Loans Receivable

3 Months Ended

Mar. 31, 2016

NOTE 4 - LOANS

The Company’s loan portfolio is composed of two segments, loans initially accounted for under the amortized cost method (referred to as "originated and other" loans) and loans acquired (referred to as "acquired" loans). Acquired loans are further segregated between acquired BBVAPR loans and acquired Eurobank loans. Acquired Eurobank loans were purchased subject to loss-sharing agreements with the FDIC. The FDIC loss-share coverage related to commercial and other-non single family acquired Eurobank loans expired on June 30, 2015. Notwithstanding the expiration of loss share coverage of commercial loans, on July 2, 2015, the Company entered into an agreement with the FDIC pursuant to which the FDIC concurred with a potential sale of a pool of loss-share assets covered under the commercial loss-sharing agreement. Pursuant to such agreement, and as further discussed below, the FDIC agreed to and paid $20 million in loss share coverage with respect to the aggregate loss resulting from any portfolio sale within 120 days of the agreement. This sale was completed on September 28, 2015. The coverage for the single family residential loans will expire on June 30, 2020. At March 31, 2016, the remaining covered loans amounting to $69.7 million, net carrying amount, are included as part of acquired Eurobank loans under the name "loans secured y 1-4 family residential properties". At December 31, 2015, covered loans amounted to $67.2 million, net carrying amount. Covered loans are no longer a material amount. Therefore, the Company changed its loan disclosures during 2015.

The coverage for the single family residential loans will expire on June 30, 2020. At March 31, 2016, the remaining covered loans amounting to $69.7 million, net carrying amount ($91.1 million gross amount), are included as part of acquired Eurobank loans under the name "loans secured by 1-4 family residential properties". At December 31, 2015, covered loans amounted to $67.2 million, net carrying amount ($92.3 million gross amount). Interest income recognized for covered loans during March 31, 2016 and 2015 was $2.2 million and $15.5 million, respectively. The decrease in interest income recognized for covered loans is due to the expiration of the FDIC loss-share coverage related to commercial and other-non single family acquired Eurobank on June 30, 2015.

The composition of the Company’s loan portfolio at March 31, 2016 and December 31, 2015 was as follows

		March 31,		December 31,
	2016		2015
	(In thousands)
Originated and other loans and leases held for investment:
Mortgage	$	751,819	$	757,828
Commercial		1,425,385		1,441,649
Consumer		252,327		242,950
Auto and leasing		687,159		669,163
		3,116,690		3,111,590
Allowance for loan and lease losses on originated and other loans and leases		(113,238)		(112,626)
		3,003,452		2,998,964
Deferred loan costs, net		4,350		4,203
Total originated and other loans loans held for investment, net		3,007,802		3,003,167

Acquired loans:
Acquired BBVAPR loans:
Accounted for under ASC 310-20 (Loans with revolving feature and/or
acquired at a premium)
Commercial		6,558		7,457
Consumer		36,346		38,385
Auto		91,406		106,911
		134,310		152,753
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-20		(4,993)		(5,542)
		129,317		147,211

Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		600,901		608,294
Commercial		267,931		287,311
Construction		77,858		88,180
Consumer		9,345		11,843
Auto		134,669		153,592
		1,090,704		1,149,220
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-30		(27,747)		(25,785)
		1,062,957		1,123,435
Total acquired BBVAPR loans, net		1,192,274		1,270,646
Acquired Eurobank loans:
Loans secured by 1-4 family residential properties		91,113		92,273
Commercial and construction		142,298		142,377
Consumer		1,770		2,314
Total acquired Eurobank loans		235,181		236,964
Allowance for loan and lease losses on Eurobank loans		(92,293)		(90,178)
Total acquired Eurobank loans, net		142,888		146,786
Total acquired loans, net		1,335,162		1,417,432
Total held for investment, net		4,342,964		4,420,599
Mortgage loans held-for-sale		17,165		13,614
Total loans, net	$	4,360,129	$	4,434,213

Originated and Other Loans and Leases 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 March 31, 2016 and December 31, 2015 by class of loans. Mortgage loans past due include 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.

