FIRST BANCORP
1519 Ponce de Leon Avenue
San Juan, Puerto Rico 00908
(787) 729-8200
NOTICE OF MEETING AND PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 29, 2003
To the Stockholders of First BanCorp Puerto Rico:
NOTICE IS HEREBY GIVEN that pursuant to a resolution of the Board of Directors
and Section 2 of the Corporation Bylaws, the Annual Meeting of Stockholders of
First BanCorp will be held at its principal offices located at 1519 Ponce de
Leon Avenue, Santurce, San Juan, Puerto Rico, on Tuesday, April 29, 2003, at
2:00 p.m., for the purpose of considering and taking action on the following
matters, all of which are more completely set forth in the accompanying Proxy
Statement.
1. To elect three (3) directors for a term of three years or until their
successors have been elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
Corporation's independent accountants for fiscal year 2003.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The stockholders or their representatives should register their credentials or
proxies with the Corporation's Secretary on or before 2:00 p.m. of the day of
the meeting.
The Board of Directors has set March 18, 2003, as the record date for the
determination of stockholders entitled to notice of, and to vote at the meeting.
San Juan, Puerto Rico
March 28, 2003
By order of the Board of Directors
Carmen Gabriella Szendrey-Ramos, Esq. Angel Alvarez-Perez, Esq.
Secretary Chairman, President and CEO
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT AT THE MEETING, YOU ARE URGED TO COMPLETE, SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING,
YOU MAY VOTE EITHER IN PERSON OR BY PROXY. YOU MAY REVOKE ANY PROXY THAT YOU
GIVE IN WRITING OR IN PERSON AT ANY TIME PRIOR TO ITS EXERCISE.
FIRST BANCORP
1519 Ponce de Leon Avenue
Santurce, Puerto Rico 00908
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 2003
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of First BanCorp ("the Corporation")
for use at the Annual Meeting of Stockholders to be held at the Corporation's
main offices located at 1519 Ponce de Leon Avenue, Santurce, Puerto Rico, on
April 29, 2003, at 2:00 p.m., and at any adjournment thereof. This Proxy
Statement is expected to be mailed to stockholders of record on or about March
28, 2003.
SOLICITATION AND REVOCATION
Proxies in the form enclosed are solicited by and on behalf of the Board of
Directors. The persons named in the proxy form have been designated as proxies
by the Board of Directors. Shares represented by properly executed proxies
received will be voted at the Meeting in accordance with the instructions you
specify in the proxy. If you do not give instructions to the contrary, each
proxy received will be voted for the matters described below. Any proxy given as
a result of this solicitation may be revoked by the stockholder at any time
before it is exercised in the following manner: (i) submitting a written
notification to the Secretary of First BanCorp, (ii) submitting a duly executed
proxy bearing a later date, or (iii) appearing at the Annual Meeting and giving
proper notice to the Secretary of his or her intention to vote in person. The
proxies that are being solicited may be exercised only at the Annual Meeting of
First BanCorp or at any adjournment of the Meeting.
Each proxy solicited hereby gives discretionary authority to the Board of
Directors of the Corporation to vote the proxy with respect to (i) the election
of any person as director if any nominee is unable to serve, or for good cause
will not serve; (ii) matters incident to the conduct of the meeting; (iii) the
approval of minutes of the previous Annual Meeting held on April 30, 2002; and
(iv) such other matters as may properly come before the Annual Meeting. Except
with respect to procedural matters incident to the conduct of the Annual
Meeting, the Board of Directors is not aware of any business which may properly
come before the Annual Meeting other than that described in this Proxy
Statement. However, if any other matters come before the Annual Meeting, it is
intended that proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the person voting those proxies.
VOTING SECURITIES
The Board of Directors has fixed the close of business on March 18, 2003,
as the record date for the determination of stockholders entitled to receive
notice of, and to vote at, the Annual Meeting of Stockholders. At the close of
business on the record date there were 39,955,285 shares of the issued and
outstanding common stock of the Corporation in circulation, each of which is
entitled to one vote at the Annual Meeting.
The presence, either in person or by proxy, of at least a majority of the
Corporation's issued and outstanding shares of common stock in circulation is
necessary to constitute a quorum. For purposes of determining quorum,
abstentions and broker non-votes will be treated as shares that are present and
entitled to vote. A broker non-vote results when a broker or nominee has
expressly indicated that it does not have discretionary authority to vote on a
particular matter. Action with respect to Proposal 1: Election of Directors, and
Proposal 2: Ratification of Appointment of Independent Accountants, shall be
taken by a majority of the total votes present in person or by proxy and
entitled to vote. Therefore, as to such prospect, abstentions and broker
non-votes will have the same effect as a vote against the proposals. Each share
of common stock is entitled to one vote for the proposals to be considered.
BENEFICIAL OWNERSHIP OF SECURITIES
The following sets forth information known to the Corporation as to the
persons or entities, which as of March 18, 2003, by themselves or as a group, as
the term is defined by section 13(d) (3) of the Securities Exchange Act of 1934,
are the beneficial owners of 5% or more of the issued and outstanding common
stock of the Corporation in circulation. All information concerning persons who
may be beneficial owners of 5% or more of the stock is derived from Schedule
13(D) or 13(G) statements filed and notified to the Corporation. The number of
shares has been adjusted to reflect a 50% stock split distributed on September
30, 2002.
1
BENEFICIAL OWNERS OF 5% OR MORE:
NAME NUMBER OF SHARES PERCENTAGE
--------------------------- ---------------- ----------
FMR Corp
82 Devonshire Street
Boston, MA 02109 3,980,778 9.9630%(1)
ANGEL ALVAREZ-PEREZ
Chairman, President and CEO
First BanCorp
1519 Ponce de Leon Avenue
Santurce, PR 00908 3,634,459(2,3) 8.7099%(4)
GARITY & Co., Capital Management
1414 Banco Popular Center
Hato Rey, Puerto Rico 00918 2,725,368 6.8200%(1)
BENEFICIAL OWNERSHIP BY DIRECTORS OR NOMINEES:
The following table sets forth information with regard to the total number
of shares of the Corporation's common stock beneficially owned by each current
member of the Board of Directors and each current executive officer and by all
current directors and executive officers as a group, as of March 18, 2003.
Information regarding the beneficial ownership by executive officers and
directors is derived from information submitted by such executive officers and
directors. The number of shares has been adjusted to reflect a 50% stock split
distributed on September 30, 2002.
Information on the number of shares is provided by each executive officer
and director.
NAME NUMBER OF SHARES(3) PERCENTAGE(4)
------------------------------------ ------------------- -------------
DIRECTORS
Angel Alvarez-Perez,
Chairman, President and CEO 3,634,4592 8.7099%
Juan Acosta-Reboyras 600 *
Jose Julian Alvarez-Bracero(5) 9,750 *
Annie Astor-Carbonell,
Senior Executive VP and CFO 871,386 2.0883%
Rafael Bouet-Souffront 159,0006 *
Jorge L. Diaz 8,700 *
Jose L. Ferrer-Canals -0- *
Hector M. Nevares(7) 225,000 *
Richard Reiss-Huyke -0- *
Jose Teixidor 65,370 *
EXECUTIVE OFFICERS:
Luis M. Beauchamp, Senior Executive VP 657,036 1.5746%
Aurelio Aleman, Executive VP 165,000 *
Fernando L. Batlle, Executive VP 177,945 *
Randolfo Rivera, Executive VP 129,000 *
Dacio Pasarell, Executive VP 10,000 *
Current Directors and
Executive Officers as a group 6,113,246 14.6503%
* Represents less than 1%.
(1) As a percentage of 39,954,535 shares issued, outstanding and in circulation
as of December 31, 2002.
(2) Includes 10,650 shares owned by the spouse of Mr. Alvarez.
(3) In the case of executive officers, the number of shares includes option
grants that the executive officer may exercise within 60 days. The number
of these options is as follows: Angel Alvarez-Perez, 906,000; Annie
Astor-Carbonell, 181,500; Luis Beauchamp, 204,000; Aurelio Aleman 165,000;
Fernando Batlle, 177,000; Dacio Pasarell, 10,000; Randolfo Rivera, 129,000.
