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Investment Securities

6 Months Ended

Jun. 30, 2020

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 June 30, 2020 and December 31, 2019, money market instruments included as part of cash and cash equivalents amounted to $10.0 million and $6.8 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 June 30, 2020 and December 31, 2019 were as follows:

	June 30, 2020
			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	$	145,405	$	4,412	$	-	$	149,817	1.97%
GNMA certificates		138,084		3,681		-		141,765	2.30%
CMOs issued by US government-sponsored agencies		47,498		1,114		-		48,612	1.97%
Total mortgage-backed securities		330,987		9,207		-		340,194	2.11%
Investment securities
US Treasury securities		196,358		982		-		197,340	1.63%
Obligations of US government-sponsored agencies		1,796		28		-		1,824	1.39%
Other debt securities		844		37		-		881	2.99%
Total investment securities		198,998		1,047		-		200,045	1.63%
Total securities available for sale	$	529,985	$	10,254	$	-	$	540,239	1.93%

	December 31, 2019
			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	$	403,227	$	846	$	1,417	$	402,656	2.00%
GNMA certificates		215,755		718		4		216,469	2.33%
CMOs issued by US government-sponsored agencies		55,235		16		490		54,761	1.97%
Total mortgage-backed securities		674,217		1,580		1,911		673,886	2.11%
Investment securities
US Treasury securities		397,183		-		-		397,183	1.60%
Obligations of US government-sponsored agencies		1,967		-		6		1,961	1.38%
Other debt securities		1,108		31		-		1,139	3.00%
Total investment securities		400,258		31		6		400,283	1.60%
Total securities available-for-sale	$	1,074,475	$	1,611	$	1,917	$	1,074,169	1.92%

The amortized cost and fair value of Oriental’s investment securities at June 30, 2020, 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, 2020
	Available-for-sale
	Amortized Cost		Fair Value
	(In thousands)
Mortgage-backed securities
Due from 1 to 5 years
FNMA and FHLMC certificates	$	905	$	947
GNMA certificates		622		628
Total due from 1 to 5 years		1,527		1,575
Due after 5 to 10 years
CMOs issued by US government-sponsored agencies	$	39,142	$	40,046
FNMA and FHLMC certificates		108,476		112,013
GNMA certificates		65,902		67,185
Total due after 5 to 10 years		213,520		219,244
Due after 10 years
FNMA and FHLMC certificates	$	36,024	$	36,857
GNMA certificates		71,560		73,952
CMOs issued by US government-sponsored agencies		8,356		8,566
Total due after 10 years		115,940		119,375
Total mortgage-backed securities		330,987		340,194
Investment securities
Due less than one year
US Treasury securities	$	186,351	$	187,026
Other debt securities		100		100
Total due in less than one year		186,451		187,126
Due from 1 to 5 years
Obligations of US government-sponsored agencies	$	1,796	$	1,824
US Treasury securities		10,007		10,314
Total due from 1 to 5 years		11,803		12,138
Due from 5 to 10 years
Other debt securities		744		781
Total due after 5 to 10 years		744		781
Total investment securities		198,998		200,045
Total	$	529,985	$	540,239

During the six-month period ended June 30, 2020, Oriental retained securitized GNMA pools totaling $31.1 million amortized cost, at a yield of 2.81% from its own originations, while during the six-month period ended on June 30, 2019 that amount totaled $25.7 million amortized cost, at a yield of 3.69%.

During the six-month period ended June 30, 2020, Oriental sold $316.3 million available-for-sale-mortgage-backed securities and recorded a net gain on sale of securities of $4.7 million. During the six-month period ended June 30, 2019 Oriental sold $349.7 million available-for-sale mortgage-backed securities and recognized a gain in the sale of $4.8 million.

	Six-Month Period Ended June 30, 2020
			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	$	229,571	$	227,213	$	2,358	$	-
GNMA certificates		91,413		89,043		2,370		-
Total	$	320,984	$	316,256	$	4,728	$	-


	Six-Month Period Ended June 30, 2019
			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	$	213,376	$	211,549	$	1,827	$	-
GNMA certificates		141,125		138,177		2,949		-
Total	$	354,501	$	349,726	$	4,776	$	-

At June 30, 2020, Oriental did not have investment securities in unrealized loss position. Effective January 1, 2020, Oriental adopted the new accounting standard for credit losses that requires evaluation of available-for-sale debt securities for any expected losses with recognition of an allowance for credit losses, when applicable. For more information, see Note 1 – Significant Accounting Policies. At June 30, 2020, all securities held by Oriental are issued by U.S. government entities and agencies that have a zero credit loss assumption.

The following table show Oriental’s gross unrealized losses and fair value of investment securities available-for-sale at December 31, 2019, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

	December 31, 2019
	12 months or more
	Amortized		Unrealized		Fair
	Cost		Loss		Value
	(In thousands)
Securities available-for-sale
CMOs issued by US Government-sponsored agencies	$	35,417	$	387	$	35,030
FNMA and FHLMC certificates		259,099		1,415		257,684
Obligations of US Government and sponsored agencies		1,967		6		1,961
GNMA certificates		19		-		19
	$	296,502	$	1,808	$	294,694

	Less than 12 months
	Amortized		Unrealized		Fair
	Cost		Loss		Value
	(In thousands)
Securities available-for-sale
CMOs issued by US Government-sponsored agencies		11,503		103		11,400
FNMA and FHLMC certificates		4,919		2		4,917
GNMA certificates		3,549		4		3,545
US Treasury Securities		627		-		627
	$	20,598	$	109	$	20,489

	Total
	Amortized		Unrealized		Fair
	Cost		Loss		Value
	(In thousands)
Securities available-for-sale
CMOs issued by US Government-sponsored agencies		46,920		490		46,430
FNMA and FHLMC certificates		264,018		1,417		262,601
Obligations of US government and sponsored agencies		1,967		6		1,961
GNMA certificates		3,568		4		3,564
US Treasury Securities		627		-		627
	$	317,100	$	1,917	$	315,183