# Republic Bancorp Inc: Form 10-K for the period ended Dec 31, 2022 - Company: [Republic Bancorp Inc](/companies/rbcaa.md) (CIK 921557) - Form: 10-K - Filed: 2023-03-03 - Accepted by EDGAR: Mar 3, 2023, 17:20 ET - Period: 2022-12-31 - Accession: 0001558370-23-002793 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/921557/000155837023002793/rbcaa-20221231x10k.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/921557/000155837023002793/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2022-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 12 months, 2022-01-01 to 2022-12-31 | $326.5m | us-gaap:Revenues | | Interest expense | 12 months, 2022-01-01 to 2022-12-31 | $7.5m | us-gaap:InterestExpense | | Income tax | 12 months, 2022-01-01 to 2022-12-31 | $25.7m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 12 months, 2022-01-01 to 2022-12-31 | $91.1m | us-gaap:NetIncomeLoss | | Diluted shares (weighted) | 12 months, 2022-01-01 to 2022-12-31 | 20,101,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2022-01-01 to 2022-12-31 | $154.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2022-01-01 to 2022-12-31 | $3.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Dividends paid | 12 months, 2022-01-01 to 2022-12-31 | $26.1m | us-gaap:PaymentsOfDividends | | Share repurchases | 12 months, 2022-01-01 to 2022-12-31 | $12.6m | us-gaap:PaymentsForRepurchaseOfCommonStock | | Cash and equivalents | at 2022-12-31 | $313.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Total assets | at 2022-12-31 | $5.84bn | us-gaap:Assets | | Total liabilities | at 2022-12-31 | $4.98bn | us-gaap:Liabilities | | Shareholders' equity | at 2022-12-31 | $856.6m | us-gaap:StockholdersEquity | ## Business As filed, 83,073 characters. Republic is a financial holding company headquartered in Louisville, Kentucky. The Bank is a Kentucky-based, state-chartered non-member financial institution that provides both traditional and non-traditional banking products through five reportable segments using a multitude of delivery channels. While the Bank operates primarily in its market footprint, its non-brick-and-mortar delivery channels allow it to reach clients across the U.S. The Captive is a Nevada-based, wholly owned insurance subsidiary of the Company. The Captive provides property and casualty insurance coverage to the Company and the Bank, as well as a group of third-party insurance captives for which insurance may not be available or economically feasible. As of December 31, 2022, Republic had 42 full-service banking centers with locations as follows: - Kentucky — 28 - Metropolitan Louisville — 18 - Central Kentucky — 7 - Georgetown — 1 - Lexington — 5 - Shelbyville — 1 - Northern Kentucky — 3 - Covington — 1 - Crestview Hills — 1 - Florence — 1 - Southern Indiana — 3 - Floyds Knobs — 1 - Jeffersonville — 1 - New Albany — 1 - Metropolitan Tampa, Florida — 7 - Metropolitan Cincinnati, Ohio — 2 - Metropolitan Nashville, Tennessee — 2 Republic’s headquarters are in Louisville, which is the largest city in Kentucky based on population. The principal business of Republic is directing, planning, and coordinating the business activities of the Bank. The financial condition and results of operations of Republic are primarily dependent upon the results of operations of the Bank. As of December 31, 2022, Republic had total assets of $5.8 billion, total deposits of $4.5 billion, and total stockholders’ equity of $857 million. Based on total assets as of December 31, 2022, Republic ranked as the second largest Kentucky-based financial holding company. The executive offices of Republic are located at 601 West Market Street, Louisville, Kentucky 40202, telephone number (502) 584-3600. The Company’s website address is www.republicbank.com. ### Website Access to Reports The Company makes its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, available free of charge through its website, www.republicbank.com, as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC. The information provided on the Company’s website is not part of this report, and is therefore not incorporated by reference, unless that information is otherwise specifically referenced elsewhere in this report. The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. ### General Business Overview As of December 31, 2022, the Company was divided into five reportable segments: Traditional Banking, Warehouse, Mortgage Banking, TRS, and RCS. Management considers the first three segments (Traditional Banking, Warehouse, Mortgage Banking) to collectively constitute “Core Bank” or “Core Banking” operations, while the last two segments (TRS and RCS) collectively constitute RPG operations. ### (I) Traditional Banking segment As of December 31, 2022 and through the date of this filing, generally all Traditional Banking products and services were offered through the Company’s traditional RB&T brand. ### Lending Activities The Bank’s principal lending activities consist of the following: **Retail Mortgage Lending —** Through the Bank’s mortgage division, which consists of a retail channel and consumer direct channel, as well as the Bank’s private banking division and banking center network, the Bank originates single-family, residential real estate loans and HELOCs. Such loans are generally collateralized by owner-occupied, residential real estate properties. The collateral for these loans is predominately located in the Bank’s market footprint, except for a small percentage of loans originated through its Consumer Direct Channel, which are secured by owner-occupied collateral located outside of the Bank’s market footprint. The Bank expects to relaunch its Correspondent Lending channel during the first quarter of 2023, with these loans secured by owner-occupied collateral generally located outside of the Bank’s market footprint, as well. The Bank offers single-family, first-lien residential real estate ARMs with interest rate adjustments tied to various market indices with specified minimum and maximum adjustments. The Bank generally charges a premium interest rate for its ARMs if the property is not owner occupied. The interest rates on the majority of ARMs are adjusted after their fixed rate periods on an annual or semi-annual basis, with most having annual and lifetime limitations on upward rate adjustments to the loan. These loans typically feature amortization periods of up to 30 years and have fixed interest-rate periods generally ranging from five to ten years, with demand dependent upon market conditions. While there is no requirement for clients to refinance their loans at the end of the fixed-rate period, clients have historically done so the majority of the time, as most clients are interest-rate-risk averse on their first mortgage loans. Depending on the term and amount of the ARM, loans collateralized by single family, owner-occupied first lien residential real estate may be originated with an LTV up to 90%. The Bank also offers a 100% LTV product for medical doctors within its primary markets. The Bank does not require the borrower to obtain private mortgage insurance for ARM loans. Except for its HEAL product under $250,000, the Bank requires mortgagee’s title insurance on single family, first lien residential real estate loans to protect the Bank against defects in its liens on the properties that collateralize the loans. The Bank normally requires title, fire, and extended casualty insurance to be obtained by the borrower and, when required by applicable regulations, flood insurance. The Bank maintains an errors and omissions insurance policy to protect the Bank against loss in the event a borrower fails to maintain proper fire and other hazard insurance policies. Single-family, first-lien residential real estate loans with fixed-rate periods of 15, 20, and 30 years are primarily originated and sold into the secondary market. MSRs attached to the sold portfolio are either sold along with the loan or retained. Loans sold into the secondary market, along with their corresponding MSRs, are included as a component of the Company’s Mortgage Banking segment, as discussed elsewhere in this filing. The Bank, as it has in the past, may retain such longer-term, fixed-rate loans from time to time in the future to help combat net interest margin compression. Any such loans retained on the Company’s balance sheet would be reported as a component of the Traditional Banking segment. The Bank does, on occasion, purchase single-family, first-lien residential real estate loans made to low-to-moderate income borrowers and/or secured by property located in low-to-moderate income areas, which assists the Bank in meeting its obligations under the CRA. In connection with loan purchases, the Bank receives various representations and warranties from the sellers regarding the quality and characteristics of the loans. **Commercial Lending —** The Bank conducts commercial lending activities primarily through Corporate Banking, Commercial Banking, CRE Banking, Business Banking, and Retail Banking channels. Commercial lending credit approvals and processing are prepared and underwritten through the Bank’s centralized CCAD. Commercial clients are typically located within the Bank’s market footprint or in an adjoining market. Credit opportunities are generally driven by the following: companies expanding their businesses; companies acquiring new businesses; and/or companies refinancing existing debt from other institutions. The Bank has a focus on C&I lending, and owner-occupied and non-owner-occupied CRE lending. The targeted C&I credit size for client relationships is typically between $1 million and $10 million, with higher targets between $10 million and $25 million for large Corporate Banking and CRE Division borrowers of higher credit quality. C&I loans typically include those secured by general business assets, which consist of equipment, accounts receivable, inventory, and other business assets owned by the borrower/guarantor. Credit facilities include annually renewable lines of credit and term loans with maturities typically from three to five years and may also involve financial covenant requirements. These requirements are monitored by the Bank’s CCAD. Underwriting for C&I loans is based on the borrower’s capacity to repay these loans from operating cash flows, typically measured by EBITDA, with capital strength, collateral, and management experience also important underwriting considerations. Corporate Banking focuses on larger C&I opportunities. Borrowers are generally single-asset entities and loan sizes typically range from $5 million to $30 million. Primary underwriting considerations are project cash flows (current and historical), financial capacity of sponsors, and collateral value financed. The majority of interest rates offered are based on a floating rate index like term-SOFR and U.S. Treasuries. Fixed-rate terms of up to 10 years are available to borrowers by utilizing standard Bank products or interest rate swaps. In many cases, limited guarantees, or in certain instances, non-recourse (of owners) loans will be issued, with such cases based upon the equity/capital position, project cash flows, and stabilization of the borrowing entity. The Bank’s CRE Division, which launched in 2022, focuses on large CRE projects, typically $5 million to $25 million. Borrowers are generally single-asset entities. Primary underwriting considerations are project cash flow (current and historical), financial capacity of sponsors, and collateral value financed. Fixed rate financing and reciprocal interest rate swap’s are typically used as well. Given the size of these credits, the Bank generally seeks established, well-known borrowers and projects with low credit risk. Commercial Banking focuses on medium sized C&I and CRE opportunities. Borrowers are generally single-asset entities and loan sizes typically range from $1 million to $5 million. As with Corporate Banking, the primary underwriting considerations are project cash flow (current and historical), quality of leases, financial capacity of sponsors, and collateral value of property financed. Interest rates offered are based on both fixed and variable interest-rate formulas. The Bank’s CRE and multi-family loans are typically secured by improved property such as office buildings, medical facilities, retail centers, warehouses, apartment buildings, condominiums, schools, religious institutions, and other types of commercial use property. The Business Banking and Business Development groups, reporting under Retail Banking, focus on locally based small-to-medium sized businesses in the Bank’s market footprint with primary annual revenues up to $10 million, and borrowings between $200,000 and $1 million. The needs of these clients range from expansion or acquisition financing, equipment financing, owner-occupied real estate financing, and smaller operating lines of credit. The Bank is an SBA Preferred Lending Partner, which allows the Bank to underwrite and approve its own SBA loans in an expedited manner. An experienced veteran lender oversees the Bank’s SBA Department. The Bank makes loans to borrowers generally up to $3 million under the SBA “7A Program,” as well as utilize the “504 Program” for owner-occupied CRE opportunities. The Bank’s goal is to expand its SBA platform over time and support the opportunities that arise within its markets. The Bank’s lenders utilize all appropriate programs of the SBA to reduce credit risk exposure. **Construction and Land Development Lending —** The Bank originates business loans for the construction of both single-family, residential properties and commercial properties (apartment complexes, shopping centers, office buildings). While not a focus for the Bank, the Bank may originate loans for the acquisition and development of residential or commercial land into buildable lots. Single-family, residential-construction loans are made in the Bank’s market area to established homebuilders with solid financial records. The majority of these loans are made for “contract” homes, which the builder has already pre-sold to a homebuyer. The duration of these loans is generally less than 12 months and repaid at the end of the construction period from the sale of the constructed property. Some loans are made on “speculative” homes, which the builder does not have pre-sold to a homebuyer but expects to execute a contract to sell during the construction period. These speculative homes are considered necessary to have in inventory for homebuilders, as not all homebuyers want to wait during the construction period to purchase and move into a newly built home. Commercial-construction loans are made in the Bank’s market to established commercial builders with solid financial records. Typically, these loans are made for investment properties and have tenants pre-committed for some or all of the space. Some projects may begin as speculative, with the builder contracting to lease or sell the property during the construction period. Generally, commercial-construction loans are made for the duration of the construction period and slightly beyond and will either convert to permanent financing with the Bank or with another lender at or before maturity. Construction-to-permanent loans are another type of construction-related financing offered by the Bank. These loans are made to borrowers who are going to build a property and retain it for ownership after construction completion. The construction phase is handled just like all other construction loans, and the permanent phase offers similar terms to a permanent CRE loan while allowing the borrower a one-time closing process at loan origination. These loans are offered on both owner-occupied and nonowner-occupied CRE. **Consumer Lending —** Traditional Banking consumer loans made by the Bank include secured and unsecured personal loans, as well as credit cards. The Bank predominately originates consumer credit cards as the main product within this lending. Credit cards are generally marketed to existing clients of the Bank and are not generally marketed to non-clients. **Aircraft Lending —** Aircraft loans are typically made to purchase or refinance personal aircrafts, along with engine overhauls and avionic upgrades. Loans range between $55,000 and $3,000,000 in size and have terms up to 20 years. The aircraft loan program is open to all fifty states. The credit characteristics of an aircraft borrower are higher than a typical consumer in that they must demonstrate and indicate a higher degree of credit worthiness for approval. #### See additional discussion regarding Lending Activities under the sections titled: - *Part I Item 1A “Risk Factors”* - *Part II Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”* - *Part II Item 8 “Financial Statements and Supplementary Data,” Footnote 4 “Loans and Allowance for Credit Losses”* The Bank’s other Traditional Banking activities generally consist of the following: **Private Banking —** The Bank provides financial products and services to high-net-worth individuals through its Private Banking department. The Bank’s Private Banking officers have extensive banking experience and are trained to meet the unique financial needs of this clientele. **Treasury Management Department —** The Bank provides various deposit products designed for commercial business clients located throughout its market footprint. Lockbox processing, remote deposit capture, business on-line banking, account reconciliation, and ACH processing are additional services offered to commercial businesses through the Bank’s Treasury Management department. Treasury Management officers work closely with commercial and retail officers to support their client’s cash management needs. **Correspondent Lending —** The Bank expects to begin acquiring single family, first lien mortgage loans for investment through its Correspondent Lending channel during the first quarter of 2023. Correspondent Lending generally involves the Bank acquiring, primarily from its Warehouse Lending clients, closed loans that meet the Bank’s specifications. Substantially all loans purchased through the Correspondent Lending channel will be purchased at a premium. Premiums on loans held for investment acquired though the Correspondent Lending channel will be amortized into interest income on the level-yield method over the expected life of the loan. Loans acquired through the Correspondent Lending channel will be generally made to borrowers outside of the Bank’s historical market footprint. **Internet Banking —** The Bank expands its market penetration and service delivery of its RB&T brand by offering clients Internet Banking services and products through its website, www.republicbank.com. **Mobile Banking —** The Bank allows clients to easily and securely access and manage their accounts through its mobile banking application. **Other Banking Services —** The Bank also provides title insurance and other financial institution related products and services. **Bank Acquisitions —** The Bank maintains an acquisition strategy to selectively grow its franchise as a complement to its organic growth strategies. *See additional discussion regarding the Traditional Banking segment under Footnote 25 “Segment Information” of Part II Item 8 “Financial Statements and Supplementary Data.”* ### (II) Warehouse Lending segment The Core Bank provides short-term, revolving credit facilities to mortgage bankers across the United States through mortgage warehouse lines of credit. These credit facilities are primarily secured by single-family, first-lien residential real estate loans. The credit facility enables the mortgage banking clients to close single-family, first-lien residential real estate loans in their own name and temporarily fund their inventory of these closed loans until the loans are sold to investors approved by the Bank. Individual advances for loans are expected to remain on the warehouse line for an average of 15 to 30 days. Advances for Reverse mortgage loans and construction loans typically remain on the line longer than conventional mortgage loans. Interest income and loan fees are accrued for each individual advance during the time the advance remains on the warehouse line and collected when the loan is sold. The Core Bank receives the sale proceeds of each loan directly from the investor and applies the funds to pay off the warehouse advance and related accrued interest and fees. The remaining proceeds are credited to the mortgage-banking client. *See additional discussion regarding the Warehouse Lending segment under Footnote 25 “Segment Information” of Part II Item 8 “Financial Statements and Supplementary Data.”* ### (III) Mortgage Banking segment Mortgage Banking activities primarily include 15-, 20- and 30-year fixed-term single-family, first-lien residential real estate loans that are originated and sold into the secondary market, primarily to the FHLMC and the FNMA. The Bank typically retains servicing on loans sold into the secondary market. Administration of loans with servicing retained by the Bank includes collecting principal and interest payments, escrowing funds for property taxes and property insurance, and remitting payments to secondary market investors. The Bank receives fees for performing these standard servicing functions. As part of the sale of loans with servicing retained, the Bank records MSRs. MSRs represent an estimate of the present value of future cash servicing income, net of estimated costs, which the Bank expects to receive on loans sold with servicing retained by the Bank. MSRs are capitalized as separate assets. This transaction is posted to net gain on sale of loans, a component of “Mortgage Banking income” in the income statement. Management considers all relevant factors, in addition to pricing considerations from other servicers, to estimate the fair value of the MSRs to be recorded when the loans are initially sold with servicing retained by the Bank. The carrying value of MSRs is initially amortized in proportion to and over the estimated period of net servicing income and subsequently adjusted quarterly based on the weighted average remaining life of the underlying loans. The MSR amortization is recorded as a reduction to net servicing income, a component of Mortgage Banking income. With the assistance of an independent third party, the MSRs asset is reviewed at least quarterly for impairment based on the fair value of the MSRs using groupings of the underlying loans based on predominant risk characteristics. Any impairment of a grouping is reported as a valuation allowance. A primary factor influencing the fair value is the estimated life of the underlying loans serviced. The estimated life of the loans serviced is significantly influenced by market interest rates. During a period of declining interest rates, the fair value of the MSRs is expected to decline due to increased anticipated prepayment speeds within the portfolio. Alternatively, during a period of rising interest rates, the fair value of MSRs would be expected to increase as prepayment speeds on the underlying loans would be expected to decline. *See additional discussion regarding the Mortgage Banking segment under Footnote 25 “Segment Information” of Part II Item 8 “Financial Statements and Supplementary Data.”* ### (IV) Tax Refund Solutions segment Through the TRS segment, the Bank is one of a limited number of financial institutions that facilitates the receipt and payment of federal and state tax refund products and offers a credit product through third-party tax preparers located throughout the U.S., as well as tax-preparation software providers (collectively, the “Tax Providers”). The majority of all the business generated by the TRS business occurs during the first half of each year. During the second half of each year, TRS generates limited revenue and incurs costs preparing for the next year’s tax season. TRS also originated $98 million of ERAs during December 2022 related to tax returns that are anticipated to be filed during the first quarter 2023 tax filing season. RTs are fee-based products whereby a tax refund is issued to the taxpayer after the Bank has received the refund from the federal or state government. There is no credit risk or borrowing cost associated with these products because they are only delivered to the taxpayer upon receipt of the tax refund directly from the governmental paying authority. Fees earned by the Company on RTs, net of revenue share, are reported as noninterest income under the line item “Net refund transfer fees.” The RA credit product is a loan made in conjunction with the filing of a taxpayer’s final federal tax return, which allows the taxpayer to borrow funds as an advance of a portion of their tax refund. The RA product had the following features during the first quarters of 2022 and 2021: - Offered only during the first two months of each year; - The taxpayer was given the option to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $6,250; - No requirement that the taxpayer pays for another bank product, such as an RT; - Multiple disbursement methods were available with most Tax Providers, including direct deposit, prepaid card, or check, based on the taxpayer-customer’s election; - Repayment of the RA to the Bank is deducted from the taxpayer’s tax refund proceeds; and - If an insufficient refund to repay the RA occurs: - there is no recourse to the taxpayer, - no negative credit reporting on the taxpayer, and - no collection efforts against the taxpayer. The ERA credit product is similar to the RA with the distinction of the timing of when the ERA is originated and the documentation available to underwrite the credit. The ERA is originated prior to the taxpayer receiving their fiscal year taxable income documentation, *e.g.*, W-2, and the filing of the taxpayer’s final federal tax return. As such, the Company generally uses paystub information to underwrite the ERA. The repayment of the ERA is incumbent upon the taxpayer client returning to the Bank’s Tax Provider for the filing of their final federal tax return in order for the tax refund to potentially be received by the Bank from the federal government to pay off the advance. The ERA product related to the first quarter 2023 tax filing season had the following features: - Offered only during December 2022 and January 2023; - The taxpayer had the option to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $1,000; - No requirement that the taxpayer pays for another bank product, such as an RT; - Multiple disbursement methods were available with most Tax Providers, including direct deposit or prepaid card, based on the taxpayer-customer’s election; - Repayment of the ERA to the Bank is deducted from the taxpayer’s tax refund proceeds; and - If an insufficient refund to repay the ERA occurs, including the failure to file a final federal tax return through a Republic Tax Provider: - there is no recourse to the taxpayer, - no negative credit reporting on the taxpayer, and - no collection efforts against the taxpayer. The Company reports fees paid for the RAs, including ERAs, as interest income on loans. RAs that were originated related to the first quarter 2022 tax season were repaid, on average, within 32 days after the taxpayer’s tax return was submitted to the applicable taxing authority. RAs do not have a contractual due date but the Company considered an RA, related to the first quarter 2022 tax season, delinquent if it remained unpaid 35 days after the taxpayer’s tax return was submitted to the applicable taxing authority. The number of days for delinquency eligibility is based on management’s annual analysis of tax return processing times. Provisions on RAs are estimated when advances are made. Unpaid RAs, including ERAs, related to the first quarter tax season of a given year are charged-off by June 30th of that year, with RAs collected during the second half of that year recorded as recoveries of previously charged-off loans. Related to the overall credit losses on RAs, including ERAs, the Bank’s ability to control losses is highly dependent upon its ability to predict the taxpayer’s likelihood to receive the tax refund as claimed on the taxpayer’s tax return. Each year, the Bank’s RA approval model is based primarily on the prior-year’s tax refund payment patterns. Because the substantial majority of the RA volume occurs each year before that year’s tax refund payment patterns can be analyzed and subsequent underwriting changes made, credit losses during a current year could be higher than management’s predictions if tax refund payment patterns change materially between years. In response to changes in the legal, regulatory, and competitive environment, management annually reviews and revises the RA, including the ERA, product parameters. Further changes in the RA product parameters do not ensure positive results and could have an overall material negative impact on the performance of all RA product offerings and therefore on the Company’s financial condition and results of operations. #### See additional discussion regarding the RA product under the sections titled: - *Part I Item 1A “Risk Factors”* - *Part II Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”* - *Part II Item 8 “Financial Statements and Supplementary Data,” Footnote 4 “Loans and Allowance for Credit Losses”* *See Footnote 1 “Summary of Significant Accounting Policies” of Part II Item 8 “Financial Statements and Supplementary Data” for discussion regarding the cancelled sale of the TRS business and associated litigation.* ### Republic Payment Solutions division RPS is currently managed and operated within the TRS segment. The RPS division offers general-purpose reloadable prepaid cards, payroll debit cards, and limited-purpose demand deposit accounts with linked debit cards as an issuing bank through third-party service providers. Until the operating results of the RPS division are material to the Company’s overall results of operations, they will be reported as part of the TRS segment. The Company does not expect to report the RPS division as a separate reportable segment until such time, if any, that it meets quantitative reporting thresholds. The Company reports fees related to RPS programs under Program fees. Additionally, the Company’s portion of interchange revenue generated by prepaid card transactions is reported as noninterest income under “Interchange fee income.” #### See additional discussion regarding the TRS segment under the sections titled: - *Part I Item 1A “Risk Factors”* - *Part II Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”* - *Part II Item 8 “Financial Statements and Supplementary Data,” Footnote 25 “Segment Information”* ### (V) Republic Credit Solutions segment Through the RCS segment, the Bank offers consumer credit products. In general, the credit products are unsecured, small dollar consumer loans that are dependent on various factors. RCS loans typically earn a higher yield but also have higher credit risk compared to loans originated through the Traditional Banking segment, with a significant portion of RCS clients considered subprime or near-prime borrowers. The Bank uses third-party service providers for certain services such as marketing and loan servicing of RCS loans. Additional information regarding consumer loan products offered through RCS follows: - RCS line-of-credit products – Using separate third-party service providers, the Bank originates two line-of-credit products to generally subprime borrowers in multiple states. The first of these two products, the LOC I, has been originated by the Bank since 2014. The second, the LOC II, was introduced in January 2021. - RCS’s LOC I represented the substantial majority of RCS activity during 2021 and 2022. Elastic Marketing, LLC and Elevate Decision Sciences, LLC, are third-party service providers for the product and are subject to the Bank’s oversight and supervision. Together, these companies provide the Bank with certain marketing, servicing, technology, and support services, while a separate third party provides customer support, servicing, and other services on the Bank’s behalf. The Bank is the lender for this product and is marketed as such. Furthermore, the Bank controls the loan terms and underwriting guidelines, and the Bank exercises consumer compliance oversight of the product. The Bank sells participation interests in this product. These participation interests are a 90% interest in advances made to borrowers under the borrower’s line-of-credit account, and the participation interests are generally sold three business days following the Bank’s funding of the associated advances. Although the Bank retains a 10% participation interest in each advance, it maintains 100% ownership of the underlying LOC I account with each borrower. Loan balances held for sale through this program are carried at the lower of cost or fair value. - In January 2021, RCS began originating balances through its LOC II. One of RCS’s existing third-party service providers, subject to the Bank’s oversight and supervision, provides the Bank with marketing services and loan servicing for the LOC II product. The Bank is the lender for this product and is marketed as such. Furthermore, the Bank controls the loan terms and underwriting guidelines, and the Bank exercises consumer compliance oversight of this product. The Bank sells participation interests in this product. These participation interests are a 95% interest in advances made to borrowers under the borrower’s line-of-credit account, and the participation interests are generally sold three business days following the Bank’s funding of the associated advances. Although the Bank retains a 5% participation interest in each advance, it maintains 100% ownership of the underlying LOC II account with each borrower. Loan balances held for sale through this program are carried at the lower of cost or fair value. - RCS installment loan product – Through RCS, the Bank offers installment loans with terms ranging from 12 to 60 months to borrowers in multiple states. The same third-party service provider for RCS’s LOC II is the third-party provider for the installment loans. This third-party provider is subject to the Bank’s oversight and supervision and provides the Bank with marketing services and loan servicing for these RCS installment loans. The Bank is the lender for these RCS installment loans and is marketed as such. Furthermore, the Bank controls the loan terms and underwriting guidelines, and the Bank exercises consumer compliance oversight of this RCS installment loan product. Currently, all loan balances originated under this RCS installment loan program are carried as “held for sale” on the Bank’s balance sheet, with the intention to sell these loans to a third-party, who is an affiliate of the Bank’s third-party service provider, generally within sixteen days following the Bank’s origination of the loans. Loans originated under this RCS installment loan program are carried at fair value under a fair-value option, with the portfolio marked to market monthly. - RCS healthcare receivables products – The Bank originates healthcare-receivables products across the U.S. through three different third-party service providers. - For two of the programs, the Bank retains 100% of the receivables, with recourse in the event of default. - For the remaining program, in some instances the Bank retains 100% of the receivables originated, with recourse in the event of default, and in other instances, the Bank sells 100% of the receivables generally within one month of origination. Loan balances held for sale through this program are carried at the lower of cost or fair value. The Company reports interest income and loan origination fees earned on RCS loans under “Loans, including fees,” while any gains or losses on sale and mark-to-market adjustments of RCS loans are reported as noninterest income under “Program fees.” #### See additional discussion regarding the RCS segment under the sections titled: - *Part I Item 1A “Risk Factors”* - *Part II Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”* - *Part II Item 8 “Financial Statements and Supplementary Data,” Footnote 25 “Segment Information”* ### Employees and Human Capital Resources As of December 31, 2022, Republic had 998 FTE employees. Altogether, Republic had 984 full-time and 28 part-time employees. None of the Company’s employees are subject to a collective bargaining agreement, and Republic has never experienced a work stoppage. The Company believes that it has had and continues to have good employee relations. Employee retention helps the Company operate efficiently and effectively. Management promotes its core values through prioritizing concern for employees’ well-being, supporting employees’ career goals, offering competitive wages, offering flexible schedules, and providing valuable fringe benefits. In addition, Bank employees may become stockholders of the Company through participation in its Employee Stock Purchase Plan and its 401(k) retirement plan, which offers a Company stock investment option. The Company actively encourages and supports the growth and development of its employees. Management generally seeks to fill positions by promotion and transfer from within the organization, whenever practical. Career development is advanced through ongoing mentoring and development programs, as well as internally developed training programs, customized corporate training engagements and educational reimbursement programs. Reimbursement is available to employees enrolled in pre-approved degree or certification programs at accredited institutions that teach skills or knowledge relevant to the financial services industry and in compliance with the Internal Revenue Code. The safety, health, and wellness of Republic’s employees is considered a top priority. The Company promotes the health and wellness of its employees by encouraging work-life balance, offering flexible work schedules, and striving to keep the employee portion of health care premiums competitive with local competition. Additionally, Republic strives to clearly and frequently communicate expectations that all employee conduct must adhere to the highest ethical standards encompassed by its corporate values, including through town hall meetings and senior leadership messages. ### Information about our Executive Officers *See Part III, Item 10. “Directors, Executive Officers and Corporate Governance.” for information about the Company’s executive officers.