UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 130
of the Securities Exchange Act of 1934
For the Quarter ended Commission File 001-14793
September 30, 2000
First BanCorp.
(Exact name of Corporation as specified in its charter)
Puerto Rico 66-0561882
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1519 Ponce de Leon Avenue, Stop 23
Santurce, Puerto Rico 00908
(Address of principal office) (Zip Code)
Corporation's telephone number, including area code:
(787) 729-8200
Indicate by check mark whether the Corporation (1) has filed all reports
required by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Corporation was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Number of shares of the Corporation's Common Stock outstanding as of
November 13, 2000
26,424,152
FIRST BANCORP
CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Statements of Financial
Condition as of September 30, 2000 and
December 31, 1999.................................................................3
Consolidated Statements of Income for the
three and nine months ended on September 30, 2000 and 1999.......................4
Consolidated Statements of Cash Flows
for the nine months ended on September 30, 2000 and 1999..........................5
Consolidated Statements of Changes in
Stockholders' Equity..............................................................6
Consolidated Statements of Comprehensive Income for the
three and nine months ended on September 30, 2000 and 1999.......................7
Notes to Consolidated Financial Statements...........................................8
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations.................................................19
Item 3. Quantitative and Qualitative Disclosures About Market Risk..................32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...........................................................33
Item 2. Changes in Securities.......................................................33
Item 3. Defaults Upon Senior Securities.............................................33
Item 4. Submission of Matters to a Vote
of Security Holders.......................................................33
Item 5. Other Information...........................................................33
Item 6. Exhibits and Report on Form 8-K.............................................33
SIGNATURES............................................................................................34
FIRST BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 2000 December 31, 1999
Assets ........ (Unaudited)
Cash and due from banks $ 52,610,836 $ 58,267,929
------------------ ---------------
Money market instruments 2,443,944 35,217,064
------------------- ----------------
Investment securities available for sale, at market:
United States and Puerto Rico Government obligations 433,108,066 340,356,015
Mortgage backed securities 1,293,100,684 1,017,176,782
Other investments 91,340,727 96,541,374
----------------- -----------------
Total investment securities available for sale 1,817,549,477 1,454,074,171
---------------- ---------------
Investment securities held to maturity, at cost:
United States and Puerto Rico Government obligations 102,296,143 97,349,381
Mortgage backed securities 206,941,081 206,696,658
---------------- ----------------
Total investment securities held to maturity 309,237,224 304,046,039
---------------- ----------------
Federal Home Loan Bank (FHLB) stock 18,536,500 17,826,500
----------------- -----------------
Loans held for sale 37,794,078
Loans receivable 3,318,007,924 2,707,574,019
--------------- ---------------
Total loans 3,318,007,924 2,745,368,097
Allowance for loan losses (76,445,352) (71,784,237)
--------------- -----------------
Total loans - net 3,241,562,572 2,673,583,860
--------------- ---------------
Other real estate owned 3,084,356 517,405
Premises and equipment - net 69,337,570 61,947,817
Accrued interest receivable 27,213,699 17,917,526
Due from customers on acceptances 2,398,540 2,738,176
Other assets 104,699,173 95,431,678
----------------- -----------------
Total assets $5,648,673,891 $4,721,568,165
============== ==============
Liabilities and Stockholders' Equity
Liabilities:
Non-interest bearing deposits $ 211,681,279 $ 211,896,459
Interest bearing deposits 3,010,766,900 2,353,525,177
Federal funds purchased and securities
sold under agreements to repurchase 1,817,945,308 1,452,151,222
Other short-term borrowings 14,500,000 152,484,084
Advances from FHLB 57,600,000 50,000,000
Notes payable 55,500,000 55,500,000
Bank acceptances outstanding 2,398,540 2,738,176
Accounts payable and other liabilities 65,083,143 54,776,718
----------------- ----------------
5,235,475,170 4,333,071,836
--------------- ---------------
Subordinated notes 92,524,328 93,594,080
----------------- -----------------
Stockholders' equity:
Preferred Stock, authorized 50,000,000 shares: issued and
outstanding 3,600,000 shares at $25.00 liquidation value
per share 90,000,000 90,000,000
---------------- ----------------
Common stock, $1.00 par value, authorized 250,000,000 shares;
issued 29,618,552 shares 29,618,552 29,612,552
Less: Treasury Stock (at par value) (3,194,400) (1,552,000)
----------------- -----------------
Common stock outstanding 26,424,152 28,060,552
---------------- ----------------
Additional paid-in capital 19,130,016 19,863,466
Capital reserve 40,000,000 40,000,000
Legal surplus 126,792,514 126,792,514
Retained earnings 67,032,021 58,834,676
Accumulated other comprehensive income - unrealized loss
on securities available for sale, net of tax (48,704,310) (68,648,959)
---------------- -----------------
320,674,393 294,902,249
--------------- ----------------
Contingencies and commitments _____________
Total liabilities and stockholders' equity $5,648,673,891 $4,721,568,165
============== ==============
The accompanying notes are an integral part of these statements.
34
FIRST BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
Interest income:
Loans $85,418,977 $66,682,290 $240,068,892 $189,612,961
Investments 34,654,795 27,477,878 97,034,570 78,463,053
Dividends on FHLB stock 310,258 314,978 908,616 797,529
-------------- -------------- --------------- ----------------
Total interest income 120,384,030 94,475,146 338,012,078 268,873,543
----------- ------------ ------------- -------------
Interest expense:
Deposits 41,206,160 24,845,841 108,485,381 63,692,990
Short term borrowings 29,386,202 19,622,306 77,729,760 57,255,173
Long term borrowings 2,754,188 3,217,907 8,101,813 10,198,160
------------ ------------- -------------- --------------
Total interest expense 73,346,550 47,686,054 194,316,954 131,146,323
------------ ------------ ------------- -------------
Net interest income 47,037,480 46,789,092 143,695,124 137,727,220
Provision for loan losses 11,565,500 11,016,500 34,743,500 37,766,000
------------ ----------- ------------ ------------
Net interest income after provision
for loan losses 35,471,980 35,772,592 108,951,624 99,961,220
------------ ------------ ------------ ------------
Other income:
Service charges on deposit accounts 2,070,993 2,310,283 6,685,821 6,271,661
Fees on loans serviced for others 128,007 193,839 412,338 682,146
Other fees on loans 5,605,491 3,524,951 13,348,169 9,441,374
Mortgage banking activities (3,398) (5,796) (3,398) 5,753
Trading income 419,367 75,000
Gain on sale of investments 1,855,368 40,297 6,812,772 1,348,583
Other operating income 3,640,679 2,457,510 8,853,986 6,390,820
------------- ------------- -------------- -------------
Total other income 13,297,140 8,521,084 36,529,055 24,215,337
------------- ------------- ------------- ------------
Other operating expenses:
Employees' compensation and benefits 12,642,990 12,069,042 38,055,926 34,637,628
Occupancy and equipment 5,670,479 5,216,581 16,845,794 14,660,489
Taxes and insurance 1,840,870 1,632,098 5,037,206 4,895,071
Other 8,332,502 6,965,809 24,816,453 19,588,595
------------- ------------- ------------- -------------
Total other operating expenses 28,486,841 25,883,530 84,755,379 73,781,783
------------ ------------ ------------- -------------
Income before income tax provision 20,282,279 18,410,146 60,725,300 50,394,774
Income tax provision 3,583,067 2,202,000 11,197,649 4,651,900
------------ ------------ ------------ -------------
Net income $16,699,212 $ 16,208,146 $49,527,651 $45,742,874
=========== ============ =========== ===========
Net income per common share - basic $ 0.56 $ 0.50 $ 1.65 $ 1.48
============= =============== ================ ==============
Net income per common share - diluted $ 0.56 $ 0.50 $ 1.64 $ 1.47
============= =============== ================ ==============
The accompanying notes are an integral part of these statements.
