LOAN PORTFOLIO | NOTE 7 – LOANS HELD FOR INVESTMENT The following provides information about the loan portfolio held for investment: As of June 30, As of December 31, 2019 2018 (In thousands) Residential mortgage loans, mainly secured by first mortgages $ 3,070,746 $ 3,163,208 Commercial loans: Construction loans 100,244 79,429 Commercial mortgage loans 1,550,364 1,522,662 Commercial and Industrial loans (1) 2,279,685 2,148,111 Total commercial loans 3,930,293 3,750,202 Finance leases 370,907 333,536 Consumer loans 1,742,009 1,611,177 Loans held for investment 9,113,955 8,858,123 Allowance for loan and lease losses ( 172,011) ( 196,362) Loans held for investment, net $ 8,941,944 $ 8,661,761 As of June 30, 2019 and December 31, 2018, includes $ 735.8 million and $ 796.8 million, respectively, of commercial loans that were secured by real estate but are not dependent upon the real estate for repayment. Loans held for investment on which accrual of interest income had been discontinued were as follows: As of As of June 30, December 31, (In thousands) 2019 2018 Nonaccrual loans: Residential mortgage $ 129,501 $ 147,287 Commercial mortgage 77,495 109,536 Commercial and Industrial 21,327 30,382 Construction: Land 5,599 6,260 Construction-residential 1,337 2,102 Consumer: Auto loans 10,361 11,212 Finance leases 994 1,329 Other consumer loans 6,491 7,865 Total nonaccrual loans held for investment (1)(2)(3) $ 253,105 $ 315,973 Excludes $ 7.1 million and $ 16.1 million of nonaccrual loans held for sale as of June 30, 2019 and December 31, 2018, respectively. Amount excludes purchased-credit impaired (“PCI”) loans with a carrying value of approximately $ 141.7 million and $ 146.6 million as of June 30, 2019 and December 31, 2018, respectively, primarily mortgage loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014, as further discussed below. These loans are not considered nonaccrual due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using an estimated cash flow analysis. Nonaccrual loans exclude $ 482.0 million and $ 478.9 million of Troubled Debt Restructuring (“TDR”) loans that were in compliance with modified terms and in accrual status as of June 30, 2019 and December 31, 2018, respectively. As of June 30, 2019, the recorded investment of residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure amounted to $ 159.2 million, including $ 41.0 million of loans insured by the U.S. Federal Housing Administration (“FHA”) or guaranteed by the U.S. Veterans Administration (“VA”), and $ 18.4 million of PCI loans. The Corporation commences the foreclosure process on residential real estate loans when a borrower becomes 120 days delinquent in accordance with the guidelines of the Consumer Financial Protection Bureau (“CFPB”). Foreclosure procedures and timelines vary depending on whether the property is located in a judicial or non-judicial state. Judicial states ( i.e. , Puerto Rico, Florida and the USVI) require the foreclosure to be processed through the state’s court while foreclosure in non-judicial states ( i.e. , the BVI) is processed without court intervention. Foreclosure timelines vary according to local jurisdiction law and investor guidelines. Occasionally, foreclosures may be delayed due to, among other reasons, mandatory mediations, bankruptcy, court delays and title issues. The Corporation’s aging of the loans held for investment portfolio is as follows: Purchased Credit-Impaired Loans 30-59 Days Past Due 60-89 Days Past Due 90 days or more Past Due (1)(2)(3) Total Past Due Total loans held for investment 90 days past due and still accruing (1)(2)(3) As of June 30, 2019 (In thousands) Current Residential mortgage: FHA/VA government-guaranteed loans (2) (3) (4) $ - $ 4,500 $ 89,687 $ 94,187 $ - $ 38,713 $ 132,900 $ 89,687 Other residential mortgage loans (2)(4) - 67,875 146,108 213,983 138,367 2,585,496 2,937,846 16,607 Commercial: Commercial and Industrial loans 960 754 22,646 24,360 - 2,255,325 2,279,685 1,319 Commercial mortgage loans (4) - 1,473 81,099 82,572 3,339 1,464,453 1,550,364 3,604 Construction: Land (4) - 106 5,821 5,927 - 13,253 19,180 222 Construction-commercial - 2,800 - 2,800 - 66,136 68,936 - Construction-residential - - 1,337 1,337 - 10,791 12,128 - Consumer: Auto loans 33,421 6,626 10,361 50,408 - 984,688 1,035,096 - Finance