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Allowance for loan losses
 9 Months Ended
Sep. 30, 2017
Receivables  
Allowance for loan losses

Note 9 – 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 September 30, 2017, 45% (September 30, 2016 - 49%) 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 leasing, credit cards, personal, auto and other consumer loan portfolios for 2017 and in the leasing, auto, other consumer loan and mortgage loan portfolios for 2016.

For the period ended September 30, 2017, 5% (September 30, 2016 - 4 %) 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 consumer portfolios for 2017 and 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.

As discussed in Note 2 - Hurricanes impact, during the quarter ended September 30, 2017, an incremental provision expense of $69.9 million was made to the allowance for loan losses based on management’s best estimate of the impact of the hurricanes on the Corporation’s loan portfolios and the ability of borrowers to repay their loans, taking into consideration currently available information and the already challenging economic environment in Puerto Rico prior to the hurricanes. Refer to Note 2 for additional information.

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 and nine months ended September 30, 2017 and 2016.

For the quarter ended September 30, 2017
Puerto Rico - Non-covered loans
(In thousands)CommercialConstructionMortgageLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$174,189$1,473$147,866$8,003$122,904$454,435
Provision (reversal of provision)31,05917638,8383,92441,118115,115
Charge-offs(5,573)9(17,460)(1,733)(31,793)(56,550)
Recoveries6,011413892384,57011,249
Ending balance$205,686$1,699$169,633$10,432$136,799$524,249
Specific ALLL$40,863$-$49,129$450$21,730$112,172
General ALLL$164,823$1,699$120,504$9,982$115,069$412,077
Loans held-in-portfolio:
Impaired non-covered loans$328,704$-$510,134$1,468$101,948$942,254
Non-covered loans held-in-portfolio
excluding impaired loans6,840,90787,7055,305,371753,4133,188,42216,175,818
Total non-covered loans held-in-portfolio$7,169,611$87,705$5,815,505$754,881$3,290,370$17,118,072

For the quarter ended September 30, 2017
Puerto Rico - Covered loans
(In thousands)CommercialConstructionMortgageLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$-$-$30,284$-$524$30,808
Provision (reversal of provision)--2,538-5623,100
Charge-offs--(863)-(24)(887)
Recoveries--32-436
Ending balance$-$-$31,991$-$1,066$33,057
Specific ALLL$-$-$-$-$-$-
General ALLL$-$-$31,991$-$1,066$33,057
Loans held-in-portfolio:
Impaired covered loans$-$-$-$-$-$-
Covered loans held-in-portfolio
excluding impaired loans--510,211-14,643524,854
Total covered loans held-in-portfolio$-$-$510,211$-$14,643$524,854

For the quarter ended September 30, 2017
U.S. Mainland
(In thousands)CommercialConstructionMortgageLegacyConsumerTotal
Allowance for credit losses:
Beginning balance$28,319$6,528$4,122$993$14,809$54,771
Provision (reversal of provision)39,246595(39)(418)3,16042,544
Charge-offs(4,553)-(113)(86)(4,957)(9,709)
Recoveries271-2873831,0602,001
Ending balance$63,283$7,123$4,257$872$14,072$89,607
Specific ALLL$-$-$2,292$-$727$3,019
General ALLL$63,283$7,123$1,965$872$13,345$86,588
Loans held-in-portfolio:
Impaired loans$-$-$9,094$-$3,439$12,533
Loans held-in-portfolio
excluding impaired loans4,057,484735,620704,63637,508507,5976,042,845
Total loans held-in-portfolio$4,057,484$735,620$713,730$37,508$511,036$6,055,378

For the quarter ended September 30, 2017
Popular, Inc.
(In thousands)CommercialConstructionMortgageLegacyLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$202,508$8,001$182,272$993$8,003$138,237$540,014
Provision (reversal of provision)70,30577141,337(418)3,92444,840160,759
Charge-offs(10,126)9(18,436)(86)(1,733)(36,774)(67,146)
Recoveries6,282417083832385,63413,286
Ending balance$268,969$8,822$205,881$872$10,432$151,937$646,913
Specific ALLL$40,863$-$51,421$-$450$22,457$115,191
General ALLL$228,106$8,822$154,460$872$9,982$129,480$531,722
Loans held-in-portfolio:
Impaired loans$328,704$-$519,228$-$1,468$105,387$954,787
Loans held-in-portfolio
excluding impaired loans10,898,391823,3256,520,21837,508753,4133,710,66222,743,517
Total loans held-in-portfolio$11,227,095$823,325$7,039,446$37,508$754,881$3,816,049$23,698,304

