First BanCorp, the parent holding company for FirstBank Puerto Rico and Firstbank VI, announced this week it has finalized the sale of $525 million of common stock to institutional investors, greatly increasing its capitalization and ability to loan and make money. First BanCorp issued 150 million shares of common stock to two large capital funds at a purchase price of $3.50 per share.

"The completion of the capital raise solidifies our competitive position as the second-largest financial institution in Puerto Rico and as the leading bank in the Virgin Islands," First BanCorp President and Chief Executive Officer Aurelio Alemán said in a statement announcing the closing of the stock sale Wednesday. "The new capital strengthens our franchise for future growth while enabling us to continue supporting our clients and the communities we serve,” Alemán continued.

Two companies purchased nearly all of the 150 million shares: Oaktree Capital Management and Thomas H. Lee Partners. Following the closing of the transaction, one official each from Oaktree and Lee will join the bank’s board of directors.

The extra capital enabled FirstBancorp to meet federal requirements imposed through the Troubled Asset Relief Program (TARP) under President George W. Bush. As the Source reported in 2009, (see FirstBank Holding Its Own Through Hard Times), FirstBancorporp sold the U.S. Treasury more than $400 million in preferred shares as part of that year’s federal bank bailout. Through TARP’s Capital Purchase Program, the U.S. Treasury gave many banks, both troubled and solvent, large cash infusions through the purchase of preferred stock.

The preferred stock is similar to debt in that mandatory dividends are paid before dividends on common stock. With the stock sale, FirstBancorp simultaneously was able to convert the preferred stock and issue the U.S. Treasury 33 million shares of common stock instead. This moves FirstBancorp closer to ending its involvement in the TARP program. It also means the U.S. government remains a part owner of the bank.

The increased capital also brings the bank closer to ending a 2010 consent order between the Federal Deposit Insurance Corporation (FDIC) and the bank, requiring it to take certain actions, such as putting in place a plan to reach specific capital levels and reducing its portfolio of nonperforming and classified assets, such as bad loans.

The infusion "allows the bank to go forward and seek relief from federal oversight in the consent order," Senior Vice President FirstBank Puerto Rico Joseph Hosie said Wednesday. "We would hope would now to be released from some of that and go back to managing the business as we had heretofore," he said.

Altogether, the sale puts the bank on an excellent footing, Hosie said.

"The main thing is we have the cash," he said. "It means we can get back to business, and we are ready to roar. It is very good news."

First BanCorp is the parent corporation of FirstBank Puerto Rico, a state-chartered commercial bank with operations in Puerto Rico, the Virgin Islands and Florida; of FirstBank Insurance Agency; and of Ponce General Corporation.