(4) The percentages are based on the shares issued, outstanding and in
circulation as of March 18, 2003 plus the option grants that the executive
officers may exercise within 60 days.
(5) Not related to chairman Angel Alvarez- Perez.
(6) Includes 145,500 shares owned by Bouet & Rodriguez, Inc.
(7) Mr. Hector Nevares no longer has the proxy to vote shares of common stock,
which were previously reported as being beneficially owned by him.
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INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTORS OF
FIRST BANCORP, DIRECTORS WHOSE TERMS CONTINUE AND
EXECUTIVE OFFICERS OF THE CORPORATION
The Bylaws of the Corporation provide that the Board of Directors shall
consist of a number of members fixed from time to time by resolution of an
absolute majority of the Board of Directors, provided that the number of
directors shall always be an odd number and not less than five nor more than
fifteen. The Board of Directors shall be divided into three classes as nearly
equal in number as possible. The members of each class are to be elected for a
term of three years and until their successors are elected and qualified. One
class is elected each year on a rotating basis. The members of the Board of
Directors of First BanCorp are also the members of the Board of FirstBank Puerto
Rico (the "Bank"). The Corporation's retirement policy for the Board of
Directors, as originally adopted on August 21, 1999, stated that directors who
reach the age of 70 or complete 15 years of service on the Board may continue to
serve until the end of the term to which they were elected, but would not be
eligible to stand for reelection. The policy was amended on April 30, 2002 only
to eliminate the provision regarding the years of service as directors as a
limitation to reelection.
The information presented below regarding the time of service on the Board
of Directors includes terms served on the Board of the Bank.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees listed below. If any
nominee should be unable or unwilling to stand for election at the time of the
Annual Meeting, the proxies will nominate and vote for the replacement nominee
or nominees recommended by the Nominating Committee. At this time, the
Nominating Committee of First BanCorp knows of no reason why any of the persons
listed below may not be able to serve as a director if elected.
PROPOSAL #1
ELECTION OF DIRECTORS
NOMINEES FOR A THREE-YEAR TERM EXPIRING 2006
JOSE JULIAN ALVAREZ-BRACERO, 69
January 1, 1999 to present, Executive Director of "Fundacion Cruz Azul de
Puerto Rico, Inc." From 1995 until retirement on December 31, 1998 was President
and Chief Executive Officer of La Cruz Azul de Puerto Rico, a medical insurance
provider. From 1981 to December 1994, Executive Director, La Cruz Azul de Puerto
Rico. Member of the Puerto Rico Chamber of Commerce, serving as President from
1990 to 1991. Established the Interamerican Commerce Council jointly with the
Organization of American States. Secretary General of the Puerto Rico Olympic
Committee. President of the Dr. Garcia Rinaldi Foundation, dedicated to fund
health treatment of low-income heart patients. Past member of the Board of
Directors of Banco Central Corporation, from April 1987 to January 1996.
Director since November 1996.
JOSE TEIXIDOR, 49
Executive Vice President and General Manager, B. Fernandez & Hnos., Inc.,
Chairman of the Board of Pan Pepin Inc. Chairman of the Board of Baguettes, Inc.
President, Eagle Investment Fund, Inc. Member of the Board of Directors of El
Nuevo Dia, Inc. Member of the Puerto Rico Chamber of Commerce. Member of the
Distributors and Manufacturers Association. Member of the Wholesalers Chamber.
Member of the Board of Directors of the Pierre Hotel. Director since January
1994.
RICHARD REISS-HUYKE, 55
Certified Public Accountant. Director of Banco Santander Puerto Rico from
February 1979 to February 2003 and also member of the Trust, Credit and Audit
Committees. Director of Santander BanCorp from May 2000 to February 2003 and
also member of Audit Committee. Since 1979, financial and management consultant
specialized in crisis intervention, financial planning, negotiations, valuations
and litigation support. Employed by Bacardi Corporation in a number of different
capacities, including Chief Financial Officer, Chief Operating Officer, Vice
President and Director from 1973 to 1979. Member of the Board of Directors and
the Audit Committee of Pepsi Cola Puerto Rico Bottling Company from February
1996 to July 1998. President of the Board of Directors of the State Insurance
Fund of Puerto Rico.
THE NOMINATING COMMITTEE RECOMMENDS THAT THE ABOVE NOMINEES BE ELECTED AS
DIRECTORS. THE VOTE OF THE HOLDERS OF THE MAJORITY OF THE TOTAL VOTES ELIGIBLE
TO BE CAST AT THE ANNUAL MEETING IS REQUIRED FOR THE ELECTION OF THE NOMINEES.
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MEMBERS OF THE BOARD CONTINUING IN OFFICE
DIRECTORS WHOSE TERMS EXPIRE IN 2004
ANGEL ALVAREZ-PEREZ, 55
CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER
Chairman, President & Chief Executive Officer of First BanCorp since
November 1998. President and Chief Executive Officer, FirstBank, since 1990, and
Chairman since August 1999. From March 1990 to August 1990, Executive Vice
President. Prior to joining the Corporation, attorney at law specializing in
corporate and commercial law. From 1987 to February 1990, partner with the law
firm of Vazquez, Vizcarrondo, Alvarez, Angelet & Gonzalez. Director of the
Federal Home Loan Bank of New York from December 1993 to January 1995. Member of
the Board of Directors of Visa International. Chairman and CEO of First Federal
Finance Corporation d/b/a Money Express, First Leasing & Rental Corporation,
FirstBank Insurance Agency, Inc., FirstBank Insurance Agency, V.I., Inc. and
FirstTrade, Inc.(8) Director since 1989.
JUAN ACOSTA-REBOYRAS, 47
Certified Public Accountant since 1977 and attorney at law since 1985.
Partner in law firm of Acosta & Ramirez, LLP, specializing in tax and corporate
law, individual tax planning, estate planning and general matters of tax and
corporate law. Admitted to the Puerto Rico Bar and the U.S. Court of Appeals for
the First Circuit in 1985. Former partner, accounting firm of KPGM, and former
partner at law firms of Goldman Antonetti & Cordova and McConnell Valdes. Member
of Puerto Rico Society of Certified Public Accountants, serving as President
from 1994 to 1995. Member of American Bar Association and the American Institute
of Certified Public Accountants (Member of Council, 1994 to 1995) and State
Legislative Committee. Former member of the Executive Committee of the Puerto
Rico Chamber of Commerce. Director since 2001.
JOSE LUIS FERRER-CANALS, 43
Doctor of Medicine in private urology practice. Commissioned Captain in the
United States Air Force in March 1991, and appointed Chief of Aeromedical
Service, 482nd Medical Squadron, December 1992. Member American Association of
Clinical Urologists, Alpha Omega Alpha Medical Honor Society since 1986. From
1995 to present, member Hospital Pavia Peer Group Review Committee, Hospital
Pavia, San Juan, Puerto Rico. Medical faculty representative to Hospital Pavia
from 1996 to 1998. Professor of flight physiology and aerospace medicine,
InterAmerican University of Puerto Rico. Member of Board of Directors of
American Cancer Society, Puerto Rico Chapter, 1999 to present. Director since
2001.
DIRECTORS WHOSE TERMS EXPIRE IN 2005
ANNIE ASTOR-CARBONELL, 45
SENIOR EXECUTIVE VICE PRESIDENT - CHIEF FINANCIAL OFFICER
Certified Public Accountant. Senior Executive Vice President and Chief
Financial Officer of First BanCorp since March 1997. From 1987 to 1997,
Executive Vice President and Chief Financial Officer. From 1984 to 1987, Senior
Vice President and Comptroller. Prior to joining the Corporation, Senior Auditor
at Peat Marwick Mitchell & Co. Member of the Board of Directors of the Puerto
Rico Community Foundation since 2003. Director of Puerto Rico Telephone Company
from January 1993 to March 1999, serving as Chairperson from 1997 to March 1999.
