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Securities Purchased Under Agreements And Investments | 3 Months Ended
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Mar. 31, 2014
Investments [Abstract] |
Securities purchased under agreement to resell and investments | NOTE 3 – SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND INVESTMENTS Money Market Investments The Company considers as cash equivalents all money market instruments that are not pledged and that have maturities of three months or less at the date of acquisition. At March 31, 2014 and Dec ember 3 1, 2013, money market instruments included as part of cash and cash equivalents amounted to $7.7 million and $7.0 million, respectively. Securities Purchased Under Agreements to Resell Securities purchased under agreements to resell consist of short-term investments and are carried at the amounts at which the assets will be subsequently resold as specified in the respective agreements. At December 31, 2013, securities purchased under agreements to resell amounted to $6 0.0 million. At March 31, 2014, there were no securities purchased under agreements to resell. The amounts advanced under those agreements are reflected as assets in the consolidated statements of financial condition. It is the Company's policy to take possession of securities purchas ed under agreements to resell. Agreements with third parties specify the Company's right to request additional collateral based on its monitoring of the fair value of the underlying securities on a daily basis. The fair value of the collateral securities held by the Company on these transactions as of December 31, 2013 was approximately $64.6 million. Investment Securities The amortized cost, gross unrealized gains and losses, fair value, and weighted average yield of the securities owned by the Company at March 31, 2014 and December 31, 2013 were as follows:
| March 31, 2014
|  |  | Gross |  | Gross |  |  | Weighted
| Amortized |  | Unrealized |  | Unrealized |  | Fair | Average
| Cost |  | Gains |  | Losses |  | Value | Yield
| (In thousands)
Available-for-sale |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 1,093,717 |  | $ | 31,769 |  | $ | 4,690 |  | $ | 1,120,796 |  | 3.03%
GNMA certificates |  | 6,146 |  |  | 426 |  |  | 23 |  |  | 6,549 |  | 4.93%
CMOs issued by US Government-sponsored agencies |  | 211,308 |  |  | 351 |  |  | 4,139 |  |  | 207,520 |  | 1.78%
Total mortgage-backed securities |  | 1,311,171 |  |  | 32,546 |  |  | 8,852 |  |  | 1,334,865 |  | 2.84%
Investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
US Treasury securities |  | 70,000 |  |  | - |  |  | - |  |  | 70,000 |  | 0.03%
Obligations of US Government-sponsored agencies |  | 9,539 |  |  | - |  |  | 42 |  |  | 9,497 |  | 1.23%
Obligations of Puerto Rico Government and political subdivisions |  | 22,367 |  |  | - |  |  | 5,298 |  |  | 17,069 |  | 5.32%
Other debt securities |  | 24,029 |  |  | 225 |  |  | - |  |  | 24,254 |  | 3.46%
Total investment securities |  | 125,935 |  |  | 225 |  |  | 5,340 |  |  | 120,820 |  | 1.72%
Total securities available for sale | $ | 1,437,106 |  | $ | 32,771 |  | $ | 14,192 |  | $ | 1,455,685 |  | 2.74%
| December 31, 2013
|  |  | Gross |  | Gross |  |  | Weighted
| Amortized |  | Unrealized |  | Unrealized |  | Fair | Average
| Cost |  | Gains |  | Losses |  | Value | Yield
| (In thousands)
Available-for-sale |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 1,190,910 |  | $ | 33,089 |  | $ | 6,669 |  | $ | 1,217,330 |  | 2.93%
GNMA certificates |  | 7,406 |  |  | 433 |  |  | 24 |  |  | 7,815 |  | 4.92%
CMOs issued by US Government-sponsored agencies |  | 220,801 |  |  | 407 |  |  | 6,814 |  |  | 214,394 |  | 1.78%
Total mortgage-backed securities |  | 1,419,117 |  |  | 33,929 |  |  | 13,507 |  |  | 1,439,539 |  | 2.76%
Investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
Obligations of US Government-sponsored agencies |  | 10,691 |  |  | - |  |  | 42 |  |  | 10,649 |  | 1.21%
Obligations of Puerto Rico Government and political subdivisions |  | 121,035 |  |  | - |  |  | 6,845 |  |  | 114,190 |  | 4.38%
