UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2012

Commission File Number: 001-34084

POPULAR, INC.

(Exact name of registrant as specified in its charter)

Puerto Rico	66-0667416
(State or other jurisdiction of Incorporation or organization)	(IRS Employer Identification Number)
Popular Center Building
209 Muñoz Rivera Avenue
Hato Rey, Puerto Rico	00918
(Address of principal executive offices)	(Zip code)

(787) 765-9800

(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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes     ¨  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 definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	x	Accelerated filer	¨
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    x  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value, 1,027,812,904 shares outstanding as of April 30, 2012.

POPULAR, INC.

INDEX

Part I – Financial Information	Page
Item 1. Financial Statements
Unaudited Consolidated Statements of Financial Condition at March 31, 2012, December 31, 2011 and March 31, 2011	4
Unaudited Consolidated Statements of Operations for the quarters ended March 31, 2012 and 2011	5
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the quarters ended March 31, 2012 and 2011	6
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the quarters ended March 31, 2012 and 2011	7
Unaudited Consolidated Statements of Cash Flows for the quarters ended March 31, 2012 and 2011	8
Notes to Unaudited Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	115
Item 3. Quantitative and Qualitative Disclosures about Market Risk	175
Item 4. Controls and Procedures	175
Part II – Other Information
Item 1. Legal Proceedings	176
Item 1A. Risk Factors	176
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	177
Item 6. Exhibits	177
Signatures	178

2

Forward-Looking Information

The information included in this Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to Popular, Inc.’s (the “Corporation”, “Popular”, “we, “us”, “our”) financial condition, results of operations, plans, objectives, future performance and business, including, but not limited to, statements with respect to the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions are generally intended to identify forward-looking statements.

These statements are not guarantees of future performance and involve certain risks, uncertainties, estimates and assumptions by management that are difficult to predict.

Various factors, some of which are beyond Popular’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

• the rate of growth in the economy and employment levels, as well as general business and economic conditions;

• changes in interest rates, as well as the magnitude of such changes;

• the fiscal and monetary policies of the federal government and its agencies;

• changes in federal bank regulatory and supervisory policies, including required levels of capital;

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

• regulatory approvals that may be necessary to undertake certain actions or consummate strategic transactions such as acquisitions and dispositions;

• the relative strength or weakness of the consumer and commercial credit sectors and of the real estate markets in Puerto Rico and the other markets in which borrowers are located;

• the performance of the stock and bond markets;

• competition in the financial services industry;

• additional Federal Deposit Insurance Corporation (“FDIC”) assessments; and

• possible legislative, tax or regulatory changes.

Other possible events or factors that could cause results or performance to differ materially from those expressed in these forward-looking statements include the following: negative economic conditions that adversely affect the general economy, housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of non-performing assets, charge-offs and provision expense; changes in interest rates and market liquidity which may reduce interest margins, impact funding sources and affect our ability to originate and distribute financial products in the primary and secondary markets; adverse movements and volatility in debt and equity capital markets; changes in market rates and prices which may adversely impact the value of financial assets and liabilities; liabilities resulting from litigation and regulatory investigations; changes in accounting standards, rules and interpretations; increased competition; our ability to grow our core businesses; decisions to downsize, sell or close units or otherwise change our business mix; and management’s ability to identify and manage these and other risks. Moreover, the outcome of legal proceedings, as discussed in “Part II, Item I. Legal Proceedings,” is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges and juries. 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” of this Form 10-Q for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

All forward-looking statements included in this document are based upon information available to the Corporation as of the date of this document, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

3

POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

(In thousands, except share information)	March 31, 2012			December 31, 2011			March 31, 2011
Assets:
Cash and due from banks	$	472,806		$	535,282		$	464,555
Money market investments:
Federal funds sold		—			75,000			—
Securities purchased under agreements to resell		240,411			252,668			200,185
Time deposits with other banks		1,063,852			1,048,506			761,380
Total money market investments		1,304,263			1,376,174			961,565
Trading account securities, at fair value:
Pledged securities with creditors’ right to repledge		348,103			402,591			587,218
Other trading securities		56,190			33,740			47,581
Investment securities available-for-sale, at fair value:
Pledged securities with creditors’ right to repledge		1,736,706			1,737,868			2,105,783
Other investment securities available-for-sale		3,401,910			3,271,955			3,580,558
Investment securities held-to-maturity, at amortized cost (fair value at
March 31, 2012 - $124,829; December 31, 2011 - $125,254;
March 31, 2011 - $147,816)		124,372			125,383			142,106
Other investment securities, at lower of cost or realizable value (realizable
value at March 31, 2012 - $197,372; December 31, 2011 - $181,583;
March 31, 2011 - $176,336)		195,708			179,880			174,930
Loans held-for-sale, at lower of cost or fair value		361,596			363,093			569,678
Loans held-in-portfolio:
Loans not covered under loss sharing agreements with the FDIC		20,577,995			20,703,192			20,781,549
Loans covered under loss sharing agreements with the FDIC		4,221,788			4,348,703			4,729,550
Less – Unearned income		99,321			100,596			104,760
Allowance for loan losses		803,264			815,308			736,505
Total loans held-in-portfolio, net		23,897,198			24,135,991			24,669,834
FDIC loss share asset		1,880,357			1,915,128			2,426,305
Premises and equipment, net		533,545			538,486			543,577
Other real estate not covered under loss sharing agreements with the FDIC		193,768			172,497			156,888
Other real estate covered under loss sharing agreements with the FDIC		110,559			109,135			65,562
Accrued income receivable		126,568			125,209			147,670
Mortgage servicing assets, at fair value		156,331			151,323			167,416
Other assets		1,439,532			1,462,393			1,314,739
Goodwill		647,911			648,350			647,387
Other intangible assets		61,798			63,954			56,441
Total assets	$	37,049,221		$	37,348,432		$	38,829,793
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing	$	5,366,420		$	5,655,474		$	4,913,009
Interest bearing		21,831,316			22,286,653			22,283,665
Total deposits		27,197,736			27,942,127			27,196,674
Assets sold under agreements to repurchase		2,113,557			2,141,097			2,642,800
Other short-term borrowings		751,200			296,200			290,302
Notes payable		1,843,754			1,856,372			3,794,655
Other liabilities		1,175,903			1,193,883			1,100,456
Total liabilities		33,082,150			33,429,679			35,024,887
Commitments and contingencies (See Note 18)
Stockholders’ equity:
Preferred stock, 30,000,000 shares authorized; 2,006,391 shares issued and outstanding in all periods presented		50,160			50,160			50,160
Common stock, $0.01 par value; 1,700,000,000 shares authorized in all periods presented; 1,027,555,936 shares issued at March 31, 2012 (December 31, 2011 – 1,026,346,396; March 31, 2011 – 1,023,628,492) and 1,027,117,068 shares outstanding (December 31, 2011 – 1,025,904,567; March 31, 2011 – 1,023,416,118)		10,276			10,263			10,236
Surplus		4,116,710			4,114,661			4,096,245
Accumulated deficit		(165,249	)		(212,726	)		(338,126	)
Treasury stock – at cost, 438,868 shares at March 31, 2012 (December 31, 2011 – 441,829; March 31, 2011 – 212,374)		(1,041	)		(1,057	)		(607	)
Accumulated other comprehensive loss, net of tax		(43,785	)		(42,548	)		(13,002	)
Total stockholders’ equity		3,967,071			3,918,753			3,804,906
Total liabilities and stockholders’ equity	$	37,049,221		$	37,348,432		$	38,829,793

The accompanying notes are an integral part of these consolidated financial statements.

