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Loans Receivable

3 Months Ended

Mar. 31, 2018

Loans Receivable [Abstract]

LOANS RECEIVABLE

NOTE 5 - LOANS

Oriental’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.

The composition of Oriental’s loan portfolio at March 31, 2018 and December 31, 2017 was as follows:

	March 31,			December 31,
	2018			2017
	(In thousands)
Originated and other loans and leases held for investment:
Mortgage	$	682,564		$	683,607
Commercial		1,346,404			1,307,261
Consumer		334,865			330,039
Auto and leasing		957,197			883,985
		3,321,030			3,204,892
Allowance for loan and lease losses on originated and other loans and leases		(96,832)			(92,718)
		3,224,198			3,112,174
Deferred loan costs, net		7,125			6,695
Total originated and other loans loans held for investment, net		3,231,323			3,118,869
Acquired loans:
Acquired BBVAPR loans:
Accounted for under ASC 310-20 (Loans with revolving feature and/or
acquired at a premium)
Commercial		4,222			4,380
Consumer		27,235			28,915
Auto		16,171			21,969
		47,628			55,264
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-20		(3,184)			(3,862)
		44,444			51,402
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		526,089			532,053
Commercial		230,988			243,092
Consumer		932			1,431
Auto		35,006			43,696
		793,015			820,272
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-30		(43,166)			(45,755)
		749,849			774,517
Total acquired BBVAPR loans, net		794,293			825,919
Acquired Eurobank loans:
Loans secured by 1-4 family residential properties		69,328			69,538
Commercial		52,418			53,793
Consumer		972			1,112
Total acquired Eurobank loans		122,718			124,443
Allowance for loan and lease losses on Eurobank loans		(25,410)			(25,174)
Total acquired Eurobank loans, net		97,308			99,269
Total acquired loans, net		891,601			925,188
Total held for investment, net		4,122,924			4,044,057
Mortgage loans held-for-sale		10,505			12,272
Total loans, net	$	4,133,429		$	4,056,329

As a result of the devastation caused by hurricanes Irma and Maria, Oriental offered an automatic three-month moratorium for the payment due on certain loans. At December 31, 2017, Oriental had $2.6 billion loans under the moratorium program. The level of delinquencies for mortgage and auto loans as of December 31, 2017 was impacted by the loan moratorium. Aging of current and early delinquent loans in moratorium were frozen at September 30, 2017, throughout the moratorium period. In addition, although the repayment schedule was modified as part of the moratorium, certain borrowers continued to make payments shortly after the moratorium, having an impact on the respective delinquency status at December 31, 2017. At March 31, 2018, most of the loan moratoriums have expired, and delinquency levels are returning to pre-hurricane levels.

Originated and Other Loans and Leases Held for Investment

Oriental’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 at March 31, 2018 and December 31, 2017, 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, 2018
																			Loans 90+
																			Days Past
																			Due and
	30-59 Days			60-89 Days			90+ Days			Total Past									Still
	Past Due			Past Due			Past Due			Due			Current			Total Loans			Accruing
	(In thousands)
Mortgage
Traditional (by origination year):
Up to the year 2002	$	168		$	1,697		$	3,696		$	5,561		$	39,752		$	45,313		$	197
Years 2003 and 2004		235			1,612			6,989			8,836			73,203			82,039			-
Year 2005		-			1,235			3,303			4,538			38,610			43,148			68
Year 2006		78			2,486			5,069			7,633			53,279			60,912			-
Years 2007, 2008 and 2009		-			2,075			7,683			9,758			57,173			66,931			336
Years 2010, 2011, 2012, 2013		205			1,422			8,346			9,973			112,977			122,950			459
Years 2014, 2015, 2016, 2017 and 2018		-			318			1,499			1,817			125,289			127,106			-
		686			10,845			36,585			48,116			500,283			548,399			1,060
Non-traditional		-			43			3,415			3,458			13,498			16,956			-
Loss mitigation program		12,921			4,695			20,062			37,678			66,767			104,445			4,439
		13,607			15,583			60,062			89,252			580,548			669,800			5,499
Home equity secured personal loans		-			-			-			-			249			249			-
GNMA's buy-back option program		-			-			12,515			12,515			-			12,515			-
		13,607			15,583			72,577			101,767			580,797			682,564			5,499
Commercial
Commercial secured by real estate:
Corporate		-			-			-			-			237,751			237,751			-
Institutional		-			-			-			-			46,955			46,955			-
Middle market		4,839			560			2,454			7,853			208,697			216,550			-
Retail		939			640			9,113			10,692			231,981			242,673			-
Floor plan		-			-			-			-			4,078			4,078			-
Real estate		-			-			-			-			17,666			17,666			-
		5,778			1,200			11,567			18,545			747,128			765,673			-
Other commercial and industrial:
Corporate		-			-			-			-			168,490			168,490			-
Institutional		-			-			-			-			115,034			115,034			-
Middle market		249			-			881			1,130			91,148			92,278			-
Retail		759			140			919			1,818			176,225			178,043			-
Floor plan		-			-			51			51			26,835			26,886			-
		1,008			140			1,851			2,999			577,732			580,731			-
		6,786			1,340			13,418			21,544			1,324,860			1,346,404			-

