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Segment Reporting
 3 Months Ended
Mar. 31, 2017
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 respective segments.

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, 2017 and 2016 on an internally managed accounting basis:

 

     For the Three Months Ended March 31, 2017  
(in thousands)    Banking
Operations		      Residential
Mortgage
Banking		      Total Company  

Net interest income

    $ 292,277      $ 2,640      $ 294,917  

Recovery of loan losses

      (4,008 )       —          (4,008 ) 

Non-Interest Income:

         

Third party(1)

      21,869        10,303        32,172  

Inter-segment

      (3,759 )       3,759        —    
  

 

 

     

 

 

     

 

 

  

Total non-interest income

      18,110        14,062        32,172  
  

 

 

     

 

 

     

 

 

  

Non-interest expense(2)

      150,936        16,007        166,943  
  

 

 

     

 

 

     

 

 

  

Income before income tax expense

      163,459        695        164,154  

Income tax expense

      59,920        277        60,197  
  

 

 

     

 

 

     

 

 

  

Net income

    $ 103,539      $ 418      $ 103,957  
  

 

 

     

 

 

     

 

 

  

Identifiable segment assets (period-end)

    $ 48,285,443      $ 539,121      $ 48,824,564  
  

 

 

     

 

 

     

 

 

  

 

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

 

     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 (loss) before income tax expense

(benefit)

      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.