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Allowance for loan losses

12 Months Ended

Dec. 31, 2014

Loans and Leases Receivable, Allowance [Abstract]

Note 12 – Allowance for loan losses

The Corporation follows a systematic methodology to establish and evaluate the adequacy of the allowance for loan losses to provide for inherent losses in the loan portfolio. This methodology includes the consideration of factors such as current economic conditions, portfolio risk characteristics, prior loss experience and results of periodic credit reviews of individual loans. The provision for loan losses charged to current operations is based on this methodology. Loan losses are charged and recoveries are credited to the allowance for loan losses.

The Corporation's assessment of the allowance for loan losses is determined in accordance with the guidance of loss contingencies in ASC Subtopic 450-20 and loan impairment guidance in ASC Section 310-10-35. Also, the Corporation determines the allowance for loan losses on purchased impaired loans and purchased loans accounted for under ASC Subtopic 310-30 by analogy, by evaluating decreases in expected cash flows after the acquisition date.

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, when these trends are higher than the respective base loss rates. The objective of this adjustment is to allow for a more recent loss trend to be captured and reflected in the ALLL estimation process. As part of the annual review of the components of the ALLL models, as discussed in the following paragraphs and implemented as of June 30, 2014, the Corporation eliminated the use of caps in the recent loss trend adjustment for the consumer and mortgage portfolios, among other enhancements. For the period ended December 31, 2013, the recent loss trend adjustment caps for the consumer and mortgage portfolios were triggered in only one portfolio segment within the Puerto Rico consumer portfolio. Management assessed the impact of the applicable cap through a review of qualitative factors that specifically considered the drivers of recent loss trends and changes to the portfolio composition. The related effect of the aforementioned cap was immaterial for the overall level of the Allowance for Loan and Lease Losses for the Puerto Rico Consumer portfolio.

For the period ended December 31, 2014, 50% (December 31, 2013, 27%) of the ALLL for BPPR non-covered loan portfolios utilized the recent loss trend adjustment instead of the base loss. The effect of replacing the base loss with the recent loss trend adjustment was mainly concentrated in the commercial multi-family, commercial and industrial, personal and auto loan portfolios for 2014, and in commercial multi-family, mortgage and leasing portfolios for 2013.

For the period ended December 31, 2014, 21% (December 31, 2013, 29%) of the ALLL for BPNA loan portfolios utilized the recent loss trend adjustment instead of the base loss. The effect of replacing the base loss with the recent loss trend adjustment was mainly concentrated in the commercial multi-family, commercial and industrial and legacy loan portfolios for 2014 and in the commercial multi-family, commercial real estate non-owner occupied, commercial and industrial loan portfolios for 2013.

Environmental factors, which include credit and macroeconomic indicators such as unemployment rate, economic activity index and delinquency rates, 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 the historical loss rate applied to each group. Environmental factors provide updated perspective on credit and economic conditions. Regression analysis is used to select these indicators and quantify the effect on the general reserve of the allowance for loan losses.

During the second quarter of 2014, management completed the annual review of the components of the ALLL models. As part of this review management updated core metrics and revised certain components related to the estimation process for evaluating the adequacy of the general reserve of the allowance for loan losses. These enhancements to the ALLL methodology, which are described in the paragraphs below, were implemented as of June 30, 2014 and resulted in a net decrease to the allowance for loan losses of $18.7 million for the non-covered portfolio and a net increase to the allowance for loan losses of $0.8 million for the covered portfolio.

Management made the following principal enhancements to the methodology during the second quarter of 2014:

Annual review and recalibration 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. During the second quarter of 2014, the environmental factor models used to account for changes in current credit and macroeconomic conditions were reviewed and recalibrated based on the latest applicable trends. Management also revised the application of environmental factors to the historical loss rates to consider last 12 month trends of the applicable credit and macroeconomic indicators applied as an incremental adjustment to account for emerging risks not necessarily considered in the historical loss rates.

The combined effect of the aforementioned recalibration and enhancements to the environmental factors adjustment resulted in a decrease to the allowance for loan losses of $17 million at June 30, 2014, of which $14.1 million related to the non-covered BPPR segment and $3.7 million related to the BPNA segment, offset in part by a $0.8 million increase in the BPPR covered segment.

Increased the historical look-back period for determining the recent loss trend adjustment for consumer and mortgage loans. The Corporation increased the look-back period for assessing recent trends applicable to the determination of consumer and mortgage loan net charge-offs from 6 months to 12 months and eliminated the use of caps. Previously, the Corporation used a recent loss trend adjustment based on 6 months of net charge-offs up to a determined cap. Given the current overall consumer and mortgage credit quality improvements, management concluded that a 12-month look-back period for the recent loss trend adjustment aligns the Corporation's allowance for loan losses methodology to current credit quality trends while limiting excessive pro-cyclicality given the longer look-back period analysis, thus, eliminating the aforementioned caps.

The combined effect of the aforementioned enhancements to the recent loss trend adjustment resulted in a decrease to the allowance for loan losses of $1 million at June 30, 2014, of which $0.9 million related to the non-covered BPPR segment and $0.1 million related to the BPNA segment.

The following tables present the changes in the allowance for loan losses for the years ended December 31, 2014 and 2013.

For the year ended December 31, 2014
Puerto Rico - Non-covered loans


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	128,150	$	5,095	$	130,330	$	10,622	$	152,578	$	426,775
	Provision (reversal of provision)		112,821		(3,121)		34,530		470		98,149		242,849
	Charge-offs		(70,402)		(1,722)		(45,389)		(6,028)		(122,400)		(245,941)
	Recoveries		31,020		5,231		1,389		2,067		25,745		65,452
Ending balance		$	201,589	$	5,483	$	120,860	$	7,131	$	154,072	$	489,135

For the year ended December 31, 2014
Puerto Rico - Covered loans


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	42,198	$	19,491	$	36,006	$	-	$	4,397	$	102,092
	Provision (reversal of provision)		21,579		15,397		13,384		-		(4,225)		46,135
	Charge-offs		(34,741)		(36,223)		(9,156)		-		2,589		(77,531)
	Recoveries		1,835		8,537		714		-		291		11,377
Ending balance		$	30,871	$	7,202	$	40,948	$	-	$	3,052	$	82,073

For the year ended December 31, 2014
U.S. Mainland - Continuing Operations


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Beginning balance		$	24,930	$	214	$	26,599	$	11,335	$	19,205	$	82,283
	Allowance transferred from discontinued operations		7,984		-		-		-		-		7,984
	Provision (reversal of provision)		(2,979)		736		(15,410)		(8,611)		7,414		(18,850)
	Charge-offs		(16,628)		-		(3,517)		(8,071)		(15,948)		(44,164)
	Recoveries		15,523		237		2,321		17,141		3,783		39,005
	Net write-down related to loans transferred to LHFS		(19,182)		-		(7,531)		(8,850)		(111)		(35,674)
Ending balance		$	9,648	$	1,187	$	2,462	$	2,944	$	14,343	$	30,584