Member of the Board of Trustees of Sacred Heart University from 1991 to 1995,
serving as Chairperson from 1993 to 1995. Director of First Federal Finance
Corporation d/b/a Money Express, First Leasing and Rental Corporation, FirstBank
Insurance Agency, Inc., FirstBank Insurance Agency, V.I., Inc. and FirstTrade,
Inc. Joined the Corporation in 1983. Director since 1995.
RAFAEL BOUET-SOUFFRONT, 56
Industrial Engineer. From 1987 to present, President of Bouet & Rodriguez,
Inc., a company engaged in the installation and construction of industrial,
residential and institutional electrical projects. From 1980 to 1987, President
of North Caribbean Electrical Corp., electrical contractors. Director since
1998.
JORGE L. DIAZ, 49
Executive Vice President and member of the Board of Directors of Empresas
Diaz, Inc., general contractors; and Executive Vice President and Director of
Betteroads Asphalt Corporation, asphalt pavement manufacturers; Betterecycling
Corporation, recycled asphalt manufacturers; and Coco Beach Development
Corporation, a real estate development company. Member of the Puerto Rico
Chamber of Commerce, the Association of General Contractors of Puerto Rico and
of the U.S. National Association of General Contractors. Member of the Baldwin
School of Puerto Rico Board of Trustees and that of Cushing Academy, Boston,
Massachusetts. Director since 1999.
(8) First Federal Finance Corporation d/b/a Money Express, First Leasing and
Rental Corporation, FirstBank Insurance Agency. V.I., Inc. and FirstTrade
are wholly owned subsidiaries of FirstBank Puerto Rico; and FirstBank
Insurance Agency, Inc. is a wholly owned subsidiary of First BanCorp Puerto
Rico.
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SENIOR EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth information with respect to executive officers of
the Corporation and of the Bank who are not directors.
LUIS M. BEAUCHAMP, 60
SENIOR EXECUTIVE VICE PRESIDENT, WHOLESALE BANKING EXECUTIVE AND
CHIEF LENDING OFFICER
From March 1997 to present, Senior Executive Vice President, wholesale
banking, Chief Lending Officer. From 1990 to March 1997, Executive Vice
President, Chief Lending Officer. From 1988 to 1990, General Manager - New York
banking operations, Banco de Ponce. Held the following responsibilities at the
Chase Manhattan Bank, N.A.: Regional Manager for Ecuador and Colombia operations
and corporate finance for Central American operations, from 1968 to 1988;
Country Manager for Mexico from 1986 to 1988; Manager, wholesale banking in
Puerto Rico from 1984 to 1986. Director of First Leasing and Rental Corporation,
First Federal Finance Corp. d/b/a Money Express and of FirstBank Insurance
Agency, Inc. Joined the Corporation in 1990.
AURELIO ALEMAN, 44
EXECUTIVE VICE PRESIDENT AND CONSUMER BANKING EXECUTIVE
Executive Vice President in charge of consumer banking, FirstBank, since
1998. From 1996 to 1998, Vice President, CitiBank, N.A., responsible for
wholesale and retail automobile financing and retail mortgage business. From
1994 to 1996, Vice President, Chase Manhattan Bank, N.A., banking operations and
technology for corporate capital markets. President of First Leasing & Rental
Corporation, First Federal Finance Corporation d/b/a Money Express, and of
FirstBank Insurance Agency Inc. Joined the Corporation in 1998.
FERNANDO L. BATLLE, 36
EXECUTIVE VICE PRESIDENT AND RETAIL AND MORTGAGE BANKING EXECUTIVE
Executive Vice President, retail and Mortgage Banking Group of FirstBank.
From April 1996 to October 1997, Managing Director of Neva Management
Corporation, an investment management firm. From 1994 to April 1996, Senior VP -
investments department, and Treasurer of FirstBank, and from June 1994 to
December 1994, Vice President, secondary market, at FirstBank Puerto Rico. From
September 1992 to June 1994, Harvard Business School, obtaining MBA in June
1994. From 1989 to August 1992, Assistant VP, Puerto Rico Home Mortgage.
Director of First Leasing & Rental Corporation, First Federal Finance
Corporation d/b/a Money Express, FirstBank Insurance Agency, Inc. President and
Director of FirstBank Insurance Agency, V.I., Inc. and FirstTrade, Inc. Joined
the Corporation in October 1997.
RANDOLFO RIVERA, 50
EXECUTIVE VICE PRESIDENT AND COMMERCIAL BANKING EXECUTIVE
Executive Vice President in charge of commercial banking of FirstBank since
May 1998. From April 1990 to December 1996, Vice President and component
executive for local companies, public sector and institutional markets for Chase
Manhattan Bank, N.A. in Puerto Rico. From January 1997 to May 1998, Corporate
Finance Executive in charge of the Caribbean and Central American region for
Chase Manhattan Bank in Puerto Rico. Joined the Corporation in May 1998.
DACIO A. PASARELL, 54
EXECUTIVE VICE PRESIDENT AND OPERATIONS AND TECHNOLOGY EXECUTIVE
Executive Vice President in charge of operations and technology since
September 2002. Held the following positions at Citibank N.A. for Puerto Rico:
Vice President, Retail Bank Manager, 2000-2002; Vice President Chief Financial
Officer, 1996-1998; Vice President, Head of Operations - Caribbean Countries,
1994-1996; Vice President, Mortgage and Automobile Financing; Product Manager,
Latin America, 1986-1994; Vice President, Mortgage and Automobile Financing
Product Manager for Puerto Rico. President of Citiseguros PR, Inc., 1998-2001.
Joined the Corporation in September, 2002
OTHER OFFICERS OF THE CORPORATION
LUIS CABRERA-MARIN, 33
SENIOR VICE PRESIDENT - TREASURY AND INVESTMENTS
Senior Vice President of the Investment and Treasury Department since May
1997. From August 1995 to May 1997, Director of Asset Management, Government
Development Bank for Puerto Rico. From August 1994 to August 1995, Investment
Executive, Oriental Financial Services, Inc., Puerto Rico. Joined the
Corporation in 1997.
5
AIDA GARCIA, 51
SENIOR VICE PRESIDENT - HUMAN RESOURCES
Director of Human Resources since May 1990. From 1988 to 1990, Second Vice
President, Human Resources. Prior to joining the Corporation, Director of Human
Resources, Dr. Federico Trilla Hospital in Carolina. Joined the Corporation in
1988.
EMILIO MARTINO, 52
SENIOR VICE PRESIDENT - CREDIT RISK MANAGEMENT
Senior Vice President and Credit Risk Management for the Corporation since
June 2002. First Senior Vice President of Banco Santander Puerto Rico; Director
for credit administration, workout and loan review, from 1997 to 2002. Senior
Vice President of Risk Area in charge of workout, credit administration, and
portfolio assessment for Banco Santander Puerto Rico from 1996 to 1997.
CASSAN PANCHAM, 42
FIRST SENIOR VICE PRESIDENT - EASTERN CARIBBEAN REGION EXECUTIVE
First Senior Vice President, Eastern Caribbean Region Executive since
October 2002. Held the following positions at JP Morgan Chase Bank Eastern
Caribbean Region Banking Group: Vice President and General Manager, December
1999 to October 2002; Vice President, Business, Professional and Consumer
Executive, from July 1998 to December 1999; Deputy General Manager, March 1999;
Vice President, Consumer Executive, December 1997 to June 1998.
NAYDA RIVERA-BATISTA, 29
SENIOR VICE PRESIDENT - GENERAL AUDITOR
Certified Public Accountant. Appointed Senior Vice President and General
Auditor on July 2002. From September 1996 to July, 2002, Audit Manager at
PricewaterhouseCoopers, LLP.
JOSIANNE ROSSELLO, 48
SENIOR VICE PRESIDENT - MARKETING AND PUBLIC RELATIONS
Appointed Senior Vice President in January 1997. From November 1994 to
January 1997, Vice President, Marketing Director, Banco Santander de Puerto
Rico. Marketing Manager, Sprint United Telephone, Orlando, Florida from October
1993 to October 1994. President, Citicorp Card Services Puerto Rico, from 1985
to 1990. Joined the Corporation in January 1997.
