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Segment Reporting | 9 Months Ended
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Sep. 30, 2024
Segment Reporting [Abstract] |
Segment Reporting | Segment Reporting As defined in ASC 280, Segment Reporting, an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. We evaluate performance based on an internal performance measurement accounting system, which provides line of business results. This system uses various techniques to assign balance sheet and income statement amounts to the business segments, including allocations of income and expense. A primary objective of this measurement system and related internal financial reporting practices are to produce consistent results that reflect the underlying financial impact of the segments on the Company and to provide a basis of support for strategic decision making. The accounting policies applicable to our segments are those that apply to our preparation of the accompanying Consolidated Financial Statements. Based on these criteria, we have identified three segments: the community bank, CCBX, and treasury & administration. The community bank segment includes all community banking activities, with a primary focus of the community bank is on providing a wide range of banking products and services to consumers and small to medium sized businesses in the broader Puget Sound region in the state of Washington and through the Internet and our mobile banking application. We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County). The CCBX segment provides BaaS that allows our broker-dealer and digital financial service partners to offer their customers banking services. The CCBX segment has 22 partners as of September 30, 2024. The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. The Company continues to evaluate its methodology on allocating items to the Company’s various segments to support strategic business decisions by the Company’s executive leadership. Income and expenses that are specific to a segment are directly posted to each segment. Additionally, certain indirect expenses are allocated to each segment utilizing various metrics, such as number of employees, utilization of space, and allocations based on loan and deposit balances. We have implemented a transfer pricing process that credits or charges the community bank and CCBX segments with intrabank interest income or expense for the difference in average loans and average deposits, with the treasury & administration segment as the offset for those entries. Summarized financial information concerning the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables for the periods indicated:
| September 30, 2024 |  | December 31, 2023
| Community Bank |  | CCBX |  | Treasury & Administration |  | Consolidated |  | Community Bank |  | CCBX |  | Treasury & Administration |  | Consolidated
Assets | (dollars in thousands; unaudited)
Cash and Due from Banks | $ | 5,052 |  |  | $ | 11,481 |  |  | $ | 467,493 |  |  | $ | 484,026 |  |  | $ | 4,702 |  |  | $ | 9,601 |  |  | $ | 468,825 |  |  | $ | 483,128 |
Intrabank assets | — |  |  | 557,119 |  |  | (557,119) |  |  | — |  |  | — |  |  | 653,178 |  |  | (653,178) |  |  | — |
Securities | — |  |  | — |  |  | 48,620 |  |  | 48,620 |  |  | — |  |  | — |  |  | 150,364 |  |  | 150,364 |
Loans held for sale | — |  |  | 7,565 |  |  | — |  |  | 7,565 |  |  | — |  |  | — |  |  | — |  |  | — |
Total loans receivable | 1,897,540 |  |  | 1,521,292 |  |  | — |  |  | 3,418,832 |  |  | 1,830,154 |  |  | 1,195,938 |  |  | — |  |  | 3,026,092 |
Allowance for credit losses | (20,132) |  |  | (150,131) |  |  | — |  |  | (170,263) |  |  | (21,595) |  |  | (95,363) |  |  | — |  |  | (116,958) |
All other assets | 29,176 |  |  | 200,430 |  |  | 47,435 |  |  | 277,041 |  |  | 30,169 |  |  | 136,931 |  |  | 43,640 |  |  | 210,740 |
Total assets | $ | 1,911,636 |  |  | $ | 2,147,756 |  |  | $ | 6,429 |  |  | $ | 4,065,821 |  |  | $ | 1,843,430 |  |  | $ | 1,900,285 |  |  | $ | 9,651 |  |  | $ | 3,753,366 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total deposits | $ | 1,522,525 |  |  | $ | 2,104,763 |  |  | $ | — |  |  | $ | 3,627,288 |  |  | $ | 1,497,601 |  |  | $ | 1,862,762 |  |  | $ | — |  |  | $ | 3,360,363 |
