10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

____________

FORM 10-Q

(Mark One)

[X]         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

[   ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

COMMISSION FILE NUMBER 001-14793

First BanCorp.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Puerto Rico	66-0561882
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification number)
1519 Ponce de León Avenue, Stop 23 Santurce, Puerto Rico (Address of principal executive offices)	00908 (Zip Code)
(787) 729-8200
(Registrant’s telephone number, including area code)
Not applicable (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes☑    No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

Yes ☑    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

                             Large accelerated filer ☑                                                                                             Accelerated filer ☐

                             Non-accelerated filer    ☐ (Do not check if a smaller reporting company)                 Smaller reporting company ☐

                                                                                                                                                                   Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registered has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock: 217,183,977 shares outstanding as of July 31, 2018.

FIRST BANCORP.

INDEX PAGE

PART I FINANCIAL INFORMATION	PAGE
Item 1. Financial Statements:
Consolidated Statements of Financial Condition (Unaudited) as of June 30, 2018 and December 31, 2017	6
Consolidated Statements of Income (Unaudited) – Quarters ended June 30, 2018 and 2017 and six-month periods ended June 30, 2018 and 2017	7
Consolidated Statements of Comprehensive Income (Unaudited) – Quarters ended June 30, 2018 and 2017 and six-month periods ended June 30, 2018 and 2017	8
Consolidated Statements of Cash Flows (Unaudited) – Six-month periods ended June 30, 2018 and 2017	9
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Six-month periods ended June 30, 2018 and 2017	10
Notes to Consolidated Financial Statements (Unaudited)	11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	89
Item 3. Quantitative and Qualitative Disclosures About Market Risk	160
Item 4. Controls and Procedures	160
PART II. OTHER INFORMATION
Item 1.    Legal Proceedings	162
Item 1A. Risk Factors	162
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds	163
Item 3.    Defaults Upon Senior Securities	164
Item 4.    Mine Safety Disclosures	164
Item 5.    Other Information	164
Item 6.    Exhibits	164
SIGNATURES

2

Forward Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the safe harbor created by such sections.  When used in this Form 10-Q or future filings by First BanCorp. (the “Corporation”) with the U.S. Securities and Exchange Commission (“SEC”), in the Corporation’s press releases or in other public or stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “would,” “intends,” “will likely result,” “expect,” “should,” “anticipate,” “look forward,” “believes,” and other terms of similar meaning or import in connection with any discussion of future operating, financial or other performance are meant to identify “forward-looking statements.”

First BanCorp. wishes to caution readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the date made, and to advise readers that these forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, estimates, and assumptions by us that are difficult to predict.  Various factors, some of which are beyond our control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. 

    The two hurricanes that affected the Corporation’s service areas in 2017 are discussed below in Note 2 to the financial statements and in various sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These events caused significant uncertainties, the outcome of which will impact the Corporation’s future results.

    Factors that could cause actual results to differ from those expressed in the Corporation’s forward-looking statements include, but are not limited to, risks described or referenced below in Part II, Item 1A. “Risk Factors” and the following:

·the actual pace and magnitude of economic recovery in the Corporation’s service areas that were affected by two hurricanes during 2017 compared to Management’s current views on the economic recovery;

·uncertainties about the effectiveness and the timing of the completion of the rebuilding taking place in the regions affected by the hurricanes, including the rebuilding of the public infrastructure, such as Puerto Rico’s power grid, how and the extent to which government, private or philanthropic funds will be invested in the affected communities, how many displaced individuals will return to their homes in both the short- and long-term, and what other demographic changes will take place, if any;

·uncertainty as to the ultimate outcomes of actions taken, or those that may be taken, by the Puerto Rico government, or the oversight board established by the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) to address Puerto Rico’s financial problems, including the filing of a form of bankruptcy under Title III of PROMESA, which provides a court debt restructuring process similar to U.S. bankruptcy protection, and the effects of measures included in the Puerto Rico government fiscal plan, or any revisions to it, on our clients and loan portfolios;

·the ability of the Puerto Rico government or any of its public corporations or other instrumentalities to repay its respective debt obligations, including the effect of payment defaults on the Puerto Rico government general obligations, bonds of the Government Development Bank for Puerto Rico (the “GDB”) and certain bonds of government public corporations, and recent and any future downgrades of the long-term and short-term debt ratings of the Puerto Rico government, which could exacerbate Puerto Rico’s adverse economic conditions and, in turn, further adversely impact the Corporation;

3

·uncertainty about whether the Federal Reserve Bank of New York ( the “New York FED” or “Federal Reserve”) will continue to provide approvals for receiving dividends from the Corporation’s subsidiary, FirstBank Puerto Rico (“FirstBank” or the “Bank”), or making payments of dividends on non-cumulative perpetual preferred stock, or payments on trust preferred securities or subordinated debt, incurring, increasing or guaranteeing debt or repurchasing any capital securities, despite the consents that have enabled the Corporation to receive quarterly dividends from FirstBank since the second quarter of 2016, to pay quarterly interest payments on the Corporation’s subordinated debentures associated with its trust preferred securities since the second quarter of 2016, and to pay monthly dividends on the non-cumulative perpetual preferred stock since December 2016;

·a decrease in demand for the Corporation’s products and services and lower revenues and earnings because of the continued recession in Puerto Rico;

·uncertainty as to the availability of certain funding sources, such as brokered certificates of deposit (“brokered CDs”);

·the Corporation’s reliance on brokered CDs to fund operations and provide liquidity;

·the risk of not being able to fulfill the Corporation’s cash obligations or resume paying dividends to the Corporation’s common stockholders in the future due to the Corporation’s need to receive regulatory approvals to declare or pay any dividends and to take dividends or any other form of payment representing a reduction in capital from FirstBank or FirstBank’s failure to generate sufficient cash flow to make a dividend payment to the Corporation;

·the weakness of the real estate markets and of the consumer and commercial sectors and their impact on the credit quality of the Corporation’s loans and other assets, which have contributed and may continue to contribute to, among other things, high levels of non-performing assets, charge-offs and provisions for loan and lease losses, and may subject the Corporation to further risk from loan defaults and foreclosures;

·the ability of FirstBank to realize the benefits of its net deferred tax assets;

·adverse changes in general economic conditions in Puerto Rico, the United States (“U.S.”), the U.S. Virgin Islands (“USVI”), and the British Virgin Islands (“BVI”), including the interest rate environment, market liquidity, housing absorption rates, real estate prices, and disruptions in the U.S. capital markets, which reduced interest margins and affected funding sources, and have affected demand for all of the Corporation’s products and services and reduced the Corporation’s revenues and earnings and the value of the Corporation’s assets, and may continue to have these effects;

·an adverse change in the Corporation’s ability to attract new clients and retain existing ones;

·the risk that additional portions of the unrealized losses in the Corporation’s investment portfolio are determined to be other-than-temporary, including additional impairments on the Corporation’s remaining $8.1 million of the Puerto Rico government’s debt securities;   

·uncertainty about regulatory and legislative changes for financial services companies in Puerto Rico, the U.S., the USVI and the BVI, which could affect the Corporation’s financial condition or performance and could cause the Corporation’s actual results for future periods to differ materially from prior results and anticipated or projected results;

4

·changes in the fiscal and monetary policies and regulations of the U.S. federal government and the Puerto Rico and other governments, including those determined by the Board of the Governors of the Federal Reserve System (the “Federal Reserve Board”), the New York FED, the Federal Deposit Insurance Corporation (“FDIC”), government-sponsored housing agencies, and regulators in Puerto Rico, and the USVI and BVI;

·the risk of possible failure or circumvention of controls and procedures and the risk that the Corporation’s risk management policies may not be adequate;

·the risk that the FDIC may increase the deposit insurance premium and/or require special assessments to replenish its insurance fund, causing an additional increase in the Corporation’s non-interest expenses;

·the impact on the Corporation’s results of operations and financial condition of acquisitions and dispositions;

·a need to recognize impairments on the Corporation’s financial instruments, goodwill or other intangible assets relating to acquisitions;

·the risk that downgrades in the credit ratings of the Corporation’s long-term senior debt will adversely affect the Corporation’s ability to access necessary external funds;

·the effect on the Corporation’s businesses, business practices and results of operations of a potential higher interest rate environment;

·uncertainty as to whether FirstBank will be able to satisfy its regulators regarding, among other things, its asset quality, liquidity plans, maintenance of capital levels and compliance with applicable laws, regulations and related requirements; and

·general competitive factors and industry consolidation.

    The Corporation does not undertake, and specifically disclaims any obligation, to update any “forward-looking statements” to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by the federal securities laws.

Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, as well as “Part II, Item 1A, Risk Factors,” in this Quarterly Report on Form 10-Q, for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

5

	FIRST BANCORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)

	June 30, 2018		December 31, 2017
(In thousands, except for share information)
ASSETS
Cash and due from banks	$	790,809	$	705,980
Money market investments:
Time deposits with other financial institutions		300		3,126
Other short-term investments		97,290		7,289
Total money market investments		97,590		10,415
Investment securities available for sale, at fair value:
Securities pledged that can be repledged		241,378		350,123
Other investment securities		1,794,632		1,540,893
Total investment securities available for sale		2,036,010		1,891,016
Investment securities held to maturity, at amortized cost:
Securities pledged that can be repledged		-		-
Other investment securities		150,486		150,627
Total investment securities held to maturity, fair value of $135,430 (2017- $131,032)		150,486		150,627
Other investment securities		43,400		43,119
Loans, net of allowance for loan and lease losses of $222,035
(2017 - $231,843)		8,418,256		8,618,633
Loans held for sale, at lower of cost or market		80,815		32,980
Total loans, net		8,499,071		8,651,613
Premises and equipment, net		144,507		141,895
Other real estate owned		143,355		147,940
Accrued interest receivable on loans and investments		47,171		57,172
Other assets		432,463		461,491
Total assets	$	12,384,862	$	12,261,268
LIABILITIES
Non-interest-bearing deposits	$	2,317,149	$	1,833,665
Interest-bearing deposits		6,900,934		7,188,966
Total deposits		9,218,083		9,022,631
Securities sold under agreements to repurchase		200,000		300,000
Advances from the Federal Home Loan Bank (FHLB)		715,000		715,000
Other borrowings		184,150		208,635
Accounts payable and other liabilities		165,950		145,905
Total liabilities		10,483,183		10,392,171
STOCKHOLDERSʼ EQUITY
Preferred stock, authorized, 50,000,000 shares:
Non-cumulative Perpetual Monthly Income Preferred Stock: issued 22,004,000
shares, outstanding 1,444,146 shares, aggregate liquidation value of $36,104		36,104		36,104
Common stock, $0.10 par value, authorized, 2,000,000,000 shares;
issued, 221,724,062 shares (2017 - 220,382,343 shares issued)		22,172		22,038
Less: Treasury stock (at par value)		(453)		(410)
Common stock outstanding, 217,185,449 shares outstanding (2017 - 216,278,040
shares outstanding)		21,719		21,628
Additional paid-in capital		937,919		936,772
Retained earnings, includes legal surplus reserve of $59,693		958,044		895,208
Accumulated other comprehensive loss, net of tax of $7,752		(52,107)		(20,615)
Total stockholdersʼ equity		1,901,679		1,869,097
Total liabilities and stockholdersʼ equity	$	12,384,862	$	12,261,268
The accompanying notes are an integral part of these statements.

6

	FIRST BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018		2017		2018		2017
(In thousands, except per share information)
Interest and dividend income:
Loans	$	137,538	$	132,697	$	270,713	$	264,139
Investment securities		14,732		13,950		28,719		27,252
Money market investments and interest-bearing cash accounts		3,363		727		5,619		1,211
Total interest income		155,633		147,374		305,051		292,602
Interest expense:
Deposits		16,974		16,348		33,945		32,320
Securities sold under agreements to repurchase		2,543		2,765		4,840		5,388
Advances from FHLB		3,410		2,292		6,782		4,414
Other borrowings		2,235		2,065		4,320		4,027
Total interest expense	25,162		23,470		49,887		46,149
Net interest income		130,471		123,904		255,164		246,453
Provision for loan and lease losses		19,536		18,096		40,080		43,538
Net interest income after provision for loan and lease losses	110,935		105,808		215,084		202,915
Non-interest income:
Service charges and fees on deposit accounts		5,344		5,803		10,432		11,593
Mortgage banking activities		4,835		4,846		9,000		8,462
Net gain on sale of investments		-		371		-		371
Other-than-temporary impairment (“OTTI”) losses on available-for-sale debt securities:
Total OTTI losses		-		-		-		(12,231)
Portion of OTTI recognized in other comprehensive income (“OCI”)		-		-		-		-
Net impairment losses on available-for-sale debt securities		-		-		-		(12,231)
Gain on early extinguishment of debt		-		-		2,316		-
Insurance commission income		1,780		1,855		5,135		5,442
Other non-interest income		8,513		7,674		16,373		15,155
Total non-interest income	20,472		20,549		43,256		28,792
Non-interest expenses:
Employees' compensation and benefits		39,555		38,409		80,239		77,062
Occupancy and equipment		13,746		13,759		28,851		27,847
Business promotion		4,016		3,192		6,592		6,473
Professional fees		10,193		11,800		20,253		22,756
Taxes, other than income taxes		3,637		3,745		7,493		7,421
Insurance and supervisory fees		3,701		4,855		7,556		9,764
Net loss on other real estate owned (“OREO”) and OREO operations		5,655		3,369		5,845		7,445
Credit and debit card processing expenses		3,766		3,566		7,303		6,397
Communications		1,582		1,628		3,064		3,171
Other non-interest expenses		4,365		4,746		9,047		8,615
Total non-interest expenses	90,216		89,069		176,243		176,951
Income before income taxes		41,191		37,288		82,097		54,756
Income tax expense		(10,159)		(9,290)		(17,917)		(1,217)
Net income	$	31,032	$	27,998	$	64,180	$	53,539
Net income attributable to common stockholders	$	30,363	$	27,329	$	62,842	$	52,201
Net income per common share:
Basic	$	0.14	$	0.13	$	0.29	$	0.24
Diluted	$	0.14	$	0.13	$	0.29	$	0.24
Dividends declared per common share	$	-	$	-	$	-	$	-
The accompanying notes are an integral part of these statements.

7

	FIRST BANCORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
		2018		2017	2018			2017
(In thousands)
Net income	$	31,032	$	27,998	$	64,180	$	53,539
Amount reclassified out of accumulated other comprehensive
loss per Accounting Standards Update (“ASU”) 2016-01		-		-		6		-
Other comprehensive (loss) income:
Unrealized (loss) gain on debt securities on which an
OTTI has been recognized		(294)		1,127		202		(1,803)
Reduction of non-credit OTTI component on securities sold		-		5,678		-		5,678
Reclassification adjustments for net gain included in net income		-		(371)		-		(371)
Reclassification adjustment for other-than-temporary impairment
on debt securities included in net income		-		-		-		12,231
All other unrealized holding (losses) gains on available-for-sale
securities arising during the period		(7,151)		2,631		(31,700)		4,026
Other comprehensive (loss) income for the period		(7,445)		9,065		(31,492)		19,761
Total comprehensive income	$	23,587	$	37,063	$	32,688	$	73,300
The accompanying notes are an integral part of these statements.

8

	FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six-Month Period Ended
	June 30,		June 30,
	2018		2017
(In thousands)
Cash flows from operating activities:
Net income	$	64,180	$	53,539
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,686		8,230
Amortization of intangible assets		1,868		2,242
Provision for loan and lease losses		40,080		43,538
Deferred income tax expense		11,479		728
Stock-based compensation		3,983		3,599
Gain on sale of investments		-		(371)
OTTI on debt securities		-		12,231
Unrealized loss (gain) on derivative instruments		103		(307)
Gain on early extinguishment of debt		(2,316)		-
Net gain on sales of premises and equipment and other assets		(840)		(133)
Net gain on sales of loans		(2,921)		(3,696)
Net amortization/accretion of premiums, discounts and deferred loan fees and costs		(3,937)		(4,235)
Originations and purchases of loans held for sale		(160,584)		(182,678)
Sales and repayments of loans held for sale		173,977		188,890
Loans held for sale valuation adjustments		558		-
Amortization of broker placement fees		676		1,007
Net amortization/accretion of premium and discounts on investment securities		1,090		40
Decrease in accrued interest receivable		9,948		10
Increase in accrued interest payable		115		567
Decrease in other assets		11,536		4,225
Increase in other liabilities		1,591		4,148
Net cash provided by operating activities		158,272		131,574
Cash flows from investing activities:
Principal collected on loans		1,282,545		1,362,537
Loans originated and purchased		(1,217,117)		(1,498,967)
Proceeds from sales of loans held for investment		33,709		53,245
Proceeds from sales of repossessed assets		24,484		20,999
Proceeds from sales of available-for-sale securities		-		23,408
Purchases of available-for-sale securities		(352,576)		(12,440)
Proceeds from principal repayments and maturities of available-for-sale securities		174,574		119,664
Proceeds from principal repayments of held-to-maturity securities		141		141
Additions to premises and equipment		(10,305)		(5,269)
Proceeds from sale of premises and equipment and other assets		1,857		1,109
Net redemptions/purchase of other investment securities		132		(80)
Proceeds from the settlement of insurance claims		5,118		-
Net cash (used in) provided by investing activities		(57,438)		64,347
Cash flows from financing activities:
Net increase (decrease) in deposits		196,687		(64,810)
Repayment of securities sold under agreements to repurchase		(100,000)		-
Net FHLB advances proceeds		-		5,000
Repayment of junior subordinated debentures		(21,434)		-
Repurchase of outstanding common stock		(2,745)		(1,894)
Dividends paid on preferred stock		(1,338)		(1,338)
Net cash provided by (used in) financing activities		71,170		(63,042)
Net increase in cash and cash equivalents		172,004		132,879
Cash and cash equivalents at beginning of period		716,395		299,685
Cash and cash equivalents at end of period	$	888,399	$	432,564
Cash and cash equivalents include:
Cash and due from banks	$	790,809	$	422,150
Money market instruments		97,590		10,414
	$	888,399	$	432,564
The accompanying notes are an integral part of these statements.

9

	FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)

	Six-Month Period Ended
	June 30,		June 30,
	2018		2017
(In thousands)
Preferred Stock	$	36,104	$	36,104
Common Stock outstanding:
Balance at beginning of period		21,628		21,745
Common stock issued as compensation		27		27
Common stock issued for exercised warrants		73		-
Common stock withheld for taxes		(42)		(33)
Restricted stock grants		34		95
Restricted stock forfeited		(1)		(238)
Balance at end of period		21,719		21,596
Additional Paid-In-Capital:
Balance at beginning of period		936,772		931,856
Stock-based compensation		3,983		3,599
Common stock issued for exercised warrants		(73)		-
Common stock withheld for taxes		(2,703)		(1,861)
Restricted stock grants		(34)		(95)
Common stock issued as compensation		(27)		(27)
Restricted stock forfeited		1		238
Balance at end of period		937,919		933,710
Retained Earnings:
Balance at beginning of period		895,208		830,928
Net income		64,180		53,539
Dividends on preferred stock		(1,338)		(1,338)
Amount reclassified from accumulated other comprehensive loss per ASU 2016-1		(6)		-
Balance at end of period		958,044		883,129
Accumulated Other Comprehensive Income (Loss), net of tax:
Balance at beginning of period		(20,615)		(34,390)
Other comprehensive (loss) income, net of tax		(31,492)		19,761
Balance at end of period		(52,107)		(14,629)
Total stockholdersʼ equity	$	1,901,679	$	1,859,910
The accompanying notes are an integral part of these statements.

10

FIRST BANCORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The Consolidated Financial Statements (unaudited) of First BanCorp. (the “Corporation”) have been prepared in conformity with the accounting policies stated in the Corporation’s Audited Consolidated Financial Statements included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report on Form 10-K”). Certain information and note disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted from these statements pursuant to the rules and regulations of the SEC and, accordingly, these financial statements should be read  in conjunction with the Audited Consolidated Financial Statements of the Corporation for the year ended December 31, 2017, which are included in the 2017 Annual Report on Form 10-K. All adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the statement of financial position, results of operations and cash flows for the interim periods have been reflected. All significant intercompany accounts and transactions have been eliminated in consolidation.

The results of operations for the quarter and six-month period ended June 30, 2018 are not necessarily indicative of the results to be expected for the entire year. 

Adoption of New Accounting Requirements and Recently Issued but Not Yet Effective Accounting Requirements

The Financial Accounting Standards Board (“FASB”) has issued the following accounting pronouncements and guidance relevant to the Corporation’s operations:

Revenue Recognition

In May 2014, the FASB updated the Accounting Standards Codification (the “Codification” or the “ASC”) to create a new, principles-based revenue recognition framework. This guidance requires entities to recognize revenues when they transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance describes a 5-step process that entities can apply to achieve the core principle of revenue recognition and requires disclosures sufficient to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers and the significant judgments used in determining that information.  

    The Corporation adopted the guidance on January 1, 2018 using a modified retrospective method, in which the guidance applies to existing contracts in effect at January 1, 2018 and new contracts entered into after this date. Most of the Corporation’s revenue, including net interest income, gain on sale of loans, and mortgage servicing fees is explicitly out of scope of the new revenue recognition guidance. The Corporation conducted an assessment of the revenue streams that were potentially affected by the new guidance and reviewed contracts in scope to ensure compliance with the new guidance.

The Corporation has identified service charges on deposits and related cash management services, insurance commissions, merchant-related income, and card interchange income as its most significant revenue streams within the scope of the standard.  For the revenue streams that were found in scope, management reviewed in detail its most significant contracts with corresponding customers. The adoption of this guidance did not have a material effect on the Corporation’s consolidated financial statements. However, additional disclosures required by the standard have been included in Note 23 – Revenue from Contracts with Customers, to the Corporation’s consolidated financial statements.

11

Recognition and Measurement of Financial Assets and Liabilities

In January 2016, the FASB updated the Codification to require an entity to: (i) measure equity investments at fair value through net income, with certain exceptions, thus, eliminating eligibility for the available-for-sale category; (ii) present in OCI the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price; and (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available-for-sale debt securities in combination with other deferred tax assets. The guidance provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment, adjusted for certain observable price changes. The guidance also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The adoption of this standard during the first quarter of 2018 did not have a material effect on the Corporation’s consolidated financial statements.

Statement of Cash Flows Presentation – Restricted Cash

In August 2016 and November 2016, the FASB updated the Codification to provide specific guidance on the classification and presentation of certain cash payments and cash receipts, including changes in restricted cash, in the statement of cash flows. This guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The amendments in this update must be applied using a retrospective transition method to each period presented. The Corporation adopted the provisions of this guidance during the first quarter of 2018 without any material effect on the Corporation’s consolidated financial statements.

Income Tax Effect of Intra-Entity Transfers of Assets

In October 2016, the FASB updated the Codification to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. With this update, entities are required to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Under prior GAAP, the recognition of current and deferred income taxes for an intra-entity asset transfer was prohibited until the assets are sold to an outside party. This Update does not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory. For example, GAAP requires an entity to disclose a comparison of income tax expense (benefit) with statutory expectations (a rate reconciliation for public entities or a description of the nature of each significant reconciling item for nonpublic entities) and also requires an entity to disclose the types of temporary differences and carryforwards that give rise to a significant portion of deferred income taxes. The Corporation adopted the provisions of this guidance during the first quarter of 2018 without any effect on the Corporation’s consolidated financial statements.

Clarifying what Changes Qualify as a Modification of a Share-Based Payment Award

In May 2017, the FASB updated the codification to reduce the cost and complexity when applying ASC Topic 718, “Compensation – Stock Compensation” (“ASC Topic 718”), and standardize the practice of applying ASC Topic 718 to financial reporting. ASC Topic 718 prescribes the accounting treatment of a modification in the terms or conditions of a share-based payment award. The guidance clarifies what changes would qualify as a modification. This was done by better defining what does not constitute a modification. In order for a change to a share-based arrangement to not require ASC Topic 718 modification treatment, all of the following must be met: (i) the fair value (or alternative measurement method used) of the modified award must equal the fair value (or alternative measurement method used) of the original award immediately before the original award is modified; (ii) the vesting conditions of the modified award must be the same as the vesting conditions of the original award immediately before the original award is modified; and (iii) the classification of the modified award as an equity instrument or a liability instrument must be the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in ASC Topic 718 apply regardless of whether an entity is required to apply modification accounting under this update. The amendments in this update must be applied prospectively to an award modified on or after the adoption date. The Corporation adopted the provisions of this guidance on January 1, 2018 without any effect on the Corporation’s consolidated financial statements. The Corporation’s Omnibus Plan provides for equity-based compensation incentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, cash-based awards and other stock-based awards. If any change occurs in the future to awards issued under the Omnibus Plan, the Corporation will evaluate it under this guidance.

12

Lease Accounting

       In February 2016, the FASB updated the Codification to replace ASC 840, “Leases (Topic 840)” (“ASC Topic 840”), with new guidance for the financial reporting about leasing transactions. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires the recognition of only capital leases on the balance sheet, the guidance will require both types of leases to be recognized on the balance sheet. The guidance will also require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information and additional information about the amounts recorded in the financial statements. The FASB issued an update in January 2018 providing an optional transition practical expedient to not evaluate under new ASC Topic 842, “Leases” (“ASC Topic 842”), land easements that exist or expired before the entity’s adoption of ASC Topic 842 and were not previously accounted for as leases. In addition, the FASB issued an update in July 2018 that makes 16 technical corrections to this guidance that alleviate the potential for unintended consequences from applying the new standard. The guidance on leases will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. Entities are required to use a modified retrospective approach for leases that existed prior to, or are entered into after, the beginning of the earliest comparative period presented in the financial statements or they can elect an additional and optional transition method to adopt the new leases. Under the optional transition method, an entity applies the new standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Also, under the optional transition method, the entity’s reporting for comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with ASC Topic 840.

     The update is expected to affect the Corporation’s consolidated financial statements since the Corporation has operating and lease arrangements for which it is a lessee. The Corporation has identified the population of its current leases and is in the process of obtaining the data necessary to estimate the amount of right-of-use assets (“ROU”) and lease liabilities that will be recognized upon adoption.  Therefore, the Corporation is still evaluating the effect that the adoption of this accounting pronouncement will have on its consolidated financial statements and preliminarily expects that amounts to be recognized as ROU will not be material as a percentage of the Corporation’s total assets.

Accounting for Financial Instruments – Credit Losses

In June 2016, the FASB updated the Codification to introduce new guidance for the accounting for credit losses. The guidance includes an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The CECL model will apply to: (1) financial assets subject to credit losses and measured at amortized cost and (2) certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees, and net investments in leases, as well as reinsurance and trade receivables. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses (“ECL”) should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating ECL. The guidance does not prescribe a specific method to make the estimate, so its application will require significant judgment.

Generally, upon initial recognition of a financial asset, the estimate of the ECL will be recorded through an allowance for loan and lease losses with an offset to current earnings. Subsequently, the ECL will need to be reassessed each period, and both negative and positive changes to the estimate will be recognized through an adjustment to the allowance for loan and lease losses and earnings.

The guidance amends the current OTTI model for available-for-sale debt securities. The new available-for-sale debt security model will require an estimate of ECL only when the fair value is below the amortized cost of the asset. The length of time the fair value of an available-for-sale debt security has been below the amortized cost will no longer affect the determination of whether a credit loss exists. As such, the new available-for-sale debt security model is not an OTTI model. In addition, credit losses on available-for-sale debt securities will now be limited to the difference between the security’s amortized cost basis and its fair value. The available-for-sale debt security model will also require the use of an allowance to record estimated credit losses (and subsequent recoveries).

13

The purchased financial assets with credit deterioration (“PCD”) model applies to purchased financial assets (measured at amortized cost or available-for-sale) that have experienced more than insignificant credit deterioration since origination. This represents a change from the scope of what are considered purchased credit-impaired assets under today’s model. In contrast to the accounting for originated or purchased assets that do not qualify as PCD, the initial estimate of expected credit losses for a PCD would be recognized through an allowance for loan and lease losses with an offset to the cost basis of the related financial asset at acquisition (i.e., there is no effect on net income at initial recognition). Subsequently, the accounting will follow the applicable CECL or available-for-sale debt security impairment model with all adjustments of the allowance for loan and lease losses recognized through earnings. Beneficial interests classified as held-to-maturity or available-for-sale will need to apply the PCD model if the beneficial interest meets the definition of PCD or if there is a significant difference between contractual and expected cash flows at initial recognition.

In general, the new guidance will require modified retrospective application to all outstanding instruments, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of the first period in which the guidance becomes effective. However, prospective application is required for PCD assets previously accounted for under ASC Topic 310-30, “Receivables,” and for debt securities for which an OTTI was recognized prior to the date of adoption.

This guidance also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, public business entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year).

The guidance will be effective for public business entities that are SEC filers in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the guidance will be permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The Corporation has developed a transition roadmap in order to comply on a timely basis with the implementation of this new accounting framework. The Corporation has created a working group with members from multiple areas across the organization that is responsible for assessing the effect of the standard, evaluating interpretative issues, and evaluating the current credit loss models against the new guidance to determine any necessary changes and other related implementation activities. The working group provides periodic updates to the Corporation’s CECL Management Committee, which has oversight responsibilities for the implementation efforts. The Corporation continues to evaluate the effect that this guidance, including the method of implementation, will have on its consolidated financial statements.

Subsequent Measurement of Goodwill

    In January 2017, the FASB updated the Codification to simplify the subsequent measurement of goodwill by eliminating Step 2 from the current two-step goodwill impairment test. This guidance provides that a goodwill impairment test be conducted by comparing the fair value of a reporting unit with its carrying amount. Entities are to recognize an impairment charge for goodwill equal to the excess of the carrying amount over the reporting unit’s fair value. Entities have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The effect of this guidance will depend upon the performance of the reporting units that have goodwill and the market conditions affecting the fair value of each reporting unit going forward.

14

Amortization of Premiums and Discounts of Callable Debt Securities

In March 2017, the FASB updated the Codification to shorten the amortization period for certain purchased callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. With respect to securities held at a discount, the amendments do not require an accounting change; thus, the discount continues to be amortized to maturity. Under current GAAP, premiums and discounts on callable debt securities generally are amortized to the maturity date. An entity must have a large number of similar loans to consider estimates of future principal prepayments when applying the interest method. However, an entity that holds an individual callable debt security at a premium may not amortize that premium to the earliest call date. If that callable debt security is subsequently called, the entity records a loss equal to the unamortized premium. The amendments in this update more closely align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying securities. In most cases, market participants price securities to the call date that produces the worst yield when the coupon is above current market rates (that is, the security is trading at a premium) and price securities to maturity when the coupon is below market rates (that is, the security is trading at a discount) in anticipation that the borrower will act in its economic best interest. As a result, the amendments more closely align interest income recorded on bonds held at a premium or a discount with the economics of the underlying instrument. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of this guidance is not expected to have a material effect on the Corporation’s consolidated statement of financial condition or results of operations. As of June 30, 2018, the Corporation had $4.0 million of callable debt securities held at a premium (unamortized premium of $32 thousand).

Derivatives and Hedging

     In August 2017, the FASB updated the Codification to: (i) expand hedge accounting for nonfinancial and financial risk components and amend measurement methodologies to more closely align hedge accounting with a company’s risk management activities; (ii) decrease the complexity of preparing and understanding hedge results by eliminating the separate measurement and reporting of hedge ineffectiveness; (iii) enhance transparency, comparability, and understanding of hedge results through enhanced disclosures and a change in the presentation of hedge results to align the effects of the hedging instrument and the hedged item; and (iv) reduce the cost and complexity of applying hedge accounting by simplifying the manner in which assessments of hedge effectiveness may be performed. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The guidance requires companies to apply requirements to existing hedging relationships on the date of adoption, and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. As of June 30, 2018, all of the derivatives held by the Corporation were considered economic undesignated hedges. The adoption of this guidance is not expected to have a material effect on the Corporation’s consolidated statement of financial condition or results of operations.

Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income

    In February 2018, the FASB updated the Codification to provide entities with an option to reclassify to retained earnings, tax effects that were stranded in accumulated other comprehensive income, pursuant to the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. This guidance may be early adopted in any interim or annual period for which financial statements have not yet been issued and applied either in the period of adoption or retrospectively to each period in which the effect of the change in the corporate tax rate in the Tax Act is recognized. The Corporation is currently evaluating whether it will adopt this guidance. If adopted, the Corporation does not expect a material effect on its consolidated financial statements.

Improvements to Nonemployee Share-Based Payment Accounting

     In June 2018, the FASB updated the Codification as part of a simplification initiative to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees and to address and improve aspects of the accounting for non-employee share-based payment transactions. The amendments will be effective for interim and annual reporting periods beginning after December 15, 2018. The adoption of this guidance is not expected to have an effect on the Corporation’s consolidated financial statements. 

15

NOTE 2 – UPDATE ON EFFECTS OF NATURAL DISASTERS

Two strong hurricanes affected the Corporation’s service areas during September 2017. The following summarizes the more significant continuing financial repercussions of these natural disasters for the Corporation and for its major subsidiary, FirstBank.

Credit Quality and Allowance for Loan and Lease Losses

Relationship officers continued to closely monitor the performance of hurricane-affected commercial loan customers during 2018. Information provided by these commercial loan officers and statistics on the performance of consumer and residential credits were factored into the determination of the allowance for loan and lease losses as of June 30, 2018. Although the identification and evaluation of hurricane-affected credits has been completed, management’s assessment of the hurricanes’ effect is still subject to uncertainties, both those specific to some individual customers, such as the resolution of insurance claims, and those applicable to the overall economic prospects of the hurricane-affected areas as a whole. During the second quarter and six-month period ended June 30, 2018, the Corporation recorded a net loan loss reserve release of approximately $2.1 million and $8.5 million, respectively, in connection with revised estimates associated with the effects of the hurricanes. The revised estimates were primarily attributable to updated assessments of financial performance and repayment prospects of certain individually-assessed commercial credits and, to a lesser extent, lower reserve requirements resulting from payments received during the first six-months of 2018 that reduced the balance of the consumer and residential mortgage loan portfolios outstanding on the dates of the hurricanes.

As of June 30, 2018, the hurricane-related qualitative allowance amounted to $42.2 million (December 31, 2017 - $55.6 million). With the future resolution of uncertainties and the ongoing collection of information on individual commercial customers and statistics on the consumer and residential loan portfolios, the loss estimate will be revised as needed. Refer to Note 7 – Loans Held for Investment, to the consolidated financial statements for information about non-performing loans and early delinquency statistics.

Disaster Response Plan Costs, Casualty Losses and Related Insurance

      The Corporation has incurred a variety of costs to operate in disaster response mode, and some facilities and their contents, including certain OREO properties, were damaged by the storms.  The Corporation maintains insurance for casualty losses, as well as for reasonable and necessary disaster response costs and certain revenue lost through business interruption. Substantially all of the significant disaster response costs had been incurred by the end of the second quarter of 2018. Insurance claim receivables were established for some of the individual costs, when incurred, based on management’s understanding of the underlying coverage and when realization of the claim was deemed probable. During the second quarter of 2018, the Corporation reached a final settlement on certain insurance claims arising from the hurricanes. With this settlement, the Corporation received proceeds of approximately $4.3 million, primarily related to repairs and maintenance costs incurred on certain OREO properties, and $0.8 million related to a loan receivable fully charged-off in prior periods. The insurance proceeds were recorded against incurred losses, previously-established accounts receivable, or loan recoveries, as applicable. Insurance recoveries are recorded in the same income statement caption as the incurred losses. Recoveries from insurance proceeds in excess of losses incurred, if any, are recognized as a gain from insurance proceeds and reported as part of “other non-interest income” in the statement of income when the insurance proceeds are received, or when all contingencies related to the insurance claim are resolved. As of June 30, 2018, the Corporation still had an insurance claim receivable of $6.3 million, included as part of “other assets” in the statement of financial condition. Management also believes that there is a possibility that some gains will be recognized with respect to casualty and lost revenue claims in future periods, but this is contingent on reaching agreement on the Corporation’s claims with the insurance carriers.

Liquidity Management  

The Corporation experienced rapid accumulation of deposits after the hurricanes in the fourth quarter of 2017 and the first six months of 2018.  Total deposits as of June 30, 2018, excluding brokered CDs, increased $523.3 million from December 31, 2017 and $884.8 million since September 30, 2017.  The most significant increase was in non-interest-bearing demand deposits, which grew 26%, or $483.5 million from December 31, 2017 and $731.0 million, or 46%, since September 30, 2017.  Hurricane-related factors, such as the effect of disaster relief funds and settlements of insurance claims, continue to contribute to this growth.  Although management expects the balances accumulated by deposit customers in the hurricane-affected areas to reduce over time, it is difficult to predict when and to what degree, and there may be further growth as insurance claims are resolved and additional disaster-recovery funds are distributed.

16

NOTE 3 – EARNINGS PER COMMON SHARE

	The calculations of earnings per common share for the quarters and six-month periods ended June 30, 2018 and 2017 are as follows:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands, except per share information)
Net income		$	31,032	$	27,998	$	64,180	$	53,539
Less: Preferred stock dividends			(669)		(669)		(1,338)		(1,338)
Net income attributable to common stockholders		$	30,363	$	27,329	$	62,842	$	52,201
Weighted-Average Shares:
Average common shares outstanding			215,737		213,900		215,194		213,621
Average potential dilutive common shares			929		2,932		1,289		3,482
Average common shares outstanding - assuming dilution			216,666		216,832		216,483		217,103
Earnings per common share:
Basic		$	0.14	$	0.13	$	0.29	$	0.24
Diluted		$	0.14	$	0.13	$	0.29	$	0.24

Earnings per common share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares issued and outstanding. Net income attributable to common stockholders represents net income adjusted for any preferred stock dividends, including any dividends declared, and any cumulative dividends related to the current dividend period that have not been declared as of the end of the period. Basic weighted-average common shares outstanding exclude unvested shares of restricted stock that do not contain non-forfeitable dividend rights.

Potential dilutive common shares consist of unvested shares of restricted stock that do not contain non-forfeitable dividend rights, performance units that do not contain non-forfeitable dividend rights if the performance condition is met as of the end of the reporting period, and warrants outstanding during the period using the treasury stock method. This method assumes that the potential dilutive common shares are issued and outstanding and the proceeds from the exercise, in addition to the amount of compensation cost attributable to future services, are used to purchase common stock at the exercise date. The difference between the numbers of potential dilutive shares issued and the shares purchased is added as incremental shares to the actual number of shares outstanding to compute diluted earnings per share. Unvested shares of restricted stock and performance units that do not contain non-forfeitable dividend rights, and warrants outstanding during the period that result in lower potential dilutive shares issued than shares purchased under the treasury stock method, are not included in the computation of dilutive earnings per share since their inclusion would have an antidilutive effect on earnings per share.

On May 17, 2018, the U.S. Treasury exercised its warrant to purchase 1,285,899 shares of the Corporation’s common stock on a cashless basis, resulting in the issuance of 730,571 shares of common stock.

17

NOTE 4 – STOCK-BASED COMPENSATION.

On May 24, 2016, the Corporation’s stockholders approved the amendment and restatement of the First BanCorp. Omnibus Incentive Plan, as amended (the “Omnibus Plan”), to, among other things, increase the number of shares of common stock reserved for issuance under the Omnibus Plan, extend the term of the Omnibus Plan to May 24, 2026 and re-approve the material terms of the performance goals under the Omnibus Plan for purposes of the then Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended. The Omnibus Plan provides for equity-based compensation incentives (the “awards”) through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, cash-based awards and other stock-based awards. The Omnibus Plan authorizes the issuance of up to14,169,807shares of common stock, subject to adjustments for stock splits, reorganizations, and other similar events. As of June 30, 2018, 6,956,802 authorized shares of common stock were available for issuance under the Omnibus Plan. The Corporation’s Board of Directors, based on the recommendation of the Corporation’s Compensation and Benefits Committee, has the power and authority to determine those eligible to receive awards and to establish the terms and conditions of any awards, subject to various limits and vesting restrictions that apply to individual and aggregate awards.

Restricted Stock

Under the Omnibus Plan, the Corporation may grant restricted stock to plan participants, subject to forfeiture upon the occurrence of certain events until the dates specified in the participant’s award agreement. While the restricted stock is subject to forfeiture and does not contain non-forfeitable dividend rights, restricted stock participants may exercise full voting rights. The restricted stock granted under the Omnibus Plan is typically subject to a vesting period. During the first six months of 2018, the Corporation awarded 342,439 shares of restricted stock to employees, fifty percent (50%) of those shares vest in two years from the grant date and the remaining (50%) vest in three years of the grant date. Included in those 342,439 shares of restricted stock were 20,447 shares granted to retirement-eligible employees at the grant date. The fair value of the shares of restricted stock granted in the first six months of 2018 was based on the market price of the Corporation’s outstanding common stock on the date of the grant.

	The following table summarizes the restricted stock activity in the first six months of 2018 under the Omnibus Plan:
		Six-Month Period Ended
		June 30, 2018
		Number of shares		Weighted-Average
		of restricted		Grant Date
		stock		Fair Value
Non-vested shares at beginning of year		1,816,968	$	2.76
Granted		342,439		6.30
Forfeited		(9,500)		2.99
Vested		(1,086,822)		2.09
Non-vested shares at June 30, 2018		1,063,085	$	4.59

18

    For the quarter and six-month period ended June 30, 2018, the Corporation recognized $0.8 million and $1.9 million, respectively, of stock-based compensation expense related to restricted stock awards, compared to $1.0 million and $2.0 million for the same periods in 2017, respectively. As of June 30, 2018, there was $3.2 million of total unrecognized compensation cost related to non-vested shares of restricted stock. The weighted average period over which the Corporation expects to recognize such cost is 1.5 years. The total expense determined for restricted stock awards granted to retirement-eligible employees was charged against earnings at the grant date.

During the first half of 2017, the Corporation awarded 3,644 shares of restricted stock subject to a one-year vesting period to an independent director appointed in the first quarter of 2017. In addition, during the first half of 2017, the Corporation awarded 951,332 shares of restricted stock to employees subject to a vesting period of two years. Included in those 951,332 shares of restricted stock were 838,332 shares granted in the first quarter of 2017 to certain senior officers consistent with the requirements of the Troubled Asset Relief Program (“TARP”) Interim Final Rule. On May 10, 2017, the United States Department of the Treasury (the “U.S. Treasury”) announced that it had sold all of its remaining 10,291,553 shares of the Corporation’s common stock. As a result of the sale by the U.S. Treasury, the Corporation is no longer subject to the compensation-related restrictions under TARP, which substantially limited the Corporation’s ability to award short-term and long-term incentives to the Corporation’s executives, and the Corporation’s senior officers are no longer subject to the transferability restrictions on their shares of restricted stock. However, since the U.S. Treasury did not recover the full amount of its original investment under TARP, the senior officers forfeited 2,370,571, or 50%, of their outstanding shares of restricted stock, resulting in a reduction in the number of common shares outstanding.

The fair value of the shares of restricted stock granted in the first quarter of 2017 was based on the market price of the Corporation’s outstanding common stock on the date of the grant. For the 838,332 shares of restricted stock granted under the TARP requirements, the market price was discounted assuming that 50% of the shares of restricted stock would become freely transferable and the remaining 50% would be forfeited, resulting in a fair value of $2.71 for each share of restricted stock granted under TARP requirements.

Stock-based compensation accounting guidance requires the Corporation to reverse compensation expense for any awards that are forfeited due to employee or director turnover. Quarterly changes in the estimated forfeiture rate may have a significant effect on stock-based compensation, as the effect of adjusting the rate for all expense amortization is recognized in the period in which the forfeiture estimate is changed.  If the actual forfeiture rate is higher than the estimated forfeiture rate, an adjustment is made to increase the estimated forfeiture rate, which will result in a decrease in the expense recognized in the financial statements.  If the actual forfeiture rate is lower than the estimated forfeiture rate, an adjustment is made to decrease the estimated forfeiture rate, which will result in an increase in the expense recognized in the financial statements. The estimated forfeiture rate did not change as a result of the restricted shares forfeited in connection with the aforementioned U.S. Treasury’s sale of the Corporation’s common stock. 

19

Performance Units

Under the Omnibus Plan, the Corporation may award performance unit awards to Omnibus Plan participants.  During the first six months of 2018, the Corporation granted 304,408 unit awards to executives, with each unit representing the value of one share of the Corporation’s common stock.  The performance unit awards granted are for the performance period beginning January 1, 2018 and ending on December 31, 2020 and are subject to a three-year requisite service period.  These awards do not contain non-forfeitable rights to dividend equivalent amounts and can only be settled in shares of the Corporation’s common stock. Included in those 304,408 performance unit awards were 29,171 units granted to retirement-eligible executives at the grant date.  The performance unit will vest based on the achievement of a pre-established tangible book value per share target as of December 31, 2020.  All of the performance units will vest if performance is at the pre-established performance target level or above.  However, the participants may vest on 50% of the awards to the extent that performance is below the target but at 80% of the pre-established performance target level (the 80% minimum threshold) which is measured based upon the growth in the tangible book value during the performance cycle.  If performance is between the 80% minimum threshold and the pre-established performance target level, the participants will vest on a proportional amount. No performance units will vest if performance is below the 80% minimum threshold. 

The fair value of the performance unit awards granted during the first six months of 2018 was based on the market price of the Corporation’s outstanding common stock on the date of the grant.  For the quarter and the first six months of 2018, the Corporation recognized $0.1 million and $0.3 million, respectively, of stock-based compensation related to performance unit awards. As of June 30, 2018, there was $1.6 million of total unrecognized compensation cost related to unvested performance units that the Corporation expects to recognize over the three-year requisite service period. The total expense determined for the performance unit awards granted to retirement-eligible executives was charged against earnings at the grant date. The total amount of compensation expense recognized reflects management’s assessment of the probability that the pre-established performance goal will be achieved. A cumulative adjustment to compensation expense is recognized in the current period to reflect any changes in the probability of achievement of the performance goals.

Salary stock

Also, effective April 1, 2013, the Corporation’s Board of Directors determined to increase the salary amounts paid to certain executive officers, primarily by paying the increased salary amounts in the form of shares of the Corporation’s common stock issued under the Omnibus Plan, instead of cash. During the first six months of 2018, the Corporation issued 268,709 shares of common stock (first six months of 2017 – 272,959 shares) with a weighted average market value of $6.51 (first six months of 2017 – $5.94) as salary stock compensation. This resulted in a compensation expense of $1.7 million recorded in the first six months of 2018 (first six months of 2017 – $1.6 million). Effective July 1, 2018, the payment of additional salary amounts in the form of stock was eliminated in accordance to the previously reported executive compensation program. 

For the first six months of 2018, the Corporation withheld 96,377 shares (first six months of 2017 – 90,973 shares) from the common stock paid to certain senior officers as additional compensation and 328,433 shares of restricted stock that vested during the first six months of 2018 (first six months of 2017 – 235,680) to cover employees’ payroll and income tax withholding liabilities; these shares are held as treasury shares. The Corporation paid in cash any fractional share of salary stock to which the officer was entitled. In the consolidated financial statements, the Corporation treats shares withheld for tax purposes as common stock repurchases.

20

NOTE 5 – INVESTMENT SECURITIES

Investment Securities Available for Sale

The amortized cost, non-credit loss component of OTTI recorded in OCI, gross unrealized gains and losses recorded in OCI, estimated fair value, and weighted-average yield of investment securities available for sale by contractual maturities as of June 30, 2018 and December 31, 2017 were as follows:

		June 30, 2018
		Amortized cost		Noncredit Loss Component of OTTI Recorded in OCI						Fair value
						Gross Unrealized						Weighted-
						gains		losses				average yield%
(Dollars in thousands)
U.S. Treasury securities:
	Due within one year	$	57,464	$	-	$	2	$	67	$	57,399	1.52
U.S. government-sponsored
agencies obligations:
Due within one year			74,962		-		-		326		74,636	1.18
After 1 to 5 years			311,675		-		-		5,481		306,194	1.51
After 5 to 10 years			186,269		-		87		3,675		182,681	2.94
After  10 years			36,702		-		-		211		36,491	2.28
Puerto Rico government
obligations:
After 5 to 10 years			4,032		-		43		-		4,075	3.14
After 10 years			4,054		-		-		1,286		2,768	6.97
United States and Puerto Rico
government obligations			675,158		-		132		11,046		664,244	1.95
Mortgage-backed securities:
Freddie Mac (“FHLMC”) certificates:
After 5 to 10 years			89,235		-		23		3,378		85,880	2.01
After 10 years			265,350		-		295		8,379		257,266	2.49
			354,585		-		318		11,757		343,146	2.37
Ginnie Mae (“GNMA”) certificates:
After 1 to 5 years			142		-		2		-		144	3.10
After 5 to 10 years			61,136		-		540		25		61,651	3.03
After 10 years			135,599		-		3,746		1,102		138,243	3.81
			196,877		-		4,288		1,127		200,038	3.57
Fannie Mae (“FNMA”) certificates:
Due within one year			801		-		11		-		812	1.90
After 1 to 5 years			11,606		-		-		260		11,346	2.38
After 5 to 10 years			148,799		-		63		5,335		143,527	2.10
After 10 years			618,975		-		1,965		16,416		604,524	2.65
			780,181		-		2,039		22,011		760,209	2.54
Collateralized mortgage obligations
guaranteed by the FHLMC
and GNMA:
After 1 to 5 years			7,588		-		5		11		7,582	2.74
After 10 years			45,385		-		367		22		45,730	2.57
			52,973		-		372		33		53,312	2.59
Other mortgage pass-through
trust certificates:
After 10 years			20,590		5,529		-		-		15,061	4.51
Total mortgage-backed
securities			1,405,206		5,529		7,017		34,928		1,371,766	2.67
Total investment securities
available for sale		$	2,080,364	$	5,529	$	7,149	$	45,974	$	2,036,010	2.44

21

		December 31, 2017
		Amortized cost		Noncredit Loss Component of OTTI Recorded in OCI		Gross Unrealized				Fair value
												Weighted-
						gains		losses				average yield%
(Dollars in thousands)
U.S. Treasury securities:
	After 1 to 5 years	$	7,458	$	-	$	-	$	57	$	7,401	1.29
U.S. government-sponsored
agencies obligations:
	Due within one year		122,471		-		-		319		122,152	1.06
	After 1 to 5 years		309,472		-		28		3,735		305,765	1.42
	After 5 to 10 years		133,451		-		117		319		133,249	2.72
	After 10 years		40,769		-		1		149		40,621	1.84
Puerto Rico government
obligations:
	After 5 to 10 years		4,071		-		47		-		4,118	3.14
	After 10 years		3,972		-		-		1,277		2,695	6.97
United States and Puerto Rico
government obligations			621,664		-		193		5,856		616,001	1.70
Mortgage-backed securities:
FHLMC certificates:
	After 5 to 10 years		18,658		-		14		63		18,609	2.14
	After 10 years		297,733		-		217		4,853		293,097	2.23
			316,391		-		231		4,916		311,706	2.23
GNMA certificates:
	After 1 to 5 years		81		-		1		-		82	3.23
	After 5 to 10 years		69,661		-		1,244		-		70,905	3.05
	After 10 years		145,067		-		5,910		334		150,643	3.81
			214,809		-		7,155		334		221,630	3.56
FNMA certificates:
	After 1 to 5 years		20,831		-		294		109		21,016	2.69
	After 5 to 10 years		49,934		-		-		818		49,116	1.83
	After 10 years		613,129		-		3,180		6,401		609,908	2.43
			683,894		-		3,474		7,328		680,040	2.39
Collateralized mortgage
	obligations issued or guaranteed
	by the FHLMC and GNMA:
	After 1 to 5 years		5,918		-		14		-		5,932	2.21
	After 5 to 10 years		2,556		-		11		-		2,567	2.23
	After 10 years		35,331		-		231		-		35,562	2.22
			43,805		-		256		-		44,061	2.22
Other mortgage pass-through
trust certificates:
	After 10 years		22,791		5,731		-		-		17,060	2.44
Total mortgage-backed securities			1,281,690		5,731		11,116		12,578		1,274,497	2.54
Other
	Due within one year		100		-		-		-		100	1.48
Equity securities (1)			424		-		-		6		418	2.11
Total investment securities
	available for sale	$	1,903,878	$	5,731	$	11,309	$	18,440	$	1,891,016	2.27
(1)	As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities.

22

Maturities of mortgage-backed securities (“MBS”) are based on the period of final contractual maturity. Expected maturities of investments might differ from contractual maturities because they may be subject to prepayments and/or call options. The weighted-average yield on investment securities available for sale is based on amortized cost and, therefore, does not give effect to changes in fair value. The net unrealized gain or loss on securities available for sale and the noncredit loss component of OTTI are presented as part of OCI.

The following tables show the Corporation’s available-for-sale investments’ fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of June 30, 2018 and December 31, 2017. The tables also include debt securities for which an OTTI was recognized and only the amount related to a credit loss was recognized in earnings. For unrealized losses for which OTTI was recognized, the related credit loss was charged against the amortized cost basis of the debt security.

		As of June 30, 2018
		Less than 12 months				12 months or more				Total
				Unrealized				Unrealized				Unrealized
		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(In thousands)
	Debt securities:
	Puerto Rico-government obligations	$	-	$	-	$	2,768	$	1,286	$	2,768	$	1,286
	U.S. Treasury and U.S. government
	agenciesʼ obligations		237,349		4,448		355,093		5,312		592,442		9,760
	Mortgage-backed securities:
	FNMA		343,390		9,315		262,712		12,696		606,102		22,011
	FHLMC		155,213		4,011		150,268		7,746		305,481		11,757
	GNMA		65,966		1,109		601		18		66,567		1,127
	Collateralized mortgage obligations
	issued or guaranteed by
	FHLMC and GNMA		17,196		33		-		-		17,196		33
	Other mortgage pass-through
	trust certificates		-		-		15,061		5,529		15,061		5,529
		$	819,114	$	18,916	$	786,503	$	32,587	$	1,605,617	$	51,503
		As of December 31, 2017
		Less than 12 months				12 months or more				Total
				Unrealized				Unrealized				Unrealized
		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(In thousands)
Debt securities:
Puerto Rico-government obligations		$	-	$	-	$	2,695	$	1,277	$	2,695	$	1,277
U.S. Treasury and U.S. government
agenciesʼ obligations			136,459		494		362,050		4,085		498,509		4,579
Mortgage-backed securities:
FNMA			189,699		1,705		274,963		5,623		464,662		7,328
FHLMC			91,174		590		166,331		4,326		257,505		4,916
GNMA			39,145		334		-		-		39,145		334
Other mortgage pass-through
trust certificates			-		-		17,060		5,731		17,060		5,731
Equity securities (1)			-		-		407		6		407		6
		$	456,477	$	3,123	$	823,506	$	21,048	$	1,279,983	$	24,171
(1)	As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities.

23

Assessment for OTTI

     Debt securities issued by U.S. government agencies, U.S. government-sponsored entities, and the U.S. Treasury accounted for approximately 99% of the total available-for-sale portfolio as of June 30, 2018, and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government. The Corporation’s OTTI assessment was concentrated mainly on private label MBS, and on Puerto Rico government debt securities, for which credit losses are evaluated on a quarterly basis. The Corporation considered the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover:

·The length of time and the extent to which the fair value has been less than the amortized cost basis;

·Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the financial condition of the issuer, credit ratings, the failure of the issuer to make scheduled principal or interest payments, recent legislation and government actions affecting the issuer’s industry, and actions taken by the issuer to deal with the present economic climate;

·Changes in the near term prospects of the underlying collateral for a security, if any, such as changes in default rates, loss severity given default, and significant changes in prepayment assumptions; and

·The level of cash flows generated from the underlying collateral, if any, supporting the principal and interest payments of the debt securities.

The Corporation recorded OTTI losses on available-for-sale debt securities as follows:

		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands)
Total OTTI losses		$	-	$	-	$	-	$	(12,231)
Portion of OTTI recognized in OCI			-		-		-		-
Net impairment losses recognized in earnings (1)		$	-	$	-	$	-	$	(12,231)
(1)	Credit losses on Puerto Rico government debt securities, recorded in the first quarter of 2017.

24

The following tables summarize the roll-forward of credit losses on debt securities held by the Corporation for which a portion of an OTTI is recognized in OCI:
	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments		Credit loss
	March 31,		recognized in earnings on		reductions for		June 30,
	2018		securities that have been		securities sold		2018
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Private label MBS	$	6,792	$	-	$	-	$	6,792

	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments		Credit loss
	December 31,		recognized in earnings on		reductions for		June 30,
	2017		securities that have been		securities sold		2018
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Private label MBS	$	6,792	$	-	$	-	$	6,792

	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments
	March 31,		recognized in earnings		Credit loss reductions		June 30,
	2017		on securities that have been		for securities sold		2017
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Puerto Rico government obligations	$	34,420	$	-	$	(34,420)	$	-
Private label MBS		6,792		-		-		6,792
Total OTTI credit losses for available-for-sale
debt securities	$	41,212	$	-	$	(34,420)	$	6,792

	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments
	December 31,		recognized in earnings		Credit loss reductions		June 30,
	2016		on securities that have been		for securities sold		2017
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Puerto Rico government obligations	$	22,189	$	12,231	$	(34,420)	$	-
Private label MBS		6,792		-		-		6,792
Total OTTI credit losses for available-for-sale
debt securities	$	28,981	$	12,231	$	(34,420)	$	6,792

25

   During the second quarter of 2017, the Corporation sold for an aggregate of $23.4 million three Puerto Rico government available-for-sale debt securities, specifically bonds of the Government Development Bank for Puerto Rico (the “GDB”) and the Puerto Rico Public Buildings Authority, carried on its book at an amortized cost at the time of sale of $23.0 million (net of $34.4 million in cumulative OTTI impairment charges). Approximately $12.2 million of the cumulative OTTI charges on these securities was recorded in the first quarter of 2017.

      For the OTTI charge recorded on the Puerto Rico government debt securities in the first quarter of 2017, the Corporation considered the latest available information about the Puerto Rico government’s financial condition, including but not limited to credit ratings downgrades, revised estimates of recovery rates, and other relevant developments such as government actions, including debt exchange proposals and the fiscal plan published by the Puerto Rico government in March 2017, as applicable. The Corporation applied a discounted cash flow analysis to its Puerto Rico government debt securities in order to calculate the cash flows expected to be collected and to determine if any portion of the decline in market value of these securities was considered a credit-related OTTI.  The analysis derived an estimate of value based on the present value of risk-adjusted cash flows of the underlying securities and included of the following components:

·The contractual future cash flows of the bonds were projected based on the key terms as set forth in the official statements for each security. Such key terms included, among others, the interest rate, amortization schedule, if any, and maturity date.

·The risk-adjusted cash flows were calculated based on a probability of default analysis and recovery rate assumptions, including the weighting of different scenarios of ultimate recovery, considering the credit rating of each security. Constant monthly default rates were assumed throughout the life of the bonds, which considered the respective security’s credit rating as of the date of the analysis.

·The adjusted future cash flows were then discounted at the original effective yield of each investment based on the purchase price and expected risk-adjusted future cash flows as of the purchase date of each investment.

      The discounted risk-adjusted cash flow analysis for the three Puerto Rico government bonds mentioned above assumed a default probability of 100%, as these three non-performing bonds had been in default since the third quarter of 2016. Based on this analysis, the Corporation recorded in the first quarter of 2017 credit-related OTTI amounting to $12.2 million, assuming recovery rates ranging from 15% to 80% (with a weighted average of 41%).

    In addition, the Corporation performed an OTTI assessment on its private label MBS, which are collateralized by fixed-rate mortgages on single-family residential properties in the United States. The interest rate on these private-label MBS is variable, tied to 3-month LIBOR and limited to the weighted-average coupon on the underlying collateral. The underlying mortgages are fixed-rate, single-family loans with original high FICO scores (over 700) and moderate loan-to-value ratios (under 80%), as well as moderate delinquency levels.

  Based on the expected cash flows, and since the Corporation does not have the intention to sell the securities and has sufficient capital and liquidity to hold these securities until a recovery of the fair value occurs, only the credit loss component, if any, is reflected in earnings.  Significant assumptions in the valuation of the private label MBS were as follows:

	As of		As of
	June 30, 2018		December 31, 2017
	Weighted		Weighted
	Average	Range	Average	Range
Discount rate	14.6%	14.6%	14.0%	14.0%
Prepayment rate	12.6%	5.0% - 23.0%	16.4%	12.0% - 29.0%
Projected Cumulative Loss Rate	4%	0% - 8.7%	3%	0% - 6.8%
No OTTI charges on private label MBS were recorded in either the first half of 2018 or the first half of 2017.

26

Investments Held to Maturity

The amortized cost, gross unrecognized gains and losses, estimated fair value, weighted-average yield and contractual maturities of investment securities held to maturity as of June 30, 2018 and December 31, 2017 were as follows:

		June 30, 2018
		Amortized cost						Fair value
				Gross Unrecognized
				gains		losses				Weighted- average yield%
Puerto Rico Municipal Bonds:
	After 1 to 5 years	$	3,712	$	-	$	151	$	3,561	5.68
	After 5 to 10 years		39,523		-		2,705		36,818	5.63
	After 10 years		107,251		-		12,200		95,051	5.78
Total investment securities
	held to maturity	$	150,486	$	-	$	15,056	$	135,430	5.74

		December 31, 2017
		Amortized cost						Fair value
				Gross Unrecognized
				gains		losses				Weighted- average yield%
Puerto Rico Municipal Bonds:
	After 1 to 5 years	$	3,853	$	-	$	173	$	3,680	5.38
	After 5 to 10 years		39,523		-		3,048		36,475	5.28
	After 10 years		107,251		-		16,374		90,877	4.93
Total investment securities
	held to maturity	$	150,627	$	-	$	19,595	$	131,032	5.03

27

The following tables show the Corporation’s held-to-maturity investments’ fair value and gross unrecognized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrecognized loss position, as of June 30, 2018 and December 31, 2017:

	As of June 30, 2018
	Less than 12 months				12 months or more				Total
			Unrecognized				Unrecognized				Unrecognized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
		(In thousands)
Debt securities:
Puerto Rico Municipal Bonds	$	-	$	-	$	135,430	$	15,056	$	135,430	$	15,056
	As of December 31, 2017
	Less than 12 months				12 months or more				Total
			Unrecognized				Unrecognized				Unrecognized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
		(In thousands)
Debt securities:
Puerto Rico Municipal Bonds	$	-	$	-	$	131,032	$	19,595	$	131,032	$	19,595

     The Corporation determines the fair market value of Puerto Rico Municipal Bonds based on a discounted cash flow analysis using risk-adjusted discount rates. A security with similar characteristics traded in the open market is used as a proxy for each municipal bond. Then the cash flow is discounted at the average spread over the discount curve exhibited by the proxy security at the end of each quarter.

     All of the Puerto Rico Municipal Bonds are performing and current as to scheduled contractual payments as of June 30, 2018. Approximately 70% of the held-to-maturity municipal bonds were issued by three of the largest municipalities in Puerto Rico. The vast majority of revenues of these three municipalities is independent of the Puerto Rico central government. These obligations typically are not issued in bearer form, nor are they registered with the SEC, and they are not rated by external credit agencies. In most cases, these bonds have priority over the payment of operating costs and expenses of the municipality, which 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 loans. The Corporation performs periodic credit quality reviews on these issuers. Based on the quarterly analysis performed, management concluded that no individual debt security held to maturity was other-than-temporarily impaired as of June 30, 2018.

      The PROMESA oversight board has not designated any of Puerto Rico’s 78 municipalities as covered entities under PROMESA. However, while the fiscal plan recently certified by the PROMESA oversight boarddid not contemplate a restructuring of the debt of Puerto Rico’s municipalities, the plan did call for the gradual elimination of budgetary subsidies provided to municipalities by the central government. Furthermore, municipalities are also likely to be affected by the negative economic and other effects resulting from the 2017 hurricanes and from expense, revenue or cash management measures taken by the Puerto Rico government to address its fiscal and liquidity shortfalls, or measures included in fiscal plans of other government entities, such as the fiscal plans of the GDB and the Puerto Rico Electric Power Authority (“PREPA”). Given the uncertain effect that the negative fiscal situation of the Puerto Rico central government and the measures taken, or to be taken, by other government entities may have on municipalities, the Corporation cannot be certain if future impairment charges will be required relating to these securities.  

     From time to time, the Corporation has securities held to maturity with an original maturity of three months or less that are considered cash and cash equivalents and classified as money market investments in the consolidated statements of financial condition.  As of June 30, 2018 and December 31, 2017, the Corporation had no outstanding securities held to maturity that were classified as cash and cash equivalents.

28

NOTE 6 – OTHER INVESTMENT SECURITIES

Institutions that are members of the FHLB system are required to maintain a minimum investment in FHLB stock. Such minimum investment is calculated as a percentage of aggregate outstanding mortgages, and the FHLB requires an additional investment that is calculated as a percentage of total FHLB advances, letters of credit, and the collateralized portion of outstanding interest-rate swaps. The stock is capital stock issued at $100 par value. Both stock and cash dividends may be received on FHLB stock.

As of June 30, 2018 and December 31, 2017, the Corporation had investments in FHLB stock with a book value of $40.8 million and $40.9 million, respectively. Dividend income from FHLB stock for the quarters ended June 30, 2018 and 2017 was $0.7 million and $0.5 million, respectively, and for the six-month periods ended June 30, 2018 and 2017 was $1.3 million and $0.9 million, respectively.

The FHLB of New York issued the shares of FHLB stock owned by the Corporation. The FHLB of New York is part of the Federal Home Loan Bank System, a national wholesale banking network of 11 regional, stockholder-owned congressionally chartered banks. The FHLBs are all privately capitalized and operated by their member stockholders. The system is supervised by the Federal Housing Finance Agency, which ensures that the FHLBs operate in a financially safe and sound manner, remain adequately capitalized and able to raise funds in the capital markets, and carry out their housing finance mission.

On January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities with a readily determinable fair value of approximately $0.4 million from available-for-sale investment securities to other investment securities. During the second quarter and six-month period ended June 30, 2018, the Corporation measured these equity securities at fair value through earnings resulting in the recognition of market-to-market losses of $3 thousand and $10 thousand, respectively, recorded as part of other non-interest income in the statement of income.

    The Corporation has other equity securities that do not have readily available fair values. The aggregate carrying value of such securities as of June 30, 2018 and December 31, 2017 was $2.2 million.

NOTE 7 – LOANS HELD FOR INVESTMENT

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

		As of June 30,		As of December 31,
		2018		2017
(In thousands)
Residential mortgage loans, mainly secured by first mortgages		$	3,238,001	$	3,290,957
Commercial loans:
Construction loans (1)			84,683		111,397
Commercial mortgage loans (1)(2)			1,533,308		1,614,972
Commercial and Industrial loans (3)			2,009,049		2,083,253
Total commercial loans			3,627,040		3,809,622
Finance leases			283,274		257,462
Consumer loans			1,491,976		1,492,435
Loans held for investment			8,640,291		8,850,476
Allowance for loan and lease losses			(222,035)		(231,843)
Loans held for investment, net		$	8,418,256	$	8,618,633
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million) in non-performing loans to held for sale. Loans transferred to held for sale consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).
(2)	During the second quarter of 2018, the Corporation completed the sale of a $10.4 million non-performing commercial mortgage loan that was among the loans transferred to held for sale in the first quarter of 2018.
(3)	As of June 30, 2018 and December 31, 2017, includes $792.0 million and $833.5 million, respectively, of commercial loans that are secured by real estate but are not dependent upon the real estate for repayment.

29

Loans held for investment on which accrual of interest income had been discontinued were as follows:
		As of		As of
		June 30,		December 31,
(In thousands)		2018		2017
Non-performing loans:
	Residential mortgage	$	162,539	$	178,291
	Commercial mortgage (1)		142,614		156,493
	Commercial and Industrial		76,887		85,839
	Construction:
	Land		12,926		15,026
	Construction-commercial (1)		-		35,100
	Construction-residential		1,222		1,987
	Consumer:
	Auto loans		12,299		10,211
	Finance leases		2,032		1,237
	Other consumer loans		8,622		5,370
Total non-performing loans held for investment (2)(3)(4)		$	419,141	$	489,554
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million) in non-performing loans to held for sale. Loans transferred to held for sale consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).
(2)	Excludes $54.5 million and $8.3 million of non-performing loans held for sale as of June 30, 2018 and December 31, 2017, respectively.
(3)	Amount excludes purchased-credit impaired (“PCI”) loans with a carrying value of approximately $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, 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.
(4)	Non-performing loans exclude $393.3 million and $374.7 million of Troubled Debt Restructuring (“TDR”) loans that are in compliance with modified terms and in accrual status as of June 30, 2018 and December 31, 2017, respectively.

During the first quarter of 2018, the Corporation transferred to held for sale three non-performing commercial and construction loans. The aggregate recorded investment in these loans was written down to $57.2 million, which resulted in charge-offs of $9.7 million, of which $4.1 million was taken against previously-established reserves for loan losses, resulting in a charge to the provision for loan and lease losses of $5.6 million in the first quarter of 2018. Loans transferred to held for sale consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).

During the second quarter of 2018, the Corporation completed the sale of a $10.4 million non-performing commercial mortgage loan that was among the loans transferred to held for sale during the first quarter.

Loans in Process of Foreclosure

    As of June 30, 2018, the recorded investment of residential mortgage loans collateralized by residential real estate property that are in the process of foreclosure amounted to $142.6 million, including $21.8 million of loans insured by the FHA or guaranteed by the VA, and $12.4 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 (i.e., Puerto Rico, Florida and USVI) require the foreclosure to be processed through the state’s court while foreclosure in non-judicial states (i.e., BVI) is processed without court intervention. Foreclosure timelines vary according to state law and investor guidelines. Occasionally, foreclosures may be delayed due to, among other reasons, mandatory mediations, bankruptcy, court delays and title issues.

30

The Corporation’s aging of the loans held for investment portfolio is as follows:
										Purchased Credit-Impaired Loans
		30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due (1)(2)(3)		Total Past Due						Total loans held for investment		90 days past due and still accruing (1)(2)(3)
As of June 30, 2018
(In thousands)												Current
Residential mortgage:
FHA/VA  government-guaranteed loans (2)(3)(4)		$	-	$	3,810	$	109,995	$	113,805	$	-	$	37,698	$	151,503	$	109,995
Other residential mortgage loans (4)			-		55,861		177,340		233,201		148,025		2,705,272		3,086,498		14,801
Commercial:
Commercial and Industrial loans			2,768		10,261		77,456		90,485		-		1,918,564		2,009,049		569
Commercial mortgage loans (4)			-		2,401		145,760		148,161		4,217		1,380,930		1,533,308		3,146
Construction:
Land (4)			-		68		18,836		18,904		-		6,135		25,039		5,910
Construction-commercial			-		-		1,013		1,013		-		52,806		53,819		1,013
Construction-residential (4)			-		-		1,222		1,222		-		4,603		5,825		-
Consumer:
Auto loans			32,527		6,906		12,299		51,732		-		804,224		855,956		-
Finance leases			5,777		1,404		2,032		9,213		-		274,061		283,274		-
Other consumer loans			8,112		5,039		14,649		27,800		-		608,220		636,020		6,027
Total loans held for investment		$	49,184	$	85,750	$	560,602	$	695,536	$	152,242	$	7,792,513	$	8,640,291	$	141,461
_____________
(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 Corporationʼs 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 $30.1 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 June 30, 2018.
(3)	As of June 30, 2018, includes $78.7 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 Corporationʼs 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 June 30, 2018 amounted to $6.8 million, $112.0 million, $3.0 million, $0.4 million, $0.3 million and $0.6 million, respectively.

As of December 31, 2017		30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due  (1)(2)(3)								Total loans held for investment		90 days past due and still accruing (1)(2)(3)
(In thousands)									Total Past Due		Purchased Credit- Impaired Loans		Current
Residential mortgage:
FHA/VA government-guaranteed loans (2) (3) (4)		$	-	$	6,792	$	102,815	$	109,607	$	-	$	29,332	$	138,939	$	102,815
Other residential mortgage loans (4)			-		92,502		193,750		286,252		153,991		2,711,775		3,152,018		15,459
Commercial:
Commercial and Industrial loans			8,971		576		88,156		97,703		-		1,985,550		2,083,253		2,317
Commercial mortgage loans (4)			-		7,525		163,180		170,705		4,183		1,440,084		1,614,972		6,687
Construction:
Land (4)			-		124		15,177		15,301		-		11,630		26,931		151
Construction-commercial			-		-		35,100		35,100		-		41,456		76,556		-
Construction-residential			-		95		1,987		2,082		-		5,828		7,910		-
Consumer:
Auto loans			57,560		23,783		10,211		91,554		-		752,777		844,331		-
Finance leases			10,549		3,484		1,237		15,270		-		242,192		257,462		-
Other consumer loans			10,776		5,052		9,361		25,189		-		622,915		648,104		3,991
Total loans held for investment		$	87,856	$	139,933	$	620,974	$	848,763	$	158,174	$	7,843,539	$	8,850,476	$	131,420
____________
(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 Corporationʼs 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 $29.9 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 December 31, 2017.
(3)	As of December 31, 2017, includes $62.1 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 Corporationʼs 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, and land loans past due 30-59 days as of December 31, 2017 amounted to $6.0 million, $224.0 million, $9.0 million, and $2.5 million, respectively.

The Corporation’s credit quality indicators by loan type as of June 30, 2018 and December 31, 2017 are summarized below:
		Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
June 30, 2018
(In thousands)
Commercial mortgage		$	291,045	$	-	$	-	$	291,045	$	1,533,308
Construction:
Land			14,350		-		-		14,350		25,039
Construction - commercial			-		-		-		-		53,819
Construction - residential			1,222		-		-		1,222		5,825
Commercial and Industrial			123,855		5,072		341		129,268		2,009,049
		Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
December 31, 2017
(In thousands)
Commercial mortgage		$	257,503	$	4,166	$	-	$	261,669	$	1,614,972
Construction:
Land			15,971		490		-		16,461		26,931
Construction - commercial			35,100		-		-		35,100		76,556
Construction - residential			1,987		-		-		1,987		7,910
Commercial and Industrial			154,416		3,854		676		158,946		2,083,253
_________
(1)	Excludes non-performing loans held for sale of $54.5 million ($16.8 million commercial mortgage, $30.0 million construction-commercial, and $7.7 million construction-land) and $8.3 million (construction-land) as of June 30, 2018 and December 31, 2017, respectively.

31

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 highly questionable and improbable, on the basis of currently known facts, conditions and values. 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 asset even though partial recovery may occur in the future. There is little or no prospect for near term improvement and no realistic strengthening action of significance pending.

The Corporation periodically reviews its loans classification to evaluate if they are properly classified, and to determine impairment, if any. The frequency of these reviews will depend on the amount of the aggregate outstanding debt, and the risk rating classification of the obligor. In addition, during the renewal and annual review process of applicable credit facilities, the Corporation evaluates the corresponding loan grades.

The Corporation has a Loan Review Group that reports directly to the Corporation’s Risk Management Committee and administratively to the Chief Risk Officer, which performs annual comprehensive credit process reviews of the Bank’s commercial portfolios. This group evaluates the credit risk profile of portfolios, including the assessment of the risk rating representative of the current credit quality of the loans, and the evaluation of collateral documentation. The monitoring performed by this group contributes to assess compliance with credit policies and underwriting standards, determine the current level of credit risk, evaluate the effectiveness of the credit management process and identify control deficiencies that may arise in the credit-granting process. Based on its findings, the Loan Review Group recommends corrective actions, if necessary, that help in maintaining a sound credit process. The Loan Review Group reports the results of the credit process reviews to the Risk Management Committee of the Corporation’s Board of Directors.

		Consumer Credit Exposure - Credit Risk Profile Based on Payment Activity
		Residential Real Estate				Consumer
June 30, 2018		FHA/VA/ Guaranteed(1)		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing		$	151,503	$	2,775,934	$	843,657	$	281,242	$	627,398
Purchased Credit-Impaired (2)			-		148,025		-		-		-
Non-performing			-		162,539		12,299		2,032		8,622
Total		$	151,503	$	3,086,498	$	855,956	$	283,274	$	636,020
(1)	It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as 90 days past-due loans and still accruing as opposed to non-performing loans since the principal repayment is insured. This balance includes $30.1 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 June 30, 2018.
(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, 2017		FHA/VA/ Guaranteed  (1)		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing		$	138,939	$	2,819,736	$	834,120	$	256,225	$	642,734
Purchased Credit-Impaired (2)			-		153,991		-		-		-
Non-performing			-		178,291		10,211		1,237		5,370
Total		$	138,939	$	3,152,018	$	844,331	$	257,462	$	648,104
(1)	It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as 90 days past-due loans and still accruing as opposed to non-performing loans since the principal repayment is insured. This balance includes $29.9 million of residential mortgage loans insured by the FHA or guaranteed by the VA, which are over 15 months delinquent, and are no longer accruing interest as of December 31, 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.

32

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

Impaired Loans
									Quarter Ended				Six-Month Period Ended
										June 30, 2018
	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 June 30, 2018
With no related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		121,396		163,583		-		123,058		788		193		1,529		351
Commercial:
Commercial mortgage loans		58,992		100,247		-		62,892		119		41		201		78
Commercial and Industrial loans		43,566		60,380		-		45,086		496		8		920		20
Consumer:
Auto loans		326		326		-		342		4		-		5		-
Other consumer loans		2,454		2,801		-		2,639		35		9		72		21
	$	226,734	$	327,337	$	-	$	234,017	$	1,442	$	251	$	2,727	$	470
With a related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		287,689		312,868		19,804		290,079		3,570		178		7,089		473
Commercial:
Commercial mortgage loans		116,583		127,995		12,204		119,058		737		307		1,397		354
Commercial and Industrial loans		67,805		80,850		10,592		69,293		128		8		253		24
Construction:
Land		11,009		19,868		1,022		11,522		23		7		47		15
Construction-residential		252		355		39		252		-		-		-		-
Consumer:
Auto loans		19,367		19,367		3,697		20,484		385		-		779		-
Finance leases		1,594		1,594		162		1,754		28		-		59		-
Other consumer loans		9,101		9,584		1,994		9,434		241		25		489		53
	$	513,400	$	572,481	$	49,514	$	521,876	$	5,112	$	525	$	10,113	$	919
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		409,085		476,451		19,804		413,137		4,358		371		8,618		824
Commercial:
Commercial mortgage loans		175,575		228,242		12,204		181,950		856		348		1,598		432
Commercial and Industrial loans		111,371		141,230		10,592		114,379		624		16		1,173		44
Construction:
Land		11,009		19,868		1,022		11,522		23		7		47		15
Construction-commercial		-		-		-		-		-		-		-		-
Construction-residential		252		355		39		252		-		-		-		-
Consumer:
Auto loans		19,693		19,693		3,697		20,826		389		-		784		-
Finance leases		1,594		1,594		162		1,754		28		-		59		-
Other consumer loans		11,555		12,385		1,994		12,073		276		34		561		74
	$	740,134	$	899,818	$	49,514	$	755,893	$	6,554	$	776	$	12,840	$	1,389

33

Impaired Loans
	Recorded Investment		Unpaid Principal Balance		Related Specific Allowance		Year-To-Date Average Recorded Investment
(In thousands)
As of December 31, 2017
With no related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		116,818		154,048		-		120,241
Commercial:
Commercial mortgage loans		65,100		100,612		-		86,563
Commercial and Industrial loans		28,292		31,254		-		28,567
Construction:
Land		48		49		-		48
Consumer:
Auto loans		267		267		-		290
Other consumer loans		2,521		3,688		-		2,745
	$	213,046	$	289,918	$	-	$	238,454
With a related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		316,616		349,284		22,086		318,606
Commercial:
Commercial mortgage loans		87,814		124,084		9,783		93,720
Commercial and Industrial loans		90,008		112,005		12,359		92,666
Construction:
Land		11,865		19,973		1,402		14,126
Construction-commercial		35,101		38,595		560		35,996
Construction-residential		252		355		55		252
Consumer:
Auto loans		22,338		22,338		3,665		24,328
Finance leases		2,184		2,184		104		2,428
Other consumer loans		11,084		11,830		1,396		11,579
	$	577,262	$	680,648	$	51,410	$	593,701
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		433,434		503,332		22,086		438,847
Commercial:
Commercial mortgage loans		152,914		224,696		9,783		180,283
Commercial and Industrial loans		118,300		143,259		12,359		121,233
Construction:
Land		11,913		20,022		1,402		14,174
Construction-commercial		35,101		38,595		560		35,996
Construction-residential		252		355		55		252
Consumer:
Auto loans		22,605		22,605		3,665		24,618
Finance leases		2,184		2,184		104		2,428
Other consumer loans		13,605		15,518		1,396		14,324
	$	790,308	$	970,566	$	51,410	$	832,155
Interest income of approximately $6.8 million ($6.3 million on an accrual basis and $0.5 million on a cash basis) and $13.6 million ($12.4 million on an accrual basis and $1.2 million on a cash basis) was recognized on impaired loans for the second quarter and six-month period ended June 30, 2017, respectively.

34

The following tables show the activity for impaired loans and the related specific reserve for the quarters and six-month periods ended June 30, 2018 and 2017:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
			2018		2017		2018		2017
(In thousands)
Impaired Loans:
Balance at beginning of period		$	746,280	$	807,198	$	790,308	$	887,905
Loans determined impaired during the period			34,273		18,976		95,681		38,604
Charge-offs (1)(2)			(13,207)		(43,083)		(30,420)		(60,487)
Loans sold, net of charge-offs			-		-		(4,121)		(53,245)
Increases to existing impaired loans			77		698		7,075		1,239
Foreclosures			(7,777)		(21,233)		(19,452)		(30,690)
Loans no longer considered impaired			(2,433)		(1,890)		(3,940)		(2,782)
Loans transferred to held for sale			-		-		(57,213)		-
Paid in full or partial payments			(17,079)		(25,041)		(37,784)		(44,919)
Balance at end of period		$	740,134	$	735,625	$	740,134	$	735,625
(1)	For the six-month period ended June 30, 2018 includes charge-offs totaling $9.7 million associated with the $57.2 million in non-performing loans transferred to held for sale.
(2)	For the six-month period ended June 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				Six-Month Period Ended
	June 30,				June 30,
	2018		2017		2018		2017
(In thousands)
Specific Reserve:
Balance at beginning of period	$	56,930	$	66,311	$	51,410		64,421
Provision for loan losses		5,753		17,563		28,456		36,195
Net charge-offs		(13,169)		(43,080)		(30,352)		(59,822)
Balance at end of period	$	49,514	$	40,794	$	49,514	$	40,794

35

   Purchased Credit Impaired Loans (PCI) 

    The Corporation acquired PCI loans accounted for under ASC 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC Topic 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, that 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 Topic 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 Topic 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 under ASC Topic 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 amounts of PCI loans were as follows:
	As of
	June 30,		December 31,
	2018		2017
(In thousands)
Residential mortgage loans	$	148,025	$	153,991
Commercial mortgage loans		4,217		4,183
Total PCI loans	$	152,242	$	158,174
Allowance for loan losses		(11,354)		(11,251)
Total PCI loans, net of allowance for loan losses	$	140,888	$	146,923

The following tables present PCI loans by past due status as of June 30, 2018 and December 31, 2017:
As of June 30, 2018		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
										Current
(In thousands)
Residential mortgage loans		$	-	$	8,588	$	27,024	$	35,612	$	112,413	$	148,025
Commercial mortgage loans			-		-		3,252		3,252		965		4,217
Total (1)		$	-	$	8,588	$	30,276	$	38,864	$	113,378	$	152,242
_____________
(1)	According to the Corporationʼs 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 June 30, 2018 amounted to $11.7 million. No PCI commercial mortgage loan was 30-59 days past due as of June 30, 2018.
As of December 31, 2017		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
										Current
(In thousands)
Residential mortgage loans		$	-	$	16,600	$	26,471	$	43,071	$	110,920	$	153,991
Commercial mortgage loans			-		355		2,834		3,189		994		4,183
Total (1)		$	-	$	16,955	$	29,305	$	46,260	$	111,914	$	158,174
(1)	According to the Corporationʼs 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, 2017 amounted to $28.1 million and $0.2 million, respectively.

36

Initial Fair Value and Accretable Yield of PCI Loans

At acquisition of PCI loans, the Corporation estimated the cash flows the Corporation expected to collect on the 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. As of June 30, 2018, the reserve related to PCI loans acquired from Doral Financial in 2014 and from Doral Bank in 2015 amounted to $11.4 million.

Changes in the accretable yield of PCI loans for the quarters and six-month periods ended June 30, 2018 and 2017 were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30,		June 30,		June 30,		June 30,
	2018		2017		2018		2017
(In thousands)
Balance at beginning of period	$	101,059	$	113,665	$	103,682	$	116,462
Accretion recognized in earnings		(2,570)		(2,724)		(5,193)		(5,521)
Reclassification (to) from non-accretable		-		(1,970)		-		(1,970)
Balance at end of period	$	98,489	$	108,971	$	98,489	$	108,971

37

Changes in the carrying amount of loans accounted for pursuant to ASC 310-30 were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
(In thousands)
Balance at beginning of period	$	155,281	$	163,100	$	158,174	$	165,818
Accretion		2,570		2,724		5,193		5,521
Collections		(4,359)		(4,509)		(7,755)		(9,102)
Foreclosures		(1,250)		(947)		(3,370)		(1,869)
Ending balance	$	152,242	$	160,368	$	152,242	$	160,368
Allowance for loan losses		(11,354)		(9,446)		(11,354)		(9,446)
Ending balance, net of allowance for loan losses	$	140,888	$	150,922	$	140,888	$	150,922

Changes in the allowance for loan losses related to PCI loans were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
(In thousands)
Balance at beginning of period	$	11,251	$	6,857	$	11,251	$	6,857
Provision for loan losses		103		2,589		103		2,589
Balance at the end of period	$	11,354	$	9,446	$	11,354	$	9,446

 The outstanding principal balance of PCI loans, including amounts charged off by the Corporation, amounted to $188.0 million as of June 30, 2018 (December 2017 - $196.6 million).

38

Purchases and Sales of Loans

During the first six months of 2018, the Corporation purchased $29.7 million of residential mortgage loans consistent with a strategic program to purchase ongoing residential mortgage loan production from mortgage bankers in Puerto Rico. In general, 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 FNMA and FHLMC, which generally securitize the transferred loans into mortgage-backed securities for sale into the secondary market. During the first six months of 2018, the Corporation sold $119.8 million of FHA/VA mortgage loans to GNMA, which packaged them into mortgage-backed securities. Also, during the first six months of 2018, the Corporation sold approximately $51.1 million of performing residential mortgage loans to FNMA and FHLMC.  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). The total amount of loans sold in the secondary market included $9.8 million of seasoned residential mortgage loans sold to FNMA in the second quarter of 2018.

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

Under ASC Topic 860, Transfer and Servicing, once the Corporation has the unilateral ability to repurchase the delinquent loan, it is considered to have regained effective control over the loan and is required to recognize the loan and a corresponding repurchase liability on the balance sheet regardless of the Corporation’s intent to repurchase the loan. As of June 30, 2018 and December 31, 2017, rebooked GNMA delinquent loans included in the residential mortgage loan portfolio amounted to $78.7 million and $62.1 million, respectively.

   During the first six months of 2018 and 2017, the Corporation repurchased, pursuant to its repurchase option with GNMA, $2.0 million and $17.5 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, which is 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. During the fourth quarter of 2017, the Corporation requested and received approval from GNMA for the exclusion of loans in the areas affected by Hurricanes Irma and Maria from calculations of delinquency and default ratios established in the GNMA Mortgage-Backed Securities Guide. 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’s estimate of losses related to breaches in representations and warranties is zero as of June 30, 2018.

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 $3 thousand and $16 thousand during the first half of 2018 and 2017, 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.

In addition, during the first six months of 2018, the Corporation purchased a $21.4 million commercial and industrial loan participation. Also, during the first six months of 2018, the Corporation sold a $5.6 million commercial and industrial adversely-classified loan in Puerto Rico (recording a charge-off of $1.3 million), a $10.4 million non-performing commercial mortgage loan held for sale in Puerto Rico, and a $9.2 million commercial and industrial loan participation in the Florida region.

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 of $53.2 million from the sale resulted in an incremental loss of $0.6 million recorded as a charge to the provision for loan and lease losses in the first quarter of 2017.

39

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 $8.6 billion as of June 30, 2018, credit risk concentration was approximately 75% in Puerto Rico, 19% in the United States, and 6% in the USVI and BVI.

    As of June 30, 2018, the Corporation had $54.6 million outstanding in loans extended to the Puerto Rico government, its municipalities and public corporations, compared to $55.9 million as of December 31, 2017. Approximately $33.1 million of the outstanding loans as of June 30, 2018 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. In addition to loans extended to municipalities, the Corporation’s exposure to the Puerto Rico government as of June 30, 2018 includes a $6.7 million loan extended to a unit of the central government, and a $14.8 million loan granted to an affiliate of PREPA.

    In addition, the Corporation had $114.7 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 under the mortgage loan insurance program. According to the most recently-released audited financial statements of the Puerto Rico Housing Finance Authority, as of June 30, 2016, the Puerto Rico Housing Finance Authority’s mortgage loans insurance program covered loans in an aggregate of approximately $576 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, 2016, 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 June 30, 2018, the Corporation had $72.5 million in loans to USVI government instrumentalities and public corporations, compared to $70.4 million as of December 31, 2017.  Of the amount outstanding as of June 30, 2018, public corporations of the USVI owed approximately $49.2 million and an independent instrumentality of the USVI government owed approximately $23.2 million.  As of June 30, 2018, all loans were currently performing and up to date on principal and interest payments.

    The Corporation cannot predict at this time the ultimate effect that the current fiscal situation of the Commonwealth of Puerto Rico, the uncertainty about the debt restructuring process, 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 the effect of Hurricane Maria will have on the Puerto Rico economy, the Corporation’s clients, and the Corporation’s financial condition and results of operations.

40

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 June 30, 2018, the Corporation’s total TDR loans held for investment of $557.2 million consisted of $342.9 million of residential mortgage loans, $91.7 million of commercial and industrial loans, $84.3 million of commercial mortgage loans, $6.4 million of construction loans, and $31.9 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $1.4 million as of June 30, 2018. In addition, the loans held for sale portfolio includes a $30.0 million TDR construction loan.

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 June 30, 2018, the Corporation classified an additional $1.1 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 loans in these portfolios 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 are considered to be concessions. The Corporation mitigates loan defaults for these loan portfolios through its collection function. The function’s objective is to minimize both early stage delinquencies and losses upon default of loans in these portfolios. 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 generally 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 not considered concessions, and the loans continue to be recorded as performing.

41

Selected information on TDR loans held for investment that includes the recorded investment by loan class and modification type is summarized in the following tables. This information reflects all TDRs held for investment:
		June 30, 2018
		Interest rate below market		Maturity or term extension		Combination of reduction in interest rate and extension of maturity		Forgiveness of principal and/or interest		Forbearance Agreement		Other (1)		Total
(In thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans		$	23,972	$	8,481	$	249,820	$	-	$	158	$	60,423	$	342,854
Commercial Mortgage loans			5,594		31,646		35,499		-		1,970		9,572		84,281
Commercial and Industrial loans			1,239		20,221		14,562		-		4,534		51,113		91,669
Construction loans:															-
Land			17		3,697		2,149		-		-		381		6,244
Construction-commercial (2)			-		-		-		-		-		-		-
Construction-residential			-		-		-		-		-		217		217
Consumer loans - Auto			-		1,746		11,666		-		-		6,280		19,692
Finance leases			-		158		1,436		-		-		-		1,594
Consumer loans - Other			1,178		1,612		5,932		216		-		1,707		10,645
Total Troubled Debt Restructurings		$	32,000	$	67,561	$	321,064	$	216	$	6,662	$	129,693	$	557,196
(1)	Other concessions granted by the Corporation included deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation, or a combination of the concessions listed in the table.
(2)	Excludes TDRs held for sale amounting to $30.0 million as of June 30, 2018.

		December 31, 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		Forbearance Agreement		Other (1)		Total
(In thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans		$	25,964	$	8,318	$	267,578	$	-	$	-	$	62,070	$	363,930
Commercial Mortgage loans			6,563		2,094		31,870		-		-		10,285		50,812
Commercial and Industrial loans			2,510		20,648		16,049		-		6,623		48,282		94,112
Construction loans:
Land			18		3,941		2,186		-		-		331		6,476
Construction-commercial			-		-		-		35,100		-		-		35,100
Construction-residential			-		-		-		-		-		217		217
Consumer loans - Auto			-		1,347		14,233		-		-		7,025		22,605
Finance leases			-		238		1,946		-		-		-		2,184
Consumer loans - Other			892		2,097		6,891		217		-		1,686		11,783
Total Troubled Debt Restructurings		$	35,947	$	38,683	$	340,753	$	35,317	$	6,623	$	129,896	$	587,219
(1)	Other concessions granted by the Corporation included 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.

42

	The following table presents the Corporationʼs TDR loans held for investment activity:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands)
Beginning balance of TDRs		$	572,376	$	602,364	$	587,219	$	647,048
New TDRs			13,228		13,368		56,647		54,267
Increases to existing TDRs			75		330		6,846		754
Charge-offs post modification (1)(2)			(8,616)		(9,365)		(17,787)		(24,027)
Sales, net of charge-offs			-		-		-		(53,245)
Foreclosures			(3,759)		(16,150)		(10,802)		(20,521)
TDR transferred to held for sale, net of charge-off			-		-		(30,000)		-
Paid-off and partial payments			(16,108)		(22,004)		(34,927)		(35,733)
Ending balance of TDRs		$	557,196	$	568,543	$	557,196	$	568,543
(1)	The six-month period ended June 30, 2018 includes a charge-off of $5.1 million associated with a $30.0 million construction loan transferred to held for sale.
(2)	The six-month period ended June 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 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 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 an impaired loan in the calendar years subsequent to the restructuring, if it is in compliance with its modified terms. The Corporation did not remove any loans from the TDR classification during the first six months of 2018 and 2017.

43

The following table provides a breakdown of the TDR loans held for investment by those in accrual and nonaccrual status:
		As of June 30, 2018
		Accrual		Nonaccrual(1)		Total TDRs
(In thousands)
Non-FHA/VA Residential Mortgage loans		$	270,358	$	72,496	$	342,854
Commercial Mortgage loans			54,354		29,927		84,281
Commercial and Industrial loans			43,478		48,191		91,669
Construction loans:
Land			1,091		5,153		6,244
Construction-commercial (2)			-		-		-
Construction-residential			-		217		217
Consumer loans - Auto			13,345		6,347		19,692
Finance leases			1,334		260		1,594
Consumer loans - Other			9,321		1,324		10,645
Total Troubled Debt Restructurings		$	393,281	$	163,915	$	557,196
(1)	Included in non-accrual loans are $51.7 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.
(2)	Excludes a $30.0 million non-performing construction loans transferred to held for sale during the first quarter of 2018.

		As of December 31, 2017
		Accrual		Nonaccrual(1)		Total TDRs
(In thousands)
Non- FHA/VA Residential Mortgage loans		$	280,729	$	83,201	$	363,930
Commercial Mortgage loans			23,329		27,483		50,812
Commercial and Industrial loans			41,536		52,576		94,112
Construction loans:
Land			1,291		5,185		6,476
Construction-commercial			-		35,100		35,100
Construction-residential			-		217		217
Consumer loans - Auto			15,548		7,057		22,605
Finance leases			1,968		216		2,184
Consumer loans - Other			10,294		1,489		11,783
Total Troubled Debt Restructurings		$	374,695	$	212,524	$	587,219
(1)	Included in non-accrual loans are $88.6 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.

44

TDR loans exclude restructured residential mortgage loans that are guaranteed by the U.S. federal government (e.g., FHA/VA loans) totaling $62.2 million as of June 30, 2018 (December 31, 2017 - $62.1 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 TDR loans completed during the quarters and six-month periods ended June 30, 2018 and 2017, were as follows:

	Quarter Ended June 30, 2018
	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	19	$	2,034	$	1,934
Commercial Mortgage loans	2		5,765		5,765
Commercial and Industrial loans	3		3,453		3,128
Construction loans:
Land	1		97		97
Consumer loans - Auto	76		1,245		1,239
Consumer loans - Other	231		1,034		1,065
Total Troubled Debt Restructurings	332	$	13,628	$	13,228
	Six-Month Period Ended June 30, 2018
	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	43	$	4,642	$	4,548
Commercial Mortgage loans	5		42,511		42,523
Commercial and Industrial loans	6		6,050		5,710
Construction loans:
Land	1		97		97
Consumer loans - Auto	121		1,925		1,919
Consumer loans - Other	367		1,819		1,850
Total Troubled Debt Restructurings	543	$	57,044	$	56,647

45

	Quarter Ended June 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	48	$	9,577	$	9,483
Commercial Mortgage loans	2		267		267
Commercial and Industrial loans	2		326		326
Consumer loans - Auto	122		1,926		1,926
Finance leases	14		362		362
Consumer loans - Other	193		991		1,004
Total Troubled Debt Restructurings	381	$	13,449	$	13,368
	Six-Month Period Ended June 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	88	$	14,227	$	13,991
Commercial Mortgage loans	8		22,705		22,465
Commercial and Industrial loans	5		11,074		11,074
Construction loans:
Land	1		25		28
Consumer loans - Auto	274		4,173		4,173
Finance leases	22		548		548
Consumer loans - Other	403		1,960		1,988
Total Troubled Debt Restructurings	801	$	54,712	$	54,267

46

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 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 six-month periods ended June 30, 2018 and 2017, and had become TDR during the 12-months preceding the default date, were as follows:

	Quarter Ended June 30,
	2018			2017
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(Dollars in thousands)
Non-FHA/VA Residential Mortgage loans	6	$	681	19	$	2,614
Consumer loans - Auto	31		514	5		69
Consumer loans - Other	28		100	29		103
Total	65	$	1,295	53	$	2,786

	Six-Month Period Ended June 30,
	2018			2017
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(Dollars in thousands)
Non-FHA/VA Residential Mortgage loans	10	$	1,068	22	$	2,891
Commercial Mortgage loans	-		-	1		57
Consumer loans - Auto	33		537	9		130
Consumer loans - Other	39		154	46		164
Finance leases	1		22	-		-
Total	83	$	1,781	78	$	3,242

47

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 is 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).

During the second quarter of 2018, a matured TDR commercial mortgage loan with a book value of $34 million was restructured using the A/B note workout strategy in which note A, with an outstanding balance of $29.4 million as of June 30, 2018 (net of approximately $3.6 million of payments collected in the second quarter), was underwritten to comply with the Corporation’s lending standards at current market rates for debt with similar credit risk characteristics. The A note was restored to accrual status at the time of the restructuring in the second quarter considering the borrower’s sustained historical repayment performance before the restructuring that demonstrated its ability to make timely interest and principal payments under the restructured terms. The B note totaling $33.4 million, consists of amounts mostly charged-off in prior periods and is fully charged-off as of June 30, 2018.

The following table provides additional information about the volume of this type of loan restructuring as of June 30, 2018 and the effect on the allowance for loan and lease losses in the first six months of 2018 and 2017:

	June 30, 2018			June 30, 2017
(In thousands)
Principal balance deemed collectible at end of period	$	64,559	$	36,141
Amount charged off	$	1,137	$	-
Charges to the provision for loan losses	$	1,902	$	388
Allowance for loan losses at end of period	$	4,611	$	5,529

Approximately $32.7 million of the loans restructured using the A/B note restructure workout strategy were in accrual status as of June 30, 2018. These loans continue to be individually evaluated for impairment purposes.

48

NOTE 8 – ALLOWANCE FOR LOAN AND LEASE LOSSES

The changes in the allowance for loan and lease losses were as follows:
	Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Quarter ended June 30, 2018
Allowance for loan and lease losses:
Beginning balance	$	56,386	$	50,393	$	47,659	$	4,122	$	67,296	$	225,856
Charge-offs		(5,544)		(3,897)		(5,110)		(818)		(12,327)		(27,696)
Recoveries		689		38		1,376		138		2,098		4,339
Provision		3,599		2,184		75		507		13,171		19,536
Ending balance	$	55,130	$	48,718	$	44,000	$	3,949	$	70,238	$	222,035
Ending balance: specific reserve for impaired loans	$	19,804	$	12,204	$	10,592	$	1,061	$	5,853	$	49,514
Ending balance: purchased credit-impaired loans (1)	$	10,954	$	400	$	-	$	-	$	-	$	11,354
Ending balance: general allowance	$	24,372	$	36,114	$	33,408	$	2,888	$	64,385	$	161,167
Loans held for investment:
Ending balance	$	3,238,001	$	1,533,308	$	2,009,049	$	84,683	$	1,775,250	$	8,640,291
Ending balance: impaired loans	$	409,085	$	175,575	$	111,371	$	11,261	$	32,842	$	740,134
Ending balance: purchased credit-impaired loans	$	148,025	$	4,217	$	-	$	-	$	-	$	152,242
Ending balance: loans with general allowance	$	2,680,891	$	1,353,516	$	1,897,678	$	73,422	$	1,742,408	$	7,747,915
	Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Six-Month Period Ended June 30, 2018
Allowance for loan and lease losses:
Beginning balance	$	58,975	$	48,493	$	48,871	$	4,522	$	70,982	$	231,843
Charge-offs		(8,915)		(10,707)		(7,040)		(5,995)		(24,399)		(57,056)
Recoveries		1,024		87		1,438		151		4,468		7,168
Provision		4,046		10,845		731		5,271		19,187		40,080
Ending balance	$	55,130	$	48,718	$	44,000	$	3,949	$	70,238	$	222,035
Ending balance: specific reserve for impaired loans	$	19,804	$	12,204	$	10,592	$	1,061	$	5,853	$	49,514
Ending balance: purchased credit-impaired loans (1)	$	10,954	$	400	$	-	$	-	$	-	$	11,354
Ending balance: general allowance	$	24,372	$	36,114	$	33,408	$	2,888	$	64,385	$	161,167
Loans held for investment:												-
Ending balance	$	3,238,001	$	1,533,308	$	2,009,049	$	84,683	$	1,775,250	$	8,640,291
Ending balance: impaired loans	$	409,085	$	175,575	$	111,371	$	11,261	$	32,842	$	740,134
Ending balance: purchased credit-impaired loans	$	148,025	$	4,217	$	-	$	-	$	-	$	152,242
Ending balance: loans with general allowance	$	2,680,891	$	1,353,516	$	1,897,678	$	73,422	$	1,742,408	$	7,747,915

49

		Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Quarter ended June 30, 2017
Allowance for loan and lease losses:
Beginning balance		$	35,775	$	68,468	$	45,970	$	3,886	$	49,132	$	203,231
Charge-offs			(6,967)		(30,495)		(6,378)		(595)		(11,053)		(55,488)
Recoveries			891		78		4,624		133		1,920		7,646
Provision (release)			10,888		525		(2,134)		312		8,505		18,096
Ending balance		$	40,587	$	38,576	$	42,082	$	3,736	$	48,504	$	173,485
Ending balance: specific reserve for impaired loans		$	13,786	$	8,330	$	10,788	$	2,374	$	5,516	$	40,794
Ending balance: purchased credit-impaired loans (1)		$	9,074	$	372	$	-	$	-	$	-	$	9,446
Ending balance: general allowance		$	17,727	$	29,874	$	31,294	$	1,362	$	42,988	$	123,245
Loans held for investment:
Ending balance		$	3,282,307	$	1,611,730	$	2,116,756	$	122,093	$	1,728,290	$	8,861,176
Ending balance: impaired loans		$	428,711	$	140,621	$	74,902	$	50,557	$	40,834	$	735,625
Ending balance: purchased credit-impaired loans		$	156,202	$	4,166	$	-	$	-	$	-	$	160,368
Ending balance: loans with general allowance		$	2,697,394	$	1,466,943	$	2,041,854	$	71,536	$	1,687,456	$	7,965,183
		Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Six-Month Period Ended June 30, 2017
Allowance for loan and lease losses:
Beginning balance		$	33,980	$	57,261	$	61,953	$	2,562	$	49,847	$	205,603
Charge-offs			(15,192)		(31,857)		(18,430)		(658)		(22,245)		(88,382)
Recoveries			1,640		108		5,499		578		4,901		12,726
Provision (release)			20,159		13,064		(6,940)		1,254		16,001		43,538
Ending balance		$	40,587	$	38,576	$	42,082	$	3,736	$	48,504	$	173,485
Ending balance: specific reserve for impaired loans		$	13,786	$	8,330	$	10,788	$	2,374	$	5,516	$	40,794
Ending balance: purchased credit-impaired loans (1)		$	9,074	$	372	$	-	$	-	$	-	$	9,446
Ending balance: general allowance		$	17,727	$	29,874	$	31,294	$	1,362	$	42,988	$	123,245
Loans held for investment:
Ending balance		$	3,282,307	$	1,611,730	$	2,116,756	$	122,093	$	1,728,290	$	8,861,176
Ending balance: impaired loans		$	428,711	$	140,621	$	74,902	$	50,557	$	40,834	$	735,625
Ending balance: purchased credit-impaired loans		$	156,202	$	4,166	$	-	$	-	$	-	$	160,368
Ending balance: loans with general allowance		$	2,697,394	$	1,466,943	$	2,041,854	$	71,536	$	1,687,456	$	7,965,183
(1)	Refer to Note 7- Loans Held For Investment-PCI Loans, for a detail of changes in the allowance for loan losses related to PCI loans.

50

The tables below present the allowance for loan and lease losses and the carrying value of loans by portfolio segment as of June 30, 2018 and December 31, 2017:
As of June 30, 2018	Residential Mortgage Loans			Commercial Mortgage Loans									Consumer and Finance Leases
										Construction Loans
(Dollars in thousands)							C&I Loans										Total
Impaired loans without specific reserves:
Principal balance of loans, net of charge-offs	$	121,396		$	58,992		$	43,566		$	-		$	2,780			$	226,734
Impaired loans with specific reserves:
Principal balance of loans, net of charge-offs		287,689			116,583			67,805			11,261			30,062				513,400
Allowance for loan and lease losses		19,804			12,204			10,592			1,061			5,853				49,514
Allowance for loan and lease losses to principal
balance		6.88	%		10.47	%		15.62	%		9.42	%		19.47	%			9.64	%
PCI loans:
Carrying value of PCI loans		148,025			4,217			-			-			-				152,242
Allowance for PCI loans		10,954			400			-			-			-				11,354
Allowance for PCI loans to carrying value		7.40	%		9.49	%		-			-			-				7.46	%
Loans with general allowance:
Principal balance of loans		2,680,891			1,353,516			1,897,678			73,422			1,742,408				7,747,915
Allowance for loan and lease losses		24,372			36,114			33,408			2,888			64,385				161,167
Allowance for loan and lease losses to principal
balance		0.91	%		2.67	%		1.76	%		3.93	%		3.70		%		2.08	%
Total loans held for investment:
Principal balance of loans	$	3,238,001		$	1,533,308		$	2,009,049		$	84,683		$	1,775,250			$	8,640,291
Allowance for loan and lease losses		55,130			48,718			44,000			3,949			70,238				222,035
Allowance for loan and lease losses to principal
balance (1)		1.70	%		3.18	%		2.19	%		4.66	%		3.96		%		2.57	%

	Residential Mortgage Loans			Commercial Mortgage Loans									Consumer and Finance Leases
										Construction Loans
(Dollars in thousands)							C&I Loans									Total
As of December 31, 2017
Impaired loans without specific reserves:
Principal balance of loans, net of charge-offs	$	116,818		$	65,100		$	28,292		$	48		$	2,788		$	213,046
Impaired loans with specific reserves:
Principal balance of loans, net of charge-offs		316,616			87,814			90,008			47,218			35,606			577,262
Allowance for loan and lease losses		22,086			9,783			12,359			2,017			5,165			51,410
Allowance for loan and lease losses to principal
balance		6.98	%		11.14	%		13.73	%		4.27	%		14.51	%		8.91	%
PCI loans:
Carrying value of PCI loans		153,991			4,183			-			-			-			158,174
Allowance for PCI loans		10,873			378			-			-			-			11,251
Allowance for PCI loans to carrying value		7.06%			9.04%			-			-			-			7.11	%
Loans with general allowance:
Principal balance of loans		2,703,532			1,457,875			1,964,953			64,131			1,711,503			7,901,994
Allowance for loan and lease losses		26,016			38,332			36,512			2,505			65,817			169,182
Allowance for loan and lease losses to principal
balance		0.96	%		2.63	%		1.86	%		3.91	%		3.85	%		2.14	%
Total loans held for investment:
Principal balance of loans	$	3,290,957		$	1,614,972		$	2,083,253		$	111,397		$	1,749,897		$	8,850,476
Allowance for loan and lease losses		58,975			48,493			48,871			4,522			70,982			231,843
Allowance for loan and lease losses to principal
balance (1)		1.79	%		3.00	%		2.35	%		4.06	%		4.06	%		2.62	%
__________
(1) Loans used in the denominator include PCI loans of $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, respectively. However, the Corporation separately tracks and reports PCI loans and excludes these loans from the amounts of non-performing loans, impaired loans, TDRs and non-performing assets.

51

As of June 30, 2018, the Corporation maintained a $0.2 million reserve for unfunded loan commitments (December 31, 2017 - $0.7 million), mainly related to outstanding commitments on floor plan revolving lines of credit. The reserve for unfunded loan commitments is an estimate of the losses inherent in off-balance sheet loan commitments to borrowers that are experiencing financial difficulties at the balance sheet date. It is calculated by multiplying an estimated loss factor by an estimated probability of funding, and then by the period-end amounts for unfunded commitments. The reserve for unfunded loan commitments is included as part of accounts payable and other liabilities in the consolidated statement of financial condition and any change to the reserve is included as part of other non-interest expenses in the consolidated statements of income.

  During the second quarter of 2018, the Corporation implemented certain enhancements to the methodology behind the calculation of the allowance for commercial loans, which include, among others, a revised procedure whereby historical loss rates for each commercial loan regulatory-based credit risk category (i.e., pass, special mention, substandard, and doubtful) are now calculated using the historical charge-offs and portfolio balances over their average loss emergence period (the “raw loss rate”) for each credit risk classification. However, when not enough loss experience is observed in a particular risk-rated category and the calculation results in a loss rate for such risk-rated category that is lower than the loss rate of a less severe risk-rated category, the Corporation now uses the loss rate of such less severe category.   Accordingly, during the second quarter of 2018, the Corporation applied the raw loss rate determined for loans rated pass to the commercial real estate loans rated special mention, instead of the lower raw loss rate that resulted for the special mention category.

