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 September 30, 2014 and December 31, 2013 was as follows:

	September 30,		December 31,
	2014		2013
	(In thousands)
Non-covered loans:
Originated and other loans and leases held for investment:
Mortgage	$	791,106	$	766,265
Commercial		1,217,235		1,127,657
Consumer		175,882		127,744
Auto and leasing		542,892		379,874
		2,727,115		2,401,540
Acquired loans:
Accounted for under ASC 310-20 (Loans with revolving feature and/or
acquired at a premium)
Commercial		26,984		77,681
Consumer		47,284		56,174
Auto		210,808		301,584
		285,076		435,439
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		670,188		717,904
Commercial		485,444		545,117
Construction		108,694		126,427
Consumer		36,470		63,620
Auto		276,749		379,145
		1,577,545		1,832,213
		4,589,736		4,669,192
Deferred loan cost , net		3,575		1,035
Loans receivable		4,593,311		4,670,227
Allowance for loan and lease losses on non-covered loans		(64,859)		(54,298)
Loans receivable, net		4,528,452		4,615,929
Mortgage loans held-for-sale		16,757		46,529
Total non-covered loans, net		4,545,209		4,662,458
Covered loans:
Loans secured by 1-4 family residential properties		121,658		121,748
Construction and development secured by 1-4 family residential properties		18,947		17,304
Commercial and other construction		228,410		264,249
Consumer		4,905		6,119
Leasing		-		270
Total covered loans		373,920		409,690
Allowance for loan and lease losses on covered loans		(62,227)		(52,729)
Total covered loans, net		311,693		356,961
Total loans, net	$	4,856,902	$	5,019,419

During the nine-month period ended September 30, 2014, the Company reclassified $25.8 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 September 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.

	September 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	$	5,996	$	3,283	$	3,424	$	12,703	$	55,635	$	68,338	$	141
Years 2003 and 2004		6,679		1,730		3,471		11,880		50,464		62,344		-
Year 2005		7,368		3,295		8,258		18,921		69,510		88,431		89
Year 2006		10,274		5,678		6,041		21,993		91,218		113,211		114
Years 2007, 2008 and 2009		3,285		3,095		7,647		14,027		83,036		97,063		59
Years 2010, 2011, 2012, 2013 and 2014		4,938		1,368		5,706		12,012		181,550		193,562		509
		38,540		18,449		34,547		91,536		531,413		622,949		912
Non-traditional		1,084		783		3,022		4,889		32,886		37,775		-
Loss mitigation program		10,022		7,358		14,625		32,005		57,578		89,583		5,773
		49,646		26,590		52,194		128,430		621,877		750,307		6,685
Home equity secured personal loans		-		-		126		126		607		733		-
GNMA's buy-back option program		-		-		40,066		40,066		-		40,066		-
		49,646		26,590		92,386		168,622		622,484		791,106		6,685
Commercial
Commercial secured by real estate:
Corporate		-		-		-		-		113,976		113,976		-
Institutional		-		-		-		-		37,177		37,177		-
Middle market		-		1,071		638		1,709		142,830		144,539		-
Retail		1,164		129		7,258		8,551		153,091		161,642		-
Floor plan		-		-		-		-		1,666		1,666		-
Real estate		-		-		-		-		11,878		11,878		-
		1,164		1,200		7,896		10,260		460,618		470,878		-
Other commercial and industrial:
Corporate		-		-		-		-		60,402		60,402		-
Institutional		-		-		-		-		482,277		482,277		-
Middle market		-		-		628		628		82,577		83,205		-
Retail		267		144		809		1,220		79,592		80,812		-
Floor plan		-		-		-		-		39,661		39,661		-
		267		144		1,437		1,848		744,509		746,357		-
		1,431		1,344		9,333		12,108		1,205,127		1,217,235		-

	September 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		238		189		408		835		17,022		17,857		-
Overdrafts		20		2		1		23		317		340		-
Personal lines of credit		67		132		29		228		1,823		2,051		-
Personal loans		1,666		627		604		2,897		135,711		138,608		-
Cash collateral personal loans		214		132		36		382		16,644		17,026		-
		2,205		1,082		1,078		4,365		171,517		175,882		-
Auto and leasing		43,537		15,956		8,279		67,772		475,120		542,892		-
Total	$	96,819	$	44,972	$	111,076	$	252,867	$	2,474,248	$	2,727,115	$	6,685

	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 September 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 September 30, 2014, the increase in delinquencies in the mortgage portfolio compared to December 31, 2013 is mainly attributed to Puerto Rico's prolonged recession.

