Segment Reporting

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Reporting

Note (11)—Segment reporting:

The Company and the Bank are engaged in the business of banking and provide a full range of financial services. The Company determines reportable segments based on the significance of the segment’s operating results to the overall Company, the products and services offered, customer characteristics, processes and service delivery of the segments and the regular financial performance review and allocation of resources by the Chief Executive Officer (“CEO”), the Company’s chief operating decision maker. The Company has identified two distinct reportable segments—Banking and Mortgage. The Company’s primary segment is Banking, which provides a full range of deposit and lending products and services to corporate, commercial and consumer customers. The Company offers full-service conforming residential mortgage products, including conforming residential loans and services through the Mortgage segment utilizing mortgage offices outside of the geographic footprint of the Banking operations as well as internet delivery channels. Additionally, the Mortgage Segment includes the servicing of residential mortgage loans and the packaging and securitization of loans to governmental agencies. The residential mortgage products and services originated in our Banking footprint and related revenues and expenses are included in our Banking segment. The Company’s mortgage division represents a distinct reportable segment which differs from the Company’s primary business of commercial and retail banking.

The financial performance of the Mortgage segment is assessed based on results of operations reflecting direct revenues and expenses and allocated expenses. This approach gives management a better indication of the operating performance of the segment. When assessing the Banking segment’s financial performance the CEO utilizes reports with indirect revenues and expenses including but not limited to the investment portfolio, electronic delivery channels and areas that primarily support the banking segment operations. Therefore these are included in the results of the Banking segment. Other indirect revenue and expenses related to general administrative areas are also included in the internal financial results reports of the Banking segment utilized by the CEO for analysis and are thus included for Banking segment reporting. The Mortgage segment utilizes funding sources from the Banking segment in order to fund mortgage loans that are ultimately sold on the secondary market. The Mortgage segment uses the proceeds from loan sales to repay obligations due to the Banking segment.

During 2016, the Company realigned its segment reporting structure to reclassify mortgage banking income and related expenses associated with retail mortgage originations within our Banking geographic footprint from the Mortgage segment to the Banking segment. This change was made to capture all of the product and service offerings for our Banking customer base within our banking geographic footprint into the Banking segment while capturing all of the mortgage banking activities outside of the banking footprint into the Mortgage segment to allow our CEO to better determine resource allocations and operating performance for each segment. As such, the tables below have been revised to reflect the reclassification for all periods presented.

The following tables provides segment financial information for the three months ended March 31, 2017 and 2016 follows:

Three Months Ended March 31, 2017	Banking			Mortgage		Consolidated
Net interest income	$	29,856		$	395	$	30,251
Provision for loan loss		(257	)		—		(257	)
Mortgage banking income		5,666			19,414		25,080
Other noninterest income		6,007			—		6,007
Depreciation		864			138		1,002
Amortization of intangibles		392			—		392
Amortization and impairment of mortgage servicing rights		—			—		—
Loss on sale of mortgage servicing rights		—			—		—
Other noninterest mortgage banking expense		4,836			17,532		22,368
Other noninterest expense		22,655			—		22,655
Income before income taxes		13,039			2,139		15,178
Income tax expense							5,425
Net income							9,753
Total assets	$	2,705,118		$	461,341	$	3,166,459
Goodwill		46,767			100		46,867

Three Months Ended March 31, 2016	Banking			Mortgage			Consolidated
Net interest income	$	26,014		$	(71	)	$	25,943
Provision for loan loss		(9	)		—			(9	)
Mortgage banking income		6,147			18,356			24,503
Other noninterest income		6,532			—			6,532
Depreciation		901			114			1,015
Amortization of intangibles		552			—			552
Amortization and impairment of mortgage servicing rights		—			2,914			2,914
Loss on sale of mortgage servicing rights		—			—			—
Other noninterest mortgage banking expense		3,858			12,712			16,570
Other noninterest expense		20,296			—			20,296
Income before income taxes		13,095			2,545			15,640
Income tax expense								1,041
Net income								14,599
Total assets	$	2,532,060		$	323,503		$	2,855,563
Goodwill		46,767			100			46,867

Our Banking segment provides our Mortgage segment with a warehouse line of credit that is used to fund mortgage loans held for sale. The warehouse line of credit had a prime interest rate of 4.00% and 3.50% as of March 31, 2017 and 2016, respectively. The amount of interest paid by our Mortgage segment to our Banking segment under this warehouse line of credit is recorded as interest income to our Banking segment and as interest expense to our Mortgage segment, both of which are included in the calculation of net interest income for each segment. The amount of interest paid by our Mortgage segment to our Banking segment under this warehouse line of credit was $3,551 and $2,259 for the three months ended March 31, 2017 and 2016, respectively.