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 September 30, 2012

¨ 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	00908
(Address of principal executive offices)	(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  x    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  x    No  ¨

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

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

Common stock: 206,179,368 shares outstanding as of October 31, 2012.

FIRST BANCORP.

INDEX PAGE

	PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Financial Condition (Unaudited) as of September 30, 2012 and December  31, 2011		5
Consolidated Statements of Income (Loss) (Unaudited) – Quarters ended September  30, 2012 and September 30, 2011 and nine-month period ended September 30, 2012 and September 30, 2011		6
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) – Quarters ended September  30, 2012 and September 30, 2011 and nine-month period ended September 30, 2012 and September 30, 2011		7
Consolidated Statements of Cash Flows (Unaudited) – Nine-month period ended September  30, 2012 and September 30, 2011		8
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Nine-month period ended September 30, 2012 and September 30, 2011		9
Notes to Consolidated Financial Statements (Unaudited)		10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		56
Item 3. Quantitative and Qualitative Disclosures About Market Risk		102
Item 4. Controls and Procedures		102
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		103
Item 1A. Risk Factors		103
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		104
Item 3. Defaults Upon Senior Securities		104
Item 4. Mine Safety Disclosures		104
Item 5. Other Information		104
Item 6. Exhibits		104
SIGNATURES		105

2

Forward Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Form 10-Q or future filings by First BanCorp. (the “Corporation”) with the 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 word or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “should,” “anticipate” and similar expressions 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 various factors, including but not limited to, the following could cause actual results to differ materially from those expressed in, or implied by such “forward-looking statements”:

• uncertainty about whether the Corporation and FirstBank Puerto Rico (“FirstBank” or “the Bank”) will be able to fully comply with the written agreement dated June 3, 2010 (the “Written Agreement”) that the Corporation entered into with the Federal Reserve Bank of New York (the “FED” or “Federal Reserve”) and the order dated June 2, 2010 (the “FDIC Order”) and together with the Written Agreement, (the “Agreements”) that the Corporation’s banking subsidiary, FirstBank entered into with the Federal Deposit Insurance Corporation (“FDIC”) and the Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico (“OCIF”) that, among other things, require the Bank to maintain certain capital levels and reduce its special mention, classified, delinquent and non-performing assets;

• the risk of being subject to possible additional regulatory actions;

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

• the Corporation’s reliance on brokered CDs and its ability to obtain, on a periodic basis, approval from the FDIC to issue brokered CDs to fund operations and provide liquidity in accordance with the terms of the FDIC Order;

• the risk of not being able to fulfill the Corporation’s cash obligations or resume paying dividends to the Corporation’s stockholders in the future due to the Corporation’s inability to receive approval from the FED to receive dividends from FirstBank or FirstBank’s failure to generate sufficient cash flow to make a dividend payment to the Corporation;

• the strength or weakness of the real estate markets and of the consumer and commercial credit sectors and their impact on the credit quality of the Corporation’s loans and other assets, including the Corporation’s construction and commercial real estate loan portfolios, which have contributed and may continue to contribute to, among other things, the high levels of non-performing assets, charge-offs and the provision expense and may subject the Corporation to further risk from loan defaults and foreclosures;

• adverse changes in general economic conditions in Puerto Rico, the United States (“U.S.”) and in the U.S. Virgin Islands (“USVI”) and 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 may reduce interest margins, impact funding sources and affect demand for all of the Corporation’s products and services and reduce the Corporation’s revenues, earnings and the value of the Corporation’s assets;

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

• a decrease in demand for the Corporation’s products and services and lower revenues and earnings because of the continued recession in Puerto Rico, the current fiscal problems and budget deficit of the Puerto Rico government and recent credit downgrades of the Puerto Rico government;

• uncertainty about regulatory and legislative changes for financial services companies in Puerto Rico, the U.S. and the USVI and 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;

• uncertainty regarding the timing and final substance of any capital or liquidity standards, including the Final Basel III requirements and their implementation through rulemaking by the Federal Reserve, including anticipated requirements to hold higher levels of regulatory capital and liquidity and meet higher regulatory capital ratios as a result of Final Basel III or other capital or liquidity standards;

3

• uncertainty about the effectiveness of the various actions undertaken to stimulate the U.S. economy and stabilize the U.S. financial markets, and the impact such actions may have on the Corporation’s business, financial condition and results of operations;

• changes in the fiscal and monetary policies and regulations of the federal government, including those determined by the Federal Reserve, the 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 further 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 risk of not being able to recover the assets pledged to Lehman Brothers Special Financing, Inc.;

• the impact on the Corporation’s results of operations and financial condition of acquisition and disposition transactions;

• a need to recognize additional impairments on financial instruments, goodwill or other intangible assets relating to acquisitions;

• risks 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 impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) on the Corporation’s businesses, business practices and cost of operations; and

• general competitive factors and industry consolidation.

The Corporation does not undertake, and specifically disclaims any obligation, to update any of the “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, 2011, 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.

4

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

(In thousands, except for share information)	September 30, 2012			December 31, 2011
ASSETS
Cash and due from banks	$	786,788		$	206,897
Money market investments:
Federal funds sold		—			2,603
Time deposits with other financial institutions		605			955
Other short-term investments		216,327			236,111
Total money market investments		216,932			239,669
Investment securities available for sale, at fair value:
Securities pledged that can be repledged		1,070,375			1,167,265
Other investment securities		527,472			756,003
Total investment securities available for sale		1,597,847			1,923,268
Other equity securities		39,656			37,951
Investment in unconsolidated entities		32,300			43,401
Loans, net of allowance for loan and lease losses of $445,531 (2011—$493,917)		9,742,633			10,065,475
Loans held for sale, at lower of cost or market		68,349			15,822
Total loans, net		9,810,982			10,081,297
Premises and equipment, net		182,733			194,942
Other real estate owned		177,001			114,292
Accrued interest receivable on loans and investments		53,216			49,957
Other assets		242,292			235,601
Total assets	$	13,139,747		$	13,127,275
LIABILITIES
Non-interest-bearing deposits	$	780,717		$	705,789
Interest-bearing deposits		9,115,685			9,201,965
Total deposits		9,896,402			9,907,754
Securities sold under agreements to repurchase		900,000			1,000,000
Advances from the Federal Home Loan Bank (FHLB)		518,440			367,440
Notes payable (including $15,968 measured at fair value as of December 31, 2011)		—			23,342
Other borrowings		231,959			231,959
Accounts payable and other liabilities		108,829			152,636
Total liabilities		11,655,630			11,683,131
Commitments and Contingencies (Note 22)
STOCKHOLDERS’ EQUITY
Preferred stock, authorized 50,000,000 shares:
Non-cumulative Perpetual Monthly Income Preferred Stock: issued—22,004,000 shares, outstanding—2,521,872 shares, aggregate liquidation value of $63,047		63,047			63,047
Common stock, $0.10 par value, authorized 2,000,000,000 shares; issued 206,674,221 shares (2011—205,794,024 shares issued)		20,667			20,579
Less: Treasury stock (at par value)		(49	)		(66	)
Common stock outstanding, 206,179,368 shares outstanding (2011—205,134,171 shares outstanding)		20,618			20,513
Additional paid-in capital		885,329			884,002
Retained earnings		472,631			457,384
Accumulated other comprehensive income, net of tax expense of $7,843 (2011—$7,751)		42,492			19,198
Total stockholders’ equity		1,484,117			1,444,144
Total liabilities and stockholders’ equity	$	13,139,747		$	13,127,275

The accompanying notes are an integral part of these statements.

5

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

	Quarter Ended						Nine-Month Period Ended
(In thousands, except per share information)	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Interest income:
Loans	$	155,225		$	144,934		$	437,990		$	449,219
Investment securities		11,344			13,283			33,513			52,610
Money market investments		395			325			1,220			1,034
Total interest income		166,964			158,542			472,723			502,863
Interest expense:
Deposits		29,953			46,140			100,176			149,724
Securities sold under agreements to repurchase		6,707			10,700			21,825			36,858
Advances from FHLB		2,953			3,796			9,222			12,760
Notes payable and other borrowings		1,848			3,651			5,426			8,552
Total interest expense		41,461			64,287			136,649			207,894
Net interest income		125,503			94,255			336,074			294,969
Provision for loan and lease losses		28,952			46,446			90,033			194,362
Net interest income after provision for loan and lease losses		96,551			47,809			246,041			100,607
Non-interest income:
Service charges on deposit accounts		3,267			3,098			9,754			9,484
Other service charges		1,098			1,485			3,843			4,659
Mortgage banking activities		4,728			3,676			13,260			19,603
Net gain on sale of investments		10			12,506			36			53,796
Other-than-temporary impairment losses on investment securities:
Total other-than-temporary impairment losses		—			—			—			—
Portion of loss previously recognized in other comprehensive income		(557	)		(350	)		(1,933	)		(957	)
Net impairment losses on investment securities		(557	)		(350	)		(1,933	)		(957	)
Loss on early extinguishment of borrowings		—			(9,012	)		—			(10,835	)
Equity in losses of unconsolidated entities		(2,199	)		(4,357	)		(10,926	)		(5,893	)
Other non-interest income		8,779			6,918			23,589			23,454
Total non-interest income		15,126			13,964			37,623			93,311
Non-interest expenses:
Employees’ compensation and benefits		31,058			29,375			93,770			89,221
Occupancy and equipment		15,208			15,468			46,065			46,321
Business promotion		4,004			2,509			10,026			8,801
Professional fees		6,295			5,983			16,796			17,192
Taxes, other than income taxes		3,499			3,420			10,350			9,953
Insurance and supervisory fees		13,023			15,041			39,333			44,622
Net loss on real estate owned (REO) and REO operations		8,686			4,952			18,915			16,423
Other non-interest expenses		10,070			6,183			28,723			19,695
Total non-interest expenses		91,843			82,931			263,978			252,228
Income (loss) before income taxes		19,834			(21,158	)		19,686			(58,310	)
Income tax expense		(761	)		(2,888	)		(4,439	)		(9,080	)
Net income (loss)	$	19,073		$	(24,046	)	$	15,247		$	(67,390	)
Net income (loss) attributable to common stockholders	$	19,073		$	(31,143	)	$	15,247		$	(88,785	)
Net income (loss) per common share:
Basic	$	0.09		$	(1.46	)	$	0.07		$	(4.17	)
Diluted	$	0.09		$	(1.46	)	$	0.07		$	(4.17	)
Dividends declared per common share	$	—		$	—		$	—		$	—

The accompanying notes are an integral part of these statements.

6

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Quarter Ended						Nine-Month Period Ended
(In thousands)	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Net income (loss)	$	19,073		$	(24,046	)	$	15,247		$	(67,390	)
Available-for-sale debt securities on which an other-than-temporary impairment has been recognized:
Subsequent unrealized gain on debt securities on which an other-than-temporary impairment has been recognized		2,012			1,225			8,309			3,883
Reclassification adjustment for other-than-temporary impairment on debt securities included in net income		(557	)		(350	)		(1,933	)		(957	)
All other unrealized gains and losses on available-for-sale securities:
All other unrealized holding gains arising during the period		14,868			15,285			17,009			26,578
Reclassification adjustments for net gain included in net income		—			(12,504	)		—			(34,453	)
Net unrealized gains on securities reclassified from held to maturity to available for sale		—			—			—			2,789
Income tax expense related to items of other comprehensive income		(442	)		(2,364	)		(92	)		(1,631	)
Other comprehensive income (loss) for the period, net of tax		15,881			1,292			23,293			(3,791	)
Total comprehensive income (loss)	$	34,954		$	(22,754	)	$	38,540		$	(71,181	)

The accompanying notes are an integral part of these statements.

7

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine-Month Period Ended
(In thousands)	September 30, 2012			September 30, 2011
Cash flows from operating activities:
Net income (loss)	$	15,247		$	(67,390	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		18,404			18,209
Amortization of core deposit intangible		1,766			1,766
Amortization of purchased credit card relationship intangible		545			—
Provision for loan and lease losses		90,033			194,362
Deferred income tax expense		775			2,187
Stock-based compensation		395			69
Gain on sales of investments, net		—			(53,115	)
Loss on early extinguishment of borrowings		—			10,835
Other-than-temporary impairments on investment securities		1,933			957
Equity in losses of unconsolidated entities		10,926			5,893
Derivative instruments and financial liabilities measured at fair value (gain) loss		(955	)		4,179
Loss (gain) on sale of premises and equipment and other assets		259			(2,733	)
Net gain on sale of loans held for investment		(451	)		(13,347	)
Net amortization of premiums, discounts and deferred loan fees and costs		1,126			(1,267	)
Originations and purchases of loans held for sale		(295,607	)		(67,016	)
Sales and repayments of loans held for sale		302,046			74,518
Amortization of broker placement fees		7,607			13,217
Net amortization of premium and discounts on investment securities		10,087			3,600
(Decrease) increase in accrued income tax payable		(1,048	)		5,335
(Increase) decrease in accrued interest receivable		(909	)		11,560
Decrease in accrued interest payable		(293	)		(382	)
Decrease (increase) in other assets		20,819			(8,995	)
Increase (decrease) in other liabilities		8,059			(3,906	)
Net cash provided by operating activities		190,764			128,536
Cash flows from investing activities:
Principal collected on loans		2,227,673			1,907,704
Loans originated		(1,791,097	)		(1,681,084	)
Purchases of loans		(493,653	)		(118,445	)
Proceeds from sale of loans held for investment		22,203			675,450
Proceeds from sale of repossessed assets		59,442			79,974
Proceeds from sale of available-for-sale securities		—			1,181,065
Proceeds from sale of held-to-maturity securities		—			348,750
Purchases of securities available for sale		(788,191	)		(677,115	)
Proceeds from principal repayments and maturities of securities available for sale		1,127,667			619,375
Proceeds from principal repayments and maturities of securities held to maturity		—			33,726
Additions to premises and equipment		(7,494	)		(10,711	)
Proceeds from sale of premises and equipment and other assets		1,040			5,107
Proceeds from securities litigation settlement and other proceeds		36			679
(Increase) decrease in other equity securities		(1,705	)		15,265
Net cash provided by investing activities		355,921			2,379,740
Cash flows from financing activities:
Net decrease in deposits		(19,611	)		(1,416,329	)
Net repayments and cancellation costs of securities sold under agreements to repurchase		(100,000	)		(410,587	)
Net FHLB advances proceeds (paid) and cancellation costs		151,000			(244,248	)
Repayments of medium-term notes		(21,957	)		(7,000	)
Proceeds from common stock sold		1,037			—
Net cash provided (used in) financing activities		10,469			(2,078,164	)
Net increase in cash and cash equivalents		557,154			430,112
Cash and cash equivalents at beginning of period		446,566			370,283
Cash and cash equivalents at end of period	$	1,003,720		$	800,395
Cash and cash equivalents include:
Cash and due from banks	$	786,788		$	612,721
Money market instruments		216,932			187,674
	$	1,003,720		$	800,395

The accompanying notes are an integral part of these statements.

8

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Nine-Month Period Ended
(In thousands)	September 30, 2012			September 30, 2011
Preferred Stock:
Balance at beginning of period	$	63,047		$	425,009
Accretion of preferred stock discount		—			5,489
Balance at end of period		63,047			430,498
Common Stock outstanding:
Balance at beginning of period		20,513			2,130
Common stock sold		29			—
Restricted stock grants		76			—
Balance at end of period		20,618			2,130
Additional Paid-In-Capital:
Balance at beginning of period		884,002			319,459
Restricted stock grants		(76	)		—
Common stock sold		1,008			—
Stock-based compensation		395			69
Balance at end of period		885,329			319,528
Retained Earnings:
Balance at beginning of period		457,384			293,643
Net income (loss)		15,247			(67,390	)
Accretion of preferred stock discount		—			(5,489	)
Balance at end of period		472,631			220,764
Accumulated Other Comprehensive Income (Loss), net of tax:
Balance at beginning of period		19,198			17,718
Other comprehensive income (loss), net of tax		23,294			(3,791	)
Balance at end of period		42,492			13,927
Total stockholders’ equity	$	1,484,117		$	986,847

The accompanying notes are an integral part of these statements.

9

FIRST BANCORP.

PART I - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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, 2011. 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, 2011, included in the Corporation’s 2011 Annual Report on Form 10-K. On May 30, 2012, the Corporation purchased an approximate $406 million credit cards portfolio, of which a portion were purchased credit impaired loans. Refer to Note 6 for additional information about this transaction, including the accounting and reporting policies related to this portfolio. 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 nine-month period ended September 30, 2012 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:

In April 2011, the FASB updated the Accounting Standards Codification (“Codification”) to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The amendments in this Update remove from the assessment of effective control the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. The Board concluded that this criterion is not a determining factor of effective control. Consequently, the amendments in this Update also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets. Eliminating the transferor’s ability criterion and related implementation guidance from an entity’s assessment of effective control should improve the accounting for repurchase agreements and other similar transactions. The amendments in this Update are effective for the first interim or annual period beginning on or after December 15, 2011, and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The Corporation adopted this guidance with no impact on the financial statements.

In May 2011, the FASB updated the Codification to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards (IFRSs). The amendments in this Update apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements and result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. The amendments in this Update are to be applied prospectively and are effective during interim and annual periods beginning after December 15, 2011. Early application is not permitted. The Corporation adopted this guidance in 2012, refer to note 19 for applicable disclosures. The adoption of this guidance did not have a material impact in the Corporation’s consolidated financial position or results of operations.

In June 2011, the FASB updated the Codification to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Under the amendments, an entity has the option to present the total comprehensive income either in a single continuous statement or in two separate but consecutive statements and eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. Additionally, this update requires consecutive presentation of the statement of net income and other comprehensive income and requires an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. The amendments in this Update should be applied retrospectively and are effective for fiscal years beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. Beginning with the financial statements for the quarter and six-month period ended June 30, 2011, the Corporation is following the guidance of separate but consecutive presentation of the statement of net income and the statement of other comprehensive income.

In September 2011, the FASB updated the Codification to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed

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directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. The amendments in this Update are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The Corporation will incorporate this guidance into the annual goodwill impairment evaluation process to be conducted in the fourth quarter of 2012.

In December 2011, the FASB updated the Codification to clarify the guidance on the derecognition of in substance real estate in order to resolve the diversity in practice when a parent ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. That is, even if the reporting entity ceases to have a controlling financial interest, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. The Corporation adopted this guidance with no impact on the consolidated financial statements.

In December 2011, the FASB updated the Codification to enhance and provided converged disclosures about financial and derivative instruments that are either offset on the balance sheet, or are subject to an enforceable master netting arrangement (or other similar arrangement). Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. In November 2012, the FASB decided to amend and clarify the scope of the disclosures to include only derivatives, repurchase agreements and securities lending transactions. The FASB plans to release an exposure draft with the revised scope language during November 2012. The amendments in this Update are effective for interim and annual period beginning on or after January 1, 2013. The Corporation is currently evaluating the impact of the adoption of this guidance, if any, on its consolidated financial statements.

In July 2012, the FASB updated the Codification to reduce the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments in this Update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of date before July 27, 2012, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The Corporation is currently evaluating the impact of the adoption of this guidance, if any, on its consolidated financial statements.

2 – EARNINGS PER COMMON SHARE

The calculations of earnings per common share for the quarters and nine-month period ended on September 30, 2012 and 2011 are as follows:

	Quarter Ended					Nine-Month Period Ended
	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
	(In thousands, except per share information)
Net Income (Loss):
Net income (loss)	$	19,073	$	(24,046	)	$	15,247	$	(67,390	)
Cumulative convertible preferred stock dividends (Series G)		—		(5,302	)		—		(15,906	)
Preferred stock discount accretion (Series G)		—		(1,795	)		—		(5,489	)
Net income (loss) attributable to common stockholders	$	19,073	$	(31,143	)	$	15,247	$	(88,785	)
Weighted-Average Shares:
Basic weighted-average common shares outstanding		205,415		21,303			205,349		21,303
Average potential common shares		508		—			348		—
Diluted weighted-average number of common shares outstanding		205,923		21,303			205,697		21,303
Income (loss) per common share:
Basic	$	0.09	$	(1.46	)	$	0.07	$	(4.17	)
Diluted	$	0.09	$	(1.46	)	$	0.07	$	(4.17	)

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Earning (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average common shares issued and outstanding. Net income (loss) attributable to common stockholders represents net income (loss) adjusted for preferred stock dividends including dividends declared, and cumulative dividends related to the current dividend period that have not been declared as of the end of the period, and the accretion of discount on preferred stock issuances. Basic weighted average common shares outstanding exclude unvested shares of restricted stock.

Potential common shares consist of common stock issuable under the assumed exercise of stock options, unvested shares of restricted stock, and outstanding warrants using the treasury stock method. This method assumes that the potential common shares are issued 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 number of potential shares issued and the shares purchased is added as incremental shares to the actual number of shares outstanding to compute diluted earnings per share. Stock options, unvested shares of restricted stock, and outstanding warrants that result in lower potential 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 anti-dilutive effect on earnings per share. Stock options not included in the computation of outstanding shares because they were antidilutive amounted to 114,757 and 129,934 for the quarter and nine-month period ended September 30, 2012 and 2011, respectively. Warrants outstanding to purchase 389,483 shares of common stock for the quarter and nine-month period ended September 30, 2011, and 720 unvested shares of restricted stock for the quarter and nine-month period ended September 30, 2011, were excluded from the computation of diluted earnings per share because the Corporation reported a net loss attributable to common stockholders and their inclusion would have an antidilutive effect.

3 – STOCK-BASED COMPENSATION

Between 1997 and January 2007, the Corporation had a stock option plan (“the 1997 stock option plan”) that authorized the granting of up to 579,740 options on shares of the Corporation’s common stock to eligible employees. The options granted under the plan could not exceed 20% of the number of common shares outstanding. Each option provides for the purchase of one share of common stock at a price not less than the fair market value of the stock on the date the option was granted. Stock options were fully vested upon grant. The maximum term to exercise the options is ten years. The stock option plan provides for a proportionate adjustment in the exercise price and the number of shares that can be purchased in the event of a stock dividend, stock split, reclassification of stock, merger or reorganization and certain other issuances and distributions such as stock appreciation rights.

Under the 1997 stock option plan, the Compensation and Benefits Committee (the “Compensation Committee”) had the authority to grant stock appreciation rights at any time subsequent to the grant of an option. Pursuant to stock appreciation rights, the optionee surrenders the right to exercise an option granted under the plan in consideration for payment by the Corporation of an amount equal to the excess of the fair market value of the shares of common stock subject to such option surrendered over the total option price of such shares. Any option surrendered is cancelled by the Corporation and the shares subject to the option are not eligible for further grants under the option plan. On January 21, 2007, the 1997 stock option plan expired; all outstanding awards granted under this plan continue in full force and effect, subject to their original terms. No awards for shares could be granted under the 1997 stock option plan as of its expiration.

The activity of stock options for the nine-month period ended September 30, 2012 is set forth below:

	Nine-Month Period Ended September 30, 2012
	Number of Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (In thousands)
Beginning of period		129,934		$	202.99
Options expired		(9,713	)		140.15
Options cancelled		(5,464	)		236.27
End of period outstanding and exercisable		114,757		$	206.72		3.1	$	—

On April 29, 2008, the Corporation’s stockholders approved the First BanCorp. 2008 Omnibus Incentive Plan (the “Omnibus Plan”). 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, and other stock-based awards. This plan allows the issuance of up to 8,169,807 shares of common stock, subject to adjustments for stock splits, reorganizations and other similar events. The Corporation’s Board of Directors, upon receiving the relevant recommendation of the Compensation 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.

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Under the Omnibus Plan, during the third quarter of 2012, 44,910 shares of restricted stock were awarded to the Corporation’s independent directors subject to a one year vesting period. In addition, early in 2012, the Corporation issued 719,500 shares of restricted stock which will vest based on the employees’ continued service with the Corporation. Fifty percent (50%) of those shares vest in two years from the grant date and the remaining 50% vest in three years from the grant date. Included in the 719,500 shares of restricted stock are 557,000 shares granted to certain senior executive officers consistent with the requirements of the Troubled Asset Relief Program (“TARP”) Interim Final Rule. Notwithstanding the vesting period mentioned above, the employees covered by TARP are restricted from transferring the shares. Specifically, the stock that has otherwise vested may not become transferable at any time earlier than as permitted under the schedule set forth by TARP, which is based on the repayment in 25% increments of the aggregate financial assistance received from the U.S. Department of Treasury (the “Treasury”).

The following table summarizes the restricted stock activity in 2012 under the Omnibus Plan for both executive officers covered by the TARP requirements and other employees as well as for the independent directors:

	Nine-Month Period Ended September 30, 2012
	Number of shares of restricted stock		Weighted-Average Grant Date Fair Value
Non-vested shares at beginning of period		—	$	—
Granted		764,410		2.50
Non-vested shares at September 30, 2012		764,410	$	2.50

For the quarter and nine-month period ended September 30, 2012, the Corporation recognized $0.2 million and $0.4 million, respectively, of stock based compensation expense related to the aforementioned restricted stock awards. For the quarter and nine-month period ended September 30, 2011, the Corporation recognized $23,333 and $69,999, respectively, of stock based compensation related to 720 shares of restricted stock granted in 2008 to members of the Board of Directors that vested in the fourth quarter of 2011. As of September 30, 2012, there was $1.4 million of total unrecognized compensation cost related to nonvested shares of restricted stock. That cost is expected to be recognized for 6% of the awards over the next 8 months, for 47% of the awards over the next 1.5 years and the remaining 47% over the next 2.5 years, as if they were multiple awards. No shares of restricted stock were granted or vested during the nine-month period ended September 30, 2011.

The fair value of the shares of restricted stock granted in 2012 was based on the market price of the Corporation’s outstanding common stock on the date of the grant, $3.34 for restricted stocks granted during the third quarter of 2012 and $4.00 for the restricted stocks granted earlier in 2012. For the 557,000 shares of restricted stock granted under the TARP requirements, the market price was discounted due to post-vesting restrictions. For purposes of computing the discount, the Corporation assumes a common stock appreciation of 25% and a holding period by the Treasury of its outstanding common stock of the Corporation of 3 years, resulting in a fair value of $2.00 for restricted shares granted under the TARP requirements. Also, the Corporation uses empirical data to estimate employee termination, separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.

Stock-based compensation accounting guidance requires the Corporation to develop an estimate of the number of share-based awards that will be forfeited due to employee or director turnover. Quarterly changes in the estimated forfeiture rate may have a significant effect on share-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, then an adjustment is made to increase the estimated forfeiture rate, which will result in a decrease to the expense recognized in the financial statements. If the actual forfeiture rate is lower than the estimated forfeiture rate, then an adjustment is made to decrease the estimated forfeiture rate, which will result in an increase to the expense recognized in the financial statements. When unvested options or shares of restricted stock are forfeited, any compensation expense previously recognized on the forfeited awards is reversed in the period of the forfeiture.

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4 – INVESTMENT SECURITIES

Investment Securities Available for Sale

The amortized cost, non-credit loss component of other-than-temporary impairment (“OTTI”) on securities with changes in fair value recorded in other comprehensive income (“OCI”), gross unrealized gains and losses recorded in OCI, approximate fair value, weighted-average yield and contractual maturities of investment securities available for sale were as follows:

	September 30, 2012												December 31, 2011
	Amortized cost		Non-Credit Loss Component of OTTI Recorded in OCI		Gross Unrealized				Fair value		Weighted average yield%		Amortized cost		Non-Credit Loss Component of OTTI Recorded in OCI		Gross Unrealized				Fair value		Weighted average yield%
(Dollars in thousands)					gains		losses										gains		losses
U.S. Treasury securities:
Due within one year	$	7,494	$	—	$	1	$	—	$	7,495		0.17	$	476,665	$	—	$	327	$	—	$	476,992		0.34
Obligations of U.S. Government sponsored agencies:
Due within one year		—		—		—		—		—		—		300,381		—		1,204		—		301,585		1.15
After 1 to 5 years		25,650		—		11		—		25,661		0.35		—		—		—		—		—		—
Puerto Rico Government obligations:
Due within one year		—		—		—		—		—		—		8,560		—		110		—		8,670		4.20
After 1 to 5 years		—		—		—		—		—		—		70,590		—		171		1		70,760		2.63
After 5 to 10 years		39,744		—		1,335		—		41,079		4.49		118,186		—		76		13		118,249		5.07
After 10 years		21,102		—		1,190		25		22,267		5.78		24,154		—		781		1		24,934		5.74
United States and Puerto Rico Government obligations		93,990		—		2,537		25		96,502		3.31		998,536		—		2,669		15		1,001,190		1.47
Mortgage-backed securities:
FHLMC certificates:
Due within one year		206		—		1		—		207		3.57		—		—		—		—		—		—
After 1 to 5 years		—		—		—		—		—		—		928		—		8		—		936		3.67
After 10 years		135,512		—		4,186		—		139,698		2.28		24,974		—		238		—		25,212		2.59
		135,718		—		4,187		—		139,905		2.28		25,902		—		246		—		26,148		2.62
GNMA certificates:
After 1 to 5 years		159		—		8		—		167		3.59		179		—		9		—		188		3.88
After 5 to 10 years		562		—		45		—		607		3.60		596		—		47		—		643		4.09
After 10 years		604,294		—		44,793		—		649,087		4.00		717,237		—		43,938		—		761,175		3.98
		605,015		—		44,846		—		649,861		4.00		718,012		—		43,994		—		762,006		3.98
FNMA certificates:
Due within one year		282		—		10		—		292		3.55		—		—		—		—		—		—
After 1 to 5 years		—		—		—		—		—		—		1,019		—		42		—		1,061		3.82
After 5 to 10 years		14,517		—		810		—		15,327		4.04		18,826		—		1,007		—		19,833		3.97
After 10 years		624,983		—		15,872		—		640,855		2.56		47,485		—		3,285		—		50,770		5.46
		639,782		—		16,692		—		656,474		2.59		67,330		—		4,334		—		71,664		5.02
Collateralized Mortgage Obligations issued or guaranteed by FHLMC,
After 5 to 10 years		377		—		—		1		376		3.01		—		—		—		—		—		—
Other mortgage pass-through trust certificates:
After 10 years		72,555		31,951		14,085		—		54,689		2.34		85,014		31,951		8,143		—		61,206		2.19
Total mortgage-backed securities		1,453,447		31,951		79,810		1		1,501,305		3.13		896,258		31,951		56,717		—		921,024		3.85
Corporate bonds:
After 10 years		—		—		—		—		—		—		1,447		434		—		—		1,013		5.80
Equity securities (without contractual maturity) (1)		77		—		—		37		40		—		77		—		—		36		41		—
Total investment securities available for sale	$	1,547,514	$	31,951	$	82,347	$	63	$	1,597,847		3.15	$	1,896,318	$	32,385	$	59,386	$	51	$	1,923,268		2.60

(1) Represents common shares of another financial institution in Puerto Rico.

Maturities of mortgage-backed securities are based on contractual terms assuming no prepayments. Expected maturities of investments might differ from contractual maturities because they may be subject to prepayments and/or call options as was the case with approximately $194.5 million of Puerto Rico Government Obligations called during the first nine months of 2012. 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 non-credit loss component of OTTI are presented as part of OCI.

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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 September 30, 2012 and December 31, 2011. It also includes debt securities for which an OTTI was recognized and only the amount related to a credit loss was recognized in earnings. Unrealized losses for which OTTI had been recognized have been reduced by any subsequent recoveries in fair value:

	As of September 30, 2012
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Debt securities:
Puerto Rico Government obligations	$	2,065	$	25	$	—	$	—	$	2,065	$	25
Mortgage-backed securities:
Collateralized mortgage obligations issued or guaranteed by FHLMC		376		1		—		—		376		1
Other mortgage pass-through trust certificates		—		—		54,540		17,867		54,540		17,867
Equity securities		—		—		40		37		40		37
	$	2,441	$	26	$	54,580	$	17,904	$	57,021	$	17,930

	As of December 31, 2011
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Debt securities:
Puerto Rico Government obligations	$	15,982	$	15	$	—	$	—	$	15,982	$	15
Mortgage-backed securities:
Other mortgage pass-through trust certificates		—		—		61,017		23,809		61,017		23,809
Corporate bonds		—		—		1,013		434		1,013		434
Equity securities		41		36		—		—		41		36
	$	16,023	$	51	$	62,030	$	24,243	$	78,053	$	24,294

Total proceeds from the sale of securities available for sale during the first nine months of 2011 amounted to approximately $1.2 billion, none in the first nine months of 2012.

Assessment for OTTI

On a quarterly basis, the Corporation performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered an OTTI. A debt security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. The accounting literature requires the Corporation to assess whether the unrealized loss is other-than-temporary.

OTTI losses must be recognized in earnings if an investor has the intent to sell the debt security or it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis. However, even if an investor does not expect to sell a debt security, it must evaluate expected cash flows to be received and determine if a credit loss has occurred.

An unrealized loss is generally deemed to be other-than-temporary and a credit loss is deemed to exist if the present value of the expected future cash flows is less than the amortized cost basis of the debt security. The credit loss component of an OTTI, if any, is recorded as a component of net impairment losses on investment securities in the accompanying consolidated statements of income (loss), while the remaining portion of the impairment loss is recognized in OCI, provided the Corporation does not intend to sell the underlying debt security and it is “more likely than not” that the Corporation will not have to sell the debt security prior to recovery.

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Debt securities issued by U.S. government agencies, government-sponsored entities and the U.S. Treasury accounted for more than 92% of the total available-for-sale portfolio as of September 30, 2012 and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government. The Corporation’s assessment was concentrated mainly on private label mortgage-backed securities with an amortized cost of $72.6 million 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.

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

• The level of cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and

• Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the overall financial condition of the issuer, credit ratings, recent legislation and government actions affecting the issuer’s industry and actions taken by the issuer to deal with the present economic climate.

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

	Private label MBS						Private label MBS
	Quarter ended September 30,						Nine-Month Period Ended September 30,
(In thousands)	2012			2011			2012			2011
Total other-than-temporary impairment losses	$	—		$	—		$	—		$	—
Portion of loss previously recognized in other comprehensive income		(557	)		(350	)		(1,933	)		(957	)
Net impairment losses recognized in earnings	$	(557	)	$	(350	)	$	(1,933	)	$	(957	)

The following table summarizes the roll-forward of credit losses on debt securities held by the Corporation for which a portion of an OTTI is recognized in OCI:

	Quarter ended September 30,				Nine-Month Period Ended September 30,
(In thousands)	2012		2011		2012		2011
Credit losses at the beginning of the period	$	5,199	$	2,459	$	3,823	$	1,852
Additions:
Credit losses on debt securities for which an OTTI was previously recognized (1)		557		350		1,933		957
Ending balance of credit losses on debt securities held for which a portion of an OTTI was recognized in OCI	$	5,756	$	2,809	$	5,756	$	2,809

(1) Related to private label MBS.

During the first nine-months of 2012, the $1.9 million credit related impairment loss is related to 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 of the underlying collateral. The underlying mortgages are fixed-rate single family loans with original high FICO scores (over 700) and moderate original loan-to-value ratios (under 80%), as well as moderate delinquency levels.

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Based on the expected cash flows derived from the model, 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 was reflected in earnings. Significant assumptions in the valuation of the private label MBS were as follow:

	September 30, 2012			December 31, 2011
	Weighted Average		Range	Weighted Average		Range
Discount rate		14.5%	14.5%		14.5%	14.5%
Prepayment rate		33%	23.81% - 43.58%		27%	21.33% -37.97%
Projected Cumulative Loss Rate		7%	0.71% - 17.51%		6%	1.94% - 11.89%

No OTTI losses on equity securities held in the available-for-sale investment portfolio were recognized for the first nine-months of 2012 or 2011.

5 – OTHER EQUITY SECURITIES

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

As of September 30, 2012 and December 31, 2011, the Corporation had investments in FHLB stock with a book value of $38.4 million and $36.7 million, respectively. The net realizable value is a reasonable proxy for the fair value of these instruments. Dividend income from FHLB stock for the quarter and nine-month period ended September 30, 2012 amounted to $0.3 million and $1.1 million, respectively, compared to $0.4 million and $1.4 million for the comparable periods in 2011.

The FHLB stocks owned by the Corporation are issued by the FHLB of New York and by the FHLB of Atlanta. Both Banks are part of the Federal Home Loan Bank System, a national wholesale banking network of 12 regional, stockholder-owned congressionally chartered banks. The Federal Home Loan Banks are all privately capitalized and operated by their member stockholders. The system is supervised by the Federal Housing Finance Agency, which ensures that the Home Loan Banks 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.

The Corporation has other equity securities that do not have a readily available fair value. The carrying value of such securities as of September 30, 2012 and December 31, 2011 was $1.3 million.

6 – LOAN PORTFOLIO

The following is a detail of the loan portfolio held for investment:

	September 30, 2012			December 31, 2011
	(In thousands)
Residential mortgage loans, mainly secured by first mortgages	$	2,762,418		$	2,873,785
Commercial loans:
Construction loans		352,891			427,863
Commercial mortgage loans		1,459,118			1,565,411
Commercial and Industrial loans		3,369,305			3,856,695
Loans to local financial institutions collateralized by real estate mortgages		258,341			273,821
Commercial loans		5,439,655			6,123,790
Finance leases		239,556			247,003
Consumer loans		1,746,535			1,314,814
Loans held for investment		10,188,164			10,559,392
Allowance for loan and lease losses		(445,531	)		(493,917	)
Loans held for investment, net	$	9,742,633		$	10,065,475

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Loans held for investment classified as non-performing were as follows:

(In thousands)	September 30, 2012		December 31, 2011
Non-performing loans:
Residential mortgage	$	320,913	$	338,208
Commercial mortgage		231,163		240,414
Commercial and Industrial		230,459		270,171
Construction		189,458		250,022
Consumer:
Auto loans		17,639		19,641
Finance leases		3,061		3,485
Other consumer loans		15,351		16,421
Total non-performing loans held for investment (1)	$	1,008,044	$	1,138,362

(1) Amount exclude purchased credit-impaired loans with a carrying value of approximately $12.7 million acquired as part of the credit cards portfolio purchased in the second quarter of 2012 as further discussed below.

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

As of September 30, 2012 (In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due (1)		Total Past Due (4)		Purchased Credit- Impaired Loans (4)		Current		Total loans held for investment		90 days past due and still accruing (5)
Residential mortgage:
FHA/VA and other government guaranteed loans (2) (3) (5)		$—	$	12,406	$	91,422	$	103,828	$	—	$	112,662	$	216,490	$	91,422
Other residential mortgage loans (3)		—		109,309		333,903		443,212		—		2,102,716		2,545,928		12,990
Commercial:
Commercial & Industrial loans		14,436		11,516		258,354		284,306		—		3,343,340		3,627,646		27,895
Commercial mortgage loans (3)		—		11,744		235,955		247,699		—		1,211,419		1,459,118		4,792
Construction loans (3)		—		2,160		189,489		191,649		—		161,242		352,891		31
Consumer:
Auto loans		67,561		19,738		17,639		104,938		—		891,681		996,619		—
Finance leases		10,098		3,122		3,061		16,281		—		223,275		239,556		—
Other consumer loans		13,373		7,533		19,249		40,155		12,741		697,020		749,916		3,898
Total loans held for investment		$105,468	$	177,528	$	1,149,072	$	1,432,068	$	12,741	$	8,743,355	$	10,188,164	$	141,028

(1) Includes non-performing loans and accruing loans which 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) As of September 30, 2012, includes $6.1 million of defaulted loans collateralizing Ginnie Mae (“GNMA”) securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.

(3) 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, residential mortgage, commercial mortgage and construction loans are considered past due when the borrower is in arrears 2 or more monthly payments.

(4) Purchased credit–impaired loans are excluded from delinquency and non-performing statistics as further discussed below.

(5) It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as past due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $34.6 million of residential mortgage loans insured by FHA or guaranteed by the VA, which are over 18 months delinquent, that are no longer accruing interest as of September 30, 2012.

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As of December 31, 2011 (In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due (1)		Total Past Due		Current		Total loans held for investment		90 days past due and still accruing
Residential mortgage:
FHA/VA and other government guaranteed loans (2) (3)	$	—	$	17,548	$	85,188	$	102,736	$	165,417	$	268,153	$	85,188
Other residential mortgage loans (3)		—		90,274		350,495		440,769		2,164,863		2,605,632		12,287
Commercial:
Commercial & Industrial loans		27,674		10,714		294,723		333,111		3,797,405		4,130,516		24,552
Commercial mortgage loans (3)		—		8,891		240,414		249,305		1,316,106		1,565,411		—
Construction loans (3)		—		8,211		258,811		267,022		160,841		427,863		8,789
Consumer:
Auto loans		61,265		18,963		19,641		99,869		837,697		937,566		—
Finance leases		11,110		4,172		3,485		18,767		228,236		247,003		—
Other consumer loans		10,170		4,699		16,421		31,290		345,958		377,248		—
Total loans held for investment	$	110,219	$	163,472	$	1,269,178	$	1,542,869	$	9,016,523	$	10,559,392	$	130,816

(1) Includes non-performing loans and accruing loans which are contractually delinquent 90 days or more (i.e. FHA/VA and other guaranteed loans).

(2) As of December 31, 2011, includes $66.4 million of defaulted loans collateralizing Ginnie Mae (“GNMA”) securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.

(3) 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, residential mortgage, commercial mortgage and construction loans are considered past due when the borrower is in arrears 2 or more monthly payments.

The Corporation’s credit quality indicators by loan type are summarized below:

	Commercial Credit Exposure-Credit risk Profile based on Creditworthiness category:
September 30, 2012	Substandard		Doubtful		Loss		Total Adversely Classified		Total Portfolio
	(In thousands)
Commercial Mortgage	$	388,225	$	6,526	$	—	$	394,751	$	1,459,118
Construction		188,051		22,184		605		210,840		352,891
Commercial and Industrial		405,897		23,728		1,240		430,865		3,627,646
	Commercial Credit Exposure-Credit risk Profile based on Creditworthiness category:
December 31, 2011	Substandard		Doubtful		Loss		Total Adversely Classified		Total Portfolio
	(In thousands)
Commercial Mortgage	$	414,355	$	8,462	$	—	$	422,817	$	1,565,411
Construction		247,560		32,059		2,916		282,535		427,863
Commercial and Industrial		457,927		31,100		1,373		490,400		4,130,516

The Corporation considered a loan as adversely classified if its risk rating is Substandard, Doubtful or Loss. These categories are defined as follows:

Substandard- A Substandard Asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful- Doubtful classifications have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. A Doubtful classification may be appropriate in cases where significant risk exposures are perceived, but Loss cannot be determined because of specific reasonable pending factors which may strengthen the credit in the near term.

Loss- Assets classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. There is little or no prospect for near term improvement and no realistic strengthening action of significance pending.

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September 30, 2012	Consumer Credit Exposure-Credit risk Profile based on payment activity
	Residential Real-Estate				Consumer
	FHA/VA/ Guaranteed (1)		Other residential loans		Auto		Finance Leases		Other Consumer
	(In thousands)
Performing		$216,490		$2,225,015		$978,980		$236,495		$721,824
Purchased Credit-Impaired		—		—		—		—		12,741
Non-performing		—		320,913		17,639		3,061		15,351
Total		$216,490		$2,545,928		$996,619		$239,556		$749,916

(1) It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as past due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $34.6 million of residential mortgage loans insured by FHA or guaranteed by the VA, which are over 18 months delinquent, that are no longer accruing interest as of September 30, 2012.

December 31, 2011	Consumer Credit Exposure-Credit risk Profile based on payment activity
	Residential Real-Estate				Consumer
	FHA/VA/ Guaranteed		Other residential loans		Auto		Finance Leases		Other Consumer
	(In thousands)
Performing	$	268,153	$	2,267,424	$	917,925	$	243,518	$	360,827
Non-performing		—		338,208		19,641		3,485		16,421
Total	$	268,153	$	2,605,632	$	937,566	$	247,003	$	377,248

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The following tables present information about impaired loans excluding purchased credit-impaired loans, which are reported separately and discussed below:

Impaired Loans

(Dollars in thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized Quarter to date		Interest Income Recognized Year to date
As of September 30, 2012 With no related allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—	$	—	$	—	$	—
Other residential mortgage loans		106,554		112,039		—		171,070		1,144		2,733
Commercial:
Commercial mortgage loans		50,043		62,819		—		40,939		442		1,003
Commercial & Industrial Loans		31,047		38,017		—		20,128		51		74
Construction Loans		38,863		64,637		—		37,314		33		70
Consumer:
Auto loans		—		—		—		—		—		—
Finance leases		—		—		—		—		—		—
Other consumer loans		1,647		2,597		—		2,729		25		51
	$	228,154	$	280,109	$	—	$	272,180	$	1,695	$	3,931
With an allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—	$	—	$	—	$	—
Other residential mortgage loans		488,234		550,123		49,640		428,808		3,857		10,851
Commercial:
Commercial mortgage loans		313,490		333,339		51,351		324,053		2,369		6,646
Commercial & Industrial Loans		207,465		272,977		57,001		236,896		479		1,503
Construction Loans		139,599		235,137		33,349		171,178		36		289
Consumer:
Auto loans		11,813		11,813		1,404		10,317		194		616
Finance leases		2,045		2,045		73		1,968		50		134
Other consumer loans		9,338		9,968		1,336		9,028		48		206
	$	1,171,984	$	1,415,402	$	194,154	$	1,182,248	$	7,033	$	20,244
Total:
FHA/VA Guaranteed loans	$	—	$	—	$	—	$	—	$	—	$	—
Other residential mortgage loans		594,788		662,162		49,640		599,878		5,001		13,584
Commercial:
Commercial mortgage loans		363,533		396,158		51,351		364,992		2,811		7,649
Commercial & Industrial Loans		238,512		310,994		57,001		257,024		530		1,577
Construction Loans		178,462		299,774		33,349		208,492		69		359
Consumer:		—		—		—		—		—		—
Auto loans		11,813		11,813		1,404		10,317		194		616
Finance leases		2,045		2,045		73		1,968		50		134
Other consumer loans		10,985		12,565		1,336		11,757		73		257
	$	1,400,138	$	1,695,511	$	194,154	$	1,454,428	$	8,728	$	24,176

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(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
As of December 31, 2011
With no related allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—
Other residential mortgage loans		181,081		192,757		—
Commercial:
Commercial mortgage loans		13,797		15,283		—
Commercial & Industrial Loans		40,453		45,948		—
Construction Loans		33,759		45,931		—
Consumer:
Auto loans		—		—		—
Finance leases		—		—		—
Other consumer loans		2,840		3,846		—
	$	271,930	$	303,765	$	—
With an allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—
Other residential mortgage loans		423,340		465,495		48,566
Commercial:
Commercial mortgage loans		354,954		383,890		59,167
Commercial & Industrial Loans		223,572		316,641		58,652
Construction Loans		213,388		344,035		44,768
Consumer:
Auto loans		8,710		8,710		1,039
Finance leases		1,804		1,804		41
Other consumer loans		9,678		9,678		2,669
	$	1,235,446	$	1,530,253	$	214,902
Total:
FHA/VA Guaranteed loans	$	—	$	—	$	—
Other residential mortgage loans		604,421		658,252		48,566
Commercial:
Commercial mortgage loans		368,751		399,173		59,167
Commercial & Industrial Loans		264,025		362,589		58,652
Construction Loans		247,147		389,966		44,768
Consumer:
Auto loans		8,710		8,710		1,039
Finance leases		1,804		1,804		41
Other consumer loans		12,518		13,524		2,669
	$	1,507,376	$	1,834,018	$	214,902

Interest income of approximately $10.2 million and $25.1 million was recognized on impaired loans for the third quarter and first nine months of 2011, respectively.

The following tables show the activity for impaired loans and the related specific reserve:

	Quarter ended			Nine-Month Period Ended
	September 30, 2012
	(In thousands)
Impaired Loans:
Balance at beginning of period	$	1,432,469		$	1,507,376
Loans determined impaired during the period		55,292			222,841
Net charge-offs		(30,971	)		(107,458	)
Increases to impaired loans (disbursements)		11,039			30,160
Foreclosures		(26,353	)		(113,737	)
Loans no longer considered impaired		(5,351	)		(42,269	)
Paid in full or partial payments		(35,987	)		(96,775	)
Balance at end of period	$	1,400,138		$	1,400,138

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	Quarter Ended			Nine-Month Period Ended
	September 30, 2012
	(In thousands)
Specific Reserve:
Balance at beginning of period	$	209,860		$	214,902
Provision for loan losses		15,265			87,070
Net charge-offs		(30,971	)		(107,818	)
Balance at end of period	$	194,154		$	194,154

Acquired loans including Purchased Credit-Impaired Loans

On May 30, 2012, the Corporation re-entered the credit card business with the acquisition of an approximate $406 million portfolio of FirstBank-branded credit card portfolio from FIA Card Services (FIA). These loans were recorded on the Consolidated Statement of Financial Condition at estimated fair value on acquisition date of $368.9 million. The Corporation concluded that a portion of these loans acquired were purchased credit-impaired (“PCI”) loans. PCI loans are acquired loans with evidence of credit quality deterioration since origination for which it is probable at the date of purchase that the Corporation will be unable to collect all contractually required payments. The loans for which the Corporation concluded were credit impaired had a contractual outstanding unpaid principal and interest balance of $34.6 million and an estimated fair value of $15.7 million. Given 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 Corporation’s subsequent accounting for PCI loans differs from the accounting for non-PCI loans, therefore, the Corporation separately tracks and report PCI loans and exclude these loans from delinquency and nonperforming loan statistics. Credit card loans continue to accrue finance charges and fees until charged-off at 180 days delinquent and the methodology employed to calculate the allowance for loan losses for non-PCI loans is similar to the methodology used for other consumer loans, except for that the loss rates are determined evaluating 12 months of historical performance, instead of 24 months.

Initial Fair value and Accretable Yield of Acquired loans

At acquisition, the Corporation estimated the cash flows the Corporation expected to collect on credit card loans acquired with a deteriorated credit quality. 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 nonaccretable difference. This difference is neither accreted into income nor recorded on the Corporation’s consolidated Statement of Financial Condition. The excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loans, using the effective yield method. The table below displays the contractually required principal and interest, cash flows expected to be collected and fair value at acquisition related to the loans the Corporation acquired. The table also displays the nonaccretable difference and the accretable yield at acquisition.

(In thousands)	At acquisition
	Purchased Credit- Impaired Loans
Contractually outstanding principal and interest at acquisition	$	34,577
Less: Nonaccretable difference		(15,408	)
Cash flows expected to be collected at acquisition		19,169
Less: Accretable yield		(3,451	)
Fair value of loans acquired	$	15,718

Outstanding balance and Carrying value of PCI loans

The table below presents the outstanding contractual principal balance and carrying value of the PCI loans as of September 30, 2012:

(In thousands)	Purchased Credit- Impaired Loans
Contractual balance	$	31,364
Carrying value		12,741

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Changes in accretable yield of acquired loans

Subsequent to acquisition, the Corporation is required to periodically evaluate its estimate of cash flows expected to be collected. These evaluations, performed quarterly, require the continued use of key assumptions and estimates, similar to the initial estimate of fair value. Subsequent changes in the estimated cash flows expected to be collected may result in changes in the accretable yield and nonaccretable difference or reclassifications from nonaccretable yield to accretable. Increases in the cash flows expected to be collected will generally result in an increase in interest income over the remaining life of the loan or pool of loans. Decreases in expected cash flows due to further credit deterioration will generally result in an impairment charge recognized in the Corporation’s provision for loan and lease losses, resulting in an increase to the allowance for loan losses. During the third quarter and first nine-months of 2012, the Corporation did not record record charges to the provision for loan losses related to PCI loans.

The following table presents changes in the accretable yield related to the PCI loans acquired from FIA:

(Dollars in thousands)	PCI Loans
Accretable yield at acquisition	$	3,451
Accretion recognized in earnings		(740	)
Accretable yield as of September 30, 2012	$	2,711

In addition to the credit card portfolio acquired from FIA, the Corporation purchased during the first nine-months of 2012 $149.5 million of residential mortgage loans consistent with a strategic program established by the Corporation in 2005 to purchase ongoing residential mortgage loan production from mortgage bankers in Puerto Rico. Generally, the loans purchased from mortgage bankers were conforming residential mortgage loans. Purchases of conforming residential mortgage loans provide the Corporation the flexibility to retain or sell the loans, including through securitization transactions depending upon whether the Corporation wants to retain high yielding loans and improve net interest margins or generate profits by selling loans. When the Corporation sells such loans, it generally keeps the servicing of the loans. The Corporation sold approximately $156.3 million of performing residential mortgage loans in the secondary market to FNMA and FHLMC during the first nine months of 2012. Also, the Corporation securitized approximately $165.3 million of FHA/VA mortgage loans into GNMA mortgage-backed securities during the first nine-months of 2012.

The Corporation’s primary lending area is Puerto Rico. The Corporation’s Puerto Rico banking subsidiary, FirstBank, also lends in the U.S. and British Virgin Islands markets and in the United States (principally in the state of Florida). Of the total gross loans held for investment portfolio of $10.2 billion as of September 30, 2012, approximately 85% have credit risk concentration in Puerto Rico, 7% in the United States and 8% in the Virgin Islands.

As of September 30, 2012, the Corporation had $148.7 million outstanding in credit facilities granted to the Puerto Rico Government and/or its political subdivisions, down from $360.1 million as of December 31, 2011, and $117.7 million granted to the Government of the Virgin Islands, down from $139.4 million as of December 31, 2011. A substantial portion of these credit facilities consist of loans to municipalities in Puerto Rico for which the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment. Another portion of these obligations consists of loans to public corporations that obtain revenues from rates charged for services or products, such as electric power and water utilities. Public corporations have varying degrees of independence from the central Government and many receive appropriations or other payments from it.

In addition to loans extended to government entities, the largest loan to one borrower as of September 30, 2012 in the amount of $258.3 million is with one mortgage originator in Puerto Rico, Doral Financial Corporation. This commercial loan is secured by individual real-estate loans, mostly 1-4 residential mortgage loans.

Troubled Debt Restructurings

The Corporation provides homeownership preservation assistance to its customers through a loss mitigation program in Puerto Rico and in accordance with the government’s Home Affordable Modification Program guidelines. Depending upon the nature of borrowers’ financial condition, restructurings or loan modifications through this program as well as other restructurings of individual commercial, commercial mortgage, construction and residential mortgage loans in the U.S. mainland fit the definition of Troubled

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debt restructurings (“TDR”). A restructuring of a debt constitutes a TDR if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. Modifications involve changes in one or more of the loan terms that bring a defaulted loan current and provide sustainable affordability. Changes may include the refinancing of any past-due amounts, including interest and escrow, the extension of the maturity of the loan and modifications of the loan rate. As of September 30, 2012, the Corporation’s total TDR loans of $925.1 million consisted of $410.2 million of residential mortgage loans, $107.5 million of commercial and industrial loans, $298.1 million of commercial mortgage loans, $86.6 million of construction loans and $22.7 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $4.4 million as of September 30, 2012.

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 for a significant period of time, and reduction of interest rates either permanently, offered up to 2010, or for a period of up to two years (step-up rates). Additionally, in remote 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 foreclosure action absent some lender concession. Notwithstanding, 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 three month period whereby 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 enters into a permanent modification. As a result of new accounting guidance on TDRs, loans that are participating in or that have been offered a binding trial modification are classified as TDRs when the trial offer is made and continue to be classified as TDR regardless of whether the borrower enters into a permanent modification. At September 30, 2012, we classified and additional $5.7 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 the construction portfolios, at the time of the restructuring, the Corporation determines, on a loan by loan basis, whether a concession was granted for economic or legal reasons related to the borrower’s financial difficulty. Concessions granted for commercial loans could include: reductions in interest rates to rates that are considered below market; extension of repayment schedules and maturity dates beyond original contractual terms; waiving of borrower covenants; forgiveness of principal or interest; or other contract changes that would be considered a concession. The Corporation mitigates loan defaults for its commercial loan portfolios through its collections function. The function’s objective is to minimize both early stage delinquencies and losses upon default of commercial loans. In the case of 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 REO. In addition to the management of the resolution process for problem loans, the SAG oversees collection efforts for all loans to prevent migration to the non-performing and/or adversely classified status. The SAG utilizes relationship officers, collection specialists and attorneys. In the case of residential construction projects, the workout function monitors project specifics, such as project management and marketing, as deemed necessary. The SAG utilizes its collections infrastructure of workout collection officers, credit work-out specialists, in-house legal counsel, and third party consultants. In the case of residential construction projects and large commercial loans, the function also utilizes third-party specialized consultants to monitor the residential and commercial construction projects in terms of construction, marketing and sales, and restructuring of large commercial loans. In addition, the Corporation extends, renews and restructures loans with satisfactory credit profiles. Many commercial loan facilities are structured as lines of credit, which are mainly one year in term and therefore are required to be renewed annually. Other facilities may be restructured or extended from time to time based upon changes in the borrower’s business needs, use of funds, timing of completion of projects and other factors. If the borrower is not deemed to have financial difficulties, extensions, renewals and restructurings are done in the normal course of business and not considered concessions, and the loans continue to be recorded as performing.

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Selected information on TDRs that includes the recorded investment by loan class and modification type is summarized in the following table. This information reflects all TDRs at September 30, 2012:

	September 30, 2012
(In Thousands)	Interest rate below market		Maturity or term extension		Combination of reduction in interest rate and extension of maturity		Forgiveness  of principal and/or interest		Forbearance agreement  (1)		Other (2)		Total
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans	$	17,437	$	4,196	$	346,314	$	—	$	—	$	42,300	$	410,247
Commercial Mortgage Loans		102,643		16,251		117,014		46,903		—		15,235		298,046
Commercial & Industrial Loans		16,878		12,394		21,708		7,333		9,521		39,723		107,557
Construction Loans		6,349		2,027		9,094		—		63,477		5,634		86,581
Consumer Loans - Auto		—		1,067		7,851		—		—		2,895		11,813
Finance Leases		—		1,669		375		—		—		—		2,044
Consumer Loans - Other		353		497		5,808		—		—		2,198		8,856
Total Troubled Debt Restructurings	$	143,660	$	38,101	$	508,164	$	54,236	$	72,998	$	107,985	$	925,144

(1) Mainly related to one construction relationship amounting to $53.4 million.

(2) Other concessions granted by the Corporation include deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation or a combination of the concessions listed in the table.

The following table presents the Corporation’s TDR activity:

(In Thousands)	Quarter ended			Nine-Month Period Ended
	September 30, 2012
Beginning Balance of TDRs	$	861,932		$	820,499
New TDRs		90,674			216,202
Increases to existing TDRs (disbursements)		5,690			21,825
Charge-offs post modification		(15,636	)		(41,198	)
Foreclosures		(2,513	)		(30,768	)
Removed from TDR classification		—			(7,051	)
Paid-off and partial payments		(15,003	)		(54,365	)
Ending balance of TDRs	$	925,144		$	925,144

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 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 loans being returned to accrual 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 interest income by returning a non-performing loan to performing status, if applicable, and increase cash flows by providing for payments to be made by the borrower, and avoid increases in foreclosure and real estate owned (“REO”) costs. The Corporation continues to consider a modified loan as an impaired loan for purposes of estimating the allowance for loan and lease losses. A TDR loan that specifies an interest rate that at the time of the restructuring is greater than or equal to the rate the Corporation is willing to accept for a new loan with comparable risk may not be reported as a TDR or an impaired loan in the calendar years subsequent to the restructuring if it is in compliance with its modified terms. During the nine-month period ended September 30, 2012, $7.1 million were removed from the TDR classification, as reflected in the table above.

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

(In Thousands)	September 30, 2012
	Accrual		Nonaccrual  (1)		Total TDRs
Non- FHA/VA Residential Mortgage loans	$	294,184	$	116,063	$	410,247
Commercial Mortgage Loans		157,445		140,601		298,046
Commercial & Industrial Loans		24,749		82,808		107,557
Construction Loans		2,490		84,091		86,581
Consumer Loans - Auto		7,114		4,699		11,813
Finance Leases		1,985		59		2,044
Consumer Loans - Other		7,037		1,819		8,856
Total Troubled Debt Restructurings	$	495,004	$	430,140	$	925,144

(1) Included in non-accrual loans are $203.6 million in loans that are performing under the terms of the restructuring agreement but are reported in non-accrual 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.

TDRs exclude restructured mortgage loans that are government guaranteed (i.e. FHA/VA loans) totaling $94.3 million. The Corporation excludes government guaranteed loans from TDRs given that in the event that the borrower defaults on the loan, the principal and interest 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 government guarantees to be impaired loans for the purpose of calculating the allowance for loan and lease losses.

Loan modifications that are considered TDRs completed during the quarter and nine-month period ended September 30, 2012 and 2011 were as follows:

(Dollars in thousands)	Quarter ended September 30, 2012
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		147	$	23,421	$	23,431
Commercial Mortgage Loans		14		57,100		57,100
Commercial & Industrial Loans		11		1,278		1,271
Construction Loans		3		4,380		4,380
Consumer Loans - Auto		156		2,044		2,044
Finance Leases		24		462		462
Consumer Loans - Other		304		1,986		1,986
Total Troubled Debt Restructurings		659	$	90,671	$	90,674
(Dollars in thousands)	Nine-Month Period Ended September 30, 2012
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		403	$	64,412	$	64,773
Commercial Mortgage Loans		35		100,036		100,072
Commercial & Industrial Loans		47		33,162		29,593
Construction Loans		8		9,671		9,661
Consumer Loans - Auto		445		5,473		5,430
Finance Leases		76		1,384		1,384
Consumer Loans - Other		827		5,289		5,289
Total Troubled Debt Restructurings		1,841	$	219,427	$	216,202

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(Dollars in thousands)	Quarter ended September 30, 2011
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		190	$	30,724	$	31,395
Commercial Mortgage Loans		21		37,686		39,998
Commercial & Industrial Loans		19		24,355		24,085
Construction Loans		7		14,532		14,423
Consumer Loans - Auto		188		2,359		2,359
Finance Leases		32		409		409
Consumer Loans - Other		234		2,730		2,820
Total Troubled Debt Restructurings		691	$	112,795	$	115,489

(Dollars in thousands)	Nine-Month Period Ended September 30, 2011
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		607	$	98,168	$	101,367
Commercial Mortgage Loans		61		149,340		121,078
Commercial & Industrial Loans		43		44,561		43,702
Construction Loans		14		106,204		106,278
Consumer Loans - Auto		600		7,423		7,423
Finance Leases		87		1,501		1,501
Consumer Loans - Other		910		8,758		8,892
Total Troubled Debt Restructurings		2,322	$	415,955	$	390,241

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-performing loan. Recidivism occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans. The Corporation considers a loan to have defaulted if the borrower has failed to make payments of either principal, interest, or both for a period of 90 days or more.

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Loan modifications considered troubled debt restructurings that defaulted during the quarter and nine-month period ended September 30, 2012 and 2011 and had been modified in a TDR during the 12-months preceding the default date were as follows:

	Quarter ended September 30,
(Dollars in Thousands)	2012				2011
	Number of contracts		Recorded Investment		Number of contracts		Recorded Investment
Non- FHA/VA Residential Mortgage loans		49	$	8,031		31	$	4,108
Commercial Mortgage Loans		1		338		5		2,783
Commercial & Industrial Loans		1		1,910		1		128
Construction Loans		—		—		—		—
Consumer Loans - Auto		3		38		—		—
Consumer Loans - Other		6		37		2		49
Finance Leases		—		—		52		250
Total		60	$	10,354		91	$	7,318
	Nine-Month Period Ended September 30,
(Dollars in Thousands)	2012				2011
	Number of contracts		Recorded Investment		Number of contracts		Recorded Investment
Non- FHA/VA Residential Mortgage loans		137	$	20,841		120	$	31,141
Commercial Mortgage Loans		9		5,549		21		6,211
Commercial & Industrial Loans		5		8,189		2		1,567
Construction Loans		2		8,382		1		70
Consumer Loans - Auto		39		431		—		—
Consumer Loans - Other		12		155		2		49
Finance Leases		1		27		54		373
Total		205	$	43,574		200	$	39,411

For certain TDRs, the Corporation splits the loans into two new notes, A and B notes. The A note is restructured to comply with the Corporation’s lending standards at current market rates, and is tailored to suit the customer’s ability to make timely interest and principal payments. The B note includes the granting of the concession to the borrower and varies by situation. The B note is charged-off but the obligation is not forgiven to the borrower, and any payments collected are accounted for as recoveries. At the time of restructuring, the A note is identified and classified as a TDR. 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 are included in assessing whether the borrower can meet the new terms and may result in that the loans be returned to accrual status at the time of restructuring. In the periods following the calendar year in which a loan was restructured, the A Note may no longer be reported as a TDR if it is on accrual, is in compliance with its modified terms, and yields a market rate (as determined and documented at the time of the restructure).

The recorded investment in loans restructured using the A/B note restructure workout strategy was approximately $128.7 million at September 30, 2012. The following table provides additional information about the volume of this type of loan restructuring and the effect on the allowance for loan and lease losses in the first nine-months of 2012 and 2011:

(In thousands)	September 30, 2012		September 30, 2011
Principal balance deemed collectible at end of period	$	128,651	$	77,799
Amount charged-off	$	2,735	$	29,576
Charges to the provision for loan losses	$	1,939	$	6,349
Allowance for loan losses as of September 30, 2012	$	5,951	$	1,394

Of the loans comprising the $128.7 million that have been deemed collectible, approximately $118.0 million were placed in accruing status as the borrowers have exhibited a period of sustained performance. These loans continue to be individually evaluated for impairment purposes.

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7 – ALLOWANCE FOR LOAN AND LEASE LOSSES

The changes in the allowance for loan and lease losses were as follows:

(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Quarter ended September 30, 2012
Allowance for loan and lease losses:
Beginning balance	$	67,440		$	100,846		$	166,021		$	67,858		$	54,988		$	457,153
Charge-offs		(7,586	)		(5,681	)		(12,795	)		(9,012	)		(9,444	)		(44,518	)
Recoveries		228			679			534			686			1,817			3,944
Provision (release)		9,083			(6,617	)		8,117			6,379			11,990			28,952
Ending balance	$	69,165		$	89,227		$	161,877		$	65,911		$	59,351		$	445,531
Ending balance: specific reserve for impaired loans	$	49,640		$	51,351		$	57,001		$	33,349		$	2,813		$	194,154
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	—		$	—
Ending balance: general allowance	$	19,525		$	37,876		$	104,876		$	32,562		$	56,538		$	251,377
Loans held for investment:
Ending balance	$	2,762,418		$	1,459,118		$	3,627,646		$	352,891		$	1,986,091		$	10,188,164
Ending balance: impaired loans	$	594,788		$	363,533		$	238,512		$	178,462		$	24,843		$	1,400,138
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	12,741		$	12,741
Ending balance: loans with general allowance	$	2,167,630		$	1,095,585		$	3,389,134		$	174,429		$	1,948,507		$	8,775,285
(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Nine-Month Period Ended September 30, 2012
Allowance for loan and lease losses:
Beginning balance	$	68,678		$	108,991		$	164,490		$	91,386		$	60,372		$	493,917
Charge-offs		(27,976	)		(15,588	)		(35,494	)		(42,908	)		(29,327	)		(151,293	)
Recoveries		676			721			2,179			4,004			5,294			12,874
Provision (release)		27,787			(4,897	)		30,702			13,429			23,012			90,033
Ending balance	$	69,165		$	89,227		$	161,877		$	65,911		$	59,351		$	445,531
Ending balance: specific reserve for impaired loans	$	49,640		$	51,351		$	57,001		$	33,349		$	2,813		$	194,154
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	—		$	—
Ending balance: general allowance	$	19,525		$	37,876		$	104,876		$	32,562		$	56,538		$	251,377
Loans held for investment:
Ending balance	$	2,762,418		$	1,459,118		$	3,627,646		$	352,891		$	1,986,091		$	10,188,164
Ending balance: impaired loans	$	594,788		$	363,533		$	238,512		$	178,462		$	24,843		$	1,400,138
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	12,741		$	12,741
Ending balance: loans with general allowance	$	2,167,630		$	1,095,585		$	3,389,134		$	174,429		$	1,948,507		$	8,775,285
(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Quarter ended September 30, 2011
Allowance for loan and lease losses:
Beginning balance	$	67,404		$	90,785		$	188,562		$	131,344		$	62,783		$	540,878
Charge-offs		(16,076	)		(3,316	)		(22,703	)		(17,008	)		(11,086	)		(70,189	)
Recoveries		260			7			177			185			1,923			2,552
Provision (release)		17,744			13,324			10,437			(2,547	)		7,488			46,446
Ending balance	$	69,332		$	100,800		$	176,473		$	111,974		$	61,108		$	519,687
Ending balance: specific reserve for impaired loans	$	49,350		$	35,928		$	77,932		$	48,209		$	2,878		$	214,297
Ending balance: general allowance	$	19,982		$	64,872		$	98,541		$	63,765		$	58,230		$	305,390
Loans held for investment:
Ending balance	$	2,873,966		$	1,584,787		$	4,123,174		$	473,812		$	1,577,403		$	10,633,142
Ending balance: impaired loans	$	548,677		$	245,439		$	384,640		$	237,701		$	15,325		$	1,431,782
Ending balance: loans with general allowance	$	2,325,289		$	1,339,348		$	3,738,534		$	236,111		$	1,562,078		$	9,201,360
(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Nine-Month Period Ended September 30, 2011
Allowance for loan and lease losses:
Beginning balance	$	62,330		$	105,596		$	152,641		$	151,972		$	80,486		$	553,025
Charge-offs		(30,571	)		(37,647	)		(50,858	)		(83,483	)		(35,168	)		(237,727	)
Recoveries		657			84			1,281			2,215			5,790			10,027
Provision		36,916			32,767			73,409			41,270			10,000			194,362
Ending balance	$	69,332		$	100,800		$	176,473		$	111,974		$	61,108		$	519,687
Ending balance: specific reserve for impaired loans	$	49,350		$	35,928		$	77,932		$	48,209		$	2,878		$	214,297
Ending balance: general allowance	$	19,982		$	64,872		$	98,541		$	63,765		$	58,230		$	305,390
Loans held for investment:
Ending balance	$	2,873,966		$	1,584,787		$	4,123,174		$	473,812		$	1,577,403		$	10,633,142
Ending balance: impaired loans	$	548,677		$	245,439		$	384,640		$	237,701		$	15,325		$	1,431,782
Ending balance: loans with general allowance	$	2,325,289		$	1,339,348		$	3,738,534		$	236,111		$	1,562,078		$	9,201,360

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As of September 30, 2012, the Corporation maintains a $1.6 million reserve for unfunded loan commitments mainly related to outstanding construction and C&I loans commitments. The reserve for unfunded loan commitments is an estimate of the losses inherent in off-balance sheet loan commitments 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.

8 – LOANS HELD FOR SALE

The Corporation’s loans held for sale portfolio was composed of:

	September 30, 2012		December 31, 2011
	(In thousands)
Residential mortgage loans	$	68,349	$	11,058
Construction loans		—		4,764
Total	$	68,349	$	15,822

9 – 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 the risk that net interest income from its loan and investment portfolios will be adversely affected by changes in interest rates. 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 as an economic undesignated hedge when it enters into the derivative contract. As of September 30, 2012 and December 31, 2011, all derivatives held by the Corporation were considered economic undesignated hedges. These undesignated hedges are 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. Specifically, the interest rate on certain of the Corporation’s commercial loans to other financial institutions is generally a variable rate limited to the weighted-average coupon of the referenced residential mortgage collateral, less a contractual servicing fee.

Interest rate swaps - Interest rate swap agreements generally involve the exchange of fixed and floating-rate interest payment obligations without the exchange of the underlying notional principal amount. As of September 30, 2012 and December 31, 2011, most of the interest rate swaps outstanding are used for protection against rising interest rates. Similar to unrealized gains and losses arising from changes in fair value, net interest settlements on interest rate swaps are recorded as an adjustment to interest income or interest expense depending on whether an asset or liability is being economically hedged.

Indexed options - Indexed options are generally over-the-counter (OTC) contracts that the Corporation enters into in order to receive the appreciation of a specified Stock Index (e.g., Dow Jones Industrial Composite Stock Index) over a specified period in exchange for a premium paid at the contract’s inception. The option period is determined by the contractual maturity of the notes payable tied to the performance of the Stock Index. The credit risk inherent in these options is the risk that the exchange party may not fulfill its obligation.

