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, 2007

Commission File Number: 000-13818

POPULAR, INC.

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)

(787) 765-9800

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ          Accelerated filer o           Non-accelerated filer o

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 $6.00 par value 279,629,000 shares outstanding as of August 3, 2007.

 

 

POPULAR, INC.

INDEX

		Page
Part I — Financial Information
Item 1. Financial Statements
Unaudited Consolidated Statements of Condition as of June 30, 2007, December 31, 2006 and June 30, 2006			4
Unaudited Consolidated Statements of Income for the quarters and six months ended June 30, 2007 and 2006			5
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2007 and 2006			6
Unaudited Consolidated Statements of Comprehensive Income for the quarters and six months ended June 30, 2007 and 2006			7
Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006			8
Notes to Unaudited Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			60
Item 3. Quantitative and Qualitative Disclosures about Market Risk			93
Item 4. Controls and Procedures			96
Part II — Other Information
Item 1. Legal Proceedings			97
Item 1A. Risk Factors			97
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			99
Item 4. Submission of Matters to a Vote of Security Holders			100
Item 6. Exhibits			100
Signatures			101
EX-12.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EX-31.1 SECTION 302, CERTIFICATION OF THE CEO
EX-31.2 SECTION 302, CERTIFICATION OF THE CFO
EX-32.1 SECTION 906, CERTIFICATION OF THE CEO
EX-32.2 SECTION 906, CERTIFICATION OF THE CFO

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 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.

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.

		June 30,				December 31,				June 30,
(In thousands, except share information)		2007				2006				2006
ASSETS
Cash and due from banks		$	762,085			$	950,158			$	848,892
Money market investments:
Federal funds sold			345,400				84,350				245,500
Securities purchased under agreements to resell			212,138				202,181				366,143
Time deposits with other banks			17,449				15,177				8,879
			574,987				301,708				620,522
Investment securities available-for-sale, at fair value:
Pledged securities with creditors’ right to repledge			3,421,716				3,743,924				6,112,628
Other investment securities available-for-sale			5,552,752				6,106,938				4,776,670
Investment securities held-to-maturity, at amortized cost (market value at June 30, 2007 - $429,536; December 31, 2006 - $92,764; June 30, 2006 – $420,172)			429,479				91,340				420,398
Other investment securities, at lower of cost or realizable value (realizable value at June 30, 2007 - $160,372; December 31, 2006 - $412,593; June 30, 2006 – $422,163)			160,150				297,394				312,042
Trading account securities, at fair value:
Pledged securities with creditors’ right to repledge			355,484				193,619				212,637
Other trading securities			321,374				188,706				163,633
Loans held-for-sale, at lower of cost or market value			605,990				719,922				606,620
Loans held-in-portfolio:
Loans held-in-portfolio pledged with creditors’ right to repledge			195,661				306,320				67,381
Other loans held-in-portfolio			32,274,058				32,019,044				31,847,625
Less – Unearned income			323,864				308,347				304,994
Allowance for loan losses			564,847				522,232				483,815
			31,581,008				31,494,785				31,126,197
Premises and equipment, net			587,505				595,140				592,704
Other real estate			112,858				84,816				83,658
Accrued income receivable			249,746				248,240				245,998
Other assets			1,499,461				1,611,890				1,515,682
Goodwill			668,469				667,853				656,189
Other intangible assets			102,299				107,554				105,044
		$	46,985,363			$	47,403,987			$	48,399,514
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing		$	4,280,195			$	4,222,133			$	4,370,437
Interest bearing			21,105,800				20,216,198				19,079,083
			25,385,995				24,438,331				23,449,520
Federal funds purchased and assets sold under agreements to repurchase			5,655,936				5,762,445				7,926,731
Other short-term borrowings			3,384,105				4,034,125				2,656,936
Notes payable			8,068,638				8,737,246				10,198,675
Other liabilities			793,500				811,424				704,547
			43,288,174				43,783,571				44,936,409
Commitments and contingencies (See Note 12)
Minority interest in consolidated subsidiaries			109				110				112
Stockholders’ equity:
Preferred stock, $25 liquidation value; 30,000,000 shares authorized; 7,475,000 shares issued and outstanding in all periods presented			186,875				186,875				186,875
Common stock, $6 par value; 470,000,000 shares authorized in all periods presented; 292,722,761 shares issued (December 31, 2006 – 292,190,924; June 30, 2006 – 291,718,358) and 279,326,816 outstanding (December 31, 2006 – 278,741,547; June 30, 2006 – 278,293,561)			1,756,337				1,753,146				1,750,310
Surplus			533,152				526,856				490,631
Retained earnings			1,701,100				1,594,144				1,576,499
Accumulated other comprehensive loss, net of tax of ($96,065) (December 31, 2006 – ($84,143); June 30, 2006 – ($110,267))			(274,817	)			(233,728	)			(334,789	)
Treasury stock – at cost, 13,395,945 shares (December 31, 2006 – 13,449,377; June 30, 2006 – 13,424,797)			(205,567	)			(206,987	)			(206,533	)
			3,697,080				3,620,306				3,462,993
		$	46,985,363			$	47,403,987			$	48,399,514

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

POPULAR, INC.

