SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrantþ
Filed by a Party other than the Registranto
Check the appropriate box:
Filed by a Party other than the Registranto
Check the appropriate box:
o Preliminary Proxy Statement
oConfidential, for Use of the Commission Only (as permitted by Rule 14a-6(e) (2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Section 240.14a-12
oConfidential, for Use of the Commission Only (as permitted by Rule 14a-6(e) (2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Section 240.14a-12
FIRST BANCORP
BANCORP.
(Name of Registrant as Specified In Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| þ | No fee required. | |
| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| 1) | Title of each class of securities to which transaction applies: | ||
| 2) | Aggregate number of securities to which transaction applies: | ||
| 3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): | ||
| 4) | Proposed maximum aggregate value of transaction: | ||
| 5) | Total fee paid: | ||
| o | Fee paid previously with preliminary materials. | |
| o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule, and the date of its filing. |
| 1) | Amount Previously Paid: | ||
| 2) | Form, Schedule or Registration Statement No.: | ||
| 3) | Filing Party: | ||
| 4) | Date Filed: | ||
1519 PONCE DE LEON AVENUE
SAN JUAN, PUERTO RICO 00908
(787) 729-8200
SAN JUAN, PUERTO RICO 00908
(787) 729-8200
NOTICE OF MEETING AND PROXY STATEMENT
---------------------- ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 28, 2005
To the Stockholders of First BanCorp Puerto Rico:
BanCorp:
NOTICE IS HEREBY GIVEN that pursuant to a resolution of the Board of Directors and Section 2 of the Corporation's Bylaws,Corporation’s By-laws, the Annual Meeting of Stockholders of First BanCorp will be held at its principal offices located at 1519 Ponce de Leon Avenue, Santurce, Puerto Rico, on Thursday, April 28, 2005,Wednesday, October 31, 2007, 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 termThe election of three years or until
their successors have been elected and qualified.
nine (9) directors.
2. To ratifyThe ratification of the appointment of PricewaterhouseCoopers LLP as the Corporation'sCorporation’s Independent Registered Public Accounting Firm for fiscal year 2005.
2007.
3. To transact suchSuch 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'sCorporation’s Secretary on or before 2:00 p.m. of the day of the meeting.
The Board
Only stockholders of Directors has set Marchrecord as of the close of business on September 14, 2005, as the record date for the
determination of stockholders2007 are entitled to receive notice of and to vote at the meeting. San Juan, Puerto Rico
March 22, 2005
A list of such stockholders shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of ten days prior to the meeting, at the offices of the Corporation.
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.
By orderOrder of the Board of Directors
Carmen Gabriella Szendrey-Ramos, Esq. Angel Alvarez-Perez, Esq.
/s/ Lawrence Odell
Secretary Chairman, President & CEO
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS
Secretary
San Juan, Puerto Rico
September 21, 2007
September 21, 2007
TABLE 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.
[This page has been Intentionally left blank]
CONTENTS
| 4 | ||||
| 4 | ||||
| 4 | ||||
| 5 | ||||
| 5 | ||||
| 5 | ||||
| 7 | ||||
| 8 | ||||
| 8 | ||||
| 8 | ||||
| 9 | ||||
| 10 | ||||
| 10 | ||||
| 10 | ||||
| 12 | ||||
| 12 | ||||
| 12 | ||||
| 13 | ||||
| 13 | ||||
| 13 | ||||
| 14 | ||||
| 14 | ||||
| 14 | ||||
| 14 | ||||
| 14 | ||||
| 15 | ||||
| 16 | ||||
| 16 | ||||
| 17 | ||||
| 17 | ||||
| 18 | ||||
| 18 | ||||
| 18 | ||||
| 20 |
2
| 24 | ||||
| 24 | ||||
| 24 | ||||
| 26 | ||||
| 27 | ||||
| 27 | ||||
| 28 | ||||
| 28 | ||||
| 28 | ||||
| 29 | ||||
| 31 | ||||
| 31 | ||||
| 32 | ||||
| 32 | ||||
| 32 |
3
FIRST BANCORP
1519 Ponce De Leon Avenue
Santurce, Puerto Rico 00908
1519 Ponce De Leon Avenue
Santurce, Puerto Rico 00908
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ONAPRIL 28, 2005
OCTOBER 31, 2007
TO BE HELD ON
This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors of First BanCorp ("the Corporation"(the “Corporation”) for use at the Annual Meeting of Stockholders to be held at the Corporation'sCorporation’s main offices located at 1519 Ponce de Leon Avenue, Santurce, Puerto Rico, on April 28, 2005,October 31, 2007, at 2:00 p.m., and at any adjournment thereof. This Proxy Statement is expected to be mailedand form of proxy are first being sent or given to stockholders of record on or about March
29, 2005.
September 21, 2007. The costs of this proxy solicitation are borne by the Corporation.
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 Annual Meeting in accordance with the instructions you specifyspecified in the proxy. If you do not give instructions to the contrary, each proxy received will be voted for the mattersin favor of management’s proposals described below. Any proxy given as a result of this solicitation may be revoked, at any time before it is exercised, by the stockholder in the following manner: (i) by submitting a written notification to the Secretary of First BanCorp before the date of the Annual Meeting, (ii) by submitting a duly executed proxy bearing a later date, or (iii) by appearing at the Annual Meeting and giving properwritten 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 toto: (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 29, 2004;28, 2005; and (iv)(iii) 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 whichthat 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 MarchSeptember 14, 2005,2007 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 40,393,155 shares of the92,504,507 issued and outstanding shares of common stock of the Corporation in circulation,(the “common stock”), each of which is entitled to one vote for each proposal to be considered at the Annual Meeting.
The presence, either in person or by proxy, of at least a majority of the Corporation'sCorporation’s issued and outstanding shares of common stock in circulation is
necessaryentitled to vote shall 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 authorityreceived instructions from a stockholder regarding how to vote on a particular matter. Action with respect to Proposal 1: Election of threenine Directors for a three year term,and Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm, shall be taken by a majority of the total votes present in person or by proxy and entitled to vote. Therefore,
asAs to such prospect,these proposals, abstentions and broker non-votes will have the same effect as a vote against the proposals. Each share of common stockproposals; however, a broker is entitled to one
vote for theon these proposals to be considered.
even if a stock holder does not provide voting instructions.
4
BENEFICIAL OWNERSHIP OF SECURITIES
Principal Beneficial Owners
The following sets forth, information known to the Corporation as to the
persons or entities, which as of March 1, 2005, by themselves orthe record date, except as a group, as
the term is defined by section 13(d) (3)otherwise stated, information concerning persons who beneficially own more than 5% of the Securities Exchange Act of 1934,
are the beneficial owners of 5% or more of theCorporation’s issued and outstanding common stock of the Corporation in circulation.stock. All information concerning persons who may be beneficial owners of more than 5% or more of the stock is derived solely from Schedule 13(D)13D or 13(G)13G statements and a Form 4 filed with the SEC and notified to the Corporation.
1
BENEFICIAL OWNERS OF 5% OR MORE:
Name NUMBER OF SHARES PERCENTAGE
- --------------------------------------------------------------------------------
FMR Corp 3,987,640 9.873%
82 Devonshire Street
Boston, MA 02109
Angel Alvarez-Perez 3,764,459(1),(2) 9.320%
Chairman, President
| Name and Address | Number of Shares | Percentage | ||||||
| The Bank of Nova Scotia | 9,250,450 | (a) | 10.00 | % | ||||
| 44 King Street West 6th Fl. Toronto, Canada M5H 1H1 | ||||||||
| FMR Corp. | 8,038,800 | (b) | 8.69 | % | ||||
| 82 Devonshire Street Boston, MA 02109 | ||||||||
| Angel Alvarez-Pérez | 7,308,918 | (c) | 7.90 | % | ||||
| Condominio Plaza Stella Apt.1504 Avenida Magdalena 1362 San Juan, Puerto Rico 00907 | ||||||||
| (a) | On August 24, 2007, the Corporation entered into a Stockholder Agreement with The Bank of Nova Scotia which completed a private placement of 9,250,450 shares of the Corporation’s common stock at a price of $10.25 per share pursuant to the terms of an investment agreement dated February 15, 2007. The Bank of Nova Scotia filed a Schedule 13D on September 4, 2007 reporting the 10% beneficial ownership. | |
| (b) | Based solely on a Schedule 13G/A filed with the SEC on February 14, 2007, FMR Corp. reported aggregate beneficial ownership of approximately 9.66% or 8,038,800 shares of the Corporation as of December 31, 2006, which as of the record date approximates 8.69%. FMR Corp. reported that it possessed sole voting power over 14,800 shares and sole dispositive power over 8,038,800 shares. FMR Corp. also reported that it did not possess shared voting or shared dispositive power over any shares beneficially owned. | |
| (c) | Number of shares is based solely on a Form 4 filed with the SEC on April 3, 2006 by Mr. Angel Àlvarez Pérez, which is the most recent filing of the reporting person known to the Corporation as of September 14, 2007. |
Beneficial Ownership by Directors or Nominees and CEO
First BanCorp
1519 Ponce de Leon Avenue
Santurce, PR 00908
Barclays Global Investors 2,939,408 7.277%
45 Fremont Street
San Francisco, CA 94105
Garity & Co., Capital Management 2,725,368 6.748%
1414 Banco Popular Center
Hato Rey, Puerto Rico 00918
BENEFICIAL OWNERSHIP BY DIRECTORS OR NOMINEES:
Executive Officers of the Corporation
The following table sets forth information with regard to the total number of shares beneficially owned, as of the Corporation's common stock beneficially ownedrecord date, September 14, 2007, by (i) each current member of the Board of Directors, and(ii) each nominee to the Board of Directors, and(iii) each current executive officer named in the Summary Compensation table, (iv) certain other officers of the Corporation, and by(v) all current directors, executive officers and executivecertain other officers as a group. Information regarding the beneficial ownership by executive
officers and directors is derived from information submitted to the Corporation by such executive officers and directors.
5
| Name | Number of Shares (a) | Percentage | ||||||
Directors or Director Nominees: | ||||||||
| Luis M. Beauchamp, Chairman, President & CEO | 2,231,672 | (b) | 2.41 | % | ||||
| Aurelio Alemán, COO & Senior Executive VP | 794,000 | (c) | * | |||||
| José Teixidor | 120,740 | * | ||||||
| Jorge L. Díaz | 23,660 | (d) | * | |||||
| José Ferrer-Canals | 500 | * | ||||||
| Richard Reiss-Huyke | — | * | ||||||
| Sharee Ann Umpierre-Catinchi | 75,500 | (e) | * | |||||
| José Menéndez-Cortada | 15,364 | (f) | * | |||||
| Fernando Rodríguez-Amaro | 5,250 | * | ||||||
| Frank Kolodziej | 2,681,856 | 2.90 | % | |||||
| Héctor M. Nevares | 3,940,474 | (g) | 4.26 | % | ||||
| José F. Rodríguez | 210,000 | (h) | * | |||||
Executive Officers: | * | |||||||
| Fernando Scherrer, CFO & Executive VP | 175,000 | (i) | * | |||||
| Lawrence Odell, General Counsel, Secretary & Executive VP | 175,000 | (j) | * | |||||
| Dacio Pasarell, Executive VP | 126,000 | (k) | * | |||||
| Randolfo Rivera, Executive VP | 518,450 | (l) | * | |||||
| Emilio Martinó, Chief Credit Officer & Executive VP | 68,323 | (m) | * | |||||
| Cassan Pancham, Executive VP | 113,188 | (n) | * | |||||
| Nayda Rivera-Batista, Chief Risk Officer & Senior VP | 70,366 | (o) | * | |||||
| Miguel Babilonia, Chief Credit Risk Officer & Senior VP | 28,000 | (p) | * | |||||
| Pedro Romero, Chief Accounting Officer and Senior VP | 35,091 | (q) | * | |||||
| Victor Barreras, Treasurer & Senior VP | 70,000 | (r) | * | |||||
| Current Directors and Executive Officers as a group | 11,478,434 | 12.41 | % | |||||
| * | Represents less than 1%. | |
| (a) | Includes options to purchase shares that are held by the Directors and Executive Officers | |
| (b) | Includes options to purchase 1,157,600 shares. | |
| (c) | Includes options to purchase 744,000 shares. | |
| (d) | Includes 22,460 shares separately owned by his spouse. | |
| (e) | Includes 9,000 shares owned jointly with her spouse. Excludes 2,091,070 shares owned by Ms. Umpierre-Catinchi’s father and a | |
| (f) | Includes 550 shares owned by Martínez-Alvarez, Menéndez-Cortada & Lefranc Romero, PSC of which Mr. Menéndez-Cortada is an indirect beneficial owner. | |
| (g) | Includes 3,715,474 shares owned by his father, Héctor G. Nevares, which Mr. Héctor M. Nevares shares voting and investment powers pursuant to a power of attorney. |
6
| (h) | Includes 206,000 shares owned jointly with spouse and 4,000 shares owned by spouse. | |
| (i) | These are options to purchase 175,000 shares. | |
| (j) | These are options to purchase 175,000 shares. | |
| (k) | Includes options to purchase 96,000 shares. | |
| (l) | Includes options to purchase 502,110 shares. | |
| (m) | Includes options to purchase 68,000 shares. | |
| (n) | Includes options to purchase 110,000 shares. | |
| (o) | Includes options to purchase 70,000 shares. | |
| (p) | These are options to purchase 28,000 shares. | |
| (q) | Includes options to purchase 35,000 shares. | |
| (r) | These are options to purchase 70,000 shares. |
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTORSDIRECTOR OF
FIRST BANCORP, DIRECTORS WHOSE TERMS CONTINUE AND
EXECUTIVE OFFICERS OF THE CORPORATION
FIRST BANCORP, DIRECTORS WHOSE TERMS CONTINUE AND
EXECUTIVE OFFICERS OF THE CORPORATION
The BylawsBy-laws 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
absolutea 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 currently number ninehas eleven members. According to the Corporation's Bylaws,Corporation’s By-laws, the Board of Directors shall be divided into three classes as nearly equal in number as possible. In accordance with the General Corporation Law of Puerto Rico, the terms of directors of a corporation that classifies its directors into one, two or three groups shall be established as follows: the term of office of the directors in the first group shall expire at the next annual meeting; of the second group, one year after said annual meeting; and of the third group, two years after said meeting. At each annual election subsequent to this classification and election, the directors shall be elected for full terms, as the case may be, to succeed those whose terms expire. The members of each class are to be elected for a term of three years and until their successors are elected and qualified.qualified or until his or her resignation, retirement or removal from office. One class is elected each year on a rotating basis. The Corporation’s By-laws further provide that any director elected by an affirmative vote of the majority of the Board of Directors to fill a vacancy shall serve until the next election of directors by stockholders.