For the year ended December 31, 2014
U.S. Mainland - Discontinued Operations


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Beginning balance		$	21,902	$	33	$	-	$	2,369	$	5,101	$	29,405
	Allowance transferred to continuing operations		(7,984)		-		-		-		-		(7,984)
	Provision (reversal of provision)		(2,831)		(226)		-		(1,812)		(1,895)		(6,764)
	Charge-offs		(2,995)		-		-		(557)		(900)		(4,452)
	Recoveries		8,283		220		-		1,400		94		9,997
	Net write-downs related to loans transferred to discontinued operations		(16,375)		(27)		-		(1,400)		(2,400)		(20,202)
Ending balance		$	-	$	-	$	-	$	-	$	-	$	-

For the year ended December 31, 2014
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Legacy		Leasing		Consumer		Total
Allowance for credit losses:
Beginning balance		$	217,180	$	24,833	$	192,935	$	13,704	$	10,622	$	181,281	$	640,555
	Provision (reversal of provision)		128,590		12,786		32,504		(10,423)		470		99,443		263,370
	Charge-offs		(124,766)		(37,945)		(58,062)		(8,628)		(6,028)		(136,659)		(372,088)
	Recoveries		56,661		14,225		4,424		18,541		2,067		29,913		125,831
	Net write-down related to loans transferred to LHFS		(19,182)		-		(7,531)		(8,850)		-		(111)		(35,674)
	Net write-downs related to loans transferred to discontinued operations		(16,375)		(27)		-		(1,400)		-		(2,400)		(20,202)
Ending balance		$	242,108	$	13,872	$	164,270	$	2,944	$	7,131	$	171,467	$	601,792

For the year ended December 31, 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 (reversal of provision)		157,433		(7,563)		258,541		11,234		128,239		547,884
	Charge-offs		(112,266)		(6,757)		(49,418)		(6,034)		(113,616)		(288,091)
	Recoveries		26,665		15,399		1,682		2,528		38,056		84,330
	Net write-downs related to loans sold		(161,297)		(1,846)		(199,502)		-		-		(362,645)
Ending balance		$	128,150	$	5,095	$	130,330	$	10,622	$	152,578	$	426,775

For the year ended December 31, 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 (reversal of provision)		(2,255)		43,653		25,706		-		2,292		69,396
	Charge-offs		(28,422)		(39,730)		(10,679)		-		(3,952)		(82,783)
	Recoveries		815		5,622		65		-		71		6,573
Ending balance		$	42,198	$	19,491	$	36,006	$	-	$	4,397	$	102,092

For the year ended December 31, 2013
U.S. Mainland - Continuing Operations


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Beginning balance		$	37,554	$	1,196	$	30,348	$	29,070	$	26,383	$	124,551
	Provision (reversal of provision)		(3,440)		(982)		4,054		(21,632)		10,826		(11,174)
	Charge-offs		(26,116)		-		(10,156)		(17,423)		(21,622)		(75,317)
	Recoveries		16,932		-		2,353		21,320		3,618		44,223
Ending balance		$	24,930	$	214	$	26,599	$	11,335	$	19,205	$	82,283


For the year ended December 31, 2013
U.S. Mainland - Discontinued Operations


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Beginning balance		$	42,513	$	371	$	-	$	4,032	$	4,937	$	51,853
	Provision (reversal of provision)		(6,427)		(338)		-		(349)		3,571		(3,543)
	Charge-offs		(29,954)		-		-		(5,105)		(3,898)		(38,957)
	Recoveries		15,770		-		-		3,791		491		20,052
Ending balance		$	21,902	$	33	$	-	$	2,369	$	5,101	$	29,405

For the year ended December 31, 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)		145,311		34,770		288,301		(21,981)		11,234		144,928		602,563
	Charge-offs		(196,758)		(46,487)		(70,253)		(22,528)		(6,034)		(143,088)		(485,148)
	Recoveries		60,182		21,021		4,100		25,111		2,528		42,236		155,178
	Net write-down related to loans sold		(161,297)		(1,846)		(199,502)		-		-		-		(362,645)
Ending balance		$	217,180	$	24,833	$	192,935	$	13,704	$	10,622	$	181,281	$	640,555

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 years ended
(In thousands)	December 31, 2014		December 31, 2013
Balance at beginning of period	$	93,915	$	95,407
Provision for loan losses		48,559		58,858
Net charge-offs		(63,628)		(60,350)
Balance at end of period	$	78,846	$	93,915

The following tables present information at December 31, 2014 and December 31, 2013 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 December 31, 2014
Puerto Rico


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Specific ALLL non-covered loans		$	64,736	$	363	$	45,838	$	770	$	27,796	$	139,503
General ALLL non-covered loans			136,853		5,120		75,022		6,361		126,276		349,632
ALLL - non-covered loans			201,589		5,483		120,860		7,131		154,072		489,135
Specific ALLL covered loans			5		-		-		-		-		5
General ALLL covered loans			30,866		7,202		40,948		-		3,052		82,068
ALLL - covered loans			30,871		7,202		40,948		-		3,052		82,073
Total ALLL		$	232,460	$	12,685	$	161,808	$	7,131	$	157,124	$	571,208

Loans held-in-portfolio:
Impaired non-covered loans		$	356,911	$	13,268	$	431,569	$	3,023	$	115,759	$	920,530
Non-covered loans held-in-portfolio
	excluding impaired loans		6,017,892		146,116		5,018,932		561,366		3,273,278		15,017,584
Non-covered loans held-in-portfolio			6,374,803		159,384		5,450,501		564,389		3,389,037		15,938,114
Impaired covered loans			4,487		2,419		-		-		-		6,906
Covered loans held-in-portfolio
	excluding impaired loans		1,610,294		67,917		822,986		-		34,559		2,535,756
Covered loans held-in-portfolio			1,614,781		70,336		822,986		-		34,559		2,542,662
Total loans held-in-portfolio		$	7,989,584	$	229,720	$	6,273,487	$	564,389	$	3,423,596	$	18,480,776

At December 31, 2014
U.S. Mainland


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Specific ALLL		$	-	$	-	$	273	$	-	$	365	$	638
General ALLL			9,648		1,187		2,189		2,944		13,978		29,946
Total ALLL		$	9,648	$	1,187	$	2,462	$	2,944	$	14,343	$	30,584

