Fair value measurement (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures

Assets and Liabilities Measured at Fair Value on a Recurring Basis

At September 30, 2022
(In thousands)	Level 1		Level 2		Level 3		Measured at NAV		Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities	$	5,450,397	$	16,055,525	$	-	$	-	$	21,505,922
Collateralized mortgage obligations - federal agencies		-		176,204		-		-		176,204
Mortgage-backed securities		-		6,580,237		711		-		6,580,948
Other		-		74		1,000		-		1,074
Total debt securities available-for-sale	$	5,450,397	$	22,812,040	$	1,711	$	-	$	28,264,148
Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	15,711	$	-	$	-	$	-	$	15,711
Obligations of Puerto Rico, States and political subdivisions		-		66		-		-		66
Collateralized mortgage obligations		-		48		135		-		183
Mortgage-backed securities		-		14,056		-		-		14,056
Other		-		-		255		-		255
Total trading account debt securities, excluding derivatives	$	15,711	$	14,170	$	390	$	-	$	30,271
Equity securities	$	-	$	26,723	$	-	$	331	$	27,054
Mortgage servicing rights		-		-		130,541		-		130,541
Derivatives		-		16,653		-		-		16,653
Total assets measured at fair value on a recurring basis	$	5,466,108	$	22,869,586	$	132,642	$	331	$	28,468,667
Liabilities
Derivatives	$	-	$	(14,776)	$	-	$	-	$	(14,776)
Total liabilities measured at fair value on a recurring basis	$	-	$	(14,776)	$	-	$	-	$	(14,776)

At December 31, 2021
(In thousands)	Level 1		Level 2		Level 3			Measured at NAV	Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities	$	-	$	15,859,030	$	-	$	-	$	15,859,030
Obligations of U.S. Government sponsored entities		-		70		-		-		70
Collateralized mortgage obligations - federal agencies		-		221,265		-		-		221,265
Mortgage-backed securities		-		8,886,950		826		-		8,887,776
Other		-		128		-		-		128
Total debt securities available-for-sale	$	-	$	24,967,443	$	826	$	-	$	24,968,269
Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	6,530	$	-	$	-	$	-	$	6,530
Obligations of Puerto Rico, States and political subdivisions		-		85		-		-		85
Collateralized mortgage obligations		-		59		198		-		257
Mortgage-backed securities		-		22,559		-		-		22,559
Other		-		-		280		-		280
Total trading account debt securities, excluding derivatives	$	6,530	$	22,703	$	478	$	-	$	29,711
Equity securities	$	-	$	32,429	$	-	$	77	$	32,506
Mortgage servicing rights		-		-		121,570		-		121,570
Derivatives		-		26,093		-		-		26,093
Total assets measured at fair value on a recurring basis	$	6,530	$	25,048,668	$	122,874	$	77	$	25,178,149
Liabilities
Derivatives	$	-	$	(22,878)	$	-	$	-	$	(22,878)
Contingent consideration		-		-		(9,241)		-		(9,241)
Total liabilities measured at fair value on a recurring basis	$	-	$	(22,878)	$	(9,241)	$	-	$	(32,119)

Nonrecurring fair value measurements

Nine months ended September 30, 2022
(In thousands)	Level 1		Level 2		Level 3		Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets										Write-downs
Loans[1]	$	-	$	-	$	9,933	$	9,933	$	(9,580)
Loans held-for-sale[2]		-		-		8,080		8,080		(224)
Other real estate owned[3]		-		-		3,067		3,067		(940)
Other foreclosed assets[3]		-		-		30		30		(1)
Long-lived assets held-for-sale[4]		-		-		686		686		(688)
Total assets measured at fair value on a nonrecurring basis	$	-	$	-	$	21,796	$	21,796	$	(11,433)
[1] Relates mainly 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.
[4] Represents the fair value of long-lived assets held-for-sale that were written down to their fair value.

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 mainly 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.

Assets measured on recurring basis, unobservable input reconciliation

	Quarter ended September 30, 2022
		MBS		Other		CMOs		Other
		classified		securities		classified		securities
		as debt		classified as		as trading		classified
		securities		debt securities		account		as trading		Mortgage
		available-		available-		debt		account debt		servicing		Total		Contingent		Total
(In thousands)		for-sale		for-sale		securities		securities		rights		assets		consideration		liabilities
Balance at June 30, 2022		$	779	$	500	$	152	$	264	$	129,877	$	131,572	$	(9,241)	$	(9,241)
Gains (losses) included in earnings			-		-		(1)		(9)		(499)		(509)		9,241		9,241
Gains (losses) included in OCI			(18)		-		-		-		-		(18)		-		-
Additions			-		500		3		-		1,163		1,666		-		-
Settlements			(50)		-		(19)		-		-		(69)		-		-
Balance at September 30, 2022		$	711	$	1,000	$	135	$	255	$	130,541	$	132,642	$	-	$	-
Changes in unrealized gains (losses) included in earnings relating to assets still held at September 30, 2022		$	-	$	-	$	(1)	$	7	$	1,984	$	1,990	$	-	$	-

	Nine months ended September 30, 2022
		MBS		Other				Other
		classified		securities		CMOs		securities
		as investment		classified as		classified		classified
		securities		debt securities		as trading		as trading		Mortgage
		available-		available-		account		account		servicing		Total		Contingent		Total
(In thousands)		for-sale		for-sale		securities		securities		rights		assets		consideration		liabilities
Balance at January 1, 2022		$	826	$	-	$	198	$	280	$	121,570	$	122,874	$	(9,241)	$	(9,241)
Gains (losses) included in earnings			-		-		(2)		(25)		2,776		2,749		9,241		9,241
Gains (losses) included in OCI			(15)		-		-		-		-		(15)		-		-
Additions			-		1,000		5		-		6,195		7,200		-		-
Settlements			(100)		-		(66)		-		-		(166)		-		-
Balance at September 30, 2022		$	711	$	1,000	$	135	$	255	$	130,541	$	132,642	$	-	$	-
Changes in unrealized gains (losses) included in earnings relating to assets still held at September 30, 2022		$	-	$	-	$	(2)	$	14	$	11,556	$	11,568	$	-	$	-

	Quarter 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 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

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

	Quarter ended September 30, 2022				Nine months ended September 30, 2022
			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	$	(499)	$	1,984	$	2,776	$	11,556
Trading account profit (loss)		(10)		6		(27)		12
Other operating income		9,241		-		9,241		-
Total	$	8,732	$	1,990	$	11,990	$	11,568

	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

Fair value measurements, recurring and nonrecurring valuation techniques

			Fair value at
		September 30,
(In thousands)			2022		Valuation technique	Unobservable inputs	Weighted average (range) [1]
CMO's - trading		$	135		Discounted cash flow model	Weighted average life	0.5 years (0.2 - 0.7 years)
						Yield	4.9% (4.9% - 5.4%)
						Prepayment speed	10.7% (10.1% - 18.5%)
Other - trading		$	255		Discounted cash flow model	Weighted average life	2.9 years
						Yield	12.0%
						Prepayment speed	10.8%
Loans held-in-portfolio		$	4,473	[2]	External appraisal	Haircut applied on
						external appraisals	16.1% (5.0% - 25.0%)
Other real estate owned		$	289	[3]	External appraisal	Haircut applied on
						external appraisals	27% (5.0% - 35%)
[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)			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% (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.