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Loans Receivable

6 Months Ended

Jun. 30, 2016

Loans Receivable [Abstract]

LOANS RECEIVABLE

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. 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 June 30, 2016, the remaining covered loans, amounting to $65.8 million, net carrying amount ($76.8 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 the six-month periods ended June 30, 2016 and 2015 was $4.3 million and $28.3 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 residential loans on June 30, 2015.

Effective June 30, 2016, pursuant to supervisory direction, the Company changed the purchase credit impaired policy for all loans accounted for under ASC 310-30 (Loans and Debt Securities Acquired with Deteriorated Credit Quality). Under the revised policy, the Company writes-off the loan’s recorded investment and derecognizes the associated allowance for loan and lease losses for loans that exit the acquired pools. The revised policy will be implemented prospectively due to the immaterial impact of retrospective adoption. Prior to June 30, 2016, the pool’s carrying value and allowance was determined by discounting expected cash flows at the pool’s effective yield. The allowance for loan and lease losses was maintained until all of the loans in the pool were paid off or charged-off. The transition to this revised policy on June 30, 2016 resulted in the de-recognition of $8.5 million and $72.2 million in the recorded investment balance and associated allowance for loans that had exited the pools, for acquired BBVAPR loans and acquired Eurobank loans, respectively, with no impact to the provision for loan and lease losses. Refer to Note 5 Allowances for Loan and Lease Losses.

The composition of the Company’s loan portfolio at June 30, 2016 and December 31, 2015 was as follows

		June 30,			December 31,
	2016			2015
	(In thousands)
Originated and other loans and leases held for investment:
Mortgage	$	741,917		$	757,828
Commercial		1,476,613			1,441,649
Consumer		265,269			242,950
Auto and leasing		712,268			669,163
		3,196,067			3,111,590
Allowance for loan and lease losses on originated and other loans and leases		(112,812)			(112,626)
		3,083,255			2,998,964
Deferred loan costs, net		4,619			4,203
Total originated and other loans loans held for investment, net		3,087,874			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		4,559			7,457
Consumer		35,194			38,385
Auto		77,118			106,911
		116,871			152,753
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-20		(4,487)			(5,542)
		112,384			147,211
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy) (a)
Mortgage		591,029			608,294
Commercial		246,188			287,311
Construction		76,917			88,180
Consumer		7,331			11,843
Auto		117,038			153,592
		1,038,503			1,149,220
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-30 (b)		(22,801)			(25,785)
		1,015,702			1,123,435
Total acquired BBVAPR loans, net		1,128,086			1,270,646
Acquired Eurobank loans: (a)
Loans secured by 1-4 family residential properties		76,777			92,273
Commercial and construction		83,377			142,377
Consumer		1,410			2,314
Total acquired Eurobank loans		161,564			236,964
Allowance for loan and lease losses on Eurobank loans (b)		(22,116)			(90,178)
Total acquired Eurobank loans, net		139,448			146,786
Total acquired loans, net		1,267,534			1,417,432
Total held for investment, net		4,355,408			4,420,599
Mortgage loans held-for-sale		18,209			13,614
Total loans, net	$	4,373,617		$	4,434,213
(a) Current period amounts have been re-measured using the revised derecognition policy for purchased credit impaired loans.
(b) A portion of the allowance for loan and lease losses associated with purchased credit impaired loans was derecognized on June 30, 2016 due to the revision in the derecognition policy for these loans.

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 June 30, 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.

