UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, 2016

Commission File Number: 001-34084

POPULAR, INC.

(Exact name of registrant as specified in its charter)

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

(787) 765-9800

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value, 103,704,084 shares outstanding as of May 4, 2016.

POPULAR, INC.

INDEX

	Page
Part I – Financial Information
Item 1. Financial Statements
Unaudited Consolidated Statements of Financial Condition at March  31, 2016 and December 31, 2015		5
Unaudited Consolidated Statements of Operations for the quarters ended March 31, 2016 and 2015		6
Unaudited Consolidated Statements of Comprehensive Income for the quarters ended March 31, 2016 and 2015		7
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the quarters ended March 31, 2016 and 2015		8
Unaudited Consolidated Statements of Cash Flows for the quarters ended March 31, 2016 and 2015		9
Notes to Unaudited Consolidated Financial Statements		10
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		121
Item 3. Quantitative and Qualitative Disclosures about Market Risk		170
Item 4. Controls and Procedures		170
Part II – Other Information
Item 1. Legal Proceedings		171
Item 1A. Risk Factors		171
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		172
Item 6. Exhibits		173
Signatures		174

2

Forward-Looking Information

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

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

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

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

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

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

• changes in federal bank regulatory and supervisory policies, including required levels of capital and the impact of proposed capital standards on our capital ratios;

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

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

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

• the impact of the Commonwealth of Puerto Rico’s fiscal crisis, and the measures taken and to be taken by the Puerto Rico Government, on the economy and our business, and the ability of the Government to manage this crisis in an orderly manner;

• the performance of the stock and bond markets;

• competition in the financial services industry;

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

• possible legislative, tax or regulatory changes; and

• risks related to the Doral Transaction, including (a) our ability to maintain customer relationships and (b) risks associated with the limited amount of diligence able to be conducted by a buyer in an FDIC transaction.

Other possible events or factors that could cause results or performance to differ materially from those expressed in these forward-looking statements include the following:

• negative economic conditions that adversely affect housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of non-performing assets, charge-offs and provision expense;

• risks associated with maintaining customer relationships from our acquisition of certain assets and deposits (other than certain brokered deposits) of Doral Bank from the FDIC as receiver;

• changes in interest rates and market liquidity which may reduce interest margins, impact funding sources and affect our ability to originate and distribute financial products in the primary and secondary markets;

3

• changes in market rates and prices which may adversely impact the value of financial assets and liabilities;

• liabilities resulting from litigation and regulatory investigations;

• changes in accounting standards, rules and interpretations;

• our ability to grow our core businesses;

• decisions to downsize, sell or close units or otherwise change our business mix; and

• management’s ability to identify and manage these and other risks.

Moreover, the outcome of legal proceedings, as discussed in “Part II, Item I. Legal Proceedings,” is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges, juries and arbitrators. Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015 as well as “Part II, Item 1A” of this Form 10-Q for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

All forward-looking statements included in this Form 10-Q are based upon information available to Popular as of the date of this Form 10-Q, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

4

POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

	March 31,			December 31,
(In thousands, except share information)	2016			2015
Assets:
Cash and due from banks	$	409,623		$	363,674
Money market investments:
Securities purchased under agreements to resell		97,830			96,338
Time deposits with other banks		1,819,630			2,083,754
Total money market investments		1,917,460			2,180,092
Trading account securities, at fair value:
Pledged securities with creditors’ right to repledge		20,085			19,506
Other trading securities		51,199			52,153
Investment securities available-for-sale, at fair value:
Pledged securities with creditors’ right to repledge		734,168			739,045
Other investment securities available-for-sale		5,915,662			5,323,947
Investment securities held-to-maturity, at amortized cost (fair value 2016—$80,914; 2015—$82,889)		99,216			100,903
Other investment securities, at lower of cost or realizable value (realizable value 2016—$167,111; 2015—$175,291)		164,024			172,248
Loans held-for-sale, at lower of cost or fair value		125,315			137,000
Loans held-in-portfolio:
Loans not covered under loss-sharing agreements with the FDIC		22,618,488			22,453,813
Loans covered under loss-sharing agreements with the FDIC		625,130			646,115
Less–Unearned income		110,751			107,698
Allowance for loan losses		538,472			537,111
Total loans held-in-portfolio, net		22,594,395			22,455,119
FDIC loss-share asset		219,448			310,221
Premises and equipment, net		527,493			502,611
Other real estate not covered under loss-sharing agreements with the FDIC		165,960			155,231
Other real estate covered under loss-sharing agreements with the FDIC		36,397			36,685
Accrued income receivable		120,308			124,234
Mortgage servicing assets, at fair value		205,051			211,405
Other assets		2,156,030			2,193,162
Goodwill		631,095			626,388
Other intangible assets		54,080			58,109
Total assets	$	36,147,009		$	35,761,733
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing	$	6,384,093		$	6,401,515
Interest bearing		21,142,500			20,808,208
Total deposits		27,526,593			27,209,723
Federal funds purchased and assets sold under agreements to repurchase		760,154			762,145
Other short-term borrowings		6,370			1,200
Notes payable		1,583,468			1,662,508
Other liabilities		1,018,309			1,019,018
Liabilities from discontinued operations (Refer to Note 4)		1,815			1,815
Total liabilities		30,896,709			30,656,409
Commitments and contingencies (Refer to Note 23)
Stockholders’ equity:
Preferred stock, 30,000,000 shares authorized; 2,006,391shares issued and outstanding		50,160			50,160
Common stock, $0.01 par value; 170,000,000 shares authorized;
103,895,642 shares issued (2015—103,816,185) and 103,670,005 shares outstanding (2015—103,618,976)		1,039			1,038
Surplus		4,231,233			4,229,156
Retained earnings		1,156,476			1,087,957
Treasury stock—at cost, 225,637 shares (2015—197,209)		(6,858	)		(6,101	)
Accumulated other comprehensive loss, net of tax		(181,750	)		(256,886	)
Total stockholders’ equity		5,250,300			5,105,324
Total liabilities and stockholders’ equity	$	36,147,009		$	35,761,733

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

5

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Quarters ended March 31,
(In thousands, except per share information)	2016			2015
Interest income:
Loans	$	363,197		$	355,631
Money market investments		2,863			1,446
Investment securities		36,271			30,301
Trading account securities		1,689			2,696
Total interest income		404,020			390,074
Interest expense:
Deposits		29,874			25,864
Short-term borrowings		1,861			1,734
Long-term debt		19,873			19,281
Total interest expense		51,608			46,879
Net interest income		352,412			343,195
Provision for loan losses—non-covered loans		47,940			29,711
Provision (reversal) for loan losses—covered loans		(3,105	)		10,324
Net interest income after provision for loan losses		307,577			303,160
Service charges on deposit accounts		39,862			39,017
Other service fees (Refer to Note 29)		53,382			53,626
Mortgage banking activities (Refer to Note 12)		10,551			12,852
Trading account (loss) profit		(162	)		414
Net loss on sale of loans, including valuation adjustments on loans held-for-sale		(304	)		(79	)
Adjustments (expense) to indemnity reserves on loans sold		(4,098	)		(4,526	)
FDIC loss share (expense) income (Refer to Note 30)		(3,146	)		4,139
Other operating income		15,545			9,792
Total non-interest income		111,630			115,235
Operating expenses:
Personnel costs		127,091			116,458
Net occupancy expenses		20,430			21,709
Equipment expenses		14,548			13,411
Other taxes		10,195			8,574
Professional fees		75,459			75,528
Communications		6,320			6,176
Business promotion		11,110			10,813
FDIC deposit insurance		7,370			6,398
Other real estate owned (OREO) expenses		9,141			23,069
Other operating expenses		17,165			17,349
Amortization of intangibles		3,114			2,104
Restructuring costs		—			10,753
Total operating expenses		301,943			312,342
Income from continuing operations before income tax		117,264			106,053
Income tax expense		32,265			32,568
Income from continuing operations		84,999			73,485
Income from discontinued operations, net of tax		—			1,341
Net Income	$	84,999		$	74,826
Net Income Applicable to Common Stock	$	84,068		$	73,896
Net Income per Common Share – Basic
Net income from continuing operations		0.81			0.71
Net income from discontinued operations		—			0.01
Net Income per Common Share – Basic	$	0.81		$	0.72
Net Income per Common Share – Diluted
Net income from continuing operations		0.81			0.71
Net income from discontinued operations		—			0.01
Net Income per Common Share – Diluted	$	0.81		$	0.72
Dividends Declared per Common Share	$	0.15		$	—

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

6

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Quarters ended March 31,
(In thousands)	2016			2015
Net income	$	84,999		$	74,826
Other comprehensive income before tax:
Foreign currency translation adjustment		(705	)		(581	)
Amortization of net losses on pension and postretirement benefit plans		5,486			5,025
Amortization of prior service cost of pension and postretirement benefit plans		(950	)		(950	)
Unrealized holding gains on investments arising during the period		76,236			35,342
Unrealized net losses on cash flow hedges		(2,000	)		(2,535	)
Reclassification adjustment for net losses included in net income		1,545			1,358
Other comprehensive income before tax		79,612			37,659
Income tax expense		(4,476	)		(2,187	)
Total other comprehensive income, net of tax		75,136			35,472
Comprehensive income, net of tax	$	160,135		$	110,298
Tax effect allocated to each component of other comprehensive income:	Quarters ended March 31,
(In thousands)	2016			2015
Amortization of net losses on pension and postretirement benefit plans	$	(2,140	)	$	(1,960	)
Amortization of prior service cost of pension and postretirement benefit plans		370			371
Unrealized holding gains on investments arising during the period		(2,885	)		(1,057	)
Unrealized net losses on cash flow hedges		781			989
Reclassification adjustment for net losses included in net income		(602	)		(530	)
Income tax expense	$	(4,476	)	$	(2,187	)

