SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2017

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 June 30, 2017, 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 Traditional Banking. The RPG segment includes the following divisions: Tax Refund Solutions (“TRS”), Republic Credit Solutions (“RCS”) and Republic Payment Solutions (“RPS”). 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 to clients outside of its market footprint primarily via its digital 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 RCS division offers credit products. RPG products are primarily provided to clients outside of the Bank’s market footprint. The RPS division offers general-purpose reloadable cards.	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 2016 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 June 30, 2017 and 2016 follows:

	Three Months Ended June 30, 2017
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company
Net interest income	$	33,434		$	4,435		$	86	$	37,955		$	5,182	$	43,137
Provision for loan and lease losses		1,461			264			—		1,725			3,336		5,061
Net refund transfer fees		—			—			—		—			2,770		2,770
Mortgage banking income		—			—			1,445		1,445			—		1,445
Program fees		—			—			—		—			1,284		1,284
Other noninterest income		6,969			10			115		7,094			334		7,428
Total noninterest income		6,969			10			1,560		8,539			4,388		12,927
Total noninterest expenses		31,185			822			984		32,991			2,743		35,734
Income before income tax expense		7,757			3,359			662		11,778			3,491		15,269
Income tax expense		2,471			1,228			232		3,931			1,267		5,198
Net income	$	5,286		$	2,131		$	430	$	7,847		$	2,224	$	10,071
Segment end-of-period assets	$	4,283,741		$	600,060		$	13,920	$	4,897,721		$	57,940	$	4,955,661
Net interest margin		3.44	%		3.62	%		NM		3.46	%		NM		3.87	%

	Three Months Ended June 30, 2016
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company
Net interest income	$	29,537		$	3,790		$	40	$	33,367		$	2,210	$	35,577
Provision for loan and lease losses		798			480			—		1,278			536		1,814
Net refund transfer fees		—			—			—		—			1,909		1,909
Mortgage banking income		—			—			1,560		1,560			—		1,560
Program fees		—			—			—		—			664		664
Other noninterest income		6,371			5			63		6,439			230		6,669
Total noninterest income		6,371			5			1,623		7,999			2,803		10,802
Total noninterest expenses		27,737			735			1,152		29,624			2,242		31,866
Income before income tax expense		7,373			2,580			511		10,464			2,235		12,699
Income tax expense		2,413			958			179		3,550			809		4,359
Net income	$	4,960		$	1,622		$	332	$	6,914		$	1,426	$	8,340
Segment end-of-period assets	$	3,989,769		$	585,441		$	18,133	$	4,593,343		$	53,579	$	4,646,922
Net interest margin		3.23	%		3.67	%		NM		3.28	%		NM		3.43	%

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 six months ended June 30, 2017 and 2016 follows:

	Six Months Ended June 30, 2017
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company
Net interest income	$	66,094		$	8,336		$	153	$	74,583		$	24,992	$	99,575
Provision for loan and lease losses		1,928			38			—		1,966			15,446		17,412
Net refund transfer fees		—			—			—		—			18,152		18,152
Mortgage banking income		—			—			2,605		2,605			—		2,605
Program fees		—			—			—		—			2,375		2,375
Other noninterest income		13,491			16			127		13,634			1,084		14,718
Total noninterest income		13,491			16			2,732		16,239			21,611		37,850
Total noninterest expenses		61,275			1,600			2,198		65,073			9,600		74,673
Income before income tax expense		16,382			6,714			687		23,783			21,557		45,340
Income tax expense		4,733			2,455			241		7,429			7,823		15,252
Net income	$	11,649		$	4,259		$	446	$	16,354		$	13,734	$	30,088
Segment end-of-period assets	$	4,283,741		$	600,060		$	13,920	$	4,897,721		$	57,940	$	4,955,661
Net interest margin		3.37	%		3.60	%		NM		3.39	%		NM		4.44	%

	Six Months Ended June 30, 2016
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company
Net interest income	$	58,145		$	6,445		$	72	$	64,662		$	10,349	$	75,011
Provision for loan and lease losses		1,278			498			—		1,776			5,224		7,000
Net refund transfer fees		—			—			—		—			18,987		18,987
Mortgage banking income		—			—			2,821		2,821			—		2,821
Program fees		—			—			—		—			963		963
Other noninterest income		12,481			10			155		12,646			306		12,952
Total noninterest income		12,481			10			2,976		15,467			20,256		35,723
Total noninterest expenses		52,612			1,430			2,392		56,434			7,973		64,407
Income before income tax expense		16,736			4,527			656		21,919			17,408		39,327
Income tax expense		5,026			1,681			230		6,937			6,315		13,252
Net income	$	11,710		$	2,846		$	426	$	14,982		$	11,093	$	26,075
Segment end-of-period assets	$	3,989,769		$	585,441		$	18,133	$	4,593,343		$	53,579	$	4,646,922
Net interest margin		3.15	%		3.65	%		NM		3.19	%		NM		3.60	%

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

NM — Not Meaningful