LOANS RECEIVABLE | NOTE 4 - LOANS The Company’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. Acquired Eurobank loans were purchased subject to loss-sharing agreements with the FDIC , which were terminated on February 6, 2017. The composition of the Company’s loan portfolio at March 31 , 2017 and December 31 , 2016 was as follows : March 31, December 31, 2017 2016 (In thousands) Originated and other loans and leases held for investment: Mortgage $ 709,863 $ 721,494 Commercial 1,253,712 1,277,866 Consumer 300,412 290,515 Auto and leasing 786,606 756,395 3,050,593 3,046,270 Allowance for loan and lease losses on originated and other loans and leases (60,483) (59,300) 2,990,110 2,986,970 Deferred loan costs, net 6,464 5,766 Total originated and other loans loans held for investment, net 2,996,574 2,992,736 Acquired loans: Acquired BBVAPR loans: Accounted for under ASC 310-20 (Loans with revolving feature and/or acquired at a premium) Commercial 5,436 5,562 Consumer 31,001 32,862 Auto 42,523 53,026 78,960 91,450 Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-20 (3,615) (4,300) 75,345 87,150 Accounted for under ASC 310-30 (Loans acquired with deteriorated credit quality, including those by analogy) Mortgage 558,112 569,253 Commercial 278,665 292,564 Consumer 3,201 4,301 Auto 71,495 85,676 911,473 951,794 Allowance for loan and lease losses on acquired BBVAPR loans accounted for under ASC 310-30 (34,930) (31,056) 876,543 920,738 Total acquired BBVAPR loans, net 951,888 1,007,888 Acquired Eurobank loans: Loans secured by 1-4 family residential properties 72,966 73,018 Commercial 73,181 81,460 Consumer 1,268 1,372 Total acquired Eurobank loans 147,415 155,850 Allowance for loan and lease losses on Eurobank loans (22,006) (21,281) Total acquired Eurobank loans, net 125,409 134,569 Total acquired loans, net 1,077,297 1,142,457 Total held for investment, net 4,073,871 4,135,193 Mortgage loans held-for-sale 15,837 12,499 Total loans, net $ 4,089,708 $ 4,147,692 Originated and Other Loans and Leases Held for Investment The Company’s originated and other loans held for investment are encompassed within four portfolio segments: mortgage, commercial, consumer, and auto and leasing. The following tables present the aging of the recorded investment in gross originated and other loans held for investment a t March 31 , 2017 and December 31 , 2016 , by class of loans. Mortgage loans past due include delinquent loans in the GNMA buy-back option program. Servic ers 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 . March 31, 2017 Loans 90+ Days Past Current Due and 30-59 Days 60-89 Days 90+ Days Total Past in Non- Current Still Past Due Past Due Past Due Due Accrual Accruing Total Loans Accruing (In thousands) Mortgage Traditional (by origination year): Up to the year 2002 $ 195 $ 1,408 $ 3,135 $ 4,738 $ 56 $ 44,001 $ 48,795 $ 112 Years 2003 and 2004 163 3,963 6,743 10,869 192 77,391 88,452 - Year 2005 - 1,852 3,573 5,425 111 42,372 47,908 - Year 2006 658 2,094 5,757 8,509 - 58,460 66,969 - Years 2007, 2008 and 2009 288 2,053 10,455 12,796 - 61,909 74,705 389 Years 2010, 2011, 2012, 2013 243 1,565 9,379 11,187 124 125,773 137,084 433 Years 2014, 2015, 2016 and 2017 - 232 1,573 1,805 - 109,593 111,398 - 1,547 13,167 40,615 55,329 483 519,499 575,311 934 Non-traditional - 378 4,567 4,945 - 16,397 21,342 - Loss mitigation program 9,956 5,779 14,840 30,575 2,960 69,363 102,898 1,637 11,503 19,324 60,022 90,849 3,443 605,259 699,551 2,571 Home equity secured personal loans - - - - - 339 339 - GNMA's buy-back option program - - 9,973 9,973 - - 9,973 - 11,503 19,324 69,995 100,822 3,443 605,598 