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Investment Securities | 3 Months Ended
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Mar. 31, 2018
Investments [Abstract] |
Investments Securities | NOTE 4 – INVESTMENT SECURITIES Money Market Investments Oriental 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, 2018 and December 31, 2017, money market instruments included as part of cash and cash equivalents amounted to $7.4 million and $7.0 million, respectively. Investment Securities The amortized cost, gross unrealized gains and losses, fair value, and weighted average yield of the securities owned by Oriental at March 31, 2018 and December 31, 2017 were as follows:
| March 31, 2018
|  |  | 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 | $ | 538,900 |  | $ | 328 |  | $ | 9,133 |  | $ | 530,095 |  | 2.51%
GNMA certificates |  | 182,055 |  |  | 317 |  |  | 2,870 |  |  | 179,502 |  | 2.97%
CMOs issued by US government-sponsored agencies |  | 78,104 |  |  | - |  |  | 2,729 |  |  | 75,375 |  | 1.90%
Total mortgage-backed securities |  | 799,059 |  |  | 645 |  |  | 14,732 |  |  | 784,972 |  | 2.56%
Investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
US Treasury securities |  | 10,280 |  |  | - |  |  | 156 |  |  | 10,124 |  | 1.28%
Obligations of US government-sponsored agencies |  | 2,773 |  |  | - |  |  | 72 |  |  | 2,701 |  | 1.38%
Obligations of Puerto Rico government and public instrumentalities |  | 2,455 |  |  | - |  |  | 43 |  |  | 2,412 |  | 5.55%
Other debt securities |  | 1,403 |  |  | 29 |  |  | - |  |  | 1,432 |  | 2.98%
Total investment securities |  | 16,911 |  |  | 29 |  |  | 271 |  |  | 16,669 |  | 2.06%
Total securities available for sale | $ | 815,970 |  | $ | 674 |  | $ | 15,003 |  | $ | 801,641 |  | 2.55%
Held-to-maturity |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 485,143 |  | $ | - |  | $ | 17,163 |  | $ | 467,980 |  | 2.07%
| December 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 | $ | 383,194 |  | $ | 1,402 |  | $ | 2,881 |  | $ | 381,715 |  | 2.39%
GNMA certificates |  | 166,436 |  |  | 1,486 |  |  | 584 |  |  | 167,338 |  | 2.94%
CMOs issued by US government-sponsored agencies |  | 82,026 |  |  | - |  |  | 1,955 |  |  | 80,071 |  | 1.90%
Total mortgage-backed securities |  | 631,656 |  |  | 2,888 |  |  | 5,420 |  |  | 629,124 |  | 2.47%
Investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
US Treasury securities |  | 10,276 |  |  | - |  |  | 113 |  |  | 10,163 |  | 1.25%
Obligations of US government-sponsored agencies |  | 2,927 |  |  | - |  |  | 48 |  |  | 2,879 |  | 1.38%
Obligations of Puerto Rico government and public instrumentalities |  | 2,455 |  |  | - |  |  | 362 |  |  | 2,093 |  | 5.55%
Other debt securities |  | 1,486 |  |  | 52 |  |  | - |  |  | 1,538 |  | 2.97%
Total investment securities |  | 17,144 |  |  | 52 |  |  | 523 |  |  | 16,673 |  | 2.04%
Total securities available-for-sale | $ | 648,800 |  | $ | 2,940 |  | $ | 5,943 |  | $ | 645,797 |  | 2.46%
Held-to-maturity |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 506,064 |  | $ | - |  | $ | 8,383 |  | $ | 497,681 |  | 2.07%
The amortized cost and fair value of Oriental’s investment securities at March 31, 2018, 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, 2018
| Available-for-sale |  | Held-to-maturity
| Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
| (In thousands)
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |
Due from 1 to 5 years |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 5,651 |  | $ | 5,598 |  | $ | - |  | $ | -
Total due from 1 to 5 years |  | 5,651 |  |  | 5,598 |  |  | - |  |  | -
Due after 5 to 10 years |  |  |  |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies | $ | 69,086 |  | $ | 66,513 |  | $ | - |  | $ | -
FNMA and FHLMC certificates |  | 216,028 |  |  | 212,418 |  |  | - |  |  | -
Total due after 5 to 10 years |  | 285,114 |  |  | 278,931 |  |  | - |  |  | -
Due after 10 years |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 317,221 |  | $ | 312,079 |  | $ | 485,143 |  | $ | 467,980
