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LOAN PORTFOLIO | 9 Months Ended
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Sep. 30, 2018
LOAN PORTFOLIO | NOTE 7 – LOANS HELD FOR INVESTMENT The following provides information about the loan portfolio held for investment:
|  | As of September 30, |  | As of December 31,
|  | 2018 |  | 2017
(In thousands) |
Residential mortgage loans, mainly secured by first mortgages | $ | 3,207,981 |  | $ | 3,290,957
Commercial loans: |  |  |  |  |
Construction loans (1) |  | 82,862 |  |  | 111,397
Commercial mortgage loans (1) |  | 1,506,502 |  |  | 1,614,972
Commercial and Industrial loans (1)(2) |  | 2,068,256 |  |  | 2,083,253
Total commercial loans |  | 3,657,620 |  |  | 3,809,622
Finance leases |  | 311,180 |  |  | 257,462
Consumer loans |  | 1,540,172 |  |  | 1,492,435
Loans held for investment |  | 8,716,953 |  |  | 8,850,476
Allowance for loan and lease losses |  | (200,563) |  |  | (231,843)
Loans held for investment, net | $ | 8,516,390 |  | $ | 8,618,633
(1) | During the first nine months of 2018, the Corporation transferred $74.4 million (net of fair value write-downs of $22.2 million recorded at the time of transfers) in non-performing loans to held for sale. Loans transferred to held for sale consisted of non-performing commercial mortgage loans totaling $39.6 million (net of fair value write-downs of $13.8 million), non-performing construction loans totaling $33.0 million (net of fair value write-downs of $6.7 million) and non-performing commercial and industrial loans totaling $1.8 million (net of fair value write-downs of $1.7 million). Approximately $27.2 million of the commercial mortgage loans transferred to loan held for sale were eventually sold during the second quarter and third quarters of 2018.
(2) | As of September 30, 2018 and December 31, 2017, $802.7 million and $833.5 million, respectively, of commercial loans were secured by real estate but are not dependent upon the real estate for repayment.
Loans held for investment on which accrual of interest income had been discontinued were as follows:
|  | As of |  | As of
| September 30, |  | December 31,
(In thousands) | 2018 |  | 2017
Non-performing loans: |  |  |  |  |
| Residential mortgage | $ | 156,685 |  | $ | 178,291
| Commercial mortgage (1) |  | 117,397 |  |  | 156,493
| Commercial and Industrial (1) |  | 34,551 |  |  | 85,839
| Construction: |  |  |  |  |
| Land (1) |  | 6,922 |  |  | 15,026
| Construction-commercial (1) |  | - |  |  | 35,100
| Construction-residential |  | 2,149 |  |  | 1,987
| Consumer: |  |  |  |  |
| Auto loans |  | 12,258 |  |  | 10,211
| Finance leases |  | 1,443 |  |  | 1,237
| Other consumer loans |  | 7,963 |  |  | 5,370
Total non-performing loans held for investment (2)(3)(4) | $ | 339,368 |  | $ | 489,554
(1) | During the first nine months of 2018, the Corporation transferred $74.4 million (net of fair value write-downs of $22.2 million recorded at the time of transfers) in non-performing loans to held for sale. Loans transferred to held for sale consisted of non-performing commercial mortgage loans totaling $39.6 million (net of fair value write-downs of $13.8 million), non-performing construction loans totaling $33.0 million (net of fair value write-downs of $6.7 million) and non-performing commercial and industrial loans totaling $1.8 million (net of fair value write-downs of $1.7 million). Approximately $27.2 million of the commercial mortgage loans transferred to loan held for sale were eventually sold during the second quarter and third quarters of 2018.
(2) | Excludes $44.2 million and $8.3 million of non-performing loans held for sale as of September 30, 2018 and December 31, 2017, respectively.
(3) | Amount excludes purchased-credit impaired (“PCI”) loans with a carrying value of approximately $149.1 million and $158.2 million as of September 30, 2018 and December 31, 2017, respectively, primarily mortgage loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014, as further discussed below. These loans are not considered non-performing due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using an estimated cash flow analysis.
(4) | Non-performing loans exclude $510.8 million and $374.7 million of Troubled Debt Restructuring (“TDR”) loans that are in compliance with modified terms and in accrual status as of September 30, 2018 and December 31, 2017, respectively.
During the first quarter of 2018, the Corporation transferred to held for sale several non-performing commercial and construction loans. The aggregate recorded investment in these loans of $66.9 million was written down to $57.2 million, which resulted in charge-offs of $9.7 million, of which $4.1 million was taken against previously-established reserves for loan losses, resulting in a charge to the provision for loan and lease losses of $5.6 million in the first quarter of 2018. Subsequent to the end of the first quarter of 2018, the Corporation sold $27.2 million of the loans transferred to held for sale in separate transactions and a $7.7 million non-performing construction loan held for sale that resulted in the recognition of an additional aggregate net l oss of $2.7 million recorded as part of “other non-interest income” in the consolidated statement of income (loss). In addition, during the third quarter of 2018, the Corporation transferred to held for sale several non-perfo rming commercial and construction loans. The aggregate recorded investment in these loans of $29.7 million was written down to $17.2 million, which resulted in charge-offs of $12.5 million, of which $2.4 million was taken against previously established res erves for loan losses, resulting in a charge to the provision for loan and lease losses of $10.1 million in the third quarter of 2018. Loans in Process of Foreclosure As of September 30, 2018, the recorded investment of residential mortgage loans collateralized by residential real estate property that are in the process of foreclosure amounted to $154.9 million, including $23.5 million of loans insured by the FHA or guaranteed by the Veterans Administration (“VA”), and $20.0 million of PCI loans. The Corporation commences the foreclosure process on residential real estate loans when a borrower becomes 120 days delinquent in accordance with the guidelines of the Consu mer Financial Protection Bureau (“CFPB”). Foreclosure procedures and timelines vary depending on whether the property is located in a judicial or non-judicial state. Judicial states (i.e., Puerto Rico, Florida and the USVI) require the foreclosure to be pr ocessed through the state’s court while foreclo sure in non-judicial states (i.e., the BVI) is processed without court intervention. Foreclosure timelines v ary according to state law and investor g uidelines. Occasionally, foreclosures may be delayed due to, among other reasons, mandatory mediations, bankruptcy, court delays and title issues.
The Corporation’s aging of the loans held for investment portfolio is as follows:
|  |  |  |  |  |  |  |  | Purchased Credit-Impaired Loans |  |  |  |  |  |  |  |
| 30-59 Days Past Due |  | 60-89 Days Past Due |  | 90 days or more Past Due (1)(2)(3) |  | Total Past Due |  |  |  |  | Total loans held for investment |  | 90 days past due and still accruing (1)(2)(3)
As of September 30, 2018 |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  | Current |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FHA/VA government-guaranteed loans (2) (3) (4) | $ | - |  | $ | 3,206 |  | $ | 107,869 |  | $ | 111,075 |  | $ | - |  | $ | 39,696 |  | $ | 150,771 |  | $ | 107,869
Other residential mortgage loans (2)(4) |  | - |  |  | 64,015 |  |  | 171,893 |  |  | 235,908 |  |  | 145,203 |  |  | 2,676,099 |  |  | 3,057,210 |  |  | 15,208
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial loans |  | 1,729 |  |  | 392 |  |  | 38,998 |  |  | 41,119 |  |  | - |  |  | 2,027,137 |  |  | 2,068,256 |  |  | 4,447
Commercial mortgage loans (4) |  | - |  |  | 1,192 |  |  | 120,456 |  |  | 121,648 |  |  | 3,919 |  |  | 1,380,935 |  |  | 1,506,502 |  |  | 3,059
Construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land (4) |  | - |  |  | 51 |  |  | 6,922 |  |  | 6,973 |  |  | - |  |  | 14,331 |  |  | 21,304 |  |  | -
Construction-commercial |  | - |  |  | 1,089 |  |  | - |  |  | 1,089 |  |  | - |  |  | 52,881 |  |  | 53,970 |  |  | -
Construction-residential |  | - |  |  | - |  |  | 2,149 |  |  | 2,149 |  |  | - |  |  | 5,439 |  |  | 7,588 |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Auto loans |  | 35,122 |  |  | 7,047 |  |  | 12,258 |  |  | 54,427 |  |  | - |  |  | 840,801 |  |  | 895,228 |  |  | -
Finance leases |  | 5,451 |  |  | 1,839 |  |  | 1,443 |  |  | 8,733 |  |  | - |  |  | 302,447 |  |  | 311,180 |  |  | -
Other consumer loans |  | 7,773 |  |  | 4,885 |  |  | 11,673 |  |  | 24,331 |  |  | - |  |  | 620,613 |  |  | 644,944 |  |  | 3,710
Total loans held for investment | $ | 50,075 |  | $ | 83,716 |  | $ | 473,661 |  | $ | 607,452 |  | $ | 149,122 |  | $ | 7,960,379 |  | $ | 8,716,953 |  | $ | 134,293
_____________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) | Includes non-performing loans and accruing loans that were contractually delinquent 90 days or more (i.e., FHA/VA guaranteed loans and credit cards). Credit card loans continue to accrue finance charges and fees until charged-off at 180 days.
