LOANS PORTFOLIO

12 Months Ended

Dec. 31, 2016

NOTE 7 – LOANS HELD FOR INVESTMENT

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

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

Residential mortgage loans, mainly secured by first mortgages		$	3,296,031	$	3,344,719

Commercial loans:
Construction loans			124,951		156,195
Commercial mortgage loans			1,568,808		1,537,806
Commercial and Industrial loans (1)			2,180,455		2,246,513
Total commercial loans			3,874,214		3,940,514

Finance leases			233,335		229,165

Consumer loans			1,483,293		1,597,984

Loans held for investment			8,886,873		9,112,382

Allowance for loan and lease losses			(205,603)		(240,710)

Loans held for investment, net		$	8,681,270	$	8,871,672

(1)	As of December 31, 2016 and 2015, includes $853.9 million and $973.2 million, respectively, of commercial loans that are secured by real estate but are not dependent upon the real estate for repayment.

As of December 31, 2016 and 2015, the Corporation had net deferred origination costs on its loan portfolio amounting to $4.8 million and $6.5 million, respectively. The total loan portfolio is net of unearned income of $32.8 million and $32.9 million as of December 31, 2016 and 2015, respectively.

As of December 31, 2016, the Corporation was servicing residential mortgage loans owned by others aggregating $2.7 billion (2015 — $2.4 billion), construction and commercial loans owned by others aggregating $0.1 million (2015 — $0.1 million), and commercial loan participations owned by others aggregating $401.4 million (2015 — $364.9 million).

Various loans, mainly secured by first mortgages, were assigned as collateral for CDs, individual retirement accounts, and advances from the FHLB. Total loans pledged as collateral amounted to $2.0 billion as of December 31, 2016 (2015 — $2.0 billion).

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

		As of		As of
		December 31,		December 31,
		2016		2015
(In thousands)
Non-performing loans:
Residential mortgage		$	160,867	$	169,001
Commercial mortgage			178,696		51,333
Commercial and Industrial			146,599		137,051
Construction:
Land			11,026		12,174
Construction-commercial			36,893		39,466
Construction-residential			1,933		2,996
Consumer:
Auto loans			14,346		17,435
Finance leases			1,335		2,459
Other consumer loans			8,399		10,858
Total non-performing loans held for investment (1)(2)(3)		$	560,094	$	442,773

________________
(1)	As of December 31, 2016 and December 31, 2015, excludes $8.1 million of non-performing loans held for sale.
(2)	Amount excludes PCI loans with a carrying value of approximately $165.8 million and $173.9 million as of December 31, 2016 and 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 $384.9 million and $414.9 million of TDR loans that are in compliance with the modified terms and in accrual status as of December 31, 2016 and 2015, respectively.

If these loans were accruing interest, the additional interest income realized would have been $43.2 million (2015— $37.8 million; 2014 — $48.9 million).

Loans in Process of Foreclosure

As of December 31, 2016, the recorded investment of residential mortgage loans collateralized by residential real estate property that are in the process of foreclosure amounted to $134.2 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 foreclosure in non-judicial states is 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 December 31, 2016	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
		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
(In thousands)
Residential mortgage:
FHA/VA and other government-guaranteed
loans (2) (3) (4)		$	-	$	5,179	$	77,052	$	82,231	$	-	$	44,627	$	126,858	$	77,052
Other residential mortgage loans (4)			-		94,004		177,568		271,572		162,676		2,734,925		3,169,173		16,701
Commercial:
Commercial and Industrial loans			14,195		3,724		151,967		169,886		-		2,010,569		2,180,455		5,368
Commercial mortgage loans (4)			-		4,534		181,977		186,511		3,142		1,379,155		1,568,808		3,281
Construction:
Land (4)			-		436		11,504		11,940		-		19,826		31,766		478
Construction-commercial			-		-		36,893		36,893		-		40,582		77,475		-
Construction-residential (4)			-		-		1,933		1,933		-		13,777		15,710		-
Consumer:
Auto loans			57,142		13,523		14,346		85,011		-		762,947		847,958		-
Finance leases			7,714		1,671		1,335		10,720		-		222,615		233,335		-
Other consumer loans			7,675		5,254		12,328		25,257		-		610,078		635,335		3,929
Total loans held for investment		$	86,726	$	128,325	$	666,903	$	881,954	$	165,818	$	7,839,101	$	8,886,873	$	106,809

(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 $29.3 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, 2016.
(3)	As of December 31, 2016, includes $43.7 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 and other 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, 2016 amounted to $9.9 million, $142.8 million, $4.6 million, $0.7 million, and $0.4 million, respectively.

