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Loans

6 Months Ended

Jun. 30, 2019

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, 2019 and December 31, 2018 was as follows:

	June 30,		December 31,
	2019		2018
	(In thousands)
Originated and other loans and leases held for investment:
Mortgage	$	635,616	$	668,809
Commercial		1,616,973		1,597,588
Consumer		356,110		348,980
Auto and leasing		1,218,070		1,129,695
		3,826,769		3,745,072
Allowance for loan and lease losses on originated and other loans and leases		(89,952)		(95,188)
		3,736,817		3,649,884
Deferred loan costs, net		9,251		7,740
Total originated and other loans held for investment, net		3,746,068		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		2,249		2,546
Consumer		21,966		23,988
Auto		996		4,435
		25,211		30,969
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-20		(1,685)		(2,062)
		23,526		28,907
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		476,081		492,890
Commercial		169,481		182,319
Auto		6,462		14,403
		652,024		689,612
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-30		(45,427)		(42,010)
		606,597		647,602
Total acquired BBVAPR loans, net		630,123		676,509
Acquired Eurobank loans:
Loans secured by 1-4 family residential properties		61,920		63,392
Commercial		46,421		47,826
Consumer		867		846
Total acquired Eurobank loans		109,208		112,064
Allowance for loan and lease losses on Eurobank loans		(25,578)		(24,971)
Total acquired Eurobank loans, net		83,630		87,093
Total acquired loans, net		713,753		763,602
Total held for investment, net		4,459,821		4,421,226
Mortgage loans held-for-sale		14,676		10,368
Total loans, net	$	4,474,497	$	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 June 30, 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.

	June 30, 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	$	291	$	614	$	2,850	$	3,755	$	34,667	$	38,422	$	228
Years 2003 and 2004		82		2,576		4,756		7,414		63,642		71,056		-
Year 2005		83		1,599		2,991		4,673		32,597		37,270		-
Year 2006		-		1,496		4,283		5,779		47,234		53,013		-
Years 2007, 2008 and 2009		224		398		4,305		4,927		50,811		55,738		196
Years 2010, 2011, 2012, 2013		224		784		6,618		7,626		97,428		105,054		320
Years 2014, 2015, 2016, 2017 and 2018		-		491		1,893		2,384		141,205		143,589		-
		904		7,958		27,696		36,558		467,584		504,142		744
Non-traditional		-		115		3,439		3,554		9,339		12,893		-
Loss mitigation program		9,371		5,955		14,926		30,252		76,422		106,674		1,381
		10,275		14,028		46,061		70,364		553,345		623,709		2,125
Home equity secured personal loans		-		-		-		-		232		232		-
GNMA's buy-back option program		-		-		11,675		11,675		-		11,675		-
		10,275		14,028		57,736		82,039		553,577		635,616		2,125
Commercial
Commercial secured by real estate:
Corporate		-		-		8,883		8,883		254,560		263,443		-
Institutional		-		-		-		-		73,213		73,213		-
Middle market		-		500		5,334		5,834		203,853		209,687		-
Retail		913		220		6,543		7,676		230,623		238,299		-
Floor plan		-		-		-		-		3,100		3,100		-
Real estate		-		-		-		-		18,317		18,317		-
		913		720		20,760		22,393		783,666		806,059		-
Other commercial and industrial:
Corporate		-		-		-		-		148,747		148,747		-
Institutional		-		-		-		-		158,462		158,462		-
Middle market		42		250		4,826		5,118		81,754		86,872		-
Retail		562		197		428		1,187		368,766		369,953		-
Floor plan		39		15		6		60		46,820		46,880		-
		643		462		5,260		6,365		804,549		810,914		-
		1,556		1,182		26,020		28,758		1,588,215		1,616,973		-

	June 30, 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	$	709	$	286	$	572	$	1,567	$	26,321	$	27,888	$	-
Overdrafts		30		-		-		30		154		184		-
Personal lines of credit		91		25		28		144		1,859		2,003		-
Personal loans		4,996		2,237		1,225		8,458		301,522		309,980		-
Cash collateral personal loans		233		10		374		617		15,438		16,055		-
		6,059		2,558		2,199		10,816		345,294		356,110		-
Auto and leasing		69,495		29,130		12,021		110,646		1,107,424		1,218,070		-
Total	$	87,385	$	46,898	$	97,976	$	232,259	$	3,594,510	$	3,826,769	$	2,125

	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 June 30, 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 June 30, 2019 and December 31, 2018, by class of loans:

	June 30, 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	$	-	$	-	$	28	$	28	$	-	$	28	$	-
Floor plan		-		-		798		798		60		858		-
		-		-		826		826		60		886		-
Other commercial and industrial
Retail		61		24		-		85		1,278		1,363		-
		61		24		-		85		1,278		1,363		-
		61		24		826		911		1,338		2,249		-
Consumer
Credit cards		434		90		276		800		19,073		19,873		-
Personal loans		39		43		11		93		2,000		2,093		-
		473		133		287		893		21,073		21,966		-
Auto		132		90		58		280		716		996		-
Total	$	666	$	247	$	1,171	$	2,084	$	23,127	$	25,211	$	-

	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 June 30, 2019 and December 31, 2018 is as follows:

	June 30,		December 31,
		2019		2018
		(In thousands)
Contractual required payments receivable:	$	1,250,597	$	1,304,545
Less: Non-accretable discount		346,055		345,423
Cash expected to be collected		904,542		959,122
Less: Accretable yield		252,518		269,510
Carrying amount, gross		652,024		689,612
Less: allowance for loan and lease losses		45,427		42,010
Carrying amount, net	$	606,597	$	647,602

At June 30, 2019 and December 31, 2018, Oriental had $44.6 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 and six-month periods ended June 30, 2019 and 2018

	Quarter Ended June 30, 2019
	Mortgage		Commercial		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	226,907	$	37,379	$	180	$	427	$	264,893
Accretion		(6,115)		(2,488)		(139)		(190)		(8,932)
Change in expected cash flows		-		1,375		8		190		1,573
Transfer to non-accretable discount		(3,243)		(1,628)		(6)		(139)		(5,016)
Balance at end of period	$	217,549	$	34,638	$	43	$	288	$	252,518

Non-Accretable Discount Activity:
Balance at beginning of period	$	290,100	$	9,911	$	24,056	$	18,835	$	342,902
Change in actual and expected losses		(1,085)		(635)		21		(164)		(1,863)
Transfer from accretable yield		3,243		1,628		6		139		5,016
Balance at end of period	$	292,258	$	10,904	$	24,083	$	18,810	$	346,055

	Six-Month Period Ended June 30, 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		(12,465)		(5,144)		(355)		(488)		(18,452)
Change in expected cash flows		-		4,640		11		488		5,139
Transfer (to) from non-accretable discount		(2,185)		(1,366)		144		(272)		(3,679)
Balance at end of period	$	217,549	$	34,638	$	43	$	288	$	252,518

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		(1,814)		(808)		(18)		(407)		(3,047)
Transfer from (to) accretable yield		2,185		1,366		(144)		272		3,679
Balance at end of period	$	292,258	$	10,904	$	24,083	$	18,810	$	346,055

	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 actual and expected losses		-		2,775		400		73		3,248
Transfer (to) from 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 actual and expected losses		-		5,931		826		131		6,888
Transfer (to) from 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 (to) accretable yield		607		2,892		996		69		4,564
Balance at end of period	$	296,137	$	11,143	$	23,645	$	19,332	$	350,257

Acquired Eurobank Loans

The carrying amount of acquired Eurobank loans at June 30, 2019 and December 31, 2018 is as follows:

	June 30		December 31,
	2019		2018
	(In thousands)
Contractual required payments receivable	$	149,401	$	156,722
Less: Non-accretable discount		1,799		2,959
Cash expected to be collected		147,602		153,763
Less: Accretable yield		38,394		41,699
Carrying amount, gross		109,208		112,064
Less: Allowance for loan and lease losses		25,578		24,971
Carrying amount, net	$	83,630	$	87,093

The following tables describe the accretable yield and non-accretable discount activity of acquired Eurobank loans for the quarters and six-months periods ended June 30, 2019 and 2018:

	Quarter Ended June 30, 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	$	36,368		2,260		654		-		-		39,282
Accretion		(1,280)		(1,199)		-		(3)		(17)		(2,499)
Change in expected cash flows		30		910		-		(10)		31		961
Transfer from (to) non-accretable discount		817		(115)		(51)		13		(14)		650
Balance at end of period	$	35,935	$	1,856	$	603	$	-	$	-	$	38,394

Non-Accretable Discount Activity:
Balance at beginning of period	$	875		-		1,551		-		116		2,542
Change in actual and expected losses		21		(115)		-		13		(12)		(93)
Transfer (to) from accretable yield		(817)		115		51		(13)		14		(650)
Balance at end of period	$	79	$	-	$	1,602	$	-	$	118	$	1,799

	Six-Month Period Ended June 30, 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		(2,631)		(2,364)		-		(15)		(63)		(5,073)
Change in expected cash flows		(393)		866		-		(41)		118		550
Transfer from (to) non-accretable discount		1,225		44		(52)		56		(55)		1,218
Balance at end of period	$	35,935	$	1,856	$	603	$	-	$	-	$	38,394