CARMEN GABRIELLA SZENDREY-RAMOS, 35
SENIOR VICE PRESIDENT - GENERAL COUNSEL - SECRETARY OF THE BOARD OF DIRECTORS
Attorney at Law. Appointed Vice President and Legal Counsel in October
2000. Appointed Assistant Secretary of First Bancorp on February 26, 2002 and
Senior Vice President on March 1, 2002. Appointed Secretary of First BanCorp,
FirstBank, First Leasing & Rental Corporation, First Federal Finance Corporation
d/b/a Money Express, FirstBank Insurance Agency, Inc. on May 2002. Secretary and
Director of FirstBank Insurance Agency, V.I., Inc. and FirstTrade. Prior to
joining the Corporation, from 1997 to September 2000, Assistant Vice President
of the Legal Division, Banco Popular de Puerto Rico. From 1995 to 1997, private
law practice and special projects analyst with law firm Fiddler Gonzalez &
Rodriguez. Joined the Corporation in 2000.
LAURA VILLARINO-TUR, 44
SENIOR VICE PRESIDENT - COMPTROLLER
Certified Public Accountant. Appointed Senior Vice President - Comptroller
of FirstBank in 1987. Vice President, Assistant Comptroller from 1984 to 1987.
Prior to joining the Corporation, staff auditor with Peat Marwick Mitchell & Co.
Joined the Corporation in 1984.
BOARD OF DIRECTORS AND COMMITTEES
The Corporation's Board of Directors is composed of the same members as the
FirstBank Board of Directors. During fiscal 2002, the Board of Directors of
First BanCorp held a total of five regular meetings and six extraordinary
meetings and the Board of Directors of the Bank held 12 regular meetings and one
extraordinary meeting. Each of the incumbent directors attended in excess of 75%
of the aggregate of the total meetings of the Board of Directors and meetings of
the Board committees on which they served.
6
AUDIT COMMITTEE
The Audit Committee is composed of three outside directors who are not and
have never been involved in the day-to-day management of the Corporation or the
Bank. The functions of the Audit Committee include review of the reports of
examination from regulatory agencies as well as review of examinations and
comments from the independent accountants and from the Internal Audit Division.
The Committee also monitors the quality of the Corporation's assets in order to
provide for early identification of possible problem assets. For further
description of the duties, responsibilities and composition of the Audit
Committee, please refer to the Report of the Audit Committee in this proxy
statement. The Audit Committee Charter is also included as Exhibit I to this
proxy statement. During fiscal 2002, the Audit Committee met a total of nine
times.
COMPENSATION COMMITTEE
The Compensation Committee is responsible for administering the executive
compensation program, including the stock option plans, and for evaluating the
performance of key executives, including that of the President and CEO. During
fiscal 2002, the Committee was composed of Messrs. Hector M. Nevares, Jose
Teixidor and Rafael Bouet. The Compensation Committee met once during 2002.
NOMINATING COMMITTEE
Article I, Section 14, of the Bylaws of the Corporation, which establishes
a Nominating Committee for selecting the nominees for election as directors at
the next succeeding Annual Meeting of Stockholders, was amended by a resolution
unanimously approved on November 26, 2002, establishing that the Nominating
Committee will be composed of no less than three independent directors. Messrs.
Hector Nevares, Rafael Bouet and Jorge Diaz were the elected members of the
Committee. No nominations for directors, except those made by the Nominating
Committee, shall be voted upon at the Annual Meeting, unless other nominations
by stockholders are made in writing and delivered to the Secretary of the
Corporation at least thirty (30) days prior to the date of the Annual Meeting.
Ballots bearing the names of the persons nominated by the Nominating Committee
and by stockholders, if any, will be provided for use at the Annual Meeting.
COMPENSATION OF DIRECTORS
Outside directors of the Corporation do not receive compensation for
service to the Board of Directors of the Corporation; however, they receive
compensation for their service to the Board of Directors of FirstBank Puerto
Rico and its committees. Outside directors receive $1,200 for each meeting of
the Board of the Bank attended. Outside directors also receive $900 for
attendance at the meetings of the Audit Committee and $500 for attendance at the
meetings of the Credit Committee, Compensation Committee and Nominating
Committee of the Board of Directors.
Officers of the Corporation, the Bank or the subsidiaries do not receive
fees or other compensation for service on the boards of directors of the
Corporation, the Bank, the subsidiaries or any of their committees.
The following table sets forth fees paid to outside directors for their
attendance at meetings of the Board of Directors of the Bank and committees
during fiscal 2002.
BOARD & COMMITTEE MEETINGS IN 2002
BOARD OF AUDIT CREDIT COMPENSATION NOMINATING TOTAL
NAME DIRECTORS COMMITTEE COMMITTEE COMMITTEE COMMITTEE FEES
------------------------ ------------ ---------- ----------- ---------- ---------- ------------
Juan Acosta Reboyras $ 15,600.00 $ 8,100.00 N/A N/A N/A $ 23,700.00
Jose Julian Alvarez $ 13,200.00 $ 8,100.00 N/A N/A N/A $ 21,300.00
Rafael Bouet $ 15,600.00 N/A $ 4,500.00 $ 500.00 0 $ 20,600.00
Jorge Diaz $ 14,400.00 N/A $ 3,500.00 N/A 0 $ 17,900.00
Francisco Fernandez* $ 3,600.00 $ 2,700.00 N/A N/A N/A $ 6,300.00
Jose L. Ferrer Canals $ 14,400.00 $ 8,100.00 N/A N/A N/A $ 22,500.00
German Malaret* $ 3,600.00 $ 2,700.00 N/A N/A N/A $ 6,300.00
Hector M. Nevares $ 13,200.00 N/A $ 4,500.00 $ 500.00 N/A $ 18,200.00
Jose Teixidor $ 13,200.00 N/A $ 2,500.00 $ 500.00 0 $ 16,200.00
TOTAL $ 106,800.00 $ 29,700.00 $ 15,000.00 $ 1,500.00 0 $ 153,000.00
* Directors Francisco Fernandez and German Malaret served until April 2002.
7
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors is composed of three
directors who are not now and have never been employees of the Bank or of the
Corporation. All members of the Committee meet the independence and expertise
requirements set forth under the rules of the New York Stock Exchange. Mr.
Acosta's law firm provides tax-consulting services to the Corporation. During
fiscal 2002, Mr. Acosta received $41,649.42 corresponding to his consulting
services. In accordance with the directives of the New York Stock Exchange and
based on its business judgment, the Committee determined that the relationship
does not interfere with Mr. Acosta's exercise of independent judgment. The
Committee operates under a written charter adopted by the Board of Directors,
the adequacy of which is reviewed and assessed on an annual basis. The
composition of the Audit Committee, the attributes of its members and the
responsibilities of the Committee, as reflected in its charter, are intended to
be in accordance with applicable requirements for corporate audit committees. A
copy of the Audit Committee Charter, as approved by the Board of Directors, is
attached as Exhibit I to this proxy statement.
The Audit Committee reviews the Corporation's financial reporting process
on behalf of the Board of Directors. Management has the primary responsibility
for the financial statements and the reporting process, including the systems of
internal controls. In this context, the Committee has met and held discussions
with management and the independent accountants. Management represented to the
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles. The Committee has
reviewed and discussed the consolidated financial statements with management and
with the independent accountants.
In addition, the Committee discussed with the independent accountants,
PricewaterhouseCoopers LLP, their independence from the Corporation, the Bank
and management. To the extent necessary, the Committee also reviewed all
relationships and services that might bear on the auditors' objectivity as
independent accountants. The Committee has received written affirmation from the
independent accountants as required by the Independence Standards Board Standard
No. 1, Independence Standards with Audit Committees, assuring their
independence.
In reliance with the reviews and discussions referred to above, the Committee
has recommended to the Board of Directors that the audited financial statements
be included in the Corporation's Annual Report on Form 10K for fiscal year 2002
to be submitted to the Securities Exchange Commission. The Committee and the
Board of Directors have also recommended, subject to stockholder approval, the
reappointment of PricewaterhouseCoopers LLP as the independent accountants for
the Corporation for fiscal year 2003.
