Investment securities

6 Months Ended

Jun. 30, 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 June 30, 2015 and December 31, 2014.

		At June 30, 2015
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	Within 1 year	$	25,279	$	795	$	-	$	26,074	3.99	%
	After 1 to 5 years		942,596		5,111		58		947,649	1.00
Total U.S. Treasury securities			967,875		5,906		58		973,723	1.08
Obligations of U.S. Government sponsored entities
	Within 1 year		35,180		116		-		35,296	1.85
	After 1 to 5 years		1,049,241		2,390		4,450		1,047,181	1.36
	After 5 to 10 years		5,110		26		17		5,119	5.04
	After 10 years		23,000		-		224		22,776	3.20
Total obligations of U.S. Government sponsored entities			1,112,531		2,532		4,691		1,110,372	1.43
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year		2,751		-		11		2,740	3.85
	After 1 to 5 years		7,099		-		234		6,865	4.05
	After 5 to 10 years		14,363		-		2,123		12,240	6.48
	After 10 years		36,757		-		6,488		30,269	6.24
Total obligations of Puerto Rico, States and political subdivisions			60,970		-		8,856		52,114	5.94
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		18,353		752		-		19,105	2.98
	After 5 to 10 years		48,183		1,172		-		49,355	2.72
	After 10 years		1,689,483		11,405		32,519		1,668,369	1.99
Total collateralized mortgage obligations - federal agencies			1,756,019		13,329		32,519		1,736,829	2.02
Mortgage-backed securities
	After 1 to 5 years		22,848		1,069		7		23,910	3.58
	After 5 to 10 years		225,725		6,723		280		232,168	3.29
	After 10 years		1,410,769		40,954		8,957		1,442,766	3.07
Total mortgage-backed securities			1,659,342		48,746		9,244		1,698,844	3.11
Equity securities (without contractual maturity)			1,350		1,247		3		2,594	0.98
Other
	After 1 to 5 years		9,095		-		14		9,081	1.69
	After 5 to 10 years		1,485		36		-		1,521	3.62
Total other			10,580		36		14		10,602	1.96
Total investment securities available-for-sale		$	5,568,667	$	71,796	$	55,385	$	5,585,078	2.11	%

		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.

During the quarter ended June 30, 2015, the Corporation sold U.S. agency securities with an approximate amortized cost of $70 million at the BPPR segment. The proceeds from this sale were $ 70.0 million. The Corporation realized a gain of $5 thousand on this transaction. There were no sales of investment securities available-for-sale during the six months ended June 30, 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 June 30, 2015 and December 31, 2014.

		At June 30, 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
U.S. Treasury securities		$	39,918	$	58	$	-	$	-	$	39,918	$	58
Obligations of U.S. Government sponsored entities			372,506		1,723		271,839		2,968		644,345		4,691
Obligations of Puerto Rico, States and political
	subdivisions		15,820		6,528		8,735		2,328		24,555		8,856
Collateralized mortgage obligations - federal agencies			303,544		3,252		907,897		29,267		1,211,441		32,519
Mortgage-backed securities			862,115		8,323		23,780		921		885,895		9,244
Equity securities			47		3		-		-		47		3
Other			9,081		14		-		-		9,081		14
Total investment securities available-for-sale in an
	unrealized loss position	$	1,603,031	$	19,901	$	1,212,251	$	35,484	$	2,815,282	$	55,385

		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 June 30, 2015, the available-for-sale investment portfolio reflects gross unrealized losses of approximately $55 million, driven by U.S. Agency Collateralized Mortgage Obligations, Mortgage-backed securities 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. 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 June 30, 2015, management performed its quarterly analysis of all debt securities in an unrealized loss position.

During the second quarter of 2015, the Corporation recognized an other-than-temporary impairment charge of $14.4 million on its portfolio of investment securities available-for-sale classified as obligations from the Puerto Rico government and its political subdivisions. At June 30, 2015 these securities were rated Caa2 and CCC- by Moody’s and S&P, respectively. Notwithstanding the payment priorities established by the Puerto Rico Constitution for these securities, Puerto Rico’s fiscal and economic situation, together with the Government’s recent announcements regarding its ability to pay its debt and its intention to pursue a comprehensive debt restructuring, led management to conclude that the unrealized losses on these government securities were other-than-temporary. The Corporation determined that the entire balance of the unrealized loss carried by these securities was attributed to estimated credit losses. Accordingly, the other-than-temporary impairment was recognized in its entirety in the accompanying consolidated statement of operations and no amount remained recognized in the accompanying statement of other comprehensive income related to these specific securities.

Prospectively, for debt securities for which other-than-temporary impairments were recognized in earnings, the difference between the new amortized cost basis and the cash flows expected to be collected shall be accreted as interest income. If upon subsequent evaluation, there is a significant increase in the cash flows expected to be collected or if actual cash flows are significantly greater than cash flows previously expected, such changes shall be accounted for as a prospective adjustment to the accretable yield. Subsequent increases and decreases (if not an other-than-temporary impairment) in the fair value of available-for-sale securities shall be included in other comprehensive income.

Further negative evidence impacting the liquidity and sources of repayment of the obligations of Puerto Rico and its political subdivisions, could result in a further charge to earnings to recognize estimated credit losses determined to be other-than-temporary. At June 30, 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.

		June 30, 2015				December 31, 2014

(In thousands)	Amortized cost		Fair value		Amortized cost		Fair value
FNMA	$	2,274,845	$	2,264,445	$	1,746,807	$	1,736,987
FHLB		445,169		444,409		737,149		732,894
Freddie Mac		962,147		959,054		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 June 30, 2015 and December 31, 2014.

		At June 30, 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	$	-	$	85	$	2,780	5.88	%
	After 1 to 5 years		13,400		-		3,758		9,642	5.97
	After 5 to 10 years		20,310		-		8,561		11,749	6.12
	After 10 years		63,695		3,200		8,720		58,175	2.13
Total obligations of Puerto Rico, States and political subdivisions			100,270		3,200		21,124		82,346	3.56
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		1,499	1.21
Total other			1,500		-		1		1,499	1.21
Total investment securities held-to-maturity		$	101,861	$	3,205	$	21,125	$	83,941	3.53	%

		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 June 30, 2015 and December 31, 2014.

		At June 30, 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		$	-	$	-	$	37,161	$	21,124	$	37,161	$	21,124
Other			1,249		1		-		-		1,249		1
Total investment securities held-to-maturity in an unrealized
	loss position	$	1,249	$	1	$	37,161	$	21,124	$	38,410	$	21,125

		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 June 30, 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 $42 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.