4

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Quarters ended March 31,
(In thousands, except per share information)	2012			2011
Interest income:
Loans	$	387,942		$	423,375
Money market investments		948			947
Investment securities		45,070			52,375
Trading account securities		5,891			8,754
Total interest income		439,851			485,451
Interest expense:
Deposits		51,679			76,879
Short-term borrowings		13,583			14,015
Long-term debt		37,007			51,198
Total interest expense		102,269			142,092
Net interest income		337,582			343,359
Provision for loan losses - non-covered loans		82,514			59,762
Provision for loan losses - covered loans		18,209			15,557
Net interest income after provision for loan losses		236,859			268,040
Service charges on deposit accounts		46,589			45,630
Other service fees (Refer to Note 24)		66,039			58,652
Trading account loss		(2,143	)		(499	)
Net gain on sale of loans, including valuation adjustments on loans held-for-sale		15,471			7,244
Adjustments (expense) to indemnity reserves on loans sold		(3,875	)		(9,848	)
FDIC loss share (expense) income (Refer to Note 25)		(15,255	)		16,035
Fair value change in equity appreciation instrument		—			7,745
Other operating income		17,082			39,409
Total non-interest income		123,908			164,368
Operating expenses:
Personnel costs		121,491			106,140
Net occupancy expenses		24,162			24,586
Equipment expenses		11,341			12,036
Other taxes		13,438			11,972
Professional fees		48,105			46,688
Communications		7,131			7,210
Business promotion		12,850			9,860
FDIC deposit insurance		24,926			17,673
Loss on early extinguishment of debt		69			8,239
Other real estate owned (OREO) expenses		14,165			2,211
Other operating expenses		15,896			26,179
Amortization of intangibles		2,593			2,255
Total operating expenses		296,167			275,049
Income before income tax		64,600			157,359
Income tax expense		16,192			147,227
Net Income	$	48,408		$	10,132
Net Income Applicable to Common Stock	$	47,477		$	9,202
Net Income per Common Share – Basic	$	0.05		$	0.01
Net Income per Common Share – Diluted	$	0.05		$	0.01
Dividends Declared per Common Share		—			—

The accompanying notes are an integral part of these consolidated financial statements.

5

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Quarter ended
	March 31,
(In thousands)	2012			2011
Net income	$	48,408		$	10,132
Other comprehensive loss before tax:
Foreign currency translation adjustment		(86	)		(591	)
Reclassification adjustment for losses included in net income		—			10,084
Adjustment of pension and postretirement benefit plans		—			—
Amortization of net losses		6,289			3,243
Amortization of prior service cost		(50	)		(240	)
Unrealized holding losses on securities available-for-sale arising during the period		(7,882	)		(19,978	)
Reclassification adjustment for losses included in net income		—			—
Unrealized net losses on cash flow hedges		(290	)		(51	)
Reclassification adjustment for net losses (gains) included in net income		1,057			(935	)
Other comprehensive loss before tax		(962	)		(8,468	)
Income tax (expense) benefit		(275	)		1,427
Total other comprehensive loss, net of tax		(1,237	)		(7,041	)
Comprehensive income, net of tax	$	47,171		$	3,091

Tax effect allocated to each component of other comprehensive loss:

	Quarter ended
	March 31,
(In thousands)	2012			2011
Underfunding of pension and postretirement benefit plans	$	—		$	—
Amortization of net losses		(1,740	)		(966	)
Amortization of prior service cost		15			72
Unrealized holding losses on securities available-for-sale arising during the period		1,681			1,941
Reclassification adjustment for losses included in net income		—			—
Unrealized net losses on cash flow hedges		87			15
Reclassification adjustment for net losses (gains) included in net income		(318	)		365
Income tax (expense) benefit	$	(275	)	$	1,427

Disclosure of accumulated other comprehensive loss:

(In thousands)	March 31, 2012			December 31, 2011			March 31, 2011
Foreign currency translation adjustment	$	(28,915	)	$	(28,829	)	$	(26,658	)
Pension and postretirement benefit plans		(327,048	)		(333,287	)		(207,933	)
Tax effect		115,504			117,229			79,962
Net of tax amount		(211,544	)		(216,058	)		(127,971	)
Unrealized holding gains on securities available-for-sale		222,864			230,746			164,596
Tax effect		(25,987	)		(27,668	)		(22,933	)
Net of tax amount		196,877			203,078			141,663
Unrealized (losses) gains on cash flow hedges		(290	)		(1,057	)		(51	)
Tax effect		87			318			15
Net of tax amount		(203	)		(739	)		(36	)
Accumulated other comprehensive loss	$	(43,785	)	$	(42,548	)	$	(13,002	)

The accompanying notes are an integral part of these consolidated financial statements.

6

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)	Common stock, including treasury stock			Preferred stock		Surplus		Accumulated deficit			Accumulated other comprehensive loss			Total
Balance at December 31, 2010	$	9,655		$	50,160	$	4,094,005	$	(347,328	)	$	(5,961	)	$	3,800,531
Net income									10,132						10,132
Issuance of stock		7					2,240								2,247
Dividends declared:
Preferred stock									(930	)					(930	)
Common stock purchases		(33	)												(33	)
Other comprehensive loss, net of tax												(7,041	)		(7,041	)
Balance at March 31, 2011	$	9,629		$	50,160	$	4,096,245	$	(338,126	)	$	(13,002	)	$	3,804,906
Balance at December 31, 2011	$	9,206		$	50,160	$	4,114,661	$	(212,726	)	$	(42,548	)	$	3,918,753
Net income									48,408						48,408
Issuance of stock		13					2,049								2,062
Dividends declared:
Preferred stock									(931	)					(931	)
Common stock purchases		(6	)												(6	)
Common stock reissuance		22													22
Other comprehensive loss, net of tax												(1,237	)		(1,237	)
Balance at March 31, 2012	$	9,235		$	50,160	$	4,116,710	$	(165,249	)	$	(43,785	)	$	3,967,071

Disclosure of changes in number of shares:	March 31, 2012			December 31, 2011			March 31, 2011
Preferred Stock:
Balance at beginning and end of period		2,006,391			2,006,391			2,006,391
Common Stock – Issued:
Balance at beginning of year		1,026,346,396			1,022,929,158			1,022,929,158
Issuance of stock		1,209,540			3,417,238			699,334
Balance at end of the period		1,027,555,936			1,026,346,396			1,023,628,492
Treasury stock		(438,868	)		(441,829	)		(212,374	)
Common Stock – Outstanding		1,027,117,068			1,025,904,567			1,023,416,118

The accompanying notes are an integral part of these consolidated financial statements.

