Business Segments
The Company has evaluated its operations and identified that it has one reportable business segment: the Banking Segment.
The accounting policies of the Banking Segment are the same as those described in the significant accounting policies. The segment was determined based upon how the Company’s Chief Operating Decision Maker (“CODM”) reviews the Company’s performance. The Company’s CODM is the CEO. As a part of the CODM review, pre-tax net income is utilized to allocate resources.
Loans and investments are the primary sources of revenues in the Banking Segment. Interest expense, provision for credit losses, and salaries and benefits are usually the most significant expenses in the Banking Segment. All operations are domestic.
In accordance with ASC 280, as amended by ASU 2023-07, the Company discloses the following significant expense categories and other items on a consolidated basis which are regularly provided to the CODM and included in the measure of consolidated profit or loss:
•Interest expense - includes interest paid on deposits, borrowings, and subordinated notes;
•Provision for credit losses - represents the amount charged to earnings to maintain the allowance for credit losses at an appropriate level;
•Salaries and benefits expense - includes wages, incentive compensation, payroll taxes, ESOP expenses and employee benefits;
•Operations expense - includes the following types of expenses:
◦loan related expenses associated with loan origination, servicing, and collection;
◦marketing expenses which includes advertising, and business development costs;
◦FDIC insurance which represents deposit insurance premiums paid to the FDIC;
◦professional services which includes legal, audit, consulting, and other professional fees; and
◦other miscellaneous expenses such as the cost of office supplies, local jurisdiction fees, and travel and conference costs;
•Regulatory assessments expense - includes periodic fees paid to the FRB and FDIC, as well as costs related to regulatory examinations;
•Occupancy expense - includes rent, depreciation, utilities, and maintenance of premises and equipment;
•Data processing expense - includes data processing and software costs related to core processing, digital banking platforms, and other technology-related services; and
•Net loss (gain) and expenses on OREO and repossessed assets - includes expenses related to maintaining OREO or repossessed assets and any gains or losses on the sale of such assets.
Other items regularly provided to the CODM and included in the measure of consolidated profit or loss include:
•Noninterest income - such as service charges on deposit accounts, gain on sale of loans, mortgage servicing income, loan-related fees, dividends on FHLB stock, and earnings on BOLI; and
•Provision for income tax expense - represents the provision for federal and state income taxes.
Segment profit or loss is measured as consolidated net income, which is calculated as total revenues (net interest income and noninterest income) less total expenses (interest expense, provision for credit losses, and noninterest expenses) and income tax expense. These financial metrics are used by the CODM to make key operating decisions, such as determination of the rate at which the Company seeks to grow, loan and deposit pricing, and the allocation of budget for noninterest expenses. Net income is used to monitor budgeted versus actual results. The Company does not have any other reportable segments, and discrete financial information is not available other than on a consolidated basis. All significant operating decisions are made on a consolidated basis.