UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 For the quarterly period ended June 30, 2010

Commission File Number: 001-34084

POPULAR, INC.

Puerto Rico		66-0667416
(State or other jurisdiction of		(IRS Employer Identification Number)
incorporation or organization)
Popular Center Building
209 Muñoz Rivera Avenue, Hato Rey
San Juan, Puerto Rico		00918
(Address of principal executive offices)		(Zip code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

     þ Yes            o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

     þ Yes           o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

     o Yes            þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock $0.01 par value, 1,022,695,797 shares outstanding as of August 5, 2010.

 

 

POPULAR, INC.
INDEX

		Page
Part I — Financial Information
Item 1. Financial Statements
Unaudited Consolidated Statements of Condition as of June 30, 2010, December 31, 2009 and June 30, 2009			4
Unaudited Consolidated Statements of Operations for the quarters and six months ended June 30, 2010 and 2009			5
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2010 and 2009			6
Unaudited Consolidated Statements of Comprehensive (Loss) Income for the quarters and six months ended June 30, 2010 and 2009			7
Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009			8
Notes to Unaudited Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			95
Item 3. Quantitative and Qualitative Disclosures about Market Risk			146
Item 4. Controls and Procedures			154
Part II — Other Information
Item 1. Legal Proceedings			155
Item 1A. Risk Factors			156
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			159
Item 6. Exhibits			159
Signatures

Forward-Looking Information

The information included in this Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to Popular, Inc.’s (the “Corporation”) financial condition, results of operations, plans, objectives, future performance and business, including, but not limited to, statements with respect to the adequacy of the allowance for loan losses, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions are generally intended to identify forward-looking statements.

These statements are not guarantees of future performance and involve certain risks, uncertainties, estimates and assumptions by management that are difficult to predict.

Various factors, some of which are beyond Popular’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

	•		the rate of growth in the economy and employment levels, as well as general business and economic conditions;
	•		difficulties in combining the operations of acquired entities, including in connection with our acquisition of certain assets and assumption of certain liabilities of Westernbank Puerto Rico from the Federal Deposit Insurance Corporation (“FDIC”);
	•		lower than expected gains related to any sale or potential sale of businesses;
	•		changes in interest rates, as well as the magnitude of such changes;
	•		the fiscal and monetary policies of the federal government and its agencies;
	•		changes in federal bank regulatory and supervisory policies, including required levels of capital;
	•		regulatory approvals that may be necessary to undertake certain actions or consummate strategic transactions such as acquisitions and dispositions;
	•		the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Financial Reform Act) on the Corporation’s businesses, business practices and costs of operations;
	•		the relative strength or weakness of the consumer and commercial credit sectors and of the real estate markets in Puerto Rico and the other markets in which borrowers are located;
	•		the performance of the stock and bond markets;
	•		competition in the financial services industry;
	•		additional FDIC assessments; and
	•		possible legislative, tax or regulatory changes.

Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009 as well as “Part II, Item 1A” of this Form 10-Q for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

Moreover, the outcome of legal proceedings, as discussed in “Part II, Item I. Legal Proceedings,” is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges and juries.

All forward-looking statements included in this document are based upon information available to the Corporation as of the date of this document, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

ITEM 1. FINANCIAL STATEMENTS

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)

(In thousands, except share information)		June 30, 2010				December 31, 2009				June 30, 2009
ASSETS
Cash and due from banks		$	744,769			$	677,330			$	661,852
Money market investments:
Federal funds sold			11,540				159,807				106,092
Securities purchased under agreements to resell			299,921				293,125				306,974
Time deposits with other banks			2,132,748				549,865				538,581
Total money market investments			2,444,209				1,002,797				951,647
Trading account securities, at fair value:
Pledged securities with creditors’ right to repledge			371,619				415,653				400,128
Other trading securities			29,924				46,783				87,054
Investment securities available-for-sale, at fair value:
Pledged securities with creditors’ right to repledge			1,981,931				2,330,441				2,599,558
Other investment securities available-for-sale			4,499,256				4,364,273				4,646,901
Investment securities held-to-maturity, at amortized cost (fair value as of June 30, 2010 - $209,207; December 31, 2009 - $213,146; June 30, 2009 - $313,462)			209,416				212,962				320,061
Other investment securities, at lower of cost or realizable value (realizable value as of June 30, 2010 - $153,845; December 31, 2009 - $165,497; June 30, 2009 - $216,551)			152,562				164,149				214,923
Loans held-for-sale measured at lower of cost or fair value			101,251				90,796				242,847
Loans held-in-portfolio:
Loans not covered under loss sharing agreements with the FDIC			22,576,299				23,827,263				24,717,321
Loans covered under loss sharing agreements with the FDIC			4,079,017				—				—
Less — Unearned income			109,911				114,150				111,259
Allowance for loan losses			1,277,016				1,261,204				1,146,239
Total loans held-in-portfolio, net			25,268,389				22,451,909				23,459,823
FDIC loss share indemnification asset			3,345,896				—				—
Premises and equipment, net			573,941				584,853				614,366
Other real estate not covered under loss sharing agreements with the FDIC			142,372				125,483				105,553
Other real estate covered under loss sharing agreements with the FDIC			76,331				—				—
Accrued income receivable			151,245				126,080				135,978
Servicing assets (at fair value on June 30, 2010 - $171,994; December 31, 2009 - $169,747; June 30, 2009 - $180,808)			174,170				172,505				184,189
Other assets (See Note 12)			1,402,072				1,322,159				1,214,849
Goodwill			710,579				604,349				607,164
Other intangible assets			63,720				43,803				48,447
Assets from discontinued operations			—				—				3,452
Total assets		$	42,443,652			$	34,736,325			$	36,498,792
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing		$	4,793,338			$	4,495,301			$	4,408,865
Interest bearing			22,320,235				21,429,593				22,504,620
Total deposits			27,113,573				25,924,894				26,913,485
Federal funds purchased and assets sold under agreements to repurchase			2,307,194				2,632,790				2,941,678
Other short-term borrowings			1,263				7,326				1,825
Notes payable			8,237,401				2,648,632				2,643,722
Other liabilities			1,180,773				983,866				1,084,455
Liabilities from discontinued operations			—				—				13,926
Total liabilities			38,840,204				32,197,508				33,599,091
Commitments and contingencies (See Note 19)
Stockholders’ equity:
Preferred stock, 30,000,000 shares authorized; 2,006,391 shares issued and outstanding at June 30, 2010 and December 31, 2009 (June 30, 2009 - 24,410,000) (aggregate liquidation preference value as of June 30, 2010 and December 31, 2009 - $50,160 (June 30, 2009 - $1,521,875))			50,160				50,160				1,487,000
Common stock, $0.01 par value; 1,700,000,000 shares authorized as of June 30, 2010 (December 31, 2009 and June 30, 2009 - 700,000,000); 1,022,878,228 shares issued as of June 30, 2010 (December 31,2009 - 639,544,895; June 30, 2009 - 282,034,819) and 1,022,695,797 outstanding as of June 30, 2010 (December 31, 2009 - 639,540,105; June 30, 2009 - 282,031,548)			10,229				6,395				2,820
Surplus			4,094,429				2,804,238				2,185,757
Accumulated deficit			(625,302	)			(292,752	)			(659,165	)
Treasury stock — at cost, 182,431 shares as of June 30, 2010 (December 31, 2009 - 4,790 shares; June 30, 2009 - 3,271)			(518	)			(15	)			(11	)
Accumulated other comprehensive income (loss), net of tax expense of $17,744 (December 31, 2009 - $33,964; June 30, 2009 - $67,257)			74,450				(29,209	)			(116,700	)
Total stockholders’ equity			3,603,448				2,538,817				2,899,701
Total liabilities and stockholders’ equity		$	42,443,652			$	34,736,325			$	36,498,792

