Fair value measurement (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures

Assets and Liabilities Measured at Fair Value on a Recurring Basis

At September 30, 2021
(In thousands)	Level 1		Level 2		Level 3		Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities	$	799,972	$	13,816,977	$	-	$	14,616,949
Obligations of U.S. Government sponsored entities		-		71		-		71
Collateralized mortgage obligations - federal agencies		-		250,491		-		250,491
Mortgage-backed securities		-		9,522,676		883		9,523,559
Other		-		156		-		156
Total debt securities available-for-sale	$	799,972	$	23,590,371	$	883	$	24,391,226
Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	10,780	$	-	$	-	$	10,780
Obligations of Puerto Rico, States and political subdivisions		-		82		-		82
Collateralized mortgage obligations		-		61		220		281
Mortgage-backed securities		-		24,569		-		24,569
Other		-		-		352		352
Total trading account debt securities, excluding derivatives	$	10,780	$	24,712	$	572	$	36,064
Equity securities	$	-	$	30,212	$	-	$	30,212
Mortgage servicing rights		-		-		116,567		116,567
Derivatives		-		23,827		-		23,827
Total assets measured at fair value on a recurring basis	$	810,752	$	23,669,122	$	118,022	$	24,597,896
Liabilities
Derivatives	$	-	$	(20,879)	$	-	$	(20,879)
Total liabilities measured at fair value on a recurring basis	$	-	$	(20,879)	$	-	$	(20,879)

At December 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	$	3,499,781	$	7,288,259	$	-	$	10,788,040
Obligations of U.S. Government sponsored entities		-		60,184		-		60,184
Collateralized mortgage obligations - federal agencies		-		392,132		-		392,132
Mortgage-backed securities		-		10,319,547		1,014		10,320,561
Other		-		235		-		235
Total debt securities available-for-sale	$	3,499,781	$	18,060,357	$	1,014	$	21,561,152
Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	11,506	$	-	$	-	$	11,506
Obligations of Puerto Rico, States and political subdivisions		-		103		-		103
Collateralized mortgage obligations		-		68		278		346
Mortgage-backed securities		-		24,338		-		24,338
Other		-		-		381		381
Total trading account debt securities, excluding derivatives	$	11,506	$	24,509	$	659	$	36,674
Equity securities	$	-	$	29,590	$	-	$	29,590
Mortgage servicing rights		-		-		118,395		118,395
Derivatives		-		20,785		-		20,785
Total assets measured at fair value on a recurring basis	$	3,511,287	$	18,135,241	$	120,068	$	21,766,596
Liabilities
Derivatives	$	-	$	(18,925)	$	-	$	(18,925)
Total liabilities measured at fair value on a recurring basis	$	-	$	(18,925)	$	-	$	(18,925)

Nonrecurring fair value measurements

Nine months ended September 30, 2021
(In thousands)	Level 1		Level 2		Level 3		Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets										Write-downs
Loans[1]	$	-	$	-	$	22,700	$	22,700	$	(4,775)
Other real estate owned[2]		-		-		6,540		6,540		(1,583)
Long-lived assets held-for-sale[3]		-		-		2,728		2,728		(303)
Total assets measured at fair value on a nonrecurring basis	$	-	$	-	$	31,968	$	31,968	$	(6,661)
[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.
[3] Represents the fair value of long-lived assets held-for-sale that were written down to their fair value.

Nine months ended September 30, 2020
(In thousands)	Level 1		Level 2		Level 3		Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets										Write-downs
Loans[1]	$	-	$	-	$	96,740	$	96,740	$	(20,495)
Loans held-for-sale[2]		-		-		4,070		4,070		(2,038)
Other real estate owned[3]		-		-		19,475		19,475		(3,025)
Other foreclosed assets[3]		-		-		444		444		(701)
Total assets measured at fair value on a nonrecurring basis	$	-	$	-	$	120,729	$	120,729	$	(26,259)
[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] Relates to a quarterly valuation on loans held-for-sale. Costs to sell are excluded from the reported fair value amount.
[3] 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 September 30, 2021
		MBS		CMOs		Other
		classified		classified		securities
		as debt		as trading		classified
		securities		account		as trading		Mortgage
		available-		debt		account debt		servicing		Total
(In thousands)		for-sale		securities		securities		rights		assets
Balance at June 30, 2021		$	938	$	250	$	361	$	119,467	$	121,016
Gains (losses) included in earnings			-		-		(9)		(5,979)		(5,988)
Gains (losses) included in OCI			(5)		-		-		-		(5)
Additions			-		4		-		3,079		3,083
Settlements			(50)		(34)		-		-		(84)
Balance at September 30, 2021		$	883	$	220	$	352	$	116,567	$	118,022
Changes in unrealized gains (losses) included in earnings relating to assets still held at September 30, 2021		$	-	$	-	$	4	$	(1,912)	$	(1,908)

