Note (12)—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 and correspondent 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 nine months ended September 30, 2017 and 2016 follows:

Three Months Ended September 30, 2017	Banking			Mortgage			Consolidated
Net interest income	$	43,741		$	(131	)	$	43,610
Provision for loan loss		(784	)		—			(784	)
Mortgage banking income		7,498			24,729			32,227
Change in fair value of mortgage servicing rights (1)		—			(893	)		(893	)
Other noninterest income		6,486			—			6,486
Depreciation		972			125			1,097
Amortization of intangibles		558			—			558
Loss on sale of mortgage servicing rights		—			—			—
Other noninterest mortgage banking expense		6,216			19,632			25,848
Other noninterest expense (2)		41,721			—			41,721
Income before income taxes		9,042			3,948			12,990
Income tax expense								4,602
Net income								8,388
Total assets	$	4,056,901		$	525,042		$	4,581,943
Goodwill		138,810			100			138,910
(1) Included in mortgage banking income.
(2) Included $15,711 in merger and conversion expenses related to the merger with the Clayton Banks.

Three Months Ended September 30, 2016	Banking		Mortgage			Consolidated
Net interest income	$	28,158	$	(541	)	$	27,617
Provision for loan loss		71		—			71
Mortgage banking income		8,878		28,060			36,938
Other noninterest income		7,024		—			7,024
Depreciation		927		45			972
Amortization of intangibles		526		—			526
Amortization and impairment of mortgage servicing rights		—		5,198			5,198
Other noninterest mortgage banking expense		7,293		18,501			25,794
Other noninterest expense (1)		23,039		—			23,039
Income before income taxes		12,204		3,775			15,979
Income tax expense							14,772
Net income							1,207
Total assets	$	2,661,116	$	526,064		$	3,187,180
Goodwill		46,767		100			46,867

(1)	Included $1,122 in merger and conversion expenses related to the merger with NWGB.

Nine Months Ended September 30, 2017	Banking			Mortgage			Consolidated
Net interest income	$	103,596		$	692		$	104,288
Provision for loan loss		(1,906	)		—			(1,906	)
Mortgage banking income		20,282			69,605			89,887
Change in fair value of mortgage servicing rights (1)		—			(3,234	)		(3,234	)
Other noninterest income		17,911			—			17,911
Depreciation		2,697			393			3,090
Amortization of intangibles		1,073			—			1,073
Loss on sale of mortgage servicing rights		—			249			249
Other noninterest mortgage banking expense		16,420			56,587			73,007
Other noninterest expense (2)		87,358			—			87,358
Income before income taxes		36,147			9,834			45,981
Income tax expense								16,601
Net income								29,380
Total assets	$	4,056,901		$	525,042		$	4,581,943
Goodwill		138,810			100			138,910

(1)	Included in mortgage banking income

(2)	Included $16,965 in merger and conversion expenses related to the merger with the Clayton Banks.

Nine Months Ended September 30, 2016	Banking			Mortgage			Consolidated
Net interest income	$	83,389		$	(1,471	)	$	81,918
Provision for loan loss		(727	)		—			(727	)
Mortgage banking income		22,237			69,337			91,574
Other noninterest income		21,779			—			21,779
Depreciation and amortization		2,729			265			2,994
Amortization of intangibles		1,605			—			1,605
Amortization and impairment of mortgage servicing rights		—			14,310			14,310
Other noninterest mortgage banking expense		15,223			47,360			62,583
Other noninterest expense (1)		65,979			—			65,979
Income before income taxes		42,596			5,931			48,527
Income tax expense								16,946
Net income								31,581
Total assets	$	2,661,116		$	526,064		$	3,187,180
Goodwill		46,767			100			46,867

(1)	Included $3,268 in merger and conversion expenses related to the merger with NWGB.

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 September 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 $4,274 and $3,472 and $11,656 and $8,555 for the three and nine months ended September 30, 2017 and 2016, respectively.