	March 31, 2016
															Loans 90+
															Days Past
									Current						Due and
	30-59 Days		60-89 Days		90+ Days		Total Past		in Non-		Current				Still
	Past Due		Past Due		Past Due		Due		Accrual		Accruing		Total Loans		Accruing
	(In thousands)
Mortgage
Traditional (by origination year):
Up to the year 2002	$	82	$	1,218	$	3,208	$	4,508	$	40	$	51,085	$	55,633	$	268
Years 2003 and 2004		388		3,579		5,844		9,811		20		87,458		97,289		-
Year 2005		313		1,893		3,864		6,070		-		47,421		53,491		-
Year 2006		634		1,238		7,212		9,084		233		66,753		76,070		-
Years 2007, 2008 and 2009		282		1,417		14,128		15,827		-		72,650		88,477		705
Years 2010, 2011, 2012, 2013		511		2,015		9,017		11,543		-		136,702		148,245		271
Years 2014, 2015 and 2016		-		444		1,099		1,543		63		91,213		92,819		-
		2,210		11,804		44,372		58,386		356		553,282		612,024		1,244
Non-traditional		-		395		5,014		5,409		12		22,286		27,707		-
Loss mitigation program		10,679		6,537		16,411		33,627		4,580		65,804		104,011		3,422
		12,889		18,736		65,797		97,422		4,948		641,372		743,742		4,666
Home equity secured personal loans		-		-		-		-		-		393		393		-
GNMA's buy-back option program		-		-		7,684		7,684		-		-		7,684		-
Total mortgage		12,889		18,736		73,481		105,106		4,948		641,765		751,819		4,666
Commercial
Commercial secured by real estate:
Corporate		-		-		-		-		-		228,782		228,782		-
Institutional		-		-		-		-		-		27,584		27,584		-
Middle market		-		-		9,498		9,498		2,515		196,890		208,903		-
Retail		644		455		7,088		8,187		2,659		233,174		244,020		-
Floor plan		-		-		-		-		-		2,859		2,859		-
Real estate		-		-		-		-		-		16,372		16,372		-
		644		455		16,586		17,685		5,174		705,661		728,520		-
Other commercial and industrial:
Corporate		-		-		-		-		-		120,881		120,881		-
Institutional		-		-		-		-		186,675		176,580		363,255		-
Middle market		-		-		-		-		1,493		102,295		103,788		-
Retail		260		948		706		1,914		21		72,689		74,624		-
Floor plan		28		18		41		87		-		34,230		34,317		-
		288		966		747		2,001		188,189		506,675		696,865		-
Total commercial		932		1,421		17,333		19,686		193,363		1,212,336		1,425,385		-

	March 31, 2016
															Loans 90+
															Days Past
									Current						Due and
	30-59 Days		60-89 Days		90+ Days		Total Past		in Non-		Current				Still
	Past Due		Past Due		Past Due		Due		Accrual		Accruing		Total Loans		Accruing
	(In thousands)
Consumer
Credit cards		387		159		422		968		-		22,397		23,365		-
Overdrafts		17		-		-		17		-		203		220		-
Personal lines of credit		51		49		53		153		3		2,194		2,350		-
Personal loans		2,518		927		1,104		4,549		434		205,240		210,223		-
Cash collateral personal loans		214		19		14		247		-		15,922		16,169		-
Total consumer		3,187		1,154		1,593		5,934		437		245,956		252,327		-
Auto and leasing		53,801		17,203		7,742		78,746		57		608,356		687,159		-
Total	$	70,809	$	38,514	$	100,149	$	209,472	$	198,805	$	2,708,413	$	3,116,690	$	4,666

	December 31, 2015
															Loans 90+
															Days Past
									Current						Due and
	30-59 Days		60-89 Days		90+ Days		Total Past		in Non-		Current				Still
	Past Due		Past Due		Past Due		Due		Accrual		Accruing		Total Loans		Accruing
	(In thousands)
Mortgage
Traditional (by origination year):
Up to the year 2002	$	80	$	2,217	$	3,889	$	6,186	$	41	$	51,562	$	57,789	$	144
Years 2003 and 2004		251		5,036		5,536		10,823		-		88,623		99,446		-
Year 2005		79		2,553		3,549		6,181		-		48,040		54,221		-
Year 2006		551		2,878		7,934		11,363		176		66,864		78,403		-
Years 2007, 2008 and 2009		170		2,053		14,733		16,956		-		74,590		91,546		526
Years 2010, 2011, 2012, 2013		662		1,673		10,519		12,854		141		137,749		150,744		72
Years 2014 and 2015		-		65		663		728		-		85,128		85,856		-
		1,793		16,475		46,823		65,091		358		552,556		618,005		742
Non-traditional		-		977		5,079		6,056		13		23,483		29,552		-
Loss mitigation program		9,958		6,887		14,930		31,775		5,593		64,548		101,916		3,083
		11,751		24,339		66,832		102,922		5,964		640,587		749,473		3,825
Home equity secured personal loans		-		-		64		64		-		346		410		-
GNMA's buy-back option program		-		-		7,945		7,945		-		-		7,945		-
Total mortgage		11,751		24,339		74,841		110,931		5,964		640,933		757,828		3,825
Commercial
Commercial secured by real estate:
Corporate		-		-		-		-		-		227,557		227,557		-
Institutional		213		-		-		213		-		33,594		33,807		-
Middle market		1,174		712		9,113		10,999		1,730		194,219		206,948		-
Retail		686		466		6,921		8,073		1,177		231,840		241,090		-
Floor plan		-		-		-		-		-		2,892		2,892		-
Real estate		-		-		-		-		-		16,662		16,662		-
		2,073		1,178		16,034		19,285		2,907		706,764		728,956		-
Other commercial and industrial:
Corporate		-		-		-		-		-		108,582		108,582		-
Institutional		-		-		-		-		190,290		190,695		380,985		-
Middle market		-		-		-		-		1,565		105,748		107,313		-
Retail		282		639		604		1,525		783		75,489		77,797		-
Floor plan		238		51		39		328		-		37,688		38,016		-
		520		690		643		1,853		192,638		518,202		712,693		-
Total commercial		2,593		1,868		16,677		21,138		195,545		1,224,966		1,441,649		-

