REVENUE FROM CONTRACTS WITH CUSTOMERS

12 Months Ended

Dec. 31, 2021

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer [Text Block]

NOTE 31 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition

In accordance with ASC Topic 606, “Revenue from Contracts with Customers” (“ASC Topic 606”), revenues are recognized when

control of promised goods or services is transferred to customers and in an amount that reflects the consideration to which the

Corporation expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that an

entity determines are within the scope of ASC Topic 606, the Corporation performs the following five steps: (i) identifies the

contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv)

allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenue when (or as) the Corporation

satisfies a performance obligation. The Corporation only applies the five-step model to contracts when it is probable that the entity

will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract

inception, once the contract is determined to be within the scope of ASC Topic 606, the Corporation assesses the goods or services

that are promised within each contract, identifies those that contain performance obligations, and assesses whether each promised

good or service is distinct. The Corporation then recognizes as revenue the amount of the transaction price that is allocated to the

respective performance obligation when (or as) the performance obligation is satisfied.

Disaggregation of Revenue 

The following tables summarizes the Corporation’s revenue, which includes net interest income on financial instruments and non-

interest income, disaggregated by type of service and business segment for the years ended December 31, 2021, 2020 and 2019:

Year ended December 31, 2021:

Mortgage

Banking

Consumer

(Retail)

Banking

Commercial and

Corporate

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Net interest income

(1)

$

104,638

$

281,703

$

191,917

$

59,331

$

65,967

$

26,373

$

729,929

Service charges and fees on deposit accounts

-

20,083

11,807

-

555

2,839

35,284

Insurance commissions

-

11,166

-

-

114

665

11,945

Merchant-related income

-

6,279

1,079

-

51

1,055

8,464

Credit and debit card fees

-

26,360

83

-

19

1,602

28,064

Other service charges and fees

771

4,185

2,640

-

1,825

556

9,977

Not in scope of ASC Topic 606

 (1)

23,507

1,701

423

227

1,399

173

27,430

 Total non-interest income

24,278

69,774

16,032

227

3,963

6,890

121,164

Total Revenue

$

128,916

$

351,477

$

207,949

$

59,558

$

69,930

$

33,263

$

851,093

Year ended December 31, 2020: 

Mortgage

Banking

Consumer

(Retail)

Banking

Commercial and

Corporate

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Net interest income

 (1)

$

76,025

$

220,678

$

135,591

$

87,879

$

54,025

$

26,124

$

600,322

Service charges and fees on deposit accounts

-

13,286

8,026

-

553

2,747

24,612

Insurance commissions

-

8,754

-

-

52

558

9,364

Merchant-related income

-

4,516

478

-

41

809

5,844

Credit and debit card fees

-

18,218

62

-

16

1,469

19,765

Other service charges and fees

342

2,900

2,260

184

1,800

1,508

8,994

Not in scope of Topic 606

 (1)(2)

21,727

3,288

1,780

13,524

2,168

160

42,647

 Total non-interest income

22,069

50,962

12,606

13,708

4,630

7,251

111,226

Total Revenue

$

98,094

$

271,640

$

148,197

$

101,587

$

58,655

$

33,375

$

711,548

Year ended December 31, 2019: 

Mortgage

Banking

Consumer

(Retail)

Banking

Commercial and

Corporate

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Net interest income

(1)

$

68,803

$

244,535

$

91,266

$

73,626

$

62,539

$

26,312

$

567,081

Service charges and fees on deposit accounts

-

14,534

5,811

-

631

2,940

23,916

Insurance commissions

-

9,621

-

-

67

498

10,186

Merchant-related income

-

4,120

466

-

-

1,049

5,635

Credit and debit card fees

-

19,014

104

-

43

1,744

20,905

Other service charges and fees

216

3,012

2,690

-

1,558

1,313

8,789

Not in scope of Topic 606 (1)

16,609

1,428

2,643

(225)

508

178

21,141

 Total non-interest income

16,825

51,729

11,714

(225)

2,807

7,722

90,572

Total Revenue

$

85,628

$

296,264

$

102,980

$

73,401

$

65,346

$

34,034

$

657,653

(1)

Most of the Corporation’s revenue is not within the scope of ASC Topic 606. The guidance explicitly excludes net interest income from financial assets and

liabilities, as well as other non-interest income from loans, leases, investment securities and derivative financial instruments.

(2)

For the year ended December 31, 2020, includes a $

5.0

 million benefit resulting from the final settlement of the Corporation’s business interruption insurance

claim related to lost profits caused by Hurricanes Irma and Maria in 2017. This insurance recovery is presented as part of other non-interest income in the

consolidated statements of income.

For 2021, 2020, and 2019, substantially all of the Corporation’s revenue within the scope of ASC Topic 606 was related to

performance obligations satisfied at a point in time. 

The following is a discussion of the revenues under the scope of ASC Topic 606. 

