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LOAN PORTFOLIO

6 Months Ended

Jun. 30, 2019

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,
	2019		2018
(In thousands)
Residential mortgage loans, mainly secured by first mortgages	$	3,070,746	$	3,163,208
Commercial loans:
Construction loans		100,244		79,429
Commercial mortgage loans		1,550,364		1,522,662
Commercial and Industrial loans (1)		2,279,685		2,148,111
Total commercial loans		3,930,293		3,750,202
Finance leases		370,907		333,536
Consumer loans		1,742,009		1,611,177
Loans held for investment		9,113,955		8,858,123
Allowance for loan and lease losses		(172,011)		(196,362)
Loans held for investment, net	$	8,941,944	$	8,661,761

As of June 30, 2019 and December 31, 2018, includes $735.8 million and $796.8 million, respectively, of commercial loans that were 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)		2019		2018
Nonaccrual loans:
	Residential mortgage	$	129,501	$	147,287
	Commercial mortgage		77,495		109,536
	Commercial and Industrial		21,327		30,382
	Construction:
	Land		5,599		6,260
	Construction-residential		1,337		2,102
	Consumer:
	Auto loans		10,361		11,212
	Finance leases		994		1,329
	Other consumer loans		6,491		7,865
Total nonaccrual loans held for investment (1)(2)(3)		$	253,105	$	315,973

Excludes $7.1 million and $16.1 million of nonaccrual loans held for sale as of June 30, 2019 and December 31, 2018, respectively.Amount excludes purchased-credit impaired (“PCI”) loans with a carrying value of approximately $141.7 million and $146.6 million as of June 30, 2019 and December 31, 2018, 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 nonaccrual 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.Nonaccrual loans exclude $482.0 million and $478.9 million of Troubled Debt Restructuring (“TDR”) loans that were in compliance with modified terms and in accrual status as of June 30, 2019 and December 31, 2018, respectively. As of June 30, 2019, the recorded investment of residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure amounted to $159.2 million, including $41.0 million of loans insured by the U.S. Federal Housing Administration (“FHA”) or guaranteed by the U.S. Veterans Administration (“VA”), and $18.4 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 the USVI) require the foreclosure to be processed through the state’s court while foreclosure in non-judicial states (i.e., the BVI) is processed without court intervention. Foreclosure timelines vary according to local jurisdiction 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, 2019
(In thousands)											Current
Residential mortgage:
FHA/VA government-guaranteed loans (2) (3) (4)	$	-	$	4,500	$	89,687	$	94,187	$	-	$	38,713	$	132,900	$	89,687
Other residential mortgage loans (2)(4)		-		67,875		146,108		213,983		138,367		2,585,496		2,937,846		16,607
Commercial:
Commercial and Industrial loans		960		754		22,646		24,360		-		2,255,325		2,279,685		1,319
Commercial mortgage loans (4)		-		1,473		81,099		82,572		3,339		1,464,453		1,550,364		3,604
Construction:
Land (4)		-		106		5,821		5,927		-		13,253		19,180		222
Construction-commercial		-		2,800		-		2,800		-		66,136		68,936		-
Construction-residential		-		-		1,337		1,337		-		10,791		12,128		-
Consumer:
Auto loans		33,421		6,626		10,361		50,408		-		984,688		1,035,096		-
Finance leases		5,891		1,062		994		7,947		-		362,960		370,907		-
Other consumer loans		8,588		5,128		9,796		23,512		-		683,401		706,913		3,305
Total loans held for investment	$	48,860	$	90,324	$	367,849	$	507,033	$	141,706	$	8,465,216	$	9,113,955	$	114,744

Includes nonaccrual loans and accruing loans that were 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.It is the Corporation's policy to report delinquent residential mortgage loans insured by the FHA, guaranteed by the VA, and other government-insured loans as past-due loans 90 days and still accruing as opposed to nonaccrual loans since the principal repayment is insured. These balances include $39.8 million of residential mortgage loans insured by the FHA that were over 15 months delinquent, and were no longer accruing interest as of June 30, 2019, taking into consideration FHA interest curtailment process.As of June 30, 2019, includes $41.9 million of defaulted loans collateralizing GNMA securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.According to the Corporation's delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans, other residential mortgage loans, commercial mortgage loans, and land loans past due 30-59 days as of June 30, 2019 amounted to $6.0 million, $110.1 million, $19.4 million, and $0.1 million respectively.

