XML 83 R68.htm IDEA: XBRL DOCUMENT v3.10.0.1
FAIR VALUE (Tables)
 12 Months Ended
Dec. 31, 2018
Fair Value Disclosures [Abstract]  
Assets and Liabilities Measured at Fair Value on Recurring Basis [Table Text Block]
Assets and liabilities measured at fair value on a recurring basis are summarized below:
As of December 31, 2018As of December 31, 2017
Fair Value Measurements Using Fair Value Measurements Using
(In thousands)Level 1Level 2Level 3Assets/Liabilities at Fair ValueLevel 1Level 2Level 3Assets/Liabilities at Fair Value
Assets:
Securities available for sale :
Equity securities (1)$-$-$-$-$418$-$-$418
U.S. Treasury Securities7,456--7,4567,401--7,401
Noncallable U.S. agency debt securities-319,124-319,124-361,971-361,971
Callable U.S. agency debt securities and MBS-1,594,622-1,594,622-1,497,253-1,497,253
Puerto Rico government obligations-4,1282,8246,952-4,1182,6956,813
Private label MBS--13,91413,914--17,06017,060
Other investments--500500--100100
Equity securities (1)418--418----
Derivatives, included in assets:
Purchased interest rate cap agreements-623-623-305-305
Forward contracts-----7-7
Interest rate lock commitments-383-383----
Forward loan sales commitments-12-12----
Liabilities:
Derivatives, included in liabilities:
Written interest rate cap agreements-617-617-305-305
Forward contracts-383-383-19-19
(1)As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities. As of December 31, 2017, equity securities had a net unrealized loss of $6 thousand.
Schedule of Changes in Fair Value [Table Text Block]
The table below summarizes changes in unrealized gains and losses recorded in earnings for the years ended December 31, 2018, 2017, and 2016 for Level 3 assets and liabilities that are still held at the end of each year:
Changes in Unrealized Losses (Year Ended December 31, 2018)Changes in Unrealized Losses (Year Ended December 31, 2017)Changes in Unrealized Losses (Year Ended December 31, 2016)
Level 3 Instruments Only Securities Available for Sale Securities Available for SaleSecurities Available for Sale
(In thousands)
Changes in unrealized losses relating to assets
still held at reporting date:
Net impairment losses on available-for-sale investment
securities (credit component)$(50)$-$(387)
Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]
The table below presents qualitative information for significant assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of December 31, 2018 and 2017:
December 31, 2018
(In thousands)Fair ValueValuation TechniqueUnobservable InputRange
Investment securities available for sale:
Private label MBS$13,914Discounted cash flowsDiscount rate14.5%
Prepayment rate3.3% - 20.9% (Weighted-Average 11.4%)
Projected Cumulative Loss Rate0.0% - 6.8% (Weighted-Average 3%)
Puerto Rico government obligations2,824Discounted cash flowsDiscount rate6.28%
Prepayment rate3.00%

December 31, 2017
(In thousands)Fair ValueValuation TechniqueUnobservable InputRange
Investment securities available-for-sale:
Private label MBS$17,060 Discounted cash flowsDiscount rate14.0%
Prepayment rate12.0 - 29.0% (Weighted Average 16.4%)
Projected Cumulative Loss Rate0% - 6.8% (Weighted Average 3.0%)
Puerto Rico government obligations2,695 Discounted cash flowsDiscount rate6.61%
Prepayment rate3.00%
Impairment or Valuation Adjustments were Recorded for Assets Recognized at Fair Value [Table Text Block]

As of December 31, 2018, impairment or valuation adjustments were recorded for assets recognized at fair value on a non-recurring basis as shown in the following table:

Carrying value as of December 31, 2018(Losses) recorded for the Year Ended December 31, 2018
Level 1Level 2Level 3
(In thousands)
Loans receivable (1)$-$-$365,726$(29,799)
OREO (2)--131,402(11,499)
Loans held for sale (3)--16,111(10,102)
(1)Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair values were derived from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.
(2)The fair values were derived from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.
(3)Nonaccrual commercial and construction loans transferred to held for sale in 2018 and still in inventory at year end. The value of these loans was primarily derived from broker price opinions that the Corporation considered.

As of December 31, 2017, impairment or valuation adjustments were recorded for assets recognized at fair value on a non-recurring basis as shown in the following table:
Carrying value as of December 31, 2017(Losses) recorded for the Year Ended December 31, 2017
Level 1Level 2Level 3
(In thousands)
Loans receivable (1)$-$-$410,428$(39,493)
OREO (2)--147,940(8,511)
Mortgage servicing rights (3)--25,255(1,611)
(1)Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair values were derived from external appraisals that take into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.
(2)The fair values were derived from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.
(3)Fair value adjustments to mortgage servicing rights were mainly due to assumptions associated with mortgage prepayment rates. The Corporation carries its mortgage servicing rights at the lower of cost or market, measured at fair value on a non-recurring basis. Assumptions for the value of mortgage servicing rights include: Prepayment rate 6.30%, Discount rate 11.23%.