7

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Quarters ended March 31,
(In thousands)	2012			2011
Cash flows from operating activities:
Net income	$	48,408		$	10,132
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		100,723			75,319
Amortization of intangibles		2,593			2,255
Depreciation and amortization of premises and equipment		11,756			12,060
Net accretion of discounts and amortization of premiums and deferred fees		(4,077	)		(88,327	)
Impairment losses on net assets to be disposed of		—			8,564
Fair value adjustments on mortgage servicing rights		(784	)		6,171
Fair value change in equity appreciation instrument		—			(7,745	)
FDIC loss share expense (income)		15,255			(13,621	)
FDIC deposit insurance expense		24,926			17,673
Adjustments (expense) to indemnity reserves on loans sold		3,875			9,848
Earnings from investments under the equity method		(2,252	)		(6,826	)
Deferred income tax expense		4,418			140,915
(Gain) loss on:
Disposition of premises and equipment		(6,284	)		(1,412	)
Early extinguishment of debt		69			—
Sale of loans, including valuation adjustments on loans held-for-sale		(15,471	)		(7,244	)
Sale of equity method investment		—			(16,666	)
Acquisitions of loans held-for-sale		(76,118	)		(90,780	)
Proceeds from sale of loans held-for-sale		63,460			45,448
Net disbursements on loans held-for-sale		(223,500	)		(184,641	)
Net (increase) decrease in:
Trading securities		270,691			206,222
Accrued income receivable		(1,357	)		2,988
Other assets		22,956			(4,602	)
Net increase (decrease) in:
Interest payable		(2,249	)		(4,410	)
Pension and other postretirement benefit obligation		4,720			(123,957	)
Other liabilities		(2,421	)		(38,203	)
Total adjustments		190,929			(60,971	)
Net cash provided by (used in) operating activities		239,337			(50,839	)
Cash flows from investing activities:
Net decrease in money market investments		71,911			17,730
Purchases of investment securities:
Available-for-sale		(529,445	)		(752,479	)
Held-to-maturity		(250	)		(51,998	)
Other		(47,629	)		(38,305	)
Proceeds from calls, paydowns, maturities and redemptions of investment securities:
Available-for-sale		388,472			278,274
Held-to-maturity		1,539			27,335
Other		31,800			27,050
Net repayments on loans		191,073			427,622
Proceeds from sale of loans		21,304			200,387
Acquisition of loan portfolios		(140,005	)		(348,226	)
Payments received from FDIC under loss sharing agreements		20,896			583
Net proceeds from sale of equity method investment		—			31,068
Mortgage servicing rights purchased		(474	)		(383	)
Acquisition of premises and equipment		(12,298	)		(18,599	)
Proceeds from sale of:
Premises and equipment		11,946			7,763
Foreclosed assets		25,923			44,648
Net cash provided by (used in) investing activities		34,763			(147,530	)
Cash flows from financing activities:
Net increase (decrease) in:
Deposits		(745,906	)		433,505
Federal funds purchased and assets sold under agreements to repurchase		(27,541	)		230,250
Other short-term borrowings		455,000			(73,920	)
Payments of notes payable		(22,284	)		(622,568	)
Proceeds from issuance of notes payable		2,719			242,000
Proceeds from issuance of common stock		2,062			2,247
Dividends paid		(620	)		(930	)
Treasury stock acquired		(6	)		(33	)
Net cash (used in) provided by financing activities		(336,576	)		210,551
Net (decrease) increase in cash and due from banks		(62,476	)		12,182
Cash and due from banks at beginning of period		535,282			452,373
Cash and due from banks at end of period	$	472,806		$	464,555

The accompanying notes are an integral part of these consolidated financial statements.

8

Notes to Consolidated Financial

Statements (Unaudited)

Note 1 -	Organization, consolidation and basis of presentation	10
Note 2 -	New accounting pronouncements	11
Note 3 -	Restrictions on cash and due from banks and certain securities	13
Note 4 -	Pledged assets	13
Note 5 -	Investment securities available-for-sale	15
Note 6 -	Investment securities held-to-maturity	20
Note 7 -	Loans	22
Note 8 -	Allowance for loan losses	31
Note 9 -	FDIC loss share asset and true-up payment obligation	49
Note 10 -	Transfers of financial assets and mortgage servicing rights	51
Note 11 -	Other assets	54
Note 12 -	Goodwill and other intangible assets	54
Note 13 -	Deposits	56
Note 14 -	Borrowings	57
Note 15 -	Trust preferred securities	59
Note 16 -	Stockholders’ equity	61
Note 17 -	Guarantees	61
Note 18 -	Commitments and contingencies	64
Note 19 -	Non-consolidated variable interest entities	69
Note 20 -	Related party transactions with affiliated company / joint venture	72
Note 21 -	Fair value measurement	74
Note 22 -	Fair value of financial instruments	83
Note 23 -	Net income per common share	88
Note 24 -	Other service fees	88
Note 25 -	FDIC loss share (expense) income	89
Note 26 -	Pension and postretirement benefits	89
Note 27 -	Stock-based compensation	90
Note 28 -	Income taxes	92
Note 29 -	Supplemental disclosure on the consolidated statements of cash flows	95
Note 30 -	Segment reporting	95
Note 31 -	Subsequent events	99
Note 32 -	Condensed consolidating financial information of guarantor and issuers of registered guaranteed securities	100

9

Note 1 – Organization, consolidation and basis of presentation

Nature of Operations

Popular, Inc. (the “Corporation”) is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States, the Caribbean and Latin America. In Puerto Rico, the Corporation provides retail and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as mortgage banking, investment banking, broker-dealer, auto and equipment leasing and financing, and insurance services through specialized subsidiaries. In the U.S. mainland, the Corporation operates Banco Popular North America (“BPNA”), including its wholly-owned subsidiary E-LOAN. BPNA focuses efforts and resources on the core community banking business. BPNA operates branches in New York, California, Illinois, New Jersey and Florida. E-LOAN markets deposit accounts under its name for the benefit of BPNA. As part of the rebranding of the BPNA franchise, some of its branches operate under a new name, Popular Community Bank. Note 30 to the consolidated financial statements presents information about the Corporation’s business segments.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Popular, Inc. and its subsidiaries (the “Corporation”). All significant intercompany accounts and transactions have been eliminated in consolidation. In accordance with the consolidation guidance for variable interest entities, the Corporation would also consolidate any variable interest entities (“VIEs”) for which it has a controlling financial interest and therefore is the primary beneficiary. The Corporation does not hold an interest in any VIEs subject to consolidation at this time. Assets held in a fiduciary capacity are not assets of the Corporation and, accordingly, are not included in the consolidated statements of financial condition. The results of operations of companies or assets acquired are included only from the dates of acquisition.

Unconsolidated investments, in which there is at least 20% ownership, are generally accounted for by the equity method. These investments are included in other assets and the Corporation’s proportionate share of income or loss is included in other operating income. Investments, in which there is less than 20% ownership, are generally carried under the cost method of accounting, unless significant influence is exercised. Under the cost method, the Corporation recognizes income when dividends are received. Limited partnerships are accounted for by the equity method unless the Corporation’s interest is so “minor” that it may have virtually no influence over partnership operating and financial policies.

Statutory business trusts that are wholly-owned by the Corporation and are issuers of trust preferred securities are not consolidated in the Corporation’s consolidated financial statements.

The consolidated interim financial statements have been prepared without audit. The consolidated statement of financial condition data at December 31, 2011 was derived from audited financial statements. The unaudited interim financial statements are, in the opinion of management, a fair statement of the results for the periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results.

Certain reclassifications have been made to the 2011 consolidated financial statements and notes to the financial statements to conform with the 2012 presentation.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. 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 (the “2011 Annual Report”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

10

Note 2 – New accounting pronouncements

FASB Accounting Standards Update 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”) and FASB Accounting Standards Update 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”)

The FASB issued ASU 2011-05 in June 2011. The amendment of this ASU allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This ASU also does not change the option for an entity to present components of other comprehensive income either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense or benefit related to the total of other comprehensive income items.

