The fair value of financial instruments is the amount at which an asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on the type of financial instrument and relevant market information. Many of these estimates involve various assumptions and may vary significantly from amounts that could be realized in actual transactions.

The information about the estimated fair values of financial instruments presented hereunder excludes all nonfinancial instruments and certain other specific items.

For those financial instruments with no quoted market prices available, fair values have been estimated using present value calculations or other valuation techniques, as well as management's best judgment with respect to current economic conditions, including discount rates, estimates of future cash flows, and prepayment assumptions.

The fair values reflected herein have been determined based on the prevailing interest rate environment at December 31, 2012 and 2011, as applicable. In different interest rate environments, fair value estimates can differ significantly, especially for certain fixed rate financial instruments. In addition, the fair values presented do not attempt to estimate the value of the Corporation's fee generating businesses and anticipated future business activities, that is, they do not represent the Corporation's value as a going concern. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Corporation.

Following is a description of the Corporation's valuation methodologies and inputs used to estimate the fair values for each class of financial assets and liabilities not measured at fair value, but for which the fair value is disclosed. The disclosure requirements exclude certain financial instruments and all non-financial instruments. Accordingly, the aggregate fair value amounts of the financial instruments disclosed do not represent management's estimate of the underlying value of the Corporation. For a description of the valuation methodologies and inputs used to estimate the fair value for each class of financial assets and liabilities measured at fair value, refer to Note 31.

Cash and due from banks include cash on hand, cash items in process of collection, and non-interest bearing deposits due from other financial institutions. The carrying amount of cash and due from banks is a reasonable estimate of its fair value. Cash and due from banks are classified as Level 1.

Investments in money market instruments include highly liquid instruments with an average maturity of three months or less. For this reason, they carry a low risk of changes in value as a result of changes in interest rates, and the carrying amount approximates their fair value. Money market investments include federal funds sold, securities purchased under agreements to resell, time deposits with other banks, and cash balances, including those held at the Federal Reserve. These money market investments are classified as Level 2, except for cash balances which generate interest, including those held at the Federal Reserve, which are classified as Level 1.

Commitments to extend credit were valued using the fees currently charged to enter into similar agreements. For those commitments where a future stream of fees is charged, the fair value was estimated by discounting the projected cash flows of fees on commitments. Since the fair value of commitments to extend credit varies depending on the undrawn amount of the credit facility, fees are subject to constant change, and cash flows are dependent on the creditworthiness of borrowers, commitments to extend credit are classified as Level 3. The fair value of letters of credit was based on fees currently charged on similar agreements. Given that the fair value of letters of credit constantly vary due to fees being subject to constant change and whether the fees are received depends on the creditworthiness of the account parties, letters of credit are classified as Level 3.

The following table presents the carrying or notional amounts, as applicable, and estimated fair values for financial instruments with their corresponding level in the fair value hierarchy.