As of December 31, 2018	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)	30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due(1)(2)(3)			Total Past Due		Purchased Credit- Impaired Loans		Current	Total loans held for investment		90 days past due and still accruing (1)(2)(3)
Residential mortgage:
FHA/VA government-guaranteed loans (2) (3) (4)	$	-	$	4,183	$	104,751	$	108,934	$	-	$	38,271	$	147,205	$	104,751
Other residential mortgage loans (2)(4)		-		62,077		161,851		223,928		143,176		2,648,899		3,016,003		14,564
Commercial:
Commercial and Industrial loans		2,550		66		35,385		38,001		-		2,110,110		2,148,111		5,003
Commercial mortgage loans (4)		-		1,038		110,482		111,520		3,464		1,407,678		1,522,662		946
Construction:
Land (4)		-		207		6,327		6,534		-		13,779		20,313		67
Construction-commercial (4)		-		-		-		-		-		47,965		47,965		-
Construction-residential (4)		-		-		2,102		2,102		-		9,049		11,151		-
Consumer:
Auto loans		31,070		7,103		11,212		49,385		-		897,091		946,476		-
Finance leases		5,502		1,362		1,329		8,193		-		325,343		333,536		-
Other consumer loans		9,898		4,542		11,617		26,057		-		638,644		664,701		3,752
Total loans held for investment	$	49,020	$	80,578	$	445,056	$	574,654	$	146,640	$	8,136,829	$	8,858,123	$	129,083

Includes nonaccrual loans and accruing loans that were 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.It is the Corporation's policy to report delinquent residential mortgage loans insured by the FHA, guaranteed by the VA, and other government-insured loans as past-due loans 90 days and still accruing as opposed to nonaccrual loans since the principal repayment is insured. These balances include $51.4 million of residential mortgage loans insured by the FHA that were over 15 months delinquent, and were no longer accruing interest as of December 31, 2018, taking into consideration the FHA interest curtailment process.As of December 31, 2018, includes $43.6 million of defaulted loans collateralizing GNMA securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.According to the Corporation's delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans, other residential mortgage loans, commercial mortgage loans, and land loans past due 30-59 days as of December 31, 2018 amounted to $5.6 million, $101.4 million, $5.1 million, and $0.2 million, respectively.

The Corporation’s commercial and construction loans credit quality indicators as of June 30, 2019 and December 31, 2018 are summarized below:

	Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
			Substandard		Doubtful		Loss		Total Criticized Asset ⁽¹⁾		Total Portfolio
June 30, 2019	Special Mention		Substandard		Doubtful		Loss		Total Criticized Asset ⁽¹⁾		Total Portfolio
(In thousands)
Commercial mortgage	$	126,766	$	240,624	$	1,533	$	-	$	368,923	$	1,550,364
Construction:
Land		-		6,648		-		-		6,648		19,180
Construction - commercial		-		-		-		-		-		68,936
Construction - residential		-		1,337		-		-		1,337		12,128
Commercial and Industrial		16,760		34,874		2,563		241		54,438		2,279,685

	Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category:
			Substandard		Doubtful		Loss		Total Criticized Asset ⁽¹⁾		Total Portfolio
December 31, 2018	Special Mention		Substandard		Doubtful		Loss		Total Criticized Asset ⁽¹⁾		Total Portfolio
(In thousands)
Commercial mortgage	$	172,260	$	276,935	$	1,701	$	-	$	450,896	$	1,522,662
Construction:
Land		-		7,407		-		-		7,407		20,313
Construction - commercial		-		-		-		-		-		47,965
Construction - residential		-		2,102		-		-		2,102		11,151
Commercial and Industrial		85,557		45,274		6,114		396		137,341		2,148,111

Excludes nonaccrual commercial mortgage loan held for sale of $7.1 million as of June 30, 2019 and $16.1 million of nonaccrual loans held for sale ($11.4 million commercial mortgage, $3.0 million construction-commercial, and $1.7 million commercial and industrial) as of December 31, 2018.

