The local banking industry underwent a reconfiguration during the first quarter of 2015 after federal and local regulators shutdown Doral following years of struggling with profitability and inadequate capital levels. Popular and FirstBank aptly seized the opportunity of acquiring a large part of Doral’s assets and deposits, further strengthening their leading position in the local market. The reshaped banking industry registered a pre-tax ROE of 8.0% in Q1 2015, showing a strong improvement vis-à-vis 2014 despite operating in a challenging environment. The most recent macroeconomic and fiscal indicators point to continued economic contraction in fiscal years 2015 and 2016 and severe governmental liquidity problems which will continue to pose challenges for local banks. However, extremely strong capital levels will help banks cope with potential future difficulties. Delinquency ratios continued to increase in Q1 2015, trend that must be closely observed. In this issue, given the profound economic and fiscal issues Puerto Rico is facing, an analysis of the exposure of local banks to government-related assets and deposits is presented. Lastly, given the growth in assets of International Banking Entities, a brief analysis of this important sector of the Island’s financial system is also put forth.