(2) | It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA, guaranteed by the VA, and other government-insured loans as past-due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $33.9 million of residential mortgage loans insured by the FHA that were over 15 months delinquent, and were no longer accruing interest as of September 30, 2018, taking into consideration the FHA interest curtailment process.
(3) | As of September 30, 2018, includes $75.9 million of defaulted loans collateralizing GNMA securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.
(4) | According to the Corporationʼs delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans, other residential mortgage loans, commercial mortgage loans and land loans past due 30-59 days as of September 30, 2018 amounted to $7.0 million, $108.1 million, $4.2 million and $0.1 million, respectively.
As of December 31, 2017 | 30-59 Days Past Due |  | 60-89 Days Past Due |  | 90 days or more Past Due (1)(2)(3) |  |  |  |  |  |  |  |  |  |  | Total loans held for investment |  | 90 days past due and still accruing (1)(2)(3)
(In thousands) |  |  |  |  | Total Past Due |  |  | Purchased Credit- Impaired Loans |  |  | Current |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FHA/VA government-guaranteed loans (2) (3) (4) | $ | - |  | $ | 6,792 |  | $ | 102,815 |  | $ | 109,607 |  | $ | - |  | $ | 29,332 |  | $ | 138,939 |  | $ | 102,815
Other residential mortgage loans (2)(4) |  | - |  |  | 92,502 |  |  | 193,750 |  |  | 286,252 |  |  | 153,991 |  |  | 2,711,775 |  |  | 3,152,018 |  |  | 15,459
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial loans |  | 8,971 |  |  | 576 |  |  | 88,156 |  |  | 97,703 |  |  | - |  |  | 1,985,550 |  |  | 2,083,253 |  |  | 2,317
Commercial mortgage loans (4) |  | - |  |  | 7,525 |  |  | 163,180 |  |  | 170,705 |  |  | 4,183 |  |  | 1,440,084 |  |  | 1,614,972 |  |  | 6,687
Construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land (4) |  | - |  |  | 124 |  |  | 15,177 |  |  | 15,301 |  |  | - |  |  | 11,630 |  |  | 26,931 |  |  | 151
Construction-commercial |  | - |  |  | - |  |  | 35,100 |  |  | 35,100 |  |  | - |  |  | 41,456 |  |  | 76,556 |  |  | -
Construction-residential |  | - |  |  | 95 |  |  | 1,987 |  |  | 2,082 |  |  | - |  |  | 5,828 |  |  | 7,910 |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Auto loans |  | 57,560 |  |  | 23,783 |  |  | 10,211 |  |  | 91,554 |  |  | - |  |  | 752,777 |  |  | 844,331 |  |  | -
Finance leases |  | 10,549 |  |  | 3,484 |  |  | 1,237 |  |  | 15,270 |  |  | - |  |  | 242,192 |  |  | 257,462 |  |  | -
Other consumer loans |  | 10,776 |  |  | 5,052 |  |  | 9,361 |  |  | 25,189 |  |  | - |  |  | 622,915 |  |  | 648,104 |  |  | 3,991
Total loans held for investment | $ | 87,856 |  | $ | 139,933 |  | $ | 620,974 |  | $ | 848,763 |  | $ | 158,174 |  | $ | 7,843,539 |  | $ | 8,850,476 |  | $ | 131,420
____________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) | Includes non-performing loans and accruing loans that were contractually delinquent 90 days or more (i.e., FHA/VA guaranteed loans and credit cards). Credit card loans continue to accrue finance charges and fees until charged-off at 180 days.
(2) | It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA, guaranteed by the VA, and other government-insured loans as past-due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $29.9 million of residential mortgage loans insured by the FHA that were over 15 months delinquent, and were no longer accruing interest as of December 31, 2017, taking into consideration the FHA interest curtailment process.
(3) | As of December 31, 2017, includes $62.1 million of defaulted loans collateralizing GNMA securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.
(4) | According to the Corporationʼs delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans, other residential mortgage loans, commercial mortgage loans, and land loans past due 30-59 days as of December 31, 2017 amounted to $6.0 million, $224.0 million, $9.0 million, and $2.5 million, respectively.
The Corporation’s credit quality indicators by loan type as of September 30, 2018 and December 31, 2017 are summarized below:
|  | Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
|  | Substandard |  | Doubtful |  | Loss |  | Total Adversely Classified (1) |  | Total Portfolio
September 30, 2018 |  |  |  |
(In thousands) |  |
Commercial mortgage | $ | 262,519 |  | $ | 7,927 |  | $ | - |  | $ | 270,446 |  | $ | 1,506,502
Construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  | 5,658 |  |  | - |  |  | - |  |  | 5,658 |  |  | 21,304
Construction - commercial |  | 3,458 |  |  | - |  |  | - |  |  | 3,458 |  |  | 53,970
Construction - residential |  | 1,194 |  |  | - |  |  | - |  |  | 1,194 |  |  | 7,588
Commercial and Industrial |  | 96,993 |  |  | 4,659 |  |  | 394 |  |  | 102,046 |  |  | 2,068,256
|  | Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
|  | Substandard |  | Doubtful |  | Loss |  | Total Adversely Classified (1) |  | Total Portfolio
December 31, 2017 |  |  |  |
(In thousands) |  |
Commercial mortgage | $ | 257,503 |  | $ | 4,166 |  | $ | - |  | $ | 261,669 |  | $ | 1,614,972
Construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  | 15,971 |  |  | 490 |  |  | - |  |  | 16,461 |  |  | 26,931
Construction - commercial |  | 35,100 |  |  | - |  |  | - |  |  | 35,100 |  |  | 76,556
Construction - residential |  | 1,987 |  |  | - |  |  | - |  |  | 1,987 |  |  | 7,910
Commercial and Industrial |  | 154,416 |  |  | 3,854 |  |  | 676 |  |  | 158,946 |  |  | 2,083,253
_________ |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) | Excludes non-performing loans held for sale of $44.2 million ($12.4 million commercial mortgage, $30.0 million construction-commercial, and $1.8 million construction-land) and $8.3 million (construction-land) as of September 30, 2018 and December 31, 2017, respectively.
The Corporation considers a loan as adversely classified if its risk rating is Substandard, Doubtful or Loss. These categories are defined as follows: Substandard – A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sus tain some loss if the deficiencies are not corrected. Doubtful – Doubtful classifications have all of the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full highly q uestionable and improbable, on the basis of currently kno wn facts, conditions and values. A Doubtful classification may be appropriate in cases where significant risk exposures are perceived, but l oss cannot be determined because of specific reasonable pen ding factors, which may strengthen the credit in the near term. Loss – Assets classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the ass et has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this asset even though partial recovery may occur in the future. There is little or no prospect for near term improvement and no realistic strengthening action of significance pendin g. The Corporation periodically reviews its loans classification to evaluate if they are properly classified, and to determine impairment, if any. The frequency of these reviews will depend on the amount of the a ggregate outstanding debt, and the risk rating classification of the obligor. In addition, during the renewal and annual review process of applicable credit facilities, the Corporation evaluates the corresponding loan grades. The Corporation has a Loan Rev iew Group that reports directly to the Corporation’s Risk Management Committee and administratively to the Chief Risk Officer, which performs annual comprehensive credit process reviews of the Bank’s commercial portfolios. This group evaluates the credit r isk profile of portfolios, including the assessment of the risk rating representative of the current credit quality of the loans, and the evaluation of collateral documentation. The monitoring performed by this group contributes to the assessment of compliance with c redit policies and underwriting standards, the determination of the current level of credit risk, the evaluation of the effectiveness of the credit management process and the identification of control deficiencies that may arise in the credit-granting process. Based on its findings, the L oan Review Group recommends corrective actions, if necessary, that help in maintaining a sound credit process. The Loan Review Group reports the results of the credit process reviews to the Risk Management Committee of the Corporation’s Board of Directors.
|  | Consumer Credit Exposure - Credit Risk Profile Based on Payment Activity
|  | Residential Real Estate |  | Consumer
September 30, 2018 | FHA/VA/ Guaranteed (1) |  | Other residential loans |  | Auto |  | Finance Leases |  | Other Consumer
(In thousands) |  |
Performing | $ | 150,771 |  | $ | 2,755,322 |  | $ | 882,970 |  | $ | 309,737 |  | $ | 636,981
Purchased Credit-Impaired (2) |  | - |  |  | 145,203 |  |  | - |  |  | - |  |  | -
Non-performing |  | - |  |  | 156,685 |  |  | 12,258 |  |  | 1,443 |  |  | 7,963
Total | $ | 150,771 |  | $ | 3,057,210 |  | $ | 895,228 |  | $ | 311,180 |  | $ | 644,944
(1) | It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA, guaranteed by the VA, and other government-insured loans as 90 days past-due loans and still accruing as opposed to non-performing loans since the principal repayment is insured. This balance includes $33.9 million of residential mortgage loans insured by the FHA that were over 15 months delinquent, and were no longer accruing interest as of September 30, 2018, taking into consideration the FHA interest curtailment process.
