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Debt securities | 9 Months Ended
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Sep. 30, 2018
Available For Sale Securities Member |
Debt securities | Note 6 – Debt securities available-for-sale T he following table s present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of debt securities available-for-sale at September 30, 2018 and December 31, 2017.
|  | At September 30, 2018 |
|  |  |  | Gross | Gross |  |  | Weighted |
|  | Amortized | unrealized | unrealized | Fair | average |
(In thousands) | cost | gains | losses | value | yield |
U.S. Treasury securities |  |  |  |  |  |  |  |  |  |
| Within 1 year | $ | 3,305,842 | $ | 16 | $ | 6,510 | $ | 3,299,348 | 1.75 | %
| After 1 to 5 years |  | 4,348,322 |  | - |  | 76,258 |  | 4,272,064 | 2.22 |
| After 5 to 10 years |  | 295,352 |  | 9 |  | 4,811 |  | 290,550 | 2.64 |
Total U.S. Treasury securities |  | 7,949,516 |  | 25 |  | 87,579 |  | 7,861,962 | 2.04 |
Obligations of U.S. Government sponsored entities |  |  |  |  |  |  |  |  |  |
| Within 1 year |  | 220,063 |  | 1 |  | 1,081 |  | 218,983 | 1.46 |
| After 1 to 5 years |  | 188,811 |  | 4 |  | 4,004 |  | 184,811 | 1.45 |
Total obligations of U.S. Government sponsored entities |  | 408,874 |  | 5 |  | 5,085 |  | 403,794 | 1.45 |
Obligations of Puerto Rico, States and political subdivisions |  |  |  |  |  |  |  |  |  |
| After 1 to 5 years |  | 6,861 |  | - |  | 182 |  | 6,679 | 1.33 |
Total obligations of Puerto Rico, States and political subdivisions |  | 6,861 |  | - |  | 182 |  | 6,679 | 1.33 |
Collateralized mortgage obligations - federal agencies |  |  |  |  |  |  |  |  |  |
| After 1 to 5 years |  | 906 |  | - |  | 8 |  | 898 | 1.92 |
| After 5 to 10 years |  | 115,854 |  | - |  | 6,397 |  | 109,457 | 1.67 |
| After 10 years |  | 681,359 |  | 1,208 |  | 34,310 |  | 648,257 | 2.10 |
Total collateralized mortgage obligations - federal agencies |  | 798,119 |  | 1,208 |  | 40,715 |  | 758,612 | 2.03 |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |
| Within 1 year |  | 879 |  | 11 |  | - |  | 890 | 4.46 |
| After 1 to 5 years |  | 4,748 |  | 23 |  | 148 |  | 4,623 | 2.31 |
| After 5 to 10 years |  | 351,597 |  | 949 |  | 11,726 |  | 340,820 | 2.21 |
| After 10 years |  | 3,834,855 |  | 9,383 |  | 174,558 |  | 3,669,680 | 2.43 |
Total mortgage-backed securities |  | 4,192,079 |  | 10,366 |  | 186,432 |  | 4,016,013 | 2.41 |
Other |  |  |  |  |  |  |  |  |  |
| After 5 to 10 years |  | 556 |  | 1 |  | - |  | 557 | 3.62 |
Total other |  | 556 |  | 1 |  | - |  | 557 | 3.62 |
Total debt securities available-for-sale[1] | $ | 13,356,005 | $ | 11,605 | $ | 319,993 | $ | 13,047,617 | 2.14 | %
[1]Includes $8.5 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $7.6 billion serve as collateral for public funds.