At September 30, 2014 and December 31, 2013, the Company had $458.0 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 September 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 September 30, 2014 and December 31, 2013, by class of loans:

	September 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	$	-	$	-	$	-	$	-	$	3,746	$	3,746	$	-
Retail		-		-		342		342		482		824		-
Floor plan		-		-		101		101		3,972		4,073		-
		-		-		443		443		8,200		8,643		-
Other commercial and industrial
Corporate		-		-		-		-		2,915		2,915		-
Retail		169		73		451		693		7,328		8,021		-
Floor plan		97		40		108		245		7,160		7,405		-
		266		113		559		938		17,403		18,341		-
		266		113		1,002		1,381		25,603		26,984		-
Consumer
Credit cards		1,625		678		1,328		3,631		40,051		43,682		-
Personal loans		160		83		66		309		3,293		3,602		-
		1,785		761		1,394		3,940		43,344		47,284		-
Auto		11,372		4,137		1,537		17,046		193,762		210,808		-
Total	$	13,423	$	5,011	$	3,933	$	22,367	$	262,709	$	285,076	$	-

	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 September 30, 2014 and December 31, 2013 is as follows:

	September 30,	December 31,
	2014	2013
	(In thousands)
Contractual required payments receivable	$ 2,505,662	$ 2,929,353
Less: Non-accretable discount	523,987	579,587
Cash expected to be collected	1,981,675	2,349,766
Less: Accretable yield	404,130	517,553
Carrying amount, gross	1,577,545	1,832,213
Less: allowance for loan and lease losses	10,120	2,863
Carrying amount, net	$ 1,567,425	$ 1,829,350

During the quarter ended September 30, 2014, the Company sold non-performing residential mortgage loans that were accounted for under ASC 310-30 with a carrying amount of $19.7 million. No gain or loss was realized in the transaction in accordance to ASC 310-30 accounting.

At September 30, 2014 and December 31, 2013, the Company had $168.7 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 September 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 nine-month periods ended September 30, 2014 and 2013

	Quarter Ended September 30,				Nine-Month Period Ended September 30,
	2014		2013		2014		2013
	(In thousands)
Accretable Yield Activity
Balance at beginning of period	$	444,606	$	561,485	$	517,553	$	655,833
Accretion		(38,340)		(48,352)		(118,323)		(150,447)
Transfer from (to) non-accretable discount		(2,136)		6,010		4,900		13,757
Balance at end of period	$	404,130	$	519,143	$	404,130	$	519,143

	Quarter Ended September 30,				Nine-Month Period Ended September 30,
	2014		2013		2014		2013
	(In thousands)
Non-Accretable Discount Activity
Balance at beginning of period	$	554,724	$	686,231	$	579,587	$	714,462
Principal losses		(32,873)		(44,301)		(50,700)		(64,785)
Transfer from (to) accretable yield		2,136		(6,010)		(4,900)		(13,757)
Balance at end of period	$	523,987	$	635,920	$	523,987	$	635,920

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

	September 30,		December 31,
	2014		2013
	(In thousands)
Contractual required payments receivable	$	561,844	$	702,126
Less: Non-accretable discount		77,940		129,477
Cash expected to be collected		483,904		572,649
Less: Accretable yield		109,984		162,959
Carrying amount, gross		373,920		409,690
Less: Allowance for covered loan and lease losses		62,227		52,729
Carrying amount, net	$	311,693	$	356,961

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

	Quarter Ended September 30,				Nine-Month Period Ended September 30,
	2014		2013		2014		2013
	(In thousands)
Accretable Yield Activity
Balance at beginning of period	$	128,061	$	167,132	$	162,959	$	188,008
Accretion		(20,886)		(21,657)		(69,154)		(65,884)
Transfer from non-accretable discount		2,809		23,070		16,179		46,421
Balance at end of period	$	109,984	$	168,545	$	109,984	$	168,545

