<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 8, 2000.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FIRST BANCORP.
(Exact name of Registrant as specified in its charter)
------------------------
<TABLE>
<S> <C>
COMMONWEALTH OF PUERTO RICO 66-0561882
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
</TABLE>
1519 PONCE DE LEON AVENUE
SAN JUAN, PUERTO RICO 00908-0146
(787) 729-8200
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------------
ANGEL ALVAREZ-PEREZ
CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER
FIRST BANCORP
1519 PONCE DE LEON AVENUE
SAN JUAN, PUERTO RICO 00908-0146
(787) 729-8200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
ANTONIO R. SIFRE JOSE A. AXTMAYER
AURELIO EMANUELLI-FREESE AXTMAYER CARLO BENITEZ & QUINONES, P.S.C.
FIDDLER GONZALEZ & RODRIGUEZ, LLP AMERICAN AIRLINES BUILDING
FIFTH FLOOR, BBV TOWER PENTHOUSE
254 MUNOZ RIVERA AVENUE 1509 LOPEZ LANDRON STREET
SAN JUAN, PUERTO RICO 00918 SAN JUAN, PUERTO RICO 00911
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM
TITLE OF SHARES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Noncumulative Perpetual Monthly Income Preferred Stock,
Series B, $1.00 par value per share....................... $60,000,000 $15,840
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER , 2000
PROSPECTUS
2,100,000 SHARES
(FIRST BANCORP CORPORATION LOGO)
% NONCUMULATIVE PERPETUAL MONTHLY INCOME
PREFERRED STOCK, SERIES B
PRICE TO PUBLIC: $25 PER SHARE
First BanCorp. is offering to the public 2,100,000 shares of its %
Noncumulative Perpetual Monthly Income Preferred Stock, Series B. The Series B
Preferred Stock has the following characteristics:
- Annual dividends of $ 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 , 2005.
- No mandatory redemption or stated maturity.
There is currently no public market for the Series B Preferred Stock. First
BanCorp has filed an application with the New York Stock Exchange to list the
Series B Preferred Stock under the symbol "FBPPrB". Trading of the Series B
Preferred Stock on the New York Stock Exchange is expected to commence not later
than 30 days after the initial delivery of the Series B Preferred Stock.
INVESTING IN THESE SECURITIES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public Offering Price................................ $ 25.00 $52,500,000
Underwriting Discounts............................... $ 0.7875 $ 1,653,750
Proceeds to First BanCorp............................ $24.2125 $50,846,250
</TABLE>
First BanCorp has also granted the underwriters an over-allotment option to
purchase up to 300,000 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
[OTHER UNDERWRITERS TO BE ADDED -- PENDING
CONFIRMATION OF OTHER PARTICIPANTS]
THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY....................
RISK FACTORS..........................
Dividends Will Not Be Paid Unless
Declared by the Board of
Directors........................
Missed Dividends Never Have to Be
Paid.............................
Banking Regulations May Restrict
First BanCorp's Ability to Pay
Dividends........................
Payment of Dividends May Be
Restricted by FirstBank's Ability
to Pay Dividends to First
BanCorp..........................
Increases in Interest Rates May
Negatively Affect First BanCorp's
Profitability....................
Increases in Provisions for Loan
Losses Would Adversely Affect
First BanCorp's Profitability and
Financial Condition..............
First BanCorp Is Exposed To Greater
Risk Because Its Business Is
Concentrated in Puerto Rico......
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FORWARD-LOOKING STATEMENTS............
USE OF PROCEEDS.......................
CAPITALIZATION........................
SELECTED FINANCIAL DATA...............
SUMMARY OF CERTAIN TERMS OF THE SERIES
B PREFERRED STOCK...................
DESCRIPTION OF CAPITAL STOCK..........
TAXATION..............................
UNDERWRITING..........................
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE...........................
WHERE YOU CAN FIND MORE INFORMATION...
LEGAL MATTERS.........................
EXPERTS...............................
</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.
2
<PAGE> 4
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
7.
Unless otherwise stated, all information in this prospectus assumes that
the underwriters will not exercise their over-allotment option to purchase any
of the 300,000 shares subject to that option.
THE COMPANY
First BanCorp. is a bank holding company that has elected to be treated as
a financial holding company and subject to regulation 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. As of June 30, 2000, First BanCorp had consolidated
total assets of approximately $5.280 billion, consolidated total deposits of
approximately $2.987 billion and consolidated shareholders' equity of
approximately $311 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.
3
<PAGE> 5
THE OFFERING
Series B Preferred Stock
Offered..................... 2,100,000 shares; 2,400,000 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
B Preferred Stock.
Dividends..................... Dividends will be paid on the last day of each
month beginning on , 2000. 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 % of the liquidation preference per
share.
No Voting Rights.............. You will not have any voting rights, except as
described on page 16 of this prospectus.
Redemption at First BanCorp's
Option...................... Series B Preferred Stock may be redeemed
beginning on , 2005 at First
BanCorp's option. Redemption prices are
discussed on page 14 of this prospectus.
No Maturity Date or Mandatory
Redemption.................. The Series B Preferred Stock does not have a
maturity date. First BanCorp is not required to
provide for the retirement of the Series B
Preferred Stock by mandatory redemption or
sinking fund payments.
Rank.......................... The Series B Preferred Stock ranks senior to
the common stock of First BanCorp and on an
equal basis to First BanCorp's outstanding
preferred stock for purposes of dividend rights
and the distribution of assets upon
liquidation. First BanCorp may not issue
preferred stock ranking senior to the Series B
Preferred Stock without the approval of holders
of at least two-thirds of the Series B
Preferred Stock.
New York Stock Exchange
Listing..................... First BanCorp has filed an application with the
New York Stock Exchange to list the Series B
Preferred Stock under the symbol "FBPPrB."
Trading of the Series B Preferred Stock on the
New York Stock Exchange is expected to commence
not later than 30 days after the initial
delivery of the Series B Preferred Stock.
4
<PAGE> 6
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.
The return on average assets ratio is computed by dividing net income by
average total assets for the period. The return on average common equity ratio
is computed by dividing net income less preferred stock dividends by average
common stockholders' equity for the period. Both ratios have been computed using
daily averages. These ratios for the six months ended June 30, 2000 and 1999,
have been presented on an annualized basis.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income... $ 96,658 $ 90,938 $ 185,733 $ 166,168 $ 154,731 $ 143,496 $ 111,650
Provision for loan
losses.............. $ 23,178 $ 26,750 $ 47,961 $ 76,000 $ 55,676 $ 31,582 $ 30,894
Gain on sale of
investments and
trading............. $ 5,377 $ 1,383 $ 1,383 $ 30,192 $ 12,133 $ 3,502 $ 22,679
Other income-excluding
gain on sale of
investments and
trading............. $ 17,855 $ 14,311 $ 31,493 $ 28,048 $ 27,733 $ 26,113 $ 25,589
Net income............ $ 32,828 $ 29,535 $ 62,075 $ 51,812 $ 47,528 $ 37,634 $ 49,101
Cash dividends paid... $ 9,169 $ 6,315 $ 14,658 $ 8,871 $ 7,197 $ 6,140 $ 2,486
BALANCE SHEET DATA:
Total assets.......... $5,280,614 $4,272,543 $4,721,568 $4,017,352 $3,327,436 $2,822,147 $2,432,816
Stockholder's
equity.............. $ 311,044 $ 318,304 $ 294,902 $ 270,368 $ 236,379 $ 191,142 $ 171,202
SELECTED RATIOS:
Return on Average
Assets.............. 1.34% 1.49% 1.49% 1.48% 1.63% 1.48% 2.22%
Return on Average
Common Equity....... 29.91% 22.64% 24.68% 20.54% 22.30% 20.49% 33.19%
</TABLE>
5
<PAGE> 7
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 and
dividends on its preferred stock. First BanCorp issued its outstanding Series A
Preferred Stock in April 30, 1999, and had no outstanding preferred stock prior
to such date. The ratios of earnings to combined fixed charges and preferred
stock dividends were computed by dividing earnings by combined fixed charges and
expenses of its debt and preferred stock dividends.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------
JUNE 30, 2000 1999 1998 1997 1996 1995
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
Including Interest on Deposits............... 1.29x 1.34x 1.36x 1.43x 1.44x 1.62x
Excluding Interest on Deposits............... 1.64x 1.66x 1.65x 1.95x 2.17x 2.58x
</TABLE>
For purposes of computing the consolidated ratios of earnings to combined
fixed charges and preferred stock dividends, 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. The term "preferred stock
dividends" is the amount of pre-tax earnings that is required to pay dividends
on First BanCorp's outstanding preferred stock. Ratios are presented both
including and excluding interest on deposits.
6
<PAGE> 8
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 B 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.
First BanCorp. had net income from operations of $32.8 million for the six
months ended June 30, 2000.
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 principal source of
cash flow to pay dividends consists of dividends from FirstBank because First
BanCorp is a financial holding company with limited operations of its own. For
example, FirstBank's ability to pay dividends to First BanCorp may be restricted
under certain circumstances by Puerto Rico and Federal banking laws and
regulations.
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. In addition, 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 June 30, 2000, FirstBank could have paid up to $104.5
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; and
- the value of holdings of securities.
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-
7
<PAGE> 9
earning assets and the interest paid by First BanCorp on its interest-bearing
liabilities. 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 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.
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 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.
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.
USE OF PROCEEDS
The net proceeds to First BanCorp after deducting expenses from the sale of
shares of Series B Preferred Stock are estimated at approximately $50,686,250.
If the underwriters' over-allotment option is exercised in full, the net
proceeds are estimated at $57,950,000. 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;
8
<PAGE> 10
- 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
except for the definitive agreement with First Virgin Islands, F.S.B., which is
a federal savings bank located in the U.S. Virgin Islands with assets of $55
million as of December 31, 1999, pursuant to which First Virgin Islands, F.S.B.
would be merged into FirstBank.