In December 2011, the FASB issued ASU 2011-12, which defers indefinitely the new requirement in ASU 2011-05 to present components of reclassification adjustments out of accumulated other comprehensive income on the face of the income statement by income statement line item.

The Corporation adopted the provisions of these two guidance in the first quarter of 2012. The guidance impacts presentation disclosure only and did not have an impact on the Corporation’s financial condition or results of operations.

FASB Accounting Standards Update 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”)

The FASB issued ASU 2011-11 in December 2011. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. To meet this objective, entities with financial instruments and derivatives that are either offset on the balance sheet or subject to a master netting arrangement or similar arrangement shall disclose the following quantitative information separately for assets and liabilities in tabular format: a) gross amounts of recognized assets and liabilities; b) amounts offset to determine the net amount presented in the balance sheet; c) net amounts presented in the balance sheet; d) amounts subject to an enforceable master netting agreement or similar arrangement not otherwise included in (b), including: amounts related to recognized financial instruments and other derivatives instruments if either management makes an accounting election not to offset or the amounts do not meet the guidance in ASC Section 210-20-45 or ASC Section 815-10-45, and also amounts related to financial collateral (including cash collateral); and e) the net amount after deducting the amounts in (d) from the amounts in (c).

In addition to these tabular disclosures, entities are required to provide a description of the setoff rights associated with assets and liabilities subject to an enforceable master netting arrangement.

An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented.

The provisions of this guidance impact presentation disclosure only and will not have an impact on the Corporation’s financial condition or results of operations.

FASB Accounting Standards Update 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification (“ASU 2011-10”)

The FASB issued ASU 2011-10 in December 2011. The objective of this ASU is to resolve the diversity in practice about whether the guidance in ASC Subtopic 360-20, “Property, Plant, and Equipment Real Estate Sales” applies to a parent that 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. ASU 2011-10 provides that 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 ASC Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and

11

the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under ASC Subtopic 810-10, 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.

ASU 2011-10 should be applied on a prospective basis to deconsolidation events occurring after the effective date; with prior periods not adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, ASU 2011-10 is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. Early adoption is permitted; however, the Corporation is not early adopting this ASU.

The adoption of this guidance is not expected to have a material effect on the Corporation’s consolidated financial statements.

FASB Accounting Standards Update 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”)

The FASB issued Accounting Standards Update (“ASU”) No. 2011-08 in September 2011. ASU 2011-08 is intended to simplify how entities test goodwill for impairment. ASU 2011-08 permits an entity the option 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 described in ASC Topic 350, Intangibles-Goodwill and Other. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. The previous guidance under ASC Topic 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. Under the amendments in this ASU, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

This ASU also removes the guidance that permitted the entities to carry forward the calculation of the fair value of the reporting unit from one year to the next if certain conditions are met. In addition, the new qualitative indicators replace those currently used to determine whether an interim goodwill impairment test is required. These indicators are also applicable for assessing whether to perform step two for reporting units with zero or negative carrying amounts.

ASU 2011-08 was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption was 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 had not yet been issued. The Corporation did not elect to adopt early the provisions of this ASU.

The Corporation adopted this guidance on January 1, 2012. The provisions of this guidance simplify how entities test for goodwill impairment and it did not impact the Corporation’s consolidated financial statements for the quarter ended March 31, 2012.

FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”)

The FASB issued ASU 2011-04 in May 2011. The amendment of this ASU provides a consistent definition of fair value between U.S. GAAP and International Financial Reporting Standards (“IFRS”). The ASU modifies some fair value measurement principles and disclosure requirements including the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, measuring the fair value of financial instruments that are managed within a portfolio, application of premiums and discounts in a fair value measurement, disclosing quantitative information about unobservable inputs used in Level 3 fair value measurements, and other additional disclosures about fair value measurements.

The new guidance was effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively and early application was not permitted.

The Corporation adopted this guidance on the first quarter of 2012. It did not have a material impact on the Corporation’s consolidated financial statements. Refer to Notes 21 and 22 for additional fair value disclosures included for the quarter ended March 31, 2012.

12

FASB Accounting Standards Update 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements (“ASU 2011-03”)

The FASB issued ASU 2011-03 in April 2011. The amendment of this ASU affects all entities that enter into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The ASU modifies the criteria for determining when these transactions would be accounted for as financings (secured borrowings / lending agreements) as opposed to sales (purchases) with commitments to repurchase (resell). This ASU does not affect other transfers of financial assets. ASC Topic 860 prescribes when an entity may or may not recognize a sale upon the transfer of financial assets subject to repurchase agreements. That determination is based, in part, on whether the entity has maintained effective control over transferred financial assets.

Specifically, the amendments in this ASU remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets.

The new guidance was effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early application was not permitted.

The adoption of this guidance on January 1, 2012 did not have an impact on the Corporation’s consolidated financial statements for the quarter ended March 31, 2012.

Note 3—Restrictions on cash and due from banks and certain securities

The Corporation’s banking subsidiaries, BPPR and BPNA, are required by federal and state regulatory agencies to maintain average reserve balances with the Federal Reserve Bank of New York (the “Fed”) or other banks. Those required average reserve balances amounted to $877 million at March 31, 2012 (December 31, 2011—$838 million; March 31, 2011—$843 million). Cash and due from banks, as well as other short-term, highly liquid securities, are used to cover the required average reserve balances.

At March 31, 2012 and December 31, 2011, the Corporation held $36 million in restricted assets in the form of cash and funds deposited in money market accounts (March 31, 2011—$51 million).

Note 4 – Pledged assets

Certain securities, loans and other real estate owned were pledged to secure public and trust deposits, assets sold under agreements to repurchase, other borrowings and credit facilities available, derivative positions, and loan servicing agreements. The classification and carrying amount of the Corporation’s pledged assets, in which the secured parties are not permitted to sell or repledge the collateral, were as follows:

	March 31,		December 31,		March 31,
(In thousands)	2012		2011		2011
Investment securities available-for-sale, at fair value	$	1,840,351	$	1,894,651	$	1,529,464
Investment securities held-to-maturity, at amortized cost		25,000		25,000		49,734
Loans held-for-sale measured at lower of cost or fair value		4,421		5,286		2,638
Loans held-in-portfolio covered under loss sharing agreements with the FDIC		536,666		—		4,634,499
Loans held-in-portfolio not covered under loss sharing agreements with the FDIC		8,967,998		8,571,268		8,906,093
Other real estate covered under loss sharing agreements with the FDIC		—		—		65,562
Total pledged assets	$	11,374,436	$	10,496,205	$	15,187,990

13

Pledged securities and loans that the creditor has the right by custom or contract to repledge are presented separately on the consolidated statements of financial condition.

At March 31, 2012, the Corporation had $1.3 billion in investment securities available-for-sale and $0.3 billion in loans that served as collateral to secure public funds (December 31, 2011—$1.4 billion and $0.4 billion, respectively; March 31, 2011—$1.0 billion and $0.7 billion, respectively).