GNMA certificates |  | 182,055 |  |  | 179,502 |  |  | - |  |  | -
CMOs issued by US government-sponsored agencies |  | 9,018 |  |  | 8,862 |  |  | - |  |  | -
Total due after 10 years |  | 508,294 |  |  | 500,443 |  |  | 485,143 |  |  | 467,980
Total mortgage-backed securities |  | 799,059 |  |  | 784,972 |  |  | 485,143 |  |  | 467,980
Investment securities |  |  |  |  |  |  |  |  |  |  |
Due less than one year |  |  |  |  |  |  |  |  |  |  |
US Treasury securities | $ | 322 |  | $ | 322 |  | $ | - |  | $ | -
Obligations of Puerto Rico government and public instrumentalities |  | 2,455 |  |  | 2,412 |  |  | - |  |  | -
Total due in less than one year |  | 2,777 |  |  | 2,734 |  |  | - |  |  | -
Due from 1 to 5 years |  |  |  |  |  |  |  |  |  |  |
US Treasury securities | $ | 9,958 |  | $ | 9,802 |  | $ | - |  | $ | -
Obligations of US government and sponsored agencies |  | 2,773 |  |  | 2,701 |  |  | - |  |  | -
Total due from 1 to 5 years |  | 12,731 |  |  | 12,503 |  |  | - |  |  | -
Due from 5 to 10 years |  |  |  |  |  |  |  |  |  |  |
Other debt securities |  | 1,403 |  |  | 1,432 |  |  | - |  |  | -
Total due after 5 to 10 years |  | 1,403 |  |  | 1,432 |  |  | - |  |  | -
Total investment securities |  | 16,911 |  |  | 16,669 |  |  | - |  |  | -
Total | $ | 815,970 |  | $ | 801,641 |  | $ | 485,143 |  | $ | 467,980
During the quarter ended March 31, 2018, Oriental retained securitized GNMA pools totaling $18.0 million amortized cost, at a yield of 3.26% from its own originations while, during the quarter end ed March 31, 2017, that amount totaled $25.0 million, amortized cost, at a yield of 3.14%. During the quarters ended March 31, 2018 and 2017, Oriental did not sell any mortgage-backed securities or investment securities. The following tables sho w Oriental’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, 2018 and December 31, 2017:
| March 31, 2018
| 12 months or more
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies | $ | 69,921 |  | $ | 2,594 |  | $ | 67,327
FNMA and FHLMC certificates |  | 106,196 |  |  | 3,804 |  |  | 102,392
Obligations of US Government and sponsored agencies |  | 2,773 |  |  | 72 |  |  | 2,701
Obligations of Puerto Rico government and public instrumentalities |  | 2,455 |  |  | 43 |  |  | 2,412
GNMA certificates |  | 20,678 |  |  | 906 |  |  | 19,772
US Treasury Securities |  | 9,958 |  |  | 156 |  |  | 9,802
| $ | 211,981 |  | $ | 7,575 |  | $ | 204,406
Securities held to maturity |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 338,260 |  | $ | 13,311 |  | $ | 324,949
| Less than 12 months
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies | $ | 8,183 |  | $ | 135 |  | $ | 8,048
FNMA and FHLMC certificates |  | 367,587 |  |  | 5,329 |  |  | 362,258
GNMA certificates |  | 131,685 |  |  | 1,964 |  |  | 129,721
US Treausury Securities |  | 322 |  |  | - |  |  | 322
| $ | 507,777 |  | $ | 7,428 |  | $ | 500,349
Securities held-to-maturity |  |  |  |  |  |  |  |
FNMA and FHLMC Certificates | $ | 146,883 |  | $ | 3,852 |  | $ | 143,031
| Total
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies | $ | 78,104 |  | $ | 2,729 |  | $ | 75,375
FNMA and FHLMC certificates |  | 473,783 |  |  | 9,133 |  |  | 464,650
Obligations of Puerto Rico government and public instrumentalities |  | 2,455 |  |  | 43 |  |  | 2,412
Obligations of US government and sponsored agencies |  | 2,773 |  |  | 72 |  |  | 2,701
GNMA certificates |  | 152,363 |  |  | 2,870 |  |  | 149,493
US Treausury Securities |  | 10,280 |  |  | 156 |  |  | 10,124
| $ | 719,758 |  | $ | 15,003 |  | $ | 704,755
Securities held-to-maturity |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 485,143 |  | $ | 17,163 |  | $ | 467,980
| December 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 | $ | 72,562 |  | $ | 1,857 |  | $ | 70,705
FNMA and FHLMC certificates |  | 111,635 |  |  | 2,122 |  |  | 109,513
Obligations of US Government and sponsored agencies |  | 2,927 |  |  | 48 |  |  | 2,879
Obligations of Puerto Rico government and public instrumentalities |  | 2,455 |  |  | 362 |  |  | 2,093
GNMA certificates |  | 20,803 |  |  | 499 |  |  | 20,304