|  | At December 31, 2017 |
|  |  |  | Gross | Gross |  |  | Weighted |
|  | Amortized | unrealized | unrealized | Fair | average |
(In thousands) | cost | gains | losses | value | yield |
U.S. Treasury securities |  |  |  |  |  |  |  |  |  |
| Within 1 year | $ | 1,112,791 | $ | 8 | $ | 2,101 | $ | 1,110,698 | 1.06 | %
| After 1 to 5 years |  | 2,550,116 |  | - |  | 26,319 |  | 2,523,797 | 1.55 |
| After 5 to 10 years |  | 293,579 |  | 281 |  | 191 |  | 293,669 | 2.24 |
Total U.S. Treasury securities |  | 3,956,486 |  | 289 |  | 28,611 |  | 3,928,164 | 1.46 |
Obligations of U.S. Government sponsored entities |  |  |  |  |  |  |  |  |  |
| Within 1 year |  | 276,304 |  | 21 |  | 818 |  | 275,507 | 1.26 |
| After 1 to 5 years |  | 336,922 |  | 22 |  | 3,518 |  | 333,426 | 1.48 |
Total obligations of U.S. Government sponsored entities |  | 613,226 |  | 43 |  | 4,336 |  | 608,933 | 1.38 |
Obligations of Puerto Rico, States and political subdivisions |  |  |  |  |  |  |  |  |  |
| After 1 to 5 years |  | 6,668 |  | - |  | 59 |  | 6,609 | 2.30 |
Total obligations of Puerto Rico, States and political subdivisions |  | 6,668 |  | - |  | 59 |  | 6,609 | 2.30 |
Collateralized mortgage obligations - federal agencies |  |  |  |  |  |  |  |  |  |
| Within 1 year |  | 40 |  | - |  | - |  | 40 | 2.60 |
| After 1 to 5 years |  | 16,972 |  | 173 |  | 75 |  | 17,070 | 2.90 |
| After 5 to 10 years |  | 36,186 |  | 57 |  | 526 |  | 35,717 | 2.31 |
| After 10 years |  | 914,568 |  | 2,789 |  | 26,431 |  | 890,926 | 2.01 |
Total collateralized mortgage obligations - federal agencies |  | 967,766 |  | 3,019 |  | 27,032 |  | 943,753 | 2.03 |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |
| Within 1 year |  | 484 |  | 8 |  | - |  | 492 | 4.23 |
| After 1 to 5 years |  | 14,599 |  | 206 |  | 211 |  | 14,594 | 3.50 |
| After 5 to 10 years |  | 339,161 |  | 2,390 |  | 3,765 |  | 337,786 | 2.21 |
| After 10 years |  | 4,385,368 |  | 19,493 |  | 69,071 |  | 4,335,790 | 2.46 |
Total mortgage-backed securities |  | 4,739,612 |  | 22,097 |  | 73,047 |  | 4,688,662 | 2.44 |
Other |  |  |  |  |  |  |  |  |  |
| After 5 to 10 years |  | 789 |  | 13 |  | - |  | 802 | 3.62 |
Total other |  | 789 |  | 13 |  | - |  | 802 | 3.62 |
Total debt securities available-for-sale[1] | $ | 10,284,547 | $ | 25,461 | $ | 133,085 | $ | 10,176,923 | 1.96 | %
[1]Includes $6.6 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $5.6 billion serve as collateral for public funds.
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 based on the period of final contractual maturity. The expected maturities of collateralized mortgage obligations, mortgage-backed securities and certain other securities may differ from their contrac tual maturities because they may be subject to prepayments or may be called by the issuer. There were no securities sold during the nine months ended September 30, 2018. During the nine months ended September 30, 2017, the Corporation sold obliga tions from the Puerto Rico government and its political subdivisions with a realized gain of $83 thousand. The proceeds from these sales were $14.4 million. The following tables present the Corporation’s fair value and gross unrealized losses of debt securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss pos ition at September 30, 2018 and December 31, 2017.