(2) | PCI loans are excluded from non-performing statistics due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analyses.
|  | Consumer Credit Exposure - Credit Risk Profile Based on Payment Activity
|  |  | Residential Real Estate |  | Consumer
December 31, 2017 | FHA/VA/ Guaranteed (1) |  | Other residential loans |  | Auto |  | Finance Leases |  | Other Consumer
(In thousands) |  |
Performing | $ | 138,939 |  | $ | 2,819,736 |  | $ | 834,120 |  | $ | 256,225 |  | $ | 642,734
Purchased Credit-Impaired (2) |  | - |  |  | 153,991 |  |  | - |  |  | - |  |  | -
Non-performing |  | - |  |  | 178,291 |  |  | 10,211 |  |  | 1,237 |  |  | 5,370
Total | $ | 138,939 |  | $ | 3,152,018 |  | $ | 844,331 |  | $ | 257,462 |  | $ | 648,104
(1) | It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA, guaranteed by the VA, and other government-insured loans as 90 days past-due loans and still accruing as opposed to non-performing loans since the principal repayment is insured. This balance includes $29.9 million of residential mortgage loans insured by the FHA that were over 15 months delinquent, and were no longer accruing interest as of December 31, 2017, taking into consideration the FHA interest curtailment process.
(2) | PCI loans are excluded from non-performing statistics due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analyses.
The following tables present information about impaired loans held for investment, excluding PCI loans, which are reported separately as discussed below:
Impaired Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | Impaired Loans |  |  |  |  |  |  |  |  |
|  | Impaired Loans - With a Related Specific Allowance |  | With No Related Specific Allowance |  | Impaired Loans Total
| Recorded Investment |  | Unpaid Principal Balance |  | Related Specific Allowance |  | Recorded Investment |  | Unpaid Principal Balance |  | Recorded Investment |  | Unpaid Principal Balance |  | Related Specific Allowance
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
As of September 30, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FHA/VA-Guaranteed loans | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | -
Other residential mortgage loans |  | 291,419 |  |  | 321,120 |  |  | 18,482 |  |  | 117,375 |  |  | 159,220 |  |  | 408,794 |  |  | 480,340 |  |  | 18,482
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage loans |  | 169,787 |  |  | 184,019 |  |  | 17,044 |  |  | 73,433 |  |  | 79,245 |  |  | 243,220 |  |  | 263,264 |  |  | 17,044
Commercial and Industrial loans |  | 62,361 |  |  | 74,519 |  |  | 10,798 |  |  | 34,793 |  |  | 52,776 |  |  | 97,154 |  |  | 127,295 |  |  | 10,798
Construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  | 4,972 |  |  | 5,872 |  |  | 750 |  |  | 160 |  |  | 337 |  |  | 5,132 |  |  | 6,209 |  |  | 750
Construction-commercial |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Construction-residential |  | 809 |  |  | 942 |  |  | 156 |  |  | 956 |  |  | 1,531 |  |  | 1,765 |  |  | 2,473 |  |  | 156
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Auto loans |  | 18,623 |  |  | 18,623 |  |  | 3,664 |  |  | 269 |  |  | 269 |  |  | 18,892 |  |  | 18,892 |  |  | 3,664
Finance leases |  | 1,372 |  |  | 1,372 |  |  | 122 |  |  | - |  |  | - |  |  | 1,372 |  |  | 1,372 |  |  | 122
Other consumer loans |  | 9,761 |  |  | 10,498 |  |  | 2,297 |  |  | 1,920 |  |  | 2,281 |  |  | 11,681 |  |  | 12,779 |  |  | 2,297
| $ | 559,104 |  | $ | 616,965 |  | $ | 53,313 |  | $ | 228,906 |  | $ | 295,659 |  | $ | 788,010 |  | $ | 912,624 |  | $ | 53,313
|  |  |  |  |  |  |  |  |  | Impaired Loans |  |  |  |  |  |  |  |  |
|  | Impaired Loans - With a Related Specific Allowance |  | With No Related Specific Allowance |  | Impaired Loans Total
| Recorded Investment |  | Unpaid Principal Balance |  | Related Specific Allowance |  | Recorded Investment |  | Unpaid Principal Balance |  | Recorded Investment |  | Unpaid Principal Balance |  | Related Specific Allowance
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
As of December 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FHA/VA-Guaranteed loans | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | -
Other residential mortgage loans |  | 316,616 |  |  | 349,284 |  |  | 22,086 |  |  | 116,818 |  |  | 154,048 |  |  | 433,434 |  |  | 503,332 |  |  | 22,086
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage loans |  | 87,814 |  |  | 124,084 |  |  | 9,783 |  |  | 65,100 |  |  | 100,612 |  |  | 152,914 |  |  | 224,696 |  |  | 9,783
Commercial and Industrial loans |  | 90,008 |  |  | 112,005 |  |  | 12,359 |  |  | 28,292 |  |  | 31,254 |  |  | 118,300 |  |  | 143,259 |  |  | 12,359
Construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  | 11,865 |  |  | 19,973 |  |  | 1,402 |  |  | 48 |  |  | 49 |  |  | 11,913 |  |  | 20,022 |  |  | 1,402
Construction-commercial |  | 35,101 |  |  | 38,595 |  |  | 560 |  |  | - |  |  | - |  |  | 35,101 |  |  | 38,595 |  |  | 560
Construction-residential |  | 252 |  |  | 355 |  |  | 55 |  |  | - |  |  | - |  |  | 252 |  |  | 355 |  |  | 55
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Auto loans |  | 22,338 |  |  | 22,338 |  |  | 3,665 |  |  | 267 |  |  | 267 |  |  | 22,605 |  |  | 22,605 |  |  | 3,665
Finance leases |  | 2,184 |  |  | 2,184 |  |  | 104 |  |  | - |  |  | - |  |  | 2,184 |  |  | 2,184 |  |  | 104
Other consumer loans |  | 11,084 |  |  | 11,830 |  |  | 1,396 |  |  | 2,521 |  |  | 3,688 |  |  | 13,605 |  |  | 15,518 |  |  | 1,396
| $ | 577,262 |  | $ | 680,648 |  | $ | 51,410 |  | $ | 213,046 |  | $ | 289,918 |  | $ | 790,308 |  | $ | 970,566 |  | $ | 51,410
| Average Recorded Investment |  | Interest Income on Accrual Basis |  | Interest Income on Cash Basis |  | Total Interest Income
(In thousands) |  |  |  |  |  |  |  |  |  |  |
For the quarter ended September 30, 2018 |  |  |  |  |  |  |  |  |  |  |
FHA/VA-Guaranteed loans | $ | - |  | $ | - |  | $ | - |  | $ | -
Other residential mortgage loans |  | 411,393 |  |  | 4,641 |  |  | 410 |  |  | 5,051
Commercial: |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage loans |  | 244,802 |  |  | 2,198 |  |  | 656 |  |  | 2,854
Commercial and Industrial loans |  | 98,903 |  |  | 557 |  |  | 2 |  |  | 559
Construction: |  |  |  |  |  |  |  |  |  |  |
Land |  | 5,204 |  |  | 23 |  |  | 5 |  |  | 28
Construction-commercial |  | - |  |  | - |  |  | - |  |  | -
Construction-residential |  | 1,766 |  |  | - |  |  | - |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |
Auto loans |  | 19,479 |  |  | 362 |  |  | - |  |  | 362
Finance leases |  | 1,444 |  |  | 27 |  |  | - |  |  | 27
Other consumer loans |  | 11,925 |  |  | 274 |  |  | 53 |  |  | 327
| $ | 794,916 |  | $ | 8,082 |  | $ | 1,126 |  | $ | 9,208
| Average Recorded Investment |  | Interest Income on Accrual Basis |  | Interest Income on Cash Basis |  | Total Interest Income
(In thousands) |  |  |  |  |  |  |  |  |  |  |
For the quarter ended September 30, 2017 |  |  |  |  |  |  |  |  |  |  |
FHA/VA-Guaranteed loans | $ | - |  | $ | - |  | $ | - |  | $ | -
Other residential mortgage loans |  | 427,858 |  |  | 4,409 |  |  | 402 |  |  | 4,811
Commercial: |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage loans |  | 158,438 |  |  | 764 |  |  | 85 |  |  | 849
Commercial and Industrial loans |  | 110,184 |  |  | 454 |  |  | 174 |  |  | 628
Construction: |  |  |  |  |  |  |  |  |  |  |
Land |  | 14,634 |  |  | 122 |  |  | 9 |  |  | 131
Construction-commercial |  | 35,520 |  |  | - |  |  | - |  |  | -
Construction-residential |  | 252 |  |  | - |  |  | - |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |
Auto loans |  | 24,049 |  |  | 462 |  |  | - |  |  | 462
Finance leases |  | 2,354 |  |  | 43 |  |  | - |  |  | 43
Other consumer loans |  | 14,268 |  |  | 388 |  |  | 40 |  |  | 428
