OFG - this is an interesting one for ya. Looks like they will live or die based upon the ultimate valuation of a bunch of CLOs and CMOs:
yahoo.brand.edgar-online.com
At March 31, 2009, the Group’s available-for-sale investment securities portfolio included approximately $619.2 million in non-agency collateralized mortgage obligations with unrealized losses of approximately $118.0 million. The Group constantly monitors such non-agency mortgage-backed securities to measure the collateral performance and gauge trends for these positions, and the effect of collateral behavior on credit enhancements, cash flows, and fair values of the bonds. The Group also periodically monitors any rating migration, and takes into account the time lag between underlying performance and rating agency actions. The collateral for all of the non-agency collateralized mortgage obligations, except for the ALT A CMO which is more thoroughly discussed below, has performed well since the issuance of each security, and the estimated future collateral losses are lower than the subordination levels of these securities. This assessment is made using a cash flow model that estimates the cash flows on the underlying mortgages, based on the security-specific collateral and deal structure, and also includes inputs such as constant default rates, prepayment rates, and loss severity. The cash flows estimated by the model are distributed through the different tranches of each security, considering subordination for the different tranches. The model results as of March 31, 2009 show that the estimated future collateral losses, if any, are lower than the Group’s subordination levels for each one of these securities. Therefore, these securities are deemed to have sufficient credit support to absorb the estimated collateral losses.
In the specific case of the ALT A CMO, this security has been carefully monitored during the past year. As of September 30, 2008, the Group considered that the deterioration in the performance of underlying loans, including increases in delinquency and loss experience, resulted in projected losses which exceeded the tranche subordination. As a result, an other than temporary impairment amounting to $38.9 million was recorded at that time. As of March 31, 2009, the Group updated its estimate of fair value of the security considering new market conditions. Based on the Group’s estimate using market participant data, projected losses in excess of remaining subordination at that date were not greater that the estimated losses contemplated by projected cash flow estimates determined upon previous impairment of the security. Consequently, the Group has determined that no additional impairment charge is necessary as of March 31, 2009.
Available-for-sale
Obligations of US Government sponsored agencies
$ 664,146 $ 5,451 $ 54 $ 669,543 5.98 %
Puerto Rico Government and agency obligations
80,616 5 8,227 72,394 5.39 %
Structured credit investments
176,536 1,597 44,318 133,815 3.57 %
Total investment securities
921,298 7,053 52,599 875,752
FNMA and FHLMC certificates
2,146,614 44,540 57 2,191,097 4.95 %
GNMA certificates
301,198 8,894 206 309,886 5.38 %
CMOs issued by US Government sponsored agencies
660,153 17,402 — 677,555 5.32 %
Non-agency collateralized mortgage obligations
619,232 — 117,989 501,243 8.43 %
Total mortgage-backed-securities and CMOs
3,727,197 70,836 118,252 3,679,781
`BC |
