LOAN PORTFOLIO

9 Months Ended

Sep. 30, 2017

NOTE 7 – LOANS HELD FOR INVESTMENT

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

	As of September 30,		As ofDecember 31,
	2017		2016
(In thousands)
Residential mortgage loans, mainly secured by first mortgages	$	3,274,340	$	3,296,031
Commercial loans:
Construction loans		129,460		124,951
Commercial mortgage loans		1,601,638		1,568,808
Commercial and Industrial loans (1)		2,144,236		2,180,455
Total commercial loans		3,875,334		3,874,214
Finance leases		246,084		233,335
Consumer loans		1,481,456		1,483,293
Loans held for investment		8,877,214		8,886,873
Allowance for loan and lease losses		(230,870)		(205,603)
Loans held for investment, net	$	8,646,344	$	8,681,270

(1) As of September 30, 2017 and December 31, 2016, includes $884.0 million and $853.9 million, respectively, 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 were as follows:

(In thousands)		September 30,		December 31,
		2017		2016
Non-performing loans:
Residential mortgage		$	178,530	$	160,867
Commercial mortgage			137,059		178,696
Commercial and Industrial			84,317		146,599
Construction:
Land			10,500		11,026
Construction-commercial			35,519		36,893
Construction-residential			701		1,933
Consumer:
Auto loans			15,809		14,346
Finance leases			1,888		1,335
Other consumer loans			8,809		8,399
Total non-performing loans held for investment (1) (2)(3)		$	473,132	$	560,094

(1)	Excludes $8.3 million and $8.1 million of non-performing loans held for sale as of September 30, 2017 and December 31, 2016, respectively.

(2)	Amount excludes purchased-credit impaired ("PCI") loans with a carrying value of approximately $157.8 million and $165.8 million as of September 30, 2017 and December 31, 2016, 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 $388.8 million and $384.9 million of Troubled Debt Restructuring ("TDR") loans that are in compliance with modified terms and in accrual status as of September 30, 2017 and December 31, 2016, respectively.

Loans in Process of Foreclosure

As of September 30, 2017, the recorded investment of residential mortgage loans collateralized by residential real estate property that are in the process of foreclosure amounted to $156.8 million, including $24.4 million of loans insured by the FHA or guaranteed by the VA, and $20.2 million of PCI loans. 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, Florida and USVI) require the foreclosure to be processed through the state’s court while foreclosure in non-judicial states (BVI) 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:
										Purchased Credit-Impaired Loans				Total loans held for investment		90 days past due and still accruing (2)
		30-59 Days Past Due		60-89 Days Past Due			90 days or more Past Due (1)	Total Past Due
As of September 30, 2017
(In thousands)												Current
Residential mortgage:
FHA/VA and other government-guaranteed loans (2) (3) (4)		$	-	$	4,300	$	76,601	$	80,901	$	-	$	40,667	$	121,568	$	76,601
Other residential mortgage loans (4)			-		82,263		197,176		279,439		153,609		2,719,724		3,152,772		18,646
Commercial:
Commercial and Industrial loans			12,011		1,763		87,970		101,744		-		2,042,492		2,144,236		3,653
Commercial mortgage loans (4)			-		16,300		143,558		159,858		4,185		1,437,595		1,601,638		6,499
Construction:
Land (4)			-		163		10,715		10,878		-		19,075		29,953		215
Construction-commercial			-		-		35,519		35,519		-		56,058		91,577		-
Construction-residential			-		-		701		701		-		7,229		7,930		-
Consumer:
Auto loans			64,869		28,638		15,809		109,316		-		724,896		834,212		-
Finance leases			10,960		4,239		1,888		17,087		-		228,997		246,084		-
Other consumer loans			15,388		5,644		12,746		33,778		-		613,466		647,244		3,937
Total loans held for investment		$	103,228	$	143,310	$	582,683	$	829,221	$	157,794	$	7,890,199	$	8,877,214	$	109,551
_____________
(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 $28.9 million of residential mortgage loans insured by the FHA or guaranteed by the VA that are over 15 months delinquent, and are no longer accruing interest as of September 30, 2017.
(3)	As of September 30, 2017, includes $45.1 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 on two or more monthly payments. FHA/VA government-guaranteed loans, other residential mortgage loans, commercial mortgage loans, land loans, construction-residential loans and construction-commercial loans past due 30-59 days as of September 30, 2017 amounted to $9.4 million, $216.1 million, $33.8 million, $0.9 million, $6.4 million and $0.1 million, respectively.

