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 March 31, 2009

POPULAR, INC.

(Exact name of registrant as specified in its charter)

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

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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).

 o 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 definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act:

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 282,034,819 shares outstanding as of May 6, 2009.

 

 

POPULAR, INC.
INDEX

		Page
Part I — Financial Information
Item 1. Financial Statements
Unaudited Consolidated Statements of Condition as of March 31, 2009, December 31, 2008 and March 31, 2008			4
Unaudited Consolidated Statements of Operations for the quarters ended March 31, 2009 and 2008			5
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the quarters ended March 31, 2009 and 2008			6
Unaudited Consolidated Statements of Comprehensive Income for the quarters ended March 31, 2009 and 2008			7
Unaudited Consolidated Statements of Cash Flows for the quarters ended March 31, 2009 and 2008			8
Notes to Unaudited Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			68
Item 3. Quantitative and Qualitative Disclosures about Market Risk			104
Item 4. Controls and Procedures			109
Part II — Other Information
Item 1. Legal Proceedings			109
Item 1A. Risk Factors			109
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			112
Item 5. Other Events			113
Item 6. Exhibits			113
Signatures			114
EX-3.1
EX-3.2
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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 the Corporation’s 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 the Corporation’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, as well as general business and economic conditions; changes in interest rates, as well as the magnitude of such changes; the fiscal and monetary policies of the federal government and its agencies; the relative strength or weakness of the consumer and commercial credit sectors and of the real estate markets; the performance of the stock and bond markets; competition in the financial services industry; possible legislative, tax or regulatory changes; and difficulties in combining the operations of acquired entities. Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008 as well as Item 1A of Part II of this Quarterly Report on 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 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)		March 31, 2009				December 31, 2008				March 31, 2008
ASSETS
Cash and due from banks		$	703,483			$	784,987			$	782,498
Money market investments:
Federal funds sold			175,403				214,990				494,940
Securities purchased under agreements to resell			319,702				304,228				391,958
Time deposits with other banks			930,366				275,436				14,331
			1,425,471				794,654				901,229
Investment securities available-for-sale, at fair value:
Pledged securities with creditors’ right to repledge			2,455,629				3,031,137				3,146,549
Other investment securities available-for-sale			4,508,609				4,893,350				4,512,959
Investment securities held-to-maturity, at amortized cost (fair value as of March 31, 2009 — $314,580; December 31, 2008 — $290,134; March 31, 2008 — $376,306)			318,894				294,747				374,903
Other investment securities, at lower of cost or realizable value (realizable value as of March 31, 2009 — $268,278; December 31, 2008 — $255,830; March 31, 2008 — $297,535)			222,013				217,667				252,157
Trading account securities, at fair value:
Pledged securities with creditors’ right to repledge			533,665				562,795				494,839
Other trading securities			162,982				83,108				67,018
Loans held-for-sale measured at lower of cost or fair value			308,206				536,058				447,097
Loans measured at fair value pursuant to SFAS No. 159:
Loans measured at fair value with creditors’ right to repledge			—				—				56,523
Other loans measured at fair value			—				—				870,297
Loans held-in-portfolio			25,355,753				25,857,237				26,742,124
Less — Unearned income			117,767				124,364				184,815
Allowance for loan losses			1,057,125				882,807				579,379
			24,180,861				24,850,066				25,977,930
Premises and equipment, net			624,212				620,807				639,840
Other real estate			95,773				89,721				85,277
Accrued income receivable			142,114				156,227				215,454
Servicing assets (at fair value on March 31, 2009 — $177,295; December 31, 2008 — $176,034; March 31, 2008 — $183,756)			181,095				180,306				188,558
Other assets (See Note 9)			1,177,078				1,115,597				2,110,675
Goodwill			606,440				605,792				630,764
Other intangible assets			50,867				53,163				67,032
Assets from discontinued operations (See Note 3)			12,036				12,587				—
		$	37,709,428			$	38,882,769			$	41,821,599
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing		$	4,372,366			$	4,293,553			$	4,253,885
Interest bearing			22,777,401				23,256,652				22,712,829
			27,149,767				27,550,205				26,966,714
Federal funds purchased and assets sold under agreements to repurchase			2,881,997				3,551,608				4,490,693
Other short-term borrowings			29,453				4,934				1,525,310
Notes payable at cost			3,399,063				3,386,763				4,190,169
Notes payable at fair value pursuant to SFAS No. 159			—				—				186,171
Other liabilities			1,104,813				1,096,338				990,822
Liabilities from discontinued operations (See Note 3)			12,421				24,557				—
			34,577,514				35,614,405				38,349,879
Commitments and contingencies (See Note 16)
Stockholders’ equity:
Preferred stock, 30,000,000 shares authorized; 24,410,000 issued and outstanding as of March 31, 2009 and December 31, 2008 (March 31, 2008 — 7,475,000) (aggregate liquidation preference value of $1,521,875 as of March 31, 2009 and December 31, 2008; $186,875 as of March 31, 2008)			1,485,287				1,483,525				186,875
Common stock, $6 par value; 470,000,000 shares authorized in all periods presented; 282,034,819 shares issued (December 31, 2008 — 295,632,080; March 31, 2008 — 294,182,809) and 282,034,819 outstanding (December 31, 2008 — 282,004,713; March 31, 2008 — 280,547,741)			1,692,209				1,773,792				1,765,097
Surplus			496,455				621,879				570,548
(Accumulated deficit) retained earnings			(451,355	)			(374,488	)			1,113,089
Accumulated other comprehensive (loss), income, net of tax of ($61,563) (December 31, 2008 — ($24,771); March 31, 2008 — $19,446)			(90,682	)			(28,829	)			43,719
Treasury stock — at cost (December 31, 2008 — 13,627,367 shares; March 31, 2008 — 13,635,068 shares)			—				(207,515	)			(207,608	)
			3,131,914				3,268,364				3,471,720
		$	37,709,428			$	38,882,769			$	41,821,599