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		Quarter ended								Six months ended
		June 30,								June 30,
(In thousands, except per share information)		2010				2009				2010				2009
INTEREST INCOME:
Loans		$	385,314			$	382,244			$	739,963			$	784,012
Money market investments			1,893				2,381				2,935				5,514
Investment securities			62,915				75,818				127,841				149,301
Trading account securities			6,599				10,603				13,177				21,411
Total interest income			456,721				471,046				883,916				960,238
INTEREST EXPENSE:
Deposits			90,615				128,452				183,589				276,491
Short-term borrowings			15,552				16,631				30,811				37,334
Long-term debt			71,578				42,903				121,623				90,867
Total interest expense			177,745				187,986				336,023				404,692
Net interest income			278,976				283,060				547,893				555,546
Provision for loan losses			202,258				349,444				442,458				721,973
Net interest income after provision for loan losses			76,718				(66,384	)			105,435				(166,427	)
Service charges on deposit accounts			50,679				53,463				101,257				107,204
Other service fees (See Note 24)			103,725				102,437				205,045				200,970
Net gain on sale and valuation adjustments of investment securities			397				53,705				478				229,851
Trading account profit			2,464				16,839				2,241				23,662
Loss on sale of loans, including adjustments to indemnity reserves, and valuation adjustments on loans held-for-sale			(9,311	)			(13,453	)			(21,533	)			(27,266	)
FDIC loss share income			23,334				—				23,334				—
Fair value change in equity appreciation instrument			24,394				—				24,394				—
Other operating income			20,176				12,848				38,508				26,149
Total non-interest income			215,858				225,839				373,724				560,570
OPERATING EXPENSES:
Personnel costs:
Salaries			109,124				107,079				204,997				212,402
Pension and other benefits			28,908				29,127				53,967				69,095
Total personnel costs			138,032				136,206				258,964				281,497
Net occupancy expenses			29,058				26,024				57,934				52,465
Equipment expenses			25,346				25,202				48,799				51,306
Other taxes			12,459				13,084				24,763				26,260
Professional fees			34,225				27,048				61,274				51,949
Communications			11,342				12,386				22,114				24,213
Business promotion			10,204				9,946				18,499				17,856
Printing and supplies			2,653				3,017				5,022				5,807
FDIC deposit insurance			17,393				36,331				32,711				45,448
Other operating expenses			45,249				38,968				74,745				73,202
Amortization of intangibles			2,455				2,433				4,504				4,839
Total operating expenses			328,416				330,645				609,329				634,842
Loss from continuing operations before income tax			(35,840	)			(171,190	)			(130,170	)			(240,699	)
Income tax expense (benefit )			19,988				5,393				10,713				(21,540	)
Loss from continuing operations			(55,828	)			(176,583	)			(140,883	)			(219,159	)
Loss from discontinued operations, net of income tax			—				(6,599	)			—				(16,545	)
NET LOSS		$	(55,828	)		$	(183,182	)		$	(140,883	)		$	(235,704	)
NET LOSS APPLICABLE TO COMMON STOCK		$	(247,495	)		$	(207,810	)		$	(332,550	)		$	(285,010	)
NET LOSS PER COMMON SHARE — BASIC
Net loss from continuing operations		$	(0.29	)		$	(0.71	)		$	(0.45	)		$	(0.95	)
Net loss from discontinued operations			—				(0.03	)			—				(0.06	)
Net loss per common share — basic		$	(0.29	)		$	(0.74	)		$	(0.45	)		$	(1.01	)
NET LOSS PER COMMON SHARE — DILUTED
Net loss from continuing operations		$	(0.29	)		$	(0.71	)		$	(0.45	)		$	(0.95	)
Net loss from discontinued operations			—				(0.03	)			—				(0.06	)
Net loss per common share — diluted		$	(0.29	)		$	(0.74	)		$	(0.45	)		$	(1.01	)
DIVIDENDS DECLARED PER COMMON SHARE			—				—				—			$	0.02

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POPULAR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

																		Accumulated
																		other
		Common				Preferred								Accumulated				comprehensive
(In thousands)		stock				stock				Surplus				deficit				(loss) income				Total
Balance as of December 31, 2008		$	1,566,277			$	1,483,525			$	621,879			$	(374,488	)		$	(28,829	)		$	3,268,364
Net loss															(235,704	)							(235,704	)
Accretion of discount							3,475	[1]							(3,475	) [1]
Stock options expense on unexercised options, net of forfeitures											45												45
Change in par value			(1,689,389	) [2]							1,689,389	[2]
Dividends declared:
Common stock															(5,641	)							(5,641	)
Preferred stock															(39,857	)							(39,857	)
Common stock reissuance			378																				378
Common stock purchases			(13	)																			(13	)
Treasury stock retired			125,556								(125,556	)
Other comprehensive loss, net of tax																			(87,871	)			(87,871	)
Balance as of June 30, 2009		$	2,809			$	1,487,000			$	2,185,757			$	(659,165	)		$	(116,700	)		$	2,899,701
Balance as of December 31, 2009		$	6,380			$	50,160			$	2,804,238			$	(292,752	)		$	(29,209	)		$	2,538,817
Net loss															(140,883	)							(140,883	)
Issuance of stocks							1,150,000	[3]															1,150,000
Issuance of common stock upon conversion of preferred stock			3,834	[3]			(1,150,000	) [3]			1,337,833	[3]											191,667
Issuance costs											(47,642	) [4]											(47,642	)
Deemed dividend on preferred stock															(191,667	)							(191,667	)
Common stock purchases			(503	)																			(503	)
Other comprehensive income, net of tax																			103,659				103,659
Balance as of June 30, 2010		$	9,711			$	50,160			$	4,094,429			$	(625,302	)		$	74,450			$	3,603,448

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Disclosure of changes in number of shares:

		June 30,				December 31,				June 30,
		2010				2009				2009
Preferred Stock:
Balance at beginning of period			2,006,391				24,410,000				24,410,000
Issuance of stocks			1,150,000	[1]			(22,403,609	) [2]			—
Conversion of stocks			(1,150,000	) [1]			—				—
Balance at end of period			2,006,391				2,006,391				24,410,000
Common Stock — Issued:
Balance at beginning of period			639,544,895				295,632,080				295,632,080
Issuance of stocks			383,333,333	[1]			357,510,076	[3]			—
Treasury stock retired			—				(13,597,261	)			(13,597,261	)
Balance at end of period			1,022,878,228				639,544,895				282,034,819
Treasury stock			(182,431	)			(4,790	)			(3,271	)
Common Stock — outstanding			1,022,695,797				639,540,105				282,031,548

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)

		Quarter ended								Six months ended
		June 30,								June 30,
(In thousands)		2010				2009				2010				2009
Net loss		$	(55,828	)		$	(183,182	)		$	(140,883	)		$	(235,704	)
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment			(1,531	)			(877	)			(577	)			(757	)
Adjustment of pension and postretirement benefit plans			4,486				1,855				6,236				63,095
Unrealized holding gains (losses) on securities available-for-sale arising during the period			80,801				(34,712	)			116,912				(19,399	)
Reclassification adjustment for losses (gains) included in net loss			6				(1,410	)			16				(177,556	)
Unrealized net losses on cash flow hedges			(1,509	)			(37	)			(1,540	)			(1,623	)
Reclassification adjustment for losses (gains) included in net loss			31				3,469				(1,168	)			5,883
Other comprehensive income (loss) before tax:			82,284				(31,712	)			119,879				(130,357	)
Income tax (expense) benefit			(12,065	)			5,694				(16,220	)			42,486
Total other comprehensive income (loss), net of tax			70,219				(26,018	)			103,659				(87,871	)
Comprehensive income (loss), net of tax		$	14,391			$	(209,200	)		$	(37,224	)		$	(323,575	)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Tax Effects Allocated to Each Component of Other Comprehensive Income (Loss):
		Quarter ended								Six months ended
		June 30,								June 30,
(In thousands)		2010				2009				2010				2009
Underfunding of pension and postretirement benefit plans		$	(882	)			—			$	(1,765	)		$	(22,783	)
Unrealized holding gains (losses) on securities available-for-sale arising during the period			(11,759	)		$	6,050				(15,507	)			3,293
Reclassification adjustment for losses (gains) included in net loss			—				247				(4	)			62,709
Unrealized net losses on cash flows hedges			588				15				600				633
Reclassification adjustment for losses (gains) included in net loss			(12	)			(618	)			456				(1,366	)
Income tax (expense) benefit		$	(12,065	)		$	5,694			$	(16,220	)		$	42,486

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Disclosure of accumulated other comprehensive income (loss):

