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

			As of		As of
		March 31,		December 31,
			2016		2015
(In thousands)

Residential mortgage loans, mainly secured by first mortgages		$	3,330,945	$	3,344,719

Commercial loans:
Construction loans			146,129		156,195
Commercial mortgage loans			1,524,491		1,537,806
Commercial and Industrial loans (1)			2,343,416		2,407,996
Loans to local financial institution collateralized by
Total Commercial loans			4,014,036		4,101,997

Finance leases			230,801		229,165

Consumer loans			1,555,560		1,597,984

Loans held for investment			9,131,342		9,273,865

Allowance for loan and lease losses			(238,125)		(240,710)

Loans held for investment, net		$	8,893,217	$	9,033,155

__________
(1)	As of March 31, 2016 and December 31, 2015, includes $1.0 billion of commercial loans that are secured by real estate but are not dependent upon the real estate for repayment.

Loans held for investment on which accrual of interest income had been discontinued as of the indicated dates were as follows:
		As of		As of
(In thousands)		March 31,		December 31,
		2016		2015
Non-performing loans:
Residential mortgage		$	172,890	$	169,001
Commercial mortgage			182,763		51,333
Commercial and Industrial			137,896		137,051
Construction:
Land			12,082		12,174
Construction-commercial			39,037		39,466
Construction-residential			2,917		2,996
Consumer:
Auto loans			15,038		17,435
Finance leases			2,136		2,459
Other consumer loans			10,177		10,858
Total non-performing loans held for investment (1)(2)(3)		$	574,936	$	442,773

_______________

(1)	As of March 31, 2016 and December 31, 2015, excludes $8.1 million of non-performing loans held for sale.

(2)	Amount excludes purchased-credit impaired ("PCI") loans with a carrying value of approximately $172.3 million and $173.9 million as of March 31, 2016 and December 31, 2015, respectively, primarily mortgage loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial 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 an estimated cash flow analysis.

(3)	Non-performing loans exclude $413.4 million and $414.9 million of Troubled Debt Restructuring ("TDR") loans that are in compliance with the modified terms and in accrual status as of March 31, 2016 and December 31, 2015, respectively.

As of March 31, 2016, the recorded investment of residential mortgage loans collateralized by residential real estate property that are in the process of foreclosure amounted to $153.5 million. The Corporation commences the foreclosure process on residential real estate loans when a borrower becomes 120 days delinquent in accordance with the guidelines of the Consumer Financial Protection Bureau (CFPB). Foreclosure procedures and timelines vary depending on whether the property is located in a judicial or non-judicial state. Judicial states (Puerto Rico) require the foreclosure to be processed through the state's court while foreclosures in non-judicial states are processed without court intervention. Foreclosure timelines vary according to state law and Investor Guidelines. Occasionally foreclosures may be delayed due to mandatory mediations, bankruptcy, court delays and title issues, among other reasons.

The Corporation’s aging of the loans held for investment portfolio is as follows:

As of March 31, 2016
(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		Current		Total loans held for investment		90 days past due and still accruing (2)
Residential mortgage:
FHA/VA and other government-guaranteed
loans (2)(3)(4)		$	-	$	5,338	$	84,217	$	89,555	$	-	$	47,149	$	136,704	$	84,217
Other residential mortgage loans (4)			-		94,576		189,615		284,191		169,190		2,740,860		3,194,241		16,725
Commercial:
Commercial and Industrial loans			12,079		6,943		144,311		163,333		-		2,180,083		2,343,416		6,415
Commercial mortgage loans (4)			-		10,408		211,576		221,984		3,142		1,299,365		1,524,491		28,813
Construction:
Land (4)			-		241		12,533		12,774		-		34,051		46,825		451
Construction-commercial			-		-		54,460		54,460		-		26,754		81,214		15,423
Construction-residential (4)			-		-		5,948		5,948		-		12,142		18,090		3,031
Consumer:
Auto loans			61,558		13,489		15,038		90,085		-		814,249		904,334		-
Finance leases			8,993		2,116		2,136		13,245		-		217,556		230,801		-
Other consumer loans			10,287		6,044		14,059		30,390		-		620,836		651,226		3,882
Total loans held for investment		$	92,917	$	139,155	$	733,893	$	965,965	$	172,332	$	7,993,045	$	9,131,342	$	158,957
_____________
(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 $34.9 million of residential mortgage loans insured by the FHA or guaranteed by the VA which are over 15 months delinquent, and are no longer accruing interest as of March 31, 2016.
(3)	As of March 31, 2016, includes $40.0 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, construction-commercial and construction-residential loans past due 30-59 days as of March 31, 2016 amounted to $10.0 million, $155.9 million, $74.8 million, $0.5 million, $5.2 million and $0.7 million, respectively.

