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Loans Receivable

9 Months Ended

Sep. 30, 2018

NOTE 5 - LOANS

Oriental’s loan portfolio is composed of two segments, loans initially accounted for under the amortized cost method (referred to as "originated and other" loans) and loans acquired (referred to as "acquired" loans). Acquired loans are further segregated between acquired BBVAPR loans and acquired Eurobank loans.

The composition of Oriental’s loan portfolio at September 30, 2018 and December 31, 2017 was as follows:

	September 30,		December 31,
	2018		2017
	(In thousands)
Originated and other loans and leases held for investment:
Mortgage	$	667,224	$	683,607
Commercial		1,540,027		1,307,261
Consumer		345,399		330,039
Auto and leasing		1,084,912		883,985
		3,637,562		3,204,892
Allowance for loan and lease losses on originated and other loans and leases		(95,236)		(92,718)
		3,542,326		3,112,174
Deferred loan costs, net		7,556		6,695
Total originated and other loans held for investment, net		3,549,882		3,118,869
Acquired loans:
Acquired BBVAPR loans:
Accounted for under ASC 310-20 (Loans with revolving feature and/or
acquired at a premium)
Commercial		2,778		4,380
Consumer		24,914		28,915
Auto		7,494		21,969
		35,186		55,264
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-20		(2,350)		(3,862)
		32,836		51,402
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		503,861		532,053
Commercial		190,178		243,092
Consumer		95		1,431
Auto		20,363		43,696
		714,497		820,272
Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-30		(43,875)		(45,755)
		670,622		774,517
Total acquired BBVAPR loans, net		703,458		825,919
Acquired Eurobank loans:
Loans secured by 1-4 family residential properties		64,785		69,538
Commercial		49,262		53,793
Consumer		895		1,112
Total acquired Eurobank loans		114,942		124,443
Allowance for loan and lease losses on Eurobank loans		(24,281)		(25,174)
Total acquired Eurobank loans, net		90,661		99,269
Total acquired loans, net		794,119		925,188
Total held for investment, net		4,344,001		4,044,057
Mortgage loans held-for-sale		8,979		12,272
Total loans, net	$	4,352,980	$	4,056,329

As a result of the devastation caused by hurricanes Irma and Maria, Oriental offered an automatic three-month moratorium for the payment due on certain loans. The level of delinquencies for mortgage and auto loans as of December 31, 2017 was impacted by the loan moratorium. Aging of current and early delinquent loans in moratorium were frozen at September 30, 2017, throughout the moratorium period. In addition, although the repayment schedule was modified as part of the moratorium, certain borrowers continued to make payments shortly after the moratorium, having an impact on the respective delinquency status at December 31, 2017. At September 30, 2018, all of the loan moratoriums have expired, and total delinquency levels have returned to pre-hurricane levels with some improvements.

Originated and Other Loans and Leases Held for Investment

Oriental’s originated and other loans held for investment are encompassed within four portfolio segments: mortgage, commercial, consumer, and auto and leasing.

The tables below present the aging of the recorded investment in gross originated and other loans held for investment at September 30, 2018 and December 31, 2017, by class of loans. Mortgage loans past due include delinquent loans in the GNMA 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.

	September 30, 2018
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Mortgage
Traditional (by origination year):
Up to the year 2002	$	276	$	890	$	3,272	$	4,438	$	38,120	$	42,558	$	240
Years 2003 and 2004		237		1,740		6,587		8,564		69,146		77,710		-
Year 2005		92		858		3,515		4,465		36,710		41,175		-
Year 2006		348		1,484		4,747		6,579		51,392		57,971		-
Years 2007, 2008 and 2009		178		1,195		7,774		9,147		54,223		63,370		56
Years 2010, 2011, 2012, 2013		258		1,238		7,946		9,442		106,819		116,261		180
Years 2014, 2015, 2016, 2017 and 2018		-		593		1,303		1,896		130,610		132,506		-
		1,389		7,998		35,144		44,531		487,020		531,551		476
Non-traditional		-		117		2,740		2,857		11,842		14,699		-
Loss mitigation program		10,346		5,435		20,797		36,578		70,819		107,397		2,631
		11,735		13,550		58,681		83,966		569,681		653,647		3,107
Home equity secured personal loans		-		-		-		-		252		252		-
GNMA's buy-back option program		-		-		13,325		13,325		-		13,325		-
		11,735		13,550		72,006		97,291		569,933		667,224		3,107
Commercial
Commercial secured by real estate:
Corporate		-		-		-		-		306,372		306,372		-
Institutional		-		-		-		-		72,372		72,372		-
Middle market		839		-		5,481		6,320		175,822		182,142		-
Retail		1,242		309		9,245		10,796		210,101		220,897		-
Floor plan		-		-		-		-		3,579		3,579		-
Real estate		-		-		-		-		19,347		19,347		-
		2,081		309		14,726		17,116		787,593		804,709		-
Other commercial and industrial:
Corporate		-		-		-		-		163,766		163,766		-
Institutional		-		-		-		-		143,886		143,886		-
Middle market		-		3,480		2,751		6,231		91,484		97,715		-
Retail		720		131		792		1,643		287,755		289,398		-
Floor plan		150		-		51		201		40,352		40,553		-
		870		3,611		3,594		8,075		727,243		735,318		-
		2,951		3,920		18,320		25,191		1,514,836		1,540,027		-