	June 30, 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	$	260		$	2,024		$	2,973		$	5,257		$	-		$	48,801		$	54,058		$	227
Years 2003 and 2004		343			3,936			6,201			10,480			65			84,208			94,753			-
Year 2005		-			1,878			3,826			5,704			64			46,293			52,061			-
Year 2006		743			2,243			6,741			9,727			50			64,109			73,886			-
Years 2007, 2008 and 2009		854			1,414			11,793			14,061			-			69,957			84,018			699
Years 2010, 2011, 2012, 2013		498			1,307			9,420			11,225			142			133,384			144,751			416
Years 2014, 2015 and 2016		-			189			901			1,090			62			98,209			99,361			-
		2,698			12,991			41,855			57,544			383			544,961			602,888			1,342
Non-traditional		-			938			5,217			6,155			12			20,028			26,195			-
Loss mitigation program		9,898			6,574			15,738			32,210			3,857			68,014			104,081			3,770
		12,596			20,503			62,810			95,909			4,252			633,003			733,164			5,112
Home equity secured personal loans		-			-			-			-			-			384			384			-
GNMA's buy-back option program		-			-			8,369			8,369			-			-			8,369			-
Total mortgage		12,596			20,503			71,179			104,278			4,252			633,387			741,917			5,112
Commercial
Commercial secured by real estate:
Corporate		-			-			-			-			-			230,296			230,296			-
Institutional		-			-			-			-			-			27,838			27,838			-
Middle market		-			125			8,589			8,714			2,255			209,127			220,096			-
Retail		96			1,226			5,871			7,193			3,327			236,171			246,691			-
Floor plan		-			-			-			-			-			2,826			2,826			-
Real estate		-			-			-			-			-			16,079			16,079			-
		96			1,351			14,460			15,907			5,582			722,337			743,826			-
Other commercial and industrial:
Corporate		-			-			-			-			-			140,192			140,192			-
Institutional		-			-			-			-			183,020			193,258			376,278			-
Middle market		2,007			-			-			2,007			1,421			102,112			105,540			-
Retail		896			529			582			2,007			135			74,823			76,965			-
Floor plan		6			38			40			84			-			33,728			33,812			-
		2,909			567			622			4,098			184,576			544,113			732,787			-
Total commercial		3,005			1,918			15,082			20,005			190,158			1,266,450			1,476,613			-

	June 30, 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		459			177			432			1,068			-			23,809			24,877			-
Overdrafts		15			1			-			16			-			204			220			-
Personal lines of credit		42			14			94			150			-			2,281			2,431			-
Personal loans		1,854			1,137			898			3,889			875			216,884			221,648			-
Cash collateral personal loans		63			3			1			67			-			16,026			16,093			-
Total consumer		2,433			1,332			1,425			5,190			875			259,204			265,269			-
Auto and leasing		44,433			19,438			7,322			71,193			15			641,060			712,268			-
Total	$	62,467		$	43,191		$	95,008		$	200,666		$	195,300		$	2,800,101		$	3,196,067		$	5,112

	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 to be comparable with local peers, except for troubled-debt restructured loans which continue using one scheduled payment due for delinquency reporting. During the quarter ended June 30, 2016, the Company changed its early delinquency reporting on consumer and auto loans from one scheduled payment due to two scheduled payments to report consistently its retail portfolio. The change resulted in a $19 thousand and $5.9 million reduction in early and total delinquency for consumer and auto loans, respectively.

At June 30, 2016 and December 31, 2015, the Company had carrying balances of $327.0 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 June 30, 2016 and December 31, 2015. As part of a bank syndicate, on November 5, 2015 the Company entered into a Restructuring Support Agreement with a view towards restructuring a line of credit to the Puerto Rico Electric Power Authority ("PREPA") on terms that provide for full repayment of the debt to the Bank. 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 classified the credit as doubtful, 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 June 30, 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 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 of June 30, 2016 and December 31, 2015, by class of loans:

	June 30, 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	$	-		$	-		$	197		$	197		$	-		$	-		$	197		$	-
Floor plan		-			-			446			446			-			2,309			2,755			-
		-			-			643			643			-			2,309			2,952			-
Other commercial and industrial
Retail		37			17			120			174			-			1,426			1,600			-
Floor plan		-			-			7			7			-			-			7			-
		37			17			127			181			-			1,426			1,607			-
		37			17			770			824			-			3,735			4,559			-
Consumer
Credit cards		731			290			704			1,725			-			30,573			32,298			-
Personal loans		116			14			60			190			-			2,706			2,896			-
		847			304			764			1,915			-			33,279			35,194			-
Auto		5,088			2,196			562			7,846			-			69,272			77,118			-
Total	$	5,972		$	2,517		$	2,096		$	10,585		$	-		$	106,286		$	116,871		$	-

	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 June 30, 2016 and December 31, 2015 is as follows:

		June 30,			December 31,
		2016			2015
			(In thousands)
Contractual required payments receivable (a)		$	1,788,121		$	1,945,098
Less: Non-accretable discount			394,500			434,190
Cash expected to be collected			1,393,621			1,510,908
Less: Accretable yield			355,118			361,688
Carrying amount, gross			1,038,503			1,149,220
Less: allowance for loan and lease losses (b)			22,801			25,785
Carrying amount, net		$	1,015,702		$	1,123,435
(a) Current period amounts have been re-measured using the revised derecognition policy for purchased credit impaired loans.
(b) A portion of the allowance for loan and lease losses associated with purchased credit impaired loans was derecognized on June 30, 2016 due to the revision in the derecognition policy for these loans.

