14. SEGMENTS

The Company's reportable segments are aggregated based primarily on geographic location, services offered, and markets served. The Company's regional segments, which include Arizona, Nevada, Southern California, and Northern California, provide full service banking and related services to their respective markets. The operations from the regional segments correspond to the following banking divisions: ABA in Arizona, BON and FIB in Nevada, TPB in Southern California, and Bridge in Northern California.

The Company's NBL segments provide specialized banking services to niche markets. With the purchase of GE's domestic select-service hotel franchise loan portfolio on April 20, 2016, management has created a new operating segment called HFF, which is now included as one of the Company's NBL reportable segments. The Company's other NBL reportable segments include HOA Services, Public & Nonprofit Finance, Technology & Innovation, and Other NBLs. These NBLs are managed centrally and are broader in geographic scope than the Company's other segments, though still predominately located within the Company's core market areas. The HOA Services NBL corresponds to the AAB division. The newly created HFF NBL includes the hotel franchise loan portfolio purchased from GE. The operations of Public and Nonprofit Finance are combined into one reportable segment. The Technology & Innovation NBL includes the operations of Equity Fund Resources, Life Sciences Group, Renewable Resource Group, and Technology Finance. The Other NBLs segment consists of Corporate Finance, Mortgage Warehouse Lending, and Resort Finance.

The Corporate & Other segment consists of corporate-related items, income and expense items not allocated to the Company's other reportable segments, and inter-segment eliminations.

The Company's segment reporting process begins with the assignment of all loan and deposit accounts directly to the segments where these products are originated and/or serviced. Equity capital is assigned to each segment based on the risk profile of their assets and liabilities. With the exception of goodwill, which is assigned a 100% weighting, equity capital allocations ranged from 0% to 12% during the year, with a funds credit provided for the use of this equity as a funding source. Any excess or deficient equity not allocated to segments based on risk is assigned to the Corporate & Other segment.

Net interest income, provision for credit losses, and non-interest expense amounts are recorded in their respective segment to the extent that the amounts are directly attributable to those segments. Net interest income is recorded in each segment on a TEB with a corresponding increase in income tax expense, which is eliminated in the Corporate & Other segment.

Further, net interest income of a reportable segment includes a funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics. Using this funds transfer pricing methodology, liquidity is transferred between users and providers. A net user of funds has lending/investing in excess of deposits/borrowings and a net provider of funds has deposits/borrowings in excess of lending/investing. A segment that is a user of funds is charged for the use of funds, while a provider of funds is credited through funds transfer pricing, which is determined based on the average life of the assets or liabilities in the portfolio.

Net income amounts for each reportable segment are further derived by the use of expense allocations. Certain expenses not directly attributable to a specific segment are allocated across all segments based on key metrics, such as number of employees, average loan balances, and average deposit balances. These types of expenses include information technology, operations, human resources, finance, risk management, credit administration, legal, and marketing.

Income taxes are applied to each segment based on the effective tax rate for the geographic location of the segment. Any difference in the corporate tax rate and the aggregate effective tax rates in the segments are adjusted in the Corporate & Other segment.

The following is a summary of selected operating segment information for the periods indicated:



				Regional Segments
Balance Sheet:	Consolidated Company			Arizona			Nevada			Southern California			Northern California
At September 30, 2016	(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities	$	3,134.2		$	1.9		$	7.9		$	1.9		$	1.3
Loans, net of deferred loan fees and costs	13,033.6			2,938.0			1,697.3			1,833.4			1,072.1
Less: allowance for credit losses	(122.9		)	(30.5		)	(18.5		)	(19.8		)	(9.1		)
Total loans	12,910.7			2,907.5			1,678.8			1,813.6			1,063.0
Other assets acquired through foreclosure, net	49.6			6.8			20.4			—			0.3
Goodwill and other intangible assets, net	303.6			—			23.9			—			157.8
Other assets	644.5			43.3			59.9			16.1			14.6
Total assets	$	17,042.6		$	2,959.5		$	1,790.9		$	1,831.6		$	1,237.0
Liabilities:
Deposits	$	14,443.2		$	3,931.9		$	3,712.0		$	2,255.0		$	1,505.0
Borrowings and qualifying debt	382.9			—			—			—			—
Other liabilities	359.1			13.2			30.7			11.1			15.8
Total liabilities	15,185.2			3,945.1			3,742.7			2,266.1			1,520.8
Allocated equity:	1,857.4			344.1			247.8			205.8			281.7
Total liabilities and stockholders' equity	$	17,042.6		$	4,289.2		$	3,990.5		$	2,471.9		$	1,802.5
Excess funds provided (used)	—			1,329.7			2,199.6			640.3			565.5



