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Loans

3 Months Ended

Mar. 31, 2019

Loans [Abstract]

Loans

NOTE 4 - 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, 2019 and December 31, 2018 was as follows:

	March 31,			December 31,
	2019			2018
	(In thousands)
Originated and other loans and leases held for investment:
Mortgage	$	651,423		$	668,809
Commercial		1,569,551			1,597,588
Consumer		350,543			348,980
Auto and leasing		1,167,482			1,129,695
		3,738,999			3,745,072
Allowance for loan and lease losses on originated and other loans and leases		(94,035)			(95,188)
		3,644,964			3,649,884
Deferred loan costs, net		8,254			7,740
Total originated and other loans held for investment, net		3,653,218			3,657,624
Acquired loans:
Acquired BBVAPR loans:
Accounted for under ASC 310-20 (Loans with revolving feature and/or
acquired at a premium)
Commercial		2,405			2,546
Consumer		22,768			23,988
Auto		2,336			4,435
		27,509			30,969
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-20		(1,968)			(2,062)
		25,541			28,907
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		484,578			492,890
Commercial		176,908			182,319
Auto		9,866			14,403
		671,352			689,612
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-30		(42,133)			(42,010)
		629,219			647,602
Total acquired BBVAPR loans, net		654,760			676,509
Acquired Eurobank loans:
Loans secured by 1-4 family residential properties		62,649			63,392
Commercial		46,588			47,826
Consumer		856			846
Total acquired Eurobank loans		110,093			112,064
Allowance for loan and lease losses on Eurobank loans		(24,352)			(24,971)
Total acquired Eurobank loans, net		85,741			87,093
Total acquired loans, net		740,501			763,602
Total held for investment, net		4,393,719			4,421,226
Mortgage loans held-for-sale		7,682			10,368
Total loans, net	$	4,401,401		$	4,431,594

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 March 31, 2019 and December 31, 2018, 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, 2019
																			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	$	243		$	972		$	2,695		$	3,910		$	35,619		$	39,529		$	164
Years 2003 and 2004		144			2,715			4,934			7,793			66,079			73,872			-
Year 2005		86			1,668			3,098			4,852			33,355			38,207			-
Year 2006		228			1,658			4,729			6,615			47,844			54,459			-
Years 2007, 2008 and 2009		-			810			5,832			6,642			51,783			58,425			55
Years 2010, 2011, 2012, 2013		286			722			7,001			8,009			103,092			111,101			307
Years 2014, 2015, 2016, 2017 and 2018		-			707			1,844			2,551			139,629			142,180			-
		987			9,252			30,133			40,372			477,401			517,773			526
Non-traditional		-			364			2,617			2,981			10,225			13,206			-
Loss mitigation program		11,639			4,533			19,026			35,198			72,059			107,257			1,645
		12,626			14,149			51,776			78,551			559,685			638,236			2,171
Home equity secured personal loans		-			-			9			9			236			245			-
GNMA's buy-back option program		-			-			12,942			12,942			-			12,942			-
		12,626			14,149			64,727			91,502			559,921			651,423			2,171
Commercial
Commercial secured by real estate:
Corporate		-			-			-			-			272,698			272,698			-
Institutional		-			-			1,167			1,167			67,759			68,926			-
Middle market		9,966			-			6,510			16,476			189,673			206,149			-
Retail		593			522			8,036			9,151			221,814			230,965			-
Floor plan		-			-			-			-			4,098			4,098			-
Real estate		-			-			-			-			18,664			18,664			-
		10,559			522			15,713			26,794			774,706			801,500			-
Other commercial and industrial:
Corporate		150			-			-			150			148,258			148,408			-
Institutional		-			-			-			-			146,380			146,380			-
Middle market		464			298			5,982			6,744			85,771			92,515			-
Retail		743			89			1,200			2,032			330,094			332,126			-
Floor plan		-			-			17			17			48,605			48,622			-
		1,357			387			7,199			8,943			759,108			768,051			-
		11,916			909			22,912			35,737			1,533,814			1,569,551			-

