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Loans Receivable

6 Months Ended

Jun. 30, 2018

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 June 30, 2018 and December 31, 2017 was as follows:

	June 30,		December 31,
	2018		2017
	(In thousands)
Originated and other loans and leases held for investment:
Mortgage	$	678,259	$	683,607
Commercial		1,507,368		1,307,261
Consumer		339,341		330,039
Auto and leasing		1,014,664		883,985
		3,539,632		3,204,892
Allowance for loan and lease losses on originated and other loans and leases		(94,218)		(92,718)
		3,445,414		3,112,174
Deferred loan costs, net		7,028		6,695
Total originated and other loans loans held for investment, net		3,452,442		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		2,909		4,380
Consumer		25,736		28,915
Auto		11,283		21,969
		39,928		55,264
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-20		(2,726)		(3,862)
		37,202		51,402
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		516,934		532,053
Commercial		223,853		243,092
Consumer		495		1,431
Auto		26,937		43,696
		768,219		820,272
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-30		(44,176)		(45,755)
		724,043		774,517
Total acquired BBVAPR loans, net		761,245		825,919
Acquired Eurobank loans:
Loans secured by 1-4 family residential properties		65,637		69,538
Commercial		49,706		53,793
Consumer		935		1,112
Total acquired Eurobank loans		116,278		124,443
Allowance for loan and lease losses on Eurobank loans		(24,314)		(25,174)
Total acquired Eurobank loans, net		91,964		99,269
Total acquired loans, net		853,209		925,188
Total held for investment, net		4,305,651		4,044,057
Mortgage loans held-for-sale		10,215		12,272
Total loans, net	$	4,315,866	$	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. 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 June 30, 2018, most of the loan moratoriums have expired, and total 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 tables below present the aging of the recorded investment in gross originated and other loans held for investment at June 30, 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.

	June 30, 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	$	165	$	1,397	$	3,539	$	5,101	$	38,932	$	44,033	$	242
Years 2003 and 2004		83		1,624		5,907		7,614		71,750		79,364		-
Year 2005		-		831		4,125		4,956		37,488		42,444		68
Year 2006		350		1,603		4,783		6,736		52,292		59,028		-
Years 2007, 2008 and 2009		112		1,360		7,443		8,915		56,154		65,069		57
Years 2010, 2011, 2012, 2013		350		719		8,638		9,707		111,791		121,498		366
Years 2014, 2015, 2016, 2017 and 2018		-		132		1,593		1,725		128,731		130,456		-
		1,060		7,666		36,028		44,754		497,138		541,892		733
Non-traditional		-		-		3,131		3,131		12,363		15,494		-
Loss mitigation program		12,147		5,135		18,539		35,821		70,274		106,095		2,726
		13,207		12,801		57,698		83,706		579,775		663,481		3,459
Home equity secured personal loans		-		-		-		-		257		257		-
GNMA's buy-back option program		-		-		14,521		14,521		-		14,521		-
		13,207		12,801		72,219		98,227		580,032		678,259		3,459
Commercial
Commercial secured by real estate:
Corporate		-		-		-		-		274,435		274,435		-
Institutional		-		-		-		-		81,019		81,019		-
Middle market		-		-		5,602		5,602		188,671		194,273		-
Retail		1,240		473		9,327		11,040		205,450		216,490		-
Floor plan		-		-		-		-		4,017		4,017		-
Real estate		-		-		-		-		15,157		15,157		-
		1,240		473		14,929		16,642		768,749		785,391		-
Other commercial and industrial:
Corporate		-		-		-		-		190,414		190,414		-
Institutional		-		-		-		-		113,810		113,810		-
Middle market		7,233		174		881		8,288		86,691		94,979		-
Retail		341		212		709		1,262		283,334		284,596		-
Floor plan		26		-		51		77		38,101		38,178		-
		7,600		386		1,641		9,627		712,350		721,977		-
		8,840		859		16,570		26,269		1,481,099		1,507,368		-

	June 30, 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	$	701	$	274	$	875	$	1,850	$	26,009	$	27,859	$	-
Overdrafts		12		1		-		13		145		158		-
Personal lines of credit		72		30		40		142		1,789		1,931		-
Personal loans		4,045		1,704		1,100		6,849		287,099		293,948		-
Cash collateral personal loans		137		87		17		241		15,204		15,445		-
		4,967		2,096		2,032		9,095		330,246		339,341		-
Auto and leasing		45,953		19,870		11,101		76,924		937,740		1,014,664		-
Total	$	72,967	$	35,626	$	101,922	$	210,515	$	3,329,117	$	3,539,632	$	3,459