		Quarter ended								Six months ended
		June 30,								June 30,
(In thousands, except per share information)		2007				2006				2007				2006
INTEREST INCOME:
Loans		$	656,485			$	613,792			$	1,300,599			$	1,205,627
Money market investments			5,752				7,906				10,361				15,888
Investment securities			113,063				133,274				228,554				266,807
Trading account securities			9,611				7,065				18,992				15,925
			784,911				762,037				1,558,506				1,504,247
INTEREST EXPENSE:
Deposits			182,730				135,961				355,832				260,372
Short-term borrowings			119,466				127,074				244,275				251,877
Long-term debt			111,298				133,223				232,000				266,455
			413,494				396,258				832,107				778,704
Net interest income			371,417				365,779				726,399				725,543
Provision for loan losses			115,167				67,096				211,513				116,043
Net interest income after provision for loan losses			256,250				298,683				514,886				609,500
Service charges on deposit accounts			48,392				47,324				96,863				94,793
Other service fees (See Note 13)			89,590				80,017				177,439				160,363
Net gain (loss) on sale and valuation adjustments of investment securities			1,175				(14,424	)			82,946				(2,084	)
Trading account profit (loss)			10,377				1,830				(3,787	)			13,305
Gain on sale of loans and valuation adjustments on loans held-for-sale			28,294				29,054				31,728				76,315
Other operating income			25,547				40,185				70,362				70,127
			459,625				482,669				970,437				1,022,319
OPERATING EXPENSES:
Personnel costs:
Salaries			126,950				126,700				263,429				262,232
Pension, profit sharing and other benefits			37,338				39,783				79,234				82,303
			164,288				166,483				342,663				344,535
Net occupancy expenses			26,501				28,629				58,515				57,267
Equipment expenses			32,245				33,973				64,641				67,170
Other taxes			11,835				10,929				23,682				21,170
Professional fees			38,642				38,488				74,629				75,566
Communications			16,973				17,293				34,035				34,593
Business promotion			30,369				31,991				58,741				64,814
Printing and supplies			4,549				4,291				8,825				8,923
Other operating expenses			32,838				28,072				64,854				56,903
Impact of change in fiscal period of certain subsidiaries			—				—				—				9,741
Amortization of intangibles			2,813				2,831				5,796				5,552
			361,053				362,980				736,381				746,234
Income before income tax			98,572				119,689				234,056				276,085
Income tax			23,622				22,308				40,459				60,201
NET INCOME		$	74,950			$	97,381			$	193,597			$	215,884
NET INCOME APPLICABLE TO COMMON STOCK		$	71,972			$	94,403			$	187,641			$	209,928
BASIC EARNINGS PER COMMON SHARE (EPS)		$	0.26			$	0.34			$	0.67			$	0.75
DILUTED EPS		$	0.26			$	0.34			$	0.67			$	0.75
DIVIDENDS DECLARED PER COMMON SHARE		$	0.16			$	0.16			$	0.32			$	0.32

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

POPULAR, INC.

		Six months ended
		June 30,
(In thousands)		2007				2006
Preferred stock:
Balance at beginning and end of year		$	186,875			$	186,875
Common stock:
Balance at beginning of year			1,753,146				1,736,443
Common stock issued under the Dividend Reinvestment Plan			3,131				2,475
Issuance of common stock			—				11,312
Stock options exercised			60				80
Balance at end of period			1,756,337				1,750,310
Surplus:
Balance at beginning of year			526,856				452,398
Common stock issued under the Dividend Reinvestment Plan			5,290				5,733
Issuance of common stock			—				28,281
Issuance cost of common stock			—				1,502
Stock options expense on unexercised options, net of forfeitures			857				1,525
Stock options exercised			149				192
Transfer from retained earnings			—				1,000
Balance at end of period			533,152				490,631
Retained earnings:
Balance at beginning of year			1,594,144				1,456,612
Net income			193,597				215,884
Cumulative effect of accounting change (adoption of SFAS No. 156 and EITF 06-5)			8,667				—
Cash dividends declared on common stock			(89,352	)			(89,041	)
Cash dividends declared on preferred stock			(5,956	)			(5,956	)
Transfer to surplus			—				(1,000	)
Balance at end of period			1,701,100				1,576,499
Accumulated other comprehensive loss:
Balance at beginning of year			(233,728	)			(176,000	)
Other comprehensive loss, net of tax			(41,089	)			(158,789	)
Balance at end of period			(274,817	)			(334,789	)
Treasury stock – at cost:
Balance at beginning of year			(206,987	)			(207,081	)
Purchase of common stock			(352	)			—
Reissuance of common stock			1,772				548
Balance at end of period			(205,567	)			(206,533	)
Total stockholders’ equity		$	3,697,080			$	3,462,993