* ### Competition ### Traditional Banking The Traditional Bank encounters intense competition in its market footprint in originating loans, attracting deposits, and selling other banking related financial services. The deregulation of the banking industry, the ability to create financial services holding companies to engage in a wide range of financial services other than banking and the widespread enactment of state laws that permit multi-bank holding companies, as well as the availability of nationwide interstate banking, has created a highly competitive environment for financial institutions. In one or more aspects of the Bank’s business, the Bank competes with local and regional retail and commercial banks, other savings banks, credit unions, finance companies, mortgage companies, fintech companies, and other financial intermediaries operating in Kentucky, Indiana, Florida, Tennessee, Ohio, and in other states where the Bank offers its products. The Bank also competes with insurance companies, consumer finance companies, investment banking firms, and mutual fund managers. Some of the Company’s competitors are not subject to the same degree of regulatory review and restrictions that apply to the Company and the Bank. Many of the Bank’s primary competitors, some of which are affiliated with large bank holding companies or other larger financial based institutions, have substantially greater resources, larger established client bases, higher lending limits, more extensive banking center networks, numerous ATMs or ITMs, and greater advertising and marketing budgets. They may also offer services that the Bank does not currently provide. These competitors attempt to gain market share through their financial product mix, pricing strategies, and banking center locations. Legislative developments related to interstate branching and banking in general, by providing large banking institutions easier access to a broader marketplace, can act to create more pressure on smaller financial institutions to consolidate. It is anticipated that competition from both bank and non-bank entities will continue to remain strong in the foreseeable future. The primary factors in competing for bank products are convenient locations, ATMs, ITMs, flexible hours, deposit interest rates, services, internet banking, mobile banking, range of lending services offered, and lending fees. The Bank believes that an emphasis on highly personalized service tailored to individual client needs, together with the local character of the Bank’s business and its “community bank” management philosophy will continue to enhance the Bank’s ability to compete successfully in its market footprint. ### Warehouse Lending The Bank faces strong competition from financial institutions across the United States for mortgage banking clients in need of warehouse lines of credit. Competitors may have substantially greater resources, larger established client bases, higher lending limits, as well as underwriting standards and on-going oversight requirements that could be viewed more favorably by some clients. A few or all of these factors can lead to a competitive disadvantage to the Company when attempting to retain or grow its Warehouse client base. ### Mortgage Banking The Bank encounters intense competition from mortgage bankers, mortgage brokers, and financial institutions for the origination and funding of mortgage loans. Many competitors have branch offices in the same areas where the Bank’s loan officers operate. The Bank also competes with mortgage companies whose focus is often on telemarketing and consumer-direct lending. ### Tax Refund Solutions The TRS segment encounters direct competition for RT and RA market share from a limited number of banks in the industry. The Bank promotes these products to Tax Providers using various revenue-share and pricing incentives, as well as product features and overall service levels. ### Republic Payment Solutions (a division of TRS) The prepaid card industry is subject to intense and increasing competition. The Bank competes with a number of companies that market different types of prepaid card products, such as general-purpose-reloadable, gift, incentive, and corporate disbursement cards. There is also competition from large retailers who are seeking to integrate more financial services into their product offerings. Increased competition is also expected from alternative financial services providers who are often well-positioned to service the “underbanked” and who may wish to develop their own prepaid card programs. ### Republic Credit Solutions The small-dollar consumer loan industry is highly competitive. Competitors for the Company’s small-dollar loan programs include, but are not limited to, billers who accept late payments for a fee, overdraft privilege programs of other banks and credit unions, as well as payday lenders and fintech companies. New entrants to the small-dollar consumer loan market must successfully implement underwriting and fraud prevention processes, overcome consumer brand loyalty, and have sufficient capital to withstand early losses associated with unseasoned loan portfolios. In addition, there are substantial regulatory and compliance costs, including the need for expertise to customize products associated with licenses to lend in various states across the United States. ### Supervision and Regulation The Company and the Bank are separate and distinct entities and are subject to extensive federal and state banking laws and regulations, which establish a comprehensive framework of activities in which the Company and the Bank may engage. These laws and regulations are primarily intended to provide protection to clients and depositors, not stockholders. The Company, as a public reporting company, is also subject to various securities laws and regulations. As an umbrella supervisor, the FRB requires that FHCs operate in a safe and sound manner so that their financial condition does not threaten the viability of affiliated depository institutions. The FRB conducts periodic examinations to review the Company’s compliance with various legal and safety and soundness requirements, which directly impact the Bank. The Bank is a Kentucky-chartered commercial banking and trust corporation and as such, it is subject to supervision and regulation by the FDIC and the KDFI. The Bank also operates physical locations in Florida, Indiana, Ohio, and Tennessee, and originates and purchases loans on a national basis. All deposits, subject to regulatory prescribed limitations, held by the Bank are insured by the FDIC. The Bank is subject to restrictions, requirements, potential enforcement actions and examinations by the FDIC and KDFI. The Bank is a member of the FHLB system. As a member of the FHLB system, the Bank must also comply with applicable regulations of the Federal Housing Finance Agency. Regulation by each of these agencies is intended primarily for the protection of the Bank’s clients and the DIF and not for the benefit of the Company’s stockholders. The Bank’s activities are also regulated under federal and state consumer protection laws applicable to the Bank’s lending, deposit, and other activities. An adverse ruling or finding against the Company or the Bank under these laws could have a material adverse effect on the results of operations. The Company and the Bank are also subject to the regulations of the CFPB. The CFPB has consolidated rules and orders with respect to consumer financial products and services and has substantial power to define the rights of consumers and responsibilities of lending institutions, such as the Bank. The CFPB does not, however, examine or supervise the Bank for compliance with such regulations; rather, based on the Bank’s size (less than $10 billion in assets), enforcement authority remains with the FDIC and the KDFI although the Bank may be required to submit reports or other materials to the CFPB upon its request. Notwithstanding jurisdictional limitations set forth in the Dodd-Frank Act, the CFPB and federal banking regulators may endeavor to work jointly on supervision matters. Regulators have extensive discretion in connection with their supervisory and enforcement authority and examination policies, including, but not limited to, policies that can materially impact the classification of assets and the establishment of adequate loan loss reserves. Any change in regulatory requirements and policies, whether by the FRB, the FDIC, the KDFI, the CFPB or state or federal legislation, could have a material adverse impact on Company operations. Regulators also have broad enforcement powers over banks and their holding companies, including, but not limited to: the power to mandate or restrict particular actions, activities, or divestitures; impose monetary fines and other penalties for violations of laws and regulations; issue cease and desist or removal orders; seek injunctions; publicly disclose such actions; and prohibit unsafe or unsound practices. This authority includes both informal and formal actions to effect corrective actions and/or sanctions. In addition, the Bank is subject to regulation and potential enforcement actions by other state and federal agencies. Certain regulatory requirements applicable to the Company and the Bank are referred to below or elsewhere in this filing. The description of statutory provisions and regulations applicable to banks and their holding companies set forth in this filing does not purport to be a complete description of such statutes and regulations. Their effect on the Company and the Bank is qualified in its entirety by reference to the actual laws and regulations. ### The Dodd-Frank Act The Dodd-Frank Act, among other things, implemented changes that affected the oversight and supervision of financial institutions, provided for a new resolution procedure for large financial companies, created the CFPB, introduced more stringent regulatory capital requirements and significant changes in the regulation of over-the-counter derivatives, reformed the regulation of credit rating agencies, increased controls and transparency in corporate governance and executive compensation practices, incorporated the Volcker Rule, required registration of advisers to certain private funds, and influenced significant changes in the securitization market. The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (the “EGRRCPA”) and its implementing regulations pulled back some of the more stringent requirements of the Dodd-Frank Act for community banks with total consolidated assets of less than $10 billion, such as the Bank. Due to exemptions in the Dodd-Frank Act, the EGRRCPA, and each Act’s implementing regulations, the Company and Bank are not subject to several provisions of the Dodd-Frank Act including but not limited to 1) the Durbin Amendment that would otherwise limit the interchange fees the Bank could charge on debit card transactions, 2) the Volcker Rule that would affect the Company’s ability to invest in or engage in certain trading activities, and 3) stricter regulatory capital requirements. *Incentive and Executive Compensation —* In 2010, the FRB and other regulators published final interagency guidance for structuring incentive compensation arrangements at financial organizations. The guidance does not set forth any formulas or pay caps but contains certain principles that companies are required to follow with respect to employees and groups of employees that may expose the company to material amounts of risk. The three primary principles are (i) balanced risk-taking incentives, (ii) compatibility with effective controls and risk management, and (iii) strong corporate governance. The FRB and the FDIC monitor compliance with this guidance as part of safety and soundness oversight. ### I. The Company *Source of Strength Doctrine —* The Dodd-Frank Act codifies the Federal Reserve Board’s existing “source of strength” policy that holding companies act as a source of strength to their insured institution subsidiaries by providing capital, liquidity, and other support in times of distress. FRB policies and regulations also prohibit bank holding companies from engaging in unsafe and unsound banking practices. The FDIC and the KDFI have similar restrictions with respect to the Bank. Under the Dodd-Frank Act and in line with prior FRB policy, a BHC is expected to act as a source of financial strength to its banking subsidiaries and to commit resources for their support. This support may restrict the Company’s ability to pay dividends, and may be required at times when, absent this FRB policy, a holding company may not be inclined to provide it. A BHC may also be required to guarantee the capital restoration plan of an undercapitalized banking subsidiary and any applicable cross-guarantee provisions that may apply to the Company. In addition, any capital loans by the Company to its bank subsidiary are subordinate in right of payment to deposits and to certain other indebtedness of the bank subsidiary. In the event of a BHC’s bankruptcy, any commitment by the BHC to a federal bank regulatory agency to maintain the capital of subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment. *Acquisitions and Strategic Planning —* The Company is required to obtain the prior approval of the FRB under the BHCA before it may, among other things, acquire all or substantially all of the assets of any bank, or ownership or control of any voting shares of any bank, if after such acquisition it would own or control, directly or indirectly, more than 5% of any class of the voting shares of such bank. In addition, the Bank must obtain regulatory approval before entering into certain transactions, such as adding new banking offices and mergers with, or acquisitions of, other financial institutions. This may affect the Company’s or the Bank’s acquisition or timely acquisition of interests in other banks, other merger and acquisition activity and banking office expansion. The BHCA and the Change in Bank Control Act also generally require the approval of the Federal Reserve before any person or company can acquire control of a bank or BHC. Acquisition of control occurs if immediately after a transaction, the acquiring person or company owns, controls, or holds voting securities of the institution with the power to vote 25% or more of any class. Control is refutably presumed to exist if, immediately after a transaction, the acquiring person or company owns, controls, or holds voting securities of the institution with the power to vote 10% or more of any class, and (i) the institution has registered securities under Section 12 of the Securities Exchange Act of 1934; or (ii) no other person will own, control, or hold the power to vote a greater percentage of that class of voting securities immediately after the transaction. *Financial Activities —* The Company is an FHC. A BHC may elect to become an FHC if it and each of its banking subsidiaries is well capitalized, is well managed and has at least a “Satisfactory” rating under the CRA. As an FHC, the Company is permitted to engage directly or indirectly in a broader range of activities than those permitted for a BHC under the BHCA. Permitted activities for an FHC include securities underwriting and dealing, insurance underwriting and brokerage, merchant banking and other activities that are declared by the FRB, in cooperation with the Treasury Department, to be “financial in nature or incidental thereto” or are declared by the FRB unilaterally to be “complementary” to financial activities. Permitted activities also include those determined to be “closely related to banking” activities by the FRB under the BHCA and permissible for any BHC. An FHC is allowed to conduct permissible new financial activities or acquire permissible non-bank financial companies with after-the-fact notice to the FRB. To maintain FHC status, the Company and the Bank must continue to meet the well capitalized and well managed requirements and maintain at least a “Satisfactory” rating under the CRA. The failure to meet such requirements could result in material restrictions on the activities of the Company and may also adversely affect the Company’s ability to enter into certain transactions (including mergers and acquisitions) or obtain necessary approvals in connection therewith, as well as loss of FHC status. If restrictions are imposed on the activities of an FHC, such information may not necessarily be available to the public. ### II. The Bank The Kentucky and federal banking statutes prescribe the permissible activities in which a Kentucky chartered bank may engage and where those activities may be conducted. Kentucky’s statutes contain a super parity provision that permits a well-rated Kentucky bank to engage in any banking activity in which a national bank in Kentucky, a state bank, state thrift, or state savings association operating in any other state, a federal savings bank, or a federal thrift meeting the qualified thrift lender test engages, provided it first obtains a legal opinion from counsel specifying the statutory or regulatory provisions that permit the activity. *Safety and Soundness —* The federal banking regulatory agencies have prescribed, by regulation, guidelines for all insured depository institutions relating to: (i) internal controls, information systems, and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; (v) asset growth; (vi) asset quality; (vii) earnings; and (viii) compensation, fees, and benefits. The guidelines set forth safety and soundness standards that the federal banking regulatory agencies use to identify and address problems at FDIC member institutions before capital becomes impaired. If the FDIC determines that the Bank fails to meet any standard prescribed by the guidelines, the FDIC may require the Bank to submit to it an acceptable plan to achieve compliance with the standard. FDIC regulations establish deadlines for the submission and review of such safety and soundness compliance plans in response to any such determination. *Branching —* Kentucky law generally permits a Kentucky chartered bank to establish a branch office in any county in Kentucky. A Kentucky bank may also, subject to regulatory approval and certain restrictions, establish a branch office outside of Kentucky. Well-capitalized Kentucky state chartered banks that have been in operation at least three years and that satisfy certain criteria relating to, among other things, their composite and management regulatory exam ratings, may establish a branch in Kentucky without the approval of the Commissioner of the KDFI, upon notice to the KDFI and any other state bank with its main office located in the county where the new branch will be located. Branching by banks not meeting these criteria requires the approval of the Commissioner of the KDFI, who must ascertain and determine that the public convenience and advantage will be served and promoted and that there is a reasonable probability of the successful operation of the branch. In any case, the proposed branch must also be approved by the FDIC, which considers a number of factors, including financial condition, capital adequacy, earnings prospects, character of management, needs of the community, and consistency with corporate powers. As a result of several legislative acts including the Dodd-Frank Act, the Bank, along with any other national or state-chartered bank, generally may branch across state lines. Such unlimited branching authority has the potential to increase competition within the markets in which the Company and the Bank operate. *Restrictions on Affiliate Transactions and Loans to Insiders —* Transactions between the Bank and its affiliates, and in some cases the Bank’s correspondent banks, are subject to FDIC regulations, the FRB’s Regulations O and W, and Sections 23A, 23B, 22(g), and 22(h) of the Federal Reserve Act (“FRA”). In general, these transactions must be on terms and conditions that are consistent with safe and sound banking practices and substantially the same, or at least as favorable to the bank or its subsidiary, as those for comparable transactions with non-affiliated parties. In addition, certain types of these transactions referred to as “covered transactions” are subject to quantitative limits based on a percentage of the Bank’s capital, thereby restricting the total dollar amount of transactions the Bank may engage in with each individual affiliate and with all affiliates in the aggregate. Limitations are also imposed on loans and extensions of credit by a bank to its executive officers, directors, and principal stockholders and each of their related interests. The Dodd-Frank Act expanded the scope of these regulations, including by applying them to the credit exposure arising under derivative transactions, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions. The FRB promulgated Regulation W to implement Sections 23A and 23B of the FRA. This regulation contains many of the foregoing restrictions and addresses derivative transactions, overdraft facilities, and other transactions between a bank and its non-bank affiliates. *Restrictions on Distribution of Subsidiary Bank Dividends and Assets —* Bank regulators may declare a dividend payment to be unsafe and unsound even if the Bank continues to meet its capital requirements after the dividend. Dividends paid by the Bank provide substantially all of the Company’s operating funds. Regulatory requirements limit the amount of dividends that may be paid by the Bank. Under federal regulations, the Bank cannot pay a dividend if, after paying the dividend, the Bank would be undercapitalized. Under Kentucky and federal banking regulations, the dividends the Bank can pay during any calendar year are generally limited to its profits for that year, plus its retained net profits for the two preceding years, less any required transfers to surplus or to fund the retirement of preferred stock or debt, absent approval of the respective state or federal banking regulators. FDIC regulations also require all insured depository institutions to remain in a safe and sound condition, as defined in regulations, as a condition of having FDIC deposit insurance. *FDIC Deposit Insurance Assessments —* All Bank deposits are insured to the maximum extent permitted by the DIF. These bank deposits are backed by the full faith and credit of the U.S. Government. As insurer, the FDIC is authorized to conduct examinations of, and to require reporting by, insured institutions. It also may prohibit any insured institution from engaging in any activity determined by regulation or order to pose a serious threat to the DIF. The FDIC assesses all banks quarterly. A bank’s assessment base and assessment rates are determined quarterly and are risk-based. For small banks (such as the Bank) post-Dodd-Frank, individual assessment rates are individually assigned based on the FDIC’s financial ratios method that estimates the probability of the bank’s failure over three years using financial data and a weighted average of the bank’s CAMELS component ratings, subject to adjustment. CAMELS composite ratings are used to set minimum and maximum assessment rates. The assessment base, post-Dodd-Frank, is the average consolidated total assets minus average tangible equity. Management cannot predict what insurance assessment rates will be in the future. The FDIC may terminate the deposit insurance of any insured depository institution, including the Bank, if it determines that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any condition imposed by an agreement with the FDIC. It may also suspend deposit insurance temporarily if the institution has no tangible capital. If insurance is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined by the FDIC. Management is aware of no existing circumstances that would result in termination of the Bank’s FDIC deposit insurance. *Anti-Money Laundering, Patriot Act; OFAC Sanctions —* The Company and the Bank are subject to federal laws that are designed to counter money laundering and terrorist financing, and transactions with persons, companies, or foreign governments sanctioned by the United States. These laws include the Bank Secrecy Act, the Money Laundering Control Act, the Anti-Money Laundering Act of 2020, the Corporate Transparency Act, and the USA Patriot Act, as administered by the United States Treasury Department’s Financial Crimes Enforcement Network. These laws obligate depository institutions and broker-dealers to verify their customers’ identity, conduct customer due diligence, report on suspicious activity, file reports of certain transactions in currency, and conduct enhanced due diligence on certain accounts. The United States Treasury Department’s Office of Foreign Assets Control prohibits persons from engaging in transactions with certain designated restricted countries and persons. Depository institutions and broker-dealers are required by their federal regulators to maintain robust policies and procedures in order to ensure compliance with these anti-money laundering and anti-terrorist financing obligations. Failure to comply with these laws or maintain an adequate compliance program can lead to significant monetary penalties and reputational damage. Federal regulators evaluate the effectiveness of an applicant in combating money laundering when determining whether to approve a proposed bank merger, acquisition, restructuring, or other expansionary activity. *Consumer Laws and Regulations —* The Bank is subject to a number of federal and state consumer protection laws, including, but not limited to, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Military Lending Act, the Real Estate Settlement Procedures Act, the Servicemembers Civil Relief Act, the Telephone Consumer Protection Act, and these laws’ respective state-law counterparts, among many others. As discussed in more detail below, the Bank also complies with fair lending and privacy laws. Banks as well as nonbank consumer financial providers are subject to any rule, regulation or guideline created by the CFPB. The CFPB is an independent “watchdog” within the Federal Reserve System that regulates any person or service provider who offers or provides personal, family or household financial products or services by overseeing the application and implementation of “Federal consumer financial laws”. The CFPB is authorized to prescribe rules applicable to any covered person or service provider identifying and prohibiting acts or practices that are unfair, deceptive, or abusive in connection with any consumer financial product or service transaction. The CFPB has engaged in rulemaking and taken enforcement actions that directly impact the business operations of financial institutions offering consumer financial products or services including the Bank and its divisions. The FDIC also regulates unfair and deceptive or abusive acts or practices under Section 5 of the Federal Trade Commission Act. Such laws and regulations and the other consumer protection laws and regulations to which the Bank has been subject have historically mandated certain disclosure requirements and regulated the manner in which financial institutions must deal with clients when taking deposits from, making loans to, or engaging in other types of transactions with, such clients. The continued effect of the CFPB on the development and promulgation of consumer protection rules and guidelines and the enforcement of federal “consumer financial laws” on the Bank, if any, cannot be determined with certainty at this time. *Community Reinvestment Act and Fair Lending Laws —* Banks have a responsibility under the CRA and related regulations of the FDIC to help meet the credit needs of their entire communities, including low- and moderate-income neighborhoods. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. An institution’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities and the denial of applications. In addition, an institution’s failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in the FDIC, other federal regulatory agencies, or the Department of Justice, taking enforcement actions against the institution. Failure by the Bank to fully comply with these laws could result in material penalties being assessed against the Bank. The Bank received a “Satisfactory” CRA Performance Evaluation in January 2020, the most recent evaluation for which it has received final ratings. A copy of the public section of this CRA Performance Evaluation is available to the public upon request. *Privacy and Data Security —* The FRB, FDIC, other bank regulatory agencies, and States have adopted guidelines for safeguarding confidential, personal customer information. These guidelines require each financial institution, under the supervision and ongoing oversight of its board of directors or an appropriate committee thereof, to create, implement and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, protect against any anticipated threats or hazards to the security or integrity of such information and protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer. If the Bank fails to properly safeguard customer information or is the subject of a successful cyber-attack, it could result in material fines and/or liabilities that would materially affect the Company’s results of operations. Moreover, in November 2021, the FRB, FDIC, and Office of the Comptroller of the Currency issued a joint final rule establishing computer-security incident notification requirements for banking organizations and their bank service providers. Effective April 2022, with full compliance no later than May 2022, banking organizations are required to satisfy specified consumer notice requirements if an incident occurs, which may include a major computer-system failure; a cyber-related interruption, such as a distributed denial of service or ransomware attack; or another type of significant operational interruption. In addition, various U.S. regulators, including the Federal Reserve and the SEC, have increased their focus on cyber-security through guidance, examinations, and regulations. The Company’s Board has approved and adopted a customer information security program. The GLBA requires financial institutions to implement policies and procedures regarding the disclosure of nonpublic personal information about consumers to non-affiliated third parties. In general, the statute requires explanations to consumers on policies and procedures regarding the disclosure of such nonpublic personal information, and, except as otherwise required by law, prohibits disclosing such information except as provided in the banking subsidiary’s policies and procedures. In addition to the GLBA, the Company and the Bank are also subject to applicable state privacy laws. *Prohibitions Against Tying Arrangements —* The Bank is subject to prohibitions on certain tying arrangements. A depository institution is prohibited, subject to certain exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the client obtain some additional product or service from the institution or its affiliates or not obtain services of a competitor of the institution. *Depositor Preference —* The FDIA provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors (including depositors whose deposits are payable only outside of the U.S.), and the parent BHC, with respect to any extensions of credit they have made to such insured depository institution. *Federal Home Loan Bank System —* The FHLB offers credit to its members, which include savings banks, commercial banks, insurance companies, credit unions, and other entities. The FHLB system is currently divided into eleven federally chartered regional FHLBs that are regulated by the Federal Housing Finance Agency. The Bank is a member and owns capital stock in the FHLB Cincinnati. The amount of capital stock the Bank must own to maintain its membership depends on its balance of outstanding advances. It is required to acquire and hold shares in an amount at least equal to 1% of the aggregate principal amount of its unpaid single-family, residential real estate loans and similar obligations at the beginning of each year, or 1/20th of its outstanding advances from the FHLB, whichever is greater. Advances are secured by pledges of loans, mortgage backed securities, and capital stock of the FHLB. FHLBs also purchase mortgages in the secondary market through their Mortgage Purchase Program,. The Bank has never sold loans to the Mortgage Purchase Program. In the event of a default on an advance, the Federal Home Loan Bank Act establishes priority of the FHLB’s claim over various other claims. If an FHLB falls below its minimum capital requirements, the FHLB may seek to require its members to purchase additional capital stock of the FHLB. If problems within the FHLB system were to occur, it could adversely affect the pricing or availability of advances, the amount and timing of dividends on capital stock issued by FHLB Cincinnati to its members, or the ability of members to have their FHLB capital stock redeemed on a timely basis. Congress continues to consider various proposals that could establish a new regulatory structure for the FHLB system, as well as for other government-sponsored entities. The Bank cannot predict at this time, which, if any, of these proposals may be adopted or what effect they would have on the Bank’s business. *Federal Reserve System —* Under regulations of the FRB, the Bank is required to maintain noninterest-earning reserves against its transaction accounts (primarily NOW and regular checking accounts). The Bank is in compliance with the foregoing reserve requirements. Required reserves must be maintained in the form of vault cash, a depository account at the FRB, or a pass-through account as defined by the FRB. The balances maintained to meet the reserve requirements imposed by the FRB may be used to satisfy liquidity requirements imposed by the FDIC. The Bank is also authorized to borrow from the FRB discount window. *Loans to One Borrower —* Under current limits, loans and extensions of credit outstanding at one time to a single borrower and not fully secured generally may not exceed 15% of the institution’s unimpaired capital and unimpaired surplus. Loans and extensions of credit fully secured by certain readily marketable collateral may represent an additional 10% of unimpaired capital and unimpaired surplus. ### Capital Adequacy Requirements *Capital Guidelines —* The Company and the Bank are subject to capital regulations in accordance with Basel III, as administered by banking regulators. Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators, including prompt corrective action as described below, that, if undertaken, could have a direct material effect on Republic’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items, as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators regarding components, risk weightings, and other factors. Banking regulators have categorized the Bank as well-capitalized. For purposes of determining if prompt corrective action is called for, the regulations in accordance with Basel III define “well capitalized” as a 10.0% Total Risk-Based Capital ratio, a 6.5% Common Equity Tier 1 Risk-Based Capital ratio, an 8.0% Tier 1 Risk-Based Capital ratio, and a 5.0% Tier 1 Leverage ratio. Additionally, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, the Company and Bank must hold a capital conservation buffer of 2.5% composed of Common Equity Tier 1 Risk-Based Capital above their minimum risk-based capital requirements. As of December 31, 2022 and 2021, the Company’s capital ratios\* were as follows: | ​ ​ December 31, (dollars in thousands) ​ Total capital to risk-weighted assets | ​ ​ ​ ​ | ​ ​ 2022 Amount ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Ratio ​ ​ ​ ​ | ​ ​ 2021 Amount ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Ratio ​ ​ ​ ​ | | --- | --- | ---: | --- | ---: | ---: | --- | ---: | | Republic Bancorp, Inc. | **​** | **$941,865** | | 17.92% | $879,310 | | 17.48% | | Republic Bank & Trust Company | **​** | **904,592** | | **17.23** ​ | 862,637 | | 17.16 ​ | | ​ | ​ | ​ ​ | ​ | **​** ​ | ​ ​ | ​ | ​ ​ | | **Common equity tier 1 capital to risk-weighted assets** | **​** | **​** **​** | **​** | **​** ​ | ​ ​ | ​ | ​ ​ | | Republic Bancorp, Inc. | **​** | **$877,735** | | 16.70% | $824,326 | | 16.39% | | Republic Bank & Trust Company | **​** | **840,462** | | **16.01** ​ | 807,653 | | 16.07 ​ | | ​ | ​ | ​ ​ | ​ | **​** ​ | ​ ​ | ​ | ​ ​ | | **Tier 1 (core) capital to risk-weighted assets** | **​** | **​** **​** | **​** | **​** ​ | ​ ​ | ​ | ​ ​ | | Republic Bancorp, Inc. | **​** | **$877,735** | | 16.70% | $824,326 | | 16.39% | | Republic Bank & Trust Company | **​** | **840,462** | | **16.01** ​ | 807,653 | | 16.07 ​ | | ​ | ​ | ​ ​ | ​ | **​** ​ | ​ ​ | ​ | ​ ​ | | **Tier 1 leverage capital to average assets** | **​** | **​** **​** | **​** | **​** ​ | ​ ​ | ​ | ​ ​ | | Republic Bancorp, Inc. | **​** | **$877,735** | | 14.81% | $824,326 | | 13.36% | | Republic Bank & Trust Company | **​** | **840,462** | | **14.09** ​ | 807,653 | | 13.11 ​ | *\* The Company and the Bank elected to defer the impact of CECL on regulatory capital. The deferral period is five years, with the total estimated CECL impact 100% deferred for 2020 and 2021, then phased in over the next three years of 2022 through 2024. If not for this election, the Company’s regulatory capital ratios would have been approximately 10 basis points and 12 basis points lower than those presented in the table above as of December 31, 2022 and 2021.* *Corrective Measures for Capital Deficiencies —* The banking regulators are required to take “prompt corrective action” with respect to capital deficient institutions. Agency regulations define, for each capital category, the levels at which institutions are well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. A bank is undercapitalized if it fails to meet any one of the ratios required to be adequately capitalized. Undercapitalized, significantly undercapitalized, and critically undercapitalized institutions are required to submit a capital restoration plan, which must be guaranteed by the holding company of the institution. In addition, agency regulations contain broad restrictions on certain activities of undercapitalized institutions including asset growth, acquisitions, branch establishment, and expansion into new lines of business. With certain exceptions, an insured depository institution is prohibited from making capital distributions, including dividends, and is prohibited from paying management fees to control persons if the institution would be undercapitalized after any such distribution or payment. A bank’s capital classification will also affect its ability to accept brokered deposits. Under banking regulations, a bank may not lawfully accept, roll over, or renew brokered deposits unless it is either well capitalized or it is adequately capitalized and receives a waiver from its applicable regulator. If a banking institution’s capital decreases below acceptable levels, bank regulatory enforcement powers become more enhanced. A significantly undercapitalized institution is subject to mandated capital raising activities, restrictions on interest rates paid and transactions with affiliates, removal of management, and other restrictions. Banking regulators have limited discretion in dealing with a critically undercapitalized institution and are normally required to appoint a receiver or conservator. Banks with risk-based capital and leverage ratios below the required minimums may also be subject to certain administrative actions, including the termination of deposit insurance upon notice and hearing, or a temporary suspension of insurance without a hearing if the institution has no tangible capital. In addition, a BHC may face significant consequences if its bank subsidiary fails to maintain the required capital and management ratings, including entering into an agreement with the FRB that imposes limitations on its operations and may even require divestitures. Until such deficiencies are corrected, the FRB may impose any limitations or conditions on the conduct or activities of the FHC and its affiliates that the FRB determines are appropriate, and the FHC may not commence any additional activity or acquire control of any company under Section 4(k) of the BHCA without prior FRB approval. Unless the period for compliance is extended by the FRB, if an FHC fails to correct deficiencies in maintaining its qualification for FHC status within 180 days of notice to the FRB, the FRB may order divestiture of any depository institution controlled by the company. A company may comply with a divestiture order by ceasing to engage in any financial or other activity that would not be permissible for a BHC that has not elected to be treated as an FHC. The Company is currently classified as an FHC. Under FDICIA, each federal banking agency has prescribed, by regulation, non-capital safety and soundness standards for institutions under its authority. These standards cover internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings, and stock valuation. An institution that fails to meet these standards must develop a plan acceptable to the agency, specifying the steps that the institution will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory sanctions. ### Other Regulation and Legislative Initiatives Any change in the laws and regulations affecting the Bank’s operations is not predictable and could affect the Bank’s operations and profitability. The U.S. Congress and state legislative bodies also continually consider proposals for altering the structure, regulation, and competitive relationships of financial institutions. It cannot be predicted whether, or in what form, any of these potential proposals or regulatory initiatives will be adopted, the impact the proposals will have on the financial institutions industry or the extent to which the business or financial condition and operations of the Company and its subsidiaries may be affected. ### Statistical Disclosures The statistical disclosures required by Part I Item 1 “*Business”* are located under Part II Item 7 “*Management’s Discussion and Analysis of Financial Condition and Results of Operations.”* ## Risk factors As filed, 66,897 characters. ### FACTORS THAT MAY AFFECT FUTURE RESULTS An investment in Republic’s common stock is subject to risks inherent in its business. The following are the material risk factors that impact us of which we are currently aware. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all the other information included in this filing. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially and adversely affect its business, financial condition, and results of operations in the future. The value or market price of the Company’s common stock could decline due to any of these identified or other risks, and an investor could lose all or part of their investment. There are factors, many beyond the Company’s control, which may significantly change the results or expectations of the Company. Some of these factors are described below, however, many are described in the other sections of this Annual Report on Form 10-K. ### REGULATORY AND LEGAL RISKS *The Bank’s RPG products represent a significant legal, compliance and regulatory risk, and if RB&T fails to comply with all statutory and regulatory requirements, it could have a material negative impact on earnings.* Federal and state laws and regulations govern numerous matters relating to the offering of consumer loan products and consumer deposit. Failure to comply with disclosure requirements or with laws relating to the permissibility of interest rates and fees charged could have a material negative impact on earnings. In addition, failure to comply with applicable laws and regulations could also expose RB&T to civil money penalties and litigation risk, including shareholder actions. Various states and consumer groups have, from time to time, questioned the fairness of the products offered by RPG. Initiatives at the federal and state level, including by governmental agencies and consumer groups, could result in regulatory, governmental, or legislative action or litigation, which could have a material adverse effect on the Company’s RPG operations. If the Company can no longer offer or must substantially alter its RPG products, it will have a material adverse effect on its profits. *The Bank’s RPG products represent a significant third-party management risk, and if the Bank’s third-party service providers fail to comply with all the statutory and regulatory requirements for these products or if the Bank fails to properly monitor its third-party service providers offering these products, it could have a material negative impact on earnings.* RPG and its third-party service providers operate in a highly regulated environment and deliver products and services that are subject to strict legal and regulatory requirements. Failure by the Bank’s third-party service providers or failure of the Bank to properly monitor the compliance of its third-party service providers with laws and regulations could result in fines and penalties that materially and adversely affect the Bank’s earnings. Such penalties could also include the discontinuance of any or all third-party program manager products and services. *The Bank’s “Overdraft Honor” program represents a significant business risk, and if the Bank terminated the program, it would materially impact the earnings of the Bank. There can be no assurance that Congress, the Bank’s regulators, or others, will not impose additional limitations on this program or prohibit the Bank from offering the program.* The Bank’s “Overdraft Honor” program permits eligible customers to opt into the Bank’s overdraft program and overdraft their checking accounts up to a limit that is calculated and assigned each day for the Bank’s customary overdraft fee(s). Generally, to be eligible for the Overdraft Honor program, customers must qualify for one of the Bank’s traditional checking products when the account is opened and have recurring deposit activity. During the first 30 days after an account is opened, a client may participate in the Overdraft Honor program with a small, fixed limit amount depending upon the account type. After the initial 30 day period a daily overdraft limit is calculated based upon deposits and other activity in the account. If an overdraft occurs, the Bank may pay the overdraft, at its discretion, up to the client’s individual overdraft limit. Under regulatory guidelines, customers utilizing the Overdraft Honor program may remain in overdraft status for no more than 60 days before it must be closed and charged off. *Loans originated through the Bank’s Consumer Direct and Correspondent Lending channels subject the Bank to regulatory and legal risks that the Bank does not have through its historical origination and servicing channels.