UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, 2017

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.    ☒  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).    ☒  Yes    ☐  No

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes  ☒  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, 101,986,341 shares outstanding as of May 5, 2017.

POPULAR, INC.

INDEX

	Page
Part I – Financial Information
Item 1. Financial Statements
Unaudited Consolidated Statements of Financial Condition at March  31, 2017 and December 31, 2016		3
Unaudited Consolidated Statements of Operations for the quarters ended March 31, 2017 and 2016		4
Unaudited Consolidated Statements of Comprehensive Income for the quarters ended March 31, 2017 and 2016		5
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the quarters ended March 31, 2017 and 2016		6
Unaudited Consolidated Statements of Cash Flows for the quarters ended March 31, 2017 and 2016		7
Notes to Unaudited Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		107
Item 3. Quantitative and Qualitative Disclosures about Market Risk		152
Item 4. Controls and Procedures		152
Part II – Other Information
Item 1. Legal Proceedings		152
Item 1A. Risk Factors		153
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		153
Item 3. Defaults upon Senior Securities		153
Item 4. Mine Safety Disclosures		153
Item 5. Other Information		153
Item 6. Exhibits		154
Signatures		155

1

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;

• the impact of the current fiscal and economic crisis of the Commonwealth of Puerto Rico (the “Commonwealth” or “Puerto Rico”) and the measures taken and to be taken by the Puerto Rico Government and the Federally-appointed oversight board on the economy, our customers and our business;

• the impact of the pending debt restructuring proceedings under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”) and of other actions taken or to be taken to address Puerto Rico’s fiscal crisis on the value of our portfolio of Puerto Rico government securities and loans to governmental entities, and the possibility that these actions may result in credit losses that are higher than currently expected;

• 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;

• 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 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

• a failure in or breach of our operational or security systems or infrastructure or those of EVERTEC, Inc., our provider of core financial transaction processing and information technology services, as a result of cyberattacks, including e-fraud, denial-of-services and computer intrusion, that might result in loss or breach of customer data, disruption of services, reputational damage or additional costs to Popular.

1

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;

• 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 and juries. Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016 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.

2

POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

	March 31,			December 31,
(In thousands, except share information)	2017			2016
Assets:
Cash and due from banks	$	340,225		$	362,394
Money market investments:
Securities purchased under agreements to resell		—			23,637
Time deposits with other banks		3,653,347			2,866,580
Total money market investments		3,653,347			2,890,217
Trading account securities, at fair value:
Pledged securities with creditors’ right to repledge		1,811			11,486
Other trading securities		49,174			48,319
Investment securities available-for-sale, at fair value:
Pledged securities with creditors’ right to repledge		452,568			491,843
Other investment securities available-for-sale		8,744,959			7,717,963
Investment securities held-to-maturity, at amortized cost (fair value 2017 - $73,628; 2016 - $75,576)		96,326			98,101
Other investment securities, at lower of cost or realizable value (realizable value 2017 - $169,617; 2016 - $170,890)		166,286			167,818
Loans held-for-sale, at lower of cost or fair value		85,309			88,821
Loans held-in-portfolio:
Loans not covered under loss-sharing agreements with the FDIC		22,858,556			22,895,172
Loans covered under loss-sharing agreements with the FDIC		551,980			572,878
Less – Unearned income		123,835			121,425
Allowance for loan losses		544,496			540,651
Total loans held-in-portfolio, net		22,742,205			22,805,974
FDIC loss-share asset		58,793			69,334
Premises and equipment, net		548,995			543,981
Other real estate not covered under loss-sharing agreements with the FDIC		185,836			180,445
Other real estate covered under loss-sharing agreements with the FDIC		29,926			32,128
Accrued income receivable		128,018			138,042
Mortgage servicing assets, at fair value		193,698			196,889
Other assets		2,111,806			2,145,510
Goodwill		627,294			627,294
Other intangible assets		42,706			45,050
Total assets	$	40,259,282		$	38,661,609
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing	$	7,262,328		$	6,980,443
Interest bearing		24,950,251			23,515,781
Total deposits		32,212,579			30,496,224
Assets sold under agreements to repurchase		434,714			479,425
Other short-term borrowings		1,200			1,200
Notes payable		1,557,972			1,574,852
Other liabilities		862,604			911,951
Total liabilities		35,069,069			33,463,652
Commitments and contingencies (Refer to Note 21)
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; 104,101,618 shares issued (2016 - 104,058,684) and 101,956,740 shares outstanding (2016 - 103,790,932)		1,041			1,040
Surplus		4,261,346			4,255,022
Retained earnings		1,286,706			1,220,307
Treasury stock - at cost, 2,144,878 shares (2016 - 267,752)		(89,128	)		(8,286	)
Accumulated other comprehensive loss, net of tax		(319,912	)		(320,286	)
Total stockholders’ equity		5,190,213			5,197,957
Total liabilities and stockholders’ equity	$	40,259,282		$	38,661,609

The accompanying notes are an integral part of these Consolidated Financial Statements.

3

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Quarters ended March 31,
(In thousands, except per share information)	2017			2016
Interest income:
Loans	$	363,136		$	363,197
Money market investments		6,573			2,863
Investment securities		44,886			36,271
Trading account securities		1,400			1,689
Total interest income		415,995			404,020
Interest expense:
Deposits		33,757			29,874
Short-term borrowings		1,095			1,861
Long-term debt		19,045			19,873
Total interest expense		53,897			51,608
Net interest income		362,098			352,412
Provision for loan losses - non-covered loans		42,057			47,940
Provision (reversal) for loan losses - covered loans		(1,359	)		(3,105	)
Net interest income after provision for loan losses		321,400			307,577
Service charges on deposit accounts		39,536			39,862
Other service fees (Refer to Note 27)		56,175			53,382
Mortgage banking activities (Refer to Note 10)		11,369			10,551
Net gain on sale and valuation adjustments of investment securities		162			—
Trading account loss		(278	)		(162	)
Net loss on sale of loans, including valuation adjustments on loans held-for-sale		—			(304	)
Adjustments (expense) to indemnity reserves on loans sold		(1,966	)		(4,098	)
FDIC loss share expense (Refer to Note 28)		(8,257	)		(3,146	)
Other operating income		19,128			15,545
Total non-interest income		115,869			111,630
Operating expenses:
Personnel costs		125,607			127,091
Net occupancy expenses		20,776			20,430
Equipment expenses		15,970			14,548
Other taxes		10,969			10,195
Professional fees		69,250			75,459
Communications		5,949			6,320
Business promotion		11,576			11,110
FDIC deposit insurance		6,493			7,370
Other real estate owned (OREO) expenses		12,818			9,141
Other operating expenses		29,565			17,165
Amortization of intangibles		2,345			3,114
Total operating expenses		311,318			301,943
Income from continuing operations before income tax		125,951			117,264
Income tax expense		33,006			32,265
Net Income	$	92,945		$	84,999
Net Income Applicable to Common Stock	$	92,014		$	84,068
Net Income per Common Share – Basic	$	0.89		$	0.81
Net Income per Common Share – Diluted	$	0.89		$	0.81
Dividends Declared per Common Share	$	0.25		$	0.15

The accompanying notes are an integral part of these Consolidated Financial Statements.

