XML 169 R18.htm IDEA: XBRL DOCUMENT

Investment securities

3 Months Ended

Mar. 31, 2015

Note 9 – 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 March 31, 2015 and December 31, 2014.

		At March 31, 2015
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	After 1 to 5 years	$	777,468	$	6,806	$	-	$	784,274	1.12	%
Total U.S. Treasury securities			777,468		6,806		-		784,274	1.12
Obligations of U.S. Government sponsored entities
	Within 1 year		35,160		254		-		35,414	1.87
	After 1 to 5 years		1,412,508		3,965		2,168		1,414,305	1.25
	After 5 to 10 years		30,115		52		818		29,349	1.98
	After 10 years		23,000		66		-		23,066	3.19
Total obligations of U.S. Government sponsored entities			1,500,783		4,337		2,986		1,502,134	1.31
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year		2,758		-		1		2,757	3.83
	After 1 to 5 years		7,036		-		189		6,847	4.10
	After 5 to 10 years		16,662		-		3,075		13,587	6.68
	After 10 years		48,843		2		14,672		34,173	6.22
Total obligations of Puerto Rico, States and political subdivisions			75,299		2		17,937		57,364	6.04
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		18,943		889		-		19,832	2.95
	After 5 to 10 years		52,779		1,269		-		54,048	2.72
	After 10 years		1,782,504		14,440		21,798		1,775,146	2.01
Total collateralized mortgage obligations - federal agencies			1,854,226		16,598		21,798		1,849,026	2.03
Mortgage-backed securities
	After 1 to 5 years		24,869		1,318		-		26,187	4.68
	After 5 to 10 years		140,493		7,319		3		147,809	3.51
	After 10 years		1,120,062		49,715		1,400		1,168,377	3.37
Total mortgage-backed securities			1,285,424		58,352		1,403		1,342,373	3.41
Equity securities (without contractual maturity)			1,350		1,284		3		2,631	1.37
Other
	After 1 to 5 years		9,187		12		-		9,199	1.69
	After 5 to 10 years		1,658		44		-		1,702	3.62
Total other			10,845		56		-		10,901	1.99
Total investment securities available-for-sale		$	5,505,395	$	87,435	$	44,127	$	5,548,703	2.08	%

		At December 31, 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	$	698,003	$	2,226	$	75	$	700,154	1.14	%
Total U.S. Treasury securities			698,003		2,226		75		700,154	1.14
Obligations of U.S. Government sponsored entities
	Within 1 year		42,140		380		-		42,520	1.61
	After 1 to 5 years		1,603,245		1,168		9,936		1,594,477	1.26
	After 5 to 10 years		67,373		58		2,271		65,160	1.72
	After 10 years		23,000		-		184		22,816	3.18
Total obligations of U.S. Government sponsored entities			1,735,758		1,606		12,391		1,724,973	1.31
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year		2,765		17		-		2,782	3.83
	After 1 to 5 years		1,024		38		-		1,062	8.40
	After 5 to 10 years		22,552		2		2,331		20,223	5.82
	After 10 years		48,823		40		11,218		37,645	6.22
Total obligations of Puerto Rico, States and political subdivisions			75,164		97		13,549		61,712	6.04
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		3,687		87		-		3,774	2.66
	After 5 to 10 years		25,202		985		-		26,187	2.93
	After 10 years		1,905,763		13,109		38,803		1,880,069	2.03
Total collateralized mortgage obligations - federal agencies			1,934,652		14,181		38,803		1,910,030	2.04
Mortgage-backed securities
	After 1 to 5 years		27,339		1,597		-		28,936	4.68
	After 5 to 10 years		147,182		7,314		1		154,495	3.51
	After 10 years		676,567		45,047		683		720,931	3.93
Total mortgage-backed securities			851,088		53,958		684		904,362	3.88
Equity securities (without contractual maturity)			1,351		1,271		-		2,622	5.03
Other
	After 1 to 5 years		9,277		10		-		9,287	1.69
	After 5 to 10 years		1,957		62		-		2,019	3.63
Total other			11,234		72		-		11,306	2.03
Total investment securities available-for-sale		$	5,307,250	$	73,411	$	65,502	$	5,315,159	2.04	%

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 securities sold during the quarters ended March 31, 2015 and 2014.

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 March 31, 2015 and December 31, 2014.