The Corporation considers a loan as a criticized asset if its risk rating is Special Mention, Substandard, Doubtful or Loss. These categories are defined as follows:

Special Mention – A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Corporation’s credit position at some future date. Special Mention assets are not adversely classified and do not expose the Corporation sufficient risk to warrant adverse classification.

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 loan classifications 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 the assessment of compliance with credit policies and underwriting standards, the determination of the current level of credit risk, the evaluation of the effectiveness of the credit management process and the identification of any deficiency 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. The Corporation’s consumer and residential loans credit quality indicators as of June 30, 2019 and December 31, 2018 are summarized below:

	Consumer Credit Exposure - Credit Risk Profile Based on Payment Activity
	Residential Real Estate				Consumer
June 30, 2019	FHA/VA/ Guaranteed⁽¹⁾		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing	$	132,900	$	2,669,978	$	1,024,735	$	369,913	$	700,422
Purchased Credit-Impaired ⁽²⁾		-		138,367		-		-		-
Nonaccrual		-		129,501		10,361		994		6,491
Total	$	132,900	$	2,937,846	$	1,035,096	$	370,907	$	706,913

	Consumer Credit Exposure - Credit Risk Profile Based on Payment Activity
		Residential Real Estate			Consumer
December 31, 2018	FHA/VA/ Guaranteed⁽¹⁾		Other residential loans		Auto		Finance Leases		Other Consumer
(In thousands)
Performing	$	147,205	$	2,725,540	$	935,264	$	332,207	$	656,836
Purchased Credit-Impaired ⁽²⁾		-		143,176		-		-		-
Nonaccrual		-		147,287		11,212		1,329		7,865
Total	$	147,205	$	3,016,003	$	946,476	$	333,536	$	664,701

It is the Corporation's policy to report delinquent residential mortgage loans insured by the FHA, guaranteed by the VA, and other government-insured loans as 90 days past-due loans and still accruing as opposed to nonaccrual loans since the principal repayment is insured. This balance includes $39.8 million and $51.4 million of residential mortgage loans insured by the FHA that were over 15 months delinquent, and were no longer accruing interest as of June 30, 2019 and December 31, 2018, respectively, taking into consideration the FHA interest curtailment process.PCI loans are excluded from nonaccrual 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 separately, as discussed below:

Impaired Loans

							Impaired Loans
		Impaired Loans - With a Related Specific Allowance					With No Related Specific Allowance				Impaired Loans Total


	Recorded Investment ⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance		Recorded Investment ⁽¹⁾		Unpaid Principal Balance		Recorded Investment ⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance
(In thousands)
As of June 30, 2019

FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		284,821		314,596		18,788		106,195		147,771		391,016		462,367		18,788
Commercial:
Commercial mortgage loans		127,909		139,958		9,023		79,600		100,325		207,509		240,283		9,023
Commercial and Industrial loans		51,283		72,436		3,880		28,854		46,155		80,137		118,591		3,880
Construction:
Land		2,261		2,619		563		2,289		2,862		4,550		5,481		563
Construction-commercial		-		-		-		-		-		-		-		-
Construction-residential		523		523		11		956		1,531		1,479		2,054		11
Consumer:
Auto loans		16,003		15,969		3,567		121		213		16,124		16,182		3,567
Finance leases		1,622		1,815		115		-		-		1,622		1,815		115
Other consumer loans		8,299		9,229		888		1,092		2,422		9,391		11,651		888
	$	492,721	$	557,145	$	36,835	$	219,107	$	301,279	$	711,828	$	858,424	$	36,835
(1) Excludes accrued interest receivable.