4

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Quarters ended March 31,
(In thousands)	2017			2016
Net income	$	92,945		$	84,999
Other comprehensive income before tax:
Foreign currency translation adjustment		139			(705	)
Amortization of net losses on pension and postretirement benefit plans		5,607			5,486
Amortization of prior service credit of pension and postretirement benefit plans		(950	)		(950	)
Unrealized holding (losses) gains on investments arising during the period		(2,907	)		76,236
Reclassification adjustment for gains included in net income		(162	)		—
Unrealized net losses on cash flow hedges		(637	)		(2,000	)
Reclassification adjustment for net losses included in net income		855			1,545
Other comprehensive income before tax		1,945			79,612
Income tax expense		(1,571	)		(4,476	)
Total other comprehensive income, net of tax		374			75,136
Comprehensive income, net of tax	$	93,319		$	160,135
Tax effect allocated to each component of other comprehensive income:
	Quarters ended March 31,
(In thousands)	2017			2016
Amortization of net losses on pension and postretirement benefit plans	$	(2,186	)	$	(2,140	)
Amortization of prior service credit of pension and postretirement benefit plans		370			370
Unrealized holding (losses) gains on investments arising during the period		298			(2,885	)
Reclassification adjustment for gains included in net income		32			—
Unrealized net losses on cash flow hedges		248			781
Reclassification adjustment for net losses included in net income		(333	)		(602	)
Income tax expense	$	(1,571	)	$	(4,476	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

5

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, 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 windfall benefit 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
Balance at December 31, 2016	$	1,040	$	50,160	$	4,255,022		$	1,220,307		$	(8,286	)	$	(320,286	)	$	5,197,957
Net income									92,945									92,945
Issuance of stock		1				1,806												1,807
Dividends declared:
Common stock									(25,615	)								(25,615	)
Preferred stock									(931	)								(931	)
Common stock purchases						4,518						(80,842	)					(76,324	)
Other comprehensive income, net of tax															374			374
Balance at March 31, 2017	$	1,041	$	50,160	$	4,261,346		$	1,286,706		$	(89,128	)	$	(319,912	)	$	5,190,213
														March 31,			March 31,
Disclosure of changes in number of shares:														2017			2016
Preferred Stock:
Balance at beginning and end of period															2,006,391			2,006,391
Common Stock – Issued:
Balance at beginning of period															104,058,684			103,816,185
Issuance of stock															42,934			79,457
Balance at end of the period															104,101,618			103,895,642
Treasury stock															(2,144,878	)		(225,637	)
Common Stock – Outstanding															101,956,740			103,670,005

The accompanying notes are an integral part of these Consolidated Financial Statements.

6

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Quarter ended March 31,
(In thousands)	2017			2016
Cash flows from operating activities:
Net income	$	92,945		$	84,999
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		40,698			44,835
Amortization of intangibles		2,345			3,114
Depreciation and amortization of premises and equipment		11,799			11,707
Net accretion of discounts and amortization of premiums and deferred fees		(6,463	)		(11,158	)
Fair value adjustments on mortgage servicing rights		5,954			8,477
FDIC loss share expense		8,257			3,146
Adjustments (expense) to indemnify reserves on loans sold		1,966			4,098
Earnings from investments under the equity method		(10,879	)		(7,089	)
Deferred income tax expense		25,060			23,218
Loss (gain) on:
Disposition of premises and equipment and other productive assets		6,466			(1,946	)
Sale and valuation adjustments of investment securities		(162	)		—
Sale of loans, including valuation adjustments on loans held-for-sale and mortgage banking activities		(5,381	)		(7,101	)
Sale of foreclosed assets, including write-downs		4,512			2,802
Acquisitions of loans held-for-sale		(73,043	)		(66,451	)
Proceeds from sale of loans held-for-sale		29,364			22,253
Net originations on loans held-for-sale		(123,336	)		(110,528	)
Net decrease (increase) in:
Trading securities		177,153			176,598
Accrued income receivable		10,024			3,926
Other assets		13,161			20,996
Net (decrease) increase in:
Interest payable		(11,281	)		(12,261	)
Pension and other postretirement benefits obligation		331			1,536
Other liabilities		(13,654	)		(17,010	)
Total adjustments		92,891			93,162
Net cash provided by operating activities		185,836			178,161
Cash flows from investing activities:
Net (increase) decrease in money market investments		(763,130	)		262,632
Purchases of investment securities:
Available-for-sale		(1,216,880	)		(742,859	)
Other		(225	)		(59,786	)
Proceeds from calls, paydowns, maturities and redemptions of investment securities:
Available-for-sale		222,677			239,399
Held-to-maturity		2,184			2,108
Other		—			41,664
Proceeds from sale of investment securities:
Available-for-sale		381			—
Other		1,757			26,346
Net repayments on loans		99,306			13,335
Proceeds from sale of loans		—			1,128
Acquisition of loan portfolios		(109,098	)		(212,798	)
Net payments (to) from FDIC under loss sharing agreements		(23,574	)		88,588
Return of capital from equity method investments		3,862			206
Acquisition of premises and equipment		(18,646	)		(38,819	)
Proceeds from sale of:
Premises and equipment and other productive assets		3,011			5,092
Foreclosed assets		27,547			14,513
Net cash used in by investing activities		(1,770,828	)		(359,251	)
Cash flows from financing activities:
Net increase (decrease) in:
Deposits		1,715,958			318,550
Federal funds purchased and assets sold under agreements to repurchase		(44,711	)		(1,991	)
Other short-term borrowings		—			5,170
Payments of notes payable		(17,408	)		(108,452	)
Proceeds from issuance of notes payable		—			28,883
Proceeds from issuance of common stock		1,806			2,109
Dividends paid		(16,499	)		(16,473	)
Net payments for repurchase of common stock		(75,604	)		(77	)
Payments related to tax withholding for shared-based compensation		(719	)		(680	)
Net cash provided by financing activities		1,562,823			227,039
Net (decrease) increase in cash and due from banks		(22,169	)		45,949
Cash and due from banks at beginning of period		362,394			363,674
Cash and due from banks at the end of the period	$	340,225		$	409,623

The accompanying notes are an integral part of these Consolidated Financial Statements.