Income Statement:
Three Months Ended September 30, 2016:	(in thousands)
Net interest income (expense)	$	172,547		$	45,531		$	35,977		$	26,488		$	22,181
Provision for (recovery of) credit losses	2,000			2,399			(1,009		)	(105		)	144
Net interest income (expense) after provision for credit losses	170,547			43,132			36,986			26,593			22,037
Non-interest income	10,683			1,180			2,264			686			2,916
Non-interest expense	(85,007		)	(16,084		)	(14,801		)	(11,532		)	(12,706		)
Income (loss) before income taxes	96,223			28,228			24,449			15,747			12,247
Income tax expense (benefit)	29,171			11,074			8,557			6,621			5,150
Net income	$	67,052		$	17,154		$	15,892		$	9,126		$	7,097



Nine Months Ended September 30, 2016:	(in thousands)
Net interest income (expense)	$	481,944		$	125,191		$	102,016		$	76,719		$	67,272
Provision for (recovery of) credit losses	7,000			10,875			(3,526		)	145			2,112
Net interest income (expense) after provision for credit losses	474,944			114,316			105,542			76,574			65,160
Non-interest income	32,375			5,749			6,420			1,907			7,858
Non-interest expense	(242,304		)	(45,090		)	(44,371		)	(33,401		)	(40,154		)
Income (loss) before income taxes	265,015			74,975			67,591			45,080			32,864
Income tax expense (benefit)	75,017			29,413			23,657			18,956			13,819
Net income	$	189,998		$	45,562		$	43,934		$	26,124		$	19,045



	National Business Lines
Balance Sheet:	HOA Services			HFF			Public & Nonprofit Finance			Technology & Innovation			Other NBL			Corporate & Other
At September 30, 2016	(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities	$	—		$	—		$	—		$	—		$	—		$	3,121.2
Loans, net of deferred loan fees and costs	106.4			1,311.2			1,447.7			934.6			1,673.9			19.0
Less: allowance for credit losses	(1.2		)	(0.6		)	(15.7		)	(8.7		)	(18.1		)	(0.7		)
Total loans	105.2			1,310.6			1,432.0			925.9			1,655.8			18.3
Other assets acquired through foreclosure, net	—			—			—			—			—			22.1
Goodwill and other intangible assets, net	—			0.2			—			121.7			—			—
Other assets	0.3			5.4			9.9			4.9			11.0			479.1
Total assets	$	105.5		$	1,316.2		$	1,441.9		$	1,052.5		$	1,666.8		$	3,640.7
Liabilities:
Deposits	$	1,813.7		$	—		$	—		$	1,066.8		$	—		$	158.8
Borrowings and qualifying debt	—			—			—			—			—			382.9
Other liabilities	0.9			1.2			98.2			0.2			59.2			128.6
Total liabilities	1,814.6			1.2			98.2			1,067.0			59.2			670.3
Allocated equity:	46.4			108.1			86.2			218.2			139.0			180.1
Total liabilities and stockholders' equity	$	1,861.0		$	109.3		$	184.4		$	1,285.2		$	198.2		$	850.4
Excess funds provided (used)	1,755.5			(1,206.9		)	(1,257.5		)	232.7			(1,468.6		)	(2,790.3		)



