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   September 30, 2007

Commission File Number: 000-13818

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 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 280,286,329 shares outstanding as of October 31, 2007.

 

 

POPULAR, INC.
INDEX

		Page
Part I – Financial Information
Item 1. Financial Statements
Unaudited Consolidated Statements of Condition as of September 30, 2007, December 31, 2006 and September 30, 2006			4
Unaudited Consolidated Statements of Income for the quarters and nine months ended September 30, 2007 and 2006			5
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2007 and 2006			6
Unaudited Consolidated Statements of Comprehensive Income for the quarters and nine months ended September 30, 2007 and 2006			7
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 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			61
Item 3. Quantitative and Qualitative Disclosures about Market Risk			108
Item 4. Controls and Procedures			113
Part II – Other Information
Item 1. Legal Proceedings			113
Item 1A. Risk Factors			113
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			116
Item 6. Exhibits			117
Signatures			118
EX-3.1 BYLAWS
EX-12.1 COMPUTATION OF RATIO OF EARNINGS
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 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.

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.

		September 30,				December 31,				September 30,
(In thousands, except share information)		2007				2006				2006
ASSETS
Cash and due from banks		$	709,056			$	950,158			$	736,669
Money market investments:
Federal funds sold			430,000				84,350				323,980
Securities purchased under agreements to resell			180,394				202,181				211,439
Time deposits with other banks			24,703				15,177				9,830
			635,097				301,708				545,249
Investment securities available-for-sale, at fair value:
Pledged securities with creditors’ right to repledge			4,742,127				3,743,924				4,463,023
Other investment securities available-for-sale			4,136,368				6,106,938				5,695,302
Investment securities held-to-maturity, at amortized cost (market value at September 30, 2007 - $280,072; December 31, 2006 - $92,764; September 30, 2006 – $358,849)			279,267				91,340				357,430
Other investment securities, at lower of cost or realizable value (realizable value at September 30, 2007 - $179,598; December 31, 2006 - $412,593; September 30, 2006 - $407,849)			179,376				297,394				297,472
Trading account securities, at fair value:
Pledged securities with creditors’ right to repledge			569,357				193,619				211,942
Other trading securities			92,801				188,706				239,720
Loans held-for-sale, at lower of cost or market value			423,303				719,922				447,314
Loans held-in-portfolio:
Loans held-in-portfolio pledged with creditors’ right to repledge			160,923				306,320				51,260
Other loans held-in-portfolio			33,067,301				32,019,044				31,563,499
Less – Unearned income			330,723				308,347				305,114
Allowance for loan losses			600,273				522,232				487,339
			32,297,228				31,494,785				30,822,306
Premises and equipment, net			580,768				595,140				588,282
Other real estate			133,508				84,816				83,636
Accrued income receivable			290,916				248,240				288,342
Other assets			1,441,681				1,611,890				1,374,900
Goodwill			668,807				667,853				678,666
Other intangible assets			100,471				107,554				104,497
		$	47,280,131			$	47,403,987			$	46,934,750
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing		$	3,975,383			$	4,222,133			$	3,822,584
Interest bearing			22,626,132				20,216,198				19,314,861
			26,601,515				24,438,331				23,137,445
Federal funds purchased and assets sold under agreements to repurchase			6,287,303				5,762,445				7,045,466
Other short-term borrowings			1,414,897				4,034,125				2,709,511
Notes payable			8,314,791				8,737,246				9,681,897
Other liabilities			857,795				811,424				724,296
			43,476,301				43,783,571				43,298,615
Commitments and contingencies (See Note 12)
Minority interest in consolidated subsidiaries			109				110				111
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; 292,993,474 shares issued (December 31, 2006 – 292,190,924; September 30, 2006 – 291,977,949) and 279,597,529 outstanding (December 31, 2006 – 278,741,547; September 30, 2006 – 278,553,152)			1,757,961				1,753,146				1,751,868
Surplus			536,129				526,856				494,398
Retained earnings			1,689,384				1,594,144				1,611,103
Accumulated other comprehensive loss, net of tax of ($56,551) (December 31, 2006 – ($84,143); September 30, 2006 – ($61,834))			(161,061	)			(233,728	)			(201,687	)
Treasury stock – at cost, 13,395,945 shares (December 31, 2006 – 13,449,377; September 30, 2006 – 13,424,797)			(205,567	)			(206,987	)			(206,533	)
			3,803,721				3,620,306				3,636,024
		$	47,280,131			$	47,403,987			$	46,934,750

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

POPULAR, INC.

