First Bancorp Shares Slide on SEC Order

October 24, 2005
Associated Press

Shares of First BanCorp slumped to new 52-week low Monday, following news the Securities and Exchange Commission issued a formal order of investigation into the Puerto Rican bank.

Shares of First Bancorp (P.R.) were down $1.13, to $14.12, on volume of 1.1 million shares, compared with average daily volume of about 678,300. Earlier, shares changed hands as low as $13.55, below the previous year low of $13.80, reached earlier this month when the company announced both its chief executive and chief financial officer stepped down amid the accounting investigation.

Late Friday, First BanCorp said the SEC had issued the order, which stems from an informal inquiry started in August. The company - which operates about 40 branches in Puerto Rico and a dozen in the U.S. and British Virgin Islands - said the investigation "appears to relate to, among other things, transactions in which First Bank acquired a substantial number of mortgage loans from other Puerto Rican financial institutions."

The bank's own audit committee has been looking into the transactions, and the proper accounting treatment of them, since learning about the SEC's interest, the company said in a release. One question is whether the mortgage transactions were properly classified in financial statements. Although the review is not complete, First BanCorp said it has found transactions with R&G Financial Corp. that were accounted for incorrectly, and may need to restate its previously issued financial statements for 2000 through the first quarter of 2005.

First Bancorp said it will continue to comb through its books to examine transactions with other Puerto Rican financial institutions, including Doral Financial Corp., Puerto Rico's largest home mortgage lender. Doral shares also fell, and were down 19 cents, to $11.69, in afternoon trading on the New York Stock Exchange.