709,863 2,571 Commercial Commercial secured by real estate: Corporate - - - - - 228,306 228,306 - Institutional - - 254 254 - 47,553 47,807 - Middle market 813 - 3,240 4,053 1,255 222,862 228,170 - Retail 3,030 359 6,042 9,431 4,408 231,436 245,275 - Floor plan - - - - - 2,950 2,950 - Real estate - - - - - 16,090 16,090 - 3,843 359 9,536 13,738 5,663 749,197 768,598 - Other commercial and industrial: Corporate - - - - - 135,056 135,056 - Institutional - - - - - 154,965 154,965 - Middle market - 99 - 99 1,207 76,902 78,208 - Retail 1,177 230 413 1,820 728 80,340 82,888 - Floor plan - - 55 55 - 33,942 33,997 - 1,177 329 468 1,974 1,935 481,205 485,114 - 5,020 688 10,004 15,712 7,598 1,230,402 1,253,712 - March 31, 2017 Loans 90+ Days Past Current Due and 30-59 Days 60-89 Days 90+ Days Total Past in Non- Current Still Past Due Past Due Past Due Due Accrual Accruing Total Loans Accruing (In thousands) Consumer Credit cards $ 641 $ 247 $ 456 $ 1,344 $ - $ 25,596 $ 26,940 $ - Overdrafts 12 16 16 44 - 192 236 - Personal lines of credit 25 44 37 106 - 2,201 2,307 - Personal loans 3,030 1,701 830 5,561 370 249,613 255,544 - Cash collateral personal loans 275 33 21 329 - 15,056 15,385 - 3,983 2,041 1,360 7,384 370 292,658 300,412 - Auto and leasing 47,588 14,324 7,710 69,622 254 716,730 786,606 - Total $ 68,094 $ 36,377 $ 89,069 $ 193,540 $ 11,665 $ 2,845,388 $ 3,050,593 $ 2,571 December 31, 2016 Loans 90+ Days Past Current Due and 30-59 Days 60-89 Days 90+ Days Total Past in Non- Current Still Past Due Past Due Past Due Due Accrual Accruing Total Loans Accruing (In thousands) Mortgage Traditional (by origination year): Up to the year 2002 $ 196 $ 2,176 $ 3,371 $ 5,743 $ - $ 44,542 $ 50,285 $ 158 Years 2003 and 2004 156 3,872 7,272 11,300 181 79,226 90,707 - Year 2005 - 1,952 4,306 6,258 180 43,571 50,009 - Year 2006 506 2,905 6,261 9,672 94 59,534 69,300 - Years 2007, 2008 and 2009 409 1,439 11,732 13,580 111 63,038 76,729 398 Years 2010, 2011, 2012, 2013 349 1,772 10,417 12,538 126 127,196 139,860 583 Years 2014, 2015 and 2016 47 123 1,357 1,527 - 106,672 108,199 - 1,663 14,239 44,716 60,618 692 523,779 585,089 1,139 Non-traditional - 498 4,730 5,228 - 17,631 22,859 - Loss mitigation program 8,911 7,205 16,541 32,657 3,599 67,272 103,528 1,724 10,574 21,942 65,987 98,503 4,291 608,682 711,476 2,863 Home equity secured personal loans - - - - - 337 337 - GNMA's buy-back option program - - 9,681 9,681 - - 9,681 - 10,574 21,942 75,668 108,184 4,291 609,019 721,494 2,863 Commercial Commercial secured by real estate: Corporate - - - - - 242,770 242,770 - Institutional - - 254 254 - 26,546 26,800 - Middle market - 60 3,319 3,379 1,304 230,298 234,981 - Retail 154 350 6,594 7,098 4,638 237,992 249,728 - Floor plan - - - - - 2,989 2,989 - Real estate - - - - - 16,395 16,395 - 154 410 10,167 10,731 5,942 756,990 773,663 - Other commercial and industrial: Corporate - - - - - 136,438 136,438 - Institutional - - - - - 180,285 180,285 - Middle market - - - - 1,278 80,355 81,633 - Retail 930 100 969 1,999 294 71,412 73,705 - Floor plan 8 - 61 69 - 32,073 32,142 - 938 100 1,030 2,068 1,572 500,563 504,203 - 1,092 510 11,197 12,799 7,514 1,257,553 1,277,866 - December 31, 2016 Loans 90+ Days Past Current Due and 30-59 Days 60-89 Days 90+ Days Total Past in Non- Current Still Past Due Past Due Past Due Due Accrual Accruing Total Loans Accruing (In thousands) Consumer Credit cards $ 527 $ 283 $ 525 $ 1,335 $ - $ 25,023 $ 26,358 $ - Overdrafts 16 12 5 33 - 174 207 - Personal lines of credit 41 4 32 77 - 2,327 2,404 - Personal loans 2,474 1,489 1,081 5,044 259 240,969 246,272 - Cash collateral personal loans 240 