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Allowance for loan losses

6 Months Ended

Jun. 30, 2013

Loans and Leases Receivable, Allowance [Abstract]

Note 8 – Allowance for loan losses

The Corporation's assessment of the allowance for loan losses is determined in accordance with accounting guidance, specifically loss contingencies guidance in ASC Subtopic 450-20 and loan impairment guidance in ASC Section 310-10-35.

The accounting guidance provides for the recognition of a loss allowance for groups of homogeneous loans. The determination for general reserves of the allowance for loan losses includes the following principal factors:

Base net loss rates, which are based on the moving average of annualized net loss rates computed over a 3-year historical loss period for the commercial and construction loan portfolios, and an 18-month period for the consumer and mortgage loan portfolios. The base net loss rates are applied by loan type and by legal entity.
Recent loss trend adjustment, which replaces the base loss rate with a 12-month average loss rate for the commercial, construction and legacy loan portfolios and 6-month average loss rate for the consumer and mortgage loan portfolios, when these trends are higher than the respective base loss rates, up to a determined cap in the case of consumer and mortgage loan portfolios. The objective of this adjustment is to include information about recent increases in loss rates in a timely and prudent manner.
Environmental factors, which include credit and macroeconomic indicators such as unemployment rate, economic activity index and delinquency rates, were adopted to account for current market conditions that are likely to cause estimated credit losses to differ from historical losses. The Corporation reflects the effect of these environmental factors on each loan group as an adjustment that, as appropriate, increases or decreases the historical loss rate applied to each group. Environmental factors provide updated perspective on credit and economic conditions. Regression analysis was used to select these indicators and quantify the effect on the general reserve of the allowance for loan losses.

During the second quarter of 2013, management revised the estimation process for evaluating the adequacy of the general reserve component of the allowance for loan losses. The enhancements to the ALLL methodology, which is described in the paragraphs below, was implemented as of June 30, 2013 and resulted in a net increase to the allowance for loan losses of $11.8 million for the non-covered portfolio and $7.5 million for the covered portfolio.

Management made the following principal changes to the methodology during the second quarter of 2013:

Incorporated risk ratings to establish a more granular stratification of the commercial, construction and legacy loan portfolios to enhance the homogeneity of the loan classes. Prior to the second quarter enhancements, the Corporation's loan segmentation was based on product type, line of business and legal entity. During the second quarter of 2013, lines of business were simplified and a regulatory classification level was added. These changes increase the homogeneity of each portfolio and capture the higher potential for loan loss in the criticized and substandard accruing categories.

These refinements resulted in a decrease to the allowance for loan losses of $42.9 million at June 30, 2013, which consisted of a $35.7 million decrease in the non-covered BPPR segment and a $7.2 million reduction in the BPNA segment.
Recalibration and enhancements of the environmental factors adjustment. The environmental factor adjustments are developed by performing regression analyses on selected credit and economic indicators for each applicable loan segment. Prior to the second quarter enhancements, these adjustments were applied in the form of a set of multipliers and weights assigned to credit and economic indicators. During the second quarter of 2013, the environmental factor models used to account for changes in current credit and macroeconomic conditions, were enhanced and recalibrated based on the latest applicable trends. Also, as part of these enhancements, environmental factors are directly applied to the adjusted base loss rates using regression models based on particular credit data for the segment and relevant economic factors. These enhancements results in a more precise adjustment by having recalibrated models with improved statistical analysis and eliminating the multiplier concept that ensures that environmental factors are sufficiently sensitive to changing economic conditions.

The combined effect of the aforementioned changes to the environmental factors adjustment resulted in an increase to the allowance for loan losses of $52.5 million at June 30, 2013, of which $56.1 million relate to the non-covered BPPR segment, offset in part by a $3.6 million reduction in the BPNA segment.

There were additional enhancements to the allowance for loan losses methodology which accounted for an increase of $9.7 million at June 30, 2013 at the BPPR segment. These enhancements included the elimination of the use of a cap for the commercial recent loss adjustment (12-month average), the incorporation of a minimum general reserve assumption for the commercial, construction and legacy portfolios with minimal or zero loss history, and the application of the enhanced ALLL framework to the covered loan portfolio.

The following tables present the changes in the allowance for loan losses for the quarters and six months ended June 30, 2013 and 2012.

For the quarter ended June 30, 2013
Puerto Rico - Non-covered loans


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	160,883	$	6,403	$	130,466	$	3,895	$	122,374	$	424,021
	Provision (reversal of provision)		(18,763)		375		204,540		6,241		38,068		230,461
	Charge-offs		(35,270)		(2,191)		(12,750)		(1,843)		(27,247)		(79,301)
	Recoveries		5,302		4,485		161		630		7,319		17,897
	Net write-down related to loans sold		-		-		(199,502)		-		-		(199,502)
Ending balance		$	112,152	$	9,072	$	122,915	$	8,923	$	140,514	$	393,576

For the quarter ended June 30, 2013
Puerto Rico - Covered loans


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	67,681	$	6,293	$	20,673	$	-	$	5,220	$	99,867
	Provision (reversal of provision)		(1,016)		16,762		8,583		-		1,171		25,500
	Charge-offs		(1,150)		(16,024)		(2,255)		-		106		(19,323)
	Recoveries		42		322		-		-		49		413
Ending balance		$	65,557	$	7,353	$	27,001	$	-	$	6,546	$	106,457

For the quarter ended June 30, 2013
U.S. Mainland


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Beginning balance		$	67,987	$	1,036	$	31,479	$	30,777	$	28,201	$	159,480
	Provision (reversal of provision)		(5,850)		(698)		4,604		(11,716)		7,107		(6,553)
	Charge-offs		(17,398)		-		(3,377)		(5,941)		(6,841)		(33,557)
	Recoveries		7,590		-		359		6,858		1,009		15,816
Ending balance		$	52,329	$	338	$	33,065	$	19,978	$	29,476	$	135,186

For the quarter ended June 30, 2013
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Legacy		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	296,551	$	13,732	$	182,618	$	30,777	$	3,895	$	155,795	$	683,368
	Provision (reversal of provision)		(25,629)		16,439		217,727		(11,716)		6,241		46,346		249,408
	Charge-offs		(53,818)		(18,215)		(18,382)		(5,941)		(1,843)		(33,982)		(132,181)
	Recoveries		12,934		4,807		520		6,858		630		8,377		34,126
	Net write-down related to loans sold		-		-		(199,502)		-		-		-		(199,502)
Ending balance		$	230,038	$	16,763	$	182,981	$	19,978	$	8,923	$	176,536	$	635,219

For the six months ended June 30, 2013
Puerto Rico - Non-covered loans


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	217,615	$	5,862	$	119,027	$	2,894	$	99,899	$	445,297
	Provision		110,114		3,117		232,752		8,226		80,544		434,753
	Charge-offs		(67,716)		(3,820)		(30,509)		(3,386)		(54,607)		(160,038)
	Recoveries		13,436		5,759		1,147		1,189		14,678		36,209
	Net write-downs related to loans sold		(161,297)		(1,846)		(199,502)		-		-		(362,645)
Ending balance		$	112,152	$	9,072	$	122,915	$	8,923	$	140,514	$	393,576

For the six months ended June 30, 2013
Puerto Rico - Covered loans


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	72,060	$	9,946	$	20,914	$	-	$	5,986	$	108,906
	Provision		5,140		22,554		10,393		-		4,969		43,056
	Charge-offs		(11,715)		(25,783)		(4,317)		-		(4,461)		(46,276)
	Recoveries		72		636		11		-		52		771
Ending balance		$	65,557	$	7,353	$	27,001	$	-	$	6,546	$	106,457

For the six months ended June 30, 2013
U.S. Mainland


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Beginning balance		$	80,067	$	1,567	$	30,348	$	33,102	$	31,320	$	176,404
	Provision (reversal of provision)		(9,069)		(1,229)		8,525		(12,913)		10,141		(4,545)
	Charge-offs		(30,538)		-		(7,394)		(12,282)		(14,038)		(64,252)
	Recoveries		11,869		-		1,586		12,071		2,053		27,579
Ending balance		$	52,329	$	338	$	33,065	$	19,978	$	29,476	$	135,186

