XML 132 R10.htm IDEA: XBRL DOCUMENT
v3.3.0.814

Investment Securities | 9 Months Ended
--- | ---
Sep. 30, 2015
Investments [Abstract] |
Securities Purchased Under Agreements To Resell And Investments Securities | NOTE 3 – INVESTMENT SECURITIES 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 September 30, 2015 and December 31, 2014, money market instruments included as part of cash and cash equivalents amounted to $4.7 million in both periods. Investment Securities The amortized cost, gross unrealized gains and losses, fair value, and weighted average yield of the securities owned by the Company at September 30, 2015 and December 31, 2014 were as follows:
| September 30, 2015
|  |  | 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 | $ | 777,412 |  | $ | 30,486 |  | $ | 97 |  | $ | 807,801 |  | 2.98%
GNMA certificates |  | 30,854 |  |  | 1,075 |  |  | - |  |  | 31,929 |  | 3.31%
CMOs issued by US government-sponsored agencies |  | 147,336 |  |  | 172 |  |  | 1,684 |  |  | 145,824 |  | 1.84%
Total mortgage-backed securities |  | 955,602 |  |  | 31,733 |  |  | 1,781 |  |  | 985,554 |  | 2.81%
Investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
Obligations of US government-sponsored agencies |  | 5,572 |  |  | 31 |  |  | - |  |  | 5,603 |  | 1.36%
Obligations of Puerto Rico government and political subdivisions |  | 18,987 |  |  | - |  |  | 5,194 |  |  | 13,793 |  | 5.53%
Other debt securities |  | 2,593 |  |  | 162 |  |  | - |  |  | 2,755 |  | 2.95%
Total investment securities |  | 27,152 |  |  | 193 |  |  | 5,194 |  |  | 22,151 |  | 4.43%
Total securities available for sale | $ | 982,754 |  | $ | 31,926 |  | $ | 6,975 |  | $ | 1,007,705 |  | 2.86%
Held-to-maturity |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 569,599 |  |  | 2,146 |  |  | 1,650 |  |  | 570,095 |  | 2.26%
Investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
US Treasury securities |  | 25,040 |  |  | 13 |  |  | - |  |  | 25,053 |  | 0.49%
Total securities held to maturity |  | 594,639 |  |  | 2,159 |  |  | 1,650 |  |  | 595,148 |  | 2.19%
Total | $ | 1,577,393 |  | $ | 34,085 |  | $ | 8,625 |  | $ | 1,602,853 |  | 2.61%
| December 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 | $ | 972,836 |  | $ | 37,876 |  | $ | 1,203 |  | $ | 1,009,509 |  | 3.12%
GNMA certificates |  | 4,473 |  |  | 288 |  |  | 8 |  |  | 4,753 |  | 4.94%
CMOs issued by US government-sponsored agencies |  | 179,146 |  |  | 136 |  |  | 3,153 |  |  | 176,129 |  | 1.81%
Total mortgage-backed securities |  | 1,156,455 |  |  | 38,300 |  |  | 4,364 |  |  | 1,190,391 |  | 2.92%
Investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
Obligations of US government-sponsored agencies |  | 7,148 |  |  | 33 |  |  | - |  |  | 7,181 |  | 1.34%
Obligations of Puerto Rico government and public instrumentalities |  | 20,939 |  |  | - |  |  | 5,267 |  |  | 15,672 |  | 5.41%
Other debt securities |  | 3,137 |  |  | 157 |  |  | - |  |  | 3,294 |  | 2.95%
Total investment securities |  | 31,224 |  |  | 190 |  |  | 5,267 |  |  | 26,147 |  | 4.23%
Total securities available-for-sale | $ | 1,187,679 |  | $ | 38,490 |  | $ | 9,631 |  | $ | 1,216,538 |  | 2.96%
Held-to-maturity |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates |  | 162,752 |  |  | 1,402 |  |  | - |  |  | 164,154 |  | 2.48%
Total | $ | 1,350,431 |  | $ | 39,892 |  | $ | 9,631 |  | $ | 1,380,692 |  | 2.90%
The amortized cost and fair value of the Company’s investment securities at September 30, 2015, 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.
