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Investment Securities | 9 Months Ended
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Sep. 30, 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 September 30, 2018 and December 31, 2017, money market instruments included as part of cash and cash equivalents amounted to $5.8 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 September 30, 2018 and December 31, 2017 were as follows:
| September 30, 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 | $ | 586,097 |  | $ | 20 |  | $ | 15,799 |  | $ | 570,318 |  | 2.59%
GNMA certificates |  | 202,585 |  |  | 300 |  |  | 5,431 |  |  | 197,454 |  | 3.06%
CMOs issued by US government-sponsored agencies |  | 69,960 |  |  | - |  |  | 3,194 |  |  | 66,766 |  | 1.90%
Total mortgage-backed securities |  | 858,642 |  |  | 320 |  |  | 24,424 |  |  | 834,538 |  | 2.64%
Investment securities |  |  |  |  |  |  |  |  |  |  |  |  |
US Treasury securities |  | 10,617 |  |  | - |  |  | 157 |  |  | 10,460 |  | 1.32%
Obligations of US government-sponsored agencies |  | 2,484 |  |  | - |  |  | 89 |  |  | 2,395 |  | 1.38%
Other debt securities |  | 1,152 |  |  | 7 |  |  | - |  |  | 1,159 |  | 2.99%
Total investment securities |  | 14,253 |  |  | 7 |  |  | 246 |  |  | 14,014 |  | 1.46%
Total securities available for sale | $ | 872,895 |  | $ | 327 |  | $ | 24,670 |  | $ | 848,552 |  | 2.62%
Held-to-maturity |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 444,679 |  | $ | - |  | $ | 19,613 |  | $ | 425,066 |  | 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 September 30, 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.
| September 30, 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 | $ | 4,241 |  | $ | 4,142 |  | $ | - |  | $ | -
Total due from 1 to 5 years |  | 4,241 |  |  | 4,142 |  |  | - |  |  | -
Due after 5 to 10 years |  |  |  |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies | $ | 61,590 |  | $ | 58,617 |  | $ | - |  | $ | -
FNMA and FHLMC certificates |  | 235,031 |  |  | 228,438 |  |  | - |  |  | -
Total due after 5 to 10 years |  | 296,621 |  |  | 287,055 |  |  | - |  |  | -
Due after 10 years |  |  |  |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 346,825 |  | $ | 337,738 |  | $ | 444,679 |  | $ | 425,066
GNMA certificates |  | 202,585 |  |  | 197,454 |  |  | - |  |  | -
CMOs issued by US government-sponsored agencies |  | 8,370 |  |  | 8,149 |  |  | - |  |  | -
Total due after 10 years |  | 557,780 |  |  | 543,341 |  |  | 444,679 |  |  | 425,066
Total mortgage-backed securities |  | 858,642 |  |  | 834,538 |  |  | 444,679 |  |  | 425,066
Investment securities |  |  |  |  |  |  |  |  |  |  |
Due less than one year |  |  |  |  |  |  |  |  |  |  |
US Treasury securities | $ | 646 |  | $ | 645 |  | $ | - |  | $ | -
Total due in less than one year |  | 646 |  |  | 645 |  |  | - |  |  | -
Due from 1 to 5 years |  |  |  |  |  |  |  |  |  |  |
US Treasury securities | $ | 9,971 |  | $ | 9,815 |  | $ | - |  | $ | -
Obligations of US government and sponsored agencies |  | 2,484 |  |  | 2,395 |  |  | - |  |  | -
Total due from 1 to 5 years |  | 12,455 |  |  | 12,210 |  |  | - |  |  | -
Due from 5 to 10 years |  |  |  |  |  |  |  |  |  |  |
Other debt securities |  | 1,152 |  |  | 1,159 |  |  | - |  |  | -
Total due after 5 to 10 years |  | 1,152 |  |  | 1,159 |  |  | - |  |  | -
Total investment securities |  | 14,253 |  |  | 14,014 |  |  | - |  |  | -
Total | $ | 872,895 |  | $ | 848,552 |  | $ | 444,679 |  | $ | 425,066
During the nine month-period ended September 30, 2018, Oriental sold $14.7 million of available-for-sale Government National Mortgage Association (“GNMA”) certificates from its recurring mortgage loan origination and securitization activities. These sales did not realize any gains or losses during such period. During the nine-month period ended September 30, 2017, Oriental sold $166.0 million of mortgage-backed securities and $84.1 million of US Treasury securities, and recorded a net gain on sale of securities of $6.9 million.