	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 June 30, 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 June 30, 2018 and December 31, 2017, by class of loans:

	June 30, 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	$	-	$	-	$	54	$	54	$	-	$	54	$	-
Floor plan		-		-		917		917		332		1,249		-
		-		-		971		971		332		1,303		-
Other commercial and industrial
Retail		22		13		42		77		1,527		1,604		-
Floor plan		-		-		2		2		-		2		-
		22		13		44		79		1,527		1,606		-
		22		13		1,015		1,050		1,859		2,909		-
Consumer
Credit cards		516		196		584		1,296		22,185		23,481		-
Personal loans		73		8		14		95		2,160		2,255		-
		589		204		598		1,391		24,345		25,736		-
Auto		726		475		139		1,340		9,943		11,283		-
Total	$	1,337	$	692	$	1,752	$	3,781	$	36,147	$	39,928	$	-

	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 June 30, 2018 and December 31, 2017 is as follows:

	June 30,		December 31,
		2018		2017
		(In thousands)
Contractual required payments receivable:	$	1,406,468	$	1,481,616
Less: Non-accretable discount		350,257		352,431
Cash expected to be collected		1,056,211		1,129,185
Less: Accretable yield		287,992		308,913
Carrying amount, gross		768,219		820,272
Less: allowance for loan and lease losses		44,176		45,755
Carrying amount, net	$	724,043	$	774,517

At June 30, 2018 and December 31, 2017, Oriental had $50.8 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 and six-month periods ended June 30, 2018 and 2017

	Quarter Ended June 30, 2018
	Mortgage		Commercial		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	248,379	$	45,711	$	1,726	$	649	$	296,465
Accretion		(6,915)		(3,597)		(656)		(194)		(11,362)
Change in expected cash flows		-		2,775		400		73		3,248
Transfer from (to) non-accretable discount		2,439		(2,368)		(399)		(31)		(359)
Balance at end of period	$	243,903	$	42,521	$	1,071	$	497	$	287,992

Non-Accretable Discount Activity:
Balance at beginning of period	$	301,107	$	10,731	$	23,443	$	19,309	$	354,590
Change in actual and expected losses		(2,531)		(1,956)		(197)		(8)		(4,692)
Transfer from accretable yield		(2,439)		2,368		399		31		359
Balance at end of period	$	296,137	$	11,143	$	23,645	$	19,332	$	350,257

	Six-Month Period Ended June 30, 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		(13,988)		(7,282)		(1,525)		(450)		(23,245)
Change in expected cash flows		-		5,931		826		131		6,888
Transfer (to) non-accretable discount		(607)		(2,892)		(996)		(69)		(4,564)
Balance at end of period	$	243,903	$	42,521	$	1,071	$	497	$	287,992

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		(3,971)		(2,345)		(401)		(21)		(6,738)
Transfer from accretable yield		607		2,892		996		69		4,564
Balance at end of period	$	296,137	$	11,143	$	23,645	$	19,332	$	350,257

	Quarter Ended June 30, 2017
	Mortgage		Commercial		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	276,817	$	46,902	$	6,583	$	3,058	$	333,360
Accretion		(7,694)		(4,513)		(1,776)		(556)		(14,539)
Change in actual and expected losses		1		15,993		98		50		16,142
Transfer (to) from non-accretable discount		1,024		(2,344)		(52)		(1,066)		(2,438)
Balance at end of period	$	270,148	$	56,038	$	4,853	$	1,486	$	332,525

Non-Accretable Discount Activity:
Balance at beginning of period	$	309,993	$	14,803	$	22,564	$	18,159	$	365,519
Change in actual and expected losses		(2,465)		(280)		1,344		206		(1,195)
Transfer from (to) accretable yield		(1,024)		2,344		52		1,066		2,438
Balance at end of period	$	306,504	$	16,867	$	23,960	$	19,431	$	366,762

	Six-Month Period Ended June 30, 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		(15,584)		(9,494)		(3,923)		(1,158)		(30,159)
Change in actual and expected losses		2		16,191		150		86		16,429
Transfer (to) from non-accretable discount		(6,385)		(1,025)		88		(1,124)		(8,446)
Balance at end of period	$	270,148	$	56,038	$	4,853	$	1,486	$	332,525

