Republic Bancorp Inc: Form 10-Q for the period ended Mar 31, 2025

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. 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 geographical market footprint where it has physical locations, its non-brick-and-mortar delivery channels allow it to reach clients across the U.S.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of Republic should be read in conjunction with Part I Item 1 “Financial Statements.”

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 results of operations;
• changes in political and economic conditions;
• 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 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 cybersecurity attacks involving either the Company or one of the Company’s third-party service providers;
• the impacts of actual or proposed tariffs to the US economy, market interest rates, and the Company’s results of operations;
• the ability for the Company to achieve its projected savings from a new core system contract;
• the ability to launch the new core system by the Company’s third quarter 2025 target date;
• the ability of the Company to achieve savings from its new call center management system;
• the ability of the Company to complete the sale of its consumer credit card portfolio; 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.” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and Part II Item 1A “Risk Factors” of the current filing.

Accounting Standards Update

For disclosure regarding the impact to the Company’s financial statements of ASUs, see Footnote 1 “Basis of Presentation and Summary of Significant Accounting Policies” of Part I Item 1 “Financial Statements.”

CRITICAL ACCOUNTING POLICIES AND 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.

A summary of the Company's significant accounting policies is set forth in Part II “Item 8. Financial Statements and Supplementary Data” of its Annual Report on Form 10-K for the year ended December 31, 2024.

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 its ACLL and Provision.

ACLL and Provision — As of March 31, 2025, 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.

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 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.

During the first quarter of 2025, the Company further segmented its Commercial Real Estate portfolio into Owner Occupied Commercial Real Estate, Nonowner Occupied Commercial Real Estate, and Multi-family. The Company believes this additional portfolio segmentation will provide better granularity to the ACLL in the future. Given the loss history for each of these portfolio segments over the past several years, this additional segmentation did not have a material impact to the Company’s ACLL as of March 31, 2025. This additional segmentation could have material impacts to the ACLL in the future, however, depending upon the overall credit performance of each of these individual portfolios on a go-forward basis.

BUSINESS SEGMENT COMPOSITION

As of March 31, 2025, the Company was divided into five reportable segments: Traditional Banking, Warehouse Lending, TRS, RPS, and RCS. Management considers the first two segments to collectively constitute “Core Bank” or “Core Banking” operations, while the last three segments collectively constitute RPG operations.

(I) Traditional Banking segment

The Traditional Banking segment provides traditional banking products primarily to customers in the Company’s market footprint. As of March 31, 2025, Republic had 47 banking centers with locations as follows:

• Kentucky — 29
• Metropolitan Louisville — 19
• Central Kentucky — 6
• Georgetown — 1
• Lexington — 5
• Northern Kentucky (Metropolitan Cincinnati) — 4
• Bellevue— 1
• Covington — 1
• Crestview Hills — 1
• Florence — 1
• Indiana — 3
• Southern Indiana (Metropolitan Louisville) — 3
• Floyds Knobs — 1
• Jeffersonville — 1
• New Albany — 1
• Florida — 7
• Metropolitan Tampa — 7
• Ohio — 4
• Metropolitan Cincinnati — 4
• Tennessee — 4
• Metropolitan Nashville — 4

Republic’s headquarters are in Louisville, which is the largest city in Kentucky based on population.

The Bank’s principal lending activities consist of the following:

Retail Mortgage Lending — Through its retail banking centers and its online Consumer Direct channel, the Bank originates single-family, residential real estate loans and HELOCs. In addition, the Bank originates HEALs through its retail banking centers. Such loans are generally collateralized by owner-occupied, residential real estate properties. For those loans originated through the Bank’s retail banking centers, the collateral is predominately located in the Bank’s market footprint, while loans originated through its Consumer Direct channel are generally secured by owner-occupied collateral located outside of the Bank’s market footprint.

Mortgage banking — 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.

Commercial Lending — The Bank conducts commercial lending activities primarily through Corporate Banking, Commercial Banking, Business Banking, and Retail Banking channels.

In general, commercial lending credit approvals and processing are prepared and underwritten through the Bank’s Commercial Credit Administration Department. Clients are generally located within the Bank’s market footprint or in areas nearby the market footprint.

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.

Consumer Lending — Traditional Banking consumer loans made by the Bank include home improvement and home equity loans, other secured and unsecured personal loans, and credit cards. Except for home equity loans, which are actively marketed in conjunction with single family, first lien residential real estate loans, other Traditional Banking consumer loan products (not including products offered through RPG), while available, are not and have not been actively promoted in the Bank’s markets.

Aircraft Lending — Aircraft loans are typically made to purchase or refinance personal aircrafts, along with engine overhauls and avionic upgrades. Loans range between $200,000 and $2,000,000 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.

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 Services — 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 the cash management needs of Bank clients.

Correspondent Lending — During 2023, the Bank purchased a block of single family, first-lien mortgage loans for investment through its Correspondent Lending channel. The Bank had previously purchased correspondent loans during 2014 and 2015. Correspondent Lending generally involves the Bank purchasing, primarily from its Warehouse Lending clients, closed loans that meet the Bank’s specifications. Substantially all loans purchased through the Correspondent Lending channel are purchased at a premium. Premiums on loans held for investment acquired though the Correspondent Lending channel will be amortized into interest income over the expected life of the loan utilizing the level-yield. Loans acquired through the Correspondent Lending channel are generally made to borrowers outside of the Bank’s historical market footprint. During the last half of March 2024, Management made the decision to sell $69 million of correspondent loans that were previously classified as held for investment. The sale of these loans was completed during the second quarter of 2024 with the final dollar amount of loans sold being $67 million.

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 (http://www.republicbank.com).

RBMAX — RBMAX is a separately branded, national branchless banking platform offered by the Bank. RBMAX focuses on technologically savvy clients that prefer to bank virtually as well as those that prefer to carry larger balances in high yield savings accounts.

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 detail regarding the Traditional Banking segment under Footnote 15 “Segment Information” of Part I Item 1 “Financial Statements.”

(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 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 detail regarding the Warehouse Lending segment under Footnote 15 “Segment Information” of Part I Item 1 “Financial Statements.”

(III) Tax Refund Solutions segment

Through the TRS segment, the Bank facilitates the receipt and payment of federal and state tax refund products and offers a credit product through 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. During December 2024, TRS originated $139 million of ERAs related to tax returns that were anticipated to be filed during the first quarter 2025 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 product is a loan made in conjunction with the filing of a taxpayer’s 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 2024 and 2025 Tax Seasons:

• 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 $6,500 for the 2024 Tax Season and $6,250 for the 2025 Tax Season;
• No requirement that the taxpayer pays for another bank product, such as an RT;
• Multiple disbursement methods were available through 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.