	September 30, 2018
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Consumer
Credit cards	$	580	$	200	$	602	$	1,382	$	26,342	$	27,724	$	-
Overdrafts		27		-		-		27		129		156		-
Personal lines of credit		44		3		70		117		1,819		1,936		-
Personal loans		3,864		1,731		1,197		6,792		292,738		299,530		-
Cash collateral personal loans		146		66		-		212		15,841		16,053		-
		4,661		2,000		1,869		8,530		336,869		345,399		-
Auto and leasing		54,888		26,940		12,148		93,976		990,936		1,084,912		-
Total	$	74,235	$	46,410	$	104,343	$	224,988	$	3,412,574	$	3,637,562	$	3,107

	December 31, 2017
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Mortgage
Traditional (by origination year):
Up to the year 2002	$	86	$	938	$	3,537	$	4,561	$	41,579	$	46,140	$	467
Years 2003 and 2004		92		1,077		6,304		7,473		75,758		83,231		-
Year 2005		101		383		3,348		3,832		40,669		44,501		68
Year 2006		242		604		5,971		6,817		55,966		62,783		66
Years 2007, 2008 and 2009		358		1,258		8,561		10,177		58,505		68,682		577
Years 2010, 2011, 2012, 2013		233		978		7,393		8,604		116,674		125,278		1,202
Years 2014, 2015, 2016 and 2017		-		75		1,649		1,724		121,194		122,918		-
		1,112		5,313		36,763		43,188		510,345		553,533		2,380
Non-traditional		-		326		3,543		3,869		14,401		18,270		-
Loss mitigation program		7,233		3,331		18,923		29,487		73,793		103,280		4,981
		8,345		8,970		59,229		76,544		598,539		675,083		7,361
Home equity secured personal loans		-		-		-		-		256		256		-
GNMA's buy-back option program		-		-		8,268		8,268		-		8,268		-
		8,345		8,970		67,497		84,812		598,795		683,607		7,361
Commercial
Commercial secured by real estate:
Corporate		-		-		-		-		235,426		235,426		-
Institutional		-		-		118		118		44,648		44,766		-
Middle market		765		-		3,527		4,292		225,649		229,941		-
Retail		352		936		9,695		10,983		235,084		246,067		-
Floor plan		-		-		-		-		3,998		3,998		-
Real estate		-		-		-		-		17,556		17,556		-
		1,117		936		13,340		15,393		762,361		777,754		-
Other commercial and industrial:
Corporate		-		-		-		-		170,015		170,015		-
Institutional		-		-		-		-		125,591		125,591		-
Middle market		-		-		881		881		84,482		85,363		-
Retail		455		103		1,616		2,174		111,078		113,252		-
Floor plan		9		-		51		60		35,226		35,286		-
		464		103		2,548		3,115		526,392		529,507		-
		1,581		1,039		15,888		18,508		1,288,753		1,307,261		-

	December 31, 2017
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Consumer
Credit cards	$	246	$	130	$	1,227	$	1,603	$	26,827	$	28,430	$	-
Overdrafts		20		6		31		57		157		214		-
Personal lines of credit		259		54		87		400		1,820		2,220		-
Personal loans		3,778		1,494		223		5,495		278,982		284,477		-
Cash collateral personal loans		103		59		312		474		14,224		14,698		-
		4,406		1,743		1,880		8,029		322,010		330,039		-
Auto and leasing		21,760		10,399		4,232		36,391		847,594		883,985		-
Total	$	36,092	$	22,151	$	89,497	$	147,740	$	3,057,152	$	3,204,892	$	7,361

At September 30, 2018 and December 31, 2017, Oriental had a carrying balance of $91.4 million and $94.9 million, respectively, in originated and other loans held for investment granted to the Puerto Rico government, including its instrumentalities, public corporations and municipalities as part of the institutional commercial loan segment. All originated and other loans granted to the Puerto Rico government are general obligations of municipalities secured by ad valorem taxation, without limitation as to rate or amount, on all taxable property within the issuing municipalities. The good faith, credit and unlimited taxing power of each issuing municipality are pledged for the payment of its general obligations.

Acquired Loans

Acquired loans were initially measured at fair value and subsequently accounted for under either ASC 310-30 or ASC 310-20 (Non-refundable fees and Other Costs). We have acquired loans in the acquisitions of BBVAPR and Eurobank.

Acquired BBVAPR Loans

Accounted for under ASC 310-20 (Loans with revolving feature and/or acquired at a premium)

Credit cards, retail and commercial revolving lines of credits, floor plans and performing auto loans with FICO scores over 660 acquired at a premium are accounted for under the guidance of ASC 310-20, which requires that any contractually required loan payment receivable in excess of Oriental’s initial investment in the loans be accreted into interest income on a level-yield basis over the life of the loan. Loans accounted for under ASC 310-20 are placed on non-accrual status when past due in accordance with Oriental’s non-accrual policy, and any accretion of discount or amortization of premium is discontinued. Acquired BBVAPR loans that were accounted for under the provisions of ASC 310-20 are removed from the acquired loan category at the end of the reporting period upon refinancing, renewal or normal re-underwriting.

