The following table provides information about the loan portfolio held for investment:

		September 30,		December 31,
		2014		2013
(In thousands)
Residential mortgage loans, mainly secured by first mortgages		$	2,819,648	$	2,549,008
Commercial loans:
Construction loans			141,689		168,713
Commercial mortgage loans			1,812,094		1,823,608
Commercial and Industrial loans (1)			2,515,384		2,788,250
Loans to a local financial institution collateralized by
real estate mortgages (2)			-		240,072
Commercial loans			4,469,167		5,020,643
Finance leases			236,115		245,323
Consumer loans			1,790,472		1,821,196
Loans held for investment			9,315,402		9,636,170
Allowance for loan and lease losses			(225,434)		(285,858)
Loans held for investment, net		$	9,089,968	$	9,350,312

(1)	As of September 30, 2014 and December 31, 2013, includes $1.1 billion and $1.2 billion, respectively, of commercial loans that are secured by real estate but are not dependent upon the real estate for repayment.
(2)	On May 30, 2014, FirstBank acquired from Doral Financial Corporation ("Doral") mortgage loans, mainly residential mortgage loans, having an unpaid principal balance of $241.7 million (estimated fair value at acquisition of $226.0 million) in full satisfaction of secured borrowings with a book value of $232.9 million owed by Doral to FirstBank. Refer to Acquired Loans, including Purchased Credit-Impaired ("PCI") loans discussion below for additional information.

Loans held for investment on which accrual of interest income had been discontinued were as follows:

(In thousands)		September 30,		December 31,
		2014		2013
Non-performing loans:
Residential mortgage		$	185,025	$	161,441
Commercial mortgage			169,967		120,107
Commercial and Industrial			130,917		114,833
Construction:
Land			16,262		27,834
Construction-commercial			-		3,924
Construction-residential			13,849		27,108
Consumer:
Auto loans			22,925		21,316
Finance leases			4,501		3,082
Other consumer loans			16,070		15,904
Total non-performing loans held for investment (1) (2) (3)		$	559,516	$	495,549

_______________
(1)	As of September 30, 2014 and December 31, 2013, excludes $54.6 million and $54.8 million, respectively, of non-performing loans held for sale.
(2)	Amount excludes PCI loans with a carrying value of approximately $104.3 million and $4.8 million as of September 30, 2014 and December 31, 2013, respectively, primarily mortgage loans acquired from Doral in the second quarter of 2014, as further discussed below. These loans are not considered non-performing due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.
(3)	Non-performing loans exclude $485.1 million and $425.4 million of Trouble Debt Restructuring loans that are in compliance with modified terms and in accrual status as of September 30, 2014 and December 31, 2013, respectively.

The Corporation’s aging of the loans held for investment portfolio is as follows:
										Purchased Credit-Impaired Loans				Total loans held for investment		90 days past due and still accruing (2)
		30-59 Days Past Due		60-89 Days Past Due			90 days or more Past Due (1)	Total Past Due
As of September 30, 2014
(In thousands)																		Current
Residential mortgage:
FHA/VA and other government-guaranteed loans (2) (3) (4)		$	-	$	8,225	$	77,238	$	85,463	$	-	$	68,847	$	154,310	$	77,238
Other residential mortgage loans (4)			-		87,502		201,883		289,385		99,535		2,276,418		2,665,338		16,858
Commercial:
Commercial and Industrial loans			16,775		11,637		149,037		177,449		-		2,337,935		2,515,384		18,120
Commercial mortgage loans (4)			-		7,306		182,498		189,804		3,418		1,618,872		1,812,094		12,531
Construction:
Land (4)			-		401		16,434		16,835		-		40,940		57,775		172
Construction-commercial			-		-		-		-		-		16,330		16,330		-
Construction-residential (4)			-		-		13,849		13,849		-		53,735		67,584		-
Consumer:
Auto loans			83,686		21,352		22,925		127,963		-		966,671		1,094,634		-
Finance leases			10,176		2,490		4,501		17,167		-		218,948		236,115		-
Other consumer loans			7,240		9,335		19,114		35,689		1,360		658,789		695,838		3,044
Total loans held for investment		$	117,877	$	148,248	$	687,479	$	953,604	$	104,313	$	8,257,485	$	9,315,402	$	127,963
_____________
(1)	Includes non-performing loans and accruing loans that are contractually delinquent 90 days or more (i.e., FHA/VA guaranteed loans and credit cards). Credit card loans continue to accrue finance charges fees until charged-off at 180 days.
(2)	It is the Corporation's policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as past-due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $41.4 million of residential mortgage loans insured by the FHA or guaranteed by the VA that are over 18 months delinquent, and are no longer accruing interest as of September 30, 2014.
(3)	As of September 30, 2014, includes $24.6 million of defaulted loans collateralizing Government National Mortgage Association ("GNMA") securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.
(4)	According to the Corporation's delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears two or more monthly payments. FHA/VA government guaranteed loans, other residential mortgage loans, commercial mortgage loans, land loans and construction-residential loans past due 30-59 days amounted to $15.1 million, $179.0 million, $40.5 million, $0.5 million, and $1.7 million, respectively.