Given that the Corporation has not been able to hold an annual meeting since April 28, 2005 due to the inability to timely file its annual reports on Form 10-K for the years ended December 31, 2005 and 2006, some of the Board members have terms that have expired and are currently holding office until the next election of directors by stockholders and other Board members have been elected to fill vacancies and will also serve until the next election of directors by stockholders. In this regard, the following members of the Board of Directors shall be up for election at the next stockholders’ meeting: Luis M. Beauchamp, Aurelio Alemán, José Teixidor, José L. Ferrer-Canals, Sharee Ann Umpierre-Catinchi, and Fernando Rodríguez-Amaro. Mr. Richard Reiss-Huyke will not stand for re-election; therefore his term will expire on the date of the stockholders meeting. In order to comply with the class number requirements established by the Corporation’s By-laws, the Corporate Governance and Nominating Committee is recommending that two directors be elected for a one-year term, four be elected for a two-year term and three be elected for a three-year term. This will result in having three classes of directors, two will have four directors each and one
7
will have three directors. The members of the Board of Directors of First BanCorp are also the members of the Board of FirstBank Puerto Rico (the "Bank"(“FirstBank” or the “Bank”).
The Corporation'sCorporation’s retirement policy for the Board of Directors states that directors who reach the age of 70 may continue to serve until the end of the term to which they were elected, but will not be eligible to stand for reelection. For a detailed description of the Corporate Governance and Nominating Committee'sCommittee’s functions, responsibilities and operations please refer, to the Corporate Governance and Nominating Committee section.
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 Corporate Governance and Nominating Committee. At this time, the Corporate Governance and 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. On February 22,
2005,July 31, 2007, the Corporate Governance and Nominating CommitteeBoard of Directors approved the inclusion of the nominees in the Corporation's 2005Corporation’s 2007 proxy card. Ms. Annie Astor-Carbonell
and Messrs. Jorge L. Diaz and Jose Menendez-Cortada were recommended by
non-management directors.
card, except for Mr. José F. Rodríguez, who was approved on September 14, 2007.
The information presented below regarding the time of service on the Board of Directors includes terms concurrently served on the Board of Directors of the Bank.
PROPOSAL #1
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
NOMINEES FOR A THREE-YEARONE-YEAR TERM EXPIRING 2008
ANNIE ASTOR-CARBONELL, 47
SENIOR EXECUTIVE VICE PRESIDENT - CHIEF FINANCIAL OFFICER
Certified Public Accountant. Senior
José Teixidor, 53
Chief Executive ViceOfficer and President of B. Fernández & Hnos., Inc. from May 2003 to present; Chairman of the Board of Pan Pepín Inc. from 1998 to present; Chairman of the Board of Baguettes, Inc. from 1998 to 2006; Chairman of the Board of Pan Pepín Baking, Inc. from 2004 to present; President of Eagle Investment Fund, Inc. from 1996 to present; President of Swiss Chalet, Inc. from 2000 to present; Chairman of the Board of Marvel International from 2005 to present; member of the Board of the Puerto Rico Chamber of Commerce and Chief Financial
Officer of First BanCorpthe Industry and Food Distribution Chamber of Commerce; member of the Board of the Distributors and Manufacturers Association; member of the Wholesalers Chamber of Puerto Rico; and member of the Board of El Nuevo Día from 1996 to 2006. Director since January 1994.
José L. Ferrer-Canals, 48
Doctor of Medicine in private Urology practice since 1992. Commissioned captain in the United States Air Force Reserve March 1997. Executive Vice President and Chief
Financial Officer from 19871991. Inactive Ready Reserve 1995 to 1997. Senior Vice President and Comptroller from
1984 to 1987. Prior to joining2005. Honorably discharged with rank of Major in 2005. Member of the Corporation, Senior Auditor at Peat Marwick
Mitchell & Co.Alpha Omega Alpha Honor Medical Society since induction in 1986. Member of the Board of Directors of the American Cancer Society, Puerto Rico Community
Foundation during 2003Chapter, from 1999 to 2003. Member of the Board of Directors of the American Red Cross, Puerto Rico Chapter, from 2005 to present. Obtained a Master of Business Administration degree by the University of New Orleans, of the Louisiana State University System on September 2007. Director since 2001.
NOMINEES FOR A TWO-YEAR TERM EXPIRING 2009
Luis M. Beauchamp, 64
Chairman, President and2004.Chief Executive Officer
Chairman, President and
Chairman from January 2006 to present. President and Chief Executive Officer from October 2005 to present. Senior Executive Vice President, Wholesale Banking of FirstBank, from March 1997 to October 2005. Executive Vice President, Chief Lending Officer from 1990 to March 1997. General Manager — New York banking operations of Banco de Ponce from 1988 to 1990. He had the following responsibilities at the Chase Manhattan Bank, N.A.: Regional Manager for the Ecuador and Colombia operations and corporate finance for the Central American operations, in 1988; Country Manager for
8
Mexico from 1986 to 1988; and Manager of Wholesale Banking in Puerto Rico from 1984 to 1986. Joined the Corporation in 1990. Director since September 30, 2005.
Aurelio Alemán, 48
Senior Executive Vice President and Chief Operating Officer
Senior Executive Vice President and Chief Operating Officer
Senior Executive Vice President and Chief Operating Officer from October 2005 to present. Executive Vice President, responsible for consumer banking and auto financing of FirstBank, since 1998 and since October 2005 also responsible for the retail banking distribution network, First Mortgage and FistBank Virgin Islands operations. President of First Federal Finance Corporation d/b/a Money Express from 2000 to 2005. President of FirstBank Insurance Agency, Inc. from 2001 to 2005. President of First Leasing & Rental Corp. from 1999 to present. From 1996 to 1998, Vice President of CitiBank, N.A., responsible for wholesale and retail automobile financing and retail mortgage business. Vice President of Chase Manhattan Bank, N.A., of banking operations and technology for Puerto Rico and the Eastern Caribbean region from 1990 to 1996. Director of FirstBank, First Leasing and Rental Corporation, First Federal Finance Corporation d/b/a Money Express, FirstBank Insurance Agency, Inc., First Insurance Agency, Inc., FirstExpress, Inc., FirstMortgage, Inc., Ponce General Corporation, FirstBank Florida, Grupo Empresas Servicios Financieros, Inc. d/b/a PR Finance, FirstBank Overseas Corp., and First Trade, Inc. Joined the Corporation in 1998. Director since September 30, 2005.
Sharee Ann Umpierre-Catinchi, 48
Doctor of Medicine. Assistant Professor at the University of Puerto Rico Telephone CompanyRico’s Department of Obstetrics and Gynecology from
January 1993 to March 1999, servingpresent. Director of the Division of Gynecologic Oncology of the University of Puerto Rico’s School of Medicine from 1993 to present. Board Certified by the National Board of Medical Examiners, American Board of Obstetrics and Gynecology and the American Board of Obstetrics and Gynecology, Division of Gynecologic Oncology. Director since 2003.
Fernando Rodríguez-Amaro, 59
Certified Public Accountant, Certified Fraud Examiner and Certified Valuation Analyst. Managing Partner and Partner in Charge of the Audit and Accounting Division of RSM ROC & Company. Has been with RSM ROC & Company for the past twenty-six years and prior thereto served as Chairperson from 1997 to March 1999.Audit Manager with Arthur Andersen & Co. for over nine years. Mr. Rodríguez Amaro has over 36 years of public accounting experience. He has served clients in the banking, insurance, manufacturing, construction, government, advertising, radio broadcasting and services industries. Member of the Board of Trustees of Sacred Heart University of Puerto Rico since August 2003 to present, serving as member of the Executive Committee and Chairman of the Audit Committee since 2004. Member of the Board of Trustees of Colegio Puertorriqueño de Niñas, since 1996 to present, and also serving as a member of the Board of Directors from 1998 to 2004. Member of the Board of Director of Proyecto de Niños de Nueva Esperanza, Inc. since 2003. Director since November 2005.
NOMINEES FOR A THREE-YEAR TERM EXPIRING 2010
Frank Kolodziej, 64
President and CEO of Centro Tomográfico de Puerto Rico, Inc. since 1978 to present; Somascan, Inc. since 1983 to present; Instituto Central de Diagnóstico, Inc. since 1991 to 1995, serving as Chairperson from 1993present, Advanced Medical Care, Inc. since 1994 to 1995. Director of First
Federal Finance Corporation d/b/a Money Express, First Leasing and Rental
Corporation, FirstBank Insurance Agency, Inc., First Insurance Agency, Inc.,
FirstMortgage, Inc., First Express, Inc., First Trade,present; Somascan Plaza, Inc. and FirstBank
Overseas Corp7. JoinedPlazaMED, Inc. since 1997 to present; International Cyclotrons, Inc. since 2004 to present; and Somascan Cardiovascular since January 2007 to present. Pioneer in the Caribbean in the areas of Computerized Tomography (CT), Digital Angiography (DSA), Magnetic Resonance Imaging (MRI), and PET/CT-16 (Positron Emission Tomography). Mr. Kolodziej was previously a member of the Board of Directors of the Corporation in 1983. Directorfrom 1988 to 1993 and currently a director since 1995.
JORGE L. DIAZ, 51
Executive Vice PresidentJuly 2007.
Héctor M. Nevares, 56
Attorney at law since 1977. Member of the Board of Directors of Dean Foods Company since 1995 to present, where he also serves on the Audit Committee. Member of the Board of Directors of V. Suarez & Co. since 2006 to present, and member of the Board of Directors of Empresas Diaz,
Inc., general contractors; Indulac from 1982 to 2005. President
9
and Chief Executive Vice President and DirectorOfficer of Betteroads Asphalt Corporation, asphalt pavement manufacturers; Betterecycling
Corporation, recycled asphalt manufacturers; and Coco Beach Development
Corporation,Suiza Dairy, a real estate development company. Member of the Chamber of
Commerce of Puerto Rico dairy processor, from 1983 to 1998, having served in additional executive capacities at Suiza Dairy since June 1972. In the Association of General Contractors of Puerto Rico
and of the U. S. National Association of General Contractors. Membernonprofit sectors, Mr. Nevares was a member of the Board of TrusteesDirectors of Baldwin School of Puerto Rico and of Cushing Academy,
Boston, Massachusetts. Director since 1999.
JOSE MENENDEZ-CORTADA, 57
Attorney at law. Partner in charge of the corporate and tax divisions of
Martinez-Alvarez, Menendez-Cortada & Lefranc Romero, PSC. General Counsel to the Puerto Rico Products Association fromGovernment Development Bank since 1989 to present. General Counsel to1993, and is currently a member of the Boards of Caribbean Preparatory Schools since 1999, the Corporation for the Development of the Cantera Peninsula since 1998, and Hacienda San Martin Inc. since 2000. Mr. Nevares was previously a member of the Board of BermudezDirectors of the Corporation from 1993 to 2002 and currently a director since July 2007.