The following tables present the aging of the recorded investment in gross acquired BBVAPR loans accounted for under ASC 310-20 as of September 30, 2018 and December 31, 2017, by class of loans:

	September 30, 2018
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Commercial
Commercial secured by real estate
Retail	$	-	$	-	$	54	$	54	$	-	$	54	$	-
Floor plan		-		-		899		899		305		1,204		-
		-		-		953		953		305		1,258		-
Other commercial and industrial
Retail		8		-		25		33		1,485		1,518		-
Floor plan		-		-		2		2		-		2		-
		8		-		27		35		1,485		1,520		-
		8		-		980		988		1,790		2,778		-
Consumer
Credit cards		330		110		443		883		21,729		22,612		-
Personal loans		23		7		58		88		2,214		2,302		-
		353		117		501		971		23,943		24,914		-
Auto		665		389		202		1,256		6,238		7,494		-
Total	$	1,026	$	506	$	1,683	$	3,215	$	31,971	$	35,186	$	-

	December 31, 2017
													Loans 90+
													Days Past
													Due and
	30-59 Days		60-89 Days		90+ Days		Total Past						Still
	Past Due		Past Due		Past Due		Due		Current		Total Loans		Accruing
	(In thousands)
Commercial
Commercial secured by real estate
Retail	$	-	$	-	$	119	$	119	$	-	$	119	$	-
Floor plan		-		-		928		928		393		1,321		-
		-		-		1,047		1,047		393		1,440		-
Other commercial and industrial
Retail		36		-		221		257		2,681		2,938		-
Floor plan		-		-		2		2		-		2		-
		36		-		223		259		2,681		2,940		-
		36		-		1,270		1,306		3,074		4,380		-
Consumer
Credit cards		208		127		1,310		1,645		24,822		26,467		-
Personal loans		139		61		45		245		2,203		2,448		-
		347		188		1,355		1,890		27,025		28,915		-
Auto		602		248		179		1,029		20,940		21,969		-
Total	$	985	$	436	$	2,804	$	4,225	$	51,039	$	55,264	$	-

Acquired BBVAPR Loans Accounted for under ASC 310-30 (including those accounted for under ASC 310-30 by analogy)

Acquired BBVAPR loans, except for credit cards, retail and commercial revolving lines of credits, floor plans and performing auto loans with FICO scores over 660 acquired at a premium, are accounted for by Oriental in accordance with ASC 310-30.

The carrying amount corresponding to acquired BBVAPR loans with deteriorated credit quality, including those accounted under ASC 310-30 by analogy, in the statements of financial condition at September 30, 2018 and December 31, 2017 is as follows:

	September 30,		December 31,
		2018		2017
		(In thousands)
Contractual required payments receivable:	$	1,340,064	$	1,481,616
Less: Non-accretable discount		347,173		352,431
Cash expected to be collected		992,891		1,129,185
Less: Accretable yield		278,394		308,913
Carrying amount, gross		714,497		820,272
Less: allowance for loan and lease losses		43,875		45,755
Carrying amount, net	$	670,622	$	774,517

At September 30, 2018 and December 31, 2017, Oriental had $44.0 million and $50.3 million, respectively, in loans granted to Puerto Rico municipalities as part of its acquired BBVAPR loans accounted for under ASC 310-30. These loans are primarily secured municipal general obligations.

The following tables describe the accretable yield and non-accretable discount activity of acquired BBVAPR loans accounted for under ASC 310-30 for the quarters and nine-month periods ended September 30, 2018 and 2017

	Quarter Ended September 30, 2018
	Mortgage		Commercial		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	243,903	$	42,521	$	1,071	$	497	$	287,992
Accretion		(6,722)		(3,977)		(466)		(88)		(11,253)
Change in expected cash flows		-		1,334		3		25		1,362
Transfer from (to) non-accretable discount		1,456		(1,140)		3		(26)		293
Balance at end of period	$	238,637	$	38,738	$	611	$	408	$	278,394

Non-Accretable Discount Activity:
Balance at beginning of period	$	296,137	$	11,143	$	23,645	$	19,332	$	350,257
Change in actual and expected losses		(1,860)		(1,125)		181		13		(2,791)
Transfer from accretable yield		(1,456)		1,140		(3)		26		(293)
Balance at end of period	$	292,821	$	11,158	$	23,823	$	19,371	$	347,173

	Nine-Month Period Ended September 30, 2018
	Mortgage		Commercial		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	258,498	$	46,764	$	2,766	$	885	$	308,913
Accretion		(20,710)		(11,259)		(1,991)		(538)		(34,498)
Change in expected cash flows		-		7,265		829		156		8,250
Transfer (to) non-accretable discount		849		(4,032)		(993)		(95)		(4,271)
Balance at end of period	$	238,637	$	38,738	$	611	$	408	$	278,394

