SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2015

SEGMENT INFORMATION

NOTE 23 – 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 March 31, 2015, 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. Other factors such as the Corporation's organizational chart, nature of the products, distribution channels, and the economic characteristics of the product were also considered in the determination of the reportable segments.

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 consists 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 USVI and BVI, including commercial and retail banking services.

The accounting policies of the segments are the same as those referred to in Note 1- “Nature of Business and Summary of Significant Accounting Policies,” in the audited consolidated financial statements of the Corporation for the year ended December 31, 2014, which are included in the Corporation's 2014 Annual Report on 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 Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
For the quarter ended March 31, 2015:
Interest income	$	33,876	$	49,836	$	34,803	$	13,067	$	11,231	$	9,672	$	152,485
Net (charge) credit for transfer of funds		(11,236)		3,684		(3,795)		7,754		3,593		-		-
Interest expense		-		(5,657)		-		(16,007)		(4,339)		(835)		(26,838)
Net interest income		22,640		47,863		31,008		4,814		10,485		8,837		125,647
(Provision) release for loan and lease losses		(6,963)		(16,685)		(9,093)		-		2,133		(2,362)		(32,970)
Non-interest income		3,399		12,417		524		(100)		524		2,522		19,286
Direct non-interest expenses		(8,065)		(31,559)		(7,979)		(1,339)		(7,183)		(8,580)		(64,705)
Segment income	$	11,011	$	12,036	$	14,460	$	3,375	$	5,959	$	417	$	47,258
Average earnings assets	$	2,492,247	$	2,045,277	$	3,028,358	$	2,764,058	$	971,887	$	639,162	$	11,940,989
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
For the quarter ended March 31, 2014:
Interest income	$	25,748	$	55,812	$	42,299	$	15,583	$	10,896	$	10,233	$	160,571
Net (charge) credit for transfer of funds		(8,546)		3,635		(2,999)		5,800		2,110		-		-
Interest expense		-		(6,796)		-		(16,761)		(4,797)		(897)		(29,251)
Net interest income		17,202		52,651		39,300		4,622		8,209		9,336		131,320
(Provision) release for loan and lease losses		(3,384)		(20,495)		(13,345)		-		5,959		(650)		(31,915)
Non-interest income (loss)		3,102		10,630		1,767		53		441		1,967		17,960
Direct non-interest expenses		(9,832)		(32,015)		(12,578)		(1,126)		(7,220)		(9,024)		(71,795)
Segment income	$	7,088	$	10,771	$	15,144	$	3,549	$	7,389	$	1,629	$	45,570
Average earnings assets	$	1,955,990	$	2,006,395	$	3,921,439	$	2,710,930	$	846,152	$	655,568	$	12,096,474

The following table presents a reconciliation of the reportable segment financial information to the consolidated totals:
		Quarter Ended
		March 31,
		2015		2014
Net income:
Total income for segments and other		$	47,258	$	45,570
Other non-interest gain (loss) (1)			13,443		(6,610)
Other operating expenses (2)			(27,023)		(20,990)
Income before income taxes			33,678		17,970
Income tax expense			(8,032)		(887)
Total consolidated net income		$	25,646	$	17,083
Average assets:
Total average earning assets for segments		$	11,940,989	$	12,096,474
Other average earning assets (1)			-		6,570
Average non-earning assets			934,999		671,146
Total consolidated average assets		$	12,875,988	$	12,774,190
(1)	The bargain purchase gain on the acquisition of assets and assumption of deposits from Doral Bank in 2015 as well as the activities related to the Bank's equity interest in CPG/GS are presented as an Other non-interest income (loss) and the investment in CPG/GS is presented as Other average earning assets in the tables above.
(2)	Expenses pertaining to corporate administrative functions that support the operating segment but are not specifically attributable to or managed by any segment are not included in the reported financial results of the operating segments. The unallocated corporate expenses include certain general and administrative expenses and related depreciation and amortization expenses.