	March 31, 2019
																			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	$	803		$	281		$	732		$	1,816		$	26,110		$	27,926		$	-
Overdrafts		35			-			-			35			137			172			-
Personal lines of credit		89			3			29			121			1,808			1,929			-
Personal loans		4,566			1,746			1,025			7,337			297,271			304,608			-
Cash collateral personal loans		261			11			292			564			15,344			15,908			-
		5,754			2,041			2,078			9,873			340,670			350,543			-
Auto and leasing		65,490			22,010			12,163			99,663			1,067,819			1,167,482			-
Total	$	95,786		$	39,109		$	101,880		$	236,775		$	3,502,224		$	3,738,999		$	2,171

	December 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	$	77		$	1,516		$	2,707		$	4,300		$	36,344		$	40,644		$	168
Years 2003 and 2004		91			2,412			5,632			8,135			67,707			75,842			-
Year 2005		-			552			3,531			4,083			35,004			39,087			-
Year 2006		255			1,693			5,074			7,022			49,213			56,235			-
Years 2007, 2008 and 2009		255			1,059			6,677			7,991			52,781			60,772			56
Years 2010, 2011, 2012, 2013		253			328			8,697			9,278			104,429			113,707			270
Years 2014, 2015, 2016 and 2017		-			483			1,462			1,945			139,500			141,445			-
		931			8,043			33,780			42,754			484,978			527,732			494
Non-traditional		-			116			3,085			3,201			11,072			14,273			-
Loss mitigation program		10,793			6,258			19,389			36,440			70,393			106,833			2,223
		11,724			14,417			56,254			82,395			566,443			648,838			2,717
Home equity secured personal loans		9			-			-			9			241			250			-
GNMA's buy-back option program		-			-			19,721			19,721			-			19,721			-
		11,733			14,417			75,975			102,125			566,684			668,809			2,717
Commercial
Commercial secured by real estate:
Corporate		-			-			-			-			289,052			289,052			-
Institutional		-			-			1,200			1,200			68,413			69,613			-
Middle market		-			1,430			5,202			6,632			200,831			207,463			-
Retail		1,641			463			8,570			10,674			213,440			224,114			-
Floor plan		-			-			-			-			4,184			4,184			-
Real estate		-			-			-			-			19,009			19,009			-
		1,641			1,893			14,972			18,506			794,929			813,435			-
Other commercial and industrial:
Corporate		-			-			-			-			179,885			179,885			-
Institutional		-			-			-			-			156,410			156,410			-
Middle market		917			-			6,020			6,937			81,030			87,967			-
Retail		571			546			817			1,934			308,278			310,212			-
Floor plan		-			-			46			46			49,633			49,679			-
		1,488			546			6,883			8,917			775,236			784,153			-
		3,129			2,439			21,855			27,423			1,570,165			1,597,588			-

	December 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	$	725		$	363		$	411		$	1,499		$	26,535		$	28,034		$	-
Overdrafts		10			-			-			10			204			214			-
Personal lines of credit		57			11			22			90			1,827			1,917			-
Personal loans		3,966			1,740			1,262			6,968			296,151			303,119			-
Cash collateral personal loans		74			339			3			416			15,280			15,696			-
		4,832			2,453			1,698			8,983			339,997			348,980			-
Auto and leasing		58,094			27,945			13,494			99,533			1,030,162			1,129,695			-
Total	$	77,788		$	47,254		$	113,022		$	238,064		$	3,507,008		$	3,745,072		$	2,717

At both March 31, 2019, and December 31, 2018, Oriental had a carrying balance of $91.4 million in current status, respectively, 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. 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, 2019 and December 31, 2018, by class of loans:

	March 31, 2019
																			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		-			-			878			878			77			955			-
		-			-			932			932			77			1,009			-
Other commercial and industrial
Retail		17			50			-			67			1,329			1,396			-
		17			50			-			67			1,329			1,396			-
		17			50			932			999			1,406			2,405			-
Consumer
Credit cards		486			137			391			1,014			19,608			20,622			-
Personal loans		55			21			35			111			2,035			2,146			-
		541			158			426			1,125			21,643			22,768			-
Auto		210			150			100			460			1,876			2,336			-
Total	$	768		$	358		$	1,458		$	2,584		$	24,925		$	27,509		$	-