As of December 31, 2016		30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due(1)								Total loans held for investment		90 days past due and still accruing (2)
(In thousands)		30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due(1)			Total Past Due		Purchased Credit- Impaired Loans		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)		$	-	$	5,179	$	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 that 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 on 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, 2016 amounted to $9.9 million, $142.8 million, $4.6 million, $0.7 million and $0.4 million, respectively.

In working with borrowers affected by Hurricanes Irma and Maria, which made landfall on September 6, 2017 and September 20, 2017, respectively, the Corporation provided automatic three-month deferred repayment arrangements across-the-board to all consumer borrowers (i.e. personal loans, auto loans, finance leases and credit cards) who were current in their payments or no more than 2 payment in arrears as of the date of the respective hurricane. For residential mortgage loans, the Corporation has entered into deferral payment agreements on 10,160 residential mortgages totaling $1.3 billion that provide for a three-month payment deferral for those loans current or no more than 2 payment in arrears as of the date of the event. The qualifying mortgage borrowers were required to contact the Corporation and opt in for the program. For both consumer and residential mortgage loans subject to the deferral programs, each borrower is required to resume making their regularly scheduled loan payments at the end of the deferral period and the deferred amounts were moved to the end of the loan. The payment deferral programs were applied prospectively from the respective dates of the events and did not change the delinquency status of the loans as of such dates. Accordingly, if all payments were current at the date of the event, the loan will not be reported as past due during the deferral period. Furthermore, for loans subject to the deferral programs on which payments were past due prior to the event, the delinquency status of such loans was frozen to the status that existed at the date of the event until the end of the deferral period. As of September 30, 2017, residential mortgage loans in early delinquency (i.e., 60-89 days in the table above) include $86.3 million of loans subject to the storm-related deferral programs established in Puerto Rico and the Virgin Islands.

The Corporation’s credit quality indicators by loan type as of September 30, 2017 and December 31, 2016 are summarized below:

		Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
September 30, 2017		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
(In thousands)
Commercial mortgage		$	158,960	$	6,416	$	-	$	165,376	$	1,601,638
Construction:
Land			18,753		-		-		18,753		29,953
Construction - commercial			35,520		-		-		35,520		91,577
Construction - residential			701		-		-		701		7,930
Commercial and Industrial			142,800		3,472		798		147,070		2,144,236

		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
_________
(1)	Excludes $8.3 million and $8.1 million of construction-land non-performing loans held for sale as of September 30, 2017 and December 31, 2016, respectively.

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 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.

		Consumer Credit Exposure - Credit Risk Profile based on Payment activity
		Residential Real Estate				Consumer
September 30, 2017		FHA/VA/ Guaranteed(1)		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing		$	121,568	$	2,820,633	$	818,403	$	244,196	$	638,435
Purchased Credit-Impaired (2)			-		153,609		-		-		-
Non-performing			-		178,530		15,809		1,888		8,809
Total		$	121,568	$	3,152,772	$	834,212	$	246,084	$	647,244

(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 $28.9 million of residential mortgage loans insured by the FHA or guaranteed by the VA that are over 15 months delinquent, and are no longer accruing interest as of September 30, 2017.

(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 analyses.


		Consumer Credit Exposure - Credit Risk Profile based on Payment activity
			Residential Real Estate			Consumer
December 31, 2016		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 that 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 analyses.