Loans held-in-portfolio:
Impaired loans		$	250	$	-	$	4,255	$	-	$	1,973	$	6,478
Loans held-in-portfolio,
	excluding impaired loans		1,759,214		92,436		1,048,130		80,818		479,261		3,459,859
Total loans held-in-portfolio		$	1,759,464	$	92,436	$	1,052,385	$	80,818	$	481,234	$	3,466,337

At December 31, 2014
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Legacy		Leasing		Consumer		Total
Allowance for credit losses:
Specific ALLL non-covered loans		$	64,736	$	363	$	46,111	$	-	$	770	$	28,161	$	140,141
General ALLL non-covered loans			146,501		6,307		77,211		2,944		6,361		140,254		379,578
ALLL - non-covered loans			211,237		6,670		123,322		2,944		7,131		168,415		519,719
Specific ALLL covered loans			5		-		-		-		-		-		5
General ALLL covered loans			30,866		7,202		40,948		-		-		3,052		82,068
ALLL - covered loans			30,871		7,202		40,948		-		-		3,052		82,073
Total ALLL		$	242,108	$	13,872	$	164,270	$	2,944	$	7,131	$	171,467	$	601,792

Loans held-in-portfolio:
Impaired non-covered loans		$	357,161	$	13,268	$	435,824	$	-	$	3,023	$	117,732	$	927,008
Non-covered loans held-in-portfolio
	excluding impaired loans		7,777,106		238,552		6,067,062		80,818		561,366		3,752,539		18,477,443
Non-covered loans held-in-portfolio			8,134,267		251,820		6,502,886		80,818		564,389		3,870,271		19,404,451
Impaired covered loans			4,487		2,419		-		-		-		-		6,906
Covered loans held-in-portfolio
	excluding impaired loans		1,610,294		67,917		822,986		-		-		34,559		2,535,756
Covered loans held-in-portfolio			1,614,781		70,336		822,986		-		-		34,559		2,542,662
Total loans held-in-portfolio		$	9,749,048	$	322,156	$	7,325,872	$	80,818	$	564,389	$	3,904,830	$	21,947,113

At December 31, 2013
Puerto Rico


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses:
Specific ALLL non-covered loans		$	16,409	$	177	$	38,034	$	1,053	$	29,920	$	85,593
General ALLL non-covered loans			111,741		4,918		92,296		9,569		122,658		341,182
ALLL - non-covered loans			128,150		5,095		130,330		10,622		152,578		426,775
Specific ALLL covered loans			153		140		-		-		-		293
General ALLL covered loans			42,045		19,351		36,006		-		4,397		101,799
ALLL - covered loans			42,198		19,491		36,006		-		4,397		102,092
Total ALLL		$	170,348	$	24,586	$	166,336	$	10,622	$	156,975	$	528,867

Loans held-in-portfolio:
Impaired non-covered loans		$	245,380	$	16,823	$	399,347	$	2,893	$	125,342	$	789,785
Non-covered loans held-in-portfolio
	excluding impaired loans		6,220,210		144,348		5,001,332		540,868		3,191,296		15,098,054
Non-covered loans held-in-portfolio			6,465,590		161,171		5,400,679		543,761		3,316,638		15,887,839
Impaired covered loans			20,945		-		-		-		-		20,945
Covered loans held-in-portfolio
	excluding impaired loans		1,791,859		190,127		934,373		-		47,123		2,963,482
Covered loans held-in-portfolio			1,812,804		190,127		934,373		-		47,123		2,984,427
Total loans held-in-portfolio		$	8,278,394	$	351,298	$	6,335,052	$	543,761	$	3,363,761	$	18,872,266

At December 31, 2013
U.S. Mainland


(In thousands)		Commercial		Construction		Mortgage		Legacy		Consumer		Total
Allowance for credit losses:
Specific ALLL		$	-	$	-	$	17,633	$	-	$	280	$	17,913
General ALLL			46,832		247		8,966		13,704		24,026		93,775
Total ALLL		$	46,832	$	247	$	26,599	$	13,704	$	24,306	$	111,688

Loans held-in-portfolio:
Impaired loans		$	52,136	$	5,663	$	52,726	$	6,045	$	2,361	$	118,931
Loans held-in-portfolio,
	excluding impaired loans		3,519,459		39,250		1,228,071		205,090		613,227		5,605,097
Total loans held-in-portfolio		$	3,571,595	$	44,913	$	1,280,797	$	211,135	$	615,588	$	5,724,028

At December 31, 2013
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Legacy		Leasing		Consumer		Total
Allowance for credit losses:
Specific ALLL non-covered loans		$	16,409	$	177	$	55,667	$	-	$	1,053	$	30,200	$	103,506
General ALLL non-covered loans			158,573		5,165		101,262		13,704		9,569		146,684		434,957
ALLL - non-covered loans			174,982		5,342		156,929		13,704		10,622		176,884		538,463
Specific ALLL covered loans			153		140		-		-		-		-		293
General ALLL covered loans			42,045		19,351		36,006		-		-		4,397		101,799
ALLL - covered loans			42,198		19,491		36,006		-		-		4,397		102,092
Total ALLL		$	217,180	$	24,833	$	192,935	$	13,704	$	10,622	$	181,281	$	640,555

Loans held-in-portfolio:
Impaired non-covered loans		$	297,516	$	22,486	$	452,073	$	6,045	$	2,893	$	127,703	$	908,716
Non-covered loans held-in-portfolio
	excluding impaired loans		9,739,669		183,598		6,229,403		205,090		540,868		3,804,523		20,703,151
Non-covered loans held-in-portfolio			10,037,185		206,084		6,681,476		211,135		543,761		3,932,226		21,611,867
Impaired covered loans			20,945		-		-		-		-		-		20,945
Covered loans held-in-portfolio
	excluding impaired loans		1,791,859		190,127		934,373		-		-		47,123		2,963,482
Covered loans held-in-portfolio			1,812,804		190,127		934,373		-		-		47,123		2,984,427
Total loans held-in-portfolio		$	11,849,989	$	396,211	$	7,615,849	$	211,135	$	543,761	$	3,979,349	$	24,596,294

Impaired loans

The following tables present loans individually evaluated for impairment at December 31, 2014 and December 31, 2013.