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

POPULAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

		Quarter ended
		March 31,
(In thousands, except per share information)		2009				2008
INTEREST INCOME:
Loans		$	401,768			$	497,456
Money market investments			3,133				6,728
Investment securities			73,483				94,104
Trading account securities			10,808				13,554
			489,192				611,842
INTEREST EXPENSE:
Deposits			148,039				194,940
Short-term borrowings			20,703				60,279
Long-term debt			47,964				20,864
			216,706				276,083
Net interest income			272,486				335,759
Provision for loan losses			372,529				161,236
Net interest income after provision for loan losses			(100,043	)			174,523
Service charges on deposit accounts			53,741				51,087
Other service fees (See Note 17)			98,533				103,230
Net gain on sale and valuation adjustments of investment securities			176,146				50,228
Trading account profit			6,823				13,337
(Loss) gain on sale of loans and valuation adjustments on loans held-for-sale			(13,813	)			14,267
Other operating income			13,301				32,602
			234,688				439,274
OPERATING EXPENSES:
Personnel costs:
Salaries			105,323				121,417
Pension and other benefits			39,968				34,551
			145,291				155,968
Net occupancy expenses			26,441				27,868
Equipment expenses			26,104				29,153
Other taxes			13,176				12,885
Professional fees			24,901				29,359
Communications			11,827				13,475
Business promotion			7,910				16,744
Printing and supplies			2,790				3,831
Other operating expenses			43,351				31,520
Amortization of intangibles			2,406				2,492
			304,197				323,295
(Loss) income from continuing operations before income tax			(69,509	)			115,979
Income tax (benefit) expense			(26,933	)			16,740
(Loss) income from continuing operations			(42,576	)			99,239
(Loss) income from discontinued operations, net of tax			(9,946	)			4,051
NET (LOSS) INCOME			($52,522	)		$	103,290
NET (LOSS) INCOME APPLICABLE TO COMMON STOCK			($77,200	)		$	100,312
(LOSSES) EARNINGS PER COMMON SHARE — BASIC AND DILUTED:
(Losses) earnings from continuing operations			($0.24	)		$	0.33
(Losses) earnings from discontinued operations			(0.03	)			0.03
Net (losses) earnings per common share			($0.27	)		$	0.36
DIVIDENDS DECLARED PER COMMON SHARE		$	0.02			$	0.16

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

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

		Quarter ended March 31,
(In thousands)		2009				2008
Preferred stock:
Balance at beginning of year		$	1,483,525			$	186,875
Amortization of preferred stock discount — 2008 Series C			1,762				—
Balance at end of period			1,485,287				186,875
Common stock:
Balance at beginning of year			1,773,792				1,761,908
Common stock issued under the Dividend Reinvestment Plan			—				3,189
Treasury stock retired			(81,583	)			—
Balance at end of period			1,692,209				1,765,097
Surplus:
Balance at beginning of year			621,879				568,184
Common stock issued under the Dividend Reinvestment Plan			—				2,080
Stock options expense on unexercised options, net of forfeitures			132				284
Treasury stock retired			(125,556	)			—
Balance at end of period			496,455				570,548
(Accumulated deficit) retained earnings:
Balance at beginning of year			(374,488	)			1,319,467
Net (loss) income			(52,522	)			103,290
Cumulative effect of accounting change — adoption of SFAS No. 159			—				(261,831	)
Cash dividends declared on common stock			(5,641	)			(44,859	)
Cash dividends declared on preferred stock			(16,942	)			(2,978	)
Amortization of preferred stock discount — 2008 Series C			(1,762	)			—
Balance at end of period			(451,355	)			1,113,089
Accumulated other comprehensive (loss) income:
Balance at beginning of year			(28,829	)			(46,812	)
Other comprehensive (loss) income, net of tax			(61,853	)			90,531
Balance at end of period			(90,682	)			43,719
Treasury stock — at cost:
Balance at beginning of year			(207,515	)			(207,740	)
Purchase of common stock			(1	)			(339	)
Reissuance of common stock			377				471
Treasury stock retired			207,139				—
Balance at end of period			—				(207,608	)
Total stockholders’ equity		$	3,131,914			$	3,471,720

Disclosure of changes in number of shares:

		March 31,				December 31,				March 31,
		2009				2008				2008
Preferred Stock:
Balance at beginning of year			24,410,000				7,475,000				7,475,000
Shared issued — (2008 Series B)			—				16,000,000				—
Shared issued — (2008 Series C)			—				935,000				—
Balance at end of period			24,410,000				24,410,000				7,475,000
Common Stock — Issued:
Balance at beginning of year			295,632,080				293,651,398				293,651,398
Issued under the Dividend Reinvestment Plan			—				1,980,682				531,411
Treasury stock retired			(13,597,261	)			—				—
Balance at end of period			282,034,819				295,632,080				294,182,809
Treasury stock			—				(13,627,367	)			(13,635,068	)
Common Stock — outstanding			282,034,819				282,004,713				280,547,741

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

POPULAR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)

		Quarter ended
		March 31,
(In thousands)		2009				2008
Net (loss) income			($52,522	)		$	103,290
Other comprehensive (loss) income before tax:
Foreign currency translation adjustment			120				219
Adjustment of pension and postretirement benefit plans			61,240				(37	)
Unrealized holding gains on securities available-for-sale arising during the period			15,313				127,490
Reclassification adjustment for (gains) losses included in net (loss) income			(176,146	)			1,312
Unrealized net losses on cash flow hedges			(1,586	)			(5,070	)
Reclassification adjustment for losses included in net (loss) income			2,414				1,501
			(98,645	)			125,415
Income tax benefit (expense)			36,792				(34,884	)
Total other comprehensive (loss) income, net of tax			(61,853	)			90,531
Comprehensive (loss) income, net of tax			($114,375	)		$	193,821