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

Impaired Loans

									Quarter Ended				Nine-Month Period Ended

										September 30, 2017
	Recorded Investment		Unpaid Principal Balance		Related Specific Allowance		Year-To-Date Average Recorded Investment		Interest Income Recognized on Accrual Basis		Interest Income Recognized on Cash Basis		Interest Income Recognized on Accrual Basis		Interest Income Recognized on Cash Basis
(In thousands)
As of September 30, 2017
With no related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		88,479		116,636		-		90,381		594		91		1,712		427
Commercial:
Commercial mortgage loans		22,832		27,204		-		23,403		194		67		583		199
Commercial and Industrial Loans		8,379		11,106		-		8,566		74		-		208		-
Construction:
Land		-		-		-		-		-		-		-		-
Construction-commercial		-		-		-		-		-		-		-		-
Construction-residential		-		-		-		-		-		-		-		-
Consumer:
Auto loans		339		339		-		357		1		-		2		-
Finance leases		-		-		-		-		-		-		-		-
Other consumer loans		2,048		3,028		-		2,220		17		25		52		67
	$	122,077	$	158,313	$	-	$	124,927	$	880	$	183	$	2,557	$	693
With a related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		337,356		375,130		19,417		341,360		3,815		311		11,458		1,121
Commercial:
Commercial mortgage loans		131,043		190,883		10,456		153,354		570		18		1,038		88
Commercial and Industrial Loans		102,560		124,335		11,240		104,076		380		174		744		211
Construction:
Land		14,601		19,938		848		14,800		122		9		358		32
Construction-commercial		35,520		38,595		979		36,101		-		-		-		-
Construction-residential		252		355		38		252		-		-		-		-
Consumer:
Auto loans		23,164		23,164		3,646		24,917		461		-		1,355		-
Finance leases		2,248		2,271		63		2,532		43		-		140		-
Other consumer loans		10,438		12,104		1,468		12,221		371		15		975		38
	$	657,182	$	786,775	$	48,155	$	689,613	$	5,762	$	527	$	16,068	$	1,490
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		425,835		491,766		19,417		431,741		4,409		402		13,170		1,548
Commercial:
Commercial mortgage loans		153,875		218,087		10,456		176,757		764		85		1,621		287
Commercial and Industrial Loans		110,939		135,441		11,240		112,642		454		174		952		211
Construction:
Land		14,601		19,938		848		14,800		122		9		358		32
Construction-commercial		35,520		38,595		979		36,101		-		-		-		-
Construction-residential		252		355		38		252		-		-		-		-
Consumer:
Auto loans		23,503		23,503		3,646		25,274		462		-		1,357		-
Finance leases		2,248		2,271		63		2,532		43		-		140		-
Other consumer loans		12,486		15,132		1,468		14,441		388		40		1,027		105
	$	779,259	$	945,088	$	48,155	$	814,540	$	6,642	$	710	$	18,625	$	2,183

Impaired Loans

	Recorded Investment		Unpaid Principal Balance		Related Specific Allowance		Year-To-Date Average Recorded Investment
(In thousands)
As of December 31, 2016
With no related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		67,996		82,602		-		71,003
Commercial:
Commercial mortgage loans		72,620		91,685		-		80,713
Commercial and Industrial Loans		14,656		24,642		-		17,209
Construction:
Land		180		233		-		212
Construction-commercial		-		-		-		-
Construction-residential		956		1,531		-		956
Consumer:
Auto loans		599		599		-		615
Finance leases		94		94		-		95
Other consumer loans		4,516		5,876		-		4,696
	$	161,617	$	207,262	$	-	$	175,499
With a related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		374,271		423,648		8,633		380,273
Commercial:
Commercial mortgage loans		121,771		133,883		26,172		122,609
Commercial and Industrial Loans		138,887		165,399		22,638		149,153
Construction:
Land		14,870		19,918		947		15,589
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
Finance leases		2,553		2,553		71		2,751
Other consumer loans		12,375		12,734		1,785		13,322
	$	726,288	$	821,683	$	64,421	$	748,842
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		442,267		506,250		8,633		451,276
Commercial:
Commercial mortgage loans		194,391		225,568		26,172		203,322
Commercial and Industrial Loans		153,543		190,041		22,638		166,362
Construction:
Land		15,050		20,151		947		15,801
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
Finance leases		2,647		2,647		71		2,846
Other consumer loans		16,891		18,610		1,785		18,018
	$	887,905	$	1,028,945	$	64,421	$	924,341