FIRST BANCORP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Nine Months
Ended Ended
September 30, 2000 September 30, 1999
Cash flows from operating activities:
Net income $ 49,527,651 $ 45,742,874
------------- -------------
Adjustments to reconcile net income to net cash:
Depreciation 6,661,739 5,573,257
Provision for loan losses 34,743,500 37,766,000
Increase (decrease) in taxes payable (17,868,623) 3,556,881
Increase in deferred tax assets (3,425,535) (5,650,996)
Increase in accrued interest receivable (9,296,174) (7,570,793)
Increase in accrued interest payable 9,567,608 6,231,229
Amortization of deferred net loan fees (123,418) (776,174)
Net gain on sale of investments securities (6,812,772) (1,348,583)
Origination of loans available for sale (12,961,662)
Proceeds from sale of loans 1,266,787
Decrease (increase) in other assets 2,313,808 18,385,011
Increase in other liabilities 17,840,587 13,089,273
---------- ----------
Total adjustments 33,600,720 57,560,230
------------- -----------
Net cash provided by operating activities 83,128,371 103,303,104
-------------- -------------
Cash flows from investing activities:
Principal collected on loans 311,376,874 513,486,123
Loans originated (930,730,675) (952,964,932)
Purchase of loans (196,247)
Proceeds from sale of investments 53,576,672 9,570,777
Purchase of securities held to maturity (5,191,185) (275,390,518)
Principal repayments and maturities of securities held to maturity (63,183)
Purchase of securities available for sale (3,619,717,784) (3,490,060,290)
Principal repayments of securities available for sale 3,236,071,442 3,783,062,863
Additions to premises and equipment - net (14,051,494) (10,942,585)
Investment in FHLB stock (710,000) (7,555,900)
---------------- ----------------
Net cash used in investing activities (969,376,150) (431,053,892)
------------- --------------
Cash flows from financing activities:
Net increase in deposits 657,026,542 555,269,108
Net increase (decrease) in federal funds purchased and securities sold
under repurchase agreement 366,221,305 (181,680,573)
FHLB-NY advances taken (paid) 7,600,000 (2,600,000)
Payments of notes payable (1,069,753) (38,518,750)
Decrease in other borrowings (137,984,084) (36,561,782)
Increase (decrease) in debt securities issuance cost (276,288) 823,284
Dividends (13,707,316) (10,518,154)
Exercise of stock options 93,750 176,313
Issuance of preferred stock 86,819,350
Treasury stock acquired (30,086,590) (22,304,851)
---------------- --------------
Net cash provided by financing activities 847,817,566 350,903,945
------------ --------------
Net increase (decrease) in cash and cash equivalents (38,430,213) 23,153,157
Cash and cash equivalents at beginning of period 93,484,993 39,941,766
------------ --------------
Cash and cash equivalents at end of period $ 55,054,780 $63,094,923
============== ===========
Cash and cash equivalents include:
Cash and due from banks $ 52,610,836 $ 43,460,680
Money market instruments 2,443,944 19,634,243
-------------- -------------
$ 55,054,780 $ 63,094,923
============ ============
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $184,749,346 $124,915,094
Income taxes 25,151,900 5,618,337
The accompanying notes are an integral part of these statements.
FIRST BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Unrealized
gain(loss)
Additional on securities
Preferred Common paid-in Capital Legal Retained available
stock stock capital reserve surplus earnings for sale
December 31, 1997 $ $14,901,826 $38,453,561 $20,000,000 $53,454,469 $97,537,900 $12,031,444
Net income 51,812,387
Change in valuation of
securities available for sale (3,281,513)
Addition to capital reserve 10,000,000 (10,000,000)
Repurchase of common stock (108,800) (217,600) (3,330,024)
Treasury stock (100,000) (50,000) (2,061,250)
Stock option exercised 10,000 186,501
Cash dividends-common stock (8,870,833)
Common stock split
on May 29, 1998 14,796,526 (14,796,526) __________ __________ ___________ __________
----------------- ------------ -----------
December 31, 1998 29,499,552 23,575,936 30,000,000 53,454,469 125,088,180 8,749,931
Net income 62,074,949
Change in valuation of
securities available for sale (77,398,890)
Issuance of preferred stock 90,000,000 (3,149,783)
Addition to legal surplus 73,338,045 (73,338,045)
Addition to capital reserve 10,000,000 (10,000,000)
Treasury stock (1,452,000) (726,000) (30,332,611)
Stock options exercised 13,000 163,313
Cash dividends:
Common stock (10,382,797)
Preferred stock _________ _________ _________ _________ __________ (4,275,000) __________
-------------
December 31, 1999 90,000,000 28,060,552 19,863,466 40,000,000 126,792,514 58,834,676 (68,648,959)
Net income 49,527,651
Change in valuation of
securities available for sale 19,944,649
Treasury stock (1,642,400) (821,200) (27,622,990)
Stock option exercised 6,000 87,750
Cash dividends:
Common stock (8,897,941)
Preferred stock __________ __________ __________ __________ ___________ (4,809,375) __________
-------------
September 30, 2000 $90,000,000 $26,424,152 $19,130,016 $40,000,000 $126,792,514 $67,032,021 $(48,704,310)
=========== =========== =========== =========== ============ =========== ============
The accompanying notes are an integral part of these statements.
FIRST BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
Net Income $16,699,212 $ 16,208,146 $49,527,651 $ 45,742,874
----------- ------------ ----------- ------------
Other comprehensive income net of tax:
Unrealized gain (losses) on securities:
Unrealized holding gains (losses) 7,447,646 (10,487,271) 21,361,509 (61,373,043)
arising during the period
Less: reclassification adjustment
for gains included in net income 1,116,050 _________ 1,416,860 897,218
------------ ------------ --------------
Total other comprehensive income 6,331,596 (10,487,271) 19,944,649 (62,270,261)
------------ ----------- ----------- -----------
Comprehensive income $23,030,808 $5,720,875 $69,472,300 $(16,527,387)
=========== ========== =========== ============
The accompanying notes are an integral part of these statements.
FIRST BANCORP
PART I - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 - NATURE OF BUSINESS
First BanCorp (the Corporation) is a financial holding company subject
to the Federal Bank Holding Company Act and to the regulations, supervision, and
examination of the Federal Reserve Board.
FirstBank Puerto Rico (FirstBank or the Bank), the Corporation's
subsidiary, is a commercial bank chartered under the laws of the Commonwealth of
Puerto Rico. Its main office is located in San Juan, Puerto Rico, and has 44
full service banking branches in Puerto Rico and four in the U.S. Virgin
Islands. It also has loan origination offices in Puerto Rico focusing on
consumer loans. Early in the year 2000 the Bank began offering brokerage
services in selected branches through a new alliance with Paine Webber of Puerto
Rico, the largest brokerage firm in the Island. In addition, through its wholly
owned subsidiaries, FirstBank operates other offices in Puerto Rico specializing
in small personal loans, finance leases and vehicle rental. The Bank is subject
to the supervision, examination and regulation of the Office of the Commissioner
of Financial Institutions of Puerto Rico and the Federal Deposit Insurance
Corporation (FDIC), which insures its deposits through the Savings Association
Insurance Fund (SAIF).
On September 25, 2000 First Virgin Islands Federal Savings Bank (FVI)
was merged with and into FirstBank, which resulted in an additional full service
banking branch located in the U.S. Virgin Islands.
2 - ACCOUNTING POLICIES
The accounting and reporting policies of the Corporation and its
subsidiaries conform with generally accepted accounting principles, and, as
such, include amounts based on judgments, estimates and assumptions made by
Management that affect the reported amounts of assets and liabilities and
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates. The accompanying unaudited
financial statements have been prepared in accordance with the instructions for
Form 10-Q. Complete information regarding the financial statements can be found
in the notes to the financial statements for the year ended December 31, 1999
contained in the annual report of the Corporation.
In the opinion of Management, the accompanying unaudited consolidated
statements of financial condition and the related consolidated statements of
income, of cash flows, of changes in stockholders' equity, and of comprehensive
income, include all adjustments (principally consisting of normal recurring
accruals) necessary for a fair presentation of the Corporation's financial
position at September 30, 2000, and the results of operations and the cash flows
for the three and nine months ended on September 30, 2000 and 1999. The results
of operations for the three and nine months ended on September 30, 2000 are not
necessarily indicative of the results to be expected for the entire year.
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including
derivative instruments that are embedded in other contracts, and for hedging
activities. SFAS No. 133 standardizes accounting for derivative instruments,
including those embedded in other contracts, by requiring the recognition of all
derivatives (both assets and liabilities) in the statement of financial position
at fair value. In accordance with SFAS No. 133, changes in the fair value of
derivative instruments are generally accounted for as current income or other
comprehensive income, depending on their designation.
SFAS No. 133 generally provides for the matching of the timing of gain
or loss recognition on the hedging instruments with the recognition of either
the changes in the fair value of the hedged asset or liability, or the earnings
effect of the hedged forecasted transaction.
On July 7, 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133". SFAS No. 137 delays the effective date of SFAS No. 133. SFAS
No. 133 would be effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. On June 19, 2000, the FASB issued SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities an Amendment
of FASB Statement No. 133", which amends certain of the provisions of SFAS No.
133.
As part of the interest rate risk management, the Corporation has
entered into interest rate swap agreements with a notional amount of
$1,026,000,000 at September 30, 2000. These swap agreements are used to hedge a
portfolio of brokered certificates of deposit. Most of the swaps are used to
convert the cost of the certificates of deposit from fixed to variable, with a
hedge relationship, which is estimated to be 100 percent effective. In
accordance with SFAS No. 133 there will be no impact on the statement of income
nor on comprehensive income, since the gain or loss on the swap agreements will
completely offset the loss or gain on the certificates of deposit. The
application of SFAS No. 133 will result in a grossing up of the balance sheet to
reflect the swap and the certificates of deposit at fair value. At September 30,
2000 the fair value (or replacement cost) of these swap agreements was
approximately $51,000,000. If the Corporation had implemented SFAS No.133 as of
September 30, 2000, a swap asset of $51,000,000 would have been recognized with
an increase in certificate of deposits by the same amount.
