FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:
	As of June 30, 2019								As of December 31, 2018
	Fair Value Measurements Using								Fair Value Measurements Using
(In thousands)	Level 1		Level 2		Level 3		Assets/Liabilities at Fair Value		Level 1		Level 2		Level 3		Assets/Liabilities at Fair Value
Assets:
Securities available for sale:
U.S. Treasury Securities	$	7,464	$	-	$	-	$	7,464	$	7,456	$	-	$	-	$	7,456
Noncallable U.S. agency debt securities		-		310,624		-		310,624		-		319,124		-		319,124
Callable U.S. agency debt securities and MBS		-		1,465,602		-		1,465,602		-		1,594,622		-		1,594,622
Puerto Rico government obligations		-		4,092		2,899		6,991		-		4,128		2,824		6,952
Private label MBS		-		-		12,507		12,507		-		-		13,914		13,914
Other investments		-		-		500		500		-		-		500		500
Equity securities		434		-		-		434		418		-		-		418
Derivatives, included in assets:
Purchased interest rate cap agreements		-		96		-		96		-		623		-		623
Interest rate lock commitments		-		294		-		294		-		383		-		383
Forward loan sales commitments		-		20		-		20		-		12		-		12
Liabilities:
Derivatives, included in liabilities:
Written interest rate cap agreements		-		94		-		94		-		617		-		617
Forward contracts		-		387		-		387		-		383		-		383

Fair Value of Assets and Liabilities Measured on Recurring Basis

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 quarters and six-month periods ended June 30, 2019 and 2018.

		Quarter Ended June 30,
		2019		2018
Level 3 Instruments Only		Securities		Securities
(In thousands)		Available For Sale(1)		Available For Sale(1)
Beginning balance		$	16,706	$	18,808
Total gains (losses) (realized/unrealized):
Included in other comprehensive income			54		(279)
Principal repayments and amortization			(854)		(700)
Ending balance		$	15,906	$	17,829
(1)	Amounts mostly related to private label MBS.

		Six-Month Period Ended June 30,
		2019		2018
Level 3 Instruments Only		Securities		Securities
(In thousands)		Available For Sale(1)		Available For Sale(1)
Beginning balance		$	17,238	$	19,855
Total gains (realized/unrealized):
Included in other comprehensive income			31		193
Principal repayments and amortization			(1,363)		(2,219)
Ending balance		$	15,906	$	17,829
(1)	Amounts mostly related to private label MBS.

Impairment or Valuation Adjustments were Recorded for Assets Recognized at Fair Value

As of June 30, 2019, impairment or valuation adjustments were recorded for assets recognized at fair value on a non-recurring basis as shown in the following table:
								Losses recorded for the Quarter Ended		Losses recorded for the Six-Month Period Ended
		Carrying value as of June 30, 2019						June 30, 2019		June 30, 2019
		Level 1		Level 2		Level 3
(In thousands)
Loans receivable (1)		$	-	$	-	$	346,627	$	(1,934)	$	(10,569)
OREO (2)			-		-		118,081		(2,820)		(4,829)
Loans held for sale (3)			-		-		7,144		-		-
(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 period end. The value of these loans was primarily derived from broker price opinions that the Corporation considered.

As of June 30, 2018, impairment or valuation adjustments were recorded for assets recognized at fair value on a non-recurring basis as shown in the following table:
								Losses recorded		Losses recorded
									for the Quarter Ended		for the Six-Month Period Ended
		Carrying value as of June 30, 2018						June 30, 2018		June 30, 2018
		Level 1		Level 2		Level 3
(In thousands)
Loans receivable (1)		$	-	$	-	$	392,039	$	(3,869)	$	(17,972)
OREO (2)			-		-		143,355		(8,076)		(8,164)
Loans held for sale (3)			-		-		54,546		-		(5,830)
(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)	The value of these loans was primarily derived from external appraisals, adjusted for specific characteristics of the loans.