		December 31, 2012											December 31, 2011
		Carrying											Carrying
(In thousands)		amount		Level 1		Level 2		Level 3		Fair value			amount	Fair value
Financial Assets:
Cash and due from banks		$	439,363	$	439,363	$	-	$	-	$	439,363	$	535,282	$	535,282
Money market investments			1,085,580		839,007		246,573		-		1,085,580		1,376,174		1,376,174
Trading account securities, excluding
	derivatives^[1]		314,515		-		297,959		16,556		314,515		436,330		436,330
Investment securities available-for-sale^[1]			5,084,201		3,827		5,073,304		7,070		5,084,201		5,009,823		5,009,823
Investment securities held-to-maturity:
	Obligations of Puerto Rico, States
	and political subdivisions		116,177		-		-		117,558		117,558		98,973		98,770
	Collateralized mortgage
	obligation-federal agency		140		-		-		144		144		160		151
	Other		26,500		-		1,500		25,031		26,531		26,250		26,333
Total investment securities
	held-to-maturity	$	142,817	$	-	$	1,500	$	142,733	$	144,233	$	125,383	$	125,254
Other investment securities:
	FHLB stock	$	89,451	$	-	$	89,451	$	-	$	89,451	$	84,133	$	84,133
	FRB stock		79,878		-		79,878		-		79,878		79,648		79,648
	Trust preferred securities		14,197		-		13,197		1,000		14,197		14,197		14,197
	Other investments		1,917		-		-		3,975		3,975		1,902		3,605
Total other investment securities		$	185,443	$	-	$	182,526	$	4,975	$	187,501	$	179,880	$	181,583
Loans held-for-sale		$	354,468	$	-	$	4,779	$	376,582	$	381,361	$	363,093	$	390,783
Loans not covered under loss sharing
	agreement with the FDIC		20,361,491		-		-		17,424,038		17,424,038		19,912,233		16,753,889
Loans covered under loss sharing
	agreements with the FDIC		3,647,066		-		-		3,925,440		3,925,440		4,223,758		4,663,327
FDIC loss share asset			1,399,098		-		-		1,241,579		1,241,579		1,915,128		1,755,295
Mortgage servicing rights			154,430		-		-		154,430		154,430		151,323		151,323
Derivatives			41,935		-		41,935		-		41,935		61,887		61,887
		December 31, 2012											December 31, 2011
		Carrying											Carrying
(In thousands)		amount		Level 1		Level 2		Level 3		Fair value			amount	Fair value
Financial Liabilities:
Deposits:
	Demand deposits	$	18,089,904	$	-	$	18,089,904	$	-	$	18,089,904	$	17,232,087	$	17,232,087
	Time deposits		8,910,709		-		8,994,363		-		8,994,363		10,710,040		10,825,256
Total deposits		$	27,000,613	$	-	$	27,084,267	$	-	$	27,084,267	$	27,942,127	$	28,057,343
Assets sold under agreements to
	repurchase:
	Securities sold under agreements
	to repurchase	$	1,378,562	$	-	$	1,385,237	$	-	$	1,385,237	$	1,102,907	$	1,107,314
	Structured repurchase agreements		638,190		-		720,620		-		720,620		1,038,190		1,166,488
Total assets sold under agreements to
	repurchase	$	2,016,752	$	-	$	2,105,857	$	-	$	2,105,857	$	2,141,097	$	2,273,802
Other short-term borrowings^[2]		$	636,200	$	-	$	636,200	$	-	$	636,200	$	296,200	$	296,200
Notes payable:
	FHLB advances	$	577,490	$	-	$	608,313	$	-	$	608,313	$	642,568	$	673,505
	Medium-term notes		236,753		-		243,351		3,843		247,194		278,897		282,898
	Junior subordinated deferrable
	interest debentures (related to
	trust preferred securities)		439,800		-		363,659		-		363,659		439,800		284,238
	Junior subordinated deferrable
	interest debentures (Troubled
	Asset Relief Program)		499,470		-		-		824,458		824,458		470,037		457,120
	Others		24,208		-		-		24,208		24,208		25,070		25,070
Total notes payable		$	1,777,721	$	-	$	1,215,323	$	852,509	$	2,067,832	$	1,856,372	$	1,722,831
Derivatives		$	42,585	$	-	$	42,585	$	-	$	42,585	$	66,700	$	66,700
Contingent consideration		$	112,002	$	-	$	-	$	112,002	$	112,002	$	99,762	$	99,762

(In thousands)			Notional amount		Level 1		Level 2		Level 3		Fair value		Notional amount		Fair value
Commitments to extend credit		$	6,774,990	$	-	$	-	$	2,858	$	2,858	$	6,695,956	$	2,062
Letters of credit			148,153		-		-		1,544		1,544		136,341		2,339

[1] Refer to Note 31 to the consolidated financial statements for the fair value by class of financial asset and its hierarchy level.

[2] Refer to Note 20 to the consolidated financial statements for the composition of short-term borrowings.