UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 12, 2015
First BanCorp.
(Exact name of registrant as specified in its charter)
Puerto Rico | 001-14793 | 66-0561882 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
1519 Ponce de Leon Ave., PO Box 9146, San Juan, Puerto Rico |
00908-0146 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: 787-729-8200
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
On March 12, 2015, First BanCorp., the bank holding company for FirstBank Puerto Rico (FirstBank), issued a press release announcing the reversal of a portion of the valuation allowance recorded against the deferred tax assets of FirstBank and a revision of earnings for the quarter and year ended December 31, 2014. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.
The Corporation has included in this release the following financial measures that are not recognized under generally accepted accounting principles, which are referred to as non-GAAP financial measures: (1) tangible book value per common share, and (ii) tangible common equity ratio. The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures generally used by the financial community to evaluate capital adequacy. Tangible common equity is total equity less preferred equity, goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible. Tangible assets are total assets less goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible. Management and many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase method of accounting for mergers and acquisitions. Neither tangible common equity nor tangible assets, or the related measures should be considered in isolation or as a substitute for stockholders equity, total assets, or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Corporation calculates its tangible common equity, tangible assets, and any other related measures may differ from that of other companies reporting measures with similar names.
The following table is a reconciliation of the Corporations tangible common equity and tangible assets as of December 31, 2014 to the comparable GAAP items:
(In thousands, except ratios and per share information) | ||||||||||||
December 31, 2014 (As Reported in February 5, 2015 Earnings Release) |
Adjustments | December 31, 2014 (As Revised) |
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Tangible Equity: |
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Total equity - GAAP |
$ | 1,367,241 | $ | 304,502 | $ | 1,671,743 | ||||||
Preferred equity |
(36,104 | ) | | (36,104 | ) | |||||||
Goodwill |
(28,098 | ) | | (28,098 | ) | |||||||
Purchased credit card relationship |
(16,389 | ) | | (16,389 | ) | |||||||
Core deposit intangible |
(5,420 | ) | | (5,420 | ) | |||||||
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Tangible common equity |
$ | 1,281,230 | $ | 304,502 | $ | 1,585,732 | ||||||
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Tangible Assets: |
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Total assets - GAAP |
$ | 12,424,396 | $ | 303,439 | $ | 12,727,835 | ||||||
Goodwill |
(28,098 | ) | | (28,098 | ) | |||||||
Purchased credit card relationship |
(16,389 | ) | | (16,389 | ) | |||||||
Core deposit intangible |
(5,420 | ) | | (5,420 | ) | |||||||
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Tangible assets |
$ | 12,374,489 | $ | 303,439 | $ | 12,677,928 | ||||||
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Common shares outstanding |
212,985 | | 212,985 | |||||||||
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Tangible common equity ratio |
10.35 | % | 12.51 | % | ||||||||
Tangible book value per common share |
$ | 6.02 | $ | 1.43 | $ | 7.45 |
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits. |
Exhibit No. |
Description of Exhibit | |
99.1 | Press Release of First BanCorp. dated March 12, 2015 - First BanCorp. Announces Reversal of Deferred Tax Asset Valuation Allowance and Revises Earnings for the Quarter and Year Ended December 31, 2014 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
First BanCorp. | ||||
March 13, 2015 | By: | /s/ Orlando Berges | ||
Name: | Orlando Berges | |||
Title: | EVP and Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
Description of Exhibit | |
99.1 | Press Release of First BanCorp. dated March 12, 2015 - First BanCorp. Announces Reversal of Deferred Tax Asset Valuation Allowance and Revises Earnings for the Quarter and Year Ended December 31, 2014 |
Exhibit 99.1
FIRST BANCORP. ANNOUNCES PARTIAL REVERSAL OF DEFERRED TAX ASSET VALUATION ALLOWANCE AND REVISES EARNINGS FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2014
SAN JUAN, Puerto Rico March 12, 2015 First BanCorp. (the Corporation) (NYSE: FBP), the bank holding company for FirstBank Puerto Rico (FirstBank or the Bank), today announced the reversal of a significant portion of the valuation allowance recorded against the deferred tax assets of its subsidiary bank, FirstBank. The reversal results in the recognition of a one-time income tax benefit in the fourth quarter of 2014 of approximately $302.9 million, or $1.42 per diluted share. The Corporations February 2015 earnings release noted the continuing evaluation of FirstBanks deferred tax asset valuation allowance. The Corporation has now concluded that, as of December 31, 2014, it is more likely than not that FirstBank will generate sufficient taxable income within the applicable net operating loss carry-forward periods to realize a significant portion of its deferred tax assets. This conclusion, and the resulting partial reversal of the deferred tax asset valuation allowance, is based upon consideration of a number of factors, including FirstBanks (i) completion of a sixth consecutive quarter of profitability and (ii) forecast of future profitability, under several potential scenarios where the Corporation has assigned more weight to its continued profitability than potential future growth which it is planning to achieve. As a result of the partial reversal, the Corporations deferred tax asset amounted to $313.0 million as of December 31, 2014, net of a valuation allowance of $204.6 million. As more objective information on the Banks planned growth and/or increased profitability becomes available, additional reversals of valuation allowance may be necessary. The ability to recognize the remaining deferred tax assets that continue to be subject to a valuation allowance will be evaluated on a quarterly basis to determine if there are any significant events that would affect FirstBanks ability to utilize these deferred tax assets.