Since its introduction in December of 2022, the ERA loan product has been structured similarly to the RA with the primary differences being the timing of when the ERAs are originated and the documentation available to underwrite the ERAs. 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 had the following features during the 2024 and 2025 Tax Seasons:

• Only offered during December and the up-coming January in connection with the upcoming first quarter tax business for each period;
• The taxpayer had the option to choose from multiple loan tiers, subject to underwriting, up to a maximum advance amount of $1,000 for the 2024 Tax Season and $2,000 for the 2025 Tax Season;
• No requirement that the taxpayer pays for another bank product, such as an RT;
• Multiple disbursement methods available through most Tax Providers, including direct deposit or prepaid card, based on the taxpayer-customer’s election;
• Repayment of the ERA to the Bank deducted from the taxpayer’s tax refund proceeds; and
• If an insufficient refund to repay the ERA, including the failure to file a final federal tax return through a Republic Tax Provider:
• 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. The number of days for delinquency eligibility is based on management’s annual analysis of tax return processing times. RAs, including ERAs that were originated related to the first quarter 2024 tax filing 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 as it did during 2024, the Company considered an RA delinquent during the first three months of 2025 if it remained unpaid 35 days after the taxpayer’s tax return was submitted to the applicable taxing authority.

Provisions on RAs are estimated when advances are made. Unpaid RAs, including ERAs related to the 2025 Tax Season, of a given year are considered delinquent at June 30th of that year and charged-off.

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. In addition, the Bank’s ability to control losses for the ERA product is highly dependent upon the taxpayer returning to a Tax Provider for the filing of their final 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 detail regarding the RA product under Footnote 4 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements.”

(IV) Republic Payment Solutions segment

Through the RPS segment, the Bank offers a range of payment-related products and services to consumers through third-party service providers. The Bank offers both issuing solutions and money movement capabilities.

Issuing Solutions:

The RPS segment offers prepaid and debit solutions primarily marketed to consumers through third-party marketer-servicers.

Prepaid solutions include the issuing of payroll and general purpose reloadable (“GPR”) cards. Characteristics of these cards include the following:

• Similar to a traditional debit card with features including traditional point of sale purchasing, ATM withdrawals and direct deposit;
• Funds associated with these products are typically held in pooled accounts at the Bank with the Bank maintaining records of individual balances within these pooled accounts; and
• Payroll cards facilitate the loading of an employer’s payroll onto a card via direct deposit with GPR cards generally distributed through retail locations and reloadable through participating retail load networks.

Debit solutions include the issuing of demand deposit accounts, savings accounts and/or debit cards. In addition to offering traditional point of sale purchasing, ATM withdrawals, and direct deposit options, these accounts may include overdraft protection.

Money Movement:

The Bank participates in traditional money movement solutions including ACH transactions, wire transfer, check processing, and the Mastercard Remote Payment and Presentment Service (“RPPS”). These capabilities are complementary to issuing within RPS, as well as, generally facilitating the movement of money for the TRS and RCS Divisions.

The Company reports its share of client-related charges and fees for RPS programs under RPS program fees. Additionally, the Company’s portion of interchange revenue generated by prepaid card transactions is reported as noninterest income under “Interchange fee income.”

(V) Republic Credit Solutions segment

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. Elastic Marketing, LLC and Elevate Decision Sciences, LLC are third-party service providers for the LOC I 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.
• Similar to its LOC I product, the Bank provides oversight and supervision to a third party for its LOC II product. In return, this third party 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 95% participation interests in the LOC II product. These 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.

For the RCS line of credit and healthcare receivable products, the Company reports interest income and loan origination fees earned on RCS loans under “Loans, including fees,” while any net gains or losses on sale and mark-to-market adjustments of RCS loans are reported as noninterest income under “RCS Program fees.” The Company has elected fair value accounting for its RCS installment loan product that it sells after an initial holding period. As a result, interest income on loans, loan origination fees, net gains or losses on sale, and mark-to-market adjustments for the RCS installment product are reported as noninterest income under “RCS Program fees.”

Recent Developments

The Company’s largest Tax Provider contract within TRS in terms of product volume expires in October 2025. The Company does not expect to enter into a new contract with this Tax Provider to replace its existing contract.

The ERAs and RAs originated through this Tax Provider represented approximately 67% of the total dollars of ERAs and RAs originated through TRS from December 2024 through March 2025. In addition, the net RT revenue generated through this Tax Provider during the first quarter of 2025 represented approximately 22% of the total net RT revenue generated through TRS for the first quarter of 2025.

In total, Management estimates that the TRS segment earned approximately 26% of its pre-tax net income from this existing contract for the 12-month period ended March 31, 2025.

OVERVIEW (Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024)

Total Company net income for the first quarter of 2025 was $47.3 million, an increase of $16.7 million over the same period in 2024. Diluted EPS also increased to $2.42 for the first quarter of 2025 compared to $1.58 for the same period in 2024. The increase in net income primarily reflected the following by reportable segment:

Traditional Banking segment

• Net income increased $3.4 million, 28%, from the first quarter of 2024 to the first quarter of 2025.
• Net interest income increased $5.1 million, or 10%, from the first quarter of 2024 to the first quarter of 2025.
• Provision was a net credit of $769,000 for the first quarter of 2025 compared to a net charge of $358,000 for the same period in 2024.
• Noninterest income increased $7.1 million, or 85%, from the first quarter of 2024 to the first quarter of 2025.
• Noninterest expense increased $8.5 million, or 21%, from the first quarter of 2024 to the first quarter of 2025.

Warehouse Lending segment

• Net income increased $810,000, or 97%, from the first quarter of 2024 to the first quarter of 2025.
• Net interest income increased $771,000, or 34%, from the first quarter of 2024 to the first quarter of 2025.
• The Warehouse Provision was a net charge of $47,000 for the first quarter of 2025 compared to a net charge of $309,000 for the same period in 2024.
• Average committed Warehouse lines increased to $968 million for the first quarter of 2025 from $929 million for the first quarter of 2024.
• Average line usage was 47% during the first quarter of 2025 compared to 37% during the same period in 2024.