For the six months ended June 30, 2013
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Legacy		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	369,742	$	17,375	$	170,289	$	33,102	$	2,894	$	137,205	$	730,607
	Provision (reversal of provision)		106,185		24,442		251,670		(12,913)		8,226		95,654		473,264
	Charge-offs		(109,969)		(29,603)		(42,220)		(12,282)		(3,386)		(73,106)		(270,566)
	Recoveries		25,377		6,395		2,744		12,071		1,189		16,783		64,559
	Net write-down related to loans sold		(161,297)		(1,846)		(199,502)		-		-		-		(362,645)
Ending balance		$	230,038	$	16,763	$	182,981	$	19,978	$	8,923	$	176,536	$	635,219

For the quarter ended June 30, 2012
Puerto Rico - Non-covered loans


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	221,329	$	6,671	$	96,507	$	4,967	$	118,062	$	447,536
	Provision (reversal of provision)		11,081		1,778		38,642		(2,002)		16,944		66,443
	Charge-offs		(39,123)		(1,033)		(15,479)		(909)		(30,475)		(87,019)
	Recoveries		10,559		48		669		901		7,420		19,597
Ending balance		$	203,846	$	7,464	$	120,339	$	2,957	$	111,951	$	446,557

For the quarter ended June 30, 2012
Puerto Rico - Covered Loans


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	90,070	$	29,727	$	10,517	$	-	$	8,182	$	138,496
	Provision		20,174		9,088		5,185		-		3,009		37,456
	Charge-offs		(34,652)		(15,187)		(4,085)		-		(4,533)		(58,457)
	Recoveries		-		-		-		-		-		-
Ending balance		$	75,592	$	23,628	$	11,617	$	-	$	6,658	$	117,495

For the quarter ended June 30, 2012
U.S. Mainland


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Beginning balance		$	92,250	$	2,462	$	28,972	$	54,725	$	38,823	$	217,232
	Provision (reversal of provision)		11,800		(788)		3,882		(5,255)		5,661		15,300
	Charge-offs		(17,769)		-		(3,674)		(11,193)		(11,883)		(44,519)
	Recoveries		6,637		4		303		5,734		1,287		13,965
Ending balance		$	92,918	$	1,678	$	29,483	$	44,011	$	33,888	$	201,978

For the quarter ended June 30, 2012
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Legacy		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	403,649	$	38,860	$	135,996	$	54,725	$	4,967	$	165,067	$	803,264
	Provision (reversal of provision)		43,055		10,078		47,709		(5,255)		(2,002)		25,614		119,199
	Charge-offs		(91,544)		(16,220)		(23,238)		(11,193)		(909)		(46,891)		(189,995)
	Recoveries		17,196		52		972		5,734		901		8,707		33,562
Ending balance		$	372,356	$	32,770	$	161,439	$	44,011	$	2,957	$	152,497	$	766,030

For the six months ended June 30, 2012
Puerto Rico - Non-covered loans


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	255,453	$	5,850	$	72,322	$	4,651	$	115,126	$	453,402
	Provision (reversal of provision)		14,475		2,228		75,053		(1,532)		44,011		134,235
	Charge-offs		(86,767)		(1,313)		(28,970)		(2,126)		(62,713)		(181,889)
	Recoveries		20,685		699		1,934		1,964		15,527		40,809
Ending balance		$	203,846	$	7,464	$	120,339	$	2,957	$	111,951	$	446,557

For the six months ended June 30, 2012
Puerto Rico - Covered Loans


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	94,472	$	20,435	$	5,310	$	-	$	4,728	$	124,945
	Provision		19,874		18,644		10,595		-		6,552		55,665
	Charge-offs		(38,754)		(15,451)		(4,288)		-		(4,622)		(63,115)
	Recoveries		-		-		-		-		-		-
Ending balance		$	75,592	$	23,628	$	11,617	$	-	$	6,658	$	117,495

For the six months ended June 30, 2012
U.S. Mainland


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Beginning balance		$	113,979	$	2,631	$	29,939	$	46,228	$	44,184	$	236,961
	Provision (reversal of provision)		6,936		(791)		8,143		6,800		8,934		30,022
	Charge-offs		(37,371)		(1,396)		(9,006)		(19,666)		(22,241)		(89,680)
	Recoveries		9,374		1,234		407		10,649		3,011		24,675
Ending balance		$	92,918	$	1,678	$	29,483	$	44,011	$	33,888	$	201,978

For the six months ended June 30, 2012
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Legacy		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	463,904	$	28,916	$	107,571	$	46,228	$	4,651	$	164,038	$	815,308
	Provision (reversal of provision)		41,285		20,081		93,791		6,800		(1,532)		59,497		219,922
	Charge-offs		(162,892)		(18,160)		(42,264)		(19,666)		(2,126)		(89,576)		(334,684)
	Recoveries		30,059		1,933		2,341		10,649		1,964		18,538		65,484
Ending balance		$	372,356	$	32,770	$	161,439	$	44,011	$	2,957	$	152,497	$	766,030

The following table provides the activity in the allowance for loan losses related to covered loans accounted for pursuant to ASC Subtopic 310-30.

	ASC 310-30 Covered loans
	For the quarters ended				For the six months ended
(In thousands)	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Balance at beginning of period	$	91,573	$	94,559	$	95,407	$	83,477
Provision for loan losses		17,568		28,221		31,608		39,591
Net charge-offs		(17,946)		(28,809)		(35,820)		(29,097)
Balance at end of period	$	91,195	$	93,971	$	91,195	$	93,971

The following tables present information at June 30, 2013 and December 31, 2012 regarding loan ending balances and the allowance for loan losses by portfolio segment and whether such loans and the allowance pertains to loans individually or collectively evaluated for impairment.

At June 30, 2013
Puerto Rico


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Specific ALLL non-covered loans		$	18,719	$	1,401	$	35,715	$	1,399	$	30,904	$	88,138
General ALLL non-covered loans			93,433		7,671		87,200		7,524		109,610		305,438
ALLL - non-covered loans			112,152		9,072		122,915		8,923		140,514		393,576
Specific ALLL covered loans			1,981		750		-		-		-		2,731
General ALLL covered loans			63,576		6,603		27,001		-		6,546		103,726
ALLL - covered loans			65,557		7,353		27,001		-		6,546		106,457
Total ALLL		$	177,709	$	16,425	$	149,916	$	8,923	$	147,060	$	500,033

Loans held-in-portfolio:
Impaired non-covered loans		$	271,177	$	39,542	$	382,398	$	3,818	$	127,643	$	824,578
Non-covered loans held-in-portfolio
	excluding impaired loans		6,052,606		216,960		4,931,072		534,530		3,131,734		14,866,902
Non-covered loans held-in-portfolio			6,323,783		256,502		5,313,470		538,348		3,259,377		15,691,480
Impaired covered loans			25,092		-		-		-		-		25,092
Covered loans held-in-portfolio
	excluding impaired loans		1,875,378		240,365		999,578		-		59,585		3,174,906
Covered loans held-in-portfolio			1,900,470		240,365		999,578		-		59,585		3,199,998
Total loans held-in-portfolio		$	8,224,253	$	496,867	$	6,313,048	$	538,348	$	3,318,962	$	18,891,478

At June 30, 2013
U.S. Mainland


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Specific ALLL		$	-	$	-	$	17,563	$	-	$	350	$	17,913
General ALLL			52,329		338		15,502		19,978		29,126		117,273
Total ALLL		$	52,329	$	338	$	33,065	$	19,978	$	29,476	$	135,186

Loans held-in-portfolio:
Impaired loans		$	63,684	$	5,834	$	52,807	$	13,368	$	2,523	$	138,216
Loans held-in-portfolio,
	excluding impaired loans		3,530,373		34,674		1,237,310		248,860		640,746		5,691,963
Total loans held-in-portfolio		$	3,594,057	$	40,508	$	1,290,117	$	262,228	$	643,269	$	5,830,179

