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Debt securities held-to-maturity
 12 Months Ended
Dec. 31, 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 December
 
31, 2023 and 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 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
$
597,768
$
597,768
$
-
$
597,768
$
-
$
7,526
$
590,242
2.58
%
After 1 to 5 years
7,971,072
7,335,159
-
7,335,159
637
21,996
7,313,800
1.39
After 5 to 10 years
211,061
188,484
-
188,484
-
187
188,297
1.50
Total U.S. Treasury
 
securities
8,779,901
8,121,411
-
8,121,411
637
29,709
8,092,339
1.47
Obligations of Puerto Rico, States and
political subdivisions
Within 1 year
4,820
4,820
9
4,811
3
-
4,814
6.17
After 1 to 5 years
20,171
20,171
147
20,024
96
125
19,995
3.80
After 5 to 10 years
845
845
28
817
28
-
845
5.80
After 10 years
39,572
39,572
5,596
33,976
2,814
2,766
34,024
1.41
Total obligations of
 
Puerto Rico, States and
political subdivisions
65,408
65,408
5,780
59,628
2,941
2,891
59,678
2.55
Collateralized mortgage obligations - federal
agencies
Within 1 year
13
13
-
13
-
-
13
6.44
After 10 years
1,543
1,543
-
1,543
-
148
1,395
2.87
Total collateralized
 
mortgage obligations -
federal agencies
1,556
1,556
-
1,556
-
148
1,408
2.90
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]
$
8,852,825
$
8,194,335
$
5,780
$
8,188,555
$
3,578
$
32,748
$
8,159,385
1.48
%
[1]
Book value includes $
658
 
million of net unrealized loss which remains in
 
Accumulated other comprehensive (loss) 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 $
8.1
 
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
 
$
67.3
 
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 (loss) 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.
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, 2023
by contractual maturity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Amortized cost
 
Book Value
Fair value
Within 1 year
$
602,601
$
602,601
$
595,069
After 1 to 5 years
7,991,243
7,355,330
7,333,795
After 5 to 10 years
211,906
189,329
189,142
After 10 years
47,075
47,075
41,379
Total debt securities
 
held-to-maturity
$
8,852,825
$
8,194,335
$
8,159,385
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, 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 $
19
 
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 December 31, 2023
At December 31, 2022
(In thousands)
Securities issued by Puerto Rico municipalities
Watch
$
2,255
$
13,735
Pass
16,565
10,925
Total
$
18,820
$
24,660
At December
 
31, 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 December 31,
 
2023, the average
refreshed
 
FICO score
 
for the
 
representative sample,
 
comprised of
67
%
 
of
 
the
 
nominal value
 
of the
 
securities, used
 
for the
 
loss
estimate was
 
of
708
 
(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 24
to the
 
Consolidated Financial
 
Statements
for additional
 
information on
 
the Corporation’s
 
exposure to
 
the Puerto
Rico Government.
At
 
December 31,
 
2023, the
 
portfolio of
 
“Obligations of
 
Puerto
 
Rico, States
 
and
 
political subdivisions”
 
also
 
includes
 
$
7
 
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
 
for further details.
Delinquency status
At December 31, 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 December 31, 2023 and December 31, 2022:
 
 
 
 
 
 
 
 
 
 
For the year ended December 31,
 
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)
(1,131)
(1,185)
Securities charged-off
-
-
Recoveries
-
-
Ending balance
$
5,780
$
6,911
The
 
allowance
 
for
 
credit
 
losses
 
for
 
the
 
Obligations
 
of
 
Puerto
 
Rico,
 
States
 
and
 
political
 
subdivisions
 
includes
 
$
0.2
 
million
 
for
securities issued by municipalities of
 
Puerto Rico, and $
5.6
 
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 $
6.6
 
million, respectively, at
 
December
31, 2022).