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Fair value of financial instruments | 9 Months Ended
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Sep. 30, 2018
Fair Value Disclosures |
Fair Value of Financial Instruments | Note 26 – Fair value of financial instruments The fair value of financial instruments is the amount at which an asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. For those financial instruments with no quoted market prices available, fair values have been estimated using present value calculations or ot her valuation techniques, as well as management’s best judgment with respect to current economic conditions, including discount rates, estimates of future cash flows, and prepayment assumptions. Many of these estimates involve various assumptions and may v ary significantly from amounts that could be realized in actual transactions. The fair values reflected herein have been determined based on the prevailing rate environment at September 30, 2018 and December 31, 2017, as applicable. In different interest rate environments, fair value estimates can differ significantly, especially for certain fixed rate financial instruments. In addition, the fair values presented do not attempt to estimate the value of the Corporation’s fee generating businesses and antic ipated future business activities, that is, they do not represent the Corporation’s value as a going concern. There have been no changes in the Corporation’s valuation methodologies and inputs used to estimate the fair values for each class of financial as sets and liabilities not measured at fair value, but for which the fair value is disclosed from those disclosed in the 2017 Form 10-K. The following tables present the carrying amount and estimated fair values of financial instruments with their corres ponding level in the fair value hierarchy. The aggregate fair value amounts of the financial instruments disclosed do not represent management’s estimate of the underlying value of the Corporation.
|  | September 30, 2018
| Carrying |  |  |  |
(In thousands) | amount | Level 1 | Level 2 | Level 3 | Fair value
Financial Assets: |  |  |  |  |  |  |  |  |  |
Cash and due from banks | $ | 400,949 | $ | 400,949 | $ | - | $ | - | $ | 400,949
Money market investments |  | 4,609,061 |  | 4,597,827 |  | 11,234 |  | - |  | 4,609,061
Trading account debt securities, excluding |  |  |  |  |  |  |  |  |  |
| derivatives[1] |  | 37,731 |  | 5,183 |  | 31,363 |  | 1,185 |  | 37,731
Debt securities available-for-sale[1] |  | 13,047,617 |  | 2,496,517 |  | 10,549,837 |  | 1,263 |  | 13,047,617
Debt securities held-to-maturity: |  |  |  |  |  |  |  |  |  |
| Obligations of Puerto Rico, States |  |  |  |  |  |  |  |  |  |
| and political subdivisions | $ | 89,121 | $ | - | $ | - | $ | 92,959 | $ | 92,959
| Collateralized mortgage |  |  |  |  |  |  |  |  |  |
| obligation-federal agency |  | 56 |  | - |  | - |  | 59 |  | 59
| Trust preferred securities |  | 11,561 |  | - |  | 11,561 |  | - |  | 11,561
| Other |  | 500 |  | - |  | 495 |  | - |  | 495
Total debt securities |  |  |  |  |  |  |  |  |  |
| held-to-maturity | $ | 101,238 | $ | - | $ | 12,056 | $ | 93,018 | $ | 105,074
Equity securities: |  |  |  |  |  |  |  |  |  |
| FHLB stock | $ | 53,562 | $ | - | $ | 53,562 | $ | - | $ | 53,562
| FRB stock |  | 88,945 |  | - |  | 88,945 |  | - |  | 88,945
| Other investments |  | 15,455 |  | - |  | 14,152 |  | 6,082 |  | 20,234
Total equity securities | $ | 157,962 | $ | - | $ | 156,659 | $ | 6,082 | $ | 162,741
Loans held-for-sale | $ | 51,742 | $ | - | $ | - | $ | 52,151 | $ | 52,151
Loans not covered under loss sharing |  |  |  |  |  |  |  |  |  |
| agreement with the FDIC |  | 25,878,450 |  | - |  | - |  | 23,709,245 |  | 23,709,245
Mortgage servicing rights |  | 162,779 |  | - |  | - |  | 162,779 |  | 162,779
Derivatives |  | 18,977 |  | - |  | 18,977 |  | - |  | 18,977
|  | September 30, 2018
| Carrying |  |  |  |
(In thousands) | amount | Level 1 | Level 2 | Level 3 | Fair value
Financial Liabilities: |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |
| Demand deposits | $ | 32,236,547 | $ | - | $ | 32,236,547 | $ | - | $ | 32,236,547
| Time deposits |  | 7,412,280 |  | - |  | 7,187,889 |  | - |  | 7,187,889
Total deposits | $ | 39,648,827 | $ | - | $ | 39,424,436 | $ | - | $ | 39,424,436
Assets sold under agreements to |  |  |  |  |  |  |  |  |  |
| repurchase | $ | 300,116 | $ | - | $ | 300,150 | $ | - | $ | 300,150
Other short-term borrowings[2] | $ | 1,200 | $ | - | $ | 1,200 | $ | - | $ | 1,200
Notes payable: |  |  |  |  |  |  |  |  |  |
| FHLB advances | $ | 599,755 | $ | - | $ | 591,397 | $ | - | $ | 591,397
| Unsecured senior debt securities |  | 742,159 |  | - |  | 763,863 |  | - |  | 763,863
| Junior subordinated deferrable |  |  |  |  |  |  |  |  |  |
| interest debentures (related to |  |  |  |  |  |  |  |  |  |
| trust preferred securities) |  | 384,869 |  | - |  | 371,913 |  | - |  | 371,913
| Others |  | 17,904 |  | - |  | - |  | 17,904 |  | 17,904
Total notes payable | $ | 1,744,687 | $ | - | $ | 1,727,173 | $ | 17,904 | $ | 1,745,077
Derivatives | $ | 16,554 | $ | - | $ | 16,554 | $ | - | $ | 16,554
[1] Refer to Note 25 to the C onsolidated F inancial S tatements for the fair value by class of financial asset and its hierarchy level. [2] Refer to Note 17 to the Consolidated F inancial S tatements for the composition of other short-term borrowings.
