UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 001-14793
FIRSTBANK 401 (K) RETIREMENT PLAN FOR RESIDENTS OF PUERTO RICO
(Full title of the Plan and address of the Plan, if different from that
of the issuer named below)
FIRST BANCORP.
1519 Ponce de Leon Avenue, Stop 23
Santurce, Puerto Rico 00908-0146
(Name of issuer of the securities held pursuant to the plan and the address
of principal executive office)
FIRSTBANK 401(K) RETIREMENT PLAN FOR RESIDENTS OF PUERTO RICO
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
INDEX
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PAGE (s)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM...........................................................1
FINANCIAL STATEMENTS
Statements of Net Assets Available for
Benefits at December 31, 2003 and 2002...........................................................................2
Statement of Changes in Net Assets
Available for Benefits for the year ended December 31, 2003......................................................3
Notes to Financial Statements.................................................................................4 - 8
SUPPLEMENTAL SCHEDULE*
Exhibit I -
Schedule of Assets (Held at End of Year) - December 31, 2003....................................................9
* Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under ERISA have
been omitted because they are not applicable.
8
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of
FirstBank 401(k) Retirement Plan
for Residents of Puerto Rico
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of FirstBank 401(k) Retirement Plan for Residents of Puerto Rico (the "Plan") at
December 31, 2003 and 2002, and the changes in net assets available for benefits
for the year ended December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of Assets (Held
at End of Year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
San Juan, Puerto Rico
June 18, 2004
FIRSTBANK 401(K) RETIREMENT PLAN FOR RESIDENTS OF PUERTO RICO
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
-------------------------------------------------------------------------------
2003 2002
------------ ------------
ASSETS
Investments
Investments in mutual funds, at fair value $ 12,044,285 $ 9,692,129
Investment in First BanCorp. common stock, at fair value 2,421,488 1,072,055
Participant loans receivable 344,502 135,592
------------ ------------
Total investments 14,810,275 10,899,776
------------ ------------
RECEIVABLES
Employer contribution 588,832 403,858
Participant contributions -- 45,362
Other receivables, principally interest and dividends 72 7,275
------------ ------------
Total receivables 588,904 456,495
------------ ------------
Cash 95,967 48,163
------------ ------------
Total assets 15,495,146 11,404,434
LIABILITIES AND NET ASSETS AVAILABLE FOR BENEFITS
Due to brokers for securities purchased 2,367 40,943
------------ ------------
Net assets available for benefits $ 15,492,779 $ 11,363,491
============ ============
The accompanying notes are an integral part of these financial statements.
2
FIRSTBANK 401(K) RETIREMENT PLAN FOR RESIDENTS OF PUERTO RICO
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2003
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2003
------------
ADDITIONS
Additions to net assets attributed to
Investment income
Net appreciation in fair value of investments $ 2,374,350
Interest income on loans to participants 14,581
Dividends 185,948
------------
2,574,879
------------
Contributions
Employer 833,717
Participants 978,584
Rollovers from other qualified plans 238,557
------------
2,050,858
------------
Total additions 4,625,737
Deductions
Benefits paid to participants 496,449
------------
Net increase in net assets available for benefits 4,129,288
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 11,363,491
------------
End of year $ 15,492,779
============
The accompanying notes are an integral part of these financial statements.
3
FIRSTBANK 401(K) RETIREMENT PLAN FOR RESIDENTS OF PUERTO RICO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
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1. DESCRIPTION OF THE PLAN
REPORTING ENTITY
The accompanying financial statements include the assets of the
FirstBank 401(k) Retirement Plan for Residents of Puerto Rico (the
"Plan") sponsored by FirstBank Puerto Rico (the "Bank") for its Puerto
Rico employees only.
The following description of the Plan provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan, which became effective in 1965,
and was amended in 1977, to comply with the requirements of the Employee
Retirement Income Security Act of 1974 (ERISA) and as of January 1,
1985, to comply with the requirements of the Retirement Equity Act of
1984 (REACT). Accordingly, it is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA). Effective
September 1, 1991, the Plan was further amended to become a savings plan
under the provisions of the Puerto Rico Internal Revenue Code Section
1165(e).
All full-time employees of the Bank and its wholly owned subsidiaries
are eligible to participate in the Plan after completion of one year of
service.
