Allowance for loan losses

3 Months Ended

Mar. 31, 2017

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.

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

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

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)		(109)		(2,127)		(30,060)		(59,937)
	Recoveries		6,554		233		1,712		356		489		7,119		16,463
Ending balance		$	207,177	$	8,976	$	159,421	$	2,484	$	11,035	$	149,379	$	538,472
Specific ALLL		$	55,098	$	172	$	43,252	$	-	$	608	$	24,907	$	124,037
General ALLL		$	152,079	$	8,804	$	116,169	$	2,484	$	10,427	$	124,472	$	414,435
Loans held-in-portfolio:
Impaired loans		$	338,980	$	2,020	$	479,092	$	-	$	2,391	$	112,167	$	934,650
Loans held-in-portfolio
	excluding impaired loans		9,889,409		732,838		7,106,820		61,044		640,751		3,767,355		22,198,217
Total loans held-in-portfolio		$	10,228,389	$	734,858	$	7,585,912	$	61,044	$	643,142	$	3,879,522	$	23,132,867

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

	ASC 310-30 Westernbank loans
	For the quarters ended
(In thousands)	March 31, 2017		March 31, 2016
Balance at beginning of period	$	68,877	$	63,563
Provision for loan losses		(322)		1,791
Net charge-offs		(2,011)		(2,387)
Balance at end of period	$	66,544	$	62,967

Impaired loans

The following tables present loans individually evaluated for impairment at March 31, 2017 and December 31, 2016.

March 31, 2017
Puerto Rico
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal			Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance			allowance
Commercial multi-family	$	79	$	79	$	29	$	-	$	-	$	79	$	79	$	29
Commercial real estate non-owner occupied		103,811		104,740		23,847		13,807		27,503		117,618		132,243		23,847
Commercial real estate owner occupied		134,455		173,707		16,873		30,972		46,625		165,427		220,332		16,873
Commercial and industrial		53,283		55,352		10,527		12,416		16,067		65,699		71,419		10,527
Mortgage		424,770		466,629		41,067		76,877		94,113		501,647		560,742		41,067
Leasing		1,803		1,803		522		-		-		1,803		1,803		522
Consumer:
Credit cards		37,952		37,952		5,686		-		-		37,952		37,952		5,686
Personal		65,622		65,622		16,145		-		-		65,622		65,622		16,145
Auto		2,070		2,070		409		-		-		2,070		2,070		409
Other		592		592		91		-		-		592		592		91
Total Puerto Rico	$	824,437	$	908,546	$	115,196	$	134,072	$	184,308	$	958,509	$	1,092,854	$	115,196

March 31, 2017
U.S. mainland
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal		Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance		allowance
Mortgage	$	6,449	$	8,130	$	2,197	$	2,472	$	3,364	$	8,921	$	11,494	$	2,197
Consumer:
HELOCs		2,367		2,375		673		298		313		2,665		2,688		673
Personal		38		38		6		77		77		115		115		6
Total U.S. mainland	$	8,854	$	10,543	$	2,876	$	2,847	$	3,754	$	11,701	$	14,297	$	2,876

March 31, 2017
Popular, Inc.
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal		Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance		allowance
Commercial multi-family	$	79	$	79	$	29	$	-	$	-	$	79	$	79	$	29
Commercial real estate non-owner occupied		103,811		104,740		23,847		13,807		27,503		117,618		132,243		23,847
Commercial real estate owner occupied		134,455		173,707		16,873		30,972		46,625		165,427		220,332		16,873
Commercial and industrial		53,283		55,352		10,527		12,416		16,067		65,699		71,419		10,527
Mortgage		431,219		474,759		43,264		79,349		97,477		510,568		572,236		43,264
Leasing		1,803		1,803		522		-		-		1,803		1,803		522
Consumer:
Credit Cards		37,952		37,952		5,686		-		-		37,952		37,952		5,686
HELOCs		2,367		2,375		673		298		313		2,665		2,688		673
Personal		65,660		65,660		16,151		77		77		65,737		65,737		16,151
Auto		2,070		2,070		409		-		-		2,070		2,070		409
Other		592		592		91		-		-		592		592		91
Total Popular, Inc.	$	833,291	$	919,089	$	118,072	$	136,919	$	188,062	$	970,210	$	1,107,151	$	118,072