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

7

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

														Accumulated
														other
	Common		Preferred					Retained			Treasury			comprehensive
(In thousands)	stock		stock		Surplus			earnings			stock			loss			Total
Balance at December 31, 2014	$	1,036	$	50,160	$	4,196,458		$	253,717		$	(4,117	)	$	(229,872	)	$	4,267,382
Net income									74,826									74,826
Issuance of stock		1				1,405												1,406
Tax windfall benefit on vesting of restricted stock						69												69
Dividends declared:
Preferred stock									(930	)								(930	)
Common stock purchases												(1,123	)					(1,123	)
Common stock reissuance												18						18
Other comprehensive income, net of tax															35,472			35,472
Balance at March 31, 2015	$	1,037	$	50,160	$	4,197,932		$	327,613		$	(5,222	)	$	(194,400	)	$	4,377,120
Balance at December 31, 2015	$	1,038	$	50,160	$	4,229,156		$	1,087,957		$	(6,101	)	$	(256,886	)	$	5,105,324
Net income									84,999									84,999
Issuance of stock		1				2,108												2,109
Tax shortfall expense on vesting of restricted stock						(31	)											(31	)
Dividends declared:
Common stock									(15,549	)								(15,549	)
Preferred stock									(931	)								(931	)
Common stock purchases												(764	)					(764	)
Common stock reissuance												7						7
Other comprehensive income, net of tax															75,136			75,136
Balance at March 31, 2016	$	1,039	$	50,160	$	4,231,233		$	1,156,476		$	(6,858	)	$	(181,750	)	$	5,250,300
														March 31,			March 31,
Disclosure of changes in number of shares:														2016			2015
Preferred Stock:
Balance at beginning and end of period															2,006,391			2,006,391
Common Stock – Issued:
Balance at beginning of period															103,816,185			103,614,553
Issuance of stock															79,457			42,621
Balance at end of the period															103,895,642			103,657,174
Treasury stock															(225,637	)		(170,247	)
Common Stock – Outstanding															103,670,005			103,486,927

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

8

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Quarter ended March 31,
(In thousands)	2016			2015
Cash flows from operating activities:
Net income	$	84,999		$	74,826
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		44,835			40,035
Amortization of intangibles		3,114			2,104
Depreciation and amortization of premises and equipment		11,707			11,919
Net accretion of discounts and amortization of premiums and deferred fees		(11,158	)		(19,100	)
Fair value adjustments on mortgage servicing rights		8,477			4,929
FDIC loss share expense (income)		3,146			(4,139	)
Adjustments (expense) to indemnity reserves on loans sold		4,098			4,526
Earnings from investments under the equity method		(7,089	)		(2,301	)
Deferred income tax expense		23,218			23,380
(Gain) loss on:
Disposition of premises and equipment and other productive assets		(1,946	)		(978	)
Sale of loans, including valuation adjustments on loans held-for-sale and mortgage banking activities		(7,101	)		(7,222	)
Sale of foreclosed assets, including write-downs		2,802			14,851
Acquisitions of loans held-for-sale		(66,451	)		(121,929	)
Proceeds from sale of loans held-for-sale		22,253			27,547
Net originations on loans held-for-sale		(110,528	)		(179,604	)
Net decrease (increase) in:
Trading securities		176,598			177,942
Accrued income receivable		3,926			(13	)
Other assets		20,996			(28,027	)
Net (decrease) increase in:
Interest payable		(12,261	)		(10,216	)
Pension and other postretirement benefits obligation		1,536			1,019
Other liabilities		(17,010	)		(19,377	)
Total adjustments		93,162			(84,654	)
Net cash provided by (used in) operating activities		178,161			(9,828	)
Cash flows from investing activities:
Net decrease (increase) in money market investments		262,632			(484,829	)
Purchases of investment securities:
Available-for-sale		(742,859	)		(411,189	)
Held-to-maturity		—			(250	)
Other		(59,786	)		(2,520	)
Proceeds from calls, paydowns, maturities and redemptions of investment securities:
Available-for-sale		239,399			385,672
Held-to-maturity		2,108			2,231
Other		41,664			30,785
Proceeds from sale of investment securities:
Other		26,346			1,388
Net repayments on loans		13,335			154,794
Proceeds from sale of loans		1,128			19,127
Acquisition of loan portfolios		(212,798	)		(49,510	)
Net payments from FDIC under loss sharing agreements		88,588			132,265
Net cash received and acquired from business combination		—			711,051
Return of capital from equity method investments		206			—
Mortgage servicing rights purchased		—			(2,400	)
Acquisition of premises and equipment		(38,819	)		(10,231	)
Proceeds from sale of:
Premises and equipment and other productive assets		5,092			3,093
Foreclosed assets		14,513			40,161
Net cash (used in) provided by investing activities		(359,251	)		519,638
Cash flows from financing activities:
Net increase (decrease) in:
Deposits		318,550			265,906
Federal funds purchased and assets sold under agreements to repurchase		(1,991	)		(139,013	)
Other short-term borrowings		5,170			(148,215	)
Payments of notes payable		(108,452	)		(419,487	)
Proceeds from issuance of notes payable		28,883			46,000
Proceeds from issuance of common stock		2,109			1,405
Dividends paid		(16,473	)		(620	)
Net payments for repurchase of common stock		(757	)		(1,105	)
Net cash provided by (used in) financing activities		227,039			(395,129	)
Net increase in cash and due from banks		45,949			114,681
Cash and due from banks at beginning of period		363,674			381,095
Cash and due from banks at the end of the period	$	409,623		$	495,776

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

During the quarter ended March 31, 2016 there have not been any cash flows associated with discontinued operations. The Consolidated Statement of Cash Flows for the quarter ended March 31, 2015 includes the cash flows from operating, investing and financing activities associated with discontinued operations.

9

Notes to Consolidated Financial Statements (Unaudited)

Note 1 - Nature of operations	11
Note 2 - Basis of presentation and summary of significant accounting policies	12
Note 3 - New accounting pronouncements	13
Note 4 - Discontinued operations and restructuring plan	16
Note 5 - Business combination	17
Note 6 - Restrictions on cash and due from banks and certain securities	19
Note 7 - Investment securities available-for-sale	20
Note 8 - Investment securities held-to-maturity	24
Note 9 - Loans	26
Note 10 - Allowance for loan losses	36
Note 11 - FDIC loss share asset and true-up payment obligation	53
Note 12 - Mortgage banking activities	55
Note 13 - Transfers of financial assets and mortgage servicing assets	56
Note 14 - Other real estate owned	59
Note 15 - Other assets	60
Note 16 - Goodwill and other intangible assets	61
Note 17 - Deposits	63
Note 18 - Borrowings	64
Note 19 - Offsetting of financial assets and liabilities	66
Note 20 - Stockholders’ equity	68
Note 21 - Other comprehensive loss	69
Note 22 - Guarantees	71
Note 23 - Commitments and contingencies	73
Note 24 - Non-consolidated variable interest entities	80
Note 25 - Related party transactions	84
Note 26 - Fair value measurement	87
Note 27 - Fair value of financial instruments	93
Note 28 - Net income per common share	99
Note 29 - Other service fees	100
Note 30 - FDIC loss share (expense) income	101
Note 31 - Pension and postretirement benefits	102
Note 32 - Stock-based compensation	103
Note 33 - Income taxes	106
Note 34 - Supplemental disclosure on the consolidated statements of cash flows	109
Note 35 - Segment reporting	110
Note 36 - Condensed consolidating financial information of guarantor and issuers of registered guaranteed securities	114

10

Note 1 – Nature of Operations

Popular, Inc. (the “Corporation”) is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States and the Caribbean. In Puerto Rico, the Corporation provides retail, mortgage, and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as investment banking, broker-dealer, auto and equipment leasing and financing, and insurance services through specialized subsidiaries. In the U.S. mainland, the Corporation operates Banco Popular North America (“BPNA”), including its wholly-owned subsidiary E-LOAN. BPNA focuses efforts and resources on the core community banking business. BPNA operates branches in New York, New Jersey and South Florida under the name of Popular Community Bank. E-LOAN markets deposit accounts under its name for the benefit of BPNA. Refer to Note 4 for discussion of the sales of the California, Illinois and Central Florida regional operations during 2014. Note 35 to the consolidated financial statements presents information about the Corporation’s business segments.

On February 27, 2015, BPPR, in an alliance with other bidders, including BPNA, acquired certain assets and all deposits (other than certain brokered deposits) of former Doral Bank (“Doral”) from the Federal Deposit Insurance Corporation (FDIC), as receiver (the “Doral Bank Transaction”). Under the FDIC’s bidding format, BPPR was the lead bidder and party to the purchase and assumption agreement with the FDIC covering all assets and deposits acquired by it and its alliance co-bidders. BPPR entered into back to back purchase and assumption agreements with the alliance co-bidders for the transfer of certain assets and deposits. The other co-bidders that formed part of the alliance led by BPPR were First Bank Puerto Rico, Centennial Bank, and a vehicle formed by J.C. Flowers III L.P. BPPR entered into transition service agreements with each of the alliance co-bidders. Refer to Note 5 for further details on the Doral Bank Transaction.

