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 December 31, 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 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 $60.0 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 purchased 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.

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 31, 2014, 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 obligations of Puerto Rico Government and political subdivisions included a $98.7 million principal amount, LIBOR floating rate bond with maturity date of July 1, 2024, that was subject to mandatory tender for purchase by the end of the third year anniversary 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 activities. 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 quarter ended March 31, 2014 the Company recorded a net gain on sale of securities of $4.4 million. The tables below present the gross realized gains 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 tables show the Company's gross unrealized losses and fair value of investment securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2014 and December 31, 2013:

	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, the Company conducts quarterly reviews to identify and evaluate each investment in an unrealized loss position for other-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 conditions 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 investments in an unrealized loss position at March 31, 2014 ($404.4 million or 95%) 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 creditworthiness of the issuers or guarantors of such securities.

The remaining investments in an unrealized loss position at March 31, 2014 ($22.4 million or 5%) consist of obligations issued or collateralized by the government of Puerto Rico and its political subdivisions 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 shrinking 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 servicing 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 the 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 these 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-temporarily impaired as of March 31, 2014.