Debt securities held-to-maturity

9 Months Ended

Sep. 30, 2019

Held To Maturity Debt Securities

Schedule of Held-to-maturity Securities [Line Items]

Investments in debt and marketable equity securities

Note 7 –Debt securities held-to-maturityThe following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of debt securities held-to-maturity at September 30, 2019 and December 31, 2018.

		At September 30, 2019
				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	$	3,745	$	-	$	33	$	3,712	6.02	%
	After 1 to 5 years		17,580		-		269		17,311	6.11
	After 5 to 10 years		18,195		-		1,861		16,334	3.11
	After 10 years		46,078		8,375		2		54,451	1.69
Total obligations of Puerto Rico, States and political subdivisions			85,598		8,375		2,165		91,808	3.09
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		48		2		-		50	6.44
Total collateralized mortgage obligations - federal agencies			48		2		-		50	6.44
Securities in wholly owned statutory business trusts
	After 10 years		11,561		-		-		11,561	6.51
Total securities in wholly owned statutory business trusts			11,561		-		-		11,561	6.51
Other
	After 1 to 5 years		500		-		1		499	2.97
Total other			500		-		1		499	2.97
Total debt securities held-to-maturity		$	97,707	$	8,377	$	2,166	$	103,918	3.50	%

		At December 31, 2018
				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	$	3,510	$	-	$	36	$	3,474	5.99	%
	After 1 to 5 years		16,505		-		1,081		15,424	6.07
	After 5 to 10 years		23,885		-		1,704		22,181	3.61
	After 10 years		45,559		3,943		47		49,455	1.79
Total obligations of Puerto Rico, States and political subdivisions			89,459		3,943		2,868		90,534	3.23
Collateralized mortgage obligations - federal agencies
	After 5 to 10 years		55		3		-		58	5.45
Total collateralized mortgage obligations - federal agencies			55		3		-		58	5.45
Securities in wholly owned statutory business trusts
	After 10 years		11,561		-		-		11,561	6.51
Total securities in wholly owned statutory business trusts			11,561		-		-		11,561	6.51
Other
	After 1 to 5 years		500		-		-		500	2.97
Total other			500		-		-		500	2.97
Total debt securities held-to-maturity		$	101,575	$	3,946	$	2,868	$	102,653	3.60	%

Debt 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 debt 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, 2019 and December 31, 2018.

	At September 30, 2019
	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	$	22,427	$	318	$	9,713	$	1,847	$	32,140	$	2,165
Other		499		1		-		-		499		1
Total debt securities held-to-maturity in an unrealized loss position	$	22,926	$	319	$	9,713	$	1,847	$	32,639	$	2,166

	At December 31, 2018
	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	$	27,471	$	1,165	$	13,307	$	1,703	$	40,778	$	2,868
Total debt securities held-to-maturity in an unrealized loss position	$	27,471	$	1,165	$	13,307	$	1,703	$	40,778	$	2,868

As indicated in Note 6 to these Consolidated Financial Statements, management evaluates debt 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, 2019 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. This includes $40 million of general and special obligation bonds issued by three municipalities of Puerto Rico, which are payable primarily from certain property taxes imposed by the issuing municipality. In the case of general obligations, they also benefit from a pledge of the full faith, credit and unlimited taxing power of the issuing municipality, which is required by law to levy property taxes in an amount sufficient for the payment of debt service on such general obligation bonds.

The portfolio also includes $46 million in securities for which the underlying source of payment is second mortgage loans in Puerto Rico residential properties (not the government), but in which a government instrumentality provides a guarantee in the event of default and subsequent foreclosure of the underlying property. The Corporation performs periodic credit quality reviews on these issuers. Based on the quarterly analysis performed, management concluded that no individual debt security held-to-maturity was other-than-temporarily impaired at September 30, 2019. A deterioration of the Puerto Rico economy or of the fiscal health of the Government of Puerto Rico and/or its instrumentalities (including if any of the issuing municipalities become subject to a debt restructuring proceeding under PROMESA) could further affect the value of these securities, resulting in losses to the Corporation. The Corporation does not have the intent to sell debt securities held-to-maturity and it is more likely than not that the Corporation will not have to sell these debt securities prior to recovery of their amortized cost basis.

Refer to Note 22 for additional information on the Corporation’s exposure to the Puerto Rico Government.