INVESTMENT SECURITIES (Tables)

9 Months Ended

Sep. 30, 2017

Investment Securities Available for Sale

		September 30, 2017
		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:
	After 1 to 5 years	$	7,450	$	-	$	-	$	18	$	7,432	1.29

Obligations of U.S.
government-sponsored
agencies:
Due within one year			97,465		-		-		160		97,305	1.05
After 1 to 5 years			334,476		-		138		1,873		332,741	1.39
After 5 to 10 years			16,943		-		29		164		16,808	2.01
After 10 years			41,833		-		-		193		41,640	1.60

Puerto Rico government
obligations:
After 10 years			7,994		-		72		1,295		6,771	5.01

United States and Puerto Rico
government obligations			506,161		-		239		3,703		502,697	1.42

Mortgage-backed securities:
FHLMC certificates:
After 5 to 10 years			20,074		-		115		-		20,189	2.15
After 10 years			267,081		-		550		3,555		264,076	2.17
			287,155		-		665		3,555		284,265	2.17

GNMA certificates:
After 1 to 5 years			91		-		2		-		93	3.07
After 5 to 10 years			75,270		-		1,621		-		76,891	3.05
After 10 years			150,231		-		7,683		56		157,858	3.81
			225,592		-		9,306		56		234,842	3.56
FNMA certificates:
Due within one year			12		-		-		-		12	1.85
After 1 to 5 years			19,563		-		418		20		19,961	2.61
After 5 to 10 years			56,234		-		6		489		55,751	1.86
After 10 years			579,082		-		4,761		4,944		578,899	2.42
			654,891		-		5,185		5,453		654,623	2.38
Collateralized mortgage obligations
guaranteed by the FHLMC
and GNMA:
After 5 to 10 years			18,874		-		28		-		18,902	1.88
After 10 years			36,814		-		181		-		36,995	1.90
			55,688		-		209		-		55,897	1.89
Other mortgage pass-through
trust certificates:
After 10 years			23,620		5,990		-		-		17,630	2.38
			23,620		5,990		-		-		17,630	2.38
Total mortgage-backed
securities			1,246,946		5,990		15,365		9,064		1,247,257	2.52

Other
Due within one year			100		-		-		-		100	1.49

Equity securities ⁽¹⁾			422		-		-		4		418	2.08

Total investment securities
available for sale		$	1,753,629	$	5,990	$	15,604	$	12,771	$	1,750,472	2.20

⁽¹⁾	Equity securities consisted of an investment in a Community Reinvestment Act Qualified Investment Fund.

		December 31, 2016
		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	$	7,508	$	-	$	1	$	-	$	7,509	0.57

Obligations of U.S.
government-sponsored
agencies:
	After 1 to 5 years		440,438		-		142		2,912		437,668	1.33
	After 5 to 10 years		16,942		-		9		256		16,695	1.91
	After 10 years		44,145		-		8		166		43,987	1.12

Puerto Rico government
obligations:
	After 1 to 5 years		21,422		12,222		-		-		9,200	-
	After 10 years		21,245		2,028		73		1,662		17,628	1.86

United States and Puerto Rico
government obligations			551,700		14,250		233		4,996		532,687	1.29

Mortgage-backed securities:

FHLMC certificates:
	After 5 to 10 years		5,908		-		72		-		5,980	2.25
	After 10 years		314,906		-		261		5,827		309,340	2.17
			320,814		-		333		5,827		315,320	2.17
GNMA certificates:
	After 1 to 5 years		83		-		3		-		86	3.82
	After 5 to 10 years		91,744		-		1,635		92		93,287	3.06
	After 10 years		123,548		-		9,706		-		133,254	4.36
			215,375		-		11,344		92		226,627	3.81
FNMA certificates:
	Due within one year		152		-		2		-		154	4.71
	After 1 to 5 years		24,409		-		435		-		24,844	2.18
	After 5 to 10 years		17,181		-		-		261		16,920	1.87
	After 10 years		690,625		-		4,136		9,406		685,355	2.35
			732,367		-		4,573		9,667		727,273	2.33

Collateralized mortgage
	obligations issued or guaranteed
	by the FHLMC and GNMA:
	After 1 to 5 years		19,851		-		4		31		19,824	1.42
	After 10 years		39,120		-		-		132		38,988	1.44
			58,971		-		4		163		58,812	1.43

Other mortgage pass-through
trust certificates:
	After 10 years		28,815		8,122		-		-		20,693	2.40

Total mortgage-backed securities			1,356,342		8,122		16,254		15,749		1,348,725	2.49

Other
	After 1 to 5 years		100		-		-		-		100	1.50

Equity securities (1)			415		-		-		7		408	2.44

Total investment securities
	available for sale	$	1,908,557	$	22,372	$	16,487	$	20,752	$	1,881,920	2.14


⁽¹⁾	Equity securities consisted of an investment in a Community Reinvestment Act Qualified Investment Fund.

OTTI Losses on Available-for-Sale Debt Securities


		Quarter Ended				Nine-Month Period Ended
		September 30,				September 30,
		2017		2016		2017		2016
(In thousands)
Total other-than-temporary impairment losses		$	-	$	-	$	(12,231)	$	(1,845)
Portion of other-than-temporary impairment recognized in OCI			-		-		-		(4,842)
Net impairment losses recognized in earnings (1)		$	-	$	-	$	(12,231)	$	(6,687)

(1)	For the nine-month periods ended September 30, 2017 and 2016, approximately $12.2 million and $6.3 million, respectively, of the credit impairment recognized in earnings consisted of credit losses on Puerto Rico Government debt securities that were sold in the second quarter of 2017, as further discussed below. For the nine-month period ended September 30, 2016, $0.4 million of the credit impairment recognized in earnings was associated with credit losses on private label MBS.