| September 30, 2015
| 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 | $ | 16,410 |  | $ | 16,772 |  | $ | - |  | $ | -
Total due after 5 to 10 years |  | 16,410 |  |  | 16,772 |  |  | - |  |  | -
Due after 10 years |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates |  | 761,002 |  |  | 791,029 |  |  | 569,599 |  |  | 570,095
GNMA certificates |  | 30,854 |  |  | 31,929 |  |  | - |  |  | -
CMOs issued by US government-sponsored agencies |  | 147,336 |  |  | 145,824 |  |  | - |  |  | -
Total due after 10 years |  | 939,192 |  |  | 968,782 |  |  | 569,599 |  |  | 570,095
Total mortgage-backed securities |  | 955,602 |  |  | 985,554 |  |  | 569,599 |  |  | 570,095
Investment securities |  |  |  |  |  |  |  |  |  |  |
Due from 1 to 5 years |  |  |  |  |  |  |  |  |  |  |
US Treasury securities |  | - |  |  | - |  |  | 25,040 |  |  | 25,053
Obligations of Puerto Rico government and political subdivisions |  | 8,766 |  |  | 7,341 |  |  | - |  |  | -
Total due from 1 to 5 years |  | 8,766 |  |  | 7,341 |  |  | 25,040 |  |  | 25,053
Due after 5 to 10 years |  |  |  |  |  |  |  |  |  |  |
Obligations of US government and sponsored agencies |  | 5,572 |  |  | 5,603 |  |  | - |  |  | -
Total due after 5 to 10 years |  | 5,572 |  |  | 5,603 |  |  | - |  |  | -
Due after 10 years |  |  |  |  |  |  |  |  |  |  |
Obligations of Puerto Rico government and political subdivisions |  | 10,221 |  |  | 6,452 |  |  | - |  |  | -
Other debt securities |  | 2,593 |  |  | 2,755 |  |  | - |  |  | -
Total due after 10 years |  | 12,814 |  |  | 9,207 |  |  | - |  |  | -
Total investment securities |  | 27,152 |  |  | 22,151 |  |  | 25,040 |  |  | 25,053
Total securities available-for-sale | $ | 982,754 |  | $ | 1,007,705 |  | $ | 594,639 |  | $ | 595,148
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 nine-month period ended September 30, 2015 and 2014, the Company sold $63.5 million and $74.1 million, respectively, of availabl e-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 s. During the quart er ended September 30, 2015, the Company retained securitized GN MA pools totaling $27.8 million, amortized cost, at a yield of 3.06% from its own originations. Previously, the Company was selling all securitized GNMA pools. For the nine-month periods periods ended September 30, 2015 and 2014, the Company recorded a net gain on sale of securities of $2.6 million and $4.4 million, respectively. The table below presents the gross realized gains by category for such periods
| Nine-Month Period Ended September 30,2015
|  |  | Book Value |  |  |  |
Description | Sale Price |  | at Sale |  | Gross Gains |  | Gross Losses
| (In thousands)
Sale of securities available-for-sale |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 40,307 |  | $ | 37,736 |  | $ | 2,571 |  | $ | -
GNMA certificates |  | 63,524 |  |  | 63,523 |  |  | 1 |  |  | -
Total | $ | 103,831 |  | $ | 101,259 |  | $ | 2,572 |  | $ | -
| Nine-Month Period Ended September 30,2014
|  |  | Book Value |  |  |  |
Description | Sale Price |  | at Sale |  | Gross Gains |  | Gross Losses
| (In thousands)
Sale of securities available-for-sale |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 115,158 |  | $ | 110,792 |  | $ | 4,366 |  | $ | -
GNMA certificates |  | 74,091 |  |  | 74,091 |  |  | - |  |  | -
Total mortgage-backed securities | $ | 189,249 |  | $ | 184,883 |  | $ | 4,366 |  | $ | -
The following table s show the Company’s gross unrealized losses and fair value of investment securities availab le-for-sale and held-to-maturity, aggregated by investment category and the length of time that individual securities have been in a continuo us unrealized loss position at September 30, 2015 and December 31, 2014:
| September 30, 2015
| 12 months or more
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies | $ | 109,190 |  | $ | 1,684 |  | $ | 107,506
Obligations of Puerto Rico government and political subdivisions |  | 18,987 |  |  | 5,194 |  |  | 13,793
| $ | 128,177 |  | $ | 6,878 |  | $ | 121,299
| Less than 12 months
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 49,679 |  | $ | 97 |  | $ | 49,582
Securities held-to-maturity |  |  |  |  |  |  |  |
FNMA and FHLMC Certificates |  | 342,215 |  |  | 1,650 |  |  | 340,565
| $ | 391,894 |  | $ | 1,747 |  | $ | 390,147
| Total
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies | $ | 109,190 |  | $ | 1,684 |  | $ | 107,506
FNMA and FHLMC certificates |  | 49,679 |  |  | 97 |  |  | 49,582
Obligations of Puerto Rico government and political subdivisions |  | 18,987 |  |  | 5,194 |  |  | 13,793
|  | 177,856 |  |  | 6,975 |  |  | 170,881
Securities held-to-maturity |  |  |  |  |  |  |  |
FNMA and FHLMC Certificates |  | 342,215 |  |  | 1,650 |  |  | 340,565
| $ | 520,071 |  | $ | 8,625 |  | $ | 511,446
| December 31, 2014
| 12 months or more
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
Obligations of Puerto Rico government and political subdivisions | $ | 20,939 |  | $ | 5,267 |  | $ | 15,672
CMOs issued by US government-sponsored agencies |  | 143,928 |  |  | 3,086 |  |  | 140,842
FNMA and FHLMC certificates |  | 113,376 |  |  | 1,172 |  |  | 112,204
GNMA certificates |  | 77 |  |  | 8 |  |  | 69
| $ | 278,320 |  | $ | 9,533 |  | $ | 268,787
| Less than 12 months
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies |  | 15,172 |  |  | 67 |  |  | 15,105
FNMA and FHLMC certificates |  | 63,736 |  |  | 31 |  |  | 63,705
| $ | 78,908 |  | $ | 98 |  | $ | 78,810
| Total
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies |  | 159,100 |  |  | 3,153 |  |  | 155,947
FNMA and FHLMC certificates |  | 177,112 |  |  | 1,203 |  |  | 175,909
Obligations of Puerto Rico government and political subdivisions |  | 20,939 |  |  | 5,267 |  |  | 15,672
GNMA certificates |  | 77 |  |  | 8 |  |  | 69
| $ | 357,228 |  | $ | 9,631 |  | $ | 347,597
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 the statements of operations with the remaining noncredit-related component recognized in other comprehensive income (loss). A credit loss is determined by assessing whether the amortized cost b asis 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 shor tfall 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 sub ject 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. Conseq uently, 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 ($501.1 million, amortized cost, or 96%) with an unr ealized loss position at September 30, 2015 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 l osses 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 ($19.0 million, amortize d cost, or 4%) with an unrealized loss position at September 30, 2015 consist of obligations issued or guaranteed by the government of Puerto Rico and its political subdivisions or instrumentalities. The decline in the market value of these securities is m ainly 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 obl igations and structural budget deficits, high unemployment and a shrinking population. Moreover, the negative rating decisions taken by the credit rating agencies have affected the market value and liquidity of these securities. As of September 30, 2015, the Company applied a discounted cash flow analysis to the Puerto Rico government bonds to calculate the cash flows expected to be collected and determine if any portion of the decline in market value of these investments was considered an other-than-temp orary impairment. The analysis derives an estimate of value based on the present value of risk-adjusted future cash flows of the underlying investments, and included the following components: The contractual future cash flows of the bonds are projected ba sed on the key terms as set forth in the official statements for each investment. Such key terms include among others the interest rate, amortization schedule, if any, and maturity date. The risk-adjusted cash flows are calculated based on a monthly defaul t probability and recovery rate assumptions based on the credit rating of each investment. Constant monthly default rates are assumed throughout the life of the bonds which are based on the respective security’s credit rating as of the date of the analysis. The adjusted future cash flows are then discounted at the original effective yield of each investment based on the purchase price and expected risk-adjusted future cash flows as of the purchase date of each investment. For certain obligations totaling $17.7 million, amortized cost, or 93% of the obligations issued or guaranteed by the government of Puerto Rico and its political subdivisions or instrumentalities, the discounted cash flow analysis for the investments showed a cumulative default probability at maturity in the range of 6.4% to 47%, thus reflecting that it is more likely than not that the bonds will not