SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2016

SEGMENT INFORMATION

SEGMENT INFORMATION

16.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 September 30, 2016, the Company was divided into four distinct operating segments: Traditional Banking, Warehouse Lending (“Warehouse”), Mortgage Banking and Republic Processing Group (“RPG”). Management considers the first three segments to collectively constitute “Core Bank” or “Core Banking” activities. Correspondent Lending operations are considered part of the Traditional Banking segment. The RPG segment includes the following divisions: Tax Refund Solutions (“TRS”), Republic Payment Solutions (“RPS”) and Republic Credit Solutions (“RCS”). TRS generates the majority of RPG’s income, with the relatively smaller divisions of RPG, RPS and RCS, considered immaterial for separate and independent segment reporting. All divisions of the RPG segment operate through the Bank.

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

	Segment:	Nature of Operations:	Primary Drivers of Net Revenues:
	Traditional Banking	Provides traditional banking products to clients primarily in its market footprint via its network of banking centers and primarily to clients outside of its market footprint via its Internet and Correspondent Lending delivery channels.	Loans, investments and deposits
Core Banking	Warehouse Lending	Provides short-term, revolving credit facilities to mortgage bankers across the Nation.	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 its market footprint.	Loan sales and servicing
	Republic Processing Group	The TRS division facilitates the receipt and payment of federal and state tax refund products.  The RPS division offers general-purpose reloadable cards.  The RCS division offers short-term credit products. RPG products are primarily provided to clients outside of the Bank’s market footprint.	Refund transfers and unsecured, small-dollar 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 2015 Annual Report on Form 10-K.  Segment performance is evaluated using operating income. Goodwill is not allocated. 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 September 30, 2016 and 2015 follows:

	Three Months Ended September 30, 2016
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company
Net interest income	$	31,134		$	4,924		$	76	$	36,134		$	3,264	$	39,398
Provision for loan and lease losses		289			188			—		477			2,012		2,489
Net refund transfer fees		—			—			—		—			132		132
Mortgage banking income		—			—			3,081		3,081			—		3,081
Republic Processing Group program fees		—			—			—		—			979		979
Other noninterest income		6,899			4			57		6,960			149		7,109
Total noninterest income		6,899			4			3,138		10,041			1,260		11,301
Total noninterest expenses		28,939			727			1,184		30,850			2,684		33,534
Income (loss) before income tax expense		8,805			4,013			2,030		14,848			(172)		14,676
Income tax expense (benefit)		2,707			1,493			710		4,910			(62)		4,848
Net income (loss)	$	6,098		$	2,520		$	1,320	$	9,938		$	(110)	$	9,828
Segment end of period assets	$	4,109,464		$	660,410		$	15,003	$	4,784,877		$	42,400	$	4,827,277
Net interest margin		3.35	%		3.63	%		NM		3.38	%		NM		3.65	%

	Three Months Ended September 30, 2015
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company
Net interest income	$	27,612		$	3,308		$	67	$	30,987		$	437	$	31,424
Provision for loan and lease losses		1,338			(238)			—		1,100			1,133		2,233
Net refund transfer fees		—			—			—		—			97		97
Mortgage banking income		—			—			972		972			—		972
Republic Processing Group program fees		—			—			—		—			474		474
Gain on call of security available for sale		—			—			—		—			—		—
Other noninterest income		6,115			8			76		6,199			64		6,263
Total noninterest income		6,115			8			1,048		7,171			635		7,806
Total noninterest expenses		24,109			663			1,151		25,923			2,315		28,238
Income (loss) before income tax expense		8,280			2,891			(36)		11,135			(2,376)		8,759
Income tax expense (benefit)		2,879			1,174			(13)		4,040			(921)		3,119
Net income (loss)	$	5,401		$	1,717		$	(23)	$	7,095		$	(1,455)	$	5,640
Segment end of period assets	$	3,600,230		$	393,110		$	13,832	$	4,007,172		$	28,805	$	4,035,977
Net interest margin		3.25	%		3.62	%		NM		3.29	%		NM		3.31	%

Segment assets are reported as of the respective period ends while income and margin data are reported for the respective periods.

NM — Not Meaningful

Segment information for the nine months ended September 30, 2016 and 2015 follows:

	Nine Months Ended September 30, 2016
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company
Net interest income	$	89,279		$	11,369		$	148	$	100,796		$	13,613	$	114,409
Provision for loan and lease losses		1,567			686			—		2,253			7,236		9,489
Net refund transfer fees		—			—			—		—			19,119		19,119
Mortgage banking income		—			—			5,902		5,902			—		5,902
Republic Processing Group program fees		—			—			—		—			1,942		1,942
Other noninterest income		19,380			14			212		19,606			455		20,061
Total noninterest income		19,380			14			6,114		25,508			21,516		47,024
Total noninterest expenses		81,551			2,157			3,576		87,284			10,657		97,941
Income before income tax expense		25,541			8,540			2,686		36,767			17,236		54,003
Income tax expense		7,733			3,174			940		11,847			6,253		18,100
Net income	$	17,808		$	5,366		$	1,746	$	24,920		$	10,983	$	35,903
Segment end of period assets	$	4,109,464		$	660,410		$	15,003	$	4,784,877		$	42,400	$	4,827,277
Net interest margin		3.22	%		3.64	%		NM		3.26	%		NM		3.62	%

	Nine Months Ended September 30, 2015
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company
Net interest income	$	80,369		$	9,354		$	180	$	89,903		$	1,601	$	91,504
Provision for loan and lease losses		2,007			185			—		2,192			1,130		3,322
Net refund transfer fees		—			—			—		—			17,339		17,339
Mortgage banking income		—			—			3,549		3,549			—		3,549
Republic Processing Group program fees		—			—			—		—			871		871
Gain on call of security available for sale		88			—			—		88			—		88
Other noninterest income		17,286			19			231		17,536			894		18,430
Total noninterest income		17,374			19			3,780		21,173			19,104		40,277
Total noninterest expenses		71,351			1,846			3,710		76,907			9,570		86,477
Income before income tax expense		24,385			7,342			250		31,977			10,005		41,982
Income tax expense		7,813			2,732			87		10,632			3,602		14,234
Net income	$	16,572		$	4,610		$	163	$	21,345		$	6,403	$	27,748
Segment end of period assets	$	3,600,230		$	393,110		$	13,832	$	4,007,172		$	28,805	$	4,035,977
Net interest margin		3.23	%		3.58	%		NM		3.26	%		NM		3.26	%

Segment assets are reported as of the respective period ends while income and margin data are reported for the respective periods.

NM — Not Meaningful