December 31, 2014
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 real estate non-owner occupied	$	50,324	$	53,154	$	5,182	$	7,929	$	7,929	$	58,253	$	61,083	$	5,182
Commercial real estate owner occupied		114,163		127,855		16,770		14,897		16,110		129,060		143,965		16,770
Commercial and industrial		145,633		148,204		42,784		23,965		31,722		169,598		179,926		42,784
Construction		2,575		7,980		363		10,693		28,994		13,268		36,974		363
Mortgage		395,911		426,502		45,838		35,658		39,248		431,569		465,750		45,838
Leasing		3,023		3,023		770		-		-		3,023		3,023		770
Consumer:
Credit cards		41,477		41,477		8,023		-		-		41,477		41,477		8,023
Personal		71,825		71,825		19,410		-		-		71,825		71,825		19,410
Auto		1,932		1,932		262		-		-		1,932		1,932		262
Other		525		525		101		-		-		525		525		101
Covered loans		2,419		7,500		5		4,487		4,487		6,906		11,987		5
Total Puerto Rico	$	829,807	$	889,977	$	139,508	$	97,629	$	128,490	$	927,436	$	1,018,467	$	139,508

December 31, 2014
U.S. mainland [1]
	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 and industrial	$	-	$	-	$	-	$	250	$	250	$	250	$	250	$	-
Mortgage		3,049		3,443		273		1,206		2,306		4,255		5,749		273
Consumer:
HELOCs		1,095		1,095		362		791		791		1,886		1,886		362
Other		3		3		3		84		-		87		3		3
Total U.S. mainland	$	4,147	$	4,541	$	638	$	2,331	$	3,347	$	6,478	$	7,888	$	638
[1] Excludes impaired loans from discontinued operations.

December 31, 2014
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 real estate non-owner occupied	$	50,324	$	53,154	$	5,182	$	7,929	$	7,929	$	58,253	$	61,083	$	5,182
Commercial real estate owner occupied		114,163		127,855		16,770		14,897		16,110		129,060		143,965		16,770
Commercial and industrial		145,633		148,204		42,784		24,215		31,972		169,848		180,176		42,784
Construction		2,575		7,980		363		10,693		28,994		13,268		36,974		363
Mortgage		398,960		429,945		46,111		36,864		41,554		435,824		471,499		46,111
Leasing		3,023		3,023		770		-		-		3,023		3,023		770
Consumer:
Credit cards		41,477		41,477		8,023		-		-		41,477		41,477		8,023
HELOCs		1,095		1,095		362		791		791		1,886		1,886		362
Personal		71,825		71,825		19,410		-		-		71,825		71,825		19,410
Auto		1,932		1,932		262		-		-		1,932		1,932		262
Other		528		528		104		84		-		612		528		104
Covered loans		2,419		7,500		5		4,487		4,487		6,906		11,987		5
Total Popular, Inc.	$	833,954	$	894,518	$	140,146	$	99,960	$	131,837	$	933,914	$	1,026,355	$	140,146

December 31, 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	$	-	$	-	$	-	$	3,405	$	6,942	$	3,405	$	6,942	$	-
Commercial real estate non-owner occupied		19,120		19,407		2,368		47,245		55,397		66,365		74,804		2,368
Commercial real estate owner occupied		55,826		74,420		6,473		33,749		47,545		89,575		121,965		6,473
Commercial and industrial		30,370		33,152		7,568		55,665		68,141		86,035		101,293		7,568
Construction		2,324		9,047		177		14,499		36,951		16,823		45,998		177
Mortgage		358,437		376,393		38,034		40,910		45,181		399,347		421,574		38,034
Leasing		2,893		2,893		1,053		-		-		2,893		2,893		1,053
Consumer:
Credit cards		45,015		45,015		8,344		-		-		45,015		45,015		8,344
Personal		78,475		78,475		21,313		-		-		78,475		78,475		21,313
Auto		1,354		1,354		171		-		-		1,354		1,354		171
Other		498		498		92		-		-		498		498		92
Covered loans		12,837		17,538		293		8,108		10,063		20,945		27,601		293
Total Puerto Rico	$	607,149	$	658,192	$	85,886	$	203,581	$	270,220	$	810,730	$	928,412	$	85,886

December 31, 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	$	-	$	-	$	-	$	7,668	$	10,870	$	7,668	$	10,870	$	-
Commercial real estate non-owner occupied		-		-		-		27,016		37,393		27,016		37,393		-
Commercial real estate owner occupied		-		-		-		15,624		19,910		15,624		19,910		-
Commercial and industrial		-		-		-		1,828		1,828		1,828		1,828		-
Construction		-		-		-		5,663		5,663		5,663		5,663		-
Mortgage		46,192		50,570		17,633		6,534		8,513		52,726		59,083		17,633
Legacy		-		-		-		6,045		8,715		6,045		8,715		-
Consumer:
HELOCs		-		-		-		198		198		198		198		-
Auto		-		-		-		88		88		88		88		-
Other		2,075		2,075		280		-		-		2,075		2,075		280
Total U.S. mainland	$	48,267	$	52,645	$	17,913	$	70,664	$	93,178	$	118,931	$	145,823	$	17,913

December 31, 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	$	-	$	-	$	-	$	11,073	$	17,812	$	11,073	$	17,812	$	-
Commercial real estate non-owner occupied		19,120		19,407		2,368		74,261		92,790		93,381		112,197		2,368
Commercial real estate owner occupied		55,826		74,420		6,473		49,373		67,455		105,199		141,875		6,473
Commercial and industrial		30,370		33,152		7,568		57,493		69,969		87,863		103,121		7,568
Construction		2,324		9,047		177		20,162		42,614		22,486		51,661		177
Mortgage		404,629		426,963		55,667		47,444		53,694		452,073		480,657		55,667
Legacy		-		-		-		6,045		8,715		6,045		8,715		-
Leasing		2,893		2,893		1,053		-		-		2,893		2,893		1,053
Consumer:
Credit cards		45,015		45,015		8,344		-		-		45,015		45,015		8,344
HELOCs		-		-		-		198		198		198		198		-
Personal		78,475		78,475		21,313		-		-		78,475		78,475		21,313
Auto		1,354		1,354		171		88		88		1,442		1,442		171
Other		2,573		2,573		372		-		-		2,573		2,573		372
Covered loans		12,837		17,538		293		8,108		10,063		20,945		27,601		293
Total Popular, Inc.	$	655,416	$	710,837	$	103,799	$	274,245	$	363,398	$	929,661	$	1,074,235	$	103,799

The following tables present the average recorded investment and interest income recognized on impaired loans for the years ended December 31, 2014 and 2013.

For the year ended December 31, 2014
	Puerto Rico				U.S. Mainland [1]				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	$	1,539	$	-	$	2,657	$	-	$	4,196	$	-
Commercial real estate non-owner occupied		70,154		2,719		9,264		-		79,418		2,719
Commercial real estate owner occupied		114,893		3,994		5,778		-		120,671		3,994
Commercial and industrial		130,940		7,852		955		-		131,895		7,852
Construction		18,418		-		1,133		-		19,551		-
Mortgage		415,188		19,319		33,686		1,187		448,874		20,506
Legacy		-		-		2,920		-		2,920		-
Leasing		2,747		-		-		-		2,747		-
Consumer:
Credit cards		42,345		-		-		-		42,345		-
HELOCs		-		-		1,768		-		1,768		-
Personal		74,593		-		-		-		74,593		-
Auto		1,884		-		52		-		1,936		-
Other		748		-		452		-		1,200		-
Covered loans		8,763		469		-		-		8,763		469
Total Popular, Inc.	$	882,212	$	34,353	$	58,665	$	1,187	$	940,877	$	35,540
[1] Excludes impaired loans from discontinued operations.

For the year ended December 31, 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	$	8,356	$	259	$	7,493	$	120	$	15,849	$	379
Commercial real estate non-owner occupied		58,773		2,225		36,688		223		95,461		2,448
Commercial real estate owner occupied		125,091		2,956		19,024		150		144,115		3,106
Commercial and industrial		102,408		4,206		2,328		15		104,736		4,221
Construction		31,491		-		5,821		-		37,312		-
Mortgage		461,534		25,610		53,137		1,955		514,671		27,565
Legacy		-		-		12,957		-		12,957		-
Leasing		3,822		-		-		-		3,822		-
Consumer:
Credit cards		40,044		-		-		-		40,044		-
HELOCs		-		-		199		-		199		-
Personal		82,687		-		-		-		82,687		-
Auto		1,003		-		89		-		1,092		-
Other		417		-		2,260		-		2,677		-
Covered loans		42,791		1,245		-		-		42,791		1,245
Total Popular, Inc.	$	958,417	$	36,501	$	139,996	$	2,463	$	1,098,413	$	38,964

Modifications

Troubled debt restructurings related to non-covered loan portfolios amounted to $ 1.1 billion at December 31, 2014 (December 31, 2013 - $ 1.0 billion). The amount of outstanding commitments to lend additional funds to debtors owing receivables whose terms have been modified in troubled debt restructurings amounted $5 million related to the commercial loan portfolio and $1 million related to the construction loan portfolio at December 31, 2014 (December 31, 2013 - $3 million and $0, 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; and (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, the 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 tends 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 Subtopic 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. The Corporation may also measure 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 December 31, 2014 and December 31, 2013.

	Popular, Inc.
	Non-Covered Loans
	December 31, 2014 [1]						December 31, 2013
(In thousands)		Accruing		Non-Accruing		Total		Accruing		Non-Accruing		Total
Commercial	$	153,380	$	150,069	$	303,449	$	109,462	$	80,140	$	189,602
Construction		453		5,488		5,941		425		10,865		11,290
Legacy		-		-		-		-		949		949
Mortgage		556,346		116,465		672,811		535,357		82,786		618,143
Leases		775		2,248		3,023		270		2,623		2,893
Consumer		107,530		14,848		122,378		116,719		10,741		127,460
Total	$	818,484	$	289,118	$	1,107,602	$	762,233	$	188,104	$	950,337
[1] Excludes TDRs from discontinued operations.

	Popular, Inc.
	Covered Loans
	December 31, 2014						December 31, 2013
(In thousands)		Accruing		Non-Accruing		Total		Accruing		Non-Accruing		Total
Commercial	$	1,689	$	3,257	$	4,946	$	7,389	$	10,017	$	17,406
Construction		-		2,419		2,419		-		3,464		3,464
Mortgage		3,629		3,990		7,619		146		189		335
Consumer		26		5		31		221		22		243
Total	$	5,344	$	9,671	$	15,015	$	7,756	$	13,692	$	21,448

The following tables present the loan count by type of modification for those loans modified in a TDR during the years ended December 31, 2014 and 2013.

Puerto Rico
For the year ended December 31, 2014
	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	5	8	-	-
Commercial real estate owner occupied	25	12	-	-
Commercial and industrial	37	43	-	-
Construction	-	4	-	-
Mortgage	52	61	413	142
Leasing	-	15	48	-
Consumer:
Credit cards	1,070	-	-	653
Personal	955	71	-	6
Auto	-	13	5	-
Other	103	-	-	2
Total	2,247	227	466	803

U.S. mainland
For the year ended December 31, 2014
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Mortgage	-	-	18	-
Consumer:
HELOCs	5	-	-	-
Total	5	-	18	-

Popular, Inc.
For the year ended December 31, 2014
	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	5	8	-	-
Commercial real estate owner occupied	25	12	-	-
Commercial and industrial	37	43	-	-
Construction	-	4	-	-
Mortgage	52	61	431	142
Leasing	-	15	48	-
Consumer:
Credit cards	1,070	-	-	653
HELOCs	5	-	-	-
Personal	955	71	-	6
Auto	-	13	5	-
Other	103	-	-	2
Total	2,252	227	484	803

Puerto Rico
For the year ended December 31, 2013
	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	5	5	-	-
Commercial real estate owner occupied	6	4	-	45
Commercial and industrial	23	13	-	10
Mortgage	22	42	341	17
Leasing	-	22	23	-
Consumer:
Credit cards	1,107	-	-	989
Personal	923	22	-	6
Auto	-	11	-	-
Other	71	-	-	4
Total	2,157	119	364	1,071

U.S. mainland
For the year ended December 31, 2013
	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	4	-
Commercial real estate owner occupied	-	1	1	-
Commercial and industrial	-	1	-	-
Mortgage	1	1	26	-
Consumer:
Total	1	5	31	-

Popular, Inc.
For the year ended December 31, 2013
	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	5	7	4	-
Commercial real estate owner occupied	6	5	1	45
Commercial and industrial	23	14	-	10
Mortgage	23	43	367	17
Leasing	-	22	23	-
Consumer:
Credit cards	1,107	-	-	989
Personal	923	22	-	6
Auto	-	11	-	-
Other	71	-	-	4
Total	2,158	124	395	1,071

The following tables present by class, quantitative information related to loans modified as TDRs during the years ended December 31, 2014 and 2013.

Puerto Rico
For the year ended December 31, 2014
(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	13	$	17,565	$	17,645	$	(865)
Commercial real estate owner occupied	37		48,403		47,754		2,002
Commercial and industrial	80		130,818		129,561		6,728
Construction	4		11,358		11,485		(570)
Mortgage	668		98,771		98,031		4,292
Leasing	63		1,628		1,632		361
Consumer:
Credit cards	1,723		14,207		16,193		2,584
Personal	1,032		17,814		17,881		3,935
Auto	18		278		289		16
Other	105		325		319		57
Total	3,743	$	341,167	$	340,790	$	18,540

U.S. mainland
For the year ended December 31, 2014
(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
Mortgage	18	$	2,342	$	2,603	$	364
Consumer:
HELOCs	5		251		250		67
Total	23	$	2,593	$	2,853	$	431
Excludes TDRs from discontinued operations.

