Segment Reporting

6 Months Ended

Jun. 30, 2013

Segment Reporting

Note 13. Segment Reporting

The Company’s operations are divided into two reportable business segments: Banking Operations and Residential Mortgage Banking. These operating segments have been identified based on the Company’s organizational structure. The segments require unique technology and marketing strategies, and offer different products and services. While the Company is managed as an integrated organization, individual executive managers are held accountable for the operations of these business segments.

The Company measures and presents information for internal reporting purposes in a variety of ways. The internal reporting system presently used by management in the planning and measurement of operating activities, and to which most managers are held accountable, is based on organizational structure.

The management accounting process uses various estimates and allocation methodologies to measure the performance of the operating segments. To determine financial performance for each segment, the Company allocates capital, funding charges and credits, certain non-interest expenses, and income tax provisions to each segment, as applicable. Allocation methodologies are subject to periodic adjustment as the internal management accounting system is revised and/or as business or product lines within the segments change. In addition, because the development and application of these methodologies is a dynamic process, the financial results presented may be periodically revised.

The Company’s overall objective is to maximize shareholder value by, among other means, optimizing return on equity and managing risk. Capital is assigned to each segment, the total of which is equivalent to the Company’s consolidated total, on an economic basis, using management’s assessment of the inherent risks associated with the segment. Capital allocations are made to cover the following risk categories: credit risk, liquidity risk, interest rate risk, option risk, basis risk, market risk, and operational risk.

The Company allocates expenses to the reportable segments based on various factors, including the volume and amount of loans produced and the number of full-time equivalent employees. Income taxes are allocated to the various segments based on taxable income and statutory rates applicable to the segment.

Banking Operations Segment

The Banking Operations Segment serves individual and business customers by offering and servicing a variety of loan and deposit products and other financial services.

Residential Mortgage Banking Segment

The Residential Mortgage Banking segment originates, sells, aggregates, and services one-to-four family mortgage loans. Mortgage loan products include conventional and jumbo fixed- and adjustable-rate loans for the purpose of purchasing or refinancing one-to-four family residential properties. The Residential Mortgage Banking segment earns interest on loans held in the warehouse and non-interest income from the origination and servicing of loans. It also recognizes gains or losses from the sale of such loans.

The following table provides a summary of the Company’s segment results for the three months ended June 30, 2013, on an internally managed accounting basis:

	For the Three Months Ended June 30, 2013
(in thousands)	Banking     Operations			Residential Mortgage Banking			Total     Company
Non-interest income – third party(1)		$	29,835		$	23,910		$	53,745
Non-interest income – inter-segment			(4,058)			4,058			--
Total non-interest income			25,777			27,968			53,745
Net interest income			293,678			6,206			299,884
Total net revenues			319,455			34,174			353,629
Provisions for loan losses			9,618			--			9,618
Non-interest expense(2)			131,201			20,464			151,665
Income before income tax expense			178,636			13,710			192,346
Income tax expense			64,633			5,196			69,829
Net income		$	114,003		$	8,514		$	122,517
Identifiable segment assets (period-end)		$	43,127,156		$	1,058,682		$	44,185,838

(1) Includes ancillary fee income.

(2) Includes both direct and indirect expenses.

The following table provides a summary of the Company’s segment results for the six months ended June 30, 2013, on an internally managed accounting basis:

	For the Six Months Ended June 30, 2013
(in thousands)	Banking     Operations			Residential Mortgage Banking			Total     Company
Non-interest income – third party(1)		$	78,557		$	50,739		$	129,296
Non-interest income – inter-segment			(8,217)			8,217			--
Total non-interest income			70,340			58,956			129,296
Net interest income			561,741			13,319			575,060
Total net revenues			632,081			72,275			704,356
Provisions for loan losses			19,120			--			19,120
Non-interest expense(2)			266,127			41,634			307,761
Income before income tax expense			346,834			30,641			377,475
Income tax expense			124,667			11,616			136,283
Net income		$	222,167		$	19,025		$	241,192
Identifiable segment assets (period-end)		$	43,127,156		$	1,058,682		$	44,185,838

(1) Includes ancillary fee income.

(2) Includes both direct and indirect expenses.

The following table provides a summary of the Company’s segment results for the three months ended June 30, 2012, on an internally managed accounting basis:

	For the Three Months Ended June 30, 2012
(in thousands)	Banking     Operations			Residential Mortgage Banking			Total     Company
Non-interest income – third party(1)		$	39,247		$	58,958		$	98,205
Non-interest income – inter-segment			(3,638)			3,638			--
Total non-interest income			35,609			62,596			98,205
Net interest income			289,355			7,301			296,656
Total net revenues			324,964			69,897			394,861
Provisions for loan losses			33,448			--			33,448
Non-interest expense(2)			135,614			19,815			155,429
Income before income tax expense			155,902			50,082			205,984
Income tax expense			55,688			19,084			74,772
Net income		$	100,214		$	30,998		$	131,212
Identifiable segment assets (period-end)		$	42,164,164		$	1,323,183		$	43,487,347

(1) Includes ancillary fee income.

(2) Includes both direct and indirect expenses.

The following table provides a summary of the Company’s segment results for the six months ended June 30, 2012, on an internally managed accounting basis:

	For the Six Months Ended June 30, 2012
(in thousands)	Banking     Operations			Residential Mortgage Banking			Total     Company
Non-interest income – third party(1)		$	65,388		$	94,813		$	160,201
Non-interest income – inter-segment			(7,224)			7,224			--
Total non-interest income			58,164			102,037			160,201
Net interest income			570,455			14,615			585,070
Total net revenues			628,619			116,652			745,271
Provisions for loan losses			48,448			--			48,448
Non-interest expense(2)			267,098			38,508			305,606
Income before income tax expense			313,073			78,144			391,217
Income tax expense			111,979			29,773			141,752
Net income		$	201,094		$	48,371		$	249,465
Identifiable segment assets (period-end)		$	42,164,164		$	1,323,183		$	43,487,347

(1) Includes ancillary fee income.

(2) Includes both direct and indirect expenses.