Non-Accretable Discount Activity:
Balance at beginning of period	$	1,276	$	-	$	1,550	$	-	$	133	$	2,959
Change in actual and expected losses		28		44		-		56		(70)		58
Transfer from (to) accretable yield		(1,225)		(44)		52		(56)		55		(1,218)
Balance at end of period	$	79	$	-	$	1,602	$	-	$	118	$	1,799

	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 actual and expected losses		(836)		1,832		-		(111)		236		1,121
Transfer from (to) 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 (to) from 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 period	$	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 period	$	4,576	$	276	$	758	$	-	$	235	$	5,845
Change in actual and expected cash flows		(20)		(1,860)		-		212		(235)		(1,903)
Transfer (to) from accretable yield		(1,918)		1,584		223		(212)		200		(123)
Balance at end of period	$	2,638	$	-	$	981	$	-	$	200	$	3,819

Non-accrual Loans

The following table presents the recorded investment in loans in non-accrual status by class of loans as of June 30, 2019 and December 31, 2018:

	June 30,		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	$	2,621	$	2,538
Years 2003 and 2004		4,912		5,818
Year 2005		2,991		3,600
Year 2006		4,398		5,140
Years 2007, 2008 and 2009		4,109		6,697
Years 2010, 2011, 2012, 2013		6,298		8,427
Years 2014, 2015, 2016, 2017 and 2018		1,893		1,462
		27,222		33,682
Non-traditional		3,439		3,085
Loss mitigation program		17,822		22,107
		48,483		58,874
Commercial
Commercial secured by real estate
Corporate		8,883		-
Institutional		9,556		9,911
Middle market		6,169		7,266
Retail		13,950		16,123
		38,558		33,300
Other commercial and industrial
Middle market		4,924		6,481
Retail		1,129		2,629
Floor plan		6		46
		6,059		9,156
		44,617		42,456
Consumer
Credit cards		572		411
Personal lines of credit		36		31
Personal loans		1,226		2,909
Cash collateral personal loans		374		3
		2,208		3,354
Auto and leasing		12,024		13,494
Total non-accrual originated loans	$	107,332	$	118,178

	June 30,		December 31,
	2019		2018
	(In thousands)
Acquired BBVAPR loans accounted for under ASC 310-20
Commercial
Commercial secured by real estate
Retail	$	28	$	54
Floor plan		798		888
		826		942
Other commercial and industrial
Retail		-		8
		-		8
		826		950
Consumer
Credit cards		276		380
Personal loans		11		18
		287		398
Auto		58		200
Total non-accrual acquired BBVAPR loans accounted for under ASC 310-20		1,171		1,548
Total non-accrual loans	$	108,503	$	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 June 30, 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 $119.7 million and $112.9 million, respectively, as they are performing under their new terms.

At June 30, 2019 and December 31, 2018, loans that are current in their monthly payments, but placed in non-accrual due to credit deterioration amounted to $20.5 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 $83.8 million and $82.0 million at June 30, 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 $9.2 million and $8.4 million at June 30, 2019 and December 31, 2018, respectively. The total investment in impaired mortgage loans that were individually evaluated for impairment was $83.1 million and $84.2 million at June 30, 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 $10.6 million and $10.2 million at June 30, 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 June 30, 2019 and December 31, 2018 are as follows:

	June 30, 2019
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	54,895	$	50,524	$	9,168	18%
Residential impaired and troubled-debt restructuring		94,501		83,093		10,615	13%
Impaired loans with no specific allowance:
Commercial		40,465		32,578		N/A	0%
Total investment in impaired loans	$	189,861	$	166,195	$	19,783	12%

	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 June 30, 2019 and December 31, 2018 are as follows:


	June 30, 2019
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance
Commercial	$	926	$	678	$	27	4%
Impaired loans with no specific allowance
Commercial	$	-	$	-		N/A	0%
Total investment in impaired loans	$	926	$	678	$	27	4%


	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 June 30, 2019 and December 31, 2018 are as follows:

	June 30, 2019
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	479,998	$	476,080	$	25,208	5%
Commercial		151,265		146,810		17,083	12%
Auto		7,393		6,462		3,136	49%
Total investment in impaired loan pools	$	638,656	$	629,352	$	45,427	7%

	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 June 30, 2019 and December 31, 2018 are as follows:

	June 30, 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	$	65,870	$	59,956	$	17,213	29%
Commercial		36,415		38,419		8,365	22%
Total investment in impaired loan pools	$	102,285	$	98,375	$	25,578	26%

	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 and six-month periods ended June 30, 2019 and 2018:

	Quarter Ended June 30,
	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	$	367	$	53,392	$	129	$	46,976
Residential troubled-debt restructuring		701		83,197		705		84,473
Impaired loans with no specific allowance
Commercial		347		32,002		131		22,129
		1,415		168,591		965		153,578
Acquired loans accounted for under ASC 310-20:
Impaired loans with specific allowance
Commercial		-		701		-		747
Impaired loans with no specific allowance
Commercial		-		-		-		-
Total interest income from impaired loans	$	1,415	$	169,292	$	965	$	154,325