							Impaired Loans
		Impaired Loans - With a Related Specific Allowance					With No Related Specific Allowance				Impaired Loans Total


	Recorded Investment ⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance		Recorded Investment ⁽¹⁾		Unpaid Principal Balance		Recorded Investment ⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance
(In thousands)
As of December 31, 2018

FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other residential mortgage loans		293,494		325,897		19,965		110,238		148,920		403,732		474,817		19,965
Commercial:
Commercial mortgage loans		184,068		201,116		17,684		43,358		49,253		227,426		250,369		17,684
Commercial and Industrial loans		61,162		76,027		9,693		30,030		48,085		91,192		124,112		9,693
Construction:
Land		2,444		2,923		552		2,431		2,927		4,875		5,850		552
Construction-commercial		-		-		-		-		-		-		-		-
Construction-residential		1,718		2,370		208		-		-		1,718		2,370		208
Consumer:
Auto loans		17,781		17,781		3,689		250		250		18,031		18,031		3,689
Finance leases		1,914		1,914		102		22		22		1,936		1,936		102
Other consumer loans		9,291		10,066		2,083		2,068		2,750		11,359		12,816		2,083
	$	571,872	$	638,094	$	53,976	$	188,397	$	252,207	$	760,269	$	890,301	$	53,976
(1) Excludes accrued interest receivable.



	Average Recorded Investment ⁽¹⁾		Interest Income on Accrual Basis		Interest Income on Cash Basis		Total Interest Income
(In thousands)
For the quarter ended June 30, 2019

FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		392,477		4,364		282		4,646
Commercial:
Commercial mortgage loans		214,375		2,122		50		2,172
Commercial and Industrial loans		81,281		929		20		949
Construction:
Land		4,594		20		7		27
Construction-commercial		-		-		-		-
Construction-residential		1,483		3		-		3
Consumer:
Auto loans		16,697		297		-		297
Finance leases		1,695		35		-		35
Other consumer loans		9,648		234		55		289
	$	722,250	$	8,004	$	414	$	8,418
(1) Excludes accrued interest receivable.



	Average Recorded Investment ⁽¹⁾		Interest Income on Accrual Basis		Interest Income on Cash Basis		Total Interest Income
(In thousands)
For the quarter ended June 30, 2018

FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		411,331		4,358		371		4,729
Commercial:
Commercial mortgage loans		179,978		856		348		1,204
Commercial and Industrial loans		114,749		624		16		640
Construction:
Land		11,370		23		7		30
Construction-commercial		-		-		-		-
Construction-residential		252		-		-		-
Consumer:
Auto loans		20,310		389		-		389
Finance leases		1,677		28		-		28
Other consumer loans		11,830		276		34		310
	$	751,497	$	6,554	$	776	$	7,330
(1) Excludes accrued interest receivable.







	Average Recorded Investment ⁽¹⁾		Interest Income on Accrual Basis		Interest Income on Cash Basis		Total Interest Income
(In thousands)
Six-month Period Ended June 30, 2019

FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		394,159		8,759		532		9,291
Commercial:
Commercial mortgage loans		221,327		4,125		151		4,276
Commercial and Industrial loans		84,551		1,871		22		1,893
Construction:
Land		4,655		41		18		59
Construction-commercial		-		-		-		-
Construction-residential		1,489		3		-		3
Consumer:
Auto loans		17,274		607		-		607
Finance leases		1,836		71		-		71
Other consumer loans		10,093		460		83		543
	$	735,384	$	15,937	$	806	$	16,743
(1) Excludes accrued interest receivable.


	Average Recorded Investment ⁽¹⁾		Interest Income on Accrual Basis		Interest Income on Cash Basis		Total Interest Income
(In thousands)
Six-Month Period Ended June 30, 2018

FHA/VA-Guaranteed loans	$	-	$	-	$	-	$	-
Other residential mortgage loans		413,137		8,618		824		9,442
Commercial:
Commercial mortgage loans		181,950		1,598		432		2,030
Commercial and Industrial loans		114,379		1,173		44		1,217
Construction:
Land		11,522		47		15		62
Construction-commercial		-		-		-		-
Construction-residential		252		-		-		-
Consumer:
Auto loans		20,826		784		-		784
Finance leases		1,754		59		-		59
Other consumer loans		12,073		561		74		635
	$	755,893	$	12,840	$	1,389	$	14,229
(1) Excludes accrued interest receivable.

