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FAIR VALUE (Tables)
 9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Assets and Liabilities Measured at Fair Value on Recurring Basis [Table Text Block]

Assets and liabilities measured at fair value on a recurring basis are summarized below as of September 30, 2021 and December 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of September 30, 2021

 

As of December 31, 2020

 

 

Fair Value Measurements Using

 

Fair Value Measurements Using

(In thousands)

Level 1

 

Level 2

 

Level 3

 

Assets/Liabilities at Fair Value

 

Level 1

 

Level 2

 

Level 3

 

Assets/Liabilities at Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

$

87,887

 

$

-

 

$

-

 

$

87,887

 

$

7,507

 

$

-

 

$

-

 

$

7,507

 

Noncallable U.S. agency debt securities

 

-

 

 

278,795

 

 

-

 

 

278,795

 

 

-

 

 

173,371

 

 

-

 

 

173,371

 

Callable U.S. agencies debt securities and MBS

 

-

 

 

6,311,329

 

 

-

 

 

6,311,329

 

 

-

 

 

4,454,164

 

 

-

 

 

4,454,164

 

Puerto Rico government obligations

 

-

 

 

-

 

 

2,894

 

 

2,894

 

 

-

 

 

-

 

 

2,899

 

 

2,899

 

Private label MBS

 

-

 

 

-

 

 

7,574

 

 

7,574

 

 

-

 

 

-

 

 

8,428

 

 

8,428

 

Other investments

 

-

 

 

-

 

 

1,000

 

 

1,000

 

 

-

 

 

-

 

 

650

 

 

650

Equity securities

 

5,436

 

 

-

 

 

-

 

 

5,436

 

 

1,474

 

 

-

 

 

-

 

 

1,474

Derivatives, included in assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements

 

-

 

 

1,218

 

 

-

 

 

1,218

 

 

-

 

 

1,622

 

 

-

 

 

1,622

 

Purchased interest rate cap agreements

 

-

 

 

3

 

 

-

 

 

3

 

 

-

 

 

1

 

 

-

 

 

1

 

Interest rate lock commitments

 

-

 

 

485

 

 

-

 

 

485

 

 

-

 

 

737

 

 

-

 

 

737

 

Forward contracts

 

-

 

 

44

 

 

-

 

 

44

 

 

-

 

 

102

 

 

-

 

 

102

 

Forward loan sales commitments

 

-

 

 

20

 

 

-

 

 

20

 

 

-

 

 

20

 

 

-

 

 

20

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives, included in liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements

 

-

 

 

1,213

 

 

-

 

 

1,213

 

 

-

 

 

1,639

 

 

-

 

 

1,639

 

Written interest rate cap agreements

 

-

 

 

3

 

 

-

 

 

3

 

 

-

 

 

1

 

 

-

 

 

1

 

Forward contracts

 

-

 

 

11

 

 

-

 

 

11

 

 

-

 

 

280

 

 

-

 

 

280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Fair Value of Assets and Liabilities Measured on Recurring Basis [Table Text Block] The table below presents a reconciliation of the beginning and ending balances of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarters and nine-month periods ended September 30, 2021 and 2020:

 

 

 

Quarter Ended September 30,

 

 

 

2021

 

2020

Level 3 Instruments Only

Securities

 

Securities

(In thousands)

Available For Sale (1)

 

Available For Sale (1)

 

 

 

 

 

 

 

 

Beginning balance

$

11,481

 

$

12,643

 

Total gains (losses) (realized/unrealized):

 

 

 

 

 

 

 

Included in other comprehensive income

 

191

 

 

649

 

 

Included in earnings

 

9

 

 

-

 

Purchases

 

1,000

 

 

-

 

BSPR securities acquired

 

-

 

 

150

 

Principal repayments and amortization

 

(1,213)

 

 

(1,046)

Ending balance

$

11,468

 

$

12,396

 

 

 

 

 

 

 

 

(1)

Amounts mostly related to private label MBS.

 

 

 

 

 

Nine-Month Period Ended September 30,

 

 

 

2021

 

2020

Level 3 Instruments Only

Securities

 

Securities

(In thousands)

Available For Sale(1)

 

Available For Sale(1)

 

 

 

 

 

 

 

 

Beginning balance

$

11,977

 

$

14,590

 

Total gains (losses) (realized/unrealized):

 

 

 

 

 

 

 

Included in other comprehensive income

 

896

 

 

1,615

 

 

Included in earnings

 

136

 

 

(1,631)

 

Purchases

 

1,000

 

 

-

 

BSPR securities acquired

 

-

 

 

150

 

Principal repayments and amortization

 

(2,541)

 

 

(2,328)

Ending balance

$

11,468

 

$

12,396

 

 

 

 

 

 

 

 

(1)

Amounts mostly related to private label MBS.

