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Debt securities held-to-maturity | 12 Months Ended
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Dec. 31, 2022
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-maturity The following tables present the amortized cost, allowance for credit losses, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of debt securities held-to-maturity at December 31, 2022 and 2021. At December 31, 2022 Allowance Carrying Value Gross Gross Weighted Amortized Book [1] for Credit Net of unrealized unrealized Fair average (In thousands) cost Value Losses Allowance gains losses value yield U.S. Treasury securities Within 1 year $ 499,034 $ 499,034 $ - $ 499,034 $ - $ 6,203 $ 492,831 2.83 % After 1 to 5 years 6,147,568 5,640,767 - 5,640,767 - 59,806 5,580,961 1.49 After 5 to 10 years 2,638,238 2,313,666 - 2,313,666 - 14,857 2,298,809 1.41 Total U.S. Treasury securities 9,284,840 8,453,467 - 8,453,467 - 80,866 8,372,601 1.54 Obligations of Puerto Rico, States and political subdivisions Within 1 year 4,530 4,530 8 4,522 5 - 4,527 6.08 After 1 to 5 years 19,105 19,105 234 18,871 150 82 18,939 4.24 After 5 to 10 years 1,025 1,025 34 991 34 - 1,025 5.80 After 10 years 41,261 41,261 6,635 34,626 4,729 2,229 37,126 1.40 Total obligations of Puerto Rico, States and political subdivisions 65,921 65,921 6,911 59,010 4,918 2,311 61,617 2.61 Collateralized mortgage obligations - federal agencies After 1 to 5 years 19 19 - 19 - - 19 6.44 Total collateralized mortgage obligations - federal agencies 19 19 - 19 - - 19 6.44 Securities in wholly owned statutory business trusts After 10 years 5,959 5,959 - 5,959 - - 5,959 6.33 Total securities in wholly owned statutory business trusts 5,959 5,959 - 5,959 - - 5,959 6.33 Total debt securities held-to-maturity [2] $ 9,356,739 $ 8,525,366 $ 6,911 $ 8,518,455 $ 4,918 $ 83,177 $ 8,440,196 1.55 % [1] Book value includes $ 831 million of net unrealized loss which remains in Accumulated other comprehensive income (AOCI) related to certain securities transferred from available-for-sale securities portfolio to the held-to-maturity securities portfolio as discussed in Note 6. [2] Includes $ 6.9 million pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral. At December 31, 2021 Allowance Gross Gross Weighted Amortized for Credit Net of unrealized unrealized Fair average (In thousands) cost Losses Allowance gains losses value yield Obligations of Puerto Rico, States and political subdivisions Within 1 year $ 4,240 $ 7 $ 4,233 $ 4 $ - $ 4,237 6.07 % After 1 to 5 years 14,395 148 14,247 149 - 14,396 6.23 After 5 to 10 years 11,280 122 11,158 104 - 11,262 2.18 After 10 years 43,561 7,819 35,742 11,746 - 47,488 1.50 Total obligations of Puerto Rico, States and political subdivisions 73,476 8,096 65,380 12,003 - 77,383 2.79 Collateralized mortgage obligations - federal agencies After 1 to 5 years 25 - 25 - - 25 6.44 Total collateralized mortgage obligations - federal agencies 25 - 25 - - 25 6.44 Securities in wholly owned statutory business trusts After 10 years 5,960 - 5,960 - - 5,960 6.33 Total securities in wholly owned statutory business trusts 5,960 - 5,960 - - 5,960 6.33 Total debt securities held-to-maturity $ 79,461 $ 8,096 $ 71,365 $ 12,003 $ - $ 83,368 3.06 % 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 table presents the aggregate amortized cost and fair value of debt securities held-to-maturity at December 31, 2022 by contractual maturity. (In thousands) Amortized cost Book Value Fair value Within 1 year $ 503,564 $ 503,564 $ 497,358 After 1 to 5 years 6,166,692 5,659,891 5,599,919 After 5 to 10 years 2,639,263 2,314,691 2,299,834 After 10 years 47,220 47,220 43,085 Total debt securities held-to-maturity $ 9,356,739 $ 8,525,366 $ 8,440,196 Credit Quality Indicators The following describes the credit quality indicators by major security type that the Corporation considers in its’ estimate to develop the allowance for credit losses for investment securities held-to-maturity. As discussed in Note 2 to the Consolidated Financial Statements, U.S. Treasury securities carry an explicit guarantee from the