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 March 31, 2019, 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.

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 refunds through RT 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 2018 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 follows:


	Three Months Ended March 31, 2019
	Core Banking												Republic Processing Group
										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	$	41,347		$	2,895		$	102		$	44,344		$	20,438		$	7,517		$	27,955		$	72,299

Provision for loan and lease losses		189			225			—			414			13,434			3,383			16,817			17,231

Net refund transfer fees		—			—			—			—			17,100			—			17,100			17,100
Mortgage banking income		—			—			1,539			1,539			—			—			—			1,539
Program fees		—			—			—			—			146			928			1,074			1,074
Other noninterest income		6,896			10			40			6,946			131			627			758			7,704
Total noninterest income		6,896			10			1,579			8,485			17,377			1,555			18,932			27,417

Total noninterest expense		35,550			758			1,320			37,628			7,114			767			7,881			45,509

Income before income tax expense		12,504			1,922			361			14,787			17,267			4,922			22,189			36,976
Income tax expense		1,765			433			76			2,274			4,030			1,156			5,186			7,460
Net income	$	10,739		$	1,489		$	285		$	12,513		$	13,237		$	3,766		$	17,003		$	29,516

Period-end assets	$	4,471,419		$	559,545		$	17,087		$	5,048,051		$	224,485		$	93,232		$	317,717		$	5,365,768

Net interest margin		3.84	%		2.84	%		NM			3.76	%		NM			NM			NM			5.66	%

Net-revenue concentration*		48	%		3	%		2	%		53	%		38	%		9	%		47	%		100	%


	Three Months Ended March 31, 2018
	Core Banking												Republic Processing Group
										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
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 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	%

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