default at all during their remaining terms (range between 53% and 93.6%). Based on this analysis, the Company determined that it is more like ly than not that it will recover all interest and principal invested in these Puerto Rico government bonds and is therefore not required to recognize a credit loss as of September 30, 2015. Also, the Bank’s conclusion is based on the assessment of the spe cific source of repayment of each outstanding bond, and the bonds continue to perform. No principal is due on the bonds until July 1st, 2017, except for PRHTA that started the principal repayments on July 1st 2014 and was paid as scheduled. All scheduled interest payments are being collected from different issuers. For one obligation amounting to $1.2 million, amortized cost, or 7% of the Puerto Rico government debt securities, the discounted cash flow analy sis showed a cumulative default of 47% using a recovery rate of 65%. T aking into consideration that the bond is guaranteed by the full faith and credit of the Commonwealth of Puerto Rico and the recent downgrades of the general obligation debts after the government announced it needs to restructure its debt, the Company concluded that it is more likely than not that this bond will default during its remaini ng term until maturity in 2028. Based on the above, during the quarter ended September 30, 2015 an ot her-than-temporary impairment was recorded in earnings for the amount of $246 thousand, which represent s the estimated loss resulting from the discounted cash flow analysis. The non-credit related portion of the unrealized losses amounting to $338 thousand was recog nized in other comprehensive income, net of related taxes. Prospectively, for debt securities for which other-than-temporary impairments was recognized in earnings, the difference between the new amortized cost basis and the cash flows expected to be collected will be accreted as interest income. If upon subsequent evaluation, there is a significant increase in the cash flows expected to be co llected or if actual cash flows are significantly greater than cash flows previously expected, such changes will be accounted for as a prospective adjustment to the accretable yield. Subsequent increases and decreases (if not other-than-temporary impairmen t) in the fair value of available-for-sale securities will be included in other comprehensive income. Further negative evidence impacting the liquidity and sources of repayment of the obligations of Puerto Rico and its political subdivisions, could result in a further charge to earnings to recognize estimated credit losses determined to be other-than-temporary. At September 30, 2015, t he Company has cash flow capacity, sufficient liquidity and a strong capital position to maintain the bonds and does not need to sell them in a loss position and it is not likely that the Company will have to sell the investment securities prior to recovery of their amortized cost basis. The following table presents a rollforward of credit-related impairment losses recognized in earnings for the quarter and nine-month periods ended September 30, 2015 and 2014 on available-for-sale securities that the Company does no t have the intent to sell or will not more-likely-than-not be required to sell:
| Quarter Ended September 30, |  | Nine-Month Period Ended September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
| (In thousands)
Balance at beginning of period | $ | - |  | $ | - |  | $ | - |  | $ | -
Additions from credit losses recognized on available-for-sale securities that had no previous impairment losses |  | 246 |  |  | - |  |  | 246 |  |  | -
Balance at end of period | $ | 246 |  | $ | - |  | $ | 246 |  | $ | -

X
- References No definition available. + Details
Name: | us-gaap_InvestmentsAbstract
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://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 2: 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 3: 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 4: 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 5: 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 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 9 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27357-111563 Reference 9: 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 + Details
Name: | us-gaap_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration