REPUBLIC BANCORP INC /KY/ - 10-K filing on 2017-03-10

SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2016

24.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 December 31, 2016, the Company was divided into four distinct business operating segments: Traditional Banking, Warehouse, Mortgage Banking and RPG. Management considers the first three segments to collectively constitute “Core Bank” or “Core Banking” activities. Correspondent Lending operations and the Company’s national branchless banking platform, MemoryBank, are considered part of Traditional Banking operations. The RPG segment includes the following divisions: TRS, RPS and 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 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 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 its market footprint.	Gain on sale of loans and servicing fees
	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.	Net refund transfer fees

The accounting policies used for Republic’s reportable segments are the same as those described in the summary of significant accounting policies. 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 years ended December 31, 2016, 2015 and 2014 is as follows:


	Year Ended December 31, 2016
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company

Net interest income	$	121,692		$	16,529		$	200	$	138,421		$	17,633	$	156,054

Provision for loan and lease losses		3,448			497			—		3,945			10,548		14,493

Net refund transfer fees		—			—			—		—			19,240		19,240
Mortgage banking income		—			—			6,882		6,882			—		6,882
Program fees		—			—			—		—			3,044		3,044
Other noninterest income		26,090			18			360		26,468			1,875		28,343
Total noninterest income		26,090			18			7,242		33,350			24,159		57,509

Total noninterest expenses		108,360			3,142			4,688		116,190			13,917		130,107

Income before income tax expense		35,974			12,908			2,754		51,636			17,327		68,963
Income tax expense		11,015			4,798			964		16,777			6,283		23,060
Net income	$	24,959		$	8,110		$	1,790	$	34,859		$	11,044	$	45,903

Segment end of period assets	$	4,169,557		$	584,916		$	17,453	$	4,771,926		$	44,383	$	4,816,309

Net interest margin		3.26	%		3.59	%		NM		3.30	%		NM		3.65	%


	Year Ended December 31, 2015
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company

Net interest income	$	108,303		$	12,209		$	219	$	120,731		$	3,239	$	123,970

Provision for loan and lease losses		2,897			168			—		3,065			2,331		5,396

Net refund transfer fees		—			—			—		—			17,388		17,388
Mortgage banking income		—			—			4,411		4,411			—		4,411
Program fees		—			—			—		—			1,233		1,233
Gain on call of security available for sale		88			—			—		88			—		88
Other noninterest income		23,670			24			248		23,942			932		24,874
Total noninterest income		23,758			24			4,659		28,441			19,553		47,994

Total noninterest expenses		93,740			2,526			4,918		101,184			12,140		113,324

Income (loss) before income tax expense		35,424			9,539			(40)		44,923			8,321		53,244
Income tax expense (benefit)		11,505			3,575			(14)		15,066			3,012		18,078
Net income (loss)	$	23,919		$	5,964		$	(26)	$	29,857		$	5,309	$	35,166

Segment end of period assets	$	3,809,526		$	386,414		$	9,348	$	4,205,288		$	25,001	$	4,230,289

Net interest margin		3.20	%		3.58	%		NM		3.24	%		NM		3.27	%


	Year Ended December 31, 2014
	Core Banking
									Total			Republic
	Traditional			Warehouse			Mortgage		Core			Processing		Total
(dollars in thousands)	Banking			Lending			Banking		Banking			Group		Company

Net interest income	$	104,832		$	7,428		$	183	$	112,443		$	330	$	112,773

Provision for loan and lease losses		3,042			350			—		3,392			(533)		2,859

Net refund transfer fees		—			—			—		—			16,130		16,130
Mortgage banking income		—			—			2,862		2,862			—		2,862
Program fees		—			—			—		—			591		591
Other noninterest income		21,489			12			244		21,745			1,191		22,936
Total noninterest income		21,489			12			3,106		24,607			17,912		42,519

Total noninterest expenses		90,713			1,857			3,881		96,451			11,667		108,118

Income (loss) before income tax expense		32,566			5,233			(592)		37,207			7,108		44,315
Income tax expense (benefit)		11,251			1,831			(207)		12,875			2,653		15,528
Net income (loss)	$	21,315		$	3,402		$	(385)	$	24,332		$	4,455	$	28,787

Segment end of period assets	$	3,404,323		$	319,153		$	11,593	$	3,735,069		$	11,944	$	3,747,013

Net interest margin		3.32	%		3.77	%		NM		3.35	%		NM		3.33	%

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

NM ---Not Meaningful