Tax Refund Solutions segment

• Net income increased $10.8 million, or 123%, from the first quarter of 2024 to the first quarter of 2025.
• Net interest income decreased $1.1 million, or 4%, from the first quarter of 2024 to the first quarter of 2025.
• Overall, TRS recorded a net charge to the Provision of $15.4 million during the first quarter of 2025 compared to a net charge to the Provision of $25.8 million for the same period in 2024.
• Noninterest income increased $3.1 million, or 28%, from the first quarter of 2024 to the first quarter of 2025.
• Within noninterest income, net RT revenue increased $3.1 million from the first quarter of 2024 to the first quarter of 2025.
• Noninterest expense was $3.2 million for the first quarter of 2025 compared to $4.5 million for the same period in 2024.

Republic Payment Solutions segment

• Net income increased $328,000, or 13%, from the first quarter of 2024 to the first quarter of 2025.
• Net interest income increased $486,000, or 14%, from the first quarter of 2024 to the first quarter of 2025.
• Noninterest income was $767,000 for the first quarter of 2025 compared to $774,000 for the first quarter of 2024.
• Noninterest expense was $1.1 million for the first quarter of 2025 and compared to $954,000 for the first quarter of 2024.

Republic Credit Solutions segment

• Net income increased $1.3 million, or 21%, from the first quarter of 2024 to the first quarter of 2025.
• Net interest income increased $548,000, or 5%, from the first quarter of 2024 to the first quarter of 2025.
• Overall, RCS recorded a net charge to the Provision of $3.0 million during the first quarter of 2025 compared to a net charge of $4.2 million for the same period in 2024.
• Noninterest income decreased $351,000, or 10%, from the first quarter of 2024 to the first quarter of 2025.
• Noninterest expense was $3.1 million for the first quarter of 2025 and $3.2 million for the same period in 2024.

RESULTS OF OPERATIONS (Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024)

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 track closely with, or are primarily indexed to, either the FFTR, Prime, or SOFR. These indices 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 beginning in March 2022 repeatedly increasing the FFTR until it reached its peak of 5.50% in July 2023.

While long-term interest rates initially rose in tandem with the increases to the FFTR through the middle part of 2022, they trended lower than short-term rates during the second half of 2022. Long-term rates generally maintained this lower level relative to short-term rates throughout 2023 and the first two quarters of 2024, which was generally negative for banks’ net interest income and net interest margins during that time period.

The FOMC lowered the FFTR by 50 basis points on September 19, 2024, 25 basis points on November 8, 2024, and 25 more basis points on December 19, 2024 bringing the FFTR to 4.50% as of December 31, 2024. Management believes the 50-basis-point decrease to the FFTR in September 2024 was beneficial to the Company’s net interest income and net interest margin during the fourth quarter of 2024. Management also believes that the two 25-basis-point decreases to the FFTR during the fourth quarter of 2024 were not beneficial to the Company’s net interest income and net interest margin as the Company began to reach pricing floors on certain deposit products.

Subsequent to the end of the first quarter of 2025, the President announced the implementation of tariffs against many of the US’s global trading partners. In response, the value of equity markets fell, bond markets rallied and market interest rates declined out of recession fears resulting from these tariffs and the retaliatory actions from the US’s global trading partners. In addition, many market pundits began projecting a high probability of multiple reductions to the FFTR by the FOMC throughout the remainder of 2025, as a result of the potential negative impact of the tariffs to the US economy. At this time Management is unable to project the future interest rate environment including the future shape of the yield curve, which became more inverted subsequent to quarter-end as a result of these tariffs. Management believes that, based on the Company’s current balance sheet structure, any future reductions to the FFTR will likely have a negative impact to the Company’s net interest income and net interest margin. The amount of such impact to the Company’s net interest income and net interest margin resulting from any future changes to the FFTR will be dependent upon many factors including, but not limited to, the magnitude of the continuing shift from noninterest-bearing deposits into interest-bearing deposits, the actual steepness and shape of the yield curve, future demand for the Company’s financial products, the Company’s ability to lower its deposit costs in conjunction with, and in line with the magnitude to, the decreases to the FFTR, as well as the Company’s overall future liquidity needs.

Total Company net interest income was $102.7 million during the first quarter of 2025 compared to $96.9 million during the first quarter of 2024, representing a $5.8 million or 6% increase. The Total Company net interest margin increased 41 basis points to 6.28% during the first quarter of 2025 compared to 5.87% during the first quarter of 2024.

The following were the most significant components affecting the Company’s net interest income by reportable segment:

Traditional Banking segment

The Traditional Bank’s net interest income was $53.3 million for the first quarter of 2025, a $5.1 million, or 10%, increase from $48.3 million during the first quarter of 2024 and was driven generally by a higher period-over-period net interest margin, and to a lesser degree, growth in average interest-earning assets. The Traditional Bank’s NIM increased from 3.33% during the first quarter of 2024 to 3.79% during the first quarter of 2025.

Items of note impacting the Traditional Bank’s change in net interest income and NIM between the first quarter of 2024 and the first quarter of 2025 were as follows:

• Traditional Bank average loans declined from $4.63 billion with a weighted-average yield of 5.45% during the first quarter of 2024 to $4.58 billion with a weighted average yield of 5.61% during the first quarter of 2025. The comparison of average loans for the Traditional Bank was negatively impacted by the sale of $67 million in residential real estate loans during the second quarter of 2024 that were previously held for investment. For additional discussion of the stricter pricing strategy for new loan originations, see section titled “Loan Portfolio” in the “COMPARISON OF FINANCIAL CONDITION” of this document.
• Average interest-earning cash was $517 million with a weighted-average yield of 4.45% during the first quarter of 2025 compared to $454 million with a weighted-average yield of 5.57% for the first quarter of 2024. In addition, average investments were $620 million with a weighted-average yield of 3.48% during the first quarter of 2025 compared to $733 million with a weighted-average yield of 2.98% for the first quarter of 2024. In general, the Company strategically deployed a higher percentage of its proceeds from maturing investments over the past year into interest-earning cash for a better overall yield due to the inverted yield curve.
• Further segmenting the Traditional Bank’s increased cost of interest-bearing liabilities:
• The weighted-average cost of total interest-bearing deposits decreased from 2.68% during the first quarter of 2024 to 2.25% for the first quarter of 2025, while average interest-bearing deposit balances grew $101 million for the same periods. Included within this growth in interest-bearing deposits was a $278 million net increase in the average balances for business and consumer money market accounts, which generally pay more premium rates.
• The average balance of FHLB borrowings decreased from $536 million for the first quarter of 2024 to $521 million for the first quarter of 2025, while the weighted-average cost of these borrowings decreased from 4.94% to 4.39% for the same time periods. The decrease in the overall weighted-average cost of FHLB borrowings resulted primarily from previous term-extension strategies implemented earlier in 2024 to take advantage of the then-inverted yield curve, as well as an approximate 100-basis point improvement in the cost of overnight borrowings as a result of Federal Reserve decreases to the Federal Funds Target Rate.
• Average noninterest-bearing deposits decreased $87 million from the first quarter of 2024 to the first quarter of 2025. The decline in noninterest-bearing deposits is an on-going trend for banks, in general, dating back to the fourth quarter of 2022, as the overall interest rate environment highlighted by an inverted yield curve, combined with the competition for deposits, continued to make premium-rate, interest-bearing checking and savings deposits a more attractive alternative for consumer and business clients.