		Quarter ended								Nine months ended
		September 30,								September 30,
(In thousands, except per share information)		2007				2006				2007				2006
INTEREST INCOME:
Loans		$	662,973			$	637,246			$	1,963,572			$	1,842,873
Money market investments			6,807				7,038				17,168				22,926
Investment securities			109,793				129,323				338,347				396,130
Trading account securities			10,653				7,724				29,645				23,649
			790,226				781,331				2,348,732				2,285,578
INTEREST EXPENSE:
Deposits			196,825				151,008				552,657				411,380
Short-term borrowings			113,832				141,727				358,107				393,604
Long-term debt			119,453				146,558				351,453				413,013
			430,110				439,293				1,262,217				1,217,997
Net interest income			360,116				342,038				1,086,515				1,067,581
Provision for loan losses			148,093				63,445				359,606				179,488
Net interest income after provision for loan losses			212,023				278,593				726,909				888,093
Service charges on deposit accounts			49,704				47,484				146,567				142,277
Other service fees (See Note 13)			93,364				79,637				270,803				240,000
Net (loss) gain on sale and valuation adjustments of investment securities			(3,089	)			7,123				79,857				5,039
Trading account (loss) profit			(2,867	)			10,019				(6,654	)			23,324
Gain on sale of loans and valuation adjustments on loans held-for-sale			5,991				20,113				37,719				96,428
Other operating income			23,902				26,973				94,264				97,100
			379,028				469,942				1,349,465				1,492,261
OPERATING EXPENSES:
Personnel costs:
Salaries			120,810				130,613				384,239				392,845
Pension, profit sharing and other benefits			31,430				34,083				110,664				116,386
			152,240				164,696				494,903				509,231
Net occupancy expenses			29,436				31,573				87,951				88,840
Equipment expenses			30,688				34,346				95,329				101,516
Other taxes			13,227				11,770				36,909				32,940
Professional fees			37,103				29,618				111,732				105,184
Communications			16,846				17,343				50,881				51,936
Business promotion			28,560				33,855				87,301				98,669
Printing and supplies			4,131				4,408				12,956				13,331
Other operating expenses			32,508				28,706				97,362				85,609
Impact of change in fiscal period of certain subsidiaries			—				—				—				9,741
Amortization of intangibles			2,234				3,608				8,030				9,160
			346,973				359,923				1,083,354				1,106,157
Income before income tax			32,055				110,019				266,111				386,104
Income tax			(3,948	)			27,859				36,511				88,060
NET INCOME		$	36,003			$	82,160			$	229,600			$	298,044
NET INCOME APPLICABLE TO COMMON STOCK		$	33,024			$	79,181			$	220,665			$	289,109
BASIC EARNINGS PER COMMON SHARE (“EPS”)		$	0.12			$	0.28			$	0.79			$	1.04
DILUTED EPS		$	0.12			$	0.28			$	0.79			$	1.04
DIVIDENDS DECLARED PER COMMON SHARE		$	0.16			$	0.16			$	0.48			$	0.48

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

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

		Nine months ended
		September 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			4,755				3,919
Issuance of common stock			—				11,312
Stock options exercised			60				194
Balance at end of period			1,757,961				1,751,868
Surplus:
Balance at beginning of year			526,856				452,398
Common stock issued under the Dividend Reinvestment Plan			7,835				8,634
Issuance of common stock			—				28,281
Issuance cost of common stock			—				1,462
Stock options expense on unexercised options, net of forfeitures			1,289				2,160
Stock options exercised			149				463
Transfer from retained earnings			—				1,000
Balance at end of period			536,129				494,398
Retained earnings:
Balance at beginning of year			1,594,144				1,456,612
Net income			229,600				298,044
Cumulative effect of accounting change (adoption of SFAS No. 156 and EITF 06-5)			8,667				—
Cash dividends declared on common stock			(134,092	)			(133,618	)
Cash dividends declared on preferred stock			(8,935	)			(8,935	)
Transfer to surplus			—				(1,000	)
Balance at end of period			1,689,384				1,611,103
Accumulated other comprehensive loss:
Balance at beginning of year			(233,728	)			(176,000	)
Other comprehensive income (loss), net of tax			72,667				(25,687	)
Balance at end of period			(161,061	)			(201,687	)
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		$	3,803,721			$	3,636,024