	December 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	$	-		$	-		$	54		$	54		$	-		$	54		$	-
Floor plan		-			-			888			888			94			982			-
		-			-			942			942			94			1,036			-
Other commercial and industrial
Retail		30			11			8			49			1,461			1,510			-
		30			11			8			49			1,461			1,510			-
		30			11			950			991			1,555			2,546			-
Consumer
Credit cards		499			147			380			1,026			20,796			21,822			-
Personal loans		64			32			18			114			2,052			2,166			-
		563			179			398			1,140			22,848			23,988			-
Auto		405			241			200			846			3,589			4,435			-
Total	$	998		$	431		$	1,548		$	2,977		$	27,992		$	30,969		$	-

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, 2019 and December 31, 2018 is as follows:

	March 31,			December 31,
		2019			2018
		(In thousands)
Contractual required payments receivable:	$	1,279,147		$	1,304,545
Less: Non-accretable discount		342,902			345,423
Cash expected to be collected		936,245			959,122
Less: Accretable yield		264,893			269,510
Carrying amount, gross		671,352			689,612
Less: allowance for loan and lease losses		42,133			42,010
Carrying amount, net	$	629,219		$	647,602

At March 31, 2019 and December 31, 2018, Oriental had $44.1 million and $44.5 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, 2019 and 2018

	Quarter Ended March 31, 2019
	Mortgage			Commercial			Auto			Consumer			Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	232,199		$	36,508		$	243		$	560		$	269,510
Accretion		(6,350)			(2,656)			(216)			(298)			(9,520)
Change in expected cash flows		-			3,265			3			298			3,566
Transfer from (to) non-accretable discount		1,058			262			150			(133)			1,337
Balance at end of period	$	226,907		$	37,379		$	180		$	427		$	264,893
Non-Accretable Discount Activity:
Balance at beginning of period	$	291,887		$	10,346		$	24,245		$	18,945		$	345,423
Change in actual and expected losses		(729)			(173)			(39)			(243)			(1,184)
Transfer from accretable yield		(1,058)			(262)			(150)			133			(1,337)
Balance at end of period	$	290,100		$	9,911		$	24,056		$	18,835		$	342,902

	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) from 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

Acquired Eurobank Loans

The carrying amount of acquired Eurobank loans at March 31, 2019 and December 31, 2018 is as follows:

	March 31			December 31,
	2019			2018
	(In thousands)
Contractual required payments receivable	$	151,917		$	156,722
Less: Non-accretable discount		2,542			2,959
Cash expected to be collected		149,375			153,763
Less: Accretable yield		39,282			41,699
Carrying amount, gross		110,093			112,064
Less: Allowance for loan and lease losses		24,352			24,971
Carrying amount, net	$	85,741		$	87,093

The following tables describe the accretable yield and non-accretable discount activity of acquired Eurobank loans for the quarters ended March 31, 2019 and 2018:

	Quarter Ended March 31, 2019
	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	$	37,734			3,310			655			-			-			41,699
Accretion		(1,351)			(1,165)			-			(12)			(46)			(2,574)
Change in expected cash flows		(423)			(44)			-			(31)			87			(411)
Transfer (to) from non-accretable discount		408			159			(1)			43			(41)			568
Balance at end of period	$	36,368		$	2,260		$	654		$	-		$	-		$	39,282
Non-Accretable Discount Activity:
Balance at beginning of period	$	1,276			-			1,550			-			133			2,959
Change in actual and expected losses		7			159			-			43			(58)			151
Transfer from (to) accretable yield		(408)			(159)			1			(43)			41			(568)
Balance at end of period	$	875		$	-		$	1,551		$	-		$	116		$	2,542

	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 from (to) 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 (to) from accretable yield		103			427			91			(97)			82			606
Balance at end of period	$	4,479		$	-		$	849		$	-		$	219		$	5,547

Non-accrual Loans

The following table presents the recorded investment in loans in non-accrual status by class of loans as of March 31, 2019 and December 31, 2018:

	March 31,			December 31
	2019			2018
	(In thousands)
Originated and other loans and leases held for investment
Mortgage
Traditional (by origination year):
Up to the year 2002	$	2,529		$	2,538
Years 2003 and 2004		5,217			5,818
Year 2005		3,098			3,600
Year 2006		4,729			5,140
Years 2007, 2008 and 2009		5,850			6,697
Years 2010, 2011, 2012, 2013		6,694			8,427
Years 2014, 2015, 2016, 2017 and 2018		1,844			1,462
		29,961			33,682
Non-traditional		2,617			3,085
Loss mitigation program		22,170			22,107
		54,748			58,874
Home equity loans, secured personal loans		9			-
		54,757			58,874
Commercial
Commercial secured by real estate
Institutional		9,760			9,911
Middle market		7,114			7,266
Retail		15,950			16,123
		32,824			33,300
Other commercial and industrial
Middle market		6,401			6,481
Retail		2,251			2,629
Floor plan		17			46
		8,669			9,156
		41,493			42,456
Consumer
Credit cards		732			411
Personal lines of credit		38			31
Personal loans		2,907			2,909
Cash collateral personal loans		294			3
		3,971			3,354
Auto and leasing		12,163			13,494
Total non-accrual originated loans	$	112,384		$	118,178

	March 31,			December 31,
	2019			2018
	(In thousands)
Acquired BBVAPR loans accounted for under ASC 310-20
Commercial
Commercial secured by real estate
Retail	$	54		$	54
Floor plan		878			888
		932			942
Other commercial and industrial
Retail		-			8
		-			8
		932			950
Consumer
Credit cards		391			380
Personal loans		35			18
		426			398
Auto		100			200
Total non-accrual acquired BBVAPR loans accounted for under ASC 310-20		1,458			1,548
Total non-accrual loans	$	113,842		$	119,726

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, 2019 and December 31, 2018, loans whose terms have been extended and which are classified as troubled-debt restructurings that are not included in non-accrual loans amounted to $113.1 million and $112.9 million, respectively, as they are performing under their new terms.

At March 31, 2019 and December 31, 2018, loans that are current in their monthly payments, but placed in non-accrual due to credit deterioration amounted to $30.6 million and $21.2 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 $89.4 million and $82.0 million at March 31, 2019 and December 31, 2018, 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 $10.9 million and $8.4 million at March 31, 2019 and December 31, 2018, respectively. The total investment in impaired mortgage loans that were individually evaluated for impairment was $83.4 million and $84.2 million at March 31, 2019 and December 31, 2018, 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 $11.1 million and $10.2 million at March 31, 2019 and December 31, 2018, 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, 2019 and December 31, 2018 are as follows:

	March 31, 2019
	Unpaid			Recorded			Related
	Principal			Investment			Allowance			Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	61,854		$	56,408		$	10,828		19%
Residential impaired and troubled-debt restructuring		94,964			83,406			11,135		13%
Impaired loans with no specific allowance:
Commercial		38,512			32,207			N/A		0%
Total investment in impaired loans	$	195,330		$	172,021		$	21,963		13%

	December 31, 2018
	Unpaid			Recorded			Related
	Principal			Investment			Allowance			Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	54,636		$	49,092		$	8,434		17%
Residential impaired and troubled-debt restructuring		95,659			84,174			10,186		12%
Impaired loans with no specific allowance
Commercial		38,241			32,137			N/A		0%
Total investment in impaired loans	$	188,536		$	165,403		$	18,620		11%

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, 2019 and December 31, 2018 are as follows:

	March 31, 2019
	Unpaid			Recorded			Related
	Principal			Investment			Allowance			Coverage
	(In thousands)
Impaired loans with specific allowance
Commercial	$	926		$	747		$	24		3%
Impaired loans with no specific allowance
Commercial	$	-		$	-			N/A		0%
Total investment in impaired loans	$	926		$	747		$	24		3%
	December 31, 2018
	Unpaid			Recorded			Specific
	Principal			Investment			Allowance			Coverage
	(In thousands)
Impaired loans with specific allowance
Commercial	$	926		$	747		$	14		2%
Impaired loans with no specific allowance
Commercial	$	-		$	-			N/A		0%
Total investment in impaired loans	$	926		$	747		$	14		2%