		June 30,				December 31,				June 30,
(In thousands)		2010				2009				2009
Foreign currency translation adjustment		$	(41,253	)		$	(40,676	)		$	(39,825	)
Underfunding of pension and postretirement benefit plans			(121,550	)			(127,786	)			(197,114	)
Tax effect			46,801				48,566				76,858
Underfunding of pension and postretirement benefit plans, net of tax			(74,749	)			(79,220	)			(120,256	)
Unrealized holding gains on securities available-for-sale			221,018				104,090				53,019
Tax effect			(29,645	)			(14,134	)			(9,616	)
Unrealized holding gains on securities available-for-sale, net of tax			191,373				89,956				43,403
Unrealized (losses) gains on cash flows hedges			(1,509	)			1,199				(37	)
Tax effect			588				(468	)			15
Unrealized (losses) gains on cash flows hedges, net of tax			(921	)			731				(22	)
Accumulated other comprehensive income (loss)		$	74,450			$	(29,209	)		$	(116,700	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		Six months ended
		June 30,
(In thousands)		2010				2009
Cash flows from operating activities:
Net loss		$	(140,883	)		$	(235,704	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of premises and equipment			30,759				33,603
Provision for loan losses			442,458				721,973
Amortization of intangibles			4,504				4,839
Fair value adjustments of mortgage servicing rights			9,577				10,505
Net (accretion of discounts) amortization of premiums			(18,639	)			8,126
Net gain on sale and valuation adjustments of investment securities			(478	)			(229,851	)
Fair value change in equity appreciation instrument			(24,394	)			—
FDIC loss share income			(23,334	)			—
Gains from changes in fair value related to instruments measured at fair value pursuant to the fair value option			—				(1,141	)
Net (gain) loss on disposition of premises and equipment			(2,071	)			1,771
Net loss on sale of loan, including adjustments to indemnity reserves and valuation adjustments on loans held-for-sale			21,533				32,472
Net amortization of deferred loan origination fees and costs			2,140				4,374
Earnings from investments under the equity method			(14,513	)			(6,380	)
Net loss on sale and subsequent write-downs of foreclosed assets			8,429				8,585
Stock options expense			—				45
Deferred income taxes, net of valuation			(15,752	)			(73,983	)
Net disbursements on loans held-for-sale			(312,489	)			(685,500	)
Acquisitions of loans held-for-sale			(133,798	)			(209,814	)
Proceeds from sale of loans held-for-sale			35,867				43,875
Net decrease in trading securities			396,940				911,066
Net decrease in accrued income receivable			10,729				19,553
Net decrease in other assets			22,935				46,218
Net decrease in interest payable			(17,566	)			(30,133	)
Net increase in postretirement benefit obligation			1,627				2,404
Net increase in other liabilities			9,312				61,055
Total adjustments			433,776				673,662
Net cash provided by operating activities			292,893				437,958
Cash flows from investing activities:
Net increase in money market investments			(1,344,614	)			(156,993	)
Purchases of investment securities:
Available-for-sale			(542,506	)			(3,962,978	)
Held-to-maturity			(37,131	)			(28,328	)
Other			(13,076	)			(22,243	)
Proceeds from calls, paydowns, maturities and redemptions of investment securities:
Available-for-sale			818,380				846,944
Held-to-maturity			40,716				3,133
Other			83,272				24,988
Proceeds from sale of investment securities available-for-sale			19,484				3,747,567
Proceeds from sale of other investment securities			—				44,425
Net repayments on loans			1,024,846				670,771
Proceeds from sale of loans			10,878				304,468
Acquisition of loan portfolios			(87,471	)			(18,260	)
Cash received from acquisitions			261,311				—
Mortgage servicing rights purchased			(364	)			(727	)
Acquisition of premises and equipment			(27,161	)			(37,741	)
Proceeds from sale of premises and equipment			9,626				8,800
Proceeds from sale of foreclosed assets			69,058				76,334
Net cash provided by investing activities			285,248				1,500,160
Cash flows from financing activities:
Net decrease in deposits			(1,202,219	)			(633,722	)
Net decrease in assets sold under agreements to repurchase			(325,596	)			(609,930	)
Net decrease in other short-term borrowings			(6,063	)			(3,109	)
Payments of notes payable			(189,780	)			(804,072	)
Proceeds from issuance of notes payable			111,101				61,031
Net proceeds from issuance of depositary shares			1,102,358				—
Dividends paid			—				(71,438	)
Treasury stock acquired			(503	)			(13	)
Net cash used in financing activities			(510,702	)			(2,061,253	)
Net increase (decrease) in cash and due from banks			67,439				(123,135	)
Cash and due from banks at beginning of period			677,330				784,987
Cash and due from banks at end of period		$	744,769			$	661,852

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Note: The Consolidated Statement of Cash Flows for the six months ended June 30, 2009 includes the cash flows from operating, investing and financing activities associated with discontinued operations.

Notes to Unaudited Consolidated Financial Statements

Note 1 - Nature of Operations

Note 2 - Business Combination

Note 3 - Basis of Presentation and Summary of Significant Accounting Policies

Note 4 - Adoption of New Accounting Standards and Issued But Not Yet Effective Accounting Standards

Note 5 - Discontinued Operations

Note 6 - Restrictions on Cash and Due from Banks and Certain Securities

Note 7 - Pledged Assets

Note 8 - Investment Securities Available-For-Sale

Note 9 - Investment Securities Held-to-Maturity

Note 10 - Loans Held-in-Portfolio and Allowance for Loan Losses

Note 11 - Transfers of Financial Assets and Mortgage Servicing Rights

Note 12 - Other Assets

Note 13 - Goodwill and Other Intangible Assets

Note 14 - Derivative Instruments and Hedging Activities

Note 15 - Deposits

Note 16 - Borrowings

Note 17 - Trust Preferred Securities

Note 18 - Stockholders’ Equity

Note 19 - Commitments, Contingencies and Guarantees

Note 20 - Non-consolidated Variable Interest Entities

Note 21 - Fair Value Measurement

Note 22 - Fair Value of Financial Instruments

Note 23 - Net Loss per Common Share

Note 24 - Other Service Fees

Note 25 - Pension and Postretirement Benefits

Note 26 - Stock-Based Compensation

Note 27 - Income Taxes

Note 28 - Supplemental Disclosure on the Consolidated Statements of Cash Flows

Note 29 - Segment Reporting

Note 30 - Subsequent Events

Note 31 - Condensed Consolidating Financial Information of Guarantor and Issuers of Registered Guaranteed Securities

Notes to Unaudited Consolidated Financial Statements

Note 1 — Nature of Operations

Popular, Inc. (the “Corporation” or “Popular”) is a diversified, publicly owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States, the Caribbean and Latin America. In Puerto Rico, the Corporation provides retail and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as auto and equipment leasing and financing, mortgage loans, investment banking, broker-dealer and insurance services through specialized subsidiaries. In the United States, the Corporation operates Banco Popular North America (“BPNA”), including its wholly-owned subsidiary E-LOAN. BPNA is a community bank providing a broad range of financial services and products to the communities it serves. BPNA operates branches in New York, California, Illinois, New Jersey and Florida. E-LOAN markets deposit accounts under its name for the benefit of BPNA. The Corporation, through its subsidiary EVERTEC, provides transaction processing services throughout the Caribbean and Latin America, as well as internally services many of Popular’s subsidiaries’ system infrastructures and transactional processing businesses. The sections that follow provide a description of two significant transactions that impacted or will impact the Corporation’s current and future operations.

Westernbank FDIC-Assisted Transaction

On April 30, 2010, BPPR entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation (the “FDIC”) to acquire certain assets and assume certain deposits and liabilities of Westernbank Puerto Rico, a Puerto Rico state-chartered bank headquartered in Mayaguez, Puerto Rico (“Westernbank”)(herein the “Westernbank FDIC-assisted transaction”). Westernbank was a wholly-owned commercial bank subsidiary of W Holding Company, Inc. and operated through a network of 45 branches located throughout Puerto Rico. On May 1, 2010, Westernbank’s branches reopened as branches of BPPR; however, the physical branch locations and leases were not immediately acquired by BPPR. BPPR has an option, which was extended until August 30, 2010, to acquire, at fair market value, any bank premises that were owned by, or any leases relating to bank premises held by, Westernbank (including ATM locations). BPPR is currently reviewing the bank premises and related leases of Westernbank, and expects to reduce the number of branches due to bank synergies. Currently, all former Westernbank banking facilities and equipment used by the Corporation are leased from the FDIC on a month-to-month basis. The integration of Westernbank’s operations into BPPR is expected to be substantially completed by the end of the third quarter of 2010. Refer to Note 2 to the consolidated financial statements for detailed information on the Westernbank FDIC-assisted transaction. Refer to the Corporation’s Form 8-K/A filed on July 16, 2010 for additional information with respect to this FDIC-assisted transaction.