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 with no net settlement provision and no market mechanism to facilitate net settlement and they provide for delivery of a security within the time 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 loans securitizations of the mortgage-banking operations. Unrealized gains (losses) are recognized as part of mortgage banking activities in the Consolidated Statement of Income (Loss).

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

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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.

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The following table summarizes the notional amounts of all derivative instruments:

	Notional Amounts
	As of September 30, 2012		As of December 31, 2011
Economic undesignated hedges:	(In thousands)
Interest rate contracts:
Interest rate swap agreements used to hedge loans	$	38,597	$	39,786
Written interest rate cap agreements		—		67,894
Purchased interest rate cap agreements		—		67,894
Equity contracts:
Embedded written options on stock index deposits and notes payable		—		46,515
Purchased options used to manage exposure to the stock market on embedded stock index options		—		46,515
Forward Contracts:
Sale of TBA GNMA MBS pools		26,000		19,000
	$	64,597	$	287,604

The following table summarizes the fair value of derivative instruments and the location in the Statement of Financial Condition:

	Asset Derivatives						Liability Derivatives
	Statement  of Financial Condition Location		September  30, 2012		December  31, 2011		Statement of Financial Condition Location	September  30, 2012		December  31, 2011
(In thousands)			Fair Value		Fair Value			Fair Value		Fair Value
Economic undesignated hedges:
Interest rate contracts:
Interest rate swap agreements used to hedge loans		Other assets	$	318	$	378	Accounts payable and other liabilities	$	6,238	$	6,767
Equity contracts:
Embedded written options on stock index notes payable		Other assets		—		—	Notes payable		—		899
Purchased options used to manage exposure to the stock market on embedded stock index options		Other assets		—		899	Accounts payable and other liabilities		—		—
Forward Contracts:
Sales of TBA GNMA MBS pools		Other assets		18		—	Accounts payable and other liabilities		190		168
			$	336	$	1,277		$	6,428	$	7,834

The following table summarizes the effect of derivative instruments on the Statement of Income (Loss):

	Location of Gain or (loss) Recognized in Income on Derivatives	Unrealized (Loss)  or Gain						Unrealized Gain  or (Loss)
		Quarter Ended September 30,						Nine-Month Period  Ended September 30,
(In thousands)		2012			2011			2012			2011
ECONOMIC UNDESIGNATED HEDGES:
Interest rate contracts:
Interest rate swap agreements used to hedge fixed-rate:
Loans	Interest income - Loans	$	170		$	(954	)	$	469		$	(1,794	)
Equity contracts:
Embedded written and purchased options on stock index notes payable	Interest expense - Notes payable and other borrowings		—			40			—			(7	)
Forward contracts:
Sales of TBA GNMA MBS pools	Mortgage Banking Activities		(47	)		(176	)		(4	)		(209	)
Total gain (loss) on derivatives		$	123		$	(1,090	)	$	465		$	(2,010	)

Derivative instruments, such as interest rate swaps, 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.

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This will depend, for the most part, on the shape of the yield curve, the level of interest rates, as well as the expectations for rates in the future.

A summary of interest rate swaps follows:

	As of September 30, 2012			As of December 31, 2011
	(Dollars in thousands)
Pay fixed/receive floating :
Notional amount	$	38,597		$	39,786
Weighted-average receive rate at period end		2.08	%		2.13	%
Weighted-average pay rate at period end		6.82	%		6.82	%
Floating rates range from 167 to 252 basis points over 3-month LIBOR

As of September 30, 2012, the Corporation has not entered into any derivative instrument containing credit-risk-related contingent features.

10 – GOODWILL AND OTHER INTANGIBLES

Goodwill as of September 30, 2012 and December 31, 2011 amounted to $28.1 million, recognized as part of “Other Assets” in the Consolidated Statement of Financial Condition. The Corporation conducted its annual evaluation of goodwill and intangibles during the fourth quarter of 2011. The evaluation was a two step process. The Step 1 evaluation of goodwill allocated to the Florida reporting unit indicated potential impairment of goodwill. The Step 1 fair value for the unit was below the carrying amount of its equity book value as of the October 1, 2011 valuation date, requiring the completion of Step 2. The Step 2 required a valuation of all assets and liabilities of the Florida unit, including any recognized and unrecognized intangible assets, to determine the fair value of net assets. To complete Step 2, the Corporation subtracted from the unit’s Step 1 fair value the determined fair value of the net assets to arrive at the implied fair value of goodwill. The results of the Step 2 analysis indicated that the implied fair value of goodwill exceeded the goodwill carrying value by $13.7 million, resulting in no goodwill impairment. Goodwill was not impaired as of December 31, 2011, nor was any goodwill written-off due to impairment during 2011. There have been no 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 nine-months of 2012. 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 next 9.3 years on an accelerated basis proportionate to the projected run-off of the acquired credit cards accounts, which is based on historical performance of the portfolio.

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The following tables shows the gross amount and accumulated amortization of the Corporation’s intangible assets recognized as part of Other Assets in the consolidated statement of financial condition:

	As of September 30, 2012			As of December 31, 2011
Core deposit intangible:
Gross amount	$	45,844		$	45,844
Accumulated amortization		(35,921	)		(34,155	)
Net carrying amount	$	9,923		$	11,689
Remaining amortization period		10.7 years			11.5 years
Purchased credit card relationship intangible:
Gross amount	$	24,465		$	—
Accumulated amortization		(545	)		—
Net carrying amount	$	23,920		$	—
Remaining amortization period		9.3 years			—

For the quarter and nine-month period ended September 30, 2012, the amortization expense of core deposit intangibles amounted to $0.6 million and $1.8 million (2011 — $0.6 million and $1.8 million). For the quarter and nine-month period ended September 30, 2012, the amortization expense of the purchased credit card relationship intangible amounted to $0.4 million and $0.5 million, respectively.

11 – NON-CONSOLIDATED VARIABLE INTEREST ENTITIES 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 transfers and other transactions with Variable Interest Entities (“VIEs”) for consolidation, 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:

Ginnie Mae

The Corporation typically transfers first lien residential mortgage loans in conjunction with Ginnie Mae securitization transactions whereby 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, as such, under seller/servicer agreements the Corporation is required to service the loans in accordance with the issuers’ servicing guidelines and standards. As of September 30, 2012, the Corporation serviced loans securitized through GNMA with principal balance of $734.2 million.

Trust Preferred Securities

In 2004, FBP Statutory Trust I, a financing subsidiary of the Corporation, sold to institutional investors $100 million of its variable rate trust preferred securities. 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, were used by FBP Statutory Trust I 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, sold to institutional investors $125 million of its variable rate trust preferred securities. 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, were used by FBP Statutory Trust II 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, net of related issuance costs. The variable rate trust preferred securities are fully and unconditionally guaranteed by the Corporation. The $100 million Junior Subordinated

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Deferrable Debentures issued by the Corporation in April 2004 and the $125 million issued in September 2004 mature on September 17, 2034 and September 20, 2034, respectively; however, under certain circumstances, the maturity of Junior Subordinated Debentures may be shortened (such shortening would result in a mandatory redemption of the variable rate trust preferred securities). The trust preferred securities, subject to certain limitations, qualify as Tier I regulatory capital under current Federal Reserve rules and regulations. The Collins Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act eliminates certain trust preferred securities from Tier 1 Capital. These “regulatory capital deductions” for trust preferred securities are to be phased in incrementally over a period of 3 years beginning on January 1, 2013.

Grantor Trusts

During 2004 and 2005, a third party to the Corporation, from now on identified as the seller, established a series of statutory trusts to effect the securitization of mortgage loans and the sale of trust certificates. 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 fee compensation for services provided, the 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, that has an interest only strip (“IO”) tied to the cash flows of the underlying loans, whereas it is entitled to received 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 of the securities. The FDIC became the owner of the IO upon the intervention of the seller, a failed financial institution. No recourse agreement exists and the risk from losses on non accruing loans and repossessed collateral are absorbed by the Bank as the sole holder of the certificates. As of September 30, 2012, the amortized balance and carrying value of Grantor Trusts amounted to $72.5 million and $54.5 million, respectively, with a weighted average yield of 2.34%.

Investment in unconsolidated entities

On February 16, 2011, FirstBank sold an asset portfolio consisting of performing and non-performing construction, commercial mortgage and C&I loans with an aggregate book value of $269.3 million to CPG/GS PR NPL, LLC (“CPG/GS” or the “Joint Venture”) 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 has a 7-year maturity and bears variable interest at 30-day LIBOR plus 300 basis points and is secured by a pledge of all of the acquiring entity’s assets as well as the PRLP’s 65% ownership interest in CPG/GS. As of September 30, 2012, the carrying amount of the loan is $75.5 million and is included in the Corporation’s C&I loan receivable portfolio; the carrying value of FirstBank’s equity interest in CPG/GS is $32.3 million as of September 30, 2012, accounted under the equity method and included as part of Investment in unconsolidated entities in the Consolidated Statements of Financial Condition. When applying the equity method, the Bank follows the Hypothetical Liquidation Book Value method (“HLBV”) to determine its share in CPG/GS earnings or losses. Under HLBV, the Bank determines its share in CPG/GS earnings or losses by determining the difference between its “claim on CPG/GS’s book value” at the end of the period as compared to the beginning of the period. This claim is calculated as the amount the Bank would receive if CPG/GS were to liquidate all of its assets at recorded amounts determined in accordance with GAAP and distribute the resulting cash to the investors, PRLP and FirstBank, according to their respective priorities as provided in the contractual agreement. The Bank reports its share of CPG/GS operating results on a one-quarter lag basis. In addition, as a result of using HLBV, the difference between the Bank’s investment in CPG/GS and its claim in the book value of CPG/GS at the date of the investment, known as the basis difference, is amortized over the estimated life of the investment, or five years as of September 30, 2012. CPG/GS records its loans receivable under the fair value option. Equity in losses of unconsolidated entities for the quarter and nine-month period ended September 30, 2012 of $2.2 million and $10.9 million, includes $1.1 million and $4.2 million, respectively, related to the amortization of the basis differential compared to equity in losses of unconsolidated entities of $4.4 million and $5.9 million for the same periods in 2011.

FirstBank also provided an $80 million advance facility to CPG/GS to fund unfunded commitments and costs to complete projects under construction which was fully disbursed in 2011, and a $20 million working capital line of credit to fund certain expenses of CPG/GS. During the second quarter of 2012, CPG repaid the outstanding balance of the advance facility to fund unfunded commitments and the funds became available to re-draw under a one-time revolver agreement. These loans bear variable interest at 30-day LIBOR plus 300 basis points. As of September 30, 2012, the carrying value of the revolver agreement and working capital line were $8.6 million and $0, respectively, and are included in the Corporation’s C&I loan receivable portfolio.

Cash proceeds received by CPG/GS are first used to cover operating expenses and debt service payments, including the note receivable, the advanced facility and the working capital line, described above, which must be fully 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%, 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

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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. FirstBank may experience further losses associated with this transaction due to this subordination in an amount equal to up to the value of its interest in CPG/GS. Factors that could impact FirstBank’s recoverability of its equity interest include lower than expected sale prices of units underlying CPG/GS assets and/or lower than projected liquidation value of the underlying collateral and changes in the expected timing of cash flows, among others.

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 impact the entity’s economic performance and the obligation to absorb losses of CPG/GS that could potentially be significant to the VIE or the right to receive benefits from the entity 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 the loan portfolio, impact foreclosure proceedings, or manage the construction and sale of the property; therefore, the Bank concluded that it is not the primary beneficiary of CPG/GS. As a creditor to CPG/GS, the Bank has certain rights related to CPG/GS, however, these are intended to be protective in nature and do not provide the Bank with the ability to manage the operations of CPG/GS. Since CPG/GS is not a consolidated subsidiary of the Bank and given that the transaction met the criteria for sale accounting under authoritative guidance, the Bank accounted for this transaction as a true sale, recognizing the cash received, the notes receivable and the interest in CPG/GS and derecognizing the loan portfolio sold.

The initial fair value of the investment in CPG/GS was determined using techniques with significant unobservable (Level 3) inputs. The valuation inputs included an estimate of future cash flows, expectations about possible variations in the amount and timing of cash flows, and a discount factor based on a rate of return. The Corporation researched available market data and internal information (i.e. proposals received for the servicing of distressed assets and public disclosures and information of similar structures and/or of distressed asset sales) and determined reasonable ranges of expected returns for FirstBank’s equity interest.

The rate of return of 17.57% was used as the discount factor used to estimate the value of the FirstBank’s equity interest and represents the Bank’s estimate of the yield a market participant would require. A reasonable range of equity returns was assessed considering the range of company specific risk premiums. The valuation of this type of equity interest is highly subjective and somewhat dependent on non-observable market assumptions, which may result in variations from market participant to market participant.

Servicing Assets

The Corporation is actively involved in the securitization of pools of FHA-insured and VA-guaranteed mortgages for issuance of GNMA 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						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Balance at beginning of period	$	16,592		$	14,638		$	15,226		$	15,163
Capitalization of servicing assets		1,389			1,271			4,486			3,793
Amortization		(834	)		(726	)		(2,220	)		(1,823	)
Adjustment to servicing assets for loans repurchased (1)		(124	)		(93	)		(629	)		(238	)
Adjustment to fair value		(363	)		(166	)		(203	)		(1,971	)
Balance at end of period	$	16,660		$	14,924		$	16,660		$	14,924

(1) Amount represents the adjustment to fair value related to the repurchase of $9.9 million and $54.5 million for the quarter and nine-month period ended September 30, 2012, respectively, and, $8.5 million and $29.3 million for the quarter and nine-month period ended September 30, 2011, respectively, in principal balance 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.

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Changes in the impairment allowance were as follows:

	Quarter ended						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Balance at beginning of period	$	118		$	2,239		$	2,725		$	434
Temporary impairment charges		378			232			565			2,355
OTTI of servicing assets		—			—			(2,447	)		—
Recoveries		(15	)		(66	)		(362	)		(384	)
Balance at end of period	$	481		$	2,405		$	481		$	2,405

The components of net servicing income are shown below:

	Quarter ended						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Servicing fees	$	1,399		$	1,293		$	4,161		$	3,955
Late charges and prepayment penalties		463			184			925			551
Adjustment for loans repurchased		(124	)		(93	)		(629	)		(238	)
Servicing income, gross		1,738			1,384			4,457			4,268
Amortization and impairment of servicing assets		(1,197	)		(892	)		(2,423	)		(3,794	)
Servicing income, net	$	541		$	492		$	2,034		$	474

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 ranged as follows:

	Maximum			Minimum
Nine-Month Period Ended September 30, 2012:
Constant prepayment rate:
Government guaranteed mortgage loans		12.4	%		11.6	%
Conventional conforming mortgage loans		12.8	%		12.6	%
Conventional non-conforming mortgage loans		13.8	%		13.3	%
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	%
Nine-Month Period Ended September 30, 2011:
Constant prepayment rate:
Government guaranteed mortgage loans		12.9	%		10.6	%
Conventional conforming mortgage loans		14.3	%		12.7	%
Conventional non-conforming mortgage loans		13.9	%		11.7	%
Discount rate:
Government guaranteed mortgage loans		11.5	%		11.3	%
Conventional conforming mortgage loans		9.5	%		9.3	%
Conventional non-conforming mortgage loans		15.0	%		13.8	%

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At September 30, 2012, fair values of the Corporation’s servicing assets were based on a valuation model that incorporates market driven assumptions, adjusted by the particular characteristics of the Corporation’s servicing portfolio, regarding discount rates and mortgage prepayment rates. The weighted-averages of the key economic assumptions used by the Corporation in its valuation model and the sensitivity of the current fair value to immediate 10 percent and 20 percent adverse changes in those assumptions for mortgage loans at September 30, 2012, were as follows:

	(Dollars in thousands)
Carrying amount of servicing assets	$	16,660
Fair value	$	18,007
Weighted-average expected life (in years)		7.60
Constant prepayment rate (weighted-average annual rate)		12.66	%
Decrease in fair value due to 10% adverse change	$	857
Decrease in fair value due to 20% adverse change	$	1,650
Discount rate (weighted-average annual rate)		11.09	%
Decrease in fair value due to 10% adverse change	$	663
Decrease in fair value due to 20% adverse change	$	1,281

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10 percent variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to 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.

12 – DEPOSITS

The following table summarizes deposit balances:

	September 30, 2012		December 31, 2011
	(In thousands)
Type of account and interest rate:
Non-interest bearing checking accounts	$	780,717	$	705,789
Savings accounts		2,287,511		2,145,625
Interest-bearing checking accounts		1,117,189		1,066,753
Certificates of deposit		2,302,723		2,258,216
Brokered certificates of deposit		3,408,262		3,731,371
	$	9,896,402	$	9,907,754

Brokered certificates of deposit mature as follows:

	September 30, 2012
	(In thousands)
One to ninety days	$	654,931
Over ninety days to one year		1,761,624
One to three years		889,003
Three to five years		98,446
Over five years		4,258
Total	$	3,408,262

The following are the components of interest expense on deposits:

	Quarter Ended				Nine-Month Period Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
	(In thousands)				(In thousands)
Interest expense on deposits	$	27,653	$	42,465	$	92,569	$	136,507
Amortization of broker placement fees		2,300		3,675		7,607		13,217
Interest expense on deposits	$	29,953	$	46,140	$	100,176	$	149,724

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13 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase (repurchase agreements) consist of the following:

	September 30, 2012		December 31, 2011
	(In thousands)
Repurchase agreements, interest ranging from 2.45% to 3.52% (December 31, 2011 - 2.50% to 4.40%)	$	900,000	$	1,000,000

Repurchase agreements mature as follows:

	September 30, 2012
	(In thousands)
Three to five years	$	600,000
Over five years		300,000
Total	$	900,000

As of September 30, 2012 and December 31, 2011, the securities underlying such agreements were delivered to the dealers with whom the repurchase agreements were transacted.

Repurchase agreements as of September 30, 2012, grouped by counterparty, were as follows:

(Dollars in thousands)	Amount		Weighted-Average Maturity (In Months)
Counterparty
Citigroup Global Markets	$	300,000		49
JP Morgan Chase		200,000		52
Dean Witter / Morgan Stanley		100,000		60
Credit Suisse First Boston		300,000		62
	$	900,000

14 – ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB)

Following is a summary of the advances from the FHLB:

(In thousands)	September 30, 2012		December 31, 2011
Fixed-rate advances from FHLB, with a weighted-average interest rate of 2.31% (December 31, 2011 - 3.59%)	$	518,440	$	367,440

Advances from FHLB mature as follows:

	September 30, 2012
	(In thousands)
One to thirty days	$	10,000
Over ninety days to one year		155,000
One to three years		53,440
Three to five years		300,000
Total	$	518,440

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As of September 30, 2012, the Corporation had additional capacity of approximately $300.4 million on this credit facility based on collateral pledged at the FHLB, including haircuts reflecting the perceived risk associated with holding the collateral.

15 – NOTES PAYABLE

Notes payable consist of:

(In thousands)	September 30, 2012		December 31, 2011
Callable step-rate notes, bearing step increasing interest from 5.00% to 7.00% (6.00 % as of December 31, 2011) maturing on October 18, 2019, measured at fair value (1)	$	—	$	15,968
Dow Jones Industrial Average (DJIA) linked principal protected notes:
Series A maturing on February 28, 2012		—		7,374
	$	—	$	23,342

(1) During the second quarter of 2012, the Corporation prepaid medium term notes with a principal balance of 15.4 million that carried a rate of 6.00%. These notes were carried at fair value and changes in value were recorded as part of interest expense. As a result of the prepayment of the notes, a marked-to-market loss of $0.5 million was reversed resulting in a reduction in interest expense for the first nine months of 2012.

16 – OTHER BORROWINGS

Other borrowings consist of:

(In thousands)	September 30, 2012		December 31, 2011
Junior subordinated debentures due in 2034, interest-bearing at a floating-rate of 2.75% over 3-month LIBOR (3.14% as of September 30, 2012 and 3.31% as of December 31, 2011)	$	103,093	$	103,093
Junior subordinated debentures due in 2034, interest-bearing at a floating-rate of 2.50% over 3-month LIBOR (2.89% as of September 30, 2012 and 3.06% as of December 31, 2011)		128,866		128,866
	$	231,959	$	231,959

17 – STOCKHOLDERS’ EQUITY

Common Stock

As of September 30, 2012 and December 31, 2011, the Corporation had 2,000,000,000 authorized shares of common stock with a par value of $0.10 per share. As of September 30, 2012 and December 31, 2011, there were 206,674,221 and 205,794,024 shares issued, respectively, and 206,179,368 and 205,134,171 shares outstanding, respectively. On July 30, 2009, the Corporation announced the suspension of common and preferred stock dividends effective with the preferred dividend for the month of August 2009.

In August of 2012 the Corporation granted 44,910 shares of restricted stock under the Omnibus Plan, as amended, to the independent directors subject to a one year vesting period. Also in March of 2012 the Corporation granted 719,500 shares of restricted stock, to certain senior executive officers and certain other employees. The restrictions on such restricted stock will lapse 50% over a two year period and 50% over a three year period. Included in the shares of restricted stock granted in 2012 are 557,000 shares granted to certain senior executive officers consistent with the requirements of the TARP Interim Final Rule, refer to Note 3 for additional details. The shares of restricted stock may vest more quickly in the event of death, disability, retirement, or a change in control. Based on particular circumstances evaluated by the Compensation Committee as they may relate to the termination of a restricted stock holder, the Corporation’s Board of Directors may, with the recommendation of the Compensation Committee, grant the full vesting of the restricted stock held upon termination of employment. Holders of restricted stock have the right to dividends or dividend equivalents, as applicable, during the restriction period. Such dividends or dividend equivalents will accrue during the restriction period, but will not be paid until restrictions lapse. The holder of restricted stock has the right to vote the shares.

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Preferred Stock

The Corporation has 50,000,000 authorized shares of preferred stock with a par value of $1, redeemable at the Corporation’s option subject to certain terms. This stock may be issued in series and the shares of each series shall have such rights and preferences as shall be fixed by the Board of Directors when authorizing the issuance of that particular series. As of September 30, 2012, 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 the 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 preferred stock in a quotation medium.

As mentioned above, the Corporation stopped paying dividends for common and all its outstanding series of preferred stock. This suspension was effective with the dividends for the month of August 2009 on the Corporation’s five outstanding series of non-cumulative preferred stock.

Stock repurchase plan and treasury stock

The Corporation has a stock repurchase program under which, from time to time, it repurchases shares of common stock in the open market and holds them as treasury stock. No shares of common stock were repurchased during the first nine-months of 2012 or in 2011 by the Corporation. On February 17, 2012, the Corporation sold 165,000 shares of treasury stock at a purchase price of $3.79 per share to a director. As of September 30, 2012 and December 31, 2011 the Corporation had 494,853 and 659,853 shares held as treasury stock, respectively, that were available for general corporate purposes.

FirstBank Statutory Reserve

The Banking Act 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 stockholders without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The net loss experienced in 2011 exhausted FirstBank’s statutory reserve fund. The Bank cannot pay dividends until it can replenish the reserve fund to an amount of at least 20% of the original capital contributed.

18 – INCOME TAXES

Income tax expense includes Puerto Rico and Virgin Islands 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. income tax purposes and is generally subject to United States income tax only on its income from sources within the United States or income effectively connected with the conduct of a trade or business within the United States. Any such tax paid is also creditable against the Corporation’s Puerto Rico tax liability, subject to certain conditions and limitations.

On January 31, 2011, the Puerto Rico Government approved Act No. 1, which repealed the 1994 Code (“1994 PR Code”) and replaces it with the Puerto Rico Internal Revenue Code of 2011 (“2011 PR Code”). The provisions of the 2011 PR Code are generally applicable to taxable years commencing after December 31, 2010. Under the 2011 PR Code, the Corporation and its subsidiaries are treated as separate taxable entities and are not entitled to file consolidated tax returns and, thus, the Corporation is not able 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, a particular subsidiary must be able to demonstrate sufficient taxable income within the applicable carry forward period (7 years under the 2011 PR Code, except for losses incurred during tax years commenced after December 31, 2004 and before December 31, 2012, that the carry forward period is extended to 10 years). The 2011 PR Code 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. Dividend payments from a U.S. subsidiary to the Corporation are subject to a 10% withholding tax based on the provisions of the U.S. Internal Revenue Code.

Under the 2011 PR Code, First BanCorp is subject to a maximum statutory tax rate of 30% (25% for taxable years commencing after December 31, 2013 if certain economic conditions are met by the Puerto Rico economy). The 2011 PR Code also includes an alternative minimum tax of 20% that applies if the Corporation’s regular income tax liability is less than the alternative minimum tax requirements.

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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 International Banking Entity (“IBE”) of the Bank and through the Bank’s subsidiary, FirstBank Overseas Corporation, in which the interest income and gain on sales is exempt from Puerto Rico and U.S. income taxation except for tax yeas that commenced after December 31, 2008 and before January 1, 2012, for which a special 5% tax was imposed to all IBEs. The IBEs and FirsBank 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 from eligible activities by IBEs operating in Puerto Rico. IBEs that operate as a unit of a bank pay income taxes at normal rates to the extent that the IBEs’ net income exceeds 20% of the bank’s total net taxable income.

For the quarter and nine-month period ended September 30, 2012, the Corporation recorded an income tax expense of $0.7 million and $4.4 million, respectively, compared to an income tax expense of $2.9 million and $9.1 million for the same periods in 2011. The decrease is primarily due to lower taxable income from profitable subsidiaries and for the nine-months period was also driven by a reduction in deferred tax assets of profitable subsidiaries due to a reduction in statutory tax rates in 2011. The income tax in the interim financial statements is calculated based on the income of the individual subsidiaries and the currently valid tax rates as a best possible estimate. As of September 30, 2012, the deferred tax asset, net of a valuation allowance of $360.0 million, amounted to $4.6 million compared to $5.4 million as of December 31, 2011.

Accounting for income taxes requires that companies assess whether a valuation allowance should be recorded against their deferred tax asset based on the consideration of all available evidence, using a “more likely than not” realization standard. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. In making such assessment, significant weight is to be given to evidence that can be objectively verified, including both positive and negative evidence. Consideration must be given to all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, future taxable income exclusive of the reversal of temporary differences and carryforwards, taxable income in carryback years and tax planning strategies. In estimating taxes, management assesses the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory, judicial and regulatory guidance, and recognizes tax benefits only when deemed probable of realization.

In assessing the weight of positive and negative evidence, a significant negative factor that resulted in the maintenance of the valuation allowance was that the Corporation’s banking subsidiary, FirstBank Puerto Rico, continues in a three-year historical cumulative loss position as of September 30, 2012, mainly due to significant charges to the provision for loan and lease losses in prior years as a result of the economic downturn. As of September 30, 2012, management concluded that $4.6 million of the deferred tax asset will be realized as it relate to profitable subsidiaries and to amounts that can be realized through future reversals of existing taxable temporary differences. To the extent the realization of a portion, or all, of the tax asset becomes “more likely than not” based on changes in circumstances (such as, improved earnings, changes in tax laws or other relevant changes), a reversal of that portion of the deferred tax asset valuation allowance will then be recorded.

The authoritative accounting guidance prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken on income tax returns. Under this guidance, income tax benefits are recognized and measured based upon a two-step model: 1) a tax position must be more likely than not to be sustained based solely on its technical merits in order to be recognized, and 2) the benefit is measured as the largest dollar amount of that position that is more likely than not to be sustained upon settlement. The difference between the benefit recognized in accordance with this model and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit (“UTB”).

During the third quarter of 2011, the Corporation recorded new UTBs of $2.4 million, all of which would, if recognized, affect the Corporations effective tax rate. The Corporation classified all interest and penalties, if any, related to tax uncertainties as income tax expense. As of September 30, 2012, the Corporation’s accrued interest that relates to tax uncertainties amounted to $1.1 million and there is no need to accrue for the payment of penalties. For the nine-month period ended September 30, 2012, the total amount of interest recognized by the Corporation as part of income tax expense related to tax uncertainties was $0.2 million. During the first nine months of 2012 there was no change to the UTB of $2.4 million. The amount of UTBs may increase or decrease for various reasons, including changes in the amounts for current tax year positions, the expiration of open income tax returns due to the expiration of statutes of limitations, changes in management’s judgment about the level of uncertainty, the status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions. The years 2007 through 2009 have been examined by the United States Internal Revenue Service (“IRS”) and disputed issues have been taken to administrative appeals. Although the timing of the resolution and/or closure of audits is highly uncertain, the Corporation believes it is reasonably possible that the IRS will conclude this audit within the next twelve months. If any issues addressed in the IRS audit are resolved in a manner not consistent with the Corporation’s expectations, the Corporation could be required to adjust its provision for income taxes in the period such resolution occurs. The Corporation currently cannot reasonably estimate a range of possible changes to existing reserves.

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The Corporation’s liability for income taxes includes the liability for UTBs, and interest which relates to tax years still subject to review by taxing authorities. Audit periods remain open for review until the statute of limitations has passed. The statute of limitations under the PR Code is 4 years; and for Virgin Islands and U.S. income tax purposes is 3 years after a tax return is due or filed, whichever is later. 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 results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. For Puerto Rico and Virgin Islands income tax purposes, all tax years subsequent to 2009 remain open to examination. Taxable years from 2007 remain open to examination for U.S. income tax purpose.

19 – FAIR VALUE

Fair Value Option

FASB authoritative guidance permits the measurement of selected eligible financial instruments at fair value.

Medium-Term Notes

The Corporation elected the fair value option for certain medium term notes that were hedged with interest rate swaps that were previously designated for fair value hedge accounting. These medium-term notes were repaid during the second quarter of 2012. As of December 31, 2011, these medium-term notes with a principal balance of $15.4 million, had a fair value of $16.0 million, recorded in notes payable. Interest paid/accrued on these instruments was recorded as part of interest expense and the accrued interest was part of the fair value of the notes. Electing the fair value option allows the Corporation to eliminate the burden of complying with the requirements for hedge accounting (e.g., documentation and effectiveness assessment) without introducing earnings volatility.

Medium-term notes for which the Corporation elected the fair value option were priced using observable market data in the institutional markets.

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 which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. 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 are traded 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 and financial liabilities (e.g., medium-term notes elected to be measured at fair value) 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 that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models for which the determination of fair value requires significant management judgment or estimation.

For 2012, there have been no transfers into or out of Level 1, Level 2 or Level 3 measurement of the fair value hierarchy.

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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 equity securities, U.S. Treasury notes and non-callable U.S. Agency debt securities), when available (Level 1), or 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 models that use unobservable inputs due to the limited market activity of the instrument, as is the case with certain private label mortgage-backed securities 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 bias on a nonrated security. The market valuation is derived from a model that utilizes relevant assumptions such as 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, others) in combination with prepayment forecasts obtained from a commercially available prepayment model (ADCO). 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, taking into account loan credit characteristics (loan-to-value, state, origination date, property type, occupancy loan purpose, documentation type, debt-to-income ratio, other) to provide an estimate of default and loss severity.

Corporate bonds are collateralized by an agency zero-coupon bond and a synthetic Collateralized Debt Obligation of 125 corporate bonds rated investment grade at the time of structuring. The value of the bonds is tied to the level of credit default swap spreads.

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

Derivative instruments

The fair value of most of the derivative instruments is based on observable market parameters and takes into consideration the credit risk component of paying counterparties when appropriate, except when collateral is pledged. That is, on interest rate swaps, the credit risk of both counterparties is included in the valuation; and, on options and caps, only the seller’s credit risk is considered. The derivative instruments, namely swaps and caps, were valued using a discounted cash flow approach using the related US LIBOR and swap rate for each cash flow. Derivatives include interest rate swaps used for protection against rising interest rates. For these interest rate swaps, a credit component was not considered in the valuation since the Corporation has fully collateralized with investment securities any mark to market loss with the counterparty and, if there were market gains, the counterparty had to deliver collateral to the Corporation.

Although most of the derivative instruments are fully collateralized, a credit spread is considered for those that are not secured in full. The cumulative mark-to-market effect of credit risk in the valuation of derivative instruments for the quarter and nine-month period ended September 30, 2012 was immaterial.

Term notes payable

The fair value of term notes was determined using a discounted cash flow analysis over the full term of the borrowings. The model assumes that the embedded options are exercised economically. The discount rates used in the valuations consider 3-month LIBOR forward curves and the credit spread at every cash flow. During the second quarter of 2012, the Corporation prepaid medium term notes with a principal balance of $15.4 million that carried a rate of 6.00%. These notes were carried at fair value and changes in value were recorded as part of interest expense. As a result of the prepayment of the notes, a marked-to-market loss of $0.5 million was reversed resulting in a reduction in interest expense for the nine-month period ended on September 30, 2012.

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Assets and liabilities measured at fair value on a recurring basis, including financial liabilities for which the Corporation has elected the fair value option, are summarized below:

	As of September 30, 2012								As of December 31, 2011
	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	$	40	$	—	$	—	$	40	$	41	$	—	$	—	$	41
U.S. Treasury Securities		7,495		—		—		7,495		476,992		—		—		476,992
Non-callable U.S. agency debt		—		—		—		—		301,585		—		—		301,585
Callable U.S. agency debt and MBS		—		1,472,277		—		1,472,277		—		859,818		—		859,818
Puerto Rico Government Obligations		—		59,603		3,743		63,346		—		219,369		3,244		222,613
Private label MBS		—		—		54,689		54,689		—		—		61,206		61,206
Corporate bonds		—		—		—		—		—		—		1,013		1,013
Derivatives, included in assets:
Interest rate swap agreements		—		318		—		318		—		378		—		378
Purchased options used to manage exposure to the stock market on embeded stock indexed options		—		—		—		—		—		899		—		899
Forward contracts		—		18		—		18		—		—		—		—
Liabilities:
Medium-term notes		—		—		—		—		—		15,968		—		15,968
Derivatives, included in liabilities:
Interest rate swap agreements		—		6,238		—		6,238		—		6,767		—		6,767
Embedded written options on stock index deposits and notes payable		—		—		—		—		—		899		—		899
Forward Contracts		—		190		—		190		—		168		—		168
Total	$	7,535	$	1,538,644	$	58,432	$	1,604,611	$	778,618	$	1,104,266	$	65,463	$	1,948,347

	Changes in Fair Value for items Measured at Fair Value Pursuant to Election of  the Fair Value Option For the Quarter ended September 30,
	2012		2011
(In thousands)	Decrease (increase) in Interest Expense included in Current-Period Earnings (1)
Medium-term notes	$	—	$	(1,871	)

(1) Changes in fair value for the quarter ended September 30, 2011 include interest expense on medium-term notes of $0.2 million. Interest expense on medium-term notes that have been elected to be carried at fair value are recorded in interest expense in the Consolidated Statement of Income (Loss) based on their contractual coupons.

	Changes in Fair Value for items Measured at Fair Value Pursuant to Election of  the Fair Value Option For the Nine-Month Period Ended September 30,
	2012			2011
(In thousands)	Decrease (increase) in Interest Expense included in Current-Period Earnings (1)
Medium-term notes	$	(140	)	$	(2,864	)

(1) Changes in fair value for the nine-month period ended September 30, 2012 and 2011 include interest expense on medium-term notes of $0.4 million and $0.7 million, respectively. Interest expense on medium-term notes that have been elected to be carried at fair value are recorded in interest expense in the Consolidated Statement of Income (Loss) based on their contractual coupons.

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The table below presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter and nine-month period ended September 30, 2012 and 2011.

	Total Fair Value  Measurements Quarter ended September 30,
	2012			2011
Level 3 Instruments Only (In thousands)	Securities Available For Sale (1)			Securities Available For Sale (1)
Beginning balance	$	61,838			71,412
Total gains or (losses) (realized/unrealized):
Included in earnings		(557	)		(350	)
Included in other comprehensive income		1,666			897
Sales		(1,450	)		—
Principal repayments and amortization		(3,065	)		(3,851	)
Ending balance	$	58,432		$	68,108

(1) Amounts mostly related to private label mortgage-backed securities.

	Total Fair Value Measurements Nine-Month Period Ended September  30,
	2012			2011
Level 3 Instruments Only (In thousands)	Securities Available For Sale (1)			Securities Available For Sale (1)
Beginning balance	$	65,463			74,993
Total gains or (losses) (realized/unrealized):
Included in earnings		(1,933	)		(957	)
Included in other comprehensive income		6,722			2,768
Held-to-Maturity investment securities reclassified to Available-for-Sale		—			2,000
Sales		(1,450	)		—
Principal repayments and amortization		(10,370	)		(10,696	)
Ending balance	$	58,432		$	68,108

(1) Amounts mostly related to private label mortgage-backed securities.

The table below presents qualitative information for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at September 30, 2012.

	September 30, 2012
(In thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
Investment securities available-for-sale:
Private label MBS	$	54,689	Discounted cash flow	Discount rate	14.5%
				Prepayment rate	23.81% - 43.58% (Weighted Average 33%)
				Projected Cumulative Loss Rate	0.71% - 17.51% (Weighted Average 7%)
Puerto Rico Government Obligations		3,743	Discounted cash flow	Prepayment Speed	5.95%

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 the prepayment rates. Shifts in those inputs would result in different fair value measurements. Increases in the probability of default, loss severity assumptions and pre-payments rates in isolation would generally result in an adverse effect in 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 speed. A significant increase (decrease) in the assumed speed would lead to a higher (lower) fair value estimate. Loss severity and probability of default are not included as significant unobservable variables because the note is guaranteed by the Puerto Rico Housing Finance Authority (“PRHFA”). The PRHFA credit risk is modeled by discounting the cash flows using a curve appropriate to the PRHFA credit rating.

Additionally, fair value is used on a non-recurring 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, loans).

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As of September 30, 2012, 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 September 30, 2012						Losses recorded for the Quarter Ended September 30, 2012		Losses recorded for the Nine-Month Period Ended September 30, 2012
	Level 1		Level 2		Level 3
	(In thousands)
Loans receivable (1)	$	—	$	—	$	702,308	$	19,676	$	80,172
Other Real Estate Owned (2)		—		—		177,001		3,264		7,860
Mortgage servicing rights (3)		—		—		16,660		363		203

(1) Mainly impaired commercial and construction loans. The impairment was generally measured based on the fair value of the collateral. The fair values are 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 value is 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), which are not market observable. Losses are related to market valuation adjustments after the transfer from the loan to the Other Real Estate Owned (“OREO”) portfolio.

(3) Fair value adjustments to mortgage servicing rights were mainly due to assumptions associated with mortgage prepayment rates. The Corporation carries its mortgage servicing rights at lower of cost or market, and they are accordingly measured at fair value on a non-recurring basis. Assumptions for the value of mortgage servicing rights include: Prepayment rate 12.66%, Discount Rate 11.09%.

As of September 30, 2011, 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 September 30, 2011						Losses recorded for the Quarter Ended September 30, 2011		Losses recorded for the Nine-Month Period Ended September 30, 2011
	Level 1		Level 2		Level 3
	(In thousands)
Loans receivable (1)	$	—	$	—	$	842,773	$	45,312	$	187,269
Other Real Estate Owned (2)		—		—		109,514		2,325		6,294

(1) Mainly impaired commercial and construction loans. The impairment was generally measured based on the fair value of the collateral. The fair values are 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 value is 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), which are not market observable. Losses are related to market valuation adjustments after the transfer from the loan to the Other Real Estate Owned (“OREO”) portfolio.

Qualitative information regarding the fair value measurements for Level 3 financial instruments are as follows:

	September 30, 2012
	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 Flow	Weighted average prepayment speed 12.66%; weighted average discount rate 11.09%

The following is a description of the valuation methodologies used for instruments that are not measured and reported at fair value on a recurring basis or non-recurring basis. The estimated fair value was calculated using certain facts and assumptions, which vary depending on the specific financial instrument.

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Cash and due from banks and money market investments

The carrying amounts of cash and due from banks and money market investments are reasonable estimates of their fair value. Money market investments include held-to-maturity U.S. Government obligations, which have a contractual maturity of three months or less. The fair value of these securities is based on quoted market prices in active markets that incorporate the risk of nonperformance.

Other equity securities

Equity or other securities that do not have a readily available fair value are stated at the net realizable value, which management believes is a reasonable proxy for their fair value. This category is principally composed of stock that is owned by the Corporation to comply with FHLB regulatory requirements. Their realizable value equals their cost as these shares can be freely redeemed at par.

Loans receivable, including loans held for sale

The fair value of loans held for investment and for mortgage loans held for sale was estimated using discounted cash flow analyses, based on interest rates currently being offered for loans with similar terms and credit quality and with adjustments that the Corporation’s management believes a market participant would consider in determining fair value. Loans were classified by type such as commercial, residential mortgage, and automobile. These asset categories were further segmented into fixed- and adjustable-rate categories. The fair values of performing fixed-rate and adjustable-rate loans were calculated by discounting expected cash flows through the estimated maturity date. This fair value is not currently an indication of an exit price as that type of assumption could result in a different fair value estimate. The fair value of credit card loans was estimated using a discounted cash flow method and excludes any value related to customer account relationship. Loans with no stated maturity, like credit lines, were valued at book value. Prepayment assumptions were considered for non-residential loans. For residential mortgage loans, prepayment estimates were based on recent historical prepayment experience of the Corporation’s residential mortgage portfolio. Discount rates were based on the Treasury and LIBOR/Swap Yield Curves at the date of the analysis, and included appropriate adjustments for expected credit losses and liquidity.

Deposits

The estimated fair value of demand deposits and savings accounts, which are deposits with no defined maturities, equals the amount payable on demand at the reporting date. The fair values of retail fixed-rate time deposits, with stated maturities, are based on the present value of the future cash flows expected to be paid on the deposits. The cash flows were based on contractual maturities; no early repayments are assumed. Discount rates were based on the LIBOR yield curve.

The estimated fair value of total deposits excludes the fair value of core deposit intangibles, which represent the value of the customer relationship measured by the value of demand deposits and savings deposits that bear a low or zero rate of interest and do not fluctuate in response to changes in interest rates.

The fair value of brokered CDs, which are included within deposits, is determined using discounted cash flow analyses over the full term of the CDs. The fair value of the CDs is computed using the outstanding principal amount. The discount rates used are based on brokered CD market rates as of September 30, 2012. The fair value does not incorporate the risk of nonperformance, since interests in brokered CDs are generally sold by brokers in amounts of less than $250,000 and, therefore, insured by the FDIC.

Securities sold under agreements to repurchase

Some repurchase agreements reprice at least quarterly, and their outstanding balances are estimated to be their fair value. Where longer commitments are involved, fair value is estimated using exit price indications of the cost of unwinding the transactions as of the end of the reporting period. The brokers who are the counter-parties provide these indications. Securities sold under agreements to repurchase are fully collateralized by investment securities.

Advances from FHLB

The fair value of advances from FHLB with fixed maturities is determined using discounted cash flow analyses over the full term of the borrowings, using indications of the fair value of similar transactions. The cash flows assume no early repayment of the borrowings. Discount rates are based on the LIBOR yield curve. For advances from FHLB that reprice quarterly, their outstanding balances are estimated to be their fair value. Advances from FHLB are fully collateralized by mortgage loans and, to a lesser extent, investment securities.

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Other borrowings

Other borrowings consist of junior subordinated debentures. Projected cash flows from the debentures were discounted using the LIBOR yield curve plus a credit spread. This credit spread was estimated using the difference in yield curves between Swap rates and a yield curve that considers the industry and credit rating of the Corporation as issuer of the note at a tenor comparable to the time to maturity of the debentures.

The following table presents the estimated fair value and carrying value of financial instruments as of September 30, 2012 and December 31, 2011

	Total Carrying Amount in Statement of Financial Condition September  30, 2012			Fair Value Estimated September 30, 2012		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Cash and due from banks and money market investments	$	1,003,720		$	1,003,720	$	1,003,720	$	—	$	—
Investment securities available for sale		1,597,847			1,597,847		7,535		1,531,880		58,432
Other equity securities		39,656			39,656		—		39,656		—
Loans held for sale		68,349			70,976		—		70,976		—
Loans, held for investment		10,188,164			—		—		—		—
Less: allowance for loan and lease losses		(445,531	)
Loans held for investment, net of allowance	$	9,742,633			9,466,460		—		—		9,466,460
Derivatives, included in assets		336			336		—		336		—
Liabilities:
Deposits		9,896,402			9,937,355		—		9,937,355		—
Securities sold under agreements to repurchase		900,000			997,179		—		997,179		—
Advances from FHLB		518,440			524,176		—		524,176		—
Other borrowings		231,959			132,599		—		—		132,599
Derivatives, included in liabilities		6,428			6,428		—		6,428		—

	Total Carrying Amount in Statement of Financial Condition December  31, 2011			Fair Value Estimated December 31, 2011
	(In thousands)
Assets:
Cash and due from banks and money market investments	$	446,566		$	446,566
Investment securities available for sale		1,923,268			1,923,268
Other equity securities		37,951			37,951
Loans held for sale		15,822			16,038
Loans, held for investment		10,559,392			—
Less: allowance for loan and lease losses		(493,917	)		—
Loans held for investment, net of allowance	$	10,065,475			9,618,267
Derivatives, included in assets		1,277			1,277
Liabilities:
Deposits		9,907,754			9,974,119
Securities sold under agreements to repurchase		1,000,000			1,102,263
Advances from FHLB		367,440			379,730
Notes Payable		23,342			22,476
Other borrowings		231,959			160,603
Derivatives, included in liabilities		7,834			7,834

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20 – SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information follows:

	Nine-Month Period Ended September 30, 2012
	2012		2011
	(In thousands)
Cash paid for:
Interest on borrowings	$	128,193	$	191,570
Income tax		5,139		2,120
Non-cash investing and financing activities:
Additions to other real estate owned		133,124		125,420
Additions to auto repossesions		39,383		50,380
Capitalization of servicing assets		4,486		3,793
Loan securitizations		165,318		151,972
Loans sold to a joint venture in exchange for an acquisition loan and an equity interest in the joint venture		—		183,709
Reclassification of Held-to-Maturity investment securities to Available-for-Sale		—		88,751

21 – 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 driven primarily by 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 September 30, 2012, 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. Others 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 segments.

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’s operations consist 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 executed to manage and enhance liquidity. This segment lends funds to the Commercial and Corporate Banking, Mortgage Banking and Consumer (Retail) Banking segments to finance their lending activities and borrows from those segments and from the United States Operations segment. The Consumer (Retail) Banking and the United States Operations segments also lend funds to 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 U.S. and British Virgin Islands, including commercial and retail banking services and insurance activities.

The accounting policies of the segments are the same as those referred to in Note 1 to the Corporation’s financial statements for the year ended December 31, 2011 contained in the Corporation’s Annual Report on Form 10-K.

The Corporation evaluates the performance of the segments based on net interest income, the estimated 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.

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The following table presents information about the reportable segments (in thousands):

(In thousands)	Mortgage Banking			Consumer (Retail) Banking			Commercial and Corporate			Treasury and Investments			United States Operations			Virgin Islands Operations			Total
For the quarter ended September 30, 2012:
Interest income	$	27,792		$	60,306		$	46,104		$	11,563		$	9,031		$	12,168		$	166,964
Net (charge) credit for transfer of funds		(12,357	)		(756	)		(5,933	)		15,991			3,055			—			—
Interest expense		—			(7,289	)		—			(26,191	)		(6,903	)		(1,078	)		(41,461	)
Net interest income		15,435			52,261			40,171			1,363			5,183			11,090			125,503
Provision for loan and lease losses		(8,453	)		(12,000	)		(5,892	)		—			6,860			(9,467	)		(28,952	)
Non-interest income		4,312			9,487			1,993			(538	)		491			1,580			17,325
Direct non-interest expenses		(10,330	)		(26,865	)		(12,607	)		(1,795	)		(7,735	)		(9,053	)		(68,385	)
Segment income (loss)	$	964		$	22,883		$	23,665		$	(970	)	$	4,799		$	(5,850	)	$	45,491
Average earnings assets	$	2,084,719		$	1,784,630		$	4,478,267		$	2,259,288		$	704,780		$	797,332		$	12,109,016

(In thousands)	Mortgage Banking			Consumer (Retail) Banking			Commercial and Corporate			Treasury and Investments			United States Operations			Virgin Islands Operations			Total
For the quarter ended September 30, 2011:
Interest income	$	27,505		$	41,611		$	51,101		$	13,328		$	11,101		$	13,896		$	158,542
Net (charge) credit for transfer of funds		(14,030	)		3,528			(3,658	)		10,203			3,957			—			—
Interest expense		—			(10,220	)		—			(42,657	)		(9,694	)		(1,716	)		(64,287	)
Net interest income (loss)		13,475			34,919			47,443			(19,126	)		5,364			12,180			94,255
Provision for loan and lease losses		(16,153	)		(7,719	)		(8,261	)		—			(5,417	)		(8,896	)		(46,446	)
Non-interest income		3,180			7,354			1,702			3,834			590			1,661			18,321
Direct non-interest expenses		(6,918	)		(22,332	)		(9,682	)		(2,060	)		(9,341	)		(8,505	)		(58,838	)
Segment (loss) income	$	(6,416	)	$	12,222		$	31,202		$	(17,352	)	$	(8,804	)	$	(3,560	)	$	7,292
Average earnings assets	$	2,047,220		$	1,435,818		$	5,107,637		$	2,765,749		$	834,848		$	888,393		$	13,079,665

	Mortgage Banking			Consumer (Retail) Banking			Commercial & Corporate			Treasury & Investments			United States Operations			Virgin Islands Operations			Total
For the Nine-Month Period Ended September 30, 2012:
Interest income	$	82,550		$	147,641		$	142,375		$	34,077		$	28,566		$	37,514		$	472,723
Net (charge) credit for transfer of funds		(37,848	)		1,827			(18,964	)		45,559			9,426			—			—
Interest expense		—			(23,818	)		—			(86,551	)		(22,702	)		(3,578	)		(136,649	)
Net interest income (loss)		44,702			125,650			123,411			(6,915	)		15,290			33,936			336,074
Provision for loan and lease losses		(29,541	)		(21,576	)		(37,449	)		—			12,216			(13,683	)		(90,033	)
Non-interest income		12,070			23,827			8,215			(1,779	)		1,264			4,952			48,549
Direct non-interest expenses		(31,142	)		(73,964	)		(37,356	)		(5,107	)		(20,912	)		(28,506	)		(196,987	)
Segment (loss) income	$	(3,911	)	$	53,937		$	56,821		$	(13,801	)	$	7,858		$	(3,301	)	$	97,603
Average earnings assets	$	2,061,036		$	1,572,342		$	4,635,264		$	2,368,164		$	735,889		$	820,510		$	12,193,205

	Mortgage Banking			Consumer (Retail) Banking			Commercial and Corporate			Treasury and Investments			United States Operations			Virgin Islands Operations			Total
For the Nine-Month Period Ended September 30, 2011:
Interest income	$	90,779		$	127,401		$	154,098		$	52,770		$	34,547		$	43,268		$	502,863
Net (charge) credit for transfer of funds		(48,007	)		7,920			(9,672	)		37,078			12,681			—			—
Interest expense		—			(32,334	)		—			(139,998	)		(30,543	)		(5,019	)		(207,894	)
Net interest income (loss)		42,772			102,987			144,426			(50,150	)		16,685			38,249			294,969
Provision for loan and lease losses		(27,892	)		(10,622	)		(108,902	)		—			(15,546	)		(31,400	)		(194,362	)
Non-interest income		18,968			21,342			6,531			42,548			903			8,912			99,204
Direct non-interest expenses		(23,140	)		(67,944	)		(30,559	)		(4,744	)		(26,159	)		(27,921	)		(180,467	)
Segment income (loss)	$	10,708		$	45,763		$	11,496		$	(12,346	)	$	(24,117	)	$	(12,160	)	$	19,344
Average earnings assets	$	2,192,271		$	1,460,871		$	5,219,856		$	3,280,009		$	866,778		$	893,256		$	13,913,041

The following table presents a reconciliation of the reportable segment financial information to the consolidated totals:

	Quarter Ended September 30,						Nine-Month Period Ended September 30,
	2012			2011			2012			2011
Net Income (loss):
Total income for segments and other	$	45,491		$	7,292		$	97,603		$	19,344
Other non-interest income (loss) (1)		(2,199	)		(4,357	)		(10,926	)		(5,893	)
Other operating expenses		(23,458	)		(24,093	)		(66,991	)		(71,761	)
Income (loss) before income taxes		19,834			(21,158	)		19,686			(58,310	)
Income tax expense		(761	)		(2,888	)		(4,439	)		(9,080	)
Total consolidated net income (loss)	$	19,073		$	(24,046	)	$	15,247		$	(67,390	)

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	Quarter Ended September 30,				Nine-Month Period Ended September 30,
	2012		2011		2012		2011
Average assets:
Total average earning assets for segments	$	12,109,016	$	13,079,665	$	12,193,205	$	13,913,041
Other average earning assets (1)		34,403		46,046		38,215		39,064
Average non-earning assets		707,816		662,192		692,083		670,758
Total consolidated average assets	$	12,851,235	$	13,787,903	$	12,923,503	$	14,622,863

(1) The activities related to the Bank’s equity interest in CPG/GS are presented as an Other non-interest income (loss) and other average earning assets in the table above

22 – REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

The Corporation is 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 effect on the Corporation’s financial statements. 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 assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation’s capital amounts and classification are also subject to qualitative judgment by the regulators about components, risk weightings and other factors.

Capital standards established by regulations require the Corporation to maintain minimum amounts and ratios for Leverage (Tier 1 capital to average total assets) and ratios of Tier 1 Capital to Risk-Weighted Assets and Total Capital to Risk-Weighted Assets as defined in the regulations. The total amount of risk-weighted assets is computed by applying risk-weighting factors to the Corporation’s assets and certain off-balance sheet items, which generally vary from 0% to 100% depending on the nature of the asset.

Effective June 2, 2010, FirstBank, by and through its Board of Directors, entered into the FDIC Order with the FDIC and OCIF. This Order provides for various things, including (among other things) the following: (1) having and retaining qualified management; (2) increased participation in the affairs of FirstBank by its board of directors; (3) development and implementation by FirstBank of a capital plan to attain a leverage ratio of at least 8%, a Tier 1 risk-based capital ratio of at least 10% and a total risk-based capital ratio of at least 12%; (4) adoption and implementation of strategic, liquidity and fund management and profit and budget plans and related projects within certain timetables set forth in the FDIC Order and on an ongoing basis; (5) adoption and implementation of plans for reducing FirstBank’s positions in certain classified assets and delinquent and non-accrual loans within timeframes set forth in the FDIC Order; (6) refraining from lending to delinquent or classified borrowers already obligated to FirstBank on any extensions of credit so long as such credit remains uncollected, except where FirstBank’s failure to extend further credit to a particular borrower would be detrimental to the best interests of FirstBank, and any such additional credit is approved by the FirstBank’s Board of Directors; (7) refraining from accepting, increasing, renewing or rolling over brokered CDs without the prior written approval of the FDIC; (8) establishment of a comprehensive policy and methodology for determining the allowance for loan and lease losses and the review and revision of FirstBank’s loan policies, including the non-accrual policy; and (9) adoption and implementation of adequate and effective programs of independent loan review, appraisal compliance and an effective policy for managing FirstBank’s sensitivity to interest rate risk. The foregoing summary is not complete and is qualified in all respects by reference to the actual language of the FDIC Order. Although all the regulatory capital ratios exceeded the established “well capitalized” levels and the minimum capital ratio requirements of the FDIC Order at September 30, 2012, because of the FDIC Order with the FDIC, FirstBank cannot be treated as a “well capitalized” institution under regulatory guidance.

Effective June 3, 2010, First BanCorp entered into the Written Agreement with the FED. The Agreement provides, among other things, that the holding company must serve as a source of strength to FirstBank, and that, except upon consent of the FED, (1) the holding company may not pay dividends to stockholders or receive dividends from FirstBank, (2) the holding company and its nonbank subsidiaries may not make payments on trust preferred securities or subordinated debt, and (3) the holding company cannot incur, increase or guarantee debt or repurchase any capital securities. The Written Agreement also requires that the holding company submit a capital plan which reflects sufficient capital at First BanCorp on a consolidated basis, which must be acceptable to the FED, and follow certain guidelines with respect to the appointment or change in responsibilities of senior officers. The foregoing summary is not complete and is qualified in all respects by reference to the actual language of the Written Agreement.

The Corporation submitted its capital plan setting forth how it plans to improve capital positions to comply with the FDIC Order and the Written Agreement over time. In addition to the Capital Plan, the Corporation has submitted to its regulators a liquidity and brokered CD plan, including a contingency funding plan, a non-performing asset reduction plan, a budget and profit plan, a strategic plan and a plan for the reduction of classified and special mention assets. As of September 30, 2012 the Corporation had completed all of the items included in the capital plan and is working on to continue the reduction of non-performing loans. Further, the Corporation has reviewed and enhanced the Corporation’s loan review program, various credit policies, the Corporation’s treasury and investment policy, the Corporation’s asset classification and allowance for loan and lease losses and non-accrual policies, the Corporation’s charge-off policy and the Corporation’s appraisal program. The Agreements also require the submission to the regulators of quarterly progress reports.

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The FDIC Order imposes no other restrictions on FirstBank’s products or services offered to customers, nor does it or the Written Agreement impose any type of penalties or fines upon FirstBank or the Corporation. Concurrent with the FDIC Order, the FDIC has granted FirstBank temporary waivers to enable it to continue accessing the brokered CD market through December 31, 2012. FirstBank will request approvals for future periods.

In June 2012, the U.S. banking regulators jointly published three notices of proposed rulemaking that are essentially intended to implement the Basel III for U.S. banks. Together these notices of proposed rulemaking would, among other things: (i) Implement in the United Stated the Basel III regulatory capital reforms including those that revise the definition of capital, increase minimum capital ratios, and introduce a minimum Tier 1 common equity ratio of 4.5% and a capital conservation buffer of 2.5% (for a total minimum Tier 1 common equity ratio of 7.0%); (ii) Revise “Basel I” rules for calculating risk-weighted assets to enhance risk sensitivity; and (iii) Comply with the Dodd-Frank Act provision prohibiting the reliance on external credit ratings.

Although uncertainty exists regarding final capital rules, based on our current interpretation of the proposed Basel III capital rules we anticipate to exceed the fully phased-in minimum capital ratios as established in the current proposal. The proposed Basel III capital rules and interpretations used in estimating our Basel III calculations are subject to change depending on final Basel III capital rules.

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 September 30, 2012, commitments to extend credit amounted to approximately $1.5 billion, of which $1.0 billion relate to credit card loans. Commercial and Financial standby letters of credit amounted to approximately $83.4 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. For most of the commercial lines of credit, the Corporation has the option to reevaluate the agreement prior to additional disbursements. In the case of credit cards and personal lines of credit, the Corporation can at any time and without cause, cancel the unused credit facility. Generally, the Corporation’s mortgage banking activities do not enter into interest rate lock agreements with prospective borrowers.

Lehman Brothers Special Financing, Inc. (“Lehman”) was the counterparty to the Corporation on certain interest rate swap agreements. During the third quarter of 2008, Lehman failed to pay the scheduled net cash settlement due to the Corporation, which constituted an event of default under those interest rate swap agreements. The Corporation terminated all interest rate swaps with Lehman and replaced them with other counterparties under similar terms and conditions. In connection with the unpaid net cash settlement under the swap agreements, the Corporation has an unsecured counterparty exposure with Lehman, which filed for bankruptcy on October 3, 2008, of approximately $1.4 million. This exposure was reserved in the third quarter of 2008. The Corporation had securities pledged as collateral with a $63.6 million face value to guarantee its performance under the swap agreements in the event payment there under was required.

Since the second quarter of 2009, the Corporation has maintained a non-performing asset with a book value of $64.5 million in addition to accrued interest of $2.1 million related to the collateral pledged with Lehman. The Corporation believes that the securities pledged as collateral should not be part of the Lehman bankruptcy estate given the facts that the posted collateral constituted a performance guarantee under the swap agreements and was not part of a financing agreement, and that ownership of the securities was never transferred to Lehman. Upon termination of the interest rate swap agreements, Lehman’s obligation was to return the collateral to the Corporation. During the fourth quarter of 2009, the Corporation discovered that Lehman Brothers, Inc., acting as agent of Lehman, had deposited the securities in a custodial account at JP Morgan Chase, and that, shortly before the filing of the Lehman bankruptcy proceedings, it had provided instructions to have most of the securities transferred to Barclays Capital (“Barclays”) in New York. After Barclays’ refusal to turn over the securities, the Corporation filed a lawsuit against Barclays in federal court in New York demanding the return of the securities in December 2009. During February 2010, Barclays filed a motion with the court requesting that the Corporation’s claim be dismissed on the grounds that the allegations of the complaint are not sufficient to justify the granting of the remedies therein sought. Shortly thereafter, the Corporation filed its opposition motion. A hearing on the motions was held in court on April 28, 2010. The court, on that date, after hearing the arguments by both sides, concluded that the Corporation’s equitable-based causes of action, upon which the return of the investment securities is being demanded, contain allegations that sufficiently plead facts warranting the denial of Barclays’ motion to dismiss the Corporation’s claim. Accordingly, the judge ordered the case to proceed to trial.

Subsequent to the court decision, the district court judge transferred the case to the Lehman bankruptcy court for trial. Discovery pursuant to that case management plan has been completed. The parties filed dispositive motions on September 13, 2012. Oppositions to such motions and replies thereto must be filed by October 15, 2012 and November 14, 2012, respectively, but this timing is subject to adjustment. The Corporation may not succeed in its litigation against Barclays to recover all or a substantial portion of the securities.

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Additionally, the Corporation continues to pursue its claim filed in January 2009 in the proceedings under the Securities Protection Act with regard to Lehman Brothers Inc. in the United States Bankruptcy Court for the Southern District of New York.

An estimated loss has not been accrued as the Corporation is unable to determine the timing of the claim resolution or whether it will succeed in recovering all or a substantial portion of the collateral or its equivalent value.

Because the Corporation has not had the benefit of the use of the investment securities pledged to Lehman (i.e., ability to sell, pledge or transfer), and because the Corporation has not received principal or interest payments since 2008 (after the collapse of Lehman), the appropriate carrying value of these securities has been under review with our regulators, with recent heightened concern due to the complex and lengthy litigation regarding this matter. If, as a result of these discussions, developments in the litigation, or for other reasons, the Corporation should determine that it is probable that the asset has been impaired and that the Corporation needs to recognize a partial or full loss for the investment securities pledged to Lehman, such an action would adversely affect the Corporation’s results of operations in the period in which such action is taken. The Corporation expects to reassess the recoverability of the asset upon the resolution of the dispositive motions filed with the court, which motions could be resolved in the fourth quarter of 2012.

As of September 30, 2012, First BanCorp and its subsidiaries were defendants in various legal proceedings arising in the ordinary course of business. Management believes that the final disposition of these matters will not have a material adverse effect on the Corporation’s financial position or results of operations.

23 – FIRST BANCORP. (Holding Company Only) Financial Information

The following condensed financial information presents the financial position of the Holding Company only as of September 30, 2012 and December 31, 2011 and the results of its operations for the quarter and nine-month period ended September 30, 2012 and 2011.

	As of September 30, 2012		As of December 31, 2011
	(In thousands)
Assets
Cash and due from banks	$	36,631	$	41,681
Money market investments		6,111		3,111
Investment securities available for sale, at market:
Equity investments		40		41
Other investment securities		1,300		1,300
Investment in First Bank Puerto Rico, at equity		1,660,373		1,615,304
Investment in First Bank Insurance Agency, at equity		7,163		5,338
Investment in FBP Statutory Trust I		3,093		3,093
Investment in FBP Statutory Trust II		3,866		3,866
Other assets		3,669		3,488
Total assets	$	1,722,246	$	1,677,222
Liabilities & Stockholders’ Equity
Liabilities:
Other borrowings	$	231,959	$	231,959
Accounts payable and other liabilities		6,170		1,119
Total liabilities		238,129		233,078
Stockholders’ equity		1,484,117		1,444,144
Total liabilities and stockholders’ equity	$	1,722,246	$	1,677,222

	Quarter Ended						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Income:
Interest income on investment securities	$	—		$	1		$	—		$	1
Dividends from other subsidiaries		—			—			—			3,000
Interest income on other investments		6			—			12			—
Other income		55			53			165			157
		61			54			177			3,158
Expense:
Notes payable and other borrowings		1,849			1,755			5,529			5,221
Other operating expenses		783			745			2,618			1,792
		2,632			2,500			8,147			7,013
Investment related proceeds and impairments on equity securities		—			—			—			679
Loss before income taxes and equity in undistributed earnings (losses) of subsidiaries		(2,571	)		(2,446	)		(7,970	)		(3,176	)
Income tax provision		—			—			—			—
Equity in undistributed earnings (losses) of subsidiaries		21,644			(21,600	)		23,217			(64,214	)
Net income (loss)	$	19,073		$	(24,046	)	$	15,247		$	(67,390	)

24 – SUBSEQUENT EVENTS

The Corporation has performed an evaluation of events occurring subsequent to September 30, 2012; management has determined that there are no additional events occurring in this period that required disclosure in or adjustment to the accompanying financial statements.

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

SELECTED FINANCIAL DATA

	Quarter ended						Nine-Month Period Ended
(In thousands, except for per share and financial ratios)	September 30,						September 30,
	2012			2011			2012			2011
Condensed Income Statements:
Total interest income	$	166,964		$	158,542		$	472,723		$	502,863
Total interest expense		41,461			64,287			136,649			207,894
Net interest income		125,503			94,255			336,074			294,969
Provision for loan and lease losses		28,952			46,446			90,033			194,362
Non-interest income		15,126			13,964			37,623			93,311
Non-interest expenses		91,843			82,931			263,978			252,228
Income (loss) before income taxes		19,834			(21,158	)		19,686			(58,310	)
Income tax expense		(761	)		(2,888	)		(4,439	)		(9,080	)
Net income (loss)		19,073			(24,046	)		15,247			(67,390	)
Net income (loss) attributable to common stockholders		19,073			(31,143	)		15,247			(88,785	)
Per Common Share Results:
Net earnings (loss) per share basic	$	0.09		$	(1.46	)	$	0.07		$	(4.17	)
Net earnings (loss) per share diluted	$	0.09		$	(1.46	)	$	0.07		$	(4.17	)
Cash dividends declared	$	—		$	—		$	—		$	—
Average shares outstanding		205,415			21,303			205,349			21,303
Average shares outstanding diluted		205,923			21,303			205,697			21,303
Book value per common share	$	6.89		$	26.12		$	6.89		$	26.12
Tangible book value per common share (1)	$	6.59		$	24.22		$	6.59		$	24.22
Selected Financial Ratios (In Percent):
Profitability:
Return on Average Assets		0.59			(0.69	)		0.16			(0.62	)
Interest Rate Spread (2)		3.77			2.61			3.31			2.55
Net Interest Margin (2)		4.02			2.86			3.59			2.81
Return on Average Total Equity		5.19			(9.46	)		1.41			(8.78	)
Return on Average Common Equity		5.43			(21.33	)		1.47			(19.83	)
Average Total Equity to Average Total Assets		11.37			7.31			11.20			7.02
Tangible common equity ratio (1)		10.39			3.84			10.39			3.84
Dividend payout ratio		—			—			—			—
Efficiency ratio (3)		65.31			76.63			70.64			64.96
Asset Quality:
Allowance for loan and lease losses to loans held for investment		4.37			4.89			4.37			4.89
Net charge-offs (annualized) to average loans (4)		1.58			2.50			1.79			2.72
Provision for loan and lease losses to net charge-offs		71.36			68.67			65.04			85.36
Non-performing assets to total assets (4)		9.58			10.22			9.58			10.22
Non-performing loans held for investment to total loans held for investment (4)		9.89			11.13			9.89			11.13
Allowance to total non-performing loans held for investment (4)		44.20			43.90			44.20			43.90
Allowance to total non-performing loans held for investment excluding residential real estate loans (4)		64.84			63.44			64.84			63.44
Other Information:
Common Stock Price: End of period	$	4.42		$	2.80		$	4.42		$	2.80

	As of September 30, 2012		As of December 31, 2011
Balance Sheet Data:
Loans, including loans held for sale	$	10,256,513	$	10,575,214
Allowance for loan and lease losses		445,531		493,917
Money market and investment securities		1,854,435		2,200,888
Intangible assets		61,941		39,787
Deferred tax asset, net		4,577		5,442
Total assets		13,139,747		13,127,275
Deposits		9,896,402		9,907,754
Borrowings		1,650,399		1,622,741
Total preferred equity		63,047		63,047
Total common equity		1,378,578		1,361,899
Accumulated other comprehensive income, net of tax		42,492		19,198
Total equity		1,484,117		1,444,144

(1) Non-GAAP measure. Refer to “Capital” discussion below for additional information of the components and reconciliation of these measures.

(2) On a tax-equivalent basis and excluding the changes in fair value of derivative instruments and financial liabilities measured at fair value (see “Net Interest Income” discussion below for a reconciliation of this non-GAAP measure).

(3) Non-interest expense to the sum of net interest income and non-interest income. The denominator includes non-recurring income and changes in the fair value of derivative instruments and financial instruments measured at fair value.

(4) Loans used in the denominator in calculating net charge-off, non-performing loan and non-performing asset rates include purchased credit-impaired (“PCI”) loans. However, the Corporation separately tracks and reports PCI loans and exclude these from delinquency, non-performing loan and non-performing asset statistics.

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The following Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to the accompanying consolidated unaudited financial statements of First BanCorp. (the “Corporation” or “First BanCorp.”) and should be read in conjunction with such financial statements and the notes thereto.

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 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 and British Virgin Islands and the State of Florida (USA) concentrating in commercial banking, residential mortgage loan originations, finance leases, personal loans, small loans, auto loans, insurance agency and broker-dealer activities.

As described in Note 22, Regulatory Matters, Commitment and Contingencies, FirstBank is currently operating under a Consent Order (the “Order”) with the Federal Deposit Insurance Corporation (“FDIC”) and First BanCorp has entered into a Written Agreement (the “Written Agreement” and collectively with the Order the “Agreements”) with the Board of Governors of the Federal Reserve System (the “FED” or “Federal Reserve”).

OVERVIEW OF RESULTS OF OPERATIONS

First BanCorp.’s results of operations generally depend primarily upon 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, which significantly affected the results for the past three years, non-interest expenses (such as personnel, occupancy, deposit insurance premiums and other costs), non-interest income (mainly service charges and fees on loans and deposits, insurance income and revenues from broker-dealer operations), gains (losses) on sales of investments, gains (losses) on mortgage banking activities, and income taxes.

Net income for the quarter ended September 30, 2012 amounted to $19.1 million or $0.09 per diluted common share, compared to a net loss of $24.0 million or ($1.46) per diluted common share for the quarter ended September 30, 2011. The Corporation’s financial results for the third quarter of 2012, as compared to the third quarter of 2011, were principally impacted by: (i) a $31.2 million increase in net interest income mainly achieved through reductions in the overall cost of funding and the impact of the $406 million credit cards portfolio acquired in late May 2012, (ii) a decrease of $17.5 million in the provision for loan and lease losses which reflected primarily a lower provision for commercial mortgage loans due to improvements in the cumulative charge-off history used for the general reserve determination, the decrease in the amount of adversely classified loans and the overall decrease in the size of the portfolio. These variances were partially offset by an $8.9 million increase in non-interest expenses driven by higher losses on real estate owned (REO) operations and expenses related to the recently acquired credit cards portfolio.

The key drivers of the Corporation’s financial results for the quarter ended September 30, 2012 include the following:

• Net interest income for the quarter ended September 30, 2012 was $125.5 million, compared to $94.3 million for the same period in 2011 driven by an improvement of 116 basis points in the net interest margin, excluding fair value adjustments (for definition and reconciliation of this non-GAAP measure, refer to “Net Interest Income” discussion below) to 3.98%. The improvement in the net interest margin was primarily due to: (i) a decrease of 51 basis points in the average cost of funding achieved through lower deposit pricing and the maturity of high-cost borrowings, and (ii) the purchase in late May of a $406 million credit cards portfolio from FIA Card Services (FIA). This acquisition increased the average balance of consumer loans by approximately $366.9 million and contributed $18.6 million to interest income, including $3.1 million related to the discount accretion recorded as an adjustment to the yield of the purchased portfolio, and was the main driver for the 64 basis points increase in the yield on total earning assets. Refer to the “Net Interest Income” discussion below for additional information.