	December 31, 2015
															Loans 90+
															Days Past
									Current						Due and
	30-59 Days		60-89 Days		90+ Days		Total Past		in Non-		Current				Still
	Past Due		Past Due		Past Due		Due		Accrual		Accruing		Total Loans		Accruing
	(In thousands)
Consumer
Credit cards		449		182		369		1,000		-		21,766		22,766		-
Overdrafts		24		-		-		24		-		166		190		-
Personal lines of credit		74		-		45		119		19		2,106		2,244		-
Personal loans		2,078		1,179		627		3,884		414		196,858		201,156		-
Cash collateral personal loans		125		17		2		144		-		16,450		16,594		-
Total consumer		2,750		1,378		1,043		5,171		433		237,346		242,950		-
Auto and leasing		53,566		16,898		8,293		78,757		49		590,357		669,163		-
Total	$	70,660	$	44,483	$	100,854	$	215,997	$	201,991	$	2,693,602	$	3,111,590	$	3,825

During 2015, the Company changed its early delinquency reporting on mortgage loans from one scheduled payment due to two scheduled payments due in order to comply with regulatory reporting instructions and be comparable with local peers, except for troubled-debt restructured loans which continue using one scheduled payment due for delinquency reporting.

At March 31, 2016 and December 31, 2015, the Company had a carrying balances of $330.8 million and $334.6 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. All loans granted to the Puerto Rico government were current at March 31, 2016 and December 31, 2015. We, as part of a bank syndicate, have granted various extensions to the Puerto Rico Electric Power Authority (“PREPA”) and on November 5, 2015 entered into a Restructuring Support Agreement with a view towards restructuring the debt on terms that provide for full repayment of the debt to the Bank. After the first extension in the third quarter of 2014, 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, which included a financial model to project the future liquidity status of PREPA under various scenarios and its capacity to service its financial obligations, and concluded that PREPA had sufficient cash flows for the repayment of the line of credit. Despite the Company’s analysis showing PREPA’s capacity to repay the line of credit, the Company placed its participation in non-accrual and recorded a $24 million provision during the first quarter of 2015. During the fourth quarter of 2015, the Company recorded an additional $29.3 million provision for loan and lease losses on PREPA. Since it was placed in non-accrual, interest payments have been applied to principal. At March 31, 2016, and December 31, 2015, the allowance for loan and lease losses to PREPA was $53.3 million.

Acquired Loans

Acquired loans were initially measured at fair value and subsequently accounted for under either ASC 310-30 (Loans and Debt Securities Acquired with Deteriorated Credit Quality) or ASC 310-20 (Non-refundable fees and Other Costs). We have acquired loans in two bank acquisitions, BBVAPR and Eurobank.

Acquired BBVAPR 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, excluding the acquired Eurobank loan 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. Acquired BBVAPR loans 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 BBVAPR loans accounted for under ASC 310-20 as March 31, 2016 and December 31, 2015, by class of loans:

	March 31, 2016
															Loans 90+
															Days Past
									Current						Due and
	30-59 Days		60-89 Days		90+ Days		Total Past		in Non-		Current				Still
	Past Due		Past Due		Past Due		Due		Accrual		Accruing		Total Loans		Accruing
	(In thousands)
Commercial
Commercial secured by real estate
Retail	$	-	$	-	$	214	$	214	$	-	$	-	$	214	$	-
Floor plan		-		-		457		457		-		2,363		2,820		-
		-		-		671		671		-		2,363		3,034		-
Other commercial and industrial
Retail		68		8		177		253		-		3,264		3,517		-
Floor plan		-		-		7		7		-		-		7		-
		68		8		184		260		-		3,264		3,524		-
		68		8		855		931		-		5,627		6,558		-
Consumer
Credit cards		650		328		779		1,757		-		31,631		33,388		-
Personal loans		37		9		9		55		-		2,903		2,958		-
		687		337		788		1,812		-		34,534		36,346		-
Auto		6,895		2,108		553		9,556		-		81,850		91,406		-
Total	$	7,650	$	2,453	$	2,196	$	12,299	$	-	$	122,011	$	134,310	$	-

	December 31, 2015
															Loans 90+
															Days Past
									Current						Due and
	30-59 Days		60-89 Days		90+ Days		Total Past		in Non-		Current				Still
	Past Due		Past Due		Past Due		Due		Accrual		Accruing		Total Loans		Accruing
	(In thousands)
Commercial
Commercial secured by real estate
Retail	$	-	$	-	$	228	$	228	$	-	$	-	$	228	$	-
Floor plan		-		-		467		467		-		2,422		2,889		-
		-		-		695		695		-		2,422		3,117		-
Other commercial and industrial
Retail		186		29		178		393		-		3,331		3,724		-
Floor plan		-		-		7		7		-		609		616		-
		186		29		185		400		-		3,940		4,340		-
		186		29		880		1,095		-		6,362		7,457		-
Consumer
Credit cards		930		384		489		1,803		-		33,414		35,217		-
Personal loans		14		29		46		89		-		3,079		3,168		-
		944		413		535		1,892		-		36,493		38,385		-
Auto		7,553		2,279		831		10,663		-		96,248		106,911		-
Total	$	8,683	$	2,721	$	2,246	$	13,650	$	-	$	139,103	$	152,753	$	-

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

Acquired BBVAPR loans, 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 acquired BBVAPR loans with deteriorated credit quality, including those accounted under ASC 310-30 by analogy, in the statements of financial condition at March 31, 2016 and December 31, 2015 is as follows:

	March 31,	December 31,
	2016	2015
	(In thousands)
Contractual required payments receivable	$1,860,343	$1,945,098
Less: Non-accretable discount	$428,976	$434,190
Cash expected to be collected	1,431,367	1,510,908
Less: Accretable yield	340,663	361,688
Carrying amount, gross	1,090,704	1,149,220
Less: allowance for loan and lease losses	27,747	25,785
Carrying amount, net	$1,062,957	$1,123,435

At March 31, 2016 and December 31, 2015, the Company had $71.0 million and $80.9 million, respectively, in loans granted to the Puerto Rico government, including its instrumentalities, public corporations and municipalities as part of its acquired BBVAPR loans accounted for under ASC 310-30. This entire amount was current at March 31, 2016 and December 31, 2015.