December 31, 2016
Puerto Rico
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal			Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance			allowance
Commercial multi-family	$	82	$	82	$	34	$	-	$	-	$	82	$	82	$	34
Commercial real estate non-owner occupied		104,119		105,047		24,537		15,935		29,631		120,054		134,678		24,537
Commercial real estate owner occupied		131,634		169,013		13,007		31,962		50,094		163,596		219,107		13,007
Commercial and industrial		46,862		49,301		4,797		7,828		11,478		54,690		60,779		4,797
Mortgage		426,737		466,249		42,428		70,751		87,806		497,488		554,055		42,428
Leasing		1,817		1,817		535		-		-		1,817		1,817		535
Consumer:
Credit cards		37,464		37,464		5,588		-		-		37,464		37,464		5,588
Personal		66,043		66,043		16,955		-		-		66,043		66,043		16,955
Auto		2,117		2,117		474		-		-		2,117		2,117		474
Other		991		991		168		-		-		991		991		168
Total Puerto Rico	$	817,866	$	898,124	$	108,523	$	126,476	$	179,009	$	944,342	$	1,077,133	$	108,523

December 31, 2016
U.S. mainland
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal		Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance		allowance
Mortgage	$	6,381	$	7,971	$	2,182	$	2,495	$	3,369	$	8,876	$	11,340	$	2,182
Consumer:
HELOCs		2,421		2,429		667		300		315		2,721		2,744		667
Personal		39		39		5		79		79		118		118		5
Total U.S. mainland	$	8,841	$	10,439	$	2,854	$	2,874	$	3,763	$	11,715	$	14,202	$	2,854

December 31, 2016
Popular, Inc.
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal		Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance		allowance
Commercial multi-family	$	82	$	82	$	34	$	-	$	-	$	82	$	82	$	34
Commercial real estate non-owner occupied		104,119		105,047		24,537		15,935		29,631		120,054		134,678		24,537
Commercial real estate owner occupied		131,634		169,013		13,007		31,962		50,094		163,596		219,107		13,007
Commercial and industrial		46,862		49,301		4,797		7,828		11,478		54,690		60,779		4,797
Mortgage		433,118		474,220		44,610		73,246		91,175		506,364		565,395		44,610
Leasing		1,817		1,817		535		-		-		1,817		1,817		535
Consumer:
Credit Cards		37,464		37,464		5,588		-		-		37,464		37,464		5,588
HELOCs		2,421		2,429		667		300		315		2,721		2,744		667
Personal		66,082		66,082		16,960		79		79		66,161		66,161		16,960
Auto		2,117		2,117		474		-		-		2,117		2,117		474
Other		991		991		168		-		-		991		991		168
Total Popular, Inc.	$	826,707	$	908,563	$	111,377	$	129,350	$	182,772	$	956,057	$	1,091,335	$	111,377

The following tables present the average recorded investment and interest income recognized on impaired loans for the quarters ended March 31, 2017 and 2016.

For the quarter ended March 31, 2017
	Puerto Rico				U.S. Mainland				Popular, Inc.
	Average		Interest		Average		Interest		Average		Interest
	recorded		income		recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized		investment		recognized
Commercial multi-family	$	81	$	1	$	-	$	-	$	81	$	1
Commercial real estate non-owner occupied		118,836		1,375		-		-		118,836		1,375
Commercial real estate owner occupied		164,512		1,598		-		-		164,512		1,598
Commercial and industrial		60,195		497		-		-		60,195		497
Mortgage		499,568		3,369		8,899		44		508,467		3,413
Leasing		1,810		-		-		-		1,810		-
Consumer:
Credit cards		37,708		-		-		-		37,708		-
Helocs		-		-		2,693		-		2,693		-
Personal		65,833		-		117		-		65,950		-
Auto		2,094		-		-		-		2,094		-
Other		792		-		-		-		792		-
Total Popular, Inc.	$	951,429	$	6,840	$	11,709	$	44	$	963,138	$	6,884