• For the third quarter of 2012, the Corporation’s provision for loan and lease losses amounted to $29.0 million, compared to $46.4 million for the same period in 2011. The decrease in the provision for 2012 was primarily driven by a lower provision for commercial mortgage loans due to improvements in the cumulative charge-off history used for the general reserve determination, the reduction in adversely classified loans and the overall decrease in the size of the portfolio. Refer to the discussions under “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.

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• For the quarter ended September 30, 2012, the Corporation’s non-interest income amounted to $15.1 million, compared to $14.0 million for the quarter ended September 30, 2011. The increase in non-interest income was mainly due to $3.1 million of interchange and other fees related to the credit cards portfolio acquired and a decrease of $2.2 million in equity in losses of unconsolidated entities. Revenues from mortgage banking activities also showed an increase of $1.1 million. These variances were partially offset by the impact in the prior year of a $3.5 million gain recorded in connection with certain Puerto Rico Housing Finance Authority bonds held by the corporation that were exchanged for cash as part of a tender offer.

• Non-interest expenses for the third quarter of 2012 amounted to $91.8 million, compared to $82.9 million for the same period in 2011. The increase of $8.9 million was mainly related to a $3.7 million increase in losses on real estate owned operations, a $3.0 million increase in servicing and processing fees, mainly related to the servicing of the credit cards portfolio, a $1.7 million increase in employee compensation and benefits, and higher marketing expenses including accrued expenses related to the credit cards portfolio rewards program. Partially offsetting this increase was a $1.9 million decrease in the deposit insurance premium expense. Refer to the “Non Interest Expenses” discussion below for additional information.

• For the third quarter of 2012, the Corporation recorded an income tax expense of $0.8 million, compared to $2.9 million for the same period in 2011. The variance is mainly due to lower taxable income from profitable subsidiaries. Refer to the “Income Taxes” discussion below for additional information.

• Total assets as of September 30, 2012 amounted to $13.1 billion, an increase of $12.5 million compared to total assets as of December 31, 2011. The increase is attributable to a higher liquidity obtained, in part, through Federal Home Loan Bank (FHLB) advances and increases in non-brokered deposits. Cash and cash equivalents increased by $557.2 million, offset by a reduction in loans and investment securities. The available for sale investment securities decreased by $325.4 million driven by matured U.S. Treasury and agency debt securities and Puerto Rico Government Obligations called prior to their contractual maturity, partially offset by purchases of U.S. agency mortgage-backed securities (MBS). Additionally, the loan portfolio decreased by $270.3 million, led by pay-offs and repayments of commercial and industrial (“C&I”) loans, as well as foreclosures and charge-offs. The REO portfolio increased by $62.7 million. Refer to the “Financial Condition and Operating Data” discussion below for additional information.

• As of September 30, 2012, total liabilities amounted to $11.66 billion, a decrease of approximately $27.5 million, as compared to $11.68 billion as of December 31, 2011. The decline in total liabilities is mainly attributable to a decrease of $323.1 million in brokered CDs. In addition, the Corporation repaid $100 million of maturing repurchase agreements, and all of its $21 million of medium-term notes. These variances were partially offset by a $311.8 million increase in non-brokered deposits and a $151 million increase in FHLB advances. Refer to the “Risk Management – Liquidity and Capital Adequacy” discussion below for additional information about the Corporation’s funding sources.

• The Corporation’s stockholders’ equity amounted to $1.5 billion as of September 30, 2012, an increase of $40.0 million from December 31, 2011, driven by a $23.3 million increase in other comprehensive income due to higher unrealized gains on available for sale securities, net income of $15.2 million for the first nine months of 2012, and net proceeds of $1.0 million related to 280,787 shares of common stock sold. Refer to the “Risk Management – Capital” section below for additional information.

• Total loan production, including purchases, refinancing and draws from existing revolving and non-revolving commitments, for the quarter ended September 30, 2012 was $660.2 million, excluding the utilization activity on outstanding credit cards, compared to $763 million for the comparable period in 2011. The decrease in loan production is mainly related to government loan originations that decreased $218 million, partially offset by an increased volume of auto and residential mortgage loan originations.

• Total non-performing loans as of September 30, 2012 were $1.0 billion, a decrease of $135.1 million compared to December 31, 2011. The decrease was primarily related to foreclosures of construction projects, charge-offs, and a decrease in the inflows of non-performing loans. Total non-performing assets decreased by $78.0 million during the nine-month period ended September 30, 2012. Refer to the “Risk Management – Non-accruing and Non-performing Assets” section below for additional information.

CRITICAL ACCOUNTING POLICIES AND PRACTICES

The accounting principles of the Corporation and the methods of applying these principles conform with generally accepted accounting principles in the United States (“GAAP”). The Corporation’s critical accounting policies relate to the 1) allowance for loan and lease losses; 2) other-than-temporary impairments; 3) income taxes; 4) classification and related values of investment securities; 5) valuation of financial instruments; and 6) income recognition on loans. These critical accounting policies involve judgments, estimates and assumptions made by management that affect the amounts recorded for assets and liabilities and for 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.

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The Corporation’s critical accounting policies are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in First BanCorp’s 2011 Annual Report on Form 10-K. There have not been any material changes in the Corporation’s critical accounting policies since December 31, 2011. On May 30, 2012, the Corporation purchased an approximate $406 million credit cards portfolio, of which a portion were purchased credit impaired loans. Refer to “Financial Condition and Operating Data Analysis-Loan Portfolio-Consumer Loans and Finance Leases” below, and Note 6 to the accompanying unaudited consolidated financial statements for additional information about this transaction, including the accounting and reporting policies related to this portfolio.

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 re-pricing and maturity mismatch of the Corporation’s assets and liabilities. Net interest income for the quarter and nine-month period ended September 30, 2012 was $125.5 million and $336.1 million, respectively, compared to $94.3 million and $295.0 million for the comparable periods in 2011. On a tax-equivalent basis and excluding the changes in the fair value of derivative instruments and unrealized gains and losses on liabilities measured at fair value, net interest income for the quarter and nine-month period ended September 30, 2012 was $126.8 million and $340.0 million, respectively, compared to $98.3 million and $304.3 million for the comparable periods of 2011.

The following tables include a detailed analysis of net interest income. Part I presents average volumes 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 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 on changes attributable to (i) changes in volume (changes in volume multiplied by prior period rates), and (ii) changes in 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: (1) the change in the fair value of derivative instruments and (2) unrealized gains or losses on liabilities measured at fair value. For definition and reconciliation of this non-GAAP measure, refer to discussions below.

Part I

Quarter ended September 30,	Average Volume				Interest income  (1) / expense				Average Rate (1)
(Dollars in thousands)	2012		2011		2012		2011		2012			2011
	(Dollars in thousands)
Interest-earning assets:
Money market & other short-term investments	$	553,283	$	482,057	$	395	$	325		0.28	%		0.27	%
Government obligations (2)		336,598		1,273,109		1,069		4,646		1.26	%		1.45	%
Mortgage-backed securities		1,313,353		988,900		10,705		8,771		3.24	%		3.52	%
Corporate bonds		959		2,000		16		29		6.64	%		5.75	%
FHLB stock		33,131		40,265		318		396		3.82	%		3.90	%
Equity securities		1,377		1,377		—		—		0.00	%		0.00	%
Total investments (3)		2,238,701		2,787,708		12,503		14,167		2.22	%		2.02	%
Residential mortgage loans		2,815,261		2,825,394		37,897		38,822		5.36	%		5.45	%
Construction loans		365,656		526,383		2,480		3,418		2.70	%		2.58	%
C&I and commercial mortgage loans		5,151,641		5,887,610		52,514		60,332		4.06	%		4.07	%
Finance leases		237,986		258,139		5,222		5,385		8.73	%		8.28	%
Consumer loans		1,727,291		1,334,900		57,641		38,893		13.28	%		11.56	%
Total loans (4) (5)		10,297,835		10,832,426		155,754		146,850		6.02	%		5.38	%
Total interest-earning assets	$	12,536,536	$	13,620,134	$	168,257	$	161,017		5.34	%		4.69	%
Interest-bearing liabilities:
Brokered CDs	$	3,400,984	$	4,887,851	$	15,435	$	26,286		1.81	%		2.13	%
Other interest-bearing deposits		5,589,449		5,308,927		14,516		19,855		1.03	%		1.48	%
Other borrowed funds		1,131,959		1,336,508		8,557		12,750		3.01	%		3.78	%
FHLB advances		395,777		411,168		2,953		3,795		2.97	%		3.66	%
Total interest-bearing liabilities (6)	$	10,518,169	$	11,944,454	$	41,461	$	62,686		1.57	%		2.08	%
Net interest income					$	126,796	$	98,331
Interest rate spread										3.77	%		2.61	%
Net interest margin										4.02	%		2.86	%

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Nine-Month Period Ended September 30,	Average Volume				Interest income  (1) / expense				Average Rate (1)
(Dollars in thousands)	2012		2011		2012		2011		2012			2011
	(Dollars in thousands)
Interest-earning assets:
Money market & other short-term investments	$	570,639	$	509,488	$	1,220	$	1,034		0.29	%		0.27	%
Government obligations (2)		655,056		1,482,025		8,238		17,049		1.68	%		1.54	%
Mortgage-backed securities		1,099,082		1,265,491		26,506		36,336		3.22	%		3.84	%
Corporate bonds		1,609		2,000		76		87		6.31	%		5.82	%
FHLB stock		34,057		45,512		1,072		1,561		4.20	%		4.59	%
Equity securities		1,377		1,377		—		1		0.00	%		0.10	%
Total investments (3)		2,361,820		3,305,893		37,112		56,068		2.10	%		2.27	%
Residential mortgage loans		2,796,850		2,991,200		113,459		126,837		5.42	%		5.67	%
Construction loans		399,078		664,889		7,695		14,063		2.58	%		2.83	%
C&I and commercial mortgage loans		5,358,916		5,869,011		163,478		177,444		4.07	%		4.04	%
Finance leases		240,415		268,124		15,760		16,649		8.76	%		8.30	%
Consumer loans		1,494,873		1,371,146		139,588		118,935		12.47	%		11.60	%
Total loans (4) (5)		10,290,132		11,164,370		439,980		453,928		5.71	%		5.44	%
Total interest-earning assets	$	12,651,952	$	14,470,263	$	477,092	$	509,996		5.04	%		4.71	%
Interest-bearing liabilities:
Brokered CDs	$	3,503,304	$	5,481,742	$	52,971	$	88,751		2.02	%		2.16	%
Other interest-bearing deposits		5,550,100		5,240,236		47,203		60,973		1.14	%		1.56	%
Other borrowed funds		1,184,930		1,528,747		27,743		43,234		3.13	%		3.78	%
FHLB advances		368,137		493,107		9,222		12,760		3.35	%		3.46	%
Total interest-bearing liabilities (6)	$	10,606,471	$	12,743,832	$	137,139	$	205,718		1.73	%		2.16	%
Net interest income					$	339,953	$	304,278
Interest rate spread										3.31	%		2.55	%
Net interest margin										3.59	%		2.81	%

(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 Puerto Rico statutory tax rate (30.0% for 2012; 30% for the Corporation’s subsidiaries other than IBEs and 25% for the Corporation’s IBEs in 2011) 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 derivative and unrealized gains or losses on liabilities measured at fair value are excluded from interest income and interest expense because the changes in valuation do not affect interest paid or received.

(2) Government obligations include debt issued by government sponsored agencies.

(3) Unrealized gains and losses in 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 $3.7 million and $2.5 million for the quarters ended September 30, 2012 and 2011, respectively, and $9.0 million and $7.2 million for the nine-month periods ended September 30, 2012 and 2011, respectively, of income from prepayment penalties and late fees related to the Corporation’s loan portfolio.

(6) Unrealized gains and losses on liabilities measured at fair value are excluded from the average volumes.

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Part II

	Quarter ended September 30, 2012 compared to 2011 Increase (decrease) Due to:									Nine-Month Period Ended September 30, 2012 compared to 2011 Increase (decrease) Due to:
(In thousands)	Volume			Rate			Total			Volume			Rate			Total
	(In thousands)									(In thousands)
Interest income on interest-earning assets:
Money market & other short-term investments	$	49		$	21		$	70		$	129		$	57		$	186
Government obligations		(3,049	)		(528	)		(3,577	)		(9,963	)		1,152			(8,811	)
Mortgage-backed securities		2,736			(802	)		1,934			(4,421	)		(5,409	)		(9,830	)
Corporate bonds		(16	)		3			(13	)		(18	)		7			(11	)
FHLB stock		(70	)		(8	)		(78	)		(368	)		(121	)		(489	)
Equity securities		—			—			—			—			(1	)		(1	)
Total investments		(350	)		(1,314	)		(1,664	)		(14,641	)		(4,315	)		(18,956	)
Residential mortgage loans		(156	)		(769	)		(925	)		(7,962	)		(5,416	)		(13,378	)
Construction loans		(1,067	)		129			(938	)		(5,206	)		(1,162	)		(6,368	)
C&I and commercial mortgage loans		(7,664	)		(154	)		(7,818	)		(15,432	)		1,466			(13,966	)
Finance leases		(436	)		273			(163	)		(1,764	)		875			(889	)
Consumer loans		12,456			6,292			18,748			11,243			9,410			20,653
Total loans		3,133			5,771			8,904			(19,121	)		5,173			(13,948	)
Total interest income		2,783			4,457			7,240			(33,762	)		858			(32,904	)
Interest expense on interest-bearing liabilities:
Brokered CDs		(7,207	)		(3,644	)		(10,851	)		(30,181	)		(5,599	)		(35,780	)
Other interest-bearing deposits		841			(6,180	)		(5,339	)		3,168			(16,938	)		(13,770	)
Other borrowed funds		(1,790	)		(2,403	)		(4,193	)		(8,759	)		(6,732	)		(15,491	)
FHLB advances		(139	)		(703	)		(842	)		(3,132	)		(406	)		(3,538	)
Total interest expense		(8,295	)		(12,930	)		(21,225	)		(38,904	)		(29,675	)		(68,579	)
Change in net interest income	$	11,078		$	17,387		$	28,465		$	5,142		$	30,533		$	35,675

Portions of the Corporation’s interest-earning assets, mostly investments in obligations of some U.S. Government agencies and sponsored entities, generate interest which 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 are tax-exempt under the Puerto Rico tax law, except for a temporary 5% tax rate imposed by the Puerto Rico Government on IBEs’ net income effective for years that commenced after December 31, 2008 and before January 1, 2012 (refer to the Income Taxes discussion 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 as adjusted for changes to enacted tax rates (30.0% for 2012; 30% for the Corporation’s subsidiaries other than IBEs and 25.0% for the Corporation’s IBEs in 2011) and adding to it the average cost of interest-bearing liabilities. The computation considers the interest expense disallowance required by Puerto Rico tax law. Refer to the “Income Taxes” discussion below for additional information of the Puerto Rico tax law.

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The presentation of net interest income excluding the effects of the changes in the fair value of the derivative instruments and unrealized gains or losses on liabilities measured at fair value (“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 and unrealized gains or losses on liabilities measured at fair value have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively, or on interest payments exchanged with interest rate swap counterparties.

The following table reconciles net interest income in accordance with GAAP to net interest income, excluding valuations, and net interest income on a 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 a tax-equivalent basis:

(Dollars in thousands)
	Quarter Ended						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Interest Income - GAAP	$	166,964		$	158,542		$	472,723		$	502,863
Unrealized loss (gain) on derivative instruments		(170	)		954			(469	)		1,794
Interest income excluding valuations		166,794			159,496			472,254			504,657
Tax-equivalent adjustment		1,463			1,521			4,838			5,339
Interest income on a tax-equivalent basis excluding valuations		168,257			161,017			477,092			509,996
Interest Expense - GAAP		41,461			64,287			136,649			207,894
Unrealized gain (loss) on derivative instruments and liabilities measured at fair value		—			(1,601	)		490			(2,176	)
Interest expense excluding valuations		41,461			62,686			137,139			205,718
Net interest income - GAAP	$	125,503		$	94,255		$	336,074		$	294,969
Net interest income excluding valuations	$	125,333		$	96,810		$	335,115		$	298,939
Net interest income on a tax-equivalent basis excluding valuations	$	126,796		$	98,331		$	339,953		$	304,278
Average Balances
Loans and leases	$	10,297,835		$	10,832,426		$	10,290,132		$	11,164,370
Total securities and other short-term investments		2,238,701			2,787,708			2,361,820			3,305,893
Average Interest-Earning Assets	$	12,536,536		$	13,620,134		$	12,651,952		$	14,470,263
Average Interest-Bearing Liabilities	$	10,518,169		$	11,944,454		$	10,606,471		$	12,743,832
Average Yield/Rate
Average yield on interest-earning assets - GAAP		5.30	%		4.62	%		4.99	%		4.65	%
Average rate on interest-bearing liabilities - GAAP		1.57	%		2.14	%		1.72	%		2.18	%
Net interest spread - GAAP		3.73	%		2.48	%		3.27	%		2.47	%
Net interest margin - GAAP		3.98	%		2.75	%		3.55	%		2.73	%
Average yield on interest-earning assets excluding valuations		5.29	%		4.65	%		4.99	%		4.66	%
Average rate on interest-bearing liabilities excluding valuations		1.57	%		2.08	%		1.73	%		2.16	%
Net interest spread excluding valuations		3.72	%		2.57	%		3.26	%		2.50	%
Net interest margin excluding valuations		3.98	%		2.82	%		3.54	%		2.76	%
Average yield on interest-earning assets on a tax-equivalent basis and excluding valuations		5.34	%		4.69	%		5.04	%		4.71	%
Average rate on interest-bearing liabilities excluding valuations		1.57	%		2.08	%		1.73	%		2.16	%
Net interest spread on a tax-equivalent basis and excluding valuations		3.77	%		2.61	%		3.31	%		2.55	%
Net interest margin on a tax-equivalent basis and excluding valuations		4.02	%		2.86	%		3.59	%		2.81	%

The following table summarizes the components of the net unrealized gain and loss on derivatives (economic undesignated hedges) and net unrealized gain and loss on liabilities measured at fair value which are included in interest expense:

	Quarter ended September 30,					Nine-Month Period Ended September 30,
	2012		2011			2012			2011
Unrealized loss on derivatives (economic undesignated hedges):
Options on stock index notes	$	—	$	(40	)	$	—		$	7
Unrealized (gain) loss on liabilities measured at fair value:
Unrealized (gain) loss on medium-term notes		—		1,641			(490	)		2,169
Net unrealized (gain) loss on derivatives (economic undesignated hedges) and liabilities measured at fair value	$	—	$	1,601		$	(490	)	$	2,176

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Interest income on interest-earning assets primarily represents interest earned on loans receivable 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 FED and notes payable.

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

Unrealized gains or losses on liabilities measured at fair value represent the change in the fair value medium-term notes elected to be measured at fair value, other than the accrual of interests.

Derivative instruments, such as interest rate swaps, are subject to market risk. While the Corporation does have certain trading derivatives to facilitate customer transactions, the Corporation does not utilize derivative instruments for speculative purposes. As of September 30, 2012, most of the interest rate swaps outstanding are used for protection against rising interest rates. Refer to Note 9 of the accompanying unaudited consolidated financial statements for further details concerning the notional amounts of derivative instruments and additional information. 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 net interest income. This will depend, for the most part, on the shape of the yield curve, the level of interest rates, as well as the expectations for rates in the future.

Net interest income increased 33% to $125.5 million for the third quarter of 2012 from $94.3 million in the third quarter of 2011, and by 14% to $336.1 million for the first nine months of 2012 from $295.0 million for the first nine months of 2011. The increase was primarily driven by an increase in the net interest margin resulting from a reduction in the average cost of funds and interest income contributed by the recently acquired credit cards portfolio.

For the quarter and nine-months period ended September 30, 2012, the net interest margin, excluding valuations, improved by 116 and 78 basis points, respectively, when compared to the same periods in 2011. The improvement in the net interest margin was mainly derived from improved deposit pricing, an improved deposit mix, renewals of maturing brokered CDs at lower current rates, and funding cost reductions resulting from the re-structuring of repurchase agreements and maturities of high cost borrowings. The Corporation reduced the average cost of funds by lowering the rates paid on certain of its savings, interest-bearing checking accounts and retail CDs. The average rate paid on non-brokered deposits declined by 45 and 42 basis points during the third quarter and first nine months of 2012, or a reduction of approximately $5.3 million and $13.8 million, respectively, in interest expense. The Corporation continued with its planned reduction of brokered CDs, which decreased by $1.5 billion and $2.0 billion in average balances for the quarter and nine-month period ended September 30, 2012, compared to the same periods in 2011. The average cost of brokered CDs decreased by 32 and 14 basis points during the third quarter and first nine months of 2012, compared to the same period in 2011. Over the past 12 months, the Corporation repaid approximately $2.9 billion of maturing brokered CDs with an all-in cost of 1.91% and new issuance amounted to $1.8 billion with an all-in cost of 0.87%. Also, the Corporation benefited from the restructuring of $900 million of repurchase agreements during the second half of 2011 and first quarter of 2012, which resulted in a reduction of $2.0 million and $7.0 million in interest expense when compared to the third quarter and first nine months of 2011, respectively. Further reductions in interest expense were achieved as the Corporation has repaid same high-cost borrowings such as $100 million of repurchase agreements and $21 million of medium-term notes over the last 12 months. Finally improvements in the cost of funds were also attributed to approximately $191 million of FHLB advances with an average cost of 3.33% that matured over the last 12 months. The corporation entered into $300 million of long-term FHLB advances during the third quarter with an average cost of 1.11%.

Also contributing to the improvement in net interest income and margin was additional interest income of $18.6 million and $24.8 million for the quarter and nine month period ended September 30, 2012, respectively, from the credit cards portfolio purchased late in May, 2012. This purchase increased the average volume of consumer loans by approximately $366.9 million and $164.9 million for the quarter and nine-month period ended on September 30, 2012, respectively. Partially offsetting these increases was a decline in the volume of interest-earning assets reflecting the execution in 2011 of deleveraging strategies included in the Corporation’s capital plan in order to preserve and improve the capital position. Average interest-earning assets decreased by $1.1 billion and $1.8 billion when compared to the third quarter and nine-month period ended September 30, 2011, respectively, reflecting a $534.6 million and $874.2 million reduction in average total loans and leases for the quarter and nine-month period ended September 30, 2012, respectively, and a $549.0 million and $944.0 million reduction in average investment securities in the quarter and nine-month period ended September 30, 2012, compared to the respective periods in 2011. The decrease in average loans was driven by significant repayments of commercial credit facilities, foreclosures and charge-offs. The decrease in the average volume of investment securities mainly relates to sales of U.S. agency MBS completed throughout 2011, maturities of U.S. Treasury and agency debt securities and Puerto Rico Government securities called before their contractual maturities. Proceeds from sale, repayments and calls of loans and securities have been used, in part, to reduce maturing brokered CDs, repurchase agreements, advances from FHLB and notes payable.

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On an adjusted tax-equivalent basis, net interest income increased by $28.5 million, or 29%, for the third quarter of 2012 compared to the same period in 2011, and by $35.7 million, or 12%, for the first nine months of 2012 compared to the first nine months of 2011, mainly due to reductions in the overall cost of funding and the contribution of the recently acquired credit cards portfolio, as discussed above. The tax-equivalent adjustment decreased by $0.1 million and $0.5 million for the quarter and first nine month of 2012 respectively, as compared to the same period in 2011. The tax-equivalent adjustment increases interest income on tax-exempt securities and loans by an amount which makes tax-exempt income comparable, on a pre-tax basis, to the Corporation’s taxable income as previously stated.

Provision and Allowance 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 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. Although the Corporation believes that the allowance for loan and lease losses is adequate, factors beyond the Corporation’s control, including factors affecting the economies of Puerto Rico, the United States, the U.S. Virgin Islands and the British Virgin Islands, may contribute to delinquencies and defaults, thus necessitating additional reserves.

For the quarter and nine-month period ended on September 30, 2012, the Corporation recorded a provision for loan and lease losses of $29.0 million and $90.0 million, respectively, compared to $46.4 million and $194.4 million, for the comparable periods in 2011. The decline in the provision for the third quarter of 2012, as compared to the third quarter of 2011, was primarily related to the commercial mortgage loan portfolio, mainly in the United States, driven by improved trends in charge-offs, the decrease in the amount of adversely classified loans and the overall reduction of the size of this portfolio. For the nine month period ended on September 30, 2012, a lower provision was reflected in all major loan categories, except for consumer loans, due to reduced charges to the specific reserve of certain collateral dependent loans, the overall decrease in the size of the portfolios and the improvement in the cumulative charge-off history used for the general reserve determination. The allowance coverage for the non-impaired portfolio (general reserve) is determined using a methodology that incorporates loss rates and risk rating by loan category. Loss rates are based on the moving average of charge-off over a historical 24-month loss period, applying adjustments, as necessary, to each loss rate based on assessments of recent charge-off trends (12-months), collateral values, and economic and business influences impacting expected losses.

In terms of geography and categories, in Puerto Rico, the Corporation recorded a provision of $26.3 million and $88.6 million for the third quarter and first nine months of 2012, respectively, compared to of $32.1 million and $147.4 million for the comparable periods in 2011. The decrease for the third quarter of 2012, compared to the same period in 2011, primarily reflects decreases in the provision for residential and commercial mortgage loans, mainly due to improved charge-offs trends and in the case of commercial mortgage loans also due to a lower migration of loans to impaired status and the reduction in the size of the portfolio. The reduction for the nine month period ended on September 30, 2012, compared to the same periods in 2011, was mainly due to the decrease in the inflows of loans to impaired status, thus, lower charges to specific reserves were required; the reduction in the size of these portfolios and; the improvement in the cumulative charge-off history used for the general reserve determination. The provision for C&I loans decreased by $37.6 million for the nine-month period ended September 30, 2012 and the provision for commercial mortgage loans decreased by $26.0 million, for the nine-month period ended September 30, 2012, compared to the same period in 2011. Partially offsetting these decreases was an increase in the provision for consumer loans of $4.3 million and $11.0 million for the quarter and nine month period ended on September 30, 2012, compared to the same periods in 2011, mainly related to an allowance build for the credit cards portfolio.

With respect to the portfolio in the United States, the Corporation recorded a reserve release of $6.9 million and $12.2 million for the third quarter and first nine months of 2012, compared to a provision of $5.4 million and $15.5 million for the comparable periods in 2011. The decrease was mainly attributable to a reduction in the provision for commercial mortgage loans by $10.3 million and $11.1 million, for the quarter and nine-month period ended September 30, 2012, respectively, driven by improved charge-off trends, the reduction in the amount of adversely classified loans and stability in collateral values. The provision for residential mortgage loans decreased by $0.9 million and $10.9 million for the third quarter and first nine months of 2012, respectively, when compared to the provision recorded in the comparable periods in 2011. Reductions in net charge-offs and certain stabilization in the expectations of loss severities for this portfolio also contributed to the decrease in the provision.

The Virgin Islands region recorded an increase of $0.6 million and a decrease of $17.7 million in the provision for loan losses in the third quarter and first nine months of 2012, compared to 2011, mainly related to an increase of $0.3 million and a decrease of $17.8 million, respectively, in the provision for construction loans. The decrease for the first nine months of 2012, compared to 2011, was substantially related to the provision charged in 2011 to a construction loan relationship placed in non-accrual status early in 2011.

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Refer to the discussions under “Credit Risk Management” below for an analysis of the allowance for loan and lease losses, non-performing assets, impaired loans and related information, and refer to the discussions under “Financial Condition and Operating Analysis – Loan Portfolio” and under “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 September 30,						Nine-Month Period Ended September 30,
	2012			2011			2012			2011
	(In thousands)
Service charges on deposit accounts	$	3,267		$	3,098		$	9,754		$	9,484
Other service charges		1,098			1,485			3,843			4,659
Mortgage banking activities		4,728			3,676			13,260			19,603
Insurance income		1,429			1,058			4,221			3,454
Broker-dealer income		20			173			2,630			1,004
Other operating income		7,330			5,687			16,738			18,996
Non-interest income before net gain on investments, loss on early extinguishment of borrowings and equity in losses of unconsolidated entities		17,872			15,177			50,446			57,200
Proceeds from securities litigation settlement and other proceeds		10			—			36			679
Net gain on sale of investments		—			12,506			—			53,117
OTTI on debt securities		(557	)		(350	)		(1,933	)		(957	)
Net (loss) gain on investments		(547	)		12,156			(1,897	)		52,839
Loss on early extinguishment of borrowings		—			(9,012	)		—			(10,835	)
Equity in losses of unconsolidated entities		(2,199	)		(4,357	)		(10,926	)		(5,893	)
Total	$	15,126		$	13,964		$	37,623		$	93,311

Non-interest income primarily consists of other service charges on loans; 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 and other fees on deposit accounts.

Other service charges consist mainly of other non-deferrable fees (e.g. agent, commitment, and drawing fees) generated from lending activities.

Income from mortgage banking activities includes gains on sales and securitizations of loans and revenues earned for administering residential mortgage loans originated by the Corporation and subsequently sold with servicing retained. 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 of insurance commissions earned by the Corporation’s subsidiary FirstBank Insurance Agency, Inc.

Broker-dealer income consists of commissions earned by the Corporation’s subsidiary, FirstBank Puerto Rico Securities.

The other operating income category is composed of miscellaneous fees such as debit, credit card and point of sale (POS) interchange fees and check and cash management fees and includes commissions from the Corporation’s broker-dealer subsidiary, FirstBank Puerto Rico Securities.

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.

Equity in earnings (losses) of unconsolidated entities is related to the FirstBank’s investment in CPG/GS, the entity that purchased $269 million of loans from FirstBank during the first quarter of 2011. The Bank holds a 35% subordinated ownership interest in CPG/GS. The majority owner of CPG/GS is entitled to recover its initial investment and a priority return of 12% prior to any return paid to the Bank. Accordingly, the Bank’s investment of $32.3 million in CPG/GS is at risk. Refer to “Financial Condition and

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Operating Data Analysis – Commercial and Construction Loans” and to Note 11 of the Corporation’s unaudited financial statements for the quarter ended September 30, 2012 for additional information about the Bank’s investment in CPG/GS, including information about the determination of the initial value of the investment.

Non-interest income increased $1.2 million to $15.1 million for the third quarter of 2012, compared to the third quarter of 2011, primarily due to:

• The impact of the credit cards portfolio acquisition that resulted in $3.1 million of interchange and other related fees included as part of “Other operating income” in the table above.

• A $1.1 million increase in revenues from mortgage banking activities, driven by both a higher volume of loans sales and improved margins.

• Non-cash charges of $2.2 million related to FirsBank’s equity interest in CPG/GS, compared to $4.4 million in the third quarter of 2011, a positive variance of $2.2 million.

Non-interest income in the third quarter of 2011 was also affected by a $3.5 million gain attributable to a tender offer by the Puerto Rico Housing Finance Authority to purchase certain of its outstanding bonds. Bonds held by the Corporation with a book value of $19.8 million were exchanged for cash as part of the tender offer and the difference between the cash received and the book value of such instruments was recorded as part of “Net gain on sale of investments” in the table above.

Non-interest income decreased by $55.7 million for the first nine months of 2012, compared to the first nine months of 2011, primarily due to:

• The impact in the first nine months of 2011 of a $40.6 million gain on sales of investments, mainly MBS as part of the Corporation’s deleveraging strategies executed in 2011 and the aforementioned impact in 2011 of the $3.5 million gain recorded as part of a tender offer. In addition, the Corporation recorded other-than-temporary impairment charge (OTTI) on debt securities of $1.9 million for the first nine months of 2012, while $1.0 million was recognized in the first nine months of 2011.

• Non-cash charge associated with the equity in losses of unconsolidated entities of approximately $10.9 million recorded in the first nine months of 2012, compared to $5.9 million recorded in the first nine months of 2011. This non-cash adjustment relates to the Bank’s investment in CPG/GS and includes $4.2 million in the first nine months of 2012 that represents the amortization of the basis differential.

• A $6.3 million decrease in mortgage banking activities driven by the impact in the previous year of $12.1 million in gains recorded for completed bulk sales of approximately $518 million of performing residential mortgage loans, this was partially offset by increases in gains from the Corporation’s mortgage loan securitization activities and recoveries in the value of servicing assets during 2012.

• The impact in 2011 of a $2.8 million gain recorded on the sale of substantially all the assets of First Bank Insurance Agency, included as part of “Other operating income” in the table above.

The aforementioned factors were partially offset by $4.2 million in Interchange and other related fees earned on the recently acquired credit cards portfolio and an increase of $1.6 million in fees from the broker-dealer subsidiary, FirstBank Securities, mainly due to higher underwriting fees.

Non-Interest Expenses

The following table presents the detail of non-interest expenses for the periods indicated:

	Quarter Ended September 30,				Nine-Month Period Ended September 30,
	2012		2011		2012		2011
	(In thousands)
Employees’ compensation and benefits	$	31,058	$	29,375	$	93,770	$	89,221
Occupancy and equipment		15,208		15,468		46,065		46,321
Insurance and supervisory fees		13,023		15,041		39,333		44,622
Taxes, other than income taxes		3,499		3,420		10,350		9,953
Professional fees		6,295		5,983		16,796		17,192
Servicing and processing fees		5,305		2,329		10,482		6,691
Business promotion		4,004		2,509		10,026		8,801
Communications		1,797		1,651		5,276		5,393
Net loss on REO and REO operations		8,686		4,952		18,915		16,423
Other		2,968		2,203		12,965		7,611
	$	91,843	$	82,931	$	263,978	$	252,228

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Non-interest expenses increased by $8.9 million to $91.8 million for the third quarter of 2012 from $82.9 million for the third quarter of 2011. The increase was principally attributable to:

• A $3.7 million increase in losses from REO activities primarily reflecting losses on the sale of certain commercial REO, properties, higher write-downs and, increased tax expenses related to REO properties in addition to higher operating expenses commensurate with a higher inventory.

• A $3.0 million increase in servicing and processing fees, mainly related to the servicing of the recently acquired credit cards portfolio.

• A $1.7 million increase in employee compensation and benefits driven by the filling of vacant positions including several managerial and supervisory positions and higher incentive and stock-based compensation expenses.

• A $1.5 million increase in business promotion expenses, including higher marketing expenses and accrued expenses related to the credit cards portfolio rewards program.

The increases were partially offset by the following decreases:

• A $1.9 million decrease in the deposit insurance premium mainly resulting from the decrease in the Bank’s average total assets and the Bank’s improved capital position. This charge is included as part of “Insurance and Supervisory fees” in the table above.

Non-interest expenses increased $11.8 million for the nine-month period ended September 30, 2012, compared to the first nine months of 2011, primarily due to:

• A $4.5 million increase in employee compensation and benefits mainly due to the filling of vacant positions including several managerial and supervisory positions and higher incentive and stock-based compensation expenses.

• A $4.5 million negative variance, related to the provision for unfunded commitments and letters of credit. Reserve releases of $5.6 million were recorded in the first nine months of 2011, mainly related to non-performing construction loans, including loans sold to CPG/GS early in 2011, this is included as part of “Other” in the table above.

• A $3.8 million increase in servicing and processing fees, mainly related to the servicing of the recently acquired credit cards portfolio.

• A $2.5 million increase in losses from REO activities mainly related to higher operating expenses, including taxes, resulting from a higher inventory.

• A $2.5 million non-recurring charge associated with a contingency adjustment related to the collectability of certain tax credits, included as part of “Other” in the table above.

• A $1.2 million increase in business promotion expenses, mainly due to accrued expenses related to the credit cards portfolio rewards program.

These increases were partially offset by a $5.6 million decrease in the deposit insurance premium mainly resulting from the decrease in the Bank’s average assets and the Bank’s improved capital position, and a decrease in write-downs to the value of non-real estate repossessed assets.

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Income Taxes

Income tax expense includes Puerto Rico and Virgin Islands 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. income tax purposes and is generally subject to United States income tax only on its income from sources within the United States or income effectively connected with the conduct of a trade or business within the United States. Any such tax paid is also creditable against the Corporation’s Puerto Rico tax liability, subject to certain conditions and limitations.

On January 31, 2011, the Puerto Rico Government approved Act No. 1, which repealed the 1994 Code (“1994 PR Code”) and replaces it with the Puerto Rico Internal Revenue Code of 2011 (“2011 PR Code”). The provisions of the 2011 PR Code are generally applicable to taxable years commencing after December 31, 2010. Under the 2011 PR Code, the Corporation and its subsidiaries are treated as separate taxable entities and are not entitled to file consolidated tax returns and, thus, the Corporation is not able 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, a particular subsidiary must be able to demonstrate sufficient taxable income within the applicable carry forward period (7 years under the 2011 PR Code, except for losses incurred during tax years commenced after December 31, 2004 and before December 31, 2012, that the carry forward period is extended to 10 years). The 2011 PR Code 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. Dividend payments from a U.S. subsidiary to the Corporation are subject to a 10% withholding tax based on the provisions of the U.S. Internal Revenue Code.

Under the 2011 PR Code, First BanCorp. is subject to a maximum statutory tax rate of 30% (25% for taxable years commencing after December 31, 2013 if certain economic conditions are met by the Puerto Rico economy). The 2011 PR Code also includes an alternative minimum tax of 20% that applies if the Corporation’s regular income tax liability is less than the alternative minimum tax requirements.

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 the International Banking Entity (“IBE”) of the Bank and through the Bank’s subsidiary, FirstBank Overseas Corporation, in which the interest income and gain on sales is exempt from Puerto Rico and U.S. income taxation except for tax years that commenced after December 31, 2008 and before January 1, 2012, for which a special 5% tax was imposed to all IBEs. The IBEs and FirsBank Overseas Corporation were created under the International Banking Entity Act of Puerto Rico, which provides for total Puerto Rico tax exemption on the net income derived from eligible activities by IBEs operating in Puerto Rico. IBEs that operate as a unit of a bank pay income taxes at normal rates to the extent that the IBEs’ net income exceeds 20% of the bank’s total net taxable income.

For the quarter and nine-month period ended September 30, 2012, the Corporation recorded an income tax expense of $0.7 million and $4.4 million, respectively, compared to an income tax expense of $2.9 million and $9.1 million for the same periods in 2011. The decrease is primarily due to lower taxable income from profitable subsidiaries and for the nine-month period was also driven by a reduction in deferred tax assets of profitable subsidiaries due to a reduction in statutory tax rates in 2011. The income tax in the interim financial statements is calculated based of the income of the individual subsidiaries and the currently valid tax rates as a best possible estimate. As of September 30, 2012 the deferred tax asset, net of a valuation allowance of $360.0 million, amounted to $4.6 million compared to $5.4 million as of December 31, 2011.

Accounting for income taxes requires that companies assess whether a valuation allowance should be recorded against their deferred tax asset based on the consideration of all available evidence, using a “more likely than not” realization standard. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. In making such assessment, significant weight is to be given to evidence that can be objectively verified, including both positive and negative evidence. Consideration must be given to all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, future taxable income exclusive of the reversal of temporary differences and carryforwards, taxable income in carryback years and tax planning strategies. In estimating taxes, management assesses the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory, judicial and regulatory guidance, and recognizes tax benefits only when deemed probable of realization.

In assessing the weight of positive and negative evidence, a significant negative factor that resulted in the maintenance of the valuation allowance was that the Corporation’s banking subsidiary, FirstBank Puerto Rico, continues in a three-year historical cumulative loss position as of September 30, 2012, mainly due to charges to the provision for loan and lease losses in prior years as a result of the economic downturn. As of September 30, 2012, management concluded that $4.6 million of the deferred tax asset will be realized as it relates to profitable subsidiaries and to amounts that can be realized through future reversals of existing taxable temporary differences. To the extent the realization of

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a portion, or all, of the tax asset becomes “more likely than not” based on changes in circumstances (such as, improved earnings, changes in tax laws or other relevant changes), a reversal of that portion of the deferred tax asset valuation allowance will then be recorded.

The authoritative accounting guidance prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken on income tax returns. Under this guidance, income tax benefits are recognized and measured based upon a two-step model: 1) a tax position must be more likely than not to be sustained based solely on its technical merits in order to be recognized, and 2) the benefit is measured as the largest dollar amount of that position that is more likely than not to be sustained upon settlement. The difference between the benefit recognized in accordance with this model and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit (“UTB”).

During the third quarter of 2011, the Corporation recorded new UTBs of $2.4 million, all of which would, if recognized, affect the Corporation’s effective tax rate. The Corporation classified all interest and penalties, if any, related to tax uncertainties as income tax expense. As of September 30, 2012 the Corporation’s accrued interest that relates to tax uncertainties amounted to $1.1 million and there is no need to accrue for the payment of penalties. For the nine-month period ended September 30, 2012, the total amount of interest recognized by the Corporation as part of income tax expense related to tax uncertainties was $0.2 million. During the first nine months of 2012 there was no change to the UTB of $2.4 million. The amount of UTBs may increase or decrease for various reasons, including changes in the amounts for current tax year positions, the expiration of open income tax returns due to the expiration of statutes of limitations, changes in management’s judgment about the level of uncertainty, the status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions. The years 2007 through 2009 have been examined by the United States Internal Revenue Service (“IRS”) and disputed issues have been taken to administrative appeals. Although the timing of the resolution and/or closure of audits is highly uncertain, the Corporation believes it is reasonably possible that the IRS will conclude this audit within the next twelve months. If any issues addressed in the IRS audit are resolved in a manner not consistent with the Corporation’s expectations, the Corporation could be required to adjust its provision for income taxes in the period such resolution occurs. The Corporation currently cannot reasonably estimate a range of possible changes to existing reserves.

The Corporation’s liability for income taxes includes the liability for UTBs, and interest which relates to tax years still subject to review by taxing authorities. Audit periods remain open for review until the statute of limitations has passed. The statute of limitations under the PR Code is 4 years; and for Virgin Islands and U.S. income tax purposes is 3 years after a tax return is due or filed, whichever is later. 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 results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. For Puerto Rico and Virgin Islands income tax purposes, all tax years subsequent to 2009 remain open to examination. Taxable years from 2007 remain open to examination for U.S. income tax purpose.

FINANCIAL CONDITION AND OPERATING DATA ANALYSIS

Assets

Total assets were approximately $13.1 billion as of September 30, 2012, up $12.5 million from December 31, 2011. The increase is attributable to a higher liquidity obtained, in part, through FHLB advances and increases in non-brokered deposits. Cash and cash equivalents increased by $557.2 million offset by reductions in investment securities and loans. Total available for sale investment securities decreased by $325.4 million primarily reflecting maturities of $765 million of U.S. Treasury and agency debt securities, calls of $194 million of Puerto Rico government obligations and MBS prepayments. The proceeds of calls and maturities of investments securities were reinvested mostly in purchases of $713 million of U.S. agency MBS. Total loans, net of the allowance for loan and lease losses, decreased by $270.3 million, led by repayments of commercial facilities, foreclosures and charge-offs. The reduction was primarily related to C&I loan repayments, including a $233 million reduction in loans granted to governmental entities. These decreases were partially offset by the completion of the purchase of the FirstBank-branded credit cards portfolio of approximately $406 million. Proceeds from loan and MBS repayments and calls of investment securities were used, in part, to repay high cost borrowings, including brokered CDs, repurchase agreements, advances from the FHLB, and medium-term notes. Other variances within the assets side include an increase of $62.7 million in REO, mainly in connection with foreclosed construction projects in the Virgin Islands and Puerto Rico.

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Loan Portfolio

The following table presents the composition of the Corporation’s loan portfolio, including loans held for sale, as of the dates indicated:

(In thousands)	September 30, 2012			December 31, 2011
Residential mortgage loans	$	2,762,418			2,873,785
Commercial loans:
Commercial mortgage loans		1,459,118			1,565,411
Construction loans		352,891			427,863
Commercial and Industrial loans		3,369,305			3,856,695
Loans to local financial institutions collateralized by real estate mortgages		258,341			273,821
Total commercial loans		5,439,655			6,123,790
Finance leases		239,556			247,003
Consumer loans		1,746,535			1,314,814
Total loans held for investment		10,188,164			10,559,392
Less:
Allowance for loan and lease losses		(445,531	)		(493,917	)
Total loans held for investment, net	$	9,742,633		$	10,065,475
Loans held for sale		68,349			15,822
Total loans, net	$	9,810,982		$	10,081,297

As of September 30, 2012, the Corporation’s total loans, net of allowance, decreased by $270.3 million, when compared with the balance as of December 31, 2011. All major loan categories, excluding consumer loans, decreased from 2011 levels mainly as a result of pay-offs, repayments, foreclosures and charge-offs. The reduction was primarily related to C&I loan repayments, including a net reduction of $233 million from loans to governmental entities and four relationships amounting to $131.6 million paid-off, and a net reduction of $117.2 million in facilities granted to CPG/GS.

Of the total gross loan portfolio held for investment of $10.2 billion as of September 30, 2012 approximately 85% have credit risk concentration in Puerto Rico, 7% in the United States (mainly in the state of Florida) and 8% in the Virgin Islands, as shown in the following table:

As of September 30, 2012	Puerto Rico			Virgin Islands			Florida			Total
	(In thousands)
Residential mortgage loans	$	2,100,210		$	386,016		$	276,192		$	2,762,418
Commercial loans:
Construction loans		229,636			100,612			22,643			352,891
Commercial mortgage loans		1,024,694			63,419			371,005			1,459,118
Commercial and Industrial loans		3,127,447			204,116			37,742			3,369,305
Loans to local financial institutions collateralized by real estate mortgages		258,341			—			—			258,341
Total commercial loans		4,640,118			368,147			431,390			5,439,655
Finance leases		239,556			—			—			239,556
Consumer loans		1,661,497			52,940			32,098			1,746,535
Total loans held for investment, gross		8,641,381			807,103			739,680			10,188,164
Allowance for loans and lease losses		(374,582	)		(26,575	)		(44,374	)		(445,531	)
Total loans held for investment, net		8,266,799			780,528			695,306			9,742,633
Loans held for sale		64,037			4,312			—			68,349
Total loans	$	8,330,836			784,840			695,306			9,810,982

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.

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The following table details First BanCorp’s loan production, including purchases, refinancings, and draws from existing revolving and non-revolving commitments for the periods indicated:

	Quarter Ended September  30,				Nine-Month Period  Ended September 30,
	2012		2011		2012		2011
	(In thousands)
Residential real estate	$	187,035	$	147,841	$	542,437	$	403,048
C&I and commercial mortgage		252,572		441,488		880,380		1,126,223
Construction		11,689		25,267		38,073		79,661
Finance leases		23,934		20,827		71,337		62,373
Consumer		279,931		127,873		629,939		351,782
Total loan production	$	755,161	$	763,296	$	2,162,166	$	2,023,087

The Corporation is experiencing continued loan demand and has continued with its targeted originations strategies. During the third quarter and nine month period ended on September 30, 2012 total loan originations, including refinancings and draws from existing commitments, amounted to approximately $755.2 million and $2.2 billion, respectively, compared to $763.3 million and $2.0 billion, respectively, for the comparable periods in 2011. The decrease for the third quarter of 2012, compared to 2011, was mainly related to government loan originations that decreased $218 million, partially offset by an increased volume of auto and residential mortgage loan originations. The increase for the nine month period is primarily related to an increase in residential mortgage loan originations and purchases. Consumer loan originations, including finance leases, increased by $155.2 million and $287.1 million for the quarter and nine month period ended September 30, 2012, compared to the same period in 2011, and include $95.0 million for the third quarter and $129.2 million for the first nine months of 2012 related to the utilization activity on outstanding credit cards. Originations of auto loans (including finance leases) amounted to $151.2 million and $414.0 million for the third quarter and the nine-month period ended on September 30, 2012, respectively, compared to $104.1 million and $299.7 million closed for the comparable periods in 2011. Loan production statistics exclude the purchase of the $406 million credit cards portfolio acquired in the second quarter of 2012.

Residential Real Estate Loans

As of September 30, 2012, the Corporation’s residential real estate loan portfolio held for investment decreased by $111.4 million as compared to the balance as of December 31, 2011, reflecting sales of $156.3 million of loans to FNMA and FHLMC, foreclosures of $42.9 million, charge-offs and principal repayments, partially offset by loan originations during the period. The majority of the Corporation’s outstanding balance of residential mortgage loans consists of fixed-rate, fully amortizing, full documentation loans. In accordance with the Corporation’s underwriting guidelines, residential real estate loans are mostly fully documented loans, and the Corporation is not actively involved in the origination of negative amortization loans, non-materially involved in adjustable-rate mortgage loans. Refer to the “Contractual Obligations and Commitments” discussion below for additional information about outstanding commitments to sell mortgage loans.

Commercial and Construction Loans

As of September 30, 2012, the Corporation’s commercial and construction loan portfolio held for investment decreased by $684.1 million, as compared to the balance as of December 31, 2011, The reduction was primarily related to C&I and commercial mortgage loans repayments, in both geographic segments, Puerto Rico and the United States, including four relationships amounting to $131.6 million paid-off, a net reduction of $233.0 million in loans granted to governmental entities and a $117.2 million reduction in facilities granted to CPG/GS. Additionally, the construction loan portfolio decrease of $75.0 million was led by the foreclosure of the underlying collateral of two commercial projects in the Virgin Islands with an aggregate book value of $16.8 million (net of charge-offs of $4.9 million at the time of foreclosure), the in-substance foreclosure of two projects in Puerto Rico amounting to $16 million in the aggregate, and $22.7 million of charge-offs against one relationship in the Virgin Islands. The Corporation’s commercial loans are primarily variable- and adjustable-rate loans.

As of September 30, 2012, the Corporation had $148.7 million outstanding in credit facilities granted to the Puerto Rico Government and/or its political subdivisions, down from $360.1 million as of December 31, 2011, and $117.7 million granted to the Government of the Virgin Islands, down from $139.4 million as of December 31, 2011. A substantial portion of these credit facilities consist of loans to municipalities in Puerto Rico for which the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment. Another portion of these obligations consists of loans to public corporations that obtain revenues from rates charged for services or products, such as electric power and water utilities. Public corporations have varying degrees of independence from the central Government and many receive appropriations or other payments from it.

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In addition to loans extended to government entities, the largest loan to one borrower as of September 30, 2012 in the amount of $258.3 million is with one mortgage originator in Puerto Rico, Doral Financial Corporation. This commercial loan is secured by individual real-estate loans, mostly 1-4 residential mortgage loans.

Construction loans originations decreased by $13.6 million and $41.6 million for the quarter and nine-month period ended on September 30, 2012, respectively, when compared to the same periods in 2011, due to the strategic decision by the Corporation to reduce its exposure to construction projects in both Puerto Rico and the United States. The Corporation has significantly reduced its exposure to construction loans in its Florida operations and construction loan originations in Puerto Rico are mainly draws from existing commitments. More than 88% of the construction loan originations in 2012 are related to disbursements from previous established commitments.

The composition of the Corporation’s construction loan portfolio held for investment as of September 30, 2012 by category and geographic location follows:

As of September 30, 2012	Puerto Rico			Virgin Islands			Florida			Total
	(In thousands)
Loans for residential housing projects:
High-rise (1)	$	5,158		$	—		$	—		$	5,158
Mid-rise (2)		31,627			4,905			37			36,569
Single-family, detached		35,094			211			3,272			38,577
Total for residential housing projects		71,879			5,116			3,309			80,304
Construction loans to individuals secured by residential properties		9,802			7,212			—			17,014
Condo-conversion loans		75			—			—			75
Loans for commercial projects		34,436			57,489			—			91,925
Bridge loans - residential		42,825			—			—			42,825
Bridge loans - commercial		—			15,700			12,398			28,098
Land loans - residential		38,108			12,084			6,939			57,131
Land loans - commercial		32,040			2,126			—			34,166
Working capital		1,447			1,041			—			2,488
Total before net deferred fees and allowance for loan losses		230,612			100,768			22,646			354,026
Net deferred fees		(976	)		(156	)		(3	)		(1,135	)
Total construction loan portfolio, gross		229,636			100,612			22,643			352,891
Allowance for loan losses		(37,662	)		(16,653	)		(11,596	)		(65,911	)
Total construction loan portfolio, net	$	191,974		$	83,959		$	11,047		$	286,980

(1) For purposes of the above table, high-rise portfolio is composed of buildings with more than 7 stories, composed of two projects in Puerto Rico.

(2) Mid-rise relates to buildings of up to 7 stories.

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The following table presents further information on the Corporation’s construction portfolio as of and for the nine-month period ended September 30, 2012:

	(Dollars in thousands)
Total undisbursed funds under existing commitments	$	137,298
Construction loans held for investment in non-accrual status	$	189,458
Net charge offs - Construction loans (1)	$	38,904
Allowance for loan losses - Construction loans	$	65,911
Non-performing construction loans to total construction loans		53.69	%
Allowance for loan losses - construction loans to total construction loans		18.68	%
Net charge-offs (annualized) to total average construction loans (1)		13.00	%

(1) Includes net charge-offs of $14.0 million related to construction loans in Puerto Rico, $27.0 million related to construction loans in the Virgin Islands, and an aggregate $2.1 million recovery related to construction loans in Florida.

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	$	26,103
$300k - $600k		10,037
Over $600k(1)		35,739
	$	71,879

(1) Mainly composed of four residential housing projects in Puerto Rico.

Consumer Loans and Finance Leases

As of September 30, 2012, the Corporation’s consumer loan and finance leases portfolio increased by $424.3 million, as compared to the portfolio balance as of December 31, 2011. This increase is primarily related to the completion on May 30, 2012 of the acquisition of an approximate $406 million portfolio of FirstBank-branded credit cards portfolio from FIA. These loans were recorded on the Consolidated Statement of Financial Condition at estimated fair value on acquisition date of approximately $369 million, and the Corporation recognized a purchased credit card relationship intangible asset of $24.4 million ($23.9 million as of September 30, 2012). The carrying value of the credit cards portfolio as of September 30, 2012, net of discount of $22.6 million, amounted to $365.5 million. Credit card loans continue to accrue finance charges and fees until charged-off at 180 days delinquent and the methodology employed to calculate the allowance for loan losses for non-PCI loans is similar to the methodology used for other consumer loans, except for that the loss rates are determined evaluating 12 months of historical performance, instead of 24 months. The auto loan portfolio (including finance leases) increased by $51.6 million driven by an increased volume of originations.

Investment Activities

As part of its strategy to diversify its revenue sources and maximize its net interest income, First BanCorp maintains an investment portfolio that is classified as available-for-sale. The Corporation’s total investment securities portfolio as of September 30, 2012 amounted to $1.6 billion, a reduction of $323.7 million from December 31, 2011 mainly due to $194.5 million in PR government obligations called prior to their contractual maturity, maturities of $765 million of U.S Treasury and agency securities, and MBS prepayments, partially offset by the purchase of approximately $713 million of U.S. Agency MBS.

Over 92% of the Corporation’s available-for-sale portfolio is invested in U.S. Government and Agency debentures and fixed-rate U.S. government sponsored-agency MBS (mainly FNMA and FHLMC fixed-rate securities). The Corporation’s investment in equity securities is minimal, approximately $0.1 million, which consists of common stock of a financial institution in Puerto Rico. As of September 30, 2012, the Corporation held approximately $63.3 million of Puerto Rico Government Obligations. In July 2012, Moody’s cut Puerto Rico Sales Tax Financing Corp.’s senior sale tax revenue bonds by one notch to Aa3 From Aa2 and its subordinated bonds by two notches to A3 from A1. These downgrades could have an adverse impact on economic conditions, but its ultimate impact is unpredictable and may not be immediately apparent.

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The following table presents the carrying value of investments at the indicated dates:

	As of September 30, 2012		As of December 31, 2011
	(In thousands)
Money market investments	$	216,932	$	239,669
Investment securities available-for-sale, at fair value:
U.S. Government and agencies obligations		33,156		778,577
Puerto Rico Government obligations		63,346		222,613
Mortgage-backed securities		1,501,305		921,024
Corporate bonds		—		1,013
Equity securities		40		41
		1,597,847		1,923,268
Other equity securities, including $38.4 million and $36.7 million of FHLB stock as of September 30, 2012 and December 31, 2011, respectively		39,656		37,951
Total money market and investment securities	$	1,854,435	$	2,200,888

Mortgage-backed securities at the indicated dates consist of:

(In thousands)	As of September 30, 2012		As of December 31, 2011
Available-for-sale:
FHLMC certificates	$	139,905	$	26,148
GNMA certificates		649,861		762,006
FNMA certificates		656,474		71,664
Collateralized Mortgage Obligations issued or guaranteed by FHLMC		376		—
Other mortgage pass-through certificates		54,689		61,206
Total mortgage-backed securities	$	1,501,305	$	921,024

The carrying values of investment securities classified as available-for-sale as of September 30, 2012 by contractual maturity (excluding mortgage-backed securities and equity securities) are shown below:

(Dollars in thousands)	Carrying Amount		Weighted Average Yield %
U.S. Government and agencies obligations
Due within one year	$	7,495		0.17
Due after one year through five years		25,661		0.35
		33,156		0.31
Puerto Rico Government obligations
Due after five years through ten years		41,079		4.49
Due after ten years		22,267		5.78
		63,346		4.94
Total		96,502		3.31
Mortgage-backed securities		1,501,305		3.13
Equity securities		40		—
Total investment securities available for sale	$	1,597,847		3.15

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Net interest income of future periods could be affected by prepayments of mortgage-backed securities. 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 in 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. Approximately $194.5 million of Puerto Rico Government obligations with an average yield of 4.20% were called during the first nine months of 2012. As of September 30, 2012, the Corporation has approximately $26.6 million in debt securities (mainly U.S. agency securities) with embedded calls and with an average yield of 0.53%. Refer to the “Risk Management” section 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 refer to Note 4 to the accompanying unaudited 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 eight 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, and (8) contingency risk. First BanCorp. has adopted policies and procedures designed to identify and manage risks to which the Corporation is exposed, specifically those relating to liquidity risk, interest rate risk, credit risk, and operational risk.

The Corporation’s risk management policies are described below as well as in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of First BanCorp.’s 2011 Annual Report on Form 10-K.

Liquidity 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 the needs for liquidity 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 September 30, 2012, FirstBank could not pay any dividend to the parent company except upon receipt of prior approval by the FED.

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. Management’s Investment and Asset Liability Committee (“MIALCO”), using measures of liquidity developed by management, which 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.

In order 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.

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The Corporation develops and maintains contingency funding plans. These plans evaluate the Corporation’s liquidity position under various operating circumstances and allow the Corporation to ensure that it 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. In 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 its current funding position, thereby ensuring the ability to honor its commitments, and establishing liquidity triggers monitored by the MIALCO in order to maintain the ordinary funding of the banking business. Three different scenarios are defined in the Contingency Funding Plan: local market event, credit rating downgrade, 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. Multiple measures are utilized to monitor the Corporation’s liquidity position, including basic liquidity and time-based reserve measures. The Corporation has maintained a basic liquidity (cash, free liquid assets, and secured lines of credit) in excess of the self-imposed minimum limit of 5%. As of September 30, 2012, the estimated basic liquidity ratio was approximately 10.29%, including un-pledged investment securities, FHLB line of credit and cash. At period end, the Corporation had $300.4 million available for additional credit on the FHLB lines of credit. Unpledged liquid securities as of September 30, 2012 mainly consisted of fixed-rate U.S. agency MBS and U.S. agency debentures amounting to approximately $62.6 million. 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 computation. Most of the cash balances are deposited with the Federal Reserve Bank and in money market instruments generating interest income between 0.25% and 0.35%. As of September 30, 2012, the holding company had $42.7 million of cash and cash equivalents. Cash and cash equivalents at the Bank level as of September 30, 2012 were approximately $996.9 million. The Bank has $165.0 million in FHLB advances maturing over the next twelve months. Liquidity at the Bank level is highly dependent on bank deposits, which fund 75.75% of the Bank’s assets (or 49.78% excluding brokered CDs). The Corporation has continued to issue brokered CDs pursuant to approvals received from the FDIC to renew or roll over brokered CD up to certain amount through December 31, 2012. Management cannot be certain it will continue to obtain waivers from the restrictions to issue brokered CDs under the Order to meet its obligations and execute its business plans.

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 securitized and sold mortgage loans as a supplementary source of funding. Issuances of commercial paper have also in the past provided additional funding. Long-term funding has also been obtained through the issuance of notes and, to a lesser extent, 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 brokered CDs. The reductions in brokered CDs are consistent with the requirements of the Order that preclude the issuance of brokered CDs without FDIC approval and require a plan to reduce the amount of brokered CDs. Brokered CDs decreased $323.1 million to $3.4 billion as of September 30, 2012 from $3.7 billion as of December 31, 2011. At the same time, as the Corporation focuses on reducing its reliance on brokered deposits, it is seeking to add core deposits.

The Corporation continues to have the support of creditors, including repurchase agreements counterparties, 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 and the $525 million capital raise completed in 2011 will be adequate to provide the necessary funding for the Corporation business plans in the foreseeable future.

The Corporation’s principal sources of funding are:

Brokered CDs – A large portion of the Corporation’s funding has been retail brokered CDs issued by FirstBank. Total brokered CDs decreased from $3.7 billion at December 31,2011 to $3.4 billion as of September 30, 2012. Although all of the Bank’s regulatory capital ratios exceeded the established “well capitalized” levels at September 30, 2012, and the minimum capital requirements of the FDIC Order, because of the Order with the FDIC, Firstbank cannot be considered a “well capitalized” institution under regulatory guidance and cannot replace maturing brokered CDs without the prior approval of the FDIC. Since the issuance of the Order, the FDIC has granted the Bank temporary waivers to enable it to continue accessing the brokered deposit market through December 31, 2012. The Bank will request approvals for future periods. The Corporation used proceeds from repayments of loans and investments to pay down maturing borrowings, including brokered CDs. Also, the Corporation successfully implemented its non-brokered deposit growth strategy that resulted in an increase of $311.8 million during the first nine months of 2012.

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The average remaining term to maturity of the retail brokered CDs outstanding as of September 30, 2012 is approximately 0.91 year. Approximately 0.12% or $4.3 million, of the principal value of these certificates are callable at the Corporation’s option.

The use of brokered CDs has been particularly important for the growth of the Corporation. The Corporation encounters intense competition in attracting and retaining regular retail deposits in Puerto Rico. The brokered CDs market is very competitive and liquid, and the Corporation has been able to obtain substantial amounts of funding in short periods of time. This strategy has enhanced the Corporation’s liquidity position, since the brokered CDs are insured by the FDIC up to regulatory limits and can be obtained faster compared to regular retail deposits. During the first nine months of 2012, the Corporation issued $1.6 billion in brokered CDs with an average cost of 0.87% to renew maturing brokered CDs. Management believes it will continue to obtain waivers from the restrictions in the issuance of brokered CDs under the Order to meet its obligations and execute its business plans.

The following table presents a maturity summary of brokered and retail CDs with denominations of $100,000 or higher as of September 30, 2012:

	Total
	(In thousands)
Three months or less	$	1,044,263
Over three months to six months		911,544
Over six months to one year		1,532,216
Over one year		1,342,307
Total	$	4,830,330

Certificates of deposit in denominations of $100,000 or higher include brokered CDs of $3.4 billion issued to deposit brokers in the form of large ($100,000 or more) certificates of deposit that are generally participated out by brokers in shares of less than $100,000 and are therefore insured by the FDIC. Certificates of deposit with denominations of $100,000 or higher also include $5.6 million of deposits through the Certificate of Deposit Account Registry Service (CDARS).

Retail deposits – The Corporation’s deposit products also include regular savings accounts, demand deposit accounts, money market accounts and retail CDs. Total deposits, excluding brokered CDs, increased by $311.8 million to $6.5 billion from the balance of $6.2 billion as of December 31, 2011, reflecting increases in core-deposit products such as savings and interest-bearing checking accounts spread through the Corporation’s geographic segments as well as increases in government deposits. Refer to Note 12 in the accompanying unaudited financial statements for further details.

Refer to the “Net Interest Income” discussion above for information about average balances of interest-bearing deposits, and the average interest rate paid on deposits for the quarter and nine-month period ended September 30, 2012 and 2011.

Securities sold under agreements to repurchase – The Corporation’s investment portfolio is funded in part with repurchase agreements. Securities sold under repurchase agreements were $900 million and $1 billion as of September 30, 2012 and December 31, 2011, respectively. During 2012, the Corporation restructured $200 million of repurchase agreements through amendments that include three to four year maturity extensions and are expected to result in additional reductions in the average cost of funding. This transaction contributed to improvements in the net interest margin. One of the Corporation’s strategies has been the use of structured repurchase agreements and long-term repurchase agreements to reduce exposure to interest rate risk by lengthening the final maturities of its liabilities while keeping funding costs at reasonable levels. All of the $900 million of repurchase agreements outstanding as of September 30, 2012 consist of structured repurchase agreements. In addition to repos, the Corporation has been able to maintain access to credit by using cost-effective sources such as FHLB advances. Refer to Note 13 in the Corporation’s unaudited financial statements for the period ended September 30, 2012 for further details about repurchase agreements outstanding by counterparty and maturities.

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 will be required to deposit additional cash or securities to meet its margin requirements, thereby adversely affecting its liquidity. Given the quality of the collateral pledged, recently the Corporation has not experienced significant margin calls from counterparties arising from credit-quality-related write-downs in valuations and, as of September 30, 2012, it had only $0.5 million of cash equivalent instruments deposited in connection with collateralized interest rate swap agreements.

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Advances from the FHLB – The Corporation’s Bank subsidiary 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 as collateral for advances taken. As of September 30, 2012 and December 31, 2011, the outstanding balance of FHLB advances was $518.4 million and $367.4 million, respectively. During the third quarter of 2012, the Corporation entered into $300 million of long-term FHLB advances with an average rate of 1.11%. Approximately $353.4 million of outstanding advances from the FHLB have maturities of over one year. At September 30, 2012, the Corporation had $300.4 million available for additional credit on FHLB lines of credit.

Though currently not in use, other 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 Junior subordinated debentures as part of its longer-term liquidity and capital management activities. No assurance can be given that these sources of liquidity will be available and, if available, will be on comparable terms.

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. 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, were used by FBP Statutory Trust I 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. 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, were used by FBP Statutory Trust II 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, net of related issuance costs. 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 September 17, 2034 and September 20, 2034, respectively; however, under certain circumstances, the maturity of Junior Subordinated Debentures may be shortened (such shortening would result in a mandatory redemption of the variable rate trust preferred securities). The trust preferred securities, subject to certain limitations, qualify as Tier I regulatory capital under current Federal Reserve rules and regulations. Section 171of the Dodd-Frank Act (the “Collins Amendment”) excludes Trust Preferred Securities from Tier 1 Capital and has a provision to effectively phase-out the use of trust preferred securities issued before May 19, 2010 as Tier 1 Capital over a 3-year period commencing on January 1, 2013. At September 30, 2012, the Corporation had $225 million in trust preferred securities that are subject to the phase-out.

With respect to the outstanding subordinated debentures, the Corporation had elected to defer the interest payments that were due in September 2012. Future interest payments are subject to Federal Reserve approval.

The Corporation’s principal uses of funds are the origination of loans and the repayment of maturing deposits and borrowings. The Corporation has committed substantial resources to its mortgage banking subsidiary, FirstMortgage Inc. As a result, the ratio of residential real estate loans as a percentage of total loans has increased over time from 14% at December 31, 2004 to 27% at September 30, 2012. Commensurate with the increase in its mortgage banking activities, the Corporation has also 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 or guarantee programs of the FHA, VA, HUD, FNMA and FHLMC. The Corporation obtained Commitment Authority to issue GNMA mortgage-backed securities from GNMA and, under this program, the Corporation completed the securitization of approximately $165.3 million of FHA/VA mortgage loans into GNMA MBS during the first nine months of 2012. Any regulatory actions affecting GNMA, FNMA or FHLMC could adversely affect the secondary mortgage market.

Impact of Credit Ratings on Access to Liquidity and Valuation of Liabilities

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 downgrades in credit ratings can hinder the Corporation’s access to 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 certain liabilities and 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 our 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 in the past. The Corporation’s ability to access new non-deposit sources of funding, however, could be adversely affected by credit downgrades.

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The Corporation’s credit as a long-term issuer is currently rated B+ by Standard & Poor’s (“S&P”) and B- by Fitch Ratings Limited (“Fitch”). At the FirstBank subsidiary level, long-term issuer ratings are currently B3 by Moody’s Investor Service (“Moody’s”), six 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.

Cash Flows

Cash and cash equivalents were $1.0 billion and $800.4 million at September 30, 2012 and 2011, respectively. These balances increased by $557.2 million from December 31, 2011 and increased by $430.1 million from December 31, 2010. The following discussion highlights the major activities and transactions that affected the Corporation’s cash flows during the nine-month period ended on September 30, 2012 and 2011.

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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 first nine months of 2012 and 2011, net cash provided by operating activities was $190.8 million and $128.5 million, respectively. Net cash generated from operating activities was higher than net income reported largely as a result of adjustments for operating items such as the provision for loan and lease losses, depreciation and amortization, and due to sales of loans held for sale.

Cash Flows from Investing Activities

The Corporation’s investing activities primarily relate to originating loans to be held to maturity and purchasing, selling and repayments of available-for-sale and held-to-maturity investment securities. For the nine-month period ended September 30, 2012, net cash provided by investing activities was $355.9 million, primarily reflecting proceeds from loans (including sales and paydowns), as well as proceeds from securities called and matured during the first nine months of 2012 and MBS prepayments. Proceeds from sales of loans and from repayments of loans and MBS were used in part to pay down maturing brokered CDs and other funding sources. The cash provided by investing activities in 2012 was lower than 2011 due to significant proceeds from sales of loans and securities in 2011 as part of the Corporation’s deleveraging strategies executed for capital preservation. In addition, the purchase of the credit cards portfolio in 2012 impacted this figure as compared to 2011.

For the first nine months of 2011, net cash provided by investing activities was $2.4 billion, primarily reflecting proceeds from loans held for investment, as well as proceeds from securities sold or called during the first nine months of 2011 and MBS prepayments.

Cash Flows from Financing Activities

The Corporation’s financing activities primarily include the receipt of deposits and issuance of brokered CDs, the issuance and payments of long-term debt, the issuance of equity instruments and activities related to its short-term funding. In addition, the Corporation paid monthly dividends on its preferred stock and quarterly dividends on its common stock until it announced the suspension of dividends beginning in August 2009. During the first nine months of 2012, net cash provided by financing activities was $10.5 million due to proceeds from new FHLB advances and the increase in non-brokered deposits, partially offset by repayments of repurchase agreements, notes payable and brokered CDs.

In the first nine months of 2011, net cash used in financing activities was $2.1 billion due to paydowns of maturing brokered CDs coupled with paydowns of FHLB Advances and repurchase agreements.

Capital

The Corporation’s stockholders’ equity amounted to $1.5 billion as of September 30, 2012, a increase of $40.0 million compared to the balance as of December 31, 2011, driven by an increase of $23.3 million in other comprehensive income due to higher unrealized gains on available for sale securities, net income of $15.2 million, and net proceeds of $1.0 million related to 165,000 shares of common stock sold to a director and 115,787 shares of common stock sold to institutional investors that exercised their anti-dilution rights. Based on the Agreement with the FED, currently neither First BanCorp., nor FirstBank, is permitted to pay dividends on capital securities without prior approval.

Effective June 2, 2010, FirstBank, by and through its Board of Directors, entered into the Order with the FDIC (see Note 22 to the accompanying unaudited consolidated financial statements). Although all the regulatory capital ratios exceeded the established “well capitalized” levels and the minimum capital requirements established by the Order, because of the Order with the FDIC, FirstBank cannot be treated as a “well capitalized” institution under regulatory guidance. Set forth below are First BanCorp.’s, and FirstBank Puerto Rico’s regulatory capital ratios as of September 30, 2012 and December 31, 2011, based on existing established FED and FDIC guidelines.

				Banking Subsidiary
	First BanCorp			FirstBank			To be well capitalized			Consent Order Requirements over time
As of September 30, 2012
Total capital (Total capital to risk-weighted assets)		17.52	%		17.03	%		10.00	%		12.00	%
Tier 1 capital ratio (Tier 1 capital to risk-weighted assets)		16.20	%		15.71	%		6.00	%		10.00	%
Leverage ratio		12.71	%		12.35	%		5.00	%		8.00	%
As of December 31, 2011
Total capital (Total capital to risk-weighted assets)		17.12	%		16.58	%		10.00	%		12.00	%
Tier 1 capital ratio (Tier 1 capital to risk-weighted assets)		15.79	%		15.25	%		6.00	%		10.00	%
Leverage ratio		11.91	%		11.52	%		5.00	%		8.00	%

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The improvement in the capital ratios was driven by internal capital generation (net income of $15.2 million), a reduction in risk-weighted assets mainly associated with reduction in commercial loans that carried a 100% risk weighting for purposes of the capital ratios calculation, and, in the case of the leverage ratio, due to the decrease in average total assets.

On October 7, 2011, the Corporation successfully completed a private placement of $525 million in shares of common stock (the “capital raise”). The proceeds from the capital raise amounted to approximately $490 million (net of offering cost), of which $435 million have been contributed to the Corporation’s wholly owned banking subsidiary, FirstBank.

In connection with the closing, the Corporation issued 150 million shares of common stock at $3.50 per share to institutional investor. The completion of the capital raise allowed the conversion of the 424,174 shares of the Corporation’s Series G Preferred Stock, held by the U.S. Treasury, into 32.9 million shares of common stock at a conversion price of $9.66. This conversion required for completion the payment of $26.4 million for past due undeclared cumulative dividends on the Series G Preferred Stock as required by the agreement with the U.S. Treasury.

Furthermore, On December 8, 2011, the Corporation completed a rights offering in which the Corporation issued an additional 888,781 shares of common stock at $3.50 per share, and received proceeds of $3.3 million.

With the $525 million capital infusion, the conversion to common stock of the Series G Preferred Stock held by the U.S. Treasury, and the issuance of an additional $3.3 million of capital in the rights offering (after deducting estimated offering expenses and the $26.4 million payment of the cumulative dividends on the Series G Preferred Stock), the Corporation increased its total common equity by approximately $834 million.

The tangible common equity ratio and tangible book value per common share are non-GAAP 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 purchased credit card relationship intangible assets. Tangible assets are total assets less goodwill, core deposit intangibles and purchased credit card relationship intangible assets. 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 accounting method of accounting for mergers and acquisitions. Neither tangible common equity, nor tangible assets, or 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 its tangible common equity, tangible assets and any other related measures may differ from that of other companies reporting measures with similar names.

The following table is a reconciliation of the Corporation’s tangible common equity and tangible assets for the periods ended September 30, 2012 and December 31, 2011 respectively:

	September 30,			December 31,
(In thousands)	2012			2011
Total equity - GAAP	$	1,484,117		$	1,444,144
Preferred equity		(63,047	)		(63,047	)
Goodwill		(28,098	)		(28,098	)
Purchased credit card relationship		(23,920	)		—
Core deposit intangible		(9,923	)		(11,689	)
Tangible common equity	$	1,359,129		$	1,341,310
Total assets - GAAP	$	13,139,747			13,127,275
Goodwill		(28,098	)		(28,098	)
Purchased credit card relationship		(23,920	)		—
Core deposit intangible		(9,923	)		(11,689	)
Tangible assets	$	13,077,806		$	13,087,488
Common shares outstanding		206,134			205,134
Tangible common equity ratio		10.39	%		10.25	%
Tangible book value per common share	$	6.59		$	6.54

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The Tier 1 common equity to risk-weighted assets ratio is calculated by dividing (a) Tier 1 capital less non-common elements including qualifying perpetual preferred stock and qualifying trust preferred securities, by (b) risk-weighted assets, which assets are calculated in accordance with applicable bank regulatory requirements. The Tier 1 common equity ratio is not required by GAAP or on a recurring basis by applicable bank regulatory requirements. Management is currently monitoring this ratio, along with the other ratios discussed above, in evaluating the Corporation’s capital levels and believes that, at this time, the ratio may continue to be of interest to investors.

The following table reconciles stockholders’ equity (GAAP) to Tier 1 common equity:

	September 30,			December 31,
(In thousands)	2012			2011
Total equity - GAAP	$	1,484,117		$	1,444,144
Qualifying preferred stock		(63,047	)		(63,047	)
Unrealized gain on available-for-sale securities (1)		(42,528	)		(19,234	)
Disallowed deferred tax asset (2)		(40	)		—
Goodwill		(28,098	)		(28,098	)
Core deposit intangible		(9,923	)		(11,689	)
Cumulative change gain in fair value of liabilities accounted for under a fair value option		—			(2,009	)
Other disallowed assets		(4,155	)		(922	)
Tier 1 common equity	$	1,336,326		$	1,319,145
Total risk-weighted assets	$	10,026,572		$	10,180,226
Tier 1 common equity to risk-weighted assets ratio		13.33	%		12.96	%

1- Tier 1 capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair value, in accordance with regulatory risk-based capital guidelines. In arriving at Tier 1 capital, institutions are required to deduct net unrealized losses on available-for sale equity securities with readily determinable fair value, net of tax.

2- Approximately $12 million and $13 million of the Corporation’s deferred tax assets at September 30, 2012 and December 31, 2011, respectively was included without limitation in regulatory capital pursuant to the risk-based capital guidelines, while approximately $40K of such assets at September 30, 2012 and $0 at December 31, 2011 exceeded the limitation imposed by these guidelines and as “disallowed deferred tax assets,” were deducted in arriving at Tier 1 capital. According to regulatory capital guidelines, the deferred tax assets that are dependent upon future taxable income are limited for inclusion in Tier 1 capital to the lesser of: (i) the amount of such deferred tax asset that the entity expects to realize within one year of the calendar quarter end-date, based on its projected future taxable income for that year or (ii) 10% of the amount of the entity’s Tier 1 capital. Approximately $7 million of the Corporation’s other net deferred tax liability at September 30, 2012 and $8 million as of December 31, 2011 represented primarily the deferred tax effects of unrealized gains and losses on available-for-sale debt securities, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines.

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 or 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

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position. As of September 30, 2012, commitments to extend credit and commercial and financial standby letters of credit amounted to approximately $1.5 billion, (including $1.0 billion pertaining to credit card loans) and $83.4 million, respectively. Commitments to extend credit are agreements to lend to customers as long as the conditions established in the contract are met. Generally, the Corporation’s mortgage banking activities do not enter into interest rate lock agreements with prospective borrowers.

Contractual Obligations and Commitments

The following table presents a detail of 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 September 30, 2012
	Total		Less than 1 year		1-3 years		3-5 years		After 5 years
	(In thousands)
Contractual obligations: (1)
Certificates of deposit	$	5,710,985	$	4,133,347	$	1,403,783	$	168,820	$	5,035
Securities sold under agreements to repurchase		900,000		—		—		600,000		300,000
Advances from FHLB		518,440		165,000		53,440		300,000		—
Notes payable		—		—		—		—		—
Other borrowings		231,959		—		—		—		231,959
Total contractual obligations	$	7,361,384	$	4,298,347	$	1,457,223	$	1,068,820	$	536,994
Commitments to sell mortgage loans	$	20,464	$	20,464
Standby letters of credit	$	18,963	$	18,963
Commitments to extend credit:
Lines of credit	$	1,526,380	$	1,526,380
Letters of credit		64,407		64,407
Commitments to originate loans		141,169		141,169
Total commercial commitments	$	1,731,956	$	1,731,956

(1) $3.5 million of tax liability, including accrued interest of $1.1 million, associated with unrecognized tax benefits have been excluded due to the high degree of uncertainty regarding the timing of future cash flows associated with such obligations.

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 at any time and without cause cancel the unused credit facility.

Lehman Brothers Special Financing, Inc. (“Lehman”) was the counterparty to the Corporation on certain interest rate swap agreements. During the third quarter of 2008, Lehman failed to pay the scheduled net cash settlement due to the Corporation, which constituted an event of default under those interest rate swap agreements. The Corporation terminated all interest rate swaps with Lehman and replaced them with other counterparties under similar terms and conditions. In connection with the unpaid net cash settlement under the swap agreements, the Corporation has an unsecured counterparty exposure with Lehman, which filed for bankruptcy on October 3, 2008, of approximately $1.4 million. This exposure was reserved in the third quarter of 2008. The Corporation had securities pledged as collateral with a $63.6 million face value to guarantee its performance under the swap agreements in the event payment there under was required.

Since the second quarter of 2009, the Corporation has maintained a non-performing asset with a book value of $64.5 million in addition to accrued interest of $2.1 million related to the collateral pledged with Lehman. The Corporation believes that the securities pledged as collateral should not be part of the Lehman bankruptcy estate given the facts that the posted collateral constituted a performance guarantee under the swap agreements and was not part of a financing agreement, and that ownership of the securities was never transferred to Lehman. Upon termination of the interest rate swap agreements, Lehman’s obligation was to return the collateral to the Corporation. During the fourth quarter of 2009, the Corporation discovered that Lehman Brothers, Inc., acting as agent of Lehman, had deposited the securities in a custodial account at JP Morgan Chase, and that, shortly before the filing of the Lehman bankruptcy proceedings, it had provided instructions to have most of the securities transferred to Barclays Capital (“Barclays”) in New York. After Barclays’ refusal to turn over the securities, the Corporation filed a lawsuit against Barclays in federal court in New York demanding the return of the securities

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in December 2009. During February 2010, Barclays filed a motion with the court requesting that the Corporation’s claim be dismissed on the grounds that the allegations of the complaint are not sufficient to justify the granting of the remedies therein sought. Shortly thereafter, the Corporation filed its opposition motion. A hearing on the motions was held in court on April 28, 2010. The court, on that date, after hearing the arguments by both sides, concluded that the Corporation’s equitable-based causes of action, upon which the return of the investment securities is being demanded, contain allegations that sufficiently plead facts warranting the denial of Barclays’ motion to dismiss the Corporation’s claim. Accordingly, the judge ordered the case to proceed to trial.

Subsequent to the court decision, the district court judge transferred the case to the Lehman bankruptcy court for trial. Discovery pursuant to that case management has been completed. The parties filed dispositive motions on September 13, 2012. Oppositions to such motions and replies thereto must be filed by October 15, 2012 and November 14, 2012, respectively, but this timing is subject to adjustment. The Corporation may not succeed in its litigation against Barclays to recover all or a substantial portion of the securities.

Additionally, the Corporation continues to pursue its claim filed in January 2009 in the proceedings under the Securities Protection Act with regard to Lehman Brothers Inc. in the United States Bankruptcy Court for the Southern District of New York.

An estimated loss was not accrued as the Corporation is unable to determine the timing of the claim resolution or whether it will succeed in recovering all or a substantial portion of the collateral or its equivalent value.

Because the Corporation has not had the benefit of the use of the investment securities pledged to Lehman (i.e., ability to sell, pledge or transfer), and because the Corporation has not received principal or interest payments since 2008 (after the collapse of Lehman), the appropriate carrying value of these securities has been under review with our regulators, with recent heightened concern due to the complex and lengthy litigation regarding this matter. If, as a result of these discussions, developments in the litigation, or for other reasons, the Corporation should determine that it is probable that the asset has been impaired and that the Corporation needs to recognize a partial or full loss for the investment securities pledged to Lehman, such action would adversely affect the Corporation’s results of operations in the period in which such action is taken. The Corporation expects to reassess the recoverability of the asset upon the resolution of the dispositive motions filed with the court, which motions could be resolved in the fourth quarter of 2012.

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 meetings focus on, among other things, current and expected conditions in world financial markets, competition and prevailing rates in the local deposit market, liquidity, 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 which may be pertinent to these areas. The MIALCO approves funding decisions in light of the Corporation’s overall strategies and objectives.

The Corporation performs on a quarterly basis 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 disclosures 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 it 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 detailed 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, deposits 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 generally 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 all 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

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LIBOR/SWAP curve, Prime, Treasury, FHLB rates, Brokered CDs rates, repurchase agreements rates and the Mortgage Commitment Rate of 30 years. Rate indices are assumed to remain constant at September 2012 end of month levels, under the flat rate scenario; a gradual (ramp) parallel upward shift of the yield curve is assumed during the first twelve months of the projection for the +200 ramp scenario. Under the 200 basis points (ramp) parallel falling rate scenario, rates move downward 200 basis points for the first twelve months of projection. Due to the historically yield curve indices low levels, the downward 200 basis points parallel effect is not completely achieved, reflecting a flattening yield curve instead of a parallel downward scenario. The Libor/Swap curve for September 2012, as compared to December 2011, showed an average decrease of 16 basis points in the short term horizon, between one to twelve months, while market rates increase an average of 34 basis points in the long term horizon. The Treasury curve showed an average increase of 6 basis points in the short term horizon, while showed a decrease of 16 basis points in the long term horizon, as compared to December 2011 end of month levels.

The following table presents the results of the simulations as of September 30, 2012 and December 31, 2011. Consistent with prior years, these exclude non-cash changes in the fair value of derivatives and liabilities measured at fair value:

	September 30, 2012												December 31, 2011
	Net Interest Income Risk (Projected for the next 12 months)												Net Interest Income Risk (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	$	14.0			2.74	%	$	9.8			1.83	%	$	19.2			4.47	%	$	29.2		6.74	%
- 200 bps ramp	$	(0.5	)		(0.10	)%	$	(2.0	)		(0.39	)%	$	(3.8	)		(0.88	)%	$	3.7		0.85	%

The Corporation continues to manage its balance sheet structure to control the overall interest rate risk. As part of the Corporation’s balance sheet restructuring strategies, the net interest income and the exposure at different market scenarios were affected during the first nine months of 2012, as compared with 2011 year end levels. The major changes during the first nine months of 2012, are mainly driven by the increase in excess liquidity, loans paid-off and repayments, a decrease in investment securities due to maturities, calls and MBS repayments levels, an increase in consumer loan due to the acquisition of the $406 million credit cards portfolio, the restructuring and maturity of repurchase agreements and a decrease in brokered CDs. The Corporation continues reducing its reliance on brokered CDs with the intend to grow its core deposits base at lower costs, while adjusting the mix of its funding sources to better match the expected average life of the assets.

Taking into consideration the above-mentioned facts for modeling purposes, the net interest income for the next twelve months under a non-static balance sheet scenario, is estimated to increase by $9.8 million in a gradual parallel upward move of 200 basis points when compared against the Corporation’s flat or unchanged interest rate forecast scenario.

Following the Corporation’s risk management policies, modeling of the downward “parallel” rates moves by anchoring the short end of the curve, (falling rates with a flattening curve) was performed, even though, given the current level of rates as of September 30, 2012, some market interest rate were projected to be close to zero. Under this scenario the net interest income for the next twelve months in a non-static balance sheet scenario is estimated to decrease by $2.0 million.

Derivatives

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

The following summarizes major strategies, including 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. Specifically, the interest rate on certain of the Corporation’s commercial loans to other financial institutions is generally a variable rate limited to the weighted-average coupon of the referenced residential mortgage collateral, less a contractual servicing fee.

Interest rate swaps – Interest rate swap agreements generally involve the exchange of fixed and floating-rate interest payment obligations without the exchange of the underlying notional principal amount. As of September 30, 2012, most of the interest rate swaps outstanding are used for protection against rising interest rates. Similar to unrealized gains and losses arising from changes in fair value, net interest settlements on interest rate swaps are recorded as an adjustment to interest income or interest expense depending on whether an asset or liability is being economically hedged.

Indexed options – Indexed options are generally over-the-counter (OTC) contracts that the Corporation enters into in order to receive the appreciation of a specified Stock Index (e.g., Dow Jones Industrial Composite Stock Index) over a specified period in exchange for a premium paid at the contract’s inception. The option period is determined by the contractual maturity of the notes payable tied to the performance of the Stock Index. The credit risk inherent in these options is the risk that the exchange party may not fulfill its obligation.

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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 with no net settlement provision and no market mechanism to facilitate net settlement and they provide for delivery of a security within the time 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 loans securitizations of the mortgage-banking operations. Unrealized gains (losses) are recognized as part of mortgage banking activities in the Consolidated Statement of Income (Loss).

For detailed information regarding the volume of derivative activities (e.g. notional amounts), location and fair values of derivative instruments in the Statement of Financial Condition and the amount of gains and losses reported in the Statement of Income (Loss), refer to Note 9 in the accompanying unaudited consolidated financial statements.

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
(In thousands)	Nine-Month Period  Ended September 30, 2012			Nine-Month Period  Ended September 30, 2012
Fair value of contracts outstanding at the beginning of the period	$	1,277		$	(7,834	)
Changes in fair value during the period		(941	)		1,406
Fair value of contracts outstanding as of September 30, 2012	$	336		$	(6,428	)

Sources of Fair Value

	Payment Due by Period
(In thousands)	Maturity Less  Than One Year			Maturity 1-3  Years			Maturity 3-5  Years			Maturity in  Excess of 5 Years		Total  Fair Value
As of September 30, 2012
Pricing from observable market inputs - Asset Derivatives	$	19		$	317		$	—		$	—	$	336
Pricing from observable market inputs - Liability Derivatives		(420	)		(322	)		(5,686	)		—		(6,428	)
	$	(401	)	$	(5	)	$	(5,686	)	$	—	$	(6,092	)

Derivative instruments, such as interest rate swaps, 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 shape of the yield curve as well as the level of interest rates.

As of September 30, 2012 and December 31, 2011, all of the derivative instruments held by the Corporation were considered economic undesignated 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 of default from 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. All of the Corporation’s interest rate swaps are supported by securities collateral agreements, which allow the delivery of securities to and from the counterparties depending on the fair value of the instruments, to minimize credit risk.

Refer to Note 19 of the accompanying unaudited consolidated financial statements for additional information regarding the fair value determination of derivative instruments.

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Set forth below is a detailed analysis of the Corporation’s credit exposure by counterparty with respect to derivative instruments outstanding as of September 30, 2012 and December 31, 2011.

	As of September 30, 2012
(In thousands)	Rating(1)	Notional		Total Exposure  at Fair Value (2)		Negative Fair  Value			Total  Fair Value			Accrued interest receivable (payable)
Counterparty
Interest rate swaps with rated counterparties:
JP Morgan	A	$	33,157	$	—	$	(5,915	)	$	(5,915	)	$	—
			33,157		—		(5,915	)		(5,915	)		—
Other Derivatives:
Other Derivatives (3)			31,440		336		(513	)		(177	)		(148	)
Total		$	64,597	$	336	$	(6,428	)	$	(6,092	)	$	(148	)

	As of December 31, 2011
(In thousands)	Rating(1)	Notional		Total Exposure  at Fair Value (2)		Negative Fair  Value			Total  Fair Value			Accrued interest receivable (payable)
Counterparty
Interest rate swaps with rated counterparties:
JP Morgan	A	$	34,347	$	—	$	(6,386	)	$	(6,386	)	$	—
Credit Suisse First Boston	A+		2,720		—		(381	)		(381	)		—
Goldman Sachs	A-		6,515		899		—			899			—
Morgan Stanley	A-		107,894		—		—			—			—
			151,476		899		(6,767	)		(5,868	)		—
Other Derivatives:
Other Derivatives (3)			136,128		378		(1,067	)		(689	)		(166	)
Total		$	287,604	$	1,277	$	(7,834	)	$	(6,557	)	$	(166	)

(1) Based on the S&P and Fitch Long Term Issuer Credit Ratings.

(2) For each counterparty, this amount includes derivatives with positive fair value excluding the related accrued interest receivable/payable

(3) Credit exposure with several counterparties for which a credit rating is not readily available and forward contracts.

The discounting of the cash flows is performed using US dollar LIBOR-based discount rates or yield curves that account for the industry sector and the credit rating of the counterparty and/or the Corporation. Although most of the derivative instruments are fully collateralized, a credit spread is considered for those that are not secured in full. The cumulative mark-to-market effect of credit risk in the valuation of derivative instruments for the first nine months of 2012 and 2011 was immaterial.

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. Refer to “Contractual Obligations and Commitments” above for further details. The credit risk of derivatives arises from the potential of the counterparty’s 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, refer to “ – Interest Rate Risk Management” section above. The Corporation manages its credit risk through 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 C&I, commercial mortgage and construction loan portfolios, the Special Asset Group (“SAG”) focuses on strategies for the accelerated reduction of non-performing

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assets through note sales, short sales, loss mitigation programs, and sales of REO. 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, comprised 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 credit losses. The amount of the allowance was determined by empirical analysis and judgments regarding the quality of each individual loan portfolio. All known relevant internal and external factors that affected loan collectability were 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 US 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 such as have been experienced since 2008. The process includes judgmental and quantitative elements that may be subject to significant change. There is no certainty that the allowance will be adequate over time to cover credit losses in the portfolio because of continued adverse changes in the economy, market conditions, or events adversely affecting specific customers, industries or markets. To the extent actual outcomes differ from our estimates, the credit quality of our customer base materially decreases or the risk profile of a market, industry, or group of customers changes materially, or if the allowance is determined to not be adequate, additional provisions for credit losses could be required, which could adversely affect our business, financial condition, liquidity, capital, and results of operations in future periods.

The allowance for loan and lease losses provides for probable losses that have been identified with specific valuation allowances for individually evaluated impaired loans and for probable losses believed to be inherent in the loan portfolio that have not been specifically identified. Internal risk ratings are assigned to each business loan at the time of approval and are 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. In connection with the recently acquired credit cards portfolio, the methodology employed to calculate the allowance for loan losses is similar to the methodology used for other consumer loans, except for that the loss rates are determined evaluating 12 months of historical performance, instead of 24 months. The Corporation does not maintain an allowance for held for sale loans or purchased credit-impaired (“PCI”) loans that are performing in accordance with or better than our expectations as of the date of acquisition, as the fair value of these loans already reflect a credit component.

The allowance for loan losses to total loans for the residential mortgage loan portfolio increased from 2.39% at December 31, 2011 to 2.50% at September 30, 2012, while the allowance to total loans for the C&I portfolio increased from 3.98% at December 31, 2011 to 4.46% at September 30, 2012. For the commercial mortgage loan portfolio, the reserve coverage decreased from 6.96% at December 31, 2011 to 6.12% at September 30, 2012 driven by improved trends in charge-offs and the reduction in adversely classified loans. The construction loans reserve coverage ratio decreased from 21.36% as of December 31, 2011 to 18.68% at September 30, 2012 due to decreases in non-performing loans, while the consumer and finance leases reserve coverage ratio decreased from 3.86% as of December 31, 2011 to 2.99% at September 30, 2012 due to decreases in delinquency levels and historical loss rates. This ratio was also impacted by the recent acquisition of a $406 million credit cards portfolio which was recorded at a fair value of approximately $369 million at the time of acquisition which reflected a credit component.

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 real estate market. The real estate market in Puerto Rico experienced readjustments in value driven by the loss of income due to the unemployment of consumers, reduced demand and the general economic conditions. The Corporation sets adequate loan-to-value ratios upon original approval following its regulatory and credit policy standards. The real estate market for the U.S. Virgin Islands remains fairly stable. In the Florida market, residential real estate is experiencing a higher demand. The Corporation continues to reduce its credit exposure in Florida through disposition of assets and different loss mitigation initiatives.

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As shown in the following table, the allowance for loan and lease losses amounted to $445.5 million at September 30, 2012, or 4.37% of total loans compared with $493.9 million, or 4.68% of total loans at December 31, 2011. Refer to the “Provision for Loan and Lease Losses” discussion above for additional information.

The following table sets forth an analysis of the activity in the allowance for loan and lease losses:

	Quarter Ended September 30,						Nine-Month Period Ended September 30,
(Dollars in thousands)	2012			2011			2012			2011
Allowance for loan and lease losses, beginning of period	$	457,153		$	540,878		$	493,917		$	553,025
Provision (release) for loan and lease losses:
Residential Mortgage		9,083			17,744			27,787			36,916
Commercial Mortgage		(6,617	)		13,324			(4,897	)		32,767
Commercial and Industrial		8,117			10,437			30,702			73,409
Construction		6,379			(2,547	)		13,429			41,270
Consumer and Finance Leases		11,990			7,488			23,012			10,000
Provision for loan and lease losses		28,952			46,446			90,033			194,362
Charge-offs
Residential Mortgage		(7,586	)		(16,076	)		(27,976	)		(30,571	)
Commercial Mortgage		(5,681	)		(3,316	)		(15,588	)		(37,647	)
Commercial and Industrial		(12,795	)		(22,703	)		(35,494	)		(50,858	)
Construction		(9,012	)		(17,008	)		(42,908	)		(83,483	)
Consumer and Finance Leases		(9,444	)		(11,086	)		(29,327	)		(35,168	)
		(44,518	)		(70,189	)		(151,293	)		(237,727	)
Recoveries:
Residential Mortgage		228			260			676			657
Commercial Mortgage		679			7			721			84
Commercial and Industrial		534			177			2,179			1,281
Construction		686			185			4,004			2,215
Consumer and Finance Leases		1,817			1,923			5,294			5,790
		3,944			2,552			12,874			10,027
Net Charge Offs		(40,574	)		(67,637	)		(138,419	)		(227,700	)
Allowance for loan and lease losses, end of period	$	445,531		$	519,687		$	445,531		$	519,687
Allowance for loan and lease losses to period end total loans receivable		4.37	%		4.89	%		4.37	%		4.89	%
Net charge-offs annualized to average loans outstanding during the period		1.58	%		2.50	%		1.79	%		2.72	%
Provision for loan and lease losses to net charge-offs during the period		0.71x			0.69x			0.65x			0.85x

The following table sets forth information concerning the allocation of the loan 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 September 30, 2012					As of December 31 2011
(In thousands)	Amount		Percent			Amount		Percent
Residential mortgage	$	69,165		27	%	$	68,678		27	%
Commercial mortgage loans		89,227		14	%		108,992		15	%
Construction loans		65,911		3	%		91,386		4	%
Commercial and Industrial loans (including loans to local financial institutions)		161,877		37	%		164,490		39	%
Consumer loans and finance leases		59,351		19	%		60,371		15	%
	$	445,531		100	%	$	493,917		100	%

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The following table sets forth information concerning the composition of the Corporation’s allowance for loan and lease losses as of September 30, 2012 and December 31, 2011 by loan category and by whether the allowance and related provisions were calculated individually or through a general valuation allowance.

(Dollars in thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			C&I Loans			Construction Loans			Consumer and Finance Leases			Total
As of September 30, 2012
Impaired loans without specific reserves:
Principal balance of loans, net of charge-offs	$	106,554		$	50,043		$	31,047		$	38,863		$	1,647		$	228,154
Impaired loans with specific reserves:
Principal balance of loans, net of charge-offs		488,234			313,490			207,465			139,599			23,196			1,171,984
Allowance for loan and lease losses		49,640			51,351			57,001			33,349			2,813			194,154
Allowance for loan and lease losses to principal balance		10.17	%		16.38	%		27.47	%		23.89	%		12.13	%		16.57	%
PCI loans:
Carrying value of PCI loans		—			—			—			—			12,741			12,741
Allowance for PCI loans		—			—			—			—			—			—
Allowance for PCI loans to carrying value		—			—			—			—			—			—
Loans with general allowance:
Principal balance of loans		2,167,630			1,095,585			3,389,134			174,429			1,948,507			8,775,285
Allowance for loan and lease losses		19,525			37,876			104,876			32,562			56,538			251,377
Allowance for loan and lease losses to principal balance		0.90	%		3.46	%		3.09	%		18.67	%		2.90	%		2.86	%
Total loans held for investment:
Principal balance of loans	$	2,762,418		$	1,459,118		$	3,627,646		$	352,891		$	1,986,091		$	10,188,164
Allowance for loan and lease losses		69,165			89,227			161,877			65,911			59,351			445,531
Allowance for loan and lease losses to principal balance (1)		2.50	%		6.12	%		4.46	%		18.68	%		2.99	%		4.37	%
(Dollars in thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			C&I Loans			Construction Loans			Consumer and Finance Leases			Total
As of December 31, 2011
Impaired loans without specific reserves:
Principal balance of loans, net of charge-offs	$	181,081		$	13,797		$	40,453		$	33,759		$	2,840		$	271,930
Impaired loans with specific reserves:
Principal balance of loans, net of charge-offs		423,340			354,954			223,572			213,388			20,192			1,235,446
Allowance for loan and lease losses		48,566			59,167			58,652			44,768			3,749			214,902
Allowance for loan and lease losses to principal balance		11.47	%		16.67	%		26.23	%		20.98	%		18.57	%		17.39	%
Loans with general allowance:
Principal balance of loans		2,269,364			1,196,660			3,866,491			180,716			1,538,785			9,052,016
Allowance for loan and lease losses		20,112			49,824			105,838			46,618			56,623			279,015
Allowance for loan and lease losses to principal balance		0.89	%		4.16	%		2.74	%		25.80	%		3.68	%		3.08	%
Total loans held for investment:
Principal balance of loans	$	2,873,785		$	1,565,411		$	4,130,516		$	427,863		$	1,561,817		$	10,559,392
Allowance for loan and lease losses		68,678			108,991			164,490			91,386			60,372			493,917
Allowance for loan and lease losses to principal balance		2.39	%		6.96	%		3.98	%		21.36	%		3.87	%		4.68	%

(1) Loans used in the denominator include PCI loans of $12.7 million as of September 30, 2012. However, the Corporation separately tracks and reports PCI loans and exclude these loans from delinquency, non-performing loans, impaired, TDRs and non-performing assets statistics.

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The following tables show the activity for impaired loans and the related specific reserve for the quarter and nine-month period ended September 30, 2012:

	Quarter ended			Nine-Month Period Ended
	September 30, 2012
	(In thousands)
Impaired Loans:
Balance at beginning of period	$	1,432,469		$	1,507,376
Loans determined impaired during the period		55,292			222,841
Net charge-offs		(30,971	)		(107,458	)
Increases to impaired loans (disbursements)		11,039			30,160
Foreclosures		(26,353	)		(113,737	)
Loans no longer considered impaired		(5,351	)		(42,269	)
Paid in full or partial payments		(35,987	)		(96,775	)
Balance at end of period	$	1,400,138		$	1,400,138
	Quarter Ended			Nine-Month Period Ended
	September 30, 2012
	(In thousands)
Specific Reserve:
Balance at beginning of period	$	209,860		$	214,902
Provision for loan losses		15,265			86,710
Net charge-offs		(30,971	)		(107,458	)
Balance at end of period	$	194,154		$	194,154

On May 30, 2012, the Corporation re-entered the credit card business with the acquisition of an approximate $406 million portfolio of FirstBank-branded credit cards portfolio from FIA. These loans were recorded on the Consolidated Statement of Financial Condition at estimated fair value on acquisition date of $368.9 million. The Corporation concluded that a portion of these loans acquired were PCI loans. PCI loans are acquired loans with evidence of credit quality deterioration since origination for which it is probable at the date of purchase that the Corporation will be unable to collect all contractually required payments. The loans for which the Corporation concluded were credit impaired had a contractual outstanding unpaid principal and interest balance of $34.6 million and an estimated fair value of $15.7 million at the time of acquisition. Given 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 Corporation’s subsequent accounting for PCI loans differs from the accounting for non–PCI loans, therefore, the Corporation separately tracks and report PCI loans and exclude these loans from delinquency, non-performing loans, impaired, TDRs and non-performing asset statistics.

Credit Quality

Credit quality performance in the first nine months of 2012 continued its slow but steady pace of improvement. Total non-performing loans decreased $135.1 million led by foreclosures, charge-offs, principal repayments and a decrease in the inflows of non-performing loans. Total non-performing assets, which include repossessed assets, decreased by $78.0 million, or 6%. Total delinquencies, which include all loans 30 days or more past due and non-accrual loans, decreased by $120.7 million, during 2012 and the level of adversely classified commercial and construction loans decreased by $159.3 million or 13%.

Non-performing Loans and Non-performing Assets

Total non-performing assets consist of non-performing loans, foreclosed real estate and other repossessed properties as well as non-performing investment securities. Non-performing loans are those loans on which the accrual of interest is discontinued. 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.

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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 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.

PCI Loans – 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 its delinquency and non-performing statistics.

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 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)

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

Other Non-Performing Assets

This category consists of assets pledged to Lehman Brothers Special Financing, Inc. at their book value.

Past Due Loans 90 days and still accruing

These are accruing loans which are contractually delinquent 90 days or more. These past due loans are either current as to interest but delinquent in the payment of principal or are insured or guaranteed under applicable FHA and VA programs.

Troubled Debt Restructuring (“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 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 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.

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The following table presents non-performing assets as of the dates indicated:

(Dollars in thousands)	September 30, 2012			December 31, 2011
Non-performing loans held for investment:
Residential mortgage	$	320,913		$	338,208
Commercial mortgage		231,163			240,414
Commercial and Industrial		230,459			270,171
Construction		189,458			250,022
Finance leases		3,061			3,485
Consumer		32,990			36,062
Total non-performing loans held for investment	$	1,008,044		$	1,138,362
Other real estate owned		177,001			114,292
Other repossessed property		9,775			15,392
Other assets (1)		64,543			64,543
Total non-performing assets, excluding loans held for sale	$	1,259,363		$	1,332,589
Non-performing loans held for sale		—			4,764
Total non-performing assets, including loans held for sale (2)	$	1,259,363		$	1,337,353
Past due loans 90 days and still accruing (3)	$	141,028		$	130,816
Non-performing assets to total assets		9.58	%		10.19	%
Non-performing loans held for investment to total loans held for investment		9.89	%		10.78	%
Allowance for loan and lease losses		445,531			493,917
Allowance to total non-performing loans held for investment		44.20	%		43.39	%
Allowance to total non-performing loans held for investment, excluding residential real estate loans		64.84	%		61.73	%

(1) Collateral pledged with Lehman Brothers Special Financing, Inc.

(2) Amounts exclude purchased credit impaired loans with a carrying value of approximately $12.7 million acquired as part of a credit cards portfolio purchased in the second quarter of 2012.

(3) It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as past due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $34.6 million of residential mortgage loans insured by FHA or guaranteed by the VA, which are over 18 months delinquent, that are no longer accruing interest as of September 30, 2012.

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The following table shows non-performing assets by geographic segment:

(Dollars in thousands)	September 30, 2012		December 31, 2011
Puerto Rico:
Non-performing loans held for investment:
Residential mortgage	$	285,994	$	297,595
Commercial mortgage		175,007		170,949
Commercial and Industrial		216,602		261,189
Construction		110,378		137,478
Finance leases		3,061		3,485
Consumer		30,005		34,888
Total non-performing loans held for investment		821,047		905,584
REO		137,877		85,788
Other repossessed property		9,700		15,283
Other assets		64,543		64,543
Total non-performing assets, excluding loans held for sale	$	1,033,167	$	1,071,198
Non-performing loans held for sale		—		4,764
Total non-performing assets, including loans held for sale (1)	$	1,033,167	$	1,075,962
Past due loans 90 days and still accruing	$	138,431	$	118,888
Virgin Islands:
Non-performing loans held for investment:
Residential mortgage	$	18,559	$	11,470
Commercial mortgage		11,751		12,851
Commercial and Industrial		12,657		7,276
Construction		72,786		110,594
Consumer		921		518
Total non-performing loans held for investment		116,674		142,709
REO		26,642		7,200
Other repossessed property		57		67
Total non-performing assets, excluding loans held for sale	$	143,373	$	149,976
Non-performing loans held for sale		—		—
Total non-performing assets, including loans held for sale	$	143,373	$	149,976
Past due loans 90 days and still accruing	$	2,597	$	11,204
Florida:
Non-performing loans held for investment:
Residential mortgage	$	16,360	$	29,143
Commercial mortgage		44,405		56,614
Commercial and Industrial		1,200		1,706
Construction		6,294		1,950
Consumer		2,064		656
Total non-performing loans held for investment		70,323		90,069
REO		12,482		21,304
Other repossessed property		18		42
Total non-performing assets, excluding loans held for sale	$	82,823	$	111,415
Non-performing loans held for sale		—		—
Total non-performing assets, including loans held for sale	$	82,823	$	111,415
Past due loans 90 days and still accruing	$	—	$	724

(1) Amount excludes purchased credit impaired loans with a carrying value of approximately $12.7 million acquired as part of the credit cards portfolio acquired from FIA.

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Total non-performing loans were $1.01 billion at September 30, 2012, which represented 9.89% of total loans held for investment. This represents a decrease of $135.1 million, or 11.82%, from $1.14 billion, or 10.78% of total loans held for investment at December 31, 2011.

Non-performing construction loans decreased by $65.3 million, or 26%, from the end of the fourth quarter of 2011, mainly due to the transfer to REO of properties acquired in foreclosure aggregating approximately $37.8 million and charge-offs. Most of the foreclosures were concentrated in four projects in both Puerto Rico and the Virgin Islands regions.

C&I non-performing loans decreased by $39.7 million, or 15% when compared to the balance at December 31, 2011, reflecting primarily net charge-offs of $33.3 million and foreclosures of approximately $30 million. Borrowers’ payments and payoffs and modified loans restored to accrual status after a sustained period of performance also contributed to the decrease in non-performing C&I loans. The decline was primarily in Puerto Rico.

Non-performing residential mortgage loans decreased $17.3 million, or 5%, from December 31, 2011. The decrease was driven by several factors, including: (i) loans brought current, (ii) foreclosures of approximately $42.9 million, and (iii) the restoration to accrual status of modified loans that successfully completed a trial performance period aggregating to approximately $30 million. Borrowers’ payments, payoffs and charge-offs also contributed to the decrease. The level of inflows of non-performing residential mortgage loans was approximately $148.4 million during the first nine months of 2012, however, the level of inflows decreased 6% from $46.9 million for the second quarter of 2012 to $44.1 million in the third quarter. Approximately $157.4 million, or 49%, of total non-performing residential mortgage loans have been written down to their net realizable value.

Non-performing commercial mortgage loans decreased $9.3 million, or 4%, from December 31, 2011, reflecting primarily net charge-off of $14.9 million, foreclosures of $18.8 million and restoration to accrual status after a sustained performance period of $7.5 million of modified loans. The decrease was primarily in the United States and the Virgin Islands regions.

The levels of non-performing consumer loans, including finance leases, showed a $3.5 million decrease during the first nine months of 2012. The decrease was mainly related to a reduction in the auto financing category.

At September 30, 2012, approximately $302.3 million of the loans placed in non-accrual status, mainly construction and commercial loans, were current, or had delinquencies of less than 90 days in their interest payments, including $203.6 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 are being recorded on a cash basis through earnings, or on a cost-recovery basis, as conditions warrant.

During the nine-month period ended September 30, 2012, interest income of approximately $7.6 million related to non-performing loans with a carrying value of $682.2 million as of September 30, 2012, mainly non-performing construction and commercial loans, was applied against the related principal balances under the cost-recovery method.

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The allowance to non-performing loans held for investment ratio as of September 30, 2012, was 44.20%, compared to 43.39% as of December 31, 2011. As of September 30, 2012, approximately $216.7 million, or 22%, of total non-performing loans held for investment have been charged-off to their net realizable value 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 September 30, 2012
Non-performing loans held for investment charged-off to realizable value	$	157,399		$	8,722		$	25,102		$	24,330		$	1,175		$	216,728
Other non-performing loans held for investment		163,514			222,441			205,357			165,128			34,876			791,316
Total non-performing loans held for investment	$	320,913		$	231,163		$	230,459		$	189,458		$	36,051		$	1,008,044
Allowance to non-performing loans held for investments		21.55	%		38.60	%		70.74	%		34.79	%		164.63	%		44.20	%
Allowance to non-performing loans held for investments, excluding non-performing loans charged-off to realizable value		42.30	%		40.11	%		78.83	%		39.92	%		170.18	%		56.30	%
As of December 31, 2011
Non-performing loans held for investment charged-off to realizable value	$	233,703		$	21,925		$	70,462		$	70,959		$	2,605		$	399,654
Other non-performing loans held for investment		104,505			218,489			199,709			179,063			36,942			738,708
Total non-performing loans held for investment	$	338,208		$	240,414		$	270,171		$	250,022		$	39,547		$	1,138,362
Allowance to non-performing loans held for investments		20.31	%		45.33	%		60.88	%		36.55	%		152.66	%		43.39	%
Allowance to non-performing loans held for investments, excluding non-performing loans charged-off to realizable value		65.72	%		49.88	%		82.36	%		51.04	%		163.42	%		66.86	%

The Corporation provides homeownership preservation assistance to its customers through a loss mitigation program in Puerto Rico and in accordance with the government’s Home Affordable Modification Program guidelines. Depending upon the nature of borrowers’ financial condition, restructurings or loan modifications through this program as well as other restructurings of individual commercial, commercial mortgage, construction and residential mortgage loans in the U.S. mainland fit the definition of TDR. A restructuring of a debt constitutes a TDR if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. Modifications involve changes in one or more of the loan terms that bring a defaulted loan current and provide sustainable affordability. Changes may include the refinancing of any past-due amounts, including interest and escrow, the extension of the maturity of the loan and modifications of the loan rate. As of September 30, 2012, the Corporation’s total TDR loans of $925.1 million consisted of $410.2 million of residential mortgage loans, $107.5 million of commercial and industrial loans, $298.1 million of commercial mortgage loans, $86.6 million of construction loans and $22.7 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $4.4 million as of September 30, 2012.

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 for a significant period of time, and reduction of interest rates either permanently, offered up to 2010, or for a period of up to two years (step-up rates). Additionally, in remote 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 to only those borrowers who have defaulted, or are likely to default, permanently on their loan and would lose their homes in foreclosure action absent some lender concession. Notwithstanding, 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 three month period whereby 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 enters into a permanent modification. As a result of new accounting guidance on TDRs, loans that are participating in or that have been offered a binding trial modification are classified as TDRs when the trial offer is made and continue to be classified as TDR regardless of whether the borrower enters into a permanent modification. At September 30, 2012, we classified and additional $5.7 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 the construction portfolios, at the time of the restructuring, the Corporation determines, on a loan by loan basis, whether a concession was granted for economic or legal reasons related to the borrower’s financial difficulty. Concessions granted for commercial loans could include: reductions in interest rates to rates that are considered below market; extension of repayment schedules and maturity dates beyond original contractual terms; waiving of borrower covenants; forgiveness of principal or interest; or other contract changes that would be considered a concession. The

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Corporation mitigates loan defaults for its commercial loan portfolios through its collections function. The function’s objective is to minimize both early stage delinquencies and losses upon default of commercial loans. In the case of C&I, commercial mortgage and construction loan portfolios, the SAG focuses on strategies for the accelerated reduction of non-performing assets through note sales, short sales, loss mitigation programs, and sales of REO. In addition to the management of the resolution process for problem loans, the SAG oversees collection efforts for all loans to prevent migration to the non-performing and/or adversely classified status. The SAG utilizes relationship officers, collection specialists and attorneys. In the case of residential construction projects, the workout function monitors project specifics, such as project management and marketing, as deemed necessary. The SAG utilizes its collections infrastructure of workout collection officers, credit work-out specialists, in-house legal counsel, and third party consultants. In the case of residential construction projects and large commercial loans, the function also utilizes third-party specialized consultants to monitor the residential and commercial construction projects in terms of construction, marketing and sales, and restructuring of large commercial loans. In addition, the Corporation extends, renews and restructures loans with satisfactory credit profiles. Many commercial loan facilities are structured as lines of credit, which are mainly one year in term and therefore are required to be renewed annually. Other facilities may be restructured or extended from time to time based upon changes in the borrower’s business needs, use of funds, timing of completion of projects and other factors. If the borrower is not deemed to have financial difficulties, extensions, renewals and restructurings are done in the normal course of business and not considered concessions, and the loans continue to be recorded as performing.

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 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 loans being returned to accrual 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 interest income by returning a non-performing loan to performing status, if applicable, and increase cash flows by providing for payments to be made by the borrower, and avoid increases in foreclosure and real estate owned costs. The Corporation continues to consider a modified loan as an impaired loan for purposes of estimating the allowance for loan and lease losses.

The following table provides a breakdown between accrual and nonaccrual status of TDRs as of September 30, 2012:

(In Thousands)	September 30, 2012
	Accrual		Nonaccrual  (1)		Total TDRs
Non-FHA/VA Residential Mortgage loans	$	294,184	$	116,063	$	410,247
Commercial Mortgage Loans		157,445		140,601		298,046
Commercial & Industrial Loans		24,749		82,808		107,557
Construction Loans		2,490		84,091		86,581
Consumer Loans - Auto		7,114		4,699		11,813
Finance Leases		1,985		59		2,044
Consumer Loans - Other		7,037		1,819		8,856
Total Troubled Debt Restructurings	$	495,004	$	430,140	$	925,144

(1) Included in non-accrual loans are $203.6 million in loans that are performing under the terms of the restructuring agreement but are reported in non-accrual 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.

The REO portfolio, which is part of non-performing assets, increased by $62.7 million. The following table shows the activity during the first nine-months of 2012 of the REO portfolio by geographic region and type of property:

(In thousands)	As of September 30, 2012
	Puerto Rico									Virgin Islands									Florida									Consolidated
	Residential			Commercial			Construction			Residential			Commercial			Construction			Residential			Commercial			Construction
Beginning Balance	$	55,381		$	24,629		$	5,778		$	6,520		$	—		$	680		$	5,710		$	11,613		$	3,981		$	114,292
Additions		39,656			43,460			20,445			—			4,244			17,388			3,256			4,674			—			133,123
Sales		(28,587	)		(5,707	)		(1,830	)		(540	)		—			—			(6,228	)		(8,535	)		—			(51,427	)
Fair value adjustments		(7,101	)		(6,634	)		(1,614	)		(1,280	)		(43	)		(327	)		(411	)		(1,337	)		(240	)		(18,987	)
	$	59,349		$	55,748		$	22,779		$	4,700		$	4,201		$	17,741		$	2,327		$	6,415		$	3,741		$	177,001

The over 90-day delinquent, but still accruing loans, excluding loans guaranteed by the U.S. Government, increased during the nine-month period ended September 30, 2012 by $4.0 million to $49.6 million, or 0.49% of total loans held for investment at September 30, 2012. Loans 30 to 89 days delinquent decreased by $.06 million to $283.0 million as of September 30, 2012.

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Net Charge-offs and Total Credit Losses

Total net charge-offs for the first nine months of 2012 were $138.4 million, or 1.79% of average loans on an annualized basis. This was down $89.3 million, or 39%, from $227.7 million, or an annualized 2.72%, in the first nine months of 2011.

Construction loans net charge-offs for the first nine months of 2012 were $38.9 million, or an annualized 13.00%, compared to $81.3 million, or an annualized 16.30% of related loans, in the first nine months of 2011. Approximately $27.0 million, of the construction loans net charge-offs in the first nine months of 2012 were in the Virgin Islands, including charge-offs of $22.7 million related to a commercial project. In Puerto Rico, construction loans net charge-offs of $14.0 million in the first nine months of 2012 include an individual charge-off of $7.6 million related to a commercial project. The United States construction loan portfolio reflected a net recovery of $2.1 million, including a $1.5 million recovery related to a residential land loan that was fully charged-off previously. The construction portfolio in Florida has been considerably reduced over the past three years to $22.6 million as of September 30, 2012.

C&I loan net charge-offs in the first nine months of 2012 were $33.3 million, or an annualized 1.15% of related average loans, down from $49.6 million, or an annualized 1.55% of related loans, in the first nine months of 2011. Substantially all of the charge-offs recorded in the first nine months of 2012 were in Puerto Rico spread through several industries. Approximately 71%, or $23.5 million, of the net charge-offs in the first nine months of 2012 were related to nine relationships with individual charge-offs in excess of $1 million.

Commercial mortgage loans net charge-offs in the first nine months of 2012 were $14.9 million, or an annualized 1.32% of related average loans, down from $37.6 million, or an annualized 3.14% of related loans, in the first nine months of 2011. Commercial mortgage loans net charge-offs in the first nine months of 2012 were $11.1 million in Puerto Rico and $3.8 million in the United States. Most of the charge-offs were concentrated in four relationships with individual charge-offs in excess of $1 million.

Residential mortgage loan net charge-offs were $27.8 million, or an annualized 1.30% of related average loans compared to $36.9 million, or an annualized 1.33% for the comparable period in 2011. Approximately $14.2 million in charge-offs for the first nine months of 2012 ($13.0 million in Puerto Rico, $1.1 million in Florida and $0.1 million in the Virgin Islands) resulted from valuations for impairment purposes of residential mortgage loan portfolios considered homogeneous given high delinquency and loan-to-value levels, compared to $20.6 million recorded in the same period of 2011. Net charge-offs on residential mortgage loans also included $6.8 million related to the foreclosure of loans during the first nine months of 2012, compared to $7.0 million recorded for foreclosures in the first nine months of 2011.

Net charge-offs on consumer loans and finance leases in the first nine months of 2012 were $24.0 million, or an annualized 1.85% of related average loans down from $29.4 million, or an annualized 2.39% of average loans for the first nine months of 2011. This decrease reflected the continued high credit quality of originations and an improved ratio also impacted by a larger portfolio led by the recently acquired credit cards portfolio.

The following table presents annualized net charge-offs to average loans held-in-portfolio:

	For the Quarter Ended						For the Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Residential mortgage loans		1.05	%		2.24	%		1.30	%		1.33	%
Commercial mortgage		1.36	%		0.84	%		1.32	%		3.14	%
Commercial and industrial		1.33	%		2.09	%		1.15	%		1.55	%
Construction loans		9.11	%		12.78	%		13.00	%		16.30	%
Consumer loans (1)(2)		1.55	%		2.30	%		1.85	%		2.39	%
Total loans		1.58	%		2.50	%		1.79	%		2.72	%

(1) Includes lease financing.

(2) Loans used in the denominator in calculating the ratio include PCI loans.

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.

98

The following table presents net charge-offs (annualized) to average loans held-in-portfolio by geographic segment:

	Quarter Ended						Nine-Month Period Ended
	September 30,			September 30,			September 30,			September 30,
	2012			2011			2012			2011
PUERTO RICO:
Residential mortgage		1.33	%		2.50	%		1.57	%		1.37	%
Commercial mortgage		2.08	%		0.99	%		1.41	%		4.05	%
Commercial and Industrial		1.43	%		2.20	%		1.25	%		1.61	%
Construction		2.28	%		15.02	%		7.46	%		9.76	%
Consumer and finance leases		1.56	%		2.33	%		1.83	%		2.44	%
Total loans		1.53	%		2.62	%		1.64	%		2.35	%
VIRGIN ISLANDS:
Residential mortgage (1)		(0.02	)%		0.19	%		0.05	%		0.03	%
Commercial mortgage		0.00	%		0.00	%		0.00	%		0.00	%
Commercial and Industrial		0.00	%		0.00	%		0.01	%		0.43	%
Construction		26.04	%		9.78	%		28.78	%		29.62	%
Consumer and finance leases		1.16	%		2.34	%		1.03	%		1.35	%
Total loans		3.48	%		1.84	%		4.29	%		5.62	%
FLORIDA:
Residential mortgage		0.30	%		3.27	%		1.03	%		2.87	%
Commercial mortgage (2)		(0.40	)%		0.62	%		1.28	%		1.43	%
Commercial and Industrial (3)		(0.01	)%		2.32	%		(0.93	)%		1.06	%
Construction (4)		(0.50	)%		6.38	%		(11.62	)%		25.45	%
Consumer and finance leases		1.64	%		1.02	%		4.06	%		1.82	%
Total loans (5)		(0.04	)%		1.93	%		0.79	%		3.56	%

(1) For the third quarter of 2012 recoveries in residential mortgage loans in the Virgin Islands exceeded charge-offs.

(2) For the third quarter of 2012 recoveries in commercial mortgage loans in Florida exceeded charge-offs.

(3) For the third quarter and nine-month period ended September 30, 2012 recoveries in commercial and industrial loans in Florida exceeded charge-offs.

(4) For the third quarter and nine-month period ended September 30, 2012 recoveries in construction loans in Florida exceeded charge-offs.

(5) For the third quarter of 2012, recoveries in total loans in Florida exceeded charge-offs.

Total credit losses (equal to net charge-offs plus losses on REO operations) for the first nine months of 2012 amounted to $157.3 million, or 2.01% on an annualized basis to average loans and repossessed assets in contrast to credit losses of $244.1 million, or a loss rate of 2.89%, for the first nine months of 2011.

99

The following table presents a detail of the REO inventory and credit losses for the periods indicated:

Credit Loss Performance	Quarter Ended						Nine-Month Period Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(Dollars in thousands)
REO
REO balances, carrying value:
Residential	$	66,376		$	67,704		$	66,376		$	67,704
Commercial		66,364			32,388			66,364			32,388
Construction		44,261			9,422			44,261			9,422
Total	$	177,001		$	109,514		$	177,001		$	109,514
REO activity (number of properties):
Beginning property inventory,		647			495			575			479
Properties acquired		129			127			396			337
Properties disposed		(106	)		(81	)		(301	)		(275	)
Ending property inventory		670			541			670			541
Average holding period (in days)
Residential		369			288			369			288
Commercial		270			315			270			315
Construction		197			439			197			439
		289			309			289			309
REO operations (loss) gain:
Market adjustments and (losses) gain on sale:
Residential	$	(2,285	)	$	(1,714	)	$	(5,263	)	$	(6,070	)
Commercial		(1,736	)		(491	)		(1,946	)		(3,411	)
Construction		(681	)		(461	)		(1,067	)		(379	)
		(4,702	)		(2,666	)		(8,276	)		(9,860	)
Other REO operations expenses		(3,984	)		(2,286	)		(10,639	)		(6,563	)
Net Loss on REO operations	$	(8,686	)	$	(4,952	)	$	(18,915	)	$	(16,423	)
CHARGE-OFFS
Residential charge-offs, net		(7,358	)		(15,816	)		(27,300	)		(29,914	)
Commercial charge-offs, net		(17,263	)		(25,835	)		(48,182	)		(87,140	)
Construction charge-offs, net		(8,326	)		(16,823	)		(38,904	)		(81,268	)
Consumer and finance leases charge-offs, net		(7,627	)		(9,163	)		(24,033	)		(29,378	)
Total charge-offs, net		(40,574	)		(67,637	)		(138,419	)		(227,700	)
TOTAL CREDIT LOSSES (1)	$	(49,260	)	$	(72,589	)	$	(157,334	)	$	(244,123	)
LOSS RATIO PER CATEGORY (2)
Residential		1.34	%		2.43	%		1.52	%		1.57	%
Commercial		1.45	%		1.78	%		1.24	%		2.05	%
Construction		9.00	%		12.88	%		12.57	%		16.08	%
Consumer		1.54	%		2.28	%		1.83	%		2.37	%
TOTAL CREDIT LOSS RATIO(3)		1.88	%		2.65	%		2.01	%		2.89	%

(1) Equal to REO operations (losses) gains plus Charge-offs, net.

(2) Calculated as net charge-offs plus market adjustments and gains (losses) on sale of REO divided by average loans and repossessed assets.

(3) Calculated as net charge-offs plus net loss on REO operations divided by average loans and repossessed assets.

100

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 risk, the potential for operational and reputational loss has increased. In order to mitigate and control operational risk, the Corporation has developed, and continues to enhance, specific internal controls, policies and procedures that are designated 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, Information Technology 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 non-compliance 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 areas 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.

As of September 30, 2012, the Corporation had $148.7 million outstanding in credit facilities granted to the Puerto Rico Government and/or its political subdivisions, down from $360.1 million as of December 31, 2011, and $117.7 million granted to the Government of the Virgin Islands, down from $139.4 million as of December 31, 2011. A substantial portion of these credit facilities consist of loans to municipalities in Puerto Rico for which the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment. Another portion of these obligations consists of loans to public corporations that obtain revenues from rates charged for services or products, such as electric power and water utilities. Public corporations have varying degrees of independence from the central Government and many receive appropriations or other payments from it.

In addition to loans extended to government entities, the largest loan to one borrower as of September 30, 2012 in the amount of $258.3 million is with one mortgage originator in Puerto Rico, Doral Financial Corporation. This commercial loan is secured by individual real-estate loans, mostly 1-4 residential mortgage loans.

Of the total gross loans held for investment portfolio of $10.2 billion as of September 30, 2012 approximately 85% have credit risk concentration in Puerto Rico, 7% in the United States and 8% in the Virgin Islands.

101

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 Control and Procedures

First BanCorp’s management, including its Chief Executive Officer and Chief Financial Officer, 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 Securities Exchange Act of 1934) as of September 30, 2012, except as otherwise noted below. Based on this evaluation, as of the end of the period covered by this Form10-Q, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.

As described in Note 6, – “Loans Held for Investment – Acquired loans including Purchased Credit-Impaired Loans,” to the consolidated financial statements included in this Quarterly Report on Form 10-Q, the Corporation acquired on May 30, 2012 an approximate $406 million portfolio of FirstBank-branded credit cards from FIA Card Services (“FIA”). As part of the credit cards portfolio acquisition, FIA has been retained as servicer of the portfolio for an eighteen month period. Prior to completing the acquisition, the Corporation performed due diligence on the assets and the business. This due diligence process provided the Corporation with a reasonable level of assurance that, as of the date the acquisition was completed, the disclosure controls and procedures in place with respect to the administration by FIA of the credit cards portfolio to be acquired were effective. After the referenced acquisition, and as of September 30, 2012, however, the Corporation has not yet completed its own assessment of the design and operation of the disclosure controls and procedures relating to the administrative systems and processes being provided by FIA as the servicer of the acquired credit cards portfolio.

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.

102

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the opinion of the Company’s management, the pending and threatened legal proceedings of which management is aware will not have a material adverse effect on the financial condition, results of operations or cash flows of the Corporation.

ITEM 1A. RISK FACTORS

Our 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 operations, financial condition or results for future periods see the risk factors below and in Item 1A, “Risk Factors,” in the Corporation’s 2011 Annual Report on Form 10-K. These 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 2011 Form 10-K.

The risks described in the Corporation’s 2011 Form 10-K and in this report are not the only risks facing the Corporation. Additional risks and uncertainties not currently known to the Corporation or currently deemed by the Corporation to be immaterial also may materially adversely affect the Corporation’s business, financial condition or results of operations.

Our business concentration in Puerto Rico imposes risks.

We conduct our operations in a geographically concentrated area, as our main market is Puerto Rico. This imposes risks from lack of diversification in our geographical portfolio. Our financial condition and results of operations are highly dependent on the economic conditions of Puerto Rico, where adverse political or economic developments, among other things, could affect the volume of loan originations, increase the level of non-performing assets, increase the rate of foreclosure losses on loans, and reduce the value of our loans and loan servicing portfolio.

Since March 2006, a number of key economic indicators have shown that the economy of Puerto Rico has been in a recession.

On April 19, 2012, the Puerto Rico Planning Board announced the release of Puerto Rico’s macroeconomic data for the projections for the fiscal year ending on June 30, 2012 (“FY 2012”) and for the fiscal year ending on June 30, 2013 (“FY 2013”). Projections show an increase of 0.9% in the real gross national product (the “GNP”) for FY2012, and an increase of 1.1% for FY 2013. The Government Development Bank for Puerto Rico’s Economic Activity Index (“EAI”), which is a coincident index consisting of four major monthly economic indicators (namely total payroll employment, total electric power generation, cement sales and gas consumption), and which monitors the actual trend of Puerto Rico’s economy, reflected a year-over year increase of 0.5% for December 2011 its first positive growth since March 2006. Since then, the EAI has experienced its fifth consecutive month of positive year-over year growth. Construction has remained weak since 2009 as Puerto Rico’s fiscal situation and decreasing public investment in construction projects has affected the sector.

Although the government of Puerto Rico has implemented various measures in order to achieve a balanced budget for FY 2012 and FY 2013, on August 8, 2011, Moody’s downgraded the general obligation (“GO”) rating of the Commonwealth of Puerto Rico. The downgrade also applies to those ratings that are based on or capped at the general obligation rating of the Commonwealth of Puerto Rico. Moody’s revised the GO on June 6, 2012 and changed its outlook from stable to negative. Moody’s based the decision on its strong concerns with the continued deterioration of the severely underfunded government retirement systems, weak economic trends and weak finances. On June 26, 2012, Standard and Poor’s (“S&P”) revised its outlook on the Government Development Bank for Puerto Rico from stable to negative, while maintaining the current rating. According to S&P, the decision was based on the strong ties that the Government Development Bank has with the Puerto Rico Government, especially given that it provides funding to the Puerto Rico Government and certain Puerto Rico public corporations; and, since the outlook for Puerto Rico GO was downgraded, the logical progression called for a downgrade of the Government Development Bank’s rating.

Some of the measures implemented by the government to reduce expenses included public-sector employee layoffs. Since the government is an important source of employment in Puerto Rico, these measures had a temporary adverse effect on the island’s economy. In order to increase revenues, the government passed Law 154 of 2010 which imposes a variable rate excise tax on Controlled Foreign Corporations. The law, which was enacted in December of 2010, will be in effect up to December 2016.

Although recent economic indicators have shown positive year-over-year trends, the Puerto Rico Labor Department reported an unemployment rate of 13.6% for the month of September 2012.

The economy of Puerto Rico is sensitive to the price of oil in the global market since it does not have a significant mass transit system available to the public and most of its electricity is powered by oil. The substantial increase in the price of oil has adversely impacted the economy by reducing disposable income and increasing the operating costs of most businesses and government. Consumer spending is particularly sensitive to wide fluctuations in oil prices.

This decline in Puerto Rico’s economy has resulted in, among other things, a downturn in our loan originations, an increase in the level of our non-performing assets, loan loss provisions and charge-offs, particularly in our construction and commercial loan portfolios, an increase in the rate of foreclosure loss on mortgage loans, and a reduction in the value of our loans and loan servicing portfolio, all of which have adversely affected our profitability. If the decline in economic activity continues, there could be further adverse effects on our profitability.

The above economic concerns and uncertainty in the private and public sectors may continue to have an adverse effect on the credit quality of our loan portfolios, as delinquency rates have increased, until the economy stabilizes.

103

We may not be able to recover all assets pledged to Lehman Brothers Special Financing, Inc.

Lehman Brothers Special Financing, Inc. (“Lehman”) was the counterparty to the Corporation on certain interest rate swap agreements. During the third quarter of 2008, Lehman failed to pay the scheduled net cash settlement due to the Corporation, which constituted an event of default under those interest rate swap agreements. The Corporation terminated all interest rate swaps with Lehman and replaced them with other counterparties under similar terms and conditions. In connection with the unpaid net cash settlement under the swap agreements, the Corporation has an unsecured counterparty exposure with Lehman, which filed for bankruptcy on October 3, 2008, of approximately $1.4 million. This exposure was reserved in the third quarter of 2008. The Corporation had securities pledged as collateral with a $63.6 million face value to guarantee its performance under the swap agreements in the event payment there under was required.

Since the second quarter of 2009, the Corporation has maintained a non-performing asset with a book value of $64.5 million in addition to accrued interest of $2.1 million related to the collateral pledged with Lehman. The Corporation believes that the securities pledged as collateral should not be part of the Lehman bankruptcy estate given the facts that the posted collateral constituted a performance guarantee under the swap agreements and was not part of a financing agreement, and that ownership of the securities was never transferred to Lehman. Upon termination of the interest rate swap agreements, Lehman’s obligation was to return the collateral to the Corporation. During the fourth quarter of 2009, the Corporation discovered that Lehman Brothers, Inc., acting as agent of Lehman, had deposited the securities in a custodial account at JP Morgan Chase, and that, shortly before the filing of the Lehman bankruptcy proceedings, it had provided instructions to have most of the securities transferred to Barclays Capital (“Barclays”) in New York. After Barclays’ refusal to turn over the securities, the Corporation filed a lawsuit against Barclays in federal court in New York demanding the return of the securities in December 2009. During February 2010, Barclays filed a motion with the court requesting that the Corporation’s claim be dismissed on the grounds that the allegations of the complaint are not sufficient to justify the granting of the remedies therein sought. Shortly thereafter, the Corporation filed its opposition motion. A hearing on the motions was held in court on April 28, 2010. The court, on that date, after hearing the arguments by both sides, concluded that the Corporation’s equitable-based causes of action, upon which the return of the investment securities is being demanded, contain allegations that sufficiently plead facts warranting the denial of Barclays’ motion to dismiss the Corporation’s claim. Accordingly, the judge ordered the case to proceed to trial.

Subsequent to the court decision, the district court judge transferred the case to the Lehman bankruptcy court for trial. Discovery pursuant to that case management plan has been completed. The parties filed dispositive motions on September 13, 2012. Oppositions to such motions and replies thereto must be filed by October 15, 2012 and November 14, 2012, respectively, but this timing is subject to adjustment. The Corporation may not succeed in its litigation against Barclays to recover all or a substantial portion of the securities.

Additionally, the Corporation continues to pursue its claim filed in January 2009 in the proceedings under the Securities Protection Act with regard to Lehman Brothers Inc. in the United States Bankruptcy Court for the Southern District of New York.

An estimated loss has not been accrued as the Corporation is unable to determine the timing of the claim resolution or whether it will succeed in recovering all or a substantial portion of the collateral or its equivalent value.

Because the Corporation has not had the benefit of the use of the investment securities pledged to Lehman (i.e., ability to sell, pledge or transfer), and because the Corporation has not received principal or interest payments since 2008 (after the collapse of Lehman), the appropriate carrying value of these securities has been under review with our regulators, with recent heightened concern due to the complex and lengthy litigation regarding this matter. If, as a result of these discussions, developments in the litigation, or for other reasons, the Corporation should determine that it is probable that the asset has been impaired and that the Corporation needs to recognize a partial or full loss for the investment securities pledged to Lehman, such an action would adversely affect the Corporation’s results of operations in the period in which such action is taken. The Corporation expects to reassess the recoverability of the asset upon the resolution of the dispositive motions filed with the court, which motions could be resolved in the fourth quarter of 2012.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURE

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

104

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: November 9, 2012	By:	/s/ Aurelio Alemán
		Aurelio Alemán
		President and Chief Executive Officer
Date: November 9, 2012	By:	/s/ Orlando Berges
		Orlando Berges
		Executive Vice President and Chief Financial Officer

105

Exhibit Index

12.1 -	Ratio of Earnings to Fixed Charges.
12.2 -	Ratio of Earnings to Fixed Charges and Preference Dividends.
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 -	Interactive Data File (Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, furnished in XBRL (eXtensible Business Reporting Language)

106

EX-12.1

Exhibit 12.1

First BanCorp

Computation of Ratio of Earnings to Fixed Charges

	Nine-Month Period Ended September 30, 2012
Including Interest on Deposits
Earnings:
Pre-tax income from continuing operations	$	19,686
Plus:
Fixed Charges (excluding capitalized interest)		139,533
Total earnings	$	159,219
Fixed Charges:
Interest expensed and capitalized	$	137,136
Amortized premiums, discounts, and capitalized expenses related to indebtedness		3
An estimate of the interest component within rental expense		2,394
Total Fixed Charges	$	139,533
Ratio of Earnings to Fixed Charges		1.14
Excluding Interest on Deposits
Earnings:
Pre-tax income from continuing operations	$	19,686
Plus:
Fixed Charges (excluding capitalized interest)		39,357
Total earnings	$	59,043
Fixed Charges:
Interest expensed and capitalized	$	36,960
Amortized premiums, discounts, and capitalized expenses related to indebtedness		3
An estimate of the interest component within rental expense		2,394
Total Fixed Charges	$	39,357
Ratio of Earnings to Fixed Charges		1.50

EX-12.2

Exhibit 12.2

First BanCorp

Computation of Ratio of Earnings to Fixed Charges and Preference Dividends

	Nine-Month Period Ended September 30, 2012
Including Interest on Deposits
Earnings:
Pre-tax income from continuing operations	$	19,686
Plus:
Fixed Charges (excluding capitalized interest)		139,533
Total earnings	$	159,219
Fixed Charges:
Interest expensed and capitalized	$	137,136
Amortized premiums, discounts, and capitalized expenses related to indebtedness		3
An estimate of the interest component within rental expense		2,394
Total fixed charges before preferred dividends	$	139,533
Preferred dividends		—
Ratio of pre tax income to net income		1.29
Preferred dividend factor		—
Total fixed charges and preferred stock dividends	$	139,533
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends		1.14
Excluding Interest on Deposits
Earnings:
Pre-tax income from continuing operations	$	19,686
Plus:
Fixed Charges (excluding capitalized interest)		39,357
Total earnings	$	59,043
Fixed Charges:
Interest expensed and capitalized	$	36,960
Amortized premiums, discounts, and capitalized expenses related to indebtedness		3
An estimate of the interest component within rental expense		2,394
Total Fixed Charges before preferred dividends	$	39,357
Preferred dividends		—
Ratio of pre tax income to net income		1.29
Preferred dividend factor		—
Total fixed charges and preferred stock dividends	$	39,357
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends		1.50

EX-31.1

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.

Date: November 9, 2012	By:	/s/ Aurelio Alemán
		Aurelio Alemán
		President and
		Chief Executive Officer

EX-31.2

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.

Date: November 9, 2012	By:	/s/ Orlando Berges
		Orlando Berges
		Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 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 September 30, 2012 (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: November 9, 2012	/s/ Aurelio Alemán
	Name:	Aurelio Alemán
	Title:	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 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 September 30, 2012 (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: November 9, 2012	/s/ Orlando Berges
	Name	Orlando Berges
	Title:	Executive Vice President and Chief Financial Officer

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GOODWILL AND OTHER INTANGIBLES (Tables)

9 Months Ended

Sep. 30, 2012

Gross Amount and Accumulated Amortization of Other Intangible Assets

The following tables shows the gross amount and accumulated amortization of the Corporation’s intangible assets recognized as part of Other Assets in the consolidated statement of financial condition:

	As of September 30, 2012			As of December 31, 2011
Core deposit intangible:
Gross amount	$	45,844		$	45,844
Accumulated amortization		(35,921	)		34,155
Net carrying amount	$	9,923		$	11,689
Remaining amortization period		10.7 years			11.5 years
Purchased credit card relationship intangible:
Gross amount	$	24,465		$	—
Accumulated amortization		(545	)		—
Net carrying amount	$	23,920		$	—
Remaining amortization period		9.3 years			—

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ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) - Summary of Advances from FHLB (Parenthetical) (Detail)	Sep. 30, 2012	Dec. 31, 2011
Short-term Debt [Line Items]
Weighted-average interest rate	2.31%	3.59%

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STOCK-BASED COMPENSATION - Activity of Stock Options (Detail) (USD $)	9 Months Ended
	Sep. 30, 2012 Y
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options, Beginning of year	129,934
Number of Options, expired	(9,713)
Number of Options, cancelled	(5,464)
Number of options, End of period outstanding and exercisable	114,757
Weighted-Average Exercise Price, beginning of year	$ 202.99
Weighted-Average Exercise Price, Options expired	$ 140.15
Weighted-Average Exercise Price, Options cancelled	$ 236.27
Weighted-Average Exercise Price, End of period outstanding and exercisable	$ 206.72
Weighted- Average Remaining Contractual Term (Years), beginning of year
Weighted- Average Remaining Contractual Term (Years), Options expired
Weighted- Average Remaining Contractual Term (Years), Options cancelled
Weighted- Average Remaining Contractual Term (Years),End of period outstanding and exercisable	3.1
Aggregate Intrinsic Value (In thousands), Beginning of year
Aggregate Intrinsic Value (In thousands), Options expired
Aggregate Intrinsic Value (In thousands), Options cancelled
Aggregate Intrinsic Value, End of period outstanding and exercisable

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SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2012

Information about the Reportable Segments

The following table presents information about the reportable segments (in thousands):

(In thousands)	Mortgage Banking			Consumer (Retail) Banking			Commercial and Corporate			Treasury and Investments			United States Operations			Virgin Islands Operations			Total
For the quarter ended September 30, 2012:
Interest income	$	27,792		$	60,306		$	46,104		$	11,563		$	9,031		$	12,168		$	166,964
Net (charge) credit for transfer of funds		(12,357	)		(756	)		(5,933	)		15,991			3,055			—			—
Interest expense		—			(7,289	)		—			(26,191	)		(6,903	)		(1,078	)		(41,461	)
Net interest income		15,435			52,261			40,171			1,363			5,183			11,090			125,503
Provision for loan and lease losses		(8,453	)		(12,000	)		(5,892	)		—			6,860			(9,467	)		(28,952	)
Non-interest income		4,312			9,487			1,993			(538	)		491			1,580			17,325
Direct non-interest expenses		(10,330	)		(26,865	)		(12,607	)		(1,795	)		(7,735	)		(9,053	)		(68,385	)
Segment income (loss)	$	964		$	22,883		$	23,665		$	(970	)	$	4,799		$	(5,850	)	$	45,491
Average earnings assets	$	2,084,719		$	1,784,630		$	4,478,267		$	2,259,288		$	704,780		$	797,332		$	12,109,016

(In thousands)	Mortgage Banking			Consumer (Retail) Banking			Commercial and Corporate			Treasury and Investments			United States Operations			Virgin Islands Operations			Total
For the quarter ended September 30, 2011:
Interest income	$	27,505		$	41,611		$	51,101		$	13,328		$	11,101		$	13,896		$	158,542
Net (charge) credit for transfer of funds		(14,030	)		3,528			(3,658	)		10,203			3,957			—			—
Interest expense		—			(10,220	)		—			(42,657	)		(9,694	)		(1,716	)		(64,287	)
Net interest income (loss)		13,475			34,919			47,443			(19,126	)		5,364			12,180			94,255
Provision for loan and lease losses		(16,153	)		(7,719	)		(8,261	)		—			(5,417	)		(8,896	)		(46,446	)
Non-interest income		3,180			7,354			1,702			3,834			590			1,661			18,321
Direct non-interest expenses		(6,918	)		(22,332	)		(9,682	)		(2,060	)		(9,341	)		(8,505	)		(58,838	)
Segment (loss) income	$	(6,416	)	$	12,222		$	31,202		$	(17,352	)	$	(8,804	)	$	(3,560	)	$	7,292
Average earnings assets	$	2,047,220		$	1,435,818		$	5,107,637		$	2,765,749		$	834,848		$	888,393		$	13,079,665

	Mortgage Banking			Consumer (Retail) Banking			Commercial & Corporate			Treasury & Investments			United States Operations			Virgin Islands Operations			Total
For the Nine-Month Period Ended September 30, 2012:
Interest income	$	82,550		$	147,641		$	142,375		$	34,077		$	28,566		$	37,514		$	472,723
Net (charge) credit for transfer of funds		(37,848	)		1,827			(18,964	)		45,559			9,426			—			—
Interest expense		—			(23,818	)		—			(86,551	)		(22,702	)		(3,578	)		(136,649	)
Net interest income (loss)		44,702			125,650			123,411			(6,915	)		15,290			33,936			336,074
Provision for loan and lease losses		(29,541	)		(21,576	)		(37,449	)		—			12,216			(13,683	)		(90,033	)
Non-interest income		12,070			23,827			8,215			(1,779	)		1,264			4,952			48,549
Direct non-interest expenses		(31,142	)		(73,964	)		(37,356	)		(5,107	)		(20,912	)		(28,506	)		(196,987	)
Segment (loss) income	$	(3,911	)	$	53,937		$	56,821		$	(13,801	)	$	7,858		$	(3,301	)	$	97,603
Average earnings assets	$	2,061,036		$	1,572,342		$	4,635,264		$	2,368,164		$	735,889		$	820,510		$	12,193,205

	Mortgage Banking			Consumer (Retail) Banking			Commercial and Corporate			Treasury and Investments			United States Operations			Virgin Islands Operations			Total
For the Nine-Month Period Ended September 30, 2011:
Interest income	$	90,779		$	127,401		$	154,098		$	52,770		$	34,547		$	43,268		$	502,863
Net (charge) credit for transfer of funds		(48,007	)		7,920			(9,672	)		37,078			12,681			—			—
Interest expense		—			(32,334	)		—			(139,998	)		(30,543	)		(5,019	)		(207,894	)
Net interest income (loss)		42,772			102,987			144,426			(50,150	)		16,685			38,249			294,969
Provision for loan and lease losses		(27,892	)		(10,622	)		(108,902	)		—			(15,546	)		(31,400	)		(194,362	)
Non-interest income		18,968			21,342			6,531			42,548			903			8,912			99,204
Direct non-interest expenses		(23,140	)		(67,944	)		(30,559	)		(4,744	)		(26,159	)		(27,921	)		(180,467	)
Segment income (loss)	$	10,708		$	45,763		$	11,496		$	(12,346	)	$	(24,117	)	$	(12,160	)	$	19,344
Average earnings assets	$	2,192,271		$	1,460,871		$	5,219,856		$	3,280,009		$	866,778		$	893,256		$	13,913,041

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 September 30,						Nine-Month Period Ended September 30,
	2012			2011			2012			2011
Net Income (loss):
Total income for segments and other	$	45,491		$	7,292		$	97,603		$	19,344
Other non-interest income (loss) (1)		(2,199	)		(4,357	)		(10,926	)		(5,893	)
Other operating expenses		(23,458	)		(24,093	)		(66,991	)		(71,761	)
Income (loss) before income taxes		19,834			(21,158	)		19,686			(58,310	)
Income tax expense		(761	)		(2,888	)		(4,439	)		(9,080	)
Total consolidated net income (loss)	$	19,073		$	(24,046	)	$	15,247		$	(67,390	)
Average assets:
Total average earning assets for segments	$	12,109,016		$	13,079,665		$	12,193,205		$	13,913,041
Other average earning assets (1)		34,403			46,046			38,215			39,064
Average non-earning assets		707,816			662,192			692,083			670,758
Total consolidated average assets	$	12,851,235		$	13,787,903		$	12,923,503		$	14,622,863

(1) The activities related to the Bank’s equity interest in CPG/GS are presented as an Other non-interest income (loss) and other average earning assets in the table above

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FAIR VALUE - Additional Information (Detail) (USD $)	3 Months Ended	9 Months Ended		6 Months Ended
	Jun. 30, 2012	Sep. 30, 2012 Bonds	Dec. 31, 2011	Jun. 30, 2012 Medium term notes [Member]	Dec. 31, 2011 Medium term notes [Member]
Debt Instrument [Line Items]
Principal balance of medium-term notes			$ 15,400,000
Fair value of medium-term notes			23,342,000		16,000,000
Number of Bonds under collateralized debt obligation		125
Medium term notes carried rate	6.00%			6.00%
Net loss from fair value changes attributable to the Corporation's own credit to the medium-term notes		500,000
Principal value of debt	15,400,000			15,400,000
Maximum amount of interest in brokered CD sold by broker		$ 250,000

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LOAN PORTFOLIO - Credit Risk Payment Activity (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Financing Receivable, Recorded Investment [Line Items]
Residential mortgage loans insured by FHA or guaranteed by the VA	$ 34.6
Period of residential mortgage loan that are no longer accruing interest	18 months
Loans considered to be defaulted if borrower has failed to make payment for a period or more than the period	90 days

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FAIR VALUE - Schedule of Changes in Fair Value (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Interest expense on medium-term notes	$ 0.2	$ 0.4	$ 0.7

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STOCK-BASED COMPENSATION - Restricted Stock Activity Under Omnibus Plan (Detail) (USD $)	9 Months Ended
	Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-Average Grant Date Fair Value, beginning of period
Weighted-Average Grant Date Fair Value, Granted restricted stock	$ 2.50
Weighted-Average Grant Date Fair Value, end of period	$ 2.50
Omnibus Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of non-vested shares of restricted stock, beginning of period
Granted shares of restricted stock	764,410
Number of non-vested shares of restricted stock, end of period	764,410

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LOAN PORTFOLIO - Selected Information on TDRs Includes Recorded Investment by Loan Class and Modification Type (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Impaired [Line Items]
Interest rate below market	$ 143,660
Maturity or term extension	38,101
Combination of reduction in interest rate and extension of maturity	508,164
Forgiveness of Principal and/or interest	54,236
Forbearance Agreements	72,998
Other	107,985
Total Troubled Debt Restructurings	925,144	861,932	820,499
Non-FHA/VA Residential Mortgage loans [Member]
Financing Receivable, Impaired [Line Items]
Interest rate below market	17,437
Maturity or term extension	4,196
Combination of reduction in interest rate and extension of maturity	346,314
Other	42,300
Total Troubled Debt Restructurings	410,247
Commercial Mortgage Loans [Member]
Financing Receivable, Impaired [Line Items]
Interest rate below market	102,643
Maturity or term extension	16,251
Combination of reduction in interest rate and extension of maturity	117,014
Forgiveness of Principal and/or interest	46,903
Other	15,235
Total Troubled Debt Restructurings	298,046
Commercial And Industrial Loans [Member]
Financing Receivable, Impaired [Line Items]
Interest rate below market	16,878
Maturity or term extension	12,394
Combination of reduction in interest rate and extension of maturity	21,708
Forgiveness of Principal and/or interest	7,333
Forbearance Agreements	9,521
Other	39,723
Total Troubled Debt Restructurings	107,557
Construction And Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Interest rate below market	6,349
Maturity or term extension	2,027
Combination of reduction in interest rate and extension of maturity	9,094
Forbearance Agreements	63,477
Other	5,634
Total Troubled Debt Restructurings	86,581
Auto loans [Member]
Financing Receivable, Impaired [Line Items]
Maturity or term extension	1,067
Combination of reduction in interest rate and extension of maturity	7,851
Other	2,895
Total Troubled Debt Restructurings	11,813
Finance leases [Member]
Financing Receivable, Impaired [Line Items]
Maturity or term extension	1,669
Combination of reduction in interest rate and extension of maturity	375
Total Troubled Debt Restructurings	2,044
Other Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Interest rate below market	353
Maturity or term extension	497
Combination of reduction in interest rate and extension of maturity	5,808
Other	2,198
Total Troubled Debt Restructurings	$ 8,856

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DEPOSITS - Summary of Deposit Balances (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Deposits [Line Items]
Non-interest bearing checking accounts	$ 780,717	$ 705,789
Savings accounts	2,287,511	2,145,625
Interest-bearing checking accounts	1,117,189	1,066,753
Certificates of deposit	2,302,723	2,258,216
Brokered certificates of deposit	3,408,262	3,731,371
Total deposits	$ 9,896,402	$ 9,907,754

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FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2012

Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis, including financial liabilities for which the Corporation has elected the fair value option, are summarized below:

	As of September 30, 2012								As of December 31, 2011
	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	$	40	$	—	$	—	$	40	$	41	$	—	$	—	$	41
U.S. Treasury Securities		7,495		—		—		7,495		476,992		—		—		476,992
Non-callable U.S. agency debt		—		—		—		—		301,585		—		—		301,585
Callable U.S. agency debt and MBS		—		1,472,277		—		1,472,277		—		859,818		—		859,818
Puerto Rico Government Obligations		—		59,603		3,743		63,346		—		219,369		3,244		222,613
Private label MBS		—		—		54,689		54,689		—		—		61,206		61,206
Corporate bonds		—		—		—		—		—		—		1,013		1,013
Derivatives, included in assets:
Interest rate swap agreements		—		318		—		318		—		378		—		378
Purchased options used to manage exposure to the stock market on embeded stock indexed options		—		—		—		—		—		899		—		899
Forward contracts		—		18		—		18		—		—		—		—
Liabilities:
Medium-term notes		—		—		—		—		—		15,968		—		15,968
Derivatives, included in liabilities:
Interest rate swap agreements		—		6,238		—		6,238		—		6,767		—		6,767
Embedded written options on stock index deposits and notes payable		—		—		—		—		—		899		—		899
Forward Contracts		—		190		—		190		—		168		—		168
Total	$	7,535	$	1,538,644	$	58,432	$	1,604,611	$	778,618	$	1,104,266	$	65,463	$	1,948,347

Schedule of Changes in Fair Value

	Changes in Fair Value for items Measured at Fair Value Pursuant to Election of  the Fair Value Option For the Quarter ended September 30,
	2012		2011
(In thousands)	Decrease (increase) in Interest Expense included in Current-Period Earnings (1)
Medium-term notes	$	—	$	(1,871	)

(1) Changes in fair value for the quarter ended September 30, 2011 include interest expense on medium-term notes of $0.2 million. Interest expense on medium-term notes that have been elected to be carried at fair value are recorded in interest expense in the Consolidated Statement of Income (Loss) based on their contractual coupons.

	Changes in Fair Value for items Measured at Fair Value Pursuant to Election of  the Fair Value Option For the Nine-Month Period Ended September 30,
	2012			2011
(In thousands)	Decrease (increase) in Interest Expense included in Current-Period Earnings (1)
Medium-term notes	$	(140	)	$	(2,864	)

(1) Changes in fair value for the nine-month period ended September 30, 2012 and 2011 include interest expense on medium-term notes of $0.4 million and $0.7 million, respectively. Interest expense on medium-term notes that have been elected to be carried at fair value are recorded in interest expense in the Consolidated Statement of Income (Loss) based on their contractual coupons.

Fair Value of Assets and Liabilities Measured on Recurring Basis

The table below presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter and nine-month period ended September 30, 2012 and 2011.

	Total Fair Value  Measurements Quarter ended September 30,
	2012			2011
Level 3 Instruments Only (In thousands)	Securities Available For Sale (1)			Securities Available For Sale (1)
Beginning balance	$	61,838			71,412
Total gains or (losses) (realized/unrealized):
Included in earnings		(557	)		(350	)
Included in other comprehensive income		1,666			897
Sales		(1,450	)		—
Principal repayments and amortization		(3,065	)		(3,851	)
Ending balance	$	58,432		$	68,108

(1) Amounts mostly related to private label mortgage-backed securities.

	Total Fair Value Measurements Nine-Month Period Ended September  30,
	2012			2011
Level 3 Instruments Only (In thousands)	Securities Available For Sale (1)			Securities Available For Sale (1)
Beginning balance	$	65,463			74,993
Total gains or (losses) (realized/unrealized):
Included in earnings		(1,933	)		(957	)
Included in other comprehensive income		6,722			2,768
Held-to-Maturity investment securities reclassified to Available-for-Sale		—			2,000
Sales		(1,450	)		—
Principal repayments and amortization		(10,370	)		(10,696	)
Ending balance	$	58,432		$	68,108

(1) Amounts mostly related to private label mortgage-backed securities.

Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)

The table below presents qualitative information for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at September 30, 2012.

	September 30, 2012
(In thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
Investment securities available-for-sale:
Private label MBS	$	54,689	Discounted cash flow	Discount rate	14.5%
				Prepayment rate	23.81% - 43.58% (Weighted Average 33%)
				Projected Cumulative Loss Rate	0.71% - 17.51% (Weighted Average 7%)
Puerto Rico Government Obligations		3,743	Discounted cash flow	Prepayment Speed	5.95%

Impairment or Valuation Adjustments were Recorded for Assets Recognized at Fair Value

As of September 30, 2012, 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 September 30, 2012						Losses recorded for the Quarter Ended September 30, 2012		Losses recorded for the Nine-Month Period Ended September 30, 2012
	Level 1		Level 2		Level 3
	(In thousands)
Loans receivable (1)	$	—	$	—	$	702,308	$	19,676	$	80,172
Other Real Estate Owned (2)		—		—		177,001		3,264		7,860
Mortgage servicing rights (3)		—		—		16,660		363		203

(1) Mainly impaired commercial and construction loans. The impairment was generally measured based on the fair value of the collateral. The fair values are 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 value is 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), which are not market observable. Losses are related to market valuation adjustments after the transfer from the loan to the Other Real Estate Owned (“OREO”) portfolio.

(3) Fair value adjustments to mortgage servicing rights were mainly due to assumptions associated with mortgage prepayment rates. The Corporation carries its mortgage servicing rights at lower of cost or market, and they are accordingly measured at fair value on a non-recurring basis. Assumptions for the value of mortgage servicing rights include: Prepayment rate 12.66%, Discount Rate 11.09%.

As of September 30, 2011, 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 September 30, 2011						Losses recorded for the Quarter Ended September 30, 2011		Losses recorded for the Nine-Month Period Ended September 30, 2011
	Level 1		Level 2		Level 3
	(In thousands)
Loans receivable (1)	$	—	$	—	$	842,773	$	45,312	$	187,269
Other Real Estate Owned (2)		—		—		109,514		2,325		6,294

(1) Mainly impaired commercial and construction loans. The impairment was generally measured based on the fair value of the collateral. The fair values are 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 value is 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), which are not market observable. Losses are related to market valuation adjustments after the transfer from the loan to the Other Real Estate Owned (“OREO”) portfolio.

Qualitative Information Regarding Fair Value Measurements for Level 3 Financial Instruments

Qualitative information regarding the fair value measurements for Level 3 financial instruments are as follows:

	September 30, 2012
	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 Flow	Weighted average prepayment speed 12.66%; weighted average discount rate 11.09%

Estimated Fair Value and Carrying Value of Financial Instruments

The following table presents the estimated fair value and carrying value of financial instruments as of September 30, 2012 and December 31, 2011

	Total Carrying Amount in Statement of Financial Condition September  30, 2012			Fair Value Estimated September 30, 2012		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Cash and due from banks and money market investments	$	1,003,720		$	1,003,720	$	1,003,720	$	—	$	—
Investment securities available for sale		1,597,847			1,597,847		7,535		1,531,880		58,432
Other equity securities		39,656			39,656		—		39,656		—
Loans held for sale		68,349			70,976		—		70,976		—
Loans, held for investment		10,188,164			—		—		—		—
Less: allowance for loan and lease losses		(445,531	)
Loans held for investment, net of allowance	$	9,742,633			9,466,460		—		—		9,466,460
Derivatives, included in assets		336			336		—		336		—
Liabilities:
Deposits		9,896,402			9,937,355		—		9,937,355		—
Securities sold under agreements to repurchase		900,000			997,179		—		997,179		—
Advances from FHLB		518,440			524,176		—		524,176		—
Other borrowings		231,959			132,599		—		—		132,599
Derivatives, included in liabilities		6,428			6,428		—		6,428		—

	Total Carrying Amount in Statement of Financial Condition December  31, 2011			Fair Value Estimated December 31, 2011
	(In thousands)
Assets:
Cash and due from banks and money market investments	$	446,566		$	446,566
Investment securities available for sale		1,923,268			1,923,268
Other equity securities		37,951			37,951
Loans held for sale		15,822			16,038
Loans, held for investment		10,559,392			—
Less: allowance for loan and lease losses		(493,917	)		—
Loans held for investment, net of allowance	$	10,065,475			9,618,267
Derivatives, included in assets		1,277			1,277
Liabilities:
Deposits		9,907,754			9,974,119
Securities sold under agreements to repurchase		1,000,000			1,102,263
Advances from FHLB		367,440			379,730
Notes Payable		23,342			22,476
Other borrowings		231,959			160,603
Derivatives, included in liabilities		7,834			7,834

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2012

Activity of Stock Options

The activity of stock options for the nine-month period ended September 30, 2012 is set forth below:

	Nine-Month Period Ended September 30, 2012
	Number of Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (In thousands)
Beginning of period		129,934		$	202.99
Options expired		(9,713	)		140.15
Options cancelled		(5,464	)		236.27
End of period outstanding and exercisable		114,757		$	206.72		3.1	$	—

Restricted Stock Activity Under Omnibus Plan

The following table summarizes the restricted stock activity in 2012 under the Omnibus Plan for both executive officers covered by the TARP requirements and other employees as well as for the independent directors:

	Nine-Month Period Ended September 30, 2012
	Number of shares of restricted stock		Weighted-Average Grant Date Fair Value
Non-vested shares at beginning of period		—	$	—
Granted		764,410		2.50
Non-vested shares at September 30, 2012		764,410	$	2.50

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LOAN PORTFOLIO - Selected Information on TDRs Includes Recorded Investment by Loan Class and Modification Type (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Sep. 30, 2012
Financing Receivable, Impaired [Line Items]
Forbearance agreements related to one construction relationship	$ 53.4

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OTHER BORROWINGS - Components of Other Borrowings (Parenthetical) (Detail)	Sep. 30, 2012	Dec. 31, 2011
Junior subordinated debentures, bearing interest at floating rate of 2.75% [Member]
Debt Instrument [Line Items]
Floating Interest rate on junior subordinated debentures	2.75%
Callable step-rate notes rate	3.14%	3.31%
Junior subordinated debentures, bearing interest at floating rate of 2.50% [Member]
Debt Instrument [Line Items]
Floating Interest rate on junior subordinated debentures	2.50%
Callable step-rate notes rate	2.89%	3.06%

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FAIR VALUE - Impairment of Valuation Adjustments were Recorded for Assets Recognized at Fair Value (Detail) (USD $) In Thousands, unless otherwise specified							3 Months Ended		9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2010	Sep. 30, 2012 Fair Value, Measurements, Nonrecurring [Member]	Sep. 30, 2011 Fair Value, Measurements, Nonrecurring [Member]	Sep. 30, 2012 Fair Value, Measurements, Nonrecurring [Member]	Sep. 30, 2011 Fair Value, Measurements, Nonrecurring [Member]	Sep. 30, 2011 Level 1 [Member]	Sep. 30, 2011 Level 2 [Member]	Sep. 30, 2012 Level 3 [Member]	Sep. 30, 2011 Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Losses Due to Impairment of Loans Receivables							$ 19,676	$ 45,312	$ 80,172	$ 187,269
Losses Due to Impairment of Other Real Estate Owned							3,264	2,325	7,860	6,294
Losses due to impairment of mortgage servicing rights							363		203
Loans receivable													702,308	842,773
Other Real Estate Owned													177,001	109,514
Mortgage servicing rights	$ 16,660	$ 16,592	$ 15,226	$ 14,924	$ 14,638	$ 15,163							$ 16,660

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SEGMENT INFORMATION - Information about Reportable Segments (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Segment Reporting Information [Line Items]
Interest income	$ 166,964	$ 158,542	$ 472,723	$ 502,863
Interest expense	(41,461)	(64,287)	(136,649)	(207,894)
Net interest income	125,503	94,255	336,074	294,969
Provision for loan and lease losses	(28,952)	(46,446)	(90,033)	(194,362)
Non-interest income	17,325	18,321	48,549	99,204
Direct non-interest expenses	(68,385)	(58,838)	(196,987)	(180,467)
Segment (loss) income	45,491	7,292	97,603	19,344
Average earnings assets	12,109,016	13,079,665	12,193,205	13,913,041
Mortgage Banking [Member]
Segment Reporting Information [Line Items]
Interest income	27,792	27,505	82,550	90,779
Net (charge) credit for transfer of funds	(12,357)	(14,030)	(37,848)	(48,007)
Net interest income	15,435	13,475	44,702	42,772
Provision for loan and lease losses	(8,453)	(16,153)	(29,541)	(27,892)
Non-interest income	4,312	3,180	12,070	18,968
Direct non-interest expenses	(10,330)	(6,918)	(31,142)	(23,140)
Segment (loss) income	964	(6,416)	(3,911)	10,708
Average earnings assets	2,084,719	2,047,220	2,061,036	2,192,271
Consumer Loans [Member]
Segment Reporting Information [Line Items]
Interest income	60,306	41,611	147,641	127,401
Net (charge) credit for transfer of funds	(756)	3,528	1,827	7,920
Interest expense	(7,289)	(10,220)	(23,818)	(32,334)
Net interest income	52,261	34,919	125,650	102,987
Provision for loan and lease losses	(12,000)	(7,719)	(21,576)	(10,622)
Non-interest income	9,487	7,354	23,827	21,342
Direct non-interest expenses	(26,865)	(22,332)	(73,964)	(67,944)
Segment (loss) income	22,883	12,222	53,937	45,763
Average earnings assets	1,784,630	1,435,818	1,572,342	1,460,871
Commercial Mortgage Loans [Member]
Segment Reporting Information [Line Items]
Interest income	46,104	51,101	142,375	154,098
Net (charge) credit for transfer of funds	(5,933)	(3,658)	(18,964)	(9,672)
Net interest income	40,171	47,443	123,411	144,426
Provision for loan and lease losses	(5,892)	(8,261)	(37,449)	(108,902)
Non-interest income	1,993	1,702	8,215	6,531
Direct non-interest expenses	(12,607)	(9,682)	(37,356)	(30,559)
Segment (loss) income	23,665	31,202	56,821	11,496
Average earnings assets	4,478,267	5,107,637	4,635,264	5,219,856
Treasury And Investments [Member]
Segment Reporting Information [Line Items]
Interest income	11,563	13,328	34,077	52,770
Net (charge) credit for transfer of funds	15,991	10,203	45,559	37,078
Interest expense	(26,191)	(42,657)	(86,551)	(139,998)
Net interest income	1,363	(19,126)	(6,915)	(50,150)
Non-interest income	(538)	3,834	(1,779)	42,548
Direct non-interest expenses	(1,795)	(2,060)	(5,107)	(4,744)
Segment (loss) income	(970)	(17,352)	(13,801)	(12,346)
Average earnings assets	2,259,288	2,765,749	2,368,164	3,280,009
United States Operations [Member]
Segment Reporting Information [Line Items]
Interest income	9,031	11,101	28,566	34,547
Net (charge) credit for transfer of funds	3,055	3,957	9,426	12,681
Interest expense	(6,903)	(9,694)	(22,702)	(30,543)
Net interest income	5,183	5,364	15,290	16,685
Provision for loan and lease losses	6,860	(5,417)	12,216	(15,546)
Non-interest income	491	590	1,264	903
Direct non-interest expenses	(7,735)	(9,341)	(20,912)	(26,159)
Segment (loss) income	4,799	(8,804)	7,858	(24,117)
Average earnings assets	704,780	834,848	735,889	866,778
Virgin Islands Operations [Member]
Segment Reporting Information [Line Items]
Interest income	12,168	13,896	37,514	43,268
Interest expense	(1,078)	(1,716)	(3,578)	(5,019)
Net interest income	11,090	12,180	33,936	38,249
Provision for loan and lease losses	(9,467)	(8,896)	(13,683)	(31,400)
Non-interest income	1,580	1,661	4,952	8,912
Direct non-interest expenses	(9,053)	(8,505)	(28,506)	(27,921)
Segment (loss) income	(5,850)	(3,560)	(3,301)	(12,160)
Average earnings assets	$ 797,332	$ 888,393	$ 820,510	$ 893,256

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LOAN PORTFOLIO - Activity for Impaired Loans (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011
Impaired Loans:
Balance at beginning of period	$ 1,432,469	$ 1,507,376	$ 1,431,782
Loans determined impaired during the period	55,292	222,841
Net charge-offs	(30,971)	(107,818)
Increases to impaired loans (disbursements)	11,039	30,160
Foreclosures	(26,353)	(113,737)
Loans no longer considered impaired	(5,351)	(42,269)
Paid in full or partial payments	(35,987)	(96,775)
Balance at end of period	$ 1,400,138	$ 1,400,138	$ 1,431,782

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Notional Amounts of All Derivative Instruments (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Derivative [Line Items]
Notional Amount of Derivatives	$ 64,597	$ 287,604
Interest rate swap agreements [Member]
Derivative [Line Items]
Interest rate swap agreements used to hedge loans	38,597	39,786
Not Designated as Hedging Instrument [Member] | Interest rate swap agreements [Member]
Derivative [Line Items]
Interest rate swap agreements used to hedge loans	38,597	39,786
Not Designated as Hedging Instrument [Member] | Written interest rate cap agreements [Member]
Derivative [Line Items]
Interest rate swap agreements used to hedge loans		67,894
Not Designated as Hedging Instrument [Member] | Purchased interest rate cap agreements [Member]
Derivative [Line Items]
Interest rate swap agreements used to hedge loans		67,894
Not Designated as Hedging Instrument [Member] | Embedded written options on stock index deposits and notes payable [Member]
Derivative [Line Items]
Notional Amount of Equity Embedded Derivative		46,515
Not Designated as Hedging Instrument [Member] | Purchased options used to manage exposure to the stock market on embedded stock index options [Member]
Derivative [Line Items]
Notional Amount of Equity Embedded Derivative		46,515
Not Designated as Hedging Instrument [Member] | Forward contract sale of TBA GNMA MBS Pools [Member]
Derivative [Line Items]
Notional Amount of Fair Value Hedge Instruments	$ 26,000	$ 19,000

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INVESTMENT SECURITIES - Additional Information (Detail) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Schedule of Trading Securities and Other Trading Assets [Line Items]
Matured value of Investment Securities called	$ 194,500,000
Proceeds from sale of available-for-sale securities	0	1,181,065,000
Amortized cost of private label of mortgage back security	72,600,000
Credit related impairment loss is related to Private label MBS	$ 1,900,000
Maximum loan to value ratio	80.00%
U.S. Treasury securities [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Minimum investment in U.S. Treasury of available for sale portfolio	0.92%

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SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Schedule of Repurchase Agreement Maturity (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Repurchase Agreement [Line Items]
Three to five years	$ 600,000
Over five years	300,000
Total	$ 900,000	$ 1,000,000

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SEGMENT INFORMATION - Reconciliation of Reportable Segment Financial Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net Income (Loss):
Total income for segments and other	$ 45,491	$ 7,292	$ 97,603	$ 19,344
Other non-interest income (loss)	(2,199)	(4,357)	(10,926)	(5,893)
Other operating expenses	(23,458)	(24,093)	(66,991)	(71,761)
Income (loss) before income taxes	19,834	(21,158)	19,686	(58,310)
Income tax expense	(761)	(2,888)	(4,439)	(9,080)
Total consolidated net income (loss)	19,073	(24,046)	15,247	(67,390)
Average assets:
Total average earning assets for segments	12,109,016	13,079,665	12,193,205	13,913,041
Other average earning assets	34,403	46,046	38,215	39,064
Average non-earning assets	707,816	662,192	692,083	670,758
Total consolidated average assets	$ 12,851,235	$ 13,787,903	$ 12,923,503	$ 14,622,863

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LOAN PORTFOLIO - Outstanding Contractual Principal Balance and Carrying Value of Acquired Loans (Detail) (Credit impaired loans [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Credit impaired loans [Member]
Financing Receivable, Impaired [Line Items]
Contractual balance	$ 31,364
Carrying value	$ 12,741

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ALLOWANCE FOR LOAN AND LEASE LOSSES - Changes in Allowance for Loan and Lease Losses (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 457,153	$ 540,878	$ 493,917	$ 553,025
Charge-offs	(44,518)	(70,189)	(151,293)	(237,727)
Recoveries	3,944	2,552	12,874	10,027
Provision (release)	28,952	46,446	90,033	194,362
Ending balance	445,531	519,687	445,531	519,687
Balance at end of period	194,154	214,297	194,154	214,297	209,860	214,902
Ending balance: general allowance	251,377	305,390	251,377	305,390
Ending balance	9,742,633	10,633,142	9,742,633	10,633,142		10,065,475
Ending balance: impaired loans	1,400,138	1,431,782	1,400,138	1,431,782	1,432,469	1,507,376
Ending balance: loans with general allowance	8,775,285	9,201,360	8,775,285	9,201,360
Purchased credit-impaired [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: purchased credit-impaired loans
Ending balance: purchased credit-impaired loans	12,741		12,741
Residential Mortgage Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	67,440	67,404	68,678	62,330
Charge-offs	(7,586)	(16,076)	(27,976)	(30,571)
Recoveries	228	260	676	657
Provision (release)	9,083	17,744	27,787	36,916
Ending balance	69,165	69,332	69,165	69,332
Balance at end of period	49,640	49,350	49,640	49,350
Ending balance: general allowance	19,525	19,982	19,525	19,982
Ending balance	2,762,418	2,873,966	2,762,418	2,873,966
Ending balance: impaired loans	594,788	548,677	594,788	548,677
Ending balance: loans with general allowance	2,167,630	2,325,289	2,167,630	2,325,289
Residential Mortgage Loans [Member] | Purchased credit-impaired [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: purchased credit-impaired loans
Commercial Mortgage Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	100,846	90,785	108,991	105,596
Charge-offs	(5,681)	(3,316)	(15,588)	(37,647)
Recoveries	679	7	721	84
Provision (release)	(6,617)	13,324	(4,897)	32,767
Ending balance	89,227	100,800	89,227	100,800
Balance at end of period	51,351	35,928	51,351	35,928
Ending balance: general allowance	37,876	64,872	37,876	64,872
Ending balance	1,459,118	1,584,787	1,459,118	1,584,787
Ending balance: impaired loans	363,533	245,439	363,533	245,439
Ending balance: loans with general allowance	1,095,585	1,339,348	1,095,585	1,339,348
Commercial Mortgage Loans [Member] | Purchased credit-impaired [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: purchased credit-impaired loans
Commercial & Industrial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	166,021	188,562	164,490	152,641
Charge-offs	(12,795)	(22,703)	(35,494)	(50,858)
Recoveries	534	177	2,179	1,281
Provision (release)	8,117	10,437	30,702	73,409
Ending balance	161,877	176,473	161,877	176,473
Balance at end of period	57,001	77,932	57,001	77,932
Ending balance: general allowance	104,876	98,541	104,876	98,541
Ending balance	3,627,646	4,123,174	3,627,646	4,123,174
Ending balance: impaired loans	238,512	384,640	238,512	384,640
Ending balance: loans with general allowance	3,389,134	3,738,534	3,389,134	3,738,534
Commercial & Industrial Loans [Member] | Purchased credit-impaired [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: purchased credit-impaired loans
Construction Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	67,858	131,344	91,386	151,972
Charge-offs	(9,012)	(17,008)	(42,908)	(83,483)
Recoveries	686	185	4,004	2,215
Provision (release)	6,379	(2,547)	13,429	41,270
Ending balance	65,911	111,974	65,911	111,974
Balance at end of period	33,349	48,209	33,349	48,209
Ending balance: general allowance	32,562	63,765	32,562	63,765
Ending balance	352,891	473,812	352,891	473,812
Ending balance: impaired loans	178,462	237,701	178,462	237,701
Ending balance: loans with general allowance	174,429	236,111	174,429	236,111
Construction Loans [Member] | Purchased credit-impaired [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: purchased credit-impaired loans
Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	54,988	62,783	60,372	80,486
Charge-offs	(9,444)	(11,086)	(29,327)	(35,168)
Recoveries	1,817	1,923	5,294	5,790
Provision (release)	11,990	7,488	23,012	10,000
Ending balance	59,351	61,108	59,351	61,108
Balance at end of period	2,813	2,878	2,813	2,878
Ending balance: general allowance	56,538	58,230	56,538	58,230
Ending balance	1,986,091	1,577,403	1,986,091	1,577,403
Ending balance: impaired loans	24,843	15,325	24,843	15,325
Ending balance: loans with general allowance	1,948,507	1,562,078	1,948,507	1,562,078
Consumer Loans [Member] | Purchased credit-impaired [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: purchased credit-impaired loans
Ending balance: purchased credit-impaired loans	$ 12,741		$ 12,741

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LOAN PORTFOLIO - Breakdown Between Accrual and Nonaccrual Status of TDRs (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	$ 925,144	$ 861,932	$ 820,499
Non-FHA/VA Residential Mortgage loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	410,247
Commercial Mortgage Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	298,046
Commercial And Industrial Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	107,557
Construction And Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	86,581
Auto loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	11,813
Finance leases [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	2,044
Other Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	8,856
Non Accrual [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	430,140
Non Accrual [Member] | Non-FHA/VA Residential Mortgage loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	116,063
Non Accrual [Member] | Commercial Mortgage Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	140,601
Non Accrual [Member] | Commercial And Industrial Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	82,808
Non Accrual [Member] | Construction And Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	84,091
Non Accrual [Member] | Auto loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	4,699
Non Accrual [Member] | Finance leases [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	59
Non Accrual [Member] | Other Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,819
Accrual [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	495,004
Accrual [Member] | Non-FHA/VA Residential Mortgage loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	294,184
Accrual [Member] | Commercial Mortgage Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	157,445
Accrual [Member] | Commercial And Industrial Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	24,749
Accrual [Member] | Construction And Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	2,490
Accrual [Member] | Auto loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	7,114
Accrual [Member] | Finance leases [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	1,985
Accrual [Member] | Other Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	$ 7,037

XML

ALLOWANCE FOR LOAN AND LEASE LOSSES - Additional Information (Detail) (Construction And Commercial Loans [Member], USD $) In Millions, unless otherwise specified	Sep. 30, 2012
Construction And Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Reserve for unfunded loan commitments	$ 1.6

XML

LOAN PORTFOLIO - Accretable Yield Related to Credit Card Portfolio from FIA (Detail) (PCI Loans [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
PCI Loans [Member]
Accretable Yield [Line Items]
Accretable yield at acquisition	$ 3,451
Accretion recognized in earnings	(740)
Accretable yield as of September 30, 2012	$ 2,711

XML

LOAN PORTFOLIO - Impaired loans (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Financing Receivable, Impaired [Line Items]
Recorded Investment	$ 1,400,138	$ 1,432,469	$ 1,507,376	$ 1,431,782
Unpaid Principal Balance	1,695,511		1,834,018
Related Allowance	194,154	209,860	214,902	214,297
Average Recorded Investments	1,454,428
Interest Income Recognized Quarter to date	8,728
Interest Income Recognized Year to date	24,176
FHA/VA Guaranteed loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment
Unpaid Principal Balance
Related Allowance
Average Recorded Investments
Interest Income Recognized Quarter to date
Interest Income Recognized Year to date
Other residential loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	594,788		604,421
Unpaid Principal Balance	662,162		658,252
Related Allowance	49,640		48,566
Average Recorded Investments	599,878
Interest Income Recognized Quarter to date	5,001
Interest Income Recognized Year to date	13,584
Commercial Mortgage Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	363,533		368,751
Unpaid Principal Balance	396,158		399,173
Related Allowance	51,351		59,167
Average Recorded Investments	364,992
Interest Income Recognized Quarter to date	2,811
Interest Income Recognized Year to date	7,649
Commercial And Industrial Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	238,512		264,025
Unpaid Principal Balance	310,994		362,589
Related Allowance	57,001		58,652
Average Recorded Investments	257,024
Interest Income Recognized Quarter to date	530
Interest Income Recognized Year to date	1,577
Construction And Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	178,462		247,147
Unpaid Principal Balance	299,774		389,966
Related Allowance	33,349		44,768
Average Recorded Investments	208,492
Interest Income Recognized Quarter to date	69
Interest Income Recognized Year to date	359
Auto loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	11,813		8,710
Unpaid Principal Balance	11,813		8,710
Related Allowance	1,404		1,039
Average Recorded Investments	10,317
Interest Income Recognized Quarter to date	194
Interest Income Recognized Year to date	616
Finance leases [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	2,045		1,804
Unpaid Principal Balance	2,045		1,804
Related Allowance	73		41
Average Recorded Investments	1,968
Interest Income Recognized Quarter to date	50
Interest Income Recognized Year to date	134
Other Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	10,985		12,518
Unpaid Principal Balance	12,565		13,524
Related Allowance	1,336		2,669
Average Recorded Investments	11,757
Interest Income Recognized Quarter to date	73
Interest Income Recognized Year to date	257
No Related Allowance Recorded [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	228,154		271,930
Unpaid Principal Balance	280,109		303,765
Related Allowance
Average Recorded Investments	272,180
Interest Income Recognized Quarter to date	1,695
Interest Income Recognized Year to date	3,931
No Related Allowance Recorded [Member] | FHA/VA Guaranteed loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment
Unpaid Principal Balance
Related Allowance
Average Recorded Investments
Interest Income Recognized Quarter to date
Interest Income Recognized Year to date
No Related Allowance Recorded [Member] | Other residential loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	106,554		181,081
Unpaid Principal Balance	112,039		192,757
Related Allowance
Average Recorded Investments	171,070
Interest Income Recognized Quarter to date	1,144
Interest Income Recognized Year to date	2,733
No Related Allowance Recorded [Member] | Commercial Mortgage Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	50,043		13,797
Unpaid Principal Balance	62,819		15,283
Related Allowance
Average Recorded Investments	40,939
Interest Income Recognized Quarter to date	442
Interest Income Recognized Year to date	1,003
No Related Allowance Recorded [Member] | Commercial And Industrial Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	31,047		40,453
Unpaid Principal Balance	38,017		45,948
Related Allowance
Average Recorded Investments	20,128
Interest Income Recognized Quarter to date	51
Interest Income Recognized Year to date	74
No Related Allowance Recorded [Member] | Construction And Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	38,863		33,759
Unpaid Principal Balance	64,637		45,931
Related Allowance
Average Recorded Investments	37,314
Interest Income Recognized Quarter to date	33
Interest Income Recognized Year to date	70
No Related Allowance Recorded [Member] | Auto loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment
Unpaid Principal Balance
Related Allowance
No Related Allowance Recorded [Member] | Finance leases [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment
Unpaid Principal Balance
Related Allowance
No Related Allowance Recorded [Member] | Other Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,647		2,840
Unpaid Principal Balance	2,597		3,846
Related Allowance
Average Recorded Investments	2,729
Interest Income Recognized Quarter to date	25
Interest Income Recognized Year to date	51
Related Allowance Recorded [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,171,984		1,235,446
Unpaid Principal Balance	1,415,402		1,530,253
Related Allowance	194,154		214,902
Average Recorded Investments	1,182,248
Interest Income Recognized Quarter to date	7,033
Interest Income Recognized Year to date	20,244
Related Allowance Recorded [Member] | FHA/VA Guaranteed loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment
Unpaid Principal Balance
Related Allowance
Related Allowance Recorded [Member] | Other residential loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	488,234		423,340
Unpaid Principal Balance	550,123		465,495
Related Allowance	49,640		48,566
Average Recorded Investments	428,808
Interest Income Recognized Quarter to date	3,857
Interest Income Recognized Year to date	10,851
Related Allowance Recorded [Member] | Commercial Mortgage Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	313,490		354,954
Unpaid Principal Balance	333,339		383,890
Related Allowance	51,351		59,167
Average Recorded Investments	324,053
Interest Income Recognized Quarter to date	2,369
Interest Income Recognized Year to date	6,646
Related Allowance Recorded [Member] | Commercial And Industrial Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	207,465		223,572
Unpaid Principal Balance	272,977		316,641
Related Allowance	57,001		58,652
Average Recorded Investments	236,896
Interest Income Recognized Quarter to date	479
Interest Income Recognized Year to date	1,503
Related Allowance Recorded [Member] | Construction And Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	139,599		213,388
Unpaid Principal Balance	235,137		344,035
Related Allowance	33,349		44,768
Average Recorded Investments	171,178
Interest Income Recognized Quarter to date	36
Interest Income Recognized Year to date	289
Related Allowance Recorded [Member] | Auto loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	11,813		8,710
Unpaid Principal Balance	11,813		8,710
Related Allowance	1,404		1,039
Average Recorded Investments	10,317
Interest Income Recognized Quarter to date	194
Interest Income Recognized Year to date	616
Related Allowance Recorded [Member] | Finance leases [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	2,045		1,804
Unpaid Principal Balance	2,045		1,804
Related Allowance	73		41
Average Recorded Investments	1,968
Interest Income Recognized Quarter to date	50
Interest Income Recognized Year to date	134
Related Allowance Recorded [Member] | Other Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	9,338		9,678
Unpaid Principal Balance	9,968		9,678
Related Allowance	1,336		2,669
Average Recorded Investments	9,028
Interest Income Recognized Quarter to date	48
Interest Income Recognized Year to date	$ 206

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INCOME TAXES

9 Months Ended

Sep. 30, 2012

INCOME TAXES

18 – INCOME TAXES

Income tax expense includes Puerto Rico and Virgin Islands 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. income tax purposes and is generally subject to United States income tax only on its income from sources within the United States or income effectively connected with the conduct of a trade or business within the United States. Any such tax paid is also creditable against the Corporation’s Puerto Rico tax liability, subject to certain conditions and limitations.

On January 31, 2011, the Puerto Rico Government approved Act No. 1, which repealed the 1994 Code (“1994 PR Code”) and replaces it with the Puerto Rico Internal Revenue Code of 2011 (“2011 PR Code”). The provisions of the 2011 PR Code are generally applicable to taxable years commencing after December 31, 2010. Under the 2011 PR Code, the Corporation and its subsidiaries are treated as separate taxable entities and are not entitled to file consolidated tax returns and, thus, the Corporation is not able 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, a particular subsidiary must be able to demonstrate sufficient taxable income within the applicable carry forward period (7 years under the 2011 PR Code, except for losses incurred during tax years commenced after December 31, 2004 and before December 31, 2012, that the carry forward period is extended to 10 years). The 2011 PR Code 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. Dividend payments from a U.S. subsidiary to the Corporation are subject to a 10% withholding tax based on the provisions of the U.S. Internal Revenue Code.

Under the 2011 PR Code, First BanCorp is subject to a maximum statutory tax rate of 30% (25% for taxable years commencing after December 31, 2013 if certain economic conditions are met by the Puerto Rico economy). The 2011 PR Code also includes an alternative minimum tax of 20% that applies if the Corporation’s regular income tax liability is less than the alternative minimum tax requirements.

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 International Banking Entity (“IBE”) of the Bank and through the Bank’s subsidiary, FirstBank Overseas Corporation, in which the interest income and gain on sales is exempt from Puerto Rico and U.S. income taxation except for tax yeas that commenced after December 31, 2008 and before January 1, 2012, for which a special 5% tax was imposed to all IBEs. The IBEs and FirsBank 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 from eligible activities by IBEs operating in Puerto Rico. IBEs that operate as a unit of a bank pay income taxes at normal rates to the extent that the IBEs’ net income exceeds 20% of the bank’s total net taxable income.

For the quarter and nine-month period ended September 30, 2012, the Corporation recorded an income tax expense of $0.7 million and $4.4 million, respectively, compared to an income tax expense of $2.9 million and $9.1 million for the same periods in 2011. The decrease is primarily due to lower taxable income from profitable subsidiaries and for the nine-months period was also driven by a reduction in deferred tax assets of profitable subsidiaries due to a reduction in statutory tax rates in 2011. The income tax in the interim financial statements is calculated based on the income of the individual subsidiaries and the currently valid tax rates as a best possible estimate. As of September 30, 2012, the deferred tax asset, net of a valuation allowance of $360.0 million, amounted to $4.6 million compared to $5.4 million as of December 31, 2011.

Accounting for income taxes requires that companies assess whether a valuation allowance should be recorded against their deferred tax asset based on the consideration of all available evidence, using a “more likely than not” realization standard. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. In making such assessment, significant weight is to be given to evidence that can be objectively verified, including both positive and negative evidence. Consideration must be given to all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, future taxable income exclusive of the reversal of temporary differences and carryforwards, taxable income in carryback years and tax planning strategies. In estimating taxes, management assesses the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory, judicial and regulatory guidance, and recognizes tax benefits only when deemed probable of realization.

In assessing the weight of positive and negative evidence, a significant negative factor that resulted in the maintenance of the valuation allowance was that the Corporation’s banking subsidiary, FirstBank Puerto Rico, continues in a three-year historical cumulative loss position as of September 30, 2012, mainly due to significant charges to the provision for loan and lease losses in prior years as a result of the economic downturn. As of September 30, 2012, management concluded that $4.6 million of the deferred tax asset will be realized as it relate to profitable subsidiaries and to amounts that can be realized through future reversals of existing taxable temporary differences. To the extent the realization of a portion, or all, of the tax asset becomes “more likely than not” based on changes in circumstances (such as, improved earnings, changes in tax laws or other relevant changes), a reversal of that portion of the deferred tax asset valuation allowance will then be recorded.

The authoritative accounting guidance prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken on income tax returns. Under this guidance, income tax benefits are recognized and measured based upon a two-step model: 1) a tax position must be more likely than not to be sustained based solely on its technical merits in order to be recognized, and 2) the benefit is measured as the largest dollar amount of that position that is more likely than not to be sustained upon settlement. The difference between the benefit recognized in accordance with this model and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit (“UTB”).

During the third quarter of 2011, the Corporation recorded new UTBs of $2.4 million, all of which would, if recognized, affect the Corporations effective tax rate. The Corporation classified all interest and penalties, if any, related to tax uncertainties as income tax expense. As of September 30, 2012, the Corporation’s accrued interest that relates to tax uncertainties amounted to $1.1 million and there is no need to accrue for the payment of penalties. For the nine-month period ended September 30, 2012, the total amount of interest recognized by the Corporation as part of income tax expense related to tax uncertainties was $0.2 million. During the first nine months of 2012 there was no change to the UTB of $2.4 million. The amount of UTBs may increase or decrease for various reasons, including changes in the amounts for current tax year positions, the expiration of open income tax returns due to the expiration of statutes of limitations, changes in management’s judgment about the level of uncertainty, the status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions. The years 2007 through 2009 have been examined by the United States Internal Revenue Service (“IRS”) and disputed issues have been taken to administrative appeals. Although the timing of the resolution and/or closure of audits is highly uncertain, the Corporation believes it is reasonably possible that the IRS will conclude this audit within the next twelve months. If any issues addressed in the IRS audit are resolved in a manner not consistent with the Corporation’s expectations, the Corporation could be required to adjust its provision for income taxes in the period such resolution occurs. The Corporation currently cannot reasonably estimate a range of possible changes to existing reserves.

The Corporation’s liability for income taxes includes the liability for UTBs, and interest which relates to tax years still subject to review by taxing authorities. Audit periods remain open for review until the statute of limitations has passed. The statute of limitations under the PR Code is 4 years; and for Virgin Islands and U.S. income tax purposes is 3 years after a tax return is due or filed, whichever is later. 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 results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. For Puerto Rico and Virgin Islands income tax purposes, all tax years subsequent to 2009 remain open to examination. Taxable years from 2007 remain open to examination for U.S. income tax purpose.

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	1 Months Ended
	May 30, 2012	Sep. 30, 2011
Significant Accounting Policies [Line Items]
Purchased credit cards portfolio	$ 406
Goodwill impairment test "more-likely-than-not threshold" likelihood percentage		More than 50%

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SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Tables)

9 Months Ended

Sep. 30, 2012

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase (repurchase agreements) consist of the following:

	September 30, 2012		December 31, 2011
	(In thousands)
Repurchase agreements, interest ranging from 2.45% to 3.52% (December 31, 2011 - 2.50% to 4.40%)	$	900,000	$	1,000,000

Schedule of Repurchase Agreement Maturity

Repurchase agreements mature as follows:

	September 30, 2012
	(In thousands)
Three to five years	$	600,000
Over five years		300,000
Total	$	900,000

Repurchase Agreements Grouped by Counterparty

Repurchase agreements as of September 30, 2012, grouped by counterparty, were as follows:

(Dollars in thousands)	Amount		Weighted-Average Maturity (In Months)
Counterparty
Citigroup Global Markets	$	300,000		49
JP Morgan Chase		200,000		52
Dean Witter / Morgan Stanley		100,000		60
Credit Suisse First Boston		300,000		62
	$	900,000

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LOAN PORTFOLIO - Contractually Required Principal and Interest Cash Flows Expected to be Collected and Fair Value at Acquisition Related to Loans Acquired (Detail) (Credit impaired loans [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Credit impaired loans [Member]
Financing Receivable, Impaired [Line Items]
Contractually outstanding principal and interest at acquisition	$ 34,577
Less: Nonaccretable difference	(15,408)
Cash flows expected to be collected at acquisition	19,169
Less: Accretable yield	(3,451)
Fair value of loans acquired	$ 15,718

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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Changes in Servicing Assets (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Servicing Assets at Amortized Value [Line Items]
Balance at beginning of period	$ 16,592	$ 14,638	$ 15,226	$ 15,163
Capitalization of servicing assets	1,389	1,271	4,486	3,793
Amortization	(834)	(726)	(2,220)	(1,823)
Adjustment to servicing assets for loans repurchased	(124)	(93)	(629)	(238)
Adjustment to fair value	(363)	(166)	(203)	(1,971)
Balance at end of period	$ 16,660	$ 14,924	$ 16,660	$ 14,924

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LOANS HELD FOR SALE (Tables)

9 Months Ended

Sep. 30, 2012

Portfolio of Loans Held for Sale

The Corporation’s loans held for sale portfolio was composed of:

	September 30, 2012		December 31, 2011
	(In thousands)
Residential mortgage loans	$	68,349	$	11,058
Construction loans		—		4,764
Total	$	68,349	$	15,822

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EARNINGS PER COMMON SHARE - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Restricted Stock [Member]
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Unvested shares of restricted stock		720		720
Stock Options [Member]
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Antidilutive effect on earnings per share	114,757	129,934	114,757	129,934
Warrant [Member]
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Antidilutive effect on earnings per share		389,483		389,483

XML

LOAN PORTFOLIO - Corporation's Aging of Loans Held for Investment Portfolio (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2012 Payment	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans considered to be defaulted if borrower has failed to make payment for a period or more than the period	90 days
Period during which credit card loans continue to accrue finance charges and fees	180 days
Defaulted loans collateralizing Ginnie Mae (GNMA) securities	$ 6.1	$ 66.4
Minimum Number of Payments in Arrears to Consider Commercial Mortgage and Construction Loan as Past Due	2
Residential mortgage loans insured by FHA or guaranteed by the VA	$ 34.6
Period of residential mortgage loan that are no longer accruing interest	18 months

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ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) - Summary of Advances from FHLB (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Short-term Debt [Line Items]
Fixed-rate advances from FHLB, with a weighted-average interest rate of 2.31% (December 31, 2011 - 3.59%)	$ 518,440
Federal Home Loan Bank [Member]
Short-term Debt [Line Items]
Fixed-rate advances from FHLB, with a weighted-average interest rate of 2.31% (December 31, 2011 - 3.59%)	$ 518,440	$ 367,440

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INVESTMENT SECURITIES - Significant Assumptions in Valuation of Private Label MBS (Detail)	Sep. 30, 2012	Dec. 31, 2011
Schedule of Trading Securities and Other Trading Assets [Line Items]
Weighted Average, Discount Rate	14.50%	14.50%
Weighted Average, Prepayment Rate	33.00%	27.00%
Weighted Average, Projected Cumulative Loss Rate	7.00%	6.00%
Percentage of Discount Rate	14.50%	14.50%
Minimum, Prepayment Rate	23.81%	21.33%
Maximum, Prepayment Rate	43.58%	37.97%
Minimum, Projected Cumulative Loss Rate	0.71%	1.94%
Maximum, Projected Cumulative Loss Rate	17.51%	11.89%

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SUPPLEMENTAL CASH FLOW INFORMATION (Tables)

9 Months Ended

Sep. 30, 2012

Supplemental Cash Flow Information

Supplemental cash flow information follows:

	Nine-Month Period Ended September 30, 2012
	2012		2011
	(In thousands)
Cash paid for:
Interest on borrowings	$	128,193	$	191,570
Income tax		5,139		2,120
Non-cash investing and financing activities:
Additions to other real estate owned		133,124		125,420
Additions to auto repossesions		39,383		50,380
Capitalization of servicing assets		4,486		3,793
Loan securitizations		165,318		151,972
Loans sold to a joint venture in exchange for an acquisition loan and an equity interest in the joint venture		—		183,709
Reclassification of Held-to-Maturity investment securities to Available-for-Sale		—		88,751

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EARNINGS PER COMMON SHARE

9 Months Ended

Sep. 30, 2012

EARNINGS PER COMMON SHARE

2 – EARNINGS PER COMMON SHARE

The calculations of earnings per common share for the quarters and nine-month period ended on September 30, 2012 and 2011 are as follows:

	Quarter Ended					Nine-Month Period Ended
	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
	(In thousands, except per share information)
Net Income (Loss):
Net income (loss)	$	19,073	$	(24,046	)	$	15,247	$	(67,390	)
Cumulative convertible preferred stock dividends (Series G)		—		(5,302	)		—		(15,906	)
Preferred stock discount accretion (Series G)		—		(1,795	)		—		(5,489	)
Net income (loss) attributable to common stockholders	$	19,073	$	(31,143	)	$	15,247	$	(88,785	)
Weighted-Average Shares:
Basic weighted-average common shares outstanding		205,415		21,303			205,349		21,303
Average potential common shares		508		—			348		—
Diluted weighted-average number of common shares outstanding		205,923		21,303			205,697		21,303
Income (loss) per common share:
Basic	$	0.09	$	(1.46	)	$	0.07	$	(4.17	)
Diluted	$	0.09	$	(1.46	)	$	0.07	$	(4.17	)

Earning (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average common shares issued and outstanding. Net income (loss) attributable to common stockholders represents net income (loss) adjusted for preferred stock dividends including dividends declared, and cumulative dividends related to the current dividend period that have not been declared as of the end of the period, and the accretion of discount on preferred stock issuances. Basic weighted average common shares outstanding exclude unvested shares of restricted stock.

Potential common shares consist of common stock issuable under the assumed exercise of stock options, unvested shares of restricted stock, and outstanding warrants using the treasury stock method. This method assumes that the potential common shares are issued 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 number of potential shares issued and the shares purchased is added as incremental shares to the actual number of shares outstanding to compute diluted earnings per share. Stock options, unvested shares of restricted stock, and outstanding warrants that result in lower potential 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 anti-dilutive effect on earnings per share. Stock options not included in the computation of outstanding shares because they were antidilutive amounted to 114,757 and 129,934 for the quarter and nine-month period ended September 30, 2012 and 2011, respectively. Warrants outstanding to purchase 389,483 shares of common stock for the quarter and nine-month period ended September 30, 2011, and 720 unvested shares of restricted stock for the quarter and nine-month period ended September 30, 2011, were excluded from the computation of diluted earnings per share because the Corporation reported a net loss attributable to common stockholders and their inclusion would have an antidilutive effect.

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NOTES PAYABLE - Component of Notes Payable (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended	6 Months Ended	9 Months Ended		9 Months Ended
	Jun. 30, 2012	Sep. 30, 2012	Jun. 30, 2012 Medium term notes [Member]	Sep. 30, 2012 Callable step-rate notes [Member]	Dec. 31, 2011 Callable step-rate notes [Member]	Sep. 30, 2012 Series A DJIA Protected Notes [Member]
Short-term Debt [Line Items]
Maximum callable step-rate notes rate				7.00%
Callable step-rate notes rate					6.00%
Interest rate on corporation prepaid medium term notes	6.00%		6.00%	5.00%
Maturity date of callable step-rate notes		Oct. 18, 2019
Maturity date of Series A notes payable						Feb. 28, 2012
Debt Instrument, Decrease, Repayments	$ 15.4		$ 15.4
Reversal of marked-to-market loss		$ 0.5

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OTHER EQUITY SECURITIES - Additional Information (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Schedule Of Other Assets [Line Items]
Capital stock par value	$ 100		$ 100
Book value of investment in FHLB stock	$ 38.4		$ 38.4		$ 36.7
Dividend income from FHLB stock	0.3	0.4	1.1	1.4
Carrying value of other equity security	$ 1.3		$ 1.3		$ 1.3

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FAIR VALUE - Impairment of Valuation Adjustments were Recorded for Assets Recognized at Fair Value (Parenthetical) (Detail) (Mortgage Servicing Rights [Member])	9 Months Ended
	Sep. 30, 2012
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	12.66%
Discount rate used for calculation of mortgage servicing rights value	11.09%

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FIRST BANCORP. (Holding Company Only) Financial Information - Statements of Financial Condition (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
ASSETS
Cash and due from banks	$ 786,788	$ 206,897
Money market investments	216,932	239,669	187,674
Investment securities available for sale, at market:
Other investment securities	527,472	756,003
Other assets	242,292	235,601
Total assets	13,139,747	13,127,275
Liabilities:
Other borrowings	231,959	231,959
Accounts payable and other liabilities	108,829	152,636
Total liabilities	11,655,630	11,683,131
Total liabilities and stockholders' equity	13,139,747	13,127,275
First Bank Puerto Rico [Member]
Investment securities available for sale, at market:
Investment in First Bank Puerto Rico, at equity	1,660,373	1,615,304
First Bank Insurance Agency [Member]
Investment securities available for sale, at market:
Investment in First Bank Insurance Agency, at equity	7,163	5,338
FBP Statutory Trust I [Member]
Investment securities available for sale, at market:
Investment in FBP Statutory Trust I	3,093	3,093
FBP Statutory Trust II [Member]
Investment securities available for sale, at market:
Investment in FBP Statutory Trust II	3,866	3,866
Holding Company [Member]
ASSETS
Cash and due from banks	36,631	41,681
Money market investments	6,111	3,111
Investment securities available for sale, at market:
Equity investments	40	41
Other investment securities	1,300	1,300
Other assets	3,669	3,488
Total assets	1,722,246	1,677,222
Liabilities:
Other borrowings	231,959	231,959
Accounts payable and other liabilities	6,170	1,119
Total liabilities	238,129	233,078
Total liabilities and stockholders' equity	$ 1,722,246	$ 1,677,222

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ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) (Tables)

9 Months Ended

Sep. 30, 2012

Summary of Advances from FHLB

Following is a summary of the advances from the FHLB:

(In thousands)	September 30, 2012		December 31, 2011
Fixed-rate advances from FHLB, with a weighted-average interest rate of 2.31% (December 31, 2011 - 3.59%)	$	518,440	$	367,440

Advances from FHLB Mature

Advances from FHLB mature as follows:

	September 30, 2012
	(In thousands)
One to thirty days	$	10,000
Over ninety days to one year		155,000
One to three years		53,440
Three to five years		300,000
Total	$	518,440

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REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2012

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

22 – REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

The Corporation is 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 effect on the Corporation’s financial statements. 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 assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation’s capital amounts and classification are also subject to qualitative judgment by the regulators about components, risk weightings and other factors.

Capital standards established by regulations require the Corporation to maintain minimum amounts and ratios for Leverage (Tier 1 capital to average total assets) and ratios of Tier 1 Capital to Risk-Weighted Assets and Total Capital to Risk-Weighted Assets as defined in the regulations. The total amount of risk-weighted assets is computed by applying risk-weighting factors to the Corporation’s assets and certain off-balance sheet items, which generally vary from 0% to 100% depending on the nature of the asset.

Effective June 2, 2010, FirstBank, by and through its Board of Directors, entered into the FDIC Order with the FDIC and OCIF. This Order provides for various things, including (among other things) the following: (1) having and retaining qualified management; (2) increased participation in the affairs of FirstBank by its board of directors; (3) development and implementation by FirstBank of a capital plan to attain a leverage ratio of at least 8%, a Tier 1 risk-based capital ratio of at least 10% and a total risk-based capital ratio of at least 12%; (4) adoption and implementation of strategic, liquidity and fund management and profit and budget plans and related projects within certain timetables set forth in the FDIC Order and on an ongoing basis; (5) adoption and implementation of plans for reducing FirstBank’s positions in certain classified assets and delinquent and non-accrual loans within timeframes set forth in the FDIC Order; (6) refraining from lending to delinquent or classified borrowers already obligated to FirstBank on any extensions of credit so long as such credit remains uncollected, except where FirstBank’s failure to extend further credit to a particular borrower would be detrimental to the best interests of FirstBank, and any such additional credit is approved by the FirstBank’s Board of Directors; (7) refraining from accepting, increasing, renewing or rolling over brokered CDs without the prior written approval of the FDIC; (8) establishment of a comprehensive policy and methodology for determining the allowance for loan and lease losses and the review and revision of FirstBank’s loan policies, including the non-accrual policy; and (9) adoption and implementation of adequate and effective programs of independent loan review, appraisal compliance and an effective policy for managing FirstBank’s sensitivity to interest rate risk. The foregoing summary is not complete and is qualified in all respects by reference to the actual language of the FDIC Order. Although all the regulatory capital ratios exceeded the established “well capitalized” levels and the minimum capital ratio requirements of the FDIC Order at September 30, 2012, because of the FDIC Order with the FDIC, FirstBank cannot be treated as a “well capitalized” institution under regulatory guidance.

Effective June 3, 2010, First BanCorp entered into the Written Agreement with the FED. The Agreement provides, among other things, that the holding company must serve as a source of strength to FirstBank, and that, except upon consent of the FED, (1) the holding company may not pay dividends to stockholders or receive dividends from FirstBank, (2) the holding company and its nonbank subsidiaries may not make payments on trust preferred securities or subordinated debt, and (3) the holding company cannot incur, increase or guarantee debt or repurchase any capital securities. The Written Agreement also requires that the holding company submit a capital plan which reflects sufficient capital at First BanCorp on a consolidated basis, which must be acceptable to the FED, and follow certain guidelines with respect to the appointment or change in responsibilities of senior officers. The foregoing summary is not complete and is qualified in all respects by reference to the actual language of the Written Agreement.

The Corporation submitted its capital plan setting forth how it plans to improve capital positions to comply with the FDIC Order and the Written Agreement over time. In addition to the Capital Plan, the Corporation has submitted to its regulators a liquidity and brokered CD plan, including a contingency funding plan, a non-performing asset reduction plan, a budget and profit plan, a strategic plan and a plan for the reduction of classified and special mention assets. As of September 30, 2012 the Corporation had completed all of the items included in the capital plan and is working on to continue the reduction of non-performing loans. Further, the Corporation has reviewed and enhanced the Corporation’s loan review program, various credit policies, the Corporation’s treasury and investment policy, the Corporation’s asset classification and allowance for loan and lease losses and non-accrual policies, the Corporation’s charge-off policy and the Corporation’s appraisal program. The Agreements also require the submission to the regulators of quarterly progress reports.

The FDIC Order imposes no other restrictions on FirstBank’s products or services offered to customers, nor does it or the Written Agreement impose any type of penalties or fines upon FirstBank or the Corporation. Concurrent with the FDIC Order, the FDIC has granted FirstBank temporary waivers to enable it to continue accessing the brokered CD market through December 31, 2012. FirstBank will request approvals for future periods.

In June 2012, the U.S. banking regulators jointly published three notices of proposed rulemaking that are essentially intended to implement the Basel III for U.S. banks. Together these notices of proposed rulemaking would, among other things: (i) Implement in the United Stated the Basel III regulatory capital reforms including those that revise the definition of capital, increase minimum capital ratios, and introduce a minimum Tier 1 common equity ratio of 4.5% and a capital conservation buffer of 2.5% (for a total minimum Tier 1 common equity ratio of 7.0%); (ii) Revise “Basel I” rules for calculating risk-weighted assets to enhance risk sensitivity; and (iii) Comply with the Dodd-Frank Act provision prohibiting the reliance on external credit ratings.

Although uncertainty exists regarding final capital rules, based on our current interpretation of the proposed Basel III capital rules we anticipate to exceed the fully phased-in minimum capital ratios as established in the current proposal. The proposed Basel III capital rules and interpretations used in estimating our Basel III calculations are subject to change depending on final Basel III capital rules.

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 September 30, 2012, commitments to extend credit amounted to approximately $1.5 billion, of which $1.0 billion relate to credit card loans. Commercial and Financial standby letters of credit amounted to approximately $83.4 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. For most of the commercial lines of credit, the Corporation has the option to reevaluate the agreement prior to additional disbursements. In the case of credit cards and personal lines of credit, the Corporation can at any time and without cause, cancel the unused credit facility. Generally, the Corporation’s mortgage banking activities do not enter into interest rate lock agreements with prospective borrowers.

Lehman Brothers Special Financing, Inc. (“Lehman”) was the counterparty to the Corporation on certain interest rate swap agreements. During the third quarter of 2008, Lehman failed to pay the scheduled net cash settlement due to the Corporation, which constituted an event of default under those interest rate swap agreements. The Corporation terminated all interest rate swaps with Lehman and replaced them with other counterparties under similar terms and conditions. In connection with the unpaid net cash settlement under the swap agreements, the Corporation has an unsecured counterparty exposure with Lehman, which filed for bankruptcy on October 3, 2008, of approximately $1.4 million. This exposure was reserved in the third quarter of 2008. The Corporation had securities pledged as collateral with a $63.6 million face value to guarantee its performance under the swap agreements in the event payment there under was required.

Since the second quarter of 2009, the Corporation has maintained a non-performing asset with a book value of $64.5 million in addition to accrued interest of $2.1 million related to the collateral pledged with Lehman. The Corporation believes that the securities pledged as collateral should not be part of the Lehman bankruptcy estate given the facts that the posted collateral constituted a performance guarantee under the swap agreements and was not part of a financing agreement, and that ownership of the securities was never transferred to Lehman. Upon termination of the interest rate swap agreements, Lehman’s obligation was to return the collateral to the Corporation. During the fourth quarter of 2009, the Corporation discovered that Lehman Brothers, Inc., acting as agent of Lehman, had deposited the securities in a custodial account at JP Morgan Chase, and that, shortly before the filing of the Lehman bankruptcy proceedings, it had provided instructions to have most of the securities transferred to Barclays Capital (“Barclays”) in New York. After Barclays’ refusal to turn over the securities, the Corporation filed a lawsuit against Barclays in federal court in New York demanding the return of the securities in December 2009. During February 2010, Barclays filed a motion with the court requesting that the Corporation’s claim be dismissed on the grounds that the allegations of the complaint are not sufficient to justify the granting of the remedies therein sought. Shortly thereafter, the Corporation filed its opposition motion. A hearing on the motions was held in court on April 28, 2010. The court, on that date, after hearing the arguments by both sides, concluded that the Corporation’s equitable-based causes of action, upon which the return of the investment securities is being demanded, contain allegations that sufficiently plead facts warranting the denial of Barclays’ motion to dismiss the Corporation’s claim. Accordingly, the judge ordered the case to proceed to trial.

Subsequent to the court decision, the district court judge transferred the case to the Lehman bankruptcy court for trial. Discovery pursuant to that case management plan has been completed. The parties filed dispositive motions on September 13, 2012. Oppositions to such motions and replies thereto must be filed by October 15, 2012 and November 14, 2012, respectively, but this timing is subject to adjustment. The Corporation may not succeed in its litigation against Barclays to recover all or a substantial portion of the securities.

Additionally, the Corporation continues to pursue its claim filed in January 2009 in the proceedings under the Securities Protection Act with regard to Lehman Brothers Inc. in the United States Bankruptcy Court for the Southern District of New York.

An estimated loss has not been accrued as the Corporation is unable to determine the timing of the claim resolution or whether it will succeed in recovering all or a substantial portion of the collateral or its equivalent value.

Because the Corporation has not had the benefit of the use of the investment securities pledged to Lehman (i.e., ability to sell, pledge or transfer), and because the Corporation has not received principal or interest payments since 2008 (after the collapse of Lehman), the appropriate carrying value of these securities has been under review with our regulators, with recent heightened concern due to the complex and lengthy litigation regarding this matter. If, as a result of these discussions, developments in the litigation, or for other reasons, the Corporation should determine that it is probable that the asset has been impaired and that the Corporation needs to recognize a partial or full loss for the investment securities pledged to Lehman, such an action would adversely affect the Corporation’s results of operations in the period in which such action is taken. The Corporation expects to reassess the recoverability of the asset upon the resolution of the dispositive motions filed with the court, which motions could be resolved in the fourth quarter of 2012.

As of September 30, 2012, First BanCorp and its subsidiaries were defendants in various legal proceedings arising in the ordinary course of business. Management believes that the final disposition of these matters will not have a material adverse effect on the Corporation’s financial position or results of operations.

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SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2012

SEGMENT INFORMATION

21 – 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 driven primarily by 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 September 30, 2012, 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. Others 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 segments.

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’s operations consist 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 executed to manage and enhance liquidity. This segment lends funds to the Commercial and Corporate Banking, Mortgage Banking and Consumer (Retail) Banking segments to finance their lending activities and borrows from those segments and from the United States Operations segment. The Consumer (Retail) Banking and the United States Operations segments also lend funds to 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 U.S. and British Virgin Islands, including commercial and retail banking services and insurance activities.

The accounting policies of the segments are the same as those referred to in Note 1 to the Corporation’s financial statements for the year ended December 31, 2011 contained in the Corporation’s Annual Report on Form 10-K.