* Loans serviced outside the Bank’s traditional footprint also subject the Bank to various state-level servicing laws and regulations that are different than those within the Bank’s traditional footprint and may impact the Bank’s ability to collect a deficiency and timely foreclose on a loan that becomes delinquent. Failure by the Bank to properly comply with these various state level laws and regulations could subject the Bank to fines and penalties that materially and adversely affect the Bank’s earnings. Such penalties could also include the discontinuance of the Consumer Direct Channel or Corresponding Lending operations. Failure to appropriately manage these additional risks could lead to additional regulatory and compliance risks, as well as create burdens that reduce profitability or cause operating losses from these origination channels. *The Company is significantly impacted by the regulatory, fiscal, and monetary policies of federal and state governments that could negatively impact the Company’s liquidity position and earnings. These policies can materially affect the value of the Company’s financial instruments and can also adversely affect the Company’s clients and their ability to repay their outstanding loans. In addition, failure to comply with laws, regulations or policies, or adverse examination findings, could result in significant penalties, negatively impact operations, or result in other sanctions against the Company.* The Board of Governors of the Federal Reserve System regulates the supply of money and credit in the U.S. Its policies determine, in large part, the Company’s cost of funds for lending and investing and the return the Company earns on these loans and investments, all of which impact net interest margin. The Company and the Bank are heavily regulated at both the federal and state levels and are subject to various routine and non-routine examinations by federal and state regulators. This regulatory oversight is primarily intended to protect depositors, the Deposit Insurance Fund, and the banking system, not the stockholders of the Company. Changes in policies, regulations and statutes, or the interpretation thereof, could significantly impact the product offerings of Republic causing the Company to terminate or modify its product offerings in a manner that could materially adversely affect the earnings of the Company. Federal and state laws and regulations govern numerous matters including changes in the ownership or control of banks and bank holding companies, maintenance of adequate capital and the financial condition of a financial institution, permissible types, amounts and terms of extensions of credit and investments, permissible non-banking activities, the level of reserves against deposits and restrictions on dividend payments. Various federal and state regulatory agencies possess cease and desist powers, and other authority to prevent or remedy unsafe or unsound practices or violations of law by banks subject to their regulations. The FRB possesses similar powers with respect to bank holding companies. These, and other restrictions, can limit in varying degrees, the way Republic conducts its business. Federal and state laws and regulations govern numerous matters relating to the offering of banking products. Failure to comply with disclosure requirements or with laws, including those relating to the permissibility of interest rates and fees charged, could have a material negative impact on earnings. In addition, failure to comply with applicable laws and regulations could also expose RB&T to civil money penalties and litigation risk, including shareholder actions. Initiatives of the current President and the current Congress, along with actions of the states, governmental agencies, and consumer groups, could result in regulatory, governmental, or legislative action or litigation, which could have a material adverse effect on the Company’s operations. *Use of third parties creates a third-party management risk. If RB&T’s third-party service providers fail to comply with all the statutory and regulatory requirements for these products or if RB&T fails to properly monitor its third-party service providers offering these products, it could have a material negative impact on earnings.* RB&T and its third-party service providers operate in a highly regulated environment and deliver products and services that are subject to strict legal and regulatory requirements. Failure by RB&T’s third-party service providers or failure of RB&T to properly monitor the compliance of its third-party service providers with laws and regulations could result in fines and penalties that materially and adversely affect RB&T’s earnings. *The Company may be subject to examinations by taxing authorities that could adversely affect results of operations.* In the normal course of business, the Company may be subject to examinations from federal and state taxing authorities regarding the amount of taxes due in connection with investments it has made and the businesses in which the Company is engaged. Federal and state taxing authorities have continued to be aggressive in challenging tax positions taken by financial institutions. The challenges made by taxing authorities may result in adjustments to the timing or amount of taxable income or deductions or the allocation of income among tax jurisdictions. If any such challenges are made and are not resolved in the Company’s favor, they could have an adverse effect on the Company’s financial condition and results of operations. *Transactions between the Company and its insurance subsidiary, the Captive, may be subject to certain IRS responsibilities and penalties.* The Company’s Captive is a Nevada-based, wholly owned insurance subsidiary of the Company that provides property and casualty insurance coverage to the Company and the Bank as well as a group of other third-party insurance captives for which insurance may not be available or economically feasible. The Treasury Department of the United States and the IRS by way of Notice 2016-66 have stated that transactions believed similar in nature to transactions between the Company and the Captive may be deemed “transactions of interest” because such transactions may have potential for tax avoidance or evasion. If the IRS ultimately concludes such transactions do create tax avoidance or evasion issues, the Company could be subject to the payment of penalties and interest. ### CREDIT RISKS *RAs represent a significant credit risk, and if the Bank is unable to collect a significant portion of its RAs, it would materially, negatively impact earnings.* There is credit risk associated with an RA because the funds are disbursed to the taxpayer customer prior to the Bank receiving the taxpayer customer’s refund as claimed on the return. Management annually reviews and revises the RA’s underwriting criteria. These changes in the RA’s underwriting criteria do not ensure positive results and could have an overall material negative impact on the performance of the RA and therefore on the Company’s financial condition and results of operations. Because there is no recourse to the taxpayer customer if the RA is not paid off by the taxpayer customer’s tax refund, the Bank must collect all its payments related to RAs through the refund process. Losses will generally occur on RAs when the Bank does not receive payment due to several reasons, such as IRS revenue protection strategies, including audits of returns, errors in the tax return, tax return fraud and tax debts not previously disclosed to the Bank during its underwriting process. While the Bank’s underwriting during the RA approval process takes these factors into consideration based on prior years’ payment patterns, if the IRS significantly alters its revenue protection strategies, if refund payment patterns for a given tax season meaningfully change, if the federal government fails to timely deliver refunds, or if the Bank is incorrect in its underwriting assumptions, the Bank could experience higher loan loss provisions above those projected. The provision for loan losses is a significant determining factor of the RPG operations’ overall net earnings. In addition, the federal government, specifically as a result of the PATH Act, mandates that tax refunds for tax returns with certain characteristics cannot receive their corresponding refunds before February 15th each year. Substantially all the tax returns driving TRS’s product volume meet the criteria of those subject to this later funding under the PATH Act. These funding delays effectively restrict the Bank’s ability to make in-season modifications to its RA underwriting model based on then-current year tax refund funding patterns, because the substantial majority of all RAs are issued prior to February 15. As a result, the underwriting criteria that TRS establishes for the RA product at the beginning of the tax season could have a material negative impact on the performance of the RA before mitigating revisions can be made. *ERAs represent a significant credit risk, and if RB&T is unable to collect a significant portion of its ERAs, it would materially, negatively impact earnings.* In addition to all the risks associated with its other RA products, ERAs carry additional credit risks. ERAs are substantially all originated during December prior to the upcoming first quarter tax season with the expectation the taxpayer client will return to the Bank’s Tax Provider during the first quarter tax filing season to file the taxpayer’s tax return, allowing the Bank to potentially receive the taxpayer’s tax refund from the federal government to repay the ERA with the Bank. In addition, TRS originates ERAs without the taxpayer client's final fiscal year taxable income documentation, *e.g.*, W-2, and the filing of the taxpayer’s actual federal tax return. As with other RAs, the Bank has no recourse to the borrower if the ERA is not repaid by the taxpayer client’s tax refund. If the taxpayer client fails to return to the Bank’s Tax Provider or if the taxpayer client’s final tax return is substantially different than the early season estimate used to make the ERA, ERA losses could be substantially higher than estimated, which could cause a material adverse impact to TRS’s earnings and the overall results of operations of the Company. *Consumer loans originated through the RCS segment represent a higher credit risk.* Loss rates for some RCS products have consistently been significantly higher than Traditional Bank loss rates for unsecured consumer loans. A material increase in RCS loan charge-offs would have a material adverse effect on the Bank’s financial condition and results of operations and, if such increase in RCS loan charge-offs persisted for an extended period of time, could lead to the discontinuation of the underlying products. *Consumer installment loans originated for sale through the RCS segment represent a higher risk of loss on sale.* RCS originates its installment loan product for sale and sells this product at a loss if the originated loan defaults on its first payment to RCS, which is generally 16 days following the loan’s origination date. A material increase in first payment defaults for RCS installment loans would result in a material increase in these loans being sold at a loss. Such an increase could have a material adverse impact on the program, and if such losses persisted for an extended period of time, it could lead to the discontinuation of the underlying product. *Management’s changes to RPG product parameters could have a material negative impact on the performance of the RPG products.* In response to changes in the legal, regulatory, and competitive environment, management annually reviews and revises product parameters. Further changes in product parameters do not ensure positive results and could have an overall material negative impact on the performance of the product and therefore on the Company’s financial condition and results of operations. *The Warehouse Lending business is subject to numerous risks that may result in losses.* Risks associated with warehouse loans include, without limitation, (i) credit risks relating to the mortgage bankers that borrow from the Bank, including but not limited to bankruptcy, (ii) the risk of intentional misrepresentation or fraud by any of such mortgage bankers and their third-party service providers, (iii) changes in the market value of mortgage loans originated by the mortgage banker during the time in warehouse, the sale of which is the expected source of repayment of the borrowings under a warehouse line of credit, or (iv) unsalable or impaired mortgage loans so originated, which could lead to decreased collateral value and the failure of a purchaser of the mortgage loan to purchase the loan from the mortgage banker. Failure to mitigate these risks could have a material adverse impact on the Bank’s financial statements and results of operations. *The ACLL could be insufficient to cover the Bank’s actual loan losses.* The Bank makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of its loans. In determining the amount of the ACLL, among other things, the Bank reviews its loss and delinquency experience, economic conditions, etc. If its assumptions are incorrect, the ACLL may not be sufficient to cover losses inherent in its loan portfolio, resulting in additions to its ACLL. In addition, regulatory agencies periodically review the ACLL and may require the Bank to increase its Provision or recognize further loan charge-offs. A material increase in the ACLL or loan charge-offs would have a material adverse effect on the Bank’s financial condition and results of operations. *Deterioration in the quality of the Traditional Banking loan portfolio may result in additional charge-offs, which would adversely impact the Bank’s operating results.* When borrowers default on their loan obligations, it may result in lost principal and interest income and increased operating expenses associated with the increased allocation of management time and resources associated with the collection efforts. In certain situations where collection efforts are unsuccessful or acceptable “work-out” arrangements cannot be reached or performed, the Bank may charge-off loans, either in part or in whole. Additional charge-offs will adversely affect the Bank’s operating results and financial condition. *Loans originated through the Bank’s Consumer Direct and Correspondent Lending channels subject the Bank to credit risks that the Bank does not have through its historical origination and servicing channels.* The dollar volume of loans originated through the Bank’s Consumer Direct and Correspondent Lending channels and loans serviced as the result of the Correspondent Lending channel are primarily out-of-market. Loans originated out of the Bank’s market footprint inherently carry additional credit risk, as the Bank will experience an increase in the complexity of the customer authentication requirements for such loans. Failure to appropriately identify the end-borrower for such loans could lead to additional fraud losses. *The Bank’s financial condition and earnings could be negatively impacted to the extent the Bank relies on borrower information that is false, misleading, or inaccurate.* The Bank relies on the accuracy and completeness of information provided by vendors, clients, and other parties in deciding whether to extend credit and/or enter transactions with other parties. If the Bank relies on incomplete and/or inaccurate information, the Bank may incur additional charge-offs that adversely affect its operating results and financial condition. *The Bank uses appraisals as part of the decision process to make a loan for, or secured by, real property. In addition, appraisals are used to value a loan if it becomes “collateral dependent” as a problem credit. Appraisals do not ensure the value of the real property collateral.* As part of the new loan process or in valuing a collateral dependent problem credit, the Bank generally requires an independent third-party appraisal of the real property. An appraisal, however, is only an estimate of the value of the property at the time the appraisal is made. An error in fact or judgment could adversely affect the reliability of the appraisal. In addition, events occurring after the appraisal may cause the value of the real estate to decrease. As a result of any of these factors, the value of collateral securing a loan may be less than supposed, and if a default occurs, the Bank may not recover the outstanding balance of the loan. Approximately 27% of the Bank’s portfolio is secured by residential real estate and 35% is secured by commercial real estate properties. Both of these loan types are heavily dependent upon third-party appraisals in the decision process Additional charge-offs in either of these portfolios as a result of inaccurate appraisals could adversely affect the Bank’s operating results and financial condition. *The Bank is exposed to risk of environmental liabilities with respect to properties to which it takes title.* In the course of its business, the Bank may own or foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties. The Bank may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if the Bank is the owner or former owner of a contaminated site, the Bank may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. These costs and claims could adversely affect the Bank. *The Bank holds a significant amount of BOLI, which creates credit risk relative to the insurers and liquidity risk relative to the product.* As of December 31, 2022, the Bank held BOLI on certain employees. The eventual repayment of the cash surrender value is subject to the ability of the various insurance companies to pay death benefits or to return the cash surrender value to the Bank if needed for liquidity purposes. The Bank continually monitors the financial strength of the various insurance companies that carry these policies. However, any one of these companies could experience a decline in financial strength, which could impair its ability to pay benefits or return the Bank’s cash surrender value. If the Bank needs to liquidate these policies for liquidity purposes, it would be subject to taxation on the increase in cash surrender value and penalties for early termination, both of which would adversely impact earnings. ### OPERATIONAL AND STRATEGIC RISKS *RPG products represent a significant operational risk and rely heavily on the accuracy and timeliness of data received from the Bank’s third party marketer and servicer providers.* To conduct its RPG businesses, the Bank must implement and test new systems, train associates for new products and changes to existing products, and process information and data received from third party marketer and servicer providers. Due to the high volume of transaction activity across all the RPG product lines, the Bank relies heavily on the communications and information systems of the Bank as well as the communications and information systems of its third party providers to operate these products. Any failure, sustained interruption, or breach in security, including the cyber security, of these systems could result in failures or disruptions in client relationship management and other systems. If the Bank were unable to properly service this business as a result of inaccurate or untimely data from its third party marketer and servicer providers, it could materially impact earnings. *RCS revenues and earnings are highly concentrated in its line-of-credit products.* The discontinuation of these line-of-credit products, or a substantial change in the terms under which these products are offered, would have a material adverse effect on the Company’s financial condition and results of operations. *Many of the RCS programs are heavily reliant on the ability of the Bank to sell all or a significant portion of the loans originated to a third party in order to fund the programs. If the Bank were unable to sell these loans to a third-party purchaser for any reason, RCS would likely cease originating new loans under that product line, which would significantly and negatively impact the overall earnings of RCS.* RCS originates installment loans and lines of credits through its various product lines. For some of its installment products, RCS sells 100% of the balances after its origination. For its line of credit products, the Bank sells a 90% or 95% participation in the product after origination, depending upon the product. If the Bank were unable to sell these loan balances for any reason, RCS would likely cease originating new loans for that particular product as soon as practical under the terms of its various agreements. The inability of RCS to originate new loans under any of its higher-yield RCS products would cause a material adverse impact to the results of operation of RCS. In addition, the agreement between the Bank and the consumer for many of its line of credit products do not allow RCS to stop originating new customer draws on that product if RCS chooses to exit the product line. For these products, if the Bank were unable to sell these balances for any reason, RCS would retain 100% of the balances it originates on those products. In those circumstances, the credit risk for the Bank would increase substantially as it would then be responsible for 100% of any charge-offs for these loans, as opposed to 5% or 10% of the charge-offs when it is able to sell participating balances to a third party purchaser. While the Bank would also be retaining 100% of the revenue from these balances as well, there is no guarantee the additional revenue would offset the charge-offs in the event of an economic downturn. Such an increase in charge-offs could have a material adverse impact on the results of operations of the RCS segment and the Company, as a whole. *The Bank is highly dependent upon programs administered by Freddie Mac and Fannie Mae. Changes in existing U.S. government-sponsored mortgage programs or servicing eligibility standards could materially and adversely affect its business, financial position, results of operations, and cash flows.* The Bank’s ability to generate revenues through mortgage loan sales to institutional investors depends significantly on programs administered by Freddie Mac and Fannie Mae. These entities play powerful roles in the residential mortgage industry, and the Bank has significant business relationships with them. The Bank’s status as an approved seller/servicer for both is subject to compliance with their selling and servicing guides. Any discontinuation of, or significant reduction or material change in, the operation of Freddie Mac or Fannie Mae or any significant adverse change in the level of activity in the secondary mortgage market or the underwriting criteria of Freddie Mac or Fannie Mae would likely prevent the Bank from originating and selling most, if not all, of its mortgage loan originations. *Prepayment of loans may negatively impact the Bank’s business.* The Bank’s clients may prepay the principal amount of their outstanding loans at any time. The speeds at which such prepayments occur, as well as the size of such prepayments, are within the Bank clients’ discretion. If clients prepay the principal amount of their loans, and the Bank is unable to lend those funds to other clients or invest the funds at the same or higher interest rates, the Bank’s interest income will be reduced. A significant reduction in interest income would have a negative impact on the Bank’s results of operations and financial condition. *The planned discontinuance of LIBOR presents risks to the Company because the Bank uses LIBOR as a reference rate for a material portion of its financial instruments.* In July 2017, the FCA, the authority regulating LIBOR, along with various other regulatory bodies, announced that LIBOR would likely be discontinued at the end of 2021. Subsequent to that announcement, in November 2020, the FCA announced that many tenors of LIBOR would continue to be published through June 2023. In compliance with regulatory guidance, the Bank discontinued referencing LIBOR for new financial instruments during 2021 and chose SOFR to be its primary alternative reference rate for most transaction types upon the discontinuance or unavailability of LIBOR. Risks associated with the Bank’s transition from LIBOR to SOFR or other alternative reference rates include the following: - SOFR is viewed as a near risk free rate because it is derived from rates on overnight U.S. Treasury repurchase transactions. These transactions are essentially overnight loans secured by U.S. Treasury securities, thus essentially risk free. Changing to SOFR or a similar rate could result in a value transfer between contracting parties to instruments originally based on LIBOR. Historically, in periods of economic or financial industry stress, near risk free rates that are analogous to SOFR have been relatively stable. In contrast, LIBOR, which is designed to reflect the credit risk of banks, has widened relative to near risk free rates, reflecting increased uncertainty regarding the credit-worthiness of banks. Accordingly, assuming that SOFR will behave like its historical equivalents, an instrument that transitions from LIBOR to SOFR may not yield identical economic outcomes for each contracting party to an instrument had the instrument continued to reference LIBOR. Similarly, SOFR, because it is near risk free, tends to be a lower rate than LIBOR. To address these differences between LIBOR and SOFR, certain industry recommended LIBOR fallback provisions include a concept of an adjustment spread that is applied when a LIBOR-based contract transitions to SOFR and that is calculated based on a five-year median look-back of the historical spot difference between the applicable LIBOR tenor and the applicable SOFR tenor. However, because any such adjustment spread will be based on a historical median, it is likely that the adjustment spread may not reflect the spot difference between LIBOR and SOFR at certain points in time and there may be a value transfer between the contracting parties over the life of the instrument because the all-in rate applied to a contract, even taking into account the spread adjustment, might have behaved differently over the life of the instrument in the absence of LIBOR cessation. Any value transfer could be financially adverse to the Bank or to its counterparties. Repercussions from a change in reference rate would likely include changes to the yield on, and value of, loans or securities held by the Bank, and amounts received and paid on derivative instruments the Bank has contracted. Any theoretical benefit to the Bank could result in counterparty dissatisfaction, which, in turn could lead to litigation, potentially as class actions, or other adverse consequences, including dissatisfied clients or counterparties, resulting in loss of business. As a result, over the life of a transaction that transitions from LIBOR to a new reference rate, the Bank’s obligations to its counterparties or vice versa and the yield the Bank contractually receives or pays may change from that which would have resulted from a continuation of LIBOR. - Transitioning from LIBOR to alternative indexes may result in operational errors during the transition such that the replacement index is not applied in a timely manner or is incorrectly applied. This is particularly true given the volume of contracts that will require transition, the variety of potential approaches to transition, and the possible short duration of the transition period. It is also possible that LIBOR quotes will become unavailable prior to the currently anticipated cessation date. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified. These risks may also be increased due to the shorter time for preparing for the transition. The Bank’s failure to successfully implement the transition from LIBOR to alternative indexes could result in reduced interest income on its loans that reprice with LIBOR, and/or increased regulatory scrutiny and actions by regulators, including fines and other supervisory sanctions. *The Company may be adversely affected by the soundness of other financial institutions.* Financial services institutions are interrelated because of trading, clearing, counterparty, or other relationships. The Company has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose the Company to credit risk in the event of a default by a counterparty or client. In addition, the Company’s credit risk may be exacerbated when the collateral held by the Company cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company. Any such losses could have a material adverse effect on the Company’s financial condition and results of operations. *The Company is dependent upon the services of key qualified personnel.* The Company is dependent upon the ability and experience of a number of its key management personnel who have substantial experience with Company operations, the financial services industry, and the markets in which the Company offers services. It is possible that the loss of the services of one or more of its key personnel would have an adverse effect on operations. *The Company’s operations could be impacted if its third-party service providers experience difficulty*. The Company depends on several relationships with third-party service providers, including core systems processing and web hosting. These providers are well-established vendors that provide these services to a significant number of financial institutions. If these third-party service providers experience difficulty or terminate their services and the Company is unable to replace them with other providers, its operations could be interrupted, which would adversely impact its business. *The Company’s operations, including third-party and client interactions, are increasingly done via electronic means, and this has increased the risks related to cyber security.* The Company is exposed to the risk of cyber-attacks in the normal course of business and incurs substantial cyber security protection costs. In general, cyber incidents can result from deliberate attacks or unintentional events. Management has observed an increased level of attention in the industry focused on cyber-attacks that include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such as by causing denial-of-service attacks on websites. Cyber-attacks may be carried out directly against the Company, or against the Company’s clients or vendors by third parties or insiders using techniques that range from highly sophisticated efforts to electronically circumvent network security or overwhelm websites to more traditional intelligence gathering and social engineering aimed at obtaining information necessary to gain access. While the Company has not incurred any material losses related to cyber-attacks, the Bank may incur substantial costs and suffer other negative consequences if the Bank, the Bank’s clients, or one of the Bank’s third-party service providers fall victim to successful cyber-attacks. Such negative consequences could include: remediation costs for stolen assets or information; system repairs; consumer protection costs; increased cyber security protection costs that may include organizational changes; deploying additional personnel and protection technologies, training employees, and engaging third-party experts and consultants; lost revenues resulting from unauthorized use of proprietary information or the failure to retain or attract clients following an attack; litigation and payment of damages; and reputational damage adversely affecting client or investor confidence. *The Company’s information systems may experience an interruption that could adversely impact the Company’s business, financial condition, and results of operations*. The Company relies heavily on communications and information systems to conduct its business. Any failure or interruption of these systems could result in failures or disruptions in client relationship management, general ledger, deposit, loan and other systems. While the Company has policies and procedures designed to prevent or limit the impact of the failure or interruption of information systems, there can be no assurance that any such failures or interruptions will not occur or, if they do occur, that they will be adequately addressed. The occurrences of any failures or interruptions of the Company’s information systems could damage the Company’s reputation, result in a loss of client business, subject the Company to additional regulatory scrutiny, or expose the Company to civil litigation and possible financial liability, any of which could have a material adverse effect on the Company’s financial condition and results of operations. *New lines of business or new products and services may subject the Company to additional risks.* From time to time, the Company may develop and grow new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, the Company may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of the Company’s system of internal control. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, results of operations, and financial condition. All service offerings, including current offerings and those that may be provided in the future, may become riskier due to changes in economic, competitive, and market conditions beyond the Company’s control. *The proposed acquisition and integration of CBank pursuant to the CBank Agreement includes certain acquisition-related risks to the Company and the Bank.* These risks include: - the possibility that some or all of the anticipated benefits of the proposed acquisition will not be realized or will not be realized within the anticipated timelines; - the risk that integration of CBank’s operations with those of the Company will be materially delayed or will be more costly or difficult than expected; the parties’ inability to meet expectations regarding the timing, completion and accounting and tax treatments of the acquisition; - the failure to satisfy other conditions to completion of the acquisition, including receipt of required regulatory and other approvals; the failure of the proposed transaction to close for any other reason; diversion of management's attention from ongoing business operations and opportunities due to the acquisition; - the challenges of integrating and retaining key employees; - the effect of the announcement of the merger on the Bank’s or CBank’s respective customer and employee relationships and operating results; - the possibility that the acquisition may be more expensive to complete than anticipated, including as a result of unexpected factors or events; and - the magnitude and duration of inflation; as well as the results of operations and financial condition of the Company following the acquisition. *The Company’s ability to successfully complete acquisitions will affect its ability to grow and compete effectively in its market footprint*. The Company has announced plans to pursue a policy of strategic growth through acquisitions to supplement organic growth. The Company’s efforts to acquire other financial institutions and financial service companies or branches may not be successful. Numerous potential acquirers exist for many acquisition candidates, creating intense competition, which affects the purchase price for which the institution can be acquired. In many cases, the Company’s competitors have significantly greater resources than the Company has, and greater flexibility to structure the consideration for the transaction. The Company may also not be the successful bidder in acquisition opportunities that it pursues due to the willingness or ability of other potential acquirers to propose a higher purchase price or more attractive terms and conditions than the Company is willing or able to propose. The Company intends to continue to pursue acquisition opportunities in its market footprint. The risks presented by the acquisition of other financial institutions could adversely affect the Bank’s financial condition and results of operations. *Successful Company acquisitions present many risks that could adversely affect the Company’s financial condition and results of operations.* An institution that the Company acquires may have unknown asset quality issues or unknown or contingent liabilities that the Company did not discover or fully recognize in the due diligence process, thereby resulting in unanticipated losses. The acquisition of other institutions also typically requires the integration of different corporate cultures, loan and deposit products, pricing strategies, data processing systems and other technologies, accounting, internal audit and financial reporting systems, operating systems and internal controls, marketing programs and personnel of the acquired institution, to make the transaction economically advantageous. The integration process is complicated and time consuming and could divert the Company’s attention from other business concerns and may be disruptive to its clients and the clients of the acquired institution. The Company’s failure to successfully integrate an acquired institution could result in the loss of key clients and employees and prevent the Company from achieving expected synergies and cost savings. Acquisitions and failed acquisitions also result in professional fees and may result in creating goodwill that could become impaired, thereby requiring the Company to recognize further charges. The Company may finance acquisitions with borrowed funds, thereby increasing the Company’s leverage and reducing liquidity, or with potentially dilutive issuances of equity securities. ### ECONOMIC, FINANCIAL MARKETS, INTEREST RATES, AND LIQUIDITY RISKS *Mortgage Banking activities have been adversely impacted by increasing long-term interest rates.* The Company is unable to predict changes in market interest rates. Changes in interest rates can impact the gain on sale of loans, loan origination fees, and loan servicing fees, which account for a significant portion of Mortgage Banking income. A decline in market interest rates generally results in higher demand for mortgage products, while an increase in rates generally results in reduced demand. Generally, if demand increases, Mortgage Banking income will be positively impacted by more gains on sale; however, the valuation of existing mortgage servicing rights will decrease and may result in a significant impairment. A decline in demand for Mortgage Banking products resulting from rising interest rates could also adversely impact other products which are typically cross-sold with mortgages. *Fluctuations in interest rates could reduce profitability.* The Bank’s asset/liability management strategy may not be able to prevent changes in interest rates from having a material adverse effect on results of operations and financial condition. The Bank’s primary source of income is from the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. The Bank expects to periodically experience “gaps” in the interest rate sensitivities of its assets and liabilities, meaning that either interest-bearing liabilities will be more sensitive to changes in market interest rates than interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to the Bank’s position, earnings may be negatively affected. *A flattening or inversion of the interest rate yield curve may reduce profitability.* Changes in the slope of the “yield curve,” or the spread between short-term and long-term interest rates, could reduce the Bank’s net interest margin. Normally, the yield curve is upward sloping, meaning short-term rates are lower than long-term rates. Because the Bank’s interest-bearing liabilities tend to be shorter in duration than its interest-earning assets, when the yield curve flattens or even inverts, the Bank’s net interest margin could decrease as its cost of funds rises higher and at a faster pace than the yield on its interest-earning assets. A rise in the Bank’s cost of interest-bearing liabilities without a corresponding increase in the yield on its interest-earning assets, would have an adverse effect on the Bank’s net interest margin and overall results of operations. *The Bank may be compelled to offer market-leading interest rates to maintain sufficient funding and liquidity levels.* The Bank has traditionally relied on client deposits (with approximately 7% of deposits concentrated with the Bank’s top 20 depositors), brokered deposits, and advances from the FHLB to fund operations. Such traditional sources may be unavailable, limited, or insufficient in the future. If the Bank were to lose a significant funding source, such as a few major depositors, or if any of its lines of credit were cancelled or curtailed, such as its borrowing line at the FHLB, or if the Bank cannot obtain brokered deposits, the Bank may be compelled to offer market-leading interest rates to meet its funding and liquidity needs. Obtaining funds at market-leading interest rates would have an adverse impact on the Company’s net interest income and overall results of operations. *Clients could pursue alternatives to bank deposits, causing the Bank to lose a relatively inexpensive source of funding.* Checking and savings account balances and other forms of client deposits could decrease if clients perceive alternative investments, such as the stock market, as providing superior expected returns. If clients move money out of bank deposits in favor of alternative investments, the Bank could lose a relatively inexpensive source of funds, increasing its funding costs and negatively impacting its overall results of operations. *The loss of large deposit relationships could increase the Bank’s funding costs.