Tax Effects Allocated to Each Component of Other Comprehensive Income (Loss):

		Quarter ended
		March 31,
(In thousands)		2009				2008
Underfunding of pension and postretirement benefit plans			($22,783	)			—
Unrealized holding gains on securities available-for-sale arising during the period			(2,757	)			($35,263	)
Reclassification adjustment for (gains) losses included in net (loss) income			62,462				(901	)
Unrealized net losses on cash flows hedges			618				1,869
Reclassification adjustment for losses included in net (loss) income			(748	)			(589	)
Income tax benefit (expense)		$	36,792				($34,884	)

Disclosure of accumulated other comprehensive loss:

		March 31,				December 31,				March 31,
(In thousands)		2009				2008				2008
Foreign currency translation adjustment			($38,948	)			($39,068	)			($34,369	)
Underfunding of pension and postretirement benefit plans			(198,969	)			(260,209	)			(51,176	)
Tax effect			76,858				99,641				20,108
Net of tax amount			(122,111	)			(160,568	)			(31,068	)
Unrealized gains on securities available-for-sale			89,141				249,974				155,894
Tax effect			(15,913	)			(75,618	)			(42,114	)
Net of tax amount			73,228				174,356				113,780
Unrealized losses on cash flows hedges			(3,469	)			(4,297	)			(7,184	)
Tax effect			618				748				2,560
Net of tax amount			(2,851	)			(3,549	)			(4,624	)
Accumulated other comprehensive (loss) income, net of tax			($90,682	)			($28,829	)		$	43,719

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

POPULAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		Quarter ended March 31,
(In thousands)		2009				2008
Cash flows from operating activities:
Net (loss) income			($52,522	)		$	103,290
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization of premises and equipment			17,049				18,711
Provision for loan losses			372,529				168,222
Amortization of intangibles			2,406				2,492
Amortization and fair value adjustments of servicing assets			5,257				15,404
Net gain on sale and valuation adjustments of investment securities			(176,146	)			(47,940	)
(Gains) losses from changes in fair value related to instruments measured at fair value pursuant to SFAS No. 159			(816	)			3,020
Net gain on disposition of premises and equipment			(76	)			(1,323	)
Net loss (gain) on sale of loans and valuation adjustments on loans held-for-sale			13,073				(68,745	)
Net amortization of premiums and accretion of discounts on investments			4,288				6,086
Net amortization of premiums and deferred loan origination fees and costs			10,021				13,190
Earnings from investments under the equity method			(3,493	)			(4,194	)
Stock options expense			132				284
Deferred income taxes, net of valuation			(50,497	)			(34,815	)
Net disbursements on loans held-for-sale			(317,338	)			(716,848	)
Acquisitions of loans held-for-sale			(113,360	)			(76,474	)
Proceeds from sale of loans held-for-sale			26,901				526,534
Net decrease in trading securities			212,367				134,437
Net decrease (increase) in accrued income receivable			14,039				(10,906	)
Net decrease (increase) in other assets			52,769				(84,473	)
Net decrease in interest payable			(13,936	)			(21,075	)
Net increase (decrease) in postretirement benefit obligation			868				(362	)
Net increase in other liabilities			46,550				34,975
Total adjustments			102,587				(143,800	)
Net cash provided by (used in) operating activities			50,065				(40,510	)
Cash flows from investing activities:
Net (increase) decrease in money market investments			(630,817	)			105,483
Purchases of investment securities:
Available-for-sale			(2,939,134	)			(120,932	)
Held-to-maturity			(25,770	)			(2,748,155	)
Other			(17,701	)			(88,720	)
Proceeds from calls, paydowns, maturities and redemptions of investment securities:
Available-for-sale			363,863				1,067,689
Held-to-maturity			1,669				2,859,246
Other			13,355				53,147
Proceeds from sale of investment securities available-for-sale			3,546,944				8,477
Proceeds from sale of other investment securities			—				49,252
Net repayments (disbursements) on loans			340,619				(253,856	)
Proceeds from sale of loans			278,481				1,585,375
Acquisition of loan portfolios			(4,883	)			(1,394	)
Mortgage servicing rights purchased			(327	)			(2,215	)
Acquisition of premises and equipment			(23,186	)			(81,111	)
Proceeds from sale of premises and equipment			2,807				13,255
Proceeds from sale of foreclosed assets			34,915				29,086
Net cash provided by investing activities			940,835				2,474,627
Cash flows from financing activities:
Net decrease in deposits			(396,730	)			(1,346,959	)
Net decrease in federal funds purchased and assets sold under agreements to repurchase			(669,611	)			(946,572	)
Net increase in other short-term borrowings			24,519				23,331
Payments of notes payable			(47,938	)			(693,280	)
Proceeds from issuance of notes payable			60,238				535,894
Dividends paid			(42,881	)			(47,788	)
Proceeds from issuance of common stock			—				5,269
Treasury stock acquired			(1	)			(339	)
Net cash used in financing activities			(1,072,404	)			(2,470,444	)
Net decrease in cash and due from banks			(81,504	)			(36,327	)
Cash and due from banks at beginning of period			784,987				818,825
Cash and due from banks at end of period		$	703,483			$	782,498

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

Note: The Consolidated Statements of Cash Flows for the quarter ended March 31, 2009 and 2008 include the cash flows from operating, investing and financing activities associated with discontinued operations.