The following tables describe the accretable yield and non-accretable discount activity of acquired BBVAPR loans accounted for under ASC 310-30 for the

	Quarter Ended March 31, 2016
	Mortgage		Commercial		Construction		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	268,794	$	45,411	$	19,615	$	21,578	$	6,290	$	361,688
Accretion		(8,307)		(5,839)		(1,869)		(4,211)		(938)		(21,164)
Change in expected cash flows		-		128		200		1		-		329
Transfer from (to) non-accretable discount		70		402		(790)		219		(91)		(190)
Balance at end of period	$	260,557	$	40,102	$	17,156	$	17,587	$	5,261	$	340,663

Non-Accretable Discount Activity:
Balance at beginning of period	$	374,772	$	11,781	$	6,764	$	22,039	$	18,834	$	434,190
Change in actual and expected cash flows		(4,547)		(663)		(122)		118		(190)		(5,404)
Transfer (to) from accretable yield		(70)		(402)		790		(219)		91		190
Balance at end of period	$	370,155	$	10,716	$	7,432	$	21,938	$	18,735	$	428,976

	Quarter Ended March 31, 2015
	Mortgage		Commercial		Construction		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	298,364	$	61,196	$	25,829	$	53,998	$	6,559	$	445,946
Accretion		(8,987)		(10,759)		(3,810)		(6,988)		(926)		(31,470)
Transfer (to) from non-accretable discount		(4,765)		6,893		(2,629)		87		(32)		(446)
Balance at end of period	$	284,612	$	57,330	$	19,390	$	47,097	$	5,601	$	414,030

Non-Accretable Discount Activity:
Balance at beginning of period	$	389,839	$	23,069	$	3,486	$	16,215	$	24,018	$	456,627
Change in actual and expected cash flows		(1,995)		(350)		(2,158)		(1,585)		(474)		(6,562)
Transfer from (to) accretable yield		4,765		(6,893)		2,629		(87)		32		446
Balance at end of period	$	392,609	$	15,826	$	3,957	$	14,543	$	23,576	$	450,511

Acquired Eurobank Loans

The carrying amount of acquired Eurobank loans at March 31, 2016 and December 31, 2015 is as follows:

		March 31		December 31
	2016		2015
	(In thousands)
Contractual required payments receivable	$	334,111	$	342,511
Less: Non-accretable discount		12,703		21,156
Cash expected to be collected		321,408		321,355
Less: Accretable yield		86,227		84,391
Carrying amount, gross		235,181		236,964
Less: Allowance for loan and lease losses		92,293		90,178
Carrying amount, net	$	142,888	$	146,786

The following tables describe the accretable yield and non-accretable discount activity of acquired Eurobank loans for the quarters ended March 31, 2016 and 2015:

	Quarter Ended March 31, 2016
	Loans Secured by 1-4 Family Residential Properties		Commercial and Other Construction		Construction & Development Secured by 1-4 Family Residential Properties		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	51,954	$	26,970	$	2,255	$	3,213	$	84,392
Accretion		(2,266)		(4,095)		(14)		(1,185)		(7,560)
Change in expected cash flows		984		11,093		(23)		(2,028)		10,026
Transfer from (to) non-accretable discount		115		(765)		19		-		(631)
Balance at end of period	$	50,787	$	33,203	$	2,237	$	-	$	86,227

Non-Accretable Discount Activity:
Balance at beginning of period	$	12,869	$	-	$	-	$	8,287	$	21,156
Change in actual and expected cash flows		(51)		(765)		19		(8,287)		(9,084)
Transfer (to) from accretable yield		(115)		765		(19)		-		631
Balance at end of period	$	12,703	$	-	$	-	$	-	$	12,703

	Quarter Ended March 31, 2015
	Loans Secured by 1-4 Family Residential Properties		Commercial and Other Construction		Construction & Development Secured by 1-4 Family Residential Properties		Leasing		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	47,636	$	37,919	$	20,753	$	2,479	$	1,072	$	109,859
Accretion		(3,518)		(9,855)		(619)		(1,392)		(120)		(15,504)
Transfer from non-accretable discount		14,214		5,417		672		578		1,052		21,933
Balance at end of period	$	58,332	$	33,481	$	20,806	$	1,665	$	2,004	$	116,288

Non-Accretable Discount Activity:
Balance at beginning of period	$	27,348	$	24,464	$	-	$	-	$	10,598	$	62,410
Change in actual and expected cash flows		(577)		(8,554)		672		578		116		(7,765)
Transfer to accretable yield		(14,214)		(5,417)		(672)		(578)		(1,052)		(21,933)
Balance at end of period	$	12,557	$	10,493	$	-	$	-	$	9,662	$	32,712