EVERTEC

Popular, EVERTEC, and two newly formed subsidiaries of a fund managed by an affiliate of Apollo Management VII, L.P. (“Apollo”), AP Carib Holdings, Ltd. (“AP Carib”) and Carib Acquisition, Inc. (“Merger Sub”), have entered into an Agreement and Plan of Merger (the “Merger Agreement”) dated as of June 30, 2010, as amended as of August 5, 2010 and August 8, 2010, pursuant to which Merger Sub will be merged with and into EVERTEC (the “Merger”). EVERTEC currently operates Popular’s merchant acquiring and processing and technology business and owns the ATH Network connecting the ATMs of various financial institutions throughout Puerto Rico, the U.S. Virgin Islands and the British Virgin Islands. Following the effective time of the Merger, AP Carib and Popular will contribute their respective shares of EVERTEC capital stock to Carib Holdings, Inc. (“Carib Holdings”) in exchange for shares of Carib Holdings capital stock. Following that contribution, EVERTEC will be a wholly-owned subsidiary of Carib Holdings, and Carib Holdings will be operated as a joint venture between Apollo and Popular, with AP Carib and Popular initially owning 51% and 49%, respectively, of Carib Holdings’s outstanding capital stock, subject to pro rata dilution to the extent that non-voting stock or other securities convertible into non-voting stock and/or derivative securities whose value is derived from such capital stock or non-voting stock are issued to EVERTEC management. The transaction is expected to contribute significantly to the Corporation’s capital levels and capital ratios, and results of operations. The closing of the transaction is currently expected to be completed in the third quarter of 2010 and is subject to various conditions and regulatory approvals. Refer to the Corporation’s Form 8-K filed with the Securities and Exchange Commission (“SEC”) on July 8, 2010 for additional information regarding transaction terms and structure.

Under the Merger Agreement, Apollo has the option to require the Corporation to sell or retain EVERTEC’s operations in Venezuela. Apollo has informed management of the Corporation of their plan to exercise this option. Therefore, as a condition to closing, EVERTEC must transfer its operations in Venezuela to another one of the Corporation’s subsidiaries for an amount equal to the net book value of those operations and the transaction consideration will be reduced.

Prior to entering into the merger agreement, Popular and its subsidiaries BPPR, Popular International Bank, Inc. (“PIBI”) and EVERTEC completed an internal reorganization transferring certain intellectual property assets and interests in certain foreign subsidiaries to EVERTEC on June 30, 2010. Commencing on June 30, 2010, PIBI’s wholly-owned subsidiaries ATH Costa Rica S.A. and T.I.I. Smart Solutions Inc. became wholly-owned subsidiaries of EVERTEC. These foreign subsidiaries were reported as part of the EVERTEC reportable segment prior to the internal reorganization. Also, in connection with the reorganization, BPPR’s Merchant Business and TicketPop divisions were transferred to EVERTEC. As of June 30, 2010, the Corporation continued to evaluate and report the merchant acquiring business and TicketPop divisions as part of the BPPR reportable segment.

Note 2 — Business Combination

As indicated in Note 1 to the consolidated financial statements, on April 30, 2010, the Corporation’s banking subsidiary, BPPR, acquired certain assets and assumed certain deposits of Westernbank Puerto Rico from the FDIC, as receiver for Westernbank, in an assisted transaction. BPPR acquired approximately $9.1 billion in assets and assumed approximately $2.4 billion in deposits, excluding the effects of purchase accounting adjustments. As part of the transaction, BPPR issued a five-year $5.8 billion note payable to the FDIC bearing an annual interest rate of 2.50%. The note is secured by a substantial amount of the assets, including loans and foreclosed other real estate properties acquired by BPPR from the FDIC in the Westernbank assisted transaction, and which are subject to the loss sharing agreements. In addition, as part of the consideration for the transaction, the FDIC received a cash-settled equity appreciation instrument, which is described in detail below.

Loss Sharing Agreements

In connection with the acquisition, BPPR entered into loss sharing agreements with the FDIC with respect to approximately $8.6 billion of loans and other real estate (the “covered assets”) acquired in the Westernbank FDIC-assisted transaction. Pursuant to the terms of the loss sharing agreements, the FDIC’s obligation to reimburse BPPR for losses with respect to covered assets begins with the first dollar of loss incurred. The FDIC will reimburse BPPR for 80% of losses with respect to covered assets, and BPPR will reimburse the FDIC for 80% of recoveries with respect to losses for which the FDIC paid BPPR 80% reimbursement under the loss sharing agreements. The loss sharing agreement applicable to single-family residential mortgage loans provides for FDIC loss and recoveries sharing for ten years. The loss sharing agreement applicable to commercial and consumer loans provides for FDIC loss sharing for five years and BPPR reimbursement to the FDIC for eight years, in each case, on the same terms and conditions as described above.

In addition, BPPR has agreed to make a true-up payment to the FDIC on the date that is 45 days following the last day (the “True-Up Measurement Date”) of the final shared loss month, or upon the final disposition of all covered assets under the loss sharing agreements in the event losses on the loss sharing agreements fail to reach expected levels. The estimated fair value of such true-up payment is recorded as a reduction in the fair value of the FDIC loss share indemnification asset. Under the loss sharing agreements, BPPR shall pay to the FDIC, 50% of the excess, if any, of: (i) 20% of the Intrinsic Loss Estimate of $4.6 billion (or $925 million)(as determined by the FDIC) less (ii) the sum of: (A) 25% of the asset discount (per bid) (or ($1.1 billion)); plus (B) 25% of the cumulative shared-loss payments (defined as the aggregate of all of the payments made or payable to BPPR minus the aggregate of all of the payments made or payable to the FDIC); plus (C) the sum of the period servicing amounts for every consecutive twelve-month period prior to and ending on the True-Up Measurement Date in respect of each of the loss sharing agreements during which the loss sharing provisions of the applicable loss sharing agreement is in effect (defined as the product of the simple average of the principal amount of shared loss loans and shared loss assets at the beginning and end of such period times 1%).

Covered loans under loss sharing agreements with the FDIC (the “covered loans”) are reported in loans exclusive of the estimated FDIC loss share indemnification asset. The covered loans acquired in the Westernbank transaction are, and will continue to be, reviewed for collectability, based on the expectations of cash flows on these loans. As a result, if there is a decrease in the expected cash flows due to an increase in estimated credit losses compared to the estimate made at the April 30, 2010 acquisition date, the Corporation will record a charge to the provision for loan losses and an allowance for loan losses will be established. A related credit to income and an increase in the FDIC loss share indemnification asset will be recognized at the same time, measured based on the loss share percentages described above.

The operating results of the Corporation for the quarter and six-months ended June 30, 2010 include the operating results produced by the acquired assets and liabilities assumed for the period of May 1, 2010 to June 30, 2010. Note 29 to the consolidated financial statements provides limited information on the results of the BPPR Westernbank operations, which is presented as additional information within the BPPR reportable segment. The Corporation believes that given the nature of assets and liabilities assumed, the significant amount of fair value adjustments, the nature of additional consideration provided to the FDIC (note payable and equity appreciation instrument) and the FDIC loss sharing agreements now in place, historical results of Westernbank are not meaningful to Popular’s results, and thus no pro forma information is presented.

The following table presents balances recorded by the Corporation at the time of the Westernbank FDIC-assisted transaction on April 30, 2010.

		Book value
		prior to
		purchase												As recorded by
		accounting				Fair value				Additional				Popular, Inc. on
(In thousands)		adjustments				adjustments				consideration				April 30, 2010
Assets:
Cash and money market investments		$	358,132				—				—			$	358,132
Investment in Federal Home Loan Bank stock			58,610				—				—				58,610
Covered loans			8,510,748			$	(4,293,756	)			—				4,216,992
Non-covered loans			43,996								—				43,996
FDIC loss share indemnification asset			—				3,322,561				—				3,322,561
Covered other real estate owned			125,947				(52,712	)			—				73,235
Core deposit intangible			—				24,415				—				24,415
Receivable from FDIC (associated to the Note payable issued to the FDIC)			—				—			$	111,101				111,101
Other assets			44,926				—				—				44,926
Total assets		$	9,142,359			$	(999,492	)		$	111,101			$	8,253,968
Liabilities:
Deposits		$	2,380,170			$	11,465				—			$	2,391,635
Note payable issued to the FDIC (including a premium of $11,612 resulting from the fair value adjustment)			—				—			$	5,769,696				5,769,696
Equity appreciation instrument			—				—				52,500				52,500
Contingent liability on unfunded loan commitments			—				132,442				—				132,442
Accrued expenses and other liabilities			13,925				—				—				13,925
Total liabilities		$	2,394,095			$	143,907			$	5,822,196			$	8,360,198
Excess of assets acquired over liabilities assumed		$	6,748,264
Aggregate fair value adjustments						$	(1,143,399	)
Aggregate additional consideration, net										$	5,711,095
Goodwill on acquisition														$	106,230

As previously disclosed, the fair values initially assigned to the assets acquired and liabilities assumed were preliminary and subject to refinement for up to one year after the closing date of the acquisition as new information relative to closing date fair values becomes available. Because of the short time period between the April 30, 2010 closing of the transaction and the June 30, 2010 reporting date, as well as delays in the receipt of certain information, the Corporation continues to analyze its estimates of fair value on loans acquired, FDIC loss share indemnification asset recorded and the note payable issued to the FDIC. As the Corporation finalizes its analyses of these assets and liabilities, there may be adjustments to the recorded carrying values, and thus the recognized goodwill may increase or decrease.