leases 5,891 1,062 994 7,947 - 362,960 370,907 - Other consumer loans 8,588 5,128 9,796 23,512 - 683,401 706,913 3,305 Total loans held for investment $ 48,860 $ 90,324 $ 367,849 $ 507,033 $ 141,706 $ 8,465,216 $ 9,113,955 $ 114,744 Includes nonaccrual loans and accruing loans that were contractually delinquent 90 days or more ( i.e ., FHA/VA guaranteed loans and credit cards). Credit card loans continue to accrue finance charges and fees until charged-off at 180 days . It is the Corporation's policy to report delinquent residential mortgage loans insured by the FHA, guaranteed by the VA, and other government-insured loans as past-due loans 90 days and still accruing as opposed to nonaccrual loans since the principal repayment is insured. These balances include $ 39.8 million of residential mortgage loans insured by the FHA that were over 15 months delinquent, and were no longer accruing interest as of June 30, 2019, taking into consideration FHA interest curtailment process. As of June 30, 2019, includes $ 41.9 million of defaulted loans collateralizing GNMA securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans. According to the Corporation's delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans, other residential mortgage loans, commercial mortgage loans, and land loans past due 30-59 days as of June 30, 2019 amounted to $ 6.0 million, $ 110.1 million, $ 19.4 million, and $ 0.1 million respectively. As of December 31, 2018 30-59 Days Past Due 60-89 Days Past Due 90 days or more Past Due (1)(2)(3) Total loans held for investment 90 days past due and still accruing (1)(2)(3) (In thousands) Total Past Due Purchased Credit- Impaired Loans Current Residential mortgage: FHA/VA government-guaranteed loans (2) (3) (4) $ - $ 4,183 $ 104,751 $ 108,934 $ - $ 38,271 $ 147,205 $ 104,751 Other residential mortgage loans (2)(4) - 62,077 161,851 223,928 143,176 2,648,899 3,016,003 14,564 Commercial: Commercial and Industrial loans 2,550 66 35,385 38,001 - 2,110,110 2,148,111 5,003 Commercial mortgage loans (4) - 1,038 110,482 111,520 3,464 1,407,678 1,522,662 946 Construction: Land (4) - 207 6,327 6,534 - 13,779 20,313 67 Construction-commercial (4) - - - - - 47,965 47,965 - Construction-residential (4) - - 2,102 2,102 - 9,049 11,151 - Consumer: Auto loans 31,070 7,103 11,212 49,385 - 897,091 946,476 - Finance leases 5,502 1,362 1,329 8,193 - 325,343 333,536 - Other consumer loans 9,898 4,542 11,617 26,057 - 638,644 664,701 3,752 Total loans held for investment $ 49,020 $ 80,578 $ 445,056 $ 574,654 $ 146,640 $ 8,136,829 $ 8,858,123 $ 129,083 Includes nonaccrual loans and accruing loans that were contractually delinquent 90 days or more ( i.e. , FHA/VA guaranteed loans and credit cards). Credit card loans continue to accrue finance charges and fees until charged-off at 180 days. It is the Corporation's policy to report delinquent residential mortgage loans insured by the FHA, guaranteed by the VA, and other government-insured loans as past-due loans 90 days and still accruing as opposed to nonaccrual loans since the principal repayment is insured. These balances include $ 51.4 million of residential mortgage loans insured by the FHA that were over 15 months delinquent, and were no longer accruing interest as of December 31, 2018, taking into consideration the FHA interest curtailment process. As of December 31, 2018, includes $ 43.6 million of defaulted loans collateralizing GNMA securities for which the Corporation has an unconditional option (but not an obligation) to repurchase the defaulted loans. According to the Corporation's delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans, other residential mortgage loans, commercial mortgage loans, and land loans past due 30-59 days as of December 31, 2018 amounted to $ 5.6 million, $ 101.4 million, $ 5.1 million, and $ 0.2 million, respectively. The Corporation’s commercial and construction loans credit quality indicators as of June 30, 2019 and December 31, 2018 are summarized below: Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category: Substandard Doubtful Loss Total Criticized Asset (1) Total Portfolio June 30, 2019 Special Mention (In thousands) Commercial mortgage $ 126,766 $ 240,624 $ 1,533 $ - $ 368,923 $ 1,550,364 Construction: Land - 6,648 - - 6,648 19,180 Construction - commercial - - - - - 68,936 Construction - residential - 1,337 - - 1,337 12,128 Commercial and Industrial 16,760 34,874 2,563 241 54,438 2,279,685 Commercial Credit Exposure - Credit Risk Profile Based on Creditworthiness Category: Substandard Doubtful Loss Total Criticized Asset (1) Total Portfolio December 31, 2018 Special Mention (In thousands) Commercial mortgage $ 172,260 $ 276,935 $ 1,701 $ - $ 450,896 $ 1,522,662 Construction: Land - 7,407 - - 7,407 20,313 Construction - commercial - - - - - 47,965 Construction - residential - 2,102 - - 2,102 11,151 Commercial and Industrial 85,557 45,274 6,114 396 137,341 2,148,111 Excludes nonaccrual commercial mortgage loan held for sale of $ 7.1 million as of June 30, 2019 and $ 16.1 million of nonaccrual loans held for sale ($ 11.4 million commercial mortgage, $ 3.0 million construction-commercial, and $ 1.7 million commercial and industrial) as of December 31, 2018. The Corporation considers a loan as a criticized asset if its risk rating is Special Mention, Substandard, Doubtful or Loss. These categories are defined as follows: Special Mention – A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Corporation’s credit position at some future date. Special Mention assets are not adversely classified and do not expose the Corporation sufficient risk to warrant adverse classification. Substandard – A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful – Doubtful classifications have all of the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently known facts, conditions and values. A Doubtful classification may be appropriate in cases where significant risk exposures are perceived, but loss cannot be determined because of specific reasonable pending factors, which may strengthen the credit in the near term. Loss – Assets classified 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 asset even though partial recovery may occur in the future. There is little or no prospect for near term improvement and no realistic strengthening action of significance pending. The Corporation periodically reviews its loan classifications to evaluate if they are properly classified, and to determine impairment, if any. The frequency of these reviews will depend on the amount of the aggregate outstanding debt, and the risk rating classification of the obligor. In addition, during the renewal and annual review process of applicable credit facilities, the Corporation evaluates the corresponding loan grades. The Corporation has a Loan Review Group that reports directly to the Corporation’s Risk Management Committee and administratively to the Chief Risk Officer, which performs annual comprehensive credit process reviews of the Bank’s commercial portfolios. This group evaluates the credit risk profile of portfolios, including the assessment of the risk rating representative of the current credit quality of the loans, and the evaluation of collateral documentation. The monitoring performed by this group contributes to the assessment of compliance with credit policies and underwriting standards, the determination of the current level of credit risk, the evaluation of the effectiveness of the credit management process and the identification of any deficiency that may arise in the credit-granting process. Based on its findings, the Loan Review Group recommends corrective actions, if necessary, that help in maintaining a sound credit process. The Loan Review Group reports the results of the credit process reviews to the Risk Management Committee of the Corporation’s Board of Directors. The Corporation’s consumer and residential loans credit quality indicators as of June 30, 2019 and December 31, 2018 are summarized below: Consumer Credit Exposure - Credit Risk Profile Based on Payment Activity Residential Real Estate Consumer June 30, 2019 FHA/VA/ Guaranteed (1) Other residential loans Auto Finance Leases Other Consumer (In thousands) Performing $ 132,900 $ 2,669,978 $ 1,024,735 $ 369,913 $ 700,422 Purchased Credit-Impaired (2) - 138,367 - - - Nonaccrual - 129,501 10,361 994 6,491 Total $ 132,900 $ 2,937,846 $ 1,035,096 $ 370,907 $ 706,913 Consumer Credit Exposure - Credit Risk Profile Based on Payment Activity Residential Real Estate Consumer December 31, 2018 FHA/VA/ Guaranteed (1) Other residential loans Auto Finance Leases Other Consumer (In thousands) Performing $ 147,205 $ 2,725,540 $ 935,264 $ 332,207 $ 656,836 Purchased Credit-Impaired (2) - 143,176 - - - Nonaccrual - 147,287 11,212 1,329 7,865 Total $ 147,205 $ 3,016,003 $ 946,476 $ 333,536 $ 664,701 It is the Corporation's policy to report delinquent residential mortgage loans insured by the FHA, guaranteed by the VA, and other government-insured loans as 90 days past-due loans and still accruing as opposed to nonaccrual loans since the principal repayment is insured. This balance includes $ 39.8 million and $ 51.4 million of residential mortgage loans insured by the FHA that were over 15 months delinquent, and were no longer accruing interest as of June 30, 2019 and December 31, 2018, respectively, taking into consideration the FHA interest curtailment process. PCI loans are excluded from nonaccrual statistics due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analyses. The following tables present information about impaired loans held for investment, excluding PCI loans, which are reported separately, as discussed below: Impaired Loans Impaired Loans Impaired Loans - With a Related Specific Allowance With No Related Specific Allowance Impaired Loans Total Recorded Investment (1) Unpaid Principal Balance Related Specific Allowance Recorded Investment (1) Unpaid Principal Balance Recorded Investment (1) Unpaid Principal Balance Related Specific Allowance (In thousands) As of June 30, 2019 FHA/VA-Guaranteed loans $ - $ - $ - $ - $ - $ - $ - $ - Other residential mortgage loans 284,821 314,596 18,788 106,195 147,771 391,016 462,367 18,788 Commercial: Commercial mortgage loans 127,909 139,958 9,023 79,600 100,325 207,509 240,283 9,023 Commercial and Industrial loans 51,283 72,436 3,880 28,854 46,155 80,137 118,591 3,880 Construction: Land 2,261 2,619 563 2,289 2,862 4,550 5,481 563 Construction-commercial - - - - - - - - Construction-residential 523 523 11 956 1,531 1,479 2,054 11 Consumer: Auto loans 16,003 15,969 3,567 121 213 16,124 16,182 3,567 Finance leases 1,622 1,815 115 - - 1,622 1,815 115 Other consumer loans 8,299 9,229 888 1,092 2,422 9,391 11,651 888 $ 492,721 $ 557,145 $ 36,835 $ 219,107 $ 301,279 $ 711,828 $ 858,424 $ 36,835 (1) Excludes accrued interest receivable. Impaired Loans Impaired Loans - With a Related Specific Allowance With No Related Specific Allowance Impaired Loans Total Recorded Investment (1) Unpaid Principal Balance Related Specific Allowance Recorded Investment (1) Unpaid Principal Balance Recorded Investment (1) Unpaid Principal Balance Related Specific Allowance (In thousands) As of December 31, 2018 FHA/VA-Guaranteed loans $ - $ - $ - $ - $ - $ - $ - $ - Other residential mortgage loans 293,494 325,897 19,965 110,238 148,920 403,732 474,817 19,965 Commercial: Commercial mortgage loans 184,068 201,116 17,684 43,358 49,253 227,426 250,369 17,684 Commercial and Industrial loans 61,162 76,027 9,693 30,030 48,085 91,192 124,112 9,693 Construction: Land 2,444 2,923 552 2,431 2,927 4,875 5,850 552 Construction-commercial - - - - - - - - Construction-residential 1,718 2,370 208 - - 1,718 2,370 208 Consumer: Auto loans 17,781 17,781 3,689 250 250 18,031 18,031 3,689 Finance leases 1,914 1,914 102 22 22 1,936 1,936 102 Other consumer loans 9,291 10,066 2,083 2,068 2,750 11,359 12,816 2,083 $ 571,872 $ 638,094 $ 53,976 $ 188,397 $ 252,207 $ 760,269 $ 890,301 $ 53,976 (1) Excludes accrued interest receivable. Average Recorded Investment (1) Interest Income on Accrual Basis Interest Income on Cash Basis Total Interest Income (In thousands) For the quarter ended June 30, 2019 FHA/VA-Guaranteed loans $ - $ - $ - $ - Other residential mortgage loans 392,477 4,364 282 4,646 Commercial: Commercial mortgage loans 214,375 2,122 50 2,172 Commercial and Industrial loans 81,281 929 20 949 Construction: Land 4,594 20 7 27 Construction-commercial - - - - Construction-residential 1,483 3 - 3 Consumer: Auto loans 16,697 297 - 297 Finance leases 1,695 35 - 35 Other consumer loans 9,648 234 55 289 $ 722,250 $ 8,004 $ 414 $ 8,418 (1) Excludes accrued interest receivable. Average Recorded Investment (1) Interest Income on Accrual Basis Interest Income on Cash Basis Total Interest Income (In thousands) For the quarter ended June 30, 2018 FHA/VA-Guaranteed loans $ - $ - $ - $ - Other residential mortgage loans 411,331 4,358 371 