Disclosure of changes in number of shares:

		June 30, 2007				December 31, 2006				June 30, 2006
Preferred Stock:
Balance at beginning and end of period			7,475,000				7,475,000				7,475,000
Common Stock – Issued:
Balance at beginning of year			292,190,924				289,407,190				289,407,190
Issued under the Dividend Reinvestment Plan			521,773				858,905				412,445
Issuance of common stock			—				1,885,380				1,885,380
Stock options exercised			10,064				39,449				13,343
Balance at end of period			292,722,761				292,190,924				291,718,358
Treasury stock			(13,395,945	)			(13,449,377	)			(13,424,797	)
Common Stock – outstanding			279,326,816				278,741,547				278,293,561

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

POPULAR, INC.

		Quarter ended								Six months ended
		June 30,								June 30,
(In thousands)		2007				2006				2007				2006
Net income		$	74,950			$	97,381			$	193,597			$	215,884
Other comprehensive loss, before tax:
Foreign currency translation adjustment			1,200				369				2,980				(317	)
Adjustment of pension and postretirement benefit plans			—				—				(519	)			—
Unrealized holding losses on securities available-for-sale arising during the period			(95,452	)			(123,859	)			(55,969	)			(215,824	)
Reclassification adjustment for (gains) losses included in net income			(1	)			14,424				(83	)			2,084
Net gain on cash flow hedges			1,840				2,710				948				3,910
Reclassification adjustment for gains included in net income			(286	)			(778	)			(125	)			(617	)
Cumulative effect of accounting change			(243	)			—				(243	)			—
			(92,942	)			(107,134	)			(53,011	)			(210,764	)
Income tax benefit			22,060				27,610				11,922				51,975
Total other comprehensive loss, net of tax			(70,882	)			(79,524	)			(41,089	)			(158,789	)
Comprehensive income		$	4,068			$	17,857			$	152,508			$	57,095

Disclosure of accumulated other comprehensive loss:

		June 30,				December 31,				June 30,
(In thousands)		2007				2006				2006
Foreign currency translation adjustment		$	(33,721	)		$	(36,701	)		$	(36,632	)
Minimum pension liability adjustment			—				(3,893	)			(2,354	)
Tax effect			—				1,518				918
Adoption of SFAS No. 158			—				3,893				—
Tax effect			—				(1,518	)			—
Net of tax amount			—				—				(1,436	)
Underfunding of pension and postretirement benefit plans			(69,779	)			(69,260	)			—
Tax effect			27,214				27,034				—
Net of tax amount			(42,565	)			(42,226	)			—
Unrealized losses on securities available-for-sale			(268,295	)			(212,243	)			(409,430	)
Tax effect			69,182				57,146				110,440
Net of tax amount			(199,113	)			(155,097	)			(298,990	)
Unrealized gains on cash flows hedges			913				90				3,117
Tax effect			(331	)			(37	)			(1,091	)
Net of tax amount			582				53				2,026
Cumulative effect of accounting change, net of tax			—				243				243
Accumulated other comprehensive loss, net of tax		$	(274,817	)		$	(233,728	)		$	(334,789	)

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

POPULAR, INC.