By the Audit Committee of the Board of Directors:
Juan Acosta-Reboyras
Jose Julian Alvarez
Jose Luis Ferrer-Canals
COMPENSATION OF EXECUTIVE OFFICERS
The summary compensation table set forth below discloses compensation for
the Chief Executive Officer and the most highly paid executive officers of the
Corporation, FirstBank or its subsidiaries who worked with the Corporation, the
Bank or such subsidiaries during any period of such fiscal year and whose total
cash compensation for fiscal 2002 exceeded $100,000 (named executives). The
table includes Bonus payments granted in February 2003 which were meant as
compensation for performance of "Named Executives" during fiscal 2002.
8
SUMMARY COMPENSATION
NAME & POSITION YEAR SALARY($) BONUS($) OTHER($)(9)
---------------------------------------------------- ---- --------- -------- -----------
Angel Alvarez-Perez 2002 825,000 700,000* 5,441
Chairman, President & 2001 825,000 600,000 5,120
Chief Executive Officer 2000 675,000 500,000 4,803
Annie Astor-Carbonell 2002 400,000 250,000* 5,198
Senior Executive Vice President & 2001 400,000 200,000 4,773
Chief Financial Officer 2000 300,000 175,000 4,710
Luis M. Beauchamp
Senior Executive Vice President, Wholesale Banking 2002 450,000 300,000* 5,624
Executive & 2001 450,000 250,000 5,135
Chief Lending Officer 2000 325,000 200,000 5,303
Aurelio Aleman 2002 350,000 250,000* 4,197
Executive Vice President 2001 350,000 200,000 4,817
Consumer Banking Executive 2000 250,000 175,000 4,779
Fernando Batlle 2002 350,000 250,000* 5,375
Executive Vice President 2001 350,000 200,000 5,100
Retail and Mortgage Banking Executive 2000 250,000 175,000 5,252
Dacio Pasarell 2002 84,231 50,000* -0-
Executive Vice President & Operations and 2001 N/A N/A N/A
Technology Executive 2000 N/A N/A N/A
Ricardo Ramos-Luina 2002 154,234 0 962
Executive Vice President 2001 200,000 40,000 4,889
Securities Department 2000 200,000 40,000 3,816
Randolfo Rivera 2002 350,000 200,000* 5,561
Executive Vice President 2001 350,000 150,000 5,095
Commercial Banking Executive 2000 250,000 175,000 -0-
* Bonuses corresponding to 2002 performance were granted in February 2003.
** Represents compensation from September 16, 2002 to December 31, 2002
*** Represents compensation from January 1, 2002 to September 13, 2002.
STOCK OPTION PLAN
The Stock Option Plan is intended to encourage optionees to remain in the
employ of the Corporation, the Bank or its subsidiaries and to assist the Board
of Directors and Management in its efforts to attract and to recruit qualified
officers to serve the Corporation, the Bank or its subsidiaries. The stock
subject to such stock options shall be authorized but unissued shares of the
Corporation's $1.00 par value common stock.
The Plan is administered by the Compensation Committee (the "Committee"),
whose members are all outside directors appointed by the Board of Directors. All
members of the Committee meet the criteria of "disinterested persons" within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934 (the "Act"). The
Committee has discretion to select which eligible persons will be granted stock
options, the number of shares of common stock that may be subject to such
options, whether stock appreciation rights will be granted for such options and,
generally, to determine the terms and conditions in accordance with the Plan.
The Plan also provides for proportionate adjustments in the event of changes in
capitalization resulting from, among other things, merger, consolidation,
reorganization, recapitalization, reclassification, and stock dividends or
splits. All options must be granted within ten years of the effective dates of
the Plan. All options granted expire on the date specified in each individual
option agreement, which date will not be later than the tenth anniversary of the
date the option was granted. An eligible person may hold more than one option at
a time. The purchase price of options granted shall not be less than the fair
market value of the Corporation's common stock at the date of the grant.
(9) Represents the Corporation's pro-rata contribution to the executive's
participation in the Defined Contribution Retirement Plan.
9
The Plan may be amended at any time by the Board of Directors, subject to
any applicable regulatory limitation or regulatory approval requirement.
However, shareholder approval is required if an amendment increases the number
of shares of common stock that may be subject to options, materially changes the
eligibility criteria, changes the minimum purchase price or increases the
maximum term of the options.
The Plan also provides that no person shall be eligible for a stock option
grant if at the date of such grant such person beneficially owns more than ten
percent (10%) of the outstanding common stock of the Corporation. In addition,
pursuant to the change of control provisions contained in Section 12 of the
Banking Law of Puerto Rico, as amended (7 L.P.R.A. 39), to the extent that by
the exercise of an option a person would acquire the beneficial ownership of
five percent (5%) or more of the issued and outstanding common stock of the
Corporation, such person must obtain the approval of the Commissioner of
Financial Institutions prior to the exercise of such option. Options granted
under the Plan are not transferable other than by will or the laws of descent
and distribution. During the life of the optionee, the options may be exercised
only by such optionee. In the event of the death or disability of an optionee,
options may be exercised whether or not exercisable at the time of such death or
disability within one year after the date of such death or disability, but not
later than the date the option would otherwise have expired.
If the employment of an employee is terminated by retirement in accordance
with the Corporation's normal retirement policies or is voluntarily or
involuntarily terminated within one year after the date of a change in control,
the option may be exercised within three months of such occurrence whether or
not the option is exercisable at such time, but not later than the date that the
option would otherwise have expired.
Options may be exercised by payment of the fair market price per share
established in the Option Agreement, as adjusted for any changes in
capitalization, if applicable. Payment may be in cash or at the election of the
optionee, common stock of the Corporation having an aggregate fair market value
equal to or less than the total option price (i.e. purchase price multiplied by
the number of shares bought), plus cash. At the discretion of the Committee, the
optionee could be granted stock appreciation rights with respect to an option.
In April 1987, the Stockholders ratified the Corporation's first Stock
Option Plan (the "1987 Plan"), which expired on January 21, 1997. As of such
expiration date, no new options have been granted under the expired 1987 Plan.
On April 19, 1997, the Stockholders ratified a new Stock Option Plan (the "1997
Plan"), for which 2,898,704 shares were set aside. As of December 31, 2002,
there were a total of 1,999,250 shares subject to unexercised options granted
under the 1997 Plan. Except to the extent limited by the Puerto Rico Internal
Revenue Code of 1994, as amended, all outstanding options are now exercisable.
OPTION/GRANTS IN LAST FISCAL YEAR
The table set forth below discloses the information regarding the stock
options granted to the Corporation's Chief Executive Officer and the most highly
paid executives during 2002.
SHARES VALUE GRANT
UNDERLYING % GRANTED EXERCISE DATE
OPTIONS/SAR IN FISCAL BASE PRICE EXPIRATION PRESENT
NAME GRANTED 2002 2002 ($) DATE VALUE
---------------------- ------------- --------- ---------- ---------- ------------
Angel Alvarez-Perez 225,000 41.57% $ 18.69 02/26/12 $ 884,520.00
Annie Astor-Carbonell 45,000 8.31% $ 18.69 02/26/12 $ 176,904.00
Luis M. Beauchamp 48,000 8.87% $ 18.69 02/26/12 $ 188,697.60
Aurelio Aleman 45,000 8.31% $ 18.69 02/26/12 $ 176,904.00
Fernando Batlle 45,000 8.31% $ 18.69 02/26/12 $ 176,904.00
Dacio Pasarell 10,000 1.85% $ 25.99 10/29/12 $ 79,796.22
Randolfo Rivera 30,000 5.54% $ 18.69 02/26/12 $ 117,936.00
*As permitted by SEC rules, the Black/Scholes pricing model was used to
values these stock options. It should be noted that this model is only one
method of valuing options and First BanCorp's use of the model is not an
endorsement of its accuracy. The actual value of the options may be
significantly different, and the value actually realized, if any, will depend
upon the excess of the market value of the common stock ever the option exercise
price and the time of exercise. Options granted on February 26, 2002 were
granted at $18.69 and options granted on October 29, 2002 were granted at
$25.99. All options were granted at the market price of First BanCorp's common
stock on the day of the grant. All options were granted for a term of ten years
and, except to the extent limited by law, are exercisable at any time during the
term of the option. In calculating the value of such option, the following
assumptions were made:
o Estimated time until exercise of 3.288 years for all options granted
during fiscal 2002.
o The risk free rate, which was obtained from U.S. Federal Government
obligations maturing close to the estimated time until exercise of the
option is 3.717% for options granted on February 26, 2002 and 2.244%
for options granted on October 30, 2002.
