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SEGMENT INFORMATION
 9 Months Ended
Sep. 30, 2016
SEGMENT INFORMATION

NOTE 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 September 30, 2016, 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 products 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, “Basis of Presentation and Significant Accounting Policies,” in the audited consolidated financial statements of the Corporation for the year ended December 31, 2015, which are included in the Corporation’s 2015 Annual Report on Form 10-K.

The Corporation evaluates the performance of the segments based on net interest income, the 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 BankingConsumer (Retail) BankingCommercial and CorporateTreasury and InvestmentsUnited States OperationsVirgin Islands OperationsTotal
For the quarter ended September 30, 2016:
Interest income$34,605$44,455$28,981$12,529$13,944$9,059$143,573
Net (charge) credit for transfer of funds(12,074)2,810(6,700)15,839125--
Interest expense-(6,323)-(14,487)(3,811)(774)(25,395)
Net interest income 22,53140,94222,28113,88110,2588,285118,178
(Provision) release for loan and lease losses(3,860)(8,655)(8,162)-2,024(2,850)(21,503)
Non-interest income5,22211,2929856,1548841,60926,146
Direct non-interest expenses(8,864)(27,100)(11,871)(914)(7,556)(7,097)(63,402)
Segment income (loss)$15,029$16,479$3,233$19,121$5,610$(53)$59,419
Average earning assets$2,549,358$1,973,424$2,410,037$2,565,019$1,252,271$604,150$11,354,259
(In thousands)Mortgage BankingConsumer (Retail) BankingCommercial and CorporateTreasury and InvestmentsUnited States OperationsVirgin Islands OperationsTotal
For the quarter ended September 30, 2015:
Interest income$36,180$48,528$32,636$11,500$11,229$9,739$149,812
Net (charge) credit for transfer of funds(12,629)4,335(4,058)8,5633,789--
Interest expense-(5,869)-(14,305)(3,931)(778)(24,883)
Net interest income 23,55146,99428,5785,75811,0878,961124,929
(Provision) release for loan and lease losses(6,750)(13,946)(11,355)-1,307(432)(31,176)
Non-interest income 3,98211,759647(174)7781,76618,758
Direct non-interest expenses(8,977)(32,669)(10,896)(1,103)(6,914)(7,441)(68,000)
Segment income $11,806$12,138$6,974$4,481$6,258$2,854$44,511
Average earning assets$2,642,388$1,959,951$2,760,788$2,531,084$1,048,451$644,769$11,587,431

(In thousands)Mortgage BankingConsumer (Retail) BankingCommercial and CorporateTreasury and InvestmentsUnited States OperationsVirgin Islands OperationsTotal
Nine-Month Period Ended September 30, 2016
Interest income$104,865$135,655$93,915$39,206$40,091$27,606$441,338
Net (charge) credit for transfer of funds(37,673)10,546(18,212)44,2261,113--
Interest expense-(18,765)-(45,828)(11,214)(2,477)(78,284)
Net interest income 67,192127,43675,70337,60429,99025,129363,054
(Provision) release for loan and lease losses(21,608)(24,451)(17,730)-1,563(1,316)(63,542)
Non-interest income14,38135,3182,4593,8152,7995,62164,393
Direct non-interest expenses(29,828)(87,218)(33,194)(3,462)(23,070)(20,757)(197,529)
Segment income$30,137$51,085$27,238$37,957$11,282$8,677$166,376
Average earning assets$2,576,194$1,989,426$2,489,268$2,774,118$1,188,463$613,666$11,631,135
(In thousands)Mortgage BankingConsumer (Retail) BankingCommercial and CorporateTreasury and InvestmentsUnited States OperationsVirgin Islands OperationsTotal
Nine-Month Period Ended September 30, 2015
Interest income$106,352$147,395$100,192$36,276$34,477$29,237$453,929
Net (charge) credit for transfer of funds(36,212)12,816(11,746)23,93611,206--
Interest expense-(17,379)-(44,834)(12,326)(2,337)(76,876)
Net interest income 70,140142,83288,44615,37833,35726,900377,053
(Provision) release for loan and lease losses(21,657)(36,588)(84,170)-6,715(2,712)(138,412)
Non-interest income (loss)11,86635,5042,350(13,046)2,0326,00844,714
Direct non-interest expenses(26,270)(96,690)(30,013)(3,487)(21,293)(24,892)(202,645)
Segment income (loss)$34,079$45,058$(23,387)$(1,155)$20,811$5,304$80,710
Average earning assets$2,601,892$1,956,352$2,947,562$2,683,313$1,001,860$640,027$11,831,006

The following table presents a reconciliation of the reportable segment financial information to the consolidated totals:
Quarter EndedNine-Month Period Ended
September 30, September 30,
2016201520162015
Net income :
Total segment income $59,419$44,511$166,376$80,710
Other non-interest income (1)---13,443
Other operating expenses (2)(24,901)(25,277)(73,315)(85,159)
Income before income taxes34,51819,23493,0618,994
Income tax expense(10,444)(4,476)(23,690)(2,664)
Total consolidated net income$24,074$14,758$69,371$6,330
Average assets:
Total average earning assets for segments $11,354,259$11,587,431$11,631,135$11,831,006
Average non-earning assets 926,043925,723927,732916,817
Total consolidated average assets$12,280,302$12,513,154$12,558,867$12,747,823
(1)The bargain purchase gain on the acquisition of assets and assumption of deposits from Doral Bank in 2015 is presented as Other non-interest income in the table above.
(2)Expenses pertaining to corporate administrative functions that support the operating segments 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.