	As of December 31, 2015	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
		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
(In thousands)
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		-		2,083,631		2,246,513		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	$	8,097,281	$	9,112,382	$	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 and other 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 December 31, 2016 and 2015 are summarized below:

		Commercial Credit Exposure-Credit Risk Profile based on Creditworthiness Category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
	December 31, 2016	Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
	(In thousands)
	Commercial Mortgage	$	193,391	$	35,416	$	-	$	228,807	$	1,568,808
	Construction:
	Land		19,345		-		-		19,345		31,766
	Construction-commercial		36,893		-		-		36,893		77,475
	Construction-residential		1,933		-		-		1,933		15,710
	Commercial and Industrial		133,599		67,996		784		202,379		2,180,455

		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		2,246,513

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

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 of 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.

	December 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	$	126,858	$	2,845,630	$	833,612	$	232,000	$	626,936
	Purchased Credit-Impaired (2)		-		162,676		-		-		-
	Non-performing		-		160,867		14,346		1,335		8,399
	Total	$	126,858	$	3,169,173	$	847,958	$	233,335	$	635,335

(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. This balance includes $29.3 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, 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. This balance includes $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

	Recorded Investment		Unpaid Principal Balance		Related Specific Allowance		Average Recorded Investment		Interest Income Recognized on Accrual Basis		Interest Income Recognized on Cash Basis
(In thousands)
As of December 31, 2016
With no related allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		67,996		82,602		-		71,003		741		731
Commercial:
Commercial mortgage loans		72,620		91,685		-		80,713		940		550
Commercial and Industrial
loans		14,656		24,642		-		17,209		42		-
Construction:
Land		180		233		-		212		2		2
Construction-commercial		-		-		-		-		-		-
Construction-residential		956		1,531		-		956		-		-
Consumer:
Auto loans		599		599		-		615		7		-
Finance leases		94		94		-		95		1		-
Other consumer loans		4,516		5,876		-		4,696		233		106
	$	161,617	$	207,262	$	-	$	175,499	$	1,966	$	1,389
With an allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		374,271		423,648		8,633		380,273		17,751		1,503
Commercial:
Commercial mortgage loans		121,771		133,883		26,172		122,609		463		173
Commercial and Industrial
loans		138,887		165,399		22,638		149,153		589		1,287
Construction:
Land		14,870		19,918		947		15,589		168		49
Construction-commercial		36,893		38,721		324		38,191		-		-
Construction-residential		392		551		134		392		-		-
Consumer:
Auto loans		24,276		24,276		3,717		26,562		1,813		-
Finance leases		2,553		2,553		71		2,751		202		-
Other consumer loans		12,375		12,734		1,785		13,322		1,143		48
	$	726,288	$	821,683	$	64,421	$	748,842	$	22,129	$	3,060
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		442,267		506,250		8,633		451,276		18,492		2,234
Commercial:
Commercial mortgage loans		194,391		225,568		26,172		203,322		1,403		723
Commercial and Industrial
loans		153,543		190,041		22,638		166,362		631		1,287
Construction:
Land		15,050		20,151		947		15,801		170		51
Construction-commercial		36,893		38,721		324		38,191		-		-
Construction-residential		1,348		2,082		134		1,348		-		-
Consumer:
Auto loans		24,875		24,875		3,717		27,177		1,820		-
Finance leases		2,647		2,647		71		2,846		203		-
Other consumer loans		16,891		18,610		1,785		18,018		1,376		154
	$	887,905	$	1,028,945	$	64,421	$	924,341	$	24,095	$	4,449



