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Investment Securities

9 Months Ended

Sep. 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 September 30, 2020 and December 31, 2019, money market instruments included as part of cash and cash equivalents amounted to $14.6 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 September 30, 2020 and December 31, 2019 were as follows:

	September 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	$	135,067	$	4,897	$	-	$	139,964	1.96%
GNMA certificates		141,412		4,480		-		145,892	2.29%
CMOs issued by US government-sponsored agencies		42,816		1,048		-		43,864	1.97%
Total mortgage-backed securities		319,295		10,425		-		329,720	2.11%
Investment securities
US Treasury securities		91,109		422		-		91,531	1.61%
Obligations of US government-sponsored agencies		1,688		26		-		1,714	1.39%
Other debt securities		808		42		-		850	2.99%
Total investment securities		93,605		490		-		94,095	1.62%
Total securities available for sale	$	412,900	$	10,915	$	-	$	423,815	2.00%

	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 September 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.

	September 30, 2020
	Available-for-sale
	Amortized Cost		Fair Value
	(In thousands)
Mortgage-backed securities
Due less than one year
FNMA and FHLMC certificates	$	597	$	624
Total due in less than one year		597		624
Due from 1 to 5 years
GNMA certificates		546		550
Total due from 1 to 5 years		546		550
Due after 5 to 10 years
CMOs issued by US government-sponsored agencies	$	35,553	$	36,442
FNMA and FHLMC certificates		103,975	$	107,933
GNMA certificates		64,979	$	66,388
Total due after 5 to 10 years		204,507		210,763
Due after 10 years
FNMA and FHLMC certificates	$	30,495	$	31,407
GNMA certificates		75,888	$	78,954
CMOs issued by US government-sponsored agencies		7,262	$	7,422
Total due after 10 years		113,645		117,783
Total mortgage-backed securities		319,295		329,720
Investment securities
Due less than one year
US Treasury securities	$	81,103	$	81,245
Other debt securities		100	$	100
Total due in less than one year		81,203		81,345
Due from 1 to 5 years
Obligations of US government-sponsored agencies	$	1,688	$	1,714
US Treasury securities		10,006	$	10,286
Total due from 1 to 5 years		11,694		12,000
Due from 5 to 10 years
Other debt securities		708		750
Total due after 5 to 10 years		708		750
Total investment securities		93,605		94,095
Total	$	412,900	$	423,815

During the nine-month period ended September 30, 2020, Oriental retained securitized GNMA pools totaling $46.2 million amortized cost, at a yield of 2.69% from its own originations, while during the nine-month period ended on September 30, 2019 that amount totaled $45.7 million amortized cost, at a yield of 3.42%.

During the nine-month period ended September 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 nine-month period ended September 30, 2019 Oriental sold $680.5 million available-for-sale mortgage-backed securities and recognized a gain in the sale of $8.3 million.

	Nine-Month Period Ended September 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	$	-


	Nine-Month Period Ended September 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	$	451,081	$	447,305	$	3,776	$	-
GNMA certificates		229,385		224,887		4,498		-
Total	$	680,466	$	672,192	$	8,274	$	-

At September 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 September 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