7

Notes to Consolidated Financial

Statements (Unaudited)

Note 1	-	Nature of operations	9
Note 2	-	Basis of presentation and summary of significant accounting policies	10
Note 3	-	New accounting pronouncements	11
Note 4	-	Restrictions on cash and due from banks and certain securities	13
Note 5	-	Investment securities available-for-sale	14
Note 6	-	Investment securities held-to-maturity	18
Note 7	-	Loans	20
Note 8	-	Allowance for loan losses	28
Note 9	-	FDIC loss share asset and true-up payment obligation	42
Note 10	-	Mortgage banking activities	44
Note 11	-	Transfers of financial assets and mortgage servicing assets	45
Note 12	-	Other real estate owned	48
Note 13	-	Other assets	49
Note 14	-	Goodwill and other intangible assets	50
Note 15	-	Deposits	52
Note 16	-	Borrowings	53
Note 17	-	Offsetting of financial assets and liabilities	55
Note 18	-	Stockholders’ equity	57
Note 19	-	Other comprehensive loss	58
Note 20	-	Guarantees	60
Note 21	-	Commitments and contingencies	62
Note 22	-	Non-consolidated variable interest entities	70
Note 23	-	Related party transactions	73
Note 24	-	Fair value measurement	76
Note 25	-	Fair value of financial instruments	82
Note 26	-	Net income per common share	86
Note 27	-	Other service fees	87
Note 28	-	FDIC loss share (expense) income	88
Note 29	-	Pension and postretirement benefits	89
Note 30	-	Stock-based compensation	90
Note 31	-	Income taxes	92
Note 32	-	Supplemental disclosure on the consolidated statements of cash flows	95
Note 33	-	Segment reporting	96
Note 34	-	Condensed consolidating financial information of guarantor and issuers of registered guaranteed securities	100

8

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”). 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.

9

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, 2016 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 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, 2016, included in the Corporation’s 2016 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.

10

Note 3 – New accounting pronouncements

Recently Adopted Accounting Standards Updates

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 to this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. As a result of the adoption of this accounting pronouncement during the first quarter of 2017, the Corporation recognized excess tax benefits and shortfalls as income tax benefit or expense in the income statement and revised the presentation of its statements of cash flows, all of which had an immaterial impact to the financial statements taken as a whole.

Additionally, adoption of the following standards effective during the first quarter of 2017 did not have a significant impact on its Consolidated Financial Statements:

• FASB Accounting Standards Update (“ASU”) 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control

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

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

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

Recently Issued Accounting Standards Updates

FASB Accounting Standards Update (“ASU”) 2017-08, Receivables– Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities

The FASB issued ASU 2017-08 in March 2017, which amends the amortization period for certain callable debt securities held at a premium by shortening such period to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.

The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The amendments in this Update should be applied on a modified retrospective basis with a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.

The Corporation does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated statements of financial condition and results of operations since the premium of purchased callable debt securities is not significant.

FASB Accounting Standards Update (“ASU”) 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

The FASB issued ASU 2017-07 in March 2017, which requires that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization.

11

The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The amendments in this Update should be applied retrospectively for the presentation of the service cost component and other components of net benefit cost and prospectively for the capitalization of the service cost component.

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

For recently issued Accounting Standards Updates not yet effective, refer to Note 3 to the Consolidated Financial Statements included in the 2016 Form 10-K.

12

Note 4 - 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 $ 1.2 billion at March 31, 2017 (December 31, 2016 - $ 1.2 billion). Cash and due from banks, as well as other highly liquid securities, are used to cover the required average reserve balances.

At March 31, 2017, the Corporation held $45 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, 2016 - $31 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.

13

Note 5 – Investment securities available-for-sale

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities available-for-sale at March 31, 2017 and December 31, 2016.

	At March 31, 2017
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Weighted average yield
U.S. Treasury securities
Within 1 year	$	944,180	$	408	$	242	$	944,346		0.98	%
After 1 to 5 years		2,007,013		1,039		9,278		1,998,774		1.24
Total U.S. Treasury securities		2,951,193		1,447		9,520		2,943,120		1.16
Obligations of U.S. Government sponsored entities
Within 1 year		125,028		39		46		125,021		0.97
After 1 to 5 years		588,119		724		1,785		587,058		1.40
After 5 to 10 years		200		3		—		203		5.64
Total obligations of U.S. Government sponsored entities		713,347		766		1,831		712,282		1.32
Obligations of Puerto Rico, States and political subdivisions
After 1 to 5 years		6,480		—		127		6,353		2.78
After 5 to 10 years		5,000		—		1,967		3,033		3.80
After 10 years		17,625		—		6,102		11,523		7.09
Total obligations of Puerto Rico, States and political subdivisions		29,105		—		8,196		20,909		5.56
Collateralized mortgage obligations - federal agencies
Within 1 year		48		—		—		48		4.00
After 1 to 5 years		18,086		349		50		18,385		2.87
After 5 to 10 years		35,328		354		59		35,623		2.67
After 10 years		1,111,730		5,130		24,030		1,092,830		1.99
Total collateralized mortgage obligations - federal agencies		1,165,192		5,833		24,139		1,146,886		2.02
Mortgage-backed securities
Within 1 year		49		—		—		49		4.73
After 1 to 5 years		18,205		441		77		18,569		3.80
After 5 to 10 years		333,619		3,071		2,324		334,366		2.23
After 10 years		4,049,014		27,557		66,499		4,010,072		2.48
Total mortgage-backed securities		4,400,887		31,069		68,900		4,363,056		2.46
Equity securities (without contractual maturity)		1,026		833		—		1,859		8.13
Other
Within 1 year		8,445		9		—		8,454		1.86
After 5 to 10 years		935		26		—		961		3.62
Total other		9,380		35		—		9,415		2.04
Total investment securities available-for-sale[1]	$	9,270,130	$	39,983	$	112,586	$	9,197,527		1.91	%

[1] Includes $4.9 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 $4.2 billion serve as collateral for public funds.