11

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated interim financial statements have been prepared without audit. The consolidated statement of financial condition data at December 31, 2015 was derived from audited financial statements. The unaudited interim financial statements are, in the opinion of management, a fair statement of the results for the periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results.

Certain reclassifications have been made to the 2015 consolidated financial statements and notes to the financial statements to conform with the 2016 presentation.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements of the Corporation for the year ended December 31, 2015, included in the Corporation’s 2015 Form 10-K. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates in the Preparation of Financial Statements

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

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Note 3 – New accounting pronouncements

Recently Adopted Accounting Standards Updates

FASB Accounting Standards Update 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”)

The FASB issued ASU 2015-03 in April 2015, which simplified the presentation of debt issuance costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability.

The amendments of this Update, which are required to be applied on a retrospective basis, are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015.

Since the Corporation‘s policy was to record debt issuance costs as a deferred asset, it reclassified $7.3 million (December 31, 2015—$7.8 million) of debt issuance costs as a result of the adoption of this accounting pronouncement during the first quarter of 2016 and adjusted prior periods accordingly.

Additionally, adoption of the following standards effective during the first quarter of 2016 did not have a significant impact on the presentation and disclosures in its consolidated financial statements:

• FASB Accounting Standards Update 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (“ASU 2014-12”)

• FASB Accounting Standards Update 2014-13, Consolidation (Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financial Entity (“ASU 2014-13”)

• FASB Accounting Standards Update 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is more Akin to Debt or to Equity (“ASU 2014-16”)

• FASB Accounting Standards Update 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”)

• FASB Accounting Standards Update 2015-02, Consolidation (Topic 810): Amendment to the Consolidation Analysis (“ASU 2015-02”)

• FASB Accounting Standards Update 2015-04, Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets (“ASU 2015-04”)

• FASB Accounting Standards Update 2015-05, Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU 2015-05”)

• FASB Accounting Standards Update 2015-07, Fair Value Measurement – (Topic 820): Disclosures for Investment in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (“ASU 2015-07”)

• FASB Accounting Standards Update 2015-09, Insurance—(Topic 944): Disclosures about Short-Duration Contracts

Recently Issued Accounting Standards Updates

FASB Accounting Standards Update (“ASU”) 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing

The FASB issued ASU 2016-10 in April 2016 which clarifies two aspects of Topic 606, in particular, the identification of performance obligations. Among other things, an entity is not required to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. In addition, in determining whether promises to transfer goods or services are separately identifiable, an entity should determine whether the nature of its promise in the contract is to transfer each of the goods or services or whether the promise is to transfer a combined item (or items) to which the promised goods and/or services are inputs.

The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (same effective date as ASU 2015-14).

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FASB Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting

The FASB issued ASU 2016-09 in March 2016 which simplifies multiple aspects of the accounting for share-based payment transactions, including the recognition of excess tax benefits and deficiencies as an income tax benefit or expense in the income statement and classification in the statement of cash flows as an operating activity, allowing entities to elect as an accounting policy to account for forfeitures when they occur, permitting entities to withhold up to the maximum individual statutory rate without classifying the awards as a liability, and requiring that the cash paid to satisfy the statutory income tax withholding obligation be classified as a financing activity.

The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.

The Corporation does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated statements of financial condition, results of operations, cash flows or presentation and disclosures.

FASB Accounting Standards Update (“ASU”) 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)

The FASB issued ASU 2016-08 in March 2016, which amends the implementation guidance in ASU 2014-09 by clarifying, among other things, that an entity should determine the nature of the goods or services provided to the customer and whether it controls each specified good or service before it is transferred to the customer, that an entity can be a principal for some goods or services and an agent for others with the same contract, and that an entity is a principal if it controls the goods or services before transferring them to the customer.

The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (same effective date as ASU 2015-14).

The Corporation is currently evaluating the impact that the adoption of this guidance will have on its consolidated statements of financial condition or results of operations.

FASB Accounting Standards Update (“ASU”) 2016-07, Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting

The FASB issued ASU 2016-07 in March 2016, which eliminates the requirement to retroactively adopt the equity method of accounting. Therefore, as of the date the investment becomes qualified for equity method accounting, an entity should add the cost of acquiring the additional interest in the investee to the current basis of its previously held interest. For available-for-sale securities, an entity should recognize through earnings the unrealized holding gains/losses in accumulated other comprehensive income/loss as of that date.

The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.

The Corporation does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated statements of financial condition or results of operations.

FASB Accounting Standards Update (“ASU”) 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments

The FASB issued ASU 2016-06 in March 2016, which clarifies that in assessing whether an embedded contingent put or call option is not clearly and closely related to the debt instrument, which is part of the assessment made to determine whether an embedded derivative must be bifurcated from the host contract, an entity is required to perform only the four step decision sequence. The four-step decision sequence requires an entity to consider whether (1) the payoff is adjusted based on changes in an index, (2) the payoff is indexed to an underlying other than interest rates or credit risk, (3) the debt involves a substantial premium or discount and (4) the put or call option is contingently exercisable. It does not have to separately assess whether the event that triggers its ability to exercise the contingent option itself is indexed only to interest rates and credit risk.

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The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.

The Corporation does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated statements of financial condition or results of operations.

FASB Accounting Standards Update (“ASU”) 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships

The FASB issued ASU 2016-05 in March 2016, which clarifies that a novation, or a change in the counterparty to the derivative instrument that has been designated as a hedging instrument under Topic 815 does not, in and of itself, require de-designation of that hedging relationship, and therefore discontinuance of the application of hedge accounting, provided that all other hedge accounting criteria continue to be met.

The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.

The Corporation does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated statements of financial condition or results of operations.

For recently issued Accounting Standards Updates not yet effective, refer to Note 3 to the consolidated financial statements included in the 2015 Form 10-K.

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Note 4 – Discontinued operations and restructuring plan

During the year ended December 31, 2014, the Corporation completed the sale of its California, Illinois and Central Florida regional operations and relocated certain back office operations to Puerto Rico and New York.

As defined in ASC 805-10-55, the regional operations sold constituted a business, and for financial reporting purposes, the results of the discontinued operations are presented as “Assets / Liabilities from discontinued operations” in the consolidated statement of condition and “(Loss) income from discontinued operations, net of tax” in the consolidated statement of operations.

As of March 31, 2016 and December 31, 2015, there were no assets held within the discontinued operations and liabilities within discontinued operations amounted to approximately $1.8 million, mainly comprised of the indemnity reserve related to the California regional sale.

There were no activities from the discontinued operations for the quarter ended March 31, 2016. Net income from the discontinued operations amounted to $1.3 million for the quarter ended March 31, 2015.

Also, in connection with the sale, the Corporation has undertaken a restructuring plan (the “PCB Restructuring Plan”) which has been completed as of March 31, 2016. The Corporation incurred restructuring charges of $45.1 million. During the quarter ended March 31, 2015, the Corporation incurred $10.8 million in restructuring costs, mostly comprised of $9.4 million in personnel costs.

The following table presents the activity in the reserve for the restructuring costs associated with the PCB Restructuring Plan:

	Quarters ended March 31,
(In thousands)	2016			2015
Beginning balance	$	620		$	13,536
Charges expensed during the period		—			6,297
Payments made during the period		(263	)		(9,030	)
Ending balance	$	357		$	10,803

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Note 5 – Business combination

On February 27, 2015, BPPR, in an alliance with co-bidders, including BPNA, acquired certain assets and all deposits (other than certain brokered deposits) of former Doral Bank from the FDIC, as receiver. Under the FDIC’s bidding format, BPPR was the lead bidder and party to the purchase and assumption agreement with the FDIC covering all assets and deposits acquired by it and its alliance co-bidders. BPPR entered into back to back purchase and assumption agreements with the alliance co-bidders for the transfer of certain assets and deposits. BPPR entered into transition service agreements with each of the alliance co-bidders. There is no loss-sharing arrangement with the FDIC on the acquired assets.

The following table presents the fair values of major classes of identifiable assets acquired and liabilities assumed by the Corporation as of February 27, 2015.

(In thousands)	Book value prior to purchase accounting adjustments		Fair value adjustments			Additional consideration[1]		As recorded by Popular, Inc.
Assets:
Cash and due from banks	$	339,633	$	—		$	—	$	339,633
Investment in available-for-sale securities		172,706		—			—		172,706
Investments in FHLB stock		30,785		—			—		30,785
Loans		1,679,792		(165,925	)		—		1,513,867
Accrued income receivable		7,808		—			—		7,808
Receivable from the FDIC		—		—			480,137		480,137
Core deposit intangible		23,572		(10,762	)		—		12,810
Other assets		67,676		7,569			—		75,245
Total assets	$	2,321,972	$	(169,118	)	$	480,137	$	2,632,991
Liabilities:
Deposits	$	2,193,404	$	9,987		$	—	$	2,203,391
Advances from the Federal Home Loan Bank		542,000		5,187			—		547,187
Other liabilities		50,728		(511	)		—		50,217
Total liabilities	$	2,786,132	$	14,663		$	—	$	2,800,795
Excess of liabilities assumed over assets acquired	$	464,160
Aggregate fair value adjustments			$	(183,781	)
Additional consideration						$	480,137
Goodwill on acquisition								$	167,804

[1] The additional consideration represents the cash to be received from the FDIC for the difference between the net liabilities assumed and the net premium paid on the transaction.