The following is a description of the methods used to determine the fair values of significant assets and liabilities:

Loans

Fair values for loans were based on a discounted cash flow methodology. Certain loans were valued individually, while other loans were valued as pools. Aggregation into pools considered characteristics such as loan type, payment term, rate type and accruing status, among others. Principal and interest projections considered prepayment rates and credit loss expectations. The discount rates were developed based on the relative risk of the cash flows, taking into account principally the loan type, market rates as of the valuation date, liquidity expectations, and the expected life of the loans.

FDIC loss share indemnification asset

Fair value was estimated using projected cash flows related to the loss sharing agreements based on the expected reimbursements for losses, including consideration of the true up payment and the applicable loss sharing percentages. These expected reimbursements do not include reimbursable amounts related to future covered expenditures. The estimates of expected losses used in valuation of this asset are consistent with the loss estimates used in the valuation of the covered assets. These cash flows were discounted to reflect the estimated timing of the receipt of the loss share reimbursement from the FDIC and the value of any true-up payment due to the FDIC at the end of the loss sharing agreements, to the extent applicable. The discount rate used in this calculation was determined using a yield of an A-rated corporate security with a term based on the weighted average life of the recovery of cash flows plus a risk premium reflecting the uncertainty related to the timing of cash flows and the potential rejection of claims by the FDIC. Due to the increased uncertainty of the true-up payment, an additional risk premium was added to the discount rate.

As of June 30, 2010, the Corporation has not made any claims to the FDIC associated with losses incurred on covered loans or covered other real estate owned. Non-interest income for the quarter ended June 30, 2010 was positively impacted by $23.3 million derived from the two-month accretion of the FDIC loss share indemnification asset.

Receivable from the FDIC

The note payable issued to the FDIC as of the April 30, 2010 transaction date was determined based on a pro-forma statement of assets acquired and liabilities assumed as of February 24, 2010, the bid transaction date. The receivable from the FDIC represents an adjustment to reconcile the consideration paid based on the assets acquired and liabilities assumed as of April 30, 2010 compared with the pro-forma statement as of February 24, 2010. The carrying amount of this receivable was a reasonable estimate of fair value based on its short-term nature. The receivable from the FDIC was collected by BPPR in June 2010 and is reflected as a cash inflow from financing activities in the consolidated statement of cash flows for the six months ended June 30, 2010. The proceeds were remitted to the FDIC in July 2010 as a payment on the note.

Other real estate covered under loss sharing agreements with the FDIC (“OREO”)

OREO includes real estate acquired in settlement of loans. OREO properties were recorded at estimated fair values less costs to sell at the date acquired based on management’s assessments of existing appraisals or broker price opinions. The estimated costs to sell are based on past experience with similar property types and terms customary for real estate transactions.

Goodwill

The amount of goodwill is the residual difference in the fair value of liabilities assumed and net consideration paid to the FDIC over the fair value of the assets acquired. The goodwill is deductible for income tax purposes. The goodwill from the Westernbank FDIC-assisted transaction was assigned to the BPPR reportable segment.

Core deposit intangible

This intangible asset represents the value of the relationships that Westernbank had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the core deposit base, interest costs, and the net maintenance cost attributable to customer deposits, and the cost of alternative funds.

Deposits

The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the reporting date. The fair values for time deposits were estimated using a discounted cash flow calculation that applies interest rates currently offered to comparable time deposits with similar maturities.

Contingent liability on unfunded loan commitments

Unfunded loan commitments are contractual obligations to provide future funding. The fair value of a liability associated to unfunded loan commitments is principally based on the expected utilization rate or likelihood that the commitment will be exercised. The estimated value of the unfunded commitments was equal to the expected loss associated with the balance expected to be funded. The expected loss is comprised of both credit and non-credit components; therefore, the discounts derived from the loan valuation were applied to the expected funded balance to derive to fair value. The unfunded loan commitments outstanding as of the April 30, 2010 transaction date, which approximated $227 million, relate principally to commercial and construction loans and commercial revolving lines of credit. Losses incurred on loan disbursements made under these unfunded loan commitments are covered by the FDIC loss sharing agreements provided that the Corporation complies with specific requirements under such agreements. The fair value of the unfunded loan commitments amounting to $132 million is included as part of “other liabilities” in the consolidated statement of condition as of June 30, 2010.

Deferred taxes

Deferred taxes relate to a difference between the financial statement and tax basis of the assets acquired and liabilities assumed in the transaction. Deferred taxes are reported based upon the principles in ASC Topic 740 “Income Taxes”, and are measured using the enacted statutory income tax rate to be in effect for BPPR at the time the deferred tax is expected to reverse, which is 39%.

For income tax purposes, the Westernbank transaction was accounted for as an asset purchase and the tax bases of assets acquired were allocated based on fair values using a modified residual method. Under this method, the purchase price was allocated among the assets in order of liquidity (the most liquid first) up to its fair market value.

Note payable issued to the FDIC

The fair value of the note payable issued to the FDIC was determined using discounted cash flows based on market rates currently available for debt with similar terms, including consideration that the debt is collateralized by the assets covered under the loss sharing agreements. The principal source of cash flows to pay down the note payable derives from the cash flows collected from the covered assets, as well as payments from the FDIC on claimed credit losses associated to the covered assets. The Corporation is required under the agreements with the FDIC to use those proceeds to repay the note payable and remit payments on a monthly basis.

Equity appreciation instrument

As part of the consideration, BPPR also issued an equity appreciation instrument to the FDIC. Under the terms of the equity appreciation instrument, the FDIC has the opportunity to obtain a cash payment with a value equal to the product of (a) 50 million units and (b) the difference between (i) Popular, Inc.’s “average volume weighted price” over the two NASDAQ trading days immediately prior to the exercise date and (ii) the exercise price of $3.43. The equity appreciation instrument is exercisable by the holder thereof, in whole or in part, up to May 7, 2011. The fair value of the equity appreciation instrument was estimated by determining a call option value using the Black-Scholes Option Pricing Model. The equity appreciation instrument is recorded as a liability and any subsequent changes in its estimated fair value will be recognized in earnings. The Corporation recognized non-interest income of $24.4 million during the quarter ended June 30, 2010 as a result of a decrease in the fair value of the equity appreciation instrument.

Note 3 — Basis of Presentation and Summary of Significant Accounting Policies

The consolidated financial statements include the accounts of Popular, Inc. and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated interim financial statements have been prepared without audit. The statement of condition data as of December 31, 2009 was derived from audited financial statements. The unaudited interim financial statements are, in the opinion of management, a fair statement of the results for the periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements of the Corporation for the year ended December 31, 2009, included in the Corporation’s Annual Report on Form 10-K filed on March 1, 2010 (the “2009 Annual Report”). Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated statement of condition.

Management exercised significant judgment regarding assumptions about discount rates, future expected cash flows including prepayments, default rates, market conditions and other future events that are highly subjective in nature, and subject to change, and all of which affected the estimation of the fair values of the net assets acquired in the Westernbank FDIC-assisted transaction. Actual results could differ from those estimates; others provided with the same information could draw different reasonable conclusions and calculate different fair values. Changes that may vary significantly from our assumptions include loan prepayments, credit losses, the estimated market values of collateral at disposition, the timing of such disposition, and deposit attrition.

Business Acquisition

The Corporation determined that the acquisition of certain assets and assumption of certain liabilities of Westernbank in the Westernbank FDIC-assisted transaction constitutes a business acquisition as defined by the Financial Accounting Standards Board (“FASB”) Codification (“ASC”) Topic 805 “Business Combinations”. The assets and liabilities, both tangible and intangible, were initially recorded at their estimated fair values. Fair values were determined based on the requirements of FASB Codification Topic 820 “Fair Value Measurements”. These fair value estimates are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair value becomes available. Acquisition-related costs are expensed as incurred.

Loans acquired in an FDIC-assisted transaction

Loans acquired in a business acquisition are recorded at their fair value at the acquisition date. Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date.

