Investment securities

6 Months Ended

Jun. 30, 2012

Available For Sale Securities Member

Notes to Financial Statements [Abstract]

Note 5 – Investment securities available-for-sale

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities available-for-sale.

		At June 30, 2012
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	Within 1 year	$	7,014	$	64	$	-	$	7,078	1.50	%
	After 1 to 5 years		27,609		3,241		-		30,850	3.82
Total U.S. Treasury securities			34,623		3,305		-		37,928	3.35
Obligations of U.S. Government sponsored entities
	Within 1 year		539,045		16,168		-		555,213	3.84
	After 1 to 5 years		190,538		2,646		7		193,177	1.81
	After 5 to 10 years		280,596		3,206		166		283,636	1.98
	After 10 years		7,083		289		-		7,372	5.41
Total obligations of U.S. Government sponsored entities			1,017,262		22,309		173		1,039,398	2.96
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year		5,000		54		-		5,054	2.99
	After 1 to 5 years		6,592		199		34		6,757	4.67
	After 10 years		37,290		808		-		38,098	5.38
Total obligations of Puerto Rico, States and political subdivisions			48,882		1,061		34		49,909	5.04
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		6,130		62		-		6,192	1.52
	After 5 to 10 years		37,137		1,580		-		38,717	2.85
	After 10 years		1,909,363		47,628		318		1,956,673	2.53
Total collateralized mortgage obligations - federal agencies			1,952,630		49,270		318		2,001,582	2.53
Collateralized mortgage obligations - private label
	After 5 to 10 years		41		2		-		43	4.95
	After 10 years		42,722		43		2,474		40,291	2.70
Total collateralized mortgage obligations - private label			42,763		45		2,474		40,334	2.70
Mortgage-backed securities
	Within 1 year		689		26		-		715	3.79
	After 1 to 5 years		4,880		228		-		5,108	3.93
	After 5 to 10 years		95,331		7,272		-		102,603	4.68
	After 10 years		1,645,570		121,764		34		1,767,300	4.24
Total mortgage-backed securities			1,746,470		129,290		34		1,875,726	4.26
Equity securities (without contractual maturity)			6,595		565		138		7,022	3.05
Other
	After 5 to 10 years		18,025		1,838		-		19,863	10.99
	After 10 years		4,907		128		-		5,035	3.62
Total other			22,932		1,966		-		24,898	9.41
Total investment securities available-for-sale		$	4,872,157	$	207,811	$	3,171	$	5,076,797	3.31	%

		At December 31, 2011
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	After 1 to 5 years	$	34,980	$	3,688	$	-	$	38,668	3.35	%
Total U.S. Treasury securities			34,980		3,688		-		38,668	3.35
Obligations of U.S. Government sponsored entities
	Within 1 year		94,492		2,382		-		96,874	3.45
	After 1 to 5 years		655,625		25,860		-		681,485	3.38
	After 5 to 10 years		171,633		2,969		-		174,602	2.94
	After 10 years		32,086		499		-		32,585	3.20
Total obligations of U.S. Government sponsored entities			953,836		31,710		-		985,546	3.30
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year		765		9		-		774	4.97
	After 1 to 5 years		14,824		283		31		15,076	4.07
	After 5 to 10 years		4,595		54		-		4,649	5.33
	After 10 years		37,320		909		-		38,229	5.38
Total obligations of Puerto Rico, States and political subdivisions			57,504		1,255		31		58,728	5.03
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		2,424		49		-		2,473	3.28
	After 5 to 10 years		55,096		1,446		-		56,542	2.64
	After 10 years		1,589,373		49,462		208		1,638,627	2.84
Total collateralized mortgage obligations - federal agencies			1,646,893		50,957		208		1,697,642	2.83
Collateralized mortgage obligations - private label
	After 5 to 10 years		5,653		1		181		5,473	0.81
	After 10 years		59,460		-		7,141		52,319	2.44
Total collateralized mortgage obligations - private label			65,113		1		7,322		57,792	2.30
Mortgage-backed securities
	Within 1 year		57		1		-		58	3.91
	After 1 to 5 years		7,564		328		-		7,892	3.86
	After 5 to 10 years		111,639		8,020		1		119,658	4.66
	After 10 years		1,870,736		141,274		49		2,011,961	4.25
Total mortgage-backed securities			1,989,996		149,623		50		2,139,569	4.27
Equity securities (without contractual maturity)			6,594		426		104		6,916	2.96
Other
	After 5 to 10 years		17,850		700		-		18,550	10.99
	After 10 years		6,311		101		-		6,412	3.61
Total other			24,161		801		-		24,962	9.06
Total investment securities available-for-sale		$	4,779,077	$	238,461	$	7,715	$	5,009,823	3.58	%

The weighted average yield on investment 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 mortgage-backed securities and collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations, mortgage-backed securities and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

There were no proceeds from the sale of investment securities available-for-sale for the six months ended June 30, 2012 since the transactions traded in June 2012, but settled in July 2012 (June 30, 2011 - $ 19.1 million). Proceeds received in July 2012 related to these sale transactions amounted to $8.0 million. Gross realized gains and losses on the sale of investment securities available-for-sale were as follows:

	For the quarter ended June 30,				Six months ended June 30,
(In thousands)		2012		2011		2012		2011
Gross realized gains	$	-	$	6	$	-	$	6
Gross realized losses		(349)		(96)		(349)		(96)
Net realized gains (losses) on sale of investment securities available-for-sale	$	(349)	$	(90)	$	(349)	$	(90)

The following tables present the Corporation's fair value and gross unrealized losses of investment securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

		At June 30, 2012
		Less than 12 months				12 months or more				Total
				Gross				Gross				Gross
		Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)		value		losses		value		losses		value		losses
Obligations of U.S. Government sponsored entities		$	31,912	$	173	$	-	$	-	$	31,912	$	173
Obligations of Puerto Rico, States and political
	subdivisions		2,798		34		-		-		2,798		34
Collateralized mortgage obligations - federal agencies			88,198		314		2,762		4		90,960		318
Collateralized mortgage obligations - private label			-		-		35,826		2,474		35,826		2,474
Mortgage-backed securities			205		4		801		30		1,006		34
Equity securities			5,164		130		3		8		5,167		138
Total investment securities available-for-sale in an
	unrealized loss position	$	128,277	$	655	$	39,392	$	2,516	$	167,669	$	3,171

		At December 31, 2011
		Less than 12 months				12 months or more				Total
				Gross				Gross				Gross
		Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)		value		losses		value		losses		value		losses
Obligations of Puerto Rico, States and political
	subdivisions	$	7,817	$	28	$	191	$	3	$	8,008	$	31
Collateralized mortgage obligations - federal agencies			90,543		208		-		-		90,543		208
Collateralized mortgage obligations - private label			13,595		539		44,148		6,783		57,743		7,322
Mortgage-backed securities			5,577		14		1,466		36		7,043		50
Equity securities			5,199		95		2		9		5,201		104
Total investment securities available-for-sale in an
	unrealized loss position	$	122,731	$	884	$	45,807	$	6,831	$	168,538	$	7,715

Management evaluates investment securities for other-than-temporary (“OTTI”) declines in fair value on a quarterly basis. Once a decline in value is determined to be other-than-temporary, the value of a debt security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses. Also, for equity securities that are considered other-than-temporarily impaired, the excess of the security's carrying value over its fair value at the evaluation date is accounted for as a loss in the results of operations. The OTTI analysis requires management to consider various factors, which include, but are not limited to: (1) the length of time and the extent to which fair value has been less than the amortized cost basis, (2) the financial condition of the issuer or issuers, (3) actual collateral attributes, (4) the payment structure of the debt security and the likelihood of the issuer being able to make payments, (5) any rating changes by a rating agency, (6) adverse conditions specifically related to the security, industry, or a geographic area, and (7) management's intent to sell the debt security or whether it is more likely than not that the Corporation would be required to sell the debt security before a forecasted recovery occurs.

At June 30, 2012, management performed its quarterly analysis of all debt securities in an unrealized loss position. Based on the analyses performed, management concluded that no individual debt security was other-than-temporarily impaired as of such date. At June 30, 2012, the Corporation did not have the intent to sell debt securities in an unrealized loss position and it is not more likely than not that the Corporation will have to sell the investment securities prior to recovery of their amortized cost basis. Also, management evaluated the Corporation's portfolio of equity securities at June 30, 2012. No other-than-temporary impairment losses on equity securities were recorded during the quarters and six months ended June 30, 2012 and 2011. Management has the intent and ability to hold the investments in equity securities that are at a loss position at June 30, 2012, for a reasonable period of time for a forecasted recovery of fair value up to (or beyond) the cost of these investments.