At June 30, 2013
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Legacy		Leasing		Consumer		Total
Allowance for credit losses:
Specific ALLL non-covered loans		$	18,719	$	1,401	$	53,278	$	-	$	1,399	$	31,254	$	106,051
General ALLL non-covered loans			145,762		8,009		102,702		19,978		7,524		138,736		422,711
ALLL - non-covered loans			164,481		9,410		155,980		19,978		8,923		169,990		528,762
Specific ALLL covered loans			1,981		750		-		-		-		-		2,731
General ALLL covered loans			63,576		6,603		27,001		-		-		6,546		103,726
ALLL - covered loans			65,557		7,353		27,001		-		-		6,546		106,457
Total ALLL		$	230,038	$	16,763	$	182,981	$	19,978	$	8,923	$	176,536	$	635,219

Loans held-in-portfolio:
Impaired non-covered loans		$	334,861	$	45,376	$	435,205	$	13,368	$	3,818	$	130,166	$	962,794
Non-covered loans held-in-portfolio
	excluding impaired loans		9,582,979		251,634		6,168,382		248,860		534,530		3,772,480		20,558,865
Non-covered loans held-in-portfolio			9,917,840		297,010		6,603,587		262,228		538,348		3,902,646		21,521,659
Impaired covered loans			25,092		-		-		-		-		-		25,092
Covered loans held-in-portfolio
	excluding impaired loans		1,875,378		240,365		999,578		-		-		59,585		3,174,906
Covered loans held-in-portfolio			1,900,470		240,365		999,578		-		-		59,585		3,199,998
Total loans held-in-portfolio		$	11,818,310	$	537,375	$	7,603,165	$	262,228	$	538,348	$	3,962,231	$	24,721,657

At December 31, 2012
Puerto Rico


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Specific ALLL non-covered loans		$	17,323	$	120	$	58,572	$	1,066	$	17,779	$	94,860
General ALLL non-covered loans			200,292		5,742		60,455		1,828		82,120		350,437
ALLL - non-covered loans			217,615		5,862		119,027		2,894		99,899		445,297
Specific ALLL covered loans			8,505		-		-		-		-		8,505
General ALLL covered loans			63,555		9,946		20,914		-		5,986		100,401
ALLL - covered loans			72,060		9,946		20,914		-		5,986		108,906
Total ALLL		$	289,675	$	15,808	$	139,941	$	2,894	$	105,885	$	554,203

Loans held-in-portfolio:
Impaired non-covered loans		$	447,779	$	35,849	$	557,137	$	4,881	$	130,663	$	1,176,309
Non-covered loans held-in-portfolio
	excluding impaired loans		5,848,505		176,418		4,391,787		535,642		3,103,666		14,056,018
Non-covered loans held-in-portfolio			6,296,284		212,267		4,948,924		540,523		3,234,329		15,232,327
Impaired covered loans			109,241		-		-		-		-		109,241
Covered loans held-in-portfolio
	excluding impaired loans		2,135,406		361,396		1,076,730		-		73,199		3,646,731
Covered loans held-in-portfolio			2,244,647		361,396		1,076,730		-		73,199		3,755,972
Total loans held-in-portfolio		$	8,540,931	$	573,663	$	6,025,654	$	540,523	$	3,307,528	$	18,988,299

At December 31, 2012
U.S. Mainland


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Specific ALLL		$	25	$	-	$	16,095	$	-	$	107	$	16,227
General ALLL			80,042		1,567		14,253		33,102		31,213		160,177
Total ALLL		$	80,067	$	1,567	$	30,348	$	33,102	$	31,320	$	176,404

Loans held-in-portfolio:
Impaired loans		$	79,885	$	5,960	$	54,093	$	18,744	$	2,714	$	161,396
Loans held-in-portfolio,
	excluding impaired loans		3,482,033		34,630		1,075,490		365,473		631,843		5,589,469
Total loans held-in-portfolio		$	3,561,918	$	40,590	$	1,129,583	$	384,217	$	634,557	$	5,750,865

At December 31, 2012
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Legacy		Leasing		Consumer		Total
Allowance for credit losses:
Specific ALLL non-covered loans		$	17,348	$	120	$	74,667	$	-	$	1,066	$	17,886	$	111,087
General ALLL non-covered loans			280,334		7,309		74,708		33,102		1,828		113,333		510,614
ALLL - non-covered loans			297,682		7,429		149,375		33,102		2,894		131,219		621,701
Specific ALLL covered loans			8,505		-		-		-		-		-		8,505
General ALLL covered loans			63,555		9,946		20,914		-		-		5,986		100,401
ALLL - covered loans			72,060		9,946		20,914		-		-		5,986		108,906
Total ALLL		$	369,742	$	17,375	$	170,289	$	33,102	$	2,894	$	137,205	$	730,607

Loans held-in-portfolio:
Impaired non-covered loans		$	527,664	$	41,809	$	611,230	$	18,744	$	4,881	$	133,377	$	1,337,705
Non-covered loans held-in-portfolio
	excluding impaired loans		9,330,538		211,048		5,467,277		365,473		535,642		3,735,509		19,645,487
Non-covered loans held-in-portfolio			9,858,202		252,857		6,078,507		384,217		540,523		3,868,886		20,983,192
Impaired covered loans			109,241		-		-		-		-		-		109,241
Covered loans held-in-portfolio
	excluding impaired loans		2,135,406		361,396		1,076,730		-		-		73,199		3,646,731
Covered loans held-in-portfolio			2,244,647		361,396		1,076,730		-		-		73,199		3,755,972
Total loans held-in-portfolio		$	12,102,849	$	614,253	$	7,155,237	$	384,217	$	540,523	$	3,942,085	$	24,739,164

Impaired loans

The following tables present loans individually evaluated for impairment at June 30, 2013 and December 31, 2012.

June 30, 2013
Puerto Rico
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal			Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance			allowance
Commercial multi-family	$	-	$	-	$	-	$	8,392	$	8,392	$	8,392	$	8,392	$	-
Commercial real estate non-owner occupied		24,293		24,864		6,656		29,256		33,139		53,549		58,003		6,656
Commercial real estate owner occupied		43,887		47,750		5,216		68,241		101,156		112,128		148,906		5,216
Commercial and industrial		31,456		31,456		6,847		65,652		80,668		97,108		112,124		6,847
Construction		4,581		6,507		1,401		34,961		90,596		39,542		97,103		1,401
Mortgage		338,008		351,235		35,715		44,390		48,818		382,398		400,053		35,715
Leasing		3,818		3,818		1,399		-		-		3,818		3,818		1,399
Consumer:
Credit cards		43,889		43,889		8,215		-		-		43,889		43,889		8,215
Personal		82,353		82,353		22,474		-		-		82,353		82,353		22,474
Auto		854		854		112		-		-		854		854		112
Other		547		547		103		-		-		547		547		103
Covered loans		19,783		19,783		2,731		5,309		5,309		25,092		25,092		2,731
Total Puerto Rico	$	593,469	$	613,056	$	90,869	$	256,201	$	368,078	$	849,670	$	981,134	$	90,869

June 30, 2013
U.S. mainland
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal		Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance		allowance
Commercial multi-family	$	-	$	-	$	-	$	6,165	$	9,570	$	6,165	$	9,570	$	-
Commercial real estate non-owner occupied		-		-		-		35,981		53,592		35,981		53,592		-
Commercial real estate owner occupied		-		-		-		20,624		27,170		20,624		27,170		-
Commercial and industrial		-		-		-		914		914		914		914		-
Construction		-		-		-		5,834		5,834		5,834		5,834		-
Mortgage		47,287		51,970		17,563		5,520		6,658		52,807		58,628		17,563
Legacy		-		-		-		13,368		18,404		13,368		18,404		-
Consumer:
HELOCs		199		199		-		-		-		199		199		-
Auto		89		89		-		-		-		89		89		-
Other		2,235		2,235		350		-		-		2,235		2,235		350
Total U.S. mainland	$	49,810	$	54,493	$	17,913	$	88,406	$	122,142	$	138,216	$	176,635	$	17,913