| $ | 787,557 |  | $ | 6,642 |  | $ | 710 |  | $ | 7,352
| Average Recorded Investment |  | Interest Income on Accrual Basis |  | Interest Income on Cash Basis |  | Total Interest Income
(In thousands) |  |  |  |  |  |  |  |  |  |  |
Nine-month Period Ended September 30, 2018 |  |  |  |  |  |  |  |  |  |  |
FHA/VA-Guaranteed loans | $ | - |  | $ | - |  | $ | - |  | $ | -
Other residential mortgage loans |  | 415,561 |  |  | 13,369 |  |  | 1,080 |  |  | 14,449
Commercial: |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage loans |  | 248,919 |  |  | 2,775 |  |  | 2,038 |  |  | 4,813
Commercial and Industrial loans |  | 102,410 |  |  | 1,438 |  |  | 6 |  |  | 1,444
Construction: |  |  |  |  |  |  |  |  |  |  |
Land |  | 5,260 |  |  | 70 |  |  | 20 |  |  | 90
Construction-commercial |  | - |  |  | - |  |  | - |  |  | -
Construction-residential |  | 1,765 |  |  | - |  |  | - |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |
Auto loans |  | 20,527 |  |  | 1,122 |  |  | - |  |  | 1,122
Finance leases |  | 1,582 |  |  | 84 |  |  | - |  |  | 84
Other consumer loans |  | 12,353 |  |  | 754 |  |  | 127 |  |  | 881
| $ | 808,377 |  | $ | 19,612 |  | $ | 3,271 |  | $ | 22,883
| Average Recorded Investment |  | Interest Income on Accrual Basis |  | Interest Income on Cash Basis |  | Total Interest Income
(In thousands) |  |  |  |  |  |  |  |  |  |  |
Nine-Month Period Ended September 30, 2017 |  |  |  |  |  |  |  |  |  |  |
FHA/VA-Guaranteed loans | $ | - |  | $ | - |  | $ | - |  | $ | -
Other residential mortgage loans |  | 431,741 |  |  | 13,170 |  |  | 1,548 |  |  | 14,718
Commercial: |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage loans |  | 176,757 |  |  | 1,621 |  |  | 287 |  |  | 1,908
Commercial and Industrial loans |  | 112,642 |  |  | 952 |  |  | 211 |  |  | 1,163
Construction: |  |  |  |  |  |  |  |  |  |  |
Land |  | 14,800 |  |  | 358 |  |  | 32 |  |  | 390
Construction-commercial |  | 36,101 |  |  | - |  |  | - |  |  | -
Construction-residential |  | 252 |  |  | - |  |  | - |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |
Auto loans |  | 25,274 |  |  | 1,357 |  |  | - |  |  | 1,357
Finance leases |  | 2,532 |  |  | 140 |  |  | - |  |  | 140
Other consumer loans |  | 14,441 |  |  | 1,027 |  |  | 105 |  |  | 1,132
| $ | 814,540 |  | $ | 18,625 |  | $ | 2,183 |  | $ | 20,808
The following tables show the activity for impaired loans and the related specific reserve for the quarters and nine-month periods ended September 30, 2018 and 2017:
|  |  |  |  |  | Quarter Ended |  | Nine-Month Period Ended
|  |  |  |  |  | September 30, |  | September 30,
|  |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  |  |  | $ | 740,134 |  | $ | 735,625 |  | $ | 790,308 |  | $ | 887,905
Loans determined impaired during the period |  |  |  |  | 119,064 |  |  | 71,884 |  |  | 214,745 |  |  | 110,488
Charge-offs (1)(2) |  |  |  |  | (18,035) |  |  | (6,472) |  |  | (48,455) |  |  | (66,959)
Loans sold, net of charge-offs |  |  |  |  | - |  |  | - |  |  | (4,121) |  |  | (53,245)
Increases to existing impaired loans |  |  |  |  | 128 |  |  | 3,215 |  |  | 7,203 |  |  | 4,454
Foreclosures |  |  |  |  | (8,293) |  |  | (5,657) |  |  | (27,745) |  |  | (36,347)
Loans no longer considered impaired |  |  |  |  | (1,146) |  |  | (542) |  |  | (5,086) |  |  | (3,324)
Loans transferred to held for sale |  |  |  |  | (16,839) |  |  | - |  |  | (74,052) |  |  | -
Paid in full, partial payments and other |  |  |  |  | (27,003) |  |  | (18,794) |  |  | (64,787) |  |  | (63,713)
Balance at end of period |  |  |  | $ | 788,010 |  | $ | 779,259 |  | $ | 788,010 |  | $ | 779,259
(1) | For the quarter ended September 30, 2018, includes charge-offs totaling $12.5 million associated with the $17.2 million in non-performing loans transferred to held for sale in the third quarter of 2018.
(2) | For the nine-month period ended September 30, 2018, includes charge-offs totaling $22.2 million associated with the $74.4 million in non-performing loans transferred to held for sale during the first nine-months of 2018.
|  |  |  |  | Quarter Ended |  | Nine-Month Period Ended
|  |  |  |  | September 30, |  | September 30,
| 2018 | 2017 |  | 2018 | 2017
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Specific Reserve: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  |  |  | $ | 49,514 |  | $ | 40,794 |  | $ | 51,410 |  |  | 64,421
Provision for loan losses |  |  |  |  | 21,821 |  |  | 13,819 |  |  | 50,277 |  |  | 50,014
Net charge-offs |  |  |  |  | (18,022) |  |  | (6,458) |  |  | (48,374) |  |  | (66,280)
Balance at end of period |  |  |  | $ | 53,313 |  | $ | 48,155 |  | $ | 53,313 |  | $ | 48,155
Purchased Credit Impaired Loans (PCI) The Corporation acquired PCI loans accounted for under ASC Topic 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC Topic 310-30”), as part of a transaction that closed on February 27, 2015 in which FirstBank acquired 10 Puerto Rico branches of Doral Bank, and acquired certain assets, including PCI loans, and assumed deposits, through an alliance with Ba nco Popular of Puerto Rico, that was the successful lead bidde r with the FDIC on the failed Doral Bank, as well as other co-bidders. The Corporation also acquired PCI loans in previously completed asset acquisitions that are accounted for under ASC Topic 310-30. These previous transactions include the acquisition fro m Doral Financial in the second quarter of 2014 of all its rights, title and interest in first and second residential mortgages loans in full satisfaction of secured borrowings owed by such entity to FirstBank. Under ASC Topic 310-30, the acquired PCI loans were aggregated into pools based on similar characteristics (i.e., delinquency status and loan terms). Each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Since the loans are accounted for under ASC Topic 310-30, they are not considered non-performing and will continue to have an accretable yield as long as there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The Corporation recognizes additional losses on this portfolio when it is probable that the Corporation will be unable to collect all cash flows expected as of the acquisition date plus additional cash flows expected to be collected arising from changes in estimates after the acquisition date.
The carrying amounts of PCI loans were as follows:
|  | As of
| September 30, |  | December 31,
| 2018 |  | 2017
(In thousands) |  |  |  |  |
Residential mortgage loans | $ | 145,203 |  | $ | 153,991
Commercial mortgage loans |  | 3,919 |  |  | 4,183
Total PCI loans | $ | 149,122 |  | $ | 158,174
Allowance for loan losses |  | (11,354) |  |  | (11,251)
Total PCI loans, net of allowance for loan losses | $ | 137,768 |  | $ | 146,923
The following tables present PCI loans by past due status as of September 30, 2018 and December 31, 2017:
As of September 30, 2018 | 30-59 Days |  | 60-89 Days |  | 90 days or more |  | Total Past Due |  |  |  |  | Total PCI loans |
|  |  |  |  |  | Current |  |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage loans | $ | - |  | $ | 7,823 |  | $ | 28,179 |  | $ | 36,002 |  |  | $ | 109,201 |  | $ | 145,203 |
Commercial mortgage loans |  | - |  |  | - |  |  | 2,960 |  |  | 2,960 |  |  |  | 959 |  |  | 3,919 |
Total (1) | $ | - |  | $ | 7,823 |  | $ | 31,139 |  | $ | 38,962 |  |  | $ | 110,160 |  | $ | 149,122 |
_____________ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(1) | According to the Corporationʼs delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage and commercial mortgage loans are considered past due when the borrower is in arrears two or more monthly payments. PCI residential mortgage loans past due 30-59 days as of September 30, 2018 amounted to $12.3 million. No PCI commercial mortgage loan was 30-59 days past due as of September 30, 2018.