José F. Rodríguez, 57
President of L&R Investments, Inc., a privately owned local investment company, since May 2005 to present; Vice-Chairman and member of the Board of Directors of Government Development Bank for Puerto Rico from March 2005 to December 2006; member of the Board of Directors of “Fundación Chana & Longo, S.E.Samuel Levis” from 19851998 to present.2007; Partner, Executive Vice-president and member of the Board of Director of Tasis Dorado
School since 2002. DirectorLedesma & Rodríguez Insurance Group, Inc. from 1990 to 2005; and President of Marvel Specialties, Inc. since 1985. Director of
the Homebuilders Association of Puerto Rico since 2002. Director of The Luis A.
Ferre Foundation,Prudential Bache PR, Inc., since 2002. Director since 2004.
- -------------------
(7) First Federal Finance Corporation d/b/a Money Express, First Leasing and
Rental Corporation, First Insurance Agency, Inc., First Trade, First
Mortgage, Inc., First Express, Inc. and FirstBank Overseas Corp. are
wholly ownedwholly-owned subsidiaries of FirstBank Puerto Rico; and First Bank
Insurance Agency, Inc. is a wholly owned subsidiary of First BanCorp
Puerto Rico.
3
then existing Prudential Bache Group, from 1980 to 1990.
THE NOMINATING COMMITTEEBOARD OF DIRECTORS 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.
MEMBERS OF THE BOARD CONTINUING IN OFFICE
DIRECTORS WHOSE TERMS EXPIRE IN 2006
JOSE JULIAN ALVAREZ-BRACERO, 71
January 1, 19992008
José Menéndez-Cortada, 59
Attorney at law since 1973. Director and Vice President in charge of the corporate and tax divisions of Martínez-Alvarez, Menéndez-Cortada & Lefranc Romero, PSC, a firm that was formerly a partnership where Mr. Menéndez served as the partner in charge of the corporate and tax divisions, formed since 1977. General Counsel to present, Executivethe Board of Bermudez & Longo, S.E. from 1985 to present. Director of "Fundacion Cruz Azul deTasis Dorado School since 2002. Director of the Homebuilders Association of Puerto Rico since 2002. Trustee of the Luis A. Ferré Foundation, Inc.";, since 2002. Director since April 2004. He has been the Lead Independent Director since February 2006.
Jorge L. Díaz, 52
Executive Vice President and Chief Executive Officer of La Cruz Azul de Puerto
Rico, a medical insurance provider, from 1995 until retirement on December 31,
1998. Executive Director, La Cruz Azul de Puerto Rico from 1981 to December
1994. 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 Olympic Committee.
President of the Dr. Garcia Rinaldi Foundation, dedicated to funding health
treatment for low-income heart patients. Past member of the Board of Directors of Banco CentralEmpresas Díaz, Inc. from 1981 to present, and Executive Vice President and Director of Betteroads Asphalt Corporation, from April 1987 to January 1996. Director since
November 1996.
JOSE TEIXIDOR, 51
Chief Executive OfficerBetterecycling Corporation, and President, B. Fernandez & Hnos., Inc. ChairmanCoco Beach Development Corporation, and its subsidiaries. Member of the Board, Pan Pepin Inc.; ChairmanChamber of Commerce of Puerto Rico, the Association of General Contractors of Puerto Rico and of the Board, Baguettes, Inc. President,
Eagle Investment Fund, Inc. President Swiss Chalet Inc.;U.S. National Association of General Contractors. Member of the Board of DirectorsTrustees of El Nuevo Dia, Inc.; Member of the Puerto Rico Chamber of Commerce
and of the Industry and Food Distribution Chamber of Commerce. President of the
Distributors and Manufacturers Association; Member of the Wholesalers ChamberBaldwin School of Puerto Rico. Director since January 1994.
RICHARD REISS-HUYKE, 57
Financial and management consultant specializing in crisis intervention,
financial planning, negotiations, valuations and litigation support since 1979.
Director of Banco Santander Puerto Rico from February 1979 to February 2003, and
Director of Santander BanCorp from May 2000 to February 2003. 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. Director
since 2003.
MEMBERS OF THE BOARD CONTINUING IN OFFICE DIRECTORS
WHOSE TERMS EXPIRE IN 2007
ANGEL ALVAREZ-PEREZ, 57
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Chairman, President & Chief Executive Officer of First BanCorp since November
1998. President and Chief Executive Officer of FirstBank since 1990, and
Chairman since August 1999. Executive Vice President from March 1990 to August
1990. Prior to joining the Corporation, attorney at law, specializing in
corporate and commercial law. Partner with the law firm of Vazquez, Vizcarrondo,
Alvarez, Angelet & Gonzalez from 1987 to February 1990. Director of VISA
International from 1996 until 2004. President of the Puerto Rico Bankers
Association from 1997 to 1998. Director of the Federal Home Loan Bank of New
York from December 1993 to January 1995. Chairman and CEO of First Federal
Finance Corporation d/b/a Money Express, First Leasing & Rental Corporation,
FirstBank Insurance Agency, Inc., First Insurance Agency, Inc., First Trade,
Inc., FirstMortgage, Inc., First Express, Inc. and FirstBank Overseas Corp.
Director since 1989.
JOSE L. FERRER-CANALS, 45
Doctor of Medicine in private urology practice. Commissioned a Captain in the
United States Air Force in March 1991 and appointed Chief of Aeromedical Service
of the 482nd Medical Squadron, December 1992. Member American Association of
Clinical Urologists, Alpha Omega Alpha Medical Honor Society since 1986. Member
Hospital Pavia Peer Group Review Committee, Hospital Pavia, San Juan, Puerto
Rico, from 1995 to present. 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.
SHAREE ANN UMPIERRE-CATINCHI, 45
Doctor of Medicine. Assistant Professor at the University of Puerto Rico's
Department of Obstetrics and Gynecology from 1993 to present. Director of the
Division of Gynecologic Oncology of the University of Puerto Rico's School of
Medicine from 1993 to present. Board Certified by the National Board of Medical
Examiners, American Board of Obstetrics and Gynecology and the American Board of
Obstetrics and Gynecology, Division of Gynecologic Oncology. Director since
2003.
4
SENIOR
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth information with respect to executive officers of the Corporation and of the BankFirstBank who are not directors.
LUIS M. BEAUCHAMP, 62
SENIOR EXECUTIVE VICE PRESIDENT, WHOLESALE BANKING EXECUTIVE AND CHIEF LENDING
OFFICER
Senior directors are listed below.
Fernando Scherrer, 39
Executive Vice Presidentwholesale banking, from March 1997 to present,and Chief LendingFinancial Officer from March 1997 to present.
Executive Vice President
Executive Vice President and Chief LendingFinancial Officer From 1990since July 2006. He is a Certified Public Accountant. Co-Founder, Managing Partner and Head of Audit and Consulting Practices at Scherrer Hernández & Co., from 2000 to March 1997. General Manager - New York
banking operations, Banco de Ponce from 19882006. Prior to 1990. Heldfounding Scherrer Hernández & Co., he worked with PricewaterhouseCoopers LLP for 10 years where he audited financial institutions and insurance companies. He has over 17 years of financial and accounting experience in the following
responsibilities at the Chase Manhattan Bank, N.A.: Regional Manager for Ecuadorfinancial services, insurance, retail 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. Directoreducation industries. Since October 2006, he has served as a director of First Leasing
and Rental Corporation, First Federal Finance Corp. d/b/a Money Express,
FirstBank Insurance Agency, Inc., First Insurance Agency, Inc., First Express,
Inc., FirstMortgage, Inc. and FirstBank Overseas Corp. Joined the Corporation in
1990.
AURELIO ALEMAN, 46
EXECUTIVE VICE PRESIDENT AND CONSUMER BANKING EXECUTIVE
Executive Vice President, 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. Vice President, Chase
Manhattan Bank, N.A., banking operations and technology for corporate capital
markets from 1994 to 1996. President and Director of First Leasing and Rental
Corporation, First Federal Finance Corporation d/b/a Money Express, and of
FirstBank Insurance Agency, Inc., Director of First Insurance Agency, Inc.,
FirstMortgage, Inc. and First Express, Inc. Joined the Corporation in 1998.
FERNANDO L. BATLLE, 38
EXECUTIVE VICE PRESIDENT - RETAIL AND MORTGAGE BANKING EXECUTIVE
Executive Vice President, Sales and Distribution, Mortgage Banking Group and
Virgin Islands operations. Managing Director, Neva Management Corporation, an
investment management firm, from April 1996 to October 1997. Senior
VP-Investments Department and Treasurer of FirstBank from 1994 to April 1996;
and Vice President, Secondary Market at FirstBank, Puerto Rico, from June 1994
to December 1994. Harvard Business School from September 1992, obtaining MBA in
June 1994. Assistant VP, Puerto Rico Home Mortgage, from 1989 to August 1992.
President and Director of First Express, Inc., First Trade, Inc. and First
Insurance Agency, Inc. Director of FirstMortgage, Inc., First Leasing and Rental Corporation, First Federal Finance Corporation d/b/a Money Express, FirstBank Insurance Agency, Inc., FirstMortgage, Inc., Ponce General Corporation.
10
Lawrence Odell, 59
Executive Vice President, General Counsel and Secretary
Executive Vice President, General Counsel and Secretary
Executive Vice President, General Counsel and Secretary since February 2006. Senior Partner at Martínez Odell & Calabria since 1979. Has over 25 years of experience in specialized legal issues related to banking, corporate finance and international corporate transactions. Served as Secretary of the Board of Pepsi-Cola Puerto Rico, Inc. from 1992 to 1997. Served as Secretary to the Board of Directors of BAESA, S.A. from 1992 to 1997.
Dacio A. Pasarell, 58
Executive Vice President and Banking Operations Executive
Executive Vice President and Banking Operations Executive
Executive Vice President and Banking Operations Executive since September 2002. Had over 27 years of experience at Citibank N.A. in Puerto Rico, which included the following positions: Vice President, Retail Bank Manager, from 2000 to 2002; Vice President and Chief Financial Officer from 1996 to 1998; Vice President, Head of Operations — Caribbean Countries from 1994 to 1996; Vice President Mortgage and Automobile Financing; Product Manager, Latin America from 1986 to 1994; Vice President, Mortgage and Automobile Financing Product Manager for Puerto Rico from 1986 to 1996. President of Citiseguros PR, Inc. from 1998 to 2001. Chairman of Ponce General Corporation and Director of FirstBank Overseas Corp. Rejoined the Corporation in
October 1997.
RANDOLFO RIVERA, 51
EXECUTIVE VICE PRESIDENT - COMMERCIAL BANKING EXECUTIVE
Florida since April 2005.
Randolfo Rivera, 53
Executive Vice President and Wholesale Banking Executive
Executive Vice President and Wholesale Banking Executive
Executive Vice President in charge of corporate banking, middle market, international, government and institutional, structure finance and cash management areas of FirstBank.FirstBank since June 1998 and since October 2005 also in charge of real estate lending, commercial mortgage unit in Puerto Rico and merchant banking. Vice President and component executive for local companies, public sector and institutional markets for Chase Manhattan Bank, N.A. in Puerto Rico from April 1990 to December 1996. Corporate Finance Executive in charge of the Caribbean and Central American region for Chase Manhattan Bank in Puerto Rico from January 1997 to May 1998. Joined the
Corporation in May 1998.
DACIO A. PASARELL, 56
EXECUTIVE VICE PRESIDENT - OPERATIONS AND TECHNOLOGY AND FLORIDA REGION
EXECUTIVE
Held the following positions at Citibank N.A. in Puerto Rico: Vice President,
Retail Bank Manager, from 2000 - 2002;
Emilio Martinó, 57
Executive Vice President and ChiefFinancialLending Officer 1996 to 1998; Vice President, Head of Operations - Caribbean Countries,
1994 - 1996; Vice President, Mortgage
Executive Vice President and Chief
Chief Lending Officer 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 2002.
OTHER OFFICERS OF THE CORPORATION
CASSAN PANCHAM, 44
FIRST SENIOR VICE PRESIDENT - EASTERN CARIBBEAN REGION EXECUTIVE
First Senior Vice President, Eastern Caribbean Region Executive. Director of
FirstExpress, Inc., First Trade, Inc., and First Insurance Agency, Inc. 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, from December 1997 to June 1998. Joined the Corporation in 2002.
5
LUIS CABRERA-MARIN, 35
SENIOR VICE PRESIDENT - TREASURY AND INVESTMENTS
Senior Vice President of the Investment and Treasury DepartmentFirstBank since May 1997.October 2005. Director of FirstBank Overseas Corp. Director of Asset Management, Government
Development Bank for Puerto Rico, fromFlorida since August 1995 to May 1997. Investment
Executive, Oriental Financial Services, Inc., Puerto Rico, from August 1994 to
August 1995. Joined the Corporation in 1997.
AIDA GARCIA, 53
SENIOR VICE PRESIDENT - HUMAN RESOURCES
Director of Human Resources since May 1990. Second Vice President, Human
Resources, from 1988 to 1990. Prior to joining the Corporation, Director of
Human Resources, Dr. Federico Trilla Hospital, Carolina, Puerto Rico. Joined the
Corporation in 1988.