* The Bank has several large deposit relationships that do not require collateral; therefore, cash from these accounts can generally be utilized to fund the loan portfolio. If any of these balances are moved from the Bank, the Bank would likely utilize overnight borrowing lines on a short-term basis to replace the balances. The overall cost of gathering brokered deposits and/or FHLB advances, however, could be substantially higher than the Traditional Bank deposits they replace, increasing the Bank’s funding costs and reducing the Bank’s overall results of operations. *Government responses to economic conditions may adversely affect the Company’s operations, financial condition, and earnings*. Enacted financial reform legislation has changed and will continue to change the bank regulatory framework. Ongoing uncertainty and adverse developments in the financial services industry and the domestic and international credit markets, and the effect of new legislation and regulatory actions in response to these conditions, may adversely affect Company operations by restricting business activities, including the Company’s ability to originate or sell loans, modify loan terms, or foreclose on property securing loans. These measures are likely to increase the Company’s costs of doing business and may have a significant adverse effect on the Company’s lending activities, financial performance, and operating flexibility. In addition, these risks could affect the performance and value of the Company’s loan and investment securities portfolios, which also would negatively affect financial performance. *The Company’s common stock generally has a low average daily trading volume, which limits a stockholder’s ability to quickly accumulate or quickly sell large numbers of shares of Republic’s stock without causing wide price fluctuations.* Republic’s stock price can fluctuate widely in response to a variety of factors, as detailed in the next risk factor. A low average daily stock trading volume can lead to significant price swings even when a relatively small number of shares are being traded. *The market price for the Company’s common stock may be volatile.* The market price of the Company’s common stock could fluctuate substantially in the future in response to several factors, including those discussed below. Some of the factors that may cause the price of the Company’s common stock to fluctuate include: - Variations in the Company’s and its competitors’ operating results; - Actual or anticipated quarterly or annual fluctuations in operating results, cash flows, and financial condition; - Changes in earnings estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to the Bank or other financial institutions; - Announcements by the Company or its competitors of mergers, acquisitions, and strategic partnerships; - Additions or departure of key personnel; - The announced exiting of or significant reductions in material lines of business within the Company; - Changes or proposed changes in banking laws or regulations or enforcement of these laws and regulations; - Events affecting other companies that the market deems comparable to the Company; - Developments relating to regulatory examinations; - Speculation in the press or investment community generally or relating to the Company’s reputation or the financial services industry; - Future issuances or re-sales of equity or equity-related securities, or the perception that they may occur; - General conditions in the financial markets and real estate markets in particular, developments related to market conditions for the financial services industry; - Domestic and international economic factors unrelated to the Company’s performance; - Developments related to litigation or threatened litigation; - The presence or absence of short selling of the Company’s common stock; and, - Future sales of the Company’s common stock or debt securities. In addition, the stock market, in general, has historically experienced extreme price and volume fluctuations. This is due, in part, to investors’ shifting perceptions of the effect of changes and potential changes in the economy on various industry sectors. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their performance or prospects. These broad market fluctuations may adversely affect the market price of the Company’s common stock, notwithstanding its actual or anticipated operating results, cash flows, and financial condition. The Company expects that the market price of its common stock will continue to fluctuate due to many factors, including prevailing interest rates, other economic conditions, operating performance, and investor perceptions of the outlook for the Company specifically and the banking industry in general. There can be no assurance about the level of the market price of the Company’s common stock in the future or that investors will be able to resell their shares at times or at prices they find attractive. *The Company’s insiders hold voting rights that give them significant control over matters requiring stockholder approval.* The Company’s Executive Chair/CEO and Vice Chair hold substantial voting authority over the Company’s Class A Common Stock and Class B Common Stock. Each share of Class A Common Stock is entitled to one vote and each share of Class B Common Stock is entitled to ten votes. This group generally votes together on matters presented to stockholders for approval. These actions may include, for example, the election of directors, the adoption of amendments to corporate documents, the approval of mergers and acquisitions, sales of assets, and the continuation of the Company as a registered company with obligations to file periodic reports and other filings with the SEC. Consequently, other stockholders’ ability to influence Company actions through their vote may be limited and the non-insider stockholders may not have sufficient voting power to approve a change in control even if a significant premium is being offered for their shares. Majority stockholders may not vote their shares in accordance with minority stockholder interests. *An investment in the Company’s Common Stock is not an insured deposit*. The Company’s common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in the Company’s common stock is inherently risky for the reasons described in this section and elsewhere in this report and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire the Company’s common stock, you could lose some or all of your investment. ### COMPETITIVE RISKS *Outstanding Warehouse lines of credit and their corresponding earnings could decline due to several factors, such as intense industry competition, declining mortgage demand, and a rising interest rate environment.* With the rise of inflation during 2022, the FOMC implemented a more aggressive and hawkish approach to its monetary policies during 2022 and has signaled these policies could continue into the future until inflation decreases to acceptable levels. Included in its actions are raising the FFTR, ending its quantitative easing program of buying certain types of bonds in the open market, and implementing a quantitative tightening program to reduce the size of its balance sheet by selling certain types of bonds in the market. The FOMC’s signaling of these actions caused market interest rates for U.S. Treasury bonds and mortgages to rise rapidly during the 2022. With the rise in mortgage rates, mortgage refinance activity slowed dramatically during 2022, and Warehouse usage began to decline significantly. Further monetary tightening by the FOMC in 2023 will likely further decrease mortgage demand and Warehouse line usage. In addition, a decrease in usage across the Warehouse industry could also cause competitive pricing pressure on the Bank to lower its pricing to its Warehouse clients in order to maintain higher volumes. The Bank could likely experience decreased earnings on its Warehouse lines of credit during 2023 due to the expected interest rate environment combined with strong industry competition and pricing pressures. Such decreased earnings could materially impact the Company’s results of operations. *The Company may lose Warehouse clients due to mergers and acquisitions in the industry.* The Bank’s Warehouse clients are primarily mortgage companies across the United States. Mergers and acquisitions affecting such clients may lead to an end to the client relationship with the Bank. The loss of a significant number of clients may materially impact the Company’s results of operations. *Mortgage Banking revenue will likely decline due to declining mortgage demand resulting from a rising interest rate environment, which will also lead to more intense industry competition for a shrinking mortgage market.* Mortgage Banking is a significant operating segment of the Company. With the rise of inflation during 2022, the FOMC has implemented a more aggressive and hawkish approach to its monetary policies. Included in its actions are raising the FFTR multiple times, ending its quantitative easing program of buying certain types of bonds in the open market, and implementing a quantitative tightening program by reducing the size of its balance sheet and selling certain types of bonds in the market. The FOMC’s implementation of these actions caused market interest rates for treasury bonds and mortgages to rise rapidly during 2022. With the rise in mortgage rates, mortgage refinance activity slowed dramatically during 2022, and as a result, mortgage origination volume declined significantly. Further monetary tightening by the FOMC in 2023 will likely further decrease mortgage demand. In addition, a decrease in mortgage demand across the mortgage industry could also cause competitive pricing pressure on the Bank to lower its mortgage pricing to maintain its volumes for a shrinking market, further causing its cash gains-as-a-percentage-of-loans-sold to decline. The Bank will likely experience decreased Mortgage Banking revenue during 2023 due to expected rising market interest rates and strong industry competition, housing supply shortages, and pricing pressures. Such decreased earnings could materially impact the Company’s results of operations. ### FINANCIAL REPORTING RISKS *Management has identified material weaknesses in the Company’s internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control, which may result in material misstatements of the Company’s consolidated financial statements or cause the Company to fail to meet its periodic reporting obligations.* Management identified material weaknesses in the Company’s internal control over financial reporting as of December 31, 2022. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses that Management identified were the following: 1\) the Company did not maintain effective controls over the initial implementation of new products offered through third parties within RPG. Specifically, Management identified that an RCS product’s contractual terms were not sufficiently communicated internally, and the controls were not designed to identify and test all relevant transactional data posting to the Company’s financial statements for the product; 2\) the Company did not maintain effective controls over the information and communication as it relates to the reconciliation function. Specifically, the controls were not precisely designed to identify, communicate, resolve, and timely escalate reconciliation issues to the appropriate levels within the organization; and 3\) the Company did not design and maintain effective controls over the financial analysis of RCS products’ yields. Specifically, the Company reviewed the weighted average yield of all RCS products on a segment basis rather than an individual product basis. Management cannot guarantee that the Company’s efforts will remediate these material weaknesses or that additional material weaknesses in the Company’s internal control over financial reporting will not be identified in the future. The Company’s failure to implement and maintain effective internal control over financial reporting could result in errors in the Company’s consolidated financial statements that could result in a restatement of its financial statements and could cause the Company to fail to meet its reporting obligations, any of which could diminish investor confidence and cause a decline in the price of the Company’s Class A common stock. See Item 9A. “Controls and Procedures” for further discussions of the identified material weaknesses and the Company’s remediation efforts. *Republic’s Management is required to evaluate the effectiveness of the Company’s disclosure controls and internal control over financial reporting. If the Company is unable to maintain effective disclosure controls and internal control over financial reporting, investors may lose confidence in the accuracy of the Company’s financial reports.* As a public company, the Company is required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act requires that Management evaluate and determine the effectiveness of the Company’s internal control over financial reporting. Additionally, the Company’s independent registered public accounting firm is required to deliver an attestation report on the effectiveness of the Company’s internal control over financial reporting. In order to maintain and improve the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting, the Company has expended, and anticipates that it will continue to expend, significant resources, including accounting-related costs and significant management oversight. If any of these new or improved controls and systems do not perform as expected, the Company may experience further deficiencies in its controls. The Company’s current controls and any new controls that it develops may become inadequate because of changes in conditions in its business. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm the Company’s results of operations, cause the Company to fail to meet its reporting obligations, and adversely affect the results of periodic management evaluations and the Company’s independent registered public accounting firm’s attestation reports required by the SEC. Ineffective internal control over financial reporting could diminish investor confidence, negatively affect the price of the Company’s Class A common stock, and could result in the Company’s delisting on the Nasdaq. See Item 9A. “Controls and Procedures” for further discussions of the identified material weaknesses. *The Company’s accounting policies and estimates are critical components of the Company’s presentation of its financial statements. Management must exercise judgment in selecting and adopting various accounting policies and in applying estimates. Actual outcomes may be materially different from amounts previously estimated.* Management has identified certain accounting policies and estimates as being critical to the presentation of the Company’s financial statements. These policies are described in Part II Item 7 “*Management’s Discussion and Analysis of Financial Condition and Results of Operations”* under the section titled “*Critical Accounting Policies and Estimates.”* The Company’s management must exercise judgment in selecting and applying many accounting policies and methods to comply with generally accepted accounting principles and reflect management’s judgment of the most appropriate manner to report the Company’s financial condition and results. In some cases, management may select an accounting policy that might be reasonable under the circumstances yet might result in the Company’s reporting different results than would have been reported under a different alternative. Materially different amounts could be reported under different conditions or using different assumptions or estimates. *The Bank may experience goodwill impairment, which could reduce its earnings.* The Bank performed its annual goodwill impairment test during the fourth quarter of 2022 as of September 30, 2022. The evaluation of the fair value of goodwill requires management judgment. If management’s judgment was incorrect and goodwill impairment was later deemed to exist, the Bank would be required to write down its goodwill resulting in a charge to earnings, which could materially, adversely affect its results of operations. ## Properties As filed, 5,029 characters. The Company’s executive offices are located at 601 West Market Street in Louisville, Kentucky. The Company also has principal support and operational functions located in three additional facilities in Louisville at 9600 Brownsboro Road, 661 South Hurstbourne Parkway and 200 South Seventh Street. As of December 31, 2022, Republic had 28 banking centers located in Kentucky, seven banking centers in Florida, three banking centers in Indiana, two banking centers in Tennessee, and two banking centers in Ohio. The location of Republic’s facilities, their respective approximate square footage, and their form of occupancy are as follows: | ​ ​ ​ Bank Offices ​ Kentucky Banking Centers: ​ Louisville Metropolitan Area | ​ ​ ​ ​ ​ | ​ Approximate Square Footage ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Owned (O)/ Leased (L) ​ ​ ​ | | --- | --- | ---: | --- | --- | | 2801 Bardstown Road, Louisville | | 5,000 | | L (1) | | 601 West Market Street, Louisville | ​ | 57,000 | ​ | L (1) | | 661 South Hurstbourne Parkway, Louisville | ​ | 42,000 | ​ | L (1) | | 9600 Brownsboro Road, Louisville | ​ | 42,000 | ​ | L (1) | | 5250 Dixie Highway, Louisville | ​ | 5,000 | ​ | O/L (2) | | 10100 Brookridge Village Boulevard, Louisville | ​ | 5,000 | ​ | O/L (2) | | 9101 U.S. Highway 42, Prospect | ​ | 3,000 | ​ | O/L (2) | | 11330 Main Street, Middletown | ​ | 6,000 | ​ | O/L (2) | | 3902 Taylorsville Road, Louisville | ​ | 4,000 | ​ | O/L (2) | | 3811 Ruckriegel Parkway, Louisville | ​ | 4,000 | ​ | O/L (2) | | 5125 New Cut Road, Louisville | ​ | 4,000 | ​ | O/L (2) | | 4808 Outer Loop, Louisville | ​ | 4,000 | ​ | O/L (2) | | 438 Highway 44 East, Shepherdsville | ​ | 4,000 | ​ | O/L (2) | | 1420 Poplar Level Road, Louisville | ​ | 3,000 | ​ | O | | 4921 Brownsboro Road, Louisville | ​ | 3,000 | ​ | L | | 3950 Kresge Way, Suite 108, Louisville | ​ | \<1,000 | ​ | L | | 3726 Lexington Road, Louisville | ​ | 4,000 | ​ | L | | 1720 West Broadway, Suite 103, Louisville | ​ | 3,000 | ​ | L | | ​ | ​ | ​ | ​ | ​ | | **Lexington** | **​** | ​ | ​ | ​ | | 3098 Helmsdale Place | ​ | 5,000 | ​ | O/L (2) | | 3608 Walden Drive | ​ | 4,000 | ​ | O/L (2) | | 2401 Harrodsburg Road | ​ | 6,000 | ​ | O | | 641 East Euclid Avenue | ​ | 3,000 | ​ | O | | 333 West Vine Street | ​ | 4,000 | ​ | L | | ​ | ​ | ​ | ​ | ​ | | **Northern Kentucky** | **​** | ​ | ​ | ​ | | 535 Madison Avenue, Covington | ​ | 4,000 | ​ | L | | 25 Town Center Blvd., Suite 104, Crestview Hills | ​ | 3,000 | ​ | L | | 8513 U.S. Highway 42, Florence | ​ | 4,000 | ​ | L | | ​ | ​ | ​ | ​ | ​ | | (continued) | ​ | ​ | ​ | ​ | | ​ ​ ​ Bank Offices (continued) ​ | ​ ​ ​ | ​ Approximate Square Footage ​ ​ | ​ ​ ​ | ​ ​ Owned (O)/ Leased (L) ​ ​ | | --- | --- | ---: | --- | --- | | Georgetown, 430 Connector Road | **​** | 5,000 | ​ | O/L (2) | | ​ | ​ | ​ | ​ | ​ | | Shelbyville, 1614 Midland Trail | **​** | 4,000 | ​ | L (2) | | ​ | ​ | ​ | ​ | ​ | | **Florida Banking Centers:** | **​** | ​ | ​ | ​ | | 12933 Walsingham Road, Largo | ​ | 4,000 | ​ | O | | 10577 State Road 54, New Port Richey | ​ | 3,000 | ​ | L | | 6300 4th Street N, St. Petersburg | ​ | 10,000 | ​ | O | | 6600 Central Avenue, St. Petersburg | ​ | 9,000 | ​ | O | | 7800 Seminole Blvd., Seminole | ​ | 3,000 | ​ | O | | 6906 E. Fowler Avenue, Temple Terrace | ​ | 2,000 | ​ | L | | 1300 North West Shore Blvd. Suite 150, Tampa | ​ | 4,000 | ​ | L | | ​ | ​ | ​ | ​ | ​ | | **Southern Indiana Banking Centers:** | **​** | ​ | ​ | ​ | | 4571 Duffy Road, Floyds Knobs | ​ | 4,000 | ​ | O/L(2) | | 3141 Highway 62, Jeffersonville | ​ | 4,000 | ​ | O | | 3001 Charlestown Crossing Way, New Albany | ​ | 2,000 | ​ | L | | ​ | ​ | ​ | ​ | ​ | | **Tennessee Banking Centers:** | **​** | ​ | ​ | ​ | | 113 Seaboard Lane, Franklin | ​ | 2,000 | ​ | L | | 2034 Richard Jones Road, Nashville | ​ | 3,000 | ​ | L | | ​ | ​ | ​ | ​ | ​ | | **Ohio Banking Center:** | **​** | ​ | ​ | ​ | | 4030 Smith Road, Norwood | ​ | 5,000 | ​ | L | | 9110 West Chester Towne Center Dr., West Chester | ​ | 1,000 | ​ | L | | ​ | ​ | ​ | ​ | ​ | | **Support and Operations:** | **​** | ​ | ​ | ​ | | 200 South Seventh Street, Louisville, KY | ​ | 80,000 | ​ | L(1) | | ​ | ​ | ​ | ​ | ​ | *(1) Locations are leased from partnerships in which the Company’s Executive Chair and Chief Executive Officer, Steven E. Trager; its Vice Chair and President, A. Scott Trager; its Director, Andrew Trager-Kusman; or family members of Steven E. Trager, A. Scott Trager, and Andrew Trager-Kusman, have a financial interest. See additional discussion included under Part III Item 13 “Certain Relationships and Related Transactions, and Director Independence.” For additional discussion regarding Republic’s lease obligations, see Part II Item 8 “Financial Statements and Supplementary Data” Footnote 6 “Right-of-Use Assets and Operating Leases Liabilities.”* *(2) The banking centers at these locations are owned by Republic; however, the banking center is located on land that is leased through long-term agreements with third parties.* ## Legal proceedings As filed, 607 characters. *See Footnote 1 “Summary of Significant Accounting Policies” of Part II Item 8 “Financial Statements and Supplementary Data” for discussion regarding the cancelled sale of the TRS business and associated litigation.* In the ordinary course of operations, Republic and the Bank are defendants in various legal proceedings. There is no proceeding, pending, or threatened litigation in which Republic and the Bank are a defendant, to the knowledge of management, in which an adverse decision could result in a material adverse change in the business or consolidated financial position of Republic or the Bank. ## Management's discussion and analysis As filed, 189,025 characters. The consolidated financial statements include the accounts of Republic Bancorp, Inc. (the “Parent Company”) and its wholly owned subsidiaries, Republic Bank & Trust Company and Republic Insurance Services, Inc. As used in this filing, the terms “Republic,” the “Company,” “we,” “our,” and “us” refer to Republic Bancorp, Inc., and, where the context requires, Republic Bancorp, Inc. and its subsidiaries. The term the “Bank” refers to the Company’s subsidiary bank: Republic Bank & Trust Company. The term the “Captive” refers to the Company’s insurance subsidiary: Republic Insurance Services, Inc. All significant intercompany balances and transactions are eliminated in consolidation. Republic is a financial holding company headquartered in Louisville, Kentucky. The Bank is a Kentucky-based, state-chartered non-member financial institution that provides both traditional and non-traditional banking products through five reportable segments using a multitude of delivery channels. While the Bank operates primarily in its market footprint, its non-brick-and-mortar delivery channels allow it to reach clients across the U.S. The Captive is a Nevada-based, wholly owned insurance subsidiary of the Company. The Captive provides property and casualty insurance coverage to the Company and the Bank, as well as a group of third-party insurance captives for which insurance may not be available or economically feasible. In 2005, Republic Bancorp Capital Trust, an unconsolidated trust subsidiary of Republic, was formed and issued $40 million in TPS. On September 30, 2021, as permitted under the terms of RBCT’s governing documents, Republic redeemed these securities at the par amount of approximately $40 million, without penalty. Although the TPS were treated as part of Republic’s Tier I Capital while outstanding, Republic’s capital ratios remained well above “well capitalized” levels following this redemption. Management’s Discussion and Analysis of Financial Condition and Results of Operations of Republic should be read in conjunction with Part II Item 8 “*Financial Statements and Supplementary Data.”* Forward-looking statements discuss matters that are not historical facts. As forward-looking statements discuss future events or conditions, the statements often include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would,” “potential,” or similar expressions. Do not rely on forward-looking statements. Forward-looking statements detail management’s expectations regarding the future and are not guarantees. Forward-looking statements are assumptions based on information known to management only as of the date the statements are made and management undertakes no obligation to update forward-looking statements, except as required by applicable law. Broadly speaking, forward-looking statements include: - the potential impact of inflation on Company operations; - projections of revenue, income, expenses, losses, earnings per share, capital expenditures, dividends, capital structure, loan volume, loan growth, deposit growth, or other financial items; - descriptions of plans or objectives for future operations, products, or services; - descriptions and projections related to management strategies for loans, deposits, investments, and borrowings; - forecasts of future economic performance; and - descriptions of assumptions underlying or relating to any of the foregoing. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by the forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties, including, but not limited to the following: - the impact of inflation on the Company’s operations and credit losses; - litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future; - natural disasters impacting the Company’s operations; - changes in political and economic conditions; - the discontinuation of LIBOR; - the magnitude and frequency of changes to the FFTR implemented by the FOMC of the FRB; - long-term and short-term interest rate fluctuations and the overall steepness of the U.S. Treasury yield curve, as well as their impact on the Company’s net interest income and Mortgage Banking operations; - competitive product and pricing pressures in each of the Company’s five reportable segments; - equity and fixed income market fluctuations; - client bankruptcies and loan defaults; - recession; - future acquisitions; - integrations of acquired businesses; - changes in technology; - changes in applicable laws and regulations or the interpretation and enforcement thereof; - changes in fiscal, monetary, regulatory, and tax policies; - changes in accounting standards; - monetary fluctuations; - changes to the Company’s overall internal control environment; - the ability of the Company to remediate its material weaknesses in its internal control over financial reporting; - success in gaining regulatory approvals when required; - the Company’s ability to qualify for future R&D federal tax credits; - the ability for Tax Providers to successfully market and realize the expected RA and RT volume anticipated by TRS; - information security breaches or cyber security attacks involving either the Company or one of the Company’s third-party service providers; and - other risks and uncertainties reported from time to time in the Company’s filings with the SEC, including Part 1 Item 1A “*Risk Factors.”* On October 26, 2022, Republic, the Bank and CBank entered into the CBank Agreement. Upon completion of the transaction, CBank will be merged with and into RB&T, with RB&T as the survivor of the merger. CBank is headquartered in Cincinnati, Ohio. This document contains statements regarding the proposed acquisition transaction that are not statements of historical fact and are considered forward-looking statements within the criteria described above. These statements are likewise subject to various risks and uncertainties that may cause actual results and outcomes of the proposed transaction to differ, possibly materially, from the anticipated results or outcomes expressed or implied in these forward-looking statements. In addition to factors disclosed in reports filed by Republic with the SEC, risks and uncertainties for Republic, CBank and the combined company include, but are not limited to: for the parties to receive all regulatory approvals as provided for in the CBank Agreement, the ability to grow CBank loan and deposit balances post-acquisition, unanticipated post-acquisition loan losses for Republic on CBank-originated loans, the ability of Republic to integrate acquired operations including obtaining synergies, integration objectives and anticipated timelines, the ability of Republic to integrate, manage and keep secure our information systems, and other risks and uncertainties reported from time to time in the Company’s filings with the SEC, including Part 1 Item 1A “*Risk Factors.”* ### Accounting Standards Updates *For disclosure regarding the impact to the Company’s financial statements of ASUs, see Footnote 1 “Summary of Significant Accounting Policies” of Part II Item 8 “Financial Statements and Supplementary Data.”* ### Critical Accounting Estimates Republic’s consolidated financial statements and accompanying footnotes have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. Management continually evaluates the Company’s accounting policies and estimates that it uses to prepare the consolidated financial statements. In general, management’s estimates and assumptions are based on historical experience, accounting and regulatory guidance, and information obtained from independent third-party professionals. Actual results may differ from those estimates made by management. Critical accounting policies are those that management believes are the most important to the portrayal of the Company’s financial condition and operating results and require management to make estimates that are difficult, subjective, and complex. Most accounting policies are not considered by management to be critical accounting policies. Several factors are considered in determining whether or not a policy is critical in the preparation of the financial statements. These factors include, among other things, whether the estimates have a significant impact on the financial statements, the nature of the estimates, the ability to readily validate the estimates with other information including independent third parties or available pricing, sensitivity of the estimates to changes in economic conditions and whether alternative methods of accounting may be utilized under GAAP. Management has discussed each critical accounting policy and the methodology for the identification and determination of critical accounting policies with the Company’s Audit Committee. Republic believes its critical accounting policies and estimates relate to the following: ACLL and Provision — As of December 31, 2022, the Bank maintained an ACLL for expected credit losses inherent in the Bank’s loan portfolio, which includes overdrawn deposit accounts. Management evaluates the adequacy of the ACLL monthly and presents and discusses the ACLL with the Audit Committee and the Board of Directors quarterly. The Company’s CECL method is a “static-pool” method that analyzes historical closed pools of loans over their expected lives to attain a loss rate, which is then adjusted for current conditions and reasonable, supportable forecasts prior to being applied to the current balance of the analyzed pools. Due to its reasonably strong correlation to the Company's historical net loan losses, the Company has chosen to use the U.S. national unemployment rate as its primary forecasting tool. For its CRE loan pool, the Company initially employed a one-year forecast of CRE vacancy rates through March 31, 2021 but discontinued use of this forecast during the second quarter of 2021 in favor of a one-year forecast of general CRE values. This change in forecast method had no material impact on the Company’s ACLL. Management’s evaluation of the appropriateness of the ACLL is often the most critical accounting estimate for a financial institution, as the ACLL requires significant reliance on the use of estimates and significant judgment as to the reliance on historical loss rates, consideration of quantitative and qualitative economic factors, and the reliance on a reasonable and supportable forecast. Adjustments to the historical loss rate for current conditions include differences in underwriting standards, portfolio mix or term, delinquency level, as well as for changes in environmental conditions, such as changes in property values or other relevant factors. One-year forecast adjustments to the historical loss rate are based on the U.S. national unemployment rate and CRE values. Subsequent to the one-year forecasts, loss rates are assumed to immediately revert back to long-term historical averages. The impact of utilizing the CECL approach to calculate the ACLL is significantly influenced by the composition, characteristics and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the ACLL, and therefore, greater volatility to the Company’s reported earnings. *See additional detail regarding the Company’s adoption of ASC 326 and the CECL method under Footnote 4 “Loans and Allowance for Credit Losses” of Part II Item 8 “Financial Statements and Supplementary Data.”* #### Management’s Evaluation of the ACLL Management evaluates the ACLL for its Core Banking operations separately from its non-traditional RPG operations. Core Banking operations consist of the Company’s Traditional Banking, Warehouse, and Mortgage Banking segments. RPG operations consist of the Company’s TRS and RCS segments. Management evaluated the reasonableness of its Core Bank ACLL as of December 31, 2022 and 2021 by evaluating absorption and exhaustion rates that account for CECL life-of-loan considerations and the economic hardship and uncertainty brought about by the COVID-19 pandemic. The absorption rate considered total Core Bank net loan losses from 2008 to 2013 as a percent of the end-of-year Core Bank ACLL. The exhaustion rate considered how many years of gross Core Bank loan charge-offs the end-of-year Core Bank ACLL could withstand based on average annual net Core Bank loan losses from 2008 to 2013. The years 2008 to 2013 represent a six-year period during which the U.S. unemployment rate rose above 8% and the Core Bank incurred a historically high period of loan losses relative to an average year of loan losses for the Core Bank. Management believes Core Bank losses from 2008 to 2013 are more representative of current economic conditions than more recent years just prior to the onset of the COVID-19 pandemic. As of December 31, 2022, the weighted average term of the Core Bank loan portfolio was approximately six years. The Core Bank’s absorption rate was 85% and its exhaustion rate was approximately 6.0 years as of December 31, 2022. Management considers these rates reasonable under current economic conditions. The table below reflects the Core Bank’s exhaustion and absorption rates for each of the last three years: | ​ Years Ended December 31, ​ Core Bank: ​ | ​ ​ ​ ​ | ​ ​ 2022 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ 2021 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ 2020 ​ ​ ​ ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | | Exhaustion Rate (end-of-year ACLL / median annual charge-offs from 2008 to 2013) | **​** | **5.99** Yrs. | ​ | 6.01 Yrs. | ​ | 6.07 Yrs. | | ​ | ​ | **​** ​ | ​ | ​ ​ | ​ | ​ ​ | | Absorption Rate (total net charge-offs from 2008 to 2013 / end-of-year ACLL) | **​** | **85%** | ​ | 85% | ​ | 84% | Based on management’s evaluation, a Core Bank ACLL of $52 million, or 1.21% of total Core Bank loans, was an adequate estimate of expected losses within the loan portfolio as of December 31, 2022 and resulted in Core Banking Provision for its loans of a net charge of $312,000 during 2022. This compares to an ACLL of $52 million and $50 million as of December 31, 2021 and December 31, 2020 with Provisions of a net credit of $319,000 for 2021 and net charge of $16.9 million for 2020. If the mix and amount of future charge-off percentages differ significantly from those assumptions used by management in making its determination, an adjustment to the Core Bank ACLL and the resulting effect on the income statement could be material. The RPG ACLL as of December 31, 2022 primarily related to loans originated and held for investment through the RCS segment. RCS generally originates small-dollar, consumer credit products. In some instances, the Bank originates these products, sells 90% or 95% of the balances within three business days of loan origination, and retains a 5% or 10% interest. RCS loans typically earn a higher yield but also have higher credit risk compared to loans originated through Core Banking operations, with a significant portion of RCS clients considered subprime or near-prime borrowers. As of December 31, 2022, management evaluated the ACLL only on its active RCS products that had incurred meaningful losses since their inception, which were its line-of-credit products. Due to the general short-term nature of these products, management utilized its traditional absorption and exhaustion calculations using 2022 net charge-offs with the beginning-of-the-year ACLL. The absorption and exhaustion rates were 69% and 0.88 years, respectively, both of which were considered reasonable. RPG maintained an ACLL for all the loan products held at amortized cost and offered through its RCS segment as of December 31, 2022, including its line-of-credit products and its healthcare-receivables products. As of December 31, 2022, the ACLL to total loans estimated for each RCS product ranged from as low as 0.25% for its healthcare-receivables portfolios to as high as 54.85% for its line-of-credit portfolios. A lower reserve percentage was provided for RCS’s healthcare receivables as of December 31, 2022, as such receivables have recourse back to the Company’s third-party service providers in the transactions. Based on management’s calculation, an ACLL of $18.7 million, or 7.3 %, of total RPG loans was an adequate estimate of expected losses within the RPG portfolio as of December 31, 2022. RPG’s TRS segment offered its RA credit product during the first two months of 2022, 2021, and 2020, and its ERA credit product during December 2022 related to the first quarter 2023 tax season. An ACLL for losses on RAs and ERAs is estimated during the limited, short-term period the product is offered. RAs originated during the first two months of 2022, were repaid, on average, within 32 days of origination. Provisions for RA and ERA losses are estimated when advances are made and adjusted to actual net charge-offs as of June 30th of each year. The ACLL for ERAs as of December 31, 2022 was $3.8 million for $98 million of ERAs originated during December 2022. There were no ERAs originated during 2021, and as a result there was no ACLL as of December 31, 2021 for ERAs. There was no ACLL as of December 31, 2022 or December 31, 2021 for RAs originated during the first two months of 2022 or 2021, as all RAs originated during the first two months of those years had either been repaid or charged-off by June 30th of each year. Related to the overall credit losses on RAs and ERAs, the Bank’s ability to control losses is highly dependent upon its ability to predict the taxpayer’s likelihood to receive the tax refund as claimed on the taxpayer’s tax return. Each year, the Bank’s RA and ERA approval model is based primarily on the prior-year’s tax refund funding patterns. Because much of the loan volume occurs each year before that year’s tax refund funding patterns can be analyzed and subsequent underwriting changes made, credit losses during a current year could be higher than management’s predictions if tax refund funding patterns change materially between years. In response to changes in the legal, regulatory, and competitive environment, management annually reviews and revises the RA and ERA product parameters. Further changes in RA and ERA product parameters do not ensure positive results and could have an overall material negative impact on the performance of the RA an ERA and therefore on the Company’s financial condition and results of operations. #### See additional discussion regarding the RA product under the sections titled: - *Part I Item 1A “Risk Factors”* - *Part II Item 8 “Financial Statements and Supplementary Data,” Footnote 4 “Loans and Allowance for Credit Losses”* RPG recorded a net charge of $22.0 million, $15.1 million, and $14.4 million to the Provision during 2022, 2021, and 2020, with the Provision for each year primarily due to net losses on RAs and growth in short-term, consumer loans originated through the RCS segment. If the number of future charge-offs on RAs and RCS loans differ significantly from assumptions used by management in making its determination, an adjustment to the RPG ACLL and the resulting effect on the income statement could be material. ### Cancelled TRS Sale Transaction On June 3, 2022, the Bank and Green Dot entered into the Settlement Agreement to fully resolve the Lawsuit that the Bank filed against Green Dot in the Delaware Court of Chancery on October 5, 2021. As previously disclosed in the Company’s prior SEC filings, the Lawsuit arose from Green Dot’s inability to consummate the Sale Transaction contemplated in the TRS Purchase Agreement through which Green Dot would purchase all of the assets and operations of the Bank’s Tax Refund Solutions business. In accordance with the Settlement Agreement, on June 6, 2022, Green Dot paid $13 million to the Bank, which was in addition to a $5 million termination fee that Green Dot paid to the Bank during the first quarter of 2022 under the terms of the TRS Purchase Agreement. On June 6, 2022, the Bank and Green Dot filed a stipulation of dismissal of the Lawsuit with the Delaware Court of Chancery, which was effective to dismiss the Lawsuit when filed. *See Footnote 1 “Summary of Significant Accounting Policies” of Part II Item 8 “Financial Statements and Supplementary Data” for discussion regarding the cancelled sale of the TRS business and associated litigation.