The Corporation also has interest rate protection agreements (caps) with a
notional amount of $800,000,000 at September 30, 2000. These caps are used to
limit the Corporation exposure to rising interest rates on its borrowings. Under
these agreements the Corporation paid an up front premium of $1,800,000 for the
right to receive cash flows payments in excess of the predetermined cap rate;
thus, effectively capping its interest rate cost for the duration of the
agreement. In accordance with SFAS No. 133, management expects to designate
these caps as cash-flow hedges. For a qualifying cash flow hedge, an interest
rate cap will be carried on the balance sheet at fair value with the time value
change reflected through the current statement of income. Any intrinsic value
will be reflected through comprehensive income and will be reflected in future
statements of income when payments are received from the counter party. If the
Corporation had implemented SFAS No. 133 as of September 30, 2000 a loss of
approximately $700,000 would have been recognized in the statement of income as
a cumulative effect of a change in accounting principle.
SFAS No. 133 supersedes SFAS No. 80 for cash flow hedge accounting. Under
SFAS No. 80, the cost of caps to reduce interest rate risk is amortized on a
straight-line method over the term of coverage as a prepaid expense. Under SFAS
No. 80, the amortization for the third quarter ended September 30, 2000 was
approximately $200,000.
Transfer and Servicing of Financial Assets and Extinguishment of Liabilities
The FASB recently issued SFAS No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, a replacement
of SFAS No. 125." SFAS No. 140 revises the standards for accounting for security
transactions and other transfers of financial assets and collateral and requires
certain disclosures, but it carries over most of SFAS No. 125's provisions
without reconsideration. SFAS No. 140 is effective on transactions occurring
after March 31, 2000. Management estimates that the adoption of this statement
will not have a material effect on the consolidated financial statements of the
Corporation.
3 - STOCKHOLDERS' EQUITY
Authorized common stock shares at September 30, 2000 and December 31,
1999 were 250,000,000, with a par value of $1.00. At September 30, 2000 the
Corporation had 26,424,152 shares issued and outstanding of common stock.
Preferred stock
The Corporation has 50,000,000 shares of authorized preferred stock
with a par value of $1. This stock may be issued in series and the shares of
each series shall have such rights and preferences as shall be fixed by the
Board of Directors when authorizing the issuance of that particular series. On
April 30, 1999, the Corporation issued 3,600,000 shares of preferred stock. The
liquidation value per share is $25.00. Annual dividends of $1.78125 per share,
are payable monthly, if declared by the board of directors.
4 - EARNINGS PER COMMON SHARE
The calculations of earnings per common share for the three and nine months
ended on September 30, 2000 and 1999 are as follows:
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
(In thousands, except per share data)
Net income $16,699 $16,208 $49,528 $45,743
Less: Preferred stock dividend (1,603) (1,603) (4,809) (2,672)
-------- -------- -------- --------
Net income - attributable to common stockholders $15,096 $14,605 $44,718 $43,071
======= ======= ======= =======
Earnings per common share - basic:
Weighted average common shares outstanding 26,725 28,971 27,117 29,123
-------- -------- -------- -------
Earnings per common share - basic $ 0.56 $ 0.50 $ 1.65 $ 1.48
======== ========= ======== ========
Earnings per common share - diluted:
Weighted average common shares and share equivalents:
Average common shares outstanding 26,725 28,971 27,117 29,123
Common stock equivalents - Options 202 243 192 265
---------- --------- ---------- --------
Total 26,927 29,214 27,309 29,388
-------- -------- -------- -------
Earnings per common share - diluted $ 0.56 $ 0.50 $ 1.64 $ 1.47
========= ======== ========= =======
Stock options outstanding under the Corporation's stock option plan for
officers are common stock equivalents and, therefore, considered in the
computation of earnings per common share - diluted. Common stock equivalents
were computed using the treasury stock method.
The stock option plan must be recognized either by the fair value based
method or the intrinsic value based method. The Corporation uses the intrinsic
value based method of accounting. Under the intrinsic value based method,
compensation cost is the excess, if any, of the quoted market price of the stock
at grant date or other measurement date over the amount an employee must pay to
acquire the stock. If material, entities using the intrinsic value based method
on awards granted to employees must make pro forma disclosures of net income and
earnings per share, as if the fair value based method of accounting had been
applied. Under the fair value based method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period.
During the three and nine months periods ended on September 30, 1999,
the Corporation granted 15,000 and 20,500 options, respectively, to buy shares
of the Corporation's common stock. Each option granted during the three and nine
months ended on September 30, 1999 has an exercise price of $22.56 and $23.55
respectively, equal to the quoted market price of the stock at the grant date,
therefore no compensation cost was recognized on the options granted. No options
were granted during the nine months ended on September 30, 2000.
Had compensation cost for the stock options granted been determined
based on the fair value at the grant date the Corporation's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
Pro forma earnings per common share Three months ended Nine months ended
September 30, September 30,
(In thousands except per share data) 2000 1999 2000 1999
--------- -------- --------- -------
Net income - attributable to common stockholders $15,096 $14,482 $44,718 $42,887
Earnings per common share - basic $0.56 $0.50 $1.65 $1.47
Earnings per common share - diluted $0.56 $0.50 $1.64 $1.46
The Corporation uses the binomial model for the computation of the fair
value of each option granted to buy shares of the Corporation's common stock.
The fair value of each option granted during the three and nine month period
ended on September 30, 1999 was estimated using the following assumptions:
dividend growth of 22.4% and 22.3%, respectively; expected life of 10 years;
expected volatility of 31.8% and 33.0%, respectively, and risk-free interest
rate of 5.8% and 5.6%, respectively. The estimated fair value of the options
granted was $8.17 and $8.98 per option, respectively.
5- INVESTMENT SECURITIES HELD FOR TRADING
At September 30, 2000 and December 31, 1999, there were no securities held
for trading purposes or options on such securities.
The net results from the sale of trading securities amounted to a gain
of $419,367 during the nine months ended on September 30, 2000. The net gain
from the sale of trading securities amounted to $75,000 during the nine months
ended on September 30, 1999. These earnings were included as trading income. No
net revenue from the sale of trading securities was recorded during the third
quarter of 2000 and 1999.
6 - INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses, approximate
market value, weighted average yield and maturities of investment securities
were as follows:
Investment securities available for sale
(Dollars in thousands)
September 30, 2000 December 31, 1999
Weighted Weighted
Amortized Unrealized Market Average Amortized Unrealized Market average
cost gains (losses) value yield% cost gains( losses) value yield%
U.S. Treasury Securities:
After 1 to 5 years $ 3,129 $ (2) $3,127 6.40
After 5 to 10 years 39,612 (2,581) 37,031 4.90 $39,577 $(4,302) $35,275 4.90
After 10 years 67,533 (4,691) 62,842 5.50 67,468 (9,621) 57,847 5.51
Obligations of other U.S.
Government Agencies:
Within 1 year 208,093 (139) 207,954 6.51 219,065 $53 (58) 219,060 5.68
After 1 to 5 years 40,135 $146 40,281 7.65
After 5 to 10 years 29,988 12 30,000 7.81
After 10 years 29,882 (5,007) 24,875 7.10 27,457 (5,127) 22,330 7.05
Puerto Rico Government
Obligations:
After 5 to 10 years 20,000 20,000 7.81
After 10 years 7,388 2 (391) 6,998 6.44 5,880 ___ (36) 5,844 6.83
---------------------------- ----------- ----------- ----------- ----------
Total $445,760 $160 $(12,811) $433,108 6.49 $359,447 $53 $(19,144) $340,356 5.69
======== ==== ======== ======== ======== === ======== ========
Mortgage backed securities- Federal Home Loan Mortgage Corporation (FHLMC)
certificates:
After 1 to 5 years $ 911 $ (7) $ 904 7.04 $ 997 $ (25) $ 972 6.87
After 5 to 10 years 8,512 (148) 8,364 6.23 9,905 (255) 9,650 6.23
After 10 years 19,656 6 (142) 19,520 7.62 22,872 $11 (155) 22,728 6.38
--------- ----- -------- -------- ------ --- ---- ------
29,079 6 (296) 28,789 7.20 33,774 11 (435) 33,350 6.35
--------- ------ -------- -------- ------ ---- ---- ------
Government National
Mortgage Association
(GNMA) certificates:
After 5 to 10 years 4,569 (47) 4,522 6.23 3,674 (46) 3,628 5.85
After 10 years 1,294,762 661 (48,665) 1,246,757 6.52 1,039,069 1,410 (76,054) 964,425 6.19
--------- ---- --------- --------- --------- ----- ------- -------
1,299,330 661 (48,712) 1,251,279 6.52 1,042,743 1,410 (76,100) 968,053 6.19
---------- ---- -------- --------- --------- ----- ------ -------
Federal National
Mortgage Association
(FNMA) certificates:
After 1 to 5 years 432 (1) 431 7.10 644 (7) 637 7.29
After 5 to 10 years 134 134 6.85 188 (6) 182 6.88
After 10 years 9,883 236 (29) 10,088 8.30 11,109 299 (46) 11,362 8.26
------------ ----- ------- -------- ---------- ----- ----- --------
10,448 236 (30) 10,652 8.23 11,941 299 (59) 12,181 8.19
----------- ----- ------- -------- ---------- ----- ----- --------
Mortgage pass through
certificates:
After 10 years 2,315 66 2,380 9.23 2,463 757 ____ 3,220 9.09
-------------------- -------- ----------- ----- --------
Real Estate Mortgage
Interest Conduit:
Within 1 year _________ ____ _______ _________ 361 12 _______ ___ 373 12.52
-------------- ------- ------------
Total $1,341,172 $969 $(49,038) $1,293,100 6.55 $1,091,282 $2,489 $(76,594) $1,017,177 6.23
========== ==== ======== ========== ========== ====== ======== ==========
Other investments:
Within 1 year $56,230 $436 $(4,150) $52,516 4.17$ 67,359 $1,914 $69,273 6.03
After 1 to 5 years 28,099 308 28,407 7.96 14,750 $ (88) 14,662 7.76
After 5 to 10 years 9,490 96 9,586 7.13 11,779 (162) 11,617 7.25
After 10 years 842 ____ (9) 833 7.06 990 _____ ____ 990 7.06
--------------- ----------- ---------- -------------- ---------
Total $ 94,661 $840 $(4,159) $91,341 5.62$ 94,878 $1,914 $(250) $96,542 6.46
============ ==== ======= ======= ============ ====== ===== =======
Maturities for mortgage backed securities are based upon contractual
terms assuming no repayments. The weighted average yield on investment
securities held for sale is based on amortized cost, therefore it does not give
effect to changes in fair value.