Other debt securities |  | 24,200 |  |  | 167 |  |  | 320 |  |  | 24,047 |  | 3.46%
Total investment securities |  | 155,926 |  |  | 167 |  |  | 7,207 |  |  | 148,886 |  | 2.99%
Total securities available-for-sale | $ | 1,575,043 |  | $ | 34,096 |  | $ | 20,714 |  | $ | 1,588,425 |  | 2.89%
The amortized cost and fair value of the Company's investment securities at March 3 1, 201 4, by contractual maturity, are shown in the next table. Securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
| March 31, 2014
| Available-for-sale
| Amortized Cost |  | Fair Value
| (In thousands)
Mortgage-backed securities |  |  |  |  |
Due after 5 to 10 years |  |  |  |  |
FNMA and FHLMC certificates | $ | 26,294 |  | $ | 26,625
Total due after 5 to 10 years |  | 26,294 |  |  | 26,625
Due after 10 years |  |  |  |  |
FNMA and FHLMC certificates |  | 1,067,423 |  |  | 1,094,171
GNMA certificates |  | 6,146 |  |  | 6,549
CMOs issued by US Government-sponsored agencies |  | 211,308 |  |  | 207,520
Total due after 10 years |  | 1,284,877 |  |  | 1,308,240
Total mortgage-backed securities |  | 1,311,171 |  |  | 1,334,865
Investment securities |  |  |  |  |
Due in less than one year |  |  |  |  |
US Treasury securities |  | 70,000 |  |  | 70,000
Other debt securities |  | 20,000 |  |  | 20,053
Total due in less than one year |  | 90,000 |  |  | 90,053
Due from 1 to 5 years |  |  |  |  |
Obligations of Puerto Rico Government and political subdivisions |  | 11,903 |  |  | 9,827
Total due from 1 to 5 years |  | 11,903 |  |  | 9,827
Due after 5 to 10 years |  |  |  |  |
Obligations of US Government and sponsored agencies |  | 9,539 |  |  | 9,497
Total due after 5 to 10 years |  | 9,539 |  |  | 9,497
Due after 10 years |  |  |  |  |
Obligations of Puerto Rico Government and political subdivisions |  | 10,464 |  |  | 7,242
Other debt securities |  | 4,029 |  |  | 4,201
Total due after 10 years |  | 14,493 |  |  | 11,443
Total investment securities |  | 125,935 |  |  | 120,820
Total securities available-for-sale | $ | 1,437,106 |  | $ | 1,455,685
At December 31, 2013 o bligations of Puerto Rico Government and political subdivisions include d a $98.7 million principal amount, LIBOR floating rate bond with maturity date of July 1, 2024, that was su bject to mandatory tender for purchase by the end of the third year anniversa ry of the closing date, which was June 1, 2014. The bond was also subject to optional demand tender for purchase upon the occurrence and continuance of certain events, including (among others) the withdrawal, suspension or reduction below investment grade of the credit rating on any general obligation of the Commonwealth by any of the three major rating agencies. This bond was repaid by the issuer on March 1, 2014. The Company, as part of its asset/liability management, may purchase U.S. Treasury securities and U.S. government-sponsored agency discount notes close to their maturities as alternatives to cash deposits at correspondent banks or as a short term vehicle to reinvest the proceeds of sale transactions until investment securities with attractive yields can be purchased. During the quarter ended March 31, 2014, the Company sold $24.0 million of available-for-sale GNMA certificates that were sold as part of its recurring mortgage loan origination and securitization a ctivities. These sales did not realize any gains or losses during such period. In addition, during the quarter ended March 31, 2014, there were certain sales of available-for-sale securities because the Company believed that gains could be realized and that there were good opportunities to invest the proceeds in other investment securities with attractive yields and terms that would allow the Company to continue protecting its net interest margin. For the quarte r ended March 31, 2014 the Company recorded a net gain on sale of securities of $4.4 millio n. The table s below present the gross realized ga ins by category for such period. There was no realized gain or loss for the quarter ended March 31, 2013.