		Six months ended June 30,
(In thousands)		2007				2006
Cash flows from operating activities:
Net income		$	193,597			$	215,884
Less: Impact of change in fiscal period of certain subsidiaries, net of tax			—				(6,129	)
Net income before change in fiscal period			193,597				222,013
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment			39,973				42,506
Provision for loan losses			211,513				116,043
Amortization of intangibles			5,796				5,552
Amortization and fair value adjustment of servicing assets			22,606				28,290
Net (gain) loss on sale and valuation adjustment of investment securities			(82,946	)			2,084
Net gain on disposition of premises and equipment			(4,851	)			(2,269	)
Net gain on sale of loans and valuation adjustments on loans held-for-sale			(31,728	)			(76,315	)
Net amortization of premiums and accretion of discounts on investments			11,235				14,358
Net amortization of premiums and deferred loan origination fees and costs			47,938				66,709
Earnings from investments under the equity method			(16,590	)			(6,163	)
Stock options expense			907				1,585
Deferred income taxes			(48,112	)			(28,381	)
Net disbursements on loans held-for-sale			(3,087,103	)			(3,559,262	)
Acquisitions of loans held-for-sale			(403,712	)			(846,117	)
Proceeds from sale of loans held-for-sale			2,833,030				3,834,624
Net decrease in trading securities			645,680				1,000,341
Net increase in accrued income receivable			(1,506	)			(1,966	)
Net increase in other assets			(16,261	)			(79,280	)
Net (decrease) increase in interest payable			(14,013	)			9,886
Net increase in postretirement benefit obligation			1,824				2,755
Net decrease in other liabilities			(52,071	)			(63,653	)
Total adjustments			61,609				461,327
Net cash provided by operating activities			255,206				683,340
Cash flows from investing activities:
Net (increase) decrease in money market investments			(206,843	)			129,048
Purchases of investment securities:
Available-for-sale			(65,385	)			(211,139	)
Held-to-maturity			(12,293,611	)			(16,847,432	)
Other			(16,935	)			(32,202	)
Proceeds from calls, paydowns, maturities and redemptions of investment securities:
Available-for-sale			810,710				761,858
Held-to-maturity			11,957,964				16,580,599
Other			5,445				39,263
Proceeds from sale of investment securities available-for-sale			28,981				44,474
Proceeds from sale of other investment securities			246,352				—
Net disbursements on loans			(362,569	)			(472,274	)
Proceeds from sale of loans			3,549				212,791
Acquisition of loan portfolios			(784	)			(175,856	)
Assets acquired, net of cash			(1,633	)			(418	)
Mortgage servicing rights purchased			(23,988	)			(9,599	)
Acquisition of premises and equipment			(49,652	)			(63,469	)
Proceeds from sale of premises and equipment			21,951				26,762
Proceeds from sale of foreclosed assets			80,278				66,685
Net cash provided by investing activities			133,830				49,091
Cash flows from financing activities:
Net increase in deposits			936,810				811,499
Net decrease in federal funds purchased and assets sold under agreements to repurchase			(106,509	)			(888,881	)
Net decrease in other short-term borrowings			(650,020	)			(150,183	)
Payments of notes payable			(773,731	)			(1,210,735	)
Proceeds from issuance of notes payable			103,249				682,406
Dividends paid			(95,223	)			(93,249	)
Proceeds from issuance of common stock			8,667				47,293
Treasury stock acquired			(352	)			—
Net cash used in financing activities			(577,109	)			(801,850	)
Cash effect of change in fiscal period of certain subsidiaries			—				11,914
Net decrease in cash and due from banks			(188,073	)			(57,505	)
Cash and due from banks at beginning of period			950,158				906,397
Cash and due from banks at end of period		$	762,085			$	848,892

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

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 is a full service financial services provider with operations in Puerto Rico, the United States, the Caribbean and Latin America. As the leading financial institution based 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, consumer lending, investment banking, broker-dealer and insurance services through specialized subsidiaries. In the United States, the Corporation has established a community banking franchise providing a broad range of financial services and products to the communities it serves. Banco Popular North America (“BPNA”) operates branches in California, Texas, Illinois, New York, New Jersey and Florida, while E-LOAN provides online consumer direct lending to obtain mortgage, auto and home equity loans, and provides an online platform to raise deposits for BPNA. Popular Financial Holdings (“PFH”) offers mortgage and personal loans and provides mortgage loan servicing. The Corporation also owns a financial transaction processing operation, EVERTEC, which strives to use its expertise in technology and electronic banking 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 21 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. The Corporation also consolidates the variable interest entities for which it is the primary beneficiary and, therefore, will absorb the majority of the entity’s expected losses, receive a majority of the entity’s expected returns, or both. 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 2007 presentation.

The statement of condition data as of December 31, 2006 were derived from audited financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted from the statements presented as of June 30, 2007, December 31, 2006 and June 30, 2006 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, 2006, included in the Corporation’s 2006 Annual Report. The Corporation’s Form 10-K filed on March 1, 2007 incorporates by reference the 2006 Annual Report.

Note 2 – Recent Accounting Developments

SFAS No. 155 “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140”

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140.” SFAS No. 155 permits companies to elect, on a transaction-by-transaction basis, to apply a fair value measurement to hybrid financial instruments that contain an embedded derivative that would otherwise require bifurcation under SFAS No. 133. This statement also clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. The adoption of SFAS No. 155 in 2007 did not have a material impact on the Corporation’s consolidated financial statements during the six months ended June 30, 2007.

