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 June 30, 2019
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	15,419	$	669	$	10,365	$	2	$	(2,179)	$	24,276
Gains on sales of loans		—		2,955		—		—		—		2,955
Other noninterest income		3,090		1,488		137		532		—		5,247
Total operating income		18,509		5,112		10,502		534		(2,179)		32,478
Expenses:
Provision for loan losses		110		—		1,700		—		—		1,810
Interest expense		2,493		409		2,618		310		(2,179)		3,651
Salaries and employee benefits		7,070		1,764		2,096		565		—		11,495
Other noninterest expenses		5,140		1,335		1,411		168		—		8,054
Total operating expenses		14,813		3,508		7,825		1,043		(2,179)		25,010
Income (loss) before income taxes		3,696		1,604		2,677		(509)		—		7,468
Income tax expense (benefit)		625		422		728		(149)		—		1,626
Net income (loss)	$	3,071	$	1,182	$	1,949	$	(360)	$	—	$	5,842
Total assets	$	1,393,186	$	106,608	$	310,538	$	6,955	$	(249,291)	$	1,567,996
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	566	$	52	$	32	$	67	$	—	$	717


	Three Months Ended June 30, 2018
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	13,209	$	499	$	10,731	$	—	$	(1,788)	$	22,651
Gains on sales of loans		—		2,408		—		—		—		2,408
Other noninterest income		2,896		1,246		162		529		—		4,833
Total operating income		16,105		4,153		10,893		529		(1,788)		29,892
Expenses:
Provision for loan losses		—		—		2,000		—		—		2,000
Interest expense		1,631		217		2,317		287		(1,788)		2,664
Salaries and employee benefits		6,754		1,560		2,228		531		—		11,073
Other noninterest expenses		4,837		1,318		1,388		145		—		7,688
Total operating expenses		13,222		3,095		7,933		963		(1,788)		23,425
Income (loss) before income taxes		2,883		1,058		2,960		(434)		—		6,467
Income tax expense (benefit)		439		279		804		(125)		—		1,397
Net income (loss)	$	2,444	$	779	$	2,156	$	(309)	$	—	$	5,070
Total assets	$	1,366,671	$	69,916	$	295,678	$	5,038	$	(201,660)	$	1,535,643
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	1,022	$	38	$	7	$	—	$	—	$	1,067


	Six Months Ended June 30, 2019
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	29,743	$	1,019	$	20,510	$	4	$	(4,049)	$	47,227
Gains on sales of loans		—		5,091		—		—		—		5,091
Other noninterest income		6,025		2,806		333		1,050		—		10,214
Total operating income		35,768		8,916		20,843		1,054		(4,049)		62,532
Expenses:
Provision for loan losses		110		—		4,095		—		—		4,205
Interest expense		4,668		572		5,169		595		(4,049)		6,955
Salaries and employee benefits		14,545		3,391		4,348		1,118		—		23,402
Other noninterest expenses		10,043		2,579		2,786		416		—		15,824
Total operating expenses		29,366		6,542		16,398		2,129		(4,049)		50,386
Income (loss) before income taxes		6,402		2,374		4,445		(1,075)		—		12,146
Income tax expense (benefit)		1,041		625		1,211		(344)		—		2,533
Net income (loss)	$	5,361	$	1,749	$	3,234	$	(731)	$	—	$	9,613
Total assets	$	1,393,186	$	106,608	$	310,538	$	6,955	$	(249,291)	$	1,567,996
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	1,288	$	76	$	40	$	67	$	—	$	1,471


	Six Months Ended June 30, 2018
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	26,369	$	866	$	21,580	$	—	$	(3,420)	$	45,395
Gains on sales of loans		—		4,647		—		—		—		4,647
Other noninterest income		5,515		2,103		410		1,012		—		9,040
Total operating income		31,884		7,616		21,990		1,012		(3,420)		59,082
Expenses:
Provision for loan losses		—		—		5,300		—		—		5,300
Interest expense		3,248		360		4,482		570		(3,420)		5,240
Salaries and employee benefits		13,240		3,003		4,493		1,070		—		21,806
Other noninterest expenses		9,818		2,593		2,695		388		—		15,494
Total operating expenses		26,306		5,956		16,970		2,028		(3,420)		47,840
Income (loss) before income taxes		5,578		1,660		5,020		(1,016)		—		11,242
Income tax expense (benefit)		822		446		1,366		(354)		—		2,280
Net income (loss)	$	4,756	$	1,214	$	3,654	$	(662)	$	—	$	8,962
Total assets	$	1,366,671	$	69,916	$	295,678	$	5,038	$	(201,660)	$	1,535,643
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	1,594	$	59	$	35	$	—	$	—	$	1,688

The retail banking segment extends two warehouse lines 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 a spread ranging from 50 basis points to 175 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.