	Recorded Investment		Unpaid Principal Balance		Related Specific Allowance		Average Recorded Investment		Interest Income Recognized Accrual Basis		Interest Income Recognized Cash Basis
(In thousands)
As of December 31, 2015
With no related allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		65,495		74,146		-		67,282		558		688
Commercial:
Commercial mortgage loans		54,048		66,448		-		54,967		1,329		832
Commercial and Industrial
loans		27,492		29,957		-		28,326		-		693
Construction:
Land		-		-		-		-		-		-
Construction-commercial		39,466		40,000		-		39,736		-		-
Construction-residential		3,046		3,046		-		3,098		164		-
Consumer:
Auto loans		-		-		-		-		-		-
Finance leases		-		-		-		-		-		-
Other consumer loans		2,618		4,300		-		2,766		21		115
	$	192,165	$	217,897	$	-	$	196,175	$	2,072	$	2,328
With an allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		395,173		440,947		21,787		398,790		17,543		1,640
Commercial:
Commercial mortgage loans		27,479		40,634		3,073		30,518		347		501
Commercial and Industrial
loans		143,214		164,050		18,096		148,547		2,338		1,939
Construction:
Land		9,578		13,758		1,060		9,727		44		70
Construction-commercial		-		-		-		-		-		-
Construction-residential		1,426		2,180		142		1,476		-		-
Consumer:
Auto loans		21,581		21,581		6,653		23,531		1,494		-
Finance leases		2,077		2,077		86		2,484		170		-
Other consumer loans		13,816		14,043		1,684		14,782		1,592		25
	$	614,344	$	699,270	$	52,581	$	629,855	$	23,528	$	4,175
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		460,668		515,093		21,787		466,072		18,101		2,328
Commercial:
Commercial mortgage loans		81,527		107,082		3,073		85,485		1,676		1,333
Commercial and Industrial
loans		170,706		194,007		18,096		176,873		2,338		2,632
Construction:
Land		9,578		13,758		1,060		9,727		44		70
Construction-commercial		39,466		40,000		-		39,736		-		-
Construction-residential		4,472		5,226		142		4,574		164		-
Consumer:
Auto loans		21,581		21,581		6,653		23,531		1,494		-
Finance leases		2,077		2,077		86		2,484		170		-
Other consumer loans		16,434		18,343		1,684		17,548		1,613		140
	$	806,509	$	917,167	$	52,581	$	826,030	$	25,600	$	6,503

	The following tables show the activity for impaired loans during 2016, 2015 and 2014 and the related specific reserves:



		2016		2015		2014
(In thousands)
Impaired Loans:
Balance at beginning of year		$	806,509	$	945,407	$	919,112
Loans determined impaired during the year			288,202		160,837		306,390
Charge-offs (1)			(67,210)		(99,023)		(106,154)
Loans sold, net of charge-offs			(8,675)		(67,836)		(4,500)
Reclassification from loans held for sale			-		40,005		-
Increases to impaired loans - additional disbursements			3,236		3,340		5,028
Foreclosures			(36,161)		(57,728)		(40,582)
Loans no longer considered impaired			(27,643)		(46,489)		(22,333)
Paid in full or partial payments			(70,353)		(72,004)		(111,554)
Balance at end of year		$	887,905	$	806,509	$	945,407

(1)	For the year ended December 31, 2016, includes $4.2 million of charge-offs related to impaired loans included in a sale of a $16.3 million pool of non-performing assets and, for the year ended December 31, 2015, includes $63.9 million of charge-offs related to a bulk sales of assets, as further discussed below.


(In thousands)	2016		2015		2014
Specific Reserve:
Balance at beginning of year	$	52,581	$	55,205	$	102,601
Provision for loan losses		78,695		91,515		58,758
Net charge-offs		(66,855)		(94,139)		(106,154)
Balance at end of year	$	64,421	$	52,581	$	55,205

PCI Loans

The Corporation acquired PCI loans accounted for under ASC 310-30 as part of the 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 that 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.

Under ASC 310-30, the acquired PCI loans were aggregated into pools based on similar characteristics (i.e. delinquency status and 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 carrying amount of PCI loans follows:

		As of		As of
		December 31,		December 31,
		2016		2015
(In thousands)
Residential mortgage loans	$	162,676	$	170,766
Commercial mortgage loans		3,142		3,147
Total PCI loans	$	165,818	$	173,913
Allowance for loan losses		(6,857)		(3,962)
Total PCI loans, net of allowance for loan losses	$	158,961	$	169,951

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


As of December 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		Current		Total PCI loans
(In thousands)
Residential mortgage loans		$	-	$	11,892	$	27,849	$	39,741	$	122,935	$	162,676
Commercial mortgage loans			-		355		1,150		1,505		1,637		3,142
Total ⁽¹⁾		$	-	$	12,247	$	28,999	$	41,246	$	124,572	$	165,818
_____________
(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 as of December 31, 2016 amounted to $22.3 million and $0.1 million, respectively.


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		Current		Total PCI loans
(In thousands)
Residential mortgage loans		$	-	$	16,094	$	22,218	$	38,312	$	132,454	$	170,766
Commercial mortgage loans			-		-		992		992		2,155		3,147
Total ⁽¹⁾		$	-	$	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.

Initial Fair Value and Accretable Yield of PCI Loans

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 statements 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.

Changes in accretable yield of acquired loans

Subsequent to the acquisition of loans, 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 non-accretable 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 and lease losses. During 2016, the Corporation increased by $2.9 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 expected performance and market conditions.

Changes in the accretable yield of PCI loans for the years ended December 31, 2016 and 2015 were as follows:

	December 31, 2016		December 31, 2015
(In thousands)
Balance at beginning of year	$	118,385	$	82,460
Additions (accretable yield at acquisition
of loans from Doral)		-		38,319
Accretion recognized in earnings		(11,533)		(11,188)
Reclassification from non-accretable		9,610		8,794
Balance at end of period	$	116,462	$	118,385

Changes in the carrying amount of loans accounted for pursuant to ASC 310-30 follows:

		Year ended		Year ended
		December 31, 2016		December 31, 2015
(In thousands)
Balance at beginning of period		$	173,913	$	102,604
Additions (1)			-		79,889
Accretion			11,533		11,188
Collections			(17,184)		(19,572)
Foreclosures			(2,444)		(196)
Ending balance		$	165,818	$	173,913
Allowance for loan losses			(6,857)		(3,962)
Ending balance, net of allowance for loan losses		$	158,961	$	169,951

(1)	For the year ended December 31, 2015, additions represents the estimated fair value of PCI loans acquired from Doral Bank at the date of acquisition.

Changes in the allowance for loan losses related to PCI loans follows:


	Year ended
	December 31, 2016		December 31, 2015

Balance at beginning of period	$	3,962	$	-
Provision for loan losses		2,895		3,962
Balance at end of period	$	6,857	$	3,962

The outstanding principal balance of PCI loans, including amounts charged off by the Corporation, amounted to $207.3 million as of December 31, 2016 (December 31, 2015- $218.1 million, December 31, 2014- $135.5 million).

Purchases and Sales of Loans

During 2016, the Corporation purchased $85.0 million of residential mortgage loans, consistent with a strategic program 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 GSEs such as FNMA and FHLMC, which generally securitize the transferred loans into mortgage-backed securities for sale into the secondary market. The Corporation sold approximately $144.3 million of performing residential mortgage loans to FNMA and FHLMC during 2016. Also during 2016, the Corporation sold approximately $338.3 million of FHA/VA mortgage loans to GNMA, which packages them into mortgage-backed securities. The Corporation’s continuing involvement in these sold loans 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, Transfers 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 2016, 2015, and 2014, the Corporation repurchased, pursuant to its repurchase option with GNMA $29.1 million, $19.2 million, and $37.8 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 amounts of $0.7 million, $1.4 million, and $2.3 million during 2016, 2015, and 2014, 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 2016. Historically, losses experienced on these loans have been immaterial. As a consequence, as of December 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 sold $20.2 million, $20.0 and $53.0 million of commercial mortgage loan participations during 2016, 2015 and 2014, respectively.

In addition to the aforementioned sales, during the fourth quarter of 2016, the Corporation completed the sale of a pool of non-performing assets with a book value of $16.3 million (principal balance of $20.1 million), in a cash transaction. The proceeds from this sale were $11.3 million net of escrows and principal and interest collected on behalf of the purchaser subsequent to the effective date of the transaction. Approximately $2.8 million of reserves had been allocated to the loans. This transaction resulted in total net charge-offs of $4.6 million and an incremental pre-tax loss of $1.8 million recorded as a charge to the provision for loan and lease losses.

Bulk Sale of Assets

During the second quarter of 2015, the Corporation completed the sale of commercial and construction loans with a book value of $147.5 million ($90.7 million of commercial mortgage loans, $45.8 million of commercial and industrial, and $11.0 million of construction loans), comprised mostly of non-performing and adversely classified loans, as well as OREO properties with a book value of $2.9 million, in a cash transaction. The sale price of this bulk sale was $87.3 million. Approximately $15.3 million of reserves had been allocated to the loans. This transaction resulted in total charge-offs of $61.4 million and an incremental pre-tax loss of $48.7 million, including $0.9 million in professional service fees directly attributable to the bulk sale.