At March 31, 2012, the Corporation’s banking subsidiaries had short-term and long-term credit facilities authorized with the Federal Home Loan Bank system (the “FHLB”) aggregating $2.5 billion (December 31, 2011—$2.0 billion; March 31, 2011—$1.7 billion). Refer to Note 14 to the consolidated financial statements for borrowings outstanding under these credit facilities. At March 31, 2012, the credit facilities authorized with the FHLB were collateralized by $3.7 billion in loans held-in-portfolio (December 31, 2011—$3.2 billion; March 31, 2011—$2.7 billion). Also, the Corporation’s banking subsidiaries had a borrowing capacity at the Federal Reserve (“Fed”) discount window of $3.2 billion (December 31, 2011—$2.6 billion; March 31, 2011—$2.8 billion), which remained unused as of such date. The amount available under these credit facilities with the Fed is dependent upon the balance of loans and securities pledged as collateral. At March 31, 2012, the credit facilities with the Fed discount window were collateralized by $4.9 billion in loans held-in-portfolio (December 31, 2011—$4.0 billion; March 31, 2011—$5.5 billion). These pledged assets are included in the above table and were not reclassified and separately reported in the consolidated statements of financial condition.

In addition, at March 31, 2012 and December 31, 2011, securities sold but not yet delivered amounting to $68 million were pledged to secure repurchase agreements.

Loans held-in-portfolio and other real estate owned that are covered by loss sharing agreements with the FDIC amounting to $4.7 billion served as collateral to secure the note issued to the FDIC at March 31, 2011.

14

Note 5 – Investment securities available-for-sale

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities available-for-sale.

	At March 31, 2012
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Weighted average yield
U.S. Treasury securities
Within 1 year	$	7,012	$	84	$	—	$	7,096		1.50	%
After 1 to 5 years		27,790		3,198		—		30,988		3.82
Total U.S. Treasury securities		34,802		3,282		—		38,084		3.35
Obligations of U.S. Government sponsored entities
Within 1 year		99,515		1,735		—		101,250		3.36
After 1 to 5 years		625,230		21,897		—		647,127		3.31
After 5 to 10 years		310,004		2,290		940		311,354		2.14
After 10 years		32,085		369		387		32,067		4.00
Total obligations of U.S. Government sponsored entities		1,066,834		26,291		1,327		1,091,798		3.00
Obligations of Puerto Rico, States and political subdivisions
Within 1 year		765		4		—		769		4.94
After 1 to 5 years		13,039		296		23		13,312		4.04
After 5 to 10 years		4,595		41		—		4,636		5.33
After 10 years		37,320		799		—		38,119		5.38
Total obligations of Puerto Rico, States and political subdivisions		55,719		1,140		23		56,836		5.06
Collateralized mortgage obligations—federal agencies
After 1 to 5 years		6,822		81		—		6,903		1.48
After 5 to 10 years		41,988		1,347		—		43,335		2.86
After 10 years		1,756,972		51,991		394		1,808,569		2.66
Total collateralized mortgage obligations—federal agencies		1,805,782		53,419		394		1,858,807		2.66
Collateralized mortgage obligations—private label
After 5 to 10 years		5,041		1		149		4,893		0.77
After 10 years		52,445		70		2,740		49,775		2.52
Total collateralized mortgage obligations—private label		57,486		71		2,889		54,668		2.37
Mortgage-backed securities
Within 1 year		32		—		—		32		3.71
After 1 to 5 years		6,619		311		—		6,930		3.90
After 5 to 10 years		102,677		7,837		1		110,513		4.67
After 10 years		1,755,946		131,139		36		1,887,049		4.24
Total mortgage-backed securities		1,865,274		139,287		37		2,004,524		4.26
Equity securities (without contractual maturity)		6,595		875		11		7,459		2.81
Other
After 5 to 10 years		17,850		3,063		—		20,913		10.99
After 10 years		5,410		117		—		5,527		3.62
Total other		23,260		3,180		—		26,440		9.28
Total investment securities available-for-sale	$	4,915,752	$	227,545	$	4,681	$	5,138,616		3.40	%

15

	At December 31, 2011
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Weighted average yield
U.S. Treasury securities
After 1 to 5 years	$	34,980	$	3,688	$	—	$	38,668		3.35	%
Total U.S. Treasury securities		34,980		3,688		—		38,668		3.35
Obligations of U.S. Government sponsored entities
Within 1 year		94,492		2,382		—		96,874		3.45
After 1 to 5 years		655,625		25,860		—		681,485		3.38
After 5 to 10 years		171,633		2,969		—		174,602		2.94
After 10 years		32,086		499		—		32,585		3.20
Total obligations of U.S. Government sponsored entities		953,836		31,710		—		985,546		3.30
Obligations of Puerto Rico, States and political subdivisions
Within 1 year		765		9		—		774		4.97
After 1 to 5 years		14,824		283		31		15,076		4.07
After 5 to 10 years		4,595		54		—		4,649		5.33
After 10 years		37,320		909		—		38,229		5.38
Total obligations of Puerto Rico, States and political subdivisions		57,504		1,255		31		58,728		5.03
Collateralized mortgage obligations—federal agencies
After 1 to 5 years		2,424		49		—		2,473		3.28
After 5 to 10 years		55,096		1,446		—		56,542		2.64
After 10 years		1,589,373		49,462		208		1,638,627		2.84
Total collateralized mortgage obligations—federal agencies		1,646,893		50,957		208		1,697,642		2.83
Collateralized mortgage obligations—private label
After 5 to 10 years		5,653		1		181		5,473		0.81
After 10 years		59,460		—		7,141		52,319		2.44
Total collateralized mortgage obligations—private label		65,113		1		7,322		57,792		2.30
Mortgage-backed securities
Within 1 year		57		1		—		58		3.91
After 1 to 5 years		7,564		328		—		7,892		3.86
After 5 to 10 years		111,639		8,020		1		119,658		4.66
After 10 years		1,870,736		141,274		49		2,011,961		4.25
Total mortgage-backed securities		1,989,996		149,623		50		2,139,569		4.27
Equity securities (without contractual maturity)		6,594		426		104		6,916		2.96
Other
After 5 to 10 years		17,850		700		—		18,550		10.99
After 10 years		6,311		101		—		6,412		3.61
Total other		24,161		801		—		24,962		9.06
Total investment securities available-for-sale	$	4,779,077	$	238,461	$	7,715	$	5,009,823		3.58	%

16

	At March 31, 2011
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Weighted average yield
U.S. Treasury securities
After 1 to 5 years	$	7,003	$	98	$	—	$	7,101		1.50	%
After 5 to 10 years		28,505		2,076		—		30,581		3.81
Total U.S. Treasury securities		35,508		2,174		—		37,682		3.35
Obligations of U.S. Government sponsored entities
Within 1 year		230,290		906		921		230,275		2.95
After 1 to 5 years		1,005,737		45,685		92		1,051,330		3.73
After 5 to 10 years		180,000		—		518		179,482		2.66
Total obligations of U.S. Government sponsored entities		1,416,027		46,591		1,531		1,461,087		3.47
Obligations of Puerto Rico, States and political subdivisions
Within 1 year		10,357		10		—		10,367		3.92
After 1 to 5 years		15,753		255		6		16,002		4.52
After 5 to 10 years		20,765		35		167		20,633		5.07
After 10 years		5,505		62		—		5,567		5.28
Total obligations of Puerto Rico, States and political subdivisions		52,380		362		173		52,569		4.70
Collateralized mortgage obligations—federal agencies
Within 1 year		35		—		—		35		3.36
After 1 to 5 years		1,737		88		—		1,825		4.76
After 5 to 10 years		91,067		1,019		865		91,221		2.47
After 10 years		1,487,274		28,001		1,011		1,514,264		2.94
Total collateralized mortgage obligations—federal agencies		1,580,113		29,108		1,876		1,607,345		2.91
Collateralized mortgage obligations—private label
After 5 to 10 years		8,109		13		90		8,032		0.86
After 10 years		73,612		51		4,547		69,116		2.30
Total collateralized mortgage obligations—private label		81,721		64		4,637		77,148		2.16
Mortgage-backed securities
Within 1 year		633		51		—		684		5.35
After 1 to 5 years		13,444		519		4		13,959		3.98
After 5 to 10 years		164,579		10,230		8		174,801		4.71
After 10 years		2,143,295		81,696		967		2,224,024		4.25
Total mortgage-backed securities		2,321,951		92,496		979		2,413,468		4.28
Equity securities (without contractual maturity)		8,722		968		256		9,434		3.43
Other
After 5 to 10 years		17,850		2,363		—		20,213		11.00
After 10 years		7,473		—		78		7,395		3.62
Total other		25,323		2,363		78		27,608		8.82
Total investment securities available-for-sale	$	5,521,745	$	174,126	$	9,530	$	5,686,341		3.67	%

