Debt securities available-for-sale

3 Months Ended

Mar. 31, 2019

Investments in debt and marketable equity securities

Note 6 – Debt 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 debt securities available-for-sale at March 31, 2019 and December 31, 2018

		At March 31, 2019
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	Within 1 year	$	3,453,820	$	677	$	4,064	$	3,450,433	2.06	%
	After 1 to 5 years		4,559,672		34,676		16,420		4,577,928	2.31
	After 5 to 10 years		2,988		138		-		3,126	3.06
Total U.S. Treasury securities			8,016,480		35,491		20,484		8,031,487	2.20
Obligations of U.S. Government sponsored entities
	Within 1 year		181,084		3		980		180,107	1.45
	After 1 to 5 years		85,737		7		1,180		84,564	1.49
Total obligations of U.S. Government sponsored entities			266,821		10		2,160		264,671	1.46
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year		6,975		-		166		6,809	-
Total obligations of Puerto Rico, States and political subdivisions			6,975		-		166		6,809	-
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		1,082		-		8		1,074	2.01
	After 5 to 10 years		107,033		-		3,502		103,531	1.68
	After 10 years		612,396		2,260		17,495		597,161	2.10
Total collateralized mortgage obligations - federal agencies			720,511		2,260		21,005		701,766	2.04
Mortgage-backed securities
	Within 1 year		135		1		-		136	4.15
	After 1 to 5 years		14,133		206		1		14,338	3.14
	After 5 to 10 years		347,822		1,156		5,621		343,357	2.15
	After 10 years		4,238,051		19,949		78,307		4,179,693	2.55
Total mortgage-backed securities			4,600,141		21,312		83,929		4,537,524	2.52
Other
	After 5 to 10 years		433		5		-		438	3.62
Total other			433		5		-		438	3.62
Total debt securities available-for-sale^[1]		$	13,611,361	$	59,078	$	127,744	$	13,542,695	2.29	%
[1] Includes $10 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $8.9 billion serve as collateral for public funds.

		At December 31, 2018
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	Within 1 year	$	3,565,571	$	108	$	5,319	$	3,560,360	2.10	%
	After 1 to 5 years		4,483,741		13,647		35,213		4,462,175	2.25
	After 5 to 10 years		245,891		3,770		-		249,661	2.84
Total U.S. Treasury securities			8,295,203		17,525		40,532		8,272,196	2.21
Obligations of U.S. Government sponsored entities
	Within 1 year		212,951		-		1,406		211,545	1.44
	After 1 to 5 years		123,857		1		2,094		121,764	1.51
Total obligations of U.S. Government sponsored entities			336,808		1		3,500		333,309	1.47
Obligations of Puerto Rico, States and political subdivisions
	After 1 to 5 years		6,926		-		184		6,742	0.70
Total obligations of Puerto Rico, States and political subdivisions			6,926		-		184		6,742	0.70
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		749		-		7		742	1.92
	After 5 to 10 years		115,744		1		4,715		111,030	1.71
	After 10 years		638,995		1,584		23,680		616,899	2.10
Total collateralized mortgage obligations - federal agencies			755,488		1,585		28,402		728,671	2.04
Mortgage-backed securities
	Within 1 year		431		4		-		435	4.30
	After 1 to 5 years		6,762		43		1		6,804	2.74
	After 5 to 10 years		365,727		1,090		8,499		358,318	2.19
	After 10 years		3,710,731		10,679		128,189		3,593,221	2.45
Total mortgage-backed securities			4,083,651		11,816		136,689		3,958,778	2.43
Other
	After 5 to 10 years		486		2		-		488	3.62
Total other			486		2		-		488	3.62
Total debt securities available-for-sale^[1]		$	13,478,562	$	30,929	$	209,307	$	13,300,184	2.25	%
[1] Includes $8.9 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $7.9 billion 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.

Debt 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 debt securities sold during the quarters ended March 31, 2019 and March 31, 2018.

The following tables present the Corporation’s fair value and gross unrealized losses of debt securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2019 and December 31, 2018.

		At March 31, 2019
		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
U.S. Treasury securities		$	1,473,943	$	76	$	2,604,306	$	20,408	$	4,078,249	$	20,484
Obligations of U.S. Government sponsored entities			-		-		263,499		2,160		263,499		2,160
Obligations of Puerto Rico, States and political
	subdivisions		-		-		6,809		166		6,809		166
Collateralized mortgage obligations - federal agencies			3,447		5		480,426		21,000		483,873		21,005
Mortgage-backed securities			18,074		220		3,460,223		83,709		3,478,297		83,929
Total debt securities available-for-sale in an
	unrealized loss position	$	1,495,464	$	301	$	6,815,263	$	127,443	$	8,310,727	$	127,744

		At December 31, 2018
		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
U.S. Treasury securities		$	3,189,007	$	4,188	$	2,607,276	$	36,343	$	5,796,283	$	40,531
Obligations of U.S. Government sponsored entities			14,847		46		318,271		3,454		333,118		3,500
Obligations of Puerto Rico, States and political
	subdivisions		-		-		6,742		184		6,742		184
Collateralized mortgage obligations - federal agencies			66,652		489		587,869		27,913		654,521		28,402
Mortgage-backed securities			125,872		2,280		3,478,635		134,410		3,604,507		136,690
Total debt securities available-for-sale in an
	unrealized loss position	$	3,396,378	$	7,003	$	6,998,793	$	202,304	$	10,395,171	$	209,307

As of March 31, 2019, the portfolio of available-for-sale debt securities reflects gross unrealized losses of approximately $128 million, driven mainly by mortgage-backed securities, U.S. Treasury securities and collateralized mortgage obligations.

Management evaluates debt 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. 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 March 31, 2019, management performed its quarterly analysis of all debt securities in an unrealized loss position. Based on the analysis performed, management concluded that no individual debt security was other-than-temporarily impaired as of such date. At March 31, 2019, the Corporation did not have the intent to sell debt securities in an unrealized loss position and it was not more likely than not that the Corporation would have to sell the debt securities prior to recovery of their amortized cost basis.

The following table states the name of issuers, and the aggregate amortized cost and fair value of the debt securities of such issuer (includes available-for-sale and held-to-maturity debt securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders’ equity. This information excludes debt 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.

		March 31, 2019				December 31, 2018

(In thousands)	Amortized cost		Fair value		Amortized cost		Fair value
FNMA	$	3,273,409	$	3,220,000	$	2,999,110	$	2,901,904
Freddie Mac		1,312,120		1,293,207		1,095,855		1,058,013