As of December 31, 2015
(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		Current		Total loans held for investment		90 days past due and still accruing (2)
Residential mortgage:
FHA/VA and other government-guaranteed
loans (2)(3)(4)		$	-	$	6,048	$	90,168	$	96,216	$	-	$	46,925	$	143,141	$	90,168
Other residential mortgage loans (4)			-		90,406		185,018		275,424		170,766		2,755,388		3,201,578		16,017
Commercial:
Commercial and Industrial loans			5,577		6,412		150,893		162,882		-		2,245,114		2,407,996		13,842
Commercial mortgage loans (4)			-		24,729		63,805		88,534		3,147		1,446,125		1,537,806		12,472
Construction:
Land (4)			-		161		12,350		12,511		-		39,363		51,874		176
Construction-commercial			-		11,722		39,466		51,188		-		32,142		83,330		-
Construction-residential (4)			-		-		6,042		6,042		-		14,949		20,991		3,046
Consumer:
Auto loans			70,836		16,787		17,435		105,058		-		829,922		934,980		-
Finance leases			7,664		3,100		2,459		13,223		-		215,942		229,165		-
Other consumer loans			9,462		5,524		15,124		30,110		-		632,894		663,004		4,266
Total loans held for investment		$	93,539	$	164,889	$	582,760	$	841,188	$	173,913	$	8,258,764	$	9,273,865	$	139,987
____________
(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 $37.3 million of residential mortgage loans insured by the FHA or guaranteed by the VA which are over 15 months delinquent, and are no longer accruing interest as of December 31, 2015.
(3)	As of December 31, 2015, includes $38.5 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 as of December 31, 2015 amounted to $11.0 million, $162.9 million, $38.6 million, $5.7 million and $0.8 million, respectively.

The Corporation’s credit quality indicators by loan type as of March 31, 2016 and December 31, 2015 are summarized below:

		Commercial Credit Exposure-Credit Risk Profile Based on Creditworthiness Category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
March 31, 2016		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
(In thousands)
Commercial mortgage		$	213,990	$	37,673	$	-	$	251,663	$	1,524,491
Construction:
Land			13,803		-		-		13,803		46,825
Construction-commercial			39,037		-		-		39,037		81,214
Construction-residential			5,949		-		-		5,949		18,090
Commercial and Industrial			186,580		71,706		395		258,681		2,343,416

		Commercial Credit Exposure-Credit Risk Profile Based on Creditworthiness Category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
December 31, 2015		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
(In thousands)
Commercial mortgage		$	252,941	$	140	$	-	$	253,081	$	1,537,806
Construction:
Land			14,035		1		-		14,036		51,874
Construction-commercial			39,466		-		-		39,466		83,330
Construction-residential			2,996		-		-		2,996		20,991
Commercial and Industrial			140,827		71,341		354		212,522		2,407,996
_________
(1)	Excludes $8.1 million as of March 31, 2016 and December 31, 2015, of construction-land 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.

March 31, 2016		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		$	136,704	$	2,852,161	$	889,296	$	228,665	$	641,049
Purchased Credit-Impaired (2)			-		169,190		-		-		-
Non-performing			-		172,890		15,038		2,136		10,177
Total		$	136,704	$	3,194,241	$	904,334	$	230,801	$	651,226

(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 $34.9 million of residential mortgage loans insured by the FHA or guaranteed by the VA, which are over 15 months delinquent, and are no longer accruing interest as of March 31, 2016.

(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, 2015		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		$	143,141	$	2,861,811	$	917,545	$	226,706	$	652,146
Purchased Credit-Impaired (2)			-		170,766		-		-		-
Non-performing			-		169,001		17,435		2,459		10,858
Total		$	143,141	$	3,201,578	$	934,980	$	229,165	$	663,004

(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 $37.3 million of residential mortgage loans insured by the FHA or guaranteed by the VA, which are over 15 months delinquent, and are no longer accruing interest as of December 31, 2015.