U.S. Government are highly rated by major rating agencies, and have a long history of no credit losses. Accordingly, the Corporation applies a zero-credit loss assumption and no ACL for these securities has been established. At December 31, 2022 and December 31, 2021, the “Obligations of Puerto Rico, States and political subdivisions” classified as held- to-maturity, includes securities issued by municipalities of Puerto Rico that are generally not rated by a credit rating agency. This includes $ 25 million of general and special obligation bonds issued by three municipalities of Puerto Rico, that are payable primarily from certain property taxes imposed by the issuing municipality (December 31, 2021 - $ 30 million). 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 Corporation performs periodic credit quality reviews of these securities and internally assigns standardized credit risk ratings based on its evaluation. The Corporation considers these ratings in its estimate to develop the allowance for credit losses associated with these securities. For the definitions of the obligor risk ratings, refer to the Credit Quality section of Note 9 to the Consolidated Financial Statements. The following presents the amortized cost basis of securities held by the Corporation issued by municipalities of Puerto Rico aggregated by the internally assigned standardized credit risk rating: At December 31, 2022 At December 31, 2021 (In thousands) Securities issued by Puerto Rico municipalities Watch $ 13,735 $ 16,345 Pass 10,925 13,800 Total $ 24,660 $ 30,145 At December 31, 2022, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also includes $ 42 million in securities issued by the Puerto Rico Housing Finance Authority (“HFA”), a government instrumentality, for which the underlying source of payment is second mortgage loans in Puerto Rico residential properties (not the government), but for which HFA, provides a guarantee in the event of default and upon the satisfaction of certain other conditions (December 31, 2021 - $ 43 million). These securities are not rated by a credit rating agency. The Corporation assesses the credit risk associated with these securities by evaluating the refreshed FICO scores of a representative sample of the underlying borrowers. At December 31, 2022, the average refreshed FICO score for the representative sample, comprised of 65 % of the nominal value of the securities, used for the loss estimate was of 707 (compared to 64 % and 704 , respectively, at December 31, 2021). The loss estimates for this portfolio was based on the methodology established under CECL for similar loan obligations. The Corporation does not consider the government guarantee when estimating the credit losses associated with this portfolio. A further 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. Refer to Note 24 to the Consolidated Financial Statements for additional information on the Corporation’s exposure to the Puerto Rico Government. Delinquency status At December 31, 2022 and December 31, 2021, there were no securities held-to-maturity in past due or non-performing status. Allowance for credit losses on debt securities held-to-maturity The following table provides the activity in the allowance for credit losses related to debt securities held-to-maturity by security type at December 31, 2022 and December 31, 2021: For the year ended December 31, 2022 2021 (In thousands) Obligations of Puerto Rico, States and political subdivisions Allowance for credit losses: Beginning balance $ 8,096 $ 10,261 Provision for credit losses (benefit) (1,185) (2,165) Securities charged-off - - Recoveries - - Ending balance $ 6,911 $ 8,096 The allowance for credit losses for the Obligations of Puerto Rico, States and political subdivisions includes $ 0.3 million for securities issued by municipalities of Puerto Rico, and $ 6.6 million for bonds issued by the Puerto Rico HFA, which are secured by second mortgage loans on Puerto Rico residential properties (compared to $ 0.3 million and $ 7.8 million, respectively, at December 31, 2021).

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