INVESTMENT SECURITIES (Tables)

3 Months Ended

Sep. 30, 2014

Investment Securities Available for Sale

		September 30, 2014
		Amortized cost		Noncredit Loss Component of OTTI Recorded in OCI								Fair value		Weighted average yield%
								Gross Unrealized
								gains			losses
		(Dollars in thousands)

U.S. Treasury securities:
	Due within one year	$	7,496	$	-	$	2		$	-		$	7,498	0.11

Obligations of U.S.
government-sponsored
agencies:
After 1 to 5 years			174,161		-		1			4,225			169,937	1.18
After 5 to 10 years			133,121		-		9			4,538			128,592	1.52
Puerto Rico government
obligations:
After 1 to 5 years			39,816		-		-			10,006			29,810	4.49
After 5 to 10 years			885		-		1			-			886	5.20
After 10 years			20,446		-		-			4,753			15,693	5.83
United States and Puerto Rico
government obligations			375,925		-		13			23,522			352,416	1.89
Mortgage-backed securities:
FHLMC certificates:
After 10 years			325,487		-		860			4,265			322,082	2.19

GNMA certificates:
After 1 to 5 years			49		-		1			-			50	3.34
After 5 to 10 years			1,534		-		84			-			1,618	3.28
After 10 years			375,148		-		20,387			-			395,535	3.83
			376,731		-		20,472			-			397,203	3.83
FNMA certificates:
After 1 to 5 years			4,639		-		201			-			4,840	3.44
After 5 to 10 years			9,640		-		467			15			10,092	3.49
After 10 years			862,358		-		5,736			13,720			854,374	2.36
			876,637		-		6,404			13,735			869,306	2.38


Other mortgage pass-through
trust certificates:
Over 5 to 10 years			115		-		1			-			116	7.27
After 10 years			48,774		12,774		-			-			36,000	2.17
			48,889		12,774		1			-			36,116	2.17
Total mortgage-backed
securities			1,627,744		12,774		27,737			18,000			1,624,707	2.67
Equity securities (without
contractual maturity) (1)			35		-		-			21			14	-
Total investment securities
available for sale		$	2,003,704	$	12,774	$	27,750		$	41,543		$	1,977,137	2.52

(1)	Represents common shares of another financial institution in Puerto Rico.

		December 31, 2013
		Amortized cost		Noncredit Loss Component of OTTI Recorded in OCI								Fair value		Weighted average yield%
								Gross Unrealized
								gains			losses


U.S. Treasury securities:
	Due within one year	$	7,498	$	-	$	1		$	-		$	7,499	0.12
Obligations of U.S.
government-sponsored
agencies:
	After 1 to 5 years		50,000		-		-			1,408			48,592	1.05
	After 5 to 10 years		214,271		-		-			13,368			200,903	1.31
Puerto Rico government
obligations:
	Due within one year		10,000		-		-			210			9,790	3.50
	After 5 to 10 years		40,699		-		-			12,962			27,737	4.51
	After 10 years		20,309		-		-			6,506			13,803	5.82
United States and Puerto Rico
government obligations			342,777		-		1			34,454			308,324	1.96
Mortgage-backed securities:
FHLMC certificates:
	After 10 years		332,766		-		133			10,712			322,187	2.16
GNMA certificates:
	After 1 to 5 years		86		-		4			-			90	3.48
	After 5 to 10 years		800		-		37			-			837	2.47
	After 10 years		425,589		-		18,492			-			444,081	3.82
			426,475		-		18,533			-			445,008	3.82
FNMA certificates:
	After 1 to 5 years		1,389		-		84			-			1,473	4.82
	After 5 to 10 years		7,765		-		389			-			8,154	4.09
	After 10 years		882,798		-		2,984			33,626			852,156	2.36
			891,952		-		3,457			33,626			861,783	2.38
Collateralized mortgage
	obligations issued or
	guaranteed by the FHLMC:
	After 1 to 5 years		82		-		-			1			81	3.01
Other mortgage pass-through
trust certificates:
	Over 5 to 10 years		127		-		1			-			128	7.27
	After 10 years		55,048		14,310		-			-			40,738	2.24
			55,175		14,310		1			-			40,866	2.24
Total mortgage-backed
	securities		1,706,450		14,310		22,124			44,339			1,669,925	2.69
Equity securities (without
	contractual maturity) (1)		35		-		-			2			33	-
Total investment securities
	available for sale	$	2,049,262	$	14,310	$	22,125		$	78,795		$	1,978,282	2.57

