NOTE 9: Business Segments

The Corporation operates in a decentralized fashion in three principal business segments: retail banking, mortgage banking and consumer finance. Revenues from retail banking operations consist primarily of interest earned on loans and investment securities and service charges on deposit accounts. Mortgage banking operating revenues consist principally of gains on sales of loans in the secondary market, loan origination fee income and interest earned on mortgage loans held for sale. Revenues from consumer finance consist primarily of interest earned on purchased retail installment sales contracts.

The Corporation’s other segment includes a full-service brokerage firm that derives revenues from offering wealth management services and insurance products through third-party service providers and an insurance company that derives revenues from owning an equity interest in an insurance agency that offers insurance products and services. The results of the other segment are not significant to the Corporation as a whole and have been included in “Other.” Revenue and expenses of the Corporation are also included in “Other,” and consist primarily of interest expense associated with the Corporation’s trust preferred capital notes and other general corporate expenses.


	Three Months Ended March 31, 2019
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	14,324	$	350	$	10,145	$	2	$	(1,870)	$	22,951
Gains on sales of loans		—		2,136		—		—		—		2,136
Other noninterest income		2,935		1,318		196		518		—		4,967
Total operating income		17,259		3,804		10,341		520		(1,870)		30,054
Expenses:
Provision for loan losses		—		—		2,395		—		—		2,395
Interest expense		2,175		163		2,551		285		(1,870)		3,304
Salaries and employee benefits		7,475		1,627		2,252		553		—		11,907
Other noninterest expenses		4,903		1,244		1,375		248		—		7,770
Total operating expenses		14,553		3,034		8,573		1,086		(1,870)		25,376
Income (loss) before income taxes		2,706		770		1,768		(566)		—		4,678
Income tax expense (benefit)		416		203		483		(195)		—		907
Net income (loss)	$	2,290	$	567	$	1,285	$	(371)	$	—	$	3,771
Total assets	$	1,380,790	$	53,642	$	301,579	$	6,836	$	(193,487)	$	1,549,360
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	722	$	24	$	8	$	—	$	—	$	754


	Three Months Ended March 31, 2018
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	13,160	$	367	$	10,849	$	—	$	(1,632)	$	22,744
Gains on sales of loans		—		2,239		—		—		—		2,239
Other noninterest income		2,619		857		248		483		—		4,207
Total operating income		15,779		3,463		11,097		483		(1,632)		29,190
Expenses:
Provision for loan losses		—		—		3,300		—		—		3,300
Interest expense		1,617		143		2,165		283		(1,632)		2,576
Salaries and employee benefits		6,486		1,443		2,265		539		—		10,733
Other noninterest expenses		4,981		1,275		1,307		243		—		7,806
Total operating expenses		13,084		2,861		9,037		1,065		(1,632)		24,415
Income (loss) before income taxes		2,695		602		2,060		(582)		—		4,775
Income tax expense (benefit)		383		167		562		(229)		—		883
Net income (loss)	$	2,312	$	435	$	1,498	$	(353)	$	—	$	3,892
Total assets	$	1,356,936	$	54,516	$	292,417	$	5,066	$	(184,009)	$	1,524,926
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	572	$	21	$	28	$	—	$	—	$	621

The retail banking segment extends a warehouse line of credit to the mortgage banking segment, providing a portion of the funds needed to originate mortgage loans. The retail banking segment charges the mortgage banking segment interest at the daily FHLB advance rate plus 50 basis points. The retail banking segment also provides the consumer finance segment with a portion of the funds needed to purchase loan contracts by means of variable rate notes that carry interest at one-month LIBOR plus 200 basis points and fixed rate notes that carry interest at rates ranging from 2.0 percent to 8.0 percent. The retail banking segment acquires certain residential real estate loans from the mortgage banking segment at prices similar to those paid by third-party investors. These transactions are eliminated to reach consolidated totals. Certain corporate overhead costs incurred by the retail banking segment are not allocated to the mortgage banking, consumer finance and other segments.