4,729 Commercial: Commercial mortgage loans 179,978 856 348 1,204 Commercial and Industrial loans 114,749 624 16 640 Construction: Land 11,370 23 7 30 Construction-commercial - - - - Construction-residential 252 - - - Consumer: Auto loans 20,310 389 - 389 Finance leases 1,677 28 - 28 Other consumer loans 11,830 276 34 310 $ 751,497 $ 6,554 $ 776 $ 7,330 (1) Excludes accrued interest receivable. Average Recorded Investment (1) Interest Income on Accrual Basis Interest Income on Cash Basis Total Interest Income (In thousands) Six-month Period Ended June 30, 2019 FHA/VA-Guaranteed loans $ - $ - $ - $ - Other residential mortgage loans 394,159 8,759 532 9,291 Commercial: Commercial mortgage loans 221,327 4,125 151 4,276 Commercial and Industrial loans 84,551 1,871 22 1,893 Construction: Land 4,655 41 18 59 Construction-commercial - - - - Construction-residential 1,489 3 - 3 Consumer: Auto loans 17,274 607 - 607 Finance leases 1,836 71 - 71 Other consumer loans 10,093 460 83 543 $ 735,384 $ 15,937 $ 806 $ 16,743 (1) Excludes accrued interest receivable. Average Recorded Investment (1) Interest Income on Accrual Basis Interest Income on Cash Basis Total Interest Income (In thousands) Six-Month Period Ended June 30, 2018 FHA/VA-Guaranteed loans $ - $ - $ - $ - Other residential mortgage loans 413,137 8,618 824 9,442 Commercial: Commercial mortgage loans 181,950 1,598 432 2,030 Commercial and Industrial loans 114,379 1,173 44 1,217 Construction: Land 11,522 47 15 62 Construction-commercial - - - - Construction-residential 252 - - - Consumer: Auto loans 20,826 784 - 784 Finance leases 1,754 59 - 59 Other consumer loans 12,073 561 74 635 $ 755,893 $ 12,840 $ 1,389 $ 14,229 (1) Excludes accrued interest receivable. The following tables show the activity for impaired loans for the quarters and six-month periods ended June 30, 2019 and 2018: Quarter Ended Six-Month Period Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Impaired Loans: Balance at beginning of period $ 732,871 $ 746,280 $ 760,269 $ 790,308 Loans determined impaired during the period 11,653 34,273 22,355 95,681 Charge-offs (1) ( 15,627) ( 13,207) ( 29,048) ( 30,420) Loans sold, net of charge-offs - - - ( 4,121) Increases to existing impaired loans 362 77 1,615 7,075 Foreclosures ( 4,950) ( 7,777) ( 12,934) ( 19,452) Loans no longer considered impaired ( 551) ( 2,433) ( 703) ( 3,940) Loans transferred to held for sale - - - ( 57,213) Paid in full, partial payments and other ( 11,930) ( 17,079) ( 29,726) ( 37,784) Balance at end of period $ 711,828 $ 740,134 $ 711,828 $ 740,134 For the six-month period ended June 30, 2018, includes charge-offs totaling $ 9.7 million associated with the $ 57.2 million in nonaccrual loans transferred to held for sale. PCI Loans The Corporation acquired PCI loans accounted for under ASC Topic 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC Topic 310-30”), as part of a transaction that closed on February 27, 2015 in which FirstBank acquired 10 Puerto Rico branches of Doral Bank, acquired certain assets, including PCI loans, and assumed deposits, through an alliance with Banco Popular of Puerto Rico, which was the successful lead bidder with the FDIC on the failed Doral Bank, as well as other co-bidders. The Corporation also acquired PCI loans in previously completed asset acquisitions that are accounted for under ASC Topic 310-30. These previous transactions include the acquisition from Doral Financial in the second quarter of 2014 of all its rights, title and interest in first and second residential mortgage loans in full satisfaction of secured borrowings owed by such entity to FirstBank. Under ASC Topic 310-30, the acquired PCI loans were aggregated into pools based on similar characteristics ( i.e., delinquency status and loan terms). Each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Since the loans are accounted for under ASC Topic 310-30, they are not considered nonaccrual and will continue to have an accretable yield as long as there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The Corporation recognizes additional losses on this portfolio when it is probable that the Corporation will be unable to collect all cash flows expected as of the acquisition date. The carrying amounts of PCI loans were as follows: As of June 30, December 31, 2019 2018 (In thousands) Residential mortgage loans $ 138,367 $ 143,176 Commercial mortgage loans 3,339 3,464 Total PCI loans $ 141,706 $ 146,640 Allowance for loan losses ( 11,434) ( 11,354) Total PCI loans, net of allowance for loan losses $ 130,272 $ 135,286 The following tables present PCI loans by past due status as of June 30, 2019 and December 31, 2018: As of June 30, 2019 30-59 Days 60-89 Days 90 days or more Total Past Due Total PCI loans Current (In thousands) Residential mortgage loans $ - $ 7,750 $ 24,626 $ 32,376 $ 105,991 $ 138,367 Commercial mortgage loans - - 2,397 2,397 942 3,339 Total (1) $ - $ 7,750 $ 27,023 $ 34,773 $ 106,933 $ 141,706 As of December 31, 2018 30-59 Days 60-89 Days 90 days or more Total Past Due Total PCI loans Current (In thousands) Residential mortgage loans $ - $ 6,979 $ 26,932 $ 33,911 $ 109,265 $ 143,176 Commercial mortgage loans - - 2,512 2,512 952 3,464 Total (1) $ - $ 6,979 $ 29,444 $ 36,423 $ 110,217 $ 146,640 According to the Corporation's delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal Reserve Board, residential mortgage and commercial mortgage loans are considered past due when the borrower is in arrears two or more monthly payments. PCI residential mortgage loans and commercial mortgage loans past due 30-59 days as of June 30, 2019 amounted to $ 13.7 million and $ 0.1 million, respectively. PCI residential mortgage loans past due 30-59 as of December 31, 2018 amounted to $ 11.6 million. No PCI commercial mortgage loan was 30-59 days past due as of December 31, 2018. Initial Fair Value and Accretable Yield of PCI Loans At acquisition of PCI loans, the Corporation estimated the cash flows the Corporation expected to collect on the loans. Under the accounting guidance for PCI loans, the difference between the contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. This difference is neither accreted into income nor recorded on the Corporation’s consolidated statements of financial condition. The excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loans, using the effective-yield method. Changes in Accretable Yield of Acquired Loans Subsequent to the acquisition of loans, the Corporation is required to periodically evaluate its estimate of cash flows expected to be collected. These evaluations, performed quarterly, require the continued use of key assumptions and estimates, similar to the initial estimate of fair value. Subsequent changes in the estimated cash flows expected to be collected may result in changes in the accretable yield and non-accretable difference or reclassifications from non-accretable yield to accretable yield. Increases in the cash flows expected to be collected will generally result in an increase in interest income over the remaining life of the loan or pool of loans. Decreases in expected cash flows due to further credit deterioration will generally result in an impairment charge recognized in the Corporation’s provision for loan and lease losses, resulting in an increase to the allowance for loan and lease losses. As of each June 30, 2019 and December 31, 2018, the reserve related to PCI loans amounted to $ 11.4 million. Changes in the accretable yield of PCI loans for the quarters and six-month periods ended June 30, 2019 and 2018 were as follows: Quarter Ended Six-Month Period Ended June 30, June 30, June 30, June 30, 2019 2018 2019 2018 (In thousands) Balance at beginning of period $ 91,060 $ 101,059 $ 93,493 $ 103,682 Accretion recognized in earnings ( 2,365) ( 2,570) ( 4,798) ( 5,193) Balance at end of period $ 88,695 $ 98,489 $ 88,695 $ 98,489 Changes in the carrying amount of PCI loans accounted for pursuant to ASC Topic 310-30 were as follows: Quarter Ended Six-Month Period Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 (In thousands) Balance at beginning of period $ 144,443 $ 155,281 $ 146,640 $ 158,174 Accretion 2,365 2,570 4,798 5,193 Collections ( 4,260) ( 4,359) ( 8,100) ( 7,755) Foreclosures ( 842) ( 1,250) ( 1,632) ( 3,370) Ending balance $ 141,706 $ 152,242 $ 141,706 $ 152,242 Allowance for loan losses ( 11,434) ( 11,354) ( 11,434) ( 11,354) Ending balance, net of allowance for loan losses $ 130,272 $ 140,888 $ 130,272 $ 140,888 Changes in the allowance for loan losses related to PCI loans were as follows: Quarter Ended Six-Month