The Corporation evaluates the performance of the segments based on net interest income, the estimated 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):

(In thousands)	Mortgage Banking			Consumer (Retail) Banking			Commercial and Corporate			Treasury and Investments			United States Operations			Virgin Islands Operations			Total
For the quarter ended September 30, 2012:
Interest income	$	27,792		$	60,306		$	46,104		$	11,563		$	9,031		$	12,168		$	166,964
Net (charge) credit for transfer of funds		(12,357	)		(756	)		(5,933	)		15,991			3,055			—			—
Interest expense		—			(7,289	)		—			(26,191	)		(6,903	)		(1,078	)		(41,461	)
Net interest income		15,435			52,261			40,171			1,363			5,183			11,090			125,503
Provision for loan and lease losses		(8,453	)		(12,000	)		(5,892	)		—			6,860			(9,467	)		(28,952	)
Non-interest income		4,312			9,487			1,993			(538	)		491			1,580			17,325
Direct non-interest expenses		(10,330	)		(26,865	)		(12,607	)		(1,795	)		(7,735	)		(9,053	)		(68,385	)
Segment income (loss)	$	964		$	22,883		$	23,665		$	(970	)	$	4,799		$	(5,850	)	$	45,491
Average earnings assets	$	2,084,719		$	1,784,630		$	4,478,267		$	2,259,288		$	704,780		$	797,332		$	12,109,016

(In thousands)	Mortgage Banking			Consumer (Retail) Banking			Commercial and Corporate			Treasury and Investments			United States Operations			Virgin Islands Operations			Total
For the quarter ended September 30, 2011:
Interest income	$	27,505		$	41,611		$	51,101		$	13,328		$	11,101		$	13,896		$	158,542
Net (charge) credit for transfer of funds		(14,030	)		3,528			(3,658	)		10,203			3,957			—			—
Interest expense		—			(10,220	)		—			(42,657	)		(9,694	)		(1,716	)		(64,287	)
Net interest income (loss)		13,475			34,919			47,443			(19,126	)		5,364			12,180			94,255
Provision for loan and lease losses		(16,153	)		(7,719	)		(8,261	)		—			(5,417	)		(8,896	)		(46,446	)
Non-interest income		3,180			7,354			1,702			3,834			590			1,661			18,321
Direct non-interest expenses		(6,918	)		(22,332	)		(9,682	)		(2,060	)		(9,341	)		(8,505	)		(58,838	)
Segment (loss) income	$	(6,416	)	$	12,222		$	31,202		$	(17,352	)	$	(8,804	)	$	(3,560	)	$	7,292
Average earnings assets	$	2,047,220		$	1,435,818		$	5,107,637		$	2,765,749		$	834,848		$	888,393		$	13,079,665

	Mortgage Banking			Consumer (Retail) Banking			Commercial & Corporate			Treasury & Investments			United States Operations			Virgin Islands Operations			Total
For the Nine-Month Period Ended September 30, 2012:
Interest income	$	82,550		$	147,641		$	142,375		$	34,077		$	28,566		$	37,514		$	472,723
Net (charge) credit for transfer of funds		(37,848	)		1,827			(18,964	)		45,559			9,426			—			—
Interest expense		—			(23,818	)		—			(86,551	)		(22,702	)		(3,578	)		(136,649	)
Net interest income (loss)		44,702			125,650			123,411			(6,915	)		15,290			33,936			336,074
Provision for loan and lease losses		(29,541	)		(21,576	)		(37,449	)		—			12,216			(13,683	)		(90,033	)
Non-interest income		12,070			23,827			8,215			(1,779	)		1,264			4,952			48,549
Direct non-interest expenses		(31,142	)		(73,964	)		(37,356	)		(5,107	)		(20,912	)		(28,506	)		(196,987	)
Segment (loss) income	$	(3,911	)	$	53,937		$	56,821		$	(13,801	)	$	7,858		$	(3,301	)	$	97,603
Average earnings assets	$	2,061,036		$	1,572,342		$	4,635,264		$	2,368,164		$	735,889		$	820,510		$	12,193,205

	Mortgage Banking			Consumer (Retail) Banking			Commercial and Corporate			Treasury and Investments			United States Operations			Virgin Islands Operations			Total
For the Nine-Month Period Ended September 30, 2011:
Interest income	$	90,779		$	127,401		$	154,098		$	52,770		$	34,547		$	43,268		$	502,863
Net (charge) credit for transfer of funds		(48,007	)		7,920			(9,672	)		37,078			12,681			—			—
Interest expense		—			(32,334	)		—			(139,998	)		(30,543	)		(5,019	)		(207,894	)
Net interest income (loss)		42,772			102,987			144,426			(50,150	)		16,685			38,249			294,969
Provision for loan and lease losses		(27,892	)		(10,622	)		(108,902	)		—			(15,546	)		(31,400	)		(194,362	)
Non-interest income		18,968			21,342			6,531			42,548			903			8,912			99,204
Direct non-interest expenses		(23,140	)		(67,944	)		(30,559	)		(4,744	)		(26,159	)		(27,921	)		(180,467	)
Segment income (loss)	$	10,708		$	45,763		$	11,496		$	(12,346	)	$	(24,117	)	$	(12,160	)	$	19,344
Average earnings assets	$	2,192,271		$	1,460,871		$	5,219,856		$	3,280,009		$	866,778		$	893,256		$	13,913,041

The following table presents a reconciliation of the reportable segment financial information to the consolidated totals:

	Quarter Ended September 30,						Nine-Month Period Ended September 30,
	2012			2011			2012			2011
Net Income (loss):
Total income for segments and other	$	45,491		$	7,292		$	97,603		$	19,344
Other non-interest income (loss) (1)		(2,199	)		(4,357	)		(10,926	)		(5,893	)
Other operating expenses		(23,458	)		(24,093	)		(66,991	)		(71,761	)
Income (loss) before income taxes		19,834			(21,158	)		19,686			(58,310	)
Income tax expense		(761	)		(2,888	)		(4,439	)		(9,080	)
Total consolidated net income (loss)	$	19,073		$	(24,046	)	$	15,247		$	(67,390	)
Average assets:
Total average earning assets for segments	$	12,109,016		$	13,079,665		$	12,193,205		$	13,913,041
Other average earning assets (1)		34,403			46,046			38,215			39,064
Average non-earning assets		707,816			662,192			692,083			670,758
Total consolidated average assets	$	12,851,235		$	13,787,903		$	12,923,503		$	14,622,863

(1) The activities related to the Bank’s equity interest in CPG/GS are presented as an Other non-interest income (loss) and other average earning assets in the table above

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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Components of Net Servicing Income (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Servicing fees	$ 1,399	$ 1,293	$ 4,161	$ 3,955
Late charges and prepayment penalties	463	184	925	551
Adjustment to servicing assets for loans repurchased	(124)	(93)	(629)	(238)
Servicing income, gross	1,738	1,384	4,457	4,268
Amortization and impairment of servicing assets	(1,197)	(892)	(2,423)	(3,794)
Servicing income, net	$ 541	$ 492	$ 2,034	$ 474

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INVESTMENT SECURITIES - Investment Securities Available for Sale (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 1,547,514		$ 1,896,318
Non credit loss component of OTTI recorded in OCI	31,951		32,385
Unrealized gain on available-for-sale securities, net	82,347		59,386
Gross unrealized gains losses	63		51
Fair value	1,597,847		1,923,268
Weighted average yield	3.15%		2.60%
Puerto Rico Government obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	93,990		998,536
Unrealized gain on available-for-sale securities, net	2,537		2,669
Gross unrealized gains losses	25		15
Fair value	96,502		1,001,190
Weighted average yield	3.31%		1.47%
Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	1,453,447		896,258
Non credit loss component of OTTI recorded in OCI	31,951		31,951
Unrealized gain on available-for-sale securities, net	79,810		56,717
Gross unrealized gains losses	1
Fair value	1,501,305		921,024
Weighted average yield	3.13%		3.85%
FHLMC certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	135,718		25,902
Unrealized gain on available-for-sale securities, net	4,187		246
Fair value	139,905		26,148
Weighted average yield	2.28%		2.62%
GNMA certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	605,015		718,012
Unrealized gain on available-for-sale securities, net	44,846		43,994
Fair value	649,861		762,006
Weighted average yield	4.00%		3.98%
FNMA certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	639,782		67,330
Unrealized gain on available-for-sale securities, net	16,692		4,334
Fair value	656,474		71,664
Weighted average yield	2.59%		5.02%
Due within 1 year [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	7,494		476,665
Unrealized gain on available-for-sale securities, net	1		327
Fair value	7,495		476,992
Weighted average yield	0.17%		0.34%
Due within 1 year [Member] | Obligations of U.S Government sponsored agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost			300,381
Unrealized gain on available-for-sale securities, net			1,204
Fair value			301,585
Weighted average yield			1.15%
Due within 1 year [Member] | Puerto Rico Government obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost			8,560
Unrealized gain on available-for-sale securities, net			110
Fair value			8,670
Weighted average yield			4.20%
Due within 1 year [Member] | FHLMC certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	206
Unrealized gain on available-for-sale securities, net	1
Fair value	207
Weighted average yield	3.57%
Due within 1 year [Member] | FNMA certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	282
Unrealized gain on available-for-sale securities, net	10
Fair value	292
Weighted average yield	3.55%
After 1 to 5 years [Member] | Obligations of U.S Government sponsored agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	25,650
Unrealized gain on available-for-sale securities, net	11
Fair value	25,661
Weighted average yield	0.35%
After 1 to 5 years [Member] | Puerto Rico Government obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost			70,590
Unrealized gain on available-for-sale securities, net			171
Gross unrealized gains losses			1
Fair value			70,760
Weighted average yield			2.63%
After 1 to 5 years [Member] | FHLMC certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost			928
Unrealized gain on available-for-sale securities, net			8
Fair value			936
Weighted average yield			3.67%
After 1 to 5 years [Member] | GNMA certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	159		179
Unrealized gain on available-for-sale securities, net	8		9
Fair value	167		188
Weighted average yield	3.59%		3.88%
After 1 to 5 years [Member] | FNMA certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost			1,019
Unrealized gain on available-for-sale securities, net			42
Fair value			1,061
Weighted average yield			3.82%
After 5 to 10 years [Member] | Puerto Rico Government obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	39,744		118,186
Unrealized gain on available-for-sale securities, net	1,335		76
Gross unrealized gains losses			13
Fair value	41,079		118,249
Weighted average yield	4.49%		5.07%
After 5 to 10 years [Member] | GNMA certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	562		596
Unrealized gain on available-for-sale securities, net	45		47
Fair value	607		643
Weighted average yield	3.60%		4.09%
After 5 to 10 years [Member] | FNMA certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	14,517		18,826
Unrealized gain on available-for-sale securities, net	810		1,007
Fair value	15,327		19,833
Weighted average yield	4.04%		3.97%
After 5 to 10 years [Member] | Collateralized Mortgage Obligations issued or guaranteed by FHLMC, FNMA and GNMA [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	377
Gross unrealized gains losses	1
Fair value	376
Weighted average yield	3.01%
After 10 years [Member] | Puerto Rico Government obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	21,102		24,154
Unrealized gain on available-for-sale securities, net	1,190		781
Gross unrealized gains losses	25		1
Fair value	22,267		24,934
Weighted average yield	5.78%		5.74%
After 10 years [Member] | Corporate bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost			1,447
Non credit loss component of OTTI recorded in OCI			434
Fair value			1,013
Weighted average yield			5.80%
After 10 years [Member] | FHLMC certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	135,512		24,974
Unrealized gain on available-for-sale securities, net	4,186		238
Fair value	139,698		25,212
Weighted average yield	2.28%		2.59%
After 10 years [Member] | GNMA certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	604,294		717,237
Unrealized gain on available-for-sale securities, net	44,793		43,938
Fair value	649,087		761,175
Weighted average yield	4.00%		3.98%
After 10 years [Member] | FNMA certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	624,983		47,485
Unrealized gain on available-for-sale securities, net	15,872		3,285
Fair value	640,855		50,770
Weighted average yield	2.56%		5.46%
After 10 years [Member] | Other-mortgage pass-through trust certificates [Member] | Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	72,555		85,014
Non credit loss component of OTTI recorded in OCI	31,951		31,951
Unrealized gain on available-for-sale securities, net	14,085		8,143
Fair value	54,689		61,206
Weighted average yield	2.34%		2.19%
Equity Securities [Member] | Corporate bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	77	[1]	77	[1]
Non credit loss component of OTTI recorded in OCI		[1]		[1]
Unrealized gain on available-for-sale securities, net		[1]		[1]
Gross unrealized gains losses	37	[1]	36	[1]
Fair value	$ 40	[1]	$ 41	[1]
Weighted average yield		[1]		[1]

[1] Represents common shares of another financial institution in Puerto Rico.

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NOTES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2012

Component of Notes Payable

Notes payable consist of:

(In thousands)	September 30, 2012		December 31, 2011
Callable step-rate notes, bearing step increasing interest from 5.00% to 7.00% (6.00 % as of December 31, 2011) maturing on October 18, 2019, measured at fair value(1)	$	—	$	15,968
Dow Jones Industrial Average (DJIA) linked principal protected notes:
Series A maturing on February 28, 2012		—		7,374
	$	—	$	23,342

(1) During the second quarter of 2012, the Corporation prepaid medium term notes with a principal balance of 15.4 million that carried a rate of 6.00%. These notes were carried at fair value and changes in value were recorded as part of interest expense. As a result of the prepayment of the notes, a marked-to-market loss of $0.5 million was reversed resulting in a reduction in interest expense for the first nine months of 2012.

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FIRST BANCORP. (Holding Company Only) Financial Information

9 Months Ended

Sep. 30, 2012

FIRST BANCORP. (Holding Company Only) Financial Information

23 – FIRST BANCORP. (Holding Company Only) Financial Information

The following condensed financial information presents the financial position of the Holding Company only as of September 30, 2012 and December 31, 2011 and the results of its operations for the quarter and nine-month period ended September 30, 2012 and 2011.

	As of September 30, 2012		As of December 31, 2011
	(In thousands)
Assets
Cash and due from banks	$	36,631	$	41,681
Money market investments		6,111		3,111
Investment securities available for sale, at market:
Equity investments		40		41
Other investment securities		1,300		1,300
Investment in First Bank Puerto Rico, at equity		1,660,373		1,615,304
Investment in First Bank Insurance Agency, at equity		7,163		5,338
Investment in FBP Statutory Trust I		3,093		3,093
Investment in FBP Statutory Trust II		3,866		3,866
Other assets		3,669		3,488
Total assets	$	1,722,246	$	1,677,222
Liabilities & Stockholders’ Equity
Liabilities:
Other borrowings	$	231,959	$	231,959
Accounts payable and other liabilities		6,170		1,119
Total liabilities		238,129		233,078
Stockholders’ equity		1,484,117		1,444,144
Total liabilities and stockholders’ equity	$	1,722,246	$	1,677,222

	Quarter Ended						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Income:
Interest income on investment securities	$	—		$	1		$	—		$	1
Dividends from other subsidiaries		—			—			—			3,000
Interest income on other investments		6			—			12			—
Other income		55			53			165			157
		61			54			177			3,158
Expense:
Notes payable and other borrowings		1,849			1,755			5,529			5,221
Other operating expenses		783			745			2,618			1,792
		2,632			2,500			8,147			7,013
Investment related proceeds and impairments on equity securities		—			—			—			679
Loss before income taxes and equity in undistributed earnings (losses) of subsidiaries		(2,571	)		(2,446	)		(7,970	)		(3,176	)
Income tax provision		—			—			—			—
Equity in undistributed earnings (losses) of subsidiaries		21,644			(21,600	)		23,217			(64,214	)
Net income (loss)	$	19,073		$	(24,046	)	$	15,247		$	(67,390	)

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2012

SUBSEQUENT EVENTS

24 – SUBSEQUENT EVENTS

The Corporation has performed an evaluation of events occurring subsequent to September 30, 2012; management has determined that there are no additional events occurring in this period that required disclosure in or adjustment to the accompanying financial statements.

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2012

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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, 2011. 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, 2011, included in the Corporation’s 2011 Annual Report on Form 10-K. On May 30, 2012, the Corporation purchased an approximate $406 million credit cards portfolio, of which a portion were purchased credit impaired loans. Refer to Note 6 for additional information about this transaction, including the accounting and reporting policies related to this portfolio. 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 nine-month period ended September 30, 2012 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:

In April 2011, the FASB updated the Accounting Standards Codification (“Codification”) to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The amendments in this Update remove from the assessment of effective control the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. The Board concluded that this criterion is not a determining factor of effective control. Consequently, the amendments in this Update also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets. Eliminating the transferor’s ability criterion and related implementation guidance from an entity’s assessment of effective control should improve the accounting for repurchase agreements and other similar transactions. The amendments in this Update are effective for the first interim or annual period beginning on or after December 15, 2011, and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The Corporation adopted this guidance with no impact on the financial statements.

In May 2011, the FASB updated the Codification to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards (IFRSs). The amendments in this Update apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements and result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. The amendments in this Update are to be applied prospectively and are effective during interim and annual periods beginning after December 15, 2011. Early application is not permitted. The Corporation adopted this guidance in 2012, refer to note 19 for applicable disclosures. The adoption of this guidance did not have a material impact in the Corporation’s consolidated financial position or results of operations.

In June 2011, the FASB updated the Codification to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Under the amendments, an entity has the option to present the total comprehensive income either in a single continuous statement or in two separate but consecutive statements and eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. Additionally, this update requires consecutive presentation of the statement of net income and other comprehensive income and requires an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. The amendments in this Update should be applied retrospectively and are effective for fiscal years beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. Beginning with the financial statements for the quarter and six-month period ended June 30, 2011, the Corporation is following the guidance of separate but consecutive presentation of the statement of net income and the statement of other comprehensive income.

In September 2011, the FASB updated the Codification to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. The amendments in this Update are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The Corporation will incorporate this guidance into the annual goodwill impairment evaluation process to be conducted in the fourth quarter of 2012.

In December 2011, the FASB updated the Codification to clarify the guidance on the derecognition of in substance real estate in order to resolve the diversity in practice when a parent ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. That is, even if the reporting entity ceases to have a controlling financial interest, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. The Corporation adopted this guidance with no impact on the consolidated financial statements.

In December 2011, the FASB updated the Codification to enhance and provided converged disclosures about financial and derivative instruments that are either offset on the balance sheet, or are subject to an enforceable master netting arrangement (or other similar arrangement). Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. In November 2012, the FASB decided to amend and clarify the scope of the disclosures to include only derivatives, repurchase agreements and securities lending transactions. The FASB plans to release an exposure draft with the revised scope language during November 2012. The amendments in this Update are effective for interim and annual period beginning on or after January 1, 2013. The Corporation is currently evaluating the impact of the adoption of this guidance, if any, on its consolidated financial statements.

In July 2012, the FASB updated the Codification to reduce the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments in this Update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of date before July 27, 2012, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The Corporation is currently evaluating the impact of the adoption of this guidance, if any, on its consolidated financial statements.

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EARNINGS PER COMMON SHARE (Tables)

9 Months Ended

Sep. 30, 2012

Calculations of Earnings Per Common Share

The calculations of earnings per common share for the quarters and nine-month period ended on September 30, 2012 and 2011 are as follows:

	Quarter Ended					Nine-Month Period Ended
	September 30, 2012		September 30, 2011			September 30, 2012		September 30, 2011
	(In thousands, except per share information)
Net Income (Loss):
Net income (loss)	$	19,073	$	(24,046	)	$	15,247	$	(67,390	)
Cumulative convertible preferred stock dividends (Series G)		—		(5,302	)		—		(15,906	)
Preferred stock discount accretion (Series G)		—		(1,795	)		—		(5,489	)
Net income (loss) attributable to common stockholders	$	19,073	$	(31,143	)	$	15,247	$	(88,785	)
Weighted-Average Shares:
Basic weighted-average common shares outstanding		205,415		21,303			205,349		21,303
Average potential common shares		508		—			348		—
Diluted weighted-average number of common shares outstanding		205,923		21,303			205,697		21,303
Income (loss) per common share:
Basic	$	0.09	$	(1.46	)	$	0.07	$	(4.17	)
Diluted	$	0.09	$	(1.46	)	$	0.07	$	(4.17	)

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LOAN PORTFOLIO - Loan Modifications are Considered TDRs (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012 Contract	Sep. 30, 2011 Contract	Sep. 30, 2012 Contract	Sep. 30, 2011 Contract
Financing Receivable, Modifications [Line Items]
Number of contracts	659	691	1,841	2,322
Pre-modification Outstanding Recorded Investment	$ 90,671	$ 112,795	$ 219,427	$ 415,955
Post-Modification Outstanding Recorded Investment	90,674	115,489	216,202	390,241
Non-FHA/VA Residential Mortgage loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	147	190	403	607
Pre-modification Outstanding Recorded Investment	23,421	30,724	64,412	98,168
Post-Modification Outstanding Recorded Investment	23,431	31,395	64,773	101,367
Commercial Mortgage Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	14	21	35	61
Pre-modification Outstanding Recorded Investment	57,100	37,686	100,036	149,340
Post-Modification Outstanding Recorded Investment	57,100	39,998	100,072	121,078
Commercial And Industrial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	11	19	47	43
Pre-modification Outstanding Recorded Investment	1,278	24,355	33,162	44,561
Post-Modification Outstanding Recorded Investment	1,271	24,085	29,593	43,702
Construction And Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	3	7	8	14
Pre-modification Outstanding Recorded Investment	4,380	14,532	9,671	106,204
Post-Modification Outstanding Recorded Investment	4,380	14,423	9,661	106,278
Auto loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	156	188	445	600
Pre-modification Outstanding Recorded Investment	2,044	2,359	5,473	7,423
Post-Modification Outstanding Recorded Investment	2,044	2,359	5,430	7,423
Finance leases [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	24	32	76	87
Pre-modification Outstanding Recorded Investment	462	409	1,384	1,501
Post-Modification Outstanding Recorded Investment	462	409	1,384	1,501
Other Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	304	234	827	910
Pre-modification Outstanding Recorded Investment	1,986	2,730	5,289	8,758
Post-Modification Outstanding Recorded Investment	$ 1,986	$ 2,820	$ 5,289	$ 8,892

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ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Sep. 30, 2012
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Credit facility based on collateral pledged	$ 300.4

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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS (Tables)

9 Months Ended

Sep. 30, 2012

Changes in Servicing Assets

The changes in servicing assets are shown below:

	Quarter ended						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Balance at beginning of period	$	16,592		$	14,638		$	15,226		$	15,163
Capitalization of servicing assets		1,389			1,271			4,486			3,793
Amortization		(834	)		(726	)		(2,220	)		(1,823	)
Adjustment to servicing assets for loans repurchased (1)		(124	)		(93	)		(629	)		(238	)
Adjustment to fair value		(363	)		(166	)		(203	)		(1,971	)
Balance at end of period	$	16,660		$	14,924		$	16,660		$	14,924

(1) Amount represents the adjustment to fair value related to the repurchase of $9.9 million and $54.5 million for the quarter and nine-month period ended September 30, 2012, respectively, and, $8.5 million and $29.3 million for the quarter and nine-month period ended September 30, 2011, respectively, in principal balance of loans serviced for others.

Changes in Impairment Allowance

Changes in the impairment allowance were as follows:

	Quarter ended						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Balance at beginning of period	$	118		$	2,239		$	2,725		$	434
Temporary impairment charges		378			232			565			2,355
OTTI of servicing assets		—			—			(2,447	)		—
Recoveries		(15	)		(66	)		(362	)		(384	)
Balance at end of period	$	481		$	2,405		$	481		$	2,405

Components of Net Servicing Income

The components of net servicing income are shown below:

	Quarter ended						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Servicing fees	$	1,399		$	1,293		$	4,161		$	3,955
Late charges and prepayment penalties		463			184			925			551
Adjustment for loans repurchased		(124	)		(93	)		(629	)		(238	)
Servicing income, gross		1,738			1,384			4,457			4,268
Amortization and impairment of servicing assets		(1,197	)		(892	)		(2,423	)		(3,794	)
Servicing income, net	$	541		$	492		$	2,034		$	474

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 ranged as follows:

	Maximum			Minimum
Nine-Month Period Ended September 30, 2012:
Constant prepayment rate:
Government guaranteed mortgage loans		12.4	%		11.6	%
Conventional conforming mortgage loans		12.8	%		12.6	%
Conventional non-conforming mortgage loans		13.8	%		13.3	%
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	%
Nine-Month Period Ended September 30, 2011:
Constant prepayment rate:
Government guaranteed mortgage loans		12.9	%		10.6	%
Conventional conforming mortgage loans		14.3	%		12.7	%
Conventional non-conforming mortgage loans		13.9	%		11.7	%
Discount rate:
Government guaranteed mortgage loans		11.5	%		11.3	%
Conventional conforming mortgage loans		9.5	%		9.3	%
Conventional non-conforming mortgage loans		15.0	%		13.8	%

Weighted-Averages of Key Economic Assumptions in Valuation Model

The weighted-averages of the key economic assumptions used by the Corporation in its valuation model and the sensitivity of the current fair value to immediate 10 percent and 20 percent adverse changes in those assumptions for mortgage loans at September 30, 2012, were as follows:

	(Dollars in thousands)
Carrying amount of servicing assets	$	16,660
Fair value	$	18,007
Weighted-average expected life (in years)		7.60
Constant prepayment rate (weighted-average annual rate)		12.66	%
Decrease in fair value due to 10% adverse change	$	857
Decrease in fair value due to 20% adverse change	$	1,650
Discount rate (weighted-average annual rate)		11.09	%
Decrease in fair value due to 10% adverse change	$	663
Decrease in fair value due to 20% adverse change	$	1,281

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STOCK-BASED COMPENSATION - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended			9 Months Ended		1 Months Ended	9 Months Ended				9 Months Ended			3 Months Ended			1 Months Ended	9 Months Ended		3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Jan. 01, 2007	Sep. 30, 2012 Maximum [Member]	Sep. 30, 2012 Minimum [Member]	Mar. 31, 2012 Omnibus Plan [Member]	Sep. 30, 2012 Omnibus Plan [Member]	Sep. 30, 2012 Omnibus Plan [Member] Maximum [Member]	Sep. 30, 2012 TARP [Member] US Treasury and Government [Member]	Jan. 01, 2007 1997 stock option plan [Member] Maximum [Member]	Sep. 30, 2012 Restricted Stock [Member]	Mar. 31, 2012 Restricted Stock [Member]	Apr. 29, 2008 Restricted Stock [Member]	Dec. 31, 2011 Restricted Stock [Member] Board Of Directors [Member]	Sep. 30, 2012 Restricted Stock [Member] Chief Executive Officer [Member]	Apr. 29, 2008 Restricted Stock [Member] Chief Executive Officer [Member]	Aug. 31, 2012 Restricted Stock [Member] Omnibus Plan [Member]	Sep. 30, 2012 Restricted Stock [Member] Omnibus Plan [Member]	Mar. 31, 2012 Restricted Stock [Member] Omnibus Plan [Member]	Sep. 30, 2012 Restricted Stock [Member] TARP [Member]	Sep. 30, 2012 Restricted Stock [Member] TARP [Member]	Sep. 30, 2012 First Forty Seven Percentage Restricted Stock Nonvest Awards [Member]	Sep. 30, 2012 Other Forty Seven Percentage Restricted Stock Nonvest Awards [Member]	Sep. 30, 2012 Six Percentage Restricted Stock Nonvest Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Authorized granting up shares												579,740
Percentage of common shares outstanding above which option granted cannot exceed			20.00%
Maximum term to exercise options					10 years
Common shares issued										8,169,807
Restricted stock issued and vest on the employees																					719,500
Restricted stock awarded to directors																			44,910
Restricted stock vesting period						3 years	2 years													1 year
Percentage of Share vest during period								50.00%	50.00%
Remaining percentage of share vest during period									50.00%
Granted shares of restricted stock									764,410											719,500
Restricted stock granted to senior executive officers														557,000	557,000		557,000	557,000
Percentage increments repayment under TARP											25.00%
Share based compensation cost	$ 200,000	$ 23,333.0	$ 400,000	$ 69,999.0
Restricted stock granted to Board of Directors																720
Stock based compensation expense unrecognized related to nonvested shares of restricted stock													$ 1,400,000
Period for cost recognition not yet recognized																								1 year 6 months	2 years 6 months	8 months
Percentage of cost to be recognized over the period																								47.00%	47.00%	6.00%
Weighted-Average Grant Date Fair Value, Granted restricted stock			$ 2.50										$ 4.00									$ 3.34	$ 2.00
Holding period under outstanding common stock			3 years

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LOAN PORTFOLIO - Additional Information (Detail) (USD $)	3 Months Ended	9 Months Ended										9 Months Ended
	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Non-FHA/VA Residential Mortgage loans [Member]	Sep. 30, 2012 Commercial And Industrial Loans [Member]	Sep. 30, 2012 Commercial Mortgage Loans [Member]	Sep. 30, 2012 Construction And Commercial Loans [Member]	Sep. 30, 2012 Consumer Loans [Member]	Sep. 30, 2012 Residential mortgage loans [Member]	Sep. 30, 2012 Credit card portfolio acquired (FIA) [Member]	Sep. 30, 2012 Puerto Rico [Member]	Dec. 31, 2011 Puerto Rico [Member]	Sep. 30, 2012 Virgin Islands [Member]	Dec. 31, 2011 Virgin Islands [Member]	Sep. 30, 2012 United States [Member]	May 30, 2012 FIA Card Services (FIA) [Member]	Sep. 30, 2012 Credit impaired loans [Member]	May 30, 2012 Credit impaired loans [Member] FIA Card Services (FIA) [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest income on impaired loans	$ 10,200,000		$ 25,100,000
Purchased credit impaired loans, fair value																		368,900,000	12,700,000	15,700,000
Contractually outstanding principal and interest at acquisition																		406,000,000		34,600,000
Residential mortgage loans acquired												149,500,000
Performing residential mortgage loans sold		156,300,000
Securitization of mortgage loans into mortgage backed securities		165,300,000
Total gross loans held for investment portfolio		10,200,000
Credit risk concentration													85.00%		8.00%		7.00%
Outstanding of credit facilities granted													148,700,000		117,700,000
Increase in outstanding of credit facilities granted														360,100,000		139,400,000
Loans to local financial institutions collateralized by real estate mortgages		258,341,000			273,821,000
Total TDR loans		925,144,000		861,932,000	820,499,000	410,247,000	107,557,000	298,046,000	86,581,000	22,700,000
Outstanding unfunded commitments on TDR loans		4,400,000
Residential mortgage loans as TDRs											5,700,000
Government guaranteed restructured mortgage loans		94,300,000
Minimum Period to be considered for loan to have defaulted		90 days
Financing receivable loans restructured recorded investment accruals		$ 118,000,000

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Consolidated Statements of Financial Condition (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
ASSETS
Cash and due from banks	$ 786,788	$ 206,897
Money market investments:
Federal funds sold		2,603
Time deposits with other financial institutions	605	955
Other short-term investments	216,327	236,111
Total money market investments	216,932	239,669
Investment securities available for sale, at fair value:
Securities pledged that can be repledged	1,070,375	1,167,265
Other investment securities	527,472	756,003
Total investment securities available for sale	1,597,847	1,923,268
Other equity securities	39,656	37,951
Investment in unconsolidated entities	32,300	43,401
Loans, net of allowance for loan and lease losses of $445,531 (2011-$493,917)	9,742,633	10,065,475
Loans held for sale, at lower of cost or market	68,349	15,822
Total loans, net	9,810,982	10,081,297
Premises and equipment, net	182,733	194,942
Other real estate owned	177,001	114,292
Accrued interest receivable on loans and investments	53,216	49,957
Other assets	242,292	235,601
Total assets	13,139,747	13,127,275
LIABILITIES
Non-interest-bearing deposits	780,717	705,789
Interest-bearing deposits	9,115,685	9,201,965
Total deposits	9,896,402	9,907,754
Securities sold under agreements to repurchase	900,000	1,000,000
Advances from the Federal Home Loan Bank (FHLB)	518,440	367,440
Notes payable (including $15,968 measured at fair value as of December 31, 2011)		23,342
Other borrowings	231,959	231,959
Accounts payable and other liabilities	108,829	152,636
Total liabilities	11,655,630	11,683,131
Commitments and Contingencies (Note 22)
Preferred stock, authorized 50,000,000 shares:
Common stock, $0.10 par value, authorized 2,000,000,000 shares; issued 206,674,221 shares (2011-205,794,024 shares issued)	20,667	20,579
Less: Treasury stock (at par value)	(49)	(66)
Common stock outstanding, 206,179,368 shares outstanding (2011-205,134,171 shares outstanding)	20,618	20,513
Additional paid-in capital	885,329	884,002
Retained earnings	472,631	457,384
Accumulated other comprehensive income, net of tax expense of $7,843 (2011-$7,751)	42,492	19,198
Total stockholders' equity	1,484,117	1,444,144
Total liabilities and stockholders' equity	13,139,747	13,127,275
Non-cumulative Perpetual Monthly Income Preferred Stock: issued 22,004,000 shares, outstanding - 2,521,872 shares, aggregate liquidation value of $63,047 [Member]
Preferred stock, authorized 50,000,000 shares:
Non-cumulative Perpetual Monthly Income Preferred Stock: issued-22,004,000 shares, outstanding-2,521,872 shares, aggregate liquidation value of $63,047	$ 63,047	$ 63,047

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OTHER BORROWINGS (Tables)

9 Months Ended

Sep. 30, 2012

Components of Other Borrowings

Other borrowings consist of:

(In thousands)	September 30, 2012		December 31, 2011
Junior subordinated debentures due in 2034, interest-bearing at a floating-rate of 2.75% over 3-month LIBOR (3.14% as of September 30, 2012 and 3.31% as of December 31, 2011)	$	103,093	$	103,093
Junior subordinated debentures due in 2034, interest-bearing at a floating-rate of 2.50% over 3-month LIBOR (2.89% as of September 30, 2012 and 3.06% as of December 31, 2011)		128,866		128,866
	$	231,959	$	231,959

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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Additional Information (Detail) (USD $)	1 Months Ended			3 Months Ended		9 Months Ended				1 Months Ended		12 Months Ended		1 Months Ended	9 Months Ended
	Feb. 28, 2011	Sep. 30, 2004	Apr. 30, 2004	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Feb. 16, 2012	Dec. 31, 2011	Sep. 30, 2004 Junior Subordinated Deferrable Debentures [Member]	Apr. 30, 2004 Junior Subordinated Deferrable Debentures [Member]	Dec. 31, 2004 FBP Statutory Trust I [Member]	Dec. 31, 2004 FBP Statutory Trust II [Member]	Feb. 28, 2011 CPG/GS [Member]	Sep. 30, 2012 CPG/GS [Member]	Sep. 30, 2012 PRLP [Member]	Sep. 30, 2012 First Bank [Member]
Servicing Liabilities at Fair Value [Line Items]
Principal amount of corporation serviced loans securitized through GNMA				$ 734,200,000		$ 734,200,000
Variable rate trust preferred securities												100,000,000	125,000,000
Proceeds of the issuance, together with proceeds of the purchase												3,100,000	3,900,000
Principal amount of corporation's junior subordinated deferrable debentures												103,100,000	128,900,000
Debentures issued date		2004-09	2004-04
Junior subordinated deferrable debentures issued										125,000,000	100,000,000
Maturity date of debt instrument										Sep. 20, 2034	Sep. 17, 2034
Maximum period trust preferred securities to be phased in increment						3 years
Period for variable interest rate for securities						90 days								30 days	30 days
Balance of amortization with third party				72,500,000		72,500,000
Carrying value with third party				54,500,000		54,500,000
Percentage of weighted average yield with third party						2.34%
Loans held for sale				68,349,000		68,349,000		269,300,000	15,822,000
Cash realized on sale of loan	88,500,000
Acquired Equity interest on disposal of loans held for sale														35.00%
Loans acquired on exchange of loan held for sale														136,100,000
Maturity period of loan acquired	7 years
Description of loan	30-day LIBOR plus 300 basis points
Percentage of ownership investment in unconsolidated entity	65.00%
Carrying amount of loan provided				75,500,000		75,500,000
Amount of ownership investment in unconsolidated entity				32,300,000		32,300,000
Estimated life of investment				5 years		5 years
Equity in losses of unconsolidated entities				2,200,000	4,400,000	10,900,000	5,900,000
Equity in losses of unconsolidated entities related to the amortization				1,100,000		4,200,000
Line of credit facility provided to fund unfunded commitments						80,000,000
Working capital line of credit to fund certain expenses						20,000,000
Interest rate on loan provided						30-day LIBOR plus 300 basis points
Revolver agreement of credit facility provided amount outstanding				8,600,000		8,600,000
Working capital line of credit facility provided amount outstanding				$ 0		$ 0
Percentage of priority interest to be received on invested capital						12.00%
Payment to be made on pro rata basis																35.00%	65.00%
Discount rate use for calculation of fair value investment						17.57%
Percentage of variation in assumptions						10.00%

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REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Jun. 02, 2010	Jun. 30, 2009
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage ratio		8.00%
Tier 1 risk based capital ratio		10.00%
Total risk based capital ratio		0.12
common equity ratio	4.50%
capital conservation buffer	2.50%
Total common equity ratio	7.00%
Unsecured counterparty exposure	$ 1.4
Corporation had pledged collateral to guarantee its performance under swap agreement	63.6
Non-performing account receivable related to collateral pledged			64.5
Accrued interest			2.1
Standby Letters of Credit [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Commitments	83.4
Commitments to Extend Credit [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Commitments	1,500.0
Commitments To Credit Card Loans [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Commitments	$ 1,000.0
Minimum [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Percentage of risk weighted assets	0.00%
Maximum [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Percentage of risk weighted assets	100.00%

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ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) - Advances from FHLB Mature (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
One to thirty days	$ 10,000
Over ninety days to one year	155,000
One to three years	53,440
Three to five years	300,000
Total	$ 518,440

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CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net income (loss)	$ 15,247	$ (67,390)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	18,404	18,209
Amortization of core deposit intangible	1,766	1,766
Amortization of purchased credit card relationship intangible	545
Provision for loan and lease losses	90,033	194,362
Deferred income tax expense	775	2,187
Stock-based compensation	395	69
Gain on sales of investments, net		(53,115)
Loss on early extinguishment of borrowings		10,835
Other-than-temporary impairments on investment securities	1,933	957
Equity in losses of unconsolidated entities	10,926	5,893
Derivative instruments and financial liabilities measured at fair value (gain) loss	(955)	4,179
Loss (gain) on sale of premises and equipment and other assets	259	(2,733)
Net gain on sale of loans held for investment	(451)	(13,347)
Net amortization of premiums, discounts and deferred loan fees and costs	1,126	(1,267)
Originations and purchases of loans held for sale	(295,607)	(67,016)
Sales and repayments of loans held for sale	302,046	74,518
Amortization of broker placement fees	7,607	13,217
Net amortization of premium and discounts on investment securities	10,087	3,600
(Decrease) increase in accrued income tax payable	(1,048)	5,335
(Increase) decrease in accrued interest receivable	(909)	11,560
Decrease in accrued interest payable	(293)	(382)
Decrease (increase) in other assets	20,819	(8,995)
Increase (decrease) in other liabilities	8,059	(3,906)
Net cash provided by operating activities	190,764	128,536
Cash flows from investing activities:
Principal collected on loans	2,227,673	1,907,704
Loans originated	(1,791,097)	(1,681,084)
Purchases of loans	(493,653)	(118,445)
Proceeds from sale of loans held for investment	22,203	675,450
Proceeds from sale of repossessed assets	59,442	79,974
Proceeds from sale of available-for-sale securities	0	1,181,065
Proceeds from sale of held-to-maturity securities		348,750
Purchases of securities available for sale	(788,191)	(677,115)
Proceeds from principal repayments and maturities of securities available for sale	1,127,667	619,375
Proceeds from principal repayments and maturities of securities held to maturity		33,726
Additions to premises and equipment	(7,494)	(10,711)
Proceeds from sale of premises and equipment and other assets	1,040	5,107
Proceeds from securities litigation settlement and other proceeds	36	679
(Increase) decrease in other equity securities	(1,705)	15,265
Net cash provided by investing activities	355,921	2,379,740
Cash flows from financing activities:
Net decrease in deposits	(19,611)	(1,416,329)
Net repayments and cancellation costs of securities sold under agreements to repurchase	(100,000)	(410,587)
Net FHLB advances proceeds (paid) and cancellation costs	151,000	(244,248)
Repayments of medium-term notes	(21,957)	(7,000)
Proceeds from common stock sold	1,037
Net cash provided (used in) financing activities	10,469	(2,078,164)
Net increase in cash and cash equivalents	557,154	430,112
Cash and cash equivalents at beginning of period	446,566	370,283
Cash and cash equivalents at end of period	1,003,720	800,395
Cash and cash equivalents include:
Cash and due from banks	786,788	612,721
Money market instruments	216,932	187,674
Cash and Cash Equivalents, at Carrying Value, Total	$ 1,003,720	$ 800,395

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GOODWILL AND OTHER INTANGIBLES - Additional Information (Detail) (USD $)	9 Months Ended		3 Months Ended	9 Months Ended	12 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Purchased credit card relationship intangible [Member]	Sep. 30, 2012 Purchased credit card relationship intangible [Member]	Dec. 31, 2011 Purchased credit card relationship intangible [Member]	Jun. 30, 2012 Purchased credit card relationship intangible [Member]	Sep. 30, 2012 Core deposits intangibles [Member]	Sep. 30, 2011 Core deposits intangibles [Member]	Sep. 30, 2012 Core deposits intangibles [Member]	Sep. 30, 2011 Core deposits intangibles [Member]	Dec. 31, 2011 Core deposits intangibles [Member]
Finite-Lived Intangible Assets [Line Items]
Goodwill	$ 28,100,000	$ 28,100,000
Amount of fair value of goodwill exceeding carrying value	13,700,000
Goodwill impairment	0
Purchase credit card relationship intangible amount			24,465,000	24,465,000		24,465,000	45,844,000		45,844,000		45,844,000
Amortization period of purchased credit card relationship intangible				9.3 years	-				10.7 years		11.5 years
Amortization expense	$ 545,000		$ 400,000	$ 500,000			$ 600,000	$ 600,000	$ 1,800,000	$ 1,800,000

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INVESTMENT SECURITIES - OTTI Losses on Available-for-Sale Debt Securities (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Schedule of Available-for-sale Securities [Line Items]
Total other-than-temporary impairment losses
Portion of loss previously recognized in other comprehensive income	557	350	1,933	957
Net impairment losses recognized in earnings	557	350	1,933	957
Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Portion of loss previously recognized in other comprehensive income	(557)	(350)	(1,933)	(957)
Net impairment losses recognized in earnings	$ (557)	$ (350)	$ (1,933)	$ (957)

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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Changes in Impairment Allowance (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Valuation Allowance for Impairment of Recognized Servicing Assets [Line Items]
Balance at beginning of period	$ 118	$ 2,239	$ 2,725	$ 434
Temporary impairment charges	378	232	565	2,355
OTTI of servicing assets			(2,447)
Recoveries	(15)	(66)	(362)	(384)
Balance at end of period	$ 481	$ 2,405	$ 481	$ 2,405

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LOAN PORTFOLIO (Tables)

9 Months Ended

Sep. 30, 2012

Loan Portfolio Held for Investment

The following is a detail of the loan portfolio held for investment:

	September 30, 2012			December 31, 2011
	(In thousands)
Residential mortgage loans, mainly secured by first mortgages	$	2,762,418		$	2,873,785
Commercial loans:
Construction loans		352,891			427,863
Commercial mortgage loans		1,459,118			1,565,411
Commercial and Industrial loans		3,369,305			3,856,695
Loans to local financial institutions collateralized by real estate mortgages		258,341			273,821
Commercial loans		5,439,655			6,123,790
Finance leases		239,556			247,003
Consumer loans		1,746,535			1,314,814
Loans held for investment		10,188,164			10,559,392
Allowance for loan and lease losses		(445,531	)		(493,917	)
Loans held for investment, net	$	9,742,633		$	10,065,475

Loans Held for Investment on Which Accrual of Interest Income had been Discontinued

Loans held for investment classified as non-performing were as follows:

(In thousands)	September 30, 2012		December 31, 2011
Non-performing loans:
Residential mortgage	$	320,913	$	338,208
Commercial mortgage		231,163		240,414
Commercial and Industrial		230,459		270,171
Construction		189,458		250,022
Consumer:
Auto loans		17,639		19,641
Finance leases		3,061		3,485
Other consumer loans		15,351		16,421
Total non-performing loans held for investment (1)	$	1,008,044	$	1,138,362

(1) Amount exclude purchased credit-impaired loans with a carrying value of approximately $12.7 million acquired as part of the credit cards portfolio purchased in the second quarter of 2012 as further discussed below.

Corporation's Aging of Loans Held for Investment Portfolio

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

As of September 30, 2012 (In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due (1)		Total Past Due(4)		Purchased Credit- Impaired Loans (4)		Current		Total loans held for investment		90 days past due and still accruing (5)
Residential mortgage:
FHA/VA and other government guaranteed loans (2) (3) (5)		$—	$	12,406	$	91,422	$	103,828	$	—	$	112,662	$	216,490	$	91,422
Other residential mortgage loans (3)		—		109,309		333,903		443,212		—		2,102,716		2,545,928		12,990
Commercial:
Commercial & Industrial loans		14,436		11,516		258,354		284,306		—		3,343,340		3,627,646		27,895
Commercial mortgage loans (3)		—		11,744		235,955		247,699		—		1,211,419		1,459,118		4,792
Construction loans (3)		—		2,160		189,489		191,649		—		161,242		352,891		31
Consumer:
Auto loans		67,561		19,738		17,639		104,938		—		891,681		996,619		—
Finance leases		10,098		3,122		3,061		16,281		—		223,275		239,556		—
Other consumer loans		13,373		7,533		19,249		40,155		12,741		697,020		749,916		3,898
Total loans held for investment		$105,468	$	177,528	$	1,149,072	$	1,432,068	$	12,741	$	8,743,355	$	10,188,164	$	141,028

(1) Includes non-performing loans and accruing loans which 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) As of September 30, 2012, includes $6.1 million of defaulted loans collateralizing Ginnie Mae (“GNMA”) securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.

(3) 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, residential mortgage, commercial mortgage and construction loans are considered past due when the borrower is in arrears 2 or more monthly payments.

(4) Purchased credit–impaired loans are excluded from delinquency and non-performing statistics as further discussed below.

(5) It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as past due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $34.6 million of residential mortgage loans insured by FHA or guaranteed by the VA, which are over 18 months delinquent, that are no longer accruing interest as of September 30, 2012.

As of December 31, 2011 (In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due(1)		Total Past Due		Current		Total loans held for investment		90 days past due and still accruing
Residential mortgage:
FHA/VA and other government guaranteed loans (2) (3)	$	—	$	17,548	$	85,188	$	102,736	$	165,417	$	268,153	$	85,188
Other residential mortgage loans (3)		—		90,274		350,495		440,769		2,164,863		2,605,632		12,287
Commercial:
Commercial & Industrial loans		27,674		10,714		294,723		333,111		3,797,405		4,130,516		24,552
Commercial mortgage loans (3)		—		8,891		240,414		249,305		1,316,106		1,565,411		—
Construction loans (3)		—		8,211		258,811		267,022		160,841		427,863		8,789
Consumer:
Auto loans		61,265		18,963		19,641		99,869		837,697		937,566		—
Finance leases		11,110		4,172		3,485		18,767		228,236		247,003		—
Other consumer loans		10,170		4,699		16,421		31,290		345,958		377,248		—
Total loans held for investment	$	110,219	$	163,472	$	1,269,178	$	1,542,869	$	9,016,523	$	10,559,392	$	130,816

(1) Includes non-performing loans and accruing loans which are contractually delinquent 90 days or more (i.e. FHA/VA and other guaranteed loans).

(2) As of December 31, 2011, includes $66.4 million of defaulted loans collateralizing Ginnie Mae (“GNMA”) securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.

(3) 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, residential mortgage, commercial mortgage and construction loans are considered past due when the borrower is in arrears 2 or more monthly payments.

Corporation's Credit Quality Indicators by Loan

The Corporation’s credit quality indicators by loan type are summarized below:

	Commercial Credit Exposure-Credit risk Profile based on Creditworthiness category:
September 30, 2012	Substandard		Doubtful		Loss		Total Adversely Classified		Total Portfolio
	(In thousands)
Commercial Mortgage	$	388,225	$	6,526	$	—	$	394,751	$	1,459,118
Construction		188,051		22,184		605		210,840		352,891
Commercial and Industrial		405,897		23,728		1,240		430,865		3,627,646
	Commercial Credit Exposure-Credit risk Profile based on Creditworthiness category:
December 31, 2011	Substandard		Doubtful		Loss		Total Adversely Classified		Total Portfolio
	(In thousands)
Commercial Mortgage	$	414,355	$	8,462	$	—	$	422,817	$	1,565,411
Construction		247,560		32,059		2,916		282,535		427,863
Commercial and Industrial		457,927		31,100		1,373		490,400		4,130,516

Credit Risk Payment Activity

September 30, 2012	Consumer Credit Exposure-Credit risk Profile based on payment activity
	Residential Real-Estate				Consumer
	FHA/VA/ Guaranteed (1)		Other residential loans		Auto		Finance Leases		Other Consumer
	(In thousands)
Performing		$216,490		$2,225,015		$978,980		$236,495		$721,824
Purchased Credit-Impaired		—		—		—		—		12,741
Non-performing		—		320,913		17,639		3,061		15,351
Total		$216,490		$2,545,928		$996,619		$239,556		$749,916

(1) It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as past due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $34.6 million of residential mortgage loans insured by FHA or guaranteed by the VA, which are over 18 months delinquent, that are no longer accruing interest as of September 30, 2012.

December 31, 2011	Consumer Credit Exposure-Credit risk Profile based on payment activity
	Residential Real-Estate				Consumer
	FHA/VA/ Guaranteed		Other residential loans		Auto		Finance Leases		Other Consumer
	(In thousands)
Performing	$	268,153	$	2,267,424	$	917,925	$	243,518	$	360,827
Non-performing		—		338,208		19,641		3,485		16,421
Total	$	268,153	$	2,605,632	$	937,566	$	247,003	$	377,248

Impaired Loans

The following tables present information about impaired loans excluding purchased credit-impaired loans, which are reported separately and discussed below:

Impaired Loans

(Dollars in thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized Quarter to date		Interest Income Recognized Year to date
As of September 30, 2012 With no related allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—	$	—	$	—	$	—
Other residential mortgage loans		106,554		112,039		—		171,070		1,144		2,733
Commercial:
Commercial mortgage loans		50,043		62,819		—		40,939		442		1,003
Commercial & Industrial Loans		31,047		38,017		—		20,128		51		74
Construction Loans		38,863		64,637		—		37,314		33		70
Consumer:
Auto loans		—		—		—		—		—		—
Finance leases		—		—		—		—		—		—
Other consumer loans		1,647		2,597		—		2,729		25		51
	$	228,154	$	280,109	$	—	$	272,180	$	1,695	$	3,931
With an allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—	$	—	$	—	$	—
Other residential mortgage loans		488,234		550,123		49,640		428,808		3,857		10,851
Commercial:
Commercial mortgage loans		313,490		333,339		51,351		324,053		2,369		6,646
Commercial & Industrial Loans		207,465		272,977		57,001		236,896		479		1,503
Construction Loans		139,599		235,137		33,349		171,178		36		289
Consumer:
Auto loans		11,813		11,813		1,404		10,317		194		616
Finance leases		2,045		2,045		73		1,968		50		134
Other consumer loans		9,338		9,968		1,336		9,028		48		206
	$	1,171,984	$	1,415,402	$	194,154	$	1,182,248	$	7,033	$	20,244
Total:
FHA/VA Guaranteed loans	$	—	$	—	$	—	$	—	$	—	$	—
Other residential mortgage loans		594,788		662,162		49,640		599,878		5,001		13,584
Commercial:
Commercial mortgage loans		363,533		396,158		51,351		364,992		2,811		7,649
Commercial & Industrial Loans		238,512		310,994		57,001		257,024		530		1,577
Construction Loans		178,462		299,774		33,349		208,492		69		359
Consumer:		—		—		—		—		—		—
Auto loans		11,813		11,813		1,404		10,317		194		616
Finance leases		2,045		2,045		73		1,968		50		134
Other consumer loans		10,985		12,565		1,336		11,757		73		257
	$	1,400,138	$	1,695,511	$	194,154	$	1,454,428	$	8,728	$	24,176

(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
As of December 31, 2011
With no related allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—
Other residential mortgage loans		181,081		192,757		—
Commercial:
Commercial mortgage loans		13,797		15,283		—
Commercial & Industrial Loans		40,453		45,948		—
Construction Loans		33,759		45,931		—
Consumer:
Auto loans		—		—		—
Finance leases		—		—		—
Other consumer loans		2,840		3,846		—
	$	271,930	$	303,765	$	—
With an allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—
Other residential mortgage loans		423,340		465,495		48,566
Commercial:
Commercial mortgage loans		354,954		383,890		59,167
Commercial & Industrial Loans		223,572		316,641		58,652
Construction Loans		213,388		344,035		44,768
Consumer:
Auto loans		8,710		8,710		1,039
Finance leases		1,804		1,804		41
Other consumer loans		9,678		9,678		2,669
	$	1,235,446	$	1,530,253	$	214,902
Total:
FHA/VA Guaranteed loans	$	—	$	—	$	—
Other residential mortgage loans		604,421		658,252		48,566
Commercial:
Commercial mortgage loans		368,751		399,173		59,167
Commercial & Industrial Loans		264,025		362,589		58,652
Construction Loans		247,147		389,966		44,768
Consumer:
Auto loans		8,710		8,710		1,039
Finance leases		1,804		1,804		41
Other consumer loans		12,518		13,524		2,669
	$	1,507,376	$	1,834,018	$	214,902

Activity for Impaired loans

The following tables show the activity for impaired loans and the related specific reserve:

	Quarter ended			Nine-Month Period Ended
	September 30, 2012
	(In thousands)
Impaired Loans:
Balance at beginning of period	$	1,432,469		$	1,507,376
Loans determined impaired during the period		55,292			222,841
Net charge-offs		(30,971	)		(107,458	)
Increases to impaired loans (disbursements)		11,039			30,160
Foreclosures		(26,353	)		(113,737	)
Loans no longer considered impaired		(5,351	)		(42,269	)
Paid in full or partial payments		(35,987	)		(96,775	)
Balance at end of period	$	1,400,138		$	1,400,138

Activity for Specific Reserve

	Quarter Ended			Nine-Month Period Ended
	September 30, 2012
	(In thousands)
Specific Reserve:
Balance at beginning of period	$	209,860		$	214,902
Provision for loan losses		15,265			87,070
Net charge-offs		(30,971	)		(107,818	)
Balance at end of period	$	194,154		$	194,154

Contractually Required Principal and Interest Cash Flows Expected to be Collected and Fair Value at Acquisition Related to Loans Acquired

The table also displays the nonaccretable difference and the accretable yield at acquisition.

(In thousands)	At acquisition
	Purchased Credit- Impaired Loans
Contractually outstanding principal and interest at acquisition	$	34,577
Less: Nonaccretable difference		(15,408	)
Cash flows expected to be collected at acquisition		19,169
Less: Accretable yield		(3,451	)
Fair value of loans acquired	$	15,718

Outstanding Contractual Principal Balance and Carrying Value of Acquired Loans

The table below presents the outstanding contractual principal balance and carrying value of the PCI loans as of September 30, 2012:

(In thousands)	Purchased Credit- Impaired Loans
Contractual balance	$	31,364
Carrying value		12,741

Accretable Yield Related to Credit Card Portfolio from FIA

The following table presents changes in the accretable yield related to the PCI loans acquired from FIA:

(Dollars in thousands)	PCI Loans
Accretable yield at acquisition	$	3,451
Accretion recognized in earnings		(740	)
Accretable yield as of September 30, 2012	$	2,711

Selected Information on TDRs Includes Recorded Investment by Loan Class and Modification Type

Selected information on TDRs that includes the recorded investment by loan class and modification type is summarized in the following table. This information reflects all TDRs at September 30, 2012:

	September 30, 2012
(In Thousands)	Interest rate below market		Maturity or term extension		Combination of reduction in interest rate and extension of maturity		Forgiveness  of principal and/or interest		Forbearance agreement  (1)		Other (2)		Total
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans	$	17,437	$	4,196	$	346,314	$	—	$	—	$	42,300	$	410,247
Commercial Mortgage Loans		102,643		16,251		117,014		46,903		—		15,235		298,046
Commercial & Industrial Loans		16,878		12,394		21,708		7,333		9,521		39,723		107,557
Construction Loans		6,349		2,027		9,094		—		63,477		5,634		86,581
Consumer Loans - Auto		—		1,067		7,851		—		—		2,895		11,813
Finance Leases		—		1,669		375		—		—		—		2,044
Consumer Loans - Other		353		497		5,808		—		—		2,198		8,856
Total Troubled Debt Restructurings	$	143,660	$	38,101	$	508,164	$	54,236	$	72,998	$	107,985	$	925,144

(1) Mainly related to one construction relationship amounting to $53.4 million.

(2) 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.

Corporation's TDR Activity

The following table presents the Corporation’s TDR activity:

(In Thousands)	Quarter ended			Nine-Month Period Ended
	September 30, 2012
Beginning Balance of TDRs	$	861,932		$	820,499
New TDRs		90,674			216,202
Increases to existing TDRs (disbursements)		5,690			21,825
Charge-offs post modification		(15,636	)		(41,198	)
Foreclosures		(2,513	)		(30,768	)
Removed from TDR classification		—			(7,051	)
Paid-off and partial payments		(15,003	)		(54,365	)
Ending balance of TDRs	$	925,144		$	925,144

Breakdown Between Accrual and Nonaccrual Status of TDRs

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

(In Thousands)	September 30, 2012
	Accrual		Nonaccrual  (1)		Total TDRs
Non- FHA/VA Residential Mortgage loans	$	294,184	$	116,063	$	410,247
Commercial Mortgage Loans		157,445		140,601		298,046
Commercial & Industrial Loans		24,749		82,808		107,557
Construction Loans		2,490		84,091		86,581
Consumer Loans - Auto		7,114		4,699		11,813
Finance Leases		1,985		59		2,044
Consumer Loans - Other		7,037		1,819		8,856
Total Troubled Debt Restructurings	$	495,004	$	430,140	$	925,144

(1) Included in non-accrual loans are $203.6 million in loans that are performing under the terms of the restructuring agreement but are reported in non-accrual 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.

Loan Modifications are Considered TDRs

Loan modifications that are considered TDRs completed during the quarter and nine-month period ended September 30, 2012 and 2011 were as follows:

(Dollars in thousands)	Quarter ended September 30, 2012
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		147	$	23,421	$	23,431
Commercial Mortgage Loans		14		57,100		57,100
Commercial & Industrial Loans		11		1,278		1,271
Construction Loans		3		4,380		4,380
Consumer Loans - Auto		156		2,044		2,044
Finance Leases		24		462		462
Consumer Loans - Other		304		1,986		1,986
Total Troubled Debt Restructurings		659	$	90,671	$	90,674
(Dollars in thousands)	Nine-Month Period Ended September 30, 2012
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		403	$	64,412	$	64,773
Commercial Mortgage Loans		35		100,036		100,072
Commercial & Industrial Loans		47		33,162		29,593
Construction Loans		8		9,671		9,661
Consumer Loans - Auto		445		5,473		5,430
Finance Leases		76		1,384		1,384
Consumer Loans - Other		827		5,289		5,289
Total Troubled Debt Restructurings		1,841	$	219,427	$	216,202

(Dollars in thousands)	Quarter ended September 30, 2011
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		190	$	30,724	$	31,395
Commercial Mortgage Loans		21		37,686		39,998
Commercial & Industrial Loans		19		24,355		24,085
Construction Loans		7		14,532		14,423
Consumer Loans - Auto		188		2,359		2,359
Finance Leases		32		409		409
Consumer Loans - Other		234		2,730		2,820
Total Troubled Debt Restructurings		691	$	112,795	$	115,489

(Dollars in thousands)	Nine-Month Period Ended September 30, 2011
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		607	$	98,168	$	101,367
Commercial Mortgage Loans		61		149,340		121,078
Commercial & Industrial Loans		43		44,561		43,702
Construction Loans		14		106,204		106,278
Consumer Loans - Auto		600		7,423		7,423
Finance Leases		87		1,501		1,501
Consumer Loans - Other		910		8,758		8,892
Total Troubled Debt Restructurings		2,322	$	415,955	$	390,241

Loan Modifications Considered Troubled Debt Restructurings Defaulted

Loan modifications considered troubled debt restructurings that defaulted during the quarter and nine-month period ended September 30, 2012 and 2011 and had been modified in a TDR during the 12-months preceding the default date were as follows:

	Quarter ended September 30,
(Dollars in Thousands)	2012				2011
	Number of contracts		Recorded Investment		Number of contracts		Recorded Investment
Non- FHA/VA Residential Mortgage loans		49	$	8,031		31	$	4,108
Commercial Mortgage Loans		1		338		5		2,783
Commercial & Industrial Loans		1		1,910		1		128
Construction Loans		—		—		—		—
Consumer Loans - Auto		3		38		—		—
Consumer Loans - Other		6		37		2		49
Finance Leases		—		—		52		250
Total		60	$	10,354		91	$	7,318
	Nine-Month Period Ended September 30,
(Dollars in Thousands)	2012				2011
	Number of contracts		Recorded Investment		Number of contracts		Recorded Investment
Non- FHA/VA Residential Mortgage loans		137	$	20,841		120	$	31,141
Commercial Mortgage Loans		9		5,549		21		6,211
Commercial & Industrial Loans		5		8,189		2		1,567
Construction Loans		2		8,382		1		70
Consumer Loans - Auto		39		431		—		—
Consumer Loans - Other		12		155		2		49
Finance Leases		1		27		54		373
Total		205	$	43,574		200	$	39,411

Loan Restructuring and Effect on Allowance for Loan and Lease Losses

The following table provides additional information about the volume of this type of loan restructuring and the effect on the allowance for loan and lease losses in the first nine-months of 2012 and 2011:

(In thousands)	September 30, 2012		September 30, 2011
Principal balance deemed collectible at end of period	$	128,651	$	77,799
Amount charged-off	$	2,735	$	29,576
Charges to the provision for loan losses	$	1,939	$	6,349
Allowance for loan losses as of September 30, 2012	$	5,951	$	1,394

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SUPPLEMENTAL CASH FLOW INFORMATION - Supplemental Cash Flow Information (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash paid for:
Interest on borrowings	$ 128,193	$ 191,570
Income tax	5,139	2,120
Non-cash investing and financing activities:
Additions to other real estate owned	133,124	125,420
Additions to auto repossesions	39,383	50,380
Capitalization of servicing assets	4,486	3,793
Loan securitizations	165,318	151,972
Loans sold to a joint venture in exchange for an acquisition loan and an equity interest in the joint venture		183,709
Reclassification of Held-to-Maturity investment securities to Available-for-Sale		$ 88,751

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LOAN PORTFOLIO - Loans Held for Investment on Which Accrual of Interest Income had been Discontinued (Parenthetical) (Detail) (Credit impaired loans [Member], USD $) In Millions, unless otherwise specified	Sep. 30, 2012
Credit impaired loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Purchased credit impaired loans, fair value	$ 12.7

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NOTES PAYABLE

9 Months Ended

Sep. 30, 2012

NOTES PAYABLE

15 – NOTES PAYABLE

Notes payable consist of:

(In thousands)	September 30, 2012		December 31, 2011
Callable step-rate notes, bearing step increasing interest from 5.00% to 7.00% (6.00 % as of December 31, 2011) maturing on October 18, 2019, measured at fair value(1)	$	—	$	15,968
Dow Jones Industrial Average (DJIA) linked principal protected notes:
Series A maturing on February 28, 2012		—		7,374
	$	—	$	23,342

(1) During the second quarter of 2012, the Corporation prepaid medium term notes with a principal balance of 15.4 million that carried a rate of 6.00%. These notes were carried at fair value and changes in value were recorded as part of interest expense. As a result of the prepayment of the notes, a marked-to-market loss of $0.5 million was reversed resulting in a reduction in interest expense for the first nine months of 2012.

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ALLOWANCE FOR LOAN AND LEASE LOSSES (Tables)

9 Months Ended

Sep. 30, 2012

Changes in Allowance for Loan and Lease Losses

The changes in the allowance for loan and lease losses were as follows:

(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Quarter ended September 30, 2012
Allowance for loan and lease losses:
Beginning balance	$	67,440		$	100,846		$	166,021		$	67,858		$	54,988		$	457,153
Charge-offs		(7,586	)		(5,681	)		(12,795	)		(9,012	)		(9,444	)		(44,518	)
Recoveries		228			679			534			686			1,817			3,944
Provision (release)		9,083			(6,617	)		8,117			6,379			11,990			28,952
Ending balance	$	69,165		$	89,227		$	161,877		$	65,911		$	59,351		$	445,531
Ending balance: specific reserve for impaired loans	$	49,640		$	51,351		$	57,001		$	33,349		$	2,813		$	194,154
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	—		$	—
Ending balance: general allowance	$	19,525		$	37,876		$	104,876		$	32,562		$	56,538		$	251,377
Loans held for investment:
Ending balance	$	2,762,418		$	1,459,118		$	3,627,646		$	352,891		$	1,986,091		$	10,188,164
Ending balance: impaired loans	$	594,788		$	363,533		$	238,512		$	178,462		$	24,843		$	1,400,138
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	12,741		$	12,741
Ending balance: loans with general allowance	$	2,167,630		$	1,095,585		$	3,389,134		$	174,429		$	1,948,507		$	8,775,285
(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Nine-Month Period Ended September 30, 2012
Allowance for loan and lease losses:
Beginning balance	$	68,678		$	108,991		$	164,490		$	91,386		$	60,372		$	493,917
Charge-offs		(27,976	)		(15,588	)		(35,494	)		(42,908	)		(29,327	)		(151,293	)
Recoveries		676			721			2,179			4,004			5,294			12,874
Provision (release)		27,787			(4,897	)		30,702			13,429			23,012			90,033
Ending balance	$	69,165		$	89,227		$	161,877		$	65,911		$	59,351		$	445,531
Ending balance: specific reserve for impaired loans	$	49,640		$	51,351		$	57,001		$	33,349		$	2,813		$	194,154
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	—		$	—
Ending balance: general allowance	$	19,525		$	37,876		$	104,876		$	32,562		$	56,538		$	251,377
Loans held for investment:
Ending balance	$	2,762,418		$	1,459,118		$	3,627,646		$	352,891		$	1,986,091		$	10,188,164
Ending balance: impaired loans	$	594,788		$	363,533		$	238,512		$	178,462		$	24,843		$	1,400,138
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	12,741		$	12,741
Ending balance: loans with general allowance	$	2,167,630		$	1,095,585		$	3,389,134		$	174,429		$	1,948,507		$	8,775,285
(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Quarter ended September 30, 2011
Allowance for loan and lease losses:
Beginning balance	$	67,404		$	90,785		$	188,562		$	131,344		$	62,783		$	540,878
Charge-offs		(16,076	)		(3,316	)		(22,703	)		(17,008	)		(11,086	)		(70,189	)
Recoveries		260			7			177			185			1,923			2,552
Provision (release)		17,744			13,324			10,437			(2,547	)		7,488			46,446
Ending balance	$	69,332		$	100,800		$	176,473		$	111,974		$	61,108		$	519,687
Ending balance: specific reserve for impaired loans	$	49,350		$	35,928		$	77,932		$	48,209		$	2,878		$	214,297
Ending balance: general allowance	$	19,982		$	64,872		$	98,541		$	63,765		$	58,230		$	305,390
Loans held for investment:
Ending balance	$	2,873,966		$	1,584,787		$	4,123,174		$	473,812		$	1,577,403		$	10,633,142
Ending balance: impaired loans	$	548,677		$	245,439		$	384,640		$	237,701		$	15,325		$	1,431,782
Ending balance: loans with general allowance	$	2,325,289		$	1,339,348		$	3,738,534		$	236,111		$	1,562,078		$	9,201,360
(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Nine-Month Period Ended September 30, 2011
Allowance for loan and lease losses:
Beginning balance	$	62,330		$	105,596		$	152,641		$	151,972		$	80,486		$	553,025
Charge-offs		(30,571	)		(37,647	)		(50,858	)		(83,483	)		(35,168	)		(237,727	)
Recoveries		657			84			1,281			2,215			5,790			10,027
Provision		36,916			32,767			73,409			41,270			10,000			194,362
Ending balance	$	69,332		$	100,800		$	176,473		$	111,974		$	61,108		$	519,687
Ending balance: specific reserve for impaired loans	$	49,350		$	35,928		$	77,932		$	48,209		$	2,878		$	214,297
Ending balance: general allowance	$	19,982		$	64,872		$	98,541		$	63,765		$	58,230		$	305,390
Loans held for investment:
Ending balance	$	2,873,966		$	1,584,787		$	4,123,174		$	473,812		$	1,577,403		$	10,633,142
Ending balance: impaired loans	$	548,677		$	245,439		$	384,640		$	237,701		$	15,325		$	1,431,782
Ending balance: loans with general allowance	$	2,325,289		$	1,339,348		$	3,738,534		$	236,111		$	1,562,078		$	9,201,360

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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Changes in Servicing Assets (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Servicing Assets at Amortized Value [Line Items]
Adjustment to servicing assets for loans repurchased	$ 9.9	$ 8.5	$ 54.5	$ 29.3

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FAIR VALUE - Schedule of Changes in Fair Value (Detail) (Medium term notes [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Medium term notes [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Decrease (increase) in Interest Expense included in Current-Period Earnings	$ (1,871)	$ (140)	$ (2,864)

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2012

STOCKHOLDERS' EQUITY

17 – STOCKHOLDERS’ EQUITY

Common Stock

As of September 30, 2012 and December 31, 2011, the Corporation had 2,000,000,000 authorized shares of common stock with a par value of $0.10 per share. As of September 30, 2012 and December 31, 2011, there were 206,674,221 and 205,794,024 shares issued, respectively, and 206,179,368 and 205,134,171 shares outstanding, respectively. On July 30, 2009, the Corporation announced the suspension of common and preferred stock dividends effective with the preferred dividend for the month of August 2009.

In August of 2012 the Corporation granted 44,910 shares of restricted stock under the Omnibus Plan, as amended, to the independent directors subject to a one year vesting period. Also in March of 2012 the Corporation granted 719,500 shares of restricted stock, to certain senior executive officers and certain other employees. The restrictions on such restricted stock will lapse 50% over a two year period and 50% over a three year period. Included in the shares of restricted stock granted in 2012 are 557,000 shares granted to certain senior executive officers consistent with the requirements of the TARP Interim Final Rule, refer to Note 3 for additional details. The shares of restricted stock may vest more quickly in the event of death, disability, retirement, or a change in control. Based on particular circumstances evaluated by the Compensation Committee as they may relate to the termination of a restricted stock holder, the Corporation’s Board of Directors may, with the recommendation of the Compensation Committee, grant the full vesting of the restricted stock held upon termination of employment. Holders of restricted stock have the right to dividends or dividend equivalents, as applicable, during the restriction period. Such dividends or dividend equivalents will accrue during the restriction period, but will not be paid until restrictions lapse. The holder of restricted stock has the right to vote the shares.

Preferred Stock

The Corporation has 50,000,000 authorized shares of preferred stock with a par value of $1, redeemable at the Corporation’s option subject to certain terms. This stock may be issued in series and the shares of each series shall have such rights and preferences as shall be fixed by the Board of Directors when authorizing the issuance of that particular series. As of September 30, 2012, 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 the 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 preferred stock in a quotation medium.

As mentioned above, the Corporation stopped paying dividends for common and all its outstanding series of preferred stock. This suspension was effective with the dividends for the month of August 2009 on the Corporation’s five outstanding series of non-cumulative preferred stock.

Stock repurchase plan and treasury stock

The Corporation has a stock repurchase program under which, from time to time, it repurchases shares of common stock in the open market and holds them as treasury stock. No shares of common stock were repurchased during the first nine-months of 2012 or in 2011 by the Corporation. On February 17, 2012, the Corporation sold 165,000 shares of treasury stock at a purchase price of $3.79 per share to a director. As of September 30, 2012 and December 31, 2011 the Corporation had 494,853 and 659,853 shares held as treasury stock, respectively, that were available for general corporate purposes.

FirstBank Statutory Reserve

The Banking Act 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 stockholders without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The net loss experienced in 2011 exhausted FirstBank’s statutory reserve fund. The Bank cannot pay dividends until it can replenish the reserve fund to an amount of at least 20% of the original capital contributed.

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LOAN PORTFOLIO - Corporation's Credit Quality Indicators by Loan (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Portfolio credit quality indicators, loan	$ 1,459,118	$ 1,565,411
Commercial Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	394,751	422,817
Portfolio credit quality indicators, loan	1,459,118	1,565,411
Commercial Mortgage Loans [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	388,225	414,355
Commercial Mortgage Loans [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	6,526	8,462
Commercial Mortgage Loans [Member] | Unlikely to be Collected Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators
Construction Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	210,840	282,535
Portfolio credit quality indicators, loan	352,891	427,863
Construction Loans [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	188,051	247,560
Construction Loans [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	22,184	32,059
Construction Loans [Member] | Unlikely to be Collected Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	605	2,916
Commercial & Industrial Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	430,865	490,400
Portfolio credit quality indicators, loan	3,627,646	4,130,516
Commercial & Industrial Loans [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	405,897	457,927
Commercial & Industrial Loans [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	23,728	31,100
Commercial & Industrial Loans [Member] | Unlikely to be Collected Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Adversely classified, credit quality indicators	$ 1,240	$ 1,373

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SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Securities Sold Under Agreements to Repurchase (Parenthetical) (Detail)	Sep. 30, 2012	Dec. 31, 2011
Maximum [Member]
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Assets sold under agreements to repurchase interest rate	3.52%	4.40%
Minimum [Member]
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Assets sold under agreements to repurchase interest rate	2.45%	2.50%

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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (USD $) In Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance at beginning of period at Dec. 31, 2010		$ 425,009	$ 2,130	$ 319,459	$ 293,643	$ 17,718
Total stockholders' equity	986,847	430,498	2,130	319,528	220,764	13,927
Restricted stock grants
Net income (loss)	(67,390)				(67,390)
Other comprehensive income (loss), net of tax	(3,791)					(3,791)
Common stock sold
Accretion of preferred stock discount	(5,489)	5,489			(5,489)
Stock-based compensation				69
Balance at end of period at Sep. 30, 2011	986,847	430,498	2,130	319,528	220,764	13,927
Balance at beginning of period at Dec. 31, 2011	1,444,144	63,047	20,513	884,002	457,384	19,198
Total stockholders' equity	1,484,117	63,047	20,618	885,329	472,631	42,492
Restricted stock grants			76	(76)
Net income (loss)	15,247				15,247
Other comprehensive income (loss), net of tax	23,293					23,294
Common stock sold			29	1,008
Stock-based compensation				395
Balance at end of period at Sep. 30, 2012	1,484,117	63,047	20,618	885,329	472,631	42,492
Balance at beginning of period at Jun. 30, 2012
Total stockholders' equity	1,484,117	63,047
Net income (loss)	19,073
Other comprehensive income (loss), net of tax	15,881
Balance at end of period at Sep. 30, 2012	$ 1,484,117	$ 63,047

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Consolidated Statements of Financial Condition (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Allowance for loan and lease losses	$ 445,531	$ 493,917
Fair value of notes payable		15,968
Preferred stock, shares authorized	50,000,000	50,000,000
Common stock, par value	$ 0.10	$ 0.10
Common stock, shares authorized	2,000,000,000	2,000,000,000
Common stock, shares issued	206,674,221	205,794,024
Common stock, shares outstanding	206,179,368	205,134,171
Tax expenses of accumulated other comprehensive income	7,843	7,751
Non-cumulative Perpetual Monthly Income Preferred Stock: issued 22,004,000 shares, outstanding - 2,521,872 shares, aggregate liquidation value of $63,047 [Member]
Preferred stock, shares issued	22,004,000	22,004,000
Preferred stock, shares outstanding	2,521,872	2,521,872
Preferred stock, liquidation value	$ 63,047	$ 63,047

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GOODWILL AND OTHER INTANGIBLES

9 Months Ended

Sep. 30, 2012

GOODWILL AND OTHER INTANGIBLES

10 – GOODWILL AND OTHER INTANGIBLES

Goodwill as of September 30, 2012 and December 31, 2011 amounted to $28.1 million, recognized as part of “Other Assets” in the Consolidated Statement of Financial Condition. The Corporation conducted its annual evaluation of goodwill and intangibles during the fourth quarter of 2011. The evaluation was a two step process. The Step 1 evaluation of goodwill allocated to the Florida reporting unit indicated potential impairment of goodwill. The Step 1 fair value for the unit was below the carrying amount of its equity book value as of the October 1, 2011 valuation date, requiring the completion of Step 2. The Step 2 required a valuation of all assets and liabilities of the Florida unit, including any recognized and unrecognized intangible assets, to determine the fair value of net assets. To complete Step 2, the Corporation subtracted from the unit’s Step 1 fair value the determined fair value of the net assets to arrive at the implied fair value of goodwill. The results of the Step 2 analysis indicated that the implied fair value of goodwill exceeded the goodwill carrying value by $13.7 million, resulting in no goodwill impairment. Goodwill was not impaired as of December 31, 2011, nor was any goodwill written-off due to impairment during 2011. There have been no 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 nine-months of 2012. 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 next 9.3 years on an accelerated basis proportionate to the projected run-off of the acquired credit cards accounts, which is based on historical performance of the portfolio.

The following tables shows the gross amount and accumulated amortization of the Corporation’s intangible assets recognized as part of Other Assets in the consolidated statement of financial condition:

	As of September 30, 2012			As of December 31, 2011
Core deposit intangible:
Gross amount	$	45,844		$	45,844
Accumulated amortization		(35,921	)		(34,155	)
Net carrying amount	$	9,923		$	11,689
Remaining amortization period		10.7 years			11.5 years
Purchased credit card relationship intangible:
Gross amount	$	24,465		$	—
Accumulated amortization		(545	)		—
Net carrying amount	$	23,920		$	—
Remaining amortization period		9.3 years			—

For the quarter and nine-month period ended September 30, 2012, the amortization expense of core deposit intangibles amounted to $0.6 million and $1.8 million (2011 — $0.6 million and $1.8 million). For the quarter and nine-month period ended September 30, 2012, the amortization expense of the purchased credit card relationship intangible amounted to $0.4 million and $0.5 million, respectively.

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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Weighted-Averages of Key Economic Assumptions in Valuation Model (Parenthetical) (Detail)	Sep. 30, 2012
Servicing assets and servicing liabilities at fair value assumptions used to estimate fair value prepayment speed	10.00%
Servicing assets and servicing liabilities at fair value assumptions used to estimate fair value prepayment speed	20.00%
Servicing assets and servicing liabilities at fair value assumptions used to estimate fair value discount rate	10.00%
Servicing assets and servicing liabilities at fair value assumptions used to estimate fair value discount rate	20.00%

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Additional Information (Detail)	Sep. 30, 2012
Maximum [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Floating rate range	2.52%
Minimum [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Floating rate range	1.67%

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Effect of Derivative Instruments on Statement of Income (Loss) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Economic undesignated hedges:
Total gain (loss) on derivatives	$ 123	$ (1,090)	$ 465	$ (2,010)
Interest income - Loans [Member] | Loans [Member]
Economic undesignated hedges:
Total gain (loss) on derivatives	170	(954)	469	(1,794)
Interest expense - Notes payable and other borrowings [Member] | Interest Rate Cap Option Written And Purchase [Member] | Embedded written and purchased options on stock index notes payable [Member]
Economic undesignated hedges:
Total gain (loss) on derivatives		40		(7)
Mortgage Banking Activities [Member] | Forward contract sale of TBA GNMA MBS Pools [Member]
Economic undesignated hedges:
Total gain (loss) on derivatives	$ (47)	$ (176)	$ (4)	$ (209)

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FAIR VALUE - Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Securities available for sale:
Investment securities available for sale	$ 1,597,847	$ 1,923,268
Liabilities:
Fair value of notes payable		15,968
Derivatives, included in liabilities:
Total	1,604,611	1,948,347
Medium term notes [Member]
Liabilities:
Fair value of notes payable		15,968
Embedded written options on stock index deposits and notes payable [Member]
Derivatives, included in liabilities:
Derivatives, included in liabilities		899
Forward Contracts [Member]
Derivatives, included in liabilities:
Derivatives, included in liabilities	190	168
Equity Securities [Member]
Securities available for sale:
Investment securities available for sale	40	41
U.S. Treasury securities [Member]
Securities available for sale:
Investment securities available for sale	7,495	476,992
Non-callable U.S. agency debt [Member]
Securities available for sale:
Investment securities available for sale		301,585
Callable U.S. agency debt and MBS [Member]
Securities available for sale:
Investment securities available for sale	1,472,277	859,818
Puerto Rico Government obligations [Member]
Securities available for sale:
Investment securities available for sale	63,346	222,613
Private label MBS [Member]
Securities available for sale:
Investment securities available for sale	54,689	61,206
Corporate bonds [Member]
Securities available for sale:
Investment securities available for sale		1,013
Interest Rate Cap [Member]
Derivatives, included in assets:
Derivatives, included in assets	318	378
Derivatives, included in liabilities:
Derivatives, included in liabilities	6,238	6,767
Purchased options used to manage exposure to the stock market on embedded stock index options [Member]
Derivatives, included in assets:
Derivatives, included in assets		899
Forward contracts [Member]
Derivatives, included in assets:
Derivatives, included in assets	18
Level 1 [Member]
Derivatives, included in liabilities:
Total	7,535	778,618
Level 1 [Member] | Equity Securities [Member]
Securities available for sale:
Investment securities available for sale	40	41
Level 1 [Member] | U.S. Treasury securities [Member]
Securities available for sale:
Investment securities available for sale	7,495	476,992
Level 1 [Member] | Non-callable U.S. agency debt [Member]
Securities available for sale:
Investment securities available for sale		301,585
Level 2 [Member]
Derivatives, included in liabilities:
Total	1,538,644	1,104,266
Level 2 [Member] | Medium term notes [Member]
Liabilities:
Fair value of notes payable		15,968
Level 2 [Member] | Embedded written options on stock index deposits and notes payable [Member]
Derivatives, included in liabilities:
Derivatives, included in liabilities		899
Level 2 [Member] | Forward Contracts [Member]
Derivatives, included in liabilities:
Derivatives, included in liabilities	190	168
Level 2 [Member] | Callable U.S. agency debt and MBS [Member]
Securities available for sale:
Investment securities available for sale	1,472,277	859,818
Level 2 [Member] | Puerto Rico Government obligations [Member]
Securities available for sale:
Investment securities available for sale	59,603	219,369
Level 2 [Member] | Interest Rate Cap [Member]
Derivatives, included in assets:
Derivatives, included in assets	318	378
Derivatives, included in liabilities:
Derivatives, included in liabilities	6,238	6,767
Level 2 [Member] | Purchased options used to manage exposure to the stock market on embedded stock index options [Member]
Derivatives, included in assets:
Derivatives, included in assets		899
Level 2 [Member] | Forward contracts [Member]
Derivatives, included in assets:
Derivatives, included in assets	18
Level 3 [Member]
Derivatives, included in liabilities:
Total	58,432	65,463
Level 3 [Member] | Puerto Rico Government obligations [Member]
Securities available for sale:
Investment securities available for sale	3,743	3,244
Level 3 [Member] | Private label MBS [Member]
Securities available for sale:
Investment securities available for sale	54,689	61,206
Level 3 [Member] | Corporate bonds [Member]
Securities available for sale:
Investment securities available for sale		$ 1,013

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SEGMENT INFORMATION - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2012 Segment
Number of reportable segments	6

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STOCKHOLDERS' EQUITY - Additional Information (Detail) (USD $)	9 Months Ended			9 Months Ended				1 Months Ended	9 Months Ended			1 Months Ended	9 Months Ended		9 Months Ended
	Sep. 30, 2012 ShareSeries	Jan. 17, 2012	Dec. 31, 2011	Sep. 30, 2012 Common Stock [Member]	Sep. 30, 2011 Common Stock [Member]	Sep. 30, 2012 Minimum [Member]	Sep. 30, 2012 Maximum [Member]	Mar. 31, 2012 Omnibus Plan [Member]	Sep. 30, 2012 Omnibus Plan [Member]	Mar. 31, 2012 Restricted Stock [Member]	Apr. 29, 2008 Restricted Stock [Member]	Aug. 31, 2012 Restricted Stock [Member] Omnibus Plan [Member]	Sep. 30, 2012 Restricted Stock [Member] Omnibus Plan [Member]	Mar. 31, 2012 Restricted Stock [Member] Omnibus Plan [Member]	Sep. 30, 2012 First Bank [Member]	Sep. 30, 2012 Series A Preferred Stock [Member]	Sep. 30, 2012 Series B Preferred Stock [Member]	Sep. 30, 2012 Series C Preferred Stock [Member]	Sep. 30, 2012 Series D Preferred Stock [Member]	Sep. 30, 2012 Series E Preferred Stock [Member]
Class of Stock [Line Items]
Common stock, shares authorized	2,000,000,000		2,000,000,000
Common stock, par value	$ 0.10		$ 0.10
Common stock, shares issued	206,674,221		205,794,024
Common stock, shares outstanding	206,179,368		205,134,171
Granted shares of restricted stock														719,500
Restricted stock awarded to directors												44,910
Restricted stock lapse, maximum						2 years	3 years						1 year
Percentage of restricted stock lapse								50.00%	50.00%
Remaining percentage of share vest during period									50.00%
Restricted stock granted to senior executive officers										557,000	557,000
Corporation has authorized shares of preferred stock	50,000,000		50,000,000
Preferred stock, par value	$ 1
Number of preferred stock series	5
Preferred stock dividend rate percentage																7.125%	8.35%	7.40%	7.25%	7.00%
Liquidation value per share		$ 25
Repurchased of common stock
Number of treasury stock sold to director	165,000
Purchase price of treasury stock	$ 3.79
Stock repurchase plan treasury stock	494,853		659,853
Legal surplus reserve rate															10.00%
Original amount contributed in percentage	20.00%

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 31, 2012
Entity Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Trading Symbol	FBP
Entity Registrant Name	FIRST BANCORP /PR/
Entity Central Index Key	0001057706
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		206,179,368

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FAIR VALUE - Fair Value of Assets and Liabilities Measured on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 61,838	$ 71,412	$ 65,463	$ 74,993
Total gains or (losses) (realized/unrealized):
Included in earnings	(557)	(350)	(1,933)	(957)
Included in other comprehensive income	1,666	897	6,722	2,768
Held-to-Maturity investment securities reclassified to Available-for-Sale				2,000
Sales	(1,450)		(1,450)
Principal repayments and amortization	(3,065)	(3,851)	(10,370)	(10,696)
Ending balance	$ 58,432	$ 68,108	$ 58,432	$ 68,108

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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS

9 Months Ended

Sep. 30, 2012

NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS

11 – NON-CONSOLIDATED VARIABLE INTEREST ENTITIES 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 transfers and other transactions with Variable Interest Entities (“VIEs”) for consolidation, 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:

Ginnie Mae

The Corporation typically transfers first lien residential mortgage loans in conjunction with Ginnie Mae securitization transactions whereby 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, as such, under seller/servicer agreements the Corporation is required to service the loans in accordance with the issuers’ servicing guidelines and standards. As of September 30, 2012, the Corporation serviced loans securitized through GNMA with principal balance of $734.2 million.

Trust Preferred Securities

In 2004, FBP Statutory Trust I, a financing subsidiary of the Corporation, sold to institutional investors $100 million of its variable rate trust preferred securities. 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, were used by FBP Statutory Trust I 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, sold to institutional investors $125 million of its variable rate trust preferred securities. 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, were used by FBP Statutory Trust II 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, net of related issuance costs. 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 September 17, 2034 and September 20, 2034, respectively; however, under certain circumstances, the maturity of Junior Subordinated Debentures may be shortened (such shortening would result in a mandatory redemption of the variable rate trust preferred securities). The trust preferred securities, subject to certain limitations, qualify as Tier I regulatory capital under current Federal Reserve rules and regulations. The Collins Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act eliminates certain trust preferred securities from Tier 1 Capital. These “regulatory capital deductions” for trust preferred securities are to be phased in incrementally over a period of 3 years beginning on January 1, 2013.

Grantor Trusts

During 2004 and 2005, a third party to the Corporation, from now on identified as the seller, established a series of statutory trusts to effect the securitization of mortgage loans and the sale of trust certificates. 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 fee compensation for services provided, the 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, that has an interest only strip (“IO”) tied to the cash flows of the underlying loans, whereas it is entitled to received 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 of the securities. The FDIC became the owner of the IO upon the intervention of the seller, a failed financial institution. No recourse agreement exists and the risk from losses on non accruing loans and repossessed collateral are absorbed by the Bank as the sole holder of the certificates. As of September 30, 2012, the amortized balance and carrying value of Grantor Trusts amounted to $72.5 million and $54.5 million, respectively, with a weighted average yield of 2.34%.

Investment in unconsolidated entities

On February 16, 2011, FirstBank sold an asset portfolio consisting of performing and non-performing construction, commercial mortgage and C&I loans with an aggregate book value of $269.3 million to CPG/GS PR NPL, LLC (“CPG/GS” or the “Joint Venture”) 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 has a 7-year maturity and bears variable interest at 30-day LIBOR plus 300 basis points and is secured by a pledge of all of the acquiring entity’s assets as well as the PRLP’s 65% ownership interest in CPG/GS. As of September 30, 2012, the carrying amount of the loan is $75.5 million and is included in the Corporation’s C&I loan receivable portfolio; the carrying value of FirstBank’s equity interest in CPG/GS is $32.3 million as of September 30, 2012, accounted under the equity method and included as part of Investment in unconsolidated entities in the Consolidated Statements of Financial Condition. When applying the equity method, the Bank follows the Hypothetical Liquidation Book Value method (“HLBV”) to determine its share in CPG/GS earnings or losses. Under HLBV, the Bank determines its share in CPG/GS earnings or losses by determining the difference between its “claim on CPG/GS’s book value” at the end of the period as compared to the beginning of the period. This claim is calculated as the amount the Bank would receive if CPG/GS were to liquidate all of its assets at recorded amounts determined in accordance with GAAP and distribute the resulting cash to the investors, PRLP and FirstBank, according to their respective priorities as provided in the contractual agreement. The Bank reports its share of CPG/GS operating results on a one-quarter lag basis. In addition, as a result of using HLBV, the difference between the Bank’s investment in CPG/GS and its claim in the book value of CPG/GS at the date of the investment, known as the basis difference, is amortized over the estimated life of the investment, or five years as of September 30, 2012. CPG/GS records its loans receivable under the fair value option. Equity in losses of unconsolidated entities for the quarter and nine-month period ended September 30, 2012 of $2.2 million and $10.9 million, includes $1.1 million and $4.2 million, respectively, related to the amortization of the basis differential compared to equity in losses of unconsolidated entities of $4.4 million and $5.9 million for the same periods in 2011.

FirstBank also provided an $80 million advance facility to CPG/GS to fund unfunded commitments and costs to complete projects under construction which was fully disbursed in 2011, and a $20 million working capital line of credit to fund certain expenses of CPG/GS. During the second quarter of 2012, CPG repaid the outstanding balance of the advance facility to fund unfunded commitments and the funds became available to re-draw under a one-time revolver agreement. These loans bear variable interest at 30-day LIBOR plus 300 basis points. As of September 30, 2012, the carrying value of the revolver agreement and working capital line were $8.6 million and $0, respectively, and are included in the Corporation’s C&I loan receivable portfolio.

Cash proceeds received by CPG/GS are first used to cover operating expenses and debt service payments, including the note receivable, the advanced facility and the working capital line, described above, which must be fully 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%, 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. FirstBank may experience further losses associated with this transaction due to this subordination in an amount equal to up to the value of its interest in CPG/GS. Factors that could impact FirstBank’s recoverability of its equity interest include lower than expected sale prices of units underlying CPG/GS assets and/or lower than projected liquidation value of the underlying collateral and changes in the expected timing of cash flows, among others.

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 impact the entity’s economic performance and the obligation to absorb losses of CPG/GS that could potentially be significant to the VIE or the right to receive benefits from the entity 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 the loan portfolio, impact foreclosure proceedings, or manage the construction and sale of the property; therefore, the Bank concluded that it is not the primary beneficiary of CPG/GS. As a creditor to CPG/GS, the Bank has certain rights related to CPG/GS, however, these are intended to be protective in nature and do not provide the Bank with the ability to manage the operations of CPG/GS. Since CPG/GS is not a consolidated subsidiary of the Bank and given that the transaction met the criteria for sale accounting under authoritative guidance, the Bank accounted for this transaction as a true sale, recognizing the cash received, the notes receivable and the interest in CPG/GS and derecognizing the loan portfolio sold.

The initial fair value of the investment in CPG/GS was determined using techniques with significant unobservable (Level 3) inputs. The valuation inputs included an estimate of future cash flows, expectations about possible variations in the amount and timing of cash flows, and a discount factor based on a rate of return. The Corporation researched available market data and internal information (i.e. proposals received for the servicing of distressed assets and public disclosures and information of similar structures and/or of distressed asset sales) and determined reasonable ranges of expected returns for FirstBank’s equity interest.

The rate of return of 17.57% was used as the discount factor used to estimate the value of the FirstBank’s equity interest and represents the Bank’s estimate of the yield a market participant would require. A reasonable range of equity returns was assessed considering the range of company specific risk premiums. The valuation of this type of equity interest is highly subjective and somewhat dependent on non-observable market assumptions, which may result in variations from market participant to market participant.

Servicing Assets

The Corporation is actively involved in the securitization of pools of FHA-insured and VA-guaranteed mortgages for issuance of GNMA 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						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Balance at beginning of period	$	16,592		$	14,638		$	15,226		$	15,163
Capitalization of servicing assets		1,389			1,271			4,486			3,793
Amortization		(834	)		(726	)		(2,220	)		(1,823	)
Adjustment to servicing assets for loans repurchased (1)		(124	)		(93	)		(629	)		(238	)
Adjustment to fair value		(363	)		(166	)		(203	)		(1,971	)
Balance at end of period	$	16,660		$	14,924		$	16,660		$	14,924

(1) Amount represents the adjustment to fair value related to the repurchase of $9.9 million and $54.5 million for the quarter and nine-month period ended September 30, 2012, respectively, and, $8.5 million and $29.3 million for the quarter and nine-month period ended September 30, 2011, respectively, in principal balance 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						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Balance at beginning of period	$	118		$	2,239		$	2,725		$	434
Temporary impairment charges		378			232			565			2,355
OTTI of servicing assets		—			—			(2,447	)		—
Recoveries		(15	)		(66	)		(362	)		(384	)
Balance at end of period	$	481		$	2,405		$	481		$	2,405

The components of net servicing income are shown below:

	Quarter ended						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Servicing fees	$	1,399		$	1,293		$	4,161		$	3,955
Late charges and prepayment penalties		463			184			925			551
Adjustment for loans repurchased		(124	)		(93	)		(629	)		(238	)
Servicing income, gross		1,738			1,384			4,457			4,268
Amortization and impairment of servicing assets		(1,197	)		(892	)		(2,423	)		(3,794	)
Servicing income, net	$	541		$	492		$	2,034		$	474

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 ranged as follows:

	Maximum			Minimum
Nine-Month Period Ended September 30, 2012:
Constant prepayment rate:
Government guaranteed mortgage loans		12.4	%		11.6	%
Conventional conforming mortgage loans		12.8	%		12.6	%
Conventional non-conforming mortgage loans		13.8	%		13.3	%
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	%
Nine-Month Period Ended September 30, 2011:
Constant prepayment rate:
Government guaranteed mortgage loans		12.9	%		10.6	%
Conventional conforming mortgage loans		14.3	%		12.7	%
Conventional non-conforming mortgage loans		13.9	%		11.7	%
Discount rate:
Government guaranteed mortgage loans		11.5	%		11.3	%
Conventional conforming mortgage loans		9.5	%		9.3	%
Conventional non-conforming mortgage loans		15.0	%		13.8	%

At September 30, 2012, fair values of the Corporation’s servicing assets were based on a valuation model that incorporates market driven assumptions, adjusted by the particular characteristics of the Corporation’s servicing portfolio, regarding discount rates and mortgage prepayment rates. The weighted-averages of the key economic assumptions used by the Corporation in its valuation model and the sensitivity of the current fair value to immediate 10 percent and 20 percent adverse changes in those assumptions for mortgage loans at September 30, 2012, were as follows:

	(Dollars in thousands)
Carrying amount of servicing assets	$	16,660
Fair value	$	18,007
Weighted-average expected life (in years)		7.60
Constant prepayment rate (weighted-average annual rate)		12.66	%
Decrease in fair value due to 10% adverse change	$	857
Decrease in fair value due to 20% adverse change	$	1,650
Discount rate (weighted-average annual rate)		11.09	%
Decrease in fair value due to 10% adverse change	$	663
Decrease in fair value due to 20% adverse change	$	1,281

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10 percent variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to 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.

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LOAN PORTFOLIO - Corporation's TDR Activity (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012
Schedule Of Financing Receivables [Line Items]
Beginning Balance of TDRs	$ 861,932	$ 820,499
New TDRs	90,674	216,202
Increases to existing TDRs (disbursements)	5,690	21,825
Charge-offs post modification	(15,636)	(41,198)
Foreclosures	(26,353)	(113,737)
Removed from TDR classification		(7,051)
Paid-off and partial payments	(15,003)	(54,365)
Ending balance of TDRs	$ 925,144	$ 925,144

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Fair Value of Derivative Instruments and Location in Statement of Financial Condition (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Derivatives, Fair Value [Line Items]
Asset derivative, Gross	$ 336	$ 1,277
Derivative Liability, Fair Value, Gross Liability	6,428	7,834
Accounts payable and other liabilities [Member] | Interest rate swap agreements [Member]
Derivatives, Fair Value [Line Items]
Accounts payable and other liabilities	6,238	6,767
Accounts payable and other liabilities [Member] | Forward contract sale of TBA GNMA MBS Pools [Member]
Derivatives, Fair Value [Line Items]
Accounts payable and other liabilities	190	168
Notes payable [Member] | Embedded written options on stock index deposits and notes payable [Member]
Derivatives, Fair Value [Line Items]
Accounts payable and other liabilities		899
Other assets [Member] | Interest rate swap agreements [Member]
Derivatives, Fair Value [Line Items]
Interest rate swap agreements used to hedge loans, Asset Derivatives	318	378
Other assets [Member] | Purchased options used to manage exposure to the stock market on embedded stock index options [Member]
Derivatives, Fair Value [Line Items]
Purchased options used to manage exposure to the stock market on embedded stock index options, Asset Derivatives		899
Other assets [Member] | Forward contract sale of TBA GNMA MBS Pools [Member]
Derivatives, Fair Value [Line Items]
Sales of TBA GNMA MBS pools	$ 18

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CONSOLIDATED STATEMENTS OF INCOME (LOSS) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Interest income:
Loans	$ 155,225	$ 144,934	$ 437,990	$ 449,219
Investment securities	11,344	13,283	33,513	52,610
Money market investments	395	325	1,220	1,034
Total interest income	166,964	158,542	472,723	502,863
Interest expense:
Deposits	29,953	46,140	100,176	149,724
Securities sold under agreements to repurchase	6,707	10,700	21,825	36,858
Advances from FHLB	2,953	3,796	9,222	12,760
Notes payable and other borrowings	1,848	3,651	5,426	8,552
Total interest expense	41,461	64,287	136,649	207,894
Net interest income	125,503	94,255	336,074	294,969
Provision for loan and lease losses	28,952	46,446	90,033	194,362
Net interest income after provision for loan and lease losses	96,551	47,809	246,041	100,607
Non-interest income:
Service charges on deposit accounts	3,267	3,098	9,754	9,484
Other service charges	1,098	1,485	3,843	4,659
Mortgage banking activities	4,728	3,676	13,260	19,603
Net gain on sale of investments	10	12,506	36	53,796
Other-than-temporary impairment losses on investment securities:
Total other-than-temporary impairment losses
Portion of loss previously recognized in other comprehensive income	(557)	(350)	(1,933)	(957)
Net impairment losses on investment securities	(557)	(350)	(1,933)	(957)
Loss on early extinguishment of borrowings		(9,012)		(10,835)
Equity in losses of unconsolidated entities	(2,199)	(4,357)	(10,926)	(5,893)
Other non-interest income	8,779	6,918	23,589	23,454
Total non-interest income	15,126	13,964	37,623	93,311
Non-interest expenses:
Employees' compensation and benefits	31,058	29,375	93,770	89,221
Occupancy and equipment	15,208	15,468	46,065	46,321
Business promotion	4,004	2,509	10,026	8,801
Professional fees	6,295	5,983	16,796	17,192
Taxes, other than income taxes	3,499	3,420	10,350	9,953
Insurance and supervisory fees	13,023	15,041	39,333	44,622
Net loss on real estate owned (REO) and REO operations	8,686	4,952	18,915	16,423
Other non-interest expenses	10,070	6,183	28,723	19,695
Total non-interest expenses	91,843	82,931	263,978	252,228
Income (loss) before income taxes	19,834	(21,158)	19,686	(58,310)
Income tax expense	(761)	(2,888)	(4,439)	(9,080)
Net income (loss)	19,073	(24,046)	15,247	(67,390)
Net income (loss) attributable to common stockholders	$ 19,073	$ (31,143)	$ 15,247	$ (88,785)
Net income (loss) per common share:
Basic	$ 0.09	$ (1.46)	$ 0.07	$ (4.17)
Diluted	$ 0.09	$ (1.46)	$ 0.07	$ (4.17)
Dividends declared per common share

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OTHER EQUITY SECURITIES

9 Months Ended

Sep. 30, 2012

OTHER EQUITY SECURITIES

5 – OTHER EQUITY SECURITIES

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

As of September 30, 2012 and December 31, 2011, the Corporation had investments in FHLB stock with a book value of $38.4 million and $36.7 million, respectively. The net realizable value is a reasonable proxy for the fair value of these instruments. Dividend income from FHLB stock for the quarter and nine-month period ended September 30, 2012 amounted to $0.3 million and $1.1 million, respectively, compared to $0.4 million and $1.4 million for the comparable periods in 2011.

The FHLB stocks owned by the Corporation are issued by the FHLB of New York and by the FHLB of Atlanta. Both Banks are part of the Federal Home Loan Bank System, a national wholesale banking network of 12 regional, stockholder-owned congressionally chartered banks. The Federal Home Loan Banks are all privately capitalized and operated by their member stockholders. The system is supervised by the Federal Housing Finance Agency, which ensures that the Home Loan Banks 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.

The Corporation has other equity securities that do not have a readily available fair value. The carrying value of such securities as of September 30, 2012 and December 31, 2011 was $1.3 million.

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INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2012

INVESTMENT SECURITIES

4 – INVESTMENT SECURITIES

Investment Securities Available for Sale

The amortized cost, non-credit loss component of other-than-temporary impairment (“OTTI”) on securities with changes in fair value recorded in other comprehensive income (“OCI”), gross unrealized gains and losses recorded in OCI, approximate fair value, weighted-average yield and contractual maturities of investment securities available for sale were as follows:

	September 30, 2012												December 31, 2011
	Amortized cost		Non-Credit Loss Component of OTTI Recorded in OCI		Gross Unrealized				Fair value		Weighted average yield%		Amortized cost		Non-Credit Loss Component of OTTI Recorded in OCI		Gross Unrealized				Fair value		Weighted average yield%
(Dollars in thousands)					gains		losses										gains		losses
U.S. Treasury securities:
Due within one year	$	7,494	$	—	$	1	$	—	$	7,495		0.17	$	476,665	$	—	$	327	$	—	$	476,992		0.34
Obligations of U.S. Government sponsored agencies:
Due within one year		—		—		—		—		—		—		300,381		—		1,204		—		301,585		1.15
After 1 to 5 years		25,650		—		11		—		25,661		0.35		—		—		—		—		—		—
Puerto Rico Government obligations:
Due within one year		—		—		—		—		—		—		8,560		—		110		—		8,670		4.20
After 1 to 5 years		—		—		—		—		—		—		70,590		—		171		1		70,760		2.63
After 5 to 10 years		39,744		—		1,335		—		41,079		4.49		118,186		—		76		13		118,249		5.07
After 10 years		21,102		—		1,190		25		22,267		5.78		24,154		—		781		1		24,934		5.74
United States and Puerto Rico Government obligations		93,990		—		2,537		25		96,502		3.31		998,536		—		2,669		15		1,001,190		1.47
Mortgage-backed securities:
FHLMC certificates:
Due within one year		206		—		1		—		207		3.57		—		—		—		—		—		—
After 1 to 5 years		—		—		—		—		—		—		928		—		8		—		936		3.67
After 10 years		135,512		—		4,186		—		139,698		2.28		24,974		—		238		—		25,212		2.59
		135,718		—		4,187		—		139,905		2.28		25,902		—		246		—		26,148		2.62
GNMA certificates:
After 1 to 5 years		159		—		8		—		167		3.59		179		—		9		—		188		3.88
After 5 to 10 years		562		—		45		—		607		3.60		596		—		47		—		643		4.09
After 10 years		604,294		—		44,793		—		649,087		4.00		717,237		—		43,938		—		761,175		3.98
		605,015		—		44,846		—		649,861		4.00		718,012		—		43,994		—		762,006		3.98
FNMA certificates:
Due within one year		282		—		10		—		292		3.55		—		—		—		—		—		—
After 1 to 5 years		—		—		—		—		—		—		1,019		—		42		—		1,061		3.82
After 5 to 10 years		14,517		—		810		—		15,327		4.04		18,826		—		1,007		—		19,833		3.97
After 10 years		624,983		—		15,872		—		640,855		2.56		47,485		—		3,285		—		50,770		5.46
		639,782		—		16,692		—		656,474		2.59		67,330		—		4,334		—		71,664		5.02
Collateralized Mortgage Obligations issued or guaranteed by FHLMC,
After 5 to 10 years		377		—		—		1		376		3.01		—		—		—		—		—		—
Other mortgage pass-through trust certificates:
After 10 years		72,555		31,951		14,085		—		54,689		2.34		85,014		31,951		8,143		—		61,206		2.19
Total mortgage-backed securities		1,453,447		31,951		79,810		1		1,501,305		3.13		896,258		31,951		56,717		—		921,024		3.85
Corporate bonds:
After 10 years		—		—		—		—		—		—		1,447		434		—		—		1,013		5.80
Equity securities (without contractual maturity)(1)		77		—		—		37		40		—		77		—		—		36		41		—
Total investment securities available for sale	$	1,547,514	$	31,951	$	82,347	$	63	$	1,597,847		3.15	$	1,896,318	$	32,385	$	59,386	$	51	$	1,923,268		2.60

(1) Represents common shares of another financial institution in Puerto Rico.

Maturities of mortgage-backed securities are based on contractual terms assuming no prepayments. Expected maturities of investments might differ from contractual maturities because they may be subject to prepayments and/or call options as was the case with approximately $194.5 million of Puerto Rico Government Obligations called during the first nine months of 2012. 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 non-credit 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 September 30, 2012 and December 31, 2011. It also includes debt securities for which an OTTI was recognized and only the amount related to a credit loss was recognized in earnings. Unrealized losses for which OTTI had been recognized have been reduced by any subsequent recoveries in fair value:

	As of September 30, 2012
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Debt securities:
Puerto Rico Government obligations	$	2,065	$	25	$	—	$	—	$	2,065	$	25
Mortgage-backed securities:
Collateralized mortgage obligations issued or guaranteed by FHLMC		376		1		—		—		376		1
Other mortgage pass-through trust certificates		—		—		54,540		17,867		54,540		17,867
Equity securities		—		—		40		37		40		37
	$	2,441	$	26	$	54,580	$	17,904	$	57,021	$	17,930

	As of December 31, 2011
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Debt securities:
Puerto Rico Government obligations	$	15,982	$	15	$	—	$	—	$	15,982	$	15
Mortgage-backed securities:
Other mortgage pass-through trust certificates		—		—		61,017		23,809		61,017		23,809
Corporate bonds		—		—		1,013		434		1,013		434
Equity securities		41		36		—		—		41		36
	$	16,023	$	51	$	62,030	$	24,243	$	78,053	$	24,294

Total proceeds from the sale of securities available for sale during the first nine months of 2011 amounted to approximately $1.2 billion, none in the first nine months of 2012.

Assessment for OTTI

On a quarterly basis, the Corporation performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered an OTTI. A debt security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. The accounting literature requires the Corporation to assess whether the unrealized loss is other-than-temporary.

OTTI losses must be recognized in earnings if an investor has the intent to sell the debt security or it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis. However, even if an investor does not expect to sell a debt security, it must evaluate expected cash flows to be received and determine if a credit loss has occurred.

An unrealized loss is generally deemed to be other-than-temporary and a credit loss is deemed to exist if the present value of the expected future cash flows is less than the amortized cost basis of the debt security. The credit loss component of an OTTI, if any, is recorded as a component of net impairment losses on investment securities in the accompanying consolidated statements of income (loss), while the remaining portion of the impairment loss is recognized in OCI, provided the Corporation does not intend to sell the underlying debt security and it is “more likely than not” that the Corporation will not have to sell the debt security prior to recovery.

Debt securities issued by U.S. government agencies, government-sponsored entities and the U.S. Treasury accounted for more than 92% of the total available-for-sale portfolio as of September 30, 2012 and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government. The Corporation’s assessment was concentrated mainly on private label mortgage-backed securities with an amortized cost of $72.6 million 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.

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

• The level of cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and

• Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the overall financial condition of the issuer, credit ratings, recent legislation and government actions affecting the issuer’s industry and actions taken by the issuer to deal with the present economic climate.

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

	Private label MBS						Private label MBS
	Quarter ended September 30,						Nine-Month Period Ended September 30,
(In thousands)	2012			2011			2012			2011
Total other-than-temporary impairment losses	$	—		$	—		$	—		$	—
Portion of loss previously recognized in other comprehensive income		(557	)		(350	)		(1,933	)		(957	)
Net impairment losses recognized in earnings	$	(557	)	$	(350	)	$	(1,933	)	$	(957	)

The following table summarizes the roll-forward of credit losses on debt securities held by the Corporation for which a portion of an OTTI is recognized in OCI:

	Quarter ended September 30,				Nine-Month Period Ended September 30,
(In thousands)	2012		2011		2012		2011
Credit losses at the beginning of the period	$	5,199	$	2,459	$	3,823	$	1,852
Additions:
Credit losses on debt securities for which an OTTI was previously recognized (1)		557		350		1,933		957
Ending balance of credit losses on debt securities held for which a portion of an OTTI was recognized in OCI	$	5,756	$	2,809	$	5,756	$	2,809

(1) Related to private label MBS.

During the first nine-months of 2012, the $1.9 million credit related impairment loss is related to 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 of the underlying collateral. The underlying mortgages are fixed-rate single family loans with original high FICO scores (over 700) and moderate original loan-to-value ratios (under 80%), as well as moderate delinquency levels.

Based on the expected cash flows derived from the model, 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 was reflected in earnings. Significant assumptions in the valuation of the private label MBS were as follow:

	September 30, 2012			December 31, 2011
	Weighted Average		Range	Weighted Average		Range
Discount rate		14.5%	14.5%		14.5%	14.5%
Prepayment rate		33%	23.81% - 43.58%		27%	21.33% -37.97%
Projected Cumulative Loss Rate		7%	0.71% - 17.51%		6%	1.94% - 11.89%

No OTTI losses on equity securities held in the available-for-sale investment portfolio were recognized for the first nine-months of 2012 or 2011.

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OTHER BORROWINGS

9 Months Ended

Sep. 30, 2012

OTHER BORROWINGS

16 – OTHER BORROWINGS

Other borrowings consist of:

(In thousands)	September 30, 2012		December 31, 2011
Junior subordinated debentures due in 2034, interest-bearing at a floating-rate of 2.75% over 3-month LIBOR (3.14% as of September 30, 2012 and 3.31% as of December 31, 2011)	$	103,093	$	103,093
Junior subordinated debentures due in 2034, interest-bearing at a floating-rate of 2.50% over 3-month LIBOR (2.89% as of September 30, 2012 and 3.06% as of December 31, 2011)		128,866		128,866
	$	231,959	$	231,959

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DEPOSITS

9 Months Ended

Sep. 30, 2012

DEPOSITS

12 – DEPOSITS

The following table summarizes deposit balances:

	September 30, 2012		December 31, 2011
	(In thousands)
Type of account and interest rate:
Non-interest bearing checking accounts	$	780,717	$	705,789
Savings accounts		2,287,511		2,145,625
Interest-bearing checking accounts		1,117,189		1,066,753
Certificates of deposit		2,302,723		2,258,216
Brokered certificates of deposit		3,408,262		3,731,371
	$	9,896,402	$	9,907,754

Brokered certificates of deposit mature as follows:

	September 30, 2012
	(In thousands)
One to ninety days	$	654,931
Over ninety days to one year		1,761,624
One to three years		889,003
Three to five years		98,446
Over five years		4,258
Total	$	3,408,262

The following are the components of interest expense on deposits:

	Quarter Ended				Nine-Month Period Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
	(In thousands)				(In thousands)
Interest expense on deposits	$	27,653	$	42,465	$	92,569	$	136,507
Amortization of broker placement fees		2,300		3,675		7,607		13,217
Interest expense on deposits	$	29,953	$	46,140	$	100,176	$	149,724

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LOAN PORTFOLIO - Loan Modifications Considered Troubled Debt Restructurings Defaulted (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012 Contract	Sep. 30, 2011 Contract	Sep. 30, 2012 Contract	Sep. 30, 2011 Contract
Financing Receivable, Modifications [Line Items]
Number of contracts	60	91	205	200
Recorded investment	$ 10,354	$ 7,318	$ 43,574	$ 39,411
Non-FHA/VA Residential Mortgage loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	49	31	137	120
Recorded investment	8,031	4,108	20,841	31,141
Commercial Mortgage Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	1	5	9	21
Recorded investment	338	2,783	5,549	6,211
Commercial And Industrial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	1	1	5	2
Recorded investment	1,910	128	8,189	1,567
Construction And Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts			2	1
Recorded investment			8,382	70
Auto loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	3		39
Recorded investment	38		431
Other Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts	6	2	12	2
Recorded investment	37	49	155	49
Finance leases [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts		52	1	54
Recorded investment		$ 250	$ 27	$ 373

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LOANS HELD FOR SALE

9 Months Ended

Sep. 30, 2012

LOANS HELD FOR SALE

8 – LOANS HELD FOR SALE

The Corporation’s loans held for sale portfolio was composed of:

	September 30, 2012		December 31, 2011
	(In thousands)
Residential mortgage loans	$	68,349	$	11,058
Construction loans		—		4,764
Total	$	68,349	$	15,822

XML

INVESTMENT SECURITIES - Roll-Forward of Credit Losses on Debt Securities Held by Corporation (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
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	$ 5,199	$ 2,459	$ 3,823	$ 1,852
Additions:
Credit losses on debt securities for which an OTTI was previously recognized	557	350	1,933	957
Ending balance of credit losses on debt securities held for which a portion of an OTTI was recognized in OCI	$ 5,756	$ 2,809	$ 5,756	$ 2,809

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Repurchase Agreements Grouped by Counterparty (Detail) (USD $) In Thousands, unless otherwise specified			9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Citigroup Global Markets [Member]	Sep. 30, 2012 Jp Morgan Chase [Member]	Sep. 30, 2012 Dean Witter / Morgan Stanley [Member]	Sep. 30, 2012 Credit Suisse First Boston [Member]
Repurchase Agreement Counterparty [Line Items]
Repurchase agreements, interest ranging from 2.45% to 3.55% (December 31, 2011 - 2.50% to 4.40%)	$ 900,000	$ 1,000,000	$ 300,000	$ 200,000	$ 100,000	$ 300,000
Weighted-Average Maturity			49 months	52 months	60 months	62 months

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LOAN PORTFOLIO

9 Months Ended

Sep. 30, 2012

LOAN PORTFOLIO

6 – LOAN PORTFOLIO

The following is a detail of the loan portfolio held for investment:

	September 30, 2012			December 31, 2011
	(In thousands)
Residential mortgage loans, mainly secured by first mortgages	$	2,762,418		$	2,873,785
Commercial loans:
Construction loans		352,891			427,863
Commercial mortgage loans		1,459,118			1,565,411
Commercial and Industrial loans		3,369,305			3,856,695
Loans to local financial institutions collateralized by real estate mortgages		258,341			273,821
Commercial loans		5,439,655			6,123,790
Finance leases		239,556			247,003
Consumer loans		1,746,535			1,314,814
Loans held for investment		10,188,164			10,559,392
Allowance for loan and lease losses		(445,531	)		(493,917	)
Loans held for investment, net	$	9,742,633		$	10,065,475

Loans held for investment classified as non-performing were as follows:

(In thousands)	September 30, 2012		December 31, 2011
Non-performing loans:
Residential mortgage	$	320,913	$	338,208
Commercial mortgage		231,163		240,414
Commercial and Industrial		230,459		270,171
Construction		189,458		250,022
Consumer:
Auto loans		17,639		19,641
Finance leases		3,061		3,485
Other consumer loans		15,351		16,421
Total non-performing loans held for investment (1)	$	1,008,044	$	1,138,362

(1) Amount exclude purchased credit-impaired loans with a carrying value of approximately $12.7 million acquired as part of the credit cards portfolio purchased in the second quarter of 2012 as further discussed below.

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

As of September 30, 2012 (In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due (1)		Total Past Due(4)		Purchased Credit- Impaired Loans (4)		Current		Total loans held for investment		90 days past due and still accruing (5)
Residential mortgage:
FHA/VA and other government guaranteed loans (2) (3) (5)		$—	$	12,406	$	91,422	$	103,828	$	—	$	112,662	$	216,490	$	91,422
Other residential mortgage loans (3)		—		109,309		333,903		443,212		—		2,102,716		2,545,928		12,990
Commercial:
Commercial & Industrial loans		14,436		11,516		258,354		284,306		—		3,343,340		3,627,646		27,895
Commercial mortgage loans (3)		—		11,744		235,955		247,699		—		1,211,419		1,459,118		4,792
Construction loans (3)		—		2,160		189,489		191,649		—		161,242		352,891		31
Consumer:
Auto loans		67,561		19,738		17,639		104,938		—		891,681		996,619		—
Finance leases		10,098		3,122		3,061		16,281		—		223,275		239,556		—
Other consumer loans		13,373		7,533		19,249		40,155		12,741		697,020		749,916		3,898
Total loans held for investment		$105,468	$	177,528	$	1,149,072	$	1,432,068	$	12,741	$	8,743,355	$	10,188,164	$	141,028

(1) Includes non-performing loans and accruing loans which 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) As of September 30, 2012, includes $6.1 million of defaulted loans collateralizing Ginnie Mae (“GNMA”) securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.

(3) 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, residential mortgage, commercial mortgage and construction loans are considered past due when the borrower is in arrears 2 or more monthly payments.

(4) Purchased credit–impaired loans are excluded from delinquency and non-performing statistics as further discussed below.

(5) It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as past due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $34.6 million of residential mortgage loans insured by FHA or guaranteed by the VA, which are over 18 months delinquent, that are no longer accruing interest as of September 30, 2012.

As of December 31, 2011 (In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 days or more Past Due(1)		Total Past Due		Current		Total loans held for investment		90 days past due and still accruing
Residential mortgage:
FHA/VA and other government guaranteed loans (2) (3)	$	—	$	17,548	$	85,188	$	102,736	$	165,417	$	268,153	$	85,188
Other residential mortgage loans (3)		—		90,274		350,495		440,769		2,164,863		2,605,632		12,287
Commercial:
Commercial & Industrial loans		27,674		10,714		294,723		333,111		3,797,405		4,130,516		24,552
Commercial mortgage loans (3)		—		8,891		240,414		249,305		1,316,106		1,565,411		—
Construction loans (3)		—		8,211		258,811		267,022		160,841		427,863		8,789
Consumer:
Auto loans		61,265		18,963		19,641		99,869		837,697		937,566		—
Finance leases		11,110		4,172		3,485		18,767		228,236		247,003		—
Other consumer loans		10,170		4,699		16,421		31,290		345,958		377,248		—
Total loans held for investment	$	110,219	$	163,472	$	1,269,178	$	1,542,869	$	9,016,523	$	10,559,392	$	130,816

(1) Includes non-performing loans and accruing loans which are contractually delinquent 90 days or more (i.e. FHA/VA and other guaranteed loans).

(2) As of December 31, 2011, includes $66.4 million of defaulted loans collateralizing Ginnie Mae (“GNMA”) securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans.

(3) 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, residential mortgage, commercial mortgage and construction loans are considered past due when the borrower is in arrears 2 or more monthly payments.

The Corporation’s credit quality indicators by loan type are summarized below:

	Commercial Credit Exposure-Credit risk Profile based on Creditworthiness category:
September 30, 2012	Substandard		Doubtful		Loss		Total Adversely Classified		Total Portfolio
	(In thousands)
Commercial Mortgage	$	388,225	$	6,526	$	—	$	394,751	$	1,459,118
Construction		188,051		22,184		605		210,840		352,891
Commercial and Industrial		405,897		23,728		1,240		430,865		3,627,646
	Commercial Credit Exposure-Credit risk Profile based on Creditworthiness category:
December 31, 2011	Substandard		Doubtful		Loss		Total Adversely Classified		Total Portfolio
	(In thousands)
Commercial Mortgage	$	414,355	$	8,462	$	—	$	422,817	$	1,565,411
Construction		247,560		32,059		2,916		282,535		427,863
Commercial and Industrial		457,927		31,100		1,373		490,400		4,130,516

The Corporation considered a loan as adversely classified if its risk rating is Substandard, Doubtful or Loss. These categories are defined as follows:

Substandard- A Substandard Asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful- Doubtful classifications have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. A Doubtful classification may be appropriate in cases where significant risk exposures are perceived, but Loss cannot be determined because of specific reasonable pending factors which may strengthen the credit in the near term.

Loss- Assets classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. There is little or no prospect for near term improvement and no realistic strengthening action of significance pending.

September 30, 2012	Consumer Credit Exposure-Credit risk Profile based on payment activity
	Residential Real-Estate				Consumer
	FHA/VA/ Guaranteed (1)		Other residential loans		Auto		Finance Leases		Other Consumer
	(In thousands)
Performing		$216,490		$2,225,015		$978,980		$236,495		$721,824
Purchased Credit-Impaired		—		—		—		—		12,741
Non-performing		—		320,913		17,639		3,061		15,351
Total		$216,490		$2,545,928		$996,619		$239,556		$749,916

(1) It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as past due loans 90 days and still accruing as opposed to non-performing loans since the principal repayment is insured. These balances include $34.6 million of residential mortgage loans insured by FHA or guaranteed by the VA, which are over 18 months delinquent, that are no longer accruing interest as of September 30, 2012.

December 31, 2011	Consumer Credit Exposure-Credit risk Profile based on payment activity
	Residential Real-Estate				Consumer
	FHA/VA/ Guaranteed		Other residential loans		Auto		Finance Leases		Other Consumer
	(In thousands)
Performing	$	268,153	$	2,267,424	$	917,925	$	243,518	$	360,827
Non-performing		—		338,208		19,641		3,485		16,421
Total	$	268,153	$	2,605,632	$	937,566	$	247,003	$	377,248

The following tables present information about impaired loans excluding purchased credit-impaired loans, which are reported separately and discussed below:

Impaired Loans

(Dollars in thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized Quarter to date		Interest Income Recognized Year to date
As of September 30, 2012 With no related allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—	$	—	$	—	$	—
Other residential mortgage loans		106,554		112,039		—		171,070		1,144		2,733
Commercial:
Commercial mortgage loans		50,043		62,819		—		40,939		442		1,003
Commercial & Industrial Loans		31,047		38,017		—		20,128		51		74
Construction Loans		38,863		64,637		—		37,314		33		70
Consumer:
Auto loans		—		—		—		—		—		—
Finance leases		—		—		—		—		—		—
Other consumer loans		1,647		2,597		—		2,729		25		51
	$	228,154	$	280,109	$	—	$	272,180	$	1,695	$	3,931
With an allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—	$	—	$	—	$	—
Other residential mortgage loans		488,234		550,123		49,640		428,808		3,857		10,851
Commercial:
Commercial mortgage loans		313,490		333,339		51,351		324,053		2,369		6,646
Commercial & Industrial Loans		207,465		272,977		57,001		236,896		479		1,503
Construction Loans		139,599		235,137		33,349		171,178		36		289
Consumer:
Auto loans		11,813		11,813		1,404		10,317		194		616
Finance leases		2,045		2,045		73		1,968		50		134
Other consumer loans		9,338		9,968		1,336		9,028		48		206
	$	1,171,984	$	1,415,402	$	194,154	$	1,182,248	$	7,033	$	20,244
Total:
FHA/VA Guaranteed loans	$	—	$	—	$	—	$	—	$	—	$	—
Other residential mortgage loans		594,788		662,162		49,640		599,878		5,001		13,584
Commercial:
Commercial mortgage loans		363,533		396,158		51,351		364,992		2,811		7,649
Commercial & Industrial Loans		238,512		310,994		57,001		257,024		530		1,577
Construction Loans		178,462		299,774		33,349		208,492		69		359
Consumer:		—		—		—		—		—		—
Auto loans		11,813		11,813		1,404		10,317		194		616
Finance leases		2,045		2,045		73		1,968		50		134
Other consumer loans		10,985		12,565		1,336		11,757		73		257
	$	1,400,138	$	1,695,511	$	194,154	$	1,454,428	$	8,728	$	24,176

(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
As of December 31, 2011
With no related allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—
Other residential mortgage loans		181,081		192,757		—
Commercial:
Commercial mortgage loans		13,797		15,283		—
Commercial & Industrial Loans		40,453		45,948		—
Construction Loans		33,759		45,931		—
Consumer:
Auto loans		—		—		—
Finance leases		—		—		—
Other consumer loans		2,840		3,846		—
	$	271,930	$	303,765	$	—
With an allowance recorded:
FHA/VA Guaranteed loans	$	—	$	—	$	—
Other residential mortgage loans		423,340		465,495		48,566
Commercial:
Commercial mortgage loans		354,954		383,890		59,167
Commercial & Industrial Loans		223,572		316,641		58,652
Construction Loans		213,388		344,035		44,768
Consumer:
Auto loans		8,710		8,710		1,039
Finance leases		1,804		1,804		41
Other consumer loans		9,678		9,678		2,669
	$	1,235,446	$	1,530,253	$	214,902
Total:
FHA/VA Guaranteed loans	$	—	$	—	$	—
Other residential mortgage loans		604,421		658,252		48,566
Commercial:
Commercial mortgage loans		368,751		399,173		59,167
Commercial & Industrial Loans		264,025		362,589		58,652
Construction Loans		247,147		389,966		44,768
Consumer:
Auto loans		8,710		8,710		1,039
Finance leases		1,804		1,804		41
Other consumer loans		12,518		13,524		2,669
	$	1,507,376	$	1,834,018	$	214,902

Interest income of approximately $10.2 million and $25.1 million was recognized on impaired loans for the third quarter and first nine months of 2011, respectively.

The following tables show the activity for impaired loans and the related specific reserve:

	Quarter ended			Nine-Month Period Ended
	September 30, 2012
	(In thousands)
Impaired Loans:
Balance at beginning of period	$	1,432,469		$	1,507,376
Loans determined impaired during the period		55,292			222,841
Net charge-offs		(30,971	)		(107,458	)
Increases to impaired loans (disbursements)		11,039			30,160
Foreclosures		(26,353	)		(113,737	)
Loans no longer considered impaired		(5,351	)		(42,269	)
Paid in full or partial payments		(35,987	)		(96,775	)
Balance at end of period	$	1,400,138		$	1,400,138

	Quarter Ended			Nine-Month Period Ended
	September 30, 2012
	(In thousands)
Specific Reserve:
Balance at beginning of period	$	209,860		$	214,902
Provision for loan losses		15,265			87,070
Net charge-offs		(30,971	)		(107,818	)
Balance at end of period	$	194,154		$	194,154

Acquired loans including Purchased Credit-Impaired Loans

On May 30, 2012, the Corporation re-entered the credit card business with the acquisition of an approximate $406 million portfolio of FirstBank-branded credit card portfolio from FIA Card Services (FIA). These loans were recorded on the Consolidated Statement of Financial Condition at estimated fair value on acquisition date of $368.9 million. The Corporation concluded that a portion of these loans acquired were purchased credit-impaired (“PCI”) loans. PCI loans are acquired loans with evidence of credit quality deterioration since origination for which it is probable at the date of purchase that the Corporation will be unable to collect all contractually required payments. The loans for which the Corporation concluded were credit impaired had a contractual outstanding unpaid principal and interest balance of $34.6 million and an estimated fair value of $15.7 million. Given 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 Corporation’s subsequent accounting for PCI loans differs from the accounting for non-PCI loans, therefore, the Corporation separately tracks and report PCI loans and exclude these loans from delinquency and nonperforming loan statistics. Credit card loans continue to accrue finance charges and fees until charged-off at 180 days delinquent and the methodology employed to calculate the allowance for loan losses for non-PCI loans is similar to the methodology used for other consumer loans, except for that the loss rates are determined evaluating 12 months of historical performance, instead of 24 months.

Initial Fair value and Accretable Yield of Acquired loans

At acquisition, the Corporation estimated the cash flows the Corporation expected to collect on credit card loans acquired with a deteriorated credit quality. 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 nonaccretable difference. This difference is neither accreted into income nor recorded on the Corporation’s consolidated Statement of Financial Condition. The excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loans, using the effective yield method. The table below displays the contractually required principal and interest, cash flows expected to be collected and fair value at acquisition related to the loans the Corporation acquired. The table also displays the nonaccretable difference and the accretable yield at acquisition.

(In thousands)	At acquisition
	Purchased Credit- Impaired Loans
Contractually outstanding principal and interest at acquisition	$	34,577
Less: Nonaccretable difference		(15,408	)
Cash flows expected to be collected at acquisition		19,169
Less: Accretable yield		(3,451	)
Fair value of loans acquired	$	15,718

Outstanding balance and Carrying value of PCI loans

The table below presents the outstanding contractual principal balance and carrying value of the PCI loans as of September 30, 2012:

(In thousands)	Purchased Credit- Impaired Loans
Contractual balance	$	31,364
Carrying value		12,741

Changes in accretable yield of acquired loans

Subsequent to acquisition, the Corporation is required to periodically evaluate its estimate of cash flows expected to be collected. These evaluations, performed quarterly, require the continued use of key assumptions and estimates, similar to the initial estimate of fair value. Subsequent changes in the estimated cash flows expected to be collected may result in changes in the accretable yield and nonaccretable difference or reclassifications from nonaccretable yield to accretable. Increases in the cash flows expected to be collected will generally result in an increase in interest income over the remaining life of the loan or pool of loans. Decreases in expected cash flows due to further credit deterioration will generally result in an impairment charge recognized in the Corporation’s provision for loan and lease losses, resulting in an increase to the allowance for loan losses. During the third quarter and first nine-months of 2012, the Corporation did not record record charges to the provision for loan losses related to PCI loans.

The following table presents changes in the accretable yield related to the PCI loans acquired from FIA:

(Dollars in thousands)	PCI Loans
Accretable yield at acquisition	$	3,451
Accretion recognized in earnings		(740	)
Accretable yield as of September 30, 2012	$	2,711

In addition to the credit card portfolio acquired from FIA, the Corporation purchased during the first nine-months of 2012 $149.5 million of residential mortgage loans consistent with a strategic program established by the Corporation in 2005 to purchase ongoing residential mortgage loan production from mortgage bankers in Puerto Rico. Generally, the loans purchased from mortgage bankers were conforming residential mortgage loans. Purchases of conforming residential mortgage loans provide the Corporation the flexibility to retain or sell the loans, including through securitization transactions depending upon whether the Corporation wants to retain high yielding loans and improve net interest margins or generate profits by selling loans. When the Corporation sells such loans, it generally keeps the servicing of the loans. The Corporation sold approximately $156.3 million of performing residential mortgage loans in the secondary market to FNMA and FHLMC during the first nine months of 2012. Also, the Corporation securitized approximately $165.3 million of FHA/VA mortgage loans into GNMA mortgage-backed securities during the first nine-months of 2012.

The Corporation’s primary lending area is Puerto Rico. The Corporation’s Puerto Rico banking subsidiary, FirstBank, also lends in the U.S. and British Virgin Islands markets and in the United States (principally in the state of Florida). Of the total gross loans held for investment portfolio of $10.2 billion as of September 30, 2012, approximately 85% have credit risk concentration in Puerto Rico, 7% in the United States and 8% in the Virgin Islands.

As of September 30, 2012, the Corporation had $148.7 million outstanding in credit facilities granted to the Puerto Rico Government and/or its political subdivisions, down from $360.1 million as of December 31, 2011, and $117.7 million granted to the Government of the Virgin Islands, down from $139.4 million as of December 31, 2011. A substantial portion of these credit facilities consist of loans to municipalities in Puerto Rico for which the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment. Another portion of these obligations consists of loans to public corporations that obtain revenues from rates charged for services or products, such as electric power and water utilities. Public corporations have varying degrees of independence from the central Government and many receive appropriations or other payments from it.

In addition to loans extended to government entities, the largest loan to one borrower as of September 30, 2012 in the amount of $258.3 million is with one mortgage originator in Puerto Rico, Doral Financial Corporation. This commercial loan is secured by individual real-estate loans, mostly 1-4 residential mortgage loans.

Troubled Debt Restructurings

The Corporation provides homeownership preservation assistance to its customers through a loss mitigation program in Puerto Rico and in accordance with the government’s Home Affordable Modification Program guidelines. Depending upon the nature of borrowers’ financial condition, restructurings or loan modifications through this program as well as other restructurings of individual commercial, commercial mortgage, construction and residential mortgage loans in the U.S. mainland fit the definition of Troubled debt restructurings (“TDR”). A restructuring of a debt constitutes a TDR if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. Modifications involve changes in one or more of the loan terms that bring a defaulted loan current and provide sustainable affordability. Changes may include the refinancing of any past-due amounts, including interest and escrow, the extension of the maturity of the loan and modifications of the loan rate. As of September 30, 2012, the Corporation’s total TDR loans of $925.1 million consisted of $410.2 million of residential mortgage loans, $107.5 million of commercial and industrial loans, $298.1 million of commercial mortgage loans, $86.6 million of construction loans and $22.7 million of consumer loans. Outstanding unfunded commitments on TDR loans amounted to $4.4 million as of September 30, 2012.

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 for a significant period of time, and reduction of interest rates either permanently, offered up to 2010, or for a period of up to two years (step-up rates). Additionally, in remote 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 foreclosure action absent some lender concession. Notwithstanding, 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 three month period whereby 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 enters into a permanent modification. As a result of new accounting guidance on TDRs, loans that are participating in or that have been offered a binding trial modification are classified as TDRs when the trial offer is made and continue to be classified as TDR regardless of whether the borrower enters into a permanent modification. At September 30, 2012, we classified and additional $5.7 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 the construction portfolios, at the time of the restructuring, the Corporation determines, on a loan by loan basis, whether a concession was granted for economic or legal reasons related to the borrower’s financial difficulty. Concessions granted for commercial loans could include: reductions in interest rates to rates that are considered below market; extension of repayment schedules and maturity dates beyond original contractual terms; waiving of borrower covenants; forgiveness of principal or interest; or other contract changes that would be considered a concession. The Corporation mitigates loan defaults for its commercial loan portfolios through its collections function. The function’s objective is to minimize both early stage delinquencies and losses upon default of commercial loans. In the case of 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 REO. In addition to the management of the resolution process for problem loans, the SAG oversees collection efforts for all loans to prevent migration to the non-performing and/or adversely classified status. The SAG utilizes relationship officers, collection specialists and attorneys. In the case of residential construction projects, the workout function monitors project specifics, such as project management and marketing, as deemed necessary. The SAG utilizes its collections infrastructure of workout collection officers, credit work-out specialists, in-house legal counsel, and third party consultants. In the case of residential construction projects and large commercial loans, the function also utilizes third-party specialized consultants to monitor the residential and commercial construction projects in terms of construction, marketing and sales, and restructuring of large commercial loans. In addition, the Corporation extends, renews and restructures loans with satisfactory credit profiles. Many commercial loan facilities are structured as lines of credit, which are mainly one year in term and therefore are required to be renewed annually. Other facilities may be restructured or extended from time to time based upon changes in the borrower’s business needs, use of funds, timing of completion of projects and other factors. If the borrower is not deemed to have financial difficulties, extensions, renewals and restructurings are done in the normal course of business and not considered concessions, and the loans continue to be recorded as performing.

Selected information on TDRs that includes the recorded investment by loan class and modification type is summarized in the following table. This information reflects all TDRs at September 30, 2012:

	September 30, 2012
(In Thousands)	Interest rate below market		Maturity or term extension		Combination of reduction in interest rate and extension of maturity		Forgiveness  of principal and/or interest		Forbearance agreement  (1)		Other (2)		Total
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans	$	17,437	$	4,196	$	346,314	$	—	$	—	$	42,300	$	410,247
Commercial Mortgage Loans		102,643		16,251		117,014		46,903		—		15,235		298,046
Commercial & Industrial Loans		16,878		12,394		21,708		7,333		9,521		39,723		107,557
Construction Loans		6,349		2,027		9,094		—		63,477		5,634		86,581
Consumer Loans - Auto		—		1,067		7,851		—		—		2,895		11,813
Finance Leases		—		1,669		375		—		—		—		2,044
Consumer Loans - Other		353		497		5,808		—		—		2,198		8,856
Total Troubled Debt Restructurings	$	143,660	$	38,101	$	508,164	$	54,236	$	72,998	$	107,985	$	925,144

(1) Mainly related to one construction relationship amounting to $53.4 million.

(2) Other concessions granted by the Corporation include deferral of principal and/or interest payments for a period longer than what would be considered insignificant, payment plans under judicial stipulation or a combination of the concessions listed in the table.

The following table presents the Corporation’s TDR activity:

(In Thousands)	Quarter ended			Nine-Month Period Ended
	September 30, 2012
Beginning Balance of TDRs	$	861,932		$	820,499
New TDRs		90,674			216,202
Increases to existing TDRs (disbursements)		5,690			21,825
Charge-offs post modification		(15,636	)		(41,198	)
Foreclosures		(2,513	)		(30,768	)
Removed from TDR classification		—			(7,051	)
Paid-off and partial payments		(15,003	)		(54,365	)
Ending balance of TDRs	$	925,144		$	925,144

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 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 loans being returned to accrual 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 interest income by returning a non-performing loan to performing status, if applicable, and increase cash flows by providing for payments to be made by the borrower, and avoid increases in foreclosure and real estate owned (“REO”) costs. The Corporation continues to consider a modified loan as an impaired loan for purposes of estimating the allowance for loan and lease losses. A TDR loan that specifies an interest rate that at the time of the restructuring is greater than or equal to the rate the Corporation is willing to accept for a new loan with comparable risk may not be reported as a TDR or an impaired loan in the calendar years subsequent to the restructuring if it is in compliance with its modified terms. During the nine-month period ended September 30, 2012, $7.1 million were removed from the TDR classification, as reflected in the table above.

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

(In Thousands)	September 30, 2012
	Accrual		Nonaccrual  (1)		Total TDRs
Non- FHA/VA Residential Mortgage loans	$	294,184	$	116,063	$	410,247
Commercial Mortgage Loans		157,445		140,601		298,046
Commercial & Industrial Loans		24,749		82,808		107,557
Construction Loans		2,490		84,091		86,581
Consumer Loans - Auto		7,114		4,699		11,813
Finance Leases		1,985		59		2,044
Consumer Loans - Other		7,037		1,819		8,856
Total Troubled Debt Restructurings	$	495,004	$	430,140	$	925,144

(1) Included in non-accrual loans are $203.6 million in loans that are performing under the terms of the restructuring agreement but are reported in non-accrual 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.

TDRs exclude restructured mortgage loans that are government guaranteed (i.e. FHA/VA loans) totaling $94.3 million. The Corporation excludes government guaranteed loans from TDRs given that in the event that the borrower defaults on the loan, the principal and interest 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 government guarantees to be impaired loans for the purpose of calculating the allowance for loan and lease losses.

Loan modifications that are considered TDRs completed during the quarter and nine-month period ended September 30, 2012 and 2011 were as follows:

(Dollars in thousands)	Quarter ended September 30, 2012
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		147	$	23,421	$	23,431
Commercial Mortgage Loans		14		57,100		57,100
Commercial & Industrial Loans		11		1,278		1,271
Construction Loans		3		4,380		4,380
Consumer Loans - Auto		156		2,044		2,044
Finance Leases		24		462		462
Consumer Loans - Other		304		1,986		1,986
Total Troubled Debt Restructurings		659	$	90,671	$	90,674
(Dollars in thousands)	Nine-Month Period Ended September 30, 2012
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		403	$	64,412	$	64,773
Commercial Mortgage Loans		35		100,036		100,072
Commercial & Industrial Loans		47		33,162		29,593
Construction Loans		8		9,671		9,661
Consumer Loans - Auto		445		5,473		5,430
Finance Leases		76		1,384		1,384
Consumer Loans - Other		827		5,289		5,289
Total Troubled Debt Restructurings		1,841	$	219,427	$	216,202

(Dollars in thousands)	Quarter ended September 30, 2011
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		190	$	30,724	$	31,395
Commercial Mortgage Loans		21		37,686		39,998
Commercial & Industrial Loans		19		24,355		24,085
Construction Loans		7		14,532		14,423
Consumer Loans - Auto		188		2,359		2,359
Finance Leases		32		409		409
Consumer Loans - Other		234		2,730		2,820
Total Troubled Debt Restructurings		691	$	112,795	$	115,489

(Dollars in thousands)	Nine-Month Period Ended September 30, 2011
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Non- FHA/VA Residential Mortgage loans		607	$	98,168	$	101,367
Commercial Mortgage Loans		61		149,340		121,078
Commercial & Industrial Loans		43		44,561		43,702
Construction Loans		14		106,204		106,278
Consumer Loans - Auto		600		7,423		7,423
Finance Leases		87		1,501		1,501
Consumer Loans - Other		910		8,758		8,892
Total Troubled Debt Restructurings		2,322	$	415,955	$	390,241

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-performing loan. Recidivism occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans. The Corporation considers a loan to have defaulted if the borrower has failed to make payments of either principal, interest, or both for a period of 90 days or more.

Loan modifications considered troubled debt restructurings that defaulted during the quarter and nine-month period ended September 30, 2012 and 2011 and had been modified in a TDR during the 12-months preceding the default date were as follows:

	Quarter ended September 30,
(Dollars in Thousands)	2012				2011
	Number of contracts		Recorded Investment		Number of contracts		Recorded Investment
Non- FHA/VA Residential Mortgage loans		49	$	8,031		31	$	4,108
Commercial Mortgage Loans		1		338		5		2,783
Commercial & Industrial Loans		1		1,910		1		128
Construction Loans		—		—		—		—
Consumer Loans - Auto		3		38		—		—
Consumer Loans - Other		6		37		2		49
Finance Leases		—		—		52		250
Total		60	$	10,354		91	$	7,318
	Nine-Month Period Ended September 30,
(Dollars in Thousands)	2012				2011
	Number of contracts		Recorded Investment		Number of contracts		Recorded Investment
Non- FHA/VA Residential Mortgage loans		137	$	20,841		120	$	31,141
Commercial Mortgage Loans		9		5,549		21		6,211
Commercial & Industrial Loans		5		8,189		2		1,567
Construction Loans		2		8,382		1		70
Consumer Loans - Auto		39		431		—		—
Consumer Loans - Other		12		155		2		49
Finance Leases		1		27		54		373
Total		205	$	43,574		200	$	39,411

For certain TDRs, the Corporation splits the loans into two new notes, A and B notes. The A note is restructured to comply with the Corporation’s lending standards at current market rates, and is tailored to suit the customer’s ability to make timely interest and principal payments. The B note includes the granting of the concession to the borrower and varies by situation. The B note is charged-off but the obligation is not forgiven to the borrower, and any payments collected are accounted for as recoveries. At the time of restructuring, the A note is identified and classified as a TDR. 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 are included in assessing whether the borrower can meet the new terms and may result in that the loans be returned to accrual status at the time of restructuring. In the periods following the calendar year in which a loan was restructured, the A Note may no longer be reported as a TDR if it is on accrual, is in compliance with its modified terms, and yields a market rate (as determined and documented at the time of the restructure).