As of December 31, 2017 | 30-59 Days |  | 60-89 Days |  | 90 days or more |  | Total Past Due |  |  |  |  | Total PCI loans |
|  |  |  |  |  | Current |  |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage loans | $ | - |  | $ | 16,600 |  | $ | 26,471 |  | $ | 43,071 |  |  | $ | 110,920 |  | $ | 153,991 |
Commercial mortgage loans |  | - |  |  | 355 |  |  | 2,834 |  |  | 3,189 |  |  |  | 994 |  |  | 4,183 |
Total (1) | $ | - |  | $ | 16,955 |  | $ | 29,305 |  | $ | 46,260 |  |  | $ | 111,914 |  | $ | 158,174 |
(1) | According to the Corporationʼs delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage and commercial mortgage loans are considered past due when the borrower is in arrears two or more monthly payments. PCI residential mortgage loans and commercial mortgage loans past due 30-59 days as of December 31, 2017 amounted to $28.1 million and $0.2 million, respectively.
Initial Fair Value and Accretable Yield of PCI Loans At acquisition of PCI loans, the Corporation estimated the cash fl ows the Cor poration expected to collect on the loans. Under the accounting guidance for PCI loans, the difference between the contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. This difference is neither accreted into income nor recorded on the Corporation’s consolidated statement s of financial condition. The exce ss of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loans, using the effective-yield metho d. Changes in Accretable Y ield of Acquired Loans Subsequent to the acquisition of loans, the Corporation is required to periodically evaluate its estimate of cash flows expected to be collected. These evaluations, performed quarterly, require the continued use of key assumptions and estimates, similar to the initial estimate of fair value. Subsequent changes in the estimated cash flows expected to be collected may result in changes in the accretable yield and non-accretable difference or reclassifications fr om non-accretable yield to accretable yield. Increases in the cash flows expected to be collected will generally result in an increase in interest income over the remaining life of the loan or pool of loans. Decreases in expected cash flows due to further credit deterioration will generally result in an impairment charge recognized in the Corporation’s provision for loan and lease losses, resulting in an increase to the allowance for loan and lease losses. As of September 30, 2018, the reserve related to PC I loans acquired from Doral Financial in 2014 and from Doral Bank in 2015 amounted to $11.4 m illion
Changes in the accretable yield of PCI loans for the quarters and nine-month periods ended September 30, 2018 and 2017 were as follows:
| Quarter Ended |  | Nine-Month Period Ended
| September 30, |  | September 30, |  | September 30, |  | September 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
(In thousands) |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 98,489 |  | $ | 108,971 |  | $ | 103,682 |  | $ | 116,462
Accretion recognized in earnings |  | (2,524) |  |  | (2,656) |  |  | (7,717) |  |  | (8,177)
Reclassification (to) from non-accretable |  | - |  |  | - |  |  | - |  |  | (1,970)
Balance at end of period | $ | 95,965 |  | $ | 106,315 |  | $ | 95,965 |  | $ | 106,315
Changes in the carrying amount of PCI loans accounted for pursuant to ASC Topic 310-30 were as follows:
|  |  | Quarter Ended |  | Nine-Month Period Ended
|  |  | September 30, 2018 |  | September 30, 2017 |  | September 30, 2018 |  | September 30, 2017
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 152,242 |  | $ | 160,368 |  | $ | 158,174 |  | $ | 165,818
Accretion |  | 2,524 |  |  | 2,656 |  |  | 7,717 |  |  | 8,177
Collections |  | (4,835) |  |  | (4,225) |  |  | (12,590) |  |  | (13,327)
Foreclosures |  | (809) |  |  | (1,005) |  |  | (4,179) |  |  | (2,874)
Ending balance | $ | 149,122 |  | $ | 157,794 |  | $ | 149,122 |  | $ | 157,794
Allowance for loan losses |  | (11,354) |  |  | (10,235) |  |  | (11,354) |  |  | (10,235)
Ending balance, net of allowance for loan losses | $ | 137,768 |  | $ | 147,559 |  | $ | 137,768 |  | $ | 147,559
Changes in the allowance for loan losses related to PCI loans were as follows:
|  |  | Quarter Ended |  | Nine-Month Period Ended
|  |  | September 30, 2018 |  | September 30, 2017 |  | September 30, 2018 |  | September 30, 2017
(In thousands) |  |
Balance at beginning of period | $ | 11,354 |  | $ | 9,446 |  | $ | 11,251 |  | $ | 6,857
Provision for loan losses |  | - |  |  | 789 |  |  | 103 |  |  | 3,378
Balance at the end of period |  | $ | 11,354 |  | $ | 10,235 |  | $ | 11,354 |  | $ | 10,235
The outstanding principal balance of PCI loans, including amounts charged off by the Corporation, amounted to $184.2 million as of September 30, 2018 (compared to - $196.6 million as of December 31, 2017). Purchases and Sales of Loans During the first nine months of 201 8, the Corporation purchased $39.3 million of residential mortgage loans as part of a strategic program to purchase ongoing residential mortgage loan production from mortgage bankers in Puerto Rico. In general, the loans purchased from mortgage bankers were conforming residential mortgage loans. Purchases of conforming residential mortga ge loans provide the Corporation the flexibility to retain or sell the loans, including through securitization transactions, depending upon the Corporation’s interest rate risk management strategies. When the Corporation sells such loans, it generally keep s the servicing of the loans. In the ordinary course of business, the Corporation sells residential mortgage loans (originated or purchased) to GNMA and government-sponsored entities (“GSEs”), such as FNMA and FHLMC, which generally securitize the tr ansferred loans into MBS for sale into the secondary market. During the first nine months of 201 8, the Corporation sold $181.2 million of FHA/VA mortgage loans to GNMA, which package d them into MBS. Also, during the first nine months of 2018, t he Corporati on sold approximately $78.9 million of performing residential mor tgage loans to FNMA and FHLMC. The Corporation’s continuing involvement in these sold loans consists primarily of servicing the loans. In addition, the Corporation agree d to repurchase loans when it breaches any of the representations and warranties included in the sale agreement. These representations and warranties are consistent with the GSEs’ selling and servicing guidelines (i.e., ensuring that the mortgage was properly underwritten accor ding to established guidelines). The total amount of loans sold in the secondary market included $9.8 million of seasoned residential mortgage loans sold to FNMA in the second quarter of 2018. For loans sold to GNMA, the Corporation holds an option to rep urchase individual delinquent loans issued on or after January 1, 2003 when the borrower fails to make any payment for three consecutive months. This option gives the Corporation the ability, but not the obligation, to repurchase the delinquent loans at pa r without prior authorization from GNMA. Under ASC Topic 860, Transfer and Servicing, once the Corporation has the unilateral ability to repurchase the delinquent loan, it is considered to have regained effective control over the loan and is required to r ecognize the loan and a corresponding repurchase liability on the balance sheet regardless of the Corporation’s intent to repurchase the loan. As of September 30, 2018 and December 31, 2017, rebooked GNMA delinquent loans included in the residential mortga ge loan portfolio amounted to $75.9 million and $62.1 million, respectively. During the first nine months of 2018 and 2017, the Corporation repurchased, pursuant to its repurchase option with GNMA, $11.0 million and $24.7 million, respectively, of loans previously sold to GNMA. The principal balance of these loans is fully guaranteed and the risk of loss related to the repurchased loans is generally limited to the difference between the delinquent interest payment advance d to GNMA, which is computed at the loan’s interest rate, and the interest payments reimbursed by FHA, which are computed at a pre-determined debenture rate. Repurchases of GNMA loans allow the Corporation, among other things, to maintain acceptable delinq uency rates on outstanding GNMA pools and remain as a seller and servicer in good standing with GNMA. During the fourth quarter of 2017, the Corporation requested and received approval from GNMA for the exclusion of loans in the areas affected by Hurricane s Irma and Maria from calculations of delinquency and default ratios established in the GNMA Mortgage-Backed Securities Guide. The Corporation generally remediates any breach of representations and warranties related to the underwriting of such loans accor ding to established GNMA guidelines without incurring losses. The Corporation’s estimate of losses related to breaches in representations and warranties is zero as of September 30, 2018. Loan sales to FNMA and FHLMC are without recourse in relation to the future performance of the loans. The Corporation repurchased at par loans previously sold to FNMA and FHLMC in the amount of $0.1 million and $27 thousand during the first nine months of 201 8 and 201 7, respectively. The Corporation’s risk of loss with re spect to these loans is also minimal as these repurchased loans are generally performing loans with documentation deficiencies. In addition, during the first nine months of 2018, the Corporation purchased a $21.4 million commercial and industrial loan pa rticipation. Also, during the first nine months of 2018, the Corporation sold a $5.6 million commercial and industrial adversely-classified loan in Puerto Rico (recording a charge-off of $1.3 million), a $9.2 million commercial and industrial loan particip ation in the Florida region, and $34.9 million in non-performing commercial and construction loans in Puerto Rico, as further discussed above. Sale of the Puerto Rico Electric Power Authority (“PREPA”) Loan During the first quarter of 2017, the Corporation received an unsolicited offer and sold its outstanding participation in the PREPA line of credit with a book value of $64 million at the time of sale (principal balance of $75 million), thereby reducing its direct exposure to the Puerto Rico go vernment. A specific reserve of approximately $10.2 million had been allocated to this loan. Gross proceeds of $53.2 million from the sale resulted in an incremental loss of $0.6 million recorded as a charge to the provision for loan and lease losses in the first quarter of 2017. Loan Portfolio Concentration The Corporation’s primary lending area is Puerto Rico. The Corporation’s banking subsidiary, FirstBank, also lends in the USVI and BVI markets and in the United