SFAS No. 156 “Accounting for Servicing of Financial Assets — an amendment of FASB No. 140”

SFAS No. 156 requires that all separately recognized servicing assets and liabilities be initially measured at fair value, if practicable. For subsequent measurements, SFAS No. 156 permits companies to choose between using an amortization method or a fair value measurement method for reporting purposes by class of servicing asset or liability. The Corporation adopted SFAS No. 156 in January 2007. The Corporation elected the fair value measurement for mortgage servicing rights (“MSRs”). Servicing rights associated with Small Business Administration (“SBA”) commercial loans will continue to be accounted at the lower of cost or market method. The initial impact of adoption of the fair value measurement for MSRs was included as a cumulative effect of a change in accounting principle directly in stockholders’ equity and resulted in a net increase in stockholders’ equity of approximately $9.6 million, net of deferred taxes. Refer to Note 7 to the consolidated financial statements for required SFAS No. 156 disclosures.

FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109” (FIN 48)

In 2006, the FASB issued FIN 48, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition related to income taxes. The accounting provisions of FIN 48 were effective for the Corporation beginning in the first quarter of 2007. Based on management’s assessment, there was no impact on retained earnings as of January 1, 2007 due to the initial application of the provisions of FIN 48. Also, as a result of the implementation, the Corporation did not recognize any change in the liability for unrecognized tax benefits. Refer to Note 14 to the consolidated financial statements for further information on the impact of FIN 48.

EITF Issue No. 06-03 “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (EITF 06-03)

EITF 06-03 provides that the presentation of taxes assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. The Corporation’s accounting policy is to account on a net basis for the taxes collected from customers and remitted to governmental authorities on a net basis. The corresponding amounts recognized in the consolidated financial statements are not significant.

EITF Issue No. 06-5 “Accounting for Purchases of Life Insurance – Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance” (EITF 06-5)

EITF 06-5 focuses on how an entity should determine the “amount that could be realized under the insurance contract” at the balance sheet date in applying FTB 85-4, and whether the determination should be on an individual or group policy basis. At the September 2006 meeting, the Task Force affirmed as a final consensus that the cash surrender value and any additional amounts provided by the contractual terms of the insurance policy that are realizable at the balance sheet date should be considered in determining the amount that could be realized under FTB 85-4, and any amounts that are not immediately payable in cash to the policyholder should be discounted to their present value. Additionally, the Task Force affirmed as a final consensus the tentative conclusion that in determining “the amount that could be realized,” companies should assume that policies will be surrendered on an individual-by-individual basis, rather than surrendering the entire group policy. Also, the Task Force reached a consensus that contractual limitations on the ability to surrender a policy do not affect the amount to be reflected under FTB 85-4, but, if significant, the nature of those restrictions should be disclosed. The Corporation adopted the EITF 06-5 guidance in the first quarter of 2007 and as a result recorded a $0.9 million cumulative effect adjustment to beginning retained earnings (reduction of capital) for the existing bank-owned life insurance arrangement.

SFAS No. 157 “Fair Value Measurements”

SFAS No. 157, issued in September 2006, defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. SFAS No. 157 requires companies to disclose the fair value of its financial instruments according to a fair value hierarchy. The fair value hierarchy ranks the quality and

reliability of the information used to determine fair values. Financial assets carried at fair value will be classified and disclosed in one of the three categories in accordance with the hierarchy. The three levels of the fair value hierarchy are: (1) quoted market prices for identical assets or liabilities in active markets; (2) observable market-based inputs or unobservable inputs that are corroborated by market data; and (3) unobservable inputs that are not corroborated by market data. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Corporation will adopt the provisions of SFAS No. 157 commencing with the first quarter of 2008. The Corporation is evaluating the impact that this accounting pronouncement may have in its consolidated financial statements and disclosures.

SFAS No. 159 “Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities”

In February 2007, the FASB issued SFAS No. 159, which provides companies with an option to report selected financial assets and liabilities at fair value. The statement also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. It also requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. The new statement does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in FASB Statements No. 157, “Fair Value Measurements,” and No. 107, “Disclosures about Fair Value of Financial Instrument.” SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157. The Corporation will adopt the provisions of SFAS No. 159 commencing in January 2008. Management is evaluating the impact that this accounting standard may have on its consolidated financial statements.

FSP FIN No. 39-1 “Amendment of FASB Interpretation No. 39”

In April 2007, the FASB issued Staff Position FSP FIN 39-1 which defines “right of setoff” and specifies what conditions must be met for a derivative contract to qualify for this right of setoff. It also addresses the applicability of a right of setoff to derivative instruments and clarifies the circumstances in which it is appropriate to offset amounts recognized for those instruments in the statement of financial position. In addition, this FSP permits the offsetting of fair value amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting arrangement and fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from the same master netting arrangement as the derivative instruments. This interpretation is effective for fiscal years beginning after November 15, 2007, with early application permitted. The adoption of FSP FIN 39-1 is not expected to have a material impact on the Corporation’s consolidated financial statements.

