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FAIR VALUE (Tables) | 6 Months Ended
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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%

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- Definition Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=99377789&loc=d3e19207-110258 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (bbb) -URI http://asc.fasb.org/extlink&oid=99377789&loc=d3e19207-110258 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=99377789&loc=d3e19207-110258 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=99377789&loc=d3e19190-110258 + Details
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