XML 21 R10.htm IDEA: XBRL DOCUMENT
v3.7.0.1

Investment Securities | 3 Months Ended
--- | ---
Mar. 31, 2017
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 March 31, 2017 and December 31, 2016, money market instruments included as part of cash and cash equivalents amounted to $6.7 million and $5.6 million, respectively. 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, 2017 and December 31, 2016 were as follows:
| March 31, 2017
|  |  | 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 | $ | 452,484 |  | $ | 6,703 |  | $ | 2,165 |  | $ | 457,022 |  | 2.62%
GNMA certificates |  | 186,514 |  |  | 2,110 |  |  | 727 |  |  | 187,897 |  | 2.96%
CMOs issued by US government-sponsored agencies |  | 98,023 |  |  | 73 |  |  | 1,610 |  |  | 96,486 |  | 1.89%
Total mortgage-backed securities |  | 737,021 |  |  | 8,886 |  |  | 4,502 |  |  | 741,405 |  | 2.61%
Investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
US Treasury securities |  | 49,530 |  |  | - |  |  | 526 |  |  | 49,004 |  | 1.73%
Obligations of US government-sponsored agencies |  | 3,604 |  |  | - |  |  | 19 |  |  | 3,585 |  | 1.38%
Obligations of Puerto Rico government and public instrumentalities |  | 4,680 |  |  | - |  |  | 433 |  |  | 4,247 |  | 5.55%
Other debt securities |  | 1,723 |  |  | 78 |  |  | - |  |  | 1,801 |  | 2.97%
Total investment securities |  | 59,537 |  |  | 78 |  |  | 978 |  |  | 58,637 |  | 2.05%
Total securities available for sale | $ | 796,558 |  | $ | 8,964 |  | $ | 5,480 |  | $ | 800,042 |  | 2.57%
Held-to-maturity |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 577,997 |  | $ | 118 |  | $ | 7,152 |  | $ | 570,963 |  | 2.13%
Total | $ | 1,374,555 |  | $ | 9,082 |  | $ | 12,632 |  | $ | 1,371,005 |  | 2.38%
| December 31, 2016
|  |  | 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 | $ | 422,168 |  | $ | 6,354 |  | $ | 3,036 |  | $ | 425,486 |  | 2.59%
GNMA certificates |  | 163,614 |  |  | 2,241 |  |  | 620 |  |  | 165,235 |  | 2.95%
CMOs issued by US government-sponsored agencies |  | 103,990 |  |  | 64 |  |  | 2,223 |  |  | 101,831 |  | 1.88%
Total mortgage-backed securities |  | 689,772 |  |  | 8,659 |  |  | 5,879 |  |  | 692,552 |  | 2.57%
Investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
US Treasury securities |  | 49,672 |  |  | - |  |  | 618 |  |  | 49,054 |  | 1.73%
Obligations of US government-sponsored agencies |  | 3,903 |  |  | - |  |  | 19 |  |  | 3,884 |  | 1.38%
Obligations of Puerto Rico government and public instrumentalities |  | 4,680 |  |  | - |  |  | 607 |  |  | 4,073 |  | 5.55%
Other debt securities |  | 1,840 |  |  | 81 |  |  | - |  |  | 1,921 |  | 3.00%
Total investment securities |  | 60,095 |  |  | 81 |  |  | 1,244 |  |  | 58,932 |  | 2.04%
Total securities available-for-sale | $ | 749,867 |  | $ | 8,740 |  | $ | 7,123 |  | $ | 751,484 |  | 2.53%
Held-to-maturity |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 599,884 |  | $ | 145 |  | $ | 7,266 |  | $ | 592,763 |  | 2.15%
Total | $ | 1,349,751 |  | $ | 8,885 |  | $ | 14,389 |  | $ | 1,344,247 |  | 2.36%
The amortized cost and fair value of the Company’s investment securities at March 31, 2017, 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, 2017
| Available-for-sale |  | Held-to-maturity
| Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
| (In thousands) |  | (In thousands)
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |
Due from 1 to 5 years |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 9,137 |  | $ | 9,212 |  | $ | - |  | $ | -
Total due from 1 to 5 years |  | 9,137 |  | $ | 9,212 |  |  | - |  |  | -
Due after 5 to 10 years |  |  |  |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies | $ | 7,511 |  | $ | 7,296 |  | $ | - |  | $ | -
FNMA and FHLMC certificates |  | 33,357 |  |  | 33,648 |  |  | - |  |  | -
Total due after 5 to 10 years |  | 40,868 |  |  | 40,944 |  |  | - |  |  | -
Due after 10 years |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 409,990 |  | $ | 414,162 |  | $ | 577,997 |  | $ | 570,963
GNMA certificates |  | 186,514 |  |  | 187,897 |  |  | - |  |  | -
CMOs issued by US Government-sponsored agencies |  | 90,512 |  |  | 89,190 |  |  | - |  |  | -
Total due after 10 years |  | 687,016 |  |  | 691,249 |  |  | 577,997 |  |  | 570,963
Total mortgage-backed securities |  | 737,021 |  |  | 741,405 |  |  | 577,997 |  |  | 570,963
Investment securities |  |  |  |  |  |  |  |  |  |  |
Due less than one year |  |  |  |  |  |  |  |  |  |  |
US Treasury securities | $ | 324 |  | $ | 324 |  | $ | - |  | $ | -
Total due in less than one year |  | 324 |  |  | 324 |  |  | - |  |  | -
Due from 1 to 5 years |  |  |  |  |  |  |  |  |  |  |
US Treasury securities | $ | 34,493 |  | $ | 34,190 |  | $ | - |  | $ | -