14

	At December 31, 2016
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Weighted average yield
U.S. Treasury securities
Within 1 year	$	844,002	$	1,254	$	28	$	845,228		1.00	%
After 1 to 5 years		1,300,729		214		9,551		1,291,392		1.11
Total U.S. Treasury securities		2,144,731		1,468		9,579		2,136,620		1.06
Obligations of U.S. Government sponsored entities
Within 1 year		100,050		102		—		100,152		0.98
After 1 to 5 years		613,293		710		2,505		611,498		1.38
After 5 to 10 years		200		—		—		200		5.64
Total obligations of U.S. Government sponsored entities		713,543		812		2,505		711,850		1.32
Obligations of Puerto Rico, States and political subdivisions
After 1 to 5 years		6,419		—		161		6,258		2.89
After 5 to 10 years		5,000		—		1,550		3,450		3.80
After 10 years		17,605		—		4,542		13,063		7.09
Total obligations of Puerto Rico, States and political subdivisions		29,024		—		6,253		22,771		5.60
Collateralized mortgage obligations - federal agencies
Within 1 year		13		—		—		13		1.23
After 1 to 5 years		18,524		429		28		18,925		2.89
After 5 to 10 years		39,178		428		61		39,545		2.68
After 10 years		1,180,686		6,313		23,956		1,163,043		1.99
Total collateralized mortgage obligations - federal agencies		1,238,401		7,170		24,045		1,221,526		2.02
Mortgage-backed securities
Within 1 year		55		1		—		56		4.76
After 1 to 5 years		19,960		537		43		20,454		3.86
After 5 to 10 years		317,185		3,701		1,721		319,165		2.29
After 10 years		3,805,675		28,772		68,790		3,765,657		2.47
Total mortgage-backed securities		4,142,875		33,011		70,554		4,105,332		2.46
Equity securities (without contractual maturity)		1,246		876		—		2,122		7.94
Other
Within 1 year		8,539		11		—		8,550		1.78
After 5 to 10 years		1,004		31		—		1,035		3.62
Total other		9,543		42		—		9,585		1.97
Total investment securities available-for-sale[1]	$	8,279,363	$	43,379	$	112,936	$	8,209,806		1.94	%

[1] Includes $4.1 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 $3.4 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.

During the quarter ended March 31, 2017, the Corporation sold equity securities with a realized gain of $162 thousand. The proceeds from these sales were $381 thousand. There were no securities sold during the quarter ended March 31, 2016.

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, 2017 and December 31, 2016.

15

	At March 31, 2017
	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	$	1,711,899	$	9,520	$	—	$	—	$	1,711,899	$	9,520
Obligations of U.S. Government sponsored entities		405,934		1,797		2,945		34		408,879		1,831
Obligations of Puerto Rico, States and political subdivisions		6,353		127		14,556		8,069		20,909		8,196
Collateralized mortgage obligations - federal agencies		471,245		8,778		325,069		15,361		796,314		24,139
Mortgage-backed securities		3,601,972		68,519		14,453		381		3,616,425		68,900
Total investment securities available-for-sale in an unrealized loss position	$	6,197,403	$	88,741	$	357,023	$	23,845	$	6,554,426	$	112,586

	At December 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
U.S. Treasury securities	$	1,162,110	$	9,579	$	—	$	—	$	1,162,110	$	9,579
Obligations of U.S. Government sponsored entities		430,273		2,426		3,126		79		433,399		2,505
Obligations of Puerto Rico, States and political subdivisions		6,258		161		16,512		6,092		22,770		6,253
Collateralized mortgage obligations - federal agencies		505,503		8,112		339,236		15,933		844,739		24,045
Mortgage-backed securities		3,537,606		70,173		15,113		381		3,552,719		70,554
Total investment securities available-for-sale in an unrealized loss position	$	5,641,750	$	90,451	$	373,987	$	22,485	$	6,015,737	$	112,936

As of March 31, 2017, the available-for-sale investment portfolio reflects gross unrealized losses of approximately $113 million, driven by Mortgage backed securities and Collateralized mortgage obligations.

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.

The portfolio of “Obligations of Puerto Rico, States and Political subdivisions” include senior obligations from the Puerto Rico Sales Tax Financing Corporation (“COFINA”) with a fair value of $15 million (December 31, 2016 - $17 million) that had an unrealized loss of $8 million, included in accumulated other comprehensive income, at March 31, 2017 (December 31, 2016 - $6 million). As further discussed in Note 21, on May 3, 2017, the Oversight Board established pursuant to the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”) filed a petition in the Federal Court for the District of Puerto Rico to utilize the restructuring authority provided by Title III of PROMESA for the Commonwealth; on May 5, 2017, the Oversight Board sought relief under Title III with respect to COFINA. Act No. 26-2017 of 2017, signed on April 29, 2017, also allows the Commonwealth to use COFINA revenues for operational expenses, subject to certain conditions and restrictions. Although to date, COFINA has made all debt service payments and has certain moneys in reserve to make certain additional debt service payments in the ordinary course, the Corporation, in light of these developments, will re-evaluate during the second quarter of 2017 whether the decline in value of these investments is other-than-temporary, which would result in the recognition of a charge to earnings related to credit losses with respect to such COFINA senior obligations. Further negative evidence impacting the liquidity and sources of repayment of the obligations of Puerto Rico and its political subdivisions, or any further actions taken by the Commonwealth or the Oversight Board that affect our holdings of obligations of the Commonwealth or its instrumentalities, could result in additional charges to earnings to recognize estimated credit losses determined to be other-than-temporary.

At March 31, 2017, the Corporation did not have the intent to sell debt securities in an unrealized loss position and it was not more likely than not that the Corporation would have to sell the investments securities prior to recovery of their amortized cost basis.

16

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, 2017				December 31, 2016
(In thousands)	Amortized cost		Fair value		Amortized cost		Fair value
FNMA	$	3,435,528	$	3,392,789	$	3,255,844	$	3,211,443
Freddie Mac		1,391,110		1,371,949		1,381,197		1,361,933

17

Note 6 – Investment securities held-to-maturity

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities held-to-maturity at March 31, 2017 and December 31, 2016.