20 4 264 - 15,010 15,274 - 3,298 1,808 1,647 6,753 259 283,503 290,515 - Auto and leasing 42,714 19,014 8,173 69,901 181 686,313 756,395 - Total $ 57,678 $ 43,274 $ 96,685 $ 197,637 $ 12,245 $ 2,836,388 $ 3,046,270 $ 2,863 At March 31 , 2017 and December 31 , 2016 , the Company had carrying balance of $ 136.5 million and $ 136.6 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 a s 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 two acquisitions, BBVAPR and Eurobank . Acquired BBVAPR Loans Accounted for under ASC 3 10-20 (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 un der the guidance of ASC 310-20, which requires that any contractually required loan payment receivable in excess of the Company’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 the Company’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 March 31 , 2017 and December 31, 2016 , by class of loans: March 31, 2017 Loans 90+ Days Past Current Due and 30-59 Days 60-89 Days 90+ Days Total Past in Non- Current Still Past Due Past Due Past Due Due Accrual Accruing Total Loans Accruing (In thousands) Commercial Commercial secured by real estate Retail $ - $ - $ 103 $ 103 $ 30 $ - $ 133 $ - Floor plan 911 - 209 1,120 - 1,198 2,318 - 911 - 312 1,223 30 1,198 2,451 - Other commercial and industrial Retail 97 90 33 220 - 2,763 2,983 - Floor plan - - 2 2 - - 2 - 97 90 35 222 - 2,763 2,985 - 1,008 90 347 1,445 30 3,961 5,436 - Consumer Credit cards 536 235 546 1,317 - 27,087 28,404 - Personal loans 24 22 48 94 - 2,503 2,597 - 560 257 594 1,411 - 29,590 31,001 - Auto 2,875 944 435 4,254 9 38,260 42,523 - Total $ 4,443 $ 1,291 $ 1,376 $ 7,110 $ 39 $ 71,811 $ 78,960 $ - December 31, 2016 Loans 90+ Days Past Current Due and 30-59 Days 60-89 Days 90+ Days Total Past in Non- Current Still Past Due Past Due Past Due Due Accrual Accruing Total Loans Accruing (In thousands) Commercial Commercial secured by real estate Retail $ 33 $ - $ 110 $ 143 $ - $ - $ 143 $ - Floor plan - - 219 219 929 1,242 2,390 - 33 - 329 362 929 1,242 2,533 - Other commercial and industrial Retail 97 34 121 252 - 2,775 3,027 - Floor plan - - 2 2 - - 2 - 97 34 123 254 - 2,775 3,029 - 130 34 452 616 929 4,017 5,562 - Consumer Credit cards 736 369 708 1,813 - 28,280 30,093 - Personal loans 48 14 120 182 - 2,587 2,769 - 784 383 828 1,995 - 30,867 32,862 - Auto 3,652 1,355 517 5,524 15 47,487 53,026 - Total $ 4,566 $ 1,772 $ 1,797 $ 8,135 $ 944 $ 82,371 $ 91,450 $ - 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 the Company 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 March 31 , 2017 and December 31 , 2016 is as follows: March 31, December 31, 2017 2016 (In thousands) Contractual required payments receivable: $ 1,610,352 $ 1,669,602 Less: Non-accretable discount 365,519 363,107 Cash expected to be collected 1,244,833 1,306,495 Less: Accretable yield 333,360 354,701 Carrying amount, gross 911,473 951,794 Less: allowance for loan and lease losses 34,930 31,056 Carrying amount, net $ 876,543 $ 920,738 At March 31 , 2017 and December 31, 2016 , the Company had $ 66.1 million and $ 66.2 million, respectively, in loans granted to the Puerto Rico government, including its instrumentalities, public corporations and municipalities as part of its acquired BBVAPR loans accounted for under ASC 310-30. These loans are primarily secured municipal general obligations and a $ 10.7 million participation in a loan to the Puerto Rico Housing Finance Authority ("PRHFA") legally required to be repaid from abandoned or unclaimed funds at financial institutions that revert to the government under a Puerto Rico escheat law. Such loan defaulted on an