SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2018

Segment Reporting Disclosure [Text Block]

NOTE 35 – 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 based primarily on 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 December 31, 2018, 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 that are 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. 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,” to the consolidated financial statements.

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 for the years ended December 31, 2018, 2017, and 2016:

	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate Banking		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
(In thousands)
For the year ended December 31, 2018:
Interest income	$	127,042	$	181,166	$	138,706	$	61,913	$	83,971	$	32,169	$	624,967
Net (charge) credit for transfer of funds		(47,653)		65,092		(60,031)		44,540		(1,948)		-		-
Interest expense		-		(28,325)		-		(44,825)		(22,967)		(3,467)		(99,584)
Net interest income		79,389		217,933		78,675		61,628		59,056		28,702		525,383
Provision for loan and lease losses		(13,083)		(23,516)		(4,804)		-		(11,882)		(5,968)		(59,253)
Non-interest income		17,073		47,706		5,158		2,505		3,020		6,848		82,310
Direct non-interest expenses		(38,213)		(112,176)		(32,371)		(2,966)		(33,566)		(30,963)		(250,255)
Segment income	$	45,166	$	129,947	$	46,658	$	61,167	$	16,628	$	(1,381)	$	298,185

Average earnings assets	$	2,258,974	$	1,636,002	$	2,530,635	$	2,552,130	$	1,750,155	$	537,574	$	11,265,470



	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate Banking		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
(In thousands)
For the year ended December 31, 2017:
Interest income	$	131,718	$	173,690	$	128,871	$	48,071	$	69,760	$	36,313	$	588,423
Net (charge) credit for transfer of funds		(45,759)		27,475		(36,904)		56,865		(1,677)		-		-
Interest expense		-		(25,240)		-		(49,577)		(18,902)		(3,153)		(96,872)
Net interest income		85,959		175,925		91,967		55,359		49,181		33,160		491,551
Provision for loan and lease losses		(47,713)		(53,778)		(33,296)		-		(3,644)		(5,823)		(144,254)
Non-interest income (loss)		12,825		43,924		7,176		(10,206)		2,664		6,004		62,387
Direct non-interest expenses		(36,403)		(108,165)		(35,142)		(3,376)		(32,197)		(26,994)		(242,277)
Segment income	$	14,668	$	57,906	$	30,705	$	41,777	$	16,004	$	6,347	$	167,407

Average earnings assets	$	2,451,655	$	1,749,148	$	2,489,948	$	2,215,551	$	1,525,191	$	603,835	$	11,035,328



	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate Banking		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
(In thousands)
For the year ended December 31, 2016:
Interest income	$	138,955	$	179,485	$	123,084	$	50,372	$	56,037	$	37,359	$	585,292
Net (charge) credit for transfer of funds		(49,435)		13,996		(26,364)		60,787		1,016		-		-
Interest expense		-		(24,787)		-		(57,924)		(15,240)		(3,223)		(101,174)
Net interest income		89,520		168,694		96,720		53,235		41,813		34,136		484,118
(Provision) release for loan and lease losses		(24,873)		(34,246)		(28,578)		-		1,369		(405)		(86,733)
Non-interest income		19,531		44,535		7,811		5,423		3,554		7,100		87,954
Direct non-interest expenses		(38,170)		(112,787)		(40,676)		(4,047)		(30,678)		(27,596)		(253,954)
Segment income (loss)	$	46,008	$	66,196	$	35,277	$	54,611	$	16,058	$	13,235	$	231,385

Average earnings assets	$	2,562,245	$	1,951,214	$	2,497,037	$	2,616,877	$	1,226,633	$	612,570	$	11,466,576

	The following table presents a reconciliation of the reportable segment financial information to the consolidated totals:

		Year Ended December 31,
		2018		2017		2016
	(In thousands)

	Net income:
	Total income for segments and other	$	298,185	$	167,407	$	231,385
	Other operating expenses (1)		(107,547)		(105,424)		(101,126)
	Income before income taxes		190,638		61,983		130,259
	Income tax (benefit) expense		(10,970)		(4,973)		37,030
	Total consolidated net income	$	201,608	$	66,956	$	93,229
	Average assets:
	Total average earning assets for segments	$	11,265,470	$	11,035,328	$	11,466,576
	Average non-earning assets		940,731		937,950		923,566
	Total consolidated average assets	$	12,206,201	$	11,973,278	$	12,390,142

(1)	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.

	The following table presents revenues (interest income plus non-interest income) and selected balance sheet data by geography based on the location in which the transaction is originated:

		2018		2017		2016
	(In thousands)

	Revenues:
	Puerto Rico	$	581,269	$	536,069	$	568,180
	United States		86,991		72,424		60,607
	Virgin Islands		39,017		42,317		44,459
	Total consolidated revenues	$	707,277	$	650,810	$	673,246

	Selected Balance Sheet Information:
	Total assets:
	Puerto Rico	$	9,797,267	$	9,871,272	$	9,765,530
	United States		1,940,633		1,780,654		1,499,548
	Virgin Islands		505,661		609,342		657,377
	Loans:
	Puerto Rico	$	6,586,033	$	6,633,432	$	6,926,719
	United States		1,834,088		1,665,448		1,382,440
	Virgin Islands		481,188		584,576		627,720
	Deposits:
	Puerto Rico (1)	$	6,208,531	$	6,268,056	$	6,291,353
	United States (2)		1,519,362		1,637,941		1,564,839
	Virgin Islands		1,266,821		1,116,634		975,013

(1)	For 2018, 2017, and 2016, includes $441.1 million, $1.0 billion, and $1.4 billion, respectively, of brokered CDs allocated to Puerto Rico operations.
(2)	For 2018, 2017, and 2016 includes $114.5 million, $158.0 million, and $60.1 million, respectively, of brokered CDs allocated to the United States operations.