Investment securities

9 Months Ended

Sep. 30, 2013

Available For Sale Securities Member

Note 5 – Investment securities available-for-sale

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities available-for-sale.

		At September 30, 2013
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	Within 1 year	$	15,000	$	-	$	-	$	15,000	0.07	%
	After 1 to 5 years		26,669		2,259		-		28,928	3.85
Total U.S. Treasury securities			41,669		2,259		-		43,928	2.49
Obligations of U.S. Government sponsored entities
	Within 1 year		43,130		182		-		43,312	1.47
	After 1 to 5 years		506,739		1,951		4,661		504,029	1.38
	After 5 to 10 years		736,292		157		19,785		716,664	1.53
	After 10 years		23,000		-		1,606		21,394	3.11
Total obligations of U.S. Government sponsored entities			1,309,161		2,290		26,052		1,285,399	1.50
Obligations of Puerto Rico, States and political subdivisions
	After 1 to 5 years		6,234		45		99		6,180	4.67
	After 5 to 10 years		7,820		-		107		7,713	4.88
	After 10 years		54,585		-		12,551		42,034	5.92
Total obligations of Puerto Rico, States and political subdivisions			68,639		45		12,757		55,927	5.69
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		5,865		101		-		5,966	1.74
	After 5 to 10 years		22,433		638		-		23,071	2.93
	After 10 years		2,535,653		25,049		55,995		2,504,707	2.05
Total collateralized mortgage obligations - federal agencies			2,563,951		25,788		55,995		2,533,744	2.06
Collateralized mortgage obligations - private label
	After 10 years		877		10		-		887	3.76
Total collateralized mortgage obligations - private label			877		10		-		887	3.76
Mortgage-backed securities
	Within 1 year		756		45		-		801	3.40
	After 1 to 5 years		7,235		348		-		7,583	4.85
	After 5 to 10 years		76,962		3,786		1,106		79,642	4.21
	After 10 years		1,053,560		56,873		2,855		1,107,578	3.96
Total mortgage-backed securities			1,138,513		61,052		3,961		1,195,604	3.98
Equity securities (without contractual maturity)			6,506		2,466		186		8,786	3.35
Other
	After 1 to 5 years		9,727		-		263		9,464	1.68
	After 10 years		2,802		77		-		2,879	3.60
Total other			12,529		77		263		12,343	2.11
Total investment securities available-for-sale		$	5,141,845	$	93,987	$	99,214	$	5,136,618	2.40	%

		At December 31, 2012
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	Within 1 year	$	7,018	$	20	$	-	$	7,038	1.67	%
	After 1 to 5 years		27,236		2,964		-		30,200	3.83
Total U.S. Treasury securities			34,254		2,984		-		37,238	3.39
Obligations of U.S. Government sponsored entities
	Within 1 year		460,319		7,614		-		467,933	3.82
	After 1 to 5 years		167,177		2,057		-		169,234	1.59
	After 5 to 10 years		456,480		3,263		592		459,151	1.74
Total obligations of U.S. Government sponsored entities			1,083,976		12,934		592		1,096,318	2.60
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year		5,220		26		-		5,246	3.08
	After 1 to 5 years		6,254		130		39		6,345	4.65
	After 5 to 10 years		5,513		-		36		5,477	3.79
	After 10 years		37,265		648		-		37,913	5.38
Total obligations of Puerto Rico, States and political subdivisions			54,252		804		75		54,981	4.91
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		4,927		35		-		4,962	1.48
	After 5 to 10 years		39,897		1,794		-		41,691	2.94
	After 10 years		2,270,184		50,740		512		2,320,412	2.21
Total collateralized mortgage obligations - federal agencies			2,315,008		52,569		512		2,367,065	2.22
Collateralized mortgage obligations - private label
	After 10 years		2,414		59		-		2,473	4.59
Total collateralized mortgage obligations - private label			2,414		59		-		2,473	4.59
Mortgage-backed securities
	Within 1 year		288		13		-		301	3.47
	After 1 to 5 years		3,838		191		-		4,029	4.12
	After 5 to 10 years		81,645		6,207		-		87,852	4.71
	After 10 years		1,297,585		93,509		129		1,390,965	4.18
Total mortgage-backed securities			1,383,356		99,920		129		1,483,147	4.21
Equity securities (without contractual maturity)			6,507		909		10		7,406	3.46
Other
	After 1 to 5 years		9,992		-		207		9,785	1.67
	After 5 to 10 years		18,032		3,675		-		21,707	11.00
	After 10 years		3,945		136		-		4,081	3.62
Total other			31,969		3,811		207		35,573	7.17
Total investment securities available-for-sale		$	4,911,736	$	173,990	$	1,525	$	5,084,201	2.94	%

The weighted average yield on investment securities available-for-sale is based on amortized cost; therefore, it does not give effect to changes in fair value.

Securities not due on a single contractual maturity date, such as mortgage-backed securities and collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations, mortgage-backed securities and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

There were no sales of investment securities available-for-sale during the nine months ended September 30, 2013. Proceeds from the sale of investments available-for-sale for the nine months ended September 30, 2012 were $8.0 million.

Gross realized gains and losses on the sale of investment securities available-for-sale were as follows:

	For the quarter ended September 30,				Nine months ended September 30,
(In thousands)		2013		2012		2013		2012
Gross realized gains	$	-	$	65	$	-	$	65
Gross realized losses		-		(2)		-		(350)
Net realized gains (losses) on sale of investment securities available-for-sale	$	-	$	63	$	-	$	(285)

The following tables present the Corporation's fair value and gross unrealized losses of investment securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

		At September 30, 2013
		Less than 12 months				12 months or more				Total
				Gross				Gross				Gross
		Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)		value		losses		value		losses		value		losses
Obligations of U.S. Government sponsored entities		$	999,439	$	25,867	$	3,252	$	185	$	1,002,691	$	26,052
Obligations of Puerto Rico, States and political
	subdivisions		50,477		12,683		1,971		74		52,448		12,757
Collateralized mortgage obligations - federal agencies			1,439,297		53,316		54,407		2,679		1,493,704		55,995
Mortgage-backed securities			57,035		3,928		902		33		57,937		3,961
Equity securities			1,642		186		-		-		1,642		186
Other			9,464		263		-		-		9,464		263
Total investment securities available-for-sale in an
	unrealized loss position	$	2,557,354	$	96,243	$	60,532	$	2,971	$	2,617,886	$	99,214

		At December 31, 2012
		Less than 12 months				12 months or more				Total
				Gross				Gross				Gross
		Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)		value		losses		value		losses		value		losses
Obligations of U.S. Government sponsored entities		$	139,278	$	592	$	-	$	-	$	139,278	$	592
Obligations of Puerto Rico, States and political
	subdivisions		6,229		44		2,031		31		8,260		75
Collateralized mortgage obligations - federal agencies			170,136		512		-		-		170,136		512
Mortgage-backed securities			7,411		90		983		39		8,394		129
Equity securities			-		-		51		10		51		10
Other			9,785		207		-		-		9,785		207
Total investment securities available-for-sale in an
	unrealized loss position	$	332,839	$	1,445	$	3,065	$	80	$	335,904	$	1,525

As of September 30, 2013, the available-for-sale investment portfolio reflects gross unrealized losses of approximately $99 million, driven by obligations from the U.S. Government sponsored entities, US Agency Collateralized Mortgage Obligations, and Obligations of the Puerto Rico Government and its political subdivisions. As part of its analysis for all US Agencies' securities, management considers the US Agency guarantee. The portfolio of Obligations of the Puerto Rico Government is comprised of securities with specific sources of income or revenues identified for repayments. The Corporation performs periodic credit quality review on these issuers.

Management evaluates investment securities for other-than-temporary (“OTTI”) declines in fair value on a quarterly basis. Once a decline in value is determined to be other-than-temporary, the value of a debt security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses. Also, for equity securities that are considered other-than-temporarily impaired, the excess of the security's carrying value over its fair value at the evaluation date is accounted for as a loss in the results of operations. The OTTI analysis requires management to consider various factors, which include, but are not limited to: (1) the length of time and the extent to which fair value has been less than the amortized cost basis, (2) the financial condition of the issuer or issuers, (3) actual collateral attributes, (4) the payment structure of the debt security and the likelihood of the issuer being able to make payments, (5) any rating changes by a rating agency, (6) adverse conditions specifically related to the security, industry, or a geographic area, and (7) management's intent to sell the debt security or whether it is more likely than not that the Corporation would be required to sell the debt security before a forecasted recovery occurs.

At September 30, 2013, management performed its quarterly analysis of all debt securities in an unrealized loss position. Based on the analyses performed, management concluded that no individual debt security was other-than-temporarily impaired as of such date. At September 30, 2013, the Corporation did not have the intent to sell debt securities in an unrealized loss position and it is not more likely than not that the Corporation will have to sell the investment securities prior to recovery of their amortized cost basis. Also, management evaluated the Corporation's portfolio of equity securities at September 30, 2013. No other-than-temporary impairment losses on equity securities were recorded during the quarters ended September 30, 2013 and September 30, 2012. Management has the intent and ability to hold the investments in equity securities that are at a loss position at September 30, 2013, for a reasonable period of time for a forecasted recovery of fair value up to (or beyond) the cost of these investments.