		At March 31, 2015
		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			195,562		706		272,535		2,280		468,097		2,986
Obligations of Puerto Rico, States and political
	subdivisions		16,408		4,104		37,885		13,833		54,293		17,937
Collateralized mortgage obligations - federal agencies			137,117		988		967,570		20,810		1,104,687		21,798
Mortgage-backed securities			238,052		1,016		24,720		387		262,772		1,403
Equity securities			47		3		-		-		47		3
Total investment securities available-for-sale in an
	unrealized loss position	$	587,186	$	6,817	$	1,302,710	$	37,310	$	1,889,896	$	44,127

		At December 31, 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		$	49,465	$	75	$	-	$	-	$	49,465	$	75
Obligations of U.S. Government sponsored entities			888,325		6,866		429,835		5,525		1,318,160		12,391
Obligations of Puerto Rico, States and political
	subdivisions		14,419		3,031		41,084		10,518		55,503		13,549
Collateralized mortgage obligations - federal agencies			539,658		13,774		733,814		25,029		1,273,472		38,803
Mortgage-backed securities			457		4		25,486		680		25,943		684
Total investment securities available-for-sale in an
	unrealized loss position	$	1,492,324	$	23,750	$	1,230,219	$	41,752	$	2,722,543	$	65,502

As of March 31, 2015, the available-for-sale investment portfolio reflects gross unrealized losses of approximately $44 million, driven by U.S. 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 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.

On February 12, 2015, S&P further downgraded the debt rating of the Commonwealth general obligation bonds and of various public instrumentalities. S&P stated that, in their view, Puerto Rico's current economic and financial trajectory is now more susceptible to adverse financial, economic and market conditions that could ultimately impair the Commonwealth's ability to fund services and its debt commitments. S&P also cited implementation risk with respect to the value-added tax and expressed concern that, while higher taxes could improve the budget balance, there could be potential negative economic implications. On February 19, 2015, Moody's also downgraded its debt ratings for the Commonwealth general obligation bonds and of various public instrumentalities, citing similar concerns as S&P. On April 27, 2015, S&P cut General Obligation ratings to CCC+ from B with negative implications. The ratings firm attributed the downgrade to a reduced possibility of the Commonwealth accessing the markets and heightened budget pressures exacerbated by current weak economic trends and high debt levels. The portfolio of obligations of the Puerto Rico Government is mostly 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 March 31, 2015, 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. However, further negative evidence impacting the liquidity and sources of repayment of the “Obligations of Puerto Rico, States and political subdivisions”, could result in a charge to earnings to recognize estimated credit losses determined to be other-than-temporary. At March 31, 2015, 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.

		March 31, 2015				December 31, 2014

(In thousands)	Amortized cost		Fair value		Amortized cost		Fair value
FNMA	$	2,008,358	$	2,015,810	$	1,746,807	$	1,736,987
FHLB		538,493		538,874		737,149		732,894
Freddie Mac		1,161,089		1,163,815		1,117,865		1,112,485

Held To Maturity Securities Member

Investments [Abstract]

Investment [Text Block]

Note 10 – 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 March 31, 2015 and December 31, 2014.

		At March 31, 2015
				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	$	2,865	$	-	$	106	$	2,759	5.88	%
	After 1 to 5 years		13,400		-		2,296		11,104	5.97
	After 5 to 10 years		20,310		-		6,400		13,910	6.12
	After 10 years		63,429		3,906		7,400		59,935	2.14
Total obligations of Puerto Rico, States and political subdivisions			100,004		3,906		16,202		87,708	3.57
Collateralized mortgage obligations - federal agencies
	After 5 to 10 years		91		5		-		96	5.45
Total collateralized mortgage obligations - federal agencies			91		5		-		96	5.45
Other
	After 1 to 5 years		1,500		-		-		1,500	1.16
Total other			1,500		-		-		1,500	1.16
Total investment securities held-to-maturity		$	101,595	$	3,911	$	16,202	$	89,304	3.54	%

		At December 31, 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	$	2,740	$	-	$	8	$	2,732	5.84	%
	After 1 to 5 years		12,830		-		764		12,066	5.95
	After 5 to 10 years		21,325		-		6,003		15,322	6.09
	After 10 years		64,678		3,342		5,543		62,477	2.22
Total obligations of Puerto Rico, States and political subdivisions			101,573		3,342		12,318		92,597	3.60
Collateralized mortgage obligations - federal agencies
	After 5 to 10 years		97		5		-		102	5.45
Total collateralized mortgage obligations - federal agencies			97		5		-		102	5.45
Other
	Within 1 year		250		-		-		250	1.33
	After 1 to 5 years		1,250		-		-		1,250	1.10
Total other			1,500		-		-		1,500	1.14
Total investment securities held-to-maturity		$	103,170	$	3,347	$	12,318	$	94,199	3.57	%

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 March 31, 2015 and December 31, 2014.

		At March 31, 2015
		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		$	619	$	6	$	42,089	$	16,196	$	42,708	$	16,202
Total investment securities held-to-maturity in an unrealized
	loss position	$	619	$	6	$	42,089	$	16,196	$	42,708	$	16,202

		At December 31, 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		$	373	$	2	$	45,969	$	12,316	$	46,342	$	12,318
Total investment securities held-to-maturity in an unrealized
	loss position	$	373	$	2	$	45,969	$	12,316	$	46,342	$	12,318

As indicated in Note 9 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 March 31, 2015 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. This includes $59 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.