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, 2020, 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. MemoryBank®, the Company’s national branchless banking platform, is 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 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 Refund Transfer 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 generally the same as those described in the summary of significant accounting policies in the Company’s 2019 Annual Report on Form 10-K. The Company did update its accounting policies during the first quarter of 2020 upon adoption of the CECL standard. Republic evaluates segment performance using operating income. The Company allocates goodwill to the Traditional Banking segment. Republic generally allocates income taxes based on income before income tax expense unless reasonable and specific segment allocations can be made. The Company makes transactions among reportable segments at carrying value.

Segment information follows:


	Three Months Ended March 31, 2020
	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	$	40,620		$	4,307		$	214		$	45,141		$	20,525		$	7,072		$	27,597		$	72,738

Credit loss expense		5,589			332			—			5,921			15,133			1,706			16,839			22,760

Net refund transfer fees		—			—			—			—			15,823			—			15,823			15,823
Mortgage banking income		—			—			4,795			4,795			—			—			—			4,795
Program fees		—			—			—			—			312			2,312			2,624			2,624
Net gain on branch divestiture		—			—			—			—			—			—			—			—
Other noninterest income		7,235			11			24			7,270			57			—			57			7,327
Total noninterest income		7,235			11			4,819			12,065			16,192			2,312			18,504			30,569

Total noninterest expense		36,647			803			1,996			39,446			6,629			894			7,523			46,969

Income before income tax expense		5,619			3,183			3,037			11,839			14,955			6,784			21,739			33,578
Income tax expense		460			716			638			1,814			3,497			1,570			5,067			6,881
Net income	$	5,159		$	2,467		$	2,399		$	10,025		$	11,458		$	5,214		$	16,672		$	26,697

Period-end assets	$	4,471,235		$	851,405		$	53,298		$	5,375,938		$	240,898		$	105,197		$	346,095		$	5,722,033

Net interest margin		3.80	%		2.68	%		NM			3.65	%		NM			NM			NM			5.57	%

Net-revenue concentration*		46	%		4	%		5	%		55	%		36	%		9	%		45	%		100	%


	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

Credit loss expense		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	%

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