In accordance with ASC Topic 805, the fair values assigned to the assets acquired and liabilities assumed are subject to refinement up to one year after the closing date of the acquisition as new information relative to closing date fair values become available, and thus the recognized goodwill may increase or decrease. During the second and third quarters of 2015, retrospective adjustments were made to the estimated fair values of certain assets acquired and liabilities assumed as part of the Doral Bank Transaction to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The retrospective adjustments resulted in a decrease of $2.1 million to the initial fair value estimate of the mortgage servicing rights, a decrease in other liabilities assumed of $0.5 million and, an increase of $2.6 million in the receivable from the FDIC related to the acquisition cost of deposits, all of which were adjusted against goodwill.

During the fourth quarter of 2015 the Corporation early adopted ASU 2015-16 “Business Combination”. Accordingly, adjustments to the initial fair value estimates identified during the measurement period were recognized in the reporting period in which the adjustment amounts were determined. Pursuant to ASU 2015-16, adjustments were made effective in the fourth quarter of 2015 to the estimated fair values of assets and liabilities assumed with the Doral Bank Transaction to reflect new information obtained during the measurement period about facts and circumstances that existed as of the acquisition date that, if known, would have affected the acquisition-date fair value measurements.

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During the quarter ended March 31, 2016, the Corporation recorded adjustments to its initial fair value estimates in connection with the Doral Bank Transaction. As a result, the discount on the loans increased by $4.7 million with a corresponding increase to goodwill.

The following table presents the principal changes in fair value and the revised amounts recorded during the measurement period.

(In thousands)	February 27, 2015 As recasted[a]		February 27, 2015 As previously reported[b]		Change
Assets:
Loans	$	1,513,867	$	1,665,756	$	(151,889	)
Goodwill		167,804		41,633		126,171
Core deposit intangible		12,810		23,572		(10,762	)
Receivable from the FDIC		480,137		441,721		38,416
Other assets		626,177		626,177		—
Total assets	$	2,800,795	$	2,798,859	$	1,936
Liabilities:
Deposits	$	2,203,391	$	2,201,455	$	1,936
Advances from the Federal Home Loan Bank		547,187		547,187		—
Other liabilities		50,217		50,217		—
Total liabilities	$	2,800,795	$	2,798,859	$	1,936

[a] Amounts reported include retrospective adjustments during the measurement period, in accordance with U.S. GAAP, related to the Doral Bank Transaction.

[b] Amounts are presented as previously reported as of September 30, 2015.

The impact in the results of operations for the quarter ended March 31, 2015 as a result of the recasting was an increase in net income of approximately $0.6 million as detailed in the following table:

	Quarter ended March 31, 2015
(In thousands)	As recasted		As reported			Difference
Net Interest Income	$	10,306	$	9,768		$	538
Non-Interest Income		4,262		4,262			—
Operating Expenses		14,398		14,488			(90	)
Income Before Taxes	$	170	$	(458	)	$	628

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Note 6 – Restrictions on cash and due from banks and certain securities

The Corporation’s banking subsidiaries, BPPR and BPNA, are required by federal and state regulatory agencies to maintain average reserve balances with the Federal Reserve Bank of New York (the “Fed”) or other banks. Those required average reserve balances amounted to $ 1.1 billion at March 31, 2016 (December 31, 2015—$ 1.1 billion). Cash and due from banks, as well as other short-term, highly liquid securities, are used to cover the required average reserve balances.

At March 31, 2016, the Corporation held $52 million in restricted assets in the form of funds deposited in money market accounts, trading account securities and investment securities available for sale (December 31, 2015—$44 million). The amounts held in trading account securities and investment securities available for sale consist primarily of restricted assets held for the Corporation’s non-qualified retirement plans and fund deposits guaranteeing possible liens or encumbrances over the title of insured properties.

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Note 7 – Investment securities available-for-sale

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities available-for-sale at March 31, 2016 and December 31, 2015.

	At March 31, 2016
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Weighted average yield
U.S. Treasury securities
Within 1 year	$	24,665	$	143	$	—	$	24,808		4.92	%
After 1 to 5 years		1,281,481		6,792		—		1,288,273		1.03
After 5 to 10 years		9,939		332		—		10,271		1.99
Total U.S. Treasury securities		1,316,085		7,267		—		1,323,352		1.11
Obligations of U.S. Government sponsored entities
After 1 to 5 years		904,631		5,221		109		909,743		1.33
After 5 to 10 years		250		3		—		253		5.64
After 10 years		23,000		—		58		22,942		3.24
Total obligations of U.S. Government sponsored entities		927,881		5,224		167		932,938		1.38
Obligations of Puerto Rico, States and political subdivisions
After 1 to 5 years		7,292		—		176		7,116		3.88
After 5 to 10 years		5,925		1		1,963		3,963		4.02
After 10 years		18,604		1		5,954		12,651		6.99
Total obligations of Puerto Rico, States and political subdivisions		31,821		2		8,093		23,730		5.72
Collateralized mortgage obligations—federal agencies
Within 1 year		282		—		—		282		0.95
After 1 to 5 years		20,257		918		—		21,175		2.86
After 5 to 10 years		41,078		818		—		41,896		2.86
After 10 years		1,447,516		14,027		11,325		1,450,218		1.98
Total collateralized mortgage obligations—federal agencies		1,509,133		15,763		11,325		1,513,571		2.01
Mortgage-backed securities
Within 1 year		25		—		—		25		4.80
After 1 to 5 years		20,808		990		6		21,792		4.64
After 5 to 10 years		281,359		6,195		2		287,552		2.43
After 10 years		2,485,109		50,510		1,282		2,534,337		2.76
Total mortgage-backed securities		2,787,301		57,695		1,290		2,843,706		2.74
Equity securities (without contractual maturity)		1,351		1,090		2		2,439		7.82
Other
After 1 to 5 years		8,819		10		—		8,829		1.72
After 5 to 10 years		1,220		45		—		1,265		3.62
Total other		10,039		55		—		10,094		1.95
Total investment securities available-for-sale[1]	$	6,583,611	$	87,096	$	20,877	$	6,649,830		2.07	%

[1] Includes $2.2 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $1.3 billion serve as collateral for public funds.

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	At December 31, 2015
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Weighted average yield
U.S. Treasury securities
Within 1 year	$	24,861	$	335	$	—	$	25,196		4.31	%
After 1 to 5 years		1,149,807		365		1,999		1,148,173		1.03
After 5 to 10 years		9,937		22		—		9,959		1.99
Total U.S. Treasury securities		1,184,605		722		1,999		1,183,328		1.11
Obligations of U.S. Government sponsored entities
After 1 to 5 years		919,819		1,337		4,808		916,348		1.33
After 5 to 10 years		250		1		—		251		5.64
After 10 years		23,000		42		—		23,042		3.22
Total obligations of U.S. Government sponsored entities		943,069		1,380		4,808		939,641		1.38
Obligations of Puerto Rico, States and political subdivisions
After 1 to 5 years		7,227		—		199		7,028		3.94
After 5 to 10 years		5,925		—		2,200		3,725		4.02
After 10 years		18,585		—		6,979		11,606		6.99
Total obligations of Puerto Rico, States and political subdivisions		31,737		—		9,378		22,359		5.74
Collateralized mortgage obligations—federal agencies
After 1 to 5 years		21,446		594		37		22,003		2.81
After 5 to 10 years		44,585		733		—		45,318		2.85
After 10 years		1,518,662		8,137		33,283		1,493,516		1.99
Total collateralized mortgage obligations—federal agencies		1,584,693		9,464		33,320		1,560,837		2.02
Mortgage-backed securities
After 1 to 5 years		22,015		987		8		22,994		4.65
After 5 to 10 years		256,097		4,866		1,197		259,766		2.51
After 10 years		2,039,217		34,839		12,620		2,061,436		2.83
Total mortgage-backed securities		2,317,329		40,692		13,825		2,344,196		2.81
Equity securities (without contractual maturity)		1,350		1,053		5		2,398		7.92
Other
After 1 to 5 years		8,911		—		28		8,883		1.71
After 5 to 10 years		1,311		39		—		1,350		3.62
Total other		10,222		39		28		10,233		1.95
Total investment securities available-for-sale[1]	$	6,073,005	$	53,350	$	63,363	$	6,062,992		2.07	%

[1] Includes $2.4 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $1.5 billion serve as collateral for public funds.

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

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

There were no securities sold during the quarters ended March 31, 2016 and 2015.

The following tables present the Corporation’s fair value and gross unrealized losses of investment securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2016 and December 31, 2015.