June 30, 2013
Popular, Inc.
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal		Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance		allowance
Commercial multi-family	$	-	$	-	$	-	$	14,557	$	17,962	$	14,557	$	17,962	$	-
Commercial real estate non-owner occupied		24,293		24,864		6,656		65,237		86,731		89,530		111,595		6,656
Commercial real estate owner occupied		43,887		47,750		5,216		88,865		128,326		132,752		176,076		5,216
Commercial and industrial		31,456		31,456		6,847		66,566		81,582		98,022		113,038		6,847
Construction		4,581		6,507		1,401		40,795		96,430		45,376		102,937		1,401
Mortgage		385,295		403,205		53,278		49,910		55,476		435,205		458,681		53,278
Legacy		-		-		-		13,368		18,404		13,368		18,404		-
Leasing		3,818		3,818		1,399		-		-		3,818		3,818		1,399
Consumer:
Credit cards		43,889		43,889		8,215		-		-		43,889		43,889		8,215
HELOCs		199		199		-		-		-		199		199		-
Personal		82,353		82,353		22,474		-		-		82,353		82,353		22,474
Auto		943		943		112		-		-		943		943		112
Other		2,782		2,782		453		-		-		2,782		2,782		453
Covered loans		19,783		19,783		2,731		5,309		5,309		25,092		25,092		2,731
Total Popular, Inc.	$	643,279	$	667,549	$	108,782	$	344,607	$	490,220	$	987,886	$	1,157,769	$	108,782

December 31, 2012
Puerto Rico
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal			Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance			allowance
Commercial multi-family	$	271	$	288	$	6	$	13,080	$	19,969	$	13,351	$	20,257	$	6
Commercial real estate non-owner occupied		22,332		25,671		1,354		55,320		63,041		77,652		88,712		1,354
Commercial real estate owner occupied		100,685		149,342		12,614		121,476		167,639		222,161		316,981		12,614
Commercial and industrial		70,216		85,508		3,349		64,399		99,608		134,615		185,116		3,349
Construction		1,865		3,931		120		33,984		70,572		35,849		74,503		120
Mortgage		517,341		539,171		58,572		39,796		42,913		557,137		582,084		58,572
Leasing		4,881		4,881		1,066		-		-		4,881		4,881		1,066
Consumer:
Credit cards		42,514		42,514		1,666		-		-		42,514		42,514		1,666
Personal		86,884		86,884		16,022		-		-		86,884		86,884		16,022
Auto		772		772		79		-		-		772		772		79
Other		493		493		12		-		-		493		493		12
Covered loans		64,762		64,762		8,505		44,479		44,479		109,241		109,241		8,505
Total Puerto Rico	$	913,016	$	1,004,217	$	103,365	$	372,534	$	508,221	$	1,285,550	$	1,512,438	$	103,365

December 31, 2012
U.S. mainland
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal		Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance		allowance
Commercial multi-family	$	1,327	$	1,479	$	25	$	6,316	$	9,898	$	7,643	$	11,377	$	25
Commercial real estate non-owner occupied		-		-		-		45,815		64,783		45,815		64,783		-
Commercial real estate owner occupied		-		-		-		20,369		22,968		20,369		22,968		-
Commercial and industrial		-		-		-		6,058		8,026		6,058		8,026		-
Construction		-		-		-		5,960		5,960		5,960		5,960		-
Mortgage		45,319		46,484		16,095		8,774		10,328		54,093		56,812		16,095
Legacy		-		-		-		18,744		29,972		18,744		29,972		-
Consumer:
HELOCs		201		201		11		-		-		201		201		11
Auto		91		91		2		-		-		91		91		2
Other		2,422		2,422		94		-		-		2,422		2,422		94
Total U.S. mainland	$	49,360	$	50,677	$	16,227	$	112,036	$	151,935	$	161,396	$	202,612	$	16,227

December 31, 2012
Popular, Inc.
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal		Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance		allowance
Commercial multi-family	$	1,598	$	1,767	$	31	$	19,396	$	29,867	$	20,994	$	31,634	$	31
Commercial real estate non-owner occupied		22,332		25,671		1,354		101,135		127,824		123,467		153,495		1,354
Commercial real estate owner occupied		100,685		149,342		12,614		141,845		190,607		242,530		339,949		12,614
Commercial and industrial		70,216		85,508		3,349		70,457		107,634		140,673		193,142		3,349
Construction		1,865		3,931		120		39,944		76,532		41,809		80,463		120
Mortgage		562,660		585,655		74,667		48,570		53,241		611,230		638,896		74,667
Legacy		-		-		-		18,744		29,972		18,744		29,972		-
Leasing		4,881		4,881		1,066		-		-		4,881		4,881		1,066
Consumer:
Credit cards		42,514		42,514		1,666		-		-		42,514		42,514		1,666
HELOCs		201		201		11		-		-		201		201		11
Personal		86,884		86,884		16,022		-		-		86,884		86,884		16,022
Auto		863		863		81		-		-		863		863		81
Other		2,915		2,915		106		-		-		2,915		2,915		106
Covered loans		64,762		64,762		8,505		44,479		44,479		109,241		109,241		8,505
Total Popular, Inc.	$	962,376	$	1,054,894	$	119,592	$	484,570	$	660,156	$	1,446,946	$	1,715,050	$	119,592

The following table presents the average recorded investment and interest income recognized on impaired loans for the quarter and six months ended June 30, 2013 and 2012.

For the quarter ended June 30, 2013
	Puerto Rico				U.S. Mainland				Popular, Inc.
	Average		Interest		Average		Interest		Average		Interest
	recorded		income		recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized		investment		recognized
Commercial multi-family	$	8,448	$	(29)	$	6,619	$	-	$	15,067	$	(29)
Commercial real estate non-owner occupied		47,621		364		38,509		55		86,130		419
Commercial real estate owner occupied		98,892		493		20,235		73		119,127		566
Commercial and industrial		96,622		769		1,457		-		98,079		769
Construction		41,528		-		5,859		-		47,387		-
Mortgage		480,435		7,861		53,000		482		533,435		8,343
Legacy		-		-		14,200		-		14,200		-
Leasing		4,088		-		-		-		4,088		-
Consumer:
Credit cards		34,019		-		-		-		34,019		-
Helocs		-		-		200		-		200		-
Personal		83,531		-		-		-		83,531		-
Auto		858		-		90		-		948		-
Other		274		-		2,311		-		2,585		-
Covered loans		24,252		265		-		-		24,252		265
Total Popular, Inc.	$	920,568	$	9,723	$	142,480	$	610	$	1,063,048	$	10,333

For the quarter ended June 30, 2012
	Puerto Rico				U.S. Mainland				Popular, Inc.
	Average		Interest		Average		Interest		Average		Interest
	recorded		income		recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized		investment		recognized
Commercial multi-family	$	8,469	$	-	$	11,397	$	11	$	19,866	$	11
Commercial real estate non-owner occupied		61,468		176		64,514		327		125,982		503
Commercial real estate owner occupied		195,838		197		34,745		-		230,583		197
Commercial and industrial		124,604		137		22,557		-		147,161		137
Construction		50,013		91		12,565		-		62,578		91
Mortgage		427,107		6,267		53,600		495		480,707		6,762
Legacy		-		-		38,510		19		38,510		19
Leasing		5,470		-		-		-		5,470		-
Consumer:
Credit cards		38,567		-		-		-		38,567		-
Personal		90,862		-		-		-		90,862		-
Auto		85		-		46		-		131		-
Other		4,107		-		2,362		-		6,469		-
Covered loans		81,275		-		-		-		81,275		-
Total Popular, Inc.	$	1,087,865	$	6,868	$	240,296	$	852	$	1,328,161	$	7,720

For the six months ended June 30, 2013
	Puerto Rico				U.S. Mainland				Popular, Inc.
	Average		Interest		Average		Interest		Average		Interest
	recorded		income		recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized		investment		recognized
Commercial multi-family	$	10,082	$	132	$	6,960	$	39	$	17,042	$	171
Commercial real estate non-owner occupied		57,631		723		40,944		90		98,575		813
Commercial real estate owner occupied		139,981		1,009		20,280		15		160,261		1,024
Commercial and industrial		109,286		1,608		2,990		-		112,276		1,608
Construction		39,635		-		5,893		-		45,528		-
Mortgage		506,002		15,596		53,364		985		559,366		16,581
Legacy		-		-		15,714		-		15,714		-
Leasing		4,352		-		-		-		4,352		-
Consumer:
Credit cards		36,851		-		-		-		36,851		-
Helocs		-		-		200		-		200		-
Personal		84,648		-		-		-		84,648		-
Auto		829		-		90		-		919		-
Other		347		-		2,348		-		2,695		-
Covered loans		52,582		504		-		-		52,582		504
Total Popular, Inc.	$	1,042,226	$	19,572	$	148,783	$	1,129	$	1,191,009	$	20,701