Obligations of US Government and sponsored agencies |  | 3,604 |  |  | 3,585 |  |  | - |  |  | -
Obligations of Puerto Rico government and public instrumentalities |  | 4,680 |  |  | 4,247 |  |  | - |  |  | -
Total due from 1 to 5 years |  | 42,777 |  |  | 42,022 |  |  | - |  |  | -
Due from 5 to 10 years |  |  |  |  |  |  |  |  |  |  |
US Treasury securities | $ | 14,713 |  | $ | 14,490 |  | $ | - |  | $ | -
Other debt securities |  | 1,723 |  |  | 1,801 |  |  | - |  |  | -
Total due after 5 to 10 years |  | 16,436 |  |  | 16,291 |  |  | - |  |  | -
Total investment securities |  | 59,537 |  |  | 58,637 |  |  | - |  |  | -
Total securities available-for-sale | $ | 796,558 |  | $ | 800,042 |  | $ | 577,997 |  | $ | 570,963
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 pur chased. During the quarter ended March 31, 2017 and 2016, the Company retained securitized GNMA pools totaling $25.0 million and $23.0 million amorti zed cost, respectively, at a yield of 3.14% and 3.06%, respectively, from its own originations. During the quarter ended March 31, 2017, the Company did not sell any mortgage-backed securities or record any net gain on sale of securities. During the qu arter ended March 31, 2016, the Company sold $272.1 million on mortgage-backed securities and $11.1 million of Puerto Rico government bonds, and recorded a net gain on sale of securities of $12.0 million. Among the 2016 sales, the Company sold all but one of the Puerto Rico government bonds it held.
| Quarter Ended March 31, 2016
|  |  | 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 | $ | 288,194 |  | $ | 272,081 |  | $ | 16,113 |  | $ | -
Investment securities |  |  |  |  |  |  |  |  |  |  |
Obligations of PR government and public instrumentalities |  | 6,978 |  |  | 11,095 |  |  | - |  |  | 4,117
Total mortgage-backed securities | $ | 295,172 |  | $ | 283,176 |  | $ | 16,113 |  | $ | 4,117
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 continuo us unrealized loss position at March 31, 2017 and December 31, 2016:
| March 31, 2017
| 12 months or more
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies | $ | 31,942 |  | $ | 564 |  | $ | 31,378
Obligations of Puerto Rico government and public instrumentalities |  | 4,680 |  |  | 433 |  |  | 4,247
| $ | 36,622 |  | $ | 997 |  | $ | 35,625
| Less than 12 months
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies | $ | 55,117 |  | $ | 1,046 |  | $ | 54,071
FNMA and FHLMC certificates |  | 177,258 |  |  | 2,165 |  |  | 175,093
Obligations of US government and sponsored agencies |  | 3,604 |  |  | 19 |  |  | 3,585
GNMA certificates |  | 30,727 |  |  | 727 |  |  | 30,000
US Treausury Securities |  | 49,206 |  |  | 526 |  |  | 48,680
| $ | 315,912 |  | $ | 4,483 |  | $ | 311,429
Securities held-to-maturity |  |  |  |  |  |  |  |
FNMA and FHLMC Certificates |  | 501,949 |  |  | 7,152 |  |  | 494,797
| $ | 501,949 |  |  | 7,152 |  |  | 494,797
| $ | 1,133,773 |  | $ | 16,118 |  | $ | 1,117,655
| Total
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies | $ | 87,059 |  | $ | 1,610 |  | $ | 85,449
FNMA and FHLMC certificates |  | 177,258 |  |  | 2,165 |  |  | 175,093
Obligations of Puerto Rico government and political subdivisions |  | 4,680 |  |  | 433 |  |  | 4,247
Obligations of US government and sponsored agencies |  | 3,604 |  |  | 19 |  |  | 3,585
GNMA certificates |  | 30,727 |  |  | 727 |  |  | 30,000
US Treausury Securities |  | 49,206 |  |  | 526 |  |  | 48,680
|  | 352,534 |  |  | 5,480 |  |  | 347,054
Securities held-to-maturity |  |  |  |  |  |  |  |
FNMA and FHLMC certificates |  | 501,949 |  |  | 7,152 |  |  | 494,797
| $ | 854,483 |  | $ | 12,632 |  | $ | 841,851
| December 31, 2016
| 12 months or more
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
Obligations of Puerto Rico government and public instrumentalities | $ | 4,680 |  | $ | 607 |  | $ | 4,073
CMOs issued by US government-sponsored agencies |  | 33,883 |  |  | 793 |  |  | 33,090
| $ | 38,563 |  | $ | 1,400 |  | $ | 37,163
| Less than 12 months
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies |  | 67,777 |  |  | 1,430 |  |  | 66,347
FNMA and FHLMC certificates |  | 184,782 |  |  | 3,036 |  |  | 181,746
Obligations of US government and sponsored agencies |  | 3,903 |  |  | 19 |  |  | 3,884
GNMA certificates |  | 29,445 |  |  | 620 |  |  | 28,825
US Treausury Securities |  | 49,172 |  |  | 618 |  |  | 48,554
| $ | 335,079 |  | $ | 5,723 |  | $ | 329,356
Securities held to maturity |  |  |  |  |  |  |  |
FNMA and FHLMC certificates |  | 525,258 |  |  | 7,266 |  |  | 517,992
| $ | 525,258 |  | $ | 7,266 |  | $ | 517,992
| $ | 860,337 |  | $ | 12,989 |  | $ | 847,348
| Total
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies |  | 101,660 |  |  | 2,223 |  |  | 99,437