The weighted average yield on investment securities available-for-sale is based on amortized cost; therefore, it does not give effect to changes in fair value.

Securities not due on a single contractual maturity date, such as mortgage-backed securities and collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations, mortgage-backed securities and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

There were no securities sold during the quarters ended March 31, 2012 and 2011.

17

The following tables present the Corporation’s fair value and gross unrealized losses of investment securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

	At March 31, 2012
	Less than 12 months				12 months or more				Total
(In thousands)	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
Obligations of U.S. Government sponsored entities	$	235,106	$	1,327	$	—	$	—	$	235,106	$	1,327
Obligations of Puerto Rico, States and political subdivisions		2,816		23		—		—		2,816		23
Collateralized mortgage obligations—federal agencies		101,959		379		3,002		15		104,961		394
Collateralized mortgage obligations—private label		914		29		48,494		2,860		49,408		2,889
Mortgage-backed securities		209		3		1,475		34		1,684		37
Equity securities		47		3		3		8		50		11
Total investment securities available-for-sale in an unrealized loss position	$	341,051	$	1,764	$	52,974	$	2,917	$	394,025	$	4,681

	At December 31, 2011
	Less than 12 months				12 months or more				Total
(In thousands)	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
Obligations of Puerto Rico, States and political subdivisions	$	7,817	$	28	$	191	$	3	$	8,008	$	31
Collateralized mortgage obligations—federal agencies		90,543		208		—		—		90,543		208
Collateralized mortgage obligations—private label		13,595		539		44,148		6,783		57,743		7,322
Mortgage-backed securities		5,577		14		1,466		36		7,043		50
Equity securities		5,199		95		2		9		5,201		104
Total investment securities available-for-sale in an unrealized loss position	$	122,731	$	884	$	45,807	$	6,831	$	168,538	$	7,715

	At March 31, 2011
	Less than 12 months				12 months or more				Total
(In thousands)	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
Obligations of U.S. Government sponsored entities	$	304,080	$	1,531	$	—	$	—	$	304,080	$	1,531
Obligations of Puerto Rico, States and political subdivisions		18,138		167		301		6		18,439		173
Collateralized mortgage obligations—federal agencies		345,887		1,876		—		—		345,887		1,876
Collateralized mortgage obligations—private label		21,678		252		46,424		4,385		68,102		4,637
Mortgage-backed securities		35,010		714		9,185		265		44,195		979
Equity securities		3,798		169		51		87		3,849		256
Other		7,395		78		—		—		7,395		78
Total investment securities available-for-sale in an unrealized loss position	$	735,986	$	4,787	$	55,961	$	4,743	$	791,947	$	9,530

Management evaluates investment securities for other-than-temporary (“OTTI”) declines in fair value on a quarterly basis. Once a decline in value is determined to be other-than-temporary, the value of a debt security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses. Also, for equity securities that are considered other-than-temporarily impaired,

18

the excess of the security’s carrying value over its fair value at the evaluation date is accounted for as a loss in the results of operations. The OTTI analysis requires management to consider various factors, which include, but are not limited to: (1) the length of time and the extent to which fair value has been less than the amortized cost basis, (2) the financial condition of the issuer or issuers, (3) actual collateral attributes, (4) the payment structure of the debt security and the likelihood of the issuer being able to make payments, (5) any rating changes by a rating agency, (6) adverse conditions specifically related to the security, industry, or a geographic area, and (7) management’s intent to sell the debt security or whether it is more likely than not that the Corporation would be required to sell the debt security before a forecasted recovery occurs.

At March 31, 2012, management performed its quarterly analysis of all debt securities in an unrealized loss position. Based on the analyses performed, management concluded that no individual debt security was other-than-temporarily impaired as of such date. At March 31, 2012, the Corporation did not have the intent to sell debt securities in an unrealized loss position and it is not more likely than not that the Corporation will have to sell the investment securities prior to recovery of their amortized cost basis. Also, management evaluated the Corporation’s portfolio of equity securities at March 31, 2012. No other-than-temporary impairment losses on equity securities were recorded during the quarters ended March 31, 2012 and 2011. Management has the intent and ability to hold the investments in equity securities that are at a loss position at March 31, 2012, for a reasonable period of time for a forecasted recovery of fair value up to (or beyond) the cost of these investments.

The unrealized losses associated with “Collateralized mortgage obligations – private label” (“private-label CMO”) are primarily related to securities backed by residential mortgages. In addition to verifying the credit ratings for the private-label CMOs, management analyzed the underlying mortgage loan collateral for these bonds. Various statistics or metrics were reviewed for each private-label CMO, including among others, the weighted average loan-to-value, FICO score, and delinquency and foreclosure rates of the underlying assets in the securities. At March 31, 2012, there were no “sub-prime” securities in the Corporation’s private-label CMOs portfolios. For private-label CMOs with unrealized losses at March 31, 2012, credit impairment was assessed using a cash flow model that estimates the cash flows on the underlying mortgages, using the security-specific collateral and transaction structure. The model estimates cash flows from the underlying mortgage loans and distributes those cash flows to various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual cash flows through the current period and then projects the expected cash flows using a number of assumptions, including default rates, loss severity and prepayment rates. Management’s assessment also considered tests using more stressful parameters. Based on the assessments, management concluded that the tranches of the private-label CMOs held by the Corporation were not other-than-temporarily impaired at March 31, 2012, thus management expects to recover the amortized cost basis of the securities.

The following table states the name of issuers, and the aggregate amortized cost and fair value of the securities of such issuer (includes available-for-sale and held-to-maturity securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders’ equity. This information excludes securities backed by the full faith and credit of the U.S. Government. Investments in obligations issued by a state of the U.S. and its political subdivisions and agencies, which are payable and secured by the same source of revenue or taxing authority, other than the U.S. Government, are considered securities of a single issuer.

	March 31, 2012				December 31, 2011				March 31, 2011
(In thousands)	Amortized cost		Fair value		Amortized cost		Fair value		Amortized cost		Fair value
FNMA	$	1,117,928	$	1,157,729	$	1,049,315	$	1,089,069	$	1,029,936	$	1,057,977
FHLB		583,897		604,020		553,940		578,617		1,003,317		1,047,747
Freddie Mac		1,149,415		1,176,487		984,270		1,010,669		977,365		993,342

19

Note 6 – Investment securities held-to-maturity

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities held-to-maturity.