Total borrowings | — |  |  | — |  |  | 47,847 |  |  | 47,847 |  |  | — |  |  | — |  |  | 47,734 |  |  | 47,734 |
Intrabank liabilities | 380,647 |  |  | — |  |  | (380,647) |  |  | — |  |  | 338,614 |  |  | — |  |  | (338,614) |  |  | — |
All other liabilities | 8,464 |  |  | 42,993 |  |  | 7,299 |  |  | 58,756 |  |  | 7,215 |  |  | 37,523 |  |  | 5,553 |  |  | 50,291 |
Total liabilities | $ | 1,911,636 |  |  | $ | 2,147,756 |  |  | $ | (325,501) |  |  | $ | 3,733,891 |  |  | $ | 1,843,430 |  |  | $ | 1,900,285 |  |  | $ | (285,327) |  |  | $ | 3,458,388 |
| Three months ended September 30, 2024 |  | Three months ended September 30, 2023
| Community Bank |  | CCBX |  | Treasury & Administration |  | Consolidated |  | Community Bank |  | CCBX |  | Treasury & Administration |  | Consolidated
| (dollars in thousands; unaudited)
INTEREST INCOME AND EXPENSE |  |  |  |  |  |  |  |  |  |  |  |
Interest income | $ | 31,898 |  |  | $ | 67,692 |  |  | $ | 5,489 |  | $ | — |  | $ | 105,079 |  |  | $ | 27,373 |  |  | $ | 56,279 |  |  | $ | 4,679 |  |  | $ | 88,331 |
Interest (expense) income intrabank transfer | (5,540) |  |  | 6,764 |  |  | (1,224) |  | — |  | — |  |  | (3,036) |  |  | 5,095 |  |  | (2,059) |  |  | — |
Interest expense | 7,264 |  |  | 24,819 |  |  | 809 |  |  | 32,892 |  |  | 5,067 |  |  | 20,384 |  |  | 651 |  |  | 26,102 |
Net interest income | 19,094 |  |  | 49,637 |  |  | 3,456 |  |  | 72,187 |  |  | 19,270 |  |  | 40,990 |  |  | 1,969 |  |  | 62,229 |
Provision/(Recapture) for credit losses - loans | (519) |  |  | 72,104 |  |  | — |  |  | 71,585 |  |  | 664 |  |  | 26,493 |  |  | — |  |  | 27,157 |
Provision for unfunded commitments | (1,248) |  |  | (80) |  |  | — |  |  | (1,328) |  |  | — |  |  | 96 |  |  | — |  |  | 96 |
Net interest income/(expense) after provision for credit losses - loans and unfunded commitments | 20,861 |  |  | (22,387) |  |  | 3,456 |  |  | 1,930 |  |  | 18,606 |  |  | 14,401 |  |  | 1,969 |  |  | 34,976 |
NONINTEREST INCOME |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposit service charges and fees | 939 |  |  | 13 |  |  | — |  |  | 952 |  |  | 986 |  |  | 12 |  |  | — |  |  | 998 |
Other income | 156 |  |  | 1 |  |  | 331 |  |  | 488 |  |  | 176 |  |  | 107 |  |  | 121 |  |  | 404 |
BaaS program income | — |  |  | 6,436 |  |  | — |  |  | 6,436 |  |  | — |  |  | 4,401 |  |  | — |  |  | 4,401 |
BaaS indemnification income | — |  |  | 72,192 |  |  | — |  |  | 72,192 |  |  | — |  |  | 28,776 |  |  | — |  |  | 28,776 |
Noninterest income (1) | 1,095 |  |  | 78,642 |  |  | 331 |  |  | 80,068 |  |  | 1,162 |  |  | 33,296 |  |  | 121 |  |  | 34,579 |
NONINTEREST EXPENSE |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits | 6,130 |  |  | 6,990 |  |  | 3,981 |  |  | 17,101 |  |  | 6,241 |  |  | 6,859 |  |  | 4,987 |  |  | 18,087 |
Occupancy | 873 |  |  | 87 |  |  | 790 |  |  | 1,750 |  |  | 927 |  |  | 96 |  |  | 201 |  |  | 1,224 |
Data processing and software licenses | 1,348 |  |  | 1,160 |  |  | 1,003 |  |  | 3,511 |  |  | 1,329 |  |  | 543 |  |  | 494 |  |  | 2,366 |
Legal and professional expenses | 28 |  |  | 2,039 |  |  | 1,530 |  |  | 3,597 |  |  | 495 |  |  | 3,030 |  |  | 922 |  |  | 4,447 |
Other expense | 960 |  |  | 2,599 |  |  | 1,402 |  |  | 4,961 |  |  | 1,073 |  |  | 2,174 |  |  | 1,277 |  |  | 4,524 |
BaaS loan expense | — |  |  | 32,612 |  |  | — |  |  | 32,612 |  |  | — |  |  | 23,003 |  |  | — |  |  | 23,003 |
BaaS fraud expense | — |  |  | 2,084 |  |  | — |  |  | 2,084 |  |  | — |  |  | 2,850 |  |  | — |  |  | 2,850 |
Total noninterest expense | 9,339 |  |  | 47,571 |  |  | 8,706 |  |  | 65,616 |  |  | 10,065 |  |  | 38,555 |  |  | 7,881 |  |  | 56,501 |
Net income/(loss) before income taxes | 12,617 |  |  | 8,684 |  |  | (4,919) |  |  | 16,382 |  |  | 9,703 |  |  | 9,142 |  |  | (5,791) |  |  | 13,054 |