	Nine months ended September 30, 2021
		MBS				Other
		classified		CMOs		securities
		as investment		classified		classified
		securities		as trading		as trading		Mortgage
		available-		account		account		servicing		Total
(In thousands)		for-sale		securities		securities		rights		assets
Balance at January 1, 2021		$	1,014	$	278	$	381	$	118,395	$	120,068
Gains (losses) included in earnings			-		-		(29)		(11,716)		(11,745)
Gains (losses) included in OCI			(6)		-		-		-		(6)
Additions			-		28		-		9,888		9,916
Settlements			(125)		(86)		-		-		(211)
Balance at September 30, 2021		$	883	$	220	$	352	$	116,567	$	118,022
Changes in unrealized gains (losses) included in earnings relating to assets still held at September 30, 2021		$	-	$	(1)	$	13	$	1,214	$	1,226

	Quarter ended September 30, 2020
		MBS				Other
		classified		CMOs		securities
		as investment		classified		classified
		securities		as trading		as trading		Mortgage
		available-		account		account		servicing		Total
(In thousands)		for-sale		securities		securities		rights		assets
Balance at June 30, 2020		$	1,151	$	442	$	423	$	141,144	$	143,160
Gains (losses) included in earnings			-		-		(10)		(20,491)		(20,501)
Gains (losses) included in OCI			(2)		-		-		-		(2)
Additions			-		2		-		2,899		2,901
Settlements			(25)		(34)		-		-		(59)
Balance at September 30, 2020		$	1,124	$	410	$	413	$	123,552	$	125,499
Changes in unrealized gains (losses) included in earnings relating to assets still held at September 30, 2020		$	-	$	-	$	-	$	(7,892)	$	(7,892)

	Nine months ended September 30, 2020
		MBS				Other
		classified		CMOs		securities
		as investment		classified		classified
		securities		as trading		as trading		Mortgage
		available-		account		account		servicing		Total
(In thousands)		for-sale		securities		securities		rights		assets
Balance at January 1, 2020		$	1,182	$	530	$	440	$	150,906	$	153,058
Gains (losses) included in earnings			-		-		(27)		(33,360)		(33,387)
Gains (losses) included in OCI			(8)		-		-		-		(8)
Additions			-		4		-		6,006		6,010
Settlements			(50)		(124)		-		-		(174)
Balance at September 30, 2020		$	1,124	$	410	$	413	$	123,552	$	125,499
Changes in unrealized gains (losses) included in earnings relating to assets still held at September 30, 2020		$	-	$	-	$	13	$	(15,278)	$	(15,265)

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

	Quarter ended September 30, 2021				Nine months ended September 30, 2021
			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	$	(5,979)	$	(1,912)	$	(11,716)	$	1,214
Trading account profit (loss)		(9)		4		(29)		12
Total	$	(5,988)	$	(1,908)	$	(11,745)	$	1,226

	Quarter ended September 30, 2020				Nine months ended September 30, 2020
			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	$	(20,491)	$	(7,892)	$	(33,360)	$	(15,278)
Trading account profit (loss)		(10)		-		(27)		13
Total	$	(20,501)	$	(7,892)	$	(33,387)	$	(15,265)

Fair value measurements, recurring and nonrecurring valuation techniques

			Fair value at
		September 30,
(In thousands)			2021		Valuation technique	Unobservable inputs	Weighted average (range) [1]
CMO's - trading		$	220		Discounted cash flow model	Weighted average life	0.9 years (0.1 - 1.1 years)
						Yield	3.6% (3.6% - 4.1%)
						Prepayment speed	11.4% (10.1% - 16.7%)
Other - trading		$	352		Discounted cash flow model	Weighted average life	3.6 years
						Yield	12.0%
						Prepayment speed	10.8%
Mortgage servicing rights		$	116,567		Discounted cash flow model	Prepayment speed	6.2% (0.3% - 34.2%)
						Weighted average life	6.1 years (0.1 - 13.1 years)
						Discount rate	11.1% (9.5% - 14.7%)
Loans held-in-portfolio		$	21,715	[2]	External appraisal	Haircut applied on
						external appraisals	11.0% (10.0% - 30.5%)
Other real estate owned		$	4,099	[3]	External appraisal	Haircut applied on
						external appraisals	22.3% (5.0% - 35.0%)
[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
		September 30,
(In thousands)			2020		Valuation technique	Unobservable inputs	Weighted average (range) [1]
CMO's - trading		$	410		Discounted cash flow model	Weighted average life	1.3 years (0.6 - 1.5 years)
						Yield	3.7% (3.6% - 4.1%)
						Prepayment speed	17.7% (13.8% - 18.4%)
Other - trading		$	413		Discounted cash flow model	Weighted average life	3.8 years
						Yield	12.0%
						Prepayment speed	10.8%
Mortgage servicing rights		$	123,552		Discounted cash flow model	Prepayment speed	6.9% (0.2% - 22.1%)
						Weighted average life	6.1 years (0.1 - 12.3 years)
						Discount rate	11.2% (9.5% - 14.7%)
Loans held-in-portfolio		$	96,740	[2]	External appraisal	Haircut applied on
						external appraisals	23.2% (21.0% - 40.0%)
Other real estate owned		$	13,826	[3]	External appraisal	Haircut applied on
						external appraisals	21.5% (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.