FSP FIN No. 46(R) – 7 “Application of FASB Interpretation No. 46(R) to Investment Companies”

In May 2007, the FASB issued Staff Position FSP FIN No. 46 (R), which amends the scope of the exception to FIN 46 (R) to indicate that investments accounted for at fair value in accordance with the specialized accounting guidance in the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies, are not subject to consolidation under FIN No. 46 (R). This interpretation is effective for fiscal years beginning on or after December 15, 2007. Management is evaluating the impact, if any, that the adoption of this interpretation may have on its consolidated financial statements.

SOP 07-01“Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies”

The Statement of Position SOP 07-01 issued in June 2007 provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide for Investment Companies (“AICPA Guide”). Additionally, it provides guidance as to whether a parent company or an equity method investor can apply the specialized industry accounting principles of the AICPA Guide. SOP 07-01 is effective for fiscal years beginning on or after December 15, 2007, with early application encouraged. Management is evaluating the impact, if any, that the adoption of SOP 07-1 may have on its consolidated financial statements.

Note 3 – Restrictions on Cash and Due from Banks and Highly Liquid 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 with a correspondent bank. Those required average reserve balances were approximately $603 million at June 30, 2007 (December 31, 2006 — $621 million; June 30, 2006 — $583 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, at June 30, 2007, December 31, 2006, and June 30, 2006, the Corporation had securities with a market value of $445 thousand segregated in a special reserve bank account for the benefit of brokerage customers of its broker-dealer subsidiary. These securities are classified in the consolidated statement of condition within the other trading securities category.

As required by the Puerto Rico International Banking Center Law, at June 30, 2007, December 31, 2006, and June 30, 2006, the Corporation maintained separately for its two international banking entities (“IBEs”), $600 thousand in time deposits, equally split for the two IBEs, which were considered restricted assets.

As part of a line of credit facility with a financial institution, at June 30, 2007, December 31, 2006, and June 30, 2006, the Corporation maintained restricted cash of $1.9 million as collateral. 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.

Note 4 – Pledged Assets

Certain securities and loans were pledged to secure public and trust deposits, assets sold under agreements to repurchase, borrowings and other available credit facilities. 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)		2007				2006				2006
Investment securities available-for-sale		$	3,264,299			$	2,645,272			$	2,799,279
Investment securities held-to-maturity			501				658				808
Loans held-for-sale			—				332,058				56,898
Loans held-in-portfolio			9,062,900				10,260,198				11,440,294
		$	12,327,700			$	13,238,186			$	14,297,279

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 5 – 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 June 30, 2007, December 31, 2006 and June 30, 2006 were as follows:

		AS OF JUNE 30, 2007
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
U.S. Treasury securities		$	500,193				—			$	37,616			$	462,577
Obligations of U.S. Government sponsored entities			6,016,206				—				174,448				5,841,758
Obligations of Puerto Rico, States and political subdivisions			117,372			$	170				3,754				113,788
Collateralized mortgage obligations			1,544,362				6,122				18,435				1,532,049
Mortgage-backed securities			991,440				1,529				32,771				960,198
Equity securities			55,250				1,173				11,074				45,349
Others			17,940				809				—				18,749
		$	9,242,763			$	9,803			$	278,098			$	8,974,468

		AS OF DECEMBER 31, 2006
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
U.S. Treasury securities		$	504,653				—			$	29,818			$	474,835
Obligations of U.S. Government sponsored entities			6,603,252			$	57				147,524				6,455,785
Obligations of Puerto Rico, States and political subdivisions			118,214				265				3,537				114,942
Collateralized mortgage obligations			1,657,613				4,904				17,191				1,645,326
Mortgage-backed securities			1,061,850				1,458				26,492				1,036,816
Equity securities			70,954				6,692				3,901				73,745
Others			46,326				3,087				—				49,413
		$	10,062,862			$	16,463			$	228,463			$	9,850,862

		AS OF JUNE 30, 2006
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
U.S. Treasury securities		$	524,093				—			$	46,330			$	477,763
Obligations of U.S. Government sponsored entities			7,440,298				—				288,943				7,151,355
Obligations of Puerto Rico, States and political subdivisions			120,410			$	70				5,801				114,679
Collateralized mortgage obligations			1,790,277				6,762				28,898				1,768,141
Mortgage-backed securities			1,285,786				2,464				50,331				1,237,919
Equity securities			68,294				2,748				925				70,117
Others			69,327				698				701				69,324
		$	11,298,485			$	12,742			$	421,929			$	10,889,298

The table below shows the Corporation’s 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, at June 30, 2007, December 31, 2006 and June 30, 2006.

