SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

SEGMENT INFORMATION

NOTE 28 – 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 September 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 – Basis of Presentation and 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 September 30, 2020:
Interest income	$	32,293	$	60,157	$	37,571	$	12,572	$	20,427	$	7,382	$	170,402
Net (charge) credit for transfer of funds		(11,627)		3,514		(1,768)		11,972		(2,091)		-		-
Interest expense		-		(9,348)		-		(5,967)		(5,418)		(973)		(21,706)
Net interest income		20,666		54,323		35,803		18,577		12,918		6,409		148,696
Provision for credit losses		(11,614)		(12,404)		(19,139)		-		(1,679)		(2,078)		(46,914)
Non-interest income (loss)		6,756		12,315		2,838		5,457		1,058		1,510		29,934
Direct non-interest expenses		(7,659)		(32,035)		(6,251)		(717)		(8,387)		(7,231)		(62,280)
Segment income (loss)	$	8,149	$	22,199	$	13,251	$	23,317	$	3,910	$	(1,390)	$	69,436
Average earnings assets	$	2,243,345	$	2,197,601	$	3,064,272	$	4,725,125	$	2,061,596	$	466,315	$	14,758,254
(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 September 30, 2019:
Interest income	$	30,091	$	55,772	$	39,146	$	15,671	$	24,229	$	7,386	$	172,295
Net (charge) credit for transfer of funds		(13,100)		16,557		(13,447)		11,411		(1,421)		-		-
Interest expense		-		(10,165)		-		(8,935)		(7,831)		(939)		(27,870)
Net interest income		16,991		62,164		25,699		18,147		14,977		6,447		144,425
(Provision) release for credit losses		(2,134)		(11,187)		5,677		-		(1,462)		1,708		(7,398)
Non-interest income (loss)		4,400		12,705		2,331		(433)		640		1,758		21,401
Direct non-interest expenses		(7,768)		(30,282)		(8,256)		(740)		(8,496)		(7,105)		(62,647)
Segment income	$	11,489	$	33,400	$	25,451	$	16,974	$	5,659	$	2,808	$	95,781
Average earnings assets	$	2,141,383	$	2,009,060	$	2,487,409	$	2,485,141	$	1,963,559	$	466,707	$	11,553,259

(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate Banking		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Nine-Month Period Ended September 30, 2020
Interest income	$	89,353	$	174,848	$	102,225	$	41,631	$	63,754	$	22,471	$	494,282
Net (charge) credit for transfer of funds		(34,176)		19,485		(15,594)		34,441		(4,156)		-		-
Interest expense		-		(28,724)		-		(20,523)		(19,659)		(2,821)		(71,727)
Net interest income		55,177		165,609		86,631		55,549		39,939		19,650		422,555
Provision for credit losses		(29,491)		(56,254)		(51,844)		(2,765)		(15,944)		(6,996)		(163,294)
Non-interest income		14,843		36,634		7,673		13,777		2,534		5,565		81,026
Direct non-interest expenses		(22,647)		(89,659)		(19,688)		(2,133)		(25,221)		(21,970)		(181,318)
Segment income (loss)	$	17,882	$	56,330	$	22,772	$	64,428	$	1,308	$	(3,751)	$	158,969
Average earnings assets	$	2,076,419	$	2,141,329	$	2,684,803	$	3,690,782	$	2,025,482	$	460,217	$	13,079,032
(In thousands)	Mortgage Banking		Consumer (Retail) Banking		Commercial and Corporate Banking		Treasury and Investments		United States Operations		Virgin Islands Operations		Total
Nine-Month Period Ended September 30, 2019
Interest income	$	91,493	$	158,548	$	114,643	$	47,553	$	73,350	$	22,690	$	508,277
Net (charge) credit for transfer of funds		(39,442)		54,743		(45,472)		34,403		(4,232)		-		-
Interest expense		-		(27,377)		-		(29,152)		(21,790)		(2,806)		(81,125)
Net interest income		52,051		185,914		69,171		52,804		47,328		19,884		427,152
(Provision) release for credit losses		(9,241)		(28,982)		12,665		-		(7,764)		1,982		(31,340)
Non-interest income (loss)		12,255		39,238		7,146		(287)		1,942		5,873		66,167
Direct non-interest expenses		(25,810)		(88,533)		(26,869)		(2,031)		(25,641)		(22,090)		(190,974)
Segment income	$	29,255	$	107,637	$	62,113	$	50,486	$	15,865	$	5,649	$	271,005
Average earnings assets	$	2,182,680	$	1,914,372	$	2,509,611	$	2,429,576	$	1,935,768	$	470,236	$	11,442,243

The following table presents a reconciliation of the reportable segment financial information to the consolidated totals for the indicated periods:
	Quarter Ended				Nine-Month Period Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net income :
Total income for segments	$	69,436	$	95,781	$	158,969	$	271,005
Other operating expenses (1)		(45,228)		(30,186)		(108,160)		(85,180)
Income before income taxes		24,208		65,595		50,809		185,825
Income tax (benefit) expense		(4,405)		19,268		(1,326)		54,897
Total consolidated net income	$	28,613	$	46,327	$	52,135	$	130,928
Average assets:
Total average earning assets for segments	$	14,758,254	$	11,553,259	$	13,079,032	$	11,442,243
Average non-earning assets		1,047,401		933,250		975,744		964,799
Total consolidated average assets	$	15,805,655	$	12,486,509	$	14,054,776	$	12,407,042

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.