SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2019

16. SEGMENT INFORMATION

We have the following three reportable segments: Banking Operations, Treasury and All Others. These segments are consistent with our internal functional reporting lines and are managed separately because each unit has different target markets, technological requirements, and specialized skills.

The Banking Operations segment includes construction and real estate development lending, commercial lending, residential mortgage lending, indirect auto lending, trust services, retail brokerage services and our retail branch offices, which provide a full range of deposit and loan products, as well as various other banking services. The Treasury segment is responsible for managing the Company's investment securities portfolio and wholesale funding activities. The All Others segment consists of all activities not captured by the Banking Operations or Treasury segments described above and includes activities such as electronic banking, data processing and management of bank owned properties.

The accounting policies of the segments are consistent with the Company's accounting policies that are described in Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC. The majority of the Company's net income is derived from net interest income. Accordingly, management focuses primarily on net interest income, rather than gross interest income and expense amounts, in evaluating segment profitability.

Intersegment net interest income (expense) was allocated to each segment based upon a funds transfer pricing process that assigns costs of funds to assets and earnings credits to liabilities based on market interest rates that reflect interest rate sensitivity and maturity characteristics. All administrative and overhead expenses are allocated to the segments at cost. Cash, investment securities, loans and leases and their related balances are allocated to the segment responsible for acquisition and maintenance of those assets. Segment assets also include all premises and equipment used directly in segment operations.

Segment profits and assets are provided in the following tables for the periods indicated.



(dollars in thousands)	Banking Operations			Treasury			All Others			Total
Three Months Ended September 30, 2019
Net interest income	$	42,790		$	2,859		$	—		$	45,649
Inter-segment net interest income (expense)	4,788			(2,825		)	(1,963		)	—
Credit (provision) for loan and lease losses	(1,532		)	—			—			(1,532		)
Other operating income:
Mortgage banking income	1,360			—			404			1,764
Service charges on deposit accounts	2,125			—			—			2,125
Other service charges and fees	1,470			—			2,254			3,724
Income from fiduciary activities	1,126			—			—			1,126
Equity in earnings of unconsolidated subsidiaries	86			—			—			86
Fees on foreign exchange	20			150			—			170
Investments securities gains (losses)	—			36			—			36
Income from bank-owned life insurance	—			645			—			645
Loan placement fees	230			—			—			230
Net gain (loss) sale of foreclosed assets	—			—			17			17
Other	154			4			185			343
Other operating income	6,571			835			2,860			10,266
Other operating expense	(16,482		)	(352		)	(18,100		)	(34,934		)
Administrative and overhead expense allocation	(17,495		)	(204		)	17,699			—
Income before taxes	18,640			313			496			19,449
Income tax (expense) benefit	(4,702		)	(89		)	(104		)	(4,895		)
Net income (loss)	$	13,938		$	224		$	392		$	14,554



(dollars in thousands)	Banking Operations			Treasury			All Others			Total
Three Months Ended September 30, 2018
Net interest income	$	38,872		$	4,453		$	—		$	43,325
Inter-segment net interest income (expense)	7,524			(4,327		)	(3,197		)	—
Credit (provision) for loan and lease losses	59			—			—			59
Other operating income:
Mortgage banking income	1,173			—			750			1,923
Service charges on deposit accounts	2,189			—			—			2,189
Other service charges and fees	1,318			8			1,960			3,286
Income from fiduciary activities	1,159			—			—			1,159
Equity in earnings of unconsolidated subsidiaries	71			—			—			71
Fees on foreign exchange	22			198						220
Income from bank-owned life insurance	—			1,055			—			1,055
Loan placement fees	115			—			—			115
Other	448			58			296			802
Other operating income	6,495			1,319			3,006			10,820
Other operating expense	(16,265		)	(335		)	(17,425		)	(34,025		)
Administrative and overhead expense allocation	(15,481		)	(206		)	15,687			—
Income before taxes	21,204			904			(1,929		)	20,179
Income tax (expense) benefit	(5,128		)	(215		)	357			(4,986		)
Net income (loss)	$	16,076		$	689		$	(1,572	)	$	15,193



(dollars in thousands)	Banking Operations			Treasury			All Others			Total
Nine Months Ended September 30, 2019
Net interest income	$	127,059		$	9,081		$	—		$	136,140
Inter-segment net interest income (expense)	18,080			(8,119		)	(9,961		)	—
Credit (provision) for loan and lease losses	(4,219		)	—			—			(4,219		)
Other operating income:
Mortgage banking income	2,967			—			1,822			4,789
Service charges on deposit accounts	6,247			—			—			6,247
Other service charges and fees	4,130			—			6,349			10,479
Income from fiduciary activities	3,220			—			—			3,220
Equity in earnings of unconsolidated subsidiaries	165			—			—			165
Fees on foreign exchange	67			472			—			539
Investments securities gains (losses)	—			36			—			36
Income from bank-owned life insurance	—			2,511			—			2,511
Loan placement fees	486			—			—			486
Net gain (loss) sale of foreclosed assets	—			—			17			17
Other	453			2,558			533			3,544
Other operating income	17,735			5,577			8,721			32,033
Other operating expense	(48,289		)	(1,097		)	(56,003		)	(105,389		)
Administrative and overhead expense allocation	(49,953		)	(624		)	50,577			—
Income before taxes	60,413			4,818			(6,666		)	58,565
Income tax (expense) benefit	(14,896		)	(1,188		)	1,644			(14,440		)
Net income (loss)	$	45,517		$	3,630		$	(5,022	)	$	44,125



(dollars in thousands)	Banking Operations			Treasury			All Others			Total
Nine Months Ended September 30, 2018
Net interest income	$	112,295		$	16,024		$	—		$	128,319
Inter-segment net interest income (expense)	21,360			(14,717		)	(6,643		)	—
Credit (provision) for loan and lease losses	(262		)	—			—			(262		)
Other operating income:
Mortgage banking income	3,089			—			2,456			5,545
Service charges on deposit accounts	6,169			—			—			6,169
Other service charges and fees	3,748			22			5,927			9,697
Income from fiduciary activities	3,132			—			—			3,132
Equity in earnings of unconsolidated subsidiaries	151			—			—			151
Fees on foreign exchange	75			633						708
Income from bank-owned life insurance	—			1,874			—			1,874
Loan placement fees	532			—			—			532
Other	803			60			733			1,596
Other operating income	17,699			2,589			9,116			29,404
Other operating expense	(47,967		)	(1,078		)	(51,995		)	(101,040		)
Administrative and overhead expense allocation	(45,594		)	(652		)	46,246			—
Income before taxes	57,531			2,166			(3,276		)	56,421
Income tax (expense) benefit	(12,707		)	(478		)	458			(12,727		)
Net income	$	44,824		$	1,688		$	(2,818	)	$	43,694



(dollars in thousands)	Banking Operations		Treasury		All Others		Total
September 30, 2019
Investment securities	$	—	$	1,187,933	$	—	$	1,187,933
Loans and leases (including loans held for sale)	4,374,878		—		—		4,374,878
Other assets	25,867		250,474		137,564		413,905
Total assets	$	4,400,745	$	1,438,407	$	137,564	$	5,976,716



(dollars in thousands)	Banking Operations		Treasury		All Others		Total
December 31, 2018
Investment securities	$	—	$	1,354,812	$	—	$	1,354,812
Loans and leases (including loans held for sale)	4,085,013		—		—		4,085,013
Other assets	36,905		256,652		73,644		367,201
Total assets	$	4,121,918	$	1,611,464	$	73,644	$	5,807,026