For the six months ended June 30, 2012
	Puerto Rico				U.S. Mainland				Popular, Inc.
	Average		Interest		Average		Interest		Average		Interest
	recorded		income		recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized		investment		recognized
Commercial multi-family	$	13,202	$	-	$	10,483	$	101	$	23,685	$	101
Commercial real estate non-owner occupied		58,121		357		63,815		814		121,936		1,171
Commercial real estate owner occupied		198,318		773		39,044		-		237,362		773
Commercial and industrial		124,974		620		26,547		37		151,521		657
Construction		49,924		107		22,364		-		72,288		107
Mortgage		395,853		11,840		52,245		977		448,098		12,817
Legacy		-		-		41,970		65		41,970		65
Leasing		5,681		-		-		-		5,681		-
Consumer:
Credit cards		38,669		-		-		-		38,669		-
Personal		91,828		-		-		-		91,828		-
Auto		57		-		62		-		119		-
Other		4,387		-		2,386		-		6,773		-
Covered loans		79,783		-		-		-		79,783		-
Total Popular, Inc.	$	1,060,797	$	13,697	$	258,916	$	1,994	$	1,319,713	$	15,691

Modifications

Troubled debt restructurings related to non-covered loan portfolios amounted to $0.9 billion at June 30, 2013 (December 31, 2012 - $1.2 billion). The amount of outstanding commitments to lend additional funds to debtors owing receivables whose terms have been modified in troubled debt restructurings amounted $4 million related to the commercial loan portfolio and none related to the construction loan portfolio at June 30, 2013 (December 31, 2012 - $4 million and $120 thousand, respectively).

A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification constitutes a concession.

Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting evergreen revolving credit lines to long-term loans. Commercial real estate (“CRE”), which includes multifamily, owner-occupied and non-owner occupied CRE, and construction loans modified in a TDR often involve reducing the interest rate for a limited period of time or the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or reductions in the payment plan. Construction loans modified in a TDR may also involve extending the interest-only payment period.

Residential mortgage loans modified in a TDR are primarily comprised of loans where monthly payments are lowered to accommodate the borrowers' financial needs for a period of time, normally five years to ten years. After the lowered monthly payment period ends, the borrower reverts back to paying principal and interest per the original terms with the maturity date adjusted accordingly.

Home equity loans modifications are made infrequently and are not offered if the Corporation also holds the first mortgage. Home equity loans modifications are uniquely designed to meet the specific needs of each borrower. Automobile loans modified in a TDR are primarily comprised of loans where the Corporation has lowered monthly payments by extending the term. Credit cards modified in a TDR are primarily comprised of loans where monthly payments are lowered to accommodate the borrowers' financial needs for a period of time, normally up to 24 months.

As part of its NPL reduction strategy and in order to expedite the resolution of delinquent construction and commercial loans, commencing in 2012, the Corporation routinely enters into liquidation agreements with borrowers and guarantors through the regular legal process, bankruptcy procedures and in certain occasions, out of Court transactions. These liquidation agreements, in general, contemplate the following conditions: (1) consent to judgment by the borrowers and guarantors; (2) acknowledgement by the borrower of the debt, its liquidity and maturity; (3) acknowledgment of the default in payments. The contractual interest rate is not reduced and continues to accrue during the term of the agreement. At the end of the period, borrower is obligated to remit all amounts due or be subject to the Corporation's exercise of its foreclosure rights and further collection efforts. Likewise, the borrower's failure to make stipulated payments will grant the Corporation the ability to exercise its foreclosure rights. This strategy procures to expedite the foreclosure process, resulting in a more effective and efficient collection process. Although in general, these liquidation agreements do not contemplate the forgiveness of principal or interest as debtor is required to cover all outstanding amounts when the agreement becomes due, it could be construed that the Corporation has granted a concession by temporarily accepting a payment schedule that is different from the contractual payment schedule. Accordingly, loans under these program agreements are considered TDRs.

Loans modified in a TDR that are not accounted pursuant to ASC 310-30 are typically already in non-accrual status at the time of the modification and partial charge-offs have in some cases already been taken against the outstanding loan balance. The TDR loan continues in non-accrual status until the borrower has demonstrated a willingness and ability to make the restructured loan payments (generally at least six months of sustained performance after the modification (or one year for loans providing for quarterly or semi-annual payments)) and management has concluded that it is probable that the borrower would not be in payment default in the foreseeable future.

Loans modified in a TDR may have the financial effect to the Corporation of increasing the specific allowance for loan losses associated with the loan. Consumer and residential mortgage loans modified under the Corporation's loss mitigation programs that are determined to be TDRs are individually evaluated for impairment based on an analysis of discounted cash flows.

For consumer and mortgage loans that are modified with regard to payment terms and which constitute TDRs, the discounted cash flow value method is used as the impairment valuation is more appropriately calculated based on the ongoing cash flow from the individuals rather than the liquidation of the asset. The computations give consideration to probability of defaults and loss-given-foreclosure on the related estimated cash flows.

Commercial and construction loans that have been modified as part of loss mitigation efforts are evaluated individually for impairment. The vast majority of the Corporation's modified commercial loans are measured for impairment using the estimated fair value of the collateral, as these are normally considered as collateral dependent loans. In very few instances, the Corporation measures modified commercial loans at their estimated realizable values determined by discounting the expected future cash flows. Construction loans that have been modified are also accounted for as collateral dependent loans. The Corporation determines the fair value measurement dependent upon its exit strategy for the particular asset(s) acquired in foreclosure.

The following tables present the non-covered and covered loans classified as TDRs according to their accruing status at June 30, 2013 and December 31, 2012.

	Popular, Inc.
	Non-Covered Loans
	June 30, 2013						December 31, 2012
(In thousands)		Accruing		Non-Accruing		Total		Accruing		Non-Accruing		Total
Commercial	$	113,576	$	78,690	$	192,266	$	105,648	$	208,119	$	313,767
Construction		2,923		12,731		15,654		2,969		10,310		13,279
Legacy		-		3,949		3,949		-		5,978		5,978
Mortgage		482,338		65,347		547,685		405,063		273,042		678,105
Leases		1,423		2,395		3,818		1,726		3,155		4,881
Consumer		121,107		10,396		131,503		125,955		8,981		134,936
Total	$	721,367	$	173,508	$	894,875	$	641,361	$	509,585	$	1,150,946

	Popular, Inc.
	Covered Loans
	June 30, 2013						December 31, 2012
(In thousands)		Accruing		Non-Accruing		Total		Accruing		Non-Accruing		Total
Commercial	$	7,454	$	11,785	$	19,239	$	46,142	$	4,071	$	50,213
Construction		-		5,232		5,232		-		7,435		7,435
Mortgage		148		189		337		149		220		369
Consumer		362		38		400		517		106		623
Total	$	7,964	$	17,244	$	25,208	$	46,808	$	11,832	$	58,640

The following tables present the loan count by type of modification for those loans modified in a TDR during the quarters and six months ended June 30, 2013 and 2012.