	Quarter Ended September 30,				Nine-Month Period Ended September 30,
	2013		2013		2014		2013
	(In thousands)
Non-Accretable Discount Activity
Balance at beginning of period	$	85,224	$	192,259	$	129,477	$	237,555
Principal losses		(4,475)		(7,762)		(35,358)		(29,707)
Transfer to accretable yield		(2,809)		(23,070)		(16,179)		(46,421)
Balance at end of period	$	77,940	$	161,427	$	77,940	$	161,427

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

	September 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	$	3,613	$	3,428
Years 2003 and 2004		3,749		1,845
Year 2005		9,117		4,922
Year 2006		7,019		4,418
Years 2007, 2008 and 2009		9,817		4,511
Years 2010, 2011, 2012, 2013 and 2014		6,244		7,818
		39,559		26,942
Non-traditional		3,022		2,311
Loss mitigation program		17,636		18,792
		60,217		48,045
Home equity secured personal loans		125		138
		60,342		48,183
Commercial
Commercial secured by real estate
Middle market		10,608		11,895
Retail		8,942		7,208
		19,550		19,103
Other commercial and industrial
Middle market		628		1,134
Retail		2,112		2,485
Floor plan		-		108
		2,740		3,727
		22,290		22,830
Consumer
Credit cards		408		232
Overdrafts		1		-
Personal lines of credit		35		84
Personal loans		761		485
Cash collateral personal loans		36		4
		1,241		805
Auto and leasing		9,008		5,089
	$	92,881	$	76,907

	September 30,		December 31,
	2014		2013
	(In thousands)
Acquired loans accounted under ASC 310-20
Commercial
Commercial secured by real estate
Retail	$	342	$	956
Floor plan		101		101
		443		1,057
Other commercial and industrial
Corporate		-		97
Retail		455		1,371
Floor plan		121		18
		576		1,486
		1,019		2,543
Consumer
Credit cards		1,326		2,068
Personal loans		76		151
		1,402		2,219
Auto		1,746		1,608
		4,167		6,370
Total non-accrual loans	$	97,048	$	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.

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.

At September 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 $273.6 million and $66.5 million, respectively, as they are performing under their new terms. During the quarter ended September 30, 2014, the revolving line of credit to finance the purchase of fuel for the day to day power generation activities of the Puerto Rico Electric Power Authority (“PREPA”) was classified substandard and a troubled-debt restructuring. Based on our analysis, the loan is being maintained in accrual status requiring no impairment. At September 30, 2014 this line of credit had an unpaid principal balance of $200.0 million.

The Company evaluates all loans, some individually and others as homogeneous groups, for purposes of determining impairment. The total investment in impaired commercial loans was $226.8 million and $28.4 million at September 30, 2014 and December 31, 2013, respectively. Impaired commercial loans at September 30, 2014 included the PREPA line of credit with an unpaid principal balance of $200.0 million. The impaired commercial loans were measured based on the fair value of collateral or the present value of cash flows, including those identified as troubled-debt restructurings. The valuation allowance for impaired commercial loans amounted to $1.1 million and $1.4 million at September 30, 2014 and December 31, 2013, respectively. The total investment in impaired mortgage loans was $91.7 million and $84.5 million at September 30, 2014 and December 31, 2013, respectively. Impairment on mortgage loans assessed as troubled-debt restructurings was measured using the present value of cash flows. The valuation allowance for impaired mortgage loans amounted to approximately $7.9 million and $8.7 million at September 30, 2014 and December 31, 2013, respectively.

The Company's recorded investment in non-covered commercial and mortgage loans categorized as originated and other loans and leases held for investment that were individually evaluated for impairment and the related allowance for loan and lease losses at September 30, 2014 and December 31, 2013 are as follows:

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

The Company's recorded investment in non-covered commercial loans categorized as non-covered acquired loans accounted for under ASC 310-20 that were individually evaluated for impairment and the related allowance for loan and lease losses at September 30, 2014 and December 31, 2013 are as follows:



	September 30, 2014
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with no specific allowance
Commercial		208		208		N/A	N/A
Total investment in impaired loans	$	208	$	208	$	-	0%


	December 31, 2013
	Unpaid		Recorded		Specific
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with no specific allowance
Commercial		208		208		N/A	N/A
Total investment in impaired loans	$	208	$	208	$	-	0%