Investment securities held to maturity
(Dollars in thousands)
September 30, 2000 December 31, 1999
Weighted Weighted
Amortized Unrealized Market Average Amortized Unrealized Market average
cost gains (losses) value yield% cost gains( losses) value yield%
Obligations of U.S.
Government Agencies:
After 1 to 5 years $10,000 $ (42) $ 9,958 7.04
After 5 to 10 years 88,526 (8,702) 79,824 7.53 $10,000 $ (166) $9,834 7.04
After 10 years 83,756 (9,255) 74,501 7.53
Puerto Rico Government
Obligations:
After 10 years 3,770 (190) 3,580 6.50 3,593 $57 ______ 3,650 6.50
----------- --------- --------- --------- --- ---------
Total $102,296 $(8,934) $93,362 7.44 $97,349 $57 $(9,421) $87,985 7.44
======== ======= ======= ======= === ======= =======
Mortgage backed securities:
Government National
Mortgage Association
(GNMA) certificates
After 10 years $206,941 $(3,287) $203,654 6.93 $206,697 $(7,851) $198,845 6.94
======== ======= ======== ======== ======= ========
Expected maturities of mortgage backed securities and certain other
securities might differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
7 - INVESTMENT IN FHLB STOCK
At September 30, 2000 and December 31, 1999, there were investments in
FHLB stock with book value of $18,536,500 and $17,826,500, respectively. The
estimated market value of such investments is its redemption value.
8- IMPAIRED LOANS
At September 30 2000, the Corporation had $13.3 million ($4.4 million
at December 31, 1999) in commercial and real estate loans over $1,000,000
considered impaired with an allowance of approximately $5.6 million ($1.3
million at December 31, 1999). There were no consumer loans over $1,000,000
considered impaired as of September 30, 2000 and December 31, 1999. The average
recorded investment in impaired loans amounted to $8.9 million for the nine
months ended on September 30, 2000 (1999 - $9.4 million). Interest income in the
amount of approximately $142,000 and $267,000 were recognized on impaired loans
for the period ended on September 30, 2000 and 1999, respectively.
9 - LOANS RECEIVABLE
The following is a detail of the loan portfolio:
September 30, December 31,
2000 1999
------------------ --------------
Residential real estate loans:
Secured by first mortgages:
Conventional $ 613,575,251 $ 395,884,613
Insured by government agencies:
Federal Housing Administration and Veterans
Administration 19,757,246 6,543,487
Puerto Rico Housing Bank and Finance Agency 29,180,881 32,928,102
Secured by second mortgages 8,121,056 5,706,225
--------------- --------------
670,634,434 441,062,427
Deferred net loan fees (5,457,787) (5,293,370)
--------------- --------------
Residential real estate loans 665,176,647 435,769,057
-------------- -------------
Commercial loans:
Construction, land acquisition and land improvements 374,745,713 288,301,904
Undisbursed portion of loans in process (192,939,236) (156,233,791)
------------- --------------
Construction loans 181,806,477 132,068,113
Commercial loans 880,083,937 655,417,037
Commercial mortgage 450,407,485 371,642,698
-------------- --------------
Commercial loans 1,512,297,899 1,159,127,848
------------- -------------
Finance leases 111,086,090 85,692,482
--------------- ---------------
Consumer and other loans:
Personal 396,114,358 422,722,624
Personal lines of credit 11,759,227 13,029,258
Auto 528,506,406 532,242,160
Boat 34,752,074 37,018,313
Credit card 171,782,789 168,045,087
Home equity reserve loans 3,452,159 2,656,713
Other 106,292
Unearned interest (116,919,725) (148,835,815)
---------------- ---------------
Consumer and other loans 1,029,447,288 1,026,984,632
--------------- --------------
Loans receivable 3,318,007,924 2,707,574,019
Loans held for sale _____________ 37,794,078
----------------
Total loans 3,318,007,924 2,745,368,097
Allowance for loan losses (76,445,352) (71,784,237)
----------------- -----------------
Total loans-net $3,241,562,572 $2,673,583,860
============== ==============
Loans held for sale were reclassified to loans receivable during the third
quarter of 2000 since the Corporation has no
intent to sell those loans.
10 - SEGMENT INFORMATION
The Corporation has three reportable segments: Retail business,
Treasury and Investments, and Commercial Corporate business. Management
determined the reportable segments based on the internal reporting used to
evaluate performance and to assess where to allocate resources. Other factors
such as the Corporation's organizational chart, nature of the products,
distribution channels and the economic characteristics of the products were also
considered in the determination of the reportable segments.
The Retail business segment is composed of the Corporation's branches
and loan centers together with the retail products of deposits and consumer
loans. Certain small commercial loans originated by the branches are included in
the Retail business. Consumer loans include loans such as personal, residential
real estate, auto, credit card and small loans. Finance leases are also included
in Retail business. The Commercial Corporate segment is composed of commercial
loans and corporate services such as letters of credit and cash management. The
Treasury and Investment segment is responsible for the Corporation investment
portfolio and treasury functions.
The accounting policies of the segments are the same as those described in
Note 2 - "Summary of Significant Accounting
Policies."
The Corporation evaluates the performance of the segments based on net
interest income after the estimated provision for loan losses. The segments are
also evaluated based on the average volume of its earning assets less the
allowance for loan losses.
The only intersegment transaction is the net transfer of funds between
the segments and the Treasury and Investment segment. The Treasury and
Investment segment sells funds to the Retail and Commercial Corporate segments
to finance their lending activities and purchases funds gathered by those
segments. The interest rates charge or credit by Investment and Treasury is
based on market rates.