	Puerto Rico
	For the quarter ended June 30, 2013				For the six months ended June 30, 2013
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial real estate non-owner occupied	-	-	-	-	-	1	-	-
Commercial real estate owner occupied	1	-	-	33	2	1	-	33
Commercial and industrial	8	2	-	8	10	4	-	8
Mortgage	5	14	85	7	9	27	215	13
Leasing	-	2	5	-	-	12	13	-
Consumer:
Credit cards	272	-	-	246	560	-	-	482
Personal	223	6	-	3	455	14	-	3
Auto	-	2	-	-	-	2	-	-
Other	26	-	-	-	45	-	-	-
Total	535	26	90	297	1,081	61	228	539

	U.S. Mainland
	For the quarter ended June 30, 2013				For the six months ended June 30, 2013
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial real estate non-owner occupied	-	-	2	-	-	2	2	-
Commercial real estate owner occupied	-	-	-	-	-	-	1	-
Mortgage	-	-	5	-	-	-	8	-
Consumer:
Total	-	-	7	-	-	2	11	-

	Popular, Inc.
	For the quarter ended June 30, 2013				For the six months ended June 30, 2013
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial real estate non-owner occupied	-	-	2	-	-	3	2	-
Commercial real estate owner occupied	1	-	-	33	2	1	1	33
Commercial and industrial	8	2	-	8	10	4	-	8
Mortgage	5	14	90	7	9	27	223	13
Leasing	-	2	5	-	-	12	13	-
Consumer:
Credit cards	272	-	-	246	560	-	-	482
Personal	223	6	-	3	455	14	-	3
Auto	-	2	-	-	-	2	-	-
Other	26	-	-	-	45	-	-	-
Total	535	26	97	297	1,081	63	239	539

	Puerto Rico
	For the quarter ended June 30, 2012				For the six months ended June 30, 2012
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial real estate non-owner occupied	-	1	-	-	2	4	-	-
Commercial real estate owner occupied	4	7	-	-	6	15	-	-
Commercial and industrial	8	22	-	-	25	53	-	-
Construction	-	-	-	-	1	1	-	-
Mortgage	125	42	459	65	161	83	794	110
Leasing	-	34	-	-	-	62	-	-
Consumer:
Credit cards	410	-	-	334	957	-	-	674
Personal	281	12	-	-	670	21	-	-
Auto	-	1	-	-	-	1	2	-
Other	14	-	-	-	25	-	-	-
Total	842	119	459	399	1,847	240	796	784

	U.S. Mainland
	For the quarter ended June 30, 2012				For the six months ended June 30, 2012
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial real estate non-owner occupied	1	-	-	-	1	-	-	1
Construction	-	-	-	-	-	-	-	1
Mortgage	1	-	23	-	3	-	48	-
Legacy	1	-	-	-	1	-	-	2
Consumer:
HELOCs	-	-	1	-	-	-	1	-
Total	3	-	24	-	5	-	49	4

	Popular, Inc.
	For the quarter ended June 30, 2012				For the six months ended June 30, 2012
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial real estate non-owner occupied	1	1	-	-	3	4	-	1
Commercial real estate owner occupied	4	7	-	-	6	15	-	-
Commercial and industrial	8	22	-	-	25	53	-	-
Construction	-	-	-	-	1	1	-	1
Mortgage	126	42	482	65	164	83	842	110
Legacy	1	-	-	-	1	-	-	2
Leasing	-	34	-	-	-	62	-	-
Consumer:
Credit cards	410	-	-	334	957	-	-	674
HELOCs	-	-	1	-	-	-	1	-
Personal	281	12	-	-	670	21	-	-
Auto	-	1	-	-	-	1	2	-
Other	14	-	-	-	25	-	-	-
Total	845	119	483	399	1,852	240	845	788

The following tables present by class, quantitative information related to loans modified as TDRs during the quarter and six months ended June 30, 2013 and 2012.

Puerto Rico
For the quarter ended June 30, 2013
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate owner occupied	34	$	10,646	$	8,628	$	(161)
Commercial and industrial	18		3,583		3,623		(17)
Mortgage	111		18,046		19,192		878
Leasing	7		116		114		30
Consumer:
Credit cards	518		3,879		4,649		718
Personal	232		3,810		3,821		985
Auto	2		38		40		2
Other	26		120		119		19
Total	948	$	40,238	$	40,186	$	2,454

U.S. Mainland
For the quarter ended June 30, 2013
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	2	$	1,228	$	1,154	$	-
Mortgage	5		702		731		49
Total	7	$	1,930	$	1,885	$	49

Popular, Inc.
For the quarter ended June 30, 2013
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	2	$	1,228	$	1,154	$	-
Commercial real estate owner occupied	34		10,646		8,628		(161)
Commercial and industrial	18		3,583		3,623		(17)
Mortgage	116		18,748		19,923		927
Leasing	7		116		114		30
Consumer:
Credit cards	518		3,879		4,649		718
Personal	232		3,810		3,821		985
Auto	2		38		40		2
Other	26		120		119		19
Total	955	$	42,168	$	42,071	$	2,503

Puerto Rico
For the quarter ended June 30, 2012
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	1	$	138	$	534	$	4
Commercial real estate owner occupied	11		4,481		4,070		1
Commercial and industrial	30		18,392		18,061		229
Mortgage	691		91,292		94,681		2,335
Leasing	34		499		481		53
Consumer:
Credit cards	744		6,296		6,981		4
Personal	293		4,290		4,285		782
Auto	1		3		3		-
Other	14		34		33		-
Total	1,819	$	125,425	$	129,129	$	3,408

U.S. Mainland
For the quarter ended June 30, 2012
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	1	$	2,252	$	1,991	$	184
Mortgage	24		2,382		2,314		357
Legacy	1		321		316		(3)
Consumer:
HELOCs	1		150		134		(1)
Total	27	$	5,105	$	4,755	$	537

Popular, Inc.
For the quarter ended June 30, 2012
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	2	$	2,390	$	2,525	$	188
Commercial real estate owner occupied	11		4,481		4,070		1
Commercial and industrial	30		18,392		18,061		229
Mortgage	715		93,674		96,995		2,692
Legacy	1		321		316		(3)
Leasing	34		499		481		53
Consumer:
Credit cards	744		6,296		6,981		4
HELOCs	1		150		134		(1)
Personal	293		4,290		4,285		782
Auto	1		3		3		-
Other	14		34		33		-
Total	1,846	$	130,530	$	133,884	$	3,945

Puerto Rico
For the six months ended June 30, 2013
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	1	$	1,248	$	741	$	(10)
Commercial real estate owner occupied	36		15,212		13,214		(501)
Commercial and industrial	22		3,743		3,784		(18)
Mortgage	264		42,944		45,981		4,305
Leasing	25		443		429		133
Consumer:
Credit cards	1,042		8,144		9,795		755
Personal	472		7,642		7,667		1,978
Auto	2		38		40		2
Other	45		169		167		19
Total	1,909	$	79,583	$	81,818	$	6,663

U.S. mainland
For the six months ended June 30, 2013
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	4	$	2,822	$	2,713	$	(2)
Commercial real estate owner occupied	1		381		287		(10)
Mortgage	8		928		959		72
Consumer:
Total	13	$	4,131	$	3,959	$	60

Popular, Inc.
For the six months ended June 30, 2013
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	5		4,070		3,454		(12)
Commercial real estate owner occupied	37		15,593		13,501		(511)
Commercial and industrial	22		3,743		3,784		(18)
Mortgage	272		43,872		46,940		4,377
Leasing	25		443		429		133
Consumer:
Credit cards	1,042		8,144		9,795		755
Personal	472		7,642		7,667		1,978
Auto	2		38		40		2
Other	45		169		167		19
Total	1,922	$	83,714	$	85,777	$	6,723

Puerto Rico
For the six months ended June 30, 2012
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	6	$	2,690	$	3,090	$	(969)
Commercial real estate owner occupied	21		7,693		7,282		(38)
Commercial and industrial	78		24,764		24,434		250
Construction	2		1,097		1,097		52
Mortgage	1,148		153,208		157,191		6,978
Leasing	62		1,009		966		103
Consumer:
Credit cards	1,631		13,521		15,347		44
Personal	691		9,079		9,080		1,501
Auto	3		47		27		(1)
Other	25		75		74		-
Total	3,667	$	213,183	$	218,588	$	7,920

U.S. mainland
For the six months ended June 30, 2012
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	2	$	5,796	$	5,536	$	184
Construction	1		1,573		1,573		-
Mortgage	51		5,403		5,425		834
Legacy	3		1,272		1,267		(3)
Consumer:
HELOCs	1		150		134		(1)
Total	58	$	14,194	$	13,935	$	1,014

Popular, Inc.
For the six months ended June 30, 2012
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	8	$	8,486	$	8,626	$	(785)
Commercial real estate owner occupied	21		7,693		7,282		(38)
Commercial and industrial	78		24,764		24,434		250
Construction	3		2,670		2,670		52
Mortgage	1,199		158,611		162,616		7,812
Legacy	3		1,272		1,267		(3)
Leasing	62		1,009		966		103
Consumer:
Credit cards	1,631		13,521		15,347		44
HELOCs	1		150		134		(1)
Personal	691		9,079		9,080		1,501
Auto	3		47		27		(1)
Other	25		75		74		-
Total	3,725	$	227,377	$	232,523	$	8,934

During the six months ended June 30, 2013 and 2012, two loan comprising a recorded investment of approximately $2.9 million and four loans of $7 million, respectively, was restructured into multiple notes (“Note A / B split”). The Corporation recorded approximately $1.3 million and $1.4 million in loan charge-offs as part of the loan restructuring during the six months ended June 30, 2013 and 2012, respectively. The renegotiations of this loan were made after analyzing the borrowers' capacity to repay the debt, collateral and ability to perform under the modified terms. The recorded investment on these commercial TDRs amounted to approximately $1.6 million at June 30, 2013 (June 30, 2012 - $6 million) with a related allowance for loan losses amounting to approximately $21 thousand (June 30, 2012 - $94 thousand).

