The Company's loan portfolio is composed of covered loans and non-covered loans. Covered loans are subject to loss sharing agreements with the FDIC and non-covered loans are not subject to FDIC loss sharing agreements. The risks of covered loans are different from the risks of non-covered loans because of the loss protection provided by the FDIC to covered loans. Loans acquired in the BBVAPR Acquisition are included as non-covered loans in the unaudited consolidated statements of financial condition. Non-covered loans are further subdivided between originated and other loans, acquired loans accounted for under ASC 310-20 (loans with revolving feature and/or acquired at a premium), and acquired loans accounted for under ASC 310-30 (loans acquired with deteriorated credit quality, including those by analogy).

The composition of the Company's loan portfolio at June 30, 2014 and December 31, 2013 was as follows:

	June 30,		December 31,
	2014		2013
	(In thousands)
Non-covered loans:
Originated and other loans and leases held for investment:
Mortgage	$	788,001	$	766,265
Commercial		1,183,172		1,127,657
Consumer		161,538		127,744
Auto and leasing		508,034		379,874
		2,640,745		2,401,540
Acquired loans:
Accounted for under ASC 310-20 (Loans with revolving feature and/or
acquired at a premium)
Commercial		38,602		77,681
Consumer		49,604		56,174
Auto		238,399		301,584
		326,605		435,439
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		692,069		717,904
Commercial		508,530		545,117
Construction		123,743		126,427
Consumer		43,824		63,620
Auto		308,512		379,145
		1,676,678		1,832,213
		4,644,028		4,669,192
Deferred loan cost , net		3,236		1,035
Loans receivable		4,647,264		4,670,227
Allowance for loan and lease losses on non-covered loans		(60,360)		(54,298)
Loans receivable, net		4,586,904		4,615,929
Mortgage loans held-for-sale		14,792		46,529
Total non-covered loans, net		4,601,696		4,662,458
Covered loans:
Loans secured by 1-4 family residential properties		121,416		121,748
Construction and development secured by 1-4 family residential properties		18,566		17,304
Commercial and other construction		248,700		264,249
Consumer		5,177		6,119
Leasing		-		270
Total covered loans		393,859		409,690
Allowance for loan and lease losses on covered loans		(59,515)		(52,729)
Total covered loans, net		334,344		356,961
Total loans, net	$	4,936,040	$	5,019,419

During the six-month period ended June 30, 2014, the Company reclassified $26.4 million in mortgage loans held-for-sale to held-for-investment

The Company's originated and other loans held for investment are encompassed within four portfolio segments: mortgage, commercial, consumer, and auto and leasing.

The following tables present the aging of the recorded investment in gross originated and other loans held for investment as of June 30, 2014 and December 31, 2013 by class of loans. Mortgage loans past due included delinquent loans in the GNMA buy-back option program. Servicers of loans underlying GNMA mortgage-backed securities must report as their own assets the defaulted loans that they have the option (but not the obligation) to repurchase, even when they elect not to exercise that option.

	June 30, 2014
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Mortgage
Traditional (by origination year):
Up to the year 2002	$	5,182	$	2,540	$	3,225	$	10,947	$	59,426	$	70,373	$	70
Years 2003 and 2004		5,503		1,905		2,929		10,337		51,945		62,282		-
Year 2005		6,775		2,959		6,783		16,517		69,352		85,869		89
Year 2006		10,562		3,781		5,278		19,621		94,765		114,386		-
Years 2007, 2008 and 2009		3,962		2,051		5,859		11,872		82,471		94,343		-
Years 2010, 2011, 2012, 2013 and 2014		3,345		2,745		5,432		11,522		184,150		195,672		339
		35,329		15,981		29,506		80,816		542,109		622,925		498
Non-traditional		1,997		1,128		2,655		5,780		32,254		38,034		-
Loss mitigation program		8,239		7,779		12,427		28,445		59,519		87,964		4,378
		45,565		24,888		44,588		115,041		633,882		748,923		4,876
Home equity secured personal loans		-		-		138		138		611		749		-
GNMA's buy-back option program		-		-		38,329		38,329		-		38,329		-
		45,565		24,888		83,055		153,508		634,493		788,001		4,876
Commercial
Commercial secured by real estate:
Corporate		-		-		-		-		90,886		90,886		-
Institutional		-		-		-		-		30,701		30,701		-
Middle market		685		-		638		1,323		139,902		141,225		-
Retail		1,634		494		6,198		8,326		148,862		157,188		-
Floor plan		-		-		-		-		1,680		1,680		-
Real estate		-		-		-		-		11,878		11,878		-
		2,319		494		6,836		9,649		423,909		433,558		-
Other commercial and industrial:
Corporate		-		-		-		-		61,329		61,329		-
Institutional		-		-		-		-		487,725		487,725		-
Middle market		-		760		-		760		80,034		80,794		-
Retail		536		149		1,343		2,028		75,728		77,756		-
Floor plan		-		-		-		-		42,010		42,010		-
		536		909		1,343		2,788		746,826		749,614		-
		2,855		1,403		8,179		12,437		1,170,735		1,183,172		-