Since the loans from the Westernbank FDIC-assisted transaction were acquired with a significant discount for credit, the Corporation applied the discount accretion guidance of ASC Subtopic 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC Subtopic 310-30”) to all acquired loans, except for credit cards and revolving lines of credit that were expressly scoped out from the application of this guidance. As documented in a letter from the AICPA Depository Institutions Expert Panel (“DIEP”) to the Office of Chief Accountant of the SEC, on December 5, 2009, the SEC addressed the recognition of discount accretion for loans acquired under these circumstances. As referred to in the AICPA’s letter, when loans are acquired with a significant discount for credit and such loans are not within the scope of ASC 310-30, they believed that the SEC “would not object to an accounting policy based on contractual cash flows or an accounting policy based on expected cash flows”, meaning that an entity could either apply the accretion guidance of ASC 310-20 or that of ASC 310-30 to such loans. Consistent with the AICPA’s views, the Corporation applied the guidance of ASC 310-30 to all loans acquired in Westernbank FDIC-assisted transaction, except for credit cards and revolving lines of credit as indicated above.

Under ASC Subtopic 310-30, the covered loans acquired from the FDIC were aggregated into pools based on similar characteristics, including factors such as loan type, interest rate type, accruing status, and amortization type. Each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Under ASC Subtopic 310-30, the difference between the undiscounted cash flows expected at acquisition and the fair value in the loans, or the “accretable yield,” is recognized as interest income using the effective yield method over the estimated life of the loan if the timing and amount of the future cash flows of the pool is reasonably estimable. The non-accretable difference represents the difference between contractually required principal and interest and the cash flows expected to be collected. Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are recognized as interest income prospectively. Decreases in expected cash flows after the acquisition date are recognized by recording an allowance for loan losses.

The fair value discount of lines of credit with revolving privileges that are accounted for pursuant to the guidance of ASC Subtopic 310-20, represents the difference between the contractually required loan payment receivable in excess of the initial investment in the loan. This discount is accreted into interest income over the life of the loan if the loan is in accruing status. Any cash flows collected in excess of the carrying amount of the loan are recognized in earnings at the time of collection. The carrying amount of lines of credit with revolving privileges, which are accounted pursuant to the guidance of ASC Subtopic 310-20, are subject to periodic review to determine the need for recognizing an allowance for loan losses.

Covered Assets

Assets subject to loss sharing agreements with the FDIC are labeled “covered” on the consolidated statement of condition and include certain loans and other real estate properties. Loans acquired in the Westernbank FDIC-assisted transaction, except for credit cards, are considered “covered loans” because the Corporation will be reimbursed for 80% of any future losses on these loans subject to the terms of the FDIC loss sharing agreements.

FDIC Loss Share Indemnification Asset

The acquisition date fair value of the reimbursement that the Corporation expects to receive from the FDIC under the loss sharing agreements was recorded as an FDIC loss share indemnification asset on the consolidated statement of condition. Fair value was estimated using projected cash flows related to the loss sharing agreements. Refer to Note 2 for additional information on the valuation methodology. The impact of the FDIC loss share indemnification on the Corporation’s results of operations is included in non-interest income, particularly in the category of “FDIC loss share income”, and considers the accretion due to discounting and the changes in expected loss sharing reimbursements. Decreases in expected reimbursements will be recognized in income prospectively consistent with the approach taken to recognize increases in cash flows on covered loans. Increases in expected reimbursements will be recognized in income in the same period that the allowance for credit losses for the related loans is recognized.

The FDIC loss share indemnification asset for loss share agreements is measured separately from the related covered assets as it is not contractually embedded in the assets and is not transferable with the assets should the assets be sold.

Equity Appreciation Instrument

The equity appreciation instrument is recorded as an “other liability” in the consolidated statement of condition and any subsequent change in its estimated fair value is recognized in earnings on each quarterly reporting date. Refer to Note 2 to the consolidated financial statements for additional information on the equity appreciation instrument issued to the FDIC.

Note 4 — Adoption of New Accounting Standards and Issued But Not Yet Effective Accounting Standards

FASB Accounting Standards Update 2009-16, Transfers and Servicing (Accounting Standards Codification (“ASC”)

Topic 860) — Accounting for Transfers of Financial Assets (“ASU 2009-16”)

ASU 2009-16 amends previous guidance relating to transfers of financial assets and eliminates the concept of a qualifying special-purpose entity, removes the exception for guaranteed mortgage securitizations when a transferor has not surrendered control over the transferred financial assets, changes the requirements for derecognizing financial assets, and includes additional disclosures requiring more information about transfers of financial assets in which entities have continuing exposure to the risks related to the transferred financial assets. Among the most significant amendments and additions to this guidance are changes to the conditions for sales of financial assets which objective is to determine whether a transferor and its consolidated affiliates included in the financial statements have surrendered control over transferred financial assets or third-party beneficial interests; and the addition of the meaning of the term participating interest which represents a proportionate (pro rata) ownership interest in an entire financial asset. The requirements for sale accounting must be applied only to a financial asset in its entirety, a pool of financial assets in its entirety, or participating interests as defined in ASC Subparagraph 860-10-40-6A. This guidance has been applied as of the beginning of the first annual reporting period that began after November 15, 2009, for interim periods within that first annual reporting period and will be applied for interim and annual reporting periods thereafter. Earlier application was prohibited. The recognition and measurement provisions have been applied to transfers that have occurred on or after the effective date. On and after the effective date, existing qualifying special-purpose entities have been evaluated for consolidation in accordance with the applicable consolidation guidance in the Codification. The Corporation adopted this new authoritative accounting guidance effective January 1, 2010. The Corporation evaluated transfers of financial assets executed during the six months ended June 30, 2010 pursuant to the new accounting guidance, principally consisting of guaranteed mortgage securitizations (Government National Mortgage Association (“GNMA”) and Federal National Mortgage Association (“FNMA”) mortgage-backed securities, and determined that the adoption of ASU 2009-16 did not have a significant impact on the Corporation’s accounting for such transactions or results of operations or financial condition for such period.

A securitization of a financial asset, a participating interest in a financial asset, or a pool of financial assets in which the Corporation (and its consolidated affiliates) (a) surrenders control over the transferred assets and (b) receives cash or other proceeds is accounted for as a sale. Control is considered to be surrendered only if all three of the following conditions are met: (1) the assets have been legally isolated; (2) the transferee has the ability to pledge or exchange the assets; and (3) the transferor no longer maintains effective control over the assets. When the Corporation transfers financial assets and the transfer fails any one of the above criteria, the Corporation is prevented from derecognizing the transferred financial assets and the transaction is accounted for as a secured borrowing.

The Corporation recognizes and initially measures at fair value a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in either of the following situations: (1) a transfer of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset that meets the requirements for sale accounting; or (2) an acquisition or assumption of a servicing obligation of financial assets that do not pertain to the Corporation or its consolidated subsidiaries. Upon adoption of ASU 2009-16, the Corporation does not recognize either a servicing asset or a servicing liability if it transfers or securitizes financial assets in a transaction that does not meet the requirements for sale accounting and is accounted for as a secured borrowing.

Refer to Note 11 to the consolidated financial statements for disclosures on transfers of financial assets and servicing assets retained as part of guaranteed mortgage securitizations.

FASB Accounting Standards Update 2009-17, Consolidations (ASC Topic 810) — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“ASU 2009-17”) and FASB Accounting Standards Update 2010-10, Consolidation (ASC Topic 810): Amendments for Certain Investment Funds (“ASU 2010-10”)

ASU 2009-17 amends the guidance applicable to variable interest entities (“VIE”) and changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. This guidance replaces a quantitative-based risks and rewards calculation for determining which entity, if any, has both (a) a controlling financial interest in a variable interest entity with an approach focused on identifying which entity has the power to direct the activities of a variable interest entity that

most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. This guidance requires reconsideration of whether an entity is a variable interest entity when any changes in facts or circumstances occur such that the holders of the equity investment at risk, as a group, lose the power to direct the activities of the entity that most significantly impact the entity’s economic performance. It also requires ongoing assessments of whether a variable interest holder is the primary beneficiary of a variable interest entity. The amendments to the consolidated guidance affect all entities that were within the scope of the original guidance, as well as qualifying special-purpose entities (“QSPEs”) that were previously excluded from the guidance. ASU 2009-17 requires a reporting entity to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. The Corporation adopted this new authoritative accounting guidance effective January 1, 2010. The new accounting guidance on variable interest entities did not have an effect on the Corporation’s consolidated statement of condition or results of operations upon adoption.

The principal variable interest entities evaluated by the Corporation during the six months ended June 30, 2010 included: (1) GNMA and FNMA guaranteed mortgage securitizations and for which management has concluded that the Corporation is not the primary beneficiary (refer to Note 20 to the consolidated financial statements) and (2) the trust preferred securities for which management believes that the Corporation does not possess a significant variable interest on the trusts (refer to Note 17 to the consolidated financial statements).