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	At March 31, 2016
	Less than 12 months				12 months or more				Total
(In thousands)	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
Obligations of U.S. Government sponsored entities	$	73,342	$	113	$	19,376	$	54	$	92,718	$	167
Obligations of Puerto Rico, States and political subdivisions		6,229		10		15,515		8,083		21,744		8,093
Collateralized mortgage obligations—federal agencies		—		—		656,971		11,325		656,971		11,325
Mortgage-backed securities		231,705		816		80,005		474		311,710		1,290
Equity securities		48		2		—		—		48		2
Total investment securities available-for-sale in an unrealized loss position	$	311,324	$	941	$	771,867	$	19,936	$	1,083,191	$	20,877
	At December 31, 2015
	Less than 12 months				12 months or more				Total
(In thousands)	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
U.S. Treasury securities	$	589,689	$	1,999	$	—	$	—	$	589,689	$	1,999
Obligations of U.S. Government sponsored entities		390,319		2,128		181,744		2,680		572,063		4,808
Obligations of Puerto Rico, States and political subdivisions		884		164		19,490		9,214		20,374		9,378
Collateralized mortgage obligations—federal agencies		331,501		4,446		814,195		28,874		1,145,696		33,320
Mortgage-backed securities		1,641,663		12,992		22,362		833		1,664,025		13,825
Equity securities		45		5		—		—		45		5
Other		8,883		28		—		—		8,883		28
Total investment securities available-for-sale in an unrealized loss position	$	2,962,984	$	21,762	$	1,037,791	$	41,601	$	4,000,775	$	63,363

As of March 31, 2016, the available-for-sale investment portfolio reflects gross unrealized losses of approximately $21 million, driven by U.S. Agency collateralized mortgage obligations, mortgage-backed securities and obligations of the Puerto Rico Government and its political subdivisions. As part of its analysis for all U.S. Agencies’ securities, management considers the U.S. Agency guarantee. The portfolio of obligations of the Puerto Rico Government is mostly comprised of securities with specific sources of income or revenues identified for repayments. The Corporation performs periodic credit quality reviews on these issuers.

Management evaluates investment securities for other-than-temporary (“OTTI”) declines in fair value on a quarterly basis. Once a decline in value is determined to be other-than-temporary, the value of a debt security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses. Also, for equity securities that are considered other-than-temporarily impaired, the excess of the security’s carrying value over its fair value at the evaluation date is accounted for as a loss in the results of operations. The OTTI analysis requires management to consider various factors, which include, but are not limited to: (1) the length of time and the extent to which fair value has been less than the amortized cost basis, (2) the financial condition of the issuer or issuers, (3) actual collateral attributes, (4) the payment structure of the debt security and the likelihood of the issuer being able to make payments, (5) any rating changes by a rating agency, (6) adverse conditions specifically related to the security, industry, or a geographic area, and (7) management’s intent to sell the debt security or whether it is more likely than not that the Corporation would be required to sell the debt security before a forecasted recovery occurs.

At March 31, 2016, management performed its quarterly analysis of all debt securities in an unrealized loss position. Based on the analyses performed, management concluded that no individual debt security was other-than-temporarily impaired as of such date. However, further negative evidence impacting the factors described above with respect to the “Obligations of Puerto Rico, States and political subdivisions”, could result in a charge to earnings to recognize estimated credit losses determined to be other-than-temporary. At March 31, 2016, the Corporation did not have the intent to sell debt securities in an unrealized loss position and it is more likely than not that the Corporation will not have to sell the investment securities prior to recovery of their amortized cost basis.

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

	March 31, 2016				December 31, 2015
(In thousands)	Amortized cost		Fair value		Amortized cost		Fair value
FNMA	$	2,799,998	$	2,824,458	$	2,649,860	$	2,633,899
FHLB		329,822		331,546		340,119		338,700
Freddie Mac		1,221,128		1,228,096		1,088,691		1,079,956

23

Note 8 – Investment securities held-to-maturity

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities held-to-maturity at March 31, 2016 and December 31, 2015.

	At March 31, 2016
			Gross		Gross				Weighted
	Amortized		unrealized		unrealized		Fair		average
(In thousands)	cost		gains		losses		value		yield
Obligations of Puerto Rico, States and political subdivisions
Within 1 year	$	3,050	$	—	$	1,601	$	1,449		5.91	%
After 1 to 5 years		14,270		—		5,910		8,360		6.00
After 5 to 10 years		18,930		—		7,716		11,214		6.17
After 10 years		60,880		5,266		8,320		57,826		1.99
Total obligations of Puerto Rico, States and political subdivisions		97,130		5,266		23,547		78,849		3.52
Collateralized mortgage obligations—federal agencies
After 5 to 10 years		86		5		—		91		5.45
Total collateralized mortgage obligations—federal agencies		86		5		—		91		5.45
Other
After 1 to 5 years		2,000		—		26		1,974		1.81
Total other		2,000		—		26		1,974		1.81
Total investment securities held-to-maturity[1]	$	99,216	$	5,271	$	23,573	$	80,914		3.49	%

[1] Includes $97.5 million pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral.

	At December 31, 2015
			Gross		Gross				Weighted
	Amortized		unrealized		unrealized		Fair		average
(In thousands)	cost		gains		losses		value		yield
Obligations of Puerto Rico, States and political subdivisions
Within 1 year	$	2,920	$	—	$	291	$	2,629		5.90	%
After 1 to 5 years		13,655		—		5,015		8,640		5.98
After 5 to 10 years		20,020		—		8,020		12,000		6.14
After 10 years		62,222		3,604		8,280		57,546		2.08
Total obligations of Puerto Rico, States and political subdivisions		98,817		3,604		21,606		80,815		3.55
Collateralized mortgage obligations—federal agencies
After 5 to 10 years		86		5		—		91		5.45
Total collateralized mortgage obligations—federal agencies		86		5		—		91		5.45
Other
After 1 to 5 years		2,000		—		17		1,983		1.81
Total other		2,000		—		17		1,983		1.81
Total investment securities held-to-maturity[1]	$	100,903	$	3,609	$	21,623	$	82,889		3.52	%

[1] Includes $57.2 million pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral.

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

The following tables present the Corporation’s fair value and gross unrealized losses of investment securities held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2016 and December 31, 2015.

24

	At March 31, 2016
	Less than 12 months				12 months or more				Total
			Gross				Gross				Gross
	Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)	value		losses		value		losses		value		losses
Obligations of Puerto Rico, States and political subdivisions	$	—	$	—	$	31,393	$	23,547	$	31,393	$	23,547
Other		1,724		26		—		—		1,724		26
Total investment securities held-to-maturity in an unrealized loss position	$	1,724	$	26	$	31,393	$	23,547	$	33,117	$	23,573

	At December 31, 2015
	Less than 12 months				12 months or more				Total
			Gross				Gross				Gross
	Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)	value		losses		value		losses		value		losses
Obligations of Puerto Rico, States and political subdivisions	$	—	$	—	$	33,334	$	21,606	$	33,334	$	21,606
Other		1,483		17		—		—		1,483		17
Total investment securities held-to-maturity in an unrealized loss position	$	1,483	$	17	$	33,334	$	21,606	$	34,817	$	21,623

As indicated in Note 7 to these consolidated financial statements, management evaluates investment securities for OTTI declines in fair value on a quarterly basis.

The “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-maturity at March 31, 2016 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. This includes $55 million of securities issued by three municipalities of Puerto Rico that are payable from the real and personal property taxes collected within such municipalities. These bonds have seniority to the payment of operating cost and expenses of the municipality. The portfolio also includes approximately $42 million in securities for which the underlying source of payment is not the central government, but in which it provides a guarantee in the event of default.

The Corporation performs periodic credit quality reviews on these issuers. Based on the quarterly analysis performed, management concluded that no individual debt security was other-than-temporarily impaired at March 31, 2016. Further deterioration of the fiscal crisis of the Government of Puerto Rico could further affect the value of these securities, resulting in losses to the Corporation. The Corporation does not have the intent to sell securities held-to-maturity and it is more likely than not that the Corporation will not have to sell these investment securities prior to recovery of their amortized cost basis.

25

Note 9 – Loans

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

The risks on loans acquired in the FDIC-assisted transaction are significantly different from the risks on loans not covered under the FDIC loss sharing agreements because of the loss protection provided by the FDIC. Accordingly, the Corporation presents loans subject to the loss sharing agreements as “covered loans” in the information below and loans that are not subject to the FDIC loss sharing agreements as “non-covered loans”. The FDIC loss sharing agreements expired on June 30, 2015 for commercial (including construction) and consumer loans, and expires on June 30, 2020 for single-family residential mortgage loans, as explained in Note 11.

For a summary of the accounting policies related to loans, interest recognition and allowance for loan losses refer to Note 2—Summary of significant accounting policies, of the 2015 Form 10-K.

During the quarter ended March 31, 2016, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $122 million, consumer loans of $106 million and commercial loans amounting to $51 million. Excluding the impact of the Doral Bank Transaction, during the quarter ended March 31, 2015, the Corporation recorded purchases of mortgage loans amounting to $169 million. Refer to Note 5 for information on loans acquired as part of the Doral Bank Transaction.

The Corporation performed whole-loan sales involving approximately $21 million of residential mortgage loans during the quarter ended March 31, 2016 (March 31, 2015—$39 million). Also, during the quarter ended March 31, 2016, the Corporation securitized approximately $134 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities and $36 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities, compared to $156 million and $47 million, respectively, during the quarter ended March 31, 2015.

Non-covered loans

The following table presents the composition of non-covered loans held-in-portfolio (“HIP”), net of unearned income, by past due status at March 31, 2016 and December 31, 2015, including loans previously covered by the commercial FDIC loss sharing agreements.