As of March 31, 2018, the historical losses and portfolio balances of special mention loans were allocated to pass or substandard categories based on the historical proportion of loans in this risk category that ultimately cured or resulted in being uncollectible. 

In addition, during the second quarter of 2018, the Corporation implemented refinements to the measurement of qualitative factors in the estimation process of the allowance for loan losses for commercial and consumer loans primarily consisting of the incorporation of a basis point adjustment derived from the difference between the average raw loss rate and the highest loss rates observed during a look-back period that management determined was appropriate to use for each region to identify any relevant effect during an economic cycle.

Although the net effect of these refinements was immaterial to the total provision expense, on a portfolio basis these enhancements resulted in a $1.6 million decrease in the provision for commercial and construction loans in the second quarter of 2018, offset by a $1.6 million increase in the provision for consumer loans.

52

NOTE 9 – LOANS HELD FOR SALE

The Corporation’s loans held-for-sale portfolio as of the dates indicated was composed of:

		June 30, 2018		December 31, 2017
(In thousands)
Residential mortgage loans		$	26,269	$	24,690
Construction loans (1)			37,732		8,290
Commercial mortgage loans (1)(2)			16,814		-
Total		$	80,815	$	32,980
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million) in non-performing loans to held for sale. Loans transferred to held for sales consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).
(2)	During the second quarter of 2018, the Corporation completed the sale of a $10.4 million non-performing commercial mortgage loan that was among the loans transferred to held for sale in the first quarter of 2018.

NOTE 10 –OTHER REAL ESTATE OWNED

The following table presents OREO inventory as of the dates indicated:
		June 30,			December 31,
		2018		2017
(In thousands)
OREO
OREO balances, carrying value:
Residential (1)		$	57,579	$	54,381
Commercial			75,844		82,871
Construction			9,932		10,688
Total		$	143,355	$	147,940
(1)	Excludes $14.5 million and $21.3 million as of June 30, 2018 and December 31, 2017, respectively, of foreclosures that meet the conditions of ASC Topic 310-40 and are presented as a receivable (other assets) in the statement of financial condition.

53

NOTE 11 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

One of the market risks facing the Corporation is interest rate risk, which includes the risk that changes in interest rates will result in changes in the value of the Corporation’s assets or liabilities and will adversely affect the Corporation’s net interest income from its loan and investment portfolios. The overall objective of the Corporation’s interest rate risk management activities is to reduce the variability of earnings caused by changes in interest rates.

The Corporation designates a derivative as a fair value hedge, cash flow hedge or economic undesignated hedge when it enters into the derivative contract.  As of June 30, 2018 and December 31, 2017, all derivatives held by the Corporation were considered economic undesignated hedges.  These undesignated hedges were recorded at fair value with the resulting gain or loss recognized in current earnings.

The following summarizes the principal derivative activities used by the Corporation in managing interest rate risk:

Interest rate cap agreements - Interest rate cap agreements provide the right to receive cash if a reference interest rate rises above a contractual rate. The value increases as the reference interest rate rises. The Corporation enters into interest rate cap agreements for protection from rising interest rates.

Forward contracts - Forward contracts are sales of to-be-announced (“TBA”) mortgage-backed securities that will settle over the standard delivery date and do not qualify as “regular way” security trades. Regular-way security trades are contracts that have no net settlement provision and no market mechanism to facilitate net settlement and that provide for delivery of a security within the time frame generally established by regulations or conventions in the market-place or exchange in which the transaction is being executed. The forward sales are considered derivative instruments that need to be marked-to-market. These securities are used to economically hedge the FHA/VA residential mortgage loan securitizations of the mortgage-banking operations. Unrealized gains (losses) are recognized as part of mortgage banking activities in the consolidated statement of income.

To satisfy the needs of its customers, the Corporation may enter into non-hedging transactions. On these transactions, the Corporation generally participates as a buyer in one of the agreements and as a seller in the other agreement under the same terms and conditions.

In addition, the Corporation enters into certain contracts with embedded derivatives that do not require separate accounting as these are clearly and closely related to the economic characteristics of the host contract. When the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, it is bifurcated, carried at fair value, and designated as a trading or non-hedging derivative instrument.

The following table summarizes the notional amounts of all derivative instruments:
		Notional Amounts (1)
		As of		As of
		June 30,		December 31,
		2018		2017
(In thousands)
Undesignated economic hedges:
Interest rate contracts:
Written interest rate cap agreements		$	90,010	$	91,010
Purchased interest rate cap agreements			90,010		91,010
Forward Contracts:
Sale of TBA GNMA MBS pools			30,000		26,000
Forward loan sales commitments			6,304		-
		$	216,324	$	208,020
(1)	Notional amounts are presented on a gross basis with no netting of offsetting exposure positions.

54

The following table summarizes for derivative instruments their fair values and location in the consolidated statements of financial condition:
	Asset Derivatives					Liability Derivatives
	Statement of	June 30,		December 31,			June 30,		December 31,
	Financial	2018		2017			2018		2017
	Condition Location	Fair Value		Fair Value		Statement of Financial Condition Location	Fair Value		Fair Value
(In thousands)
Undesignated economic hedges:
Interest rate contracts:
Written interest rate cap agreements	Other assets	$	-	$	-	Accounts payable and other liabilities	$	799	$	305
Purchased interest rate cap agreements	Other assets		799		305	Accounts payable and other liabilities		-		-
Forward Contracts:
Sales of TBA GNMA MBS pools	Other assets		7		7	Accounts payable and other liabilities		122		19
Forward loan sales commitments	Other assets		-		-	Accounts payable and other liabilities		-		-
		$	806	$	312		$	921	$	324

The following table summarizes the effect of derivative instruments on the consolidated statement of income:
		(Loss) or Gain				(Loss) or Gain
	Location of  (Loss) or Gain	Quarter Ended				Six-Month Period Ended
	Recognized in Statement	June 30,				June 30,
	of Income on Derivatives	2018		2017		2018		2017
		(In thousands)
UNDESIGNATED ECONOMIC HEDGES:
Interest rate contracts:
Written and purchased interest rate cap agreements	Interest income - Loans	$	-	$	-	$	-	$	(1)
Forward contracts:
Sales of TBA GNMA MBS pools	Mortgage Banking Activities		(51)		364		(103)		308
Forward loan sales commitments	Mortgage Banking Activities		-		-		-		-
Total (loss) gain  on derivatives		$	(51)	$	364	$	(103)	$	307

Derivative instruments are subject to market risk.  As is the case with investment securities, the market value of derivative instruments is largely a function of the financial market’s expectations regarding the future direction of interest rates.  Accordingly, current market values are not necessarily indicative of the future effect of derivative instruments on earnings.  This will depend, for the most part, on the shape of the yield curve, and the level of interest rates, as well as the expectations for rates in the future.

As of June 30, 2018, the Corporation had not entered into any derivative instrument containing credit-risk-related contingent features.

55

NOTE 12 – OFFSETTING OF ASSETS AND LIABILITIES

The Corporation enters into master agreements with counterparties, primarily related to derivatives and repurchase agreements, that may allow for netting of exposures in the event of default. In an event of default, each party has a right of set-off against the other party for amounts owed under the related agreement and any other amount or obligation owed in respect of any other agreement or transaction between them. The following table presents information about the offsetting of financial assets and liabilities, as well as derivative assets and liabilities:

Offsetting of Financial Assets and Derivative Assets
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Assets Presented in the Statement of Financial Position
	Gross Amounts of Recognized  Assets		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of June 30, 2018											Net Amount
(In thousands)
Description
Derivatives	$	799	$	-	$	799	$	(29)	$	(770)	$	-
Securities purchased under agreements to resell		200,000		(200,000)		-		-		-		-
Total	$	200,799	$	(200,000)	$	799	$	(29)	$	(770)	$	-
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Assets Presented in the Statement of Financial Position
	Gross Amounts of Recognized  Assets		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of December 31, 2017											Net Amount
(In thousands)
Description
Derivatives	$	305	$	-	$	305	$	(305)	$	-	$	-
Securities purchased under agreements to resell		200,000		(200,000)		-		-		-		-
Total	$	200,305	$	(200,000)	$	305	$	(305)	$	-	$	-

56

Offsetting of Financial Liabilities and Derivative Liabilities
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Liabilities Presented in the Statement of Financial Position
	Gross Amounts of Recognized  Liabilities		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of June 30, 2018											Net Amount
(In thousands)
Description
Securities sold under agreements to repurchase	$	400,000	$	(200,000)	$	200,000	$	(200,000)	$	-	$	-
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Liabilities Presented in the Statement of Financial Position
	Gross Amounts of Recognized  Liabilities		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of December 31, 2017											Net Amount
(In thousands)
Description
Derivatives	$	-	$	-	$	-	$	-	$	-	$	-
Securities sold under agreements to repurchase	$	500,000	$	(200,000)	$	300,000	$	(300,000)	$	-	$	-

57

NOTE 13 – GOODWILL AND OTHER INTANGIBLES

Goodwill as of June 30, 2018 and December 31, 2017 amounted to $28.1 million, recognized as part of “Other Assets” in the consolidated statements of financial condition. The Corporation conducted its annual evaluation of goodwill and other intangibles during the fourth quarter of 2017. The Corporation’s goodwill is related to the acquisition of FirstBank Florida in 2005.

There have been no significant events related to the Florida reporting unit that could indicate potential goodwill impairment since the date of the last evaluation; therefore, no goodwill impairment evaluation was performed during the first six months of 2018. Goodwill and other indefinite life intangibles are reviewed at least annually for impairment.

In connection with the acquisition of the FirstBank-branded credit card loan portfolio, in the second quarter of 2012, the Corporation recognized a purchased credit card relationship intangible of $24.5 million, which is being amortized over the remaining estimated life of 3.3 years on an accelerated basis based on the estimated attrition rate of the purchased credit card accounts, which reflects the pattern in which the economic benefits of the intangible asset are consumed. These benefits are consumed as the revenue stream generated by the cardholder relationship is realized.

    The core deposit intangible includes the core deposit acquired in the February 2015 Doral Bank transaction amounting to $3.4 million as of June 30, 2018.

    In the first quarter of 2016, FirstBank Insurance Agency acquired certain insurance customer accounts and related customer records and recognized an insurance customer relationship intangible of $1.1 million ($0.7 million as of June 30, 2018), which is being amortized over the next 4.5 years on a straight-line basis. The acquired accounts have a direct relationship to the previous mortgage loan portfolio acquisitions from Doral Bank and Doral Financial in 2015 and 2014.

58

	The following table shows the gross amount and accumulated amortization of the Corporation’s intangible assets recognized as part of Other Assets in the consolidated statements of financial condition:
		As of		As of
		June 30,		December 31,
		2018		2017
	(Dollars in thousands)
Core deposit intangible:
Gross amount, beginning of period		$	51,664	$	51,664
Accumulated amortization  (1)			(46,829)		(46,186)
Net carrying amount		$	4,835	$	5,478
Remaining amortization period			6.5 years		7.0 years
Purchased credit card relationship intangible:
Gross amount		$	24,465	$	24,465
Accumulated amortization (2)			(17,614)		(16,465)
Net carrying amount		$	6,851	$	8,000
Remaining amortization period			3.3 years		3.9 years
Insurance customer relationship intangible:
Gross amount		$	1,067	$	1,067
Accumulated amortization (3)			(368)		(292)
Net carrying amount		$	699	$	775
Remaining amortization period			4.5 years		5.0 years
(1)	For the quarter and six-month period ended June 30, 2018, the amortization expense of core deposit intangibles amounted to $0.2 million and $0.6 million, respectively (2017 - $0.5 million and $0.9 million, respectively).
(2)	For the quarter and six-month period ended June 30, 2018, the amortization expense of the purchased credit card relationship intangible amounted to $0.6 million and $1.1 million, respectively (2017 - $0.6 million and $1.3 million, respectively).
(3)	For the quarter and six-month period ended June 30, 2018, the amortization expense of insurance customer relationship intangible amounted to $38 thousand and $76 thousand, respectively (2017 - $38 thousand and $76 thousand, respectively).

The estimated aggregate annual amortization expense related to the intangible assets for future periods is as follows:
			Amount
			(In thousands)
	2018	$	1,723
	2019		3,088
	2020		2,851
	2021		2,658
	2022		915
	2023 and after		1,150

59

NOTE 14 – NON CONSOLIDATED VARIABLE INTEREST ENTITIES (“VIE”) AND SERVICING ASSETS

The Corporation transfers residential mortgage loans in sale or securitization transactions in which it has continuing involvement, including servicing responsibilities and guarantee arrangements. All such transfers have been accounted for as sales as required by applicable accounting guidance.

    When evaluating the need to consolidate counterparties to which the Corporation has transferred assets, or with which the Corporation has entered into other transactions, the Corporation first determines if the counterparty is an entity for which a variable interest exists. If no scope exception is applicable and a variable interest exists, the Corporation then evaluates if it is the primary beneficiary of the VIE and whether the entity should be consolidated or not.

Below is a summary of transfers of financial assets to VIEs for which the Corporation has retained some level of continuing involvement:

GNMA

The Corporation typically transfers first lien residential mortgage loans in conjunction with GNMA securitization transactions in which the loans are exchanged for cash or securities that are readily redeemed for cash proceeds and servicing rights. The securities issued through these transactions are guaranteed by the issuer and, under seller/servicer agreements, the Corporation is required to service the loans in accordance with the issuers’ servicing guidelines and standards. As of June 30, 2018, the Corporation serviced loans securitized through GNMA with a principal balance of $1.7 billion.

Trust-Preferred Securities

     In 2004, FBP Statutory Trust I, a financing trust that is wholly owned by the Corporation, sold to institutional investors $100 million of its variable-rate trust-preferred securities. FBP Statutory Trust I used the proceeds of the issuance, together with the proceeds of the purchase by the Corporation of $3.1 million of FBP Statutory Trust I variable-rate common securities, to purchase $103.1 million aggregate principal amount of the Corporation’s Junior Subordinated Deferrable Debentures. Also in 2004, FBP Statutory Trust II, a financing trust that is wholly owned by the Corporation, sold to institutional investors $125 million of its variable-rate trust-preferred securities. FBP Statutory Trust II used the proceeds of the issuance, together with the proceeds of the purchase by the Corporation of $3.9 million of FBP Statutory Trust II variable-rate common securities, to purchase $128.9 million aggregate principal amount of the Corporation’s Junior Subordinated Deferrable Debentures. The debentures are presented in the Corporation’s consolidated statement of financial condition as Other Borrowings, net of related issuance costs. The variable-rate trust-preferred securities are fully and unconditionally guaranteed by the Corporation. The Junior Subordinated Deferrable Debentures issued by the Corporation in April 2004 and September 2004 mature on June 17, 2034 and September 20, 2034, respectively; however, under certain circumstances, the maturity of Junior Subordinated Deferrable Debentures may be shortened (such shortening would result in a mandatory redemption of the variable-rate trust-preferred securities).

     During the first quarter of 2018, the Corporation completed the repurchase of $23.8 million of trust preferred securities of the FBP Statutory Trust I that were auctioned in a public sale at which the Corporation was invited to participate. The Corporation repurchased and cancelled the repurchased trust preferred securities, resulting in a commensurate reduction in the related Floating Rate Junior Subordinated Debenture. The Corporation’s winning bid equated to 90% of the $23.8 million par value. The 10% discount resulted in a gain of approximately $2.3 million, which is reflected in the statement of income as a “Gain on early extinguishment of debt.”

     The Collins Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated certain trust-preferred securities from Tier 1 Capital; however, these instruments may remain in Tier 2 capital until the instruments are redeemed or mature. Under the indentures, the Corporation has the right, from time to time, and without causing an event of default, to defer payments of interest on the Junior Subordinated Deferrable Debentures by extending the interest payment period at any time and from time to time during the term of the subordinated debentures for up to twenty consecutive quarterly periods. During the second quarter of 2016, the Corporation, having received approval from the Federal Reserve, paid $31.2 million for all of the accrued but deferred interest payments plus the interest for the second quarter of 2016 on the Corporation’s subordinated debentures associated with its trust preferred securities. Subsequently, the Corporation has received quarterly approvals that have enabled it to make scheduled quarterly interest payments. As of June 30, 2018, the Corporation was current on all interest payments due on its subordinated debt. In October 2017, the New York FED terminated the formal written agreement (the “Written Agreement”) entered into on June 3, 2010 between the Corporation and the Reserve Bank. However, the Corporation has agreed with its regulators to continue to obtain approval before paying dividends, receiving dividends from the Bank, making payments on subordinated debt or trust-preferred securities, incurring or guaranteeing debt or purchasing or redeeming any corporate stock. The Corporation has received approval to make the subordinated debentures’ quarterly payment for September 30, 2018.

60

Grantor Trusts

    During 2004 and 2005, an unaffiliated party, referred to in this subsection as the seller, established a series of statutory trusts to effect the securitization of mortgage loans and the sale of trust certificates (the “Grantor Trusts”). The seller initially provided the servicing for a fee, which is senior to the obligations to pay trust certificate holders. The seller then entered into a sales agreement through which it sold and issued the trust certificates in favor of the Corporation’s banking subsidiary. Currently, the Bank is the sole owner of the trust certificates; the servicing of the underlying residential mortgages that generate the principal and interest cash flows is performed by another third party, which receives a servicing fee. The securities are variable-rate securities indexed to 90-day LIBOR plus a spread. The principal payments from the underlying loans are remitted to a paying agent (servicer), who then remits interest to the Bank. Interest income is shared to a certain extent with the FDIC, which has an interest only strip (“IO”) tied to the cash flows of the underlying loans and is entitled to receive the excess of the interest income less a servicing fee over the variable rate income that the Bank earns on the securities. This IO is limited to the weighted-average coupon on the securities. The FDIC became the owner of the IO upon its intervention of the seller, a failed financial institution. No recourse agreement exists, and the Bank, as a sole holder of the certificates, absorbs all risks from losses on non-accruing loans and repossessed collateral.  As of June 30, 2018, the amortized cost and fair value of the Grantor Trusts amounted to $20.6 million and $15.1 million, respectively, with a weighted average yield of 4.51%, which is included as part of the Corporation’s available-for-sale investment securities portfolio.

Investment in unconsolidated entity

   On February 16, 2011, FirstBank sold an asset portfolio consisting of performing and non-performing construction, commercial mortgage and commercial and industrial loans with an aggregate book value of $269.3 million to CPG/GS, an entity organized under the laws of the Commonwealth of Puerto Rico and majority owned by PRLP Ventures LLC (“PRLP”), a company created by Goldman, Sachs & Co. and Caribbean Property Group.  In connection with the sale, the Corporation received $88.5 million in cash and a 35% interest in CPG/GS, and made a loan in the amount of $136.1 million representing seller financing provided by FirstBank. The loan matured in February 2018 and was refinanced and consolidated with other outstanding loans of CPG/GS in the second quarter of 2018. As of June 30, 2018, the carrying amount of the new loan was $10.6 million, which was included in the Corporation’s commercial mortgage loans held for investment portfolio. This loan has a three-year maturity, bears a fixed-interest rate, and is primarily secured by income-producing real estate properties and certain residential units. FirstBank’s equity interest in CPG/GS is accounted for under the equity method. FirstBank recorded a loss on its interest in CPG/GS in 2014 that reduced to zero the carrying amount of the Bank’s investment in CPG/GS. No negative investment needs to be reported as the Bank has no legal obligation or commitment to provide further financial support to this entity; thus, no further losses have been or will be recorded on this investment.

Cash proceeds received by CPG/GS have been first used to cover operating expenses and debt service payments, including those related to the refinanced loan described above, which must be substantially repaid before proceeds can be used for other purposes, including the return of capital to both PRLP and FirstBank. FirstBank will not receive any return on its equity interest until PRLP receives an aggregate amount equivalent to its initial investment and a priority return of at least 12%, which has not occurred, resulting in FirstBank’s interest in CPG/GS being subordinate to PRLP’s interest. CPG/GS will then begin to make payments pro rata to PRLP and FirstBank, 35% and 65%, respectively, until FirstBank has achieved a 12% return on its invested capital and the aggregate amount of distributions is equal to FirstBank’s capital contributions to CPG/GS.

   The Bank has determined that CPG/GS is a VIE in which the Bank is not the primary beneficiary. In determining the primary beneficiary of CPG/GS, the Bank considered applicable guidance that requires the Bank to qualitatively assess the determination of the primary beneficiary (or consolidator) of CPG/GS based on whether it has both the power to direct the activities of CPG/GS that most significantly affect the entity’s economic performance and the obligation to absorb losses of, or the right to receive benefits from, CPG/GS that could potentially be significant to the VIE. The Bank determined that it does not have the power to direct the activities that most significantly impact the economic performance of CPG/GS as it does not have the right to manage or influence the loan portfolio, foreclosure proceedings, or the construction and sale of the property; therefore, the Bank concluded that it is not the primary beneficiary of CPG/GS. 

Servicing Assets

   The Corporation sells residential mortgage loans to GNMA, which generally securitizes the transferred loans into mortgage-backed securities. Also, certain conventional conforming loans are sold to FNMA or FHLMC with servicing retained. The Corporation recognizes as separate assets the rights to service loans for others, whether those servicing assets are originated or purchased.

The changes in servicing assets are shown below:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
(In thousands)		2018		2017		2018		2017
Balance at beginning of period		$	26,135	$	26,330	$	25,255	$	26,244
Capitalization of servicing assets			1,138		1,049		2,025		1,924
Amortization			(729)		(779)		(1,466)		(1,567)
Adjustment to fair value			617		(197)		1,330		(357)
Other (1)			30		99		47		258
Balance at end of period		$	27,191	$	26,502	$	27,191	$	26,502
(1)	Amount represents the adjustment to fair value related to the repurchase of loans serviced for others.

61

   Impairment charges are recognized through a valuation allowance for each individual stratum of servicing assets. The valuation allowance is adjusted to reflect the amount, if any, by which the cost basis of the servicing asset for a given stratum of loans being serviced exceeds its fair value. Any fair value in excess of the cost basis of the servicing asset for a given stratum is not recognized.

Changes in the impairment allowance were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018		2017		2018		2017
(In thousands)
Balance at beginning of period	$	673	$	-	$	1,451	$	461
Temporary impairment charges		20		197		37		357
OTTI of servicing assets		-		-		(65)		(621)
Recoveries		(637)		-		(1,367)		-
Balance at end of period	$	56	$	197	$	56	$	197

	The components of net servicing income are shown below:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands)
Servicing fees		$	2,058	$	1,975	$	4,178	$	3,999
Late charges and prepayment penalties			146		138		266		237
Adjustment for loans repurchased			30		99		47		258
Other			-		(28)		-		(35)
Servicing income, gross			2,234		2,184		4,491		4,459
Amortization and impairment of servicing assets			(112)		(977)		(136)		(1,925)
Servicing income, net		$	2,122	$	1,207	$	4,355	$	2,534

62

The Corporation’s servicing assets are subject to prepayment and interest rate risks. Key economic assumptions used in determining the fair value at the time of sale of the related mortgages ranged as follows:
	Maximum		Minimum
Six-Month Period Ended June 30, 2018:
Constant prepayment rate:
Government-guaranteed mortgage loans	5.7	%	5.6	%
Conventional conforming mortgage loans	6.3	%	6.2	%
Conventional non-conforming mortgage loans	9.6	%	9.1	%
Discount rate:
Government-guaranteed mortgage loans	12.0	%	12.0	%
Conventional conforming mortgage loans	10.0	%	10.0	%
Conventional non-conforming mortgage loans	14.3	%	14.3	%
Six-Month Period Ended June 30, 2017:
Constant prepayment rate:
Government-guaranteed mortgage loans	6.0	%	6.0	%
Conventional conforming mortgage loans	6.4	%	6.3	%
Conventional non-conforming mortgage loans	9.5	%	9.1	%
Discount rate:
Government-guaranteed mortgage loans	12.0	%	12.0	%
Conventional conforming mortgage loans	10.0	%	10.0	%
Conventional non-conforming mortgage loans	14.3	%	14.3	%

  The weighted averages of the key economic assumptions that the Corporation used in its valuation model and the sensitivity of the current fair value to immediate 10% and 20% adverse changes in those assumptions for mortgage loans as of June 30, 2018 were as follows:

	(Dollars in thousands)
Carrying amount of servicing assets	$	27,191
Fair value	$	31,953
Weighted-average expected life (in years)		8.63
Constant prepayment rate (weighted-average annual rate)		-
Decrease in fair value due to 10% adverse change	$	731
Decrease in fair value due to 20% adverse change	$	1433
Discount rate (weighted-average annual rate)		-
Decrease in fair value due to 10% adverse change	$	1,603
Decrease in fair value due to 20% adverse change	$	3,067

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship between the change in assumption and the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the servicing asset is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or counteract the sensitivities.

63

NOTE 15 – DEPOSITS

The following table summarizes deposit balances as of the dates indicated:
	June 30,			December 31,
	2018		2017
(In thousands)
Type of account:
Non-interest bearing checking accounts	$	2,317,149	$	1,833,665
Savings accounts		2,360,345		2,401,385
Interest-bearing checking accounts		1,328,540		1,207,511
Certificates of deposit		2,389,383		2,429,585
Brokered certificates of deposit (CDs)		822,666		1,150,485
	$	9,218,083	$	9,022,631

Brokered CDs mature as follows:
	June 30,
	2018
(In thousands)
Three months or less	$	148,917
Over three months to six months		180,053
Over six months to one year		128,815
Over one year to three years		284,747
Over three years to five years		78,753
Over five years		1,381
Total	$	822,666

The following are the components of interest expense on deposits:
	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018			2017	2018			2017
(In thousands)
Interest expense on deposits	$	16,667	$	15,883	$	33,274	$	31,351
Accretion of premium from acquisition		(2)		(15)		(5)		(38)
Amortization of broker placement fees		309		480		676		1,007
Interest expense on deposits	$	16,974	$	16,348	$	33,945	$	32,320

64

NOTE 16 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase (repurchase agreements) as of the dates indicated consisted of the following:
		June 30, 2018		December 31, 2017
(Dollars in thousands)
Short-term fixed-rate repurchase agreement with a rate of 1.53%		$	-	$	100,000
Long-term fixed-rate repurchase agreements,
interest ranging from 1.96% to 2.26% (1)(2)			200,000		200,000
		$	200,000	$	300,000
(1)	Reported net of securities purchased under agreements to repurchase (reverse repurchase agreements) by counterparty, when applicable, pursuant to Topic ASC 210-20-45-11.
(2)	As of June 30, 2018, includes $200 million with an average rate of 2.11% that lenders have the right to call before their contractual maturities at various dates beginning on July 19, 2018. Subsequent to June 30, 2018, no lender has exercised its call option on repurchase agreements.

Repurchase agreements mature as follows:
		June 30, 2018
		(In thousands)
	Three to four years		200,000
	Total	$	200,000

As of June 30, 2018 and December 31, 2017, the securities underlying such agreements were delivered to the dealers with which the repurchase agreements were transacted.

Repurchase agreements as of June 30, 2018, grouped by counterparty, were as follows:
	(Dollars in thousands)			Weighted-Average
	Counterparty	Amount		Maturity (In Months)
	JP Morgan Chase	$	200,000	43

65

NOTE 17 – ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB)

The following is a summary of the advances from the FHLB:
		June 30,		December 31,
	(Dollars in thousands)	2018		2017
	Long-term fixed-rate advances from FHLB, with a weighted-average
	interest rate of 1.91%	$	715,000	$	715,000

Advances from FHLB mature as follows:
		June 30, 2018
	(In thousands)
	Within one month	$	25,000
	Over three to six months		70,000
	Over one to three years		420,000
	Over three to five years		200,000
	Total	$	715,000

As of June 30, 2018, the Corporation used $162.0 million in letters of credit issued by the FHLB as pledges for public deposits in the Virgin Islands and had additional capacity of approximately $491.6 million on this credit facility based on collateral pledged at the FHLB, including a haircut reflecting the perceived risk associated with the collateral.

NOTE 18 – OTHER BORROWINGS

 Other borrowings, as of the indicated dates, consisted of:

	June 30,		December 31,
	2018		2017
	(In thousands)
Junior subordinated debentures due in 2034,
interest-bearing at a floating rate of 2.75%
over 3-month LIBOR (5.08% as of June 30, 2018
and 4.35% as of December 31, 2017) (1)	$	65,593	$	90,078
Junior subordinated debentures due in 2034,
interest-bearing at a floating rate of 2.50%
over 3-month LIBOR (4.82% as of June 30, 2018
and 4.12% as of December 31, 2017)		118,557		118,557
	$	184,150	$	208,635
(1) Refer to Note 14 - Non-Consolidated Variable Interest Entities (“VIE”) and Servicing Assets-Trust-Preferred Securities, for additional information about the Corporation repurchase and cancellation in the first quarter of 2018 of $23.8 million in trust-preferred securities associated with these junior subordinated debentures.

66

NOTE 19 – STOCKHOLDERS’ EQUITY

Common Stock

As of June 30, 2018 and December 31, 2017, the Corporation had 2,000,000,000 authorized shares of common stock with a par value of $0.10 per share. As of June 30, 2018 and December 31, 2017, there were 221,724,062 and 220,382,343 shares issued, respectively, and 217,185,449 and 216,278,040 shares outstanding, respectively.  Refer to Note 4 – Stock Based Compensation, for information about transactions related to common stock under the Omnibus Plan.

On May 17, 2018, the U.S. Treasury exercised its warrant to purchase 1,285,899 shares of the Corporation’s stock on a cashless basis resulting in the issuance of 730,571 shares of common stock and the use of 555,328 shares to cover the strike price of the transaction. Cash paid in lieu of fractional shares was $6.58.

Preferred Stock

The Corporation has 50,000,000 authorized shares of preferred stock with a par value of $1.00, redeemable at the Corporation’s option, subject to certain terms. This stock may be issued in series and the shares of each series have such rights and preferences as are fixed by the Board of Directors when authorizing the issuance of that particular series. As of June 30, 2018, the Corporation has five outstanding series of non-convertible, non-cumulative preferred stock: 7.125% non-cumulative perpetual monthly income preferred stock, Series A; 8.35% non-cumulative perpetual monthly income preferred stock, Series B; 7.40% non-cumulative perpetual monthly income preferred stock, Series C; 7.25% non-cumulative perpetual monthly income preferred stock, Series D; and 7.00% non-cumulative perpetual monthly income preferred stock, Series E.  The liquidation value per share is $25.

    Effective January 17, 2012, the Corporation delisted all of its outstanding series of non-convertible, non-cumulative preferred stock from the New York Stock Exchange. The Corporation has not arranged for listing and/or registration on another national securities exchange or for quotation of the Series A through E Preferred Stock in a quotation medium. In December 2016, for the first time since July 2009, the Corporation paid dividends on its non-cumulative perpetual monthly income preferred stock, after receiving regulatory approval. Since then, the Corporation has continued to pay monthly dividend payments on the non-cumulative perpetual monthly income preferred stock. The Corporation intends to request approval in future periods to continue monthly dividend payments on the non-cumulative perpetual monthly income preferred stock. The Corporation has received regulatory approval to pay the monthly dividends on the Corporation’s Series A through E Preferred Stock through September 2018.

     On October 3, 2017, the Federal Reserve terminated the Written Agreement entered into on June 3, 2010 between the Corporation and the Federal Reserve. However, the Corporation has agreed with its regulators to continue to obtain approval before paying dividends, receiving dividends from the Bank, making payments on subordinated debt or trust preferred securities, incurring or guaranteeing debt or purchasing or redeeming any corporate stock.

Treasury stock

   During the first six months of 2018 and 2017, the Corporation withheld an aggregate of 424,810 shares and 326,653 shares, respectively, of the common stock paid to certain senior officers as additional compensation and restricted stock that vested during the first six months of 2018 and 2017 to cover employees’ payroll and income tax withholding liabilities; these shares are held as treasury stock. As of June 30, 2018, and December 31, 2017, the Corporation had 4,538,613 and 4,104,303 shares held as treasury stock, respectively.

FirstBank Statutory Reserve (Legal Surplus)

   The Banking Law of the Commonwealth of Puerto Rico requires that a minimum of 10% of FirstBank’s net income for the year be transferred to a legal surplus reserve until such surplus equals the total of paid-in-capital on common and preferred stock. Amounts transferred to the legal surplus reserve from the retained earnings account are not available for distribution to the Corporation, including for payment as dividends to the stockholders, without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The Puerto Rico Banking Law provides that, when the expenditures of a Puerto Rico commercial bank are greater than receipts, the excess of the expenditures over receipts must be charged against the undistributed profits of the bank, and the balance, if any, must be charged against the legal surplus reserve, as a reduction thereof. If there is no legal surplus reserve sufficient to cover such balance in whole or in part, the outstanding amount must be charged against the capital account and the Bank cannot pay dividends until it can replenish the legal surplus reserve to an amount of at least 20% of the original capital contributed. During the fourth quarter of 2017, $7.3 million was transferred to the legal surplus reserve. FirstBank’s legal surplus reserve, included as part of retained earnings in the Corporation’s consolidated statement of financial condition, amounted to $59.7 million as of June 30, 2018. There were no transfers to the legal surplus reserve during the first six months of 2018.

67

NOTE 20 - INCOME TAXES

Income tax expense includes Puerto Rico and USVI income taxes as well as applicable U.S. federal and state taxes. The Corporation is subject to Puerto Rico income tax on its income from all sources. As a Puerto Rico corporation, First BanCorp. is treated as a foreign corporation for U.S. and USVI income tax purposes and is generally subject to U.S. and USVI income tax only on its income from sources within the U.S. and USVI or income effectively connected with the conduct of a trade or business in those regions. Any such tax paid in the U.S. and USVI is also creditable against the Corporation’s Puerto Rico tax liability, subject to certain conditions and limitations.

    Under the Puerto Rico Internal Revenue Code of 2011, as amended (the “2011 PR Code”), the Corporation and its subsidiaries are treated as separate taxable entities and are generally not entitled to file consolidated tax returns and, thus, the Corporation is generally  not entitled to utilize losses from one subsidiary to offset gains in another subsidiary. Accordingly, in order to obtain a tax benefit from a net operating loss (“NOL”), a particular subsidiary must be able to demonstrate sufficient taxable income within the applicable NOL carry-forward period. The 2011 PR Code allows entities organized as limited liability companies to perform an election to become a non-taxable “pass-through” entity and utilize losses to offset income from other “pass-through” entities, subject to certain limitations, with the remaining net income passing-through to its partner entities. The 2011 PR Code also provides a dividend received deduction of 100% on dividends received from “controlled” subsidiaries subject to taxation in Puerto Rico and 85% on dividends received from other taxable domestic corporations.

   On March 1, 2017, the Corporation completed the applicable regulatory filings to change the tax status of its subsidiary, First Federal Finance, from a taxable corporation to a non-taxable “pass-through” entity. This election allows the Corporation to realize tax benefits of its deferred tax assets associated with pass-through ordinary net operating losses available at the banking subsidiary, FirstBank, which were subject to a full valuation allowance as of December 31, 2016, against now pass-through ordinary income from this profitable subsidiary.

On March 1, 2017, the Corporation also completed the applicable regulatory filings to change the tax status of its subsidiary, FirstBank Insurance, from a taxable corporation to a non-taxable “pass-through” entity. This election allows the Corporation to offset pass-through income projected to be earned by FirstBank Insurance with net operating losses available at the Holding Company level.

    The Corporation has maintained an effective tax rate lower than the maximum statutory rate mainly by investing in government obligations and mortgage-backed securities exempt from U.S. and Puerto Rico income taxes and by doing business through an International Banking Entity (“IBE”) unit of the Bank, and through the Bank’s subsidiary, FirstBank Overseas Corporation, whose interest income and gain on sales is exempt from Puerto Rico income taxation. The IBE and FirstBank Overseas Corporation were created under the International Banking Entity Act of Puerto Rico, which provides for total Puerto Rico tax exemption on net income derived by IBEs operating in Puerto Rico on the specific activities identified in the IBE Act.  An IBE that operates as a unit of a bank pays income taxes at the corporate standard rates to the extent that the IBE’s net income exceeds 20% of the bank’s total net taxable income.

    For the second quarter and first six months of 2018, the Corporation recorded an income tax expense of $10.2 million and $17.9 million, respectively, compared to an income tax expense of $9.3 million and $1.2 million for the comparable periods in 2017. The increase in the income tax expense for the second quarter of 2018, as compared to the same period a year ago, was primarily related to higher pre-tax earnings generated in 2018. The increase for the first six months of 2018, compared to same period in 2017, was mostly related to a  $13.2 million tax benefit recorded in the first quarter of 2017 as a result of the above discussed change in tax status of certain subsidiaries from taxable corporations to limited liability companies that have elected to be treated as partnerships for income tax purposes in Puerto Rico and, to a lesser extent, a higher pre-tax income subject to the estimated annual effective tax rate for the six month period ended June 30, 2018.

For the six-month period ended June 30, 2018, the Corporation calculated the provision for income taxes by applying the estimated annual effective tax rate for the full fiscal year to ordinary income or loss.  In the computation of the consolidated worldwide annual estimated effective tax rate, ASC Topic 740-270, “Income Taxes – Interim Reporting,” requires the exclusion of legal entities with pre-tax losses from which a tax benefit cannot be recognized.  The Corporation’s estimated annual effective tax rate in the first six months of 2018, excluding entities from which a tax benefit cannot be recognized and discrete items, was 25% compared to 24% for the first six months of 2017.  The estimated annual effective tax rate including all entities for the first six months of 2018 was 24% (25% excluding discrete items, primarily the tax benefit resulting from the excess tax benefit recognized during the first quarter of 2018 upon the vesting of shares granted under the Corporation’s stock-based compensation plan) compared to 14% for the first six months of 2017 (25% excluding discrete items, primarily the tax benefit resulting from the previously mentioned change in the tax status of two subsidiaries).

68

The Corporation’s net deferred tax asset amounted to $283.3 million as of June 30, 2018, net of a valuation allowance of $181.2 million, and management concluded, based upon the assessment of all positive and negative evidence, that it is more likely than not that the Corporation will generate sufficient taxable income within the applicable NOL carry-forward periods to realize such amount. The net deferred tax asset of the Corporation’s banking subsidiary, FirstBank, amounted to $283.2 million as of June 30, 2018, net of a valuation allowance of $144.6 million, compared to a net deferred tax asset of $294.7 million, net of a valuation allowance of $150.7 million, as of December 31, 2017.

During the third quarter of 2017, the Corporation completed a formal ownership change analysis within the meaning of Section 382 of the U.S. Internal Revenue Code (“Section 382”) covering a comprehensive period, and concluded that an ownership change occurred during such period. Section 382 limits the ability to utilize U.S. and USVI NOLs for income tax purposes at such jurisdictions following an event of an ownership change.  The Section 382 limitation could result in higher U.S. and USVI liabilities in the future than we would incur in the absence of such limitation. For the second quarter and first six months of 2018, and as a result of the Section 382 limitation, the Corporation incurred an income tax expense of approximately $1.0 million and $2.6 million, respectively, related to its U.S. operations. The limitation did not affect the USVI operations in the first half of 2018. Prospectively, the Corporation expects that it will be able to mitigate the adverse effects associated with the Section 382 limitation as any such tax paid in the U.S. or USVI could be creditable against Puerto Rico tax liabilities or taken as deduction against taxable income.  However, our ability to reduce our Puerto Rico tax liability through such a credit or deduction depends on our tax profile at each annual taxable period, which is dependent on various factors.

    As of June 30, 2018, the Corporation did not have Unrecognized Tax Benefits recorded on its books. The Corporation classifies all interest and penalties, if any, related to tax uncertainties as income tax expense. Audit periods remain open for review until the statute of limitations has passed. The statute of limitations under the 2011 PR Code is four years; the statute of limitations for U.S. and USVI income tax purposes is three years after a tax return is due or filed, whichever is later, for each. The completion of an audit by the taxing authorities or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Corporation’s liability for income taxes. Any such adjustment could be material to the results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. For U.S. and USVI income tax purposes, all tax years subsequent to 2013 remain open to examination. For Puerto Rico tax purposes, all tax years subsequent to 2012 remain open to examination.

On December 22, 2017, the United States president signed H.R.1, The Tax Cuts and Jobs Acts, which includes an overhaul of individual, business and international taxes and has affected our branch operations in the U.S. and the USVI. The bill includes measures reducing corporate taxes from 35% to 21%, a repeal of the corporate alternative minimum tax regime, changes to business deductions and NOLs, a 15.5% tax on mandatory repatriation of liquid assets, 10% tax on base erosion payments, and a minimum 10.5% tax on inclusion of global intangible low-tax income by U.S. shareholders, among other significant changes. The main provisions affecting our operations in the U.S. and the USVI in the first half of 2018 include: the change in tax rate to 21%, the limitation to the amount certain financial institutions may deduct for premiums paid to the FDIC, and changes in permanent differences, such as meals and entertainment deductions. Other significant provisions, such as the base erosion and anti-abuse tax, do not affect the Corporation’s U.S. and USVI branch operations since these operations’ receipts do not exceed the annual threshold of U.S. effectively connected gross receipts.

69

NOTE 21 – OTHER COMPREHENSIVE LOSS

The following table presents changes in accumulated other comprehensive loss for the quarters and six-month periods ended June 30, 2018 and 2017:
	Changes in Accumulated Other Comprehensive Loss by Component (1)
	Quarter ended June 30, 2018		Quarter ended June 30, 2017		Six-month period ended June 30, 2018		Six-month period ended June 30, 2017
(In thousands)
Unrealized net holding losses on debt securities
Beginning Balance	$	(44,662)	$	(23,688)	$	(20,608)	$	(34,383)
Other comprehensive (loss) income		(7,445)		9,434		(31,499)		7,898
Amounts reclassified from accumulated comprehensive loss		-		(371)		-		11,860
Ending balance	$	(52,107)	$	(14,625)	$	(52,107)	$	(14,625)
Unrealized holding losses on equity securities
Beginning Balance	$	-	$	(6)	$	(6)	$	(7)
Reclassification to retained earnings per ASU 2016-01		-		-		6		-
Other comprehensive income		-		2		-		3
Ending balance	$	-	$	(4)	$	-	$	(4)
____________________
(1) All amounts presented are net of tax.

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss during the quarters and six-month periods ended June 30, 2018 and 2017:
		Reclassifications Out of Accumulated Other Comprehensive Loss
		Quarter ended June 30,				Six-month period ended June 30,
	Affected Line Item in the Consolidated Statements of Income	2018		2017		2018		2017
(In thousands)
Unrealized holding losses on debt securities
Realized gain (loss) on sale of debt securities	Net gain on sale of
	investments	$	-	$	371	$	-	$	371
OTTI on debt securities	Net impairment losses
	on available-for-sale
	debt securities		-		-		-		(12,231)
	Total before tax	$	-	$	371	$	-	$	(11,860)
	Income tax		-		-		-		-
	Total, net of tax	$	-	$	371	$	-	$	(11,860)

70

 NOTE 22 – FAIR VALUE

Fair Value Measurement

The FASB authoritative guidance for fair value measurement defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  This guidance also establishes a fair value hierarchy for classifying financial instruments.  The hierarchy is based on whether the inputs to the valuation techniques used to measure fair value are observable or unobservable.  Three levels of inputs may be used to measure fair value: 

Level 1	Valuations of Level 1 assets and liabilities are obtained from readily-available pricing sources for market transactions involving identical assets or liabilities. Level 1 assets and liabilities include equity securities that trade in an active exchange market, as well as certain U.S. Treasury and other U.S. government and agency securities and corporate debt securities that are traded by dealers or brokers in active markets.
Level 2	Valuations of Level 2 assets and liabilities are based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include (i) mortgage-backed securities for which the fair value is estimated based on the value of identical or comparable assets, (ii) debt securities with quoted prices that are traded less frequently than exchange-traded instruments, and (iii) derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.
Level 3	Valuations of Level 3 assets and liabilities are based on unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined by using pricing models for which the determination of fair value requires significant management judgments estimation.

For the first six months of 2018, there were no transfers into or out of Level 1, Level 2 or Level 3 of the fair value hierarchy.

71

Financial Instruments Recorded at Fair Value on a Recurring Basis

Investment securities available for sale

The fair value of investment securities was the market value based on quoted market prices (as is the case with Treasury notes and non-callable U.S. Agency debt securities), when available (Level 1), or, when available, market prices for identical or comparable assets (as is the case with MBS and callable U.S. agency debt) that are based on observable market parameters, including benchmark yields, reported trades, quotes from brokers or dealers, issuer spreads, bids, offers and reference data including market research operations (Level 2). Observable prices in the market already consider the risk of nonperformance. If listed prices or quotes are not available, fair value is based upon discounted cash flow models that use unobservable inputs due to the limited market activity of the instrument, as is the case with certain private label MBS held by the Corporation (Level 3).

Private label MBS are collateralized by fixed-rate mortgages on single-family residential properties in the United States; the interest rate on the securities is variable, tied to 3-month LIBOR and limited to the weighted-average coupon of the underlying collateral. The market valuation represents the estimated net cash flows over the projected life of the pool of underlying assets applying a discount rate that reflects market observed floating spreads over LIBOR, with a widening spread based on a nonrated security. The market valuation is derived from a model that utilizes relevant assumptions, such as the prepayment rate, default rate, and loss severity on a loan level basis. The Corporation modeled the cash flow from the fixed-rate mortgage collateral using a static cash flow analysis according to collateral attributes of the underlying mortgage pool (i.e., loan term, current balance, note rate, rate adjustment type, rate adjustment frequency, rate caps, and others) in combination with prepayment forecasts based on historical portfolio performance. The variable cash flow of the security is modeled using the 3-month LIBOR forward curve. Loss assumptions were driven by the combination of default and loss severity estimates, using an asset-level risk assessment method taking into account loan credit characteristics (loan-to-value, state jurisdiction, delinquency, property type and pricing behavior, and others) to provide an estimate of default and loss severity.

Refer to the table below for further information regarding qualitative information for all assets and liabilities measured at fair value using significant unobservable inputs (Level 3).

Derivative instruments

The fair value of most of the Corporation’s derivative instruments is based on observable market parameters and takes into consideration the credit risk component of paying counterparties, when appropriate. On interest caps, only the seller’s credit risk is considered.  The caps were valued using a discounted cash flow approach based on the related LIBOR and swap rate for each cash flow.

A credit spread is considered for those derivative instruments that are not secured. The cumulative mark-to-market effect of credit risk in the valuation of derivative instruments for the quarters and six-month periods ended June 30, 2018 and 2017 was immaterial.   

Assets and liabilities measured at fair value on a recurring basis are summarized below:
	As of June 30, 2018								As of December 31, 2017
	Fair Value Measurements Using								Fair Value Measurements Using
(In thousands)	Level 1		Level 2		Level 3		Assets/Liabilities at Fair Value		Level 1		Level 2		Level 3		Assets/Liabilities at Fair Value
Assets:
Securities available for sale :
Equity securities (1)	$	-	$	-	$	-	$	-	$	418	$	-	$	-	$	418
U.S. Treasury Securities		57,399		-		-		57,399		7,401		-		-		7,401
Noncallable U.S. agency debt securities		-		311,367		-		311,367		-		361,971		-		361,971
Callable U.S. agency debt securities and MBS		-		1,645,340		-		1,645,340		-		1,497,253		-		1,497,253
Puerto Rico government obligations		-		4,075		2,768		6,843		-		4,118		2,695		6,813
Private label MBS		-		-		15,061		15,061		-		-		17,060		17,060
Other investments		-		-		-		-		-		-		100		100
Equity securities (1)		412		-		-		412		-		-		-		-
Derivatives, included in assets:
Purchased interest rate cap agreements		-		799		-		799		-		305		-		305
Forward contracts		-		7		-		7		-		7		-		7
Liabilities:
Derivatives, included in liabilities:
Written interest rate cap agreements		-		799		-		799		-		305		-		305
Forward contracts		-		122		-		122		-		19		-		19
(1) As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities. As of December 31, 2017, equity securities had a net unrealized loss of $6 thousand.

72

The table below presents a reconciliation of the beginning and ending balances of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarters and six-month periods ended June 30, 2018 and 2017.

		Quarter Ended June 30,
		2018		2017
Level 3 Instruments Only		Securities		Securities
(In thousands)		Available For Sale(1)		Available For Sale(1)
Beginning balance		$	18,808	$	21,382
Total gains (losses) (realized/unrealized):
Included in other comprehensive income			(279)		228
Principal repayments and amortization			(700)		(1,839)
Ending balance		$	17,829	$	19,771
(1)	Amounts mostly related to private label MBS.

		Six-Month Period Ended June 30,
		2018		2017
Level 3 Instruments Only		Securities		Securities
(In thousands)		Available For Sale(1)		Available For Sale(1)
Beginning balance		$	19,855	$	22,914
Total gains (realized/unrealized):
Included in other comprehensive income			193		746
Principal repayments and amortization			(2,219)		(3,889)
Ending balance		$	17,829	$	19,771
(1)	Amounts mostly related to private label MBS.

73

The tables below present qualitative information for significant assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2018 and December 31, 2017:
	June 30, 2018
(In thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
Investment securities available-for-sale:
Private label MBS	$	15,061	Discounted cash flows	Discount rate	14.6%
				Prepayment rate	5.0% - 23.0% (Weighted Average 12.6%)
				Projected Cumulative Loss Rate	0.0% - 8.7% (Weighted Average 3.9%)
Puerto Rico government obligations		2,768	Discounted cash flows	Discount rate	6.10%
				Prepayment rate	3.00%

	December 31, 2017
(In thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
Investment securities available for sale:
Private label MBS	$	17,060	Discounted cash flows	Discount rate	14.0%
				Prepayment rate	12.0% - 29.0% (Weighted Average 16.4%)
				Projected Cumulative Loss Rate	0.0% - 6.8% (Weighted Average 3.0%)
Puerto Rico government obligations		2,695	Discounted cash flows	Discount rate	6.61%
				Prepayment rate	3.00%

74

Information about Sensitivity to Changes in Significant Unobservable Inputs

Private label MBS: The significant unobservable inputs in the valuation include probability of default, the loss severity assumption, and prepayment rates. Shifts in those inputs would result in different fair value measurements. Increases in the probability of default, loss severity assumptions, and prepayment rates in isolation would generally result in an adverse effect on the fair value of the instruments. Meaningful and possible shifts of each input were modeled to assess the effect on the fair value estimation.

Puerto Rico Government Obligations: The significant unobservable input used in the fair value measurement is the assumed prepayment rate of the underlying residential mortgage loans that collateralize these obligations that are guaranteed by the Puerto Rico Housing Finance Authority. A significant increase (decrease) in the assumed rate would lead to a higher (lower) fair value estimate. The fair value of these bonds was based on a discounted cash flow analysis that contemplates the credit quality of the holder of second mortgages and a discount for liquidity constraints on the bonds considering the absence of an active market for them. Due to the guarantee of the Puerto Rico Housing Finance Authority and other applicable contractual safeguards, no additional credit spread is applied for services default.   

There were no changes in unrealized gains and losses recorded in earnings for the quarters and six-month period ended June 30, 2018 and 2017 for Level 3 assets and liabilities that were still held at the end of each period.

Additionally, fair value is used on a nonrecurring basis to evaluate certain assets in accordance with GAAP. Adjustments to fair value usually result from the application of lower-of-cost or market accounting (e.g., loans held for sale carried at the lower-of-cost or fair value and repossessed assets) or write downs of individual assets (e.g., goodwill and loans).

As of June 30, 2018, impairment or valuation adjustments were recorded for assets recognized at fair value on a non-recurring basis as shown in the following table:
		Carrying value as of June 30, 2018						(Losses) Gains recorded for the Quarter Ended                 June 30, 2018		(Losses) Gains recorded for the Six-Month Period Ended June 30, 2018
		Level 1		Level 2		Level 3
(In thousands)
Loans receivable (1)		$	-	$	-	$	392,039	$	(3,869)	$	(17,972)
Other real estate owned (2)			-		-		143,355		(8,076)		(8,164)
Loans Held For Sale (3)			-		-		54,546		-		(5,830)
(1)	Consists mainly of impaired commercial and construction loans.  The impairments were generally measured based on the fair value of  the collateral. The fair values were derived from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.
(2)	The fair values were derived from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable.  Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.
(3)	The value of these loans was primarily derived from external appraisals, adjusted for specific characteristics of the loans.

75

As of June 30, 2017, impairment or valuation adjustments were recorded for assets recognized at fair value on a non-recurring basis as shown in the following table:
		Carrying value as of June 30, 2017						(Losses) recorded for the Quarter Ended June 30, 2017		(Losses) recorded for the Six-Month Period Ended June 30, 2017
		Level 1		Level 2		Level 3
(In thousands)
Loans receivable (1)		$	-	$	-	$	359,302	$	(5,341)	$	(22,707)
OREO (2)			-		-		150,045		(3,237)		(6,873)
Mortgage servicing rights (3)			-		-		26,502		(197)		(357)
(1)	Consists mainly of impaired commercial and construction loans.  The impairments were generally measured based on the fair value of the collateral. The fair value was derived from external appraisals that take into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.
(2)	The fair values were derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable.  Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.
(3)	Fair value adjustments to the mortgage servicing rights were mainly due to assumptions associated with mortgage prepayments rates. The Corporation carries its mortgage servicing rights at the lower of cost or market, measured at fair value on a non-recurring basis. Assumptions for the value of mortgage servicing rights include: Prepayment Rate of 6.23%, Discount Rate of 11.21%.

Qualitative information regarding the fair value measurements for Level 3 financial instruments are as follows:
	June 30, 2018
	Method	Inputs
Loans	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
OREO	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
Mortgage servicing rights	Discounted Cash Flows	Weighted average prepayment rate of 5.96%; weighted average discount rate of 11.24%

76

The following tables present the carrying value, estimated fair value and estimated fair value level of the hierarchy of financial instruments as of June 30, 2018 and December 31, 2017:
	Total Carrying Amount in Statement of Financial Condition June 30, 2018		Fair Value Estimate June 30, 2018		Level 1		Level 2		Level 3
(In thousands)
Assets:
Cash and due from banks and money
market investments (amortized cost)	$	888,399	$	888,399	$	888,399	$	-	$	-
Investment securities available
for sale (fair value)		2,036,010		2,036,010		57,399		1,960,782		17,829
Investment securities held to maturity (amortized cost)		150,486		135,340		-		-		135,340
Equity Securities (fair value)		412		412		412		-		-
Other investment securities (amortized cost)		42,988		42,988		-		42,988		-
Loans held for sale (lower of cost or market)		80,815		81,236		-		26,690		54,546
Loans held for investment (amortized cost)		8,640,291
Less: allowance for loan and lease losses		(222,035)
Loans held for investment, net of allowance	$	8,418,256		8,130,099		-		-		8,130,099
Derivatives, included in assets (fair value)		806		806		-		806		-
Liabilities:
Deposits (amortized cost)		9,218,083		9,224,516		-		9,224,516		-
Securities sold under agreements
to repurchase (amortized cost)		200,000		225,171		-		225,171		-
Advances from FHLB (amortized cost)		715,000		699,956		-		699,956		-
Other borrowings (amortized cost)		184,150		172,356		-		-		172,356
Derivatives, included in liabilities (fair value)		921		921		-		921		-

	Total Carrying Amount in Statement of Financial Condition December 31, 2017		Fair Value Estimate December 31, 2017		Level 1		Level 2		Level 3
(In thousands)
Assets:
Cash and due from banks and money
market investments  (amortized cost)	$	716,395	$	716,395	$	716,395	$	-	$	-
Investment securities available
for sale (fair value)		1,891,016		1,891,016		7,819		1,863,342		19,855
Investment securities
held to maturity (amortized cost)		150,627		131,032		-		-		131,032
Other investment securities (amortized cost)		43,119		43,119		-		43,119		-
Loans held for sale (lower of cost or market)		32,980		34,979		-		25,237		9,742
Loans held for investment (amortized cost)		8,850,476
Less: allowance for loan and lease losses		(231,843)
Loans held for investment, net of allowance	$	8,618,633		8,372,865		-		-		8,372,865
Derivatives, included in assets (fair value)		312		312		-		312		-
Liabilities:
Deposits (amortized cost)		9,022,631		9,026,600		-		9,026,600		-
Securities sold under
agreements to repurchase (amortized cost)		300,000		325,913		-		325,913		-
Advances from FHLB (amortized cost)		715,000		707,272		-		707,272		-
Other borrowings (amortized cost)		208,635		189,424		-		-		189,424
Derivatives, included in liabilities (fair value)		324		324		-		324		-
Forward contracts

The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include cash and due from banks and other short-term assets, such as FHLB stock. Certain assets, the most significant being premises and equipment, mortgage servicing rights, deposits base, and other customer relationship intangibles, are not considered financial instruments and are not included above. Accordingly, this fair value information is not intended to, and does not, represent the Corporation’s underlying value. Many of these assets and liabilities subject to the disclosure requirements are not actively traded, requiring management to estimate fair values. These estimates necessarily involve the use of judgment about a wide variety of factors, including but not limited to, relevancy of market prices of comparable instruments, expected futures cash flows, and appropriate discount rates.

77

NOTE 23 – REVENUE FROM CONTRACTS WITH CUSTOMERS

As noted in Note 1 – Basis of Presentation and Significant Accounting Policies, the Corporation adopted the provisions of ASU 2014-09,“Revenue from Contracts with Customers (Topic 606)” (“ASC Topic 606”), on January 1, 2018. Results for reporting periods beginning after December 31, 2017 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with Topic 605.

Revenue Recognition

In accordance with ASC Topic 606, revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration to which the Corporation expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC Topic 606, the Corporation performs the following five steps: (i) identifies the contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenue when (or as) the Corporation satisfies a performance obligation. The Corporation only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC Topic 606, the Corporation assesses the goods or services that are promised within each contract and identifies those that contain performance obligations, and assesses whether each promised good or service is distinct. The Corporation then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Disaggregation of Revenue

The following table summarizes the Corporation’s revenue, which includes net interest income on financial instruments and non-interest income, disaggregated by type of service and business segments for the quarter and six-month period ended June 30, 2018:

(In thousands)		Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Quarter ended June 30, 2018:
Net interest income (1)		$	20,102	$	55,138	$	20,443	$	12,443	$	15,053	$	7,292	$	130,471
Service charges and fees on deposit accounts			-		3,279		1,230		-		142		693		5,344
Insurance commissions			-		1,618		-		-		33		129		1,780
Merchant-related income			-		964		201		-		-		208		1,373
Credit and debit card fees			-		4,296		336		-		151		518		5,301
Other service charges and fees			21		811		304		71		(60)		269		1,416
Not in scope of Topic 606 (1)			4,645		283		140		-		194		(4)		5,258
Total non-interest income			4,666		11,251		2,211		71		460		1,813		20,472
Total Revenue		$	24,768	$	66,389	$	22,654	$	12,514	$	15,513	$	9,105	$	150,943
(In thousands)		Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Six-month period ended June 30, 2018:
Net interest income (1)		$	41,307	$	106,187	$	39,363	$	24,961	$	28,445	$	14,901	$	255,164
Service charges and fees on deposit accounts			-		6,444		2,322		-		276		1,390		10,432
Insurance commissions			-		4,762		-		-		45		328		5,135
Merchant-related income			-		1,609		362		-		-		393		2,364
Credit and debit card fees			-		8,465		591		-		279		1,060		10,395
Other service charges and fees			54		1,611		604		71		979		351		3,670
Not in scope of Topic 606 (1)			8,696		290		(409)		2,378		289		16		11,260
Total non-interest income			8,750		23,181		3,470		2,449		1,868		3,538		43,256
Total Revenue		$	50,057	$	129,368	$	42,833	$	27,410	$	30,313	$	18,439	$	298,420
(1)	Most of the Corporation’s revenue is not within the scope of ASU No. 2014-09, Revenue from Contracts with Customers. The guidance explicitly excludes net interest income from financial assets and liabilities, as well as other noninterest income from loans, leases, investment securities and derivative financial instruments.

78

For the six-month period ended June 30, 2018, substantially all of the Corporation’s revenue under the scope of Topic 606 was related to performance obligations satisfied at a point in time.

The following is a discussion of revenues within the scope of ASC Topic 606.

Service Charges and Fees on Deposit Accounts

Service charges and fees on deposit accounts relate to fees generated from a variety of deposit products and services rendered to customers.  Charges include, but are not limited to, overdraft fees, non-sufficient fund fees, dormant fees and monthly service charges. Such fees are recognized concurrently with the event on a daily basis or on a monthly basis depending upon the customer’s cycle date.  These depository arrangements are considered day-to-day contracts that do not extend beyond the services performed, as customers have the right to terminate these contracts with no penalty or, if any, nonsubstantive penalties.  As a consequence, the income recognition under the standard is not different from the Corporation’s practice before the adoption of this guidance.

Insurance Commissions

For insurance commissions, which include regular and contingent commissions paid to the Corporation’s insurance agency, the agreements contain a performance obligation related to the sale/issuance of the policy and ancillary administrative post-issuance support. The performance obligation will be satisfied as the policies are issued and revenue will be recognized at that point in time.  In addition, contingent commission income was found to be constrained, as defined under the new standard. Contingent commission income will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or payments are received, which is consistent with the Corporation’s practice before the adoption of this guidance. For the quarter and six-month period ended June 30, 2018, the Corporation recognized revenue of $0.3 million and $2.4 million, respectively, as payments were received and constraints were released.

Merchant-related Income

For merchant-related income, the determination of which included the consideration of a 2015 sale of merchant contracts that involved sales of point of sale (“POS”) terminals and entry into a marketing alliance under a revenue-sharing agreement, the Corporation concluded that control of the POS terminals and merchant contracts was transferred to the customer at the contract’s inception. With respect to the related revenue-sharing agreement, the Corporation satisfies the marketing alliance performance obligation over the life of the contract, and the associated transaction price is recognized as the entity performs and any constraints over the variable consideration are resolved. There was no material change in the timing or measurement of revenues. The overall effect on an ongoing basis of the new revenue guidance, as compared the Corporation’s practice before the adoption of this guidance, is expected to be immaterial.

Credit and Debit Card Fees

Credit and debit card fees primarily represent revenues earned from interchange fees and ATM fees. Interchange and network revenues are earned on credit and debit card transactions conducted with payment networks. ATM fees are primarily earned as a result of surcharges assessed to non-FirstBank customers who use a FirstBank ATM. Such fees are generally recognized concurrently with the delivery of services on a daily basis. As a consequence, the income recognition is unchanged from the Corporation’s practice before the adoption of this guidance. 

Other Fees

Other fees primarily include revenues generated from wire transfers, lockboxes, and bank issuances of checks. Such fees are recognized concurrently with the event or on a monthly basis.

79

Contract Balances

A contract liability is an entity’s obligation to transfer goods or services to a customer in exchange for consideration from the customer. As mentioned above, during 2015, the Bank entered into a long-term strategic marketing alliance with another entity to which the Bank sold its merchant contracts portfolio and related POS terminals.  Merchant services are marketed through FirstBank’s branches and offices in Puerto Rico and the Virgin Islands.  Under the marketing and referral agreement, FirstBank shares with this entity revenues generated by the merchant contracts over the term of the 10-year agreement.  As of June 30, 2018, and December 31, 2017, this contract liability amounted to $2.2 million and $2.4 million, respectively, which will be recognized over the remaining term of the contract. For the quarter and six-month period ended June 30, 2018, the Corporation recognized revenue and contract liabilities decreased by approximately $0.1 million and $0.2 million, respectively, due to the passage of time. There were no changes in contract liabilities due to changes in transaction price estimates. 

A contract asset is the right to consideration for transferred goods or services when the amount is conditioned on something other than the passage of time. As of June 30, 2018, and December 31, 2017, there were no receivables from contracts with customers or contract assets recorded on the Corporation’s consolidated financial statements.

Other

Except for the contract liabilities noted above, the Corporation did not have any significant performance obligations as of June 30, 2018. The Corporation also did not have any material contract acquisition costs and did not make any significant judgments or estimates in recognizing revenue for financial reporting purposes. 

NOTE 24 – SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is as follows:

	Six-Month Period Ended June 30,
	2018		2017
	(In thousands)
Cash paid for:
Interest on borrowings	$	49,102	$	44,613
Income tax		3,527		2,389
Non-cash investing and financing activities:
Additions to OREO		27,393		37,756
Additions to auto and other repossessed assets		30,194		22,731
Capitalization of servicing assets		2,025		1,924
Loan securitizations		119,754		131,808
Loans held for investment transferred to held for sale		69,851		-
Loans held for sale transferred to held for investment		385		10,206
Property plant and equipment transferred to other assets		-		1,185

80

NOTE 25 – SEGMENT INFORMATION

Based upon the Corporation’s organizational structure and the information provided to the Chief Executive Officer of the Corporation and, to a lesser extent, the Board of Directors, the operating segments are based primarily on the Corporation’s lines of business for its operations in Puerto Rico, the Corporation’s principal market, and by geographic areas for its operations outside of Puerto Rico.  As of June 30, 2018, the Corporation had six reportable segments: Commercial and Corporate Banking; Mortgage Banking; Consumer (Retail) Banking; Treasury and Investments; United States Operations; and Virgin Islands Operations.  Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess where to allocate resources. Other factors such as the Corporation’s organizational chart, nature of the products, distribution channels, and the economic characteristics of the product were also considered in the determination of the reportable segment.

The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers represented by specialized and middle-market clients and the public sector. The Commercial and Corporate Banking segment offers commercial loans, including commercial real estate and construction loans, and floor plan financings, as well as other products, such as cash management and business management services. The Mortgage Banking segment consists of the origination, sale, and servicing of a variety of residential mortgage loans. The Mortgage Banking segment also acquires and sells mortgages in the secondary markets.  In addition, the Mortgage Banking segment includes mortgage loans purchased from other local banks and mortgage bankers.  The Consumer (Retail) Banking segment consists of the Corporation’s consumer lending and deposit-taking activities conducted mainly through its branch network and loan centers. The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions that are executed to manage and enhance liquidity.  This segment also lends funds to the Commercial and Corporate Banking, Mortgage Banking and Consumer (Retail) Banking segments to finance their lending resources and borrows from those segments.  The Consumer (Retail) Banking and the United States Operations segments also lend funds to the other segments. The interest rates charged or credited by Treasury and Investments, the Consumer (Retail) Banking, and the United States Operations segments are allocated based on market rates. The difference between the allocated interest income or expense and the Corporation’s actual net interest income from centralized management of funding costs is reported in the Treasury and Investments segment. The United States Operations segment consists of all banking activities conducted by FirstBank in the United States mainland, including commercial and retail banking services.  The Virgin Islands Operations segment consists of all banking activities conducted by the Corporation in the USVI and BVI, including commercial and retail banking services. 

The accounting policies of the segments are the same as those referred to in Note 1 – “Nature of Business and Summary of Significant Accounting Policies,” in the audited consolidated financial statements included in the 2017 Annual Report on Form 10-K.

The Corporation evaluates the performance of the segments based on net interest income, the provision for loan and lease losses, non-interest income and direct non-interest expenses. The segments are also evaluated based on the average volume of their interest-earning assets less the allowance for loan and lease losses.

81

The following table presents information about the reportable segments:
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
For the quarter ended June 30, 2018:
Interest income	$	31,860	$	44,050	$	35,274	$	15,428	$	20,880	$	8,141	$	155,633
Net (charge) credit for transfer of funds		(11,758)		18,064		(14,831)		8,705		(180)		-		-
Interest expense		-		(6,976)		-		(11,690)		(5,647)		(849)		(25,162)
Net interest income		20,102		55,138		20,443		12,443		15,053		7,292		130,471
(Provision) release for loan and lease losses		(4,258)		(12,703)		(2,260)		-		(1,597)		1,282		(19,536)
Non-interest income		4,666		11,251		2,211		71		460		1,813		20,472
Direct non-interest expenses		(10,471)		(29,062)		(8,085)		(951)		(8,533)		(7,408)		(64,510)
Segment income	$	10,039	$	24,624	$	12,309	$	11,563	$	5,383	$	2,979	$	66,897
Average earnings assets	$	2,269,640	$	1,584,114	$	2,551,130	$	2,692,677	$	1,742,522	$	541,624	$	11,381,707
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
For the quarter ended June 30, 2017:
Interest income	$	33,086	$	43,369	$	30,364	$	14,657	$	16,675	$	9,223	$	147,374
Net (charge) credit for transfer of funds		(11,500)		6,546		(9,012)		14,427		(461)		-		-
Interest expense		-		(6,183)		-		(12,112)		(4,372)		(803)		(23,470)
Net interest income		21,586		43,732		21,352		16,972		11,842		8,420		123,904
(Provision) release for loan and lease losses		(11,167)		(7,767)		770		-		(131)		199		(18,096)
Non-interest income		4,764		12,153		1,171		438		574		1,449		20,549
Direct non-interest expenses		(9,622)		(28,066)		(9,771)		(969)		(8,115)		(6,918)		(63,461)
Segment income	$	5,561	$	20,052	$	13,522	$	16,441	$	4,170	$	3,150	$	62,896
Average earnings assets	$	2,471,666	$	1,772,605	$	2,482,323	$	2,142,975	$	1,501,169	$	609,280	$	10,980,018

(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Six-Month Period Ended June 30, 2018
Interest income	$	64,181	$	86,600	$	67,611	$	29,682	$	40,407	$	16,570	$	305,051
Net (charge) credit for transfer of funds		(22,874)		33,286		(28,248)		18,679		(843)		-		-
Interest expense		-		(13,699)		-		(23,400)		(11,119)		(1,669)		(49,887)
Net interest income		41,307		106,187		39,363		24,961		28,445		14,901		255,164
Provision for loan and lease losses		(4,639)		(18,496)		(9,060)		-		(3,056)		(4,829)		(40,080)
Non-interest income		8,750		23,181		3,470		2,449		1,868		3,538		43,256
Direct non-interest expenses		(18,191)		(55,963)		(14,799)		(1,899)		(16,489)		(15,030)		(122,371)
Segment income (loss)	$	27,227	$	54,909	$	18,974	$	25,511	$	10,768	$	(1,420)	$	135,969
Average earnings assets	$	2,280,770	$	1,579,773	$	2,578,498	$	2,585,641	$	1,726,310	$	556,340	$	11,307,332
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Six-Month Period Ended June 30, 2017
Interest income	$	67,044	$	86,286	$	59,775	$	28,414	$	32,464	$	18,619	$	292,602
Net (charge) credit for transfer of funds		(23,198)		11,448		(18,323)		30,660		(587)		-		-
Interest expense		-		(12,083)		-		(23,918)		(8,567)		(1,581)		(46,149)
Net interest income		43,846		85,651		41,452		35,156		23,310		17,038		246,453
Provision for loan and lease losses		(20,103)		(14,909)		(7,285)		-		(96)		(1,145)		(43,538)
Non-interest income		8,350		25,982		1,958		(11,732)		1,079		3,155		28,792
Direct non-interest expenses		(19,501)		(55,484)		(19,138)		(2,176)		(15,974)		(13,668)		(125,941)
Segment income	$	12,592	$	41,240	$	16,987	$	21,248	$	8,319	$	5,380	$	105,766
Average earnings assets	$	2,486,280	$	1,776,384	$	2,513,270	$	2,150,097	$	1,447,490	$	613,527	$	10,987,048

82

The following table presents a reconciliation of the reportable segment financial information to the consolidated totals:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
Net income :
Total income for segments and other		$	66,897	$	62,896	$	135,969	$	105,766
Other operating expenses (1)			(25,706)		(25,608)		(53,872)		(51,010)
Income before income taxes			41,191		37,288		82,097		54,756
Income tax expense			(10,159)		(9,290)		(17,917)		(1,217)
Total consolidated net income		$	31,032	$	27,998	$	64,180	$	53,539
Average assets:
Total average earning assets for segments		$	11,381,707	$	10,980,018	$	11,307,332	$	10,987,048
Average non-earning assets			963,752		900,622		943,828		893,785
Total consolidated average assets		$	12,345,459	$	11,880,640	$	12,251,160	$	11,880,833
(1)	Expenses pertaining to corporate administrative functions that support the operating segment, but are not specifically attributable to or managed by any segment are not included in the reported financial results of the operating segments. The unallocated corporate expenses include certain general and administrative expenses and related depreciation and amortization expenses.

83

NOTE 26 – REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

The Corporation and FirstBank are each subject to various regulatory capital requirements imposed by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on the Corporation’s financial statements and activities. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation must meet specific capital guidelines that involve quantitative measures of the Corporation’s and FirstBank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation’s capital amounts and classifications are also subject to qualitative judgments and adjustment by the regulators with respect to minimum capital requirements, components, risk weightings, and other factors.

      On October 3, 2017, the New York FED terminated the Written Agreement entered into on June 3, 2010 between the Corporation and the New York FED. However, the Corporation has agreed with the New York FED to continue to obtain the approval of the New York FED before paying dividends, receiving dividends from the Bank, making payments on subordinated debt or trust preferred securities, incurring or guaranteeing debt or purchasing or redeeming any corporate stock. 

Although the Corporation and FirstBank became subject to the U.S. Basel III capital rules (“Basel III rules”) beginning on January 1, 2015, certain requirements of the Basel III rules are being phased-in over several years and, in general, will be fully effective as of January 1, 2019, although certain elements of the new rules have been deferred by the federal banking agencies. The Corporation and FirstBank compute risk-weighted assets using the Standardized Approach required by the Basel III rules.

The Basel III rules require the Corporation to maintain an additional capital conservation buffer of 2.5% to avoid limitations on both (i) capital distributions (e.g., repurchases of capital instruments, dividends and interest payments on capital instruments), and (ii) discretionary bonus payments to executive officers and heads of major business lines. The phase-in of the capital conservation buffer began on January 1, 2016 with a first year requirement of 0.625% of additional Common Equity Tier 1 Capital (“CET1”), which is being progressively increased over a four-year period, increasing by that same percentage amount on each subsequent January 1 until it reaches the fully phased-in 2.5% CET1 requirement on January 1, 2019.

    Under the fully phased-in Basel III rules, in order to be considered adequately capitalized, the Corporation will be required to maintain: (i) a minimum CET1 capital to risk-weighted assets ratio of at least  4.5%, plus the 2.5% capital conservation buffer, resulting in a required minimum CET1 ratio of at least 7%, (ii) a minimum ratio of total Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer, resulting in a required minimum Tier 1 capital ratio of 8.5%, (iii) a minimum ratio of total Tier 1 plus Tier 2 capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer, resulting in a required minimum total capital ratio of 10.5%, and (iv) a required minimum leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average on-balance sheet (non-risk adjusted) assets.

    In addition, as required under the Basel III rules, the Corporation’s trust preferred securities (“TRuPs”) were fully phased out from Tier 1 capital as of January 1, 2016. However, the Corporation’s TRuPs may continue to be included in Tier 2 capital until the instruments are redeemed or mature.

    On November 21, 2017, the Federal Reserve Board, the FDIC, and the Office of the Comptroller of the Currency finalized an extension of the phase-in of certain Basel III capital rules for banks not using the Basel advanced approaches. The extension, which was effective January 1, 2018, pauses the full transition to the Basel III treatment of mortgage servicing assets, certain deferred tax assets, investments in the capital of unconsolidated financial institutions and minority interests, pending the banking agencies’ broader efforts, announced in September 2017, to simplify the regulatory capital rules that apply to banking organizations that are not subject to the advanced approaches capital rules. Because the advanced approaches capital rules apply to banking organizations with more than $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposure, the extension relief applies broadly to community, midsize, and regional banks, including the Corporation and FirstBank.

Please refer to the discussion in “Part I, – Item 1, – Business – Supervision and Regulation,” included in the 2017 Annual Report on Form 10-K for a more complete discussion of supervision and regulatory matters and activities that affect the Corporation and its subsidiaries.

84

The Corporation's and its banking subsidiary's regulatory capital positions as of June 30, 2018 and December 31, 2017 were as follows:
	Regulatory Requirements
	Actual			For Capital Adequacy Purposes			To be Well-Capitalized-General Thresholds
	Amount		Ratio	Amount		Ratio	Amount		Ratio
(Dollars in thousands)
As of June 30, 2018
Total Capital (to
Risk-Weighted Assets)
First BanCorp.	$	2,035,920	23.47%	$	694,037	8.0%		N/A	N/A
FirstBank	$	1,993,786	22.98%	$	694,037	8.0%	$	867,546	10.0%
Common Equity Tier 1 Capital
(to Risk-Weighted Assets)
First BanCorp.	$	1,711,472	19.73%	$	390,396	4.5%		N/A	N/A
FirstBank	$	1,576,068	18.17%	$	390,396	4.5%	$	563,905	6.5%
Tier I Capital (to
Risk-Weighted Assets)
First BanCorp.	$	1,747,576	20.14%	$	520,527	6.0%		N/A	N/A
FirstBank	$	1,884,068	21.72%	$	520,527	6.0%	$	694,037	8.0%
Leverage ratio
First BanCorp.	$	1,747,576	14.35%	$	487,239	4.0%		N/A	N/A
FirstBank	$	1,884,068	15.48%	$	486,780	4.0%	$	608,475	5.0%
As of December 31, 2017
Total Capital (to
Risk-Weighted Assets)
First BanCorp.	$	1,989,873	22.53%	$	706,432	8.0%		N/A	N/A
FirstBank	$	1,947,627	22.06%	$	706,218	8.0%	$	882,772	10.0%
Common Equity Tier 1 Capital
(to Risk-Weighted Assets)
First BanCorp.	$	1,674,164	18.96%	$	397,368	4.5%		N/A	N/A
FirstBank	$	1,562,431	17.70%	$	397,248	4.5%	$	573,802	6.5%
Tier I Capital (to
Risk-Weighted Assets)
First BanCorp.	$	1,675,282	18.97%	$	529,824	6.0%		N/A	N/A
FirstBank	$	1,835,445	20.79%	$	529,663	6.0%	$	706,218	8.0%
Leverage ratio
First BanCorp.	$	1,675,282	14.03%	$	477,643	4.0%		N/A	N/A
FirstBank	$	1,835,445	15.39%	$	477,056	4.0%	$	596,320	5.0%

85

The Corporation enters into financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments may include commitments to extend credit and commitments to sell mortgage loans at fair value. As of June 30, 2018, commitments to extend credit amounted to approximately $1.2 billion, of which $663.7 million relates to credit card loans. Commercial and Financial standby letters of credit amounted to approximately $58.7 million. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since certain commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. For most of the commercial lines of credit, the Corporation has the option to reevaluate the agreement prior to making additional disbursements. In the case of credit cards and personal lines of credit, the Corporation can cancel the unused credit facility at any time and without cause.

As of June 30, 2018, First BanCorp. and its subsidiaries were defendants in various legal proceedings arising in the ordinary course of business. On at least a quarterly basis, the Corporation assesses its liabilities and contingencies in connection with threatened and outstanding legal cases, matters and proceedings, utilizing the latest information available. For cases, matters and proceedings where it is both probable the Corporation will incur a loss and the amount can be reasonably estimated, the Corporation establishes an accrual for the loss. Once established, the accrual is adjusted as appropriate to reflect any relevant developments. For cases, matters or proceedings where a loss is not probable or the amount of the loss cannot be estimated, no accrual is established.

Any estimate involves significant judgment, given the varying stages of the proceedings (including the fact that some of them are currently in preliminary stages), the existence of multiple defendants in some of the current proceedings whose share of liability has yet to be determined, the numerous unresolved issues in the proceedings, and the inherent uncertainty of the various potential outcomes of such proceedings. Accordingly, the Corporation’s estimate will change from time-to-time, and actual losses may be more or less than the current estimate.

While the final outcome of legal cases, matters, and proceedings is inherently uncertain, based on information currently available, Management believes that the final disposition of the Corporation’s legal cases, matters or proceedings, to the extent not previously provided for, will not have a material negative adverse effect on the Corporation’s consolidated financial position as a whole. If management believes that, based on available information, it is at least reasonably possible that a material loss (or additional material loss in excess of any accrual) will be incurred in connection with any legal actions, the Corporation discloses an estimate of the possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate can be made, or discloses that an estimate cannot be made. Based on the Corporation’s assessment as of June 30, 2018, no such disclosures were necessary. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these cases, matters and proceedings, if unfavorable, may be material to the Corporation’s consolidated financial position on a particular period.

Ramírez Torres, et al. v. Banco Popular de Puerto Rico, et al. FirstBank Puerto Rico has been named Defendant in this Class Action Complaint, filed of February 17, 2017 at the Court of First Instance in San Juan, Puerto Rico. The Complaint seeks damages and preliminary injunctive relief on behalf of the purported class against Banco Popular de Puerto Rico and other financial institutions with insurance agency subsidiaries in Puerto Rico. Plaintiffs allege that Defendants have been unjustly enriched by failing to reimburse them  for "good experience" commissions allegedly paid by Antilles Insurance Company and Puerto Rico Home Insurance Company. On March 30, 2017, FirstBank Puerto Rico filed a Motion to Dismiss and a Motion for Declaratory Judgment and Third Party Complaint against Antilles Insurance Company  and the Insurance Commissioner's Office. All other Defendants filed Motions to Dismiss.  Antilles Insurance Company filed a Motion against the Third Party Complaint filed by FirstBank Puerto Rico, which FirstBank Puerto Rico opposed. The Insurance Commissioner's Office filed a Motion for Summary Judgment. On July 28, 2017, the Court issued Judgment granting the Motions to Dismiss filed by Defendants, dismissing the Complaint with prejudice, except the Third Party Complaint filed by FirstBank Puerto Rico which was dismissed without prejudice. On August 30, 2017, Plaintiffs filed an Appeal before the Puerto Rico Court of Appeals and FirstBank Puerto Rico filed its Opposition. On March 20, 2018, the Court of Appeals entered Judgment revoking the lower court judgment. Oriental Bank filed for Reconsideration, which was denied. All other Defendants filed writs of Certiorari before the Puerto Rico Supreme Court on May 29, 2018. On June 26, 2018, the Supreme Court issued Resolution denying all writs of Certiorari filed by Defendants.  Defendants are currently discussing the Supreme Court's Judgment in order to determine if a Reconsideration will be filed.

86

NOTE 27 – FIRST BANCORP. (HOLDING COMPANY ONLY) FINANCIAL INFORMATION

The following condensed financial information presents the financial position of the Holding Company only as of June 30, 2018 and December 31, 2017 and the results of its operations for the quarters and six-month periods ended June 30, 2018 and 2017.

Statements of Financial Condition
	As of June 30,			As of December 31,
	2018		2017
(In thousands)
Assets
Cash and due from banks	$	18,444	$	20,864
Money market investments		6,111		6,111
Other investment securities		285		285
Loans held for investment, net		96		191
Investment in FirstBank Puerto Rico, at equity		2,037,467		2,028,641
Investment in FirstBank Insurance Agency, at equity		15,955		12,400
Investment in FBP Statutory Trust I		1,963		2,698
Investment in FBP Statutory Trust II		3,561		3,561
Other assets		4,875		3,799
Total assets	$	2,088,757	$	2,078,550
Liabilities and Stockholdersʼ Equity
Liabilities:
Other borrowings	$	184,149	$	208,635
Accounts payable and other liabilities		2,929		818
Total liabilities		187,078		209,453
Stockholdersʼ equity		1,901,679		1,869,097
Total liabilities and stockholdersʼ equity	$	2,088,757	$	2,078,550

87

Statements of Income
	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018		2017		2018		2017
	(In thousands)				(In thousands)
Income:
Interest income on money market investments	$	5	$	5	$	10	$	10
Dividend income from banking subsidiary		3,800		1,800		25,384		3,600
Other income		70		66		133		128
		3,875		1,871		25,527		3,738
Expense:
Other borrowings		2,235		2,065		4,320		4,027
Other operating expenses		631		699		1,227		1,666
		2,866		2,764		5,547		5,693
Gain on early extinguishment of debt		-		-		2,316		-
Income (loss) before income taxes and equity
in undistributed earnings of subsidiaries		1,009		(893)		22,296		(1,955)
Equity in undistributed earnings of subsidiaries		30,023		28,891		41,884		55,494
Net income	$	31,032	$	27,998	$	64,180	$	53,539
Other Comprehensive (loss) income, net of tax		(7,445)		9,065		(31,492)		19,761
Comprehensive income	$	23,587	$	37,063	$	32,688	$	73,300

NOTE 28 – SUBSEQUENT EVENTS

The Corporation has performed an evaluation of events occurringsubsequent to June 30, 2018; management has determined that there were no events occurring in this period that require disclosure in or adjustment to the accompanying financial statements.

88

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

SELECTED FINANCIAL DATA
			Quarter ended					Six-Month Period Ended
(In thousands, except for per share and financial ratios)			June 30,				June 30,
			2018		2017		2018		2017
Condensed Income Statements:
	Total interest income		$	155,633	$	147,374	$	305,051	$	292,602
	Total interest expense			25,162		23,470		49,887		46,149
	Net interest income			130,471		123,904		255,164		246,453
	Provision for loan and lease losses			19,536		18,096		40,080		43,538
	Non-interest income			20,472		20,549		43,256		28,792
	Non-interest expenses			90,216		89,069		176,243		176,951
	Income before income taxes			41,191		37,288		82,097		54,756
	Income tax expense			(10,159)		(9,290)		(17,917)		(1,217)
	Net income			31,032		27,998		64,180		53,539
	Net income attributable to common stockholders			30,363		27,329		62,842		52,201
Per Common Share Results:
	Net earnings per common share-basic		$	0.14	$	0.13	$	0.29	$	0.24
	Net earnings per common share-diluted		$	0.14	$	0.13	$	0.29	$	0.24
	Cash dividends declared		$	-	$	-	$	-	$	-
	Average shares outstanding			215,737		213,900		215,194		213,621
	Average shares outstanding diluted			216,666		216,832		216,483		217,103
	Book value per common share		$	8.59	$	8.44	$	8.59	$	8.44
	Tangible book value per common share (1)		$	8.40	$	8.24	$	8.40	$	8.24
Selected Financial Ratios (In Percent):
Profitability:
	Return on Average Assets			1.01		0.95		1.06		0.91
	Interest Rate Spread			4.11		4.15		4.07		4.15
	Net Interest Margin			4.49		4.44		4.45		4.43
	Interest Rate Spread - tax equivalent basis (2)			4.28		4.32		4.25		4.31
	Net Interest Margin - tax equivalent basis (2)			4.67		4.61		4.62		4.59
	Return on Average Total Equity			6.65		6.10		6.93		5.94
	Return on Average Common Equity			6.78		6.22		7.07		6.06
	Average Total Equity to Average Total Assets			15.17		15.50		15.24		15.31
	Tangible common equity ratio (1)			14.78		14.99		14.78		14.99
	Dividend payout ratio			-		-		-		-
	Efficiency ratio (3)			59.77		61.66		59.06		64.29
Asset Quality:
	Allowance for loan and lease losses to total loans held for investment			2.57		1.96		2.57		1.96
	Net charge-offs (annualized) to average loans (4)			1.07		2.16		1.14		1.71
	Provision for loan and lease losses to net charge-offs			83.64		37.82		80.34		57.55
	Non-performing assets to total assets (4)			5.02		4.83		5.02		4.83
	Non-performing loans held for investment to total loans held for investment (4)			4.85		4.64		4.85		4.64
	Allowance to total non-performing loans held for investment (4)			52.97		42.17		52.97		42.17
	Allowance to total non-performing loans held for investment,
	excluding residential real estate loans			86.53		67.75		86.53		67.75
Other Information:
	Common Stock Price: End of period		$	7.65	$	5.79	$	7.65	$	5.79
			As of June 30, 2018		As of December 31, 2017
Balance Sheet Data:
	Loans, including loans held for sale		$	8,721,106	$	8,883,456
	Allowance for loan and lease losses			222,035		231,843
	Money market and investment securities			2,327,486		2,095,177
	Intangible assets			40,483		42,351
	Deferred tax asset, net			283,334		294,809
	Total assets			12,384,862		12,261,268
	Deposits			9,218,083		9,022,631
	Borrowings			1,099,150		1,223,635
	Total preferred equity			36,104		36,104
	Total common equity			1,917,682		1,853,608
	Accumulated other comprehensive loss, net of tax			(52,107)		(20,615)
	Total equity			1,901,679		1,869,097
______________
	(1)	Non-GAAP financial measures. See "Risk Management - Capital" below for additional information about the components and a reconciliation of these measures.
	(2)	On a tax-equivalent basis and excluding the changes in fair value of derivative instruments. See "Results of Operations - Net Interest Income" below for a reconciliation of these non-GAAP financial measures.
	(3)	Non-interest expenses to the sum of net interest income and non-interest income.
	(4)	Loans used in the denominator in calculating each of these ratios include purchased credit-impaired ("PCI") loans. However, the Corporation separately tracks and reports PCI loans and excludes these from non-performing loan and non-performing asset amounts.

89

The following MD&A relates to the accompanying unaudited consolidated financial statements of First BanCorp. (the “Corporation” or “First BanCorp.”) and should be read in conjunction with such financial statements and the notes thereto.  This section also presents certain financial measures that are not based on generally accepted accounting principles in the United States (“GAAP”).  See “Risk Management - Basis of Presentation” below for information about why the non-GAAP financial measures are being presented and the reconciliation of the non-GAAP financial measures for which the reconciliation is not presented earlier.

EXECUTIVE SUMMARY

First BanCorp. is a diversified financial holding company headquartered in San Juan, Puerto Rico offering a full range of financial products to consumers and commercial customers through various subsidiaries. First BanCorp. is the holding company (the “Holding Company”) of FirstBank Puerto Rico (“FirstBank” or the “Bank”) and FirstBank Insurance Agency. Through its wholly-owned subsidiaries, the Corporation operates offices in Puerto Rico, the United States Virgin Islands and British Virgin Islands, and the State of Florida (USA), concentrating on commercial banking, residential mortgage loan originations, finance leases, credit cards, personal loans, small loans, auto loans, and insurance agency and broker-dealer activities.

OVERVIEW OF RESULTS OF OPERATIONS

First BanCorp.'s results of operations depend primarily on its net interest income, which is the difference between the interest income earned on its interest-earning assets, including investment securities and loans, and the interest expense incurred on its interest-bearing liabilities, including deposits and borrowings. Net interest income is affected by various factors, including: the interest rate scenario; the volumes, mix and composition of interest-earning assets and interest-bearing liabilities; and the re-pricing characteristics of these assets and liabilities. The Corporation's results of operations also depend on the provision for loan and lease losses, non-interest expenses (such as personnel, occupancy, the deposit insurance premium and other costs), non-interest income (mainly service charges and fees on deposits, and insurance income), gains (losses) on sales of investments, gains (losses) on mortgage banking activities, and income taxes.

     The Corporation had net income of $31.0 million, or $0.14 per diluted common share, for the quarter ended June 30, 2018, compared to $28.0 million, or $0.13 per diluted common share, for the same period in 2017. 

The key drivers of the Corporation’s GAAP financial results for the quarter ended June 30, 2018, compared to the same period in 2017, include the following:

·Net interest income increased by $6.6 million to $130.5 million for the quarter ended June 30, 2018 compared to $123.9 million for the same period in 2017.  The increase in net interest income was driven primarily by: (i)  a $5.0 million increase in interest income on commercial and construction loans, primarily associated with the upward repricing of variable-rate commercial loans and a $1.2 million cash interest collection on a non-performing commercial loan in the second quarter of 2018, (ii) a $2.6 million increase in interest income from interest-bearing cash balances, primarily deposits maintained at the Federal Reserve Bank of New York (“New York FED”), due to both a higher average balance of interest-bearing cash and increases in the Federal Funds target rate, (iii) a $0.8 million increase in interest income on investment securities, primarily due to the gradual reinvestment of liquidity in higher-yielding U.S. agency debt securities; and (iv) a $0.7 million increase in interest income on consumer loans, primarily due to a $34.8 million increase in the average balance of this portfolio.    

The aforementioned variances were partially offset by: (i) a $1.7 million increase in interest expense, primarily reflecting the effect of higher market interest rates on the cost of commercial money market accounts tied to variable short-term interest rates, brokered and retail certificates of deposit (“CDs”), and Federal Home Loan Bank of New York (“FHLB”) advances, partially offset by a decrease of $272.8 million in the average balance of interest-bearing liabilities, primarily brokered CDs and repurchase agreements; and (ii) a $0.8 million decrease in interest income on residential mortgage loans, primarily associated with a $70.3 million decrease in the average balance of this portfolio.

The net interest margin increased to 4.49% for the second quarter of 2018, compared to 4.44% for the same period a year ago, primarily related to the upward repricing of variable rate commercial loans, the $1.2 million cash interest collected on a non-performing commercial loan, and an improved funding mix driven by the increase in the proportion of interest-earning assets funded by the growth in non-interest-bearing deposits.  See “Results of Operations - Net Interest Income” below for additional information. 

·The provision for loan and lease losses increased by $1.4 million to $19.5 million for the second quarter of 2018, compared to $18.1 million for the same period in 2017.  The increase was driven by: (i) a $4.7 million increase in the provision for consumer loans, primarily related to higher charge-offs on personal loans, the increase in size of the auto and finance lease portfolio, and the effect of refinements in the measurement of qualitative factors used in the determination of the general reserve for consumer loans implemented in the second quarter of 2018 and (ii) a $4.1 million increase in the provision for commercial and construction loans, primarily reflecting the effect in the second quarter of 2017 of a $4.2 million recovery on

90

a previously charged-off commercial loan in Puerto Rico and downgrades in the credit risk classification of certain large commercial loans in the second quarter of 2018, partially offset by a $1.9 million net loan loss reserve release related to revised estimates associated with the effects of Hurricanes Maria and Irma, resulting from updated assessments about the performance and repayment prospects of certain individually-assessed commercial credits.  These variances were partially offset by a $7.3 million decrease in the provision for residential mortgage loans, reflecting lower charge-off levels, a decline in non-performing loan levels, the overall decrease in the size of this portfolio, and the effect in the second quarter of 2017 of a $2.6 million charge to the provision for PCI loans. 

Net charge-offs totaled $23.4 million for the second quarter of 2018, or 1.07% of average loans on an annualized basis, compared to $47.8 million, or 2.16% of average loans for the same period in 2017.  The decrease primarily reflects the effect in the second quarter of 2017 of charge-offs amounting to $29.7 million taken against previously-established specific reserves for commercial mortgage loans formerly guaranteed by the Puerto Rico Tourism Development Fund (“TDF”).  See “Results of Operations - Provision for Loan and Lease Losses” and “Risk Management” below for an analysis of the allowance for loan and lease losses and non-performing assets and related ratios.

·The Corporation recorded non-interest income of $20.5 million for the second quarter of 2018, relatively flat compared to the second quarter of 2017.  Some of the most significant variances were: (i) a $0.7 million increase in transaction fee income from merchant-related transactions and credit and debit card interchange fees, (ii) a $0.4 million decrease in service charge on deposits accounts; and (iii) the effect of a $0.4 million partial recovery of previously-recognized other-than-temporary impairment (“OTTI”) charges on non-performing bonds of the Government Development Bank for Puerto Rico (the “GDB”) and the Puerto Rico Public Buildings Authority sold in the second quarter of 2017.  See “Results of Operation - Non-Interest Income” below for additional information.     

·Non-interest expenses for the second quarter of 2018 were $90.2 million, compared to $89.1 million for the same period in 2017.  The increase was driven by: (i) a $2.3 million increase in losses on other real estate owned (“OREO”) operations, primarily reflecting a $2.5 million increase in adverse fair value adjustments to the value of OREO properties, (ii) a $1.1 million increase in employees’ compensation and benefit expenses, reflecting costs associated with a cash transition award paid to certain senior officers of $0.6 million in connection with the previously-reported executive compensation program that became effective in the third quarter of 2017, and a $0.5 million increase in bonus and incentive-based compensation expenses; and (iii) a $0.8 million increase in business promotion expenses, reflecting a $0.4 million increase related to advertising, public relations, and sponsorship activities, and a $0.3 million increase in costs of the credit card rewards program. 

These increases were partially offset by a $1.6 million decrease in professional service fees, primarily reflecting reductions in attorneys’ collection fees, and a $1.3 million decrease in the Federal Deposit Insurance Corporation (“FDIC”) insurance premium expense reflecting, among other things, the effect of reductions in brokered CDs, higher liquidity levels tied to the growth in non-interest bearing deposits, and an improvement in the risk profile of the Bank’s balance sheet.  See “Results of Operation - Non-Interest Expenses” below for additional information.

·For the second quarter of 2018, the Corporation recorded an income tax expense of $10.2 million, compared to $9.3 million for the same period in 2017.  The increase was driven by higher pre-tax earnings generated in the second quarter of 2018.  The Corporation’s estimated annual effective tax rate for the first six months of 2018, excluding entities from which a tax benefit cannot be recognized and discrete items, was 25%, compared to 24% for the first six months of 2017.  The estimated annual effective tax rate, including all entities for 2018, was 24% (25% excluding discrete items), compared to 14% for the first six months of 2017 (25% excluding discrete items, primarily the tax benefit resulting from the change in the tax status of certain subsidiaries discussed below).  As of June 30, 2018, the Corporation had a net deferred tax asset of $283.3 million (net of a valuation allowance of $181.2 million).  See “Results of Operation - Income Taxes” below for additional information.

·As of June 30, 2018, total assets were $12.4 billion, an increase of $123.6 million from December 31, 2017.  The increase primarily reflects: (i) a $172.0 million increase in cash and cash equivalents, largely driven by the growth in non-interest-bearing deposits and proceeds from loan repayments, partially offset by liquidity used to pay off maturing brokered CDs and a $100 million short-term repurchase agreement, as well as for the repurchase of $23.8 million of trust preferred securities, and (ii) a $145.1 million increase in investment securities, driven by purchases of U.S. agency debt securities totaling $302.9 million and the purchase of a 6-month U.S. Treasury Bill of $50 million, partially offset by prepayments of $92.1 million of U.S. agency MBS, $70 million of U.S. agency callable debt securities matured during 2018, and a $31.5 million decrease in the fair value of available-for-sale investment securities. 

These variances were partially offset by a $162.4 million decrease in total loans, reflecting reductions of $126.3 million and $39.2 million in the Puerto Rico and Virgin Islands regions, respectively, partially offset by a $3.1 million increase in the Florida region.  The decrease reflects the effect of eight large commercial loans totaling $91.4 million paid off during 2018,

91

the sale of three large commercial loans totaling $25.2 million, and significant payments received, including payments that reduced the outstanding balance of eight commercial lines of credit in Puerto Rico by $36.1 million.  In addition, the residential mortgage loan portfolio decreased by $51.4 million, including the effect of the $9.8 million sale of seasoned residential mortgage loans in the secondary market, partially offset by a $25.4 million increase in the consumer loan portfolio.   Accrued interest receivable on loans and investment securities decreased by $10.0 million, primarily related to interest payments collected on loans after the expiration in the first quarter of 2018 of the three-month payment deferral programs extended to eligible customers affected by Hurricanes Maria and Irma.  See “Financial Condition and Operating Data Analysis” below for additional information.

·As of June 30, 2018, total liabilities were $10.5 billion, an increase of $91.0 million from December 31, 2017.  The increase was mainly due to: (i) a $367.5 million increase in deposits, excluding government deposits and brokered CDs, primarily reflected in non-interest-bearing deposits and (ii) a $155.8 million increase in government deposits.  Hurricane-related factors, such as the effect of disaster relief funds and settlements of insurance claims, contributed to this growth in deposits.  These increases were partially offset by a $327.8 million decrease in brokered CDs and the repayment at maturity of a $100 million repurchase agreement.  See “Risk Management - Liquidity Risk and Capital Adequacy” below for additional information about the Corporation’s funding sources. 

·As of June 30, 2018, the Corporation’s stockholders’ equity was $1.9 billion, an increase of $32.6 million from December 31, 2017.  The increase was mainly driven by the earnings generated in the first six months of 2018, partially offset by the decrease in the fair value of available-for-sale investment securities recorded as part of other comprehensive loss.  The Corporation’s Total Capital, Common Equity Tier 1 Capital, Tier 1 Capital and Leverage ratios calculated under the Basel III rules as currently in effect were 23.47%, 19.73%, 20.14%, and 14.35%, respectively, as of June 30, 2018, compared to Total Capital, Common Equity Tier 1 Capital, Tier 1 Capital and Leverage ratios of 22.53%, 18.96%, 18.97%, and 14.03%, respectively, as of December 31, 2017.  See “Risk Management - Capital” below for additional information.   

·Total loan production, including purchases, refinancings, renewals and draws from existing revolving and non-revolving commitments, was $726.8 million for the quarter ended June 30, 2018, excluding the utilization activity on outstanding credit cards, compared to $906.2 million for the same period in 2017.  The variance was primarily related to a $109.5 million decrease in Puerto Rico loan originations, including reductions of $128.3 million and $4.2 million in commercial and residential mortgage loan originations, respectively, partially offset by an increase of $23.0 million in consumer loan originations.  Total loan originations in the Florida region decreased by $68.7 million, primarily reflected in commercial and residential mortgage loan originations. 

·Total non-performing assets were $621.3 million as of June 30, 2018, a decrease of $29.3 million from December 31, 2017.  The decrease primarily reflects the effect of the split loan restructuring of a $34 million commercial mortgage loan, the sale of a $10.4 million non-performing commercial mortgage loan transferred to held for sale in the first quarter of 2018, and collections and charge-offs totaling $71.7 million.  These variances were partially offset by the inflow of two large commercial mortgage loans totaling $69.8 million tied to a legacy commercial loan relationship that operates in both the Florida and Puerto Rico regions with independent sources of repayment. 

·Adversely classified commercial and construction loans, including loans held for sale, increased by $8.0 million to $490.4 million as of June 30, 2018, driven by the downgrade in the credit risk classification of three large commercial loans totaling $110.3 million, including the aforementioned $69.8 million in two large commercial mortgage loans classified as non-performing during 2018.  This was partially offset by the sale of two large commercial loans totaling $16.0 million, the upgrade in the credit risk classification of several commercial loans totaling $56.7 million, including the aforementioned $34 million loan restructured through a loan split and restored to accrual status considering the sustained historical repayment performance before the restructuring, and collections and charge-offs recorded during the first six months of 2018.   

92

The Corporation’s financial results for the second quarter and first six months of 2018 and 2017 included the following items that management believes are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts (the “Special Items”):

Quarter and Six-Month Period Ended June 30, 2018

·Net loan loss reserve releases of $2.1 million ($1.3 million after-tax) and $8.5 million ($5.2 million after-tax) for the second quarter and six-month period ended June 30, 2018, respectively, in connection with revised estimates of the reserves associated with the effects of Hurricanes Maria and Irma.  See “Results of Operations - Provision for Loan and Lease Losses” below for additional information.

·Hurricane-related expenses of $0.7 million ($0.4 million after-tax) and $2.3 million ($1.4 million after-tax) for the second quarter and six-month period ended June 30, 2018, respectively.

·Charge to the provision for loan and lease losses of $5.6 million ($3.4 million after-tax) associated with three non-performing commercial and construction loans totaling $57.2 million that were transferred to held for sale during the first quarter of 2018.  See “Results of Operations - Provision for Loan and Lease Losses” below for additional information.

·Gain of $2.3 million on the repurchase and cancellation of $23.8 million in trust-preferred securities, reflected in the consolidated statement of income as “Gain on early extinguishment of debt.”  The gain, realized at the holding company level, had no effect on the income tax expense in 2018.  See “Results of Operation - Non-Interest Income” below for additional information.

Quarter and Six-Month Period Ended June 30, 2017

·Partial recovery of $0.4 million of previously-recognized OTTI charges on non-performing bonds of the GDB and the Puerto Rico Public Buildings Authority sold in the second quarter of 2017, reflected in the statement of income as part of “Net gain on sale of investments.”  No tax expense was recognized for the recovery on the sale of bonds in 2017.

·Tax benefit of $13.2 million recorded in the first quarter of 2017 in connection with the change in tax status of certain subsidiaries from taxable corporations to limited liability companies that make an election to be treated as partnerships for income tax purposes in Puerto Rico. See “Results of Operations - Income Taxes” below for additional information.

·OTTI charge of $12.2 million recorded in the first quarter of 2017 on the aforementioned non-performing bonds of the GDB and the Puerto Rico Public Buildings Authority. No tax benefit was recognized for the OTTI charge in 2017.

·Charge to the provision for loan and lease losses of $0.6 million ($0.3 million after-tax) recorded in the first quarter of 2017 associated with the sale of the Corporation’s participation in the Puerto Rico Electric Power Authority (“PREPA”) credit line with a book value of $64 million at the time of sale. See “Results of Operations - Provision for Loan and Lease Losses” below for additional information.

·Costs of $0.3 million associated with a secondary offering of the Corporation’s common stock by certain of our existing stockholders, which was completed in the first quarter of 2017. The costs, incurred at the Holding Company level, had no effect on the income tax expense in 2017 based on available operating expenses at the holding company level.

93

The following table reconciles for the second quarter and first six months of 2018 and 2017, the reported net  income to adjusted net income, a non-GAAP financial measure that excludes the Special Items identified above:
	Quarter ended June 30,				Six-month period ended June 30,
	2018		2017		2018		2017
(In thousands)
Net income, as reported  (GAAP)	$	31,032	$	27,998	$	64,180	$	53,539
Adjustments:
Hurricane-related loan loss reserve release		(2,057)		-		(8,464)		-
Hurricane-related expenses		654		-		2,250		-
Charge to the provision for loan losses related to loans transferred to held for sale		-		-		5,645		-
Recovery of previously recorded OTTI charges on Puerto Rico
government debt securities sold		-		(371)		-		(371)
Gain on repurchase and cancellation of trust preferred securities		-		-		(2,316)		-
Income tax benefit related to change in tax-status of certain subsidiaries		-		-		-		(13,161)
OTTI on debt securities		-		-		-		12,231
Charge to the provision for loan losses related to the sale of the PREPA credit line		-		-		-		569
Secondary offering costs		-		-		-		274
Income tax impact of adjustments (1)		547		-		223		(222)
Adjusted net income (Non-GAAP)	$	30,176	$	27,627	$	61,518	$	52,859
(1) See "Basis of Presentation" for the individual tax impact for each reconciling item.

94

Critical Accounting Policies and Practices

The accounting principles of the Corporation and the methods of applying these principles conform to GAAP.  The Corporation’s critical accounting policies relate to: 1) the allowance for loan and lease losses; 2) OTTI; 3) income taxes; 4) the classification and values of financial instruments; 5) income recognition on loans; 6) loans acquired; and 7) loans held for sale. These critical accounting policies involve judgments, estimates and assumptions made by management that affect the amounts recorded for assets, liabilities and contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from estimates, if different assumptions or conditions prevail. Certain determinations inherently require greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than those originally reported.

The Corporation’s critical accounting policies are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Practices,” included in First BanCorp.’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report on Form 10-K”). There have not been any material changes in the Corporation’s critical accounting policies since December 31, 2017.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income is the excess of interest earned by First BanCorp. on its interest-earning assets over the interest incurred on its interest-bearing liabilities. First BanCorp.’s net interest income is subject to interest rate risk due to the repricing and maturity mismatch of the Corporation’s assets and liabilities. Net interest income for the quarter and six-month period ended June 30, 2018 was $130.5 million and $255.2 million, respectively, compared to $123.9 million and $246.5 million for the comparable periods in 2017. On a tax-equivalent basis and excluding the changes in the fair value of derivative instruments, net interest income for the quarter and six-month period ended June 30, 2018 was $135.6 million and $265.1 million, respectively, compared to $128.7 million and $255.6 million for the comparable periods in 2017.

The following tables include a detailed analysis of net interest income. Part I presents average volumes (based on the average daily balance) and rates on an adjusted tax-equivalent basis and Part II presents, also on an adjusted tax-equivalent basis, the extent to which changes in interest rates and changes in the volume of interest-related assets and liabilities have affected the Corporation’s net interest income. For each category of interest-earning assets and interest-bearing liabilities, information is provided relating to changes in (i) volume (changes in volume multiplied by prior period rates) and (ii) rate (changes in rate multiplied by prior period volumes). Rate-volume variances (changes in rate multiplied by changes in volume) have been allocated to the changes in volume and rate based upon their respective percentage of the combined totals.

The net interest income is computed on an adjusted tax-equivalent basis and excluding the change in the fair value of derivative instruments. A definition and a reconciliation of this non-GAAP financial measure are presented below.

