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 June 30, 2014 and December 31, 2013, money market instruments included as part of cash and cash equivalents amounted to $8.2 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 June 30, 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 June 30, 2014 and December 31, 2013 were as follows:

	June 30, 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	$	1,070,034	$	44,076	$	1,992	$	1,112,118	3.10%
GNMA certificates		5,560		389		21		5,928	4.92%
CMOs issued by US government-sponsored agencies		200,111		306		3,786		196,631	1.79%
Total mortgage-backed securities		1,275,705		44,771		5,799		1,314,677	2.90%
Investment securities
US Treasury securities		9,000		-		-		9,000	0.01%
Obligations of US government-sponsored agencies		74,613		-		38		74,575	0.17%
Obligations of Puerto Rico government and political subdivisions		22,391		-		5,591		16,800	5.32%
Other debt securities		3,729		177		-		3,906	2.95%
Total investment securities		109,733		177		5,629		104,281	1.30%
Total securities available for sale	$	1,385,438	$	44,948	$	11,428	$	1,418,958	2.77%
Held-to-maturity
Mortgage-backed securities
FNMA and FHLMC certificates		26,706		138		-		26,844	2.52%
Total	$	1,412,144	$	45,086	$	11,428	$	1,445,802	2.77%

	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 June 30, 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.

	June 30, 2014
	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)				(In thousands)
Mortgage-backed securities
Due after 5 to 10 years
FNMA and FHLMC certificates	$	24,631	$	25,109	$	-	$	-
Total due after 5 to 10 years		24,631		25,109		-		-
Due after 10 years
FNMA and FHLMC certificates		1,045,403		1,087,009		26,706		26,844
GNMA certificates		5,560		5,928		-		-
CMOs issued by US government-sponsored agencies		200,111		196,631		-		-
Total due after 10 years		1,251,074		1,289,568		26,706		26,844
Total mortgage-backed securities		1,275,705		1,314,677		26,706		26,844
Investment securities
Due in less than one year
US Treasury securities		9,000		9,000		-		-
Obligations of US government and sponsored agencies		66,000		66,000		-		-
Total due in less than one year		75,000		75,000		-		-
Due from 1 to 5 years
Obligations of Puerto Rico government and political subdivisions		11,927		9,543		-		-
Total due from 1 to 5 years		11,927		9,543		-		-
Due after 5 to 10 years
Obligations of US government and sponsored agencies		8,613		8,575		-		-
Total due after 5 to 10 years		8,613		8,575		-		-
Due after 10 years
Obligations of Puerto Rico government and political subdivisions		10,464		7,257		-		-
Other debt securities		3,729		3,906		-		-
Total due after 10 years		14,193		11,163		-		-
Total investment securities		109,733		104,281		-		-
Total securities available-for-sale	$	1,385,438	$	1,418,958	$	26,706	$	26,844

At December 31, 2013, obligations of the Puerto Rico government and its political subdivisions included a $98.7 million principal amount, LIBOR floating rate bond with a 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 17, 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 six-month period ended June 30, 2014, the Company sold $48.1 million of available-for-sale Government National Mortgage Association (“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 six-month period ended June 30, 2014, certain available-for-sale securities were sold to realize gains and to invest the proceeds in other investment securities with attractive yields and terms that protect the Company's net interest margin.

For the six-month period ended June 30, 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 six-month period ended June 30, 2013.

	Six-Month Period Ended June 30, 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	$	115,158	$	110,792	$	4,366	$	-
GNMA certificates		48,077		48,077		-		-
Total	$	163,235	$	158,869	$	4,366	$	-

The following tables show the Company's gross unrealized losses and fair value of investment securities available-for-sale and held-to-maturity, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position at June 30, 2014 and December 31, 2013:

	June 30, 2014
	12 months or more
	Amortized		Unrealized		Fair
	Cost		Loss		Value
	(In thousands)
Securities available-for-sale
CMOs issued by US government-sponsored agencies	$	156,542	$	3,734	$	152,808
FNMA and FHLMC certificates		190,630		1,992		188,638
Obligations of Puerto Rico government and political subdivisions		22,391		5,591		16,800
GNMA certificates		199		21		178
	$	369,762	$	11,338	$	358,424

	Less than 12 months
	Amortized		Unrealized		Fair
	Cost		Loss		Value
	(In thousands)
Securities available-for-sale
CMOs issued by US government-sponsored agencies	$	16,365	$	52	$	16,313
Obligations of US government and sponsored agencies		8,613		38		8,575
	$	24,978	$	90	$	24,888


	Total
	Amortized		Unrealized		Fair
	Cost		Loss		Value
	(In thousands)
Securities available-for-sale
CMOs issued by US government-sponsored agencies	$	172,907	$	3,786	$	169,121
FNMA and FHLMC certificates		190,630		1,992		188,638
Obligations of Puerto Rico government and political subdivisions		22,391		5,591		16,800
Obligations of US government and sponsored agencies		8,613		38		8,575
GNMA certificates		199		21		178
	$	394,740	$	11,428	$	383,312

	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 Company performs valuations of the investment securities 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 June 30, 2014 ($372.3 million or 94%) 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 June 30, 2014 ($22.4 million or 6%) consist of obligations issued or guaranteed 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. Moreover, uncertainty in regards to the impact of the recently enacted Public Corporation Debt Enforcement and Recovery Act (the “Recovery Act”) and the related subsequent negative rating decisions taken by the credit rating agencies has affected the market value of these securities. As of June 30, 2014, the Company analyzed these investments and considered several factors that, in the Company's view, support the ability of the Commonwealth and the particular political subdivisions or instrumentalities to continue servicing their 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” 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 June 30, 2014.