For the quarter ended March 31, 2016
	Puerto Rico				U.S. Mainland				Popular, Inc.
	Average		Interest		Average		Interest		Average		Interest
	recorded		income		recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized		investment		recognized
Commercial real estate non-owner occupied	$	118,660	$	1,159	$	-	$	-	$	118,660	$	1,159
Commercial real estate owner occupied		158,046		1,393		-		-		158,046		1,393
Commercial and industrial		61,351		516		-		-		61,351		516
Construction		2,251		21		-		-		2,251		21
Mortgage		468,150		3,387		7,362		-		475,512		3,387
Leasing		2,398		-		-		-		2,398		-
Consumer:
Credit cards		38,256		-		-		-		38,256		-
Helocs		-		-		1,599		-		1,599		-
Personal		68,172		-		613		-		68,785		-
Auto		2,878		-		-		-		2,878		-
Other		485		-		-		-		485		-
Total Popular, Inc.	$	920,647	$	6,476	$	9,574	$	-	$	930,221	$	6,476

Modifications

Troubled debt restructurings related to non-covered loan portfolios amounted to $ 1.3 billion at March 31, 2017 (December 31, 2016 - $ 1.2 billion). The amount of outstanding commitments to lend additional funds to debtors owing receivables whose terms have been modified in troubled debt restructurings amounted $10 million related to the commercial loan portfolio at March 31, 2017 (December 31, 2016 - $8 million).

At March 31, 2017, the mortgage loan TDRs include $421 million guaranteed by U.S. sponsored entities at BPPR, compared to $407 million at December 31, 2016.

A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification constitutes a concession. For a summary of the accounting policy related to TDRs, refer to the summary of significant accounting policies included in Note 2 of the 2016 Form 10-K.

The following tables present the non-covered and covered loans classified as TDRs according to their accruing status and the related allowance at March 31, 2017 and December 31, 2016.

	Popular, Inc.
	Non-Covered Loans
	March 31, 2017								December 31, 2016
(In thousands)		Accruing		Non-Accruing		Total		Related Allowance		Accruing		Non-Accruing		Total		Related Allowance
Commercial	$	171,238	$	79,571	$	250,809	$	45,327	$	176,887	$	83,157	$	260,044	$	40,810
Mortgage		761,151		130,589		891,740		43,264		744,926		127,071		871,997		44,610
Leases		1,574		230		1,804		522		1,383		434		1,817		535
Consumer		98,581		12,421		111,002		23,010		100,277		12,442		112,719		23,857
Total	$	1,032,544	$	222,811	$	1,255,355	$	112,123	$	1,023,473	$	223,104	$	1,246,577	$	109,812

	Popular, Inc.
	Covered Loans
	March 31, 2017								December 31, 2016
(In thousands)		Accruing		Non-Accruing		Total		Related Allowance		Accruing		Non-Accruing		Total		Related Allowance
Mortgage	$	2,954	$	2,804	$	5,758	$	-	$	2,950	$	2,580	$	5,530	$	-
Total	$	2,954	$	2,804	$	5,758	$	-	$	2,950	$	2,580	$	5,530	$	-

The following tables present the loan count by type of modification for those loans modified in a TDR during the quarters ended March 31, 2017 and 2016. Loans modified as TDRs for the U.S. operations are considered insignificant to the Corporation.

Popular, Inc.
For the quarter ended March 31, 2017
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial real estate non-owner occupied	-	1	-	-
Commercial real estate owner occupied	2	1	-	-
Commercial and industrial	2	6	-	-
Mortgage	14	6	104	68
Leasing	-	-	3	-
Consumer:
Credit cards	126	-	1	158
Personal	262	4	-	1
Auto	-	1	1	-
Other	8	-	-	-
Total	414	19	109	227

Popular, Inc.
For the quarter ended March 31, 2016
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial real estate non-owner occupied	1	1	-	-
Commercial real estate owner occupied	16	1	-	-
Commercial and industrial	6	-	-	-
Mortgage	20	10	123	55
Consumer:
Credit cards	175	-	-	174
HELOCs	-	-	1	-
Personal	261	5	-	-
Auto	-	2	2	-
Other	10	-	-	-
Total	489	19	126	229

The following tables present by class, quantitative information related to loans modified as TDRs during the quarters ended March 31, 2017 and 2016. Loans modified as TDRs for the U.S. operations are considered insignificant to the Corporation.