| Nine-Month Period Ended September 30, 2018
|  |  | Book Value |  |  |  |
Description | Sale Price |  | at Sale |  | Gross Gains |  | Gross Losses
| (In thousands)
Sale of securities available-for-sale |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |  |  |  |  |  |
GNMA certificates | $ | 14,746 |  | $ | 14,746 |  | $ | - |  | $ | -
Total | $ | 14,746 |  | $ | 14,746 |  | $ | - |  | $ | -
| Nine-Month Period Ended September 30, 2017
|  |  | 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 | $ | 107,510 |  | $ | 102,311 |  | $ | 5,199 |  | $ | -
GNMA certificates |  | 65,284 |  |  | 63,704 |  |  | 1,580 |  |  | -
Investment securities |  |  |  |  |  |  |  |  |  |  |
US Treasury securities |  | 84,202 |  |  | 84,085 |  |  | 117 |  |  | -
Total mortgage-backed securities | $ | 256,996 |  | $ | 250,100 |  | $ | 6,896 |  | $ | -
The following tables show 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 continuous unrealized loss position at September 30, 2018 and December 31, 2017:
| September 30, 2018
| 12 months or more
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US Government-sponsored agencies | $ | 68,960 |  | $ | 3,174 |  | $ | 65,786
FNMA and FHLMC certificates |  | 160,420 |  |  | 7,451 |  |  | 152,969
Obligations of US Government and sponsored agencies |  | 2,484 |  |  | 89 |  |  | 2,395
GNMA certificates |  | 28,296 |  |  | 1,606 |  |  | 26,690
US Treasury Securities |  | 9,971 |  |  | 157 |  |  | 9,814
| $ | 270,131 |  | $ | 12,477 |  | $ | 257,654
Securities held to maturity |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 381,941 |  | $ | 17,619 |  | $ | 364,322
| Less than 12 months
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies | $ | 1,000 |  | $ | 20 |  | $ | 980
FNMA and FHLMC certificates |  | 425,094 |  |  | 8,348 |  |  | 416,746
GNMA certificates |  | 145,438 |  |  | 3,825 |  |  | 141,613
US Treasury Securities |  | 646 |  |  | - |  |  | 646
| $ | 572,178 |  | $ | 12,193 |  | $ | 559,985
Securities held-to-maturity |  |  |  |  |  |  |  |
FNMA and FHLMC Certificates | $ | 62,738 |  | $ | 1,994 |  | $ | 60,744
| Total
| Amortized |  | Unrealized |  | Fair
| Cost |  | Loss |  | Value
| (In thousands)
Securities available-for-sale |  |  |  |  |  |  |  |
CMOs issued by US government-sponsored agencies | $ | 69,960 |  | $ | 3,194 |  | $ | 66,766
FNMA and FHLMC certificates |  | 585,514 |  |  | 15,799 |  |  | 569,715
Obligations of US government and sponsored agencies |  | 2,484 |  |  | 89 |  |  | 2,395
GNMA certificates |  | 173,734 |  |  | 5,431 |  |  | 168,303
US Treausury Securities |  | 10,617 |  |  | 157 |  |  | 10,460
| $ | 842,309 |  | $ | 24,670 |  | $ | 817,639
Securities held-to-maturity |  |  |  |  |  |  |  |
FNMA and FHLMC certificates | $ | 444,679 |  | $ | 19,613 |  | $ | 425,066
| 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 Treasury 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 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 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 Oriental believes that the methodology used to value these exposures is reasonable, the methodology is subject to continuing improvement, 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. All of the investments ($1.2 billion, amortized cost) with an unrealized loss position at September 30, 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.

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