95

Part I
		Average Volume				Interest income (1) / expense				Average Rate (1)
	Quarter ended June 30,	2018		2017		2018		2017		2018		2017
	(Dollars in thousands)
	Interest-earning assets:
	Money market & other short-term investments	$	780,346	$	305,563	$	3,387	$	727	1.74	%	0.95	%
	Government obligations (2)		822,416		698,471		7,103		4,503	3.46	%	2.59	%
	Mortgage-backed securities		1,313,082		1,292,997		10,825		12,489	3.31	%	3.87	%
	FHLB stock		40,812		37,254		656		488	6.45	%	5.25	%
	Other investments		2,625		2,701		2		2	0.31	%	0.30	%
	Total investments (3)		2,959,281		2,336,986		21,973		18,209	2.98	%	3.13	%
	Residential mortgage loans		3,195,633		3,265,883		42,842		43,678	5.38	%	5.36	%
	Construction loans		121,136		154,980		1,106		1,458	3.66	%	3.77	%
	Commercial and Industrial and Commercial mortgage loans		3,627,829		3,728,733		48,349		42,942	5.35	%	4.62	%
	Finance leases		272,096		239,271		4,901		4,333	7.22	%	7.26	%
	Consumer loans		1,476,653		1,474,662		41,625		41,536	11.31	%	11.30	%
	Total loans (4) (5)		8,693,347		8,863,529		138,823		133,947	6.41	%	6.06	%
	Total interest-earning assets	$	11,652,628	$	11,200,515	$	160,796	$	152,156	5.53	%	5.45	%
	Interest-bearing liabilities:
	Brokered CDs	$	874,766	$	1,309,399	$	3,865	$	4,695	1.77	%	1.44	%
	Other interest-bearing deposits		6,080,949		5,908,238		13,109		11,653	0.86	%	0.79	%
	Other borrowed funds		384,150		516,187		4,778		4,830	4.99	%	3.75	%
	FHLB advances		715,000		593,791		3,410		2,292	1.91	%	1.55	%
	Total interest-bearing liabilities	$	8,054,865	$	8,327,615	$	25,162	$	23,470	1.25	%	1.13	%
	Net interest income					$	135,634	$	128,686
	Interest rate spread									4.28	%	4.32	%
	Net interest margin									4.67	%	4.61	%

	Average Volume				Interest income (1) / expense				Average Rate (1)
Six-Month Period Ended June 30,	2018		2017		2018		2017		2018		2017
(Dollars in thousands)
Interest-earning assets:
Money market & other short-term investments	$	699,854	$	287,349	$	5,643	$	1,211	1.63	%	0.85	%
Government obligations (2)		810,368		713,804		13,296		8,895	3.31	%	2.51	%
Mortgage-backed securities		1,286,756		1,313,664		21,450		24,103	3.36	%	3.70	%
FHLB stock		40,874		38,401		1,349		949	6.66	%	4.98	%
Other investments		2,670		2,700		4		4	0.30	%	0.30	%
Total investments (3)		2,840,522		2,355,918		41,742		35,162	2.96	%	3.01	%
Residential mortgage loans		3,210,984		3,265,886		86,192		87,958	5.41	%	5.43	%
Construction loans		119,996		142,790		2,028		2,602	3.41	%	3.67	%
Commercial and Industrial and Commercial mortgage loans		3,657,985		3,742,103		93,538		84,762	5.16	%	4.57	%
Finance leases		266,140		237,013		9,561		8,647	7.24	%	7.36	%
Consumer loans		1,480,455		1,475,113		81,931		82,606	11.16	%	11.29	%
Total loans (4) (5)		8,735,560		8,862,905		273,250		266,575	6.31	%	6.07	%
Total interest-earning assets	$	11,576,082	$	11,218,823	$	314,992	$	301,737	5.49	%	5.42	%
Interest-bearing liabilities:
Brokered CDs	$	958,545	$	1,361,245	$	8,220	$	9,500	1.73	%	1.41	%
Other interest-bearing deposits		6,051,489		5,896,570		25,725		22,820	0.86	%	0.78	%
Other borrowed funds		399,235		516,187		9,160		9,415	4.63	%	3.68	%
FHLB advances		715,000		617,873		6,782		4,414	1.91	%	1.44	%
Total interest-bearing liabilities	$	8,124,269	$	8,391,875	$	49,887	$	46,149	1.24	%	1.11	%
Net interest income					$	265,105	$	255,588
Interest rate spread									4.25	%	4.31	%
Net interest margin									4.62	%	4.59	%

(1)	On an adjusted tax-equivalent basis.  The adjusted tax-equivalent yield was estimated by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory tax rate of 39.0% and adding to it the cost of interest-bearing liabilities.  The tax-equivalent adjustment recognizes the income tax savings when comparing taxable and tax-exempt assets.  Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread and net interest margin on a fully tax-equivalent basis. Therefore, management believes these measures provide useful information to investors by allowing them to make peer comparisons. Changes in the fair value of derivatives are excluded from interest income and interest expense because the changes in valuation do not affect interest received or paid.
(2)	Government obligations include debt issued by government-sponsored agencies.
(3)	Unrealized gains and losses on available-for-sale securities are excluded from the average volumes.
(4)	Average loan balances include the average of non-performing loans.
(5)	Interest income on loans includes $2.1 million and $2.0 million for the quarters ended June 30, 2018 and 2017, respectively, and $3.9 million and $4.1 million for the six-month periods ended June 30, 2018 and 2017, respectively, of income from prepayment penalties and late fees related to the Corporation’s loan portfolio.

96

Part II
		Quarter ended June 30,						Six-Month Period Ended June 30,
		2018 compared to 2017						2018 compared to 2017
		Increase (decrease)						Increase (decrease)
		Due to:						Due to:
	(In thousands)	Volume		Rate		Total		Volume		Rate		Total
	Interest income on interest-earning assets:
	Money market & other short-term investments	$	1,738	$	922	$	2,660	$	2,709	$	1,723	$	4,432
	Government obligations		892		1,708		2,600		1,317		3,084		4,401
	Mortgage-backed securities		183		(1,847)		(1,664)		(485)		(2,168)		(2,653)
	FHLB stock		50		118		168		64		336		400
	Other investments		-		-		-		-		-		-
	Total investments		2,863		901		3,764		3,605		2,975		6,580
	Residential mortgage loans		(942)		106		(836)		(1,475)		(291)		(1,766)
	Construction loans		(310)		(42)		(352)		(395)		(179)		(574)
	Commercial and Industrial and Commercial mortgage loans		(1,264)		6,671		5,407		(2,081)		10,857		8,776
	Finance leases		594		(26)		568		1,059		(145)		914
	Consumer loans		56		33		89		303		(978)		(675)
	Total loans		(1,866)		6,742		4,876		(2,589)		9,264		6,675
	Total interest income		997		7,643		8,640		1,016		12,239		13,255
	Interest expense on interest-bearing liabilities:
	Brokered CDs		(1,743)		913		(830)		(3,153)		1,873		(1,280)
	Other interest-bearing deposits		348		1,108		1,456		612		2,293		2,905
	Other borrowed funds		(1,443)		1,391		(52)		(2,427)		2,172		(255)
	FHLB advances		519		599		1,118		768		1,600		2,368
	Total interest expense		(2,319)		4,011		1,692		(4,200)		7,938		3,738
	Change in net interest income	$	3,316	$	3,632	$	6,948	$	5,216	$	4,301	$	9,517

Portions of the Corporation’s interest-earning assets, mostly investments in obligations of some U.S. government agencies and sponsored entities, generate interest that is exempt from income tax, principally in Puerto Rico. Also, interest and gains on sales of investments held by the Corporation’s international banking entities (“IBEs”) are tax-exempt under the Puerto Rico tax law (see “Income Taxes” below for additional information). To facilitate the comparison of all interest data related to these assets, the interest income has been converted to an adjusted taxable equivalent basis. The tax equivalent yield was estimated by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory tax rate (39.0%) and adding to it the average cost of interest-bearing liabilities. The computation considers the interest expense disallowance required by Puerto Rico tax law.

   The presentation of net interest income excluding the effects of the changes in the fair value of the derivative instruments (“valuations”) provides additional information about the Corporation’s net interest income and facilitates comparability and analysis. The changes in the fair value of the derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. 

97

The following table reconciles net interest income in accordance with GAAP to net interest income, excluding valuations, and net interest income on an adjusted tax-equivalent basis.  The table also reconciles net interest spread and net interest margin on a GAAP basis to these items excluding valuations and on an adjusted tax-equivalent basis:
	Quarter Ended						Six-Month Period Ended
(Dollars in thousands)	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Interest Income - GAAP	$	155,633		$	147,374		$	305,051		$	292,602
Unrealized loss on derivative instruments		-			-			-			1
Interest income excluding valuations		155,633			147,374			305,051			292,603
Tax-equivalent adjustment		5,163			4,782			9,941			9,134
Interest income on a tax-equivalent basis excluding valuations		160,796			152,156			314,992			301,737
Interest Expense - GAAP		25,162			23,470			49,887			46,149
Net interest income - GAAP	$	130,471		$	123,904		$	255,164		$	246,453
Net interest income excluding valuations - Non-GAAP	$	130,471		$	123,904		$	255,164		$	246,454
Net interest income on a tax-equivalent basis excluding valuations - Non-GAAP	$	135,634		$	128,686		$	265,105		$	255,588
Average Balances
Loans and leases	$	8,693,347		$	8,863,529		$	8,735,560		$	8,862,905
Total securities, other short-term investments and interest-bearing cash balances		2,959,281			2,336,986			2,840,522			2,355,918
Average Interest-Earning Assets	$	11,652,628		$	11,200,515		$	11,576,082		$	11,218,823
Average Interest-Bearing Liabilities	$	8,054,865		$	8,327,615		$	8,124,269		$	8,391,875
Average Yield/Rate
Average yield on interest-earning assets - GAAP		5.36	%		5.28	%		5.31	%		5.26	%
Average rate on interest-bearing liabilities - GAAP		1.25	%		1.13	%		1.24	%		1.11	%
Net interest spread - GAAP		4.11	%		4.15	%		4.07	%		4.15	%
Net interest margin - GAAP		4.49	%		4.44	%		4.45	%		4.43	%
Average yield on interest-earning assets excluding valuations - Non-GAAP		5.36	%		5.28	%		5.31	%		5.26	%
Average rate on interest-bearing liabilities		1.25	%		1.13	%		1.24	%		1.11	%
Net interest spread excluding valuations - Non-GAAP		4.11	%		4.15	%		4.07	%		4.15	%
Net interest margin excluding valuations - Non-GAAP		4.49	%		4.44	%		4.45	%		4.43	%
Average yield on interest-earning assets on a tax-equivalent basis
and excluding valuations - Non-GAAP		5.53	%		5.45	%		5.49	%		5.42	%
Average rate on interest-bearing liabilities		1.25	%		1.13	%		1.24	%		1.11	%
Net interest spread on a tax-equivalent basis and excluding valuations - Non-GAAP		4.28	%		4.32	%		4.25	%		4.31	%
Net interest margin on a tax-equivalent basis and excluding valuations - Non-GAAP		4.67	%		4.61	%		4.62	%		4.59	%

98

Interest income on interest-earning assets primarily represents interest earned on loans held for investment and investment securities.

Interest expense on interest-bearing liabilities primarily represents interest paid on brokered CDs, branch-based deposits, repurchase agreements, advances from the FHLB and junior subordinated debentures.

Unrealized gains or losses on derivatives represent changes in the fair value of derivatives, primarily interest rate caps used for protection against rising interest rates.

For the quarter and six-month period ended June 30, 2018, net interest income increased $6.6 million to $130.5 million, and $8.7 million to $255.2 million, respectively, compared to the same periods in 2017. The $6.6 million increase in net interest income for the second quarter of 2018, compared to the same period in 2017, was primarily due to:

·A $5.0 million increase in interest income on commercial and construction loans, primarily associated with the upward repricing of variable-rate commercial loans and a $1.2 million cash interest collection on a non-performing commercial loan in the second quarter of 2018. 

·A $2.6 million increase in interest income from interest-bearing cash balances due to both an increase of $383.6 million in the average balance of deposits maintained at the New York FED and increases in the Federal Funds target rate.  A growth in non-interest-bearing deposits provided higher liquidity levels in the second quarter of 2018, as compared to the same period a year ago.  In addition, the Federal Funds target rate has increased three times since the end of the second quarter of 2017 from a range of 1.00%-1.25% to its current range of 1.75%-2.00%.  

·A $0.8 million increase in interest income on investment securities, primarily due to the gradual reinvestment of liquidity in higher-yielding U.S. agency debt securities and a $0.2 million increase in FHLB stock dividends.

·A $0.7 million increase in interest income on consumer loans, primarily due to a $34.8 million increase in the average balance of this portfolio, primarily auto loans and finance leases.

Partially offset by:

·A $1.7 million increase in interest expense, primarily reflecting the effect of higher market interest rates on the cost of commercial money market accounts tied to variable short-term interest rates, FHLB advances, brokered CDs, and repurchase agreements, partially offset by a decrease of $272.8 million in the average balance of interest-bearing liabilities, primarily brokered CDs and repurchase agreements.  Over the last 12 months, the Corporation repaid $713.8 million of maturing brokered CDs with an all-in cost of 1.23% and new issuances amounted to $281.9 million with an all-in cost of 1.86%.  While the Corporation continues to reduce its reliance on brokered CDs, it is increasing the core deposit base.  For the second quarter of 2018, the average balance of non-brokered interest-bearing-deposits increased by $172.7 million and the average balance of non-interest-bearing deposits increased by $670.8 million, as compared to the same period in 2017.  In addition, during the third quarter of 2017, the Corporation repaid at maturity a $100 million repurchase agreement that carried a cost of 3.11%.

·A $0.8 million decrease in interest income on residential mortgage loans, primarily associated with a $70.3 million decrease in the average balance of this portfolio.

The $8.7 million increase in net interest income for the first six months of 2018, compared to the same period in 2017, was primarily due to:

·An $8.1 million increase in interest income on commercial and construction loans, primarily associated with the upward repricing of variable rate commercial loans.

·A $4.4 million increase in interest income from interest-bearing cash balances due to both an increase of $344.7 million in the average balance of deposits maintained at the New York FED and the aforementioned increases in the Federal Funds target rate.

·A $1.5 million increase in interest income on investment securities, primarily due to the gradual reinvestment of liquidity in higher-yielding U.S. agency debt securities. The average balance of investment securities increased by $72.1 million in the first six months of 2018, as compared to the same period a year ago.

99

·A $0.2 million increase in interest income on consumer loans, primarily due to a $34.5 million increase in the average balance of this portfolio in the first six months of 2018, as compared to the same period in 2017, primarily auto loans and finance leases, partially offset by higher inflows of loans to non-performing status during 2018.

Partially offset by:

·A $3.7 million increase in interest expense driven by: (i) a $2.9 million increase in interest expense on non-brokered interest-bearing deposits, driven by higher market interest rates on the cost of retail CDs and commercial money market accounts tied to variable short-term interest rates, (ii) a $2.4 million increase in interest expense on FHLB advances reflecting an increase of $97.1 million in the average balance and the effect of a higher reliance in the use of short-term advances during 2017.  The aforementioned increases were partially offset by a $1.3 million decrease in interest expense on brokered CDs, primarily related to a $402.7 million decrease in the average balance that offset higher costs of new issuances in the second half of 2017.  There were no new brokered CDs obtained during 2018. 

·A $1.7 million decrease in interest income on residential mortgage loans, primarily associated with a $54.9 million decrease in the average balance of this portfolio.

The net interest margin increased by 5 basis points to 4.49% for the second quarter of 2018, compared to the same period in 2017, and increased by 2 basis points to 4.45% for the first six months of 2018, compared to the same period in 2017.  The increase was primarily driven by the upward repricing of variable rate commercial loans, the $1.2 million cash interest collected on a non-performing commercial loan, and an improved funding mix driven by the increase in the proportion of interest-earning assets funded by the growth in non-interest-bearing deposits. 

On an adjusted tax-equivalent basis, net interest income for the quarter ended June 30, 2018 increased by $6.9 million to $135.6 million, compared to the same period in 2017, and by $9.5 million to $265.1 million for the first six months of 2018, compared to the same period in 2017. In addition to the facts discussed above, the increase in the second quarter of 2018, as compared to the same period in 2017, also includes an increase of $0.4 million in the tax-equivalent adjustment related to the increased interest income of tax-exempt U.S. agency debt securities.  For the first six months of 2018, the tax equivalent adjustment increased by $0.8 million, as compared to the same period in 2017.    

Provision for Loan and Lease Losses

The provision for loan and lease losses is charged to earnings to maintain the allowance for loan and lease losses at a level that the Corporation considers adequate to absorb probable incurred losses inherent in the portfolio. The adequacy of the allowance for loan and lease losses is also based upon a number of additional factors, including trends in charge-offs and delinquencies, current economic conditions, the fair value of the underlying collateral and the financial condition of the borrowers, and, as such, includes amounts based on judgments and estimates made by the Corporation.  Important factors that influence this judgment are re-evaluated on a quarterly basis to respond to changing conditions.

As described in Note 2, “Update on Effects of Natural Disasters,” in the consolidated financial statements, two strong hurricanes affected the Corporation’s service areas during September 2017.  These hurricanes caused widespread property damage, flooding, power outages, and water and communication service interruptions, and severely disrupted normal economic activity in the affected areas.  Relationship officers have continued to closely monitor the performance of hurricane-affected commercial loan customers during 2018.  Information provided by these commercial loan officers and statistics on the performance of consumer and residential credits was factored in the determination of the allowance for loan and lease losses as of June 30, 2018.  Although the identification and evaluation of hurricane-affected credits has been completed, management’s assessment of the hurricanes’ effect is still subject to uncertainties, both those specific to some individual customers, such as the resolution of insurance claims, and those applicable to the overall economic prospects of the hurricane-affected areas as a whole.  During the second quarter and six-month period ended June 30, 2018, the Corporation recorded a net loan loss reserve release of $2.1 million and $8.5 million, respectively, in connection with revised estimates associated with the effects of the hurricanes.  The revised estimates were primarily attributable to updated assessments of financial performance and repayment prospects of certain individually-assessed commercial credits and, to a lesser extent, lower reserve requirements resulting from payments received during the first six months of 2018 that reduced the balance of the consumer and residential mortgage loan portfolios outstanding on the dates of the hurricanes.  As of June 30, 2018, the hurricane-related qualitative allowance amounted to $42.2 million.  With the ongoing collection of information on individual commercial customers and statistics on the consumer and residential mortgage loans portfolios, the loss estimate will be revised as needed.  The methodologies that the Corporation used to determine the hurricane-related qualitative estimate and for the review of individual large commercial credits are discussed in detail in Note 1, “Nature of Business and Summary of Significant Accounting Policies,” in the audited consolidated financial statements of the Corporation for the year ended December 31, 2017, which are included in the 2017 Annual Report on Form 10-K.     

100

On a non-GAAP basis, excluding the effect of the reserve release associated with revised estimates of the hurricane-related qualitative allowance, the adjusted provision for loan and lease losses increased by $3.5 million to $21.6 million for the second quarter of 2018, as compared to the provision of $18.1 million for the second quarter of 2017.  The $3.5 million increase in the adjusted provision was driven by:

·A $5.9 million increase in the adjusted provision for commercial and construction loans, primarily reflecting higher charges to the provision in the second quarter of 2018 related to downgrades in the credit risk classification of certain large commercial loans and the effect in the second quarter of 2017 of a $4.2 million recovery on a previously charged-off commercial loan in Puerto Rico.  These variances were partially offset by a $1.6 million decrease related to refinements to both the determination of the historical loss rates and the measurement of qualitative factors used in the estimation process of the general reserve for commercial loans, as further discussed below.

·A $4.7 million increase in the provision for consumer loans, primarily related to higher charge-offs on personal loans, the increase in size of the auto and finance leases portfolio, and the effect of refinements discussed below in the measurement of qualitative factors used in the determination of the general reserve of consumer loans implemented in the second quarter of 2018.

Partially offset by:

· A $7.1 million decrease in the adjusted provision for residential mortgage loans, reflecting lower charge-off levels, a decline in non-performing loan levels, the overall decrease in the size of this portfolio, and the effect in the second quarter of 2017 of a $2.6 million charge to the provision for purchased-credit impaired loans. 

During the second quarter of 2018, and as part of the Corporation’s plan to remediate a material weakness identified in the preparation of financial statements included in the 2017 Annual Report on Form 10-K, an independent third party engaged by the Corporation completed its assessment of the commercial allowance for loan losses framework and the appropriateness of assumptions used in the analysis.  The Corporation reviewed the assessment and decided to implement certain enhancements, which include, among others, a revised procedure whereby historical loss rates for each commercial loan regulatory-based credit risk category (i.e., pass, special mention, substandard, and doubtful) are now calculated using the historical charge-offs and portfolio balances over their average loss emergence period (the “raw loss rate”) for each credit risk classification. However, when not enough loss experience is observed in a particular risk-rated category and the calculation results in a loss rate for such risk-rated category that is lower than the loss rate of a less severe risk-rated category, the Corporation now uses the loss rate of such less severe category. Accordingly, during the second quarter of 2018, the Corporation applied the raw loss rate determined for loans rated pass to the commercial real estate loans rated special mention, instead of the lower raw loss rate that resulted for the special mention category.

As of March 31, 2018, the historical losses and portfolio balances of special mention loans were allocated to pass or substandard categories based on the historical proportion of loans in this risk category that ultimately cured or resulted in being uncollectible. 

In addition, during the second quarter of 2018, the Corporation implemented refinements to the measurement of qualitative factors in the estimation process of the allowance for loan losses for commercial and consumer loans primarily consisting of the incorporation of a basis point adjustment derived from the difference between the average raw loss rate and the highest loss rates observed during a look-back period that management determined was appropriate to use for each region to identify any relevant effect during an economic cycle.

Although the net effect of these refinements were immaterial to the total provision expense, on a portfolio basis these enhancements resulted in a $1.6 million decrease in the provision for commercial and construction loans in the second quarter of 2018, offset by a $1.6 million increase in the provision for consumer loans.

In addition, during the first quarter of 2018, the Corporation transferred to held for sale three non-performing commercial and construction loans.  The aggregate recorded investment in these two loans was written down to $57.2 million, which resulted in charge-offs of $9.7 million and an incremental loss of $5.6 million reflected in the provision for loan and lease losses for the first six months of 2018.  Loans transferred to held for sale consisted of a $30.0 million non-performing construction loan in the Virgin Islands (net of a $5.1 million write-down to fair value recorded at the time of the transfer) and two non-performing commercial mortgage loans totaling $27.2 million (net of write-downs to fair value of $4.6 million recorded at the time of transfer).  During the second quarter of 2018, the Corporation completed the sale of a $10.4 million non-performing commercial mortgage loan that was among the aforementioned loans transferred to held for sale in the first quarter of 2018.

101

Further, the provision for loan and lease losses for the first six months of 2017 included a $0.6 million charge related to the sale of the PREPA credit line.  See Note 7, “Loans Held for Investment – Purchases and Sales of Loans,” in the consolidated financial statements for additional information about this transaction.

On a non-GAAP basis, excluding the effect of the aforementioned reserve releases in 2018 associated with revised estimates of the hurricane-related qualitative allowance, the loans transferred to held for sale in 2018, and the sale of the PREPA credit line in 2017, the adjusted provision for loan and lease losses of $42.9 million for the first six months of 2018 decreased $0.1 million as compared to the adjusted provision of $43.0 million for the first six months of 2017.  The $0.1 million decrease in the adjusted provision was driven by:

·A $15.8 million decrease in the adjusted provision for residential mortgage loans, reflecting lower charge-off levels, a decline in non-performing loan levels, the overall decrease in the size of this portfolio, the effect in 2017 of adjustments to the loss severity estimates used in the calculation of the general reserve, and the effect in 2017 of a $2.6 million charge to the provision for purchased-credit impaired loans.

Partially offset by:

·A $10.5 million increase in the adjusted provision for commercial and construction loans, driven by the downgrade in the credit risk classification of three large commercial loans totaling $110.3 million during the first six months of 2018, and the aforementioned effect of a $4.2 million recovery on a previously charged-off commercial loan in Puerto Rico.

·A $5.3 million increase in the adjusted provision for consumer loans, primarily reflecting higher charge-offs on personal loans, the increase in size of the auto and finance leases portfolio, the effect of the above mentioned refinements in the measurement of qualitative factors used in the determination of the general reserve of consumer loans, and the effect in 2017 of a loan loss recovery of $1.2 million on the sale of certain credit card loans that had been fully charged-off in prior periods. 

     See “Basis of Presentation” below for a reconciliation of the GAAP provision for loan and lease losses to the non-GAAP provision for loan and lease losses excluding the effects of the hurricane-related reserve releases, the loans transferred to held for sale, and the sale of the PREPA credit line.  Also see “Risk Management - Credit Risk Management” below for an analysis of the allowance for loan and lease losses, non-performing assets, impaired loans and related information, and see “Financial Condition and Operating Data Analysis – Loan Portfolio” as well as “Risk Management - Credit Risk Management” below for additional information concerning the Corporation’s loan portfolio exposure in the geographic areas where the Corporation does business.

Non-Interest Income
		Quarter Ended June 30,				Six-Month Period Ended June 30,
		2018		2017		2018		2017
	(In thousands)
	Service charges on deposit accounts	$	5,344	$	5,803	$	10,432	$	11,593
	Mortgage banking activities		4,835		4,846		9,000		8,462
	Insurance income		1,780		1,855		5,135		5,442
	Other operating income		8,513		7,674		16,373		15,155
	Non-interest income before net gain on investment securities and
	gain on early extinguishment of debt		20,472		20,178		40,940		40,652
	Net gain on sale of investments securities		-		371		-		371
	OTTI on debt securities		-		-		-		(12,231)
	Net gain (loss) on investments securities		-		371		-		(11,860)
	Gain on early extinguishment of debt		-		-		2,316		-
	Total	$	20,472.00	$	20,549.00	$	43,256	$	28,792.00

102

Non-interest income primarily consists of income from service charges on deposit accounts, commissions derived from various banking, securities and insurance activities, gains and losses on mortgage banking activities, interchange and other fees related to debit and credit cards, and net gains and losses on investments and impairments.

Service charges on deposit accounts include monthly fees, overdraft fees, and other fees on deposit accounts, as well as corporate cash management fees.

Income from mortgage banking activities includes gain on sales and securitization of loans, revenues earned for administering residential mortgage loans originated by the Corporation and subsequently sold with servicing retained, and unrealized gains and losses on forward contracts used to hedge the Corporation’s securitization pipeline. In addition, lower-of-cost-or-market valuation adjustments to the Corporation’s residential mortgage loans held-for-sale portfolio and servicing rights portfolio, if any, are recorded as part of mortgage banking activities.

Insurance income consists mainly of insurance commissions earned by the Corporation’s subsidiary, FirstBank Insurance Agency, Inc.

The other operating income category is composed of miscellaneous fees such as debit, credit card and point of sale (“POS”) interchange fees, as well as contractual shared revenues from merchant contracts sold in 2015. 

The net gain (loss) on investment securities reflects gains or losses as a result of sales that are consistent with the Corporation’s investment policies, as well as OTTI charges on the Corporation’s investment portfolio.

The gain on early extinguishment of debt is related to the repurchase and cancellation in the first quarter of 2018 of $23.8 million in trust-preferred securities of FBP Statutory Trust I that were auctioned in a public sale at which the Corporation was invited to participate. The Corporation repurchased and cancelled the repurchased trust-preferred securities, resulting in a commensurate reduction in the related Floating Rate Junior Subordinated Debentures.  The Corporation’s winning bid equated to 90% of the $23.8 million par value.  The 10% discount resulted in a gain of $2.3 million, which is reflected in the statement of income as a “Gain on early extinguishment of debt.”  As of June 30, 2018, the Corporation still had Floating Rate Junior Subordinated Debentures (“subordinated debt”) outstanding in the aggregate amount of $184.2 million. 

Non-interest income for the second quarter of 2018 of $20.5 million remained relatively flat compared to the second quarter of 2017. The most significant variances within the non-interest income components follows:

·A $0.8 million increase in “Other operating income” in the table above, primarily due to a $0.7 million increase in transaction fee income from merchant-related transactions and credit and debit card interchange fees.

Offset by:

·A $0.4 million decrease in service charge on deposits accounts, primarily related to a decrease in the volume of returned items and overdraft fee transactions.

·The effect in the second quarter of 2017 of a $0.4 million partial recovery of previously-recognized OTTI charges on non-performing bonds of the GDB and the Puerto Rico Public Buildings Authority sold in the second quarter of 2017. The Corporation sold for an aggregate of $23.4 million these non-performing bonds that were carried on its books at an amortized cost of $23.0 million (net of $34.4 million in cumulative OTTI charges).

103

Non-interest income for the six-month period ended June 30, 2018 amounted to $43.3 million, compared to $28.8 million for the same period in 2017.  The $14.5 million increase in non-interest income was primarily due to:

·The effect in 2017 of a $12.2 million OTTI charge on three Puerto Rico Government debt securities held by the Corporation as part of its available-for-sale securities portfolio, specifically the aforementioned bonds of the GDB and the Puerto Rico Public Buildings Authority sold in the second quarter of 2017.

·The $2.3 million gain recorded in the first quarter of 2018 on the repurchase and cancellation of $23.8 million in trust-preferred securities.

·A $0.5 million increase in revenues from mortgage banking activities driven by a net variance of $1.7 million related to adjustments recorded in 2018 to reduce the valuation allowance of mortgage servicing rights, partially offset by lower conforming loan originations and sales in the secondary market, resulting in a $1.3 million decrease in gain on sale of residential mortgage loans. Total loans sold in the secondary market to U.S government-sponsored entities amounted to $170.9 million with a related net gain of $4.6 million, including gains of $0.8 million on To-Be-Announced mortgage-backed securities (“TBA”) hedges, in the first half of 2018, compared to total loans sold in the secondary market of $184.6 million with a related net gain of $5.9 million, net of TBA hedges losses of $0.3 million, in the first half of 2017.  The total amount of loans sold in the secondary market in 2018 included $9.8 million of seasoned residential mortgage loans sold to Fannie Mae that resulted in a gain of $0.2 million.

·A $1.2 million increase in “Other operating income” in the table above, reflecting the effect of a $0.8 million gain on sale of fixed assets of a closed banking branch in Florida and a $0.8 million increase in transaction fee income from credit and debit card interchange fees and merchant-related transactions, partially offset by a $0.6 million lower of cost or market adjustment recorded in the first quarter of 2018 to reduce the carrying value of a construction loan held for sale.

Partially offset by:

·A $1.2 million decrease in service charges on deposits, primarily related to a decrease in the volume of returned item and overdraft transaction fees. 

·The aforementioned effect in 2017 of the $0.4 million partial recovery of previously recorded OTTI charges on non-performing bonds of the GDB and the Puerto Rico Public Buildings Authority sold in the second quarter of 2017.

104

Non-Interest Expenses
The following table presents the components of non-interest expenses:
		Quarter Ended June 30,				Six-Month Period Ended June 30,
		2018		2017		2018		2017
	(In thousands)
	Employees' compensation and benefits	$	39,555	$	38,409	$	80,239	$	77,062
	Occupancy and equipment		13,746		13,759		28,851		27,847
	Insurance and supervisory fees		3,701		4,855		7,556		9,764
	Taxes, other than income taxes		3,637		3,745		7,493		7,421
	Professional fees:
	Collections, appraisals and other credit-related fees		1,650		2,452		3,249		4,524
	Outsourcing technology services		5,127		5,398		10,250		10,752
	Other professional fees		3,416		3,950		6,754		7,480
	Credit and debit card processing expenses		3,766		3,566		7,303		6,397
	Business promotion		4,016		3,192		6,592		6,473
	Communications		1,582		1,628		3,064		3,171
	Net loss on OREO and OREO operations		5,655		3,369		5,845		7,445
	Other		4,365		4,746		9,047		8,615
	Total	$	90,216	$	89,069	$	176,243	$	176,951

105

Non-interest expenses for the second quarter of 2018 were $90.2 million, compared to $89.1 million for the same period in 2017. The $1.1 million increase in non-interest expenses was mainly due to:

·A $2.3 million increase in losses from OREO operations, primarily reflecting a $2.5 million increase in adverse fair value adjustments to the value of OREO properties, primarily income-producing commercial properties.

·A $1.1 million increase in employees’ compensation expenses, primarily related to cash transition award payments to certain senior officers of $0.6 million in connection with the previously-reported executive compensation program that became effective in the third quarter of 2017, and a $0.5 million increase in bonus and incentive-based compensation expenses.

·A $0.8 million increase in business promotion expenses, primarily reflecting a $0.4 million increase related to advertising, public relations, and sponsorship activities, and a $0.3 million increase in the estimated cost of the credit card rewards program.

Partially offset by:

·A $1.3 million decrease in the FDIC insurance premium expense, included as part of “Insurance and supervisory fees” in the table above, reflecting, among other things, the effect of reductions in brokered CDs, higher liquidity levels tied to the growth in non-interest-bearing deposits, and an improvement in the risk profile of the Bank’s balance sheet.

·A $1.6 million decrease in professional service fees, mainly related to reductions in attorneys’ collection fees. 

Non-interest expenses for the six months of 2018 were $176.2 million, compared to $177.0 million for the same period in 2017.  The $0.7 million decrease in non-interest expenses was principally attributable to:

·A $2.4 million decrease in the FDIC insurance premium expense, included as part of “Insurance and supervisory fees” in the table above, as further explained above.

·A $2.5 million decrease in total professional service fees, primarily reflecting lower attorneys’ collection fees and legal expenses, and the effect in 2017 of costs related to the implementation of new information technology systems.

·A $1.6 million decrease in losses from OREO operations, primarily related to a $1.1 million decrease in adverse fair value adjustments to the value of OREO properties, mainly income-producing commercial properties.

Partially offset by:

·A $3.2 million increase in employees’ compensation and benefits, primarily associated with the cash transition award payments of $1.2 million in connection with the above-mentioned executive compensation program that became effective in the third quarter of 2017, a $1.0 million increase in bonus and incentive-based compensation, and a $0.3 million increase in stock-based compensation.

·A $1.0 million increase in occupancy and equipment expenses, primarily related to hurricane-related expenses amounting to $2.1 million recorded in the first six months of 2018, mostly attributable to repairs and security matters.

·A $0.9 million increase in credit and debit card processing expenses, mainly related to higher transaction volumes.

·A $0.4 million increase in “Other operating expenses” in the table above, primarily reflecting lower reserve releases related to unfunded loan commitments.

106

Income Taxes

Income tax expense includes Puerto Rico and USVI income taxes as well as applicable U.S. federal and state taxes. The Corporation is subject to Puerto Rico income tax on its income from all sources. As a Puerto Rico corporation, First BanCorp. is treated as a foreign corporation for U.S. and USVI income tax purposes and is generally subject to U.S. and USVI income tax only on its income from sources within the U.S. and USVI or income effectively connected with the conduct of a trade or business in those regions. Any such tax paid in the U.S. and USVI is also creditable against the Corporation’s Puerto Rico tax liability, subject to certain conditions and limitations.

    Under the Puerto Rico Internal Revenue Code of 2011, as amended (the “2011 PR Code”), the Corporation and its subsidiaries are treated as separate taxable entities and are generally not entitled to file consolidated tax returns and, thus, the Corporation is generally  not entitled to utilize losses from one subsidiary to offset gains in another subsidiary. Accordingly, in order to obtain a tax benefit from a net operating loss (“NOL”), a particular subsidiary must be able to demonstrate sufficient taxable income within the applicable NOL carry-forward period. The 2011 PR Code allows entities organized as limited liability companies to perform an election to become a non-taxable “pass-through” entity and utilize losses to offset income from other “pass-through” entities, subject to certain limitations, with the remaining net income passing-through to its partner entities. The 2011 PR Code also provides a dividend received deduction of 100% on dividends received from “controlled” subsidiaries subject to taxation in Puerto Rico and 85% on dividends received from other taxable domestic corporations.

   On March 1, 2017, the Corporation completed the applicable regulatory filings to change the tax status of its subsidiary, First Federal Finance, from a taxable corporation to a non-taxable “pass-through” entity. This election allows the Corporation to realize tax benefits of its deferred tax assets associated with pass-through ordinary net operating losses available at the banking subsidiary, FirstBank, which were subject to a full valuation allowance as of December 31, 2016, against now pass-through ordinary income from this profitable subsidiary.

On March 1, 2017, the Corporation also completed the applicable regulatory filings to change the tax status of its subsidiary, FirstBank Insurance, from a taxable corporation to a non-taxable “pass-through” entity. This election allows the Corporation to offset pass-through income projected to be earned by FirstBank Insurance with net operating losses available at the Holding Company level.

    The Corporation has maintained an effective tax rate lower than the maximum statutory rate mainly by investing in government obligations and mortgage-backed securities exempt from U.S. and Puerto Rico income taxes and by doing business through an International Banking Entity (“IBE”) unit of the Bank, and through the Bank’s subsidiary, FirstBank Overseas Corporation, whose interest income and gain on sales is exempt from Puerto Rico income taxation. The IBE and FirstBank Overseas Corporation were created under the International Banking Entity Act of Puerto Rico, which provides for total Puerto Rico tax exemption on net income derived by IBEs operating in Puerto Rico on the specific activities identified in the IBE Act.  An IBE that operates as a unit of a bank pays income taxes at the corporate standard rates to the extent that the IBE’s net income exceeds 20% of the bank’s total net taxable income.

    For the second quarter and first six months of 2018, the Corporation recorded an income tax expense of $10.2 million and $17.9 million, respectively, compared to an income tax expense of $9.3 million and $1.2 million for the comparable periods in 2017. The increase in the income tax expense for the second quarter of 2018, as compared to the same period a year ago, was primarily related to higher pre-tax earnings generated in 2018.  The increase for the first six months of 2018, compared to same period in 2017, was mostly related to a  $13.2 million tax benefit recorded in the first quarter of 2017 as a result of the above discussed change in tax status of certain subsidiaries from taxable corporations to limited liability companies that have elected to be treated as partnerships for income tax purposes in Puerto Rico and, to a lesser extent, a higher pre-tax income subject to the estimated annual effective tax rate for the six-month period ended June 30, 2018.

For the six-month period ended June 30, 2018, the Corporation calculated the provision for income taxes by applying the estimated annual effective tax rate for the full fiscal year to ordinary income or loss.  In the computation of the consolidated worldwide annual estimated effective tax rate, ASC Topic 740-270, “Income Taxes-Interim Reporting,” requires the exclusion of legal entities with pre-tax losses from which a tax benefit cannot be recognized.  The Corporation’s estimated annual effective tax rate in the first six months of 2018, excluding entities from which a tax benefit cannot be recognized and discrete items, was 25% compared to 24% for the first six months of 2017.  The estimated annual effective tax rate including all entities for the first six months of 2018 was 24% (25% excluding discrete items, primarily the tax benefit resulting from the excess tax benefit recognized during the first quarter of 2018 upon the vesting of shares granted under the Corporation’s stock-based compensation plan) compared to 14% for the first six months of 2017 (25% excluding discrete items, primarily the tax benefit resulting from the previously mentioned change in the tax status of two subsidiaries).

    The Corporation’s net deferred tax asset amounted to $283.3 million as of June 30, 2018, net of a valuation allowance of $181.2 million, and management concluded, based upon the assessment of all positive and negative evidence, that it is more likely than not that the Corporation will generate sufficient taxable income within the applicable NOL carry-forward periods to realize such amount.

107

The net deferred tax asset of the Corporation’s banking subsidiary, FirstBank, amounted to $283.2 million as of June 30, 2018, net of a valuation allowance of $144.6 million, compared to a net deferred tax asset of $294.7 million, net of a valuation allowance of $150.7 million, as of December 31, 2017.

During the third quarter of 2017, the Corporation completed a formal ownership change analysis within the meaning of Section 382 of the U.S. Internal Revenue Code (“Section 382”) covering a comprehensive period, and concluded that an ownership change occurred during such period. Section 382 limits the ability to utilize U.S. and USVI NOLs for income tax purposes at such jurisdictions following an event of an ownership change.  The Section 382 limitation could result in higher U.S. and USVI liabilities in the future than we would incur in the absence of such limitation. For the second quarter and first six months of 2018, and as a result of the Section 382 limitation, the Corporation incurred an income tax expense of approximately $1.0 million and $2.6 million, respectively, related to its U.S. operations. The limitation did not affect the USVI operations in the first half of 2018. Prospectively, the Corporation expects that it will be able to mitigate the adverse effects associated with the Section 382 limitation as any such tax paid in the U.S. or USVI could be creditable against Puerto Rico tax liabilities or taken as deduction against taxable income.  However, our ability to reduce our Puerto Rico tax liability through such a credit or deduction depends on our tax profile at each annual taxable period, which is dependent on various factors.

    As of June 30, 2018, the Corporation did not have Unrecognized Tax Benefits recorded on its books. The Corporation classifies all interest and penalties, if any, related to tax uncertainties as income tax expense. Audit periods remain open for review until the statute of limitations has passed. The statute of limitations under the 2011 PR Code is four years; the statute of limitations for U.S. and USVI income tax purposes is three years after a tax return is due or filed, whichever is later, for each. The completion of an audit by the taxing authorities or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Corporation’s liability for income taxes. Any such adjustment could be material to the results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. For U.S. and USVI income tax purposes, all tax years subsequent to 2013 remain open to examination. For Puerto Rico tax purposes, all tax years subsequent to 2012 remain open to examination.

On December 22, 2017, the United States president signed H.R.1, The Tax Cuts and Jobs Acts, which includes an overhaul of individual, business and international taxes and has affected our branch operations in the U.S. and the USVI. The bill includes measures reducing corporate taxes from 35% to 21%, a repeal of the corporate alternative minimum tax regime, changes to business deductions and NOLs, a 15.5% tax on mandatory repatriation of liquid assets, 10% tax on base erosion payments, and a minimum 10.5% tax on inclusion of global intangible low-tax income by U.S. shareholders, among other significant changes. The main provisions affecting our operations in the U.S. and the USVI in the first half of 2018 include: the change in tax rate to 21%, the limitation to the amount certain financial institutions may deduct for premiums paid to the FDIC, and changes in permanent differences, such as meals and entertainment deductions. Other significant provisions, such as the base erosion and anti-abuse tax, do not affect the Corporation’s U.S. and USVI branch operations since these operations’ receipts do not exceed the annual threshold of U.S. effectively connected gross receipts

       On April 16, 2018, the Puerto Rico House of Representatives introduced the house legislative project 1544 (“P de la C. 1544”), which includes proposed changes to the Puerto Rico Income Tax Code. The P de la C. 1544 proposes changes effective January 1, 2019 including: a reduction in the maximum corporate tax rate to 31% from the current 39%, an increase in the NOL limitation to 90% from the current 80%, and changes to the alternative minimum tax computation, including a reduction in the rate to 23%, from the current 30%. The legislative project also eliminates the exemption for interest income of certain mortgage loans, and sets forth additional limitations to deductions related to meals and travel. Other proposed measures include a reduction of the business to business services sales tax for electronic payments. The P de la C. 1544 also includes preventive measures that condition the reductions in income tax and sales tax rates to the government reaching the budgeted revenue collections. It is uncertain whether the proposed tax reform legislation will be enacted in 2018.  Some of the provisions in the proposed tax reform legislation, such as the reduction in corporate tax rates, are likely to result in a write down of the Corporation’s consolidated net deferred tax asset with a corresponding charge to the Corporation’s income tax expense in the period of enactment. The reduction in the corporate tax rates could also result in reductions to the Corporation’s effective tax rate going forward.

108

FINANCIAL CONDITION AND OPERATING DATA ANALYSIS

Assets

   The Corporation’s total assets were $12.4 billion as of June 30, 2018, an increase of $123.6 million from December 31, 2017. The increase was mainly due to a $172.0 million increase in cash and cash equivalents, largely driven by the increase of $483.5 million in non-interest-bearing deposits during the first six months of 2018 and proceeds from loan repayments, partially offset by liquidity used to pay off maturing brokered CDs and a $100 million short-term repurchase agreement, as well as for the repurchase of $23.8 million of trust-preferred securities.  In addition, total investments securities increased by $145.1 million during the first six months of 2018 driven by purchases of approximately $352 million of U.S. agency debt securities, partially offset by U.S. agency mortgage-backed securities (“MBS”) prepayments, certain U.S. agency callable debentures that matured during 2018, and the decrease in the fair value of available-for-sale investment securities, as further discussed below.

These variances were partially offset, as further discussed below, by a $162.4 million decrease in total loans, a decrease of $10.0 million in accrued interest receivable in connection with interest payments collected on loans after the expiration in the first quarter of 2018 of the three-month payment deferral programs extended to eligible customers affected by Hurricanes Maria and Irma, and an $11.5 million decrease in the net deferred tax asset. 

Loan Portfolio
The following table presents the composition of the Corporation’s loan portfolio, including loans held for sale, as of the dates indicated:
		June 30,		December 31,
(In thousands)		2018		2017
Residential mortgage loans		$	3,238,001	$	3,290,957
Commercial loans:
Commercial mortgage loans (1)			1,533,308		1,614,972
Construction loans (1)			84,683		111,397
Commercial and Industrial loans			2,009,049		2,083,253
Total commercial loans			3,627,040		3,809,622
Finance leases			283,274		257,462
Consumer loans			1,491,976		1,492,435
Total loans held for investment			8,640,291		8,850,476
Less:
Allowance for loan and lease losses			(222,035)		(231,843)
Total loans held for investment, net		$	8,418,256	$	8,618,633
Loans held for sale (1) (2)			80,815		32,980
Total loans, net		$	8,499,071	$	8,651,613
com
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million) in non-performing loans to held for sale. Loans transferred to held for sale consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).
(2)	During the second quarter of 2018, the Corporation completed the sale of a $10.4 million non-performing commercial mortgage loan that was among the loans transferred to held for sale in the first quarter of 2018.

109

As of June 30, 2018, the Corporation’s total loan portfolio, before allowance, amounted to $8.7 billion, down $162.4 million when compared to December 31, 2017. The decline primarily reflects reductions of $126.3 million and $39.2 million in the Puerto Rico and Virgin Islands regions, respectively, partially offset by a $3.1 million increase in the Florida region.  The decrease reflects the effect of eight large commercial loans paid off during 2018 totaling $91.4 million, the sale of three large commercial loans totaling $25.2 million, and significant payments received, including payments that reduced the outstanding balance of eight commercial lines of credit in Puerto Rico by $36.1 million.  In addition, the residential mortgage loan portfolio decreased by $51.4 million, including the effect of the $9.8 million sale of seasoned residential mortgage loans in the secondary market, partially offset by a $25.4 million increase in the consumer loan portfolio.  

    As shown in the table above, as of June 30, 2018, the loans held-for-investment portfolio was comprised of commercial and construction loans (42%), residential real estate loans (37%), and consumer and finance leases (21%). Of the total gross loan portfolio held for investment of $8.6 billion as of June 30, 2018, approximately 75% had credit risk concentration in Puerto Rico, 19% in the United States (mainly in the state of Florida) and 6% in the Virgin Islands, as shown in the following table:

As of June 30, 2018	Puerto Rico		Virgin  Islands		United  States		Total
(In thousands)
Residential mortgage loans	$	2,374,276	$	265,252	$	598,473	$	3,238,001
Commercial mortgage loans		1,057,317		81,317		394,674		1,533,308
Construction loans		40,277		9,043		35,363		84,683
Commercial and Industrial loans		1,311,854		113,883		583,312		2,009,049
Total commercial loans		2,409,448		204,243		1,013,349		3,627,040
Finance leases		283,274		-		-		283,274
Consumer loans		1,390,099		45,774		56,103		1,491,976
Total loans held for investment, gross	$	6,457,097	$	515,269	$	1,667,925	$	8,640,291
Loans held for sale		50,030		30,138		647		80,815
Total loans	$	6,507,127	$	545,407	$	1,668,572	$	8,721,106
As of December 31, 2017	Puerto Rico		Virgin  Islands		United  States		Total
(In thousands)
Residential mortgage loans	$	2,413,379	$	282,738	$	594,840	$	3,290,957
Commercial mortgage loans		1,127,409		95,464		392,099		1,614,972
Construction loans		41,511		43,314		26,572		111,397
Commercial and Industrial loans		1,373,714		116,323		593,216		2,083,253
Total commercial loans		2,542,634		255,101		1,011,887		3,809,622
Finance leases		257,462		-		-		257,462
Consumer loans		1,389,560		46,412		56,463		1,492,435
Total loans held for investment, gross	$	6,603,035	$	584,251	$	1,663,190	$	8,850,476
Loans held for sale		30,397		325		2,258		32,980
Total loans	$	6,633,432	$	584,576	$	1,665,448	$	8,883,456

110

Residential Real Estate Loans

As of June 30, 2018, the Corporation’s residential mortgage loan portfolio held for investment decreased by $53.0 million, as compared to the balance as of December 31, 2017, mainly resulting from activities in Puerto Rico and the Virgin Islands as principal repayments, charge-offs, and $22.4 million of foreclosures recorded in the first half of 2018 exceeded the volume of new loans originated and held for investment purposes. The residential mortgage loan portfolio held for investment in the Puerto Rico and Virgin Islands regions decreased during the first six months of 2018 by $39.1 million and $17.5 million, respectively, partially offset by an increase of $3.6 million in the Florida region.  The increase in the Florida region was achieved despite the sale of $9.8 million of seasoned residential mortgage loans to FNMA in the second quarter of 2018.

    The majority of the Corporation’s outstanding balance of residential mortgage loans in Puerto Rico and the Virgin Islands consisted of fixed-rate loans that traditionally carried higher yields than residential mortgage loans in Florida.  In the Florida region, approximately 56% of the residential mortgage loan portfolio consisted of adjustable-rate mortgages.   In accordance with the Corporation’s underwriting guidelines, residential mortgage loans are mostly fully documented loans, and the Corporation does not originate negative amortization loans. 

Commercial and Construction Loans

As of June 30, 2018, the Corporation’s commercial and construction loan portfolio held for investment decreased by $182.6 million to $3.6 billion, as compared to the balance as of December 31, 2017. The decrease was mainly related to the aforementioned transfer of $57.2 million of non-performing loans to held for sale (net of fair value write downs of $9.7 million recorded at the time of transfer in the first quarter of 2018), the repayment in 2018 of eight large commercial loans totaling $91.4 million, the sale of three large commercial loans totaling $25.2 million (including $10.4 million of the aforementioned loans transferred to held for sale in the first quarter), and significant repayments that reduced the outstanding balance of eight commercial lines of credit in Puerto Rico by $36.1 million.

The commercial and construction loan portfolio, including loans held for sale, decreased by $116.9 million in the Puerto Rico region driven by two large commercial loans totaling $23.7 million paid off during 2018, the sale of two large adversely-classified commercial loans totaling $16.0 million, significant repayments that reduced the outstanding balance of eight commercial lines of credit in Puerto Rico by $36.1 million, and charge-offs.  In the Virgin Islands, commercial and construction loans decreased by $20.9 million, driven by a $6.7 million commercial mortgage loan paid off during 2018, the fair value write-down of $5.1 million recorded on the construction loan transferred to held for sale in the first quarter of 2018, and a $10.0 million decrease in the balance of a commercial line of credit of a United States Virgin Island (“USVI”) government public corporation.  In Florida, total commercial and construction loans increased by $1.5 million, despite the effect of five large loans paid off during the first six months of 2018 totaling $61.0 million and the sale of a $9.2 million commercial loan participation.

    As of June 30, 2018, the Corporation had $54.6 million outstanding in loans extended to the Puerto Rico government, its municipalities and public corporations, compared to $55.9 million as of December 31, 2017.  Approximately $33.1 million of the outstanding loans as of June 30, 2018 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. In addition to loans extended to municipalities, the Corporation’s exposure to the Puerto Rico government as of June 30, 2018 includes a $6.7 million loans extended to a unit of the central government and a $14.8 million loan granted to an affiliate of PREPA.

The Corporation also has credit exposure to USVI government entities. As of June 30, 2018, the Corporation had $72.5 million in loans to USVI government instrumentalities and public corporations, compared to $70.4 million as of December 31, 2017.  Of the amount outstanding as of June 30, 2018, public corporations of the USVI owed approximately $49.2 million and an independent instrumentality of the USVI government owed approximately $23.2 million.  As of June 30, 2018, all loans were currently performing and up to date with their respective principal and interest payments.

Furthermore, as of June 30, 2018, the Corporation had loans granted to the hotel industry in Puerto Rico that were formerly guaranteed by the TDF with an aggregate book value of $46.2 million, compared to $70.8 million as of December 31, 2017. Historically, the borrower and the operations of the underlying collateral of these loans have been the primary sources of repayment and the TDF, which is a subsidiary of the GDB, provided a secondary guarantee for payment performance.  As part of agreements executed in the second quarter of 2017 and in the first quarter of 2018, the TDF paid $7.6 million and $4.0 million, respectively, to honor a portion of its guarantee on these loans.  As provided in the agreements, the cash payments received by the Corporation released the TDF from its liability as a guarantor of these loans.  In addition, the GDB agreed to issue to the Bank a fixed income

111

financial instrument pursuant to the GDB’s Restructuring Support Agreement approved by the PROMESA oversight board.  During the first quarter of 2018, the Corporation transferred to held for sale $27.2 million (net of write-downs of $4.6 million recorded at the time of transfer) in two of these three commercial mortgage loans. Subsequently, the Corporation sold in the second quarter of 2018 one of these loans that carried a book value of $10.4 million. Also in the second quarter of 2018, the Corporation completed the split loan restructuring of the largest of these three facilities amounting to $34 million.  This loan relationship was restructured in the second quarter using the A/B note workout strategy in which note A, with an outstanding balance of $29.4 million as of June 30, 2018 (net of approximately $3.6 million of payments collected in the second quarter), was underwritten to comply with the Corporation’s lending standards at current market rates.  The A note was restored to accrual status at the time of the restructuring in the second quarter considering the borrower’s sustained historical repayment performance before the restructuring that demonstrated its ability to make timely interest and principal payments under the restructured terms.  The B note consists of amounts mostly charged-off in prior periods and is fully charged-off as of June 30, 2018. The sale and the loans split restructuring resulted in a $44.4 million reduction in non-performing assets during the second quarter of 2018.    

    As of June 30, 2018, the Corporation’s total exposure to shared national credit (“SNC”) loans amounted to $749.2 million.  As of June 30, 2018, approximately $267.0 million of the SNC exposure related to the portfolio in Puerto Rico and $482.2 million related to the portfolio in the Florida region.

The composition of the Corporationʼs construction loan portfolio held for investment as of June 30, 2018 by category and geographic location follows:
As of June 30, 2018
	Puerto Rico		Virgin Islands		United  States		Total
(In thousands)
Loans for residential housing projects:
Mid-rise (1)	$	587	$	-	$	-	$	587
Single-family, detached		597		883		2,636		4,116
Total for residential housing projects		1,184		883		2,636		4,703
Construction loans to individuals secured by residential properties		361		772		-		1,133
Loans for commercial projects (2)		16,030		5,078		32,717		53,825
Land loans - residential		12,163		2,315		10		14,488
Land loans - commercial		10,563		-		-		10,563
Total before net deferred fees and allowance for loan losses	$	40,301	$	9,048	$	35,363	$	84,712
Net deferred fees		(24)		(5)		-		(29)
Total construction loan portfolio, gross		40,277		9,043		35,363		84,683
Allowance for loan losses		(3,260)		(673)		(16)		(3,949)
Total Construction Loan Portfolio, net (2)	$	37,017	$	8,370	$	35,347	$	80,734
____________________
(1) Mid-rise relates to buildings of up to seven stories.
(2) Excludes a construction-commercial loan held for sale of $30.0 million in the Virgin Islands.

112

The following table presents further information related to the Corporation’s construction portfolio as of and for the six-month period ended June 30, 2018:
	(In thousands)
	Total undisbursed funds under existing commitments	$	63,551
	Construction loans held for investment in non-accrual status	$	14,148
	Construction loans held for sale in non-accrual status	$	37,732
	Net charge offs - Construction loans	$	5,844
	Allowance for loan losses - Construction loans	$	3,949
	Non-performing construction loans to total construction loans, including held for sale		42.38%
	Allowance for loan losses - construction loans to total construction loans held for investment		4.66%
	Net charge-offs (annualized) to total average construction loans (1)		9.74%
	(1) Includes a charge-off of $5.1 million associated with the fair value write-down of a $30.0 million construction loan
	transferred to held for sale in the Virgin Islands.

The following summarizes the construction loans for residential housing projects in Puerto Rico segregated by the  estimated selling price of the units:
	(In thousands)
Under $300k	$	587
Over $600k (1)		597
	$	1,184
_____________
(1) One residential housing project in Puerto Rico.

113

Consumer Loans and Finance Leases

As of June 30, 2018, the Corporation’s consumer loan and finance lease portfolio increased by $25.4 million to $1.8 billion, as compared to the portfolio balance as of December 31, 2017. The increase was primarily reflected in auto, finance leases, and personal loans, which increased by $11.7 million, $25.8 million, and $8.8 million, respectively, partially offset by reductions of $14.5 million and $3.9 million in credit card and boat loans, respectively.  The increase was primarily associated with a higher level of consumer loan originations in the Puerto Rico region during the first half of 2018.

Loan Production

First BanCorp. relies primarily on its retail network of branches to originate residential and consumer loans. The Corporation supplements its residential mortgage originations with wholesale servicing released mortgage loan purchases from mortgage bankers.  The Corporation manages its construction and commercial loan originations through centralized units and most of its originations come from existing customers, as well as through referrals and direct solicitations.

The following table provides a breakdown of First BanCorp.’s loan production, including purchases, refinancings, renewals and draws from existing revolving and non-revolving commitments, for the periods indicated:

	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2018		2017		2018		2017
	(In thousands)
Residential real estate	$	140,344	$	180,031	$	261,118	$	344,171
Commercial and industrial and commercial mortgage		377,277		538,175		712,352		1,062,870
Construction		8,949		9,382		19,633		34,997
Finance leases		41,533		25,781		69,011		50,169
Consumer		242,379		239,369		431,809		445,016
Total loan production	$	810,482	$	992,738	$	1,493,923	$	1,937,223

The Corporation is experiencing continued loan demand and has continued its targeted origination strategy. During the quarter and six-month period ended June 30, 2018, total loan originations, including purchases, refinancings, and draws from existing revolving and non-revolving commitments, amounted to approximately $810.5 million and $1.5 billion, respectively, compared to $992.7 million and $1.9 billion, respectively, for the comparable periods in 2017.   

Residential mortgage loan originations and purchases for the quarter and six-month period ended June 30, 2018 amounted to $140.3 million and $261.1 million, respectively, compared to $180.0 million and $344.2 million, respectively, for the comparable periods in 2017. These statistics include purchases from mortgage bankers of $15.2 million and $29.7  million for the quarter and six-month period ended June 30, 2018, respectively, compared to $17.7 million and $32.4 million, respectively, for the comparable periods in 2017. The decrease of $39.7 million in the second quarter of 2018, as compared to the same period of 2017, reflects declines of approximately $4.2 million, $33.0 million, and $2.5 million in Puerto Rico, Florida, and the Virgin Islands, respectively.  For the six-month period ended June 30, 2018, the decrease includes reductions of $31.6 million, $47.4 million, and $4.1 million on the Puerto Rico, Florida, and the Virgin Islands regions, respectively. 

Originations of auto loans (including finance leases) for the quarter and six-month period ended June 30, 2018 amounted to $141.0 million and $242.4 million, respectively, compared to $116.3 million and $221.7 million, respectively, for the comparable periods in 2017.  The increases were primarily reflected in the Puerto Rico region with increases of $25.4 million and $21.8 million for the second quarter and six-month period ended June 30, 2018, compared to the same periods in 2017.   Personal loan originations, other than credit cards, for the quarter and six-month period ended June 30, 2018 amounted to $59.2 million and $97.5 million, respectively, compared to $62.2 million and $110.0 million, respectively, for the comparable periods in 2017.  Most of the decrease in personal loan originations was reflected in the Puerto Rico region. The utilization activity on the outstanding credit card portfolio for the quarter and six-month period ended June 30, 2018 amounted to approximately $83.7 million and $160.9 million, respectively, compared to $86.6 million and $163.5 million, respectively, for the comparable periods in 2017.

The above-mentioned statistics of residential mortgage, auto and finance leases in Puerto Rico show levels close or above pre-hurricane levels.     

Commercial and construction loan originations (excluding government loans) for the second quarter of 2018 and 2017 amounted to $383.8 million and $547.6 million, respectively, while the originations for the six-month periods ended June 30, 2018 and 2017 amounted to $716.0 million and $1.1 billion, respectively. The decrease in the second quarter of 2018, compared to the same period in

114

2017, reflects a decrease of approximately $128.3 million in the Puerto Rico region, primarily due to the effect in the second quarter of 2017 of the refinancing and renewal of two large commercial loans totaling $72.5 million and reduced activity compared to pre-hurricane levels, and a decrease of approximately $33.3 million in the Florida region.  For the six-month period ended June 30, 2018, the decrease reflects the impact in 2017 of the refinancing and renewal of five large commercial loans in Puerto Rico totaling $248.9 million and a decrease of $31.3 million in commercial and construction loan originations in the Florida region.   

Government loan originations for the quarter and six-month period ended June 30, 2018 amounted to $2.4 million and $16.0 million, respectively, mainly related to the utilization of an arranged overdraft line of credit of a government entity in the Virgin Islands region. No government loans were originated during the first six months of 2017.

Investment Activities

As part of its liquidity, revenue diversification and interest rate risk strategies, First BanCorp. maintains an investment portfolio that is classified as available for sale or held to maturity. The Corporation’s total available-for-sale investment securities portfolio as of June 30, 2018 amounted to $2.0 billion, a $145.0 million increase from December 31, 2017. The increase was mainly driven by purchases of U.S. agency debt securities totaling $302.9 million (average yield of 3.13%) and the purchase of a 6-month U.S. Treasury Bill of $50 million, partially offset by prepayments of $92.1 million of U.S. agency MBS, $70 million of U.S. agency callable debt securities matured during 2018, and a $31.5 million decrease in the fair value of available-for-sale investment securities.

As of June 30, 2018, approximately 99% of the Corporation’s available-for-sale securities portfolio was invested in U.S. Government and agency debentures and fixed-rate U.S. government-sponsored agency MBS (mainly GNMA, FNMA and FHLMC fixed-rate securities).

As of June 30, 2018, the Corporation owned bonds of the Puerto Rico Housing Finance Authority in the aggregate amount of $8.1 million, carried on the Corporation’s books at their aggregate fair value of $6.8 million, which were current as to contractual payments as of June 30, 2018.

As of June 30, 2018, the Corporation’s held-to-maturity investment securities portfolio amounted to $150.5 million, down $0.1 million from December 31, 2017. Held-to-maturity investment securities consisted of financing arrangements with Puerto Rico municipalities issued in bond form, which are accounted for as securities, but were underwritten as loans with features that are typically found in commercial loans.  These obligations typically are not issued in bearer form, are not registered with the SEC, and they are not rated by external credit agencies. These bonds have seniority to the payment of operating costs and expenses of the municipality and are supported by assigned property tax revenues. Approximately 70% of the Corporation’s municipality bonds consisted of obligations issued by three of the largest municipalities in Puerto Rico. 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 loans.

    See “Exposure to Puerto Rico Government” below for information and details about the Corporation’s total direct exposure to the Puerto Rico government.

115

The following table presents the carrying value of investments as of the indicated dates:
	June 30,		December 31,
	2018		2017
(In thousands)
Money market investments	$	97,590	$	10,415
Investment securities available for sale, at fair value:
U.S. Government and agencies obligations		657,401		609,188
Puerto Rico government obligations		6,843		6,813
Mortgage-backed securities		1,371,766		1,274,497
Other (1)		-		518
Total investment securities available for sale, at fair value		2,036,010		1,891,016
Investment securities held-to-maturity, at amortized cost:
Puerto Rico Municipal Bonds		150,486		150,627
Other investment securities, including $40.8 million and $40.9 million of FHLB stock
as of June 30, 2018 and December 31, 2017, respectively		43,400		43,119
Total money market investments and investment securities	$	2,327,486	$	2,095,177
(1) As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities.

Mortgage-backed securities as of the indicated dates consisted of:
	June 30,		December 31,
(In thousands)	2018		2017
Available for sale:
FHLMC certificates	$	343,146	$	311,706
GNMA certificates		200,038		221,630
FNMA certificates		760,209		680,040
Collateralized mortgage obligations issued or
guaranteed by FHLMC and GNMA		53,312		44,061
Other mortgage pass-through certificates		15,061		17,060
Total mortgage-backed securities	$	1,371,766	$	1,274,497

116

The carrying values of investment securities classified as available for sale and held to maturity as of June 30, 2018 by contractual maturity (excluding mortgage-backed securities) are shown below:
	Carrying		Weighted
(Dollars in thousands)	Amount		Average Yield %
U.S. Government and agencies obligations
Due within one year	$	132,035	1.33
Due after one year through five years		306,194	1.51
Due after five years through ten years		182,681	2.94
Due after ten years		36,491	2.28
		657,401	1.91
Puerto Rico government and municipalities obligations
Due after one year through five years		3,712	5.68
Due after five years through ten years		43,598	5.40
Due after ten years		110,019	5.82
		157,329	5.70
Total		814,730	2.64
Mortgage-backed securities		1,371,766	2.67
Total investment securities available for sale and held to maturity	$	2,186,496	2.66

117

Net interest income of future periods could be affected by prepayments of mortgage-backed securities. Any acceleration in the prepayments of mortgage-backed securities would lower yields on these securities, as the amortization of premiums paid upon acquisition of these securities would accelerate. Conversely, acceleration of the prepayments of mortgage-backed securities would increase yields on securities purchased at a discount, as the amortization of the discount would accelerate. These risks are directly linked to future period market interest rate fluctuations. Also, net interest income in future periods might be affected by the Corporation’s investment in callable securities. As of June 30, 2018, the Corporation had approximately $292.7 million in debt securities (U.S. agencies and Puerto Rico government securities) with embedded calls and with an average yield of 2.42%.  See “Risk Management” below for further analysis of the effects of changing interest rates on the Corporation’s net interest income and of the interest rate risk management strategies followed by the Corporation. Also see Note 5, “Investment Securities,” to the consolidated financial statements for additional information regarding the Corporation’s investment portfolio.

RISK MANAGEMENT

     Risks are inherent in virtually all aspects of the Corporation’s business activities and operations. Consequently, effective risk management is fundamental to the success of the Corporation. The primary goals of risk management are to ensure that the Corporation’s risk-taking activities are consistent with the Corporation’s objectives and risk tolerance, and that there is an appropriate balance between risk and reward in order to maximize stockholder value.

The Corporation has in place a risk management framework to monitor, evaluate and manage the principal risks assumed in conducting its activities. First BanCorp.’s business is subject to eleven broad categories of risks: (1) liquidity risk; (2) interest rate risk; (3) market risk; (4) credit risk; (5) operational risk; (6) legal and compliance risk; (7) reputational risk; (8) model risk; (9) capital risk; (10) strategic risk; and (11) information technology risk. First BanCorp. has adopted policies and procedures designed to identify and manage the risks to which the Corporation is exposed.

The Corporation’s risk management policies are described below as well as in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of  the 2017 Annual Report on Form 10-K.

Liquidity Risk and Capital Adequacy

Liquidity is the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and business operations, and meet contractual obligations through unconstrained access to funding at reasonable market rates. Liquidity management involves forecasting funding requirements and maintaining sufficient capacity to meet liquidity needs and accommodate fluctuations in asset and liability levels due to changes in the Corporation’s business operations or unanticipated events.

The Corporation manages liquidity at two levels. The first is the liquidity of the parent company, which is the holding company that owns the banking and non-banking subsidiaries. The second is the liquidity of the banking subsidiary. As of June 30, 2018, FirstBank could not pay any dividend to the holding company, except upon receipt of required regulatory approvals. During the first six months of 2018, the Corporation continued to pay quarterly interest payments on the subordinated debentures associated with its trust preferred securities and the monthly dividend income on its non-cumulative perpetual monthly income preferred stock pursuant to regulatory approvals.   

The Asset and Liability Committee of the Board of Directors is responsible for establishing the Corporation’s liquidity policy, as well as approving operating and contingency procedures and monitoring liquidity on an ongoing basis. The Management Investment and Asset Liability Committee (the “MIALCO”), using measures of liquidity developed by management that involve the use of several assumptions, reviews the Corporation’s liquidity position on a monthly basis. The MIALCO oversees liquidity management, interest rate risk and other related matters.

The MIALCO, which reports to the Board of Directors’ Asset and Liability Committee, is composed of senior management officers, including the Chief Executive Officer, the Chief Financial Officer, the Chief Risk Officer, the Retail Financial Services Director, the Risk Manager of the Treasury and Investments Division, the Financial Analysis and Asset/Liability Director and the Treasurer. The Treasury and Investments Division is responsible for planning and executing the Corporation’s funding activities and strategy, monitoring liquidity availability on a daily basis, and reviewing liquidity measures on a weekly basis. The Treasury and Investments Accounting and Operations area of the Comptroller’s Department is responsible for calculating the liquidity measurements used by the Treasury and Investment Division to review the Corporation’s liquidity position on a monthly basis. The Financial Analysis and Asset/Liability Director estimates the liquidity gap for longer periods.

To ensure adequate liquidity through the full range of potential operating environments and market conditions, the Corporation conducts its liquidity management and business activities in a manner that will preserve and enhance funding stability, flexibility and diversity. Key components of this operating strategy include a strong focus on the continued development of customer-based funding, the maintenance of direct relationships with wholesale market funding providers, and the maintenance of the ability to liquidate certain assets when, and if, requirements warrant.

118

The Corporation develops and maintains contingency funding plans. These plans evaluate the Corporation’s liquidity position under various operating circumstances and are designed to help ensure that the Corporation will be able to operate through periods of stress when access to normal sources of funds is constrained. The plans project funding requirements during a potential period of stress, specify and quantify sources of liquidity, outline actions and procedures for effectively managing through a difficult period, and define roles and responsibilities. Under the contingency funding plan, the Corporation stresses the balance sheet and the liquidity position to critical levels that imply difficulties in getting new funds or even maintaining the current funding position of the Corporation and the Bank and are designed to help ensure the ability of the Corporation and the Bank to honor its respective commitments, and has established liquidity triggers monitored by the MIALCO in order to maintain the ordinary funding of the banking business. Four different scenarios are defined in the contingency funding plan: local market event, credit rating downgrade, an economic cycle downturn event, and a concentration event. They are reviewed and approved annually by the Board of Directors’ Asset and Liability Committee.

    The Corporation manages its liquidity in a proactive manner and maintains a sound liquidity position. It uses multiple measures to monitor the liquidity position, including core liquidity, basic liquidity, and time-based reserve measures. As of June 30, 2018, the estimated core liquidity reserve (which includes cash and free liquid assets) was $2.2 billion, or 17.8% of total assets, compared to $1.9 billion or 15.6% of total assets as of December 31, 2017. The basic liquidity ratio (which adds available secured lines of credit to the core liquidity) was approximately 21.8% of total assets, compared to 21.2% of total assets as of December 31, 2017. The increase in core liquidity was largely driven by the aforementioned deposit build-up experienced after the hurricanes.  As of June 30, 2018, the Corporation had $491.6 million available for additional credit from the FHLB of New York. Unpledged liquid securities as of June 30, 2018, mainly fixed-rate MBS and U.S. agency debentures, amounted to approximately $1.2 billion. The Corporation does not rely on uncommitted inter-bank lines of credit (federal funds lines) to fund its operations and does not include them in the basic liquidity measure. As of June 30, 2018, the holding company had $24.6 million of cash and cash equivalents. Cash and cash equivalents at the Bank level as of June 30, 2018 were approximately $881.6 million. The Bank had $822.7 million in brokered CDs as of June 30, 2018, of which approximately $457.8 million mature over the next twelve months. Liquidity at the Bank level is highly dependent on bank deposits, which fund 75% of the Bank’s assets (or 68%, excluding brokered CDs).

Sources of Funding

The Corporation utilizes different sources of funding to help ensure that adequate levels of liquidity are available when needed. Diversification of funding sources is of great importance to protect the Corporation’s liquidity from market disruptions. The principal sources of short-term funds are deposits, including brokered CDs, securities sold under agreements to repurchase, and lines of credit with the FHLB.

The Asset Liability Committee of the Board of Directors reviews credit availability on a regular basis. The Corporation has also sold mortgage loans as a supplementary source of funding. Long-term funding has also been obtained in the past through the issuance of notes and long-term brokered CDs. The cost of these different alternatives, among other things, is taken into consideration.

The Corporation has continued reducing the amounts of its outstanding brokered CDs. As of June 30, 2018, the amount of brokered CDs had decreased $327.8 million to $822.7 million from brokered CDs of $1.2 billion as of December 31, 2017. At the same time as the Corporation focuses on reducing its reliance on brokered CDs, it is seeking to add core deposits. During the first six months of 2018, the Corporation increased non-brokered deposits, excluding government deposits, by $367.5 million to $7.6 billion as further discussed below.  

The Corporation continues to have access to financing through counterparties to repurchase agreements, the FHLB, and other agents, such as wholesale funding brokers. While liquidity is an ongoing challenge for all financial institutions, management believes that the Corporation’s available borrowing capacity and efforts to grow retail deposits will be adequate to provide the necessary funding for the Corporation’s business plans in the foreseeable future.

The Corporation’s principal sources of funding are:

Brokered CDs – Historically, a large portion of the Corporation’s funding has been brokered CDs issued by FirstBank. Total brokered CDs decreased during the first six months of 2018 by $327.8 million to $822.7 million as of June 30, 2018.

   The average remaining term to maturity of the retail brokered CDs outstanding as of June 30, 2018 was approximately 1.2 years.

    The use of brokered CDs has historically been important for the growth of the Corporation. The Corporation encounters intense competition in attracting and retaining regular retail deposits in Puerto Rico. The brokered CD market is very competitive and liquid, and has enabled the Corporation to obtain substantial amounts of funding in short periods of time. This strategy has enhanced the Corporation’s liquidity position, since brokered CDs are insured by the FDIC up to regulatory limits and can be obtained faster than regular retail deposits.

119

The following table presents contractual maturities of time deposits with denominations of $100,000 or higher as of  June 30, 2018:
			Total
			(In thousands)
	Three months or less	$	477,766
	Over three months to six months		371,689
	Over six months to one year		535,057
	Over one year		1,055,447
	Total	$	2,439,959

Certificates of deposit in denominations of $100,000 or higher include brokered CDs of $822.7 million issued to deposit brokers in the form of large certificates of deposit that are generally participated out by brokers in shares of less than the FDIC insurance limit.

Government deposits – As of June 30, 2018, the Corporation had $634.4 million of Puerto Rico public sector deposits ($535.7 million in transactional accounts and $98.8 million in time deposits), compared to $490.3 million as of December 31, 2017. Approximately 31% is from municipalities and municipal agencies in Puerto Rico and 69% is from public corporations and the central government and agencies.  Most of the increase in 2018 was related to higher balances in transactional deposit accounts of certain municipalities in Puerto Rico.

   In addition, as of June 30, 2018, the Corporation had $174.3 million of government deposits in the Virgin Islands, compared to $162.6 million as of December 31, 2017.

Retail deposits – The Corporation’s deposit products also include regular saving accounts, demand deposit accounts, money market accounts and retail CDs. Total deposits, excluding brokered CDs and government deposits, increased by $367.5 million to $7.6 billion from the balance of $7.2 billion as of December 31, 2017. The higher balance reflects increases of $288.4 million and $114.2 million in Puerto Rico and the Virgin Islands, respectively, partially offset by a $35.2 million decrease in Florida. After the hurricanes and during the fourth quarter of 2017 and the first six months of 2018, the Corporation experienced rapid accumulation of deposits.  Total deposits as of June 30, 2018, excluding brokered CDs and government deposits, increased $367.5 million from December 31, 2017 and $743.6 million since September 30, 2017.  The most significant increase was in non-interest-bearing demand deposits, which grew 26%, or $483.5 million, between December 31, 2017 and June 30, 2018, and $730.9 million, or 46%, between September 30, 2017 and June 30, 2018.  Hurricane-related factors, such as the effect of disaster relief funds and settlement of insurance claims, continue to contribute to this growth.  Although management expects the balances accumulated by deposit customers in the hurricane-affected areas to reduce over time, it is difficult to predict when and to what degree, and there may be further growth as insurance claims are resolved and additional disaster-recovery funds are distributed.  See Note 15, “Deposits,” in the consolidated financial statements for further details.

See “Results of Operations – Net Interest Income” above for information about average balances of interest-bearing deposits, and the average interest rate paid on deposits for the quarters and six-month periods ended June 30, 2018 and 2017.

Securities sold under agreements to repurchase - The Corporation’s investment portfolio is funded in part with repurchase agreements. The Corporation’s outstanding securities sold under repurchase agreements amounted to $400 million as of June 30, 2018, compared to $500 million as of December 31, 2017.  The Corporation repaid at maturity a $100 million short-term repurchase agreement carried at a cost of 1.53%.  One of the Corporation’s strategies has been the use of structured repurchase agreements and long-term repurchase agreements to reduce liquidity risk and manage exposure to interest rate risk by lengthening the final maturities of its liabilities while keeping funding costs at reasonable levels. In addition to these repurchase agreements, the Corporation has been able to maintain access to credit by using cost-effective sources such as FHLB advances. See Note 16, “Securities Sold Under Agreements to Repurchase,” in the consolidated financial statements for further details about repurchase agreements outstanding by counterparty and maturities.

As of June 30, 2018, the Corporation had $200 million of reverse repurchase agreements with a counterparty under a master netting arrangement that provides for a right of setoff that meets the conditions of ASC Topic 210-20-45-11 for a net presentation. These repurchase agreements and reverse repurchase agreements are presented net on the consolidated statement of financial condition.

Under the Corporation’s repurchase agreements, as is the case with derivative contracts, the Corporation is required to pledge cash or qualifying securities to meet margin requirements. To the extent that the value of securities previously pledged as collateral declines due to changes in interest rates, a liquidity crisis or any other factor, the Corporation is required to deposit additional cash or securities to meet its margin requirements, thereby adversely affecting its liquidity. 

120

   Given the quality of the collateral pledged, the Corporation has not experienced margin calls from counterparties arising from credit-quality-related write-downs in valuations.

Advances from the FHLB – The Bank is a member of the FHLB system and obtains advances to fund its operations under a collateral agreement with the FHLB that requires the Bank to maintain qualifying mortgages and/or investments as collateral for advances taken. As of each of June 30, 2018 and December 31, 2017, the outstanding balance of FHLB advances was $715.0 million.  As of June 30, 2018, the Corporation had $491.6 million available for additional credit on FHLB lines of credit.

Trust-Preferred Securities – In 2004, FBP Statutory Trust I, a statutory trust that is wholly-owned by the Corporation and not consolidated in the Corporation’s financial statements, sold to institutional investors $100 million of its variable-rate trust-preferred securities. FBP Statutory Trust I used the proceeds of the issuance, together with the proceeds of the purchase by the Corporation of $3.1 million of FBP Statutory Trust I variable rate common securities, to purchase $103.1 million aggregate principal amount of the Corporation’s Junior Subordinated Deferrable Debentures.

Also in 2004, FBP Statutory Trust II, a statutory trust that is wholly-owned by the Corporation and not consolidated in the Corporation’s financial statements, sold to institutional investors $125 million of its variable-rate trust-preferred securities. FBP Statutory Trust II used the proceeds of the issuance, together with the proceeds of the purchase by the Corporation of $3.9 million of FBP Statutory Trust II variable rate common securities, to purchase $128.9 million aggregate principal amount of the Corporation’s Junior Subordinated Deferrable Debentures.

The trust-preferred debentures are presented in the Corporation’s consolidated statement of financial condition as Other Borrowings. The variable-rate trust-preferred securities are fully and unconditionally guaranteed by the Corporation. The $100 million Junior Subordinated Deferrable Debentures issued by the Corporation in April 2004 and the $125 million issued in September 2004 mature on June 17, 2034 and September 20, 2034, respectively; however, under certain circumstances, the maturity of the subordinated debentures may be shortened (such shortening would result in a mandatory redemption of the variable-rate trust-preferred securities). The Collins Amendment of the Dodd-Frank Act eliminated certain trust-preferred securities from Tier 1 Capital. Bank holding companies such as the Corporation were required to fully phase out these instruments from Tier I capital in January 1, 2016; however, they may remain in Tier 2 capital until the instruments are redeemed or mature.

As mentioned above, during the first quarter of 2018, the Corporation completed the repurchase of $23.8 million of trust-preferred securities of the FBP Statutory Trust I that were being auctioned in a public sale at which the Corporation was invited to participate.    The Corporation repurchased and cancelled the repurchased trust-preferred securities, resulting in a commensurate reduction in the related subordinated debenture.  As of June 30, 2018, the Corporation still had subordinated debentures outstanding in the aggregate amount of $184.2 million. 

   During the second quarter of 2016, the Corporation received approval from the Federal Reserve and paid $31.2 million for all the accrued but deferred interest payments, plus the interest for the 2016 second quarter on the Corporation’s subordinated debentures associated with its trust preferred securities. Subsequently, the Corporation received quarterly regulatory approvals and made scheduled quarterly interest payments.  As of June 30, 2018, the Corporation was current on all interest payments due related to its subordinated debentures.  On October 3, 2017, the New York FED terminated the Written Agreement entered into on June 3, 2010 between the Corporation and the Federal Reserve.  However, the Corporation has agreed with its regulators to continue to obtain approval before paying dividends, receiving dividends from the Bank, making payments on subordinated debt or trust-preferred securities, incurring or guaranteeing debt or purchasing or redeeming any corporate stock.  The Corporation has received approval to make the subordinated debenture quarterly payment for September 30, 2018.  The Corporation intends to request approval for future periods to continue regularly- scheduled quarterly payments. 

Other Sources of Funds and Liquidity - The Corporation’s principal uses of funds are for the origination of loans and the repayment of maturing deposits and borrowings.  In connection with its mortgage banking activities, the Corporation has invested in technology and personnel to enhance the Corporation’s secondary mortgage market capabilities. 

The enhanced capabilities improve the Corporation’s liquidity profile as they allow the Corporation to derive liquidity, if needed, from the sale of mortgage loans in the secondary market. The U.S. (including Puerto Rico) secondary mortgage market is still highly liquid, in large part because of the sale of mortgages through guarantee programs of the FHA, VA, HUD, FNMA and FHLMC. During the first six months of 2018, the Corporation sold approximately $119.8 million of FHA/VA mortgage loans to GNMA, which packages them into mortgage-backed securities. Any regulatory actions affecting GNMA, FNMA or FHLMC could adversely affect the secondary mortgage market.

Although currently not in use, other potential sources of short-term funding for the Corporation include commercial paper and federal funds purchased. Furthermore, in previous years, the Corporation entered into several financing transactions to diversify its funding sources, including the issuance of notes payable and, as noted above, junior subordinated debentures as part of its longer-term

121

liquidity and capital management activities.  No assurance can be given that these sources of liquidity will be available in the future and, if available, will be on comparable terms. 

Effect of Credit Ratings on Access to Liquidity

The Corporation’s liquidity is contingent upon its ability to obtain external sources of funding to finance its operations. The Corporation’s current credit ratings and any further downgrade in credit ratings can hinder the Corporation’s access to new forms of external funding and/or cause external funding to be more expensive, which could in turn adversely affect results of operations. Also, changes in credit ratings may further affect the fair value of unsecured derivatives that consider the Corporation’s own credit risk as part of the valuation.

The Corporation does not have any outstanding debt or derivative agreements that would be affected by credit downgrades. Furthermore, given the Corporation’s non-reliance on corporate debt or other instruments directly linked in terms of pricing or volume to credit ratings, the liquidity of the Corporation so far has not been affected in any material way by downgrades. The Corporation’s ability to access new non-deposit sources of funding, however, could be adversely affected by credit downgrades.

As of June 30, 2018, the Corporation’s credit as a long-term issuer was rated B+ by S&P and B- by Fitch. At the FirstBank subsidiary level, long-term issuer ratings as of June 30, 2018 were Caa1 by Moody’s, seven notches below their definition of investment grade, B+ by S&P, four notches below their definition of investment grade, and B- by Fitch, six notches below their definition of investment grade. The Corporation’s credit ratings are dependent on a number of factors, both quantitative and qualitative, and are subject to change at any time. The disclosure of credit ratings is not a recommendation to buy, sell or hold the Corporation’s securities. Each rating should be evaluated independently of any other rating.

Cash Flows

Cash and cash equivalents were $888.4 million as of June 30, 2018, an increase of $172.0 million when compared to the balance as of December 31, 2017. The following discussion highlights the major activities and transactions that affected the Corporation’s cash flows during the first six months of 2018 and 2017: 

Cash Flows from Operating Activities

First BanCorp.’s operating assets and liabilities vary significantly in the normal course of business due to the amount and timing of cash flows. Management believes cash flows from operations, available cash balances and the Corporation’s ability to generate cash through short- and long-term borrowings will be sufficient to fund the Corporation’s operating liquidity needs for the foreseeable future.

For the first six months of 2018 and 2017, net cash provided by operating activities was $158.3 million and $131.6 million, respectively.  Net cash generated from operating activities was higher than reported net income largely as a result of adjustments for items such as the provision for loan and lease losses, depreciation and amortization, and impairments, as well as the cash generated from sales of loans held for sale.

Cash Flows from Investing Activities

The Corporation’s investing activities primarily relate to originating loans to be held for investment and the purchasing, selling and repaying available-for-sale and held-to-maturity investment securities. For the six-month period ended June 30, 2018, net cash used in investing activities was $57.4 million, primarily reflecting the effect of purchases of U.S. agency debt securities, partially offset by U.S. agency MBS prepayments and proceeds from the aforementioned sales of adversely-classified commercial loans and seasoned residential mortgage loans. 

For the six-month period ended June 30, 2017, net cash provided by investing activities was $64.3 million, primarily reflecting U.S. agency MBS prepayments and proceed from the sales of the PREPA credit line and non-performing bonds of GDB and the Puerto Rico Public Buildings Authority.

 Cash Flows from Financing Activities

The Corporation’s financing activities primarily include the receipt of deposits and the issuance of brokered CDs, the issuance and payments on long-term debt, the issuance of equity instruments and activities related to its short-term funding. During the six-month period ended June 30, 2018, net cash provided by financing activities was $71.2 million, mainly reflecting the effect of the increases in non-brokered deposits, partially offset by repayments of maturing brokered CDs and a $100 million short-term repurchase agreement, as well as the repurchase of trust-preferred securities.      

122

In the first six months of 2017, net cash used in financing activities was $63.0 million, mainly due to repayments of maturing brokered CDs.

Capital 

As of June 30, 2018, the Corporation’s stockholders’ equity was $1.9 billion, an increase of $32.6 million from December 31, 2017.  The increase was mainly driven by the earnings generated in the first six months of 2018, partially offset by the decrease in the fair value of available-for-sale investment securities recorded as part of other comprehensive loss. On December 31, 2016, for the first time since July 2009, the Corporation paid dividends on its non-cumulative perpetual monthly income preferred stock, after receiving regulatory approval.  Since then, the Corporation has continued to pay monthly dividend payments on the non-cumulative perpetual monthly income preferred stock. As mentioned above, on October 3, 2017, the Federal Reserve terminated the Written Agreement entered into on June 3, 2010 between the Corporation and the Federal Reserve.  However, the Corporation has agreed with its regulators to continue to obtain approval before paying dividends, receiving dividends from the Bank, making payments on subordinated debt or trust preferred securities, incurring or guaranteeing debt or purchasing or redeeming any corporate stock. The Corporation received regulatory approvals to pay the monthly dividends on the Corporation’s Series A through E Preferred Stock through September 2018.  The Corporation intends to request approval in future periods to continue to pay monthly dividend payments on the non-cumulative perpetual monthly income preferred stock.

Set forth below are First BanCorp.ʼs and FirstBankʼs regulatory capital ratios as of June 30, 2018 and December 31, 2017:
			Banking Subsidiary
	First BanCorp.		FirstBank		To be well capitalized - General thresholds
		Fully		Fully
As of June 30, 2018	Actual	Phased-in (1)	Actual	Phased-in (1)
Total capital ratio (Total capital to risk-weighted assets)	23.47%	22.92%	22.98%	22.44%	10.00%
Common Equity Tier 1 capital ratio
(Common equity Tier 1 capital to risk-weighted assets)	19.73%	19.24%	18.17%	17.72%	6.50%
Tier 1 capital ratio (Tier 1 capital to risk-weighted assets)	20.14%	19.65%	21.72%	21.18%	8.00%
Leverage ratio	14.35%	14.35%	15.48%	15.48%	5.00%
			Banking Subsidiary
	First BanCorp.		FirstBank		To be well capitalized - General thresholds
		Fully		Fully
As of December 31, 2017	Actual	Phased-in (1)	Actual	Phased-in (1)
Total capital ratio (Total capital to risk-weighted assets)	22.53%	21.99%	22.06%	21.53%	10.00%
Common Equity Tier 1 capital ratio
(Common equity Tier 1 capital to risk-weighted assets)	18.96%	18.09%	17.70%	16.86%	6.50%
Tier 1 capital ratio (Tier 1 capital to risk-weighted assets)	18.97%	18.49%	20.79%	20.26%	8.00%
Leverage ratio	14.03%	14.01%	15.39%	15.37%	5.00%
(1) Certain adjustments required under Basel III rules will be phased-in through the end of 2018 although certain elements of the Basel III rules have recently been deferred by the federal banking agencies. The ratios shown in this column were calculated assuming a fully phased-in adjustments as if they were effective as of June 30, 2018 and December 31, 2017.

123

Although the Corporation and FirstBank became subject to the Basel III rules beginning on January 1, 2015, certain requirements of the Basel III rules are being phased-in over several years and, in general, were intended to be fully effective as of January 1, 2019. The federal banking agencies have recently deferred certain elements of the Basel III rules.  The Corporation and FirstBank compute risk-weighted assets using the Standardized Approach required by the Basel III rules.

The Basel III rules require the Corporation to maintain an additional capital conservation buffer of 2.5% to avoid limitations on both (i) capital distributions (e.g., repurchases of capital instruments, dividends and interest payments on capital instruments) and (ii) discretionary bonus payments to executive officers and heads of major business lines. The phase-in of the capital conservation buffer began on January 1, 2016 with a first year requirement of 0.625% of additional Common Equity Tier 1 capital (“CET1”), which is being progressively increased by that same percentage amount on each subsequent January 1 until it reaches the fully phased-in 2.5% CET1 requirement on January 1, 2019.

Under the fully phased-in Basel III rules, in order to be considered adequately capitalized, the Corporation will be required to maintain: (i) a minimum CET1 capital to risk-weighted assets ratio of at least 4.5%, plus the 2.5% “capital conservation buffer,” resulting in a required minimum CET1 ratio of at least 7%, (ii) a minimum ratio of total Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer, resulting in a required minimum Tier 1 capital ratio of 8.5%, (iii) a minimum ratio of total Tier 1 plus Tier 2 capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer, resulting in a required minimum total capital ratio of 10.5%, and (iv) a required minimum leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average on-balance sheet (non-risk adjusted) assets.

In addition, as required under Basel III rules, the Corporation’s trust-preferred securities (“TRUPs”) were fully phased out from Tier 1 capital on January 1, 2016.  However, the Corporation’s TRUPs may continue to be included in Tier 2 capital until the instruments are redeemed or mature.

On November 21, 2017, the Federal Reserve Board, the FDIC, and the Office of the Comptroller of the Currency finalized an extension of the phase-in of certain Basel III capital rules for banks not using the Basel advanced approaches capital rule.  The extension, which was effective on January 1, 2018, pauses the full transition of the Basel III treatment of mortgage servicing assets, certain deferred tax assets, and investments in the capital of unconsolidated financial institutions and minority interests, pending the banking agencies’ broader efforts, announced in September 2017, to simplify the regulatory capital rules that apply to banking organizations that are not subject to the advanced approaches capital rules.  Because the advanced approaches capital rules apply to banking organizations with more than $250 billion in assets or foreign bank subsidiaries with more than $10 billion in assets, the extension relief applies broadly to community, midsize, and regional banks, including the Corporation and FirstBank.

   The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures generally used by the financial community to evaluate capital adequacy. Tangible common equity is total equity less preferred equity, goodwill, core deposit intangibles, purchased credit card relationship assets and insurance customer relationship intangible assets. Tangible assets are total assets less goodwill, core deposit intangibles, purchased credit card relationship and insurance customer relationship intangible assets.  See “Basis of Presentation” below for additional information.

124

The following table is a reconciliation of the Corporation’s tangible common equity and tangible assets as of June 30, 2018 and December 31, 2017, respectively:
		June 30,		December 31,
	(In thousands, except ratios and per share information)	2018		2017
	Total equity - GAAP	$	1,901,679	$	1,869,097
	Preferred equity		(36,104)		(36,104)
	Goodwill		(28,098)		(28,098)
	Purchased credit card relationship intangible		(6,851)		(8,000)
	Core deposit intangible		(4,835)		(5,478)
	Insurance customer relationship intangible		(699)		(775)
	Tangible common equity	$	1,825,092	$	1,790,642
	Total assets - GAAP	$	12,384,862	$	12,261,268
	Goodwill		(28,098)		(28,098)
	Purchased credit card relationship intangible		(6,851)		(8,000)
	Core deposit intangible		(4,835)		(5,478)
	Insurance customer relationship intangible		(699)		(775)
	Tangible assets	$	12,344,379	$	12,218,917
	Common shares outstanding		217,185		216,278
	Tangible common equity ratio		14.78%		14.65%
	Tangible book value per common share	$	8.40	$	8.28
	(1) In May 2017, the U.S. Treasury sold its remaining shares of common stock in First BanCorp. As a result, senior officers forfeited approximately 2.4 million of restricted shares that they held.

On May 17, 2018, the U.S. Department of the Treasury fully exercised its warrant to purchase 1,285,899 shares of the Corporation’s common stock on a cashless basis, resulting in the issuance of 730,571 shares of common stock.

125

  The Banking Law of the Commonwealth of Puerto Rico requires that a minimum of 10% of FirstBank’s net income for the year be transferred to legal surplus until such surplus equals the total of paid-in-capital on common and preferred stock. Amounts transferred to the legal surplus account from the retained earnings account are not available for distribution to the Corporation, including for payment as dividends to the stockholders, without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The Puerto Rico Banking Law provides that, when the expenditures of a Puerto Rico commercial bank are greater than receipts, the excess of the expenditures over receipts must be charged against the undistributed profits of the bank, and the balance, if any, must be charged against the legal surplus reserve, as a reduction thereof. If there is no legal surplus reserve sufficient to cover such balance, in whole or in part, the outstanding amount must be charged against the capital account and the Bank cannot pay dividends until it can replenish the legal surplus reserve to an amount equal to at least 20% of the original capital contributed. During the fourth quarter of 2017, $7.3 million was transferred to the legal surplus reserve. FirstBank’s legal surplus reserve, included as part of retained earnings in the Corporation’s consolidated statement of financial condition, amounted to $59.7 million as of June 30, 2018.  There were no transfers to the legal surplus reserve during the first six months of 2018.

Off -Balance Sheet Arrangements

In the ordinary course of business, the Corporation engages in financial transactions that are not recorded on the balance sheet, or may be recorded on the balance sheet in amounts that are different from the full contract or notional amount of the transaction. These transactions are designed to (1) meet the financial needs of customers, (2) manage the Corporation’s credit, market and liquidity risks, (3) diversify the Corporation’s funding sources, and (4) optimize capital.

   As a provider of financial services, the Corporation routinely enters into commitments with off-balance sheet risk to meet the financial needs of its customers. These financial instruments may include loan commitments and standby letters of credit. These commitments are subject to the same credit policies and approval process used for on-balance sheet instruments. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position. As of June 30, 2018, commitments to extend credit amounted to approximately $1.2 billion, of which $663.7 million related to credit card loans.  Commercial and financial standby letters of credit amounted to approximately $58.7 million.  Commitments to extend credit are agreements to lend to customers as long as the conditions established in the contract are met.

126

Contractual Obligations, Commitments and Contingencies
The following table presents information about the maturities of the Corporation’s contractual obligations and commitments, which consist of CDs, long-term contractual debt obligations, commitments to sell mortgage loans and commitments to extend credit:
	Contractual Obligations and Commitments
	As of June 30, 2018
	Total		Less than 1 year		1-3 years		3-5 years		After 5 years
(In thousands)
Contractual obligations:
Certificates of deposit	$	3,212,048	$	1,824,249	$	1,028,191	$	353,893	$	5,715
Securities sold under agreements to repurchase (1)		200,000		-		-		200,000		-
Advances from FHLB		715,000		95,000		420,000		200,000		-
Other borrowings		184,150		-		-		-		184,150
Total contractual obligations	$	4,311,198	$	1,919,249	$	1,448,191	$	753,893	$	189,865
Commitments to sell mortgage loans	$	6,304
Standby letters of credit	$	2,728
Commitments to extend credit:
Lines of credit	$	1,130,187
Letters of credit		55,997
Construction undisbursed funds		63,551
Total commercial commitments	$	1,249,735
(1) Reported net of reverse repurchase agreement by counterparty, when applicable, pursuant to ASC Topic 210-20-45-11.

127

The Corporation has obligations and commitments to make future payments under contracts, such as debt and lease agreements, and under other commitments to sell mortgage loans at fair value and to extend credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Other contractual obligations result mainly from contracts for the rental and maintenance of equipment. Since certain commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. For most of the commercial lines of credit, the Corporation has the option to reevaluate the agreement prior to additional disbursements. There have been no significant or unexpected draws on existing commitments.  In the case of credit cards and personal lines of credit, the Corporation can cancel the unused credit facility at any time and without cause.

Interest Rate Risk Management

First BanCorp. manages its asset/liability position in order to limit the effects of changes in interest rates on net interest income and to maintain stability of profitability under varying interest rate scenarios. The MIALCO oversees interest rate risk, and the MIALCO’s meetings focus on, among other things, current and expected conditions in world financial markets, competition and prevailing rates in the local deposit market, liquidity, the pipeline of loan originations, securities market values, recent or proposed changes to the investment portfolio, alternative funding sources and related costs, hedging and the possible purchase of derivatives such as swaps and caps, and any tax or regulatory issues that may be pertinent to these areas. The MIALCO approves funding decisions in light of the Corporation’s overall strategies and objectives.

On a quarterly basis, the Corporation performs a consolidated net interest income simulation analysis to estimate the potential change in future earnings from projected changes in interest rates. These simulations are carried out over a one-to-five-year time horizon, assuming upward and downward yield curve shifts. The rate scenarios considered in these simulations reflect gradual upward and downward interest rate movements of 200 basis points during a twelve-month period. Simulations are carried out in two ways:

(1) Using a static balance sheet, as the Corporation had on the simulation date, and

(2) Using a dynamic balance sheet based on recent patterns and current strategies.

The balance sheet is divided into groups of assets and liabilities by maturity or re-pricing structure and their corresponding interest yields and costs. As interest rates rise or fall, these simulations incorporate expected future lending rates, current and expected future funding sources and costs, the possible exercise of options, changes in prepayment rates, deposit decay and other factors, which may be important in projecting net interest income.

The Corporation uses a simulation model to project future movements in the Corporation’s balance sheet and income statement. The starting point of the projections corresponds to the actual values on the balance sheet on the date of the simulations.

These simulations are highly complex, and are based on many assumptions that are intended to reflect the general behavior of the balance sheet components over the period in question. It is unlikely that actual events will match these assumptions in most cases. For this reason, the results of these forward-looking computations are only approximations of the true sensitivity of net interest income to changes in market interest rates. Several benchmark and market rate curves were used in the modeling process, primarily the LIBOR/SWAP curve, Prime, Treasury, FHLB rates, brokered CD rates, repurchase agreements rates and the mortgage commitment rate of 30 years. 

The 12-month net interest income is forecasted assuming the June 30, 2018 interest rate curves remain constant. Then, net interest income is estimated under rising and falling rate scenarios.  For the rising rate scenario, a gradual (ramp) parallel upward shift of the yield curve is assumed during the first 12 months (the “+200 ramp” scenario). Conversely, for the falling rate scenario, a gradual (ramp) parallel downward shift of the yield curve is assumed during the first 12 months (the “-200 ramp” scenario). However, given the current low levels of interest rates, a full downward shift of 200 basis points would represent an unrealistic scenario. Therefore, under the falling rate scenario, rates move downward up to 200 basis points, but without reaching zero. The resulting scenario shows interest rates close to zero in most cases, reflecting a flattening yield curve instead of a parallel downward scenario.

The Libor/Swap curve for June 2018, as compared to December 2017, reflected a 63 basis points increase in the short-term horizon, between 1 to 12 months, while market rates increased by 68 basis points in the medium term, that is, between 2 to 5 years. In the long-term, that is, over a 5-year time horizon, market rates increased by 53 basis points, causing a more flattened yield curve. The U.S. Treasury curve in the short-term increased by 55 basis points and in the medium-term horizon increased by 59 basis points as compared to the December 2017 end of month levels. The long-term horizon increased by 34 basis points as compared to December 2017 end of month levels.

128

The following table presents the results of the simulations as of June 30, 2018 and December 31, 2017.  Consistent with prior years, these exclude non-cash changes in the fair value of derivatives:
	June 30, 2018								December 31, 2017
	Net Interest Income Risk								Net Interest Income Risk
	(Projected for the next 12 months)								(Projected for the next 12 months)
	Static Simulation				Growing Balance Sheet				Static Simulation				Growing Balance Sheet
(Dollars in millions)	Change		% Change		Change		% Change		Change		% Change		Change		% Change
+ 200 bps ramp	$	18.0	3.40	%	$	17.3	3.15	%	$	18.0	3.55	%	$	17.5	3.42	%
- 200 bps ramp	$	(16.2)	(3.05)	%	$	(18.0)	(3.27)	%	$	(14.6)	(2.89)	%	$	(17.7)	(3.47)	%

The Corporation continues to manage its balance sheet structure to control the overall interest rate risk. As of June 30, 2018, the simulations showed that the Corporation maintained an asset-sensitive position.  The Corporation has continued repositioning the balance sheet and improving the funding mix, driven by an increase in the average balance of non-interest-bearing deposits and reductions in brokered CDs, short-term repurchase agreements and other borrowings.  The above-mentioned growth in non-interest-bearing deposits, along with proceeds from US agency mortgage-backed securities and loan repayments, has helped the Corporation continue to maintain high liquidity levels.

Taking into consideration the above-mentioned facts for modeling purposes, the net interest income for the next 12 months under a non-static balance sheet scenario is estimated to increase by $17.3 million in the rising rate scenario when compared against the Corporation’s flat or unchanged interest rate forecast scenario. Under the falling rate, non-static scenario, the net interest income is estimated to decrease by $18.0 million.

Derivatives

First BanCorp. uses derivative instruments and other strategies to manage its exposure to interest rate risk caused by changes in interest rates that are beyond management’s control.

The following summarizes major strategies, including derivative activities, that the Corporation uses in managing interest rate risk:

Interest rate cap agreements - Interest rate cap agreements provide the right to receive cash if a reference interest rate rises above a contractual rate. The value increases as the reference interest rate rises. The Corporation enters into interest rate cap agreements for protection from rising interest rates. 

Forward Contracts - Forward contracts are sales of TBAs that will settle over the standard delivery date and do not qualify as “regular-way” security trades. Regular-way security trades are contracts that have no net settlement provision and no market mechanism to facilitate net settlement and provide for delivery of a security within the timeframe generally established by regulations or conventions in the market-place or exchange in which the transaction is being executed.The forward sales are considered derivative instruments that need to be marked-to-market. These securities are used to hedge the FHA/VA residential mortgage loan securitizations of the mortgage-banking operations. Unrealized gains (losses) are recognized as part of mortgage banking activities in the consolidated statement of income.

For detailed information regarding the volume of derivative activities (e.g., notional amounts), location and fair values of derivative instruments in the consolidated statements of financial condition and the amount of gains and losses reported in the consolidated statements of income, see Note 11, “Derivative Instruments and Hedging Activities,” in the consolidated financial statements.

129

The following tables summarize the fair value changes in the Corporation’s derivatives, as well as the sources of the fair values:
	Asset Derivatives		Liability Derivatives
	Six-Month Period Ended		Six-Month Period Ended
(In thousands)	June 30, 2018		June 30, 2018
Fair value of contracts outstanding as of the beginning of the period	$	312	$	(324)
Changes in fair value during the period		494		(597)
Fair value of contracts outstanding as of  June 30, 2018	$	806	$	(921)

Sources of Fair Value
	Maturity by Period
	Maturity Less Than One Year			Maturity 1-3 Years		Maturity 3-5 Years		Maturity      in Excess      of 5 Years		Total Fair Value
(In thousands)
As of June 30, 2018
Pricing from observable market inputs - Asset Derivatives		$	7	$	799	$	-	$	-	$	806
Pricing from observable market inputs - Liability Derivatives			(122)		(799)		-		-		(921)
		$	(115)	$	-	$	-	$	-	$	(115)

130

Derivative instruments, such as interest rate caps, are subject to market risk.  As is the case with investment securities, the market value of derivative instruments is largely a function of the financial market’s expectations regarding the future direction of interest rates.  Accordingly, current market values are not necessarily indicative of the future impact of derivative instruments on earnings.  This will depend, for the most part, on the level of interest rates, as well as the expectations for rates in the future.

As of June 30, 2018 and December 31, 2017, all of the derivative instruments held by the Corporation were considered undesignated economic hedges.

The use of derivatives involves market and credit risk. The market risk of derivatives stems principally from the potential for changes in the value of derivative contracts based on changes in interest rates. The credit risk of derivatives arises from the potential for default of the counterparty.  To manage this credit risk, the Corporation deals with counterparties of good credit standing, enters into master netting agreements whenever possible and, when appropriate, obtains collateral.Master netting agreements incorporate rights of set-off that provide for the net settlement of contracts with the same counterparty in the event of default.

Credit Risk Management

First BanCorp. is subject to credit risk mainly with respect to its portfolio of loans receivable and off-balance-sheet instruments, mainly derivatives and loan commitments. Loans receivable represents loans that First BanCorp. holds for investment and, therefore, First BanCorp. is at risk for the term of the loan. Loan commitments represent commitments to extend credit, subject to specific conditions, for specific amounts and maturities. These commitments may expose the Corporation to credit risk and are subject to the same review and approval process as for loans made by the Bank. See “Contractual Obligations, Commitments and Contingencies” above for further details. The credit risk of derivatives arises from the potential that the counterparty will default on its contractual obligations. To manage this credit risk, the Corporation deals with counterparties of good credit standing, enters into master netting agreements whenever possible and, when appropriate, obtains collateral. For further details and information on the Corporation’s derivative credit risk exposure, see “Interest Rate Risk Management,” above. The Corporation manages its credit risk through its credit policy, underwriting, independent loan review and quality control procedures, statistical analysis, comprehensive financial analysis, and established management committees. The Corporation also employs proactive collection and loss mitigation efforts. Furthermore, personnel performing structured loan workout functions are responsible for mitigating defaults and minimizing losses upon default within each region and for each business segment. In the case of the commercial and industrial (“C&I”), commercial mortgage and construction loan portfolios, the Special Asset Group (“SAG”) focuses on strategies for the accelerated reduction of non-performing assets through note sales, short sales, loss mitigation programs, and sales of OREO.  In addition to the management of the resolution process for problem loans, the SAG oversees collection efforts for all loans to prevent migration to the non-performing and/or adversely classified status.  The SAG utilizes relationship officers, collection specialists and attorneys. In the case of residential construction projects, the workout function monitors project specifics, such as project management and marketing, as deemed necessary.

The Corporation may also have risk of default in the securities portfolio. The securities held by the Corporation are principally fixed-rate U.S. agency mortgage-backed securities and U.S. Treasury and agency securities. Thus, a substantial portion of these instruments is backed by mortgages, a guarantee of a U.S. government-sponsored entity or the full faith and credit of the U.S. government.

    Management, consisting of the Corporation’s Commercial Credit Risk Officer, Retail Credit Risk Officer, Chief Lending Officer and other senior executives, has the primary responsibility for setting strategies to achieve the Corporation’s credit risk goals and objectives. These goals and objectives are documented in the Corporation’s Credit Policy.

Allowance for Loan and Lease Losses and Non-performing Assets

Allowance for Loan and Lease Losses

The allowance for loan and lease losses represents the estimate of the level of reserves appropriate to absorb inherent incurred credit losses. The amount of the allowance is determined by empirical analysis and judgments regarding the quality of each individual loan portfolio. All known relevant internal and external factors that affect loan collectability are considered, including analyses of historical charge-off experience, migration patterns, changes in economic conditions, and changes in loan collateral values. For example, factors affecting the economies of Puerto Rico, Florida (USA), the United States Virgin Islands and the British Virgin Islands may contribute to delinquencies and defaults above the Corporation’s historical loan and lease losses. Such factors are subject to regular review and may change to reflect updated performance trends and expectations, particularly in times of severe stress. The process includes judgments and quantitative elements that may be subject to significant change.

The allowance for loan and lease losses provides for probable incurred losses that have been identified with specific valuation allowances for individually evaluated impaired loans and probable incurred losses believed to be inherent in the loan portfolio that have not been specifically identified. An internal risk rating is assigned to each business loan at the time of approval and is subject to subsequent periodic reviews by the Corporation’s senior management. The allowance for loan and lease losses is reviewed on a quarterly basis as part of the Corporation’s continued evaluation of its asset quality.

131

Hurricanes Maria and Irma caused widespread property damage, flooding, power outages, and water and communication services interruptions, and severely disrupted normal economic activity in the affected areas.  Damages associated with these hurricane-related events have had and will continue to have significant short-term economic repercussions, both positive and negative, for the Corporation’s commercial and individual loan customers in the most severely affected parts of Puerto Rico and the Virgin Islands.    The methodologies used by the Corporation to determine the hurricane-related qualitative estimate and for the review of individual large commercial credits are discussed in detail in Note 1, “Nature of Business and Summary of Significant Accounting Policies,” in the audited consolidated financial statements for the year ended December 31, 2017, which are included in the 2017 Annual Report on Form 10-K.  With the ongoing collection of information on individual commercial customers and statistics on the consumer and residential loan portfolios, the loss estimate will be revised as needed.

The ratio of the allowance for loan and lease losses to total loans held for investment remained relatively flat at 2.57% as of June 30, 2018, compared to 2.62% as of December 31, 2017. The change for each portfolio follows:

·The allowance to total loans ratio for the residential mortgage portfolio decreased from 1.79% as of December 31, 2017 to 1.70% as of June 30, 2018, primarily due to lower delinquency levels reflecting the effect of clients that resumed their payments after the expiration of the three-month payment deferral program.

·The allowance to total loans ratio for the commercial mortgage portfolio increased from 3.00% as of December 31, 2017 to 3.17% as of June 30, 2018, driven by the effect of the downgrade in the credit risk classification of three large loans totaling  $110.3  million. 

·The allowance to total loans for the C&I portfolio decreased from 2.35% as of December 31, 2017 to 2.19% as of June 30, 2018, reflecting the effect of a $4.0 million net loan loss reserve release related to revised estimates of the reserve associated with the effects of Hurricanes Maria and Irma, primarily due to updated assessments about the performance and repayment prospects of certain individually assessed commercial loans and charge-offs taken against previously-established reserves. 

·The allowance to total loans for the construction loan portfolio increased from 4.06% as of December 31, 2017 to 4.66% as of June 30, 2018, primarily due to the effect of the aforementioned transfer of loans to held for sale, including the transfer to held for sale of a $30.0 million construction loan in the Virgin Islands.

·The allowance to total loans for the consumer loan portfolio decreased from 4.06% as of December 31, 2017 to 3.96% as of June 30, 2018, reflecting the effect of a $2.0 million release of the hurricane-related qualitative reserve resulting from payments received during 2018 that reduced the balance of the consumer loan portfolio outstanding on the dates of the hurricanes.

The ratio of the total allowance to non-performing loans held for investment was 52.97% as of June 30, 2018 compared to 47.36% as of December 31, 2017, reflecting the effect of the aforementioned transfer to held for sale of non-performing commercial and construction loans totaling $57.2 million.   