The recorded investment in loans restructured using the A/B note restructure workout strategy was approximately $128.7 million at September 30, 2012. The following table provides additional information about the volume of this type of loan restructuring and the effect on the allowance for loan and lease losses in the first nine-months of 2012 and 2011:

(In thousands)	September 30, 2012		September 30, 2011
Principal balance deemed collectible at end of period	$	128,651	$	77,799
Amount charged-off	$	2,735	$	29,576
Charges to the provision for loan losses	$	1,939	$	6,349
Allowance for loan losses as of September 30, 2012	$	5,951	$	1,394

Of the loans comprising the $128.7 million that have been deemed collectible, approximately $118.0 million were placed in accruing status as the borrowers have exhibited a period of sustained performance. These loans continue to be individually evaluated for impairment purposes.

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ALLOWANCE FOR LOAN AND LEASE LOSSES

9 Months Ended

Sep. 30, 2012

ALLOWANCE FOR LOAN AND LEASE LOSSES

7 – ALLOWANCE FOR LOAN AND LEASE LOSSES

The changes in the allowance for loan and lease losses were as follows:

(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Quarter ended September 30, 2012
Allowance for loan and lease losses:
Beginning balance	$	67,440		$	100,846		$	166,021		$	67,858		$	54,988		$	457,153
Charge-offs		(7,586	)		(5,681	)		(12,795	)		(9,012	)		(9,444	)		(44,518	)
Recoveries		228			679			534			686			1,817			3,944
Provision (release)		9,083			(6,617	)		8,117			6,379			11,990			28,952
Ending balance	$	69,165		$	89,227		$	161,877		$	65,911		$	59,351		$	445,531
Ending balance: specific reserve for impaired loans	$	49,640		$	51,351		$	57,001		$	33,349		$	2,813		$	194,154
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	—		$	—
Ending balance: general allowance	$	19,525		$	37,876		$	104,876		$	32,562		$	56,538		$	251,377
Loans held for investment:
Ending balance	$	2,762,418		$	1,459,118		$	3,627,646		$	352,891		$	1,986,091		$	10,188,164
Ending balance: impaired loans	$	594,788		$	363,533		$	238,512		$	178,462		$	24,843		$	1,400,138
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	12,741		$	12,741
Ending balance: loans with general allowance	$	2,167,630		$	1,095,585		$	3,389,134		$	174,429		$	1,948,507		$	8,775,285
(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Nine-Month Period Ended September 30, 2012
Allowance for loan and lease losses:
Beginning balance	$	68,678		$	108,991		$	164,490		$	91,386		$	60,372		$	493,917
Charge-offs		(27,976	)		(15,588	)		(35,494	)		(42,908	)		(29,327	)		(151,293	)
Recoveries		676			721			2,179			4,004			5,294			12,874
Provision (release)		27,787			(4,897	)		30,702			13,429			23,012			90,033
Ending balance	$	69,165		$	89,227		$	161,877		$	65,911		$	59,351		$	445,531
Ending balance: specific reserve for impaired loans	$	49,640		$	51,351		$	57,001		$	33,349		$	2,813		$	194,154
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	—		$	—
Ending balance: general allowance	$	19,525		$	37,876		$	104,876		$	32,562		$	56,538		$	251,377
Loans held for investment:
Ending balance	$	2,762,418		$	1,459,118		$	3,627,646		$	352,891		$	1,986,091		$	10,188,164
Ending balance: impaired loans	$	594,788		$	363,533		$	238,512		$	178,462		$	24,843		$	1,400,138
Ending balance: purchased credit-impaired loans	$	—		$	—		$	—		$	—		$	12,741		$	12,741
Ending balance: loans with general allowance	$	2,167,630		$	1,095,585		$	3,389,134		$	174,429		$	1,948,507		$	8,775,285
(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Quarter ended September 30, 2011
Allowance for loan and lease losses:
Beginning balance	$	67,404		$	90,785		$	188,562		$	131,344		$	62,783		$	540,878
Charge-offs		(16,076	)		(3,316	)		(22,703	)		(17,008	)		(11,086	)		(70,189	)
Recoveries		260			7			177			185			1,923			2,552
Provision (release)		17,744			13,324			10,437			(2,547	)		7,488			46,446
Ending balance	$	69,332		$	100,800		$	176,473		$	111,974		$	61,108		$	519,687
Ending balance: specific reserve for impaired loans	$	49,350		$	35,928		$	77,932		$	48,209		$	2,878		$	214,297
Ending balance: general allowance	$	19,982		$	64,872		$	98,541		$	63,765		$	58,230		$	305,390
Loans held for investment:
Ending balance	$	2,873,966		$	1,584,787		$	4,123,174		$	473,812		$	1,577,403		$	10,633,142
Ending balance: impaired loans	$	548,677		$	245,439		$	384,640		$	237,701		$	15,325		$	1,431,782
Ending balance: loans with general allowance	$	2,325,289		$	1,339,348		$	3,738,534		$	236,111		$	1,562,078		$	9,201,360
(In thousands)	Residential Mortgage Loans			Commercial Mortgage Loans			Commercial & Industrial Loans			Construction Loans			Consumer Loans			Total
Nine-Month Period Ended September 30, 2011
Allowance for loan and lease losses:
Beginning balance	$	62,330		$	105,596		$	152,641		$	151,972		$	80,486		$	553,025
Charge-offs		(30,571	)		(37,647	)		(50,858	)		(83,483	)		(35,168	)		(237,727	)
Recoveries		657			84			1,281			2,215			5,790			10,027
Provision		36,916			32,767			73,409			41,270			10,000			194,362
Ending balance	$	69,332		$	100,800		$	176,473		$	111,974		$	61,108		$	519,687
Ending balance: specific reserve for impaired loans	$	49,350		$	35,928		$	77,932		$	48,209		$	2,878		$	214,297
Ending balance: general allowance	$	19,982		$	64,872		$	98,541		$	63,765		$	58,230		$	305,390
Loans held for investment:
Ending balance	$	2,873,966		$	1,584,787		$	4,123,174		$	473,812		$	1,577,403		$	10,633,142
Ending balance: impaired loans	$	548,677		$	245,439		$	384,640		$	237,701		$	15,325		$	1,431,782
Ending balance: loans with general allowance	$	2,325,289		$	1,339,348		$	3,738,534		$	236,111		$	1,562,078		$	9,201,360

As of September 30, 2012, the Corporation maintains a $1.6 million reserve for unfunded loan commitments mainly related to outstanding construction and C&I loans commitments. The reserve for unfunded loan commitments is an estimate of the losses inherent in off-balance sheet loan commitments 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.

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FIRST BANCORP. (Holding Company Only) Financial Information - Statements of Loss (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Income:
Interest income on investment securities	$ 11,344	$ 13,283	$ 33,513	$ 52,610
Total interest income	166,964	158,542	472,723	502,863
Expense:
Notes payable and other borrowings	1,848	3,651	5,426	8,552
Loss before income taxes and equity in undistributed earnings (losses) of subsidiaries	19,834	(21,158)	19,686	(58,310)
Equity in undistributed earnings (losses) of subsidiaries	21,644	(21,600)	23,217	(64,214)
Net income (loss)	19,073	(24,046)	15,247	(67,390)
Holding Company [Member]
Income:
Interest income on investment securities		1		1
Interest income on other investments	6		12
Other income	55	53	165	157
Expense:
Notes payable and other borrowings	1,849	1,755	5,529	5,221
Other operating expenses	783	745	2,618	1,792
Total operating expenses	2,632	2,500	8,147	7,013
Investment related proceeds and impairments on equity securities				679
Loss before income taxes and equity in undistributed earnings (losses) of subsidiaries	(2,571)	(2,446)	(7,970)	(3,176)
Income tax provision
First Bank Puerto Rico [Member]
Income:
Dividends from other subsidiaries				$ 3,000

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

9 Months Ended

Sep. 30, 2012

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

9 – 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 the risk that net interest income from its loan and investment portfolios will be adversely affected by changes in interest rates. 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 as an economic undesignated hedge when it enters into the derivative contract. As of September 30, 2012 and December 31, 2011, all derivatives held by the Corporation were considered economic undesignated hedges. These undesignated hedges are 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. Specifically, the interest rate on certain of the Corporation’s commercial loans to other financial institutions is generally a variable rate limited to the weighted-average coupon of the referenced residential mortgage collateral, less a contractual servicing fee.

Interest rate swaps - Interest rate swap agreements generally involve the exchange of fixed and floating-rate interest payment obligations without the exchange of the underlying notional principal amount. As of September 30, 2012 and December 31, 2011, most of the interest rate swaps outstanding are used for protection against rising interest rates. Similar to unrealized gains and losses arising from changes in fair value, net interest settlements on interest rate swaps are recorded as an adjustment to interest income or interest expense depending on whether an asset or liability is being economically hedged.

Indexed options - Indexed options are generally over-the-counter (OTC) contracts that the Corporation enters into in order to receive the appreciation of a specified Stock Index (e.g., Dow Jones Industrial Composite Stock Index) over a specified period in exchange for a premium paid at the contract’s inception. The option period is determined by the contractual maturity of the notes payable tied to the performance of the Stock Index. The credit risk inherent in these options is the risk that the exchange party may not fulfill its obligation.

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 with no net settlement provision and no market mechanism to facilitate net settlement and they provide for delivery of a security within the time 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 loans securitizations of the mortgage-banking operations. Unrealized gains (losses) are recognized as part of mortgage banking activities in the Consolidated Statement of Income (Loss).

To satisfy the needs of its customers, the Corporation may enter into non-hedging transactions. On these transactions, generally, the Corporation 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
	As of September 30, 2012		As of December 31, 2011
Economic undesignated hedges:	(In thousands)
Interest rate contracts:
Interest rate swap agreements used to hedge loans	$	38,597	$	39,786
Written interest rate cap agreements		—		67,894
Purchased interest rate cap agreements		—		67,894
Equity contracts:
Embedded written options on stock index deposits and notes payable		—		46,515
Purchased options used to manage exposure to the stock market on embedded stock index options		—		46,515
Forward Contracts:
Sale of TBA GNMA MBS pools		26,000		19,000
	$	64,597	$	287,604

The following table summarizes the fair value of derivative instruments and the location in the Statement of Financial Condition:

	Asset Derivatives						Liability Derivatives
	Statement  of Financial Condition Location		September  30, 2012		December  31, 2011		Statement of Financial Condition Location	September  30, 2012		December  31, 2011
(In thousands)			Fair Value		Fair Value			Fair Value		Fair Value
Economic undesignated hedges:
Interest rate contracts:
Interest rate swap agreements used to hedge loans		Other assets	$	318	$	378	Accounts payable and other liabilities	$	6,238	$	6,767
Equity contracts:
Embedded written options on stock index notes payable		Other assets		—		—	Notes payable		—		899
Purchased options used to manage exposure to the stock market on embedded stock index options		Other assets		—		899	Accounts payable and other liabilities		—		—
Forward Contracts:
Sales of TBA GNMA MBS pools		Other assets		18		—	Accounts payable and other liabilities		190		168
			$	336	$	1,277		$	6,428	$	7,834

The following table summarizes the effect of derivative instruments on the Statement of Income (Loss):

	Location of Gain or (loss) Recognized in Income on Derivatives	Unrealized (Loss)  or Gain						Unrealized Gain  or (Loss)
		Quarter Ended September 30,						Nine-Month Period  Ended September 30,
(In thousands)		2012			2011			2012			2011
ECONOMIC UNDESIGNATED HEDGES:
Interest rate contracts:
Interest rate swap agreements used to hedge fixed-rate:
Loans	Interest income - Loans	$	170		$	(954	)	$	469		$	(1,794	)
Equity contracts:
Embedded written and purchased options on stock index notes payable	Interest expense - Notes payable and other borrowings		—			40			—			(7	)
Forward contracts:
Sales of TBA GNMA MBS pools	Mortgage Banking Activities		(47	)		(176	)		(4	)		(209	)
Total gain (loss) on derivatives		$	123		$	(1,090	)	$	465		$	(2,010	)

Derivative instruments, such as interest rate swaps, 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 shape of the yield curve, the level of interest rates, as well as the expectations for rates in the future.

A summary of interest rate swaps follows:

	As of September 30, 2012			As of December 31, 2011
	(Dollars in thousands)
Pay fixed/receive floating :
Notional amount	$	38,597		$	39,786
Weighted-average receive rate at period end		2.08	%		2.13	%
Weighted-average pay rate at period end		6.82	%		6.82	%
Floating rates range from 167 to 252 basis points over 3-month LIBOR

As of September 30, 2012, the Corporation has not entered into any derivative instrument containing credit-risk-related contingent features.

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LOAN PORTFOLIO - Loans Held for Investment on Which Accrual of Interest Income had been Discontinued (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Non-performing loans:
Total non-performing loans held for investment	$ 1,008,044	$ 1,138,362
Residential Mortgage Loans [Member]
Non-performing loans:
Total non-performing loans held for investment	320,913	338,208
Commercial mortgage [Member]
Non-performing loans:
Total non-performing loans held for investment	231,163	240,414
Commercial and Industrial Loans [Member]
Non-performing loans:
Total non-performing loans held for investment	230,459	270,171
Construction Loans [Member]
Non-performing loans:
Total non-performing loans held for investment	189,458	250,022
Auto loans [Member]
Non-performing loans:
Total non-performing loans held for investment	17,639	19,641
Finance leases [Member]
Non-performing loans:
Total non-performing loans held for investment	3,061	3,485
Consumer Loans [Member]
Non-performing loans:
Total non-performing loans held for investment	$ 15,351	$ 16,421

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INCOME TAXES - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 ShareSeries Y	Sep. 30, 2011	Dec. 31, 2011
Income Tax Contingency [Line Items]
Number of subsidiaries from which corporation is not able to utilize losses			1
Net operating loss carry forward period			7
Carry forward period is, extended for taxable income			10 years
Percentage of dividend received deduction from controlled subsidiaries			100.00%
Percentage of dividend received from other taxable domestic corporations			85.00%
Percentage of dividend payment by subsidiary			10.00%
Maximum statutory tax rate			30.00%
Tax rate subject to some condition			25.00%
Percentage of alternative minimum tax			20.00%
Special tax on International Banking Entity			5.00%
Minimum percentage of bank net taxable income for paying Income tax at normal rate			20.00%
Income tax expense	$ 0.7	$ 2.9	$ 4.4	$ 9.1
Deferred tax asset, net of valuation allowance	360.0		360.0
Valuation allowance	4.6		4.6		5.4
Deferred tax asset that will be realized	4.6		4.6
New unrecognized Tax Benefits (UTBs)		2.4		2.4
Accrued interest related to UTB	1.1		1.1
Accrued interest related to tax uncertainties			$ 0.2
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

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LOAN PORTFOLIO - Loan Restructuring and Effect on Allowance for Loan and Lease Losses (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Principal balance deemed collectible at end of period	$ 128,651	$ 77,799
Amount charged-off	2,735	29,576
Charges to the provision for loan losses	1,939	6,349
Allowance for loan losses as of September 30, 2012	$ 445,531	$ 1,394	$ 493,917

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LOAN PORTFOLIO - Corporation's Aging of Loans Held for Investment Portfolio (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	$ 105,468	$ 110,219
60-89 Days, Past Due	177,528	163,472
90 days or more, Past Due	1,149,072	1,269,178
Total Past Due	1,432,068	1,542,869
Purchased Credit - Impaired Loans	12,741
Financing Receivable, Current	8,743,355	9,016,523
Loans held for investment	10,188,164	10,559,392
90 days past due and still accruing	141,028	130,816
FHA/VA and other government guaranteed loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
60-89 Days, Past Due	12,406	17,548
90 days or more, Past Due	91,422	85,188
Total Past Due	103,828	102,736
Financing Receivable, Current	112,662	165,417
Loans held for investment	216,490	268,153
90 days past due and still accruing	91,422	85,188
Residential Mortgage Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
60-89 Days, Past Due	109,309	90,274
90 days or more, Past Due	333,903	350,495
Total Past Due	443,212	440,769
Financing Receivable, Current	2,102,716	2,164,863
Loans held for investment	2,545,928	2,605,632
90 days past due and still accruing	12,990	12,287
Commercial and Industrial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	14,436	27,674
60-89 Days, Past Due	11,516	10,714
90 days or more, Past Due	258,354	294,723
Total Past Due	284,306	333,111
Financing Receivable, Current	3,343,340	3,797,405
Loans held for investment	3,627,646	4,130,516
90 days past due and still accruing	27,895	24,552
Commercial mortgage loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
60-89 Days, Past Due	11,744	8,891
90 days or more, Past Due	235,955	240,414
Total Past Due	247,699	249,305
Financing Receivable, Current	1,211,419	1,316,106
Loans held for investment	1,459,118	1,565,411
90 days past due and still accruing	4,792
Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
60-89 Days, Past Due	2,160	8,211
90 days or more, Past Due	189,489	258,811
Total Past Due	191,649	267,022
Financing Receivable, Current	161,242	160,841
Loans held for investment	352,891	427,863
90 days past due and still accruing	31	8,789
Auto Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	67,561	61,265
60-89 Days, Past Due	19,738	18,963
90 days or more, Past Due	17,639	19,641
Total Past Due	104,938	99,869
Financing Receivable, Current	891,681	837,697
Loans held for investment	996,619	937,566
Finance Leases Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	10,098	11,110
60-89 Days, Past Due	3,122	4,172
90 days or more, Past Due	3,061	3,485
Total Past Due	16,281	18,767
Financing Receivable, Current	223,275	228,236
Loans held for investment	239,556	247,003
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	13,373	10,170
60-89 Days, Past Due	7,533	4,699
90 days or more, Past Due	19,249	16,421
Total Past Due	40,155	31,290
Purchased Credit - Impaired Loans	12,741
Financing Receivable, Current	697,020	345,958
Loans held for investment	749,916	377,248
90 days past due and still accruing	$ 3,898

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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Weighted-Averages of Key Economic Assumptions in Valuation Model (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2010
Carrying amount of servicing assets	$ 16,660	$ 16,592	$ 15,226	$ 14,924	$ 14,638	$ 15,163
Fair value	18,007
Weighted-average expected life	7 years 7 months 6 days
Decrease in fair value due to 10% adverse change	857
Decrease in fair value due to 20% adverse change	1,650
Decrease in fair value due to 10% adverse change	663
Decrease in fair value due to 20% adverse change	$ 1,281
Weighted Averages [Member]
Constant prepayment rate	12.66%
Discount rate	11.09%

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LOAN PORTFOLIO - Loan Portfolio Held for Investment (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Financial Information [Line Items]
Residential mortgage loans, mainly secured by first mortgages	$ 2,762,418	$ 2,873,785
Commercial loans:
Construction loans	352,891	427,863
Commercial mortgage loans	1,459,118	1,565,411
Commercial and Industrial loans	3,369,305	3,856,695
Loans to local financial institutions collateralized by real estate mortgages	258,341	273,821
Commercial loans	5,439,655	6,123,790
Finance leases	239,556	247,003
Consumer loans	1,746,535	1,314,814
Loans held for investment	10,188,164	10,559,392
Allowance for loan and lease losses	(445,531)	(493,917)	(1,394)
Loans held for investment, net	$ 9,742,633	$ 10,065,475	$ 10,633,142

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Interest Rate Swaps (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Interest rate swap agreements [Member]
Pay fixed/receive floating :
Notional amount	$ 38,597	$ 39,786
Weighted-average receive rate at period end [Member]
Pay fixed/receive floating :
Weighted-average receive rate at period end	2.08%	2.13%
Weighted-average pay rate at period end [Member]
Pay fixed/receive floating :
Weighted-average pay rate at period end	6.82%	6.82%

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FAIR VALUE - Qualitative Information Regarding Fair Value Measurements for Level 3 Financial Instruments (Detail)	9 Months Ended
	Sep. 30, 2012
Loans [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Method	Income, Market, Comparable Sales, Discounted Cash Flows
Inputs	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
OREO [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Method	Income, Market, Comparable Sales, Discounted Cash Flows
Inputs	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 Flow
Inputs	Weighted average prepayment speed 12.66%; weighted average discount rate 11.09%

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INVESTMENT SECURITIES (Tables)

9 Months Ended

Sep. 30, 2012

Investment Securities Available for Sale

The amortized cost, non-credit loss component of other-than-temporary impairment (“OTTI”) on securities with changes in fair value recorded in other comprehensive income (“OCI”), gross unrealized gains and losses recorded in OCI, approximate fair value, weighted-average yield and contractual maturities of investment securities available for sale were as follows:

	September 30, 2012												December 31, 2011
	Amortized cost		Non-Credit Loss Component of OTTI Recorded in OCI		Gross Unrealized				Fair value		Weighted average yield%		Amortized cost		Non-Credit Loss Component of OTTI Recorded in OCI		Gross Unrealized				Fair value		Weighted average yield%
(Dollars in thousands)					gains		losses										gains		losses
U.S. Treasury securities:
Due within one year	$	7,494	$	—	$	1	$	—	$	7,495		0.17	$	476,665	$	—	$	327	$	—	$	476,992		0.34
Obligations of U.S. Government sponsored agencies:
Due within one year		—		—		—		—		—		—		300,381		—		1,204		—		301,585		1.15
After 1 to 5 years		25,650		—		11		—		25,661		0.35		—		—		—		—		—		—
Puerto Rico Government obligations:
Due within one year		—		—		—		—		—		—		8,560		—		110		—		8,670		4.20
After 1 to 5 years		—		—		—		—		—		—		70,590		—		171		1		70,760		2.63
After 5 to 10 years		39,744		—		1,335		—		41,079		4.49		118,186		—		76		13		118,249		5.07
After 10 years		21,102		—		1,190		25		22,267		5.78		24,154		—		781		1		24,934		5.74
United States and Puerto Rico Government obligations		93,990		—		2,537		25		96,502		3.31		998,536		—		2,669		15		1,001,190		1.47
Mortgage-backed securities:
FHLMC certificates:
Due within one year		206		—		1		—		207		3.57		—		—		—		—		—		—
After 1 to 5 years		—		—		—		—		—		—		928		—		8		—		936		3.67
After 10 years		135,512		—		4,186		—		139,698		2.28		24,974		—		238		—		25,212		2.59
		135,718		—		4,187		—		139,905		2.28		25,902		—		246		—		26,148		2.62
GNMA certificates:
After 1 to 5 years		159		—		8		—		167		3.59		179		—		9		—		188		3.88
After 5 to 10 years		562		—		45		—		607		3.60		596		—		47		—		643		4.09
After 10 years		604,294		—		44,793		—		649,087		4.00		717,237		—		43,938		—		761,175		3.98
		605,015		—		44,846		—		649,861		4.00		718,012		—		43,994		—		762,006		3.98
FNMA certificates:
Due within one year		282		—		10		—		292		3.55		—		—		—		—		—		—
After 1 to 5 years		—		—		—		—		—		—		1,019		—		42		—		1,061		3.82
After 5 to 10 years		14,517		—		810		—		15,327		4.04		18,826		—		1,007		—		19,833		3.97
After 10 years		624,983		—		15,872		—		640,855		2.56		47,485		—		3,285		—		50,770		5.46
		639,782		—		16,692		—		656,474		2.59		67,330		—		4,334		—		71,664		5.02
Collateralized Mortgage Obligations issued or guaranteed by FHLMC,
After 5 to 10 years		377		—		—		1		376		3.01		—		—		—		—		—		—
Other mortgage pass-through trust certificates:
After 10 years		72,555		31,951		14,085		—		54,689		2.34		85,014		31,951		8,143		—		61,206		2.19
Total mortgage-backed securities		1,453,447		31,951		79,810		1		1,501,305		3.13		896,258		31,951		56,717		—		921,024		3.85
Corporate bonds:
After 10 years		—		—		—		—		—		—		1,447		434		—		—		1,013		5.80
Equity securities (without contractual maturity)(1)		77		—		—		37		40		—		77		—		—		36		41		—
Total investment securities available for sale	$	1,547,514	$	31,951	$	82,347	$	63	$	1,597,847		3.15	$	1,896,318	$	32,385	$	59,386	$	51	$	1,923,268		2.60

(1) Represents common shares of another financial institution in Puerto Rico.

Available-for-Sale Investments' Fair Value and Gross Unrealized Losses

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 September 30, 2012 and December 31, 2011. It also includes debt securities for which an OTTI was recognized and only the amount related to a credit loss was recognized in earnings. Unrealized losses for which OTTI had been recognized have been reduced by any subsequent recoveries in fair value:

	As of September 30, 2012
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Debt securities:
Puerto Rico Government obligations	$	2,065	$	25	$	—	$	—	$	2,065	$	25
Mortgage-backed securities:
Collateralized mortgage obligations issued or guaranteed by FHLMC		376		1		—		—		376		1
Other mortgage pass-through trust certificates		—		—		54,540		17,867		54,540		17,867
Equity securities		—		—		40		37		40		37
	$	2,441	$	26	$	54,580	$	17,904	$	57,021	$	17,930

	As of December 31, 2011
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Debt securities:
Puerto Rico Government obligations	$	15,982	$	15	$	—	$	—	$	15,982	$	15
Mortgage-backed securities:
Other mortgage pass-through trust certificates		—		—		61,017		23,809		61,017		23,809
Corporate bonds		—		—		1,013		434		1,013		434
Equity securities		41		36		—		—		41		36
	$	16,023	$	51	$	62,030	$	24,243	$	78,053	$	24,294

OTTI Losses on Available-for-Sale Debt Securities

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

	Private label MBS						Private label MBS
	Quarter ended September 30,						Nine-Month Period Ended September 30,
(In thousands)	2012			2011			2012			2011
Total other-than-temporary impairment losses	$	—		$	—		$	—		$	—
Portion of loss previously recognized in other comprehensive income		(557	)		(350	)		(1,933	)		(957	)
Net impairment losses recognized in earnings	$	(557	)	$	(350	)	$	(1,933	)	$	(957	)

Roll-Forward of Credit Losses on Debt Securities Held by Corporation

The following table summarizes the roll-forward of credit losses on debt securities held by the Corporation for which a portion of an OTTI is recognized in OCI:

	Quarter ended September 30,				Nine-Month Period Ended September 30,
(In thousands)	2012		2011		2012		2011
Credit losses at the beginning of the period	$	5,199	$	2,459	$	3,823	$	1,852
Additions:
Credit losses on debt securities for which an OTTI was previously recognized (1)		557		350		1,933		957
Ending balance of credit losses on debt securities held for which a portion of an OTTI was recognized in OCI	$	5,756	$	2,809	$	5,756	$	2,809

(1) Related to private label MBS.

Significant Assumptions in Valuation of Private Label MBS

Significant assumptions in the valuation of the private label MBS were as follow:

	September 30, 2012			December 31, 2011
	Weighted Average		Range	Weighted Average		Range
Discount rate		14.5%	14.5%		14.5%	14.5%
Prepayment rate		33%	23.81% - 43.58%		27%	21.33% -37.97%
Projected Cumulative Loss Rate		7%	0.71% - 17.51%		6%	1.94% - 11.89%

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EARNINGS PER COMMON SHARE - Calculations of Earnings Per Common Share (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net Income (Loss):
Net income (loss)	$ 19,073	$ (24,046)	$ 15,247	$ (67,390)
Cumulative convertible preferred stock dividends (Series G)		(5,302)		(15,906)
Preferred stock discount accretion (Series G)		(1,795)		(5,489)
Net income (loss) attributable to common stockholders	$ 19,073	$ (31,143)	$ 15,247	$ (88,785)
Weighted-Average Shares:
Basic weighted-average common shares outstanding	205,415	21,303	205,349	21,303
Average potential common shares	508		348
Diluted weighted-average number of common shares outstanding	205,923	21,303	205,697	21,303
Income (loss) per common share:
Basic	$ 0.09	$ (1.46)	$ 0.07	$ (4.17)
Diluted	$ 0.09	$ (1.46)	$ 0.07	$ (4.17)

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ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB)

9 Months Ended

Sep. 30, 2012

ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB)

14 – ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB)

Following is a summary of the advances from the FHLB:

(In thousands)	September 30, 2012		December 31, 2011
Fixed-rate advances from FHLB, with a weighted-average interest rate of 2.31% (December 31, 2011 - 3.59%)	$	518,440	$	367,440

Advances from FHLB mature as follows:

	September 30, 2012
	(In thousands)
One to thirty days	$	10,000
Over ninety days to one year		155,000
One to three years		53,440
Three to five years		300,000
Total	$	518,440

As of September 30, 2012, the Corporation had additional capacity of approximately $300.4 million on this credit facility based on collateral pledged at the FHLB, including haircuts reflecting the perceived risk associated with holding the collateral.

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NOTES PAYABLE - Component of Notes Payable (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011
Short-term Debt [Line Items]
Fair value of medium-term notes	$ 23,342
Callable step-rate notes [Member]
Short-term Debt [Line Items]
Fair value of medium-term notes	15,968
Series A DJIA Protected Notes [Member]
Short-term Debt [Line Items]
Fair value of medium-term notes	$ 7,374

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FAIR VALUE

9 Months Ended

Sep. 30, 2012

FAIR VALUE

19 – FAIR VALUE

Fair Value Option

FASB authoritative guidance permits the measurement of selected eligible financial instruments at fair value.

Medium-Term Notes

The Corporation elected the fair value option for certain medium term notes that were hedged with interest rate swaps that were previously designated for fair value hedge accounting. These medium-term notes were repaid during the second quarter of 2012. As of December 31, 2011, these medium-term notes with a principal balance of $15.4 million, had a fair value of $16.0 million, recorded in notes payable. Interest paid/accrued on these instruments was recorded as part of interest expense and the accrued interest was part of the fair value of the notes. Electing the fair value option allows the Corporation to eliminate the burden of complying with the requirements for hedge accounting (e.g., documentation and effectiveness assessment) without introducing earnings volatility.

Medium-term notes for which the Corporation elected the fair value option were priced using observable market data in the institutional markets.

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 which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. 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 are traded 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 and financial liabilities (e.g., medium-term notes elected to be measured at fair value) 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 that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models for which the determination of fair value requires significant management judgment or estimation.

For 2012, there have been no transfers into or out of Level 1, Level 2 or Level 3 measurement 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 equity securities, U.S. Treasury notes and non-callable U.S. Agency debt securities), when available (Level 1), or 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 models that use unobservable inputs due to the limited market activity of the instrument, as is the case with certain private label mortgage-backed securities 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 bias on a nonrated security. The market valuation is derived from a model that utilizes relevant assumptions such as 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, others) in combination with prepayment forecasts obtained from a commercially available prepayment model (ADCO). 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, taking into account loan credit characteristics (loan-to-value, state, origination date, property type, occupancy loan purpose, documentation type, debt-to-income ratio, other) to provide an estimate of default and loss severity.

Corporate bonds are collateralized by an agency zero-coupon bond and a synthetic Collateralized Debt Obligation of 125 corporate bonds rated investment grade at the time of structuring. The value of the bonds is tied to the level of credit default swap spreads.

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

Derivative instruments

The fair value of most of the derivative instruments is based on observable market parameters and takes into consideration the credit risk component of paying counterparties when appropriate, except when collateral is pledged. That is, on interest rate swaps, the credit risk of both counterparties is included in the valuation; and, on options and caps, only the seller’s credit risk is considered. The derivative instruments, namely swaps and caps, were valued using a discounted cash flow approach using the related US LIBOR and swap rate for each cash flow. Derivatives include interest rate swaps used for protection against rising interest rates. For these interest rate swaps, a credit component was not considered in the valuation since the Corporation has fully collateralized with investment securities any mark to market loss with the counterparty and, if there were market gains, the counterparty had to deliver collateral to the Corporation.

Although most of the derivative instruments are fully collateralized, a credit spread is considered for those that are not secured in full. The cumulative mark-to-market effect of credit risk in the valuation of derivative instruments for the quarter and nine-month period ended September 30, 2012 was immaterial.

Term notes payable

The fair value of term notes was determined using a discounted cash flow analysis over the full term of the borrowings. The model assumes that the embedded options are exercised economically. The discount rates used in the valuations consider 3-month LIBOR forward curves and the credit spread at every cash flow. During the second quarter of 2012, the Corporation prepaid medium term notes with a principal balance of $15.4 million that carried a rate of 6.00%. These notes were carried at fair value and changes in value were recorded as part of interest expense. As a result of the prepayment of the notes, a marked-to-market loss of $0.5 million was reversed resulting in a reduction in interest expense for the nine-month period ended on September 30, 2012.

Assets and liabilities measured at fair value on a recurring basis, including financial liabilities for which the Corporation has elected the fair value option, are summarized below:

	As of September 30, 2012								As of December 31, 2011
	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	$	40	$	—	$	—	$	40	$	41	$	—	$	—	$	41
U.S. Treasury Securities		7,495		—		—		7,495		476,992		—		—		476,992
Non-callable U.S. agency debt		—		—		—		—		301,585		—		—		301,585
Callable U.S. agency debt and MBS		—		1,472,277		—		1,472,277		—		859,818		—		859,818
Puerto Rico Government Obligations		—		59,603		3,743		63,346		—		219,369		3,244		222,613
Private label MBS		—		—		54,689		54,689		—		—		61,206		61,206
Corporate bonds		—		—		—		—		—		—		1,013		1,013
Derivatives, included in assets:
Interest rate swap agreements		—		318		—		318		—		378		—		378
Purchased options used to manage exposure to the stock market on embeded stock indexed options		—		—		—		—		—		899		—		899
Forward contracts		—		18		—		18		—		—		—		—
Liabilities:
Medium-term notes		—		—		—		—		—		15,968		—		15,968
Derivatives, included in liabilities:
Interest rate swap agreements		—		6,238		—		6,238		—		6,767		—		6,767
Embedded written options on stock index deposits and notes payable		—		—		—		—		—		899		—		899
Forward Contracts		—		190		—		190		—		168		—		168
Total	$	7,535	$	1,538,644	$	58,432	$	1,604,611	$	778,618	$	1,104,266	$	65,463	$	1,948,347

	Changes in Fair Value for items Measured at Fair Value Pursuant to Election of  the Fair Value Option For the Quarter ended September 30,
	2012		2011
(In thousands)	Decrease (increase) in Interest Expense included in Current-Period Earnings (1)
Medium-term notes	$	—	$	(1,871	)

(1) Changes in fair value for the quarter ended September 30, 2011 include interest expense on medium-term notes of $0.2 million. Interest expense on medium-term notes that have been elected to be carried at fair value are recorded in interest expense in the Consolidated Statement of Income (Loss) based on their contractual coupons.

	Changes in Fair Value for items Measured at Fair Value Pursuant to Election of  the Fair Value Option For the Nine-Month Period Ended September 30,
	2012			2011
(In thousands)	Decrease (increase) in Interest Expense included in Current-Period Earnings (1)
Medium-term notes	$	(140	)	$	(2,864	)

(1) Changes in fair value for the nine-month period ended September 30, 2012 and 2011 include interest expense on medium-term notes of $0.4 million and $0.7 million, respectively. Interest expense on medium-term notes that have been elected to be carried at fair value are recorded in interest expense in the Consolidated Statement of Income (Loss) based on their contractual coupons.

The table below presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter and nine-month period ended September 30, 2012 and 2011.

	Total Fair Value  Measurements Quarter ended September 30,
	2012			2011
Level 3 Instruments Only (In thousands)	Securities Available For Sale (1)			Securities Available For Sale (1)
Beginning balance	$	61,838			71,412
Total gains or (losses) (realized/unrealized):
Included in earnings		(557	)		(350	)
Included in other comprehensive income		1,666			897
Sales		(1,450	)		—
Principal repayments and amortization		(3,065	)		(3,851	)
Ending balance	$	58,432		$	68,108

(1) Amounts mostly related to private label mortgage-backed securities.

	Total Fair Value Measurements Nine-Month Period Ended September  30,
	2012			2011
Level 3 Instruments Only (In thousands)	Securities Available For Sale (1)			Securities Available For Sale (1)
Beginning balance	$	65,463			74,993
Total gains or (losses) (realized/unrealized):
Included in earnings		(1,933	)		(957	)
Included in other comprehensive income		6,722			2,768
Held-to-Maturity investment securities reclassified to Available-for-Sale		—			2,000
Sales		(1,450	)		—
Principal repayments and amortization		(10,370	)		(10,696	)
Ending balance	$	58,432		$	68,108

(1) Amounts mostly related to private label mortgage-backed securities.

The table below presents qualitative information for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at September 30, 2012.

	September 30, 2012
(In thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
Investment securities available-for-sale:
Private label MBS	$	54,689	Discounted cash flow	Discount rate	14.5%
				Prepayment rate	23.81% - 43.58% (Weighted Average 33%)
				Projected Cumulative Loss Rate	0.71% - 17.51% (Weighted Average 7%)
Puerto Rico Government Obligations		3,743	Discounted cash flow	Prepayment Speed	5.95%

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 the prepayment rates. Shifts in those inputs would result in different fair value measurements. Increases in the probability of default, loss severity assumptions and pre-payments rates in isolation would generally result in an adverse effect in 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 speed. A significant increase (decrease) in the assumed speed would lead to a higher (lower) fair value estimate. Loss severity and probability of default are not included as significant unobservable variables because the note is guaranteed by the Puerto Rico Housing Finance Authority (“PRHFA”). The PRHFA credit risk is modeled by discounting the cash flows using a curve appropriate to the PRHFA credit rating.

Additionally, fair value is used on a non-recurring 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, loans).

As of September 30, 2012, 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 September 30, 2012						Losses recorded for the Quarter Ended September 30, 2012		Losses recorded for the Nine-Month Period Ended September 30, 2012
	Level 1		Level 2		Level 3
	(In thousands)
Loans receivable (1)	$	—	$	—	$	702,308	$	19,676	$	80,172
Other Real Estate Owned (2)		—		—		177,001		3,264		7,860
Mortgage servicing rights (3)		—		—		16,660		363		203

(1) Mainly impaired commercial and construction loans. The impairment was generally measured based on the fair value of the collateral. The fair values are 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 value is 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), which are not market observable. Losses are related to market valuation adjustments after the transfer from the loan to the Other Real Estate Owned (“OREO”) portfolio.

(3) Fair value adjustments to mortgage servicing rights were mainly due to assumptions associated with mortgage prepayment rates. The Corporation carries its mortgage servicing rights at lower of cost or market, and they are accordingly measured at fair value on a non-recurring basis. Assumptions for the value of mortgage servicing rights include: Prepayment rate 12.66%, Discount Rate 11.09%.

As of September 30, 2011, 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 September 30, 2011						Losses recorded for the Quarter Ended September 30, 2011		Losses recorded for the Nine-Month Period Ended September 30, 2011
	Level 1		Level 2		Level 3
	(In thousands)
Loans receivable (1)	$	—	$	—	$	842,773	$	45,312	$	187,269
Other Real Estate Owned (2)		—		—		109,514		2,325		6,294

(1) Mainly impaired commercial and construction loans. The impairment was generally measured based on the fair value of the collateral. The fair values are 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 value is 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), which are not market observable. Losses are related to market valuation adjustments after the transfer from the loan to the Other Real Estate Owned (“OREO”) portfolio.

Qualitative information regarding the fair value measurements for Level 3 financial instruments are as follows:

	September 30, 2012
	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 Flow	Weighted average prepayment speed 12.66%; weighted average discount rate 11.09%

The following is a description of the valuation methodologies used for instruments that are not measured and reported at fair value on a recurring basis or non-recurring basis. The estimated fair value was calculated using certain facts and assumptions, which vary depending on the specific financial instrument.

Cash and due from banks and money market investments

The carrying amounts of cash and due from banks and money market investments are reasonable estimates of their fair value. Money market investments include held-to-maturity U.S. Government obligations, which have a contractual maturity of three months or less. The fair value of these securities is based on quoted market prices in active markets that incorporate the risk of nonperformance.

Other equity securities

Equity or other securities that do not have a readily available fair value are stated at the net realizable value, which management believes is a reasonable proxy for their fair value. This category is principally composed of stock that is owned by the Corporation to comply with FHLB regulatory requirements. Their realizable value equals their cost as these shares can be freely redeemed at par.

Loans receivable, including loans held for sale

The fair value of loans held for investment and for mortgage loans held for sale was estimated using discounted cash flow analyses, based on interest rates currently being offered for loans with similar terms and credit quality and with adjustments that the Corporation’s management believes a market participant would consider in determining fair value. Loans were classified by type such as commercial, residential mortgage, and automobile. These asset categories were further segmented into fixed- and adjustable-rate categories. The fair values of performing fixed-rate and adjustable-rate loans were calculated by discounting expected cash flows through the estimated maturity date. This fair value is not currently an indication of an exit price as that type of assumption could result in a different fair value estimate. The fair value of credit card loans was estimated using a discounted cash flow method and excludes any value related to customer account relationship. Loans with no stated maturity, like credit lines, were valued at book value. Prepayment assumptions were considered for non-residential loans. For residential mortgage loans, prepayment estimates were based on recent historical prepayment experience of the Corporation’s residential mortgage portfolio. Discount rates were based on the Treasury and LIBOR/Swap Yield Curves at the date of the analysis, and included appropriate adjustments for expected credit losses and liquidity.

Deposits

The estimated fair value of demand deposits and savings accounts, which are deposits with no defined maturities, equals the amount payable on demand at the reporting date. The fair values of retail fixed-rate time deposits, with stated maturities, are based on the present value of the future cash flows expected to be paid on the deposits. The cash flows were based on contractual maturities; no early repayments are assumed. Discount rates were based on the LIBOR yield curve.

The estimated fair value of total deposits excludes the fair value of core deposit intangibles, which represent the value of the customer relationship measured by the value of demand deposits and savings deposits that bear a low or zero rate of interest and do not fluctuate in response to changes in interest rates.

The fair value of brokered CDs, which are included within deposits, is determined using discounted cash flow analyses over the full term of the CDs. The fair value of the CDs is computed using the outstanding principal amount. The discount rates used are based on brokered CD market rates as of September 30, 2012. The fair value does not incorporate the risk of nonperformance, since interests in brokered CDs are generally sold by brokers in amounts of less than $250,000 and, therefore, insured by the FDIC.

Securities sold under agreements to repurchase

Some repurchase agreements reprice at least quarterly, and their outstanding balances are estimated to be their fair value. Where longer commitments are involved, fair value is estimated using exit price indications of the cost of unwinding the transactions as of the end of the reporting period. The brokers who are the counter-parties provide these indications. Securities sold under agreements to repurchase are fully collateralized by investment securities.

Advances from FHLB

The fair value of advances from FHLB with fixed maturities is determined using discounted cash flow analyses over the full term of the borrowings, using indications of the fair value of similar transactions. The cash flows assume no early repayment of the borrowings. Discount rates are based on the LIBOR yield curve. For advances from FHLB that reprice quarterly, their outstanding balances are estimated to be their fair value. Advances from FHLB are fully collateralized by mortgage loans and, to a lesser extent, investment securities.

Other borrowings

Other borrowings consist of junior subordinated debentures. Projected cash flows from the debentures were discounted using the LIBOR yield curve plus a credit spread. This credit spread was estimated using the difference in yield curves between Swap rates and a yield curve that considers the industry and credit rating of the Corporation as issuer of the note at a tenor comparable to the time to maturity of the debentures.

The following table presents the estimated fair value and carrying value of financial instruments as of September 30, 2012 and December 31, 2011

	Total Carrying Amount in Statement of Financial Condition September  30, 2012			Fair Value Estimated September 30, 2012		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Cash and due from banks and money market investments	$	1,003,720		$	1,003,720	$	1,003,720	$	—	$	—
Investment securities available for sale		1,597,847			1,597,847		7,535		1,531,880		58,432
Other equity securities		39,656			39,656		—		39,656		—
Loans held for sale		68,349			70,976		—		70,976		—
Loans, held for investment		10,188,164			—		—		—		—
Less: allowance for loan and lease losses		(445,531	)
Loans held for investment, net of allowance	$	9,742,633			9,466,460		—		—		9,466,460
Derivatives, included in assets		336			336		—		336		—
Liabilities:
Deposits		9,896,402			9,937,355		—		9,937,355		—
Securities sold under agreements to repurchase		900,000			997,179		—		997,179		—
Advances from FHLB		518,440			524,176		—		524,176		—
Other borrowings		231,959			132,599		—		—		132,599
Derivatives, included in liabilities		6,428			6,428		—		6,428		—

	Total Carrying Amount in Statement of Financial Condition December  31, 2011			Fair Value Estimated December 31, 2011
	(In thousands)
Assets:
Cash and due from banks and money market investments	$	446,566		$	446,566
Investment securities available for sale		1,923,268			1,923,268
Other equity securities		37,951			37,951
Loans held for sale		15,822			16,038
Loans, held for investment		10,559,392			—
Less: allowance for loan and lease losses		(493,917	)		—
Loans held for investment, net of allowance	$	10,065,475			9,618,267
Derivatives, included in assets		1,277			1,277
Liabilities:
Deposits		9,907,754			9,974,119
Securities sold under agreements to repurchase		1,000,000			1,102,263
Advances from FHLB		367,440			379,730
Notes Payable		23,342			22,476
Other borrowings		231,959			160,603
Derivatives, included in liabilities		7,834			7,834

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GOODWILL AND OTHER INTANGIBLES - Gross Amount and Accumulated Amortization of Other Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Jun. 30, 2012
Core deposits intangibles [Member]
Finite-Lived Intangible Assets [Line Items]
Gross amount	$ 45,844	45,844
Accumulated amortization	(35,921)	(34,155)
Net carrying amount	9,923	11,689
Remaining amortization period	10.7 years	11.5 years
Purchased credit card relationship intangible [Member]
Finite-Lived Intangible Assets [Line Items]
Gross amount	24,465		24,465
Accumulated amortization	(545)
Net carrying amount	$ 23,920
Remaining amortization period	9.3 years	-

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FIRST BANCORP. (Holding Company Only) Financial Information (Tables)

9 Months Ended

Sep. 30, 2012

Statements of Financial Condition

The following condensed financial information presents the financial position of the Holding Company only as of September 30, 2012 and December 31, 2011 and the results of its operations for the quarter and nine-month period ended September 30, 2012 and 2011.

	As of September 30, 2012		As of December 31, 2011
	(In thousands)
Assets
Cash and due from banks	$	36,631	$	41,681
Money market investments		6,111		3,111
Investment securities available for sale, at market:
Equity investments		40		41
Other investment securities		1,300		1,300
Investment in First Bank Puerto Rico, at equity		1,660,373		1,615,304
Investment in First Bank Insurance Agency, at equity		7,163		5,338
Investment in FBP Statutory Trust I		3,093		3,093
Investment in FBP Statutory Trust II		3,866		3,866
Other assets		3,669		3,488
Total assets	$	1,722,246	$	1,677,222
Liabilities & Stockholders’ Equity
Liabilities:
Other borrowings	$	231,959	$	231,959
Accounts payable and other liabilities		6,170		1,119
Total liabilities		238,129		233,078
Stockholders’ equity		1,484,117		1,444,144
Total liabilities and stockholders’ equity	$	1,722,246	$	1,677,222

Statements of Loss

	Quarter Ended						Nine-Month Period Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(In thousands)
Income:
Interest income on investment securities	$	—		$	1		$	—		$	1
Dividends from other subsidiaries		—			—			—			3,000
Interest income on other investments		6			—			12			—
Other income		55			53			165			157
		61			54			177			3,158
Expense:
Notes payable and other borrowings		1,849			1,755			5,529			5,221
Other operating expenses		783			745			2,618			1,792
		2,632			2,500			8,147			7,013
Investment related proceeds and impairments on equity securities		—			—			—			679
Loss before income taxes and equity in undistributed earnings (losses) of subsidiaries		(2,571	)		(2,446	)		(7,970	)		(3,176	)
Income tax provision		—			—			—			—
Equity in undistributed earnings (losses) of subsidiaries		21,644			(21,600	)		23,217			(64,214	)
Net income (loss)	$	19,073		$	(24,046	)	$	15,247		$	(67,390	)

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DEPOSITS - Brokered Certificates Of Deposit Mature (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment, Past Due [Line Items]
One to ninety days	$ 654,931
Over ninety days to one year	1,761,624
One to three years	889,003
Three to five years	98,446
Over five years	4,258
Total	$ 3,408,262	$ 3,731,371

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DEPOSITS (Tables)

9 Months Ended

Sep. 30, 2012

Summary of Deposit Balances

The following table summarizes deposit balances:

	September 30, 2012		December 31, 2011
	(In thousands)
Type of account and interest rate:
Non-interest bearing checking accounts	$	780,717	$	705,789
Savings accounts		2,287,511		2,145,625
Interest-bearing checking accounts		1,117,189		1,066,753
Certificates of deposit		2,302,723		2,258,216
Brokered certificates of deposit		3,408,262		3,731,371
	$	9,896,402	$	9,907,754

Brokered Certificates Of Deposit Mature

Brokered certificates of deposit mature as follows:

	September 30, 2012
	(In thousands)
One to ninety days	$	654,931
Over ninety days to one year		1,761,624
One to three years		889,003
Three to five years		98,446
Over five years		4,258
Total	$	3,408,262

Components of Interest Expense on Deposits

The following are the components of interest expense on deposits:

	Quarter Ended				Nine-Month Period Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
	(In thousands)				(In thousands)
Interest expense on deposits	$	27,653	$	42,465	$	92,569	$	136,507
Amortization of broker placement fees		2,300		3,675		7,607		13,217
Interest expense on deposits	$	29,953	$	46,140	$	100,176	$	149,724

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SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Securities Sold Under Agreements to Repurchase (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Securities Sold Under Agreements To Repurchase And Other Short Term Borrowings [Line Items]
Repurchase agreements, interest ranging from 2.45% to 3.52% (December 31, 2011 - 2.50% to 4.40%)	$ 900,000	$ 1,000,000

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net income (loss)	$ 19,073	$ (24,046)	$ 15,247	$ (67,390)
Available-for-sale debt securities on which an other-than-temporary impairment has been recognized:
Subsequent unrealized gain on debt securities on which an other-than-temporary impairment has been recognized	2,012	1,225	8,309	3,883
Reclassification adjustment for other-than-temporary impairment on debt securities included in net income	(557)	(350)	(1,933)	(957)
All other unrealized gains and losses on available-for-sale securities:
All other unrealized holding gains arising during the period	14,868	15,285	17,009	26,578
Reclassification adjustments for net gain included in net income		(12,504)		(34,453)
Net unrealized gains on securities reclassified from held to maturity to available for sale				2,789
Income tax expense related to items of other comprehensive income	(442)	(2,364)	(92)	(1,631)
Other comprehensive income (loss) for the period, net of tax	15,881	1,292	23,293	(3,791)
Total comprehensive income (loss)	$ 34,954	$ (22,754)	$ 38,540	$ (71,181)

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LOANS HELD FOR SALE - Portfolio of Loans Held for Sale (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Feb. 16, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 68,349	$ 269,300	$ 15,822
Residential Mortgage Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential mortgage loans	68,349		11,058
Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Construction loans			$ 4,764

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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2012

STOCK-BASED COMPENSATION

3 – STOCK-BASED COMPENSATION

Between 1997 and January 2007, the Corporation had a stock option plan (“the 1997 stock option plan”) that authorized the granting of up to 579,740 options on shares of the Corporation’s common stock to eligible employees. The options granted under the plan could not exceed 20% of the number of common shares outstanding. Each option provides for the purchase of one share of common stock at a price not less than the fair market value of the stock on the date the option was granted. Stock options were fully vested upon grant. The maximum term to exercise the options is ten years. The stock option plan provides for a proportionate adjustment in the exercise price and the number of shares that can be purchased in the event of a stock dividend, stock split, reclassification of stock, merger or reorganization and certain other issuances and distributions such as stock appreciation rights.

Under the 1997 stock option plan, the Compensation and Benefits Committee (the “Compensation Committee”) had the authority to grant stock appreciation rights at any time subsequent to the grant of an option. Pursuant to stock appreciation rights, the optionee surrenders the right to exercise an option granted under the plan in consideration for payment by the Corporation of an amount equal to the excess of the fair market value of the shares of common stock subject to such option surrendered over the total option price of such shares. Any option surrendered is cancelled by the Corporation and the shares subject to the option are not eligible for further grants under the option plan. On January 21, 2007, the 1997 stock option plan expired; all outstanding awards granted under this plan continue in full force and effect, subject to their original terms. No awards for shares could be granted under the 1997 stock option plan as of its expiration.

The activity of stock options for the nine-month period ended September 30, 2012 is set forth below:

	Nine-Month Period Ended September 30, 2012
	Number of Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (In thousands)
Beginning of period		129,934		$	202.99
Options expired		(9,713	)		140.15
Options cancelled		(5,464	)		236.27
End of period outstanding and exercisable		114,757		$	206.72		3.1	$	—

On April 29, 2008, the Corporation’s stockholders approved the First BanCorp. 2008 Omnibus Incentive Plan (the “Omnibus Plan”). 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, and other stock-based awards. This plan allows the issuance of up to 8,169,807 shares of common stock, subject to adjustments for stock splits, reorganizations and other similar events. The Corporation’s Board of Directors, upon receiving the relevant recommendation of the Compensation 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.

Under the Omnibus Plan, during the third quarter of 2012, 44,910 shares of restricted stock were awarded to the Corporation’s independent directors subject to a one year vesting period. In addition, early in 2012, the Corporation issued 719,500 shares of restricted stock which will vest based on the employees’ continued service with the Corporation. Fifty percent (50%) of those shares vest in two years from the grant date and the remaining 50% vest in three years from the grant date. Included in the 719,500 shares of restricted stock are 557,000 shares granted to certain senior executive officers consistent with the requirements of the Troubled Asset Relief Program (“TARP”) Interim Final Rule. Notwithstanding the vesting period mentioned above, the employees covered by TARP are restricted from transferring the shares. Specifically, the stock that has otherwise vested may not become transferable at any time earlier than as permitted under the schedule set forth by TARP, which is based on the repayment in 25% increments of the aggregate financial assistance received from the U.S. Department of Treasury (the “Treasury”).

The following table summarizes the restricted stock activity in 2012 under the Omnibus Plan for both executive officers covered by the TARP requirements and other employees as well as for the independent directors:

	Nine-Month Period Ended September 30, 2012
	Number of shares of restricted stock		Weighted-Average Grant Date Fair Value
Non-vested shares at beginning of period		—	$	—
Granted		764,410		2.50
Non-vested shares at September 30, 2012		764,410	$	2.50

For the quarter and nine-month period ended September 30, 2012, the Corporation recognized $0.2 million and $0.4 million, respectively, of stock based compensation expense related to the aforementioned restricted stock awards. For the quarter and nine-month period ended September 30, 2011, the Corporation recognized $23,333 and $69,999, respectively, of stock based compensation related to 720 shares of restricted stock granted in 2008 to members of the Board of Directors that vested in the fourth quarter of 2011. As of September 30, 2012, there was $1.4 million of total unrecognized compensation cost related to nonvested shares of restricted stock. That cost is expected to be recognized for 6% of the awards over the next 8 months, for 47% of the awards over the next 1.5 years and the remaining 47% over the next 2.5 years, as if they were multiple awards. No shares of restricted stock were granted or vested during the nine-month period ended September 30, 2011.

The fair value of the shares of restricted stock granted in 2012 was based on the market price of the Corporation’s outstanding common stock on the date of the grant, $3.34 for restricted stocks granted during the third quarter of 2012 and $4.00 for the restricted stocks granted earlier in 2012. For the 557,000 shares of restricted stock granted under the TARP requirements, the market price was discounted due to post-vesting restrictions. For purposes of computing the discount, the Corporation assumes a common stock appreciation of 25% and a holding period by the Treasury of its outstanding common stock of the Corporation of 3 years, resulting in a fair value of $2.00 for restricted shares granted under the TARP requirements. Also, the Corporation uses empirical data to estimate employee termination, separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.

Stock-based compensation accounting guidance requires the Corporation to develop an estimate of the number of share-based awards that will be forfeited due to employee or director turnover. Quarterly changes in the estimated forfeiture rate may have a significant effect on share-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, then an adjustment is made to increase the estimated forfeiture rate, which will result in a decrease to the expense recognized in the financial statements. If the actual forfeiture rate is lower than the estimated forfeiture rate, then an adjustment is made to decrease the estimated forfeiture rate, which will result in an increase to the expense recognized in the financial statements. When unvested options or shares of restricted stock are forfeited, any compensation expense previously recognized on the forfeited awards is reversed in the period of the forfeiture.

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INVESTMENT SECURITIES - Available-For-Sale Investments' Fair Value And Gross Unrealized Losses (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	$ 2,441	$ 16,023
Unrealized Losses Less than 12 months	26	51
Fair Value 12 months or more	54,580	62,030
Unrealized Losses 12 months or more	17,904	24,243
Total Fair Value	57,021	78,053
Total Unrealized Losses	17,930	24,294
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months		41
Unrealized Losses Less than 12 months		36
Fair Value 12 months or more	40
Unrealized Losses 12 months or more	37
Total Fair Value	40	41
Total Unrealized Losses	37	36
Corporate bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value 12 months or more		1,013
Unrealized Losses 12 months or more		434
Total Fair Value		1,013
Total Unrealized Losses		434
Debt Securities [Member] | Puerto Rico Government obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	2,065	15,982
Unrealized Losses Less than 12 months	25	15
Fair Value 12 months or more
Unrealized Losses 12 months or more
Total Fair Value	2,065	15,982
Total Unrealized Losses	25	15
Mortgage-backed securities [Member] | Collateralized Mortgage Obligations Issued By Private Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value Less than 12 months	376
Unrealized Losses Less than 12 months	1
Total Fair Value	376
Total Unrealized Losses	1
Mortgage-backed securities [Member] | Other-mortgage pass-through trust certificates [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value 12 months or more	54,540	61,017
Unrealized Losses 12 months or more	17,867	23,809
Total Fair Value	54,540	61,017
Total Unrealized Losses	$ 17,867	$ 23,809

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LOAN PORTFOLIO - Breakdown Between Accrual and Nonaccrual Status of TDRs (Parenthetical) (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Modifications [Line Items]
Total TDR loans	$ 925,144	$ 861,932	$ 820,499
Non Accrual [Member]
Financing Receivable, Modifications [Line Items]
Total TDR loans	430,140
Performing [Member] | Non Accrual [Member]
Financing Receivable, Modifications [Line Items]
Total TDR loans	$ 203,600

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DEPOSITS - Components of Interest Expense on Deposits (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Deposits [Line Items]
Interest expense on deposits	$ 27,653	$ 42,465	$ 92,569	$ 136,507
Amortization of broker placement fees	2,300	3,675	7,607	13,217
Interest expense on deposits	$ 29,953	$ 46,140	$ 100,176	$ 149,724

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LOAN PORTFOLIO - Credit Risk Payment Activity (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Feb. 16, 2012	Dec. 31, 2011	Sep. 30, 2011
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	$ 9,742,633		$ 10,065,475	$ 10,633,142
Loans, net of allowance for loan and lease losses	68,349	269,300	15,822
Residential Real-Estate [Member] | FHA/VA Guaranteed loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	216,490
Loans, net of allowance for loan and lease losses			268,153
Residential Real-Estate [Member] | Other residential loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	2,545,928
Loans, net of allowance for loan and lease losses			2,605,632
Residential Real-Estate [Member] | Performing [Member] | FHA/VA Guaranteed loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	216,490		268,153
Residential Real-Estate [Member] | Performing [Member] | Other residential loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	2,225,015		2,267,424
Residential Real-Estate [Member] | Purchased credit-impaired [Member] | FHA/VA Guaranteed loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses
Residential Real-Estate [Member] | Purchased credit-impaired [Member] | Other residential loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses
Residential Real-Estate [Member] | Non-performing [Member] | FHA/VA Guaranteed loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses
Residential Real-Estate [Member] | Non-performing [Member] | Other residential loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	320,913		338,208
Consumer [Member] | Auto loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	996,619
Loans, net of allowance for loan and lease losses			937,566
Consumer [Member] | Finance leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	239,556
Loans, net of allowance for loan and lease losses			247,003
Consumer [Member] | Other Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	749,916
Loans, net of allowance for loan and lease losses			377,248
Consumer [Member] | Performing [Member] | Auto loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	978,980		917,925
Consumer [Member] | Performing [Member] | Finance leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	236,495		243,518
Consumer [Member] | Performing [Member] | Other Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	721,824		360,827
Consumer [Member] | Purchased credit-impaired [Member] | Auto loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses
Consumer [Member] | Purchased credit-impaired [Member] | Finance leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses
Consumer [Member] | Purchased credit-impaired [Member] | Other Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	12,741
Consumer [Member] | Non-performing [Member] | Auto loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	17,639		19,641
Consumer [Member] | Non-performing [Member] | Finance leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	3,061		3,485
Consumer [Member] | Non-performing [Member] | Other Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans, net of allowance for loan and lease losses	$ 15,351		$ 16,421

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SUPPLEMENTAL CASH FLOW INFORMATION

9 Months Ended

Sep. 30, 2012

SUPPLEMENTAL CASH FLOW INFORMATION

20 – SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information follows:

	Nine-Month Period Ended September 30, 2012
	2012		2011
	(In thousands)
Cash paid for:
Interest on borrowings	$	128,193	$	191,570
Income tax		5,139		2,120
Non-cash investing and financing activities:
Additions to other real estate owned		133,124		125,420
Additions to auto repossesions		39,383		50,380
Capitalization of servicing assets		4,486		3,793
Loan securitizations		165,318		151,972
Loans sold to a joint venture in exchange for an acquisition loan and an equity interest in the joint venture		—		183,709
Reclassification of Held-to-Maturity investment securities to Available-for-Sale		—		88,751

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OTHER BORROWINGS - Components of Other Borrowings (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Debt Instrument [Line Items]
Junior subordinated debentures due in 2034	$ 231,959	$ 231,959
Junior subordinated debentures, bearing interest at floating rate of 2.75% [Member]
Debt Instrument [Line Items]
Junior subordinated debentures due in 2034	103,093	103,093
Junior subordinated debentures, bearing interest at floating rate of 2.50% [Member]
Debt Instrument [Line Items]
Junior subordinated debentures due in 2034	$ 128,866	$ 128,866

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FAIR VALUE - Fair Value (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Assets:
Investment securities available for sale	$ 1,597,847	$ 1,923,268
Less: allowance for loan and lease losses	(445,531)	(493,917)	(1,394)
Liabilities:
Notes Payable		15,968
Level 1 [Member]
Assets:
Loans held for investment, net of allowance
Level 2 [Member]
Assets:
Loans held for investment, net of allowance
Level 3 [Member]
Assets:
Loans held for investment, net of allowance	702,308		842,773
Total Carrying Amount in Statement of Financial Condition [Member]
Assets:
Cash and due from banks and money market investments	1,003,720	446,566
Investment securities available for sale	1,597,847	1,923,268
Other equity securities	39,656	37,951
Loans held for sale	68,349	15,822
Loans, held for investment		10,559,392
Loans, held for investment	10,188,164
Less: allowance for loan and lease losses	(445,531)	(493,917)
Loans held for investment, net of allowance	9,742,633	10,065,475
Derivatives, included in assets	336	1,277
Liabilities:
Deposits	9,896,402	9,907,754
Securities sold under agreements to repurchase	900,000	1,000,000
Advances from FHLB	518,440	367,440
Notes Payable		23,342
Other borrowings	231,959	231,959
Derivatives, included in liabilities	6,428	7,834
Fair Value Estimated [Member]
Assets:
Cash and due from banks and money market investments	1,003,720	446,566
Investment securities available for sale	1,597,847	1,923,268
Other equity securities	39,656	37,951
Loans held for sale	70,976	16,038
Loans held for investment, net of allowance	9,466,460	9,618,267
Derivatives, included in assets	336	1,277
Liabilities:
Deposits	9,937,355	9,974,119
Securities sold under agreements to repurchase	997,179	1,102,263
Advances from FHLB	524,176	379,730
Notes Payable		22,476
Other borrowings	132,599	160,603
Derivatives, included in liabilities	6,428	7,834
Fair Value Estimated [Member] | Level 1 [Member]
Assets:
Cash and due from banks and money market investments	1,003,720
Investment securities available for sale	7,535
Liabilities:
Deposits
Securities sold under agreements to repurchase
Advances from FHLB
Other borrowings
Derivatives, included in liabilities
Fair Value Estimated [Member] | Level 2 [Member]
Assets:
Investment securities available for sale	1,531,880
Other equity securities	39,656
Loans held for sale	70,976
Derivatives, included in assets	336
Liabilities:
Deposits	9,937,355
Securities sold under agreements to repurchase	997,179
Advances from FHLB	524,176
Derivatives, included in liabilities	6,428
Fair Value Estimated [Member] | Level 3 [Member]
Assets:
Investment securities available for sale	58,432
Loans held for investment, net of allowance	9,466,460
Liabilities:
Other borrowings	$ 132,599

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FAIR VALUE - Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3) (Detail) (USD $) In Thousands, unless otherwise specified					9 Months Ended				9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Private label MBS [Member]	Sep. 30, 2012 Puerto Rico Government obligations [Member]	Sep. 30, 2012 Discounted Cash Flow [Member] Private label MBS [Member]	Sep. 30, 2012 Discounted Cash Flow [Member] Puerto Rico Government obligations [Member]	Sep. 30, 2012 Categories of Investments, Marketable Securities, Available-for-sale Securities [Member] Private label MBS [Member]	Sep. 30, 2012 Categories of Investments, Marketable Securities, Available-for-sale Securities [Member] Puerto Rico Government obligations [Member]	Sep. 30, 2012 Minimum [Member] Categories of Investments, Marketable Securities, Available-for-sale Securities [Member]	Sep. 30, 2012 Maximum [Member] Categories of Investments, Marketable Securities, Available-for-sale Securities [Member]	Sep. 30, 2012 Weighted Averages [Member] Categories of Investments, Marketable Securities, Available-for-sale Securities [Member]
Investment securities available-for-sale:
Fair Value			$ 54,689	$ 3,743
Valuation technique					Discounted cash flow	Discounted cash flow
Fair value input discount rate	14.50%	14.50%					14.50%
Fair value input prepayment rate									23.81%	43.58%
Unobservable input prepayment rate											33.00%
Fair value projected Cumulative Loss Rate									0.71%	17.51%
Unobservable input projected cumulative loss rate											7.00%
Unobservable input prepayment Speed								5.95%
Securities available for sale
Fair Value			$ 54,689	$ 3,743
Valuation technique					Discounted cash flow	Discounted cash flow
Fair value input discount rate	14.50%	14.50%					14.50%
Fair value input prepayment rate									23.81%	43.58%
Unobservable input prepayment rate											33.00%
Fair value projected Cumulative Loss Rate									0.71%	17.51%
Unobservable input projected cumulative loss rate											7.00%
Unobservable input prepayment Speed								5.95%

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LOAN PORTFOLIO - Activity for Specific Reserve (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011
Specific Reserve:
Balance at beginning of period	$ 209,860	$ 214,902	$ 214,297
Provision for loan losses	15,265	87,070
Net charge-offs	(30,971)	(107,818)
Balance at end of period	$ 194,154	$ 194,154	$ 214,297

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

9 Months Ended

Sep. 30, 2012

Notional Amounts of All Derivative Instruments

The following table summarizes the notional amounts of all derivative instruments:

	Notional Amounts
	As of September 30, 2012		As of December 31, 2011
Economic undesignated hedges:	(In thousands)
Interest rate contracts:
Interest rate swap agreements used to hedge loans	$	38,597	$	39,786
Written interest rate cap agreements		—		67,894
Purchased interest rate cap agreements		—		67,894
Equity contracts:
Embedded written options on stock index deposits and notes payable		—		46,515
Purchased options used to manage exposure to the stock market on embedded stock index options		—		46,515
Forward Contracts:
Sale of TBA GNMA MBS pools		26,000		19,000
	$	64,597	$	287,604

Summary of Fair Value of Derivative Instruments and Location in Statement of Financial Condition

The following table summarizes the fair value of derivative instruments and the location in the Statement of Financial Condition:

	Asset Derivatives						Liability Derivatives
	Statement  of Financial Condition Location		September  30, 2012		December  31, 2011		Statement of Financial Condition Location	September  30, 2012		December  31, 2011
(In thousands)			Fair Value		Fair Value			Fair Value		Fair Value
Economic undesignated hedges:
Interest rate contracts:
Interest rate swap agreements used to hedge loans		Other assets	$	318	$	378	Accounts payable and other liabilities	$	6,238	$	6,767
Equity contracts:
Embedded written options on stock index notes payable		Other assets		—		—	Notes payable		—		899
Purchased options used to manage exposure to the stock market on embedded stock index options		Other assets		—		899	Accounts payable and other liabilities		—		—
Forward Contracts:
Sales of TBA GNMA MBS pools		Other assets		18		—	Accounts payable and other liabilities		190		168
			$	336	$	1,277		$	6,428	$	7,834

Effect of Derivative Instruments on Statement of Income (Loss)

The following table summarizes the effect of derivative instruments on the Statement of Income (Loss):

	Location of Gain or (loss) Recognized in Income on Derivatives	Unrealized (Loss)  or Gain						Unrealized Gain  or (Loss)
		Quarter Ended September 30,						Nine-Month Period  Ended September 30,
(In thousands)		2012			2011			2012			2011
ECONOMIC UNDESIGNATED HEDGES:
Interest rate contracts:
Interest rate swap agreements used to hedge fixed-rate:
Loans	Interest income - Loans	$	170		$	(954	)	$	469		$	(1,794	)
Equity contracts:
Embedded written and purchased options on stock index notes payable	Interest expense - Notes payable and other borrowings		—			40			—			(7	)
Forward contracts:
Sales of TBA GNMA MBS pools	Mortgage Banking Activities		(47	)		(176	)		(4	)		(209	)
Total gain (loss) on derivatives		$	123		$	(1,090	)	$	465		$	(2,010	)

Summary of Interest Rate Swaps

A summary of interest rate swaps follows:

	As of September 30, 2012			As of December 31, 2011
	(Dollars in thousands)
Pay fixed/receive floating :
Notional amount	$	38,597		$	39,786
Weighted-average receive rate at period end		2.08	%		2.13	%
Weighted-average pay rate at period end		6.82	%		6.82	%
Floating rates range from 167 to 252 basis points over 3-month LIBOR

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SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

9 Months Ended

Sep. 30, 2012

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

13 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase (repurchase agreements) consist of the following:

	September 30, 2012		December 31, 2011
	(In thousands)
Repurchase agreements, interest ranging from 2.45% to 3.52% (December 31, 2011 - 2.50% to 4.40%)	$	900,000	$	1,000,000

Repurchase agreements mature as follows:

	September 30, 2012
	(In thousands)
Three to five years	$	600,000
Over five years		300,000
Total	$	900,000

As of September 30, 2012 and December 31, 2011, the securities underlying such agreements were delivered to the dealers with whom the repurchase agreements were transacted.

Repurchase agreements as of September 30, 2012, grouped by counterparty, were as follows:

(Dollars in thousands)	Amount		Weighted-Average Maturity (In Months)
Counterparty
Citigroup Global Markets	$	300,000		49
JP Morgan Chase		200,000		52
Dean Witter / Morgan Stanley		100,000		60
Credit Suisse First Boston		300,000		62
	$	900,000

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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES AND SERVICING ASSETS - Key Economic Assumptions Used in Determining Fair Value at Time of Sale of Loans (Detail)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Government guaranteed mortgage loans [Member] | Maximum [Member]
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items]
Constant prepayment rate	12.40%	12.90%
Discount rate	12.00%	11.50%
Government guaranteed mortgage loans [Member] | Minimum [Member]
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items]
Constant prepayment rate	11.60%	10.60%
Discount rate	12.00%	11.30%
Conventional conforming mortgage loans [Member] | Maximum [Member]
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items]
Constant prepayment rate	12.80%	14.30%
Discount rate	10.00%	9.50%
Conventional conforming mortgage loans [Member] | Minimum [Member]
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items]
Constant prepayment rate	12.60%	12.70%
Discount rate	10.00%	9.30%
Conventional non-conforming mortgage loans [Member] | Maximum [Member]
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items]
Constant prepayment rate	13.80%	13.90%
Discount rate	14.30%	15.00%
Conventional non-conforming mortgage loans [Member] | Minimum [Member]
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items]
Constant prepayment rate	13.30%	11.70%
Discount rate	14.30%	13.80%