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SEGMENT INFORMATION
 6 Months Ended
Jun. 30, 2020
Segment Reporting [Abstract]  
SEGMENT INFORMATION

NOTE 27 – SEGMENT INFORMATION

 

Based upon the Corporation’s organizational structure and the information provided to the Chief Executive Officer, 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 June 30, 2020, 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 structure 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, Consumer (Retail) Banking and United States Operations segments to finance their lending activities and borrows from those segments. The Consumer (Retail) Banking segment also lends funds to other segments. The interest rates charged or credited by Treasury and Investments and the Consumer (Retail) Banking 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, 2019, which are included in the 2019 Annual Report on Form 10-K and updates to significant accounting policies described in Note 1, – Basis of Presentation and Significant Accounting Policies, above.

 

The Corporation evaluates the performance of the segments based on net interest income, the provision for credit 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 ACL.

The following table presents information about the reportable segments for the indicated periods:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Mortgage Banking

 

Consumer (Retail) Banking

 

Commercial and Corporate Banking

 

Treasury and Investments

 

United States Operations

 

Virgin Islands Operations

 

Total

For the Quarter Ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

28,260

 

$

56,595

 

$

32,018

 

$

12,993

 

$

21,172

 

$

7,578

 

$

158,616

Net (charge) credit for transfer of funds

 

(10,807)

 

 

5,941

 

 

(4,771)

 

 

10,978

 

 

(1,341)

 

 

-

 

 

-

Interest expense

 

-

 

 

(8,994)

 

 

-

 

 

(6,874)

 

 

(6,595)

 

 

(943)

 

 

(23,406)

Net interest income

 

17,453

 

 

53,542

 

 

27,247

 

 

17,097

 

 

13,236

 

 

6,635

 

 

135,210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

(2,676)

 

 

(11,697)

 

 

(13,530)

 

 

(1,263)

 

 

(7,701)

 

 

(2,147)

 

 

(39,014)

Non-interest income (loss)

 

4,447

 

 

10,591

 

 

2,824

 

 

(8)

 

 

645

 

 

2,393

 

 

20,892

Direct non-interest expenses

 

(6,489)

 

 

(28,148)

 

 

(6,390)

 

 

(653)

 

 

(7,843)

 

 

(7,304)

 

 

(56,827)

Segment income (loss)

$

12,735

 

$

24,288

 

$

10,151

 

$

15,173

 

$

(1,663)

 

$

(423)

 

$

60,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average earnings assets

$

1,971,171

 

$

2,094,266

 

$

2,565,899

 

$

3,475,392

 

$

2,070,069

 

$

459,140

 

$

12,635,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Mortgage Banking

 

Consumer (Retail) Banking

 

Commercial and Corporate Banking

 

Treasury and Investments

 

United States Operations

 

Virgin Islands Operations

 

Total

For the Quarter Ended June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

30,545

 

$

52,801

 

$

38,110

 

$

15,633

 

$

24,964

 

$

7,457

 

$

169,510

Net (charge) credit for transfer of funds

 

(13,234)

 

 

18,524

 

 

(15,571)

 

 

11,742

 

 

(1,461)

 

 

-

 

 

-

Interest expense

 

-

 

 

(9,109)

 

 

-

 

 

(9,513)

 

 

(7,361)

 

 

(981)

 

 

(26,964)

Net interest income

 

17,311

 

 

62,216

 

 

22,539

 

 

17,862

 

 

16,142

 

 

6,476

 

 

142,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

(695)

 

 

(8,383)

 

 

(1,474)

 

 

-

 

 

(1,938)

 

 

(44)

 

 

(12,534)

Non-interest income

 

4,249

 

 

12,526

 

 

2,297

 

 

72

 

 

769

 

 

2,310

 

 

22,223

Direct non-interest expenses

 

(9,561)

 

 

(28,847)

 

 

(9,212)

 

 

(568)

 

 

(8,783)

 

 

(7,245)

 

 

(64,216)

Segment income

$

11,304

 

$

37,512

 

$

14,150

 

$

17,366

 

$

6,190

 

$

1,497

 

$

88,019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average earnings assets

$

2,184,350

 

$

1,907,785

 

$

2,549,429

 

$

2,426,182

 

$

1,940,305

 

$

471,159

 

$

11,479,210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Mortgage Banking

 