States (principally in the s tate of Florida). Of the total gross loans held for investment of $8.7 billion as of September 30, 201 8, credit risk concentration was approximately 74% in Puerto Rico, 20% in the United States, and 6% in the USVI and BVI. As of September 30, 201 8, the Corporation had $68.5 million outstanding in loans extended to the Puerto Rico government, its municipalities and public corporations, compared to $55.9 million as of December 31, 201 7. Approximately $47.2 million of the outstanding loans as of Sept ember 30, 2018 consisted of loans extended to municipalities in Puerto Rico, which in most cases are supported by assigned property tax revenues. The vast majority of revenues of the municipalities included in the Corporation’s loan portfolio are independ ent of the Puerto Rico central government. These municipalities are required by law to levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and notes. Late in 2015, the GDB and the Municipal Revenue Collection Center (“CRIM”) signed and perfected a deed of trust. Through this deed, the GDB, as fiduciary, is bound to keep the CRIM funds separate from any other deposits and must distribute the funds pursuant to applicable law. The CRIM funds are deposited at another commercial depository financial institution in Puerto Rico. In addition to loans extended to municipalities, the Corporation’s exposure to the Puerto Rico government as of September 30, 2018 included a $6.7 million loan exte nded to a unit of the centr al government, and a $14.7 million loan granted to an affiliate of PREPA. In addition, as of September 30, 2018, the Corporation had $113.3 million in exposure to residential mortgage loans that are guaranteed by the Puerto Rico Housing Finance Authority. Residential mortgage loans guaranteed by the Puerto Rico Housing Finance Authority are secured by the underlying properties and the guarantees serve to cover shortfalls in collateral in the event of a borrower default. The Puerto Rico government guarantees up to $75 million of the principal under the mortgage loan insurance program. According to the most recently-released audited financial statements of the Puerto Rico Housing Financ e Authority, as of June 30, 201 6, the Puer to Rico Housing Finance Authority’s mortgage loan s insurance program covered loans in an aggregate of approximately $5 76 million. The regulations adopted by the Puerto Rico Housing Finance Authority require the establishment of adequate reserves to guarant ee the solvency of the mortgage loan insurance fund. As of June 30, 201 6, the most recent date as to which information is available, the Puerto Rico Housing Finance Authority had a restricted net position for such purposes of approximately $7 7.4 million. The Corporation also has credit exposure to USVI government entities. As of September 30, 201 8, the Corporation had $69.4 million in loans to USVI government instrumentalities and public corporations, compared to $70.4 million as of December 31, 201 7. O f the amount outstanding as of September 30, 201 8, public corporations of the USVI owed approximately $46.1 million and an independent instrumentality of the USVI government owed approximately $23.2 million. As of September 30, 2018, all loans were curr ently performing and up to date on principal and interest payments. The Corporation cannot predict at this time the ultimate effect that the current fiscal situation of the Commonwealth of Puerto Rico, the uncertainty about the debt restructuring process, the various legislative and other measures adopted and to be adopted by the Puerto Rico government and the PROMESA oversight board in response to such fiscal situation, and Hurricane Maria will have on the Puerto Rico economy, t he Corporation’s clients, and the Corporation’s financial condition and results of op erations. Troubled Debt Restructurings The Corporation provides homeownership preservation assistance to its customers through a loss mitigation program in Puerto Rico that is similar to the U.S. government’s Home Affordable Modification Program guidelines. Depending upon the nature of borrowers’ financial condition, restructurings or loan modifications through this program, as well as other restructurings of individual commercial, commercial mortgage, construction, and residential mortgage loans, fit the definition of a TDR. A restructuring of a debt constitutes a TDR if the creditor, for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. Modifications involve changes in one or more of the loan terms that bring a defaulted loan current and provide sustainable affordability. Changes may include, among others, the extension of the maturity of the loan and modifications of the loan rate. As of September 30, 2018, the Corporation’s total TDR loans held for investment of $625.7 million consisted of $340.3 million of residential mortgage loans, $79.7 million of commercial and indus trial loans, $169.2 million of commercial mortgage loans, $5.8 million of construction loans, and $30.7 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $0.4 million as of September 30, 2018. The Cor poration’s loss mitigation programs for residential mortgage and consumer loans can provide for one or a combination of the following: movement of interest past due to the end of the loan, extension of the loan term, deferral of principal payments and reduction of intere st rates either permanently or for a period of up to six years (increasing back in step-up rates). Additionally, in certain cases, the restructuring may provide for t he forgiveness of contractually-due principal or interest. Uncollected interest is added t o the end of the loan term at the time of the restructuring and not recognized as income until collected or when the loan is paid off. These programs are available only to those borrowers who have defaulted, or are likely to default, permanently on their l oan and would lose their homes in a foreclosure action absent some lender concession. Nevertheless, if the Corporation is not reasonably assured that the borrower will comply with its contractual commitment, properties are foreclosed. Prior to permane ntly modifying a loan, the Corporation may enter into trial modifications with certain borrowers. Trial modifications generally represent a six-month period during which the borrower makes monthly payments under the anticipated modified payment terms prior to a formal modification. Upon successful completion of a trial modification, the Corporation and the borrower enter into a permanent modification. TDR loans that are participating in or that have been offered a binding trial modification are classified a s TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification. As of September 30, 2018, the Corporation classified an additional $5.5 million of residential mortgage l oans as TDRs that were participating in or had been offered a trial modification. For the commercial real estate, commercial and industrial, and construction loan portfolios, at the time of a restructuring, the Corporation determines, on a loan-by-loan ba sis, whether a concession was granted for economic or legal reasons related to the borrower’s financial difficulty. Concessions granted for loans in these portfolios could include: reductions in interest rates to rates that are considered below market; extension of repayment schedules and maturity dates beyond original contractual terms; waivers of borrower covenants; forgiveness of principal or interest; or other c on tractual changes that are considered to be concession s. The Corporation mitigates loan defaults for these loan portfolios through its collection function. The function’s objective is to minimize both early stage delinquencies and losses upon default of loa ns in these portfolios. In the case of the commercial and industrial, commercial mortgage, and construction loan portfolios, the Corporation’s Special Asset Group (“SAG”) focuses on strategies for the accelerated reduction of non-performing assets through note sales, short sales, loss mitigation programs, and sales of OREO. In addition, the Corporation extends, renews, and restructures loans with satisfactory credit profiles. Many commercial loan facilities are structured as lines of credit, which genera lly have one-year terms and, therefore, are required to be renewed annually. Other facilities may be restructured or extended from time to time based upon changes in the borrower’s business needs, use of funds, and timing of completion of projects, and oth er factors. If the borrower is not deemed to have financial difficulties, extensions, renewals, and restructurings are done in the n ormal course of business and not considered concessions, and the loans continue to be recorded as performing.
Selected information on TDR loans held for investment that included the recorded investment by loan class and modification type is summarized in the following tables. This information reflects all TDRs held for investment:
|  | September 30, 2018
| Interest rate below market |  | Maturity or term extension |  | Combination of reduction in interest rate and extension of maturity |  | Forgiveness of principal and/or interest |  | Forbearance Agreement |  | Other (1) |  | Total
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Troubled Debt Restructurings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non - FHA/VA residential mortgage loans | $ | 24,053 |  | $ | 11,496 |  | $ | 245,022 |  | $ | - |  | $ | 158 |  | $ | 59,540 |  | $ | 340,269
Commercial Mortgage loans (2) |  | 4,400 |  |  | 30,980 |  |  | 124,493 |  |  | - |  |  | - |  |  | 9,332 |  |  | 169,205
Commercial and Industrial loans (3) |  | 688 |  |  | 19,963 |  |  | 13,323 |  |  | - |  |  | 4,225 |  |  | 41,512 |  |  | 79,711
Construction loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  | 16 |  |  | 104 |  |  | 2,016 |  |  | - |  |  | - |  |  | 339 |  |  | 2,475
Construction-commercial (4) |  | - |  |  | 3,102 |  |  | - |  |  | - |  |  | - |  |  | 217 |  |  | 3,319
Construction-residential |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Consumer loans - Auto |  | - |  |  | 1,627 |  |  | 11,066 |  |  | - |  |  | - |  |  | 6,199 |  |  | 18,892
Finance leases |  | - |  |  | 116 |  |  | 1,256 |  |  | - |  |  | - |  |  | - |  |  | 1,372
Consumer loans - Other |  | 1,299 |  |  | 1,398 |  |  | 5,772 |  |  | 228 |  |  | - |  |  | 1,780 |  |  | 10,477
Total Troubled Debt Restructurings | $ | 30,456 |  | $ | 68,786 |  | $ | 402,948 |  | $ | 228 |  | $ | 4,383 |  | $ | 118,919 |  | $ | 625,720
(1) | Other concessions granted by the Corporation included deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation, or a combination of the concessions listed in the table.