Disclosure of changes in number of shares:

		September 30,				December 31,				September 30,
		2007				2006				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			792,486				858,905				653,142
Issuance of common stock			—				1,885,380				1,885,380
Stock options exercised			10,064				39,449				32,237
Balance at end of period			292,993,474				292,190,924				291,977,949
Treasury stock			(13,395,945	)			(13,449,377	)			(13,424,797	)
Common Stock – outstanding			279,597,529				278,741,547				278,553,152

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

POPULAR, INC.

		Quarter ended								Nine months ended
		September 30,								September 30,
(In thousands)		2007				2006				2007				2006
Net income		$	36,003			$	82,160			$	229,600			$	298,044
Other comprehensive income (loss), before tax:
Foreign currency translation adjustment			(966	)			(150	)			2,014				(467	)
Adjustment of pension and postretirement benefit plans			—				—				(519	)			—
Unrealized gains (losses) on securities available-for-sale arising during the period			156,462				192,674				100,493				(23,150	)
Reclassification adjustment for losses (gains) included in net income			3				(7,123	)			(80	)			(5,039	)
Unrealized net losses on cash flows hedges			(2,065	)			(4,992	)			(1,117	)			(1,082	)
Reclassification adjustment for (gains) losses included in net income			(164	)			1,126				(289	)			509
Cumulative effect of accounting change			—				—				(243	)			—
			153,270				181,535				100,259				(29,229	)
Income tax (expense) benefit			(39,514	)			(48,433	)			(27,592	)			3,542
Total other comprehensive income (loss), net of tax			113,756				133,102				72,667				(25,687	)
Comprehensive income		$	149,759			$	215,262			$	302,267			$	272,357

Tax Effects Allocated to Each Component of Other Comprehensive Income:

		Quarter ended								Nine months ended
		September 30,								September 30,
(In thousands)		2007				2006				2007				2006
Underfunding of pension and postretirement benefit plans			—				—			$	180				—
Unrealized gains (losses) on securities available-for-sale arising during the period			($40,302	)			($49,801	)			(28,280	)		$	3,348
Reclassification adjustment for losses (gains) included in net income			(1	)			3				13				(3	)
Unrealized net losses on cash flows hedges			723				1,807				371				425
Reclassification adjustment for (gains) losses included in net income			66				(442	)			124				(228	)
Income tax (expense) benefit			($39,514	)			($48,433	)			($27,592	)		$	3,542

Disclosure of accumulated other comprehensive loss:

		September 30,				December 31,				September 30,
(In thousands)		2007				2006				2006
Foreign currency translation adjustment			($34,687	)			($36,701	)			($36,782	)
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			(111,830	)			(212,243	)			(223,879	)
Tax effect			28,879				57,146				60,642
Net of tax amount			(82,951	)			(155,097	)			(163,237	)
Unrealized (losses) gains on cash flows hedges			(1,316	)			90				(749	)
Tax effect			458				(37	)			274
Net of tax amount			(858	)			53				(475	)
Cumulative effect of accounting change, net of tax			—				243				243
Accumulated other comprehensive loss, net of tax			($161,061	)			($233,728	)			($201,687	)

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

POPULAR, INC.