Popular, Inc.
For the year ended December 31, 2014
(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	13	$	17,565	$	17,645	$	(865)
Commercial real estate owner occupied	37		48,403		47,754		2,002
Commercial and industrial	80		130,818		129,561		6,728
Construction	4		11,358		11,485		(570)
Mortgage	686		101,113		100,634		4,656
Leasing	63		1,628		1,632		361
Consumer:
Credit cards	1,723		14,207		16,193		2,584
HELOCs	5		251		250		67
Personal	1,032		17,814		17,881		3,935
Auto	18		278		289		16
Other	105		325		319		57
Total	3,766	$	343,760	$	343,643	$	18,971
Excludes TDRs from discontinued operations.

Puerto Rico
For the year ended December 31, 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	10	$	10,729	$	9,194	$	(7)
Commercial real estate owner occupied	55		29,975		25,629		(1,047)
Commercial and industrial	46		15,947		14,855		(253)
Mortgage	422		72,899		76,839		8,869
Leasing	45		928		900		271
Consumer:
Credit cards	2,096		16,622		19,810		2,380
Personal	951		15,474		15,507		3,864
Auto	11		122		199		15
Other	75		267		264		36
Total	3,711	$	162,963	$	163,197	$	14,128

U.S. mainland
For the year ended December 31, 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	6	$	4,798	$	4,552	$	(65)
Commercial real estate owner occupied	2		1,263		836		(144)
Commercial and industrial	1		2,125		1,060		(216)
Mortgage	28		3,240		3,395		1,099
Consumer:
Total	37	$	11,426	$	9,843	$	674

Popular, Inc.
For the year ended December 31, 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	16	$	15,527	$	13,746	$	(72)
Commercial real estate owner occupied	57		31,238		26,465		(1,191)
Commercial and industrial	47		18,072		15,915		(469)
Mortgage	450		76,139		80,234		9,968
Leasing	45		928		900		271
Consumer:
Credit cards	2,096		16,622		19,810		2,380
Personal	951		15,474		15,507		3,864
Auto	11		122		199		15
Other	75		267		264		36
Total	3,748	$	174,389	$	173,040	$	14,802

During the years ended December 31, 2014 and 2013, six loans with an aggregate unpaid principal balance of $10.1 million and six loans of $165 million, respectively, were restructured into multiple notes (“Note A / B split”). The Corporation recorded $2.1 million charge-offs as part of those loan restructurings during the year ended December 31, 2014 (December 31, 2013 - $26.6 million). The restructuring of those loans was made after analyzing the borrowers' capacity to repay the debt, collateral and ability to perform under the modified terms. The recorded investment on those commercial TDRs amounted to approximately $2.9 million at December 31, 2014 (December 31, 2013 - $130 million) with a related allowance for loan losses amounting to approximately $166 thousand (December 31, 2013 - $64 million).

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 December 31, 2014 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 year ended December 31, 2014
(Dollars In thousands)	Loan count	Recorded investment as of first default date
Commercial real estate non-owner occupied	3	$	433
Commercial real estate owner occupied	5		1,191
Commercial and industrial	5		609
Construction	1		952
Mortgage	125		22,819
Leasing	8		72
Consumer:
Credit cards	465		4,176
Personal	101		1,331
Auto	14		255
Total [1]	727	$	31,838
[1] Excludes loans for which the Corporation has entered into liquidation agreements with borrowers and guarantors and is accepting payments which differ from the contractual payment schedule. The Corporation considers these as defaulted loans and does not intent to return them to accrual status.

U.S. mainland
Defaulted during the year ended December 31, 2014
(Dollars In thousands)	Loan count	Recorded investment as of first default date
Commercial real estate non-owner occupied	1	$	907
Mortgage	1		110
Total	2	$	1,017

Popular, Inc.
Defaulted during the year ended December 31, 2014
(Dollars In thousands)	Loan count	Recorded investment as of first default date
Commercial real estate non-owner occupied	4	$	1,340
Commercial real estate owner occupied	5		1,191
Commercial and industrial	5		609
Construction	1		952
Mortgage	126		22,929
Leasing	8		72
Consumer:
Credit cards	465		4,176
Personal	101		1,331
Auto	14		255
Total	729	$	32,855

Puerto Rico
Defaulted during the year ended December 31, 2013
(Dollars In thousands)	Loan count	Recorded investment as of first default date
Commercial real estate owner occupied	5	$	5,733
Commercial and industrial	6		1,838
Mortgage	208		32,734
Leasing	18		279
Consumer:
Credit cards	623		5,955
Personal	134		1,862
Auto	6		145
Other	2		21
Total [1]	1,002	$	48,567
[1] Exclude loans for which the Corporation has entered into liquidation agreements with borrowers and guarantors and is accepting payments which differ from the contractual payment schedule. The Corporation considers these as defaulted loans and does not intent to return them to accrual status.

U.S. mainland
Defaulted during the year ended December 31, 2013
(Dollars In thousands)	Loan count	Recorded investment as of first default date
Commercial real estate non-owner occupied	3	$	2,554
Consumer:
Total	3	$	2,554

Popular, Inc.
Defaulted during the year ended December 31, 2013
(Dollars In thousands)	Loan count	Recorded investment as of first default date
Commercial real estate non-owner occupied	3	$	2,554
Commercial real estate owner occupied	5		5,733
Commercial and industrial	6		1,838
Mortgage	208		32,734
Leasing	18		279
Consumer:
Credit cards	623		5,955
Personal	134		1,862
Auto	6		145
Other	2		21
Total	1,005	$	51,121

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 Corporation has defined a dual risk rating system to assign a rating to all credit exposures, particularly for the commercial and construction loan portfolios. Risk ratings in the aggregate provide the Corporation's management the asset quality profile for the loan portfolio. The dual risk rating system provides for the assignment of ratings at the obligor level based on the financial condition of the borrower, and at the credit facility level based on the collateral supporting the transaction. The Corporation's consumer and mortgage loans are not subject to the dual risk rating system. Consumer and mortgage loans are classified substandard or loss based on their delinquency status. All other consumer and mortgage loans that are not classified as substandard or loss would be considered “unrated”.