US Treasury Securities |  | 9,952 |  |  | 113 |  |  | 9,839
| $ | 220,334 |  | $ | 5,001 |  | $ | 215,333
Securities available-for-sale |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 352,399 |  |  | 7,264 |  |  | 345,135
| Less than 12 months
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies |  | 9,464 |  |  | 98 |  |  | 9,366
FNMA and FHLMC certificates |  | 125,107 |  |  | 759 |  |  | 124,348
GNMA certificates |  | 14,001 |  |  | 85 |  |  | 13,916
US Treausury Securities |  | 324 |  |  | - |  |  | 324
| $ | 148,896 |  | $ | 942 |  | $ | 147,954
Securities held to maturity |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 153,665 |  | $ | 1,119 |  | $ | 152,546
| Total
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies |  | 82,026 |  |  | 1,955 |  |  | 80,071
FNMA and FHLMC certificates |  | 236,742 |  |  | 2,881 |  |  | 233,861
Obligations of Puerto Rico government and public instrumentalities |  | 2,455 |  |  | 362 |  |  | 2,093
Obligations of US government and sponsored agencies |  | 2,927 |  |  | 48 |  |  | 2,879
GNMA certificates |  | 34,804 |  |  | 584 |  |  | 34,220
US Treausury Securities |  | 10,276 |  |  | 113 |  |  | 10,163
| $ | 369,230 |  | $ | 5,943 |  | $ | 363,287
Securities held to maturity |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 506,064 |  | $ | 8,383 |  | $ | 497,681
Oriental performs valuations of the investment securities on a monthly basis. Moreover, Oriental 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 Oriental believes that the methodology used to value these exposures is reasonable, the methodology is subject to continuing improve ment, including those made as a result of market developments. Consequentl y, 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 ($1.2 billion, amortized cost, or 99.8%) with an unrealiz ed loss position at March 31, 2018 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 sole exposure to a Puerto Rico government bond ($2.5 million, amortized cost, or 0.2%) with an unrealized loss position at March 31, 2018 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 Bri dge 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 facing, which is expected to result in a significant restructurin g of the government under the supervision of the federally-created Fiscal Oversight and Management Board of Puerto Rico. The PRHTA bond had an aggregate fair value of $2.4 million at March 31, 2018 (98% of the bond's amortized cost) and matures on July 1, 2018. The discounted cash flow analysis for the investment showed a cumulative default probability at maturity of 2.3%, thus reflecting that it is more likely than not that the bond will not default during its remaining term. Based on this analysis, Or iental 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, 2018. Also, Oriental’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 have been collected. As a result o f the aforementioned analysis, no other-than-temporary losses were recorded during the quarter ended March 31, 2018. As of March 31, 2018, Oriental 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 flo ws of the underlying investment, and included the following components: The contractual future cash flows of the bond are projected based on the key terms as set forth in the PRHTA official statement for the investment. Such key terms include among others the interest rate, amortization schedule, if any, and the maturity date. 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 defaul t 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.

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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 -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=73527792&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=73527792&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=73527792&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=73527792&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=73527792&loc=d3e27405-111563 + Details
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