As a result of this adjustment and the related effect on the deposit insurance premium assessment, the Corporations results for the fourth quarter and year ended December 31, 2014 are higher than the results announced on February 5, 2015. As revised, the Corporations net income for the fourth quarter of 2014 increased to $330.8 million, or $1.56 per diluted share, compared to the $26.3 million net income, or $0.12 per diluted share, previously announced in the February 5, 2015 earnings release. This result compares to $23.2 million, or $0.11 per diluted share, for the third quarter of 2014 and $14.8 million, or $0.07 per diluted share, for the fourth quarter of 2013. The revised net income for the year ended December 31, 2014 amounted to $392.3 million, or $1.87 per diluted share, compared to the $87.8 million net income, or $0.42 per diluted share, previously announced in the February 5, 2015 earnings release. This result compares to a net loss of $164.5 million, or $0.80 loss per diluted share, for the year ended December 31, 2013.
The revised book value per common share as of December 31, 2014 was $7.68 (the Corporation disclosed book value per share of $6.25 in the February 5, 2015 earnings release) and the revised tangible book value per common share was $7.45 (the Corporation disclosed tangible book value per common share of $6.02 in the February 5, 2015 earnings release). The revised tangible common equity ratio as of December 31, 2014 was 12.51% (the Corporation disclosed book value per share of 10.35% in the February 5, 2015 earnings release).
Safe Harbor
This press release may contain forward-looking statements concerning the Corporations future economic performance. The words or phrases expect, anticipate, look forward, should, believes and similar expressions are meant to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by such sections. The Corporation wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including, but not limited to, the following could cause actual results to differ materially from those expressed in, or implied by such forward-looking statements: uncertainty about whether the Corporation and FirstBank will be able to continue to fully comply with the written agreement dated June 3, 2010 that the
First BanCorp. Announces Partial Reversal of Deferred Tax Asset Valuation Allowance and
Revises Earnings for the Quarter and Year Ended December 31, 2014 Page 2 of 5
Corporation entered into with the Federal Reserve Bank of New York (the New York Fed) and the consent order dated June 2, 2010 that FirstBank entered into with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico (the FDIC Order) that, among other things, require FirstBank to maintain certain capital levels and reduce its special mention, classified, delinquent, and non-performing assets; the risk of being subject to possible additional regulatory actions; uncertainty as to the availability of certain funding sources, such as retail brokered certificates of deposit (brokered CDs); the Corporations reliance on brokered CDs and its ability to obtain, on a periodic basis, approval from the FDIC to issue brokered CDs to fund operations and provide liquidity in accordance with the terms of the FDIC Order; the risk of not being able to fulfill the Corporations cash obligations or resume paying dividends to the Corporations stockholders in the future due to the Corporations need to receive approval from the New York Fed or the Board of Governors of the Federal Reserve System (the Federal Reserve Board) to receive dividends from FirstBank, or FirstBanks failure to generate sufficient cash flow to make a dividend payment to the Corporation; the strength or weakness of the real estate markets and of the consumer and commercial sectors and their impact on the credit quality of the Corporations loans and other assets, which has contributed and may continue to contribute to, among other things, high levels of non-performing assets, charge-offs and provisions for loan and lease losses and may subject the Corporation to further risk from loan defaults and foreclosures; additional adverse changes in general economic conditions in Puerto Rico, the United States (U.S.), and the U.S. Virgin Islands (USVI) and British Virgin Islands (BVI), including the interest rate environment, market liquidity, housing absorption rates, real estate prices, and disruptions in the U.S. capital markets, which has reduced and may once again reduce interest margins and impact funding sources, and has affected demand for all of the Corporations products and services and reduce the