|  | At September 30, 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
U.S. Treasury securities | $ | 5,699,061 | $ | 57,506 | $ | 1,617,265 | $ | 30,073 | $ | 7,316,326 | $ | 87,579
Obligations of U.S. Government sponsored entities |  | 62,347 |  | 135 |  | 340,364 |  | 4,950 |  | 402,711 |  | 5,085
Obligations of Puerto Rico, States and political |  |  |  |  |  |  |  |  |  |  |  |
| subdivisions |  | 6,679 |  | 182 |  | - |  | - |  | 6,679 |  | 182
Collateralized mortgage obligations - federal agencies |  | 122,520 |  | 2,481 |  | 576,298 |  | 38,234 |  | 698,818 |  | 40,715
Mortgage-backed securities |  | 973,548 |  | 35,262 |  | 2,760,024 |  | 151,170 |  | 3,733,572 |  | 186,432
Total debt securities available-for-sale in an |  |  |  |  |  |  |  |  |  |  |  |
| unrealized loss position | $ | 6,864,155 | $ | 95,566 | $ | 5,293,951 | $ | 224,427 | $ | 12,158,106 | $ | 319,993
|  | At December 31, 2017
| 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 | $ | 2,608,473 | $ | 14,749 | $ | 1,027,066 | $ | 13,862 | $ | 3,635,539 | $ | 28,611
Obligations of U.S. Government sponsored entities |  | 214,670 |  | 1,108 |  | 376,807 |  | 3,228 |  | 591,477 |  | 4,336
Obligations of Puerto Rico, States and political |  |  |  |  |  |  |  |  |  |  |  |
| subdivisions |  | 6,609 |  | 59 |  | - |  | - |  | 6,609 |  | 59
Collateralized mortgage obligations - federal agencies |  | 153,336 |  | 2,110 |  | 595,339 |  | 24,922 |  | 748,675 |  | 27,032
Mortgage-backed securities |  | 1,515,295 |  | 12,529 |  | 2,652,359 |  | 60,518 |  | 4,167,654 |  | 73,047
Total debt securities available-for-sale in an |  |  |  |  |  |  |  |  |  |  |  |
| unrealized loss position | $ | 4,498,383 | $ | 30,555 | $ | 4,651,571 | $ | 102,530 | $ | 9,149,954 | $ | 133,085
As of September 30, 2018, the portfolio of available-for-sale debt securities reflects gross unrealized losses of approximately $320 million, driven mainly by mortgage-backed securities, U.S. Treasury securities, and collateralized mortgage obligations. Management evaluates debt 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. 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 amort ized 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 befor e a forecasted recovery occurs. At September 30, 2018, management performed its quarterly analysis of all debt securities in an unrealized loss position. Based on the analysis performed, management concluded that no individual debt security was other-than-temporarily impaired as of such date. At September 30, 2018, the Corporation did not have the intent to sell debt securities in an unrealized loss position and it was not more likely than not that the Corporation would have to sell the debt securities prior to recovery of their amortized cost basis. The following table states the name of issuers, a nd the aggregate amortized cost and fair value of the debt securities of such issuer (includes available-for-sale and held-to-maturity debt secu rities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders’ equity. This information excludes debt 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, 2018 |  | December 31, 2017
(In thousands) | Amortized cost | Fair value | Amortized cost | Fair value
FNMA | $ | 3,132,301 | $ | 2,993,841 | $ | 3,621,537 | $ | 3,572,474
Freddie Mac |  | 1,119,833 |  | 1,066,880 |  | 1,358,708 |  | 1,335,685
Held To Maturity Securities Member |
Debt securities | Note 7 –Debt securities held-to-maturity The following table s present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of debt securities held-to-maturi ty at September 30, 2018 and December 31, 2017.
|  | At September 30, 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 | $ | 8 | $ | 3 | $ | 3,515 | 6.00 | %
| After 1 to 5 years |  | 16,505 |  | 497 |  | 1 |  | 17,001 | 6.07 |
| After 5 to 10 years |  | 23,885 |  | 1,127 |  | 575 |  | 24,437 | 3.61 |
| After 10 years |  | 45,221 |  | 3,004 |  | 219 |  | 48,006 | 1.87 |
Total obligations of Puerto Rico, States and political subdivisions |  | 89,121 |  | 4,636 |  | 798 |  | 92,959 | 3.28 |
Collateralized mortgage obligations - federal agencies |  |  |  |  |  |  |  |  |  |
| After 5 to 10 years |  | 56 |  | 3 |  | - |  | 59 | 5.45 |
Total collateralized mortgage obligations - federal agencies |  | 56 |  | 3 |  | - |  | 59 | 5.45 |
Trust preferred securities |  |  |  |  |  |  |  |  |  |
| After 10 years |  | 11,561 |  | - |  | - |  | 11,561 | 6.51 |
Total trust preferred securities |  | 11,561 |  | - |  | - |  | 11,561 | 6.51 |
Other |  |  |  |  |  |  |  |  |  |
| After 1 to 5 years |  | 500 |  | - |  | 5 |  | 495 | 2.97 |
Total other |  | 500 |  | - |  | 5 |  | 495 | 2.97 |
Total debt securities held-to-maturity[1] | $ | 101,238 | $ | 4,639 | $ | 803 | $ | 105,074 | 3.65 | %
[1]Includes $89.1 million pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral.
