Segment Reporting

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2017 and 2016 follows:  

Three Months Ended June 30, 2017	Banking			Mortgage			Consolidated
Net interest income	$	29,999		$	428		$	30,427
Provision for loan loss		(865	)		—			(865	)
Mortgage banking income		7,118			24,961			32,079
Change in fair value of mortgage servicing rights (1)		—			(1,840	)		(1,840	)
Other noninterest income		5,418			—			5,418
Depreciation		861			130			991
Amortization of intangibles		123			—			123
Loss on sale of mortgage servicing rights		—			249			249
Other noninterest mortgage banking expense		5,368			19,423			24,791
Other noninterest expense		22,982			—			22,982
Income before income taxes		14,066			3,747			17,813
Income tax expense								6,574
Net income								11,239
Total assets	$	2,878,437		$	468,133		$	3,346,570
Goodwill		46,767			100			46,867
(1) Included in mortgage banking income.

Three Months Ended June 30, 2016	Banking			Mortgage			Consolidated
Net interest income	$	29,217		$	(859	)	$	28,358
Provision for loan loss		(789	)		—			(789	)
Mortgage banking income		7,215			22,918			30,133
Other noninterest income		8,223			—			8,223
Depreciation		901			106			1,007
Amortization of intangibles		527			—			527
Amortization and impairment of mortgage servicing rights		—			6,882			6,882
Other noninterest mortgage banking expense		4,072			15,463			19,535
Other noninterest expense		22,644			—			22,644
Income before income taxes		17,300			(392	)		16,908
Income tax expense								1,133
Net income								15,775
Total assets	$	2,508,867		$	409,091		$	2,917,958
Goodwill		46,767			100			46,867

Six Months Ended June 30, 2017	Banking			Mortgage			Consolidated
Net interest income	$	59,855		$	823		$	60,678
Provision for loan loss		(1,122	)		—			(1,122	)
Mortgage banking income		12,784			44,876			57,660
Change in fair value of mortgage servicing rights (1)		—			(2,341	)		(2,341	)
Other noninterest income		11,425			—			11,425
Depreciation		1,725			268			1,993
Amortization of intangibles		515			—			515
Loss on sale of mortgage servicing rights		—			249			249
Other noninterest mortgage banking expense		10,204			36,955			47,159
Other noninterest expense		45,637			—			45,637
Income before income taxes		27,105			5,886			32,991
Income tax expense								11,999
Net income								20,992
Total assets	$	2,878,437		$	468,133		$	3,346,570
Goodwill		46,767			100			46,867

(1) Included in mortgage banking income

Six Months Ended June 30, 2016	Banking			Mortgage			Consolidated
Net interest income	$	55,231		$	(930	)	$	54,301
Provision for loan loss		(798	)		—			(798	)
Mortgage banking income		13,359			41,277			54,636
Other noninterest income		14,755			—			14,755
Depreciation and amortization		1,802			220			2,022
Amortization of intangibles		1,079			—			1,079
Amortization and impairment of mortgage servicing rights		—			9,112			9,112
Other noninterest mortgage banking expense		7,930			28,859			36,789
Other noninterest expense		42,940			—			42,940
Income before income taxes		30,392			2,156			32,548
Income tax expense								2,174
Net income								30,374
Total assets	$	2,508,867		$	409,091		$	2,917,958
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 4.25% and 3.50% as of June 30, 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 $3,831 and $2,824 and $7,382 and $5,083 for the three and six months ended June 30, 2017 and 2016, respectively.