Notes to Unaudited Consolidated Financial Statements

Note 1 — Nature of Operations and Basis of Presentation
Note 2 — Adoption of New Accounting Standards and Issued But Not Yet Effective Accounting Standards
Note 3 — Discontinued Operations
Note 4 — Restrictions on Cash and Due from Banks and Certain Securities
Note 5 — Pledged Assets
Note 6 — Investment Securities Available-For-Sale
Note 7 — Investment Securities Held-to-Maturity
Note 8 — Mortgage Servicing Rights
Note 9 — Other Assets
Note 10 — Derivative Instruments and Hedging
Note 11 — Goodwill and Other Intangible Assets
Note 12 — Fair Value Measurement
Note 13 — Borrowings
Note 14 — Trust Preferred Securities
Note 15 — Stockholders’ Equity
Note 16 — Commitments, Contingencies and Guarantees
Note 17 — Other Service Fees
Note 18 — Pension and Postretirement Benefits
Note 19 — Restructuring Plans
Note 20 — Income Taxes
Note 21 — Stock-Based Compensation
Note 22 — (Loss) Earnings per Common Share
Note 23 — Supplemental Disclosure on the Consolidated Statements of Cash Flows
Note 24 — Segment Reporting
Note 25 — Condensed Consolidating Financial Information of Guarantor and Issuers of Registered Guaranteed Securities

Notes to Unaudited Consolidated Financial Statements

Note 1 — Nature of Operations and Basis of Presentation

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. As the leading financial institution in Puerto Rico, the Corporation offers 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 and offers loan customers the option of being referred to a trusted consumer lending partner for loan products. The Corporation, through its transaction processing company, EVERTEC, continues to use its expertise in technology as a competitive advantage in its expansion throughout the United States, the Caribbean and Latin America, as well as internally servicing many of its subsidiaries’ system infrastructures and transactional processing businesses. Note 24 to the consolidated financial statements presents further information about the Corporation’s business segments.

The unaudited 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. These unaudited 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 reclassifications have been made to the prior period consolidated financial statements to conform to the 2009 presentation, including retrospectively adjusting certain information of the consolidated statement of operations to present in a separate line item the results of discontinued operations from prior periods presented.

The statement of condition data as of December 31, 2008 was derived from audited financial statements. 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 statements presented as of March 31, 2009, December 31, 2008 and March 31, 2008 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, 2008, included in the Corporation’s 2008 Annual Report. The Corporation’s Form 10-K filed on March 2, 2009 incorporates by reference the 2008 Annual Report.

Note 2 — Adoption of New Accounting Standards and Issued But Not Yet Effective Accounting Standards

SFAS No. 141-R “Statement of Financial Accounting Standards No. 141(R), Business Combinations (a revision of SFAS No. 141)” (“SFAS No. 141(R)”)

SFAS No. 141(R), issued in December 2007, establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. The Corporation is required to apply SFAS No. 141(R) to all business combinations completed on or after January 1, 2009. For business combinations in which the acquisition date was before the effective date, the provisions of SFAS No. 141(R) will apply to the subsequent accounting for deferred income tax valuation allowances and income tax contingencies and will require any changes in those amounts to be recorded in earnings. SFAS No. 141(R) has not had a material effect on the consolidated financial statements of the Corporation as of March 31, 2009.

SFAS No. 160 “Statement of Financial Accounting Standards No. 160, Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS No. 160”)

In December 2007, the FASB issued SFAS No. 160, which amends ARB No. 51, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 requires entities to classify noncontrolling interests as a component of stockholders’ equity on the consolidated financial statements and requires subsequent changes in ownership interests in a subsidiary to be accounted for as an equity transaction. Additionally, SFAS No. 160 requires entities to recognize a gain or loss upon the loss of control of a subsidiary and to remeasure any ownership interest retained at fair value on that date. This statement also requires expanded disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 was adopted by the Corporation on January 1, 2009. The adoption of this standard did not have a significant impact on the Corporation’s consolidated financial statements.

SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”)

In March 2008, the FASB issued SFAS No. 161, an amendment of SFAS No. 133. The standard requires enhanced disclosures about derivative instruments and hedged items that are accounted for under SFAS No. 133 and related interpretations. The standard expands the disclosure requirements for derivatives and hedged items and has no impact on how the Corporation accounts for these instruments. The standard was adopted by the Corporation in the first quarter of 2009. Refer to Note 10 to the consolidated financial statements.

FASB Staff Position FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions"(“FSP 140-3”)

FSP FAS 140-3, issued by the FASB in February 2008, provides implementation guidance on whether the security transfer and contemporaneous repurchase financing involving the transferred financial asset must be evaluated as one linked transaction or two separate de-linked transactions. FSP FAS 140-3 requires the recognition of the transfer and the repurchase agreement as one linked transaction, unless all of the following criteria are met: (1) the initial transfer and the repurchase financing are not contractually contingent on one another; (2) the initial transferor has full recourse upon default, and the repurchase agreement’s price is fixed and not at fair value; (3) the financial asset is readily obtainable in the marketplace and the transfer and repurchase financing are executed at market rates; and (4) the maturity of the repurchase financing is before the maturity of the financial asset. The scope of this FSP is limited to transfers and subsequent repurchase financings that are entered into contemporaneously or in contemplation of one another. The Corporation adopted FSP FAS 140-3 on January 1, 2009. The adoption of FAS 140-3 FSP did not have a significant impact on the Corporation’s consolidated financial statements for the first quarter of 2009.

FASB Staff Position FAS 142-3, “Determination of the Useful Life of Intangible Assets"(“FSP 142-3”)

FSP FAS 142-3, issued by the FASB in April 2008, amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142 “Goodwill and Other Intangible Assets”. In developing these assumptions, an entity should consider its own historical experience in renewing or extending similar arrangements adjusted for entity specific factors or, in the absence of that experience, the assumptions that market participants would use about renewals or extensions adjusted for the entity specific factors. FSP FAS 142-3 shall be applied prospectively to intangible assets acquired after the effective date of January 1, 2009. The adoption of this FSP did not have a significant impact on the Corporation’s consolidated financial statements for the quarter ended March 31, 2009.