| Quarter Ended March 31, 2014
|  |  | Book Value |  | Gross |  | Gross
Description | Sale Price |  | at Sale |  | Gains |  | Losses
| (In thousands)
Sale of securities available-for-sale |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 115,159 |  | $ | 110,792 |  | $ | 4,366 |  | $ | -
GNMA certificates |  | 23,993 |  |  | 23,993 |  |  | - |  |  | -
Total | $ | 139,152 |  | $ | 134,785 |  | $ | 4,366 |  | $ | -
The following table s show the Company's gross unrealized losses and fair value of investment securities availab le-for-sale, aggregated by investment category and length of time that individual securities have been in a continuo us unrealized loss position, at March 31, 2014 and December 31, 201 3:
| March 31, 2014
| 12 months or more
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies | $ | 1,897 |  | $ | 163 |  | $ | 1,734
Obligations of Puerto Rico Government and political subdivisions |  | 22,367 |  |  | 5,298 |  |  | 17,069
GNMA certificates |  | 80 |  |  | 10 |  |  | 70
| $ | 24,344 |  | $ | 5,471 |  | $ | 18,873
| Less than 12 months
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies | $ | 177,882 |  | $ | 3,976 |  | $ | 173,906
FNMA and FHLMC certificates |  | 214,926 |  |  | 4,690 |  |  | 210,236
Obligations of US government and sponsored agencies |  | 9,539 |  |  | 42 |  |  | 9,497
GNMA certificates |  | 121 |  |  | 13 |  |  | 108
| $ | 402,468 |  | $ | 8,721 |  | $ | 393,747
| Total
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies | $ | 179,779 |  | $ | 4,139 |  | $ | 175,640
FNMA and FHLMC certificates |  | 214,926 |  |  | 4,690 |  |  | 210,236
Obligations of Puerto Rico Government and political subdivisions |  | 22,367 |  |  | 5,298 |  |  | 17,069
Obligations of US government and sponsored agencies |  | 9,539 |  |  | 42 |  |  | 9,497
GNMA certificates |  | 201 |  |  | 23 |  |  | 178
| $ | 426,812 |  | $ | 14,192 |  | $ | 412,620
| December 31, 2013
| 12 months or more
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
Obligations of Puerto Rico Government and political subdivisions | $ | 20,845 |  | $ | 5,470 |  | $ | 15,375
CMOs issued by US Government-sponsored agencies |  | 2,559 |  |  | 237 |  |  | 2,322
GNMA certificates |  | 81 |  |  | 11 |  |  | 70
| $ | 23,485 |  | $ | 5,718 |  | $ | 17,767
| Less than 12 months
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
Obligations of Puerto Rico Government and political subdivisions | $ | 100,190 |  | $ | 1,375 |  | $ | 98,815
CMOs issued by US Government-sponsored agencies |  | 182,661 |  |  | 6,577 |  |  | 176,084
GNMA certificates |  | 122 |  |  | 13 |  |  | 109
FNMA and FHLMC certificates |  | 220,913 |  |  | 6,669 |  |  | 214,244
Obligations of US Government and sponsored agencies |  | 10,691 |  |  | 42 |  |  | 10,649
Other debt securities |  | 20,000 |  |  | 320 |  |  | 19,680
| $ | 534,577 |  | $ | 14,996 |  | $ | 519,581
| Total
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
Obligations of Puerto Rico Government and political subdivisions | $ | 121,035 |  | $ | 6,845 |  | $ | 114,190
CMOs issued by US Government-sponsored agencies |  | 185,220 |  |  | 6,814 |  |  | 178,406
GNMA certificates |  | 203 |  |  | 24 |  |  | 179
FNMA and FHLMC certificates |  | 220,913 |  |  | 6,669 |  |  | 214,244
Obligations of US Government and sponsored agencies |  | 10,691 |  |  | 42 |  |  | 10,649
Other debt securities |  | 20,000 |  |  | 320 |  |  | 19,680
| $ | 558,062 |  | $ | 20,714 |  | $ | 537,348
The valuations of the investment securities are performed on a monthly basis. Moreover, t he Company conducts quarterly reviews to identify and evaluate each investment in an unrealized loss position for o ther-than-temporary impairment. Any portion of a decline in value associated with credit loss is recognized in income with the remaining noncredit-related component recognized in other comprehensive income. A credit loss is determined by assessing whether the amortized cost basis of the security will be recovered by comparing the present value of cash flows expected to be collected from the security, discounted at the rate equal to the yield used to accrete