W Holding Company - History

History

Westernbank was founded on March 1, 1958 under the name Western Federal Savings and Loan Association of Puerto Rico in the western town of Mayagüez by Miguel A. García Méndez, a local statesman, businessman and experienced banker. With initial deposits reaching $250,000, the bank grew at a rapid rate, quadrupling its deposits and assets in less than 9 months. By the early 1960s, Westernbank had expanded to the western and southwestern region of the island, with bank branches in the towns of Aguadilla, San Germán and Cabo Rojo.

Between 1978 and 1981, when the United States and Puerto Rican economies were suffering from high inflation rates, local banks were facing losses due to an increasing number in bankruptcies and unemployment rates, and some were forced to either close, merge, or sell portions of their assets. To counter these economic conditions, Westernbank applied conservative policies and banking practices that included tightening its credit lending criteria, assuming stricter loan to value ratios, favoring collateralized loans, and restructuring its assets and liabilities. In 1988, facing an impending recession in the US and Puerto Rico, Westernbank began applying the same conservative measures, to reduce inherent risks and protect the bank’s capital position. During the following years, between 1989 and 1990, private and public savings banks on the island, with the exception of Westernbank, faced losses, restated their financial statements, and saw significant decreases in their stock prices.

Westernbank lending policies and practices focused mainly on mortgage residential loans rather than commercial and construction loans because, although commercial and construction loans offer a much higher rate of return, mortgage loans offer a much smaller risk of default. However, in 1994, after a revision of state bank laws, the company decided to diversify its loan portfolio and services by changing its charter to become a full-service commercial bank. This allowed the bank to experience significant increases in customers, bank branches, loans (which now included commercial and construction loans), and ultimately revenue, doubling its financial size every two and a half years without the need of consolidations or mergers during the 1990s.

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