Investment securities

9 Months Ended

Sep. 30, 2014

Available For Sale Securities Member

Note 7 – 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, 2014 and December 31, 2013.

		At September 30, 2014
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	After 1 to 5 years	$	591,928	$	1,567	$	685	$	592,810	1.15	%
Total U.S. Treasury securities			591,928		1,567		685		592,810	1.15
Obligations of U.S. Government sponsored entities
	Within 1 year		32,119		417		-		32,536	1.61
	After 1 to 5 years		1,785,955		1,125		12,997		1,774,083	1.22
	After 5 to 10 years		150,621		80		6,124		144,577	1.53
	After 10 years		23,000		-		791		22,209	3.16
Total obligations of U.S. Government sponsored entities			1,991,695		1,622		19,912		1,973,405	1.27
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year		1,755		6		-		1,761	5.41
	After 1 to 5 years		3,790		41		16		3,815	4.96
	After 5 to 10 years		22,452		1		1,728		20,725	5.83
	After 10 years		48,830		55		9,068		39,817	6.23
Total obligations of Puerto Rico, States and political subdivisions			76,827		103		10,812		66,118	6.03
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		4,235		114		-		4,349	2.62
	After 5 to 10 years		26,540		1,020		7		27,553	2.90
	After 10 years		2,148,305		14,198		59,331		2,103,172	2.06
Total collateralized mortgage obligations - federal agencies			2,179,080		15,332		59,338		2,135,074	2.07
Collateralized mortgage obligations - private label
	After 10 years		6		-		-		6	0.05
Total collateralized mortgage obligations - private label			6		-		-		6	0.05
Mortgage-backed securities
	After 1 to 5 years		30,049		1,674		-		31,723	4.69
	After 5 to 10 years		180,944		8,262		377		188,829	3.41
	After 10 years		680,211		45,664		1,858		724,017	4.06
Total mortgage-backed securities			891,204		55,600		2,235		944,569	3.95
Equity securities (without contractual maturity)			3,178		1,220		157		4,241	6.01
Other
	After 1 to 5 years		9,368		-		51		9,317	1.69
	After 5 to 10 years		2,151		75		-		2,226	3.63
Total other			11,519		75		51		11,543	2.05
Total investment securities available-for-sale		$	5,745,437	$	75,519	$	93,190	$	5,727,766	2.04	%

		At December 31, 2013
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	After 1 to 5 years	$	26,474	$	2,008	$	-	$	28,482	3.85	%
Total U.S. Treasury securities			26,474		2,008		-		28,482	3.85
Obligations of U.S. Government sponsored entities
	Within 1 year		25,021		39		-		25,060	1.85
	After 1 to 5 years		1,087,453		1,678		12,715		1,076,416	1.26
	After 5 to 10 years		528,611		100		21,742		506,969	1.52
	After 10 years		23,000		-		2,240		20,760	3.12
Total obligations of U.S. Government sponsored entities			1,664,085		1,817		36,697		1,629,205	1.38
Obligations of Puerto Rico, States and political subdivisions
	After 1 to 5 years		6,228		45		85		6,188	4.64
	After 5 to 10 years		23,147		-		1,978		21,169	6.33
	After 10 years		48,803		29		9,812		39,020	5.84
Total obligations of Puerto Rico, States and political subdivisions			78,178		74		11,875		66,377	5.89
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		5,131		101		-		5,232	1.79
	After 5 to 10 years		31,613		921		-		32,534	2.98
	After 10 years		2,438,021		18,532		76,023		2,380,530	2.05
Total collateralized mortgage obligations - federal agencies			2,474,765		19,554		76,023		2,418,296	2.06
Collateralized mortgage obligations - private label
	After 10 years		509		4		-		513	3.78
Total collateralized mortgage obligations - private label			509		4		-		513	3.78
Mortgage-backed securities
	Within 1 year		419		24		-		443	3.14
	After 1 to 5 years		15,921		833		-		16,754	4.50
	After 5 to 10 years		62,373		3,058		1,214		64,217	4.12
	After 10 years		1,007,733		50,807		4,313		1,054,227	3.93
Total mortgage-backed securities			1,086,446		54,722		5,527		1,135,641	3.95
Equity securities (without contractual maturity)			3,178		1,109		171		4,116	4.06
Other
	After 1 to 5 years		9,638		-		141		9,497	1.68
	After 10 years		2,604		69		-		2,673	3.61
Total other			12,242		69		141		12,170	2.09
Total investment securities available-for-sale		$	5,345,877	$	79,357	$	130,434	$	5,294,800	2.30	%

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.

During the quarter ended September 30, 2014, the Corporation sold approximately $94.2 million in mortgage backed securities and collateralized mortgage obligations investment securities available-for-sale at the BPNA segment. The proceeds from this sale were $ 91.3 million. The Corporation realized a loss of $1.8 million on this transaction. There were no sales of investment securities available-for-sale during the nine months ended September 30, 2013.

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, 2014 and December 31, 2013.