		Nine months ended September 30,
(In thousands)		2007				2006
Cash flows from operating activities:
Net income		$	229,600			$	298,044
Less: Impact of change in fiscal period of certain subsidiaries, net of tax			—				(6,129	)
Net income before change in fiscal period			229,600				304,173
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment			59,558				63,805
Provision for loan losses			359,606				179,488
Amortization of intangibles			8,030				9,160
Amortization and fair value adjustments of servicing assets			34,941				43,309
Net gain on sale and valuation adjustments of investment securities			(79,857	)			(5,039	)
Net gain on disposition of premises and equipment			(5,293	)			(7,177	)
Net gain on sale of loans and valuation adjustments on loans held-for-sale			(37,719	)			(96,428	)
Net amortization of premiums and accretion of discounts on investments			15,801				19,060
Net amortization of premiums and deferred loan origination fees and costs			70,645				99,065
Earnings from investments under the equity method			(19,514	)			(9,081	)
Stock options expense			1,339				2,308
Deferred income taxes			(94,581	)			(19,630	)
Net disbursements on loans held-for-sale			(4,007,301	)			(4,963,647	)
Acquisitions of loans held-for-sale			(474,269	)			(1,188,844	)
Proceeds from sale of loans held-for-sale			3,475,817				5,559,968
Net decrease in trading securities			1,003,078				1,195,639
Net increase in accrued income receivable			(42,675	)			(44,311	)
Net decrease in other assets			30,507				67,881
Net increase in interest payable			4,586				41,257
Net increase in postretirement benefit obligation			2,407				3,028
Net increase (decrease) in other liabilities			18,645				(88,160	)
Total adjustments			323,751				861,651
Net cash provided by operating activities			553,351				1,165,824
Cash flows from investing activities:
Net (increase) decrease in money market investments			(266,954	)			204,322
Purchases of investment securities:
Available-for-sale			(67,920	)			(243,481	)
Held-to-maturity			(17,026,831	)			(20,847,771	)
Other			(47,786	)			(50,980	)
Proceeds from calls, paydowns, maturities and redemptions of investment securities:
Available-for-sale			1,066,304				1,560,612
Held-to-maturity			16,844,551				20,644,100
Other			17,071				72,611
Proceeds from sale of investment securities available-for-sale			37,352				198,191
Proceeds from sale of other investment securities			246,352				—
Net disbursements on loans			(1,137,982	)			(877,628	)
Proceeds from sale of loans			16,367				759,518
Acquisition of loan portfolios			(22,312	)			(291,330	)
Assets acquired, net of cash			(2,378	)			(2,752	)
Mortgage servicing rights purchased			(25,596	)			(18,723	)
Acquisition of premises and equipment			(69,607	)			(85,415	)
Proceeds from sale of premises and equipment			29,501				39,031
Proceeds from sale of foreclosed assets			113,776				99,928
Net cash (used in) provided by investing activities			(296,092	)			1,160,233
Cash flows from financing activities:
Net increase in deposits			2,150,668				494,091
Net increase (decrease) in federal funds purchased and assets sold under agreements to repurchase			524,858				(1,770,146	)
Net decrease in other short-term borrowings			(2,619,228	)			(97,642	)
Payments of notes payable			(1,245,332	)			(1,822,303	)
Proceeds from issuance of notes payable			821,087				777,171
Dividends paid			(142,898	)			(140,765	)
Proceeds from issuance of common stock			12,836				51,895
Treasury stock acquired			(352	)			—
Net cash used in financing activities			(498,361	)			(2,507,699	)
Cash effect of change in fiscal period of certain subsidiaries			—				11,914
Net decrease in cash and due from banks			(241,102	)			(169,728	)
Cash and due from banks at beginning of period			950,158				906,397
Cash and due from banks at end of period		$	709,056			$	736,669

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 based in Puerto Rico with 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, 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 New York, California, Illinois, New Jersey, Florida and Texas, while E-LOAN provides online consumer direct lending for obtaining 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, 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 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 was 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 September 30, 2007, December 31, 2006 and September 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.

SUBSEQUENT EVENTS

Sale of BPNA’s Retail Bank Branches in Houston

On October 22, 2007, the Corporation announced the signing of a definitive agreement to sell the six Houston retail bank branches of BPNA to Prosperity Bank. Prosperity Bank has agreed to pay a premium of 10.10% for approximately $140 million in deposits, as well as purchase certain loans and other assets attributable to the branches. Prosperity Bank also agreed to retain all branch-based employees of BPNA’s Houston locations as part of the transaction. BPNA will continue to operate its mortgage business based in Houston as well as its franchise and small business lending activities in Texas. BPNA will also continue to maintain a retail branch in Arlington, Texas. The agreement was approved by the Boards of Directors of both banks and is expected to close during the fourth quarter of 2007. The transaction is subject to certain customary closing conditions, including receipt of regulatory approvals.