Interest income of approximately $7.2 million ($6.4 million on an accrual basis and $0.8 million on a cash basis) and $21.7 million ($18.9 million on an accrual basis and $2.8 on a million cash basis) was recognized on impaired loans for the third quarter and nine-month period ended September 30, 2016, respectively.

The following tables show the activity for impaired loans and the related specific reserve for the quarters and nine-month periods ended September 30, 2017 and 2016:

		Quarter Ended				Nine-Month Period Ended
		September 30,				September 30,
			2017		2016		2017		2016
(In thousands)
Impaired Loans:
Balance at beginning of period		$	735,625	$	953,774	$	887,905	$	806,509
Loans determined impaired during the period			71,884		26,613		110,488		261,544
Charge-offs (1)			(6,472)		(30,426)		(66,959)		(50,027)
Loans sold, net of charge-offs			-		-		(53,245)		-
Increases to impaired loans-additional disbursements			3,215		1,091		4,454		2,852
Foreclosures			(5,657)		(11,856)		(36,347)		(28,466)
Loans no longer considered impaired			(542)		(2,674)		(3,324)		(27,560)
Paid in full or partial payments			(18,794)		(23,668)		(63,713)		(51,998)
Balance at end of period		$	779,259	$	912,854	$	779,259	$	912,854

(1)	For the nine-month period ended September 30, 2017, includes a charge-off of $10.7 million related to the sale of the PREPA credit line, as further discussed below.


	Quarter Ended				Nine-Month Period Ended
	September 30,				September 30,
	2017		2016		2017		2016
(In thousands)
Specific Reserve:
Balance at beginning of period	$	40,794	$	86,372	$	64,421		52,581
Provision for loan losses		13,819		16,619		50,014		70,011
Net charge-offs		(6,458)		(30,309)		(66,280)		(49,910)
Balance at end of period	$	48,155	$	72,682	$	48,155	$	72,682

Purchased Credit Impaired (PCI) Loans

The Corporation acquired PCI loans accounted for under ASC 310-30 as part of a transaction that 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 Doral Financial’s 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, 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 was as follows:
	As of
	September 30,		December 31,
	2017		2016
(In thousands)
Residential mortgage loans	$	153,609	$	162,676
Commercial mortgage loans		4,185		3,142
Total PCI loans	$	157,794	$	165,818
Allowance for loan losses		(10,235)		(6,857)
Total PCI loans, net of allowance for loan losses	$	147,559	$	158,961

The following tables present PCI loans by past due status as of September 30, 2017 and December 31, 2016:


As of September 30, 2017		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		$	-	$	14,310	$	28,820	$	43,130	$	110,479	$	153,609
Commercial mortgage loans			-		471		2,285		2,756		1,429		4,185
Total (1)		$	-	$	14,781	$	31,105	$	45,886	$	111,908	$	157,794
_____________
(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 on two or more monthly payments. PCI residential mortgage loans and commercial mortgage loans past due 30-59 days as of September 30, 2017 amounted to $27.5 million and $0.4 million, respectively.


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 on 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.

Initial Fair Value and Accretable Yield of PCI Loans

At acquisition, the Corporation estimated the cash flows the Corporation expected to collect on the 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.