(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 PCI loans, which are reported separately as discussed below:

Impaired Loans
(In thousands)
	Recorded Investment		Unpaid Principal Balance		Related Specific Allowance		Average Recorded Investment		Interest Income Recognized On Accrual Basis		Interest Income Recognized On Cash Basis
As of March 31, 2016
With no related allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		62,899		72,939		-		63,303		92		80
Commercial:
Commercial mortgage loans		35,565		45,358		-		35,982		200		135
Commercial and Industrial Loans		29,230		32,629		-		29,575		-		-
Construction:
Land		-		-		-		-		-		-
Construction-commercial		39,037		40,000		-		39,252		-		-
Construction-residential		3,031		3,031		-		3,039		42		-
Consumer:
Auto loans		-		-		-		-		-		-
Finance leases		-		-		-		-		-		-
Other consumer loans		3,092		3,839		-		2,950		1		38
	$	172,854	$	197,796	$	-	$	174,101	$	335	$	253
With an allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		398,707		445,440		16,150		400,571		4,715		437
Commercial:
Commercial mortgage loans		155,686		164,543		36,007		155,782		140		26
Commercial and Industrial Loans		138,930		163,236		18,749		141,502		535		26
Construction:
Land		9,522		13,759		1,059		9,550		9		9
Construction-commercial		-		-		-		-		-		-
Construction-residential		1,348		2,082		143		1,348		-		-
Consumer:
Auto loans		23,475		23,475		7,459		24,049		446		-
Finance leases		2,468		2,468		144		2,563		54		-
Other consumer loans		14,601		14,846		1,784		14,916		373		12
	$	744,737	$	829,849	$	81,495	$	750,281	$	6,272	$	510
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		461,606		518,379		16,150		463,874		4,807		517
Commercial:
Commercial mortgage loans		191,251		209,901		36,007		191,764		340		161
Commercial and Industrial Loans		168,160		195,865		18,749		171,077		535		26
Construction:
Land		9,522		13,759		1,059		9,550		9		9
Construction-commercial		39,037		40,000		-		39,252		-		-
Construction-residential		4,379		5,113		143		4,387		42		-
Consumer:
Auto loans		23,475		23,475		7,459		24,049		446		-
Finance leases		2,468		2,468		144		2,563		54		-
Other consumer loans		17,693		18,685		1,784		17,866		374		50
	$	917,591	$	1,027,645	$	81,495	$	924,382	$	6,607	$	763

Impaired Loans
(In thousands)
	Recorded Investment		Unpaid Principal Balance		Related Specific Allowance		Average Recorded Investment
As of December 31, 2015
With no related allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		65,495		74,146		-		67,282
Commercial:
Commercial mortgage loans		54,048		66,448		-		54,967
Commercial and Industrial Loans		27,492		29,957		-		28,326
Construction:
Land		-		-		-		-
Construction-commercial		39,466		40,000		-		39,736
Construction-residential		3,046		3,046		-		3,098
Consumer:
Auto loans		-		-		-		-
Finance leases		-		-		-		-
Other consumer loans		2,618		4,300		-		2,766
	$	192,165	$	217,897	$	-	$	196,175
With an allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		395,173		440,947		21,787		398,790
Commercial:
Commercial mortgage loans		27,479		40,634		3,073		30,518
Commercial and Industrial Loans		143,214		164,050		18,096		148,547
Construction:
Land		9,578		13,758		1,060		9,727
Construction-commercial		-		-		-		-
Construction-residential		1,426		2,180		142		1,476
Consumer:
Auto loans		21,581		21,581		6,653		23,531
Finance leases		2,077		2,077		86		2,484
Other consumer loans		13,816		14,043		1,684		14,782
	$	614,344	$	699,270	$	52,581	$	629,855
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		460,668		515,093		21,787		466,072
Commercial:
Commercial mortgage loans		81,527		107,082		3,073		85,485
Commercial and Industrial Loans		170,706		194,007		18,096		176,873
Construction:
Land		9,578		13,758		1,060		9,727
Construction-commercial		39,466		40,000		-		39,736
Construction-residential		4,472		5,226		142		4,574
Consumer:
Auto loans		21,581		21,581		6,653		23,531
Finance leases		2,077		2,077		86		2,484
Other consumer loans		16,434		18,343		1,684		17,548
	$	806,509	$	917,167	$	52,581	$	826,030

Interest income of approximately $9.7 million ($8.2 million on an accrual basis and $1.5 million on a cash basis) was recognized on impaired loans for the first quarter of 2015.