9
<PAGE> 11
CAPITALIZATION
The following table shows the unaudited indebtedness and capitalization of
First BanCorp, on an actual basis and as adjusted to give effect to the issuance
of the shares of Series B Preferred Stock offered by this prospectus. In
addition to the indebtedness reflected below, First BanCorp had total deposits
of $2.987 billion at June 30, 2000. 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............... $ 43,500 $ 43,500
Federal Funds purchased and securities sold under
agreements to repurchase............................... 1,726,122 1,726,122
Other short term borrowings............................... 12,131 12,131
---------- ----------
Total short-term borrowings....................... $1,781,753 $1,781,753
========== ==========
Long-term borrowings
Notes payable............................................. $ 55,500 $ 55,500
Subordinated notes........................................ 92,856 92,856
---------- ----------
Total long-term borrowings........................ $ 148,356 $ 148,356
========== ==========
Stockholders' equity
Preferred stock, $1 par value, 50,000,000 shares
authorized; 3,600,000 shares of Series A Preferred
Stock outstanding and 2,100,000 shares of Series B
Preferred Stock, as adjusted........................... $ 90,000 $ 142,500
Common stock, $1.00 par value, 250,000,000 shares
authorized; issued 29,612,552 and outstanding
26,889,452............................................. 29,613 29,613
Treasury stock (2,723,100 shares at par).................. (2,723) (2,723)
Additional paid-in capital................................ 19,278 17,464
Capital reserve........................................... 40,000 40,000
Legal surplus............................................. 126,792 126,792
Retained earnings......................................... 63,120 63, 120
Accumulated other comprehensive income -- unrealized loss
on securities available for sale net of tax............ (55,036) (55,036)
---------- ----------
Total stockholders' equity........................ $ 311,044 $ 361,730
========== ==========
</TABLE>
SELECTED FINANCIAL DATA
The following table shows certain selected consolidated financial and
operating data of First BanCorp on a historical basis as of and for the
six-month periods ended June 30, 2000 and 1999, and for each of the five years
in the period ended December 31, 1999. This information should be read together
with First BanCorp's Consolidated Financial Statements and the related notes
incorporated by reference in this prospectus. Financial information for the
six-month periods ended June 30, 2000 and 1999, is derived from unaudited
financial statements, which, in the opinion of management, include all
adjustments necessary for a fair presentation of the results for those periods.
These adjustments consist only of normal recurring accruals. Results for the
six-month period ended June 30, 2000 are not necessarily indicative of results
for a full year. First BanCorp has made certain reclassifications to data for
years prior to 1999 to conform to 1999 classifications. Certain amounts shown on
a per share basis were recalculated, when applicable, to retroactively consider
the effect of common stock splits.
10
<PAGE> 12
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.
The return on average assets ratio is computed by dividing net income by
average assets for the period. The return on average common equity ratio is
computed by dividing net income less preferred stock dividends by average common
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 return on average assets and average common equity ratios for the
six-month periods ended June 30, 2000 and 1999, have been presented on an
annualized basis. 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>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONDENSED INCOME STATEMENTS:
Total interest income................ $ 217,628 $ 174,398 $ 369,063 $ 321,298 $ 285,160 $ 256,523 $ 208,488
Total interest expense............... 120,970 83,460 183,330 155,130 130,429 113,027 96,838
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income.................. 96,658 90,938 185,733 166,168 154,731 143,496 111,650
Provision for loan losses............ 23,178 26,749 47,960 76,000 55,676 31,582 30,894
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses.................... 73,480 64,189 137,773 90,168 99,055 111,914 80,756
Gain on sale of investments and
trading............................ 5,377 1,383 1,369 30,192 12,133 3,501 22,679
Other income -- excluding gains on
sale of investments and trading.... 17,855 14,311 31,493 28,048 27,733 26,113 25,589
Other operating expenses............. 56,269 47,898 101,272 91,798 83,268 82,498 65,628
Unusual item -- SAIF assessment...... -- -- -- -- -- 9,115 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income tax provision... 40,443 31,985 69,363 56,610 55,653 49,915 63,396
Provision for income tax............. 7,615 2,450 7,288 4,798 8,125 12,281 14,295
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................... $ 32,828 $ 29,535 $ 62,075 $ 51,812 $ 47,528 $ 37,634 $ 49,101
========== ========== ========== ========== ========== ========== ==========
PER COMMON SHARE RESULTS DILUTED:
Net income per common share.......... $ 1.08 $ 0.97 $ 1.98 $ 1.74 $ 1.58 $ 1.22 $ 1.58
Cash dividends declared.............. $ 0.22 $ 0.18 $ 0.36 $ 0.30 $ 0.24 $ 0.20 $ 0.08
Average shares outstanding........... 27,315 29,201 28,941 29,586 30,036 30,794 30,592
Average shares diluted............... 27,502 29,476 29,199 29,858 30,204 30,952 31,118
BALANCE SHEET DATA:
Loans and loans held for sale (net of
unearned interest)................. $3,063,953 $2,347,249 $2,745,368 $2,120,054 $1,959,301 $1,896,074 $1,556,606
Allowance for possible loan losses... 74,100 70,762 71,784 67,854 57,712 55,254 55,009
Investments.......................... 2,033,651 1,781,087 1,811,164 1,800,489 1,276,900 830,980 785,747
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets................. 5,280,614 4,272,543 4,721,568 4,017,352 3,327,436 2,822,147 2,432,816
Deposits............................. 2,987,292 2,212,299 2,565,422 1,775,045 1,594,635 1,703,926 1,518,367
Borrowings........................... 1,930,109 1,696,227 1,803,729 1,930,488 1,461,582 889,669 700,610
Total capital................ 311,044 318,304 294,902 270,368 236,379 191,142 171,202
Book value per common share, end of
period............................. 8.22 7.84 7.30 9.17 7.93 6.32 5.51
REGULATORY CAPITAL RATIOS:
Total capital to risk weighted
assets............................. 14.48% 19.75% 16.16% 17.39% 17.26% 15.25% 16.17%
Tier 1 capital to risk weighted
assets............................. 10.37% 14.57% 11.64% 11.55% 11.07% 9.32% 9.93%
Tier 1 capital to average assets..... 6.58% 8.87% 7.47% 6.59% 7.44% 6.65% 6.82%
SELECTED FINANCIAL RATIOS:
Net income to average total assets... 1.34% 1.49% 1.49% 1.48% 1.63% 1.48% 2.22%
Interest rate spread................. 3.72% 4.54% 4.29% 4.76% 5.30% 5.46% 5.07%
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income to average
earning assets..................... 4.27% 5.08% 4.85% 5.27% 5.83% 6.03% 5.59%
Net yield on average earning
assets............................. 9.29% 9.43% 9.29% 9.83% 10.45% 10.63% 10.12%
Net cost on average interest bearing
liabilities........................ 5.57% 4.89% 5.00% 5.07% 5.15% 5.17% 5.05%
Net income to average common
equity............................. 29.91% 22.64% 24.68% 20.54% 22.30% 20.49% 33.19%
Average total equity to average total
assets............................. 5.87% 7.14% 7.07% 7.22% 7.32% 7.23% 6.68%
Dividend payout ratio................ 20.13% 18.43% 17.96% 17.12% 15.14% 16.32% 5.06%
Efficiency ratio..................... 48.89% 45.48% 46.62% 46.46% 45.45% 47.66% 47.71%
</TABLE>
12
<PAGE> 14
SUMMARY OF CERTAIN TERMS OF THE SERIES B PREFERRED STOCK
The following summary contains a description of the material terms of the
Series B 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 B 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 B Preferred Stock will be entitled to receive cash
dividends in the amount of $ per share each year, which is equivalent
to % of the liquidation preference of $25.00 per share. First BanCorp is
not required to declare or pay dividends on the Series B 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 B 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 , 2000. Payment of dividends will be made
to the holders of record of the Series B Preferred Stock as they appear on the
books of First BanCorp on the fifteenth day of the month for which the dividends
are payable. In the case of the dividend payable on , 2000, this
dividend will cover the period from the date of issuance of the Series B
Preferred Stock to , 2000. 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 B Preferred Stock will be noncumulative. If the
board of directors does not declare a dividend for any monthly dividend period
on the Series B Preferred Stock, then the holders of Series B Preferred Stock
will not have a right to receive a dividend for that monthly dividend period,
whether or not dividends on the Series B 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 $ 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 B
Preferred Stock at their addresses appearing on the register for the Series B
Preferred Stock.
The terms of the Series B 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 B
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 B 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 B 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
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<PAGE> 15
redemption price of any shares of Series B 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 B 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 B Preferred Stock as to the payment of dividends and as to
the distribution of assets.
If First BanCorp is unable to pay in full the dividends on the Series B
Preferred Stock and on any other shares of stock of equal rank as to the payment
of dividends with the Series B Preferred Stock, all dividends declared upon the
Series B Preferred Stock and any such other shares of stock will be declared pro
rata. In this event, each share of Series B 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 B 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," and for a
discussion on certain potential regulatory limitations on First BanCorp's
ability to pay dividends, see "Risk Factors -- Banking Regulations May Restrict
First BanCorp's Ability to Pay Dividends."
NO CONVERSION OR EXCHANGE RIGHTS
The Series B 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 B Preferred Stock
prior to , 2005. On and after that date, First BanCorp may redeem the
Series B 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 , 2005 are shown below.
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
2005........................................................ $25.50
2006........................................................ 25.25
2007 and thereafter......................................... 25.00
</TABLE>
In the event that First BanCorp elects to redeem less than all of the
outstanding shares of the Series B 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 B 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 B 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 B
Preferred Stock will specify the number of shares of Series B 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
14
<PAGE> 16
of Series B 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 B
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 B 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.
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 B 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 B
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 B 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 B
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 B 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 B
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
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.
15
<PAGE> 17
LIQUIDATION PREFERENCE
Upon any liquidation, dissolution, or winding up of First BanCorp, the
record holders of shares of Series B 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 B
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 B Preferred Stock and any other shares of stock of equal
rank upon liquidation are not paid in full, the holders of the Series B
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 B 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.
VOTING RIGHTS
Holders of the Series B 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 under this caption titled "Voting Rights."
If First BanCorp does not declare and pay dividends in full on the Series B
Preferred Stock for eighteen monthly dividend periods, whether consecutive or
not, the holders of outstanding shares of the Series B 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 B 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 B 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 B 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 B 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
16
<PAGE> 18
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 amendment, alteration or repeal of the terms of the Series B Preferred
Stock contained in First BanCorp's Certificate of Incorporation, which includes
the Certificate of Designation of the Series B Preferred Stock, which would
materially and adversely affect the powers, preferences, or special rights of
the Series B Preferred Stock will require the approval of holders of at least
two thirds of the outstanding aggregate liquidation preference of the Series B
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 B Preferred
Stock. The authorization or issuance of any shares of First BanCorp ranking
senior to the Series B Preferred Stock as to dividend rights or rights on
liquidation or similar events, will be considered a change requiring the consent
of the Series B 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 B Preferred Stock, will not be
considered a change requiring the consent of the holders of the Series B
Preferred Stock. The approval of the holders is not required if at or prior to
the act with respect to such vote would otherwise be required all outstanding
shares of Series B Preferred Stock shall have been redeemed or called for
redemption and sufficient funds shall have been deposited in trust to effect
such redemption.
No vote of the holders of the Series B Preferred Stock will be required for
First BanCorp to redeem or purchase and cancel the Series B Preferred Stock in
accordance with the Certificate of Incorporation of First BanCorp or the
Certificate of Designation for the Series B Preferred Stock.
First BanCorp will cause a notice of any meeting at which holders of the
Series B Preferred Stock are entitled to vote to be mailed to each record holder
of the Series B 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.
Certain Regulatory Issues Related to Voting Rights
Under regulations adopted by the Federal Reserve Board, if the holders of
shares of Series B Preferred Stock become entitled to vote for the election of
directors as described above, the Series B 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 B 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 B
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 B
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
17
<PAGE> 19
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 B 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 B
Preferred Stock;
- on a parity with First BanCorp's outstanding 7.125% Noncumulative Monthly
Income Preferred Stock, Series A, and 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 B 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 B 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 B Preferred
Stock, except with the consent of the holders of at least two-thirds of the
outstanding aggregate liquidation preference of the Series B 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 B Preferred Stock. Holders of the
Series B Preferred Stock may contact The Bank of New York, at the following
address: The Bank of New York, 101 Barclay Street 22 W, New York, New York,
telephone number (212) 495-1784.
The transfer of a share of Series B Preferred Stock may be registered upon
the surrender of the certificate evidencing the share of Series B 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 B 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
18
<PAGE> 20
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 B Preferred Stock after the share has been called for redemption.
REPLACEMENT OF LOST CERTIFICATES
If any certificate for a share of Series B 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 B 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 B Preferred Stock will have no right to require First
BanCorp to redeem or repurchase any shares of Series B Preferred Stock.
NO MANDATORY REDEMPTION OR SINKING FUNDING OBLIGATION
The shares of Series B 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 B Preferred
Stock from holders thereof from time to time, by tender, in privately negotiated
transactions or otherwise.
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 June 30, 2000, there were 26,889,452 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
19
<PAGE> 21
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, First BanCorp's 7.125% Noncumulative
Perpetual Monthly Income Preferred Stock, Series A (the "Series A Preferred
Stock") described below is the only series of outstanding preferred stock
designated by First BanCorp.
SERIES A PREFERRED STOCK
Dividend Rights and Limitations. The holders of shares of Series A
Preferred Stock are entitled to receive noncumulative cash dividends when, as
and if declared by the Board of Directors, at the annual rate of 7.125% of the
$25 liquidation preference payable monthly. The holders of the Series A
Preferred Stock are entitled to receive such dividends prior to any payment of
dividends or distribution of assets to holders of common stock and to any other
class of capital stock ranking junior to the Series A Preferred Stock as to the
payment of dividends.
Liquidation Rights. Upon the liquidation, dissolution or winding up of
First BanCorp, whether voluntary or involuntary, the holders of the Series A
Preferred Stock are entitled to receive out of the assets of First BanCorp an
amount in cash equal to $25 per share plus accrued and unpaid dividends thereon
for the current monthly dividend period to the date of distribution. This
distribution must be made before any payment may be made to the holders of
common stock or any other securities of First BanCorp ranking junior to the
Series B Preferred Stock as to the distribution of assets upon liquidation. No
distribution of this type or payment on account of liquidation, dissolution or
winding up of First BanCorp may be made to the holders of the shares of any
class or series of stock ranking on a parity with the Series A Preferred Stock
as to the distribution of assets upon liquidation, unless the holders of the
Series A Preferred Stock receive like amounts ratably in accordance with the
full distributive amounts which they and the holders of parity stock are
respectively entitled to receive upon this preferential distribution.
20
<PAGE> 22
After the payment to the holders of those Series A Preferred Stock of the
full preferential amounts provided for above, the holders of the Series A
Preferred Stock will have no right or claim to any of the remaining assets of
First BanCorp.
Conversion Rights. The shares of Series A Preferred Stock are not
convertible into or exchangeable for any other securities of First BanCorp.
Redemption. This Series A Preferred Stock is subject to redemption in
whole or in part, at the option of First BanCorp with the consent of the Federal
Reserve Board on or after April 30, 2004 and on or prior to April 19, 2005, at a
price of $25.50 per share and after the period at redemption prices declining to
a price of $25 per share on or after April 30, 2006. There is no mandatory
redemption or sinking fund obligation with respect to the Series A Preferred
Stock.
Voting Rights. The holders of shares of the Series A Preferred Stock are
not entitled to any voting rights except (1) if First BanCorp does not pay
dividends in full on the Series A Preferred Stock for 18 monthly dividends
periods (whether consecutive or not), (2) as required by law or (3) in
connection with any changes of the terms or rights of the Series A Preferred
Stock.
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 might 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 will provide 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 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.
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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.
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 B 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 B 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.
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OWNERSHIP AND DISPOSITION OF SERIES B PREFERRED STOCK
Taxation of Dividends
General. Distributions of cash or other property made by First BanCorp on
the Series B 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 B 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 B Preferred Stock and will be subject
to income tax as described below.
The following discussion regarding the income taxation of dividends on
Series B 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 B
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%.
Puerto Rico corporations will be subject to income tax on dividends paid on
the Series B 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 B
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 B 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 B Preferred Stock issued and
registered in their own names. Similarly, Puerto Rico corporations that own
shares of Series B 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 B 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
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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 B Preferred Stock
registered in their names. Individuals who hold shares of Series B 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 B 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
B 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 B 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 B 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 B 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.
Taxation of Gains upon Sales or Exchanges Other Than Redemptions
General. The sale or exchange of Series B 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 B 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 B 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 B Preferred Stock exceeds six months.
Individual Residents of Puerto Rico and Puerto Rico Corporations. Gain on
the sale or exchange of Series B 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%.
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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 B Preferred Stock if the gain
resulting therefrom constitutes income from sources outside Puerto Rico.
Generally, gain on the sale or exchange of Series B Preferred Stock will be
considered to be income from sources outside Puerto Rico if all rights, title
and interest in or to the Series B Preferred Stock are transferred outside
Puerto Rico, and if the delivery or surrender of the instruments that evidence
the Series B 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 B 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 B 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 B 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 B Preferred Stock if the
gain is from sources within Puerto Rico. Gain on the sale or exchange of Series
B 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 B Preferred
Stock are transferred outside Puerto Rico, and if the delivery or surrender of
the instruments that evidence the Series B 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 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.
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Taxation of Redemptions
A redemption of shares of the Series B 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 of 1986, 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 B 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 B Preferred Stock. Gain on the
redemption of Series B Preferred Stock will generally be recognized and will be
subject to income tax. If the stockholder of the Series B 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 B 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 B 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 B Preferred Stock may be treated as
income from sources within Puerto Rico or effectively connected income and
subject to income tax accordingly.
ESTATE AND GIFT TAXATION
The transfer of Series B 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 B
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 B Preferred Stock or on any gain realized on the sale, exchange or
redemption of the Series B 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 B Preferred Stock and on the gain realized
on the sale, exchange or redemption of the Series B Preferred Stock if the
dividends or gain are attributable to that trade or business. The municipal
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license tax is imposed on the volume of business of the 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 B 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 B 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 B 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 B
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,
- an estate the income of which is subject to United States federal income
taxation regardless of its source, or
- a trust if a court within the United States is able to exercise primary
supervision over its administration and one or more United States persons
(as such term is defined in the Code) have authority to control all
substantial decisions of the trust.
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 B PREFERRED STOCK
Taxation of Dividends
General. Dividends on the Series B 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 the taxable year preceding the deduction 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, less than
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25% of First BanCorp's gross income has been effectively connected in the
conduct of a trade or business in the United States, and First BanCorp expects
to satisfy such gross income test on an ongoing basis. Accordingly, dividends on
the Series B 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 B Preferred Stock, including the
amount of any Puerto Rico taxes withheld on the distribution, will be includable
in the gross 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
B 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 a deduction or a credit
against the U.S. Holder's United States federal income tax liability. See
"Puerto Rico Taxation -- Ownership and Disposition of Series B 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 B 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 B 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.
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 B Preferred Stock, including redemptions treated as sales
or exchanges of the Series B 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 B 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 B Preferred Stock that are
not
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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
B 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 B Preferred Stock, including redemptions treated as sales
or exchanges of the Series B Preferred Stock under Section 302 of the Code, by a
Puerto Rico U.S. Holder that is a nonresident under Section 865(a)(2) 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 B 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.
PR Corporations. In general, any gain derived by a PR Corporation from the
sale or exchange of the Series B 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 B 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 B 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 B 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 B Preferred Stock. An "excess
distribution" is, generally, any distributions received by the U.S. Holder on
the Series B 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 B Preferred
Stock if shorter.
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Under these rules, (1) the excess distribution or gain would be allocated
ratably over the U.S. Holder's holding period for the Series B 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 B Preferred Stock, provided that the Series B
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 B 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 B 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 B Preferred
Stock.
ESTATE AND GIFT TAXATION
The transfer of Series B 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 B Preferred Stock by death or gift.
30
<PAGE> 32
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 B
Preferred Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBERS OF
UNDERWRITERS SHARES(1)
------------ ----------
<S> <C>
PaineWebber Incorporated of Puerto Rico.....................
[Other Underwriters To be Added]............................
---------
2,100,000
=========
</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 B Preferred Stock shown in the table above, if any of the
shares of Series B Preferred Stock are purchased.
The underwriters propose to offer the shares of Series B 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 $ 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 300,000 additional
shares of Series B 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 B
Preferred Stock offered hereby.
The following table shows the per share and total underwriting discounts
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 300,000 shares.
<TABLE>
<CAPTION>
TOTAL,
ASSUMING
FULL EXERCISE OF
OVER-ALLOTMENT
PER SHARE TOTAL OPTION
--------- ----------- ----------------
<S> <C> <C> <C>
Public Offering Price.................................... $ 25.00 $52,500,000 $60,000,000
Underwriting Discount.................................... 0.7875 1,653,750 1,890,000
Proceeds to First BanCorp................................ 24.2125 50,846,250 58,110,000
</TABLE>
Until the distribution of the Series B 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 B Preferred Stock. As an
exception to these rules, the underwriters may engage in certain transactions
that stabilize the price of the Series B Preferred Stock. These transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Series B Preferred Stock.
31
<PAGE> 33
If the underwriters create a short position in the Series B Preferred Stock
in connection with the offering, i.e., if the underwriters sell more shares of
Series B Preferred Stock than are set forth on the cover page of this
prospectus, they may reduce that short position by purchasing shares of Series B
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 $160,000.
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.
First BanCorp has applied to have the Series B Preferred Stock listed for
trading on the New York Stock Exchange under the symbol "FBPPrB". Trading of the
Series B Preferred Stock is expected to commence not later than 30 days after
initial delivery of the Series B Preferred Stock. First BanCorp has been advised
by the underwriters that they intend to make a market for the Series B Preferred
Stock prior to the commencement of trading. The underwriters will have no
obligation to make a market in the Series B Preferred Stock, however, 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. In addition, PaineWebber Incorporated of Puerto Rico and
its parent company PaineWebber Inc. have entered into an agreement with
FirstBank pursuant to which PaineWebber Incorporated of Puerto Rico and
PaineWebber Inc. are leasing certain space at eleven branches of FirstBank in
Puerto Rico for the purpose of offering and selling securities and other
investment products. The agreement contemplates the payment by PaineWebber
Incorporated of Puerto Rico and PaineWebber Inc. to FirstBank of a monthly
rental payment principally based on a percentage of the commissions earned by
them from the sale of the securities and investment products at FirstBank's
eleven branches.
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 documents with the
SEC and is incorporating them by reference into this prospectus:
- Annual Report on Form 10-K for the year ended December 31, 1999;
- Current Report on Form 10-Q for the quarter ended March 31, 2000; and
- Current Report on Form 10-Q for the quarter ended June 30, 2000.
32
<PAGE> 34
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 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.
WHERE YOU CAN FIND MORE 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 B 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 B 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 B Preferred Stock offered hereby will
be passed upon for First BanCorp by Fiddler Gonzalez & Rodriguez, LLP, San Juan,
Puerto Rico. As of , 2000, attorneys working at Fiddler Gonzalez &
Rodriguez, LLP owned, in the aggregate, approximately shares of
common stock of First BanCorp. Certain legal matters will be passed upon for the
underwriters by Axtmayer Carlo Benitez & Quinones, P.S.C., San Juan, Puerto
Rico.
EXPERTS
The consolidated financial statements of First BanCorp as of December 31,
1999 and 1998, and for each of the three years in the period ended December 31,
1999, 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.
33
<PAGE> 35
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2,100,000 SHARES
[FIRST BANCORP LOGO)
% NONCUMULATIVE
PERPETUAL MONTHLY INCOME
PREFERRED STOCK, SERIES B
PRICE TO PUBLIC: $25 PER SHARE
------------------------
PROSPECTUS
------------------------
PAINEWEBBER INCORPORATED
OF PUERTO RICO
------------------------
[OTHER UNDERWRITERS TO BE ADDED]
, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 36
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than commissions
and fees of the underwriters. All of the amounts shown are estimates except the
Securities and Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
Securities and Exchange Commission registration fee......... $ 15,840
NASD filing fee............................................. 6,500
Printing and engraving expenses............................. 20,000
New York Stock Exchange listing fee......................... 32,460
Accounting fees and expenses................................ 30,000
Legal fees and expenses..................................... 40,000
Miscellaneous expenses...................................... 15,200
--------
Total............................................. $160,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Article 4.09 of the Puerto Rico General Corporation Law authorizes
Puerto Rico corporations to indemnify their officers and directors against
liabilities arising out of pending or threatened actions, suits or proceedings
to which they are or may be made parties by reason of being directors or
officers. Such rights of indemnification are not exclusive of any other rights
to which such officers or directors may be entitled under any by-law, agreement,
vote of stockholders or otherwise. The Certificate of Incorporation provides
that First BanCorp shall indemnify its directors, officers and employees to the
fullest extent permitted by law. First BanCorp also maintains directors' and
officers' liability insurance on behalf of its directors and officers.
(b) Article Ninth, Section 1 of the Certificate of Incorporation provides
that First BanCorp shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of First BanCorp) by reason of the fact
that he is or was a director, officer, employee or agent of First BanCorp or is
or was serving at the request of First BanCorp as a director, officer, employee
or agent of another corporation or enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of First BanCorp, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Article Ninth, Section 2 of the Certificate of Incorporation provides that
First BanCorp shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of First BanCorp to procure a judgment in its favor by reason of
the fact that such person acted in any of the capacities set forth above,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar standards
set forth in the preceding paragraph, except that no indemnification may be made
in respect of any claim, issue or matter as to which such person shall have been
II-1
<PAGE> 37
adjudged to be liable to First BanCorp unless and only to the extent that the
court in which such action or suit was brought shall determine that despite the
adjudication or liability, such person is fairly and reasonably entitled to be
indemnified for such expenses which the court shall deem proper.
Article Ninth, Section 3 of the Certificate of Incorporation provides that
to the extent a director, officer, employee or agent of First BanCorp has been
successful on the merits or otherwise in the defense of any action, suit or
proceeding referred to in Sections 1 and 2 of Article Ninth of the Certificate
of Incorporation or in the defense of any claim, issue, or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith. Section 4 of Article Ninth
of the Certificate of Incorporation provides that any indemnification by First
BanCorp under Sections 1 and 2 of Article Ninth of the Certificate of
Incorporation shall be made only as authorized in the specific case upon a
determination that indemnification of such person is proper under the
circumstances because such person has met the applicable standard of conduct set
forth therein. Such determination shall be made (a) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to such
action, (b) if such a quorum is not obtainable, or, even if obtainable a quorum
of disinterested directors so directs, or (c) by the stockholders.
Section 5 of Article Ninth of the Certificate of Incorporation provides
that First BanCorp shall pay expenses incurred in defending a civil or criminal
action, suit or proceeding in advance of the final disposition of such action,
suit or proceeding. First BanCorp must make such advanced payments if it
receives an undertaking by or on behalf of any person covered by Section 1 of
Article Ninth of the Certificate of Incorporation to repay such amounts, if it
is ultimately determined that he is not entitled to be indemnified by First
BanCorp as authorized in Article Ninth of the Certificate of Incorporation.
Sections 6 and 7 of Article Ninth of the Certificate of Incorporation
provide that indemnification provided for by Sections 1 and 2 of Article Ninth
of the Certificate of Incorporation shall not be deemed exclusive of any other
rights to which the indemnified party may be entitled; and that First BanCorp
may purchase and maintain insurance on behalf of a director, officer, employee
or agent of First BanCorp against any liability asserted against such person or
incurred by such person in any such capacity or arising out of such person's
status as such whether or not First BanCorp would have the power to indemnify
such person against such liabilities under such Sections 1 and 2 of Article
Ninth of the Certificate of Incorporation.
(c) The resolutions of the Board of Directors adopted on August 29, 2000
approving the issuance and sale of the Series B Preferred Stock provide that, to
the extent permitted by First BanCorp's Certificate of Incorporation and
applicable law, First BanCorp (i) will indemnify and hold harmless the directors
and executive officers and their attorney-in-facts who signed this Registration
Statement against any losses, claims, damages or liabilities they may become
subject under the Securities Act of 1933, the Securities Exchange Act of 1934,
any state securities or insurance laws or regulations of any other jurisdiction,
insofar as such losses, claims, damages or liabilities arise in connection with
this Registration Statement or any other registration statement filed in
connection with the Series B Preferred Stock and (ii) shall reimburse each such
person for any legal or other expenses reasonably incurred by him in connection
with investigating or defending any such action or claims.
II-2
<PAGE> 38
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C> <C>
1 -- Form of Underwriting Agreement*
4(a) -- Form of Series B Preferred Stock Certificate.*
4(b) -- Certificate of Designation designating the terms of Series B
Preferred Stock*
4(c) -- Certificate of Incorporation of First BanCorp.**
4(b) -- By-Laws of First BanCorp.**
5 -- Opinion regarding legality and consent of Fiddler Gonzalez &
Rodriguez, LLP*
8 -- Opinion regarding tax matters of Fiddler Gonzalez &
Rodriguez, LLP*
12 -- Statement re: Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends*
23.1 -- Consent of PricewaterhouseCoopers LLP.*
23.2 -- Consent of Fiddler Gonzalez & Rodriguez, LLP (included in
the opinion of counsel filed as Exhibit 5 hereto).*
24 -- Powers of Attorney (included on Pages II-5 to II-6).*
</TABLE>
---------------
* Filed herewith.
** Incorporated by reference to the Form S-4 Registration Statement (Reg. No.
333-08640), filed by First BanCorp. with the Commission on April 15, 1998, as
amended.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b) (1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of First
BanCorp pursuant to the provision described under Item 15 above, or otherwise,
First BanCorp has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for
II-3
<PAGE> 39
indemnification against such liabilities (other than the payment by First
BanCorp of expenses incurred or paid by a director, officer, or controlling
person of First BanCorp in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, First BanCorp will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-4
<PAGE> 40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in San Juan, Puerto Rico, on the 8th day of September, 2000.
FIRST BANCORP.
By: /s/ ANGEL ALVAREZ PEREZ
------------------------------------
Angel Alvarez Perez
Chairman of the Board, Chief
Executive
Officer and President
POWERS OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Angel Alvarez Perez and Annie Astor de Carbonell and each of them, each with
full power to act without the other, his or her true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the same offering as this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each of said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ANGEL ALVAREZ PEREZ Chairman, Chief Executive September 8, 2000
--------------------------------------------------- Officer and President
Angel Alvarez Perez
/s/ ANNIE ASTOR DE CARBONELL Senior Executive Vice September 8, 2000
--------------------------------------------------- President, Chief Financial
Annie Astor de Carbonell Officer and Director
/s/ LAURA VILLARINO TUR Senior Vice President and September 8, 2000
--------------------------------------------------- Comptroller
Laura Villarino Tur
/s/ JOSE JULIAN ALVAREZ Director September 8, 2000
---------------------------------------------------
Jose Julian Alvarez
</TABLE>
II-5
<PAGE> 41
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RAFAEL BOUET SOUFRRONT Director September 8, 2000
---------------------------------------------------
Rafael Bouet Soufrront
/s/ FRANCISCO D. FERNANDEZ Director September 8, 2000
---------------------------------------------------
Francisco D. Fernandez
/s/ JOSE L. DiAZ Director September 8, 2000
---------------------------------------------------
Jose L. Diaz
/s/ GERMAN E. MALARET Director September 8, 2000
---------------------------------------------------
German E. Malaret
/s/ HECTOR M. NEVARES Director September 8, 2000
---------------------------------------------------
Hector M. Nevares
/s/ ANTONIO PAViA VILLAMIL Director September 8, 2000
---------------------------------------------------
Antonio Pavia Villamil
/s/ JOSE TEIXIDOR Director September 8, 2000
---------------------------------------------------
Jose Teixidor
/s/ ANGEL L. UMPIERRE Director September 8, 2000
---------------------------------------------------
Angel L. Umpierre
</TABLE>
II-6
<PAGE> 42
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement*
4(a) -- Form of Series B Preferred Stock Certificate.*
4(b) -- Certificate of Designation designating the terms of Series B
Preferred Stock*
4(c) -- Certificate of Incorporation of First BanCorp.**
4(b) -- By-Laws of First BanCorp.**
5 -- Opinion regarding legality and consent of Fiddler Gonzalez &
Rodriguez, LLP *
8 -- Opinion regarding tax matters of Fiddler Gonzalez &
Rodriguez, LLP *
12 -- Statement re: Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends*
23.1 -- Consent of PricewaterhouseCoopers LLP.*
23.2 -- Consent of Fiddler Gonzalez & Rodriguez, LLP (included in
the opinion of counsel filed as Exhibit 5 hereto).*
24 -- Powers of Attorney (included on Pages II-5 to II-6).*
</TABLE>
---------------
* Filed herewith.
** Incorporated by reference to the Form S-4 Registration Statement (Reg. No.
333-08640), filed by First BanCorp. with the Commission on April 15, 1998,as
amended.
II-7
