First BanCorp on Monday said it rejected a takeover offer from Doral Financial Corp. last week in favor of a deal with the Treasury Department to bolster its balance sheet by raising capital.

Doral Financial on Dec. 2 submitted an unsolicited bid worth nearly $96 million for the struggling, San Juan, Puerto Rico-based First Bancorp, whose board deemed the offer "not in the best interest" of shareholders, First Bancorp said in a press release.

Doral, also of San Juan, offered First Bancorp 30 cents per share, a 15% premium to its closing share price on Friday.

First Bancorp - under orders to raise capital -- announced an agreement on Thursday with the Treasury that will enable it to do that by selling $350 million of stock; the Treasury, in turn, agreed to convert its $424 million of preferred shares in the company into common shares.

The recession has been longer and deeper in Puerto Rico than it has been in most parts of the mainland United States, given the region's sensitivity to the real estate and employment markets. That's put pressure on the island's ailing banks to consolidate.

A merger between Doral and First BanCorp would have made strategic sense, given the growing competitive threat posed by the region's top player, Popular Inc. Popular, with 212 branches, now controls about 37% of the island's deposits after buying the failed Westernbank last year, according to the Federal Deposit Insurance Corp.

First Bancorp is No. 2 by deposit share, at 20.79%. It has 48 branches and lost $75 million last quarter. Doral, with 34 branches in Puerto Rico, is third in deposits, with a 9.67% share. It lost $19 million last quarter.

First Bancorp has $17 billion of assets, and Doral has $9 billion.

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