XML 31 R17.htm IDEA: XBRL DOCUMENT
v3.23.2

Debt securities held-to-maturity | 6 Months Ended
--- | ---
Jun. 30, 2023
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 June 30, 2023 and December 31, 2022. At June 30, 2023 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 $ 598,603 $ 598,603 $ - $ 598,603 $ - $ 8,926 $ 589,677 2.55 % After 1 to 5 years 7,056,531 6,471,438 - 6,471,438 - 106,735 6,364,703 1.42 After 5 to 10 years 1,427,865 1,266,528 - 1,266,528 - 14,050 1,252,478 1.50 Total U.S. Treasury securities 9,082,999 8,336,569 - 8,336,569 - 129,711 8,206,858 1.51 Obligations of Puerto Rico, States and political subdivisions Within 1 year 4,730 4,730 12 4,718 12 5 4,725 6.14 After 1 to 5 years 20,282 20,282 195 20,087 95 156 20,026 3.74 After 5 to 10 years 1,025 1,025 33 992 33 - 1,025 5.80 After 10 years 40,434 40,434 5,905 34,529 3,172 2,801 34,900 1.41 Total obligations of Puerto Rico, States and political subdivisions 66,471 66,471 6,145 60,326 3,312 2,962 60,676 2.53 Collateralized mortgage obligations - federal agencies Within 1 year 16 16 - 16 - - 16 6.44 After 10 years 1,550 1,550 - 1,550 - 110 1,440 2.87 Total collateralized mortgage obligations - federal agencies 1,566 1,566 - 1,566 - 110 1,456 2.91 Securities in wholly owned statutory business trusts After 10 years 5,960 5,960 - 5,960 - - 5,960 6.33 Total securities in wholly owned statutory business trusts 5,960 5,960 - 5,960 - - 5,960 6.33 Total debt securities held-to-maturity [2] $ 9,156,996 $ 8,410,566 $ 6,145 $ 8,404,421 $ 3,312 $ 132,783 $ 8,274,950 1.52 % [1] Book value includes $ 746 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 $ 7.4 billion pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral. The Corporation had unpledged held-to-maturities securities with a fair value of $ 934 million that could be used to increase its borrowing facilities. 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 billion pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral. The Corporation had unpledged held-to-maturities securities with a fair value of $ 1.5 billion that could be used to increase its borrowing facilities. 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. 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 on the 2022 Form 10-K, 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 June 30, 2023 and December 31, 2022, 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 $ 22 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, 2022 - $ 25 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 June 30, 2023 At December 31, 2022 (In thousands) Securities issued by Puerto Rico municipalities Watch $ 2,905 $ 13,735 Pass 18,655 10,925 Total $ 21,560 $ 24,660 At June 30, 2023, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also includes $ 40 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, 2022 - $ 42 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 June 30, 2023, the average refreshed FICO score for the representative sample, comprised of 66 % of the nominal value of the securities, used for the loss estimate was of 709 (compared to 65 % and 707 , respectively, at December 31, 2022). 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 21 to the Consolidated Financial Statements for additional information on the Corporation’s exposure to the Puerto Rico Government. At June 30, 2023, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also includes $ 5 million in securities issued by the HFA for which the underlying source of payment is U.S. Treasury securities. The Corporation applies a zero -credit loss assumption for these securities, and no ACL has been established for these securities given that 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. Refer to Note 2 to the Consolidated Financial Statements in the 2022 Form 10-K for further details. Delinquency status At June 30, 2023 and December 31, 2022, 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 June 30, 2023 and June 30, 2022: For the quarters ended June 30, 2023 2022 (In thousands) Obligations of Puerto Rico, States and political subdivisions Allowance for credit losses: Beginning balance $ 6,792 $ 7,844 Provision for credit losses (benefit) (647) (349) Securities charged-off - - Recoveries - - Ending balance $ 6,145 $ 7,495 For the six months ended June 30, 2023 2022 (In thousands) Obligations of Puerto Rico, States and political subdivisions Allowance for credit losses: Beginning balance $ 6,911 $ 8,096 Provision for credit losses (benefit) (766) (601) Securities charged-off - - Recoveries - - Ending balance $ 6,145 $ 7,495 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 $ 5.9 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 $ 6.6 million, respectively, at December 31, 2022).

X
- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI https://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2176304 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
Name: | us-gaap_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Definition Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table. + References No definition available. + Details
Name: | us-gaap_ScheduleOfHeldToMaturitySecuritiesLineItems
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Details
Name: | us-gaap_InformationByCategoryOfDebtSecurityAxis=us-gaap_HeldtomaturitySecuritiesMember
Namespace Prefix: |
Data Type: | na
Balance Type: |
Period Type: |