 
Schedule Of Changes In Unrealized Gains Losses [Table Text Block] The table below summarizes changes in unrealized gains and losses recorded in earnings for the quarters and nine-month periods ended September 30, 2021 and 2020 for Level 3 assets and liabilities that were still held at the end of each period:

 

 

 

Changes in Unrealized Losses

 

 

 

Quarter Ended September 30,

 

Nine-Month Period Ended September 30,

 

 

 

2021

 

2020

 

2021

 

2020

Level 3 Instruments Only

Securities Available for Sale

 

Securities Available for Sale

 

Securities Available for Sale

 

Securities Available for Sale

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Changes in unrealized losses relating to assets

 

 

 

 

 

 

 

 

 

 

 

 

still held at reporting date:

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses - benefit (expense)

$

9

 

$

-

 

$

136

 

$

(1,631)

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Impairment or Valuation Adjustments were Recorded for Assets Recognized at Fair Value [Table Text Block]

As of September 30, 2021, the Corporation recorded losses or valuation adjustments for assets recognized at fair value on a non-recurring basis as shown in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying value as of September 30, 2021

 

Losses recorded for the Quarter Ended September 30, 2021

 

Losses recorded for the Nine-Month Period Ended September 30, 2021

 

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable (1)

$

-

 

$

-

 

$

176,683

 

$

(1,362)

 

$

(3,156)

OREO (2)

 

-

 

 

-

 

 

43,798

 

 

(71)

 

 

(435)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Consists mainly of collateral dependent commercial and construction loans. The Corporation generally measured losses based on the fair value of the collateral. The Corporation derived the fair values from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

The Corporation derived the fair values from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of September 30, 2020, the Corporation recorded losses or valuation adjustments for assets recognized at fair value on a non-recurring basis as shown in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses recorded

 

Losses recorded

 

 

 

 

 

 

 

 

 

 

 

 

for the Quarter Ended

 

 

for the Nine-Month Period Ended

 

 

Carrying value as of September 30, 2020

 

September 30, 2020

 

September 30, 2020

 

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable (1)

$

-

 

$

-

 

$

239,256

 

$

(193)

 

$

(5,906)

OREO (2)

 

-

 

 

-

 

 

89,049

 

 

(999)

 

 

(1,775)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Consists mainly of collateral dependent commercial and construction loans. The Corporation generally measured losses based on the fair value of the collateral. The Corporation derived the fair values from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

The Corporation derived the fair values from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.

 

 
Estimated Fair Value and Carrying Value of Financial Instruments [Table Text Block]

The following tables present the carrying value, estimated fair value and estimated fair value level of the hierarchy of financial instruments as of September 30, 2021 and December 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Carrying Amount in Statement of Financial Condition as of September 30, 2021

 

Fair Value Estimate as of September 30, 2021

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks and money

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

market investments (amortized cost)

$

2,658,173

 

$

2,658,173

 

$

2,658,173

 

$

-

 

$

-

Investment securities available

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for sale (fair value)

 

6,689,479

 

 

6,689,479

 

 

87,887

 

 

6,590,124

 

 

11,468

Investment securities held to maturity (amortized cost)

 

177,805

 

 

 

 

 

 

 

 

 

 

 

 

Less: allowance for credit losses on held to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

held to maturity securities

 

(8,317)

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities held to maturity, net of allowance

$

169,488

 

 

170,438

 

 

-

 

 

-

 

 

170,438

Equity Securities (fair value)

 

37,427

 

 

37,427

 

 

5,436

 

 

31,991

 

 

-

Loans held for sale (lower of cost or market)

 

30,681

 

 

31,607

 

 

-

 

 

31,607

 

 

-

Loans, held for investment (amortized cost)

 

11,140,582

 

 

 

 

 

 

 

 

 

 

 

 

Less: allowance for credit losses for loans and finance leases

 

(288,360)

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for investment, net of allowance

$

10,852,222

 

 

11,021,304

 

 

-

 

 

-

 

 

11,021,304

Derivatives, included in assets (fair value)

 

1,770

 

 

1,770

 

 

-

 

 

1,770

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits (amortized cost)

$

17,984,658

 

$

18,013,613

 

$

-

 

$

18,013,613

 