The following table shows the activity for impaired loans and the related specific reserve during the first quarter of 2016 and 2015:

	Quarter ended
	March 31, 2016		March 31, 2015
Impaired Loans:	(In thousands)
Balance at beginning of period	$	806,509	$	945,407
Loans determined impaired during the period		157,984		62,933
Charge-offs		(8,352)		(11,715)
Loans sold, net of charge-offs		-		(1,137)
Increases to impaired loans- additional disbursements		1,347		519
Foreclosures		(7,421)		(9,952)
Loans no longer considered impaired		(20,339)		(9,898)
Paid in full or partial payments		(12,137)		(21,176)
Balance at end of period	$	917,591	$	954,981

The Corporation acquired PCI loans accounted under ASC 310-30 as part of transaction closed on February 27, 2015 in which FirstBank acquired 10 Puerto Rico branches of Doral Bank, and acquired certain assets, including PCI loans, and assumed deposits, through an alliance with Banco Popular of Puerto Rico, which was the successful lead bidder with the FDIC on the failed Doral Bank, as well as other co-bidders. The Corporation also acquired PCI loans in previously completed asset acquisitions which are accounted for under ASC 310-30. These previous transactions include the acquisition from Doral Financial in the second quarter of 2014 of all its rights, title and interest in first and second residential mortgages loans in full satisfaction of secured borrowings owed by such entity to FirstBank, and the acquisition in 2012 of a FirstBank-branded credit card loans portfolio from FIA Card Services (“FIA”).

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. Since the loans are accounted for by the Corporation under ASC 310-30, they 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 recognizes additional losses on this portfolio when it is probable that the Corporation will be unable to collect all cash flows expected as of the acquisition date plus additional cash flows expected to be collected arising from changes in estimates after the acquisition date.

	The following tables present PCI loans by past due status as of March 31, 2016 and December 31, 2015:

As of March 31, 2016		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans		Current
		(In thousands)
Residential mortgage loans (1)		$	-	$	12,999	$	24,941	$	37,940	$	131,250	$	169,190
Commercial mortgage loans (1)			-		-		992		992		2,150		3,142
		$	-	$	12,999	$	25,933	$	38,932	$	133,400	$	172,332
_____________
(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 past due 30-59 days as of March 31, 2016 amounted to $23.5 million.


As of December 31, 2015		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans		Current
		(In thousands)
Residential mortgage loans (1)		$	-	$	16,094	$	22,218	$	38,312	$	132,454	$	170,766
Commercial mortgage loans (1)			-		-		992		992		2,155		3,147
		$	-	$	16,094	$	23,210	$	39,304	$	134,609	$	173,913
_____________
(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 past due 30-59 days as of December 31, 2015 amounted to $23.6 million.

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 non-accretable 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.

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 non-accretable difference or reclassifications from nonaccretable yield to accretable yield. 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 quarter of 2016, the Corporation increased by $0.6 million to $4.6 million the reserve related to PCI loans acquired from Doral Financial in 2014. The reserve is driven by the revisions to the expected cash flows of the portfolio for the remaining term of the loan pool based on market conditions.

The outstanding principal balance of PCI loans, including amounts charged off by the Corporation, amounted to $216.1 million as of March 31, 2016 (December 31, 2015- $218.1 million).

During the first quarter of 2016, the Corporation purchased $19.1 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.