	June 30, 2014
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Consumer
Credit cards		345		236		271		852		15,034		15,886		-
Overdrafts		19		3		1		23		295		318		-
Personal lines of credit		57		1		129		187		1,789		1,976		-
Personal loans		1,227		535		677		2,439		123,981		126,420		-
Cash collateral personal loans		280		94		48		422		16,516		16,938		-
		1,928		869		1,126		3,923		157,615		161,538		-
Auto and leasing		37,047		13,620		6,953		57,620		450,414		508,034		-
Total	$	87,395	$	40,780	$	99,313	$	227,488	$	2,413,257	$	2,640,745	$	4,876

	December 31, 2013
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Mortgage
Traditional (by origination year):
Up to the year 2002	$	6,697	$	1,635	$	3,408	$	11,740	$	64,772	$	76,512	$	79
Years 2003 and 2004		4,722		2,163		1,845		8,730		56,387		65,117		-
Year 2005		8,527		2,119		4,808		15,454		74,087		89,541		-
Year 2006		12,055		4,312		4,418		20,785		99,537		120,322		-
Years 2007, 2008 and 2009		3,464		1,104		4,663		9,231		91,919		101,150		152
Years 2010, 2011, 2012 and 2013		3,923		1,609		4,453		9,985		139,561		149,546		459
		39,388		12,942		23,595		75,925		526,263		602,188		690
Non-traditional		3,217		1,162		2,311		6,690		35,412		42,102		-
Loss mitigation program		9,759		5,560		13,191		28,510		57,808		86,318		2,185
		52,364		19,664		39,097		111,125		619,483		730,608		2,875
Home equity secured personal loans		-		-		138		138		598		736		-
GNMA's buy-back option program		-		-		34,921		34,921		-		34,921		-
		52,364		19,664		74,156		146,184		620,081		766,265		2,875
Commercial
Commercial secured by real estate:
Corporate		-		-		-		-		54,796		54,796		-
Institutional		-		-		-		-		4,050		4,050		-
Middle market		1,356		-		10,294		11,650		149,933		161,583		-
Retail		4,253		1,015		3,190		8,458		158,184		166,642		-
Floor plan		-		-		-		-		1,835		1,835		-
Real estate		-		-		-		-		11,655		11,655		-
		5,609		1,015		13,484		20,108		380,453		400,561		-
Other commercial and industrial:
Corporate		236		-		-		236		32,362		32,598		-
Institutional		-		-		-		-		536,445		536,445		-
Middle market		-		299		1,134		1,433		57,464		58,897		-
Retail		1,830		552		539		2,921		58,589		61,510		-
Floor plan		39		-		-		39		37,607		37,646		-
		2,105		851		1,673		4,629		722,467		727,096		-
		7,714		1,866		15,157		24,737		1,102,920		1,127,657		-

	December 31, 2013
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Consumer
Credit cards		287		168		232		687		14,554		15,241		-
Overdrafts		46		4		-		50		322		372		-
Personal lines of credit		33		38		66		137		1,844		1,981		-
Personal loans		1,324		399		352		2,075		92,485		94,560		-
Cash collateral personal loans		324		43		-		367		15,223		15,590		-
		2,014		652		650		3,316		124,428		127,744		-
Auto and leasing		25,531		9,437		5,089		40,057		339,817		379,874		-
Total	$	87,623	$	31,619	$	95,052	$	214,294	$	2,187,246	$	2,401,540	$	2,875

At June 30, 2014, the increase in delinquencies in the consumer and the auto and leasing portfolios compared to December 31, 2013 is mainly attributed to the fact that non-performing loans of acquired non-covered loan portfolio were accounted for under ASC 310-30. Such portfolios are increasing as new originations are ramping up the balances outstanding. More than a year from the BBVAPR Acquisition, those portfolios are beginning to reflect normal delinquency levels as seasoned portfolios. At June 30, 2014, the increase in delinquencies in the mortgage portfolio compared to December 31, 2013 is mainly attributed to local economic conditions.

