Income taxes (Tables)

6 Months Ended

Jun. 30, 2011

Components of Deferred Tax Assets and Liabilities

The following table presents the components of the Corporation’s deferred tax assets and liabilities.

(In thousands)	June 30, 2011		December 31, 2010
Deferred tax assets:
Tax credits available for carryforward	$	3,423	$	5,833
Net operating loss and other carryforward available		1,112,849		1,222,717
Postretirement and pension benefits		92,934		131,508
Deferred loan origination fees		6,842		8,322
Allowance for loan losses		554,187		393,289
Deferred gains		12,376		13,056
Accelerated depreciation		6,850		7,108
Intercompany deferred gains		4,822		5,480
Other temporary differences		20,074		26,063
Total gross deferred tax assets	$	1,814,357	$	1,813,376
Deferred tax liabilities:
Differences between the assigned values and the tax bases of assets and liabilities recognized in purchase business combinations		30,447		31,846
Difference in outside basis between financial and tax reporting on sale of a business		11,809		11,120
FDIC-assisted transaction		94,931		64,049
Unrealized net gain on trading and available-for-sale securities		63,192		52,186
Deferred loan origination costs		4,669		6,911
Other temporary differences		3,330		1,392
Total gross deferred tax liabilities		208,378		167,504
Valuation allowance		1,257,619		1,268,589
Net deferred tax asset	$	348,360	$	377,283

Reconciliation of Unrecognized Tax Benefits

The reconciliation of unrecognized tax benefits was as follows:

(In millions)	2011			2010
Balance at January 1	$	26.3		$	41.8
Additions for tax positions - January through March		2.2			0.4
Reduction as a result of settlements - January through March		(4.4	)		(14.3	)
Balance at March 31	$	24.1		$	27.9
Additions for tax positions - April through June		0.8			0.2
Additions for tax positions taken in prior years - April through June		2.1			—
Reduction for tax positions - April through June		—			(1.6	)
Balance at June 30	$	27.0		$	26.5

PUERTO RICO

Differences Between Income Tax Expense (Benefit) Applicable to Income Before Income Taxes and Amount Computed by Applying the Statutory Tax Rate in Puerto Rico

The reasons for the difference between the income tax (benefit) expense applicable to income before taxes and the amount computed by applying the statutory tax rate in Puerto Rico are included in the following tables.

	Quarters ended
	June 30, 2011						June 30, 2010
(In thousands)	Amount			% of pre-tax income			Amount			% of pre-tax income
Computed income tax at statutory rates	$	21,776			30	%	$	(7,065	)		41	%
Net benefit of net tax exempt interest income		(15,206	)		(21	)		(2,331	)		13
Effect of income subject to preferential tax rate		(100	)		—			(693	)		4
Deferred tax asset valuation allowance		3,945			5			28,449			(165	)
Non-deductible expenses		5,400			7			6,984			(40	)
Difference in tax rates due to multiple jurisdictions		(1,866	)		(2	)		2,226			(13	)
Recognition of tax benefits from previous years [1]		(53,615	)		(74	)		—			—
State taxes and others		1,566			2			(333	)		2
Income tax (benefit) expense	$	(38,100	)		(53	)%	$	27,237			(158	)%

[1] Due to ruling and closing agreement discussed below

	Six months ended
	June 30, 2011						June 30, 2010
(In thousands)	Amount			% of pre-tax income			Amount			% of pre-tax income
Computed income tax at statutory rates	$	68,984			30	%	$	(45,693	)		41	%
Net benefit of net tax exempt interest income		(17,613	)		(8	)		(12,036	)		11
Effect of income subject to preferential tax rate		(332	)		—			(1,106	)		1
Deferred tax asset valuation allowance		(1,360	)		(1	)		61,728			(55	)
Non-deductible expenses		10,726			5			13,882			(12	)
Difference in tax rates due to multiple jurisdictions		(4,344	)		(2	)		6,320			(6	)
Initial adjustment in deferred tax due to change in tax rate		103,287			45			—			—
Recognition of tax benefits from previous years [1]		(53,615	)		(23	)		—			—
State taxes and others		3,394			1			(5,133	)		4
Income tax expense	$	109,127			47	%	$	17,962			(16	)%

[1] Due to ruling and closing agreement discussed below