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Loans Receivable

12 Months Ended

Dec. 31, 2017

NOTE 6 - 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. Acquired Eurobank loans were purchased subject to loss-sharing agreements with the FDIC, which were terminated on February 6, 2017.

As a result of the devastation caused by hurricanes Irma and Maria, Oriental offered an automatic three-month moratorium for the payment due on auto and personal loans for customers whose payments were not over 89 days past due at August 31, 2017. These payments, together with any additional accrued interest, are payable in three installments after the original maturity of the loans. Residential mortgage loans have the same moratorium, but the payments subject to the moratorium on non-conforming loans are payable in aggregate as a balloon payment at the maturity of the loan and on conforming mortgage loans the repayment terms are established on a case by case basis at the end of the moratorium period. For credit cards, that were not over 29 days past due at August 31, 2017, the minimum payment amount was waived until December 31, 2017. Oriental also offered an automatic one-month moratorium for the payment of principal and interest on commercial loans for customers whose payments were not over 30 days past due at August 31, 2017, and the flexibility of extending it up to two additional months, based on the customer's needs. Oriental had approximately 83 thousand loans under the moratorium program amounting to $2.6 billion at December 31, 2017. The level of delinquencies for mortgage and auto loans as of December 31, 2017 was impacted by the loan moratorium. Although the repayment schedule was modified as part of the moratorium, certain borrowers continued to make payments, having an impact on the respective delinquency status.

The composition of Oriental’s loan portfolio at December 31, 2017 and 2016 was as follows:

	December 31,
	2017		2016
	(In thousands)
Originated and other loans and leases held for investment:
Mortgage	$	683,607	$	721,494
Commercial		1,307,261		1,277,866
Consumer		330,039		290,515
Auto and leasing		883,985		756,395
		3,204,892		3,046,270
Allowance for loan and lease losses on originated and other loans and leases		(92,718)		(59,300)
		3,112,174		2,986,970
Deferred loan costs, net		6,695		5,766
Total originated and other loans loans held for investment, net		3,118,869		2,992,736
Acquired loans:
Acquired BBVAPR loans:
Accounted for under ASC 310-20 (Loans with revolving feature and/or
acquired at a premium)
Commercial		4,380		5,562
Consumer		28,915		32,862
Auto		21,969		53,026
		55,264		91,450
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-20		(3,862)		(4,300)
		51,402		87,150
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		532,053		569,253
Commercial		243,092		292,564
Consumer		1,431		4,301
Auto		43,696		85,676
		820,272		951,794
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-30		(45,755)		(31,056)
		774,517		920,738
Total acquired BBVAPR loans, net		825,919		1,007,888
Acquired Eurobank loans:
Loans secured by 1-4 family residential properties		69,538		73,018
Commercial		53,793		81,460
Consumer		1,112		1,372
Total acquired Eurobank loans		124,443		155,850
Allowance for loan and lease losses on Eurobank loans		(25,174)		(21,281)
Total acquired Eurobank loans, net		99,269		134,569
Total acquired loans, net		925,188		1,142,457
Total held for investment, net		4,044,057		4,135,193
Mortgage loans held-for-sale		12,272		12,499
Total loans, net	$	4,056,329	$	4,147,692

Originated and Other Loans and Leases Held for Investment

Oriental’s originated and other loans held for investment are encompassed within four portfolio segments: mortgage, commercial, consumer, and auto and leasing.

The following tables present the aging of the recorded investment in gross originated and other loans held for investment at December 31, 2017 and 2016, 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.