Estimated Fair Value and Carrying Value of Financial Instruments

The following tables present the carrying value, estimated fair value and estimated fair value level of the hierarchy of financial instruments as of June 30, 2019 and December 31, 2018:
	Total Carrying Amount in Statement of Financial Condition June 30, 2019		Fair Value Estimate June 30, 2019		Level 1		Level 2		Level 3
(In thousands)
Assets:
Cash and due from banks and money
market investments (amortized cost)	$	740,293	$	740,293	$	740,293	$	-	$	-
Investment securities available
for sale (fair value)		1,803,688		1,803,688		7,464		1,780,318		15,906
Investment securities held to maturity (amortized cost)		144,672		123,114		-		-		123,114
Equity Securities (fair value)		44,227		44,227		434		43,793		-
Loans held for sale (lower of cost or market)		33,630		34,399		-		27,255		7,144
Loans held for investment (amortized cost)		9,113,955
Less: allowance for loan and lease losses		(172,011)
Loans held for investment, net of allowance	$	8,941,944		8,654,929		-		-		8,654,929
Derivatives, included in assets (fair value)		410		410		-		410		-
Liabilities:
Deposits (amortized cost)		9,182,181		9,192,863		-		9,192,863		-
Securities sold under agreements
to repurchase (amortized cost)		100,000		123,244		-		123,244		-
Advances from FHLB (amortized cost)		740,000		742,319		-		742,319		-
Other borrowings (amortized cost)		184,150		184,453		-		-		184,453
Derivatives, included in liabilities (fair value)		481		481		-		481		-

	Total Carrying Amount in Statement of Financial Condition December 31, 2018		Fair Value Estimate December 31, 2018		Level 1		Level 2		Level 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)		1,942,568		1,942,568		7,456		1,917,874		17,238
Investment securities held to maturity (amortized cost)		144,815		125,658		-		-		125,658
Equity securities (fair value)		44,530		44,530		418		44,112		-
Loans held for sale (lower of cost or market)		43,186		43,831		-		27,720		16,111
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	$	8,661,761		8,213,144		-		-		8,213,144
Derivatives, included in assets (fair value)		1,018		1,018		-		1,018		-
Liabilities:
Deposits (amortized cost)		8,994,714		9,005,679		-		9,005,679		-
Securities sold under
agreements to repurchase (amortized cost)		150,086		169,366		-		169,366		-
Advances from FHLB (amortized cost)		740,000		730,253		-		730,253		-
Other borrowings (amortized cost)		184,150		177,201		-		-		177,201
Derivatives, included in liabilities (fair value)		1,000		1,000		-		1,000		-

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 June 30, 2019 are as follows:
	June 30, 2019
	Method	Inputs
Loans	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors
OREO	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Table Text Block]

The tables below present qualitative information for significant assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2019 and December 31, 2018:
	June 30, 2019
	Fair Value		Valuation Technique	Unobservable Input	Range		Weighted Average
(Dollars in thousands)					Minimum	Maximum
Investment securities available-for-sale:
Private label MBS	$	12,507	Discounted cash flows	Discount rate	13.8%	13.8%	13.8%
				Prepayment rate	3.3%	17.0%	9.1%
				Projected Cumulative Loss Rate	0.0%	6.6%	3.1%
Puerto Rico government obligations		2,899	Discounted cash flows	Discount rate	6.9%	6.9%	6.9%
				Prepayment rate	3.0%	3.0%	3.0%

	December 31, 2018
	Fair Value		Valuation Technique	Unobservable Input	Range		Weighted Average
(Dollars in thousands)					Minimum	Maximum
Investment securities available-for-sale:
Private label MBS	$	13,914	Discounted cash flows	Discount rate	14.5%	14.5%	14.5%
				Prepayment rate	3.3%	20.9%	11.4%
				Projected Cumulative Loss Rate	0.0%	6.8%	3.0%
Puerto Rico government obligations		2,824	Discounted cash flows	Discount rate	6.3%	6.3%	6.3%
				Prepayment rate	3.0%	3.0%	3.0%