As of December 31, 2013		30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due(1)								Total loans held for investment		90 days past due and still accruing (2)
(In thousands)		30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due(1)					Total Past Due		Purchased Credit- Impaired Loans	Total loans held for investment		90 days past due and still accruing (2)		Current
Residential mortgage:
FHA/VA and other government-guaranteed loans (2) (3) (4)		$	-	$	12,180	$	78,645	$	90,825	$	-	$	104,401	$	195,226	$	78,645
Other residential mortgage loans (4)			-		88,898		172,286		261,184		-		2,092,598		2,353,782		10,845
Commercial:
Commercial and Industrial loans			21,029		5,454		134,233		160,716		-		2,867,606		3,028,322		19,400
Commercial mortgage loans (4)			-		5,428		126,674		132,102		-		1,691,506		1,823,608		6,567
Construction:
Land (4)			-		358		27,871		28,229		-		52,145		80,374		37
Construction-commercial			-		-		3,924		3,924		-		12,907		16,831		-
Construction-residential (4)			-		-		27,108		27,108		-		44,400		71,508		-
Consumer:
Auto loans			79,279		17,944		21,316		118,539		-		993,781		1,112,320		-
Finance leases			10,275		3,536		3,082		16,893		-		228,430		245,323		-
Other consumer loans			11,710		8,691		20,492		40,893		4,791		663,192		708,876		4,588
Total loans held for investment		$	122,293	$	142,489	$	615,631	$	880,413	$	4,791	$	8,750,966	$	9,636,170	$	120,082
____________
(1)	Includes non-performing loans and accruing loans that are contractually delinquent 90 days or more (i.e. FHA/VA guaranteed loans and credit cards). Credit card loans continue to accrue finance charges and fees until charged-off at 180 days.
(2)	It is the Corporation's policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as past-due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $37.0 million of residential mortgage loans insured by the FHA or guaranteed by the VA that are over 18 months delinquent, and are no longer accruing interest as of December 31, 2013.
(3)	As of December 31, 2013, includes $11.5 million of defaulted loans collateralizing GNMA securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.
(4)	According to the Corporation's delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears two or more monthly payments. FHA/VA government guaranteed loans, other residential mortgage loans, commercial mortgage loans, land loans and construction-residential loans past due 30-59 days amounted to $23.9 million, $166.7 million, $18.4 million, $0.9 million and $2.5 million, respectively.

The Corporation’s credit quality indicators by loan type as of September 30, 2014 and December 31, 2013 are summarized below:

		Commercial Credit Exposure-Credit Risk Profile Based on Creditworthiness category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
September 30, 2014		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
(In thousands)
Commercial mortgage		$	294,134	$	1,710	$	-	$	295,844	$	1,812,094
Construction:
Land			17,648		-		-		17,648		57,775
Construction-commercial			11,790		-		-		11,790		16,330
Construction-residential			13,072		777		-		13,849		67,584
Commercial and Industrial			225,941		5,515		794		232,250		2,515,384

		Commercial Credit Exposure-Credit Risk Profile Based on Creditworthiness category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
December 31, 2013		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
(In thousands)
Commercial mortgage		$	317,365	$	9,160	$	234	$	326,759	$	1,823,608
Construction
Land			31,777		3,308		52		35,137		80,373
Construction-commercial			16,022		-		-		16,022		16,831
Construction-residential			27,829		2,209		241		30,279		71,509
Commercial and Industrial			205,807		7,998		973		214,778		3,028,322
_________
(1)	Excludes $54.6 million ($7.8 million land, $39.1 million construction-commercial, $0.9 million construction-residential and $6.8 million commercial mortgage) and $54.8 million ($7.8 million land, $39.1 million construction-commercial, $0.9 million construction-residential and $7.0 million commercial mortgage) as of September 30, 2014 and December 31, 2013, respectively, of non-performing loans held for sale.

The Corporation considers a loan as adversely classified if its risk rating is Substandard, Doubtful or Loss. These categories are defined as follows:

Substandard- A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must 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- Doubtful classifications have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. A Doubtful classification may be appropriate in cases where significant risk exposures are perceived, but Loss cannot be determined because of specific reasonable pending factors which may strengthen the credit in the near term.

Loss- Assets classified 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 basically worthless asset even though partial recovery may be affected in the future. There is little or no prospect for near term improvement and no realistic strengthening action of significance pending.

September 30, 2014		Consumer Credit Exposure-Credit Risk Profile based on payment activity
		Residential Real-Estate				Consumer
		FHA/VA/ Guaranteed(1)		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing		$	154,310	$	2,380,778	$	1,071,709	$	231,614	$	678,408
Purchased Credit-Impaired (2)			-		99,535		-		-		1,360
Non-performing			-		185,025		22,925		4,501		16,070
Total		$	154,310	$	2,665,338	$	1,094,634	$	236,115	$	695,838

(1)	It is the Corporation's policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as past due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $41.4 million of residential mortgage loans insured by the FHA or guaranteed by the VA that are over 18 months delinquent, and are no longer accruing interest as of September 30, 2014.
(2)	PCI loans are excluded from non-performing statistics due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.


December 31, 2013		Consumer Credit Exposure-Credit Risk Profile based on payment activity
			Residential Real-Estate			Consumer
		FHA/VA/ Guaranteed(1)		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing		$	195,226	$	2,192,341	$	1,091,004	$	242,241	$	688,181
Purchased Credit-Impaired (2)			-		-		-		-		4,791
Non-performing			-		161,441		21,316		3,082		15,904
Total		$	195,226	$	2,353,782	$	1,112,320	$	245,323	$	708,876

(1)	It is the Corporation's policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as past due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $37.0 million of residential mortgage loans insured by the FHA or guaranteed by the VA that are over 18 months delinquent, and are no longer accruing interest as of December 31, 2013.
(2)	PCI loans are excluded from non-performing statistics due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

The following tables present information about impaired loans, excluding purchased credit-impaired loans, which are reported separately, as discussed below:

Impaired Loans
(In thousands)
									Quarter ended				Nine-month Period Ended

										September 30, 2014
	Recorded Investment		Unpaid Principal Balance		Related Specific Allowance		Year-To-Date Average Recorded Investment		Interest Income Recognized Accrual Basis		Interest Income Recognized Cash Basis		Interest Income Recognized Accrual Basis		Interest Income Recognized Cash Basis
As of September 30, 2014
With no related allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		88,126		99,529		-		91,683		372		242		829		553
Commercial:
Commercial mortgage loans		103,282		116,016		-		105,065		286		536		1,059		1,512
Commercial and Industrial Loans		44,683		54,955		-		49,686		-		240		-		518
Construction:
Land		1,003		1,072		-		1,009		6		4		18		5
Construction-commercial		-		-		-		-		-		-		-		-
Construction-residential		4,706		4,802		-		4,681		42		2		125		5
Consumer:
Auto loans		-		-		-		-		-		-		-		-
Finance leases		-		-		-		-		-		-		-		-
Other consumer loans		1,641		2,939		-		1,637		5		18		19		41
	$	243,441	$	279,313	$	-	$	253,761	$	711	$	1,042	$	2,050	$	2,634
With an allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		333,697		371,553		11,658		337,227		3,713		594		10,864		1,799
Commercial:
Commercial mortgage loans		135,050		159,717		14,128		142,484		390		203		1,179		1,126
Commercial and Industrial Loans		196,730		224,723		21,267		197,862		1,897		24		3,033		380
Construction:
Land		11,031		18,929		938		13,517		15		7		42		22
Construction-commercial		11,790		11,790		790		11,944		-		128		-		344
Construction-residential		10,911		14,147		1,208		12,322		-		-		-		-
Consumer:
Auto loans		15,733		15,733		2,388		16,692		264		-		810		-
Finance leases		2,163		2,163		170		2,410		44		-		151		-
Other consumer loans		12,468		13,172		2,737		12,561		537		11		1,192		23
	$	729,573	$	831,927	$	55,284	$	747,019	$	6,860	$	967	$	17,271	$	3,694
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		421,823		471,082		11,658		428,910		4,085		836		11,693		2,352
Commercial:
Commercial mortgage loans		238,332		275,733		14,128		247,549		676		739		2,238		2,638
Commercial and Industrial Loans		241,413		279,678		21,267		247,548		1,897		264		3,033		898
Construction:
Land		12,034		20,001		938		14,526		21		11		60		27
Construction-commercial		11,790		11,790		790		11,944		-		128		-		344
Construction-residential		15,617		18,949		1,208		17,003		42		2		125		5
Consumer:
Auto loans		15,733		15,733		2,388		16,692		264		-		810		-
Finance leases		2,163		2,163		170		2,410		44		-		151		-
Other consumer loans		14,109		16,111		2,737		14,198		542		29		1,211		64
	$	973,014	$	1,111,240	$	55,284	$	1,000,780	$	7,571	$	2,009	$	19,321	$	6,328

(In thousands)


	Recorded Investments		Unpaid Principal Balance		Related Specific Allowance		Year-To-Date Average Recorded Investment
As of December 31, 2013
With no related allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		220,428		237,709		-		222,617
Commercial:
Commercial mortgage loans		69,484		73,723		-		71,367
Commercial and Industrial Loans		32,418		56,831		-		37,946
Construction:
Land		359		366		-		360
Construction-commercial		-		-		-		-
Construction-residential		14,761		19,313		-		17,334
Consumer:
Auto loans		-		-		-		-
Finance leases		-		-		-		-
Other consumer loans		4,035		4,450		-		3,325
	$	341,485	$	392,392	$	-	$	352,949
With an allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		190,566		212,028		18,125		193,372
Commercial:
Commercial mortgage loans		149,888		163,656		32,189		153,992
Commercial and Industrial Loans		154,686		170,191		26,686		162,786
Construction:
Land		27,711		40,348		10,455		28,906
Construction-commercial		16,022		16,238		8,873		16,157
Construction-residential		13,864		13,973		2,816		13,640
Consumer:
Auto loans		14,121		14,122		1,829		12,937
Finance leases		2,359		2,359		73		2,219
Other consumer loans		8,410		8,919		1,555		8,919
	$	577,627	$	641,834	$	102,601	$	592,928
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		410,994		449,737		18,125		415,989
Commercial:
Commercial mortgage loans		219,372		237,379		32,189		225,359
Commercial and Industrial Loans		187,104		227,022		26,686		200,732
Construction:
Land		28,070		40,714		10,455		29,266
Construction-commercial		16,022		16,238		8,873		16,157
Construction-residential		28,625		33,286		2,816		30,974
Consumer:
Auto loans		14,121		14,122		1,829		12,937
Finance leases		2,359		2,359		73		2,219
Other consumer loans		12,445		13,369		1,555		12,244
	$	919,112	$	1,034,226	$	102,601	$	945,877

Interest income of approximately $8.8 million ($7.4 million on an accrual basis and $1.4 million on a cash basis) and $23.6 million ($19.3 million on an accrual basis and $4.3 million on a cash basis) was recognized on impaired loans for the third quarter and nine-month period ended September 30, 2013, respectively.

The following tables show the activity for impaired loans and the related specific reserve for the quarter and nine-month
period ended September 30, 2014:
	Quarter Ended		Nine-Month Period Ended

	September 30, 2014
		(In thousands)
Impaired Loans:
Balance at beginning of period	$	908,858	$	919,112
Loans determined impaired during the period		118,549		271,792
Charge-offs		(31,263)		(95,948)
Increases to impaired loans-additional disbursements		1,768		2,687
Foreclosures		(5,332)		(13,472)
Loans no longer considered impaired		(1,009)		(18,740)
Paid in full or partial payments		(18,557)		(92,417)
Balance at end of period	$	973,014	$	973,014

On May 30, 2014, FirstBank purchased from Doral all of its rights, title and interests in first and second mortgage loans having an unpaid principal balance of approximately $241.7 million for an aggregate purchase price of approximately $232.9 million. Doral had pledged the mortgage loans to FirstBank as collateral for secured borrowings pursuant to a series of credit agreements between the parties entered into in 2006. As consideration for the purchase of the mortgage loans, FirstBank credited approximately $232.9 million as full satisfaction of the outstanding balance of the Doral secured borrowings plus interest owed to FirstBank. The estimated fair value of the mortgage loans at acquisition was $226.0 million. This transaction resulted in a loss of $6.9 million derived from the difference between the fair value of the mortgage loans acquired, $226.0 million, and the book value of the secured borrowings of $232.9 million. Approximately $5.5 million of the loss was part of the general allowance for loan losses established for commercial loans in prior periods; thus, an additional charge of $1.4 million to the provision was recorded in the second quarter of 2014. In addition, the Corporation recorded $0.6 million of professional service fees in the second quarter of 2014 specifically related to this transaction.