As of December 31, 2016, impairment or valuation adjustments were recorded for assets recognized at fair value on a nonrecurring basis as shown in the following table:
Carrying value as of December 31, 2016(Losses) recorded for the Year Ended December 31, 2016
Level 1Level 2Level 3
(In thousands)
Loans receivable (1)$-$-$442,081$(49,884)
OREO (2)--137,681(7,873)
Mortgage servicing rights (3)--26,244(325)
(1)Consists mainly of impaired commercial and construction loans. The impairments were generally measured based on the fair value of the collateral. The fair values were derived from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which are not market observable.
(2)The fair values were derived from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the OREO portfolio.
(3)Fair value adjustments to the mortgage servicing rights were mainly due to assumptions associated with mortgage prepayments rates. The Corporation carries its mortgage servicing rights at the lower of cost or market, measured at fair value on a non-recurring basis. Assumptions for the value of mortgage servicing rights include: Prepayment rate 6.12%, Discount rate 11.19%.
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]
Qualitative information regarding the fair value measurements for Level 3 financial instruments as of December 31, 2018 are as follows:
December 31, 2018
MethodInputs
LoansIncome, Market, Comparable Sales, Discounted Cash FlowsExternal appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
OREOIncome, Market, Comparable Sales, Discounted Cash FlowsExternal appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
Estimated Fair Value and Carrying Value of Financial Instruments [Table Text Block]
The following tables present the carrying value, estimated fair value and estimated fair value level of the hierarchy of financial instruments as of December 31, 2018 and 2017:
Total Carrying Amount in Statement of Financial Condition December 31, 2018Fair Value Estimate December 31, 2018Level 1Level 2Level 3
(In thousands)
Assets:
Cash and due from banks and money
market investments (amortized cost)$586,203$586,203$586,203$-$-
Investment securities available
for sale (fair value)1,942,5681,942,5687,4561,917,87417,238
Investment securities held to maturity (amortized cost)144,815125,658--125,658
Equity securities (fair value)44,53044,53041844,112-
Loans held for sale (lower of cost or market)43,18643,831-27,72016,111
Loans, held for investment (amortized cost)8,858,123
Less: allowance for loan and lease losses(196,362)
Loans held for investment, net of allowance$8,661,7618,213,144--8,213,144
Derivatives, included in assets (fair value)1,0181,018-1,018-
Liabilities:
Deposits (amortized cost)8,994,7149,005,679-9,005,679-
Securities sold under agreements to
repurchase (amortized cost)150,086169,366-169,366-
Advances from FHLB (amortized cost)740,000730,253-730,253-
Other borrowings (amortized cost)184,150177,201--177,201
Derivatives, included in liabilities (fair value)1,0001,000-1,000-

Total Carrying Amount in Statement of Financial Condition December 31, 2017Fair Value Estimate December 31, 2017Level 1Level 2Level 3
(In thousands)
Assets:
Cash and due from banks and money
market investments (amortized cost)$716,395$716,395$716,395$-$-
Investment securities available
for sale (fair value)1,891,0161,891,0167,8191,863,34219,855
Investment securities held to maturity (amortized cost)150,627131,032--131,032
Equity Securities (fair value)43,11943,119-43,119-
Loans held for sale (lower of cost or market)32,98034,979-25,2379,742
Loans held for investment (amortized cost)8,850,476
Less: allowance for loan and lease losses(231,843)
Loans held for investment, net of allowance$8,618,6338,372,865--8,372,865
Derivatives, included in assets (fair value)312312-312-
Liabilities:
Deposits (amortized cost)9,022,6319,026,600-9,026,600-
Securities sold under agreements to
repurchase (amortized cost)300,000325,913-325,913-
Advances from FHLB (amortized cost)715,000707,272-707,272-
Other borrowings (amortized cost)208,635189,424--189,424
Derivatives, included in liabilities (fair value)324324-324-
Fair Value of Assets and Liabilities Measured on Recurring Basis [Table Text Block]
The table below presents a reconciliation of the beginning and ending balances of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2018, 2017, and 2016:
201820172016
Level 3 Instruments Only Securities Available for Sale (1)Securities Available for Sale (1)Securities Available for Sale (1)
(In thousands)
Beginning balance$19,855$22,914$27,297
Total gain (losses) (realized/unrealized):
Included in earnings(50)-(387)
Included in other comprehensive income2222,7771,586
Purchases500--
Principal repayments and amortization(3,289)(5,836)(5,582)
Ending balance$17,238$19,855$22,914
___________________
(1) Amounts mostly related to private label MBS.