E-LOAN Restructuring Plan

On November 5, 2007, the Board of Directors of Popular adopted a Restructuring Plan for its internet financial services subsidiary E-LOAN (the “E-LOAN’s Restructuring Plan”).

Considering the losses in the operation of E-LOAN, market conditions and other factors, the Board of Directors approved a substantial reduction of marketing and personnel costs at E-LOAN. This change will include concentrating marketing investment toward the internet and the origination of first mortgage loans that are actually being sold to Government Sponsored Entities (GSEs). The E-LOAN Restructuring Plan continues to promote the expansion of the Internet deposit gathering initiative with BPNA.

The cost-control plan initiative at the E-LOAN subsidiary will result in the elimination of approximately 513 positions out of a total of 771 and will be substantially accomplished in the fourth quarter of 2007. As a result of the E-LOAN Restructuring Plan, operating expenses are expected to be reduced by approximately $79 million for 2008. E-LOAN’s estimated net losses for the year ended December 31, 2008 are expected to decline by $28 million, resulting principally from the reduction in operating expenses, partially offset by the related tax impact and by lower volume of loan originations in certain business channels that are impacted by this plan.

It is expected that this Plan will result in estimated restructuring charges as follows:

(In millions)		Fourth Quarter 2007
Severance		$	4.4
Stay and retention bonuses			0.2
Lease terminations			4.2
Total restructuring charges			8.8
Impairment of long-lived assets			12.3
Impairment charges on definite-life intangible assets			3.1
Total estimated charges		$	24.2

These estimates are preliminary as management continues to work on the E-LOAN Restructuring Plan. Further, the Corporation is currently evaluating whether this change in E-LOAN’s business model could result in impairment in the value of its recorded goodwill and trademark. As of September 30, 2007, E-LOAN’s accounting records reflect $164 million in goodwill and $64 million in trademark. The impairment valuation analysis is to be completed in the fourth quarter of 2007. Any impairment charge will not impact the regulatory capital ratios of the Corporation or its liquidity since it would be a non-cash transaction.

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 nine months ended September 30, 2007.

SFAS No. 156 “Accounting for Servicing of Financial Assets — an amendment of FASB Statement 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 for at the lower of cost or market method. The initial impact of adoption of the fair value measurement for MSRs during the first quarter of 2007 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 No. 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 adopted the EITF 06-03 guidance in the first quarter of 2007. 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 their 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 on 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 election to measure a financial asset or liability at fair value can be made on an instrument-by-instrument basis and is irrevocable. The difference between the carrying amount and the fair value at the election date is recorded as a transition adjustment to opening retained earnings. Subsequent changes in fair value are recognized in earnings. 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. 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 and disclosures.

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

In April 2007, the FASB issued Staff Position FSP FIN No. 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 No. 39-1 is not expected to have a material impact on the Corporation’s consolidated financial statements and disclosures.

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 American Institute of Certified Public Accountants (“AICPA”) Audit and Accounting Guide for Investment Companies (“the 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. On October 17, 2007, the FASB agreed to propose an indefinite delay of the effective dates of SOP 07-01 and, for entities that meet the definition of an “investment company” in SOP 07-01, of FSP FIN 46(R)-7, “Application of FASB Interpretation No. 46(R) to Investment Companies”. The proposed delays, which will be exposed for comment for 30 days, will enable the FASB to add a project to its technical agenda to address the implementation issues that have arisen and possibly revise SOP 07-01. Until that occurs, affected entities should continue to follow existing guidance. Nevertheless, management is evaluating the impact, if any, that the adoption of SOP 07-01 may have on its consolidated financial statements and disclosures.

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) – 7 , which amends the scope of the exception to FIN No. 46 (R) to indicate that investments accounted for at fair value in accordance with the specialized accounting guidance in the AICPA Guide, 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 and disclosures. Also, management is considering the guidance of SOP 07-01 which was previously described that considers an indefinite delay on its implementation until further notification by the FASB.