Popular, Inc.
For the quarter ended March 31, 2017
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	1	$	141	$	139	$	(11)
Commercial real estate owner occupied	3		1,157		1,147		56
Commercial and industrial	8		319		2,388		419
Mortgage	192		21,068		19,513		1,014
Leasing	3		114		115		32
Consumer:
Credit cards	285		2,402		2,643		312
Personal	267		4,598		4,595		1,033
Auto	2		36		37		6
Other	8		65		65		9
Total	769	$	29,900	$	30,642	$	2,870

Popular, Inc.
For the quarter ended March 31, 2016
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	2	$	6,323	$	6,307	$	4,163
Commercial real estate owner occupied	17		3,095		3,149		136
Commercial and industrial	6		2,529		2,527		5
Mortgage	208		25,572		24,474		2,229
Consumer:
Credit cards	349		3,256		3,665		576
HELOCs	1		147		147		77
Personal	266		4,413		4,411		887
Auto	4		72		76		12
Other	10		23		24		4
Total	863	$	45,430	$	44,780	$	8,089

The following tables present by class, TDRs that were subject to payment default and that had been modified as a TDR during the twelve months preceding the default date. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or charged-off, whichever occurs first. The recorded investment at March 31, 2017 is inclusive of all partial paydowns and charge-offs since the modification date. Loans modified as a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Popular, Inc.
Defaulted during the quarter ended March 31, 2017
(Dollars In thousands)	Loan count	Recorded investment as of first default date
Commercial real estate non-owner occupied	1	$	262
Commercial real estate owner occupied	1		267
Commercial and industrial	2		544
Mortgage	36		3,695
Leasing	1		45
Consumer:
Credit cards	128		1,349
HELOCs	1		97
Personal	42		1,024
Auto	2		57
Total	214	$	7,340

Popular, Inc.
Defaulted during the quarter ended March 31, 2016
(Dollars In thousands)	Loan count	Recorded investment as of first default date
Commercial real estate non-owner occupied	2	$	327
Commercial real estate owner occupied	6		2,456
Mortgage	27		3,235
Consumer:
Credit cards	106		1,122
Personal	43		1,139
Auto	1		17
Other	1		4
Total	186	$	8,300

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

Credit Quality

The following table presents the outstanding balance, net of unearned income, of non-covered loans held-in-portfolio based on the Corporation’s assignment of obligor risk ratings as defined at March 31, 2017 and December 31, 2016.

March 31, 2017
				Special										Pass/
(In thousands)		Watch		Mention		Substandard		Doubtful		Loss		Sub-total		Unrated		Total
Puerto Rico^[1]
Commercial multi-family		$	2,231	$	371	$	5,943	$	-	$	-	$	8,545	$	138,307	$	146,852
Commercial real estate non-owner occupied			322,673		367,288		348,580		133		-		1,038,674		1,474,921		2,513,595
Commercial real estate owner occupied			281,761		129,010		356,280		17,749		-		784,800		953,478		1,738,278
Commercial and industrial			261,003		149,306		207,528		11,159		10		629,006		2,036,599		2,665,605