EMILIO MARTINO, 54
SENIOR VICE PRESIDENT - CREDIT RISK MANAGEMENT2006. Senior Vice President and Credit Risk Management for the Corporation sinceof FirstBank from June 2002.2002 to October 2005. Staff Credit Executive for theFirstBank’s Corporate and Commercial Banking Business components since November 2004. First Senior Vice President of Banco Santander Puerto Rico; Director for Credit Administration, Workout and Loan Review, from 1997 to 2002. Senior Vice President for Risk Area in charge of Workout, Credit Administration, and Portfolio Assessment for Banco Santander Puerto Rico from 1996 to 1997. Deputy Country Senior Credit Officer for Chase Manhattan Bank Puerto Rico from 1986 to 1991. Director of FirstBank Florida since August 2006.
Cassan Pancham, 47
Executive Vice President and Eastern Caribbean Region Executive
Executive Vice President and Eastern Caribbean Region Executive
Executive Vice President of FirstBank since October 2005. First Senior Vice President, Eastern Caribbean Region of FirstBank from October 2002 until October 2005. Director and President of FirstExpress, Inc., First Trade, Inc., and First Insurance Agency, Inc. He held the following positions at JP Morgan ChaseBank Eastern Caribbean Region Banking Group: Vice President and General Manager, from December 1999 to October 2002; Vice President, Business, Professional and Consumer Executive, from July 1998 to December 1999; Deputy General Manager from March 1999 to December 1999, and Vice President, Consumer Executive, from December 1997 to 1998. Member of the Governing Board of Directors of the Virgin Islands Port Authority since June 2007.
The Corporation’s By-laws provide that each officer shall be elected annually at the first meeting of the Board of Directors after the annual meeting of stockholders and that each officer shall hold office until his or her successor has been duly elected and qualified or until his or her death, resignation or removal from office.
11
CERTAIN OTHER OFFICERS
Miguel A. Babilonia, 42
Senior Vice President and Chief Credit Risk Officer
Senior Vice President and Chief Credit Risk Officer
Senior Vice President and Chief Credit Risk Officer since 2006. Vice President of Consumer Credit Policy and Portfolio Risk Management from 1998 to 2006 and promoted to Senior Vice President in 1999. In 2005, the mortgage risk management and centralized collections responsibilities were added to his scope. He has sixteen years of experience in banking including, Consumer Scorecard Manager at Citibank, N.A. from 1997 to 1998; Assistant Vice President/Risk Manager at First Union National Bank from 1996-1997; Assistant Vice President/Segmentation Manager at First Union National Bank from 1993 to 1996; Portfolio Risk Senior Analyst at National City Bank from 1991 to 1993. Chairman of the Consumer Credit Committee of the Puerto Rico Bankers Association. Joined the Corporation in 2002.
NAYDA RIVERA-BATISTA, 31
SENIOR VICE PRESIDENT - GENERAL AUDITOR
Certified Public Accountant. Appointed1998.
Nayda Rivera-Batista, 34
Senior Vice President, Chief Risk Officer and Assistant Secretary
Senior Vice President, Chief Risk Officer and Assistant Secretary
Senior Vice President and Chief Risk Officer since April 2006. Assistant Secretary of the Board since November 2006. Senior Vice President and General Auditor onfrom July 2002. Audit Manager at PricewaterhouseCoopers, LLP, from September 19962002 to July 2002. ServingApril 2006. She is a Certified Public Accountant and Certified Internal Auditor. She has more than 12 years of combined work experience in public company, auditing, accounting, financial reporting, internal controls, corporate governance, risk management and regulatory compliance. Served as a member of the Board of Trustees of the BayamonBayamón Central University sincefrom January 2005.2005 to January 2006. Joined the Corporation in 2002.
ALAN COHEN, 39
SENIOR VICE PRESIDENT - MARKETING AND PUBLIC RELATIONS
Appointed
Pedro Romero, 34
Senior Vice Presidentin January 2005. Prior to joining the
Corporation, Sales Director, Caribbean Market Unit at Pepsico International from
2001 to 2005.and Chief MarketingAccounting Officer and
Senior Vice President
Senior Vice President for Banco
Santander Puerto Ricoand Chief Accounting Officer since August 2006. Senior Vice President and Comptroller from 1999May 2005 to 2001. Group Account Director, North Latin
America-McDonald's Group, Country Manager-Dominican Republic, Home Market
Manager-Puerto RicoAugust 2006. Vice President and Marketing Assistant-Puerto Rico,Assistant Comptroller from 1991December 2002 to 1999.
Assistant to the Counselor, OfficeMay 2005. He is a Certified Public Accountant with a Master of the Governor CommonwealthScience in Accountancy and has technical expertise in management reporting, financial analysis, corporate tax, internal controls and compliance with US GAAP, SEC rules and Sarbanes Oxley. He has more than ten years of Puerto Rico,
from 1987 to 1991.experience in accounting including, big four public accounting company, banking and financial services. Joined the Corporation in 2005.
CARMEN GABRIELLA SZENDREY-RAMOS, 37
SENIOR VICE PRESIDENT - GENERAL COUNSEL - SECRETARY OF THE BOARD OF DIRECTORS
Attorney at Law. AppointedDecember 2002.
Víctor M. Barreras-Pellegrini, 39
Senior Vice President andGeneral Counsel in October 2000.
Appointed Assistant Secretary of First Bancorp on February 26, 2002, and Treasurer
Senior Vice President 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., First Insurance Agency,
Inc., First Trade, Inc., FirstMortgage, Inc., FirstExpress, Inc., and FirstBank
Overseas Corp. Prior to joining the Corporation, Assistant Vice President of the
Legal Division,Treasurer since July 6, 2006. Previously held various positions with Banco Popular de Puerto Rico from 1997January 1992 to September 2000.
Private law practiceJune 2006, including, Fixed-Income Portfolio Manager of the Popular Assets Management division from 1998 to 2006 and special projects analyst with law firm Fiddler Gonzalez
& RodriguezInvestment Officer in the Treasury division from 1995 to 1997.1998. Director of FirstBank Overseas Corp. and First Mortgage. He has over 15 years of experience in banking and investments and holds the Chartered Financial Analyst designation. Joined the Corporation in 2000.
LAURA VILLARINO-TUR, 46
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 joining2006.
CORPORATE GOVERNANCE AND RELATED MATTERS
General
The following discussion summarizes the Corporation, staff auditor with Peat Marwick Mitchell & Co.
Joined the Corporation in 1984.
BOARD OF DIRECTORS AND COMMITTEESCorporation’s corporate governance including director independence, board and committee structure, function and composition, and governance charters, policies and procedures. The Corporation's Board of Directors is composed of the same members as
the Bank's Board of Directors. During fiscal 2004, the Board of Directors of
First BanCorp held a total of 12 regular meetings and the Board of Directors of
the Bank held 12 regular meetings. Each of the incumbent directors attended in
excess of 75% of the aggregate of the total meetings of the Board of Directors,
and the Board's Committees on which they served.
The Corporation encourages all members of the Board to attend its Annual
Meeting of Stockholders. All of the Corporation's Directors attended the Annual
Meeting of Stockholders held on April 29, 2004.
6
INDEPENDENCE OF THE BOARD OF DIRECTORS
The Board of Directors conducted a self-assessment regarding the
independence of its members on April 2004. The criteria for determining
independence are as defined by the New York Stock Exchange, the Securities and
Exchange Act of 1934 and the Corporation's Independence Principles for
Directors, which are included as Exhibit I to this proxy statement, are
published on the Corporation's web page www.firstbancorppr.com under the
Corporate Governance section and available in print to any shareholder who
requests it through a written communication sent to Carmen Gabriella
Szendrey-Ramos, Esq., Secretary, First BanCorp, 1519 Ponce de Leon Avenue,
Santurce, Puerto Rico 00908. According to the Corporation's Corporate Governance Standards adoptedand charters approved by the Board of Directors on December 2003 and amended on
December 2004, a substantial majority of the Board shall be composed of
directors who meet the requirements(the “Board”) for independence established in the
Corporation's "Independence Principles" which shall incorporate, at a minimum,
those established by the New York Stock Exchange and the Securities and Exchange
Commission. The Board shall make a determination at least annually as to the
independence of each director, in accordance with standards that are disclosed
to the shareholders. The Corporation's Independence Principles for Directors and
Corporate Governance Standards are included as Exhibit II to this proxy
statement, are available on the Corporation's web page, www.firstbancorppr.com
and available in print to any shareholder who requests it through a written
communication sent to Carmen Gabriella Szendrey-Ramos, Esq., Secretary, First
BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico 00908. The Board
determined that Messrs. Jose Teixidor, Jose L. Ferrer-Canals, Jorge L. Diaz,
Jose Julian Alvarez-Bracero, Richard Reiss-Huyke, Jose Menendez-Cortada and Ms.
Sharee Ann Umpierre-Catinchi are independent under such criteria. Messrs. Angel
Alvarez-Perez and Ms. Annie Astor-Carbonell are not considered to be
independent. Mr. Angel Alvarez-Perez is not independent because he is the Chief
Executive Officer of the Corporation. Ms. Annie Astor-Carbonell is not
independent because she is the Chief Financial Officer of the Corporation.
Non-management directors met twice during 2004 with Mr. Jose Teixidor serving as
chairman during the meetings of the Board's executive session.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
Any shareholder who desires to communicate with the Corporation's Board of
Directors may do so by writing to the Chairman of the Board or to the
non-management directors as a group in care of the Office of the Corporate
Secretary at the Corporation's headquarters, P.O. Box 9146, San Juan, PR,
00908-0146 or by email to directors@firstbancorppr.com or
thenetwork@firstbankpr.com. Communications may also be made by calling the
following toll-free Hotline telephone number 1-877-888-0002. Any concern related
to accounting, internal accounting controls or auditing matters will be referred
to the Chair of the Audit Committee, communications regarding other matters will
be directed to the General Counsel for their proper referral.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation has the following Committees:
Audit Committee, Corporate Governance and Nominating Committee and Compensation
and Benefits Committee.
COMPENSATION AND BENEFITS COMMITTEE
The Compensation and Benefits Committee is composed of three outside
directors who meet the independence criteria established by the New York Stock
Exchange, the Securities and Exchange Act of 1934 and the Corporation's
Independence Principles for Directors of First BanCorp. The Committee is
responsible for the oversight and determination of the proper salary and
incentive compensation of the executive officers and key employees of the
Corporation.
The following are the responsibilities of the Compensation and Benefits Committee, under its charter:
1. Review and approve the annual goals and objectives relevant to
compensation of the CEO, including the balance of the components of
total compensation.
2. Evaluate the performance of the CEO in light of the agreed-upon
goals and objectives and set the compensation level of the CEO based
on such evaluation.
3. Establish and approve the salaries, annual incentive awards and
long-term incentives of the CEO, executive officers and selected
senior executives.
4. Evaluate and approve severance arrangements and employment contracts
for executive officers and selected senior executives.
5. Approve and administer the Corporation's cash- and equity-based
incentive plans for senior executives.
6. Prepare and publish an annual executive compensation report in the
company's proxy statement.
7. Periodically review the operation of the Corporation's overall
compensation program for key employees and evaluate its
effectiveness in promoting shareholder value and company objectives.
Currently, the Committee is composed of Messrs. Jorge L. Diaz, Jose
Teixidor and Jose L. Ferrer-Canals. The Compensation Committee met twice during
2004. A copy of the Committee's charter is available at the Corporation's web
page, www.firstbancorppr.com, and available in print to any shareholder who
requests it through a written communication sent to Carmen Gabriella
Szendrey-Ramos, Esq., Secretary, First BanCorp, 1519 Ponce de Leon Avenue,
Santurce, Puerto Rico 00908.
7
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
Article I, Section 14, of the Corporation Bylaws establishes a Nominating
Committee for selecting the nominees for election as directors at the next
succeeding Annual Meeting of Stockholders, and requires that the Nominating
Committee be composed of no less than three independent directors. All three
members are outside directors who meet the independence criteria established by
the New York Stock Exchange, the Securities and Exchange Act of 1934 and the
Corporation's Independence Principles for Directors of First BanCorp. Messrs.
Jose Teixidor, Jose L. Ferrer-Canals and Jose Julian Alvarez-Bracero are the
current members of the Committee.
The duties of the Corporate Governance and Nominating Committee, are as
follows:
1. Develop a setthe Asset/Liability Risk Committee, the Corporation’s Code of corporate governance principles applicable to the
CorporationEthics and Code of Ethics for Board approval, and following such approval,
annually review the principles for continued compliance.
2. Establish the criteria for selecting new directors in accordance
with the requirements of the New York Stock Exchange.
3. Recommend the director nominees for approval by the Board.
4. Have the authority to retain and terminate outside consultants or
search firms to advise the Committee regarding the identification
and review of candidates, including sole authority to approve such
consultant's or search firm's fees, and other retention terms.
