Mechanics BancorpMCHB
Mechanics Bancorp Segments Disclosure
BUSINESS SEGMENTS:
The Company's business segments are determined based on the products and services provided, as well as the nature of the related business activities, and they reflect the manner in which financial information is currently evaluated by management. The Company organizes the segments into two lines of business: Commercial and Consumer Banking segment and Mortgage Banking segment.
A description of the Company's business segments and the products and services that they provide is as follows.
Commercial and Consumer Banking provides diversified financial products and services to our commercial and consumer customers through bank branches and through ATMs, online, mobile and telephone banking. These products and services include deposit products; residential, consumer, business and agricultural portfolio loans; non-deposit investment products; insurance products and cash management services. We originate construction loans, bridge loans and permanent loans for our portfolio on single family residences, and on office, retail, industrial and multifamily property types. We originate multifamily real estate loans through our Fannie Mae DUS® business, whereby loans are sold to or securitized by Fannie Mae, while the Company generally retains the servicing rights. This segment also reflects the results for the management of the Company's portfolio of investment securities.
Mortgage Banking originates single family residential mortgage loans primarily for sale in the secondary markets. The majority of our mortgage loans are sold to or securitized by Fannie Mae, Freddie Mac or Ginnie Mae, while we retain the right to service these loans. We have become a rated originator and servicer of jumbo loans, allowing us to sell these loans to other securitizers. Additionally, we purchase loans from WMS Series LLC through a correspondent arrangement with that company. We also sell loans on a servicing-released and servicing-retained basis to securitizers and correspondent lenders. A small percentage of our loans are brokered to other lenders or sold on a servicing-released basis to correspondent lenders. On occasion, we may sell a portion of our MSR portfolio. We reflect the results from the management of loan funding and the interest rate risk associated with the secondary market loan sales and the retained single family mortgage servicing rights within this business segment.
We use various management accounting methodologies to assign certain income statement items to the responsible operating segment, including:
• | a funds transfer pricing ("FTP") system, which allocates interest income credits and funding charges between the segments, assigning to each segment a funding credit for its liabilities, such as deposits, and a charge to fund its assets; |
• | an allocation of charges for services rendered to the segments by centralized functions, such as corporate overhead, which are generally based on each segment’s consumption patterns; and |
• | an allocation of the Company's consolidated income taxes which are based on the effective tax rate applied to the segment's pretax income or loss. |
The FTP methodology is based on external market factors and aligns the expected weighted-average life of the financial asset or liability to external economic data, such as the U.S. Dollar LIBOR/Swap curve, and provides a consistent basis for determining the cost of funds to be allocated to each operating segment.
Financial highlights by operating segment were as follows.
Year Ended December 31, 2018 | |||||||||||
(in thousands) | Mortgage Banking | Commercial and Consumer Banking | Total | ||||||||
Condensed income statement: | |||||||||||
Net interest income (1) | $ | 12,515 | $ | 189,964 | $ | 202,479 | |||||
Provision for credit losses | — | 3,000 | 3,000 | ||||||||
Noninterest income | 200,425 | 36,534 | 236,959 | ||||||||
Noninterest expense | 236,803 | 153,770 | 390,573 | ||||||||
(Loss) income before income taxes | (23,863 | ) | 69,728 | 45,865 | |||||||
Income tax (benefit) expense | (7,125 | ) | 12,963 | 5,838 | |||||||
Net (loss) income | $ | (16,738 | ) | $ | 56,765 | $ | 40,027 | ||||
Total assets | $ | 606,197 | $ | 6,436,024 | $ | 7,042,221 | |||||
Year Ended December 31, 2017 | |||||||||||
(in thousands) | Mortgage Banking | Commercial and Consumer Banking | Total | ||||||||
Condensed income statement: | |||||||||||
Net interest income (1) | $ | 19,896 | $ | 174,542 | $ | 194,438 | |||||
Provision for credit losses | — | 750 | 750 | ||||||||
Noninterest income | 269,794 | 42,360 | 312,154 | ||||||||
Noninterest expense | 290,676 | 148,977 | 439,653 | ||||||||
(Loss) income before income taxes | (986 | ) | 67,175 | 66,189 | |||||||
Income tax (benefit) expense | (27,871 | ) | 25,114 | (2,757 | ) | ||||||
Net income | $ | 26,885 | $ | 42,061 | $ | 68,946 | |||||
Total assets | $ | 866,712 | $ | 5,875,329 | $ | 6,742,041 | |||||
Year Ended December 31, 2016 | |||||||||||
(in thousands) | Mortgage Banking | Commercial and Consumer Banking | Total | ||||||||
Condensed income statement: | |||||||||||
Net interest income (1) | $ | 26,034 | $ | 154,015 | $ | 180,049 | |||||
Provision for credit losses | — | 4,100 | 4,100 | ||||||||
Noninterest income | 323,468 | 35,682 | 359,150 | ||||||||
Noninterest expense | 305,937 | 138,385 | 444,322 | ||||||||
Income before income taxes | 43,565 | 47,212 | 90,777 | ||||||||
Income tax expense | 16,214 | 16,412 | 32,626 | ||||||||
Net income | $ | 27,351 | $ | 30,800 | $ | 58,151 | |||||
Total assets | $ | 974,248 | $ | 5,269,452 | $ | 6,243,700 | |||||
(1)
Net interest income is the aggregation of interest earned on assets, interest expense charged by treasury to fund the assets, interest paid on liabilities, and interest income provided by treasury for investing the liabilities.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2018 | Mar 6, 2019 | Showing above |
| 2017 | Mar 6, 2018 | |
| 2016 | Mar 9, 2017 | |
| 2015 | Mar 11, 2016 | |
About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.