1 min
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ⌧
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ⌧
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ◻ | Non-accelerated filer ◻ | Smaller reporting company | ||||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The number of shares outstanding of the registrant’s Class A Common Stock and Class B Common Stock, as of July 31, 2025 was
TABLE OF CONTENTS
4 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 59 | |
110 | ||
110 | ||
110 | ||
110 | ||
Unregistered Sales of Equity Securities and Use of Proceeds. | 111 | |
111 | ||
112 | ||
113 |
2
GLOSSARY OF TERMS
The terms identified in alphabetical order below are used throughout this Form 10-Q. You may find it helpful to refer to this page as you read this report.
Term |
| Definition |
2024 Tax Season | December 2023 through February 2024 | |
2025 Tax Season | December 2024 through February 2025 | |
ACH | Automated Clearing House | |
ACL | Allowance for Credit Losses | |
ACLC | Allowance for Credit Losses on Off-Balance Sheet Credit Exposures | |
ACLL | Allowance for Credit Losses on Loans | |
ACLS | Allowance for Credit Losses on Securities | |
AFS | Available for Sale | |
AOCI | Accumulated Other Comprehensive Income | |
ARM | Adjustable Rate Mortgage | |
ASC | Accounting Standards Codification | |
ASU | Accounting Standards Update | |
Basic EPS | Basic earnings per Class A Common Share | |
BOLI | Bank Owned Life Insurance | |
BPO | Brokered Price Opinion | |
C&D | Construction and Development | |
C&I | Commercial and Industrial | |
CCAD | Commercial Credit Administration Department | |
CD | Certificate of Deposit | |
CDI | Core Deposit Intangible | |
CECL | Current Expected Credit Losses | |
CMO | Collateralized Mortgage Obligation | |
CODM | Chief Operating Decision Maker | |
Core Bank | The Traditional Banking and Warehouse Lending reportable segments of the Company | |
CRE | Commercial Real Estate | |
DDA | Demand Deposit Account | |
Diluted EPS | Diluted earnings per Class A Common Share | |
DTA | Deferred Tax Asset | |
EPS | Earnings Per Share | |
ERA | Early Season Refund Advance | |
ESPP | Employee Stock Purchase Plan | |
FDIC | Federal Deposit Insurance Corporation | |
FFTR | Federal Funds Target Rate | |
FHLB | Federal Home Loan Bank | |
FHLMC | Federal Home Loan Mortgage Corporation | |
FICO | Fair Isaac Corporation | |
FNMA | Federal National Mortgage Association | |
FOMC | Federal Open Market Committee | |
FRB | Federal Reserve Bank | |
FTP | Funds Transfer Pricing | |
GAAP | Generally Accepted Accounting Principles in the United States | |
HEAL | Home Equity Amortizing Loan | |
HELOC | Home Equity Line of Credit | |
HFS | Held for Sale | |
HTM | Held to Maturity | |
LOC | Line of Credit | |
LOC I | RCS product introduced in 2014 for which the Bank participates out a 90% interest and holds a 10% interest | |
LOC II | RCS product introduced in 2021 for which the Bank participates out a 95% interest and holds a 5% interest | |
MBS | Mortgage Backed Securities | |
MSRs | Mortgage Servicing Rights | |
NA | Not Applicable | |
NIM | Net Interest Margin | |
NM | Not Meaningful | |
OBS | Off-Balance Sheet | |
OCI | Other Comprehensive Income | |
OREO | Other Real Estate Owned | |
PCD | Purchased Credit Deteriorated | |
Prime | The Wall Street Journal Prime Interest Rate | |
Provision | Provision for Expected Credit Loss Expense | |
RA | Refund Advance | |
RB&T / the Bank | Republic Bank & Trust Company | |
RCS | Republic Credit Solutions segment | |
Republic / the Company | Republic Bancorp, Inc. | |
RPG | Republic Processing Group | |
RPS | Republic Payment Solutions | |
RT | Refund Transfer | |
SBA | U.S. Small Business Administration | |
SEC | Securities and Exchange Commission | |
SOFR | Secured Overnight Financing Right | |
SSUAR | Securities Sold Under Agreements to Repurchase | |
Tax Provider | Third-party tax preparers located throughout the U.S., as well as tax-preparation software providers that offer Republic Bank ERAs, RAs, and RTs | |
TBA | To Be Announced | |
TRS | Tax Refund Solutions segment | |
TRUP | Trust Preferred Security Investment | |
Warehouse | Warehouse Lending segment |
3
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share data)
| June 30, |
| December 31, | |||
2025 | 2024 | |||||
ASSETS | ||||||
Cash and cash equivalents | $ | | $ | | ||
Available-for-sale debt securities, at fair value (amortized cost of $ |
| |
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Held-to-maturity debt securities (fair value of $ |
| |
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Equity securities with readily determinable fair value | | | ||||
Mortgage loans held for sale, at fair value |
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Consumer loans held for sale, at fair value | | | ||||
Consumer loans held for sale, at the lower of cost or fair value | | | ||||
Loans |
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Allowance for credit losses |
| ( |
| ( | ||
Loans, net |
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Federal Home Loan Bank stock, at cost |
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Premises and equipment, net |
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Right-of-use assets | | | ||||
Goodwill |
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Other real estate owned |
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Bank owned life insurance |