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

The Company's recorded investment in non-covered acquired loan pools accounted for under ASC 310-30 and their related allowance for non-covered loan and lease losses at September 30, 2014 and December 31, 2013 are as follows:

	December 31, 2013
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired non-covered loan pools:
Mortgage	$	5,183	$	4,718	$	57	1%
Commercial		48,100		40,411		394	1%
Construction		21,526		17,818		1,319	7%
Consumer		73,043		63,606		361	1%
Auto		379,236		377,316		732	0%
Total investment in impaired non-covered loan pools	$	527,088	$	503,869	$	2,863	1%

The following table presents the interest recognized in non-covered commercial and mortgage loans that were individually evaluated for impairment, excluding loans accounted for under ASC 310-30, for the quarters and nine-month periods ended September 30, 2014 and 2013:

	Quarter Ended September 30,
	2014				2013
	Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment
	(In thousands)

Impaired loans with specific allowance
Commercial	$	28	$	5,103	$	5	$	9,039
Residential troubled-debt restructuring		666		91,293		712		82,388
Impaired loans with no specific allowance
Commercial		1,728		89,029		146		28,805
Total interest income from impaired loans	$	2,422	$	185,425	$	863	$	120,232


	Nine-Month Period Ended Ended September 30,
	2014				2013
	Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment
	(In thousands)

Impaired loans with specific allowance
Commercial	$	83	$	6,187	$	16	$	14,872
Residential troubled-debt restructuring		1,876		89,597		1,942		81,406
Impaired loans with no specific allowance
Commercial		5,185		44,203		438		26,471
Total interest income from impaired loans	$	7,144	$	139,987	$	2,396	$	122,749

The Company's recorded investment in covered loan pools that have recorded impairments and their related allowance for covered loan and lease losses as of September 30, 2014 and December 31, 2013 are as follows:

	September 30, 2014
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired covered loan pools:
Loans secured by 1-4 family residential properties	$	138,029	$	106,823	$	15,252	14%
Construction and development secured by 1-4 family residential properties		61,562		20,249		8,679	43%
Commercial and other construction		105,542		73,424		37,907	52%
Consumer		8,408		4,844		389	8%
Total investment in impaired covered loan pools	$	313,541	$	205,340	$	62,227	30%

	December 31, 2013
							Coverage
	Unpaid		Recorded		Specific		to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired covered loan pools with specific allowance
Loans secured by 1-4 family residential properties	$	52,142	$	38,179	$	12,495	33%
Construction and development secured by 1-4 family residential properties		66,037		17,304		6,866	40%
Commercial and other construction		209,566		111,946		32,753	29%
Consumer		10,512		5,857		615	11%
Total investment in impaired covered loan pools	$	338,257	$	173,286	$	52,729	30%

The following tables present the troubled-debt restructurings during the quarters and nine-month periods ended September 30, 2014 and 2013:

	Quarter Ended September 30, 2014
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	26	$	3,016	5.62%	347	$	2,965	4.22%	393
Commercial	20		200,007	7.25%	3		200,007	7.25%	10
Consumer	6		58	10.00%	61		68	9.66%	55


	Nine-Month Period Ended September 30, 2014
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	113	$	14,562	5.99%	349	$	14,162	4.21%	389
Commercial	21		200,080	7.25%	3		200,080	7.25%	10
Consumer	13		123	11.77%	66		136	11.48%	62


	Quarter Ended September 30, 2013
	Number of contracts	Pre- Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	21	$	2,887	6.74%	352	$	3,066	6.74%	351


	Nine-Month Period Ended September 30, 2013
	Number of contracts	Pre- Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	102	$	12,828	6.43%	334	$	13,685	5.15%	393
Commercial	2		1,842	8.99%	87		1,842	4.00%	66

The following table presents troubled-debt restructurings for which there was a payment default during the twelve-month periods ended September 30, 2014 and 2013:

The Company categorizes non-covered originated and other loans and acquired loans accounted for under ASC 310-20 into risk categories based on relevant information about the ability of borrowers to service their debt, such as economic conditions, portfolio risk characteristics, prior loss experience, and the results of periodic credit reviews of individual loans.

