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Fair value measurement (Tables)

3 Months Ended

Mar. 31, 2019

Assets and Liabilities Measured at Fair Value on a Recurring Basis

At March 31, 2019

(In thousands)	Level 1		Level 2		Level 3		Total

RECURRING FAIR VALUE MEASUREMENTS

Assets
Debt securities available-for-sale:
U.S. Treasury securities	$	2,476,890	$	5,554,597	$	-	$	8,031,487
Obligations of U.S. Government sponsored entities		-		264,671		-		264,671
Obligations of Puerto Rico, States and political subdivisions		-		6,809		-		6,809
Collateralized mortgage obligations - federal agencies		-		701,766		-		701,766
Mortgage-backed securities		-		4,536,289		1,235		4,537,524
Other		-		438		-		438
Total debt securities available-for-sale	$	2,476,890	$	11,064,570	$	1,235	$	13,542,695

Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	6,764	$	-	$	-	$	6,764
Obligations of Puerto Rico, States and political subdivisions		-		129		-		129
Collateralized mortgage obligations		-		47		595		642
Mortgage-backed securities		-		28,186		43		28,229
Other		-		2,975		478		3,453
Total trading account debt securities, excluding derivatives	$	6,764	$	31,337	$	1,116	$	39,217
Equity securities	$	-	$	17,658	$	-	$	17,658
Mortgage servicing rights		-		-		167,813		167,813
Derivatives		-		14,843		-		14,843
Total assets measured at fair value on a recurring basis	$	2,483,654	$	11,128,408	$	170,164	$	13,782,226
Liabilities
Derivatives	$	-	$	(12,770)	$	-	$	(12,770)
Total liabilities measured at fair value on a recurring basis	$	-	$	(12,770)	$	-	$	(12,770)

At December 31, 2018

(In thousands)	Level 1		Level 2		Level 3		Total

RECURRING FAIR VALUE MEASUREMENTS

Assets
Debt securities available-for-sale:
U.S. Treasury securities	$	2,719,740	$	5,552,456	$	-	$	8,272,196
Obligations of U.S. Government sponsored entities		-		333,309		-		333,309
Obligations of Puerto Rico, States and political subdivisions		-		6,742		-		6,742
Collateralized mortgage obligations - federal agencies		-		728,671		-		728,671
Mortgage-backed securities		-		3,957,545		1,233		3,958,778
Other		-		488		-		488
Total debt securities available-for-sale	$	2,719,740	$	10,579,211	$	1,233	$	13,300,184

Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	6,278	$	-	$	-	$	6,278
Obligations of Puerto Rico, States and political subdivisions		-		134		-		134
Collateralized mortgage obligations		-		48		611		659
Mortgage-backed securities		-		27,214		43		27,257
Other		-		2,974		485		3,459
Total trading account debt securities, excluding derivatives	$	6,278	$	30,370	$	1,139	$	37,787
Equity securities	$	-	$	13,296	$	-	$	13,296
Mortgage servicing rights		-		-		169,777		169,777
Derivatives		-		13,603		-		13,603
Total assets measured at fair value on a recurring basis	$	2,726,018	$	10,636,480	$	172,149	$	13,534,647
Liabilities
Derivatives	$	-	$	(12,320)	$	-	$	(12,320)
Total liabilities measured at fair value on a recurring basis	$	-	$	(12,320)	$	-	$	(12,320)

Nonrecurring fair value measurements

Quarter ended March 31, 2019

(In thousands)		Level 1		Level 2		Level 3		Total

NONRECURRING FAIR VALUE MEASUREMENTS
Assets											Write-downs
	Loans^[1]	$	-	$	-	$	13,147	$	13,147	$	(3,316)
	Other real estate owned^[2]		-		-		8,035		8,035		(1,889)
	Other foreclosed assets^[2]		-		-		1,283		1,283		(118)
Total assets measured at fair value on a nonrecurring basis		$	-	$	-	$	22,465	$	22,465	$	(5,323)

[1] Relates mostly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations, in accordance with the provisions of ASC Section 310-10-35. Costs to sell are excluded from the reported fair value amount.

[2] Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are excluded from the reported fair value amount.

