elect to reduce
any short position by purchasing all or part of the over-allotment option
described above.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of these purchases.

First BanCorp estimates that the total expenses of this offering, excluding
underwriting discounts and commissions, will be $300,000.

In connection with this offering, First BanCorp has agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments that the underwriters may
be required to make in respect thereof.

The New York Stock Exchange has approved the Series A Preferred Stock for
listing under the symbol "FBPPrA," subject to official notice of issuance.
Trading of the Series A Preferred Stock on the New York Stock Exchange is
expected to commence not later than 30 days after the initial delivery thereof.
The underwriters have advised First BanCorp that they intend to make a market in
the Series A Preferred Stock prior to the commencement of trading. The
underwriters will have no obligation to make a market in the Series A Preferred
Stock and may cease market making activities, if commenced, at any time.

Several of the underwriters have from time to time been customers of,
engaged in transactions with, or performed services for, First BanCorp and its
subsidiaries in the ordinary course of business. The underwriters may continue
to do so in the future.

DIRECTED SHARE PROGRAM

At the request of First BanCorp, the underwriters have reserved for sale,
at the initial offering price, shares of the Series A Preferred Stock that will
be offered by this Prospectus to certain directors, officers and employees of
First BanCorp. Such persons are expected to purchase, in the aggregate, not more
than 5% of the total shares of the Series A Preferred Stock offered hereby. All
purchasers of such reserved shares will agree in writing not to sell, transfer,
assign, pledge or hypothecate such shares for three months from the date of
purchase. The number of shares of the Series A Preferred Stock available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares that are not so purchased will be
offered by the underwriters to the general public on the same basis as the other
shares offered hereby.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Securities and Exchange Commission allows First BanCorp to "incorporate
by reference" the information it files with them, which means First BanCorp can
disclose important information to you by referring to these documents. The
information included in the following documents is incorporated by reference and
is considered a part of this prospectus. The most recent information that First
BanCorp files with the SEC automatically updates and supersedes previously filed
information. First BanCorp has previously filed the following document with the
SEC and is incorporating it by reference into this prospectus:

- Annual Report on Form 10-K for the year ended December 31, 1998;

- Current Report on Form 8-K dated April 14, 1999.

- Current Report on Form 8-K dated April 28, 1999.

First BanCorp also incorporates by reference all documents filed by it
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, after the date of this prospectus and until all the shares being offered
by this prospectus are sold.

First BanCorp will provide, at no cost, to each person, including a
beneficial owner, to whom this prospectus is delivered, upon written or oral
request, a copy of any or all of the documents incorporated herein

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by reference, other than exhibits to these documents unless such exhibits are
specifically incorporated by reference into such documents. Requests for copies
should be directed to First BanCorp, Attention: Antonio R. Escriba-Oliver,
Secretary, 1519 Ponce de Leon Avenue, San Juan, Puerto Rico, 00908; telephone
number: (787) 729-8200.

AVAILABLE INFORMATION

First BanCorp files annual, quarterly and current reports, proxy statements
and other information with the SEC. First BanCorp has also filed with the SEC a
Registration Statement on Form S-3, to register the Series A Preferred Stock
being offered in this prospectus. This prospectus, which forms part of the
Registration Statement, does not contain all of the information included in the
Registration Statement. For further information about First BanCorp and the
shares of Series A Preferred Stock offered in this prospectus, you should refer
to the Registration Statement and its exhibits.

You may read and copy any document filed by First BanCorp with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the Public Reference Room. First BanCorp files its SEC materials
electronically with the SEC, so you can also review First BanCorp's filings by
accessing the web site maintained by the SEC at http://www.sec.gov. This site
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC. You can also obtain
more information about First BanCorp by visiting our web site at
http://www.1bankpr.com.

LEGAL MATTERS

The validity of the shares of Series A Preferred Stock offered hereby will
be passed upon for First BanCorp by Fiddler Gonzalez & Rodriguez, LLP, San Juan,
Puerto Rico. As of April 10, 1999, attorneys working at Fiddler Gonzalez &
Rodriguez, LLP owned, in the aggregate, approximately 9,750 shares of common
stock of First BanCorp. Certain legal matters will be passed upon for the
underwriters by Axtmayer Adsuar Muniz & Goyco, P.S.C., San Juan, Puerto Rico.

EXPERTS

The consolidated financial statements of First BanCorp as of December 31,
1998 and 1997, and for each of the three years in the period ended December 31,
1998, incorporated by reference into this prospectus, have been so incorporated
in reliance on the report of PricewaterhouseCoopers, LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

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3,600,000 SHARES

(FIRST BANCORP CORPORATION LOGO)

7.125% NONCUMULATIVE PERPETUAL MONTHLY INCOME

PREFERRED STOCK, SERIES A

PRICE TO PUBLIC: $25 PER SHARE

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PROSPECTUS
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PAINEWEBBER INCORPORATED
OF PUERTO RICO

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KEEFE, BRUYETTE & WOODS, INC.
POPULAR SECURITIES
PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY INC.
SANTANDER SECURITIES

April 29, 1999

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