Management believes that any future reductions to the FFTR will likely not benefit the Traditional Bank’s net interest income and net interest margin. The amount of such impact to the Traditional Bank’s net interest income and net interest margin resulting from the most recent change and any future changes to the FFTR will be dependent upon many factors including, but not limited to, the magnitude of the continuing shift from noninterest-bearing deposits into interest-bearing deposits, the actual steepness and shape of the yield curve, future demand for the Company’s financial products, the Company’s ability to lower its deposit costs in conjunction with, and in line with the magnitude to, the decreases to the FFTR, as well as the Company’s overall future liquidity needs.

For additional discussion of the factors impacting interest-earning cash and deposit balances as well as deposit betas, see sections titled “Cash and Cash Equivalents” and “Deposits” in the “COMPARISON OF FINANCIAL CONDITION” of this document.

Warehouse Lending

Net interest income within Warehouse increased $771,000, or 34%, from the first quarter of 2024 to the first quarter of 2025. The rise in Warehouse net interest income was primarily driven by a $118 million increase in average outstanding Warehouse balances, while the Warehouse NIM remained relatively stable increasing 1 basis point from the first quarter of 2024 to the first quarter of 2025. Overall, Average outstanding Warehouse balances increased 35% from $340 million during the first quarter of 2024 to $458 million for the first quarter of 2025. Period-end committed Warehouse lines increased from $932 million to $975 million from March 31, 2024 to March 31 2025, while higher demand caused average usage rates for Warehouse lines to increase from 37% during the first quarter of 2024 to 47% for the first quarter of 2025.

Because consumer mortgage demand drives the usage of Warehouse lines of credit, overall line usage for the Warehouse segment has been sensitive, historically, to changes in interest rates on the long end of the yield curve. As a result, a decreasing interest rate environment for the long end of the yield curve could positively impact Warehouse demand if the long term interest rate declines are substantial. Alternatively, if interest rates only decline on the short-end of the yield curve, Warehouse demand would not likely be materially impacted.

Republic Payment Solutions

Net interest income from the Company’s prepaid card division increased $486,000 from the first quarter of 2024 to the first quarter of 2025. Driving this increase at RPS was a reduction in the segment’s revenue share component for the first quarter of 2025, as the

Company’s largest marketer-servicer did not achieve the minimal contractual thresholds in order to earn a revenue share for the quarter. By contrast, this revenue share was $969,000 during the first quarter of 2024 and was recorded as interest expense in the segment’s income statement. At this time, Management is uncertain how much the revenue share component may be in the future as deposit balances originated through the segment’s largest marketer-servicer are at levels near the thresholds necessary to achieve a revenue share, making a future revenue share probable, but not certain.

Partially offsetting the positive benefit of the decreased revenue share, RPS earned a lower yield of 4.55% for its $373 million average of prepaid program balances for the first quarter of 2025 compared to a yield of 5.07% for the $375 million in average prepaid card balances for the first quarter of 2024. The lower earnings rate was driven by a decrease in the Federal Funds target rate of 100 basis points from the first quarter of 2024 to the first quarter of 2025.

Overall customer demand for the RPS segment has historically not been interest rate sensitive and therefore management does not believe a changing interest rate environment would impact origination volume for its prepaid card products. A decreasing interest rate environment, however, would likely negatively impact the Company’s internal FTP credit more than it would impact the revenue share the Company pays for the product, decreasing the segment's net interest margin. The exact amount of impact for either scenario would depend on the final internal FTP credit assigned, as well as the overall volume of balances, as the revenue share payouts are also based on overall balances tiers.

The following table presents the average balance sheets for the three-month periods ended March 31, 2025 and 2024, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

Table 1 — Total Company Average Balance Sheets and Interest Rates

(dollars in thousands)

a) For the purpose of this calculation, the fair market value adjustment on debt securities is included as a component of other assets.

b) Interest income for Refund Advances and RCS line-of-credit products is composed entirely of loan fees.

c) Interest income includes loan fees of $384,000 and $1.2 million for the three months ended March 31, 2025 and 2024.

d) Interest income includes loan fees of $310,000 and $263,000 for the three months ended March 31, 2025 and 2024.

e) Interest income includes loan fees of $1.3 million and $1.4 million for the three months ended March 31, 2025 and 2024.

f) 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 2 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 2 — Total Company Volume/Rate Variance Analysis

(in thousands)

Provision

Total Company Provision was a net charge of $17.7 million for the first quarter of 2025 compared to a net charge of $30.6 million for the same period in 2024.

The following were the most significant components comprising the Company’s Provision by reportable segment:

Traditional Banking segment

The Traditional Banking Provision during the first quarter of 2025 was a net credit of $769,000 compared to a net charge of $358,000 for the first quarter of 2024.

The net credit of $769,000 for the first quarter of 2025 was driven, primarily, by the following:

• The Traditional Bank recorded a credit to the Provision of $414,000 as a result of a reclassification of $5 million of consumer credit cards from loans held for investment into loans held for sale. The consumer credit card sale is expected to be completed during the second quarter of 2025.
• The Traditional Bank recorded a net credit to the Provision of $491,000 during the first quarter of 2025 primarily related to a general improvement in the life-of-loan historical loss rates within certain categories of the Traditional Bank loan portfolio combined with a minimal net change in the Traditional Bank period-end loan balances for the quarter.

The net charge of $358,000 during the first quarter of 2024 was primarily driven by the following:

• The Core Bank recorded a net charge to the Provision of $820,000 during the first quarter of 2024 related to general formula reserves applied to Traditional Bank loans. While loan balances at the Traditional Bank decreased in total during the first quarter, the segment experienced a change in loan mix generally growing in loan categories with higher loan loss reserve requirements.
• The Core Bank recorded a net charge to the Provision of $309,000 resulting from general formula reserves applied to a $124 million increase in the outstanding Warehouse spot balances during the quarter. ​
• Offsetting the above charges to Provision, the Core Bank recorded a credit to the Provision of $631,000 as a result of a reclass of $69 million of correspondent mortgage loans from loans held for investment into loans held for sale.