In the ordinary course of business, the Corporation sells residential mortgage loans (originated or purchased) to GNMA and government-sponsored entities (“GSEs”) such as Fannie Mae (“FNMA”) and Freddie Mac (“FHLMC”), which generally securitize the transferred loans into mortgage-backed securities for sale into the secondary market. The Corporation sold approximately $38.3 million of performing residential mortgage loans to FNMA and FHLMC during the first quarter of 2016. Also, during the first quarter of 2016, the Corporation sold $67.7 million of FHA/VA mortgage loans to GNMA, which packages them into mortgage-backed securities. 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 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 quarter of 2016 and 2015, the Corporation repurchased pursuant to its repurchase option with GNMA $8.4 million and $3.0 million, respectively, of loans previously sold to GNMA. The principal balance of these loans is fully guaranteed and the risk of loss related to the repurchased loans 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 $0.5 million and $0.2 million during the first quarter of 2016 and 2015, respectively. 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. No losses related to breaches of representations and warranties were incurred in the first quarter of 2016. Historically, losses experienced on these loans have been immaterial. As a consequence, as of March 31, 2016, 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'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 $9.1 billion as of March 31, 2016, approximately 80% have credit risk concentration in Puerto Rico, 13% in the United States, and 7% in the USVI and BVI.

As of March 31, 2016, the Corporation had $315.6 million of credit facilities, excluding investment securities, extended to the Puerto Rico government, its municipalities and public corporations, of which $302.2 million was outstanding (book value of $297.2 million), compared to $314.6 million outstanding as of December 31, 2015. In addition, the outstanding balance of facilities granted to the government of the Virgin Islands amounted to $67.4 million as of March 31, 2016, compared to $126.2 million as of December 31, 2015. Approximately $199.3 million of the granted credit facilities outstanding consisted of loans to municipalities in Puerto Rico whose revenues are independent of the Puerto Rico central government. 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 the municipality's loans. Approximately 88% of the Corporation's municipality exposure consists primarily of senior priority loans concentrated on five of the largest municipalities on Puerto Rico (San Juan, Carolina, Bayamon, Mayaguez and Guaynabo). These municipalities are required by law to levy special property taxes in such amounts as required for the payment of all their respective general obligation bonds and loans. In addition to municipalities, loans extended to the Puerto Rico Government include $6.9 million of loans to units of the Puerto Rico central government, and approximately $96.0 million ($91.0 million book value) consisted 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 credit facility extended to the Puerto Rico Electric Power Authority (“PREPA”) with a book value of $69.7 million as of March 31, 2016. The PREPA credit facility was placed in non-accrual status in the first quarter of 2015, and interest payments are recorded on a cost recovery basis. Major public corporations have varying degrees of independence from the central government and many receive appropriations or other payments from the Puerto Rico government's general fund. Debt issued by the Puerto Rico 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, as of March 31, 2016, the Corporation had $128.6 million outstanding in financings to the hotel industry in Puerto Rico where the borrower and operations of the underlying collateral are the primary sources of repayment and the Puerto Rico Tourism Development Fund (the “TDF”) provides a secondary guarantee for payment performance, compared to $129.4 million as of December 31, 2015. The TDF is a subsidiary of the GDB that facilitates private-sector financings to Puerto Rico's hotel industry. The TDF provides guarantees to financings and may provide direct loans. The Corporation placed the $128.6 million exposure to loans guaranteed by the TDF in non-accrual status in the first quarter of 2016. Recent developments related to the Puerto Rico government's fiscal situation introduced additional uncertainty regarding TDF's ability to honor its guarantee, including the enactment on April 6, 2016 of the Puerto Rico Emergency Moratorium and Financial Rehabilitation Act. This Act gives Puerto Rico's governor emergency powers to deal with the Puerto Rico government's challenging fiscal situation, including the ability to declare a moratorium on all bonds and other payments. Puerto Rico's governor issued an executive order intended to protect the GDB's liquidity by allowing withdrawals only to fund necessary costs for essential services such as health, public safety and education services. Most recently, the GDB paid the scheduled interest payment but defaulted on the principal payment of $367 million notes due on May 1, 2016 and entered into an agreement with credit unions in Puerto Rico to exchange $33 million of notes maturing on May 1, 2016 for newly issued notes with substantially the same terms, but maturing on May 1, 2017.

The Corporation has been receiving combined payments from the borrowers and TDF as guarantor sufficient to cover contractual payments on these loans, including collections of principal and interest from TDF of $0.6 million in the first quarter of 2016 and $5.3 million in the entire year 2015. These loans, which have been adversely classified since the third quarter of 2015, were current in contractual payments as of March 31, 2016. Prospectively, principal and interest payment collections received by the Corporation for these loans will be applied against the outstanding balance of the loans.