Non-Accretable Discount Activity:
Balance at beginning of period	$	299,501	$	10,596	$	23,050	$	19,284	$	352,431
Change in actual and expected losses		(5,831)		(3,470)		(220)		(8)		(9,529)
Transfer from accretable yield		(849)		4,032		993		95		4,271
Balance at end of period	$	292,821	$	11,158	$	23,823	$	19,371	$	347,173

	Quarter Ended September 30, 2017
	Mortgage		Commercial		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	270,148	$	56,038	$	4,853	$	1,486	$	332,525
Accretion		(7,434)		(7,114)		(1,350)		(384)		(16,282)
Change in actual and expected losses		-		3,716		13		37		3,766
Transfer (to) from non-accretable discount		(6,158)		(2,950)		(8)		26		(9,090)
Balance at end of period	$	256,556	$	49,690	$	3,508	$	1,165	$	310,919

Non-Accretable Discount Activity:
Balance at beginning of period	$	306,504	$	16,867	$	23,960	$	19,431	$	366,762
Change in actual and expected losses		(2,310)		(8,679)		(191)		(124)		(11,304)
Transfer from (to) accretable yield		6,158		2,950		8		(26)		9,090
Balance at end of period	$	310,352	$	11,138	$	23,777	$	19,281	$	364,548

	Nine-Month Period Ended September 30, 2017
	Mortgage		Commercial		Auto		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	292,115	$	50,366	$	8,538	$	3,682	$	354,701
Accretion		(23,018)		(16,608)		(5,273)		(1,542)		(46,441)
Change in actual and expected losses		2		19,907		163		123		20,195
Transfer (to) from non-accretable discount		(12,543)		(3,975)		80		(1,098)		(17,536)
Balance at end of period	$	256,556	$	49,690	$	3,508	$	1,165	$	310,919

Non-Accretable Discount Activity:
Balance at beginning of period	$	305,615	$	16,965	$	22,407	$	18,120	$	363,107
Change in actual and expected losses		(7,806)		(9,802)		1,450		63		(16,095)
Transfer from (to) accretable yield		12,543		3,975		(80)		1,098		17,536
Balance at end of period	$	310,352	$	11,138	$	23,777	$	19,281	$	364,548

Acquired Eurobank Loans

The carrying amount of acquired Eurobank loans at September 30, 2018 and December 31, 2017 is as follows:

	September 30		December 31
	2018		2017
	(In thousands)
Contractual required payments receivable:	$	162,204	$	179,960
Less: Non-accretable discount		4,187		5,845
Cash expected to be collected		158,017		174,115
Less: Accretable yield		43,075		49,672
Carrying amount, gross		114,942		124,443
Less: Allowance for loan and lease losses		24,281		25,174
Carrying amount, net	$	90,661	$	99,269

The following tables describe the accretable yield and non-accretable discount activity of acquired Eurobank loans for the quarters and nine-month periods ended September 30, 2018 and 2017:

	Quarter Ended September 30, 2018
	Loans Secured by 1-4 Family Residential Properties		Commercial		Construction & Development Secured by 1-4 Family Residential Properties		Leasing		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	39,269		4,585		1,224		-		-		45,078
Accretion		(1,440)		(1,883)		-		(7)		(155)		(3,485)
Change in expected cash flows		6		2,063		-		(143)		283		2,209
Transfer (to) from non-accretable discount		188		(412)		(525)		150		(128)		(727)
Balance at end of period	$	38,023	$	4,353	$	699	$	-	$	-	$	43,075

Non-Accretable Discount Activity:
Balance at beginning of period	$	2,638		-		981		-		200		3,819
Change in actual and expected losses		63		(412)		-		150		(160)		(359)
Transfer from (to) accretable yield		(188)		412		525		(150)		128		727
Balance at end of period	$	2,513	$	-	$	1,506	$	-	$	168	$	4,187

	Nine-Month Period Ended September 30, 2018
	Loans Secured by 1-4 Family Residential Properties		Commercial		Construction & Development Secured by 1-4 Family Residential Properties		Leasing		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of year	$	41,474	$	6,751	$	1,447	$	-	$	-	$	49,672
Accretion		(4,583)		(5,195)		-		(45)		(369)		(10,192)
Change in expected cash flows		(974)		4,793		-		(317)		697		4,199
Transfer from (to) non-accretable discount		2,106		(1,996)		(748)		362		(328)		(604)
Balance at end of period	$	38,023	$	4,353	$	699	$	-	$	-	$	43,075

Non-Accretable Discount Activity:
Balance at beginning of year	$	4,576	$	276	$	758	$	-	$	235	$	5,845
Change in actual and expected losses		43		(2,272)		-		362		(395)		(2,262)
Transfer from (to) accretable yield		(2,106)		1,996		748		(362)		328		604
Balance at end of period	$	2,513	$	-	$	1,506	$	-	$	168	$	4,187

	Quarter Ended September 30, 2017
	Loans Secured by 1-4 Family Residential Properties		Commercial		Construction & Development Secured by 1-4 Family Residential Properties		Leasing		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	43,012	$	9,157	$	1,906		-	$	-	$	54,075
Accretion		(1,736)		(2,480)		(39)		(11)		(73)		(4,339)
Change in actual and expected losses		18		106		39		(49)		346		460
Transfer from (to) non-accretable discount		1,094		1,448		(142)		60		(273)		2,187
Balance at end of period	$	42,388	$	8,231	$	1,764	$	-	$	-	$	52,383