The following table presents information about the reportable segments
(in thousands):
Treasury and Commercial
Retail Investments Corporate Total
For the quarter ended September 30, 2000:
Interest income $56,707 $34,967 $28,710 $120,384
Net (charge) credit for transfer of funds (3,724) 23,181 (19,457)
Interest expense (18,779) (54,567) (73,346)
Net interest income 34,204 3,581 9,253 47,038
Provision for loan losses (5,974) (5,592) (11,566)
Segment income 28,230 3,581 3,661 35,472
Average earning assets $1,939,139 $2,048,439 $1,170,986 $5,158,564
For the period ended September 30, 2000:
Interest income $163,871 $97,938 $76,203 $338,012
Net (charge) credit for transfer of funds (7,949) 59,466 (51,517)
Interest expense (53,550) (140,767) (194,317)
Net interest income 102,372 16,637 24,686 143,695
Provision for loan losses (20,567) (14,177) (34,744)
Segment income 81,805 16,637 10,509 108,951
Average earning assets $1,834,965 $1,929,671 $1,067,127 $4,831,763
Treasury and Commercial
Retail Investments Corporate Total
For the quarter ended September 30, 1999:
Interest income $47,155 $27,795 $19,525 $94,475
Net (charge) credit for transfer of funds 2,185 9,682 (11,868)
Interest expense (16,094) (31,591) (47,685)
Net interest income 33,246 5,886 7,657 46,790
Provision for loan losses (10,323) (694) (11,017)
Segment income 22,923 5,886 6,963 35,773
Average earning assets $1,511,691 $1,720,446 $883,674 $4,115,811
For the period ended September 30, 1999:
Interest income $133,850 $79,267 $55,756 $268,873
Net (charge) credit for transfer of funds 3,176 28,017 (31,194)
Interest expense (43,584) (87,562) (131,146)
Net interest income 93,442 19,722 24,562 137,727
Provision for loan losses (35,560) (2,207) (37,767)
Segment income 57,882 19,722 22,355 99,960
Average earning assets $1,427,073 $1,682,673 $780,189 $3,889,935
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
SELECTED FINANCIAL DATA
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Condensed income statements (in thousands):
Interest income $120,384 $94,475 $338,012 $268,874
Interest expense 73,347 47,686 194,317 131,146
---------- -------- --------- --------
Net interest income 47,037 46,789 143,695 137,727
Provision for loan losses 11,566 11,017 34,744 37,766
---------- -------- ---------- ---------
Net interest income after provision
for loan losses 35,472 35,773 108,952 99,961
Other income 11,442 8,481 29,716 22,866
Gain on sale of investments 1,855 40 6,813 1,349
Other operating expenses 28,487 25,884 84,755 73,782
--------- ------- -------- --------
Net income before income tax expense 20,282 18,410 60,725 50,395
Income tax expense 3,583 2,202 11,198 4,652
---------- -------- -------- ---------
Net income $ 16,699 $16,208 $49,528 $45,743
======== ======= ======= =======
Per common share results:
Net income per common share - basic $0.56 $0.50 $1.65 $1.48
Net income per common share - diluted $0.56 $0.50 $1.64 $1.47
Cash dividends declared $0.11 $0.09 $0.33 $0.27
Selected financial ratios (in percent):
Average yield on earning assets (1) 9.18 9.13 9.25 9.36
Cost of interest bearing liabilities 6.02 4.94 5.73 4.91
Interest rate spread (1) 3.16 4.19 3.52 4.45
Net interest margin (1) 3.69 4.70 4.06 4.98
Net income to average total assets 1.23 1.51 1.30 1.50
Net income to average equity 21.26 21.02 22.25 20.95
Net income to average common equity 26.94 26.74 28.83 23.89
Average equity to average total assets 5.80 7.16 5.84 7.15
Dividend payout ratio 19.45 17.80 19.90 18.22
Efficiency ratio (2) 47.21 46.80 47.03 45.56
September 30 December 31,
2000 1999
---- ----
Regulatory capital ratios (in percent):
Total capital to risk weighted assets 13.51 16.16
Tier 1 capital to risk weighted assets 9.61 11.64
Tier 1 capital to average assets 6.18 7.47
Balance sheet data (in thousands):
Loans and loans held for sale $3,318,008 $2,745,368
Allowance for loan losses 76,445 71,784
Investments 2,147,767 1,811,164
Total assets 5,648,674 4,721,568
Deposits 3,222,448 2,565,422
Borrowings 2,038,070 1,803,729
Total capital 320,674 294,902
Number of full service branches 48 48
Loan origination offices 41 41
(1) On a taxable equivalent basis.
(2) Other operating expenses to the sum of net interest income and other
income.
RESULTS OF OPERATIONS
First BanCorp's results of operations depend primarily upon its net
interest income, which is the difference between the interest income earned on
its earning assets, including investment securities and loans, and the interest
expense on its interest bearing liabilities including deposits and borrowings.
The Corporation's results of operations also depend on the provision for loan
losses; other income, mainly service charges and fees on loans; operating
expenses, such as personnel, occupancy and other costs; and on gains on sales of
securities.
For the quarter ended on September 30, 2000, the Corporation recorded
earnings of $16,699,212 or $0.56 per common share (basic and diluted), a per
share increase of 12% as compared to earnings of $16,208,146 or $0.50 per common
share (basic and diluted) for the third quarter of 1999. Earnings for the nine
months ended on September 30, 2000 amounted to $49,527,651 or $1.65 per common
share (basic) and $1.64 per common share (diluted), as compared to earnings of
$45,742,874 or $1.48 per common share (basic) and $1.47 per common share
(diluted) for the same period of 1999. On a per share basis-diluted, earnings
for the nine months ended on September 30, 2000 increased by 11.6% as compared
to earnings for the nine months ended on September 30, 1999.
Net Interest Income
Net interest income for the three and nine months ended on September 30,
2000 increased by $248,000 and by $6.0 million, respectively, as compared with
the same periods in 1999. On a taxable equivalent basis, net interest income for
the three and nine months ended on September 30, 2000 decreased by $1.6 million
and increased by $3.0 million, respectively. The interest rate spread and net
interest margin, on a taxable equivalent basis, amounted to 3.16% and 3.69%,
respectively, for the third quarter of 2000 as compared to 4.19% and 4.70%,
respectively, for the third quarter of 1999. The interest rate spread and net
interest margin, on a taxable equivalent basis, amounted to 3.52% and 4.06%,
respectively, for the nine months ended on September 30, 2000 as compared to
4.45% and 4.98%, respectively, for the nine months ended on September 30, 1999.
The reduction in the interest rate spread and net interest margin is primarily
attributed to the increase in the average volume of total investments and total
commercial loans when compared to the increase in the average volume of consumer
loans. The interest rate spread for investments and commercial loans is lower
than the spread for consumer loans.
Part I of the following table presents average volumes and rates on a
taxable equivalent basis and Part II describes the respective extent to which
changes in interest rates and changes in volume of interest-related assets and
liabilities have affected the Corporation's interest income and interest expense
during the periods indicated. For each category of earning assets and interest
bearing liabilities, information is provided on changes attributable to (i)
changes in volume (changes in volume multiplied by old rates), (ii) changes in
rate (changes in rate multiplied by old volumes). Rate-volume variances (changes
in rate multiplied by the changes in volume) have been allocated to the changes
in volume and changes in rate based upon their respective percentage of the
combined totals.
PART I Three months ended September 30,
Interest income (1) /
Average volume expense Average rate (1)
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
(Dollars in Thousands)
Earning assets:
Deposits at banks and other
short-term investments $ 7,444 $ 14,276 $ 122 $ 138 6.52% 3.83%
Government obligations 542,217 454,848 9,506 7,012 6.97% 6.12%
Mortgage backed securities 1,495,698 1,300,171 25,502 23,285 6.78% 7.11%
FHLB stock 17,827 17,827 311 315 6.94% 7.01%
Other investment 56,123 9,667 1,216 231 8.62% 9.46%
------------ ------------- --------- ---------
Total investments 2,119,309 1,796,789 36,657 30,980 6.88% 6.84%
---------- ---------- -------- --------
Residential real estate loans 589,007 330,821 12,519 8,061 8.46% 9.67%
Construction loans 174,344 113,753 5,552 2,406 12.67% 8.39%
Commercial loans 1,291,676 938,913 29,592 20,142 9.11% 8.51%
Finance leases 107,734 72,855 3,251 2,292 12.00% 12.48%
Consumer loans 1,026,181 1,015,549 34,978 34,351 13.56% 13.42%
----------- ---------- --------- -------
Total loans (2) 3,188,942 2,471,891 85,892 67,252 10.72% 10.79%
----------- ----------- --------- --------
Total earning assets $5,308,251 $4,268,680 $122,549 $98,232 9.18% 9.13%
========== ========== ======== =======
Interest-bearing liabilities:
Deposits $2,866,624 $2,120,869 $ 41,206 $24,846 5.72% 4.65%
Other borrowed funds 1,928,504 1,710,421 31,325 22,839 6.46% 5.30%
FHLB advances 49,308 43 815 _______ 6.58% 0.00%
------------ ----------------- -----------
Total interest-bearing liabilities $4,844,436 $3,831,333 $73,346 $47,685 6.02% 4.94%
========== =========== ======= =======
Net interest income $49,203 $50,547
======= =======
Interest rate spread 3.16% 4.19%
Net interest margin 3.69% 4.70%
PART II Nine months ended September 30,
Interest income (1) /
Average volume expense Average rate (1)
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
(Dollars in Thousands)
Earning assets:
Deposits at banks and other
short-term investments $ 10,241 $ 10,068 $ 420 $ 346 5.48% 4.59%
Government obligations 514,030 396,644 26,080 17,595 6.78% 5.93%
Mortgage backed securities 1,427,710 1,292,108 74,160 69,560 6.94% 7.20%
FHLB stock 17,827 15,612 909 798 6.81% 6.83%
Other investment 48,725 4,552 3,111 381 8.53% 11.19%
----------- ------------- --------- ----------
Total investments 2,018,533 1,718,984 104,680 88,680 6.93% 6.90%
---------- ---------- -------- --------
Residential real estate loans 529,374 317,813 34,003 23,867 8.58% 10.04%
Construction loans 162,493 84,424 13,320 5,437 10.95% 8.61%
Commercial loans 1,166,625 805,969 79,601 53,956 9.11% 8.95%
Finance leases 98,292 64,341 8,947 6,215 12.16% 12.91%
Consumer loans 1,022,790 1,009,201 105,695 101,928 13.80% 13.50%
------------ ---------- --------- ---------
Total loans(2) 2,979,574 2,281,748 241,566 191,403 10.83% 11.22%
----------- ----------- --------- ---------
Total earning assets $4,998,107 $4,000,732 $346,246 $ 280,083 9.25% 9.36%
========== ========== ======== =========
Interest-bearing liabilities:
Deposits $2,677,409 $1,842,494 $108,485 $ 63,693 5.41% 4.62%
Other borrowed funds 1,812,064 1,729,546 83,901 67,417 6.18% 5.21%
FHLB advances 40,538 1,000 1,931 36 6.36% 4.81%
------------- -------------- ----------- -------------
Total interest-bearing liabilities $4,530,011 $3,573,040 $194,317 $131,146 5.73% 4.91%
========== ========== ======== ========
Net interest income $151,929 $148,937
======== ========
Interest rate spread 3.52% 4.45%
Net interest margin 4.06% 4.98%
(1) On a tax equivalent basis. The tax equivalent yield was computed dividing
the interest rate spread on exempt assets by (1- statutory tax rate) and
adding to it the cost of interest bearing liabilities. When adjusted to a
tax equivalent basis, yields on taxable and exempt assets are comparative.