		At September 30, 2014
		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
U.S. Treasury securities		$	315,946	$	685	$	-	$	-	$	315,946	$	685
Obligations of U.S. Government sponsored entities			1,103,884		10,762		466,218		9,150		1,570,102		19,912
Obligations of Puerto Rico, States and political
	subdivisions		25,773		2,254		35,107		8,558		60,880		10,812
Collateralized mortgage obligations - federal agencies			767,902		24,824		748,428		34,514		1,516,330		59,338
Mortgage-backed securities			10,230		42		49,805		2,193		60,035		2,235
Equity securities			-		-		1,671		157		1,671		157
Other			-		-		9,317		51		9,317		51
Total investment securities available-for-sale in an
	unrealized loss position	$	2,223,735	$	38,567	$	1,310,546	$	54,623	$	3,534,281	$	93,190

		At December 31, 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		$	1,326,866	$	32,457	$	69,257	$	4,240	$	1,396,123	$	36,697
Obligations of Puerto Rico, States and political
	subdivisions		54,256		11,685		8,330		190		62,586		11,875
Collateralized mortgage obligations - federal agencies			1,567,654		70,378		96,676		5,645		1,664,330		76,023
Mortgage-backed securities			105,455		4,762		7,225		765		112,680		5,527
Equity securities			1,657		171		-		-		1,657		171
Other			-		-		9,497		141		9,497		141
Total investment securities available-for-sale in an
	unrealized loss position	$	3,055,888	$	119,453	$	190,985	$	10,981	$	3,246,873	$	130,434

As of September 30, 2014, the available-for-sale investment portfolio reflects gross unrealized losses of approximately $93 million, driven by U.S. Agency Collateralized Mortgage Obligations, obligations from the U.S. Government sponsored entities, and obligations of the Puerto Rico Government and its political subdivisions. As part of its analysis for all US Agencies' securities, management considers the U.S. Agency guarantee.

In February 2014, the three principal nationally recognized rating agencies (Moody's Investor Services, Standard and Poor's and Fitch Ratings) downgraded the general-obligation bonds of the Commonwealth and other obligations of Puerto Rico instrumentalities to non-investment grade categories, citing concerns about financial flexibility and a reduced capacity to borrow in the financial markets. In July 2014, the Puerto Rico general obligations were further downgraded by the rating agencies, after the Commonwealth enacted a law that allowed certain Puerto Rico public corporations to restructure their debt. 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 reviews 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, 2014, 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, 2014, 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.

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, 2014				December 31, 2013

(In thousands)	Amortized cost		Fair value		Amortized cost		Fair value
FNMA	$	1,883,634	$	1,853,487	$	2,318,171	$	2,266,610
FHLB		887,135		880,513		336,933		326,220
Freddie Mac		1,292,586		1,282,920		1,434,346		1,418,216

Held To Maturity Securities Member

Investments [Abstract]

Investment [Text Block]

Note 8 – Investment securities held-to-maturity

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities held-to-maturity at September 30, 2014 and December 31, 2013.

		At September 30, 2014
				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	$	12,740	$	-	$	5	$	12,735	2.11	%
	After 1 to 5 years		12,830		-		412		12,418	5.95
	After 5 to 10 years		21,325		-		5,240		16,085	6.09
	After 10 years		64,397		1,376		5,498		60,275	2.22
Total obligations of Puerto Rico, States and political subdivisions			111,292		1,376		11,155		101,513	3.38
Collateralized mortgage obligations - federal agencies
	After 5 to 10 years		101		6		-		107	5.45
Total collateralized mortgage obligations - federal agencies			101		6		-		107	5.45
Other
	Within 1 year		250		-		-		250	1.20
	After 1 to 5 years		1,250		-		-		1,250	1.12
Total other			1,500		-		-		1,500	1.13
Total investment securities held-to-maturity		$	112,893	$	1,382	$	11,155	$	103,120	3.35	%

		At December 31, 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	$	12,570	$	-	$	12	$	12,558	2.06	%
	After 1 to 5 years		12,060		-		984		11,076	5.91
	After 5 to 10 years		20,015		-		5,251		14,764	6.06
	After 10 years		69,236		257		13,179		56,314	2.43
Total obligations of Puerto Rico, States and political subdivisions			113,881		257		19,426		94,712	3.40
Collateralized mortgage obligations - federal agencies
	After 10 years		115		7		-		122	5.45
Total collateralized mortgage obligations - federal agencies			115		7		-		122	5.45
Other
	Within 1 year		26,000		-		645		25,355	3.41
	After 1 to 5 years		500		-		1		499	1.33
Total other			26,500		-		646		25,854	3.37
Total investment securities held-to-maturity		$	140,496	$	264	$	20,072	$	120,688	3.40	%

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, 2014 and December 31, 2013.

		At September 30, 2014
		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		$	-	$	-	$	71,397	$	11,155	$	71,397	$	11,155
Total investment securities held-to-maturity in an unrealized
	loss position	$	-	$	-	$	71,397	$	11,155	$	71,397	$	11,155

		At December 31, 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		$	60,028	$	12,180	$	13,044	$	7,246	$	73,072	$	19,426
Other			24,604		646		-		-		24,604		646
Total investment securities held-to-maturity in an unrealized
	loss position	$	84,632	$	12,826	$	13,044	$	7,246	$	97,676	$	20,072

As indicated in Note 7 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, 2014 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. This includes $61 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 $41 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. In February 2014, the three principal nationally recognized rating agencies (Moody's Investor Services, Standard and Poor's and Fitch Ratings) downgraded the general-obligation bonds of the Commonwealth and other obligations of Puerto Rico instrumentalities to non-investment grade categories, citing concerns about financial flexibility and a reduced capacity to borrow in the financial markets. In July 2014, the Puerto Rico general obligations were further downgraded by the rating agencies, after the Commonwealth enacted a law that allowed certain Puerto Rico public corporations to restructure their debt. 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.