For the nine months ended September 30, 2017
Puerto Rico - Non-covered loans
(In thousands)CommercialConstructionMortgageLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$189,686$1,353$143,320$7,662$125,963$467,984
Provision (reversal of provision)29,945(2,218)77,6926,51676,831188,766
Charge-offs(38,219)(3,646)(53,936)(5,030)(81,607)(182,438)
Recoveries24,2746,2102,5571,28415,61249,937
Ending balance$205,686$1,699$169,633$10,432$136,799$524,249
Specific ALLL$40,863$-$49,129$450$21,730$112,172
General ALLL$164,823$1,699$120,504$9,982$115,069$412,077
Loans held-in-portfolio:
Impaired non-covered loans$328,704$-$510,134$1,468$101,948$942,254
Non-covered loans held-in-portfolio
excluding impaired loans6,840,90787,7055,305,371753,4133,188,42216,175,818
Total non-covered loans held-in-portfolio$7,169,611$87,705$5,815,505$754,881$3,290,370$17,118,072

For the nine months ended September 30, 2017
Puerto Rico - Covered loans
(In thousands)CommercialConstructionMortgageLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$-$-$30,159$-$191$30,350
Provision (reversal of provision)--3,253-1,0024,255
Charge-offs--(2,700)-(134)(2,834)
Recoveries--1,279-71,286
Ending balance$-$-$31,991$-$1,066$33,057
Specific ALLL$-$-$-$-$-$-
General ALLL$-$-$31,991$-$1,066$33,057
Loans held-in-portfolio:
Impaired covered loans$-$-$-$-$-$-
Covered loans held-in-portfolio
excluding impaired loans--510,211-14,643524,854
Total covered loans held-in-portfolio$-$-$510,211$-$14,643$524,854

For the nine months ended September 30, 2017
U.S. Mainland
(In thousands)CommercialConstructionMortgageLegacyConsumerTotal
Allowance for credit losses:
Beginning balance$12,968$8,172$4,614$1,343$15,220$42,317
Provision (reversal of provision)53,491(1,049)(173)(1,554)10,20060,915
Charge-offs(4,774)-(1,064)(669)(14,476)(20,983)
Recoveries1,598-8801,7523,1287,358
Ending balance$63,283$7,123$4,257$872$14,072$89,607
Specific ALLL$-$-$2,292$-$727$3,019
General ALLL$63,283$7,123$1,965$872$13,345$86,588
Loans held-in-portfolio:
Impaired loans$-$-$9,094$-$3,439$12,533
Loans held-in-portfolio
excluding impaired loans4,057,484735,620704,63637,508507,5976,042,845
Total loans held-in-portfolio$4,057,484$735,620$713,730$37,508$511,036$6,055,378

For the nine months ended September 30, 2017
Popular, Inc.
(In thousands)CommercialConstructionMortgageLegacyLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$202,654$9,525$178,093$1,343$7,662$141,374$540,651
Provision (reversal of provision)83,436(3,267)80,772(1,554)6,51688,033253,936
Charge-offs(42,993)(3,646)(57,700)(669)(5,030)(96,217)(206,255)
Recoveries25,8726,2104,7161,7521,28418,74758,581
Ending balance$268,969$8,822$205,881$872$10,432$151,937$646,913
Specific ALLL$40,863$-$51,421$-$450$22,457$115,191
General ALLL$228,106$8,822$154,460$872$9,982$129,480$531,722
Loans held-in-portfolio:
Impaired loans$328,704$-$519,228$-$1,468$105,387$954,787
Loans held-in-portfolio
excluding impaired loans10,898,391823,3256,520,21837,508753,4133,710,66222,743,517
Total loans held-in-portfolio$11,227,095$823,325$7,039,446$37,508$754,881$3,816,049$23,698,304

For the quarter ended September 30, 2016
Puerto Rico - Non-covered loans
(In thousands)CommercialConstructionMortgageLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$199,827$3,605$136,724$10,094$130,471$480,721
Provision (reversal of provision)13,746(605)13,841(1,363)10,66236,281
Charge-offs(13,799)(951)(16,002)(1,429)(25,470)(57,651)
Recoveries10,6006576561312,64924,692
Ending balance$210,374$2,114$135,328$7,915$128,312$484,043
Specific ALLL$58,527$-$43,567$540$23,708$126,342
General ALLL$151,847$2,114$91,761$7,375$104,604$357,701
Loans held-in-portfolio:
Impaired non-covered loans$328,868$-$487,972$1,899$108,341$927,080
Non-covered loans held-in-portfolio
excluding impaired loans6,925,29081,0545,476,876680,9113,185,49016,349,621
Total non-covered loans held-in-portfolio$7,254,158$81,054$5,964,848$682,810$3,293,831$17,276,701

For the quarter ended September 30, 2016
Puerto Rico - Covered Loans
(In thousands)CommercialConstructionMortgageLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$-$-$29,951$-$630$30,581
Provision (reversal of provision)--845-(95)750
Charge-offs--(973)-(411)(1,384)
Recoveries--312-3315
Ending balance$-$-$30,135$-$127$30,262
Specific ALLL$-$-$-$-$-$-
General ALLL$-$-$30,135$-$127$30,262
Loans held-in-portfolio:
Impaired covered loans$-$-$-$-$-$-
Covered loans held-in-portfolio
excluding impaired loans--571,349-16,862588,211
Total covered loans held-in-portfolio$-$-$571,349$-$16,862$588,211

