Business Segments

9 Months Ended

Sep. 30, 2016

Business Segments

Business Segments

NOTE 8: 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 automobile retail installment sales contracts.

The Corporation’s other segment includes a full-service brokerage firm that derives revenues from offering investment services and insurance products through an alliance with an independent broker/dealer and an insurance company that derives revenues from insurance 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 September 30, 2016
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	11,751	$	549	$	11,832	$	1	$	(1,455)	$	22,678
Gains on sales of loans		—		2,299		—		—		—		2,299
Other noninterest income		2,742		1,169		202		315		—		4,428
Total operating income		14,493		4,017		12,034		316		(1,455)		29,405
Expenses:
Provision for loan losses		—		—		4,925		—		—		4,925
Interest expense		1,440		158		1,801		288		(1,455)		2,232
Salaries and employee benefits		6,296		1,530		2,524		449		—		10,799
Other noninterest expenses		4,428		1,327		1,325		54		—		7,134
Total operating expenses		12,164		3,015		10,575		791		(1,455)		25,090
Income (loss) before income taxes		2,329		1,002		1,459		(475)		—		4,315
Income tax expense (benefit)		377		397		577		(180)		—		1,171
Net income (loss)	$	1,952	$	605	$	882	$	(295)	$	—	$	3,144
Total assets	$	1,255,815	$	81,274	$	306,674	$	4,905	$	(223,658)	$	1,425,010
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	760	$	70	$	93	$	—	$	—	$	923

	Three Months Ended September 30, 2015
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	10,715	$	528	$	12,702	$	—	$	(1,167)	$	22,778
Gains on sales of loans		—		1,156		—		—		—		1,156
Other noninterest income		2,312		703		237		397		—		3,649
Total operating income		13,027		2,387		12,939		397		(1,167)		27,583
Expenses:
Provision for loan losses		—		15		4,127		—		—		4,142
Interest expense		1,453		100		1,579		294		(1,167)		2,259
Salaries and employee benefits		5,663		660		2,503		281		—		9,107
Other noninterest expenses		4,440		1,292		1,324		98		—		7,154
Total operating expenses		11,556		2,067		9,533		673		(1,167)		22,662
Income (loss) before income taxes		1,471		320		3,406		(276)		—		4,921
Income tax expense (benefit)		85		130		1,336		(107)		—		1,444
Net income (loss)	$	1,386	$	190	$	2,070	$	(169)	$	—	$	3,477
Total assets	$	1,194,435	$	58,370	$	291,214	$	4,728	$	(175,376)	$	1,373,371
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	434	$	28	$	7	$	1	$	—	$	470

	Nine Months Ended September 30, 2016
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	34,268	$	1,216	$	35,448	$	2	$	(3,988)	$	66,946
Gains on sales of loans		—		6,581		—		—		—		6,581
Other noninterest income		8,598		2,853		628		953		—		13,032
Total operating income		42,866		10,650		36,076		955		(3,988)		86,559
Expenses:
Provision for loan losses		—		—		13,125		—		—		13,125
Interest expense		4,316		304		5,221		859		(3,988)		6,712
Salaries and employee benefits		18,447		4,213		7,683		1,149		—		31,492
Other noninterest expenses		13,237		3,517		4,032		392		—		21,178
Total operating expenses		36,000		8,034		30,061		2,400		(3,988)		72,507
Income (loss) before income taxes		6,866		2,616		6,015		(1,445)		—		14,052
Income tax expense (benefit)		885		1,039		2,366		(549)		—		3,741
Net income (loss)	$	5,981	$	1,577	$	3,649	$	(896)	$	—	$	10,311
Total assets	$	1,255,815	$	81,274	$	306,674	$	4,905	$	(223,658)	$	1,425,010
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	1,584	$	255	$	347	$	—	$	—	$	2,186

	Nine Months Ended September 30, 2015
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	32,157	$	1,301	$	34,985	$	—	$	(3,512)	$	64,931
Gains on sales of loans		—		4,803		—		—		—		4,803
Other noninterest income		6,764		1,961		751		1,142		—		10,618
Total operating income		38,921		8,065		35,736		1,142		(3,512)		80,352
Expenses:
Provision for loan losses		—		45		9,767		—		—		9,812
Interest expense		4,238		240		4,622		878		(3,512)		6,466
Salaries and employee benefits		17,354		3,511		7,294		1,050		—		29,209
Other noninterest expenses		12,906		3,430		3,708		412		—		20,456
Total operating expenses		34,498		7,226		25,391		2,340		(3,512)		65,943
Income (loss) before income taxes		4,423		839		10,345		(1,198)		—		14,409
Income tax expense (benefit)		250		340		4,053		(457)		—		4,186
Net income (loss)	$	4,173	$	499	$	6,292	$	(741)	$	—	$	10,223
Total assets	$	1,194,435	$	58,370	$	291,214	$	4,728	$	(175,376)	$	1,373,371
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	928	$	86	$	47	$	2	$	—	$	1,063

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 rates ranging from 3.8 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.