	March 31, 2018
																			Loans 90+
																			Days Past
																			Due and
	30-59 Days			60-89 Days			90+ Days			Total Past									Still
	Past Due			Past Due			Past Due			Due			Current			Total Loans			Accruing
	(In thousands)
Consumer
Credit cards	$	1,144		$	61		$	260		$	1,465		$	26,049		$	27,514		$	-
Overdrafts		22			14			42			78			168			246			-
Personal lines of credit		125			67			50			242			1,791			2,033			-
Personal loans		3,310			2,410			1,278			6,998			283,137			290,135			-
Cash collateral personal loans		238			87			21			346			14,591			14,937			-
		4,839			2,639			1,651			9,129			325,736			334,865			-
Auto and leasing		45,003			16,555			13,594			75,152			882,045			957,197			-
Total	$	70,235		$	36,117		$	101,240		$	207,592		$	3,113,438		$	3,321,030		$	5,499

	December 31, 2017
																			Loans 90+
																			Days Past
																			Due and
	30-59 Days			60-89 Days			90+ Days			Total Past									Still
	Past Due			Past Due			Past Due			Due			Current			Total Loans			Accruing
	(In thousands)
Mortgage
Traditional (by origination year):
Up to the year 2002	$	86		$	938		$	3,537		$	4,561		$	41,579		$	46,140		$	467
Years 2003 and 2004		92			1,077			6,304			7,473			75,758			83,231			-
Year 2005		101			383			3,348			3,832			40,669			44,501			68
Year 2006		242			604			5,971			6,817			55,966			62,783			66
Years 2007, 2008 and 2009		358			1,258			8,561			10,177			58,505			68,682			577
Years 2010, 2011, 2012, 2013		233			978			7,393			8,604			116,674			125,278			1,202
Years 2014, 2015, 2016 and 2017		-			75			1,649			1,724			121,194			122,918			-
		1,112			5,313			36,763			43,188			510,345			553,533			2,380
Non-traditional		-			326			3,543			3,869			14,401			18,270			-
Loss mitigation program		7,233			3,331			18,923			29,487			73,793			103,280			4,981
		8,345			8,970			59,229			76,544			598,539			675,083			7,361
Home equity secured personal loans		-			-			-			-			256			256			-
GNMA's buy-back option program		-			-			8,268			8,268			-			8,268			-
		8,345			8,970			67,497			84,812			598,795			683,607			7,361
Commercial
Commercial secured by real estate:
Corporate		-			-			-			-			235,426			235,426			-
Institutional		-			-			118			118			44,648			44,766			-
Middle market		765			-			3,527			4,292			225,649			229,941			-
Retail		352			936			9,695			10,983			235,084			246,067			-
Floor plan		-			-			-			-			3,998			3,998			-
Real estate		-			-			-			-			17,556			17,556			-
		1,117			936			13,340			15,393			762,361			777,754			-
Other commercial and industrial:
Corporate		-			-			-			-			170,015			170,015			-
Institutional		-			-			-			-			125,591			125,591			-
Middle market		-			-			881			881			84,482			85,363			-
Retail		455			103			1,616			2,174			111,078			113,252			-
Floor plan		9			-			51			60			35,226			35,286			-
		464			103			2,548			3,115			526,392			529,507			-
		1,581			1,039			15,888			18,508			1,288,753			1,307,261			-

	December 31, 2017
																			Loans 90+
																			Days Past
																			Due and
	30-59 Days			60-89 Days			90+ Days			Total Past									Still
	Past Due			Past Due			Past Due			Due			Current			Total Loans			Accruing
	(In thousands)
Consumer
Credit cards	$	246		$	130		$	1,227		$	1,603		$	26,827		$	28,430		$	-
Overdrafts		20			6			31			57			157			214			-
Personal lines of credit		259			54			87			400			1,820			2,220			-
Personal loans		3,778			1,494			223			5,495			278,982			284,477			-
Cash collateral personal loans		103			59			312			474			14,224			14,698			-
		4,406			1,743			1,880			8,029			322,010			330,039			-
Auto and leasing		21,760			10,399			4,232			36,391			847,594			883,985			-
Total	$	36,092		$	22,151		$	89,497		$	147,740		$	3,057,152		$	3,204,892		$	7,361

At both March 31, 2018 and December 31, 2017, Oriental had a carrying balance of $94.9 million in originated and other loans held for investment granted to the Puerto Rico government, including its instrumentalities, public corporations and municipalities as part of the institutional commercial loan segment. All originated and other loans granted to the Puerto Rico government 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.

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 the acquisitions of 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 are accounted for under the guidance of ASC 310-20, which requires that any contractually required loan payment receivable in excess of Oriental’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 Oriental’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 March 31, 2018 and December 31, 2017, by class of loans:

	March 31, 2018
																			Loans 90+
																			Days Past
																			Due and
	30-59 Days			60-89 Days			90+ Days			Total Past									Still
	Past Due			Past Due			Past Due			Due			Current			Total Loans			Accruing
	(In thousands)
Commercial
Commercial secured by real estate
Retail	$	-		$	-		$	119		$	119		$	-		$	119		$	-
Floor plan		-			-			921			921			363			1,284			-
		-			-			1,040			1,040			363			1,403			-
Other commercial and industrial
Retail		161			16			46			223			2,594			2,817			-
Floor plan		-			-			2			2			-			2			-
		161			16			48			225			2,594			2,819			-
		161			16			1,088			1,265			2,957			4,222			-
Consumer
Credit cards		767			105			270			1,142			23,719			24,861			-
Personal loans		84			7			61			152			2,222			2,374			-
		851			112			331			1,294			25,941			27,235			-
Auto		798			402			154			1,354			14,817			16,171			-
Total	$	1,810		$	530		$	1,573		$	3,913		$	43,715		$	47,628		$	-

	December 31, 2017
																			Loans 90+
																			Days Past
																			Due and
	30-59 Days			60-89 Days			90+ Days			Total Past									Still
	Past Due			Past Due			Past Due			Due			Current			Total Loans			Accruing
	(In thousands)
Commercial
Commercial secured by real estate
Retail	$	-		$	-		$	119		$	119		$	-		$	119		$	-
Floor plan		-			-			928			928			393			1,321			-
		-			-			1,047			1,047			393			1,440			-
Other commercial and industrial
Retail		36			-			221			257			2,681			2,938			-
Floor plan		-			-			2			2			-			2			-
		36			-			223			259			2,681			2,940			-
		36			-			1,270			1,306			3,074			4,380			-
Consumer
Credit cards		208			127			1,310			1,645			24,822			26,467			-
Personal loans		139			61			45			245			2,203			2,448			-
		347			188			1,355			1,890			27,025			28,915			-
Auto		602			248			179			1,029			20,940			21,969			-
Total	$	985		$	436		$	2,804		$	4,225		$	51,039		$	55,264		$	-