At June 30, 2014 and December 31, 2013, the Company had $476.3 million and $515.4 million, respectively, in loans granted to the Puerto Rico government, including its instrumentalities, public corporations and municipalities as part of the institutional commercial loan segment. This entire amount was current at June 30, 2014.

Acquired Loans Accounted for under ASC 310-20 (Loans with revolving feature and/or acquired at a premium)

Credit cards, retail and commercial revolving lines of credits, floor plans and performing auto loans with FICO scores over 660 acquired at a premium as part of the non-covered portfolio are accounted for under the guidance of ASC 310-20, which requires that any contractually required loan payment receivable in excess of the Company's initial investment in the loans be accreted into interest income on a level-yield basis over the life of the loan. Loans accounted for under ASC 310-20 are placed on non-accrual status when past due in accordance with the Company's non-accrual policy, and any accretion of discount or amortization of premium is discontinued. Loans acquired in the non-covered portfolio that were accounted for under the provisions of ASC 310-20 are removed from the acquired loan category at the end of the reporting period upon refinancing, renewal or normal re-underwriting.

The following tables present the aging of the recorded investment in gross acquired loans accounted for under ASC 310-20 as of June 30, 2014 and December 31, 2013, by class of loans:

	June 30, 2014
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Commercial
Commercial secured by real estate
Corporate	$	-	$	-	$	-	$	-	$	2,999	$	2,999	$	-
Retail		-		-		506		506		2,051		2,557		-
Floor plan		-		-		101		101		3,846		3,947		-
		-		-		607		607		8,896		9,503		-
Other commercial and industrial
Corporate		-		-		94		94		2,916		3,010		-
Retail		254		92		556		902		10,518		11,420		-
Floor plan		51		68		119		238		14,431		14,669		-
		305		160		769		1,234		27,865		29,099		-
		305		160		1,376		1,841		36,761		38,602		-
Consumer
Credit cards		1,520		835		1,320		3,675		42,263		45,938		-
Personal loans		218		82		32		332		3,334		3,666		-
		1,738		917		1,352		4,007		45,597		49,604		-
Auto		11,603		4,325		1,566		17,494		220,905		238,399		-
Total	$	13,646	$	5,402	$	4,294	$	23,342	$	303,263	$	326,605	$	-

	December 31, 2013
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Commercial
Commercial secured by real estate
Corporate	$	-	$	-	$	-	$	-	$	10,166	$	10,166	$	-
Retail		431		331		868		1,630		4,140		5,770		-
Floor plan		-		-		101		101		2,576		2,677		-
		431		331		969		1,731		16,882		18,613		-
Other commercial and industrial
Corporate		14		83		-		97		9,696		9,793		-
Retail		1,717		1,418		659		3,794		23,544		27,338		-
Floor plan		35		193		18		246		21,691		21,937		-
		1,766		1,694		677		4,137		54,931		59,068		-
		2,197		2,025		1,646		5,868		71,813		77,681		-
Consumer
Credit cards		2,217		1,200		2,068		5,485		46,714		52,199		-
Personal loans		196		7		91		294		3,681		3,975		-
		2,413		1,207		2,159		5,779		50,395		56,174		-
Auto		12,534		3,616		1,608		17,758		283,826		301,584		-
Total	$	17,144	$	6,848	$	5,413	$	29,405	$	406,034	$	435,439	$	-

Acquired Loans Accounted for under ASC 310-30 (including those accounted for under ASC 310-30 by analogy)

Acquired loans that are part of the non-covered portfolio, except for credit cards, retail and commercial revolving lines of credits, floor plans and performing auto loans with FICO scores over 660 acquired at a premium, are accounted for by the Company in accordance with ASC 310-30.

The carrying amount corresponding to non-covered loans acquired with deteriorated credit quality, including those accounted under ASC 310-30 by analogy, in the statements of financial condition at June 30, 2014 and December 31, 2013 is as follows:

At June 30, 2014 and December 31, 2013, the Company had $179.1 million and $180.5 million, respectively, in loans granted to the Puerto Rico government, including its instrumentalities, public corporations and municipalities as part of its non-covered acquired loans accounted for under ASC 310-30. This entire amount was current at June 30, 2014.

