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SEGMENT INFORMATION | 12 Months Ended
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Dec. 31, 2024
SEGMENT INFORMATION [Abstract] |
SEGMENT INFORMATION | NOTE 25 – SEGMENT INFORMATION The Corporation’s 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 December 31, 2024, the Corporation had six reportable segments: Mortgage Banking; Consumer (Retail) Banking; Commercial and Corporate Banking; Treasury and Investments; United States Operations; and Virgin Islands Operations. The Chief Executive Officer (“CEO”), who is the designated chief operating decision maker (“CODM”), as ultimate decision maker, evaluates performance and allocates resources based on financial information provided by management. In determining the reportable segments, the Corporation considers factors such as the organizational structure, nature of the products, distribution channels, customer relationship management, and economic characteristics of the business lines. The Corporation evaluates the performance of the segments based on segment income or loss, which consists of net interest income, the provision for credit losses, non-interest income and non-interest expenses. Segment income or loss is measured on a pre-tax basis, consistent with the Corporation’s consolidated financial statements under GAAP. The total segment income or loss equals consolidated pre-tax income or loss, and no adjustments or reconciliations are necessary. The segments are also evaluated based on the average volume of their interest-earning assets (net of fair value adjustments of investment securities and the ACL). 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 market. The Consumer (Retail) Banking segment includes the Corporation’s consumer lending, commercial lending to small businesses, commercial transaction banking, and deposit- taking activities primarily conducted through its branch network and loan centers. 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 government sector. The Commercial and Corporate Banking segment consists of the Corporation’s commercial lending (other than small business commercial loans) and commercial deposit-taking activities (other than the government sector). The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions that are executed to manage and enhance liquidity. Under the Corporation’s fund transfer pricing (“FTP”) methodology, the Treasury and Investments segment centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial and Corporate Banking, United States Operations, and Virgin Islands Operations segments to support their lending activities and compensating these units for deposits gathered. The mismatch between funds provided and funds used is managed by the Treasury and Investments segment. The funds transfer pricing charged or credited are calculated using the SOFR/swap curve with term rates, adjusted for a funding spread that reflects the Corporation’s cost of funds. The methodology, which is performed based on matched maturity funding, ensures a market-based allocation of funding costs and credits, impacting segment profitability by aligning internal pricing with external market conditions. The United States Operations segment consists of all banking activities conducted by FirstBank in the United States mainland, including commercial and consumer banking services. The Virgin Islands Operations segment consists of all banking activities conducted by the Corporation in the USVI and the BVI, including commercial and consumer banking services. During the fourth quarter of 2024, the Corporation adopted ASU 2023-07. In addition, as part of the Corporation’s ongoing efforts to enhance internal reporting, in the fourth quarter of 2024, the Corporation refined its segment performance methodology. These refinements align with improvements in internal reporting. Key changes included the following: Support units and Overhead Expense Allocations – Previously, support units and corporate overhead expenses were not allocated to segments due to limitations in identifying appropriate cost drivers. With enhanced granularity in expense drivers, the Corporation implemented a refined allocation methodology based on specific usage, allowing for a reasonable allocation of these expenses to each reportable segment. This change resulted in a decrease in segment income across business lines, as expenses that were previously excluded from segment reporting are now appropriately allocated. Recharacterization of Certain Business Products and Enhancements to FTP – Previously, certain commercial and retail business products were reported under the segment where the product is reported for purposes of credit-risk oversight, rather than the segment responsible for the customer relationship and overall business results. The shift from commercial products to retail business products aligns product classification with the business unit managing the customer relationship. Also, the Corporation refined its FTP methodology to better reflect the cost of funds and transfer pricing mechanics across business lines and recharacterization. These refinements resulted in adjustments to the FTP charges and credits, improving the comparability of segment results. Specifically, the Corporation transitioned to a SOFR/swap curve with term rates-based approach, replacing the previous methodology that was based on historical market rates tied to the portfolio type of each segment. In the aggregate, due to the above, this resulted in lower income from funds loaned to other business segments in the Consumer (Retail) Banking Segment and a related impact on the remaining segments. To ensure comparability, prior period segment results have been recast to reflect these refinements. See Note 1 – “Nature of Business and Summary of Significant Accounting Policies” for the accounting policies of the segments and information related to the adoption of ASU 2023-07. The following tables present information about the reportable segments for the indicated periods: Mortgage Banking Consumer (Retail) Banking Commercial and Corporate Banking Treasury and Investments United States Operations Virgin Islands Operations Total (In thousands) Year Ended December 31, 2024 Interest income $ 127,189 $ 423,738 $ 251,899 $ 116,734 $ 146,637 $ 28,956 $ 1,095,153 Net (charge) credit for transfer of funds (54,734) 284,065 (78,291) (184,627) (7,215) 40,802 - Interest expense - (156,983) (15,936) (44,258) (61,434) (9,063) (287,674) Net interest income (loss) 72,455 550,820 157,672 (112,151) 77,988 60,695 807,479 Provision for credit losses - (benefit) expense (15,526) 95,315 (12,928) (50) (6,661) (229) 59,921 Non-interest income 13,507 96,239 6,996 455 3,589 9,936 130,722 Non-interest expenses: Employees' compensation and benefits 27,144 139,176 19,538 3,648 28,203 17,986 235,695 Occupancy and equipment 5,858 59,478 5,725 739 7,607 9,020 88,427 Business promotion 1,264 12,331 1,166 727 1,280 877 17,645 Professional fees 7,638 27,618 4,022 1,313 4,383 4,481 49,455 Taxes, other than income taxes 1,808 16,702 2,107 407 503 669 22,196 FDIC deposit insurance 1,832 3,415 2,926 - 962 683 9,818 Net (gain) loss on OREO operations (5,553) (51) (2,483) - (4) 617 (7,474) Credit and debit processing expenses - 23,620 764 - 10 3,206 27,600 Other non-interest expenses (1) 2,994 26,159 5,956 2,363 2,640 3,599 43,711 Total non-interest expenses 42,985 308,448 39,721 9,197 45,584 41,138 487,073 Segment income (loss) $ 58,503 $ 243,296 $ 137,875 $ (120,843) $ 42,654 $ 29,722 $ 391,207 Average interest-earning assets $ 2,134,551 $ 4,042,201 $ 3,518,554 $ 5,850,884 $ 2,176,701 $ 403,365 $ 18,126,256 Mortgage Banking Consumer (Retail) Banking Commercial and Corporate Banking Treasury and Investments United States Operations Virgin Islands Operations Total (In thousands) Year Ended December 31, 2023 Interest income $ 127,154 $ 390,619 $ 229,217 $ 116,382 $ 132,490 $ 27,624 $ 1,023,486 Net (charge) credit for transfer of funds (51,380) 214,392 (71,813) (111,433) (12,830) 33,064 - Interest expense - (120,705) (15,091) (36,893) (48,862) (4,825) (226,376) Net interest income (loss) 75,774 484,306 142,313 (31,944) 70,798 55,863 797,110 Provision for credit losses - (benefit) expense (7,908) 66,072 (5,997) 20 8,687 66 60,940 Non-interest income 11,213 92,608 11,053 2,125 6,839 8,856 132,694 Non-interest expenses: Employees' compensation and benefits 25,463 133,422 17,426 3,354 25,960 17,230 222,855 Occupancy and equipment 6,015 58,000 4,987 717 6,959 9,233 85,911 Business promotion 1,446 13,787 1,218 881 1,221 1,073 19,626 Professional