EITF 08-6 “Equity Method Investment Accounting Considerations"(“EITF 08-6”)

EITF 08-6 clarifies the accounting for certain transactions and impairment considerations involving equity method investments. This EITF applies to all investments accounted for under the equity method. EITF 08-6 provides guidance on the following: (1) how the initial carrying value of an equity method investment should be determined; (2) how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed; (3) how an equity method investee’s issuance of shares should be accounted for, and (4) how to account for a change in an investment from the equity method to the cost method. The adoption of EITF 08-6 in January 2009 did not have a significant impact on the Corporation’s consolidated financial statements.

FASB Staff Position FSP FAS 132(R)-1 “Employers’ Disclosures about Postretirement Benefit Plan Assets”(“FSP FAS 132(R)-1”)

FSP FAS 132(R)-1 requires additional disclosures in the financial statements of employers who are subject to the disclosure requirements of FAS 132(R) as follows: (a) the investment allocation decision making process, including the factors that are pertinent to an understanding of investment policies and strategies; (b) the fair value of each major category of plan assets, disclosed separately for pension plans and other postretirement benefit plans; (c) the inputs and valuation techniques used to measure the fair value of plan assets, including the level within the fair value hierarchy in which the fair value measurements in their entirety fall; and (d) significant concentrations of risk within plan assets. Additional detailed information is required for each category above. Upon initial application, the provisions of this FSP are not required for earlier periods that are presented for comparative periods. The Corporation will apply the new disclosure requirements commencing with the December 31, 2009 annual financial statements. This FSP impacts disclosures only and will not have an effect on the Corporation’s consolidated statements of condition or results of operations.

FASB Staff Position FAS 115-2 and FAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments”(“FSP FAS 115-2 and FAS 124-2”)

FSP FAS 115-2 and FAS 124-2, issued in April 2009, eliminate the requirement for the entity to evaluate whether it has the intent and ability to hold an impaired security until maturity. Conversely, the new FSP requires the issuer to recognize an other-than-temporary impairment (“OTTI”) in the event that the entity intends to sell the impaired security or in the event that it is more likely than not that the entity will sell the security prior to recovery. In the event that the sale of the security in question prior to its maturity is not probable but the entity does not expect to recover its amortized cost basis in that security, then the entity will be required to recognize an OTTI. In the event that the recovery of the security’s cost basis prior to maturity is not probable and an OTTI is recognized, the FSP provides that any component of the OTTI relating to a decline in the creditworthiness of the debtor should be reflected in results of operations, with the remainder being recognized in other comprehensive income. Conversely, in the event that the issuer determines that sale of the security in question prior to recovery is probable, then the entire OTTI will be recognized in earnings. On adoption, the entity is required to record a cumulative-effect adjustment as of the beginning of the period of adoption to reclassify the noncredit component of a previously recognized OTTI from retained earnings to accumulated other comprehensive income if the entity does not intend to sell the security and it is not more likely than not that the security will not be required to be sold before recovery. The Corporation elected to adopt FSP FAS 115-2 and FAS 124-2 for interim and annual reporting periods commencing with the quarter ended June 30, 2009. The Corporation is currently evaluating the potential impact of the adoption to its consolidated financial statements, but it is not expected to be significant.

FASB Staff Position FAS 107-1 and APB 28-1 “Interim Disclosures about Fair Value of Financial Instruments”(“FSP FAS 107-1 and APB 28-1”)

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1 to require providing disclosures on a quarterly basis about the fair value of financial instruments that are not currently reflected on the statement of condition at fair value. Prior to issuing this FSP, fair value for these assets and liabilities was only required for year-end disclosures. The Corporation will adopt FSP FAS 107-1 and APB 28-1 effective with the disclosures included into the consolidated financial statements for the quarter ended June 30, 2009. This FSP will only impact disclosure requirements and therefore will not impact the Corporation’s financial condition or results of operations.

FASB Staff Position FAS 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly”(“FSP FAS 157-4”)

FSP FAS 157-4, issued in April 2009, provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. The FSP also includes guidance on identifying circumstances that indicate that a transaction is not orderly. It reaffirms the need to use judgment to ascertain if an active market has become inactive and in determining fair values when markets have become inactive. Additionally, it also emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation techniques used, the objective of a fair value measurement remains the same. Fair value is the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FSP FAS 157-4 shall be applied prospectively and retrospective application is not permitted. This FSP will be effective for the

Corporation in the quarter ended June 30, 2009. The Corporation will be evaluating the potential impact of adopting this FSP.

SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”)

SFAS No. 162, issued by the FASB in May 2008, identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” Management does not expect SFAS No. 162 to have a material impact on the Corporation’s consolidated financial statements. The Board does not expect that this statement will result in a change in current accounting practice. However, transition provisions have been provided in the unusual circumstance that the application of the provisions of this statement results in a change in accounting practice.

Note 3 — Discontinued Operations

As disclosed in the 2008 Annual Report, the Corporation discontinued the operations of Popular Financial Holdings in 2008 by selling substantially all assets and closing service branches and other units. As of March 31, 2009, the Corporation continues its plans to dispose of any remaining assets of PFH.

For financial reporting purposes, the results of the discontinued operations of PFH are presented as “Assets / Liabilities from discontinued operations” in the consolidated statements of condition as of March 31, 2009 and December 31, 2008 and as “Loss from discontinued operations, net of tax” in the consolidated statements of operations for all periods presented. Prior periods presented in the consolidated statement of operations, as well as note disclosures covering income and expense amounts included in the accompanying notes to the consolidated financial statements, were retrospectively adjusted for comparative purposes. The consolidated statement of condition and related amounts in the notes to the consolidated financial statements for the quarter ended March 31, 2008 do not reflect the reclassification of PFH’s assets / liabilities to discontinued operations.