Substantially all of the Corporation’s loan portfolio is located within the boundaries of the U.S. economy. Whether the collateral is located in Puerto Rico, the U.S. and British Virgin Islands or the U.S. mainland (mainly in the state of Florida), the performance of the Corporation’s loan portfolio and the value of the collateral supporting the transactions are dependent upon the performance of and conditions within each specific area’s real estate market. The real estate market in Puerto Rico experienced readjustments in value driven by the loss of income due to higher unemployment, reduced demand and general adverse economic conditions that were exacerbated by the effect of Hurricanes Maria and Irma. The Corporation sets adequate loan-to-value ratios following its regulatory and credit policy standards.

As shown in the following table, the allowance for loan and lease losses amounted to $222.0 million as of June 30, 2018, or 2.57% of total loans, compared with $231.8 million, or 2.62% of total loans, as of December 31, 2017. See “Results of Operations - Provision for Loan and Lease Losses” above for additional information.

132

		Quarter Ended						Six-Month Period Ended
		June 30,						June 30,
(Dollars in thousands)		2018			2017			2018			2017
Allowance for loan and lease losses, beginning of period		$	225,856		$	203,231		$	231,843		$	205,603
Provision (release) for loan and lease losses:
Residential Mortgage (1)			3,599			10,888			4,046			20,159
Commercial Mortgage (2)			2,184			525			10,845			13,064
Commercial and Industrial (3)			75			(2,134)			731			(6,940)
Construction (4)			507			312			5,271			1,254
Consumer and Finance Leases (5)			13,171			8,505			19,187			16,001
Total provision for loan and lease losses (6)			19,536			18,096			40,080			43,538
Charge-offs
Residential Mortgage			(5,544)			(6,967)			(8,915)			(15,192)
Commercial Mortgage (7)			(3,897)			(30,495)			(10,707)			(31,857)
Commercial and Industrial (8)			(5,110)			(6,378)			(7,040)			(18,430)
Construction (9)			(818)			(595)			(5,995)			(658)
Consumer and Finance Leases			(12,327)			(11,053)			(24,399)			(22,245)
Total charge offs (10)			(27,696)			(55,488)			(57,056)			(88,382)
Recoveries:
Residential Mortgage			689			891			1,024			1,640
Commercial Mortgage			38			78			87			108
Commercial and Industrial			1,376			4,624			1,438			5,499
Construction			138			133			151			578
Consumer and Finance Leases			2,098			1,920			4,468			4,901
Total recoveries			4,339			7,646			7,168			12,726
Net Charge-Offs			(23,357)			(47,842)			(49,888)			(75,656)
Allowance for loan and lease losses, end of period		$	222,035		$	173,485		$	222,035		$	173,485
Allowance for loan and lease losses to period end total loans held for
investment			2.57	%		1.96	%		2.57	%		1.96	%
Allowance for loan and lease losses, excluding the $42.2 million hurricane-related
qualitative allowance, to period end total loans held for  investment  (11)			2.08	%		1.96	%		2.08	%		1.96	%
Net charge-offs (annualized) to average loans outstanding during the
period			1.07	%		2.16	%		1.14	%		1.71	%
Net charge-offs (annualized), excluding charge-offs of $9.7 million related to loans
transferred to held for sale in the first six months of 2018 and
	the charge-off of $10.7 million related to the sale of the PREPA credit line
in the first six months of 2017, to average loans outstanding during the period (11)			1.07	%		2.16	%		0.92	%		1.47	%
Provision for loan and lease losses to net charge-offs during the
period			0.84x			0.38x			0.80x			0.58x
	Provision for loan and lease losses to net charge-offs during period,
	excluding the effect of the hurricane-related reserve releases and loans
	transferred to held for sale in the first six months of 2018,
and the effect of the sale of the PREPA credit line in the
first six-months of 2017 (11)			0.92x			0.38x			1.07x			0.66x
___________
(1)	Net of a $0.2 million and $0.3 million net loan loss reserve release for the second quarter and six-month period ended June 30, 2018, respectively, associated with the effects of Hurricanes Maria and Irma.
(2)	Net of a $1.7 million and $1.9 million net loan loss reserve release for the second quarter and six-month period ended June 30, 2018, respectively, associated with the revised estimates of the effects of Hurricanes Maria and Irma. For the six-month period ended June 30 2018, also includes a provision of $1.1 million associated with the transfer of $27.2 million in non-performing commercial mortgage loans to held for sale.
(3)	Net of a $0.2 million and $4.0 million net loan loss reserve release for the second quarter and six-month period ended June 30, 2018, respectively, associated with revised estimates of the effects of Hurricanes Maria and Irma. For the six-month period ended June 30 2017, includes a provision of $0.6 million associated with the sale of the PREPA credit line.
(4)	Net of a $0.1 million net loan loss reserve release for the six-month period ended June 30, 2018 associated with the revised estimates of the effects of Hurricanes Maria and Irma. For the six-month period ended June 30, 2018, also includes a provision of $4.5 million associated with a $30.0 million non-performing construction loan transferred to held for sale.
(5)	Net of a $2.0 million net loan loss reserve release for the six-month period June 30, 2018 associated with revised estimates of the effects of Hurricanes Maria and Irma.
(6)	Net of a $2.1 million and $8.5 million net loan loss reserve release for the second quarter and six-month period ended June 30, 2018, respectively, associated with revised estimates of the effects of Hurricanes Maria and Irma. For the six-month period ended June 30, 2018, also includes a provision of $5.6 million associated with  the transfer of $57.2 million in non-performing loans to held for sale in the first quarter of 2018.  For the six-month period ended June 30, 2017, includes a provision of $0.6 million associated with the sale of the PREPA credit line.
(7)	Includes charge-offs totaling $4.6 million associated with the transfer of $27.2 million in non-performing commercial mortgage loans to held for sale in the six-month period ended June 30, 2018.
(8)	Includes a charge-off of $10.7 million associated with the sale of the PREPA credit line in the six-month period ended June 30, 2017.
(9)	Includes a charge-off of $5.1 million associated with the transfer of a $30.0 million non-performing construction loan to held for sale in the six-month period ended June 30, 2018.
(10)	Includes charge-offs totaling $9.7 million associated with the transfer of $57.2 million in non-performing loans to held for sale in the six-month period ended June 30, 2018. Includes a charge-off of $10.7 million associated with the sale of the PREPA credit line in the six-month period ended June 30, 2017.
(11)	Non-GAAP financial measures, see "Basis of Presentation" below for a reconciliation of these measures.

133

The following table sets forth information concerning the allocation of the allowance for loan and lease losses by loan category and the percentage of loan balances in each category to the total of such loans as of the dates indicated:
	As of				As of
	June 30, 2018				December 31, 2017
(In thousands)	Amount		Percent of loans in each category to total loans		Amount		Percent of loans in each category to total loans
Residential mortgage loans	$	55,130		37%	$	58,975		37	%
Commercial mortgage loans		48,718		18%		48,493		18	%
Construction loans		3,949		1%		4,522		1	%
Commercial and Industrial loans		44,000		23%		48,871		24	%
Consumer loans and finance leases		70,238		21%		70,982		20	%
	$	222,035		100%	$	231,843		100	%
See "Results of Operations - Provision for Loan and Lease Losses" above for information about enhancements to the methodology behind the calculation of the allowance for loan and lease losses implemented in the second quarter of 2018

The following table sets forth information concerning the composition of the Corporation's allowance for loan and lease losses as of June 30, 2018 and December 31, 2017 by loan category and by whether the allowance and related provision were calculated individually or through a general valuation allowance.
As of June 30, 2018	Residential Mortgage Loans			Commercial Mortgage Loans									Consumer and Finance Leases
										Construction Loans
(Dollars in thousands)							C&I Loans										Total
Impaired loans without specific reserves:
Principal balance of loans, net of charge-offs	$	121,396		$	58,992		$	43,566		$	-		$	2,780			$	226,734
Impaired loans with specific reserves:
Principal balance of loans, net of charge-offs		287,689			116,583			67,805			11,261			30,062				513,400
Allowance for loan and lease losses		19,804			12,204			10,592			1,061			5,853				49,514
Allowance for loan and lease losses to principal
balance		6.88	%		10.47	%		15.62	%		9.42	%		19.47	%			9.64	%
PCI loans:
Carrying value of PCI loans		148,025			4,217			-			-			-				152,242
Allowance for PCI loans		10,954			400			-			-			-				11,354
Allowance for PCI loans to carrying value		7.40	%		9.49	%		-			-			-				7.46	%
Loans with general allowance:
Principal balance of loans		2,680,891			1,353,516			1,897,678			73,422			1,742,408				7,747,915
Allowance for loan and lease losses		24,372			36,114			33,408			2,888			64,385				161,167
Allowance for loan and lease losses to principal
balance		0.91	%		2.67	%		1.76	%		3.93	%		3.70		%		2.08	%
Total loans held for investment:
Principal balance of loans	$	3,238,001		$	1,533,308		$	2,009,049		$	84,683		$	1,775,250			$	8,640,291
Allowance for loan and lease losses		55,130			48,718			44,000			3,949			70,238				222,035
Allowance for loan and lease losses to principal
balance (1)		1.70	%		3.18	%		2.19	%		4.66	%		3.96		%		2.57	%

	Residential Mortgage Loans			Commercial Mortgage Loans									Consumer and Finance Leases
										Construction Loans
(Dollars in thousands)							C&I Loans									Total
As of December 31, 2017
Impaired loans without specific reserves:
Principal balance of loans, net of charge-offs	$	116,818		$	65,100		$	28,292		$	48		$	2,788		$	213,046
Impaired loans with specific reserves:
Principal balance of loans, net of charge-offs		316,616			87,814			90,008			47,218			35,606			577,262
Allowance for loan and lease losses		22,086			9,783			12,359			2,017			5,165			51,410
Allowance for loan and lease losses to principal
balance		6.98	%		11.14	%		13.73	%		4.27	%		14.51	%		8.91	%
PCI loans:
Carrying value of PCI loans		153,991			4,183			-			-			-			158,174
Allowance for PCI loans		10,873			378			-			-			-			11,251
Allowance for PCI loans to carrying value		7.06%			9.04%			-			-			-			7.11	%
Loans with general allowance:
Principal balance of loans		2,703,532			1,457,875			1,964,953			64,131			1,711,503			7,901,994
Allowance for loan and lease losses		26,016			38,332			36,512			2,505			65,817			169,182
Allowance for loan and lease losses to principal
balance		0.96	%		2.63	%		1.86	%		3.91	%		3.85	%		2.14	%
Total loans held for investment:
Principal balance of loans	$	3,290,957		$	1,614,972		$	2,083,253		$	111,397		$	1,749,897		$	8,850,476
Allowance for loan and lease losses		58,975			48,493			48,871			4,522			70,982			231,843
Allowance for loan and lease losses to principal
balance (1)		1.79	%		3.00	%		2.35	%		4.06	%		4.06	%		2.62	%
__________
(1) Loans used in the denominator include PCI loans of $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, respectively. However, the Corporation separately tracks and reports PCI loans and excludes these loans from the amounts of non-performing loans, impaired loans, TDRs and non-performing assets.

134

The following tables show the activity for impaired loans held for investment and the related specific reserve during the quarters and six-month periods ended June 30, 2018 and 2017:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
			2018		2017		2018		2017
		(In thousands)				(In thousands)
	Impaired Loans:
	Balance as of beginning of period	$	746,280	$	807,198	$	790,308	$	887,905
	Loans determined impaired during the period		34,273		18,976		95,681		38,604
	Charge-offs (1)(2)		(13,207)		(43,083)		(30,420)		(60,487)
	Loans sold, net of charge-offs		-		-		(4,121)		(53,245)
	Increases to existing impaired loans		77		698		7,075		1,239
	Foreclosures		(7,777)		(21,233)		(19,452)		(30,690)
	Loans no longer considered impaired		(2,433)		(1,890)		(3,940)		(2,782)
	Loans transferred to held for sale		-		-		(57,213)		-
	Paid in full or partial payments		(17,079)		(25,041)		(37,784)		(44,919)
	Balance as of end of period	$	740,134	$	735,625	$	740,134	$	735,625
(1)	For the six-month period ended June 30, 2018 includes charge-offs totaling $9.7 million associated with the transfer of $57.2 million in non-performing loans to held for sale.
(2)	For the six-month period ended June 30, 2017 includes a charge-off of $10.7 million related to the sale of the PREPA credit line.
			Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
			2018		2017		2018		2017
		(In thousands)				(In thousands)
	Specific Reserve:
	Balance as of beginning of period	$	56,930	$	66,311	$	51,410	$	64,421
	Provision for loan losses		5,753		17,563		28,456		36,195
	Net charge-offs		(13,169)		(43,080)		(30,352)		(59,822)
	Balance as of end of period	$	49,514	$	40,794	$	49,514	$	40,794

135

In addition, as of June 30, 2018, the Corporation maintained a $0.2 million reserve for unfunded loan commitments, mainly related to outstanding commitments on floor plan revolving lines of credit. The reserve for unfunded loan commitments is an estimate of the losses inherent in off-balance sheet loan commitments to borrowers that are experiencing financial difficulties as of the balance sheet date. The reserve for unfunded loan commitments is included as part of accounts payable and other liabilities in the consolidated statement of financial condition and any change to the reserve is included as part of other non-interest expenses in the consolidated statements of income. 

Non-performing Loans and Non-performing Asset

Total non-performing assets consist of non-performing loans (generally loans held for investment or loans held for sale on which the recognition of interest income has been discontinued when the loan became 90 days past due or earlier if the full and timely collection of interest or principal is uncertain), foreclosed real estate and other repossessed properties, and non-performing investment securities. When a loan is placed in non-performing status, any interest previously recognized and not collected is reversed and charged against interest income.

Non-performing Loans Policy

Residential Real Estate Loans — The Corporation classifies real estate loans in non-performing status when interest and principal have not been received for a period of 90 days or more.

Commercial and Construction Loans — The Corporation places commercial loans (including commercial real estate and construction loans) in non-performing status when interest and principal have not been received for a period of 90 days or more or when collection of all of the principal or interest is not expected due to deterioration in the financial condition of the borrower.     

Finance Leases — Finance leases are classified in non-performing status when interest and principal have not been received for a period of 90 days or more.

Consumer Loans — Consumer loans are classified in non-performing status when interest and principal have not been received for a period of 90 days or more. Credit card loans continue to accrue finance charges and fees until charged-off at 180 days delinquent.

Purchased Credit Impaired Loans — PCI loans were recorded at fair value at acquisition. Since the initial fair value of these loans included an estimate of credit losses expected to be realized over the remaining lives of the loans, the subsequent accounting for PCI loans differs from the accounting for non-PCI loans. The Corporation, therefore, separately tracks and reports PCI loans and excludes these from the amounts of non-performing loans, impaired loans, TDR loans, and non-performing assets.

Cash payments received on certain loans that are impaired and collateral dependent are recognized when collected in accordance with the contractual terms of the loans.  The principal portion of the payment is used to reduce the principal balance of the loan, whereas the interest portion is recognized on a cash basis (when collected). However, when management believes that the ultimate collectability of principal is in doubt, the interest portion is applied to the outstanding principal.  The risk exposure of this portfolio is diversified as to individual borrowers and industries, among other factors. In addition, a large portion is secured with real estate collateral.

Other Real Estate Owned

OREO acquired in settlement of loans is carried at the lower of cost (carrying value of the loan) or fair value less estimated costs to sell off the real estate. Appraisals are obtained periodically, generally, on an annual basis.

Other Repossessed Property

The other repossessed property category generally includes repossessed boats and autos acquired in settlement of loans. Repossessed boats and autos are recorded at the lower of cost or estimated fair value.

Past-Due Loans 90 days and still accruing

These are accruing loans that are contractually delinquent 90 days or more. These past-due loans are either current as to interest but delinquent as to the payment of principal or are insured or guaranteed under applicable FHA and VA programs. Past due loans 90 days and still accruing also include PCI loans with individual delinquencies over 90 days, primarily related to mortgage loans acquired from Doral Bank in 2015 and from Doral Financial in 2014.

TDRs are classified as either accrual or nonaccrual loans. A loan on nonaccrual and restructured as a TDR will remain on nonaccrual status until the borrower has proven the ability to perform under the modified structure, generally for a minimum of six

136

months, and there is evidence that such payments can and are likely to continue as agreed. Performance prior to the restructuring, or significant events that coincide with the restructuring, are included in assessing whether the borrower can meet the new terms and may result in the loans being returned to accrual 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.

The following table presents non-performing assets as of the dates indicated:
		June 30,			December 31,
(Dollars in thousands)		2018			2017
Non-performing loans held for investment:
Residential mortgage		$	162,539		$	178,291
Commercial mortgage (1)			142,614			156,493
Commercial and Industrial			76,887			85,839
Construction (1)			14,148			52,113
Finance leases			2,032			1,237
Consumer			20,921			15,581
Total non-performing loans held for investment (1)		$	419,141		$	489,554
OREO			143,355			147,940
Other repossessed property			4,271			4,802
Total non-performing assets, excluding loans held for sale		$	566,767		$	642,296
Non-performing loans held for sale (1)			54,546			8,290
Total non-performing assets, including loans held for sale (2) (3)		$	621,313		$	650,586
Past due loans 90 days and still accruing (4) (5)		$	171,737		$	160,725
Non-performing assets to total assets			5.02	%		5.31	%
Non-performing loans held for investment to total loans held for investment			4.85	%		5.53	%
Allowance for loan and lease losses		$	222,035		$	231,843
Allowance to total non-performing loans held for investment (6)			52.97	%		47.36	%
Allowance to total non-performing loans held for investment,
excluding residential real estate loans (7)			86.53	%		74.48	%
___________
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million recorded at the time of transfer) in non-performing loans to held for sale. Loans transferred to held for sale consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-down of $4.6 million). Subsequently, during the second quarter of 2018, the Corporation completed the sale of a $10.4 million non-performing commercial mortgage loan that was among the loans transferred to held for sale in the first quarter of 2018.
(2)	Purchased credit impaired loans accounted for under ASC Topic 310-30 of $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, respectively, are excluded and 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 assets exclude $393.3 million and $374.7 million of TDR loans that were in compliance with the modified terms and in accrual status as of June 30, 2018 and December 31, 2017, respectively.
(4)	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 $30.1 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 June 30, 2018.
(5)	Amount includes PCI loans with individual delinquencies over 90 days and still accruing with a carrying value as of June 30, 2018 and December 31, 2017 of approximately $30.3 million and $29.3 million, respectively, primarily related to loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014.
(6)	The ratio of the allowance for loan and lease losses to non-performing loans held for investment, excluding the hurricane-related qualitative allowance, was 42.92% and 36.00% as of June 30, 2018 and December 31, 2017, respectively.
(7)	The ratio of the allowance for loan and lease losses to non-performing loans held for investment, excluding the residential real estate and the hurricane-related qualitative allowance, was 70.10% and 56.63% as of June 30, 2018 and December 31, 2017, respectively.

137

The following table shows non-performing assets by geographic region:
		June 30,		December 31,
(Dollars in thousands)		2018		2017
Puerto Rico:
Non-performing loans held for investment:
Residential mortgage		$	135,583	$	147,852
Commercial mortgage (1)			72,863		128,232
Commercial and Industrial			71,852		79,809
Construction			12,510		14,506
Finance leases			2,032		1,237
Consumer			19,740		14,885
Total non-performing loans held for investment			314,580		386,521
OREO			135,897		140,063
Other repossessed property			4,035		4,723
Total non-performing assets, excluding loans held for sale		$	454,512	$	531,307
Non-performing loans held for sale (1)			24,546		8,290
Total non-performing assets, including loans held for sale (2)		$	479,058	$	539,597
Past due loans 90 days and still accruing (3)		$	168,342	$	151,724
Virgin Islands:
Non-performing loans held for investment:
Residential mortgage		$	15,753	$	22,110
Commercial mortgage			20,371		25,309
Commercial and Industrial			5,035		6,030
Construction (4)			1,638		37,607
Consumer			843		281
Total non-performing loans held for investment			43,640		91,337
OREO			7,015		6,306
Other repossessed property			62		26
Total non-performing assets		$	50,717	$	97,669
Non-performing loans held for sale (4)			30,000		-
Total non-performing assets		$	80,717	$	97,669
Past due loans 90 days and still accruing		$	3,395	$	9,001
United States:
Non-performing loans held for investment:
Residential mortgage		$	11,203	$	8,329
Commercial mortgage			49,380		2,952
Consumer			338		415
Total non-performing loans held for investment			60,921		11,696
OREO			443		1,571
Other repossessed property			174		53
Total non-performing assets		$	61,538	$	13,320
Past due loans 90 days and still accruing		$	-	$	-
____________
(1)	During the first quarter of 2018, the Corporation transferred two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million) to held for sale. Subsequently, during the second quarter of 2018, the Corporation sold a $10.4 million non-performing commercial mortgage loan that was among the loans transferred to loans held for sale during the first quarter of 2018.
(2)	Purchased credit impaired loans accounted for under ASC Topic 310-30 of $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, respectively, are excluded and 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)	Amount includes purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of June 30, 2018  and December 31, 2017 of approximately $30.3 million and $29.3 million, respectively, primarily related to loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014.
(4)	During the first quarter of 2018, the Corporation transferred a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) to held for sale.

138

Total non-performing loans, including non-performing loans held for sale, were $473.7 million as of June 30, 2018.  This represents a decrease of $24.2 million from $497.8 million as of December 31, 2017. The decrease in non-performing loans was primarily attributable to $74.8 million in loans restored to accrual status, including the split loan restructuring of a $34 million commercial mortgage loan, collections and charge-offs totaling $71.7 million during the first half of 2018, the transfer of approximately $20.8 million of non-performing loans to the OREO portfolio, and the sale of a $10.4 million non-performing commercial mortgage loan transferred to held for sale during the first quarter of 2018. These variances were partially offset by inflows of approximately $155.0 million, including the inflow of two large commercial mortgage loans totaling $69.8 tied to a legacy commercial loan relationship that operates in both the Florida and Puerto Rico regions with independent sources of repayment.

Non-performing commercial mortgage loans, including loans held for sale, increased by $2.9 million to $159.4 million as of June 30, 2018 from $156.5 million as of December 31, 2017. The increase was primarily related to the aforementioned inflow in the second quarter of 2018 of two large commercial mortgage loans totaling $69.8 million tied to a legacy commercial loan relationship that operates in both the Florida and Puerto Rico regions. This variance was partially offset by the split loan restructuring of a $34 million commercial mortgage loan, collections and charge-offs totaling $22.3 million during the first half of 2018, and the sale of a $10.4 million non-performing commercial mortgage loan. Total inflows of non-performing commercial mortgage loans held for investment amounted to $75.7 million for the first half of 2018, compared to $2.6 million for the same period in 2017.

Non-performing C&I loans decreased by $9.0 million to $76.9 million as of June 30, 2018 from $85.8 million as of December 31, 2017. The decrease was driven by charge-offs and collections of $5.6 million and $3.9 million, respectively, including a charge-off of $3.5 million taken on a commercial loan in Puerto Rico. Total inflows of non-performing C&I loans were $4.1 million during the first half of 2018, compared to $1.5 million for the same period in 2017.

Non-performing construction loans, including non-performing construction loans held for sale, decreased by $8.5 million to $51.9 million as of June 30, 2018 from $60.4 million as of December 31, 2017, mainly due to the $5.1 million charge-off taken on the $30.0 million non-performing construction loan transferred to held for sale in the Virgin Islands during the first quarter of 2018, and a $0.6 million write-down to the fair value of another construction loan held for sale in Puerto Rico.  The inflows of non-performing construction loans held for investment during the first half of 2018 amounted to $0.3 million, compared to inflows of $1.1 million for the same period in 2017.

The following tables present the activity of commercial and construction non-performing loans held for investment:

		Commercial Mortgage		Commercial & Industrial		Construction			Total
(In thousands)
Quarter ended June 30, 2018
Beginning balance		$	115,179	$	85,325	$	16,236	$	216,740
Plus:
	Additions to non-performing		72,097		1,357		75		73,529
Less:
	Loans returned to accrual status		(34,602)		(2,233)		(899)		(37,734)
	Non-performing loans transferred to OREO		(862)		(215)		(241)		(1,318)
	Non-performing loan charge-offs		(3,897)		(5,061)		(784)		(9,742)
	Loan collections		(5,301)		(2,286)		(239)		(7,826)
Ending balance		$	142,614	$	76,887	$	14,148	$	233,649

139

		Commercial Mortgage		Commercial & Industrial		Construction			Total
(In thousands)
Six-Month Period Ended June 30, 2018
Beginning balance		$	156,493	$	85,839	$	52,113		294,445
Plus:
	Additions to non-performing		75,665		4,129		271		80,065
Less:
	Loans returned to accrual status		(37,753)		(2,233)		(899)		(40,885)
	Non-performing loans transferred to OREO		(2,318)		(1,348)		(299)		(3,965)
	Non-performing loan charge-offs		(10,707)		(5,592)		(5,961)		(22,260)
	Loan collections		(11,552)		(3,908)		(296)		(15,756)
	Reclassification		-		-		(781)		(781)
	Loans transferred to loans held for sale, net of charge-offs		(27,214)		-		(30,000)		(57,214)
Ending balance		$	142,614	$	76,887	$	14,148	$	233,649

		Commercial Mortgage		Commercial & Industrial		Construction			Total
(In thousands)
Quarter ended June 30, 2017
Beginning balance		$	174,908	$	77,972	$	48,468	$	301,348
Plus:
	Additions to non-performing		1,728		155		634		2,517
Less:
	Loans returned to accrual status		(1,568)		(175)		(20)		(1,763)
	Non-performing loans transferred to OREO		(8,116)		(3,771)		(20)		(11,907)
	Non-performing loan charge-offs		(30,346)		(6,378)		(598)		(37,322)
	Loan collections		(14,438)		(2,228)		(1,073)		(17,739)
	Reclassification		(133)		-		-		(133)
Ending balance		$	122,035	$	65,575	$	47,391	$	235,001

		Commercial Mortgage		Commercial & Industrial		Construction			Total
(In thousands)
Six-Month Period Ended June 30, 2017
Beginning balance		$	178,696	$	146,599	$	49,852	$	375,147
Plus:
	Additions to non-performing		2,633		1,544		1,091		5,268
Less:
	Loans returned to accrual status		(2,041)		(987)		(20)		(3,048)
	Non-performing loans transferred to OREO		(8,647)		(4,228)		(182)		(13,057)
	Non-performing loan charge-offs		(31,453)		(18,353)		(658)		(50,464)
	Loan collections		(17,267)		(5,755)		(2,692)		(25,714)
	Reclassification		114		-		-		114
	Non-performing loans sold, net of charge-offs		-		(53,245)		-		(53,245)
Ending balance		$	122,035	$	65,575	$	47,391	$	235,001

140

The following tables present the activity of commercial and construction non-performing loans held for sale:
		Commercial Mortgage		Construction			Total
(In thousands)
Quarter ended June 30, 2018
Beginning balance		$	27,213	$	37,732	$	64,945
Plus:
	Loans transferred from held for investment		-		-		-
Less:
	Lower of cost or market adjustment		-		-		-
	Non-performing loans sold		(10,399)		-		(10,399)
Ending balance		$	16,814	$	37,732	$	54,546
		Commercial Mortgage		Construction			Total
(In thousands)
Six-Month Period Ended June 30, 2018
Beginning balance		$	-	$	8,290	$	8,290
Plus:
	Loans transferred from held for investment		27,213		30,000		57,213
Less:
	Lower of cost or market adjustment		-		(558)		(558)
	Non-performing loans sold		(10,399)		-		(10,399)
Ending balance		$	16,814	$	37,732	$	54,546

141

   Total non-performing commercial and construction loans, including non-performing loans held for sale, with a book value of $288.2 million as of June 30, 2018 were being carried (net of reserves and accumulated charge-offs) at 52.6% of unpaid principal balance.

   Non-performing residential mortgage loans decreased by $15.8 million to $162.5 million as of June 30, 2018 from $178.3 million as of December 31, 2017.  The decrease was driven primarily by loans transferred to the OREO portfolio, loans brought current, and charge-offs recorded during the first half of 2018, partially offset by inflows.

The following tables presents the activity of residential non-performing loans held for investment:
			Quarter Ended				Six-Month Period Ended
			June 30,				June 30,
(In thousands)			2018		2017		2018		2017
Beginning balance		$	171,380	$	154,893	$	178,291	$	160,867
Plus:
	Additions to non-performing		16,776		26,258		43,737		49,106
Less:
	Loans returned to accrual status		(11,987)		(10,139)		(31,108)		(22,289)
	Non-performing loans transferred to OREO		(6,708)		(9,449)		(16,837)		(19,000)
	Non-performing loan charge-offs		(4,064)		(4,875)		(6,864)		(9,327)
	Loan collections		(2,858)		(1,491)		(5,461)		(3,913)
	Reclassification		-		133		781		(114)
Ending balance		$	162,539	$	155,330	$	162,539	$	155,330

142

The amount of non-performing consumer loans, including finance leases, increased by $6.1 million during the first half of 2018 to $23.0 million, compared to $16.8 million as of December 31, 2017.  The inflows of non-performing consumer loans during the first half of 2018 were $31.2 million, an increase of $14.5 million, compared to inflows of $16.7 million for the same period in 2017.

As of June 30, 2018, approximately $151.3 million of the loans placed in non-accrual status, mainly commercial loans, were current, or had delinquencies of less than 90 days in their principal and interest payments, including $51.7 million of TDRs maintained in nonaccrual 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. Collections on these loans are being recorded on a cash basis through earnings, or on a cost-recovery basis, as conditions warrant.

  During the six-month period ended June 30, 2018, interest income of approximately $2.0 million related to non-performing loans with a carrying value of $181.8 million as of June 30, 2018, mainly non-performing construction and commercial loans, was applied against the related principal balances under the cost-recovery method.

As of June 30, 2018, approximately $113.6 million, or 27.1%, of total non-performing loans held for investment have been charged-off to their net realizable value and no specific reserve was allocated, as shown in the following table:
(Dollars in thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			C&I Loans			Construction Loans			Consumer and Finance Leases			Total
As of June 30, 2018
Non-performing loans held for investment
charged-off to realizable value	$	80,085		$	21,789		$	10,933		$	-		$	811		$	113,618
Other non-performing loans held
for investment		82,454			120,825			65,954			14,148			22,142			305,523
Total non-performing loans held
for investment	$	162,539		$	142,614		$	76,887		$	14,148		$	22,953		$	419,141
Allowance to non-performing loans held for
investments		33.92	%		34.16	%		57.23	%		27.91	%		306.01	%		52.97	%
Allowance to non-performing loans held for
investments, excluding non-performing loans
charged-off to realizable value		66.86	%		40.32	%		66.71	%		27.91	%		317.22	%		72.67	%
As of December 31, 2017
Non-performing loans held for investment
charged-off to realizable value	$	76,668		$	60,680		$	6,872		$	48		$	843		$	145,111
Other non-performing loans held
for investment		101,623			95,813			78,967			52,065			15,975			344,443
Total non-performing loans held
for investment	$	178,291		$	156,493		$	85,839		$	52,113		$	16,818		$	489,554
Allowance to non-performing loans held for
investments		33.08	%		30.99	%		56.93	%		8.68	%		422.06	%		47.36	%
Allowance to non-performing loans held for
investments, excluding non-performing loans
charged-off to realizable value		58.03	%		50.61	%		61.89	%		8.69	%		444.33	%		67.31	%

143

Total loans in early delinquency (i.e., 30-89 days past due loans, as defined in regulatory report instructions) amounted to $143.5 million as of June 30, 2018, a decrease of $101.2 million compared to $244.7 million as of December 31, 2017.  The variances by major portfolio categories follow:

·Consumer loans in early delinquency decreased by $51.4 million to $59.7 million as of June 30, 2018, compared to $111.2 million as of December 31, 2017, and residential mortgage loans in early delinquency decreased by $47.6 million to $68.3 as of June 30, 2018, from $115.9 million as of December 31, 2017. These variances reflect both the resumption payments by clients after the expiration of the three-month payment deferral programs and the classification of loans as non-performing during the first half of 2018.  When compared to pre-hurricane levels, consumer loans in early delinquency decreased by $23.2 million to $59.7 million as of June 30, 2018 from $82.9 million as of June 30, 2017, and residential mortgage loans in early delinquency decreased by $36.4 million to $68.3 million as of June 30, 2018 from $104.7 million as of June 30, 2017.

·Commercial and construction loans in early delinquency decreased by $2.2 million to $15.5 million as of June 30, 2018, compared to $17.7 million as of December 31, 2017. When compared to pre-hurricane levels, commercial and construction loans in early delinquency increased by $9.5 million to $15.5 million as of June 30, 2018 from $6.0 million as of June 30, 2017.

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. See Note 7, “Loans Held for Investment,” to the consolidated financial statements for additional information and statistics about the Corporation’s TDR loans.  

TDR loans are classified as either accrual or nonaccrual loans. Loans in accrual status may remain in accrual status when their contractual terms have been modified in a TDR if the loans had demonstrated performance prior to the restructuring and payment in full under the restructured terms is expected. Otherwise, loans on 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.

144

The following table provides a breakdown between accrual and nonaccrual TDRs:
(In thousands)	As of June 30, 2018
	Accrual		Nonaccrual (1)		Total TDRs
Non-FHA/VA Residential Mortgage loans	$	270,358	$	72,496	$	342,854
Commercial Mortgage loans		54,354		29,927		84,281
Commercial and Industrial loans		43,478		48,191		91,669
Construction loans (2)		1,091		5,370		6,461
Consumer loans - Auto		13,345		6,347		19,692
Finance leases		1,334		260		1,594
Consumer loans - Other		9,321		1,324		10,645
Total Troubled Debt Restructurings	$	393,281	$	163,915	$	557,196
(1) Included in non-accrual loans are $51.7 million in loans that are performing under the terms of the restructuring agreements 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.
(2) Excludes a $30.0 million non-performing construction loan transferred to held for sale during the first quarter of 2018.

    The OREO portfolio, which is part of non-performing assets, decreased by $4.6 million to $143.4 million as of June 30, 2018 from $147.9 million as of December 31, 2017. The following tables show the composition of the OREO portfolio as of June 30, 2018 and December 31, 2017, as well as the activity during the six-month period ended June 30, 2018 of the OREO portfolio by geographic region:

OREO Composition by Region
(In thousands)	As of June 30, 2018
	Puerto Rico		Virgin Islands		Florida			Consolidated
Residential	$	56,045	$	1,223	$	311	$	57,579
Commercial		70,785		4,927		132		75,844
Construction		9,067		865		-		9,932
	$	135,897	$	7,015	$	443	$	143,355
(In thousands)	As of December 31, 2017
	Puerto Rico		Virgin Islands		Florida			Consolidated
Residential	$	52,427	$	514	$	1,440	$	54,381
Commercial		77,812		4,927		132		82,871
Construction		9,823		865		-		10,688
	$	140,062	$	6,306	$	1,572	$	147,940
OREO Activity by Region
(In thousands)	As of June 30, 2018
	Puerto Rico		Virgin Islands		Florida			Consolidated
Beginning Balance	$	140,062	$	6,306	$	1,572	$	147,940
Additions		27,821		709		84		28,614
Sales		(19,820)		-		(1,169)		(20,989)
Fair value adjustments and impairments		(12,166)		-		(44)		(12,210)
Ending Balance	$	135,897	$	7,015	$	443	$	143,355

145

Net Charge-offs and Total Credit Losses

Net charge-offs totaled $49.9 million for the first six months of 2018, or 1.14% of average loans on an annualized basis, compared to $75.7 million, or an annualized 1.71%, for the same period in 2017. Net charge-offs for the first six months of 2018 included charge-offs totaling $9.7 million associated with the transfer of $57.2 million in non-performing commercial and construction loans to held for sale. Net charge-offs for the first six months of 2017 included a $10.7 million charge-off associated with the sale of the PREPA credit line. Excluding the charge-offs related to the loans transferred to held for sale in the first six months of 2018 and the charge-off related to the sale of the PREPA credit line in the first six months of 2017, total adjusted net charge-offs for the first six months of 2018 were $40.2 million, or 0.92% of average loans on an annualized basis, compared to adjusted net charge-offs of $64.9 million, or 1.47% of average loans for the first six months of 2017.

     Commercial mortgage loans net charge-offs for the first six months of 2018 were $10.6 million, or an annualized 1.34% of average commercial mortgage loans, compared to $31.7 million, or an annualized 3.93%, for the first six months of 2017. Commercial mortgage loans net charge-offs for the first six months of 2018 included $4.6 million associated with the transfer of $27.2 million in non-performing loans to held for sale.  Excluding the effect of the loans transferred to held for sale, adjusted commercial mortgage loans net charge-offs for the first six months of 2018 were $6.0 million. The decrease, as compared to the first six months of 2017, was primarily related to the effect in 2017 of charge-offs totaling $29.7 million taken on commercial mortgages loans previously guaranteed by the TDF. 

Commercial and Industrial loans net charge-offs for the first six months of 2018 totaled $5.6 million, or an annualized 0.54% of average commercial and industrial loans, compared to $12.9 million, or an annualized 1.22%, for the first six months of 2017. Commercial and Industrial loans net charge-offs for the first six months of 2017 included the $10.7 million charge-off associated with the sale of the PREPA credit line. Excluding the impact of the PREPA credit line, adjusted commercial and industrial loans net charge-offs were $2.2 million in the first six months of 2017.   

Construction loans net charge-offs for the first six months of 2018 were $5.8 million, or an annualized 9.74% of average construction loans, compared to net charge-offs of $0.1 million, or an annualized 0.11%, for the first six months of 2017.  The variance was primarily related to the $5.1 million charge-off recorded on the $30.0 million non-performing loan transferred to held for sale in the Virgin Islands.

Residential mortgage loans net charge-offs for the first six months of 2018 were $7.9 million, or an annualized 0.49% of average residential mortgage loans, compared to $13.6 million, or an annualized 0.83%, for the first six months of 2017. Approximately $7.3 million in charge-offs for the first half of 2018 resulted from valuations for impairment purposes of residential mortgage loans considered homogeneous given high delinquency and loan-to-value levels compared to $8.2 million for the first half of 2017. Net charge-offs on residential mortgage loans also included $1.1 million related to foreclosures for the first half of 2018, compared to $4.4 million for the first half of 2017.

   Net charge-offs of consumer loans and finance leases for the first six months of 2018 were $19.9 million, or an annualized 2.28% of average consumer loans and finance leases, compared to $17.3 million, or an annualized 2.03% of average loans, in the first six months of 2017.  The increase reflects the effect of a loan loss recovery of $1.2 million recorded in 2017 on the sale of certain credit card loans that had been fully charged-off in prior periods. 

The following table presents annualized net charge-offs to average loans held in various portfolio:
		Quarter Ended				Six-Month Period Ended
		June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Residential mortgage		0.61	%	0.74	%	0.49	%	0.83	%
Commercial mortgage (1)		0.98	%	7.42	%	1.34	%	3.93	%
Commercial and industrial (2)		0.73	%	0.34	%	0.54	%	1.22	%
Construction (3)		2.25	%	1.19	%	9.74	%	0.11	%
Consumer and finance leases		2.34	%	2.13	%	2.28	%	2.03	%
Total loans  (4)(5)		1.07	%	2.16	%	1.14	%	1.71	%
_______________
(1)	For the six-month period ended June 30, 2018, includes net charge-offs totaling $4.6 million associated with the transfer of $27.2 million in non-performing commercial mortgage loans  to held for sale in the first quarter of 2018. The ratio of commercial mortgage net charge-offs to average loans, excluding the charge-offs associated with commercial mortgage loans transferred to held for sale, was 0.76% for the six-month period ended June 30, 2018.
(2)	For the six-month period ended June 30, 2017, includes a charge-off of $10.7 million associated with the sale of the PREPA credit line in the first quarter of 2017. The ratio of commercial and industrial net charge-offs to average loans, excluding the charge-off associated with the sale of the PREPA credit line, was 0.21% in the first half of 2017.
(3)	For the six-month period ended June 30, 2018, includes a charge-off of $5.1 million associated with the transfer of a $30.0 million non-performing construction loan to held for sale in the first quarter of 2018. The ratio of construction net charge-offs to average loans, excluding the charge-off associated with the construction loan transferred to held for sale, was 1.24% in the first half of 2018.
(4)	For the six-month period ended June 30, 2018, includes net charge-offs totaling $9.7 million associated with the transfer of $57.2 million in non-performing loans to held for sale in the first quarter of 2018. The ratio of total loans net charge-offs to average loans, excluding charge-offs associated with loans transferred to held for sale, was 0.92% in the first half of 2018.
(5)	For the six-month period ended June 30, 2017, includes a charge-off of $10.7 million associated with the sale of the PREPA credit line. The ratio of total net charge-offs to average loans, excluding the charge-off associated with the sale of the PREPA credit line, was 1.47% in the first half of 2017.

146

The following table presents annualized net charge-offs or (recoveries) to average loans held in various portfolios by geographic region:
		Quarter Ended				Six-Month Period Ended
		June 30,		June 30,		June 30,		June 30,
		2018		2017		2018		2017
PUERTO RICO:
Residential mortgage		0.81	%	0.99	%	0.62	%	1.09	%
Commercial mortgage (1)		1.44	%	10.14	%	1.95	%	5.34	%
Commercial and Industrial (2)		1.04	%	0.49	%	0.78	%	1.72	%
Construction		6.59	%	3.84	%	3.59	%	2.40	%
Consumer and finance leases		2.34	%	2.19	%	2.30	%	2.07	%
Total loans (3)		1.40	%	2.82	%	1.32	%	2.22	%
VIRGIN ISLANDS:
Residential mortgage		0.41	%	0.07	%	0.57	%	0.09	%
Commercial mortgage (4)		(0.11)	%	(0.10)	%	(0.13)	%	(0.10)	%
Commercial and Industrial (5)		0.67	%	(0.02)	%	0.32	%	(0.01)	%
Construction (6)(7)		-	%	-	%	24.49	%	(1.98)	%
Consumer and finance leases		2.30	%	1.61	%	2.43	%	1.40	%
Total loans (8)(9)		0.51	%	0.14	%	2.30	%	(0.01)	%
FLORIDA:
Residential mortgage (10)		(0.09)	%	0.04	%	(0.04)	%	0.07	%
Commercial mortgage (11)		(0.01)	%	(0.01)	%	(0.01)	%	(0.01)	%
Commercial and Industrial		0.02	%	-	%	0.03	%	-	%
Construction (12)		(1.73)	%	(1.06)	%	(1.05)	%	(0.65)	%
Consumer and finance leases		2.27	%	0.98	%	1.78	%	1.20	%
Total loans		0.02	%	0.01	%	0.04	%	0.05	%
(1)	For the six-month period ended June 30, 2018, includes charge-offs totaling $4.6 million associated with the transfer of $27.2 million in non-performing commercial mortgage loan to held for sale in the first quarter of 2018. The ratio of commercial mortgage net-charge offs to average loans in Puerto Rico, excluding the charge-offs associated with commercial mortgage loans transferred to held for sale was 1.12%.
(2)	For the six-month period ended June 30, 2017, includes the charge-off of $10.7 million associated with the sale of the PREPA credit line in the first quarter of 2017. The ratio of commercial and industrial net charge-offs to average loans in Puerto Rico, excluding the charge-off associated with the sale of the PREPA credit line, was 0.30%.
(3)	For the six-month period ended June 30, 2018, includes charge-offs totaling $4.6 million associated with the transfer of $27.2 million in non-performing loans to held for sale in the first quarter of 2018. The ratio of total loans net charge-offs to average loans in Puerto Rico, excluding charge-offs associated with loans transferred to held for sale, was 1.18%.
(4)	For the second quarter and six-month periods ended June 30, 2018 and 2017, recoveries in commercial mortgage loans in the Virgin Islands exceeded charge-offs.
(5)	For the second quarter and six-month period ended June 30, 2017, recoveries in commercial and industrial loans in the Virgin Islands exceeded charge-offs.
(6)	For the six-month period ended June 30, 2018, includes a charge-off of $5.1 million associated with the transfer of a $30.0 million non-performing construction loan to held for sale in the first quarter of 2018. The ratio of construction net charge-offs to average loans in the Virgin Islands, excluding the charge-off associated with the construction loans transferred to held for sale, was 0.00%.
(7)	For the six-month period ended June 30, 2017,  recoveries in construction loans in the Virgin Islands exceeded charge-offs.
(8)	For the six-month period ended June 30, 2018, includes the charge-off of $5.1 million associated with the transfer of a $30.0 million non-performing loan to held for sale in the Virgin Islands in the first quarter of 2018. The ratio of total loans net charge-offs to average loans in the Virgin Islands, excluding charge-offs associated with the loan transferred to held for sale, was 0.51%.
(9)	For the six-month period ended June 30, 2017, recoveries in total loans in the Virgin Islands exceeded charge-offs.
(10)	For the second quarter and six-month period ended June 30, 2018, recoveries in residential mortgage loans in Florida exceeded charge-offs.
(11)	For the second quarter and six-month periods ended June 30, 2018 and 2017, recoveries in commercial mortgage loans in Florida exceeded charge-offs.
(12)	For the second quarter and six-month periods ended June 30, 2018 and 2017, recoveries in construction loans in Florida exceeded charge-offs.

    The above ratios are based on annualized charge-offs and are not necessarily indicative of the results expected for the entire year or in subsequent periods.  

   Total credit losses (equal to net charge-offs plus losses on OREO operations) for the first six months of 2018 amounted to $55.7 million, or 1.37% on an annualized basis to average loans and repossessed assets, in contrast to credit losses of $83.1 million, or a loss rate of 2.00%, for the same period in 2017.

147

The following table presents information about the OREO inventory and credit losses for the periods indicated:
	Quarter Ended						Six-Month Period Ended
	June 30,						June 30,
	2018			2017			2018			2017
(Dollars in thousands)
OREO
OREO balances, carrying value:
Residential	$	57,579		$	54,346		$	57,579		$	54,346
Commercial		75,844			84,939			75,844			84,939
Construction		9,932			10,760			9,932			10,760
Total	$	143,355		$	150,045		$	143,355		$	150,045
OREO activity (number of properties):
Beginning property inventory		755			671			708			626
Properties acquired		89			107			219			221
Properties disposed		(89)			(82)			(172)			(151)
Ending property inventory		755			696			755			696
Average holding period (in days)
Residential		414			327			414			327
Commercial		1,197			854			1,197			854
Construction		1,508			1,254			1,508			1,254
		904			692			904			692
OREO operations gain (loss):
Market adjustments, impairments (net of insurance recoveries),
and gain (losses) on sale:
Residential	$	(1,950)		$	(675)		$	(1,771)		$	(2,063)
Commercial		(2,266)			(2,168)			(2,441)			(5,552)
Construction		(894)			(38)			(1,057)			755
		(5,110)			(2,881)			(5,269)			(6,860)
Other OREO operations expenses		(545)			(488)			(576)			(585)
Net Loss on OREO operations	$	(5,655)		$	(3,369)		$	(5,845)		$	(7,445)
CHARGE-OFFS
Residential charge-offs, net		(4,855)			(6,076)			(7,891)			(13,552)
Commercial charge-offs, net		(7,593)			(32,171)			(16,222)			(44,680)
Construction charge-offs, net		(680)			(462)			(5,844)			(80)
Consumer and finance leases charge-offs, net		(10,229)			(9,133)			(19,931)			(17,344)
Total charge-offs, net		(23,357)			(47,842)			(49,888)			(75,656)
TOTAL CREDIT LOSSES (1)	$	(29,012)		$	(51,211)		$	(55,733)		$	(83,101)
LOSS RATIO PER CATEGORY (2)
Residential		0.84	%		0.81	%		0.59	%		0.94	%
Commercial		1.06	%		3.61	%		1.00	%		2.63	%
Construction		4.77	%		1.20	%		10.51	%		(0.87)	%
Consumer		2.33	%		2.12	%		2.27	%		2.02	%
TOTAL CREDIT LOSS RATIO(3)		1.54	%		2.40	%		1.37	%		2.00	%
(1) Equal to Net Loss on OREO operations plus charge-offs, net.
(2) Calculated as net charge-offs plus market adjustments and gains (losses) on sales of OREO divided by average loans and repossessed assets.
(3) Calculated as net charge-offs plus net loss on OREO operations divided by average loans and repossessed assets.

148

Operational Risk

   The Corporation faces ongoing and emerging risk and regulatory pressure related to the activities that surround the delivery of banking and financial products. Coupled with external influences, such as market conditions, security risks, and legal risks, the potential for operational and reputational loss has increased. To mitigate and control operational risk, the Corporation has developed, and continues to enhance, specific internal controls, policies and procedures that are designed to identify and manage operational risk at appropriate levels throughout the organization. The purpose of these mechanisms is to provide reasonable assurance that the Corporation’s business operations are functioning within the policies and limits established by management.

   The Corporation classifies operational risk into two major categories: business-specific and corporate-wide affecting all business lines. For business specific risks, a risk assessment group works with the various business units to ensure consistency in policies, processes and assessments. With respect to corporate-wide risks, such as information security, business recovery, and legal and compliance, the Corporation has specialized groups, such as the Legal Department, Information Security, Corporate Compliance, and Operations. These groups assist the lines of business in the development and implementation of risk management practices specific to the needs of the business groups.

Legal and Compliance Risk

  Legal and compliance risk includes the risk of noncompliance with applicable legal and regulatory requirements, the risk of adverse legal judgments against the Corporation, and the risk that a counterparty’s performance obligations will be unenforceable. The Corporation is subject to extensive regulation in the different jurisdictions in which it conducts its business, and this regulatory scrutiny has been significantly increasing over the last several years. The Corporation has established, and continues to enhance procedures based on legal and regulatory requirements that are designed to ensure compliance with all applicable statutory and regulatory requirements. The Corporation has a Compliance Director who reports to the Chief Risk Officer and is responsible for the oversight of regulatory compliance and implementation of an enterprise-wide compliance risk assessment process. The Compliance division has officer roles in each major business area with direct reporting relationships to the Corporate Compliance Group.

Concentration Risk

The Corporation conducts its operations in a geographically concentrated area, as its main market is Puerto Rico. However, the Corporation has diversified its geographical risk, as evidenced by its operations in the Virgin Islands and in Florida. Of the total gross loan portfolio held for investment of $8.6 billion as of June 30, 2018, approximately 75% has credit risk concentration in Puerto Rico, 19% in the United States, and 6% in the Virgin Islands.

Update to the Puerto Rico Fiscal Situation

Economy Indicators and Projections

A significant portion of our financial activities and credit exposure is concentrated in the Commonwealth of Puerto Rico, which has been in an economic recession since 2006 that has been exacerbated by the effects of Hurricanes Irma and Maria in 2017.  The New Fiscal Plan certified by the PROMESA oversight board, projects a contraction in the Puerto Rico’s gross national product of 13.3% for fiscal year 2018, followed by projected growths of 6.1% and 1.1% for fiscal years 2019 and 2020, respectively. Such projected growth was based on an assumption that over $62 billion of disaster relief funding will enter the economy of Puerto Rico from federal and private sources. Of the total disaster relief funding of $62 billion, estimated amounts of approximately $35 billion are to be used for public assistance, $19 billion for individual assistance, and $8 billion for private and business insurance pay outs. On July 30, 2018, the U.S. Department of Housing and Urban Development (“HUD”) approved a $1.5 billion disaster recovery plan submitted by the Puerto Rico government that primarily focuses on the restoration of damaged and destroyed homes, businesses and infrastructure.  The disaster recovery action plan includes the following activities: (i) housing ($1 billion) – for rebuilding and repairs of damaged properties, rental assistance, and appliances, (ii) economic revitalization ($145 million) – for eligible businesses to help-revitalize the post-disaster economy, including through grants, and (iii) infrastructure ($100 million) – for repairs of the damaged infrastructure in Puerto Rico.

149

The Puerto Rico Economic Activity Index (the “EDB-EAI”) in May 2018 was 120.4, an increase of 0.4% compared to April 2018, and close to the pre-hurricane levels of 122.1 in August 2017. The EDB-EAI is a coincident index of economic activity for Puerto Rico made up of four indicators (non-farm payroll employment, electric power generation, cement sales and gasoline consumption).  The cement sales for May 2018 totaled 1.25 million of 94 pound bags, a decrease of 1.9% over the prior month, and an annual increase of 27.5%. Estimated gasoline consumption in May 2018 was 82.5 million gallons, a 6.9% decrease when compared with April 2018, and an increase of 2.3% compared to the same period in 2017.  Electric power generation for May 2018 totaled 1,441.2 million kilowatt-hours, an increases of 2.3% over the prior month, and a decrease of 14.5% compared with the same period in 2017. The New Fiscal Plan projects that the hurricanes will create a spike in inflation of 2.0% in fiscal year 2018, with subsequent average increases of about 1.85% over the next six years, until fiscal year 2023.  The seasonally adjusted unemployment rate in Puerto Rico was 9.3% in June 2018, compared to 10.3% in June 2017.

GDB Liquidation Plan

On July 14, 2017, the PROMESA oversight board authorized the GDB to pursue the restructuring of its debts under Title VI of PROMESA and conditionally certified the GDB’s Restructuring Support Agreement (“RSA”) under the relevant provisions of Title VI.  The PROMESA oversight board’s decision was in response to a request from Puerto Rico’s Fiscal Agency and Financial Advisory Authority, dated June 30, 2017, in which the agency noted that the proposed restructuring, along with certain related settlements contemplated by the RSA, will result in an efficient wind down of GDB’s operations and a comprehensive financial restructuring of GDB’s obligations. The RSA provides for the organized and consensual restructuring of a substantial portion of the GDB’s liabilities, including the GDB public bonds, deposit claims by municipalities and certain non-public entities, and claims under certain GDB-issued letters of credit and guarantees (“Participating Bond Claims”). In exchange for releasing the GDB from liability relating to these claims, the claim-holders will receive new bonds to be issued by a new entity.

On April 20, 2018, the PROMESA oversight board approved the new GDB fiscal plan. The new GDB fiscal plan authorizes the recently amended terms of RSA. It also paves the way for the GDB’s operational wind-down, provides for a simplified transaction structure, and ensures equal treatment of creditors. It also offers municipalities offset rights against their deposit claims.

New Fiscal Plan

On April 19, 2018, the PROMESA oversight board’s twelfth public meeting took place. In that meeting, the PROMESA oversight board approved the Commonwealth of Puerto Rico New Fiscal Plan (the “New Fiscal Plan”). The New Fiscal Plan uses a six-year horizon and projects a six-year cumulative decline in population of 12%. In addition, the New Fiscal Plan established an annual emergency reserve of $130 million for 10 years. As mentioned above, it also assumes $62 billion in disaster relief funding. The New Fiscal Plan includes a series of structural reforms in areas, such as: (i) human capital and labor, (ii) ease of doing business, (iii) power sector reform, and (iv) infrastructure reform.  The plan also proposes fiscal measures projected to drive $12.3 billion in increased revenues and reduced expenditures through fiscal year 2023, and up to $142 billion in fiscal benefits over a 30-year period.  These fiscal measures include areas, such as: (i) tax compliance and incentives, (ii) governmental rightsizing, (iii) healthcare reform, (iv) reduction of appropriations, (v) comprehensive pension reform, and (vi) fiscal controls, budgeting, procurement practices and accountability.

On May 10, 2018, the Puerto Rico governor, proposed the Commonwealth of Puerto Rico budget for fiscal year 2018-2019. The proposed consolidated budget amounts to $25,323 million and comes from the following sources:

·$8,730 million from General Fund

·$8,106 million from Federal Funds

·$7,455 million from Revenue Funds

·$402 million from Special State Funds

·$630 million from Other Governmental Funds

150

The recommended General Fund budget amounted to $8,730 million, a net decrease of $832 million when compared with the budget approved for the fiscal year 2017-2018. On the other hand, the Federal Funds included in the proposed budget, show an increase of $1,773 million or a 28% more compared with the budget for fiscal year 2017-2018. However, the PROMESA oversight board concluded that the proposed Commonwealth of Puerto Rico budget for fiscal year 2018-2019 does not comply with the New Fiscal Plan approved on April 19, 2018.   On June 29, 2018, the PROMESA oversight board stated that, because of the Puerto Rico government’s failure to enact labor reform, including the repeal of the law on unjustified work dismissals ( Law 80), it had certified a new revised version of the New Fiscal Plan that reflects, among others changes, a reduction of the projected 30-year surplus of the central government to $14.4 billion from the previous projection between $39 billion to $40 billion, the elimination of Christmas bonuses for public employees, and lower funding for infrastructure and municipalities.

On June 30, 2018, the PROMESA oversight board certified a revised budget for fiscal year 2019 that outlines expenditures of $8,757 million for the General Fund and $20,663 million for the consolidated budget.

As a result of the recertified New Fiscal Plan, on July 5, 2018, the Puerto Rico government filed a lawsuit seeking declaratory judgment that clarifies the PROMESA oversight board’s power over the Commonwealth’s budget.

On August 7, 2018, the U.S. District Judge Laura Taylor Swain ruled that the PROMESA oversight board has the power to enforce fiscal discipline through the budgetary process, but lacks authority to demand changes in law.

Exposure to Puerto Rico Government

As of June 30, 2018, the Corporation had $213.2 million of direct exposure to the Puerto Rico government, its municipalities and public corporations, compared to $214.5 million as of December 31, 2017. As of June 30, 2018, approximately $183.5 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment, compared to $184.6 million as of December 31, 2017.  Approximately 73% of the Corporation’s municipality exposure consisted primarily of senior priority obligations concentrated in three of the largest municipalities in Puerto Rico. 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. The PROMESA oversight board has not designated any of the Commonwealth’s 78 municipalities as covered entities under PROMESA.  However, while the recent fiscal plan certified by the PROMESA oversight board did not contemplate a restructuring of the debt of Puerto Rico’s municipalities, the plan did call for the gradual elimination of budgetary subsidies provided to municipalities. Furthermore, municipalities are also likely to be affected by the negative economic and other effects resulting from expense, revenue or cash management measures taken to address the Puerto Rico government’s fiscal and liquidity shortfalls, as well as measures included in fiscal plans of other government entities.  In addition to municipalities, the total direct exposure also included a $6.7 million loan to a unit of the central government, and a $14.8 million loan to an affiliate of PREPA.  The Corporation’s total direct exposure also included obligations of the Puerto Rico government, specifically bonds of the Puerto Rico Housing Finance Authority, at an amortized cost of $8.1 million as part of its available-for-sale investment securities portfolio, which were recorded on its books at a fair value of $6.8 million as of June 30, 2018.

151

The following table details the Corporation’s total direct exposure to the Puerto Rico Government according to their maturities:
	As of June 30, 2018
		Investment
		Portfolio				Total
		(Amortized cost)		Loans		Exposure
(In thousands)
Central Government:
After 1 to 5 years	$	-	$	6705	$	6705
Total Central Government		-		6,705		6,705
Puerto Rico Housing Finance Authority:
After 5 to 10 years		4,032		-		4,032
After  10 years		4,054		-		4,054
Total Puerto Rico Housing Finance Authority		8,086		-		8,086
Public Corporations:
Affiliate of the Puerto Rico Electric Power Authority:
After 1 to 5 years		-		14,819		14,819
Total Public Corporations		-		14,819		14,819
Municipalities:
After 1 to 5 years		3,712		33,056		36,768
After 5 to 10 years		39,523		-		39,523
After 10 years		107,251		-		107,251
Total Municipalities		150,486		33,056		183,542
Total Direct Government Exposure	$	158,572	$	54,580	$	213,152

152

In addition, the Corporation had $114.7 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 under the mortgage loan insurance program. According to the most recently-released audited financial statements of the Puerto Rico Housing Finance Authority, as of June 30, 2016, the Puerto Rico Housing Finance Authority’s mortgage loans insurance program covered loans in an aggregate of approximately $576 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, 2016, 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.

As of June 30, 2018, the Corporation had $634.4 million of public sector deposits in Puerto Rico, compared to $490.3 million as of December 31, 2017. Approximately 31% is from municipalities and municipal agencies in Puerto Rico and 69% is from public corporations and the central government and agencies in Puerto Rico.

Exposure to USVI government

The Corporation has operations in the USVI and has credit exposure to USVI government entities.

The USVI is experiencing a number of fiscal and economic challenges, exacerbated by the impact of Hurricane Irma in the third quarter of 2017, that could adversely affect the ability of its public corporations and instrumentalities to service their outstanding debt obligations.  PROMESA does not apply to the USVI and, as such, there is currently no federal legislation permitting the restructuring of the debts of the USVI and its public corporations and instrumentalities.

To the extent that the fiscal condition of the USVI government continues to deteriorate, the U.S. Congress or the government of the USVI may enact legislation allowing for the restructuring of the financial obligations of the USVI government entities or imposing a stay on creditor remedies, including by making PROMESA applicable to the USVI.

As of June 30, 2018, the Corporation had $72.5 million in loans to USVI government instrumentalities and public corporations, compared to $70.4 million as of December 31, 2017. Of the amount outstanding as of June 30, 2018, public corporations of the USVI owed approximately $49.2 million and an independent instrumentality of the USVI government owned approximately $23.2 million.  As of June 30, 2018, all loans were currently performing and up to date on principal and interest payments   

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in conformity with GAAP, which requires the measurement of the financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.

Unlike most industrial companies, substantially all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a greater impact on a financial institution’s performance than the effects of general levels of inflation. Interest rate movements are not necessarily correlated with changes in the prices of goods and services.

153

Basis of Presentation

The Corporation has included in this Form 10-Q the following financial measures that are not recognized under GAAP, which are referred to as non-GAAP financial measures:

1.Net interest income, interest rate spread, and net interest margin are reported excluding the changes in the fair value of derivative instruments and on a tax-equivalent basis in order to provide to investors additional information about the Corporation’s net interest income that management uses and believes should facilitate comparability and analysis. The changes in the fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-exempt loans, on a common basis that facilitates comparison of results to the results of peers.  See “Results of Operations – Net Interest Income” above for the table that reconciles the non-GAAP financial measure “net interest income excluding fair value changes and on a tax-equivalent basis” with net interest income calculated and presented in accordance with GAAP.  The table also reconciles the non-GAAP financial measures “net interest spread and margin excluding fair value changes and on a tax-equivalent basis” with net interest spread and margin calculated and presented in accordance with GAAP.

2.The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures generally used by the financial community to evaluate capital adequacy. Tangible common equity is total equity less preferred equity, goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible and the insurance customer relationship intangible. Tangible assets are total assets less goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible and the insurance customer relationship intangible. Management and many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase method of accounting for mergers and acquisitions. Accordingly, the Corporation believes that disclosure of these financial measures is useful to investors.  Neither tangible common equity nor tangible assets, or the related measures, should be considered in isolation or as a substitute for stockholders’ equity, total assets, or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Corporation calculates tangible common equity, tangible assets, and any other related measures may differ from that of other companies reporting measures with similar names.  See “Risk Management – Capital” above for a reconciliation of the Corporation’s tangible common equity and tangible assets.

3.Adjusted provision for loan and lease losses, adjusted net charge-offs, and the ratios of adjusted net charge-offs to average loans, adjusted provision for loan and lease losses to net charge-offs, and the adjusted allowance for loan and lease losses to total loans held for investment, are non-GAAP financial measures that exclude the effects related to: (a) net loan loss reserve releases of $2.1 million and $8.5 million recorded in the second quarter and six-month period ended June 30, 2018, respectively, in connection with revised estimates of the reserve associated with the effects of Hurricanes Irma and Maria, (b) a $5.6 million charge to the provision and charge-offs totaling $9.7 million associated with the transfer of commercial and construction loans to held for sale in the first quarter of 2018, and (c) a $0.6 million charge to the provision and a charge-off of $10.7 million taken on the sale of the PREPA credit line in the first quarter of 2017.  Management believes that this information helps investors understand the adjusted measures without regard to items that are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts on reported results and facilitates comparisons with prior periods.

4.Adjusted non-interest income excludes the $2.3 million gain on the repurchase and cancellation of trust-preferred securities in the first quarter of 2018, the $0.4 million partial recovery of previously recorded OTTI charges on debt securities sold in the second quarter of 2017, and the $12.2 million in OTTI charges on debt securities recorded in the first quarter of 2017.   Management believes that the exclusion from non-interest income of items that are not expected to reoccur with any regularity or may reoccur at uncertain times or in uncertain amounts facilitates comparisons with prior periods and provides an alternate presentation of the Corporation’s performance.

154

5.Adjusted non-interest expenses reflects the exclusion of hurricane-related expenses of $0.7 million and $1.6 million for the second quarter and first six months of 2018, respectively, and the exclusion of costs of $0.3 million associated with a secondary offering of the Corporation’s common stock by certain of the existing stockholders in the first quarter of 2017. Management believes that the exclusion from non-interest expenses of items that are above normal or recurring levels, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts facilitates comparisons with prior periods and provides an alternate presentation of the Corporation’s performance.  

6.Adjusted net income that excludes the effect of a $13.2 million tax benefit recorded in the first quarter of 2017 related to the change in tax status of certain subsidiaries from taxable corporations to limited liability companies, and the effect of all the items mentioned above and their tax related effects as follows:

·Tax expense of $0.8 million and $3.3 million in the second quarter and first six months of 2018, respectively, related to net loan loss reserve releases resulting from the revised estimates of the reserves associated with the effects of Hurricanes Maria and Irma (calculated based on the statutory tax rate of 39%).

·Tax benefit of $2.2 million in the first six months of 2018 related to the charge to the provision for loan and lease losses recorded in connection with the transfer of $57.2 million in loans to held for sale (calculated based on the statutory tax rate of 39%). 

·Tax benefit of $0.3 million and $0.9 million in the second quarter and first six months of 2018, respectively, related to hurricane-related expenses (calculated based on the statutory tax rate of 39%).

·Tax benefit of $0.2 million in the first six months of 2017 related to the charge to the provision for loan and lease losses in connection with the sale of the Corporation’s participation in the PREPA credit line (calculated based on the statutory tax rate of 39%).

·No tax expense/benefit was recorded for the gain on repurchase and cancellation of trust-preferred securities and for costs related to the secondary offering that were recorded at the holding company level in the first six months of 2018 and 2017, respectively.  In addition, no tax expense/benefit was recorded for the partial recovery of previous OTTI charges on non-performing bonds sold in the second quarter of 2017 and OTTI charges recorded in the first six months of 2017 on tax-exempt bonds of the GDB and the Puerto Rico Public Buildings Authority. 

Management believes that adjustments to net income of items that are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts facilitates comparisons with prior periods and provides an alternate presentation of the Corporation’s performance.

The Corporation uses these non-GAAP financial measures, and believes that these non-GAAP financial measures enhance the ability of analysts and investors, to analyze trends in the Corporation’s business and understand the performance of the Corporation. In addition, the Corporation may utilize these non-GAAP financial measures as a guide in its budgeting and long-term planning process. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.

    See “Overview of Results of Operations” above for the reconciliation of the non-GAAP financial measure “adjusted net income” to the GAAP financial measure.  The following tables reconcile the non-GAAP financial measures “adjusted net charge-offs,”  “adjusted net charge-offs to average loans ratio,” “adjusted provision for loan and lease losses,” “adjusted provision for loan and lease losses to adjusted net charge-offs,” “adjusted allowance to total loans held for investment,” “adjusted non-interest income” and “adjusted non-interest expenses” to the GAAP financial measures for the second quarters and six-month periods ended June 30, 2018 and 2017:

155

2018 Second Quarter		As reported                 (GAAP)		Hurricane-related Allowance Release		Hurricane-related Expenses		Adjusted                 (Non-GAAP)
(Dollars in thousands)
Provision for loan and lease losses	$	19,536	$	2,057	$	-	$	21,593
Residential Mortgage Loans		3,599		238		-		3,837
Commercial Mortgage Loans		2,184		1,680		-		3,864
Commercial and Industrial Loans		75		198		-		273
Construction Loans		507		(59)		-		448
Non-interest expenses	$	90,216	$	-	$	(654)	$	89,562
Occupancy and Equipment		13,746		-		(553)		13,193
Business Promotion		4,016		-		(24)		3,992
Net loss on other real estate owned operations		5,655		-		(77)		5,578

2017 Second Quarter		As reported                 (GAAP)		Gain from Recovery of Previously recorded OTTI charges		Adjusted                 (Non-GAAP)
(Dollars in thousands)
Non-interest income	$	20,549	$	(371)	$	20,178
Gain on sale of investment securities	$	371	$	(371)	$	-

156

2018 First Six-Months		As reported                 (GAAP)		Loans Transferred to Held for Sale		Hurricane-related Allowance Release		Hurricane-related Expenses		Repurchase and Cancellation of Trust Preferred Securities		Adjusted                 (Non-GAAP)
(Dollars in thousands)
Total net-charge offs (1)	$	49,888	$	(9,673)	$	-	$	-	$	-	$	40,215
Total net charge-offs to average loans		1.14%										0.92%
Commercial mortgage		10,620		(4,573)		-		-		-		6,047
Commercial mortgage net charge-offs to average loans		1.34%										0.76%
Construction		5,844		(5,100)		-		-		-		744
Construction net charge-offs to average loans		9.74%										1.24%
Provision for loan and lease losses	$	40,080	$	(5,645)	$	8,464	$	-	$	-	$	42,899
Residential mortgage		4,046		-		374		-		-		4,420
Commercial mortgage		10,845		(1,105)		1,925		-		-		11,665
Commercial and industrial		731		-		4,020		-		-		4,751
Construction		5,271		(4,540)		102		-		-		833
Consumer		19,187		-		2,043		-		-		21,230
Non-interest income	$	43,256	$	-	$	-	$	-	$	(2,316)	$	40,940
Gain on early extinguishment of debt		2,316		-		-		-		(2,316)		-
Non-interest expenses	$	176,243	$		$		$	(2,250)	$	-	$	173,993
Employees' compensation and benefits		80,239		-		-		(5)		-		80,234
Occupancy and equipment		28,851		-		-		(2,102)		-		26,749
Business promotion		6,592		-		-		(55)		-		6,537
Net loss on other real estate owned operations		5,845						(77)		-		5,768
Professional fees		20,253		-		-		(11)		-		20,242
(1) Net charge-offs percentages annualized

2017 First Six-Months		As reported                 (GAAP)		Secondary Offering Costs		OTTI on Debt Securities		Gain from Recovery of Previously recorded OTTI charges		Sale of PREPA credit line		Adjusted                 (Non-GAAP)
(Dollars in thousands)
Total net charge-offs	$	75,656	$	-	$	-	$	-	$	(10,734)	$	64,922
Total net charge-offs to average loans		1.71%										1.47%
Commercial and Industrial		12,931		-		-		-		(10,734)		2,197
Commercial and Industrial loans
net charge-offs to average loans		1.22%										0.21%
Provision for loan and lease losses	$	43,538	$	-	$	-	$	-	$	(569)	$	42,969
Commercial and Industrial		(6,940)								(569)		(7,509)
Non-interest income	$	28,792	$	-	$	12,231	$	(371)	$		$	40,652
Net loss on investment and impairments		(11,860)		-		12,231		(371)				-
Non-interest expenses	$	176,951	$	(274)	$	-	$	-			$	176,677
Professional Fees		22,756		(254)		-		-				22,502
Business promotion		6,473		(20)		-		-				6,453

157

The following tables reconcile the ratios of the provision for loan and lease losses to net charge-offs and net charge-offs to average loans to the Non-GAAP financial measures “adjusted provision for loan and lease losses to net charge-offs” and “adjusted net charge-offs to average loans,” for the second quarter and first six months of 2018 and for the first six months of 2017, and the ratio of the allowance for loan and lease losses to total loans held for investment to the “adjusted allowance for loan and lease losses to total loans held for investment” as of June 30, 2018. 

	Provision for Loan and Lease					Provision for Loan and Lease
	Losses to Net Charge-Offs					Losses to Net Charge-Offs
	and Net Charge-Offs to Average Loans					and Net Charge-Offs to Average Loans
	(GAAP to Non-GAAP reconciliation)					(GAAP to Non-GAAP reconciliation)
	Quarter Ended						Six-Month Period Ended
	June 30, 2018						June 30, 2018
	Provision for Loan			Net Charge-Offs		Provision for Loan				Net Charge-Offs
	and Lease Losses					and Lease Losses
(In thousands)
Provision for loan and lease losses and net charge-offs (GAAP)	$	19,536		$	23,357	$	40,080		$	49,888
Less special items:
Loans transferred to held for sale		-			-		(5,645)			(9,673)
Hurricane-related reserve release		2,057			-		8,464			-
Provision for loan and lease losses and net charge-offs,
excluding special items (Non-GAAP)	$	21,593		$	23,357	$	42,899		$	40,215
Average Loans	$	8,693,347				$	8,735,560
Provision for loan and lease losses to net charge-offs (GAAP)		83.64	%				80.34	%
Provision for loan and lease losses to net charge-offs,
excluding special  items (Non-GAAP)		92.45	%				106.67	%
Net charge-offs to average loans (GAAP)		1.07	%				1.14	%
Net charge-offs to average loans,
excluding special items (Non-GAAP)		1.07	%				0.92	%

158

	Provision for Loan and Lease
	Losses to Net Charge-Offs
	(GAAP to Non-GAAP reconciliation)
	Six-Month Period Ended
	June 30, 2017
	Provision for Loan		Net Charge-Offs
	and Lease Losses
(In thousands)
Provision for loan and lease losses and net charge-offs (GAAP)	$	43,538	$	75,656
Less special items:
Sale of the PREPA credit line		(569)		(10,734)
Provision for loan and lease losses and net charge-offs, excluding special items (Non-GAAP)	$	42,969	$	64,922
Average Loans	$	8,862,905
Provision for loan and lease losses to net charge-offs (GAAP)		57.55%
Provision for loan and lease losses to net charge-offs, excluding special items (Non-GAAP)		66.19%
Net charge-offs to average loans (GAAP)		1.71%
Net charge-offs to average loans, excluding special items (Non-GAAP)		1.47%

	Allowance for Loan and Lease Losses
	to Total Loans Held For Investment
	(GAAP to Non-GAAP reconciliation)
	As of June 30, 2018
	Allowance for Loan			Total Loans Held for Investment
	and Lease Losses
(In thousands)
Allowance for loan and lease losses and total  loans held for investment (GAAP)	$	222,035		$	8,640,291
Less special items:
Hurricane-related qualitative allowance for loand and lease losses		(42,158)			-
Allowance for loan and lease losses and total loans held for investment,
excluding special items (Non-GAAP)	$	179,877		$	8,640,291
Allowance for loan and lease losses to total loans held for investment (GAAP)		2.57	%
Allowance for loan and lease losses to total loans held for investment,
excluding special items (Non-GAAP)		2.08	%

159

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       For information regarding market risk to which the Corporation is exposed, see the information contained in Part I, – Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management.”

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

First BanCorp.’s management evaluated the effectiveness of the design and operation of First BanCorp.’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2018. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to ensure timely decisions regarding required disclosures. During the evaluation of disclosure controls and procedures and our internal control over financial reporting as of December 31, 2017, which was conducted during the preparation of our financial statements that were included in the 2017 Annual Report on Form 10-K, management identified a material weakness in internal control over financial reporting relating to management’s review and approval of the appropriateness of certain assumptions used to estimate the allowance for loan losses for commercial loans. As a result, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2017, our disclosure controls and procedures and our internal control over financial reporting were ineffective. Upon identification of the material weakness and under the direction of our Chief Executive Officer and Chief Financial Officer, we developed a plan to remediate the material weakness.

As of June 30, 2018, and as described under Status of Remediation of Material Weakness in Internal Control Over Financial Reporting below, the material weakness has not been fully remediated. As a result, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2018, our disclosure controls and procedures were not effective. Notwithstanding the aforementioned material weakness, management has taken additional steps to assure the accuracy of our allowance for loan losses for commercial loans as of June 30, 2018, and has concluded that the financial statements included in this report fairly present, in all material respects, our financial condition for the periods presented in conformity with generally accepted accounting principles.

Internal Control over Financial Reporting

There have been no changes to the Corporation’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting, other than as described below under the caption “Status of Remediation of Material Weakness in Internal Control Over Financial Reporting.”

Status of Remediation of Material Weakness in Internal Control Over Financial Reporting

As previously described in Part II, Item 9A. “Controls and Procedures,” of the 2017 Annual Report on Form 10-K, we began implementing a remediation plan to address the control deficiency that led to the material weakness mentioned above. The remediation plan includes the following:

·Implementing a revised procedure to determine the historical loss rates to be applied to the different commercial loan regulatory-based credit risk categories (i.e., pass, special mention, substandard and doubtful).

·Implementing a quarterly sensitivity analysis using actual historical loss rates for loans risk-rated pass, special mention and substandard to compare the results of such sensitivity to the calculated reserves under the revised procedure, and establishing sensitivity thresholds that could trigger further reviews and/or adjustments prior to reaching a conclusion as to the adequacy of the allowance for loan losses for the Corporation’s commercial portfolio.

·Engaging an independent third party to assess the allowance framework and the appropriateness of the assumptions used in the analysis.

160

The Corporation implemented enhancements to the methodology and internal controls behind the calculation of the allowance for commercial loans that were in place and operating during the first half of 2018.  During the second quarter of 2018, an independent third party engaged by the Corporation completed its assessment of the commercial allowance for loan losses framework and the appropriateness of assumptions used in the analysis.  The Corporation reviewed the assessment and decided to implement certain enhancements, which include, among others, a revised procedure whereby historical loss rates for each commercial loan regulatory-based credit risk category (i.e., pass, special mention, substandard, and doubtful) are now calculated using the historical charge-offs and portfolio balances over their average loss emergence period (the “raw loss rate”) for each credit risk classification.  However, when not enough loss experience is observed in a particular risk-rated category and the calculation results in a loss rate for such risk-rated category that is lower than the loss rate of a less severe risk-rated category, the Corporation now uses the loss rate of such less severe category.  As a result of these revisions, the Corporation’s method for determining the allowance for loan losses differs from the method that it used as of March 31, 2018, which was to allocate historical losses and portfolio balances of special mention loans to pass or substandard categories based on the historical proportion of loans in this risk category that ultimately cured or became uncollectible, and the method that it used as of December 31, 2017, which was to use blended loss rates for commercial loans risk-rated special mention, substandard and doubtful. In addition, as a result of the enhancements incorporated in the second quarter of 2018, the Corporation does not need to conduct the sensitivity analysis that it previously conducted pursuant to the initial remediation plan.  The Corporation’s management will perform tests of the revised procedures, documentation, and controls around the calculation of the allowance for loan losses and underlying assumptions. 

Management believes that the new procedures and controls discussed above will appropriately remediate the material weakness; however, the operating effectiveness of the controls has not been fully tested by management. The Corporation expects to remediate the material weakness during the second half of 2018 when, in the opinion of our management, the revised control processes have been operating on a satisfactory basis for a sufficient period of time and have been independently validated by management.

The Audit Committee of the Corporation’s Board of Directors will review the remediation of the material weakness once it is fully resolved and management believes that the Corporation’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15(d)-15(e) under the Exchange Act, are effective.

161

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Not applicable.

ITEM 1A.  RISK FACTORS

The Corporation’s business, operating results and/or the market price of our common and preferred stock may be significantly affected by a number of factors.  For a detailed discussion of certain risk factors that could affect the Corporation’s future operations, financial condition or results for future periods see the risk factors in Part I, Item 1A., “Risk Factors,” in the 2017 Annual Report on Form 10-K.  These risk factors could also cause actual results to differ materially from historical results or the results contemplated by the forward-looking statements contained in this report.  Also refer to the discussion in “Part I, Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report for additional information that may supplement or update the discussion of  risk factors in the Corporation’s 2017 Form 10-K.

There have been no material changes from those risk factors previously disclosed in Part I, Item 1A., “Risk Factors,“ of the 2017 Form 10-K.  Additional risks and uncertainties that are not currently known to the Corporation or are currently deemed by the Corporation to be immaterial also may materially adversely affect the Corporation’s business, financial condition or results of operations.

162

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds

a)Not applicable.

b)Not applicable.

c)Purchase of equity securities by the issuer and affiliated purchasers. The following table provides information relating to the Corporation’s purchases of shares of its common stock in the second quarter of 2018.

					Maximum
				Total Number of	Number of Shares
				Shares Purchased	That May Yet be
			Average	as Part of Publicly	Purchased Under
	Total number of		Price	Announced Plans	These Plans or
Period	shares purchased (1)		Paid	Or Programs	Programs
April 2018	14,837	$	6.73	-	-
May 2018	11,611		7.73	-	-
June 2018	15,275		7.94	-	-
Total	41,723	$	7.45	-	-
(1) Reflects the withholding of shares of common stock to cover minimum tax withholding obligations from the common stock (a) paid to certain senior officers as additional compensation, which the Corporation calls salary stock, and (b) upon vesting of restricted stock. The Corporation intends to continue to satisfy statutory tax withholding obligations in connection with the vesting of outstanding restricted stock through the withholding of shares.

163

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6.  EXHIBITS

See the Exhibit Index below, which is incorporated by reference herein:

Exhibit Index

10.1  – Form of Executive Employment Agreement executed by each executive officer.

31.1  – CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2  – CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1  –  CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2  –  CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.1 – Interactive Data File (Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, furnished in XBRL (eXtensible Business Reporting Language)

164

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Corporation has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized: 

First BanCorp.

Registrant

Date: August 9, 2018	By:	/s/ Aurelio Alemán
		Aurelio Alemán
		President and Chief Executive Officer

Date: August 9, 2018	By:	/s/ Orlando Berges
		Orlando Berges
		Executive Vice President and Chief Financial Officer

165

EX-10

 

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

AGREEMENT  dated as of ____________, 2018 by and among FIRST BANCORP (“BanCorp”), a registered bank holding company, and its subsidiary FIRSTBANK PUERTO RICO, a commercial bank (the “Bank,” and together with BanCorp, the “Company”) and [Executive] (or “Executive”).

WHEREAS, the Company presently employs the Executive as a Business Group Director. The Company recognizes that the Executive’s leadership and contribution to the well-being of the Company is substantial. The Company desires to provide for the continued employment of the Executive as a Business Group Director which the Company has determined will reinforce and encourage the continued dedication of the Executive to the Company and will promote the best interests of the Company, and the Company’s shareholders.  The Executive is willing to continue to serve the Company on the terms and conditions herein provided.

                WHEREAS, the Board of Directors of each of BanCorp and the Bank has approved and authorized the execution of this Agreement with Executive to take effect as of the date of the execution of this Agreement;

WHEREAS, the parties desire to enter into this Agreement setting forth the terms and conditions of the employment relationship of BanCorp, the Bank and Executive;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

                1.             Employment.  Each of BanCorp and the Bank agrees to continue to employ Executive and Executive agrees to continue to serve BanCorp and the Bank for the period stated in Paragraph 4 hereof and subject to the other terms and conditions herein provided.

                2.             Position and Responsibilities.  The Company shall continue to employ the Executive as Executive Vice President, and the Executive shall continue to carry out and render to BanCorp and to the Bank such services as are customarily performed by persons holding a similar corporate title. The Executive shall have such authority and responsibilities consistent with his positions as assigned by the Company’s Chief Executive Officer or the Company’s Board of Directors (the “Board”) from time to time. The Executive shall also perform such other related duties as he may from time to time be reasonably directed in writing to perform, including but not limited to performing duties for BanCorp, the Bank and other subsidiaries thereof.  The Executive shall report to the Chief Executive Officer of the Company or any other officer designated by the Board of Directors of BanCorp or the Bank, as applicable.  Notwithstanding the foregoing, the Board of Directors of BanCorp or the Bank may delegate or assign specific tasks to Executive, provided that the assignment clearly sets for the priority of the task, and whether it takes precedence over other duties and obligations of Executive.  

                3.             Duties.  During the period of employment hereunder, and except for illness, vacation periods, and leaves of absence, Executive shall devote his business time, attention, skill, and efforts to the faithful performance of his duties as provided herein as is customary for an executive holding a similar position in a financial institution of comparable size. 

                                Executive agrees that, during the term of his employment hereunder, he will not, directly or indirectly, engage or participate, become a director of, or render advisory or other services for, or in connection with, or become interested in, or make any financial investment in any firm, corporation, business entity or business enterprise that directly competes with the Company or its subsidiaries in Puerto Rico; provided, however, that Executive shall not thereby be precluded or prohibited from owning passive investments, including investments in the securities of other financial institutions so long as such ownership does not require him to devote substantial time to the management or control of the business or activities of any such firm, corporation, business entity or enterprise.

1

                4.             Term.  The initial term of employment under this Agreement shall be for a period of one (1) year, effective upon the execution of this Agreement and terminating on ­[DATE].  On each anniversary of the date of commencement of this Agreement, the term of the employment hereunder shall automatically be extended for an additional one (1) year period beyond the then effective expiration date, unless a written notice from either party is received ninety (90) days prior to the anniversary date, advising the other party that this Agreement shall not be further extended.  Any such written notice shall not affect any prior extensions of the term of employment hereunder.

                5.             Standards.  Executive shall perform his duties and responsibilities under this Agreement in accordance with such reasonable standards as are established from time to time by the Board of Directors and/or management of BanCorp or the Bank, as applicable, and conveyed in writing to Executive.  The reasonableness of such standards shall be measured against standards for executive performance generally prevailing in the financial industry.

                                Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement will be interpreted in any manner which would tend to limit or interfere with the authority or oversight duties and discretion of the Boards of Directors of BanCorp and the Bank to establish adequate guidelines for the effective management of the Company.

                6.             Compensation and Reimbursement of Expenses. 

                                a)            Compensation 

                                                The Bank agrees to pay Executive during the term of this Agreement a base salary of not less than [EXECUTIVE CASH BASE SALARY] a year.   The Compensation and Benefits Committee (the “Compensation Committee”) of the Board of Directors of BanCorp shall evaluate the Executive’s performance at least annually. The Board may increase this compensation in an amount as determined by the Board upon favorable evaluations of the Company’s and Executive’s performance. 

                                b)            Performance Bonus

                                                In addition to the base salary set forth above, Executive shall be eligible for a performance bonus determined on the basis of his achievement of the predetermined business objectives contained in the Company’s annual business plan in connection with the areas of endeavor assigned to Executive.  The contribution of Executive to the achievement of the Company’s annual business objectives and his performance of such other functions as may be reasonably assigned to him, will be evaluated by the Chief Executive Officer of BanCorp, who may recommend to the Compensation and Benefits Committee (the “Compensation Committee”) of the Board of Directors of BanCorp payment of a performance bonus.  Following review of such recommendation, and at its discretion, the Compensation Committee may recommend payment of a performance bonus to the Board of Directors of BanCorp for approval.

                                c)             Long-Term Incentive Compensation Benefits

                                                 Executive shall be entitled to participate in and receive the benefits of any stock-based award, or other benefits and privileges granted to employees and executives of similar rank of the Company or its subsidiaries and affiliates which now exist or may come into existence hereafter, to the extent commensurate with his then assigned duties and responsibilities, as recommended by the Compensation Committee of the Board of Directors of BanCorp and approved by the Board of Directors of BanCorp. The terms and conditions of such benefits will be within the parameters set forth in the then existing applicable long-term equity incentive plan or under any other similar plan or successor plan adopted by the Company which may come into existence hereafter under which eligible participants may be granted stock options, restricted stock, and other awards as determined by the Board to Executive.

                                d)            Automobile Expenses

                                                The Bank shall provide Executive with a company owned automobile. Such automobile will be furnished in accordance with the existing company car policy, as approved by the Board of Directors of the Bank.

                                e)             Reimbursement of Expenses

2

                                                Not less frequently than monthly, the Bank shall pay or reimburse Executive for all reasonable and necessary travel and other business expenses incurred by Executive in the performance of his duties under this Agreement in accordance with the Company’s then applicable business expense reimbursement policy.

                                f)             Club Membership

                                                To the extent consistent with the Company’s strategic objectives, the Bank shall pay for the initiation fees and annual dues of a club membership to be designated by Executive during the term of this Agreement or any renewal thereof of up to $25,000 for the initiation fee and subsequently up to $10,000 per year.                     

                                g)             Clawback Policy

                                                The Executive agrees to repay any compensation previously paid or otherwise made available to the Executive under this Agreement that is subject to recovery under any applicable law (including any rule of any exchange or service through which the securities of the Company are then traded), including, but not limited to, the following circumstances:

                                                i.) where such compensation was in excess of what should have been paid or made available because the determination of the amount due was based, in whole or in part, on materially inaccurate financial information of the Company, including but not limited to, when the Company shall have a restatement of financial results attributable to the Executive’s actions, whether intentional or negligent;

                ii.) where such compensation constitutes “excessive compensation” within the meaning of 12 C.F.R. Section 263;

iii). where the Executive has committed, is substantially responsible for, or has violated, the respective acts, omissions, conditions, or offenses outlined under 12 C.F.R. Section 359.4(a)(4); and

iv) if, while the Executive is also a senior executive officer of the Bank, the Bank becomes, and for so long as the Bank remains, subject to the provisions of 12 U.S.C. Section 1831o(f), where such compensation exceeds the restrictions imposed on the senior executive officers of such an institution.

The EXECITUVE agrees to return promptly any such compensation identified by the Company by written notice provided pursuant to Section 18.  If the Executive fails to return such compensation promptly, the Executive agrees that the amount of such compensation may be deducted from any and all other compensation owed to the Executive by the Company.  If the Executive is then employed by the Company, the Executive acknowledges that the Company may take appropriate disciplinary action (up to, and including, Termination of Employment) if the Executive fails to return such compensation.  The Executive acknowledges the Company’s rights to engage in any legal or equitable action or proceeding in order to enforce the provisions of this Section 6(g).  The provisions of this Section 6(g) shall be modified to the extent, and remain in effect for the period, required by applicable law. 

                7.             Participation in Benefit Plans.  The payment and benefits provided in this Agreement are independent and separate of any payment and benefits to which Executive may be or may become entitled to under any other present or future group employee benefits plans or insurance programs of the Company applicable generally to all employees of the Company or for which executives of the Company and or its subsidiaries are or shall become eligible, and Executive shall be eligible to receive all benefits and entitlements for which said executives are eligible under every such plan or program.  

                8.             Voluntary Absences; Vacations and Sick Leave.   Executive shall be entitled, without loss of pay, to absent himself voluntarily for reasonable periods of time from the performance of his duties and responsibilities under this Agreement.  All such voluntarily absences shall count either as paid vacation time or sick leave, unless otherwise provided by the Board of Directors of BanCorp or the Bank, as applicable.  Executive shall be entitled to an annual paid vacation of such days as the Board of Directors of BanCorp or the Bank, as applicable, may approve pursuant to applicable corporate policy or otherwise, which vacations shall be scheduled by Executive with the prior approval of the Chief Executive Officer of BanCorp, as applicable, taking into account the needs of the Company.  Executive may accumulate unused paid vacation time from twelve (12) month period to the next; provided

3

that such accumulation shall not exceed eighteen (18) working days of unused vacation time from prior twelve (12) month periods.  Executive shall be entitled to up to fifteen (15) non-cumulative working days of paid sick leave for each twelve (12) month period or such longer non-cumulative working days as the Board of Directors may approve pursuant to applicable corporate policy or otherwise.  Upon termination of employment with or without cause, or for any reason, the Bank shall pay all accrued and unused vacation days, at the highest rate of salary earned by Executive during his tenure.

                9.             Benefits Payable upon Disability or Death.  The Bank shall, at all times, maintain in effect disability and death benefits insurance for the benefit of Executive in an amount at least equal to that maintained for executives of similar rank and which will not be less than that maintained by the Bank, for all officers and employees; provided that the benefits to which Executive and/or Executive’s heirs would be entitled thereunder may never decrease.

                10.          Termination of Employment. 

                                (a)           Without cause.    

(i)The Board of Directors of BanCorp or the Bank, as applicable, may, without cause, terminate this Agreement at any time, by giving ninety (90) days written notice to Executive. In such event, Executive, if requested by the Board of Directors of BanCorp or the Bank, as applicable, shall continue to render his services, and shall be paid his regular salary up to the date of termination, which shall be paid in accordance with the Company’s standard payroll procedures. In addition, Executive shall be paid on the date of termination a severance payment equal to the higher of (i) any severance payment required by state/local statute or (ii) the total of twelve (12) months of the then current cash base salary amount to which Executive would be entitled to under this Agreement, plus the average of any cash bonuses or cash incentive compensation awarded for the last two calendar years ended immediately before the year in which the termination occurred, regardless of when the bonuses or incentive compensation earned for the preceding calendar years were paid and regardless of whether all or part of the bonuses or incentive compensation were subject to elective deferral or vesting.

(ii)For avoidance of doubt, the term “cash base salary” used throughout this Agreement shall mean that portion of the Executive’s base salary which is paid in the form of cash.

(iii)Executive may, without cause, terminate the Agreement by giving ninety (90) days written notice to the Board of Directors of BanCorp or the Bank, as applicable. In such event, Executive shall continue to render his services and shall be paid his regular salary up to the date of termination, but shall not receive any severance payment.

                                (b)           With Cause.  

(i)The Board of Directors of BanCorp or the Bank, as applicable, may, at any time, terminate this Agreement for cause. In such event, Executive shall not be entitled to receive any further compensation from the date of notice of termination. The notice of termination shall be in writing, shall set forth the date of delivery to Executive, and the effect of termination shall not be retroactive to a date prior to delivery of such notice.  For the purpose of this Agreement, “ for cause” shall consist of any of (i) the commission by the Executive of a willful act (including, without limitation, a dishonest or fraudulent act) or a grossly negligent act, or the willful or grossly negligent omission to act by the Executive, which is intended to cause, does cause or is reasonably likely to cause material harm to the Company or any affiliate (including harm to its business reputation); (ii) the indictment of the Executive for the commission or perpetration by the Executive of any felony or any crime involving dishonesty, moral turpitude or fraud; (iii) the material breach by the Executive of this Agreement that, if susceptible of cure, remains uncured 10 days following written notice to the Executive of such breach; (iv) the receipt of any formal written notice that any regulatory agency having jurisdiction over the Company or the Bank intends to institute any form of formal regulatory action against the Executive, the Company or the Bank (provided that the Board determines in good faith, with the Executive abstaining from participating in the consideration of and vote on the matter, that the subject matter of such action involves acts or omissions by the Executive); (v) the exhibition by the Executive of a standard of behavior within the scope of his employment that is materially disruptive to the orderly

4

conduct of the Company’s business operations (including, without limitation, substance abuse or sexual misconduct) to a level which, in the Board’s good faith and reasonable judgment, with the Executive abstaining from participating in the consideration of and vote on the matter, is materially detrimental to the Company’s best interest, that, if susceptible of cure remains uncured 10 days following written notice to the Executive of such specific inappropriate behavior; or (vi) the failure of the Executive to devote his full business time and attention to his employment as provided under this Agreement that, if susceptible of cure, remains uncured 30 days following written notice to the Executive of such failure.  In order for the Board of Directors to make a determination that termination shall be for Cause, the Board must provide the Executive with notice of the grounds providing the purported basis for termination and provide the Executive an opportunity to meet with the Board in person to address the proposed grounds.  The Board reserves the right to suspend the Executive with pay pending the determination of Cause under this Section 10(b), as appropriate.

(ii)Executive may, with cause, terminate this Agreement. For purposes of this Section, termination with cause shall mean a failure of the Company to comply with any material provision of this Agreement, which failure has not been cured within fifteen (15) days of receipt of a written notice by Executive of such noncompliance by the Company.

(iii)A party hereto may submit for arbitration, as provided in Section 23 of this Agreement, among other matters, any controversy that may arise with regard to the cause for termination that is set forth in the written notice of termination provided by the Board of Directors of BanCorp or the Bank, as applicable, or Executive, as the case may be.

                                (c)           If  Executive is suspended and/or prohibited from participating in the conduct of affairs of BanCorp or the Bank by a notice or order served under Section 8(e)(3),(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 USC 1818(e)(3), (e)(4) and (g)(1), or any other similar provision of state or federal law now in place or enacted in the future, the Company’s obligations under this Agreement shall be suspended as of the date of service, unless such prohibition and/or suspension is stayed by appropriate proceedings.  If after a hearing is held and upon judicial review, the notice or order suspending and/or prohibiting Executive from participating in the affairs of BanCorp or the Bank is confirmed, then this Agreement shall be terminated with cause. If the charges in the notice or order are dismissed, BanCorp or the Bank, as applicable, shall: (i) pay Executive all the compensation withheld while the contractual obligations were suspended and (ii) reinstate, in whole or in part, any of the obligations which were suspended.

                                (d)           In the event that Executive is terminated or he terminates this Agreement in a manner which violates the provisions of this Section 10, as determined by the arbitration procedure provided in Section 23, Executive, BanCorp or the Bank, as the case may be, shall be entitled to reimbursement for all reasonable costs, including attorney’s fees, incurred by such party in challenging such termination.

                11. Change in Control.

                                (a)           In the event, within two years following a “change in control” of BanCorp, as such term is defined in sub-section (b) of this Section 11, Executive’s employment is terminated by BanCorp or the Bank, as applicable, without cause or there is a constructive termination without cause, Executive shall be entitled to receive from BanCorp or the Bank, as applicable, a severance payment in consideration of having bound himself to employment by the Company and having foregone other business or professional opportunities, actual or potential. The severance payment shall be a lump sum cash payment equal to the total of [TWO or THREE] times the cash base salary, plus [TWO or THREE] times the average of any cash bonuses or cash incentive compensation awarded for the last two calendar years ended immediately before the year in which the termination without cause occurred, regardless of when the bonuses or incentive compensation earned for the preceding calendar years were paid and regardless of whether all or part of the bonuses or incentive compensation were subject to elective deferral or vesting. Payment of the amounts set forth in this Section 11(a) shall be made on or before the fifth day following the date on which the executive is terminated without cause. 

                                (b)           A “change in control” shall be deemed to have taken place if: (i) a third person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of either BanCorp or the

5

Bank having 25% or more of the total number of votes which may be cast for the election of directors of BanCorp or the Bank, as applicable, or which, by cumulative voting, if permitted by the charter or bylaws, would enable such third person to elect 50% or more of the directors of BanCorp or the Bank, as applicable; or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or any other business combination, sales of assets or contested election, or any combination of the foregoing transactions, the person who were directors of BanCorp or the Bank, as applicable, before such transaction shall cease to constitute a majority of the Board of Directors of BanCorp or the Bank, as applicable, or any successor institution.    

                12.          Confidentiality; Injunctive Relief.   Recognizing that the knowledge and information about, or relationships with, the business associates, customers, clients, and agents of the Company and its affiliated companies and the business methods, systems, plans, and policies of the Company and of its affiliated companies which  Executive will receive, obtain, or establish as an employee of the Company or otherwise are valuable and unique assets of the Company,  Executive agrees that, during the continuance of this Agreement and thereafter, he shall not (otherwise than pursuant to his duties hereunder) disclose without the written consent of the Company, any material or substantial, confidential, or proprietary know-how, data, or information pertaining to the Company, or its business, personnel, or plans, to any person, firm, corporation, or other entity, for any reason or purpose whatsoever.  Executive acknowledges and agrees that all memoranda, notes, records, and other documents made or complied by Executive or made available to Executive concerning the Company’s business shall be the Company’s exclusive property and shall be delivered by Executive to the Company upon expiration or termination of this Agreement or at any other time upon the request of the Company.

                The provision of this Section 12 shall survive the expiration or termination of this Agreement or any part thereof, without regard to the reason therefore.

                 Executive hereby acknowledges that the services to be rendered by him are of special, unique, and extraordinary character and, in connection with such services he will have access to confidential information concerning the Company’s business. By reason of this,   Executive consents and agrees that if he violates any of the provisions of this Agreement with respect to confidentiality, the Company would sustain irreparable harm and, therefore, in addition to any other remedies which the Company may have under this Agreement or otherwise, the Company will be entitled to an injunction to be issued by any court of competent jurisdiction restraining Executive from committing or continuing any such violation of this Agreement. The term “Confidential Information” means: (i) proprietary information of the Company; (2) information marked or designated by the Company as confidential; (3) information, whether or not in written form and whether or not designated as confidential, which is known to Executive as treated by the Company as confidential; and (4) information provided to the Company by third parties which the Company is obligated to keep confidential, specifically including customer lists and information. Confidential information does not include any information now or hereafter voluntarily disseminated by the Company to the public, or which otherwise becomes part of the public domain through lawful means.

13.          No Solicitation. During the Executive’s employment with the Company and for a period of twelve (12) months thereafter, the Executive shall not (except on behalf of or with the prior written consent of the Company), either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, (i) solicit, divert, or appropriate to or for a Competing Business, or (ii) attempt to solicit, divert, or appropriate to or for a Competing Business any person or entity that is or was a customer of the Company or any of its affiliates on the date of termination and with whom the Executive has had material contact. For the purpose of this Agreement, “Competing Business” shall mean any business that, in whole or in part, is the same or substantially the same as the operation of a depository financial institution, including, without limitation, the solicitation and acceptance of deposits of money and commercial paper, the solicitation and funding of loans and the provision of other banking services, and any other related business engaged in by the Bank or any of its affiliates as of the date of termination.

14.          No Recruitment of Personnel. During the Executive’s employment with the Company and for a period of twelve (12) months thereafter, the Executive shall not, either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, (i) solicit, divert or hire away; or (ii) attempt to solicit, divert, or hire away to any Competing Business, any employee

6

of or consultant to the Company or any of its affiliates, regardless of whether the employee or consultant is full-time or temporary, the employment or engagement is pursuant to written agreement, or the employment is for a determined period or is at will.

                15.          No Assignments.  This Agreement is personal to each of the parties hereto. None of the parties may assign or delegate any of his or its rights or obligations hereunder without first obtaining the written consent of the other parties. However, in the event of the death of Executive all his rights to receive payments hereunder shall become rights of his estate.

                16.          Benefits.  Any benefits due or provided hereunder to Executive shall be in addition to, and not in substitution of, any benefit to which Executive is otherwise entitled to without regard to the Agreement.

                17.          Mitigation.             Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company’s obligation to make the payments and arrangements required to be made under this Agreement.

                18.          Notices.  All notices required by this Agreement to be given by one party to the other shall be in writing and shall be deemed to have been delivered either:

                                (a)           When personally delivered to the Office of the Secretary of BanCorp at his regular corporate office, or Executive in person; or

                                (b)           Five days after depositing such notice in the United States mails, certified mail with return receipt requested and postage prepaid at:

i.If to the Company:

                                                                C/O Office of the Secretary

First BanCorp Puerto Rico

PO Box 9146

Santurce, PR 00908-0146

                                                ii.             if to [Executive]:

                                                                [Executive CORPORATE ADDRESS]

or to such other address as the parties may designate to each other by notice in writing in accordance with the terms hereof.

                19.          Amendments or Additions; Action by Board of Directors.  No amendments or additions to this Agreement shall be binding unless in writing and signed by the parties hereto.  The prior approval by a two-thirds affirmative vote of the full Board of Directors of each of BanCorp and the Bank shall be required in order for the Company to authorize any amendments or additions to this Agreement, to give any consent or waivers of provisions of this Agreement, or to take any other action under this Agreement including any termination of the employment of Executive with or without cause under Section 10 hereof.

                20.          Sections Headings.  The Section headings used in this agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement.

                21.          Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereto.

                22.          Governing Law.  This Agreement shall be governed by the laws of the Commonwealth of Puerto Rico.  Venue for the litigation of any and all matters arising under or in connection with this Agreement shall be in the Court of First Instance, San Juan Superior Part for the Commonwealth of Puerto Rico, in the case of state court jurisdiction, or in the U.S. District Court for the District of Puerto Rico, in the case of federal court jurisdiction.

                23.          Arbitration.  Any controversy as to the interpretation of this Agreement must be submitted before three arbitrators to be appointed by the American Arbitration Association (“AAA”).  The rules and regulations of the AAA shall govern the procedures of said arbitration.  The award of a majority of arbitrators shall be binding and final on the parties.

7

                24.          Reimbursement of Legal Expenses.  The Company agrees to reimburse Executive for all reasonable legal fees incurred by him in connection with the negotiation, drafting and execution of this Agreement.

                25.          Compliance with the Dodd–Frank Wall Street Reform and Consumer Protection Act.  Notwithstanding anything to the contrary herein, any incentive payments to the Executive shall be limited to the extent required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), including, but not limited to, clawbacks for such incentive payments as required by the Dodd-Frank Act and Section 10D of the Securities Exchange Act of 1934. The Executive agrees to such amendments, agreements, or waivers that are required by the Dodd-Frank Act or requested by the Company to comply with the terms of the Dodd-Frank Act.

                26.          Compliance with Regulatory Restrictions.  Notwithstanding anything to the contrary herein, and in addition to any restrictions stated above, any compensation or other benefits paid to the Executive shall be limited to the extent required by any federal or state regulatory agency having authority over the Company or, if applicable, the Bank.  The Executive agrees that compliance by the Company or the Bank with such regulatory restrictions, even to the extent that compensation or other benefits paid to the Executive are limited, shall not be a breach of this Agreement by the Company or the Bank.  Any payment to be made to Executive pursuant to Sections 10(a) and 11 are subject to and conditioned upon compliance with 12 U.S.C. § 1828(k) and any regulations promulgated thereunder, as applicable.  The Company shall in good faith seek to obtain, if necessary or required, any consent or approval from the Federal Deposit Insurance Corporation or any other applicable regulatory agency and any successors thereto with respect to any payment to be made or any benefits to be provided to Executive pursuant to the terms of Section 10(a) and 11, and shall not make any such payment unless and until any applicable consents or approvals with respect thereto have been obtained.

 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

8

FIRST BANCORP

By:         _____________________________

                                                                                                                Name:   

                                                                                                                Title:      

                                                                                                                Date:      _____________________________

FIRSTBANK PUERTO RICO

                                                                                                                By:         __________________________

                                                                                                                Name:   

                                                                                                                Title:      

                                                                                                                Date:      ___________________________

Attest:    ____________________________

                [Name]

Date:      ____________________________ 

                                                                                                                Executive

                                                                                                                By:         ____________________________

                                                                                                                Name:    [Executive]

                                                                                                                Date:      ____________________________

9

EX-31

 

EXHIBIT 31.1

I, Aurelio Alemán, certify that:

1.I have reviewed this Form 10-Q of First BanCorp.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August  9, 2018	By:	/s/ Aurelio Alemán
		Aurelio Alemán
		President and Chief Executive Officer

1

EX-31

 

EXHIBIT 31.2

I, Orlando Berges, certify that:

1.I have reviewed this Form 10-Q of First BanCorp.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August  9, 2018	By:	/s/ Orlando Berges
		Orlando Berges
		Executive Vice President and Chief Financial Officer

1

EX-32

 

EXHIBIT 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of First BanCorp., a Puerto Rico corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 (the “Form l0-Q”) of the Company fully complies with the requirements of section l3(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2018	/s/ Aurelio Alemán
	Name: Aurelio Alemán
	Title: President and Chief Executive Officer

1

EX-32

 

EXHIBIT 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of First BanCorp., a Puerto Rico corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

             The Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 (the “Form l0-Q”) of the Company fully complies with the requirements of section l3(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 9, 2018	/s/ Orlando Berges
	Name: Orlando Berges
	Title: Executive Vice President and Chief Financial Officer

1

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 31, 2018
Document Documentand Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Trading Symbol	fbp
Entity Registrant Name	FIRST BANCORP /PR/
Entity Central Index Key	0001057706
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		217,183,977

XML

Consolidated Statements of Financial Condition (Unaudited) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
ASSETS
Cash and due from banks		$ 790,809	$ 705,980
Money market investments:
Time deposits with other financial institutions		300	3,126
Other short term investments		97,290	7,289
Total money market investments		97,590	10,415
Investment securities available for sale, at fair value:
Securities pledged that can be repledged		241,378	350,123
Other investment securities		1,794,632	1,540,893
Total investment securities available for sale		2,036,010	1,891,016
Investment securities held to maturity, at amortized cost:
Securities pledged that can be repledged		0	0
Other investment securities		150,486	150,627
Total investment securities held to maturity, fair value of $135,430 (2017- $131,302)		150,486	150,627
Other equity securities		43,400	43,119
Loans, net of allowance for loan and lease losses of $222,035 (2017 - $231,843)		8,418,256	8,618,633
Loans held for sale, at lower of cost or market		80,815	32,980
Total loans, net		8,499,071	8,651,613
Premises and equipment, net		144,507	141,895
Other real estate owned		143,355	147,940
Accrued interest receivable on loans and investments		47,171	57,172
Other assets		432,463	461,491
Total assets		12,384,862	12,261,268
LIABILITIES
Non-interest-bearing deposits		2,317,149	1,833,665
Interest-bearing deposits		6,900,934	7,188,966
Total deposits		9,218,083	9,022,631
Securities sold under agreements to repurchase	[1],[2]	200,000	300,000
Advances from the Federal Home Loan Bank (FHLB)		715,000	715,000
Other borrowings		184,150	208,635
Accounts payable and other liabilities		165,950	145,905
Total liabilities		10,483,183	10,392,171
Preferred stock, authorized 50,000,000 shares:
Non-cumulative Perpetual Monthly Income Preferred Stock: issued - 22,004,000 shares, outstanding 1,444,146 shares, aggregate liquidation value of $36,104		36,104	36,104
Common stock, $0.10 par value, authorized, 2,000,000,000 shares; issued, 221,724,062 shares (2017 - 220,382,343 shares issued)		22,172	22,038
Less: Treasury stock (at par value)		(453)	(410)
Common stock outstanding, 217,185,449 shares outstanding (2017 - 216,278,040 shares outstanding)		21,719	21,628
Additional paid-in capital		937,919	936,772
Retained earnings, includes legal surplus reserve of $59,693		958,044	895,208
Accumulated other comprehensive loss , net of tax of $7,752		(52,107)	(20,615)
Total stockholders' equity		1,901,679	1,869,097
Total liabilities and stockholders' equity		$ 12,384,862	$ 12,261,268

[1] As of June 30, 2018, includes $200 million with an average rate of 2.11% that lenders have the right to call before their contractual maturities at various dates beginning on July 19, 2018. Subsequent to June 30, 2018, no lender has exercised its call option on repurchase agreements.

[2] Reported net of securities purchased under agreements to repurchase (reverse repurchase agreements) by counterparty, when applicable, pursuant to Topic ASC 210-20-45-11.

