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 and correspondent delivery channels. Additionally, the Mortgage Segment includes the servicing of residential retail 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.

The following tables provides segment financial information for the three and nine months ended September 30, 2018 and 2017 follows:

Three Months Ended September 30, 2018	Banking		Mortgage			Consolidated
Net interest income	$	52,733	$	22		$	52,755
Provision for loan loss		1,818		—			1,818
Mortgage banking income		7,417		21,933			29,350
Change in fair value of mortgage servicing rights⁽¹⁾		—		(2,701	)		(2,701	)
Other noninterest income		7,706		—			7,706
Depreciation		896		117			1,013
Amortization of intangibles		777		—			777
Other noninterest mortgage banking expense		6,383		18,704			25,087
Other noninterest expense		30,336		—			30,336
Income before income taxes		27,646		433			28,079
Income tax expense							6,702
Net income							21,377
Total assets	$	4,637,097	$	421,070		$	5,058,167
Goodwill		137,090		100			137,190
(1) Included in mortgage banking income on the Consolidated Unaudited Statements of Income.

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
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 on the Consolidated Unaudited Statements of Income.

(2)	Included $15,711 in merger and conversion expenses related to the merger with the Clayton Banks.

Nine Months Ended September 30, 2018	Banking		Mortgage			Consolidated
Net interest income	$	153,173	$	(472	)	$	152,701
Provision for loan loss		3,198		—			3,198
Mortgage banking income		20,419		67,437			87,856
Net, change in fair value of mortgage servicing rights⁽¹⁾		—		(6,192	)		(6,192	)
Other noninterest income		21,729		—			21,729
Depreciation		2,864		387			3,251
Amortization of intangibles		2,432		—			2,432
Other noninterest mortgage banking expense		17,129		56,926			74,055
Other noninterest expense⁽²⁾		89,984		—			89,984
Income before income taxes		79,714		3,460			83,174
Income tax expense							19,978
Net income							63,196
Total assets	$	4,637,097	$	421,070		$	5,058,167
Goodwill		137,090		100			137,190

(1)	Included in mortgage banking income on the Consolidated Unaudited Statements of Income.

(2)	Included $1,193 in merger and conversion expenses related to the merger with the Clayton Banks.

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
Net, change in fair value of mortgage servicing rights⁽¹⁾		—			(3,234	)		(3,234	)
Other noninterest income		17,911			—			17,911
Depreciation and amortization		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, net of hedging gains/losses, on the Consolidated Unaudited Statements of Income.

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

Our Banking segment provides our Mortgage segment with an intercompany warehouse line of credit that is used to fund mortgage loans held for sale. The warehouse line of credit, which eliminated in consolidation, had a prime interest rate of 5.25% and 4.25% as of September 30, 2018 and 2017, respectively, and further limited based on interest income earned by the Mortgage segment. The amount of interest paid by the Mortgage segment to the Banking segment under this warehouse line of credit is recorded as interest income to the Banking segment and as interest expense to the Mortgage segment, both of which are included in the calculation of net interest income for each segment. The amount of interest paid by the Mortgage segment to the Banking segment under this warehouse line of credit was $3,997 and $13,022 for the three and nine months ended September 30, 2018, respectively, and $4,274 and $11,656 for the three and nine months ended September 30, 2017, respectively.

For more information regarding the Company’s segment reporting, see “Business segment highlights” and Note 21 “Segment reporting” in the notes to the consolidated financial statements in the Company’s Form 10-K filed with SEC on March 16, 2018.