The following tables present by class, TDRs that were subject to payment default and that had been modified as a TDR during the twelve months preceding the default date. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or charged-off, whichever occurs first. The recorded investment at June 30, 2013 is inclusive of all partial paydowns and charge-offs since the modification date. Loans modified as a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Puerto Rico
	Defaulted during the quarter ended June 30, 2013			Defaulted during the six months ended June 30, 2013
(Dollars in thousands)	Loan count	Recorded investment as of first default date		Loan count	Recorded investment as of first default date
Commercial real estate owner occupied	2	$	5,127	2	$	5,127
Commercial and industrial	1		504	2		1,436
Mortgage	68		11,730	131		20,601
Leasing	3		21	10		65
Consumer:
Credit cards	169		1,807	300		2,927
Personal	30		415	71		992
Total	273	$	19,604	516	$	31,148

U.S. Mainland
	Defaulted during the quarter ended June 30, 2013			Defaulted during the six months ended June 30, 2013
(Dollars in thousands)	Loan count	Recorded investment as of first default date		Loan count	Recorded investment as of first default date
Commercial real estate non-owner occupied	-	$	-	1	$	1,139
Total	-	$	-	1	$	1,139

Popular, Inc.
	Defaulted during the quarter ended June 30, 2013				Defaulted during the six months ended June 30, 2013
(Dollars in thousands)	Loan count		Recorded investment as of first default date		Loan count		Recorded investment as of first default date
Commercial real estate non-owner occupied	-	$	-		1	$	1,139
Commercial real estate owner occupied	2		5,127		2		5,127
Commercial and industrial	1		504		2		1,436
Mortgage	68		11,730	-	131		20,601
Legacy	3		21		10		65
Consumer:
Credit cards	169		1,807		300		2,927
Personal	30		415		71		992
Total	273	$	19,604		517	$	32,287

Puerto Rico
	Defaulted during the quarter ended June 30, 2012			Defaulted during the six months ended June 30, 2012
(Dollars in thousands)	Loan count	Recorded investment as of first default date		Loan count	Recorded investment as of first default date
Commercial real estate non-owner occupied	2	$	1,791	3	$	3,561
Commercial real estate owner occupied	6		3,186	15		15,619
Commercial and industrial	4		3,843	12		4,918
Mortgage	165		25,332	324		48,420
Leasing	4		43	13		412
Consumer:
Credit cards	241		1,795	481		3,842
Personal	92		650	189		1,392
Auto	1		16	1		16
Other	-		-	1		1
Total	515	$	36,656	1,039	$	78,181

U.S. Mainland
	Defaulted during the quarter ended June 30, 2012			Defaulted during the six months ended June 30, 2012
(Dollars in thousands)	Loan count	Recorded investment as of first default date		Loan count	Recorded investment as of first default date
Commercial real estate non-owner occupied	-	$	-	1	$	1,935
Mortgage	3		319	6		732
Consumer:
Total	3	$	319	7	$	2,667

Popular, Inc.
	Defaulted during the quarter ended June 30, 2012			Defaulted during the six months ended June 30, 2012
(Dollars in thousands)	Loan count		Recorded investment as of first default date	Loan count		Recorded investment as of first default date
Commercial real estate non-owner occupied	2	$	1,791	4	$	5,496
Commercial real estate owner occupied	6		3,186	15		15,619
Commercial and industrial	4		3,843	12		4,918
Mortgage	168		25,651	330		49,152
Leasing	4		43	13		412
Consumer:
Credit cards	241		1,795	481		3,842
Personal	92		650	189		1,392
Auto	1		16	1		16
Other	-		-	1		1
Total	518	$	36,975	1,046	$	80,848

Commercial, consumer and mortgage loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Corporation evaluates the loan for possible further impairment. The allowance for loan losses may be increased or partial charge-offs may be taken to further write-down the carrying value of the loan.

Credit Quality

The following table presents the outstanding balance, net of unearned income, of non-covered loans held-in-portfolio based on the Corporation's assignment of obligor risk ratings as defined at June 30, 2013 and December 31, 2012.

June 30, 2013
				Special										Pass/
(In thousands)		Watch		Mention		Substandard		Doubtful		Loss		Sub-total		Unrated		Total
Puerto Rico^[1]
Commercial multi-family		$	1,353	$	681	$	14,003	$	-	$	-	$	16,037	$	69,094	$	85,131
Commercial real estate non-owner occupied			72,811		153,272		311,055		-		-		537,138		1,245,282		1,782,420
Commercial real estate owner occupied			194,828		123,989		372,464		1,236		-		692,517		1,008,802		1,701,319
Commercial and industrial			608,943		194,896		280,689		3,291		604		1,088,423		1,666,490		2,754,913
	Total Commercial		877,935		472,838		978,211		4,527		604		2,334,115		3,989,668		6,323,783
Construction			9,306		2,375		45,760		6,168		-		63,609		192,893		256,502
Mortgage			-		-		138,393		-		-		138,393		5,175,077		5,313,470
Leasing			-		-		4,389		-		121		4,510		533,838		538,348
Consumer:
	Credit cards		-		-		20,551		-		-		20,551		1,147,707		1,168,258
	Home equity lines of credit		-		-		1,205		-		2,458		3,663		11,643		15,306
	Personal		-		-		7,501		-		111		7,612		1,219,794		1,227,406
	Auto		-		-		8,534		-		156		8,690		610,409		619,099
	Other		-		-		2,302		-		2,969		5,271		224,037		229,308
	Total Consumer		-		-		40,093		-		5,694		45,787		3,213,590		3,259,377
Total Puerto Rico		$	887,241	$	475,213	$	1,206,846	$	10,695	$	6,419	$	2,586,414	$	13,105,066	$	15,691,480
U.S. mainland
Commercial multi-family		$	92,990	$	17,238	$	75,664	$	-	$	-	$	185,892	$	862,574	$	1,048,466
Commercial real estate non-owner occupied			101,414		23,564		173,815		-		-		298,793		893,819		1,192,612
Commercial real estate owner occupied			17,486		10,938		103,782		-		-		132,206		418,755		550,961
Commercial and industrial			11,505		10,729		47,687		-		-		69,921		732,097		802,018
	Total Commercial		223,395		62,469		400,948		-		-		686,812		2,907,245		3,594,057
Construction			-		-		21,056		-		-		21,056		19,452		40,508
Mortgage			-		-		27,158		-		-		27,158		1,262,959		1,290,117
Legacy			14,515		9,886		71,054		-		-		95,455		166,773		262,228
Consumer:
	Credit cards		-		-		362		-		-		362		14,104		14,466
	Home equity lines of credit		-		-		3,764		-		4,225		7,989		477,578		485,567
	Personal		-		-		697		-		540		1,237		140,129		141,366
	Auto		-		-		-		-		3		3		541		544
	Other		-		-		19		-		-		19		1,307		1,326
	Total Consumer		-		-		4,842		-		4,768		9,610		633,659		643,269
Total U.S. mainland		$	237,910	$	72,355	$	525,058	$	-	$	4,768	$	840,091	$	4,990,088	$	5,830,179
Popular, Inc.
Commercial multi-family		$	94,343	$	17,919	$	89,667	$	-	$	-	$	201,929	$	931,668	$	1,133,597
Commercial real estate non-owner occupied			174,225		176,836		484,870		-		-		835,931		2,139,101		2,975,032
Commercial real estate owner occupied			212,314		134,927		476,246		1,236		-		824,723		1,427,557		2,252,280
Commercial and industrial			620,448		205,625		328,376		3,291		604		1,158,344		2,398,587		3,556,931
	Total Commercial		1,101,330		535,307		1,379,159		4,527		604		3,020,927		6,896,913		9,917,840
Construction			9,306		2,375		66,816		6,168		-		84,665		212,345		297,010
Mortgage			-		-		165,551		-		-		165,551		6,438,036		6,603,587
Legacy			14,515		9,886		71,054		-		-		95,455		166,773		262,228
Leasing			-		-		4,389		-		121		4,510		533,838		538,348
Consumer:
	Credit cards		-		-		20,913		-		-		20,913		1,161,811		1,182,724
	Home equity lines of credit		-		-		4,969		-		6,683		11,652		489,221		500,873
	Personal		-		-		8,198		-		651		8,849		1,359,923		1,368,772
	Auto		-		-		8,534		-		159		8,693		610,950		619,643
	Other		-		-		2,321		-		2,969		5,290		225,344		230,634
	Total Consumer		-		-		44,935		-		10,462		55,397		3,847,249		3,902,646
Total Popular, Inc.		$	1,125,151	$	547,568	$	1,731,904	$	10,695	$	11,187	$	3,426,505	$	18,095,154	$	21,521,659