annual principal payment in the third quarter of 2016. The following tables describe the accretable yield and non- accreta ble discount activity of acquired BBVAPR loans accounted for under ASC 310-30 for the quarters ended March 31 , 2017 , and 2016 Quarter Ended March 31, 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 (7,890) (4,981) (2,147) (602) (15,620) Change in expected cash flows 1 198 52 36 287 Transfer (to) from non-accretable discount (7,409) 1,319 140 (58) (6,008) Balance at end of period $ 276,817 $ 46,902 $ 6,583 $ 3,058 $ 333,360 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 (3,031) (843) 297 (19) (3,596) Transfer from (to) accretable yield 7,409 (1,319) (140) 58 6,008 Balance at end of period $ 309,993 $ 14,803 $ 22,564 $ 18,159 $ 365,519 Quarter Ended March 31, 2016 Mortgage Commercial Auto Consumer Total (In thousands) Accretable Yield Activity: Balance at beginning of period $ 268,794 $ 65,026 $ 21,578 $ 6,290 $ 361,688 Accretion (8,307) (7,708) (4,211) (938) (21,164) Change in actual and expected losses - 328 1 - 329 Transfer from (to) non-accretable discount 70 (388) 219 (91) (190) Balance at end of period $ 260,557 $ 57,258 $ 17,587 $ 5,261 $ 340,663 Non-Accretable Discount Activity: Balance at beginning of period $ 374,772 $ 18,545 $ 22,039 $ 18,834 $ 434,190 Change in actual and expected losses (4,547) (785) 118 (190) (5,404) Transfer (to) from accretable yield (70) 388 (219) 91 190 Balance at end of period $ 370,155 $ 18,148 $ 21,938 $ 18,735 $ 428,976 Acquired Eurobank Loans The carrying amount of acquired Eurobank loans at March 31 , 2017 and December 31 , 2016 is as follows: March 31 December 31 2017 2016 (In thousands) Contractual required payments receivable: $ 216,962 $ 232,698 Less: Non-accretable discount 10,236 12,340 Cash expected to be collected 206,726 220,358 Less: Accretable yield 59,311 64,508 Carrying amount, gross 147,415 155,850 Less: Allowance for loan and lease losses 22,006 21,281 Carrying amount, net $ 125,409 $ 134,569 The following tables describe the accretable yield and non- accretable discount activity of acquired Eurobank loans for the quarters ended March 31 , 2017 , and 2016 : Quarter Ended March 31, 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 (1,904) (4,510) (38) - (158) (6,610) Change in expected cash flows 81 778 37 (143) 310 1,063 Transfer from (to) non-accretable discount 681 - (322) 143 (152) 350 Balance at end of period $ 44,697 $ 12,743 $ 1,871 $ - $ - $ 59,311 Non-Accretable Discount Activity: Balance at beginning of period $ 8,441 $ 3,880 $ 11 $ - $ 8 $ 12,340 Change in actual and expected losses (334) (1,409) - 143 (154) (1,754) Transfer from (to) accretable yield (681) - 322 (143) 152 (350) Balance at end of period $ 7,426 $ 2,471 $ 333 $ - $ 6 $ 10,236 Quarter Ended March 31, 2016 Loans Secured by 1-4 Family Residential Properties Commercial Construction & Development Secured by 1-4 Family Residential Properties Consumer Total (In thousands) Accretable Yield Activity: Balance at beginning of period $ 51,954 $ 26,970 $ 2,255 $ 3,213 $ 84,392 Accretion (2,266) (4,095) (14) (1,185) (7,560) Change in actual and expected losses 984 11,093 (23) (2,028) 10,026 Transfer from (to) non-accretable discount 115 (765) 19 - (631) Balance at end of period $ 50,787 $ 33,203 $ 2,237 $ - $ 86,227 Non-Accretable Discount Activity: Balance at beginning of period $ 12,869 $ - $ - $ 8,287 $ 21,156 Change in actual and expected losses (51) (765) 19 (8,287) (9,084) Transfer (to) from accretable yield (115) 765 (19) - 631 Balance at end of period $ 12,703 $ - $ - $ - $ 12,703 Non-accrual Loans The following table presents