Non-Accretable Discount Activity:
Balance at beginning of period	$	6,687	$	2,010	$	299	$	-	$	14	$	9,010
Change in actual and expected losses		20		126		(39)		60		(55)		112
Transfer (to) from accretable yield		(1,094)		(1,448)		142		(60)		273		(2,187)
Balance at end of period	$	5,613	$	688	$	402	$	-	$	232	$	6,935

	Nine-Month Period Ended September 30, 2017
	Loans Secured by 1-4 Family Residential Properties		Commercial		Construction & Development Secured by 1-4 Family Residential Properties		Leasing		Consumer		Total
	(In thousands)
Accretable Yield Activity:
Balance at beginning of period	$	45,839	$	16,475	$	2,194	$	-	$	-	$	64,508
Accretion		(5,564)		(11,051)		(82)		(22)		(268)		(16,987)
Change in expected cash flows		119		1,427		82		(214)		730		2,144
Transfer from (to) non-accretable discount		1,994		1,380		(430)		236		(462)		2,718
Balance at end of period	$	42,388	$	8,231	$	1,764	$	-	$	-	$	52,383

Non-Accretable Discount Activity:
Balance at beginning of period	$	8,441	$	3,880	$	11	$	-	$	8	$	12,340
Change in actual and expected cash flows		(834)		(1,812)		(39)		236		(238)		(2,687)
Transfer (to) from accretable yield		(1,994)		(1,380)		430		(236)		462		(2,718)
Balance at end of period	$	5,613	$	688	$	402	$	-	$	232	$	6,935

Non-accrual Loans

The following table presents the recorded investment in loans in non-accrual status by class of loans as of September 30, 2018 and December 31, 2017:

	September 30,		December 31,
	2018		2017
	(In thousands)
Originated and other loans and leases held for investment
Mortgage
Traditional (by origination year):
Up to the year 2002	$	3,088	$	3,070
Years 2003 and 2004		6,587		6,380
Year 2005		3,727		3,280
Year 2006		4,778		5,905
Years 2007, 2008 and 2009		7,717		7,984
Years 2010, 2011, 2012, 2013		7,766		6,259
Years 2014, 2015, 2016, 2017 and 2018		1,303		1,649
		34,966		34,527
Non-traditional		2,740		3,543
Loss mitigation program		23,292		16,783
		60,998		54,853
Commercial
Commercial secured by real estate
Institutional		10,155		118
Middle market		7,619		11,394
Retail		15,662		14,438
		33,436		25,950
Other commercial and industrial
Middle market		6,561		6,323
Retail		2,759		2,929
Floor plan		51		51
		9,371		9,303
		42,807		35,253
Consumer
Credit cards		602		1,227
Overdrafts		-		31
Personal lines of credit		80		102
Personal loans		2,434		900
Cash collateral personal loans		-		312
		3,116		2,572
Auto and leasing		12,185		4,232
Total non-accrual originated loans	$	119,106	$	96,910

	September 30,		December 31,
	2018		2017
	(In thousands)
Acquired BBVAPR loans accounted for under ASC 310-20
Commercial
Commercial secured by real estate
Retail	$	54	$	119
Floor plan		899		928
		953		1,047
Other commercial and industrial
Retail		25		221
Floor plan		2		2
		27		223
		980		1,270
Consumer
Credit cards		443		1,310
Personal loans		58		45
		501		1,355
Auto		202		179
Total non-accrual acquired BBVAPR loans accounted for under ASC 310-20		1,683		2,804
Total non-accrual loans	$	120,789	$	99,714

Loans accounted for under ASC 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 or are accounted under the cost recovery method.

Delinquent residential mortgage loans insured or guaranteed under applicable FHA and VA programs are classified as non-performing loans when they become 90 days or more past due, but are not placed in non-accrual status until they become 12 months or more past due, since they are insured loans. Therefore, these loans are included as non-performing loans but excluded from non-accrual loans. In addition, these loans are excluded from the impairment analysis.

At September 30, 2018 and December 31, 2017, loans whose terms have been extended and which are classified as troubled-debt restructurings that are not included in non-accrual loans amounted to $97.7 million and $109.2 million, respectively, as they are performing under their new terms.

At September 30, 2018 and December 31, 2017, loans that are current in their monthly payments, but placed in non-accrual due to credit deterioration amounted to $23.6 million and $20.1 million, respectively.

Impaired Loans

Oriental evaluates all loans, some individually and others as homogeneous groups, for purposes of determining impairment. The total investment in impaired commercial loans that were individually evaluated for impairment was $69.6 million and $72.3 million at September 30, 2018 and December 31, 2017, respectively. The impairments on these commercial loans were measured based on the fair value of collateral or the present value of cash flows, including those identified as troubled-debt restructurings. The allowance for loan and lease losses for these impaired commercial loans amounted to $7.6 million and $10.6 million at September 30, 2018 and December 31, 2017, respectively. The total investment in impaired mortgage loans that were individually evaluated for impairment was $85.1 million and $85.4 million at September 30, 2018 and December 31, 2017, respectively. Impairment on mortgage loans assessed as troubled-debt restructurings was measured using the present value of cash flows. The allowance for loan losses for these impaired mortgage loans amounted to $10.6 million and $9.1 million at September 30, 2018 and December 31, 2017, respectively.