Acquired loans are recorded at fair value at the date of acquisition. The Corporation concluded that loans with a contractual unpaid principal balance of $119.2 million and an estimated fair value at acquisition of $102.8 million were acquired with evidence of credit quality deterioration and, as purchased credit impaired loans, have been accounted for under ASC 310-30, while loans with a contractual unpaid principal balance of $122.5 million and an estimated fair value at acquisition of $123.2 million are non-credit impaired purchased loans that have been accounted for under ASC 310-20.

Subsequent to the day-one fair value, acquired loans accounted for under ASC 310-20 are accounted for consistently with other originated loans, potentially becoming non-accrual or impaired, as well as being classified under the Corporation's standard practices and procedures. In addition, these loans are considered in the determination of the allowance for loan losses.

Under ASC 310-30, the acquired PCI loans were aggregated into pools based on similar characteristics (i.e. delinquency status, loan terms). Each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. The loans which are accounted for under ASC 310-30 by the Corporation are not considered non-performing and will continue to have an accretable yield as long as there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The Corporation measures additional losses for this portfolio when it is probable the Corporation will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition.

On May 30, 2012, the Corporation reentered the credit card business with the acquisition of an approximate $406 million portfolio of FirstBank-branded credit card loans from FIA Card Services (“FIA”). These loans were recorded on the Consolidated Statement of Financial Condition at estimated fair value on the acquisition date of $368.9 million. The Corporation concluded that loans with a contractual outstanding unpaid principal and interest balance at acquisition of $34.6 million and an estimated fair value of $15.7 million were PCI loans.

The following tables present PCI loans by past due status as of September 30, 2014 and December 31, 2013:


As of September 30, 2014		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
(In thousands)		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans		Current
Residential mortgage loans (1)		$	-	$	11,210	$	14,963	$	26,173	$	73,362	$	99,535
Commercial mortgage loans (1)			-		290		497		787		2,631		3,418
Credit Cards			79		48		113		240		1,120		1,360
		$	79	$	11,548	$	15,573	$	27,200	$	77,113	$	104,313
_____________
(1)	According to the Corporation's delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage and commercial mortgage loans are considered past due when the borrower is in arrears two or more monthly payments. PCI residential mortgage loans and commercial mortgage loans past due 30-59 days amounted to $16.8 million and $0.7 million, respectively.


As of December 31, 2013		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
(In thousands)		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans		Current
Credit Cards		$	377	$	354	$	573	$	1,304	$	3,487	$	4,791

At acquisition, the Corporation estimated the cash flows the Corporation expected to collect on PCI loans. Under the accounting guidance for PCI loans, the difference between the contractually required payments and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. This difference is neither accreted into income nor recorded on the Corporation's Consolidated Statement of Financial Condition. The excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loans, using the effective-yield method

The cash flows expected to be collected consider the estimated remaining life of the underlying loans and include the effects of estimated prepayments.

Subsequent to acquisition, the Corporation is required to periodically evaluate its estimate of cash flows expected to be collected. These evaluations, performed quarterly, require the continued use of key assumptions and estimates, similar to the initial estimate of fair value. Subsequent changes in the estimated cash flows expected to be collected may result in changes in the accretable yield and nonaccretable difference or reclassifications from nonaccretable yield to accretable. Increases in the cash flows expected to be collected will generally result in an increase in interest income over the remaining life of the loan or pool of loans. Decreases in expected cash flows due to further credit deterioration will generally result in an impairment charge recognized in the Corporation's provision for loan and lease losses, resulting in an increase to the allowance for loan losses. During the first nine months of 2014, the Corporation did not record charges to the provision for loan losses related to PCI loans, most of which were acquired on May 30, 2014.

Changes in the accretable yield of PCI loans for the quarter and nine-month period ended September 30, 2014 and 2013 were as follows:

	Quarter ended September 30, 2014		Quarter ended September 30, 2013		Nine month period ended September 30, 2014		Nine month period ended September 30, 2013
(In thousands)
Balance at beginning of period	$	86,147	$	406	$	-	$	2,171
Additions (accretable yield at acquisition
of loans from Doral)		-		-		86,759		-
Accretion recognized in earnings		(1,850)		(406)		(2,462)		(819)
Reclassification to non accretable		-		-		-		(1,352)
Balance at end of period	$	84,297	$	-	$	84,297	$	-


Changes in the carrying amount of loans accounted for pursuant to ASC 310-30 follows:
		Quarter Ended		Nine-Month Period Ended
			September 30, 2014		September 30, 2014
(In thousands)
Balance at beginning of period (1)		$	105,619	$	4,791
Additions (2)			-		102,831
Accretion			1,850		2,462
Collections and charge-offs			(3,156)		(5,771)
Ending balance		$	104,313	$	104,313

(1)	For the nine month period ended September 30, 2014, the beginning balance relates to PCI loans acquired as part of the credit card portfolio purchased in the second quarter of 2012.
(2)	Represents the estimated fair value of the PCI loans acquired from Doral at the date of acquisition.

The outstanding principal balance of PCI loans, including amounts charged off by the Corporation, amounted to $137.5 million as of September 30, 2014 (December 2013- $22.7 million).