	At March 31, 2012
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Weighted average yield
Obligations of Puerto Rico, States and political subdivisions
Within 1 year	$	7,375	$	29	$	—	$	7,404		2.31	%
After 1 to 5 years		11,649		556		—		12,205		5.83
After 5 to 10 years		19,302		395		51		19,646		6.00
After 10 years		59,391		116		623		58,884		4.05
Total obligations of Puerto Rico, States and political subdivisions		97,717		1,096		674		98,139		4.52
Collateralized mortgage obligations—federal agencies
After 10 years		155		6		—		161		5.16
Total collateralized mortgage obligations—federal agencies		155		6		—		161		5.16
Other
After 1 to 5 years		26,500		29		—		26,529		3.39
Total other		26,500		29		—		26,529		3.39
Total investment securities held-to-maturity	$	124,372	$	1,131	$	674	$	124,829		4.28	%

	At December 31, 2011
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Weighted average yield
Obligations of Puerto Rico, States and political subdivisions
Within 1 year	$	7,275	$	6	$	—	$	7,281		2.24	%
After 1 to 5 years		11,174		430		—		11,604		5.80
After 5 to 10 years		18,512		266		90		18,688		5.99
After 10 years		62,012		40		855		61,197		4.11
Total obligations of Puerto Rico, States and political subdivisions		98,973		742		945		98,770		4.51
Collateralized mortgage obligations—private label
After 10 years		160		—		9		151		5.45
Total collateralized mortgage obligations—private label		160		—		9		151		5.45
Other
After 1 to 5 years		26,250		83		—		26,333		3.41
Total other		26,250		83		—		26,333		3.41
Total investment securities held-to-maturity	$	125,383	$	825	$	954	$	125,254		4.28	%

20

	At March 31, 2011
			Gross		Gross				Weighted
	Amortized		unrealized		unrealized		Fair		average
(In thousands)	cost		gains		losses		Value		yield
U.S. Treasury securities
Within 1 year	$	24,734	$	—	$	—	$	24,734		0.02	%
Total U.S. Treasury securities		24,734		—		—		24,734		0.02
Obligations of Puerto Rico, States and political subdivisions
Within 1 year		2,235		30		—		2,265		5.56
After 1 to 5 years		15,973		356		—		16,329		4.19
After 5 to 10 years		18,340		94		264		18,170		5.97
After 10 years		54,154		6,695		1,325		59,524		4.13
Total obligations of Puerto Rico, States and political subdivisions		90,702		7,175		1,589		96,288		4.55
Collateralized mortgage obligations - private label
After 10 years		170		—		9		161		5.45
Total collateralized mortgage obligations - private label		170		—		9		161		5.45
Other
Within 1 year		1,250		—		—		1,250		0.96
After 1 to 5 years		25,250		133		—		25,383		3.47
Total other		26,500		133		—		26,633		3.35
Total investment securities held-to-maturity	$	142,106	$	7,308	$	1,598	$	147,816		3.54	%

Securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

The following tables present the Corporation’s fair value and gross unrealized losses of investment securities held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2012, December 31, 2011 and March 31, 2011:

	At March 31, 2012
	Less than 12 months				12 months or more				Total
			Gross				Gross				Gross
	Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)	value		losses		value		losses		value		losses
Obligations of Puerto Rico, States and political subdivisions	$	—	$	—	$	30,866	$	674	$	30,866	$	674
Total investment securities held-to-maturity in an unrealized loss position	$	—	$	—	$	30,866	$	674	$	30,866	$	674

	At December 31, 2011
	Less than 12 months				12 months or more				Total
			Gross				Gross				Gross
	Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)	value		losses		value		losses		value		losses
Obligations of Puerto Rico, States and political subdivisions	$	10,323	$	92	$	31,062	$	853	$	41,385	$	945
Collateralized mortgage obligations - private label		—		—		151		9		151		9
Total investment securities held-to-maturity in an unrealized loss position	$	10,323	$	92	$	31,213	$	862	$	41,536	$	954

21

	At March 31, 2011
	Less than 12 months				12 months or more				Total
			Gross				Gross				Gross
	Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)	value		losses		value		losses		value		losses
Obligations of Puerto Rico, States and political subdivisions	$	26,407	$	567	$	30,808	$	1,022	$	57,215	$	1,589
Collateralized mortgage obligations - private label		—		—		161		9		161		9
Total investment securities held-to-maturity in an unrealized loss position	$	26,407	$	567	$	30,969	$	1,031	$	57,376	$	1,598

As indicated in Note 5 to these consolidated financial statements, management evaluates investment securities for OTTI declines in fair value on a quarterly basis.

The “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-maturity at March 31, 2012 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. The Corporation performs periodic credit quality reviews on these issuers. The decline in fair value at March 31, 2012 was attributable to changes in interest rates and not credit quality, thus no other-than-temporary decline in value was necessary to be recorded in these held-to-maturity securities at March 31, 2012. At March 31, 2012, the Corporation does not have the intent to sell securities held-to-maturity and it is not more likely than not that the Corporation will have to sell these investment securities prior to recovery of their amortized cost basis.

Note 7 – Loans

Covered loans acquired in the Westernbank FDIC-assisted transaction, except for lines of credit with revolving privileges, are accounted for by the Corporation in accordance with ASC Subtopic 310-30. Under ASC Subtopic 310-30, the acquired loans were aggregated into pools based on similar characteristics. Each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. The covered loans which are accounted for under ASC Subtopic 310-30 by the Corporation are not considered non-performing and will continue to have an accretable yield as long as there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The Corporation measures additional losses for this portfolio when it is probable the Corporation will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition. Lines of credit with revolving privileges that were acquired as part of the Westernbank FDIC-assisted transaction are accounted for under the guidance of ASC Subtopic 310-20, which requires that any differences between the contractually required loan payment receivable in excess of the Corporation’s initial investment in the loans be accreted into interest income. Loans accounted for under ASC Subtopic 310-20 are placed in non-accrual status when past due in accordance with the Corporation’s non-accruing policy and any accretion of discount is discontinued.

The risks on loans acquired in the FDIC-assisted transaction are significantly different from the risks on loans not covered under the FDIC loss sharing agreements because of the loss protection provided by the FDIC. Accordingly, the Corporation presents loans subject to the loss sharing agreements as “covered loans” in the information below and loans that are not subject to the FDIC loss sharing agreements as “non-covered loans”.

For a summary of the accounting policy related to loans, interest recognition and allowance for loan losses refer to the summary of significant accounting policies included in Note 2 to the consolidated financial statements included in the 2011 Annual Report. Also, refer to Note 8 for a description of enhancements done to the Corporation’s methodology for determining the allowance for loan losses which were effective on March 31, 2012.

22

The following table presents the composition of non-covered loans held-in-portfolio (“HIP”), net of unearned income, at March 31, 2012 and December 31, 2011.

	Non-covered loans		Non-covered loans
(In thousands)	HIP at March 31, 2012		HIP at December 31, 2011
Commercial multi-family	$	802,286	$	808,933
Commercial real estate non-owner occupied		2,641,361		2,665,499
Commercial real estate owner occupied		2,665,551		2,817,266
Commercial and industrial		3,759,044		3,681,629
Construction		236,579		239,939
Mortgage		5,591,745		5,518,460
Leasing		543,314		548,706
Legacy[2]		603,874		648,409
Consumer:
Credit cards		1,204,551		1,230,029
Home equity lines of credit		542,249		557,894
Personal		1,119,335		1,130,593
Auto		533,575		518,476
Other		235,210		236,763
Total loans held-in-portfolio[1]	$	20,478,674	$	20,602,596

[1] Non-covered loans held-in-portfolio at March 31, 2012 are net of $99 million in unearned income and exclude $362 million in loans held-for-sale. (December 31, 2011 - $101 million in unearned income and $363 million in loans held-for-sale.)