As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.29% as of March 31, 2025 compared to 1.31% as of December 31, 2024 and 1.29% as of March 31, 2024. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses as of March 31, 2025.

See the sections titled “Allowance for Credit Losses” and “Asset Quality” in this section of the filing under “Comparison of Financial Condition” for additional discussion regarding the Provision and the Bank’s credit quality.

Warehouse Lending segment

Warehouse recorded a net charge to the Provision of $47,000 for the first quarter of 2025 compared to a net charge of $309,000 for the same period in 2024. Provision for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances increased $19 million during the first quarter of 2025 compared to an increase of $124 million during the first quarter of 2024.

As a percentage of total Warehouse outstanding balances, the Warehouse ACLL was 0.25% as of March 31, 2025, December 31, 2024, and March 31, 2024. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses as of March 31, 2025.

Tax Refund Solutions segment

TRS recorded a net charge to the Provision of $15.4 million during the 2025 Tax Season compared to a net charge of $25.8 million for the 2024 Tax Season. Substantially all TRS Provisions in both periods were related to its RA, including ERAs, product. In addition to a decrease in total RA volume driving lower estimated loan losses during the quarter, the decrease in Provision from the first quarter of 2024 to the first quarter of 2025 primarily occurred because of the following two factors:

• Payments received from the U.S. Treasury to fund federal tax refunds through March 31, 2025 were notably better than payments received through March 31, 2024; and
• TRS recorded a larger percentage of its total ERA Provision during the fourth quarter of 2024 than it did for ERAs during the fourth quarter of 2023, effectively leading to a lower Provision during the first quarter of 2025 than the first quarter of 2024. TRS recorded a larger percentage of its total ERA Provision during the fourth quarter of 2024 versus the fourth quarter of 2023 due to the final loss rate realized from the ERAs originated December 2023, with that final loss rate applied to the ERAs originated during December 2024 in the Company’s fourth quarter 2024 Allowance calculation.

RAs related to the 2025 Tax Season were only originated during December of 2024 and the first two months of 2025, while RAs related to the 2024 Tax Season were only originated during December of 2023 and the first two months of 2024. As of March 31, 2025 and March 31, 2024, the Company estimated Allowance for RAs was 3.22% and 3.37% of total RAs/ERAs originated for the respective tax seasons. In June 2024, the Company charged off all unpaid RAs/ERAs for the 2024 Tax Season, which equated to 3.22% of those originated. The final loss rate of RAs/ERAs for the 2024 Tax Season was 3.11% of originations.

As is the case each year as of March 31st, the Allowance related to RAs is an estimate with that estimate finalized during the second quarter when all uncollected RAs are ultimately charged off as of June 30th. The final charge-off figures posted during the second quarter of a calendar year can be meaningfully different (higher or lower) than its March 31st estimate based on actual paydowns received from the U.S. Treasury during the second quarter. RAs collected during the second half of that year, not subject to loan loss guarantee arrangements, are recorded as recoveries of previously charged-off loans.

For factors affecting the comparison of the TRS results of operations for the first quarter of 2025 and the first quarter of 2024, see section titled “OVERVIEW (Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024) - Tax Refund Solutions.”

See additional detail regarding the RA product under Footnote 4 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements.”

Republic Credit Solutions segment

As illustrated in Table 3 below, RCS recorded a net charge to the Provision of $3.0 million during the first quarter of 2025 compared to a net charge to the Provision of $4.2 million for the same period in 2024. The decrease in the Provision was driven primarily by a $1.1 million decrease in Provision for the LOC II product. The reduction in the Provision for the LOC II product was primarily the result of a $218,000 decrease in its Allowance for the first quarter of 2025 driven by a decline in period-end loan balances during the quarter. Conversely, the LOC II Allowance increased $856,000 during the first quarter of 2024 and was driven by an increase in period-end loan balances during the quarter combined with an increase in reserve requirements based an increase in historical charge-offs at that time.

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 17.03% as of March 31, 2025, 16.30% as of December 31, 2024, and 14.09% as of March 31, 2024. The segment continued to experience a change in loan mix, growing in categories with higher loan loss reserve requirements thus driving its higher ACLL for the quarter. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses as of March 31, 2025.

The following table presents net charges to the RCS Provision by product:

Table 3 — RCS Provision by Product

(dollars in thousands)

Table 4 — Summary of Loan and Lease Loss Experience

(dollars in thousands)

Table 5 — Annualized Net Loan Charge-offs (Recoveries) to Average Loans by Loan Category

* All loss rates above are based on net charge-offs as a function of average outstanding portfolio balances. Refund Advances are originated during the first two months of each year, with all RAs charged-off by June 30th of each year. Due to their relatively short life, RA net charge-offs are typically analyzed by the Company as a percentage of total RA originations, not as a percentage of average outstanding balances.

The Company’s net charge-offs to average total Company loans decreased from 0.30% during the first quarter of 2024 to 0.24% during the first quarter of 2025, with net charge-offs decreasing $703,000, or 17%, and average total Company loans increasing $44 million, or 1%. The $703,000 decrease in net charge-offs was driven by a $659,000 decrease in RPG net charge-offs.

Noninterest Income

Total Company noninterest income increased $9.8 million during the first quarter of 2025 compared to the same period in 2024.

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 $7.1 million, or 85%, from the first quarter of 2024 compared to the first quarter of 2025. The increase in noninterest income was primarily driven by the following:

• Mortgage Banking income increased $1.5 million from the first quarter of 2024 to the first quarter of 2025. Approximately $1.0 million of the increase was the result of a negative fair value adjustment recorded during the first quarter of 2024 related to the $69 million of correspondent loans that were redesignated from held for investment to held for sale during the quarter. The remaining $500,000 of the increase was primarily related to a $23 million increase in the volume of fixed rate loans that were sold into the secondary market during the first quarter of 2025 compared to the first quarter of 2024.
• The Traditional Bank recorded a $4.1 million gain on sale of Visa Class B-1 shares during the quarter. The Visa Class B-1 common stock was issued to Visa’s U.S. member banks during 2008 in connection with a reorganization and Initial Public Offering.
• The Traditional Bank recorded a $1.6 million insurance recovery related to a $1.9 million charge-off recorded during the third quarter of 2024.

In addition to the previously noted items, the Traditional Bank earns a substantial majority of its fee income related to its overdraft service program from the per item fee it assesses its customers for each insufficient-funds check or electronic debit presented for payment. The total per item fees, net of refunds, included in service charges on deposits for the three months ended March 31, 2025 and 2024 were $1.8 million and $1.7 million. The total daily overdraft charges, net of refunds, included in interest income for the three months ended March 31, 2025 and 2024 were $295,000 and $301,000.

Tax Refund Solutions segment

TRS’s noninterest income increased from $10.9 million for the first quarter of 2024 to $13.9 million for the first quarter of 2025. RT fees constituted the substantial majority of all TRS noninterest income for each of these quarters. Total RT fees increased $3.1 million during these time periods due to a 30% increase in the net revenue earned for each RT product. The better per-unit profitability was generally brought about by a select increase in prices for the product combined with a minimal change in the revenue being shared.

For factors affecting the comparison of the TRS results of operations for the first quarter of 2025 and the first quarter of 2024, see section titled “OVERVIEW (Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024) - Tax Refund Solutions.”

Noninterest Expense

Total Company noninterest expense increased to $58.2 million for the first quarter of 2025 compared to $51.0 million for first quarter of 2024.

The following were the most significant components comprising the increase in noninterest expense by reportable segment:

Traditional Banking segment

Traditional Banking noninterest expense increased $8.5 million, or 21%, for the first quarter of 2025 compared to the same period in 2024. Notable line-item variances within the noninterest expense category included:

• Salaries and employee benefits increased by a combined $1.6 million, or 7%, driven by a $1.5 million increase in estimated bonus-related expenses. The larger estimated bonus-related expenses for the first quarter of 2025 were due to an increased probability of a larger bonus payout for the year based on the Company’s strong first quarter operating results.
• Equipment expenses increased $296,000, or 24%, over the first quarter of 2024. The higher expenses were primarily caused by an increase in depreciation expense due to the write-down of obsolete fixed assets related to the Company’s existing core operating system. ​
• Technology expenses increased $625,000, or 13%, over the first quarter of 2024. The increase in Technology expense was generally driven by enhanced security and new ancillary systems, including approximately $229,000 in additional costs resulting from the transition to a new call center management system. Management expects to incur a net benefit in technology and communication costs in the future as a result of the new call center management system.
• The Traditional Bank recorded $5.7 million during the first quarter of 2025 for Core Contract deconversion and consulting fees. Included within these costs were the following:
• The Company is targeting the third quarter of 2025 to launch a new core system. Approximately $4.1 million of the $5.7 million expense was for contract negotiation assistance from a third-party consultant and was determined based on a percentage of anticipated savings over the five-year term of the new contract. Republic projects a savings in excess of $16 million over the contract’s five-year term. If the Company is unable to convert to the new Core System by the third quarter of 2025, it will likely not be able to convert until mid-2026. Such a delay would result in a postponement of the expected benefit from the new Core System’s contract savings until the new conversion date.
• Approximately $1.6 million of this expense was related to data conversion and secondary system migration costs in preparation for the conversion to the new Core.

COMPARISON OF FINANCIAL CONDITION AS OF MARCH 31, 2025 AND DECEMBER 31, 2024

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. Republic had $793 million in cash and cash equivalents as of March 31, 2025 compared to $432 million as of December 31, 2024. Comparing average balances for the first three months of 2025 and 2024, the Company had average interest-earning cash and cash equivalent balances of $517 million for the first three months of 2025 compared to $454 million for the first three months of 2024.

The increase in average interest-earning cash was a strategic decision primarily resulting from the inverted yield curve as the yield for overnight cash remained a more appealing option throughout the first quarter of 2025 than longer-term investment alternatives.

For cash held at the FRB, the Bank earns a yield on amounts more than required reserves. This cash earned a weighted-average yield of 4.45% during the first three months of 2025. For cash held within the Bank’s banking center and ATM networks, the Bank does not earn interest.

Investment Securities

Table 7 — Purchases of Investment Securities

(dollars in thousands)

Republic’s total investment portfolio increased $22 million from December 31, 2024 to March 31, 2025. The increase was driven by the purchases of $135 million in securities and $2 million of FHLB stock, which were partially offset by $105 million in calls and maturities of debt securities and $10 million in paydowns on mortgage-backed securities. The Company elected to generally maintain the excess cash it received from the decline in its investment portfolio in interest-earning cash due to its more attractive yield as compared to longer-term investment options.

Loan Portfolio

The composition of the loan portfolio follows:

Table 8 — Loan Portfolio Composition

(dollars in thousands)

*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 decreased by $150 million, or 3%, during the first three months of 2025 to $5.3 billion as of March 31, 2025. The most significant components comprising the change in loans by reportable segment follow:

Traditional Banking segment

Period-end balances for Traditional Banking loans decreased $3 million, or less than 1%, from December 31, 2024 to March 31, 2025. During March 2025, Management reached an agreement to sell $5 million of consumer credit cards that were previously classified as held for investment. The sale of these credit cards is expected to be completed during the second quarter of 2025.

In addition, Management has continued to generally maintain a stricter pricing strategy across all loan types due to the inverted yield curve and elevated funding costs in the market. This stricter pricing strategy has continued to lead to slower overall origination volume across most product types. Management believes it will maintain this stricter pricing strategy as long as the yield curve remains inverted, or flat, and incremental funding costs remain elevated. It is possible this stricter pricing policy could cause loan payoffs and paydowns to outpace new originations, leading to a decline in the Traditional Bank’s loan balances during 2025.

Warehouse Lending segment

Outstanding Warehouse period-end balances increased $19 million from December 31, 2024 to March 31, 2025. 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 first quarter of 2023 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.

Tax Refund Solutions segment

Outstanding TRS loans decreased $155 million from December 31, 2024 to March 31, 2025 primarily reflecting the substantial paydown of ERAs originated during December 2024. In addition, TRS also received substantial paydowns of commercial loans made during the fourth quarter of 2024 to third-party tax-related businesses for their cash flow needs for the first quarter tax season. RAs, including ERAs, are only made during December of the previous year and the first two months of each year, with all unpaid RAs charged off by June 30th of each year.

Allowance for Credit Losses

As of March 31, 2025, 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 to $106 million at March 31, 2025 compared to $92 million at December 31, 2024. As a percent of total loans, the total Company’s ACLL increased to 2.01% as of March 31, 2025 compared to 1.69% as of December 31, 2024. An analysis of the ACL by reportable segment follows:

Traditional Banking segment

The Traditional Banking ACLL decreased approximately $905,000 to $59 million as of March 31, 2025 driven primarily by general formula reserves applied to Traditional Bank loans. While loan balances at the Traditional Bank slightly decreased in total during the first three months of 2025, the segment experienced a decrease in its Allowance as a percentage of total loans primarily due to a reduction in reserve requirements brought about by a decrease in life-of-loan historical loss rates within the portfolio.