$

-

Securities sold under agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to repurchase (amortized cost)

 

300,000

 

 

322,555

 

 

-

 

 

322,555

 

 

-

Advances from FHLB (amortized cost)

 

320,000

 

 

324,992

 

 

-

 

 

324,992

 

 

-

Other borrowings (amortized cost)

 

183,762

 

 

149,246

 

 

-

 

 

-

 

 

149,246

Derivatives, included in liabilities (fair value)

 

1,227

 

 

1,227

 

 

-

 

 

1,227

 

 

-

 

 

Total Carrying Amount in Statement of Financial Condition as of December 31, 2020

 

Fair Value Estimate as of December 31, 2020

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks and money

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

market investments (amortized cost)

$

1,493,833

 

$

1,493,833

 

$

1,493,833

 

$

-

 

$

-

Investment securities available

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for sale (fair value)

 

4,647,019

 

 

4,647,019

 

 

7,507

 

 

4,627,535

 

 

11,977

Investment securities held to maturity (amortized cost)

 

189,488

 

 

 

 

 

 

 

 

 

 

 

 

Less: allowance for credit losses on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

held to maturity securities

 

(8,845)

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities held to maturity, net of allowance

 

180,643

 

 

173,806

 

 

-

 

 

-

 

 

173,806

Equity securities (fair value)

 

37,588

 

 

37,588

 

 

1,474

 

 

36,114

 

 

-

Loans held for sale (lower of cost or market)

 

50,289

 

 

52,322

 

 

-

 

 

52,322

 

 

-

Loans, held for investment (amortized cost)

 

11,777,289

 

 

 

 

 

 

 

 

 

 

 

 

Less: allowance for credit losses for loans and finance leases

 

(385,887)

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for investment, net of allowance

$

11,391,402

 

 

11,564,635

 

 

-

 

 

-

 

 

11,564,635

Derivatives, included in assets (fair value)

 

2,842

 

 

2,842

 

 

-

 

 

2,842

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits (amortized cost)

$

15,317,383

 

$

15,363,236

 

$

-

 

$

15,363,236

 

$

-

Securities sold under

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

agreements to repurchase (amortized cost)

 

300,000

 

 

329,493

 

 

-

 

 

329,493

 

 

-

Advances from FHLB (amortized cost)

 

440,000

 

 

446,703

 

 

-

 

 

446,703

 

 

-

Other borrowings (amortized cost)

 

183,762

 

 

151,645

 

 

-

 

 

-

 

 

151,645

Derivatives, included in liabilities (fair value)

 

1,920

 

 

1,920

 

 

-

 

 

1,920

 

 

-
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]

Qualitative information regarding the fair value measurements for Level 3 financial instruments as of September 30, 2021 are as follows:

 

 

 

 

 

September 30, 2021

 

Method

 

Inputs

Loans

Income, Market, Comparable Sales, Discounted Cash Flows

 

External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors

OREO

Income, Market, Comparable Sales, Discounted Cash Flows

 

External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Table Text Block]

The tables below present qualitative information for significant assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of September 30, 2021 and December 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2021

 

 

 

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range

 

Weighted Average

(Dollars in thousands)

 

 

 

Minimum

Maximum

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private label MBS

$

7,574

 

Discounted cash flows

 

Discount rate

 

12.7%

12.7%

 

12.7%

 

 

 

 

 

 

 

Prepayment rate

 

4.8%

24.1%

 

15.8%

 

 

 

 

 

 

 

Projected cumulative loss rate

 

0.2%

18.6%

 

9.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Puerto Rico government obligations

 

2,894

 

Discounted cash flows

 

Discount rate

 

6.7%

6.7%

 

6.7%

 

 

 

 

 

 

 

Projected cumulative loss rate

 

10.7%

10.7%

 

10.7%

 

 

December 31, 2020

 

 

 

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range

 

Weighted Average

(Dollars in thousands)

 

 

 

Minimum

Maximum

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private label MBS

$

8,428

 

Discounted cash flows

 

Discount rate

 

12.2%

12.2%

 

12.2%

 

 

 

 

 

 

 

Prepayment rate

 

1.2%

18.8%

 

12.1%

 

 

 

 

 

 

 

Projected cumulative loss rate

 

2.6%

22.3%

 

10.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Puerto Rico government obligations

 

2,899

 

Discounted cash flows

 

Discount rate

 

7.9%

7.9%

 

7.9%

 

 

 

 

 

 

 

Projected cumulative loss rate

 

12.4%

12.4%

 

12.4%