|  | December 31, 2017
| Carrying |  |  |  |
(In thousands) | amount | Level 1 | Level 2 | Level 3 | Fair value
Financial Assets: |  |  |  |  |  |  |  |  |  |
Cash and due from banks | $ | 402,857 | $ | 402,857 | $ | - | $ | - | $ | 402,857
Money market investments |  | 5,255,119 |  | 5,245,346 |  | 9,773 |  | - |  | 5,255,119
Trading account debt securities, excluding |  |  |  |  |  |  |  |  |  |
| derivatives[1] |  | 33,746 |  | 261 |  | 32,384 |  | 1,101 |  | 33,746
Debt securities available-for-sale[1] |  | 10,176,923 |  | 503,385 |  | 9,672,250 |  | 1,288 |  | 10,176,923
Debt securities held-to-maturity: |  |  |  |  |  |  |  |  |  |
| Obligations of Puerto Rico, States |  |  |  |  |  |  |  |  |  |
| and political subdivisions | $ | 92,754 | $ | - | $ | - | $ | 83,239 | $ | 83,239
| Collateralized mortgage |  |  |  |  |  |  |  |  |  |
| obligation-federal agency |  | 67 |  | - |  | - |  | 71 |  | 71
| Trust preferred securities |  | 13,198 |  | - |  | 13,198 |  | - |  | 13,198
| Other |  | 1,000 |  | - |  | 750 |  | 243 |  | 993
Total debt securities |  |  |  |  |  |  |  |  |  |
| held-to-maturity | $ | 107,019 | $ | - | $ | 13,948 | $ | 83,553 | $ | 97,501
Equity securities: |  |  |  |  |  |  |  |  |  |
| FHLB stock | $ | 57,819 | $ | - | $ | 57,819 | $ | - | $ | 57,819
| FRB stock |  | 94,308 |  | - |  | 94,308 |  | - |  | 94,308
| Other investments |  | 12,976 |  | - |  | 11,076 |  | 5,214 |  | 16,290
Total equity securities | $ | 165,103 | $ | - | $ | 163,203 | $ | 5,214 | $ | 168,417
Loans held-for-sale | $ | 132,395 | $ | - | $ | - | $ | 134,839 | $ | 134,839
Loans not covered under loss sharing |  |  |  |  |  |  |  |  |  |
| agreement with the FDIC |  | 23,702,612 |  | - |  | - |  | 21,883,003 |  | 21,883,003
Loans covered under loss sharing |  |  |  |  |  |  |  |  |  |
| agreements with the FDIC |  | 484,030 |  | - |  | - |  | 465,893 |  | 465,893
FDIC loss share asset |  | 45,192 |  | - |  | - |  | 33,323 |  | 33,323
Mortgage servicing rights |  | 168,031 |  | - |  | - |  | 168,031 |  | 168,031
Derivatives |  | 16,719 |  | - |  | 16,719 |  | - |  | 16,719
|  | December 31, 2017
| Carrying |  |  |  |
(In thousands) | amount | Level 1 | Level 2 | Level 3 | Fair value
Financial Liabilities: |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |
| Demand deposits | $ | 27,938,630 | $ | - | $ | 27,938,630 | $ | - | $ | 27,938,630
| Time deposits |  | 7,514,878 |  | - |  | 7,381,232 |  | - |  | 7,381,232
Total deposits | $ | 35,453,508 | $ | - | $ | 35,319,862 | $ | - | $ | 35,319,862
Assets sold under agreements to |  |  |  |  |  |  |  |  |  |
| repurchase | $ | 390,921 | $ | - | $ | 390,752 | $ | - | $ | 390,752
Other short-term borrowings[2] | $ | 96,208 | $ | - | $ | 96,208 | $ | - | $ | 96,208
Notes payable: |  |  |  |  |  |  |  |  |  |
| FHLB advances | $ | 631,490 | $ | - | $ | 628,839 | $ | - | $ | 628,839
| Unsecured senior debt |  | 446,873 |  | - |  | 463,554 |  | - |  | 463,554
| Junior subordinated deferrable |  |  |  |  |  |  |  |  |  |
| interest debentures (related to |  |  |  |  |  |  |  |  |  |
| trust preferred securities) |  | 439,351 |  | - |  | 406,883 |  | - |  | 406,883
| Others |  | 18,642 |  | - |  | - |  | 18,642 |  | 18,642
Total notes payable | $ | 1,536,356 | $ | - | $ | 1,499,276 | $ | 18,642 | $ | 1,517,918
Derivatives | $ | 14,431 | $ | - | $ | 14,431 | $ | - | $ | 14,431
Contingent consideration | $ | 164,858 | $ | - | $ | - | $ | 164,858 | $ | 164,858
[1] Refer to Note 25 to the Consolidated F inancial S tatements for the fair value by class of financial asset and its hierarchy level. [2] Refer to Note 17 to the C onsolidated F inancial S tatements for the composition of other short-term borrowings. The notional amount of commitments to extend credit at September 30, 2018 and December 31, 2017 is $ 7.5 billion and $ 7.6 billion, respectively, and represents the unused portion of credit facilities granted to customers. The notional amount of letters of credit at September 30, 2018 and December 31, 2017 is $ 33 million and $ 36 million respectively, and represents the contractual amo unt that is required to be paid in the event of nonperformance. The fair value of commitments to extend credit and letters of credit, which are based on the fees charged to enter into those agreements, are not material to Popular’s financial statements.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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