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REVENUE FROM CONTRACTS WITH CUSTOMERS
 9 Months Ended
Sep. 30, 2021
Revenue from Contract with Customer [Abstract]  
REVENUE FROM CONTRACTS WITH CUSTOMER [Text Block]

NOTE 26 – 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 table 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 quarters and nine-month periods ended September 30, 2021 and 2020:

(In thousands)

Mortgage Banking

 

Consumer (Retail) Banking

 

Commercial and Corporate

 

Treasury and Investments

 

United States Operations

 

Virgin Islands Operations

 

Total

Quarter Ended September 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (1)

$

26,535

 

$

75,343

 

$

46,358

 

$

12,756

 

$

17,255

 

$

6,496

 

$

184,743

Service charges and fees on deposit accounts

 

-

 

 

5,076

 

 

2,855

 

 

-

 

 

128

 

 

631

 

 

8,690

Insurance commissions

 

-

 

 

2,183

 

 

-

 

 

-

 

 

25

 

 

109

 

 

2,317

Merchant-related income

 

-

 

 

1,878

 

 

263

 

 

-

 

 

14

 

 

266

 

 

2,421

Credit and debit card fees

 

-

 

 

6,897

 

 

22

 

 

-

 

 

-

 

 

394

 

 

7,313

Other service charges and fees

 

211

 

 

1,018

 

 

715

 

 

-

 

 

462

 

 

150

 

 

2,556

Not in scope of ASC Topic 606 (1)

 

5,710

 

 

492

 

 

39

 

 

61

 

 

336

 

 

11

 

 

6,649

 

Total non-interest income

 

5,921

 

 

17,544

 

 

3,894

 

 

61

 

 

965

 

 

1,561

 

 

29,946

Total Revenue

$

32,456

 

$

92,887

 

$

50,252

 

$

12,817

 

$

18,220

 

$

8,057

 

$

214,689

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Mortgage Banking

 

Consumer (Retail) Banking

 

Commercial and Corporate

 

Treasury and Investments

 

United States Operations

 

Virgin Islands Operations

 

Total

Quarter Ended September 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (1)

$

20,666

 

$

54,323

 

$

35,803

 

$

18,577

 

$

12,918

 

$

6,409

 

$

148,696

Service charges and fees on deposit accounts

 

-

 

 

3,021

 

 

2,044

 

 

-

 

 

125

 

 

658

 

 

5,848

Insurance commissions

 

-

 

 

1,377

 

 

-

 

 

-

 

 

5

 

 

91

 

 

1,473

Merchant-related income

 

-

 

 

1,941

 

 

-

 

 

-

 

 

-

 

 

276

 

 

2,217

Credit and debit card fees

 

-

 

 

4,778

 

 

16

 

 

-

 

 

(2)

 

 

350

 

 

5,142

Other service charges and fees

 

49

 

 

846

 

 

700

 

 

-

 

 

537

 

 

142

 

 

2,274

Not in scope of ASC Topic 606 (1) (2)

 

6,707

 

 

352

 

 

78

 

 

5,457

 

 

393

 

 

(7)

 

 

12,980

 

Total non-interest income

 

6,756

 

 

12,315

 

 

2,838

 

 

5,457

 

 

1,058

 

 

1,510

 

 

29,934

Total Revenue

$

27,422

 

$

66,638

 

$

38,641

 

$

24,034

 

$

13,976

 

$

7,919

 

$

178,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Mortgage Banking

 

Consumer (Retail) Banking

 

Commercial and Corporate

 

Treasury and Investments

 

United States Operations

 

Virgin Islands Operations

 

Total

Nine-Month Period Ended September 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (1)

$

78,106

 

$

198,577

 

$

146,837

 

$

53,378

 

$

48,684

 

$

20,209

 

$

545,791

Service charges and fees on deposit accounts

 

-

 

 

14,518

 

 

8,813

 

 

-

 

 

412

 

 

2,039

 

 

25,782

Insurance commissions

 

-

 

 

9,137

 

 

-

 

 

-

 

 

82

 

 

555

 

 

9,774

Merchant-related income

 

-

 

 

4,710

 

 

776

 

 

-

 

 

39

 

 

752

 

 