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 Oriental 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, 2018 and December 31, 2017 is as follows:

	March 31,			December 31,
		2018			2017
		(In thousands)
Contractual required payments receivable:	$	1,444,070		$	1,481,616
Less: Non-accretable discount		354,590			352,431
Cash expected to be collected		1,089,480			1,129,185
Less: Accretable yield		296,465			308,913
Carrying amount, gross		793,015			820,272
Less: allowance for loan and lease losses		43,166			45,755
Carrying amount, net	$	749,849		$	774,517

At March 31, 2018 and December 31, 2017, Oriental had $50.2 million and $50.3 million, respectively, in loans granted to Puerto Rico municipalities as part of its acquired BBVAPR loans accounted for under ASC 310-30. These loans are primarily secured municipal general obligations.

The following tables describe the accretable yield and non-accretable discount activity of acquired BBVAPR loans accounted for under ASC 310-30 for the quarters ended March 31, 2018 and 2017

	Quarter Ended March 31, 2018
	Mortgage			Commercial			Auto			Consumer			Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	258,498		$	46,764		$	2,766		$	885		$	308,913
Accretion		(7,073)			(3,685)			(869)			(256)			(11,883)
Change in expected cash flows		-			3,156			426			58			3,640
Transfer (to) non-accretable discount		(3,046)			(524)			(597)			(38)			(4,205)
Balance at end of period	$	248,379		$	45,711		$	1,726		$	649		$	296,465
Non-Accretable Discount Activity:
Balance at beginning of period	$	299,501		$	10,596		$	23,050		$	19,284		$	352,431
Change in actual and expected losses		(1,440)			(389)			(204)			(13)			(2,046)
Transfer from accretable yield		3,046			524			597			38			4,205
Balance at end of period	$	301,107		$	10,731		$	23,443		$	19,309		$	354,590

	Quarter Ended March 31, 2017
	Mortgage			Commercial			Auto			Consumer			Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	292,115		$	50,366		$	8,538		$	3,682		$	354,701
Accretion		(7,890)			(4,981)			(2,147)			(602)			(15,620)
Change in actual and expected losses		1			198			52			36			287
Transfer (to) from non-accretable discount		(7,409)			1,319			140			(58)			(6,008)
Balance at end of period	$	276,817		$	46,902		$	6,583		$	3,058		$	333,360
Non-Accretable Discount Activity:
Balance at beginning of period	$	305,615		$	16,965		$	22,407		$	18,120		$	363,107
Change in actual and expected losses		(3,031)			(843)			297			(19)			(3,596)
Transfer from (to) accretable yield		7,409			(1,319)			(140)			58			6,008
Balance at end of period	$	309,993		$	14,803		$	22,564		$	18,159		$	365,519

Acquired Eurobank Loans

The carrying amount of acquired Eurobank loans at March 31, 2018 and December 31, 2017 is as follows:

	March 31			December 31
	2018			2017
	(In thousands)
Contractual required payments receivable:	$	174,859		$	179,960
Less: Non-accretable discount		5,547			5,845
Cash expected to be collected		169,312			174,115
Less: Accretable yield		46,594			49,672
Carrying amount, gross		122,718			124,443
Less: Allowance for loan and lease losses		25,410			25,174
Carrying amount, net	$	97,308		$	99,269

The following tables describe the accretable yield and non-accretable discount activity of acquired Eurobank loans for the quarters ended March 31, 2018 and 2017:

	Quarter Ended March 31, 2018
	Loans Secured by 1-4 Family Residential Properties			Commercial			Construction & Development Secured by 1-4 Family Residential Properties			Leasing			Consumer			Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	41,474		$	6,751		$	1,447		$	-		$	-		$	49,672
Accretion		(1,605)			(1,606)			-			(34)			(96)			(3,341)
Change in expected cash flows		(144)			898			-			(63)			178			869
Transfer (to) from non-accretable discount		(103)			(427)			(91)			97			(82)			(606)
Balance at end of period	$	39,622		$	5,616		$	1,356		$	-		$	-		$	46,594
Non-Accretable Discount Activity:
Balance at beginning of period	$	4,576		$	276		$	758		$	-		$	235		$	5,845
Change in actual and expected losses		(200)			(703)			-			97			(98)			(904)
Transfer from (to) accretable yield		103			427			91			(97)			82			606
Balance at end of period	$	4,479		$	-		$	849		$	-		$	219		$	5,547

	Quarter Ended March 31, 2017
	Loans Secured by 1-4 Family Residential Properties			Commercial			Construction & Development Secured by 1-4 Family Residential Properties			Leasing			Consumer			Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	45,839		$	16,475		$	2,194			-		$	-		$	64,508
Accretion		(1,904)			(4,510)			(38)			-			(158)			(6,610)
Change in actual and expected losses		81			778			37			(143)			310			1,063
Transfer from (to) non-accretable discount		681			-			(322)			143			(152)			350
Balance at end of period	$	44,697		$	12,743		$	1,871		$	-		$	-		$	59,311
Non-Accretable Discount Activity:
Balance at beginning of period	$	8,441		$	3,880		$	11		$	-		$	8		$	12,340
Change in actual and expected losses		(334)			(1,409)			-			143			(154)			(1,754)
Transfer (to) from accretable yield		(681)			-			322			(143)			152			(350)
Balance at end of period	$	7,426		$	2,471		$	333		$	-		$	6		$	10,236

Non-accrual Loans

The following table presents the recorded investment in loans in non-accrual status by class of loans as of March 31, 2018 and December 31, 2017:

	March 31,			December 31,
	2018			2017
	(In thousands)
Originated and other loans and leases held for investment
Mortgage
Traditional (by origination year):
Up to the year 2002	$	3,394		$	3,070
Years 2003 and 2004		6,852			6,380
Year 2005		3,235			3,280
Year 2006		5,069			5,905
Years 2007, 2008 and 2009		7,347			7,984
Years 2010, 2011, 2012, 2013		7,652			6,259
Years 2014, 2015, 2016 and 2017		1,383			1,649
		34,932			34,527
Non-traditional		3,415			3,543
Loss mitigation program		17,456			16,783
		55,803			54,853
Commercial
Commercial secured by real estate
Institutional		10,548			118
Middle market		10,128			11,394
Retail		16,638			14,438
		37,314			25,950
Other commercial and industrial
Middle market		6,829			6,323
Retail		2,850			2,929
Floor plan		51			51
		9,730			9,303
		47,044			35,253
Consumer
Credit cards		260			1,227
Overdrafts		42			31
Personal lines of credit		63			102
Personal loans		1,877			900
Cash collateral personal loans		21			312
		2,263			2,572
Auto and leasing		13,594			4,232
Total non-accrual originated loans	$	118,704		$	96,910

	March 31,			December 31,
	2018			2017
	(In thousands)
Acquired BBVAPR loans accounted for under ASC 310-20
Commercial
Commercial secured by real estate
Retail	$	119		$	119
Floor plan		921			928
		1,040			1,047
Other commercial and industrial
Retail		46			221
Floor plan		2			2
		48			223
		1,088			1,270
Consumer
Credit cards		270			1,310
Personal loans		61			45
		331			1,355
Auto		154			179
Total non-accrual acquired BBVAPR loans accounted for under ASC 310-20		1,573			2,804
Total non-accrual loans	$	120,277		$	99,714

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 12 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. In addition, these loans are excluded from the impairment analysis.

At March 31, 2018 and December 31, 2017, loans whose terms have been extended and which are classified as troubled-debt restructurings that are not included in non-accrual loans amounted to $98.2 million and $109.2 million, respectively, as they are performing under their new terms.

At March 31, 2018 and December 31, 2017, loans that are current in their monthly payments, but placed in non-accrual due to credit deterioration amounted to $28.0 million and $20.1 million, respectively.

