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Investment Securities

3 Months Ended

Mar. 31, 2021

NOTE 3 – INVESTMENT SECURITIES

Money Market Investments

OFG 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, 2021 and December 31, 2020, money market instruments included as part of cash and cash equivalents amounted to $11.4 million and $11.9 million, respectively.

Investment Securities

The amortized cost, gross unrealized gains and losses, fair value, and weighted average yield of the securities owned by OFG at March 31, 2021 and December 31, 2020, were as follows:

	March 31, 2021
			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	$	220,735	$	3,854	$	3,593	$	220,996	1.73%
GNMA certificates		193,884		7,624		160		201,348	2.20%
CMOs issued by US government-sponsored agencies		34,422		907		-		35,329	1.96%
Total mortgage-backed securities		449,041		12,385		3,753		457,673	1.95%
Investment securities
US Treasury securities		10,739		207		-		10,946	1.49%
Obligations of US government-sponsored agencies		1,496		16		-		1,512	1.39%
Other debt securities		839		39		-		878	2.28%
Total investment securities		13,074		262		-		13,336	1.53%
Total securities available for sale	$	462,115	$	12,647	$	3,753	$	471,009	1.94%

Held-to-maturity
Mortgage-backed securities
FNMA and FHLMC certificates	$	126,767	$	-	$	1,289	$	125,478	1.21%

	December 31, 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	$	206,195	$	4,786	$	32	$	210,949	1.78%
GNMA certificates		174,472		8,478		178		182,772	2.21%
CMOs issued by US government-sponsored agencies		38,309		905		-		39,214	1.96%
Total mortgage-backed securities		418,976		14,169		210		432,935	1.97%
Investment securities
US Treasury securities		10,740		243		-		10,983	1.49%
Obligations of US government-sponsored agencies		1,585		21		-		1,606	1.39%
Other debt securities		875		39		-		914	2.31%
Total investment securities		13,200		303		-		13,503	1.53%
Total securities available-for-sale	$	432,176	$	14,472	$	210	$	446,438	1.96%

Effective January 1, 2020, OFG adopted the new accounting standard for credit losses that requires evaluation of available-for-sale and held-to-maturity debt securities for any expected losses with recognition of an allowance for credit losses, when applicable. At March 31, 2021 and December 31, 2020, all securities held by OFG are issued by U.S. government entities and agencies that have a zero-credit loss assumption.The amortized cost and fair value of OFG’s investment securities at March 31, 2021, 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, 2021
	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Mortgage-backed securities
Due less than one year
FNMA and FHLMC certificates	$	141	$	148	$	-	$	-
Total due in less than one year		141		148		-		-
Due from 1 to 5 years
GNMA certificates		395		396		-		-
Total due from 1 to 5 years		395		396		-		-
Due after 5 to 10 years
CMOs issued by US government-sponsored agencies	$	29,295	$	30,106	$	-	$	-
FNMA and FHLMC certificates		92,424		95,664		-		-
GNMA certificates		52,748		54,294		-		-
Total due after 5 to 10 years		174,467		180,064		-		-
Due after 10 years
FNMA and FHLMC certificates	$	128,170	$	125,184	$	126,767	$	125,478
GNMA certificates		140,741		146,658		-		-
CMOs issued by US government-sponsored agencies		5,127		5,223		-		-
Total due after 10 years		274,038		277,065		126,767		125,478
Total mortgage-backed securities		449,041		457,673		126,767		125,478
Investment securities
Due less than one year
Obligations of US government-sponsored agencies	$	1,496	$	1,512	$	-	$	-
US Treasury securities		735		735		-		-
Other debt securities		250		250		-		-
Total due in less than one year		2,481		2,497		-		-
Due from 1 to 5 years
US Treasury securities	$	10,004	$	10,211	$	-	$	-
Other debt securities		589		628		-		-
Total due from 1 to 5 years		10,593		10,839		-		-
Due from 5 to 10 years
Total investment securities		13,074		13,336		-		-
Total	$	462,115	$	471,009	$	126,767	$	125,478

During the quarter ended March 31, 2020, OFG sold $316.3 million available-for-sale mortgage-backed securities and recognized a $4.7 million gain in the sale. There were no sales of securities during the quarter ended on March 31, 2021.

During the quarters ended March 31, 2021 and 2020, OFG retained securitized GNMA pools totaling $30.0 million and $26.8 million amortized cost, respectively, at a yield of 2.22% and 2.82%, from its own originations.

	Quarter Ended March 31, 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	$	-

The following table show OFG’s gross unrealized losses and fair value of investment securities available-for-sale and held-to-maturity at March 31, 2021 and December 31, 2020, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

	March 31, 2021
	Less than 12 months
	Amortized		Unrealized		Fair
	Cost		Loss		Value
	(In thousands)
Securities available-for-sale
FNMA and FHLMC certificates	$	108,552	$	3,750	$	104,802
GNMA certificates		536		3		533
	$	109,088	$	3,753	$	105,335

Held-to-maturity
FNMA and FHLMC certificates	$	126,767	$	1,289	$	125,478

	Total
	Amortized		Unrealized		Fair
	Cost		Loss		Value
	(In thousands)
Securities available-for-sale
FNMA and FHLMC certificates	$	108,552	$	3,750	$	104,802
GNMA certificates		536		3		533
	$	109,088	$	3,753	$	105,335

Held-to-maturity
FNMA and FHLMC certificates	$	126,767	$	1,289	$	125,478

	December 31, 2020
	Less than 12 months
	Amortized		Unrealized		Fair
	Cost		Loss		Value
	(In thousands)
Securities available-for-sale
FNMA and FHLMC certificates	$	34,628	$	32	$	34,596
GNMA certificates		5,104		178		4,926
	$	39,732	$	210	$	39,522

	Total
	Amortized		Unrealized		Fair
	Cost		Loss		Value
	(In thousands)
Securities available-for-sale
FNMA and FHLMC certificates	$	34,628	$	32	$	34,596
GNMA certificates		5,104		178		4,926
	$	39,732	$	210	$	39,522

OFG had no investment securities with continuous loss position for 12 months or more at March 31, 2021 or December 31, 2020.