		AS OF JUNE 30, 2007
		Less than 12 Months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	475,542			$	13,283			$	462,259
Obligations of Puerto Rico, States and political subdivisions			21,652				473				21,179
Collateralized mortgage obligations			189,570				2,077				187,493
Mortgage-backed securities			39,132				873				38,259
Equity securities			53,683				11,047				42,636
		$	779,579			$	27,753			$	751,826

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	500,193			$	37,616			$	462,577
Obligations of U.S. Government sponsored entities			5,540,664				161,165				5,379,499
Obligations of Puerto Rico, States and political subdivisions			69,136				3,281				65,855
Collateralized mortgage obligations			647,337				16,358				630,979
Mortgage-backed securities			869,343				31,898				837,445
Equity securities			310				27				283
		$	7,626,983			$	250,345			$	7,376,638

		Total
		Amortized				Gross Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	500,193			$	37,616			$	462,577
Obligations of U.S. Government sponsored entities			6,016,206				174,448				5,841,758
Obligations of Puerto Rico, States and political subdivisions			90,788				3,754				87,034
Collateralized mortgage obligations			836,907				18,435				818,472
Mortgage-backed securities			908,475				32,771				875,704
Equity securities			53,993				11,074				42,919
		$	8,406,562			$	278,098			$	8,128,464

		AS OF DECEMBER 31, 2006
		Less than 12 Months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	19,421			$	134			$	19,287
Obligations of U.S. Government sponsored entities			425,076				4,345				420,731
Obligations of Puerto Rico, States and political subdivisions			21,426				259				21,167
Collateralized mortgage obligations			501,705				4,299				497,406
Mortgage-backed securities			28,958				484				28,474
Equity securities			11,180				3,699				7,481
		$	1,007,766			$	13,220			$	994,546

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	485,232			$	29,684			$	455,548
Obligations of U.S. Government sponsored entities			6,097,274				143,179				5,954,095
Obligations of Puerto Rico, States and political subdivisions			55,238				3,278				51,960
Collateralized mortgage obligations			564,217				12,892				551,325
Mortgage-backed securities			954,293				26,008				928,285
Equity securities			300				202				98
		$	8,156,554			$	215,243			$	7,941,311

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	504,653			$	29,818			$	474,835
Obligations of U.S. Government sponsored entities			6,522,350				147,524				6,374,826
Obligations of Puerto Rico, States and political subdivisions			76,664				3,537				73,127
Collateralized mortgage obligations			1,065,922				17,191				1,048,731
Mortgage-backed securities			983,251				26,492				956,759
Equity securities			11,480				3,901				7,579
		$	9,164,320			$	228,463			$	8,935,857

		AS OF JUNE 30, 2006
		Less than 12 Months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	19,418			$	342			$	19,076
Obligations of U.S. Government sponsored entities			3,519,349				157,756				3,361,593
Obligations of Puerto Rico, States and political subdivisions			44,386				1,024				43,362
Collateralized mortgage obligations			732,872				16,340				716,532
Mortgage-backed securities			205,765				29,321				176,444
Equity securities			35,716				925				34,791
Others			14,261				701				13,560
		$	4,571,767			$	206,409			$	4,365,358

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	504,675			$	45,988			$	458,687
Obligations of U.S. Government sponsored entities			3,920,949				131,187				3,789,762
Obligations of Puerto Rico, States and political subdivisions			55,232				4,777				50,455
Collateralized mortgage obligations			313,094				12,558				300,536
Mortgage-backed securities			957,443				21,010				936,433
		$	5,751,393			$	215,520			$	5,535,873

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	524,093			$	46,330			$	477,763
Obligations of U.S. Government sponsored entities			7,440,298				288,943				7,151,355
Obligations of Puerto Rico, States and political subdivisions			99,618				5,801				93,817
Collateralized mortgage obligations			1,045,966				28,898				1,017,068
Mortgage-backed securities			1,163,208				50,331				1,112,877
Equity securities			35,716				925				34,791
Others			14,261				701				13,560
		$	10,323,160			$	421,929			$	9,901,231

At June 30, 2007, “Obligations of Puerto Rico, States and political subdivisions” include approximately $59 million in Commonwealth of Puerto Rico Appropriation Bonds (“Appropriation Bonds”) the rating on which was downgraded in May 2006 by Moody’s Investors Service (“Moody’s”) to Ba1, one notch below investment grade. Standard & Poor’s (“S&P”), another nationally-recognized credit rating agency, rated the Appropriation Bonds BBB-, which is still considered investment grade. As of June 30, 2007, these Appropriation Bonds represented approximately $2.9 million in unrealized losses in the Corporation’s available-for-sale investment securities portfolio. 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 being 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.

The unrealized loss positions of available-for-sale securities at June 30, 2007, except for the obligations of the Puerto Rico government described above, are primarily associated with U.S. government sponsored entities and Treasury obligations, and to a lesser extent, U.S. Agency and government sponsored-issued mortgage-backed securities and collateralized mortgage obligations. The vast majority of these securities are rated the equivalent of AAA by the major rating agencies. The investment portfolio is structured primarily with highly-liquid securities, which possess a large and efficient secondary market. Valuations are performed at least on a quarterly basis using third party providers and dealer quotes. Management believes that the unrealized losses in these available-for-sale securities at June 30, 2007 are temporary and are substantially related to market interest rate fluctuations and not to the deterioration in the creditworthiness of the issuers. Also, 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.

During the six months ended June 30, 2007, the Corporation recognized through earnings approximately $30.7 million in losses in residual interests classified as available-for-sale and $7.6 million in losses in equity securities that management considered to be other-than-temporarily impaired. The equity securities that generated this other-than-temporary impairment in the first quarter of 2007 were sold in the second quarter of 2007.

The following table states the name 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), when 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.

		June 30, 2007								December 31, 2006								June 30, 2006
(In thousands)		Amortized Cost				Market Value				Amortized Cost				Market Value				Amortized Cost				Market Value
FNMA		$	1,261,541			$	1,238,499			$	1,539,651			$	1,517,525			$	1,797,323			$	1,758,590
FHLB			6,069,496				5,897,748				6,230,841				6,086,885				7,354,827				7,073,831
Freddie Mac			1,011,125				996,046				1,149,185				1,134,853				1,243,039				1,212,853

Note 6 – 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 June 30, 2007, December 31, 2006 and June 30, 2006 were as follows:

		AS OF JUNE 30, 2007
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
Obligations of U.S. Government sponsored entities		$	340,323			$	13			$	36			$	340,300
Obligations of Puerto Rico, States and political subdivisions			72,406				441				374				72,473
Collateralized mortgage obligations			354				—				19				335
Others			16,396				39				7				16,428
		$	429,479			$	493			$	436			$	429,536

		AS OF DECEMBER 31, 2006
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
Obligations of U.S. Government sponsored entities		$	3,017				—				—			$	3,017
Obligations of Puerto Rico, States and political subdivisions			72,152			$	1,559			$	161				73,550
Collateralized mortgage obligations			381				—				21				360
Others			15,790				60				13				15,837
		$	91,340			$	1,619			$	195			$	92,764

		AS OF JUNE 30, 2006
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
Obligations of U.S. Government sponsored entities		$	314,408				—			$	64			$	314,344
Obligations of Puerto Rico, States and political subdivisions			73,043			$	367				527				72,883
Collateralized mortgage obligations			433				—				24				409
Others			32,514				50				28				32,536
		$	420,398			$	417			$	643			$	420,172

The following table shows the Corporation’s gross unrealized losses and fair 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, at June 30, 2007, December 31, 2006 and June 30, 2006:

		AS OF JUNE 30, 2007
		Less than 12 months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	240,336			$	36			$	240,300
Obligations of Puerto Rico, States and political subdivisions			20,995				223				20,772
Others			250				2				248
		$	261,581			$	261			$	261,320

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	24,545			$	151			$	24,394
Collateralized mortgage obligations			354				19				335
Others			1,250				5				1,245
		$	26,149			$	175			$	25,974

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	240,336			$	36			$	240,300
Obligations of Puerto Rico, States and political subdivisions			45,540				374				45,166
Collateralized mortgage obligations			354				19				335
Others			1,500				7				1,493
		$	287,730			$	436			$	287,294

		AS OF DECEMBER 31, 2006
		12 months or more and Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	26,623			$	161			$	26,462
Collateralized mortgage obligations			381				21				360
Others			1,250				13				1,237
		$	28,254			$	195			$	28,059

		AS OF JUNE 30, 2006
		Less than 12 months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	307,460			$	61			$	307,399
Obligations of Puerto Rico, States and political subdivisions			25,830				328				25,502
Others			7,636				28				7,608
		$	340,926			$	417			$	340,509

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	6,948			$	3			$	6,945
Obligations of Puerto Rico, States and political subdivisions			25,993				199				25,794
Collateralized mortgage obligations			433				24				409
Others			250				—				250
		$	33,624			$	226			$	33,398

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	314,408			$	64			$	314,344
Obligations of Puerto Rico, States and political subdivisions			51,823				527				51,296
Collateralized mortgage obligations			433				24				409
Others			7,886				28				7,858
		$	374,550			$	643			$	373,907