For the quarter ended September 30, 2016
U.S. Mainland - Continuing Operations
(In thousands)CommercialConstructionMortgageLegacyConsumerTotal
Allowance for credit losses:
Beginning balance$9,854$7,460$4,762$1,852$13,490$37,418
Provision (reversal of provision)2,7653681,380(690)2,4906,313
Charge-offs(155)-(2,022)(145)(2,884)(5,206)
Recoveries1,328-806659523,025
Ending balance$13,792$7,828$4,200$1,682$14,048$41,550
Specific ALLL$-$-$1,990$-$725$2,715
General ALLL$13,792$7,828$2,210$1,682$13,323$38,835
Loans held-in-portfolio:
Impaired loans$-$-$8,896$-$2,588$11,484
Loans held-in-portfolio
excluding impaired loans3,283,022650,298800,76347,914525,7905,307,787
Total loans held-in-portfolio$3,283,022$650,298$809,659$47,914$528,378$5,319,271

For the quarter ended September 30, 2016
Popular, Inc.
(In thousands)CommercialConstructionMortgageLegacyLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$209,681$11,065$171,437$1,852$10,094$144,591$548,720
Provision (reversal of provision)16,511(237)16,066(690)(1,363)13,05743,344
Charge-offs(13,954)(951)(18,997)(145)(1,429)(28,765)(64,241)
Recoveries11,928651,15766561313,60428,032
Ending balance$224,166$9,942$169,663$1,682$7,915$142,487$555,855
Specific ALLL$58,527$-$45,557$-$540$24,433$129,057
General ALLL$165,639$9,942$124,106$1,682$7,375$118,054$426,798
Loans held-in-portfolio:
Impaired loans$328,868$-$496,868$-$1,899$110,929$938,564
Loans held-in-portfolio
excluding impaired loans10,208,312731,3526,848,98847,914680,9113,728,14222,245,619
Total loans held-in-portfolio$10,537,180$731,352$7,345,856$47,914$682,810$3,839,071$23,184,183

For the nine months ended September 30, 2016
Puerto Rico - Non-covered loans
(In thousands)CommercialConstructionMortgageLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$186,925$4,957$128,327$10,993$138,721$469,923
Provision (reversal of provision)30,630(5,786)50,398(190)43,451118,503
Charge-offs(47,256)(3,026)(45,924)(4,435)(78,860)(179,501)
Recoveries35,7065,0552,5271,54724,83869,673
Net recoveries (write-downs)4,369914--1625,445
Ending balance$210,374$2,114$135,328$7,915$128,312$484,043
Specific ALLL$58,527$-$43,567$540$23,708$126,342
General ALLL$151,847$2,114$91,761$7,375$104,604$357,701
Loans held-in-portfolio:
Impaired non-covered loans$328,868$-$487,972$1,899$108,341$927,080
Non-covered loans held-in-portfolio
excluding impaired loans6,925,29081,0545,476,876680,9113,185,49016,349,621
Total non-covered loans held-in-portfolio$7,254,158$81,054$5,964,848$682,810$3,293,831$17,276,701

For the nine months ended September 30, 2016
Puerto Rico - Covered Loans
(In thousands)CommercialConstructionMortgageLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$-$-$33,967$-$209$34,176
Provision (reversal of provision)--(1,476)-(75)(1,551)
Charge-offs--(3,078)-(17)(3,095)
Recoveries--722-10732
Ending balance$-$-$30,135$-$127$30,262
Specific ALLL$-$-$-$-$-$-
General ALLL$-$-$30,135$-$127$30,262
Loans held-in-portfolio:
Impaired covered loans$-$-$-$-$-$-
Covered loans held-in-portfolio
excluding impaired loans--571,349-16,862588,211
Total covered loans held-in-portfolio$-$-$571,349$-$16,862$588,211

For the nine months ended September 30, 2016
U.S. Mainland
(In thousands)CommercialConstructionMortgageLegacyConsumerTotal
Allowance for credit losses:
Beginning balance$9,908$3,912$4,985$2,687$11,520$33,012
Provision (reversal of provision)1,6513,9161,403(2,665)7,39411,699
Charge-offs(1,040)-(2,595)(388)(8,194)(12,217)
Recoveries3,273-4072,0483,3289,056
Ending balance$13,792$7,828$4,200$1,682$14,048$41,550
Specific ALLL$-$-$1,990$-$725$2,715
General ALLL$13,792$7,828$2,210$1,682$13,323$38,835
Loans held-in-portfolio:
Impaired loans$-$-$8,896$-$2,588$11,484
Loans held-in-portfolio
excluding impaired loans3,283,022650,298800,76347,914525,7905,307,787
Total loans held-in-portfolio$3,283,022$650,298$809,659$47,914$528,378$5,319,271

