22 — SEGMENT INFORMATION

Based upon the Corporation’s organizational structure and the information provided to the Chief Executive Officer of the Corporation and, to a lesser extent, the Board of Directors, the operating segments are driven primarily by the Corporation’s lines of business for its operations in Puerto Rico, the Corporation’s principal market, and by geographic areas for its operations outside of Puerto Rico. As of June 30, 2011, the Corporation had six reportable segments: Commercial and Corporate Banking; Mortgage Banking; Consumer (Retail) Banking; Treasury and Investments; United States operations and Virgin Islands operations. Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess where to allocate resources.

The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers represented by specialized and middle-market clients and the public sector. The Commercial and Corporate Banking segment offers commercial loans, including commercial real estate and construction loans, and floor plan financings as well as other products such as cash management and business management services. The Mortgage Banking segment’s operations consist of the origination, sale and servicing of a variety of residential mortgage loans. The Mortgage Banking segment also acquires and sells mortgages in the secondary markets. In addition, the Mortgage Banking segment includes mortgage loans purchased from other local banks and mortgage bankers. The Consumer (Retail) Banking segment consists of the Corporation’s consumer lending and deposit-taking activities conducted mainly through its branch network and loan centers. The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions executed to manage and enhance liquidity. This segment lends funds to the Commercial and Corporate Banking, Mortgage Banking and Consumer (Retail) Banking segments to finance their lending activities and borrows from those segments and from the United States Operations segment. The Consumer (Retail) Banking and the United States Operations segments also lend funds to other segments. The interest rates charged or credited by Treasury and Investments, the Consumer (Retail) Banking and the United States Operations segments are allocated based on market rates. The difference between the allocated interest income or expense and the Corporation’s actual net interest income from centralized management of funding costs is reported in the Treasury and Investments segment. The United States operations segment consists of all banking activities conducted by FirstBank in the United States mainland, including commercial and retail banking services. The Virgin Islands operations segment consists of all banking activities conducted by the Corporation in the U.S. and British Virgin Islands, including commercial and retail banking services and insurance activities.

The accounting policies of the segments are the same as those referred to in Note 1 to the Corporation’s financial statements for the year ended December 31, 2010 contained in the Corporation’s Annual Report or Form 10-K.

The Corporation evaluates the performance of the segments based on net interest income, the estimated provision for loan and lease losses, non-interest income and direct non-interest expenses. The segments are also evaluated based on the average volume of their interest-earning assets less the allowance for loan and lease losses.

The following table presents information about the reportable segments (in thousands):


	Mortgage			Consumer			Commercial and			Treasury and			United States			Virgin Islands
(In thousands)	Banking			(Retail) Banking			Corporate			Investments			Operations			Operations			Total
For the quarter ended June 30, 2011:
Interest income	$	28,394		$	42,377		$	50,607		$	16,812		$	11,104			14,124		$	163,418
Net (charge) credit for transfer of funds		(15,285	)		2,554			(2,784	)		11,370			4,145			—			—
Interest expense		—			(10,609	)		—			(46,650	)		(10,052	)		(1,672	)		(68,983	)

Net interest income (loss)		13,109			34,322			47,823			(18,468	)		5,197			12,452			94,435

Provision for loan and lease losses		(11,064	)		2,289			(49,517	)		—			(2,229	)		1,337			(59,184	)
Non-interest income		8,283			7,059			2,609			20,289			170			1,988			40,398
Direct non-interest expenses		(8,407	)		(23,257	)		(11,724	)		(1,208	)		(8,216	)		(9,347	)		(62,159	)

Segment income (loss)	$	1,921		$	20,413		$	(10,809	)	$	613		$	(5,078	)	$	6,430		$	13,490


Average earnings assets	$	2,095,358		$	1,454,513		$	5,167,454		$	3,521,836		$	861,903		$	881,459		$	13,982,523