	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

	December 31, 2016
													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	$	196	$	2,176	$	3,371	$	5,743	$	44,542	$	50,285	$	158
Years 2003 and 2004		156		3,872		7,272		11,300		79,407		90,707		-
Year 2005		-		1,952		4,306		6,258		43,751		50,009		-
Year 2006		506		2,905		6,261		9,672		59,628		69,300		-
Years 2007, 2008 and 2009		409		1,439		11,732		13,580		63,149		76,729		398
Years 2010, 2011, 2012, 2013		349		1,772		10,417		12,538		127,322		139,860		583
Years 2014, 2015 and 2016		47		123		1,357		1,527		106,672		108,199		-
		1,663		14,239		44,716		60,618		524,471		585,089		1,139
Non-traditional		-		498		4,730		5,228		17,631		22,859		-
Loss mitigation program		8,911		7,205		16,541		32,657		70,871		103,528		1,724
		10,574		21,942		65,987		98,503		612,973		711,476		2,863
Home equity secured personal loans		-		-		-		-		337		337		-
GNMA's buy-back option program		-		-		9,681		9,681		-		9,681		-
		10,574		21,942		75,668		108,184		613,310		721,494		2,863
Commercial
Commercial secured by real estate:
Corporate		-		-		-		-		242,770		242,770		-
Institutional		-		-		254		254		26,546		26,800		-
Middle market		-		60		3,319		3,379		231,602		234,981		-
Retail		154		350		6,594		7,098		242,630		249,728		-
Floor plan		-		-		-		-		2,989		2,989		-
Real estate		-		-		-		-		16,395		16,395		-
		154		410		10,167		10,731		762,932		773,663		-
Other commercial and industrial:
Corporate		-		-		-		-		136,438		136,438		-
Institutional		-		-		-		-		180,285		180,285		-
Middle market		-		-		-		-		81,633		81,633		-
Retail		930		100		969		1,999		71,706		73,705		-
Floor plan		8		-		61		69		32,073		32,142		-
		938		100		1,030		2,068		502,135		504,203		-
		1,092		510		11,197		12,799		1,265,067		1,277,866		-

	December 31, 2016
													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	$	527	$	283	$	525	$	1,335	$	25,023	$	26,358	$	-
Overdrafts		16		12		5		33		174		207		-
Personal lines of credit		41		4		32		77		2,327		2,404		-
Personal loans		2,474		1,489		1,081		5,044		241,228		246,272		-
Cash collateral personal loans		240		20		4		264		15,010		15,274		-
		3,298		1,808		1,647		6,753		283,762		290,515		-
Auto and leasing		42,714		19,014		8,173		69,901		686,494		756,395		-
Total	$	57,678	$	43,274	$	96,685	$	197,637	$	2,848,633	$	3,046,270	$	2,863

At December 31, 2017 and 2016, Oriental had carrying balance of $94.9 million and $136.6 million, 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. In 2017, Oriental sold a performing originated municipal loan, which was due in July 2018, for $28.8 million. The sale reduced near-term risk associated with a likely refinancing.

Acquired Loans

Acquired loans were initially measured at fair value and subsequently accounted for under either ASC 310-30 or ASC 310-20 (Non-refundable fees and Other Costs). We have acquired loans in two acquisitions, BBVAPR and Eurobank.

Acquired BBVAPR Loans

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

Credit cards, retail and commercial revolving lines of credits, floor plans and performing auto loans with FICO scores over 660 acquired at a premium 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 December 31, 2017 and 2016, by class of loans:

	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	$	-

	December 31, 2016
													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	$	33	$	-	$	110	$	143	$	-	$	143	$	-
Floor plan		-		-		219		219		2,171		2,390		-
		33		-		329		362		2,171		2,533		-
Other commercial and industrial
Retail		97		34		121		252		2,775		3,027		-
Floor plan		-		-		2		2		-		2		-
		97		34		123		254		2,775		3,029		-
		130		34		452		616		4,946		5,562		-
Consumer
Credit cards		736		369		708		1,813		28,280		30,093		-
Personal loans		48		14		120		182		2,587		2,769		-
		784		383		828		1,995		30,867		32,862		-
Auto		3,652		1,355		517		5,524		47,502		53,026		-
Total	$	4,566	$	1,772	$	1,797	$	8,135	$	83,315	$	91,450	$	-

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 December 31, 2017 and 2016 is as follows:

	December 31,
		2017		2016
		(In thousands)
Contractual required payments receivable:	$	1,481,616	$	1,669,602
Less: Non-accretable discount		352,431		363,107
Cash expected to be collected		1,129,185		1,306,495
Less: Accretable yield		308,913		354,701
Carrying amount, gross		820,272		951,794
Less: allowance for loan and lease losses		45,755		31,056
Carrying amount, net	$	774,517	$	920,738

At December 31, 2017 and 2016, Oriental had $50.3 million and $66.2 million, respectively, in loans granted to the Puerto Rico government, including its instrumentalities, public corporations and municipalities as part of its acquired BBVAPR loans accounted for under ASC 310-30. These loans are primarily secured municipal general obligations and funds recovered under a Puerto Rico escheat law. During of 2017, Oriental received the scheduled payments of principal from the municipal general obligations and settled the loan payable from funds recovered under the escheat law that was in default.