Corporations revenues and earnings, and the value of the Corporations assets; the ability of FirstBank to realize the benefits of its deferred tax assets subject to the remaining valuation allowance; a credit default by the Puerto Rico government or any of its public corporations or other instrumentalities, and recent and any future downgrades of the long-term and short-term debt ratings of the Puerto Rico government, which could exacerbate Puerto Ricos adverse economic conditions; an adverse change in the Corporations ability to attract new clients and retain existing ones; a decrease in demand for the Corporations products and services and lower revenues and earnings because of the continued recession in Puerto Rico, the current fiscal problems of the Puerto Rico government and recent credit downgrades of the Puerto Rico governments debt; the risk that any portion of the unrealized losses in the Corporations investment portfolio is determined to be other-than-temporary, including unrealized losses on the Puerto Rico governments obligations; uncertainty about regulatory and legislative changes for financial services companies in Puerto Rico, the U.S., and the USVI and the BVI, which could affect the Corporations financial condition or performance and could cause the Corporations actual results for future periods to differ materially from prior results and anticipated or projected results; changes in the fiscal and monetary policies and regulations of the U.S. federal government and the Puerto Rico government, including those determined by the Federal Reserve Board, the New York Fed, the FDIC, government-sponsored housing agencies, and regulators in Puerto Rico, the USVI and the BVI; the risk of possible failure or circumvention of controls and procedures and the risk that the Corporations risk management policies may not be adequate; the risk that the FDIC may increase the deposit insurance premium and/or require special assessments to replenish its insurance fund, causing an additional increase in the Corporations non-interest expenses; the impact on the Corporations results of operations and financial condition of acquisitions and dispositions, including the recent acquisition of certain assets, ten branches and related deposits previously owned by Doral Bank; a need to recognize impairments on financial instruments, goodwill, or other intangible assets relating to acquisitions; the risk that downgrades in the credit ratings of the Corporations long-term senior debt will adversely affect the Corporations ability to access necessary external funds; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the Corporations businesses, business practices, and cost of operations; and general competitive factors and industry consolidation. The Corporation does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by the federal securities laws.
First BanCorp. Announces Partial Reversal of Deferred Tax Asset Valuation Allowance and
Revises Earnings for the Quarter and Year Ended December 31, 2014 Page 3 of 5
FIRST BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (REVISED) (a)
Quarter Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
(In thousands, except per share information) | 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||
Net interest income: |
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Interest income |
$ | 158,293 | $ | 156,662 | $ | 162,690 | $ | 633,949 | $ | 645,788 | ||||||||||
Interest expense |
29,141 | 28,968 | 30,031 | 115,876 | 130,843 | |||||||||||||||
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Net interest income |
129,152 | 127,694 | 132,659 | 518,073 | 514,945 | |||||||||||||||
Provision for loan and lease losses |
23,872 | 26,999 | 22,969 | 109,530 | 243,751 | |||||||||||||||
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Net interest income after provision for loan and lease losses |
105,280 | 100,695 | 109,690 | 408,543 | 271,194 | |||||||||||||||
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Non-interest income (loss): |
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Service charges on deposit accounts |
4,155 | 4,205 | 4,114 | 16,709 | 16,974 | |||||||||||||||
Mortgage banking activities |
4,472 | 3,809 | 3,906 | 14,685 | 16,830 | |||||||||||||||
Net (loss) gain on investments and impairments |
(172 | ) | (245 | ) | | (126 | ) | (159 | ) | |||||||||||
Equity in (loss) earnings of unconsolidated entity |
| | (5,893 | ) | (7,279 | ) | (16,691 | ) | ||||||||||||
Impairment of collateral pledged to Lehman |
| | | | (66,574 | ) | ||||||||||||||
Other non-interest income |