Warehouse Lending segment

The Warehouse ACLL remained at approximately $1 million, and the Warehouse ACLL to total Warehouse loans remained at 0.25% when comparing March 31, 2025 to December 31, 2024. As of March 31, 2025, the Warehouse ACLL was entirely qualitative in nature with no adjustments to the qualitative reserve percentage required for the first three months of 2025.

Tax Refund Solutions

TRS recorded an increase to its ACLL primarily for estimated RAs originated during the first quarter of 2025. Including ERAs originated during the fourth quarter of 2024, TRS had a total Allowance for RAs of $26.0 million as of March 31, 2025 representing 3.22% of all RAs originated related to the first quarter 2025 tax season.

RAs are only originated during December of the previous year and the first two months of the current year related to the first quarter tax season of a year. As is the case each year as of March 31st, the Allowance related to RAs is an estimate with that estimate finalized during the second quarter when all uncollected RAs are ultimately charged off as of June 30th. The final charge-off figures posted during the second quarter of a calendar year can be meaningfully different (higher or lower) than its March 31st estimate based on actual paydowns received during the second quarter. RAs collected during the second half of that year, not subject to loan loss guarantee arrangements, are recorded as recoveries of previously charged-off loans.

Republic Credit Solutions segment

The RCS ACLL decreased $1 million to $20 million as of March 31, 2025, with this decrease driven by a decrease in the RCS LOC I and RCS LOC II spot loan balances.

RCS maintained an ACLL for two distinct credit products offered as of March 31, 2025, including its line-of-credit products and its healthcare-receivables products. As of March 31, 2025, 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 70.63% for its line-of-credit products. 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.

Table 9 — Management’s Allocation of the Allowance for Credit Losses on Loans

(dollars in thousands)

* Values of less than 50 basis points are rounded down to zero.

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 increased approximately $1.5 million during the first three months of 2025, driven primarily by a $3.2 million increase in residential real estate substandard loans.

See Footnote 4 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements” for additional discussion regarding Classified and Special Mention loans.

Table 10 — Classified and Special Mention Loans

(dollars in thousands)

Nonperforming Loans

Nonperforming loans include loans on nonaccrual status and loans past due 90-days-or-more and still accruing. Nonperforming loans to total loans increased to 0.43% as of March 31, 2025 from 0.42% as of December 31, 2024, as the total balance of nonperforming loans increased by $90,000, or less than 1%, while total loans decreased $150 million during the first three months of 2025.

The ACLL to total nonperforming loans increased to 465% as of March 31, 2025 from 404% as of December 31, 2024, as the total ACLL increased $14 million and the balance of nonperforming loans increased by $90,000.

Table 11 — Nonperforming Loans and Nonperforming Assets Summary

(dollars in thousands)

* Loans on nonaccrual status include collateral-dependent loans. See Footnote 4 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements” for additional discussion regarding collateral-dependent loans.

** Loans past due 90-days-or-more and still accruing consist of smaller balance consumer loans.

Table 12 — Nonperforming Loan Composition

(dollars in thousands)

Table 13 — Stratification of Nonperforming Loans

Table 14 — Roll-forward of Nonperforming Loans

(in thousands)

* Includes relatively small consumer portfolios, e.g., RCS loans.

Table 15 — Detail of Loans Removed from Nonperforming Status

(in thousands)

Based on the Bank’s review as of March 31, 2025, management believes that its reserves are adequate to absorb expected losses on all nonperforming loans.

Delinquent Loans

Total Company delinquent loans to total loans decreased to 0.33% as of March 31, 2025 from 0.38% as of December 31, 2024. Core Bank delinquent loans to total Core Bank loans decreased to 0.18% as of March 31, 2025 from 0.20% as of December 31, 2024. With the exception of small-dollar consumer loans, all Traditional Bank loans past due 90-days-or-more as of March 31, 2025 and December 31, 2024 were on nonaccrual status.

Table 16 — Delinquent Loan Composition*

(dollars in thousands)

* 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 17 — Roll-forward of Delinquent Loans

(in thousands)

* RAs do not have a contractual due date but the Company considers a RA delinquent if it remains unpaid 35 days after the taxpayer’s tax return is submitted to the applicable taxing authority.

** Includes relatively small consumer portfolios, e.g., RCS loans.

Table 18 — Detail of Loans Removed from Delinquent Status

(in thousands)

Deposits

Table 19 — Deposit Composition

(dollars in thousands)

(1) Includes time deposits

Total period-end deposits increased $195 million from December 31, 2024 to $5.4 billion as of March 31, 2025, with Core Bank period-end deposits increasing $175 million and RPG period-end deposits increasing $20 million.

Within the Core Bank noninterest-bearing deposits increased by $26 million for the quarter with interest-bearing deposits increasing by $149 million during the same period. The increase in Core Bank interest-bearing deposits was driven by $124 million of growth in interest-bearing IOLTA, business and consumer money market accounts, which generally pay premium rates above sheet pricing.

While the Core Bank period-end noninterest-bearing deposits increased $26 million for the quarter, the average balances of Core Bank noninterest-bearing deposits decreased $81 million from the fourth quarter of 2024 to the first quarter of 2025. Overall, the Core Bank’s noninterest-bearing deposits have experienced a general quarterly decline in balances dating back to the fourth quarter of 2022. At this time, Management is unsure whether the increase in Core Bank period-end noninterest-bearing deposits represents a temporary reversal of this long-term decline in balances or a possible change in momentum going forward.

Within RPG, the $20 million increase in period-end deposit balances was the net result of the following notable fluctuations:

• Noninterest-bearing deposits at TRS increased $161 million driven by short-term tax refund deposits from RTs;
• Interest-bearing deposits at TRS declined $200 million due to the maturity of short-term brokered deposits used to partially fund RA and ERA loan volume for the 2025 Tax Season;
• Total deposits at RCS increased $7 million due to an increase in excess deposits held at the Bank by the segment’s marketer-servicers; and
• Prepaid card balances increased by approximately $51 million due primarily to growth in balances from the segment’s largest marketer-servicer.