5. Review annually the Corporation's Insider Trading Policy to ensure
continued compliance with applicable legal standards and corporate
best practices. In connection with its annual review of the Insider
Trading Policy, the Committee shall also review the list of
executive officers subject to Section 16 of the Securities and
Exchange Act of 1934, as amended,Senior Financial Officers and the listCorporation’s Independence Principles for Directors are available at the Corporation’s web site at www.firstbancorppr.com, under “Investor Relations / Governance Documents”. First BanCorp stockholders may obtain printed copies of persons subjectthese documents by writing to the trading windows contained in the Policy.
6. Review annually and update, as necessary, this Charter's adequacy
and the performance of the Committee, and receive approval from the
Board of any proposed changes.
7. Consistent with the foregoing, take such actions as deemed necessary
to encourage continuous improvement of, and to foster adherence to,
the Company's corporate governance policies, procedures and
practices at all levels, and to perform other corporate governance
oversight functions as requested by the Board.
The criteria for selecting new directors as well as the desired
qualifications of the membersLawrence Odell, Secretary of the Board of Directors, are included in the
Corporation's Corporate Governance Standards adopted by the BoardFirst BanCorp, 1519 Ponce de León Avenue, Santurce, Puerto Rico 00908.
12
Code of Directors
in December 2003 and reviewed in December 2004. According to the standards, all
directors should be persons of the highest integrity, who abide by exemplary
standards of business and professional conduct. They should possess the skills
and judgment and the commitment to devote the time and attention necessary to
fulfill their duties and responsibilities. Based on these requirements, the
Corporate Governance and Nominating Committee evaluates potential nominees who
are recommended by shareholders, non-management directors, the chief executive
officer or other executive officers. There are no differences in the manner in
which the Committee evaluates nominees for directors based on whether the
nominee is recommended by shareholders.
OnEthics
In November 25, 2003, the Corporation adopted a Code of ConductEthics for Senior Financial Officers ("Code"(the “Code”). The Code, which applies to the Corporation’s Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Accounting Officer, Comptroller, Executive Vice Presidents, to all professional employees in the areas of finance, internal audit and treasury, and to all members of the Corporation’s Risk Management Council, states the principles to which senior financial officers must adhere in order to act in a manner consistent with the highest moral and ethical standards. The Code imposes a duty to avoid conflicts of interest, comply with the laws and regulations that apply to the Corporation and its subsidiaries specifically making referencesubsidiaries. Any waiver of any part of the Code may be made only by the Audit Committee and will be promptly disclosed to those regarding
transactions instockholders as required by the Corporation's securities.rules of the SEC and the NYSE. Neither the Audit Committee nor the General Counsel received any requests for waivers under the Code. The Code is included as an exhibit on the Corporation's Annual Report on Form 10-K, is
available at the Corporation's website, www.firstbancorppr.com and is also
available in print to any shareholder who requests it through a written
communication sent to Carmen Gabriella Szendrey-Ramos, Esq., Secretary, First
BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico 00908.
fiscal year 2006.
The Corporation has also adopted a Code of Ethics that is applicable to all employees of the Corporation and all of its subsidiaries, which purports to strengthen the ethical culture that prevails in the Corporation. The Code of Ethics addresses, among other matters, conflicts of interest, operational norms and confidentiality of the Corporation'sCorporation’s and its customer'scustomers’ information.
Independence of the Board of Directors
The CodeBoard annually evaluates the independence of Ethics is included as an exhibitits members based on the Corporation's Annual Reportcriteria for determining independence identified by the New York Stock Exchange (“NYSE”), the Securities and Exchange Commission (“SEC”) and the Corporation’s Independence Principles for Directors. The Corporation’s Corporate Governance Standards provides that a majority of the Board be composed of directors who meet the requirements for independence established in the Corporation’s Independence Principles for Directors, which shall incorporate, at a minimum, those established by the NYSE and the SEC. The Board has concluded that the Corporation has a majority of independent directors. The Board has determined that Messrs. José Teixidor-Méndez, José L. Ferrer-Canals, Jorge L. Díaz, Fernando Rodríguez-Amaro, Richard Reiss-Huyke, José Menéndez-Cortada, Sharee Ann Umpierre-Catinchi, Héctor M. Nevares, and Frank Kolodziej are independent under the Independence Principles for Directors. In determining director Richard Reiss-Huyke’s independence, the Board took into consideration services rendered by his adult daughter’s consulting company to the Corporation in an aggregate amount equal to $1,500 during 2006. Also, in designating José F. Rodríguez as a director nominee, the Board concluded that Mr. Rodríguez is independent under the Independence Principles for Directors. Messrs. Luis M. Beauchamp, President and Chief Executive Officer, and Aurelio Alemán, Senior Executive Vice President and Chief Operating Officer, are not considered to be independent as they are management Board members. During 2006, the independent directors usually met in executive sessions without the Corporation’s management on Form 10-K, is availabledays where there were regularly scheduled Board meetings. In addition, non-management directors separately met two (2) times during 2006 with José Menéndez-Cortada serving as chairman during the meetings.
Director Stock Ownership
The Board believes that appropriate stock ownership by directors further aligns their interests with those of the stockholders. Accordingly, on August 28, 2007, which became effective upon adoption the Board adopted Director Stock Ownership Requirement Guidelines (the “Guidelines”) for all non-management directors, which became effective upon adoption. Non-management directors are expected to hold an investment position in the Corporation’s common stock which cost basis, except as described below, shall be equivalent to at least $250,000. Any shares of stock owned by the non-management directors upon the adoption of the Guidelines will be considered for purposes of compliance. In such connection, the amount of shares of stock owned by the non-management directors shall be valued at the Corporation's website, www.firstbancorppr.comgreater of the historical cost or the market value at the closing price of the stock as of the date the Guidelines were adopted. Upon meeting the ownership goal, that number of shares, considering stock split adjustments, becomes fixed and is also available in printmust be maintained until the end of the director’s service on the Board. Directors are required to any shareholder who requests it through a written
communication sentachieve the ownership goal within three years after the Board’s adoption of the Guidelines for current directors and for new directors from the director’s appointment to Carmen Gabriella Szendrey-Ramos, Esq., Secretary, First
BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico 00908.
No nominations for directors, except those made by the Nominating
Committee,Board. In reaching the ownership requirement, annual investments shall be voted upon at the Annual Meeting, unless other nominations
by stockholders are made in writing and delivered toequal proportions throughout the Secretary ofthree year period. The Guidelines shall be administrated by the
Corporation, PO Box 9146, San Juan, PR 00908-0146, at least thirty (30) days
prior to the date of the Annual Meeting. The Corporate Governance and Nominating Committee has not received recommendations from shareholders for the 2005 Annual
Meeting. Ballots bearing the names of the persons nominatedBoard. The Committee shall have the discretion to submit for approval by the Nominating
CommitteeBoard, and the Board may at any time approve amendments or modifications to the Guidelines.
13
Stockholder Communications with the Board
Any stockholder who desires to communicate with the Corporation’s Board may do so by stockholders, if any, will be provided for usewriting to the Chairman of the Board or to the Lead Independent Director in care of the Office of the Corporate Secretary at the Annual
Meeting. The Committee met a total of two times during fiscal year 2004. A copy
of the Committee's charter is available at the Corporation's web page,
www.firstbancorppr.com and available in print to any shareholder who requests it
through a written communication sent to Carmen Gabriella Szendrey-Ramos, Esq.,
Secretary, First BanCorp,Corporation’s headquarters, 1519 Ponce de LeonLeón Avenue, Santurce, Puerto Rico 00908.
8
AUDIT COMMITTEE00908 or by email todirectors@firstbankpr.com orthenetwork@firstbankpr.com. Communications may also be made by calling the following toll-free telephone number: 1-877-888-0002. Communications related to accounting, internal accounting controls or auditing matters will be referred to the Chair of the Audit Committee; communications regarding other matters will be directed to the General Counsel for referral to the appropriate director or Board committee.
Board Meetings
The Board is responsible for directing and overseeing the business and affairs of the Corporation. The Board represents the Corporation’s stockholders and its primary purpose is to build long term stockholder value. The Board meets on a regularly scheduled basis during the year to review significant developments affecting the Corporation and to act on matters that require Board approval. It also holds special meetings when an important matter requires Board action between regularly scheduled meetings. The Board of the Corporation met thirty two (32) times during 2006. Each member of the Board participated in at least 75% of Board and applicable committee meetings held during 2006.
Board Committees
The Board has four standing committees: the Audit Committee, the Compensation and Benefits Committee, the Corporate Governance and Nominating Committee, and the Asset/Liability Risk Committee. The members of the committees are appointed and removed by the Board, which also appoints a chair for each committee. The functions of those committees, their current members and the number of meetings held during 2006 are set forth below.
Audit Committee. The Audit Committee ischarter provides that this Committee shall be composed of at least three outside directors who meet the independence criteria established by the New York Stock Exchange,NYSE, the Securities
and Exchange Act of 1934SEC, and the Corporation'sCorporation’s Independence Principles for DirectorsDirectors.
The members of First BanCorp.this Committee are Fernando Rodríguez-Amaro, appointed Chairman effective in January 2006, José Ferrer-Canals, Richard Reiss-Huyke and Héctor M. Nevares, who was appointed on July 31, 2007. Each member of ourthe Corporation’s Audit Committee is financially literate, knowledgeable and qualified to review financial statements. The "audit“audit committee financial expert"experts” designated by ourthe Corporation’s Board is Mr. Jose Julian
Alvarez-Bracero. Forare Richard Reiss-Huyke and Fernando Rodríguez-Amaro. The Audit Committee met a brief descriptiontotal of Mr. Alvarez-Bracero's qualifying
experience, please refer tothirty two (32) times during fiscal year 2006.
Audit Committee Report
In the Boardperformance of Directors and Committees section of
this proxy. According to a self-assessment performed byits oversight function, the Audit Committee has considered and which was presenteddiscussed the audited financial statements of the Corporation for the fiscal year ended December 31, 2006 with management and PricewaterhouseCoopers LLP, the Corporation’s independent registered public accountants. The Audit Committee has also discussed with the independent accountants the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees”. Finally, the Audit Committee has received the written disclosures and the letter from PricewaterhouseCoopers LLP required by Independence Standards Board Standard No. 1, as amended, “Independence Discussion with Audit Committees”, has considered whether the provision of non-audit services by the independent registered public accounting firm to the Board during 2005, Mr. Richard Reiss-Huyke also
qualifies as a financial expert. Please refer toCorporation is compatible with maintaining the Board of Directorsauditors’ independence, and Committees section of this proxy for a descriptionhas discussed with the independent registered public accountants its independence from the Corporation and its management. These considerations and discussions, however, do not assure that the audit of the qualifying experience.
UnderCorporation’s financial statements has been carried out in accordance with the termsstandards of its charter, which was last reviewed and approved by
the Public Company Accounting Oversight Board, on February 22, 2005,that the financial statements are presented in accordance with Generally Accepted Accounting Principles in the United States or that the Corporation’s registered public accountants are in fact “independent.”
14
As set forth in the Audit Committee Charter, the Audit Committee represents and assists the Board in fulfilling its oversight responsibility relating to the integrity of the Corporation'sCorporation’s financial statements and the financial reporting process, the systemseffectiveness of the Corporation’s internal control over financial reporting and adequacy of internal accountingcontrol disclosures and financial controls,procedures, the Corporation’s compliance with legal and regulatory requirements, the performance of the Corporation’s internal audit function, the annual independent audit of the Company'sCorporation’s financial statements and the Company's compliance with legalqualifications, independence and regulatory requirements and its ethics
program, the independent auditors' qualifications and independence, the performance of the Company's internal audit function and the performance of itsCorporation’s independent auditors.registered public accounting firm. The Audit Committee also monitors the quality of the Corporation'sCorporation’s assets in order to provide for early identification of possible problem assets.
The Audit Committee Charter is included as Exhibit III to this
proxy statement, is published at the corporation's web page,
www.firstbancorppr.com and available in print to any shareholder who requests it
through a written communication sent to Carmen Gabriella Szendrey-Ramos, Esq.,
Secretary, First BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico
00908. During fiscal 2004,members of the Audit Committee met a total of 12 times.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
As stated above, the Audit Committee reviews the Corporation's financial
reporting processare not engaged professionally in rendering, auditing or accounting services on behalf of the BoardCorporation nor are they employees of Directors. Management has the primaryCorporation. The Corporation’s management is responsible for its accounting, financial management and internal controls. As such, it is not the duty or responsibility forof the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures to set auditor independence standards.
Based on the Audit Committee’s consideration of the audited financial statements and the reporting process,
including the systems of internal controls. In this context, the Committee has
met and held discussions referred to above with management and the Independent Registered Public
Accounting Firm. Management representedindependent registered public accountants, and subject 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
Registered Public Accounting Firm.