Income Statement:
Three Months Ended September 30, 2016:	(in thousands)
Net interest income (expense)	$	11,312		$	13,370		$	5,012		$	18,143		$	12,060		$	(17,527	)
Provision for (recovery of) credit losses	72			—			(315		)	(557		)	1,372			(1		)
Net interest income (expense) after provision for credit losses	11,240			13,370			5,327			18,700			10,688			(17,526		)
Non-interest income	125			—			19			1,871			728			894
Non-interest expense	(6,062		)	(3,207		)	(1,974		)	(8,837		)	(3,972		)	(5,832		)
Income (loss) before income taxes	5,303			10,163			3,372			11,734			7,444			(22,464		)
Income tax expense (benefit)	1,989			3,811			1,265			4,400			2,791			(16,487		)
Net income	$	3,314		$	6,352		$	2,107		$	7,334		$	4,653		$	(5,977	)



Nine Months Ended September 30, 2016:	(in thousands)
Net interest income (expense)	$	29,853		$	25,438		$	15,259		$	51,083		$	35,220		$	(46,107	)
Provision for (recovery of) credit losses	160			—			(509		)	(2,336		)	3,309			(3,230		)
Net interest income (expense) after provision for credit losses	29,693			25,438			15,768			53,419			31,911			(42,877		)
Non-interest income	340			—			22			4,623			1,598			3,858
Non-interest expense	(17,423		)	(5,764		)	(5,927		)	(23,177		)	(11,007		)	(15,990		)
Income (loss) before income taxes	12,610			19,674			9,863			34,865			22,502			(55,009		)
Income tax expense (benefit)	4,729			7,378			3,699			13,074			8,438			(48,146		)
Net income	$	7,881		$	12,296		$	6,164		$	21,791		$	14,064		$	(6,863	)



				Regional Segments
Balance Sheet:	Consolidated Company			Arizona			Nevada			Southern California			Northern California
At December 31, 2015	(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities	$	2,266.8		$	2.3		$	9.5		$	2.4		$	2.4
Loans, net of deferred loan fees and costs	11,136.7			2,811.7			1,737.2			1,761.9			1,188.4
Less: allowance for credit losses	(119.1		)	(30.1		)	(18.6		)	(18.8		)	(12.7		)
Total loans	11,017.6			2,781.6			1,718.6			1,743.1			1,175.7
Other assets acquired through foreclosure, net	43.9			8.4			20.8			—			0.3
Goodwill and other intangible assets, net	305.4			—			24.8			—			158.2
Other assets	641.4			43.9			62.3			15.7			16.1
Total assets	$	14,275.1		$	2,836.2		$	1,836.0		$	1,761.2		$	1,352.7
Liabilities:
Deposits	$	12,030.6		$	2,880.7		$	3,382.8		$	1,902.5		$	1,541.1
Borrowings and qualifying debt	360.3			—			—			—			—
Other liabilities	292.7			12.2			29.0			7.8			11.2
Total liabilities	12,683.6			2,892.9			3,411.8			1,910.3			1,552.3
Allocated equity:	1,591.5			309.2			244.4			191.3			293.2
Total liabilities and stockholders' equity	$	14,275.1		$	3,202.1		$	3,656.2		$	2,101.6		$	1,845.5
Excess funds provided (used)	—			365.9			1,820.2			340.4			492.8



Income Statement:
Three Months Ended September 30, 2015:	(in thousands)
Net interest income (expense)	$	137,407		$	32,920		$	30,875		$	24,146		$	24,012
Provision for (recovery of) credit losses	—			1,964			(2,376		)	(442		)	1,390
Net interest income (expense) after provision for credit losses	137,407			30,956			33,251			24,588			22,622
Non-interest income	8,502			962			2,199			586			2,484
Non-interest expense	(72,916		)	(15,159		)	(15,513		)	(11,910		)	(12,846		)
Income (loss) before income taxes	72,993			16,759			19,937			13,264			12,260
Income tax expense (benefit)	17,133			6,574			6,978			5,577			5,156
Net income	$	55,860		$	10,185		$	12,959		$	7,687		$	7,104