9,438 | 8,405 | 10,358 | 37,359 | 34,131 | |||||||||||||||
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Total non-interest income (loss) |
17,893 | 16,174 | 12,485 | 61,348 | (15,489 | ) | ||||||||||||||
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Non-interest expenses: |
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Employees compensation and benefits |
33,854 | 33,877 | 31,428 | 135,422 | 130,815 | |||||||||||||||
Occupancy and equipment |
14,763 | 14,727 | 15,684 | 58,290 | 60,746 | |||||||||||||||
Business promotion |
4,491 | 3,925 | 5,251 | 16,531 | 15,977 | |||||||||||||||
Professional fees |
13,439 | 12,054 | 11,619 | 47,940 | 49,444 | |||||||||||||||
Taxes, other than income taxes |
4,482 | 4,528 | 4,100 | 18,089 | 18,109 | |||||||||||||||
Insurance and supervisory fees |
7,864 | 9,493 | 11,452 | 39,131 | 48,470 | |||||||||||||||
Net loss on other real estate owned operations |
3,655 | 4,326 | 13,321 | 20,596 | 42,512 | |||||||||||||||
Other non-interest expenses |
11,171 | 10,674 | 13,686 | 42,254 | 48,955 | |||||||||||||||
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Total non-interest expenses |
93,719 | 93,604 | 106,541 | 378,253 | 415,028 | |||||||||||||||
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Income (loss) before income taxes |
29,454 | 23,265 | 15,634 | 91,638 | (159,323 | ) | ||||||||||||||
Income tax benefit (expense) |
301,324 | (64 | ) | (845 | ) | 300,649 | (5,164 | ) | ||||||||||||
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Net income (loss) |
$ | 330,778 | $ | 23,201 | $ | 14,789 | $ | 392,287 | $ | (164,487 | ) | |||||||||
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Net income (loss) attributable to common stockholders |
$ | 330,778 | $ | 23,201 | $ | 14,789 | $ | 393,946 | $ | (164,487 | ) | |||||||||
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Earnings (loss) per common share: |
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Basic |
$ | 1.57 | $ | 0.11 | $ | 0.07 | $ | 1.89 | $ | (0.80 | ) | |||||||||
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Diluted |
$ | 1.56 | $ | 0.11 | $ | 0.07 | $ | 1.87 | $ | (0.80 | ) | |||||||||
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(a) | This statement of income has been revised from that included in the Corporations February 5, 2015 earnings release to reflect the $302.9 million partial reversal of the deferred tax assets valuation allowance and the related effect on the deposit insurance premium assessment, which will be discussed in detail in the Corporations Annual Report on Form 10-K. |
First BanCorp. Announces Partial Reversal of Deferred Tax Asset Valuation Allowance and
Revises Earnings for the Quarter and Year Ended December 31, 2014 Page 4 of 5
FIRST BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (REVISED) (a)
As of | ||||||||||||
December 31, | September 30, | December 31, | ||||||||||
(In thousands, except for share information) | 2014 | 2014 | 2013 | |||||||||
ASSETS |
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Cash and due from banks |
$ | 779,147 | $ | 953,038 | $ | 454,302 | ||||||
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Money market investments: |
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Time deposits with other financial institutions |
300 | 300 | 300 | |||||||||
Other short-term investments |
16,661 | 16,657 | 201,069 | |||||||||
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Total money market investments |
16,961 | 16,957 | 201,369 | |||||||||
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Investment securities available for sale, at fair value |
1,965,666 | 1,977,137 | 1,978,282 | |||||||||
Other equity securities |
25,752 | 25,752 | 28,691 | |||||||||
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Total investment securities |
1,991,418 | 2,002,889 | 2,006,973 | |||||||||
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Investment in unconsolidated entity |
| | 7,279 | |||||||||
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Loans, net of allowance for loan and lease losses of $222,395 (September 30, 2014 - $225,434; December 31, 2013 - $285,858) |
9,040,041 | 9,089,968 | 9,350,312 | |||||||||
Loans held for sale, at lower of cost or market |
76,956 | 80,014 | 75,969 | |||||||||
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Total loans, net |
9,116,997 | 9,169,982 | 9,426,281 | |||||||||
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Premises and equipment, net |
166,926 | 167,916 | 166,946 | |||||||||
Other real estate owned |
124,003 | 112,803 | 160,193 | |||||||||