* ### RECENT DEVELOPMENTS ### Correction of Prior Period Error As disclosed in Note 27, “Correction of Prior Period Error,” to our consolidated financial statements, the Company identified a prior period accounting error substantially in the form of an immaterial understatement of revenue, solely related to one RCS line of credit product. The financial reporting periods affected by this error include the Company’s previously reported audited consolidated financial statements for the fiscal year ended December 31, 2021, and the Company’s previously reported interim unaudited consolidated financial statements for each of the quarterly and fiscal year-to-date periods ended June 30, 2021; September 30, 2021; March 31, 2022; June 30, 2022; and September 30, 2022; and the unaudited consolidated quarterly financial data for the quarter ending December 31, 2021 (collectively the “previously reported financial statements”). The three month period ended December 31, 2021 and year ended December 31, 2021 also reflected certain immaterial revisions to reclassify certain gains and losses on the sale of the same RCS line of credit product. These reclassifications impact noninterest income, noninterest expense and interest income with no impact to net income. The Company concluded this error was not material, on an individual or aggregate basis, to the Company’s previously reported financial statements and correction of the error would not be material to the current year financial statements, including any interim periods. However, the Company corrected this error as a voluntary immaterial revision to the accompanying consolidated financial statements of this Annual Report on Form 10-K, as of and for the fiscal years ended December 31, 2022, and 2021, in the periods in which the error occurred. In addition, the Company expects to present the corrected interim 2022 amounts as a voluntary immaterial revision in its 2023 consolidated interim financial statements on a quarterly basis and a year-to-date basis upon the filing of its Quarterly Reports on Form 10-Q. As a result, the financial results in the periods presented within the Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth below, have been revised to give effect to the correction of this error. ### Bank Acquisition On October 26, 2022, the Company, RB&T, and CBank entered into the CBank Agreement. Upon completion of the transaction, CBank will be merged with and into RB&T, with RB&T as the survivor of the merger. CBank is headquartered in Cincinnati, Ohio. Under the terms of the CBank Agreement, the Company will acquire all of CBank’s outstanding common stock in an all-cash direct merger of CBank with RB&T, resulting in a total cash payment of approximately $51 million to CBank’s existing shareholders. Republic expects to fund the cash payment through existing resources on-hand at RB&T. The completion of the transaction is subject to customary closing conditions, including regulatory approval and approval by CBank’s shareholders. The CBank Agreement also contains reciprocal termination provisions in the event the transaction does not receive the required regulatory approvals within six months of the effective date of the CBank Agreement or if certain minimum capital levels are not maintained by CBank as of the closing date. The CBank Agreement was unanimously approved by the Republic, RB&T and CBank boards of directors on October 25, 2022. In connection with entering into the CBank Agreement, Republic entered into customary support agreements with the members of CBank’s board of directors and other shareholders in their capacities as shareholders of CBank (the “CBank Support Agreements”). Subject to the terms and conditions, and non-termination, of the CBank Support Agreements, each such shareholder agreed, among other things, to vote his or her respective shares of CBank Common Stock in favor of the approval of the CBank Agreement and the transaction contemplated thereby, and against alternative acquisition proposals. The CBank Support Agreements do not prevent the shareholders, in their capacity as directors, from exercising their fiduciary obligations in connection with alternative acquisition proposals. The CBank Agreement provides certain termination rights for both Republic and CBank and further provides that a termination fee of $2,040,000 will be payable by CBank to Republic upon termination of the CBank Agreement under certain circumstances, including CBank’s termination of the CBank Agreement to accept a Superior Proposal (as defined in the CBank Agreement). The CBank Agreement was approved by its shareholders on December 13, 2022. As of January 31, 2023, CBank had approximately $257 million in assets, consisting of approximately $221 million in gross loans, no other real estate owned, approximately $16 million of marketable securities, approximately $14 million in cash and cash equivalents and approximately $6 million in other assets. Also as of January 31, 2023, CBank had approximately $228 million of liabilities, including approximately $209 million in customer deposits and $13 million in Federal Home Loan Bank advances. ### OVERVIEW Total Company net income was $91.1 million and Diluted EPS was $4.59 for 2022, compared to net income of $87.6 million and Diluted EPS of $4.28 for 2021. Table 1 below presents Republic’s financial performance for the years ended December 31, 2022, 2021, and 2020: ### Table 1 — Summary | ​ ​ Years Ended December 31, (dollars in thousands, except per share data) ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2022 ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2021 ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2020 ​ ​ ​ | ​ ​ Percent Increase/(Decrease) 2022/2021 ​ ​ | ​ ​ ​ 2021/2020 ​ ​ ​ | | --- | --- | --- | ---: | ---: | ---: | ---: | | Income before income tax expense | ​ | **$116,845** ​ | $111,442 ​ | $102,633 ​ | **5%** | 9% | | Net income | ​ | **​** **91,106** ​ | ​ 87,611 ​ | ​ 83,246 ​ | **4** **​** | 5 ​ | | Diluted EPS of Class A Common Stock | **​** | **​** **4.59** ​ | ​ 4.28 ​ | ​ 3.99 ​ | **7** **​** | 7 ​ | | ROA | **​** | **​** **1.48%** | 1.39% | 1.38% | **6** **​** | 1 ​ | | ROE | **​** | **10.68** **​** | 10.37 ​ | 10.37 ​ | **3** **​** | — ​ | | ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ **​** | ​ ​ | The increase in net income for the Total Company primarily reflected the following: - The benefit of an $13 million pre-tax legal settlement; - The benefit of a $5 million pre-tax contract termination fee; - A $32.9 million increase in non-PPP related interest income; - A $18.6 million decrease in PPP income within interest income; and - An $13.8 million decrease in Mortgage Banking income. Additional discussion follows in this section of the filing under “*Results of Operations.”* ### General highlights by reportable segment for the year ended December 31, 2022 consisted of the following: ### Traditional Banking segment - Net income increased $5.3 million, or 15%, from 2021. - Net interest income increased $14.3 million, or 9%, compared to 2021. - Provision was a net charge of $1.4 million for 2022 compared to a net credit of $38,000 for 2021. - Noninterest income increased $156,000, or less than 1%, over 2021. - Noninterest expense increased $4.3 million, or 3%, over 2021. - Total Traditional Bank non-PPP related loans increased $404 million, or 12%, during 2022, driven primarily by strong CRE loan growth. - Total nonperforming loans to total loans for the Traditional Banking segment was 0.40% as of December 31, 2022 compared to 0.59% as of December 31, 2021. - Delinquent loans to total loans for the Traditional Banking segment was 0.16% as of December 31, 2022 compared to 0.21% as of December 31, 2021. ### Warehouse Lending segment - Net income decreased $7.6 million, or 47%, from 2021. - Net interest income decreased $11.5 million, or 46%, from 2021. - The Warehouse Provision was a net credit of $1.1 million for 2022 compared to a net credit of $281,000 for 2021. - Average committed Warehouse lines decreased to $1.3 billion during 2022 from $1.4 billion during 2021. - Average Warehouse line usage was 44% during 2022 compared to 53% during 2021. ### Mortgage Banking segment - Within the Mortgage Banking segment, mortgage banking income decreased $13.8 million, or 69%, from 2021 to 2022. - Overall, Republic’s proceeds from sale of secondary market loans totaled $238 million during 2022 compared to $718 million during 2021, with the Company’s cash-gain-as-a-percent-of-loans-sold decreasing to 3.01% from 3.22% from period to period. ### Tax Refund Solutions segment - Net income increased $14.1 million, or 111%, from 2021 to 2022. - Net interest income increased $5.9 million, or 37%, from 2021 to 2022. - Total RA originations were $311 million during the first quarter of 2022 compared to $250 million for the first quarter of 2021. - TRS originated $98 million of ERAs during the fourth quarter of 2022 related to the anticipated filing of tax returns for the upcoming first quarter 2023 tax season. - The TRS Provision was $10.0 million for 2022, compared to $6.7 million for 2021. - Noninterest income was $38.5 million for 2022 compared to $23.8 million for 2021. Noninterest income for 2022 included a $5.0 million non-recurring contract termination fee and a $13.0 million non-recurring legal settlement payment. - Net RT revenue decreased $3.2 million, or 16%, from 2021 to 2022. - Noninterest expense was $15.7 million for 2022 compared to $16.3 million for 2021. - On October 19, 2022, TRS entered into a new agreement with a large Tax Provider, for which TRS had previously only provided RTs. As part of the new agreement, TRS will be the exclusive provider of RAs and ERAs originated through this provider until October 2025. As a result of the new agreement, management expects to add an additional $550 million of new RA origination volume, including ERAs originated during December 2022, to its first quarter 2023 tax filing season. TRS had multiple factors during 2021 and 2022 that impacted its 2022 performance and the comparability of that performance to the same periods in 2021. By year, these factors discussed below include, but may not be limited to, the following: #### 2021 Calendar Year 1\) The start of the IRS processing season was delayed approximately two weeks later than a typical tax season; and 2\) The Company believes stimulus programs from the Federal Government and pandemic-related restrictions during early 2021 negatively impacted demand for TRS’s RT and RA products. #### 2022 Calendar Year 1\) TRS amended one of its existing third-party contracts to provide for a small revenue share from Republic to the third party, along with a ceiling on loan losses from the third party to Republic for all RA products originated through this provider; 2\) TRS experienced a loss of RT and RA product volume to Green Dot directly following the execution of the TRS Purchase Agreement; 3\) Although to a lesser degree than in the 2021 tax season, management believes stimulus programs from the Federal Government during the latter half of 2021 negatively impacted the 2022 tax season; 4\) The Bank received a $5.0 million non-recurring termination fee in January 2022 following the cancellation of the Sales Transaction; and 5\) The Bank received a $13.0 million non-recurring legal settlement in June 2022 upon settling its lawsuit against Green Dot. As it relates to factors impacting 2021, the processing season with the IRS started approximately two weeks later than normal. As a result, RT funding volume and loan repayments from the IRS lagged normal funding patterns in non-COVID-impacted years and effectively pushed RT revenue and loan recovery activity later into the 2021 calendar year. In addition, management believes government stimulus programs during 2021 negatively impacted demand for TRS RA and RT products. In addition to the more normal timing of the tax season in 2022 as compared to 2021, the fiscal year 2022 tax season, in totality, was favorably impacted by a contractual amendment with one of the Company’s large Tax Providers. As a result of the amended contract, TRS shares certain revenues with this provider, while this provider absorbs certain overhead costs of the program and furnishes to TRS a loan loss guaranty ceiling as a percentage of RAs originated by this provider. Through this provider, TRS originated $172 million of RAs during the first quarter of 2022 as compared to $135 million originated during the first quarter of 2021. The net cost of the revenue share to the provider from TRS was approximately $266,000 for the $172 million of RA volume, while the benefit to TRS of the overhead costs eliminated as a result of the new contract was approximately $543,000 and the net benefit to TRS of the loan loss guaranty ceiling for 2022 was approximately $516,000. Negatively impacting 2022 as compared to 2021 was a loss of RT volume by RB&T to Green Dot from certain third-party Tax Providers following the execution of the TRS Purchase Agreement. While TRS was able to partially offset this lost volume through higher volume from other existing relationships, the lost volume to Green Dot from this one provider had a negative impact to the overall results of TRS for 2022 and may continue to have a negative impact to the overall results of TRS beyond 2022, if TRS is unable to win this business back through its normal solicitation process. As a net result of all the factors in the preceding paragraphs as well as the positive impact to non-interest income of the Green Dot settlement, TRS experienced a net positive improvement to its 2022 operating results as compared to 2021. ### Republic Credit Solutions segment - Net income increased $1.2 million, or 7%, over 2021. - Net interest income increased $5.8 million, or 25%, over 2021. - Overall, RCS recorded a net charge to the Provision of $12.1 million during 2022 compared to a net charge of $8.4 million for 2021. - Noninterest income increased $2.2 million, or 20%, over 2021. - Noninterest expense was $8.4 million for 2022 and $4.8 million for 2021. - Total nonperforming loans to total loans for the RCS segment was 0.70% as of December 31, 2022 compared to 0.05% as of December 31, 2021. - Delinquent loans to total loans for the RCS segment was 8.53% as of December 31, 2022 compared to 6.48% as of December 31, 2021. ### RESULTS OF OPERATIONS *This section provides a comparative discussion of Republic’s Results of Operations for the two-year period ended December 31, 2022, unless otherwise specified. Refer to Results of Operations on pages 53-63 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”) for a discussion of the 2021 versus 2020 results.* ### Net Interest Income Banking operations are significantly dependent upon net interest income. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities, and the interest expense on interest-bearing liabilities used to fund those assets, such as interest-bearing deposits, securities sold under agreements to repurchase, and FHLB advances. Net interest income is impacted by both changes in the amount and composition of interest-earning assets and interest-bearing liabilities, as well as market interest rates. *See the section titled “Asset/Liability Management and Market Risk” in this section of the filing regarding the Bank’s interest rate sensitivity.* A large amount of the Company’s financial instruments tracks closely with, or are primarily indexed to, either the FFTR, Prime, or LIBOR. These rates trended lower beginning in the first quarter of 2020 with the onset of the COVID pandemic, as the FOMC reduced the FFTR to approximately 25 basis points. During 2022 inflation rose to levels not seen in approximately 40 years. In response, the FOMC began executing a quantitative tightening program by reducing its balance sheet, selling certain types of bonds in the market, and repeatedly increasing the FFTR. The FOMC’s increases to the FFTR during 2022 included the following: ### Table 2 — Increases to the Federal Funds Target Rate during 2022 | ​ ​ Date ​ | ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Increase to the FFTR ​ ​ | ​ ​ ​ ​ | ​ ​ FFTR after Increase ​ ​ | | --- | --- | --- | ---: | --- | ---: | | March 17, 2022 | ​ | ​ | 0.25% | **​** | 0.50% | | May 5, 2022 | ​ | ​ | 0.50 ​ | **​** | 1.00 ​ | | June 16, 2022 | ​ | ​ | 0.75 ​ | **​** | 1.75 ​ | | July 27, 2022 | ​ | ​ | 0.75 ​ | **​** | 2.50 ​ | | September 21, 2022 | ​ | ​ | 0.75 ​ | **​** | 3.25 ​ | | November 2, 2022 | ​ | ​ | 0.75 ​ | **​** | 4.00 ​ | | December 15, 2022 | ​ | ​ | 0.50 ​ | **​** | 4.50 ​ | The FOMC’s actions and signals continued to place upward pressure on short-term market interest rates for bonds and loans throughout the second half of 2022. While long-term interest rates initially rose in tandem with the increases to the FFTR during the middle part of 2022, they began to decline during the second half of 2022 as the market generally began to anticipate a recession to take place in 2023. As a result of the increase in short-term interest rates and the moderation of long-term interest rates, the yield curve became inverted during 2022 with some short-term rates higher than some long-term rates on the yield curve. Further monetary tightening by the FOMC in the future will likely cause short-term interest rates to continue to increase. At this time, the future of long-term market interest rates remains uncertain. Increases in short-term market interest rates are expected to impact the various business segments of the Company differently and will be discussed in further detail in the sections below. Total Company net interest income was $236.7 million during 2022 and represented an increase of $14.0 million over 2021. Total Company net interest margin expanded to 4.12% during 2022 compared to 3.79% for 2021. The following were the most significant components affecting the Company’s net interest income by reportable segment: ### Traditional Banking segment The Traditional Banking’s net interest income increased $14.3 million, or 9%, over 2021. Traditional Banking’s net interest margin was 3.38% for 2022, an increase of 20 basis points from 2021. The increase in the Traditional Bank’s net interest income during 2022 was primarily attributable to the following factors: - Traditional Bank net interest income, excluding PPP fees and interest, increased $32.9 million, or 24%, over 2021. Contributing significantly to this growth in net interest income was a 44-basis point increase in the Traditional Bank’s net interest margin, excluding PPP loans and related fees and interest. Driving this increase in net interest margin, excluding PPP-related elements, was the following: - Increases in the FFTR during 2022 continued to benefit the Traditional Bank’s high level of interest-earning cash on its balance sheet, as well as its loan and investment portfolio yields. As a result, the Traditional Bank’s yield on interest earning assets, excluding PPP, increased 42 basis points from 2021 to 2022. - Average non-PPP loans at the Traditional Bank grew from $3.3 billion for 2021 to $3.6 billion for 2022. - The Traditional Bank was able to maintain a relatively low cost of interest-bearing deposits as compared to the benefit it received on its interest earning cash as a result of the increases to the FFTR. *For further discussion of the Bank’s interest-bearing deposits, see section titled Deposits below in this section of the filing.* - The Traditional Bank recognized $1.4 million of fees and interest on its PPP portfolio during 2022 compared to $20.0 million during 2021. The $18.6 million decrease in PPP fees and interest primarily highlighted the short-term nature of this program, which was closer to its peak during 2021. ### Table 3 — Traditional Bank Net Interest Income and Net Interest Margin Excluding PPP (Non-GAAP) The Company earns fees and a coupon interest rate of 1.0% on its PPP portfolio. Due to the short-term nature of the PPP, management believes Traditional Bank net interest income excluding PPP fees and coupon interest is a more appropriate measure to analyze the performance of the Traditional Bank’s net interest income and net interest margin. The following table reconciles Traditional Bank net interest income and net interest margin to Traditional Bank net interest income and net interest margin excluding PPP fees and interest, a non-GAAP measure. *(dollars in thousands)* | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Net Interest Income Years Ended Dec. 31, 2022 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ 2021 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ $ Change ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ % Change ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Average Interest-Earning Assets Years Ended Dec. 31, 2022 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ 2021 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ $ Change ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ % Change ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Net Interest Margin Years Ended Dec. 31, 2022 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ 2021 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ % Change ​ ​ ​ | | --- | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | | Traditional Banking - GAAP | ​ | ​ | **$171,543** | ​ | $157,249 | **​** | $14,294 | ​ | 9% | ​ | **$5,071,728** | ​ | $4,945,316 | **​** | $126,412 | ​ | 3% | ​ | **3.38%** | ​ | 3.18% | ​ | ​ | 0.20% | | Less: Impact of PPP fees and interest | ​ | ​ | **​** **1,384** | ​ | ​ 20,029 | **​** | ​ (18,645) | ​ | (93) ​ | ​ | **​** **16,557** | ​ | ​ 246,451 | **​** | ​ (229,894) | ​ | (93) ​ | ​ | **0.02** **​** | ​ | 0.26 ​ | ​ | ​ | (0.24) ​ | | Traditional Banking ex PPP fees and interest - non-GAAP | ​ | ​ | **$170,159** | ​ | $137,220 | **​** | $32,939 | ​ | 24 ​ | ​ | **$5,055,171** | ​ | $4,698,865 | **​** | $356,306 | ​ | 8 ​ | ​ | **3.36** **​** | ​ | 2.92 ​ | ​ | ​ | 0.44 ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ ​ | As previously disclosed, short-term interest rates driven by the FOMC are expected to continue to increase into 2023 as a result of expected monetary tightening by the FOMC. Additional increases in short-term interest rates are generally believed by management to be favorable to the Traditional Bank’s net interest income and net interest margin in the near term. While many factors will determine the Traditional Bank’s net interest income and net interest margin in 2023 and beyond, the Bank’s ability to maintain its deposit balances near their current, relatively-low pricing levels is a significant assumption driving Management’s current belief that rising short-term rates will be beneficial to the Traditional Bank’s net interest income and net interest margin in the future. In addition, a continued or increased inversion of the yield curve could negatively impact the Traditional Bank’s net interest income and net interest margin in the future as many of the Bank’s loan products are priced relative to the long end of the yield curve while many of its deposit products are priced relative to the short-end of the yield curve. Additional variables which may also impact the Traditional Bank’s net interest income and net interest margin in the future include, but are not limited to, the actual steepness and shape of the yield curve, future demand for the Traditional Bank’s financial products, and the Traditional Bank’s overall future liquidity needs. ### Warehouse Lending segment Net interest income within the Warehouse segment decreased $11.5 million, or 46%, from 2021, driven by decreases in both average outstanding balances and net interest margin. Overall average outstanding Warehouse balances declined from $748 million during the 2021 to $510 million for 2022, driven largely by the sharp rise in long-term interest rates during 2022, which depressed mortgage-refinancing demand and resulted in a significant drop in Warehouse line usage. In addition, the Warehouse net interest margin decreased 68 basis points from 3.37% during 2021 to 2.69% during 2022. The decline in the Warehouse net interest margin occurred as its funding costs, as charged through the Company’s internal FTP methodology, generally rose in tandem with the increase in short-term interest rates during the year, while its yield increases were delayed until the adjustable rates on its clients’ lines of credit surpassed their contractual interest rate floors. These interest rate floors benefited Warehouse’s net interest margin substantially during 2020 and 2021 when market rates declined to historical lows but have produced margin compression since the onset of the FFTR increases during 2022. Committed Warehouse lines-of-credit decreased from $1.4 billion as of December 31, 2021 to $1.1 billion as of December 31, 2022, while average usage rates for Warehouse lines were 44% and 53%, respectively, during 2022 and 2021. Additional increases in short-term interest rates are generally believed by management to be favorable to Warehouse’s net interest income and net interest margin in the near term, however, the benefit of an increase in rates could be partially or entirely offset by a reduction in average outstanding balances driven by a decline in demand from Warehouse clients, as higher long-term interest rates generally drive lower demand for Warehouse borrowings. In addition, a lower demand for Warehouse borrowings could cause additional competitive pricing pressures for the industry, driving down the yield Warehouse earns on its lines of credit. ### Tax Refund Solutions segment TRS’s net interest income increased $5.9 million over 2021, driven by an increase in RA fees, which are recorded as interest income on loans; an increase in outstanding commercial loan balances; and an increase in interest income on TRS’s prepaid card balances as a function of the Company’s internal FTP methodology and a rise in interest rates. TRS’s RA product, including ERAs originated during December 2022, earned $14.5 million in fees during 2022, a $1.3 million increase from 2021, resulting primarily from a $159 million increase in RA originations from year to year. ### Republic Credit Solutions segment RCS’s net interest income increased $5.8 million, or 25%, from 2021. The increase was driven primarily by an increase in fee income from RCS’s LOC products. RCS’s LOC loan fees, which are recorded as interest income on loans, increased to $27.3 million during 2022 compared to $19.3 million during 2021. Interest income on RCS’s LOC I product increased $2.5 million during 2022, driven by a $3.4 million increase in average outstanding balances for this product from 2021 to 2022. Interest income on RCS’s LOC II product increased $5.4 million, as the Company first piloted this product during early 2021 with limited originations during the pilot phase. Interest income from RCS’s hospital receivables decreased $381,000 from 2021 resulting from a $21 million decrease in average receivables from period to period. Overall product demand for the RCS segment is not assumed to be interest rate sensitive and therefore management does not believe a rising interest rate environment will impact demand for its various consumer loan products. A rising interest rate environment, however, likely will impact the Company’s internal FTP cost allocated to this segment. As a result, the impact of rising interest rates to RCS during 2023 will likely be negative to the segment’s financial results, although the exact amount of the negative impact will depend on the internal FTP cost assigned, as well as the overall volume and mix of loans it generates. ### Table 4 — Total Company Average Balance Sheets and Interest Rates *(dollars in thousands)* | ​ ​ ​ ​ ​ ASSETS ​ Interest-earning assets: | ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ Years Ended December 31, 2022 Average Balance ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ Average Rate ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ 2021 Average Balance ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ Average Rate ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ 2020 Average Balance ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ Average Rate ​ ​ ​ ​ ​ ​ ​ | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Federal funds sold and other interest-earning deposits | ​ | ​ | **$738,399** | ​ | **$11,370** | | **1.54%** | $806,811 | ​ | $1,108 | | 0.14% | $283,151 | ​ | $911 | | 0.32% | | Investment securities, including FHLB stock (1) | ​ | ​ | ​ **671,858** | ​ | ​ **11,739** | | **1.75** ​ | ​ 555,599 | ​ | ​ 7,706 | | 1.39 ​ | ​ 584,300 | ​ | ​ 10,303 | | 1.76 ​ | | TRS Refund Advance loans (2) | ​ | ​ | **​** **28,085** | ​ | **​** **14,481** | ​ | **51.56** **​** | ​ 26,283 | ​ | ​ 13,202 | ​ | 50.23 ​ | ​ 38,843 | ​ | ​ 19,671 | ​ | 50.64 ​ | | RCS LOC products (2) | ​ | ​ | **​** **28,986** | ​ | **​** **27,318** | ​ | **94.25** **​** | ​ 20,662 | ​ | ​ 19,345 | ​ | 93.63 ​ | ​ 20,217 | ​ | ​ 18,522 | ​ | 91.62 ​ | | Other RPG loans (3) (7) | **​** | **​** | **96,538** | **​** | **5,744** | | **5.95** **​** | 107,129 | ​ | ​ 5,991 | | 5.59 ​ | 105,569 | ​ | 6,101 | | 5.78 ​ | | Outstanding Warehouse lines of credit (4) (7) | **​** | **​** | **​** **510,417** | **​** | **​** **21,351** | **​** | **4.18** **​** | ​ 747,840 | ​ | ​ 27,169 | ​ | 3.63 ​ | ​ 812,862 | ​ | ​ 31,199 | ​ | 3.84 ​ | | Paycheck Protection Program loans (5) (7) | **​** | **​** | **​** **16,557** | **​** | **​** **1,384** | **​** | **8.36** **​** | ​ 246,451 | ​ | ​ 20,029 | ​ | 8.13 ​ | ​ 341,704 | ​ | ​ 12,178 | ​ | 3.56 ​ | | All other Core Bank loans (6) (7) | **​** | **​** | **3,657,850** | **​** | **150,797** | | **4.12** **​** | 3,370,912 | ​ | ​ 133,856 | | 3.97 ​ | 3,477,646 | ​ | 153,373 | | 4.41 ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | **​** ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Total interest-earning assets | **​** | **​** | **5,748,690** | **​** | **244,184** | | **4.25** **​** | 5,881,687 | ​ | 228,406 | | 3.88 ​ | 5,664,292 | ​ | 252,258 | | 4.45 ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Allowance for credit losses | **​** | **​** | **(67,951)** | ​ | ​ ​ | ​ | ​ ​ | (66,481) | ​ | ​ ​ | ​ | ​ ​ | (60,008) | ​ | ​ ​ | ​ | ​ ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | **Noninterest-earning assets:** | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Noninterest-earning cash and cash equivalents | ​ | ​ | **186,636** | ​ | ​ ​ | ​ | ​ ​ | 167,556 | ​ | ​ ​ | ​ | ​ ​ | 125,904 | ​ | ​ ​ | ​ | ​ ​ | | Premises and equipment, net | **​** | **​** | **33,892** | ​ | ​ ​ | ​ | ​ ​ | 38,428 | ​ | ​ ​ | ​ | ​ ​ | 42,991 | ​ | ​ ​ | ​ | ​ ​ | | Bank owned life insurance | **​** | **​** | **100,452** | ​ | ​ ​ | ​ | ​ ​ | 91,329 | ​ | ​ ​ | ​ | ​ ​ | 67,264 | ​ | ​ ​ | ​ | ​ ​ | | Other assets (1) | **​** | **​** | **167,251** | ​ | ​ ​ | ​ | ​ ​ | 189,339 | ​ | ​ ​ | ​ | ​ ​ | 171,422 | ​ | ​ ​ | ​ | ​ ​ | | Total assets | **​** | **​** | **$6,168,970** | ​ | ​ ​ | ​ | ​ ​ | $6,301,858 | ​ | ​ ​ | ​ | ​ ​ | $6,011,865 | ​ | ​ ​ | ​ | ​ ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | **LIABILITIES AND STOCKHOLDERS’ EQUITY** | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | **​** | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | **Interest-bearing liabilities:** | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Transaction accounts | **​** | **​** | **$1,696,809** | **​** | **$1,974** | | **0.12%** | $1,580,570 | ​ | $361 | | 0.02% | $1,291,980 | ​ | $1,201 | | 0.09% | | Money market accounts | **​** | **​** | **779,457** | **​** | **2,000** | | **0.26** **​** | 784,777 | ​ | ​ 385 | | 0.05 ​ | 739,524 | ​ | 1,930 | | 0.26 ​ | | Time deposits | **​** | **​** | **240,701** | **​** | **2,636** | | **1.10** **​** | 300,784 | ​ | ​ 3,625 | | 1.21 ​ | 400,704 | ​ | 7,868 | | 1.96 ​ | | Reciprocal money market and time deposits | **​** | **​** | **​** **55,042** | **​** | **​** **147** | **​** | **0.27** **​** | ​ 226,503 | ​ | ​ 644 | ​ | 0.28 ​ | ​ 274,725 | ​ | ​ 1,776 | ​ | 0.65 ​ | | Brokered deposits | ​ | ​ | **—** | ​ | **—** | | **—** **​** | 30,863 | ​ | ​ 24 | | 0.08 ​ | 206,553 | ​ | 2,314 | | 1.12 ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Total interest-bearing deposits | **​** | **​** | **2,772,009** | **​** | **6,757** | | **0.24** **​** | 2,923,497 | ​ | 5,039 | | 0.17 ​ | 2,913,486 | ​ | 15,089 | | 0.52 ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | SSUARs and other short-term borrowings | ​ | ​ | **265,188** | ​ | **397** | | **0.15** **​** | 231,430 | ​ | 63 | | 0.03 ​ | 204,797 | ​ | 177 | | 0.09 ​ | | Federal Reserve PPP Liquidity Facility | ​ | ​ | **​** **—** | ​ | **​** **—** | ​ | **—** **​** | ​ — | ​ | — | ​ | **—** ​ | ​ 43,932 | ​ | ​ 153 | ​ | 0.35 ​ | | Federal Home Loan Bank advances | **​** | **​** | **21,233** | **​** | **339** | | **1.60** **​** | 29,479 | ​ | 57 | | 0.19 ​ | 211,776 | ​ | 3,524 | | 1.66 ​ | | Subordinated note | **​** | **​** | **—** | **​** | **—** | | **—** **​** | 30,732 | ​ | 507 | | 1.65 ​ | 41,240 | ​ | 1,000 | | 2.42 ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Total interest-bearing liabilities | **​** | **​** | **3,058,430** | **​** | **7,493** | | **0.24** **​** | 3,215,138 | ​ | 5,666 | | 0.18 ​ | 3,415,231 | ​ | 19,943 | | 0.58 ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | **Noninterest-bearing liabilities and Stockholders’ equity:** | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Noninterest-bearing deposits | **​** | **​** | **2,148,848** | ​ | ​ ​ | ​ | ​ ​ | 2,129,222 | ​ | ​ ​ | ​ | ​ ​ | 1,672,442 | ​ | ​ ​ | ​ | ​ ​ | | Other liabilities | **​** | **​** | **108,965** | ​ | ​ ​ | ​ | ​ ​ | 112,466 | ​ | ​ ​ | ​ | ​ ​ | 121,466 | ​ | ​ ​ | ​ | ​ ​ | | Stockholders’ equity | **​** | **​** | **852,727** | ​ | ​ ​ | ​ | ​ ​ | 845,032 | ​ | ​ ​ | ​ | ​ ​ | 802,726 | ​ | ​ ​ | ​ | ​ ​ | | Total liabilities and stockholders’ equity | ​ | ​ | **$6,168,970** | ​ | ​ ​ | ​ | ​ ​ | $6,301,858 | ​ | ​ ​ | ​ | ​ ​ | $6,011,865 | ​ | ​ ​ | ​ | ​ ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Net interest income | ​ | ​ | ​ ​ | **​** | **$236,691** | ​ | ​ ​ | ​ ​ | ​ | $222,740 | ​ | ​ ​ | ​ ​ | ​ | $232,315 | ​ | ​ ​ | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Net interest spread | ​ | ​ | ​ ​ | ​ | ​ ​ | | **4.01%** | ​ ​ | ​ | ​ ​ | | 3.70% | ​ ​ | ​ | ​ ​ | | 3.87% | | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | **​** ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Net interest margin | ​ | ​ | ​ ​ | ​ | ​ ​ | | **4.12%** | ​ ​ | ​ | ​ ​ | | 3.79% | ​ ​ | ​ | ​ ​ | | 4.10% | *(1) For the purpose of this calculation, the fair market value adjustment on debt securities is included as a component of other assets.* *(2) Interest income for RAs and RCS line-of-credit products is composed entirely of loan fees.* *(3) Interest income includes loan fees of $882,000, $1.7 million, and $1.4 million for 2022, 2021, and 2020.* *(4) Interest income includes loan fees of $1.7 million, $3.1 million, and $3.4 million for 2022, 2021, and 2020.* *(5) Interest income includes loan fees of $1.2 million, $17.5 million, and $8.6 million for 2022, 2021, and 2020.* *(6) Interest income includes loan fees of $4.8 million, $4.1 million, and $3.4 million for 2022, 2021, and 2020.* *(7) Average balances for loans include the principal balance of nonaccrual loans and loans held for sale, and are inclusive of all loan premiums, discounts, fees, and costs.* Table 5 illustrates the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities impacted Republic’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume) and (iii) net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate. ### Table 5 — Total Company Volume/Rate Variance Analysis *(in thousands)* | ​ ​ ​ ​ ​ ​ Interest income: ​ | ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Total Net Change ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Increase / (Decrease) Due to Volume ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Rate ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Total Net Change ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Increase / (Decrease) Due to Volume ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Rate ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | | Federal funds sold and other interest-earning deposits | **​** | **$10,262** | **​** | **$(102)** | **​** | **$10,364** | ​ | $197 | ​ | $947 | ​ | $(750) | ​ | | Investment securities, including FHLB stock | ​ | ​ **4,033** | **​** | ​ **1,799** | **​** | ​ **2,234** | ​ | ​ (2,597) | ​ | ​ (486) | ​ | ​ (2,111) | ​ | | TRS Refund Advance loans | **​** | **​** **1,279** | **​** | **​** **922** | **​** | **​** **357** | ​ | ​ (6,469) | ​ | ​ (6,310) | ​ | ​ (159) | ​ | | RCS LOC products | **​** | **​** **7,973** | **​** | **​** **7,844** | **​** | **​** **129** | ​ | ​ 823 | ​ | ​ 401 | ​ | ​ 422 | ​ | | Other RPG loans | **​** | **(247)** | **​** | **(615)** | **​** | **368** | ​ | (110) | ​ | 89 | ​ | (199) | ​ | | Outstanding Warehouse lines of credit | **​** | **​** **(5,818)** | **​** | **​** **(9,510)** | **​** | **​** **3,692** | ​ | ​ (4,030) | ​ | ​ (2,416) | ​ | ​ (1,614) | ​ | | Paycheck Protection Program loans | **​** | **​** **(18,645)** | **​** | **​** **(19,200)** | **​** | **​** **555** | ​ | ​ 7,851 | ​ | ​ (4,172) | ​ | ​ 12,023 | ​ | | All other Core Bank loans | **​** | **16,941** | **​** | **11,694** | **​** | **5,247** | ​ | (19,517) | ​ | (4,597) | ​ | (14,920) | ​ | | Net change in interest income | **​** | **15,778** | **​** | **(7,168)** | **​** | **22,946** | ​ | (23,852) | ​ | (16,544) | ​ | (7,308) | ​ | | ​ | ​ | **​** **​** | **​** | **​** **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | | **Interest expense:** | ​ | **​** **​** | **​** | **​** **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | | ​ | ​ | **​** **​** | **​** | **​** **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | | Transaction accounts | **​** | **1,613** | **​** | **29** | **​** | **1,584** | ​ | (840) | ​ | 222 | ​ | (1,062) | ​ | | Money market accounts | **​** | **1,615** | **​** | **(3)** | **​** | **1,618** | ​ | (1,545) | ​ | 111 | ​ | (1,656) | ​ | | Time deposits | **​** | **(989)** | **​** | **(679)** | **​** | **(310)** | ​ | (4,243) | ​ | (1,665) | ​ | (2,578) | ​ | | Reciprocal money market and time deposits | **​** | **​** **(497)** | **​** | **(460)** | **​** | **(37)** | ​ | ​ (1,132) | ​ | (270) | ​ | (862) | ​ | | Brokered deposits | **​** | **(24)** | **​** | **(24)** | **​** | **—** | ​ | (2,290) | ​ | (1,093) | ​ | (1,197) | ​ | | SSUARs and other short-term borrowings | **​** | **334** | **​** | **10** | **​** | **324** | ​ | (114) | ​ | 20 | ​ | (134) | ​ | | Federal Reserve PPP Liquidity Facility | **​** | **—** | **​** | **—** | **​** | **—** | ​ | (153) | ​ | (153) | ​ | — | ​ | | Federal Home Loan Bank advances | **​** | **282** | **​** | **(20)** | **​** | **302** | ​ | (3,467) | ​ | (1,710) | ​ | (1,757) | ​ | | Subordinated note | **​** | **(507)** | **​** | **(507)** | **​** | **—** | ​ | (493) | ​ | (219) | ​ | (274) | ​ | | Net change in interest expense | **​** | **1,827** | **​** | **(1,654)** | **​** | **3,481** | ​ | (14,277) | ​ | (4,757) | ​ | (9,520) | ​ | | ​ | ​ | **​** **​** | **​** | **​** **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | | Net change in net interest income | **​** | **$13,951** | **​** | **$(5,514)** | **​** | **$19,465** | ​ | $(9,575) | ​ | $(11,787) | ​ | $2,212 | ​ | 55 ### Provision Total Company Provision was a net charge of $22.3 million for 2022 compared to a net charge of $14.8 million for 2021. The following were the most significant components comprising the Company’s Provision by reportable segment: ### Traditional Banking segment The Traditional Banking Provision during 2022 was a net charge of $1.4 million compared to a net credit of $38,000 for 2021. An analysis of the Provision for 2022 compared 2021 follows: - For 2022, the Traditional Bank Provision primarily reflected the following: - The Traditional Bank released $2.8 million of reserves following the payoff or upgrade of Substandard and Special Mention loans. - Non-PPP Traditional Bank loans grew $404 million from December 31, 2021 to December 31, 2022, driving approximately $4.5 million of additional Provision tied to general formula reserves for loan growth. - For 2021, there was a minimal net credit to the Traditional Bank Provision, generally based on an improving economic outlook in conjunction with limited net charge-offs incurred by the Traditional Bank since making significant life-of-loan reserves during 2020 following the onset of the pandemic. The net credit recorded during 2021 primarily included nominal ACLL releases for the residential real estate, CRE, and HELOC portfolios offset by additional reserves for certain Special Mention loans with continued signs of pandemic-related hardship through December 31, 2021. As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.32% as of December 31, 2022 compared to 1.41% as of December 31, 2021. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses as of December 31, 2022. ### Table 6 — Traditional Bank ACLL to Non-PPP Traditional Bank Loans (Non-GAAP) *(dollars in thousands)* | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ December 31, 2022 ​ ​ Gross Loans ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Allowance ​ ​ | ​ ​ ​ | ​ ​ ​ Allowance ​ to Loans ​ ​ | ​ ​ 2021 ​ ​ Gross Loans ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Allowance ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Allowance ​ to Loans ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | --- | ---: | | **Traditional Bank - GAAP** | | **$3,855,142** | **​** | **$50,709** | **​** | **1.32%** | $3,501,959 | ​ | $49,407 | ​ | 1.41% | | Less: Paycheck Protection Program | ​ | ​ **4,980** | **​** | **​** **—** | **​** | ​ ​ | ​ 56,014 | ​ | ​ — | ​ | ​ ​ | | **Traditional Bank, Less PPP - non-GAAP** | **​** | **$3,850,162** | **​** | **$50,709** | **​** | **1.32** **​** | $3,445,945 | ​ | $49,407 | ​ | 1.43 ​ | *See the sections titled “Allowance for Credit Losses” and “Asset Quality” in this section of the filing under “Financial Condition” for additional discussion regarding the Provision and the Bank’s delinquent, nonperforming, impaired, and TDR loans.* ### Warehouse Lending segment Warehouse recorded a net credit of $1.1 million for 2022 compared to a net credit of $281,000 for 2021. Provision for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances decreased $447 million during 2022 compared to a decrease of $112 million during 2021. As a percentage of total Warehouse outstanding balances, the Warehouse ACLL was 0.25% as of December 31, 2022, and December 31, 2021. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses as of December 31, 2022. ### Tax Refund Solutions segment TRS recorded a net charge to the Provision of $10.0 million during 2022 compared to a net charge of $6.7 million for in 2021. Substantially all TRS Provision in both periods was related to its RA product, including the ERA product. TRS recorded a charge to the Provision for RA loans of $10.5 million, or 2.56 % of its $409 million in total RAs and ERAs originated during 2022 compared to a charge to the Provision of $6.7 million, or 2.69% of its $250 million of RAs originated during 2021. The decrease in Provision as a percentage of originations for 2022 was primarily due to a contractual loss guaranty that TRS received from one of its large Tax Providers during 2022 that set a percentage ceiling on losses for RAs originated through this provider. Through this provider, TRS originated $172 million of RAs during 2022. The net benefit to the TRS Provision for this loan loss guaranty arrangement during 2022 was approximately $516,000. *See additional detail regarding the RA and ERA products under Footnote 4 “Loans and Allowance for Credit Losses” of Part II Item 8 “Financial Statements and Supplemental Data.”* ### Republic Credit Solutions segment RCS recorded a net charge to the Provision of $12.1 million during 2022 compared to a net charge to the Provision of $8.4 million for 2021. The increase in the Provision was driven primarily by a $5.9 million increase in net charge-offs on RCS’s line-of-credit products. Net charge-offs for RCS’s LOC I product increased to $7.0 million for 2022 from $3.5 million during 2021, with government stimulus programs generally driving down usage of this product during 2021. Net charge-offs for RCS’s LOC II product were $3.2 million for 2022 compared to $840,000 of net charge-offs during 2021. The lower level of charge-offs for the LOC II product during 2021 were attributable to the relatively low level of originations during the year, as the product was launched during 2021 and remained in a pilot phase for much of the year. While RCS loans generally return higher yields, they also present a greater credit risk than Traditional Banking loan products. As a percentage of total RCS loans, the RCS ACLL was 13.73% as of December 31, 2022 and 13.91% as of December 31, 2021. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses as of December 31, 2022. The following table presents RCS Provision by product: ### Table 7 — RCS Provision by Product | ​ ​ Years Ended December 31, (in thousands) Product: | ​ ​ ​ ​ | ​ ​ ​ 2022 ​ ​ | ​ ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ 2020 ​ ​ | ​ ​ ​ ​ | ​ Percent Increase/(Decrease) 2022/2021 ​ | ​ ​ ​ ​ ​ | ​ ​ ​ 2021/2020 ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | ---: | | Lines of credit | ​ | **$12,050** | ​ | $8,509 | **​** | $1,178 | **​** | ​ | **42%** | 622% | | Hospital receivables | ​ | **​** **31** | ​ | ​ (65) | **​** | ​ 41 | **​** | **​** | **(148)** **​** | (259) **​** | | **Total** | ​ | **$12,081** | ​ | $8,444 | **​** | $1,219 | **​** | **​** | **43** **​** | 593 **​** | ### Noninterest Income ### Table 8 — Analysis of Noninterest Income | ​ ​ Years Ended December 31, (dollars in thousands) ​ | ​ ​ ​ | ​ ​ ​ ​ 2022 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ 2021 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ 2020 ​ ​ | ​ ​ ​ | ​ ​ Percent Increase/(Decrease) 2022/2021 ​ ​ | ​ ​ 2021/2020 ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | ---: | | Service charges on deposit accounts | **​** | **$13,426** | ​ | $12,553 | ​ | $11,615 | | **7%** | 8% | | Net refund transfer fees | **​** | **17,080** | ​ | 20,248 | ​ | 20,297 | | **(16)** **​** | — ​ | | Mortgage banking income | **​** | **6,196** | ​ | 19,994 | ​ | 31,847 | | **(69)** **​** | (37) ​ | | Interchange fee income | **​** | **13,125** | ​ | 13,062 | ​ | 11,188 | | **—** **​** | 17 ​ | | Program fees | **​** | **16,172** | ​ | 14,237 | ​ | 7,095 | | **14** **​** | 101 ​ | | Increase in cash surrender value of bank owned life insurance | **​** | **2,526** | ​ | 2,242 | ​ | 1,585 | | **13** **​** | 41 ​ | | Death benefits in excess of cash surrender value of life insurance | **​** | **​** **—** | ​ | ​ 979 | ​ | ​ — | **​** | **(100)** **​** | NM ​ | | Net losses on other real estate owned | **​** | **(211)** | ​ | (160) | ​ | (40) | | **(32)** **​** | (300) ​ | | Contract termination fee | **​** | **​** **5,000** | ​ | ​ — | ​ | ​ — | **​** | **NM** **​** | NM ​ | | Legal settlement | **​** | **​** **13,000** | ​ | ​ ​ | ​ | ​ ​ | **​** | **​** **​** | ​ ​ | | Other | **​** | **3,496** | ​ | 3,420 | ​ | 3,466 | | **2** **​** | (1) ​ | | Total noninterest income | **​** | **$89,810** | ​ | $86,575 | ​ | $87,053 | | **4** **​** | (1) ​ | #### NM - Not meaningful Total Company noninterest income increased $3.2 million over 2021. The following were the most significant components comprising the total Company’s noninterest income by reportable segment: ### Traditional Banking segment Traditional Banking’s noninterest income increased $156,000, or less than 1%, over 2021, driven primarily by a $882,000 increase in Service Charges on Deposit Accounts offset by a $399,000 nonrecurring gain on sale of a former banking center recorded during 2021. The Bank earns a substantial majority of its fee income related to its overdraft service. The total per item fees, net of refunds, included in service charges on deposits for 2022 and 2021 were $6.8 million and $5.6 million. The total daily overdraft charges, net of refunds, included in interest income for 2022 and 2021 were $1.3 million and $1.1 million. The year-over-year growth in these overdraft related fees were generally due to a full year of more normal economic activity during 2022 as opposed to 2021, which had less activity due to some continuing COVID restrictions. ### Mortgage Banking segment A significant rise in long-term interest rates during 2022 led to a significant slowdown in the origination and subsequent sale of mortgage loans into the secondary market. As a result, Mortgage Banking income decreased from $20.0 million during 2021 to $6.2 million for 2022. For 2022, the Bank recorded proceeds of $238 million for its loans sold into the secondary market and achieved an average cash-gain-as-a-percent-of-loans-sold during the year of 3.01%. During 2021, however, long-term interest rates were closer to historical lows, driving secondary market loan sales higher with overall proceeds from sale of $718 million and comparable cash-gain-as-a-percent-of-loans-sold of 3.22%. With the FOMC potentially moving forward with its quantitative tightening program during 2023, management believes it is likely that the Core Bank’s mortgage origination volume will continue to be negatively impacted by higher interest rates combined with a potential economic slow-down within the US economy. ### Tax Refund Solutions segment TRS’s noninterest income increased $14.7 million, or 62%, over 2021. Green Dot paid RB&T a total of $18 million in nonrecurring payments during 2022 related to the now-cancelled TRS Purchase Agreement. These nonrecurring payments included the following: - A contract termination fee of $5.0 million in January 2022 after RB&T provided Green Dot a notice of termination of the May 2021 TRS Purchase Agreement for the sale of substantially all of RB&T’s TRS assets and operations to Green Dot. - A legal settlement of $13.0 million in June 2022 regarding RB&T’s lawsuit against Green Dot. Regarding TRS’s RT product, net RT revenue decreased 16% from $20.2 million during 2021 to $17.1 million during 2022. The decrease was primarily driven by an 3% overall decrease in RT volume from the 2021 to the 2022 tax season, with a substantial portion of that decrease driven by the loss of one of TRS’s tax providers following the announcement of the now-cancelled May 2021 Asset Purchase Agreement. For factors affecting the comparison of the TRS results of operations for 2022 and 2021, see section titled “*OVERVIEW - Tax Refund Solutions.”* ### Republic Credit Solutions segment RCS’s noninterest income increased $2.2 million, or 20%, with program fees representing the entirety of RCS’s noninterest income. The increase in RCS program fees primarily reflected higher sales volume from RCS’s line of credit and installment loan products as sales volume was negatively impacted during 2021 by federal government stimulus programs implemented to combat the economic impact of the COVID pandemic. RPG program fees resulting from the sale of RCS loan products totaled $13.3 million during 2022, a 20% increase over 2021. The following table presents RCS program fees by product: ### Table 9 — RCS Program Fees by Product | ​ ​ Years Ended December 31, (in thousands) Product: | ​ ​ ​ ​ | ​ ​ ​ 2022 ​ ​ | ​ ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ 2020 ​ ​ | ​ ​ ​ ​ | ​ Percent Increase/(Decrease) 2022/2021 ​ | ​ ​ ​ ​ ​ | ​ ​ ​ 2021/2020 ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | ---: | | Lines of credit | ​ | **$6,406** | ​ | $5,049 | ​ | $3,119 | **​** | ​ | **27%** | 62% | | Hospital receivables | ​ | **​** **178** | ​ | ​ 268 | ​ | ​ 102 | **​** | **​** | **(34)** **​** | 163 **​** | | Installment loans\* | ​ | **​** **6,716** | ​ | ​ 5,749 | ​ | ​ 1,681 | **​** | **​** | **17** **​** | 242 **​** | | **Total** | ​ | **$13,300** | ​ | $11,066 | ​ | $4,902 | **​** | **​** | **20** **​** | 126 **​** | *\*The Company has elected the fair value option for this product, with mark-to-market adjustments recorded as a component of program fees.* ### Noninterest Expense ### Table 10 — Analysis of Noninterest Expense | ​ ​ Years Ended December 31, (dollars in thousands) ​ | ​ ​ ​ | ​ ​ ​ ​ 2022 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ 2021 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ 2020 ​ ​ | ​ ​ ​ ​ Percent Increase/(Decrease) 2022/2021 ​ ​ ​ | ​ ​ 2021/2020 ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | ---: | ---: | | Salaries and employee benefits | **​** | **$111,240** | ​ | $110,088 | ​ | $106,166 | **1%** | 4% | | Technology, equipment, and communication | **​** | **28,954** | ​ | 29,351 | ​ | 29,128 | **(1)** **​** | 1 ​ | | Occupancy | **​** | **13,014** | ​ | 13,193 | ​ | 13,438 | **(1)** **​** | (2) ​ | | Marketing and development | **​** | **6,875** | ​ | 4,390 | ​ | 4,031 | **57** **​** | 9 ​ | | FDIC insurance expense | **​** | **1,668** | ​ | 1,591 | ​ | 1,010 | **5** **​** | 58 ​ | | State bank franchise tax expense | **​** | **—** | ​ | — | ​ | 5,369 | **—** **​** | (100) ​ | | Interchange related expense | **​** | **4,773** | ​ | 4,960 | ​ | 4,303 | **(4)** **​** | 15 ​ | | Legal and professional fees | **​** | **4,024** | ​ | 4,924 | ​ | 4,244 | **(18)** **​** | 16 ​ | | FHLB advances early termination penalties | **​** | **—** | ​ | — | ​ | 2,108 | **NM** **​** | NM ​ | | Other | **​** | **16,760** | ​ | 14,568 | ​ | 15,660 | **15** **​** | (7) ​ | | Total noninterest expense | **​** | **$187,308** | ​ | $183,065 | ​ | $185,457 | **2** **​** | (1) ​ | Total Company noninterest expense increased $4.2 million, or 2%, over 2021. The following were the most significant components comprising the increase in noninterest expense by reportable segment: ### Traditional Banking segment Traditional Banking noninterest expense increased $4.3 million over 2021. The following primarily drove the change in noninterest expense: - Other noninterest expense increased by $3.0 million, or 53%. Notable fluctuations within the Other noninterest expense category were as follows: - Net losses related to client disputes for unauthorized checks as well as unauthorized debit and credit card transactions increased $780,000 over 2021. - Meals, Entertainment, and Travel expenses increased $860,000 with in-person community outreach and business-related travel increasing to nearer pre-pandemic levels in combination with inflationary pressures on these costs. - Freight, postage and supplies expense increased $261,000 with these expenses negatively impacted by additional usage and inflation-related cost increases. - Provision for losses on off-balance sheet commitments increased $135,000 driven primarily by an increase in the Bank’s committed but unused lines of credit during the previous 12 months. - The remaining increase was spread over several miscellaneous accounts, with these expenses rising back closer to pre-pandemic levels. - Salaries and Benefits expense increased a net $1.2 million, or 1%, to $88.5 million for 2022. The most notable change within Salaries and Benefits was estimated bonus expense, which increased $1.1 million from 2021 to 2022, as expected bonus payouts for 2022 are expected to increase from those paid out for 2021. ### Mortgage Banking segment Noninterest expense at the Mortgage Banking segment decreased $2.4 million, or 20%, from 2021, primarily due to a $3.3 million reduction in mortgage commissions partially offset by a $2.2 million reduction in credits to deferred salary expense. The decrease in mortgage commissions was directly attributable to the previously discussed significant decline in secondary market loan volume from 2021 to 2022. The Company records a credit offset to salary expense for each loan it originates and recognizes the cost of that credit as an adjustment to the loan’s yield over its estimated life. The amount of credit benefit to salary expense during a given year is determined by the overall loan origination volume during that year. With the dramatic decrease in mortgage origination volume during 2022, the overall credit benefit recognized by the Mortgage Banking segment during 2022 decreased substantially as compared to 2021 when mortgage origination volume was much higher. In addition to the change in salary expenses noted in the previous paragraph, the Mortgage Banking segment also experienced a year-to-year decrease of $350,000 in marketing expenses as the rapid rise in interest rates made the fixed-rate secondary market product a less attractive alternative for clients seeking mortgage loans. The remaining decline in noninterest expense was related to a reduction in general overhead expenses allocated to the business segment as a result of the decrease in new loan origination volume. ### Republic Credit Solutions segment Noninterest expense at the RCS segment increased $3.6 million, or 76%, over 2021, primarily due to increased marketing of RCS’s LOC II product. The LOC II product was first piloted during the first quarter of 2021. ### FINANCIAL CONDITION ### Cash and Cash Equivalents Cash and cash equivalents include cash, deposits with other financial institutions with original maturities less than 90 days, and federal funds sold. For cash held at the FRB, the Bank earns a yield on amounts exceeding required reserves. This cash earned a weighted-average yield of 1.54% during 2022 with a spot balance yield of 4.40% on December 31, 2022. For cash held within the Bank’s banking center and ATM networks, the Bank does not earn interest. Republic had $314 million in cash and cash equivalents as of December 31, 2022 compared to $757 million as of December 31, 2021. Period-end cash balances did decrease from December 31, 2021 to December 31, 2022 due in part to cash utilized to fund $98 million of ERAs originated during December of 2022 and also due to a $301 million decline in customer deposit balances during the year. While the Company deployed a portion of its excess cash into the purchase of long-term investment securities during the fourth quarter of 2021 and periodically throughout 2022, it maintained a general strategy of keeping a large amount of interest earning cash on balance sheet for interest rate risk protection. As a result, Republic’s average interest-earning cash and cash equivalent balances were $738 million during 2022 compared to $807 million for 2021. This strategy significantly benefitted the Traditional Bank’s net interest income during the year as the FOMC began raising the FFTR during 2022. The Company’s Captive maintains cash reserves to cover insurable claims. Captive cash reserves totaled approximately $4 million as of December 31, 2022 and 2021. ### Investment Securities ### Table 11 — Investment Securities Portfolio | ​ December 31, (in thousands) ​ Available-for-sale debt securities (fair value): | ​ ​ ​ | ​ ​ 2022 ​ ​ ​ ​ | ​ ​ ​ | ​ ​ 2021 ​ ​ ​ ​ | ​ ​ ​ | ​ ​ 2020 ​ ​ ​ ​ | ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | | U.S. Treasury securities and U.S. Government agencies | ​ | **$411,141** | ​ | $237,459 | ​ | $246,909 | ​ | | Private label mortgage-backed security | **​** | **2,127** | ​ | 2,731 | ​ | 2,957 | ​ | | Mortgage-backed securities - residential | **​** | **171,873** | ​ | 210,749 | ​ | 211,202 | ​ | | Collateralized mortgage obligations | **​** | **21,368** | ​ | 30,294 | ​ | 48,952 | ​ | | Corporate bonds | **​** | **10,001** | ​ | 10,046 | ​ | 10,043 | ​ | | Trust preferred security | **​** | **3,855** | ​ | 3,847 | ​ | 3,800 | ​ | | Total available-for-sale debt securities | **​** | **620,365** | ​ | 495,126 | ​ | 523,863 | ​ | | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | | **Held-to-maturity debt securities (carrying value):** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | | U.S. Treasury securities and U.S. Government agencies | **​** | **75,000** | ​ | — | ​ | — | ​ | | Mortgage backed securities - residential | **​** | **27** | ​ | 46 | ​ | 99 | ​ | | Collateralized mortgage obligations | **​** | **7,270** | ​ | 9,080 | ​ | 13,061 | ​ | | Corporate bonds | **​** | **​** **4,964** | ​ | ​ 34,928 | ​ | ​ 39,808 | ​ | | Obligations of state and political subdivisions | **​** | **125** | ​ | 245 | ​ | 356 | ​ | | Total held-to-maturity debt securities | **​** | **87,386** | ​ | 44,299 | ​ | 53,324 | ​ | | ​ | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | | **Equity securities with a readily determinable fair value (fair value):** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | | Freddie Mac preferred stock | **​** | **111** | ​ | 170 | ​ | 560 | ​ | | Community Reinvestment Act mutual fund | **​** | **—** | ​ | 2,450 | ​ | 2,523 | ​ | | Total equity securities with a readily determinable fair value | **​** | **​** **111** | ​ | ​ 2,620 | ​ | ​ 3,083 | ​ | | ​ | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | | **Total investment securities** | **​** | **$707,862** | ​ | $542,045 | ​ | $580,270 | ​ | AFS debt securities primarily consists of U.S. Treasury securities and U.S. Government agency obligations, including agency MBS and agency CMOs. The agency MBSs primarily consist of hybrid mortgage investment securities, as well as other adjustable rate mortgage investment securities, underwritten and guaranteed by the GNMA, the FHLMC and the FNMA. Agency CMOs held in the investment portfolio are substantially all floating rate securities that adjust monthly. The Bank uses a portion of the investment securities portfolio as collateral to Bank clients for SSUARs. The remaining eligible securities that are not pledged to secure client SSUARs may be pledged to the FHLB as collateral for the Bank’s borrowing line. During 2022, the Bank purchased $330 million in investment debt securities, allocated among $30 million in MBSs, $160 million in U.S. Treasuries, and $140 million in U.S. government agencies. Of the U.S. Treasuries that were purchased during the year, $75 million of these securities were designated as HTM at their time of purchase. The mortgage-backed securities that were purchased had an expected weighted-average yield of approximately 1.30% and a weighted-average maturity at purchase of 9.0 years. The U.S. Treasuries had an expected weighted-average yield of approximately 2.03% and a weighted-average life at purchase of 1.6 years. The U.S. Government agencies purchased had an expected weighted-average yield of approximately 4.70% and a weighted-average life of 2.0 years. Strategies for the investment securities portfolio are influenced by economic and market conditions, loan demand, deposit mix, and liquidity needs. Since early 2020, the Bank has utilized a general investing strategy of purchasing securities with shorter-term durations or maintaining a large amount cash at the Federal Reserve. The Bank utilized this general strategy due to liquidity reasons and as an interest rate risk management tool, as management did not believe that extending the duration of a significant amount of the Company’s cash into longer investment terms was worth the interest rate risk given the historically low level of long-term interest rates at that time. This strategy could change in 2023 depending upon several factors including, but not limited to, the Company’s overall current and projected liquidity positions, its customers’ demand for its loans and deposit products, the Company’s overall interest rate risk position, the interest rate environment at the time, as well as the projected interest rate environment for the near term and the long term. During 2019, one of the Company’s floating rate corporate bonds with a current carrying amount of $10 million was downgraded to BBB+ (S&P/Fitch), driving a significant decrease in the bond’s market value at that time. As of December 31, 2022, this bond had recovered its lost value and reflected an unrealized gain of $1,000. ### Table 12 — Available-for-Sale Debt Securities | ​ ​ ​ ​ December 31, 2022 (dollars in thousands) ​ U.S. Treasury securities and U.S. Government agencies: | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Amortized Cost ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ Weighted ​ Average ​ Yield ​ ​ ​ ​ ​ | ​ Weighted Average Maturity in Years ​ ​ | ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | ---: | --- | | **Due in one year or less** | **​** | **$31,789** | **​** | **$31,432** | | **1.10%** | **0.25** | **​** | | **Due from one year to five years** | **​** | **404,544** | **​** | **379,709** | | **1.81** **​** | **2.29** | **​** | | **Due from five years to 10 years** | **​** | **—** | **​** | **—** | | **—** **​** | **—** | **​** | | **Total U.S. Treasury securities and U.S. Government agencies** | **​** | **436,333** | ​ | **411,141** | | **1.75** **​** | **2.14** | ​ | | **Corporate bonds:** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | | **Due in one year or less** | **​** | **10,000** | **​** | **10,001** | | **5.08** **​** | **0.29** | **​** | | **Total Corporate bonds** | **​** | **10,000** | **​** | **10,001** | | **5.08** **​** | **0.29** | **​** | | **Trust preferred security, due beyond ten years** | **​** | **​** **3,741** | **​** | **​** **3,855** | **​** | **5.48** **​** | **14.43** | **​** | | **Private label mortgage backed security** | **​** | **843** | **​** | **2,127** | | **7.96** **​** | **10.63** | **​** | | **Total mortgage backed securities - residential** | **​** | **189,312** | **​** | **171,873** | | **1.89** **​** | **10.94** | **​** | | **Total collateralized mortgage obligations** | **​** | **22,774** | **​** | **21,368** | | **1.60** **​** | **17.48** | **​** | | **Total available-for-sale debt securities** | **​** | **$663,003** | **​** | **$620,365** | | **1.89** **​** | **5.24** | **​** | ### Table 13 — Held-to-Maturity Debt Securities | ​ ​ ​ ​ December 31, 2022 (dollars in thousands) ​ U.S. Treasury securities and U.S. Government agencies: | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Carrying Value ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ Weighted ​ Average ​ Yield ​ ​ ​ ​ ​ | ​ Weighted Average Maturity in Years ​ ​ | ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | ---: | --- | | **Due from one year or less** | **​** | **$75,000** | **​** | **$75,106** | | **5.17** **​** | **1.91** | **​** | | **Total U.S. Treasury securities and U.S. Government agencies** | **​** | **75,000** | ​ | **75,106** | | **5.17** **​** | **1.91** | ​ | | **Corporate bonds:** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | | **Due from one year to five years** | **​** | **$4,974** | **​** | **$4,925** | **​** | **5.56%** | **3.10** | ​ | | **Total corporate bonds** | **​** | **4,974** | **​** | **4,925** | | **5.56** **​** | **3.10** | **​** | | **Obligations of state and political subdivisions:** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | | **Due from one year or less** | **​** | **​** **125** | **​** | **​** **124** | **​** | **1.90** **​** | **0.58** | ​ | | **Due from one year to five years** | **​** | **—** | **​** | **—** | | **—** ​ | **—** | ​ | | **Total obligations of state and political subdivisions** | **​** | **125** | **​** | **124** | | **1.90** **​** | **0.58** | **​** | | **Total mortgage backed securities - residential** | **​** | **27** | **​** | **26** | | **4.37** **​** | **11.59** | **​** | | **Total collateralized mortgage obligations** | **​** | **7,270** | **​** | **7,176** | | **1.29** **​** | **17.09** | **​** | | **Total held-to-maturity debt securities** | **​** | **$87,396** | **​** | **$87,357** | | **4.86** **​** | **3.24** | **​** | *See Footnote 2 “Investment Securities” of Part II Item 8 “Financial Statements and Supplementary Data” for further information regarding the Bank’s investment securities.* ### Loan Portfolio ### Table 14 — Loan Portfolio Composition | ​ December 31, (in thousands) ​ Traditional Banking: Residential real estate: | ​ ​ ​ ​ | ​ ​ 2022 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ 2021 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ 2020 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | | Owner occupied | ​ | **$911,427** | ​ | $820,731 | ​ | $879,800 | ​ | | Nonowner occupied | **​** | **321,358** | ​ | 306,323 | ​ | 264,780 | ​ | | Commercial real estate | **​** | **1,599,510** | ​ | 1,456,009 | ​ | 1,349,085 | ​ | | Construction & land development | **​** | **153,875** | ​ | 129,337 | ​ | 98,674 | ​ | | Commercial & industrial | **​** | **408,407** | ​ | 340,363 | ​ | 325,596 | ​ | | Paycheck Protection Program | **​** | **4,980** | ​ | 56,014 | ​ | 392,319 | ​ | | Lease financing receivables | **​** | **10,505** | ​ | 8,637 | ​ | 10,130 | ​ | | Aircraft | **​** | **179,785** | ​ | 142,894 | ​ | 101,375 | ​ | | Home equity | **​** | **241,739** | ​ | 210,578 | ​ | 240,640 | ​ | | Consumer: | ​ | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | | Credit cards | ​ | **​** **15,473** | ​ | ​ 14,510 | ​ | ​ 14,196 | ​ | | Overdrafts | ​ | **​** **726** | ​ | ​ 683 | ​ | ​ 587 | ​ | | Automobile loans | ​ | **​** **6,731** | ​ | ​ 14,448 | ​ | ​ 30,300 | ​ | | Other consumer | **​** | **​** **626** | ​ | ​ 1,432 | ​ | ​ 8,167 | ​ | | **Total Traditional Banking** | **​** | **​** **3,855,142** | ​ | ​ 3,501,959 | ​ | ​ 3,715,649 | ​ | | Warehouse lines of credit\* | **​** | **403,560** | ​ | 850,550 | ​ | 962,796 | ​ | | **Total Core Banking** | ​ | **​** **4,258,702** | ​ | ​ 4,352,509 | ​ | ​ 4,678,445 | ​ | | ​ | ​ | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | | **Republic Processing Group\*:** | ​ | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | | Tax Refund Solutions: | **​** | **​** | ​ | ​ | ​ | ​ | ​ | | Refund Advances | **​** | **97,505** | ​ | — | ​ | — | ​ | | Other TRS commercial & industrial loans | ​ | **​** **51,767** | ​ | ​ 50,987 | ​ | ​ 23,765 | ​ | | Republic Credit Solutions | **​** | **107,828** | ​ | 93,066 | ​ | 110,893 | ​ | | **Total Republic Processing Group** | **​** | **257,100** | ​ | 144,053 | ​ | 134,658 | ​ | | ​ | **​** | **​** | ​ | ​ | ​ | ​ | ​ | | **Total loans\*\*** | **​** | **4,515,802** | ​ | 4,496,562 | ​ | 4,813,103 | ​ | | Allowance for credit losses | **​** | **(70,413)** | ​ | (64,577) | ​ | (61,067) | ​ | | ​ | ​ | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | | **Total loans, net** | **​** | **$4,445,389** | ​ | $4,431,985 | ​ | $4,752,036 | ​ | *\* Identifies loans to borrowers located primarily outside of the Bank’s market footprint.* \*\* *Total loans are presented inclusive of premiums, discounts and net loan origination fees and costs.* Gross loans increased by $19 million during 2022 to $4.5 billion as of December 31, 2022. The most significant components comprising the change in loans by reportable segment follow: ### Traditional Banking segment Period-end balances for Traditional Banking loans increased $353 million, or 10%, from December 31, 2021 to December 31, 2022. The following primarily drove the change in loan balances during 2022: - CRE loans grew $144 million, or 10%, and C&I loans grew $68 million, or 20%, during 2022, as the Traditional Bank experienced strong loan demand within its Louisville-based CRE Lending, Private Banking and Commercial Banking business lines, as well as its Northern Kentucky/Cincinnati and Florida markets. - With mortgage refinance volume at all-time record levels during 2020 and 2021, balances of 1-4 family loans, including HELOCs, generally declined as the vast majority of the volume of refinancings was sold into the secondary market. This trend began to change in 2022, however, as a significant rise in long-term, fixed-rate mortgages caused portfolio level ARM loans to become generally more attractive than secondary market loans. As a result, residential real estate loans increased $106 million during 2022, while HELOCs increased $31 million during the same period. - Offsetting the growth above, during 2022, the Core Bank’s PPP portfolio decreased $51 million, as this temporary government program continued to wind down. ### Warehouse Lending segment Outstanding Warehouse period-end balances decreased $447 million from December 31, 2021 to December 31, 2022. Due to the volatility and seasonality of the mortgage market, it is difficult to project future outstanding balances of Warehouse lines of credit. The growth of the Bank’s Warehouse Lending business greatly depends on the overall mortgage market and typically follows industry trends. Since its entrance into this business during 2011, the Bank has experienced volatility in the Warehouse portfolio consistent with overall demand for mortgage products. Weighted-average quarterly usage rates on the Bank’s Warehouse lines have ranged from a low of 31% during the fourth quarter of 2013 to a high of 71% during the fourth quarter of 2019. On an annual basis, weighted average usage rates on the Bank’s Warehouse lines have ranged from a low of 39% during 2022 to a high of 66% during 2020. As previously discussed, additional increases overall market rates are generally believed by management to be unfavorable to Warehouse’s client demand, likely leading to a reduction in average outstanding balances as higher long-term interest rates generally drive lower demand for Warehouse borrowings. ### Tax Refund Solutions segment Outstanding TRS loans increased $99 million from December 31, 2021 to December 31, 2022 primarily reflecting the impact of $98 million of ERAs originated during the fourth quarter of 2022 through a new third party Tax Provider contract. Conversely, no ERAs were originated during the fourth quarter of 2021. In addition, other TRS loans increased $1 million from December 31, 2021 to December 31, 2022. Other TRS loans primarily represent commercial-related loans to Tax Providers. These loans are typically made in the fourth quarter of each year and fully repaid by June 30th of the following year. ### Republic Credit Solutions segment Outstanding RCS loans increased $15 million during 2022 reflecting a $12 million increase in hospital receivables and a $3 million increase in outstanding balances for RCS’s line-of-credit products. The increase in balances for RCS’s line-of-credit product was the direct result of additional marketing of the products during 2022. The table below illustrates the Bank’s fixed and variable rate loan maturities: ### Table 15 — Selected Loan Distribution | ​ ​ ​ December 31, 2022 (in thousands) ​ Fixed rate loan maturities: ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ One Year ​ Or Less ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ Over One Through ​ Five Years ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ Over Five Through ​ 15 Years ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Over 15 Years ​ ​ ​ ​ ​ ​ ​ ​ ​ | | --- | --- | ---: | ---: | ---: | ---: | ---: | | **Residential real estate** | **​** | **$618,577** **​** | **$19,402** **​** | **$32,740** **​** | **$252,817** **​** | **$313,618** **​** | | **Commercial real estate** | **​** | **717,325** **​** | **13,739** **​** | **169,697** **​** | **533,067** **​** | **822** **​** | | **Construction & land development** | **​** | **57,797** **​** | **17,886** **​** | **22,148** **​** | **14,636** **​** | **3,127** **​** | | **Commercial & industrial** | **​** | **245,217** **​** | **62,804** **​** | **113,290** **​** | **69,123** **​** | **—** **​** | | **Paycheck Protection Program** | **​** | **​** **4,980** **​** | **202** **​** | **4,778** **​** | **—** **​** | **—** **​** | | **Lease financing receivables** | **​** | **10,505** **​** | **316** **​** | **10,189** **​** | **—** **​** | **—** **​** | | **Aircraft** | **​** | **​** **179,785** **​** | **—** **​** | **1,528** **​** | **36,949** **​** | **141,308** **​** | | **Warehouse lines of credit** | **​** | **—** **​** | **—** **​** | **—** **​** | **—** **​** | **—** **​** | | **Home equity** | **​** | **1,070** **​** | **—** **​** | **1,025** **​** | **45** **​** | **—** **​** | | **Consumer** | **​** | **161,635** **​** | **154,788** **​** | **6,633** **​** | **147** **​** | **67** **​** | | **Total fixed rate loans** | **​** | **$1,996,891** **​** | **$269,137** **​** | **$362,028** **​** | **$906,784** **​** | **$458,942** **​** | | ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | | **Variable rate loan maturities:** | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | | ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | | **Residential real estate** | **​** | **$614,208** **​** | **$2,000** **​** | **$26,194** **​** | **$174,741** **​** | **$411,273** **​** | | **Commercial real estate** | **​** | **882,185** **​** | **31,878** **​** | **141,711** **​** | **689,862** **​** | **18,734** **​** | | **Construction & land development** | **​** | **96,078** **​** | **13,983** **​** | **4,805** **​** | **77,184** **​** | **106** **​** | | **Commercial & industrial** | **​** | **214,957** **​** | **77,484** **​** | **96,738** **​** | **20,735** **​** | **20,000** **​** | | **Paycheck Protection Program** | **​** | **​** **—** **​** | **—** **​** | **—** **​** | **—** **​** | **—** **​** | | **Lease financing receivables** | **​** | **—** **​** | **—** **​** | **—** **​** | **—** **​** | **—** **​** | | **Aircraft** | **​** | **​** **—** **​** | **—** **​** | **—** **​** | **—** **​** | **—** **​** | | **Warehouse lines of credit** | **​** | **403,560** **​** | **403,560** **​** | **—** **​** | **—** **​** | **—** **​** | | **Home equity** | **​** | **240,669** **​** | **14,894** **​** | **61,444** **​** | **164,331** **​** | **—** **​** | | **Consumer** | **​** | **67,254** **​** | **15,473** **​** | **8** **​** | **—** **​** | **51,773** **​** | | **Total variable rate loans** | **​** | **$2,518,911** **​** | **$559,272** **​** | **$330,900** **​** | **$1,126,853** **​** | **$501,886** **​** | | ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | | **Total:** | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | | ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | | **Residential real estate** | **​** | **$1,232,785** **​** | **$21,402** **​** | **$58,934** **​** | **$427,558** **​** | **$724,891** **​** | | **Commercial real estate** | **​** | **1,599,510** **​** | **45,617** **​** | **311,408** **​** | **1,222,929** **​** | **19,556** **​** | | **Construction & land development** | **​** | **153,875** **​** | **31,869** **​** | **26,953** **​** | **91,820** **​** | **3,233** **​** | | **Commercial & industrial** | **​** | **460,174** **​** | **140,288** **​** | **210,028** **​** | **89,858** **​** | **20,000** **​** | | **Paycheck Protection Program** | **​** | **​** **4,980** **​** | **202** **​** | **4,778** **​** | **—** **​** | **—** **​** | | **Lease financing receivables** | **​** | **10,505** **​** | **316** **​** | **10,189** **​** | **—** **​** | **—** **​** | | **Aircraft** | **​** | **​** **179,785** **​** | **—** **​** | **1,528** **​** | **36,949** **​** | **141,308** **​** | | **Warehouse lines of credit** | **​** | **403,560** **​** | **403,560** **​** | **—** **​** | **—** **​** | **—** **​** | | **Home equity** | **​** | **241,739** **​** | **14,894** **​** | **62,469** **​** | **164,376** **​** | **—** **​** | | **Consumer** | **​** | **228,889** **​** | **170,261** **​** | **6,641** **​** | **147** **​** | **51,840** **​** | | **Total loans** | **​** | **$4,515,802** **​** | **$828,409** **​** | **$692,928** **​** | **$2,033,637** **​** | **$960,828** **​** | | ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | | **Loans at maturity interval to overall total loans** | ​ | ​ **100%** | **​** **19%** | **​** **15%** | **​** **45%** | **​** **21%** | ### Allowance for Credit Losses As of December 31, 2022, the Bank maintained an ACLL for expected credit losses inherent in the Bank’s loan portfolio, which includes overdrawn deposit accounts. The Bank also maintained an ACLS and an ACLC for expected losses in its securities portfolio and its off-balance sheet credit exposures, respectively. Management evaluates the adequacy of the ACLL monthly, and the adequacy of the ACLS and ACLC quarterly. All ACLs are presented and discussed with the Audit Committee and the Board of Directors quarterly. The Company’s ACLL increased $5.8 million from $64.6 million as of December 31, 2021 to $70.4 million as of December 31, 2022. As a percent of total loans, the total Company’s ACLL increased to 1.56% as of December 31, 2022 compared to 1.44% as of December 31, 2021. An analysis of the ACL by reportable segment follows: ### Traditional Banking segment The Traditional Banking ACLL increased approximately $1.3 million to $50.7 million as of December 31, 2022 driven primarily by formula reserves tied to loan growth during 2022, partially offset by reserves released following the payoff or upgrade of loans graded Substandard or Special Mention. ### Warehouse Lending segment The Warehouse ACLL decreased to approximately $1.0 million, and the Warehouse ACLL to total Warehouse loans remained at 0.25% when comparing December 31, 2022 to December 31, 2021. As of December 31, 2022, the Warehouse ACLL was entirely qualitative in nature with no adjustments to the qualitative reserve percentage required for 2021. ### Tax Refund Solutions segment The TRS ACLL increased to approximately $3.9 million as of December 31, 2022 compared to $944,000 as of December 31, 2021. The increased ACLL was primarily driven by estimated loss reserves for $98 million of ERAs outstanding as of December 31, 2022. These ERAs were originated during the fourth quarter of 2022 through a new third party Tax Provider contract and are expected to be repaid from tax refunds generated by tax returns filed during the first quarter 2023 filing season. In contrast there were no ERAs outstanding as of December 31, 2021 ### Republic Credit Solutions segment The RCS ACLL increased $1.9 million from $12.9 million as of December 31, 2021 to $14.8 million as of December 31, 2022. RCS maintained an ACLL for two distinct credit products offered as of December 31, 2022, including its line-of-credit products and its healthcare-receivables products. As of December 31, 2022, the ACLL to total loans estimated for each RCS product ranged from as low as 0.25% for its healthcare-receivables products to as high as 48.91% for its LOC I product and 54.85% for its LOC II product. The lower reserve percentage of 0.25% was provided for RCS’s healthcare receivables, as such receivables have recourse back to the third-party providers. *For additional discussion regarding Republic’s methodology for determining the adequacy of the ACLL, see the section titled “Critical Accounting Policies and Estimates” in this section of the filing.