current and prospective beneficial interest for the security. The shortfall of the present value of the cash flows expected to be collected in relation to the amortized cost basis is considered to be the “credit loss.” Other-than-temporary impairment analysis is based on estimates that depend on market condition s and are subject to further change over time. In addition, while the Company believes that the methodology used to value these exposures is reasonable, the methodology is subject to continuing refinement, including those made as a result of market developments. Consequently, it is reasonably possible that changes in estimates or conditions could result in the need to recognize additional other-than-temporary impairment charges in the future. Most of the i nvestments in an unre alized loss position at March 31, 2014 ($4 04.4 million or 9 5%) consist of securities issued or guaranteed by the U.S. Treasury or U.S. government-sponsored agencies, all of which are highly liquid securities that have a large and efficient secondary market. Their aggregate losses and their variability from period to period are the result of changes in market conditions, and not due to the repayment capacity or creditworthine ss of the issuers or guarantors of such securities. The remaining investments in an unre alized loss position at March 31, 20 14 ($22.4 million or 5%) consist of obligations issued or collateralized by the government of Puerto Rico and its political subd ivisions or instrumentalities. The recent decline in the market value of these securities is mainly attributed to an increase in volatility as a result of changes in market conditions that reflect the significant economic and fiscal challenges that Puerto Rico is facing, including a protracted economic recession, sizable government debt-service obligations and structural budget deficits, high unemployment and a shrin king population. As of March 31, 2014, the Company analyzed these investments under a plausible set of scenarios that included the possibility of a further downgrade in the credit ratings of the Commonwealth, and also considered numerous factors that, in the Company's view, support the ability of the Commonwealth to continue s ervicing its debt obligations. Such factors include (i) the collateralization and sources of repayment for such debt obligations; (ii) the government's efforts to increase revenues and reduce expenses to tackle its recurrent budget deficits; (iii) the Commonwealth's constitutional framework that provides that “public debt” (e.g., general obligation bonds such as the $98.7 million principal amount Puerto Rico government bond owned by t he Company, and repaid by the issuer on March 1, 2014) constitutes a first claim on available Commonwealth resources; and (iv) the Commonwealth's compliance and commitment to its contractual debt obligations. In addition, the Company believes it is probable that it will collect all amounts due according to the contractual terms of its Puerto Rico government bonds. Based on thes e factors, the Company expects that such bonds will be repaid in full when due, and given that the Company does not have the intent to sell any such bonds in an unrealized loss position, the Company does not consider them to be other-than-tem porarily impaired as of March 31, 2014.

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27290-111563 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27357-111563 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -Glossary Debt Security -URI http://asc.fasb.org/extlink&oid=6509901 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6379141&loc=d3e15032-111544 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27232-111563 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6957658&loc=d3e62557-112803 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27161-111563 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27405-111563 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -Glossary Equity Security -URI http://asc.fasb.org/extlink&oid=6511694 + Details
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