6,277

Credit and debit card fees

 

-

 

 

19,163

 

 

62

 

 

-

 

 

14

 

 

1,168

 

 

20,407

Other service charges and fees

 

561

 

 

2,729

 

 

1,927

 

 

-

 

 

1,351

 

 

438

 

 

7,006

Not in scope of ASC Topic 606 (1)

 

18,613

 

 

1,256

 

 

352

 

 

202

 

 

1,110

 

 

7

 

 

21,540

 

Total non-interest income

 

19,174

 

 

51,513

 

 

11,930

 

 

202

 

 

3,008

 

 

4,959

 

 

90,786

Total Revenue

$

97,280

 

$

250,090

 

$

158,767

 

$

53,580

 

$

51,692

 

$

25,168

 

$

636,577

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Mortgage Banking

 

Consumer (Retail) Banking

 

Commercial and Corporate

 

Treasury and Investments

 

United States Operations

 

Virgin Islands Operations

 

Total

Nine-Month Period Ended September 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (1)

$

55,177

 

$

165,609

 

$

86,631

 

$

55,549

 

$

39,939

 

$

19,650

 

$

422,555

Service charges and fees on deposit accounts

 

-

 

 

8,777

 

 

5,049

 

 

-

 

 

416

 

 

2,038

 

 

16,280

Insurance commissions

 

-

 

 

6,933

 

 

-

 

 

-

 

 

24

 

 

479

 

 

7,436

Merchant-related income

 

-

 

 

3,535

 

 

-

 

 

-

 

 

-

 

 

570

 

 

4,105

Credit and debit card fees

 

-

 

 

12,380

 

 

45

 

 

-

 

 

12

 

 

1,076

 

 

13,513

Other service charges and fees

 

215

 

 

1,882

 

 

1,591

 

 

89

 

 

1,366

 

 

1,393

 

 

6,536

Not in scope of ASC Topic 606 (1) (2)

 

14,628

 

 

3,127

 

 

988

 

 

13,688

 

 

716

 

 

9

 

 

33,156

Total non-interest income

 

14,843

 

 

36,634

 

 

7,673

 

 

13,777

 

 

2,534

 

 

5,565

 

 

81,026

Total Revenue

$

70,020

 

$

202,243

 

$

94,304

 

$

69,326

 

$

42,473

 

$

25,215

 

$

503,581

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 nine-month period ended September 30, 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 the nine-month periods ended September 30, 2021 and 2020, 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 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 each of the nine-month period ended September 30, 2021, the Corporation recognized revenue at the time that payments were confirmed and constraints were released of $3.3 million. No revenue was recognized during the quarters ended September 30, 2021 and 2020.

 

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 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 on this contract required the Bank to either launch a new debit card product during year ended 2021, or maintain a ratio of over 50% of the portfolio with the related card service association by the end of year 2021. In connection with this agreement, the Corporation recognized a contract liability as the revenue is constrained to the fulfillment of the above conditions. During the third quarter ended September 30, 2021, the Bank successfully launched the new debit card product required and therefore, satisfied performance obligations within the contract 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 FirstBank’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 September 30, 2021 and 2020, the contract liability amounted to $1.6 million and $2.2 million, respectively, which will be recognized over the remaining term of the contract. For the quarter and nine-month period ended September 30, 2021, the Corporation recognized revenue and its contract liabilities decreased by approximately $0.4 million and $0.6 million, respectively, compared to $0.1 million and $0.3 million, for the quarter and nine-month period ended September 30, 2020, 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 quarters and nine-month periods ended September 30, 2021 and 2020:

 

 

Quarter Ended

 

Nine-Month Period Ended

 

 

September 30,

 

September 30,

(In thousands)

2021

 

2020

 

2021

 

2020

Beginning Balance

$

1,989

 

$

2,314

 

$

2,151

 

$

2,476

Less:

 

 

 

 

 

 

 

 

 

 

 

Revenue recognized

 

(433)

 

 

(81)

 

 

(595)

 

 

(243)

Ending balance

$

1,556

 

$

2,233

 

$

1,556

 

$

2,233

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Except for the contract liabilities noted above, the Corporation did not have any significant performance obligations as of September 30, 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.