STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2016

STOCKHOLDERS' EQUITY [Text Block]

NOTE 22 – STOCKHOLDERS’ EQUITY

Common Stock

As of December 31, 2016 and 2015, the Corporation had 2,000,000,000 authorized shares of common stock with a par value of $0.10 per share. As of December 31, 2016 and 2015, there were 218,700,394 and 216,051,128 shares issued, respectively, and 217,446,205 and 215,088,698, shares outstanding, respectively. Refer to Note 21 for information about transactions related to common stock under the Omnibus Plan.

On December 5, 2016, a secondary offering of the Corporation’s common stock was completed by certain of the Corporation’s existing stockholders. Funds affiliated with Thomas H. Lee Partners, L.P. (“THL”) sold 9 million shares of common stock, and funds managed by Oaktree Capital Management (“Oaktree”) sold 9 million shares of common stock. In addition, the underwriters exercised their option to purchase an additional 2.7 million shares of common stock from the selling stockholders. The Corporation did not receive any proceeds from the offering. As of December 31, 2016, each of THL and Oaktree owned 14.5% of the Corporation’s common stock. In February 2017, THL and Oaktree sold an aggregate of an additional 23 million shares of common stock in a secondary offering, reducing each of their percentage ownership interests in the Corporation to approximately 9.2%.

During the second quarter of 2015, the Corporation issued 852,831 shares of its common stock in exchange for trust preferred securities with a liquidation value of $5.3 million. As a result of these transactions, common stock increased by $85 thousand, which represents the par value of the shares issued. Also, additional paid-in capital increased by the excess of the common stock fair value over the par value, or $5.5 million. With these exchanges, the other borrowings balance decreased by $5.5 million.

Preferred Stock

The Corporation has 50,000,000 authorized shares of preferred stock with a par value of $1.00, redeemable at the Corporation’s option subject to certain terms. This stock may be issued in series and the shares of each series will have such rights and preferences as are fixed by the Board of Directors when authorizing the issuance of that particular series. As of December 31, 2016, the Corporation has five outstanding series of non-convertible, non-cumulative preferred stock: 7.125% non-cumulative perpetual monthly income preferred stock, Series A; 8.35% non-cumulative perpetual monthly income preferred stock, Series B; 7.40% non-cumulative perpetual monthly income preferred stock, Series C; 7.25% non-cumulative perpetual monthly income preferred stock, Series D; and 7.00% non-cumulative perpetual monthly income preferred stock, Series E. The liquidation value per share is $25.

Effective January 17, 2012, the Corporation delisted all of its outstanding series of non-convertible, non-cumulative preferred stock from the New York Stock Exchange. The Corporation has not arranged for listing and/or registration on another national securities exchange or for quotation of the Series A through E Preferred Stock in a quotation medium. For the first time since July 2009, the Corporation paid dividends on its non-cumulative perpetual monthly income preferred stock in December 2016, after receiving regulatory approval. The Corporation intends to request approval in future periods to continue with monthly dividend payments on the non-cumulative perpetual monthly income preferred stock.

In 2014, the Corporation issued an aggregate of 4,597,121 shares of its common stock in exchange for an aggregate of 1,077,726 shares of the Corporation’s Series A through E Preferred Stock, having an aggregate liquidation value of $26.9 million. The shares of common stock were issued to holders of the Series A through E Preferred Stock in separate and unrelated transactions in reliance upon the exemption set forth in Section 3(a)(9) of the Securities Act of 1933, as amended, for securities exchanged by an issuer with existing security holders where no commission or other remuneration is paid or given directly or indirectly by the issuer for soliciting such exchange. The carrying (liquidation) value of the Series A through E preferred stock exchanged, or $26.9 million, was reduced, and common stock and additional paid-in capital was increased in the amount of the fair value of the common stock issued. The Corporation recorded the par value of the shares issued as common stock ($0.10 per common share) or $0.5 million. The excess of the common stock fair value over the par value, or $23.9 million, was recorded in additional paid-in capital. The excess of the carrying amount of the shares of preferred stock over the fair value of the shares of common stock, or $1.7 million, was recorded as an increase to retained earnings and an increase in earnings per common share computation.

Treasury stock

During 2016 and 2015, the Corporation withheld an aggregate of 291,759 shares and 222,381 shares, respectively, of the common stock paid to certain senior officers as additional compensation and restricted stock that vested during 2016 and 2015 to cover employees’ payroll and income tax withholding liabilities; these shares are also held as treasury shares. As of December 31, 2016 and 2015, the Corporation had 1,254,189and 962,430 shares held as treasury stock, respectively.

FirstBank Statutory Reserve (Legal Surplus)

The Banking Law of the Commonwealth of Puerto Rico requires that a minimum of 10% of FirstBank’s net income for the year be transferred to legal surplus until such surplus equals the total of paid-in capital on common and preferred stock. Amounts transferred to the legal surplus account from the retained earnings account are not available for distribution to the Corporation, including for payment as dividends to the stockholders, without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The Puerto Rico Banking Law provides that, when the expenditures of a Puerto Rico commercial bank are greater than receipts, the excess of the expenditures over receipts must be charged against the undistributed profits of the bank, and the balance, if any, must be charged against the reserve fund, as a reduction thereof. If there is no reserve fund sufficient to cover such balance in whole or in part, the outstanding amount must be charged against the capital account and the Bank cannot pay dividends until it can replenish the reserve fund to an amount of at least 20% of the original capital contributed. During 2016 and 2015, $9.6 million and $2.8 million, respectively, were transferred to the legal surplus reserve. FirstBank’s legal surplus reserve, included as part of retained earnings in the Corporation’s statement of financial condition, amounted to $52.4 million and $42.8 million, respectively, as of December 31, 2016 and 2015.