Nine Months Ended September 30, 2015:	(in thousands)
Net interest income (expense)	$	349,233		$	93,996		$	90,030		$	70,706		$	33,681
Provision for (recovery of) credit losses	700			2,122			(5,175		)	(176		)	1,876
Net interest income (expense) after provision for credit losses	348,533			91,874			95,205			70,882			31,805
Non-interest income	20,289			2,909			6,852			2,101			2,806
Non-interest expense	(188,158		)	(44,520		)	(45,019		)	(35,389		)	(16,776		)
Income (loss) before income taxes	180,664			50,263			57,038			37,594			17,835
Income tax expense (benefit)	44,946			19,718			19,963			15,808			7,500
Net income	$	135,718		$	30,545		$	37,075		$	21,786		$	10,335



	National Business Lines
Balance Sheet:	HOA Services			Public & Nonprofit Finance			Technology & Innovation			Other NBL			Corporate & Other
At December 31, 2015	(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities	$	—		$	—		$	—		$	—		$	2,250.2
Loans, net of deferred loan fees and costs	88.4			1,458.9			770.3			1,280.3			39.6
Less: allowance for credit losses	(0.9		)	(15.6		)	(8.2		)	(13.8		)	(0.4		)
Total loans	87.5			1,443.3			762.1			1,266.5			39.2
Other assets acquired through foreclosure, net	—			—			—			—			14.4
Goodwill and other intangible assets, net	—			—			122.4			—			—
Other assets	0.2			14.0			2.7			11.5			475.0
Total assets	$	87.7		$	1,457.3		$	887.2		$	1,278.0		$	2,778.8
Liabilities:
Deposits	$	1,291.9		$	—		$	842.5		$	—		$	189.1
Borrowings and qualifying debt	—			—			—			—			360.3
Other liabilities	0.5			63.8			—			40.8			127.4
Total liabilities	1,292.4			63.8			842.5			40.8			676.8
Allocated equity:	34.2			87.8			200.9			105.7			124.8
Total liabilities and stockholders' equity	$	1,326.6		$	151.6		$	1,043.4		$	146.5		$	801.6
Excess funds provided (used)	1,238.9			(1,305.7		)	156.2			(1,131.5		)	(1,977.2		)



Income Statement:
Three Months Ended September 30, 2015:	(in thousands)
Net interest income (expense)	$	6,458		$	5,050		$	14,527		$	11,312		$	(11,893	)
Provision for (recovery of) credit losses	57			473			1,526			(2,544		)	(48		)
Net interest income (expense) after provision for credit losses	6,401			4,577			13,001			13,856			(11,845		)
Non-interest income	83			26			1,157			168			837
Non-interest expense	(4,515		)	(1,419		)	(3,650		)	(3,541		)	(4,363		)
Income (loss) before income taxes	1,969			3,184			10,508			10,483			(15,371		)
Income tax expense (benefit)	738			1,194			3,941			3,931			(16,956		)
Net income	$	1,231		$	1,990		$	6,567		$	6,552		$	1,585



Nine Months Ended September 30, 2015:	(in thousands)
Net interest income (expense)	$	18,662		$	14,534		$	14,527		$	37,366		$	(24,269	)
Provision for (recovery of) credit losses	198			2,579			1,526			(2,131		)	(119		)
Net interest income (expense) after provision for credit losses	18,464			11,955			13,001			39,497			(24,150		)
Non-interest income	236			665			1,157			413			3,150
Non-interest expense	(12,985		)	(4,056		)	(3,650		)	(11,257		)	(14,506		)
Income (loss) before income taxes	5,715			8,564			10,508			28,653			(35,506		)
Income tax expense (benefit)	2,143			3,212			3,941			10,745			(38,084		)
Net income	$	3,572		$	5,352		$	6,567		$	17,908		$	2,578