Additionally, the Corporation has variable interests in certain investments that have the attributes of investment companies, as well as limited partnership investments in venture capital companies. However, in January 2010, the FASB issued ASU 2010-10, Consolidation (ASC Topic 810), Amendments for Certain Investment Funds, which deferred the effective date of the provisions of ASU 2009-17 for a reporting entity’s interest in an entity that has all the attributes of an investment company; or for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies. The deferral allows asset managers that have no obligation to fund potentially significant losses of an investment entity to continue to apply the previous accounting guidance to investment entities that have the attributes of entities subject to ASC Topic 946 (the “Investment Company Guide”). The FASB also decided to defer the application of ASU 2009-17 for money market funds subject to Rule 2a-7 of the Investment Company Act of 1940. Asset managers would continue to apply the applicable existing guidance to those entities that qualify for the deferral. ASU 2010-10 did not defer the disclosure requirements in ASU 2009-17.

The Corporation was not required to consolidate existing variable interest entities for which it has a variable interest as of June 30, 2010. Refer to Note 20 to the consolidated financial statements for required disclosures associated with the guaranteed mortgage securitizations in which the Corporation holds a variable interest.

FASB Accounting Standards Update 2010-06, Fair Value Measurements and Disclosures (ASC Topic 820) - Improving Disclosures about Fair Value Measurements (“ASU 2010-06”)

ASU 2010-06, issued in January 2010, revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than a net basis. The amendments also clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. ASU 2010-06 has been effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for interim and annual reporting periods beginning after December 15, 2010. This guidance impacts disclosures only and will not have an effect on the Corporation’s consolidated statements of condition or results of operations. The Corporation’s disclosures about fair value measurements are presented in Note 21 to the consolidated financial statements.

FASB Accounting Standards Update 2010-11, Derivatives and Hedging (ASC Topic 815): Scope Exception Related to Embedded Credit Derivatives (“ASU 2010-11”)

ASU 2010-11 clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. The type of credit derivative that qualifies for the exemption is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. The amendments in ASU 2010-11 are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after March 5, 2010. The Corporation does not expect that the adoption of this standard will have a significant effect, if any, on its consolidated financial statements.

FASB Accounting Standards Update 2010-18, Receivables (ASC Topic 310): Effect of a Loan Modification When the Loan is Part of a Pool That is Accounted for as a Single Asset (“ASU 2010-18”)

The amendments in ASU 2010-18, issued in April 2010, affect any entity that acquires loans subject to ASC Subtopic 310-30, that accounts for some or all of those loans within pools, and that subsequently modifies one or more of those loans after acquisition. ASC Subtopic 310-30 provides guidance on accounting for acquired loans that have evidence of credit deterioration upon acquisition. As a result of the amendments in ASU 2010-18, modifications of loans that are accounted for within a pool under ASC Subtopic 310-30 do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. The amendments in ASU 2010-18 do not affect the accounting for loans under the scope of Subtopic 310-30 that are not accounted for within pools. Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within ASC Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors. The amendments in ASU 2010-18 are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early application is permitted. Upon initial adoption of the guidance in ASU 2010-18, an entity may make a one-time election to terminate accounting for loans as a pool under Subtopic 310-30. This election may be applied on a pool-by-pool basis and does not preclude an entity from applying pool accounting to subsequent acquisitions of loans with credit deterioration. The Corporation elected to early adopt the provisions of this statement, effective with the closing of the Westernbank FDIC-assisted transaction on April 30, 2010. As a result, the accounting for modified loans follows the guidelines of ASU 2010-18; however, the adoption of these provisions did not have a significant impact on the Corporation’s result of operations or financial position as of June 30, 2010.

FASB Accounting Standards Update 2010-20, Receivables (ASC Topic 310): Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (“ASU 2010-20”)

ASU 2010-20, issued in July 2010, expands disclosure requirements about the credit quality of financing receivables and allowance for credit losses. The objective of this ASU is for an entity to provide disclosures that facilitate financial statement users’ evaluation of the following: (1) the nature of credit risk inherent in the entity’s portfolio of financing receivables; (2) how that risk is analyzed and assessed in arriving at the allowance for credit losses; and (3) the changes and reasons for those changes in the allowance for credit losses. Disclosures should be provided on a disaggregated basis on two defined levels: (1) portfolio segment; and (2) class of financing receivable. The ASU 2010-20 makes changes to existing disclosure requirements and includes additional disclosure requirements about financing receivables, including: the credit quality indicators of financing receivables at the end of the reporting period by class of financing receivables; the aging of past due financing receivables at the end of the reporting period by class of financing receivables; and the nature and extent of troubled debt restructurings that occurred during the period by class of financing receivables and their effect on the allowance for credit losses. The disclosure requirements as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. This guidance impacts disclosures only and will not have an effect on the Corporation’s consolidated statements of condition or results of operations.

Note 5 — Discontinued Operations

In 2008, the Corporation discontinued the operations of Popular Financial Holdings (“PFH”) by selling assets and closing service branches and other units. The loss from discontinued operations for the quarter and six months

ended June 30, 2009 was $6.6 million and $16.5 million, respectively, net of taxes. This loss was primarily related to salary and other expenses incurred in providing loan portfolio servicing to affiliated companies and other costs for full-time equivalent employees (“FTEs”) that were retained for a transition period, as well as adjustments to indemnity reserves on loans previously sold.

Note 6 — Restrictions on Cash and Due from Banks and Certain Securities

The Corporation’s subsidiary banks are required by federal and state regulatory agencies to maintain average reserve balances with the Federal Reserve Bank or other banks. Those required average reserve balances were $788 million as of June 30, 2010 (December 31, 2009 — $721 million; June 30, 2009 — $718 million). Cash and due from banks as well as other short-term, highly-liquid securities are used to cover the required average reserve balances.

As required by the Puerto Rico International Banking Center Regulatory Act, as of June 30, 2010, December 31, 2009, and June 30, 2009, the Corporation maintained separately for its two international banking entities (“IBEs”), $0.6 million in time deposits, equally divided for the two IBEs, which were considered restricted assets.

As part of a line of credit facility with a financial institution, as of June 30, 2010, the Corporation maintained restricted cash of $1 million (December 31, 2009 and June 30, 2009 — $2 million) as collateral for the line of credit. The cash is being held in certificates of deposits which mature in less than 90 days. The line of credit is used to support letters of credit.

As of June 30, the Corporation maintained restricted cash of $6 million to support letters of credit (December 31, 2009 — $4 million; June 30, 2009 — $5 million).

As of June 30, 2010, the Corporation maintained restricted cash of $2 million that represents funds deposited in an escrow account which are guaranteeing possible liens or encumbrances over the title of insured properties.

As of June 30, 2010, the Corporation maintained restricted cash of $5 million as collateral for repurchase liabilities.

As of June 30, 2010, the Corporation had restricted cash of $4 million which represents cash received on deposit from participant institutions of the ATH network that has been segregated for the development of the ATH brand.

As of June 30, 2010, the Corporation maintained restricted cash of $12 million to comply with the requirements of the credit card networks.

Note 7 — Pledged Assets

Certain securities and loans were pledged principally to secure public and trust deposits, assets sold under agreements to repurchase, other borrowings and credit facilities available, derivative positions and loan servicing agreements.

The classification and carrying amount of the Corporation’s pledged assets, in which the secured parties are not permitted to sell or repledge the collateral, were as follows:

		June 30,				December 31,				June 30,
(In thousands)		2010				2009				2009
Investment securities available-for-sale, at fair value		$	2,384,829			$	1,923,338			$	2,252,017
Investment securities held-to-maturity, at amortized cost			125,770				125,769				125,770
Loans held-for-sale measured at lower of cost or fair value			3,069				2,254				34,014
Loans held-in-portfolio covered under loss sharing agreements with the FDIC			3,932,700				—				—
Loans held-in-portfolio not covered under loss sharing agreements with the FDIC			9,392,857				8,993,967				7,629,613
Other real estate covered under loss sharing agreements with the FDIC			76,331				—				—
Total pledged assets		$	15,915,556			$	11,045,328			$	10,041,414

Pledged investment securities and loans in which the creditor has the right by custom or contract to repledge are presented separately in the consolidated statements of condition.

Investment securities available-for-sale and held-to-maturity totaling $2.0 billion as of June 30, 2010 served as collateral to secure public funds.