In addition to loans acquired from Doral, during the first nine months of 2014, the Corporation purchased $115.1 million of residential mortgage loans consistent with a strategic program established by the Corporation in 2005 to purchase ongoing residential mortgage loan production from mortgage bankers in Puerto Rico. Generally, the loans purchased from mortgage bankers were conforming residential mortgage loans. Purchases of conforming residential mortgage loans provide the Corporation the flexibility to retain or sell the loans, including through securitization transactions, depending upon the Corporation's interest rate risk management strategies. When the Corporation sells such loans, it generally keeps the servicing of the loans. Refer to Note 24, Subsequent Events, for additional information related to an additional purchase of approximately $192.6 million of performing residential mortgage loans from Doral completed on October 2, 2014.

In the ordinary course of business, the Corporation sells residential mortgage loans (originated or purchased) to the GNMA and government-sponsored entities (“GSEs”). GNMA and GSEs, such as Fannie Mae (“FNMA”) and Freddie Mac (“FHLMC”), generally securitize the transferred loans into mortgage-backed securities for sale into the secondary market. The Corporation sold approximately $100.9 million of performing residential mortgage loans to FNMA and FHLMC during the first nine months of 2014. Also, the Corporation securitized $144.6 million of FHA/VA mortgage loans into GNMA mortgage-backed securities during the first nine months of 2014. The Corporation's continuing involvement in these loan sales consists primarily of servicing the loans. In addition, the Corporation agreed to repurchase loans when it breaches any of the representations and warranties included in the sale agreement. These representations and warranties are consistent with the GSEs' selling and servicing guidelines (i.e., ensuring that the mortgage was properly underwritten according to established guidelines).

For loans sold to GNMA, the Corporation holds an option to repurchase individual delinquent loans issued on or after January 1, 2003 when the borrower fails to make any payment for three consecutive months. This option gives the Corporation the ability, but not the obligation, to repurchase the delinquent loans at par without prior authorization from GNMA.

Under ASC Topic 860, Transfer and Servicing, once the Corporation has the unilateral ability to repurchase the delinquent loan, it is considered to have regained effective control over the loan and is required to recognize the loan and a corresponding repurchase liability on the balance sheet regardless of the Corporation's intent to repurchase the loan.

During the first nine months of 2014, the Corporation repurchased pursuant to its repurchase option with GNMA $6.4 million of loans previously sold to GNMA. The principal balance of these loans is fully guaranteed and the risk of loss related to repurchases is generally limited to the difference between the delinquent interest payment advanced to GNMA computed at the loan's interest rate and the interest payments reimbursed by FHA, which are computed at a pre-determined debenture rate. Repurchases of GNMA loans allow the Corporation, among other things, to maintain acceptable delinquency rates on outstanding GNMA pools and remain as a seller and servicer in good standing with GNMA. The Corporation generally remediates any breach of representations and warranties related to the underwriting of such loans according to established GNMA guidelines without incurring losses. The Corporation does not maintain a liability for estimated losses as a result of breaches in representations and warranties.

Loan sales to FNMA and FHLMC are without recourse in relation to the future performance of the loans. The Corporation repurchased at par loans previously sold to FNMA and FHLMC in the amount of $1.6 million during the first nine months of 2014. The Corporation's risk of loss with respect to these loans is also minimal as these repurchased loans are generally performing loans with documentation deficiencies. A $0.7 million loss was recorded in the first nine months of 2014 related to breaches in representations and warranties and a $0.5 million charge was recorded related to compensatory fees imposed by GSEs. Historically, losses experienced related to breaches in representations and warranties have been immaterial. As a consequence, as of September 30, 2014, the Corporation does not maintain a liability for estimated losses on loans expected to be repurchased as a result of breaches in loan and servicer representations and warranties.

The Corporation sold during the third quarter of 2014, a$15.0 million participation of a commercial mortgage loan.

On June 21, 2013, the Corporation announced that it had completed a sale of non-performing residential mortgage loans with a book value of $203.8 million and OREO properties with a book value of $19.2 million in a cash transaction. The sales price of this bulk sale was $128.3 million. Approximately $30.1 million of reserves had already been allocated to the loans. This transaction resulted in total charge-offs of $98.0 million and an incremental loss of $69.8 million, reflected in the provision for loan and lease losses for the first nine months of 2013. In addition, the Corporation recorded $3.1 million of professional service fees specifically related to this bulk sale of non-performing residential assets. This transaction resulted in a total pre-tax loss of $72.9 million.

On March 28, 2013, the Corporation completed the sale of adversely classified loans with a book value of $211.4 million ($100.1 million of commercial and industrial loans, $68.8 million of commercial mortgage loans, $41.3 million of construction loans, and $1.2 million of residential mortgage loans), and $6.3 million of OREO properties in a cash transaction. Included in the bulk sale was $185.0 million of non-performing assets. The sales price of this bulk sale was $120.2 million. Approximately $39.9 million of reserves had already been allocated to the loans. This transaction resulted in total charge-offs of $98.5 million and an incremental loss of $58.9 million, reflected in the provision for loan and lease losses for the first nine months of 2013. In addition, the Corporation recorded $3.9 million of professional fees specifically related to this bulk sale of assets. This transaction resulted in a total pre-tax loss of $62.8 million.

In addition, during the first quarter of 2013, the Corporation transferred to held for sale non-performing loans with an aggregate book value of $181.6 million. These transfers resulted in charge-offs of $36.0 million and an incremental loss of $5.2 million reflected in the provision for loan and lease losses for the first nine months of 2013.

During the second quarter of 2013, the Corporation completed the sale of a $40.8 million non-performing commercial mortgage loan that was among the loans transferred to held for sale in the first quarter of 2013 without incurring additional losses.

In a separate transaction during 2013, the Corporation foreclosed on the collateral underlying $39.2 million related to one of the loans written-off and transferred to held for sale in the first quarter of 2013. Furthermore, in the third quarter of 2013, approximately $6.4 million of construction loans held for sale participations were paid-off.

