Business Segments

12 Months Ended

Dec. 31, 2019

NOTE 31 – BUSINESS SEGMENTS

Oriental segregates its businesses into the following major reportable segments of business: Banking, Wealth Management, and Treasury. Management established the reportable segments based on the internal reporting used to evaluate performance and to assess where to allocate resources. Other factors such as Oriental’s organization, nature of its products, distribution channels and economic characteristics of the products were also considered in the determination of the reportable segments. Oriental measures the performance of these reportable segments based on pre-established goals of different financial parameters such as net income, net interest income, loan production, and fees generated. Oriental’s methodology for allocating non-interest expenses among segments is based on several factors such as revenue, employee headcount, occupied space, dedicated services or time, among others. These factors are reviewed on a periodical basis and may change if the conditions warrant.

Banking includes the Bank’s branches and traditional banking products such as deposits and commercial, consumer and mortgage loans. Mortgage banking activities are carried out by the Bank’s mortgage banking division, whose principal activity is to originate mortgage loans for Oriental’s own portfolio. As part of its mortgage banking activities, Oriental may sell loans directly into the secondary market or securitize conforming loans into mortgage-backed securities.

Wealth Management is comprised of the Bank’s trust division, Oriental Financial Services, Oriental Insurance, and OPC. The core operations of this segment are financial planning, money management and investment banking, brokerage services, insurance sales activity, corporate and individual trust and retirement services, as well as retirement plan administration services.

The Treasury segment encompasses all of Oriental’s asset/liability management activities, such as purchases and sales of investment securities, interest rate risk management, derivatives, and borrowings. Intersegment sales and transfers, if any, are accounted for as if the sales or transfers were to third parties, that is, at current market prices.

Following are the results of operations and the selected financial information by operating segment for the years ended December 31, 2019, 2018, and 2017:

	Year Ended December 31, 2019
			Wealth				Total Major				Consolidated
	Banking		Management		Treasury		Segments		Eliminations		Total
	(In thousands)
Interest income	$	337,448	$	69	$	36,278	$	373,795	$	-	$	373,795
Interest expense		(36,023)		-		(14,979)		(51,002)		-		(51,002)
Net interest income		301,425		69		21,299		322,793		-		322,793
Provision for loan and lease losses, net		(96,504)		-		(288)		(96,792)		-		(96,792)
Non-interest income		47,517		26,649		8,327		82,493		-		82,493
Non-interest expenses		(211,755)		(17,163)		(4,326)		(233,244)		-		(233,244)
Intersegment revenue		2,207		-		-		2,207		(2,207)		-
Intersegment expenses		-		(652)		(1,555)		(2,207)		2,207		-
Income before income taxes	$	42,890	$	8,903	$	23,457	$	75,250	$	-	$	75,250
Income tax expense		16,084		3,339		1,986		21,409		-		21,409
Net income	$	26,806	$	5,564	$	21,471	$	53,841	$	-	$	53,841
Total assets	$	7,486,314	$	33,369	$	2,865,186	$	10,384,869	$	(1,087,208)	$	9,297,661

	Year Ended December 31, 2018
			Wealth				Total Major				Consolidated
	Banking		Management		Treasury		Segments		Eliminations		Total
	(In thousands)
Interest income	$	320,084	$	46	$	40,289	$	360,419	$	-	$	360,419
Interest expense		(29,746)		-		(14,779)		(44,525)		-		(44,525)
Net interest income		290,338		46		25,510		315,894		-		315,894
Provision for loan and lease losses, net		(55,885)		-		(223)		(56,108)		-		(56,108)
Non-interest income		53,592		26,457		46		80,095		-		80,095
Non-interest expenses		(186,460)		(16,440)		(4,181)		(207,081)		-		(207,081)
Intersegment revenue		2,126		-		-		2,126		(2,126)		-
Intersegment expenses		-		(788)		(1,338)		(2,126)		2,126		-
Income before income taxes	$	103,711	$	9,275	$	19,814	$	132,800	$	-	$	132,800
Income tax expense		40,447		3,617		4,326		48,390		-		48,390
Net income	$	63,264	$	5,658	$	15,488	$	84,410	$	-	$	84,410
Total assets	$	5,863,067	$	25,757	$	1,708,455	$	7,597,279	$	(1,013,927)	$	6,583,352

	Year Ended December 31, 2017
			Wealth				Total Major				Consolidated
	Banking		Management		Treasury		Segments		Eliminations		Total
	(In thousands)
Interest income	$	311,503	$	53	$	34,091	$	345,647	$	-	$	345,647
Interest expense		(26,308)		-		(15,167)		(41,475)		-		(41,475)
Net interest income		285,195		53		18,924		304,172		-		304,172
Provision for loan and lease losses, net		(113,108)		-		(31)		(113,139)		-		(113,139)
Non-interest income		45,102		26,069		7,516		78,687		-		78,687
Non-interest expenses		(184,567)		(13,486)		(3,578)		(201,631)		-		(201,631)
Intersegment revenue		1,604		-		748		2,352		(2,352)		-
Intersegment expenses		(748)		(1,137)		(467)		(2,352)		2,352		-
Income before income taxes	$	33,478	$	11,499	$	23,112	$	68,089	$	-	$	68,089
Income tax expense		13,057		4,485		(2,099)		15,443		-		15,443
Net income	$	20,421	$	7,014	$	25,211	$	52,646	$	-	$	52,646
Total assets	$	5,597,077	$	25,980	$	1,536,417	$	7,159,474	$	(970,421)	$	6,189,053