XML

Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Allowance for loan and lease losses	$ 222,035	$ 222,035	$ 231,843
Preferred stock, shares authorized	50,000,000	50,000,000	50,000,000
Preferred stock, shares issued	22,004,000	22,004,000	22,004,000
Preferred stock, shares outstanding	1,444,146	1,444,146	1,444,146
Preferred stock, liquidation value	$ 36,104	$ 36,104	$ 36,104
Common stock, par value	$ 0.1	$ 0.1	$ 0.1
Common stock, shares authorized	2,000,000,000	2,000,000,000	2,000,000,000
Common stock, shares issued	221,724,062	221,724,062	220,382,343
Common stock, shares outstanding	217,185,449	217,185,449	216,278,040
Income tax expense	$ 10,159	$ 17,917
Legal Surplus Amount	59,693	59,693	$ 59,693
Held To Maturity Securities Fair Value	$ 135,430	135,430	131,032
Accumulated Other Comprehensive Income (Loss) [Member]
Income tax expense		$ 7,752	$ 7,752

XML

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Interest and dividend income:
Loans	$ 137,538	$ 132,697	$ 270,713	$ 264,139
Investment securities	14,732	13,950	28,719	27,252
Money market investments and interest-bearing cash accounts	3,363	727	5,619	1,211
Total interest income	155,633	147,374	305,051	292,602
Interest expense:
Deposits	16,974	16,348	33,945	32,320
Securities sold under agreements to repurchase	2,543	2,765	4,840	5,388
Advances from FHLB	3,410	2,292	6,782	4,414
Other borrowings	2,235	2,065	4,320	4,027
Total interest expense	25,162	23,470	49,887	46,149
Net interest income	130,471	123,904	255,164	246,453
Provision for loan and lease losses	19,536	18,096	40,080	43,538
Net interest income after provision for loan and lease losses	110,935	105,808	215,084	202,915
Non-interest income:
Service charges and fees on deposit accounts	5,344	5,803	10,432	11,593
Mortgage banking activities	4,835	4,846	9,000	8,462
Net gain on sale of investments	0	371	0	371
Other-than-temporary impairment (OTTI) losses on available-for-sale debt securities:
Total OTTI losses	0	0	0	(12,231)
Portion of other-than-temporary impairment recognized in other comprehensive income (OCI)	0	0	0	0
Net impairment losses on available-for-sale debt securities	0	0	0	(12,231)
Gain on early extinguishment of debt	0	0	2,316	0
Insurance commission income	1,780	1,855	5,135	5,442
Other non-interest income	8,513	7,674	16,373	15,155
Total non-interest income	20,472	20,549	43,256	28,792
Non-interest expenses:
Employees' compensation and benefits	39,555	38,409	80,239	77,062
Occupancy and equipment	13,746	13,759	28,851	27,847
Business promotion	4,016	3,192	6,592	6,473
Professional fees	10,193	11,800	20,253	22,756
Taxes, other than income taxes	3,637	3,745	7,493	7,421
Insurance and supervisory fees	3,701	4,855	7,556	9,764
Net loss on real estate owned (OREO) and OREO operations	5,655	3,369	5,845	7,445
Credit and debit card processing expenses	3,766	3,566	7,303	6,397
Communications	1,582	1,628	3,064	3,171
Other non-interest expenses	4,365	4,746	9,047	8,615
Total non-interest expenses	90,216	89,069	176,243	176,951
Income before income taxes	41,191	37,288	82,097	54,756
Income tax expense	(10,159)	(9,290)	(17,917)	(1,217)
Net income	31,032	27,998	64,180	53,539
Net income attributable to common stockholders	$ 30,363	$ 27,329	$ 62,842	$ 52,201
Net income per common share:
Basic	$ 0.14	$ 0.13	$ 0.29	$ 0.24
Diluted	0.14	0.13	0.29	0.24
Dividends declared per common share	$ 0	$ 0	$ 0	$ 0

XML

CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Statement [Abstract]
Net gain on sale of investments	$ 0	$ (371)	$ 0	$ (371)

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net income		$ 31,032	$ 27,998	$ 64,180	$ 53,539
Amount Reclassified Out Of Accumulated Other Comprehensive Income Loss Per ASU 2016 01		0	0	6	0
Other comprehensive (loss) income:
Unrealized (loss) gain on debt securities on which an other-than-temporary impairment has been recognized		(294)	1,127	202	(1,803)
Reduction of non-credit OTTI component on securities sold		0	5,678	0	5,678
Reclassification adjustment for net gain included in net income		0	(371)	0	(371)
Reclassification adjustment for other-than-temporary impairment on debt securities included in net income	[1]	0	0	0	12,231
All other unrealized gains and losses on available-for-sale securities:
All other unrealized holding (losses) gains on available-for-sale securities arising during the period		(7,151)	2,631	(31,700)	4,026
Other comprehensive income (loss) for the period		(7,445)	9,065	(31,492)	19,761
Total comprehensive (loss) income		$ 23,587	$ 37,063	$ 32,688	$ 73,300

[1] Credit losses on Puerto Rico government debt securities, recorded in the first quarter of 2017.

XML

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - USD ($)		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Total, net of tax		$ 64,180,000	$ 53,539,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,686,000	8,230,000
Amortization of intangible assets		1,868,000	2,242,000
Provision for loan and lease losses		40,080,000	43,538,000
Deferred income tax expense		11,479,000	728,000
Stock-based compensation		3,983,000	3,599,000
Gain on sales of investments		0	(371,000)
Gain on early extinguishment of debt		(2,316,000)	0
OTTI on debt securities	[1]	0	12,231,000
Unrealized loss (gain) on derivative instruments		103,000	(307,000)
Net gain on sales of premises and equipment and other assets		(840,000)	(133,000)
Net gain on sales of loans		(2,921,000)	(3,696,000)
Net amortization/accretion of premiums, discounts and deferred loan fees and costs		(3,937,000)	(4,235,000)
Originations and purchases of loans held for sale		(160,584,000)	(182,678,000)
Sales and repayments of loans held for sale		173,977,000	188,890,000
Loans held for sale valuation adjustment		558,000	0
Amortization of broker placement fees		676,000	1,007,000
Net amortization/accretion of premium and discounts on investment securities		1,090,000	40,000
Decrease in accrued interest receivable		9,948,000	10,000
Increase in accrued interest payable		115,000	567,000
Decrease in other assets		11,536,000	4,225,000
Increase in other liabilities		1,591,000	4,148,000
Net cash provided by operating activities		158,272,000	131,574,000
Cash flows from investing activities:
Principal collected on loans		1,282,545,000	1,362,537,000
Loans originated and purchased		(1,217,117,000)	(1,498,967,000)
Proceeds from sale of loans held for investment		33,709,000	53,245,000
Proceeds from sale of repossessed assets		24,484,000	20,999,000
Proceeds from sale of available-for-sale securities		0	23,408,000
Purchases of available-for-sale securities		(352,576,000)	(12,440,000)
Proceeds from principal repayments and maturities of available-for-sale securities		174,574,000	119,664,000
Proceeds from principal repayments and maturities of held-to-maturity securities		141,000	141,000
Additions to premises and equipment		(10,305,000)	(5,269,000)
Proceeds from sale of premises and equipment and other assets		1,857,000	1,109,000
Proceeds from the settlement of insurance claims		5,118,000	0
Net redemptions/purchases of other investment securities		(132,000)	80,000
Net cash (used in) provided by investing activities		(57,438,000)	64,347,000
Cash flows from financing activities:
Net increase (decrease) in deposits		196,687,000	(64,810,000)
Change in securities sold under agreements to repurchase		(100,000,000)	0
Net FHLB advances proceeds		0	5,000,000
Repayment of junior subordinated debentures		(21,434,000)	0
Repurchase of outstanding common stock		(2,745,000)	(1,894,000)
Dividends paid on preferred stock		(1,338,000)	(1,338,000)
Net cash provided (used in) financing activities		71,170,000	(63,042,000)
Net increase in cash and cash equivalents		172,004,000	132,879,000
Cash and cash equivalents at beginning of period		716,395,000	299,685,000
Cash and cash equivalents at end of period		888,399,000	432,564,000
Cash and cash equivalents include:
Cash and Cash Equivalents, at Carrying Value, Total		$ 716,395,000	$ 299,685,000

[1] Credit losses on Puerto Rico government debt securities, recorded in the first quarter of 2017.

XML

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]
Total stockholders' equity			$ 21,745,000	$ 931,856,000	$ 830,928,000	$ (34,390,000)
Balance at beginning of period at Dec. 31, 2016			21,745,000	931,856,000	830,928,000	(34,390,000)
Common stock issued as compensation			27,000	(27,000)
Common stock issued for exercised warrants			0	0
Common stock withheld for taxes			(33,000)	(1,861,000)
Restricted stock grants			95,000	(95,000)
Restricted stock forfeited			(238,000)	(238,000)
Stock-based compensation				3,599,000
Net income	$ 53,539,000				53,539,000
Dividends on preferred stock	(1,338,000)				(1,338,000)
Amount reclassified from accumulated other comprehensive loss per ASU 201601					0
Other comprehensive income (loss), net of tax	19,761,000					19,761,000
Balance at end of period at Jun. 30, 2017	1,859,910,000	$ 36,104,000	21,596,000	933,710,000	883,129,000	(14,629,000)
Total stockholders' equity	1,859,910,000	36,104,000	21,596,000	931,856,000	883,129,000	(14,629,000)
Total stockholders' equity	1,859,910,000	36,104,000	21,596,000	933,710,000	883,129,000	(14,629,000)
Total stockholders' equity	1,869,097,000		21,628,000	936,772,000	895,208,000	(20,615,000)
Balance at beginning of period at Dec. 31, 2017	1,869,097,000		21,628,000	936,772,000	895,208,000	(20,615,000)
Common stock issued as compensation			27,000	(27,000)
Common stock issued for exercised warrants			73,000	(73,000)
Common stock withheld for taxes			(42,000)	(2,703,000)
Restricted stock grants			34,000	(34,000)
Restricted stock forfeited			(1,000)	(1,000)
Stock-based compensation				3,983,000
Net income	64,180,000				64,180,000
Dividends on preferred stock	(1,338,000)				(1,338,000)
Amount reclassified from accumulated other comprehensive loss per ASU 201601					(6,000)
Other comprehensive income (loss), net of tax	(31,492,000)					(31,492,000)
Balance at end of period at Jun. 30, 2018	1,901,679,000	36,104,000	21,719,000	937,919,000	958,044,000	(52,107,000)
Total stockholders' equity	1,869,097,000	36,104,000	21,628,000	936,772,000	895,208,000	(52,107,000)
Total stockholders' equity	$ 1,901,679,000	$ 36,104,000	$ 21,719,000	$ 937,919,000	$ 958,044,000	$ (52,107,000)

XML

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2018

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The Consolidated Financial Statements (unaudited) of First BanCorp. (the “Corporation”) have been prepared in conformity with the accounting policies stated in the Corporation’s Audited Consolidated Financial Statements included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report on Form 10-K”). Certain information and note disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted from these statements pursuant to the rules and regulations of the SEC and, accordingly, these financial statements should be read in conjunction with the Audited Consolidated Financial Statements of the Corporation for the year ended December 31, 2017, which are included in the 2017 Annual Report on Form 10-K. All adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the statement of financial position, results of operations and cash flows for the interim periods have been reflected. All significant intercompany accounts and transactions have been eliminated in consolidation.

The results of operations for the quarter and six-month period ended June 30, 2018 are not necessarily indicative of the results to be expected for the entire year.

Adoption of New Accounting Requirements and Recently Issued but Not Yet Effective Accounting Requirements

The Financial Accounting Standards Board (“FASB”) has issued the following accounting pronouncements and guidance relevant to the Corporation’s operations:

Revenue Recognition

In May 2014, the FASB updated the Accounting Standards Codification (the “Codification” or the “ASC”) to create a new, principles-based revenue recognition framework. This guidance requires entities to recognize revenues when they transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance describes a 5-step process that entities can apply to achieve the core principle of revenue recognition and requires disclosures sufficient to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers and the significant judgments used in determining that information.  

The Corporation adopted the guidance on January 1, 2018 using a modified retrospective method, in which the guidance applies to existing contracts in effect at January 1, 2018 and new contracts entered into after this date. Most of the Corporation’s revenue, including net interest income, gain on sale of loans, and mortgage servicing fees is explicitly out of scope of the new revenue recognition guidance. The Corporation conducted an assessment of the revenue streams that were potentially affected by the new guidance and reviewed contracts in scope to ensure compliance with the new guidance.

The Corporation has identified service charges on deposits and related cash management services, insurance commissions, merchant-related income, and card interchange income as its most significant revenue streams within the scope of the standard.  For the revenue streams that were found in scope, management reviewed in detail its most significant contracts with corresponding customers. The adoption of this guidance did not have a material effect on the Corporation’s consolidated financial statements. However, additional disclosures required by the standard have been included in Note 23 – Revenue from Contracts with Customers, to the Corporation’s consolidated financial statements.

Recognition and Measurement of Financial Assets and Liabilities

In January 2016, the FASB updated the Codification to require an entity to: (i) measure equity investments at fair value through net income, with certain exceptions, thus, eliminating eligibility for the available-for-sale category; (ii) present in OCI the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price; and (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available-for-sale debt securities in combination with other deferred tax assets. The guidance provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment, adjusted for certain observable price changes. The guidance also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The adoption of this standard during the first quarter of 2018 did not have a material effect on the Corporation’s consolidated financial statements.

Statement of Cash Flows Presentation – Restricted Cash

In August 2016 and November 2016, the FASB updated the Codification to provide specific guidance on the classification and presentation of certain cash payments and cash receipts, including changes in restricted cash, in the statement of cash flows. This guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The amendments in this update must be applied using a retrospective transition method to each period presented. The Corporation adopted the provisions of this guidance during the first quarter of 2018 without any material effect on the Corporation’s consolidated financial statements.

Income Tax Effect of Intra-Entity Transfers of Assets

In October 2016, the FASB updated the Codification to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. With this update, entities are required to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Under prior GAAP, the recognition of current and deferred income taxes for an intra-entity asset transfer was prohibited until the assets are sold to an outside party. This Update does not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory. For example, GAAP requires an entity to disclose a comparison of income tax expense (benefit) with statutory expectations (a rate reconciliation for public entities or a description of the nature of each significant reconciling item for nonpublic entities) and also requires an entity to disclose the types of temporary differences and carryforwards that give rise to a significant portion of deferred income taxes. The Corporation adopted the provisions of this guidance during the first quarter of 2018 without any effect on the Corporation’s consolidated financial statements.

Clarifying what Changes Qualify as a Modification of a Share-Based Payment Award

In May 2017, the FASB updated the codification to reduce the cost and complexity when applying ASC Topic 718, “Compensation – Stock Compensation” (“ASC Topic 718”), and standardize the practice of applying ASC Topic 718 to financial reporting. ASC Topic 718 prescribes the accounting treatment of a modification in the terms or conditions of a share-based payment award. The guidance clarifies what changes would qualify as a modification. This was done by better defining what does not constitute a modification. In order for a change to a share-based arrangement to not require ASC Topic 718 modification treatment, all of the following must be met: (i) the fair value (or alternative measurement method used) of the modified award must equal the fair value (or alternative measurement method used) of the original award immediately before the original award is modified; (ii) the vesting conditions of the modified award must be the same as the vesting conditions of the original award immediately before the original award is modified; and (iii) the classification of the modified award as an equity instrument or a liability instrument must be the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in ASC Topic 718 apply regardless of whether an entity is required to apply modification accounting under this update. The amendments in this update must be applied prospectively to an award modified on or after the adoption date. The Corporation adopted the provisions of this guidance on January 1, 2018 without any effect on the Corporation’s consolidated financial statements. The Corporation’s Omnibus Plan provides for equity-based compensation incentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, cash-based awards and other stock-based awards. If any change occurs in the future to awards issued under the Omnibus Plan, the Corporation will evaluate it under this guidance.

Lease Accounting

In February 2016, the FASB updated the Codification to replace ASC 840, “Leases (Topic 840)” (“ASC Topic 840”), with new guidance for the financial reporting about leasing transactions. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires the recognition of only capital leases on the balance sheet, the guidance will require both types of leases to be recognized on the balance sheet. The guidance will also require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information and additional information about the amounts recorded in the financial statements. The FASB issued an update in January 2018 providing an optional transition practical expedient to not evaluate under new ASC Topic 842, “Leases” (“ASC Topic 842”), land easements that exist or expired before the entity’s adoption of ASC Topic 842 and were not previously accounted for as leases. In addition, the FASB issued an update in July 2018 that makes 16 technical corrections to this guidance that alleviate the potential for unintended consequences from applying the new standard. The guidance on leases will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. Entities are required to use a modified retrospective approach for leases that existed prior to, or are entered into after, the beginning of the earliest comparative period presented in the financial statements or they can elect an additional and optional transition method to adopt the new leases. Under the optional transition method, an entity applies the new standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Also, under the optional transition method, the entity’s reporting for comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with ASC Topic 840.

The update is expected to affect the Corporation’s consolidated financial statements since the Corporation has operating and lease arrangements for which it is a lessee. The Corporation has identified the population of its current leases and is in the process of obtaining the data necessary to estimate the amount of right-of-use assets (“ROU”) and lease liabilities that will be recognized upon adoption. Therefore, the Corporation is still evaluating the effect that the adoption of this accounting pronouncement will have on its consolidated financial statements and preliminarily expects that amounts to be recognized as ROU will not be material as a percentage of the Corporation’s total assets.

Accounting for Financial Instruments – Credit Losses

In June 2016, the FASB updated the Codification to introduce new guidance for the accounting for credit losses. The guidance includes an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The CECL model will apply to: (1) financial assets subject to credit losses and measured at amortized cost and (2) certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees, and net investments in leases, as well as reinsurance and trade receivables. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses (“ECL”) should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating ECL. The guidance does not prescribe a specific method to make the estimate, so its application will require significant judgment.

Generally, upon initial recognition of a financial asset, the estimate of the ECL will be recorded through an allowance for loan and lease losses with an offset to current earnings. Subsequently, the ECL will need to be reassessed each period, and both negative and positive changes to the estimate will be recognized through an adjustment to the allowance for loan and lease losses and earnings.

The guidance amends the current OTTI model for available-for-sale debt securities. The new available-for-sale debt security model will require an estimate of ECL only when the fair value is below the amortized cost of the asset. The length of time the fair value of an available-for-sale debt security has been below the amortized cost will no longer affect the determination of whether a credit loss exists. As such, the new available-for-sale debt security model is not an OTTI model. In addition, credit losses on available-for-sale debt securities will now be limited to the difference between the security’s amortized cost basis and its fair value. The available-for-sale debt security model will also require the use of an allowance to record estimated credit losses (and subsequent recoveries).

The purchased financial assets with credit deterioration (“PCD”) model applies to purchased financial assets (measured at amortized cost or available-for-sale) that have experienced more than insignificant credit deterioration since origination. This represents a change from the scope of what are considered purchased credit-impaired assets under today’s model. In contrast to the accounting for originated or purchased assets that do not qualify as PCD, the initial estimate of expected credit losses for a PCD would be recognized through an allowance for loan and lease losses with an offset to the cost basis of the related financial asset at acquisition (i.e., there is no effect on net income at initial recognition). Subsequently, the accounting will follow the applicable CECL or available-for-sale debt security impairment model with all adjustments of the allowance for loan and lease losses recognized through earnings. Beneficial interests classified as held-to-maturity or available-for-sale will need to apply the PCD model if the beneficial interest meets the definition of PCD or if there is a significant difference between contractual and expected cash flows at initial recognition.

In general, the new guidance will require modified retrospective application to all outstanding instruments, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of the first period in which the guidance becomes effective. However, prospective application is required for PCD assets previously accounted for under ASC Topic 310-30, “Receivables,” and for debt securities for which an OTTI was recognized prior to the date of adoption.

This guidance also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, public business entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year).

The guidance will be effective for public business entities that are SEC filers in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the guidance will be permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The Corporation has developed a transition roadmap in order to comply on a timely basis with the implementation of this new accounting framework. The Corporation has created a working group with members from multiple areas across the organization that is responsible for assessing the effect of the standard, evaluating interpretative issues, and evaluating the current credit loss models against the new guidance to determine any necessary changes and other related implementation activities. The working group provides periodic updates to the Corporation’s CECL Management Committee, which has oversight responsibilities for the implementation efforts. The Corporation continues to evaluate the effect that this guidance, including the method of implementation, will have on its consolidated financial statements.

Subsequent Measurement of Goodwill

In January 2017, the FASB updated the Codification to simplify the subsequent measurement of goodwill by eliminating Step 2 from the current two-step goodwill impairment test. This guidance provides that a goodwill impairment test be conducted by comparing the fair value of a reporting unit with its carrying amount. Entities are to recognize an impairment charge for goodwill equal to the excess of the carrying amount over the reporting unit’s fair value. Entities have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The effect of this guidance will depend upon the performance of the reporting units that have goodwill and the market conditions affecting the fair value of each reporting unit going forward.

Amortization of Premiums and Discounts of Callable Debt Securities

In March 2017, the FASB updated the Codification to shorten the amortization period for certain purchased callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. With respect to securities held at a discount, the amendments do not require an accounting change; thus, the discount continues to be amortized to maturity. Under current GAAP, premiums and discounts on callable debt securities generally are amortized to the maturity date. An entity must have a large number of similar loans to consider estimates of future principal prepayments when applying the interest method. However, an entity that holds an individual callable debt security at a premium may not amortize that premium to the earliest call date. If that callable debt security is subsequently called, the entity records a loss equal to the unamortized premium. The amendments in this update more closely align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying securities. In most cases, market participants price securities to the call date that produces the worst yield when the coupon is above current market rates (that is, the security is trading at a premium) and price securities to maturity when the coupon is below market rates (that is, the security is trading at a discount) in anticipation that the borrower will act in its economic best interest. As a result, the amendments more closely align interest income recorded on bonds held at a premium or a discount with the economics of the underlying instrument. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of this guidance is not expected to have a material effect on the Corporation’s consolidated statement of financial condition or results of operations. As of June 30, 2018, the Corporation had $4.0 million of callable debt securities held at a premium (unamortized premium of $32 thousand).

Derivatives and Hedging

In August 2017, the FASB updated the Codification to: (i) expand hedge accounting for nonfinancial and financial risk components and amend measurement methodologies to more closely align hedge accounting with a company’s risk management activities; (ii) decrease the complexity of preparing and understanding hedge results by eliminating the separate measurement and reporting of hedge ineffectiveness; (iii) enhance transparency, comparability, and understanding of hedge results through enhanced disclosures and a change in the presentation of hedge results to align the effects of the hedging instrument and the hedged item; and (iv) reduce the cost and complexity of applying hedge accounting by simplifying the manner in which assessments of hedge effectiveness may be performed. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The guidance requires companies to apply requirements to existing hedging relationships on the date of adoption, and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. As of June 30, 2018, all of the derivatives held by the Corporation were considered economic undesignated hedges. The adoption of this guidance is not expected to have a material effect on the Corporation’s consolidated statement of financial condition or results of operations.

Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income

In February 2018, the FASB updated the Codification to provide entities with an option to reclassify to retained earnings, tax effects that were stranded in accumulated other comprehensive income, pursuant to the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. This guidance may be early adopted in any interim or annual period for which financial statements have not yet been issued and applied either in the period of adoption or retrospectively to each period in which the effect of the change in the corporate tax rate in the Tax Act is recognized. The Corporation is currently evaluating whether it will adopt this guidance. If adopted, the Corporation does not expect a material effect on its consolidated financial statements.

Improvements to Nonemployee Share-Based Payment Accounting

In June 2018, the FASB updated the Codification as part of a simplification initiative to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees and to address and improve aspects of the accounting for non-employee share-based payment transactions. The amendments will be effective for interim and annual reporting periods beginning after December 15, 2018. The adoption of this guidance is not expected to have an effect on the Corporation’s consolidated financial statements.

XML

UPDATE ON IMPACTS OF NATURAL DISASTERS

6 Months Ended

Jun. 30, 2018

Natural Disasters [Text Block]

NOTE 2 – UPDATE ON EFFECTS OF NATURAL DISASTERS

Two strong hurricanes affected the Corporation’s service areas during September 2017. The following summarizes the more significant continuing financial repercussions of these natural disasters for the Corporation and for its major subsidiary, FirstBank.

Credit Quality and Allowance for Loan and Lease Losses

Relationship officers continued to closely monitor the performance of hurricane-affected commercial loan customers during 2018. Information provided by these commercial loan officers and statistics on the performance of consumer and residential credits were factored into the determination of the allowance for loan and lease losses as of June 30, 2018. Although the identification and evaluation of hurricane-affected credits has been completed, management’s assessment of the hurricanes’ effect is still subject to uncertainties, both those specific to some individual customers, such as the resolution of insurance claims, and those applicable to the overall economic prospects of the hurricane-affected areas as a whole. During the second quarter and six-month period ended June 30, 2018, the Corporation recorded a net loan loss reserve release of approximately $2.1 million and $8.5 million, respectively, in connection with revised estimates associated with the effects of the hurricanes. The revised estimates were primarily attributable to updated assessments of financial performance and repayment prospects of certain individually-assessed commercial credits and, to a lesser extent, lower reserve requirements resulting from payments received during the first six-months of 2018 that reduced the balance of the consumer and residential mortgage loan portfolios outstanding on the dates of the hurricanes.

As of June 30, 2018, the hurricane-related qualitative allowance amounted to $42.2million (December 31, 2017 - $55.6 million). With the future resolution of uncertainties and the ongoing collection of information on individual commercial customers and statistics on the consumer and residential loan portfolios, the loss estimate will be revised as needed. Refer to Note 7 – Loans Held for Investment, to the consolidated financial statements for information about non-performing loans and early delinquency statistics.

Disaster Response Plan Costs, Casualty Losses and Related Insurance

The Corporation has incurred a variety of costs to operate in disaster response mode, and some facilities and their contents, including certain OREO properties, were damaged by the storms. The Corporation maintains insurance for casualty losses, as well as for reasonable and necessary disaster response costs and certain revenue lost through business interruption. Substantially all of the significant disaster response costs had been incurred by the end of the second quarter of 2018. Insurance claim receivables were established for some of the individual costs, when incurred, based on management’s understanding of the underlying coverage and when realization of the claim was deemed probable. During the second quarter of 2018, the Corporation reached a final settlement on certain insurance claims arising from the hurricanes. With this settlement, the Corporation received proceeds of approximately $4.3 million, primarily related to repairs and maintenance costs incurred on certain OREO properties, and $0.8 million related to a loan receivable fully charged-off in prior periods. The insurance proceeds were recorded against incurred losses, previously-established accounts receivable, or loan recoveries, as applicable. Insurance recoveries are recorded in the same income statement caption as the incurred losses. Recoveries from insurance proceeds in excess of losses incurred, if any, are recognized as a gain from insurance proceeds and reported as part of “other non-interest income” in the statement of income when the insurance proceeds are received, or when all contingencies related to the insurance claim are resolved. As of June 30, 2018, the Corporation still had an insurance claim receivable of $6.3 million, included as part of “other assets” in the statement of financial condition. Management also believes that there is a possibility that some gains will be recognized with respect to casualty and lost revenue claims in future periods, but this is contingent on reaching agreement on the Corporation’s claims with the insurance carriers.

Liquidity Management

The Corporation experienced rapid accumulation of deposits after the hurricanes in the fourth quarter of 2017 and the first six months of 2018. Total deposits as of June 30, 2018, excluding brokered CDs, increased $523.3 million from December 31, 2017 and $884.8 million since September 30, 2017. The most significant increase was in non-interest-bearing demand deposits, which grew 26%, or $483.5 million from December 31, 2017 and $731.0 million, or 46%, since September 30, 2017. Hurricane-related factors, such as the effect of disaster relief funds and settlements of insurance claims, continue to contribute to this growth. Although management expects the balances accumulated by deposit customers in the hurricane-affected areas to reduce over time, it is difficult to predict when and to what degree, and there may be further growth as insurance claims are resolved and additional disaster-recovery funds are distributed.

XML

EARNINGS PER COMMON SHARE

6 Months Ended

Jun. 30, 2018

EARNINGS PER COMMON SHARE

NOTE 3 – EARNINGS PER COMMON SHARE

	The calculations of earnings per common share for the quarters and six-month periods ended June 30, 2018 and 2017 are as follows:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands, except per share information)
Net income		$	31,032	$	27,998	$	64,180	$	53,539
Less: Preferred stock dividends			(669)		(669)		(1,338)		(1,338)
Net income attributable to common stockholders		$	30,363	$	27,329	$	62,842	$	52,201
Weighted-Average Shares:
Average common shares outstanding			215,737		213,900		215,194		213,621
Average potential dilutive common shares			929		2,932		1,289		3,482
Average common shares outstanding - assuming dilution			216,666		216,832		216,483		217,103
Earnings per common share:
Basic		$	0.14	$	0.13	$	0.29	$	0.24
Diluted		$	0.14	$	0.13	$	0.29	$	0.24

Earnings per common share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares issued and outstanding. Net income attributable to common stockholders represents net income adjusted for any preferred stock dividends, including any dividends declared, and any cumulative dividends related to the current dividend period that have not been declared as of the end of the period. Basic weighted-average common shares outstanding exclude unvested shares of restricted stock that do not contain non-forfeitable dividend rights.

Potential dilutive common shares consist of unvested shares of restricted stock that do not contain non-forfeitable dividend rights, performance units that do not contain non-forfeitable dividend rights if the performance condition is met as of the end of the reporting period, and warrants outstanding during the period using the treasury stock method. This method assumes that the potential dilutive common shares are issued and outstanding and the proceeds from the exercise, in addition to the amount of compensation cost attributable to future services, are used to purchase common stock at the exercise date. The difference between the numbers of potential dilutive shares issued and the shares purchased is added as incremental shares to the actual number of shares outstanding to compute diluted earnings per share. Unvested shares of restricted stock and performance units that do not contain non-forfeitable dividend rights, and warrants outstanding during the period that result in lower potential dilutive shares issued than shares purchased under the treasury stock method, are not included in the computation of dilutive earnings per share since their inclusion would have an antidilutive effect on earnings per share.

On May 17, 2018, the U.S. Treasury exercised its warrant to purchase 1,285,899 shares of the Corporation’s common stock on a cashless basis, resulting in the issuance of 730,571 shares of common stock.

XML

STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2018

STOCK-BASED COMPENSATION

NOTE 4 – STOCK-BASED COMPENSATION.

On May 24, 2016, the Corporation’s stockholders approved the amendment and restatement of the First BanCorp. Omnibus Incentive Plan, as amended (the “Omnibus Plan”), to, among other things, increase the number of shares of common stock reserved for issuance under the Omnibus Plan, extend the term of the Omnibus Plan to May 24, 2026 and re-approve the material terms of the performance goals under the Omnibus Plan for purposes of the then Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended. The Omnibus Plan provides for equity-based compensation incentives (the “awards”) through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, cash-based awards and other stock-based awards. The Omnibus Plan authorizes the issuance of up to14,169,807shares of common stock, subject to adjustments for stock splits, reorganizations, and other similar events. As of June 30, 2018, 6,956,802 authorized shares of common stock were available for issuance under the Omnibus Plan. The Corporation’s Board of Directors, based on the recommendation of the Corporation’s Compensation and Benefits Committee, has the power and authority to determine those eligible to receive awards and to establish the terms and conditions of any awards, subject to various limits and vesting restrictions that apply to individual and aggregate awards.

Restricted Stock

Under the Omnibus Plan, the Corporation may grant restricted stock to plan participants, subject to forfeiture upon the occurrence of certain events until the dates specified in the participant’s award agreement. While the restricted stock is subject to forfeiture and does not contain non-forfeitable dividend rights, restricted stock participants may exercise full voting rights. The restricted stock granted under the Omnibus Plan is typically subject to a vesting period. During the first six months of 2018, the Corporation awarded 342,439 shares of restricted stock to employees, fifty percent (50%) of those shares vest in two years from the grant date and the remaining(50%) vest in three years of the grant date. Included in those 342,439 shares of restricted stock were 20,447 shares granted to retirement-eligible employees at the grant date. The fair value of the shares of restricted stock granted in the first six months of 2018 was based on the market price of the Corporation’s outstanding common stock on the date of the grant.

	The following table summarizes the restricted stock activity in the first six months of 2018 under the Omnibus Plan:
		Six-Month Period Ended
		June 30, 2018
		Number of shares		Weighted-Average
		of restricted		Grant Date
		stock		Fair Value
Non-vested shares at beginning of year		1,816,968	$	2.76
Granted		342,439		6.30
Forfeited		(9,500)		2.99
Vested		(1,086,822)		2.09
Non-vested shares at June 30, 2018		1,063,085	$	4.59

For the quarter and six-month period ended June 30, 2018, the Corporation recognized $0.8 million and $1.9 million, respectively, of stock-based compensation expense related to restricted stock awards, compared to $1.0 million and $2.0million for the same periods in 2017, respectively. As of June 30, 2018, there was $3.2 million of total unrecognized compensation cost related to non-vested shares of restricted stock. The weighted average period over which the Corporation expects to recognize such cost is 1.5 years. The total expense determined for restricted stock awards granted to retirement-eligible employees was charged against earnings at the grant date.

During the first half of 2017, the Corporation awarded 3,644 shares of restricted stock subject to a one-year vesting period to an independent director appointed in the first quarter of 2017. In addition, during the first half of 2017, the Corporation awarded 951,332 shares of restricted stock to employees subject to a vesting period of two years. Included in those 951,332 shares of restricted stock were 838,332shares granted in the first quarter of 2017 to certain senior officers consistent with the requirements of the Troubled Asset Relief Program (“TARP”) Interim Final Rule. On May 10, 2017, the United States Department of the Treasury (the “U.S. Treasury”) announced that it had sold all of its remaining 10,291,553 shares of the Corporation’s common stock. As a result of the sale by the U.S. Treasury, the Corporation is no longer subject to the compensation-related restrictions under TARP, which substantially limited the Corporation’s ability to award short-term and long-term incentives to the Corporation’s executives, and the Corporation’s senior officers are no longer subject to the transferability restrictions on their shares of restricted stock. However, since the U.S. Treasury did not recover the full amount of its original investment under TARP, the senior officers forfeited 2,370,571, or 50%, of their outstanding shares of restricted stock, resulting in a reduction in the number of common shares outstanding.

The fair value of the shares of restricted stock granted in the first quarter of 2017 was based on the market price of the Corporation’s outstanding common stock on the date of the grant. For the 838,332 shares of restricted stock granted under the TARP requirements, the market price was discounted assuming that 50% of the shares of restricted stock would become freely transferable and the remaining50% would be forfeited, resulting in a fair value of $2.71for each share of restricted stock granted under TARP requirements.

Stock-based compensation accounting guidance requires the Corporation to reverse compensation expense for any awards that are forfeited due to employee or director turnover. Quarterly changes in the estimated forfeiture rate may have a significant effect on stock-based compensation, as the effect of adjusting the rate for all expense amortization is recognized in the period in which the forfeiture estimate is changed.  If the actual forfeiture rate is higher than the estimated forfeiture rate, an adjustment is made to increase the estimated forfeiture rate, which will result in a decrease in the expense recognized in the financial statements.  If the actual forfeiture rate is lower than the estimated forfeiture rate, an adjustment is made to decrease the estimated forfeiture rate, which will result in an increase in the expense recognized in the financial statements. The estimated forfeiture rate did not change as a result of the restricted shares forfeited in connection with the aforementioned U.S. Treasury’s sale of the Corporation’s common stock. 

Performance Units

Under the Omnibus Plan, the Corporation may award performance unit awards to Omnibus Plan participants.  During the first six months of 2018, the Corporation granted 304,408 unit awards to executives, with each unit representing the value of one share of the Corporation’s common stock.  The performance unit awards granted are for the performance period beginning January 1, 2018 and ending on December 31, 2020 and are subject to a three-year requisite service period.  These awards do not contain non-forfeitable rights to dividend equivalent amounts and can only be settled in shares of the Corporation’s common stock. Included in those 304,408 performance unit awards were 29,171units granted to retirement-eligible executives at the grant date.  The performance unit will vest based on the achievement of a pre-established tangible book value per share target as of December 31, 2020.  All of the performance units will vest if performance is at the pre-established performance target level or above.  However, the participants may vest on 50% of the awards to the extent that performance is below the target but at 80% of the pre-established performance target level (the 80% minimum threshold) which is measured based upon the growth in the tangible book value during the performance cycle.  If performance is between the 80% minimum threshold and the pre-established performance target level, the participants will vest on a proportional amount. No performance units will vest if performance is below the 80% minimum threshold. 

The fair value of the performance unit awards granted during the first six months of 2018 was based on the market price of the Corporation’s outstanding common stock on the date of the grant.  For the quarter and the first six months of 2018, the Corporation recognized $0.1 million and $0.3 million, respectively, of stock-based compensation related to performance unit awards. As of June 30, 2018, there was $1.6 million of total unrecognized compensation cost related to unvested performance units that the Corporation expects to recognize over the three-year requisite service period. The total expense determined for the performance unit awards granted to retirement-eligible executives was charged against earnings at the grant date. The total amount of compensation expense recognized reflects management’s assessment of the probability that the pre-established performance goal will be achieved. A cumulative adjustment to compensation expense is recognized in the current period to reflect any changes in the probability of achievement of the performance goals.

Salary stock

Also, effective April 1, 2013, the Corporation’s Board of Directors determined to increase the salary amounts paid to certain executive officers, primarily by paying the increased salary amounts in the form of shares of the Corporation’s common stock issued under the Omnibus Plan, instead of cash. During the first six months of 2018, the Corporation issued 268,709shares of common stock (first six months of 2017 – 272,959 shares) with a weighted average market value of $6.51 (firstsix months of 2017 – $5.94) as salary stock compensation. This resulted in a compensation expense of $1.7 million recorded in the first six months of 2018 (first six months of 2017 – $1.6 million). Effective July 1, 2018, the payment of additional salary amounts in the form of stock was eliminated in accordance to the previously reported executive compensation program.

For the first six months of 2018, the Corporation withheld 96,377shares (first six months of 2017 – 90,973 shares) from the common stock paid to certain senior officers as additional compensation and 328,433shares of restricted stock that vested during the first six months of 2018 (first six months of 2017 – 235,680) to cover employees’ payroll and income tax withholding liabilities; these shares are held as treasury shares. The Corporation paid in cash any fractional share of salary stock to which the officer was entitled. In the consolidated financial statements, the Corporation treats shares withheld for tax purposes as common stock repurchases.

XML

INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2018

INVESTMENT SECURITIES

NOTE 5 – INVESTMENT SECURITIES

Investment Securities Available for Sale

The amortized cost, non-credit loss component of OTTI recorded in OCI, gross unrealized gains and losses recorded in OCI, estimated fair value, and weighted-average yield of investment securities available for sale by contractual maturities as of June 30, 2018 and December 31, 2017 were as follows:

		June 30, 2018
		Amortized cost		Noncredit Loss Component of OTTI Recorded in OCI						Fair value
						Gross Unrealized						Weighted-
						gains		losses				average yield%
(Dollars in thousands)
U.S. Treasury securities:
	Due within one year	$	57,464	$	-	$	2	$	67	$	57,399	1.52
U.S. government-sponsored
agencies obligations:
Due within one year			74,962		-		-		326		74,636	1.18
After 1 to 5 years			311,675		-		-		5,481		306,194	1.51
After 5 to 10 years			186,269		-		87		3,675		182,681	2.94
After 10 years			36,702		-		-		211		36,491	2.28
Puerto Rico government
obligations:
After 5 to 10 years			4,032		-		43		-		4,075	3.14
After 10 years			4,054		-		-		1,286		2,768	6.97
United States and Puerto Rico
government obligations			675,158		-		132		11,046		664,244	1.95
Mortgage-backed securities:
Freddie Mac (“FHLMC”) certificates:
After 5 to 10 years			89,235		-		23		3,378		85,880	2.01
After 10 years			265,350		-		295		8,379		257,266	2.49
			354,585		-		318		11,757		343,146	2.37
Ginnie Mae (“GNMA”) certificates:
After 1 to 5 years			142		-		2		-		144	3.10
After 5 to 10 years			61,136		-		540		25		61,651	3.03
After 10 years			135,599		-		3,746		1,102		138,243	3.81
			196,877		-		4,288		1,127		200,038	3.57
Fannie Mae (“FNMA”) certificates:
Due within one year			801		-		11		-		812	1.90
After 1 to 5 years			11,606		-		-		260		11,346	2.38
After 5 to 10 years			148,799		-		63		5,335		143,527	2.10
After 10 years			618,975		-		1,965		16,416		604,524	2.65
			780,181		-		2,039		22,011		760,209	2.54
Collateralized mortgage obligations
guaranteed by the FHLMC
and GNMA:
After 1 to 5 years			7,588		-		5		11		7,582	2.74
After 10 years			45,385		-		367		22		45,730	2.57
			52,973		-		372		33		53,312	2.59
Other mortgage pass-through
trust certificates:
After 10 years			20,590		5,529		-		-		15,061	4.51
Total mortgage-backed
securities			1,405,206		5,529		7,017		34,928		1,371,766	2.67
Total investment securities
available for sale		$	2,080,364	$	5,529	$	7,149	$	45,974	$	2,036,010	2.44

		December 31, 2017
		Amortized cost		Noncredit Loss Component of OTTI Recorded in OCI		Gross Unrealized				Fair value
												Weighted-
						gains		losses				average yield%
(Dollars in thousands)
U.S. Treasury securities:
	After 1 to 5 years	$	7,458	$	-	$	-	$	57	$	7,401	1.29
U.S. government-sponsored
agencies obligations:
	Due within one year		122,471		-		-		319		122,152	1.06
	After 1 to 5 years		309,472		-		28		3,735		305,765	1.42
	After 5 to 10 years		133,451		-		117		319		133,249	2.72
	After 10 years		40,769		-		1		149		40,621	1.84
Puerto Rico government
obligations:
	After 5 to 10 years		4,071		-		47		-		4,118	3.14
	After 10 years		3,972		-		-		1,277		2,695	6.97
United States and Puerto Rico
government obligations			621,664		-		193		5,856		616,001	1.70
Mortgage-backed securities:
FHLMC certificates:
	After 5 to 10 years		18,658		-		14		63		18,609	2.14
	After 10 years		297,733		-		217		4,853		293,097	2.23
			316,391		-		231		4,916		311,706	2.23
GNMA certificates:
	After 1 to 5 years		81		-		1		-		82	3.23
	After 5 to 10 years		69,661		-		1,244		-		70,905	3.05
	After 10 years		145,067		-		5,910		334		150,643	3.81
			214,809		-		7,155		334		221,630	3.56
FNMA certificates:
	After 1 to 5 years		20,831		-		294		109		21,016	2.69
	After 5 to 10 years		49,934		-		-		818		49,116	1.83
	After 10 years		613,129		-		3,180		6,401		609,908	2.43
			683,894		-		3,474		7,328		680,040	2.39
Collateralized mortgage
	obligations issued or guaranteed
	by the FHLMC and GNMA:
	After 1 to 5 years		5,918		-		14		-		5,932	2.21
	After 5 to 10 years		2,556		-		11		-		2,567	2.23
	After 10 years		35,331		-		231		-		35,562	2.22
			43,805		-		256		-		44,061	2.22
Other mortgage pass-through
trust certificates:
	After 10 years		22,791		5,731		-		-		17,060	2.44
Total mortgage-backed securities			1,281,690		5,731		11,116		12,578		1,274,497	2.54
Other
	Due within one year		100		-		-		-		100	1.48
Equity securities (1)			424		-		-		6		418	2.11
Total investment securities
	available for sale	$	1,903,878	$	5,731	$	11,309	$	18,440	$	1,891,016	2.27
(1)	As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities.

Maturities of mortgage-backed securities (“MBS”) are based on the period of final contractual maturity. Expected maturities of investments might differ from contractual maturities because they may be subject to prepayments and/or call options. The weighted-average yield on investment securities available for sale is based on amortized cost and, therefore, does not give effect to changes in fair value. The net unrealized gain or loss on securities available for sale and the noncredit loss component of OTTI are presented as part of OCI.

The following tables show the Corporation’s available-for-sale investments’ fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of June 30, 2018 and December 31, 2017. The tables also include debt securities for which an OTTI was recognized and only the amount related to a credit loss was recognized in earnings. For unrealized losses for which OTTI was recognized, the related credit loss was charged against the amortized cost basis of the debt security.

		As of June 30, 2018
		Less than 12 months				12 months or more				Total
				Unrealized				Unrealized				Unrealized
		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(In thousands)
	Debt securities:
	Puerto Rico-government obligations	$	-	$	-	$	2,768	$	1,286	$	2,768	$	1,286
	U.S. Treasury and U.S. government
	agenciesʼ obligations		237,349		4,448		355,093		5,312		592,442		9,760
	Mortgage-backed securities:
	FNMA		343,390		9,315		262,712		12,696		606,102		22,011
	FHLMC		155,213		4,011		150,268		7,746		305,481		11,757
	GNMA		65,966		1,109		601		18		66,567		1,127
	Collateralized mortgage obligations
	issued or guaranteed by
	FHLMC and GNMA		17,196		33		-		-		17,196		33
	Other mortgage pass-through
	trust certificates		-		-		15,061		5,529		15,061		5,529
		$	819,114	$	18,916	$	786,503	$	32,587	$	1,605,617	$	51,503
		As of December 31, 2017
		Less than 12 months				12 months or more				Total
				Unrealized				Unrealized				Unrealized
		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(In thousands)
Debt securities:
Puerto Rico-government obligations		$	-	$	-	$	2,695	$	1,277	$	2,695	$	1,277
U.S. Treasury and U.S. government
agenciesʼ obligations			136,459		494		362,050		4,085		498,509		4,579
Mortgage-backed securities:
FNMA			189,699		1,705		274,963		5,623		464,662		7,328
FHLMC			91,174		590		166,331		4,326		257,505		4,916
GNMA			39,145		334		-		-		39,145		334
Other mortgage pass-through
trust certificates			-		-		17,060		5,731		17,060		5,731
Equity securities (1)			-		-		407		6		407		6
		$	456,477	$	3,123	$	823,506	$	21,048	$	1,279,983	$	24,171
(1)	As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities.

Assessment for OTTI

Debt securities issued by U.S. government agencies, U.S. government-sponsored entities, and the U.S. Treasury accounted for approximately 99% of the total available-for-sale portfolio as of June 30, 2018, and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government. The Corporation’s OTTI assessment was concentrated mainly on private label MBS,and on Puerto Rico government debt securities, for which credit losses are evaluated on a quarterly basis. The Corporation considered the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover:

• The length of time and the extent to which the fair value has been less than the amortized cost basis;
• Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the financial condition of the issuer, credit ratings, the failure of the issuer to make scheduled principal or interest payments, recent legislation and government actions affecting the issuer’s industry, and actions taken by the issuer to deal with the present economic climate;
• Changes in the near term prospects of the underlying collateral for a security,if any, such as changes in default rates, loss severity given default, and significant changes in prepayment assumptions; and
• The level of cash flows generated from the underlying collateral, if any, supporting the principal and interest payments of the debt securities.

The Corporation recorded OTTI losses on available-for-sale debt securities as follows:

		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands)
Total OTTI losses		$	-	$	-	$	-	$	(12,231)
Portion of OTTI recognized in OCI			-		-		-		-
Net impairment losses recognized in earnings (1)		$	-	$	-	$	-	$	(12,231)
(1)	Credit losses on Puerto Rico government debt securities, recorded in the first quarter of 2017.

The following tables summarize the roll-forward of credit losses on debt securities held by the Corporation for which a portion of an OTTI is recognized in OCI:
	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments		Credit loss
	March 31,		recognized in earnings on		reductions for		June 30,
	2018		securities that have been		securities sold		2018
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Private label MBS	$	6,792	$	-	$	-	$	6,792

	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments		Credit loss
	December 31,		recognized in earnings on		reductions for		June 30,
	2017		securities that have been		securities sold		2018
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Private label MBS	$	6,792	$	-	$	-	$	6,792

	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments
	March 31,		recognized in earnings		Credit loss reductions		June 30,
	2017		on securities that have been		for securities sold		2017
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Puerto Rico government obligations	$	34,420	$	-	$	(34,420)	$	-
Private label MBS		6,792		-		-		6,792
Total OTTI credit losses for available-for-sale
debt securities	$	41,212	$	-	$	(34,420)	$	6,792

	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments
	December 31,		recognized in earnings		Credit loss reductions		June 30,
	2016		on securities that have been		for securities sold		2017
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Puerto Rico government obligations	$	22,189	$	12,231	$	(34,420)	$	-
Private label MBS		6,792		-		-		6,792
Total OTTI credit losses for available-for-sale
debt securities	$	28,981	$	12,231	$	(34,420)	$	6,792

During the second quarter of 2017, the Corporation sold for an aggregate of $23.4million three Puerto Rico government available-for-sale debt securities, specifically bonds of the Government Development Bank for Puerto Rico (the “GDB”) and the Puerto Rico Public Buildings Authority, carried on its book at an amortized cost at the time of sale of $23.0 million (net of $34.4 million in cumulative OTTI impairment charges).Approximately $12.2 million of the cumulative OTTI charges on these securities was recorded in the first quarter of 2017.

  For the OTTI charge recorded on the Puerto Rico government debt securities in the first quarter of 2017, the Corporation considered the latest available information about the Puerto Rico government’s financial condition, including but not limited to credit ratings downgrades, revised estimates of recovery rates, and other relevant developments such as government actions, including debt exchange proposals and the fiscal plan published by the Puerto Rico government in March 2017, as applicable. The Corporation applied a discounted cash flow analysis to its Puerto Rico government debt securities in order to calculate the cash flows expected to be collected and to determine if any portion of the decline in market value of these securities was considered a credit-related OTTI.  The analysis derived an estimate of value based on the present value of risk-adjusted cash flows of the underlying securities and included of the following components:

• The contractual future cash flows of the bonds were projected based on the key terms as set forth in the official statements for each security. Such key terms included, among others, the interest rate, amortization schedule, if any, and maturity date.

• The risk-adjusted cash flows were calculated based on a probability of default analysis and recovery rate assumptions, including the weighting of different scenarios of ultimate recovery, considering the credit rating of each security. Constant monthly default rates were assumed throughout the life of the bonds, which considered the respective security’s credit rating as of the date of the analysis.

• The adjusted future cash flows were then discounted at the original effective yield of each investment based on the purchase price and expected risk-adjusted future cash flows as of the purchase date of each investment.

The discounted risk-adjusted cash flow analysis for the three Puerto Rico government bonds mentioned above assumed a default probability of 100%, as these three non-performing bonds had been in default since the third quarter of 2016. Based on this analysis, the Corporation recorded in the first quarter of 2017 credit-related OTTIamounting to $12.2 million, assuming recovery rates ranging from 15% to 80% (with a weighted average of 41%).

In addition, the Corporation performed an OTTI assessment on its private label MBS, which are collateralized by fixed-rate mortgages on single-family residential properties in the United States. The interest rate on these private-label MBS is variable, tied to 3-month LIBOR and limited to the weighted-average coupon on the underlying collateral. The underlying mortgages are fixed-rate, single-family loans with original high FICO scores (over 700) and moderate loan-to-value ratios (under 80%), as well as moderate delinquency levels.

Based on the expected cash flows, and since the Corporation does not have the intention to sell the securities and has sufficient capital and liquidity to hold these securities until a recovery of the fair value occurs, only the credit loss component, if any, is reflected in earnings. Significant assumptions in the valuation of the private label MBS were as follows:

	As of		As of
	June 30, 2018		December 31, 2017
	Weighted		Weighted
	Average	Range	Average	Range
Discount rate	14.6%	14.6%	14.0%	14.0%
Prepayment rate	12.6%	5.0% - 23.0%	16.4%	12.0% - 29.0%
Projected Cumulative Loss Rate	4%	0% - 8.7%	3%	0% - 6.8%
No OTTI charges on private label MBS were recorded in either the first half of 2018 or the first half of 2017.

InvestmentsHeld to Maturity

The amortized cost, gross unrecognized gains and losses, estimated fair value, weighted-average yield and contractual maturities of investment securities held to maturity as of June 30, 2018 and December 31, 2017 were as follows:

		June 30, 2018
		Amortized cost						Fair value
				Gross Unrecognized
				gains		losses				Weighted- average yield%
Puerto Rico Municipal Bonds:
	After 1 to 5 years	$	3,712	$	-	$	151	$	3,561	5.68
	After 5 to 10 years		39,523		-		2,705		36,818	5.63
	After 10 years		107,251		-		12,200		95,051	5.78
Total investment securities
	held to maturity	$	150,486	$	-	$	15,056	$	135,430	5.74

		December 31, 2017
		Amortized cost						Fair value
				Gross Unrecognized
				gains		losses				Weighted- average yield%
Puerto Rico Municipal Bonds:
	After 1 to 5 years	$	3,853	$	-	$	173	$	3,680	5.38
	After 5 to 10 years		39,523		-		3,048		36,475	5.28
	After 10 years		107,251		-		16,374		90,877	4.93
Total investment securities
	held to maturity	$	150,627	$	-	$	19,595	$	131,032	5.03

The following tables show the Corporation’s held-to-maturity investments’ fair value and gross unrecognized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrecognized loss position, as of June 30, 2018 and December 31, 2017:

	As of June 30, 2018
	Less than 12 months				12 months or more				Total
			Unrecognized				Unrecognized				Unrecognized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
		(In thousands)
Debt securities:
Puerto Rico Municipal Bonds	$	-	$	-	$	135,430	$	15,056	$	135,430	$	15,056
	As of December 31, 2017
	Less than 12 months				12 months or more				Total
			Unrecognized				Unrecognized				Unrecognized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
		(In thousands)
Debt securities:
Puerto Rico Municipal Bonds	$	-	$	-	$	131,032	$	19,595	$	131,032	$	19,595

The Corporation determines the fair market value of Puerto Rico Municipal Bonds based on a discounted cash flow analysis using risk-adjusted discount rates. A security with similar characteristics traded in the open market is used as a proxy for each municipal bond. Then the cash flow is discounted at the average spread over the discount curve exhibited by the proxy security at the end of each quarter.

All of the Puerto Rico Municipal Bonds are performing and current as to scheduled contractual payments as of June 30, 2018. Approximately 70% of the held-to-maturity municipal bonds were issued by three of the largest municipalities in Puerto Rico. The vast majority of revenues of these three municipalities is independent of the Puerto Rico central government. These obligations typically are not issued in bearer form, nor are they registered with the SEC, and they are not rated by external credit agencies. In most cases, these bonds have priority over the payment of operating costs and expenses of the municipality, which 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 loans. The Corporation performs periodic credit quality reviews on these issuers. Based on the quarterly analysis performed, management concluded that no individual debt security held to maturity was other-than-temporarily impaired as of June 30, 2018.

The PROMESA oversight board has not designated any ofPuerto Rico’s 78 municipalities as covered entities under PROMESA. However, while the fiscal plan recently certified by the PROMESA oversight boarddid not contemplate a restructuring of the debt of Puerto Rico’s municipalities, the plan did call for the gradual elimination of budgetary subsidies provided to municipalities by the central government. Furthermore, municipalities are also likely to be affected by the negative economic and other effects resulting from the 2017 hurricanes and from expense, revenue or cash management measures taken by the Puerto Rico government to address its fiscal and liquidity shortfalls, or measures included in fiscal plans of other government entities, such as the fiscal plans of the GDB and the Puerto Rico Electric Power Authority (“PREPA”). Given the uncertain effect that the negative fiscal situation of the Puerto Rico central government and the measures taken, or to be taken, by other government entities may have on municipalities, the Corporation cannot be certain if future impairment charges will be required relating to these securities.

From time to time, the Corporation has securities held to maturity with an original maturity of three months or less that are considered cash and cash equivalents and classified as money market investments in the consolidated statements of financial condition.  As of June 30, 2018 and December 31, 2017, the Corporation had no outstanding securities held to maturity that were classified as cash and cash equivalents.

XML

OTHER EQUITY SECURITIES

6 Months Ended

Jun. 30, 2018

OTHER EQUITY SECURITIES

NOTE 6 – OTHER INVESTMENT SECURITIES

Institutions that are members of the FHLB system are required to maintain a minimum investment in FHLB stock. Such minimum investment is calculated as a percentage of aggregate outstanding mortgages, and the FHLB requires an additional investment that is calculated as a percentage of total FHLB advances, letters of credit, and the collateralized portion of outstanding interest-rate swaps. The stock is capital stock issued at $100 par value. Both stock and cash dividends may be received on FHLB stock.

As of June 30, 2018 and December 31, 2017, the Corporation had investments in FHLB stock with a book value of $40.8million and $40.9million, respectively. Dividend income from FHLB stock for the quarters ended June 30, 2018and 2017was $0.7 million and $0.5 million, respectively, and forthe six-month periods ended June 30, 2018 and 2017 was $1.3 million and $0.9 million, respectively.

The FHLB of New York issued the shares of FHLB stock owned by the Corporation. The FHLB of New York is part of the Federal Home Loan Bank System, a national wholesale banking network of 11 regional, stockholder-owned congressionally chartered banks. The FHLBs are all privately capitalized and operated by their member stockholders. The system is supervised by the Federal Housing Finance Agency, which ensures that the FHLBs operate in a financially safe and sound manner, remain adequately capitalized and able to raise funds in the capital markets, and carry out their housing finance mission.

On January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities with a readily determinable fair value of approximately $0.4 million from available-for-sale investment securities to other investment securities. During the second quarter and six-month period ended June 30, 2018, the Corporation measured these equity securities at fair value through earnings resulting in the recognition of market-to-market losses of $3 thousand and $10 thousand, respectively, recorded as part of other non-interest income in the statement of income.

The Corporation has other equity securities that do not have readily available fair values. The aggregate carrying value of such securities as of June 30, 2018 and December 31, 2017was $2.2million.

XML

LOAN PORTFOLIO

6 Months Ended

Jun. 30, 2018

LOAN PORTFOLIO

NOTE 7 – LOANS HELD FOR INVESTMENT

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

		As of June 30,		As ofDecember 31,
		2018		2017
(In thousands)
Residential mortgage loans, mainly secured by first mortgages		$	3,238,001	$	3,290,957
Commercial loans:
Construction loans (1)			84,683		111,397
Commercial mortgage loans (1)(2)			1,533,308		1,614,972
Commercial and Industrial loans (3)			2,009,049		2,083,253
Total commercial loans			3,627,040		3,809,622
Finance leases			283,274		257,462
Consumer loans			1,491,976		1,492,435
Loans held for investment			8,640,291		8,850,476
Allowance for loan and lease losses			(222,035)		(231,843)
Loans held for investment, net		$	8,418,256	$	8,618,633
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million) in non-performing loans to held for sale. Loans transferred to held for sale consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).
(2)	During the second quarter of 2018, the Corporation completed the sale of a $10.4 million non-performing commercial mortgage loan that was among the loans transferred to held for sale in the first quarter of 2018.
(3)	As of June 30, 2018 and December 31, 2017, includes $792.0 million and $833.5 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:
		As of		As of
		June 30,		December 31,
(In thousands)		2018		2017
Non-performing loans:
	Residential mortgage	$	162,539	$	178,291
	Commercial mortgage (1)		142,614		156,493
	Commercial and Industrial		76,887		85,839
	Construction:
	Land		12,926		15,026
	Construction-commercial (1)		-		35,100
	Construction-residential		1,222		1,987
	Consumer:
	Auto loans		12,299		10,211
	Finance leases		2,032		1,237
	Other consumer loans		8,622		5,370
Total non-performing loans held for investment (2)(3)(4)		$	419,141	$	489,554
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million) in non-performing loans to held for sale. Loans transferred to held for sale consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).
(2)	Excludes $54.5 million and $8.3 million of non-performing loans held for sale as of June 30, 2018 and December 31, 2017, respectively.
(3)	Amount excludes purchased-credit impaired (“PCI”) loans with a carrying value of approximately $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, 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.
(4)	Non-performing loans exclude $393.3 million and $374.7 million of Troubled Debt Restructuring (“TDR”) loans that are in compliance with modified terms and in accrual status as of June 30, 2018 and December 31, 2017, respectively.

During the first quarter of 2018, the Corporation transferred to held for sale three non-performing commercial and construction loans. The aggregate recorded investment in these loans was written down to $57.2 million, which resulted in charge-offs of $9.7million, of which $4.1million was taken against previously-established reserves for loan losses, resulting in a charge to the provision for loan and lease losses of $5.6million in the first quarter of 2018. Loans transferred to held for sale consisted of a $30.0million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6million).

During the second quarter of 2018, the Corporation completed the sale of a $10.4million non-performing commercial mortgage loan that was among the loans transferred to held for sale during the first quarter.

Loans in Process of Foreclosure

As of June 30, 2018, the recorded investment of residential mortgage loans collateralized by residential real estate property that are in the process of foreclosure amounted to $142.6 million, including $21.8 million of loans insured by the FHA or guaranteed by the VA, and $12.4 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 (i.e., Puerto Rico, Florida and USVI) require the foreclosure to be processed through the state’s court while foreclosure in non-judicial states (i.e., BVI) is processed without court intervention. Foreclosure timelines vary according to state law and investor guidelines. Occasionally, foreclosures may be delayed due to, among other reasons, mandatory mediations, bankruptcy, court delays and title issues.

The Corporation’s aging of the loans held for investment portfolio is as follows:
										Purchased Credit-Impaired Loans
		30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due (1)(2)(3)		Total Past Due						Total loans held for investment		90 days past due and still accruing (1)(2)(3)
As of June 30, 2018
(In thousands)												Current
Residential mortgage:
FHA/VA government-guaranteed loans (2)(3)(4)		$	-	$	3,810	$	109,995	$	113,805	$	-	$	37,698	$	151,503	$	109,995
Other residential mortgage loans (4)			-		55,861		177,340		233,201		148,025		2,705,272		3,086,498		14,801
Commercial:
Commercial and Industrial loans			2,768		10,261		77,456		90,485		-		1,918,564		2,009,049		569
Commercial mortgage loans (4)			-		2,401		145,760		148,161		4,217		1,380,930		1,533,308		3,146
Construction:
Land (4)			-		68		18,836		18,904		-		6,135		25,039		5,910
Construction-commercial			-		-		1,013		1,013		-		52,806		53,819		1,013
Construction-residential (4)			-		-		1,222		1,222		-		4,603		5,825		-
Consumer:
Auto loans			32,527		6,906		12,299		51,732		-		804,224		855,956		-
Finance leases			5,777		1,404		2,032		9,213		-		274,061		283,274		-
Other consumer loans			8,112		5,039		14,649		27,800		-		608,220		636,020		6,027
Total loans held for investment		$	49,184	$	85,750	$	560,602	$	695,536	$	152,242	$	7,792,513	$	8,640,291	$	141,461
_____________
(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 Corporationʼs 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 $30.1 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 June 30, 2018.
(3)	As of June 30, 2018, includes $78.7 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 Corporationʼs 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 June 30, 2018 amounted to $6.8 million, $112.0 million, $3.0 million, $0.4 million, $0.3 million and $0.6 million, respectively.

As of December 31, 2017		30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due(1)(2)(3)								Total loans held for investment		90 days past due and still accruing (1)(2)(3)
(In thousands)									Total Past Due		Purchased Credit- Impaired Loans		Current
Residential mortgage:
FHA/VA government-guaranteed loans (2) (3) (4)		$	-	$	6,792	$	102,815	$	109,607	$	-	$	29,332	$	138,939	$	102,815
Other residential mortgage loans (4)			-		92,502		193,750		286,252		153,991		2,711,775		3,152,018		15,459
Commercial:
Commercial and Industrial loans			8,971		576		88,156		97,703		-		1,985,550		2,083,253		2,317
Commercial mortgage loans (4)			-		7,525		163,180		170,705		4,183		1,440,084		1,614,972		6,687
Construction:
Land (4)			-		124		15,177		15,301		-		11,630		26,931		151
Construction-commercial			-		-		35,100		35,100		-		41,456		76,556		-
Construction-residential			-		95		1,987		2,082		-		5,828		7,910		-
Consumer:
Auto loans			57,560		23,783		10,211		91,554		-		752,777		844,331		-
Finance leases			10,549		3,484		1,237		15,270		-		242,192		257,462		-
Other consumer loans			10,776		5,052		9,361		25,189		-		622,915		648,104		3,991
Total loans held for investment		$	87,856	$	139,933	$	620,974	$	848,763	$	158,174	$	7,843,539	$	8,850,476	$	131,420
____________
(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 Corporationʼs 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 $29.9 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 December 31, 2017.
(3)	As of December 31, 2017, includes $62.1 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 Corporationʼs 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, and land loans past due 30-59 days as of December 31, 2017 amounted to $6.0 million, $224.0 million, $9.0 million, and $2.5 million, respectively.

The Corporation’s credit quality indicators by loan type as of June 30, 2018 and December 31, 2017 are summarized below:
		Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
June 30, 2018
(In thousands)
Commercial mortgage		$	291,045	$	-	$	-	$	291,045	$	1,533,308
Construction:
Land			14,350		-		-		14,350		25,039
Construction - commercial			-		-		-		-		53,819
Construction - residential			1,222		-		-		1,222		5,825
Commercial and Industrial			123,855		5,072		341		129,268		2,009,049
		Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
December 31, 2017
(In thousands)
Commercial mortgage		$	257,503	$	4,166	$	-	$	261,669	$	1,614,972
Construction:
Land			15,971		490		-		16,461		26,931
Construction - commercial			35,100		-		-		35,100		76,556
Construction - residential			1,987		-		-		1,987		7,910
Commercial and Industrial			154,416		3,854		676		158,946		2,083,253
_________
(1)	Excludes non-performing loans held for sale of $54.5 million ($16.8 million commercial mortgage, $30.0 million construction-commercial, and $7.7 million construction-land) and $8.3 million (construction-land) as of June 30, 2018 and December 31, 2017, 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 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 fullhighly questionable and improbable, on the basis of currently known facts, conditions and values. 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 asset even though partial recovery may occur in the future.There is little or no prospect for near term improvement and no realistic strengthening action of significance pending.

The Corporation periodically reviews its loans classification to evaluate if they are properly classified, and to determine impairment, if any. The frequency of these reviews will depend on the amount of the aggregate outstanding debt, and the risk rating classification of the obligor. In addition, during the renewal and annual review process of applicable credit facilities, the Corporation evaluates the corresponding loan grades.

The Corporation has a Loan Review Group that reports directly to the Corporation’s Risk Management Committee and administratively to the Chief Risk Officer, which performs annual comprehensive credit process reviews of the Bank’s commercial portfolios. This group evaluates the credit risk profile of portfolios, including the assessment of the risk rating representative of the current credit quality of the loans, and the evaluation of collateral documentation. The monitoring performed by this group contributes to assess compliance with credit policies and underwriting standards, determine the current level of credit risk, evaluate the effectiveness of the credit management process and identify control deficiencies that may arise in the credit-granting process. Based on its findings, the Loan Review Group recommends corrective actions, if necessary, that help in maintaining a sound credit process. The Loan Review Group reports the results of the credit process reviews to the Risk Management Committee of the Corporation’s Board of Directors.

		Consumer Credit Exposure - Credit Risk Profile Based on Payment Activity
		Residential Real Estate				Consumer
June 30, 2018		FHA/VA/ Guaranteed(1)		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing		$	151,503	$	2,775,934	$	843,657	$	281,242	$	627,398
Purchased Credit-Impaired (2)			-		148,025		-		-		-
Non-performing			-		162,539		12,299		2,032		8,622
Total		$	151,503	$	3,086,498	$	855,956	$	283,274	$	636,020
(1)	It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as 90 days past-due loans and still accruing as opposed to non-performing loans since the principal repayment is insured. This balance includes $30.1 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 June 30, 2018.
(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, 2017		FHA/VA/ Guaranteed(1)		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing		$	138,939	$	2,819,736	$	834,120	$	256,225	$	642,734
Purchased Credit-Impaired (2)			-		153,991		-		-		-
Non-performing			-		178,291		10,211		1,237		5,370
Total		$	138,939	$	3,152,018	$	844,331	$	257,462	$	648,104
(1)	It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as 90 days past-due loans and still accruing as opposed to non-performing loans since the principal repayment is insured. This balance includes $29.9 million of residential mortgage loans insured by the FHA or guaranteed by the VA, which are over 15 months delinquent, and are no longer accruing interest as of December 31, 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.

The following tables present information about impaired loans held for investment, excluding PCI loans, which are reported separatelyas discussed below:

Impaired Loans
									Quarter Ended				Six-Month Period Ended
										June 30, 2018
	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 June 30, 2018
With no related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		121,396		163,583		-		123,058		788		193		1,529		351
Commercial:
Commercial mortgage loans		58,992		100,247		-		62,892		119		41		201		78
Commercial and Industrial loans		43,566		60,380		-		45,086		496		8		920		20
Consumer:
Auto loans		326		326		-		342		4		-		5		-
Other consumer loans		2,454		2,801		-		2,639		35		9		72		21
	$	226,734	$	327,337	$	-	$	234,017	$	1,442	$	251	$	2,727	$	470
With a related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		287,689		312,868		19,804		290,079		3,570		178		7,089		473
Commercial:
Commercial mortgage loans		116,583		127,995		12,204		119,058		737		307		1,397		354
Commercial and Industrial loans		67,805		80,850		10,592		69,293		128		8		253		24
Construction:
Land		11,009		19,868		1,022		11,522		23		7		47		15
Construction-residential		252		355		39		252		-		-		-		-
Consumer:
Auto loans		19,367		19,367		3,697		20,484		385		-		779		-
Finance leases		1,594		1,594		162		1,754		28		-		59		-
Other consumer loans		9,101		9,584		1,994		9,434		241		25		489		53
	$	513,400	$	572,481	$	49,514	$	521,876	$	5,112	$	525	$	10,113	$	919
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		409,085		476,451		19,804		413,137		4,358		371		8,618		824
Commercial:
Commercial mortgage loans		175,575		228,242		12,204		181,950		856		348		1,598		432
Commercial and Industrial loans		111,371		141,230		10,592		114,379		624		16		1,173		44
Construction:
Land		11,009		19,868		1,022		11,522		23		7		47		15
Construction-commercial		-		-		-		-		-		-		-		-
Construction-residential		252		355		39		252		-		-		-		-
Consumer:
Auto loans		19,693		19,693		3,697		20,826		389		-		784		-
Finance leases		1,594		1,594		162		1,754		28		-		59		-
Other consumer loans		11,555		12,385		1,994		12,073		276		34		561		74
	$	740,134	$	899,818	$	49,514	$	755,893	$	6,554	$	776	$	12,840	$	1,389

Impaired Loans
	Recorded Investment		Unpaid Principal Balance		Related Specific Allowance		Year-To-Date Average Recorded Investment
(In thousands)
As of December 31, 2017
With no related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		116,818		154,048		-		120,241
Commercial:
Commercial mortgage loans		65,100		100,612		-		86,563
Commercial and Industrial loans		28,292		31,254		-		28,567
Construction:
Land		48		49		-		48
Consumer:
Auto loans		267		267		-		290
Other consumer loans		2,521		3,688		-		2,745
	$	213,046	$	289,918	$	-	$	238,454
With a related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		316,616		349,284		22,086		318,606
Commercial:
Commercial mortgage loans		87,814		124,084		9,783		93,720
Commercial and Industrial loans		90,008		112,005		12,359		92,666
Construction:
Land		11,865		19,973		1,402		14,126
Construction-commercial		35,101		38,595		560		35,996
Construction-residential		252		355		55		252
Consumer:
Auto loans		22,338		22,338		3,665		24,328
Finance leases		2,184		2,184		104		2,428
Other consumer loans		11,084		11,830		1,396		11,579
	$	577,262	$	680,648	$	51,410	$	593,701
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		433,434		503,332		22,086		438,847
Commercial:
Commercial mortgage loans		152,914		224,696		9,783		180,283
Commercial and Industrial loans		118,300		143,259		12,359		121,233
Construction:
Land		11,913		20,022		1,402		14,174
Construction-commercial		35,101		38,595		560		35,996
Construction-residential		252		355		55		252
Consumer:
Auto loans		22,605		22,605		3,665		24,618
Finance leases		2,184		2,184		104		2,428
Other consumer loans		13,605		15,518		1,396		14,324
	$	790,308	$	970,566	$	51,410	$	832,155
Interest income of approximately $6.8 million ($6.3 million on an accrual basis and $0.5 million on a cash basis) and $13.6 million ($12.4 million on an accrual basis and $1.2 million on a cash basis) was recognized on impaired loans for the second quarter and six-month period ended June 30, 2017, respectively.

The following tables show the activity for impaired loans and the related specific reserve for the quarters and six-month periods ended June 30, 2018 and 2017:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
			2018		2017		2018		2017
(In thousands)
Impaired Loans:
Balance at beginning of period		$	746,280	$	807,198	$	790,308	$	887,905
Loans determined impaired during the period			34,273		18,976		95,681		38,604
Charge-offs (1)(2)			(13,207)		(43,083)		(30,420)		(60,487)
Loans sold, net of charge-offs			-		-		(4,121)		(53,245)
Increases to existing impaired loans			77		698		7,075		1,239
Foreclosures			(7,777)		(21,233)		(19,452)		(30,690)
Loans no longer considered impaired			(2,433)		(1,890)		(3,940)		(2,782)
Loans transferred to held for sale			-		-		(57,213)		-
Paid in full or partial payments			(17,079)		(25,041)		(37,784)		(44,919)
Balance at end of period		$	740,134	$	735,625	$	740,134	$	735,625
(1)	For the six-month period ended June 30, 2018 includes charge-offs totaling $9.7 million associated with the $57.2 million in non-performing loans transferred to held for sale.
(2)	For the six-month period ended June 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				Six-Month Period Ended
	June 30,				June 30,
	2018		2017		2018		2017
(In thousands)
Specific Reserve:
Balance at beginning of period	$	56,930	$	66,311	$	51,410		64,421
Provision for loan losses		5,753		17,563		28,456		36,195
Net charge-offs		(13,169)		(43,080)		(30,352)		(59,822)
Balance at end of period	$	49,514	$	40,794	$	49,514	$	40,794

Purchased Credit Impaired Loans(PCI)

The Corporation acquired PCI loans accounted for under ASC 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC Topic 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, that 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 Topic 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 Topic 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 under ASC Topic 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 amounts of PCI loans were as follows:
	As of
	June 30,		December 31,
	2018		2017
(In thousands)
Residential mortgage loans	$	148,025	$	153,991
Commercial mortgage loans		4,217		4,183
Total PCI loans	$	152,242	$	158,174
Allowance for loan losses		(11,354)		(11,251)
Total PCI loans, net of allowance for loan losses	$	140,888	$	146,923

The following tables present PCI loans by past due status as of June 30, 2018 and December 31, 2017:
As of June 30, 2018		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
										Current
(In thousands)
Residential mortgage loans		$	-	$	8,588	$	27,024	$	35,612	$	112,413	$	148,025
Commercial mortgage loans			-		-		3,252		3,252		965		4,217
Total (1)		$	-	$	8,588	$	30,276	$	38,864	$	113,378	$	152,242
_____________
(1)	According to the Corporationʼs 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 June 30, 2018 amounted to $11.7 million. No PCI commercial mortgage loan was 30-59 days past due as of June 30, 2018.
As of December 31, 2017		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
										Current
(In thousands)
Residential mortgage loans		$	-	$	16,600	$	26,471	$	43,071	$	110,920	$	153,991
Commercial mortgage loans			-		355		2,834		3,189		994		4,183
Total (1)		$	-	$	16,955	$	29,305	$	46,260	$	111,914	$	158,174
(1)	According to the Corporationʼs 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, 2017 amounted to $28.1 million and $0.2 million, respectively.

Initial Fair Value and Accretable Yield of PCI Loans

At acquisition of PCI loans, the Corporation estimated the cash flows the Corporation expected to collect on the 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-yieldmethod.

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. As of June 30, 2018, the reserve related to PCI loans acquired from Doral Financial in 2014 and from Doral Bank in 2015 amounted to $11.4 million

Changes in the accretable yield of PCI loans for the quarters and six-month periods ended June 30, 2018 and 2017 were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30,		June 30,		June 30,		June 30,
	2018		2017		2018		2017
(In thousands)
Balance at beginning of period	$	101,059	$	113,665	$	103,682	$	116,462
Accretion recognized in earnings		(2,570)		(2,724)		(5,193)		(5,521)
Reclassification (to) from non-accretable		-		(1,970)		-		(1,970)
Balance at end of period	$	98,489	$	108,971	$	98,489	$	108,971

Changes in the carrying amount of loans accounted for pursuant to ASC 310-30 were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
(In thousands)
Balance at beginning of period	$	155,281	$	163,100	$	158,174	$	165,818
Accretion		2,570		2,724		5,193		5,521
Collections		(4,359)		(4,509)		(7,755)		(9,102)
Foreclosures		(1,250)		(947)		(3,370)		(1,869)
Ending balance	$	152,242	$	160,368	$	152,242	$	160,368
Allowance for loan losses		(11,354)		(9,446)		(11,354)		(9,446)
Ending balance, net of allowance for loan losses	$	140,888	$	150,922	$	140,888	$	150,922

Changes in the allowance for loan losses related to PCI loans were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
(In thousands)
Balance at beginning of period	$	11,251	$	6,857	$	11,251	$	6,857
Provision for loan losses		103		2,589		103		2,589
Balance at the end of period	$	11,354	$	9,446	$	11,354	$	9,446

The outstanding principal balance of PCI loans, including amounts charged off by the Corporation, amounted to $188.0 million as of June 30, 2018 (December 2017 - $196.6 million).

Purchases and Sales of Loans

During the first six months of 2018, the Corporation purchased $29.7 million of residential mortgage loans consistent with a strategic program to purchase ongoing residential mortgage loan production from mortgage bankers in Puerto Rico. In general, 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 FNMA and FHLMC, which generally securitize the transferred loans into mortgage-backed securities for sale into the secondary market. During the first six months of 2018, the Corporation sold $119.8 million of FHA/VA mortgage loans to GNMA, which packaged them into mortgage-backed securities. Also, during the first six months of 2018, the Corporation sold approximately $51.1 million of performing residential mortgage loans to FNMA and FHLMC. 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). The total amount of loans sold in the secondary market included $9.8 million of seasoned residential mortgage loans sold to FNMA in the second quarter of 2018.

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

Under ASC Topic 860, Transfer and Servicing, once the Corporation has the unilateral ability to repurchase the delinquent loan, it is considered to have regained effective control over the loan and is required to recognize the loan and a corresponding repurchase liability on the balance sheet regardless of the Corporation’s intent to repurchase the loan. As of June 30, 2018 and December 31, 2017, rebooked GNMA delinquent loans included in the residential mortgage loan portfolio amounted to $78.7 million and $62.1 million, respectively.

During the first six months of 2018 and 2017, the Corporation repurchased, pursuant to its repurchase option with GNMA, $2.0 million and $17.5 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, which is 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. During the fourth quarter of 2017, the Corporation requested and received approval from GNMA for the exclusion of loans in the areas affected by Hurricanes Irma and Maria from calculations of delinquency and default ratios established in the GNMA Mortgage-Backed Securities Guide. 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’s estimate of losses related to breaches in representations and warranties is zero as of June 30, 2018.

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 $3 thousand and $16thousand during the first half of 2018 and 2017, 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.

In addition, during the first six months of 2018, the Corporation purchased a $21.4 million commercial and industrial loan participation. Also, during the first six months of 2018, the Corporation sold a $5.6 million commercial and industrial adversely-classified loan in Puerto Rico (recording a charge-off of $1.3million), a $10.4 million non-performing commercial mortgage loan held for sale in Puerto Rico, and a $9.2 million commercial and industrial loan participation in the Florida region.

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 $64million 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 $10.2million had been allocated to this loan.  Gross proceeds of $53.2million from the sale resulted in an incremental loss of $0.6million recorded as a charge to the provision for loan and lease losses in the first quarter of 2017.

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 $8.6 billion as of June 30, 2018, credit risk concentration was approximately 75% in Puerto Rico, 19% in the United States, and 6% in the USVI and BVI.

As of June 30, 2018, the Corporation had $54.6 million outstanding in loans extended to the Puerto Rico government, its municipalities and public corporations, compared to $55.9million as of December 31, 2017. Approximately $33.1 million of the outstanding loansas of June 30, 2018 consisted of loansextended 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. In addition to loans extended to municipalities, the Corporation’s exposure to the Puerto Rico government as of June 30, 2018 includes a $6.7 million loan extended to a unit of the central government, anda $14.8million loan granted toan affiliate of PREPA.

    In addition, the Corporation had $114.7million 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 under the mortgage loan insurance program. According to the most recently-released audited financial statements of the Puerto Rico Housing Finance Authority, as of June 30, 2016, the Puerto Rico Housing Finance Authority’s mortgage loans insurance program covered loans in an aggregate of approximately $576 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, 2016, 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 $77.4million.

The Corporation also has credit exposure to USVI government entities. As of June 30, 2018, the Corporation had $72.5million in loans to USVI government instrumentalities and public corporations, compared to $70.4million as of December 31, 2017.  Of the amount outstanding as of June 30, 2018, public corporations of the USVI owed approximately $49.2 million and an independent instrumentality of the USVI government owed approximately $23.2 million.  As of June 30, 2018, all loans were currently performing and up to date on principal and interest payments.

The Corporation cannot predict at this time the ultimate effect that the current fiscal situation of the Commonwealth of Puerto Rico, the uncertainty about the debt restructuring process, 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 the effect of Hurricane Maria will have on the Puerto Rico economy, the Corporation’s clients, and 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, among others, the extension of the maturity of the loan and modifications of the loan rate. As of June 30, 2018, the Corporation’s total TDR loans held for investment of $557.2 million consisted of $342.9 million of residential mortgage loans, $91.7 million of commercial and industrial loans, $84.3 million of commercial mortgage loans, $6.4 million of construction loans, and $31.9 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $1.4 million as of June 30, 2018. In addition, the loans held for sale portfolio includes a $30.0 million TDR construction loan.

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 June 30, 2018, the Corporation classified an additional $1.1 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 loans in these portfolios 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 are considered to be concessions. The Corporation mitigates loan defaults for these loan portfolios through its collection function. The function’s objective is to minimize both early stage delinquencies and losses upon default of loans in these portfolios. 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 generally 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 not considered concessions, and the loans continue to be recorded as performing.

Selected information on TDR loans held for investment that includes the recorded investment by loan class and modification type is summarized in the following tables. This information reflects all TDRs held for investment:
		June 30, 2018
		Interest rate below market		Maturity or term extension		Combination of reduction in interest rate and extension of maturity		Forgiveness of principal and/or interest		Forbearance Agreement		Other (1)		Total
(In thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans		$	23,972	$	8,481	$	249,820	$	-	$	158	$	60,423	$	342,854
Commercial Mortgage loans			5,594		31,646		35,499		-		1,970		9,572		84,281
Commercial and Industrial loans			1,239		20,221		14,562		-		4,534		51,113		91,669
Construction loans:															-
Land			17		3,697		2,149		-		-		381		6,244
Construction-commercial (2)			-		-		-		-		-		-		-
Construction-residential			-		-		-		-		-		217		217
Consumer loans - Auto			-		1,746		11,666		-		-		6,280		19,692
Finance leases			-		158		1,436		-		-		-		1,594
Consumer loans - Other			1,178		1,612		5,932		216		-		1,707		10,645
Total Troubled Debt Restructurings		$	32,000	$	67,561	$	321,064	$	216	$	6,662	$	129,693	$	557,196
(1)	Other concessions granted by the Corporation included deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation, or a combination of the concessions listed in the table.
(2)	Excludes TDRs held for sale amounting to $30.0 million as of June 30, 2018.

		December 31, 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		Forbearance Agreement		Other (1)		Total
(In thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans		$	25,964	$	8,318	$	267,578	$	-	$	-	$	62,070	$	363,930
Commercial Mortgage loans			6,563		2,094		31,870		-		-		10,285		50,812
Commercial and Industrial loans			2,510		20,648		16,049		-		6,623		48,282		94,112
Construction loans:
Land			18		3,941		2,186		-		-		331		6,476
Construction-commercial			-		-		-		35,100		-		-		35,100
Construction-residential			-		-		-		-		-		217		217
Consumer loans - Auto			-		1,347		14,233		-		-		7,025		22,605
Finance leases			-		238		1,946		-		-		-		2,184
Consumer loans - Other			892		2,097		6,891		217		-		1,686		11,783
Total Troubled Debt Restructurings		$	35,947	$	38,683	$	340,753	$	35,317	$	6,623	$	129,896	$	587,219
(1)	Other concessions granted by the Corporation included 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 Corporationʼs TDR loans held for investment activity:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands)
Beginning balance of TDRs		$	572,376	$	602,364	$	587,219	$	647,048
New TDRs			13,228		13,368		56,647		54,267
Increases to existing TDRs			75		330		6,846		754
Charge-offs post modification (1)(2)			(8,616)		(9,365)		(17,787)		(24,027)
Sales, net of charge-offs			-		-		-		(53,245)
Foreclosures			(3,759)		(16,150)		(10,802)		(20,521)
TDR transferred to held for sale, net of charge-off			-		-		(30,000)		-
Paid-off and partial payments			(16,108)		(22,004)		(34,927)		(35,733)
Ending balance of TDRs		$	557,196	$	568,543	$	557,196	$	568,543
(1)	The six-month period ended June 30, 2018 includes a charge-off of $5.1 million associated with a $30.0 million construction loan transferred to held for sale.
(2)	The six-month period ended June 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 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 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 an impaired loan in the calendar years subsequent to the restructuring, if it is in compliance with its modified terms.The Corporation did not remove any loans from the TDR classification during the first six months of 2018 and 2017.

The following table provides a breakdown of the TDR loans held for investment by those in accrual and nonaccrual status:
		As of June 30, 2018
		Accrual		Nonaccrual(1)		Total TDRs
(In thousands)
Non-FHA/VA Residential Mortgage loans		$	270,358	$	72,496	$	342,854
Commercial Mortgage loans			54,354		29,927		84,281
Commercial and Industrial loans			43,478		48,191		91,669
Construction loans:
Land			1,091		5,153		6,244
Construction-commercial (2)			-		-		-
Construction-residential			-		217		217
Consumer loans - Auto			13,345		6,347		19,692
Finance leases			1,334		260		1,594
Consumer loans - Other			9,321		1,324		10,645
Total Troubled Debt Restructurings		$	393,281	$	163,915	$	557,196
(1)	Included in non-accrual loans are $51.7 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.
(2)	Excludes a $30.0 million non-performing construction loans transferred to held for sale during the first quarter of 2018.

		As of December 31, 2017
		Accrual		Nonaccrual(1)		Total TDRs
(In thousands)
Non- FHA/VA Residential Mortgage loans		$	280,729	$	83,201	$	363,930
Commercial Mortgage loans			23,329		27,483		50,812
Commercial and Industrial loans			41,536		52,576		94,112
Construction loans:
Land			1,291		5,185		6,476
Construction-commercial			-		35,100		35,100
Construction-residential			-		217		217
Consumer loans - Auto			15,548		7,057		22,605
Finance leases			1,968		216		2,184
Consumer loans - Other			10,294		1,489		11,783
Total Troubled Debt Restructurings		$	374,695	$	212,524	$	587,219
(1)	Included in non-accrual loans are $88.6 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 (e.g., FHA/VA loans) totaling $62.2million as of June 30, 2018 (December 31, 2017 - $62.1 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 TDR loans completed during the quarters and six-month periods ended June 30, 2018and 2017, were as follows:

	Quarter Ended June 30, 2018
	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	19	$	2,034	$	1,934
Commercial Mortgage loans	2		5,765		5,765
Commercial and Industrial loans	3		3,453		3,128
Construction loans:
Land	1		97		97
Consumer loans - Auto	76		1,245		1,239
Consumer loans - Other	231		1,034		1,065
Total Troubled Debt Restructurings	332	$	13,628	$	13,228
	Six-Month Period Ended June 30, 2018
	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	43	$	4,642	$	4,548
Commercial Mortgage loans	5		42,511		42,523
Commercial and Industrial loans	6		6,050		5,710
Construction loans:
Land	1		97		97
Consumer loans - Auto	121		1,925		1,919
Consumer loans - Other	367		1,819		1,850
Total Troubled Debt Restructurings	543	$	57,044	$	56,647

	Quarter Ended June 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	48	$	9,577	$	9,483
Commercial Mortgage loans	2		267		267
Commercial and Industrial loans	2		326		326
Consumer loans - Auto	122		1,926		1,926
Finance leases	14		362		362
Consumer loans - Other	193		991		1,004
Total Troubled Debt Restructurings	381	$	13,449	$	13,368
	Six-Month Period Ended June 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	88	$	14,227	$	13,991
Commercial Mortgage loans	8		22,705		22,465
Commercial and Industrial loans	5		11,074		11,074
Construction loans:
Land	1		25		28
Consumer loans - Auto	274		4,173		4,173
Finance leases	22		548		548
Consumer loans - Other	403		1,960		1,988
Total Troubled Debt Restructurings	801	$	54,712	$	54,267

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 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 six-month periods ended June 30, 2018 and2017, and had become TDR during the 12-months preceding the default date, were as follows:

	Quarter Ended June 30,
	2018			2017
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(Dollars in thousands)
Non-FHA/VA Residential Mortgage loans	6	$	681	19	$	2,614
Consumer loans - Auto	31		514	5		69
Consumer loans - Other	28		100	29		103
Total	65	$	1,295	53	$	2,786

	Six-Month Period Ended June 30,
	2018			2017
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(Dollars in thousands)
Non-FHA/VA Residential Mortgage loans	10	$	1,068	22	$	2,891
Commercial Mortgage loans	-		-	1		57
Consumer loans - Auto	33		537	9		130
Consumer loans - Other	39		154	46		164
Finance leases	1		22	-		-
Total	83	$	1,781	78	$	3,242

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 is 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).

During the second quarter of 2018, a matured TDR commercial mortgage loan with a book value of $34 million was restructured using the A/B note workout strategy in which note A, with an outstanding balance of $29.4 million as of June 30, 2018 (net of approximately $3.6 million of payments collected in the second quarter), was underwritten to comply with the Corporation’s lending standards at current market rates for debt with similar credit risk characteristics. The A note was restored to accrual status at the time of the restructuring in the second quarter considering the borrower’s sustained historical repayment performance before the restructuring that demonstrated its ability to make timely interest and principal payments under the restructured terms. The B note totaling $33.4 million, consists of amounts mostly charged-off in prior periods and is fully charged-off as of June 30, 2018.

The following table provides additional information about the volume of this type of loan restructuring as of June 30, 2018 and the effect on the allowance for loan and lease losses in the first six months of 2018 and 2017:

	June 30, 2018			June 30, 2017
(In thousands)
Principal balance deemed collectible at end of period	$	64,559	$	36,141
Amount charged off	$	1,137	$	-
Charges to the provision for loan losses	$	1,902	$	388
Allowance for loan losses at end of period	$	4,611	$	5,529

Approximately $32.7 million of the loans restructured using the A/B note restructure workout strategy were in accrual status as of June 30, 2018. These loans continue to be individually evaluated for impairment purposes.

XML

ALLOWANCE FOR LOAN AND LEASE LOSSES

6 Months Ended

Jun. 30, 2018

ALLOWANCE FOR LOAN AND LEASE LOSSES

NOTE 8 – ALLOWANCE FOR LOAN AND LEASE LOSSES

The changes in the allowance for loan and lease losses were as follows:
	Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Quarter ended June 30, 2018
Allowance for loan and lease losses:
Beginning balance	$	56,386	$	50,393	$	47,659	$	4,122	$	67,296	$	225,856
Charge-offs		(5,544)		(3,897)		(5,110)		(818)		(12,327)		(27,696)
Recoveries		689		38		1,376		138		2,098		4,339
Provision		3,599		2,184		75		507		13,171		19,536
Ending balance	$	55,130	$	48,718	$	44,000	$	3,949	$	70,238	$	222,035
Ending balance: specific reserve for impaired loans	$	19,804	$	12,204	$	10,592	$	1,061	$	5,853	$	49,514
Ending balance: purchased credit-impaired loans (1)	$	10,954	$	400	$	-	$	-	$	-	$	11,354
Ending balance: general allowance	$	24,372	$	36,114	$	33,408	$	2,888	$	64,385	$	161,167
Loans held for investment:
Ending balance	$	3,238,001	$	1,533,308	$	2,009,049	$	84,683	$	1,775,250	$	8,640,291
Ending balance: impaired loans	$	409,085	$	175,575	$	111,371	$	11,261	$	32,842	$	740,134
Ending balance: purchased credit-impaired loans	$	148,025	$	4,217	$	-	$	-	$	-	$	152,242
Ending balance: loans with general allowance	$	2,680,891	$	1,353,516	$	1,897,678	$	73,422	$	1,742,408	$	7,747,915
	Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Six-Month Period Ended June 30, 2018
Allowance for loan and lease losses:
Beginning balance	$	58,975	$	48,493	$	48,871	$	4,522	$	70,982	$	231,843
Charge-offs		(8,915)		(10,707)		(7,040)		(5,995)		(24,399)		(57,056)
Recoveries		1,024		87		1,438		151		4,468		7,168
Provision		4,046		10,845		731		5,271		19,187		40,080
Ending balance	$	55,130	$	48,718	$	44,000	$	3,949	$	70,238	$	222,035
Ending balance: specific reserve for impaired loans	$	19,804	$	12,204	$	10,592	$	1,061	$	5,853	$	49,514
Ending balance: purchased credit-impaired loans (1)	$	10,954	$	400	$	-	$	-	$	-	$	11,354
Ending balance: general allowance	$	24,372	$	36,114	$	33,408	$	2,888	$	64,385	$	161,167
Loans held for investment:												-
Ending balance	$	3,238,001	$	1,533,308	$	2,009,049	$	84,683	$	1,775,250	$	8,640,291
Ending balance: impaired loans	$	409,085	$	175,575	$	111,371	$	11,261	$	32,842	$	740,134
Ending balance: purchased credit-impaired loans	$	148,025	$	4,217	$	-	$	-	$	-	$	152,242
Ending balance: loans with general allowance	$	2,680,891	$	1,353,516	$	1,897,678	$	73,422	$	1,742,408	$	7,747,915

		Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Quarter ended June 30, 2017
Allowance for loan and lease losses:
Beginning balance		$	35,775	$	68,468	$	45,970	$	3,886	$	49,132	$	203,231
Charge-offs			(6,967)		(30,495)		(6,378)		(595)		(11,053)		(55,488)
Recoveries			891		78		4,624		133		1,920		7,646
Provision (release)			10,888		525		(2,134)		312		8,505		18,096
Ending balance		$	40,587	$	38,576	$	42,082	$	3,736	$	48,504	$	173,485
Ending balance: specific reserve for impaired loans		$	13,786	$	8,330	$	10,788	$	2,374	$	5,516	$	40,794
Ending balance: purchased credit-impaired loans (1)		$	9,074	$	372	$	-	$	-	$	-	$	9,446
Ending balance: general allowance		$	17,727	$	29,874	$	31,294	$	1,362	$	42,988	$	123,245
Loans held for investment:
Ending balance		$	3,282,307	$	1,611,730	$	2,116,756	$	122,093	$	1,728,290	$	8,861,176
Ending balance: impaired loans		$	428,711	$	140,621	$	74,902	$	50,557	$	40,834	$	735,625
Ending balance: purchased credit-impaired loans		$	156,202	$	4,166	$	-	$	-	$	-	$	160,368
Ending balance: loans with general allowance		$	2,697,394	$	1,466,943	$	2,041,854	$	71,536	$	1,687,456	$	7,965,183
		Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Six-Month Period Ended June 30, 2017
Allowance for loan and lease losses:
Beginning balance		$	33,980	$	57,261	$	61,953	$	2,562	$	49,847	$	205,603
Charge-offs			(15,192)		(31,857)		(18,430)		(658)		(22,245)		(88,382)
Recoveries			1,640		108		5,499		578		4,901		12,726
Provision (release)			20,159		13,064		(6,940)		1,254		16,001		43,538
Ending balance		$	40,587	$	38,576	$	42,082	$	3,736	$	48,504	$	173,485
Ending balance: specific reserve for impaired loans		$	13,786	$	8,330	$	10,788	$	2,374	$	5,516	$	40,794
Ending balance: purchased credit-impaired loans (1)		$	9,074	$	372	$	-	$	-	$	-	$	9,446
Ending balance: general allowance		$	17,727	$	29,874	$	31,294	$	1,362	$	42,988	$	123,245
Loans held for investment:
Ending balance		$	3,282,307	$	1,611,730	$	2,116,756	$	122,093	$	1,728,290	$	8,861,176
Ending balance: impaired loans		$	428,711	$	140,621	$	74,902	$	50,557	$	40,834	$	735,625
Ending balance: purchased credit-impaired loans		$	156,202	$	4,166	$	-	$	-	$	-	$	160,368
Ending balance: loans with general allowance		$	2,697,394	$	1,466,943	$	2,041,854	$	71,536	$	1,687,456	$	7,965,183
(1)	Refer to Note 7- Loans Held For Investment-PCI Loans, for a detail of changes in the allowance for loan losses related to PCI loans.

The tables below present the allowance for loan and lease losses and the carrying value of loans by portfolio segment as of June 30, 2018 and December 31, 2017:
As of June 30, 2018	Residential Mortgage Loans			Commercial Mortgage Loans									Consumer and Finance Leases
										Construction Loans
(Dollars in thousands)							C&I Loans										Total
Impaired loans without specific reserves:
Principal balance of loans, net of charge-offs	$	121,396		$	58,992		$	43,566		$	-		$	2,780			$	226,734
Impaired loans with specific reserves:
Principal balance of loans, net of charge-offs		287,689			116,583			67,805			11,261			30,062				513,400
Allowance for loan and lease losses		19,804			12,204			10,592			1,061			5,853				49,514
Allowance for loan and lease losses to principal
balance		6.88	%		10.47	%		15.62	%		9.42	%		19.47	%			9.64	%
PCI loans:
Carrying value of PCI loans		148,025			4,217			-			-			-				152,242
Allowance for PCI loans		10,954			400			-			-			-				11,354
Allowance for PCI loans to carrying value		7.40	%		9.49	%		-			-			-				7.46	%
Loans with general allowance:
Principal balance of loans		2,680,891			1,353,516			1,897,678			73,422			1,742,408				7,747,915
Allowance for loan and lease losses		24,372			36,114			33,408			2,888			64,385				161,167
Allowance for loan and lease losses to principal
balance		0.91	%		2.67	%		1.76	%		3.93	%		3.70		%		2.08	%
Total loans held for investment:
Principal balance of loans	$	3,238,001		$	1,533,308		$	2,009,049		$	84,683		$	1,775,250			$	8,640,291
Allowance for loan and lease losses		55,130			48,718			44,000			3,949			70,238				222,035
Allowance for loan and lease losses to principal
balance (1)		1.70	%		3.18	%		2.19	%		4.66	%		3.96		%		2.57	%

	Residential Mortgage Loans			Commercial Mortgage Loans									Consumer and Finance Leases
										Construction Loans
(Dollars in thousands)							C&I Loans									Total
As of December 31, 2017
Impaired loans without specific reserves:
Principal balance of loans, net of charge-offs	$	116,818		$	65,100		$	28,292		$	48		$	2,788		$	213,046
Impaired loans with specific reserves:
Principal balance of loans, net of charge-offs		316,616			87,814			90,008			47,218			35,606			577,262
Allowance for loan and lease losses		22,086			9,783			12,359			2,017			5,165			51,410
Allowance for loan and lease losses to principal
balance		6.98	%		11.14	%		13.73	%		4.27	%		14.51	%		8.91	%
PCI loans:
Carrying value of PCI loans		153,991			4,183			-			-			-			158,174
Allowance for PCI loans		10,873			378			-			-			-			11,251
Allowance for PCI loans to carrying value		7.06%			9.04%			-			-			-			7.11	%
Loans with general allowance:
Principal balance of loans		2,703,532			1,457,875			1,964,953			64,131			1,711,503			7,901,994
Allowance for loan and lease losses		26,016			38,332			36,512			2,505			65,817			169,182
Allowance for loan and lease losses to principal
balance		0.96	%		2.63	%		1.86	%		3.91	%		3.85	%		2.14	%
Total loans held for investment:
Principal balance of loans	$	3,290,957		$	1,614,972		$	2,083,253		$	111,397		$	1,749,897		$	8,850,476
Allowance for loan and lease losses		58,975			48,493			48,871			4,522			70,982			231,843
Allowance for loan and lease losses to principal
balance (1)		1.79	%		3.00	%		2.35	%		4.06	%		4.06	%		2.62	%
__________
(1) Loans used in the denominator include PCI loans of $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, respectively. However, the Corporation separately tracks and reports PCI loans and excludes these loans from the amounts of non-performing loans, impaired loans, TDRs and non-performing assets.

As of June 30, 2018, the Corporation maintained a $0.2million reserve for unfunded loan commitments (December 31, 2017 - $0.7 million), mainly related to outstanding commitments on floor plan revolving lines of credit. The reserve for unfunded loan commitments is an estimate of the losses inherent in off-balance sheet loan commitments to borrowers that are experiencing financial difficulties at the balance sheet date. It is calculated by multiplying an estimated loss factor by an estimated probability of funding, and then by the period-end amounts for unfunded commitments. The reserve for unfunded loan commitments is included as part of accounts payable and other liabilities in the consolidated statement of financial condition and any change to the reserve is included as part of other non-interest expenses in the consolidated statements of income.

During the second quarter of 2018, the Corporation implemented certain enhancements to the methodology behind the calculation of the allowance for commercial loans, which include, among others, a revised procedure whereby historical loss rates for each commercial loan regulatory-based credit risk category (i.e., pass, special mention, substandard, and doubtful) are now calculated using the historical charge-offs and portfolio balances over their average loss emergence period (the “raw loss rate”) for each credit risk classification. However, when not enough loss experience is observed in a particular risk-rated category and the calculation results in a loss rate for such risk-rated category that is lower than the loss rate of a less severe risk-rated category, the Corporation now uses the loss rate of such less severe category. Accordingly, during the second quarter of 2018, the Corporation applied the raw loss rate determined for loans rated pass to the commercial real estate loans rated special mention, instead of the lower raw loss rate that resulted for the special mention category.

As of March 31, 2018, the historical losses and portfolio balances of special mention loans were allocated to pass or substandard categories based on the historical proportion of loans in this risk category that ultimately cured or resulted in being uncollectible.

In addition, during the second quarter of 2018, the Corporation implemented refinements to the measurement of qualitative factors in the estimation process of the allowance for loan losses for commercial and consumer loans primarily consisting of the incorporation of a basis point adjustment derived from the difference between the average raw loss rate and the highest loss rates observed during a look-back period that management determined was appropriate to use for each region to identify any relevant effect during an economic cycle.

Although the neteffect of these refinements was immaterial to the total provision expense, on a portfolio basis these enhancements resulted in a $1.6 million decrease in the provision for commercial and construction loans in the second quarter of 2018, offset by a $1.6 million increase in the provision for consumer loans.

XML

LOANS HELD FOR SALE

6 Months Ended

Jun. 30, 2018

LOANS HELD FOR SALE

NOTE 9–LOANS HELD FOR SALE

The Corporation’s loans held-for-sale portfolio as of the dates indicated was composed of:

		June 30, 2018		December 31, 2017
(In thousands)
Residential mortgage loans		$	26,269	$	24,690
Construction loans (1)			37,732		8,290
Commercial mortgage loans (1)(2)			16,814		-
Total		$	80,815	$	32,980
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million) in non-performing loans to held for sale. Loans transferred to held for sales consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).
(2)	During the second quarter of 2018, the Corporation completed the sale of a $10.4 million non-performing commercial mortgage loan that was among the loans transferred to held for sale in the first quarter of 2018.

XML

OTHER REAL ESTATE OWNED

6 Months Ended

Jun. 30, 2018

Text Block [Abstract]

Other Real Estate Owned Disclosure [Text Block]

NOTE10–OTHER REAL ESTATE OWNED

The following table presents OREO inventory as of the dates indicated:
		June 30,			December 31,
		2018		2017
(In thousands)
OREO
OREO balances, carrying value:
Residential (1)		$	57,579	$	54,381
Commercial			75,844		82,871
Construction			9,932		10,688
Total		$	143,355	$	147,940
(1)	Excludes $14.5 million and $21.3 million as of June 30, 2018 and December 31, 2017, respectively, of foreclosures that meet the conditions of ASC Topic 310-40 and are presented as a receivable (other assets) in the statement of financial condition.

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

6 Months Ended

Jun. 30, 2018

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 11–DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

One of the market risks facing the Corporation is interest rate risk, which includes the risk that changes in interest rates will result in changes in the value of the Corporation’s assets or liabilities and will adversely affect the Corporation’s net interest income from its loan and investment portfolios. The overall objective of the Corporation’s interest rate risk management activities is to reduce the variability of earnings caused by changes in interest rates.

The Corporation designates a derivative as a fair value hedge,cash flow hedge or economic undesignated hedge when it enters into the derivative contract. As of June 30, 2018 and December 31, 2017, all derivatives held by the Corporation were considered economic undesignated hedges. These undesignated hedges were recorded at fair value with the resulting gain or loss recognized in current earnings.

The following summarizes the principal derivative activities used by the Corporation in managing interest rate risk:

Interest rate cap agreements - Interest rate cap agreements provide the right to receive cash if a reference interest rate rises above a contractual rate. The value increases as the reference interest rate rises. The Corporation enters into interest rate cap agreements for protection from rising interest rates.

Forward contracts- Forward contracts are sales of to-be-announced (“TBA”) mortgage-backed securities that will settle over the standard delivery date and do not qualify as “regular way” security trades. Regular-way security trades are contracts that have no net settlement provision and no market mechanism to facilitate net settlement and that provide for delivery of a security within the time framegenerally established by regulations or conventions in the market-place or exchange in which the transaction is being executed. The forward sales are considered derivative instruments that need to be marked-to-market. These securities are used to economically hedge the FHA/VA residential mortgage loan securitizations of the mortgage-banking operations. Unrealized gains (losses) are recognized as part of mortgage banking activities in the consolidated statement of income.

To satisfy the needs of its customers, the Corporation may enter into non-hedging transactions. On these transactions, the Corporation generally participates as a buyer in one of the agreements and as a seller in the other agreement under the same terms and conditions.

In addition, the Corporation enters into certain contracts with embedded derivatives that do not require separate accounting as these are clearly and closely related to the economic characteristics of the host contract. When the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, it is bifurcated, carried at fair value, and designated as a trading or non-hedging derivative instrument.

The following table summarizes the notional amounts of all derivative instruments:
		Notional Amounts (1)
		As of		As of
		June 30,		December 31,
		2018		2017
(In thousands)
Undesignated economic hedges:
Interest rate contracts:
Written interest rate cap agreements		$	90,010	$	91,010
Purchased interest rate cap agreements			90,010		91,010
Forward Contracts:
Sale of TBA GNMA MBS pools			30,000		26,000
Forward loan sales commitments			6,304		-
		$	216,324	$	208,020
(1)	Notional amounts are presented on a gross basis with no netting of offsetting exposure positions.

The following table summarizes for derivative instruments their fair values and location in the consolidated statements of financial condition:
	Asset Derivatives					Liability Derivatives
	Statement of	June 30,		December 31,			June 30,		December 31,
	Financial	2018		2017			2018		2017
	Condition Location	FairValue		FairValue		Statement of Financial Condition Location	FairValue		FairValue
(In thousands)
Undesignated economic hedges:
Interest rate contracts:
Written interest rate cap agreements	Other assets	$	-	$	-	Accounts payable and other liabilities	$	799	$	305
Purchased interest rate cap agreements	Other assets		799		305	Accounts payable and other liabilities		-		-
Forward Contracts:
Sales of TBA GNMA MBS pools	Other assets		7		7	Accounts payable and other liabilities		122		19
Forward loan sales commitments	Other assets		-		-	Accounts payable and other liabilities		-		-
		$	806	$	312		$	921	$	324

The following table summarizes the effect of derivative instruments on the consolidated statement of income:
		(Loss) or Gain				(Loss) or Gain
	Location of (Loss) or Gain	Quarter Ended				Six-Month Period Ended
	Recognized in Statement	June 30,				June 30,
	of Income on Derivatives	2018		2017		2018		2017
		(In thousands)
UNDESIGNATED ECONOMIC HEDGES:
Interest rate contracts:
Written and purchased interest rate cap agreements	Interest income - Loans	$	-	$	-	$	-	$	(1)
Forward contracts:
Sales of TBA GNMA MBS pools	Mortgage Banking Activities		(51)		364		(103)		308
Forward loan sales commitments	Mortgage Banking Activities		-		-		-		-
Total (loss) gain on derivatives		$	(51)	$	364	$	(103)	$	307

Derivative instruments are subject to market risk. As is the case with investment securities, the market value of derivative instruments is largely a function of the financial market’s expectations regarding the future direction of interest rates. Accordingly, current market values are not necessarily indicative of the future effect of derivative instruments on earnings. This will depend, for the most part, on the shape of the yield curve, and the level of interest rates, as well as the expectations for rates in the future.

As of June 30, 2018, the Corporation had not entered into any derivative instrument containing credit-risk-related contingent features.

XML

OFFSETTING OF ASSETS AND LIABILITIES

6 Months Ended

Jun. 30, 2018

Text Block [Abstract]

OFFSETTING OF ASSETS AND LIABILITIES

NOTE 12–OFFSETTING OF ASSETS AND LIABILITIES

The Corporation enters into master agreements with counterparties, primarily related to derivatives and repurchase agreements, that may allow for netting of exposures in the event of default. In an event of default, each party has a right of set-off against the other party for amounts owed under the related agreement and any other amount or obligation owed in respect of any other agreement or transaction between them. The following table presents information about the offsetting of financial assets and liabilities, as well as derivative assets and liabilities:

Offsetting of Financial Assets and Derivative Assets
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Assets Presented in the Statement of Financial Position
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of June 30, 2018											Net Amount
(In thousands)
Description
Derivatives	$	799	$	-	$	799	$	(29)	$	(770)	$	-
Securities purchased under agreements to resell		200,000		(200,000)		-		-		-		-
Total	$	200,799	$	(200,000)	$	799	$	(29)	$	(770)	$	-
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Assets Presented in the Statement of Financial Position
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of December 31, 2017											Net Amount
(In thousands)
Description
Derivatives	$	305	$	-	$	305	$	(305)	$	-	$	-
Securities purchased under agreements to resell		200,000		(200,000)		-		-		-		-
Total	$	200,305	$	(200,000)	$	305	$	(305)	$	-	$	-

Offsetting of Financial Liabilities and Derivative Liabilities
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Liabilities Presented in the Statement of Financial Position
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of June 30, 2018											Net Amount
(In thousands)
Description
Securities sold under agreements to repurchase	$	400,000	$	(200,000)	$	200,000	$	(200,000)	$	-	$	-
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Liabilities Presented in the Statement of Financial Position
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of December 31, 2017											Net Amount
(In thousands)
Description
Derivatives	$	-	$	-	$	-	$	-	$	-	$	-
Securities sold under agreements to repurchase	$	500,000	$	(200,000)	$	300,000	$	(300,000)	$	-	$	-

XML

GOODWILL AND OTHER INTANGIBLES

6 Months Ended

Jun. 30, 2018

GOODWILL AND OTHER INTANGIBLES

NOTE 13 – GOODWILL AND OTHER INTANGIBLES

Goodwill as of June 30, 2018 and December 31, 2017 amounted to $28.1 million, recognized as part of “Other Assets” in the consolidated statements of financial condition. The Corporation conducted its annual evaluation of goodwill and other intangibles during the fourth quarter of 2017. The Corporation’s goodwill is related to the acquisition of FirstBank Florida in 2005.