Total assets of the PFH discontinued operations amounted to $12 million as of March 31, 2009, compared to $13 million as of December 31, 2008. PFH’s total assets amounted to $2.1 billion as of March 31, 2008, principally consisting of $1.3 billion in loans, of which $927 million were accounted at fair value pursuant to SFAS No. 159, and $338 million in deferred tax assets, $230 million in servicing advances and related assets, and $68 million in mortgage servicing rights. As disclosed in the 2008 Annual Report, the Corporation substantially sold these assets in late 2008. As of March 31, 2008, all loans and borrowings recognized at fair value pursuant to SFAS No. 159 pertained to the discontinued operations of PFH.

Assets held by the PFH discontinued operations as of March 31, 2009 consisted principally of $7 million in loans measured at fair value with an unpaid principal balance of $58 million.

The following table provides financial information for the discontinued operations for the quarter ended March 31, 2009 and 2008.

		Quarter ended
($ in millions)		March 31, 2009				March 31, 2008
Net interest income		$	0.9			$	21.4
Provision for loan losses			—				7.0
Non-interest income			1.8				43.2
Operating expenses			6.0				49.2
Loss on disposition during the period			—				—
Pre-tax (loss) income from discontinued operations			(3.3	)			8.4
Income tax expense			6.6				4.4
(Loss) income from discontinued operations, net of tax			($9.9	)		$	4.0

Management took a series of actions in 2008 to downsize and eventually discontinue the PFH’s operations. These actions included two major restructuring plans, which are described in the 2008 Annual Report. These are the “PFH Discontinuance Restructuring Plan” and the “PFH Branch Network Restructuring Plan”. The PFH Discontinuance Restructuring Plan commenced execution in the second half of 2008 and included the elimination of substantially all employment positions and termination of contracts with the objective of discontinuing PFH’s operations. The PFH Branch Network Restructuring Plan resulted in the sale of a substantial portion of PFH’s loan portfolio in the first quarter of 2008 and the closure of Equity One’s consumer service branches, which represented, at the time, the only significant channel for PFH to continue originating loans. The following sections provide information on the PFH restructuring plans.

PFH Discontinuance Restructuring Plan

During the quarter ended March 31, 2009, the PFH Discontinuance Restructuring Plan resulted in charges, on a pre-tax basis, broken down as follows:

		Restructuring
(In thousands)		costs
Quarter ended:
March 31, 2009		$	895	(a)
Total		$	895

 

As of March 31, 2009, the PFH Discontinuance Restructuring Plan has resulted in combined charges for 2008 and 2009, broken down as follows:

		Impairments on				Restructuring
(In thousands)		long-lived assets				costs				Total
Year ended December 31, 2008		$	3,916			$	4,124			$	8,040
Quarter ended March 31, 2009			—				895				895
Total		$	3,916			$	5,019			$	8,935

The PFH Discontinuance Restructuring Plan charges are included in the line item “Loss from discontinued operations, net of tax” in the consolidated statements of operations for 2009 and 2008.

The following table presents the activity in the accrued balances for the PFH Discontinuance Plan during 2009.

		Restructuring
(In thousands)		costs
Balance as of January 1, 2009		$	3,428
Charges			895
Cash payments			(1,711	)
Balance as of March 31, 2009		$	2,612

PFH continues to employ 99 FTEs that are primarily providing loan portfolio servicing to affiliated companies and other FTEs that have been retained for a transition period. Additional restructuring costs could be incurred during 2009, but these are not expected to be significant to the Corporation’s results of operations.

PFH Branch Network Restructuring Plan

The PFH Branch Network Restructuring Plan resulted from the closure of Equity One’s consumer service branches during the first quarter of 2008. The Corporation did not incur and does not expect to incur additional restructuring costs related to the PFH Branch Network Restructuring Plan for the year 2009.

The following table presents the activity in the accrued balances for the PFH Branch Network Restructuring Plan during 2009.

		Restructuring
(In thousands)		costs
Balance as of January 1, 2009		$	1,879
Charges			—
Cash payments			(734	)
Balance as of March 31, 2009		$	1,145

Note 4 — 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 $694 million as of March 31, 2009 (December 31, 2008 — $684 million; March 31, 2008 — $655 million). Cash and due from banks as well as other short-term, highly-liquid securities are used to cover the required average reserve balances.

In compliance with rules and regulations of the Securities and Exchange Commission, the Corporation may be required to establish a special reserve account for the benefit of brokerage customers of its broker-dealer subsidiary, which may consist of securities segregated in the special reserve account. There were no reserve requirements as of March 31, 2009 and March 31, 2008 (December 31, 2008 — securities with a market value of $0.3 million). These securities as of December 31, 2008 were classified in the consolidated statement of condition within the other trading securities category.

As required by the Puerto Rico International Banking Center Regulatory Act, as of March 31, 2009, December 31, 2008, and March 31, 2008, 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 March 31, 2009, December 31, 2008 and March 31, 2008, the Corporation maintained restricted cash of $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 March 31, 2009, the Corporation had restricted cash of $2 million (December 31, 2008 — $3 million; March 31, 2008 — $4 million) to support a letter of credit related to a service settlement agreement.

At March 31, 2009 and December 31, 2008, the Corporation had $10 million in cash equivalents restricted as to usage for the potential payment of obligations contained in a loan sales agreement until November 3, 2009.

Note 5 — Pledged Assets

Certain securities and loans were pledged to secure public and trust deposits, assets sold under agreements to repurchase, other borrowings and credit facilities available. 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:

		March 31,				December 31,				March 31,
(In thousands)		2009				2008				2008
Investment securities available-for-sale, at fair value		$	1,975,253			$	2,470,591			$	2,808,803
Investment securities held-to-maturity, at amortized cost			225,770				100,000				—
Loans held-for-sale measured at lower of cost or market value			41,231				35,764				38,553
Loans measured at fair value pursuant to SFAS No. 159			—				—				193,781
Loans held-in-portfolio			7,837,478				8,101,999				7,586,260
		$	10,079,732			$	10,708,354			$	10,627,397

Pledged 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.