(2) Non-accruing loans are included in the average balances.
PART II Three months ended on September 30, Nine months ended on September 30,
2000 compared to 1999 2000 compared to 1999
---------------------------------- -------------------------------
Variance Variance Variance Variance
due to due to Total due to due to Total
volume rate variance volume rate variance
(In thousands)
Interest income on earning assets:
Deposits at banks and other
short-term investments $ (89) $ 73 $ (16) $ 6 $ 68 $ 74
Government obligations 1,441 1,053 2,494 5,725 2,759 8,484
Mortgage backed securities 3,369 (1,151) 2,218 7,216 (2,616) 4,600
FHLB stock (4) (4) 114 (3) 111
Other investment 1,002 (17) 985 3,199 (469) 2,730
------- ------- ------- -------- ------- -------
Total investments 5,723 (46) 5,677 16,260 (261) 15,999
------- ------- ------ ------- ------- ------
Real estate loans 5,850 (1,392) 4,458 14,775 (4,640) 10,135
Construction loans 1,608 1,538 3,146 6,093 1,790 7,883
Commercial loans 7,950 1,500 9,450 24,639 1,006 25,645
Finance leases 1,067 (108) 959 3,193 (461) 2,732
Consumer loans 314 314 628 1,420 2,347 3,767
-------- ------- ------- --------- ------- --------
Total loans 16,789 1,852 18,641 50,120 42 50,162
------ ------ ------ -------- --------- -------
Total interest income 22,512 1,806 24,318 66,380 (219) 66,161
------ ------ ------ -------- ------- -------
Interest expense on interest bearing liabilities:
Deposits 9,884 6,476 16,360 32,518 12,274 44,792
Other borrowed funds 3,115 5,371 8,486 3,354 13,130 16,484
FHLB advances 815 815 1,879 16 1,895
---------------------- --------- --------------------- --------
Total interest expense 13,814 11,847 25,661 37,751 25,420 63,171
------ --------- ------- -------- --------- ------
Change in net interest income $ 8,698 $(10,041) $(1,343) $28,521 $(25,531) $ 2,990
======= ======== ======= ======= ======== =======
Total interest income includes tax equivalent adjustments based on the
Puerto Rico income tax rate of $2.2 million and $8.2 million for the three and
nine months ended on September 30, 2000, and of $3.8 million and $11.2 million
for the three and nine months ended on September 30, 1999. The adjustments have
been made on debt securities (primarily United States and Puerto Rico government
obligations) and on loans guaranteed by United States and Puerto Rico government
agencies. The computation considers the interest expense disallowance as
required by the Puerto Rico tax law.
Interest Income
Interest income increased by $25.9 million and $69.1 million for the
three and nine months ended on September 30, 2000 as compared to the same
periods for 1999. When adjusted to a taxable equivalent basis, interest income
increased by $24.3 million and $66.2 million for the three and nine months ended
on September 30, 2000 as compared to the same periods in 1999. The yield on
earning assets, on a taxable equivalent basis, amounted to 9.18% and 9.13% for
the three months ended on September 30, 2000 and 1999, respectively, and 9.25%
and 9.36% for the nine months ended on September 30, 2000 and 1999,
respectively. The growth in interest income for the periods analyzed was due to
the increase in the average volume of earning assets. The average volume of
earning assets increased by $1,039.6 million and $997.4 million for the three
and nine months ended on September 30, 2000, as compared to the same periods in
1999.
The average volume of total investments increased by $322.5 million and
$299.5 million for the three and nine months period ended on September 30, 2000
as compared with the same periods in 1999, mostly concentrated in mortgage
backed securities and government obligations.
The average volume of the loan portfolio increased by $717.1 million and
$697.8 million for the three and nine months ended on September 30, 2000 as
compared with the same periods in 1999, due to an increase in real estate,
construction and commercial loans. Residential real estate, construction loans,
commercial loans, finance leases and consumer loans increased by $211.6 million,
$78.1 million, $360.7 million, $34.0 million and $13.6 million, respectively,
for the nine months ended on September 30, 2000 as compared to the same period
in 1999.
Interest Expense
Interest expense increased by $25.7 million and $63.2 million for the
three and nine months ended on September 30, 2000 as compared with the amounts
recorded in the same periods of 1999. The increase in interest expense due to
volume amounted to $13.8 million and $37.8 million for the three and nine months
ended on September 30, 2000 as compared to the same periods ended on September
30, 1999. The increase in interest expense due to rate amounted to $11.8 million
and $25.4 million for the three and nine months ended on September 30, 2000 as
compared to the same periods ended on September 30, 1999. The cost of interest
bearing liabilities increased from 4.94% and 4.91% for the three and nine months
period ended on September 30, 1999 to 6.02% and 5.73% for the three and nine
months period ended on September 30, 2000.
Provision for Loan Losses
For the three and nine months ended on September 30, 2000, the
Corporation provided $11.6 million and $34.7 million, respectively, for possible
loan losses as compared to $11.0 million and $37.8 million, for the same periods
of 1999. The provision for loan losses recorded during 2000 reflects a lower
provision need due to lower charge-offs. This decrease was achieved even though
non-performing assets increased at September 30, 2000 by $16.1 million. The
increase was due to the merger with FVI, which at September 30, 2000 had $6.8
million in non-performing assets with a reserve of $1.4 million. (See Other
adjustment in the analysis of the allowance for possible loan losses table). In
addition, a $9.9 million commercial loan became non-performing in September 2000
for which the estimated allowance for possible loan losses was allocated from
reserves previously allocated to consumer loans. The reserve allocated to
consumer loans has decreased as a result of the decrease in the loss ratio due
to the significant improvement in the credit quality of this portfolio.
The Corporation maintains an allowance for loan losses on its portfolio
at a level that Management considers adequate to provide for potential losses in
the portfolio based upon an evaluation of known and inherent risks. The
Corporation establishes a quarterly allowance for loan losses based on the asset
classification report to cover the total amount of any assets classified as a
"loss," the potential loss exposure of other classified assets, and a percentage
of the assets not classified. The adequacy of the allowance for loan losses is
also based upon a number of additional factors including historical loan loss
experience, current economic conditions, value of the underlying collateral,
financial condition of the borrowers and other pertinent factors. Although
Management believes that the allowance for loan losses is adequate, factors
beyond the Corporation's control, including factors affecting the Puerto Rico
economy, may contribute to delinquencies and defaults thus necessitating
additional reserves.