the recorded investment in loans in non-accrual status by class of loans as of March 31 , 2017 and December 31 , 2016 : March 31, December 31, 2017 2016 (In thousands) Originated and other loans and leases held for investment Mortgage Traditional (by origination year): Up to the year 2002 $ 3,079 $ 3,336 Years 2003 and 2004 7,064 7,668 Year 2005 3,794 4,487 Year 2006 5,807 6,746 Years 2007, 2008 and 2009 10,256 11,526 Years 2010, 2011, 2012, 2013 9,070 10,089 Years 2014, 2015, 2016 and 2017 1,573 1,404 40,643 45,256 Non-traditional 4,567 4,730 Loss mitigation program 18,239 20,744 63,449 70,730 Commercial Commercial secured by real estate Institutional 254 - Middle market 4,497 4,682 Retail 11,168 11,561 15,919 16,243 Other commercial and industrial Middle market 1,306 1,278 Retail 2,107 1,950 Floor plan 55 61 3,468 3,289 19,387 19,532 Consumer Credit cards 456 525 Overdrafts 16 - Personal lines of credit 37 32 Personal loans 1,418 1,420 Cash collateral personal loans 21 4 1,948 1,981 Auto and leasing 8,709 9,052 Total non-accrual originated loans $ 93,493 $ 101,295 March 31, December 31, 2017 2016 (In thousands) Acquired BBVAPR loans accounted for under ASC 310-20 Commercial Commercial secured by real estate Retail $ 133 $ 143 Floor plan 1,120 1,149 1,253 1,292 Other commercial and industrial Retail 33 121 Floor plan 2 2 35 123 1,288 1,415 Consumer Credit cards 546 708 Personal loans 48 120 594 828 Auto 466 552 Total non-accrual acquired BBVAPR loans accounted for under ASC 310-20 2,348 2,795 Total non-accrual loans $ 95,841 $ 104,090 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 18 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 fr om the impairment analysis. At March 31 , 2017 and December 31 , 2016 , loans whose terms have been extended and which are classified as troubled-debt restructurings that are not included in non-accrual loans amounted to $ 99.1 million and $ 98.1 million, respectively, as they are performing under their new terms . Impaired Loans The Company 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 $ 59.6 million and $ 54.3 million at March 31 , 2017 and December 31 , 2016 , 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-de bt restructurings . The allowance for loan and lease losses for these impaired commercial loans amounted to $ 1.6 million and $ 1.8 million at March 31 , 2017 and December 31 , 2016 , respectively . The total investment in impaired mortgage loans that were individually evaluated for impairment was $ 88.8 mi llion and $ 91.6 million at March 31 , 2017 and December 31 , 2016 , 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 mo rtgage loans amounted to $ 8.2 million and $ 7.8 million at March 31 , 2017 and December 31 , 2016 , respectively. Originated and Other Loans and Leases Held for Investment The Company’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 March 31 , 2017 and December 31 , 2016 are as follows: March 31, 2017 Unpaid Recorded Related Principal Investment Allowance Coverage (In thousands) Impaired loans with specific allowance: Commercial $ 14,091 $ 12,362 $ 1,475 12% Residential impaired and troubled-debt restructuring 97,696 88,820 8,156 9% Impaired loans with no specific allowance: Commercial 52,682 46,345 N/A 0% Total investment in impaired loans $ 164,469 $ 147,527 $ 9,631 7% December 31, 2016 Unpaid Recorded Related Principal Investment Allowance Coverage (In thousands) Impaired loans with specific allowance: Commercial $ 13,183 $ 11,698 $ 1,626 14% Residential impaired and troubled-debt restructuring 100,101 91,650 7,761 8% Impaired loans with no specific allowance Commercial 49,038 41,441 