[2] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.

The following table presents the composition of covered loans at March 31, 2012 and December 31, 2011.

	Covered loans at		Covered loans at
(In thousands)	March 31, 2012		December 31, 2011
Commercial real estate	$	2,202,860	$	2,271,295
Commercial and industrial		228,841		241,447
Construction		532,433		546,826
Mortgage		1,150,996		1,172,954
Consumer		106,658		116,181
Total loans held-in-portfolio	$	4,221,788	$	4,348,703

The following table provides a breakdown of loans held-for-sale (“LHFS”) at March 31, 2012 and December 31, 2011 by main categories.

	Non-covered loans
(In thousands)	March 31, 2012		December 31, 2011
Commercial	$	25,994	$	26,198
Construction		206,246		236,045
Mortgage		129,356		100,850
Total	$	361,596	$	363,093

During the quarter ended March 31, 2012, the Corporation recorded purchases of mortgage loans amounting to $215 million (March 31, 2011—$439 million). In addition, during the quarter ended March 31, 2012, the Corporation recorded purchases of construction loans amounting to $1 million (no construction loans were purchased during the quarter ended March 31, 2011). There were no significant purchases of commercial loans during the quarters ended March 31, 2012 and 2011.

23

The Corporation performed whole-loan sales involving approximately $50 million of residential mortgage loans during the quarter ended March 31, 2012 (March 31, 2011—$235 million). Also, the Corporation securitized approximately $190 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities during the quarter ended March 31, 2012 (March 31, 2011—$256 million). Furthermore, the Corporation securitized approximately $60 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities during the quarter ended March 31, 2012 (March 31, 2011—$73 million). The Corporation sold commercial and construction loans with a book value of approximately $20 million during the quarter ended March 31, 2012 (March 31, 2011—$2 million).

Non-covered loans

The following tables present non-covered loans held-in-portfolio by loan class that are in non-performing status or are accruing interest but are past due 90 days or more at March 31, 2012 and December 31, 2011. Accruing loans past due 90 days or more consist primarily of credit cards, FHA / VA and other insured mortgage loans, and delinquent mortgage loans which are included in the Corporation’s financial statements pursuant to GNMA’s buy-back option program. Servicers of loans underlying GNMA mortgage-backed securities must report as their own assets the defaulted loans that they have the option (but not the obligation) to repurchase, even when they elect not to exercise that option. Also, accruing loans past due 90 days or more include residential conventional loans purchased from another financial institution that, although delinquent, the Corporation has received timely payment from the seller / servicer, and, in some instances, have partial guarantees under recourse agreements. However, residential conventional loans purchased from another financial institution, which are in the process of foreclosure, are classified as non-performing mortgage loans.

At March 31, 2012
	Puerto Rico				U.S. mainland				Popular, Inc.
	Non-covered loans
			Accruing				Accruing				Accruing
	Non-accrual		loans past-due		Non-accrual		loans past-due		Non-accrual		loans past-due
(In thousands)	loans		90 days or more		loans		90 days or more		loans		90 days or more
Commercial multi-family	$	14,666	$	—	$	16,860	$	—	$	31,526	$	—
Commercial real estate non-owner occupied		62,155		—		86,448		—		148,603		—
Commercial real estate owner occupied		377,623		—		52,979		—		430,602		—
Commercial and industrial		166,472		671		41,475		—		207,947		671
Construction		56,247		—		13,223		—		69,470		—
Mortgage		633,517		293,805		33,700		—		667,217		293,805
Leasing		5,673		—		—		—		5,673		—
Legacy		—		—		79,077		—		79,077		—
Consumer:
Credit cards		—		24,478		623		—		623		24,478
Home equity lines of credit		—		439		12,212		—		12,212		439
Personal		17,630		—		1,639		—		19,269		—
Auto		6,527		—		38		—		6,565		—
Other		2,971		695		48		—		3,019		695
Total[1]	$	1,343,481	$	320,088	$	338,322	$	—	$	1,681,803	$	320,088

[1] For purposes of this table non-performing loans exclude $232 million in non-performing loans held-for-sale.

24

At December 31, 2011
	Puerto Rico				U.S. mainland				Popular, Inc.
	Non-covered loans
			Accruing				Accruing				Accruing
	Non-accrual		loans past-due		Non-accrual		loans past-due		Non-accrual		loans past-due
(In thousands)	loans		90 days or more		loans		90 days or more		loans		90 days or more
Commercial multi-family	$	15,396	$	—	$	13,935	$	—	$	29,331	$	—
Commercial real estate non-owner occupied		51,013		—		80,820		—		131,833		—
Commercial real estate owner occupied		385,303		—		59,726		—		445,029		—
Commercial and industrial		179,459		675		44,440		—		223,899		675
Construction		53,859		—		42,427		—		96,286		—
Mortgage		649,279		280,912		37,223		—		686,502		280,912
Leasing		5,642		—		—		—		5,642		—
Legacy		—		—		75,660		—		75,660		—
Consumer:
Credit cards		—		25,748		735		—		735		25,748
Home equity lines of credit		—		157		10,065		—		10,065		157
Personal		19,317		—		1,516		—		20,833		—
Auto		6,830		—		34		—		6,864		—
Other		5,144		468		27		—		5,171		468
Total[1]	$	1,371,242	$	307,960	$	366,608	$	—	$	1,737,850	$	307,960

[1] For purposes of this table non-performing loans exclude $262 million in non-performing loans held-for-sale.

The following tables present loans by past due status at March 31, 2012 and December 31, 2011 for non-covered loans held-in-portfolio (net of unearned income).

March 31, 2012
Puerto Rico
Non- covered loans
	Past due										Non - covered
	30-59		60-89		90 days		Total				loans HIP
(In thousands)	days		days		or more		past due		Current		Puerto Rico
Commercial multi-family	$	409	$	—	$	14,666	$	15,075	$	94,503	$	109,578
Commercial real estate non-owner occupied		6,708		230		62,155		69,093		1,209,572		1,278,665
Commercial real estate owner occupied		51,307		10,426		377,623		439,356		1,648,609		2,087,965
Commercial and industrial		58,769		8,000		167,143		233,912		2,719,549		2,953,461
Construction		12,360		—		56,247		68,607		107,161		175,768
Mortgage		261,859		45,756		927,322		1,234,937		3,525,408		4,760,345
Leasing		9,203		1,448		5,673		16,324		526,990		543,314
Consumer:
Credit cards		15,323		11,016		24,478		50,817		1,140,363		1,191,180
Home equity lines of credit		205		340		439		984		18,693		19,677
Personal		15,471		9,360		17,630		42,461		932,538		974,999
Auto		21,213		5,817		6,527		33,557		498,360		531,917
Other		678		651		3,666		4,995		228,735		233,730
Total	$	453,505	$	93,044	$	1,663,569	$	2,210,118	$	12,650,481	$	14,860,599

25

March 31, 2012
U.S. mainland
	Past due
	30-59	60-89	90 days	Total	Loans HIP