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		(5,496)		(1,123)		1,641		187		(4,791)
Transfer from (to) accretable yield		6,385		1,025		(88)		1,124		8,446
Balance at end of period	$	306,504	$	16,867	$	23,960	$	19,431	$	366,762

Acquired Eurobank Loans

The carrying amount of acquired Eurobank loans at June 30, 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 and six-month periods ended June 30, 2018 and 2017:

	Quarter Ended June 30, 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	$	39,622		5,616		1,356		-		-		46,594
Accretion		(1,538)		(1,706)		-		(4)		(118)		(3,366)
Change in expected cash flows		(836)		1,832		-		(111)		236		1,121
Transfer (to) from non-accretable discount		2,021		(1,157)		(132)		115		(118)		729
Balance at end of period	$	39,269	$	4,585	$	1,224	$	-	$	-	$	45,078

Non-Accretable Discount Activity:
Balance at beginning of period	$	4,479		-		849		-		219		5,547
Change in actual and expected losses		180		(1,157)		-		115		(137)		(999)
Transfer from (to) accretable yield		(2,021)		1,157		132		(115)		118		(729)
Balance at end of period	$	2,638	$	-	$	981	$	-	$	200	$	3,819

	Six-Month Period Ended June 30, 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 year	$	41,474	$	6,751	$	1,447	$	-	$	-	$	49,672
Accretion		(3,143)		(3,312)		-		(38)		(214)		(6,707)
Change in expected cash flows		(980)		2,730		-		(174)		414		1,990
Transfer from (to) non-accretable discount		1,918		(1,584)		(223)		212		(200)		123
Balance at end of period	$	39,269	$	4,585	$	1,224	$	-	$	-	$	45,078

Non-Accretable Discount Activity:
Balance at beginning of year	$	4,576	$	276	$	758	$	-	$	235	$	5,845
Change in actual and expected losses		(20)		(1,860)		-		212		(235)		(1,903)
Transfer from (to) accretable yield		(1,918)		1,584		223		(212)		200		(123)
Balance at end of period	$	2,638	$	-	$	981	$	-	$	200	$	3,819

	Quarter Ended June 30, 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	$	44,697	$	12,743	$	1,871		-	$	-	$	59,311
Accretion		(1,923)		(4,061)		(5)		(11)		(37)		(6,037)
Change in actual and expected losses		19		543		6		(22)		74		620
Transfer from (to) non-accretable discount		219		(68)		34		33		(37)		181
Balance at end of period	$	43,012	$	9,157	$	1,906	$	-	$	-	$	54,075

Non-Accretable Discount Activity:
Balance at beginning of period	$	7,426	$	2,471	$	333	$	-	$	6	$	10,236
Change in actual and expected losses		(520)		(529)		-		33		(29)		(1,045)
Transfer (to) from accretable yield		(219)		68		(34)		(33)		37		(181)
Balance at end of period	$	6,687	$	2,010	$	299	$	-	$	14	$	9,010

	Six-Month Period Ended June 30, 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		(3,827)		(8,571)		(43)		(11)		(195)		(12,647)
Change in expected cash flows		100		1,321		43		(165)		384		1,683
Transfer from (to) non-accretable discount		900		(68)		(288)		176		(189)		531
Balance at end of period	$	43,012	$	9,157	$	1,906	$	-	$	-	$	54,075

Non-Accretable Discount Activity:
Balance at beginning of period	$	8,441	$	3,880	$	11	$	-	$	8	$	12,340
Change in actual and expected cash flows		(854)		(1,938)		-		176		(183)		(2,799)
Transfer (to) from accretable yield		(900)		68		288		(176)		189		(531)
Balance at end of period	$	6,687	$	2,010	$	299	$	-	$	14	$	9,010

Non-accrual Loans

The following table presents the recorded investment in loans in non-accrual status by class of loans as of June 30, 2018 and December 31, 2017:

	June 30,		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	$	3,616	$	3,070
Years 2003 and 2004		6,082		6,380
Year 2005		4,108		3,280
Year 2006		5,004		5,905
Years 2007, 2008 and 2009		7,454		7,984
Years 2010, 2011, 2012, 2013		8,272		6,259
Years 2014, 2015, 2016 and 2017		1,593		1,649
		36,129		34,527
Non-traditional		3,131		3,543
Loss mitigation program		19,675		16,783
		58,935		54,853
Commercial
Commercial secured by real estate
Institutional		10,352		118
Middle market		8,533		11,394
Retail		15,906		14,438
		34,791		25,950
Other commercial and industrial
Middle market		9,781		6,323
Retail		2,828		2,929
Floor plan		51		51
		12,660		9,303
		47,451		35,253
Consumer
Credit cards		875		1,227
Overdrafts		-		31
Personal lines of credit		50		102
Personal loans		1,884		900
Cash collateral personal loans		17		312
		2,826		2,572
Auto and leasing		11,141		4,232
Total non-accrual originated loans	$	120,353	$	96,910

	June 30,		December 31,
	2018		2017
	(In thousands)
Acquired BBVAPR loans accounted for under ASC 310-20
Commercial
Commercial secured by real estate
Retail	$	54	$	119
Floor plan		917		928
		971		1,047
Other commercial and industrial
Retail		42		221
Floor plan		2		2
		44		223
		1,015		1,270
Consumer
Credit cards		584		1,310
Personal loans		14		45
		598		1,355
Auto		139		179
Total non-accrual acquired BBVAPR loans accounted for under ASC 310-20		1,752		2,804
Total non-accrual loans	$	122,105	$	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 June 30, 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 $100.5 million and $109.2 million, respectively, as they are performing under their new terms.

At June 30, 2018 and December 31, 2017, loans that are current in their monthly payments, but placed in non-accrual due to credit deterioration amounted to $21.8 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 $69.8 million and $72.3 million at June 30, 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 $10.0 million and $10.6 million at June 30, 2018 and December 31, 2017, respectively. The total investment in impaired mortgage loans that were individually evaluated for impairment was $84.5 million and $85.4 million at June 30, 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 $9.9 million and $9.1 million at June 30, 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 June 30, 2018 and 2017 are as follows:

	June 30, 2018
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	47,346	$	43,363	$	9,906	23%
Residential impaired and troubled-debt restructuring		95,121		84,520		9,862	12%
Impaired loans with no specific allowance:
Commercial		30,916		25,689		N/A	0%
Total investment in impaired loans	$	173,383	$	153,572	$	19,768	13%

	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 June 30, 2018 and December 31, 2017 are as follows:


	June 30, 2018
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance
Commercial	$	926	$	747	$	68	9%
Impaired loans with no specific allowance
Commercial	$	-	$	-		N/A	0%
Total investment in impaired loans	$	926	$	747	$	68	9%


	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 June 30, 2018 and December 31, 2017 are as follows:

	June 30, 2018
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	525,230	$	516,934	$	14,567	3%
Commercial		230,905		222,202		23,019	10%
Consumer		1,400		495		18	4%
Auto		28,086		26,937		6,572	24%
Total investment in impaired loan pools	$	785,621	$	766,568	$	44,176	6%

	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 June 30, 2018 and December 31, 2017 are as follows:

	June 30, 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	$	74,185	$	65,584	$	15,170	23%
Commercial		51,865		49,758		9,140	18%
Consumer		14		4		4	100%
Total investment in impaired loan pools	$	126,064	$	115,346	$	24,314	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 and six-month periods ended June 30, 2018 and 2017:

	Quarter Ended June 30,
	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	$	129	$	46,976	$	193	$	14,908
Residential troubled-debt restructuring		705		84,473		723		87,615
Impaired loans with no specific allowance
Commercial		131		22,129		383		44,528
		965		153,578		1,299		147,051
Acquired loans accounted for under ASC 310-20:
Impaired loans with specific allowance
Commercial		-		747		-		-
Impaired loans with no specific allowance
Commercial		-		-		-		763
Total interest income from impaired loans	$	965	$	154,325	$	1,299	$	147,814

	Six-Month Period Ended June 30,
	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	$	250	$	49,154	$	385	$	13,859
Residential troubled-debt restructuring		1,384		84,613		1,427		88,579
Impaired loans with no specific allowance
Commercial		262		19,946		766		44,211
Total interest income from impaired loans	$	1,896	$	153,713	$	2,578	$	146,649

Acquired loans accounted for under ASC 310-20:
Impaired loans with specific allowance
Commercial	$	-	$	747	$	-	$	-
Impaired loans with no specific allowance
Commercial		-		-		-		840
Total interest income from impaired loans	$	1,896	$	154,460	$	2,578	$	147,489

Modifications

The following tables present the troubled-debt restructurings in all loan portfolios during the quarters and six-month periods ended June 30, 2018 and 2017.

