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Investment Securities

9 Months Ended

Sep. 30, 2021

Investment Securities [Abstract]

Investment Securities

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 September 30, 2021 and December 31, 2020, money market instruments included as part of cash and cash equivalents amounted to $9.8 million and $11.9 million, respectively.

Investment Securities

The amortized cost, gross unrealized gains and losses, fair value, weighted average yield and contractual maturities of the securities owned by OFG at September 30, 2021 and December 31, 2020, were as follows:

	September 30, 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
Due from 5 to 10 years	$	93,940		$	3,219		$	-		$	97,159		1.95%
Due after 10 years		101,017			111			3,012			98,116		1.40%
Total FNMA and FHLMC certificates		194,957			3,330			3,012			195,275		1.67%
GNMA certificates
Due from 1 to 5 years		4,078			137			-			4,215		1.46%
Due from 5 to 10 years		38,961			1,133			-			40,094		1.77%
Due after 10 years		218,249			9,474			204			227,519		2.45%
Total GNMA certificates		261,288			10,744			204			271,828		2.33%
CMOs issued by US government-sponsored agencies
Due from 5 to 10 years		25,127			596			-			25,723		1.80%
Due after 10 years		1,878			24			-			1,902		4.05%
Total CMOs issued by US government-sponsored agencies		27,005			620			-			27,625		1.96%
Total mortgage-backed securities		483,250			14,694			3,216			494,728		2.04%
Investment securities
US Treasury securities
Due less than 1 year		10,738			137			-			10,875		1.49%
Total US Treasury securities		10,738			137			-			10,875		1.49%
Obligations of US government-sponsored agencies
Due less than 1 year		1,275			5			-			1,280		1.40%
Total Obligations of US government-sponsored agencies		1,275			5			-			1,280		1.40%
Other debt securities
Due less than 1 year		250			-			-			250		0.65%
Due from 1 to 5 years		1,937			37			-			1,974		5.31%
Total Other debt securities		2,187			37			-			2,224		4.78%
Total investment securities		14,200			179			-			14,379		1.99%
Total securities available for sale	$	497,450		$	14,873		$	3,216		$	509,107		2.04%

September 30, 2021

Gross

Gross

Weighted

Amortized

Unrealized

Unrealized

Fair

Average

Cost

Gains

Losses

Value

Yield

(In thousands)

Held-to-maturity

Mortgage-backed securities

FNMA and FHLMC certificates

Due after 10 years

$

375,214

$

34

$

3,421

$

371,827

1.73%

Investment securities as of September 30, 2021 include $276.9 million pledged to secure government deposits, assets sold under agreements to repurchase, derivatives and regulatory collateral that the secured parties are not permitted to sell or repledge the collateral, of which $210.5 million serve as collateral for public funds.

	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
Due less than 1 year	$	348		$	16		$	-		$	364		1.77%
Due from 5 to 10 years		96,902			3,741			-			100,643		2.00%
Due after 10 years		108,945			1,029			32			109,942		1.58%
Total FNMA and FHLMC certificates		206,195			4,786			32			210,949		1.78%
GNMA certificates
Due from 1 to 5 years		469			3			-			472		1.83%
Due from 5 to 10 years		58,615			1,466			-			60,081		1.80%
Due after 10 years		115,388			7,009			178			122,219		2.42%
Total GNMA certificates		174,472			8,478			178			182,772		2.21%
CMOs issued by US government-sponsored agencies
Due from 5 to 10 years		32,220			793			-			33,013		1.78%
Due after 10 years		6,089			112			-			6,201		2.95%
Total 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
Due less than 1 year		735			-			-			735		0.10%
Due from 1 to 5 years		10,005			243			-			10,248		1.59%
Total US Treasury securities		10,740			243			-			10,983		1.49%
Obligations of US government-sponsored agencies
Due from 1 to 5 years		1,585			21			-			1,606		1.39%
Total Obligations of US government-sponsored agencies		1,585			21			-			1,606		1.39%
Other debt securities
Due less than 1 year		251			-			-			251		0.65%
Due from 5 to 10 years		624			39			-			663		2.97%
Total 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%
Investment securities as of December 31, 2020 include $150.8 million pledged to secure government deposits, derivatives and regulatory collateral that the secured parties are not permitted to sell or repledge the collateral, of which $146.4 million serve as collateral for public funds.

The weighted average yield on debt securities available-for-sale is based on amortized cost; therefore, it does not give effect to changes in fair value.

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.

At September 30, 2021 and December 31, 2020, most securities held by OFG are issued by U.S. government entities and agencies that have a zero-credit loss assumption.

At both September 30, 2021 and December 31, 2020, the Bank’s international banking entities held short-term US Treasury securities in the amount of $305 thousand and $325 thousand as the legal reserve required for international banking entities under Puerto Rico law. These instruments cannot be withdrawn or transferred without the prior written approval of the OCFI.

During the nine-month periods ended September 30, 2021 and 2020, OFG retained securitized GNMA pools totaling $117.1 million and $46.2 million amortized cost, respectively, at a yield of 2.51% and 2.69%, from its own originations.

During the nine-month period ended September 30, 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 nine-month period ended on September 30, 2021.

	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		$	-

The following tables show OFG’s gross unrealized losses and fair value of investment securities available-for-sale and held-to-maturity at September 30, 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:

	September 30, 2021
	Less than 12 months
	Amortized			Unrealized			Fair
	Cost			Loss			Value
	(In thousands)
Securities available-for-sale
FNMA and FHLMC certificates	$	97,049		$	3,012		$	94,037
GNMA certificates		4,870			204			4,666
	$	101,919		$	3,216		$	98,703

Held-to-maturity
FNMA and FHLMC certificates	$	360,150		$	3,421		$	356,729

	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

OFG had no investment securities in a continuous loss position for 12 months or more at September 30, 2021 or December 31, 2020.