The following table presents the weighted average obligor risk rating at June 30, 2013 for those classifications that consider a range of rating scales.

Weighted average obligor risk rating					(Scales 11 and 12)								(Scales 1 through 8)
Puerto Rico:^[1]						Substandard									Pass
Commercial multi-family							11.69								5.37
Commercial real estate non-owner occupied							11.14								6.58
Commercial real estate owner occupied							11.29								6.84
Commercial and industrial							11.26								6.35
	Total Commercial						11.24								6.53
Construction							11.78								7.87

U.S. mainland:						Substandard									Pass
Commercial multi-family							11.27								7.11
Commercial real estate non-owner occupied							11.37								7.06
Commercial real estate owner occupied							11.29								6.90
Commercial and industrial							11.14								6.62
	Total Commercial						11.30								6.53
Construction							11.28								7.91
Legacy							11.29								7.71

[1]

Excludes covered loans acquired in the Westernbank FDIC-assisted transaction.

December 31, 2012
				Special										Pass/
(In thousands)		Watch		Mention		Substandard		Doubtful		Loss		Sub-total		Unrated		Total
Puerto Rico^[1]
Commercial multi-family		$	978	$	255	$	16,736	$	-	$	-	$	17,969	$	97,124	$	115,093
Commercial real estate non-owner occupied			120,608		156,853		252,068		-		-		529,529		820,904		1,350,433
Commercial real estate owner occupied			195,876		140,788		647,458		1,242		-		985,364		1,057,122		2,042,486
Commercial and industrial			438,758		201,660		410,026		4,162		682		1,055,288		1,732,984		2,788,272
	Total Commercial		756,220		499,556		1,326,288		5,404		682		2,588,150		3,708,134		6,296,284
Construction			645		31,789		41,278		-		-		73,712		138,555		212,267
Mortgage			-		-		569,334		-		-		569,334		4,379,590		4,948,924
Leasing			-		-		4,742		-		123		4,865		535,658		540,523
Consumer:
	Credit cards		-		-		22,965		-		-		22,965		1,160,107		1,183,072
	Home equity lines of credit		-		-		1,333		-		3,269		4,602		12,204		16,806
	Personal		-		-		8,203		-		77		8,280		1,237,502		1,245,782
	Auto		-		-		8,551		-		-		8,551		551,765		560,316
	Other		-		-		3,036		-		-		3,036		225,317		228,353
	Total Consumer		-		-		44,088		-		3,346		47,434		3,186,895		3,234,329
Total Puerto Rico		$	756,865	$	531,345	$	1,985,730	$	5,404	$	4,151	$	3,283,495	$	11,948,832	$	15,232,327
U.S. mainland
Commercial multi-family		$	78,490	$	22,050	$	71,658	$	-	$	-	$	172,198	$	734,489	$	906,687
Commercial real estate non-owner occupied			108,806		55,911		204,532		-		-		369,249		914,750		1,283,999
Commercial real estate owner occupied			22,423		6,747		113,161		-		-		142,331		423,633		565,964
Commercial and industrial			24,489		8,889		65,562		-		-		98,940		706,328		805,268
	Total Commercial		234,208		93,597		454,913		-		-		782,718		2,779,200		3,561,918
Construction			5,268		-		21,182		-		-		26,450		14,140		40,590
Mortgage			-		-		34,077		-		-		34,077		1,095,506		1,129,583
Legacy			26,176		15,225		109,470		-		-		150,871		233,346		384,217
Consumer:
	Credit cards		-		-		505		-		-		505		14,636		15,141
	Home equity lines of credit		-		-		3,150		-		4,304		7,454		466,775		474,229
	Personal		-		-		785		-		941		1,726		141,403		143,129
	Auto		-		-		-		-		4		4		764		768
	Other		-		-		3		-		-		3		1,287		1,290
	Total Consumer		-		-		4,443		-		5,249		9,692		624,865		634,557
Total U.S. mainland		$	265,652	$	108,822	$	624,085	$	-	$	5,249	$	1,003,808	$	4,747,057	$	5,750,865
Popular, Inc.
Commercial multi-family		$	79,468	$	22,305	$	88,394	$	-	$	-	$	190,167	$	831,613	$	1,021,780
Commercial real estate non-owner occupied			229,414		212,764		456,600		-		-		898,778		1,735,654		2,634,432
Commercial real estate owner occupied			218,299		147,535		760,619		1,242		-		1,127,695		1,480,755		2,608,450
Commercial and industrial			463,247		210,549		475,588		4,162		682		1,154,228		2,439,312		3,593,540
	Total Commercial		990,428		593,153		1,781,201		5,404		682		3,370,868		6,487,334		9,858,202
Construction			5,913		31,789		62,460		-		-		100,162		152,695		252,857
Mortgage			-		-		603,411		-		-		603,411		5,475,096		6,078,507
Legacy			26,176		15,225		109,470		-		-		150,871		233,346		384,217
Leasing			-		-		4,742		-		123		4,865		535,658		540,523
Consumer:
	Credit cards		-		-		23,470		-		-		23,470		1,174,743		1,198,213
	Home equity lines of credit		-		-		4,483		-		7,573		12,056		478,979		491,035
	Personal		-		-		8,988		-		1,018		10,006		1,378,905		1,388,911
	Auto		-		-		8,551		-		4		8,555		552,529		561,084
	Other		-		-		3,039		-		-		3,039		226,604		229,643
	Total Consumer		-		-		48,531		-		8,595		57,126		3,811,760		3,868,886
Total Popular, Inc.		$	1,022,517	$	640,167	$	2,609,815	$	5,404	$	9,400	$	4,287,303	$	16,695,889	$	20,983,192

The following table presents the weighted average obligor risk rating at December 31, 2012 for those classifications that consider a range of rating scales.

Weighted average obligor risk rating					(Scales 11 and 12)								(Scales 1 through 8)
Puerto Rico:^[1]						Substandard									Pass
Commercial multi-family							11.94								5.68
Commercial real estate non-owner occupied							11.28								6.98
Commercial real estate owner occupied							11.51								6.93
Commercial and industrial							11.35								6.69
	Total Commercial						11.42								6.81
Construction							11.99								7.86

U.S. mainland:						Substandard									Pass
Commercial multi-family							11.26								7.12
Commercial real estate non-owner occupied							11.38								7.04
Commercial real estate owner occupied							11.28								6.64
Commercial and industrial							11.19								6.73
	Total Commercial						11.31								6.81
Construction							11.28								7.21
Legacy							11.30								7.48

[1]

Excludes covered loans acquired in the Westernbank FDIC-assisted transaction.