Non-accrual Loans

The following table presents the recorded investment in loans in non-accrual status by class of loans as of March 31, 2016 and December 31, 2015:

	March 31,		December 31,
	2016		2015
	(In thousands)
Originated and other loans and leases held for investment
Mortgage
Traditional (by origination year):
Up to the year 2002	$	3,051	$	3,786
Years 2003 and 2004		5,958		5,737
Year 2005		3,941		3,627
Year 2006		7,532		8,189
Years 2007, 2008 and 2009		13,742		14,625
Years 2010, 2011, 2012, 2013		9,056		10,588
Years 2014, 2015 and 2016		1,162		663
		44,442		47,215
Non-traditional		5,055		5,092
Loss mitigation program		19,630		20,172
		69,127		72,479
Home equity loans, secured personal loans		-		64
		69,127		72,543
Commercial
Commercial secured by real estate
Middle market		12,012		12,729
Retail		10,597		8,726
		22,609		21,455
Other commercial and industrial
Institutional		186,675		190,290
Middle market		1,493		1,565
Retail		1,527		1,932
Floor plan		41		39
		189,736		193,826
		212,345		215,281
Consumer
Credit cards		422		369
Personal lines of credit		64		100
Personal loans		1,539		1,146
Cash collateral personal loans		14		16
		2,039		1,631
Auto and leasing		7,873		8,418
Total non-accrual originated loans	$	291,384	$	297,873

	March 31,		December 31,
	2016		2015
	(In thousands)
Acquired BBVAPR loans accounted for under ASC 310-20
Commercial
Commercial secured by real estate
Retail	$	214	$	228
Floor plan		456		467
		670		695
Other commercial and industrial
Retail		177		178
Floor plan		7		7
		184		185
		854		880
Consumer
Credit cards		779		489
Personal loans		9		46
		788		535
Auto		572		831
Total non-accrual acquired BBVAPR loans accounted for under ASC 310-20		2,214		2,246
Total non-accrual loans	$	293,598	$	300,119

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 or are accounted under the cost recovery method.

Delinquent residential mortgage loans insured or guaranteed under applicable FHA and VA programs are classified as non-performing loans when they become 90 days or more past due, but are not placed in non-accrual status until they become 18 months or more past due, since they are insured loans. Therefore, these loans are included as non-performing loans but excluded from non-accrual loans.

During the first quarter of 2015, the revolving line of credit to PREPA was classified as non-accrual. At March 31, 2016, this line of credit had an unpaid principal balance of $186.7 million. Since the second quarter of 2015, interest payments are applied to principal. As of March 31, 2016, the specific reserve for the PREPA line of credit is $53.3 million.

At March 31, 2016 and December 31, 2015, loans whose terms have been extended and which are classified as troubled-debt restructurings that are not included in non-accrual loans amounted to $96.5 million and $93.6 million, respectively, as they are performing under their new terms.

Impaired Loans

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 $227.1 million and $235.8 million at March 31, 2016 and December 31, 2015, respectively. Impaired commercial loans at March 31, 2016 and December 31, 2015 included the PREPA line of credit with an unpaid principal balance of $186.7 million and $190.3 million, respectively. 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 $56.6 million at March 31, 2016 and $55.9 million at December 31, 2015. The valuation allowance for impaired commercial loans at March 31, 2016 and December 31, 2015 included $53.3 million of specific allowance for PREPA. The total investment in impaired mortgage loans was $90.8 million and $90.0 million at March 31, 2016 and December 15, 2015, 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 $9.1 million at March 31, 2016 and $9.2 million at December 31, 2015.

Originated and Other Loans and Leases Held for Investment

The Company’s recorded investment in 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 March 31, 2016 and December 31, 2015 are as follows:

	March 31, 2016
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	211,543	$	196,997	$	56,580	29%
Residential impaired and troubled-debt restructuring		98,610		90,772		9,135	10%
Impaired loans with no specific allowance:
Commercial		37,034		29,656		-	0%
Total investment in impaired loans	$	347,187	$	317,425	$	65,715	21%

	December 31, 2015
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	210,718	$	199,366	$	55,947	29%
Residential impaired and troubled-debt restructuring		97,424		89,973		9,233	10%
Impaired loans with no specific allowance
Commercial		42,110		35,928		-	0%
Total investment in impaired loans	$	350,252	$	325,267	$	65,180	21%

Acquired BBVAPR Loans

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

The Company’s recorded investment in acquired BBVAPR commercial loans accounted for under ASC 310-20 that were individually evaluated for impairment and the related allowance for loan and lease losses at March 31, 2016 and December 31, 2015 are as follows:


	March 31, 2016
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with no specific allowance
Commercial	$	478	$	464	$	-	0%
Total investment in impaired loans	$	478	$	464	$	-	0%


	December 31, 2015
	Unpaid		Recorded		Specific
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with no specific allowance
Commercial	$	486	$	474	$	-	0%
Total investment in impaired loans	$	486	$	474	$	-	0%

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

The Company’s recorded investment in acquired BBVAPR loan pools accounted for under ASC 310-30 that have recorded impairments and their related allowance for loan and lease losses at March 31, 2016 and December 31, 2015 are as follows:

	March 31, 2016
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	600,901	$	600,901	$	1,762	0%
Commercial		267,931		164,913		15,668	10%
Construction		77,619		77,619		4,762	6%
Auto		134,669		134,669		5,555	4%
Total investment in impaired loan pools	$	1,081,120	$	978,102	$	27,747	3%

	December 31 , 2015
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	608,294	$	608,294	$	1,762	0%
Commercial		287,311		168,107		15,454	9%
Construction		88,180		87,983		5,707	6%
Auto		153,592		153,592		2,862	2%
Total investment in impaired loan pools	$	1,137,377	$	1,017,976	$	25,785	3%

The tables above only present information with respect to acquired BBVAPR loans and pools accounted for under ASC 310-30 if there is a recorded impairment to such loans or loan pools and a specific allowance for loan losses.