In addition, the Committee discussed with the Independent Registered
Public Accounting Firm, 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 bearlimitations on the auditors'
objectivity as Independent Registered Public Accounting Firm. Therole and responsibilities of the Audit Committee has
received written affirmation fromset forth in the Independent Registered Public Accounting
Firm as required by the Independence Standards Board Standard No. 1,
Independence Standards with Audit Committees, assuring their independence.
In reliance with the reviewsCharter and discussions referred tothose discussed above, the Committee has recommended to the Board of Directors that the Corporation’s audited financial statements be included in the Corporation'sCorporation’s Annual Report on Form 10-K for the year ended December 31, 2006 for filing with the SEC.
This report is provided by the following independent directors who comprised the Committee at the date of the recommendation:
Fernando Rodríguez-Amaro (Chairman)
Richard Reiss-Huyke
José Ferrer-Canals
Richard Reiss-Huyke
José Ferrer-Canals
Compensation and Benefits Committee. The Compensation and Benefits Committee charter provides that the Committee shall be composed of a minimum of three directors who meet the independence criteria established by the NYSE and the Corporation’s Independence Principles for Directors. In addition, the members of the Committee are independent as defined in Rule 16b-3 under the Exchange Act. The Committee is responsible for the oversight and determination of the proper salary and incentive compensation of the executive officers and key employees of the Corporation. The responsibilities and duties of the Committee include the following:
| • | Review and approve the annual goals and objectives relevant to compensation of the CEO, including the balance of the components of total compensation. | ||
| • | Evaluate the performance of the CEO in light of the agreed upon goals and objectives and set the compensation level of the CEO based on such evaluation. | ||
| • | Establish and approve the salaries, annual incentive awards and long-term incentives of the CEO, executive officers and selected senior executives. | ||
| • | Evaluate and approve severance arrangements and employment contracts for executive officers and selected senior executives. | ||
| • | Approve and administer the Corporation’s cash and equity-based incentive plans for senior executives. | ||
| • | Prepare and publish an annual executive compensation report in the Corporation’s proxy statement. | ||
| • | Periodically review the operation of the Corporation’s overall compensation program for key employees and evaluate its effectiveness in promoting stockholder value and Corporation objectives. | ||
| • | The Committee establishes criteria for evaluating its performance and conducts an annual evaluation of the charter and discusses the results of the annual evaluation with the Board. |
15
The Committee has the sole authority to engage outside consultants to assist it in determining appropriate compensation levels for the CEO and other executive officers, and to set fees and retention arrangements for such consultants. The Committee has full access to any relevant records of the Corporation and may request any employee of the Corporation or other person to meet with the Committee or its consultants.
The members of this Committee are Sharee Ann Umpierre-Catinchi, appointed Chairperson in August 2006, Richard Reiss-Huyke, José Teixidor-Méndez and Frank Kolodziej, who was appointed to the Committee on July 31, 2007. The Compensation and Benefits Committee met a total of three (3) times during fiscal year 2004 to2006.
Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee charter provides that the Committee shall be submittedcomposed of a minimum of three directors who meet the independence criteria established by the NYSE, the SEC and the Corporation’s Independence Principles for Directors. The responsibilities and duties of the Committee include, among others, the following:
| • | Develop a set of corporate governance principles applicable to the Corporation for Board approval, and following such approval annually review the principles for continued compliance. | ||
| • | Establish the criteria for selecting new directors in accordance with the requirements of the NYSE. | ||
| • | Recommend the director nominees for approval by the Board. | ||
| • | Retain outside consultants or search firms if determined necessary to advise the Committee regarding the identification and review of director candidates. | ||
| • | Review annually the Corporation’s Insider Trading Policy to ensure continued compliance with applicable legal standards and corporate best practices. In connection with its annual review of the Insider Trading Policy, the Committee also reviews the list of executive officers subject to Section 16 of the Securities Exchange Act of 1934, as amended, and the list of affiliates subject to the trading windows contained in the Policy. | ||
| • | Review annually and update, as necessary, the Charter’s adequacy and the performance of the Committee, and receive approval from the Board of any proposed changes. | ||
| • | Consistent with the foregoing, take such actions as it deems necessary to encourage continuous improvement of, and foster adherence to, the Corporation’s corporate governance policies, procedures and practices at all levels and shall perform other corporate governance oversight functions as requested by the Board. |
Identifying and evaluating Nominees for Directors
The Board’s Corporate Governance and Nominating Committee shall be responsible for identifying and recommending to the Securities Exchange Commission. Board qualified candidates for Board membership, based primarily on the following criteria:
| • | Judgment, character, integrity, expertise, skills and knowledge useful to the oversight of the Corporation’s business; | ||
| • | Diversity of viewpoints, backgrounds, experiences, and other demographics; | ||
| • | Business or other relevant experience; and | ||
| • | The extent to which the interplay of the candidate’s expertise, skills, knowledge and experience with that of other Board members will build a Board that is effective, collegial and responsive to the needs of the Corporation. |
The Committee shall give appropriate consideration to candidates for Board membership nominated by stockholders and shall evaluate such candidates in the same manner as other candidates identified by the Committee. The Committee may use outside consultants to assist in identifying candidates. Members of the Committee shall discuss and evaluate possible candidates in detail prior to recommending them to the Board.
The Committee shall also be responsible for initially assessing whether a candidate would be an “independent” director under the requirements for independence established in the Corporation’s “Independence Principles for Directors of First BanCorp” and applicable rules and regulations (an “Independent Director”). The Board, taking into consideration the recommendations of the Committee,
16
shall be responsible for selecting the nominees for election to the Board by the stockholders and for appointing directors to the Board to fill vacancies, with primary emphasis on the criteria set forth above. The Board, taking into consideration the assessment of the Committee, shall also make a determination as to whether a nominee or appointee would be an Independent Director.
The invitation to join the Board shall be extended by the Board via the Chairman and either the chairperson of the Committee or another independent director of the Corporation designated by the Chairman and the chairperson of the Committee.
The members of this Committee are José Luis Ferrer-Canals, appointed Chairman in February 2006, Jorge Diaz-Irizarry and José Menéndez-Cortada. The Corporate Governance and Nominating Committee met a total of six (6) times during fiscal year 2006.
Asset/Liability Risk Committee. The Asset/Liability Risk Committee charter provides that the Committee shall be composed of a minimum of three directors who meet the independence criteria established by the NYSE, the SEC, and the Corporation’s Independence Principles for Directors, and shall also include the Corporation’s Chief Executive Officer and Chief Operating Officer, provided each of those executives are also members of the Board. Under the terms of its charter, the Asset/Liability Risk Committee assists the Board in its oversight of Directors have also recommended, subjectthe Corporation’s policies and procedures related to stockholder approval,asset and liability management, including the reappointmentmanagement of PricewaterhouseCoopers LLP asfunds, investments and credit. In doing so, the Independent Registered Public Accounting Firm forCommittee’s primary general functions involve:
| • | The establishment of a process to enable the identification, assessment and management of risks that could affect the Corporation’s assets and liabilities; | ||
| • | The identification of the Corporation’s risk tolerance levels related to its assets and liabilities; | ||
| • | The evaluation of the adequacy and effectiveness of the Corporation’s risk management process related to the Corporation’s assets and liabilities, including management’s role in that process; | ||
| • | The evaluation of the Corporation’s compliance with its risk management process related to the Corporation’s assets and liabilities; and | ||
| • | The approval of loans and other business matters following the lending authorities approved by the Board. |
The members of this Committee are Jorge Díaz-Irizarry, appointed Chairman in June 2006, Luis Beauchamp, Aurelio Alemán, José Menéndez-Cortada, Sharee Ann Umpierre-Catinchi, and José Teixidor-Méndez. The Asset/Liability Risk Committee met a total of nine (9) times during fiscal year 2006.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The Corporation reviews all transactions and relationships in which the Corporation and its directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. In addition, the Corporation’s Corporate Governance Standards and Code of Ethics for fiscal
year 2005.
BySenior Financial Officers require our directors, executive officers and principal financial officers to report to the Board or the Audit Committee any situation that could be perceived as a conflict of interest. In addition, applicable law and regulations require that all loans or extensions of credit to executive officers and directors must be made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons (unless the loan or extension of credit is made under a benefit program generally available to all employees and does not give preference to any insider over any other employee) and must not involve more than the normal risk of repayment or present other unfavorable features. All loans to directors, executive officers and their related parties are required to be approved by the Board where the aggregate amount loaned exceeds the greater of $25,000 or 5% of FirstBank’s unimpaired surplus. Loans and aggregate loans of $500,000 or greater are also reviewed and approved by the Board, pursuant to Regulation O of the Federal Reserve Board.
During fiscal year 2006, 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,
17
except for the ones set forth below, 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:
• Lawrence Odell, General Counsel of the Corporation since February 2006, is a partner at Martínez Odell & Calabria (the “Law Firm”). During 2006, the Corporation entered into a Services Agreement, approved by the Board, see Exhibit 10.4 and 10.5 to the 2005 Form 10-K, with the Law Firm effective as of February 15, 2006 and amended on February 24, 2006 pursuant to which it agreed to pay the Law Firm $60,000 per month, except for the payment to be made in February 2006, which was for $30,000, as consideration for the services rendered to the Corporation by Lawrence Odell. The Services Agreement has a term of four years unless earlier terminated. The Corporation has also hired the Law Firm to be the corporate and regulatory counsel to it and FirstBank. In 2006, the Corporation paid $1,242,823 to the Law Firm for its legal services and $630,000 to the Law Firm in accordance with the terms of the Services Agreement.
• Fernando Scherrer, Chief Financial Officer of the Corporation since July 2006, was the Managing Partner and Head of Audit and Consulting Practices of Scherrer Hernández & Co. (“Scherrer Hernández”) until July 23, 2006, after which Mr. Scherrer no longer had a related interest in such company. During fiscal year 2006 through July 24, 2006, Scherrer Hernández provided accounting services to the Corporation in the aggregate amount of $502,972.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2006, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent stockholders were complied with, except as follows: Luis Beauchamp, Aurelio Alemán, Randolfo Rivera, Dacio A. Pasarell, Emilio Martino, Cassan Pancham, and Luis Cabrera each filed one late Form 4 relating to stock options granted in January 2006; Lawrence Odell filed a late Form 3 upon becoming a Section 16(a) reporting person, which also reported, on a late basis, stock options granted in connection with employment; Pedro Romero, Nayda Rivera and Miguel Babilonia each filed a late Form 3 upon their becoming Section 16(a) reporting persons, which also reported, on a late basis, stock options granted in January 2006.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Corporation’s Compensation and Benefits Committee consists of directors Sharee Ann Umpierre-Catinchi, appointed Chairperson in August 2006, Richard Reiss-Huyke and José Teixidor-Méndez, and, since July 31, 2007, Frank Kolodziej. None of the current members, nor the members during fiscal year 2006, has served as an officer of, or been an employee of, the Corporation, FirstBank or a subsidiary of the Corporation or of FirstBank. No Executive Officer of the Corporation serves on any board of directors or compensation committee of any entity on whose board or management serves on the Corporation’s Board or on its Compensation and Benefits Committee. Other than disclosed in the Certain Relationships and Related Transactions and Director Independence section of this Proxy Statement, none of the members of the Compensation Committee had any relationship with the Corporation requiring disclosure under Item 404 of the SEC Regulation S-K.
COMPENSATION OF DIRECTORS
Non-management directors of the Corporation receive compensation for attending meetings of the Board of Directors:
Jose Julian Alvarez-Bracero
Jose L. Ferrer-Canals
Richard Reiss-Huyke
COMPENSATION OF DIRECTORS
Outside directors of the Corporation dobut not receive compensation for service toattending meetings of the Board of Directors of the Corporation; however, they receive
compensation for their service to the Board ofBank. Directors of the Bank and its
committees. Outside directors received $1,300 for each meeting of the Board of
the Bank attended during fiscal year 2004. Outside directors who are
18
also received $950
for attendance at the meetings of the Audit Committee and $550 for attendance at
the meetings of the Credit Committee, Compensation and Benefits Committee and
Corporate Governance and Nominating Committee during fiscal year 2004.