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, 2019 and December 31, 2018 are as follows:

	March 31, 2019
										Coverage
	Unpaid			Recorded						to Recorded
	Principal			Investment			Allowance			Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	489,638		$	484,577		$	17,901		4%
Commercial		162,612			156,682			20,733		13%
Auto		10,336			9,866			3,499		35%
Total investment in impaired loan pools	$	662,586		$	651,125		$	42,133		6%

	December 31 , 2018
										Coverage
	Unpaid			Recorded						to Recorded
	Principal			Investment			Allowance			Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	498,537		$	492,890		$	15,225		3%
Commercial		188,413			180,790			20,641		11%
Auto		14,551			14,403			6,144		43%
Total investment in impaired loan pools	$	701,501		$	688,083		$	42,010		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, 2019 and December 31, 2018 are as follows:

	March 31, 2019
										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	$	66,713		$	60,642		$	15,110		25%
Commercial		38,447			39,319			9,242		24%
Total investment in impaired loan pools	$	105,160		$	99,961		$	24,352		24%

	December 31, 2018
										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	$	70,153		$	63,406		$	15,382		24%
Commercial		47,342			47,820			9,585		20%
Consumer		15			4			4		100%
Total investment in impaired loan pools	$	117,510		$	111,230		$	24,971		22%

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, 2019 and 2018:

	Quarter Ended March 31,
	2019						2018
	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	$	399		$	50,890		$	263		$	51,331
Residential troubled-debt restructuring		667			83,657			720			84,754
Impaired loans with no specific allowance
Commercial		305			32,246			176			17,764
		1,371			166,793			1,159			153,849
Acquired loans accounted for under ASC 310-20:
Impaired loans with specific allowance
Commercial		-			747			-			747
Impaired loans with no specific allowance
Commercial		-			-			-			-
Total interest income from impaired loans	$	1,371		$	167,540		$	1,159		$	154,596

Modifications

The following tables present the troubled-debt restructurings in all loan portfolios during the quarters ended March 31, 2019 and 2018.

	Quarter Ended March 31, 2019
	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		$	4,494		5.52%		387		$	4,242		4.60%		353
Commercial	1			7		11.50%		36			7		11.50%		24
Consumer	71			963		15.20%		65			967		11.86%		73
	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

The following table presents troubled-debt restructurings for which there was a payment default during the twelve month periods ended March 31, 2019 and 2018:

	Twelve month Period Ended March 31,
	2019						2018
	Number of Contracts		Recorded Investment				Number of Contracts		Recorded Investment
	(Dollars in thousands)
Mortgage	27		$	3,011			36		$	3,310
Commercial	4		$	1,981			4		$	398
Consumer	43		$	587			23		$	243

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, 2019 and December 31, 2018, 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, 2019
	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	$	272,698		$	230,648		$	17,502		$	24,548		$	-		$	-
Institutional		68,926			58,976			-			9,950			-			-
Middle market		206,149			149,873			33,394			22,882			-			-
Retail		230,965			205,603			3,902			21,460			-			-
Floor plan		4,098			2,817			-			1,281			-			-
Real estate		18,664			18,664			-			-			-			-
		801,500			666,581			54,798			80,121			-			-
Other commercial and industrial:
Corporate		148,408			123,288			25,120			-			-			-
Institutional		146,380			146,380			-			-			-			-
Middle market		92,515			81,395			3,711			7,409			-			-
Retail		332,126			322,540			304			9,282			-			-
Floor plan		48,622			45,463			2,959			200			-			-
		768,051			719,066			32,094			16,891			-			-
Total		1,569,551			1,385,647			86,892			97,012			-			-
Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		54			-			-			54			-			-
Floor plan		955			77			-			878			-			-
		1,009			77			-			932			-			-
Other commercial and industrial:
Retail		1,396			1,396			-			-			-			-
		1,396			1,396			-			-			-			-
Total		2,405			1,473			-			932			-			-