The Corporation's obligor risk rating scales range from rating 1 (Excellent) to rating 14 (Loss). The obligor risk rating reflects the risk of payment default of a borrower in the ordinary course of business.

Pass Credit Classifications:

Pass (Scales 1 through 8) – Loans classified as pass have a well defined primary source of repayment very likely to be sufficient, with no apparent risk, strong financial position, minimal operating risk, profitability, liquidity and capitalization better than industry standards.

Watch (Scale 9) – Loans classified as watch have acceptable business credit, but borrower's operations, cash flow or financial condition evidence more than average risk, requires above average levels of supervision and attention from Loan Officers.

Special Mention (Scale 10) - Loans classified as special mention have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Corporation's credit position at some future date.

Adversely Classified Classifications:

Substandard (Scales 11 and 12) - Loans classified as substandard are deemed to be inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans classified as such have well-defined weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful (Scale 13) - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the additional characteristic that the weaknesses make the collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss (Scale 14) - Uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be effected in the future.

Risk ratings scales 10 through 14 conform to regulatory ratings. The assignment of the obligor risk rating is based on relevant information about the ability of borrowers to service their debts such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.

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

Loans classified as pass credits are excluded from the scope of the review process described above until: (a) they become past due; (b) management becomes aware of deterioration in the creditworthiness of the borrower; or (c) the customer contacts the Corporation for a modification. In these circumstances, the credit facilities are specifically evaluated to assign the appropriate risk rating classification.

The Corporation has a Credit Process Review Group within the Corporate Credit Risk Management Division (“CCRMD”), which performs annual comprehensive credit process reviews of several middle markets, construction, asset-based and corporate banking lending groups in BPPR. This group evaluates the credit risk profile of each originating unit along with each unit's credit administration effectiveness, including the assessment of the risk rating representative of the current credit quality of the loans, and the evaluation of collateral documentation. The monitoring performed by this group contributes to assess compliance with credit policies and underwriting standards, determine the current level of credit risk, evaluate the effectiveness of the credit management process and identify control deficiencies that may arise in the credit-granting process. Based on its findings, the Credit Process Review Group recommends corrective actions, if necessary, that help in maintaining a sound credit process. CCRMD has contracted an outside loan review firm to perform the credit process reviews for the portfolios of commercial and construction loans in the U.S. mainland operations. The CCRMD participates in defining the review plan with the outside loan review firm and actively participates in the discussions of the results of the loan reviews with the business units. The CCRMD may periodically review the work performed by the outside loan review firm. CCRMD reports the results of the credit process reviews to the Risk Management Committee of the Corporation's Board of Directors.

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 December 31, 2014 and 2013.

December 31, 2014
				Special										Pass/
(In thousands)		Watch		Mention		Substandard		Doubtful		Loss		Sub-total		Unrated		Total
Puerto Rico^[1]
Commercial multi-family		$	2,306	$	5,021	$	3,186	$	-	$	-	$	10,513	$	69,564	$	80,077
Commercial real estate non-owner occupied			171,771		144,104		169,900		-		-		485,775		1,527,804		2,013,579
Commercial real estate owner occupied			212,236		144,536		306,014		3,595		-		666,381		806,981		1,473,362
Commercial and industrial			421,332		367,834		272,880		849		255		1,063,150		1,744,635		2,807,785
	Total Commercial		807,645		661,495		751,980		4,444		255		2,225,819		4,148,984		6,374,803
Construction			4,612		6,204		16,908		-		-		27,724		131,660		159,384
Mortgage			-		-		218,680		-		-		218,680		5,231,821		5,450,501
Leasing			-		-		3,102		-		-		3,102		561,287		564,389
Consumer:
	Credit cards		-		-		21,070		-		-		21,070		1,119,094		1,140,164
	HELOCs		-		-		8,186		-		7		8,193		5,207		13,400
	Personal		-		-		8,380		-		77		8,457		1,254,076		1,262,533
	Auto		-		-		11,348		-		40		11,388		755,908		767,296
	Other		-		-		2,130		-		1,735		3,865		201,779		205,644
	Total Consumer		-		-		51,114		-		1,859		52,973		3,336,064		3,389,037
Total Puerto Rico		$	812,257	$	667,699	$	1,041,784	$	4,444	$	2,114	$	2,528,298	$	13,409,816	$	15,938,114
U.S. mainland^[2]
Commercial multi-family		$	11,283	$	6,818	$	13,653	$	-	$	-	$	31,754	$	375,449	$	407,203
Commercial real estate non-owner occupied			17,424		8,745		13,446		-		-		39,615		472,952		512,567
Commercial real estate owner occupied			24,284		4,707		4,672		-		-		33,663		160,242		193,905
Commercial and industrial			5,357		2,548		7,988		-		-		15,893		629,896		645,789
	Total Commercial		58,348		22,818		39,759		-		-		120,925		1,638,539		1,759,464
Construction			-		-		-		-		-		-		92,436		92,436
Mortgage			-		-		23,100		-		-		23,100		1,029,285		1,052,385
Legacy			7,902		2,491		9,204		-		-		19,597		61,221		80,818
Consumer:
	Credit cards		-		-		-		-		-		-		15,065		15,065
	HELOCs		-		-		2,457		-		1,632		4,089		348,673		352,762
	Personal		-		-		571		-		835		1,406		111,513		112,919
	Auto		-		-		-		-		-		-		73		73
	Other		-		-		7		-		-		7		408		415
	Total Consumer		-		-		3,035		-		2,467		5,502		475,732		481,234
Total U.S. mainland		$	66,250	$	25,309	$	75,098	$	-	$	2,467	$	169,124	$	3,297,213	$	3,466,337
Popular, Inc.
Commercial multi-family		$	13,589	$	11,839	$	16,839	$	-	$	-	$	42,267	$	445,013	$	487,280
Commercial real estate non-owner occupied			189,195		152,849		183,346		-		-		525,390		2,000,756		2,526,146
Commercial real estate owner occupied			236,520		149,243		310,686		3,595		-		700,044		967,223		1,667,267
Commercial and industrial			426,689		370,382		280,868		849		255		1,079,043		2,374,531		3,453,574
	Total Commercial		865,993		684,313		791,739		4,444		255		2,346,744		5,787,523		8,134,267
Construction			4,612		6,204		16,908		-		-		27,724		224,096		251,820
Mortgage			-		-		241,780		-		-		241,780		6,261,106		6,502,886
Legacy			7,902		2,491		9,204		-		-		19,597		61,221		80,818
Leasing			-		-		3,102		-		-		3,102		561,287		564,389
Consumer:
	Credit cards		-		-		21,070		-		-		21,070		1,134,159		1,155,229
	HELOCs		-		-		10,643		-		1,639		12,282		353,880		366,162
	Personal		-		-		8,951		-		912		9,863		1,365,589		1,375,452
	Auto		-		-		11,348		-		40		11,388		755,981		767,369
	Other		-		-		2,137		-		1,735		3,872		202,187		206,059
	Total Consumer		-		-		54,149		-		4,326		58,475		3,811,796		3,870,271
Total Popular, Inc.		$	878,507	$	693,008	$	1,116,882	$	4,444	$	4,581	$	2,697,422	$	16,707,029	$	19,404,451

