Fair value measurement (Tables)

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures

Assets and Liabilities Measured at Fair Value on a Recurring Basis

At March 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities	$	2,099,856	$	8,317,657	$	-	$	10,417,513
Obligations of U.S. Government sponsored entities		-		86,336		-		86,336
Collateralized mortgage obligations - federal agencies		-		560,836		-		560,836
Mortgage-backed securities		-		4,747,123		1,177		4,748,300
Other		-		316		-		316
Total debt securities available-for-sale	$	2,099,856	$	13,712,268	$	1,177	$	15,813,301
Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	1	$	-	$	-	$	1
Obligations of Puerto Rico, States and political subdivisions		-		109		-		109
Collateralized mortgage obligations		-		76		467		543
Mortgage-backed securities		-		38,468		-		38,468
Other		-		2,996		428		3,424
Total trading account debt securities, excluding derivatives	$	1	$	41,649	$	895	$	42,545
Equity securities	$	-	$	21,601	$	-	$	21,601
Mortgage servicing rights		-		-		147,311		147,311
Derivatives		-		9,534		-		9,534
Total assets measured at fair value on a recurring basis	$	2,099,857	$	13,785,052	$	149,383	$	16,034,292
Liabilities
Derivatives	$	-	$	(12,037)	$	-	$	(12,037)
Total liabilities measured at fair value on a recurring basis	$	-	$	(12,037)	$	-	$	(12,037)

At December 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	$	3,841,715	$	8,214,540	$	-	$	12,056,255
Obligations of U.S. Government sponsored entities		-		122,404		-		122,404
Obligations of Puerto Rico, States and political subdivisions		-		6,975		-		6,975
Collateralized mortgage obligations - federal agencies		-		586,175		-		586,175
Mortgage-backed securities		-		4,875,132		1,182		4,876,314
Other		-		350		-		350
Total debt securities available-for-sale	$	3,841,715	$	13,805,576	$	1,182	$	17,648,473
Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	7,081	$	2	$	-	$	7,083
Obligations of Puerto Rico, States and political subdivisions		-		633		-		633
Collateralized mortgage obligations		-		76		530		606
Mortgage-backed securities		-		28,556		-		28,556
Other		-		3,003		440		3,443
Total trading account debt securities, excluding derivatives	$	7,081	$	32,270	$	970	$	40,321
Equity securities	$	-	$	21,327	$	-	$	21,327
Mortgage servicing rights		-		-		150,906		150,906
Derivatives		-		17,966		-		17,966
Total assets measured at fair value on a recurring basis	$	3,848,796	$	13,877,139	$	153,058	$	17,878,993
Liabilities
Derivatives	$	-	$	(16,619)	$	-	$	(16,619)
Total liabilities measured at fair value on a recurring basis	$	-	$	(16,619)	$	-	$	(16,619)

Nonrecurring fair value measurements

Quarter ended March 31, 2020
(In thousands)		Level 1		Level 2		Level 3		Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets											Write-downs
Loans[1]		$	-	$	-	$	3,151	$	3,151	$	(497)
Other real estate owned[2]			-		-		10,742		10,742		(1,368)
Other foreclosed assets[2]			-		-		1,021		1,021		(152)
Total assets measured at fair value on a nonrecurring basis		$	-	$	-	$	14,914	$	14,914	$	(2,017)
[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. 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, 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. 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.

Assets measured on recurring basis, unobservable input reconciliation

	Quarter ended March 31, 2020
		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, 2019		$	1,182	$	530	$	-	$	440	$	150,906	$	153,058
Gains (losses) included in earnings			-		1		-		(12)		(5,229)		(5,240)
Gains (losses) included in OCI			(5)		-		-		-		-		(5)
Additions			-		2		-		-		1,634		1,636
Settlements			-		(66)		-		-		-		(66)
Balance at March 31, 2020		$	1,177	$	467	$	-	$	428	$	147,311	$	149,383
Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2020		$	-	$	1	$	-	$	6	$	(2,439)	$	(2,432)

	Quarter ended March 31, 2019
		MBS						Other
		classified		CMOs				securities
		as investment		classified		MBS		classified
		securities		as trading		classified as		as trading		Mortgage
		available-		account		trading account		account		servicing		Total
(In thousands)		for-sale		securities		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)

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

	Quarter ended March 31, 2020				Quarter ended March 31, 2019
				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
Mortgage banking activities	$	(5,229)	$	(2,439)	$	(3,825)	$	(747)
Trading account loss		(11)		7		(7)		3
Total	$	(5,240)	$	(2,432)	$	(3,832)	$	(744)

Fair value measurements, recurring and nonrecurring valuation techniques

			Fair value
			at March 31,
(In thousands)			2020		Valuation technique	Unobservable inputs	Weighted average (range) [1]
CMO's - trading		$	467		Discounted cash flow model	Weighted average life	1.5 years (0.1 - 1.6 years)
						Yield	3.8% (3.7% - 4.3%)
						Prepayment speed	18.4% (14.5% - 21.2%)
Other - trading		$	428		Discounted cash flow model	Weighted average life	3.8 years
						Yield	12.0%
						Prepayment speed	10.8%
Mortgage servicing rights		$	147,311		Discounted cash flow model	Prepayment speed	6.3%(0.2% - 18.9%)
						Weighted average life	7.2 years (0.1 - 14.3 years)
						Discount rate	11.1% (9.5% - 14.7%)
Loans held-in-portfolio		$	3,151	[2]	External appraisal	Haircut applied on
						external appraisals	10.0%
Other real estate owned		$	7,050	[3]	External appraisal	Haircut applied on
						external appraisals	22.3% (5.0% - 30.0%)
[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.

			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.