NOTE 18: 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 wealth management services and insurance products through an alliance with an independent broker/dealer 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.


	Year Ended December 31, 2017
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	49,564	$	1,660	$	44,745	$	1	$	(6,377)	$	89,593
Gains on sales of loans		—		8,553		—		—		—		8,553
Other noninterest income		10,633		4,653		995		1,905		—		18,186
Total operating income		60,197		14,866		45,740		1,906		(6,377)		116,332
Expenses:
Provision for loan losses		200		—		16,235		—		—		16,435
Interest expense		6,076		587		8,164		1,151		(6,377)		9,601
Salaries and employee benefits		25,264		6,503		9,389		1,948		—		43,104
Other noninterest expenses		17,951		5,185		5,421		669		—		29,226
Total operating expenses		49,491		12,275		39,209		3,768		(6,377)		98,366
Income (loss) before income taxes		10,706		2,591		6,531		(1,862)		—		17,966
Income tax expense (benefit)		5,727		1,606		4,198		(137)		—		11,394
Net income (loss)	$	4,979	$	985	$	2,333	$	(1,725)	$	—	$	6,572
Total assets	$	1,341,879	$	69,537	$	292,438	$	(604)	$	(194,194)	$	1,509,056
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	3,352	$	410	$	232	$	14	$	—	$	4,008


	Year Ended December 31, 2016
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	46,071	$	1,689	$	47,150	$	2	$	(5,473)	$	89,439
Gains on sales of loans		—		8,120		—		—		—		8,120
Other noninterest income		11,400		3,913		921		1,273		—		17,507
Total operating income		57,471		13,722		48,071		1,275		(5,473)		115,066
Expenses:
Provision for loan losses		—		—		18,040		—		—		18,040
Interest expense		5,790		435		7,073		1,143		(5,473)		8,968
Salaries and employee benefits		24,613		5,664		10,102		1,546		—		41,925
Other noninterest expenses		17,433		4,815		5,437		530		—		28,215
Total operating expenses		47,836		10,914		40,652		3,219		(5,473)		97,148
Income (loss) before income taxes		9,635		2,808		7,419		(1,944)		—		17,918
Income tax expense (benefit)		1,425		1,121		2,882		(969)		—		4,459
Net income (loss)	$	8,210	$	1,687	$	4,537	$	(975)	$	—	$	13,459
Total assets	$	1,290,733	$	65,351	$	306,012	$	6,005	$	(216,109)	$	1,451,992
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	2,376	$	314	$	386	$	42	$	—	$	3,118


	Year Ended December 31, 2015
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	42,960	$	1,698	$	47,053	$	—	$	(4,662)	$	87,049
Gains on sales of loans		—		6,336		—		—		—		6,336
Other noninterest income		9,083		2,621		1,095		1,579		—		14,378
Total operating income		52,043		10,655		48,148		1,579		(4,662)		107,763
Expenses:
Provision for loan losses		—		45		15,467		—		—		15,512
Interest expense		5,682		310		6,201		1,163		(4,662)		8,694
Salaries and employee benefits		23,185		4,594		9,758		1,389		—		38,926
Other noninterest expenses		17,155		4,563		4,970		560		—		27,248
Total operating expenses		46,022		9,512		36,396		3,112		(4,662)		90,380
Income (loss) before income taxes		6,021		1,143		11,752		(1,533)		—		17,383
Income tax expense (benefit)		392		466		4,573		(578)		—		4,853
Net income (loss)	$	5,629	$	677	$	7,179	$	(955)	$	—	$	12,530
Total assets	$	1,233,976	$	58,206	$	295,430	$	4,973	$	(187,509)	$	1,405,076
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	1,597	$	100	$	211	$	1	$	—	$	1,909

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 3.7 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.