Impaired Loans

Oriental evaluates all loans, some individually and others as homogeneous groups, for purposes of determining impairment. The total investment in impaired commercial loans that were individually evaluated for impairment was $68.6 million and $72.3 million at March 31, 2018 and December 31, 2017, respectively. The impairments on these 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 allowance for loan and lease losses for these impaired commercial loans amounted to $13.3 million and $10.6 million at March 31, 2018 and December 31, 2017, respectively. The total investment in impaired mortgage loans that were individually evaluated for impairment was $84.3 million and $85.4 million at March 31, 2018 and December 31, 2017, respectively. Impairment on mortgage loans assessed as troubled-debt restructurings was measured using the present value of cash flows. The allowance for loan losses for these impaired mortgage loans amounted to $9.0 million and $9.1 million at March 31, 2018 and December 31, 2017, respectively.

Originated and Other Loans and Leases Held for Investment

Oriental’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, 2018 and 2017 are as follows:

	March 31, 2018
	Unpaid			Recorded			Related
	Principal			Investment			Allowance			Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	57,169		$	52,049		$	13,274		26%
Residential impaired and troubled-debt restructuring		94,405			84,283			9,022		11%
Impaired loans with no specific allowance:
Commercial		19,020			15,784			N/A		0%
Total investment in impaired loans	$	170,594		$	152,116		$	22,296		15%

	December 31, 2017
	Unpaid			Recorded			Related
	Principal			Investment			Allowance			Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	57,922		$	52,585		$	10,573		20%
Residential impaired and troubled-debt restructuring		94,971			85,403			9,121		11%
Impaired loans with no specific allowance
Commercial		22,022			18,953			N/A		0%
Total investment in impaired loans	$	174,915		$	156,941		$	19,694		13%

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

Oriental’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, 2018 and December 31, 2017 are as follows:

	March 31, 2018
	Unpaid			Recorded			Related
	Principal			Investment			Allowance			Coverage
	(In thousands)
Impaired loans with specific allowance
Commercial	$	926		$	747		$	21		3%
Impaired loans with no specific allowance
Commercial	$	-		$	-			N/A		0%
Total investment in impaired loans	$	926		$	747		$	21		3%
	December 31, 2017
	Unpaid			Recorded			Specific
	Principal			Investment			Allowance			Coverage
	(In thousands)
Impaired loans with specific allowance
Commercial	$	926		$	747		$	20		3%
Impaired loans with no specific allowance
Commercial	$	-		$	-			N/A		0%
Total investment in impaired loans	$	926		$	747		$	20		3%

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

Oriental’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, 2018 and December 31, 2017 are as follows:

	March 31, 2018
										Coverage
	Unpaid			Recorded						to Recorded
	Principal			Investment			Allowance			Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	536,514		$	526,089		$	14,331		3%
Commercial		239,976			229,216			22,045		10%
Consumer		1,892			932			21		2%
Auto		35,560			35,006			6,769		19%
Total investment in impaired loan pools	$	813,942		$	791,243		$	43,166		5%

	December 31 , 2017
										Coverage
	Unpaid			Recorded						to Recorded
	Principal			Investment			Allowance			Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	547,064		$	532,052		$	14,085		3%
Commercial		250,451			241,124			23,691		10%
Consumer		2,468			1,431			18		1%
Auto		43,440			43,696			7,961		18%
Total investment in impaired loan pools	$	843,423		$	818,303		$	45,755		6%

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

Acquired Eurobank Loans

Oriental’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, 2018 and December 31, 2017 are as follows:

	March 31, 2018
										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	$	79,633		$	69,328		$	15,414		22%
Commercial		56,087			52,418			9,992		19%
Consumer		14			4			4		100%
Total investment in impaired loan pools	$	135,734		$	121,750		$	25,410		21%

	December 31, 2017
										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	$	81,132		$	69,538		$	15,187		22%
Commercial		58,099			53,793			9,982		19%
Consumer		15			4			5		125%
Total investment in impaired loan pools	$	139,246		$	123,335		$	25,174		20%

