XML 23 R12.htm IDEA: XBRL DOCUMENT
v3.10.0.1

INVESTMENT SECURITIES | 9 Months Ended
--- | ---
Sep. 30, 2018
Debt and Equity Securities [Abstract] |
Investments In Debt And Marketable Equity Securities And Certain Trading Assets Disclosure | NOTE 5 – INVESTMENT SECURITIES Investment Securities Available for Sale The amortized cost, non-credit loss component of OTTI recorded in OCI, gross unrealized gains and losses recorded in OCI, estimated fair value, and weighted-average yield of investment securities available for sale by contractual maturities as of September 30, 2018 and December 31, 2017 were as follows:
|  | September 30, 2018
|  | Amortized cost |  | Noncredit Loss Component of OTTI Recorded in OCI |  |  |  | Fair value |  |
|  |  | Gross Unrealized |  |  | Weighted-
|  |  |  | gains |  | losses |  |  | average yield%
(Dollars in thousands) |
U.S. Treasury securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Due within one year | $ | 7,481 |  | $ | - |  | $ | - |  | $ | 55 |  | $ | 7,426 |  | 1.29
U.S. government-sponsored |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
agencies obligations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Due within one year |  | 156,575 |  |  | - |  |  | - |  |  | 1,584 |  |  | 154,991 |  | 1.25
After 1 to 5 years |  | 236,368 |  |  | - |  |  | - |  |  | 4,480 |  |  | 231,888 |  | 1.82
After 5 to 10 years |  | 191,119 |  |  | - |  |  | 47 |  |  | 5,505 |  |  | 185,661 |  | 2.94
After 10 years |  | 43,638 |  |  | - |  |  | - |  |  | 241 |  |  | 43,397 |  | 2.50
Puerto Rico government |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
obligations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
After 5 to 10 years |  | 4,013 |  |  | - |  |  | 129 |  |  | - |  |  | 4,142 |  | 3.14
After 10 years |  | 4,111 |  |  | - |  |  | - |  |  | 1,313 |  |  | 2,798 |  | 6.97
United States and Puerto Rico |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
government obligations |  | 643,305 |  |  | - |  |  | 176 |  |  | 13,178 |  |  | 630,303 |  | 2.10
Mortgage-backed securities (“MBS”): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Freddie Mac (“FHLMC”) certificates: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
After 5 to 10 years |  | 96,598 |  |  | - |  |  | 8 |  |  | 3,527 |  |  | 93,079 |  | 2.09
After 10 years |  | 274,233 |  |  | - |  |  | - |  |  | 9,636 |  |  | 264,597 |  | 2.50
|  |  | 370,831 |  |  | - |  |  | 8 |  |  | 13,163 |  |  | 357,676 |  | 2.39
Ginnie Mae (“GNMA”) certificates: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
After 1 to 5 years |  | 160 |  |  | - |  |  | 2 |  |  | - |  |  | 162 |  | 3.52
After 5 to 10 years |  | 65,411 |  |  | - |  |  | 305 |  |  | 714 |  |  | 65,002 |  | 2.89
After 10 years |  | 122,975 |  |  | - |  |  | 2,962 |  |  | 1,030 |  |  | 124,907 |  | 3.93
|  |  | 188,546 |  |  | - |  |  | 3,269 |  |  | 1,744 |  |  | 190,071 |  | 3.57
Fannie Mae (“FNMA”) certificates: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Due within one year |  | 379 |  |  | - |  |  | 8 |  |  | - |  |  | 387 |  | 1.91
After 1 to 5 years |  | 25,872 |  |  | - |  |  | - |  |  | 468 |  |  | 25,404 |  | 2.75
After 5 to 10 years |  | 191,965 |  |  | - |  |  | - |  |  | 6,982 |  |  | 184,983 |  | 2.22