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Other assets and accrued interest receivable |
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TOTAL ASSETS | $ | | $ | | ||
LIABILITIES | ||||||
Deposits: | ||||||
Noninterest-bearing | $ | | $ | | ||
Interest-bearing |
| |
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Total deposits |
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Securities sold under agreements to repurchase and other short-term borrowings |
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Operating lease liabilities | | | ||||
Federal Home Loan Bank advances |
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Other liabilities and accrued interest payable |
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Total liabilities |
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Commitments and contingent liabilities (Footnote 8) |
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STOCKHOLDERS’ EQUITY | ||||||
Preferred stock, |
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Class A Common Stock, |
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Additional paid in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
| ( |
| ( | ||
Total stockholders’ equity |
| |
| | ||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | | $ | |
See accompanying footnotes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
Three Months Ended |
| Six Months Ended | |||||||||
June 30, | June 30, | ||||||||||
2025 | 2024 | 2025 | 2024 | ||||||||
INTEREST INCOME: | |||||||||||
Loans, including fees | $ | | $ | | $ | | $ | | |||
Taxable investment securities |
| |
| |
| |
| | |||
Federal Home Loan Bank stock and other |
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Total interest income |
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| |
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INTEREST EXPENSE: | |||||||||||
Deposits |
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| |
| | |||
Securities sold under agreements to repurchase and other short-term borrowings |
| |
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| | |||
Federal Home Loan Bank advances |
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| | |||
Total interest expense |
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NET INTEREST INCOME |
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Provision for expected credit loss expense on loans |
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NET INTEREST INCOME AFTER PROVISION |
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NONINTEREST INCOME: | |||||||||||
Service charges on deposit accounts |
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Net refund transfer fees |
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Mortgage banking income |
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Interchange fee income |
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Program fees |
| |
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| |
| | |||
Increase in cash surrender value of bank owned life insurance |
| |
| |
| |
| | |||
Net losses on other real estate owned |
| ( |
| ( |
| ( |
| ( | |||
Gain on sale of Visa Class B-1 shares | — | — | | — | |||||||
Other |
| |
| |
| |
| | |||
Total noninterest income |
| |
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| |
| | |||
NONINTEREST EXPENSE: | |||||||||||
Salaries and employee benefits |
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Technology, equipment, and communication |
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Occupancy |
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Marketing and development |
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FDIC insurance expense |
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Interchange related expense |
| |
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Legal and professional fees | | | | | |||||||
Core conversion and contract consulting fees | | — | | — | |||||||
Merger expense | — | — | — | | |||||||
Other |
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Total noninterest expense |
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INCOME BEFORE INCOME TAX EXPENSE |
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INCOME TAX EXPENSE |
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NET INCOME | $ | | $ | | $ | | $ | | |||
BASIC EARNINGS PER SHARE: | |||||||||||
Class A Common Stock | $ | | $ | | $ | | $ | | |||
Class B Common Stock | | | | | |||||||
DILUTED EARNINGS PER SHARE: | |||||||||||
Class A Common Stock | $ | | $ | | $ | | $ | | |||
Class B Common Stock | | | | | |||||||
See accompanying footnotes to consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
Three Months Ended |
| Six Months Ended | |||||||||
June 30, | June 30, | ||||||||||
2025 |
| 2024 | 2025 |
| 2024 | ||||||
Net income | $ | | $ | | $ | | $ | | |||
OTHER COMPREHENSIVE INCOME | |||||||||||
Change in fair value of derivatives |
| ( |
| ( |
| ( |
| ( | |||
Reclassification amount for net derivative losses realized in income |
| ( |
| ( |
| ( |
| ( | |||
Unrealized gain on AFS debt securities |
| |
| |
| |
| | |||
Total other comprehensive income before income tax |
| |
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| | |||
Income tax expense related to items of other comprehensive income |
| ( |
| ( |
| ( |
| ( | |||
Total other comprehensive income, net of tax |
| |
| |
| |
| | |||
COMPREHENSIVE INCOME | $ | | $ | | $ | | $ | |
See accompanying footnotes to consolidated financial statements.
6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
Three Months Ended June 30, 2025 | |||||||||||||||||||
Common Stock | Accumulated | ||||||||||||||||||
| Class A |
| Class B |
|
|
| Additional |
|
|
| Other |
| Total | ||||||
Shares | Shares | Paid In | Retained | Comprehensive | Stockholders’ | ||||||||||||||
(in thousands, except per share data) | Outstanding | Outstanding | Amount | Capital | Earnings | Income (Loss) | Equity | ||||||||||||
Balance, April 1, 2025 |
| | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net income |
| — |
| — |
| — |
| — |
| |
| — |
| | |||||
Net change in AOCI |
| — |
| — |
| — |
| — |
| — |
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| | |||||
Dividends declared on Common Stock: | |||||||||||||||||||
Class A Shares ($ |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Class B Shares ($ |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Stock options exercised, net of shares withheld |
| |
| — |
| |
| |
| ( |
| — |
| ( | |||||
Conversion of Class B to Class A Common Shares | |
| ( |
| — |
| — |
| — |
| — |
| — | ||||||
Repurchase of Class A Common Stock | ( |
| — |
| — |
| ( |
| ( |
| — |
| ( | ||||||
Deferred compensation - Class A Common Stock: |
| ||||||||||||||||||
Directors | — |
| — |
| — |
| |
| — |
| — |
| | ||||||
Designated key employees | — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||
Employee stock purchase plan - Class A Common Stock | |
| — |
| — |
| |
| — |
| — |
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Stock-based awards - Class A Common Stock: | |||||||||||||||||||
Performance stock units |
| — |
| — |
| — |
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| — |
| — |
| | |||||
Restricted stock, net of shares withheld |
| ( |
| — |
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| ( |
| — |
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Stock options |
| — |
| — |
| — |
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| — |
| — |
| | |||||
Balance, June 30, 2025 | | | $ | | $ | | $ | | $ | ( | $ | |
Three Months Ended June 30, 2024 | |||||||||||||||||||
Common Stock | Accumulated | ||||||||||||||||||
| Class A |
| Class B |
|
|
| Additional |
|
|
| Other |
| Total | ||||||
Shares | Shares | Paid In | Retained | Comprehensive | Stockholders’ | ||||||||||||||
(in thousands, except per share data) | Outstanding | Outstanding | Amount | Capital | Earnings | Income (Loss) | Equity | ||||||||||||
Balance, April 1, 2024 |
| | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net income |
| — |
| — |
| — |
| — |
| |
| — |
| | |||||
Net change in AOCI |
| — |
| — |
| — |
| — |
| — |
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| | |||||
Dividends declared on Common Stock: | |||||||||||||||||||
Class A Shares ($ |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Class B Shares ($ |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Stock options exercised, net of shares withheld |
| |
| — |
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| ( |
| — |
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Conversion of Class B to Class A Common Shares |
| |
| ( |
| — |
| — |
| — |
| — |
| — | |||||
Net change in notes receivable on Class A Common Stock |
| — |
| — |
| — |
| |
| — |
| — |
| | |||||
Deferred compensation - Class A Common Stock: |
| ||||||||||||||||||
Directors | — |
| — |
| |
| |
| — |
| — |
| | ||||||
Designated key employees | — |
| — |
| — |
| |
| — |
| — |
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Employee stock purchase plan - Class A Common Stock | |
| — |
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| — |
| — |
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Stock-based awards - Class A Common Stock: | |||||||||||||||||||
Performance stock units |
| — |
| — |
| — |
| |
| — |
| — |
| | |||||
Restricted stock, net of shares withheld |
| — |
| — |
| ( |
| |
| ( |
| — |
| ( | |||||
Stock options |
| — |
| — |
| — |
| |
| — |
| — |
| | |||||
Balance, June 30, 2024 |
| |
| | $ | | $ | | $ | | $ | ( | $ | |
7
Six Months Ended June 30, 2025 | |||||||||||||||||||
Common Stock | Accumulated | ||||||||||||||||||
| Class A |
| Class B |
|
|
| Additional |
|
|
| Other |
| Total | ||||||
Shares | Shares | Paid In | Retained | Comprehensive | Stockholders’ | ||||||||||||||
(in thousands, except per share data) | Outstanding | Outstanding | Amount | Capital | Earnings | Income (Loss) | Equity | ||||||||||||
Balance, January 1, 2025 |
| | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net income |
| — |
| — |
| — |
| — |
| |
| — |
| | |||||
Net change in AOCI |
| — |
| — |
| — |
| — |
| — |
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Dividends declared on Common Stock: | |||||||||||||||||||
Class A Shares ($ |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Class B Shares ($ |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Stock options exercised, net of shares withheld |
| |
| — |
| |
| |
| ( |
| — |
| | |||||
Conversion of Class B to Class A Common Shares | |
| ( |
| — |
| — |
| — |
| — |
| — | ||||||
Repurchase of Class A Common Stock | ( |
| — |
| — |
| ( |
| ( |
| — |
| ( | ||||||
Net change in notes receivable on Class A Common Stock |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | |||||
Deferred compensation - Class A Common Stock: |
| ||||||||||||||||||
Directors | — |
| — |
| — |
| |
| — |
| — |
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Designated key employees | |
| — |
| ( |
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| ( |
| — |
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Employee stock purchase plan - Class A Common Stock | |
| — |
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| — |
| — |
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Stock-based awards - Class A Common Stock: | |||||||||||||||||||
Performance stock units |
| — |
| — |
| — |
| |
| — |
| — |
| | |||||
Restricted stock, net of shares withheld |
| |
| — |
| — |
| |
| ( |
| — |
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Stock options |
| — |
| — |
| — |
| |
| — |
| — |
| | |||||
Balance, June 30, 2025 | | | $ | | $ | | $ | | $ | ( | $ | |
Six Months Ended June 30, 2024 | |||||||||||||||||||
Common Stock | Accumulated | ||||||||||||||||||
| Class A |
| Class B |
|
|
| Additional |
|
|
| Other |
| Total | ||||||
Shares | Shares | Paid In | Retained | Comprehensive | Stockholders’ | ||||||||||||||
(in thousands, except per share data) | Outstanding | Outstanding | Amount | Capital | Earnings | Income (Loss) | Equity | ||||||||||||
Balance, January 1, 2024 |
| | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net income |
| — |
| — |
| — |
| — |
| |
| — |
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Net change in AOCI |
| — |
| — |
| — |
| — |
| — |
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Dividends declared on Common Stock: | |||||||||||||||||||
Class A Shares ($ |
| — |
| — |
| — |
| — |
| ( |
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| ( | |||||
Class B Shares ($ |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Stock options exercised, net of shares withheld |
| |
| — |
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| ( |
| — |
| ( | |||||
Conversion of Class B to Class A Common Shares |
| |
| ( |
| — |
| — |
| — |
| — |
| — | |||||
Net change in notes receivable on Class A Common Stock |
| — |
| — |
| — |
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| — |
| — |
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Deferred compensation - Class A Common Stock: |
| ||||||||||||||||||
Directors | — |
| — |
| — |
| |
| — |
| — |
| | ||||||
Designated key employees | |
| — |
| — |
| |
| — |
| — |
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Employee stock purchase plan - Class A Common Stock | |
| — |
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| — |
| — |
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Stock-based awards - Class A Common Stock: | |||||||||||||||||||
Performance stock units |
| — |
| — |
| — |
| |
| — |
| — |
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Restricted stock, net of shares withheld |
| |
| — |
| ( |
| |
| ( |
| — |
| ( | |||||
Stock options |
| — |
| — |
| — |
| |
| — |
| — |
| | |||||
Balance, June 30, 2024 |
| |
| | $ | | $ | | $ | | $ | ( | $ | |
See accompanying footnotes to consolidated financial statements.
8
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
| Six Months Ended | |||||
June 30, | ||||||
| 2025 |
| 2024 | |||
OPERATING ACTIVITIES: | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Net amortization on investment securities and low-income housing investments |
| |
| | ||
Net accretion and amortization on loans and deposits |
| ( |
| ( | ||
Unrealized and realized losses on equity securities with readily determinable fair value | ( | ( | ||||
Depreciation of premises and equipment |
| |
| | ||
Amortization of mortgage servicing rights |
| |
| | ||
Provision for on-balance sheet exposures |
| |
| | ||
Provision for off-balance sheet exposures | | ( | ||||
Net gain on sale of mortgage loans held for sale |
| ( |
| ( | ||
Origination of mortgage loans held for sale |
| ( |
| ( | ||
Proceeds from sale of mortgage loans held for sale |
| |
| | ||
Net gain on sale of consumer loans held for sale | ( | ( | ||||
Origination of consumer loans held for sale | ( | ( | ||||
Proceeds from sale of consumer loans held for sale | | | ||||
Net gain realized on sale of other real estate owned |
| — |
| ( | ||
Writedowns of other real estate owned |
| |
| | ||
Deferred compensation expense - Class A Common Stock |
| |
| | ||
Stock-based awards and ESPP expense - Class A Common Stock |
| |
| | ||
Amortization of right-of-use assets |
| | | |||
Repayment of operating lease liabilities | ( |
| ( | |||
Increase in cash surrender value of bank owned life insurance |
| ( |
| ( | ||
Net change in other assets and liabilities: | ||||||
Accrued interest receivable |
| ( |
| ( | ||
Accrued interest payable |
| ( |
| ( | ||
Other assets |
| ( |
| ( | ||
Other liabilities |
| |
| ( | ||
Net cash provided by operating activities |
| |
| | ||
INVESTING ACTIVITIES: | ||||||
Purchases of available-for-sale debt securities |
| ( |
| ( | ||
Proceeds from calls, maturities and paydowns of equity and available-for-sale debt securities |
| |
| | ||
Proceeds from calls, maturities and paydowns of held-to-maturity debt securities |
| |
| | ||
Net change in outstanding warehouse lines of credit |
| ( |
| ( | ||
Net change in other loans, net of allowance |
| |
| | ||
Proceeds from sale of mortgage loans transferred to held for sale | — | | ||||
Net proceeds from sale of consumer loans transferred to held for sale |
| |
| — | ||
Purchases of Federal Home Loan Bank stock | ( | ( | ||||
Proceeds from sale of other real estate owned |
| — |
| | ||
Investments in low-income housing tax partnerships | ( | ( | ||||
Net purchases of premises and equipment |
| ( |
| ( | ||
Net cash (used in) provided by investing activities |
| ( |
| | ||
FINANCING ACTIVITIES: | ||||||
Net change in deposits |
| |
| | ||
Net change in securities sold under agreements to repurchase and other short-term borrowings |
| ( |
| ( | ||
Payments of Federal Home Loan Bank advances |
| ( |
| ( | ||
Proceeds from Federal Home Loan Bank advances |
| |
| | ||
Repurchase of Class A Common Stock |
| ( |
| — | ||
Net proceeds from Class A Common Stock purchased through employee stock purchase plan | | | ||||
Net proceeds from option exercises and equity awards vested - Class A Common Stock |
| |
| ( | ||
Cash dividends paid |
| ( |
| ( | ||
Net cash (used in) provided by financing activities |
| |
| ( | ||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
| |
| | ||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
| |
| | ||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | | $ | | ||
SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION: | ||||||
Cash paid during the period for: | ||||||
Interest | $ | | $ | | ||
Income taxes |
| |
| | ||
SUPPLEMENTAL NONCASH DISCLOSURES: | ||||||
Mortgage servicing rights capitalized | $ | | $ | | ||
Transfers from loans to real estate acquired in settlement of loans | — | | ||||
Net transfers from loans held for investment to loans held for sale | | | ||||
New unfunded obligations in low-income-housing investments | | | ||||
Right-of-use assets obtained in exchange for new operating lease liabilities | | — | ||||
Premises and equipment obtained through the use of vendor credits | | — |
See accompanying footnotes to consolidated financial statements.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –JUNE 30, 2025 and 2024 AND DECEMBER 31, 2024 (UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation — The consolidated financial statements include the accounts of Republic Bancorp, Inc. (the “Parent Company”) and its wholly owned subsidiary, Republic Bank & Trust Company. 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 subsidiary. The term the “Bank” refers to the Company’s subsidiary bank, Republic Bank & Trust Company, as well as, its wholly owned subsidiary, RBT Insurance Agency LLC. 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
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2025, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2025. For further information, refer to the consolidated financial statements and footnotes thereto included in Republic’s Form 10-K for the year ended December 31, 2024. Certain amounts presented in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact on previously reported prior periods’ net income or shareholders’ equity.
BUSINESS SEGMENT COMPOSITION
As of June 30, 2025, the Company was divided into
The Company’s Executive Chair and Chief Executive Officer serve as the Company’s CODM’s. Income (loss) before income tax expense is the reportable measure of segment profit or loss that the CODM’s regularly review and utilize to allocate resources and assess performance.
Core Bank
The Core Bank consists of the Traditional Banking and Warehouse Lending segments.
(I) | Traditional Banking segment |
The Traditional Banking segment provides traditional banking products primarily to customers in the Company’s market footprint ,with all products and services generally offered under the Company’s traditional RB&T brand. As of June 30, 2025, Republic had
● | Kentucky — |
● | Metropolitan Louisville — |
● | Central Kentucky — |
● | Georgetown — |
● | Lexington — |
● | Northern Kentucky (Metropolitan Cincinnati) — |
●Bellevue—
● | Covington — |
● | Crestview Hills — |
● | Florence — |
● | Indiana — |
10
● | Southern Indiana (Metropolitan Louisville) — |
● | Floyds Knobs — |
● | Jeffersonville — |
● | New Albany — |
● | Florida — |
● | Metropolitan Tampa — |
● | Ohio — |
● | Metropolitan Cincinnati — |
● | Tennessee — |
● | Metropolitan Nashville — |
Republic’s headquarters are in Louisville, which is the largest city in Kentucky based on population.
Traditional Banking results of operations are primarily dependent upon net interest income, which represents the difference between the interest income and fees on interest-earning assets and the interest expense on interest-bearing liabilities. Principal interest-earning Traditional Banking assets represent investment securities and commercial and consumer loans primarily secured by real estate and/or personal property. Interest-bearing liabilities primarily consist of interest-bearing deposit accounts, SSUAR, as well as short-term and long-term borrowing sources. FHLB advances have traditionally served as a significant borrowing and liquidity source for the Bank.
Other sources of Traditional Banking income include service charges on deposit accounts, mortgage banking income, debit and credit card interchange fee income, title insurance commissions, swap fee income and increases in the cash surrender value of BOLI.
Traditional Banking operating expenses consist primarily of salaries and employee benefits; technology, equipment, and communication; occupancy; interchange related expense; marketing and development; FDIC insurance expense, and various other general and administrative costs. Traditional Banking results of operations are significantly impacted by general economic and competitive conditions, particularly changes in market interest rates, government laws and policies, and actions of regulatory agencies.
(II) | Warehouse Lending segment |
The Core Bank provides short-term, revolving credit facilities to mortgage bankers across the U.S. 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 LOC for an average of
Republic Processing Group
(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 third-party tax preparers located throughout the U.S., as well as tax-preparation software providers that offer Republic Bank ERAs, RAs, and RTs (collectively, the “Tax Providers”). The majority of 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 and 2003, TRS originated ERAs related to tax returns that were anticipated to be filed during the first quarter of the following 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
11
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 |
● | The taxpayer was given the option to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $ |
● | 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 $ |
● | 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 via deduction from the taxpayer’s tax refund proceeds; and |
● | If a tax refund is insufficient to repay the ERA, including but not limited to the failure to file a final federal tax return through a Republic Tax Provider: |
● | there is no recourse to the taxpayer, |
● | no negative credit reporting on the taxpayer, and |
● | no collection efforts against the taxpayer. |
The Company reports fees paid for 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
Provisions on RAs are estimated when advances are made. Unpaid RAs, including ERAs, related to the first quarter tax filing season of a given year are considered delinquent at June 30th of that year and charged-off. In addition, as of June 30, 2025, RAs that were subject to Tax Provider loan loss guarantees were charged-off and immediately recorded as recoveries of previously charged-off loans with corresponding receivables recorded in other assets for the Tax Provider guarantees. Those corresponding receivables are expected to be settled during the third quarter of 2025. RAs collected during the second half of the year, not subject to loan loss guarantee arrangements, are recorded as recoveries of previously charged-off loans.
Related to the overall credit losses on RAs, including ERAs, the Bank’s ability to control losses is highly dependent upon its ability to predict the taxpayer’s likelihood to receive the tax refund as claimed on the taxpayer’s tax return. 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
12
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.
The RPS segment offers a range of payment-related products and services to consumers through third-party service providers. Through the Bank, the RPS segment offers both issuing solutions and money movement capabilities.
Issuing Solutions:
The RPS segment offers prepaid and debit solutions primarily marketed to the consumer industry. Prepaid solutions include the issuing of payroll and general purpose reloadable cards. Characteristics of these cards include the following:
● | Similar to a traditional debit card with features including traditional point of sale purchasing, automatic teller machine 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 payroll and general purpose reloadable cards generally distributed through retail locations and reloadable through participating retail load networks. |
Debit solutions include the issuing of DDAs, savings accounts and/or debit cards. In addition to offering traditional point of sale purchasing, automated teller machine withdrawals, and direct deposit options, these accounts may include overdraft protection.
Money Movement:
Through the Bank, the RPS segment participates in traditional money movement solutions including ACH transactions, wire transfer, check processing, and the Mastercard Remote Payment and Presentment Service. These capabilities are also complementary products facilitating the movement of money for other RPG 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.” The Company began sharing interest income revenue with its largest prepaid marketer-servicer during 2024, with the interest shared reported as “Interest expense on deposits.” The Company has not shared interest income revenue with its largest prepaid marketer-servicer for the three and six months ended June 30, 2025, as minimum deposit balance thresholds were not met.
(V) | Republic Credit Solutions segment |
Through the Bank, the RCS segment 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. Through the Bank, RCS uses third-party service providers for certain services such as marketing and loan servicing for (1) RCS’ LOC products, (2) RCS’ installment loan product and (3) RCS’ healthcare receivables products.
LOC Products:
Through the Bank, RCS uses third-party service providers to originate
13
The Bank sells participation interests in this product. These participation interests are a
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
Installment Loan Product:
Through RCS, the Bank offers installment loans with terms ranging from
Healthcare Receivables Products:
Through RCS, Bank originates healthcare receivables products across the U.S. through
For two of the programs, the Bank retains
For the remaining program, in some instances the Bank retains
For the RCS LOC 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 “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 “Program fees.”
14
Recently Adopted Accounting Standards
The following ASUs were adopted by the Company during the six months ended June 30, 2025:
Method of | Financial | |||||||||
ASU. No. |
| Topic |
| Nature of Update |
| Date Adopted |
| Adoption |
| Statement Impact |
2024-02 | Codification Improvements—Amendments to Remove References to the Concepts Statements | This ASU contains amendments to the Codification that remove references to various Concepts Statements. In most instances the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior Statements to provide guidance in certain topical areas. | January 1, 2025 | Prospectively | Immaterial |
Accounting Standards Update
The following not-yet-effective ASUs are considered relevant to the Company’s financial statements.
Date Adoption | Adoption | Expected | ||||||||
ASU. No. | Topic | Nature of Update | Required | Method | Financial Impact | |||||
2023-09 | Income Taxes (Topic 740): Improvements to Income Tax Disclosures | Among other things, these amendments require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and income tax paid information and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate). | Annual reporting periods beginning after Dec. 15, 2024. | Prospectively | The Company will update its income tax disclosures upon adoption within its 2025 Form 10-K. | |||||
2024-03 | Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses | This ASU requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. | Annual reporting periods beginning after Dec. 15, 2026, and interim periods within annual reporting periods beginning after Dec. 15, 2027. | Retrospectively | The Company is currently analyzing the impact of this ASU on its financial statements. | |||||
2025-01 | Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date | This ASU amends the effective date of ASU No. 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. | Annual reporting periods beginning after Dec. 15, 2026, and interim periods within annual reporting periods beginning after Dec. 15, 2027. | Retrospectively | The Company is currently analyzing the impact of this ASU on its financial statements. |
15
2. INVESTMENT SECURITIES
Available-for-Sale Debt Securities
The following tables summarize the amortized cost and fair value of AFS debt securities along with the corresponding amounts of related gross unrealized gains and losses recognized in AOCI:
|
| Gross |
| Gross |
|
| ||||||
Amortized | Unrealized | Unrealized |
| Fair | ||||||||
June 30, 2025 (in thousands) | Cost | Gains | Losses |
| Value | |||||||
U.S. Treasury securities and U.S. Government agencies | $ | | $ | | $ | ( | $ | | ||||
Private label mortgage-backed security |
| |
| |
| — |
| | ||||
Mortgage-backed securities - residential |
| |
| |
| ( |
| | ||||
Collateralized mortgage obligations |
| |
| |
| ( |
| | ||||
Corporate bonds |
| |
| — |
| ( |
| | ||||
Trust preferred security |
| |
| |
| — |
| | ||||
Total available-for-sale debt securities | $ | | $ | | $ | ( | $ | |
|
| Gross |
| Gross |
|
| ||||||
Amortized | Unrealized | Unrealized |
| Fair | ||||||||
December 31, 2024 (in thousands) | Cost | Gains | Losses |
| Value | |||||||
U.S. Treasury securities and U.S. Government agencies | $ | | $ | | $ | ( | $ | | ||||
Private label mortgage-backed security |
| |
| |
| — |
| | ||||
Mortgage-backed securities - residential |
| |
| |
| ( |
| | ||||
Collateralized mortgage obligations |
| |
| |
| ( |
| | ||||
Corporate bonds |
| |
| |
| — |
| | ||||
Trust preferred security |
| |
| |
| — |
| | ||||
Total available-for-sale debt securities | $ | | $ | | $ | ( | $ | |
Held-to-Maturity Debt Securities
The following tables summarize the amortized cost and fair value of HTM debt securities along with the corresponding amounts of related gross unrecognized gains and losses:
|
|
| Gross |
| Gross |
|
| |||||
Amortized | Unrecognized | Unrecognized | Fair | |||||||||
June 30, 2025 (in thousands) | Cost | Gains | Losses | Value | ||||||||
Mortgage-backed securities - residential | $ | | $ | — | $ | — | $ | | ||||
Collateralized mortgage obligations |
| |
| |
| ( |
| | ||||
Total held-to-maturity debt securities | $ | | $ | | $ | ( | $ | |
|
|
| Gross |
| Gross |
|
| |||||
Amortized | Unrecognized | Unrecognized | Fair | |||||||||
December 31, 2024 (in thousands) | Cost | Gains | Losses | Value | ||||||||
Mortgage-backed securities - residential | $ | | $ | | $ | — | $ | | ||||
Collateralized mortgage obligations |
| |
| |
| ( |
| | ||||
Corporate bonds |
| |
| |
| — |
| | ||||
Total held-to-maturity debt securities | $ | | $ | | $ | ( | $ | |
Sales and Calls of Available-for-Sale Debt Securities
During the three and six months ended June 30, 2025, and 2024, there were
16
Debt Securities by Contractual Maturity
The amortized cost and fair value of debt securities by contractual maturity as of June 30, 2025, follow. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are detailed separately.
Available-for-Sale | Held-to-Maturity | |||||||||||
Debt Securities | Debt Securities | |||||||||||
| Amortized |
| Fair |
| Amortized |
| Fair | |||||
June 30, 2025 (in thousands) | Cost | Value | Cost | Value | ||||||||
Due in one year or less | $ | | $ | | $ | — | $ | — | ||||
Due from one year to five years |
| |
| |
| — |
| — | ||||
Due from five years to ten years |
| — |
| — |
| — |
| — | ||||
Due beyond ten years |
| |
| |
| — |
| — | ||||
Private label mortgage-backed security |
| |
| |
| — |
| — | ||||
Mortgage-backed securities - residential |
| |
| |
| |
| | ||||
Collateralized mortgage obligations |
| |
| |
| |
| | ||||
Total debt securities | $ | | $ | | $ | | $ | |
Unrealized Loss Analysis on Debt Securities
The following tables summarize AFS debt securities in an unrealized loss position for which an ACLS had not been recorded as of June 30, 2025, and December 31, 2024, aggregated by investment category and length of time in a continuous unrealized loss position:
Less than 12 months | 12 months or more | Total | ||||||||||||||||
|
| Unrealized |
|
| Unrealized |
|
| Unrealized | ||||||||||
June 30, 2025 (in thousands) | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||
Available-for-sale debt securities: | ||||||||||||||||||
U.S. Treasury securities and U.S. Government agencies | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
Mortgage-backed securities - residential | | ( | | ( | | ( | ||||||||||||
Collateralized mortgage obligations | | ( | | ( | | ( | ||||||||||||
Corporate bonds | | ( | — | — | | ( | ||||||||||||
Total available-for-sale debt securities | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( |
Less than 12 months | 12 months or more | Total | ||||||||||||||||
|
| Unrealized |
|
| Unrealized |
|
| Unrealized | ||||||||||
December 31, 2024 (in thousands) | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||
Available-for-sale debt securities: | ||||||||||||||||||
U.S. Treasury securities and U.S. Government agencies | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
Mortgage-backed securities - residential | | ( | | ( | | ( | ||||||||||||
Collateralized mortgage obligations | | ( | | ( | | ( | ||||||||||||
Total available-for-sale debt securities | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( |
As of June 30, 2025, the Bank’s security portfolio consisted of
As of December 31, 2024, the Bank’s security portfolio consisted of
As of June 30, 2025, and December 31, 2024, there were no holdings of debt securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than
Mortgage-Backed Securities and Collateralized Mortgage Obligations
As of June 30, 2025, with the exception of the $
17
There were
Accrued interest on AFS debt securities is presented as a component of other assets on the Company’s balance sheet and is excluded from the ACLS, if applicable. Accrued interest on AFS debt securities totaled $
Pledged Debt Securities