Period Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 (In thousands) Balance at beginning of period $ 11,354 $ 11,251 $ 11,354 $ 11,251 Provision for loan losses 80 103 80 103 Balance at the end of period $ 11,434 $ 11,354 $ 11,434 $ 11,354 The outstanding principal balance of PCI loans, including amounts charged off by the Corporation, amounted to $ 174.8 million as of June 30, 2019 (compared to - $ 181.1 million as of December 31, 2018). Purchases and Sales of Loans During the first six months of 2019, the Corporation purchased $ 9.3 million of residential mortgage loans as part of a strategic program to purchase ongoing residential mortgage loan production from mortgage bankers in Puerto Rico. In general, the loans purchased from mortgage bankers were conforming residential mortgage loans. Purchases of conforming residential mortgage loans provide the Corporation the flexibility to retain or sell the loans, including through securitization transactions, depending upon the Corporation’s interest rate risk management strategies. When the Corporation sells such loans, it generally keeps the servicing of the loans. In the ordinary course of business, the Corporation sells residential mortgage loans (originated or purchased) to GNMA and GSEs such as FNMA and FHLMC, which generally securitize the transferred loans into MBS for sale into the secondary market. During the first six months of 2019, the Corporation sold $ 115.0 million of FHA/VA mortgage loans to GNMA, which packaged them into MBS. Also, during the first six months of 2019, the Corporation sold approximately $ 59.9 million of performing residential mortgage loans to FNMA and FHLMC. The Corporation’s continuing involvement in these sold loans consists primarily of servicing the loans. In addition, the Corporation agreed to repurchase loans if it breaches any of the representations and warranties included in the sale agreement. These representations and warranties are consistent with the GSEs’ selling and servicing guidelines ( i.e. , ensuring that the mortgage was properly underwritten according to established guidelines). For loans sold to GNMA, the Corporation holds an option to repurchase individual delinquent loans issued on or after January 1, 2003 when the borrower fails to make any payment for three consecutive months. This option gives the Corporation the ability, but not the obligation, to repurchase the delinquent loans at par without prior authorization from GNMA. Under ASC Topic 860, “Transfer and Servicing,” once the Corporation has the unilateral ability to repurchase the delinquent loan, it is considered to have regained effective control over the loan and is required to recognize the loan and a corresponding repurchase liability on the balance sheet regardless of the Corporation’s intent to repurchase the loan. As of June 30, 2019 and December 31, 2018, rebooked GNMA delinquent loans included in the residential mortgage loan portfolio amounted to $ 41.9 million and $ 43.6 million, respectively. During the first six months of 2019 and 2018, the Corporation repurchased, pursuant to its repurchase option with GNMA, $ 10.7 million and $ 2.0 million, respectively, of loans previously sold to GNMA. The principal balance of these loans is fully guaranteed and the risk of loss related to the repurchased loans is generally limited to the difference between the delinquent interest payment advanced to GNMA, which is computed at the loan’s interest rate, and the interest payments reimbursed by FHA, which are computed at a pre-determined debenture rate. Repurchases of GNMA loans allow the Corporation, among other things, to maintain acceptable delinquency rates on outstanding GNMA pools and remain as a seller and servicer in good standing with GNMA. Historically, losses for violations of representations and warranties, and on optional repurchases of GNMA delinquent loans, have been immaterial and no provision has been made at the time of sale. Loan sales to FNMA and FHLMC are without recourse in relation to the future performance of the loans. The Corporation repurchased at par loans previously sold to FNMA and FHLMC in the amount of $ 64 thousand and $ 3 thousand during the first half of 2019 and 2018, respectively. The Corporation’s risk of loss with respect to these loans is also minimal as these repurchased loa |