The tables above only present information with respect to acquired Eurobank loan pools accounted for under ASC 310-30 if there is a recorded impairment to such 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, which excludes loans accounted for under ASC 310-30, for the quarters ended March 31, 2018 and 2017:

	Quarter Ended March 31,
	2018						2017
	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	$	263		$	51,331		$	125		$	12,809
Residential troubled-debt restructuring		720			84,754			766			89,543
Impaired loans with no specific allowance
Commercial		176			17,764			532			43,895
		1,159			153,849			1,423			146,247
Acquired loans accounted for under ASC 310-20:
Impaired loans with specific allowance
Commercial		-			747			-			917
Total interest income from impaired loans	$	1,159		$	154,596		$	1,423		$	147,164

Modifications

The following tables present the troubled-debt restructurings in all loan portfolios during the quarters ended March 31, 2018 and 2017.

	Quarter Ended March 31, 2018
	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	38		$	5,747		5.69%		397		$	5,339		5.08%		363
Commercial	3			1,559		4.75%		72			1,555		4.75%		72
Consumer	28			354		15.75%		47			355		11.60%		69

	Quarter Ended March 31, 2017
	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	32		$	4,004		6.53%		391		$	4,015		4.86%		387
Commercial	9			1,218		7.29%		55			1,219		5.93%		64
Consumer	25			392		10.94%		64			430		10.33%		74
Auto	3			45		8.90%		75			47		11.88%		39

The following table presents troubled-debt restructurings for which there was a payment default during the twelve month periods ended March 31, 2018 and 2017:

	Twelve Month Period Ended March 31,
	2018						2017
	Number of Contracts		Recorded Investment				Number of Contracts		Recorded Investment
	(Dollars in thousands)
Mortgage	36		$	3,310			14		$	2,051
Commercial	4		$	398			1		$	50
Consumer	23		$	243			15		$	188

Credit Quality Indicators

Oriental 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.

Oriental 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, 2018 and December 31, 2017, 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, 2018
	Risk Ratings
	Balance						Special
	Outstanding			Pass			Mention			Substandard			Doubtful			Loss
	(In thousands)
Commercial - originated and other loans held for investment
Commercial secured by real estate:
Corporate	$	237,751		$	203,090		$	32,790		$	1,871		$	-		$	-
Institutional		46,955			36,206			-			10,749			-			-
Middle market		216,550			180,511			13,389			22,650			-			-
Retail		242,673			213,262			4,178			25,233			-			-
Floor plan		4,078			2,771			-			1,307			-			-
Real estate		17,666			17,666			-			-			-			-
		765,673			653,506			50,357			61,810			-			-
Other commercial and industrial:
Corporate		168,490			156,581			11,909			-			-			-
Institutional		115,034			115,034			-			-			-			-
Middle market		92,278			78,493			5,425			8,360			-			-
Retail		178,043			174,727			333			2,983			-			-
Floor plan		26,886			24,439			2,396			51			-			-
		580,731			549,274			20,063			11,394			-			-
Total		1,346,404			1,202,780			70,420			73,204			-			-
Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		119			-			-			119			-			-
Floor plan		1,284			363			-			921			-			-
		1,403			363			-			1,040			-			-
Other commercial and industrial:
Retail		2,817			2,812			-			5			-			-
Floor plan		2			-			-			2			-			-
		2,819			2,812			-			7			-			-
Total		4,222			3,175			-			1,047			-			-