For the nine months ended September 30, 2016
Popular, Inc.
(In thousands)CommercialConstructionMortgageLegacyLeasingConsumerTotal
Allowance for credit losses:
Beginning balance$196,833$8,869$167,279$2,687$10,993$150,450$537,111
Provision (reversal of provision)32,281(1,870)50,325(2,665)(190)50,770128,651
Charge-offs(48,296)(3,026)(51,597)(388)(4,435)(87,071)(194,813)
Recoveries38,9795,0553,6562,0481,54728,17679,461
Net recoveries (write-downs)4,369914---1625,445
Ending balance$224,166$9,942$169,663$1,682$7,915$142,487$555,855
Specific ALLL$58,527$-$45,557$-$540$24,433$129,057
General ALLL$165,639$9,942$124,106$1,682$7,375$118,054$426,798
Loans held-in-portfolio:
Impaired loans$328,868$-$496,868$-$1,899$110,929$938,564
Loans held-in-portfolio
excluding impaired loans10,208,312731,3526,848,98847,914680,9113,728,14222,245,619
Total loans held-in-portfolio$10,537,180$731,352$7,345,856$47,914$682,810$3,839,071$23,184,183

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
For the quarters endedFor the nine months ended
(In thousands)September 30, 2017September 30, 2016September 30, 2017September 30, 2016
Balance at beginning of period$65,674$66,995$68,877$63,563
Provision (reversal of provision)2,9956,7108,2142,640
Net recoveries (charge-offs)(1,569)(4,134)(9,991)3,368
Balance at end of period$67,100$69,571$67,100$69,571

Impaired loans

The following tables present loans individually evaluated for impairment at September 30, 2017 and December 31, 2016.

September 30, 2017
Puerto Rico
Impaired Loans – With an Impaired Loans
AllowanceWith No AllowanceImpaired Loans - Total
UnpaidUnpaidUnpaid
RecordedprincipalRelatedRecordedprincipalRecordedprincipalRelated
(In thousands)investmentbalanceallowanceinvestmentbalanceinvestmentbalanceallowance
Commercial multi-family$204$204$30$-$-$204$204$30
Commercial real estate non-owner occupied109,814120,25225,5357,61712,780117,431133,03225,535
Commercial real estate owner occupied120,196178,8928,72928,38959,034148,585237,9268,729
Commercial and industrial46,80749,8696,56915,67725,10562,48474,9746,569
Mortgage452,734502,90849,12957,40069,694510,134572,60249,129
Leasing1,4681,468450--1,4681,468450
Consumer:
Credit cards35,78235,7825,500--35,78235,7825,500
Personal 63,01563,01515,616--63,01563,01515,616
Auto 2,0492,049440--2,0492,049440
Other1,1021,102174--1,1021,102174
Total Puerto Rico$833,171$955,541$112,172$109,083$166,613$942,254$1,122,154$112,172

September 30, 2017
U.S. mainland
Impaired Loans – With an Impaired Loans
AllowanceWith No AllowanceImpaired Loans - Total
UnpaidUnpaidUnpaid
RecordedprincipalRelatedRecordedprincipalRecordedprincipalRelated
(In thousands)investmentbalanceallowanceinvestmentbalanceinvestmentbalanceallowance
Mortgage$6,501$8,282$2,292$2,593$3,513$9,094$11,795$2,292
Consumer:
HELOCs2,1492,1585015195362,6682,694501
Personal554555226217217771772226
Total U.S. mainland$9,204$10,995$3,019$3,329$4,266$12,533$15,261$3,019

September 30, 2017
Popular, Inc.
Impaired Loans – With an Impaired Loans
AllowanceWith No AllowanceImpaired Loans - Total
UnpaidUnpaidUnpaid
RecordedprincipalRelatedRecordedprincipalRecordedprincipalRelated
(In thousands)investmentbalanceallowanceinvestmentbalanceinvestmentbalanceallowance
Commercial multi-family$204$204$30$-$-$204$204$30
Commercial real estate non-owner occupied109,814120,25225,5357,61712,780117,431133,03225,535
Commercial real estate owner occupied120,196178,8928,72928,38959,034148,585237,9268,729
Commercial and industrial46,80749,8696,56915,67725,10562,48474,9746,569
Mortgage459,235511,19051,42159,99373,207519,228584,39751,421
Leasing1,4681,468450--1,4681,468450
Consumer:
Credit Cards35,78235,7825,500--35,78235,7825,500
HELOCs2,1492,1585015195362,6682,694501
Personal63,56963,57015,84221721763,78663,78715,842
Auto 2,0492,049440--2,0492,049440
Other1,1021,102174--1,1021,102174
Total Popular, Inc.$842,375$966,536$115,191$112,412$170,879$954,787$1,137,415$115,191