10
o Volatility assumption is the historical price volatility of the
Corporation's closing stock price as measured by standard deviation of
day-to-day logarithmic price changes. The volatility for the options
granted on 02/26/02 is 31.228. The volatility for the options granted
on 10/29/02 is 45.60.
o Based on the above assumptions, the theoretical value of the stock
options granted on 2/26/02 is $3.9312 and $7.979622 for those granted
on 10/29/02. These valuations do not take into account the
non-transferability provisions of the Stock Option Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The table set forth below discloses the aggregated options/SAR exercises
and value realized and the number of unexercised options and the value thereof
with regards to the Chief Executive Officer and the most highly paid executives
(named executives) as of December 31, 2002, under the Plan. All presently
unexercised options are exercisable at this time, except to the extent limited
by the Puerto Rico Internal Revenue Code of 1994, as amended.
NUMBER OF
SHARES UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS AT IN-THE-MONEY
NAME EXERCISE REALIZED 12/31/02 OPTIONS AT 12/31/02*
---------------------- ----------- ----------- ---------- --------------------
Angel Alvarez-Perez 0 0 906,000 $ 6,737,170.50
Annie Astor-Carbonell 0 0 181,500 $ 1,428,625.80
Luis M. Beauchamp 0 0 204,000 $ 1,623,135.30
Aurelio Aleman 10,000 $162,125.00 165,000 $ 1,184,853.60
Fernando Batlle -0- 0 177,000 $ 1,380,044.10
Randolfo Rivera 12,000 $206,094.00 129,000 $ 690,924.00
Ricardo Ramos-Luina 15,000 $284,105.00 0 0
*The value of unexercised in-the-money options in the table above
represents the difference between the grant price of the option and the market
price as of December 31, 2002, multiplied by the number of in-the-money options
outstanding as of that date. At the close of business on December 31, 2002, the
closing price of First BanCorp's common stock was $22.60. The average price at
which the named executives could have exercised their outstanding options as of
such date was $10.417 for options granted on 11/25/97; $12.7917 for options
granted on 2/24/98; $18.0625 for options granted on 5/26/98; $17.333 for options
granted on 11/17/98; $13.0833 for options granted on 11/23/99; $14.8750 for
options granted on 12/13/00; $18.6867 for options granted on 2/26/02 and
$25.9900 for options granted on 10/29/02. As of 12/31/02, the named executives
held unexercised options to purchase shares as follows: Angel Alvarez-Perez,
156,000 granted on 11/25/97; 150,000 granted on 11/17/98; 150,000 granted on
11/23/99; 225,000 granted on 12/13/00 and 225,000 granted on 02/26/02. Annie
Astor-Carbonell, 48,000 granted on 11/25/97; 24,000 granted on 11/17/98; 24,000
granted on 11/23/99; 40,500 granted on 12/13/00 and 45,000 granted on 02/26/02.
Luis M. Beauchamp, 57,000 granted on 11/25/97; 27,000 granted on 11/17/98;
27,000 granted on 11/23/99; 45,000 granted on 12/13/00 and 48,000 granted on
02/26/02. Aurelio Aleman, 45,000 granted on 2/24/98; 18,000 granted on 11/17/98;
18,000 granted on 11/23/99; 39,000 granted on 12/13/00 and 45,000 granted on
02/26/02. Fernando Batlle 30,000 granted on 11/25/97; 30,000 granted on 2/24/98;
18,000 granted on 11/17/98; 18,000 granted on 11/23/99; 36,000 granted on
12/13/00 and 45,000 granted on 02/26/02. Randolfo Rivera, 60,000 granted on
5/26/98; 39,000 granted on 12/13/00 and 30,000 granted on 02/26/02. Dacio
Pasarell, 10,000 granted on 10/29/02. All options were granted at an exercise
price equal to the market price of First BanCorp's common stock on the date of
grant. The Stock Option Plan provides for automatic adjustments in the number
and price of options due to changes in capitalization resulting from stock
dividends or splits. All options have been adjusted to reflect the 50% stock
split distributed on September 30, 2002.
EMPLOYMENT AGREEMENTS
The following table discloses information regarding the employment
agreements of the named executives.
EFFECTIVE CURRENT TERM OF
NAME DATE BASE SALARY YEARS
-------------------------- -------- ----------- -----
Angel Alvarez-Perez 05-14-98 $ 866,250 4
Annie Astor-Carbonell 04-14-98 420,000 4
Luis M. Beauchamp 05-14-98 472,500 4
Aurelio Aleman 02-24-98 367,500 4
Fernando Batlle 05-14-98 367,500 4
Randolfo Rivera 05-26-98 367,500 4
11
The agreements provide that on each anniversary of the date of commencement
of each agreement the term of such agreement shall be automatically extended for
an additional one (1) year period beyond the then-effective expiration date,
unless either party receives written notice that the agreement shall not be
further extended. Notwithstanding such contract, the Board of Directors may
terminate the contracting officer at any time; however, unless such termination
is for cause, the contracting officer will continue to be entitled to the
compensation provided in the contract for the remaining term thereof. "Cause" is
defined to include personal dishonesty, incompetence, willful misconduct, breach
of fiduciary duty, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease and desist order or any material breach of any
provision of the Employment Agreement.
In the event of a "change in control" of the Corporation during the term of
the employment agreements, the executive shall be entitled to receive a lump sum
severance payment equal to his or her then current base annual salary plus the
highest cash performance bonus received by the executive in any of the four (4)
fiscal years prior to the date of the change in control, multiplied by the term
of years for which such contracting officer's employment agreement was to be
effective on the date into which it was entered. The severance payment that each
of the contracting officers would have received if his or her agreement had been
terminated as of December 31, 2002, pursuant to a change in control was: Angel
Alvarez-Perez, $6,265,000; Annie Astor-Carbonell, $2,680,000; Luis M. Beauchamp,
$3,090,000; Aurelio Aleman, $2,470,000; Fernando Batlle, $2,470,000; Randolfo
Rivera, $2,270,000.
Pursuant to the employment agreements, a "change in control" shall be
deemed to have taken place if a third person, including a group as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial
owner of shares of the Corporation having 25% or more of the total number of
votes which may be cast for the election of directors of the Corporation, or
which, by cumulative voting, if permitted by the Corporation's Charter or
Bylaws, would enable such third person to elect 25% or more of the directors of
the Corporation; or if, as a result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sales of assets or
contested election, or any combination of the foregoing transactions, the
persons who were directors of the Corporation before such transactions shall
cease to constitute a majority of the Board of the Corporation or any successor
institution.
DEFINED CONTRIBUTION RETIREMENT PLAN
The Corporation has a Defined Contribution Retirement Plan under Section
165(e) of Puerto Rico's Internal Revenue Act10 which provides participating
employees with retirement, death, disability and termination of employment
benefits in accordance with their participation. The Plan complies with the
"Employee Retirement Income Security Act of 1974 (ERISA)" and the "Retirement
Equity Act of 1984 (ERA)." The Corporation's employees are eligible to
participate in the Plan after completing one year of service and there is no age
requirement. An individual account is maintained for each participant and
benefits are paid based solely on the amount of each participant's account.
Participating employees may defer from 1% to 10% of their annual salary, up
to a maximum of $8,000, into the Plan on a pre-tax basis as employee salary
savings contributions. Each year the Corporation will make a contribution equal
to 25% of each participating employee's salary savings contribution; however, no
match is provided for salary savings contributions in excess of 4% of
compensation. At the end of the fiscal year, the Corporation may, but is not
obligated to make, additional contributions in an amount determined by the Board
of Directors; however, the maximum of any additional contribution in any year
may not exceed 15% of the total compensation of all eligible employees
participating in the Plan and no basic monthly or additional annual matches need
be made on years during which the Corporation incurs a loss.