Service Charges and Fees on Deposit Accounts 

Service charges and fees on deposit accounts relate to fees generated from a variety of deposit products and services rendered to

customers. Charges include, but are not limited to, overdraft fees, insufficient fund fees, dormant fees, and monthly service charges.

Such fees are recognized concurrently with the event on a daily basis or on a monthly basis depending upon the customer’s cycle date. 

These depository arrangements are considered day-to-day contracts that do not extend beyond the services performed, as customers

have the right to terminate these contracts with no penalty or, if any, nonsubstantive penalties.

Insurance Commissions

For insurance commissions, which include regular and contingent commissions paid to the Corporation’s insurance agency, the

agreements contain a performance obligation related to the sale/issuance of the policy and ancillary administrative post-issuance

support. The performance obligations are satisfied when the policies are issued, and revenue is recognized at that point in time. In

addition, contingent commission income may be considered to be constrained, as defined under ASC Topic 606. Contingent

commission income is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of

cumulative revenue recognized will not occur or payments are received . For the years ended December 31, 2021, 2020 and 2019, the

Corporation recognized revenue at the time that payments were confirmed and constraints were released of $

3.3

 million, $

3.3

 million,

and $

3.0

 million, respectively. 

Merchant-related Income

For merchant-related income, the determination of which included the consideration of a 2015 sale of merchant contracts that

involved sales of point of sale (“POS”) terminals and entry into a marketing alliance under a revenue-sharing agreement, the

Corporation concluded that control of the POS terminals and merchant contracts was transferred to the customer at the contract’s

inception. With respect to the related revenue-sharing agreement, the Corporation satisfies the marketing alliance performance

obligation over the life of the contract, and recognizes the associated transaction price as the entity performs and any constraints over

the variable consideration are resolved.

Credit and Debit Card Fees 

Credit and debit card fees primarily represent revenues earned from interchange fees and ATM fees. Interchange and network

revenues are earned on credit and debit card transactions conducted with payment networks. ATM fees are primarily earned as a result

of surcharges assessed to non-FirstBank customers who use a FirstBank ATM. Such fees are generally recognized concurrently with

the delivery of services on a daily basis.

Other Fees 

Other fees primarily include revenues generated from wire transfers, lockboxes, bank issuances of checks and trust fees recognized

from transfer paying agent, retirement plan, and other trustee activities. Revenues are recognized on a recurring basis when the

services are rendered.

Contract Balances

A contract liability is an entity’s obligation to transfer goods or services to a customer in exchange for consideration from the

customer. During the year ended December 31, 2019, the Bank entered into a growth agreement with an international card service

association to expand the customer base and enhance product offerings. The primary performance obligation of this contract required

the Bank to either launch a new debit card product by 2021, or maintain a ratio of over

50

% of the portfolio with the related card

service association by the year ended December 31, 2021. In connection with this agreement, the Corporation recognized a contract

liability as the revenue is constrained until the fulfillment of either of the above conditions. During the year ended December 31, 2021,

the Bank successfully launched the new debit card product required and recognized revenues of $

0.4

 million from this contract. In

addition, as discussed above, during 2015, the Bank entered into a long-term strategic marketing alliance under a revenue-sharing

agreement with another entity to which the Bank sold its merchant contracts portfolio and related POS terminals. Merchant services

are marketed through the Bank’s branches and offices in Puerto Rico and the Virgin Islands. Under the revenue-sharing agreement,

FirstBank shares with this entity revenues generated by the merchant contracts over the term of the

10

-year agreement. As of

December 31, 2021 and 2020, the contract liability amounted to approximately $

1.1

 million and $

1.4

 million, respectively, which will

be recognized over the remaining term of the contract. For the years ended December 31, 2021, 2020, and 2019, the Corporation

recognized revenue and its contract liabilities decreased by approximately $

0.7

 million, $

0.3

 million, and $

0.3

 million, respectively,

due to the completion of performance over time. There were no changes in contract liabilities due to changes in transaction price

estimates.

The following table shows the activity of contract liabilities for the years ended December 31, 2021, 2020 and 2019:

(In thousands)

2021

2020

2019

Beginning Balance

$

2,151

$

2,476

$

2,071

Plus:

Additions

-

-

730

Less:

Revenue recognized

(708)

(325)

(325)

Ending balance

$

1,443

$

2,151

$

2,476

A contract asset is the right to consideration for transferred goods or services when the amount is conditioned on something other

than the passage of time. As of December 31, 2021 and 2020, there were no receivables from contracts with customers or contract

assets recorded on the Corporation’s consolidated financial statements.

Other

Except for the contract liabilities noted above, the Corporation did not have any significant performance obligations as of December

31, 2021. The Corporation also did not have any material contract acquisition costs and did not make any significant judgments or

estimates in recognizing revenue for financial reporting purposes.