10. BUSINESS SEGMENTS

The Company has identified two principal reportable segments: Business Financial and Commercial Banking Centers (“Centers”) and the Treasury Department. The Bank has 43 Business Financial Centers and eight Commercial 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 segments 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 segments in deciding how to allocate resources and to assess performance. Centers are considered one operating segment 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. The Treasury Department’s primary focus is managing the Bank’s investments, liquidity and interest rate risk. Information related to the Company’s remaining operating segments, which include construction lending, dairy & livestock and agribusiness lending, leasing, CitizensTrust, and centralized functions have been aggregated and included in “Other.” 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 administration.

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, 2015. 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 two business segments 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, 2016

	Centers		Treasury		Other			Eliminations			Total
			(Dollars in thousands)
Interest income, including loan fees	$	38,953	$	17,779	$	11,283		$	-		$	68,015
Credit for funds provided (1)		8,820		-		14,004			(22,824	)		-

Total interest income		47,773		17,779		25,287			(22,824	)		68,015

Interest expense		1,723		203		133			-			2,059
Charge for funds used (1)		1,467		15,629		5,728			(22,824	)		-

Total interest expense		3,190		15,832		5,861			(22,824	)		2,059

Net interest income		44,583		1,947		19,426			-			65,956
Recapture of provision for loan losses		-		-		-			-			-

Net interest income after recapture of provision for loan losses		44,583		1,947		19,426			-			65,956

Noninterest income		5,326		-		3,948			-			9,274
Noninterest expense		12,891		218		21,313			-			34,422
Debt termination expense		-		16		-			-			16

Segment pre-tax profit	$	37,018	$	1,713	$	2,061		$	-		$	40,792

Segment assets as of June 30, 2016	$	6,967,395	$	3,738,321	$	943,289		$	(3,336,698	)	$	8,312,307

(1) Credit for funds provided and charges for funds used are eliminated in the condensed consolidated presentation.

	For the Three Months Ended June 30, 2015

	Centers		Treasury		Other			Eliminations			Total
			(Dollars in thousands)
Interest income, including loan fees	$	35,813	$	19,210	$	9,492		$	-		$	64,515
Credit for funds provided (1)		8,530		-		13,024			(21,554	)		-

Total interest income		44,343		19,210		22,516			(21,554	)		64,515

Interest expense		1,628		31		98			-			1,757
Charge for funds used (1)		1,052		15,441		5,061			(21,554	)		-

Total interest expense		2,680		15,472		5,159			(21,554	)		1,757

Net interest income		41,663		3,738		17,357			-			62,758
Recapture of provision for loan losses		-		-		(2,000	)		-			(2,000	)

Net interest income after recapture of provision for loan losses		41,663		3,738		19,357			-			64,758

Noninterest income		5,319		-		3,026			-			8,345
Noninterest expense		12,259		211		19,063			-			31,533
Debt termination expense		-		-		-			-			-

Segment pre-tax profit	$	34,723	$	3,527	$	3,320		$	-		$	41,570

Segment assets as of June 30, 2015	$	6,436,216	$	3,624,321	$	875,585		$	(3,238,764	)	$	7,697,358

(1) Credit for funds provided and charges for funds used are eliminated in the condensed consolidated presentation.


	For the Six Months Ended June 30, 2016

	Centers		Treasury		Other		Eliminations		Total
			(Dollars in thousands)
Interest income, including loan fees	$	75,457	$	36,536	$	20,522	$	-	$	132,515
Credit for funds provided (1)		17,517		-		27,685		(45,202)		-

Total interest income		92,974		36,536		48,207		(45,202)		132,515

Interest expense		3,403		387		253		-		4,043
Charge for funds used (1)		2,754		30,978		11,470		(45,202)		-

Total interest expense		6,157		31,365		11,723		(45,202)		4,043

Net interest income		86,817		5,171		36,484		-		128,472
Recapture of provision for loan losses		-		-		-		-		-

Net interest income after recapture of provision for loan losses		86,817		5,171		36,484		-		128,472

Noninterest income		10,153		-		7,804		-		17,957
Noninterest expense		25,501		434		42,851		-		68,786
Debt termination expense		-		16		-		-		16

Segment pre-tax profit	$	71,469	$	4,721	$	1,437	$	-	$	77,627

Segment assets as of June 30, 2016	$	6,967,395	$	3,738,321	$	943,289	$	(3,336,698)	$	8,312,307

(1) Credit for funds provided and charges for funds used are eliminated in the condensed consolidated presentation.

	For the Six Months Ended June 30, 2015

	Centers		Treasury		Other		Eliminations		Total
			(Dollars in thousands)
Interest income, including loan fees	$	71,181	$	37,865	$	19,649	$	-	$	128,695
Credit for funds provided (1)		16,741		-		25,665		(42,406)		-

Total interest income		87,922		37,865		45,314		(42,406)		128,695

Interest expense		3,291		1,462		175		-		4,928
Charge for funds used (1)		2,119		30,247		10,040		(42,406)		-

Total interest expense		5,410		31,709		10,215		(42,406)		4,928

Net interest income		82,512		6,156		35,099		-		123,767
Recapture of provision for loan losses		-		-		(2,000)		-		(2,000)

Net interest income after recapture of provision for loan losses		82,512		6,156		37,099		-		125,767

Noninterest income		10,386		-		5,970		-		16,356
Noninterest expense		24,108		424		37,603		-		62,135
Debt termination expense		-		13,870		-		-		13,870

Segment pre-tax profit (loss)	$	68,790	$	(8,138)	$	5,466	$	-	$	66,118

Segment assets as of June 30, 2015	$	6,436,216	$	3,624,321	$	875,585	$	(3,238,764)	$	7,697,358

(1) Credit for funds provided and charges for funds used are eliminated in the condensed consolidated presentation.