The following tables show the activity for impaired loans for the quarters and six-month periods ended June 30, 2019 and 2018:

	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
		2019		2018		2019		2018
(In thousands)
Impaired Loans:
Balance at beginning of period	$	732,871	$	746,280	$	760,269	$	790,308
Loans determined impaired during the period		11,653		34,273		22,355		95,681
Charge-offs (1)		(15,627)		(13,207)		(29,048)		(30,420)
Loans sold, net of charge-offs		-		-		-		(4,121)
Increases to existing impaired loans		362		77		1,615		7,075
Foreclosures		(4,950)		(7,777)		(12,934)		(19,452)
Loans no longer considered impaired		(551)		(2,433)		(703)		(3,940)
Loans transferred to held for sale		-		-		-		(57,213)
Paid in full, partial payments and other		(11,930)		(17,079)		(29,726)		(37,784)
Balance at end of period	$	711,828	$	740,134	$	711,828	$	740,134

For the six-month period ended June 30, 2018, includes charge-offs totaling $9.7 million associated with the $57.2 million in nonaccrual loans transferred to held for sale.

PCI Loans

The Corporation acquired PCI loans accounted for under ASC Topic 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, acquired certain assets, including PCI loans, and assumed deposits, through an alliance with Banco Popular of Puerto Rico, which was the successful lead bidder with the FDIC on the failed Doral Bank, as well as other co-bidders. The Corporation also acquired PCI loans in previously completed asset acquisitions that are accounted for under ASC 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 mortgage 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 nonaccrual 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.

The carrying amounts of PCI loans were as follows:
	As of
	June 30,		December 31,
	2019		2018
(In thousands)
Residential mortgage loans	$	138,367	$	143,176
Commercial mortgage loans		3,339		3,464
Total PCI loans	$	141,706	$	146,640
Allowance for loan losses		(11,434)		(11,354)
Total PCI loans, net of allowance for loan losses	$	130,272	$	135,286

The following tables present PCI loans by past due status as of June 30, 2019 and December 31, 2018:


As of June 30, 2019	30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
	30-59 Days		60-89 Days		90 days or more		Total Past Due		Current		Total PCI loans
(In thousands)
Residential mortgage loans	$	-	$	7,750	$	24,626	$	32,376	$	105,991	$	138,367
Commercial mortgage loans		-		-		2,397		2,397		942		3,339
Total (1)	$	-	$	7,750	$	27,023	$	34,773	$	106,933	$	141,706


As of December 31, 2018	30-59 Days		60-89 Days		90 days or more		Total Past Due				Total PCI loans
	30-59 Days		60-89 Days		90 days or more		Total Past Due		Current		Total PCI loans
(In thousands)
Residential mortgage loans	$	-	$	6,979	$	26,932	$	33,911	$	109,265	$	143,176
Commercial mortgage loans		-		-		2,512		2,512		952		3,464
Total (1)	$	-	$	6,979	$	29,444	$	36,423	$	110,217	$	146,640

According to the Corporation's delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage and commercial mortgage loans are considered past due when the borrower is in arrears two or more monthly payments. PCI residential mortgage loans and commercial mortgage loans past due 30-59 days as of June 30, 2019 amounted to $13.7 million and $0.1 million, respectively. PCI residential mortgage loans past due 30-59 as of December 31, 2018 amounted to $11.6 million. No PCI commercial mortgage loan was 30-59 days past due as of December 31, 2018.

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 each June 30, 2019 and December 31, 2018, the reserve related to PCI loans amounted to $11.4 million.

Changes in the accretable yield of PCI loans for the quarters and six-month periods ended June 30, 2019 and 2018 were as follows:

	Quarter Ended				Six-Month Period Ended
	June 30,		June 30,		June 30,		June 30,
	2019		2018		2019		2018
(In thousands)
Balance at beginning of period	$	91,060	$	101,059	$	93,493	$	103,682
Accretion recognized in earnings		(2,365)		(2,570)		(4,798)		(5,193)
Balance at end of period	$	88,695	$	98,489	$	88,695	$	98,489


Changes in the carrying amount of PCI loans accounted for pursuant to ASC Topic 310-30 were as follows:
	Quarter Ended				Six-Month Period Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
(In thousands)
Balance at beginning of period	$	144,443	$	155,281	$	146,640	$	158,174
Accretion		2,365		2,570		4,798		5,193
Collections		(4,260)		(4,359)		(8,100)		(7,755)
Foreclosures		(842)		(1,250)		(1,632)		(3,370)
Ending balance	$	141,706	$	152,242	$	141,706	$	152,242
Allowance for loan losses		(11,434)		(11,354)		(11,434)		(11,354)
Ending balance, net of allowance for loan losses	$	130,272	$	140,888	$	130,272	$	140,888