Income taxes | 2,042 |  |  | 1,798 |  |  | (914) |  |  | 2,926 |  |  | 2,068 |  |  | 1,951 |  |  | (1,235) |  |  | 2,784 |
Net income/(loss) | $ | 10,575 |  |  | $ | 6,886 |  |  | $ | (4,005) |  |  | $ | 13,456 |  |  | $ | 7,635 |  |  | $ | 7,191 |  |  | $ | (4,556) |  |  | $ | 10,270 |
| Nine Months Ended September 30, 2024 |  | Nine Months Ended September 30, 2023
| Community Bank |  | CCBX |  | Treasury & Administration |  | Consolidated |  | Community Bank |  | CCBX |  | Treasury & Administration |  | Consolidated
| (dollars in thousands; unaudited)
INTEREST INCOME AND EXPENSE |  |  |  |  |  |  |  |  |  |  |  |
Interest income | $ | 92,692 |  |  | $ | 182,463 |  |  | $ | 17,883 |  |  | $ | 293,038 |  |  | $ | 78,151 |  |  | $ | 152,131 |  |  | $ | 11,846 |  |  | $ | 242,128 |
Interest income (expense) intrabank transfer | (16,975) |  |  | 23,214 |  |  | (6,239) |  |  | — |  |  | (6,605) |  |  | 11,234 |  |  | (4,629) |  |  | — |
Interest expense | 19,736 |  |  | 71,792 |  |  | 2,150 |  |  | 93,678 |  |  | 11,264 |  |  | 49,820 |  |  | 1,974 |  |  | 63,058 |
Net interest income | 55,981 |  |  | 133,885 |  |  | 9,494 |  |  | 199,360 |  |  | 60,282 |  |  | 113,545 |  |  | 5,243 |  |  | 179,070 |
Provision/(Recapture) for credit losses - loans | (1,059) |  |  | 214,052 |  |  | — |  |  | 212,993 |  |  | 1,045 |  |  | 122,254 |  |  | — |  |  | 123,299 |
Provision for unfunded commitments | 1,224 |  |  | 1,523 |  |  | — |  |  | 2,747 |  |  | (203) |  |  | 107 |  |  | — |  |  | (96) |
Net interest income after provision for credit losses - loans and unfunded commitments | 55,816 |  |  | (81,690) |  |  | 9,494 |  |  | (16,380) |  |  | 59,440 |  |  | (8,816) |  |  | 5,243 |  |  | 55,867 |
NONINTEREST INCOME |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposit service charges and fees | 2,770 |  |  | 36 |  |  | — |  |  | 2,806 |  |  | 2,862 |  |  | 35 |  |  | — |  |  | 2,897 |
Other income | 570 |  |  | 72 |  |  | 603 |  |  | 1,245 |  |  | 1,004 |  |  | 434 |  |  | 521 |  |  | 1,959 |
BaaS program income | — |  |  | 17,357 |  |  | — |  |  | 17,357 |  |  | — |  |  | 11,924 |  |  | — |  |  | 11,924 |
BaaS indemnification income | — |  |  | 215,533 |  |  | — |  |  | 215,533 |  |  | — |  |  | 125,701 |  |  | — |  |  | 125,701 |
Noninterest income (1) | 3,340 |  |  | 232,998 |  |  | 603 |  |  | 236,941 |  |  | 3,866 |  |  | 138,094 |  |  | 521 |  |  | 142,481 |
NONINTEREST EXPENSE |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits | 18,171 |  |  | 21,388 |  |  | 12,531 |  |  | 52,090 |  |  | 18,034 |  |  | 18,412 |  |  | 13,525 |  |  | 49,971 |
Occupancy | 2,653 |  |  | 281 |  |  | 2,020 |  |  | 4,954 |  |  | 2,918 |  |  | 257 |  |  | 411 |  |  | 3,586 |
Data processing and software licenses | 3,441 |  |  | 2,983 |  |  | 2,903 |  |  | 9,327 |  |  | 3,202 |  |  | 1,667 |  |  | 1,309 |  |  | 6,178 |
Legal and professional expenses | 78 |  |  | 6,458 |  |  | 4,364 |  |  | 10,900 |  |  | 1,563 |  |  | 7,630 |  |  | 2,961 |  |  | 12,154 |
Other expense | 2,894 |  |  | 5,990 |  |  | 2,972 |  |  | 11,856 |  |  | 3,031 |  |  | 5,250 |  |  | 3,928 |  |  | 12,209 |
BaaS loan expense | — |  |  | 86,525 |  |  | — |  |  | 86,525 |  |  | — |  |  | 62,590 |  |  | — |  |  | 62,590 |
BaaS fraud expense | — |  |  | 4,791 |  |  | — |  |  | 4,791 |  |  | — |  |  | 6,386 |  |  | — |  |  | 6,386 |
Total noninterest expense | 27,237 |  |  | 128,416 |  |  | 24,790 |  |  | 180,443 |  |  | 28,748 |  |  | 102,192 |  |  | 22,134 |  |  | 153,074 |
Net income before income taxes | 31,919 |  |  | 22,892 |  |  | (14,693) |  |  | 40,118 |  |  | 34,558 |  |  | 27,086 |  |  | (16,370) |  |  | 45,274 |
Income taxes | 6,176 |  |  | 5,452 |  |  | (3,362) |  |  | 8,266 |  |  | 7,409 |  |  | 5,807 |  |  | (3,509) |  |  | 9,707 |
Net Income | $ | 25,743 |  |  | $ | 17,440 |  |  | $ | (11,330) |  |  | $ | 31,852 |  |  | 27,149 |  |  | 21,279 |  |  | (12,861) |  |  | 35,567 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 48 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482785/280-10-55-48 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards 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