December 31, 2016
Puerto Rico
Impaired Loans – With an Impaired Loans
AllowanceWith No AllowanceImpaired Loans - Total
UnpaidUnpaidUnpaid
RecordedprincipalRelatedRecordedprincipalRecordedprincipalRelated
(In thousands)investmentbalanceallowanceinvestmentbalanceinvestmentbalanceallowance
Commercial multi-family$82$82$34$-$-$82$82$34
Commercial real estate non-owner occupied104,119105,04724,53715,93529,631120,054134,67824,537
Commercial real estate owner occupied131,634169,01313,00731,96250,094163,596219,10713,007
Commercial and industrial46,86249,3014,7977,82811,47854,69060,7794,797
Mortgage426,737466,24942,42870,75187,806497,488554,05542,428
Leasing1,8171,817535--1,8171,817535
Consumer:
Credit cards37,46437,4645,588--37,46437,4645,588
Personal 66,04366,04316,955--66,04366,04316,955
Auto 2,1172,117474--2,1172,117474
Other991991168--991991168
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
AllowanceWith No AllowanceImpaired Loans - Total
UnpaidUnpaidUnpaid
RecordedprincipalRelatedRecordedprincipalRecordedprincipalRelated
(In thousands)investmentbalanceallowanceinvestmentbalanceinvestmentbalanceallowance
Mortgage$6,381$7,971$2,182$2,495$3,369$8,876$11,340$2,182
Consumer:
HELOCs2,4212,4296673003152,7212,744667
Personal3939579791181185
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
AllowanceWith No AllowanceImpaired Loans - Total
UnpaidUnpaidUnpaid
RecordedprincipalRelatedRecordedprincipalRecordedprincipalRelated
(In thousands)investmentbalanceallowanceinvestmentbalanceinvestmentbalanceallowance
Commercial multi-family$82$82$34$-$-$82$82$34
Commercial real estate non-owner occupied104,119105,04724,53715,93529,631120,054134,67824,537
Commercial real estate owner occupied131,634169,01313,00731,96250,094163,596219,10713,007
Commercial and industrial46,86249,3014,7977,82811,47854,69060,7794,797
Mortgage433,118474,22044,61073,24691,175506,364565,39544,610
Leasing1,8171,817535--1,8171,817535
Consumer:
Credit Cards37,46437,4645,588--37,46437,4645,588
HELOCs2,4212,4296673003152,7212,744667
Personal66,08266,08216,960797966,16166,16116,960
Auto 2,1172,117474--2,1172,117474
Other991991168--991991168
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 and nine months ended September 30, 2017 and 2016.

For the quarter ended September 30, 2017
Puerto RicoU.S. MainlandPopular, Inc.
AverageInterestAverageInterestAverageInterest
recordedincomerecordedincomerecordedincome
(In thousands)investmentrecognizedinvestmentrecognizedinvestmentrecognized
Commercial multi-family$141$1$-$-$141$1
Commercial real estate non-owner occupied117,6501,272--117,6501,272
Commercial real estate owner occupied151,5801,413--151,5801,413
Commercial and industrial61,950531--61,950531
Mortgage507,6893,2118,99560516,6843,271
Leasing1,568---1,568-
Consumer:
Credit cards35,727---35,727-
Helocs--2,572-2,572-
Personal 64,091-763-64,854-
Auto 2,065---2,065-
Other991---991-
Total Popular, Inc.$943,452$6,428$12,330$60$955,782$6,488

For the quarter ended September 30, 2016
Puerto RicoU.S. MainlandPopular, Inc.
AverageInterestAverageInterestAverageInterest
recordedincomerecordedincomerecordedincome
(In thousands)investmentrecognizedinvestmentrecognizedinvestmentrecognized
Commercial multi-family$43$1$-$-$43$1
Commercial real estate non-owner occupied140,0831,345--140,0831,345
Commercial real estate owner occupied136,5651,408--136,5651,408
Commercial and industrial55,685483--55,685483
Construction518---518-
Mortgage482,0673,5388,73068490,7973,606
Leasing2,005---2,005-
Consumer:
Credit cards38,431---38,431-
Helocs--1,883-1,883-
Personal 67,077-651-67,728-
Auto 2,501---2,501-
Other728---728-
Total Popular, Inc.$925,703$6,775$11,264$68$936,967$6,843

For the nine months ended September 30, 2017
Puerto RicoU.S. MainlandPopular, Inc.
AverageInterestAverageInterestAverageInterest
recordedincomerecordedincomerecordedincome
(In thousands)investmentrecognizedinvestmentrecognizedinvestmentrecognized
Commercial multi-family$111$4$-$-$111$4
Commercial real estate non-owner occupied118,2433,997--118,2433,997
Commercial real estate owner occupied158,0464,640--158,0464,640
Commercial and industrial61,0721,682--61,0721,682
Mortgage503,62811,3948,947156512,57511,550
Leasing1,689---1,689-
Consumer:
Credit cards36,718---36,718-
HELOCs--2,632-2,632-
Personal 64,962-440-65,402-
Auto 2,079---2,079-
Other891---891-
Total Popular, Inc.$947,439$21,717$12,019$156$959,458$21,873