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


	Quarter Ended				Six-Month Period Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
(In thousands)
Balance at beginning of period	$	11,354	$	11,251	$	11,354	$	11,251
Provision for loan losses		80		103		80		103
Balance at the end of period	$	11,434	$	11,354	$	11,434	$	11,354

The outstanding principal balance of PCI loans, including amounts charged off by the Corporation, amounted to $174.8 million as of June 30, 2019 (compared to - $181.1 million as of December 31, 2018).

Purchases and Sales of Loans

During the first six months of 2019, the Corporation purchased $9.3 million of residential mortgage loans as part of 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 GSEs such as FNMA and FHLMC, which generally securitize the transferred loans into MBS for sale into the secondary market. During the first six months of 2019, the Corporation sold $115.0 million of FHA/VA mortgage loans to GNMA, which packaged them into MBS. Also, during the first six months of 2019, the Corporation sold approximately $59.9 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 if it breaches any of the representations and warranties included in the sale agreement. These representations and warranties are consistent with the GSEs’ selling and servicing guidelines (i.e., ensuring that the mortgage was properly underwritten according to established guidelines).

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

Under ASC Topic 860, “Transfer and Servicing,” once the Corporation has the unilateral ability to repurchase the delinquent loan, it is considered to have regained effective control over the loan and is required to recognize the loan and a corresponding repurchase liability on the balance sheet regardless of the Corporation’s intent to repurchase the loan. As of June 30, 2019 and December 31, 2018, rebooked GNMA delinquent loans included in the residential mortgage loan portfolio amounted to $41.9 million and $43.6 million, respectively.

During the first six months of 2019 and 2018, the Corporation repurchased, pursuant to its repurchase option with GNMA, $10.7 million and $2.0 million, respectively, of loans previously sold to GNMA. The principal balance of these loans is fully guaranteed and the risk of loss related to the repurchased loans is generally limited to the difference between the delinquent interest payment advanced to GNMA, 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. Historically, losses for violations of representations and warranties, and on optional repurchases of GNMA delinquent loans, have been immaterial and no provision has been made at the time of sale.

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 $64 thousand and $3 thousand during the first half of 2019 and 2018, 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 2019, the Corporation sold $4.8 million in nonaccrual commercial loans held for sale. The Corporation recorded a $0.2 million gain on the sale of these nonaccrual loans in the first quarter of 2019, reported as part of Other non-interest income in the consolidated statement of income. Also, during the second quarter of 2019, the Corporation sold a $20.0 million commercial and industrial loan participation in Puerto Rico.

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.

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 $9.1 billion as of June 30, 2019, credit risk concentration was approximately 74% in Puerto Rico, 21% in the United States, and 5% in the USVI and BVI.

As of June 30, 2019, the Corporation had $60.4 million outstanding in loans extended to the Puerto Rico government, its municipalities and public corporations, compared to $61.6 million as of December 31, 2018. Approximately $46.3 million of the outstanding loans as of June 30, 2019 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, 2019 included a $14.2 million loan granted to an affiliate of PREPA.

In addition, as of June 30, 2019, the Corporation had $110.0 million in exposure to residential mortgage loans that are guaranteed by the PRHFA, compared to $112.1 million as of December 31, 2018. Residential mortgage loans guaranteed by the PRHFA 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 PRHFA, as of June 30, 2016, the PRHFA’s mortgage loans insurance program covered loans in an aggregate of approximately $576 million. The regulations adopted by the PRHFA 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 PRHFA 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, 2019, the Corporation had $64.0 million in loans to USVI government instrumentalities and public corporations, compared to $55.8 million as of December 31, 2018. Of the amount outstanding as of June 30, 2019, public corporations of the USVI owed approximately $40.8 million and an independent instrumentality of the USVI government owed approximately $23.2 million. As of June 30, 2019, 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 and political environment of the Commonwealth of Puerto Rico, the uncertainty about the ultimate outcomes of 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 uncertainty about the timing of the receipt of disaster relief funds, 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, 2019, the Corporation’s total TDR loans held for investment of $582.4 million consisted of $326.7 million of residential mortgage loans, $70.5 million of commercial and industrial loans, $153.4 million of commercial mortgage loans, $5.0 million of construction loans, and $26.8 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $0.3 million as of June 30, 2019.