26

March 31, 2016
Puerto Rico
	Past due										Non-covered
	30-59		60-89		90 days		Total				loans HIP
(In thousands)	days		days		or more		past due		Current		Puerto Rico
Commercial multi-family	$	652	$	168	$	1,418	$	2,238	$	172,413	$	174,651
Commercial real estate non-owner occupied		46,119		3,102		103,719		152,940		2,506,513		2,659,453
Commercial real estate owner occupied		16,339		6,608		141,443		164,390		1,703,399		1,867,789
Commercial and industrial		7,267		4,297		39,529		51,093		2,615,305		2,666,398
Construction		678		372		13,133		14,183		90,961		105,144
Mortgage		352,313		134,842		823,440		1,310,595		4,789,164		6,099,759
Leasing		7,209		1,598		3,419		12,226		630,916		643,142
Consumer:
Credit cards		10,915		7,159		18,864		36,938		1,061,845		1,098,783
Home equity lines of credit		82		141		280		503		9,126		9,629
Personal		12,963		7,693		20,495		41,151		1,150,239		1,191,390
Auto		32,638		6,029		10,844		49,511		776,794		826,305
Other		1,337		282		19,220		20,839		162,145		182,984
Total	$	488,512	$	172,291	$	1,195,804	$	1,856,607	$	15,668,820	$	17,525,427
March 31, 2016
U.S. mainland
	Past due
	30-59		60-89		90 days		Total				Loans HIP
(In thousands)	days		days		or more		past due		Current		U.S. mainland
Commercial multi-family	$	32	$	—	$	246	$	278	$	762,276	$	762,554
Commercial real estate non-owner occupied		9,556		—		11,155		20,711		969,937		990,648
Commercial real estate owner occupied		3,817		—		193		4,010		219,791		223,801
Commercial and industrial		16,935		156		84,086		101,177		781,918		883,095
Construction		15,091		—		671		15,762		613,952		629,714
Mortgage		18,877		514		12,069		31,460		847,982		879,442
Legacy		3,119		400		4,046		7,565		53,479		61,044
Consumer:
Credit cards		187		157		382		726		12,292		13,018
Home equity lines of credit		1,701		845		4,309		6,855		287,405		294,260
Personal		1,624		639		1,429		3,692		240,722		244,414
Auto		—		—		6		6		18		24
Other		—		—		10		10		286		296
Total	$	70,939	$	2,711	$	118,602	$	192,252	$	4,790,058	$	4,982,310

27

March 31, 2016
Popular, Inc.
	Past due										Non-covered
	30-59		60-89		90 days		Total				loans HIP
(In thousands)	days		days		or more		past due		Current		Popular, Inc.[1] [2]
Commercial multi-family	$	684	$	168	$	1,664	$	2,516	$	934,689	$	937,205
Commercial real estate non-owner occupied		55,675		3,102		114,874		173,651		3,476,450		3,650,101
Commercial real estate owner occupied		20,156		6,608		141,636		168,400		1,923,190		2,091,590
Commercial and industrial		24,202		4,453		123,615		152,270		3,397,223		3,549,493
Construction		15,769		372		13,804		29,945		704,913		734,858
Mortgage		371,190		135,356		835,509		1,342,055		5,637,146		6,979,201
Leasing		7,209		1,598		3,419		12,226		630,916		643,142
Legacy[3]		3,119		400		4,046		7,565		53,479		61,044
Consumer:
Credit cards		11,102		7,316		19,246		37,664		1,074,137		1,111,801
Home equity lines of credit		1,783		986		4,589		7,358		296,531		303,889
Personal		14,587		8,332		21,924		44,843		1,390,961		1,435,804
Auto		32,638		6,029		10,850		49,517		776,812		826,329
Other		1,337		282		19,230		20,849		162,431		183,280
Total	$	559,451	$	175,002	$	1,314,406	$	2,048,859	$	20,458,878	$	22,507,737

[1] Non-covered loans held-in-portfolio are net of $111 million in unearned income and exclude $125 million in loans held-for-sale.

[2] Includes $7.7 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.7 billion were pledged at the FHLB as collateral for borrowings, $2.5 billion at the FRB for discount window borrowings and $0.5 billion serve as collateral for public funds.

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

December 31, 2015
Puerto Rico
	Past due										Non-covered
	30-59		60-89		90 days		Total				loans HIP
(In thousands)	days		days		or more		past due		Current		Puerto Rico
Commercial multi-family	$	459	$	217	$	1,316	$	1,992	$	130,154	$	132,146
Commercial real estate non-owner occupied		166,732		12,520		84,982		264,234		2,404,858		2,669,092
Commercial real estate owner occupied		14,245		5,624		138,778		158,647		1,750,597		1,909,244
Commercial and industrial		6,010		6,059		38,464		50,533		2,607,204		2,657,737
Construction		238		253		13,738		14,229		86,719		100,948
Mortgage		344,858		162,341		863,869		1,371,068		4,756,423		6,127,491
Leasing		7,844		1,630		3,009		12,483		615,167		627,650
Consumer:
Credit cards		11,078		9,414		19,098		39,590		1,088,755		1,128,345
Home equity lines of credit		186		292		394		872		9,816		10,688
Personal		13,756		7,889		22,625		44,270		1,158,565		1,202,835
Auto		33,554		7,500		11,640		52,694		763,256		815,950
Other		1,069		298		19,232		20,599		167,885		188,484
Total	$	600,029	$	214,037	$	1,217,145	$	2,031,211	$	15,539,399	$	17,570,610

28

December 31, 2015
U.S. mainland
	Past due
	30-59		60-89		90 days		Total				Loans HIP
(In thousands)	days		days		or more		past due		Current		U.S. mainland
Commercial multi-family	$	33	$	253	$	—	$	286	$	693,647	$	693,933
Commercial real estate non-owner occupied		160		—		253		413		962,610		963,023
Commercial real estate owner occupied		1,490		429		221		2,140		200,204		202,344
Commercial and industrial		13,647		1,526		75,575		90,748		780,896		871,644
Construction		—		—		—		—		580,158		580,158
Mortgage		18,957		3,424		13,538		35,919		872,671		908,590
Legacy		1,160		662		3,649		5,471		58,965		64,436
Consumer:
Credit cards		327		134		437		898		13,037		13,935
Home equity lines of credit		3,149		1,114		4,176		8,439		296,045		304,484
Personal		1,836		690		1,240		3,766		168,860		172,626
Auto		—		—		6		6		22		28
Other		—		10		5		15		289		304
Total	$	40,759	$	8,242	$	99,100	$	148,101	$	4,627,404	$	4,775,505
December 31, 2015
Popular, Inc.
	Past due										Non-covered
	30-59		60-89		90 days		Total				loans HIP
(In thousands)	days		days		or more		past due		Current		Popular, Inc.[1] [2]
Commercial multi-family	$	492	$	470	$	1,316	$	2,278	$	823,801	$	826,079
Commercial real estate non-owner occupied		166,892		12,520		85,235		264,647		3,367,468		3,632,115
Commercial real estate owner occupied		15,735		6,053		138,999		160,787		1,950,801		2,111,588
Commercial and industrial		19,657		7,585		114,039		141,281		3,388,100		3,529,381
Construction		238		253		13,738		14,229		666,877		681,106
Mortgage		363,815		165,765		877,407		1,406,987		5,629,094		7,036,081
Leasing		7,844		1,630		3,009		12,483		615,167		627,650
Legacy[3]		1,160		662		3,649		5,471		58,965		64,436
Consumer:
Credit cards		11,405		9,548		19,535		40,488		1,101,792		1,142,280
Home equity lines of credit		3,335		1,406		4,570		9,311		305,861		315,172
Personal		15,592		8,579		23,865		48,036		1,327,425		1,375,461
Auto		33,554		7,500		11,646		52,700		763,278		815,978
Other		1,069		308		19,237		20,614		168,174		188,788
Total	$	640,788	$	222,279	$	1,316,245	$	2,179,312	$	20,166,803	$	22,346,115

[1] Non-covered loans held-in-portfolio are net of $108 million in unearned income and exclude $137 million in loans held-for-sale.

[2] Includes $7.3 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.3 billion were pledged at the FHLB as collateral for borrowings, $2.5 billion at the FRB for discount window borrowings and $0.5 billion serve as collateral for public funds.

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

The following tables present non-covered loans held-in-portfolio by loan class that are in non-performing status or are accruing interest but are past due 90 days or more at March 31, 2016 and 2015. Accruing loans past due 90 days or more consist primarily of credit cards, FHA / VA and other insured mortgage loans, and delinquent mortgage loans which are included in the Corporation’s financial statements pursuant to GNMA’s buy-back option program. Servicers of loans underlying GNMA mortgage-backed securities must report as their own assets the defaulted loans that they have the option (but not the obligation) to repurchase, even when they elect not to exercise that option.