Loan Portfolio Concentration

The Corporation’s primary lending area is Puerto Rico. The Corporation’s banking subsidiary, FirstBank, 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 $8.9 billion as of December 31, 2016, approximately 78% have credit risk concentration in Puerto Rico, 15% in the United States, and 7% in the USVI and BVI.

As of December 31, 2016, the Corporation had $133.6 million outstanding (book value of $124.5 million) in loans extended to the Puerto Rico government, its municipalities and public corporations, compared to $153.2 million outstanding as of December 31, 2015. In addition, the outstanding balance of loans granted to the government of the Virgin Islands amounted to $84.7 million as of December 31, 2016, compared to $126.2 million as of December 31, 2015. Approximately $91.0 million of the granted credit facilities outstanding ($81.9 million book value) consisted of loans to public corporations, including a direct exposure to the Puerto Rico Electric Power Authority (“PREPA”), with an outstanding balance of $75 million ($65.5 million book value) as of December 31, 2016, and approximately $6.9 million consisted of loans to units of the Puerto Rico central government. The PREPA credit facility was placed in non-accrual status in the first quarter of 2015, and interest payments recorded on a cost-recovery basis. The PREPA credit facility was sold in the first quarter of 2017. Refer to Note 35 – Subsequent Events for additional information about this transaction.

In addition, the Corporation had $35.7 million of loans extended to municipalities in Puerto Rico, which in most cases are supported by assigned property tax revenues. The vast majority of municipalities’ revenues are independent of the Puerto Rico central government. These municipalities are required by law to levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and notes. Late in 2015, the GDB and the Municipal Revenue Collection Center (CRIM) signed and perfected a deed of trust. Through this deed, the GDB, as fiduciary, is bound to keep the CRIM funds separate from any other deposits and must distribute the funds pursuant to applicable law. The CRIM funds are deposited at another commercial depository financial institution in Puerto Rico.

Furthermore, as of December 31, 2016, the Corporation had $127.7 million outstanding (book value of $111.8 million) in credit facilities extended to the hotel industry in Puerto Rico under which the borrower and the 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. These facilities were placed in non-accrual status and classified as impaired in the first quarter of 2016, and interest payments are now applied against principal. Approximately $2.0 million of interest payments received on loans guaranteed by the TDF since late March 2016 have been applied against principal. The Corporation has been receiving payments on the largest of these three facilities sufficient to cover the monthly contractual payments. This facility matured on February 1, 2017 and is currently under renegotiation. In addition, the borrowers’ cash flows related to the other two facilities are insufficient to cover debt service and the Corporation is not receiving collections from the TDF guarantee. As such, these two facilities are collateral dependent loans and charge-offs amounting to $13.9 million were recorded during the second half of 2016, of which $13.0 million was charged against reserves established in prior periods. These loans have been adversely classified since the third quarter of 2015. As of December 31, 2016, the loans guaranteed by the TDF are being carried at 72% of unpaid principal balance, net of reserves and accumulated charge-offs. The Corporation measures impairment on these loans based on the fair value of the collateral and the existence of the government guarantee. Developments of the Puerto Rico government debt restructuring process, with the automatic stay on litigations under PROMESA set to expire on May 1, 2017, and actions taken or those that may have to be taken by the Commonwealth or the PROMESA oversight board to address Puerto Rico’s fiscal and economic crisis could ultimately adversely affect the value of the Puerto Rico government guarantees, including the TDF guarantee. If as a result of developments, including discussions with regulators, loan rating downgrades, progress in the debt restructuring process, or for other reasons, the Corporation determines that additional impairment charges are necessary, such an action would adversely affect the Corporation’s results of operations in the period in which such determination is taken. The Corporation’s collections of principal and interest from TDF in 2016 amounted to $0.6 million compared to $5.3 million in 2015.

As of December 31, 2016, the total reserve to book value coverage ratio related to commercial loans extended to or guaranteed by the Puerto Rico government (excluding municipalities) was 17% and the loans are being carried at 74% of unpaid principal balance, net of reserves and accumulated charge offs.

In addition, the Corporation had $119.9 million in 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 guaranteed under 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 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 most recent date as to which information is available, 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 the various legislative and other measures that have been and could 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.