Changes in accretable yield of acquired loans

Subsequent to an 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 losses. During the first nine months of 2017, the Corporation increased by $3.4 million to $10.2 million the reserve related to PCI loans acquired from Doral Financial in 2014 and from Doral Bank in 2015. The reserve is driven by the revisions to the expected cash flows of the portfolios for the remaining term of the loan pools based on expected performance and market conditions.

Changes in the accretable yield of PCI loans for the quarters and nine-month periods ended September 30, 2017 and 2016 were as follows:

	Quarter Ended				Nine-Month Period Ended
	September 30,		September 30,		September 30,		September 30,
	2017		2016		2017		2016
(In thousands)
Balance at beginning of period	$	108,971	$	122,179	$	116,462	$	118,385
Accretion recognized in earnings		(2,656)		(2,875)		(8,177)		(8,691)
Reclassification (to) from non-accretable		-		-		(1,970)		9,610
Balance at end of period	$	106,315	$	119,304	$	106,315	$	119,304


Changes in the carrying amount of loans accounted for pursuant to ASC 310-30 were as follows:
	Quarter Ended				Nine-Month Period Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
(In thousands)
Balance at beginning of period	$	160,368	$	169,690	$	165,818	$	173,913
Accretion		2,656		2,875		8,177		8,691
Collections		(4,225)		(4,184)		(13,327)		(13,136)
Foreclosures		(1,005)		(240)		(2,874)		(1,327)
Ending balance	$	157,794	$	168,141	$	157,794	$	168,141
Allowance for loan losses		(10,235)		(6,857)		(10,235)		(6,857)
Ending balance, net of allowance for loan losses	$	147,559	$	161,284	$	147,559	$	161,284

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


	Quarter Ended				Nine-Month Period Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
(In thousands)
Balance at beginning of period	$	9,446	$	6,857	$	6,857	$	3,962
Provision for loan losses		789		-		3,378		2,895
Balance at end of period	$	10,235	$	6,857	$	10,235	$	6,857

The outstanding principal balance of PCI loans, including amounts charged off by the Corporation, amounted to $196.4 million as of September 30, 2017 (December 2016 - $207.3 million).

Purchases and Sales of Loans

During the first nine months of 2017, the Corporation purchased $48.9 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 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 $69.5 million of performing residential mortgage loans to FNMA and FHLMC during the first nine months of 2017. Also, during the first nine months of 2017, the Corporation sold $200.2 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 agrees to repurchase loans when it breaches any of the representations and warranties included in the sale agreement. These representations and warranties are consistent with the GSEs’ selling and servicing guidelines (i.e., ensuring that the mortgage was properly underwritten according to established guidelines).

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

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

During the first nine months of 2017 and 2016, the Corporation repurchased, pursuant to its repurchase option with GNMA, $24.7 million and $20.9 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 $27 thousand and $0.7 million during the first nine months of 2017 and 2016, 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 nine months of 2017. Historically, losses experienced on these loans have been immaterial. As a consequence, as of September 30, 2017, 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.

In addition, during the first nine months of 2017, the Corporation purchased $32.0 million in commercial and industrial loan participations. Also, during the first nine months of 2016, the Corporation sold a $20.2 million participation in a commercial mortgage loan.

Sale of the Puerto Rico Electric Power Authority (PREPA) Loan

During the first quarter of 2017, the Corporation received an unsolicited offer and sold its outstanding participation in the PREPA line of credit with a book value of $64 million at the time of sale (principal balance of $75 million), thereby reducing its direct exposure to the Puerto Rico government. A specific reserve of approximately $10.2 million had been allocated to this loan. Gross proceeds from the sale of $53.2 million have resulted in an incremental loss of $0.6 million recorded as a charge to the provision for loan and lease losses.

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 portfolio of $8.9 billion as of September 30, 2017, approximately 75% have credit risk concentration in Puerto Rico, 18% in the United States, and 7% in the USVI and BVI.