The following table states the name of issuers, and the aggregate amortized cost and fair value of the securities of such issuer (includes available-for-sale and held-to-maturity securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders' equity. This information excludes securities backed by the full faith and credit of the U.S. Government. Investments in obligations issued by a state of the U.S. and its political subdivisions and agencies, which are payable and secured by the same source of revenue or taxing authority, other than the U.S. Government, are considered securities of a single issuer.

		September 30, 2013				December 31, 2012

(In thousands)	Amortized cost		Fair value		Amortized cost		Fair value
FNMA	$	2,307,890	$	2,277,592	$	1,594,933	$	1,634,927
FHLB		339,910		331,972		520,127		528,287
Freddie Mac		1,178,266		1,172,096		1,198,969		1,221,863

Held To Maturity Securities Member

Investments [Abstract]

Investment [Text Block]

Note 6 – Investment securities held-to-maturity

		At September 30, 2013
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year	$	2,570	$	-	$	33	$	2,537	5.80	%
	After 1 to 5 years		22,060		-		1,143		20,917	3.73
	After 5 to 10 years		20,015		-		5,354		14,661	6.06
	After 10 years		69,088		54		13,721		55,421	2.43
Total obligations of Puerto Rico, States and political subdivisions			113,733		54		20,251		93,536	3.40
Collateralized mortgage obligations - federal agencies
	After 10 years		122		7		-		129	5.45
Total collateralized mortgage obligations - federal agencies			122		7		-		129	5.45
Other
	Within 1 year		26,000		-		913		25,087	3.41
	After 1 to 5 years		500		-		3		497	1.39
Total other			26,500		-		916		25,584	3.37
Total investment securities held-to-maturity		$	140,355	$	61	$	21,167	$	119,249	3.40	%

		At December 31, 2012
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year	$	2,420	$	8	$	-	$	2,428	5.74	%
	After 1 to 5 years		21,335		520		19		21,836	3.63
	After 5 to 10 years		18,780		866		5		19,641	6.03
	After 10 years		73,642		449		438		73,653	5.35
Total obligations of Puerto Rico, States and political subdivisions			116,177		1,843		462		117,558	5.15
Collateralized mortgage obligations - federal agencies
	After 10 years		140		4		-		144	5.00
Total collateralized mortgage obligations - federal agencies			140		4		-		144	5.00
Other
	Within 1 year		250		-		-		250	0.86
	After 1 to 5 years		26,250		31		-		26,281	3.40
Total other			26,500		31		-		26,531	3.38
Total investment securities held-to-maturity		$	142,817	$	1,878	$	462	$	144,233	4.82	%

Securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

The following tables present the Corporation's fair value and gross unrealized losses of investment securities held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2013 and December 31, 2012.

		At September 30, 2013
		Less than 12 months				12 months or more				Total
				Gross				Gross				Gross
		Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)		value		losses		value		losses		value		losses
Obligations of Puerto Rico, States and political subdivisions		$	61,797	$	13,515	$	12,039	$	6,736	$	73,836	$	20,251
Other			24,334		916		-		-		24,334		916
Total investment securities held-to-maturity in an unrealized
	loss position	$	86,131	$	14,431	$	12,039	$	6,736	$	98,170	$	21,167

		At December 31, 2012
		Less than 12 months				12 months or more				Total
				Gross				Gross				Gross
		Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)		value		losses		value		losses		value		losses

Obligations of Puerto Rico, States and political subdivisions		$	2,365	$	35	$	19,118	$	427	$	21,483	$	462
Total investment securities held-to-maturity in an unrealized
	loss position	$	2,365	$	35	$	19,118	$	427	$	21,483	$	462

As indicated in Note 5 to these consolidated financial statements, management evaluates investment securities for OTTI declines in fair value on a quarterly basis.

The “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-maturity at September 30, 2013 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. This includes $64 million of securities issued by three Municipalities of Puerto Rico that are payable from the real and personal property taxes collected within such municipalities. These bonds have seniority to the payment of operating cost and expenses of the municipality. The portfolio also includes approximately $40 million in securities for which the underlying source of payment is not the central government, but in which it provides a guarantee in the event of default. The Corporation performs periodic credit quality reviews on these issuers. The Corporation does not have the intent to sell securities held-to-maturity and it is not more likely than not that the Corporation will have to sell these investment securities prior to recovery of their amortized cost basis.