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Segment Reporting
 3 Months Ended
Mar. 31, 2016
Segment Reporting

Note 13. Segment Reporting

The Company’s operations are divided into two reportable business segments: Banking Operations and Residential Mortgage Banking. These operating segments have been identified based on the Company’s organizational structure. The segments require unique technology and marketing strategies, and offer different products and services. While the Company is managed as an integrated organization, individual executive managers are held accountable for the operations of these business segments.

The Company measures and presents information for internal reporting purposes in a variety of ways. The internal reporting system presently used by management in the planning and measurement of operating activities, and to which most managers are held accountable, is based on organizational structure.

The management accounting process uses various estimates and allocation methodologies to measure the performance of the operating segments. To determine financial performance for each segment, the Company allocates capital, funding charges and credits, certain non-interest expenses, and income tax provisions to each segment, as applicable. Allocation methodologies are subject to periodic adjustment as the internal management accounting system is revised and/or as business or product lines within the segments change. In addition, because the development and application of these methodologies is a dynamic process, the financial results presented may be periodically revised.

The Company seeks to maximize shareholder value by, among other means, optimizing the return on stockholders’ equity and managing risk. Capital is assigned to each segment, the combination of which is equivalent to the Company’s consolidated total, on an economic basis, using management’s assessment of the inherent risks associated with the segment. Capital allocations are made to cover the following risk categories: credit risk, liquidity risk, interest rate risk, option risk, basis risk, market risk, and operational risk.

The Company allocates expenses to the reportable segments based on various factors, including the volume and number of loans produced and the number of full-time equivalent employees. Income taxes are allocated to the various segments based on taxable income and statutory rates applicable to the segment.

Banking Operations Segment

The Banking Operations segment serves consumers and businesses by offering and servicing a variety of loan and deposit products and other financial services.

 

Residential Mortgage Banking Segment

The Residential Mortgage Banking segment originates, aggregates, sells, and services one-to-four family mortgage loans. Mortgage loan products consist primarily of agency-conforming, fixed- and adjustable-rate loans and, to a lesser extent, jumbo loans, for the purpose of purchasing or refinancing one-to-four family homes. The Residential Mortgage Banking segment earns interest on loans held in the warehouse and non-interest income from the origination and servicing of loans. It also recognizes gains or losses on the sale of such loans.

The following tables provide a summary of the Company’s segment results for the three months ended March 31, 2016 and 2015, on an internally managed accounting basis:

 

     For the Three Months Ended March 31, 2016  
(in thousands)    Banking
Operations		      Residential
Mortgage Banking		      Total
Company		  

Net interest income

    $ 324,917       $ 2,949       $ 327,866   

Recoveries of loan losses

      (176 )       —           (176 ) 

Non-Interest Income:

         

Third party (1)

      30,586         4,651         35,237   

Inter-segment

      (4,112 )       4,112         —     
  

 

 

     

 

 

     

 

 

  

Total non-interest income

      26,474         8,763         35,237   
  

 

 

     

 

 

     

 

 

  

Non-interest expense (2)

      142,050         16,398         158,448   
  

 

 

     

 

 

     

 

 

  

Income before income tax expense

      209,517         (4,686 )       204,831   

Income tax expense (benefit)

      76,815         (1,893 )       74,922   
  

 

 

     

 

 

     

 

 

  

Net income (loss)

    $ 132,702       $ (2,793 )     $ 129,909   
  

 

 

     

 

 

     

 

 

  

Identifiable segment assets (period-end)

    $ 47,739,937       $ 775,635       $ 48,515,572   
  

 

 

     

 

 

     

 

 

  

 

(1) Includes ancillary fee income.
(2) Includes both direct and indirect expenses.

 

     For the Three Months Ended March 31, 2015  
(in thousands)    Banking
Operations		      Residential
Mortgage Banking		      Total
Company		  

Net interest income

    $ 289,285       $ 3,483       $ 292,768   
  

 

 

     

 

 

     

 

 

  

Provision for loan losses

      7         —           7   
  

 

 

     

 

 

     

 

 

  

Non-interest income:

         

Third party(1)

      33,154         19,080         52,234   

Inter-segment

      (4,170 )       4,170         —     
  

 

 

     

 

 

     

 

 

  

Total non-interest income

      28,984         23,250         52,234   
  

 

 

     

 

 

     

 

 

  

Non-interest expense(2)

      140,151         16,685         156,836   
  

 

 

     

 

 

     

 

 

  

Income before income tax expense

      178,111         10,048         188,159   

Income tax expense

      64,890         4,010         68,900   
  

 

 

     

 

 

     

 

 

  

Net income

    $ 113,221       $ 6,038       $ 119,259   
  

 

 

     

 

 

     

 

 

  

Identifiable segment assets (period-end)

    $ 47,573,020       $ 678,695       $ 48,251,715   
  

 

 

     

 

 

     

 

 

  

 

(1) Includes ancillary fee income.
(2) Includes both direct and indirect expenses.