The Corporation's primary goal with respect to these sales was to accelerate the disposition of non-performing assets, which is the main priority of the Corporation's Strategic Plan. The opportunistic sale of distressed assets is a pivotal and tactical step in the Corporation's efforts to reduce balance sheet risk, improve earnings in the future through reductions of credit-related-costs and enhance credit quality consistent with regulators' expectations of adequate levels of adversely classified assets for financial institutions.

The Corporation's primary lending area is Puerto Rico. The Corporation's banking subsidiary, First Bank, also lends in the USVI and BVI markets and in the United States (principally in the state of Florida). Of the total gross loans held for investment of $9.3 billion as of September 30, 2014, approximately 83% have credit risk concentration in Puerto Rico, 10% in the United States, and 7% in the USVI and BVI.

As of September 30, 2014, the Corporation had $364.3 million in credit facilities granted to the Puerto Rico government, its municipalities and public corporations, of which $316.3 million was outstanding, compared to $397.8 million outstanding as of December 31, 2013. In addition, the outstanding balance of facilities granted to the government of the Virgin Islands amounted to $40.8 million as of September 30, 2014, compared to $60.6 million as of December 31, 2013. Approximately $201.4 million of the outstanding credit facilities consists of loans to municipalities in Puerto Rico. Municipal debt exposure is secured by ad valorem taxation without limitation as to rate or amount on all taxable property within the boundaries of each municipality. The good faith, credit, and unlimited taxing power of the applicable municipality have been pledged to the repayment of all outstanding bonds and notes. Approximately $24.8 million consists of loans to units of the central government, and approximately $90.1 million consists of loans to public corporations that generally receive revenues from the rates they charge for services or products, such as electric power services, including a $75.0 million credit extended to the Puerto Rico Electric Power Authority (“PREPA”) for fuel purchases that have priority over senior bonds and other debt. In August 2014, PREPA entered into a forbearance agreement with a group of banks, including FirstBank, to extend further its maturing credit lines to March 31, 2015. As a result of the forbearance, this credit facility was classified as a Trouble debt Restructuring (“TDR”) during the third quarter of 2014. The loan was maintained in accrual status based on the estimated cash flows analysis performed on this noncollateral dependent loan, repayment prospects and compliance with contractual terms. Major public corporations have varying degrees of independence from the central government and many receive appropriations or other payments from the Puerto Rico's government general fund. Debt issued by the central government can either carry the full faith, credit and taxing power of the Commonwealth of Puerto Rico or represent an obligation that is subject to annual budget appropriations.

Furthermore, the Corporation had $200.4 million outstanding as of September 30, 2014 in financing to the hotel industry in Puerto Rico guaranteed by the Puerto Rico Tourism Development Fund (“TDF”). The TDF is a subsidiary of the GDB that works with private-sector financial institutions to structure financings for new hospitality projects.

As disclosed in Note 4, S&P, Moody's and Fitch downgraded the credit rating of the Commonwealth of Puerto Rico's debt and certain public corporations to non-investment grade categories. The Corporation cannot predict at this time the impact that the current fiscal situation of the Commonwealth of Puerto Rico and the various legislative and other measures adopted and to be adopted by the Puerto Rico government in response to such fiscal situation will have on the Puerto Rico economy and on the Corporation's financial condition and results of operations.

The Corporation provides homeownership preservation assistance to its customers through a loss mitigation program in Puerto Rico that is similar to the U.S. government's Home Affordable Modification Program guidelines. Depending upon the nature of borrowers' financial condition, restructurings or loan modifications through this program as well as other restructurings of individual commercial, commercial mortgage, construction, and residential mortgage loans in the U.S. mainland fit the definition of a TDR. A restructuring of a debt constitutes a TDR if the creditor for economic or legal reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider. Modifications involve changes in one or more of the loan terms that bring a defaulted loan current and provide sustainable affordability. Changes may include the refinancing of any past-due amounts, including interest and escrow, the extension of the maturity of the loan and modifications of the loan rate. As of September 30, 2014, the Corporation's total TDR loans held for investment of $701.1 million consisted of $348.4 million of residential mortgage loans, $174.3 million of commercial and industrial loans, $134.9 million of commercial mortgage loans, $13.2 million of construction loans, and $30.2 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $0.2 million as of September 30, 2014.

The Corporation's loss mitigation programs for residential mortgage and consumer loans can provide for one or a combination of the following: movement of interest past due to the end of the loan, extension of the loan term, deferral of principal payments for a significant period of time, and reduction of interest rates either permanently (offered up to 2010) or for a period of up to two years (step-up rates). Additionally, in certain cases, the restructuring may provide for the forgiveness of contractually due principal or interest. Uncollected interest is added to the end of the loan term at the time of the restructuring and not recognized as income until collected or when the loan is paid off. These programs are available only to those borrowers who have defaulted, or are likely to default, permanently on their loan and would lose their homes in a foreclosure action absent some lender concession. Nevertheless, if the Corporation is not reasonably assured that the borrower will comply with its contractual commitment, properties are foreclosed.

Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers. Trial modifications generally represent a six-month period during which the borrower makes monthly payments under the anticipated modified payment terms prior to a formal modification. Upon successful completion of a trial modification, the Corporation and the borrower enter into a permanent modification. TDR loans that are participating in or that have been offered a binding trial modification are classified as TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification. As of September 30, 2014, we classified an additional $11.2 million of residential mortgage loans as TDRs that were participating in or had been offered a trial modification.