The following tables describe the accretable yield and non-accretable discount activity of acquired BBVAPR loans accounted for under ASC 310-30 for the years ended December 31, 2017, 2016 and 2015

	Year Ended December 31, 2017
	Mortgage		Commercial		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of year	$	292,115	$	50,366	$	8,538	$	3,682	$	354,701
Accretion		(30,205)		(20,572)		(6,339)		(1,841)		(58,957)
Change in expected cash flows		2		22,250		170		143		22,565
Transfer (to) from non-accretable discount		(3,414)		(5,280)		397		(1,099)		(9,396)
Balance at end of year	$	258,498	$	46,764	$	2,766	$	885	$	308,913

Non-Accretable Discount Activity:
Balance at beginning of year	$	305,615	$	16,965	$	22,407	$	18,120	$	363,107
Change in actual and expected losses		(9,528)		(11,649)		1,040		65		(20,072)
Transfer from (to) accretable yield		3,414		5,280		(397)		1,099		9,396
Balance at end of year	$	299,501	$	10,596	$	23,050	$	19,284	$	352,431

	Year Ended December 31, 2016
	Mortgage		Commercial		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of year	$	268,794	$	65,026	$	21,578	$	6,290	$	361,688
Accretion		(32,834)		(26,254)		(13,567)		(2,982)		(75,637)
Change in actual and expected losses		(1)		14,259		1,251		(242)		15,267
Transfer from (to) non-accretable discount		56,156		(2,665)		(724)		616		53,383
Balance at end of year	$	292,115	$	50,366	$	8,538	$	3,682	$	354,701

Non-Accretable Discount Activity:
Balance at beginning of year	$	374,772	$	18,545	$	22,039	$	18,834	$	434,190
Change in actual and expected losses		(13,001)		(4,245)		(356)		(98)		(17,700)
Transfer (to) from accretable yield		(56,156)		2,665		724		(616)		(53,383)
Balance at end of year	$	305,615	$	16,965	$	22,407	$	18,120	$	363,107

	Year Ended December 31, 2015
	Mortgage		Commercial		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of year	$	298,364	$	87,025	$	53,998	$	6,559	$	445,946
Accretion		(34,842)		(49,429)		(23,463)		(4,379)		(112,113)
Change in actual and expected losses		-		8,532		-		(1)		8,531
Transfer (to) from non-accretable discount		5,272		18,898		(8,957)		4,111		19,324
Balance at end of year	$	268,794	$	65,026	$	21,578	$	6,290	$	361,688

Non-Accretable Discount Activity:
Balance at beginning of year	$	389,839	$	26,555	$	16,215	$	24,018	$	456,627
Change in actual and expected losses		(9,795)		10,888		(3,133)		(1,073)		(3,113)
Transfer from (to) accretable yield		(5,272)		(18,898)		8,957		(4,111)		(19,324)
Balance at end of year	$	374,772	$	18,545	$	22,039	$	18,834	$	434,190

Acquired Eurobank Loans

The carrying amount of acquired Eurobank loans at December 31, 2017 and 2016 is as follows:

	December 31
	2017		2016
	(In thousands)
Contractual required payments receivable:	$	179,960	$	232,698
Less: Non-accretable discount		5,845		12,340
Cash expected to be collected		174,115		220,358
Less: Accretable yield		49,672		64,508
Carrying amount, gross		124,443		155,850
Less: Allowance for loan and lease losses		25,174		21,281
Carrying amount, net	$	99,269	$	134,569

The following tables describe the accretable yield and non-accretable discount activity of acquired Eurobank loans for the years ended December 31, 2017, 2016 and 2015:

	Year Ended December 31, 2017
	Loans Secured by 1-4 Family Residential Properties		Commercial		Construction & Development Secured by 1-4 Family Residential Properties		Leasing		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of year	$	45,839	$	16,475	$	2,194	$	-	$	-	$	64,508
Accretion		(7,180)		(12,985)		(82)		(30)		(283)		(20,560)
Change in expected cash flows		121		1,881		121		(217)		759		2,665
Transfer from (to) non-accretable discount		2,694		1,380		(786)		247		(476)		3,059
Balance at end of year	$	41,474	$	6,751	$	1,447	$	-	$	-	$	49,672

Non-Accretable Discount Activity:
Balance at beginning of year	$	8,441	$	3,880	$	11	$	-	$	8	$	12,340
Change in actual and expected losses		(1,171)		(2,224)		(39)		247		(249)		(3,436)
Transfer from (to) accretable yield		(2,694)		(1,380)		786		(247)		476		(3,059)
Balance at end of year	$	4,576	$	276	$	758	$	-	$	235	$	5,845

	Year Ended December 31, 2016
	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	$	51,954	$	26,970	$	2,255		-	$	3,212	$	84,391
Accretion		(8,942)		(19,593)		(90)		(60)		(1,813)		(30,498)
Change in actual and expected losses		2,134		13,722		1		(15)		(1,386)		14,456
Transfer from (to) non-accretable discount		693		(4,624)		28		75		(13)		(3,841)
Balance at end of year	$	45,839	$	16,475	$	2,194	$	-	$	-	$	64,508

Non-Accretable Discount Activity:
Balance at beginning of year	$	12,869	$	-	$	-	$	-	$	8,287	$	21,156
Change in actual and expected losses		(3,735)		(744)		39		75		(8,292)		(12,657)
Transfer (to) from accretable yield		(693)		4,624		(28)		(75)		13		3,841
Balance at end of year	$	8,441	$	3,880	$	11	$	-	$	8	$	12,340

	Year Ended December 31, 2015
	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	$	47,636	$	37,920	$	20,753	$	2,479	$	1,071	$	109,859
Accretion		(13,685)		(32,124)		(2,513)		(3,458)		(631)		(52,411)
Change in expected cash flows		4,631		44,660		(15,048)		(51)		305		34,497
Transfer from (to) non-accretable discount		13,372		(23,486)		(937)		1,030		2,467		(7,554)
Balance at end of year	$	51,954	$	26,970	$	2,255	$	-	$	3,212	$	84,391

Non-Accretable Discount Activity:
Balance at beginning of year	$	27,348	$	24,464	$	-	$	-	$	10,598	$	62,410
Change in actual and expected cash flows		(1,107)		(47,950)		(937)		1,030		156		(48,808)
Transfer (to) from accretable yield		(13,372)		23,486		937		(1,030)		(2,467)		7,554
Balance at end of year	$	12,869	$	-	$	-	$	-	$	8,287	$	21,156

Non-accrual Loans

The following table presents the recorded investment in loans in non-accrual status by class of loans as of December 31, 2017 and 2016:

	December 31,
	2017		2016
	(In thousands)
Originated and other loans and leases held for investment
Mortgage
Traditional (by origination year):
Up to the year 2002	$	3,070	$	3,336
Years 2003 and 2004		6,380		7,668
Year 2005		3,280		4,487
Year 2006		5,905		6,746
Years 2007, 2008 and 2009		7,984		11,526
Years 2010, 2011, 2012, 2013		6,259		10,089
Years 2014, 2015, 2016 and 2017		1,649		1,404
		34,527		45,256
Non-traditional		3,543		4,730
Loss mitigation program		16,783		20,744
		54,853		70,730
Commercial
Commercial secured by real estate
Institutional		118		-
Middle market		11,394		4,682
Retail		14,438		11,561
		25,950		16,243
Other commercial and industrial
Middle market		6,323		1,278
Retail		2,929		1,950
Floor plan		51		61
		9,303		3,289
		35,253		19,532
Consumer
Credit cards		1,227		525
Overdrafts		31		-
Personal lines of credit		102		32
Personal loans		900		1,420
Cash collateral personal loans		312		4
		2,572		1,981
Auto and leasing		4,232		9,052
Total non-accrual originated loans	$	96,910	$	101,295