After 10 years |  | 557,882 |  |  | - |  |  | 1,055 |  |  | 18,909 |  |  | 540,028 |  | 2.65
|  | 776,098 |  |  | - |  |  | 1,063 |  |  | 26,359 |  |  | 750,802 |  | 2.55
Collateralized mortgage obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
guaranteed by the FHLMC |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
and GNMA: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
After 1 to 5 years |  | 7,462 |  |  | - |  |  | 4 |  |  | 10 |  |  | 7,456 |  | 2.91
After 10 years |  | 59,575 |  |  | - |  |  | 348 |  |  | 81 |  |  | 59,842 |  | 3.07
|  |  | 67,037 |  |  | - |  |  | 352 |  |  | 91 |  |  | 67,298 |  | 3.05
Other mortgage pass-through |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
trust certificates: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
After 10 years |  | 20,038 |  |  | 5,467 |  |  | - |  |  | - |  |  | 14,571 |  | 4.57
Total MBS |  | 1,422,550 |  |  | 5,467 |  |  | 4,692 |  |  | 41,357 |  |  | 1,380,418 |  | 2.70
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
After 1 to 5 years |  | 500 |  |  | - |  |  | - |  |  | - |  |  | 500 |  | 2.96
Total investment securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
available for sale | $ | 2,066,355 |  | $ | 5,467 |  | $ | 4,868 |  | $ | 54,535 |  | $ | 2,011,221 |  | 2.51
|  | December 31, 2017
|  | Amortized cost |  | Noncredit Loss Component of OTTI Recorded in OCI |  | Gross Unrealized |  | Fair value |  |
|  |  |  |  |  | Weighted-
|  |  |  | gains |  | losses |  |  | average yield%
(Dollars in thousands)
U.S. Treasury securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| After 1 to 5 years | $ | 7,458 |  | $ | - |  | $ | - |  | $ | 57 |  | $ | 7,401 |  | 1.29
U.S. government-sponsored |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
agencies obligations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Due within one year |  | 122,471 |  |  | - |  |  | - |  |  | 319 |  |  | 122,152 |  | 1.06
| After 1 to 5 years |  | 309,472 |  |  | - |  |  | 28 |  |  | 3,735 |  |  | 305,765 |  | 1.42
| After 5 to 10 years |  | 133,451 |  |  | - |  |  | 117 |  |  | 319 |  |  | 133,249 |  | 2.72
| After 10 years |  | 40,769 |  |  | - |  |  | 1 |  |  | 149 |  |  | 40,621 |  | 1.84
Puerto Rico government |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
obligations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| After 5 to 10 years |  | 4,071 |  |  | - |  |  | 47 |  |  | - |  |  | 4,118 |  | 3.14
| After 10 years |  | 3,972 |  |  | - |  |  | - |  |  | 1,277 |  |  | 2,695 |  | 6.97
United States and Puerto Rico |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
government obligations |  | 621,664 |  |  | - |  |  | 193 |  |  | 5,856 |  |  | 616,001 |  | 1.70
MBS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FHLMC certificates: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| After 5 to 10 years |  | 18,658 |  |  | - |  |  | 14 |  |  | 63 |  |  | 18,609 |  | 2.14
| After 10 years |  | 297,733 |  |  | - |  |  | 217 |  |  | 4,853 |  |  | 293,097 |  | 2.23
|  |  | 316,391 |  |  | - |  |  | 231 |  |  | 4,916 |  |  | 311,706 |  | 2.23
GNMA certificates: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| After 1 to 5 years |  | 81 |  |  | - |  |  | 1 |  |  | - |  |  | 82 |  | 3.23