|  | At December 31, 2017 |
|  |  |  | 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 | $ | 3,295 | $ | - | $ | 79 | $ | 3,216 | 5.96 | %
| After 1 to 5 years |  | 15,485 |  | - |  | 4,143 |  | 11,342 | 6.05 |
| After 5 to 10 years |  | 29,240 |  | - |  | 8,905 |  | 20,335 | 3.89 |
| After 10 years |  | 44,734 |  | 3,834 |  | 222 |  | 48,346 | 1.93 |
Total obligations of Puerto Rico, States and political subdivisions |  | 92,754 |  | 3,834 |  | 13,349 |  | 83,239 | 3.38 |
Collateralized mortgage obligations - federal agencies |  |  |  |  |  |  |  |  |  |
| After 5 to 10 years |  | 67 |  | 4 |  | - |  | 71 | 5.45 |
Total collateralized mortgage obligations - federal agencies |  | 67 |  | 4 |  | - |  | 71 | 5.45 |
Trust preferred securities |  |  |  |  |  |  |  |  |  |
| After 5 to 10 years |  | 1,637 |  | - |  | - |  | 1,637 | 8.33 |
| After 10 years |  | 11,561 |  | - |  | - |  | 11,561 | 6.51 |
Total trust preferred securities |  | 13,198 |  | - |  | - |  | 13,198 | 6.73 |
Other |  |  |  |  |  |  |  |  |  |
| Within 1 year |  | 500 |  | - |  | 7 |  | 493 | 1.96 |
| After 1 to 5 years |  | 500 |  | - |  | - |  | 500 | 2.97 |
Total other |  | 1,000 |  | - |  | 7 |  | 993 | 2.47 |
Total debt securities held-to-maturity[1] | $ | 107,019 | $ | 3,838 | $ | 13,356 | $ | 97,501 | 3.79 | %
[1]Includes $92.8 million pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral.
Debt s ecurities 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 ma y 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 i nvestment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2018 and December 31, 2017.
|  | At September 30, 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 | $ | 17,359 | $ | 219 | $ | 14,431 | $ | 579 | $ | 31,790 | $ | 798
Other |  | - |  | - |  | 495 |  | 5 |  | 495 |  | 5
Total debt securities held-to-maturity in an unrealized |  |  |  |  |  |  |  |  |  |  |  |
| loss position | $ | 17,359 | $ | 219 | $ | 14,926 | $ | 584 | $ | 32,285 | $ | 803
|  | At December 31, 2017
|  | 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 | $ | - | $ | - | $ | 35,696 | $ | 13,349 | $ | 35,696 | $ | 13,349
Other |  | - |  | - |  | 743 |  | 7 |  | 743 |  | 7
Total debt securities held-to-maturity in an unrealized |  |  |  |  |  |  |  |  |  |  |  |
| loss position | $ | - | $ | - | $ | 36,439 | $ | 13,356 | $ | 36,439 | $ | 13,356
As indicated in Note 6 to these C onsolidated F inancial S tatements, 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, 2018 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. This includes $45 million of general and special obligation bonds issued by three municipalities of Puerto Rico, which are payable primarily from, and have a lien on, 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 unli mited taxing power of the issuing municipality and issuing municipalities are required by law to levy property taxes in an amount sufficient for the payment of debt service on such general obligations bonds. The p ortfolio also includes $44 millio n in securities for which the underlying source of payment is not the central government, but in which a government instrumentality provides a guarantee in the event of default. The Corporation performs periodic credit quality reviews on these issuers. Bas ed on the quarterly analysis performed, management concluded that no individual debt security held-to-maturity was other-than-temporarily impaired at September 30, 2018. Further deterioration of the Puerto Rico economy or of the fiscal crisis of the Government of Puerto Rico (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 investment 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.

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- Definition The entire disclosure for investments, including all tables. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 6 -Section 10 -Paragraph (c) -Subparagraph (1) + Details
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