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 $588 million at September 30, 2007 (December 31, 2006 — $621 million; September 30, 2006 — $591 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 September 30, 2007, the Corporation had securities with a market value of $397 thousand (December 31, 2006 - $445 thousand; September 30, 2006 — $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 September 30, 2007, December 31, 2006, and September 30, 2006, the Corporation maintained separately for its two international banking entities (“IBEs”), $600 thousand 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, at September 30, 2007, the Corporation maintained restricted cash of $1.9 million as collateral (December 31, 2006 — $1.9 million; September 30, 2006 — $1.9 million). 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:

		September 30,				December 31,				September 30,
(In thousands)		2007				2006				2006
Investment securities available-for-sale		$	3,222,644			$	2,645,272			$	2,882,589
Investment securities held-to-maturity			340				658				659
Loans held-for-sale			41,266				332,058				20,838
Loans held-in-portfolio			11,482,585				10,260,198				10,642,884
		$	14,746,835			$	13,238,186			$	13,546,970

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 September 30, 2007, December 31, 2006 and September 30, 2006 were as follows:

		AS OF SEPTEMBER 30, 2007
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
U.S. Treasury securities		$	497,893			$	41			$	22,114			$	475,820
Obligations of U.S. Government sponsored entities			5,871,339				2,628				55,613				5,818,354
Obligations of Puerto Rico, States and political subdivisions			109,289				420				2,871				106,838
Collateralized mortgage obligations			1,479,951				3,216				13,798				1,469,369
Mortgage-backed securities			969,023				3,190				22,738				949,475
Equity securities			46,100				1,780				6,598				41,282
Others			16,730				627				—				17,357
		$	8,990,325			$	11,902			$	123,732			$	8,878,495

		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 SEPTEMBER 30, 2006
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
U.S. Treasury securities		$	521,885				—			$	28,418			$	493,467
Obligations of U.S. Government sponsored entities			6,776,956			$	178				154,923				6,622,211
Obligations of Puerto Rico, States and political subdivisions			119,999				308				3,927				116,380
Collateralized mortgage obligations			1,725,068				5,031				17,198				1,712,901
Mortgage-backed securities			1,099,321				1,412				29,535				1,071,198
Equity securities			70,987				4,938				3,109				72,816
Others			67,745				2,289				682				69,352
		$	10,381,961			$	14,156			$	237,792			$	10,158,325

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 September 30, 2007, December 31, 2006 and September 30, 2006.

		AS OF SEPTEMBER 30, 2007
		Less than 12 Months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	106,914			$	3,960			$	102,954
Obligations of Puerto Rico, States and political subdivisions			22,680				411				22,269
Collateralized mortgage obligations			283,814				1,869				281,945
Mortgage-backed securities			22,328				399				21,929
Equity securities			22,638				6,572				16,066
		$	458,374			$	13,211			$	445,163

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	478,436			$	22,114			$	456,322
Obligations of U.S. Government sponsored entities			5,212,523				51,653				5,160,870
Obligations of Puerto Rico, States and political subdivisions			50,235				2,460				47,775
Collateralized mortgage obligations			576,852				11,929				564,923
Mortgage-backed securities			818,782				22,339				796,443
Equity securities			300				26				274
		$	7,137,128			$	110,521			$	7,026,607

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	478,436			$	22,114			$	456,322
Obligations of U.S. Government sponsored entities			5,319,437				55,613				5,263,824
Obligations of Puerto Rico, States and political subdivisions			72,915				2,871				70,044
Collateralized mortgage obligations			860,666				13,798				846,868
Mortgage-backed securities			841,110				22,738				818,372
Equity securities			22,938				6,598				16,340
		$	7,595,502			$	123,732			$	7,471,770

		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 SEPTEMBER 30, 2006
		Less than 12 Months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	19,410			$	91			$	19,319
Obligations of U.S. Government sponsored entities			443,593				4,348				439,245
Obligations of Puerto Rico, States and political subdivisions			26,398				375				26,023
Collateralized mortgage obligations			507,121				4,037				503,084
Mortgage-backed securities			165,200				2,363				162,837
Equity securities			46,811				2,811				44,000
Others			10,360				682				9,678
		$	1,218,893			$	14,707			$	1,204,186