The general reserve for commercial loans was increased in the fourth quarter of 2015 due to qualitative factors that stressed the historical loss rates applied to the Puerto Rico Government-related exposure, including the TDF-guaranteed portfolio. The migration of the loans guaranteed by the TDF to non-accrual status in the first quarters of 2016 did not result in a significant increase to the allowance for loan losses. As of March 31, 2016, the total reserve coverage ratio related to commercial loans extended to or guaranteed by the Puerto Rico Government (excluding municipalities) was 20%.

In addition, the Corporation had $124.3 million in indirect exposure to residential mortgage loans that are guaranteed by the Puerto Rico Housing Finance Authority. Residential mortgage loans guaranteed by the Puerto Rico Housing Finance Authority are secured by the underlying properties and the guarantees serve to cover shortfalls in collateral in the event of a borrower default. The Puerto Rico government guarantees up to $75 million of the principal insured by the mortgage loans insurance program. According to the most recently released audited financial statements of the Puerto Rico Housing Financing Authority, as of June 30, 2015, the Puerto Rico Housing Finance Authority's mortgage loans insurance program covered loans aggregating to approximately $552 million. The regulations adopted by the Puerto Rico Housing Finance Authority require the establishment of adequate reserves to guarantee the solvency of the mortgage loans insurance fund. As of June 30, 2015, the Puerto Rico Housing Finance Authority had a restricted net position for such purposes of approximately $77.4 million.

The Corporation cannot predict at this time the impact that the current fiscal situation of the Commonwealth of Puerto Rico, including the payment defaults on certain bonds, the uncertainty about the debt restructuring process and how the U.S. government may address Puerto Rico's financial problems, 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 March 31, 2016, the Corporation's total TDR loans held for investment of $659.1 million consisted of $384.3 million of residential mortgage loans, $144.8 million of commercial and industrial loans, $43.5 million of commercial mortgage loans, $45.2 million of construction loans, and $41.3 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $0.3 million as of March 31, 2016.

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, and reduction of interest rates either permanently or for a period of up to four years (increasing back in 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 the 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 TDR regardless of whether the borrower enters into a permanent modification. As of March 31, 2016, we classified an additional $7.2 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 loan 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 contractual changes that would be considered a concession. The Corporation mitigates loan defaults for its commercial loan portfolios through its collection 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 SAG function also utilizes third-party specialized consultants to monitor the residential and commercial construction projects in terms of construction, marketing and sales, and to assist 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 TDR loans that includes the recorded investment by loan class and modification type is summarized in the following tables. This information reflects all TDRs:

		March 31, 2016
(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		$	29,605	$	6,272	$	296,531	$	-	$	51,927	$	384,335
Commercial Mortgage Loans			4,005		1,235		25,921		-		12,308		43,469
Commercial and Industrial Loans			1,700		73,089		26,583		3,018		40,438		144,828
Construction Loans:
Land			-		228		2,159		-		368		2,755
Construction-commercial			-		-		-		39,037		-		39,037
Construction-residential			-		-		3,031		-		357		3,388
Consumer Loans - Auto			-		2,173		13,765		-		7,542		23,480
Finance Leases			-		541		1,928		-		-		2,469
Consumer Loans - Other			82		1,555		11,145		258		2,303		15,343
Total Troubled Debt Restructurings		$	35,392	$	85,093	$	381,063	$	42,313	$	115,243	$	659,104

(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.

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:

		December 31, 2015
(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		$	29,066	$	6,027	$	297,310	$	-	$	50,269	$	382,672
Commercial Mortgage Loans			4,379		1,244		26,109		-		12,766		44,498
Commercial and Industrial Loans			2,163		75,104		27,214		3,027		42,746		150,254
Construction Loans:
Land			-		229		2,165		-		372		2,766
Construction-commercial			-		-		-		39,466		-		39,466
Construction-residential			-		-		3,046		-		436		3,482
Consumer Loans - Auto			-		2,330		12,388		-		6,864		21,582
Finance Leases			-		621		1,456		-		-		2,077
Consumer Loans - Other			89		1,604		11,026		327		1,748		14,794
Total Troubled Debt Restructurings		$	35,697	$	87,159	$	380,714	$	42,820	$	115,201	$	661,591

(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.