The following table sets forth an analysis of the activity in the allowance
for loan losses during the periods indicated:
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
(Dollars in thousands)
Allowance for loan losses, beginning of period $74,100 $70,762 $71,784 $67,854
Provision for loan losses 11,566 11,017 34,744 37,766
-------- ------- ------- -------
Loans charged-off:
Residential real estate
Commercial (850) (1) (2,650) (744)
Finance leases (702) (1,928) (465)
Consumer (11,327) (12,876) (34,676) (38,627)
Other assets (1) (155) (32) (569)
----------- --------- ---------- ---------
Total charge-offs (12,880) (13,032) (39,286) (40,405)
------- ------- ------- -------
Recoveries of loans previously charged-off:
Residential real estate
Commercial 209 35 346 111
Finance leases 52 175 168 226
Consumer 1,956 2,346 7,230 5,529
Other assets 2 46 20 267
------------ ----------- ---------- ----------
Total recoveries 2,219 2,602 7,763 6,134
--------- -------- -------- ---------
Net charge-offs (10,661) (10,430) (31,523) (34,272)
-------- ------- ------- -------
Other adjustment 1,440 787 1,440 787
--------- --------- --------- ----------
Allowance for loan losses, end of period $76,445 $72,136 $76,445 $72,136
======= ======= ======= =======
Allowance for loan losses to total loans and loans
held for sale 2.30% 2.86% 2.30% 2.86%
Net charge-offs annualized to average loans
outstanding during the period 1.34% 1.69% 1.41% 2.00%
Other Income
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
--------------- ------------ --------------- -------------
Service charges on deposit accounts $2,070,993 $2,310,283 $6,685,821 $6,271,661
Other fees on loans 5,605,491 3,524,951 13,348,169 9,441,374
Fees on loans serviced for others 128,007 193,839 412,338 682,146
Mortgage banking activities (3,398) (5,796) (3,398) 5,753
Rental income 704,907 665,816 1,739,520 1,902,523
Other operating income 2,935,772 1,791,694 7,114,466 4,488,297
------------- ----------- ------------ ------------
Subtotal 11,441,772 8,480,787 29,296,916 22,791,754
Gain on sale of investments 1,855,368 40,297 6,812,772 1,348,583
Trading income _ 419,367 75,000
------------------------------------- -------------- ---------------
Total $13,297,140 $8,521,084 $36,529,055 $24,215,337
=========== ========== =========== ===========
Other income primarily consists of service charges on deposit accounts,
fees on loans, commissions derived from various banking activities, the results
of trading activities and gains on sale of investments. Service charges on
deposit accounts represent an important and stable source of other income for
the Corporation. Other fees on loans consist mainly of credit card fees and late
charges collected on loans. Total other income also increased due to the fees
generated by the new business acquired during the second semester of 1999. (See
following section on Other Operating Expenses).
The Corporation's second tier subsidiary, First Leasing and Rental
Corporation, generates income on the rental of various types of motor vehicles.
The other operating income category is composed of miscellaneous fees
such as check fees and rental of safe deposit boxes.
The Corporation recorded $1.9 million and $6.8 million during the three
and nine months ended September 30, 2000 and $40,297 and $1.3 million during the
three and nine months ended September 30, 1999 from gains on sale of investments
securities. These gains reflect market opportunities that arose and that are in
consonance to the Corporation's investment policies.
Other Operating Expenses
The following table presents the detail of other operating expenses for
the periods indicated:
Three months ended Nine months ended
September 30, September 30,
------------------------------------------------------------------
2000 1999 2000 1999
--------------- ------------ ------------ ------------
Employees' compensation and benefits $12,642,990 $12,069,042 $38,055,926 $34,637,628
Occupancy and equipment 5,670,479 5,216,582 16,845,794 14,660,489
Taxes and insurance 1,840,870 1,632,098 5,037,206 4,895,071
Net cost (gain) of operations and
disposition of other real estate owned (34,130) 14,715 20,491 (285,661)
Amortization of debt issuance costs 88,878 159,701 263,720 471,557
Professional fees 619,794 550,781 1,967,435 1,607,727
Servicing and processing fees 1,607,515 1,206,360 4,565,018 3,291,018
Communications 1,453,743 1,228,700 4,190,636 3,434,792
Supplies and printing 250,024 295,772 868,397 994,467
Other 4,346,678 3,509,779 12,940,756 10,074,695
------------- ------------- ------------ ------------
Total $28,486,841 $25,883,530 $84,755,379 $73,781,783
=========== =========== =========== ===========
Operating expenses increased to $28.5 million and $84.8 million for the
three and nine months ended September 30, 2000 as compared to $25.9 million and
$73.8 million for the same periods in 1999. Management's goal has been to make
only expenditures that contribute clearly and directly to increase the
efficiency and profitability of the Corporation. This control over other
operating expenses has been an important factor contributing to the improvement
in earnings in recent years. The best measure of the success of this program is
the efficiency ratio, which is the ratio of other operating expenses to the sum
of net interest income and other income. The Corporation's efficiency ratio was
47.0% and 45.6% for the nine months period ended on September 30, 2000 and 1999,
respectively.
The increase in operating expenses for 2000 is mainly the result of the
investments made in new technology, the expansion of the Corporation's branch
network, the acquisition of new business and branches and the staffing of the
commercial lending business to support the growth in the portfolio. During 1999
the Corporation opened a new full-service branch and two in-store branches. In
July of 1999, the Corporation acquired the Royal Bank's operations in Puerto
Rico including its full service branch in the financial district of Hato Rey. In
August of 1999, the Corporation acquired the credit card portfolio of Western
Auto. In December of 1999, the Corporation acquired four branches from CitiBank.
To emphasize the commercial lending area, the Corporation recruited new officers
for the origination of loans to the middle market throughout selected branches.
Provision for Income Tax
The provision for income tax amounted to $11.2 million (or 18.44% of
pretax earnings) for the nine months ended on September 30, 2000 as compared to
$4.7 million (or 9.23% of pretax earnings) for the same period in 1999. The
increase in the effective tax rate is attributed to the growth in the loan
portfolio resulting in an increase in taxable income. The Corporation has
effectively reduced the enacted tax rate of 39%, through the strategy of
investing in tax exempt securities.
FINANCIAL CONDITION
Assets
Total assets amounted to $5,648.7 million as of September 30, 2000, an
increase of $927.10 million as compared to total assets of $4,721.6 million as
of December 31, 1999. This increase was primarily attributed to an increase of
$336.6 million in total investments and $572.6 million in total loans.
The composition of loans receivable and loans available for sale:
September 30, December 31, Increase
2000 1999 (Decrease)
-------------- -------------------- --------
(In thousands)
Residential real estate loans $ 665,177 $ 473,563 $ 191,614
---------- ----------- ----------
Commercial real estate loans 450,407 371,643 78,764
Construction loans 181,806 132,068 49,738
Commercial loans 880,084 655,417 224,667
----------- ------------ ---------
Total commercial 1,512,297 1,159,128 353,169
---------- ----------- ---------
Finance leases 111,086 85,692 25,394
----------- ------------- ----------
Consumer and other loans 1,029,447 1,026,985 2,462
----------- ----------- -----------
Total $3,318,008 $2,745,368 $572,640
========== ========== ========
The fluctuation in the loans receivable category represents the net
effect of total loan origination of $930.7 million and repayments and other
adjustments of $358.1 million. The Corporation continued its strategy of
diversifying its loan portfolio composition through the origination of
commercial loans, resulting in an increase of $353.2 million in the commercial
loan portfolio. Residential real estate loans increased by $191.6 million as a
result of new resources added to this line of business. Finance leases, which
are mostly composed of loans to individuals to finance the acquisition of an
auto, increased by $25.4 million.
As a result of the merger with FVI, FirstBank acquired total assets of
$56.3 million, including $459 million on loans receivable and $7.5 million on
investments.
Non-performing Assets
Total non-performing assets are the sum of non-accruing loans, OREO's
and other repossessed properties. Non-accruing loans are loans as to which
interest is no longer being recognized. When loans fall into non-accruing
status, all previously accrued and uncollected interest is charged against
interest income.
At September 30, 2000, total non-performing assets amounted to $73.5
million (1.30% of total assets) as compared to $57.4 million (1.22% of total
assets) at December 31, 1999 and $62.9 million (1.57% of total assets) at
December 31, 1998.
The increase of $16.1 million in non-performing assets as of September
30, 2000 when compared to December 31, 1999 was due to the merger with FVI,
which at September 30, 2000 had $6.8 million in non-performing assets. In
addition, a $9.9 million commercial loan was reclassified to non-accruing status
during the third quarter of 2000.
Past due loans are loans delinquent 90 days or more as to principal
and/or interest and still accruing interest.
The following table presents non-performing assets at the dates
indicated:
September 30, December 31,
2000 1999 1998
----------- ---------- --------
(Dollars in thousands)
Non-accruing loans:
Residential real estate $13,556 $ 8,633 $ 9,151
Commercial and commercial real estate 34,759 17,975 19,355
Finance leases 1,754 2,482 1,716
Consumer 17,167 24,726 26,736
-------- ------ --------
67,236 53,816 56,958
Other real estate owned (OREO) 3,084 517 3,642
Other repossessed property 3,160 3,112 2,277
--------- --------- ---------
Total non-performing assets $73,480 $57,445 $62,877
======= ======= =======
Past due loans $15,090 $13,781 $15,110
Non-performing assets to total assets 1.30% 1.22% 1.57%
Non-performing loans to total loans 2.03% 1.96% 2.69%
Allowance for loan losses $76,445 $71,784 $67,854
Allowance to total non-performing loans 113.70% 133.39% 119.13%
Non-accruing Loans
Residential Real Estate Loans - The Corporation classifies all
residential real estate loans delinquent 90 days or more in non-accruing status.
Even though these loans are in non-accruing status, Management considers based
on the value of the underlying collateral and the loan to value ratios, that no
material losses will be incurred in this portfolio. Management's understanding
is based on the historical experience of the Corporation. Non-accruing
residential real estate loans amounted to $13.6 million (2.04% of total
residential real estate loans) at September 30, 2000, as compared to $8.6
million (1.82% of total residential real estate loans) and $9.2 million (3.02%
of total residential real estate loans) at December 31, 1999 and 1998,
respectively.