	Mortgage			Consumer			Commercial and			Treasury and			United States			Virgin Islands
(In thousands)	Banking			(Retail) Banking			Corporate			Investments			Operations			Operations			Total
For the quarter ended June 30, 2010:
Interest income	$	39,634		$	47,127		$	57,691		$	39,208		$	13,308			17,896		$	214,864
Net (charge) credit for transfer of funds		(24,185	)		2,681			(6,484	)		27,988			—			—			—
Interest expense		—			(13,549	)		—			(69,123	)		(11,561	)		(1,569	)		(95,802	)

Net interest income (loss)		15,449			36,259			51,207			(1,927	)		1,747			16,327			119,062

Provision for loan and lease losses		(29,424	)		(10,923	)		(71,651	)		—			(33,611	)		(1,184	)		(146,793	)
Non-interest income		2,166			7,461			3,003			24,288			161			2,446			39,525
Direct non-interest expenses		(10,193	)		(25,151	)		(19,576	)		(1,413	)		(12,692	)		(10,500	)		(79,525	)

Segment (loss) income	$	(22,002	)	$	7,646		$	(37,017	)	$	20,948		$	(44,395	)	$	7,089		$	(67,731	)


Average earnings assets	$	2,714,807		$	1,625,859		$	6,001,446		$	5,428,208		$	1,148,631		$	1,031,373		$	17,950,324


	Mortgage			Consumer			Commercial and			Treasury and			United States			Virgin Islands
	Banking			(Retail) Banking			Corporate			Investments			Operations			Operations			Total
For the six-month period ended June 30, 2011:
Interest income	$	63,274		$	85,790		$	102,997		$	39,442		$	23,446		$	29,372		$	344,321
Net (charge) credit for transfer of funds		(33,977	)		4,392			(6,014	)		26,875			8,724			—			—
Interest expense		—			(22,114	)		—			(97,341	)		(20,849	)		(3,303	)		(143,607	)

Net interest income (loss)		29,297			68,068			96,983			(31,024	)		11,321			26,069			200,714


Provision for loan and lease losses		(11,739	)		(2,903	)		(100,641	)		—			(10,129	)		(22,504	)		(147,916	)
Non-interest income		15,070			13,988			4,829			39,432			313			7,251			80,883
Direct non-interest expenses		(16,222	)		(45,612	)		(20,877	)		(2,684	)		(16,818	)		(19,416	)		(121,629	)

Segment income (loss)	$	16,406		$	33,541		$	(19,706	)	$	5,724		$	(15,313	)	$	(8,600	)	$	12,052


Average earnings assets	$	2,264,703		$	1,473,605		$	5,278,191		$	3,541,401		$	883,008		$	895,727		$	14,336,635


	Mortgage			Consumer			Commercial and			Treasury and			United States			Virgin Islands
	Banking			(Retail) Banking			Corporate			Investments			Operations			Operations			Total
For the six-month period ended June 30, 2010:
Interest income	$	79,660		$	94,689		$	116,533		$	81,982		$	27,238		$	35,750		$	435,852
Net (charge) credit for transfer of funds		(49,512	)		4,821			(13,310	)		58,001			—			—			—
Interest expense		—			(27,117	)		—			(146,863	)		(22,828	)		(3,119	)		(199,927	)

Net interest income (loss)		30,148			72,393			103,223			(6,880	)		4,410			32,631			235,925


Provision for loan and lease losses		(45,438	)		(23,416	)		(131,099	)		—			(104,813	)		(12,992	)		(317,758	)
Non-interest income		4,417			14,768			4,605			54,873			315			5,873			84,851
Direct non-interest expenses		(18,288	)		(49,151	)		(37,162	)		(3,025	)		(22,009	)		(21,509	)		(151,144	)

Segment (loss) income	$	(29,161	)	$	14,594		$	(60,433	)	$	44,968		$	(122,097	)	$	4,003		$	(148,126	)


Average earnings assets	$	2,712,067		$	1,646,337		$	6,225,334		$	5,447,358		$	1,204,921		$	1,036,541		$	18,272,558