Originated and Other Loans and Leases Held for Investment

Oriental’s recorded investment in commercial and mortgage loans categorized as originated and other loans and leases held for investment that were individually evaluated for impairment and the related allowance for loan and lease losses at September 30, 2018 and 2017 are as follows:

	September 30, 2018
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	38,650	$	33,379	$	7,607	23%
Residential impaired and troubled-debt restructuring		95,673		85,119		10,620	12%
Impaired loans with no specific allowance:
Commercial		41,393		35,513		N/A	0%
Total investment in impaired loans	$	175,716	$	154,011	$	18,227	12%

	December 31, 2017
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance:
Commercial	$	57,922	$	52,585	$	10,573	20%
Residential impaired and troubled-debt restructuring		94,971		85,403		9,121	11%
Impaired loans with no specific allowance
Commercial		22,022		18,953		N/A	0%
Total investment in impaired loans	$	174,915	$	156,941	$	19,694	13%

Acquired BBVAPR Loans Accounted for under ASC 310-20 (Loans with revolving feature and/or acquired at a premium)

Oriental’s recorded investment in acquired BBVAPR commercial loans accounted for under ASC 310-20 that were individually evaluated for impairment and the related allowance for loan and lease losses at September 30, 2018 and December 31, 2017 are as follows:


	September 30, 2018
	Unpaid		Recorded		Related
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance
Commercial	$	926	$	747	$	4	1%
Impaired loans with no specific allowance
Commercial	$	-	$	-		N/A	0%
Total investment in impaired loans	$	926	$	747	$	4	1%


	December 31, 2017
	Unpaid		Recorded		Specific
	Principal		Investment		Allowance		Coverage
	(In thousands)
Impaired loans with specific allowance
Commercial	$	926	$	747	$	20	3%
Impaired loans with no specific allowance
Commercial	$	-	$	-		N/A	0%
Total investment in impaired loans	$	926	$	747	$	20	3%

Acquired BBVAPR Loans Accounted for under ASC 310-30 (including those accounted for under ASC 310-30 by analogy)

Oriental’s recorded investment in acquired BBVAPR loan pools accounted for under ASC 310-30 that have recorded impairments and their related allowance for loan and lease losses at September 30, 2018 and December 31, 2017 are as follows:

	September 30, 2018
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	510,426	$	503,860	$	15,258	3%
Commercial		197,516		189,164		22,256	12%
Consumer		1,016		96		18	19%
Auto		22,079		20,364		6,343	31%
Total investment in impaired loan pools	$	731,037	$	713,484	$	43,875	6%

	December 31 , 2017
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance:
Mortgage	$	547,064	$	532,052	$	14,085	3%
Commercial		250,451		241,124		23,691	10%
Consumer		2,468		1,431		18	1%
Auto		43,440		43,696		7,961	18%
Total investment in impaired loan pools	$	843,423	$	818,303	$	45,755	6%

The tables above only present information with respect to acquired BBVAPR loan pools accounted for under ASC 310-30 if there is a recorded impairment to such loan pools and a specific allowance for loan losses.

Acquired Eurobank Loans

Oriental’s recorded investment in acquired Eurobank loan pools that have recorded impairments and their related allowance for loan and lease losses as of September 30, 2018 and December 31, 2017 are as follows:

	September 30, 2018
							Coverage
	Unpaid		Recorded				to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance:
Loans secured by 1-4 family residential properties	$	72,874	$	64,785	$	15,155	23%
Commercial		50,430		49,262		9,122	19%
Consumer		13		4		4	100%
Total investment in impaired loan pools	$	123,317	$	114,051	$	24,281	21%

	December 31, 2017
							Coverage
	Unpaid		Recorded		Specific		to Recorded
	Principal		Investment		Allowance		Investment
	(In thousands)
Impaired loan pools with specific allowance
Loans secured by 1-4 family residential properties	$	81,132	$	69,538	$	15,187	22%
Commercial		58,099		53,793		9,983	19%
Consumer		15		4		4	100%
Total investment in impaired loan pools	$	139,246	$	123,335	$	25,174	20%

The tables above only present information with respect to acquired Eurobank loan pools accounted for under ASC 310-30 if there is a recorded impairment to such loan pools and a specific allowance for loan losses.