Note 6 — Investment Securities Available-For-Sale

The amortized cost, gross unrealized gains and losses and approximate market value (or fair value for certain investment securities where no market quotations are available) of investment securities available-for-sale as of March 31, 2009, December 31, 2008 and March 31, 2008 were as follows:

		AS OF MARCH 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
U.S. Treasury securities		$	29,859			$	2,561				—			$	32,420
Obligations of U.S. Government sponsored entities			1,578,821				78,041				—				1,656,862
Obligations of Puerto Rico, States and political subdivisions			104,006				407			$	5,168				99,245
Collateralized mortgage obligations			1,792,623				19,654				50,257				1,762,020
Mortgage-backed securities			3,122,403				49,197				885				3,170,715
Equity securities			13,053				34				3,772				9,315
Others (corporate bonds)			234,332				744				1,415				233,661
		$	6,875,097			$	150,638			$	61,497			$	6,964,238

		AS OF DECEMBER 31, 2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
U.S. Treasury securities		$	456,551			$	45,567				—			$	502,118
Obligations of U.S. Government sponsored entities			4,539,778				267,230				—				4,807,008
Obligations of Puerto Rico, States and political subdivisions			104,157				348			$	3,515				100,990
Collateralized mortgage obligations			1,716,985				9,926				71,195				1,655,716
Mortgage-backed securities			837,461				14,866				3,822				848,505
Equity securities			19,581				61				9,492				10,150
		$	7,674,513			$	337,998			$	88,024			$	7,924,487

		AS OF MARCH 31, 2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
U.S. Treasury securities		$	463,769			$	18,219				—			$	481,988
Obligations of U.S. Government sponsored entities			4,582,861				154,438				—				4,737,299
Obligations of Puerto Rico, States and political subdivisions			102,378				728			$	1,894				101,212
Collateralized mortgage obligations			1,366,306				7,299				24,686				1,348,919
Mortgage-backed securities			956,964				8,000				6,390				958,574
Equity securities			28,550				884				704				28,730
Others			2,786				—				—				2,786
		$	7,503,614			$	189,568			$	33,674			$	7,659,508

The following table shows the Corporation’s amortized cost, gross unrealized losses and market value of investment securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31 2009, December 31, 2008 and March 31, 2008.

		AS OF MARCH 31, 2009
		Less than 12 months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	42,415			$	324			$	42,091
Collateralized mortgage obligations			272,367				6,510				265,857
Mortgage-backed securities			36,601				280				36,321
Equity securities			7,907				3,713				4,194
Others			53,287				1,415				51,872
		$	412,577			$	12,242			$	400,335

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	44,143			$	4,844			$	39,299
Collateralized mortgage obligations			631,516				43,747				587,769
Mortgage-backed securities			82,371				605				81,766
Equity securities			1,808				59				1,749
		$	759,838			$	49,255			$	710,583

		Total
		Amortized				Gross Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	86,558			$	5,168			$	81,390
Collateralized mortgage obligations			903,883				50,257				853,626
Mortgage-backed securities			118,972				885				118,087
Equity securities			9,715				3,772				5,943
Others			53,287				1,415				51,872
		$	1,172,415			$	61,497			$	1,110,918

		AS OF DECEMBER 31, 2008
		Less than 12 months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	34,795			$	303			$	34,492
Collateralized mortgage obligations			544,783				28,589				516,194
Mortgage-backed securities			109,298				676				108,622
Equity securities			19,541				9,480				10,061
		$	708,417			$	39,048			$	669,369

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	44,011			$	3,212			$	40,799
Collateralized mortgage obligations			553,202				42,606				510,596
Mortgage-backed securities			206,472				3,146				203,326
Equity securities			29				12				17
		$	803,714			$	48,976			$	754,738

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	78,806			$	3,515			$	75,291
Collateralized mortgage obligations			1,097,985				71,195				1,026,790
Mortgage-backed securities			315,770				3,822				311,948
Equity securities			19,570				9,492				10,078
		$	1,512,131			$	88,024			$	1,424,107

		AS OF MARCH 31, 2008
		Less than 12 months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	20,343			$	22			$	20,321
Collateralized mortgage obligations			628,360				16,343				612,017
Mortgage-backed securities			144,912				1,803				143,109
Equity securities			13,654				704				12,950
		$	807,269			$	18,872			$	788,397

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	49,662			$	1,872			$	47,790
Collateralized mortgage obligations			176,527				8,343				168,184
Mortgage-backed securities			319,054				4,587				314,467
		$	545,243			$	14,802			$	530,441

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	70,005			$	1,894			$	68,111
Collateralized mortgage obligations			804,887				24,686				780,201
Mortgage-backed securities			463,966				6,390				457,576
Equity securities			13,654				704				12,950
		$	1,352,512			$	33,674			$	1,318,838

The unrealized loss positions of available-for-sale securities as of March 31, 2009 are primarily associated with collateralized mortgage obligations (“CMOs”). Federal agency CMOs and private label CMOs represented 92% and 8%, respectively, of the CMOs portfolio available-for-sale as of March 31, 2009. The securities that made up the private label component of the CMO portfolio available-for-sale are each rated AAA by either Moody’s and/or Standard & Poor’s rating agencies. None of the securities are on negative watch or outlook, nor have their ratings changed from their respective issuance dates. The carrying value of the private label CMOs available-for-sale as of March 31, 2009 was approximately $138 million, net of unrealized losses of $35 million. The losses related primarily to adjustable rate mortgages with lower coupons. In addition to verifying the credit ratings for the private label CMOs, management analyzed the underlying mortgage loan collateral for these bonds. Various statistics or metrics were reviewed for each private label CMO, including among others, the weighted average loan-to-value, FICO score, and delinquency and foreclosure rates. All of these CMOs securities were found to be in good credit condition. Since no observable credit quality issues were present in the Corporation’s CMOs as of March 31, 2009, and management has the intent and ability to hold the CMOs for a reasonable period of time for a forecasted recovery of fair value up to (or beyond) the cost of these investments, management considered the unrealized losses to be temporary.

