17. SEGMENT INFORMATION

Reportable segments are determined by the type of products and services offered and the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business (such as banking centers and business units), which are then aggregated if operating performance, products/services, and clients are similar.

As of March 31, 2018, the Company was divided into five reportable segments: Traditional Banking, Warehouse, Mortgage Banking, TRS and RCS. Management considers the first three segments to collectively constitute “Core Bank” or “Core Banking” operations, while the last two segments collectively constitute RPG operations. The Bank’s Correspondent Lending channel and the Company’s national branchless banking platform, MemoryBank, are considered part of the Traditional Banking segment.

Prior to the third quarter of 2017, management reported RPG as a segment consisting of its largest division, TRS, along with its relatively smaller divisions, RPS and RCS. During the third quarter of 2017, due to RCS’s growth in revenue relative to the total Company’s revenue, management identified TRS and RCS as separate reportable segments under the newly classified RPG operations. Also, as part of the updated segmentation, management is reporting the RPS division, which remained below thresholds to be classified a separate reportable segment, within the newly classified TRS segment. The reportable segments within RPG operations and divisions within those segments operate through the Bank. All prior periods have been reclassified to conform to the current presentation.

The nature of segment operations and the primary drivers of net revenue by reportable segment are provided below:


Reportable Segment:	Nature of Operations:	Primary Drivers of Net Revenue:

Core Banking:

Traditional Banking	Provides traditional banking products to clients in its market footprint primarily via its network of banking centers and to clients outside of its market footprint primarily via its Digital and Correspondent Lending delivery channels.	Loans, investments, and deposits.

Warehouse Lending	Provides short-term, revolving credit facilities to mortgage bankers across the United States.	Mortgage warehouse lines of credit.

Mortgage Banking	Primarily originates, sells and services long-term, single family, first lien residential real estate loans primarily to clients in the Bank's market footprint.	Loan sales and servicing.

Republic Processing Group:

Tax Refund Solutions	TRS offers tax-related credit products and facilitates the receipt and payment of federal and state tax refund products. The RPS division of TRS offers general-purpose reloadable cards. TRS and RPS products are primarily provided to clients outside of the Bank’s market footprint.	Loans, refund transfers, and prepaid cards.

Republic Credit Solutions	Offers consumer credit products. RCS products are primarily provided to clients outside of the Bank’s market footprint, with a substantial portion of RCS clients considered subprime or near prime borrowers.	Unsecured, consumer loans.

The accounting policies used for Republic’s reportable segments are the same as those described in the summary of significant accounting policies in the Company’s 2017 Annual Report on Form 10-K. Segment performance is evaluated using operating income. Goodwill is allocated to the Traditional Banking segment. Income taxes are generally allocated based on income before income tax expense unless specific segment allocations can be reasonably made. Transactions among reportable segments are made at carrying value.

Segment information for the three months ended March 31, 2018 and 2017 follows:


	Three Months Ended March 31, 2018
	Core Banking												Republic Processing Group ("RPG")
										Total			Tax			Republic
	Traditional			Warehouse			Mortgage			Core			Refund			Credit			Total			Total
(dollars in thousands)	Banking			Lending			Banking			Banking			Solutions			Solutions			RPG			Company

Net interest income	$	38,188		$	3,591		$	72		$	41,851		$	18,686		$	7,128		$	25,814		$	67,665

Provision for loan and lease losses		939			21			—			960			13,389			2,906			16,295			17,255

Net refund transfer fees		—			—			—			—			16,352			—			16,352			16,352
Mortgage banking income		—			—			1,020			1,020			—			—			—			1,020
Program fees		—			—			—			—			59			1,637			1,696			1,696
Other noninterest income		7,002			8			38			7,048			1,110			319			1,429			8,477
Total noninterest income		7,002			8			1,058			8,068			17,521			1,956			19,477			27,545

Total noninterest expense		33,392			839			1,204			35,435			6,525			1,085			7,610			43,045

Income (loss) before income tax expense		10,859			2,739			(74)			13,524			16,293			5,093			21,386			34,910
Total income tax expense (benefit)		1,772			627			(16)			2,383			3,854			1,204			5,058			7,441
Net income (loss)	$	9,087		$	2,112		$	(58)		$	11,141		$	12,439		$	3,889		$	16,328		$	27,469

Period-end total assets	$	4,344,341		$	534,545		$	9,864		$	4,888,750		$	129,395		$	60,189		$	189,584		$	5,078,334

Net interest margin		3.59	%		3.21	%		NM			3.55	%		NM			NM			NM			5.50	%

Net-revenue concentration*		47	%		4	%		1	%		52	%		38	%		10	%		48	%		100	%


	Three Months Ended March 31, 2017
	Core Banking												Republic Processing Group ("RPG")
										Total			Tax			Republic
	Traditional			Warehouse			Mortgage			Core			Refund			Credit			Total			Total
(dollars in thousands)	Banking			Lending			Banking			Banking			Solutions			Solutions			RPG			Company

Net interest income	$	32,661		$	3,900		$	67		$	36,628		$	14,962		$	4,848		$	19,810		$	56,438

Provision for loan and lease losses		467			(226)			—			241			8,341			3,769			12,110			12,351

Net refund transfer fees		—			—			—			—			15,382			—			15,382			15,382
Mortgage banking income		—			—			1,160			1,160			—			—			—			1,160
Program fees		—			—			—			—			(17)			1,108			1,091			1,091
Other noninterest income		6,519			6			12			6,537			68			685			753			7,290
Total noninterest income		6,519			6			1,172			7,697			15,433			1,793			17,226			24,923

Total noninterest expense		30,088			777			1,214			32,079			6,069			791			6,860			38,939

Income before income tax expense		8,625			3,355			25			12,005			15,985			2,081			18,066			30,071
Income tax expense		2,262			1,227			9			3,498			5,801			755			6,556			10,054
Net income	$	6,363		$	2,128		$	16		$	8,507		$	10,184		$	1,326		$	11,510		$	20,017

Period-end total assets	$	4,017,173		$	493,127		$	15,080		$	4,525,380		$	108,858		$	30,554		$	139,412		$	4,664,792

Net interest margin		3.30	%		3.57	%		NM			3.33	%		NM			NM			NM			4.99	%

Net-revenue concentration*		48	%		5	%		2	%		55	%		37	%		8	%		45	%		100	%

*Net revenue represents net interest income plus total noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue.

NM — Not Meaningful