	Total Commercial		867,668		645,975		918,331		29,041		10		2,461,025		4,603,305		7,064,330
Construction			100		3,091		1,668		-		-		4,859		90,600		95,459
Mortgage			4,187		1,664		192,283		-		-		198,134		5,671,584		5,869,718
Leasing			-		-		2,427		-		17		2,444		717,199		719,643
Consumer:
	Credit cards		-		-		19,330		-		-		19,330		1,059,154		1,078,484
	HELOCs		-		-		572		-		-		572		7,577		8,149
	Personal		1,146		599		20,157		-		-		21,902		1,121,433		1,143,335
	Auto		-		-		12,484		-		201		12,685		816,274		828,959
	Other		-		-		17,590		-		2,004		19,594		148,558		168,152
	Total Consumer		1,146		599		70,133		-		2,205		74,083		3,152,996		3,227,079
Total Puerto Rico		$	873,101	$	651,329	$	1,184,842	$	29,041	$	2,232	$	2,740,545	$	14,235,684	$	16,976,229
U.S. mainland
Commercial multi-family		$	16,085	$	7,749	$	645	$	-	$	-	$	24,479	$	1,084,093	$	1,108,572
Commercial real estate non-owner occupied			78,015		17,140		2,465		-		-		97,620		1,350,589		1,448,209
Commercial real estate owner occupied			15,569		895		9,629		-		-		26,093		216,762		242,855
Commercial and industrial			1,060		1,437		152,118		-		-		154,615		793,119		947,734
	Total Commercial		110,729		27,221		164,857		-		-		302,807		3,444,563		3,747,370
Construction			2,966		85		26,222		-		-		29,273		706,573		735,846
Mortgage			-		-		11,888		-		-		11,888		746,381		758,269
Legacy			856		549		4,195		-		-		5,600		35,088		40,688
Consumer:
	Credit cards		-		-		35		-		-		35		122		157
	HELOCs		-		-		2,276		-		3,525		5,801		230,844		236,645
	Personal		-		-		1,452		-		950		2,402		236,925		239,327
	Auto		-		-		-		-		-		-		7		7
	Other		-		-		-		-		-		-		183		183
	Total Consumer		-		-		3,763		-		4,475		8,238		468,081		476,319
Total U.S. mainland		$	114,551	$	27,855	$	210,925	$	-	$	4,475	$	357,806	$	5,400,686	$	5,758,492
Popular, Inc.
Commercial multi-family		$	18,316	$	8,120	$	6,588	$	-	$	-	$	33,024	$	1,222,400	$	1,255,424
Commercial real estate non-owner occupied			400,688		384,428		351,045		133		-		1,136,294		2,825,510		3,961,804
Commercial real estate owner occupied			297,330		129,905		365,909		17,749		-		810,893		1,170,240		1,981,133
Commercial and industrial			262,063		150,743		359,646		11,159		10		783,621		2,829,718		3,613,339
	Total Commercial		978,397		673,196		1,083,188		29,041		10		2,763,832		8,047,868		10,811,700
Construction			3,066		3,176		27,890		-		-		34,132		797,173		831,305
Mortgage			4,187		1,664		204,171		-		-		210,022		6,417,965		6,627,987
Legacy			856		549		4,195		-		-		5,600		35,088		40,688
Leasing			-		-		2,427		-		17		2,444		717,199		719,643
Consumer:
	Credit cards		-		-		19,365		-		-		19,365		1,059,276		1,078,641
	HELOCs		-		-		2,848		-		3,525		6,373		238,421		244,794
	Personal		1,146		599		21,609		-		950		24,304		1,358,358		1,382,662
	Auto		-		-		12,484		-		201		12,685		816,281		828,966
	Other		-		-		17,590		-		2,004		19,594		148,741		168,335
	Total Consumer		1,146		599		73,896		-		6,680		82,321		3,621,077		3,703,398
Total Popular, Inc.		$	987,652	$	679,184	$	1,395,767	$	29,041	$	6,707	$	3,098,351	$	19,636,370	$	22,734,721