As of September 30, 2017, the Corporation had $56.2 million of outstanding loans extended to the Puerto Rico government, its municipalities and public corporations, compared to $133.6 million as of December 31, 2016. As mentioned above, during the first quarter of 2017, the Corporation received an unsolicited offer and sold its outstanding participation in the PREPA line of credit with a book value of $64 million at the time of sale (principal balance of $75 million), thereby reducing its direct exposure to the Puerto Rico government. Approximately $33.9 million of the outstanding loans consisted of loans extended to municipalities in Puerto Rico, which in most cases are supported by assigned property tax revenues. The vast majority of revenues of the municipalities included in the Corporation’s loan portfolio 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. Approximately $6.8 million of the outstanding loans as of September 30, 2017 consisted of a loan to a unit of the central government, and approximately $15.4 million consisted of a loan to an affiliate of a public corporation.

Furthermore, as of September 30, 2017, the Corporation had three loans granted to the hotel industry in Puerto Rico guaranteed by the Puerto Rico Tourism Development Fund (“TDF”) with an outstanding principal balance of $120.2 million (book value $72.4 million), compared to $127.7 million outstanding (book value of $111.8 million) as of December 31, 2016. The borrower and the operations of the underlying collateral of these loans are the primary sources of repayment and the TDF provides a secondary guarantee for payment performance. The TDF is a subsidiary of the GDB. These loans have been classified as non-performing and impaired since the first quarter of 2016, and interest payments have been applied against principal since then. Approximately $4.1 million of interest payments received on loans guaranteed by the TDF since late March 2016 have been applied against principal. During the second quarter of 2017, the Corporation recorded charge-offs of $29.7 million on these facilities. The largest of these three loans became over 90 days matured in the second quarter of 2017 and, as a collateral dependent loan, the portion of the recorded investment in excess of the fair value of the collateral and the guarantee was charged-off. A portion of the charge-offs was related to an adjustment to the estimated fair value of the guarantee on these loans in light of an agreement reached in the second quarter of 2017 in which the TDF agreed to honor a portion of its guarantee through a cash payment and a fixed income financial instrument. During the third quarter of 2017, the Corporation received a cash payment of $ 7.6 million in connection with this agreement. The issuance of the fixed income financial instrument is linked to the GDB’s Restructuring Support Agreement approved by the PROMESA oversight board. Upon completion of the agreement, TDF will be released as guarantor and the income-producing real estate properties will be the only collateral on these loans, thus, any decline in the collateral valuations may require additional impairments on these bonds. As of September 30, 2017, the non-performing loans guaranteed by the TDF and related facilities are being carried (net of reserves and accumulated charge-offs) at 53% of unpaid principal balance.

In addition, the Corporation had $116.0 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 loan 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 loan insurance program covered loans in an aggregate of 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 loan 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 also has credit exposure to USVI government entities. As of September 30, 2017, the Corporation had $84.8 million in loans to USVI government instrumentalities and public corporations, compared to $84.7 million as of December 31, 2016. Of the amount outstanding as of September 30, 2017, approximately $61.6 million was owed by public corporations of the USVI and $23.2 million was owed by an independent instrumentality of the USVI government. All loans are currently performing and up to date with their respective principal and interest payments.

The Corporation cannot predict at this time the impact that the current fiscal situation of the Commonwealth of Puerto Rico, the uncertainty about the debt restructuring process, and the various legislative and other measures adopted and to be adopted by the Puerto Rico government and the PROMESA oversight board in response to such fiscal situation and Hurricanes Irma and Maria will have on the Puerto Rico economy, the Corporation’s clients, and on the Corporation’s financial condition and results of operations. Refer to Note 8 – “Allowance for Loan and Lease Losses” for additional information about the Corporation’s initial estimate of losses related to the impact of Hurricanes Irma and Maria in the third quarter of 2017.

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, among others, the extension of the maturity of the loan and modifications of the loan rate. As of September 30, 2017, the Corporation’s total TDR loans held for investment of $585.8 million consisted of $363.3 million of residential mortgage loans, $88.0 million of commercial and industrial loans, $51.6 million of commercial mortgage loans, $44.9 million of construction loans, and $38.0 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $4.1 million as of September 30, 2017.

