achieved since 1998, when the Corporation improved its underwriting, introduced tighter approval procedures and improved computer systems.The quality of the Corporation’s assets contributed importantly to the record profits last year. 

During 2001 First BanCorp wrote off $47.0 million of loans on a net basis, compared with $42.0 million in 2000, $44.6 mil- lion in 1999 and $66.2 million in 1998.The amounts provided for loan losses have followed a similar trend.They were $61.0 million in 2001, $45.7 million in 2000, $48.0 million in 1999 and $76.0 million in 1998. On December 31, 2001 non-per- forming loans totaled $73.0 million, compared to $67.7 million on the same date in 2000, and $53.8 million at the end of 1999. 

These trends took place as the overall loan portfolio more than doubled to $4.3 billion at the end of 2001 from $2.1 bil- lion at the end of 1998.The Corporation has built its loan loss reserves in line with this growth. Loan loss reserves reached $91.1 million at the end of 2001, compared with $76.9 million for 2000, $71.8 million for 1999 and $67.9 million for 1998. As a result, the reserve coverage ratio (allowance for loan losses as a percentage of non-performing loans) has remained above100% in the recent past. It was 124.7% at the end of 2001, 113.6% at the end of 2000, 133.4% at year-end 1999 and 119.1% at the end of 1998. 

Overall, loan quality has been improving even as the size of the loan portfolio has grown. At the end of 2001 the ratio of non- performing loans to total loans had fallen to 1.69%, compared with 1.94% at the end of 2000, 1.96% at the end of 1999 and 2.69% at year-end 1998. Maintaining good asset quality has been an achievement, in view of the recessionary environment which prevailed during 2001. 

## Restructuring Liabilities and Capital >. 

Management also restructured the Corporation’s liabilities during 2001, adding fixed rate borrowings and deposits with terms ranging from two to five years. These changes have reduced the Corporation’s exposure to interest rate risk in the future. 

During 2001 Management also strengthened the capital struc- ture of First BanCorp by issuing $103.5 million in preferred stock, the largest issue of its type ever undertaken in Puerto Rico. Management closed an additional $92 million issue of preferred stock in early 2002. Although assets grew substan- tially during 2001 these transactions helped the Corporation to maintain a solid and prudent capital structure. As of December 31, 2001 the core capital ratio was 7.49% and the risk based capital ratio was 14.50%. 

Maintaining good asset quality has been an achievement, in view of the recessionary environment which prevailed during 2001. 