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 loans 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, 2019, the Corporation classified an additional $3.0 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, and 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 all of the Corporation's TDR loans held for investment based on the recorded investment by loan class and modification type is summarized in the following tables. This information reflects all of the Corporation's TDRs held for investment:

	As of June 30, 2019
	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	$	20,893	$	12,502	$	230,894	$	-	$	143	$	62,271	$	326,703
Commercial Mortgage loans ⁽²⁾		3,882		1,804		118,774		-		19,991		8,915		153,366
Commercial and Industrial loans		627		18,861		12,605		-		709		37,708		70,510
Construction loans:
Land		26		2,371		1,782		-		-		261		4,440
Construction-commercial		-		-		-		-		-		-		-
Construction-residential		-		523		-		-		-		-		523
Consumer loans - Auto		-		1,212		8,778		-		-		6,134		16,124
Finance leases		-		73		1,145		-		-		404		1,622
Consumer loans - Other		1,329		1,161		5,125		227		-		1,259		9,101
Total Troubled Debt Restructurings	$	26,757	$	38,507	$	379,103	$	227	$	20,843	$	116,952	$	582,389

Other concessions granted by the Corporation include deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation, or a combination of the concessions listed in the table.Excludes commercial mortgage TDR loans held for sale amounting to $7.1 million as of June 30, 2019.

	As of December 31, 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	$	22,729	$	11,586	$	239,348	$	-	$	145	$	60,094	$	333,902
Commercial Mortgage loans ⁽²⁾		3,966		2,005		122,709		-		-		9,269		137,949
Commercial and Industrial loans ⁽³⁾		664		19,769		13,323		-		2,673		38,492		74,921
Construction loans:
Land		16		2,524		1,933		-		-		292		4,765
Construction-commercial		-		-		-		-		-		-		-
Construction-residential		-		545		-		-		-		217		762
Consumer loans - Auto		-		1,517		10,085		-		-		6,429		18,031
Finance leases		-		101		1,186		-		-		648		1,935
Consumer loans - Other		1,396		1,236		5,651		275		-		1,824		10,382
Total Troubled Debt Restructurings	$	28,771	$	39,283	$	394,235	$	275	$	2,818	$	117,265	$	582,647

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

		Quarter Ended				Six-Month Period Ended
		June 30,				June 30,
		2019		2018		2019		2018
(In thousands)
Beginning balance of TDRs		$	589,795	$	572,376	$	582,647	$	587,219
New TDRs			6,961		13,228		32,420		56,647
Increases to existing TDRs			347		75		1,522		6,846
Charge-offs post modification (1)			(2,092)		(8,616)		(4,913)		(17,787)
Foreclosures			(3,278)		(3,759)		(6,921)		(10,802)
TDRs transferred to held for sale, net of charge-off			-		-		-		(30,000)
Paid-off, partial payments and other			(9,344)		(16,108)		(22,366)		(34,927)
Ending balance of TDRs		$	582,389	$	557,196	$	582,389	$	557,196

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.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 status 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 nonaccrual 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 2019 and 2018.

The following tables provide a breakdown of the TDR loans held for investment by those in accrual and nonaccrual status:

	As of June 30, 2019

	Accrual		Nonaccrual (1)		Total TDRs
(In thousands)
Non-FHA/VA residential mortgage loans	$	271,067	$	55,636	$	326,703
Commercial mortgage loans (2)		125,793		27,573		153,366
Commercial and Industrial loans		63,216		7,294		70,510
Construction loans:
Land		980		3,460		4,440
Construction-commercial		-		-		-
Construction-residential		523		-		523
Consumer loans - Auto		10,385		5,739		16,124
Finance leases		1,597		25		1,622
Consumer loans - Other		8,485		616		9,101
Total Troubled Debt Restructurings	$	482,046	$	100,343	$	582,389

Included in nonaccrual loans are $24.3 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.Excludes commercial mortgage TDR loans held for sale amounting to $7.1 million as of June 30, 2019.