(1)	Represents common shares of another financial institution in Puerto Rico.

Available-for-Sale Investments' Fair Value and Gross Unrealized Losses

	As of September 30, 2014
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
		(In thousands)
Debt securities:
Puerto Rico government obligations	$	-	$	-	$	45,503	$	14,759	$	45,503	$	14,759
U.S. government agencies obligations		34,617		132		255,600		8,631		290,217		8,763
Mortgage-backed securities:
FNMA		71,267		326		558,555		13,409		629,822		13,735
FHLMC		48,806		224		189,757		4,041		238,563		4,265
Other mortgage pass-through trust
certificates		-		-		36,000		12,774		36,000		12,774
Equity securities		14		21		-		-		14		21
	$	154,704	$	703	$	1,085,415	$	53,614	$	1,240,119	$	54,317


	As of December 31, 2013
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
		(In thousands)
Debt securities:
Puerto Rico government obligations	$	23,156	$	5,977	$	28,174	$	13,701	$	51,330	$	19,678
U.S. government agencies obligations		175,369		8,913		74,126		5,863		249,495		14,776
Mortgage-backed securities:
FNMA		748,215		33,626		-		-		748,215		33,626
FHLMC		286,208		10,712		-		-		286,208		10,712
Collateralized mortgage obligations
issued or guaranteed by FHLMC		-		-		81		1		81		1
Other mortgage pass-through trust
certificates		-		-		40,738		14,310		40,738		14,310
Equity securities		33		2		-		-		33		2
	$	1,232,981	$	59,230	$	143,119	$	33,875	$	1,376,100	$	93,105

OTTI Losses on Available-for-Sale Debt Securities

	Private Label MBS				Private Label MBS
	Quarter ended September 30,				Nine-Month Period Ended September 30,
	2014		2013		2014		2013
(In thousands)
Total other-than-temporary impairment losses	$	-	$	-	$	-	$	-
Portion of other-than-temporary impairment losses previously recognized in OCI		(245)		-		(245)		(117)
Net impairment losses recognized in earnings	$	(245)	$	-	$	(245)	$	(117)

Roll-Forward of Credit Losses on Debt Securities Held by Corporation

The following table summarizes the roll-forward of credit losses on debt securities held by the Corporation for which a portion of an OTTI is recognized in OCI:
	Quarter ended September 30,				Nine-Month Period Ended September 30,
	2014		2013		2014		2013
(In thousands)
Credit losses at the beginning of the period	$	5,389	$	5,389	$	5,389	$	5,272
Additions:
Credit losses on debt securities for which an OTTI was
previously recognized		245		-		245		117

Ending balance of credit losses on debt securities held for
which a portion of an OTTI was recognized in OCI	$	5,634	$	5,389	$	5,634	$	5,389

Significant Assumptions in Valuation of Private Label MBS

	September 30, 2014		December 31, 2013
	Weighted		Weighted
	Average	Range	Average	Range

Discount rate	14.5%	14.5%	14.5%	14.5%
Prepayment rate	31%	19.21%-100.00%	29%	15.86%-100.00%
Projected Cumulative Loss Rate	7.6%	0.94%-80.00%	6.8%	0.58%-38.16%

No OTTI losses on equity securities held in the available-for-sale investment portfolio were recognized in the first nine months of 2014. The Corporation recorded OTTI losses of $42 thousand on equity securities held in the available-for-sale investment portfolio in the first nine months of 2013.

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

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- Definition

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

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