Acquired Eurobank Loans

The Company’s recorded investment in acquired Eurobank loan pools that have recorded impairments and their related allowance for loan and lease losses as of March 31, 2016 and December 31, 2015 are as follows:

	March 31, 2016
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance:
Loans secured by 1-4 family residential properties	$	96,028	$	91,113	$	23,961	26%
Commercial and construction		130,042		142,298		68,089	48%
Consumer		1,708		1,770		243	14%
Total investment in impaired loan pools	$	227,778	$	235,181	$	92,293	39%

	December 31, 2015
							Coverage
	Unpaid		Recorded		Specific		to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance
Loans secured by 1-4 family residential properties	$	101,444	$	92,273	$	22,570	24%
Commercial and construction		133,148		142,377		67,365	47%
Consumer		6,713		2,314		243	11%
Total investment in impaired loan pools	$	241,305	$	236,964	$	90,178	38%

The tables above only present information with respect to acquired Eurobank loans and loan pools accounted for under ASC 310-30 if there is a recorded impairment to such loans or loan pools and a specific allowance for loan losses.

The following table presents the interest recognized in commercial and mortgage loans that were individually evaluated for impairment, excluding loans accounted for under ASC 310-30 for the quarters ended March 31, 2016 and 2015:

	Quarter Ended March 31,
	2016				2015
	Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment
	(In thousands)
Originated and other loans held for investment:
Impaired loans with specific allowance
Commercial	$	71	$	196,795	$	3,695	$	79,873
Residential troubled-debt restructuring		798		90,292		733		93,391
Impaired loans with no specific allowance
Commercial		270		33,626		241		161,568
		1,139		320,713		4,669		334,832
Acquired loans accounted for under ASC 310-20:
Impaired loans with no specific allowance
Commercial		-		467		12		2,401
Total interest income from impaired loans	$	1,139	$	321,180	$	4,681	$	337,233

Modifications

The following tables present the troubled-debt restructurings during the

	Quarter Ended March 31, 2016
	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	33	$	3,957	6.03%	361	$	4,854	4.83%	493
Commercial	2		655	6.81%	41		656	6.71%	36
Consumer	21		192	14.28%	75		231	11.15%	72


	Quarter Ended March 31, 2015
	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	51	$	6,182	4.00%	356	$	6,054	4.02%	357
Commercial	3		4,505	6.83%	80		4,505	7.00%	141
Consumer	11		146	14.67%	75		182	14.80%	66

The following table presents troubled-debt restructurings for which there was a payment default during the twelve-month periods ended March 31, 2016 and 2015:

	Twelve Month Period Ended March 31,
	2016			2015
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(Dollars in thousands)
Mortgage	31	$	3,732	60	$	6,963
Consumer	3	$	77	6	$	81
Auto	1	$	17	-	$	-

Credit Quality Indicators

The Company categorizes 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.

The Company uses the following definitions for risk ratings:

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 March 31, 2016 and December 31, 2015, and based on the most recent analysis performed, the risk category of gross originated and other loans and BBVAPR acquired loans accounted for under ASC 310-20 subject to risk rating by class of loans is as follows:

	March 31, 2016
	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	$	228,782	$	213,714	$	15,068	$	-	$	-	$	-
Institutional		27,584		25,779		-		-		-		1,805
Middle market		208,903		180,248		14,078		189		-		14,388
Retail		244,020		219,150		7,592		5,069		-		12,209
Floor plan		2,859		2,859		-		-		-		-
Real estate		16,372		16,372		-		-		-		-
		728,520		658,122		36,738		5,258		-		28,402
Other commercial and industrial:
Corporate		120,881		113,235		-		-		-		7,646
Institutional		363,255		176,580		-		-		-		186,675
Middle market		103,788		92,896		8,787		218		-		1,887
Retail		74,624		69,644		1,749		1,227		-		2,004
Floor plan		34,317		34,195		-		83		-		39
		696,865		486,550		10,536		1,528		-		198,251
Total		1,425,385		1,144,672		47,274		6,786		-		226,653
Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		214		-		-		214		-		-
Floor plan		2,820		574		1,789		-		-		457
		3,034		574		1,789		214		-		457
Other commercial and industrial:
Retail		3,517		3,444		-		73		-		-
Floor plan		7		-		-		-		-		7
		3,524		3,444		-		73		-		7
Total		6,558		4,018		1,789		287		-		464
Total	$	1,431,943	$	1,148,690	$	49,063	$	7,073	$	-	$	227,117