N/A 0% Total investment in impaired loans $ 162,322 $ 144,789 $ 9,387 6% Acquired BBVAPR Loans Accounted for under ASC 310-20 (Loans with revolving feature and/or acquired at a premium) The Company’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 March 31 , 2017 and December 31 , 2016 are as follows: March 31, 2017 Unpaid Recorded Related Principal Investment Allowance Coverage (In thousands) Impaired loans with specific allowance Commercial $ 936 $ 911 149 16% Impaired loans with no specific allowance Commercial $ - $ - N/A 0% Total investment in impaired loans $ 936 $ 911 $ 149 16% December 31, 2016 Unpaid Recorded Specific Principal Investment Allowance Coverage (In thousands) Impaired loans with specific allowance Commercial $ 944 $ 929 141 15% Impaired loans with no specific allowance Commercial $ 240 $ 221 N/A 0% Total investment in impaired loans $ 1,184 $ 1,150 $ 141 12% Acquired BBVAPR Loans Accounted for under ASC 310-30 (including those accounted for under ASC 310-30 by analogy) The Company’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 March 31 , 2017 and December 31 , 2016 are as follows : March 31, 2017 Coverage Unpaid Recorded to Recorded Principal Investment Allowance Investment (In thousands) Impaired loan pools with specific allowance: Mortgage $ 584,300 $ 558,112 $ 3,573 1% Commercial 191,970 189,408 23,528 12% Auto 79,022 71,495 7,829 11% Total investment in impaired loan pools $ 855,292 $ 819,015 $ 34,930 4% December 31 , 2016 Coverage Unpaid Recorded to Recorded Principal Investment Allowance Investment (In thousands) Impaired loan pools with specific allowance: Mortgage $ 595,757 $ 569,250 $ 2,682 0% Commercial 199,092 195,528 23,452 12% Auto 92,797 85,676 4,922 6% Total investment in impaired loan pools $ 887,646 $ 850,454 $ 31,056 4% The tables above only present information with respect to acquired BBVAPR loan pools accounted for under ASC 310-30 if there is a recor ded impairment to such loan pools and a specific allowance for loan losses. Acquired Eurobank Loans The Company’s recorded investment in acquired Eurobank loan pools that have recorded impairments and their related allowance for loan and lease losses as of March 31 , 2017 and December 31 , 2016 are as follows : March 31, 2017 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 $ 87,689 $ 72,966 $ 14,168 19% Commercial 69,800 62,529 7,833 13% Consumer 13 1,268 5 0% Total investment in impaired loan pools $ 157,502 $ 136,763 $ 22,006 16% December 31, 2016 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 $ 88,017 $ 73,018 $ 11,947 16% Commercial 81,992 72,140 9,328 13% Consumer 29 1,372 6 0% Total investment in impaired loan pools $ 170,038 $ 146,530 $ 21,281 15% The tables above only present information with respect to acquired Eurobank loan pools accounted for under ASC 310-30 if there is a recor ded 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 eva luated for impairment, which excludes loans accounted for under ASC 310-30, for the quarters ended March 31 , 2017 and 2016 : Quarter Ended March 31, 2017 2016 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 $ 125 $ 12,809 $ 71 $ 196,795 Residential troubled-debt restructuring 766 89,543 798 90,292 Impaired loans with no specific allowance Commercial 532 43,895 270 33,626 1,423 146,247 1,139 320,713 Acquired loans accounted for under ASC 310-20: Impaired loans with specific allowance Commercial - 917 - - Impaired loans with no specific allowance Commercial - - - 467 Total interest income from impaired loans $ 1,423 $ 147,164 $ 1,139 $ 321,180 Modifications The following tables present the troubled-debt restructurings