NOTE 9: OPERATING SEGMENTS

We operate four principal segments: Oklahoma Banking, Texas Banking, Kansas Banking, and Other Operations. The Oklahoma Banking segment provides deposit and lending services, including residential mortgage lending services to customers. Due to its size and our management structure, our Colorado banking operations are included within the Oklahoma Banking segment. The Texas Banking segment and the Kansas Banking segment provide deposit and lending services. Other Operations includes our funds management unit and corporate investments.

The primary purpose of the funds management unit is to manage our overall internal liquidity needs and interest rate risk. Each segment borrows funds from or provides funds to the funds management unit as needed to support its operations. The value of funds provided to and the cost of funds borrowed from the funds management unit by each segment are internally priced at rates that approximate market rates for funds with similar duration. The yield used in the funds transfer pricing curve is a blend of rates based on the volume usage of retail and brokered certificates of deposit and FHLB advances.

The accounting policies of each reportable segment are the same as ours. Expenses for consolidated back-office operations are allocated to operating segments based on estimated uses of those services. General overhead expenses such as executive administration, accounting, and audit are allocated based on the direct expense and/or deposit and loan volumes of the operating segment. Income tax expense for the operating segments is calculated at statutory rates. The Other Operations segment records the tax expense or benefit necessary to reconcile to the consolidated financial statements. The following table summarizes financial results by operating segment:


For the three months ended June 30, 2017
	Oklahoma		Texas		Kansas		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Operations		Company
Net interest income	$	13,349	$	6,197	$	1,614	$	210	$	21,370
Provision (credit) for loan losses		1,424		354		(52)		3		1,729
Noninterest income		3,146		466		290		619		4,521
Noninterest expenses		9,735		3,219		1,314		887		15,155
Income (loss) before taxes		5,336		3,090		642		(61)		9,007
Taxes on income (loss)		1,892		1,095		227		(25)		3,189
Net income (loss)	$	3,444	$	1,995	$	415	$	(36)	$	5,818


For the six months ended June 30, 2017
	Oklahoma		Texas		Kansas		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Operations*		Company
Net interest income (loss)	$	26,143	$	12,285	$	3,172	$	(67)	$	41,533
Provision (credit) for loan losses		2,846		845		(186)		-		3,505
Noninterest income		6,406		922		592		1,481		9,401
Noninterest expenses		19,432		6,416		2,721		1,889		30,458
Income (loss) before taxes		10,271		5,946		1,229		(475)		16,971
Taxes on income (loss)		3,555		2,058		425		(164)		5,874
Net income (loss)	$	6,716	$	3,888	$	804	$	(311)	$	11,097

* Includes externally generated revenue of $2.3 million, primarily from investing services, and an internally generated loss of $0.9 million from the funds management unit.

Total loans at period end	$	1,193,108	$	636,709	$	141,817	$	-	$	1,971,634
Total assets at period end		1,228,506		632,773		140,702		570,954		2,572,935
Total deposits at period end		1,369,810		196,390		156,383		291,251		2,013,834


For the three months ended June 30, 2016
	Oklahoma		Texas		Kansas		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Operations		Company
Net interest income	$	12,339	$	5,640	$	1,638	$	78	$	19,695
Provision (credit) for loan losses		(210)		330		(113)		3		10
Noninterest income		2,657		290		300		624		3,871
Noninterest expenses		9,879		3,256		1,347		786		15,268
Income (loss) before taxes		5,327		2,344		704		(87)		8,288
Taxes on income (loss)		1,837		816		250		(27)		2,876
Net income (loss)	$	3,490	$	1,528	$	454	$	(60)	$	5,412


For the six months ended June 30, 2016
	Oklahoma		Texas		Kansas		Other		Total
(Dollars in thousands)	Banking		Banking		Banking		Operations*		Company
Net interest income (loss)	$	25,277	$	11,206	$	3,466	$	(414)	$	39,535
Provision for loan losses		50		2,245		2,086		4		4,385
Noninterest income		4,852		592		618		1,224		7,286
Noninterest expenses		19,839		6,987		2,764		1,674		31,264
Income (loss) before taxes		10,240		2,566		(766)		(868)		11,172
Taxes on income (loss)		3,566		894		(267)		(302)		3,891
Net income (loss)	$	6,674	$	1,672	$	(499)	$	(566)	$	7,281

* Includes externally generated revenue of $1.9 million, primarily from investing services, and an internally generated loss of $1.0 million from the funds management unit.

Total loans at period end	$	1,085,986	$	577,333	$	158,058	$	-	$	1,821,377
Total assets at period end		1,130,161		573,199		157,054		541,848		2,402,262
Total deposits at period end		1,322,430		190,475		135,585		254,375		1,902,865