Commercial Loans - The Corporation places all commercial loans
(including commercial real estate and construction loans) 90 days delinquent as
to principal and interest in non-accruing status. The risk exposure of this
portfolio is diversified. Non-accruing commercial loans amounted to $34.8
million (2.30% of total commercial loans) at September 30, 2000 as compared to
$18.0 million (1.55% of total commercial loans) and $19.4 million (2.53% of
total commercial loans) at December 31, 1999 and 1998, respectively.
Finance Leases - Finance leases are classified as non-accruing status
when they are delinquent 90 days or more. Non-accruing finance leases amounted
to $1.8 million (1.58% of total finance leases) at September 30, 2000, as
compared to $2.5 million (2.90% of total finance leases) and $1.7 million (3.29%
of total finance leases) at December 31, 1999 and 1998, respectively.
Consumer Loans - Consumer loans are classified as non-accruing when
they are delinquent 90 days in auto, boat and home equity reserve loans, 120
days in personal loans (including small loans) and 180 days in credit cards and
personal lines of credit.
Non-accruing consumer loans amounted to $17.2 million (1.67% of the
total consumer loan portfolio) at September 30, 2000, $24.7 million (or 2.41% of
the total consumer loan portfolio) at December 31, 1999 and $26.7 million (or
2.67% of the total consumer loan portfolio) at December 31, 1998. The decrease
in the ratio and amount of non-accruing loans was the result of the improvement
on the credit quality of the portfolio.
Other Real Estate Owned (OREO)
OREO acquired in settlement of loans is carried at the lower of cost
(carrying value of the loan) or fair value less estimated cost to sell off the
real estate at the date of acquisition.
Other Repossessed Property
The other repossessed property category includes repossessed boats and
autos acquired in settlement of loans. Repossessed boats are recorded at the
lower of cost or estimated fair value. Repossessed autos are recorded at the
principal balance of the loans less an estimated loss on the disposition of
certain units.
Past Due Loans
Past due loans are accruing commercial and consumer loans, which are
contractually delinquent 90 days or more. Past due commercial loans are current
as to interest but delinquent in the payment of principal. Past due consumer
loans include personal lines of credit and credit card loans delinquent 90 days
up to 179 days and personal loans (including small loans) delinquent 90 days up
to 119 days.
Sources of Funds
Total liabilities amounted to $5,328.0 million as of September 30,
2000, an increase of $901.3 million as compared to $4,426.7 million as of
December 31, 1999. The increase in total liabilities was primarily due to: (1)
an increase in total deposits of $657.0 million; (2) an increase in federal
funds and securities sold under agreements to repurchase of $365.8 million; (3)
an increase in advances from FHLB of $7.6 million; (4) an increase in accounts
payable and other liabilities of $10.0 million; net of (5) a decrease in other
short term borrowings of $138.0 million.
The Corporation maintains unsecured standby lines of credit with other
banks. At September 30, 2000, the Corporation's total unused lines of credit
with these banks amounted to approximately $121,500,000 (1999 - $123,500,000).
At September 30, 2000, the Corporation has an available line of credit with the
FHLB guaranteed with excess collateral, in the amount of $79,490,687 (1999 -
$2,812,126).
Capital
Total stockholders' equity amounted to $320.7 million as of September
30, 2000, an increase of $25.8 million from the balance as of December 31, 1999.
This increase was primarily attributed to $49.5 million in net income generated
for the period ended on September 30, 2000, an increase in the valuation on
securities available for sale of $19.9 million, dividends paid of $13.7 million,
and the repurchase of 1,642,400 shares of common stock at a total cost of $30.1
million.
The Corporation is subject to various regulatory capital requirements
imposed by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Corporation must meet specific capital guidelines that involve quantitative
measures of the Corporation's assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Corporation's
capital amounts and classification are also subject to qualitative judgment by
the regulators about components, risk weightings and other factors.
Capital standards established by regulations require the Corporation to
maintain minimum amounts and ratios of Tier 1 capital to total average assets
(leverage ratio) and ratios of Tier 1 and total capital to risk-weighted assets,
as defined in the regulations. The total amount of risk-weighted assets is
computed by applying risk weighting factors to the Corporation's assets, which
vary from 0% to 100% depending on the nature of the asset.
At September 30, 2000 and December 31, 1999, the Corporation exceeded
the requirements for an adequately capitalized institution.
At September 30, 2000 and December 31, 1999, the Corporation also was a
well capitalized institution under the regulatory framework for prompt
corrective action. To be categorized as well capitalized the Corporation must
maintain minimum total risk based, Tier 1 risk based and Tier 1 leverage ratios
as set forth in the following table. Management believes that there are no
conditions or events that have changed that classification.
The Corporation's regulatory capital position was as follows:
Regulatory requirements
Regulatory requirements
For capital
Actual adequacy purposes To be well capitalized
Amount Ratio Amount Ratio Amount Ratio
At September 30, 2000 (Dollars in thousands)
Total Capital (to Risk-Weighted Assets):
First BanCorp $473,459 13.51% $280,292 8% $350,364 10%
FirstBank 437,105 12.60% 277,577 8% 346,971 10%
Tier I Capital (to Risk-Weighted Assets):
First BanCorp $336,827 9.61% $140,146 4% $210,219 6%
FirstBank 300,893 8.67% 138,788 4% 208,183 6%
Tier I Capital (to Average Assets):
First BanCorp $336,827 6.18% $163,408 3% $272,346 5%
FirstBank 300,893 5.57% 162,010 3% 270,017 5%
At December 31, 1999
Total Capital (to Risk-Weighted Assets):
First BanCorp $468,261 16.16% $231,758 8% $289,697 10%
FirstBank 409,173 14.26% 229,608 8% 287,010 10%
Tier I Capital (to Risk-Weighted Assets):
First BanCorp $337,284 11.64% $115,879 4% $173,818 6%
FirstBank 279,383 9.73% 114,804 4% 172,206 6%
Tier I Capital (to Average Assets):
First BanCorp $337,284 7.47% $135,473 3% $225,789 5%
FirstBank 279,383 6.26% 133,953 3% 223,255 5%
Dividends
During the period ended on September 30, 2000, the Corporation declared
three quarterly cash dividends of $0.11 per common share representing a 22%
increase over the three quarterly cash dividends of $0.09 per common share
declared during the same period ended on September 30, 1999. Total dividends
declared per common share amounted to $8.9 million for the period ended on
September 30, 2000 for an annualized dividend payout ratio of 19.90% as compared
to $7.8 million for the period ended September 30, 1999 (or a 18.22% dividend
payout ratio). Dividends declared on preferred stock amounted to $4.8 million
for the period ended on September 30, 2000 as compared to $2.7 million for the
period ended on September 30, 1999.
Liquidity
Liquidity refers to the level of cash and eligible investments readily
available to meet loan and investment commitments, potential deposit outflows
and debt repayments. The Corporation's liquidity position and liquidity targets
are reviewed on a weekly basis by the Asset Liability Management and Investment
Committee, using measures of liquidity developed by Management.
The Corporation's principal sources of short-term funds are loan
repayments, deposits, securities sold under agreements to repurchase, and lines
of credit with the FHLB and other financial institutions. The Investment
Committee reviews credit availability on a regular basis. In addition, the
Corporation has securitized and sold auto and mortgage loans as a supplementary
source of funding. The Corporation has obtained long-term funding through the
issuance of notes and long-term institutional certificates of deposit. The
Corporation's principal uses of funds are the origination of loans and
investments, and the repayment of maturing deposit accounts and borrowings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required herein is incorporated by reference from page 33
of the annual report to security holders for the year ended December 31, 1999.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Corporation is a defendant in a number of legal proceedings arising
out of, and incidental to its business. Based on its review with counsel on the
development of these matters to date, Management is of the opinion that the
ultimate aggregate liability, if any, resulting from these pending proceedings
will not have a material adverse effect on the accompanying consolidated
financial statements.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
On October 27, 2000 the Corporation filed a report on Form 8-A, for the
registration of the 8.35% Noncumulative Perpetual Monthly Income Preferred
Stock, Series B, $1.00 par value per share to be issued during the fourth
quarter of 2000. On October 31, 2000, the Corporation issued 2,620,000 shares of
preferred stock for a total amount of $65.5 million.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
a) None
b) On September 25, 2000, the Corporation filed a report on Form 8-K,
reporting under Item 5, the merger of First Virgin Islands Federal Savings Bank
with and into FirstBank Puerto Rico, after obtaining all required shareholder
and regulatory approvals.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Corporation has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized:
First BanCorp.
Name of the Corporation
Date: November 14, 2000 By: /s/ Angel Alvarez-Perez, Esq.
------------------------------
Angel Alvarez-Perez, Esq.
Chairman, President and Chief
Executive Officer
Date: November 14, 2000 By: /s/ Annie Astor de Carbonell
-----------------------------
Annie Astor de Carbonell
Senior Executive Vice President
and Chief Financial Officer