TDR loans are classified as either accrual or nonaccrual loans. Loans in accrual status may remain in accrual status when their contractual terms have been modified in a TDR if the loans had demonstrated performance prior to the restructuring and payment in full under the restructured terms is expected. Otherwise, loans on non-accrual 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 loan being returned to accrual status 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 non-accrual 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 limit 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 any loans from the TDR classification during the first quarter of 2016 and 2015.

The following table provides a breakdown between the accrual and non-accrual status of TDR loans:

(In thousands)		As of March 31, 2016

		Accrual		Non-accrual (1)		Total TDRs

Non-FHA/VA Residential Mortgage loans		$	302,773	$	81,562	$	384,335
Commercial Mortgage Loans			27,763		15,706		43,469
Commercial and Industrial Loans			47,463		97,365		144,828
Construction Loans:
Land			917		1,838		2,755
Construction-commercial			-		39,037		39,037
Construction-residential			3,031		357		3,388
Consumer Loans - Auto			15,943		7,537		23,480
Finance Leases			2,329		140		2,469
Consumer Loans - Other			13,214		2,129		15,343
Total Troubled Debt Restructurings		$	413,433	$	245,671	$	659,104

(1)	Included in non-accrual loans are $119.2 million in loans that are performing under the terms of a 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.



(In thousands)		December 31, 2015

		Accrual		Non-accrual (1)		Total TDRs

Non-FHA/VA Residential Mortgage loans		$	303,885	$	78,787	$	382,672
Commercial Mortgage Loans			29,121		15,377		44,498
Commercial and Industrial Loans			48,392		101,862		150,254
Construction Loans:
Land			924		1,842		2,766
Construction-commercial			-		39,466		39,466
Construction-residential			3,046		436		3,482
Consumer Loans - Auto			14,823		6,759		21,582
Finance Leases			1,980		97		2,077
Consumer Loans - Other			12,737		2,057		14,794
Total Troubled Debt Restructurings		$	414,908	$	246,683	$	661,591

(1)	Included in non-accrual loans are $118.2 million in loans that are performing under the terms of a 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.

TDR loans exclude restructured residential mortgage loans that are guaranteed by the U.S. federal government (i.e., FHA/VA loans) totaling $74.2 million as of March 31, 2016 (December 31, 2015 - $77.6 million). The Corporation excludes FHA/VA guaranteed loans from TDR loans statistics given that, in the event that the borrower defaults on the loan, the principal and interest (at the specified 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.

Loans modifications that are considered TDR loans and were completed during the first quarter of 2016 and 2015 were as follows:

(Dollars in thousands)	Quarter ended March 31, 2016
	Number of contracts	Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	58	$	9,012	$	8,459
Commercial Mortgage Loans	-		-		-
Commercial and Industrial Loans	-		-		-
Construction Loans:
Land	-		-		-
Construction-commercial	-		-		-
Construction-residential	-		-		-
Consumer Loans - Auto	258		4,981		4,981
Finance Leases	36		940		940
Consumer Loans - Other	336		1,821		1,839
Total Troubled Debt Restructurings	688	$	16,754	$	16,219

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 TDR loans that defaulted during the quarters ended March 31, 2016 and March 31, 2015 and had become TDR during the 12-month period preceding the default date, were as follows:

	Quarter ended March 31,
(Dollars in thousands)	2016			2015
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment

Non-FHA/VA Residential Mortgage loans	11	$	1,978	12	$	1,773
Commercial Mortgage Loans	-		-	-		-
Commercial and Industrial Loans	-		-	4		5,745
Construction Loans:	-		-	-		-
Land	-		-	-		-
Construction-commercial	-		-	-		-
Construction-residential	-		-	-		-
Consumer Loans - Auto	9		136	2		8
Finance Leases	1		13	1		15
Consumer Loans - Other	33		130	53		229
Total	54	$	2,257	72	$	7,770

For certain TDR loans, 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 the restructuring, the A note is identified and classified as a TDR loan. 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 was restructured, the A note may no longer be reported as a TDR loan if it is on accrual status, 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 $38.6 million as of March 31, 2016. 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 quarter of 2016 and 2015:

Of the loans comprising the $38.6 million that have been deemed collectible, approximately $38.5 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.