There have been no significant events related to the Florida reporting unit that could indicate potential goodwill impairment since the date of the last evaluation; therefore, no goodwill impairment evaluation was performed during the first six months of 2018. Goodwill and other indefinite life intangibles are reviewed at least annually for impairment.

In connection with the acquisition of the FirstBank-branded credit card loan portfolio, in the second quarter of 2012, the Corporation recognized a purchased credit card relationship intangible of $24.5 million, which is being amortized over the remaining estimated life of3.3 years on an accelerated basis based on the estimated attrition rate of the purchased credit card accounts, which reflects the pattern in which the economic benefits of the intangible asset are consumed. These benefits are consumed as the revenue stream generated by the cardholder relationship is realized.

The core deposit intangible includes the core deposit acquired in the February 2015 Doral Bank transaction amountingto $3.4 million as of June 30, 2018.

In the first quarter of 2016, FirstBank Insurance Agency acquired certain insurance customer accounts and related customer records and recognized an insurance customer relationship intangible of $1.1 million ($0.7 million as of June 30, 2018), which is being amortized over the next 4.5years on a straight-line basis. The acquired accounts have a direct relationship to the previous mortgage loan portfolio acquisitions from Doral Bank and Doral Financial in 2015 and 2014.

	The following table shows the gross amount and accumulated amortization of the Corporation’s intangible assets recognized as part of Other Assets in the consolidated statements of financial condition:
		As of		As of
		June 30,		December 31,
		2018		2017
	(Dollars in thousands)
Core deposit intangible:
Gross amount, beginning of period		$	51,664	$	51,664
Accumulated amortization (1)			(46,829)		(46,186)
Net carrying amount		$	4,835	$	5,478
Remaining amortization period			6.5 years		7.0 years
Purchased credit card relationship intangible:
Gross amount		$	24,465	$	24,465
Accumulated amortization (2)			(17,614)		(16,465)
Net carrying amount		$	6,851	$	8,000
Remaining amortization period			3.3 years		3.9 years
Insurance customer relationship intangible:
Gross amount		$	1,067	$	1,067
Accumulated amortization (3)			(368)		(292)
Net carrying amount		$	699	$	775
Remaining amortization period			4.5 years		5.0 years
(1)	For the quarter and six-month period ended June 30, 2018, the amortization expense of core deposit intangibles amounted to $0.2 million and $0.6 million, respectively (2017 - $0.5 million and $0.9 million, respectively).
(2)	For the quarter and six-month period ended June 30, 2018, the amortization expense of the purchased credit card relationship intangible amounted to $0.6 million and $1.1 million, respectively (2017 - $0.6 million and $1.3 million, respectively).
(3)	For the quarter and six-month period ended June 30, 2018, the amortization expense of insurance customer relationship intangible amounted to $38 thousand and $76 thousand, respectively (2017 - $38 thousand and $76 thousand, respectively).

The estimated aggregate annual amortization expense related to the intangible assets for future periods is as follows:
			Amount
			(In thousands)
	2018	$	1,723
	2019		3,088
	2020		2,851
	2021		2,658
	2022		915
	2023 and after		1,150

XML

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS

6 Months Ended

Jun. 30, 2018

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS

NOTE 14 – NON CONSOLIDATED VARIABLE INTEREST ENTITIES (“VIE”) AND SERVICING ASSETS

The Corporation transfers residential mortgage loans in sale or securitization transactions in which it has continuing involvement, including servicing responsibilities and guarantee arrangements. All such transfers have been accounted for as sales as required by applicable accounting guidance.

When evaluating the need to consolidate counterparties to which the Corporation has transferred assets, or with which the Corporation has entered into other transactions, the Corporation first determines if the counterparty is an entity for which a variable interest exists. If no scope exception is applicable and a variable interest exists, the Corporation then evaluates if it is the primary beneficiary of the VIE and whether the entity should be consolidated or not.

Below is a summary of transfers of financial assets to VIEs for which the Corporation has retained some level of continuing involvement:

GNMA

The Corporation typically transfers first lien residential mortgage loans in conjunction with GNMA securitization transactions in which the loans are exchanged for cash or securities that are readily redeemed for cash proceeds and servicing rights. The securities issued through these transactions are guaranteed by the issuer and, under seller/servicer agreements, the Corporation is required to service the loans in accordance with the issuers’ servicing guidelines and standards. As of June 30, 2018, the Corporation serviced loans securitized through GNMA with a principal balance of $1.7 billion.

Trust-Preferred Securities

In 2004, FBP Statutory Trust I, a financing trust that is wholly owned by the Corporation, sold to institutional investors $100 million of its variable-rate trust-preferred securities. FBP Statutory Trust I used the proceeds of the issuance, together with the proceeds of the purchase by the Corporation of $3.1 million of FBP Statutory Trust I variable-rate common securities, to purchase $103.1 million aggregate principal amount of the Corporation’s Junior Subordinated Deferrable Debentures. Also in 2004, FBP Statutory Trust II, a financing trust that is wholly owned by the Corporation, sold to institutional investors $125 million of its variable-rate trust-preferred securities. FBP Statutory Trust II used the proceeds of the issuance, together with the proceeds of the purchase by the Corporation of $3.9 million of FBP Statutory Trust II variable-rate common securities, to purchase $128.9 million aggregate principal amount of the Corporation’s Junior Subordinated Deferrable Debentures. The debentures are presented in the Corporation’s consolidated statement of financial condition as Other Borrowings, net of related issuance costs. The variable-rate trust-preferred securities are fully and unconditionally guaranteed by the Corporation. The Junior Subordinated Deferrable Debentures issued by the Corporation in April 2004 and September 2004 mature on June 17, 2034 and September 20, 2034, respectively; however, under certain circumstances, the maturity of Junior Subordinated Deferrable Debentures may be shortened (such shortening would result in a mandatory redemption of the variable-rate trust-preferred securities).

During the first quarter of 2018, the Corporation completed the repurchase of $23.8 million of trust preferred securities of the FBP Statutory Trust I that were auctioned in a public sale at which the Corporation was invited to participate. The Corporation repurchased and cancelled the repurchased trust preferred securities, resulting in a commensurate reduction in the related Floating Rate Junior Subordinated Debenture. The Corporation’s winning bid equated to 90% of the $23.8 million par value. The 10% discount resulted in a gain of approximately $2.3 million, which is reflected in the statement of income as a “Gain on early extinguishment of debt.”

The Collins Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated certain trust-preferred securities from Tier 1 Capital; however, these instruments may remain in Tier 2 capital until the instruments are redeemed or mature. Under the indentures, the Corporation has the right, from time to time, and without causing an event of default, to defer payments of interest on the Junior Subordinated Deferrable Debentures by extending the interest payment period at any time and from time to time during the term of the subordinated debentures for up to twenty consecutive quarterly periods. During the second quarter of 2016, the Corporation, having received approval from the Federal Reserve, paid $31.2 million for all of the accrued but deferred interest payments plus the interest for the second quarter of 2016 on the Corporation’s subordinated debentures associated with its trust preferred securities.Subsequently, the Corporation has received quarterly approvals that have enabled it to make scheduled quarterly interest payments. As of June 30, 2018, the Corporation was current on all interest payments due on its subordinated debt. In October 2017, the New York FED terminated the formal written agreement (the “Written Agreement”) entered into on June 3, 2010 between the Corporation and the Reserve Bank. However, the Corporation has agreedwith its regulators to continue to obtain approval before paying dividends, receiving dividends from the Bank, making payments on subordinated debt or trust-preferred securities, incurring or guaranteeing debt or purchasing or redeeming any corporate stock. The Corporation has received approval to make the subordinated debentures’ quarterly payment for September 30, 2018.

Grantor Trusts

During 2004 and 2005, an unaffiliated party, referred to in this subsection as the seller, established a series of statutory trusts to effect the securitization of mortgage loans and the sale of trust certificates (the “Grantor Trusts”). The seller initially provided the servicing for a fee, which is senior to the obligations to pay trust certificate holders. The seller then entered into a sales agreement through which it sold and issued the trust certificates in favor of the Corporation’s banking subsidiary. Currently, the Bank is the sole owner of the trust certificates; the servicing of the underlying residential mortgages that generate the principal and interest cash flows is performed by another third party, which receives a servicing fee. The securities are variable-rate securities indexed to 90-day LIBOR plus a spread. The principal payments from the underlying loans are remitted to a paying agent (servicer), who then remits interest to the Bank. Interest income is shared to a certain extent with the FDIC, which has an interest only strip (“IO”) tied to the cash flows of the underlying loans and is entitled to receive the excess of the interest income less a servicing fee over the variable rate income that the Bank earns on the securities. This IO is limited to the weighted-average coupon on the securities. The FDIC became the owner of the IO upon its intervention of the seller, a failed financial institution. No recourse agreement exists, and the Bank, as a sole holder of the certificates, absorbs all risks from losses on non-accruing loans and repossessed collateral. As of June 30, 2018, the amortized cost and fair value of the Grantor Trusts amounted to $20.6 million and $15.1 million, respectively, with a weighted average yield of 4.51%, which is included as part of the Corporation’s available-for-sale investment securities portfolio.

Investment in unconsolidated entity

On February 16, 2011, FirstBank sold an asset portfolio consisting of performing and non-performing construction, commercial mortgage and commercial and industrial loans with an aggregate book value of $269.3 million to CPG/GS, an entity organized under the laws of the Commonwealth of Puerto Rico and majority owned by PRLP Ventures LLC (“PRLP”), a company created by Goldman, Sachs & Co. and Caribbean Property Group. In connection with the sale, the Corporation received $88.5 million in cash and a 35% interest in CPG/GS, and made a loan in the amount of $136.1 million representing seller financing provided by FirstBank. The loan matured in February 2018 and was refinanced and consolidated with other outstanding loans of CPG/GS in the second quarter of 2018. As of June 30, 2018, the carrying amount of the new loan was $10.6 million, which was included in the Corporation’s commercial mortgage loans held for investment portfolio. This loan has a three-year maturity, bears a fixed-interest rate, and is primarily secured by income-producing real estate properties and certain residential units. FirstBank’s equity interest in CPG/GS is accounted for under the equity method. FirstBank recorded a loss on its interest in CPG/GS in 2014 that reduced to zero the carrying amount of the Bank’s investment in CPG/GS. No negative investment needs to be reported as the Bank has no legal obligation or commitment to provide further financial support to this entity; thus, no further losses have been or will be recorded on this investment.

Cash proceeds received by CPG/GS have been first used to cover operating expenses and debt service payments, including those related to the refinanced loandescribed above, which must be substantially repaid before proceeds can be used for other purposes, including the return of capital to both PRLP and FirstBank. FirstBank will not receive any return on its equity interest until PRLP receives an aggregate amount equivalent to its initial investment and a priority return of at least 12%, which has not occurred, resulting in FirstBank’s interest in CPG/GS being subordinate to PRLP’s interest. CPG/GS will then begin to make payments pro rata to PRLP and FirstBank, 35% and 65%, respectively, until FirstBank has achieved a 12% return on its invested capital and the aggregate amount of distributions is equal to FirstBank’s capital contributions to CPG/GS.

The Bank has determined that CPG/GS is a VIE in which the Bank is not the primary beneficiary. In determining the primary beneficiary of CPG/GS, the Bank considered applicable guidance that requires the Bank to qualitatively assess the determination of the primary beneficiary (or consolidator) of CPG/GS based on whether it has both the power to direct the activities of CPG/GS that most significantly affect the entity’s economic performance and the obligation to absorb losses of, or the right to receive benefits from, CPG/GS that could potentially be significant to the VIE. The Bank determined that it does not have the power to direct the activities that most significantly impact the economic performance of CPG/GS as it does not have the right to manage or influence the loan portfolio, foreclosure proceedings, or the construction and sale of the property; therefore, the Bank concluded that it is not the primary beneficiary of CPG/GS.

Servicing Assets

The Corporation sells residential mortgage loans to GNMA, which generally securitizes the transferred loans into mortgage-backed securities. Also, certain conventional conforming loans are sold to FNMA or FHLMC with servicing retained. The Corporation recognizes as separate assets the rights to service loans for others, whether those servicing assets are originated or purchased.

The changes in servicing assets are shown below:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
(In thousands)		2018		2017		2018		2017
Balance at beginning of period		$	26,135	$	26,330	$	25,255	$	26,244
Capitalization of servicing assets			1,138		1,049		2,025		1,924
Amortization			(729)		(779)		(1,466)		(1,567)
Adjustment to fair value			617		(197)		1,330		(357)
Other (1)			30		99		47		258
Balance at end of period		$	27,191	$	26,502	$	27,191	$	26,502
(1)	Amount represents the adjustment to fair value related to the repurchase of loans serviced for others.

Impairment charges are recognized through a valuation allowance for each individual stratum of servicing assets. The valuation allowance is adjusted to reflect the amount, if any, by which the cost basis of the servicing asset for a given stratum of loans being serviced exceeds its fair value. Any fair value in excess of the cost basis of the servicing asset for a given stratum is not recognized.

Changes in the impairment allowance were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018		2017		2018		2017
(In thousands)
Balance at beginning of period	$	673	$	-	$	1,451	$	461
Temporary impairment charges		20		197		37		357
OTTI of servicing assets		-		-		(65)		(621)
Recoveries		(637)		-		(1,367)		-
Balance at end of period	$	56	$	197	$	56	$	197

	The components of net servicing income are shown below:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands)
Servicing fees		$	2,058	$	1,975	$	4,178	$	3,999
Late charges and prepayment penalties			146		138		266		237
Adjustment for loans repurchased			30		99		47		258
Other			-		(28)		-		(35)
Servicing income, gross			2,234		2,184		4,491		4,459
Amortization and impairment of servicing assets			(112)		(977)		(136)		(1,925)
Servicing income, net		$	2,122	$	1,207	$	4,355	$	2,534

The Corporation’s servicing assets are subject to prepayment and interest rate risks. Key economic assumptions used in determining the fair value at the time of sale of the related mortgages ranged as follows:
	Maximum		Minimum
Six-Month Period Ended June 30, 2018:
Constant prepayment rate:
Government-guaranteed mortgage loans	5.7	%	5.6	%
Conventional conforming mortgage loans	6.3	%	6.2	%
Conventional non-conforming mortgage loans	9.6	%	9.1	%
Discount rate:
Government-guaranteed mortgage loans	12.0	%	12.0	%
Conventional conforming mortgage loans	10.0	%	10.0	%
Conventional non-conforming mortgage loans	14.3	%	14.3	%
Six-Month Period Ended June 30, 2017:
Constant prepayment rate:
Government-guaranteed mortgage loans	6.0	%	6.0	%
Conventional conforming mortgage loans	6.4	%	6.3	%
Conventional non-conforming mortgage loans	9.5	%	9.1	%
Discount rate:
Government-guaranteed mortgage loans	12.0	%	12.0	%
Conventional conforming mortgage loans	10.0	%	10.0	%
Conventional non-conforming mortgage loans	14.3	%	14.3	%

The weighted averages of the key economic assumptions that the Corporation used in its valuation model and the sensitivity of the currentfair value to immediate 10% and 20% adverse changes in those assumptions for mortgage loans as of June 30, 2018were as follows:

	(Dollars in thousands)
Carrying amount of servicing assets	$	27,191
Fair value	$	31,953
Weighted-average expected life (in years)		8.63
Constant prepayment rate (weighted-average annual rate)		-
Decrease in fair value due to 10% adverse change	$	731
Decrease in fair value due to 20% adverse change	$	1433
Discount rate (weighted-average annual rate)		-
Decrease in fair value due to 10% adverse change	$	1,603
Decrease in fair value due to 20% adverse change	$	3,067

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship between the change in assumption and the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the servicing asset is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or counteract the sensitivities.

XML

DEPOSITS

6 Months Ended

Jun. 30, 2018

DEPOSITS

NOTE15– DEPOSITS

The following table summarizes deposit balances as of the dates indicated:
	June 30,			December 31,
	2018		2017
(In thousands)
Type of account:
Non-interest bearing checking accounts	$	2,317,149	$	1,833,665
Savings accounts		2,360,345		2,401,385
Interest-bearing checking accounts		1,328,540		1,207,511
Certificates of deposit		2,389,383		2,429,585
Brokered certificates of deposit (CDs)		822,666		1,150,485
	$	9,218,083	$	9,022,631

Brokered CDs mature as follows:
	June 30,
	2018
(In thousands)
Three months or less	$	148,917
Over three months to six months		180,053
Over six months to one year		128,815
Over one year to three years		284,747
Over three years to five years		78,753
Over five years		1,381
Total	$	822,666

The following are the components of interest expense on deposits:
	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018			2017	2018			2017
(In thousands)
Interest expense on deposits	$	16,667	$	15,883	$	33,274	$	31,351
Accretion of premium from acquisition		(2)		(15)		(5)		(38)
Amortization of broker placement fees		309		480		676		1,007
Interest expense on deposits	$	16,974	$	16,348	$	33,945	$	32,320

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

6 Months Ended

Jun. 30, 2018

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

NOTE 17 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase (repurchase agreements) as of the dates indicated consisted of the following:
		June 30, 2018		December 31, 2017
(Dollars in thousands)
Short-term fixed-rate repurchase agreement with a rate of 1.53%		$	-	$	100,000
Long-term fixed-rate repurchase agreements,
interest ranging from 1.96% to 2.26% (1)(2)			200,000		200,000
		$	200,000	$	300,000
(1)	Reported net of securities purchased under agreements to repurchase (reverse repurchase agreements) by counterparty, when applicable, pursuant to Topic ASC 210-20-45-11.
(2)	As of June 30, 2018, includes $200 million with an average rate of 2.11% that lenders have the right to call before their contractual maturities at various dates beginning on July 19, 2018. Subsequent to June 30, 2018, no lender has exercised its call option on repurchase agreements.

Repurchase agreements mature as follows:
		June 30, 2018
		(In thousands)
	Three to four years		200,000
	Total	$	200,000

As of June 30, 2018 and December 31, 2017, the securities underlying such agreements were delivered to the dealers with which the repurchase agreements were transacted.

Repurchase agreements as of June 30, 2018, grouped by counterparty, were as follows:
	(Dollars in thousands)			Weighted-Average
	Counterparty	Amount		Maturity (In Months)
	JP Morgan Chase	$	200,000	43

XML

ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB)

6 Months Ended

Jun. 30, 2018

ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB)

NOTE 18 – ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB)

The following is a summary of the advances from the FHLB:
		June 30,		December 31,
	(Dollars in thousands)	2018		2017
	Long-term fixed-rate advances from FHLB, with a weighted-average
	interest rate of 1.91%	$	715,000	$	715,000

Advances from FHLB mature as follows:
		June 30, 2018
	(In thousands)
	Within one month	$	25,000
	Over three to six months		70,000
	Over one to three years		420,000
	Over three to five years		200,000
	Total	$	715,000

As of June 30, 2018, the Corporation used $162.0 million in letters of credit issued by the FHLB as pledges for public deposits in the Virgin Islands and had additional capacity of approximately $491.6million on this credit facility based on collateral pledged at the FHLB, including a haircut reflecting the perceived risk associated with the collateral.

XML

OTHER BORROWINGS

6 Months Ended

Jun. 30, 2018

OTHER BORROWINGS

NOTE 18 – OTHER BORROWINGS

Other borrowings, as of the indicated dates, consisted of:

	June 30,		December 31,
	2018		2017
	(In thousands)
Junior subordinated debentures due in 2034,
interest-bearing at a floating rate of 2.75%
over 3-month LIBOR (5.08% as of June 30, 2018
and 4.35% as of December 31, 2017) (1)	$	65,593	$	90,078
Junior subordinated debentures due in 2034,
interest-bearing at a floating rate of 2.50%
over 3-month LIBOR (4.82% as of June 30, 2018
and 4.12% as of December 31, 2017)		118,557		118,557
	$	184,150	$	208,635
(1) Refer to Note 14 - Non-Consolidated Variable Interest Entities (“VIE”) and Servicing Assets-Trust-Preferred Securities, for additional information about the Corporation repurchase and cancellation in the first quarter of 2018 of $23.8 million in trust-preferred securities associated with these junior subordinated debentures.

XML

STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2018

STOCKHOLDERS' EQUITY

NOTE 20 – STOCKHOLDERS’ EQUITY

Common Stock

As of June 30, 2018 and December 31, 2017, the Corporation had 2,000,000,000 authorized shares of common stock with a par value of $0.10 per share. As of June 30, 2018 and December 31, 2017, there were 221,724,062 and 220,382,343 shares issued, respectively, and 217,185,449 and 216,278,040 shares outstanding, respectively. Refer to Note 4 – Stock Based Compensation, for information about transactions related to common stock under the Omnibus Plan.

On May 17, 2018, the U.S. Treasury exercised its warrant to purchase1,285,899 shares of the Corporation’s stock on a cashless basis resulting in the issuance of 730,571 shares of common stock and the use of555,328shares to cover the strike price of the transaction. Cash paid in lieu of fractional shares was $6.58.

Preferred Stock

The Corporation has 50,000,000 authorized shares of preferred stock with a par value of $1.00, redeemable at the Corporation’s option, subject to certain terms. This stock may be issued in series and the shares of each series have such rights and preferences as are fixed by the Board of Directors when authorizing the issuance of that particular series. As of June 30, 2018, the Corporation has five outstanding series of non-convertible, non-cumulative preferred stock: 7.125% non-cumulative perpetual monthly income preferred stock, Series A; 8.35% non-cumulative perpetual monthly income preferred stock, Series B; 7.40% non-cumulative perpetual monthly income preferred stock, Series C; 7.25% non-cumulative perpetual monthly income preferred stock, Series D; and 7.00% non-cumulative perpetual monthly income preferred stock, Series E. The liquidation value per share is $25.

Effective January 17, 2012, the Corporation delisted all of its outstanding series of non-convertible, non-cumulative preferred stock from the New York Stock Exchange. The Corporation has not arranged for listing and/or registration on another national securities exchange or for quotation of the Series A through E Preferred Stock in a quotation medium.In December 2016, for the first time since July 2009, the Corporation paid dividends on its non-cumulative perpetual monthly income preferred stock, after receiving regulatory approval. Since then, the Corporation has continued to pay monthly dividend payments on the non-cumulative perpetual monthly income preferred stock. The Corporation intends to request approval in future periods to continue monthly dividend payments on the non-cumulative perpetual monthly income preferred stock. The Corporation has received regulatory approval to pay the monthly dividends on the Corporation’s Series A through E Preferred Stock through September 2018.

On October 3, 2017, the Federal Reserve terminated the Written Agreement entered into on June 3, 2010 between the Corporation and the Federal Reserve. However, the Corporation has agreed with its regulators to continue to obtain approval before paying dividends, receiving dividends from the Bank, making payments on subordinated debt or trust preferred securities, incurring or guaranteeing debt or purchasing or redeeming any corporate stock.

Treasury stock

During the first six months of 2018 and 2017, the Corporation withheld an aggregate of 424,810shares and 326,653 shares, respectively, of the common stock paid to certain senior officers as additional compensation and restricted stock that vested during the first six months of 2018 and 2017 to cover employees’ payroll and income tax withholding liabilities; these shares are held as treasury stock. As of June 30, 2018, and December 31, 2017, the Corporation had 4,538,613 and 4,104,303shares held as treasury stock, respectively.

FirstBank Statutory Reserve (Legal Surplus)

The Banking Law of the Commonwealth of Puerto Rico requires that a minimum of 10% of FirstBank’s net income for the year be transferred to a legal surplus reserve until such surplus equals the total of paid-in-capital on common and preferred stock. Amounts transferred to the legal surplus reserve from the retained earnings account are not available for distribution to the Corporation, including for payment as dividends to the stockholders, without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The Puerto Rico Banking Law provides that, when the expenditures of a Puerto Rico commercial bank are greater than receipts, the excess of the expenditures over receipts must be charged against the undistributed profits of the bank, and the balance, if any, must be charged against the legal surplus reserve, as a reduction thereof. If there is no legal surplus reserve sufficient to cover such balance in whole or in part, the outstanding amount must be charged against the capital account and the Bank cannot pay dividends until it can replenish the legal surplus reserve to an amount of at least 20% of the original capital contributed. During the fourth quarter of 2017, $7.3million was transferred to the legal surplus reserve. FirstBank’s legal surplus reserve, included as part of retained earnings in the Corporation’s consolidated statement of financial condition, amounted to $59.7million as of June 30, 2018. There were no transfers to the legal surplus reserve during the first six months of 2018.

XML

INCOME TAXES

6 Months Ended

Jun. 30, 2018

INCOME TAXES

NOTE 21 - INCOME TAXES

Income tax expense includes Puerto Rico and USVI income taxes as well as applicable U.S. federal and state taxes. The Corporation is subject to Puerto Rico income tax on its income from all sources. As a Puerto Rico corporation, First BanCorp. is treated as a foreign corporation for U.S. and USVI income tax purposes and is generally subject to U.S. and USVI income tax only on its income from sources within the U.S. and USVI or income effectively connected with the conduct of a trade or business in those regions. Any such tax paid in the U.S. and USVI is also creditable against the Corporation’s Puerto Rico tax liability, subject to certain conditions and limitations.

Under the Puerto Rico Internal Revenue Code of 2011, as amended (the “2011 PR Code”), the Corporation and its subsidiaries are treated as separate taxable entities and are generally not entitled to file consolidated tax returns and, thus, the Corporation is generally not entitled to utilize losses from one subsidiary to offset gains in another subsidiary. Accordingly, in order to obtain a tax benefit from a net operating loss (“NOL”), a particular subsidiary must be able to demonstrate sufficient taxable income within the applicable NOL carry-forward period. The 2011 PR Code allows entities organized as limited liability companies to perform an election to become a non-taxable “pass-through” entity and utilize losses to offset income from other “pass-through” entities, subject to certain limitations, with the remaining net income passing-through to its partner entities. The 2011 PR Code also provides a dividend received deduction of 100% on dividends received from “controlled” subsidiaries subject to taxation in Puerto Rico and 85% on dividends received from other taxable domestic corporations.

On March 1, 2017, the Corporation completed the applicable regulatory filings to change the tax status of its subsidiary, First Federal Finance, from a taxable corporation to a non-taxable “pass-through” entity. This election allows the Corporation to realize tax benefits of its deferred tax assets associated with pass-through ordinary net operating losses available at the banking subsidiary, FirstBank, which were subject to a full valuation allowance as of December 31, 2016, against now pass-through ordinary income from this profitable subsidiary.

On March 1, 2017, the Corporation also completed the applicable regulatory filings to change the tax status of its subsidiary, FirstBank Insurance, from a taxable corporation to a non-taxable “pass-through” entity. This election allows the Corporation to offset pass-through income projected to be earned by FirstBank Insurance with net operating losses available at the Holding Company level.

The Corporation has maintained an effective tax rate lower than the maximum statutory rate mainly by investing in government obligations and mortgage-backed securities exempt from U.S. and Puerto Rico income taxes and by doing business through an International Banking Entity (“IBE”) unit of the Bank, and through the Bank’s subsidiary, FirstBank Overseas Corporation, whose interest income and gain on sales is exempt from Puerto Rico income taxation. The IBE and FirstBank Overseas Corporation were created under the International Banking Entity Act of Puerto Rico, which provides for total Puerto Rico tax exemption on net income derived by IBEs operating in Puerto Rico on the specific activities identified in the IBE Act. An IBE that operates as a unit of a bank pays income taxes at the corporate standard rates to the extent that the IBE’s net income exceeds 20% of the bank’s total net taxable income.

For the second quarter and first six months of 2018, the Corporation recorded an income tax expense of $10.2 million and $17.9 million, respectively, compared to an income tax expense of $9.3 million and $1.2 million for the comparable periods in 2017. The increase in the income tax expense for the second quarter of 2018, as compared to the same period a year ago, was primarily related to higher pre-tax earnings generated in 2018. The increase for the first six months of 2018, compared to same period in 2017, was mostly related to a $13.2 million tax benefit recorded in the first quarter of 2017 as a result of the above discussed change in tax status of certain subsidiaries from taxable corporations to limited liability companies that have elected to be treated as partnerships for income tax purposes in Puerto Rico and, to a lesser extent, a higher pre-tax income subject to the estimated annual effective tax rate for the six month period ended June 30, 2018.

For the six-month period ended June 30, 2018, the Corporation calculated the provision for income taxes by applying the estimated annual effective tax rate for the full fiscal year to ordinary income or loss.  In the computation of the consolidated worldwide annual estimated effective tax rate, ASC Topic 740-270, “Income Taxes – Interim Reporting,” requires the exclusion of legal entities with pre-tax losses from which a tax benefit cannot be recognized.  The Corporation’s estimated annual effective tax rate in the first six months of 2018, excluding entities from which a tax benefit cannot be recognized and discrete items, was 25% compared to 24% for the first six months of 2017.  The estimated annual effective tax rate including all entities for the first six months of 2018 was 24% (25% excluding discrete items, primarily the tax benefit resulting from the excess tax benefit recognized during the first quarter of 2018 upon the vesting of shares granted under the Corporation’s stock-based compensation plan) compared to 14% for the first six months of 2017 (25% excluding discrete items, primarily the tax benefit resulting from the previously mentioned change in the tax status of two subsidiaries).

The Corporation’s net deferred tax asset amounted to $283.3 million as of June 30, 2018, net of a valuation allowance of $181.2 million, and management concluded, based upon the assessment of all positive and negative evidence, that it is more likely than not that the Corporation will generate sufficient taxable income within the applicable NOL carry-forward periods to realize such amount. The net deferred tax asset of the Corporation’s banking subsidiary, FirstBank, amounted to $283.2 million as of June 30, 2018, net of a valuation allowance of $144.6 million, compared to a net deferred tax asset of $294.7million, net of a valuation allowance of $150.7million, as of December 31, 2017.

During the third quarter of 2017, the Corporation completed a formal ownership change analysis within the meaning of Section 382 of the U.S. Internal Revenue Code (“Section 382”) covering a comprehensive period, and concluded that an ownership change occurred during such period. Section 382 limits the ability to utilize U.S. and USVI NOLs for income tax purposes at such jurisdictions following an event of an ownership change.  The Section 382 limitation could result in higher U.S. and USVI liabilities in the future than we would incur in the absence of such limitation. For the second quarter and first six months of 2018, and as a result of the Section 382 limitation, the Corporation incurred an income tax expense of approximately $1.0 million and $2.6 million, respectively, related to its U.S. operations. The limitation did not affect the USVI operations in the first half of 2018. Prospectively, the Corporation expects that it will be able to mitigate the adverse effects associated with the Section 382 limitation as any such tax paid in the U.S. or USVI could be creditable against Puerto Rico tax liabilities or taken as deduction against taxable income.  However, our ability to reduce our Puerto Rico tax liability through such a credit or deduction depends on our tax profile at each annual taxable period, which is dependent on various factors.

As of June 30, 2018, the Corporation did not have Unrecognized Tax Benefits recorded on its books. The Corporation classifies all interest and penalties, if any, related to tax uncertainties as income tax expense. Audit periods remain open for review until the statute of limitations has passed. The statute of limitations under the 2011 PR Code is four years; the statute of limitations for U.S. and USVI income tax purposes is three years after a tax return is due or filed, whichever is later, for each. The completion of an audit by the taxing authorities or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Corporation’s liability for income taxes. Any such adjustment could be material to the results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. For U.S. and USVI income tax purposes, all tax years subsequent to 2013 remain open to examination. For Puerto Rico tax purposes, all tax years subsequent to 2012 remain open to examination.

On December 22, 2017, the United States president signed H.R.1, The Tax Cuts and Jobs Acts, which includes an overhaul of individual, business and international taxes and has affected our branch operations in the U.S. and the USVI. The bill includes measures reducing corporate taxes from 35% to 21%, a repeal of the corporate alternative minimum tax regime, changes to business deductions and NOLs, a 15.5% tax on mandatory repatriation of liquid assets, 10% tax on base erosion payments, and a minimum 10.5% tax on inclusion of global intangible low-tax income by U.S. shareholders, among other significant changes. The main provisions affecting our operations in the U.S. and the USVI in the first half of 2018 include: the change in tax rate to 21%, the limitation to the amount certain financial institutions may deduct for premiums paid to the FDIC, and changes in permanent differences, such as meals and entertainment deductions. Other significant provisions, such as the base erosion and anti-abuse tax, do not affect the Corporation’s U.S. and USVI branch operations since these operations’ receipts do not exceed the annual threshold of U.S. effectively connected gross receipts.

XML

OTHER COMPREHENSIVE INCOME

6 Months Ended

Jun. 30, 2018

Text Block [Abstract]

OTHER COMPREHENSIVE INCOME

NOTE 22 – OTHER COMPREHENSIVE LOSS

The following table presents changes in accumulated other comprehensive loss for the quarters and six-month periods ended June 30, 2018 and 2017:
	Changes in Accumulated Other Comprehensive Loss by Component (1)
	Quarter endedJune 30, 2018		Quarter endedJune 30, 2017		Six-month period ended June 30, 2018		Six-month period ended June 30, 2017
(In thousands)
Unrealized net holding losses on debt securities
Beginning Balance	$	(44,662)	$	(23,688)	$	(20,608)	$	(34,383)
Other comprehensive (loss) income		(7,445)		9,434		(31,499)		7,898
Amounts reclassified from accumulated comprehensive loss		-		(371)		-		11,860
Ending balance	$	(52,107)	$	(14,625)	$	(52,107)	$	(14,625)
Unrealized holding losses on equity securities
Beginning Balance	$	-	$	(6)	$	(6)	$	(7)
Reclassification to retained earnings per ASU 2016-01		-		-		6		-
Other comprehensive income		-		2		-		3
Ending balance	$	-	$	(4)	$	-	$	(4)
____________________
(1) All amounts presented are net of tax.

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss during the quarters and six-month periods ended June 30, 2018 and 2017:
		Reclassifications Out of Accumulated Other Comprehensive Loss
		Quarter ended June 30,				Six-month period ended June 30,
	Affected Line Item in the Consolidated Statements of Income	2018		2017		2018		2017
(In thousands)
Unrealized holding losses on debt securities
Realized gain (loss) on sale of debt securities	Net gain on sale of
	investments	$	-	$	371	$	-	$	371
OTTI on debt securities	Net impairment losses
	on available-for-sale
	debt securities		-		-		-		(12,231)
	Total before tax	$	-	$	371	$	-	$	(11,860)
	Income tax		-		-		-		-
	Total, net of tax	$	-	$	371	$	-	$	(11,860)

XML

FAIR VALUE

6 Months Ended

Jun. 30, 2018

FAIR VALUE

NOTE 21 – FAIR VALUE

Fair Value Measurement

The FASB authoritative guidance for fair value measurement defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This guidance also establishes a fair value hierarchy for classifying financial instruments. The hierarchy is based on whether the inputs to the valuation techniques used to measure fair value are observable or unobservable. Three levels of inputs may be used to measure fair value:

Level 1	Valuations of Level 1 assets and liabilities are obtained from readily-available pricing sources for market transactions involving identical assets or liabilities. Level 1 assets and liabilities include equity securities that trade in an active exchange market, as well as certain U.S. Treasury and other U.S. government and agency securities and corporate debt securities that are traded by dealers or brokers in active markets.
Level 2	Valuations of Level 2 assets and liabilities are based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include (i) mortgage-backed securities for which the fair value is estimated based on the value of identical or comparable assets, (ii) debt securities with quoted prices that are traded less frequently than exchange-traded instruments, and (iii) derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.
Level 3	Valuations of Level 3 assets and liabilities are based on unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined by using pricing models for which the determination of fair value requires significant management judgments estimation.

For the first six months of 2018, there were no transfers into or out of Level 1, Level 2 or Level 3 of the fair value hierarchy.

Financial Instruments Recorded at Fair Value on a Recurring Basis

Investment securities available for sale

The fair value of investment securities was the market value based on quoted market prices (as is the case with Treasury notes and non-callable U.S. Agency debt securities), when available (Level 1), or, when available, market prices for identical or comparable assets (as is the case with MBS and callable U.S. agency debt) that are based on observable market parameters, including benchmark yields, reported trades, quotes from brokers or dealers, issuer spreads, bids, offers and reference data including market research operations (Level 2). Observable prices in the market already consider the risk of nonperformance. If listed prices or quotes are not available, fair value is based upon discounted cash flow models that use unobservable inputs due to the limited market activity of the instrument, as is the case with certain private label MBS held by the Corporation (Level 3).

Private label MBS are collateralized by fixed-rate mortgages on single-family residential properties in the United States; the interest rate on the securities is variable, tied to 3-month LIBOR and limited to the weighted-average coupon of the underlying collateral. The market valuation represents the estimated net cash flows over the projected life of the pool of underlying assets applying a discount rate that reflects market observed floating spreads over LIBOR, with a widening spread based on a nonrated security. The market valuation is derived from a model that utilizes relevant assumptions, such as the prepayment rate, default rate, and loss severity on a loan level basis. The Corporation modeled the cash flow from the fixed-rate mortgage collateral using a static cash flow analysis according to collateral attributes of the underlying mortgage pool (i.e., loan term, current balance, note rate, rate adjustment type, rate adjustment frequency, rate caps, and others) in combination with prepayment forecasts based on historical portfolio performance. The variable cash flow of the security is modeled using the 3-month LIBOR forward curve. Loss assumptions were driven by the combination of default and loss severity estimates, using an asset-level risk assessment method taking into account loan credit characteristics (loan-to-value, state jurisdiction, delinquency, property type and pricing behavior, and others) to provide an estimate of default and loss severity.

Refer to the table below for further information regarding qualitative information for all assets and liabilities measured at fair value using significant unobservable inputs (Level 3).

Derivative instruments

The fair value of most of the Corporation’s derivative instruments is based on observable market parameters and takes into consideration the credit risk component of paying counterparties, when appropriate. On interest caps, only the seller’s credit risk is considered. The caps were valued using a discounted cash flow approach based on the related LIBOR and swap rate for each cash flow.

A credit spread is considered for those derivative instruments that are not secured. The cumulative mark-to-market effect of credit risk in the valuation of derivative instruments for the quarters and six-month periods ended June 30, 2018 and 2017 was immaterial.

Assets and liabilities measured at fair value on a recurring basis are summarized below:
	As of June 30, 2018								As of December 31, 2017
	Fair Value Measurements Using								Fair Value Measurements Using
(In thousands)	Level 1		Level 2		Level 3		Assets/Liabilities at Fair Value		Level 1		Level 2		Level 3		Assets/Liabilities at Fair Value
Assets:
Securities available for sale :
Equity securities (1)	$	-	$	-	$	-	$	-	$	418	$	-	$	-	$	418
U.S. Treasury Securities		57,399		-		-		57,399		7,401		-		-		7,401
Noncallable U.S. agency debt securities		-		311,367		-		311,367		-		361,971		-		361,971
Callable U.S. agency debt securities and MBS		-		1,645,340		-		1,645,340		-		1,497,253		-		1,497,253
Puerto Rico government obligations		-		4,075		2,768		6,843		-		4,118		2,695		6,813
Private label MBS		-		-		15,061		15,061		-		-		17,060		17,060
Other investments		-		-		-		-		-		-		100		100
Equity securities (1)		412		-		-		412		-		-		-		-
Derivatives, included in assets:
Purchased interest rate cap agreements		-		799		-		799		-		305		-		305
Forward contracts		-		7		-		7		-		7		-		7
Liabilities:
Derivatives, included in liabilities:
Written interest rate cap agreements		-		799		-		799		-		305		-		305
Forward contracts		-		122		-		122		-		19		-		19
(1) As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities. As of December 31, 2017, equity securities had a net unrealized loss of $6 thousand.

The table below presents a reconciliation of the beginning and ending balances of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarters and six-month periods ended June 30, 2018 and 2017.

		Quarter Ended June 30,
		2018		2017
Level 3 Instruments Only		Securities		Securities
(In thousands)		Available For Sale(1)		Available For Sale(1)
Beginning balance		$	18,808	$	21,382
Total gains (losses) (realized/unrealized):
Included in other comprehensive income			(279)		228
Principal repayments and amortization			(700)		(1,839)
Ending balance		$	17,829	$	19,771
(1)	Amounts mostly related to private label MBS.

		Six-Month Period Ended June 30,
		2018		2017
Level 3 Instruments Only		Securities		Securities
(In thousands)		Available For Sale(1)		Available For Sale(1)
Beginning balance		$	19,855	$	22,914
Total gains (realized/unrealized):
Included in other comprehensive income			193		746
Principal repayments and amortization			(2,219)		(3,889)
Ending balance		$	17,829	$	19,771
(1)	Amounts mostly related to private label MBS.

The tables below present qualitative information for significant assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2018 and December 31, 2017:
	June 30, 2018
(In thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
Investment securities available-for-sale:
Private label MBS	$	15,061	Discounted cash flows	Discount rate	14.6%
				Prepayment rate	5.0% - 23.0% (Weighted Average 12.6%)
				Projected Cumulative Loss Rate	0.0% - 8.7% (Weighted Average 3.9%)
Puerto Rico government obligations		2,768	Discounted cash flows	Discount rate	6.10%
				Prepayment rate	3.00%

	December 31, 2017
(In thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
Investment securities available for sale:
Private label MBS	$	17,060	Discounted cash flows	Discount rate	14.0%
				Prepayment rate	12.0% - 29.0% (Weighted Average 16.4%)
				Projected Cumulative Loss Rate	0.0% - 6.8% (Weighted Average 3.0%)
Puerto Rico government obligations		2,695	Discounted cash flows	Discount rate	6.61%
				Prepayment rate	3.00%

Information about Sensitivity to Changes in Significant Unobservable Inputs

Private label MBS: The significant unobservable inputs in the valuation include probability of default, the loss severity assumption, and prepayment rates. Shifts in those inputs would result in different fair value measurements. Increases in the probability of default, loss severity assumptions, and prepayment rates in isolation would generally result in an adverse effect on the fair value of the instruments. Meaningful and possible shifts of each input were modeled to assess the effect on the fair value estimation.

Puerto Rico Government Obligations: The significant unobservable input used in the fair value measurement is the assumed prepayment rate of the underlying residential mortgage loans that collateralize these obligations that are guaranteed by the Puerto Rico Housing Finance Authority. A significant increase (decrease) in the assumed rate would lead to a higher (lower) fair value estimate. The fair value of these bonds was based on a discounted cash flow analysis that contemplates the credit quality of the holder of second mortgages and a discount for liquidity constraints on the bonds considering the absence of an active market for them. Due to the guarantee of the Puerto Rico Housing Finance Authority and other applicable contractual safeguards, no additional credit spread is applied for services default.

The tables below summarize changes in unrealized gains and losses recorded in earnings for the quarters and nine-month periods ended September 30, 2017 and 2016 for Level 3 assets and liabilities that are still held at the end of each period:
	Changes in Unrealized Losses		Changes in Unrealized Losses
	(Quarter ended June 30, 2018)		(Quarter ended June 30, 2017)
Level 3 Instruments Only	Securities		Securities
(In thousands)	Available For Sale		Available For Sale
Changes in unrealized losses relating to assets still held at reporting date:
Net impairment losses on available-for-sale investment securities (credit component)	$	-	$	-

	Changes in Unrealized Losses		Changes in Unrealized Losses
	(Nine-Month Period Ended September 30, 2017)		(Nine-Month Period Ended September 30, 2016)
Level 3 Instruments Only	Securities		Securities
(In thousands)	Available For Sale		Available For Sale
Changes in unrealized losses relating to assets still held at reporting date:
Net impairment losses on available-for-sale investment securities (credit component)	$	-	$	-

There were no changes in unrealized gains and losses recorded in earnings for the quarters and six-month period ended June 30, 2018 and 2017 for Level 3 assets and liabilities that were still held at the end of each period.

Additionally, fair value is used on a nonrecurring basis to evaluate certain assets in accordance with GAAP. Adjustments to fair value usually result from the application of lower-of-cost or market accounting (e.g., loans held for sale carried at the lower-of-cost or fair value and repossessed assets) or write downs of individual assets (e.g., goodwill and loans).

As of June 30, 2018, impairment or valuation adjustments were recorded for assets recognized at fair value on a non-recurring basis as shown in the following table:
		Carrying value as of June 30, 2018						(Losses) Gains recorded for the Quarter Ended June 30, 2018		(Losses) Gains recorded for the Six-Month Period Ended June 30, 2018
		Level 1		Level 2		Level 3
(In thousands)
Loans receivable (1)		$	-	$	-	$	392,039	$	(3,869)	$	(17,972)
Other real estate owned (2)			-		-		143,355		(8,076)		(8,164)
Loans Held For Sale (3)			-		-		54,546		-		(5,830)
(1)	Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair values were derived from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.
(2)	The fair values were derived from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.
(3)	The value of these loans was primarily derived from external appraisals, adjusted for specific characteristics of the loans.

As of June 30, 2017, impairment or valuation adjustments were recorded for assets recognized at fair value on a non-recurring basis as shown in the following table:
		Carrying value as of June 30, 2017						(Losses) recorded for the Quarter Ended June 30, 2017		(Losses) recorded for the Six-Month Period Ended June 30, 2017
		Level 1		Level 2		Level 3
(In thousands)
Loans receivable (1)		$	-	$	-	$	359,302	$	(5,341)	$	(22,707)
OREO (2)			-		-		150,045		(3,237)		(6,873)
Mortgage servicing rights (3)			-		-		26,502		(197)		(357)
(1)	Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair value was derived from external appraisals that take into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.
(2)	The fair values were derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.
(3)	Fair value adjustments to the mortgage servicing rights were mainly due to assumptions associated with mortgage prepayments rates. The Corporation carries its mortgage servicing rights at the lower of cost or market, measured at fair value on a non-recurring basis. Assumptions for the value of mortgage servicing rights include: Prepayment Rate of 6.23%, Discount Rate of 11.21%.

Qualitative information regarding the fair value measurements for Level 3 financial instruments are as follows:
	June 30, 2018
	Method	Inputs
Loans	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
OREO	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
Mortgage servicing rights	Discounted Cash Flows	Weighted average prepayment rate of 5.96%; weighted average discount rate of 11.24%

The following tables present the carrying value, estimated fair value and estimated fair value level of the hierarchy of financial instruments as of June 30, 2018 and December 31, 2017:
	Total Carrying Amount in Statement of Financial Condition June 30, 2018		Fair Value Estimate June 30, 2018		Level 1		Level 2		Level 3
(In thousands)
Assets:
Cash and due from banks and money
market investments (amortized cost)	$	888,399	$	888,399	$	888,399	$	-	$	-
Investment securities available
for sale (fair value)		2,036,010		2,036,010		57,399		1,960,782		17,829
Investment securities held to maturity (amortized cost)		150,486		135,340		-		-		135,340
Equity Securities (fair value)		412		412		412		-		-
Other investment securities (amortized cost)		42,988		42,988		-		42,988		-
Loans held for sale (lower of cost or market)		80,815		81,236		-		26,690		54,546
Loans held for investment (amortized cost)		8,640,291
Less: allowance for loan and lease losses		(222,035)
Loans held for investment, net of allowance	$	8,418,256		8,130,099		-		-		8,130,099
Derivatives, included in assets (fair value)		806		806		-		806		-
Liabilities:
Deposits (amortized cost)		9,218,083		9,224,516		-		9,224,516		-
Securities sold under agreements
to repurchase (amortized cost)		200,000		225,171		-		225,171		-
Advances from FHLB (amortized cost)		715,000		699,956		-		699,956		-
Other borrowings (amortized cost)		184,150		172,356		-		-		172,356
Derivatives, included in liabilities (fair value)		921		921		-		921		-

	Total Carrying Amount in Statement of Financial Condition December 31, 2017		Fair Value Estimate December 31, 2017		Level 1		Level 2		Level 3
(In thousands)
Assets:
Cash and due from banks and money
market investments (amortized cost)	$	716,395	$	716,395	$	716,395	$	-	$	-
Investment securities available
for sale (fair value)		1,891,016		1,891,016		7,819		1,863,342		19,855
Investment securities
held to maturity (amortized cost)		150,627		131,032		-		-		131,032
Other investment securities (amortized cost)		43,119		43,119		-		43,119		-
Loans held for sale (lower of cost or market)		32,980		34,979		-		25,237		9,742
Loans held for investment (amortized cost)		8,850,476
Less: allowance for loan and lease losses		(231,843)
Loans held for investment, net of allowance	$	8,618,633		8,372,865		-		-		8,372,865
Derivatives, included in assets (fair value)		312		312		-		312		-
Liabilities:
Deposits (amortized cost)		9,022,631		9,026,600		-		9,026,600		-
Securities sold under
agreements to repurchase (amortized cost)		300,000		325,913		-		325,913		-
Advances from FHLB (amortized cost)		715,000		707,272		-		707,272		-
Other borrowings (amortized cost)		208,635		189,424		-		-		189,424
Derivatives, included in liabilities (fair value)		324		324		-		324		-
Forward contracts

XML

REVENUE FROM CONTRACTS WITH CUSTOMERS

6 Months Ended

Jun. 30, 2018

Revenue From Contract With Customers [Text Block]

NOTE 22 – REVENUE FROM CONTRACTS WITH CUSTOMERS

As noted in Note 1 – Basis of Presentation and Significant Accounting Policies, the Corporation adopted the provisions of ASU 2014-09,“Revenue from Contracts with Customers (Topic 606)” (“ASC Topic 606”),on January 1, 2018. Results for reporting periods beginning after December 31, 2017 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with Topic 605.

Revenue Recognition

In accordance with ASC Topic 606, revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration to which the Corporation expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC Topic 606, the Corporation performs the following five steps: (i) identifies the contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenue when (or as) the Corporation satisfies a performance obligation. The Corporation only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC Topic 606, the Corporation assesses the goods or services that are promised within each contract and identifies those that contain performance obligations, and assesses whether each promised good or service is distinct. The Corporation then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Disaggregation of Revenue

The following table summarizes the Corporation’s revenue, which includes net interest income on financial instruments and non-interest income, disaggregated by type of service and business segments for the quarter and six-month period ended June 30, 2018:

(In thousands)		Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Quarter ended June 30, 2018:
Net interest income (1)		$	20,102	$	55,138	$	20,443	$	12,443	$	15,053	$	7,292	$	130,471
Service charges and fees on deposit accounts			-		3,279		1,230		-		142		693		5,344
Insurance commissions			-		1,618		-		-		33		129		1,780
Merchant-related income			-		964		201		-		-		208		1,373
Credit and debit card fees			-		4,296		336		-		151		518		5,301
Other service charges and fees			21		811		304		71		(60)		269		1,416
Not in scope of Topic 606 (1)			4,645		283		140		-		194		(4)		5,258
Total non-interest income			4,666		11,251		2,211		71		460		1,813		20,472
Total Revenue		$	24,768	$	66,389	$	22,654	$	12,514	$	15,513	$	9,105	$	150,943
(In thousands)		Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Six-month period ended June 30, 2018:
Net interest income (1)		$	41,307	$	106,187	$	39,363	$	24,961	$	28,445	$	14,901	$	255,164
Service charges and fees on deposit accounts			-		6,444		2,322		-		276		1,390		10,432
Insurance commissions			-		4,762		-		-		45		328		5,135
Merchant-related income			-		1,609		362		-		-		393		2,364
Credit and debit card fees			-		8,465		591		-		279		1,060		10,395
Other service charges and fees			54		1,611		604		71		979		351		3,670
Not in scope of Topic 606 (1)			8,696		290		(409)		2,378		289		16		11,260
Total non-interest income			8,750		23,181		3,470		2,449		1,868		3,538		43,256
Total Revenue		$	50,057	$	129,368	$	42,833	$	27,410	$	30,313	$	18,439	$	298,420
(1)	Most of the Corporation’s revenue is not within the scope of ASU No. 2014-09, Revenue from Contracts with Customers. The guidance explicitly excludes net interest income from financial assets and liabilities, as well as other noninterest income from loans, leases, investment securities and derivative financial instruments.

For the six-month period ended June 30, 2018, substantially all of the Corporation’s revenue under the scope of Topic 606 was related to performance obligations satisfied at a point in time.

The following is a discussion of revenues within the scope of ASC Topic 606.

Service Charges and Fees on Deposit Accounts

Service charges and fees on deposit accounts relate to fees generated from a variety of deposit products and services rendered to customers.  Charges include, but are not limited to, overdraft fees, non-sufficient fund fees, dormant fees and monthly service charges. Such fees are recognized concurrently with the event on a daily basis or on a monthly basis depending upon the customer’s cycle date. These depository arrangements are considered day-to-day contracts that do not extend beyond the services performed, as customers have the right to terminate these contracts with no penalty or, if any, nonsubstantive penalties. As a consequence, the income recognition under the standard is not different from the Corporation’s practice before the adoption of this guidance.

Insurance Commissions

For insurance commissions, which include regular and contingent commissions paid to the Corporation’s insurance agency, the agreements contain a performance obligation related to the sale/issuance of the policy and ancillary administrative post-issuance support. Theperformance obligation will be satisfied as the policies are issued and revenue will be recognized at that point in time.  In addition, contingent commission income was found to be constrained, as defined under the new standard. Contingent commission income will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or payments are received, which is consistent with the Corporation’s practice before the adoption of this guidance. For the quarter and six-month period ended June 30, 2018, the Corporation recognized revenue of $0.3 million and $2.4 million, respectively, as payments were received and constraints were released.

Merchant-related Income

For merchant-related income, the determination of which included the consideration of a 2015 sale of merchant contracts that involved sales of point of sale (“POS”) terminals and entry into a marketing alliance under a revenue-sharing agreement, the Corporation concluded that control of the POS terminals and merchant contracts was transferred to the customer at the contract’s inception. With respect to the related revenue-sharing agreement, the Corporation satisfies the marketing alliance performance obligation over the life of the contract, and the associated transaction price is recognized as the entity performs and any constraints over the variable consideration are resolved. There was no material change in the timing or measurement of revenues. The overall effect on an ongoing basis of the new revenue guidance, as compared the Corporation’s practice before the adoption of this guidance, is expected to be immaterial.

Credit and Debit Card Fees

Credit and debit card fees primarily represent revenues earned from interchange fees and ATM fees. Interchange and network revenues are earned on credit and debit card transactions conducted with payment networks. ATM fees are primarily earned as a result of surcharges assessed to non-FirstBank customers who use a FirstBank ATM. Such fees are generally recognized concurrently with the delivery of services on a daily basis. As a consequence, the income recognition is unchanged from the Corporation’s practice before the adoption of this guidance. 

Other Fees

Other fees primarily include revenues generated from wire transfers, lockboxes, and bank issuances of checks. Such fees are recognized concurrently with the event or on a monthly basis.

Contract Balances

A contract liability is an entity’s obligation to transfer goods or services to a customer in exchange for consideration from the customer. As mentioned above, during 2015, the Bank entered into a long-term strategic marketing alliance with another entity to which the Bank sold its merchant contracts portfolio and related POS terminals. Merchant services are marketed through FirstBank’s branches and offices in Puerto Rico and the Virgin Islands. Under the marketing and referral agreement, FirstBank shares with this entity revenues generated by the merchant contracts over the term of the 10-year agreement. As of June 30, 2018, and December 31, 2017, this contract liability amounted to $2.2 million and $2.4 million, respectively, which will be recognized over the remaining term of the contract. For the quarter and six-month period ended June 30, 2018, the Corporation recognized revenue and contract liabilities decreased by approximately $0.1 million and $0.2 million, respectively, due to the passage of time. There were no changes in contract liabilities due to changes in transaction price estimates.

A contract asset is the right to consideration for transferred goods or services when the amount is conditioned on something other than the passage of time. As of June 30, 2018, and December 31, 2017, there were no receivables from contracts with customers or contract assets recorded on the Corporation’s consolidated financial statements.

Other

Except for the contract liabilities noted above, the Corporation did not have any significant performance obligations as of June 30, 2018. The Corporation also did not have any material contract acquisition costs and did not make any significant judgments or estimates in recognizing revenue for financial reporting purposes. 

XML

SUPPLEMENTAL CASH FLOW INFORMATION

6 Months Ended

Jun. 30, 2018

SUPPLEMENTAL CASH FLOW INFORMATION

NOTE 25 – SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is as follows:

	Six-Month Period Ended June 30,
	2018		2017
	(In thousands)
Cash paid for:
Interest on borrowings	$	49,102	$	44,613
Income tax		3,527		2,389
Non-cash investing and financing activities:
Additions to OREO		27,393		37,756
Additions to auto and other repossessed assets		30,194		22,731
Capitalization of servicing assets		2,025		1,924
Loan securitizations		119,754		131,808
Loans held for investment transferred to held for sale		69,851		-
Loans held for sale transferred to held for investment		385		10,206
Property plant and equipment transferred to other assets		-		1,185

XML

SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2018

SEGMENT INFORMATION

NOTE 26 – SEGMENT INFORMATION

Based upon the Corporation’s organizational structure and the information provided to the Chief Executive Officer of the Corporation and, to a lesser extent, the Board of Directors, the operating segments are based primarily on the Corporation’s lines of business for its operations in Puerto Rico, the Corporation’s principal market, and by geographic areas for its operations outside of Puerto Rico. As of June 30, 2018, the Corporation had six reportable segments: Commercial and Corporate Banking; Mortgage Banking; Consumer (Retail) Banking; Treasury and Investments; United States Operations; and Virgin Islands Operations. Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess where to allocate resources. Other factors such as the Corporation’s organizational chart, nature of the products, distribution channels, and the economic characteristics of the product were also considered in the determination of the reportable segment.

The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers represented by specialized and middle-market clients and the public sector. The Commercial and Corporate Banking segment offers commercial loans, including commercial real estate and construction loans, and floor plan financings, as well as other products, such as cash management and business management services. The Mortgage Banking segment consists of the origination, sale, and servicing of a variety of residential mortgage loans. The Mortgage Banking segment also acquires and sells mortgages in the secondary markets. In addition, the Mortgage Banking segment includes mortgage loans purchased from other local banks and mortgage bankers. The Consumer (Retail) Banking segment consists of the Corporation’s consumer lending and deposit-taking activities conducted mainly through its branch network and loan centers. The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions that are executed to manage and enhance liquidity. This segment also lends funds to the Commercial and Corporate Banking, Mortgage Banking and Consumer (Retail) Banking segments to finance their lending resources and borrows from those segments. The Consumer (Retail) Banking and the United States Operations segments also lend funds to the other segments. The interest rates charged or credited by Treasury and Investments, the Consumer (Retail) Banking, and the United States Operations segments are allocated based on market rates. The difference between the allocated interest income or expense and the Corporation’s actual net interest income from centralized management of funding costs is reported in the Treasury and Investments segment. The United States Operations segment consists of all banking activities conducted by FirstBank in the United States mainland, including commercial and retail banking services. The Virgin Islands Operations segment consists of all banking activities conducted by the Corporation in the USVI and BVI, including commercial and retail banking services.

The accounting policies of the segments are the same as those referred to in Note 1 – “Nature of Business and Summary of Significant Accounting Policies,” in the audited consolidated financial statements included in the 2017 Annual Report on Form 10-K.

The Corporation evaluates the performance of the segments based on net interest income, the provision for loan and lease losses, non-interest income and direct non-interest expenses. The segments are also evaluated based on the average volume of their interest-earning assets less the allowance for loan and lease losses.

The following table presents information about the reportable segments:
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
For the quarter ended June 30, 2018:
Interest income	$	31,860	$	44,050	$	35,274	$	15,428	$	20,880	$	8,141	$	155,633
Net (charge) credit for transfer of funds		(11,758)		18,064		(14,831)		8,705		(180)		-		-
Interest expense		-		(6,976)		-		(11,690)		(5,647)		(849)		(25,162)
Net interest income		20,102		55,138		20,443		12,443		15,053		7,292		130,471
(Provision) release for loan and lease losses		(4,258)		(12,703)		(2,260)		-		(1,597)		1,282		(19,536)
Non-interest income		4,666		11,251		2,211		71		460		1,813		20,472
Direct non-interest expenses		(10,471)		(29,062)		(8,085)		(951)		(8,533)		(7,408)		(64,510)
Segment income	$	10,039	$	24,624	$	12,309	$	11,563	$	5,383	$	2,979	$	66,897
Average earnings assets	$	2,269,640	$	1,584,114	$	2,551,130	$	2,692,677	$	1,742,522	$	541,624	$	11,381,707
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
For the quarter ended June 30, 2017:
Interest income	$	33,086	$	43,369	$	30,364	$	14,657	$	16,675	$	9,223	$	147,374
Net (charge) credit for transfer of funds		(11,500)		6,546		(9,012)		14,427		(461)		-		-
Interest expense		-		(6,183)		-		(12,112)		(4,372)		(803)		(23,470)
Net interest income		21,586		43,732		21,352		16,972		11,842		8,420		123,904
(Provision) release for loan and lease losses		(11,167)		(7,767)		770		-		(131)		199		(18,096)
Non-interest income		4,764		12,153		1,171		438		574		1,449		20,549
Direct non-interest expenses		(9,622)		(28,066)		(9,771)		(969)		(8,115)		(6,918)		(63,461)
Segment income	$	5,561	$	20,052	$	13,522	$	16,441	$	4,170	$	3,150	$	62,896
Average earnings assets	$	2,471,666	$	1,772,605	$	2,482,323	$	2,142,975	$	1,501,169	$	609,280	$	10,980,018

(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Six-Month Period Ended June 30, 2018
Interest income	$	64,181	$	86,600	$	67,611	$	29,682	$	40,407	$	16,570	$	305,051
Net (charge) credit for transfer of funds		(22,874)		33,286		(28,248)		18,679		(843)		-		-
Interest expense		-		(13,699)		-		(23,400)		(11,119)		(1,669)		(49,887)
Net interest income		41,307		106,187		39,363		24,961		28,445		14,901		255,164
Provision for loan and lease losses		(4,639)		(18,496)		(9,060)		-		(3,056)		(4,829)		(40,080)
Non-interest income		8,750		23,181		3,470		2,449		1,868		3,538		43,256
Direct non-interest expenses		(18,191)		(55,963)		(14,799)		(1,899)		(16,489)		(15,030)		(122,371)
Segment income (loss)	$	27,227	$	54,909	$	18,974	$	25,511	$	10,768	$	(1,420)	$	135,969
Average earnings assets	$	2,280,770	$	1,579,773	$	2,578,498	$	2,585,641	$	1,726,310	$	556,340	$	11,307,332
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Six-Month Period Ended June 30, 2017
Interest income	$	67,044	$	86,286	$	59,775	$	28,414	$	32,464	$	18,619	$	292,602
Net (charge) credit for transfer of funds		(23,198)		11,448		(18,323)		30,660		(587)		-		-
Interest expense		-		(12,083)		-		(23,918)		(8,567)		(1,581)		(46,149)
Net interest income		43,846		85,651		41,452		35,156		23,310		17,038		246,453
Provision for loan and lease losses		(20,103)		(14,909)		(7,285)		-		(96)		(1,145)		(43,538)
Non-interest income		8,350		25,982		1,958		(11,732)		1,079		3,155		28,792
Direct non-interest expenses		(19,501)		(55,484)		(19,138)		(2,176)		(15,974)		(13,668)		(125,941)
Segment income	$	12,592	$	41,240	$	16,987	$	21,248	$	8,319	$	5,380	$	105,766
Average earnings assets	$	2,486,280	$	1,776,384	$	2,513,270	$	2,150,097	$	1,447,490	$	613,527	$	10,987,048

The following table presents a reconciliation of the reportable segment financial information to the consolidated totals:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
Net income :
Total income for segments and other		$	66,897	$	62,896	$	135,969	$	105,766
Other operating expenses (1)			(25,706)		(25,608)		(53,872)		(51,010)
Income before income taxes			41,191		37,288		82,097		54,756
Income tax expense			(10,159)		(9,290)		(17,917)		(1,217)
Total consolidated net income		$	31,032	$	27,998	$	64,180	$	53,539
Average assets:
Total average earning assets for segments		$	11,381,707	$	10,980,018	$	11,307,332	$	10,987,048
Average non-earning assets			963,752		900,622		943,828		893,785
Total consolidated average assets		$	12,345,459	$	11,880,640	$	12,251,160	$	11,880,833
(1)	Expenses pertaining to corporate administrative functions that support the operating segment, but are not specifically attributable to or managed by any segment are not included in the reported financial results of the operating segments. The unallocated corporate expenses include certain general and administrative expenses and related depreciation and amortization expenses.

XML

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2018

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

NOTE 26 – REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

The Corporation and FirstBank are each subject to various regulatory capital requirements imposed by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on the Corporation’s financial statements and activities. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation must meet specific capital guidelines that involve quantitative measures of the Corporation’s and FirstBank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation’s capital amounts and classifications are also subject to qualitative judgments and adjustment by the regulators with respect to minimum capital requirements, components, risk weightings, and other factors.

On October 3, 2017, the New York FED terminated the Written Agreement entered into on June 3, 2010 between the Corporation and the New York FED. However, the Corporation has agreed with the New York FED to continue to obtain the approval of the New York FED before paying dividends, receiving dividends from the Bank, making payments on subordinated debt or trust preferred securities, incurring or guaranteeing debt or purchasing or redeeming any corporate stock.

Although the Corporation and FirstBank became subject to the U.S. Basel III capital rules (“Basel III rules”) beginning on January 1, 2015, certain requirements of the Basel III rules are being phased-in over several years and, in general, will be fully effective as of January 1, 2019, although certain elements of the new rules have been deferred by the federal banking agencies. The Corporation and FirstBank compute risk-weighted assets using the Standardized Approach required by the Basel III rules.

The Basel III rules require the Corporation to maintain an additional capital conservation buffer of 2.5% to avoid limitations on both (i) capital distributions (e.g., repurchases of capital instruments, dividends and interest payments on capital instruments), and (ii) discretionary bonus payments to executive officers and heads of major business lines. The phase-in of the capital conservation buffer began on January 1, 2016 with a first year requirement of 0.625% of additional Common Equity Tier 1 Capital (“CET1”), which is being progressively increased over a four-year period, increasing by that same percentage amount on each subsequent January 1 until it reaches the fully phased-in 2.5% CET1 requirement on January 1, 2019.

Under the fully phased-in Basel III rules, in order to be considered adequately capitalized, the Corporation will be required to maintain: (i) a minimum CET1 capital to risk-weighted assets ratio of at least 4.5%, plus the 2.5% capital conservation buffer, resulting in a required minimum CET1 ratio of at least 7%, (ii) a minimum ratio of total Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer, resulting in a required minimum Tier 1 capital ratio of 8.5%, (iii) a minimum ratio of total Tier 1 plus Tier 2 capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer, resulting in a required minimum total capital ratio of 10.5%, and (iv) a required minimum leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average on-balance sheet (non-risk adjusted) assets.

In addition, as required under the Basel III rules, the Corporation’s trust preferred securities (“TRuPs”) were fully phased out from Tier 1 capital as of January 1, 2016. However, the Corporation’s TRuPs may continue to be included in Tier 2 capital until the instruments are redeemed or mature.

On November 21, 2017, the Federal Reserve Board, the FDIC, and the Office of the Comptroller of the Currency finalized an extension of the phase-in of certain Basel III capital rules for banks not using the Basel advanced approaches. The extension, which was effective January 1, 2018, pauses the full transition to the Basel III treatment of mortgage servicing assets, certain deferred tax assets, investments in the capital of unconsolidated financial institutions and minority interests, pending the banking agencies’ broader efforts, announced in September 2017, to simplify the regulatory capital rules that apply to banking organizations that are not subject to the advanced approaches capital rules. Because the advanced approaches capital rules apply to banking organizations with more than $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposure, the extension relief applies broadly to community, midsize, and regional banks, including the Corporation and FirstBank.

Please refer to the discussion in “Part I, – Item 1, – Business – Supervision and Regulation,” included in the 2017 Annual Report on Form 10-K for a more complete discussion of supervision and regulatory matters and activities that affect the Corporation and its subsidiaries.

The Corporation's and its banking subsidiary's regulatory capital positions as of June 30, 2018 and December 31, 2017 were as follows:
	Regulatory Requirements
	Actual			For Capital Adequacy Purposes			To be Well-Capitalized-General Thresholds
	Amount		Ratio	Amount		Ratio	Amount		Ratio
(Dollars in thousands)
As of June 30, 2018
Total Capital (to
Risk-Weighted Assets)
First BanCorp.	$	2,035,920	23.47%	$	694,037	8.0%		N/A	N/A
FirstBank	$	1,993,786	22.98%	$	694,037	8.0%	$	867,546	10.0%
Common Equity Tier 1 Capital
(to Risk-Weighted Assets)
First BanCorp.	$	1,711,472	19.73%	$	390,396	4.5%		N/A	N/A
FirstBank	$	1,576,068	18.17%	$	390,396	4.5%	$	563,905	6.5%
Tier I Capital (to
Risk-Weighted Assets)
First BanCorp.	$	1,747,576	20.14%	$	520,527	6.0%		N/A	N/A
FirstBank	$	1,884,068	21.72%	$	520,527	6.0%	$	694,037	8.0%
Leverage ratio
First BanCorp.	$	1,747,576	14.35%	$	487,239	4.0%		N/A	N/A
FirstBank	$	1,884,068	15.48%	$	486,780	4.0%	$	608,475	5.0%
As of December 31, 2017
Total Capital (to
Risk-Weighted Assets)
First BanCorp.	$	1,989,873	22.53%	$	706,432	8.0%		N/A	N/A
FirstBank	$	1,947,627	22.06%	$	706,218	8.0%	$	882,772	10.0%
Common Equity Tier 1 Capital
(to Risk-Weighted Assets)
First BanCorp.	$	1,674,164	18.96%	$	397,368	4.5%		N/A	N/A
FirstBank	$	1,562,431	17.70%	$	397,248	4.5%	$	573,802	6.5%
Tier I Capital (to
Risk-Weighted Assets)
First BanCorp.	$	1,675,282	18.97%	$	529,824	6.0%		N/A	N/A
FirstBank	$	1,835,445	20.79%	$	529,663	6.0%	$	706,218	8.0%
Leverage ratio
First BanCorp.	$	1,675,282	14.03%	$	477,643	4.0%		N/A	N/A
FirstBank	$	1,835,445	15.39%	$	477,056	4.0%	$	596,320	5.0%

The Corporation enters into financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments may include commitments to extend credit and commitments to sell mortgage loans at fair value. As of June 30, 2018, commitments to extend credit amounted to approximately $1.2 billion, of which $663.7million relates to credit card loans. Commercial and Financial standby letters of credit amounted to approximately $58.7million. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since certain commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. For most of the commercial lines of credit, the Corporation has the option to reevaluate the agreement prior to making additional disbursements. In the case of credit cards and personal lines of credit, the Corporation can cancel the unused credit facility at any time and without cause.

As of June 30, 2018, First BanCorp. and its subsidiaries were defendants in various legal proceedings arising in the ordinary course of business. On at least a quarterly basis, the Corporation assesses its liabilities and contingencies in connection with threatened and outstanding legal cases, matters and proceedings, utilizing the latest information available. For cases, matters and proceedings where it is both probable the Corporation will incur a loss and the amount can be reasonably estimated, the Corporation establishes an accrual for the loss. Once established, the accrual is adjusted as appropriate to reflect any relevant developments. For cases, matters or proceedings where a loss is not probable or the amount of the loss cannot be estimated, no accrual is established.

Any estimate involves significant judgment, given the varying stages of the proceedings (including the fact that some of them are currently in preliminary stages), the existence of multiple defendants in some of the current proceedings whose share of liability has yet to be determined, the numerous unresolved issues in the proceedings, and the inherent uncertainty of the various potential outcomes of such proceedings. Accordingly, the Corporation’s estimate will change from time-to-time, and actual losses may be more or less than the current estimate.

While the final outcome of legal cases, matters, and proceedings is inherently uncertain, based on information currently available, Management believes that the final disposition of the Corporation’s legal cases, matters or proceedings, to the extent not previously provided for, will not have a material negative adverse effect on the Corporation’s consolidated financial position as a whole. If management believes that, based on available information, it is at least reasonably possible that a material loss (or additional material loss in excess of any accrual) will be incurred in connection with any legal actions, the Corporation discloses an estimate of the possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate can be made, or discloses that an estimate cannot be made. Based on the Corporation’s assessment as of June 30, 2018, no such disclosures were necessary. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these cases, matters and proceedings, if unfavorable, may be material to the Corporation’s consolidated financial position on a particular period.

Ramírez Torres, et al. v. Banco Popular de Puerto Rico, et al.FirstBank Puerto Rico has been named Defendant in this Class Action Complaint, filed of February 17, 2017 at the Court of First Instance in San Juan, Puerto Rico. The Complaint seeks damages and preliminary injunctive relief on behalf of the purported class against Banco Popular de Puerto Rico and other financial institutions with insurance agency subsidiaries in Puerto Rico. Plaintiffs allege that Defendants have been unjustly enriched by failing to reimburse them  for "good experience" commissions allegedly paid by Antilles Insurance Company and Puerto Rico Home Insurance Company. On March 30, 2017, FirstBank Puerto Rico filed a Motion to Dismiss and a Motion for Declaratory Judgment and Third Party Complaint against Antilles Insurance Company  and the Insurance Commissioner's Office. All other Defendants filed Motions to Dismiss.  Antilles Insurance Company filed a Motion against the Third Party Complaint filed by FirstBank Puerto Rico, which FirstBank Puerto Rico opposed. The Insurance Commissioner's Office filed a Motion for Summary Judgment. On July 28, 2017, the Court issued Judgment granting the Motions to Dismiss filed by Defendants, dismissing the Complaint with prejudice, except the Third Party Complaint filed by FirstBank Puerto Rico which was dismissed without prejudice. On August 30, 2017, Plaintiffs filed an Appeal before the Puerto Rico Court of Appeals and FirstBank Puerto Rico filed its Opposition. On March 20, 2018, the Court of Appeals entered Judgment revoking the lower court judgment. Oriental Bank filed for Reconsideration, which was denied. All other Defendants filed writs of Certiorari before the Puerto Rico Supreme Court on May 29, 2018. On June 26, 2018, the Supreme Court issued Resolution denying all writs of Certiorari filed by Defendants.  Defendants are currently discussing the Supreme Court's Judgment in order to determine if a Reconsideration will be filed.

XML

FIRST BANCORP. (Holding Company Only) Financial Information

6 Months Ended

Jun. 30, 2018

FIRST BANCORP. (Holding Company Only) Financial Information

NOTE 28 – FIRST BANCORP. (HOLDING COMPANY ONLY) FINANCIAL INFORMATION

The following condensed financial information presents the financial position of the Holding Company only as of June 30, 2018 and December 31, 2017 and the results of its operations for the quarters and six-month periods ended June 30, 2018 and 2017.

Statements of Financial Condition
	As of June 30,			As of December 31,
	2018		2017
(In thousands)
Assets
Cash and due from banks	$	18,444	$	20,864
Money market investments		6,111		6,111
Other investment securities		285		285
Loans held for investment, net		96		191
Investment in FirstBank Puerto Rico, at equity		2,037,467		2,028,641
Investment in FirstBank Insurance Agency, at equity		15,955		12,400
Investment in FBP Statutory Trust I		1,963		2,698
Investment in FBP Statutory Trust II		3,561		3,561
Other assets		4,875		3,799
Total assets	$	2,088,757	$	2,078,550
Liabilities and Stockholdersʼ Equity
Liabilities:
Other borrowings	$	184,149	$	208,635
Accounts payable and other liabilities		2,929		818
Total liabilities		187,078		209,453
Stockholdersʼ equity		1,901,679		1,869,097
Total liabilities and stockholdersʼ equity	$	2,088,757	$	2,078,550

Statements of Income
	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018		2017		2018		2017
	(In thousands)				(In thousands)
Income:
Interest income on money market investments	$	5	$	5	$	10	$	10
Dividend income from banking subsidiary		3,800		1,800		25,384		3,600
Other income		70		66		133		128
		3,875		1,871		25,527		3,738
Expense:
Other borrowings		2,235		2,065		4,320		4,027
Other operating expenses		631		699		1,227		1,666
		2,866		2,764		5,547		5,693
Gain on early extinguishment of debt		-		-		2,316		-
Income (loss) before income taxes and equity
in undistributed earnings of subsidiaries		1,009		(893)		22,296		(1,955)
Equity in undistributed earnings of subsidiaries		30,023		28,891		41,884		55,494
Net income	$	31,032	$	27,998	$	64,180	$	53,539
Other Comprehensive (loss) income, net of tax		(7,445)		9,065		(31,492)		19,761
Comprehensive income	$	23,587	$	37,063	$	32,688	$	73,300

XML

SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2018

SUBSEQUENT EVENTS

NOTE 27 – SUBSEQUENT EVENTS

The Corporation has performed an evaluation of events occurringsubsequent to June 30, 2018; management has determined that there were no events occurring in this period that require disclosure in or adjustment to the accompanying financial statements.

XML

EARNINGS PER COMMON SHARE (Tables)

6 Months Ended

Jun. 30, 2018

Schedule of Earning Per Share [Table Text Block]

	The calculations of earnings per common share for the quarters and six-month periods ended June 30, 2018 and 2017 are as follows:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands, except per share information)
Net income		$	31,032	$	27,998	$	64,180	$	53,539
Less: Preferred stock dividends			(669)		(669)		(1,338)		(1,338)
Net income attributable to common stockholders		$	30,363	$	27,329	$	62,842	$	52,201
Weighted-Average Shares:
Average common shares outstanding			215,737		213,900		215,194		213,621
Average potential dilutive common shares			929		2,932		1,289		3,482
Average common shares outstanding - assuming dilution			216,666		216,832		216,483		217,103
Earnings per common share:
Basic		$	0.14	$	0.13	$	0.29	$	0.24
Diluted		$	0.14	$	0.13	$	0.29	$	0.24

XML

STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2018

Restricted Stock Activity Under Omnibus Plan

	The following table summarizes the restricted stock activity in the first six months of 2018 under the Omnibus Plan:
		Six-Month Period Ended
		June 30, 2018
		Number of shares		Weighted-Average
		of restricted		Grant Date
		stock		Fair Value
Non-vested shares at beginning of year		1,816,968	$	2.76
Granted		342,439		6.30
Forfeited		(9,500)		2.99
Vested		(1,086,822)		2.09
Non-vested shares at June 30, 2018		1,063,085	$	4.59

XML

INVESTMENT SECURITIES (Tables)

6 Months Ended

Jun. 30, 2018

Investment Securities Available for Sale

		June 30, 2018
		Amortized cost		Noncredit Loss Component of OTTI Recorded in OCI						Fair value
						Gross Unrealized						Weighted-
						gains		losses				average yield%
(Dollars in thousands)
U.S. Treasury securities:
	Due within one year	$	57,464	$	-	$	2	$	67	$	57,399	1.52
U.S. government-sponsored
agencies obligations:
Due within one year			74,962		-		-		326		74,636	1.18
After 1 to 5 years			311,675		-		-		5,481		306,194	1.51
After 5 to 10 years			186,269		-		87		3,675		182,681	2.94
After 10 years			36,702		-		-		211		36,491	2.28
Puerto Rico government
obligations:
After 5 to 10 years			4,032		-		43		-		4,075	3.14
After 10 years			4,054		-		-		1,286		2,768	6.97
United States and Puerto Rico
government obligations			675,158		-		132		11,046		664,244	1.95
Mortgage-backed securities:
Freddie Mac (“FHLMC”) certificates:
After 5 to 10 years			89,235		-		23		3,378		85,880	2.01
After 10 years			265,350		-		295		8,379		257,266	2.49
			354,585		-		318		11,757		343,146	2.37
Ginnie Mae (“GNMA”) certificates:
After 1 to 5 years			142		-		2		-		144	3.10
After 5 to 10 years			61,136		-		540		25		61,651	3.03
After 10 years			135,599		-		3,746		1,102		138,243	3.81
			196,877		-		4,288		1,127		200,038	3.57
Fannie Mae (“FNMA”) certificates:
Due within one year			801		-		11		-		812	1.90
After 1 to 5 years			11,606		-		-		260		11,346	2.38
After 5 to 10 years			148,799		-		63		5,335		143,527	2.10
After 10 years			618,975		-		1,965		16,416		604,524	2.65
			780,181		-		2,039		22,011		760,209	2.54
Collateralized mortgage obligations
guaranteed by the FHLMC
and GNMA:
After 1 to 5 years			7,588		-		5		11		7,582	2.74
After 10 years			45,385		-		367		22		45,730	2.57
			52,973		-		372		33		53,312	2.59
Other mortgage pass-through
trust certificates:
After 10 years			20,590		5,529		-		-		15,061	4.51
Total mortgage-backed
securities			1,405,206		5,529		7,017		34,928		1,371,766	2.67
Total investment securities
available for sale		$	2,080,364	$	5,529	$	7,149	$	45,974	$	2,036,010	2.44

		December 31, 2017
		Amortized cost		Noncredit Loss Component of OTTI Recorded in OCI		Gross Unrealized				Fair value
												Weighted-
						gains		losses				average yield%
(Dollars in thousands)
U.S. Treasury securities:
	After 1 to 5 years	$	7,458	$	-	$	-	$	57	$	7,401	1.29
U.S. government-sponsored
agencies obligations:
	Due within one year		122,471		-		-		319		122,152	1.06
	After 1 to 5 years		309,472		-		28		3,735		305,765	1.42
	After 5 to 10 years		133,451		-		117		319		133,249	2.72
	After 10 years		40,769		-		1		149		40,621	1.84
Puerto Rico government
obligations:
	After 5 to 10 years		4,071		-		47		-		4,118	3.14
	After 10 years		3,972		-		-		1,277		2,695	6.97
United States and Puerto Rico
government obligations			621,664		-		193		5,856		616,001	1.70
Mortgage-backed securities:
FHLMC certificates:
	After 5 to 10 years		18,658		-		14		63		18,609	2.14
	After 10 years		297,733		-		217		4,853		293,097	2.23
			316,391		-		231		4,916		311,706	2.23
GNMA certificates:
	After 1 to 5 years		81		-		1		-		82	3.23
	After 5 to 10 years		69,661		-		1,244		-		70,905	3.05
	After 10 years		145,067		-		5,910		334		150,643	3.81
			214,809		-		7,155		334		221,630	3.56
FNMA certificates:
	After 1 to 5 years		20,831		-		294		109		21,016	2.69
	After 5 to 10 years		49,934		-		-		818		49,116	1.83
	After 10 years		613,129		-		3,180		6,401		609,908	2.43
			683,894		-		3,474		7,328		680,040	2.39
Collateralized mortgage
	obligations issued or guaranteed
	by the FHLMC and GNMA:
	After 1 to 5 years		5,918		-		14		-		5,932	2.21
	After 5 to 10 years		2,556		-		11		-		2,567	2.23
	After 10 years		35,331		-		231		-		35,562	2.22
			43,805		-		256		-		44,061	2.22
Other mortgage pass-through
trust certificates:
	After 10 years		22,791		5,731		-		-		17,060	2.44
Total mortgage-backed securities			1,281,690		5,731		11,116		12,578		1,274,497	2.54
Other
	Due within one year		100		-		-		-		100	1.48
Equity securities (1)			424		-		-		6		418	2.11
Total investment securities
	available for sale	$	1,903,878	$	5,731	$	11,309	$	18,440	$	1,891,016	2.27
(1)	As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities.

OTTI Losses on Available-for-Sale Debt Securities

		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands)
Total OTTI losses		$	-	$	-	$	-	$	(12,231)
Portion of OTTI recognized in OCI			-		-		-		-
Net impairment losses recognized in earnings (1)		$	-	$	-	$	-	$	(12,231)
(1)	Credit losses on Puerto Rico government debt securities, recorded in the first quarter of 2017.

Roll-Forward of Credit Losses on Debt Securities Held by Corporation

The following tables summarize the roll-forward of credit losses on debt securities held by the Corporation for which a portion of an OTTI is recognized in OCI:
	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments		Credit loss
	March 31,		recognized in earnings on		reductions for		June 30,
	2018		securities that have been		securities sold		2018
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Private label MBS	$	6,792	$	-	$	-	$	6,792

	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments		Credit loss
	December 31,		recognized in earnings on		reductions for		June 30,
	2017		securities that have been		securities sold		2018
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Private label MBS	$	6,792	$	-	$	-	$	6,792

	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments
	March 31,		recognized in earnings		Credit loss reductions		June 30,
	2017		on securities that have been		for securities sold		2017
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Puerto Rico government obligations	$	34,420	$	-	$	(34,420)	$	-
Private label MBS		6,792		-		-		6,792
Total OTTI credit losses for available-for-sale
debt securities	$	41,212	$	-	$	(34,420)	$	6,792

	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments
	December 31,		recognized in earnings		Credit loss reductions		June 30,
	2016		on securities that have been		for securities sold		2017
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Puerto Rico government obligations	$	22,189	$	12,231	$	(34,420)	$	-
Private label MBS		6,792		-		-		6,792
Total OTTI credit losses for available-for-sale
debt securities	$	28,981	$	12,231	$	(34,420)	$	6,792

Significant Assumptions in Valuation of Private Label MBS

	As of		As of
	June 30, 2018		December 31, 2017
	Weighted		Weighted
	Average	Range	Average	Range
Discount rate	14.6%	14.6%	14.0%	14.0%
Prepayment rate	12.6%	5.0% - 23.0%	16.4%	12.0% - 29.0%
Projected Cumulative Loss Rate	4%	0% - 8.7%	3%	0% - 6.8%
No OTTI charges on private label MBS were recorded in either the first half of 2018 or the first half of 2017.

Held To Maturity Securities [Text Block]

		June 30, 2018
		Amortized cost						Fair value
				Gross Unrecognized
				gains		losses				Weighted- average yield%
Puerto Rico Municipal Bonds:
	After 1 to 5 years	$	3,712	$	-	$	151	$	3,561	5.68
	After 5 to 10 years		39,523		-		2,705		36,818	5.63
	After 10 years		107,251		-		12,200		95,051	5.78
Total investment securities
	held to maturity	$	150,486	$	-	$	15,056	$	135,430	5.74

		December 31, 2017
		Amortized cost						Fair value
				Gross Unrecognized
				gains		losses				Weighted- average yield%
Puerto Rico Municipal Bonds:
	After 1 to 5 years	$	3,853	$	-	$	173	$	3,680	5.38
	After 5 to 10 years		39,523		-		3,048		36,475	5.28
	After 10 years		107,251		-		16,374		90,877	4.93
Total investment securities
	held to maturity	$	150,627	$	-	$	19,595	$	131,032	5.03

Held to maturity Securities [Member]

Available-for-Sale Investments' Fair Value and Gross Unrealized Losses

	As of June 30, 2018
	Less than 12 months				12 months or more				Total
			Unrecognized				Unrecognized				Unrecognized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
		(In thousands)
Debt securities:
Puerto Rico Municipal Bonds	$	-	$	-	$	135,430	$	15,056	$	135,430	$	15,056
	As of December 31, 2017
	Less than 12 months				12 months or more				Total
			Unrecognized				Unrecognized				Unrecognized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
		(In thousands)
Debt securities:
Puerto Rico Municipal Bonds	$	-	$	-	$	131,032	$	19,595	$	131,032	$	19,595

Available for sale Securities [Member]

Available-for-Sale Investments' Fair Value and Gross Unrealized Losses

		As of June 30, 2018
		Less than 12 months				12 months or more				Total
				Unrealized				Unrealized				Unrealized
		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(In thousands)
	Debt securities:
	Puerto Rico-government obligations	$	-	$	-	$	2,768	$	1,286	$	2,768	$	1,286
	U.S. Treasury and U.S. government
	agenciesʼ obligations		237,349		4,448		355,093		5,312		592,442		9,760
	Mortgage-backed securities:
	FNMA		343,390		9,315		262,712		12,696		606,102		22,011
	FHLMC		155,213		4,011		150,268		7,746		305,481		11,757
	GNMA		65,966		1,109		601		18		66,567		1,127
	Collateralized mortgage obligations
	issued or guaranteed by
	FHLMC and GNMA		17,196		33		-		-		17,196		33
	Other mortgage pass-through
	trust certificates		-		-		15,061		5,529		15,061		5,529
		$	819,114	$	18,916	$	786,503	$	32,587	$	1,605,617	$	51,503
		As of December 31, 2017
		Less than 12 months				12 months or more				Total
				Unrealized				Unrealized				Unrealized
		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(In thousands)
Debt securities:
Puerto Rico-government obligations		$	-	$	-	$	2,695	$	1,277	$	2,695	$	1,277
U.S. Treasury and U.S. government
agenciesʼ obligations			136,459		494		362,050		4,085		498,509		4,579
Mortgage-backed securities:
FNMA			189,699		1,705		274,963		5,623		464,662		7,328
FHLMC			91,174		590		166,331		4,326		257,505		4,916
GNMA			39,145		334		-		-		39,145		334
Other mortgage pass-through
trust certificates			-		-		17,060		5,731		17,060		5,731
Equity securities (1)			-		-		407		6		407		6
		$	456,477	$	3,123	$	823,506	$	21,048	$	1,279,983	$	24,171
(1)	As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities.

XML

LOAN PORTFOLIO (Tables)

6 Months Ended

Jun. 30, 2018

Loan Portfolio Held for Investment

		As of June 30,		As ofDecember 31,
		2018		2017
(In thousands)
Residential mortgage loans, mainly secured by first mortgages		$	3,238,001	$	3,290,957
Commercial loans:
Construction loans (1)			84,683		111,397
Commercial mortgage loans (1)(2)			1,533,308		1,614,972
Commercial and Industrial loans (3)			2,009,049		2,083,253
Total commercial loans			3,627,040		3,809,622
Finance leases			283,274		257,462
Consumer loans			1,491,976		1,492,435
Loans held for investment			8,640,291		8,850,476
Allowance for loan and lease losses			(222,035)		(231,843)
Loans held for investment, net		$	8,418,256	$	8,618,633
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million) in non-performing loans to held for sale. Loans transferred to held for sale consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).
(2)	During the second quarter of 2018, the Corporation completed the sale of a $10.4 million non-performing commercial mortgage loan that was among the loans transferred to held for sale in the first quarter of 2018.
(3)	As of June 30, 2018 and December 31, 2017, includes $792.0 million and $833.5 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

Loans held for investment on which accrual of interest income had been discontinued were as follows:
		As of		As of
		June 30,		December 31,
(In thousands)		2018		2017
Non-performing loans:
	Residential mortgage	$	162,539	$	178,291
	Commercial mortgage (1)		142,614		156,493
	Commercial and Industrial		76,887		85,839
	Construction:
	Land		12,926		15,026
	Construction-commercial (1)		-		35,100
	Construction-residential		1,222		1,987
	Consumer:
	Auto loans		12,299		10,211
	Finance leases		2,032		1,237
	Other consumer loans		8,622		5,370
Total non-performing loans held for investment (2)(3)(4)		$	419,141	$	489,554
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million) in non-performing loans to held for sale. Loans transferred to held for sale consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).
(2)	Excludes $54.5 million and $8.3 million of non-performing loans held for sale as of June 30, 2018 and December 31, 2017, respectively.
(3)	Amount excludes purchased-credit impaired (“PCI”) loans with a carrying value of approximately $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, 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.
(4)	Non-performing loans exclude $393.3 million and $374.7 million of Troubled Debt Restructuring (“TDR”) loans that are in compliance with modified terms and in accrual status as of June 30, 2018 and December 31, 2017, respectively.

Corporation's Aging of Loans Held for Investment Portfolio

The Corporation’s aging of the loans held for investment portfolio is as follows:
										Purchased Credit-Impaired Loans
		30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due (1)(2)(3)		Total Past Due						Total loans held for investment		90 days past due and still accruing (1)(2)(3)
As of June 30, 2018
(In thousands)												Current
Residential mortgage:
FHA/VA government-guaranteed loans (2)(3)(4)		$	-	$	3,810	$	109,995	$	113,805	$	-	$	37,698	$	151,503	$	109,995
Other residential mortgage loans (4)			-		55,861		177,340		233,201		148,025		2,705,272		3,086,498		14,801
Commercial:
Commercial and Industrial loans			2,768		10,261		77,456		90,485		-		1,918,564		2,009,049		569
Commercial mortgage loans (4)			-		2,401		145,760		148,161		4,217		1,380,930		1,533,308		3,146
Construction:
Land (4)			-		68		18,836		18,904		-		6,135		25,039		5,910
Construction-commercial			-		-		1,013		1,013		-		52,806		53,819		1,013
Construction-residential (4)			-		-		1,222		1,222		-		4,603		5,825		-
Consumer:
Auto loans			32,527		6,906		12,299		51,732		-		804,224		855,956		-
Finance leases			5,777		1,404		2,032		9,213		-		274,061		283,274		-
Other consumer loans			8,112		5,039		14,649		27,800		-		608,220		636,020		6,027
Total loans held for investment		$	49,184	$	85,750	$	560,602	$	695,536	$	152,242	$	7,792,513	$	8,640,291	$	141,461
_____________
(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 Corporationʼs 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 $30.1 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 June 30, 2018.
(3)	As of June 30, 2018, includes $78.7 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 Corporationʼs 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 June 30, 2018 amounted to $6.8 million, $112.0 million, $3.0 million, $0.4 million, $0.3 million and $0.6 million, respectively.

As of December 31, 2017		30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due(1)(2)(3)								Total loans held for investment		90 days past due and still accruing (1)(2)(3)
(In thousands)									Total Past Due		Purchased Credit- Impaired Loans		Current
Residential mortgage:
FHA/VA government-guaranteed loans (2) (3) (4)		$	-	$	6,792	$	102,815	$	109,607	$	-	$	29,332	$	138,939	$	102,815
Other residential mortgage loans (4)			-		92,502		193,750		286,252		153,991		2,711,775		3,152,018		15,459
Commercial:
Commercial and Industrial loans			8,971		576		88,156		97,703		-		1,985,550		2,083,253		2,317
Commercial mortgage loans (4)			-		7,525		163,180		170,705		4,183		1,440,084		1,614,972		6,687
Construction:
Land (4)			-		124		15,177		15,301		-		11,630		26,931		151
Construction-commercial			-		-		35,100		35,100		-		41,456		76,556		-
Construction-residential			-		95		1,987		2,082		-		5,828		7,910		-
Consumer:
Auto loans			57,560		23,783		10,211		91,554		-		752,777		844,331		-
Finance leases			10,549		3,484		1,237		15,270		-		242,192		257,462		-
Other consumer loans			10,776		5,052		9,361		25,189		-		622,915		648,104		3,991
Total loans held for investment		$	87,856	$	139,933	$	620,974	$	848,763	$	158,174	$	7,843,539	$	8,850,476	$	131,420
____________
(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 Corporationʼs 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 $29.9 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 December 31, 2017.
(3)	As of December 31, 2017, includes $62.1 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 Corporationʼs 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, and land loans past due 30-59 days as of December 31, 2017 amounted to $6.0 million, $224.0 million, $9.0 million, and $2.5 million, respectively.

Corporation's Credit Quality Indicators by Loan

The Corporation’s credit quality indicators by loan type as of June 30, 2018 and December 31, 2017 are summarized below:
		Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
June 30, 2018
(In thousands)
Commercial mortgage		$	291,045	$	-	$	-	$	291,045	$	1,533,308
Construction:
Land			14,350		-		-		14,350		25,039
Construction - commercial			-		-		-		-		53,819
Construction - residential			1,222		-		-		1,222		5,825
Commercial and Industrial			123,855		5,072		341		129,268		2,009,049
		Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
		Substandard		Doubtful		Loss		Total Adversely Classified (1)		Total Portfolio
December 31, 2017
(In thousands)
Commercial mortgage		$	257,503	$	4,166	$	-	$	261,669	$	1,614,972
Construction:
Land			15,971		490		-		16,461		26,931
Construction - commercial			35,100		-		-		35,100		76,556
Construction - residential			1,987		-		-		1,987		7,910
Commercial and Industrial			154,416		3,854		676		158,946		2,083,253
_________
(1)	Excludes non-performing loans held for sale of $54.5 million ($16.8 million commercial mortgage, $30.0 million construction-commercial, and $7.7 million construction-land) and $8.3 million (construction-land) as of June 30, 2018 and December 31, 2017, respectively.

		Consumer Credit Exposure - Credit Risk Profile Based on Payment Activity
		Residential Real Estate				Consumer
June 30, 2018		FHA/VA/ Guaranteed(1)		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing		$	151,503	$	2,775,934	$	843,657	$	281,242	$	627,398
Purchased Credit-Impaired (2)			-		148,025		-		-		-
Non-performing			-		162,539		12,299		2,032		8,622
Total		$	151,503	$	3,086,498	$	855,956	$	283,274	$	636,020
(1)	It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as 90 days past-due loans and still accruing as opposed to non-performing loans since the principal repayment is insured. This balance includes $30.1 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 June 30, 2018.
(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, 2017		FHA/VA/ Guaranteed(1)		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing		$	138,939	$	2,819,736	$	834,120	$	256,225	$	642,734
Purchased Credit-Impaired (2)			-		153,991		-		-		-
Non-performing			-		178,291		10,211		1,237		5,370
Total		$	138,939	$	3,152,018	$	844,331	$	257,462	$	648,104
(1)	It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as 90 days past-due loans and still accruing as opposed to non-performing loans since the principal repayment is insured. This balance includes $29.9 million of residential mortgage loans insured by the FHA or guaranteed by the VA, which are over 15 months delinquent, and are no longer accruing interest as of December 31, 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.

Impaired Loans

Impaired Loans
									Quarter Ended				Six-Month Period Ended
										June 30, 2018
	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 June 30, 2018
With no related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		121,396		163,583		-		123,058		788		193		1,529		351
Commercial:
Commercial mortgage loans		58,992		100,247		-		62,892		119		41		201		78
Commercial and Industrial loans		43,566		60,380		-		45,086		496		8		920		20
Consumer:
Auto loans		326		326		-		342		4		-		5		-
Other consumer loans		2,454		2,801		-		2,639		35		9		72		21
	$	226,734	$	327,337	$	-	$	234,017	$	1,442	$	251	$	2,727	$	470
With a related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		287,689		312,868		19,804		290,079		3,570		178		7,089		473
Commercial:
Commercial mortgage loans		116,583		127,995		12,204		119,058		737		307		1,397		354
Commercial and Industrial loans		67,805		80,850		10,592		69,293		128		8		253		24
Construction:
Land		11,009		19,868		1,022		11,522		23		7		47		15
Construction-residential		252		355		39		252		-		-		-		-
Consumer:
Auto loans		19,367		19,367		3,697		20,484		385		-		779		-
Finance leases		1,594		1,594		162		1,754		28		-		59		-
Other consumer loans		9,101		9,584		1,994		9,434		241		25		489		53
	$	513,400	$	572,481	$	49,514	$	521,876	$	5,112	$	525	$	10,113	$	919
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		409,085		476,451		19,804		413,137		4,358		371		8,618		824
Commercial:
Commercial mortgage loans		175,575		228,242		12,204		181,950		856		348		1,598		432
Commercial and Industrial loans		111,371		141,230		10,592		114,379		624		16		1,173		44
Construction:
Land		11,009		19,868		1,022		11,522		23		7		47		15
Construction-commercial		-		-		-		-		-		-		-		-
Construction-residential		252		355		39		252		-		-		-		-
Consumer:
Auto loans		19,693		19,693		3,697		20,826		389		-		784		-
Finance leases		1,594		1,594		162		1,754		28		-		59		-
Other consumer loans		11,555		12,385		1,994		12,073		276		34		561		74
	$	740,134	$	899,818	$	49,514	$	755,893	$	6,554	$	776	$	12,840	$	1,389

Impaired Loans
	Recorded Investment		Unpaid Principal Balance		Related Specific Allowance		Year-To-Date Average Recorded Investment
(In thousands)
As of December 31, 2017
With no related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		116,818		154,048		-		120,241
Commercial:
Commercial mortgage loans		65,100		100,612		-		86,563
Commercial and Industrial loans		28,292		31,254		-		28,567
Construction:
Land		48		49		-		48
Consumer:
Auto loans		267		267		-		290
Other consumer loans		2,521		3,688		-		2,745
	$	213,046	$	289,918	$	-	$	238,454
With a related specific allowance recorded:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		316,616		349,284		22,086		318,606
Commercial:
Commercial mortgage loans		87,814		124,084		9,783		93,720
Commercial and Industrial loans		90,008		112,005		12,359		92,666
Construction:
Land		11,865		19,973		1,402		14,126
Construction-commercial		35,101		38,595		560		35,996
Construction-residential		252		355		55		252
Consumer:
Auto loans		22,338		22,338		3,665		24,328
Finance leases		2,184		2,184		104		2,428
Other consumer loans		11,084		11,830		1,396		11,579
	$	577,262	$	680,648	$	51,410	$	593,701
Total:
FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		433,434		503,332		22,086		438,847
Commercial:
Commercial mortgage loans		152,914		224,696		9,783		180,283
Commercial and Industrial loans		118,300		143,259		12,359		121,233
Construction:
Land		11,913		20,022		1,402		14,174
Construction-commercial		35,101		38,595		560		35,996
Construction-residential		252		355		55		252
Consumer:
Auto loans		22,605		22,605		3,665		24,618
Finance leases		2,184		2,184		104		2,428
Other consumer loans		13,605		15,518		1,396		14,324
	$	790,308	$	970,566	$	51,410	$	832,155
Interest income of approximately $6.8 million ($6.3 million on an accrual basis and $0.5 million on a cash basis) and $13.6 million ($12.4 million on an accrual basis and $1.2 million on a cash basis) was recognized on impaired loans for the second quarter and six-month period ended June 30, 2017, respectively.

Activity for Impaired loans

The following tables show the activity for impaired loans and the related specific reserve for the quarters and six-month periods ended June 30, 2018 and 2017:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
			2018		2017		2018		2017
(In thousands)
Impaired Loans:
Balance at beginning of period		$	746,280	$	807,198	$	790,308	$	887,905
Loans determined impaired during the period			34,273		18,976		95,681		38,604
Charge-offs (1)(2)			(13,207)		(43,083)		(30,420)		(60,487)
Loans sold, net of charge-offs			-		-		(4,121)		(53,245)
Increases to existing impaired loans			77		698		7,075		1,239
Foreclosures			(7,777)		(21,233)		(19,452)		(30,690)
Loans no longer considered impaired			(2,433)		(1,890)		(3,940)		(2,782)
Loans transferred to held for sale			-		-		(57,213)		-
Paid in full or partial payments			(17,079)		(25,041)		(37,784)		(44,919)
Balance at end of period		$	740,134	$	735,625	$	740,134	$	735,625
(1)	For the six-month period ended June 30, 2018 includes charge-offs totaling $9.7 million associated with the $57.2 million in non-performing loans transferred to held for sale.
(2)	For the six-month period ended June 30, 2017 includes a charge-off of $10.7 million related to the sale of the PREPA credit line as further discussed below.

Activity for Specific Reserve

	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018		2017		2018		2017
(In thousands)
Specific Reserve:
Balance at beginning of period	$	56,930	$	66,311	$	51,410		64,421
Provision for loan losses		5,753		17,563		28,456		36,195
Net charge-offs		(13,169)		(43,080)		(30,352)		(59,822)
Balance at end of period	$	49,514	$	40,794	$	49,514	$	40,794

Carrying Value of Acquired Loans

The carrying amounts of PCI loans were as follows:
	As of
	June 30,		December 31,
	2018		2017
(In thousands)
Residential mortgage loans	$	148,025	$	153,991
Commercial mortgage loans		4,217		4,183
Total PCI loans	$	152,242	$	158,174
Allowance for loan losses		(11,354)		(11,251)
Total PCI loans, net of allowance for loan losses	$	140,888	$	146,923

Accretable Yield

Changes in the accretable yield of PCI loans for the quarters and six-month periods ended June 30, 2018 and 2017 were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30,		June 30,		June 30,		June 30,
	2018		2017		2018		2017
(In thousands)
Balance at beginning of period	$	101,059	$	113,665	$	103,682	$	116,462
Accretion recognized in earnings		(2,570)		(2,724)		(5,193)		(5,521)
Reclassification (to) from non-accretable		-		(1,970)		-		(1,970)
Balance at end of period	$	98,489	$	108,971	$	98,489	$	108,971

Selected Information on TDRs Includes Recorded Investment by Loan Class and Modification Type

Selected information on TDR loans held for investment that includes the recorded investment by loan class and modification type is summarized in the following tables. This information reflects all TDRs held for investment:
		June 30, 2018
		Interest rate below market		Maturity or term extension		Combination of reduction in interest rate and extension of maturity		Forgiveness of principal and/or interest		Forbearance Agreement		Other (1)		Total
(In thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans		$	23,972	$	8,481	$	249,820	$	-	$	158	$	60,423	$	342,854
Commercial Mortgage loans			5,594		31,646		35,499		-		1,970		9,572		84,281
Commercial and Industrial loans			1,239		20,221		14,562		-		4,534		51,113		91,669
Construction loans:															-
Land			17		3,697		2,149		-		-		381		6,244
Construction-commercial (2)			-		-		-		-		-		-		-
Construction-residential			-		-		-		-		-		217		217
Consumer loans - Auto			-		1,746		11,666		-		-		6,280		19,692
Finance leases			-		158		1,436		-		-		-		1,594
Consumer loans - Other			1,178		1,612		5,932		216		-		1,707		10,645
Total Troubled Debt Restructurings		$	32,000	$	67,561	$	321,064	$	216	$	6,662	$	129,693	$	557,196
(1)	Other concessions granted by the Corporation included deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation, or a combination of the concessions listed in the table.
(2)	Excludes TDRs held for sale amounting to $30.0 million as of June 30, 2018.

		December 31, 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		Forbearance Agreement		Other (1)		Total
(In thousands)
Troubled Debt Restructurings:
Non-FHA/VA Residential Mortgage loans		$	25,964	$	8,318	$	267,578	$	-	$	-	$	62,070	$	363,930
Commercial Mortgage loans			6,563		2,094		31,870		-		-		10,285		50,812
Commercial and Industrial loans			2,510		20,648		16,049		-		6,623		48,282		94,112
Construction loans:
Land			18		3,941		2,186		-		-		331		6,476
Construction-commercial			-		-		-		35,100		-		-		35,100
Construction-residential			-		-		-		-		-		217		217
Consumer loans - Auto			-		1,347		14,233		-		-		7,025		22,605
Finance leases			-		238		1,946		-		-		-		2,184
Consumer loans - Other			892		2,097		6,891		217		-		1,686		11,783
Total Troubled Debt Restructurings		$	35,947	$	38,683	$	340,753	$	35,317	$	6,623	$	129,896	$	587,219
(1)	Other concessions granted by the Corporation included 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.

Corporation's TDR Activity

	The following table presents the Corporationʼs TDR loans held for investment activity:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands)
Beginning balance of TDRs		$	572,376	$	602,364	$	587,219	$	647,048
New TDRs			13,228		13,368		56,647		54,267
Increases to existing TDRs			75		330		6,846		754
Charge-offs post modification (1)(2)			(8,616)		(9,365)		(17,787)		(24,027)
Sales, net of charge-offs			-		-		-		(53,245)
Foreclosures			(3,759)		(16,150)		(10,802)		(20,521)
TDR transferred to held for sale, net of charge-off			-		-		(30,000)		-
Paid-off and partial payments			(16,108)		(22,004)		(34,927)		(35,733)
Ending balance of TDRs		$	557,196	$	568,543	$	557,196	$	568,543
(1)	The six-month period ended June 30, 2018 includes a charge-off of $5.1 million associated with a $30.0 million construction loan transferred to held for sale.
(2)	The six-month period ended June 30, 2017 includes a charge-off of $10.7 million related to the sale of the PREPA credit line.

Breakdown Between Accrual and Nonaccrual Status of TDRs

The following table provides a breakdown of the TDR loans held for investment by those in accrual and nonaccrual status:
		As of June 30, 2018
		Accrual		Nonaccrual(1)		Total TDRs
(In thousands)
Non-FHA/VA Residential Mortgage loans		$	270,358	$	72,496	$	342,854
Commercial Mortgage loans			54,354		29,927		84,281
Commercial and Industrial loans			43,478		48,191		91,669
Construction loans:
Land			1,091		5,153		6,244
Construction-commercial (2)			-		-		-
Construction-residential			-		217		217
Consumer loans - Auto			13,345		6,347		19,692
Finance leases			1,334		260		1,594
Consumer loans - Other			9,321		1,324		10,645
Total Troubled Debt Restructurings		$	393,281	$	163,915	$	557,196
(1)	Included in non-accrual loans are $51.7 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.
(2)	Excludes a $30.0 million non-performing construction loans transferred to held for sale during the first quarter of 2018.

		As of December 31, 2017
		Accrual		Nonaccrual(1)		Total TDRs
(In thousands)
Non- FHA/VA Residential Mortgage loans		$	280,729	$	83,201	$	363,930
Commercial Mortgage loans			23,329		27,483		50,812
Commercial and Industrial loans			41,536		52,576		94,112
Construction loans:
Land			1,291		5,185		6,476
Construction-commercial			-		35,100		35,100
Construction-residential			-		217		217
Consumer loans - Auto			15,548		7,057		22,605
Finance leases			1,968		216		2,184
Consumer loans - Other			10,294		1,489		11,783
Total Troubled Debt Restructurings		$	374,695	$	212,524	$	587,219
(1)	Included in non-accrual loans are $88.6 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.