The unrealized losses associated with “Collateralized mortgage obligations – private label” (“private-label CMO”) are primarily related to securities backed by residential mortgages. In addition to verifying the credit ratings for the private-label CMOs, management analyzed the underlying mortgage loan collateral for these bonds. Various statistics or metrics were reviewed for each private-label CMO, including among others, the weighted average loan-to-value, FICO score, and delinquency and foreclosure rates of the underlying assets in the securities. At June 30, 2012, there were no “sub-prime” securities in the Corporation's private-label CMOs portfolios. For private-label CMOs with unrealized losses at June 30, 2012, credit impairment was assessed using a cash flow model that estimates the cash flows on the underlying mortgages, using the security-specific collateral and transaction structure. The model estimates cash flows from the underlying mortgage loans and distributes those cash flows to various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual cash flows through the current period and then projects the expected cash flows using a number of assumptions, including default rates, loss severity and prepayment rates. Management's assessment also considered tests using more stressful parameters. Based on the assessments, management concluded that the tranches of the private-label CMOs held by the Corporation were not other-than-temporarily impaired at June 30, 2012, thus management expects to recover the amortized cost basis of the securities.

The following table states the name of issuers, and the aggregate amortized cost and fair value of the securities of such issuer (includes available-for-sale and held-to-maturity securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders' equity. This information excludes securities backed by the full faith and credit of the U.S. Government. Investments in obligations issued by a state of the U.S. and its political subdivisions and agencies, which are payable and secured by the same source of revenue or taxing authority, other than the U.S. Government, are considered securities of a single issuer.

		June 30, 2012				December 31, 2011

(In thousands)	Amortized cost		Fair value		Amortized cost		Fair value
FNMA	$	1,234,776	$	1,273,616	$	1,049,315	$	1,089,069
FHLB		538,854		555,078		553,940		578,617
Freddie Mac		1,123,166		1,147,089		984,270		1,010,669

Held To Maturity Securities Member

Notes to Financial Statements [Abstract]

Investment securities

Note 6 – Investment securities held-to-maturity

		At June 30, 2012
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year	$	7,375	$	18	$	-	$	7,393	2.31	%
	After 1 to 5 years		11,649		579		-		12,228	5.83
	After 5 to 10 years		19,301		960		13		20,248	6.00
	After 10 years		59,674		704		405		59,973	4.00
Total obligations of Puerto Rico, States and political subdivisions			97,999		2,261		418		99,842	4.48
Collateralized mortgage obligations - federal agencies
	After 10 years		147		5		-		152	5.45
Total collateralized mortgage obligations - federal agencies			147		5		-		152	5.45
Other
	After 1 to 5 years		26,500		29		-		26,529	3.38
Total other			26,500		29		-		26,529	3.38
Total investment securities held-to-maturity		$	124,646	$	2,295	$	418	$	126,523	4.25	%

		At December 31, 2011
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year	$	7,275	$	6	$	-	$	7,281	2.24	%
	After 1 to 5 years		11,174		430		-		11,604	5.80
	After 5 to 10 years		18,512		266		90		18,688	5.99
	After 10 years		62,012		40		855		61,197	4.11
Total obligations of Puerto Rico, States and political subdivisions			98,973		742		945		98,770	4.51
Collateralized mortgage obligations - private label
	After 10 years		160		-		9		151	5.45
Total collateralized mortgage obligations - private label			160		-		9		151	5.45
Other
	After 1 to 5 years		26,250		83		-		26,333	3.41
Total other			26,250		83		-		26,333	3.41
Total investment securities held-to-maturity		$	125,383	$	825	$	954	$	125,254	4.28	%

Securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

The following tables present the Corporation's fair value and gross unrealized losses of investment securities held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2012 and December 31, 2011.

		At June 30, 2012
		Less than 12 months				12 months or more				Total
				Gross				Gross				Gross
		Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)		value		losses		value		losses		value		losses
Obligations of Puerto Rico, States and political subdivisions		$	91	$	1	$	22,147	$	417	$	22,238	$	418
Total investment securities held-to-maturity in an unrealized
	loss position	$	91	$	1	$	22,147	$	417	$	22,238	$	418

		At December 31, 2011
		Less than 12 months				12 months or more				Total
				Gross				Gross				Gross
		Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)		value		losses		value		losses		value		losses

Obligations of Puerto Rico, States and political subdivisions		$	10,323	$	92	$	31,062	$	853	$	41,385	$	945
Collateralized mortgage obligations - private label			-		-		151		9		151		9
Total investment securities held-to-maturity in an unrealized
	loss position	$	10,323	$	92	$	31,213	$	862	$	41,536	$	954

As indicated in Note 5 to these consolidated financial statements, management evaluates investment securities for OTTI declines in fair value on a quarterly basis.

The “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-maturity at June 30, 2012 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. The Corporation performs periodic credit quality reviews on these issuers. The decline in fair value at June 30, 2012 was attributable to changes in interest rates and not credit quality, thus no other-than-temporary decline in value was necessary to be recorded in these held-to-maturity securities at June 30, 2012. At June 30, 2012, the Corporation does not have the intent to sell securities held-to-maturity and it is not more likely than not that the Corporation will have to sell these investment securities prior to recovery of their amortized cost basis.