FNMA and FHLMC certificates |  | 184,782 |  |  | 3,036 |  |  | 181,746
Obligations of Puerto Rico government and public instrumentalities |  | 4,680 |  |  | 607 |  |  | 4,073
Obligations of US government and sponsored agencies |  | 3,903 |  |  | 19 |  |  | 3,884
GNMA certificates |  | 29,445 |  |  | 620 |  |  | 28,825
US Treausury Securities |  | 49,172 |  |  | 618 |  |  | 48,554
| $ | 373,642 |  | $ | 7,123 |  | $ | 366,519
Securities available-for-sale |  |  |  |  |  |  |  |
FNMA and FHLMC certificates |  | 525,258 |  |  | 7,266 |  |  | 517,992
| $ | 525,258 |  | $ | 7,266 |  | $ | 517,992
| $ | 898,900 |  | $ | 14,389 |  | $ | 884,511
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 dec line 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 basi s 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 shortfa ll 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 subjec t 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. Consequen tly, 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 ($849.8 million, amortized cost, or 99.5%) with an unre alized loss position at March 31, 2017 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 lo sses 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 investment ($4.7 million, amortized c ost, or 0.5%) with an unrealized loss position at March 31, 2017 consists of an obligation issued by the Puerto Rico Highways and Transportation Authority ("PRHTA") secured by a pledge of toll revenues from the Teodoro Moscoso Bridge operated through a public-private partnership. The decline in the market value of this security is mainly attributed to the significant economic and fiscal challenges that Puerto Rico is facin g, which is expected to result i n a significant restructuring of the government un der the supervision of a federally created Fiscal Oversight Board. All other Puerto Rico government securities were sold during the first quarter of 2016. The PRHTA bond had an aggregate fair value of $4.2 million at March 31, 2017 (90% of the bond's amort ized cost) and matures on July 1, 2018. The discounted cash flow analysis for the investment showed a cumulative default probability at maturity of 6.4%, thus reflecting that it is more likely than not that the bond will not default during its remaining te rm. Based on this analysis, the Company determined that it is more likely than not that it will recover all interest and principal invested in this Puerto Rico government bond and is, therefore, not required to recognize a credit loss as of March 31, 2017. Also, the Company’s conclusion is based on the assessment of the specific source of repayment of the outstanding bond, which continues to perform. PRHTA started principal repayments on July 1, 2014. All scheduled principal and interest payments to date ha ve been collected. On July 1, 20 16, the Company received a scheduled principal payment of $2.0 million. The next principal payment amounting to $2.2 million is scheduled for July 1, 2017. As a result of the aforementioned analysis, no other-than-temporary losses were rec orded during the period ended March 31, 2017. As of March 31, 2017, the Company performed a cash flow analysis of its Puerto Rico government bond to calculate the cash flows expected to be collected and determine if any portion of the decline in market value of this investment was considered an other-than-temporary impairment. The analysis derives an estimate of value based on the present value of risk-adjusted future cash flows of the underlying investment, and included the following c omponents: The contractual future cash flows of the bond are projected based on the key terms as set forth in the official statements for the investment. Such key terms include among others the interest rate, amortization schedule, if any, and maturity da te. The risk-adjusted cash flows are calculated based on a monthly default probability and recovery rate assumptions based on the credit rating of the investment. Constant monthly default rates are assumed throughout the life of the bond which is 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 the investment based on the purchase price and expected risk-adjusted future cash flows as of the purchase date of the investment. The following table presents a rollforward of credit-related impairment losses recognized in earnings for the quarters ended March 31, 2017 and 2016 on available-for-sale securities
|  | Quarter Ended March 31,
|  | 2017 |  | 2016
| (In thousands)
Balance at beginning of period |  | $ | - |  | $ | 1,490
Reductions for securities sold during the period (realized) |  |  | - |  |  | (1,490)
Balance at end of period |  | $ | - |  | $ | -

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