Quarter ended March 31, 2018

(In thousands)		Level 1		Level 2		Level 3		Total

NONRECURRING FAIR VALUE MEASUREMENTS
Assets											Write-downs
	Loans^[1]	$	-	$	-	$	29,826	$	29,826	$	(13,766)
	Other real estate owned^[2]		-		-		14,397		14,397		(3,116)
	Other foreclosed assets^[2]		-		-		2,045		2,045		(523)
Total assets measured at fair value on a nonrecurring basis		$	-	$	-	$	46,268	$	46,268	$	(17,405)

[2] Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are excluded from the reported fair value amount.

Assets measured on recurring basis, unobservable input reconciliation

	Quarter ended March 31, 2019
		MBS		CMOs				Other
		classified		classified				securities
		as debt		as trading		MBS		classified
		securities		account		classified as		as trading		Mortgage
		available-		debt		trading account		account debt		servicing		Total
(In thousands)		for-sale		securities		debt securities		securities		rights		assets
Balance at December 31, 2018		$	1,233	$	611	$	43	$	485	$	169,777	$	172,149
Gains (losses) included in earnings			-		-		-		(7)		(3,825)		(3,832)
Gains (losses) included in OCI			2		-		-		-		-		2
Additions			-		14		-		-		1,861		1,875
Settlements			-		(30)		-		-		-		(30)
Balance at March 31, 2019		$	1,235	$	595	$	43	$	478	$	167,813	$	170,164
Changes in unrealized gains (losses)
	included in earnings relating to assets still held
	at March 31, 2019	$	-	$	-	$	-	$	3	$	(747)	$	(744)

	Quarter ended March 31, 2018
		MBS		CMOs				Other
		classified		classified		MBS		securities
		as debt		as trading		classified as		classified
		securities		account		trading		as trading		Mortgage
		available-		debt		account debt		account debt		servicing		Total		Contingent		Total
(In thousands)		for-sale		securities		securities		securities		rights		assets		consideration		liabilities
Balance at December 31, 2017		$	1,288	$	529	$	43	$	529	$	168,031	$	170,420	$	(164,858)	$	(164,858)
Gains (losses) included in earnings			-		-		-		(10)		(4,307)		(4,317)		(6,112)		(6,112)
Gains (losses) included in OCI			1		-		-		-		-		1		-		-
Additions			-		16		-		-		2,557		2,573		-		-
Settlements			(26)		(57)		-		-		-		(83)		-		-
Balance at March 31, 2018		$	1,263	$	488	$	43	$	519	$	166,281	$	168,594	$	(170,970)	$	(170,970)
Changes in unrealized gains
	(losses) included in earnings
	relating to assets still held
	at March 31, 2018	$	-	$	-	$	-	$	5	$	-	$	5	$	(6,112)	$	(6,112)

Gain (loss) included in earnings, measured on recurring basis

	Quarter ended March 31, 2019				Quarter ended March 31, 2018
				Changes in unrealized				Changes in unrealized
		Total gains		gains (losses) relating to		Total gains		gains (losses) relating to
		(losses) included		assets still held at		(losses) included		assets still held at
(In thousands)		in earnings		reporting date		in earnings		reporting date

FDIC loss share expense	$	-	$	-	$	(6,112)	$	(6,112)
Mortgage banking activities		(3,825)		(747)		(4,307)		-
Trading account loss		(7)		3		(10)		5
Total	$	(3,832)	$	(744)	$	(10,429)	$	(6,107)

Fair value measurements, recurring and nonrecurring valuation techniques

		Fair value
		at March 31,
(In thousands)		2019	Valuation technique	Unobservable inputs	Weighted average (range)^[1]
CMO's - trading	$	595	Discounted cash flow model	Weighted average life	1.8 years (1.2 - 2.0 years)
				Yield	4.1% (3.9% - 4.4%)
				Prepayment speed	17.7% (15.0% - 19.6%)
Other - trading	$	478	Discounted cash flow model	Weighted average life	5.2	years
				Yield	12.0	%
				Prepayment speed	10.8	%
Mortgage servicing rights	$	167,813	Discounted cash flow model	Prepayment speed	5.4% (0.2% - 23.2%)
				Weighted average life	6.8 years (0.1 - 15.6 years)
				Discount rate	11.2% (9.5% - 24.5%)
Loans held-in-portfolio	$	9,610 ^[2]	External appraisal	Haircut applied on
				external appraisals	13.8% (11.4% - 25.0%)
Other real estate owned	$	5,871 ^[3]	External appraisal	Haircut applied on
				external appraisals	21.2% (15.0% - 25.0%)
[1] Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2] Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
[3] Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table.