10.

BUSINESS SEGMENTS

The Company has identified two principal reportable segments: Banking Centers (“Centers”) and Dairy & Livestock and Agribusiness. All other operations have been aggregated in “Other”. The Bank has 51 Banking Centers organized in geographic regions, which are the focal points for customer sales and services. The Company utilizes an internal reporting system to measure the performance of various operating departments within the Bank which is the basis for determining the Bank’s reportable segments. The chief operating decision maker (currently our CEO) regularly reviews the financial information of these two segments in deciding how to allocate resources and to assess performance. Our two principal reporting segments, Centers and Dairy & Livestock and Agribusiness, are aggregated into separate operating segments as their products and services are similar and are sold to similar types of customers, have similar production and distribution processes, have similar economic characteristics, and have similar reporting and organizational structures. All other operating departments have been aggregated and included in “Other” for reporting purposes. Recapture of provision for loan losses was allocated by reporting segment based on loan type. In addition, the Company allocates internal funds to the segments using a methodology that charges users of funds interest expense and credits providers of funds interest income with the net effect of this allocation being recorded in the ”Other” category.

The following tables represent the selected financial information for these two business segments. GAAP does not have an authoritative body of knowledge regarding the management accounting used in presenting segment financial information. The accounting policies for each of the business units is the same as those policies identified for the consolidated Company and disclosed in Note 3 – Summary of Significant Accounting Policies, included in our Annual Report on Form 10-K for the year ended December 31, 2017. The income numbers represent the actual income and expenses of each business unit. In addition, each segment has allocated income and expenses based on management’s internal reporting system, which allows management to determine the performance of each of its business units. Loan fees included in the Centers category are the actual loan fees paid to the Company by its customers. These fees are eliminated and deferred in the “Other” category, resulting in deferred loan fees for the condensed consolidated financial statements. All income and expense items not directly associated with the Centers’ business segment are grouped in the “Other” category. Future changes in the Company’s management structure or reporting methodologies may result in changes in the measurement of operating segment results.

The following tables present the operating results and other key financial measures for the individual operating segments for the periods presented.


	For the Three Months Ended June 30, 2018
	Centers			Dairy & livestock and agribusiness			Other (1)			Total
	(Dollars in thousands)
Net interest income	$	52,271		$	3,467		$	16,950		$	72,688
Recapture of provision for loan losses		(70	)		(334	)		(596	)		(1,000	)

Net interest income after recapture of provision for loan losses		52,341			3,801			17,546			73,688

Noninterest income		5,637			47			4,011			9,695
Noninterest expense		12,779			472			21,003			34,254

Segment pre-tax profit	$	45,199		$	3,376		$	554		$	49,129


Goodwill	$	116,564		$	-		$	-		$	116,564

Segment assets as of June 30, 2018	$	6,996,216		$	404,236		$	693,411		$	8,093,863

(1)

Includes treasury and administration, as well as the elimination of certain items that are included in more than one department, most of which represents products and services for Centers’ customers.


	For the Three Months Ended June 30, 2017
	Centers		Dairy & livestock and agribusiness			Other (1)			Total
	(Dollars in thousands)
Net interest income	$	48,762	$	2,369		$	19,352		$	70,483
(Recapture of) provision for loan losses		875		(421	)		(1,454	)		(1,000	)

Net interest income after (recapture of) provision for loan losses		47,887		2,790			20,806			71,483

Noninterest income		5,303		49			5,424			10,776
Noninterest expense		13,206		504			23,163			36,873
Debt termination expense		-		-			-			-

Segment pre-tax profit	$	39,984	$	2,335		$	3,067		$	45,386


Goodwill	$	119,193	$	-		$	-		$	119,193

Segment assets as of June 30, 2017	$	7,314,110	$	348,570		$	755,523		$	8,418,203

(1)


	For the Six Months Ended June 30, 2018
	Centers		Dairy & livestock and agribusiness			Other (1)			Total
	(Dollars in thousands)
Net interest income	$	101,854	$	7,318		$	34,037		$	143,209
(Recapture of) provision for loan losses		259		(315	)		(1,944	)		(2,000	)

Net interest income after (recapture of) provision for loan losses		101,595		7,633			35,981			145,209

Noninterest income		10,938		92			11,581			22,611
Noninterest expense		26,004		989			43,207			70,200
Debt termination expense		-		-			-			-

Segment pre-tax profit	$	86,529	$	6,736		$	4,355		$	97,620


Goodwill	$	116,564	$	-		$	-		$	116,564

Segment assets as of June 30, 2018	$	6,996,216	$	404,236		$	693,411		$	8,093,863

(1)


	For the Six Months Ended June 30, 2017
	Centers		Dairy & livestock and agribusiness			Other (1)			Total
	(Dollars in thousands)
Net interest income	$	94,340	$	4,513		$	37,063		$	135,916
(Recapture of) provision for loan losses		1,386		(3,120	)		(3,766	)		(5,500	)

Net interest income after (recapture of) provision for loan losses		92,954		7,633			40,829			141,416

Noninterest income		10,510		104			8,884			19,498
Noninterest expense		25,644		1,005			44,341			70,990
Debt termination expense		-		-			-			-

Segment pre-tax profit	$	77,820	$	6,732		$	5,372		$	89,924


Goodwill	$	119,193	$	-		$	-		$	119,193

Segment assets as of June 30, 2017	$	7,314,110	$	348,570		$	755,523		$	8,418,203

(1)