Consumer (Retail) Banking

 

Commercial and Corporate Banking

 

Treasury and Investments

 

United States Operations

 

Virgin Islands Operations

 

Total

Six-Month Period Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

57,060

 

$

114,691

 

$

64,654

 

$

29,059

 

$

43,327

 

$

15,089

 

$

323,880

Net (charge) credit for transfer of funds

 

(22,549)

 

 

15,971

 

 

(13,826)

 

 

22,469

 

 

(2,065)

 

 

-

 

 

-

Interest expense

 

-

 

 

(19,376)

 

 

-

 

 

(14,556)

 

 

(14,241)

 

 

(1,848)

 

 

(50,021)

Net interest income

 

34,511

 

 

111,286

 

 

50,828

 

 

36,972

 

 

27,021

 

 

13,241

 

 

273,859

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

(17,877)

 

 

(43,850)

 

 

(32,705)

 

 

(2,765)

 

 

(14,265)

 

 

(4,918)

 

 

(116,380)

Non-interest income

 

8,087

 

 

24,319

 

 

4,835

 

 

8,320

 

 

1,476

 

 

4,055

 

 

51,092

Direct non-interest expenses

 

(14,988)

 

 

(57,624)

 

 

(13,437)

 

 

(1,416)

 

 

(16,834)

 

 

(14,739)

 

 

(119,038)

Segment income (loss)

$

9,733

 

$

34,131

 

$

9,521

 

$

41,111

 

$

(2,602)

 

$

(2,361)

 

$

89,533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average earnings assets

$

1,992,039

 

$

2,112,884

 

$

2,492,983

 

$

3,170,840

 

$

2,007,227

 

$

457,135

 

$

12,233,108

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Mortgage Banking

 

Consumer (Retail) Banking

 

Commercial and Corporate Banking

 

Treasury and Investments

 

United States Operations

 

Virgin Islands Operations

 

Total

Six-Month Period Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

61,402

 

$

102,776

 

$

75,497

 

$

31,882

 

$

49,121

 

$

15,304

 

$

335,982

Net (charge) credit for transfer of funds

 

(26,342)

 

 

38,186

 

 

(32,025)

 

 

22,992

 

 

(2,811)

 

 

-

 

 

-

Interest expense

 

-

 

 

(17,212)

 

 

-

 

 

(20,217)

 

 

(13,959)

 

 

(1,867)

 

 

(53,255)

Net interest income

 

35,060

 

 

123,750

 

 

43,472

 

 

34,657

 

 

32,351

 

 

13,437

 

 

282,727

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

(7,107)

 

 

(17,795)

 

 

6,988

 

 

-

 

 

(6,302)

 

 

274

 

 

(23,942)

Non-interest income

 

7,855

 

 

26,533

 

 

4,815

 

 

146

 

 

1,302

 

 

4,115

 

 

44,766

Direct non-interest expenses

 

(18,042)

 

 

(58,251)

 

 

(18,613)

 

 

(1,291)

 

 

(17,145)

 

 

(14,985)

 

 

(128,327)

Segment income

$

17,766

 

$

74,237

 

$

36,662

 

$

33,512

 

$

10,206

 

$

2,841

 

$

175,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average earnings assets

$

2,203,670

 

$

1,866,243

 

$

2,521,438

 

$

2,404,052

 

$

1,921,642

 

$

472,030

 

$

11,389,075

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Six-Month Period Ended

 

 

 

June 30,

 

June 30,

 

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income for segments

 

$

60,261

 

$

88,019

 

$

89,533

 

$

175,224

Other operating expenses (1)

 

 

(32,959)

 

 

(28,721)

 

 

(62,932)

 

 

(54,994)

Income before income taxes

 

 

27,302

 

 

59,298

 

 

26,601

 

 

120,230

Income tax expense

 

 

6,046

 

 

18,011

 

 

3,079

 

 

35,629

Total consolidated net income

 

$

21,256

 

$

41,287

 

$

23,522

 

$

84,601

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total average earning assets for segments

 

$

12,635,937

 

$

11,479,210

 

$

12,233,108

 

$

11,389,075

Average non-earning assets

 

 

950,071

 

 

969,286

 

 

936,610

 

 

977,577

Total consolidated average assets

 

$

13,586,008

 

$

12,448,496

 

$

13,169,718

 

$

12,366,652