Troubled Debt Restructurings

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 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 December 31, 2016, the Corporation’s total TDR loans of $647.0 million consisted of $375.8 million of residential mortgage loans, $133.5 million of commercial and industrial loans, $48.7 million of commercial mortgage loans, $46.6 million of construction loans, and $42.4 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $1.2 million as of December 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 loans 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 TDRs regardless of whether the borrower enters into a permanent modification. As of December 31, 2016, the Corporation classified an additional $4.1 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, 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 are not considered to be 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:

		As of December 31, 2016
		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
	(In thousands)
	Troubled Debt Restructurings:
	Non-FHA/VA Residential Mortgage loans	$	29,254	$	8,373	$	280,588	$	-	$	57,594	$	375,809
	Commercial Mortgage loans		6,044		2,007		30,005		-		10,686		48,742
	Commercial and Industrial loans		2,111		66,830		16,359		863		47,358		133,521
	Construction loans:
	Land		-		6,735		2,219		-		408		9,362
	Construction-commercial		-		-		-		36,893		-		36,893
	Construction-residential		-		-		-		-		357		357
	Consumer loans - Auto		-		1,706		14,698		-		8,471		24,875
	Finance Leases		-		366		2,281		-		-		2,647
	Consumer loans - Other		236		2,518		9,662		299		2,127		14,842
	Total Troubled Debt Restructurings	$	37,645	$	88,535	$	355,812	$	38,055	$	127,001	$	647,048

(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.

		As of December 31, 2015
		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
	(In thousands)
	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 (2)		-		-		-		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 above.
(2)	During the third quarter of 2015, upon the signing of a new agreement with the borrower, the Corporation changed its intent to sell a $40.0 million construction loan in the Virgin Islands. Accordingly, the loan was transferred back from held for sale to held for investment and continues to be classified as a TDR and a non-performing loan.


		As of December 31, 2014
		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
	(In thousands)
	Troubled Debt Restructurings:
	Non-FHA/VA Residential Mortgage loans	$	24,850	$	5,859	$	283,317	$	-	$	35,749	$	349,775
	Commercial Mortgage Loans		29,881		12,737		72,493		-		12,655		127,766
	Commercial and Industrial Loans		7,533		80,642		31,553		3,074		49,124		171,926
	Construction Loans:
	Land		-		202		1,732		-		536		2,470
	Construction-Residential		6,154		337		3,112		-		434		10,037
	Consumer Loans - Auto		-		380		10,363		-		6,248		16,991
	Finance Leases		-		376		1,805		-		-		2,181
	Consumer Loans - Other		37		129		10,812		443		1,886		13,307
	Total Troubled Debt Restructurings (2)	$	68,455	$	100,662	$	415,187	$	3,517	$	106,632	$	694,453

(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 above.
(2)	Excludes TDRs held for sale amounting to $45.7 million as of December 31, 2014.

	The following table presents the Corporation's TDRs activity:

		Year Ended		Year Ended		Year Ended
		December 31, 2016		December 31, 2015		December 31, 2014
(In thousands)
Beginning balance of TDRs		$	661,591	$	694,453	$	630,258
New TDRs			84,942		111,890		164,108
Increases to existing TDRs - additional disbursements			3,921		1,018		1,903
Charge-offs post-modification (1)			(24,876)		(64,116)		(43,916)
Sales, net of charge-offs			(3,761)		(44,048)		(4,500)
Foreclosures			(16,834)		(39,706)		(4,948)
Removed from TDR classification			(3,031)		-		-
Reclassification from loans held for sale (2)			-		40,005		-
Paid-off and partial payments			(54,904)		(37,905)		(48,452)
Ending balance of TDRs		$	647,048	$	661,591	$	694,453

(1)	For the year ended December 31, 2016, includes $1.3 million of charge-offs related to TDRs included in the sale of the $16.3 million pool of non-performing assets. For the year ended December 31, 2015 includes $45.3 million of charge-offs related to TDRs included in the bulk sale of assets.
(2)	During the third quarter of 2015, upon the signing of a new agreement with the borrower, the Corporation changed its intent to sell a $40.0 million construction loan in the Virgin Islands. Accordingly, the loan was transferred back from held for sale to held for investment and continues to be classified as a TDR and a non-performing loan.

TDRs 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 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 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. 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. During the year ended December 31, 2016, the Corporation removed a $3.0 million loan from the TDR classification as the borrower is no longer experiencing financial difficulties, and the loan was refinanced at market terms and does not contain any concession to the borrower.