CONTRIBUTIONS
Participants are permitted to contribute up to 10% of their pretax
annual compensation, as defined in the Plan, and up to an additional 8%
on an after-tax basis. During the plan year, contributions were limited
to a pre-tax maximum of $8,000 per year. The Bank is required to make a
matching contribution of twenty-five cents for every dollar on the first
4% of the compensation that a participant contributes to the Plan on a
pre-tax basis. In addition, the Bank may voluntarily make additional
discretionary contributions to the Plan at the end of the year to be
distributed among the participants' accounts as established in the
Plan's document. Investment of participants' and employer's
contributions are directed by participants into various investment
options, which include several mutual funds and common stock of First
BanCorp., the Bank's parent company. Contributions are subject to
certain limitations.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contributions and allocations of (a) the Bank's contributions and (b)
Plan earnings, and charged with an allocation of investment management
expenses. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's vested account.
VESTING
Participants are immediately vested in their contributions and
employer's matching contribution plus actual earnings thereon.
4
FIRSTBANK 401(K) RETIREMENT PLAN FOR RESIDENTS OF PUERTO RICO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
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Effective January 1, 2002, the Plan was amended to adopt a graded
vesting schedule for the Bank's additional discretionary contribution as
follows:
Years of Vested
Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 or more 100%
LOANS TO PARTICIPANTS
Under the terms of the Plan, participants are allowed to borrow from
their accounts up to 50% of their vested account balance or $50,000
whichever is less. Loan transactions are treated as a transfer to
(from) the investment funds from (to) the Participants Loan Fund. Loans
are secured by the balance in the participants' accounts and bear
interest at the rate determined by the Plan administrator at the time of
the loan. The interest rate of these loans range from 6% to 9%.
Principal and interest is paid ratably through biweekly payroll
deductions.
PAYMENT OF BENEFITS
Plan participants are permitted to make withdrawals from the Plan,
subject to provisions in the Plan agreement. If a participant suffers
financial hardship, as defined in the Plan agreement, the participant
may request a withdrawal from his or her contributions. In the case of
participant termination because of death, the entire vested amount is
paid to the person or persons legally entitled thereto.
Benefits are paid in a lump-sum cash payment. If the value of the vested
account is more than $5,000, the participant may elect to defer any
benefit payable under the Plan until a specified future date. If benefit
payments are to be deferred, the Plan will earmark the balance as part
of its assets in a special account or a deposit certificate with the
funds of the former member. Interest earned on such special account is
paid to the participant. Such special accounts or certificates do not
participate in the allocation of the Bank's contributions or earnings of
the Plan's investments. There were no deferred vested benefits at
December 31, 2003.
PLAN EXPENSES AND ADMINISTRATION
Bank and participant contributions are held by AST Trust Company as
custodian and managed by Milliman USA, Inc. as plan recordkeeper, both
appointed by the Board of Directors of the Bank. The custodian invests
cash received, interest and dividend income and makes distributions to
participants.
Administrative fees are paid by the Bank.
FORFEITURES
Forfeited balances of terminated participants' nonvested accounts are
used to reduce future Bank contributions or used to cover administrative
expenses of the Plan for the following year.
5
FIRSTBANK 401(K) RETIREMENT PLAN FOR RESIDENTS OF PUERTO RICO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
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2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENTS
The Plan's policy is to prepare its financial statements using the
accrual basis of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CONTRIBUTIONS
Employee contributions are recorded in the period in which the Bank
makes payroll deductions from the participants' compensation. Matching
employer's contributions are recorded in the same period.
INVESTMENTS VALUATION AND INCOME RECOGNITION
The Plan's investments in mutual funds and common stock of First
BanCorp. are stated at fair value. Shares of registered investment
companies are valued at quoted market prices which represent the net
asset value of shares held by the Plan at the reporting date. First
BanCorp.'s common stock is valued at its quoted market price. The Plan
presents in the statements of changes in assets available for benefits
the net appreciation (depreciation) in the fair value of its investments
which consists of the realized gains or losses and the unrealized
appreciation (depreciation) on them.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis and dividends are
recorded on the ex-dividend date.
PARTICIPANT LOANS
Participant loans receivable are valued at the amounts receivable from
participants.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
6
FIRSTBANK 401(K) RETIREMENT PLAN FOR RESIDENTS OF PUERTO RICO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
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3. INVESTMENTS
The following presents the Plan's investments:
2003 2002
--------------------------- ---------------------------
Value # of shares Value # of shares
------------ ------------ ------------ ------------
Vanguard S&P Indexed Fund* $ 2,891,384 28,162 $ 2,261,843 27,872
Vanguard Money Market* 3,467,004 3,467,004 2,837,110 2,837,110
Ameristock Mutual Fund* 1,567,843 39,783 1,305,515 39,513
Baron Asset Fund* 1,131,926 25,825 910,887 26,464
Harbor Bond Mutual Fund 463,221 39,156 -- --
Harbor International Institutional Fund* 1,072,575 29,154 -- --
Janus Balanced Fund* 1,237,290 63,427 1,134,075 63,427
Ariel Fund 119,767 2,654
Lazard International Equity* -- -- 636,395 71,345
Warburg Pincus Fixed Income -- -- 542,389 56,032
First BanCorp. Common Stock* 2,421,488 61,226 1,072,055 52,209
Janus Investment Growth & Income 93,275 3,226 63,915 2,738
Participant Loans 344,502 -- 135,592 --
------------ ------------
$ 14,810,275 $ 10,899,776
============ ============
*Investment exceeds five percent of net assets available for benefits.