29

At March 31, 2016
	Puerto Rico				U.S. mainland				Popular, Inc.
			Accruing loans				Accruing loans				Accruing loans
	Non-accrual		past-due 90		Non-accrual		past-due 90		Non-accrual		past-due 90
(In thousands)	loans		days or more [1]		loans		days or more [1]		loans		days or more [1]
Commercial multi-family	$	1,178	$	—	$	246	$	—	$	1,424	$	—
Commercial real estate non-owner occupied		32,310		—		11,155		—		43,465		—
Commercial real estate owner occupied		110,972		—		193		—		111,165		—
Commercial and industrial		38,179		332		3,398		—		41,577		332
Construction		3,270		—		671		—		3,941		—
Mortgage[3]		322,838		406,327		12,069		—		334,907		406,327
Leasing		3,419		—		—		—		3,419		—
Legacy		—		—		4,046		—		4,046		—
Consumer:
Credit cards		—		18,864		382		—		382		18,864
Home equity lines of credit		—		280		4,309		—		4,309		280
Personal		20,023		46		1,429		—		21,452		46
Auto		10,844		—		6		—		10,850		—
Other		18,579		588		10		—		18,589		588
Total[2]	$	561,612	$	426,437	$	37,914	$	—	$	599,526	$	426,437

[1] Non-covered loans of $288 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

[2] For purposes of this table non-performing loans exclude $ 43 million in non-performing loans held-for-sale.

[3] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured. These balances include $161 million of residential mortgage loans in Puerto Rico insured by FHA or guaranteed by the VA that are no longer accruing interest as of March 31, 2016. Furthermore, the Corporation has approximately $68 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest. Due to the guaranteed nature of the loans, it is the Corporation’s policy to exclude these balances from non-performing assets.

At December 31, 2015
	Puerto Rico				U.S. mainland				Popular, Inc.
			Accruing loans				Accruing loans				Accruing loans
	Non-accrual		past-due 90		Non-accrual		past-due 90		Non-accrual		past-due 90
(In thousands)	loans		days or more [1]		loans		days or more [1]		loans		days or more [1]
Commercial multi-family	$	1,062	$	—	$	—	$	—	$	1,062	$	—
Commercial real estate non-owner occupied		33,720		—		253		—		33,973		—
Commercial real estate owner occupied		106,449		—		221		—		106,670		—
Commercial and industrial		36,671		555		3,440		—		40,111		555
Construction		3,550		—		—		—		3,550		—
Mortgage[3]		337,933		426,094		13,538		—		351,471		426,094
Leasing		3,009		—		—		—		3,009		—
Legacy		—		—		3,649		—		3,649		—
Consumer:
Credit cards		—		19,098		437		—		437		19,098
Home equity lines of credit		—		394		4,176		—		4,176		394
Personal		22,102		523		1,240		—		23,342		523
Auto		11,640		—		6		—		11,646		—
Other		18,698		61		5		—		18,703		61
Total[2]	$	574,834	$	446,725	$	26,965	$	—	$	601,799	$	446,725

[1] Non-covered loans by $268 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

[2] For purposes of this table non-performing loans exclude $ 45 million in non-performing loans held-for-sale.

[3] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured. These balances include $164 million of residential mortgage loans in Puerto Rico insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2015. Furthermore, the Corporation has approximately $70 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest. Due to the guaranteed nature of the loans, it is the Corporation’s policy to exclude these balances from non-performing assets.

30

The following table provides a breakdown of loans held-for-sale (“LHFS”) at March 31, 2016 and December 31, 2015 by main categories.

(In thousands)	March 31, 2016		December 31, 2015
Commercial	$	42,771	$	45,074
Construction		2		95
Mortgage		82,542		91,831
Total loans held-for-sale	$	125,315	$	137,000

The following table provides a breakdown of loans held-for-sale (“LHFS”) in non-performing status at March 31, 2016 and December 31, 2015 by main categories.

(In thousands)	March 31, 2016		December 31, 2015
Commercial	$	42,741	$	45,074
Construction		2		95
Total	$	42,743	$	45,169

The following table presents loans acquired as part of the Doral Bank Transaction accounted for under ASC subtopic 310-20 as of the February 27, 2015 acquisition date:

(In thousands)
Fair value of loans accounted under ASC Subtopic 310-20	$	1,178,543
Gross contractual amounts receivable (principal and interest)	$	1,666,695
Estimate of contractual cash flows not expected to be collected	$	34,646

Covered loans

The following tables present the composition of loans by past due status at March 31, 2016 and December 31, 2015 for covered loans held-in-portfolio. The information considers covered loans accounted for under ASC Subtopic 310-20 and ASC Subtopic 310-30.

March 31, 2016
	Past due
	30-59		60-89		90 days		Total				Covered
(In thousands)	days		days		or more		past due		Current		loans HIP [1]
Mortgage	$	29,539	$	15,953	$	77,968	$	123,460	$	483,251	$	606,711
Consumer		1,108		324		1,389		2,821		15,598		18,419
Total covered loans	$	30,647	$	16,277	$	79,357	$	126,281	$	498,849	$	625,130

[1] Includes $374 million pledged to secure credit facilities at the FHLB which are not permitted to sell or repledge the collateral.

31

December 31, 2015
	Past due
	30-59		60-89		90 days		Total				Covered
(In thousands)	days		days		or more		past due		Current		loans HIP [1]
Mortgage	$	31,413	$	16,593	$	83,132	$	131,138	$	495,964	$	627,102
Consumer		1,246		444		1,283		2,973		16,040		19,013
Total covered loans	$	32,659	$	17,037	$	84,415	$	134,111	$	512,004	$	646,115

[1] Includes $386 million pledged to secure credit facilities at the FHLB which are not permitted to sell or repledge the collateral.

The following table presents covered loans in non-performing status and accruing loans past-due 90 days or more by loan class at March 31, 2016 and December 31, 2015.

	March 31, 2016				December 31, 2015
	Non-accrual		Accruing loans past		Non-accrual		Accruing loans past
(In thousands)	loans		due 90 days or more		loans		due 90 days or more
Mortgage	$	3,408	$	—	$	3,790	$	—
Consumer		111		—		97		—
Total[1]	$	3,519	$	—	$	3,887	$	—

[1] Covered loans accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analyses.

The Corporation accounts for lines of credit with revolving privileges under the accounting guidance of ASC Subtopic 310-20, which requires that any differences between the contractually required loans payment receivable in excess of the initial investment in the loans be accreted into interest income over the life of the loans, if the loan is accruing interest. Covered loans accounted for under ASC Subtopic 310-20 amounted to $10 million at March 31, 2016 (December 31, 2015—$10 million).

Loans acquired with deteriorated credit quality accounted for under ASC 310-30

The following provides information of loans acquired with evidence of credit deterioration as of the acquisition date, accounted for under the guidance of ASC 310-30.

Loans acquired from Westernbank as part of an FDIC-assisted transaction

The carrying amount of the Westernbank loans consisted of loans determined to be impaired at the time of acquisition, which are accounted for in accordance with ASC Subtopic 310-30 (“credit impaired loans”), and loans that were considered to be performing at the acquisition date, accounted for by analogy to ASC Subtopic 310-30 (“non-credit impaired loans”), as detailed in the following table.

32

	March 31, 2016 [1]									December 31, 2015 [1]
	Carrying amount									Carrying amount
(In thousands)	Non-credit impaired loans			Credit impaired loans			Total			Non-credit impaired loans			Credit impaired loans			Total
Commercial real estate	$	1,104,257		$	30,090		$	1,134,347		$	1,114,368		$	35,393		$	1,149,761
Commercial and industrial		83,267			519			83,786			84,765			519			85,284
Construction		8,479			6,026			14,505			8,943			6,027			14,970
Mortgage		647,739			31,627			679,366			667,023			33,090			700,113
Consumer		22,198			1,239			23,437			23,047			1,326			24,373
Carrying amount		1,865,940			69,501			1,935,441			1,898,146			76,355			1,974,501
Allowance for loan losses		(58,703	)		(4,264	)		(62,967	)		(59,753	)		(3,810	)		(63,563	)
Carrying amount, net of allowance	$	1,807,237		$	65,237		$	1,872,474		$	1,838,393		$	72,545		$	1,910,938

[1] The carrying amount of loans acquired from Westernbank and accounted for under ASC 310-30 which remains subject to the loss sharing agreement with the FDIC amounted to approximately $615 million as of March 31, 2016 and $636 million as of December 31, 2015.

The outstanding principal balance of Westernbank loans accounted pursuant to ASC Subtopic 310-30, amounted to $2.4 billion at March 31, 2016 (December 31, 2015—$2.4 billion). At March 31, 2016, none of the acquired loans from the Westernbank FDIC-assisted transaction accounted for under ASC Subtopic 310-30 were considered non-performing loans. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, was recognized on all acquired loans.

Changes in the carrying amount and the accretable yield for the Westernbank loans accounted pursuant to the ASC Subtopic 310-30, for the quarters ended March 31, 2016 and 2015, were as follows:

	Activity in the accretable yield
	Westernbank loans ASC 310-30
	For the quarters ended
	March 31, 2016									March 31, 2015
	Non-credit			Credit						Non-credit			Credit
(In thousands)	impaired loans			impaired loans			Total			impaired loans			impaired loans			Total
Beginning balance	$	1,105,732		$	6,726		$	1,112,458		$	1,265,752		$	5,585		$	1,271,337
Accretion		(42,000	)		(1,533	)		(43,533	)		(53,776	)		(1,921	)		(55,697	)
Change in expected cash flows		54,544			5,339			59,883			42,273			1,035			43,308
Ending balance	$	1,118,276		$	10,532		$	1,128,808		$	1,254,249		$	4,699		$	1,258,948

33

	Carrying amount of Westernbank loans accounted for pursuant to ASC 310-30
	For the quarters ended
	March 31, 2016 [1]									March 31, 2015
	Non-credit			Credit						Non-credit			Credit
(In thousands)	impaired loans			impaired loans			Total			impaired loans			impaired loans			Total
Beginning balance	$	1,898,146		$	76,355		$	1,974,501		$	2,272,142		$	172,030		$	2,444,172
Accretion		42,000			1,533			43,533			53,776			1,921			55,697
Collections and charge-offs		(74,206	)		(8,387	)		(82,593	)		(114,137	)		(18,636	)		(132,773	)
Ending balance	$	1,865,940		$	69,501		$	1,935,441		$	2,211,781		$	155,315		$	2,367,096
Allowance for loan losses ASC 310-30 Westernbank loans		(58,703	)		(4,264	)		(62,967	)		(49,750	)		(18,636	)		(68,386	)
Ending balance, net of ALLL	$	1,807,237		$	65,237		$	1,872,474		$	2,162,031		$	136,679		$	2,298,710

[1] The carrying amount of loans acquired from Westernbank and accounted for under ASC 310-30 which remain subject to the loss sharing agreement with the FDIC amounted to approximately $ 615 million as of March 31, 2016.