	March 31, 2019
	Risk Ratings
	Balance						Special
	Outstanding			Pass			Mention			Substandard			Doubtful			Loss
	(In thousands)
Retail - originated and other loans held for investment
Mortgage:
Traditional		517,773			487,640			-			30,133			-			-
Non-traditional		13,206			10,589			-			2,617			-			-
Loss mitigation program		107,257			88,231			-			19,026			-			-
Home equity secured personal loans		245			236			-			9			-			-
GNMA's buy-back option program		12,942			-			-			12,942			-			-
		651,423			586,696			-			64,727			-			-
Consumer:
Credit cards		27,926			27,194			-			732			-			-
Overdrafts		172			137			-			35			-			-
Unsecured personal lines of credit		1,929			1,900			-			29			-			-
Unsecured personal loans		304,608			303,582			-			1,026			-			-
Cash collateral personal loans		15,908			15,616			-			292			-			-
		350,543			348,429			-			2,114			-			-
Auto and Leasing		1,167,482			1,155,319			-			12,163			-			-
Total		2,169,448			2,090,444			-			79,004			-			-
Retail - acquired loans (accounted for under ASC 310-20)
Consumer:
Credit cards		20,622			20,232			-			390			-			-
Personal loans		2,146			2,111			-			35			-			-
		22,768			22,343			-			425			-			-
Auto		2,336			2,236			-			100			-			-
		25,104			24,579			-			525			-			-
	$	3,766,508		$	3,502,143		$	86,892		$	177,473		$	-		$	-

	December 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	$	289,052		$	246,711		$	26,544		$	15,797		$	-		$	-
Institutional		69,613			59,509			-			10,104			-			-
Middle market		207,463			151,638			32,638			23,187			-			-
Retail		224,114			198,402			3,996			21,716			-			-
Floor plan		4,184			2,890			-			1,294			-			-
Real estate		19,009			19,009			-			-			-			-
		813,435			678,159			63,178			72,098			-			-
Other commercial and industrial:
Corporate		179,885			154,629			25,256			-			-			-
Institutional		156,410			156,410			-			-			-			-
Middle market		87,967			63,876			13,737			10,354			-			-
Retail		310,212			307,160			318			2,734			-			-
Floor plan		49,679			47,092			2,541			46			-			-
		784,153			729,167			41,852			13,134			-			-
Total		1,597,588			1,407,326			105,030			85,232			-			-
Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		54			-			-			54			-			-
Floor plan		982			94			-			888			-			-
		1,036			94			-			942			-			-
Other commercial and industrial:
Retail		1,510			1,510			-			-			-			-
		1,510			1,510			-			-			-			-
Total		2,546			1,604			-			942			-			-

	December 31, 2018
	Risk Ratings
	Balance						Special
	Outstanding			Pass			Mention			Substandard			Doubtful			Loss
	(In thousands)
Retail - originated and other loans held for investment
Mortgage:
Traditional		527,732			493,952			-			33,780			-			-
Non-traditional		14,273			11,188			-			3,085			-			-
Loss mitigation program		106,833			87,444			-			19,389			-			-
Home equity secured personal loans		250			250			-			-			-			-
GNMA's buy-back option program		19,721			-			-			19,721			-			-
		668,809			592,834			-			75,975			-			-
Consumer:
Credit cards		28,034			27,623			-			411			-			-
Overdrafts		214			204			-			10			-			-
Unsecured personal lines of credit		1,917			1,895			-			22			-			-
Unsecured personal loans		303,119			301,857			-			1,262			-			-
Cash collateral personal loans		15,696			15,693			-			3			-			-
		348,980			347,272			-			1,708			-			-
Auto and Leasing		1,129,695			1,116,201			-			13,494			-			-
Total		2,147,484			2,056,307			-			91,177			-			-
Retail - acquired loans (under ASC 310-20)
Consumer:
Credit cards		21,822			21,442			-			380			-			-
Personal loans		2,166			2,148			-			18			-			-
		23,988			23,590			-			398			-			-
Auto		4,435			4,235			-			200			-			-
Total		28,423			27,825			-			598			-			-
	$	3,776,041		$	3,493,062		$	105,030		$	177,949		$	-		$	-

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.

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