At June 30, 2016 and December 31, 2015, the Company had $71.6 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 June 30, 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 June 30, 2016
	Mortgage			Commercial			Construction			Auto			Consumer			Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	260,557		$	40,102		$	17,156		$	17,587		$	5,261		$	340,663
Accretion		(8,294)			(5,272)			(1,307)			(3,616)			(870)			(19,359)
Change in expected cash flows		-			3,062			(408)			630			(1)			3,283
Transfer from (to) non-accretable discount		31,560			(833)			(193)			(498)			495			30,531
Balance at end of period	$	283,823		$	37,059		$	15,248		$	14,103		$	4,885		$	355,118
Non-Accretable Discount Activity:
Balance at beginning of period	$	370,155		$	10,716		$	7,432		$	21,938		$	18,735		$	428,976
Change in actual and expected losses		(2,442)			(967)			(206)			(315)			(15)			(3,945)
Transfer (to) from accretable yield		(31,560)			833			193			498			(495)			(30,531)
Balance at end of period	$	336,153		$	10,582		$	7,419		$	22,121		$	18,225		$	394,500

	Six-Month Period Ended June 30, 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		(16,601)			(11,111)			(3,176)			(7,827)			(1,808)			(40,523)
Change in expected cash flows		-			3,190			(208)			631			(1)			3,612
Transfer from (to) non-accretable discount		31,630			(431)			(983)			(279)			404			30,341
Balance at end of period	$	283,823		$	37,059		$	15,248		$	14,103		$	4,885		$	355,118
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 losses		(6,989)			(1,630)			(328)			(197)			(205)			(9,349)
Transfer (to) from accretable yield		(31,630)			431			983			279			(404)			(30,341)
Balance at end of period	$	336,153		$	10,582		$	7,419		$	22,121		$	18,225		$	394,500

	Quarter Ended June 30, 2015
	Mortgage			Commercial			Construction			Auto			Consumer			Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	284,612		$	57,330		$	19,390		$	47,097		$	5,601		$	414,030
Accretion		(8,813)			(9,597)			(2,143)			(6,163)			(1,287)			(28,003)
Change in actual and expected losses		-			23,695			9,867			-			-			33,562
Transfer from (to) non-accretable discount		81			135			(2,501)			(9,403)			4,147			(7,541)
Balance at end of period	$	275,880		$	71,563		$	24,613		$	31,531		$	8,461		$	412,048
Non-Accretable Discount Activity:
Balance at beginning of period	$	392,609		$	15,826		$	3,957		$	14,543		$	23,576		$	450,511
Change in actual and expected losses		(3,421)			(4,921)			536			(256)			(73)			(8,135)
Transfer (to) from accretable yield		(81)			(135)			2,501			9,403			(4,147)			7,541
Balance at end of period	$	389,107		$	10,770		$	6,994		$	23,690		$	19,356		$	449,917

	Six-Month Period Ended June 30, 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		(17,800)			(20,356)			(5,953)			(13,151)			(2,213)			(59,473)
Change in actual and expected losses		-			23,695			9,867			-			-			33,562
Transfer (to) from non-accretable discount		(4,684)			7,028			(5,130)			(9,316)			4,115			(7,987)
Balance at end of period	$	275,880			71,563			24,613			31,531			8,461			412,048
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 losses		(5,416)			(5,271)			(1,622)			(1,841)			(547)			(14,697)
Transfer from (to) accretable yield		4,684			(7,028)			5,130			9,316			(4,115)			7,987
Balance at end of period	$	389,107		$	10,770		$	6,994		$	23,690		$	19,356		$	449,917

Acquired Eurobank Loans

The carrying amount of acquired Eurobank loans at June 30, 2016 and December 31, 2015 is as follows:

		June 30			December 31
	2016			2015
	(In thousands)
Contractual required payments receivable (a)	$	252,801		$	342,511
Less: Non-accretable discount		11,555			21,156
Cash expected to be collected		241,246			321,355
Less: Accretable yield		79,682			84,391
Carrying amount, gross		161,564			236,964
Less: Allowance for loan and lease losses (b)		22,116			90,178
Carrying amount, net	$	139,448		$	146,786
(a) Current period amounts have been re-measured using the revised derecognition policy for purchased credit impaired loans.
(b) A portion of the allowance for loan and lease losses associated with purchased credit impaired loans was derecognized on June 30, 2016 due to the revision in the derecognition policy for these loans.