	December 31, 2015
	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	$	227,557	$	212,410	$	15,147	$	-	$	-	$	-
Institutional		33,807		25,907		-		-		-		7,900
Middle market		206,948		181,916		9,697		-		-		15,335
Retail		241,090		217,836		7,936		5,097		-		10,221
Floor plan		2,892		2,892		-		-		-		-
Real estate		16,662		16,662		-		-		-		-
		728,956		657,623		32,780		5,097		-		33,456
Other commercial and industrial:
Corporate		108,582		100,826		-		-		-		7,756
Institutional		380,985		190,695		-		-		-		190,290
Middle market		107,313		97,288		8,052		-		-		1,973
Retail		77,797		73,757		1,076		1,184		-		1,780
Floor plan		38,016		35,862		2,115		-		-		39
		712,693		498,428		11,243		1,184		-		201,838
Total		1,441,649		1,156,051		44,023		6,281		-		235,294

Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		228		-		-		228		-		-
Floor plan		2,889		602		1,820		-		-		467
		3,117		602		1,820		228		-		467
Other commercial and industrial:
Retail		3,724		3,637		-		87		-		-
Floor plan		616		609		-		-		-		7
		4,340		4,246		-		87		-		7
Total		7,457		4,848		1,820		315		-		474
Total	$	1,449,106	$	1,160,899	$	45,843	$	6,596	$	-	$	235,768

At March 31, 2016 and 2015, the Company had outstanding credit facilities of approximately $401.8 million and $415.4 million, respectively, granted to the Puerto Rico government, including its instrumentalities, public corporations and municipalities, included within portfolio of originated and other loans and acquired BBVAPR loans accounted for under ASC 310-30. A substantial portion of the Company’s credit exposure to Puerto Rico’s government consists of collateralized loans or obligations that have a specific source of income or revenues identified for their repayment. Approximately $204 million of these loans are general obligations of municipalities secured by ad valorem taxation, without limitation as to rate or amount, on all taxable property within the issuing municipalities. The good faith, credit and unlimited taxing power of each issuing municipality are pledged for the payment of its general obligations.

At March 31, 2016, we had approximately $198.2 million of credit facilities to central government and public corporations of the Commonwealth, including:

PREPA with an outstanding balance of $186.7 million; and
The PRHFA with an outstanding balance of $11.0 million to be repaid from abandoned or unclaimed funds at financial institutions that revert to the government under a Puerto Rico escheat law.

The outstanding balance of credit facilities to public corporations decreased to $10.0 during the first quarter of 2016 as a result of partial repayment by PRHFA.

Oriental Bank is part of a four bank syndicate providing a $550 million revolving line of credit to finance the purchase of fuel for PREPA’s day-to-day power generation activities. Our participation in the line of credit has an unpaid principal balance of $186.7 million as of March 31, 2016. As part of the bank syndicate, the Bank entered into a forbearance agreement with PREPA, which was extended several times during 2015 until the execution of a Restructuring Support Agreement on November 5, 2015 with PREPA and certain other creditors. The Restructuring Support Agreement provides for the restructuring of the fuel line of credit subject to the accomplishment of several milestones, including some milestones that depend on the actions of third parties to the agreement, such as the negotiation of agreements with other creditors and legislative action. The Company has classified the credit facility to PREPA as doubtful and on non-accrual status. The Company conducted an impairment analysis considering the probability of collection of principal and interest, which included a financial model to project the future liquidity status of PREPA under various scenarios and its capacity to service its financial obligations, and concluded that PREPA had sufficient cash flows for the repayment of the line of credit. Despite the Company’s analysis showing PREPA’s capacity to repay the line of credit, the Company placed its participation in non-accrual and recorded a $24 million provision during the first quarter of 2015. During the fourth quarter of 2015, the Company recorded an additional $29.3 million provision for loan and lease losses for PREPA as a result of the increased level of uncertainty as to the closing of the restructuring agreement, which is expected by the second half of 2016. Since April 1, 2015, interest payments have been applied to principal.

The PREPA Revitalization Act was recently signed into law by the Governor of Puerto Rico. It provides for a major debt restructuring of PREPA’s outstanding debt and sets forth a legal framework for PREPA to execute on the agreements reached with its creditors. Among other things, it (i) enhances PREPA’s governance processes; (ii) adjusts PREPA’s practices for hiring and managing personnel; (iii) changes PREPA’s processes for collecting outstanding bills from public and private entities; (iv) improves transparency of PREPA’s billing practices; (v) implements a competitive bidding process for soliciting third party investment in PREPA’s infrastructure; (vi) allows for the refinancing of existing PREPA bonds through a securitization that would reduce PREPA’s indebtedness and cost of borrowing; and (vii) sets forth a process for the Energy Commission to address PREPA’s proposal for a new rate structure that consistent with its recovery plan.

PREPA’s enabling act provides for local receivership upon request to any Puerto Rico court of competent jurisdiction in the event of a default in debt-service payments or other obligations in connection with PREPA’s bonds. The receiver so appointed would be empowered, directly or through its agents and attorneys, to take possession of the undertakings, income and revenues pledged to the payment of the bonds in default; to have, hold, use, operate, manage and control the same; and to exercise all of PREPA’s rights and powers with respect to such undertakings. However, any such receiver would not have the power to sell, assign, mortgage or otherwise dispose of PREPA’s assets, and its powers would be limited to the operation and maintenance of such undertakings and the collection and application of the income and revenues therefrom. Although the Puerto Rico government is actively seeking the right to bankruptcy relief for some of its public instrumentalities, including PREPA, both through an amendment to the federal bankruptcy code and the enactment of a local debt restructuring law, such efforts have thus far been unsuccessful.