For the nine months ended September 30, 2016
Puerto RicoU.S. MainlandPopular, Inc.
AverageInterestAverageInterestAverageInterest
recordedincomerecordedincomerecordedincome
(In thousands)investmentrecognizedinvestmentrecognizedinvestmentrecognized
Commercial multi-family214--214
Commercial real estate non-owner occupied$129,372$3,971$-$-$129,372$3,971
Commercial real estate owner occupied147,3054,349--147,3054,349
Commercial and industrial58,5181,466--58,5181,466
Construction1,384---1,384-
Mortgage475,10810,3118,046133483,15410,444
Leasing2,201---2,201-
Consumer:
Credit cards38,344---38,344-
HELOCs--1,741-1,741-
Personal 67,624-632-68,256-
Auto 2,689---2,689-
Other606---606-
Total Popular, Inc.$923,172$20,101$10,419$133$933,591$20,234

Modifications

Troubled debt restructurings (“TDRs”) related to non-covered loan portfolios amounted to $ 1.3 billion at September 30, 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 $8 million related to the commercial loan portfolio at September 30, 2017 (December 31, 2016 - $8 million).

At September 30, 2017, the mortgage loan TDRs include $444 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 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 September 30, 2017 and December 31, 2016.

Popular, Inc.
Non-Covered Loans
September 30, 2017 December 31, 2016
(In thousands)AccruingNon-AccruingTotalRelated AllowanceAccruingNon-AccruingTotalRelated Allowance
Commercial$163,349$66,492$229,841$37,471$176,887$83,157$260,044$40,810
Mortgage793,478131,424924,90251,421744,926127,071871,99744,610
Leases9633701,3334501,3834341,817535
Consumer95,79512,004107,79922,457100,27712,442112,71923,857
Total$1,053,585$210,290$1,263,875$111,799$1,023,473$223,104$1,246,577$109,812

Popular, Inc.
Covered Loans
September 30, 2017 December 31, 2016
(In thousands)AccruingNon-AccruingTotalRelated AllowanceAccruingNon-AccruingTotalRelated Allowance
Mortgage$3,320$2,617$5,937$-$2,950$2,580$5,530$-
Total$3,320$2,617$5,937$-$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 and nine months ended September 30, 2017 and 2016. Loans modified as TDRs for the U.S. operations are considered insignificant to the Corporation.

Popular, Inc.
For the quarter ended September 30, 2017For the nine months ended September 30, 2017
Reduction in interest rateExtension of maturity dateCombination of reduction in interest rate and extension of maturity dateOtherReduction in interest rateExtension of maturity dateCombination of reduction in interest rate and extension of maturity dateOther
Commercial real estate non-owner occupied----41--
Commercial real estate owner occupied-3--312--
Commercial and industrial115--336--
Mortgage131483164535301116
Leasing--1--16-
Consumer:
Credit cards140-4114425-5424
HELOCs--2--13-
Personal187212699613
Auto-12--541
Other11---271-1
Total35235931321,20698320545

Popular, Inc.
For the quarter ended September 30, 2016For the nine months ended September 30, 2016
Reduction in interest rateExtension of maturity dateCombination of reduction in interest rate and extension of maturity dateOtherReduction in interest rateExtension of maturity dateCombination of reduction in interest rate and extension of maturity dateOther
Commercial real estate non-owner occupied3---51--
Commercial real estate owner occupied9---385--
Commercial and industrial8---221--
Mortgage1724134435558376133
Leasing-1---1--
Consumer:
Credit cards218-1158603-1531
HELOCs------21
Personal24161-7611611
Auto-442-1182
Other6---27---
Total502351402031,51193388668

The following tables present by class, quantitative information related to loans modified as TDRs during the quarters and nine months ended September 30, 2017 and 2016.

Popular, Inc.
For the quarter ended September 30, 2017
(Dollars in thousands)Loan countPre-modification outstanding recorded investmentPost-modification outstanding recorded investmentIncrease (decrease) in the allowance for loan losses as a result of modification
Commercial real estate owner occupied3$272$269$29
Commercial and industrial161,0221,044111
Mortgage12617,69216,6331,103
Leasing127278
Consumer:
Credit cards2582,8813,114375
HELOCs220320323
Personal1922,9452,944673
Auto342428
Other1146466
Total612$25,130$24,322$2,336

Popular, Inc.
For the quarter ended September 30, 2016
(Dollars in thousands)Loan countPre-modification outstanding recorded investmentPost-modification outstanding recorded investmentIncrease (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied3$469$3,085$860
Commercial real estate owner occupied97731,874136
Commercial and industrial824630121
Mortgage21825,25524,6811,780
Leasing115153
Consumer:
Credit cards3773,3213,715450
Personal2484,4814,547853
Auto1012313427
Other623234
Total880$34,706$38,375$4,134