Pass: Loans classified as “pass” have a well defined primary source of repayment very likely to be sufficient, with no apparent risk, strong financial position, minimal operating risk, profitability, liquidity and capitalization better than industry standards.

Special Mention: Loans classified as “special mention” have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard: Loans classified as “substandard” are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified 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 sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as “doubtful” have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, questionable and improbable.

Loss: Loans classified as “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 asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be effected in the future.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

As of September 30, 2014 and December 31, 2013, and based on the most recent analysis performed, the risk category of gross non-covered originated and other loans and acquired loans accounted for under ASC 310-20 subject to risk rating by class of loans is as follows:

	September 30, 2014
	Risk Ratings
											Individually
	Balance				Special						Measured for
	Outstanding		Pass		Mention		Substandard		Doubtful		Impairment
	(In thousands)
Commercial - originated and other loans held for investment
Commercial secured by real estate:
Corporate	$	113,976	$	90,006	$	23,970	$	-	$	-	$	-
Institutional		37,177		27,232		9,702		-		-		243
Middle market		144,539		127,640		3,707		-		-		13,192
Retail		161,642		147,034		3,020		2,441		-		9,147
Floor plan		1,666		594		971		101		-		-
Real estate		11,878		11,878		-		-		-		-
		470,878		404,384		41,370		2,542		-		22,582
Other commercial and industrial:
Corporate		60,402		60,402		-		-		-		-
Institutional		482,275		282,293		-		-		-		199,982
Middle market		83,206		77,504		3,144		-		-		2,558
Retail		80,813		76,684		308		2,360		-		1,461
Floor plan		39,661		38,301		1,147		213		-		-
		746,357		535,184		4,599		2,573		-		204,001
Total		1,217,235		939,568		45,969		5,115		-		226,583

Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Corporate		3,746		3,746		-		-		-		-
Retail		824		467		-		357		-		-
Floor plan		4,073		4,073		-		-		-		-
		8,643		8,286		-		357		-		-
Other commercial and industrial:
Corporate		2,915		2,915		-		-		-		-
Retail		8,021		7,612		9		400		-		-
Floor plan		7,405		7,405		-		-		-		-
		18,341		17,932		9		400		-		-
Total		26,984		26,218		9		757		-		-
Total	$	1,244,219	$	965,786	$	45,978	$	5,872	$	-	$	226,583

	December 31, 2013
	Risk Ratings
											Individually
	Balance				Special						Measured for
	Outstanding		Pass		Mention		Substandard		Doubtful		Impairment
	(In thousands)
Commercial - originated and other loans held for investment
Commercial secured by real estate:
Corporate	$	54,796	$	54,796	$	-	$	-	$	-	$	-
Institutional		4,050		4,050		-		-		-		-
Middle market		161,583		133,061		16,627		118		-		11,777
Retail		166,642		149,018		2,182		2,258		-		13,184
Floor plan		1,835		1,835		-		-		-		-
Real estate		11,655		11,655		-		-		-		-
		400,561		354,415		18,809		2,376		-		24,961
Other commercial and industrial:
Corporate		32,598		32,598		-		-		-		-
Institutional		536,445		536,445		-		-		-		-
Middle market		58,897		53,868		3,466		198		-		1,365
Retail		61,510		58,742		257		691		-		1,820
Floor plan		37,646		37,350		188		108		-		-
		727,096		719,003		3,911		997		-		3,185
Total		1,127,657		1,073,418		22,720		3,373		-		28,146

Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Corporate		10,166		10,166		-		-		-		-
Retail		5,770		4,378		443		949		-		-
Floor plan		2,677		2,576		-		101		-		-
		18,613		17,120		443		1,050		-		-
Other commercial and industrial:
Corporate		9,793		9,696		-		97		-		-
Retail		27,338		26,044		150		1,144		-		-
Floor plan		21,937		21,769		168		-		-		-
		59,068		57,509		318		1,241		-		-
Total		77,681		74,629		761		2,291		-		-
Total	$	1,205,338	$	1,148,047	$	23,481	$	5,664	$	-	$	28,146

All loans individually measured for impairment are classified as substandard as of September 30, 2014.