* #### See additional detail regarding Republic Credit Solution’s loan products under Item 1 “Business.” ### Table 16 — Summary of Loan and Lease Loss Experience | ​ ​ ​ Years Ended December 31, (dollars in thousands) ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ 2020 ​ ​ ​ ​ | | --- | --- | --- | --- | --- | | **ACLL at beginning of period** | **​** | **$64,577** ​ | $61,067 ​ | $43,351 ​ | | ​ | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Adoption of ASC 326** | **​** | **​** **—** ​ | ​ — ​ | ​ 6,734 ​ | | ​ | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Charge-offs:** | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **​** | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Traditional Banking:** | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | Residential real estate | ​ | **(21)** ​ | — ​ | (169) ​ | | Commercial real estate | **​** | **(9)** ​ | (428) ​ | (795) ​ | | Commercial & industrial | **​** | **—** ​ | (86) ​ | (310) ​ | | Home equity | **​** | **—** ​ | (51) ​ | (14) ​ | | Consumer | ​ | **​** **(1,290)** ​ | ​ (895) ​ | ​ (1,481) ​ | | **Total Traditional Banking** | ​ | **​** **(1,320)** ​ | ​ (1,460) ​ | ​ (2,769) ​ | | Warehouse lines of credit | **​** | **—** ​ | — ​ | — ​ | | **Total Core Banking** | ​ | **​** **(1,320)** ​ | ​ (1,460) ​ | ​ (2,769) ​ | | ​ | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Republic Processing Group:** | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | Tax Refund Solutions: | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | Refund Advances | ​ | **​** **(11,505)** ​ | **​** (10,256) ​ | **​** (19,575) ​ | | Other TRS loans | ​ | **​** **(154)** ​ | ​ (51) ​ | ​ (234) ​ | | Republic Credit Solutions | ​ | **​** **(11,390)** ​ | ​ (4,707) ​ | ​ (6,163) ​ | | **Total Republic Processing Group** | ​ | **​** **(23,049)** ​ | ​ (15,014) ​ | ​ (25,972) ​ | | **Total charge-offs** | **​** | **(24,369)** ​ | (16,474) ​ | (28,741) ​ | | ​ | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Recoveries:** | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **​** | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Traditional Banking:** | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | Residential real estate | ​ | **​** **104** ​ | ​ 396 ​ | ​ 182 ​ | | Commercial real estate | **​** | **287** ​ | 82 ​ | 472 ​ | | Commercial & industrial | **​** | **271** ​ | 76 ​ | 122 ​ | | Home equity | **​** | **121** ​ | 46 ​ | 115 ​ | | Consumer | ​ | **​** **373** **​** | ​ 475 ​ | ​ 508 ​ | | **Total Traditional Banking** | ​ | **​** **1,156** **​** | ​ 1,075 ​ | ​ 1,399 ​ | | Warehouse lines of credit | **​** | **—** ​ | — ​ | — ​ | | **Total Core Banking** | **​** | **​** **1,156** ​ | ​ 1,075 ​ | ​ 1,399 ​ | | ​ | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Republic Processing Group:** | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | Tax Refund Solutions: | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | Refund Advances | **​** | **​** **4,831** ​ | ​ 3,533 ​ | ​ 6,542 ​ | | Other TRS commercial & industrial loans | **​** | **​** **665** ​ | ​ 29 ​ | ​ 2 ​ | | Republic Credit Solutions | **​** | **​** **1,168** ​ | ​ 408 ​ | ​ 629 ​ | | **Total Republic Processing Group** | **​** | **​** **6,664** ​ | ​ 3,970 ​ | ​ 7,173 ​ | | ​ | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Total recoveries** | **​** | **7,820** ​ | 5,045 ​ | 8,572 ​ | | ​ | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Net loan recoveries (charge-offs)** | **​** | **(16,549)** ​ | (11,429) ​ | (20,169) ​ | | ​ | **​** | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | Provision - Core Banking | **​** | **349** ​ | (188) ​ | 16,743 ​ | | Provision - RPG | **​** | **22,036** ​ | 15,127 ​ | 14,408 ​ | | **Total Provision** | **​** | **22,385** ​ | 14,939 ​ | 31,151 ​ | | **ACLL at end of period** | **​** | **$70,413** ​ | $64,577 ​ | $61,067 ​ | | ​ | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | ​ | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Credit Quality Ratios - Total Company:** | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | ​ | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | ACLL to total loans | **​** | **1.56%** | 1.44% | 1.27% | | ACLL to nonperforming loans | **​** | **432** **​** | 314 ​ | 259 ​ | | Net loan charge-offs (recoveries) to average loans | **​** | **​** **0.38** **​** | ​ 0.25 ​ | ​ 0.42 ​ | | ​ | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Credit Quality Ratios - Core Banking:** | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | ​ | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | ACLL to total loans | **​** | **1.21%** | 1.18% | 1.11% | | ACLL to nonperforming loans | **​** | **332** **​** | 251 ​ | 221 ​ | | Net loan charge-offs (recoveries) to average loans | ​ | **​** **0.00** ​ | ​ 0.01 ​ | ​ 0.03 ​ | ### Table 17 — Net Loan Charge-offs (Recoveries) to Average Loans by Loan Category | ​ ​ Years Ended December 31, (dollars in thousands) ​ Traditional Banking: Residential real estate: | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Net Loan Charge-Offs (Recoveries) to Average Loans 2022 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ 2021 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ 2020 ​ ​ ​ ​ ​ ​ | | --- | --- | --- | ---: | --- | ---: | --- | ---: | | Owner occupied | ​ | ​ | **(0.01)%** | **​** | (0.04)% | ​ | —% | | Nonowner occupied | ​ | ​ | **—** **​** | **​** | — ​ | ​ | — ​ | | Commercial real estate | ​ | ​ | **(0.02)** **​** | **​** | 0.03 ​ | ​ | 0.02 ​ | | Construction & land development | ​ | ​ | **—** **​** | **​** | — ​ | ​ | — ​ | | Commercial & industrial | ​ | ​ | **(0.07)** **​** | **​** | — ​ | ​ | 0.05 ​ | | Paycheck Protection Program | ​ | ​ | **—** **​** | **​** | — ​ | ​ | — ​ | | Lease financing receivables | ​ | ​ | **—** **​** | **​** | — ​ | ​ | — ​ | | Aircraft | ​ | ​ | **—** **​** | **​** | — ​ | ​ | — ​ | | Home equity | ​ | ​ | **(0.06)** **​** | **​** | — ​ | ​ | (0.04) ​ | | Consumer: | ​ | ​ | **​** **​** | **​** | ​ ​ | ​ | ​ ​ | | Credit cards | ​ | ​ | **0.48** **​** | **​** | 0.65 ​ | ​ | 1.46 ​ | | Overdrafts | ​ | ​ | **104.04** **​** | **​** | 51.69 ​ | ​ | 93.94 ​ | | Automobile loans | ​ | ​ | **(0.14)** **​** | **​** | (0.10) ​ | ​ | 0.08 ​ | | Other consumer | ​ | ​ | **1.02** **​** | **​** | 0.27 ​ | ​ | 0.58 ​ | | **Total Traditional Banking** | **​** | **​** | **—** **​** | **​** | 0.01 ​ | ​ | 0.04 ​ | | Warehouse lines of credit | ​ | ​ | **—** **​** | **​** | — ​ | ​ | — ​ | | **Total Core Banking** | **​** | **​** | **—** **​** | **​** | 0.01 ​ | ​ | 0.03 ​ | | **​** | **​** | **​** | **​** **​** | **​** | ​ ​ | ​ | ​ ​ | | **Republic Processing Group:** | **​** | **​** | **​** **​** | **​** | ​ ​ | ​ | ​ ​ | | Tax Refund Solutions: | ​ | ​ | **​** **​** | **​** | ​ ​ | ​ | ​ ​ | | Refund Advances\* | ​ | ​ | **26.78** **​** | **​** | 26.58 ​ | ​ | 33.55 ​ | | Other TRS commercial & industrial loans | ​ | ​ | **(3.18)** **​** | **​** | 0.19 ​ | ​ | 2.32 ​ | | Republic Credit Solutions | ​ | ​ | **10.73** **​** | **​** | 3.93 ​ | ​ | 5.35 ​ | | **Total Republic Processing Group** | **​** | **​** | **12.02** **​** | **​** | 7.42 ​ | ​ | 12.20 ​ | | **Total** | **​** | **​** | **0.38** **​** | **​** | 0.25 ​ | ​ | 0.42 ​ | *\* Refund advances are originated during the first two months of each year, and beginning in December 2022, ERAs for the upcoming first quarter tax season are originated during the fourth quarter of the year. All RAs, including ERAs, are charged-off by June 30th of each year.* The Company’s net charge-offs to average total Company loans increased from 0.25% during 2021 to 0.38% during 2022, with net charge-offs increasing $5.1 million and average total Company loans decreasing $180 million, or 4%. The increase in net charge-offs was primarily driven by a $5.3 million increase in net charge-offs within the Company’s RPG operations, which has historically conducted higher-risk lending activities than the Company’s Core Banking operations. From 2021 to 2022, RPG experienced a $5.9 million increase in net charge-offs within its RCS segment. Net charge-offs for RCS’s LOC I product increased to $7.0 million for 2022 from $3.5 million for 2021, with government stimulus programs generally driving down usage of this product during 2021. Net charge-offs for RCS’s LOC II product were $3.2 million for 2022 compared to $840,000 of net charge-offs during 2021. The LOC II product was launched in January 2021 and remained in a pilot phase for much of 2021 leading to a lower level of originations during 2021, and as a result, a lower level of charge-offs for the year. From 2021 to 2022, RPG experienced a $582,000 decrease in net charge-offs within its TRS segment, as TRS amended one of its existing Tax Provider contracts to place a ceiling on loan losses for RAs originated through this Tax Provider. For factors affecting the comparison of the TRS results of operations for 2022 and 2021, see section titled “*OVERVIEW - Tax Refund Solutions.”* During 2022 and 2021, the Company’s Core Bank net charge-offs to average Core Bank loans remained near zero. The following table sets forth management’s allocation of the ACLL by loan class. The ACLL allocation is based on management’s assessment of economic conditions, historical loss experience, forecasting for unemployment and vacancy rates, and various other life-of-loan and forecast considerations, as well as, qualitative factors. Additionally, management began including life-of-loan and forecast considerations into its ACLL allocation upon adoption of the CECL method on January 1, 2020. Since these factors and management’s assumptions are subject to change, the allocation is not necessarily indicative of future loan portfolio performance or future ACLL allocation. ### Table 18 — Management’s Allocation of the Allowance for Credit Losses on Loans | ​ ​ ​ ​ ​ December 31, (in thousands) ​ Traditional Banking: Residential real estate: | ​ 2022 ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ACLL ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of Loans to Total Loans\* ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of ACLL to Total Loan Class ​ ​ ​ ​ ​ ​ | ​ 2021 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ACLL ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of Loans to Total Loans\* ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of ACLL to Total Loan Class\* ​ ​ ​ ​ ​ ​ | ​ 2020 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ACLL ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of Loans to Total Loans\* ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of ACLL to Total Loan Class\* ​ ​ ​ ​ ​ ​ | | --- | --- | --- | --- | ---: | --- | ---: | --- | --- | --- | ---: | --- | ---: | --- | --- | --- | ---: | --- | ---: | | Owner occupied | | **$8,909** | | **21%** | | **0.98%** | ​ | $8,647 | | 19% | | 1.05% | ​ | $9,715 | | 19% | | 1.10% | | Nonowner occupied | | **2,831** | | **7** **​** | | **0.88** **​** | ​ | 2,700 | | 7 ​ | | 0.88 ​ | ​ | 2,466 | | 6 ​ | | 0.93 ​ | | Commercial real estate | | **23,739** | | **36** **​** | | **1.48** **​** | ​ | 23,769 | | 32 ​ | | 1.63 ​ | ​ | 23,606 | | 28 ​ | | 1.75 ​ | | Construction & land development | | **4,123** | | **3** **​** | | **2.68** **​** | ​ | 4,128 | | 3 ​ | | 3.19 ​ | ​ | 3,274 | | 2 ​ | | 3.32 ​ | | Commercial & industrial | **​** | **​** **3,976** | **​** | **9** **​** | **​** | **0.97** **​** | ​ | ​ 3,487 | ​ | 8 ​ | ​ | 1.02 ​ | ​ | ​ 2,797 | ​ | 7 ​ | ​ | 0.86 ​ | | Paycheck Protection Program | **​** | **​** **—** | **​** | **—** **​** | **​** | **—** **​** | ​ | ​ — | ​ | 1 ​ | ​ | — ​ | ​ | ​ — | ​ | 8 ​ | ​ | — ​ | | Lease financing receivables | **​** | **​** **110** | **​** | **—** **​** | **​** | **1.05** **​** | ​ | ​ 91 | ​ | — ​ | ​ | 1.05 ​ | ​ | ​ 106 | ​ | — ​ | ​ | 1.05 ​ | | Aircraft | **​** | **​** **449** | **​** | **4** **​** | **​** | **0.25** **​** | ​ | ​ 357 | ​ | 3 ​ | ​ | 0.25 ​ | ​ | ​ 253 | ​ | 2 ​ | ​ | 0.25 ​ | | Home equity | **​** | **​** **4,628** | **​** | **5** **​** | **​** | **1.91** **​** | ​ | ​ 4,111 | ​ | 5 ​ | ​ | 1.95 ​ | ​ | ​ 4,990 | ​ | 5 ​ | ​ | 2.07 ​ | | Consumer: | **​** | **​** **​** | **​** | **​** **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Credit cards | **​** | **​** **996** | **​** | **—** **​** | **​** | **6.44** **​** | ​ | ​ 934 | ​ | — ​ | ​ | 6.44 ​ | ​ | ​ 929 | ​ | — ​ | ​ | 6.54 ​ | | Overdrafts | **​** | **​** **726** | **​** | **—** **​** | **​** | **100.00** **​** | ​ | ​ 683 | ​ | — ​ | ​ | 100.00 ​ | ​ | ​ 587 | ​ | — ​ | ​ | 100.00 ​ | | Automobile loans | **​** | **​** **87** | **​** | **—** **​** | **​** | **1.29** **​** | ​ | ​ 186 | ​ | — ​ | ​ | 1.29 ​ | ​ | ​ 399 | ​ | 1 ​ | ​ | 1.32 ​ | | Other consumer | **​** | **​** **135** | **​** | **—** **​** | **​** | **21.57** **​** | ​ | ​ 314 | ​ | — ​ | ​ | 21.93 ​ | ​ | ​ 577 | ​ | — ​ | ​ | 7.07 ​ | | **Total Traditional Banking** | **​** | **​** **50,709** | **​** | **85** **​** | **​** | **1.32** **​** | ​ | ​ 49,407 | ​ | 78 ​ | ​ | 1.41 ​ | ​ | ​ 49,699 | ​ | 78 ​ | ​ | 1.34 ​ | | Warehouse lines of credit | **​** | **​** **1,009** | **​** | **9** **​** | **​** | **0.25** **​** | ​ | ​ 2,126 | ​ | 19 ​ | ​ | 0.25 ​ | ​ | ​ 2,407 | ​ | 20 ​ | ​ | 0.25 ​ | | **Total Core Banking** | **​** | **​** **51,718** | **​** | **94** **​** | **​** | **1.21** **​** | ​ | ​ 51,533 | ​ | 97 ​ | ​ | 1.18 ​ | ​ | ​ 52,106 | ​ | 98 ​ | ​ | 1.11 ​ | | **​** | **​** | **​** **​** | **​** | **​** **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | **Republic Processing Group:** | **​** | **​** **​** | **​** | **​** **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Tax Refund Solutions: | | **​** | **​** | **​** **​** | **​** | **​** **​** | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Refund Advances | | **3,797** | | **2** **​** | | **4** **​** | ​ | — | | — ​ | | — ​ | ​ | — | | — ​ | | — ​ | | Other TRS commercial & industrial loans | | **91** | | **1** **​** | | **0.18** **​** | ​ | 96 | | 1 ​ | | 0.19 ​ | ​ | 158 | | — ​ | | 0.66 ​ | | Republic Credit Solutions | | **​** **14,807** | **​** | **3** **​** | **​** | **13.73** **​** | ​ | ​ 12,948 | ​ | 2 ​ | ​ | 13.91 ​ | ​ | ​ 8,803 | ​ | 2 ​ | ​ | 7.94 ​ | | **Total Republic Processing Group** | **​** | **​** **18,695** | **​** | **6** **​** | **​** | **7.27** **​** | ​ | ​ 13,044 | ​ | 3 ​ | ​ | 9.06 ​ | ​ | ​ 8,961 | ​ | 2 ​ | ​ | 6.65 ​ | | **Total** | | **$70,413** | | **100** **​** | | **1.56** **​** | ​ | $64,577 | | 100 ​ | | 1.44 ​ | ​ | $61,067 | | 100 ​ | | 1.27 ​ | | ​ | ​ | ​ ​ | ​ | **​** **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | *\*See Table 14 in this section of the filing for loan portfolio balances. Values of less than 50 basis points are rounded down to zero.* Management believes, based on information presently available, that it has adequately provided for loan and lease credit losses as of December 31, 2022. *For additional discussion regarding Republic’s methodology for determining the adequacy of the ACLL, see the section titled “Critical Accounting Policies and Estimates” in this section of the filing.* ### Asset Quality ### Classified and Special Mention Loans The Bank applies credit quality indicators, or ratings, to individual loans based on internal Bank policies. Such internal policies are informed by regulatory standards. Loans rated “Loss,” “Doubtful,” “Substandard,” and PCD-Substandard are considered “Classified.” Loans rated “Special Mention” or PCD-Special Mention are considered Special Mention. The Bank’s Classified and Special Mention loans decreased approximately $50 million during 2022, driven primarily by commercial-purpose loans within the hospitality and leisure industry upgraded during 2022. *See Footnote 4 “Loans and Allowance for Credit Losses” of Part II Item 8 “Financial Statements and Supplementary Data” for additional discussion regarding Classified and Special Mention loans.* ### Table 19 — Classified and Special Mention Loans | ​ December 31, (in thousands) ​ | ​ ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ | ​ ​ 2020 ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | | Loss | ​ | **$—** | ​ | $— | ​ | $— | | Doubtful | ​ | **—** | ​ | — | ​ | — | | Substandard | ​ | **17,010** | ​ | 21,714 | ​ | 30,193 | | PCD - Substandard | ​ | **1,498** | ​ | 1,692 | ​ | 1,887 | | **Total Classified Loans** | ​ | **18,508** | ​ | 23,406 | ​ | 32,080 | | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | Special Mention | **​** | **69,246** | ​ | 114,496 | ​ | 89,206 | | PCD - Special Mention | **​** | **718** | ​ | 795 | ​ | 895 | | **Total Special Mention Loans** | **​** | **69,964** | ​ | 115,291 | ​ | 90,101 | | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | **Total Classified and Special Mention Loans** | ​ | **$88,472** | ​ | $138,697 | ​ | $122,181 | ### Nonperforming Loans Nonperforming loans include loans on nonaccrual status and loans past due 90-days-or-more and still accruing. The nonperforming loan category included TDRs totaling approximately $2 million and $6 million as of December 31, 2022 and 2021. Nonperforming loans to total loans decreased to 0.36% as of December 31, 2022 from 0.46% as of December 31, 2021, as the total balance of nonperforming loans decreased by $4 million, or 21%, while total loans increased $19 million during 2022. As presented in Tables 23 and 24 below, the decrease in nonperforming loans during 2022, including the nonaccrual loan component, was primarily driven by the pay off and pay down of $8 million of these loans during the year. The ACLL to total nonperforming loans increased to 432% as of December 31, 2022 from 315% as of December 31, 2021, as the total ACLL increased $6 million, or 9%, and the balance of nonperforming loans decreased by $4 million, or 21%. The driver of the increase in ACLL was primarily growth in higher risk loans originated through the RCS segment, while the driver of the decrease in nonperforming loans was primarily the refinancing out of the Bank of a meaningful portion of these loans during 2022. ### Table 20 — Nonperforming Loans and Nonperforming Assets Summary | ​ December 31, (in thousands) ​ | ​ ​ | ​ ​ ​ 2022 ​ ​ ​ | ​ ​ ​ 2021 ​ ​ ​ | ​ ​ ​ 2020 ​ ​ ​ | | --- | --- | ---: | ---: | ---: | | Loans on nonaccrual status\* | **​** | **$15,562** ​ | $20,504 ​ | $23,548 ​ | | Loans past due 90-days-or-more and still on accrual\*\* | **​** | **756** ​ | 48 ​ | 47 ​ | | **Total nonperforming loans** | **​** | **16,318** ​ | 20,552 ​ | 23,595 ​ | | Other real estate owned | **​** | **1,581** ​ | 1,792 ​ | 2,499 ​ | | **Total nonperforming assets** | **​** | **$17,899** ​ | $22,344 ​ | $26,094 ​ | | ​ | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | **Credit Quality Ratios - Total Company:** | ​ | **​** **​** ​ | ​ ​ ​ | ​ ​ ​ | | ACLL to total loans | **​** | **​** **1.56%** | ​ 1.44% | ​ 1.27% | | Nonaccrual loans to total loans | **​** | **​** **0.34** **​** | ​ 0.46 ​ | ​ 0.49 ​ | | ACLL to nonaccrual loans | **​** | **​** **452** **​** | ​ 315 ​ | ​ 259 ​ | | Nonperforming loans to total loans | **​** | **0.36** **​** | 0.46 ​ | 0.49 ​ | | Nonperforming assets to total loans (including OREO) | **​** | **0.40** **​** | 0.50 ​ | 0.54 ​ | | Nonperforming assets to total assets | **​** | **0.31** **​** | 0.37 ​ | 0.42 ​ | | ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | | **Credit Quality Ratios - Core Bank:** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | | ACLL to total loans | **​** | **1.21%** | 1.18% | 1.11% | | Nonaccrual loans to total loans | **​** | **​** **0.37** **​** | ​ 0.47 ​ | ​ 0.50 ​ | | ACLL to nonaccrual loans | **​** | **​** **332** **​** | ​ 251 ​ | ​ 221 ​ | | Nonperforming loans to total loans | **​** | **0.37** **​** | 0.47 ​ | 0.50 ​ | | Nonperforming assets to total loans (including OREO) | **​** | **0.40** **​** | 0.51 ​ | 0.56 ​ | | Nonperforming assets to total assets | **​** | **0.32** **​** | 0.40 ​ | 0.45 ​ | *\* Loans on nonaccrual status include collateral-dependent loans. See Footnote 4 “Loans and Allowance for Credit Losses” of Part II Item 8 “Financial Statements and Supplementary Data” for the components within the nonaccrual loans to total loans and ACLL to nonaccrual loans ratios, as well as additional discussion regarding nonaccrual loans and collateral-dependent loans.* *\*\* Loans past due 90-days-or-more and still accruing consist of smaller-balance consumer loans.* ### Table 21 — Nonperforming Loan Composition | ​ ​ ​ ​ December 31, (in thousands) ​ Traditional Banking: Residential real estate: | ​ ​ ​ ​ ​ ​ ​ | ​ 2022 ​ Balance ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ Loan Class ​ ​ ​ | ​ ​ Percent of Total ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ | ​ 2021 ​ ​ Balance ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of Total Loan Class ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ | ​ 2020 ​ ​ Balance ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of Total Loan Class ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ | | --- | --- | --- | --- | --- | ---: | --- | --- | --- | --- | ---: | --- | --- | --- | --- | ---: | --- | | Owner occupied | **​** | | **$13,388** | **​** | **1.47%** | **​** | | $12,039 | ​ | 1.47% | **​** | | $14,328 | ​ | 1.63% | **​** | | Nonowner occupied | **​** | | **117** | **​** | **0.04** **​** | **​** | ​ | 95 | ​ | 0.03 ​ | **​** | ​ | 81 | ​ | 0.03 ​ | **​** | | Commercial real estate | **​** | | **1,001** | **​** | **0.06** **​** | **​** | ​ | 6,557 | ​ | 0.45 ​ | **​** | ​ | 6,762 | ​ | 0.50 ​ | **​** | | Construction & land development | **​** | | **—** | **​** | **—** **​** | **​** | ​ | — | ​ | — ​ | **​** | ​ | — | ​ | — ​ | **​** | | Commercial & industrial | **​** | | **—** | **​** | **—** **​** | **​** | ​ | 13 | ​ | 0.00 ​ | **​** | ​ | 55 | ​ | 0.02 ​ | **​** | | Paycheck Protection Program | **​** | **​** | **​** **—** | **​** | **—** **​** | **​** | ​ | ​ — | ​ | — ​ | **​** | ​ | ​ — | ​ | — ​ | **​** | | Lease financing receivables | **​** | | **—** | **​** | **—** **​** | **​** | ​ | — | ​ | — ​ | **​** | ​ | — | ​ | — ​ | **​** | | Aircraft | **​** | **​** | **​** **—** | **​** | **—** **​** | **​** | ​ | ​ — | ​ | — ​ | **​** | ​ | ​ — | ​ | — ​ | **​** | | Home equity | **​** | | **815** | **​** | **0.34** **​** | **​** | | 1,700 | ​ | 0.81 ​ | **​** | | 2,141 | ​ | 0.89 ​ | **​** | | Consumer: | ​ | | **​** **​** | ​ | **​** **​** | **​** | ​ | ​ ​ | ​ | ​ ​ | **​** | ​ | ​ ​ | ​ | ​ ​ | **​** | | Credit cards | ​ | **​** | **​** **—** | ​ | **—** **​** | **​** | ​ | ​ — | ​ | — ​ | **​** | ​ | ​ 5 | ​ | 0.04 ​ | **​** | | Overdrafts | ​ | **​** | **​** **—** | ​ | **—** **​** | **​** | ​ | ​ 1 | ​ | 0.15 ​ | **​** | ​ | ​ — | ​ | — ​ | **​** | | Automobile loans | ​ | **​** | **​** **31** | ​ | **0.46** **​** | **​** | ​ | ​ 97 | ​ | 0.67 ​ | **​** | ​ | ​ 170 | ​ | 0.56 ​ | **​** | | Other consumer | ​ | **​** | **​** **210** | ​ | **33.55** **​** | **​** | ​ | ​ 3 | ​ | 0.21 ​ | **​** | ​ | ​ 11 | ​ | 0.13 ​ | **​** | | **Total Traditional Banking** | ​ | **​** | **​** **15,562** | ​ | **0.40** **​** | **​** | ​ | ​ 20,505 | ​ | 0.59 ​ | **​** | ​ | ​ 23,553 | ​ | 0.63 ​ | **​** | | Warehouse lines of credit | **​** | | **—** | **​** | **—** **​** | **​** | ​ | — | ​ | — ​ | **​** | ​ | — | ​ | — ​ | **​** | | **Total Core Banking** | ​ | **​** | **​** **15,562** | ​ | **0.37** **​** | **​** | ​ | ​ 20,505 | ​ | 0.47 ​ | **​** | ​ | ​ 23,553 | ​ | 0.50 ​ | **​** | | ​ | ​ | **​** | **​** **​** | ​ | **​** **​** | **​** | ​ | ​ ​ | ​ | ​ ​ | **​** | ​ | ​ ​ | ​ | ​ ​ | **​** | | **Republic Processing Group:** | ​ | **​** | **​** **​** | ​ | **​** **​** | **​** | ​ | ​ ​ | ​ | ​ ​ | **​** | ​ | ​ ​ | ​ | ​ ​ | **​** | | Tax Refund Solutions: | **​** | | **​** | **​** | **​** **​** | **​** | ​ | ​ | ​ | ​ **​** | **​** | ​ | ​ ​ | ​ | ​ **​** | **​** | | Refund Advances | **​** | | **—** | ​ | **—** **​** | **​** | ​ | — | ​ | — ​ | **​** | ​ | — | ​ | — ​ | **​** | | Other TRS commercial & industrial loans | ​ | **​** | **​** **—** | ​ | **—** **​** | **​** | ​ | ​ — | ​ | — ​ | **​** | ​ | ​ — | ​ | — ​ | **​** | | Republic Credit Solutions | **​** | | **756** | **​** | **0.70** **​** | **​** | ​ | 47 | ​ | 0.05 **​** | **​** | ​ | 42 | ​ | 0.04 **​** | **​** | | **Total Republic Processing Group** | **​** | | **756** | **​** | **0.29** **​** | **​** | ​ | 47 | ​ | 0.03 **​** | **​** | ​ | 42 | ​ | 0.03 **​** | **​** | | ​ | **​** | | **​** **​** | **​** | **​** **​** | **​** | ​ | ​ ​ | ​ | ​ **​** | **​** | ​ | ​ ​ | ​ | ​ **​** | **​** | | **Total nonperforming loans** | **​** | | **$16,318** | **​** | **0.36** **​** | **​** | ​ | $20,552 | ​ | 0.46 **​** | **​** | ​ | $23,595 | ​ | 0.49 **​** | **​** | | ​ | ​ | | **​** **​** | ​ | ​ ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ### Table 22 — Stratification of Nonperforming Loans *(dollars in thousands)* | ​ ​ ​ December 31, 2022 ​ Traditional Banking: Residential real estate: | ​ ​ ​ ​ ​ ​ | ​ Number of Nonperforming Loans and Recorded Investment ​ ​ No. ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Balance \<= $100 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ No. ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Balance \> $100 & \<= $500 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ No. ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Balance \> $500 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ No. ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Total Balance ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | | --- | --- | ---: | --- | --- | --- | --- | ---: | --- | --- | --- | --- | ---: | --- | --- | --- | --- | ---: | --- | ---: | --- | | **Owner occupied** | | **134** | **​** | **$4,650** | | **​** | **45** | **​** | **$7,353** | | **​** | **1** | **​** | **$1,385** | | **​** | **180** | **​** | **$13,388** | **​** | | **Nonowner occupied** | | **4** | **​** | **117** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **4** | **​** | **117** | **​** | | **Commercial real estate** | | **—** | **​** | **—** | | **​** | **1** | **​** | **232** | | **​** | **1** | **​** | **769** | | **​** | **2** | **​** | **1,001** | **​** | | **Construction & land development** | | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | **​** | | **Commercial & industrial** | | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | **​** | | **Paycheck Protection Program** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **—** | **​** | | **Lease financing receivables** | | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | **​** | | **Aircraft** | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | **​** | | **Home equity** | | **28** | **​** | **711** | | **​** | **1** | **​** | **104** | | **​** | **—** | **​** | **—** | | **​** | **29** | **​** | **815** | **​** | | **Consumer:** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | | **Credit cards** | | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | **​** | | **Overdrafts** | **​** | **NM** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **NM** | **​** | **—** | **​** | | **Automobile loans** | **​** | **6** | **​** | **31** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **6** | **​** | **31** | **​** | | **Other consumer** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **1** | **​** | **​** **210** | **​** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **1** | **​** | **210** | **​** | | **Total Traditional Banking** | **​** | **172** | **​** | **​** **5,509** | **​** | **​** | **48** | **​** | **​** **7,899** | **​** | **​** | **2** | **​** | **​** **2,154** | **​** | **​** | **222** | **​** | **​** **15,562** | **​** | | **Warehouse lines of credit** | | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | | **​** | **—** | **​** | **—** | **​** | | **Total Core Banking** | **​** | **172** | **​** | **​** **5,509** | **​** | **​** | **48** | **​** | **​** **7,899** | **​** | **​** | **2** | **​** | **​** **2,154** | **​** | **​** | **222** | **​** | **​** **15,562** | **​** | | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | | **Republic Processing Group:** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | | **Tax Refund Solutions:** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | | **Refund Advances** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **—** | **​** | | **Other TRS commercial & industrial loans** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **—** | **​** | | **Republic Credit Solutions** | **​** | **NM** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **756** | **​** | **​** | **NM** | **​** | **756** | **​** | | **Total Republic Processing Group** | **​** | **NM** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **—** | **​** | **​** | **—** | **​** | **​** **756** | **​** | **​** | **NM** | **​** | **​** **756** | **​** | | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | | **Total** | | **172** | **​** | **$5,509** | | **​** | **48** | **​** | **$7,899** | | **​** | **2** | **​** | **$2,910** | | **​** | **222** | **​** | **$16,318** | **​** | | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | **​** | **​** | **​** | **​** **​** | **​** | *NM – Not meaningful. Loans from Republic Processing Group are generally small dollar homogenous consumer loans.* *(dollars in thousands)* | ​ ​ ​ December 31, 2021 ​ Traditional Banking: Residential real estate: | ​ ​ ​ ​ ​ ​ ​ | ​ Number of Nonperforming Loans and Recorded Investment ​ ​ No. ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Balance \<= $100 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ No. ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Balance \> $100 & \<= $500 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ No. ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Balance \> $500 ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ No. ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Total Balance ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | | --- | --- | ---: | --- | --- | --- | --- | ---: | --- | --- | --- | --- | ---: | --- | --- | --- | --- | ---: | --- | ---: | --- | | Owner occupied | | 146 | ​ | $5,042 | | ​ | 27 | ​ | $4,857 | | ​ | 2 | ​ | $2,140 | | ​ | 175 | ​ | $12,039 | ​ | | Nonowner occupied | | 3 | ​ | 95 | | ​ | — | ​ | — | | ​ | — | ​ | — | | ​ | 3 | ​ | 95 | ​ | | Commercial real estate | | — | ​ | — | | ​ | 4 | ​ | 872 | | ​ | 3 | ​ | 5,685 | | ​ | 7 | ​ | 6,557 | ​ | | Construction & land development | | — | ​ | — | | ​ | — | ​ | — | | ​ | — | ​ | — | | ​ | — | ​ | — | ​ | | Commercial & industrial | | 1 | ​ | 13 | | ​ | — | ​ | — | | ​ | — | ​ | — | | ​ | 1 | ​ | 13 | ​ | | Paycheck Protection Program | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | — | ​ | | Lease financing receivables | | — | ​ | — | | ​ | — | ​ | — | | ​ | — | ​ | — | | ​ | — | ​ | — | ​ | | Aircraft | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | | ​ | — | ​ | ​ — | ​ | | Home equity | | 25 | ​ | 695 | | ​ | 5 | ​ | 1,005 | | ​ | — | ​ | — | | ​ | 30 | ​ | 1,700 | ​ | | Consumer: | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | | Credit cards | | — | ​ | — | | ​ | — | ​ | — | | ​ | — | ​ | — | | ​ | — | ​ | — | ​ | | Overdrafts | ​ | NM | ​ | 1 | | ​ | — | ​ | — | | ​ | — | ​ | — | | ​ | NM | ​ | 1 | ​ | | Automobile loans | ​ | 13 | ​ | 97 | | ​ | — | ​ | — | | ​ | — | ​ | — | | ​ | 13 | ​ | 97 | ​ | | Other consumer | ​ | 4 | ​ | ​ 3 | ​ | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | ​ — | ​ | ​ | 4 | ​ | 3 | ​ | | Total Traditional Banking | ​ | 192 | ​ | ​ 5,946 | ​ | ​ | 36 | ​ | ​ 6,734 | ​ | ​ | 5 | ​ | ​ 7,825 | ​ | ​ | 233 | ​ | ​ 20,505 | ​ | | Warehouse lines of credit | | — | ​ | — | | ​ | — | ​ | — | | ​ | — | ​ | — | | ​ | — | ​ | — | ​ | | Total Core Banking | ​ | 192 | ​ | ​ 5,946 | ​ | ​ | 36 | ​ | ​ 6,734 | ​ | ​ | 5 | ​ | ​ 7,825 | ​ | ​ | 233 | ​ | ​ 20,505 | ​ | | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | | Republic Processing Group: | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | | Tax Refund Solutions: | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | | Refund Advances | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | — | ​ | | Other TRS commercial & industrial loans | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | — | ​ | | Republic Credit Solutions | ​ | NM | ​ | ​ 47 | ​ | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | ​ — | ​ | ​ | NM | ​ | 47 | ​ | | Total Republic Processing Group | ​ | NM | ​ | ​ 47 | ​ | ​ | — | ​ | ​ — | ​ | ​ | — | ​ | ​ — | ​ | ​ | NM | ​ | ​ 47 | ​ | | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | | Total | | 192 | ​ | $5,993 | | ​ | 36 | ​ | $6,734 | | ​ | 5 | ​ | $7,825 | | ​ | 233 | ​ | $20,552 | ​ | | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | *NM – Not meaningful. Loans from Republic Processing Group are generally small dollar homogenous consumer loans.* Interest income that would have been recorded if nonaccrual loans were on a current basis in accordance with their original terms was $1.0 million, $1.3 million and 1.3 million in 2022, 2021, and 2020. Based on the Bank’s review as of December 31, 2022, management believes that its reserves are adequate to absorb expected losses on all nonperforming credits ### Table 23 — Rollforward of Nonperforming Loans | ​ ​ ​ Years Ended December 31, (in thousands) ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2022 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2021 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2020 ​ ​ | ​ ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | | Nonperforming loans at the beginning of the period | **​** | **$20,552** | ​ | $23,595 | ​ | $23,489 | ​ | | Loans added to nonperforming status during the period that remained nonperforming at the end of the period | **​** | **7,076** | ​ | 3,627 | ​ | 8,993 | ​ | | Loans removed from nonperforming status during the period that were nonperforming at the beginning of the period (see table below) | **​** | **(10,934)** | ​ | (5,221) | ​ | (7,959) | ​ | | Principal balance paydowns of loans nonperforming at both period ends | **​** | **​** **(1,084)** | ​ | ​ (1,450) | ​ | ​ (817) | ​ | | Net change in principal balance of other loans nonperforming at both period ends\* | **​** | **708** | ​ | 1 | ​ | (111) | ​ | | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | | Nonperforming loans at the end of the period | **​** | **$16,318** | ​ | $20,552 | ​ | $23,595 | ​ | ### Table 24 — Detail of Loans Removed from Nonperforming Status | ​ ​ ​ Years Ended December 31, (in thousands) ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2022 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2021 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2020 ​ ​ | ​ ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | | Loans charged off | **​** | **$—** | ​ | $(57) | ​ | $(1,142) | ​ | | Loans transferred to OREO | **​** | **—** | ​ | — | ​ | (2,254) | ​ | | Loan payoffs and paydowns | **​** | **(8,385)** | ​ | (4,884) | ​ | (4,420) | ​ | | Loans returned to accrual status | **​** | **(2,549)** | ​ | (280) | ​ | (143) | ​ | | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | | **Total loans removed from nonperforming status during the period that were nonperforming at the beginning of the period** | **​** | **$(10,934)** | ​ | $(5,221) | ​ | $(7,959) | ​ | ### Delinquent Loans Delinquent loans to total loans increased to 0.34% as of December 31, 2022, from 0.30% as of December 31, 2021, primarily due to a $3 million increase in delinquent RPG loans, partially offset by a $1 million decrease in Core Bank loans. Core Bank delinquent loans to total Core Bank loans decreased to 0.14% as of December 31, 2022 from 0.17% as of December 31, 2021. With the exception of small-dollar consumer loans, all Traditional Bank loans past due 90-days-or-more as of December 31, 2022 and December 31, 2021 were on nonaccrual status. ### Table 25 — Delinquent Loan Composition\* | ​ ​ ​ ​ December 31, (dollars in thousands) ​ Traditional Banking: Residential real estate: | ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ | ​ 2022 ​ ​ Balance ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of Total Loan Class ​ ​ ​ ​ ​ ​ | ​ 2021 ​ ​ Balance ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of Total Loan Class ​ ​ ​ ​ ​ ​ | ​ 2020 ​ ​ Balance ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of Total Loan Class ​ ​ ​ ​ ​ ​ | | --- | --- | --- | --- | --- | --- | ---: | --- | --- | --- | ---: | --- | --- | --- | ---: | | Owner occupied | **​** | **​** | | **$4,834** | **​** | **0.53%** | | $1,599 | ​ | 0.19% | | $3,260 | ​ | 0.37% | | Nonowner occupied | **​** | **​** | | **—** | **​** | **—** **​** | | — | ​ | — ​ | | — | ​ | — ​ | | Commercial real estate | **​** | **​** | | **604** | **​** | **0.04** **​** | | 5,292 | ​ | 0.36 ​ | | 5,457 | ​ | 0.40 ​ | | Construction & land development | **​** | **​** | | **—** | **​** | **—** **​** | | — | ​ | — ​ | | — | ​ | — ​ | | Commercial & industrial | **​** | **​** | | **177** | **​** | **0.04** **​** | | 21 | ​ | 0.01 ​ | | 12 | ​ | 0.00 ​ | | Paycheck Protection Program | **​** | **​** | **​** | **​** **—** | **​** | **—** **​** | **​** | ​ — | ​ | — ​ | **​** | ​ — | ​ | — ​ | | Lease financing receivables | **​** | **​** | **​** | **​** **—** | **​** | **—** **​** | **​** | ​ — | ​ | — ​ | **​** | ​ — | ​ | — ​ | | Aircraft | **​** | **​** | **​** | **​** **—** | **​** | **—** **​** | **​** | ​ — | ​ | — ​ | **​** | ​ — | ​ | — ​ | | Home equity | **​** | **​** | **​** | **​** **175** | **​** | **0.07** **​** | **​** | ​ 314 | ​ | 0.15 ​ | **​** | ​ 702 | ​ | 0.29 ​ | | Consumer: | **​** | **​** | **​** | **​** **​** | **​** | **​** **​** | **​** | ​ ​ | ​ | ​ ​ | **​** | ​ ​ | ​ | ​ ​ | | Credit cards | **​** | **​** | **​** | **​** **55** | **​** | **0.36** **​** | **​** | ​ 30 | ​ | 0.21 ​ | **​** | ​ 73 | ​ | 0.51 ​ | | Overdrafts | **​** | **​** | **​** | **​** **160** | **​** | **22.04** **​** | **​** | ​ 164 | ​ | 24.01 ​ | **​** | ​ 147 | ​ | 25.04 ​ | | Automobile loans | **​** | **​** | **​** | **​** **11** | **​** | **0.16** **​** | **​** | ​ 9 | ​ | 0.06 ​ | **​** | ​ 56 | ​ | 0.18 ​ | | Other consumer | **​** | **​** | **​** | **​** **44** | **​** | **7.03** **​** | **​** | ​ 1 | ​ | 0.07 ​ | **​** | ​ 6 | ​ | 0.07 ​ | | **Total Traditional Banking** | **​** | **​** | **​** | **​** **6,060** | **​** | **0.16** **​** | **​** | ​ 7,430 | ​ | 0.21 ​ | **​** | ​ 9,713 | ​ | 0.26 ​ | | Warehouse lines of credit | **​** | **​** | **​** | **​** **—** | **​** | **—** **​** | **​** | ​ — | ​ | — ​ | **​** | ​ — | ​ | — ​ | | **Total Core Banking** | **​** | **​** | **​** | **​** **6,060** | **​** | **0.14** **​** | **​** | ​ 7,430 | ​ | 0.17 ​ | **​** | ​ 9,713 | ​ | 0.21 ​ | | ​ | **​** | **​** | **​** | **​** **​** | **​** | **​** **​** | **​** | ​ ​ | ​ | ​ ​ | **​** | ​ ​ | ​ | ​ ​ | | **Republic Processing Group:** | **​** | **​** | **​** | **​** **​** | **​** | **​** **​** | **​** | ​ ​ | ​ | ​ ​ | **​** | ​ ​ | ​ | ​ ​ | | Tax Refund Solutions: | **​** | **​** | **​** | **​** **​** | **​** | **​** **​** | **​** | ​ **​** | **​** | **​** **​** | **​** | ​ **​** | **​** | **​** **​** | | Refund Advances | **​** | **​** | | **—** | **​** | **—** **​** | | — | ​ | — ​ | | — | ​ | — ​ | | Other TRS commercial & industrial loans | **​** | **​** | | **—** | **​** | **—** **​** | | — | ​ | — ​ | | — | ​ | — ​ | | Republic Credit Solutions | **​** | **​** | | **9,200** | **​** | **8.53** **​** | | 6,035 | ​ | 6.48 ​ | | 10,234 | ​ | 9.23 ​ | | **Total Republic Processing Group** | **​** | **​** | | **9,200** | **​** | **3.58** **​** | | 6,035 | ​ | 4.19 ​ | | 10,234 | ​ | 7.60 ​ | | ​ | ​ | ​ | | **​** **​** | **​** | **​** **​** | | ​ ​ | ​ | ​ ​ | | ​ ​ | ​ | ​ ​ | | **Total delinquent loans** | **​** | **​** | | **$15,260** | **​** | **0.34** **​** | | $13,465 | ​ | 0.30 ​ | | $19,947 | ​ | 0.41 ​ | | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | *\*Represents total loans 30-days-or-more past due. Delinquent status may be determined by either the number of days past due or number of payments past due.* ### Table 26 — Rollforward of Delinquent Loans | ​ ​ ​ Years Ended December 31, (in thousands) ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2022 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2021 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2020 ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | | Delinquent loans at the beginning of the period | **​** | **$13,465** | ​ | $19,947 | ​ | $20,804 | | Loans added to delinquency status during the period and remained in delinquency status at the end of the period | **​** | **5,507** | ​ | 1,459 | ​ | 6,681 | | Loans removed from delinquency status during the period that were in delinquency status at the beginning of the period (see table below) | **​** | **(6,847)** | ​ | (3,559) | ​ | (8,617) | | Principal balance paydowns of loans delinquent at both period ends | **​** | **​** **(50)** | ​ | ​ (158) | ​ | ​ (146) | | Net change in principal balance of other loans delinquent at both period ends\* | **​** | **3,185** | ​ | (4,224) | ​ | 1,225 | | Delinquent loans at the end of period | **​** | **$15,260** | ​ | $13,465 | ​ | $19,947 | #### \*Includes small consumer portfolios, e.g., RCS loans. ### Table 27 — Detail of Loans Removed from Delinquent Status | ​ ​ ​ Years Ended December 31, (in thousands) ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2022 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2021 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2020 ​ ​ | | --- | --- | --- | ---: | --- | ---: | --- | ---: | | Loans charged off | ​ | **​** | **$(1)** | ​ | $(58) | ​ | $(115) | | Refund Advances paid off or charged off | ​ | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | | Loans transferred to OREO | ​ | **​** | **—** | ​ | — | ​ | (2,254) | | Loan payoffs and paydowns | ​ | **​** | **(6,243)** | ​ | (2,016) | ​ | (4,052) | | Loans paid current | ​ | **​** | **(603)** | ​ | (1,485) | ​ | (2,196) | | ​ | ​ | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | | **Total loans removed from delinquency status during the period that were in delinquency status at the beginning of the period** | ​ | **​** | **$(6,847)** | ​ | $(3,559) | ​ | $(8,617) | ### Collateral-Dependent Loans and Troubled Debt Restructurings When management determines that a loan is collateral dependent and foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date and adjusted for selling costs if appropriate. The Bank’s policy is to charge-off all or that portion of its recorded investment in collateral-dependent loans upon a determination that it expects the full amount of contractual principal and interest will not be collected. A TDR is a situation where, due to a borrower’s financial difficulties, the Bank grants a concession to the borrower that the Bank would not otherwise have considered. The majority of the Bank’s TDRs involve a restructuring of loan terms such as a temporary reduction in the payment amount to require only interest and escrow (if required), reducing the loan’s interest rate and/or extending the maturity date of the debt. Nonaccrual loans modified as TDRs remain on nonaccrual status and continue to be reported as nonperforming loans. Accruing loans modified as TDRs are evaluated for nonaccrual status based on a current evaluation of the borrower’s financial condition and ability and willingness to service the modified debt. ### Table 28 — Collateral Dependent Loan Composition | ​ Years Ended December 31, (in thousands) ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ | ​ ​ 2020 ​ ​ | ​ ​ | | --- | --- | --- | ---: | --- | ---: | --- | ---: | --- | | Cashflow-dependent TDRs | **​** | ​ | **$5,761** | ​ | $5,960 | ​ | $10,938 | ​ | | Collateral-dependent TDRs | **​** | ​ | **​** **6,265** | ​ | ​ 9,426 | ​ | ​ 9,840 | ​ | | **Total TDRs** | **​** | ​ | **​** **12,026** | ​ | ​ 15,386 | ​ | ​ 20,778 | ​ | | Collateral-dependent loans (which are not TDRs) | **​** | ​ | **14,186** | ​ | 14,645 | ​ | 20,806 | ​ | | **Total recorded investment in TDRs and collateral-dependent loans** | **​** | ​ | **$26,212** | ​ | $30,031 | ​ | $41,584 | ​ | *See Footnote 4 “Loans and Allowance for Credit Losses” of Part II Item 8 “Financial Statements and Supplementary Data” for additional discussion regarding collateral-dependent loans and TDRs.* ### Other Real Estate Owned ### Table 29 — Rollforward of Other Real Estate Owned Activity | ​ ​ ​ Years Ended December 31, (in thousands) ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2022 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2021 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2020 ​ ​ | ​ ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | | OREO at beginning of period | **​** | **$1,792** | ​ | $2,499 | ​ | $113 | ​ | | Transfer from loans to OREO | **​** | **—** | ​ | 64 | ​ | 2,750 | ​ | | Proceeds from sale\* | **​** | **—** | ​ | (611) | ​ | (324) | ​ | | Net gain on sale | **​** | **—** | ​ | 51 | ​ | 65 | ​ | | Writedowns | **​** | **(211)** | ​ | (211) | ​ | (105) | ​ | | OREO at end of period | **​** | **$1,581** | ​ | $1,792 | ​ | $2,499 | ​ | *\*Inclusive of non-cash proceeds where the Bank financed the sale of the property.