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 six 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 a foreclosure action absent some lender concession. Nevertheless, if the Corporation is not reasonably assured that the borrower will comply with its contractual commitment, properties are foreclosed.

Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers. Trial modifications generally represent a six-month period during which the borrower makes monthly payments under the anticipated modified payment terms prior to a formal modification. Upon successful completion of a trial modification, the Corporation and the borrower enter into a permanent modification. TDR loans that are participating in or that have been offered a binding trial modification are classified as TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification. As of September 30, 2017, we classified an additional $1.8 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 primarily have one-year terms 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.

Loans subject to the above described three-month payment deferral programs established by the Corporation in the third quarter of 2017 to assist individuals affected by Hurricanes Irma and Maria are not considered TDRs as the time period for deferral of payments is not significant.

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:

		September 30, 2017
		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		$	26,013	$	8,308	$	268,035	$	-	$	60,913	$	363,269
Commercial Mortgage Loans			6,639		2,124		32,697		-		10,185		51,645
Commercial and Industrial Loans			2,115		20,749		16,026		94		49,039		88,023
Construction Loans:
Land			17		6,645		2,181		-		320		9,163
Construction-commercial			-		-		-		35,520		-		35,520
Construction-residential			-		-		-		-		217		217
Consumer Loans - Auto			-		1,371		14,721		-		7,412		23,504
Finance Leases			-		255		2,016		-		-		2,271
Consumer Loans - Other			821		2,053		7,323		250		1,736		12,183
Total Troubled Debt Restructurings		$	35,605	$	41,505	$	342,999	$	35,864	$	129,822	$	585,795

(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.


		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.

	The following table presents the Corporation's TDR loans activity:

		Quarter Ended				Nine-Month Period Ended
		September 30,				September 30,
		2017		2016		2017		2016
(In thousands)
Beginning balance of TDRs		$	568,543	$	670,991	$	647,048	$	661,591
New TDRs			29,101		15,596		83,368		66,075
Increases to existing TDRs - additional
disbursements			2,650		517		3,404		1,573
Charge-offs post modification (1)			(2,949)		(5,445)		(26,976)		(15,899)
Sales, net of charge-offs			-		-		(53,245)		-
Foreclosures			(3,564)		(5,567)		(24,085)		(12,967)
Removed from the TDR classification			-		-		-		(3,031)
Paid-off and partial payments			(7,986)		(19,774)		(43,719)		(41,024)
Ending balance of TDRs		$	585,795	$	656,318	$	585,795	$	656,318

(1)	For the nine-month period ended September 30, 2017, includes a charge-off of $10.7 million related to the sale of the PREPA credit line.

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 loan 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 nonaccrual loan. Loan modifications increase the Corporation’s interest income by returning a non-performing loan to performing status, if applicable, increase cash flows by providing for payments to be made by the borrower, and 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 as an impaired loan in the calendar years subsequent to the restructuring, if it is in compliance with its modified terms. During the first nine months of 2016, the Corporation removed a $3.0 million loan from the TDR classification as the borrower was 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 of the TDR loans by those in accrual and nonaccrual status:

		As of September 30, 2017

		Accrual		Nonaccrual (1)		Total TDRs
(In thousands)
Non-FHA/VA Residential Mortgage loans		$	281,256	$	82,013	$	363,269
Commercial Mortgage Loans			33,695		17,950		51,645
Commercial and Industrial Loans			38,077		49,946		88,023
Construction Loans:
Land			7,599		1,564		9,163
Construction-commercial			-		35,520		35,520
Construction-residential			-		217		217
Consumer Loans - Auto			15,599		7,905		23,504
Finance Leases			2,045		226		2,271
Consumer Loans - Other			10,563		1,620		12,183
Total Troubled Debt Restructurings		$	388,834	$	196,961	$	585,795

(1)	Included in non-accrual loans are $82.8 million in loans that are performing under the terms of the restructuring agreement but are reported in nonaccrual 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, 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.

