v3.25.4
Note 26 - Segment Information
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

Note 26. Segment Information

 

The Company’s reportable segments are determined by the CFO and the President of Avenu, who are the designated chief operating decision makers, based upon information provided about the Company’s products and services offered, primarily distinguished between core banking and financial technology operations. They are also distinguished by the level of information provided to the chief operating decision makers, who use such information to review performance of various components of the business, which are then aggregated if operating performance, products/services, and customers are similar. The chief operating decision makers evaluate the financial performance of the Company’s business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the performance of the Company’s segments and in the determination of allocating resources. The chief operating decision makers use revenue streams to evaluate product pricing and significant expenses to assess performance of each segment to evaluate compensation of certain employees. Segment pretax profit or loss is used to assess the performance of the core banking segment by monitoring the margin between interest income and interest expense. Financial technology segment pretax profit or loss is used to assess the performance of the financial technology segment by monitoring the service charge income received on customer transactions. Loans and investments provide the revenues in the core banking segment, and service charges provide the revenues in the financial technology segment. Interest expense, provisions for credit losses, and salaries and employee benefits provide the significant expenses in the core banking segment. Salaries and employee benefits and outside services provide the significant expenses in the financial technology segment. Additionally, the intangible impairment is a significant expense in the financial technology segment for 2024. All operations are domestic.


Accounting policies for segments are the same as those described in Note 1. Segment performance is evaluated using income before income taxes. Indirect expenses are allocated on revenue. Transactions among segments are made at fair value. Information reported internally for performance assessment by the chief operating decision makers follows, inclusive of reconciliations of significant segment totals to the financial statements:
 

  

For the Year ended December 31, 2024

 

2024

 

Core Banking

  

Financial Technology

  

Consolidated

 

Interest income - loans, including fees - (1)

 $123,609  $1,568  $125,177 

Interest income - investments, other

  9,438   —   9,438 

Service charge income

  1,298   698   1,996 

Other fee income

  1,256   —   1,256 

Total

 $135,601  $2,266  $137,867 
             

Less:

            

Interest expense - deposits

  68,062   103   68,165 

Interest expense - subordinated debt, other

  3,876   —   3,876 

Total consolidated interest expense

  71,938   103   72,041 

Segment gross profit

 $63,663  $2,163  $65,826 

Less:

            

Provision for credit losses

  6,763   —     

Salaries and employee benefits

  28,207   2,268     

Furniture and equipment expenses

  2,944   692     

Advertising and marketing

  2,058   141     

Outside services

  1,753   1,874     

Computer software intangible impairment

  —   19,721     

Other operating expenses

  12,473   836     

Total non-interest expense

  54,198   25,532     

Segment profit (loss)

 $9,465  $(23,369) $(13,904)
             

Other segment disclosures

            

Interest income

  133,047   1,568   134,615 

Interest expense

  71,938   103   72,041 

Depreciation

  1,450   20   1,470 

Amortization

  2,717   447   3,164 

Other significant noncash items:

            

Provision for credit losses

  6,763   —   6,763 

Computer software intangible impairment

  —   19,721   19,721 

Segment assets

  2,228,036   62   2,228,098 

Expenditures for segment assets

  158,263   4,880   163,143 

(1) - Includes transfer pricing on average deposits outstanding for the period

 

Other operating expenses for the core banking segment are occupancy expenses, franchise taxes, FDIC insurance, data processing expenses, administrative expenses and other operating expenses, which can all be seen on the Consolidated Statements of Income. Additionally, board expenses, shareholder expenses, settlement costs, workout expenses, and fees for brokered deposits, makeup the other operating expense line item on the Consolidated Statements of Income. Other operating expenses for the financial technology segment are administrative expenses, armored car services, and computer software amortization.

 

The core banking segment reported segment profit before income taxes of $9.5 million for the year ended December 31, 2024, compared to $32.9 million for the year ended December 31, 2023. The decrease in core banking segment profit or loss was primarily related to:

 

•

higher interest expense due primarily to higher rates on deposits and higher balances of interest bearing deposits, specifically money market and time deposits;

•

higher provision for credit losses due primarily to loan growth, charge offs taken in 2024, as well as increasing qualitative factors within our model assumptions for increased levels of past dues and potential weaknesses in underlying collateral for certain asset classes;

•

higher other operating expenses due primarily to increases in meals and entertainment, board and shareholder expenses, settlement and workout costs, DDA losses, and brokered deposits fees. 

 

The financial technology segment reported segment loss before income taxes of $23.4 million for the year ended December 31, 2024, compared to segment loss of $71,000 for the year ended December 31, 2023. The increase in financial technology segment loss was primarily related to:

 

•

impairment of the computer software intangible asset. The impairment charge of $19.7 million reduced fully the carrying value of the Company's intangible asset of $19.1 million and the related prepaid asset of $621,000, consisting of the enhanced value of cloud development expenses; 

•

higher salaries and employee benefits as well as outside services, primarily due to the development of the Avenu SaaS software program;

•

lower transfer pricing income for 2024 due primarily to lower deposit balances in the financial technology segment in 2024 compared to 2023.