	At March 31, 2017
(In thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Weighted average yield
Obligations of Puerto Rico, States and political subdivisions
Within 1 year	$	3,235	$	—	$	1,375	$	1,860		5.95	%
After 1 to 5 years		15,200		—		6,627		8,573		6.03
After 5 to 10 years		17,485		—		7,689		9,796		6.24
After 10 years		58,333		1,387		8,360		51,360		1.80
Total obligations of Puerto Rico, States and political subdivisions		94,253		1,387		24,051		71,589		3.45
Collateralized mortgage obligations - federal agencies
After 5 to 10 years		73		4		—		77		5.45
Total collateralized mortgage obligations - federal agencies		73		4		—		77		5.45
Other
Within 1 year		1,250		—		25		1,225		1.62
After 1 to 5 years		750		—		13		737		2.75
Total other		2,000		—		38		1,962		2.04
Total investment securities held-to-maturity[1]	$	96,326	$	1,391	$	24,089	$	73,628		3.42	%

[1] Includes $94.3 million pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral.

	At December 31, 2016
			Gross		Gross				Weighted
(In thousands)	Amortized cost		unrealized gains		unrealized losses		Fair value		average yield
Obligations of Puerto Rico, States and political subdivisions
Within 1 year	$	3,105	$	—	$	1,240	$	1,865		5.90	%
After 1 to 5 years		14,540		—		5,957		8,583		6.02
After 5 to 10 years		18,635		—		7,766		10,869		6.20
After 10 years		59,747		1,368		8,892		52,223		1.91
Total obligations of Puerto Rico, States and political subdivisions		96,027		1,368		23,855		73,540		3.49
Collateralized mortgage obligations - federal agencies
After 5 to 10 years		74		4		—		78		5.45
Total collateralized mortgage obligations - federal agencies		74		4		—		78		5.45
Other
Within 1 year		1,000		—		3		997		1.65
After 1 to 5 years		1,000		—		39		961		2.44
Total other		2,000		—		42		1,958		2.05
Total investment securities held-to-maturity[1]	$	98,101	$	1,372	$	23,897	$	75,576		3.46	%

[1] Includes $53.1 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, 2017 and December 31, 2016.

18

	At March 31, 2017
	Less than 12 months				12 months or more				Total
(In thousands)	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
Obligations of Puerto Rico, States and political subdivisions	$	31,526	$	1,764	$	28,703	$	22,287	$	60,229	$	24,051
Other		737		13		1,225		25		1,962		38
Total investment securities held-to-maturity in an unrealized loss position	$	32,263	$	1,777	$	29,928	$	22,312	$	62,191	$	24,089

	At December 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 Puerto Rico, States and political subdivisions	$	31,294	$	1,702	$	30,947	$	22,153	$	62,241	$	23,855
Other		491		9		1,217		33		1,708		42
Total investment securities held-to-maturity in an unrealized loss position	$	31,785	$	1,711	$	32,164	$	22,186	$	63,949	$	23,897

As indicated in Note 5 to these Consolidated Financial Statements, management evaluates investment securities for OTTI declines in fair value on a quarterly basis.

The “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-maturity at March 31, 2017 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. This includes $51 million of general and special obligation bonds issued by three municipalities of Puerto Rico, which are payable primarily from, and have a lien on, certain property taxes imposed by the issuing municipality. In the case of general obligations, they also benefit from a pledge of the full faith, credit and unlimited taxing power of the issuing municipality and issuing municipalities are required by law to levy property taxes in an amount sufficient for the payment of debt service on such general obligations bonds.

The portfolio also includes approximately $43 million in securities for which the underlying source of payment is not the central government, but in which a government instrumentality 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, 2017. 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.

Refer to Note 21 for additional information on the Corporation’s exposure to the Puerto Rico Government.

19

Note 7 – 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 9.

For a summary of the accounting policies related to loans, interest recognition and allowance for loan losses refer to the summary of significant accounting policies included in Note 2 of the 2016 Form10K.

During the quarter ended March 31, 2017, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $136 million, consumer loans of $42 million and leasing loans of $2 million. During the quarter ended March 31, 2016, the Corporation recorded purchases of mortgage loans amounting to $122 million, consumer loans of $106 million and commercial loans of $51 million.

The Corporation performed whole-loan sales involving approximately $28 million of residential mortgage loans during the quarter ended March 31, 2017 (March 31, 2016 - $21 million). Also, during the quarter ended March 31, 2017, the Corporation securitized approximately $147 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities and $28 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities, compared to $134 million and $36 million, respectively, during the quarter ended March 31, 2016.

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, 2017 and December 31, 2016, including loans previously covered by the commercial FDIC loss sharing agreements.

20

March 31, 2017
Puerto Rico
	Past due										Non-covered
(In thousands)	30-59 days		60-89 days		90 days or more		Total past due		Current		loans HIP Puerto Rico
Commercial multi-family	$	1,727	$	—	$	578	$	2,305	$	144,547	$	146,852
Commercial real estate non-owner occupied		97,018		1,487		34,932		133,437		2,380,158		2,513,595
Commercial real estate owner occupied		13,055		1,768		115,260		130,083		1,608,195		1,738,278
Commercial and industrial		7,127		1,286		46,968		55,381		2,610,224		2,665,605
Construction		—		—		1,668		1,668		93,791		95,459
Mortgage		293,694		146,474		777,260		1,217,428		4,652,290		5,869,718
Leasing		8,141		1,052		2,444		11,637		708,006		719,643
Consumer:
Credit cards		12,330		7,835		19,330		39,495		1,038,989		1,078,484
Home equity lines of credit		492		—		572		1,064		7,085		8,149
Personal		13,131		7,382		19,460		39,973		1,103,362		1,143,335
Auto		30,214		6,228		12,685		49,127		779,832		828,959
Other		729		611		19,480		20,820		147,332		168,152
Total	$	477,658	$	174,123	$	1,050,637	$	1,702,418	$	15,273,811	$	16,976,229
March 31, 2017
U.S. mainland
	Past due
(In thousands)	30-59 days		60-89 days		90 days or more		Total past due		Current		Loans HIP U.S. mainland
Commercial multi-family	$	26	$	—	$	199	$	225	$	1,108,347	$	1,108,572
Commercial real estate non-owner occupied		1,030		—		1,629		2,659		1,445,550		1,448,209
Commercial real estate owner occupied		2,451		—		762		3,213		239,642		242,855
Commercial and industrial		5,426		1		101,756		107,183		840,551		947,734
Construction		100		—		—		100		735,746		735,846
Mortgage		13,873		3,458		11,889		29,220		729,049		758,269
Legacy		660		267		3,335		4,262		36,426		40,688
Consumer:
Credit cards		6		1		35		42		115		157
Home equity lines of credit		2,085		453		5,801		8,339		228,306		236,645
Personal		2,311		1,424		2,404		6,139		233,188		239,327
Auto		—		—		—		—		7		7
Other		—		4		—		4		179		183
Total	$	27,968	$	5,608	$	127,810	$	161,386	$	5,597,106	$	5,758,492