The following table presents the weighted average obligor risk rating at December 31, 2014 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								5.63
Commercial real estate non-owner occupied							11.20								6.83
Commercial real estate owner occupied							11.28								6.96
Commercial and industrial							11.48								6.89
	Total Commercial						11.33								6.87
Construction							11.82								7.43

U.S. mainland:^[2]						Substandard									Pass
Commercial multi-family							11.00								7.24
Commercial real estate non-owner occupied							11.00								6.83
Commercial real estate owner occupied							11.17								7.04
Commercial and industrial							11.09								6.29
	Total Commercial						11.04								6.74
Construction							-								7.76
Legacy							11.11								7.70

[1]	Excludes covered loans acquired in the Westernbank FDIC-assisted transaction.
[2]	Excludes discontinued operations.

December 31, 2013
				Special										Pass/
(In thousands)		Watch		Mention		Substandard		Doubtful		Loss		Sub-total		Unrated		Total
Puerto Rico^[1]
Commercial multi-family		$	2,477	$	4,453	$	2,343	$	-	$	-	$	9,273	$	73,130	$	82,403
Commercial real estate non-owner occupied			230,847		156,189		115,435		-		112		502,583		1,361,635		1,864,218
Commercial real estate owner occupied			231,705		134,577		305,565		-		-		671,847		934,656		1,606,503
Commercial and industrial			727,647		192,404		214,531		68		446		1,135,096		1,777,370		2,912,466
	Total Commercial		1,192,676		487,623		637,874		68		558		2,318,799		4,146,791		6,465,590
Construction			6,895		1,788		25,722		2,250		-		36,655		124,516		161,171
Mortgage			-		-		169,239		-		-		169,239		5,231,440		5,400,679
Leasing			-		-		3,495		-		-		3,495		540,266		543,761
Consumer:
	Credit cards		-		-		21,044		-		-		21,044		1,148,577		1,169,621
	HELOCs		-		-		665		-		2,426		3,091		12,087		15,178
	Personal		-		-		7,483		-		141		7,624		1,206,260		1,213,884
	Auto		-		-		10,407		-		155		10,562		688,929		699,491
	Other		-		-		2,019		-		3,531		5,550		212,914		218,464
	Total Consumer		-		-		41,618		-		6,253		47,871		3,268,767		3,316,638
Total Puerto Rico		$	1,199,571	$	489,411	$	877,948	$	2,318	$	6,811	$	2,576,059	$	13,311,780	$	15,887,839
U.S. mainland
Commercial multi-family		$	73,481	$	11,459	$	62,346	$	-	$	-	$	147,286	$	946,248	$	1,093,534
Commercial real estate non-owner occupied			75,094		29,442		160,001		-		-		264,537		841,750		1,106,287
Commercial real estate owner occupied			56,515		15,845		75,508		-		-		147,868		412,174		560,042
Commercial and industrial			11,657		11,822		46,307		-		-		69,786		741,945		811,731
	Total Commercial		216,747		68,568		344,162		-		-		629,477		2,942,117		3,571,594
Construction			-		-		20,885		-		-		20,885		24,028		44,913
Mortgage			-		-		26,292		-		-		26,292		1,254,505		1,280,797
Legacy			14,948		11,593		42,622		-		-		69,163		141,972		211,135
Consumer:
	Credit cards		-		-		486		-		-		486		15,165		15,651
	HELOCs		-		-		3,317		-		5,315		8,632		454,401		463,033
	Personal		-		-		1,005		-		569		1,574		133,661		135,235
	Auto		-		-		-		-		2		2		487		489
	Other		-		-		20		-		1		21		1,159		1,180
	Total Consumer		-		-		4,828		-		5,887		10,715		604,873		615,588
Total U.S. mainland		$	231,695	$	80,161	$	438,789	$	-	$	5,887	$	756,532	$	4,967,495	$	5,724,027
Popular, Inc.
Commercial multi-family		$	75,958	$	15,912	$	64,689	$	-	$	-	$	156,559	$	1,019,378	$	1,175,937
Commercial real estate non-owner occupied			305,941		185,631		275,436		-		112		767,120		2,203,385		2,970,505
Commercial real estate owner occupied			288,220		150,422		381,073		-		-		819,715		1,346,830		2,166,545
Commercial and industrial			739,304		204,226		260,838		68		446		1,204,882		2,519,315		3,724,197
	Total Commercial		1,409,423		556,191		982,036		68		558		2,948,276		7,088,908		10,037,184
Construction			6,895		1,788		46,607		2,250		-		57,540		148,544		206,084
Mortgage			-		-		195,531		-		-		195,531		6,485,945		6,681,476
Legacy			14,948		11,593		42,622		-		-		69,163		141,972		211,135
Leasing			-		-		3,495		-		-		3,495		540,266		543,761
Consumer:
	Credit cards		-		-		21,530		-		-		21,530		1,163,742		1,185,272
	HELOCs		-		-		3,982		-		7,741		11,723		466,488		478,211
	Personal		-		-		8,488		-		710		9,198		1,339,921		1,349,119
	Auto		-		-		10,407		-		157		10,564		689,416		699,980
	Other		-		-		2,039		-		3,532		5,571		214,073		219,644
	Total Consumer		-		-		46,446		-		12,140		58,586		3,873,640		3,932,226
Total Popular, Inc.		$	1,431,266	$	569,572	$	1,316,737	$	2,318	$	12,698	$	3,332,591	$	18,279,275	$	21,611,866

The following table presents the weighted average obligor risk rating at December 31, 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							11.33								5.31
Commercial real estate non-owner occupied							11.38								6.73
Commercial real estate owner occupied							11.31								6.89
Commercial and industrial							11.34								6.63
	Total Commercial						11.33								6.71
Construction							11.63								7.86

U.S. mainland:						Substandard									Pass
Commercial multi-family							11.34								7.08
Commercial real estate non-owner occupied							11.27								6.89
Commercial real estate owner occupied							11.31								7.04
Commercial and industrial							11.09								6.53
	Total Commercial						11.27								6.89
Construction							11.27								7.64
Legacy							11.24								7.72

[1]

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