(2) | Excludes commercial mortgage TDR loans held for sale amounting to $3.6 million as of September 30, 2018.
(3) | Excludes commercial and industrial TDR loans held for sale amounting to $0.9 million as of September 30, 2018.
(4) | Excludes a construction TDR loan held for sale of $27.0 million as of September 30, 2018.
|  | December 31, 2017
| Interest rate below market |  | Maturity or term extension |  | Combination of reduction in interest rate and extension of maturity |  | Forgiveness of principal and/or interest |  | Forbearance Agreement |  | Other (1) |  | Total
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Troubled Debt Restructurings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non - FHA/VA residential mortgage loans | $ | 25,964 |  | $ | 8,318 |  | $ | 267,578 |  | $ | - |  | $ | - |  | $ | 62,070 |  | $ | 363,930
Commercial Mortgage loans |  | 6,563 |  |  | 2,094 |  |  | 31,870 |  |  | - |  |  | - |  |  | 10,285 |  |  | 50,812
Commercial and Industrial loans |  | 2,510 |  |  | 20,648 |  |  | 16,049 |  |  | - |  |  | 6,623 |  |  | 48,282 |  |  | 94,112
Construction loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  | 18 |  |  | 3,941 |  |  | 2,186 |  |  | - |  |  | - |  |  | 331 |  |  | 6,476
Construction-commercial |  | - |  |  | - |  |  | - |  |  | 35,100 |  |  | - |  |  | - |  |  | 35,100
Construction-residential |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 217 |  |  | 217
Consumer loans - Auto |  | - |  |  | 1,347 |  |  | 14,233 |  |  | - |  |  | - |  |  | 7,025 |  |  | 22,605
Finance leases |  | - |  |  | 238 |  |  | 1,946 |  |  | - |  |  | - |  |  | - |  |  | 2,184
Consumer loans - Other |  | 892 |  |  | 2,097 |  |  | 6,891 |  |  | 217 |  |  | - |  |  | 1,686 |  |  | 11,783
Total Troubled Debt Restructurings | $ | 35,947 |  | $ | 38,683 |  | $ | 340,753 |  | $ | 35,317 |  | $ | 6,623 |  | $ | 129,896 |  | $ | 587,219
(1) | Other concessions granted by the Corporation included deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation or a combination of the concessions listed in the table.
| The following table presents the Corporationʼs TDR loans held for investment activity:
|  |  |  | Quarter Ended |  | Nine-Month Period Ended
| September 30, |  | September 30,
|  |  |  | 2018 |  | 2017 |  | 2018 |  | 2017
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance of TDRs |  | $ | 557,196 |  |  | $ | 568,543 |  | $ | 587,219 |  |  | $ | 647,048
New TDRs |  |  | 107,357 |  |  |  | 29,101 |  |  | 164,004 |  |  |  | 83,368
Increases to existing TDRs |  |  | 78 |  |  |  | 2,650 |  |  | 6,924 |  |  |  | 3,404
Charge-offs post modification (1)(2)(3) |  |  | (7,549) |  |  |  | (2,949) |  |  | (25,336) |  |  |  | (26,976)
Sales, net of charge-offs |  |  | - |  |  |  | - |  |  | - |  |  |  | (53,245)
Foreclosures |  |  | (4,898) |  |  |  | (3,564) |  |  | (15,700) |  |  |  | (24,085)
TDR transferred to held for sale, net of charge-offs |  |  | (4,541) |  |  |  | - |  |  | (34,541) |  |  |  | -
Paid-off, partial payments and other |  |  | (21,923) |  |  |  | (7,986) |  |  | (56,850) |  |  |  | (43,719)
Ending balance of TDRs |  | $ | 625,720 |  |  | $ | 585,795 |  | $ | 625,720 |  |  | $ | 585,795
(1) | The quarter ended September 30, 2018 includes charge-offs of $3.4 million associated with $4.5 million in commercial loans transferred to held for sale.
(2) | The nine-month period ended September 30, 2018 includes charge-offs totaling $8.5 million associated with $34.5 in million commercial and construction loans transferred to held for sale.
(3) | The nine-month period ended September 30, 2017 includes a charge-off of $10.7 million related to the sale of the PREPA credit line.
TDR loans are classified as either accrual or nonaccrual loans. Loans in accrual status may remain in accrual status when their contractual terms have bee n modified in a TDR if the loans had demonstrated performance prior to the restructuring and payment in full under the restructured terms is ex pected. Otherwise, loans on non accrual and restructured as a TDR will remain on nonaccrual status until the borrower has proven the ability to pe rform under the modified structure, generally for a minimum of six months, and there is evidence that such payments can, and are likely to, continue as agreed. Performance prior to the restructuring, or significant events that coincide with the restructuri ng, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of the restructuring or after a shorter performance period. If the borrower’s ability to meet the revised paym ent schedule is uncertain, the l oan remains classified as a non accrual loan. Loan modifications increase the Corporation’s interest incom e by returning a non-performing loan to performing status, if applicable, increase cash flows by providing for payments to be made by the borrower, and limit increases in foreclosure and OREO costs. A TDR loan that specifies an interest rate that at the time of the restructuring is greater than or equal to the rate the Corporation is willing to accept for a new loan with c omparable risk m ay not be reported as a TDR, or an impaired loan in the calendar years subsequent to the restructuring, if it is in compliance with its modified terms. The Corporation did not remove any loans from the TDR classification during the first ni ne months of 2018 and 2017, other than a $9.9 million loan refinanced at market terms as the borrower was no longer experiencing financial difficulties and the refinancing does not contain any concession to the borrower. This refinancing was included as pa rt of “paid-off, partial payments and other” in the above table.
The following table provides a breakdown of the TDR loans held for investment by those in accrual and nonaccrual status: |
| As of September 30, 2018
|  | Accrual |  | Nonaccrual (1) |  | Total TDRs
(In thousands) |  |  |  |  |  |  |  |
Non-FHA/VA residential mortgage loans | $ | 270,067 |  | $ | 70,202 |  | $ | 340,269
Commercial Mortgage loans (2) |  | 146,293 |  |  | 22,912 |  |  | 169,205
Commercial and Industrial loans (3) |  | 70,416 |  |  | 9,295 |  |  | 79,711
Construction loans: |  |  |  |  |  |  |  |
Land |  | 1,080 |  |  | 3,939 |  |  | 5,019
Construction-commercial (4) |  | - |  |  | - |  |  | -
Construction-residential |  | - |  |  | 775 |  |  | 775
Consumer loans - Auto | 12,541 |  |  | 6,350 |  |  | 18,891
Finance leases | 1,273 |  |  | 99 |  |  | 1,372
Consumer loans - Other |  | 9,176 |  |  | 1,302 |  |  | 10,478
Total Troubled Debt Restructurings | $ | 510,846 |  | $ | 114,874 |  | $ | 625,720
(1) | Included in non-accrual loans are $20.7 million in loans that were performing under the terms of the restructuring agreement but are reported in nonaccrual status until the restructured loans meet the criteria of sustained payment performance under the revised terms for reinstatement to accrual status and are deemed fully collectible.
(2) | Excludes commercial mortgage TDR loans held for sale amounting to $3.6 million as of September 30, 2018.
(3) | Excludes commercial and industrial TDR loans held for sale amounting to $0.9 million as of September 30, 2018.
(4) | Excludes a construction TDR loan held for sale of $27.0 million as of September 30, 2018.
| As of December 31, 2017
|  | Accrual |  | Nonaccrual (1) |  | Total TDRs
(In thousands) |  |  |  |  |  |  |  |
Non-FHA/VA residential mortgage loans | $ | 280,729 |  | $ | 83,201 |  | $ | 363,930
Commercial Mortgage loans |  | 23,329 |  |  | 27,483 |  |  | 50,812
Commercial and Industrial loans |  | 41,536 |  |  | 52,576 |  |  | 94,112
Construction loans: |  |  |  |  |  |  |  |
Land |  | 1,291 |  |  | 5,185 |  |  | 6,476
Construction-commercial |  | - |  |  | 35,100 |  |  | 35,100
Construction-residential |  | - |  |  | 217 |  |  | 217
Consumer loans - Auto |  | 15,548 |  |  | 7,057 |  |  | 22,605
Finance leases |  | 1,968 |  |  | 216 |  |  | 2,184
Consumer loans - Other |  | 10,294 |  |  | 1,489 |  |  | 11,783
Total Troubled Debt Restructurings | $ | 374,695 |  | $ | 212,524 |  | $ | 587,219
(1) | Included in non-accrual loans are $88.6 million in loans that were performing under the terms of the restructuring agreement but are reported in non-accrual status until the restructured loans meet the criteria of sustained payment performance under the revised terms for reinstatement to accrual status and are deemed fully collectible.
TDR loans exclude restructured residential mortgage loans that are government-guaranteed (e.g., FHA/VA loans) totaling $60.7 million as of September 30, 2018 (compared with $62.1 million as of December 31, 2017). The Corporation excludes FHA/VA guaranteed loans from TDR loan statistics given that, in the event that the borrower defaults on the loan, the principal and interest (at the specified debenture rate) are guaranteed by the U.S. government; therefore, the risk of loss on these types of loans is very low. The Corporation does not consider loans with U.S. federal government guarantees to be impaired loans for the purpose of calculating the allowance for loan and lease losses. Loan modifications that are considered TDR loans completed during the quarte rs and nine-month periods ended September 30, 2018 and 2017, were as follows:
| Quarter Ended September 30, 2018
| Number of contracts |  | Pre-modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
(Dollars in thousands) |  |  |  |  |  |  |
Troubled Debt Restructurings: |  |  |  |  |  |  |
Non-FHA/VA residential mortgage loans | 27 |  | $ | 6,316 |  | $ | 5,729
Commercial Mortgage loans | 4 |  |  | 96,088 |  |  | 95,867
Commercial and Industrial loans | 2 |  |  | 2,800 |  |  | 2,786
Construction loans: |  |  |  |  |  |  |
Construction-residential | 1 |  |  | 587 |  |  | 558
Consumer loans - Auto | 74 |  |  | 1,281 |  |  | 1,281
Finance leases | 5 |  |  | 82 |  |  | 80
Consumer loans - Other | 198 |  |  | 1,038 |  |  | 1,056
Total Troubled Debt Restructurings | 311 |  | $ | 108,192 |  | $ | 107,357
| Nine-Month Period Ended September 30, 2018
| Number of contracts |  | Pre-modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
(Dollars in thousands) |  |  |  |  |  |  |
Troubled Debt Restructurings: |  |  |  |  |  |  |
Non-FHA/VA residential mortgage loans | 70 |  | $ | 10,958 |  | $ | 10,277
Commercial Mortgage loans | 9 |  |  | 138,599 |  |  | 138,390
Commercial and Industrial loans | 8 |  |  | 8,850 |  |  | 8,496
Construction loans: |  |  |  |  |  |  |
Land | 1 |  |  | 97 |  |  | 97
Construction-residential | 1 |  |  | 587 |  |  | 558
Consumer loans - Auto | 195 |  |  | 3,206 |  |  | 3,200
Finance leases | 5 |  |  | 82 |  |  | 80
Consumer loans - Other | 565 |  |  | 2,857 |  |  | 2,906
Total Troubled Debt Restructurings | 854 |  | $ | 165,236 |  | $ | 164,004
| Quarter Ended September 30, 2017
| Number of contracts |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
(Dollars in thousands) |  |  |  |  |  |  |
Troubled Debt Restructurings: |  |  |  |  |  |  |
Non-FHA/VA residential mortgage loans | 25 |  | $ | 3,358 |  | $ | 3,358
Commercial Mortgage loans | 4 |  |  | 2,569 |  |  | 2,318
Commercial and Industrial loans | 8 |  |  | 21,079 |  |  | 21,019
Construction loans: |  |  |  |  |  |  |
Land | 1 |  |  | 18 |  |  | 18
Consumer loans - Auto | 109 |  |  | 1,568 |  |  | 1,568
Consumer loans - Other | 199 |  |  | 796 |  |  | 820
Total Troubled Debt Restructurings | 346 |  | $ | 29,388 |  | $ | 29,101
| Nine-Month Period Ended September 30, 2017
| Number of contracts |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
(Dollars in thousands) |  |  |  |  |  |  |
Troubled Debt Restructurings: |  |  |  |  |  |  |
Non-FHA/VA residential mortgage loans | 113 |  | $ | 17,585 |  | $ | 17,349
Commercial Mortgage loans | 12 |  |  | 25,274 |  |  | 24,783
Commercial and Industrial loans | 13 |  |  | 32,153 |  |  | 32,093
Construction loans: |  |  |  |  |  |  |
Land | 2 |  |  | 43 |  |  | 46
Consumer loans - Auto | 383 |  |  | 5,741 |  |  | 5,741
Finance leases | 22 |  |  | 548 |  |  | 548
Consumer loans - Other | 602 |  |  | 2,756 |  |  | 2,808
Total Troubled Debt Restructurings | 1,147 |  | $ | 84,100 |  | $ | 83,368
Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-performing loan. Recidivism on a modified loan occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans. The Corporation considers a loan to have defaulted if the borrower has failed to make payments of either principal, interest, or both for a period of 90 days or more. Loan m odifications considered TDR loans that defaulted during the quarters and nine-month periods ended September 30, 2018 and 2017, and had become TDR during the 12-months preceding the default date, were as follows:
| Quarter Ended September 30,
| 2018 |  | 2017
| Number of contracts |  | Recorded Investment |  | Number of contracts |  | Recorded Investment
(Dollars in thousands) |  |  |  |  |  |  |  |  |
Non-FHA/VA residential mortgage loans | 3 |  | $ | 338 |  | 16 |  | $ | 1,795
Consumer loans - Auto | 34 |  |  | 559 |  | 4 |  |  | 59
Consumer loans - Other | 18 |  |  | 59 |  | 53 |  |  | 223
Total | 55 |  | $ | 956 |  | 73 |  | $ | 2,077
| Nine-Month Period Ended September 30,
| 2018 |  | 2017
| Number of contracts |  | Recorded Investment |  | Number of contracts |  | Recorded Investment
(Dollars in thousands) |  |  |  |  |  |  |  |  |
Non-FHA/VA residential mortgage loans | 13 |  | $ | 1,406 |  | 38 |  | $ | 4,686
Commercial Mortgage loans | - |  |  | - |  | 1 |  |  | 57
Consumer loans - Auto | 67 |  |  | 1,096 |  | 13 |  |  | 189
Consumer loans - Other | 57 |  |  | 213 |  | 99 |  |  | 387
Finance leases | 1 |  |  | 22 |  | - |  |  | -
Total | 138 |  | $ | 2,737 |  | 151 |  | $ | 5,319
For certain TDR loans, the Corporation splits the loans into two new notes, A and B notes. The A note is restructured to comply with the Corporation’s lending standards at current market rates, and is tailored to suit the customer’s ability to make timely interest and principal payments. The B note includes the granting of the concession to the borrower and varies by situation. The B note is charged off but the obligation is not forgiven to the borrower, and any payments collected are accounted for as reco veries. At the time of the restructuring, the A note is identified and classified as a TDR loan. If the loan performs for at least six months according to the modified terms, the A note may be returned to accrual status. The borrower’s payment performance prior to the restructuring is included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of the restructuring. In the periods following the calendar year in which a loan is rest ructured, the A note may no longer be reported as a TDR loan if it is i n accrual status, is in compliance with its modified terms, and yields a market rate (as determined and documente d at the time of the restructuring). The following table provides addit ional information about the volume of this type of loan restructuring as of September 30, 2018 and 2017 and the effect on the allowance for loan and lease losses in the first nine months of 2018 and 2017:
| September 30, 2018 |  |  | September 30, 2017
(In thousands) |  |  |  |  |
Principal balance deemed collectible at end of period | $ | 65,706 |  | $ | 35,603
Amount charged off | $ | 1,137 |  | $ | -
Charges (release) to the provision for loan losses | $ | 1,407 |  | $ | (1,080)
Allowance for loan losses at end of period | $ | 4,116 |  | $ | 4,061
A pproximately $63.1 million of the loans restructured using the A/B note restructure workout strategy were in accrual status as of September 30, 2018. These loans continue to be individually evaluated for impairment purposes.

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- Definition The entire disclosure for financing receivables. Examples of financing receivables include, but are not limited to, loans, trade accounts receivables, notes receivable, credit cards, and receivables relating to a lessor's right(s) to payment(s) from a lease other than an operating lease that is recognized as assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -URI http://asc.fasb.org/topic&trid=2196771 + Details
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