In fiscal 2002, the total contribution to the Plan by the Corporation
amounted to $627,448, which funds were distributed on a pro rata basis among all
participating employees. The table below sets forth the total of the
Corporation's contribution during fiscal 2002 to the named executives of the
Corporation who participate in the Plan.
Angel Alvarez Perez $ 5,441
Annie Astor-Carbonell $ 5,198
Luis M. Beauchamp $ 5,624
Aurelio Aleman $ 4,197
Fernando Batlle $ 5,375
Ricardo Ramos-Luina $ 962
Randolfo Rivera $ 5,561
10 Section 165 of Puerto Rico's Internal Revenue Act is similar to Section
401 (k) of the Federal Internal Revenue Code
12
DEFERRED COMPENSATION PLAN
The Corporation has a Deferred Compensation Plan available to Executive
Officers whereby the executives may defer a portion of their salary. These
deferred amounts, if any, are included in the amounts disclosed in the summary
compensation table. The Corporation does not match any of the deferred amounts.
The deferred amounts are deposited in a Trust which is administered by the Bank.
The Corporation does not guarantee a return on the investment of these funds.
REPORT OF THE COMPENSATION COMMITTEE
The Executive Compensation Program is administered by the Compensation
Committee (the "Committee"), which is composed of three (3) non-employee
directors selected by the Board of Directors. During fiscal 2002 the Committee
was composed of Messrs. Hector M. Nevares, Rafael Bouet and Jose Teixidor. None
of the members of the Committee are or have been employees of the Corporation,
the Bank or of any of its subsidiaries.
EXECUTIVE COMPENSATION POLICY
The Corporation operates in a highly competitive industry where the quality,
creativity and professionalism of its executives are of utmost importance to the
success, profitability and growth of the institution. The underlying philosophy
of any effective compensation program must be to retain and recruit top
executives who will make significant contributions to the promotion and
achievement of the institutional goals, which will ultimately result in enhanced
shareholder value. Accordingly, the Corporation has put in place a compensation
policy that is designed to recruit, retain and reward key executives who
demonstrate the capacity to lead the Corporation in achieving its business
objectives.
OBJECTIVES
o Stimulate behavior that will lead to the attainment of the
Corporation's goals.
o Provide additional short-term and long-term variable compensation to
enable implementation of a pay-for-performance package.
In making their determinations for fiscal 2002, the Compensation Committee
reviewed the Corporation's performance as a whole and the performance of the
named executives in relation to the performance goals that have been set forth.
The Committee also took into consideration the performance of the Corporation in
comparison with the performance of other Corporations in the community as well
as the performance of the Corporation in relation to other institutions of
similar size and complexity of loan portfolio and other assets. On the basis of
their review, the Committee took the following actions with regard to the named
executives:
PERFORMANCE BONUS
The Executive Compensation Program provides for a performance bonus plan
whose purpose is to maximize the efficiency and effectiveness of the operation
of the Corporation. The Committee has designated the CEO and the Executive Vice
Presidents of the Corporation as plan participants. The performance bonus is
linked to the performance of the Corporation as a whole as well as the
achievement of individual goals by each of the named executives. Based on the
Corporation's performance and the performance of each of the named executives in
fiscal 2002, the Committee recommended, and on February 25, 2003 the Board
granted, the following performance bonuses to the following named executives:
Luis M. Beauchamp, Senior Executive Vice President, $300,000; Annie
Astor-Carbonell, Senior Executive Vice President, $250,000; Aurelio Aleman,
Executive Vice President, $250,000; Fernando Batlle, Executive Vice President,
$250,000; Randolfo Rivera, Executive Vice President, $200,000 and Dacio
Pasarell, Executive Vice President, $50,000.
LONG-TERM COMPENSATION
The Executive Compensation Plan also contemplates long-term incentive
compensation in the form of stock options under the Corporation's Employee Stock
Option Plan (the "SOP"). The Compensation Committee has discretion to select
which of the eligible persons will be granted stock options, whether stock
appreciation rights will be granted with such options, and generally to
determine the terms and conditions of such options in accordance with the
provisions of the SOP. During fiscal 2002 the following 10-year options were
granted to the named executives: Luis M. Beauchamp, Senior Executive Vice
President, 48,000; Annie Astor-Carbonell, Senior Executive Vice President,
45,000; Aurelio Aleman, Executive Vice President, 45,000; Fernando Batlle,
Executive Vice President, 45,000; Randolfo Rivera, Executive Vice President
30,000 and Dacio Pasarell, Executive Vice President, 10,000.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Angel Alvarez-Perez has served as President and Chief Executive Officer
of FirstBank since September 1990 and as Chairman, President and CEO of First
Bancorp since November 1998. During fiscal 2002, the annual salary of Mr. Angel
Alvarez-Perez was $825,000. On February 25, 2003, the Committee granted the
President a cash bonus of $700,000 corresponding to performance in fiscal 2002.
During fiscal 2002, the President received 225,000 stock options. The
compensation granted was determined in accordance with the Corporation's
compensation policy described above. In making such determination, the Committee
took into consideration the
13
Corporation's performance during 2002, including a significant increases in
First BanCorp's earnings, continued control of operating expenses, and the
achievement of goals that are geared to ensure the Corporation's continued trend
of earnings growth that has produced excellent value for First BanCorp's
stockholders.
Hector M. Nevares
Rafael Bouet
Jose Teixidor
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee has served as an officer
or employee of the Corporation, the Bank or of a subsidiary of the Corporation
or of the Bank.
PERFORMANCE OF FIRST BANCORP COMMON STOCK
[Plotpoints below represents line chart in printed document.]
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
First Bank $100 $133 $239 $167 $195 $240 $290
S&P 500 $100 $133 $171 $207 $190 $167 $130
S&P Supercom Banks Index $100 $147 $151 $126 $147 $145 $145
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
FirstBank $100 $133 $239 $167 $195 $240 $290
S&P 500 $100 $133 $171 $207 $190 $167 $130
S&P Supercom Banks Index $100 $147 $151 $126 $147 $145 $145
The stock performance graph set forth above compares the cumulative total
shareholder return of the Corporation's common stock from December 31, 1996, to
December 31, 2002, with cumulative total return of the S&P 500 Market Index. The
S&P 500 Market Index is a broad index that includes a wide variety of issuers
and industries representative of a cross section of the market. The S&P
Supercomposite Banks Index is a capitalization-weighted index that is composed
of 90 members.
OTHER EMPLOYMENT BENEFITS
The Corporation's executive officers are provided hospitalization and
medical insurance under group plans on generally the same basis as other
full-time employees of the Corporation. The Corporation offers to all executive
officers a life insurance policy of $1,000,000. In addition, the Corporation
offers all of its employees a contributory medical and hospitalization plan and
non-contributory long-term disability coverage, which will pay 60% at such
employees' salaries up to a maximum of $6,000 per month until age 65. The plans
are provided through Servicios de Seguros de Salud, Inc. (SSS) a Blue Cross and
Blue Shield Association of Puerto Rico.
BUSINESS TRANSACTIONS BETWEEN FIRSTBANK OR ITS SUBSIDIARIES
AND EXECUTIVE OFFICERS OR DIRECTORS
During fiscal 2002, directors and officers and persons or entities related
to such directors and officers were customers of and had transactions with the
Corporation and/or its subsidiaries. All such transactions were made in the
ordinary course of business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time they were made for
comparable transactions with other persons who are not insiders, and did not
either involve more than the normal risk of uncollectibility or present other
unfavorable features.
14
SECTION 16(a) COMPLIANCE
Based on reports filed with the Securities Exchange Commission and
information obtained from officers and directors of the Corporation, the
Corporation is not aware of any failure by its executive officers or directors
to file on a timely basis any reports required to be filed by Section 16(a) of
Securities Exchange Act of 1934 with respect to beneficial ownership of shares
of the Corporation except for the following instances: Director Jorge Diaz filed
six late reports corresponding to 13 transactions which were subsequently
informed on a Form 5. Former Director Francisco Fernandez filed one Form 4
corresponding to the purchase of shares of common stock seven days late; Mrs.