fees 7,054 25,251 3,501 654 4,300 5,081 45,841 Taxes, other than income taxes 1,382 16,891 1,272 425 552 714 21,236 FDIC deposit insurance 2,879 5,043 4,311 - 1,524 1,116 14,873 Net (gain) loss on OREO operations (7,305) (58) 96 - (150) 279 (7,138) Credit and debit processing expenses - 22,258 1,457 - 10 2,272 25,997 Other non-interest expenses (1) 2,968 25,878 5,332 2,562 2,393 3,094 42,227 Total non-interest expenses 39,902 300,472 39,600 8,593 42,769 40,092 471,428 Segment income (loss) $ 54,993 $ 210,370 $ 119,763 $ (38,432) $ 26,181 $ 24,561 $ 397,436 Average interest-earning assets $ 2,149,445 $ 3,770,393 $ 3,299,209 $ 6,186,018 $ 2,072,292 $ 389,489 $ 17,866,846 Mortgage Banking Consumer (Retail) Banking Commercial and Corporate Banking Treasury and Investments United States Operations Virgin Islands Operations Total (In thousands) Year ended December 31, 2022: Interest income $ 130,844 $ 331,558 $ 177,526 $ 102,991 $ 94,782 $ 24,913 $ 862,614 Net (charge) credit for transfer of funds (52,746) 161,946 (30,130) (96,178) (9,065) 26,173 - Interest expense - (30,301) (3,620) (20,777) (11,549) (1,074) (67,321) Net interest income (loss) 78,098 463,203 143,776 (13,964) 74,168 50,012 795,293 Provision for credit losses - (benefit) expense (7,936) 54,934 (17,759) (434) (3,073) 1,964 27,696 Non-interest income 15,698 88,857 7,274 (161) 3,006 8,418 123,092 Non-interest expenses: Employees' compensation and benefits 24,460 120,356 16,841 3,168 24,626 16,587 206,038 Occupancy and equipment 6,647 58,036 5,449 814 7,141 10,190 88,277 Business promotion 1,371 12,754 1,061 901 1,104 1,040 18,231 Professional fees 7,716 25,120 3,990 1,292 4,472 5,258 47,848 Taxes, other than income taxes 964 17,105 816 370 419 593 20,267 FDIC deposit insurance 1,346 1,983 1,793 - 565 462 6,149 Net (gain) loss on OREO operations (6,391) 27 610 - (172) 100 (5,826) Credit and debit processing expenses - 19,452 1,292 - 11 1,981 22,736 Other non-interest expenses (1) 2,802 23,644 4,619 2,451 2,531 3,338 39,385 Total non-interest expenses 38,915 278,477 36,471 8,996 40,697 39,549 443,105 Segment income (loss) $ 62,817 $ 218,649 $ 132,338 $ (22,687) $ 39,550 $ 16,917 $ 447,584 Average interest-earning assets $ 2,240,946 $ 3,372,309 $ 3,165,020 $ 7,300,208 $ 2,069,030 $ 369,591 $ 18,517,104 (1) Consists of communication expenses and the expense categories included in Note 19 - “Other Non-Interest Expenses.” The following table presents a reconciliation of the reportable segment financial information to the consolidated totals for the indicated periods: Year Ended December 31, 2024 2023 2022 (In thousands) Average assets: Total average interest-earning assets for segments $ 18,126,256 $ 17,866,846 $ 18,517,104 Average non-interest-earning assets (1) 835,100 839,577 861,545 Total consolidated average assets $ 18,961,356 $ 18,706,423 $ 19,378,649 (1) Includes, among other things, non-interest-earning cash, premises and equipment, net deferred tax asset, ROU assets, and accrued interest receivable on loans and investments. The following table presents revenues (interest income plus non-interest income) and selected balance sheet data by geography based on the location in which the transaction was originated as of the indicated dates: 2024 2023 2022 (In thousands) Revenues: Puerto Rico $ 1,036,757 $ 980,371 $ 854,587 United States 150,226 139,329 97,788 Virgin Islands 38,892 36,480 33,331 Total consolidated revenues $ 1,225,875 $ 1,156,180 $ 985,706 Selected Balance Sheet Information: Total assets: Puerto Rico $ 16,427,587 $ 16,308,000 $ 16,020,987 United States 2,403,379 2,141,427 2,213,333 Virgin Islands 461,955 460,122 400,164 Loans: Puerto Rico $ 10,036,686 $ 9,745,872 $ 9,097,013 United States 2,295,234 2,022,261 2,088,351 Virgin Islands 429,912 424,718 379,767 Deposits: Puerto Rico (1) $ 13,562,227 $ 13,429,303 $ 12,933,570 United States (2) 1,864,772 1,631,402 1,623,725 Virgin Islands 1,444,299 1,495,280 1,586,172 (1) For 2024, 2023, and 2022, includes $ 33.0 million, $ 420.2 million, and $ 1.4 million, respectively, of brokered CDs allocated to Puerto Rico operations. (2) For 2024, 2023, and 2022, includes $ 445.1 million, $ 363.1 million, and $ 104.4 million, respectively, of brokered CDs allocated to United States operations.

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