Other loans acquired with deteriorated credit quality

The outstanding principal balance of other acquired loans accounted pursuant to ASC Subtopic 310-30, amounted to $713 million at March 31, 2016 (December 31, 2015—$710 million). At March 31, 2016, none of the other acquired loans accounted under ASC Subtopic 310-30 were considered non-performing loans. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, was recognized on all acquired loans.

Changes in the carrying amount and the accretable yield for the other acquired loans accounted pursuant to the ASC Subtopic 310-30, for the quarters ended March 31, 2016 and 2015 were as follows:

Activity in the accretable yield - Other acquired loans ASC 310-30
	For the quarters ended
(In thousands)	March 31, 2016			March 31, 2015
Beginning balance	$	221,128		$	116,304
Additions		4,340			50,662
Accretion		(8,555	)		(3,223	)
Change in expected cash flows		50,855			(5,319	)
Ending balance	$	267,768		$	158,424
Carrying amount of other acquired loans accounted for pursuant to ASC 310-30
	For the quarters ended
(In thousands)	March 31, 2016			March 31, 2015
Beginning balance	$	564,050		$	212,763
Purchase accounting adjustments related to the Doral Bank Transaction (Refer to Note 5)		(4,707	)		—
Additions		10,051			157,091
Accretion		8,555			3,223
Collections and charge-offs		(15,226	)		(9,980	)
Ending balance	$	562,723		$	363,097
Allowance for loan losses ASC 310-30 non-covered loans		(15,258	)		(16,092	)
Ending balance, net of allowance for loan losses	$	547,465		$	347,005

34

The following table presents loans acquired as part of the Doral Bank Transaction accounted for pursuant to ASC Subtopic 310-30 at the February 27, 2015 acquisition date.

(In thousands)
Contractually-required principal and interest	$	560,833
Non-accretable difference		112,153
Cash flows expected to be collected		448,680
Accretable yield		113,977
Fair value of loans accounted for under ASC Subtopic 310-30	$	334,703

35

Note 10 – 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 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 5-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.

For the period ended March 31, 2016, 44% (March 31, 2015–59%) of the ALLL for non-covered BPPR segment 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 mortgage, commercial multi-family and commercial and industrial loan portfolios for 2016, and in the consumer and mortgage loan portfolios for 2015.

For the period ended March 31, 2016, 2% (March 31, 2015—13%) of the ALLL for BPNA segment 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 concentrated in the consumer loan portfolio for 2016 and in the consumer loan portfolio for 2015.

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.

36

The following tables present the changes in the allowance for loan losses, loan ending balances and whether such loans and the allowance pertain to loans individually or collectively evaluated for impairment for the quarters ended March 31, 2016 and 2015.

For the quarter ended March 31, 2016
Puerto Rico - Non-covered loans
(In thousands)	Commercial			Construction			Mortgage			Leasing			Consumer			Total
Allowance for credit losses:
Beginning balance	$	186,925		$	4,957		$	128,327		$	10,993		$	138,721		$	469,923
Provision (reversal of provision)		13,369			(409	)		10,869			1,680			18,362			43,871
Charge-offs		(8,968	)		(544	)		(15,972	)		(2,127	)		(27,379	)		(54,990	)
Recoveries		6,264			233			1,276			489			6,081			14,343
Ending balance	$	197,590		$	4,237		$	124,500		$	11,035		$	135,785		$	473,147
Specific ALLL	$	55,098		$	172		$	41,660		$	608		$	24,326		$	121,864
General ALLL	$	142,492		$	4,065		$	82,840		$	10,427		$	111,459		$	351,283
Loans held-in-portfolio:
Impaired non-covered loans	$	338,980		$	2,020		$	471,183		$	2,391		$	109,920		$	924,494
Non-covered loans held-in-portfolio excluding impaired loans		7,029,311			103,124			5,628,576			640,751			3,199,171			16,600,933
Total non-covered loans held-in-portfolio	$	7,368,291		$	105,144		$	6,099,759		$	643,142		$	3,309,091		$	17,525,427
For the quarter ended March 31, 2016
Puerto Rico - Covered loans
(In thousands)	Commercial			Construction			Mortgage			Leasing			Consumer			Total
Allowance for credit losses:
Beginning balance	$	—		$	—		$	33,967		$	—		$	209		$	34,176
Provision (reversal of provision)		—			—			(3,149	)		—			44			(3,105	)
Charge-offs		—			—			(1,221	)		—			(33	)		(1,254	)
Recoveries		—			—			225			—			3			228
Ending balance	$	—		$	—		$	29,822		$	—		$	223		$	30,045
Specific ALLL	$	—		$	—		$	—		$	—		$	—		$	—
General ALLL	$	—		$	—		$	29,822		$	—		$	223		$	30,045
Loans held-in-portfolio:
Impaired covered loans	$	—		$	—		$	—		$	—		$	—		$	—
Covered loans held-in-portfolio excluding impaired loans		—			—			606,711			—			18,419			625,130
Total covered loans held-in-portfolio	$	—		$	—		$	606,711		$	—		$	18,419		$	625,130
For the quarter ended March 31, 2016
U.S. Mainland
(In thousands)	Commercial			Construction			Mortgage			Legacy			Consumer			Total
Allowance for credit losses:
Beginning balance	$	9,908		$	3,912		$	4,985		$	2,687		$	11,520		$	33,012
Provision (reversal of provision)		(116	)		827			344			(450	)		3,464			4,069
Charge-offs		(495	)		—			(441	)		(109	)		(2,648	)		(3,693	)
Recoveries		290			—			211			356			1,035			1,892
Ending balance	$	9,587		$	4,739		$	5,099		$	2,484		$	13,371		$	35,280
Specific ALLL	$	—		$	—		$	1,592		$	—		$	581		$	2,173
General ALLL	$	9,587		$	4,739		$	3,507		$	2,484		$	12,790		$	33,107
Loans held-in-portfolio:
Impaired loans	$	—		$	—		$	7,909		$	—		$	2,247		$	10,156
Loans held-in-portfolio excluding impaired loans		2,860,098			629,714			871,533			61,044			549,765			4,972,154
Total loans held-in-portfolio	$	2,860,098		$	629,714		$	879,442		$	61,044		$	552,012		$	4,982,310

37

For the quarter ended March 31, 2016
Popular, Inc.
(In thousands)	Commercial			Construction			Mortgage			Legacy			Leasing			Consumer			Total
Allowance for credit losses:
Beginning balance	$	196,833		$	8,869		$	167,279		$	2,687		$	10,993		$	150,450		$	537,111
Provision (reversal of provision)		13,253			418			8,064			(450	)		1,680			21,870			44,835
Charge-offs		(9,463	)		(544	)		(17,634	)		(109	)		(2,127	)		(30,060	)		(59,937	)
Recoveries		6,554			233			1,712			356			489			7,119			16,463
Ending balance	$	207,177		$	8,976		$	159,421		$	2,484		$	11,035		$	149,379		$	538,472
Specific ALLL	$	55,098		$	172		$	43,252		$	—		$	608		$	24,907		$	124,037
General ALLL	$	152,079		$	8,804		$	116,169		$	2,484		$	10,427		$	124,472		$	414,435
Loans held-in-portfolio:
Impaired loans	$	338,980		$	2,020		$	479,092		$	—		$	2,391		$	112,167		$	934,650
Loans held-in-portfolio excluding impaired loans		9,889,409			732,838			7,106,820			61,044			640,751			3,767,355			22,198,217
Total loans held-in-portfolio	$	10,228,389		$	734,858		$	7,585,912		$	61,044		$	643,142		$	3,879,522		$	23,132,867

For the quarter ended March 31, 2015
Puerto Rico - Non-covered loans
(In thousands)	Commercial			Construction			Mortgage			Leasing			Consumer			Total
Allowance for credit losses:
Beginning balance	$	201,589		$	5,483		$	120,860		$	7,131		$	154,072		$	489,135
Provision (reversal of provision)		(1,321	)		(6,813	)		16,192			846			23,009			31,913
Charge-offs		(9,572	)		—			(10,973	)		(1,237	)		(29,699	)		(51,481	)
Recoveries		4,770			2,925			500			468			6,046			14,709
Ending balance	$	195,466		$	1,595		$	126,579		$	7,208		$	153,428		$	484,276
Specific ALLL	$	69,946		$	158		$	42,229		$	687		$	25,223		$	138,243