21

March 31, 2017
Popular, Inc.
	Past due										Non-covered
(In thousands)	30-59 days		60-89 days		90 days or more		Total past due		Current		loans HIP Popular, Inc.[1] [2]
Commercial multi-family	$	1,753	$	—	$	777	$	2,530	$	1,252,894	$	1,255,424
Commercial real estate non-owner occupied		98,048		1,487		36,561		136,096		3,825,708		3,961,804
Commercial real estate owner occupied		15,506		1,768		116,022		133,296		1,847,837		1,981,133
Commercial and industrial		12,553		1,287		148,724		162,564		3,450,775		3,613,339
Construction		100		—		1,668		1,768		829,537		831,305
Mortgage		307,567		149,932		789,149		1,246,648		5,381,339		6,627,987
Leasing		8,141		1,052		2,444		11,637		708,006		719,643
Legacy[3]		660		267		3,335		4,262		36,426		40,688
Consumer:
Credit cards		12,336		7,836		19,365		39,537		1,039,104		1,078,641
Home equity lines of credit		2,577		453		6,373		9,403		235,391		244,794
Personal		15,442		8,806		21,864		46,112		1,336,550		1,382,662
Auto		30,214		6,228		12,685		49,127		779,839		828,966
Other		729		615		19,480		20,824		147,511		168,335
Total	$	505,626	$	179,731	$	1,178,447	$	1,863,804	$	20,870,917	$	22,734,721

[1] Non-covered loans held-in-portfolio are net of $124 million in unearned income and exclude $85 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 $4.5 billion were pledged at the Federal Home Loan Bank(“FHLB”) as collateral for borrowings, $2.3 billion at the Federal Reserve Bank (“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, 2016
Puerto Rico
	Past due										Non-covered
(In thousands)	30-59 days		60-89 days		90 days or more		Total past due		Current		loans HIP Puerto Rico
Commercial multi-family	$	232	$	—	$	664	$	896	$	173,644	$	174,540
Commercial real estate non-owner occupied		98,604		4,785		51,435		154,824		2,409,461		2,564,285
Commercial real estate owner occupied		12,967		5,014		112,997		130,978		1,660,497		1,791,475
Commercial and industrial		19,156		2,638		32,147		53,941		2,617,976		2,671,917
Construction		—		—		1,668		1,668		83,890		85,558
Mortgage		289,635		136,558		801,251		1,227,444		4,689,056		5,916,500
Leasing		6,619		1,356		3,062		11,037		691,856		702,893
Consumer:
Credit cards		11,646		8,752		18,725		39,123		1,061,484		1,100,607
Home equity lines of credit		—		65		185		250		8,101		8,351
Personal		12,148		7,918		20,686		40,752		1,109,425		1,150,177
Auto		32,441		7,217		12,320		51,978		774,614		826,592
Other		1,259		294		19,311		20,864		154,665		175,529
Total	$	484,707	$	174,597	$	1,074,451	$	1,733,755	$	15,434,669	$	17,168,424

22

December 31, 2016
U.S. mainland
	Past due
(In thousands)	30-59 days		60-89 days		90 days or more		Total past due		Current		Loans HIP U.S. mainland
Commercial multi-family	$	5,952	$	—	$	206	$	6,158	$	1,058,138	$	1,064,296
Commercial real estate non-owner occupied		1,992		379		1,195		3,566		1,353,750		1,357,316
Commercial real estate owner occupied		2,116		540		472		3,128		240,617		243,745
Commercial and industrial		960		610		101,257		102,827		828,106		930,933
Construction		—		—		—		—		690,742		690,742
Mortgage		15,974		5,272		11,713		32,959		746,902		779,861
Legacy		833		346		3,337		4,516		40,777		45,293
Consumer:
Credit cards		8		28		30		66		92		158
Home equity lines of credit		2,908		1,055		4,762		8,725		243,450		252,175
Personal		2,547		1,675		1,864		6,086		234,521		240,607
Auto		—		—		—		—		9		9
Other		—		—		8		8		180		188
Total	$	33,290	$	9,905	$	124,844	$	168,039	$	5,437,284	$	5,605,323
December 31, 2016
Popular, Inc.
	Past due										Non-covered
(In thousands)	30-59 days		60-89 days		90 days or more		Total past due		Current		loans HIP Popular, Inc.[1] [2]
Commercial multi-family	$	6,184	$	—	$	870	$	7,054	$	1,231,782	$	1,238,836
Commercial real estate non-owner occupied		100,596		5,164		52,630		158,390		3,763,211		3,921,601
Commercial real estate owner occupied		15,083		5,554		113,469		134,106		1,901,114		2,035,220
Commercial and industrial		20,116		3,248		133,404		156,768		3,446,082		3,602,850
Construction		—		—		1,668		1,668		774,632		776,300
Mortgage		305,609		141,830		812,964		1,260,403		5,435,958		6,696,361
Leasing		6,619		1,356		3,062		11,037		691,856		702,893
Legacy[3]		833		346		3,337		4,516		40,777		45,293
Consumer:
Credit cards		11,654		8,780		18,755		39,189		1,061,576		1,100,765
Home equity lines of credit		2,908		1,120		4,947		8,975		251,551		260,526
Personal		14,695		9,593		22,550		46,838		1,343,946		1,390,784
Auto		32,441		7,217		12,320		51,978		774,623		826,601
Other		1,259		294		19,319		20,872		154,845		175,717
Total	$	517,997	$	184,502	$	1,199,295	$	1,901,794	$	20,871,953	$	22,773,747

[1] Non-covered loans held-in-portfolio are net of $121 million in unearned income and exclude $89 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 $4.5 billion were pledged at the FHLB as collateral for borrowings, $2.3 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, 2017 and December 31, 2016. Accruing loans past due 90 days or more consist primarily of credit cards, Federal Housing Administration (“FHA”) / U.S. Department of Veterans Affairs (“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.

23

At March 31, 2017
	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	$	578	$	—	$	199	$	—	$	777	$	—
Commercial real estate non-owner occupied		23,259		—		1,629		—		24,888		—
Commercial real estate owner occupied		104,950		—		762		—		105,712		—
Commercial and industrial		46,690		278		1,174		—		47,864		278
Mortgage[3]		319,450		387,641		11,889		—		331,339		387,641
Leasing		2,444		—		—		—		2,444		—
Legacy		—		—		3,335		—		3,335		—
Consumer:
Credit cards		—		19,330		35		—		35		19,330
Home equity lines of credit		—		572		5,801		—		5,801		572
Personal		19,365		9		2,404		—		21,769		9
Auto		12,685		—		—		—		12,685		—
Other		18,964		516		—		—		18,964		516
Total[2]	$	548,385	$	408,346	$	27,228	$	—	$	575,613	$	408,346

[1] Non-covered loans of $194 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 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 $173 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, 2017. Furthermore, the Corporation has approximately $59 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, 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	$	664	$	—	$	206	$	—	$	870	$	—
Commercial real estate non-owner occupied		24,611		—		1,195		—		25,806		—
Commercial real estate owner occupied		102,771		—		472		—		103,243		—
Commercial and industrial		31,609		538		1,820		—		33,429		538
Mortgage[3]		318,194		406,583		11,713		—		329,907		406,583
Leasing		3,062		—		—		—		3,062		—
Legacy		—		—		3,337		—		3,337		—
Consumer:
Credit cards		—		18,725		30		—		30		18,725
Home equity lines of credit		—		185		4,762		—		4,762		185
Personal		20,553		34		1,864		—		22,417		34
Auto		12,320		—		—		—		12,320		—
Other		18,724		587		8		—		18,732		587
Total[2]	$	532,508	$	426,652	$	25,407	$	—	$	557,915	$	426,652

[1] Non-covered loans by $215 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 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 $181 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, 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.

24

Covered loans

The following tables present the composition of loans by past due status at March 31, 2017 and December 31, 2016 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, 2017
	Past due
	30-59		60-89		90 days		Total				Covered
(In thousands)	days		days		or more		past due		Current		loans HIP [1]
Mortgage	$	33,374	$	2,897	$	63,073	$	99,344	$	436,943	$	536,287
Consumer		1,164		—		732		1,896		13,797		15,693
Total covered loans	$	34,538	$	2,897	$	63,805	$	101,240	$	450,740	$	551,980

[1] Includes $325 million pledged to secure credit facilities at the FHLB which are not permitted to sell or repledge the collateral.

December 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	$	25,506	$	12,904	$	69,856	$	108,266	$	448,304	$	556,570
Consumer		751		245		1,074		2,070		14,238		16,308
Total covered loans	$	26,257	$	13,149	$	70,930	$	110,336	$	462,542	$	572,878

[1] Includes $337 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, 2017 and December 31, 2016.

	March 31, 2017				December 31, 2016
	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	$	3,798	$	—	$	3,794	$	—
Consumer		142		—		121		—
Total[1]	$	3,940	$	—	$	3,915	$	—

[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, 2017 (December 31, 2016 - $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.

25

	March 31, 2017									December 31, 2016
	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	$	957,360		$	14,031		$	971,391		$	985,181		$	14,440		$	999,621
Commercial and industrial		100,759			—			100,759			103,476			—			103,476
Construction		—			1,668			1,668			—			1,668			1,668
Mortgage		571,594			23,990			595,584			587,949			25,781			613,730
Consumer		18,615			883			19,498			18,775			1,059			19,834
Carrying amount [1]		1,648,328			40,572			1,688,900			1,695,381			42,948			1,738,329
Allowance for loan losses		(59,283	)		(7,261	)		(66,544	)		(61,855	)		(7,022	)		(68,877	)
Carrying amount, net of allowance	$	1,589,045		$	33,311		$	1,622,356		$	1,633,526		$	35,926		$	1,669,452

[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 $542 million as of March 31, 2017 and $563 million as of December 31, 2016.

The outstanding principal balance of Westernbank loans accounted pursuant to ASC Subtopic 310-30, amounted to $2.1 billion at March 31, 2017 (December 31, 2016 - $2.1 billion). At March 31, 2017, 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, 2017 and 2016, were as follows:

	Activity in the accretable yield
	Westernbank loans ASC 310-30
	For the quarters ended
	March 31, 2017									March 31, 2016
(In thousands)	Non-credit impaired loans			Credit impaired loans			Total			Non-credit impaired loans			Credit impaired loans			Total
Beginning balance	$	1,001,908		$	8,179		$	1,010,087		$	1,105,732		$	6,726		$	1,112,458
Accretion		(36,016	)		(876	)		(36,892	)		(42,000	)		(1,533	)		(43,533	)
Change in expected cash flows		7,789			222			8,011			54,544			5,339			59,883
Ending balance	$	973,681		$	7,525		$	981,206		$	1,118,276		$	10,532		$	1,128,808

26

	Carrying amount of Westernbank loans accounted for pursuant to ASC 310-30
	For the quarters ended
	March 31, 2017									March 31, 2016
(In thousands)	Non-credit impaired loans			Credit impaired loans			Total			Non-credit impaired loans			Credit impaired loans			Total
Beginning balance	$	1,695,381		$	42,948		$	1,738,329		$	1,898,146		$	76,355		$	1,974,501
Accretion		36,016			876			36,892			42,000			1,533			43,533
Collections / loan sales / charge-offs		(83,069	)		(3,252	)		(86,321	)		(74,206	)		(8,387	)		(82,593	)
Ending balance[1]	$	1,648,328		$	40,572		$	1,688,900		$	1,865,940		$	69,501		$	1,935,441
Allowance for loan losses ASC 310-30 Westernbank loans		(59,283	)		(7,261	)		(66,544	)		(58,703	)		(4,264	)		(62,967	)
Ending balance, net of ALLL	$	1,589,045		$	33,311		$	1,622,356		$	1,807,237		$	65,237		$	1,872,474

[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 $ 542 million as of March 31, 2017 (March 31, 2016-$615 million).