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	502,475			$	28,327			$	474,148
Obligations of U.S. Government sponsored entities			6,254,447				150,575				6,103,872
Obligations of Puerto Rico, States and political subdivisions			53,305				3,552				49,753
Collateralized mortgage obligations			576,660				13,161				563,499
Mortgage-backed securities			858,717				27,172				831,545
Equity securities			300				298				2
		$	8,245,904			$	223,085			$	8,022,819

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
U.S. Treasury securities		$	521,885			$	28,418			$	493,467
Obligations of U.S. Government sponsored entities			6,698,040				154,923				6,543,117
Obligations of Puerto Rico, States and political subdivisions			79,703				3,927				75,776
Collateralized mortgage obligations			1,083,781				17,198				1,066,583
Mortgage-backed securities			1,023,917				29,535				994,382
Equity securities			47,111				3,109				44,002
Others			10,360				682				9,678
		$	9,464,797			$	237,792			$	9,227,005

At September 30, 2007, “Obligations of Puerto Rico, States and political subdivisions” include approximately $55 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 September 30, 2007, these Appropriation Bonds represented approximately $2.2 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 September 30, 2007, except for the obligations of the Puerto Rico government described above are primarily associated with U.S. government sponsored entities, and to a lesser extent, U.S. Treasury obligations and 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 September 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 nine months ended September 30, 2007, the Corporation recognized through earnings approximately $32.7 million in losses on residual interests classified as available-for-sale ($2.0 million for the third quarter of 2007) and $7.6 million in losses on 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 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), 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.

		September 30, 2007								December 31, 2006								September 30, 2006
(In thousands)		Amortized Cost				Market Value				Amortized Cost				Market Value				Amortized Cost				Market Value
FNMA		$	1,184,225			$	1,169,857			$	1,539,651			$	1,517,525			$	1,594,165			$	1,570,842
FHLB			5,841,614				5,788,544				6,230,841				6,086,885				6,621,836				6,470,786
Freddie Mac			954,598				944,533				1,149,185				1,134,853				1,195,093				1,178,715

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 September 30, 2007, December 31, 2006 and September 30, 2006 were as follows:

		AS OF SEPTEMBER 30, 2007
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
Obligations of U.S. Government sponsored entities		$	196,190				—			$	71			$	196,119
Obligations of Puerto Rico, States and political subdivisions			71,465			$	1,400				148				72,717
Collateralized mortgage obligations			331				—				18				313
Others			11,281				—				358				10,923
		$	279,267			$	1,400			$	595			$	280,072

		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 SEPTEMBER 30, 2006
						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(In thousands)		Cost				Gains				Losses				Value
Obligations of U.S. Government sponsored entities		$	269,683				—			$	34			$	269,649
Obligations of Puerto Rico, States and political subdivisions			72,154			$	1,605				158				73,601
Collateralized mortgage obligations			409				—				22				387
Others			15,184				43				15				15,212
		$	357,430			$	1,648			$	229			$	358,849

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 September 30, 2007, December 31, 2006 and September 30, 2006:

		AS OF SEPTEMBER 30, 2007
		Less than 12 months
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	196,190			$	71			$	196,119
Obligations of Puerto Rico, States and political subdivisions			1,545				24				1,521
Others			6,225				354				5,871
		$	203,960			$	449			$	203,511

		12 months or more
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of Puerto Rico, States and political subdivisions		$	23,460			$	124			$	23,336
Collateralized mortgage obligations			331				18				313
Others			1,250				4				1,246
		$	25,041			$	146			$	24,895

		Total
						Gross
		Amortized				Unrealized				Market
(In thousands)		Cost				Losses				Value
Obligations of U.S. Government sponsored entities		$	196,190			$	71			$	196,119
Obligations of Puerto Rico, States and political subdivisions			25,005				148				24,857
Collateralized mortgage obligations			331				18				313
Others			7,475				358				7,117
		$	229,001			$	595			$	228,406

		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