	As of December 31, 2018

	Accrual		Nonaccrual (1)		Total TDRs
(In thousands)
Non-FHA/VA residential mortgage loans	$	271,766	$	62,136	$	333,902
Commercial mortgage loans ⁽²⁾		116,830		21,119		137,949
Commercial and Industrial loans ⁽³⁾		66,603		8,318		74,921
Construction loans:
Land		1,071		3,694		4,765
Construction-commercial		-		-		-
Construction-residential		-		762		762
Consumer loans - Auto		11,842		6,189		18,031
Finance leases		1,791		144		1,935
Consumer loans - Other		9,025		1,357		10,382
Total Troubled Debt Restructurings	$	478,928	$	103,719	$	582,647

Included in nonaccrual loans are $17.7 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.Excludes commercial mortgage TDR loans held for sale amounting to $11.1 million as of December 31, 2018.Excludes commercial and industrial TDR loans held for sale amounting to $0.9 million as of December 31, 2018.

TDR loans exclude restructured residential mortgage loans that are government-guaranteed (e.g., FHA/VA loans) totaling $61.8 million as of June 30, 2019 (compared with $60.5 million as of December 31, 2018). 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, 2019 and 2018, were as follows:

	Quarter Ended June 30, 2019
	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	37	$	4,174	$	3,974
Commercial mortgage loans	3		520		520
Commercial and Industrial loans	2		96		96
Construction loans:
Land	3		106		105
Consumer loans - Auto	76		1,175		1,141
Finance leases	14		285		282
Consumer loans - Other	174		841		843
Total Troubled Debt Restructurings	309	$	7,197	$	6,961

	Six-Month Period Ended June 30, 2019
	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	66	$	7,352	$	7,165
Commercial mortgage loans	6		23,030		20,854
Commercial and Industrial loans	6		203		202
Construction loans:
Land	4		118		117
Consumer loans - Auto	138		2,122		2,088
Finance leases	21		444		441
Consumer loans - Other	322		1,533		1,553
Total Troubled Debt Restructurings	563	$	34,802	$	32,420

	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

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a nonaccrual 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, 2019 and 2018, and had become TDR during the 12-months preceding the default date, were as follows:

	Quarter Ended June 30,
	2019			2018
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(Dollars in thousands)
Non-FHA/VA residential mortgage loans	3	$	184	6	$	681
Consumer loans - Auto	29		517	31		514
Consumer loans - Other	16		57	28		100
Total	48	$	758	65	$	1,295

	Six-Month Period Ended June 30,
	2019			2018
	Number of contracts	Recorded Investment		Number of contracts	Recorded Investment
(Dollars in thousands)
Non-FHA/VA residential mortgage loans	3	$	184	10	$	1,068
Consumer loans - Auto	49		767	33		537
Consumer loans - Other	34		105	39		154
Finance leases	-		-	1		22
Total	86	$	1,056	83	$	1,781

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 fully charged off but the obligation is not forgiven to the borrower, and payments collected are accounted for as recoveries of previous charged-off amounts. A partial charge-off may be recorded if the B note is collateral dependent and the source of repayment is independent of Note A. 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).

The following tables provide additional information about the volume of this type of loan restructuring as of June 30, 2019 and 2018 and the effect on the allowance for loan and lease losses in the first six months of 2019 and 2018:


(In thousands)	June 30, 2019		June 30, 2018
Beginning balance	$	33,840	$	35,577
New TDR loan splits		20,059		29,601
Paid-off and partial payments		(683)		(619)
Ending balance	$	53,216	$	64,559



(In thousands)	June 30, 2019		June 30, 2018
Allowance for loan losses at the beginning of the year	$	473	$	3,846
Charges to the provision for loan losses		1,106		1,902
Net charge-offs		-		(1,137)
Allowance for loan losses at the end of the year	$	1,579	$	4,611

Approximately $41.3 million of the loans restructured using the A/B note restructure workout strategy were in accrual status as of June 30, 2019. These loans continue to be individually evaluated for impairment purposes.