NOTE 19: SEGMENT REPORTING

Reflecting the sale of the Company’s mortgage banking business, the Residential Mortgage Banking segment will no longer be reportable. The information presented below represents activity in the Residential Mortgage Banking segment through September 30, 2017.

The Company’s operations were 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 required unique technology and marketing strategies, and offer different products and services. While the Company is managed as an integrated organization, individual executive managers were 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 used various estimates and allocated methodologies to measure the performance of the operating segments. To determine financial performance for each segment, the Company allocated capital, funding charges and credits, certain non-interest expenses, and income tax provisions to each segment, as applicable. Allocation methodologies were subject to periodic adjustment as the internal management accounting system was revised and/or as business or product lines within the segments change. In addition, because the development and application of these methodologies was a dynamic process, the financial results presented may be periodically revised.

The Company allocated 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 were 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 originated, aggregated, sold, and serviced one-to-four family mortgage loans. Mortgage loan products consisted 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 earned interest on loans held in the warehouse and non-interest income from the origination and servicing of loans. It also recognized gains or losses on the sale of such loans.

The following tables provide a summary of the Company’s segment results for the years ended December 31, 2017, 2016, and 2015 on an internally managed accounting basis:


	For the Twelve Months Ended December 31, 2017
(in thousands)	Banking Operations			Residential Mortgage Banking		Total Company
Net interest income	$	1,121,460		$	8,543	$	1,130,003
Provision for loan losses		37,242			—		37,242
Non-Interest Income:
Third party⁽¹⁾		188,564			20,957		209,521
Gain on sale of mortgage banking operation		—			7,359		7,359
Inter-segment		(10,222	)		10,222		—

Total non-interest income		178,342			38,538		216,880

Non-interest expense⁽²⁾		594,394			47,032		641,426

Income before income tax expense		668,166			49		668,215
Income tax expense		201,994			20		202,014

Net income	$	466,172		$	29	$	466,201

Identifiable segment assets (period-end)	$	49,124,195		$	—	$	49,124,195

(1)

Includes ancillary fee income.

(2)

Includes both direct and indirect expenses.


	For the Twelve Months Ended December 31, 2016
(in thousands)	Banking Operations			Residential Mortgage Banking			Total Company
Net interest income	$	1,272,423		$	14,959		$	1,287,382
Provision for loan losses		4,180			—			4,180
Non-Interest Income:
Third party⁽¹⁾		116,200			29,372			145,572
Inter-segment		(17,645	)		17,645			—

Total non-interest income		98,555			47,017			145,572

Non-interest expense⁽²⁾		584,894			66,752			651,646

Income (loss) before income tax expense (benefit)		781,904			(4,776	)		777,128
Income tax expense (benefit)		283,656			(1,929	)		281,727

Net income (loss)	$	498,248		$	(2,847	)	$	495,401

Identifiable segment assets (period-end)	$	48,195,581		$	730,974		$	48,926,555

(1)

Includes ancillary fee income.

(2)

Includes both direct and indirect expenses.


	For the Twelve Months Ended December 31, 2015
(in thousands)	Banking Operations			Residential Mortgage Banking		Total Company
Net interest income	$	393,074		$	15,001	$	408,075
Recoveries of loan losses		(15,004	)		—		(15,004	)
Non-Interest Income:
Third party⁽¹⁾		154,847			55,916		210,763
Inter-segment		(15,359	)		15,359		—

Total non-interest income		139,488			71,275		210,763

Non-interest expense⁽²⁾		700,469			65,386		765,855

(Loss) income before income tax expense		(152,903	)		20,890		(132,013	)
Income tax (benefit) expense		(93,297	)		8,440		(84,857	)

Net (loss) income	$	(59,606	)	$	12,450	$	(47,156	)

Identifiable segment assets (period-end)	$	49,619,931		$	697,865	$	50,317,796

(1)

Includes ancillary fee income.

(2)

Includes both direct and indirect expenses.