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

		As of December 31, 2016

		Accrual		Nonaccrual (1)		Total TDRs
	(In thousands)
	Non-FHA/VA Residential Mortgage loans	$	295,656	$	80,153	$	375,809
	Commercial Mortgage loans		32,340		16,402		48,742
	Commercial and Industrial loans		18,496		115,025		133,521
	Construction loans:
	Land		7,732		1,630		9,362
	Construction-commercial		-		36,893		36,893
	Construction-residential		-		357		357
	Consumer loans - Auto		16,253		8,622		24,875
	Finance Leases		2,542		105		2,647
	Consumer loans - Other		11,868		2,974		14,842
	Total Troubled Debt Restructurings	$	384,887	$	262,161	$	647,048

(1)	Included in non-accrual loans are $110.6 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 are deemed fully collectible.



		As of December 31, 2015

		Accrual		Nonaccrual ⁽¹⁾		Total TDRs
	(In thousands)
	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 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.

TDR loans exclude restructured residential mortgage loans that are guaranteed by the U.S. federal government (i.e., FHA/VA loans) totaling $69.1 million as of December 31, 2016 (December 31, 2015 - $77.6 million). The Corporation excludes FHA/VA guaranteed loans from TDR loan 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.

Loan modifications that are considered TDRs completed during 2016, 2015 and 2014 were as follows:

	Year ended December 31, 2016
	Number of contracts	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
(In thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	209	$	30,940	$	29,668
Commercial Mortgage loans	11		5,710		5,739
Commercial and Industrial loans	25		22,182		22,184
Construction loans:
Land	9		6,759		6,756
Consumer loans - Auto	744		13,141		13,141
Finance Leases	74		1,878		1,878
Consumer loans - Other	1,156		5,496		5,576
Total Troubled Debt Restructurings	2,228	$	86,106	$	84,942

	Year ended December 31, 2015
	Number of contracts	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
(In thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	408	$	67,006	$	64,679
Commercial Mortgage loans	16		22,366		19,914
Commercial and Industrial loans	5		5,971		5,351
Construction loans:
Land	7		603		600
Consumer loans - Auto	756		12,219		11,985
Finance Leases	55		1,447		1,250
Consumer loans - Other	1,338		8,158		8,111
Total Troubled Debt Restructurings	2,585	$	117,770	$	111,890

	Year ended December 31, 2014
	Number of contracts	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
(In thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	291	$	40,166	$	39,194
Commercial Mortgage loans	9		2,853		2,855
Commercial and Industrial loans	17		105,372		105,110
Construction loans:
Land	6		257		219
Consumer loans - Auto	602		8,903		8,748
Finance Leases	45		953		800
Consumer loans - Other	1,492		7,240		7,182
Total Troubled Debt Restructurings	2,462	$	165,744	$	164,108

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 on a modified loan 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 modified 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 years ended December 31, 2016, 2015, and 2014, and had become TDR during the 12 months preceding the default date, were as follows:

	Year ended December 31,
	2016			2015			2014
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(In thousands)
Non-FHA/VA Residential Mortgage loans	50	$	7,673	69	$	10,240	55	$	8,087
Commercial Mortgage loans	-		-	1		2,179	2		4,604
Commercial and Industrial loans	-		-	4		5,745	2		1,537
Construction loans:
Land	-		-	-		-	1		46
Consumer loans - Auto	51		764	13		159	45		697
Finance Leases	2		43	6		185	6		115
Consumer loans - Other	119		454	172		706	241		989
Total	222	$	8,934	265	$	19,214	352	$	16,075

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 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 is restructured, the A note may no longer be reported as a TDR if it is in 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 $37.0 million and $39.3 million at December 31, 2016 and 2015, respectively. 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 2016, 2015 and 2014:


(In thousands)	December 31, 2016		December 31, 2015		December 31, 2014
Principal balance deemed collectible at end of year	$	36,971	$	39,329	$	46,032
Amount (recovered) charged off	$	-	$	-	$	(7,501)
Charges (reductions) to the provision for loan losses	$	4,279	$	131	$	(8,341)
Allowance for loan losses at end of year	$	5,141	$	862	$	731

Of the loans comprising the $37.0 million that have been deemed collectible as of December 31, 2016, approximately $3.2 million are in accrual status. These loans continue to be individually evaluated for impairment purposes.