During 2003, the Plan's investments (including gains and losses on
investments bought and sold) appreciated (depreciated) in values as
follows:
Mutual Funds $ 1,508,980
Common stock - First BanCorp. 865,370
-----------
$ 2,374,350
===========
4. TAX STATUS
The Puerto Rico Department of Treasury has determined and informed the
Bank under letter dated April 5, 1993 that the Plan is designed in
accordance with the applicable sections of the Internal Revenue Code of
the Commonwealth of Puerto Rico and, therefore, exempt from income
taxes. The Plan and the income tax law have been amended since receiving
the determination letter. However, the Plan Administrator believes that
the Plan is designed and is currently being operated in compliance with
the applicable requirements of the income tax law.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Bank has the
right to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan
termination, participants will become 100 percent vested in their
accounts and such termination shall not reduce the interest of any
participating employee or their beneficiaries accrued under the Plan up
to the date of such termination.
7
FIRSTBANK 401(K) RETIREMENT PLAN FOR RESIDENTS OF PUERTO RICO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
6. FORFEITED AMOUNT
Forfeited nonvested accounts amounted to $11,603 at December 31, 2003
(2002 - $4,393). These accounts are transferred by the Plan
administrator to an unallocated account to be used to cover
administrative expenses of the Plan for the following year or reduce the
Bank's future contributions. In 2002, $12,888 from forfeited nonvested
accounts were used to cover administrative expenses. No forfeitures were
used to reduce Bank's contributions or administrative expenses in 2003.
7. RISKS AND UNCERTAINTIES
The Plan's investments are exposed to various risks, such as interest
rate, market and credit risks. Due to the level of risk associated with
certain investments and the level of uncertainty related to changes in
the values of investments, it is at least reasonably possible that
changes in these factors in the near term would materially affect the
amounts reported in the statement of assets available for benefits and
the statement of changes in assets available for benefits.
8. ADDITIONAL CONTRIBUTIONS
The Board of Directors of the Bank approved in 2004 an additional
contribution of approximately $481,200 based on the Bank's 2003 results
and has been recorded as employer contribution receivable in the
statement of net assets available for benefits. In addition, as part of
the Plan's compliance with its non-discrimination test the Bank agreed
to contribute approximately $107,600 to non-highly compensated
participants to satisfy contribution requirements. Such additional
contribution has been also recorded as employer contribution receivable
in the statement of net assets for benefits.
8
FIRSTBANK 401(K) RETIREMENT PLAN FOR RESIDENTS OF PUERTO RICO
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
(SCHEDULE H, LINE 4(I) ON FORM 5500) EXHIBIT I
--------------------------------------------------------------------------------
Description of
Identity of Issue or Borrower Investment or Rate of Interest 2003
Ameristock Mutual Fund Mutual Fund, 39,783 shares $ 1,567,843
Ariel Fund Mutual Fund, 2,654 shares 119,767
Baron Asset Fund Mutual Fund, 25,852 shares 1,131,926
First BanCorp. Common Stock * 61,226 shares of common stock 2,421,488
Harbor Bond Fund Mutual Fund, 39,156 shares 463,221
Harbor International Equity Fund Mutual Fund, 29,154 shares 1,072,575
Janus Balanced Fund Mutual Fund, 62,050 shares 1,237,290
Janus Investment Growth & Income Mutual Fund, 3,226 shares 93,275
Participant loans Interest rate ranging from 6% to 9% 344,502
Vanguard Prime Money Market Fund Pooled Account, 3,467,004 units 3,467,004
Vanguard S&P 500 Indexed Fund Mutual Fund, 28,162 shares 2,891,384
-------------
$ 14,810,275
=============
* Party-in-interest
9
SIGNATURE
The Plan. Pursuant to the requirement of the Securities Exchange Act of 1934,
the Board of Trustees (or the persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST BANCORP.
Date: 06/28/04 By: /s/ Annie Astor-Carbonell
-------------------------------
Authorized Representative
Date: 06/28/04 By: /s/ Aida M. Garcia
-------------------------------
Authorized Representative
INDEX OF EXHIBITS
EXHIBIT NUMBER EXHIBIT DESCRIPTION
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23 Consent of PricewaterhouseCoopers LLP