For residential and consumer loan classes, the Company evaluates credit quality based on the delinquency status of the loan. As of March 31, 2016 and December 31, 2015, and based on the most recent analysis performed, the risk category of gross originated and other loans and acquired BBVAPR loans accounted for under ASC 310-20 not subject to risk rating by class of loans is as follows:

	March 31, 2016
	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	$	55,633	$	50,439	$	82	$	1,219	$	629	$	1,352	$	1,229	$	683
Years 2003 and 2004		97,289		85,896		388		3,580		1,681		1,552		2,444		1,748
Year 2005		53,491		46,578		314		1,893		315		1,412		2,140		839
Year 2006		76,070		63,614		402		1,238		816		1,620		4,775		3,605
Years 2007, 2008 and 2009		88,477		69,491		282		1,420		997		2,909		9,617		3,761
Years 2010, 2011, 2012 2013		148,245		134,179		452		1,819		69		1,777		5,866		4,083
Years 2014, 2015 and 2016		92,819		91,277		-		444		639		225		234		-
		612,024		541,474		1,920		11,613		5,146		10,847		26,305		14,719
Non-traditional		27,707		22,299		-		395		128		2,337		2,548		-
Loss mitigation program		104,011		17,800		2,890		1,953		669		1,498		3,148		76,053
		743,742		581,573		4,810		13,961		5,943		14,682		32,001		90,772
Home equity secured personal loans		393		393		-		-		-		-		-		-
GNMA's buy-back option program		7,684		-		-		-		805		3,730		3,149		-
		751,819		581,966		4,810		13,961		6,748		18,412		35,150		90,772
Consumer
Credit cards		23,365		22,403		387		153		192		230		-		-
Overdrafts		220		203		17		-		-		-		-		-
Unsecured personal lines of credit		2,350		2,197		51		49		22		31		-		-
Unsecured personal loans		210,223		205,756		2,458		920		1,082		7		-		-
Cash collateral personal loans		16,169		15,922		214		19		14		-		-		-
		252,327		246,481		3,127		1,141		1,310		268		-		-
Auto and Leasing		687,159		608,442		53,801		17,203		5,572		2,141		-		-
		1,691,305		1,436,889		61,738		32,305		13,630		20,821		35,150		90,772
Acquired loans (accounted for under ASC 310-20)
Consumer
Credit cards		33,388		31,631		650		328		287		492		-		-
Personal loans		2,959		2,903		37		9		-		10		-		-
		36,346		34,534		687		337		287		502		-		-
Auto		91,406		81,849		6,895		2,108		342		212		-		-
		127,752		116,383		7,582		2,445		629		714		-		-
Total	$	1,819,057	$	1,553,272	$	69,320	$	34,750	$	14,259	$	21,535	$	35,150	$	90,772

	December 31, 2015
	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	$	57,789	$	50,912	$	82	$	2,218	$	530	$	1,504	$	1,858	$	685
Years 2003 and 2004		99,446		87,060		251		4,867		1,261		1,353		2,921		1,733
Year 2005		54,221		47,197		79		2,553		292		1,068		2,189		843
Year 2006		78,403		63,659		318		2,878		1,168		1,895		4,871		3,614
Years 2007, 2008 and 2009		91,546		71,439		170		1,665		685		2,972		10,725		3,890
Years 2010, 2011, 2012 2013		150,744		134,945		569		1,611		434		1,982		6,737		4,466
Year 2014 and 2015		85,856		85,128		-		65		148		281		234		-
		618,005		540,340		1,469		15,857		4,518		11,055		29,535		15,231
Non-traditional		29,552		23,497		-		977		552		2,621		1,905		-
Loss mitigation program		101,916		16,031		4,173		1,977		727		1,728		2,538		74,742
		749,473		579,868		5,642		18,811		5,797		15,404		33,978		89,973
Home equity secured personal loans		410		346		-		-		-		64		-		-
GNMA's buy-back option program		7,945		-		-		-		1,593		3,578		2,774		-
		757,828		580,214		5,642		18,811		7,390		19,046		36,752		89,973
Consumer
Credit cards		22,766		21,766		449		182		179		190		-		-
Overdrafts		190		166		24		-		-		-		-		-
Unsecured personal lines of credit		2,244		2,125		74		-		17		28		-		-
Unsecured personal loans		201,156		197,339		2,083		1,107		621		6		-		-
Cash collateral personal loans		16,594		16,450		125		17		2		-		-		-
		242,950		237,846		2,755		1,306		819		224		-		-
Auto and Leasing		669,163		590,482		53,549		16,839		5,708		2,585		-		-
		1,669,941		1,408,542		61,946		36,956		13,917		21,855		36,752		89,973
Acquired loans (accounted for under ASC 310-20)
Consumer
Credit cards		35,217		33,414		930		384		186		303		-		-
Personal loans		3,168		3,079		14		29		1		45		-		-
		38,385		36,493		944		413		187		348		-		-
Auto		106,911		96,247		7,553		2,279		623		209		-		-
		145,296		132,740		8,497		2,692		810		557		-		-
Total	$	1,815,237	$	1,541,282	$	70,443	$	39,648	$	14,727	$	22,412	$	36,752	$	89,973

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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