The following tables describe the accretable yield and non-accretable discount activity of acquired Eurobank loans for the quarters and six-months periods ended June 30, 2016 and 2015:

	Quarter Ended June 30, 2016
	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	$	50,787		$	33,203		$	2,237		$	-		$	-		$	86,227
Accretion		(2,263)			(4,528)			(33)			2			(76)			(6,898)
Change in expected cash flows		(198)			1,619			-			(77)			81			1,425
Transfer from (to) non-accretable discount		10			(1,152)			-			75			(5)			(1,072)
Balance at end of year	$	48,336		$	29,142		$	2,204		$	-		$	-		$	79,682
Non-Accretable Discount Activity:
Balance at beginning of period	$	12,703		$	-		$	-		$	-		$	-		$	12,703
Change in actual and expected losses		(1,138)			(1,152)			-			75			(5)			(2,220)
Transfer from (to) accretable yield		(10)			1,152			-			(75)			5			1,072
Balance at end of period	$	11,555		$	-		$	-		$	-		$	-		$	11,555

	Six-Month Period Ended June 30, 2016
	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	$	51,954		$	26,970		$	2,255		$	-		$	3,213		$	84,392
Accretion		(4,529)			(8,623)			(47)			2			(1,261)			(14,458)
Change in expected cash flows		786			12,712			(23)			(77)			(1,947)			11,451
Transfer from (to) non-accretable discount		125			(1,917)			19			75			(5)			(1,703)
Balance at end of period	$	48,336		$	29,142		$	2,204		$	-		$	-		$	79,682
Non-Accretable Discount Activity:
Balance at beginning of period	$	12,869		$	-		$	-		$	-		$	8,287		$	21,156
Change in actual and expected losses		(1,189)			(1,917)			19			75			(8,292)			(11,304)
Transfer (to) from accretable yield		(125)			1,917			(19)			(75)			5			1,703
Balance at end of period	$	11,555		$	-		$	-		$	-		$	-		$	11,555

	Quarter Ended June 30, 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	$	58,332		$	33,481		$	20,806		$	1,665		$	2,004		$	116,288
Accretion		(3,276)			(8,047)			(405)			(937)			(93)			(12,758)
Transfer from non-accretable discount		750			2,039			(2,052)			375			(1)			1,111
Balance at end of period	$	55,806		$	27,473		$	18,349		$	1,103		$	1,910		$	104,641
Non-Accretable Discount Activity:
Balance at beginning of period	$	12,557		$	10,493		$	-		$	-		$	9,662		$	32,712
Change in actual and expected losses		(405)			(8,454)			(2,052)			375			67			(10,469)
Transfer to accretable yield		(750)			(2,039)			2,052			(375)			1			(1,111)
Balance at end of period	$	11,402		$	-		$	-		$	-		$	9,730		$	21,132

	Six-Month Period Ended June 30, 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		(6,794)			(17,902)			(1,024)			(2,329)			(213)			(28,262)
Transfer from (to) non-accretable discount		14,964			7,456			(1,380)			953			1,051			23,044
Balance at end of period	$	55,806		$	27,473		$	18,349		$	1,103		$	1,910		$	104,641
Non-Accretable Discount Activity:
Balance at beginning of period	$	27,348		$	24,464		$	-		$	-		$	10,598		$	62,410
Change in actual and expected cash flows		(982)			(17,008)			(1,380)			953			183			(18,234)
Transfer (to) from accretable yield		(14,964)			(7,456)			1,380			(953)			(1,051)			(23,044)
Balance at end of period	$	11,402		$	-		$	-		$	-		$	9,730		$	21,132

Non-accrual Loans

The following table presents the recorded investment in loans in non-accrual status by class of loans as of June 30, 2016 and December 31, 2015:

	June 30,			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	$	2,812		$	3,786
Years 2003 and 2004		6,359			5,737
Year 2005		3,889			3,627
Year 2006		7,135			8,189
Years 2007, 2008 and 2009		11,292			14,625
Years 2010, 2011, 2012, 2013		9,311			10,588
Years 2014, 2015 and 2016		963			663
		41,761			47,215
Non-traditional		5,229			5,092
Loss mitigation program		18,769			20,172
		65,759			72,479
Home equity loans, secured personal loans		-			64
		65,759			72,543
Commercial
Commercial secured by real estate
Middle market		10,969			12,729
Retail		10,352			8,726
		21,321			21,455
Other commercial and industrial
Institutional		183,020			190,290
Middle market		1,421			1,565
Retail		1,966			1,932
Floor plan		40			39
		186,447			193,826
		207,768			215,281
Consumer
Credit cards		432			369
Personal lines of credit		94			100
Personal loans		1,812			1,146
Cash collateral personal loans		1			16
		2,339			1,631
Auto and leasing		7,337			8,418
Total non-accrual originated loans	$	283,203		$	297,873

	June 30,			December 31,
	2016			2015
	(In thousands)
Acquired BBVAPR loans accounted for under ASC 310-20
Commercial
Commercial secured by real estate
Retail	$	197		$	228
Floor plan		446			467
		643			695
Other commercial and industrial
Retail		120			178
Floor plan		7			7
		127			185
		770			880
Consumer
Credit cards		704			489
Personal loans		60			46
		764			535
Auto		562			831
Total non-accrual acquired BBVAPR loans accounted for under ASC 310-20		2,096			2,246
Total non-accrual loans	$	285,299		$	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 for under the cost recovery method.

Delinquent residential mortgage loans insured or guaranteed under applicable Federal Housing Administration ("FHA") and U.S. Department of Veterans Affairs ("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 June 30, 2016, this line of credit had an unpaid principal balance of $183.0 million. Since the second quarter of 2015, interest payments have been applied to principal. As of June 30, 2016, the specific reserve for the PREPA line of credit is $53.3 million.

At June 30, 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 $97.2 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 $219.4 million and $235.8 million at June 30, 2016 and December 31, 2015, respectively. Impaired commercial loans at June 30, 2016 and December 31, 2015 included the PREPA line of credit with an unpaid principal balance of $183.0 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 $56.8 million at June 30, 2016 and $55.9 million at December 31, 2015. The valuation allowance for impaired commercial loans at June 30, 2016 and December 31, 2015 included $53.3 million of specific allowance for PREPA. The total investment in impaired mortgage loans was $90.9 million and $90.0 million at June 30, 2016 and December 31, 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 $8.9 million at June 30, 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 June 30, 2016 and December 31, 2015 are as follows:

	June 30, 2016
	Unpaid			Recorded			Related
	Principal			Investment			Allowance			Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	212,876		$	194,084		$	56,758		29%
Residential impaired and troubled-debt restructuring		99,145			90,948			8,864		10%
Impaired loans with no specific allowance:
Commercial		30,228			23,876			-		0%
Total investment in impaired loans	$	342,249		$	308,908		$	65,622		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		28%
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		20%

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 June 30, 2016 and December 31, 2015 are as follows:

	June 30, 2016
	Unpaid			Recorded			Related
	Principal			Investment			Allowance			Coverage
	(In thousands)
Impaired loans with no specific allowance
Commercial	$	1,450		$	1,433		$	-		0%
Total investment in impaired loans	$	1,450		$	1,433		$	-		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 June 30, 2016 and December 31, 2015 are as follows:

	June 30, 2016
										Coverage
	Unpaid			Recorded						to Recorded
	Principal			Investment			Allowance			Investment
	(In thousands)
Impaired loan pools with specific allowance: (a)(b)
Mortgage	$	591,029		$	591,056		$	1,585		0%
Commercial		246,142			173,949			11,884		7%
Construction		76,677			56,457			3,979		7%
Auto		117,038			117,043			5,353		5%
Total investment in impaired loan pools	$	1,030,886		$	938,505		$	22,801		2%
(a) Current period amounts have been re-measured using the revised derecognition policy for purchased credit impaired loans.
(b) A portion of the allowance for loan and lease losses associated with purchased credit impaired loans was derecognized on June 30, 2016 due to the revision in the derecognition policy for these loans.