	Quarter Ended June 30, 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	45	$	5,718	5.63%	371	$	5,679	4.85%	325
Commercial	5		5,775	5.55%	39		5,775	6.34%	45
Consumer	21		357	16.49%	56		357	10.26%	72


	Six-Month Period Ended June 30, 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	83	$	11,466	5.66%	384	$	11,019	4.96%	344
Commercial	8		7,334	5.38%	46		7,330	6.00%	50
Consumer	49		711	16.12%	51		712	10.93%	70

	Quarter Ended June 30, 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	27	$	3,349	6.00%	382	$	3,313	4.21%	367
Commercial	9		2,155	5.96%	55		2,155	5.12%	68
Consumer	37		477	12.83%	65		477	10.87%	68
Auto	4		66	6.39%	61		66	12.91%	37

	Six-Month Period Ended June 30, 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	59	$	7,353	6.29%	387	$	7,328	4.26%	378
Commercial	18		3,373	6.44%	55		3,374	5.41%	67
Consumer	62		869	11.98%	65		907	10.62%	70
Auto	7		111	7.41%	67		113	12.48%	38

The following table presents troubled-debt restructurings for which there was a payment default during the twelve month periods ended June 30, 2018 and 2017:

	Twelve Month Period Ended June 30,
	2018			2017
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(Dollars in thousands)
Mortgage	12	$	1,718	22	$	2,293
Commercial	1	$	235	5	$	563
Consumer	15	$	141	17	$	156

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 June 30, 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:

	June 30, 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	$	274,435	$	240,118	$	32,480	$	1,837	$	-	$	-
Institutional		81,019		70,468		-		10,551		-		-
Middle market		194,273		150,675		32,987		10,611		-		-
Retail		216,490		189,366		4,079		23,045		-		-
Floor plan		4,017		2,714		-		1,303		-		-
Real estate		15,157		15,157		-		-		-		-
		785,391		668,498		69,546		47,347		-		-
Other commercial and industrial:
Corporate		190,414		179,117		11,297		-		-		-
Institutional		113,810		113,810		-		-		-		-
Middle market		94,979		67,804		3,470		23,705		-		-
Retail		284,596		280,653		229		3,714		-		-
Floor plan		38,178		35,105		3,022		51		-		-
		721,977		676,489		18,018		27,470		-		-
Total		1,507,368		1,344,987		87,564		74,817		-		-

Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		54		-		-		54		-		-
Floor plan		1,249		332		-		917		-		-
		1,303		332		-		971		-		-
Other commercial and industrial:
Retail		1,604		1,603		-		1		-		-
Floor plan		2		-		-		2		-		-
		1,606		1,603		-		3		-		-
Total		2,909		1,935		-		974		-		-

	June 30, 2018
	Risk Ratings

	Balance				Special
	Outstanding		Pass		Mention		Substandard		Doubtful		Loss
	(In thousands)
Retail - originated and other loans held for investment
Mortgage:
Traditional		541,892		505,864		-		36,028		-		-
Non-traditional		15,494		12,363		-		3,131		-		-
Loss mitigation program		106,095		87,556		-		18,539		-		-
Home equity secured personal loans		257		257		-		-		-		-
GNMA's buy-back option program		14,521		-		-		14,521		-		-
		678,259		606,040		-		72,219		-		-

Consumer:
Credit cards		27,859		26,984		-		875		-		-
Overdrafts		158		145		-		13		-		-
Unsecured personal lines of credit		1,931		1,891		-		40		-		-
Unsecured personal loans		293,948		292,848		-		1,100		-		-
Cash collateral personal loans		15,445		15,428		-		17		-		-
		339,341		337,296		-		2,045		-		-
Auto and Leasing		1,014,664		1,003,563		-		11,101		-		-
Total		2,032,264		1,946,899		-		85,365		-		-

Retail - acquired loans (accounted for under ASC 310-20)
Consumer:
Credit cards		23,481		22,897		-		584		-		-
Personal loans		2,255		2,241		-		14		-		-
		25,736		25,138		-		598		-		-
Auto		11,283		11,144		-		139		-		-
		37,019		36,282		-		737		-		-
	$	3,579,560	$	3,330,103	$	87,564	$	161,893	$	-	$	-

	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	$	-	$	-

- 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 + Details