The following table presents the interest recognized in commercial and mortgage loans that were individually evaluated for impairment, which excludes loans accounted for under ASC 310-30, for the quarters and nine-month periods ended September 30, 2018 and 2017:

	Quarter Ended September 30,
	2018				2017
	Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment
	(In thousands)
Originated and other loans held for investment:
Impaired loans with specific allowance
Commercial	$	150	$	35,765	$	306	$	24,178
Residential troubled-debt restructuring		695		84,787		576		86,694
Impaired loans with no specific allowance
Commercial		271		31,315		675		36,133
		1,116		151,867		1,557		147,005
Acquired loans accounted for under ASC 310-20:
Impaired loans with specific allowance
Commercial		-		747		-		751
Impaired loans with no specific allowance
Commercial		-		-		-		-
Total interest income from impaired loans	$	1,116	$	152,614	$	1,557	$	147,756

	Nine-Month Period Ended September 30,
	2018					2017
	Interest Income Recognized		Average Recorded Investment			Interest Income Recognized		Average Recorded Investment
	(In thousands)
Originated and other loans held for investment:
Impaired loans with specific allowance
Commercial	$	432	$	44,691	$	612	$	17,298
Residential troubled-debt restructuring		2,028		84,671		1,685		87,951
Impaired loans with no specific allowance
Commercial		812		23,736		1,350		41,519
Total interest income from impaired loans	$	3,272	$	153,098	$	3,647	$	146,768

Acquired loans accounted for under ASC 310-20:
Impaired loans with specific allowance
Commercial	$	-	$	747	$	-	$	810
Impaired loans with no specific allowance
Total interest income from impaired loans	$	3,272	$	153,845	$	3,647	$	147,578

Modifications

The following tables present the troubled-debt restructurings in all loan portfolios during the quarters and nine-month periods ended September 30, 2018 and 2017.

	Quarter Ended September 30, 2018
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	21	$	2,621	5.42%	373	$	2,579	4.19%	344
Commercial	5		3,007	5.79%	71		3,002	5.10%	83
Consumer	52		758	15.06%	66		765	12.04%	73
Auto	2		40	10.28%	37		40	10.28%	37


	Nine-Month Period Ended September 30, 2018
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	104	$	14,087	5.61%	382	$	13,597	4.82%	344
Commercial	13		10,341	5.50%	53		10,332	5.74%	60
Consumer	101		1,469	15.58%	59		1,477	11.51%	72
Auto	2		40	10.28%	37		40	10.28%	37

	Quarter Ended September 30, 2017
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	15	$	1,796	6.18%	401	$	1,804	4.28%	409
Commercial	2		154	7.99%	53		154	8.45%	51
Consumer	30		383	11.52%	61		383	11.21%	68
Auto	2		23	6.42%	63		23	8.13%	31

	Nine-Month Period Ended September 30, 2017
	Number of contracts	Pre-Modification Outstanding Recorded Investment		Pre-Modification Weighted Average Rate	Pre-Modification Weighted Average Term (in Months)	Post-Modification Outstanding Recorded Investment		Post-Modification Weighted Average Rate	Post-Modification Weighted Average Term (in Months)
	(Dollars in thousands)
Mortgage	74	$	9,149	6.27%	390	$	9,132	4.26%	384
Commercial	20		3,527	6.51%	55		3,528	5.55%	66
Consumer	93		1,262	11.87%	64		1,301	10.79%	70
Auto	9		134	7.24%	66		135	11.75%	37

The following table presents troubled-debt restructurings for which there was a payment default during the twelve-month periods ended September 30, 2018 and 2017:

	Twelve-Month Period Ended September 30,
	2018			2017
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(Dollars in thousands)
Mortgage	19	$	2,756	28	$	2,663
Commercial	2	$	281	8	$	868
Consumer	11	$	107	22	$	248

Credit Quality Indicators

Oriental categorizes originated and other loans and acquired loans accounted for under ASC 310-20 into risk categories based on relevant information about the ability of borrowers to service their debt, such as economic conditions, portfolio risk characteristics, prior loss experience, and the results of periodic credit reviews of individual loans.

Oriental uses the following definitions for risk ratings:

Pass: Loans classified as “pass” have a well-defined primary source of repayment very likely to be sufficient, with no apparent risk, strong financial position, minimal operating risk, profitability, liquidity and capitalization better than industry standards.

Special Mention: Loans classified as “special mention” have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loans classified as “substandard” are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as “doubtful” have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, questionable and improbable.

Loss: Loans classified as “loss” are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be effected in the future.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

As of September 30, 2018 and December 31, 2017, and based on the most recent analysis performed, the risk category of gross originated and other loans and BBVAPR acquired loans accounted for under ASC 310-20 subject to risk rating by class of loans is as follows:

	September 30, 2018
	Risk Ratings

	Balance				Special
	Outstanding		Pass		Mention		Substandard		Doubtful		Loss
	(In thousands)
Commercial - originated and other loans held for investment
Commercial secured by real estate:
Corporate	$	306,372	$	263,522	$	26,887	$	15,963	$	-	$	-
Institutional		72,372		62,021		-		10,351		-		-
Middle market		182,142		133,506		31,912		16,724		-		-
Retail		220,897		194,554		4,024		22,319		-		-
Floor plan		3,579		2,281		-		1,298		-		-
Real estate		19,347		19,347		-		-		-		-
		804,709		675,231		62,823		66,655		-		-
Other commercial and industrial:
Corporate		163,766		135,269		28,497		-		-		-
Institutional		143,886		143,886		-		-		-		-
Middle market		97,715		74,204		4,948		18,563		-		-
Retail		289,398		286,090		213		3,095		-		-
Floor plan		40,553		37,766		2,736		51		-		-
		735,318		677,215		36,394		21,709		-		-
Total		1,540,027		1,352,446		99,217		88,364		-		-

Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		54		-		-		54		-		-
Floor plan		1,204		305		-		899		-		-
		1,258		305		-		953		-		-
Other commercial and industrial:
Retail		1,518		1,518		-		-		-		-
Floor plan		2		-		-		2		-		-
		1,520		1,518		-		2		-		-
Total		2,778		1,823		-		955		-		-

	September 30, 2018
	Risk Ratings

	Balance				Special
	Outstanding		Pass		Mention		Substandard		Doubtful		Loss
	(In thousands)
Retail - originated and other loans held for investment
Mortgage:
Traditional		531,551		496,407		-		35,144		-		-
Non-traditional		14,699		11,959		-		2,740		-		-
Loss mitigation program		107,397		86,600		-		20,797		-		-
Home equity secured personal loans		252		252		-		-		-		-
GNMA's buy-back option program		13,325		-		-		13,325		-		-
		667,224		595,218		-		72,006		-		-

Consumer:
Credit cards		27,724		27,122		-		602		-		-
Overdrafts		156		129		-		27		-		-
Unsecured personal lines of credit		1,936		1,865		-		71		-		-
Unsecured personal loans		299,530		298,334		-		1,196		-		-
Cash collateral personal loans		16,053		16,053		-		-		-		-
		345,399		343,503		-		1,896		-		-
Auto and Leasing		1,084,912		1,072,764		-		12,148		-		-
Total		2,097,535		2,011,485		-		86,050		-		-

Retail - acquired loans (accounted for under ASC 310-20)
Consumer:
Credit cards		22,612		22,169		-		443		-		-
Personal loans		2,302		2,244		-		58		-		-
		24,914		24,413		-		501		-		-
Auto		7,494		7,292		-		202		-		-
		32,408		31,705		-		703		-		-
	$	3,672,748	$	3,397,459	$	99,217	$	176,072	$	-	$	-

	December 31, 2017
	Risk Ratings

	Balance				Special
	Outstanding		Pass		Mention		Substandard		Doubtful		Loss
	(In thousands)
Commercial - originated and other loans held for investment
Commercial secured by real estate:
Corporate	$	235,426	$	200,395	$	33,094	$	1,937	$	-	$	-
Institutional		44,766		33,856		-		10,910		-		-
Middle market		229,941		196,058		4,749		29,134		-		-
Retail		246,067		215,121		8,058		22,888		-		-
Floor plan		3,998		2,678		1,320		-		-		-
Real estate		17,556		17,556		-		-		-		-
		777,754		665,664		47,221		64,869		-		-
Other commercial and industrial:
Corporate		170,015		157,683		12,332		-		-		-
Institutional		125,591		125,591		-		-		-		-
Middle market		85,363		71,222		6,386		7,755		-		-
Retail		113,252		109,477		562		3,213		-		-
Floor plan		35,286		32,165		3,070		51		-		-
		529,507		496,138		22,350		11,019		-		-
Total		1,307,261		1,161,802		69,571		75,888		-		-

Commercial - acquired loans (under ASC 310-20)
Commercial secured by real estate:
Retail		119		-		-		119		-		-
Floor plan		1,321		393		-		928		-		-
		1,440		393		-		1,047		-		-
Other commercial and industrial:
Retail		2,938		2,933		-		5		-		-
Floor plan		2		-		-		2		-		-
		2,940		2,933		-		7		-		-
Total		4,380		3,326		-		1,054		-		-

	December 31, 2017
	Risk Ratings

	Balance				Special
	Outstanding		Pass		Mention		Substandard		Doubtful		Loss
	(In thousands)
Retail - originated and other loans held for investment
Mortgage:
Traditional		553,533		516,770		-		36,763		-		-
Non-traditional		18,270		14,727		-		3,543		-		-
Loss mitigation program		103,280		84,357		-		18,923		-		-
Home equity secured personal loans		256		256		-		-		-		-
GNMA's buy-back option program		8,268		-		-		8,268		-		-
		683,607		616,110		-		67,497		-		-

Consumer:
Credit cards		28,430		27,203		-		1,227		-		-
Overdrafts		214		158		-		56		-		-
Unsecured personal lines of credit		2,220		2,133		-		87		-		-
Unsecured personal loans		284,477		284,255		-		222		-		-
Cash collateral personal loans		14,698		14,386		-		312		-		-
		330,039		328,135		-		1,904		-		-
Auto and Leasing		883,985		879,753		-		4,232		-		-
Total		1,897,631		1,823,998		-		73,633		-		-

Retail - acquired loans (under ASC 310-20)
Consumer:
Credit cards		26,467		25,156		-		1,311		-		-
Personal loans		2,448		2,402		-		46		-		-
		28,915		27,558		-		1,357		-		-
Auto		21,969		21,790		-		179		-		-
Total		50,884		49,348		-		1,536		-		-
	$	3,260,156	$	3,038,474	$	69,571	$	152,111	$	-	$	-

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References + Details