	Six-Month Period Ended June 30,
	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	$	733	$	52,141	$	250	$	49,154
Residential troubled-debt restructuring		1,373		83,427		1,384		84,613
Impaired loans with no specific allowance
Commercial		687		32,124		262		19,946
Total interest income from impaired loans	$	2,793	$	167,692	$	1,896	$	153,713

Acquired loans accounted for under ASC 310-20:
Impaired loans with specific allowance
Commercial	$	-	$	724	$	-	$	747
Impaired loans with no specific allowance
Total interest income from impaired loans	$	2,793	$	168,416	$	1,896	$	154,460

Modifications

The following tables present the troubled-debt restructurings in all loan portfolios during the quarters and six-month periods ended June 30, 2019 and 2018.

	Quarter Ended June 30, 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	50	$	7,000	6.14%	388	$	6,345	5.45%	341
Commercial	1		1,157	7.00%	55		1,157	5.75%	86
Consumer	70		1,052	15.57%	69		1,082	11.56%	74
Auto	13		193	7.58%	70		200	9.18%	46


	Six-Month Period Ended June 30, 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	88	$	11,494	5.90%	388	$	10,586	5.11%	346
Commercial	2		1,164	7.03%	55		1,164	5.78%	86
Consumer	141		2,015	15.39%	67		2,049	11.70%	74
Auto	13		193	7.58%	70		200	9.18%	46

	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

The following table presents troubled-debt restructurings for which there was a payment default during the twelve-month periods ended June 30, 2019 and 2018:

	Twelve month Period Ended June 30,
	2019			2018
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(Dollars in thousands)
Mortgage	22	$	2,830	12	$	1,718
Commercial	3	$	1,935	1	$	235
Consumer	66	$	928	15	$	141
Auto	1	$	27	-	$	-

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, 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:

	June 30, 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	$	263,443	$	221,728	$	17,342	$	24,373	$	-	$	-
Institutional		73,213		63,109		361		9,743		-		-
Middle market		209,687		155,069		33,391		21,227		-		-
Retail		238,299		216,971		3,373		17,955		-		-
Floor plan		3,100		1,834		-		1,266		-		-
Real estate		18,317		18,317		-		-		-		-
		806,059		677,028		54,467		74,564		-		-
Other commercial and industrial:
Corporate		148,747		145,929		2,818		-		-		-
Institutional		158,462		158,462		-		-		-		-
Middle market		86,872		76,418		4,124		6,330		-		-
Retail		369,953		361,703		283		7,967		-		-
Floor plan		46,880		43,816		3,058		6		-		-
		810,914		786,328		10,283		14,303		-		-
Total		1,616,973		1,463,356		64,750		88,867		-		-

Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		28		-		-		28		-		-
Floor plan		858		60		-		798		-		-
		886		60		-		826		-		-
Other commercial and industrial:
Retail		1,363		1,363		-		-		-		-
		1,363		1,363		-		-		-		-
Total		2,249		1,423		-		826		-		-

	June 30, 2019
	Risk Ratings

	Balance				Special
	Outstanding		Pass		Mention		Substandard		Doubtful		Loss
	(In thousands)
Retail - originated and other loans held for investment
Mortgage:
Traditional		504,142		476,446		-		27,696		-		-
Non-traditional		12,893		9,454		-		3,439		-		-
Loss mitigation program		106,674		91,748		-		14,926		-		-
Home equity secured personal loans		232		232		-		-		-		-
GNMA's buy-back option program		11,675		-		-		11,675		-		-
		635,616		577,880		-		57,736		-		-

Consumer:
Credit cards		27,888		27,316		-		572		-		-
Overdrafts		184		154		-		30		-		-
Unsecured personal lines of credit		2,003		1,975		-		28		-		-
Unsecured personal loans		309,980		308,756		-		1,224		-		-
Cash collateral personal loans		16,055		15,681		-		374		-		-
		356,110		353,882		-		2,228		-		-
Auto and Leasing		1,218,070		1,206,049		-		12,021		-		-
Total		2,209,796		2,137,811		-		71,985		-		-

Retail - acquired loans (accounted for under ASC 310-20)
Consumer:
Credit cards		19,873		19,596		-		277		-		-
Personal loans		2,093		2,082		-		11		-		-
		21,966		21,678		-		288		-		-
Auto		996		938		-		58		-		-
		22,962		22,616		-		346		-		-
	$	3,851,980	$	3,625,206	$	64,750	$	162,024	$	-	$	-

	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	$	-	$	-

- 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