Accrued interest receivable on loans and investments |
50,796 | 48,516 | 54,012 | |||||||||
Other assets |
481,587 | 171,179 | 179,570 | |||||||||
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Total assets |
$ | 12,727,835 | $ | 12,643,280 | $ | 12,656,925 | ||||||
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LIABILITIES |
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Deposits: |
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Non-interest-bearing deposits |
$ | 900,616 | $ | 862,422 | $ | 851,212 | ||||||
Interest-bearing deposits |
8,583,329 | 8,840,752 | 9,028,712 | |||||||||
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Total deposits |
9,483,945 | 9,703,174 | 9,879,924 | |||||||||
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Securities sold under agreements to repurchase |
900,000 | 900,000 | 900,000 | |||||||||
Advances from the Federal Home Loan Bank (FHLB) |
325,000 | 325,000 | 300,000 | |||||||||
Other borrowings |
231,959 | 231,959 | 231,959 | |||||||||
Accounts payable and other liabilities |
115,188 | 158,990 | 129,184 | |||||||||
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Total liabilities |
11,056,092 | 11,319,123 | 11,441,067 | |||||||||
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STOCKHOLDERS EQUITY |
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Preferred Stock, authorized 50,000,000 shares: issued 22,828,174 shares; outstanding 1,444,146 shares (September 30, 2014 - 1,444,146 shares outstanding; December 31, 2013 - 2,521,872 shares outstanding); aggregate liquidation value of $36,104 (September 30, 2014 - $36,104; December 31, 2013 - $63,047) |
36,104 | 36,104 | 63,047 | |||||||||
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Common stock, $0.10 par value, authorized 2,000,000,000 shares; issued, 213,724,749 shares (September 30, 2014 - 213,642,311 shares issued; December 31, 2013 - 207,635,157 shares issued) |
21,372 | 21,364 | 20,764 | |||||||||
Less: Treasury stock (at par value) |
(74 | ) | (66 | ) | (57 | ) | ||||||
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Common stock outstanding, 212,984,700 shares outstanding (September 30, 2014 - 212,977,588 shares outstanding; December 31, 2013 - 207,068,978 shares outstanding) |
21,298 | 21,298 | 20,707 | |||||||||
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Additional paid-in capital |
916,067 | 915,231 | 888,161 | |||||||||
Retained earnings |
716,625 | 385,847 | 322,679 | |||||||||
Accumulated other comprehensive loss |
(18,351 | ) | (34,323 | ) | (78,736 | ) | ||||||
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Total stockholders equity |
1,671,743 | 1,324,157 | 1,215,858 | |||||||||
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Total liabilities and stockholders equity |
$ | 12,727,835 | $ | 12,643,280 | $ | 12,656,925 | ||||||
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(a) | This statement of financial condition has been revised from that included in the Corporations February 5, 2015 earnings release to reflect the $302.9 million partial reversal of the deferred tax assets valuation allowance and the related effect on the deposit insurance premium assessment, which will be discussed in detail in the Corporations Annual Report on Form 10-K. |
First BanCorp. Announces Partial Reversal of Deferred Tax Asset Valuation Allowance and
Revises Earnings for the Quarter and Year Ended December 31, 2014 Page 5 of 5
About First BanCorp.
First BanCorp. is the parent corporation of FirstBank Puerto Rico, a state-chartered commercial bank with operations in Puerto Rico, the Virgin Islands and Florida, and of FirstBank Insurance Agency. First BanCorp. and FirstBank Puerto Rico operate within U.S. banking laws and regulations. The Corporation operates a total of 153 branches, stand-alone offices, and in-branch service centers throughout Puerto Rico, the U.S. and British Virgin Islands, and Florida. Among the subsidiaries of FirstBank Puerto Rico are First Federal Finance Corp., a small loan company; FirstBank Puerto Rico Securities, a broker-dealer subsidiary; and First Management of Puerto Rico, a domestic corporation that holds tax-exempt assets. In the U.S. Virgin Islands, FirstBank operates First Express, a small loan company. First BanCorps shares of common stock trade on the New York Stock Exchange under the symbol FBP. Additional information about First BanCorp. may be found at www.firstbankpr.com.
###
First BanCorp.
John B. Pelling III
Investor Relations Officer
john.pelling@firstbankpr.com
(305) 577-6000 Ext. 162
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