	March 31, 2018
	Risk Ratings
	Balance						Special
	Outstanding			Pass			Mention			Substandard			Doubtful			Loss
	(In thousands)
Retail - originated and other loans held for investment
Mortgage:
Traditional		548,399			511,814			-			36,585			-			-
Non-traditional		16,956			13,541			-			3,415			-			-
Loss mitigation program		104,445			84,383			-			20,062			-			-
Home equity secured personal loans		249			249			-			-			-			-
GNMA's buy-back option program		12,515			-			-			12,515			-			-
		682,564			609,987			-			72,577			-			-
Consumer:
Credit cards		27,514			27,254			-			260			-			-
Overdrafts		246			168			-			78			-			-
Unsecured personal lines of credit		2,033			1,983			-			50			-			-
Unsecured personal loans		290,135			288,857			-			1,278			-			-
Cash collateral personal loans		14,937			14,916			-			21			-			-
		334,865			333,178			-			1,687			-			-
Auto and Leasing		957,197			943,603			-			13,594			-			-
Total		1,974,626			1,886,768			-			87,858			-			-
Retail - acquired loans (accounted for under ASC 310-20)
Consumer:
Credit cards		24,861			24,591			-			270			-			-
Personal loans		2,374			2,313			-			61			-			-
		27,235			26,904			-			331			-			-
Auto		16,171			16,017			-			154			-			-
		43,406			42,921			-			485			-			-
	$	3,368,658		$	3,135,644		$	70,420		$	162,594		$	-		$	-

	December 31, 2017
	Risk Ratings
	Balance						Special
	Outstanding			Pass			Mention			Substandard			Doubtful			Loss
	(In thousands)
Commercial - originated and other loans held for investment
Commercial secured by real estate:
Corporate	$	235,426		$	200,395		$	33,094		$	1,937		$	-		$	-
Institutional		44,766			33,856			-			10,910			-			-
Middle market		229,941			196,058			4,749			29,134			-			-
Retail		246,067			215,121			8,058			22,888			-			-
Floor plan		3,998			2,678			1,320			-			-			-
Real estate		17,556			17,556			-			-			-			-
		777,754			665,664			47,221			64,869			-			-
Other commercial and industrial:
Corporate		170,015			157,683			12,332			-			-			-
Institutional		125,591			125,591			-			-			-			-
Middle market		85,363			71,222			6,386			7,755			-			-
Retail		113,252			109,477			562			3,213			-			-
Floor plan		35,286			32,165			3,070			51			-			-
		529,507			496,138			22,350			11,019			-			-
Total		1,307,261			1,161,802			69,571			75,888			-			-
Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		119			-			-			119			-			-
Floor plan		1,321			393			-			928			-			-
		1,440			393			-			1,047			-			-
Other commercial and industrial:
Retail		2,938			2,933			-			5			-			-
Floor plan		2			-			-			2			-			-
		2,940			2,933			-			7			-			-
Total		4,380			3,326			-			1,054			-			-

	December 31, 2017
	Risk Ratings
	Balance						Special
	Outstanding			Pass			Mention			Substandard			Doubtful			Loss
	(In thousands)
Retail - originated and other loans held for investment
Mortgage:
Traditional		553,533			516,770			-			36,763			-			-
Non-traditional		18,270			14,727			-			3,543			-			-
Loss mitigation program		103,280			84,357			-			18,923			-			-
Home equity secured personal loans		256			256			-			-			-			-
GNMA's buy-back option program		8,268			-			-			8,268			-			-
		683,607			616,110			-			67,497			-			-
Consumer:
Credit cards		28,430			27,203			-			1,227			-			-
Overdrafts		214			158			-			56			-			-
Unsecured personal lines of credit		2,220			2,133			-			87			-			-
Unsecured personal loans		284,477			284,255			-			222			-			-
Cash collateral personal loans		14,698			14,386			-			312			-			-
		330,039			328,135			-			1,904			-			-
Auto and Leasing		883,985			879,753			-			4,232			-			-
Total		1,897,631			1,823,998			-			73,633			-			-
Retail - acquired loans (under ASC 310-20)
Consumer:
Credit cards		26,467			25,156			-			1,311			-			-
Personal loans		2,448			2,402			-			46			-			-
		28,915			27,558			-			1,357			-			-
Auto		21,969			21,790			-			179			-			-
Total		50,884			49,348			-			1,536			-			-
	$	3,260,156		$	3,038,474		$	69,571		$	152,111		$	-		$	-

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- 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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