For the commercial real estate, commercial and industrial, and construction portfolios, at the time of a restructuring, the Corporation determines, on a loan-by-loan basis, whether a concession was granted for economic or legal reasons related to the borrower's financial difficulty. Concessions granted for commercial loans could include: reductions in interest rates to rates that are considered below market; extension of repayment schedules and maturity dates beyond original contractual terms; waivers of borrower covenants; forgiveness of principal or interest; or other contract changes that would be considered a concession. The Corporation mitigates loan defaults for its commercial loan portfolios through its collections function. The function's objective is to minimize both early stage delinquencies and losses upon default of commercial loans. In the case of the commercial and industrial, commercial mortgage and construction loan portfolios, the Corporation's Special Asset Group (“SAG”) focuses on strategies for the accelerated reduction of non-performing assets through note sales, short sales, loss mitigation programs, and sales of OREO. In addition to the management of the resolution process for problem loans, the SAG oversees collection efforts for all loans to prevent migration to the non-performing and/or adversely classified status. The SAG utilizes relationship officers, collection specialists, and attorneys. In the case of residential construction projects, the workout function monitors project specifics, such as project management and marketing, as deemed necessary. The SAG utilizes its collections infrastructure of workout collection officers, credit work-out specialists, in-house legal counsel, and third-party consultants. In the case of residential construction projects and large commercial loans, the function also utilizes third-party specialized consultants to monitor the residential and commercial construction projects in terms of construction, marketing and sales, and assists with the restructuring of large commercial loans.

In addition, the Corporation extends, renews, and restructures loans with satisfactory credit profiles. Many commercial loan facilities are structured as lines of credit, which are mainly one year in term and therefore are required to be renewed annually. Other facilities may be restructured or extended from time to time based upon changes in the borrower's business needs, use of funds, timing of completion of projects, and other factors. If the borrower is not deemed to have financial difficulties, extensions, renewals, and restructurings are done in the normal course of business and not considered concessions, and the loans continue to be recorded as performing.

Selected information on TDRs that includes the recorded investment by loan class and modification type is summarized in the following tables. This information reflects all TDRs:


		September 30, 2014
(In thousands)		Interest rate below market		Maturity or term extension		Combination of reduction in interest rate and extension of maturity		Forgiveness of principal and/or interest		Other (1)		Total
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans		$	23,658	$	6,046	$	282,922	$	-	$	35,820	$	348,446
Commercial Mortgage Loans			29,889		12,837		74,364		-		17,844		134,934
Commercial and Industrial Loans			7,602		80,742		33,051		3,089		49,813		174,297
Construction Loans:
Land			811		203		1,714		-		539		3,267
Construction-residential			6,155		244		3,127		-		434		9,960
Consumer Loans - Auto			-		441		9,292		-		6,000		15,733
Finance Leases			-		437		1,726		-		-		2,163
Consumer Loans - Other			38		155		9,879		509		1,762		12,343
Total Troubled Debt Restructurings (2)		$	68,153	$	101,105	$	416,075	$	3,598	$	112,212	$	701,143

(1)	Other concessions granted by the Corporation include deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation or a combination of the concessions listed in the table.
(2)	Excludes TDRs held for sale amounting to $45.7 million as of September 30, 2014




		December 31, 2013
(In thousands)		Interest rate below market		Maturity or term extension		Combination of reduction in interest rate and extension of maturity		Forgiveness of principal and/or interest		Other (1)		Total
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans		$	23,428	$	6,059	$	274,562	$	-	$	33,195	$	337,244
Commercial Mortgage Loans			36,543		12,985		83,993		7		20,048		153,576
Commercial and Industrial Loans			12,099		11,341		12,835		3,122		52,554		91,951
Construction Loans:
Land			878		2,012		1,760		-		675		5,325
Construction-commercial			-		-		3,924		-		-		3,924
Construction-residential			6,054		160		3,173		994		513		10,894
Consumer Loans - Auto			-		706		8,350		-		5,066		14,122
Finance Leases			-		1,286		1,072		-		-		2,358
Consumer Loans - Other			227		256		8,638		-		1,743		10,864
Total Troubled Debt Restructurings (2)		$	79,229	$	34,805	$	398,307	$	4,123	$	113,794	$	630,258

(1)	Other concessions granted by the Corporation include deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation or a combination of the concessions listed in the table.
(2)	Excludes TDRs held for sale amounting to $45.9 million as of December 31, 2013.

TDRs are classified as either accrual or nonaccrual loans. A loan on nonaccrual and restructured as a TDR will remain on nonaccrual status until the borrower has proven the ability to perform under the modified structure, generally for a minimum of six months, and there is evidence that such payments can and are likely to continue as agreed. Performance prior to the restructuring, or significant events that coincide with the restructuring, are included in assessing whether the borrower can meet the new terms and may result in the loans being returned to accrual at the time of the restructuring or after a shorter performance period. If the borrower's ability to meet the revised payment schedule is uncertain, the loan remains classified as a nonaccrual loan. Loan modifications increase the Corporation's interest income by returning a non-performing loan to performing status, if applicable, increase cash flows by providing for payments to be made by the borrower, and avoid increases in foreclosure and OREO costs. The Corporation continues to consider a modified loan as an impaired loan for purposes of estimating the allowance for loan and lease losses. A TDR loan that specifies an interest rate that at the time of the restructuring is greater than or equal to the rate the Corporation is willing to accept for a new loan with comparable risk may not be reported as a TDR or an impaired loan in the calendar years subsequent to the restructuring if it is in compliance with its modified terms. The Corporation did not remove loans from the TDR classification during the first nine months of 2014.

The following table provides a breakdown between accrual and nonaccrual status of TDRs:

(In thousands)		September 30, 2014

		Accrual		Nonaccrual (1) (2)		Total TDRs

Non-FHA/VA Residential Mortgage loans		$	259,749	$	88,697	$	348,446
Commercial Mortgage Loans			72,601		62,333		134,934
Commercial and Industrial Loans			127,178		47,119		174,297
Construction Loans:
Land			972		2,295		3,267
Construction-residential			3,371		6,589		9,960
Consumer Loans - Auto			9,584		6,149		15,733
Finance Leases			1,916		247		2,163
Consumer Loans - Other			9,712		2,631		12,343
Total Troubled Debt Restructurings		$	485,083	$	216,060	$	701,143

(1)	Included in non-accrual loans are $65.8 million in loans that are performing under the terms of the restructuring agreement but are reported in non-accrual status until the restructured loans meet the criteria of sustained payment performance under the revised terms for reinstatement to accrual status and there is no doubt about full collectability.
(2)	Excludes non-accrual TDRs held for sale with a carrying value of $45.7 million as of September 30, 2014.