As of March 31, 2009, “Obligations of Puerto Rico, States and political subdivisions” include approximately $45 million in Commonwealth of Puerto Rico Appropriation Bonds (“Appropriation Bonds”) in the Corporation’s investment securities portfolios. The rating on these bonds by Moody’s Investors Service (“Moody’s”) is Ba1, one

notch below investment grade, while Standard & Poor’s (“S&P”) rates them as investment grade. As of March 31, 2009, these Appropriation Bonds represented approximately $5 million in net unrealized losses in the Corporation’s investment securities portfolios. The Corporation is closely monitoring the political and economic situation of the Island as part of its evaluation of its available-for-sale portfolio for any declines in value that management may consider other-than-temporary. Management has the intent and ability to hold these investments for a reasonable period of time for a forecasted recovery of fair value up to (or beyond) the cost of these investments.

Proceeds from the sale of investment securities available-for-sale during the quarter ended March 31, 2009 were $3.5 billion. Gross realized gains on the sale of securities available-for-sale amounted to $182.7 million for the quarter ended March 31, 2009. There were no securities sold at a loss during the quarter ended March 31, 2009.

During the three months ended March 31, 2009, the Corporation recognized through earnings approximately $6.6 million in losses in equity securities classified as available-for-sale that management considered to be other-than-temporarily impaired.

The following table states the names of issuers and the aggregate amortized cost and market value of the securities of such issuer (includes available-for-sale and held-to-maturity securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders’ equity. This information excludes securities of the U.S. Government agencies and corporations. Investments in obligations issued by a state of the U.S. and its political subdivisions and agencies, which are payable and secured by the same source of revenue or taxing authority, other than the U.S. Government, are considered securities of a single issuer.

		March 31, 2009								December 31, 2008								March 31, 2008
(In thousands)		Amortized Cost				Market Value				Amortized Cost				Market Value				Amortized Cost				Market Value
FNMA		$	1,226,321			$	1,239,608			$	1,198,645			$	1,197,648			$	1,156,383			$	1,158,103
FHLB			1,466,561				1,540,697				4,389,271				4,651,249				4,725,045				4,875,028
Freddie Mac			909,344				915,635				884,414				875,493				794,885				790,067

Note 7 — Investment Securities Held-to-Maturity

The amortized cost, gross unrealized gains and losses and approximate market value (or fair value for certain investment securities where no market quotations are available) of investment securities held-to-maturity as of March 31, 2009, December 31, 2008 and March 31, 2008 were as follows:

		AS OF MARCH 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
Obligations of U.S. Government sponsored entities		$	25,770				—			$	54			$	25,716
Obligations of Puerto Rico, States and political subdivisions			283,389			$	125				4,384				279,130
Collateralized mortgage obligations			236				—				13				223
Others			9,499				12				—				9,511
		$	318,894			$	137			$	4,451			$	314,580

		AS OF DECEMBER 31, 2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
Obligations of U.S. Government sponsored entities		$	1,499			$	1				—			$	1,500
Obligations of Puerto Rico, States and political subdivisions			284,670				974			$	5,624				280,020
Collateralized mortgage obligations			244				—				13				231
Others			8,334				49				—				8,383
		$	294,747			$	1,024			$	5,637			$	290,134

		AS OF MARCH 31, 2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
Obligations of U.S. Government sponsored entities		$	288,601				—			$	8			$	288,593
Obligations of Puerto Rico, States and political subdivisions			74,918			$	1,369				53				76,234
Collateralized mortgage obligations			283				—				16				267
Others			11,101				114				3				11,212
		$	374,903			$	1,483			$	80			$	376,306

The following table shows the Corporation’s amortized cost, gross unrealized losses and market value of investment securities held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2009, December 31, 2008 and March 31, 2008:

		AS OF MARCH 31, 2009
		Less than 12 months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	25,770			$	54			$	25,716
Obligations of Puerto Rico, States and political subdivisions			145,224				1,724				143,500
Others			250				—				250
		$	171,244			$	1,778			$	169,466

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	23,645			$	2,660			$	20,985
Collateralized mortgage obligations			236				13				223
Others			250				—				250
		$	24,131			$	2,673			$	21,458

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	25,770			$	54			$	25,716
Obligations of Puerto Rico, States and political subdivisions			168,869				4,384				164,485
Collateralized mortgage obligations			236				13				223
Others			500				—				500
		$	195,375			$	4,451			$	190,924

		AS OF DECEMBER 31, 2008
		Less than 12 months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	135,650			$	5,452			$	130,198
Others			250				—				250
		$	135,900			$	5,452			$	130,448

						12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	9,535			$	172			$	9,363
Collateralized mortgage obligations			244				13				231
Others			250				—				250
		$	10,029			$	185			$	9,844

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	145,185			$	5,624			$	139,561
Collateralized mortgage obligations			244				13				231
Others			500				—				500
		$	145,929			$	5,637			$	140,292

		AS OF MARCH 31, 2008
		Less than 12 months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	38,601			$	8			$	38,593
Obligations of Puerto Rico, States and political subdivisions			10,555				53				10,502
Others			250				1				249
		$	49,406			$	62			$	49,344

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Collateralized mortgage obligations		$	283			$	16			$	267
Others			1,000				2				998
		$	1,283			$	18			$	1,265

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	38,601			$	8			$	38,593
Obligations of Puerto Rico, States and political subdivisions			10,555				53				10,502
Collateralized mortgage obligations			283				16				267
Others			1,250				3				1,247
		$	50,689			$	80			$	50,609