At September 30, 2014 and December 31, 2013, we had approximately $647.9 million and $763.4 million, respectively, of credit facilities granted to the Puerto Rico government, including its instrumentalities, public corporations and municipalities, of which $626.8 million and $696.0 million, respectively, were outstanding as of such dates. A substantial portion of our credit exposure to the government of Puerto Rico consists of collateralized loans or obligations that have a specific source of income or revenues identified for its repayment. Some of these obligations consist of senior and subordinated loans to public corporations that obtain revenues from rates charged for services, such as water and electric power utilities. Public corporations have varying degrees of independence from the central government and many have received appropriations or are due other payments from it. We also have loans to various municipalities for which the good faith, credit and unlimited taxing power of the applicable municipality has been pledged to their repayment. These municipalities are required by law to levy special property taxes in such amounts as shall be required for the payment of all their general obligation bonds and notes. Another portion of these loans consists of special obligations of various municipalities that are payable from the basic real and personal property taxes collected within such municipalities. The good faith and credit obligations of the municipalities have a first lien on the basic property taxes.

In the second quarter of 2014, the government enacted the Puerto Rico Public Corporation Debt Enforcement and Recovery Act (the “Recovery Act”), which establishes procedures for the adjustment of certain public corporations' debts. The Recovery Act states in its preamble that it further promotes the central government's public policy objectives of no longer providing financial support to public corporations and promoting their economic independence. The Recovery Act, which is without precedent and is being challenged in federal court on constitutional grounds, has increased the level of uncertainty as to the rights of the affected public corporation's creditors. As of September 30, 2014, we had approximately $382.1 million of credit facilities granted to public corporations authorized to initiate proceedings under the Recovery Act.

Oriental Bank is part of a four bank syndicate providing a $550 million dollar revolving line of credit to finance the purchase of fuel for the day to day power generation activities of PREPA, a public corporation authorized to seek relief under the Recovery Act. The Bank's participation in the line of credit has an unpaid principal balance of $200.0 million as of September 30, 2014. The Company, as part of the bank syndicate, agreed during the quarter to extend its credit facility with PREPA to March 31, 2015. In connection with such extension, PREPA appointed a Chief Restructuring Officer to work alongside the Executive Director to develop, organize and manage a financial and operational restructuring of PREPA subject to the approval of PREPA's Board. PREPA also committed to delivering a comprehensive business plan by December 15, 2014 and a full debt restructuring plan by March 2, 2015. After the extension, the Company classified the credit as substandard and a troubled-debt restructuring. The Company conducted an impairment analysis considering the probability of collection of principal and interest. Based on the experience and knowledge of the borrower, independent scenarios were developed to assess the collectability of the Company's current credit exposure to PREPA. Such scenarios project very probable outcomes based on a conservative set of assumptions related to PREPA's ability for future cash flow generation. The Company concluded that the loan should be maintained in accrual status requiring no impairment.

For residential and consumer loan classes, the Company evaluates credit quality based on the delinquency status of the loan. As of September 30, 2014 and December 31, 2013, and based on the most recent analysis performed, the risk category of non-covered gross originated and other loans and acquired loans accounted for under ASC 310-20 not subject to risk rating by class of loans is as follows:

	September 30, 2014
	Delinquency
															Individually
	Balance														Measured for
	Outstanding		0-29 days		30-59 days		60-89 days		90-119 days		120-364 days		365+ days		Impairment
	(In thousands)
Originated and other loans and leases held for investment
Mortgage
Traditional (by origination year)
Up to the year 2002	$	68,338	$	54,931	$	5,831	$	3,160	$	537	$	999	$	1,888	$	992
Years 2003 and 2004		62,344		49,747		6,309		1,730		221		1,623		1,489		1,225
Year 2005		88,431		66,895		6,451		3,236		831		3,768		3,659		3,591
Year 2006		113,211		90,157		9,821		5,471		1,740		2,479		1,759		1,784
Years 2007, 2008 and 2009		97,063		79,950		2,874		2,774		839		3,181		3,352		4,093
Years 2010, 2011, 2012 2013 and 2014		193,562		180,558		4,088		1,224		106		1,597		1,281		4,708
		622,949		522,238		35,374		17,595		4,274		13,647		13,428		16,393
Non-traditional		37,775		32,886		1,084		783		259		1,047		1,667		49
Loss mitigation program		89,583		9,249		1,665		789		628		1,022		980		75,250
		750,307		564,373		38,123		19,167		5,161		15,716		16,075		91,692
Home equity secured personal loans		733		607		-		-		-		-		126		-
GNMA's buy-back option program		40,066		-		-		-		8,825		18,512		12,729		-
		791,106		564,980		38,123		19,167		13,986		34,228		28,930		91,692
Consumer
Credit cards		17,857		17,022		238		189		140		268		-		-
Overdrafts		340		318		20		2		-		-		-		-
Unsecured personal lines of credit		2,051		1,823		67		132		-		26		3		-
Unsecured personal loans		138,608		135,169		1,586		614		579		22		-		638
Cash collateral personal loans		17,026		16,644		214		132		36		-		-		-
		175,882		170,976		2,125		1,069		755		316		3		638
Auto and Leasing		542,892		475,120		43,537		15,956		5,662		2,617		-		-
		1,509,880		1,211,076		83,785		36,192		20,403		37,161		28,933		92,330
Acquired loans (accounted for under ASC 310-20)
Consumer
Credit cards		43,682		40,053		1,625		678		483		843		-		-
Personal loans		3,602		3,293		160		83		32		34		-		-
		47,284		43,346		1,785		761		515		877		-		-
Auto		210,808		193,762		11,372		4,137		1,209		328		-		-
		258,092		237,108		13,157		4,898		1,724		1,205		-		-
Total	$	1,767,972	$	1,448,184	$	96,942	$	41,090	$	22,127	$	38,366	$	28,933	$	92,330

	December 31, 2013
	Delinquency
															Individually
	Balance														Measured for
	Outstanding		0-29 days		30-59 days		60-89 days		90-119 days		120-364 days		365+ days		Impairment
	(In thousands)
Originated and other loans and leases held for investment
Mortgage
Traditional (by origination year)
Up to the year 2002	$	76,512	$	64,743	$	6,594	$	1,634	$	868	$	1,082	$	1,458	$	133
Years 2003 and 2004		65,117		56,283		4,722		1,938		56		1,437		352		329
Year 2005		89,541		74,016		8,414		2,119		1,198		3,037		573		184
Year 2006		120,322		99,243		12,055		4,312		1,148		2,755		515		294
Years 2007, 2008 and 2009		101,150		91,920		3,464		1,104		1,264		2,844		554		-
Years 2010, 2011, 2012 and 2013		149,546		134,577		3,192		1,609		115		974		989		8,090
		602,188		520,782		38,441		12,716		4,649		12,129		4,441		9,030
Non-traditional		42,102		35,168		3,217		1,162		-		1,324		833		398
Loss mitigation program		86,318		7,762		1,376		149		624		312		1,029		75,066
		730,608		563,712		43,034		14,027		5,273		13,765		6,303		84,494
Home equity secured personal loans		736		598		-		-		-		126		12		-
GNMA's buy-back option program		34,921		-		-		-		7,670		14,425		12,826		-
		766,265		564,310		43,034		14,027		12,943		28,316		19,141		84,494
Consumer
Credit cards		15,241		14,555		287		168		118		113		-		-
Overdrafts		372		322		46		4		-		-		-		-
Unsecured personal lines of credit		1,981		1,844		33		38		25		34		7		-
Unsecured personal loans		94,560		92,102		1,272		399		300		39		13		435
Cash collateral personal loans		15,590		15,223		324		43		-		-		-		-
		127,744		124,046		1,962		652		443		186		20		435
Auto and Leasing		379,874		339,817		25,532		9,437		3,397		1,691		-		-
		1,273,883		1,028,173		70,528		24,116		16,783		30,193		19,161		84,929
Acquired loans (accounted for under ASC 310-20)
Consumer
Credit cards		52,199		46,713		2,217		1,200		828		1,241		-		-
Personal loans		3,975		3,681		196		7		60		31		-		-
		56,174		50,394		2,413		1,207		888		1,272		-		-
Auto		301,584		283,825		12,534		3,616		1,095		514		-		-
		357,758		334,219		14,947		4,823		1,983		1,786		-		-
Total	$	1,631,641	$	1,362,392	$	85,475	$	28,939	$	18,766	$	31,979	$	19,161	$	84,929