Schedule Of Troubled Debt Restructurings Table [Text Block]

	Quarter Ended June 30, 2018
	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	19	$	2,034	$	1,934
Commercial Mortgage loans	2		5,765		5,765
Commercial and Industrial loans	3		3,453		3,128
Construction loans:
Land	1		97		97
Consumer loans - Auto	76		1,245		1,239
Consumer loans - Other	231		1,034		1,065
Total Troubled Debt Restructurings	332	$	13,628	$	13,228
	Six-Month Period Ended June 30, 2018
	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	43	$	4,642	$	4,548
Commercial Mortgage loans	5		42,511		42,523
Commercial and Industrial loans	6		6,050		5,710
Construction loans:
Land	1		97		97
Consumer loans - Auto	121		1,925		1,919
Consumer loans - Other	367		1,819		1,850
Total Troubled Debt Restructurings	543	$	57,044	$	56,647

	Quarter Ended June 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	48	$	9,577	$	9,483
Commercial Mortgage loans	2		267		267
Commercial and Industrial loans	2		326		326
Consumer loans - Auto	122		1,926		1,926
Finance leases	14		362		362
Consumer loans - Other	193		991		1,004
Total Troubled Debt Restructurings	381	$	13,449	$	13,368
	Six-Month Period Ended June 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	88	$	14,227	$	13,991
Commercial Mortgage loans	8		22,705		22,465
Commercial and Industrial loans	5		11,074		11,074
Construction loans:
Land	1		25		28
Consumer loans - Auto	274		4,173		4,173
Finance leases	22		548		548
Consumer loans - Other	403		1,960		1,988
Total Troubled Debt Restructurings	801	$	54,712	$	54,267

Loan Modifications Considered Troubled Debt Restructurings Defaulted

	Quarter Ended June 30,
	2018			2017
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(Dollars in thousands)
Non-FHA/VA Residential Mortgage loans	6	$	681	19	$	2,614
Consumer loans - Auto	31		514	5		69
Consumer loans - Other	28		100	29		103
Total	65	$	1,295	53	$	2,786

	Six-Month Period Ended June 30,
	2018			2017
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(Dollars in thousands)
Non-FHA/VA Residential Mortgage loans	10	$	1,068	22	$	2,891
Commercial Mortgage loans	-		-	1		57
Consumer loans - Auto	33		537	9		130
Consumer loans - Other	39		154	46		164
Finance leases	1		22	-		-
Total	83	$	1,781	78	$	3,242

Loan Restructuring and Effect on Allowance for Loan and Lease Losses

	June 30, 2018			June 30, 2017
(In thousands)
Principal balance deemed collectible at end of period	$	64,559	$	36,141
Amount charged off	$	1,137	$	-
Charges to the provision for loan losses	$	1,902	$	388
Allowance for loan losses at end of period	$	4,611	$	5,529

Past Due Purchased Credit Impaired Table [Text Block]

The following tables present PCI loans by past due status as of June 30, 2018 and December 31, 2017:
As of June 30, 2018		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
										Current
(In thousands)
Residential mortgage loans		$	-	$	8,588	$	27,024	$	35,612	$	112,413	$	148,025
Commercial mortgage loans			-		-		3,252		3,252		965		4,217
Total (1)		$	-	$	8,588	$	30,276	$	38,864	$	113,378	$	152,242
_____________
(1)	According to the Corporationʼs 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 June 30, 2018 amounted to $11.7 million. No PCI commercial mortgage loan was 30-59 days past due as of June 30, 2018.
As of December 31, 2017		30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
										Current
(In thousands)
Residential mortgage loans		$	-	$	16,600	$	26,471	$	43,071	$	110,920	$	153,991
Commercial mortgage loans			-		355		2,834		3,189		994		4,183
Total (1)		$	-	$	16,955	$	29,305	$	46,260	$	111,914	$	158,174
(1)	According to the Corporationʼs 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, 2017 amounted to $28.1 million and $0.2 million, respectively.

Changes In Carrying Amount Of Purchased Credit Impaired Loans Table [Text Block]

Changes in the carrying amount of loans accounted for pursuant to ASC 310-30 were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
(In thousands)
Balance at beginning of period	$	155,281	$	163,100	$	158,174	$	165,818
Accretion		2,570		2,724		5,193		5,521
Collections		(4,359)		(4,509)		(7,755)		(9,102)
Foreclosures		(1,250)		(947)		(3,370)		(1,869)
Ending balance	$	152,242	$	160,368	$	152,242	$	160,368
Allowance for loan losses		(11,354)		(9,446)		(11,354)		(9,446)
Ending balance, net of allowance for loan losses	$	140,888	$	150,922	$	140,888	$	150,922

Allowance For Credit Losses On Purchased Credit Impaired Loans Table [Text Block]

Changes in the allowance for loan losses related to PCI loans were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
(In thousands)
Balance at beginning of period	$	11,251	$	6,857	$	11,251	$	6,857
Provision for loan losses		103		2,589		103		2,589
Balance at the end of period	$	11,354	$	9,446	$	11,354	$	9,446

XML

ALLOWANCE FOR LOAN AND LEASE LOSSES (Tables)

6 Months Ended

Jun. 30, 2018

Changes in Allowance for Loan and Lease Losses

The changes in the allowance for loan and lease losses were as follows:
	Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Quarter ended June 30, 2018
Allowance for loan and lease losses:
Beginning balance	$	56,386	$	50,393	$	47,659	$	4,122	$	67,296	$	225,856
Charge-offs		(5,544)		(3,897)		(5,110)		(818)		(12,327)		(27,696)
Recoveries		689		38		1,376		138		2,098		4,339
Provision		3,599		2,184		75		507		13,171		19,536
Ending balance	$	55,130	$	48,718	$	44,000	$	3,949	$	70,238	$	222,035
Ending balance: specific reserve for impaired loans	$	19,804	$	12,204	$	10,592	$	1,061	$	5,853	$	49,514
Ending balance: purchased credit-impaired loans (1)	$	10,954	$	400	$	-	$	-	$	-	$	11,354
Ending balance: general allowance	$	24,372	$	36,114	$	33,408	$	2,888	$	64,385	$	161,167
Loans held for investment:
Ending balance	$	3,238,001	$	1,533,308	$	2,009,049	$	84,683	$	1,775,250	$	8,640,291
Ending balance: impaired loans	$	409,085	$	175,575	$	111,371	$	11,261	$	32,842	$	740,134
Ending balance: purchased credit-impaired loans	$	148,025	$	4,217	$	-	$	-	$	-	$	152,242
Ending balance: loans with general allowance	$	2,680,891	$	1,353,516	$	1,897,678	$	73,422	$	1,742,408	$	7,747,915
	Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Six-Month Period Ended June 30, 2018
Allowance for loan and lease losses:
Beginning balance	$	58,975	$	48,493	$	48,871	$	4,522	$	70,982	$	231,843
Charge-offs		(8,915)		(10,707)		(7,040)		(5,995)		(24,399)		(57,056)
Recoveries		1,024		87		1,438		151		4,468		7,168
Provision		4,046		10,845		731		5,271		19,187		40,080
Ending balance	$	55,130	$	48,718	$	44,000	$	3,949	$	70,238	$	222,035
Ending balance: specific reserve for impaired loans	$	19,804	$	12,204	$	10,592	$	1,061	$	5,853	$	49,514
Ending balance: purchased credit-impaired loans (1)	$	10,954	$	400	$	-	$	-	$	-	$	11,354
Ending balance: general allowance	$	24,372	$	36,114	$	33,408	$	2,888	$	64,385	$	161,167
Loans held for investment:												-
Ending balance	$	3,238,001	$	1,533,308	$	2,009,049	$	84,683	$	1,775,250	$	8,640,291
Ending balance: impaired loans	$	409,085	$	175,575	$	111,371	$	11,261	$	32,842	$	740,134
Ending balance: purchased credit-impaired loans	$	148,025	$	4,217	$	-	$	-	$	-	$	152,242
Ending balance: loans with general allowance	$	2,680,891	$	1,353,516	$	1,897,678	$	73,422	$	1,742,408	$	7,747,915

		Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Quarter ended June 30, 2017
Allowance for loan and lease losses:
Beginning balance		$	35,775	$	68,468	$	45,970	$	3,886	$	49,132	$	203,231
Charge-offs			(6,967)		(30,495)		(6,378)		(595)		(11,053)		(55,488)
Recoveries			891		78		4,624		133		1,920		7,646
Provision (release)			10,888		525		(2,134)		312		8,505		18,096
Ending balance		$	40,587	$	38,576	$	42,082	$	3,736	$	48,504	$	173,485
Ending balance: specific reserve for impaired loans		$	13,786	$	8,330	$	10,788	$	2,374	$	5,516	$	40,794
Ending balance: purchased credit-impaired loans (1)		$	9,074	$	372	$	-	$	-	$	-	$	9,446
Ending balance: general allowance		$	17,727	$	29,874	$	31,294	$	1,362	$	42,988	$	123,245
Loans held for investment:
Ending balance		$	3,282,307	$	1,611,730	$	2,116,756	$	122,093	$	1,728,290	$	8,861,176
Ending balance: impaired loans		$	428,711	$	140,621	$	74,902	$	50,557	$	40,834	$	735,625
Ending balance: purchased credit-impaired loans		$	156,202	$	4,166	$	-	$	-	$	-	$	160,368
Ending balance: loans with general allowance		$	2,697,394	$	1,466,943	$	2,041,854	$	71,536	$	1,687,456	$	7,965,183
		Residential Mortgage Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Construction Loans		Consumer Loans		Total
(In thousands)
Six-Month Period Ended June 30, 2017
Allowance for loan and lease losses:
Beginning balance		$	33,980	$	57,261	$	61,953	$	2,562	$	49,847	$	205,603
Charge-offs			(15,192)		(31,857)		(18,430)		(658)		(22,245)		(88,382)
Recoveries			1,640		108		5,499		578		4,901		12,726
Provision (release)			20,159		13,064		(6,940)		1,254		16,001		43,538
Ending balance		$	40,587	$	38,576	$	42,082	$	3,736	$	48,504	$	173,485
Ending balance: specific reserve for impaired loans		$	13,786	$	8,330	$	10,788	$	2,374	$	5,516	$	40,794
Ending balance: purchased credit-impaired loans (1)		$	9,074	$	372	$	-	$	-	$	-	$	9,446
Ending balance: general allowance		$	17,727	$	29,874	$	31,294	$	1,362	$	42,988	$	123,245
Loans held for investment:
Ending balance		$	3,282,307	$	1,611,730	$	2,116,756	$	122,093	$	1,728,290	$	8,861,176
Ending balance: impaired loans		$	428,711	$	140,621	$	74,902	$	50,557	$	40,834	$	735,625
Ending balance: purchased credit-impaired loans		$	156,202	$	4,166	$	-	$	-	$	-	$	160,368
Ending balance: loans with general allowance		$	2,697,394	$	1,466,943	$	2,041,854	$	71,536	$	1,687,456	$	7,965,183
(1)	Refer to Note 7- Loans Held For Investment-PCI Loans, for a detail of changes in the allowance for loan losses related to PCI loans.

Carrying amount and allowance by portfolio segment

The tables below present the allowance for loan and lease losses and the carrying value of loans by portfolio segment as of June 30, 2018 and December 31, 2017:
As of June 30, 2018	Residential Mortgage Loans			Commercial Mortgage Loans									Consumer and Finance Leases
										Construction Loans
(Dollars in thousands)							C&I Loans										Total
Impaired loans without specific reserves:
Principal balance of loans, net of charge-offs	$	121,396		$	58,992		$	43,566		$	-		$	2,780			$	226,734
Impaired loans with specific reserves:
Principal balance of loans, net of charge-offs		287,689			116,583			67,805			11,261			30,062				513,400
Allowance for loan and lease losses		19,804			12,204			10,592			1,061			5,853				49,514
Allowance for loan and lease losses to principal
balance		6.88	%		10.47	%		15.62	%		9.42	%		19.47	%			9.64	%
PCI loans:
Carrying value of PCI loans		148,025			4,217			-			-			-				152,242
Allowance for PCI loans		10,954			400			-			-			-				11,354
Allowance for PCI loans to carrying value		7.40	%		9.49	%		-			-			-				7.46	%
Loans with general allowance:
Principal balance of loans		2,680,891			1,353,516			1,897,678			73,422			1,742,408				7,747,915
Allowance for loan and lease losses		24,372			36,114			33,408			2,888			64,385				161,167
Allowance for loan and lease losses to principal
balance		0.91	%		2.67	%		1.76	%		3.93	%		3.70		%		2.08	%
Total loans held for investment:
Principal balance of loans	$	3,238,001		$	1,533,308		$	2,009,049		$	84,683		$	1,775,250			$	8,640,291
Allowance for loan and lease losses		55,130			48,718			44,000			3,949			70,238				222,035
Allowance for loan and lease losses to principal
balance (1)		1.70	%		3.18	%		2.19	%		4.66	%		3.96		%		2.57	%

	Residential Mortgage Loans			Commercial Mortgage Loans									Consumer and Finance Leases
										Construction Loans
(Dollars in thousands)							C&I Loans									Total
As of December 31, 2017
Impaired loans without specific reserves:
Principal balance of loans, net of charge-offs	$	116,818		$	65,100		$	28,292		$	48		$	2,788		$	213,046
Impaired loans with specific reserves:
Principal balance of loans, net of charge-offs		316,616			87,814			90,008			47,218			35,606			577,262
Allowance for loan and lease losses		22,086			9,783			12,359			2,017			5,165			51,410
Allowance for loan and lease losses to principal
balance		6.98	%		11.14	%		13.73	%		4.27	%		14.51	%		8.91	%
PCI loans:
Carrying value of PCI loans		153,991			4,183			-			-			-			158,174
Allowance for PCI loans		10,873			378			-			-			-			11,251
Allowance for PCI loans to carrying value		7.06%			9.04%			-			-			-			7.11	%
Loans with general allowance:
Principal balance of loans		2,703,532			1,457,875			1,964,953			64,131			1,711,503			7,901,994
Allowance for loan and lease losses		26,016			38,332			36,512			2,505			65,817			169,182
Allowance for loan and lease losses to principal
balance		0.96	%		2.63	%		1.86	%		3.91	%		3.85	%		2.14	%
Total loans held for investment:
Principal balance of loans	$	3,290,957		$	1,614,972		$	2,083,253		$	111,397		$	1,749,897		$	8,850,476
Allowance for loan and lease losses		58,975			48,493			48,871			4,522			70,982			231,843
Allowance for loan and lease losses to principal
balance (1)		1.79	%		3.00	%		2.35	%		4.06	%		4.06	%		2.62	%
__________
(1) Loans used in the denominator include PCI loans of $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, respectively. However, the Corporation separately tracks and reports PCI loans and excludes these loans from the amounts of non-performing loans, impaired loans, TDRs and non-performing assets.

XML

LOANS HELD FOR SALE (Tables)

6 Months Ended

Jun. 30, 2018

Portfolio of Loans Held for Sale

		June 30, 2018		December 31, 2017
(In thousands)
Residential mortgage loans		$	26,269	$	24,690
Construction loans (1)			37,732		8,290
Commercial mortgage loans (1)(2)			16,814		-
Total		$	80,815	$	32,980
(1)	During the first quarter of 2018, the Corporation transferred $57.2 million (net of fair value write-downs of $9.7 million) in non-performing loans to held for sale. Loans transferred to held for sales consisted of a $30.0 million non-performing construction loan (net of a $5.1 million fair value write-down) and two non-performing commercial mortgage loans totaling $27.2 million (net of fair value write-downs of $4.6 million).
(2)	During the second quarter of 2018, the Corporation completed the sale of a $10.4 million non-performing commercial mortgage loan that was among the loans transferred to held for sale in the first quarter of 2018.

XML

OTHER REAL ESTATE OWNED (Tables)

6 Months Ended

Jun. 30, 2018

Text Block [Abstract]

Schedule Of Other Real Estate Assets And Foreclosed Properties [Table Text Block]

The following table presents OREO inventory as of the dates indicated:
		June 30,			December 31,
		2018		2017
(In thousands)
OREO
OREO balances, carrying value:
Residential (1)		$	57,579	$	54,381
Commercial			75,844		82,871
Construction			9,932		10,688
Total		$	143,355	$	147,940
(1)	Excludes $14.5 million and $21.3 million as of June 30, 2018 and December 31, 2017, respectively, of foreclosures that meet the conditions of ASC Topic 310-40 and are presented as a receivable (other assets) in the statement of financial condition.

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

6 Months Ended

Jun. 30, 2018

Notional Amounts of All Derivative Instruments

The following table summarizes the notional amounts of all derivative instruments:
		Notional Amounts (1)
		As of		As of
		June 30,		December 31,
		2018		2017
(In thousands)
Undesignated economic hedges:
Interest rate contracts:
Written interest rate cap agreements		$	90,010	$	91,010
Purchased interest rate cap agreements			90,010		91,010
Forward Contracts:
Sale of TBA GNMA MBS pools			30,000		26,000
Forward loan sales commitments			6,304		-
		$	216,324	$	208,020
(1)	Notional amounts are presented on a gross basis with no netting of offsetting exposure positions.

Summary of Fair Value of Derivative Instruments and Location in Statement of Financial Condition

The following table summarizes for derivative instruments their fair values and location in the consolidated statements of financial condition:
	Asset Derivatives					Liability Derivatives
	Statement of	June 30,		December 31,			June 30,		December 31,
	Financial	2018		2017			2018		2017
	Condition Location	FairValue		FairValue		Statement of Financial Condition Location	FairValue		FairValue
(In thousands)
Undesignated economic hedges:
Interest rate contracts:
Written interest rate cap agreements	Other assets	$	-	$	-	Accounts payable and other liabilities	$	799	$	305
Purchased interest rate cap agreements	Other assets		799		305	Accounts payable and other liabilities		-		-
Forward Contracts:
Sales of TBA GNMA MBS pools	Other assets		7		7	Accounts payable and other liabilities		122		19
Forward loan sales commitments	Other assets		-		-	Accounts payable and other liabilities		-		-
		$	806	$	312		$	921	$	324

Effect of Derivative Instruments on Statement of Income (Loss)

The following table summarizes the effect of derivative instruments on the consolidated statement of income:
		(Loss) or Gain				(Loss) or Gain
	Location of (Loss) or Gain	Quarter Ended				Six-Month Period Ended
	Recognized in Statement	June 30,				June 30,
	of Income on Derivatives	2018		2017		2018		2017
		(In thousands)
UNDESIGNATED ECONOMIC HEDGES:
Interest rate contracts:
Written and purchased interest rate cap agreements	Interest income - Loans	$	-	$	-	$	-	$	(1)
Forward contracts:
Sales of TBA GNMA MBS pools	Mortgage Banking Activities		(51)		364		(103)		308
Forward loan sales commitments	Mortgage Banking Activities		-		-		-		-
Total (loss) gain on derivatives		$	(51)	$	364	$	(103)	$	307

XML

OFFSETTING OF ASSETS AND LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2018

Text Block [Abstract]

Offsetting of assets and liabilties

Offsetting of Financial Assets and Derivative Assets
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Assets Presented in the Statement of Financial Position
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of June 30, 2018											Net Amount
(In thousands)
Description
Derivatives	$	799	$	-	$	799	$	(29)	$	(770)	$	-
Securities purchased under agreements to resell		200,000		(200,000)		-		-		-		-
Total	$	200,799	$	(200,000)	$	799	$	(29)	$	(770)	$	-
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Assets Presented in the Statement of Financial Position
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of December 31, 2017											Net Amount
(In thousands)
Description
Derivatives	$	305	$	-	$	305	$	(305)	$	-	$	-
Securities purchased under agreements to resell		200,000		(200,000)		-		-		-		-
Total	$	200,305	$	(200,000)	$	305	$	(305)	$	-	$	-

Offsetting of Financial Liabilities and Derivative Liabilities
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Liabilities Presented in the Statement of Financial Position
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of June 30, 2018											Net Amount
(In thousands)
Description
Securities sold under agreements to repurchase	$	400,000	$	(200,000)	$	200,000	$	(200,000)	$	-	$	-
							Gross Amounts Not Offset in the Statement of Financial Position
					Net Amounts of Liabilities Presented in the Statement of Financial Position
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position
							Financial Instruments		Cash Collateral
As of December 31, 2017											Net Amount
(In thousands)
Description
Derivatives	$	-	$	-	$	-	$	-	$	-	$	-
Securities sold under agreements to repurchase	$	500,000	$	(200,000)	$	300,000	$	(300,000)	$	-	$	-

XML

GOODWILL AND OTHER INTANGIBLES (Tables)

6 Months Ended

Jun. 30, 2018

Gross Amount and Accumulated Amortization of Other Intangible Assets

	The following table shows the gross amount and accumulated amortization of the Corporation’s intangible assets recognized as part of Other Assets in the consolidated statements of financial condition:
		As of		As of
		June 30,		December 31,
		2018		2017
	(Dollars in thousands)
Core deposit intangible:
Gross amount, beginning of period		$	51,664	$	51,664
Accumulated amortization (1)			(46,829)		(46,186)
Net carrying amount		$	4,835	$	5,478
Remaining amortization period			6.5 years		7.0 years
Purchased credit card relationship intangible:
Gross amount		$	24,465	$	24,465
Accumulated amortization (2)			(17,614)		(16,465)
Net carrying amount		$	6,851	$	8,000
Remaining amortization period			3.3 years		3.9 years
Insurance customer relationship intangible:
Gross amount		$	1,067	$	1,067
Accumulated amortization (3)			(368)		(292)
Net carrying amount		$	699	$	775
Remaining amortization period			4.5 years		5.0 years
(1)	For the quarter and six-month period ended June 30, 2018, the amortization expense of core deposit intangibles amounted to $0.2 million and $0.6 million, respectively (2017 - $0.5 million and $0.9 million, respectively).
(2)	For the quarter and six-month period ended June 30, 2018, the amortization expense of the purchased credit card relationship intangible amounted to $0.6 million and $1.1 million, respectively (2017 - $0.6 million and $1.3 million, respectively).
(3)	For the quarter and six-month period ended June 30, 2018, the amortization expense of insurance customer relationship intangible amounted to $38 thousand and $76 thousand, respectively (2017 - $38 thousand and $76 thousand, respectively).

The estimated aggregate annual amortization expense related to the intangible assets for future periods is as follows:
			Amount
			(In thousands)
	2018	$	1,723
	2019		3,088
	2020		2,851
	2021		2,658
	2022		915
	2023 and after		1,150

XML

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS (Tables)

6 Months Ended

Jun. 30, 2018

Changes in Servicing Assets

The changes in servicing assets are shown below:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
(In thousands)		2018		2017		2018		2017
Balance at beginning of period		$	26,135	$	26,330	$	25,255	$	26,244
Capitalization of servicing assets			1,138		1,049		2,025		1,924
Amortization			(729)		(779)		(1,466)		(1,567)
Adjustment to fair value			617		(197)		1,330		(357)
Other (1)			30		99		47		258
Balance at end of period		$	27,191	$	26,502	$	27,191	$	26,502
(1)	Amount represents the adjustment to fair value related to the repurchase of loans serviced for others.

Changes in Impairment Allowance

Changes in the impairment allowance were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018		2017		2018		2017
(In thousands)
Balance at beginning of period	$	673	$	-	$	1,451	$	461
Temporary impairment charges		20		197		37		357
OTTI of servicing assets		-		-		(65)		(621)
Recoveries		(637)		-		(1,367)		-
Balance at end of period	$	56	$	197	$	56	$	197

Components of Net Servicing Income

	The components of net servicing income are shown below:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
(In thousands)
Servicing fees		$	2,058	$	1,975	$	4,178	$	3,999
Late charges and prepayment penalties			146		138		266		237
Adjustment for loans repurchased			30		99		47		258
Other			-		(28)		-		(35)
Servicing income, gross			2,234		2,184		4,491		4,459
Amortization and impairment of servicing assets			(112)		(977)		(136)		(1,925)
Servicing income, net		$	2,122	$	1,207	$	4,355	$	2,534

Key Economic Assumptions Used in Determining Fair Value at Time of Sale of Loans

The Corporation’s servicing assets are subject to prepayment and interest rate risks. Key economic assumptions used in determining the fair value at the time of sale of the related mortgages ranged as follows:
	Maximum		Minimum
Six-Month Period Ended June 30, 2018:
Constant prepayment rate:
Government-guaranteed mortgage loans	5.7	%	5.6	%
Conventional conforming mortgage loans	6.3	%	6.2	%
Conventional non-conforming mortgage loans	9.6	%	9.1	%
Discount rate:
Government-guaranteed mortgage loans	12.0	%	12.0	%
Conventional conforming mortgage loans	10.0	%	10.0	%
Conventional non-conforming mortgage loans	14.3	%	14.3	%
Six-Month Period Ended June 30, 2017:
Constant prepayment rate:
Government-guaranteed mortgage loans	6.0	%	6.0	%
Conventional conforming mortgage loans	6.4	%	6.3	%
Conventional non-conforming mortgage loans	9.5	%	9.1	%
Discount rate:
Government-guaranteed mortgage loans	12.0	%	12.0	%
Conventional conforming mortgage loans	10.0	%	10.0	%
Conventional non-conforming mortgage loans	14.3	%	14.3	%

Weighted-Averages of Key Economic Assumptions in Valuation Model

	(Dollars in thousands)
Carrying amount of servicing assets	$	27,191
Fair value	$	31,953
Weighted-average expected life (in years)		8.63
Constant prepayment rate (weighted-average annual rate)		-
Decrease in fair value due to 10% adverse change	$	731
Decrease in fair value due to 20% adverse change	$	1433
Discount rate (weighted-average annual rate)		-
Decrease in fair value due to 10% adverse change	$	1,603
Decrease in fair value due to 20% adverse change	$	3,067

XML

DEPOSITS (Tables)

6 Months Ended

Jun. 30, 2018

Summary of Deposit Balances

The following table summarizes deposit balances as of the dates indicated:
	June 30,			December 31,
	2018		2017
(In thousands)
Type of account:
Non-interest bearing checking accounts	$	2,317,149	$	1,833,665
Savings accounts		2,360,345		2,401,385
Interest-bearing checking accounts		1,328,540		1,207,511
Certificates of deposit		2,389,383		2,429,585
Brokered certificates of deposit (CDs)		822,666		1,150,485
	$	9,218,083	$	9,022,631

Brokered Certificates Of Deposit Mature

Brokered CDs mature as follows:
	June 30,
	2018
(In thousands)
Three months or less	$	148,917
Over three months to six months		180,053
Over six months to one year		128,815
Over one year to three years		284,747
Over three years to five years		78,753
Over five years		1,381
Total	$	822,666

Components of Interest Expense on Deposits

The following are the components of interest expense on deposits:
	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018			2017	2018			2017
(In thousands)
Interest expense on deposits	$	16,667	$	15,883	$	33,274	$	31,351
Accretion of premium from acquisition		(2)		(15)		(5)		(38)
Amortization of broker placement fees		309		480		676		1,007
Interest expense on deposits	$	16,974	$	16,348	$	33,945	$	32,320

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Tables)

6 Months Ended

Jun. 30, 2018

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase (repurchase agreements) as of the dates indicated consisted of the following:
		June 30, 2018		December 31, 2017
(Dollars in thousands)
Short-term fixed-rate repurchase agreement with a rate of 1.53%		$	-	$	100,000
Long-term fixed-rate repurchase agreements,
interest ranging from 1.96% to 2.26% (1)(2)			200,000		200,000
		$	200,000	$	300,000
(1)	Reported net of securities purchased under agreements to repurchase (reverse repurchase agreements) by counterparty, when applicable, pursuant to Topic ASC 210-20-45-11.
(2)	As of June 30, 2018, includes $200 million with an average rate of 2.11% that lenders have the right to call before their contractual maturities at various dates beginning on July 19, 2018. Subsequent to June 30, 2018, no lender has exercised its call option on repurchase agreements.

Schedule of Repurchase Agreement Maturity

Repurchase agreements mature as follows:
		June 30, 2018
		(In thousands)
	Three to four years		200,000
	Total	$	200,000

Repurchase Agreements Grouped by Counterparty

Repurchase agreements as of June 30, 2018, grouped by counterparty, were as follows:
	(Dollars in thousands)			Weighted-Average
	Counterparty	Amount		Maturity (In Months)
	JP Morgan Chase	$	200,000	43

XML

ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) (Tables)

6 Months Ended

Jun. 30, 2018

Summary of Advances from FHLB

The following is a summary of the advances from the FHLB:
		June 30,		December 31,
	(Dollars in thousands)	2018		2017
	Long-term fixed-rate advances from FHLB, with a weighted-average
	interest rate of 1.91%	$	715,000	$	715,000

Advances from FHLB Mature

Advances from FHLB mature as follows:
		June 30, 2018
	(In thousands)
	Within one month	$	25,000
	Over three to six months		70,000
	Over one to three years		420,000
	Over three to five years		200,000
	Total	$	715,000

XML

OTHER BORROWINGS (Tables)

6 Months Ended

Jun. 30, 2018

Components of Other Borrowings

	June 30,		December 31,
	2018		2017
	(In thousands)
Junior subordinated debentures due in 2034,
interest-bearing at a floating rate of 2.75%
over 3-month LIBOR (5.08% as of June 30, 2018
and 4.35% as of December 31, 2017) (1)	$	65,593	$	90,078
Junior subordinated debentures due in 2034,
interest-bearing at a floating rate of 2.50%
over 3-month LIBOR (4.82% as of June 30, 2018
and 4.12% as of December 31, 2017)		118,557		118,557
	$	184,150	$	208,635
(1) Refer to Note 14 - Non-Consolidated Variable Interest Entities (“VIE”) and Servicing Assets-Trust-Preferred Securities, for additional information about the Corporation repurchase and cancellation in the first quarter of 2018 of $23.8 million in trust-preferred securities associated with these junior subordinated debentures.

XML

OTHER COMPREHENSIVE INCOME (Tables)

6 Months Ended

Jun. 30, 2018

Text Block [Abstract]

Schedule of Accumulated Other Comprehensive Income

The following table presents changes in accumulated other comprehensive loss for the quarters and six-month periods ended June 30, 2018 and 2017:
	Changes in Accumulated Other Comprehensive Loss by Component (1)
	Quarter endedJune 30, 2018		Quarter endedJune 30, 2017		Six-month period ended June 30, 2018		Six-month period ended June 30, 2017
(In thousands)
Unrealized net holding losses on debt securities
Beginning Balance	$	(44,662)	$	(23,688)	$	(20,608)	$	(34,383)
Other comprehensive (loss) income		(7,445)		9,434		(31,499)		7,898
Amounts reclassified from accumulated comprehensive loss		-		(371)		-		11,860
Ending balance	$	(52,107)	$	(14,625)	$	(52,107)	$	(14,625)
Unrealized holding losses on equity securities
Beginning Balance	$	-	$	(6)	$	(6)	$	(7)
Reclassification to retained earnings per ASU 2016-01		-		-		6		-
Other comprehensive income		-		2		-		3
Ending balance	$	-	$	(4)	$	-	$	(4)
____________________
(1) All amounts presented are net of tax.

Reclassification out of Accumulated Other Comprehensive Income

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss during the quarters and six-month periods ended June 30, 2018 and 2017:
		Reclassifications Out of Accumulated Other Comprehensive Loss
		Quarter ended June 30,				Six-month period ended June 30,
	Affected Line Item in the Consolidated Statements of Income	2018		2017		2018		2017
(In thousands)
Unrealized holding losses on debt securities
Realized gain (loss) on sale of debt securities	Net gain on sale of
	investments	$	-	$	371	$	-	$	371
OTTI on debt securities	Net impairment losses
	on available-for-sale
	debt securities		-		-		-		(12,231)
	Total before tax	$	-	$	371	$	-	$	(11,860)
	Income tax		-		-		-		-
	Total, net of tax	$	-	$	371	$	-	$	(11,860)

XML

FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2018

Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:
	As of June 30, 2018								As of December 31, 2017
	Fair Value Measurements Using								Fair Value Measurements Using
(In thousands)	Level 1		Level 2		Level 3		Assets/Liabilities at Fair Value		Level 1		Level 2		Level 3		Assets/Liabilities at Fair Value
Assets:
Securities available for sale :
Equity securities (1)	$	-	$	-	$	-	$	-	$	418	$	-	$	-	$	418
U.S. Treasury Securities		57,399		-		-		57,399		7,401		-		-		7,401
Noncallable U.S. agency debt securities		-		311,367		-		311,367		-		361,971		-		361,971
Callable U.S. agency debt securities and MBS		-		1,645,340		-		1,645,340		-		1,497,253		-		1,497,253
Puerto Rico government obligations		-		4,075		2,768		6,843		-		4,118		2,695		6,813
Private label MBS		-		-		15,061		15,061		-		-		17,060		17,060
Other investments		-		-		-		-		-		-		100		100
Equity securities (1)		412		-		-		412		-		-		-		-
Derivatives, included in assets:
Purchased interest rate cap agreements		-		799		-		799		-		305		-		305
Forward contracts		-		7		-		7		-		7		-		7
Liabilities:
Derivatives, included in liabilities:
Written interest rate cap agreements		-		799		-		799		-		305		-		305
Forward contracts		-		122		-		122		-		19		-		19
(1) As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities. As of December 31, 2017, equity securities had a net unrealized loss of $6 thousand.

Schedule of Changes in Fair Value

The tables below summarize changes in unrealized gains and losses recorded in earnings for the quarters and nine-month periods ended September 30, 2017 and 2016 for Level 3 assets and liabilities that are still held at the end of each period:
	Changes in Unrealized Losses		Changes in Unrealized Losses
	(Quarter ended June 30, 2018)		(Quarter ended June 30, 2017)
Level 3 Instruments Only	Securities		Securities
(In thousands)	Available For Sale		Available For Sale
Changes in unrealized losses relating to assets still held at reporting date:
Net impairment losses on available-for-sale investment securities (credit component)	$	-	$	-

	Changes in Unrealized Losses		Changes in Unrealized Losses
	(Nine-Month Period Ended September 30, 2017)		(Nine-Month Period Ended September 30, 2016)
Level 3 Instruments Only	Securities		Securities
(In thousands)	Available For Sale		Available For Sale
Changes in unrealized losses relating to assets still held at reporting date:
Net impairment losses on available-for-sale investment securities (credit component)	$	-	$	-

Fair Value of Assets and Liabilities Measured on Recurring Basis

		Quarter Ended June 30,
		2018		2017
Level 3 Instruments Only		Securities		Securities
(In thousands)		Available For Sale(1)		Available For Sale(1)
Beginning balance		$	18,808	$	21,382
Total gains (losses) (realized/unrealized):
Included in other comprehensive income			(279)		228
Principal repayments and amortization			(700)		(1,839)
Ending balance		$	17,829	$	19,771
(1)	Amounts mostly related to private label MBS.

		Six-Month Period Ended June 30,
		2018		2017
Level 3 Instruments Only		Securities		Securities
(In thousands)		Available For Sale(1)		Available For Sale(1)
Beginning balance		$	19,855	$	22,914
Total gains (realized/unrealized):
Included in other comprehensive income			193		746
Principal repayments and amortization			(2,219)		(3,889)
Ending balance		$	17,829	$	19,771
(1)	Amounts mostly related to private label MBS.

Impairment or Valuation Adjustments were Recorded for Assets Recognized at Fair Value

As of June 30, 2018, impairment or valuation adjustments were recorded for assets recognized at fair value on a non-recurring basis as shown in the following table:
		Carrying value as of June 30, 2018						(Losses) Gains recorded for the Quarter Ended June 30, 2018		(Losses) Gains recorded for the Six-Month Period Ended June 30, 2018
		Level 1		Level 2		Level 3
(In thousands)
Loans receivable (1)		$	-	$	-	$	392,039	$	(3,869)	$	(17,972)
Other real estate owned (2)			-		-		143,355		(8,076)		(8,164)
Loans Held For Sale (3)			-		-		54,546		-		(5,830)
(1)	Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair values were derived from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.
(2)	The fair values were derived from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.
(3)	The value of these loans was primarily derived from external appraisals, adjusted for specific characteristics of the loans.

As of June 30, 2017, impairment or valuation adjustments were recorded for assets recognized at fair value on a non-recurring basis as shown in the following table:
		Carrying value as of June 30, 2017						(Losses) recorded for the Quarter Ended June 30, 2017		(Losses) recorded for the Six-Month Period Ended June 30, 2017
		Level 1		Level 2		Level 3
(In thousands)
Loans receivable (1)		$	-	$	-	$	359,302	$	(5,341)	$	(22,707)
OREO (2)			-		-		150,045		(3,237)		(6,873)
Mortgage servicing rights (3)			-		-		26,502		(197)		(357)
(1)	Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair value was derived from external appraisals that take into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.
(2)	The fair values were derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.
(3)	Fair value adjustments to the mortgage servicing rights were mainly due to assumptions associated with mortgage prepayments rates. The Corporation carries its mortgage servicing rights at the lower of cost or market, measured at fair value on a non-recurring basis. Assumptions for the value of mortgage servicing rights include: Prepayment Rate of 6.23%, Discount Rate of 11.21%.

Estimated Fair Value and Carrying Value of Financial Instruments

The following tables present the carrying value, estimated fair value and estimated fair value level of the hierarchy of financial instruments as of June 30, 2018 and December 31, 2017:
	Total Carrying Amount in Statement of Financial Condition June 30, 2018		Fair Value Estimate June 30, 2018		Level 1		Level 2		Level 3
(In thousands)
Assets:
Cash and due from banks and money
market investments (amortized cost)	$	888,399	$	888,399	$	888,399	$	-	$	-
Investment securities available
for sale (fair value)		2,036,010		2,036,010		57,399		1,960,782		17,829
Investment securities held to maturity (amortized cost)		150,486		135,340		-		-		135,340
Equity Securities (fair value)		412		412		412		-		-
Other investment securities (amortized cost)		42,988		42,988		-		42,988		-
Loans held for sale (lower of cost or market)		80,815		81,236		-		26,690		54,546
Loans held for investment (amortized cost)		8,640,291
Less: allowance for loan and lease losses		(222,035)
Loans held for investment, net of allowance	$	8,418,256		8,130,099		-		-		8,130,099
Derivatives, included in assets (fair value)		806		806		-		806		-
Liabilities:
Deposits (amortized cost)		9,218,083		9,224,516		-		9,224,516		-
Securities sold under agreements
to repurchase (amortized cost)		200,000		225,171		-		225,171		-
Advances from FHLB (amortized cost)		715,000		699,956		-		699,956		-
Other borrowings (amortized cost)		184,150		172,356		-		-		172,356
Derivatives, included in liabilities (fair value)		921		921		-		921		-

	Total Carrying Amount in Statement of Financial Condition December 31, 2017		Fair Value Estimate December 31, 2017		Level 1		Level 2		Level 3
(In thousands)
Assets:
Cash and due from banks and money
market investments (amortized cost)	$	716,395	$	716,395	$	716,395	$	-	$	-
Investment securities available
for sale (fair value)		1,891,016		1,891,016		7,819		1,863,342		19,855
Investment securities
held to maturity (amortized cost)		150,627		131,032		-		-		131,032
Other investment securities (amortized cost)		43,119		43,119		-		43,119		-
Loans held for sale (lower of cost or market)		32,980		34,979		-		25,237		9,742
Loans held for investment (amortized cost)		8,850,476
Less: allowance for loan and lease losses		(231,843)
Loans held for investment, net of allowance	$	8,618,633		8,372,865		-		-		8,372,865
Derivatives, included in assets (fair value)		312		312		-		312		-
Liabilities:
Deposits (amortized cost)		9,022,631		9,026,600		-		9,026,600		-
Securities sold under
agreements to repurchase (amortized cost)		300,000		325,913		-		325,913		-
Advances from FHLB (amortized cost)		715,000		707,272		-		707,272		-
Other borrowings (amortized cost)		208,635		189,424		-		-		189,424
Derivatives, included in liabilities (fair value)		324		324		-		324		-
Forward contracts

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]

Qualitative information regarding the fair value measurements for Level 3 financial instruments are as follows:
	June 30, 2018
	Method	Inputs
Loans	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
OREO	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
Mortgage servicing rights	Discounted Cash Flows	Weighted average prepayment rate of 5.96%; weighted average discount rate of 11.24%

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Table Text Block]

The tables below present qualitative information for significant assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2018 and December 31, 2017:
	June 30, 2018
(In thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
Investment securities available-for-sale:
Private label MBS	$	15,061	Discounted cash flows	Discount rate	14.6%
				Prepayment rate	5.0% - 23.0% (Weighted Average 12.6%)
				Projected Cumulative Loss Rate	0.0% - 8.7% (Weighted Average 3.9%)
Puerto Rico government obligations		2,768	Discounted cash flows	Discount rate	6.10%
				Prepayment rate	3.00%

	December 31, 2017
(In thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
Investment securities available for sale:
Private label MBS	$	17,060	Discounted cash flows	Discount rate	14.0%
				Prepayment rate	12.0% - 29.0% (Weighted Average 16.4%)
				Projected Cumulative Loss Rate	0.0% - 6.8% (Weighted Average 3.0%)
Puerto Rico government obligations		2,695	Discounted cash flows	Discount rate	6.61%
				Prepayment rate	3.00%

XML

REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

6 Months Ended

Jun. 30, 2018

Disaggregation Of Revenue Table [TextBlock]

(In thousands)		Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Quarter ended June 30, 2018:
Net interest income (1)		$	20,102	$	55,138	$	20,443	$	12,443	$	15,053	$	7,292	$	130,471
Service charges and fees on deposit accounts			-		3,279		1,230		-		142		693		5,344
Insurance commissions			-		1,618		-		-		33		129		1,780
Merchant-related income			-		964		201		-		-		208		1,373
Credit and debit card fees			-		4,296		336		-		151		518		5,301
Other service charges and fees			21		811		304		71		(60)		269		1,416
Not in scope of Topic 606 (1)			4,645		283		140		-		194		(4)		5,258
Total non-interest income			4,666		11,251		2,211		71		460		1,813		20,472
Total Revenue		$	24,768	$	66,389	$	22,654	$	12,514	$	15,513	$	9,105	$	150,943
(In thousands)		Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Six-month period ended June 30, 2018:
Net interest income (1)		$	41,307	$	106,187	$	39,363	$	24,961	$	28,445	$	14,901	$	255,164
Service charges and fees on deposit accounts			-		6,444		2,322		-		276		1,390		10,432
Insurance commissions			-		4,762		-		-		45		328		5,135
Merchant-related income			-		1,609		362		-		-		393		2,364
Credit and debit card fees			-		8,465		591		-		279		1,060		10,395
Other service charges and fees			54		1,611		604		71		979		351		3,670
Not in scope of Topic 606 (1)			8,696		290		(409)		2,378		289		16		11,260
Total non-interest income			8,750		23,181		3,470		2,449		1,868		3,538		43,256
Total Revenue		$	50,057	$	129,368	$	42,833	$	27,410	$	30,313	$	18,439	$	298,420
(1)	Most of the Corporation’s revenue is not within the scope of ASU No. 2014-09, Revenue from Contracts with Customers. The guidance explicitly excludes net interest income from financial assets and liabilities, as well as other noninterest income from loans, leases, investment securities and derivative financial instruments.

XML

SUPPLEMENTAL CASH FLOW INFORMATION (Tables)

6 Months Ended

Jun. 30, 2018

Supplemental Cash Flow Information

	Six-Month Period Ended June 30,
	2018		2017
	(In thousands)
Cash paid for:
Interest on borrowings	$	49,102	$	44,613
Income tax		3,527		2,389
Non-cash investing and financing activities:
Additions to OREO		27,393		37,756
Additions to auto and other repossessed assets		30,194		22,731
Capitalization of servicing assets		2,025		1,924
Loan securitizations		119,754		131,808
Loans held for investment transferred to held for sale		69,851		-
Loans held for sale transferred to held for investment		385		10,206
Property plant and equipment transferred to other assets		-		1,185

XML

SEGMENT INFORMATION (Tables)

6 Months Ended

Jun. 30, 2018

Information about the Reportable Segments

The following table presents information about the reportable segments:
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
For the quarter ended June 30, 2018:
Interest income	$	31,860	$	44,050	$	35,274	$	15,428	$	20,880	$	8,141	$	155,633
Net (charge) credit for transfer of funds		(11,758)		18,064		(14,831)		8,705		(180)		-		-
Interest expense		-		(6,976)		-		(11,690)		(5,647)		(849)		(25,162)
Net interest income		20,102		55,138		20,443		12,443		15,053		7,292		130,471
(Provision) release for loan and lease losses		(4,258)		(12,703)		(2,260)		-		(1,597)		1,282		(19,536)
Non-interest income		4,666		11,251		2,211		71		460		1,813		20,472
Direct non-interest expenses		(10,471)		(29,062)		(8,085)		(951)		(8,533)		(7,408)		(64,510)
Segment income	$	10,039	$	24,624	$	12,309	$	11,563	$	5,383	$	2,979	$	66,897
Average earnings assets	$	2,269,640	$	1,584,114	$	2,551,130	$	2,692,677	$	1,742,522	$	541,624	$	11,381,707
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
For the quarter ended June 30, 2017:
Interest income	$	33,086	$	43,369	$	30,364	$	14,657	$	16,675	$	9,223	$	147,374
Net (charge) credit for transfer of funds		(11,500)		6,546		(9,012)		14,427		(461)		-		-
Interest expense		-		(6,183)		-		(12,112)		(4,372)		(803)		(23,470)
Net interest income		21,586		43,732		21,352		16,972		11,842		8,420		123,904
(Provision) release for loan and lease losses		(11,167)		(7,767)		770		-		(131)		199		(18,096)
Non-interest income		4,764		12,153		1,171		438		574		1,449		20,549
Direct non-interest expenses		(9,622)		(28,066)		(9,771)		(969)		(8,115)		(6,918)		(63,461)
Segment income	$	5,561	$	20,052	$	13,522	$	16,441	$	4,170	$	3,150	$	62,896
Average earnings assets	$	2,471,666	$	1,772,605	$	2,482,323	$	2,142,975	$	1,501,169	$	609,280	$	10,980,018

(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Six-Month Period Ended June 30, 2018
Interest income	$	64,181	$	86,600	$	67,611	$	29,682	$	40,407	$	16,570	$	305,051
Net (charge) credit for transfer of funds		(22,874)		33,286		(28,248)		18,679		(843)		-		-
Interest expense		-		(13,699)		-		(23,400)		(11,119)		(1,669)		(49,887)
Net interest income		41,307		106,187		39,363		24,961		28,445		14,901		255,164
Provision for loan and lease losses		(4,639)		(18,496)		(9,060)		-		(3,056)		(4,829)		(40,080)
Non-interest income		8,750		23,181		3,470		2,449		1,868		3,538		43,256
Direct non-interest expenses		(18,191)		(55,963)		(14,799)		(1,899)		(16,489)		(15,030)		(122,371)
Segment income (loss)	$	27,227	$	54,909	$	18,974	$	25,511	$	10,768	$	(1,420)	$	135,969
Average earnings assets	$	2,280,770	$	1,579,773	$	2,578,498	$	2,585,641	$	1,726,310	$	556,340	$	11,307,332
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Six-Month Period Ended June 30, 2017
Interest income	$	67,044	$	86,286	$	59,775	$	28,414	$	32,464	$	18,619	$	292,602
Net (charge) credit for transfer of funds		(23,198)		11,448		(18,323)		30,660		(587)		-		-
Interest expense		-		(12,083)		-		(23,918)		(8,567)		(1,581)		(46,149)
Net interest income		43,846		85,651		41,452		35,156		23,310		17,038		246,453
Provision for loan and lease losses		(20,103)		(14,909)		(7,285)		-		(96)		(1,145)		(43,538)
Non-interest income		8,350		25,982		1,958		(11,732)		1,079		3,155		28,792
Direct non-interest expenses		(19,501)		(55,484)		(19,138)		(2,176)		(15,974)		(13,668)		(125,941)
Segment income	$	12,592	$	41,240	$	16,987	$	21,248	$	8,319	$	5,380	$	105,766
Average earnings assets	$	2,486,280	$	1,776,384	$	2,513,270	$	2,150,097	$	1,447,490	$	613,527	$	10,987,048

Reconciliation of the Reportable Segment Financial Information

The following table presents a reconciliation of the reportable segment financial information to the consolidated totals:
		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2018		2017		2018		2017
Net income :
Total income for segments and other		$	66,897	$	62,896	$	135,969	$	105,766
Other operating expenses (1)			(25,706)		(25,608)		(53,872)		(51,010)
Income before income taxes			41,191		37,288		82,097		54,756
Income tax expense			(10,159)		(9,290)		(17,917)		(1,217)
Total consolidated net income		$	31,032	$	27,998	$	64,180	$	53,539
Average assets:
Total average earning assets for segments		$	11,381,707	$	10,980,018	$	11,307,332	$	10,987,048
Average non-earning assets			963,752		900,622		943,828		893,785
Total consolidated average assets		$	12,345,459	$	11,880,640	$	12,251,160	$	11,880,833
(1)	Expenses pertaining to corporate administrative functions that support the operating segment, but are not specifically attributable to or managed by any segment are not included in the reported financial results of the operating segments. The unallocated corporate expenses include certain general and administrative expenses and related depreciation and amortization expenses.

XML

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Schedule Of Compliance With Regulatory Capital Requirements Under Banking Regulations [Text Block]

The Corporation's and its banking subsidiary's regulatory capital positions as of June 30, 2018 and December 31, 2017 were as follows:
	Regulatory Requirements
	Actual			For Capital Adequacy Purposes			To be Well-Capitalized-General Thresholds
	Amount		Ratio	Amount		Ratio	Amount		Ratio
(Dollars in thousands)
As of June 30, 2018
Total Capital (to
Risk-Weighted Assets)
First BanCorp.	$	2,035,920	23.47%	$	694,037	8.0%		N/A	N/A
FirstBank	$	1,993,786	22.98%	$	694,037	8.0%	$	867,546	10.0%
Common Equity Tier 1 Capital
(to Risk-Weighted Assets)
First BanCorp.	$	1,711,472	19.73%	$	390,396	4.5%		N/A	N/A
FirstBank	$	1,576,068	18.17%	$	390,396	4.5%	$	563,905	6.5%
Tier I Capital (to
Risk-Weighted Assets)
First BanCorp.	$	1,747,576	20.14%	$	520,527	6.0%		N/A	N/A
FirstBank	$	1,884,068	21.72%	$	520,527	6.0%	$	694,037	8.0%
Leverage ratio
First BanCorp.	$	1,747,576	14.35%	$	487,239	4.0%		N/A	N/A
FirstBank	$	1,884,068	15.48%	$	486,780	4.0%	$	608,475	5.0%
As of December 31, 2017
Total Capital (to
Risk-Weighted Assets)
First BanCorp.	$	1,989,873	22.53%	$	706,432	8.0%		N/A	N/A
FirstBank	$	1,947,627	22.06%	$	706,218	8.0%	$	882,772	10.0%
Common Equity Tier 1 Capital
(to Risk-Weighted Assets)
First BanCorp.	$	1,674,164	18.96%	$	397,368	4.5%		N/A	N/A
FirstBank	$	1,562,431	17.70%	$	397,248	4.5%	$	573,802	6.5%
Tier I Capital (to
Risk-Weighted Assets)
First BanCorp.	$	1,675,282	18.97%	$	529,824	6.0%		N/A	N/A
FirstBank	$	1,835,445	20.79%	$	529,663	6.0%	$	706,218	8.0%
Leverage ratio
First BanCorp.	$	1,675,282	14.03%	$	477,643	4.0%		N/A	N/A
FirstBank	$	1,835,445	15.39%	$	477,056	4.0%	$	596,320	5.0%

XML

FIRST BANCORP. (Holding Company Only) Financial Information (Tables)

6 Months Ended

Jun. 30, 2018

Statements of Financial Condition

Statements of Financial Condition
	As of June 30,			As of December 31,
	2018		2017
(In thousands)
Assets
Cash and due from banks	$	18,444	$	20,864
Money market investments		6,111		6,111
Other investment securities		285		285
Loans held for investment, net		96		191
Investment in FirstBank Puerto Rico, at equity		2,037,467		2,028,641
Investment in FirstBank Insurance Agency, at equity		15,955		12,400
Investment in FBP Statutory Trust I		1,963		2,698
Investment in FBP Statutory Trust II		3,561		3,561
Other assets		4,875		3,799
Total assets	$	2,088,757	$	2,078,550
Liabilities and Stockholdersʼ Equity
Liabilities:
Other borrowings	$	184,149	$	208,635
Accounts payable and other liabilities		2,929		818
Total liabilities		187,078		209,453
Stockholdersʼ equity		1,901,679		1,869,097
Total liabilities and stockholdersʼ equity	$	2,088,757	$	2,078,550

Statements of Income (Loss)

Statements of Income
	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2018		2017		2018		2017
	(In thousands)				(In thousands)
Income:
Interest income on money market investments	$	5	$	5	$	10	$	10
Dividend income from banking subsidiary		3,800		1,800		25,384		3,600
Other income		70		66		133		128
		3,875		1,871		25,527		3,738
Expense:
Other borrowings		2,235		2,065		4,320		4,027
Other operating expenses		631		699		1,227		1,666
		2,866		2,764		5,547		5,693
Gain on early extinguishment of debt		-		-		2,316		-
Income (loss) before income taxes and equity
in undistributed earnings of subsidiaries		1,009		(893)		22,296		(1,955)
Equity in undistributed earnings of subsidiaries		30,023		28,891		41,884		55,494
Net income	$	31,032	$	27,998	$	64,180	$	53,539
Other Comprehensive (loss) income, net of tax		(7,445)		9,065		(31,492)		19,761
Comprehensive income	$	23,587	$	37,063	$	32,688	$	73,300

XML

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Detail) $ in Thousands	Jun. 30, 2018 USD ($)
Significant Accounting Policies [Line Items]
Callable Debt Securities Held At Premium	$ 4,000
Callable Debt Securities Unamortized Premium	$ 32

XML

UPDATE ON IMPACTS OF NATURAL DISASTERS- Additional information (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Liability For Catastrophe Claims Line [Items]
Financing Receivable Allowance For Credit Losses		$ 222,035	$ 173,485	$ 222,035	$ 173,485	$ 225,856	$ 231,843	$ 203,231	$ 205,603
Loans And Leases Receivable Impaired Nonperforming Nonaccrual Of Interest	[1],[2],[3]	419,141		419,141			489,554
Marketing And Advertising Expense		4,016	3,192	6,592	6,473
Financing Receivable Allowance For Credit Losses Write Offs		27,696	$ 55,488	57,056	88,382
Proceeds from Insurance Settlement, Investing Activities				5,118	$ 0
Hurricane [Member]
Liability For Catastrophe Claims Line [Items]
Financing Receivable Allowance For Credit Losses		42,200		42,200			55,600
Net Loan Loss Reserve Release		2,100		8,500
Increase Decrease In Deposits Excluding Brokered Certificates Of Deposits				$ 523,300
Percentage Of Non Interest Bearing Demand Deposits				26.00%
Increase Decrease In Non Interest Bearing Demand Deposits				$ 483,500
Insurance Settlements Receivable		6,300		6,300
Hurricane [Member] | Wholly Owned Properties [Member]
Liability For Catastrophe Claims Line [Items]
Proceeds from Insurance Settlement, Investing Activities		4,300
Residential Mortgage [Member]
Liability For Catastrophe Claims Line [Items]
Loans And Leases Receivable Impaired Nonperforming Nonaccrual Of Interest		162,539		$ 162,539			$ 178,291
Loans Receivable [Member] | Hurricane [Member]
Liability For Catastrophe Claims Line [Items]
Proceeds from Insurance Settlement, Investing Activities		$ 800

[1] Amount excludes purchased-credit impaired (“PCI”) loans with a carrying value of approximately $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, 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.

[2] Excludes $54.5 million and $8.3 million of non-performing loans held for sale as of June 30, 2018 and December 31, 2017, respectively.

[3] Non-performing loans exclude $393.3 million and $374.7 million of Troubled Debt Restructuring (“TDR”) loans that are in compliance with modified terms and in accrual status as of June 30, 2018 and December 31, 2017, respectively.

XML

BUSINESS COMBINATION- Additional information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Business Acquisition [Line Items]
Branches Doral	10
Contractually outstanding principal and interest at acquisition	$ 188,000	$ 196,600
Callable Debt Securities Held At Premium	4,000
Callable Debt Securities Unamortized Premium	$ 32

XML

EARNINGS PER COMMON SHARE - Calculations of Earnings Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net Income (Loss):
Net income	$ 31,032	$ 27,998	$ 64,180	$ 53,539
Dividends on preferred stock	(669)	(669)	(1,338)	(1,338)
Net income (loss) attributable to common stockholders	$ 30,363	$ 27,329	$ 62,842	$ 52,201
Weighted-Average Shares:
Basic weighted-average common shares outstanding	215,737	213,900	215,194	213,621
Average potential common shares	929	2,932	1,289	3,482
Diluted weighted-average number of common shares outstanding	216,666	216,832	216,483	217,103
Income (loss) per common share:
Basic	$ 0.14	$ 0.13	$ 0.29	$ 0.24
Diluted	$ 0.14	$ 0.13	$ 0.29	$ 0.24
Retained Earnings [Member]
Net Income (Loss):
Net income			$ 64,180	$ 53,539
Dividends on preferred stock			$ (1,338)	$ (1,338)

XML

EARNINGS PER COMMON SHARE - Additional Information (Detail) - shares	Jun. 30, 2018	Dec. 31, 2017
Earnings Per Share Diluted [Line Items]
Unvested shares of restricted stock	1,063,085	1,816,968

XML

STOCK-BASED COMPENSATION - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	May 10, 2017	May 24, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted shares of restricted stock			342,439
Vested			1,086,822
Weighted-Average Grant Date Fair Value of Stocks			$ 6.3
Repurchased of common stock			424,810	326,653
Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Forfeited In Period			9,500
Board Of Directors [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted shares of restricted stock				3,644
Restricted stock vesting period				1 year
Senior Executives
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted shares			268,709	272,959
Weighted-Average Grant Date Fair Value of Stocks			$ 6.51	$ 5.94
Repurchased of common stock			96,377	90,973
Management [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted shares of restricted stock				951,332
Restricted stock vesting period				2 years
Omnibus Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Authorized granting up shares						14,169,807
Restricted stock available for issuance	6,956,802		6,956,802
Omnibus Plan [Member] | Senior Executives
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation cost			$ 1.7	$ 1.6
Troubled Asset Relief Program [Member] | Management [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of Share vested during period				50.00%
Granted shares of restricted stock				838,332
Fair Value Of Restricted Stock Granted				$ 2.71
Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Forfeited In Period				2,370,571
Restricted Stock Forfeitures Percentage				50.00%
Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation cost	$ 0.8	$ 1.0	1.9	$ 2.0
Stock based compensation expense unrecognized related to nonvested shares of restricted stock	3.2		$ 3.2
Period for cost recognition not yet recognized			1 year 6 months
Repurchased of common stock			328,433	235,680
Retirement Eligible Shares			20,447
Performance Shares [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation cost	0.1		$ 0.3
Stock based compensation expense unrecognized related to nonvested shares of restricted stock	$ 1.6		$ 1.6
Period for cost recognition not yet recognized			3 years
Required service time			3 years
Performance Shares [Member] | Omnibus Plan [Member] | Executive Officers [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted shares			304,408
Retirement Eligible Shares			29,171
Restricted Stock Vesting After Two Years Member [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock vesting percentage			50.00%
Restricted Stock Vesting After Three Years Member [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock vesting percentage			50.00%
Performance Shares Vesting After Minimum Threshold [Member] | Omnibus Plan [Member] | Executive Officers [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Performance Share Based Awards Percentage			50.00%
Minimum performance threshold [Member] | Omnibus Plan [Member] | Executive Officers [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Performance Share Based Awards Percentage			80.00%
Department Of Treasury [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Secondary Offering Of Common Stock					10,291,553

XML

STOCK-BASED COMPENSATION - Restricted Stock Activity Under Omnibus Plan (Detail)	6 Months Ended
	Jun. 30, 2018 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of non-vested shares of restricted stock, beginning of period | shares	1,816,968
Granted shares of restricted stock | shares	342,439
Vested | shares	(1,086,822)
Forefeited | shares	(9,500)
Number of non-vested shares of restricted stock, end of period | shares	1,063,085
Weighted-Average Grant Date Fair Value, beginning of period | $ / shares	$ 2.76
Weighted-Average Grant Date Fair Value of Stocks | $ / shares	6.3
Weighted-Averages Grant Date Dair Value, Forefeitures | $ / shares	2.99
Weighted-Averages Grant Date Fair Value, Vested | $ / shares	2.09
Weighted-Average Grant Date Fair Value, end of period | $ / shares	$ 4.59

XML

INVESTMENT SECURITIES - Investment Securities Available for Sale (Detail) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 2,080,364	$ 1,903,878
Noncredit Loss Component of OTTI Recorded in OCI		5,529	5,731
Gross unrealized gain		7,149	11,309
Gross unrealized loss		45,974	18,440
Fair value		$ 2,036,010	$ 1,891,016
Weighted average yield		2.44%	2.27%
United States And Puerto Rico Government Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 675,158	$ 621,664
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		132	193
Gross unrealized loss		11,046	5,856
Fair value		$ 664,244	$ 616,001
Weighted average yield		1.95%	1.70%
Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 1,405,206	$ 1,281,690
Noncredit Loss Component of OTTI Recorded in OCI		5,529	5,731
Gross unrealized gain		7,017	11,116
Gross unrealized loss		34,928	12,578
Fair value		$ 1,371,766	$ 1,274,497
Weighted average yield		2.67%	2.54%
Federal Home Loan Mortgage Corporation Certificates And Obligations F H L M C [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 354,585	$ 316,391
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		318	231
Gross unrealized loss		11,757	4,916
Fair value		$ 343,146	$ 311,706
Weighted average yield		2.37%	2.23%
Government National Mortgage Association Certificates And Obligations G N M A [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 196,877	$ 214,809
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		4,288	7,155
Gross unrealized loss		1,127	334
Fair value		$ 200,038	$ 221,630
Weighted average yield		3.57%	3.56%
Federal National Mortgage Association Certificates And Obligations F N M A [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 780,181	$ 683,894
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		2,039	3,474
Gross unrealized loss		22,011	7,328
Fair value		$ 760,209	$ 680,040
Weighted average yield		2.54%	2.39%
Collateralized Mortgage Obligations Issued And Guaranteed By Fhlmc Fnma And Gnma [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 52,973	$ 43,805
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		372	256
Gross unrealized loss		33	0
Fair value		$ 53,312	$ 44,061
Weighted average yield		2.59%	2.22%
Mortgage Backed Securities Issued By Private Enterprises [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 20,590	$ 22,791
Noncredit Loss Component of OTTI Recorded in OCI		5,529	5,731
Gross unrealized gain		0	0
Gross unrealized loss		0	0
Fair value		$ 15,061	$ 17,060
Weighted average yield		4.51%	2.44%
Due Within One Year [Member] | U S Treasury Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 57,464
Noncredit Loss Component of OTTI Recorded in OCI		0
Gross unrealized gain		2
Gross unrealized loss		67
Fair value		$ 57,399
Weighted average yield		1.52%
Due Within One Year [Member] | US Government Sponsored Enterprises Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 74,962	$ 122,471
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		0	0
Gross unrealized loss		326	319
Fair value		$ 74,636	$ 122,152
Weighted average yield		1.18%	1.06%
Due Within One Year [Member] | Other Available For Sale Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost			$ 100
Noncredit Loss Component of OTTI Recorded in OCI			0
Gross unrealized gain			0
Gross unrealized loss			0
Fair value			$ 100
Weighted average yield			1.48%
Due Within One Year [Member] | Federal National Mortgage Association Certificates And Obligations F N M A [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 801
Noncredit Loss Component of OTTI Recorded in OCI		0
Gross unrealized gain		11
Gross unrealized loss		0
Fair value		$ 812
Weighted average yield		1.90%
After One To Five Years [Member] | U S Treasury Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost			$ 7,458
Noncredit Loss Component of OTTI Recorded in OCI			0
Gross unrealized gain			0
Gross unrealized loss			57
Fair value			$ 7,401
Weighted average yield			1.29%
After One To Five Years [Member] | US Government Sponsored Enterprises Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 311,675	$ 309,472
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		0	28
Gross unrealized loss		5,481	3,735
Fair value		$ 306,194	$ 305,765
Weighted average yield		1.51%	1.42%
After One To Five Years [Member] | Government National Mortgage Association Certificates And Obligations G N M A [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 142	$ 81
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		2	1
Gross unrealized loss		0	0
Fair value		$ 144	$ 82
Weighted average yield		3.10%	3.23%
After One To Five Years [Member] | Federal National Mortgage Association Certificates And Obligations F N M A [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 11,606	$ 20,831
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		0	294
Gross unrealized loss		260	109
Fair value		$ 11,346	$ 21,016
Weighted average yield		2.38%	2.69%
After One To Five Years [Member] | Collateralized Mortgage Obligations Issued And Guaranteed By Fhlmc Fnma And Gnma [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 7,588	$ 5,918
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		5	14
Gross unrealized loss		11	0
Fair value		$ 7,582	$ 5,932
Weighted average yield		2.74%	2.21%
After Five To Ten Years [Member] | US Government Sponsored Enterprises Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 186,269	$ 133,451
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		87	117
Gross unrealized loss		3,675	319
Fair value		$ 182,681	$ 133,249
Weighted average yield		2.94%	2.72%
After Five To Ten Years [Member] | Puerto Rico Government obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 4,032	$ 4,071
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		43	47
Gross unrealized loss		0	0
Fair value		$ 4,075	$ 4,118
Weighted average yield		3.14%	3.14%
After Five To Ten Years [Member] | Federal Home Loan Mortgage Corporation Certificates And Obligations F H L M C [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 89,235	$ 18,658
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		23	14
Gross unrealized loss		3,378	63
Fair value		$ 85,880	$ 18,609
Weighted average yield		2.01%	2.14%
After Five To Ten Years [Member] | Government National Mortgage Association Certificates And Obligations G N M A [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 61,136	$ 69,661
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		540	1,244
Gross unrealized loss		25	0
Fair value		$ 61,651	$ 70,905
Weighted average yield		3.03%	3.05%
After Five To Ten Years [Member] | Federal National Mortgage Association Certificates And Obligations F N M A [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 148,799	$ 49,934
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		63	0
Gross unrealized loss		5,335	818
Fair value		$ 143,527	$ 49,116
Weighted average yield		2.10%	1.83%
After Five To Ten Years [Member] | Collateralized Mortgage Obligations Issued And Guaranteed By Fhlmc Fnma And Gnma [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost			$ 2,556
Noncredit Loss Component of OTTI Recorded in OCI			0
Gross unrealized gain			11
Gross unrealized loss			0
Fair value			$ 2,567
Weighted average yield			2.23%
After Ten Years [Member] | US Government Sponsored Enterprises Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 36,702	$ 40,769
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		0	1
Gross unrealized loss		211	149
Fair value		$ 36,491	$ 40,621
Weighted average yield		2.28%	1.84%
After Ten Years [Member] | Puerto Rico Government obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 4,054	$ 3,972
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		0	0
Gross unrealized loss		1,286	1,277
Fair value		$ 2,768	$ 2,695
Weighted average yield		6.97%	6.97%
After Ten Years [Member] | Federal Home Loan Mortgage Corporation Certificates And Obligations F H L M C [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 265,350	$ 297,733
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		295	217
Gross unrealized loss		8,379	4,853
Fair value		$ 257,266	$ 293,097
Weighted average yield		2.49%	2.23%
After Ten Years [Member] | Government National Mortgage Association Certificates And Obligations G N M A [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 135,599	$ 145,067
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		3,746	5,910
Gross unrealized loss		1,102	334
Fair value		$ 138,243	$ 150,643
Weighted average yield		3.81%	3.81%
After Ten Years [Member] | Federal National Mortgage Association Certificates And Obligations F N M A [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 618,975	$ 613,129
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		1,965	3,180
Gross unrealized loss		16,416	6,401
Fair value		$ 604,524	$ 609,908
Weighted average yield		2.65%	2.43%
After Ten Years [Member] | Collateralized Mortgage Obligations Issued And Guaranteed By Fhlmc Fnma And Gnma [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 45,385	$ 35,331
Noncredit Loss Component of OTTI Recorded in OCI		0	0
Gross unrealized gain		367	231
Gross unrealized loss		22	0
Fair value		$ 45,730	$ 35,562
Weighted average yield		2.57%	2.22%
After Ten Years [Member] | Mortgage Backed Securities Issued By Private Enterprises [Member] | Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 20,590	$ 22,791
Noncredit Loss Component of OTTI Recorded in OCI		5,529	5,731
Gross unrealized gain		0	0
Gross unrealized loss		0	0
Fair value		$ 15,061	$ 17,060
Weighted average yield		4.51%	2.44%
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	[1]		$ 424
Noncredit Loss Component of OTTI Recorded in OCI	[1]		0
Gross unrealized gain	[1]		0
Gross unrealized loss	[1]		6
Fair value	[1]		$ 418
Weighted average yield	[1]		2.11%

[1] As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities.

XML

INVESTMENT SECURITIES - Additional Information (Detail) - USD ($) $ in Thousands		3 Months Ended			6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018	Dec. 31, 2017	May 17, 2017	Dec. 31, 2016
Schedule Of Investments [Line Items]
Proceeds from sale of available-for-sale securities					$ 0	$ 23,408
Percentage Of Debt Securities Government And Government Sponsored Agencies		99.00%			99.00%
Maximum loan to value ratio					80.00%
Proceeds From Maturities Prepayments And Calls Of Available For Sale Securities					$ 174,574	119,664
Total investment securities available for sale		$ 2,036,010			2,036,010			$ 1,891,016
Impairement on equity securities		0	$ 371		0	371
Fair value		2,036,010			2,036,010			1,891,016
Amortized cost		$ 2,080,364			$ 2,080,364			$ 1,903,878
Weighted average yield		2.44%			2.44%			2.27%
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities, Portion Recognized in Earnings, Net, Qualitative Disclosures, Default Rate				100.00%
Other Than Temporary Impairment Losses Investments Portion Recognized In Earnings Net	[1]	$ 0	0		$ 0	12,231
Percentage Of Held To Maturity Securities		70.00%
Interest Receivable		$ 47,171			47,171			$ 57,172
Other Than Temporary Impairment Credit Losses Recognized In Earnings Credit Losses On Debt Securities Held			6,792	$ 41,212		6,792				$ 28,981
Maximum [Member]
Schedule Of Investments [Line Items]
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities, Portion Recognized in Earnings, Net, Qualitative Disclosures, Recovery Rate				80.00%
Minimum [Member]
Schedule Of Investments [Line Items]
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities, Portion Recognized in Earnings, Net, Qualitative Disclosures, Recovery Rate				15.00%
Weighted Average [Member]
Schedule Of Investments [Line Items]
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities, Portion Recognized in Earnings, Net, Qualitative Disclosures, Recovery Rate				41.00%
Mortgage Backed Securities Issued By Private Enterprises [Member]
Schedule Of Investments [Line Items]
Other Than Temporary Impairment Credit Losses Recognized In Earnings Credit Losses On Debt Securities Held		6,792	6,792	$ 6,792	6,792	6,792	$ 6,792	6,792		6,792
Puerto Rico Government obligations [Member]
Schedule Of Investments [Line Items]
Other Than Temporary Impairment Credit Losses Recognized In Earnings Credit Losses On Debt Securities Held		$ 0	0	$ 34,420	$ 0	$ 0		$ 0		$ 22,189
Puerto Rico Government obligations [Member] | Puerto Rico Government Debt Securities Other Than Temporary Impairment [Member]
Schedule Of Investments [Line Items]
Proceeds from sale of available-for-sale securities			$ 23,400
Amortized cost									$ 23,000

[1] Credit losses on Puerto Rico government debt securities, recorded in the first quarter of 2017.

XML

INVESTMENT SECURITIES - Narratives (Detail)	Jun. 30, 2018 minimumcreditscore
Disclosure Investment Securities Additional Information [Abstract]
Minimum Credit Score	700

XML

INVESTMENT SECURITIES - Available-For-Sale Investments' Fair Value And Gross Unrealized Losses (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	$ 819,114	$ 456,477
Unrealized Losses Less than 12 months	18,916	3,123
Fair Value 12 months or more	786,503	823,506
Unrealized Losses 12 months or more	32,587	21,048
Total Fair Value	1,605,617	1,279,983
Total Unrealized Losses	51,503	24,171
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months		0
Unrealized Losses Less than 12 months		0
Fair Value 12 months or more		407
Unrealized Losses 12 months or more		6
Total Fair Value		407
Total Unrealized Losses		6
Debt Securities [Member] | Puerto Rico Government Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	0	0
Unrealized Losses Less than 12 months	0	0
Fair Value 12 months or more	2,768	2,695
Unrealized Losses 12 months or more	1,286	1,277
Total Fair Value	2,768	2,695
Total Unrealized Losses	1,286	1,277
Debt Securities [Member] | US States And Political Subdivisions Member [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	237,349	136,459
Unrealized Losses Less than 12 months	4,448	494
Fair Value 12 months or more	355,093	362,050
Unrealized Losses 12 months or more	5,312	4,085
Total Fair Value	592,442	498,509
Total Unrealized Losses	9,760	4,579
Mortgage Backed Securities [Member] | Collateralized Mortgage Obligations Member
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	17,196
Unrealized Losses Less than 12 months	33
Fair Value 12 months or more	0
Unrealized Losses 12 months or more	0
Total Fair Value	17,196
Total Unrealized Losses	33
Mortgage Backed Securities [Member] | Other-mortgage pass-through trust certificates [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	0	0
Unrealized Losses Less than 12 months	0	0
Fair Value 12 months or more	15,061	17,060
Unrealized Losses 12 months or more	5,529	5,731
Total Fair Value	15,061	17,060
Total Unrealized Losses	5,529	5,731
Mortgage Backed Securities [Member] | Government National Mortgage Association Certificates And Obligations G N M A [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	65,966	39,145
Unrealized Losses Less than 12 months	1,109	334
Fair Value 12 months or more	601	0
Unrealized Losses 12 months or more	18	0
Total Fair Value	66,567	39,145
Total Unrealized Losses	1,127	334
Mortgage Backed Securities [Member] | Federal National Mortgage Association Certificates And Obligations F N M A [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	343,390	189,699
Unrealized Losses Less than 12 months	9,315	1,705
Fair Value 12 months or more	262,712	274,963
Unrealized Losses 12 months or more	12,696	5,623
Total Fair Value	606,102	464,662
Total Unrealized Losses	22,011	7,328
Mortgage Backed Securities [Member] | Federal Home Loan Mortgage Corporation Certificates And Obligations F H L M C [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	155,213	91,174
Unrealized Losses Less than 12 months	4,011	590
Fair Value 12 months or more	150,268	166,331
Unrealized Losses 12 months or more	7,746	4,326
Total Fair Value	305,481	257,505
Total Unrealized Losses	$ 11,757	$ 4,916

XML

INVESTMENT SECURITIES - OTTI Losses on Available-for-Sale Debt Securities (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Schedule of Available-for-sale Securities [Line Items]
Total OTTI losses		$ 0	$ 0	$ 0	$ (12,231)
Credit losses on debt securities for which an OTTI was no previously recognized			0		12,231
Portion of loss previously recognized in other comprehensive income		0	0	0	0
Net impairment losses recognized in earnings	[1]	$ 0	0	$ 0	(12,231)
Mortgage Backed Securities Issued By Private Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Credit losses on debt securities for which an OTTI was no previously recognized			0		0
US States And Political Subdivisions Member [Member]
Schedule of Available-for-sale Securities [Line Items]
Credit losses on debt securities for which an OTTI was no previously recognized			$ 0		$ 12,231

[1] Credit losses on Puerto Rico government debt securities, recorded in the first quarter of 2017.

XML

INVESTMENT SECURITIES - Roll-Forward of Credit Losses on Debt Securities Held by Corporation (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Other Than Temporary Impairment Credit Losses Recognized In Earnings [Line Items]
Beginning balance of credit losses on debt securities held for which a portion of an OTTI was recognized in OCI		$ 41,212,000		$ 28,981,000
Additions:
Credit losses on debt securities for which an OTTI was no previously recognized		0		12,231,000
Credit losses on debt securities for which an OTTI was previously recognized		(34,420,000)		(34,420,000)
Reductions:
Ending balance of credit losses on debt securities held for which a portion of an OTTI was recognized in OCI		6,792,000		6,792,000
Mortgage Backed Securities Issued By Private Enterprises [Member]
Other Than Temporary Impairment Credit Losses Recognized In Earnings [Line Items]
Beginning balance of credit losses on debt securities held for which a portion of an OTTI was recognized in OCI	$ 6,792,000	6,792,000	$ 6,792,000	6,792,000
Additions:
Credit losses on debt securities for which an OTTI was no previously recognized		0		0
Credit losses on debt securities for which an OTTI was previously recognized	0	0	0	0
Reductions:
Securities sold during the period	0		0
Ending balance of credit losses on debt securities held for which a portion of an OTTI was recognized in OCI	6,792,000	6,792,000	6,792,000	6,792,000
US States And Political Subdivisions Member [Member]
Other Than Temporary Impairment Credit Losses Recognized In Earnings [Line Items]
Beginning balance of credit losses on debt securities held for which a portion of an OTTI was recognized in OCI		34,420,000	0	22,189,000
Additions:
Credit losses on debt securities for which an OTTI was no previously recognized		0		12,231,000
Credit losses on debt securities for which an OTTI was previously recognized		(34,420,000)	0	(34,420,000)
Reductions:
Securities sold during the period			0
Ending balance of credit losses on debt securities held for which a portion of an OTTI was recognized in OCI	$ 0	$ 0	$ 0	$ 0

XML

INVESTMENT SECURITIES - Significant Assumptions in Valuation of Private Label MBS (Detail)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Schedule Of Investments [Line Items]
Fair Value Inputs Discount Rate	14.61%	14.00%
Fair Value Inputs Prepayment Rate	12.60%	16.40%
Weighted Average, Projected Cumulative Loss Rate	4.00%	3.00%
Minimum [Member]
Schedule Of Investments [Line Items]
Fair Value Inputs Prepayment Rate	5.00%	12.00%
Weighted Average, Projected Cumulative Loss Rate	0.00%	0.00%
Maximum [Member]
Schedule Of Investments [Line Items]
Fair Value Inputs Prepayment Rate	23.00%	29.00%
Weighted Average, Projected Cumulative Loss Rate	8.70%	6.80%

XML

INVESTMENT SECURITIES - Investment Securities Held to Maturity (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Schedule Of Held To Maturity Securities [Line Items]
Held To Maturity Securities	$ 150,486	$ 150,627
Held To Maturity Securities Fair Value	135,430	131,032
US States And Political Subdivisions Member [Member] | P R
Schedule Of Held To Maturity Securities [Line Items]
Held To Maturity Securities	150,486	150,627
Held To Maturity Securities Accumulated Unrecognized Holding Gain	0	0
Held To Maturity Securities Accumulated Unrecognized Holding Loss	15,056	19,595
Held To Maturity Securities Fair Value	$ 135,430	$ 131,032
Held To Maturity Securities Debt Maturities Average Yield	5.74%	5.03%
US States And Political Subdivisions Member [Member] | After One To Five Years [Member] | P R
Schedule Of Held To Maturity Securities [Line Items]
Held To Maturity Securities	$ 3,712	$ 3,853
Held To Maturity Securities Accumulated Unrecognized Holding Gain	0	0
Held To Maturity Securities Accumulated Unrecognized Holding Loss	151	173
Held To Maturity Securities Fair Value	$ 3,561	$ 3,680
Held To Maturity Securities Debt Maturities Average Yield	5.68%	5.38%
US States And Political Subdivisions Member [Member] | After Five To Ten Years [Member] | P R
Schedule Of Held To Maturity Securities [Line Items]
Held To Maturity Securities	$ 39,523	$ 39,523
Held To Maturity Securities Accumulated Unrecognized Holding Gain	0	0
Held To Maturity Securities Accumulated Unrecognized Holding Loss	2,705	3,048
Held To Maturity Securities Fair Value	$ 36,818	$ 36,475
Held To Maturity Securities Debt Maturities Average Yield	5.63%	5.28%
US States And Political Subdivisions Member [Member] | After Ten Years [Member] | P R
Schedule Of Held To Maturity Securities [Line Items]
Held To Maturity Securities	$ 107,251	$ 107,251
Held To Maturity Securities Accumulated Unrecognized Holding Gain	0	0
Held To Maturity Securities Accumulated Unrecognized Holding Loss	12,200	16,374
Held To Maturity Securities Fair Value	$ 95,051	$ 90,877
Held To Maturity Securities Debt Maturities Average Yield	5.78%	4.93%

XML

INVESTMENT SECURITIES - Investment Securities Held to Maturity (Securities in continuous unrealized loss position) (Detail) - US States And Political Subdivisions Member [Member] - P R - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Schedule Of Held To Maturity Securities [Line Items]
Held to maturity less than twelve months fair value	$ 0	$ 0
Held to maturity less than twelve months unrealized losses	0	0
Held to maturity securities twelve months or longer fair value	135,430	131,032
Held to maturity securities twelve month or longer unrealized losses	15,056	19,595
Held to maturity unrealized loss position fair value	135,430	131,032
Held to maturity unrealized loss position aggregate losses	$ 15,056	$ 19,595

XML

OTHER EQUITY SECURITIES - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018	Dec. 31, 2017
Schedule Of Other Assets [Line Items]
Capital stock par value	$ 100		$ 100
Book value of investment in FHLB stock	$ 40,800		$ 40,800			$ 40,900
Dividend income from FHLB stock	700	$ 500	1,300	$ 900
Carrying value of other equity security	2,200		2,200			$ 2,200
Other Equity Securities Fair Value					$ 400
Market to Market loss on equity securities reclassified as per ASU201601	$ 3		$ 10

XML

LOAN PORTFOLIO - Loan Portfolio Held for Investment (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
Financial Information [Line Items]
Loans held for investment	$ 8,640,291	$ 8,850,476	$ 8,861,176
Less: allowance for loan and lease losses	(222,035)	(231,843)
Loans held for investment, net	8,418,256	8,618,633
Construction Loans [Member]
Financial Information [Line Items]
Loans held for investment	84,683	111,397
Residential Mortgage [Member]
Financial Information [Line Items]
Loans held for investment	3,238,001	3,290,957
Commercial Real Estate Portfolio Segment [Member]
Financial Information [Line Items]
Loans held for investment	1,533,308	1,614,972
Commercial Portfolio Segment [Member]
Financial Information [Line Items]
Loans held for investment	3,627,040	3,809,622
Commercial And Industrial Sector [Member]
Financial Information [Line Items]
Loans held for investment	2,009,049	2,083,253
Other Consumer Loans [Member]
Financial Information [Line Items]
Loans held for investment	1,491,976	1,492,435
Finance Leases [Member]
Financial Information [Line Items]
Loans held for investment	$ 283,274	$ 257,462

XML

LOAN PORTFOLIO - Loan Portfolio Held for Investment (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Financial Information [Line Items]
Classified And Non Performing Loans Sold	$ 10.4
Commercian Loans Collaterized By Real Estate	$ 792.0	$ 833.5

XML

LOAN PORTFOLIO - Loans Held for Investment on Which Accrual of Interest Income had been Discontinued (Detail) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Non-performing loans:
Total non-performing loans held for investment	[1],[2],[3]	$ 419,141	$ 489,554
Residential Mortgage [Member]
Non-performing loans:
Total non-performing loans held for investment		162,539	178,291
Commercial Mortgage [Member]
Non-performing loans:
Total non-performing loans held for investment		142,614	156,493
Commercial And Industrial [Member]
Non-performing loans:
Total non-performing loans held for investment		76,887	85,839
Consumer Auto Loans [Member]
Non-performing loans:
Total non-performing loans held for investment		12,299	10,211
Finance Leases [Member]
Non-performing loans:
Total non-performing loans held for investment		2,032	1,237
Residential Construction [Member]
Non-performing loans:
Total non-performing loans held for investment		1,222	1,987
Commercial Construction [Member]
Non-performing loans:
Total non-performing loans held for investment		0	35,100
Land Construction [Member]
Non-performing loans:
Total non-performing loans held for investment		12,926	15,026
Other Consumer Loans [Member]
Non-performing loans:
Total non-performing loans held for investment		$ 8,622	$ 5,370

[1] Amount excludes purchased-credit impaired (“PCI”) loans with a carrying value of approximately $152.2 million and $158.2 million as of June 30, 2018 and December 31, 2017, 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.

[2] Excludes $54.5 million and $8.3 million of non-performing loans held for sale as of June 30, 2018 and December 31, 2017, respectively.

[3] Non-performing loans exclude $393.3 million and $374.7 million of Troubled Debt Restructuring (“TDR”) loans that are in compliance with modified terms and in accrual status as of June 30, 2018 and December 31, 2017, respectively.

XML

LOAN PORTFOLIO - Loans Held for Investment on Which Accrual of Interest Income had been Discontinued (Parenthetical) (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accounts Notes And Loans Receivable [Line Items]
Loans held for sale	$ 80,815	$ 32,980

XML

LOAN PORTFOLIO - Corporation's Aging of Loans Held for Investment Portfolio (Detail) - USD ($) $ in Thousands	Jun. 30, 2018		Mar. 31, 2018	Dec. 31, 2017		Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	$ 695,536			$ 848,763
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	152,242		$ 155,281	158,174		$ 160,368	$ 163,100	$ 165,818
Financing Receivable, Current	7,792,513			7,843,539
Loans held for investment	8,640,291			8,850,476		$ 8,861,176
90 days past due and still accruing	141,461	[1]		131,420	[2]
Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	85,750			139,933
Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	49,184			87,856
Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	560,602	[3]		620,974	[4]
Fha Va And Other Government Guaranteed Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	113,805	[1],[5],[6]		109,607	[2],[7],[8]
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0	[1],[5],[6]		0	[2],[7],[8]
Financing Receivable, Current	37,698	[1],[5],[6]		29,332	[2],[7],[8]
Loans held for investment	151,503	[1],[5],[6]		138,939	[2],[7],[8]
90 days past due and still accruing	109,995	[1],[5],[6]		102,815	[2],[7],[8]
Fha Va And Other Government Guaranteed Loans [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	3,810	[1],[5],[6]		6,792	[2],[7],[8]
Fha Va And Other Government Guaranteed Loans [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[1],[5],[6]		0	[2],[7],[8]
Fha Va And Other Government Guaranteed Loans [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	109,995	[1],[3],[5],[6]		102,815	[2],[4],[7],[8]
Residential Mortgage [Member]
Accounts Notes And Loans Receivable [Line Items]
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	148,025	[5]		153,991	[7]
Loans held for investment	3,238,001			3,290,957
Commercial And Industrial [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	90,485			97,703
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0			0
Financing Receivable, Current	1,918,564			1,985,550
Loans held for investment	2,009,049			2,083,253
90 days past due and still accruing	569	[1]		2,317	[2]
Commercial And Industrial [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	10,261			576
Commercial And Industrial [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	2,768			8,971
Commercial And Industrial [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	77,456	[3]		88,156	[4]
Commercial Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	148,161	[5]		170,705	[7]
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	4,217	[5]		4,183	[7]
Financing Receivable, Current	1,380,930	[5]		1,440,084	[7]
Loans held for investment	1,533,308	[5]		1,614,972	[7]
90 days past due and still accruing	3,146	[1],[5]		6,687	[2],[7]
Commercial Mortgage Loans [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	2,401	[5]		7,525	[7]
Commercial Mortgage Loans [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[5]		0	[7]
Commercial Mortgage Loans [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	145,760	[3],[5]		163,180	[4],[7]
Construction Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans held for investment	84,683			111,397
Auto loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	51,732			91,554
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0			0
Financing Receivable, Current	804,224			752,777
Loans held for investment	855,956			844,331
90 days past due and still accruing	0	[1]		0	[2]
Auto loans [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	6,906			23,783
Auto loans [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	32,527			57,560
Auto loans [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	12,299	[3]		10,211	[4]
Finance Leases [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	9,213			15,270
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0			0
Financing Receivable, Current	274,061			242,192
Loans held for investment	283,274			257,462
90 days past due and still accruing	0	[1]		0	[2]
Finance Leases [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	1,404			3,484
Finance Leases [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	5,777			10,549
Finance Leases [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	2,032	[3]		1,237	[4]
Consumer Loan [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	27,800			25,189
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0			0
Financing Receivable, Current	608,220			622,915
Loans held for investment	636,020			648,104
90 days past due and still accruing	6,027	[1]		3,991	[2]
Consumer Loan [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	5,039			5,052
Consumer Loan [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	8,112			10,776
Consumer Loan [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	14,649	[3]		9,361	[4]
Commercial Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	1,013	[5]		35,100
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0	[5]		0	[7]
Financing Receivable, Current	52,806	[5]		41,456
Loans held for investment	53,819	[5]		76,556
90 days past due and still accruing	1,013	[1],[5]		0	[2]
Commercial Construction [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[5]		0
Commercial Construction [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[5]		0
Commercial Construction [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	1,013	[3],[5]		35,100	[4]
Residential Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	1,222	[5]		2,082	[7]
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0	[5]		0	[7]
Financing Receivable, Current	4,603	[5]		5,828	[7]
Loans held for investment	5,825	[5]		7,910	[7]
90 days past due and still accruing	0	[1],[5]		0	[2],[7]
Residential Construction [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[5]		95	[7]
Residential Construction [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[5]		0	[7]
Residential Construction [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	1,222	[3],[5]		1,987	[4],[7]
Land Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	18,904	[5]		15,301	[7]
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0			0	[7]
Financing Receivable, Current	6,135	[5]		11,630	[7]
Loans held for investment	25,039	[5]		26,931	[7]
90 days past due and still accruing	5,910	[1],[5]		151	[2],[7]
Land Construction [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	68	[5]		124	[7]
Land Construction [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[5]		0	[7]
Land Construction [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	18,836	[3],[5]		15,177	[4],[7]
Other Residential Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	233,201	[5]		286,252
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	148,025	[5]		153,991	[7]
Financing Receivable, Current	2,705,272	[5]		2,711,775
Loans held for investment	3,086,498	[5]		3,152,018
90 days past due and still accruing	14,801	[5]		15,459
Other Residential Mortgage Loans [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	55,861	[5]		92,502
Other Residential Mortgage Loans [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[5]		0
Other Residential Mortgage Loans [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	$ 177,340	[3],[5]		$ 193,750

[1] It is the Corporationʼs 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 $30.1 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 June 30, 2018.

[2] It is the Corporationʼs 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 $29.9 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 December 31, 2017.

[3] 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.

[4] 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.

[5] According to the Corporationʼs 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 June 30, 2018 amounted to $6.8 million, $112.0 million, $3.0 million, $0.4 million, $0.3 million and $0.6 million, respectively.

[6] As of June 30, 2018, includes $78.7 million of defaulted loans collateralizing GNMA securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.

[7] According to the Corporationʼs 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, and land loans past due 30-59 days as of December 31, 2017 amounted to $6.0 million, $224.0 million, $9.0 million, and $2.5 million, respectively.

[8] As of December 31, 2017, includes $62.1 million of defaulted loans collateralizing GNMA securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.

XML

LOAN PORTFOLIO - Corporation's Aging of Loans Held for Investment Portfolio (Parenthetical) (Detail) $ in Millions	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($) numberofpayments	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Accounts Notes And Loans Receivable [Line Items]
Loans considered to be defaulted if borrower has failed to make payment for a period or more than the period		2 months 29 days	2 months 29 days
Period during which credit card loans continue to accrue finance charges and fees		5 months 27 days	5 months 27 days
Defaulted loans collateralizing Ginnie Mae (GNMA) securities	$ 78.7	$ 78.7	$ 62.1
Minimum Number of Payments in Arrears to Consider Commercial Mortgage and Construction Loan as Past Due | numberofpayments	2
Residential mortgage loans insured by FHA or guaranteed by the VA	$ 30.1	$ 30.1	$ 29.9
Period of residential mortgage loan that are no longer accruing interest	1 year 3 months	1 year 3 months	1 year 3 months
Fha Va And Other Government Guaranteed Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
30-59 Days past due Mortgages	$ 6.8	$ 6.8	$ 6.0
Commercial Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
30-59 Days past due Mortgages	3.0	3.0	9.0
Commercial Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
30-59 Days past due Mortgages	0.6	0.6
Residential Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
30-59 Days past due Mortgages	0.3	0.3	0.0
Land Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
30-59 Days past due Mortgages	0.4	0.4	2.5
Other Residential Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
30-59 Days past due Mortgages	$ 112.0	$ 112.0	$ 224.8

XML

LOAN PORTFOLIO - Corporation's Credit Quality Indicators by Loan (Detail) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Financing Receivable Recorded Investment [Line Items]
Commercial mortgage loans		$ 1,533,308	$ 1,614,972
Commercial and Industrial loans		2,009,049	2,083,253
Land		25,039	26,931
Residential Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Construction loans		5,825	7,910
Commercial Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Construction loans		53,819	76,556
Substandard [Member]
Financing Receivable Recorded Investment [Line Items]
Commercial mortgage loans		291,045	257,503
Commercial and Industrial loans		123,855	154,416
Land		14,350	15,971
Substandard [Member] | Residential Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Construction loans		1,222	1,987
Substandard [Member] | Commercial Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Construction loans		0	35,100
Doubtful [Member]
Financing Receivable Recorded Investment [Line Items]
Commercial mortgage loans		0	4,166
Commercial and Industrial loans		5,072	3,854
Land		0	490
Doubtful [Member] | Residential Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Construction loans		0	0
Doubtful [Member] | Commercial Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Construction loans		0	0
Unlikely To Be Collected Financing Receivable [Member]
Financing Receivable Recorded Investment [Line Items]
Commercial mortgage loans		0	0
Commercial and Industrial loans		341	676
Land		0	0
Unlikely To Be Collected Financing Receivable [Member] | Residential Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Construction loans		0	0
Unlikely To Be Collected Financing Receivable [Member] | Commercial Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Construction loans		0	0
Total Adversely Classified [Member]
Financing Receivable Recorded Investment [Line Items]
Commercial mortgage loans	[1]	291,045	261,669
Commercial and Industrial loans	[1]	129,268	158,946
Land	[1]	14,350	16,461
Total Adversely Classified [Member] | Residential Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Construction loans	[1]	1,222	1,987
Total Adversely Classified [Member] | Commercial Construction [Member]
Financing Receivable Recorded Investment [Line Items]
Construction loans	[1]	$ 0	$ 35,100

[1] Excludes non-performing loans held for sale of $54.5 million ($16.8 million commercial mortgage, $30.0 million construction-commercial, and $7.7 million construction-land) and $8.3 million (construction-land) as of June 30, 2018 and December 31, 2017, respectively.

XML

LOAN PORTFOLIO - Credit Risk Payment Activity (Detail) - USD ($) $ in Thousands	Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2017
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	$ 8,640,291		$ 8,850,476		$ 8,861,176
Other Residential Mortgage Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	3,086,498	[1]	3,152,018
Auto loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	855,956		844,331
Finance Leases [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	283,274		257,462
Other Consumer Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	1,491,976		1,492,435
Residential Real Estate [Member] | Fhava Guaranteed Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	151,503	[2]	138,939	[3]
Residential Real Estate [Member] | Other Residential Mortgage Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	3,086,498		3,152,018
Residential Real Estate [Member] | Performing Financing Receivable [Member] | Fhava Guaranteed Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	151,503	[2]	138,939	[3]
Residential Real Estate [Member] | Performing Financing Receivable [Member] | Other Residential Mortgage Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	2,775,934		2,819,736
Residential Real Estate [Member] | Purchased Credit Impaired [Member] | Fhava Guaranteed Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	0	[2],[4]	0	[3],[5]
Residential Real Estate [Member] | Purchased Credit Impaired [Member] | Other Residential Mortgage Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	148,025	[4]	153,991	[5]
Residential Real Estate [Member] | Nonperforming Financing Receivable [Member] | Fhava Guaranteed Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	0	[2]	0	[3]
Residential Real Estate [Member] | Nonperforming Financing Receivable [Member] | Other Residential Mortgage Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	162,539		178,291
Consumer [Member] | Auto loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	855,956		844,331
Consumer [Member] | Finance Leases [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	283,274		257,462
Consumer [Member] | Other Consumer Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	636,020		648,104
Consumer [Member] | Performing Financing Receivable [Member] | Auto loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	843,657		834,120
Consumer [Member] | Performing Financing Receivable [Member] | Finance Leases [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	281,242		256,225
Consumer [Member] | Performing Financing Receivable [Member] | Other Consumer Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	627,398		642,734
Consumer [Member] | Purchased Credit Impaired [Member] | Auto loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	0	[4]	0	[5]
Consumer [Member] | Purchased Credit Impaired [Member] | Finance Leases [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	0	[4]	0	[5]
Consumer [Member] | Purchased Credit Impaired [Member] | Other Consumer Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	0	[4]	0	[5]
Consumer [Member] | Nonperforming Financing Receivable [Member] | Auto loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	12,299		10,211
Consumer [Member] | Nonperforming Financing Receivable [Member] | Finance Leases [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	2,032		1,237
Consumer [Member] | Nonperforming Financing Receivable [Member] | Other Consumer Loans [Member]
Financing Receivable Recorded Investment [Line Items]
Loans And Leases Receivable Gross Carrying Amount	$ 8,622		$ 5,370

[1] According to the Corporationʼs 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 June 30, 2018 amounted to $6.8 million, $112.0 million, $3.0 million, $0.4 million, $0.3 million and $0.6 million, respectively.

[2] It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as 90 days past-due loans and still accruing as opposed to non-performing loans since the principal repayment is insured. This balance includes $30.1 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 June 30, 2018.

[3] It is the Corporationʼs policy to report delinquent residential mortgage loans insured by the FHA or guaranteed by the VA as 90 days past-due loans and still accruing as opposed to non-performing loans since the principal repayment is insured. This balance includes $29.9 million of residential mortgage loans insured by the FHA or guaranteed by the VA, which are over 15 months delinquent, and are no longer accruing interest as of December 31, 2017.

[4] 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.

[5] 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.

XML

LOAN PORTFOLIO - Credit Risk Payment Activity (Parenthetical) (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Financing Receivable Recorded Investment [Line Items]
Residential mortgage loans insured by FHA or guaranteed by the VA	$ 30,100	$ 30,100	$ 29,900
Period of residential mortgage loan that are no longer accruing interest	1 year 3 months	1 year 3 months	1 year 3 months
Loans considered to be defaulted if borrower has failed to make payment for a period or more than the period		2 months 29 days	2 months 29 days
Loans held for sale	$ 80,815	$ 80,815	$ 32,980
Non Accrual [Member]
Financing Receivable Recorded Investment [Line Items]
Loans held for sale	$ 54,500	$ 54,500	$ 8,300

XML

LOAN PORTFOLIO - Impaired loans (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	$ 226,734		$ 226,734		$ 213,046
Unpaid Principal Balance with no Related Allowance	327,337		327,337		289,918
Average Recorded Investment No Related Allowance			234,017		238,454
Interest Income with no Related Allowance Accrual Basis	1,442		2,727
Interest Income with No Related Allowance Cash Basis	251		470
Recorded Investment with Related Allowance	513,400		513,400		577,262
Unpaid Principal Balance with Related Allowance	572,481		572,481		680,648
Related Allowance	49,514	$ 40,794	49,514	$ 40,794	51,410	$ 56,930	$ 66,311	$ 64,421
Average Recorded Investment With Related Allowance			521,876		593,701
Interest Income with Related Allowance Accrual Basis	5,112		10,113
Interest Income with Realted Allowance Cash Basis	525		919
Recorded Investment	740,134	735,625	740,134	735,625	790,308	$ 746,280	$ 807,198	$ 887,905
Unpaid Principal Balance	899,818		899,818		970,566
Average Recorded Investments			755,893		832,155
Interest Income on Impaired Loans Accrual Basis	6,554	6,300	12,840	12,400
Interest Income on Impaired Loans Cash Basis	776	500	1,389	1,200
Fhava Guaranteed Loans [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	0		0		0
Unpaid Principal Balance with no Related Allowance	0		0		0
Average Recorded Investment No Related Allowance			0		0
Interest Income with no Related Allowance Accrual Basis	0		0
Interest Income with No Related Allowance Cash Basis	0		0
Recorded Investment with Related Allowance	0		0		0
Unpaid Principal Balance with Related Allowance	0		0		0
Related Allowance	0		0		0
Average Recorded Investment With Related Allowance			0		0
Interest Income with Related Allowance Accrual Basis	0		0
Interest Income with Realted Allowance Cash Basis	0		0
Recorded Investment	0		0		0
Unpaid Principal Balance	0		0		0
Average Recorded Investments			0		0
Interest Income on Impaired Loans Accrual Basis	0		0
Interest Income on Impaired Loans Cash Basis	0		0
Other Residential Mortgage Loans [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	121,396		121,396		116,818
Unpaid Principal Balance with no Related Allowance	163,583		163,583		154,048
Average Recorded Investment No Related Allowance			123,058		120,241
Interest Income with no Related Allowance Accrual Basis	788		1,529
Interest Income with No Related Allowance Cash Basis	193		351
Recorded Investment with Related Allowance	287,689		287,689		316,616
Unpaid Principal Balance with Related Allowance	312,868		312,868		349,284
Related Allowance	19,804		19,804		22,086
Average Recorded Investment With Related Allowance			290,079		318,606
Interest Income with Related Allowance Accrual Basis	3,570		7,089
Interest Income with Realted Allowance Cash Basis	178		473
Recorded Investment	409,085		409,085		433,434
Unpaid Principal Balance	476,451		476,451		503,332
Average Recorded Investments			413,137		438,847
Interest Income on Impaired Loans Accrual Basis	4,358		8,618
Interest Income on Impaired Loans Cash Basis	371		824
Commercial Mortgage Loans [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	58,992		58,992		65,100
Unpaid Principal Balance with no Related Allowance	100,247		100,247		100,612
Average Recorded Investment No Related Allowance			62,892		86,563
Interest Income with no Related Allowance Accrual Basis	119		201
Interest Income with No Related Allowance Cash Basis	41		78
Recorded Investment with Related Allowance	116,583		116,583		87,814
Unpaid Principal Balance with Related Allowance	127,995		127,995		124,084
Related Allowance	12,204		12,204		9,783
Average Recorded Investment With Related Allowance			119,058		93,720
Interest Income with Related Allowance Accrual Basis	737		1,397
Interest Income with Realted Allowance Cash Basis	307		354
Recorded Investment	175,575		175,575		152,914
Unpaid Principal Balance	228,242		228,242		224,696
Average Recorded Investments			181,950		180,283
Interest Income on Impaired Loans Accrual Basis	856		1,598
Interest Income on Impaired Loans Cash Basis	348		432
Commercial And Industrial Loan [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	43,566		43,566		28,292
Unpaid Principal Balance with no Related Allowance	60,380		60,380		31,254
Average Recorded Investment No Related Allowance			45,086		28,567
Interest Income with no Related Allowance Accrual Basis	496		920
Interest Income with No Related Allowance Cash Basis	8		20
Recorded Investment with Related Allowance	67,805		67,805		90,008
Unpaid Principal Balance with Related Allowance	80,850		80,850		112,005
Related Allowance	10,592		10,592		12,359
Average Recorded Investment With Related Allowance			69,293		92,666
Interest Income with Related Allowance Accrual Basis	128		253
Interest Income with Realted Allowance Cash Basis	8		24
Recorded Investment	111,371		111,371		118,300
Unpaid Principal Balance	141,230		141,230		143,259
Average Recorded Investments			114,379		121,233
Interest Income on Impaired Loans Accrual Basis	624		1,173
Interest Income on Impaired Loans Cash Basis	16		44
Construction Loans [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	0		0		48
Recorded Investment with Related Allowance	11,261		11,261		47,218
Related Allowance	1,061	2,374	1,061	2,374	2,017
Recorded Investment	11,261	$ 50,557	11,261	$ 50,557
Consumer Auto Loans [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	326		326		267
Unpaid Principal Balance with no Related Allowance	326		326		267
Average Recorded Investment No Related Allowance			342		290
Interest Income with no Related Allowance Accrual Basis	4		5
Interest Income with No Related Allowance Cash Basis	0		0
Recorded Investment with Related Allowance	19,367		19,367		22,338
Unpaid Principal Balance with Related Allowance	19,367		19,367		22,338
Related Allowance	3,697		3,697		3,665
Average Recorded Investment With Related Allowance			20,484		24,328
Interest Income with Related Allowance Accrual Basis	385		779
Interest Income with Realted Allowance Cash Basis	0		0
Recorded Investment	19,693		19,693		22,605
Unpaid Principal Balance	19,693		19,693		22,605
Average Recorded Investments			20,826		24,618
Interest Income on Impaired Loans Accrual Basis	389		784
Interest Income on Impaired Loans Cash Basis	0		0
Finance Leases [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	0		0		0
Unpaid Principal Balance with no Related Allowance	0		0		0
Average Recorded Investment No Related Allowance			0		0
Interest Income with no Related Allowance Accrual Basis	0		0
Interest Income with No Related Allowance Cash Basis	0		0
Recorded Investment with Related Allowance	1,594		1,594		2,184
Unpaid Principal Balance with Related Allowance	1,594		1,594		2,184
Related Allowance	162		162		104
Average Recorded Investment With Related Allowance			1,754		2,428
Interest Income with Related Allowance Accrual Basis	28		59
Interest Income with Realted Allowance Cash Basis	0		0
Recorded Investment	1,594		1,594		2,184
Unpaid Principal Balance	1,594		1,594		2,184
Average Recorded Investments			1,754		2,428
Interest Income on Impaired Loans Accrual Basis	28		59
Interest Income on Impaired Loans Cash Basis	0		0
Other Consumer Loans [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	2,454		2,454		2,521
Unpaid Principal Balance with no Related Allowance	2,801		2,801		3,688
Average Recorded Investment No Related Allowance			2,639		2,745
Interest Income with no Related Allowance Accrual Basis	35		72
Interest Income with No Related Allowance Cash Basis	9		21
Recorded Investment with Related Allowance	9,101		9,101		11,084
Unpaid Principal Balance with Related Allowance	9,584		9,584		11,830
Related Allowance	1,994		1,994		1,396
Average Recorded Investment With Related Allowance			9,434		11,579
Interest Income with Related Allowance Accrual Basis	241		489
Interest Income with Realted Allowance Cash Basis	25		53
Recorded Investment	11,555		11,555		13,605
Unpaid Principal Balance	12,385		12,385		15,518
Average Recorded Investments			12,073		14,324
Interest Income on Impaired Loans Accrual Basis	276		561
Interest Income on Impaired Loans Cash Basis	34		74
Commercial Construction [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	0		0		0
Unpaid Principal Balance with no Related Allowance	0		0		0
Average Recorded Investment No Related Allowance			0		0
Interest Income with no Related Allowance Accrual Basis	0		0
Interest Income with No Related Allowance Cash Basis	0		0
Recorded Investment with Related Allowance	0		0		35,101
Unpaid Principal Balance with Related Allowance	0		0		38,595
Related Allowance	0		0		560
Average Recorded Investment With Related Allowance			0		35,996
Interest Income with Related Allowance Accrual Basis	0		0
Interest Income with Realted Allowance Cash Basis	0		0
Recorded Investment	0		0		35,101
Unpaid Principal Balance	0		0		38,595
Average Recorded Investments			0		35,996
Interest Income on Impaired Loans Accrual Basis	0		0
Interest Income on Impaired Loans Cash Basis	0		0
Residential Construction [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	0		0		0
Unpaid Principal Balance with no Related Allowance	0		0		0
Average Recorded Investment No Related Allowance			0		0
Interest Income with no Related Allowance Accrual Basis	0		0
Interest Income with No Related Allowance Cash Basis	0		0
Recorded Investment with Related Allowance	252		252		252
Unpaid Principal Balance with Related Allowance	355		355		355
Related Allowance	39		39		55
Average Recorded Investment With Related Allowance			252		252
Interest Income with Related Allowance Accrual Basis	0		0
Interest Income with Realted Allowance Cash Basis	0		0
Recorded Investment	252		252		252
Unpaid Principal Balance	355		355		355
Average Recorded Investments			252		252
Interest Income on Impaired Loans Accrual Basis	0		0
Interest Income on Impaired Loans Cash Basis	0		0
Land Construction [Member]
Financing Receivable Impaired [Line Items]
Recorded Investment with no Related Allowance	0		0		48
Unpaid Principal Balance with no Related Allowance	0		0		49
Average Recorded Investment No Related Allowance			0		48
Interest Income with no Related Allowance Accrual Basis	0		0
Interest Income with No Related Allowance Cash Basis	0		0
Recorded Investment with Related Allowance	11,009		11,009		11,865
Unpaid Principal Balance with Related Allowance	19,868		19,868		19,973
Related Allowance	1,022		1,022		1,402
Average Recorded Investment With Related Allowance			11,522		14,126
Interest Income with Related Allowance Accrual Basis	23		47
Interest Income with Realted Allowance Cash Basis	7		15
Recorded Investment	11,009		11,009		11,913
Unpaid Principal Balance	19,868		19,868		20,022
Average Recorded Investments			11,522		$ 14,174
Interest Income on Impaired Loans Accrual Basis	23		47
Interest Income on Impaired Loans Cash Basis	$ 7		$ 15

XML

LOAN PORTFOLIO - Additional Information (Detail) - USD ($)	3 Months Ended					6 Months Ended
	Jun. 30, 2018		Mar. 31, 2018	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2018		Jun. 30, 2017	Dec. 31, 2017		Dec. 31, 2016	Jun. 30, 2016	Jun. 30, 2015
Accounts Notes And Loans Receivable [Line Items]
Interest Income Impaired Loans				$ 6,800,000				$ 13,600,000
Interest Income on Impaired Loans Accrual Basis	$ 6,554,000			6,300,000		$ 12,840,000		12,400,000
Contractually outstanding principal and interest at acquisition	188,000,000					188,000,000			$ 196,600,000
Financing Receivable Significant Purchases						29,700,000
Securitization of mortgage loans into mortgage backed securities						119,800,000
Total gross loans held for investment portfolio	8,640,291,000			8,861,176,000		8,640,291,000		8,861,176,000	8,850,476,000
Total TDR loans	557,196,000		$ 572,376,000	568,543,000	$ 602,364,000	557,196,000		568,543,000	587,219,000		$ 647,048,000
Provsion of PCI Loans	103,000			2,589,000		103,000		2,589,000
Classified and non-performing loans sold	10,400,000
Loans held for sale	80,815,000					80,815,000			32,980,000
Proceeds From Sale Of Loans Held For Investment						33,709,000		53,245,000
Government Guaranteed Residential Mortgage Loans Indirect Exposure	114,700,000					114,700,000
Puerto Rico Housing Finance Authority Restricted Net Position													$ 77,400,000
Puerto Rico Housing Finance Authority Covered Loans												$ 576,000,000
Threshold Mortgage Loans Principal Amount Puerto Rico Housing Financing Authority	75,000,000					75,000,000
Interest Paid						49,102,000		44,613,000
Financing Receivable Allowance For Credit Losses Write Offs Impaired Loans	13,207,000			43,083,000		30,420,000	[1]	60,487,000
Impaired Financing Receivable Related Allowance	49,514,000		56,930,000	40,794,000	66,311,000	49,514,000		40,794,000	51,410,000		$ 64,421,000
Mortgage Loans In Process Of Foreclosure Amount	142,600,000					142,600,000
Provision For Loan Lease And Other Losses	19,536,000			18,096,000		40,080,000		43,538,000
Financing Receivable Allowance For Credit Losses Write Offs	27,696,000			55,488,000		57,056,000		88,382,000
Proceeds From Principal Repayments On Loans And Leases Held For Investment						1,282,545,000		1,362,537,000
Performing Financing Receivable [Member]
Accounts Notes And Loans Receivable [Line Items]
Residential mortgage loans sold	9,800,000
Puerto Rico Electric PowerAuthority [Member]
Accounts Notes And Loans Receivable [Line Items]
Classified and non-performing loans sold					64,000,000
Reserves allocated to bulk sale					10,200,000
Incremental losses					600,000
Proceeds From Sale Of NonPerforming Assets Sold					53,200,000
Classified an non performing loan sold					$ 75,000,000
GNMA
Accounts Notes And Loans Receivable [Line Items]
Loans repurchased						2,000,000		17,500,000
FNMA and FHLMC
Accounts Notes And Loans Receivable [Line Items]
Loans repurchased						3,000		16,000
Residential Mortgage [Member]
Accounts Notes And Loans Receivable [Line Items]
Total gross loans held for investment portfolio	3,238,001,000			3,282,307,000		3,238,001,000		3,282,307,000	3,290,957,000
Impaired Financing Receivable Related Allowance	19,804,000			13,786,000		19,804,000		13,786,000	22,086,000
Provision For Loan Lease And Other Losses	3,599,000			10,888,000		4,046,000		20,159,000
Financing Receivable Allowance For Credit Losses Write Offs	$ 5,544,000			6,967,000		8,915,000		15,192,000
Residential Mortgage [Member] | Hurricane [Member] | Payment Deferral [Member]
Accounts Notes And Loans Receivable [Line Items]
Payment Deferral Period	2 months 29 days
Government Guaranteed Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Financing Receivable Significant Sales						51,100,000
Total TDR loans	$ 62,200,000					62,200,000			62,100,000
Mortgage Loans In Process Of Foreclosure Amount	21,800,000					21,800,000
Loans in trial [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR loans	1,100,000					1,100,000
Non Accrual [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR loans	163,915,000	[2]				163,915,000	[2]		212,524,000	[3]
Troubled Debt Restructurings [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding unfunded commitments on TDR loans	1,400,000					1,400,000
Allowance For Loan And Lease Losses Write Offs Net Loans Sold								10,700,000
Loans Split [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR loans	64,559,000			36,141,000		64,559,000		36,141,000
Financing receivable loans restructured recorded investment accruals	32,700,000
Financing Receivable Allowance For Credit Losses Write Offs						33,400,000
Proceeds From Principal Repayments On Loans And Leases Held For Investment	3,600,000
Book Value Of Loans	34,000,000					34,000,000
Loans Split [Member] | Commercial Real Estate [Member]
Accounts Notes And Loans Receivable [Line Items]
Financing receivable loans restructured recorded investment accruals	29,400,000
Non Fha Va Residential Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR loans	342,854,000					342,854,000			363,930,000
Commercial And Industrial Loan [Member]
Accounts Notes And Loans Receivable [Line Items]
Interest Income on Impaired Loans Accrual Basis	624,000					1,173,000
Total TDR loans	91,669,000					91,669,000			94,112,000
Impaired Financing Receivable Related Allowance	10,592,000					10,592,000			12,359,000
Commercial Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Interest Income on Impaired Loans Accrual Basis	856,000					1,598,000
Total gross loans held for investment portfolio	1,533,308,000					1,533,308,000			1,614,972,000
Total TDR loans	84,281,000					84,281,000			50,812,000
Charge-offs of loans transferred to loans held for sale			4,600,000
Book value of loans transferred to held for sale			27,200,000
Impaired Financing Receivable Related Allowance	12,204,000					12,204,000			9,783,000
Commercial Mortgage Loans [Member] | Non Accrual [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans held for sale	16,800,000					16,800,000
Construction Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total gross loans held for investment portfolio	84,683,000			122,093,000		84,683,000		122,093,000	111,397,000
Total TDR loans	6,400,000					6,400,000
Charge-offs of loans transferred to loans held for sale			5,100,000
Book value of loans transferred to held for sale			30,000,000
Impaired Financing Receivable Related Allowance	1,061,000			2,374,000		1,061,000		2,374,000	2,017,000
Provision For Loan Lease And Other Losses	507,000			312,000		5,271,000		1,254,000
Financing Receivable Allowance For Credit Losses Write Offs	818,000			595,000		5,995,000		658,000
Consumer Loan [Member]
Accounts Notes And Loans Receivable [Line Items]
Total gross loans held for investment portfolio	1,775,250,000			1,728,290,000		1,775,250,000		1,728,290,000
Total TDR loans	31,900,000					31,900,000
Impaired Financing Receivable Related Allowance	5,853,000			5,516,000		5,853,000		5,516,000
Provision For Loan Lease And Other Losses	13,171,000			8,505,000		19,187,000		16,001,000
Financing Receivable Allowance For Credit Losses Write Offs	12,327,000			$ 11,053,000		24,399,000		$ 22,245,000
Commercial Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
Interest Income on Impaired Loans Accrual Basis	0					0
Total TDR loans	0					0			35,100,000
Impaired Financing Receivable Related Allowance	0					0			560,000
Commercial Construction [Member] | Non Accrual [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans held for sale	30,000,000					30,000,000
Residential Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
Interest Income on Impaired Loans Accrual Basis	0					0
Total TDR loans	217,000					217,000			217,000
Impaired Financing Receivable Related Allowance	39,000					39,000			55,000
Land Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
Interest Income on Impaired Loans Accrual Basis	23,000					47,000
Total TDR loans	6,244,000					6,244,000			6,476,000
Impaired Financing Receivable Related Allowance	1,022,000					1,022,000			1,402,000
Land Construction [Member] | Non Accrual [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans held for sale	7,700,000					7,700,000			8,300,000
Loans Tranferred To Held For Sale [Member]
Accounts Notes And Loans Receivable [Line Items]
Charge-offs of loans transferred to loans held for sale			9,700,000
Additional losses loans transferred to loans held for sale			5,600,000
Book value of loans transferred to held for sale			57,200,000
Charge Offs Taken On Previosuly Established Reserve			$ 4,100,000
P R
Accounts Notes And Loans Receivable [Line Items]
Outstanding of credit facilities granted	54,600,000					$ 54,600,000			55,900,000
P R | Geographic Concentration Risk [Member]
Accounts Notes And Loans Receivable [Line Items]
Credit risk concentration						75.00%
P R | Puerto Rico Government and Political Subdivisions [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding of credit facilities granted	33,100,000					$ 33,100,000
P R | Public Corporations [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding of credit facilities granted	14,800,000					14,800,000
P R | Government [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding of credit facilities granted	6,700,000					6,700,000
P R | Commercial And Industrial Loan [Member]
Accounts Notes And Loans Receivable [Line Items]
Charge-offs of loans sold						1,300,000
Proceeds From Sale Of Loans Held For Investment						5,600,000
Payments To Acquire Loans Held For Investment						21,400,000
V I
Accounts Notes And Loans Receivable [Line Items]
Outstanding of credit facilities granted	72,500,000					$ 72,500,000			$ 70,400,000
V I | Geographic Concentration Risk [Member]
Accounts Notes And Loans Receivable [Line Items]
Credit risk concentration						6.00%
V I | Public Corporations [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding of credit facilities granted	49,200,000					$ 49,200,000
V I | Government [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding of credit facilities granted	23,200,000					$ 23,200,000
U S | Geographic Concentration Risk [Member]
Accounts Notes And Loans Receivable [Line Items]
Credit risk concentration						19.00%
U S | Commercial And Industrial Loan [Member]
Accounts Notes And Loans Receivable [Line Items]
Proceeds From Sale Of Loans Held For Investment						$ 9,200,000
Credit Impaired Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Mortgage Loans In Process Of Foreclosure Amount	$ 12,400,000					12,400,000
Impaired Financing Receivable [Member]
Accounts Notes And Loans Receivable [Line Items]
Allowance For Loan And Lease Losses Write Offs Net Loans Sold						$ 10,700,000

[1] For the six-month period ended June 30, 2017 includes a charge-off of $10.7 million related to the sale of the PREPA credit line as further discussed below.