Other loans acquired with deteriorated credit quality

The outstanding principal balance of other acquired loans accounted pursuant to ASC Subtopic 310-30, amounted to $689 million at March 31, 2017 (December 31, 2016 - $700 million). At March 31, 2017, 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, 2017 and 2016 were as follows:

Activity in the accretable yield - Other acquired loans ASC 310-30
	For the quarters ended
(In thousands)	March 31, 2017			March 31, 2016
Beginning balance	$	278,896		$	221,128
Additions		3,254			4,340
Accretion		(8,836	)		(8,555	)
Change in expected cash flows		36,464			50,855
Ending balance	$	309,778		$	267,768

Carrying amount of other acquired loans accounted for pursuant to ASC 310-30
	For the quarters ended
(In thousands)	March 31, 2017			March 31, 2016
Beginning balance	$	562,695		$	564,050
Purchase accounting adjustments related to the Doral Bank Transaction (Refer to Note14)		—			(4,707	)
Additions		5,581			10,051
Accretion		8,836			8,555
Collections and charge-offs		(20,388	)		(15,226	)
Ending balance	$	556,724		$	562,723
Allowance for loan losses ASC 310-30 non-covered loans		(28,909	)		(15,258	)
Ending balance, net of allowance for loan losses	$	527,815		$	547,465

27

Note 8 – 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, 2017, 55% (March 31, 2016 - 44%) 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, other consumer and commercial real estate owner occupied portfolios for 2017 and in the mortgage, commercial multi-family and commercial and industrial loan portfolios for 2016.

For the period ended March 31, 2017, 0.35% (March 31, 2016 - 2%) of our 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 commercial multifamily loan and legacy portfolios for 2017 and in the consumer loan portfolio for 2016.

• 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.

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, 2017 and 2016.

28

For the quarter ended March 31, 2017
Puerto Rico - Non-covered loans
(In thousands)	Commercial			Construction			Mortgage			Leasing			Consumer			Total
Allowance for credit losses:
Beginning balance	$	189,686		$	1,353		$	143,320		$	7,662		$	125,963		$	467,984
Provision		583			464			15,172			1,048			14,211			31,478
Charge-offs		(11,071	)		(3,587	)		(14,983	)		(1,341	)		(21,812	)		(52,794	)
Recoveries		8,433			3,731			1,428			528			5,729			19,849
Ending balance	$	187,631		$	1,961		$	144,937		$	7,897		$	124,091		$	466,517
Specific ALLL	$	51,276		$	—		$	41,067		$	522		$	22,331		$	115,196
General ALLL	$	136,355		$	1,961		$	103,870		$	7,375		$	101,760		$	351,321
Loans held-in-portfolio:
Impaired non-covered loans	$	348,823		$	—		$	501,647		$	1,803		$	106,236		$	958,509
Non-covered loans held-in-portfolio excluding impaired loans		6,715,507			95,459			5,368,071			717,840			3,120,843			16,017,720
Total non-covered loans held-in-portfolio	$	7,064,330		$	95,459		$	5,869,718		$	719,643		$	3,227,079		$	16,976,229
For the quarter ended March 31, 2017
Puerto Rico - Covered loans
(In thousands)	Commercial			Construction			Mortgage			Leasing			Consumer			Total
Allowance for credit losses:
Beginning balance	$	—		$	—		$	30,159		$	—		$	191		$	30,350
Provision (reversal of provision)		—			—			(1,690	)		—			331			(1,359	)
Charge-offs		—			—			(1,231	)		—			(93	)		(1,324	)
Recoveries		—			—			103			—			1			104
Ending balance	$	—		$	—		$	27,341		$	—		$	430		$	27,771
Specific ALLL	$	—		$	—		$	—		$	—		$	—		$	—
General ALLL	$	—		$	—		$	27,341		$	—		$	430		$	27,771
Loans held-in-portfolio:
Impaired covered loans	$	—		$	—		$	—		$	—		$	—		$	—
Covered loans held-in-portfolio excluding impaired loans		—			—			536,287			—			15,693			551,980
Total covered loans held-in-portfolio	$	—		$	—		$	536,287		$	—		$	15,693		$	551,980
For the quarter ended March 31, 2017
U.S. Mainland
(In thousands)	Commercial			Construction			Mortgage			Legacy			Consumer			Total
Allowance for credit losses:
Beginning balance	$	12,968		$	8,172		$	4,614		$	1,343		$	15,220		$	42,317
Provision (reversal of provision)		7,622			(136	)		(436	)		(665	)		4,194			10,579
Charge-offs		(70	)		—			(106	)		(41	)		(4,733	)		(4,950	)
Recoveries		533			—			210			529			990			2,262
Ending balance	$	21,053		$	8,036		$	4,282		$	1,166		$	15,671		$	50,208
Specific ALLL	$	—		$	—		$	2,197		$	—		$	679		$	2,876
General ALLL	$	21,053		$	8,036		$	2,085		$	1,166		$	14,992		$	47,332
Loans held-in-portfolio:
Impaired loans	$	—		$	—		$	8,921		$	—		$	2,780		$	11,701
Loans held-in-portfolio excluding impaired loans		3,747,370			735,846			749,348			40,688			473,539			5,746,791
Total loans held-in-portfolio	$	3,747,370		$	735,846		$	758,269		$	40,688		$	476,319		$	5,758,492

29

For the quarter ended March 31, 2017
Popular, Inc.
(In thousands)	Commercial			Construction			Mortgage			Legacy			Leasing			Consumer			Total
Allowance for credit losses:
Beginning balance	$	202,654		$	9,525		$	178,093		$	1,343		$	7,662		$	141,374		$	540,651
Provision (reversal of provision)		8,205			328			13,046			(665	)		1,048			18,736			40,698
Charge-offs		(11,141	)		(3,587	)		(16,320	)		(41	)		(1,341	)		(26,638	)		(59,068	)
Recoveries		8,966			3,731			1,741			529			528			6,720			22,215
Ending balance	$	208,684		$	9,997		$	176,560		$	1,166		$	7,897		$	140,192		$	544,496
Specific ALLL	$	51,276		$	—		$	43,264		$	—		$	522		$	23,010		$	118,072
General ALLL	$	157,408		$	9,997		$	133,296		$	1,166		$	7,375		$	117,182		$	426,424
Loans held-in-portfolio:
Impaired loans	$	348,823		$	—		$	510,568		$	—		$	1,803		$	109,016		$	970,210
Loans held-in-portfolio excluding impaired loans		10,462,877			831,305			6,653,706			40,688			717,840			3,610,075			22,316,491
Total loans held-in-portfolio	$	10,811,700		$	831,305		$	7,164,274		$	40,688		$	719,643		$	3,719,091		$	23,286,701

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

30

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

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	)