TDR loans exclude restructured residential mortgage loans that are guaranteed by the U.S. federal government (i.e., FHA/VA loans) totaling $62.1 million as of September 30, 2017 (December 31, 2016 - $69.1 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 and were completed during the quarters and nine-month periods ended September 30, 2017 were as follows:

	Quarter Ended September 30, 2017
	Number of contracts	Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(Dollars in thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	25	$	3,358	$	3,358
Commercial Mortgage Loans	4		2,569		2,318
Commercial and Industrial Loans	8		21,079		21,019
Land	1		18		18
Consumer Loans - Auto	109		1,568		1,568
Consumer Loans - Other	199		796		820
Total Troubled Debt Restructurings	346	$	29,388	$	29,101

	Nine-Month Period Ended September 30, 2017
	Number of contracts	Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(Dollars in thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	113	$	17,585	$	17,349
Commercial Mortgage Loans	12		25,274		24,783
Commercial and Industrial Loans	13		32,153		32,093
Construction Loans:
Land	2		43		46
Consumer Loans - Auto	383		5,741		5,741
Finance Leases	22		548		548
Consumer Loans - Other	602		2,756		2,808
Total Troubled Debt Restructurings	1,147	$	84,100	$	83,368

	Quarter Ended September 30, 2016
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(Dollars in thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	55	$	8,631	$	8,449
Commercial Mortgage Loans	5		679		712
Commercial and Industrial Loans	2		1,432		1,432
Construction Loans:
Land	4		158		155
Consumer Loans - Auto	189		3,262		3,262
Finance Leases	11		295		295
Consumer Loans - Other	257		1,269		1,291
Total Troubled Debt Restructurings	523	$	15,726	$	15,596


	Nine-Month Period Ended September 30, 2016
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(Dollars in thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans	167	$	25,040	$	24,040
Commercial Mortgage Loans	8		3,351		3,380
Commercial and Industrial Loans	21		21,693		21,693
Construction Loans:
Land	4		158		155
Consumer Loans - Auto	612		10,961		10,961
Finance Leases	59		1,477		1,477
Consumer Loans - Other	862		4,312		4,369
Total Troubled Debt Restructurings	1,733	$	66,992	$	66,075

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 modified loans 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 and nine-month periods ended September 30, 2017 and September 30, 2016 and had become TDR during the 12-months preceding the default date, were as follows:

	Quarter Ended September 30,
	2017			2016
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(Dollars in thousands)
Non-FHA/VA Residential Mortgage loans	16	$	1,795	14	$	1,707
Consumer Loans - Auto	4		59	5		68
Consumer Loans - Other	53		223	22		93
Finance Leases	-		-	1		30
Total	73	$	2,077	42	$	1,898

	Nine-Month Period Ended September 30,
	2017			2016
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(Dollars in thousands)
Non-FHA/VA Residential Mortgage loans	38	$	4,686	35	$	4,863
Commercial Mortgage Loans	1		57	-		-
Consumer Loans - Auto	13		189	45		702
Consumer Loans - Other	99		387	89		339
Finance Leases	-		-	2		43
Total	151	$	5,319	171	$	5,947

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 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 $35.6 million as of September 30, 2017. The following table provides additional information about the volume of this type of loan restructuring and the effect on the allowance for loan and lease losses in the first nine months of 2017 and 2016:

	September 30, 2017			September 30, 2016
(In thousands)
Principal balance	$	35,603	$	38,004
Amount charged off	$	-	$	-
(Release) charges to the provision for loan losses	$	(1,080)	$	2,660
Allowance for loan losses at end of period	$	4,061	$	3,521

Approximately $3.1 million of the loans restructured using the A/B note restructure workout strategy are in accrual status. These loans continue to be individually evaluated for impairment purposes.