 

 

  

For the Year ended December 31, 2023

 

2023

 

Core Banking

  

Financial Technology

  

Consolidated

 

Interest income - loans, including fees - (1)

 $114,120  $2,362  $116,482 

Interest income - investments, other

  7,939   —   7,939 

Service charge income

  1,281   868   2,149 

Other fee income

  1,191   —   1,191 

Total

 $124,531  $3,230  $127,761 
             

Less:

            

Interest expense - deposits

  42,850   18   42,868 

Interest expense - subordinated debt, other

  4,811   —   4,811 

Total consolidated interest expense

  47,661   18   47,679 

Segment gross profit

 $76,870  $3,212  $80,082 

Less:

            

Provision for credit losses

  1,642   —     

Salaries and employee benefits

  26,688   1,579     

Furniture and equipment expenses

  2,431   356     

Advertising and marketing

  2,208   135     

Outside Services

  1,206   838     

Other Operating expenses

  9,800   375     

Total Non-Interest Expense

  43,975   3,283     

Segment profit (loss)

 $32,895  $(71) $32,824 
             

Other segment disclosures

            

Interest income

  122,059   2,362   124,421 

Interest expense

  47,661   18   47,679 

Depreciation

  1,242   20   1,262 

Amortization

  1,483   —   1,483 

Other significant noncash items:

            

Provision for credit losses

  1,642   —   1,642 

Segment assets

  2,020,693   14,739   2,035,432 

Expenditures for segment assets

  138,761   5,508   144,269 

(1) Includes transfer pricing on average deposits outstanding for the period

 

Other operating expenses for the core banking segment are occupancy expenses, franchise taxes, FDIC insurance, data processing expenses, administrative expenses and other operating expenses, which can all be seen on the Consolidated Statements of Income. Additionally, board expenses, shareholder expenses, and settlement costs, makeup the other operating expense line item on the Consolidated Statements of Income. Other operating expenses for the financial technology segment are administrative expenses and armored car services.

 

The core banking segment reported segment profit before income taxes of $32.9 million for the year ended December 31, 2023, compared to $33.8 million for the year ended December 31, 2022. The decrease in core banking segment profit was primarily related to:

 

•

lower provision for credit losses in 2023 due primarily to less loan growth in 2023 compared to 2022. Loan originations for the years ended December 31, 2023 and December 31, 2022 were $447.6 million and $599.9 million.

 

The financial technology segment reported segment loss before income taxes of $71,000 for the year ended December 31, 2023, compared to segment loss of $439,000 for the year ended December 31, 2022. The decrease in financial technology segment loss was primarily related to:

 

•

higher transfer pricing income for 2023 due primarily to the increasing federal funds rate in 2023;

•

higher salaries and employee benefits as well as outside services, primarily due to the development of the Avenu SaaS software program.

 

  

For the Year ended December 31, 2022

 

2022

 

Core Banking

  

Financial Technology

  

Consolidated

 

Interest income - loans, including fees - (1)

 $77,954  $1,091  $79,045 

Interest income - investments, other

  4,973   —   4,973 

Service charge income

  1,414   1,006   2,420 

Other fee income

  2,241   —   2,241 

Total

 $86,582  $2,097  $88,679 
             

Less:

            

Interest expense - deposits

  10,080   6   10,086 

Interest expense - subordinated debt, other

  3,283   —   3,283 

Total consolidated interest expense

  13,363   6   13,369 

Segment gross profit

 $73,219  $2,091  $75,310 

Less:

            

Provision for loan losses

  2,398   —     

Salaries and employee benefits

  22,623   1,178     

Furniture and equipment expenses

  2,658   128     

Advertising and marketing

  1,993   311     

Outside services

  1,532   543     

Other operating expenses

  8,188   370     

Total non-interest expense

  39,392   2,530     

Segment profit (loss)

 $33,827  $(439) $33,388 
             

Other segment disclosures

            

Interest income

  82,927   1,091   84,018 

Interest expense

  13,363   6   13,369 

Depreciation

  1,274   5   1,279 

Amortization

  1,300   —   1,300 

Other significant noncash items:

            

Provision for loan losses

  2,398   —   2,398 

Segment assets

  1,868,944   9,253   1,878,197 

Expenditures for segment assets

  503,542   6,656   510,198 

(1) Includes transfer pricing on average deposits outstanding for the period

 

Other operating expenses for the core banking segment are occupancy expenses, franchise taxes, FDIC insurance, data processing expenses, administrative expenses and other operating expenses, which can all be seen on the Consolidated Statements of Income. Additionally, board expenses, shareholder expenses, armored car services, and ATM expenses, makeup the other operating expense line item on the Consolidated Statements of Income. Other operating expenses for the financial technology segment are administrative expenses and armored car services.