Officersofficers of the Corporation, the Bankof FirstBank or theof any other subsidiaries do not receive fees or other compensation for service on the boards of directorsBoard of the Corporation, the Bank,Board of Directors of FirstBank, the Board of Directors of the subsidiaries or any of their committees. Accordingly, Luis Beauchamp and Aurelio Alemán are not included in the table set forth below because they were employees during 2006 and therefore received no compensation for their services as a director. The compensation set forth in the table is based on the following schedule of fees for 2006 compensation of non-management directors:
| • | Board Meeting Fees. During 2006, each non-management director received $1,400 for each meeting attended. | ||
| • | Fees for meetings of Compensation and Benefits Committee and Asset/Liability Risk Committee. During 2006, each non-management director received $650 for each meeting attended. | ||
| • | Fees for meetings of Audit Committee. During 2006, each non-management director received $1,050 for each meeting attended. | ||
| • | As part of the Audit Committee’s investigation, principally pertaining to the accounting for certain mortgage-related transactions with two large mortgage originators in Puerto Rico during calendar years 1999 through 2005, certain independent directors of the Board actively engaged in activities related to said investigation. As a result, the Compensation and Benefits Committee, in September 2005, approved the payment of additional fees in an amount equal to $250 per hour for these independent directors in order to compensate them for the additional work and time incurred by them in said investigation. |
In January 2007, the Board approved an increase in fees to the members of the Board effective February 2007. Fees increased as follows:
| • | Board Meeting Fees. Currently, each non-management director receives $1,750 for each meeting attended. | ||
| • | Fees for meetings of Compensation and Benefits Committee and Asset/Liability Risk Committee. Currently, each non-management director receives $1,200 for each meeting attended. | ||
| • | Fees for meetings of Audit Committee. Currently, each non-management director receives $1,500 for each meeting attended. |
The Corporation reimburses Board members for travel, lodging and other reasonable out-of-pocket expenses in connection with attendance at board and committee meetings or performing other services for the Corporation in their capacities as directors.
The following table sets forth feesall the compensation that the Corporation paid to outsidenon-management directors for their
attendance at meetingsduring fiscal year 2006:
| Fees | Nonqualified | |||||||||||||||||||||||||||
| Earned or | Non-Equity | Deferred | ||||||||||||||||||||||||||
| Paid in | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
| Name | Cash ($) | Awards ($) | Awards ($) | Compensation ($) | Earnings ($) | Compensation ($) (b) | Total ($) | |||||||||||||||||||||
| José Teixidor-Méndez | 44,750 | — | — | — | — | — | 44,750 | |||||||||||||||||||||
| José Julian Álvarez-Bracero (a) | 11,750 | — | — | — | — | — | 11,750 | |||||||||||||||||||||
| Jorge Díaz-Irizarry | 60,700 | — | — | — | — | 3,222 | 63,922 | |||||||||||||||||||||
| José Ferrer-Canals | 80,800 | — | — | — | — | 41,388 | 122,188 | |||||||||||||||||||||
| Sharee Ann Umpierre-Catinchi | 54,650 | — | — | — | — | 3,222 | 57,872 | |||||||||||||||||||||
| Richard Reiss-Huyke | 75,050 | — | — | — | — | 40,625 | 115,675 | |||||||||||||||||||||
| José Menéndez-Cortada | 58,850 | — | — | — | — | 25,198 | 84,048 | |||||||||||||||||||||
| Fernando Rodríguez-Amaro | 81,800 | — | — | — | — | — | 81,800 | |||||||||||||||||||||
| (a) | José Julian Álvarez-Bracero resigned as director of the Corporation effective March 31, 2006. | |
| (b) | All other compensation includes: (1) additional fees paid to certain independent directors for the additional work and time incurred by them as part of the Audit Committee’s investigation detailed as follows; José Ferrer-Canals — $24,750, Richard Reiss-Huyke – $40,625, and José Menéndez- |
19
| Cortada — $21,976; (2) a corporate club membership for the benefit of José Ferrer-Canals; and (3) expenses incurred by the Corporation for family members who accompanied the directors to Board-related activities. |
In 2007, the Compensation and Benefits Committee retained Mercer Human Resources Consulting to provide services as compensation consultants. Mercer will perform a director compensation review to assess the competitiveness of the Corporation’s current Board compensation strategy for its non-management directors and provide recommendations in terms of structure and magnitude of compensation.
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Discussion and Analysis (“CD&A”) describes the objectives of the Corporation’s Executive Compensation Program, the process for determining executive officer compensation, and the elements of the compensation for the Corporation’s President and Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and the next three highest paid executive officers of the Corporation (the “Named Executives”).
The Executive Compensation Program is administered by the Compensation and Benefits Committee (the “Compensation Committee”). For the first six months of 2006 the members of the Compensation Committee were Jorge L. Díaz, José Teixidor, José Ferrer-Canals, José J. Álvarez (who resigned as a director in March 2006), and Sharee Ann Umpierre-Catinchi. Subsequently thereto, the members of the Corporation’s Compensation Committee were Richard Reiss, José Teixidor, and Sharee Ann Umpierre-Catinchi who is also the Chair of the Committee. The Compensation Committee is responsible for the oversight and determination of the proper salary, incentive compensation, nonqualified benefits and perquisites of the executive officers and key employees of the Corporation. To fulfill its responsibilities and duties the Compensation Committee reviews and recommends to the Board the annual goals and objectives relevant to the CEO and evaluates and recommends to the Board the salaries, annual incentives awards and long term incentives for the CEO, executive vice presidents and other selected executives of the Corporation.
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 the Executive Compensation Program is to attract and retain a highly qualified workforce that will make significant contributions to the promotion and achievement of the Corporation’s goals, with a view to maximizing stockholder value, motivating a high level of individual and group performance and rewarding contributions and achievement of strategic objectives under the responsibility of the executives. Accordingly, the Corporation has adopted a compensation policy that is designed to recruit, retain and motivate the best executive talent to deliver superior short-term and long-term performance to stockholders. To support those goals, the Corporation provides it’s Named Executives with a competitive base salary, a cash bonus, stock option awards, and other fringe benefits. The cash bonus and stock awards, which are the variable components of the compensation, are based on the performance of the objectives assigned to the Named Executives. In 2006, variable compensation accounted for approximately 70% of the CEO’s total compensation and approximately 50% to 60% for the other Named Executives.
Objectives of the Corporation’s Executive Compensation Program:
| • | Attract and retain top executives. | ||
| • | Promote behavior that will lead to the attainment of the Corporation’s goals. | ||
| • | Provide a short-term and long-term variable compensation structure aimed at rewarding performance that is measured against the achievement of goals and management objectives. | ||
| • | Promote the alignment of interests with those of the stockholders by providing a significant portion of the executive compensation in the form of stock-based compensation. |
For the year 2006, the Board set forth the following management key objectives:
Recruit key corporate executives to strengthen the restructured management organization, retain key corporate officers in the face of potential adverse consequences to the Corporation resulting
20
| from a restatement process with respect to its financial statements for 2004 and the corresponding filing of the Corporation’s Amended Annual Report restating years 2002-2004 (the “Restatement Process”) and maintain high moral of the employees of the Corporation in such circumstances. | |||
| • | Establish effective working relations with key constituencies to enhance the impaired Corporation’s reputation resulting from the Restatement Process; i.e., regulators, rating agencies, credit counterparts, financial analysts’ investors, clients and employees. | ||
| • | Create a strong enterprise risk management function and develop programs to remedy critical issues and correct material weaknesses identified by management, regulatory agencies, internal audit and independent auditors. | ||
| • | Reduce credit risk concentration in connection with certain loans outstanding to two large mortgage originators in Puerto Rico to levels acceptable to regulatory agencies and to bring it within parameters set forth in the policies adopted by the Corporation. | ||
| • | Fulfill all directives and requirements imposed by the various enforcement actions of the regulators on the Corporation and its banking subsidiaries. | ||
| • | Undertake steps towards satisfactorily resolving significant litigation brought against the Corporation as a result of the Restatement Process. | ||
| • | Undertake steps towards satisfactorily resolving a formal investigation initiated by the SEC principally pertaining to the accounting for certain mortgage-related transactions with two large mortgage originators in Puerto Rico during calendar years 1999 through 2005. | ||
| • | Initiate a process involving the raising of equity capital for the Corporation. | ||
| • | Successfully complete the Restatement Process with the filing of the Amended 2004 Form 10-K/A. | ||
| • | Maintain the Corporation’s business components moving forward through the effective implementation of key business strategies to grow the core business and retain existing clients during the period of potential adverse consequences and impaired reputation of the Corporation. | ||
| • | Sustain the Corporation’s market share goals in each business segment. |
Compensation Review Process
The Compensation Committee typically reviews and determines executive compensation in January of each year. The Corporation’s President and Chief Executive Officer makes recommendations concerning the amount of compensation to be awarded to executive officers, excluding himself, but does not participate in the Compensation Committee’s deliberations or decisions. The Compensation Committee reviews and considers his recommendations and makes a final determination. In making its determinations, the Compensation Committee reviews the Corporation’s performance as a whole and the performance of the executives as it relates to the accomplishment of the goals and objectives set forth for management for the year, together with any such goals that have been established for the relevant lines of business of the Corporation. The determinations in terms of accomplishments are ultimately judgments based on the Compensation Committee’s assessment of the year-end performance of the Corporation against its annual financial and strategic objectives established by the Board at the beginning of the year, and the level of responsibility and individual performance of each executive. The Compensation Committee, typically, also takes into consideration the performance of the Corporation in comparison with the performance of other corporations in similar markets who provide similar financial services and products, as well as executive compensation at comparable companies.
During 2006, in lieu of the typical process, the Compensation Committee gave substantial weight to the achievement and/or progress made towards the accomplishment of the key management objectives mentioned above in the final determination of management effectiveness. In light of the Corporation’s extraordinary efforts with respect to management’s work on the Restatement Process and the legal and regulatory matters affecting the Corporation, the Compensation Committee in its deliberations and determinations, gave substantial weight to the significant time and effort employed by management towards the resolutions of such adversities affecting the Corporation. Specifically, these included: completion of the Restatement Process; development of a strong enterprise risk management framework; completion and delivery of all items required by the Cease and Desist orders entered into with the FDIC, the Commissioner of Financial Institutions of Puerto Rico and the Federal Reserve Bank of New York; defending against the securities class action and stockholder derivatives claims, and working towards a
21
successful resolution thereof; cooperating with a SEC formal investigation and undertaking a process for a settlement of a potential enforcement action in connection therewith; and commencing a process involving the raising of equity capital for the Corporation to ensure its compliance under the Bank Holding Company Act which requires that the Corporation serve as a source of financial strength to its banking subsidiaries.
The following financial factors were also considered in the evaluation of management overall effectiveness: attainment of financial results versus plan, overall effectiveness in the implementation of business strategies, market penetration and market positioning, and adjusted asset growth and adjusted earnings performance, among other factors.
Elements of Executive Compensation
The Corporation’s compensation program primarily consists of the following components:
| • | Base salary; | ||
| • | Short term incentives – annual performance bonuses; | ||
| • | Long term incentives – stock-based compensation in the form of stock option grants; and | ||
| • | Other compensation |
Base Salary
Base salary is the basic element of direct cash compensation, designed to attract and motivate highly qualified executives. In setting base salary, the Compensation Committee takes into consideration the experience, skills, knowledge and responsibilities required of the executive and senior officers in their roles, and the Corporation’s performance. The Compensation Committee seeks to maintain base salaries that are competitive with the marketplace, to allow it to attract and retain executive talent. Salaries for executive and senior officers are reviewed on an annual basis as well as at the time of a promotion or other change in level of responsibilities.
Considering the financial performance of the Corporation and the large amounts of extraordinary expenses incurred during 2006 relating to the regulatory and legal issues that the Corporation was facing, the base salaries of the CEO, the Chief Operating Officer (“COO”) and the Executive Vice Presidents were not increased during 2006 and have not been increased as of the date of this filing.
During 2006, the Corporation, because of the adversities affecting it during the year, faced certain challenges which impacted the entity’s ability to hire and retain employees and executives with the necessary skills and experience to execute extensive actions directed towards improving corporate governance, greater transparency, higher quality of financial reporting, enhanced internal control policies, programs and processes, and the resolution of legal and regulatory actions. As part of the recruitment process, the Corporation designed compensation packages, which included, in some instances, a guaranteed performance bonus, signing bonus and stock option awards, all of which were aimed to compensate the executives for the risk of leaving their respective prior employers and/or professions. In meeting these objectives, the Corporation entered into an employment agreement with Lawrence Odell in February 2006 relating to his retention as Executive Vice President and General Counsel of the Corporation and its subsidiaries and at the same time entered into a services agreement with his law firm Martinez Odell & Calabria (the “Law Firm”) in consideration of his employment with the Corporation. The services agreement provides for monthly payments to the Law Firm of $60,000. Separately, under the terms of his employment agreement, Mr. Odell receives a nominal base salary of $100.00 a year and the opportunity to receive annual performance bonuses based upon his achievement of predetermined business objectives. In addition, at the time of his employment he received stock options exercisable for 100,000 shares of common stock. The payments under the services agreement with the Law Firm have been taken into consideration in determining total compensation for identifying the Named Executives. The employment agreement has a four-year term with automatic one-year extensions. The services agreement has a four-year term.
Also, in July 2006, the Corporation entered into an employment agreement with Fernando Scherrer relating to his retention as Executive Vice President and Chief Financial Officer of the Corporation and its subsidiary FirstBank. Under the terms of his employment agreement, Mr. Scherrer receives a base salary of $700,000 a year and a guaranteed bonus of $400,000 upon the first anniversary of his employment. Every
22
year thereafter, Mr. Scherrer’s performance bonus will be determined based upon his achievement of predetermined business objectives. In addition, Mr. Scherrer received stock options exercisable for 100,000 shares of common stock and a signing bonus of $200,000.