* The fair value of OREO represents the estimated value that management expects to receive when the property is sold, net of related costs to sell. These estimates are based on the most recently available real estate appraisals, with certain adjustments made based on the type of property, age of appraisal, current status of the property and other relevant factors to estimate the current value of the property. ### Bank Owned Life Insurance BOLI offers tax advantaged noninterest income to help the Bank offset employee benefits expenses. The Company carried $102 million and $99 million of BOLI on its consolidated balance sheet as of December 31, 2022 and 2021. ### Table 30 — Rollforward of Bank Owned Life Insurance | ​ Years ended December 31, (in thousands) ​ | ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ | ​ ​ 2020 ​ ​ | ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | | BOLI at beginning of period | **​** | **$99,161** | ​ | $68,018 | ​ | $66,433 | ​ | | BOLI acquired | **​** | **—** | ​ | 30,000 | ​ | — | ​ | | Death benefits paid | **​** | **​** **—** | ​ | ​ (1,099) | ​ | ​ — | ​ | | Increase in cash surrender value | **​** | **2,526** | ​ | 2,242 | ​ | 1,585 | ​ | | BOLI at end of period | **​** | **$101,687** | ​ | $99,161 | ​ | $68,018 | ​ | ### Deposits ### Table 31 — Deposit Composition | ​ December 31, (in thousands) ​ Core Bank: | ​ ​ ​ ​ | ​ ​ 2022 ​ ​ ​ ​ | ​ ​ ​ | ​ ​ 2021 ​ ​ ​ ​ | ​ ​ ​ | ​ ​ 2020 ​ ​ ​ ​ | | --- | --- | --- | --- | --- | --- | --- | | Demand | **​** | **$1,336,082** | ​ | $1,381,522 | ​ | $1,217,263 | | Money market accounts | **​** | **707,272** | ​ | 789,876 | ​ | 712,824 | | Savings | **​** | **323,015** | ​ | 311,624 | ​ | 236,335 | | Reciprocal money market | **​** | **28,635** | ​ | 60,685 | ​ | 246,257 | | Individual retirement accounts (1) | **​** | **38,640** | ​ | 43,724 | ​ | 47,889 | | Time deposits, $250 and over (1) | **​** | **54,855** | ​ | 81,050 | ​ | 83,448 | | Other certificates of deposit (1) | **​** | **129,324** | ​ | 154,174 | ​ | 199,214 | | Reciprocal time deposits (1) | **​** | **​** **7,405** | ​ | ​ 17,265 | ​ | ​ 67,852 | | Brokered deposits (1) | **​** | **—** | ​ | — | ​ | 25,010 | | Total Core Bank interest-bearing deposits | **​** | **​** **2,625,228** | ​ | ​ 2,839,920 | ​ | ​ 2,836,092 | | Total Core Bank noninterest-bearing deposits | **​** | **1,464,493** | ​ | 1,579,171 | ​ | 1,503,662 | | **Total Core Bank deposits** | **​** | **4,089,721** | ​ | 4,419,091 | ​ | 4,339,754 | | ​ | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | | **Republic Processing Group:** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | | Money market accounts | **​** | **​** **3,849** | ​ | ​ 9,717 | ​ | ​ 6,673 | | Total RPG interest-bearing deposits | **​** | **​** **3,849** | ​ | ​ 9,717 | ​ | ​ 6,673 | | ​ | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | | Brokered prepaid card deposits | **​** | **​** **328,655** | ​ | ​ 320,907 | ​ | ​ 257,856 | | Other noninterest-bearing deposits | **​** | **​** **115,620** | ​ | ​ 89,601 | ​ | ​ 128,898 | | Total RPG noninterest-bearing deposits | **​** | **​** **444,275** | ​ | ​ 410,508 | ​ | ​ 386,754 | | **Total RPG deposits** | **​** | **​** **448,124** | ​ | ​ 420,225 | ​ | ​ 393,427 | | **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | | **Total deposits** | **​** | **$4,537,845** | ​ | $4,839,316 | ​ | $4,733,181 | #### (1) Represents time deposits. Total Bank deposits decreased $301 million from December 31, 2021 to $4.5 billion as of December 31, 2022. Total Core Bank deposits decreased by $329 million with a $215 million decrease in interest-bearing deposits and a $115 million decrease in noninterest-bearing deposits. Management believes the net decrease in Core Bank interest-bearing deposits was generally due to clients’ responses to the low deposit beta the Bank maintained throughout 2022. A deposit beta measures the change in the interest rates the Bank pays for its interest-bearing deposit accounts versus the change in the federal funds target rate, which is a public index the Bank generally uses to price its non-maturity, interest-bearing deposits. A low deposit beta would indicate that the Bank has not changed the interest rates it pays on deposit accounts to the same magnitude as the FOMC has changed the FFTR. The Bank implemented a general strategy to maintain a low deposit beta during the year as part of its strategy to increase its overall net interest margin and net interest income. In general, the Bank maintained a low deposit beta during 2022 by not applying across-the-board increases in rates to all its interest-bearing accounts as a result of increases to the FFTR. Instead, the Bank applied a nominal amount of the FFTR’s increases to products on an across-the-board basis and selectively applied larger rate increases for more price-sensitive commercial accounts. This strategy played a significant part in expanding the Core Bank’s net interest margin throughout 2022 as the Bank’s yield on its interest earning assets generally outpaced the cost of its interest-bearing liabilities as the FFTR increased during the year. As a result of this strategy, however, the Bank did experience a decline in both personal and business account balances as some clients moved their funds to more attractive offerings outside of the Bank. The Bank currently expects to continue its low beta strategy for deposits in 2023, but this strategy is subject to change depending upon several factors including, but not limited to, the Bank’s overall current and projected liquidity positions, its clients’ demand for its loans and deposit products, the Bank’s overall interest rate risk position, the interest rate environment at the time, as well as the projected interest rate environment for the near term and the long term. In addition to the above, the Core Bank also experienced a $115 million decrease in Core Bank noninterest-bearing deposits. Management believes two factors generally drove this overall decrease in noninterest-bearing deposits. The first is a general decline in liquidity among both businesses and consumers as the excess liquidity created during the COVID pandemic continued to wane throughout the year. Second, Management believes that the substantial increase in market interest rates caused the difference between what a client can earn for an interest-bearing deposit versus the client’s lack of a financial return for a noninterest-bearing deposit to become large enough to cause some clients to pursue other opportunities for their cash outside the Bank. As a result of all the factors noted above, Management believes the Company is more likely to experience slower overall growth and possibly a continued decline in its deposits over the foreseeable future. ### Table 32 — Average Deposits | ​ ​ ​ Years ended December 31, (dollars in thousands) ​ | ​ ​ ​ ​ | ​ ​ 2022 Average Balance ​ ​ | ​ ​ ​ | ​ ​ ​ Average Rate ​ ​ ​ | ​ ​ 2021 Average Balance ​ ​ | ​ ​ ​ | ​ ​ ​ Average Rate ​ ​ ​ | ​ ​ 2020 Average Balance ​ ​ | ​ ​ ​ | ​ ​ ​ Average Rate ​ ​ ​ | | --- | --- | ---: | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | | Transaction accounts | **​** | **$1,696,809** | | **0.12%** | $1,580,570 | | 0.02% | $1,291,980 | | 0.09% | | Money market accounts | **​** | **779,457** | | **0.26** **​** | 784,777 | | 0.05 ​ | 739,524 | | 0.26 ​ | | Time deposits | **​** | **240,701** | | **1.10** **​** | 300,784 | | 1.21 ​ | 400,704 | | 1.96 ​ | | Reciprocal money market accounts | **​** | **44,152** | | **0.22** **​** | 185,922 | | 0.18 ​ | 202,112 | | 0.28 ​ | | Reciprocal time deposits | **​** | **​** **10,890** | **​** | **0.48** **​** | ​ 40,581 | ​ | 0.75 ​ | ​ 72,613 | ​ | 1.66 ​ | | Brokered money market accounts | **​** | **​** **—** | **​** | **—** **​** | ​ 30,863 | ​ | 0.08 ​ | ​ 104,460 | ​ | 0.50 ​ | | Brokered time deposits | **​** | **—** | | **—** **​** | — | | — ​ | 102,093 | | 1.75 ​ | | Total average interest-bearing deposits | **​** | **2,772,009** | | **0.24** **​** | 2,923,497 | | 0.17 ​ | 2,913,486 | | 0.52 ​ | | Total average noninterest-bearing deposits | **​** | **2,148,848** | | — ​ | 2,129,222 | | — ​ | 1,672,442 | | — ​ | | Total average deposits | **​** | **$4,920,857** | | **0.14** **​** | $5,052,719 | | 0.10 ​ | $4,585,928 | | 0.33 ​ | **Table 33 — Maturity Schedule of Time Deposits in Excess of the FDIC Limit and Estimated Time Deposits that are Otherwise Uninsured as of December 31, 2022** | ​ ​ ​ ​ Maturity (dollars in thousands) ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Individual Instruments that Meet or Exceed the FDIC Insurance Limit ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ Estimated Otherwise Uninsured Time Deposits ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Total ​ ​ | | --- | --- | ---: | --- | ---: | --- | ---: | | **Three months or less** | **​** | **$2,996** | **​** | **$972** | **​** | **$3,968** | | **Over three months through six months** | **​** | **5,176** | **​** | **658** | **​** | **5,834** | | **Over six months through 12 months** | **​** | **40,030** | **​** | **1,886** | **​** | **41,916** | | **Over 12 months** | **​** | **6,653** | **​** | **1,438** | **​** | **8,091** | | **Total** | **​** | **$54,855** | **​** | **$4,954** | **​** | **$59,809** | The Bank held total estimated uninsured deposits of $1.77 billion as of December 31, 2022. ### Securities Sold Under Agreements to Repurchase and Other Short-term Borrowings SSUARs are collateralized by securities and are treated as financings; accordingly, the securities involved with the agreements are recorded as assets and are held by a safekeeping agent and the obligations to repurchase the securities are reflected as liabilities. All securities underlying the agreements are under the Bank’s control. SSUARs decreased $74 million, or 25%, during 2022 to $217 million as of December 31, 2022. SSUARs generally represent large customer relationships deposited into the Bank that require security collateral above the $250,000 FDIC insurance limit of the Bank. Due to the size of the underlying relationships, large fluctuations in the underlying account balances from period to period are common. As it did with interest-bearing deposits, the Bank generally maintained a low beta strategy with its SSUARs. As a result of this strategy, the Bank experienced a decline in SSUAR balances as some clients moved their funds to more attractive offerings outside of the Bank. One client, in particular, reduced its SSUAR balances by $45 million from December 31, 2021 to December 31, 2022 as it moved these funds into an outside brokerage account. As was noted with deposits, the Bank currently expects to continue its low beta strategy for SSUARS in 2023, but this strategy is subject to change depending upon several factors including, but not limited to, the Bank’s overall current and projected liquidity positions, its clients’ demand for its loans and deposit products, the Bank’s overall interest rate risk position, the interest rate environment at the time, as well as the projected interest rate environment for the near term and the long term. ### Table 34 — Securities Sold Under Agreements to Repurchase | ​ As of and for the Years Ended December 31, (dollars in thousands) ​ | ​ ​ | ​ ​ ​ 2022 ​ ​ ​ | ​ ​ ​ 2021 ​ ​ ​ | ​ ​ ​ 2020 ​ ​ ​ | | --- | --- | ---: | ---: | ---: | | Outstanding balance at end of period | **​** | **$216,956** ​ | $290,967 ​ | $211,026 ​ | | Weighted average interest rate at period end | **​** | **0.41%** | 0.04% | 0.04% | | Average outstanding balance during the period | **​** | **$265,188** ​ | $231,430 ​ | $204,797 ​ | | Average interest rate during the period | **​** | **0.15%** | 0.03% | 0.09% | | Maximum outstanding at any month end | **​** | **$303,315** ​ | $432,047 ​ | $295,698 ​ | ### Federal Home Loan Bank Advances The Bank’s total FHLB advances were $95 million as of December 31, 2022 compared to $25 million as of December 31, 2021. Approximately $75 million of these borrowings were overnight in nature as of December 31, 2022 compared to $25 million as of December 31, 2021. During 2022, the Bank extended the term on $25 million of its FHLB advances in anticipation of increasing long-term interest rates. As of December 31, 2022, the Company’s $95 million of FHLB advances had a weighted-average maturity of 1.06 years and a weighted-average cost of 3.84%. Overall use of FHLB advances during a given year is dependent upon many factors including asset growth, deposit growth, current earnings, and expectations of future interest rates, among others. ### Table 35 — Federal Home Loan Bank Advances | ​ As of and for the Years Ended December 31, (dollars in thousands) ​ | ​ ​ | ​ ​ ​ 2022 ​ ​ ​ | ​ ​ ​ 2021 ​ ​ ​ | ​ ​ ​ 2020 ​ ​ ​ | | --- | --- | ---: | ---: | ---: | | Outstanding balance at end of period | **​** | **$95,000** ​ | $25,000 ​ | $235,000 ​ | | Weighted average interest rate at period end | **​** | **3.84%** | 0.14% | 0.23% | | Average outstanding balance during the period | **​** | **$21,233** ​ | $29,479 ​ | $211,776 ​ | | Average interest rate during the period | **​** | **1.60%** | 0.19% | 1.66% | | Maximum outstanding at any month end | **​** | **$95,000** ​ | $25,000 ​ | $590,000 ​ | ### Interest Rate Swaps #### Non-hedge Interest Rate Swaps The Bank enters into interest rate swaps to facilitate client transactions and meet their financing needs. Upon entering into these instruments, the Bank enters into offsetting positions in order to minimize the Bank’s interest rate risk. These swaps are derivatives, but are not designated as hedging instruments, and therefore changes in fair value are reported in current year earnings. A summary of the Bank’s interest rate swaps related to clients as of December 31, 2022 and 2021 is included in the following table: | ​ ​ ​ December 31, (in thousands) ​ | ​ ​ ​ ​ | ​ ​ ​ Bank Position ​ | ​ ​ ​ ​ | ​ ​ | ​ ​ 2022 Notional Amount ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Fair Value ​ ​ | ​ ​ ​ ​ | ​ ​ 2021 Notional Amount ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Fair Value ​ ​ | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Interest rate swaps with Bank clients - Assets | | Pay variable/receive fixed | | ​ | **$40,032** | | **$1,386** | | $107,502 | | $5,786 | | Interest rate swaps with Bank clients - Liabilities | | Pay variable/receive fixed | | ​ | **​** **91,636** | **​** | **​** **(6,742)** | ​ | ​ 16,423 | ​ | ​ (298) | | Interest rate swaps with Bank clients - Total | | Pay variable/receive fixed | | ​ | **$131,668** | | **$(5,356)** | ​ | $123,925 | | $5,488 | | ​ | ​ | ​ | ​ | ​ | **​** **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | | Offsetting interest rate swaps with institutional swap dealer - Assets | ​ | Pay fixed/receive variable | ​ | ​ | **​** **91,636** | **​** | **​** **6,742** | ​ | ​ 16,423 | ​ | ​ 298 | | Offsetting interest rate swaps with institutional swap dealer - Liabilities | ​ | Pay fixed/receive variable | ​ | ​ | **​** **40,032** | **​** | **​** **(1,386)** | ​ | ​ 107,502 | ​ | ​ (5,786) | | Offsetting interest rate swaps with institutional swap dealer - Total | ​ | Pay fixed/receive variable | ​ | ​ | **$131,668** | | **$5,356** | ​ | $123,925 | | $(5,488) | | ​ | ​ | ​ | ​ | ​ | **​** **​** | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | | **Total** | ​ | ​ | | ​ | **$263,336** | | **$—** | | $247,850 | | $— | *See Footnote 8 “Interest Rate Swaps” of Part II Item 8 “Financial Statements and Supplementary Data” for further information regarding the Bank’s interest rate swaps.* ### Liquidity The Bank maintains sufficient liquidity to fund routine loan demand and routine deposit withdrawal activity. Liquidity is managed by maintaining sufficient liquid assets, primarily in the form of cash, cash equivalents, and unincumbered investment securities. Funding and cash flows can also be realized through deposit product promotions, the sale of AFS debt securities, principal paydowns on loans and mortgage-backed securities, and proceeds realized from loans held for sale. ### Table 37 — Liquid Assets and Borrowing Capacity The Company’s liquid assets and borrowing capacity included the following: | ​ December 31, (in thousands) ​ | ​ ​ | ​ ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ | ​ ​ 2020 ​ ​ | | --- | --- | --- | ---: | --- | ---: | --- | ---: | | Cash and cash equivalents | ​ | **​** | **$313,689** | ​ | $756,971 | ​ | $485,587 | | Unincumbered debt securities | ​ | **​** | **438,052** | ​ | 219,775 | ​ | 273,652 | | Total liquid assets | ​ | **​** | **​** **751,741** | ​ | ​ 976,746 | ​ | ​ 759,239 | | ​ | ​ | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | | Available borrowing capacity with the FHLB | ​ | **​** | **899,362** | ​ | 900,424 | ​ | 682,992 | | Available borrowing capacity through unsecured credit lines | ​ | **​** | **125,000** | ​ | 125,000 | ​ | 125,000 | | Total available borrowing capacity | ​ | **​** | **​** **1,024,362** | ​ | ​ 1,025,424 | ​ | ​ 807,992 | | ​ | ​ | **​** | **​** **​** | ​ | ​ ​ | ​ | ​ ​ | | Total liquid assets and available borrowing capacity | ​ | **​** | **$1,776,103** | ​ | $2,002,170 | ​ | $1,567,231 | The Bank had a loan to deposit ratio (excluding brokered deposits) of 107% as of December 31, 2022 and 99% as of December 31, 2021. Republic’s banking centers and its website, www.republicbank.com, provide access to retail deposit markets. These retail deposit products, if offered at attractive rates, have historically been a source of additional funding when needed. If the Bank were to lose a significant funding source, such as a few major depositors, or if any of its lines of credit were cancelled, or if the Bank cannot obtain brokered deposits, the Bank would be compelled to offer market leading deposit interest rates to meet its funding and liquidity needs. As noted in the sections above titled “Deposits” and “Securities Sold Under Agreements to Repurchase and Other Short-term Borrowings”, the Bank implemented a general strategy during 2022 to maintain a low beta for its client-related interest-bearing liabilities as part of its overall strategy to increase its net interest margin and net interest income. As a result of this strategy, however, the Bank did experience a decline in both personal and business deposit balances and SSUAR balances as some clients moved their funds to more attractive offerings outside of the Bank. The Bank currently expects to continue its low beta strategy for deposits and SSUARS in 2023, but this strategy is subject to change depending upon several factors including, but not limited to, the Bank’s overall current and projected liquidity positions, its clients’ demand for its loans and deposit products, the Bank’s overall interest rate risk position, the interest rate environment at the time, as well as the projected interest rate environment for the near term and the long term. As of December 31, 2022, the Bank had approximately $879 million in deposits from 185 large non-sweep deposit relationships, including reciprocal deposits, where the individual relationship exceeded $2 million. The 20 largest non-sweep deposit relationships represented approximately $304 million, or 7%, of the Company’s total deposit balances as of December 31, 2022. These accounts do not require collateral; therefore, cash from these accounts can generally be utilized to fund the loan portfolio. If any of these balances were moved from the Bank, the Bank would likely utilize overnight borrowing lines in the short-term to replace the balances. On a longer-term basis, the Bank would likely utilize wholesale-brokered deposits to replace withdrawn balances, or alternatively, higher-cost internet-sourced deposits. Based on past experience utilizing brokered deposits and internet-sourced deposits, the Bank believes it can quickly obtain these types of deposits if needed. The overall cost of gathering these types of deposits, however, could be substantially higher than the Traditional Bank deposits they replace, potentially decreasing the Bank’s earnings. The Bank’s liquidity is also impacted by its ability to sell certain investment securities, which could be limited due to the level of investment securities that are needed to secure public deposits, SSUARs, FHLB borrowings, and for other purposes, as required by law. As of December 31, 2022 and December 31, 2021, these pledged investment securities had a fair value of $218 million and $320 million. ### Capital ### Table 38 — Capital Information pertaining to the Company’s capital balances and ratios follows: | ​ As of and for the Years Ended December 31, (dollars in thousands, except per share data) ​ | ​ ​ | ​ ​ ​ 2022 ​ ​ ​ | ​ ​ ​ 2021 ​ ​ ​ | ​ ​ ​ 2020 ​ ​ ​ | | --- | --- | ---: | ---: | ---: | | Stockholders’ equity | **​** | **$856,613** ​ | $835,054 ​ | $823,323 ​ | | Book value per share at December 31, | **​** | **43.38** ​ | 41.79 ​ | 39.40 ​ | | Tangible book value per share at December 31,\* | **​** | **42.11** ​ | 40.52 ​ | 38.27 ​ | | Dividends declared per share - Class A Common Stock | **​** | **1.364** ​ | 1.232 ​ | 1.144 ​ | | Dividends declared per share - Class B Common Stock | **​** | **1.240** ​ | 1.120 ​ | 1.040 ​ | | Average stockholders’ equity to average total assets | **​** | **13.82%** | 13.41% | 13.35% | | Total risk-based capital | **​** | **17.92** **​** | 17.48 ​ | 18.52 ​ | | Common equity tier 1 capital | **​** | **​** **16.70** **​** | ​ 16.39 ​ | ​ 16.61 ​ | | Tier 1 risk-based capital | **​** | **16.70** **​** | 16.39 ​ | 17.43 ​ | | Tier 1 leverage capital | **​** | **14.81** **​** | 13.36 ​ | 13.70 ​ | | Dividend payout ratio | **​** | **30** **​** | 29 ​ | 29 ​ | | Dividend yield | **​** | **3.33** **​** | 2.42 ​ | 3.17 ​ | *\*For additional detail, see Footnote 2 of “Selected Financial Data” in this section of the filing.* Total stockholders’ equity increased from $835 million as of December 31, 2021 to $857 million as of December 31, 2022. The increase in stockholders’ equity was primarily attributable to net income earned during 2022 reduced by cash dividends declared and common stock repurchases. *See Part II, Item 5. “Unregistered Sales of Equity Securities and Use of Proceeds” for additional detail regarding stock repurchases and stock buyback programs.* ***Common Stock —*** The Class A Common shares are entitled to cash dividends equal to 110% of the cash dividend paid per share on Class B Common Stock. Class A Common shares have one vote per share and Class B Common shares have ten votes per share. Class B Common shares may be converted, at the option of the holder, to Class A Common shares on a share for share basis. The Class A Common shares are not convertible into any other class of Republic’s capital stock. ***Dividend Restrictions —*** The Parent Company’s principal source of funds for dividend payments are dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid to the Parent Company by the Bank without prior approval of the respective states’ banking regulators. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years. As of January 1, 2023, the Bank could, without prior approval, declare dividends of approximately $92 million. Any payment of dividends in the future will depend, in large part, on the Company’s earnings, capital requirements, financial condition, and other factors considered relevant by the Company’s Board of Directors. ***Regulatory Capital Requirements —*** The Company and the Bank are subject to capital regulations in accordance with Basel III, as administered by banking regulators. Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Republic’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Parent Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators regarding components, risk weightings and other factors. Banking regulators have categorized the Bank as well-capitalized. For prompt corrective action, the regulations in accordance with Basel III define “well capitalized” as a 10.0% Total Risk-Based Capital ratio, a 6.5% Common Equity Tier 1 Risk-Based Capital ratio, an 8.0% Tier 1 Risk-Based Capital ratio, and a 5.0% Tier 1 Leverage ratio. Additionally, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, the Company and Bank must hold a capital conservation buffer of 2.5% composed of Common Equity Tier 1 Risk-Based Capital above their minimum risk-based capital requirements. Republic continues to exceed the regulatory requirements for Total Risk Based Capital, Common Equity Tier I Risk Based Capital, Tier I Risk Based Capital and Tier I Leverage Capital. Republic and the Bank intend to maintain a capital position that meets or exceeds the “well-capitalized” requirements as defined by the FRB and the FDIC, in addition to the Capital Conservation Buffer. Formal measurements of the capital ratios for Republic and the Bank are performed by the Company at each quarter end. ### Contractual Obligations and Commitments The Company or the Bank has required future payments under various contractual obligations and other commitments. *See the following footnotes within Part II Item 8 “Financial Statements and Supplementary Data” for additional detail regarding contractual obligations and other commitments of the Company or Bank:* - *Footnote 6 “Right-of-Use Assets and Operating Lease Liabilities”* - *Footnote 9 “Deposits”* - *Footnote 10 “Securities Sold Under Agreements to Repurchase”* - *Footnote 13 “Off Balance Sheet Risks, Commitments, and Contingent Liabilities”* - *Footnote 18 “Benefit Plans”* In addition, the Bank maintains contractual obligations for its technological needs, including its enterprise risk management application, customer relationship management application, internet banking platform, and its core accounting application. The total contractual commitment for these applications is approximately $13 million through May 2025. ### Asset/Liability Management and Market Risk Asset/liability management is designed to ensure safety and soundness, maintain liquidity, meet regulatory capital standards, and achieve acceptable net interest income based on the Bank’s risk tolerance. Interest rate risk is the exposure to adverse changes in net interest income as a result of market fluctuations in interest rates. The Bank, on an ongoing basis, monitors interest rate and liquidity risk in order to implement appropriate funding and balance sheet strategies. Management considers interest rate risk to be a significant risk to the Bank’s overall earnings and balance sheet. The interest sensitivity profile of the Bank at any point in time will be impacted by a number of factors. These factors include the mix of interest sensitive assets and liabilities, as well as their relative pricing schedules. It is also influenced by changes in market interest rates, deposit and loan balances, and other factors. The Bank utilizes earnings simulation models as tools to measure interest rate sensitivity, including both a static and dynamic earnings simulation model. A static simulation model is based on current exposures and assumes a constant balance sheet. In contrast, a dynamic simulation model relies on detailed assumptions regarding changes in existing business lines, new business, and changes in management and customer behavior. While the Bank runs the static simulation model as one measure of interest rate risk, historically, the Bank has utilized its dynamic earnings simulation model as its primary interest rate risk tool to measure the potential changes in market interest rates and their subsequent effects on net interest income for a one-year time period. This dynamic model projects a “Base” case net interest income over the next 12 months and the effect on net interest income of instantaneous movements in interest rates between various basis point increments equally across all points on the yield curve. Many assumptions based on growth expectations and on the historical behavior of the Bank’s deposit and loan rates and their related balances in relation to changes in interest rates are incorporated into this dynamic model. These assumptions are inherently uncertain and, as a result, the dynamic model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to the actual timing, magnitude and frequency of interest rate changes, the actual timing and magnitude of changes in loan and deposit balances, as well as the actual changes in market conditions and the application and timing of various management strategies as compared to those projected in the various simulated models. Additionally, actual results could differ materially from the model if interest rates do not move equally across all points on the yield curve. The following table illustrates the Bank’s projected percent change from its Base net interest income over the period beginning January 1, 2023 and ending December 31, 2023 based on instantaneous movements in interest rates from Down 200 to Up 300 basis points equally across all points on the yield curve. The Bank’s dynamic earnings simulation model includes secondary market loan fees and excludes Traditional Bank loan fees. ### Table 39 — Bank Interest Rate Sensitivity as of December 31, 2022 and 2021 | ​ ​ | ​ ​ Change in Rates | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | | --- | ---: | --- | ---: | --- | --- | --- | --- | --- | --- | --- | | **​** | **-200** | | **-100** | | **+100** | | **+200** | | **+300** | | | **​** | **Basis Points** | **​** | **Basis Points** | **​** | **Basis Points** | **​** | **Basis Points** | **​** | **Basis Points** | **​** | | **​** | **​** **​** | **​** | **​** **​** | **​** | **​** **​** | **​** | **​** **​** | **​** | **​** **​** | **​** | | % Change from base net interest income as of December 31, 2022 | (2.8)% | ​ | (0.6)% | ​ | 1.8% | ​ | 3.7% | ​ | 5.7% | ​ | | % Change from base net interest income as of December 31, 2021 | (2.9)% | ​ | 1.3% | ​ | (0.6)% | ​ | 0.7% | ​ | 4.7% | ​ | For the Down-100 scenario, the December 2022 simulation reflected a more negative outcome than the December 2021 simulation. For the Up-100, Up-200, and Up-300 scenarios, the December 31, 2022 simulation reflected a more positive outcome for the Bank’s net interest income than the comparable December 31, 2021 simulation. The period-to-period decline in the Down-100 scenario was generally tied to interest rate floors for the Bank’s floating rate loans. As of December 31, 2021, market interest rates were significantly lower than market interest rates as of December 31, 2022. As a result, many of the Bank’s floating rate loans were priced at their contractual interest rate floors as of December 31, 2021. The Bank’s interest rate simulation model for December 31, 2021, assumed that interest rates for most of these loans would remain at their contractual interest rate floors, even as market rates declined in the simulation. With market interest rates significantly higher as of December 31, 2022, the current rates for a substantial amount of the Bank’s floating rate loans are above their contractual interest rate floors, and therefore, can reprice lower, down to their contractual interest rate floors, in a declining market rate environment. As compared to the December 2021 simulation, the improvement for the December 2022 simulation outcomes for the Up-rate scenarios was generally tied to contractual interest rate floors, as well. As previously noted, market interest rates were significantly lower as of December 31, 2021 than market interest rates as of December 31, 2022, and many of the Bank’s loans were already priced at their contractual interest rate floors as of December 31, 2021. By formula, the interest rates for many of the Bank’s floating rate loans would have been much lower at December 31, 2021 had their contractual interest rate floors not existed. As a result, the formula interest rate for each floating rate loan had to increase substantially, in many cases, before the formula interest rate surpassed the contractual interest rate floor and the loan starting repricing higher. With most of the Bank’s floating rate loans now above their contractual interest rate floors as of December 31, 2022, the Bank would generally experience an earlier benefit from an increase in interest rates, based on each loan’s floating rate formula, in a rising interest rate environment. #### LIBOR Exposure In July 2017, the Financial Conduct Authority (“FCA”), the authority regulating LIBOR, along with various other regulatory bodies, announced that LIBOR would likely be discontinued at the end of 2021. Subsequent to that announcement, in November 2020, the FCA announced that many tenors of LIBOR would continue to be published through June 2023. In compliance with regulatory guidance, the Bank discontinued referencing LIBOR for new financial instruments during 2021 and chose SOFR to be its primary alternative reference rate for most transaction types upon the discontinuance or unavailability of LIBOR. Regarding its legacy assets that reference LIBOR, the Bank has previously disclosed that the underlying contracts for these assets may not include adequate “fallback” language to use alternative indexes and margins when LIBOR ceases. However, on March 15, 2022, President Biden signed into law the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Law”), which is designed to accomplish the following: - Establish a clear and uniform process, on a nationwide basis, for replacing LIBOR in existing contracts, the terms of which do not provide for the use of a clearly defined or practicable replacement benchmark rate, without affecting the ability of parties to use any appropriate benchmark rate in new contracts; - Preclude litigation related to existing contracts, the terms of which do not provide for the use of a clearly defined or practicable replacement benchmark rate; - Allow existing contracts that reference LIBOR but provide for the use of a clearly defined and practicable replacement rate to operate according to their terms; and - Address LIBOR references in federal law. With limited exception, the LIBOR Law generally covers legacy LIBOR contracts with no or inadequate fallback provisions. Additionally, under the LIBOR Law, the Board of Governors of the Federal Reserve System (the “FRB Board”) issued final regulations in December 2022 that included the selection of a FRB Board-Selected Benchmark Replacement based on SOFR and incorporates an applicable tenor spread adjustment and identification of any related conforming changes. As of December 31, 2022, the Company had approximately $410 million of legacy assets that reference LIBOR, with short-term Warehouse loans representing $10 million of these assets, investment securities representing $60 million, and commercial and mortgage loans primarily making up the remainder. As of December 31, 2022, of the Bank’s legacy assets that reference LIBOR, approximately $351 million of those assets were scheduled to mature after June 30, 2023. These amounts exclude derivative assets and liabilities on the Company’s consolidated balance sheet. As of December31, 2022, the notional amount of the Company’s LIBOR-referenced interest rate derivative contracts was approximately $183 million, with $183 million of such notional amount scheduled to mature after June 30, 2023. *For additional discussion regarding the Bank’s net interest income, see the sections titled “Net Interest Income” in this section of the filing under “RESULTS OF OPERATIONS (Discussion of 2021 vs. 2020).”* ## Market risk As filed, 190 characters. See the section titled “*Asset/Liability Management and Market Risk”* included under Part II Item 7 “*Management’s Discussion and Analysis of Financial Condition and Results of Operations.”* ## Controls and procedures As filed, 8,997 characters. In preparing this report, the Company’s Management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the last day of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, due to the material weaknesses in the Company’s internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective as of December 31, 2022. However, after giving full consideration to these material weaknesses, and the additional analyses and other procedures Management performed to ensure that the Company’s consolidated financial statements included in this Annual Report on Form 10-K were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), Management concluded that the Company’s consolidated financial statements present fairly, in all material respects, its financial position, results of operations and cash flows for the periods disclosed in conformity with GAAP. **Management’s Report on Internal Control Over Financial Reporting** Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting includes those policies and procedures that: - pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; - provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and - provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. There are inherent limitations in the effectiveness of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal control can provide only reasonable assurance with respect to reliability of financial statements. Management has made its own assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, in relation to the criteria described in the report, Internal Control — Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of its review, Management identified material weaknesses in the Company’s internal control over financial reporting as of December 31, 2022. Based on its assessment under the COSO, Management concluded that the Company’s system of internal control over financial reporting was not effective due to these material weaknesses, which are further described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses that Management identified were the following: 1\) the Company did not maintain effective controls over the initial implementation of new products offered through third parties within RPG. Specifically, Management identified that an RCS product’s contractual terms were not sufficiently communicated internally, and the controls were not designed to identify and test all relevant transactional data posting to the Company’s financial statements for the product; 2\) the Company did not maintain effective controls over the information and communication as it relates to the reconciliation function. Specifically, the controls were not precisely designed to identify, communicate, resolve, and timely escalate reconciliation issues to the appropriate levels within the organization; and 3\) the Company did not design and maintain effective controls over the financial analysis of RCS products’ yields. Specifically, the Company reviewed the weighted average yield of all RCS products on a segment basis rather than an individual product basis. The material weaknesses identified above resulted in the correction of an error through a voluntary immaterial revision of revenue and net income solely related to one RCS product during 2021 and the first three quarters of 2022. This understatement could have become material to the Company’s current and historical financial statements if it had remained undetected. The Company corrected this error as a voluntary immaterial revision to the accompanying financial statements, as of and for the fiscal years ended December 31, 2022, and 2021, and in the periods in which the error occurred. The 2022 financial statements have been audited by the independent registered public accounting firm of Crowe LLP (“Crowe”). Crowe has also issued a report on the effectiveness of internal control over financial reporting. That report has also been made a part of this Annual Report. ### Remediation Plan and Status Management believes that the material weaknesses as of December 31, 2022, are in the process of being remediated. A material weakness will not be considered fully remediated until the enhanced controls related to that material weakness are fully implemented and operate for a sufficient period and management has concluded that these controls are operating effectively. To remediate the material weaknesses, the Company has implemented or plans to implement the following measures as it relates to each: **Material Weakness 1:** the Company did not maintain effective controls over the initial implementation of new products offered through third parties within RPG. Specifically, Management identified that an RCS product’s contractual terms were not sufficiently communicated internally, and the controls were not designed to identify and test all relevant transactional data posting to the Company’s financial statements for the product. - The Company will evaluate and enhance its new product implementation policies and procedures for new third-party products offered through RPG to ensure proper implementation and design, as well as adequate reviews and approvals from all required stakeholders within the Company. **Material Weakness 2:** the Company did not maintain effective controls over the information and communication as it relates to the reconciliation function. Specifically, the controls were not precisely designed to identify, communicate, resolve, and timely escalate reconciliation issues to the appropriate levels within the organization. - The Company will designate a new accounting position specific to the RPG operations that will report up through the Chief Financial Officer of the Company and not to the business unit. This position will have day-to-day responsibilities overseeing the financial reporting of the RPG segment. - The Company has engaged an outside technology company to assist it in automating internal reconciliations, which will allow the Company’s personnel to more quickly identify and resolve reconciliation issues. - The Company will enhance its training, policies, and procedures to provide better guidance to reconciliation personnel for escalation requirements of reconciliation items as well as internal responsibilities for resolving reconciliation issues. **Material Weakness 3:** the Company did not design and maintain effective controls over the financial analysis of RCS products’ yields. Specifically, the Company reviewed the weighted average yield of all RCS products on a segment basis rather than an individual product basis. - Management is enhancing its internal monthly financial reporting to provide a more detailed yield analysis at the product level for the performance of each RCS product. ### Changes in Internal Control over Financial Reporting There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. After December 31, 2022, the Company began the remediation steps described above. Filed Mar 3, 2023. Source: SEC EDGAR, the filing index for accession 0001558370-23-002793. Last ingested by Listed: Nov 5, 2026, 18:31 ET. No prices; not investment advice.