	December 31,
	2017		2016
	(In thousands)
Acquired BBVAPR loans accounted for under ASC 310-20
Commercial
Commercial secured by real estate
Retail	$	119	$	143
Floor plan		928		1,149
		1,047		1,292
Other commercial and industrial
Retail		221		121
Floor plan		2		2
		223		123
		1,270		1,415
Consumer
Credit cards		1,310		708
Personal loans		45		120
		1,355		828
Auto		179		552
Total non-accrual acquired BBVAPR loans accounted for under ASC 310-20		2,804		2,795
Total non-accrual loans	$	99,714	$	104,090

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 December 31, 2017 and 2016, loans whose terms have been extended and which are classified as troubled-debt restructurings that are not included in non-accrual loans amounted to $109.2 million and $98.1 million, respectively, as they are performing under their new terms.

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 $72.3 million and $54.3 million at December 31, 2017 and 2016, 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 $10.6 million and $1.8 million at December 31, 2017 and 2016, respectively. The total investment in impaired mortgage loans that were individually evaluated for impairment was $85.4 million and $91.6 million at December 31, 2017 and 2016, 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 $9.1 million and $7.8 million at December 31, 2017 and 2016, 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 December 31, 2017 and 2016 are as follows:

	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%

	December 31, 2016
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	13,183	$	11,698	$	1,626	14%
Residential impaired and troubled-debt restructuring		100,101		91,650		7,761	8%
Impaired loans with no specific allowance
Commercial		49,038		41,441		N/A	0%
Total investment in impaired loans	$	162,322	$	144,789	$	9,387	6%

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 December 31, 2017 and 2016 are as follows:


	December 31, 2017
	Unpaid		Recorded		Related
	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%


	December 31, 2016
	Unpaid		Recorded		Specific
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance
Commercial	$	944	$	929	$	141	15%
Impaired loans with no specific allowance
Commercial	$	240	$	221		N/A	0%
Total investment in impaired loans	$	1,184	$	1,150	$	141	12%

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 December 31, 2017 and 2016 are as follows:

	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%

	December 31 , 2016
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	595,757	$	569,250	$	2,682	0%
Commercial		199,092		195,528		23,452	12%
Auto		92,797		85,676		4,922	6%
Total investment in impaired loan pools	$	887,646	$	850,454	$	31,056	4%

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 December 31, 2017 and 2016 are as follows:

	December 31, 2017
							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	$	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%

	December 31, 2016
							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	$	88,017	$	73,018	$	11,947	16%
Commercial		81,992		72,140		9,328	13%
Consumer		29		1,372		6	0%
Total investment in impaired loan pools	$	170,038	$	146,530	$	21,281	15%

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 years ended December 31, 2017, 2016 and 2015:

	Year Ended December 31,
	2017					2016				2015
	Interest Income Recognized		Average Recorded Investment			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	$	1,538	$	25,797	$	452	$	118,980	$	280	$	175,115
Residential troubled-debt restructuring		3,301		87,414		3,190		91,139		3,219		90,736
Impaired loans with no specific allowance
Commercial		875		36,666		1,941		40,443		1,350		64,356
Total interest income from impaired loans	$	5,714	$	149,877	$	5,583	$	250,562	$	4,849	$	330,207

Acquired loans accounted for under ASC 310-20:
Impaired loans with specific allowance
Commercial	$	-	$	794	$	-	$	319	$	-	$	-
Impaired loans with no specific allowance
Commercial		-		-		-		608		-		-
Total interest income from impaired loans	$	5,714	$	150,671	$	5,583	$	251,489	$	4,849	$	330,207

Modifications

The following tables present the troubled-debt restructurings in all loan portfolios during the years ended December 31, 2017, 2016 and 2015.

	Year Ended December 31, 2017
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	85	$	10,441	6.23%	390	$	10,343	4.40%	384
Commercial	24		13,828	6.05%	57		13,829	5.73%	62
Consumer	107		1,391	11.68%	62		1,430	10.85%	69
Auto	9		134	7.24%	66		135	11.75%	37

	Year Ended December 31, 2016
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	90	$	11,684	6.05%	351	$	11,625	4.77%	439
Commercial	20		9,833	5.73%	64		10,151	5.93%	116
Consumer	75		817	13.60%	73		902	11.23%	66


	Year Ended December 31, 2015
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	160	$	21,053	5.42%	356	$	21,182	4.35%	272
Commercial	9		5,664	6.79%	66		13,174	4.57%	56
Consumer	64		611	13.85%	71		898	13.43%	60
Auto	5		130	10.51%	65		131	10.87%	61

The following table presents troubled-debt restructurings for which there was a payment default during the years ended 2017, 2016 and 2015:

	Year Ended December 31,
	2017			2016			2015
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(Dollars in thousands)
Mortgage	34	$	3,129	19	$	2,241	65	$	7,387
Commercial	5	$	452	2	$	157	-	$	-
Consumer	20	$	249	11	$	126	8	$	177
Auto	-	$	-	-	$	-	1	$	64

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 December 31, 2017 and 2016, 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:

	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 (accounted for 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		-		-
		50,884		49,348		-		1,536		-		-
	$	3,260,156	$	3,038,474	$	69,571	$	152,111	$	-	$	-

	December 31, 2016
	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	$	242,770	$	226,768	$	16,002	$	-	$	-	$	-
Institutional		26,800		16,067		9,090		1,643		-		-
Middle market		234,981		194,913		11,689		28,379		-		-
Retail		249,728		222,205		8,559		18,964		-		-
Floor plan		2,989		2,989		-		-		-		-
Real estate		16,395		16,395		-		-		-		-
		773,663		679,337		45,340		48,986		-		-
Other commercial and industrial:
Corporate		136,438		136,438		-		-		-		-
Institutional		180,285		180,185		100		-		-		-
Middle market		81,633		63,556		16,150		1,927		-		-
Retail		73,705		68,743		731		4,231		-		-
Floor plan		32,142		29,267		2,814		61		-		-
		504,203		478,189		19,795		6,219		-		-
Total		1,277,866		1,157,526		65,135		55,205		-		-

Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		143		-		-		143		-		-
Floor plan		2,390		905		337		1,148		-		-
		2,533		905		337		1,291		-		-
Other commercial and industrial:
Retail		3,027		3,014		-		13		-		-
Floor plan		2		-		-		2		-		-
		3,029		3,014		-		15		-		-
Total		5,562		3,919		337		1,306		-		-

	December 31, 2016
	Risk Ratings

	Balance				Special
	Outstanding		Pass		Mention		Substandard		Doubtful		Loss
	(In thousands)
Retail - originated and other loans held for investment
Mortgage:
Traditional		585,089		540,373		-		44,716		-		-
Non-traditional		22,859		18,129		-		4,730		-		-
Loss mitigation program		103,528		86,987		-		16,541		-		-
Home equity secured personal loans		337		337		-		-		-		-
GNMA's buy-back option program		9,681		-		-		9,681		-		-
		721,494		645,826		-		75,668		-		-

Consumer:
Credit cards		26,358		25,833		-		525		-		-
Overdrafts		207		174		-		33		-		-
Unsecured personal lines of credit		2,404		2,372		-		32		-		-
Unsecured personal loans		246,272		245,190		-		1,082		-		-
Cash collateral personal loans		15,274		15,270		-		4		-		-
		290,515		288,839		-		1,676		-		-
Auto and Leasing		756,395		748,221		-		8,174		-		-
Total		1,768,404		1,682,886		-		85,518		-		-

Retail - acquired loans (under ASC 310-20)
Consumer:
Credit cards		30,093		29,386		-		707		-		-
Personal loans		2,769		2,649		-		120		-		-
		32,862		32,035		-		827		-		-
Auto		53,026		52,510		-		516		-		-
Total		85,888		84,545		-		1,343		-		-
	$	3,137,720	$	2,928,876	$	65,472	$	143,372	$	-	$	-

- 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