Federal Home Loan Bank Advances

The Bank’s total FHLB advances were $370 million as of March 31, 2025 compared to $395 million as of December 31, 2024. There were no overnight borrowings as of March 31, 2025 compared to $25 million as of December 31, 2024. The Company has utilized FHLB advances over the past year to partially fund its noninterest-bearing deposit outflow and overall loan growth.

As of March 31, 2025, the Company’s $370 million of FHLB advances had a weighted-average maturity of 3.11 years and a weighted-average cost of 4.35%, both including the impact of the related swaps. 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.

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.

In addition, as noted in the section above, the Company entered into $100 million of notional amount balance sheet related interest rate swaps during the second quarter of 2024 in order to take advantage of the more attractive long-term pricing resulting from the inverted yield.

See Footnote 11 “Interest Rate Swaps” of Part I Item 1 “Financial Statements” for additional discussion 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 unencumbered 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 20 — Liquid Assets and Borrowing Capacity

The Bank’s liquid assets and borrowing capacity included the following:

(in thousands)

The Company generally carried higher average interest-earning cash balances during the first three months of 2025 as the result of a strategic decision to maintain additional on-balance sheet liquidity above required minimums in response to the uncertainty of the economic environment.

The Bank had a period-end loan-to-deposit ratio (excluding brokered deposits) of 100% as of March 31, 2025 and 111% as of December 31, 2024. Republic’s banking centers and its website, www.republicbank.com (http://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 of March 31, 2025, the Bank had approximately $1.2 billion in deposits from 224 large non-sweep deposit relationships, including reciprocal deposits, where the individual relationship exceeded $2 million for a depositor’s taxpayer identification number. Total uninsured deposits for the Bank were $1.9 billion, or 36%, of total deposits as of March 31, 2025. The 20 largest non-sweep deposit relationships represented approximately $378 million, or 7%, of the Company’s total deposit balances as of as of March 31, 2025. 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 impacted by its ability to sell certain investment securities, which is limited due to the level of investment securities that are needed to secure public deposits, securities sold under agreements to repurchase, FHLB borrowings, and for other purposes, as required by law. As of March 31, 2025 and December 31, 2024, these pledged investment securities had a fair value of $201 million and $152 million.

Capital

Total stockholders’ equity increased from $992 million as of December 31, 2024 to $1.0 billion as of March 31, 2025. The increase in stockholders’ equity was primarily attributable to net income earned during the first three months of 2025 reduced primarily by cash dividends declared.

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 RB&T. 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 April 1, 2025, RB&T could, without prior approval, declare dividends of approximately $131 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. Republic’s average stockholders’ equity to average assets ratio was 13.94% as of March 31, 2025 and 14.21% as of December 31, 2024. Formal measurements of the capital ratios for Republic and the Bank are performed by the Company at each quarter end.

Table 21 — Capital Ratios (1)

(dollars in thousands)

(1) The Company and the Bank elected in 2020 to defer the impact of CECL on regulatory capital. The deferral period is five years, with the total estimated CECL impact 100% deferred for the first two years, then phased in over the next three years. If not for this election, the Company’s regulatory capital ratios would have been approximately 0 basis points lower than those presented in the table above as of March 31, 2025 and approximately 3 basis points lower than those presented in the table above as of December 31, 2024.

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.

As of March 31, 2025, a dynamic simulation model was run for interest rate changes from “Down 400” basis points to “Up 400” basis points. The following table illustrates the Bank’s projected percent change from its Base net interest income over the period beginning April 1, 2025 and ending March 31, 2026 based on instantaneous movements in interest rates from Down 400 to Up 400 basis points equally across all points on the yield curve. The Bank’s dynamic earnings simulation model includes secondary market loan fees, which are a component of mortgage banking income within noninterest income and excludes Traditional Bank loan fees.

Table 22 — Bank Interest Rate Sensitivity

Notable changes for the Bank’s interest rate sensitivity projections from December 31, 2024 to March 31, 2025 occurred in all scenarios. In general, the period-to-period improvements in the up-rate scenarios were generally tied to the Company’s average interest-earning cash balances, which increased from December 2024 to March 2025. As a result, the Bank’s earnings are more sensitive to fluctuations in short-term interest rates. Additionally, a reduction in short-term variable rate borrowings also contributed to the improvement. The benefit from the higher interest-earning cash balances was partially offset by lower projected interest income on loans as loan growth assumptions were lowered based on recent trends.

In the down-rate scenarios, the Company’s interest rate risk position notably deteriorated as the higher interest-earning cash balances that benefited net interest income in the up-rate scenarios are projected to cause similar corresponding declines to net interest income in the down-rate rate scenarios. In addition, the Company’s projected net interest income in down-rate scenarios for March 31, 2025 was also negatively impacted by revisions to the Bank’s deposit beta assumptions, as the Bank assumed a lower beta for deposit costs associated with its premium rate products. The Bank assumed this lower beta for its premium rate deposit products in anticipation of greater competition for deposits and liquidity in a declining interest rate environment. The lower net interest income in the down-rate scenarios is partially offset by assumed increases in mortgage banking income as rates fall and more borrowers gain incentive to refinance.

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 (Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024).”

Information required by this item is included under Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

As of the end of the period covered by this report, an evaluation was carried out by Republic Bancorp, Inc.’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Except for the additional risk factor information described below, there have been no material changes in the Company’s risk factors as previously disclosed in Part 1, “Item 1A. Risk Factors” of its Annual Report on Form 10-K for the year ended December 31, 2024. You should carefully consider the risk factors discussed below and in Republic’s 2024 Form 10-K, which could materially affect the Company’s business, financial condition and results of operations in the future.

The Company plans to convert its core customer operating system during the 3rd quarter of 2025 and could encounter significant adverse developments. The Company plans to replace its core customer operating system (the “Core System”). The Core System, among many other functions, is used to track customer relationships, deposit accounts, and loan accounts. The Core System is integrated with many other customer-facing applications and ancillary back-office systems that are used to service customers. Changing the Core System will subject the Company to operational risks during and after the conversion, which may adversely impact the Company’s customers, including, but not limited to, possible disruptions to technology systems, loss of data, improperly posted transactions and the inability to correct transaction errors. While the Company has plans and procedures designed to prevent or limit the risks of a failure during and after the conversion of our Core System, there can be no assurance that any such adverse development(s) will not occur or, if they do occur, that they will be timely and adequately remediated. The ultimate impact of any adverse development could result in the write-off of unidentified outages, damage the Company's reputation, result in a loss of customer business, subject the Company to regulatory scrutiny, and expose it to civil litigation and possible financial liability, any of which could have a material adverse effect on the Company’s business, financial condition, and results of operations.