Aida Garcia filed one Form 4 corresponding to the sale of shares of common stock
seven days late and Mr. Dacio Pasarell filed one late report corresponding to
the purchase of preferred stock, which was subsequently reported on a Form 5.
AUDIT FEES
Total fees paid to PricewaterhouseCoopers LLP for professional services
rendered for the annual audit of the Corporation's financial statements for
fiscal 2002 were $221,400. There were no fees paid for financial information
systems design or implementation services. Other fees paid to
PricewaterhouseCoopers LLP in fiscal 2002 were for comfort letters and an agreed
upon procedure related to the acquisition of JP Morgan Chase's Eastern Caribbean
Region Operations. Such other fees totaled $134,000.
PROPOSAL #2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP has been selected as the independent
Certified Public Accountants of the Corporation for the fiscal year ending
December 31, 2003. The firm will be represented at the Annual Meeting and
representatives will have the opportunity to make a statement, if they so
desire, and also will be available to respond to appropriate questions. The
affirmative vote of a majority of the total votes eligible to be cast at the
Annual Meeting is required for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS OF THE
CORPORATION FOR THE FISCAL YEAR ENDING DECEMBER 31, 2003. THE VOTE OF THE
HOLDERS OF THE MAJORITY OF THE TOTAL VOTES ELIGIBLE TO BE CAST AT THE ANNUAL
MEETING IS REQUIRED FOR THE APPROVAL OF THIS PROPOSAL.
STOCKHOLDER PROPOSAL
Any proposal that a stockholder wishes to have presented at the next Annual
Meeting of the Corporation must be received at the main offices of First BanCorp
not later than December 20, 2003. If such proposal is in compliance with all of
the requirements of Rule 14a-8 of the Securities Exchange Act of 1934 (the
"Act"), it will be included in the Proxy Statement and set forth in the form of
proxy issued for the next Annual Meeting of Stockholders. All such proposals
should be sent by certified mail, return receipt requested, to the attention of
the Secretary.
OTHER MATTERS
Management of the Corporation does not know of any business to be brought
before the Annual Meeting other than that specified herein. However, if any
other matters are properly brought before the Meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the person voting the proxies.
The cost of solicitation of proxies will be borne by the Corporation. First
BanCorp has retained the services of Morrow & Co., a professional proxy
solicitation firm, to assist in the solicitation of proxies. The fee arranged
with Morrow & Co. is in the amount of $3,500.00 plus reimbursement for
out-of-pocket expenses. The Corporation will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy materials to the beneficial owners of First BanCorp's common
stock. In addition to solicitation by mail, directors, officers and employees of
the Corporation may solicit proxies personally or by telephone without
additional compensation.
ANNUAL REPORT
Stockholders will be sent a copy of the Corporation's Annual Report to
Stockholders for the fiscal year ended December 31, 2002, prior to or
accompanying the Proxy Statement. Such Annual Report is not part of the proxy
solicitation material. Upon receipt of a written request, the Corporation will
furnish to any stockholder, without charge, a copy of the Corporation's Annual
Report on Form 10-K under Section 13 of the Securities Exchange Act of 1934 and
the list of exhibits thereto required to be filed with the Securities Exchange
Commission under applicable law. Such written request must set forth a good
faith representation that the person making the request is, as of March 18,
2003, the owner of record of shares of common stock entitled to vote at the
Annual Meeting and should be directed to Carmen Gabriella Szendrey-Ramos,
Secretary, First BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico
00908.
BY ORDER of the Board of Directors
March 28, 2003
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EXHIBIT I
FIRST BANCORP
AUDIT COMMITTEE CHARTER
I. Purpose
The Audit Committee is appointed by the Board to assist in monitoring (1)
the integrity of the financial statements of the Corporation, (2) the compliance
by the Corporation with legal and regulatory requirements and (3) the
independence and performance of the Corporation's internal and external
auditors.
II. Composition
The Audit Committee shall be composed of a minimum of three directors, as
determined by the Board. The members of the Audit Committee shall meet the
independence and experience requirements of the Securities and Exchange
Commission and the New York Stock Exchange. The members of the Audit
Committee shall be appointed by the full Board of Directors.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit
Committee may request any officer or employee of the Corporation or the
Corporation's outside counsel or independent auditor to attend a meeting of
the Committee or to meet with any members of, or consultants to, the
Committee.
The Audit Committee shall make regular reports to the Board.
I. Responsibilities
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles
and practices as well as the adequacy of internal controls that could
significantly affect the Corporation's financial statements.
3. Review analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in
connection with the preparation of the Corporation's financial
statements.
4. Review with management and the independent auditor the Corporation's
quarterly financial statements prior to the release of quarterly
earnings.
5. Meet periodically with management to review the Corporation's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
6. Review major changes to the Corporation's auditing and accounting
principles and practices as suggested by the independent auditor,
internal auditors or management.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the
Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if
so determined by the Audit Committee, recommend that the Board take
appropriate action to satisfy itself of the independence of the
auditor.
10. Evaluate together with the Board the performance of the independent
Auditor and, if so determined by the Audit Committee, recommend that
the Board replaces the independent auditor.
11. Recommend to the Board the appointment and replacement of the senior
internal auditing executive.
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12. Review the significant reports to management prepared by the internal
auditing department and management's responses.
13. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
14. Obtain from the independent auditor assurance that Section 10A of the
Private Securities Litigation Reform Act of 1995 has not been
implicated.
15. Obtain reports from management, the Corporation's senior internal
auditing executive and the independent auditor that the Corporation's
subsidiary/foreign affiliated entities are in conformity with
applicable legal requirements and the Corporation's Code of Conduct.
16. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.
17. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Corporation's response to that letter. Such review
should include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access
to required information.
(b) Any changes required in the planned scope of the internal audit.
(c) The internal audit department responsibilities, budget and
staffing.
18. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Corporation's annual proxy
statement.
19. Advise the Board with respect to the Corporation's policies and
procedures regarding compliance with applicable laws and regulations
and with the Corporation's Code of Conduct.
20. Review with the Corporation's General Counsel legal matters that may
have a material impact on the financial statements, the Corporation's
compliance policies and any material reports or inquiries received
from regulators or governmental agencies.
21. Meet at least annually with the chief financial officer, the senior
internal auditing executive and the independent auditor in separate
executive sessions.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditor or
to assure compliance with laws and regulations and the Corporation's Code of
Conduct.
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-- DETACH PROXY CARD HERE --
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/ / MARK, SIGN, DATE AND RETURN / X /
THE PROXY CARD PROMPTLY VOTES MUST BE INDICATED
USING THE ENCLOSED ENVELOPE. (X) IN BLACK OR BLUE INK.
1. To elect the following directors for a term of three years:
NOMINEES: Jose Julian Alvarez-Bracero, Jose Teixidor, and Richard Reiss-Huyke
FOR all nominees / / WITHHOLD AUTHORITY to vote / / *EXCEPTIONS / /
listed above for all nominees listed
above
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW).
*Exceptions ______________________________________________________________
FOR AGAINST ABSTAIN
2. To ratify the appointment of / / / / / /
PricewaterhouseCoopers LLP
as the Corporations independent
accountants for fiscal year 2003.
3. To consider any other matters / / / / / /
that may be properly brought up for
consideration at the Annual Meeting
To change your address, please mark this box. / /
To include any comments, please mark this box. / /
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S C A N L I N E
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Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Date Share Owner sign here Co-Owner sign here
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REVOCABLE PROXY
FIRST BANCORP
1519 Ponce De Leon Avenue
San Juan, Puerto Rico
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Angel Alvarez-Perez, Jorge L. Diaz and Jose L.
Ferrer-Canals as Proxies, each with the power to appoint a substitute, and
hereby authorizes them to vote as designated on the reverse, all shares of
common stock of First BanCorp held of record by the undersigned on March 18,
2003 at the Annual Meeting of Stockholders to be held on April 29, 2003 or any
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSALS 1 AND 2.
(Continued, and to be dated and signed on the reverse side)
FIRST BANCORP
P.O. BOX 11089
NEW YORK, N.Y. 10203-0089