in all loan portfolios during the quarters ended March 31 , 2017 and 2016 . Quarter Ended March 31, 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 32 $ 4,004 6.53% 391 $ 4,015 4.86% 387 Commercial 9 1,218 7.29% 55 1,219 5.93% 64 Consumer 25 392 10.94% 64 430 10.33% 74 Auto 3 45 8.90% 75 47 11.88% 39 Quarter Ended March 31, 2016 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 33 $ 3,957 6.03% 361 $ 4,854 4.83% 493 Commercial 2 655 6.81% 41 656 6.71% 36 Consumer 21 192 14.28% 75 231 11.15% 72 The following table presents troubled-debt restructurings for which there was a payment default during the twelve month periods ended March 31 , 2017 and 2016 : Twelve Month Period Ended, March 31, 2017 2016 Number of Contracts Recorded Investment Number of Contracts Recorded Investment (Dollars in thousands) Mortgage 14 $ 2,051 31 $ 3,732 Commercial 1 $ 50 - $ - Consumer 15 $ 188 3 $ 77 Auto - $ - 1 $ 17 Credit Quality Indicators The Company 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. The Company uses the following definitions for risk ratings: Pass: Loans classified as “pass” have a well-defined primary s ource 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” h ave 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 . Substanda rd: 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 liquidatio n 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 substanda rd, 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 worthl ess 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 March 31 , 2017 and December 31 , 2016 , 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: March 31, 2017 Risk Ratings Individually Balance Special Measured for Outstanding Pass Mention Substandard Doubtful Impairment (In thousands) Commercial - originated and other loans held for investment Commercial secured by real estate: Corporate $ 228,306 $ 213,576 $ 14,730 $ - $ - $ - Institutional 47,807 35,458 10,788 - - 1,561 Middle market 228,170 189,767 8,151 454 - 29,798 Retail 245,275 218,160 6,844 3,708 - 16,563 Floor plan 2,950 2,950 - - - - Real estate 16,090 16,090 - - - - 768,598 676,001 40,513 4,162 - 47,922 Other commercial and industrial: Corporate 135,056 135,056 - - - - Institutional 154,965 154,965 - - - - Middle market 78,208 61,094 9,832 235 - 7,047 Retail 82,888 77,716 720 714 - 3,738 Floor plan 33,997 31,259 2,683 55 - - 485,114 460,090 13,235 1,004 - 10,785 Total 1,253,712 1,136,091 53,748 5,166 - 58,707 Commercial - acquired loans (under ASC 310-20) Commercial secured by real estate: Retail 133 - - 133 - - Floor plan 2,318 880 318 209 - 911 2,451 880 318 342 - 911 Other commercial and industrial: Retail 2,983 2,977 - 6 - - Floor plan 2 - - 2 - - 2,985 2,977 - 8 - - Total 5,436 3,857 318 350 - 911 Total $ 1,259,148 $ 1,139,948 $ 54,066 $ 5,516 $ - $ 59,618 December 31, 2016 Risk Ratings Individually Balance Special Measured for Outstanding Pass Mention Substandard Doubtful Impairment (In thousands) Commercial - originated and other loans held for investment Commercial secured by real estate: Corporate $ 242,770 $ 226,768 $ 16,002 $ - $ - $ - Institutional 26,800 16,067 9,090 - - 1,643 Middle market 234,981 194,913 9,437 514 - 30,117 Retail 249,728 221,687 7,860 4,318 - 15,863 Floor plan 2,989 2,989 - - - - Real estate 16,395 16,395 - - - - 773,663 678,819 42,389 4,832 - 47,623 Other commercial and industrial: Corporate 136,438 136,438 - - - - Institutional 180,285 180,185 100 - - - Middle market 81,633 63,556 16,150 149 - 1,778 Retail 73,705 68,529 731 740 - 3,705 Floor plan 32,142 29,267 2,814 28 - 33 504,203 477,975 19,795 917 - 5,516 Total 1,277,866 1,156,794 62,184 |