	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		$	1,761		0%
Commercial		287,311			168,107			15,455		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 June 30, 2016 and December 31, 2015 are as follows:

	June 30, 2016
										Coverage
	Unpaid			Recorded						to Recorded
	Principal			Investment			Allowance			Investment
	(In thousands)
Impaired loan pools with specific allowance: (a)(b)
Loans secured by 1-4 family residential properties	$	95,755		$	76,777		$	11,016		14%
Commercial and construction		114,932			83,377			11,096		13%
Consumer		1,252			1,410			4		0%
Total investment in impaired loan pools	$	211,939		$	161,564		$	22,116		14%
(a) Current period amounts have been re-measured using the revised derecognition policy for purchased credit impaired loans.
(b) A portion of the allowance for loan and lease losses associated with purchased credit impaired loans was derecognized on June 30, 2016 due to the revision in the derecognition policy for these loans.

	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 and six-month periods ended June 30, 2016 and 2015:

	Quarter Ended June 30,
	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	$	75		$	194,759		$	45		$	212,414
Residential troubled-debt restructuring		791			91,007			781			89,041
Impaired loans with no specific allowance
Commercial		149			29,579			316			30,015
		1,015			315,345			1,142			331,470
Acquired loans accounted for under ASC 310-20:
Impaired loans with no specific allowance
Commercial		15			789			11			1,446
Total interest income from impaired loans	$	1,030		$	316,134		$	1,153		$	332,916

	Six-Month Period Ended June 30,
	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	$	150		$	195,777		$	90		$	146,144
Residential troubled-debt restructuring		1,591			90,650			1,563			91,216
Impaired loans with no specific allowance
Commercial		298			31,603			631			95,791
Total interest income from impaired loans	$	2,039		$	318,030		$	2,284		$	333,151
Aquired loans accounted for under SC 310-20:
Impaired loans with no specific allowance
Commercial		30			628			21			1,923
Total interest income from impaired loans	$	2,069		$	318,658		$	2,305		$	335,074

Modifications

The following tables present the troubled-debt restructurings during the

	Quarter Ended June 30, 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	19		$	2,670		5.69%		372		$	2,670		4.54%		494
Commercial	6			668		6.65%		65			668		5.91%		86
Consumer	26			364		12.73%		75			372		10.20%		70
	Six-Month Period Ended June 30, 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	52		$	6,628		5.90%		365		$	7,525		4.73%		493
Commercial	8			1,323		6.73%		53			1,324		6.31%		61
Consumer	47			556		13.27%		75			603		10.56%		71

	Quarter Ended June 30, 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	39		$	4,455		5.62%		330		$	4,455		4.21%		330
Commercial	1			29		7.25%		44			29		6.50%		60
Consumer	21			250		14.40%		71			259		13.87%		69
Auto	1			64		12.95%		72			65		12.95%		72
	Six-Month Period Ended June 30, 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	97		$	11,609		4.65%		348		$	11,594		4.13%		349
Commercial	4			4,533		6.83%		80			4,533		7.00%		141
Consumer	32			396		14.50%		72			440		14.25%		68
Auto	1			64		12.95%		72			65		12.95%		72

The following table presents troubled-debt restructurings for which there was a payment default during the twelve-month periods ended June 30, 2016 and 2015:

	Twelve-Month Period Ended June 30,
	2016						2015
	Number of Contracts		Recorded Investment				Number of Contracts		Recorded Investment
	(Dollars in thousands)
Mortgage	84		$	9,869			60		$	6,911
Consumer	7		$	134			4		$	72
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 June 30, 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:

	June 30, 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	$	230,296		$	215,312		$	14,984		$	-		$	-		$	-
Institutional		27,838			26,200			-			-			-			1,638
Middle market		220,096			188,700			17,697			374			-			13,325
Retail		246,691			222,814			7,468			4,128			-			12,281
Floor plan		2,826			2,826			-			-			-			-
Real estate		16,079			16,079			-			-			-			-
		743,826			671,931			40,149			4,502			-			27,244
Other commercial and industrial:
Corporate		140,192			140,192			-			-			-			-
Institutional		376,278			193,258			-			-			-			183,020
Middle market		105,540			95,946			5,142			181			-			4,271
Retail		76,965			71,933			898			979			-			3,155
Floor plan		33,812			28,046			5,415			81			-			270
		732,787			529,375			11,455			1,241			-			190,716
Total		1,476,613			1,201,306			51,604			5,743			-			217,960
Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		197			-			-			197			-			-
Floor plan		2,755			953			376			-			-			1,426
		2,952			953			376			197			-			1,426
Other commercial and industrial:
Retail		1,600			1,527			-			73			-			-
Floor plan		7			-			-			-			-			7
		1,607			1,527			-			73			-			7
Total		4,559			2,480			376			270			-			1,433
Total	$	1,481,172		$	1,203,786		$	51,980		$	6,013		$	-		$	219,393

