computer programs and capacity, and by offering new prod- ucts tailored to commercial clients. During 2001 the Corporation continued this transition as commercial loans grew $557 million to $2.1 billion while con- sumer lending remained roughly constant at $1.15 billion. In the five years between the end of 1996 and the end of 2001 consumer loans declined from 61.0% to 26.7% of the Corporation’s loan portfolio, while commercial loans increased from 23.3% to 49.8%. Residential mortgage loans increased from 15.7% to 23.5%. In absolute terms, commercial loans grew from $0.4 billion in 1996 to $2.1 billion in 2001. The inauguration of the FirstBank Insurance Agency in 2001 will lead to further diversification. It will lay the groundwork for greater fee income in the future, and complement the First Securities operation in providing a greater variety of services for clients.These changes are transforming First BanCorp into a full service financial holding company which emphasizes both commercial and consumer lending. During 2001 First BanCorp continued its outstanding record in cost control. The Corporation had an efficiency ratio of 41.81%, considerably better than the 46.95% of 2000. These results compare favorably with others in the industry. Operating expenses rose by 6.9% in 2001, from $113.0 million to $120.9 million. Improvements in data processing technology continued to move forward in 2001. Having introduced internet banking in 2000, the Corporation will be advancing the process of branch automation by mechanizing clerical functions such as opening accounts and handling documents.Teller functions were previ- ously streamlined in 2000. During 2002 the Corporation will also add a larger, more modern mainframe computer which will triple previous computing capacity. These changes will allow the Corporation to continue growing and improving customer service. The Corporation opened one strategically important branch in 2001 and plans another opening during 2002. Both these branches are located in shopping centers in the San Juan met- ropolitan area. In addition, First BanCorp is beginning a three year total quality campaign to improve service quality in all areas of the institution. These changes will make the branch network more efficient and serve clients better. Despite economic growth on the island slowing, Management has mostly maintained the hard-won gains in asset quality Asset Quality >. Cost Control and Restructuring >. 0 12 First BanCorp.> 2001