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

The following tables summarize the roll-forward of credit losses on debt securities held by the Corporation for which a portion of an OTTI is recognized in OCI:

	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments		Credit impairments		Credit loss
	June 30,		recognized in earnings		recognized in earnings on		reductions for		September 30,
	2017		on securities not		securities that have been		securities sold		2017
	Balance		previously impaired		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Private label MBS	$	6,792	$	-	$	-	$	-	$	6,792
Total OTTI credit losses for available-for-sale
debt securities	$	6,792	$	-	$	-	$	-	$	6,792


	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments		Credit loss
	December 31,		recognized in earnings on		reductions for		September 30,
	2016		securities that have been		securities sold		2017
	Balance		previously impaired		during the period		Balance
(In thousands)
Available-for-sale securities
Puerto Rico government obligations	$	22,189	$	12,231	$	(34,420)	$	-
Private label MBS		6,792		-		-		6,792
Total OTTI credit losses for available-for-sale
debt securities	$	28,981	$	12,231	$	(34,420)	$	6,792


	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments		Credit impairments
	June 30,		recognized in earnings		recognized in earnings on		September 30,
	2016		on securities not		securities that have been		2016
	Balance		previously impaired		previously impaired		Balance
(In thousands)
Available-for-sale securities
Puerto Rico government obligations	$	22,189	$	-	$	-	$	22,189
Private label MBS		6,792		-		-		6,792
Total OTTI credit losses for available-for-sale
debt securities	$	28,981	$	-	$	-	$	28,981


	Cumulative OTTI credit losses recognized in earnings on securities still held
			Credit impairments		Credit impairments
	December 31,		recognized in earnings		recognized in earnings on		September 30,
	2015		on securities not		securities that have been		2016
	Balance		previously impaired		previously impaired		Balance
(In thousands)
Available-for-sale securities
Puerto Rico government obligations	$	15,889	$	-	$	6,300	$	22,189
Private label MBS		6,405		-		387		6,792
Total OTTI credit losses for available-for-sale
debt securities	$	22,294	$	-	$	6,687	$	28,981

Significant Assumptions in Valuation of Private Label MBS

	As of		As of
	September 30, 2017		December 31, 2016
	Weighted		Weighted
	Average	Range	Average	Range

Discount rate	14.2%	14.2%	14.1%	12.88% - 14.43%
Prepayment rate	16.5%	12.0% - 29.0%	13.8%	6.5% - 22.5%
Projected Cumulative Loss Rate	4%	0.1% - 7.1%	4%	0.2% - 8.6%

Held To Maturity Securities [Text Block]

		September 30, 2017
		Amortized cost						Fair value		Weighted average yield%
				Gross Unrealized
				gains		losses

Puerto Rico Municipal Bonds:
	After 1 to 5 years	$	3,853	$	-	$	146	$	3,707	5.38
	After 5 to 10 years		39,523		-		2,775		36,748	5.27
	After 10 years		107,251		-		17,581		89,670	4.88
Total investment securities
	held to maturity	$	150,627	$	-	$	20,502	$	130,125	4.99

		December 31, 2016
		Amortized cost						Fair value		Weighted average yield%
				Gross Unrealized
				gains		losses

Puerto Rico Municipal Bonds:
	After 1 to 5 years	$	1,136	$	-	$	20	$	1,116	5.38
	After 5 to 10 years		10,741		-		718		10,023	4.47
	After 10 years		144,313		-		22,693		121,620	4.74
Total investment securities
	held to maturity	$	156,190	$	-	$	23,431	$	132,759	4.73

Held to maturity Securities [Member]

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

	As of September 30, 2017
	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 Municipal Bonds	$	-	$	-	$	130,125	$	20,502	$	130,125	$	20,502


	As of December 31, 2016
	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 Municipal Bonds	$	-	$	-	$	132,759	$	23,431	$	132,759	$	23,431

Available for sale Securities [Member]

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

	As of September 30, 2017
	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	$	-	$	-	$	2,609	$	1,295	$	2,609	$	1,295
U.S. Treasury and U.S. government
agencies obligations		368,367		1,815		89,811		593		458,178		2,408
Mortgage-backed securities:
FNMA		320,072		2,839		113,145		2,614		433,217		5,453
FHLMC		133,966		1,394		75,028		2,161		208,994		3,555
GNMA		10,966		56		-		-		10,966		56
Other mortgage pass-through trust
certificates		-		-		17,630		5,990		17,630		5,990
Equity securities		406		4		6		-		412		4
	$	833,777	$	6,108	$	298,229	$	12,653	$	1,132,006	$	18,761


	As of December 31, 2016
	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	$	-	$	-	$	22,609	$	15,912	$	22,609	$	15,912
U.S. Treasury and U.S. government
agencies obligations		469,046		3,334		-		-		469,046		3,334
Mortgage-backed securities:
FNMA		519,008		9,667		-		-		519,008		9,667
FHLMC		244,839		5,827		-		-		244,839		5,827
GNMA		43,388		92		-		-		43,388		92
Collateralized mortgage obligations
issued or guaranteed by FHLMC and GNMA		55,309		163		-		-		55,309		163
Other mortgage pass-through trust
certificates		-		-		20,693		8,122		20,693		8,122
Equity securities		408		7		-		-		408		7
	$	1,331,998	$	19,090	$	43,302	$	24,034	$	1,375,300	$	43,124

- 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.

+ References + Details

- Definition

Tabular disclosure of all investments in certain debt and equity securities for which the entity has the positive intent and ability to hold until maturity.

+ References + Details