First BanCorp Notes to Consolidated Financial Statements Note 1 - Nature of Business >. Note 2 - Summary of Significant Accounting Policies >. Principles of consolidation Statement of cash flows Investment securities First BanCorp (the Corporation) is a financial holding company offering a full range of financial services. First BanCorp is subject to the Federal Bank Holding Company Act and to the regulations, supervision, and examination of the Federal Reserve Board. FirstBank Puerto Rico (FirstBank), the Corporation’s wholly owned bank subsidiary, is a commercial bank chartered under the laws of the Commonwealth of Puerto Rico. Its main office is located in San Juan, Puerto Rico, and it has 44 full-service banking branches in Puerto Rico and four in the U.S.Virgin Islands. It also has loan origination offices in Puerto Rico focusing on consumer loans and residential mortgage loans. In addi- tion, through its wholly-owned subsidiaries, FirstBank operates other offices in Puerto Rico specializing in small personal loans, finance leases and vehicle rental. Early in the year 2000, the Bank began offering brokerage services in selected branches through an alliance with a national brokerage house in Puerto Rico. The Bank is subject to the supervision, examination and regulation of the Office of the Commissioner of Financial Institutions of Puerto Rico and the Federal Deposit Insurance Corporation (FDIC), which insures its deposits through the Savings Association Insurance Fund (SAIF). Effective August 2001, the Corporation entered into the insurance business through a wholly owned subsidiary, FirstBank Insurance Agency. This sub- sidiary is subject to the supervision, examination and regulation of the Office of the Commissioner of Insurance of Puerto Rico. The accounting and reporting policies of the Corporation and its sub- sidiaries conform with generally accepted accounting principles, and, as such, include amounts based on judgments, estimates and assumptions made by Management that affect the reported amounts of assets and lia- bilities and contingent assets and liabilities at the date of the financial state- ments and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Following is a description of the more significant accounting policies fol- lowed by the Corporation: The consolidated financial statements include the accounts of the Corporation and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and short-term money market instruments with original maturities of 90 days or less. The Corporation classifies its investments in debt and equity securities into one of three categories: Held to maturity - Securities which the entity has the positive intent and abil- ity to hold to maturity. These securities are carried at amortized cost. First BanCorp.> 2001 0 53