(In thousands)		December 31, 2013

		Accrual		Nonaccrual (1) (2)		Total TDRs

Non- FHA/VA Residential Mortgage loans		$	263,919	$	73,324	$	337,243
Commercial Mortgage Loans			84,419		69,156		153,575
Commercial and Industrial Loans			53,509		38,441		91,950
Construction Loans:
Land			1,000		4,325		5,325
Construction-commercial			-		3,924		3,924
Construction-residential			3,332		7,562		10,894
Consumer Loans - Auto			8,512		5,610		14,122
Finance Leases			2,275		85		2,360
Consumer Loans - Other			8,417		2,448		10,865
Total Troubled Debt Restructurings		$	425,383	$	204,875	$	630,258

(1)	Included in non-accrual loans are $95.7 million in loans that are performing under the terms of the restructuring agreement but are reported in non-accrual status until the restructured loans meet the criteria of sustained payment performance under the revised terms for reinstatement to accrual status and there is no doubt about full collectability.
(2)	Excludes non-accrual TDRs held for sale with a carrying value of $45.9 million as of December 31, 2013.

TDRs exclude restructured residential mortgage loans that are guaranteed by the U.S. federal government (i.e., FHA/VA loans) totaling $72.4 million. The Corporation excludes FHA/VA guaranteed loans from TDRs given that, in the event that the borrower defaults on the loan, the principal and interest (debenture rate) are guaranteed by the U.S. government; therefore, the risk of loss on these types of loans is very low. The Corporation does not consider loans with U.S. federal government guarantees to be impaired loans for the purpose of calculating the allowance for loan and lease losses.

Loan modifications that are considered TDRs completed during the quarter and nine-month period ended September 30, 2014 and 2013 were as follows:

(Dollars in thousands)	Quarter ended September 30, 2014
	Number of contracts	Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	88	$	13,050	$	12,856
Commercial Mortgage Loans	1		589		589
Commercial and Industrial Loans	4		76,110		76,182
Construction Loans:
Land	3		183		143
Consumer Loans - Auto	214		3,189		3,106
Finance Leases	13		292		230
Consumer Loans - Other	352		1,756		1,758
Total Troubled Debt Restructurings	675	$	95,169	$	94,864

(Dollars in thousands)	Nine-Month period ended September 30, 2014
	Number of contracts	Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	226	$	31,776	$	30,831
Commercial Mortgage Loans	5		1,833		1,836
Commercial and Industrial Loans	16		105,188		104,926
Construction Loans:
Land	5		238		200
Consumer Loans - Auto	423		6,202		6,104
Finance Leases	33		659		565
Consumer Loans - Other	1,094		5,172		5,147
Total Troubled Debt Restructurings	1,802	$	151,068	$	149,609

(Dollars in thousands)	Quarter ended September 30, 2013
	Number of contracts	Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	140	$	29,530	$	29,984
Commercial Mortgage Loans	15		4,481		4,586
Commercial and Industrial Loans	13		8,528		7,925
Construction Loans:
Land	3		133		136
Consumer Loans - Auto	149		2,006		2,006
Finance Leases	16		334		334
Consumer Loans - Other	271		1,118		1,118
Total Troubled Debt Restructurings	607	$	46,130	$	46,089


(Dollars in thousands)	Nine-Month period ended September 30, 2013
	Number of contracts	Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	253	$	42,628	$	43,106
Commercial Mortgage Loans	16		4,972		5,077
Commercial and Industrial Loans	21		76,579		50,588
Construction Loans:
Land	7		341		344
Construction-residential	1		195		195
Consumer Loans - Auto	434		5,874		5,874
Finance Leases	54		1,063		1,063
Consumer Loans - Other	1,001		4,440		4,440
Total Troubled Debt Restructurings	1,787	$	136,092	$	110,687

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-performing loan. Recidivism occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans. The Corporation considers a loan to have defaulted if the borrower has failed to make payments of either principal, interest, or both for a period of 90 days or more.

Loan modifications considered TDRs that defaulted during the quarters and nine-month periods ended September 30, 2014 and September 30, 2013 and had become TDRs during the 12-months preceding the default date were as follows:

For certain TDRs, the Corporation splits the loans into two new notes, A and B notes. The A note is restructured to comply with the Corporation's lending standards at current market rates, and is tailored to suit the customer's ability to make timely interest and principal payments. The B note includes the granting of the concession to the borrower and varies by situation. The B note is charged off but the obligation is not forgiven to the borrower, and any payments collected are accounted for as recoveries. At the time of restructuring, the A note is identified and classified as a TDR. If the loan performs for at least six months according to the modified terms, the A note may be returned to accrual status. The borrower's payment performance prior to the restructuring is included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of the restructuring. In the periods following the calendar year in which a loan is restructured, the A note may no longer be reported as a TDR if it is on accrual, is in compliance with its modified terms, and yields a market rate (as determined and documented at the time of the restructuring).

The recorded investment in loans held for investment restructured using the A/B note restructure workout strategy was approximately $59.8 million at September 30, 2014. The following table provides additional information about the volume of this type of loan restructuring and the effect on the allowance for loan and lease losses in the first nine months of 2014 and 2013:

Of the loans comprising the $59.8 million that have been deemed collectible, approximately $53.5 million were placed in accrual status as the borrowers have exhibited a period of sustained performance. These loans continue to be individually evaluated for impairment purposes.