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10 Bank Stocks Trading Below Book Value

First Bancorp (FBP) of San Juan, Puerto Rico was trading for just 0.2 times tangible book value on Thursday, when shares closed at $1.06, down 54% year-to-date.

TARP Status: The company owes $400 million in TARP money and has missed three dividend payments on government-held preferred shares since August.

Capital: FirstBancorp was ordered on June 4 by the Federal Reserve to submit a plan within 30 days to raise sufficient capital to maintain Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios of 8%, 10% and 12%, respectively. These ratios normally need to be at least 5%, 6% and 10% for most banks to be considered well-capitalized.

While FirstBancorp's capital ratios as of March 31 exceeded those required by the Federal Reserves's order, the order states that if the ratios slip below the required amounts, the company will be required to submit a plan for "the sale, merger, or liquidation of the bank" within 45 days, unless additional capital becomes available.

The company announced on June 4 that it was in "advanced discussions" with Treasury officials to convert the $400 million in TARP preferred shares to common shares, and was also planning to raise $500 in common equity.

Earnings: In late April, the company reported a net loss of $107 million, or $1.22 a share, for the first quarter after losing a total of $275 million, or $3.48 a share, in 2009, as charge-offs (loan losses) mainly in FirstBancorp's construction and consumer loan portfolios took their toll.

Asset Quality: Nonperforming assets -- including nonaccrual loans and repossessed real estate loans, less any government-guaranteed balances -- comprised 10.28% of total assets as of March 31 according to SNL. The annualized ratio of net charge-offs to average loans for the first quarter was 3.65%. Loan loss reserves covered 4.09% of total loans as of March 31, staying "ahead of the pace" of charge-offs.

Prospects: The massive dilution on the table from the company's plans to convert the TARP preferred to common and raise additional common equity are reflected in the low valuation. Investors should steer clear until and if First Bancorp's capital initiatives are completed.

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