Short-Term Annual Performance Bonuses
Generally, the annual cash bonus element of the Corporation’s Executive Compensation Program is designed to provide incentives for executive officers on generating strong corporate financial performance and therefore seeks to link the payment of cash bonuses to the achievement of key strategic, operational and financial performance objectives. Other criteria, beside financial performance, may include objectives and goals that may not involve actions that specifically and directly relate to financial matters, but the resolutions of which would necessarily protect the financial soundness of the Corporation. The performance of the executive officers was evaluated on the basis of the Corporation’s achievement of the predetermined business objectives, such as the 2006 management key objectives detailed in the Executive Compensation Policy section above and which are discussed in more detail below. The contributions of the executive to the achievement of the Corporation’s business objectives were evaluated by the Compensation Committee to determine, at its discretion, the amount of the performance bonus. The Compensation Committee does not use a formula to calculate bonus payments.
During 2006, the Corporation placed emphasis on compliance with various regulatory provisions and enhancement of the Corporation’s overall corporate governance and risk management. Notwithstanding the substantial progress realized during the year in accomplishing these objectives, and considering the financial performance of the Corporation and the large amounts of extraordinary expenses incurred during 2006 relating to the regulatory and legal issues that the Corporation was facing, the Compensation Committee approved the performance bonuses listed in the Summary Compensation Table, which were equal to those approved for 2005. Such bonuses considered individual performance given certain milestones which included but were not limited to:
| • | Strict adherence and completion of deliverables in connection with the FDIC, the Commissioner of Financial Institutions of Puerto Rico, and the Federal Reserve Bank of New York with respect to the mortgage related Cease and Desist Orders. | ||
| • | A complete assessment of management’s compliance with the Bank Secrecy Act (“BSA”), a revamping of the Corporation’s BSA program, and substantial implementation of recommendations and action items required by the BSA Cease and Desist Order. | ||
| • | Active negotiation towards a Memorandum of Understanding for settlement of the Class Action Lawsuit. | ||
| • | Dismissal of the Derivative Action Lawsuit. | ||
| • | Active settlement negotiation with the Enforcement Division of the SEC in connection with its formal investigation. | ||
| • | Completion of the Corporation’s Amended Annual Report for the year ended December 31, 2004. | ||
| • | Substantial completion of the Corporation’s Annual Report for the year ended December 31, 2005, which was subsequently filed on February 9, 2007. | ||
| • | Complete Corporate Governance Review and implementation of changes in accordance with consultant recommendations. | ||
| • | Revision of the Corporation’s risk management program resulting in a realignment of risk management functions and the adoption of an enterprise-wide risk management framework. | ||
| • | Substantial reduction of the credit risk concentration in connection with loans outstanding to two large mortgage originators in Puerto Rico. | ||
| • | Maintaining market leadership positioning in key business segments. |
Long-Term Equity Incentive
Long term incentives were provided under the Executive Compensation Program in the form of stock options under the Corporation’s 1997 Stock Option Plan. The 1997 Stock Option Plan (the “1997 Plan”) was effective through January 21, 2007, at which time it expired. Under the 1997 Plan, the Compensation Committee had discretion to select which of the eligible persons would be granted stock options, whether stock appreciation rights would be granted with such options, and generally to determine the terms and conditions of such options in accordance with the provisions of the 1997 Plan. Under the 1997 Plan,
23
options are granted at a price not less than the fair market value of the stock at the date of grant. Accordingly, all options have been awarded at the market value of the Corporation’s common stock on the date of grant. The options are fully vested upon grant. The purpose of the 1997 Plan was to further the success of the Corporation and its subsidiaries by enabling executive officers to maintain an equity interest in the Corporation, which aligns their compensation with the stockholders’ interest. The Corporation makes initial grants of options to new executives to quickly align their interests.
In determining equity awards to the executives in 2006, the Compensation Committee, based on recommendations submitted by the CEO, other than with respect to himself, took into account the executive’s position and scope of responsibility, ability to affect profitability and stockholder value, the accomplishment of the goals and objectives set forth by the Corporation, recent job performance, and the value of the equity award in relation to other compensation elements. The Compensation Committee in granting the equity awards to executives in 2006 placed great weight on the accomplishment and progress made by management towards the resolution of the adversities facing the Corporation during 2005 and 2006 that included substantial legal actions against the Corporation, several regulatory enforcement actions and the Restatement Process. The Corporation does not have a practice of coordinating the timing of stock option grants with the release of material, nonpublic information. Management has no role with respect to the timing of stock option awards. During 2006, the equity awards were granted in accordance with the Corporation’s historical practice of granting equity awards to executives and other management personnel at the beginning of each year. Further, the amounts were consistent with those granted in prior years.
Other Compensation
The use of personal benefits and perquisites as an element of compensation is extremely limited. Under our current plan, Named Executives are provided with a corporate-owned automobile, club memberships and participation in the same corporate-wide plans and programs available to other employees such as the 401(k) plan (including Corporation’s match), group medical and dental plans, long-term and short-term disability, health care, and group life insurance. The Corporation offers to all executive officers a life insurance policy of $1,000,000 ($500,000 in excess of other employees). In addition, the CEO is provided personal security solely for business purposes.
In 2007, the Compensation Committee retained Mercer Human Resources Consulting to provide services as compensation consultants. Mercer will perform an executive compensation review which includes a market competitiveness study, a pay for performance assessment, and will assist the Compensation Committee in developing a new compensation program for the Corporation’s management.
Compensation Committee Report
The Compensation and Benefits Committee has reviewed the Compensation Discussion and Analysis and discussed it with management. Based on its review and discussions with management, the Compensation and benefits Committee recommended to our Board of Directors ofthat the BankCompensation Discussion and committees
during fiscal 2004.
9
BOARD & COMMITTEE MEETINGS IN 2004
* Director Juan Acosta Reboyras served onAnalysis be included in the Board and onCorporation’s Proxy for the Credit
Committee until April 2004.2007 Annual Meeting. This report is provided by the following independent directors, who comprise the committee:
Sharee Ann Umpierre-Catinchi (Chairperson)
Richard Reiss
José Teixidor
Richard Reiss
José Teixidor
TABULAR EXECUTIVE COMPENSATION OF EXECUTIVE OFFICERS
DISCLOSURE
SUMMARY COMPENSATION TABLE
The summary compensation tableSummary Compensation Table set forth below discloses compensation for the Chief Executive Officer, Chief Financial Officer and the most highlynext three highest paid executive officers of the Corporation, the BankFirstBank 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 2004 exceeded $100,000 ("Named Executives"). The
table includes bonus payments granted during a meeting of the Compensation and
Benefits Committee held in February 2005 and the regular meeting of the Board of
Directors held in March 2005, which were meantsubsidiaries.
24
| Change in | ||||||||||||||||||||||||||||||||||||
| Pension Value | ||||||||||||||||||||||||||||||||||||
| and Nonqualified | ||||||||||||||||||||||||||||||||||||
| Non-Equity | Deferred | |||||||||||||||||||||||||||||||||||
| Stock | Option | Incentive Plan | Compensation | All Other | ||||||||||||||||||||||||||||||||
| Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||||||||||
| Name and Principal Position | Year | ($) (d) | ($) (e) | ($) | ($) (f) | ($) | ($) | ($) (g) | ($) | |||||||||||||||||||||||||||
| Luis Beauchamp | 2006 | 1,000,000 | 852,200 | — | 1,595,676 | — | — | 77,340 | 3,525,216 | |||||||||||||||||||||||||||
| Chairman, President and Chief Executive Officer | ||||||||||||||||||||||||||||||||||||
| Aurelio Alemán | 2006 | 750,000 | 602,200 | — | 683,861 | — | — | 36,824 | 2,072,885 | |||||||||||||||||||||||||||
| Senior Executive Vice President and Chief Operating Officer | ||||||||||||||||||||||||||||||||||||
| Fernando Scherrer (a) | 2006 | 290,769 | 202,200 | — | 288,000 | — | — | 22,180 | 803,149 | |||||||||||||||||||||||||||
| Executive Vice President and Chief Fiancial Officer | ||||||||||||||||||||||||||||||||||||
| Lawrence Odell (b) | 2006 | 630,100 | 402,200 | — | 459,000 | — | — | 8,505 | 1,499,805 | |||||||||||||||||||||||||||
| Executive Vice President, General Counsel and Secretary of the Board of Directors | ||||||||||||||||||||||||||||||||||||
| Randolfo Rivera | 2006 | 550,000 | 402,200 | — | 341,931 | — | — | 31,656 | 1,325,787 | |||||||||||||||||||||||||||
| Executive Vice President and Corporate Banking Operations Executive | ||||||||||||||||||||||||||||||||||||
| Luis Cabrera (c) | 2006 | 409,846 | 225,000 | — | 227,954 | — | — | 614,472 | 1,477,272 | |||||||||||||||||||||||||||
| Former Executive Vice President, Interim Chief Financial Officer and Chief Investment Officer | ||||||||||||||||||||||||||||||||||||
| (a) | Fernando Scherrer was hired in July 2006; his employment agreement stipulates a base salary of no less than $700,000 a year and no bonus payable until a guaranteed bonus of $400,000 upon the first anniversary of his employment. In addition, Mr. Scherrer received a signing bonus of $200,000 which is included in the bonus section of the Summary Compensation Table and stock options exercisable for 100,000 shares of common stock. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (b) | As discussed in more detail in the Compensation Disclosure and Analysis section, in February 2006, the Corporation entered into an employment agreement with Lawrence Odell and at the same time entered into a services agreement with his law firm Martinez Odell & Calabria relating to the services of Mr. Odell as
25
GRANTS The table set forth below discloses the information regarding the stock options granted to the
26
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END The
OPTIONS EXERCISED AND STOCK VESTED TABLE During 2006, no stock options were exercised by the 27 PENSION BENEFITS The Corporation does not have a defined benefit or pension plan in place for executive officers. DEFINED CONTRIBUTION RETIREMENT PLAN The Corporation provides a Defined Contribution Retirement Plan pursuant to Participating employees may defer from 1% to 10% of their annual salary, up to a maximum of $8,000, for Puerto Rico participants and $15,000 for U.S.V.I. and U.S participants, into the In fiscal year 2006, the total contribution to the Defined Contribution Retirement Plans by the Corporation amounted to $952,546 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 year 2006 to the Named Executives of the Corporation who participate in the Defined Contribution Retirement Plan.
NON-QUALIFIED DEFERRED COMPENSATION The Deferred Compensation Plan is an unfunded deferred compensation arrangement available to a select group of management or highly compensated personnel whereby the personnel entitled to participate may elect to do so by executing an Individual Deferred Compensation Agreement (the “Agreement”). Pursuant to the Agreement, the participant may defer a portion of his/her compensation to be earned from the date in which the Agreement is executed. 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 that 28
EMPLOYMENT CONTROL ARRANGEMENTS Employment Agreements The following table discloses information regarding the employment agreements of the Named Executives.
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. Under the employment agreements, the Board In the event of a 29 amended, 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 The
30
AUDIT FEES Total fees billed to • Audit • Audit-Related Fees: $21,500 in • Tax Fees: none in 2005 and none in 2006. • Other The Audit Committee has established controls and procedures that require the pre-approval of all PROPOSAL RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The firm of PricewaterhouseCoopers LLP has been selected as the Independent Registered Public Accounting Firm of the Corporation for the fiscal year ending December 31, THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF 31 STOCKHOLDER SEC rules and regulations require that proposals that stockholders would like included in a company’s proxy materials must be received by the corporate secretary of the company no later than 120 days before the first anniversary of the date on which the previous year’s proxy statement was first mailed to stockholders unless the date of the annual meeting has been changed by more than 30 days from the date of the previous year’s meeting. When the date is changed by more than 30 days from the date of the previous year’s meeting, the deadline is a reasonable time before the company begins to print and send its proxy materials. The Corporation’s 2007 Annual Meeting of Stockholders was delayed by more than 30 days because of the Corporation’s inability to timely file its annual reports on Form 10-K for the years ended December 31, 2005 and 2006. Accordingly, the deadlines applicable for submitting stockholder proposals with respect to the Corporation’s 2008 Annual Meeting of Stockholders will not be based on the date on which this Proxy Statement was first mailed to stockholders in connection with the 2007 Annual Meeting of Stockholders. In accordance with the Corporation’s By-laws, the Corporation expects to hold its 2008 Annual Meeting of Stockholders on or before April 30, 2008, subject to the right of the Board to change such date based on changed circumstances. Any proposal that a stockholder wishes to have Under the Corporation’s By-laws, if a stockholder seeks to propose a nominee for director for consideration at the annual meeting of stockholder, notice must be 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 ANNUAL REPORT Stockholders have been sent a copy of the BY ORDER of the Board of Directors September 21, 32 
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||