Popular, Inc.
For the nine months ended September 30, 2017
(Dollars in thousands)Loan countPre-modification outstanding recorded investmentPost-modification outstanding recorded investmentIncrease (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied5$2,069$1,901$145
Commercial real estate owner occupied152,9752,951172
Commercial and industrial391,8503,967579
Mortgage49758,77754,9653,343
Leasing726326274
Consumer:
Credit cards8547,7858,5141,019
HELOCs468968636
Personal70911,97911,9822,704
Auto102,0431,999362
Other292,0022,00270
Total2,169$90,432$89,229$8,504

Popular, Inc.
For the nine months ended September 30, 2016
(Dollars in thousands)Loan countPre-modification outstanding recorded investmentPost-modification outstanding recorded investmentIncrease (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied6$6,989$9,589$5,029
Commercial real estate owner occupied4311,62311,648473
Commercial and industrial233,8323,8841
Mortgage62269,59167,7025,407
Leasing115153
Consumer:
Credit cards1,13510,35211,7681,677
HELOCs3355398216
Personal77913,08913,1952,784
Auto2125627452
Other27788014
Total2,660$116,180$118,553$15,656

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 September 30, 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 September 30, 2017Defaulted during the nine months ended September 30, 2017
(Dollars in thousands)Loan countRecorded investment as of first default dateLoan countRecorded investment as of first default date
Commercial real estate non-owner occupied-$-2$457
Commercial real estate owner occupied--31,749
Commercial and industrial1364601
Mortgage484,21611010,112
Consumer:
Credit cards1351,2122742,661
HELOCs--197
Personal671,2221383,230
Auto119599
Other--19
Total252$6,705538$19,015

Popular, Inc.
Defaulted during the quarter ended September 30, 2016Defaulted during the nine months ended September 30, 2016
(Dollars in thousands)Loan countRecorded investment as of first default dateLoan countRecorded investment as of first default date
Commercial real estate non-owner occupied-$-2$327
Commercial real estate owner occupied3773103,276
Commercial and industrial37585785
Mortgage525,40913214,132
Leasing--429
Consumer:
Credit cards1091,0842212,259
Personal34623932,375
Auto3636111
Other510510
Total209$8,720478$23,304

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 September 30, 2017 and December 31, 2016.

September 30, 2017
SpecialPass/
(In thousands)WatchMentionSubstandardDoubtfulLossSub-totalUnratedTotal
Puerto Rico[1]
Commercial multi-family$1,477$968$6,315$-$-$8,760$137,791$146,551
Commercial real estate non-owner occupied375,756329,210321,592--1,026,5581,498,2372,524,795
Commercial real estate owner occupied252,655141,304333,9472,248-730,154942,1191,672,273
Commercial and industrial268,283124,237217,45947351610,5032,215,4892,825,992
Total Commercial898,171595,719879,3132,721512,375,9754,793,6367,169,611
Construction755,353269--5,69782,00887,705
Mortgage2,6373,277193,127--199,0415,616,4645,815,505
Leasing--2,649-352,684752,197754,881
Consumer:
Credit cards--20,626--20,6261,062,6201,083,246
HELOCs--48--486,0766,124
Personal33365321,107--22,0931,192,2381,214,331
Auto--12,244-1612,260809,744822,004
Other --16,079-39616,475148,190164,665
Total Consumer33365370,104-41271,5023,218,8683,290,370
Total Puerto Rico$901,216$605,002$1,145,462$2,721$498$2,654,899$14,463,173$17,118,072
U.S. mainland
Commercial multi-family$15,688$6,387$5,962$-$-$28,037$1,153,150$1,181,187
Commercial real estate non-owner occupied43,20544,48337,493--125,1811,444,0141,569,195
Commercial real estate owner occupied25,8403,4518,916--38,207250,577288,784
Commercial and industrial3,480554156,947--160,981857,3371,018,318
Total Commercial88,21354,875209,318--352,4063,705,0784,057,484
Construction30,6812,39150,574--83,646651,974735,620
Mortgage--14,347--14,347699,383713,730
Legacy7314673,690--4,88832,62037,508
Consumer:
Credit cards--13--136780
HELOCs--7,565-4,39511,960184,858196,818
Personal--1,624-7172,341311,502313,843
Auto------33
Other --21--21271292
Total Consumer--9,223-5,11214,335496,701511,036
Total U.S. mainland$119,625$57,733$287,152$-$5,112$469,622$5,585,756$6,055,378
Popular, Inc.
Commercial multi-family$17,165$7,355$12,277$-$-$36,797$1,290,941$1,327,738
Commercial real estate non-owner occupied418,961373,693359,085--1,151,7392,942,2514,093,990
Commercial real estate owner occupied278,495144,755342,8632,248-768,3611,192,6961,961,057
Commercial and industrial271,763124,791374,40647351771,4843,072,8263,844,310
Total Commercial986,384650,5941,088,6312,721512,728,3818,498,71411,227,095
Construction30,7567,74450,843--89,343733,982823,325
Mortgage2,6373,277207,474--213,3886,315,8476,529,235
Legacy7314673,690--4,88832,62037,508
Leasing--2,649-352,684752,197754,881
Consumer:
Credit cards--20,639--20,6391,062,6871,083,326
HELOCs--7,613-4,39512,008190,934202,942
Personal33365322,731-71724,4341,503,7401,528,174
Auto--12,244-1612,260809,747822,007
Other --16,100-39616,496148,461164,957
Total Consumer33365379,327-5,52485,8373,715,5693,801,406
Total Popular, Inc.$1,020,841$662,735$1,432,614$2,721$5,610$3,124,521$20,048,929$23,173,450
The following table presents the weighted average obligor risk rating at September 30, 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]SubstandardPass
Commercial multi-family11.185.98
Commercial real estate non-owner occupied11.077.01
Commercial real estate owner occupied11.257.16
Commercial and industrial11.217.19
Total Commercial11.187.11
Construction11.377.73
U.S. mainland:SubstandardPass
Commercial multi-family11.007.24
Commercial real estate non-owner occupied11.216.68
Commercial real estate owner occupied11.057.14
Commercial and industrial11.606.15
Total Commercial11.496.76
Construction11.007.68
Legacy11.127.93

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

December 31, 2016
SpecialPass/
(In thousands)WatchMentionSubstandardDoubtfulLossSub-totalUnratedTotal
Puerto Rico[1]
Commercial multi-family$2,016$383$6,108$-$-$8,507$166,033$174,540
Commercial real estate non-owner occupied310,510377,858342,054155-1,030,5771,533,7082,564,285
Commercial real estate owner occupied310,484109,873360,94117,788-799,086992,3891,791,475
Commercial and industrial136,091133,270227,36011,51412508,2472,163,6702,671,917
Total Commercial759,101621,384936,46329,457122,346,4174,855,8007,202,217
Construction501,7051,668--3,42382,13585,558
Mortgage4,4071,987190,090--196,4845,720,0165,916,500
Leasing--3,062--3,062699,831702,893
Consumer:
Credit cards--18,725--18,7251,081,8821,100,607
HELOCs--185--1858,1668,351
Personal1,06881221,496--23,3761,126,8011,150,177
Auto--12,321--12,321814,271826,592
Other --19,311--19,311156,218175,529
Total Consumer1,06881272,038--73,9183,187,3383,261,256
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 occupied57,1119,7781,720--68,6091,288,7071,357,316
Commercial real estate owner occupied9,271-9,119--18,390225,355243,745
Commercial and industrial3,048937153,793--157,778773,155930,933
Total Commercial82,96718,511165,290--266,7683,329,5223,596,290
Construction3,0008,15316,950--28,103662,639690,742
Mortgage--11,711--11,711768,150779,861
Legacy9217864,400--6,10739,18645,293
Consumer:
Credit cards--30--30128158
HELOCs--1,923-2,8394,762247,413252,175
Personal--1,252-6091,861238,746240,607
Auto------99
Other --8--8180188
Total Consumer--3,213-3,4486,661486,476493,137
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 occupied367,621387,636343,774155-1,099,1862,822,4153,921,601
Commercial real estate owner occupied319,755109,873370,06017,788-817,4761,217,7442,035,220
Commercial and industrial139,139134,207381,15311,51412666,0252,936,8253,602,850
Total Commercial842,068639,8951,101,75329,457122,613,1858,185,32210,798,507
Construction3,0509,85818,618--31,526744,774776,300
Mortgage4,4071,987201,801--208,1956,488,1666,696,361
Legacy9217864,400--6,10739,18645,293
Leasing--3,062--3,062699,831702,893
Consumer:
Credit cards--18,755--18,7551,082,0101,100,765
HELOCs--2,108-2,8394,947255,579260,526
Personal1,06881222,748-60925,2371,365,5471,390,784
Auto--12,321--12,321814,280826,601
Other --19,319--19,319156,398175,717
Total Consumer1,06881275,251-3,44880,5793,673,8143,754,393
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]SubstandardPass
Commercial multi-family11.125.95
Commercial real estate non-owner occupied11.076.91
Commercial real estate owner occupied11.237.09
Commercial and industrial11.097.19
Total Commercial11.147.06
Construction11.007.67
U.S. mainland:SubstandardPass
Commercial multi-family11.317.26
Commercial real estate non-owner occupied11.706.67
Commercial real estate owner occupied11.057.32
Commercial and industrial11.656.15
Total Commercial11.626.78
Construction11.007.67
Legacy11.107.91

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