	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 June 30, 2016 and December 31, 2015, the Company had outstanding credit facilities of approximately $398.6 million and $415.4 million, respectively, granted to the Puerto Rico government, including its instrumentalities, public corporations and municipalities, included within the portfolios 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 June 30, 2016, we had approximately $194.4 million of credit facilities to central government and public corporations of the Commonwealth, including:

• PREPA with an outstanding balance of $183.0 million; and
• The Puerto Rico Housing Finance Authority ("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 central government and public corporations decreased by $10.0 million during the first quarter of 2016 as a result of a partial repayment by PRHFA.

Oriental Bank is part of a four bank syndicate that provided 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 $183.0 million as of June 30, 2016. As part of the bank syndicate, the Bank entered into 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 expects the restructuring to be completed by the end of 2016. 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 classifies this participation in the substandard risk category and non-accrual and has a $53.3 million allowance for loan and lease losses recorded for this line of credit. Since April 1, 2015, interest payments have been applied to principal.

For residential and consumer loan classes, the Company evaluates credit quality based on the delinquency status of the loan. As of June 30, 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:

	June 30, 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	$	54,058		$	48,163		$	259		$	2,023		$	527		$	1,153		$	1,292		$	641
Years 2003 and 2004		94,753			82,651			343			3,936			1,864			1,859			2,312			1,788
Year 2005		52,061			45,538			-			1,878			497			918			2,410			820
Year 2006		73,886			60,860			511			2,244			554			1,603			4,584			3,530
Years 2007, 2008 and 2009		84,018			66,997			703			1,286			569			1,724			8,898			3,841
Years 2010, 2011, 2012 2013		144,751			132,451			407			1,203			182			1,581			5,132			3,795
Years 2014, 2015 and 2016		99,361			98,270			-			189			140			398			364			-
		602,888			534,930			2,223			12,759			4,333			9,236			24,992			14,415
Non-traditional		26,195			20,040			-			938			564			1,999			2,654			-
Loss mitigation program		104,081			18,865			1,692			1,381			940			1,306			3,364			76,533
		733,164			573,835			3,915			15,078			5,837			12,541			31,010			90,948
Home equity secured personal loans		384			384			-			-			-			-			-			-
GNMA's buy-back option program		8,369			-			-			-			1,498			3,228			3,643			-
		741,917			574,219			3,915			15,078			7,335			15,769			34,653			90,948
Consumer
Credit cards		24,877			23,809			459			177			214			218			-			-
Overdrafts		220			204			15			1			-			-			-			-
Unsecured personal lines of credit		2,431			2,281			42			14			11			83			-			-
Unsecured personal loans		221,648			217,759			1,854			1,137			898			-			-			-
Cash collateral personal loans		16,093			16,026			63			3			-			1			-			-
		265,269			260,079			2,433			1,332			1,123			302			-			-
Auto and Leasing		712,268			641,075			44,433			19,438			5,492			1,830			-			-
		1,719,454			1,475,373			50,781			35,848			13,950			17,901			34,653			90,948
Acquired loans (accounted for under ASC 310-20)
Consumer
Credit cards		32,298			30,573			731			290			290			414			-			-
Personal loans		2,896			2,707			116			14			26			33			-			-
		35,194			33,280			847			304			316			447			-			-
Auto		77,118			69,272			5,088			2,196			412			150			-			-
		112,312			102,552			5,935			2,500			728			597			-			-
Total	$	1,831,766		$	1,577,925		$	56,716		$	38,348		$	14,678		$	18,498		$	34,653		$	90,948

	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

X

- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=49124121&loc=d3e5066-111524

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-Publisher FASB
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-Publisher FASB
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-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=49124121&loc=d3e5074-111524

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 7
-Article 9

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