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REVENUE FROM CONTRACTS WITH CUSTOMERS
 3 Months Ended
Mar. 31, 2022
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block]

NOTE 20 – 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 ended March 31, 2022 and 2021:

For the quarter ended March 31, 2022:

Mortgage Banking

 

Consumer (Retail) Banking

 

Commercial and Corporate

 

Treasury and Investments

 

United States Operations

 

Virgin Islands Operations

 

Total

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (1)

$

25,779

 

$

89,546

 

$

40,415

 

$

7,409

 

$

16,482

 

$

5,993

 

$

185,624

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges and fees on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

deposit accounts

 

-

 

 

5,539

 

 

2,976

 

 

-

 

 

138

 

 

710

 

 

9,363

Insurance commissions

 

-

 

 

4,967

 

 

-

 

 

-

 

 

29

 

 

279

 

 

5,275

Merchant-related income

 

-

 

 

1,822

 

 

373

 

 

-

 

 

5

 

 

389

 

 

2,589

Credit and debit card fees

 

-

 

 

6,671

 

 

16

 

 

-

 

 

(7)

 

 

410

 

 

7,090

Other service charges and fees

 

143

 

 

1,110

 

 

1,113

 

 

-

 

 

499

 

 

157

 

 

3,022

Not in scope of Topic 606 (1)

 

5,109

 

 

354

 

 

76

 

 

(112)

 

 

80

 

 

12

 

 

5,519

 

Total non-interest income

 

5,252

 

 

20,463

 

 

4,554

 

 

(112)

 

 

744

 

 

1,957

 

 

32,858

Total Revenue

$

31,031

 

$

110,009

 

$

44,969

 

$

7,297

 

$

17,226

 

$

7,950

 

$

218,482

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended March 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)

$

25,240

 

$

58,483

 

$

48,981

 

$

21,583

 

$

15,023

 

$

6,955

 

$

176,265

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges and fees on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

deposit accounts

 

-

 

 

4,476

 

 

2,971

 

 

-

 

 

149

 

 

708

 

 

8,304

Insurance commissions

 

-

 

 

4,967

 

 

-

 

 

-

 

 

29

 

 

245

 

 

5,241

Merchant-related income

 

-

 

 

922

 

 

256

 

 

-

 

 

13

 

 

204

 

 

1,395

Credit and debit card fees

 

-

 

 

5,645

 

 

19

 

 

-

 

 

3

 

 

370

 

 

6,037

Other service charges and fees

 

173

 

 

865

 

 

519

 

 

-

 

 

458

 

 

141

 

 

2,156

Not in scope of Topic 606 (1)

 

6,943

 

 

368

 

 

132

 

 

56

 

 

323

 

 

1

 

 

7,823

 

Total non-interest income

 

7,116

 

 

17,243

 

 

3,897

 

 

56

 

 

975

 

 

1,669

 

 

30,956

Total Revenue

$

32,356

 

$

75,726

 

$

52,878

 

$

21,639

 

$

15,998

 

$

8,624

 

$

207,221

(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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarters ended March 31, 2022 and 2021, 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, no-substantive 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 quarters ended March 31, 2022 and 2021, the Corporation recognized revenue at the time that payments were confirmed and constraints were released of $3.0 million and $3.3 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 automated teller machine (“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 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 to the fulfillment of the above conditions. During the third quarter of 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 March 31, 2022 and 2021, this contract liability amounted to $1.0 million and $1.3 million, respectively, which will be recognized over the remaining term of the contract. For the quarters ended March 31, 2022 and 2021, the Corporation recognized revenue and its contract liabilities decreased by approximately $0.3 million and $0.1 million, respectively, due to the completion of performance over time. There were no changes in contract liabilities due to changes in transaction price estimates.

 

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 March 31, 2022 and 2021, there were no contract assets from contracts with customers or contract assets recorded on the Corporation’s consolidated financial statements.

 

The following table shows the activity of contract liabilities for the quarters ended March 31, 2022 and 2021:

 

(In thousands)

March 31, 2022

 

March 31, 2021

Beginning Balance

$

1,443

 

$

2,151

Less:

 

 

 

 

 

Revenue recognized

 

(289)

 

 

(81)

Ending balance

$

1,154

 

$

2,070

 

 

 

 

 

 

Other

 

Except for the contract liabilities noted above, the Corporation did not have any significant performance obligations as of March 31, 2022. 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.