The Corporation’s banking subsidiaries have the ability to borrow funds from the Federal Home Loan Bank of New York (“FHLB) and from the Federal Reserve Bank of New York (“Fed”). As of June 30, 2010, the banking subsidiaries had short-term and long-term credit facilities authorized with the FHLB aggregating $1.7 billion. Refer to Note 16 to the consolidated financial statements for borrowings outstanding under these credit facilities. As of June 30, 2010, the credit facilities authorized with the FHLB were collateralized by $3.0 billion in loans held-in-portfolio and investment securities available-for-sale. Also, the Corporation’s banking subsidiaries had a borrowing capacity at the Fed discount window of $3.2 billion, which remained unused as of such date. The amount available under this credit facility is dependent upon the balance of loans and securities pledged as collateral. As of June 30, 2010, the credit facilities with the Fed were collateralized by $6.4 billion in loans held-in-portfolio. These pledged assets are included in the above table and were not reclassified and separately reported in the consolidated statement of condition as of June 30, 2010.

Loans held-in-portfolio and other real estate owned that are covered by loss sharing agreements with the FDIC amounting to $4.0 billion as of June 30, 2010, serve as collateral to secure the Note payable issued to the FDIC. Refer to Note 2 to the consolidated financial statements for descriptive information on the note payable issued to the FDIC.

Note 8 — Investment Securities Available-For-Sale

The amortized cost, gross unrealized gains and losses, fair value and weighted average yield of investment securities available-for-sale as of June 30, 2010, December 31, 2009 and June 30, 2009 were as follows:

		AS OF JUNE 30, 2010
						Gross				Gross								Weighted
		Amortized				Unrealized				Unrealized				Fair				Average
(In thousands)		Cost				Gains				Losses				Value				Yield
U.S. Treasury securities
After 1 to 5 years		$	107,776			$	1,311				—			$	109,087				1.47	%
After 5 to 10 years			29,023				2,577				—				31,600				3.80
Total U.S. Treasury securities			136,799				3,888				—				140,687				1.97
Obligations of U.S. Government sponsored entities
Within 1 year			384,536				5,504				—				390,040				3.52
After 1 to 5 years			1,254,234				65,786				—				1,320,020				3.41
After 5 to 10 years			11,928				83				—				12,011				5.30
After 10 years			26,887				517				—				27,404				5.68
Total obligations of U.S. Government sponsored entities			1,677,585				71,890				—				1,749,475				3.49
Obligations of Puerto Rico, States and political subdivisions
After 1 to 5 years			22,406				171				—				22,577				4.09
After 5 to 10 years			27,049				321			$	4				27,366				5.12
After 10 years			5,560				129				—				5,689				5.28
Total obligations of Puerto Rico, States and political subdivisions			55,015				621				4				55,632				4.72
Collateralized mortgage obligations — federal agencies
Within 1 year			159				3				—				162				4.06
After 1 to 5 years			4,714				136				—				4,850				4.61
After 5 to 10 years			98,717				1,507				88				100,136				2.65
After 10 years			1,310,206				32,005				2,341				1,339,870				2.93
Total collateralized mortgage obligations — federal agencies			1,413,796				33,651				2,429				1,445,018				2.92
Collateralized mortgage obligations — private label
After 5 to 10 years			16,737				21				522				16,236				2.08
After 10 years			92,212				116				6,577				85,751				2.37
Total collateralized mortgage obligations — private label			108,949				137				7,099				101,987				2.32
Mortgage-backed securities — agencies
Within 1 year			20,661				177				—				20,838				2.96
After 1 to 5 years			20,438				544				—				20,982				3.96
After 5 to 10 years			188,865				12,762				—				201,627				4.72
After 10 years			2,629,056				107,342				161				2,736,237				4.31
Total mortgage-backed securities — agencies			2,859,020				120,825				161				2,979,684				4.33
Equity securities			9,005				202				503				8,704				3.46
Total investment securities available-for-sale		$	6,260,169			$	231,214			$	10,196			$	6,481,187				3.70	%

		AS OF DECEMBER 31, 2009
						Gross				Gross								Weighted
		Amortized				Unrealized				Unrealized				Fair				Average
(In thousands)		Cost				Gains				Losses				Value				Yield
U.S. Treasury securities
After 5 to 10 years		$	29,359			$	1,093				—			$	30,452				3.80	%
Obligations of U.S. Government sponsored entities
Within 1 year			349,424				7,491				—				356,915				3.67
After 1 to 5 years			1,177,318				58,151				—				1,235,469				3.79
After 5 to 10 years			27,812				680				—				28,492				4.96
After 10 years			26,884				176				—				27,060				5.68
Total obligations of U.S. Government sponsored entities			1,581,438				66,498				—				1,647,936				3.82
Obligations of Puerto Rico, States and political subdivisions
After 1 to 5 years			22,311				7			$	15				22,303				6.92
After 5 to 10 years			50,910				249				632				50,527				5.08
After 10 years			7,840				—				61				7,779				5.26
Total obligations of Puerto Rico, States and political subdivisions			81,061				256				708				80,609				5.60
Collateralized mortgage obligations — federal agencies
Within 1 year			41				—				—				41				3.78
After 1 to 5 years			4,875				120				—				4,995				4.44
After 5 to 10 years			125,397				2,105				404				127,098				2.85
After 10 years			1,454,833				19,060				5,837				1,468,056				3.03
Total collateralized mortgage obligations — federal agencies			1,585,146				21,285				6,241				1,600,190				3.02
Collateralized mortgage obligations — private label
After 5 to 10 years			20,885				—				653				20,232				2.00
After 10 years			105,669				109				8,452				97,326				2.59
Total collateralized mortgage obligations — private label			126,554				109				9,105				117,558				2.50
Mortgage-backed securities — agencies
Within 1 year			26,878				512				—				27,390				3.61
After 1 to 5 years			30,117				823				—				30,940				3.94
After 5 to 10 years			205,480				8,781				—				214,261				4.80
After 10 years			2,915,689				32,102				10,203				2,937,588				4.40
Total mortgage-backed securities — agencies			3,178,164				42,218				10,203				3,210,179				4.42
Equity securities			8,902				233				1,345				7,790				3.65
Total investment securities available-for-sale		$	6,590,624			$	131,692			$	27,602			$	6,694,714				3.91	%

		AS OF JUNE 30, 2009
						Gross				Gross								Weighted
		Amortized				Unrealized				Unrealized				Market				Average
(In thousands)		Cost				Gains				Losses				Value				Yield
U.S. Treasury securities
After 5 to 10 years		$	29,695			$	1,138				—			$	30,833				3.80	%
Obligations of U.S. Government sponsored entities
Within 1 year			154,896				2,990				—				157,886				4.33
After 1 to 5 years			1,476,345				65,241			$	174				1,541,412				3.77
After 5 to 10 years			27,811				1,060				—				28,871				4.96
After 10 years			26,880				579				—				27,459				5.68
Total obligations of U.S. Government sponsored entities			1,685,932				69,870				174				1,755,628				3.87
Obligations of Puerto Rico, States and political subdivisions
Within 1 year			4,500				10				—				4,510				6.10
After 1 to 5 years			2,150				5				8				2,147				4.95
After 5 to 10 years			68,476				264				4,906				63,834				4.79
After 10 years			28,690				4				277				28,417				5.23
Total obligations of Puerto Rico, States and political subdivisions			103,816				283				5,191				98,908				4.97
Collateralized mortgage obligations — federal agencies
Within 1 year			266				1				—				267				4.12
After 1 to 5 years			8,566				181				16				8,731				5.16
After 5 to 10 years			148,888				2,202				473				150,617				3.04
After 10 years			1,508,619				17,049				11,638				1,514,030				3.19
Total collateralized mortgage obligations — federal agencies			1,666,339				19,433				12,127				1,673,645				3.18
Collateralized mortgage obligations — private label
Within 1 year			221				—				1				220				3.87
After 5 to 10 years			27,224				—				746				26,478				2.35
After 10 years			128,354				3				18,567				109,790				3.60
Total collateralized mortgage obligations — private label			155,799				3				19,314				136,488				3.38
Mortgage-backed securities
Within 1 year			5,143				52				—				5,195				3.04
After 1 to 5 years			78,841				1,502				1				80,342				3.80
After 5 to 10 years			149,901				4,812				4				154,709				4.82
After 10 years			3,304,858				17,212				19,559				3,302,511				4.50
Total mortgage-backed securities			3,538,743				23,578				19,564				3,542,757				4.50
Equity securities			13,116				81				4,997				8,200				2.48
Total investment securities available-for-sale		$	7,193,440			$	114,386			$	61,367			$	7,246,459				4.02	%