The following table presents the weighted average obligor risk rating at March 31, 2017 for those classifications that consider a range of rating scales.

Weighted average obligor risk rating					(Scales 11 and 12)								(Scales 1 through 8)
Puerto Rico:^[1]						Substandard									Pass
Commercial multi-family							11.11								6.13
Commercial real estate non-owner occupied							11.07								6.89
Commercial real estate owner occupied							11.23								7.08
Commercial and industrial							11.14								7.14
	Total Commercial						11.15								7.03
Construction							11.00								7.65

U.S. mainland:						Substandard									Pass
Commercial multi-family							11.31								7.22
Commercial real estate non-owner occupied							11.66								6.65
Commercial real estate owner occupied							11.11								7.24
Commercial and industrial							11.67								6.12
	Total Commercial						11.63								6.75
Construction							11.00								7.64
Legacy							11.11								7.91

[1]

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

December 31, 2016
				Special										Pass/
(In thousands)		Watch		Mention		Substandard		Doubtful		Loss		Sub-total		Unrated		Total
Puerto Rico^[1]
Commercial multi-family		$	2,016	$	383	$	6,108	$	-	$	-	$	8,507	$	166,033	$	174,540
Commercial real estate non-owner occupied			310,510		377,858		342,054		155		-		1,030,577		1,533,708		2,564,285
Commercial real estate owner occupied			310,484		109,873		360,941		17,788		-		799,086		992,389		1,791,475
Commercial and industrial			136,091		133,270		227,360		11,514		12		508,247		2,163,670		2,671,917
	Total Commercial		759,101		621,384		936,463		29,457		12		2,346,417		4,855,800		7,202,217
Construction			50		1,705		1,668		-		-		3,423		82,135		85,558
Mortgage			4,407		1,987		190,090		-		-		196,484		5,720,016		5,916,500
Leasing			-		-		3,062		-		-		3,062		699,831		702,893
Consumer:
	Credit cards		-		-		18,725		-		-		18,725		1,081,882		1,100,607
	HELOCs		-		-		185		-		-		185		8,166		8,351
	Personal		1,068		812		21,496		-		-		23,376		1,126,801		1,150,177
	Auto		-		-		12,321		-		-		12,321		814,271		826,592
	Other		-		-		19,311		-		-		19,311		156,218		175,529
	Total Consumer		1,068		812		72,038		-		-		73,918		3,187,338		3,261,256
Total Puerto Rico		$	764,626	$	625,888	$	1,203,321	$	29,457	$	12	$	2,623,304	$	14,545,120	$	17,168,424
U.S. mainland
Commercial multi-family		$	13,537	$	7,796	$	658	$	-	$	-	$	21,991	$	1,042,305	$	1,064,296
Commercial real estate non-owner occupied			57,111		9,778		1,720		-		-		68,609		1,288,707		1,357,316
Commercial real estate owner occupied			9,271		-		9,119		-		-		18,390		225,355		243,745
Commercial and industrial			3,048		937		153,793		-		-		157,778		773,155		930,933
	Total Commercial		82,967		18,511		165,290		-		-		266,768		3,329,522		3,596,290
Construction			3,000		8,153		16,950		-		-		28,103		662,639		690,742
Mortgage			-		-		11,711		-		-		11,711		768,150		779,861
Legacy			921		786		4,400		-		-		6,107		39,186		45,293
Consumer:
	Credit cards		-		-		30		-		-		30		128		158
	HELOCs		-		-		1,923		-		2,839		4,762		247,413		252,175
	Personal		-		-		1,252		-		609		1,861		238,746		240,607
	Auto		-		-		-		-		-		-		9		9
	Other		-		-		8		-		-		8		180		188
	Total Consumer		-		-		3,213		-		3,448		6,661		486,476		493,137
Total U.S. mainland		$	86,888	$	27,450	$	201,564	$	-	$	3,448	$	319,350	$	5,285,973	$	5,605,323
Popular, Inc.
Commercial multi-family		$	15,553	$	8,179	$	6,766	$	-	$	-	$	30,498	$	1,208,338	$	1,238,836
Commercial real estate non-owner occupied			367,621		387,636		343,774		155		-		1,099,186		2,822,415		3,921,601
Commercial real estate owner occupied			319,755		109,873		370,060		17,788		-		817,476		1,217,744		2,035,220
Commercial and industrial			139,139		134,207		381,153		11,514		12		666,025		2,936,825		3,602,850
	Total Commercial		842,068		639,895		1,101,753		29,457		12		2,613,185		8,185,322		10,798,507
Construction			3,050		9,858		18,618		-		-		31,526		744,774		776,300
Mortgage			4,407		1,987		201,801		-		-		208,195		6,488,166		6,696,361
Legacy			921		786		4,400		-		-		6,107		39,186		45,293
Leasing			-		-		3,062		-		-		3,062		699,831		702,893
Consumer:
	Credit cards		-		-		18,755		-		-		18,755		1,082,010		1,100,765
	HELOCs		-		-		2,108		-		2,839		4,947		255,579		260,526
	Personal		1,068		812		22,748		-		609		25,237		1,365,547		1,390,784
	Auto		-		-		12,321		-		-		12,321		814,280		826,601
	Other		-		-		19,319		-		-		19,319		156,398		175,717
	Total Consumer		1,068		812		75,251		-		3,448		80,579		3,673,814		3,754,393
Total Popular, Inc.		$	851,514	$	653,338	$	1,404,885	$	29,457	$	3,460	$	2,942,654	$	19,831,093	$	22,773,747

The following table presents the weighted average obligor risk rating at December 31, 2016 for those classifications that consider a range of rating scales.

Weighted average obligor risk rating					(Scales 11 and 12)								(Scales 1 through 8)
Puerto Rico:^[1]						Substandard									Pass
Commercial multi-family							11.12								5.95
Commercial real estate non-owner occupied							11.07								6.91
Commercial real estate owner occupied							11.23								7.09
Commercial and industrial							11.09								7.19
	Total Commercial						11.14								7.06
Construction							11.00								7.67

U.S. mainland:						Substandard									Pass
Commercial multi-family							11.31								7.26
Commercial real estate non-owner occupied							11.70								6.67
Commercial real estate owner occupied							11.05								7.32
Commercial and industrial							11.65								6.15
	Total Commercial						11.62								6.78
Construction							11.00								7.67
Legacy							11.10								7.91

[1]

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