The following tables describe the accretable yield and non-accretable discount activity of acquired loans accounted for under ASC 310-30 for the quarters and six-month periods ended June 30, 2014 and 2013

	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2014		2013		2014		2013
	(In thousands)
Accretable Yield Activity
Balance at beginning of period	$	482,001	$	542,741	$	517,553	$	590,409
Accretion		(39,714)		(54,427)		(79,983)		(102,095)
Transfer from non-accretable discount		2,319		7,747		7,036		7,747
Balance at end of period	$	444,606	$	496,061	$	444,606	$	496,061

	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2014		2013		2014		2013
	(In thousands)
Non-Accretable Discount Activity
Balance at beginning of period	$	563,294	$	733,126	$	579,587	$	741,872
Principal losses		(6,251)		(11,738)		(17,827)		(20,484)
Transfer to accretable yield		(2,319)		(7,747)		(7,036)		(7,747)
Balance at end of period	$	554,724	$	713,641	$	554,724	$	713,641

The carrying amount of covered loans at June 30, 2014 and December 31, 2013 is as follows:

	June 30,		December 31,
	2014		2013
	(In thousands)
Contractual required payments receivable	$	607,144	$	702,126
Less: Non-accretable discount		85,224		129,477
Cash expected to be collected		521,920		572,649
Less: Accretable yield		128,061		162,959
Carrying amount, gross		393,859		409,690
Less: Allowance for covered loan and lease losses		59,515		52,729
Carrying amount, net	$	334,344	$	356,961

The following tables describe the accretable yield and non-accretable discount activity of covered loans for the quarters and six-month periods ended June 30, 2014 and 2013:

	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2014		2013		2014		2013
	(In thousands)
Accretable yield activity
Balance at beginning of period	$	147,767	$	174,107	$	162,959	$	188,008
Accretion		(24,880)		(23,999)		(48,268)		(44,228)
Transfer from non-accretable discount		5,174		17,024		13,370		23,352
Balance at end of period	$	128,061	$	167,132	$	128,061	$	167,132

	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2013		2012		2014		2013
	(In thousands)
Non-accretable discount activity
Balance at beginning of period	$	107,323	$	214,236	$	129,477	$	237,555
Principal losses		(16,925)		(4,953)		(30,883)		(21,944)
Transfer to accretable yield		(5,174)		(17,024)		(13,370)		(23,352)
Balance at end of period	$	85,224	$	192,259	$	85,224	$	192,259

The following table presents the recorded investment in loans in non-accrual status by class of loans as of June 30, 2014 and December 31, 2013:

	June 30,		December 31,
	2014		2013
	(In thousands)
Originated and other loans and leases held for investment
Mortgage
Traditional (by origination year):
Up to the year 2002	$	3,194	$	3,428
Years 2003 and 2004		2,945		1,845
Year 2005		6,905		4,922
Year 2006		5,278		4,418
Years 2007, 2008 and 2009		5,860		4,511
Years 2010, 2011, 2012, 2013 and 2014		9,379		7,818
		33,561		26,942
Non-traditional		2,655		2,311
Loss mitigation program		16,084		18,792
		52,300		48,045
Home equity secured personal loans		138		138
		52,438		48,183
Commercial
Commercial secured by real estate
Middle market		10,345		11,895
Retail		9,823		7,208
		20,168		19,103
Other commercial and industrial
Middle market		760		1,134
Retail		2,578		2,485
Floor plan		-		108
		3,338		3,727
		23,506		22,830
Consumer
Credit cards		271		232
Overdrafts		1		-
Personal lines of credit		139		84
Personal loans		985		485
Cash collateral personal loans		58		4
		1,454		805
Auto and leasing		7,300		5,089
	$	84,698	$	76,907

	June 30,		December 31,
	2014		2013
	(In thousands)
Acquired loans accounted under ASC 310-20
Commercial
Commercial secured by real estate
Retail	$	545	$	956
Floor plan		101		101
		646		1,057
Other commercial and industrial
Corporate		94		97
Retail		588		1,371
Floor plan		120		18
		802		1,486
		1,448		2,543
Consumer
Credit cards		1,318		2,068
Personal loans		34		151
		1,352		2,219
Auto		1,680		1,608
		4,480		6,370
Total non-accrual loans	$	89,178	$	83,277

Loans accounted for under ASC 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analyses.

Effective April 24, 2013, delinquent residential mortgage loans insured or guaranteed under applicable FHA and VA programs are placed in non-accrual when they become 18 months or more past due, since they are insured loans. Before that date, they were placed in non-accrual when they became 90 days or more past due.

At June 30, 2014 and December 31, 2013, loans whose terms have been extended and which are classified as troubled-debt restructurings that are not included in non-accrual loans amounted to $75.4 million and $66.5 million, respectively, as they are performing under their new terms.