| After 5 to 10 years |  | 69,661 |  |  | - |  |  | 1,244 |  |  | - |  |  | 70,905 |  | 3.05
| After 10 years |  | 145,067 |  |  | - |  |  | 5,910 |  |  | 334 |  |  | 150,643 |  | 3.81
|  |  | 214,809 |  |  | - |  |  | 7,155 |  |  | 334 |  |  | 221,630 |  | 3.56
FNMA certificates: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| After 1 to 5 years |  | 20,831 |  |  | - |  |  | 294 |  |  | 109 |  |  | 21,016 |  | 2.69
| After 5 to 10 years |  | 49,934 |  |  | - |  |  | - |  |  | 818 |  |  | 49,116 |  | 1.83
| After 10 years | 613,129 |  |  | - |  |  | 3,180 |  |  | 6,401 |  |  | 609,908 |  | 2.43
|  |  | 683,894 |  |  | - |  |  | 3,474 |  |  | 7,328 |  |  | 680,040 |  | 2.39
Collateralized mortgage |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| obligations issued or guaranteed |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| by the FHLMC and GNMA: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| After 1 to 5 years |  | 5,918 |  |  | - |  |  | 14 |  |  | - |  |  | 5,932 |  | 2.21
| After 5 to 10 years |  | 2,556 |  |  | - |  |  | 11 |  |  | - |  |  | 2,567 |  | 2.23
| After 10 years |  | 35,331 |  |  | - |  |  | 231 |  |  | - |  |  | 35,562 |  | 2.22
|  |  | 43,805 |  |  | - |  |  | 256 |  |  | - |  |  | 44,061 |  | 2.22
Other mortgage pass-through |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
trust certificates: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| After 10 years |  | 22,791 |  |  | 5,731 |  |  | - |  |  | - |  |  | 17,060 |  | 2.44
Total MBS |  | 1,281,690 |  |  | 5,731 |  |  | 11,116 |  |  | 12,578 |  |  | 1,274,497 |  | 2.54
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Due within one year |  | 100 |  |  | - |  |  | - |  |  | - |  |  | 100 |  | 1.48
Equity securities (1) |  | 424 |  |  | - |  |  | - |  |  | 6 |  |  | 418 |  | 2.11
Total investment securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| available for sale | $ | 1,903,878 |  | $ | 5,731 |  | $ | 11,309 |  | $ | 18,440 |  | $ | 1,891,016 |  | 2.27
(1) | As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of $0.4 million in equity securities from available-for-sale investment securities to other investment securities.
Maturities of MBS are based on the period of final contractual maturity. Expected maturities of investments might differ from contractual maturities because they may be subject to prepayments an d/or call options. The weighted-average yield on investment securities available for sale is based on amortized cost and, therefore, does not give effect to changes in fair value. The net unrealized gain or loss on securities available for sale and the non credit loss component o f OTTI are presented as part of OCI. The following tables show the Corporation’s available-for-sale investments’ fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continu ous unrealized loss position, as of September 30, 2018 and December 31, 2017. The tables also include debt securities for which an OTTI was recognized and only the amount related to a credit loss was recognized in earnings. For unrealized losses for which OTTI was recognized, the related credit loss was charged against the amortized cost basis of the debt security.
|  | As of September 30, 2018
|  | Less than 12 months |  | 12 months or more |  | Total
|  |  |  | Unrealized |  |  |  | Unrealized |  |  |  | Unrealized
|  | Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses
| (In thousands) |  |
| Debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Puerto Rico-government obligations | $ | - |  | $ | - |  | $ | 2,798 |  | $ | 1,313 |  | $ | 2,798 |  | $ | 1,313
| U.S. Treasury and U.S. government |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| agenciesʼ obligations |  | 251,555 |  |  | 5,585 |  |  | 366,761 |  |  | 6,280 |  |  | 618,316 |  |  | 11,865
| MBS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| FNMA |  | 342,334 |  |  | 6,489 |  |  | 369,408 |  |  | 19,870 |  |  | 711,742 |  |  | 26,359
| FHLMC |  | 183,780 |  |  | 3,508 |  |  | 173,733 |  |  | 9,655 |  |  | 357,513 |  |  | 13,163
| GNMA |  | 34,354 |  |  | 491 |  |  | 32,999 |  |  | 1,253 |  |  | 67,353 |  |  | 1,744
| Collateralized mortgage obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| issued or guaranteed by |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| FHLMC and GNMA |  | 31,963 |  |  | 91 |  |  | - |  |  | - |  |  | 31,963 |  |  | 91
| Other mortgage pass-through |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| trust certificates |  | - |  |  | - |  |  | 14,571 |  |  | 5,467 |  |  | 14,571 |  |  | 5,467
|  | $ | 843,986 |  | $ | 16,164 |  | $ | 960,270 |  | $ | 43,838 |  | $ | 1,804,256 |  | $ | 60,002
|  | As of December 31, 2017
|  | Less than 12 months |  | 12 months or more |  | Total
|  |  |  | Unrealized |  |  |  | Unrealized |  |  |  | Unrealized
|  | Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses
(In thousands) |  |
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Puerto Rico-government obligations | $ | - |  | $ | - |  | $ | 2,695 |  | $ | 1,277 |  | $ | 2,695 |  | $ | 1,277
U.S. Treasury and U.S. government |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
agenciesʼ obligations |  | 136,459 |  |  | 494 |  |  | 362,050 |  |  | 4,085 |  |  | 498,509 |  |  | 4,579
MBS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FNMA |  | 189,699 |  |  | 1,705 |  |  | 274,963 |  |  | 5,623 |  |  | 464,662 |  |  | 7,328
FHLMC |  | 91,174 |  |  | 590 |  |  | 166,331 |  |  | 4,326 |  |  | 257,505 |  |  | 4,916
GNMA |  | 39,145 |  |  | 334 |  |  | - |  |  | - |  |  | 39,145 |  |  | 334
Other mortgage pass-through |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
trust certificates |  | - |  |  | - |  |  | 17,060 |  |  | 5,731 |  |  | 17,060 |  |  | 5,731
Equity securities (1) |  | - |  |  | - |  |  | 407 |  |  | 6 |  |  | 407 |  |  | 6
| $ | 456,477 |  | $ | 3,123 |  | $ | 823,506 |  | $ | 21,048 |  | $ | 1,279,983 |  | $ | 24,171
(1) | As of January 1, 2018, the Corporation adopted ASU 2016-01, resulting in the reclassification of $0.4 million in equity securities from available-for-sale investment securities to other investment securities.
Assessment for OTTI Debt securities issued by U.S. government agencies, U.S. government-sponsored entities, and the U.S. Treasu ry accounted for approximately 99% of the total availabl e-for-sale portfolio as of September 3 0, 2018, and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government. The Corporation’s OTTI asses sment was concentrated mainly on private label MBS, and on Puerto Rico government debt securities, for which credit losses are evaluated on a quarterly basis. The Corporation considered the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover: The length of time and the extent to which the fair value has been less than the amortized cost basis; Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest informat ion available about the financial condition of the issuer, credit ratings, the failure of the issuer to make scheduled principal or interest payments, recent legislation and government actions affecting the issuer’s industry, and actions taken by the issuer to deal with the present economic climate; Changes in the near term prospect s of the underlying collateral for a security, if any, such as changes in default rates, loss severity given default, and significant changes in prepayment assumptions; and The level of cash flows generated from the underlying collateral, if any, supportin g the principal and interest payments of the debt securities. T he Corporation recorded OTTI losses on available-for-sale debt securities as follows:
|  | Quarter Ended |  | Nine-Month Period Ended
|  | September 30, |  | September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
(In thousands) |  |  |  |  |  |  |  |  |  |  |
Total OTTI losses | $ | - |  | $ | - |  | $ | - |  | $ | (12,231)
Portion of OTTI recognized in OCI |  | - |  |  | - |  |  | - |  |  | -
Net impairment losses recognized in earnings (1) | $ | - |  | $ | - |  | $ | - |  | $ | (12,231)
(1) | Credit losses on Puerto Rico government debt securities, recorded in the first quarter of 2017.
The following tables summarize the roll-forward of credit losses on debt securities held by the Corporation for which a portion of an OTTI is recognized in OCI: |
|  | Cumulative OTTI credit losses recognized in earnings on securities still held |
|  |  |  |  |  | Credit impairments |  | Credit loss |  |  |
|  | June 30, |  |  | recognized in earnings on |  | reductions for |  | September 30, |
|  | 2018 |  |  | securities that have been |  | securities sold |  | 2018 |
|  | Balance |  |  | previously impaired |  | during the period |  | Balance |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |  |
Private label MBS | $ | 6,792 |  |  | $ | - |  | $ | - |  | $ | 6,792 |
|  | Cumulative OTTI credit losses recognized in earnings on securities still held |
|  |  |  |  | Credit impairments |  | Credit loss |  |  |
|  | December 31, |  | recognized in earnings on |  | reductions for |  | September 30, |
|  | 2017 |  | securities that have been |  | securities sold |  | 2018 |
|  | Balance |  | previously impaired |  | during the period |  | Balance |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |
Private label MBS | $ | 6,792 |  | $ | - |  | $ | - |  | $ | 6,792 |
|  | Cumulative OTTI credit losses recognized in earnings on securities still held |
|  |  |  |  | Credit impairments |  |  |  |  |
|  | June 30, |  | recognized in earnings |  | Credit loss reductions |  | September 30, |
|  | 2017 |  | on securities that have been | for securities sold |  | 2017 |
|  | Balance |  | previously impaired |  | during the period |  | Balance |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |
Private label MBS | $ | 6,792 |  | $ | - |  | $ | - |  | $ | 6,792 |
|  | Cumulative OTTI credit losses recognized in earnings on securities still held |
|  |  |  |  | Credit impairments |  |  |  |  |
|  | December 31, |  | recognized in earnings |  | Credit loss reductions |  | September 30, |
|  | 2016 |  | on securities that have been |  | for securities sold |  | 2017 |
|  | Balance |  | previously impaired |  | during the period |  | Balance |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |
Puerto Rico government obligations | $ | 22,189 |  | $ | 12,231 |  | $ | (34,420) |  | $ | - |
Private label MBS |  | 6,792 |  |  | - |  |  | - |  |  | 6,792 |
Total OTTI credit losses for available-for-sale |  |  |  |  |  |  |  |  |  |  |  |
debt securities | $ | 28,981 |  | $ | 12,231 |  | $ | (34,420) |  | $ | 6,792 |
During the second quarter of 2017, the Corporation sold for an aggregate of $23.4 million three Puerto Rico government available-for-sale debt securities, specifically bonds of the Government Development Bank for Puerto Rico (the “GDB”) and the Puerto Rico Public Buildings Authority, carried on its book at an amortized cost at the time of sale of $23.0 million (net of $34.4 million in cumulative OTTI impairment charges). Approximately $12.2 million of the cumulative OTTI charges on these securities was recorded in the first quarter of 2017. For the OTTI charge recorded on the Puerto Rico government debt securities in the first quarter of 2017, the Corporation considered the latest available information about the Puerto Rico govern ment’s financial condition, including but not limited to credit, ratings downgrades, revised estimates of recovery rates, and other relevant developments such as government actions, including debt exchange proposals and the fiscal plan published by the Pue rto Rico government in March 2017, as applicable. The Corporation applied a discounted cash flow analysis to its Puerto Rico government debt securities in order to calculate the cash flows expected to be collected and to determine if any portion of the dec line in market value of these securities was considered a credit-related OTTI. The analysis derived an estimate of value based on the present value of risk-adjusted cash flows of the underlying securities and included the following components: The contra ctual fu ture cash flows of the bonds were projected based on the key terms as set forth in the official statements for each security. Such key terms include d, among others, the interest rate, amortization schedule, if any, and maturity date. The risk-adj usted cash flows were calculated based on a probability of default analysis and recovery rate assumptions, including the weighting of different scenarios of ultimate recovery, considering the credit rating of each security. Co nstant monthly default rates w ere assumed throughout the li fe of the bonds, which considered the respective security’s credit rating as of the date of the analysis. The adjusted future cash flows were then discounted at the original effective yield of each investment based on the pu rchase price and expected risk-adjusted future cash flows as of the purchase date of each investment. The discounted risk-adjusted cash flow anal ysis for the three Puerto Rico g overnment bonds mentioned above assumed a default probability of 100%, a s these three non-performing bonds had been in default since the third quarter of 2016. Based on this analysis, the C orporation recorde d in the first quarter of 2017 credit-related OTTI amounting to $12.2 million, assuming recovery rates ranging from 1 5% t o 80% (with a weighted average of 4 1%). In addition, the Corporation performed an OTTI assessment on its private label MBS, which are collateralized by fixed-rate mortgages on single-family residential properties in the United States. The interest ra t e on these private-label MBS is variable, tied to 3-month LIBOR and limited t o the weighted-average coupon on the underlying collateral. The underlying mortgages are fixed-rate, single-family loans with original high FICO scores (over 700) and moderate lo an-to-value ratios (under 80%), as well as moderate delinquency levels. Based on the expected cash flows, and since the Corporation does not have the intention to sell the securities and has sufficient capital and liquidity to hold these securities until a recovery of the fair value occurs, only the credit loss component, if any, is reflected in earnings. Significant assumptions in the valuation of the private label MBS were as follows:
| As of |  | As of
| September 30, 2018 |  | December 31, 2017
| Weighted |  |  |  | Weighted |  |
| Average |  | Range |  | Average |  | Range
Discount rate | 14.8% |  | 14.8% |  | 14.0% |  | 14.0%
Prepayment rate | 11.7% |  | 3.5% - 22.5% |  | 16.4% |  | 12.0% - 29.0%
Projected Cumulative Loss Rate | 4% |  | 0% - 7.8% |  | 3% |  | 0% - 6.8%
No OTTI charges on private label MBS were recorded in either the first nine months of 2018 or the first nine months of 2017. Investment s Held to Maturity The amortized cost, gross unrecognized gains and losses, estimated fair value, weighted-average yield and contractual maturities of investment securities held to maturity as of September 30, 2018 and December 31, 2017 were as follows:
|  | September 30, 2018
|  | Amortized cost |  |  |  |  | Fair value |  |
|  |  |  | Gross Unrecognized |  |  |
|  |  |  | gains |  | losses |  |  | Weighted- average yield%
Puerto Rico Municipal Bonds: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| After 1 to 5 years | $ | 6,096 |  |  | $ | - |  | $ | 364 |  | $ | 5,732 |  | 4.73
| After 5 to 10 years |  | 53,006 |  |  |  | - |  |  | 3,374 |  |  | 49,632 |  | 5.94
| After 10 years |  | 85,697 |  |  |  | - |  |  | 9,358 |  |  | 76,339 |  | 5.78
Total investment securities |  |  |  |  |  |  |  |  |  |  |  |  |  |
| held to maturity | $ | 144,799 |  |  | $ | - |  | $ | 13,096 |  | $ | 131,703 |  | 5.79
|  | December 31, 2017
|  | Amortized cost |  |  |  | Fair value |  |
|  |  | Gross Unrecognized |  |  |
|  |  | gains |  | losses |  |  | Weighted- average yield%
Puerto Rico Municipal Bonds: |  |  |  |  |  |  |  |  |  |  |  |  |
| After 1 to 5 years | $ | 3,853 |  | $ | - |  | $ | 173 |  | $ | 3,680 |  | 5.38
| After 5 to 10 years |  | 39,523 |  |  | - |  |  | 3,048 |  |  | 36,475 |  | 5.28
| After 10 years |  | 107,251 |  |  | - |  |  | 16,374 |  |  | 90,877 |  | 4.93
Total investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
| held to maturity | $ | 150,627 |  | $ | - |  | $ | 19,595 |  | $ | 131,032 |  | 5.03
The following tables show the Corporation’s held-to-maturity investments’ fair value and gross unre cognized losses, aggregated by investment category and length of time that individual securities hav e been in a continuous unrecognized loss position, as of September 30, 2018 and Decem ber 31, 2017:
| As of September 30, 2018
| Less than 12 months |  | 12 months or more |  | Total
|  |  | Unrecognized |  |  |  | Unrecognized |  |  |  | Unrecognized
| Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses
|  | (In thousands)
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Puerto Rico Municipal Bonds | $ | - |  | $ | - |  | $ | 131,703 |  | $ | 13,096 |  | $ | 131,703 |  | $ | 13,096
| As of December 31, 2017
| Less than 12 months |  | 12 months or more |  | Total
|  |  | Unrecognized |  |  |  | Unrecognized |  |  |  | Unrecognized
| Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses
|  | (In thousands)
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Puerto Rico Municipal Bonds | $ | - |  | $ | - |  | $ | 131,032 |  | $ | 19,595 |  | $ | 131,032 |  | $ | 19,595
The Corporation determine s the fair mark et value of Puerto Rico Municipal Bonds based on a discounted cash flow analysis using risk-adjusted discount rates. A security with similar characteristics traded in the open market is used as a proxy for each municipal bond. Then the cash flow is discounted at the average spread over the discount curve exhibited by the proxy security at the end of each quarter. All of the Puerto Rico Municipal Bonds are performing and current as to scheduled contractual p ayments as of September 30, 2018. Approximately 70% of the held-to-maturity municipal bonds were issued by three of the largest municipalities in Puerto Rico. The vast majority of revenues of these three municipalities is independent of the Puerto Rico cen tral government. These obligations typically are not issued in bearer form, nor are they registered with the SEC, and are not rated by external credit agencies. In most cases, t hese bonds have priority over the payment of operating cost s and expenses of the municipality, which are required by law to levy special property taxes in such amounts as are required for the payment of all of their respective gene ral obligation bonds and loans. The Corporation performs periodic credit quality reviews on these i ssuers. Based on the quarterly analysis performed, management concluded that no individual debt security held to maturity was other-than-temporarily impaired as of September 30, 2018. The PROMESA oversight bo ard has not designated any of Puerto Rico’s 78 municipalities as covered entities under PROMESA. However, while the latest fiscal plan certified by the PROMESA oversight board did not contemplate a restructuring of the debt of Puerto Rico’s municipalities, the plan did call for the gradual elimina tion of budgetary subsidies provided to municipalities by the central government. Furthermore, municipalities are also likely to be affected by the negative economic and other effects resulting from expense, revenue or cash management measures taken by the Puerto Rico government to address its fiscal and liquidity shortfalls, or measures included in fiscal plans of other government entities, such as the fiscal plans of the GDB and the Puerto Rico Electric Power Authority (“PREPA”). Given the uncertain effec t that the negative fiscal situation of the Puerto Rico central government and the measures taken, or to be taken, by other government entities may have on municipalities, the Corporation cannot be certain whether future impairment charges will be required relating to these securities. From time to time, the Corporation has securities held to maturity with an original maturity of three months or less that are considered cash and cash equivalents and are classified as money ma rket investments in the consolidated statements of f inancial condition. As of September 30, 201 8 and December 31, 201 7, the Corporation had no outstanding securities held to maturity that were classified as cash and cash equivalents.

X
- References No definition available. + Details
Name: | us-gaap_InvestmentsDebtAndEquitySecuritiesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

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 http://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 http://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 http://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 http://asc.fasb.org/subtopic&trid=2176304 + Details
Name: | us-gaap_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration