The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by federal and Puerto Rico banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Pursuant to the Dodd-Frank Act, federal banking regulators have adopted new capital rules that became effective January 1, 2014 for advanced approaches banking organizations and will become effective January 1, 2015 for all other covered organizations (subject to certain phase-in periods through January 1, 2019) and that will replace their general risk-based capital rules, advanced approaches rule, market risk rule, and leverage rules.

Quantitative measures established by regulation to ensure capital adequacy currently require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations) and of Tier 1 capital to average total assets (as defined in the regulations). As of March 31, 2014 and December 31, 2013, the Company and the Bank met all capital adequacy requirements to which they are subject. As of March 31, 2014 and December 31, 2013, the Bank is “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables.

The Company's and the Bank's actual capital amounts and ratios as of March 31, 2014 and December 31, 2013 are as follows

				Minimum Capital			Minimum to be Well
	Actual			Requirement			Capitalized
	Amount		Ratio	Amount		Ratio		Amount	Ratio
	(Dollars in thousands)
Company Ratios
As of March 31, 2014
Total capital to risk-weighted assets	$	836,168	16.56%	$	404,054	8.00%	$	505,067	10.00%
Tier 1 capital to risk-weighted assets	$	745,619	14.76%	$	202,027	4.00%	$	303,040	6.00%
Tier 1 capital to average total assets	$	745,619	9.51%	$	313,594	4.00%	$	391,993	5.00%
As of December 31, 2013
Total capital to risk-weighted assets	$	827,460	16.16%	$	409,514	8.00%	$	511,893	10.00%
Tier 1 capital to risk-weighted assets	$	736,930	14.35%	$	204,757	4.00%	$	307,136	6.00%
Tier 1 capital to average total assets	$	736,930	9.11%	$	324,910	4.00%	$	406,138	5.00%



				Minimum Capital			Minimum to be Well
	Actual			Requirement			Capitalized
	Amount		Ratio	Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
Bank Ratios
As of March 31, 2014
Total capital to risk-weighted assets	$	805,900	16.02%	$	402,495	8.00%	$	503,119	10.00%
Tier 1 capital to risk-weighted assets	$	715,591	14.22%	$	201,248	4.00%	$	301,871	6.00%
Tier 1 capital to average total assets	$	715,591	9.18%	$	311,659	4.00%	$	389,574	5.00%
As of December 31, 2013
Total capital to risk-weighted assets	$	779,413	15.30%	$	407,637	8.00%	$	509,547	10.00%
Tier 1 capital to risk-weighted assets	$	688,350	13.51%	$	203,819	4.00%	$	305,728	6.00%
Tier 1 capital to average total assets	$	688,350	8.54%	$	322,395	4.00%	$	402,993	5.00%

Additional paid-in capital represents contributed capital in excess of par value of common and preferred stock net of costs of the issuance. As of March 31, 2014, accumulated issuance costs charged against additional paid in capital amounted to $10.1 million and $13.6 million for preferred and common stock, respectively.

The calculation of earnings per common share for the quarters ended March 31, 2014 and 2013 is as follows:

	Quarter Ended March 31,
	2014		2013
	(In thousands, except per share data)
Net income	$	23,747	$	21,192
Less: Dividends on preferred stock
Non-Convertible Preferred Stock (Series A, B, and D)		(1,628)		(1,628)
Convertible preferred stock (Series C)		(1,837)		(1,837)
Income available to common shareholders	$	20,282	$	17,727
Effect of assumed conversion of the Convertible Preferred Stock		1,837		1,837
Income available to common shareholders assuming conversion	$	22,119	$	19,564

Weighted average common shares and share equivalents:
Average common shares outstanding		45,329		45,595
Effect of dilutive securities:
Average potential common shares-options		131		159
Average potential common shares-assuming conversion of ' ' convertible preferred stock		7,138		7,138
Total weighted average common shares outstanding ' 'and equivalents		52,598		52,892
Earnings per common share - basic	$	0.45	$	0.39
Earnings per common share - diluted	$	0.42	$	0.37

In computing diluted earnings per common share, the 84,000 shares of convertible preferred stock, which remain outstanding at March 31, 2014, with a conversion rate, subject to certain conditions, of 84.9798 shares of common stock per share, were included as average potential common shares from the date they were issued and outstanding. Moreover, in computing diluted earnings per common share, the dividends declared during the quarters ended March 31, 2014 and 2013 on the convertible preferred stock were added back as income available to common shareholders.

For the quarters ended March 31, 2014 and 2013, weighted-average stock options with an anti-dilutive effect on earnings per share not included in the calculation amounted to 254,662, and 653,843, respectively

Under the Company's current stock repurchase program it is authorized to purchase in the open market up to $70 million of its outstanding shares of common stock, of which approximately $23.1 million of authority remains. The shares of common stock repurchased are to be held by the Company as treasury shares. During the quarter ended March 31, 2014, the Company purchased 707,400 shares under this program for a total of $10.4 million, at an average price of $14.66 per share. There were no repurchases during 2013.

The following table presents the shares repurchased for each month in the quarter ended March 31, 2014, excluding the month ended March 31, 2014, during which no shares were purchased as part of the stock repurchase program:

	Total number of				Dollar amount of
	shares purchased as		Average		shares repurchased
		part of stock	price paid		(excluding
	repurchase programs		per share		commissions paid)
						(In thousands)
Period
January 2014		57,700	$	14.73	$	850
February 2014		649,700	$	14.66	$	9,522
Quarter ended March 31, 2014		707,400		14.66		10,372

The number of shares that may yet be purchased under the $70 million program is estimated at 1,341,002 and was calculated by dividing the remaining balance of $23.1 million by $17.19 (closing price of the Company common stock at March 31, 2014). The Company did not purchase any shares of its common stock other than through its publicly announced stock repurchase program during the quarter ended March 31, 2014.

The activity in connection with common shares held in treasury by the Company for quarters ended March 31, 2014 and 2013 is set forth below:

	Quarter Ended March 31,
	2014			2013
		Dollar			Dollar
	Shares	Amount		Shares	Amount
	(In thousands, except shares data)
Beginning of year	7,030,101	$	80,642	7,090,597	$	81,275
Common shares used upon lapse of restricted stock units	(27,752)		(292)	(33,600)		(351)
Common shares repurchased as part of the stock repurchase program	707,400		10,393	-		-
Common shares used to match defined contribution plan, net	-		-	(7,318)		(77)
End of year	7,709,749	$	90,743	7,049,679	$	80,847

Accumulated other comprehensive income, net of income tax, as of March 31, 2014 and December 31, 2013 consisted of:

	March 31,		December 31,
	2014		2013
	(In thousands)
Unrealized gain on securities available-for-sale which are not other-than-temporarily impaired	$	18,464	$	13,267
Income tax effect of unrealized gain on securities available-for-sale		(2,429)		(1,834)
Net unrealized gain on securities available-for-sale which are not other-than-temporarily impaired		16,035		11,433
Unrealized loss on cash flow hedges		(10,529)		(10,907)
Income tax effect of unrealized loss on cash flow hedges		2,516		2,665
Net unrealized loss on cash flow hedges		(8,013)		(8,242)
Accumulated other comprehensive income, net of taxes	$	8,022	$	3,191

The following table presents changes in accumulated other comprehensive income by component, net of taxes, for the quarters ended March 31, 2014 and 2013:

	Quarter Ended March 31,
	2014						2013
	Net unrealized		Net unrealized		Accumulated		Net unrealized		Net unrealized		Accumulated
	gains on		loss on		other		gains on		loss on		other
	securities		cash flow		comprehensive		securities		cash flow		comprehensive
	available-for-sale		hedges		income		available-for-sale		hedges		income
	(In thousands)						(In thousands)
Beginning balance	$	11,433	$	(8,242)	$	3,191	$	68,245	$	(12,365)	$	55,880
Other comprehensive income before reclassifications		4,465		(1,392)		3,073		(9,899)		(313)		(10,212)
Amounts reclassified out of accumulated other comprehensive income		137		1,621		1,758		47		1,336		1,383
Other comprehensive income (loss)		4,602		229		4,831		(9,852)		1,023		(8,829)
Ending balance	$	16,035	$	(8,013)	$	8,022	$	58,393	$	(11,342)	$	47,051

The following table presents reclassifications out of accumulated other comprehensive income for the quarters ended March 31, 2014 and 2013:

					Affected Line Item in
	Quarter ended March 31,				Consolidated Statement
	2014		2013		of Operations
	(In thousands)
Cash flow hedges:
Interest-rate contracts	$	1,621	$	1,336	Net interest expense
Available-for-sale securities:
Residual tax effect from OIB's change in applicable tax rate		137		47	Income tax expense
	$	1,758	$	1,383