[2] Excludes a $30.0 million non-performing construction loans transferred to held for sale during the first quarter of 2018.

[3] Included in non-accrual loans are $88.6 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.

XML

LOAN PORTFOLIO - Activity for Impaired Loans (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018		Jun. 30, 2017
Impaired Loans:
Balance at beginning of period	$ 746,280	$ 807,198	$ 790,308		$ 887,905
Loans determined impaired during the period	34,273	18,976	95,681		38,604
Charge-offs	(13,207)	(43,083)	(30,420)	[1]	(60,487)
Loans sold, net charge-offs	0	0	(4,121)		(53,245)
Increases to impaired loans (disbursements)	77	698	7,075		1,239
Foreclosures	(7,777)	(21,233)	(19,452)		(30,690)
Loans no longer considered impaired	(2,433)	(1,890)	(3,940)		(2,782)
Paid in full or partial payments	(17,079)	(25,041)	(37,784)		(44,919)
Transfer Of Impaired Loans Held For Sale To Portfolio Loans			0
Balance at end of period	740,134	735,625	740,134		735,625
Impaired loans foreclosed [Member]
Impaired Loans:
Loans transferred to held for sale	$ 0	$ 0	$ (57,213)		$ 0

[1] For the six-month period ended June 30, 2017 includes a charge-off of $10.7 million related to the sale of the PREPA credit line as further discussed below.

XML

LOAN PORTFOLIO - Activity for Specific Reserve (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Specific Reserve:
Balance at beginning of period	$ 56,930	$ 66,311	$ 51,410	$ 64,421
Provision for loan losses	5,753	17,563	28,456	36,195
Financing Receivable Allowance For Credit Losses Net Write Offs Impaired Loans	(13,169)	(43,080)	(30,352)	(59,822)
Balance at end of period	$ 49,514	$ 40,794	$ 49,514	$ 40,794

XML

LOAN PORTFOLIO- Carrying Value of Purchased Credit Impaired Loans (Detail) - USD ($) $ in Thousands	Jun. 30, 2018		Mar. 31, 2018	Dec. 31, 2017		Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable Impaired [Line Items]
Purchased Credit Impaired Loans	$ 152,242		$ 155,281	$ 158,174		$ 160,368	$ 163,100	$ 165,818
Allowance for loan losses Purchased Credit Impaired	(11,354)		$ (11,251)	(11,251)		(9,446)	$ (6,857)	$ (6,857)
Purchased Credit Impaired Loans, Net	140,888			146,923		$ 150,922
Residential Mortgage Loans [Member]
Financing Receivable Impaired [Line Items]
Purchased Credit Impaired Loans	148,025	[1]		153,991	[2]
Commercial Mortgage Loans [Member]
Financing Receivable Impaired [Line Items]
Purchased Credit Impaired Loans	$ 4,217	[1]		$ 4,183	[2]

[1] According to the Corporationʼs 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 June 30, 2018 amounted to $6.8 million, $112.0 million, $3.0 million, $0.4 million, $0.3 million and $0.6 million, respectively.

[2] According to the Corporationʼs 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, and land loans past due 30-59 days as of December 31, 2017 amounted to $6.0 million, $224.0 million, $9.0 million, and $2.5 million, respectively.

XML

LOAN PORTFOLIO- Corporation's Aging of Purchased Credit Impaired Loans (Detail) - USD ($) $ in Thousands	Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2017
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	$ 695,536		$ 848,763
Financing Receivable, Current	7,792,513		7,843,539
Loans held for investment	8,640,291		8,850,476		$ 8,861,176
90 days past due and still accruing	141,461	[1]	131,420	[2]
Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	85,750		139,933
Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	49,184		87,856
Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	560,602	[3]	620,974	[4]
Purchased Credit Impaired Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	38,864	[5]	46,260
Financing Receivable, Current	113,378	[5]	111,914
Loans held for investment	152,242	[5]	158,174
Purchased Credit Impaired Loans [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	8,588	[5]	16,955
Purchased Credit Impaired Loans [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0		0
Purchased Credit Impaired Loans [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	30,276	[5]	29,305
Residential Mortgage [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans held for investment	3,238,001		3,290,957
Residential Mortgage [Member] | Purchased Credit Impaired Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	35,612	[5]	43,071	[6]
Financing Receivable, Current	112,413	[5]	110,920	[6]
Loans held for investment	148,025	[5]	153,991	[6]
30-59 Days past due Mortgages	11,700		28,100
Residential Mortgage [Member] | Purchased Credit Impaired Loans [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	8,588	[5]	16,600	[6]
Residential Mortgage [Member] | Purchased Credit Impaired Loans [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[5]	0	[6]
Residential Mortgage [Member] | Purchased Credit Impaired Loans [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	27,024	[5]	26,471	[6]
Commercial Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	148,161	[7]	170,705	[8]
Financing Receivable, Current	1,380,930	[7]	1,440,084	[8]
Loans held for investment	1,533,308	[7]	1,614,972	[8]
90 days past due and still accruing	3,146	[1],[7]	6,687	[2],[8]
30-59 Days past due Mortgages	3,000		9,000
Commercial Mortgage Loans [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	2,401	[7]	7,525	[8]
Commercial Mortgage Loans [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[7]	0	[8]
Commercial Mortgage Loans [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	145,760	[3],[7]	163,180	[4],[8]
Commercial Mortgage Loans [Member] | Purchased Credit Impaired Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	3,252	[5]	3,189	[6]
Financing Receivable, Current	965	[5]	994	[6]
Loans held for investment	4,217	[5]	4,183	[6]
30-59 Days past due Mortgages	0		200
Commercial Mortgage Loans [Member] | Purchased Credit Impaired Loans [Member] | Financing Receivables 60 To 89 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[5]	355	[6]
Commercial Mortgage Loans [Member] | Purchased Credit Impaired Loans [Member] | Financing Receivables 30 To 59 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	0	[5]	0	[6]
Commercial Mortgage Loans [Member] | Purchased Credit Impaired Loans [Member] | Financing Receivables Equal To Greater Than 90 Days Past Due [Member]
Accounts Notes And Loans Receivable [Line Items]
Total Past Due	$ 3,252	[5]	$ 2,834	[6]

[1] It is the Corporationʼs 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 $30.1 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 June 30, 2018.

[2] It is the Corporationʼs 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 $29.9 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 December 31, 2017.

[3] 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.

[4] 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.

[5] According to the Corporationʼs 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 June 30, 2018 amounted to $11.7 million. No PCI commercial mortgage loan was 30-59 days past due as of June 30, 2018.

[6] According to the Corporationʼs 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, 2017 amounted to $28.1 million and $0.2 million, respectively.

[7] According to the Corporationʼs 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 June 30, 2018 amounted to $6.8 million, $112.0 million, $3.0 million, $0.4 million, $0.3 million and $0.6 million, respectively.

[8] According to the Corporationʼs 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, and land loans past due 30-59 days as of December 31, 2017 amounted to $6.0 million, $224.0 million, $9.0 million, and $2.5 million, respectively.

XML

LOAN PORTFOLIO - Accretable Yield Related to Purchased Credit Impaired Loans (Detail) - Pci Loans [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Accretable Yield [Line Items]
Accretable yield at acquisition	$ 101,059	$ 113,665	$ 103,682	$ 116,462
Reclassification to nonaccretable	0	(1,970)	0	(1,970)
Accretion recognized in earnings	(2,570)	(2,724)	(5,193)	(5,521)
Accretable yield at the end of the period	$ 98,489	$ 108,971	$ 98,489	$ 108,971

XML

LOAN PORTFOLIO -Changes in Carrying Amount Of Purchased Credit Impaired Loans (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable Impaired [Line Items]
Beggining balance: purchased credit-impaired loans	$ 155,281	$ 163,100	$ 158,174	$ 165,818
Accretion	2,570	2,724	5,193	5,521
Purchased Credit Impaired Loans Foreclosures	(1,250)	(947)	(3,370)	(1,869)
Sop Collections	(4,359)	(4,509)	(7,755)	(9,102)
Ending balance: purchased credit-impaired loans	152,242	160,368	152,242	160,368
Allowance for loan losses Purchased Credit Impaired	(11,354)	(9,446)	(11,354)	(9,446)	$ (11,251)	$ (11,251)	$ (6,857)	$ (6,857)
Ending balance: purchased credit-impaired loans, net	$ 140,888	$ 150,922	$ 140,888	$ 150,922

XML

LOAN PORTFOLIO -Changes in the allowance for loan losses related to purchased credit impaired doans (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities [Abstract]
Allowance for loan losses Purchased Credit Impaired	$ 11,251	$ 6,857	$ 11,251	$ 6,857
Provsion of PCI Loans	103	2,589	103	2,589
Allowance for loan losses Purchased Credit Impaired	$ 11,354	$ 9,446	$ 11,354	$ 9,446

XML

LOAN PORTFOLIO - Selected Information on TDRs Includes Recorded Investment by Loan Class and Modification Type (Detail) - USD ($) $ in Thousands	Jun. 30, 2018		Mar. 31, 2018	Dec. 31, 2017		Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	$ 557,196		$ 572,376	$ 587,219		$ 568,543	$ 602,364	$ 647,048
Interest Rate Below Market [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	32,000			35,947
Maturity of Term Extension [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	67,561			38,683
Combination of reduction in interest rate and extension of maturity [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	321,064			340,753
Forgiveness of principal and/or interest [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	216			35,317
Foberance Agrrements [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	6,662			6,623
Other [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	129,693	[1]		129,896	[2]
Non Fha Va Residential Mortgage Loans [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	342,854			363,930
Non Fha Va Residential Mortgage Loans [Member] | Interest Rate Below Market [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	23,972			25,964
Non Fha Va Residential Mortgage Loans [Member] | Maturity of Term Extension [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	8,481			8,318
Non Fha Va Residential Mortgage Loans [Member] | Combination of reduction in interest rate and extension of maturity [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	249,820			267,578
Non Fha Va Residential Mortgage Loans [Member] | Forgiveness of principal and/or interest [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Non Fha Va Residential Mortgage Loans [Member] | Foberance Agrrements [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	158			0
Non Fha Va Residential Mortgage Loans [Member] | Other [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	60,423	[1]		62,070	[2]
Commercial Mortgage Loans [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	84,281			50,812
Commercial Mortgage Loans [Member] | Interest Rate Below Market [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	5,594			6,563
Commercial Mortgage Loans [Member] | Maturity of Term Extension [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	31,646			2,094
Commercial Mortgage Loans [Member] | Combination of reduction in interest rate and extension of maturity [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	35,499			31,870
Commercial Mortgage Loans [Member] | Forgiveness of principal and/or interest [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Commercial Mortgage Loans [Member] | Foberance Agrrements [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,970			0
Commercial Mortgage Loans [Member] | Other [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	9,572	[1]		10,285	[2]
Commercial And Industrial Loan [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	91,669			94,112
Commercial And Industrial Loan [Member] | Interest Rate Below Market [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,239			2,510
Commercial And Industrial Loan [Member] | Maturity of Term Extension [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	20,221			20,648
Commercial And Industrial Loan [Member] | Combination of reduction in interest rate and extension of maturity [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	14,562			16,049
Commercial And Industrial Loan [Member] | Forgiveness of principal and/or interest [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Commercial And Industrial Loan [Member] | Foberance Agrrements [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	4,534			6,623
Commercial And Industrial Loan [Member] | Other [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	51,113	[1]		48,282	[2]
Construction Loans [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	6,400
Consumer Auto Loans [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	19,692			22,605
Consumer Auto Loans [Member] | Interest Rate Below Market [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Consumer Auto Loans [Member] | Maturity of Term Extension [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,746			1,347
Consumer Auto Loans [Member] | Combination of reduction in interest rate and extension of maturity [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	11,666			14,233
Consumer Auto Loans [Member] | Forgiveness of principal and/or interest [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Consumer Auto Loans [Member] | Foberance Agrrements [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Consumer Auto Loans [Member] | Other [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	6,280	[1]		7,025	[2]
Finance Leases [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,594			2,184
Finance Leases [Member] | Interest Rate Below Market [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Finance Leases [Member] | Maturity of Term Extension [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	158			238
Finance Leases [Member] | Combination of reduction in interest rate and extension of maturity [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,436			1,946
Finance Leases [Member] | Forgiveness of principal and/or interest [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Finance Leases [Member] | Foberance Agrrements [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Finance Leases [Member] | Other [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0	[1]		0	[2]
Other Consumer Loans [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	10,645			11,783
Other Consumer Loans [Member] | Interest Rate Below Market [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,178			892
Other Consumer Loans [Member] | Maturity of Term Extension [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,612			2,097
Other Consumer Loans [Member] | Combination of reduction in interest rate and extension of maturity [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	5,932			6,891
Other Consumer Loans [Member] | Forgiveness of principal and/or interest [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	216			217
Other Consumer Loans [Member] | Foberance Agrrements [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Other Consumer Loans [Member] | Other [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,707	[1]		1,686	[2]
Commercial Construction [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			35,100
Commercial Construction [Member] | Interest Rate Below Market [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Commercial Construction [Member] | Maturity of Term Extension [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Commercial Construction [Member] | Combination of reduction in interest rate and extension of maturity [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Commercial Construction [Member] | Forgiveness of principal and/or interest [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			35,100
Commercial Construction [Member] | Foberance Agrrements [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Commercial Construction [Member] | Other [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0	[1]		0	[2]
Residential Construction [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	217			217
Residential Construction [Member] | Interest Rate Below Market [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Residential Construction [Member] | Maturity of Term Extension [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Residential Construction [Member] | Combination of reduction in interest rate and extension of maturity [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Residential Construction [Member] | Forgiveness of principal and/or interest [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Residential Construction [Member] | Foberance Agrrements [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Residential Construction [Member] | Other [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	217	[1]		217	[2]
Land Construction [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	6,244			6,476
Land Construction [Member] | Interest Rate Below Market [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	17			18
Land Construction [Member] | Maturity of Term Extension [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	3,697			3,941
Land Construction [Member] | Combination of reduction in interest rate and extension of maturity [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	2,149			2,186
Land Construction [Member] | Forgiveness of principal and/or interest [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Land Construction [Member] | Foberance Agrrements [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Land Construction [Member] | Other [Member]
Financing Receivable Impaired [Line Items]
Financing Receivable, Modifications, Recorded Investment	$ 381	[1]		$ 331	[2]

[1] Other concessions granted by the Corporation included deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation, or a combination of the concessions listed in the table.

[2] Other concessions granted by the Corporation included 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.

XML

LOAN PORTFOLIO - Corporation's TDR Activity (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018		Jun. 30, 2017
Schedule Of Financing Receivables [Line Items]
Beginning Balance of TDRs	$ 572,376	$ 602,364	$ 587,219		$ 647,048
New TDRs	13,228	13,368	56,647		54,267
Increases to existing TDRs (disbursements)	75	330	6,846		754
Charge-offs post modification	(8,616)	(9,365)	(17,787)	[1]	(24,027)
Sales	0	0	0		53,245
Foreclosures	(3,759)	(16,150)	(10,802)		(20,521)
TDRs transferred to loans held for sale	0	0	(30,000)		0
Paid-off and partial payments	(16,108)	(22,004)	(34,927)		(35,733)
Ending balance of TDRs	$ 557,196	$ 568,543	$ 557,196		$ 568,543

[1] The six-month period ended June 30, 2018 includes a charge-off of $5.1 million associated with a $30.0 million construction loan transferred to held for sale.

XML

LOAN PORTFOLIO - Breakdown Between Accrual and Nonaccrual Status of TDRs (Detail) - USD ($) $ in Thousands	Jun. 30, 2018		Mar. 31, 2018	Dec. 31, 2017		Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	$ 557,196		$ 572,376	$ 587,219		$ 568,543	$ 602,364	$ 647,048
Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	163,915	[1]		212,524	[2]
Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	393,281			374,695
Non Fha Va Residential Mortgage Loans [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	342,854			363,930
Non Fha Va Residential Mortgage Loans [Member] | Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	72,496	[1]		83,201	[2]
Non Fha Va Residential Mortgage Loans [Member] | Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	270,358			280,729
Commercial Mortgage Loans [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	84,281			50,812
Commercial Mortgage Loans [Member] | Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	29,927	[1]		27,483	[2]
Commercial Mortgage Loans [Member] | Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	54,354			23,329
Commercial And Industrial Loan [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	91,669			94,112
Commercial And Industrial Loan [Member] | Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	48,191	[1]		52,576	[2]
Commercial And Industrial Loan [Member] | Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	43,478			41,536
Consumer Auto Loans [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	19,692			22,605
Consumer Auto Loans [Member] | Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	6,347	[1]		7,057	[2]
Consumer Auto Loans [Member] | Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	13,345			15,548
Finance Leases [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,594			2,184
Finance Leases [Member] | Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	260	[1]		216	[2]
Finance Leases [Member] | Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,334			1,968
Other Consumer Loans [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	10,645			11,783
Other Consumer Loans [Member] | Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,324	[1]		1,489	[2]
Other Consumer Loans [Member] | Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	9,321			10,294
Commercial Construction [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			35,100
Commercial Construction [Member] | Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	0	[1]		35,100	[2]
Commercial Construction [Member] | Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Residential Construction [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	217			217
Residential Construction [Member] | Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	217	[1]		217	[2]
Residential Construction [Member] | Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	0			0
Land Construction [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	6,244			6,476
Land Construction [Member] | Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	5,153	[1]		5,185	[2]
Land Construction [Member] | Accrual [Member]
Financing Receivable Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	$ 1,091			$ 1,291

[1] Excludes a $30.0 million non-performing construction loans transferred to held for sale during the first quarter of 2018.

[2] Included in non-accrual loans are $88.6 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.

XML

LOAN PORTFOLIO - Breakdown Between Accrual and Nonaccrual Status of TDRs (Parenthetical) (Detail) - USD ($) $ in Thousands	Jun. 30, 2018		Mar. 31, 2018	Dec. 31, 2017		Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable Modifications [Line Items]
Total TDR loans	$ 557,196		$ 572,376	$ 587,219		$ 568,543	$ 602,364	$ 647,048
Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Total TDR loans	163,915	[1]		212,524	[2]
Performing Financing Receivable [Member] | Non Accrual [Member]
Financing Receivable Modifications [Line Items]
Total TDR loans	$ 51,700			$ 88,600

[1] Excludes a $30.0 million non-performing construction loans transferred to held for sale during the first quarter of 2018.

[2] Included in non-accrual loans are $88.6 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.

XML

LOAN PORTFOLIO - Loan Modifications are Considered TDRs (Detail) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($) numberofcontracts	Jun. 30, 2017 USD ($) numberofcontracts	Jun. 30, 2018 USD ($) numberofcontracts	Jun. 30, 2017 USD ($) numberofcontracts
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	332	381	543	801
Pre-Modification Outstanding Recorded Investment	$ 13,628	$ 13,449	$ 57,044	$ 54,712
Post-Modification Outstanding Recorded Investment	$ 13,228	$ 13,368	$ 56,647	$ 54,267
Non Fha Va Residential Mortgage Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	19	48	43	88
Pre-Modification Outstanding Recorded Investment	$ 2,034	$ 9,577	$ 4,642	$ 14,227
Post-Modification Outstanding Recorded Investment	$ 1,934	$ 9,483	$ 4,548	$ 13,991
Commercial Mortgage Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	2	2	5	8
Pre-Modification Outstanding Recorded Investment	$ 5,765	$ 267	$ 42,511	$ 22,705
Post-Modification Outstanding Recorded Investment	$ 5,765	$ 267	$ 42,523	$ 22,465
Commercial And Industrial Loan [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	3	2	6	5
Pre-Modification Outstanding Recorded Investment	$ 3,453	$ 326	$ 6,050	$ 11,074
Post-Modification Outstanding Recorded Investment	$ 3,128	$ 326	$ 5,710	$ 11,074
Consumer Auto Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	76	122	121	274
Pre-Modification Outstanding Recorded Investment	$ 1,245	$ 1,926	$ 1,925	$ 4,173
Post-Modification Outstanding Recorded Investment	$ 1,239	$ 1,926	$ 1,919	$ 4,173
Finance Leases [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts		14	0	22
Pre-Modification Outstanding Recorded Investment		$ 362	$ 0	$ 548
Post-Modification Outstanding Recorded Investment		$ 362	$ 0	$ 548
Other Consumer Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	231	193	367	403
Pre-Modification Outstanding Recorded Investment	$ 1,034	$ 991	$ 1,819	$ 1,960
Post-Modification Outstanding Recorded Investment	$ 1,065	$ 1,004	$ 1,850	$ 1,988
Land Construction [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	1	0	1	1
Pre-Modification Outstanding Recorded Investment	$ 97	$ 0	$ 97	$ 25
Post-Modification Outstanding Recorded Investment	$ 97	$ 0	$ 97	$ 28

XML

LOAN PORTFOLIO - Loan Modifications Considered Troubled Debt Restructurings Defaulted (Detail) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($) numberofcontracts	Jun. 30, 2017 USD ($) numberofcontracts	Jun. 30, 2018 USD ($) numberofcontracts	Jun. 30, 2017 USD ($) numberofcontracts
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	65	53	83	78
Recorded Investment | $	$ 1,295	$ 2,786	$ 1,781	$ 3,242
Non Fha Va Residential Mortgage Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	6	19	10	22
Recorded Investment | $	$ 681	$ 2,614	$ 1,068	$ 2,891
Commercial Mortgage Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts			0	1
Recorded Investment | $			$ 0	$ 57
Consumer Auto Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	31	5	33	9
Recorded Investment | $	$ 514	$ 69	$ 537	$ 130
Other Consumer Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	28	29	39	46
Recorded Investment | $	$ 100	$ 103	$ 154	$ 164
Finance Leases [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | numberofcontracts	0	0	1	0
Recorded Investment | $	$ 0	$ 0	$ 22	$ 0

XML

LOAN PORTFOLIO - Loan Restructuring and Effect on Allowance for Loan and Lease Losses (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable Allowance For Credit Losses [Line Items]
Financing Receivable, Modifications, Recorded Investment	$ 557,196	$ 568,543	$ 557,196	$ 568,543	$ 572,376	$ 587,219	$ 602,364	$ 647,048
Charges to the provision for loan losses	19,536	18,096	40,080	43,538
Allowance for loan losses at the end of the period	222,035		222,035			231,843
Loans Split [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Financing Receivable, Modifications, Recorded Investment	64,559	36,141	64,559	36,141
Amount charged-off			1,137	0
Charges to the provision for loan losses			1,902	388
Allowance for loan losses at the end of the period	4,611	$ 5,529	4,611	$ 5,529
Accrual [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Financing Receivable, Modifications, Recorded Investment	$ 393,281		$ 393,281			$ 374,695

XML

LOAN PORTFOLIO - Narratives (Detail)	3 Months Ended
	Jun. 30, 2018
Disclosure Loan Portfolio Additional Information [Abstract]
Branches Doral	10

XML

ALLOWANCE FOR LOAN AND LEASE LOSSES - Changes in Allowance for Loan and Lease Losses (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance		$ 225,856	$ 203,231	$ 231,843	$ 205,603
Charge-offs		(27,696)	(55,488)	(57,056)	(88,382)
Recoveries		4,339	7,646	7,168	12,726
Provision For Loan Lease And Other Losses		19,536	18,096	40,080	43,538
Ending balance		222,035	173,485	222,035	173,485
Balance at end of period		49,514	40,794	49,514	40,794
Allowance for loan losses Purchased Credit Impaired		11,354	9,446	11,354	9,446
Ending balance: general allowance		161,167	123,245	161,167	123,245
Ending balance		8,640,291	8,861,176	8,640,291	8,861,176
Ending balance: impaired loans		740,134	735,625	740,134	735,625	$ 746,280	$ 790,308	$ 807,198	$ 887,905
Ending balance: purchased credit-impaired loans		152,242	160,368	152,242	160,368
Ending balance: loans with general allowance		7,747,915	7,965,183	7,747,915	7,965,183
Purchased Credit Impaired [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses Purchased Credit Impaired	[1]	11,354	9,446	11,354	9,446
Residential Mortgage [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance		56,386	35,775	58,975	33,980
Charge-offs		(5,544)	(6,967)	(8,915)	(15,192)
Recoveries		689	891	1,024	1,640
Provision For Loan Lease And Other Losses		3,599	10,888	4,046	20,159
Ending balance		55,130	40,587	55,130	40,587
Balance at end of period		19,804	13,786	19,804	13,786
Allowance for loan losses Purchased Credit Impaired		10,954		10,954
Ending balance: general allowance		24,372	17,727	24,372	17,727
Ending balance		3,238,001	3,282,307	3,238,001	3,282,307
Ending balance: impaired loans		409,085	428,711	409,085	428,711
Ending balance: purchased credit-impaired loans		148,025	156,202	148,025	156,202
Ending balance: loans with general allowance		2,680,891	2,697,394	2,680,891	2,697,394
Residential Mortgage [Member] | Purchased Credit Impaired [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses Purchased Credit Impaired	[1]	10,954	9,074	10,954	9,074
Commercial Mortgage [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance		50,393	68,468	48,493	57,261
Charge-offs		(3,897)	(30,495)	(10,707)	(31,857)
Recoveries		38	78	87	108
Provision For Loan Lease And Other Losses		2,184	525	10,845	13,064
Ending balance		48,718	38,576	48,718	38,576
Balance at end of period		12,204	8,330	12,204	8,330
Ending balance: general allowance		36,114	29,874	36,114	29,874
Ending balance		1,533,308	1,611,730	1,533,308	1,611,730
Ending balance: impaired loans		175,575	140,621	175,575	140,621
Ending balance: purchased credit-impaired loans		4,217	4,166	4,217	4,166
Ending balance: loans with general allowance		1,353,516	1,466,943	1,353,516	1,466,943
Commercial Mortgage [Member] | Purchased Credit Impaired [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses Purchased Credit Impaired	[1]	400	372	400	372
Commercial And Industrial Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance		47,659	45,970	48,871	61,953
Charge-offs		(5,110)	(6,378)	(7,040)	(18,430)
Recoveries		1,376	4,624	1,438	5,499
Provision For Loan Lease And Other Losses		75	(2,134)	731	(6,940)
Ending balance		44,000	42,082	44,000	42,082
Balance at end of period		10,592	10,788	10,592	10,788
Allowance for loan losses Purchased Credit Impaired		0		0
Ending balance: general allowance		33,408	31,294	33,408	31,294
Ending balance		2,009,049	2,116,756	2,009,049	2,116,756
Ending balance: impaired loans		111,371	74,902	111,371	74,902
Ending balance: purchased credit-impaired loans		0	0	0	0
Ending balance: loans with general allowance		1,897,678	2,041,854	1,897,678	2,041,854
Commercial And Industrial Loans [Member] | Purchased Credit Impaired [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses Purchased Credit Impaired	[1]	0	0	0	0
Construction Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance		4,122	3,886	4,522	2,562
Charge-offs		(818)	(595)	(5,995)	(658)
Recoveries		138	133	151	578
Provision For Loan Lease And Other Losses		507	312	5,271	1,254
Ending balance		3,949	3,736	3,949	3,736
Balance at end of period		1,061	2,374	1,061	2,374
Allowance for loan losses Purchased Credit Impaired		0		0
Ending balance: general allowance		2,888	1,362	2,888	1,362
Ending balance		84,683	122,093	84,683	122,093
Ending balance: impaired loans		11,261	50,557	11,261	50,557
Ending balance: purchased credit-impaired loans		0	0	0	0
Ending balance: loans with general allowance		73,422	71,536	73,422	71,536
Construction Loans [Member] | Purchased Credit Impaired [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses Purchased Credit Impaired	[1]	0	0	0	0
Consumer Loan [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance		67,296	49,132	70,982	49,847
Charge-offs		(12,327)	(11,053)	(24,399)	(22,245)
Recoveries		2,098	1,920	4,468	4,901
Provision For Loan Lease And Other Losses		13,171	8,505	19,187	16,001
Ending balance		70,238	48,504	70,238	48,504
Balance at end of period		5,853	5,516	5,853	5,516
Ending balance: general allowance		64,385	42,988	64,385	42,988
Ending balance		1,775,250	1,728,290	1,775,250	1,728,290
Ending balance: impaired loans		32,842	40,834	32,842	40,834
Ending balance: purchased credit-impaired loans		0	0	0	0
Ending balance: loans with general allowance		1,742,408	1,687,456	1,742,408	1,687,456
Consumer Loan [Member] | Purchased Credit Impaired [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses Purchased Credit Impaired	[1]	$ 0	$ 0	$ 0	$ 0

[1] Refer to Note 7- Loans Held For Investment-PCI Loans, for a detail of changes in the allowance for loan losses related to PCI loans.

XML

ALLOWANCE FOR LOAN AND LEASE LOSSES - Carrying Amount of Portfolios (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016
Accounts Notes And Loans Receivable [Line Items]
Impaired Financing Receivable With No Related Allowance Recorded Investment	$ 226,734		$ 213,046
Impaired Financing Receivable With Related Allowance Recorded Investment	513,400		577,262
Impaired Financing Receivable Related Allowance	49,514	$ 56,930	51,410	$ 40,794	$ 66,311	$ 64,421
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	152,242	155,281	158,174	160,368	163,100	165,818
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Allowance For Loan Losses	11,354	11,251	11,251	9,446	6,857	6,857
Loans With General Allowance Recorded Investment	7,747,915		7,901,994
Loans With General Allowance Related Allowance	161,167		169,182
Loans And Leases Receivable Gross Carrying Amount	8,640,291		8,850,476	8,861,176
Financing Receivable Allowance For Credit Losses	222,035	225,856	231,843	173,485	203,231	205,603
Residential Mortgage [Member]
Accounts Notes And Loans Receivable [Line Items]
Impaired Financing Receivable With No Related Allowance Recorded Investment	121,396		116,818
Impaired Financing Receivable With Related Allowance Recorded Investment	287,689		316,616
Impaired Financing Receivable Related Allowance	19,804		22,086	13,786
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	148,025		153,991	156,202
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Allowance For Loan Losses	10,954		10,873
Loans With General Allowance Recorded Investment	2,680,891		2,703,532
Loans With General Allowance Related Allowance	24,372		26,016
Loans And Leases Receivable Gross Carrying Amount	3,238,001		3,290,957	3,282,307
Financing Receivable Allowance For Credit Losses	55,130	56,386	58,975	40,587	35,775	33,980
Commercial Mortgage [Member]
Accounts Notes And Loans Receivable [Line Items]
Impaired Financing Receivable Related Allowance	12,204			8,330
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	4,217			4,166
Loans And Leases Receivable Gross Carrying Amount	1,533,308			1,611,730
Financing Receivable Allowance For Credit Losses	48,718	50,393	48,493	38,576	68,468	57,261
Commercial And Industrial Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Impaired Financing Receivable With No Related Allowance Recorded Investment	43,566		28,292
Impaired Financing Receivable With Related Allowance Recorded Investment	67,805		90,008
Impaired Financing Receivable Related Allowance	10,592		12,359	10,788
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0		0	0
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Allowance For Loan Losses	0		0
Loans With General Allowance Recorded Investment	1,897,678		1,964,953
Loans With General Allowance Related Allowance	33,408		36,512
Loans And Leases Receivable Gross Carrying Amount	2,009,049		2,083,253	2,116,756
Financing Receivable Allowance For Credit Losses	44,000	47,659	48,871	42,082	45,970	61,953
Consumer and Finance Leases [Member]
Accounts Notes And Loans Receivable [Line Items]
Impaired Financing Receivable With No Related Allowance Recorded Investment	2,780		2,788
Impaired Financing Receivable With Related Allowance Recorded Investment	30,062		35,606
Impaired Financing Receivable Related Allowance	5,853		5,165
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0		0
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Allowance For Loan Losses	0		0
Loans With General Allowance Recorded Investment	1,742,408		1,711,503
Loans With General Allowance Related Allowance	64,385		65,817
Loans And Leases Receivable Gross Carrying Amount	1,775,250		1,749,897
Financing Receivable Allowance For Credit Losses	70,238		70,982
Construction Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Impaired Financing Receivable With No Related Allowance Recorded Investment	0		48
Impaired Financing Receivable With Related Allowance Recorded Investment	11,261		47,218
Impaired Financing Receivable Related Allowance	1,061		2,017	2,374
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	0		0	0
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Allowance For Loan Losses	0		0
Loans With General Allowance Recorded Investment	73,422		64,131
Loans With General Allowance Related Allowance	2,888		2,505
Loans And Leases Receivable Gross Carrying Amount	84,683		111,397	122,093
Financing Receivable Allowance For Credit Losses	3,949	$ 4,122	4,522	$ 3,736	$ 3,886	$ 2,562
Commercial Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Impaired Financing Receivable With No Related Allowance Recorded Investment	58,992		65,100
Impaired Financing Receivable With Related Allowance Recorded Investment	116,583		87,814
Impaired Financing Receivable Related Allowance	12,204		9,783
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Carrying Amount	4,217		4,183
Certain Loans Acquired In Transfer Not Accounted For As Debt Securities Allowance For Loan Losses	400		378
Loans With General Allowance Recorded Investment	1,353,516		1,457,875
Loans With General Allowance Related Allowance	36,114		38,332
Loans And Leases Receivable Gross Carrying Amount	1,533,308		1,614,972
Financing Receivable Allowance For Credit Losses	$ 48,718		$ 48,493

XML

ALLOWANCE FOR LOAN AND LEASE LOSSES - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Financing Receivable Allowance For Credit Losses [Line Items]
Reserve for unfunded loan commitments	$ 200		$ 200		$ 700
Loans And Leases Receivable Gross Carrying Amount	8,640,291	$ 8,861,176	8,640,291	$ 8,861,176	8,850,476
Provision For Loan And Lease Losses	19,536	18,096	40,080	43,538
Commercial And Industrial [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Loans And Leases Receivable Gross Carrying Amount	2,009,049		2,009,049		2,083,253
Decrease Increase In Provision	(1,600)
Construction Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Loans And Leases Receivable Gross Carrying Amount	84,683		84,683		111,397
Commercial Portfolio Segment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Loans And Leases Receivable Gross Carrying Amount	3,627,040		3,627,040		3,809,622
Residential Mortgage [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Loans And Leases Receivable Gross Carrying Amount	3,238,001		3,238,001		3,290,957
Consumer Loan [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Loans And Leases Receivable Gross Carrying Amount	636,020		636,020		648,104
Decrease Increase In Provision	1,600
Commercial And Industrial Sector [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Loans And Leases Receivable Gross Carrying Amount	2,009,049		2,009,049		2,083,253
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Loans And Leases Receivable Gross Carrying Amount	1,533,308		1,533,308		1,614,972
Residential Mortgage [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Loans And Leases Receivable Gross Carrying Amount	$ 3,238,001	$ 3,282,307	$ 3,238,001	$ 3,282,307	$ 3,290,957

XML

LOANS HELD FOR SALE - Portfolio of Loans Held for Sale (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accounts Notes And Loans Receivable [Line Items]
Total	$ 80,815	$ 32,980
Residential Mortgage [Member]
Accounts Notes And Loans Receivable [Line Items]
Residential mortgage loans	26,269	24,690
Construction Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Construction loans	37,732	8,290
Commercial Mortgage [Member]
Accounts Notes And Loans Receivable [Line Items]
Commercial Mortgage loans	$ 16,814	$ 0

XML

LOANS HELD FOR SALE - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Accounts Notes And Loans Receivable [Line Items]
Loans held for sale	$ 80,815	$ 80,815		$ 32,980
Non-performing loan sold previously reclassified to Loans Held For Sale	$ 10,400
Transfer Of Loans Held For Sale To Portfolio Loans 1		$ 385	$ 10,206

XML

OTHER REAL ESTATE OWNED- Other real estate owned (Detail) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Other Real Estate And Foreclosed Assets [Line Items]
Other real estate owned		$ 143,355	$ 147,940
Residential Real Estate [Member]
Other Real Estate And Foreclosed Assets [Line Items]
Other real estate owned	[1]	57,579	54,381
Commercial Real Estate [Member]
Other Real Estate And Foreclosed Assets [Line Items]
Other real estate owned		75,844	82,871
Construction Real Estate [Member]
Other Real Estate And Foreclosed Assets [Line Items]
Other real estate owned		$ 9,932	$ 10,688

[1] Excludes $14.5 million and $21.3 million as of June 30, 2018 and December 31, 2017, respectively, of foreclosures that meet the conditions of ASC Topic 310-40 and are presented as a receivable (other assets) in the statement of financial condition.

XML

OTHER REAL ESTATE OWNED- Additional information (Detail) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Other Real Estate And Foreclosed Assets [Abstract]
Transfers From Loans to Other Receivable	$ 14.5	$ 21.3

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Notional Amounts of All Derivative Instruments (Detail) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Economic undesignated hedges:
Notional amount of derivatives	[1]	$ 216,324	$ 208,020
Nondesignated [Member] | Interest Rate Cap [Member] | Purchase
Economic undesignated hedges:
Notional amount of derivatives	[1]	90,010	91,010
Nondesignated [Member] | Interest Rate Cap [Member] | Written
Economic undesignated hedges:
Notional amount of derivatives	[1]	90,010	91,010
Nondesignated [Member] | Forward Contracts [Member]
Economic undesignated hedges:
Notional amount of derivatives	[1]	30,000	26,000
Designated as Hedging Instrument [Member] | Forward Contracts [Member]
Economic undesignated hedges:
Notional amount of derivatives		$ 6,304	$ 0

[1] Notional amounts are presented on a gross basis with no netting of offsetting exposure positions.

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Fair Value of Derivative Instruments and Location in Statement of Financial Condition (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Derivatives Fair Value [Line Items]
Derivatives, included in assets	$ 806	$ 312
Derivatives, included in liabilities	921	324
Other Assets [Member] | Interest Rate Cap [Member] | Purchase
Derivatives Fair Value [Line Items]
Derivatives, included in assets	799	305
Other Assets [Member] | Interest Rate Cap [Member] | Written
Derivatives Fair Value [Line Items]
Derivatives, included in assets	0	0
Other Assets [Member] | Forward Contracts [Member]
Derivatives Fair Value [Line Items]
Derivatives, included in assets	7	7
Other Assets [Member] | Forward Contracts [Member] | Designated as Hedging Instrument [Member]
Derivatives Fair Value [Line Items]
Derivatives, included in assets	0	0
Other Liabilities [Member] | Interest Rate Cap [Member] | Purchase
Derivatives Fair Value [Line Items]
Derivatives, included in liabilities	0	0
Other Liabilities [Member] | Interest Rate Cap [Member] | Written
Derivatives Fair Value [Line Items]
Derivatives, included in liabilities	799	305
Other Liabilities [Member] | Forward Contracts [Member]
Derivatives Fair Value [Line Items]
Derivatives, included in liabilities	122	19
Other Liabilities [Member] | Forward Contracts [Member] | Designated as Hedging Instrument [Member]
Derivatives Fair Value [Line Items]
Derivatives, included in liabilities	$ 0	$ 0

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Effect of Derivative Instruments on Statement of Income (Loss) (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Economic undesignated hedges:
Total gain (loss) on derivatives	$ (51)	$ 364	$ (103)	$ 307
Interest Rate Cap [Member]
Economic undesignated hedges:
Total gain (loss) on derivatives	0	0	0	(1)
Mortgage Banking Activities [Member] | Forward Contracts [Member]
Economic undesignated hedges:
Total gain (loss) on derivatives	(51)	364	(103)	308
Mortgage Banking Activities [Member] | Forward Contracts [Member] | Designated as Hedging Instrument [Member]
Economic undesignated hedges:
Total gain (loss) on derivatives	$ 0	$ 0	$ 0	$ 0

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Interest Rate Swaps (Detail) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Pay fixed/receive floating :
Notional amount	[1]	$ 216,324	$ 208,020

[1] Notional amounts are presented on a gross basis with no netting of offsetting exposure positions.

XML

OFFESTTING OF ASSETS AND LIABILITIES - Offsetting of financial assets and liabilities (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Offsetting [Abstract]
Gross amount recognized of derivative asset	$ 799	$ 305
Gross amount of derivatives assets offset	0	0
Net asset amount of assets presented in the Statement of Financial Condition	799	305
Obligation to return Financial instrument, derivatives assets	(29)	(305)
Obligation to return Cash Collateral, derivative assets	(770)	0
Net derivative asset amount not offset	0	0
Gross amount recognized of repurchase agreements	400,000	500,000
Gross amount of repurchase agreements offset	(200,000)	(200,000)
Net repurchase agreements amount offset presented	200,000	300,000
Right to claim Financial instrument, repurchase agreements	200,000	300,000
Right to claim Cash Collateral, repurchase agreements	0	0
Net repurchase agreements amount not offset	0	0
Securities Purchased Under Agreements To Resell Gross	200,000	200,000
Securities Purchased Under Agreements To Resell Liability	(200,000)	(200,000)
Securities Purchased Under Agreements To Resell Not Offset	0	0
Securities Purchased Under Agreements To Resell Collateral Obligation To Return Securities	0	0
Securities Purchased Under Agreements To Resell Collateral Obligation To Return Cash	0	0
Securities Purchased Under Agreements To Resell Amount Offset Against Collateral	0	0
Derivative Asset Securities Purchased Under Agreements To Resell Securities Borrowed Gross	200,799	200,305
Derivative Asset Securities Purchased Under Agreements To Resell Securities Borrowed Liability	(200,000)	(200,000)
Derivative Asset Securities Purchased Under Agreements To Resell Securities Borrowed Liability Not Offset	799	305
Derivative Asset Securities Purchased Under Agreements To Resell Securities Borrowed Collateral Obligation To Return Securities	(29)	(305)
Derivative Asset Securities Purchased Under Agreements To Resell Securities Borrowed Collateral Obligation To Return Cash	770	0
Derivative Asset Securities Purchased Under Agreements To Resell Securities Borrowed Amount Offset Against Collateral	$ 0	$ 0

XML

GOODWILL AND OTHER INTANGIBLES - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Jun. 30, 2012
Finite Lived Intangible Assets [Line Items]
Goodwill	$ 28,100,000		$ 28,100,000		$ 28,100,000
Purchase credit card relationship intangible amount						$ 24,500,000
Amortization expense			1,868,000	$ 2,242,000
Business Combination Finite Lived Intangible Assets Net	3,400,000		3,400,000
Purchased Credit Card Relationship Intangible [Member]
Finite Lived Intangible Assets [Line Items]
Purchase credit card relationship intangible amount	$ 24,465,000		24,465,000		$ 24,465,000
Amortization period of purchased credit card relationship intangible	3 years 3 months 18 days				3 years 10 months 24 days
Amortization expense	$ 600,000	$ 600,000	1,100,000	1,300,000
Core Deposits [Member]
Finite Lived Intangible Assets [Line Items]
Purchase credit card relationship intangible amount	$ 51,664,000		51,664,000		$ 51,664,000
Amortization period of purchased credit card relationship intangible	6 years 6 months				7 years
Amortization expense	$ 200,000	500,000	600,000	900,000
Customer Related Intangible Assets [Member]
Finite Lived Intangible Assets [Line Items]
Purchase credit card relationship intangible amount	$ 1,067,000		1,067,000		$ 1,067,000
Amortization period of purchased credit card relationship intangible	4 years 6 months				5 years
Amortization expense	$ 38,000	$ 38,000	$ 76,000	$ 76,000

XML

GOODWILL AND OTHER INTANGIBLES - Gross Amount and Accumulated Amortization of Other Intangible Assets (Detail) - USD ($) $ in Thousands		3 Months Ended	12 Months Ended
		Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2012
Finite Lived Intangible Assets [Line Items]
Gross amount				$ 24,500
Goodwill And Intangible Assets Disclosure [Abstract]
Finite Lived Intangible Assets Amortization Expense Year Two		$ 3,088
Finite Lived Intangible Assets Amortization Expense Year Three		2,851
Finite Lived Intangible Assets Amortization Expense Year Four		2,658
Finite Lived Intangible Assets Amortization Expense After Year Five		1,150
Finite Lived Intangible Assets Amortization Expense Remainder Of Fiscal Year		1,723
Finite Lived Intangible Assets Amortization Expense Year Five		915
Core Deposits [Member]
Finite Lived Intangible Assets [Line Items]
Gross amount		51,664	$ 51,664
Finite lived Intangible Assets Acquired 1			0
Accumulated amortization	[1]	(46,829)	(46,186)
Net carrying amount		$ 4,835	$ 5,478
Remaining amortization period		6 years 6 months	7 years
Purchased Credit Card Relationship Intangible [Member]
Finite Lived Intangible Assets [Line Items]
Gross amount		$ 24,465	$ 24,465
Accumulated amortization	[2]	(17,614)	(16,465)
Net carrying amount		$ 6,851	$ 8,000
Remaining amortization period		3 years 3 months 18 days	3 years 10 months 24 days
Customer Related Intangible Assets [Member]
Finite Lived Intangible Assets [Line Items]
Gross amount		$ 1,067	$ 1,067
Accumulated amortization	[3]	(368)	(292)
Net carrying amount		$ 699	$ 775
Remaining amortization period		4 years 6 months	5 years

[1] For the quarter and six-month period ended June 30, 2018, the amortization expense of core deposit intangibles amounted to $0.2 million and $0.6 million, respectively (2017 - $0.5 million and $0.9 million, respectively).

[2] For the quarter and six-month period ended June 30, 2018, the amortization expense of the purchased credit card relationship intangible amounted to $0.6 million and $1.1 million, respectively (2017 - $0.6 million and $1.3 million, respectively).

[3] For the quarter and six-month period ended June 30, 2018, the amortization expense of insurance customer relationship intangible amounted to $38 thousand and $76 thousand, respectively (2017 - $38 thousand and $76 thousand, respectively).

XML

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - additional Information (Detail) - USD ($) $ in Millions	1 Months Ended			3 Months Ended
	Feb. 16, 2011	Sep. 30, 2004	Apr. 30, 2004	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2016
Servicing Liabilities At Fair Value [Line Items]
Principal amount of corporation serviced loans securitized through GNMA				$ 1.7
Balance of amortization with third party				20.6
Carrying value with third party				$ 15.1
Percentage of weighted average yield with third party				4.51%
Maturity period of loan acquired	7 years			3 years
Payment to be made on pro rata basis				65.00%
Interest Expense Accrued Trust Preferred Securities						$ 31.2
Maximum [Member]
Servicing Liabilities At Fair Value [Line Items]
Percentage of variation in assumptions				20.00%
Minimum [Member]
Servicing Liabilities At Fair Value [Line Items]
Percentage of variation in assumptions				10.00%
Mortgage pass through trust certificates [Member]
Servicing Liabilities At Fair Value [Line Items]
Debt Instrument Description Of Variable Rate Basis				90-day LIBOR
Fbp Statutory Trust One [Member]
Servicing Liabilities At Fair Value [Line Items]
Variable rate trust preferred securities			$ 100.0
Proceeds of the issuance, together with proceeds of the purchase			3.1
Principal amount of corporation's junior subordinated deferrable debentures			$ 103.1
Trust Preferred Securities Repurchases					$ 23.8
Trust Preferred Securties Discount					10.00%
Fbp Statutory Trust Two [Member]
Servicing Liabilities At Fair Value [Line Items]
Variable rate trust preferred securities		$ 125.0
Proceeds of the issuance, together with proceeds of the purchase		3.9
Principal amount of corporation's junior subordinated deferrable debentures		$ 128.9
Cpg Gs [Member]
Servicing Liabilities At Fair Value [Line Items]
Loans Sold to CPG	$ 269.3
Cash realized on sale of loan	88.5
Loans acquired on exchange of loan held for sale	$ 136.1
Carrying amount of loan provided				$ 10.6
Prlp [Member]
Servicing Liabilities At Fair Value [Line Items]
Percentage of priority interest to be received on invested capital				12.00%
Payment to be made on pro rata basis				35.00%
FirstBank [Member]
Servicing Liabilities At Fair Value [Line Items]
Acquired Equity interest on disposal of loans held for sale	35.00%

XML

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Income Statement Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Variable Interest Entity [Line Items]
Revenues	$ 150,943		$ 298,420
Net income	$ 31,032	$ 27,998	$ 64,180	$ 53,539

XML

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Changes in Servicing Assets (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Servicing Assets At Amortized Value [Line Items]
Balance at beginning of period		$ 26,135	$ 26,330	$ 25,255	$ 26,244
Capitalization of servicing assets		1,138	1,049	2,025	1,924
Amortization		(729)	(779)	(1,466)	(1,567)
Adjustment To Servicing Assets For Loans Repurchased	[1]	30	99	47	258
Adjustment to fair value		617	(197)	1,330	(357)
Balance at end of period		$ 27,191	$ 26,502	$ 27,191	$ 26,502

[1] Amount represents the adjustment to fair value related to the repurchase of loans serviced for others.

XML

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Changes in Impairment Allowance (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Valuation Allowance For Impairment Of Recognized Servicing Assets [Line Items]
Balance at beginning of period	$ 673	$ 0	$ 1,451	$ 461
Temporary impairment charges	20	197	37	357
OTTI of servicing assets	0	0	(65)	(621)
Recoveries	(637)	0	(1,367)	0
Balance at end of period	$ 56	$ 197	$ 56	$ 197

XML

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Components of Net Servicing Income (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Servicing fees		$ 2,058	$ 1,975	$ 4,178	$ 3,999
Late charges and prepayment penalties		146	138	266	237
All Other Fees	[1]	0	(28)	0	(35)
Adjustment To Servicing Assets For Loans Repurchased	[2]	30	99	47	258
Servicing income, gross		2,234	2,184	4,491	4,459
Amortization and impairment of servicing assets		(112)	(977)	(136)	(1,925)
Servicing income, net		$ 2,122	$ 1,207	$ 4,355	$ 2,534

[1]

[2] Amount represents the adjustment to fair value related to the repurchase of loans serviced for others.

XML

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Key Economic Assumptions Used in Determining Fair Value at Time of Sale of Loans (Detail)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Government Guaranteed Mortgage Loans [Member] | Maximum [Member]
Assumption For Fair Value On Securitization Date Of Interests Continued To Be Held By Transferor Servicing Assets Or Liabilities [Line Items]
Constant prepayment rate	5.70%	6.00%
Discount rate	12.00%	12.00%
Government Guaranteed Mortgage Loans [Member] | Minimum [Member]
Assumption For Fair Value On Securitization Date Of Interests Continued To Be Held By Transferor Servicing Assets Or Liabilities [Line Items]
Constant prepayment rate	5.60%	6.00%
Discount rate	12.00%	12.00%
Conventional Loan [Member] | Maximum [Member]
Assumption For Fair Value On Securitization Date Of Interests Continued To Be Held By Transferor Servicing Assets Or Liabilities [Line Items]
Constant prepayment rate	6.30%	6.40%
Discount rate	10.00%	10.00%
Conventional Loan [Member] | Minimum [Member]
Assumption For Fair Value On Securitization Date Of Interests Continued To Be Held By Transferor Servicing Assets Or Liabilities [Line Items]
Constant prepayment rate	6.20%	6.30%
Discount rate	10.00%	10.00%
Conventional Non Conforming Mortgage Loans [Member] | Maximum [Member]
Assumption For Fair Value On Securitization Date Of Interests Continued To Be Held By Transferor Servicing Assets Or Liabilities [Line Items]
Constant prepayment rate	9.60%	9.50%
Discount rate	14.30%	14.30%
Conventional Non Conforming Mortgage Loans [Member] | Minimum [Member]
Assumption For Fair Value On Securitization Date Of Interests Continued To Be Held By Transferor Servicing Assets Or Liabilities [Line Items]
Constant prepayment rate	9.10%	9.10%
Discount rate	14.30%	14.30%

XML

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Weighted-Averages of Key Economic Assumptions in Valuation Model (Detail) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016
Carrying amount of servicing assets	$ 27,191	$ 26,135	$ 25,255	$ 26,502	$ 26,330	$ 26,244
Fair value	$ 31,953
Weighted-average expected life	8 years 5 months 19 days
Constant prepayment rate	6.41%
Decrease in fair value due to 10% adverse change	$ 731
Decrease in fair value due to 20% adverse change	$ 1,433
Discount rate	11.22%
Decrease in fair value due to 10% adverse change	$ 1,603
Decrease in fair value due to 20% adverse change	$ 3,067

XML

DEPOSITS - Summary of Deposit Balances (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Deposits [Line Items]
Non-interest bearing checking accounts	$ 2,317,149	$ 1,833,665
Savings accounts	2,360,345	2,401,385
Interest-bearing checking accounts	1,328,540	1,207,511
Certificates of deposit	2,389,383	2,429,585
Brokered certificates of deposit	822,666	1,150,485
Total deposits	$ 9,218,083	$ 9,022,631

XML

DEPOSITS - Brokered Certificates Of Deposit Mature (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Deposits [Line Items]
Interest Bearing Domestic Deposit Brokered	$ 822,666	$ 1,150,485
One to ninety days
Deposits [Line Items]
Interest Bearing Domestic Deposit Brokered	148,917
Over three month to six months
Deposits [Line Items]
Interest Bearing Domestic Deposit Brokered	180,053
Over six months to one year
Deposits [Line Items]
Interest Bearing Domestic Deposit Brokered	128,815
One to three year
Deposits [Line Items]
Interest Bearing Domestic Deposit Brokered	284,747
Three to five years
Deposits [Line Items]
Interest Bearing Domestic Deposit Brokered	78,753
Over five years
Deposits [Line Items]
Interest Bearing Domestic Deposit Brokered	$ 1,381

XML

DEPOSITS - Components of Interest Expense on Deposits (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Deposits [Line Items]
Interest expense on deposits	$ 16,667	$ 15,883	$ 33,274	$ 31,351
Accretion Of Premium From Acquisitions	(2)	(15)	(5)	(38)
Amortization of broker placement fees	309	480	676	1,007
Interest expense on deposits	$ 16,974	$ 16,348	$ 33,945	$ 32,320

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Securities Sold Under Agreements to Repurchase (Detail) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Repurchase agreements	[1],[2]	$ 200,000	$ 300,000
long term debt [member]
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Repurchase agreements		200,000	200,000
short term debt [member]
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Repurchase agreements		$ 0	$ 100,000

[1] As of June 30, 2018, includes $200 million with an average rate of 2.11% that lenders have the right to call before their contractual maturities at various dates beginning on July 19, 2018. Subsequent to June 30, 2018, no lender has exercised its call option on repurchase agreements.

[2] Reported net of securities purchased under agreements to repurchase (reverse repurchase agreements) by counterparty, when applicable, pursuant to Topic ASC 210-20-45-11.

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Securities Sold Under Agreements to Repurchase (Parenthetical) (Detail) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Securities sold under agreements to repurchase	[1],[2]	$ 200,000	$ 300,000
long term debt [member]
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Securities sold under agreements to repurchase		200,000	$ 200,000
short term debt [member]
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Assets sold under agreements to repurchase interest rate			0.0153%
Securities sold under agreements to repurchase		0	$ 100,000
Callable Repurchase Agreements [Member]
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Securities sold under agreements to repurchase		$ 200,000
Maximum [Member] | long term debt [member]
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Assets sold under agreements to repurchase interest rate		2.26%
Minimum [Member] | long term debt [member]
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Assets sold under agreements to repurchase interest rate		1.96%
Weighted Average [Member] | Callable Repurchase Agreements [Member]
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Assets sold under agreements to repurchase interest rate		2.11%

[1] As of June 30, 2018, includes $200 million with an average rate of 2.11% that lenders have the right to call before their contractual maturities at various dates beginning on July 19, 2018. Subsequent to June 30, 2018, no lender has exercised its call option on repurchase agreements.

[2] Reported net of securities purchased under agreements to repurchase (reverse repurchase agreements) by counterparty, when applicable, pursuant to Topic ASC 210-20-45-11.

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Schedule of Repurchase Agreement Maturity (Detail) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Repurchase Agreement [Line Items]
Securities Sold Under Agreements To Repurchase	[1],[2]	$ 200,000	$ 300,000
Maturity Over Three to Four Years [Member]
Repurchase Agreement [Line Items]
Securities Sold Under Agreements To Repurchase		$ 200,000

[1] As of June 30, 2018, includes $200 million with an average rate of 2.11% that lenders have the right to call before their contractual maturities at various dates beginning on July 19, 2018. Subsequent to June 30, 2018, no lender has exercised its call option on repurchase agreements.

[2] Reported net of securities purchased under agreements to repurchase (reverse repurchase agreements) by counterparty, when applicable, pursuant to Topic ASC 210-20-45-11.

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Schedule of Repurchase Agreement Maturity (Parenthetical) (Detail) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Repurchase Agreement [Line Items]
Securities Sold Under Agreements To Repurchase	[1],[2]	$ 200,000	$ 300,000

[1] As of June 30, 2018, includes $200 million with an average rate of 2.11% that lenders have the right to call before their contractual maturities at various dates beginning on July 19, 2018. Subsequent to June 30, 2018, no lender has exercised its call option on repurchase agreements.

[2] Reported net of securities purchased under agreements to repurchase (reverse repurchase agreements) by counterparty, when applicable, pursuant to Topic ASC 210-20-45-11.

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Repurchase Agreements Grouped by Counterparty (Detail) - USD ($) $ in Thousands		3 Months Ended
		Jun. 30, 2018	Dec. 31, 2017
Repurchase Agreement Counterparty [Line Items]
Repurchase agreements, interest ranging from 2.45% to 3.39% (December 31, 2011 - 2.50% to 4.40%) (1)	[1],[2]	$ 200,000	$ 300,000
Jp Morgan Chase [Member]
Repurchase Agreement Counterparty [Line Items]
Repurchase agreements, interest ranging from 2.45% to 3.39% (December 31, 2011 - 2.50% to 4.40%) (1)		$ 200,000
Weighted-Average Maturity		3 years 7 months 6 days

[1] As of June 30, 2018, includes $200 million with an average rate of 2.11% that lenders have the right to call before their contractual maturities at various dates beginning on July 19, 2018. Subsequent to June 30, 2018, no lender has exercised its call option on repurchase agreements.

[2] Reported net of securities purchased under agreements to repurchase (reverse repurchase agreements) by counterparty, when applicable, pursuant to Topic ASC 210-20-45-11.

XML

ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) - Summary of Advances from FHLB (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Short Term Debt [Line Items]
Fixed-rate advances from FHLB	$ 715,000	$ 715,000
long term debt [member]
Short Term Debt [Line Items]
Fixed-rate advances from FHLB	$ 715,000	$ 715,000

XML

ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) - Summary of Advances from FHLB (Parenthetical) (Detail)	Jun. 30, 2018	Dec. 31, 2017
Weighted Average [Member] | long term debt [member]
Short Term Debt [Line Items]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Interest Rate at Period End	1.91%	1.91%

XML

ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) - Advances from FHLB Mature (Detail) $ in Thousands	Jun. 30, 2018 USD ($)
One to thirty days
Federal Home Loan Bank Advances Branch Of F H L B Bank [Line Items]
Federal Home Loan Bank Advances	$ 25,000
Over one to three years
Federal Home Loan Bank Advances Branch Of F H L B Bank [Line Items]
Federal Home Loan Bank Advances	420,000
Over three months to six months
Federal Home Loan Bank Advances Branch Of F H L B Bank [Line Items]
Federal Home Loan Bank Advances	70,000
Over three years to five years
Federal Home Loan Bank Advances Branch Of F H L B Bank [Line Items]
Federal Home Loan Bank Advances	$ 200,000

XML

ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) - Additional Information (Detail) $ in Billions	Jun. 30, 2018 USD ($)
Federal Home Loan Bank Advances Branch Of F H L B Bank [Line Items]
Credit facility based on collateral pledged	$ 491.6

XML

OTHER BORROWINGS - Components of Other Borrowings (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Junior subordinated debentures due in 2034	$ 184,150	$ 208,635
Junior Subordinated Debentures Bearing Interest At Floating Rate Of Two Point Seventy Five [Member]
Debt Instrument [Line Items]
Junior subordinated debentures due in 2034	65,593	90,078
Junior Subordinated Debentures Bearing Interest At Floating Rate Of Two Point Fifty Percent [Member]
Debt Instrument [Line Items]
Junior subordinated debentures due in 2034	$ 118,557	$ 118,557

XML

OTHER BORROWINGS - Components of Other Borrowings (Parenthetical) (Detail)	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Junior Subordinated Debentures Bearing Interest At Floating Rate Of Two Point Seventy Five [Member]
Debt Instrument [Line Items]
Floating Interest rate on junior subordinated debentures	5.08%	5.08%	4.35%
Subordinated Borrowing Due Date	Jun. 17, 2034	Jun. 17, 2034
Callable step-rate notes rate	2.75%
Junior Subordinated Debentures Bearing Interest At Floating Rate Of Two Point Fifty Percent [Member]
Debt Instrument [Line Items]
Floating Interest rate on junior subordinated debentures	4.82%	4.82%	4.12%
Subordinated Borrowing Due Date	Sep. 20, 2034	Sep. 20, 2034
Callable step-rate notes rate	2.50%

XML

STOCKHOLDERS' EQUITY - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2018	Jun. 30, 2017	May 10, 2017
Class Of Stock [Line Items]
Common stock, shares authorized	2,000,000,000	2,000,000,000	2,000,000,000
Common stock, par value	$ 0.1	$ 0.1	$ 0.1
Common stock, shares issued	221,724,062	220,382,343	221,724,062
Common stock, shares outstanding	217,185,449	216,278,040	217,185,449
Granted shares of restricted stock			342,439
Corporation has authorized shares of preferred stock	50,000,000	50,000,000	50,000,000
Preferred stock, par value	$ 1		$ 1
Stock repurchase plan treasury stock	4,538,613	4,104,303	4,538,613
Legal surplus reserve rate			10.00%
Original amount contributed in percentage			20.00%
Repurchased of common stock			424,810	326,653
Liquidation value per share	$ 25		$ 25
Legal surplus reserve amount	$ 59,693	$ 59,693	$ 59,693
Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Nonvested Number	1,063,085	1,816,968	1,063,085
Legal Surplus Amount Additions		$ 7,300
Shares Used To Cover Strike Price	555,328
Common stock issued for exercised warrants	730,571
Purchase Of Common Stock Warrants Exercise	1,285,899		1,285,899
Omnibus Plan [Member]
Class Of Stock [Line Items]
Restricted stock available for issuance	6,956,802		6,956,802
Restricted Stock [Member]
Class Of Stock [Line Items]
Repurchased of common stock			328,433	235,680
Department Of Treasury [Member]
Class Of Stock [Line Items]
Secondary Offering Of Common Stock					10,291,553
Series A Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock dividend rate percentage			7.125%
Series B Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock dividend rate percentage			8.35%
Series C Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock dividend rate percentage			7.40%
Series D Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock dividend rate percentage			7.25%
Series E Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock dividend rate percentage			7.00%

XML

STOCKHOLDERS' EQUITY - Exchange offer with respect to Series A through E preferred stock (Detail) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Class Of Stock [Line Items]
Liquidation value per share	$ 25
Preferred stock, shares outstanding	1,444,146	1,444,146
Preferred Stock Value	$ 36,104	$ 36,104
Series A Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock dividend rate percentage	7.125%
Series B Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock dividend rate percentage	8.35%
Series C Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock dividend rate percentage	7.40%
Series D Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock dividend rate percentage	7.25%
Series E Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock dividend rate percentage	7.00%

XML

INCOME TAXES - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Income Tax Contingency [Line Items]
Percentage of dividend received deduction from controlled subsidiaries			100.00%
Percentage of dividend received from other taxable domestic corporations			85.00%
Income tax expense	$ 10,159	$ 9,290	$ 17,917	$ 1,217
Minimum percentage of bank net taxable income for paying Income tax at normal rate			20.00%
Effective Tax Rate Pretax Losses			25.00%	24.00%
Effective Income Tax Rate Continuing Operations			24.00%	14.00%
Effective Income Tax Rate Excluding Discrete Items			25.00%
Puerto Rico [Member]
Income Tax Contingency [Line Items]
Statute of limitations under income tax act			4 years
United States [Member]
Income Tax Contingency [Line Items]
Statute of limitations under income tax act			3 years
Virgin Islands [Member]
Income Tax Contingency [Line Items]
Statute of limitations under income tax act			3 years
FirstBank [Member]
Income Tax Contingency [Line Items]
Valuation allowance	$ 144,600		$ 144,600		$ 150,700
Deferred Tax Assets Net					$ 294,700

XML

OTHER COMPREHENSIVE INCOME - Change in Accumulated Other Comprehensive Loss by Component (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Available For Sale Securities [Abstract]
Beginning balance	$ (44,662)	$ (23,688)	$ (20,608)	$ (34,383)
Other comprehensive (loss) income	(7,445)	9,434	(31,499)	7,898
Amounts reclassified from accumulated comprehensive loss	0	371	0	(11,860)
Ending balance	(52,107)	(14,625)	(52,107)	(14,625)
Equity Securities Gross Unrealized Gain Loss [Abstract]
Beginning balance	0	(6)	(6)	(7)
Amount Reclassified Out Of Accumulated Other Comprehensive Income Loss Per ASU 2016 01	0	0	6	0
Other comprehensive income	0	2	0	3
Ending balance	$ 0	$ (4)	$ 0	$ (4)

XML

OTHER COMPREHENSIVE INCOME - Reclassifications Out of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gain on sale of investments	$ 0	$ 371	$ 0	$ 371
Total before tax	41,191	37,288	82,097	54,756
Income tax	10,159	9,290	17,917	1,217
Total, net of tax	31,032	27,998	64,180	53,539
Accumulated Other-than-Temporary Impairment Attributable to Parent [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities	0	0	0	(12,231)
Available For Sale Securities Gross Realized Gain Loss Net [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gain on sale of investments	0	371	0	371
Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total before tax	0	371	0	(11,860)
Income tax	0	0	0	0
Total, net of tax	$ 0	$ 371	$ 0	$ (11,860)

XML

FAIR VALUE - Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Securities available for sale
Investment securities available for sale	$ 2,036,010,000	$ 1,891,016,000
Derivatives, included in assets:
Derivatives, included in assets	806,000	312,000
Derivatives, included in liabilities:
Derivatives, included in liabilities	921,000	324,000
Forward Contracts [Member]
Derivatives, included in liabilities:
Derivatives, included in liabilities	122,000	19,000
Equity Securities [Member]
Securities available for sale
Investment securities available for sale	0	418,000
U S Treasury Securities [Member]
Securities available for sale
Investment securities available for sale	57,399,000	7,401,000
Us Government Agencies Debt Securities Noncallable [Member]
Securities available for sale
Investment securities available for sale	311,367,000	361,971,000
Us Government Agencies Debt Securities Callable [Member]
Securities available for sale
Investment securities available for sale	1,645,340,000	1,497,253,000
US States And Political Subdivisions Member [Member]
Securities available for sale
Investment securities available for sale	6,843,000	6,813,000
Private Label Mbs [Member]
Securities available for sale
Investment securities available for sale	15,061,000	17,060,000
Interest Rate Cap [Member] | Purchase
Derivatives, included in assets:
Derivatives, included in assets	799,000	305,000
Interest Rate Cap [Member] | Written
Derivatives, included in liabilities:
Derivatives, included in liabilities	799,000	305,000
Forward And Future Contracts [Member] | Purchase
Derivatives, included in assets:
Derivatives, included in assets	7,000	7,000
Other Available For Sale Securities [Member]
Securities available for sale
Investment securities available for sale	0	100,000
Other investments [Member]
other investment
Other investments	412,000	0
Fair Value Inputs Level 1 [Member] | Forward Contracts [Member]
Derivatives, included in liabilities:
Derivatives, included in liabilities	0	0
Fair Value Inputs Level 1 [Member] | Equity Securities [Member]
Securities available for sale
Investment securities available for sale	0	418,000
Fair Value Inputs Level 1 [Member] | U S Treasury Securities [Member]
Securities available for sale
Investment securities available for sale	57,399,000	7,401,000
Fair Value Inputs Level 1 [Member] | Us Government Agencies Debt Securities Noncallable [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 1 [Member] | Us Government Agencies Debt Securities Callable [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 1 [Member] | US States And Political Subdivisions Member [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 1 [Member] | Private Label Mbs [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 1 [Member] | Interest Rate Cap [Member] | Purchase
Derivatives, included in assets:
Derivatives, included in assets	0	0
Fair Value Inputs Level 1 [Member] | Interest Rate Cap [Member] | Written
Derivatives, included in liabilities:
Derivatives, included in liabilities	0	0
Fair Value Inputs Level 1 [Member] | Forward And Future Contracts [Member] | Purchase
Derivatives, included in assets:
Derivatives, included in assets	0	0
Fair Value Inputs Level 1 [Member] | Other Available For Sale Securities [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 1 [Member] | Other investments [Member]
other investment
Other investments	412,000	0
Fair Value Inputs Level 2 [Member] | Forward Contracts [Member]
Derivatives, included in liabilities:
Derivatives, included in liabilities	122,000	19,000
Fair Value Inputs Level 2 [Member] | Equity Securities [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 2 [Member] | U S Treasury Securities [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 2 [Member] | Us Government Agencies Debt Securities Noncallable [Member]
Securities available for sale
Investment securities available for sale	311,367,000	361,971,000
Fair Value Inputs Level 2 [Member] | Us Government Agencies Debt Securities Callable [Member]
Securities available for sale
Investment securities available for sale	1,645,340,000	1,497,253,000
Fair Value Inputs Level 2 [Member] | US States And Political Subdivisions Member [Member]
Securities available for sale
Investment securities available for sale	4,075,000	4,118,000
Fair Value Inputs Level 2 [Member] | Private Label Mbs [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 2 [Member] | Interest Rate Cap [Member] | Purchase
Derivatives, included in assets:
Derivatives, included in assets	799,000	305,000
Fair Value Inputs Level 2 [Member] | Interest Rate Cap [Member] | Written
Derivatives, included in liabilities:
Derivatives, included in liabilities	799,000	305,000
Fair Value Inputs Level 2 [Member] | Forward And Future Contracts [Member] | Purchase
Derivatives, included in assets:
Derivatives, included in assets	7,000	7,000
Fair Value Inputs Level 2 [Member] | Other Available For Sale Securities [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 2 [Member] | Other investments [Member]
other investment
Other investments	0	0
Fair Value Inputs Level 3 [Member] | Forward Contracts [Member]
Derivatives, included in liabilities:
Derivatives, included in liabilities	0	0
Fair Value Inputs Level 3 [Member] | Equity Securities [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 3 [Member] | U S Treasury Securities [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 3 [Member] | Us Government Agencies Debt Securities Noncallable [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 3 [Member] | Us Government Agencies Debt Securities Callable [Member]
Securities available for sale
Investment securities available for sale	0	0
Fair Value Inputs Level 3 [Member] | US States And Political Subdivisions Member [Member]
Securities available for sale
Investment securities available for sale	2,768,000	2,695,000
Fair Value Inputs Level 3 [Member] | Private Label Mbs [Member]
Securities available for sale
Investment securities available for sale	15,061,000	17,060,000
Fair Value Inputs Level 3 [Member] | Interest Rate Cap [Member] | Purchase
Derivatives, included in assets:
Derivatives, included in assets	0	0
Fair Value Inputs Level 3 [Member] | Interest Rate Cap [Member] | Written
Derivatives, included in liabilities:
Derivatives, included in liabilities	0	0
Fair Value Inputs Level 3 [Member] | Forward And Future Contracts [Member] | Purchase
Derivatives, included in assets:
Derivatives, included in assets	0	0
Fair Value Inputs Level 3 [Member] | Other Available For Sale Securities [Member]
Securities available for sale
Investment securities available for sale	0	100,000
Fair Value Inputs Level 3 [Member] | Other investments [Member]
other investment
Other investments	$ 0	$ 0

XML

FAIR VALUE - Fair Value of Assets and Liabilities Measured on Recurring Basis (Detail) - USD ($) $ in Thousands		3 Months Ended				6 Months Ended
		Jun. 30, 2018		Jun. 30, 2017		Jun. 30, 2018		Jun. 30, 2017
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance		$ 18,808	[1]	$ 21,382	[1]	$ 19,855	[2]	$ 22,914	[2]
Total gains or (losses) (realized/unrealized):
Included in earnings	[2]					0		0
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Gain Loss Included In Other Comprehensive Income Loss		(279)	[1]	228	[1]	193	[2]	746	[2]
Principal Repayments		(700)	[1]	(1,839)	[1]	(2,219)	[2]	(3,889)	[2]
Ending balance	[2]	17,829	[1]	19,771		17,829	[1]	19,771
Available for Sale Securities
Total gains or (losses) (realized/unrealized):
Included in earnings		$ 0		$ 0		$ 0		$ 0

[1] Amounts mostly related to private label MBS.

[2] Amounts mostly related to private label MBS.

XML

FAIR VALUE - Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3) (Detail) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate used for calculation of mortgage servicing rights value		14.61%	14.00%
Fair value input prepayment rate		12.60%	16.40%
Private Label Mbs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	$ 15,061,000	$ 15,061,000	$ 17,060,000
Discount rate used for calculation of mortgage servicing rights value	14.60%		14.00%
Private Label Mbs [Member] | Discounted Cash Flow [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Valuation technique		Discounted cash flows	Discounted cash flows
US States And Political Subdivisions Member [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	$ 2,768,000	$ 2,768,000	$ 2,695,000
Discount rate used for calculation of mortgage servicing rights value	0.061%
Unobservable input prepayment rate	3.00%	3.00%
US States And Political Subdivisions Member [Member] | Discounted Cash Flow [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Valuation technique		Discounted cash flows	Discounted cash flows
Discount rate used for calculation of mortgage servicing rights value			6.61%
Fair value input prepayment rate			3.00%
Minimum [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value input prepayment rate		5.00%	12.00%
Minimum [Member] | Private Label Mbs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Unobservable input prepayment rate	5.00%	5.00%
Fair value projected Cumulative Loss Rate	0.00%	0.00%
Minimum [Member] | Private Label Mbs [Member] | Discounted Cash Flow [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value input prepayment rate			12.00%
Fair value projected Cumulative Loss Rate			0.00%
Maximum [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value input prepayment rate		23.00%	29.00%
Maximum [Member] | Private Label Mbs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Unobservable input prepayment rate	23.00%	23.00%
Fair value projected Cumulative Loss Rate	8.70%	8.70%
Maximum [Member] | Private Label Mbs [Member] | Discounted Cash Flow [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value input prepayment rate			29.00%
Fair value projected Cumulative Loss Rate			6.80%
Weighted Average [Member] | Private Label Mbs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value input prepayment rate	12.60%
Unobservable input projected cumulative loss rate	3.90%	3.90%
Weighted Average [Member] | Private Label Mbs [Member] | Discounted Cash Flow [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value input prepayment rate			16.40%
Fair value projected Cumulative Loss Rate			3.00%

XML

FAIR VALUE - Change in unrealized losses included in earnings (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Included in earnings	[1]			$ 0	$ 0
Available for Sale Securities
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Included in earnings		$ 0	$ 0	$ 0	$ 0

[1] Amounts mostly related to private label MBS.

XML

FAIR VALUE - Impairment of Valuation Adjustments were Recorded for Assets Recognized at Fair Value (Detail) - USD ($) $ in Thousands		3 Months Ended				6 Months Ended
		Jun. 30, 2018		Jun. 30, 2017		Jun. 30, 2018		Jun. 30, 2017		Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Mortgage servicing rights		$ 27,191		$ 26,502		$ 27,191		$ 26,502		$ 26,135	$ 25,255	$ 26,330	$ 26,244
Loans held for sale		54,546				54,546
Loans Held For Sale [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets Fair Value Adjustment		0
Fair Value Measurements Nonrecurring [Member] | Loans Receivable [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets Fair Value Adjustment		(3,869)	[1]	(5,341)	[2]	(17,972)	[1]	(22,707)	[2]
Fair Value Measurements Nonrecurring [Member] | Other Real Estate Owned [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets Fair Value Adjustment		(8,076)	[3]	(3,237)	[4]	(8,164)	[3]	(6,873)	[4]
Fair Value Measurements Nonrecurring [Member] | Mortgage Servicing Rights [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets Fair Value Adjustment	[5]			(197)				(357)
Fair Value Measurements Nonrecurring [Member] | Loans Held For Sale [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets Fair Value Adjustment						(5,830)
Fair Value Inputs Level 1 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Loans receivable		0	[1]	0	[2]	0	[1]	0	[2]
Other Real Estate Owned		0	[3]	0	[4]	0	[3]	0	[4]
Mortgage servicing rights	[5]			0				0
Loans held for sale		0				0
Fair Value Inputs Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Loans receivable		0	[1]	0	[2]	0	[1]	0	[2]
Other Real Estate Owned		0	[3]	0	[4]	0	[3]	0	[4]
Mortgage servicing rights	[5]			0				0
Loans held for sale		0				0
Fair Value Inputs Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Loans receivable		392,039	[1]	359,302	[2]	392,039	[1]	359,302	[2]
Other Real Estate Owned		143,355	[3]	150,045	[4]	143,355	[3]	150,045	[4]
Mortgage servicing rights	[5]			$ 26,502				$ 26,502
Loans held for sale		$ 0				$ 0

[1] Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair values were derived from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.

[2] Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair value was derived from external appraisals that take into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.

[3] The fair values were derived from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.

[4] The fair values were derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.

[5] Fair value adjustments to the mortgage servicing rights were mainly due to assumptions associated with mortgage prepayments rates. The Corporation carries its mortgage servicing rights at the lower of cost or market, measured at fair value on a non-recurring basis. Assumptions for the value of mortgage servicing rights include: Prepayment Rate of 6.23%, Discount Rate of 11.21%.

XML

FAIR VALUE - Impairment of Valuation Adjustments were Recorded for Assets Recognized at Fair Value (Parenthetical) (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2018	Dec. 31, 2017
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Repayment rate used for the calculation of mortgage servicing rights value		12.60%	16.40%
Discount rate used for calculation of mortgage servicing rights value		14.61%	14.00%
Loans held for sale		$ 80,815	$ 32,980
Mortgage Servicing Rights [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Repayment rate used for the calculation of mortgage servicing rights value	6.34%
Discount rate used for calculation of mortgage servicing rights value	11.18%

XML

FAIR VALUE - Qualitative Information Regarding Fair Value Measurements for Level 3 Financial Instruments (Detail)	3 Months Ended
	Jun. 30, 2018
Loans [Member]
Fair Value Option Quantitative Disclosures [Line Items]
Method	Income, Market, Comparable Sales, Discounted Cash Flows
Valuation technique	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
Other Real Estate Owned [Member]
Fair Value Option Quantitative Disclosures [Line Items]
Method	Income, Market, Comparable Sales, Discounted Cash Flows
Valuation technique	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
Mortgage Servicing Rights [Member]
Fair Value Option Quantitative Disclosures [Line Items]
Method	Discounted Cash Flows
Valuation technique	Weighted average prepayment rate of 5.96%; weighted average discount rate of 11.24%

XML

FAIR VALUE - Fair Value (Detail) - USD ($) $ in Thousands	Jun. 30, 2018		Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2017	[2]
Assets:
Investment securities available for sale	$ 2,036,010			$ 1,891,016
Held To Maturity Securities	150,486			150,627
Other equity securities			$ 400
Loans held for sale	54,546
Less: allowance for loan and lease losses	(222,035)			(231,843)
Derivatives, included in assets	806			312
Liabilities:
Other borrowings	184,150			208,635
Derivatives, included in liabilities	921			324
Fair Value Inputs Level 1 [Member]
Assets:
Loans held for sale	0
Loans held for investment, net of allowance	0	[1]			$ 0
Fair Value Inputs Level 2 [Member]
Assets:
Loans held for sale	0
Loans held for investment, net of allowance	0	[1]			0
Fair Value Inputs Level 3 [Member]
Assets:
Loans held for sale	0
Loans held for investment, net of allowance	392,039	[1]			$ 359,302
Carrying Reported Amount Fair Value Disclosure [Member]
Assets:
Cash and due from banks and money market investments	888,399			716,395
Investment securities available for sale	2,036,010			1,891,016
Held To Maturity Securities	150,486			150,627
Other equity securities	42,988			43,119
Loans held for sale	80,815			32,980
Loans, held for investment	8,640,291			8,850,476
Less: allowance for loan and lease losses	(222,035)			(231,843)
Loans held for investment, net of allowance	8,418,256			8,618,633
Derivatives, included in assets	806			312
Other investments	412
Liabilities:
Deposits	9,218,083			9,022,631
Securities sold under agreements to repurchase	200,000			300,000
Advances from FHLB	715,000			715,000
Other borrowings	184,150			208,635
Derivatives, included in liabilities	921			324
Estimate Of Fair Value Fair Value Disclosure [Member]
Assets:
Cash and due from banks and money market investments	888,399			716,395
Investment securities available for sale	2,036,010			1,891,016
Held To Maturity Securities	135,340			131,032
Other equity securities	42,988			43,119
Loans held for sale	81,236			34,979
Loans held for investment, net of allowance	8,130,099			8,372,865
Derivatives, included in assets	806			312
Other investments	412
Liabilities:
Deposits	9,224,516			9,026,600
Securities sold under agreements to repurchase	225,171			325,913
Advances from FHLB	699,956			707,272
Other borrowings	172,356			189,424
Derivatives, included in liabilities	921			324
Estimate Of Fair Value Fair Value Disclosure [Member] | Fair Value Inputs Level 1 [Member]
Assets:
Cash and due from banks and money market investments	888,399			716,395
Investment securities available for sale	57,399			7,819
Held To Maturity Securities	0			0
Other equity securities	0			0
Loans held for sale	0			0
Loans held for investment, net of allowance	0			0
Derivatives, included in assets	0			0
Other investments	412
Liabilities:
Deposits	0			0
Securities sold under agreements to repurchase	0			0
Advances from FHLB	0			0
Other borrowings	0			0
Derivatives, included in liabilities	0			0
Estimate Of Fair Value Fair Value Disclosure [Member] | Fair Value Inputs Level 2 [Member]
Assets:
Cash and due from banks and money market investments	0			0
Investment securities available for sale	1,960,782			1,863,342
Held To Maturity Securities	0			0
Other equity securities	42,988			43,119
Loans held for sale	26,690			25,237
Loans held for investment, net of allowance	0			0
Derivatives, included in assets	806			312
Other investments	0
Liabilities:
Deposits	9,224,516			9,026,600
Securities sold under agreements to repurchase	225,171			325,913
Advances from FHLB	699,956			707,272
Other borrowings	0			0
Derivatives, included in liabilities	921			324
Estimate Of Fair Value Fair Value Disclosure [Member] | Fair Value Inputs Level 3 [Member]
Assets:
Cash and due from banks and money market investments	0			0
Investment securities available for sale	17,829			19,855
Held To Maturity Securities	135,340			131,032
Other equity securities	0			0
Loans held for sale	54,546			9,742
Loans held for investment, net of allowance	8,130,099			8,372,865
Derivatives, included in assets	0			0
Other investments	0
Liabilities:
Deposits	0			0
Securities sold under agreements to repurchase	0			0
Advances from FHLB	0			0
Other borrowings	172,356			189,424
Derivatives, included in liabilities	$ 0			$ 0

[1] Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair values were derived from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.

[2] Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair value was derived from external appraisals that take into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.

XML

REVENUE FROM CONTRACT WITH CUSTOMERS (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Segment Reporting Information [Line Items]
Net interest income	$ 130,471	$ 123,904	$ 255,164	$ 246,453
Service charges and fees on deposits accounts	5,344		10,432
Insurance commission income	1,780		5,135
Merchant Related Income	1,373		2,364
Creadit and debit card fees	5,301		10,395
Other service charges fees	1,416		3,670
Not in scope of Topic 606	5,258		11,260
Total non interest income	20,472	20,549	43,256	28,792
Total Revenue	150,943		298,420
Mortgage Banking [Member]
Segment Reporting Information [Line Items]
Net interest income	20,102	21,586	41,307	43,846
Service charges and fees on deposits accounts	0		0
Insurance commission income	0		0
Merchant Related Income	0		0
Creadit and debit card fees	0		0
Other service charges fees	21		54
Not in scope of Topic 606	4,645		8,696
Total non interest income	4,666	4,764	8,750	8,350
Total Revenue	24,768		50,057
Consumer Retail Banking [Member]
Segment Reporting Information [Line Items]
Net interest income	55,138		106,187
Service charges and fees on deposits accounts	3,279		6,444
Insurance commission income	1,618		4,762
Merchant Related Income	964		1,609
Creadit and debit card fees	4,296		8,465
Other service charges fees	811		1,611
Not in scope of Topic 606	283		290
Total non interest income	11,251		23,181
Total Revenue	66,389		129,368
Commercial And Corporate [Member]
Segment Reporting Information [Line Items]
Net interest income	20,443	21,352	39,363	41,452
Service charges and fees on deposits accounts	1,230		2,322
Insurance commission income	0		0
Merchant Related Income	201		362
Creadit and debit card fees	336		591
Other service charges fees	304		604
Not in scope of Topic 606	140		(409)
Total non interest income	2,211	1,171	3,470	1,958
Total Revenue	22,654		42,833
Treasury And Investments [Member]
Segment Reporting Information [Line Items]
Net interest income	12,443	16,972	24,961	35,156
Service charges and fees on deposits accounts	0		0
Insurance commission income	0		0
Merchant Related Income	0		0
Creadit and debit card fees	0		0
Other service charges fees	71		71
Not in scope of Topic 606	0		2,378
Total non interest income	71	438	2,449	(11,732)
Total Revenue	12,514		27,410
United States Operations [Member]
Segment Reporting Information [Line Items]
Net interest income	15,053	11,842	28,445	23,310
Service charges and fees on deposits accounts	142		276
Insurance commission income	33		45
Merchant Related Income	0		0
Creadit and debit card fees	151		279
Other service charges fees	(60)		979
Not in scope of Topic 606	194		289
Total non interest income	460	574	1,868	1,079
Total Revenue	15,513		30,313
Virgin Islands Operations [Member]
Segment Reporting Information [Line Items]
Net interest income	7,292	8,420	14,901	17,038
Service charges and fees on deposits accounts	693		1,390
Insurance commission income	129		328
Merchant Related Income	208		393
Creadit and debit card fees	518		1,060
Other service charges fees	269		351
Not in scope of Topic 606	(4)		16
Total non interest income	1,813	$ 1,449	3,538	$ 3,155
Total Revenue	$ 9,105		$ 18,439

XML

REVENUE FROM CONTACTS WITH CUSTOMERS - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
entity wide
contract liability	$ 2,200	$ 2,200	$ 2,400
Revenues	150,943	298,420
Increase Decrease In Contract With Customer Liability	(100)	(200)
insurance commission income [Member]
entity wide
Revenues	$ 300	$ 2,400

XML

SUPPLEMENTAL CASH FLOW INFORMATION - Supplemental Cash Flow Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Cash paid for:
Interest on borrowings			$ 49,102	$ 44,613
Income tax			3,527	2,389
Non-cash investing and financing activities:
Additions to other real estate owned			27,393	37,756
Additions to auto repossesions			30,194	22,731
Loan securitizations			119,754	131,808
Capitalization of servicing assets	$ 1,138	$ 1,049	2,025	1,924
Loans held for investment transferred to held for sale			69,851	0
Transfer Of Loans Held For Sale To Portfolio Loans 1			385	10,206
Property Plant And Equipment Transferred To Other Assets			$ 0	$ 1,185

XML

SEGMENT INFORMATION - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2018 numberofreportableunits
Number of reportable segments	6

XML

SEGMENT INFORMATIO - Information about reportable segments (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Segment Reporting Information [Line Items]
Interest income	$ 155,633	$ 147,374	$ 305,051	$ 292,602
Net (charge) credit for transfer of funds	0	0	0	0
Interest expense	(25,162)	(23,470)	(49,887)	(46,149)
Net interest income	130,471	123,904	255,164	246,453
(Provision) release for loan and lease losses	(19,536)	(18,096)	(40,080)	(43,538)
Non-interest income (loss)	20,472	20,549	43,256	28,792
Direct non-interest expenses	(64,510)	(63,461)	(122,371)	(125,941)
Segment income	66,897	62,896	135,969	105,766
Average earnings assets	11,381,707	10,980,018	11,307,332	10,987,048
Mortgage Banking [Member]
Segment Reporting Information [Line Items]
Interest income	31,860	33,086	64,181	67,044
Net (charge) credit for transfer of funds	(11,758)	(11,500)	(22,874)	(23,198)
Interest expense	0	0	0	0
Net interest income	20,102	21,586	41,307	43,846
(Provision) release for loan and lease losses	(4,258)	(11,167)	(4,639)	(20,103)
Non-interest income (loss)	4,666	4,764	8,750	8,350
Direct non-interest expenses	(10,471)	(9,622)	(18,191)	(19,501)
Segment income	10,039	5,561	27,227	12,592
Average earnings assets	2,269,640	2,471,666	2,280,770	2,486,280
Consumer Retail Banking [Member]
Segment Reporting Information [Line Items]
Interest income	44,050	43,369	86,600	86,286
Net (charge) credit for transfer of funds	18,064	6,546	33,286	11,448
Interest expense	(6,976)	(6,183)	(13,699)	(12,083)
Net interest income	55,138	43,732	106,187	85,651
(Provision) release for loan and lease losses	(12,703)	(7,767)	(18,496)	(14,909)
Non-interest income (loss)	11,251	12,153	23,181	25,982
Direct non-interest expenses	(29,062)	(28,066)	(55,963)	(55,484)
Segment income	24,624	20,052	54,909	41,240
Average earnings assets	1,584,114	1,772,605	1,579,773	1,776,384
Commercial And Corporate [Member]
Segment Reporting Information [Line Items]
Interest income	35,274	30,364	67,611	59,775
Net (charge) credit for transfer of funds	(14,831)	(9,012)	(28,248)	(18,323)
Interest expense	0	0	0	0
Net interest income	20,443	21,352	39,363	41,452
(Provision) release for loan and lease losses	(2,260)	770	(9,060)	(7,285)
Non-interest income (loss)	2,211	1,171	3,470	1,958
Direct non-interest expenses	(8,085)	(9,771)	(14,799)	(19,138)
Segment income	12,309	13,522	18,974	16,987
Average earnings assets	2,551,130	2,482,323	2,578,498	2,513,270
Treasury And Investments [Member]
Segment Reporting Information [Line Items]
Interest income	15,428	14,657	29,682	28,414
Net (charge) credit for transfer of funds	8,705	14,427	18,679	30,660
Interest expense	(11,690)	(12,112)	(23,400)	(23,918)
Net interest income	12,443	16,972	24,961	35,156
(Provision) release for loan and lease losses	0	0	0	0
Non-interest income (loss)	71	438	2,449	(11,732)
Direct non-interest expenses	(951)	(969)	(1,899)	(2,176)
Segment income	11,563	16,441	25,511	21,248
Average earnings assets	2,692,677	2,142,975	2,585,641	2,150,097
United States Operations [Member]
Segment Reporting Information [Line Items]
Interest income	20,880	16,675	40,407	32,464
Net (charge) credit for transfer of funds	(180)	(461)	(843)	(587)
Interest expense	(5,647)	(4,372)	(11,119)	(8,567)
Net interest income	15,053	11,842	28,445	23,310
(Provision) release for loan and lease losses	(1,597)	(131)	(3,056)	(96)
Non-interest income (loss)	460	574	1,868	1,079
Direct non-interest expenses	(8,533)	(8,115)	(16,489)	(15,974)
Segment income	5,383	4,170	10,768	8,319
Average earnings assets	1,742,522	1,501,169	1,726,310	1,447,490
Virgin Islands Operations [Member]
Segment Reporting Information [Line Items]
Interest income	8,141	9,223	16,570	18,619
Net (charge) credit for transfer of funds	0	0	0	0
Interest expense	(849)	(803)	(1,669)	(1,581)
Net interest income	7,292	8,420	14,901	17,038
(Provision) release for loan and lease losses	1,282	199	(4,829)	(1,145)
Non-interest income (loss)	1,813	1,449	3,538	3,155
Direct non-interest expenses	(7,408)	(6,918)	(15,030)	(13,668)
Segment income	2,979	3,150	(1,420)	5,380
Average earnings assets	$ 541,624	$ 609,280	$ 556,340	$ 613,527

XML

SEGMENT INFORMATION - Reconciliation of Reportable Segment Financial Information (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net Income (Loss):
Segment income		$ 66,897	$ 62,896	$ 135,969	$ 105,766
Other operating expenses	[1]	(25,706)	(25,608)	(53,872)	(51,010)
Income before income taxes		41,191	37,288	82,097	54,756
Income tax expense		(10,159)	(9,290)	(17,917)	(1,217)
Total, net of tax		31,032	27,998	64,180	53,539
Average assets:
Total average earning assets for segments		11,381,707	10,980,018	11,307,332	10,987,048
Average non-earning assets		963,752	900,622	943,828	893,785
Total consolidated average assets		$ 12,345,459	$ 11,880,640	$ 12,251,160	$ 11,880,833

[1] Expenses pertaining to corporate administrative functions that support the operating segment, but are not specifically attributable to or managed by any segment are not included in the reported financial results of the operating segments. The unallocated corporate expenses include certain general and administrative expenses and related depreciation and amortization expenses.

XML

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES - Additional Information (Detail) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017	Nov. 21, 2017
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Commitments To Extent Credit	$ 1,200.0
Banking Organizations Basel Advanced Approach Asset Requirement			$ 250,000.0
Foreign Subsidiaries Basel Advanced Approach Asset Requirement			$ 10,000.0
Credit Cards [Member]
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Commitments To Extent Credit	663.7
Commercial And Financial Standby Letters Of Credit [Member]
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Commitments To Extent Credit	$ 58.7
Basel III [Member]
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Common Equity Tier 1 Capital Conservation Buffer	2.50%
Basel III [Member] | Minimum [Member]
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Common Equity Tier1 Capital To Risk Weight Assets Ratio	4.50%
Common Equity Tier 1 Capital To Risk Weight Assets Ratio Plus Common Equity Tier 1 Capital Conservation Buffer	7.00%
Total Tier 1 Capital To Risk Weight Assets Ratio	6.00%
Total Tier 1 Capital To Risk Weight Assets Ratio Plus Common Equity Tier 1 Capital Conservation Buffer	8.50%
Total Tier 1 Capital And Tier 2 Capital To Risk Weight Assets Ratio	8.00%
Total Tier 1 Capital And Tier 2 Capital To Risk Weight Assets Ratio Plus Common Equity Tier 1 Capital Conservation Buffer	10.50%
Leverage Ratio	4.00%
Common Equity Tier 1 Capital Conservation Buffer First Year	0.625%
FirstBank [Member]
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Leverage ratio	15.48%	15.39%
Tier 1 risk based capital ratio	21.72%	20.79%
Total Risk Based Capital Ratio	22.98%	22.06%
Tier 1 risk based capital ratio to be considered well capitalzed under PCA	8.00%	8.00%
Total risk based capital to be considered well capitalized under PCA	10.00%	10.00%
Leverage ratio to be considered well capitalized under PCA	5.00%	5.00%
Common Equity Tier1 Capital To Risk Weight Assets Ratio	18.17%	17.70%

XML

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES- Regulatory Capital Positions (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Holding Company [Member]
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Capital	$ 2,035,920	$ 1,989,873
Tier One Risk Based Capital	1,747,576	1,675,282
Tier One Leverage Capital	1,747,576	1,675,282
Capital Required For Capital Adequacy	694,037	706,432
Tier One Risk Based Capital Required For Capital Adequacy	520,527	529,824
Tier One Leverage Capital Required For Capital Adequacy	$ 487,239	$ 477,643
Capital To Risk Weighted Assets	23.47%	22.53%
Tier One Risk Based Capital To Risk Weighted Assets	20.14%	18.97%
Tier One Leverage Capital To Average Assets	14.35%	14.03%
Capital Required For Capital Adequacy To Risk Weighted Assets	8.00%	8.00%
Tier One Risk Based Capital Required For Capital Adequacy To Risk Weighted Assets	6.00%	6.00%
Tier One Leverage Capital Required For Capital Adequacy To Average Assets	4.00%	4.00%
Common Equity Tier1 Capital To Risk Weight Assets Ratio	19.73%	18.96%
Common Equity Tier 1 Capital To Risk Weight Assets	$ 1,711,472	$ 1,674,164
Common Equity Tier 1 Capital To Risk Weight Assets Ratio Capital Adequacy	4.50%	4.50%
Common Equity Tier 1 Capital To Risk Weight Assets Capital Adequacy	$ 390,396	$ 397,368
FirstBank [Member]
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Capital	1,993,786	1,947,627
Tier One Risk Based Capital	1,884,068	1,835,445
Tier One Leverage Capital	1,884,068	1,835,445
Capital Required For Capital Adequacy	694,037	706,218
Tier One Risk Based Capital Required For Capital Adequacy	520,527	529,663
Tier One Leverage Capital Required For Capital Adequacy	486,780	477,056
Capital Required To Be Well Capitalized	867,546	882,772
Tier One Risk Based Capital Required To Be Well Capitalized	$ 694,037	$ 706,218
Capital To Risk Weighted Assets	22.98%	22.06%
Tier One Risk Based Capital To Risk Weighted Assets	21.72%	20.79%
Tier One Leverage Capital To Average Assets	15.48%	15.39%
Capital Required For Capital Adequacy To Risk Weighted Assets	8.00%	8.00%
Tier One Risk Based Capital Required For Capital Adequacy To Risk Weighted Assets	6.00%	6.00%
Tier One Leverage Capital Required For Capital Adequacy To Average Assets	4.00%	4.00%
Capital Required To Be Well Capitalized To Risk Weighted Assets	10.00%	10.00%
Tier One Risk Based Capital Required To Be Well Capitalized To Risk Weighted Assets	8.00%	8.00%
Tier One Leverage Capital Required To Be Well Capitalized To Average Assets	5.00%	5.00%
Tier One Leverage Capital Required To Be Well Capitalized	$ 608,475	$ 596,320
Common Equity Tier1 Capital To Risk Weight Assets Ratio	18.17%	17.70%
Common Equity Tier 1 Capital To Risk Weight Assets	$ 1,576,068	$ 1,562,431
Common Equity Tier 1 Capital To Risk Weight Assets Ratio Capital Adequacy	4.50%	4.50%
Common Equity Tier 1 Capital To Risk Weight Assets Capital Adequacy	$ 390,396	$ 397,248
Common Equity Tier 1 Capital To Risk Weight Assets Well Capitalized	$ 563,905	$ 573,802
Common Equity Tier 1 Capital To Risk Weight Assets Ratio Well Capitalized	6.50%	6.50%

XML

FIRST BANCORP. (Holding Company Only) Financial Information - Statements of Financial Condition (Detail) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
ASSETS
Cash and due from banks	$ 790,809	$ 705,980	$ 422,150
Money market investments	97,590	10,415	10,414
Investment securities available for sale, at market:
Other investment securities	1,794,632	1,540,893
Carrying Value Of Other Equity Security	2,200	2,200
Loans Receivable, net	8,499,071	8,651,613
Other assets	432,463	461,491
Total assets	12,384,862	12,261,268
Liabilities:
Other borrowings	184,150	208,635
Accounts payable and other liabilities	165,950	145,905
Total liabilities	10,483,183	10,392,171
Stockholders Equity	1,901,679	1,869,097	$ 1,859,910
Total liabilities and stockholders' equity	12,384,862	12,261,268
Holding Company [Member]
ASSETS
Cash and due from banks	18,444	20,864
Money market investments	6,111	6,111
Investment securities available for sale, at market:
Carrying Value Of Other Equity Security	285	285
Loans Receivable, net	96	191
Other assets	4,875	3,799
Total assets	2,088,757	2,078,550
Liabilities:
Other borrowings	184,149	208,635
Accounts payable and other liabilities	2,929	818
Total liabilities	187,078	209,453
Stockholders Equity	1,901,679	1,869,097
Total liabilities and stockholders' equity	2,088,757	2,078,550
Holding Company [Member] | Investment in First Bank Puerto Rico, at equity [Member]
Investment securities available for sale, at market:
Equity Method Investments	2,037,467	2,028,641
Holding Company [Member] | Investment in First Bank Insurance Agency, at equity
Investment securities available for sale, at market:
Equity Method Investments	15,955	12,400
Holding Company [Member] | Investment in FBP Statutory Trust I [Member]
Investment securities available for sale, at market:
Equity Method Investments	1,963	2,698
Holding Company [Member] | Investment in FBP Statutory Trust II [Member]
Investment securities available for sale, at market:
Equity Method Investments	$ 3,561	$ 3,561

XML

FIRST BANCORP. (Holding Company Only) Financial Information - Statements of Income (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income:
Interest income on money market securities	$ 14,732	$ 13,950	$ 28,719	$ 27,252
Other Interest And Dividend Income	3,363	727	5,619	1,211
Expense:
Impairement on equity securities	0	371	0	371
Gain on early extinguishment of debt	0	0	2,316	0
Segment income	66,897	62,896	135,969	105,766
Income tax expense	(10,159)	(9,290)	(17,917)	(1,217)
Net income	31,032	27,998	64,180	53,539
Other comprehensive income (loss), net of tax	(7,445)	9,065	(31,492)	19,761
Comprehensive (loss) income	23,587	37,063	32,688	73,300
Holding Company [Member]
Income:
Other Interest And Dividend Income	5	5	10	10
Other income	70	66	133	128
Total interest income	3,875	1,871	25,527	3,738
Expense:
Other borrowings	2,235	2,065	4,320	4,027
Other operating expenses	631	699	1,227	1,666
Total operating expenses	2,866	2,764	5,547	5,693
Gain on early extinguishment of debt	0	0	2,316	0
Segment income	1,009	(893)	22,296	(1,955)
Equity in undistributed earnings (losses) of subsidiaries	30,023	28,891	41,884	55,494
Net income	31,032	27,998	64,180	53,539
Other comprehensive income (loss), net of tax	(7,445)	9,065	(31,492)	19,761
Comprehensive (loss) income	23,587	37,063	32,688	73,300
Investment In Banking Subsidiary [Member] | Holding Company [Member]
Income:
Dividend Income From Subsidiaries	$ 3,800	$ 1,800	$ 25,384	$ 3,600

XML

SUBSEQUENT EVENTS- Additional information (Detail)	May 10, 2017 shares
Department Of Treasury [Member]
Subsequent Event [Line Items]
Secondary Offering Of Common Stock	10,291,553