Debt securities pledged to secure public deposits, SSUAR, and debt securities held for other purposes, as required or permitted by law, were as follows:
As of | ||||||
(in thousands) |
| June 30, 2025 |
| December 31, 2024 | ||
Amortized cost | $ | | $ | | ||
Fair value |
| |
| | ||
Carrying amount | | |
Equity Securities
The amortized cost, gross unrealized gains and losses, and fair value of equity securities with readily determinable fair values were as follows:
|
| Gross |
| Gross |
|
| ||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
June 30, 2025 (in thousands) | Cost | Gains | Losses | Value | ||||||||
Freddie Mac preferred stock | $ | — | $ | | $ | — | $ | | ||||
Total equity securities | $ | — | $ | | $ | — | $ | |
|
| Gross |
| Gross |
|
| ||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
December 31, 2024 (in thousands) | Cost | Gains | Losses | Value | ||||||||
Freddie Mac preferred stock | $ | — | $ | | $ | — | $ | | ||||
Total equity securities | $ | — | $ | | $ | — | $ | |
For equity securities with readily determinable fair values, the gross realized and unrealized gains and losses recognized in the Company’s consolidated statements of income were as follows:
Gains (Losses) Recognized on Equity Securities | |||||||||||||||||||
Three Months Ended June 30, 2025 |
| Three Months Ended June 30, 2024 |
| ||||||||||||||||
(in thousands) |
| Realized |
| Unrealized |
| Total |
| Realized |
| Unrealized |
| Total | |||||||
Freddie Mac preferred stock | $ | — | $ | | $ | | $ | — | $ | | $ | | |||||||
Total equity securities | $ | — | $ | | $ | | $ | — | $ | | $ | |
Gains (Losses) Recognized on Equity Securities | |||||||||||||||||||
Six Months Ended June 30, 2025 |
| Six Months Ended June 30, 2024 | |||||||||||||||||
(in thousands) | Realized | Unrealized | Total | Realized | Unrealized | Total | |||||||||||||
Freddie Mac preferred stock | $ | — | $ | | $ | | $ | — | $ | | $ | | |||||||
Total equity securities | $ | — | $ | | $ | | $ | — | $ | | $ | |
18
3. LOANS HELD FOR SALE
In the ordinary course of business, the Bank originates for sale mortgage loans and consumer loans. Mortgage loans originated for sale are primarily originated and sold into the secondary market through the Bank’s Traditional Banking segment, while consumer loans originated for sale are originated and sold through the RCS segment.
Mortgage Loans Held for Sale, at Fair Value
See additional detail regarding mortgage loans originated for sale, at fair value under Footnote 10 “Mortgage Banking Activities” of this section of the filing.
Consumer Loans Held for Sale, at Fair Value
The Bank offers RCS installment loans with terms ranging from
Activity for consumer loans HFS and carried at fair value was as follows:
| Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | ||||||||||||
(in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||
Balance, beginning of period | $ | | $ | | $ | | $ | | |||||
Origination of consumer loans held for sale |
| |
| |
| |
| | |||||
Proceeds from the sale of consumer loans held for sale |
| ( |
| ( |
| ( |
| ( | |||||
Net gain on sale of consumer loans held for sale |
| |
| |
| |
| | |||||
Balance, end of period | $ | | $ | | $ | | $ | |
Consumer Loans Held for Sale, at the Lower of Cost or Fair Value
RCS originates for sale
Activity for consumer loans HFS and carried at the lower of cost or market value was as follows:
| Three Months Ended |
| Six Months Ended |
| |||||||||
June 30, | June 30, | ||||||||||||
(in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||
Balance, beginning of period | $ | | $ | | $ | | $ | | |||||
Origination of consumer loans held for sale |
| |
| |
| |
| | |||||
Transferred from held for investment to held for sale | — | — | | — | |||||||||
Proceeds from the sale of consumer loans held for sale |
| ( |
| ( |
| ( |
| ( | |||||
Net gain on sale of consumer loans held for sale |
| |
| |
| |
| | |||||
Balance, end of period | $ | | $ | | $ | | $ | |
19
4. LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS
The composition of the loan portfolio follows:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 |
| ||
Traditional Banking: | |||||||
Residential real estate: | |||||||
Owner-occupied | $ | | $ | | |||
Nonowner-occupied |
| |
| | |||
Commercial real estate: |
|
| |||||
Owner-occupied | | | |||||
Nonowner-occupied | | | |||||
Multi-family | | | |||||
Construction & land development |
| |
| | |||
Commercial & industrial |
| |
| | |||
Lease financing receivables |
| |
| | |||
Aircraft* | | | |||||
Home equity |
| |
| | |||
Consumer: | |||||||
Credit cards |
| |
| | |||
Overdrafts |
| |
| | |||
Automobile loans |
| |
| | |||
Other consumer |
| |
| | |||
Total Traditional Banking | | | |||||
Warehouse lines of credit* |
| |
| | |||
Total Core Banking | | | |||||
Republic Processing Group*: |
| ||||||
Tax Refund Solutions: | |||||||
Refund Advances | — | | |||||
Other TRS commercial & industrial loans | | | |||||
Republic Credit Solutions | |
| | ||||
Total Republic Processing Group | | | |||||
Total loans** |
| |
| | |||
Allowance for credit losses |
| ( |
| ( | |||
Total loans, net | $ | | $ | |
*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. See the following table for expanded detail.
The following table reconciles the contractually receivable and carrying amounts of loans:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 |
| ||
Contractually receivable | $ | | $ | | |||
Unearned income |
| ( |
| ( | |||
Unamortized premiums |
| |
| | |||
Unaccreted discounts |
| ( |
| ( | |||
Other net unamortized deferred origination (fees) and costs |
| ( |
| ( | |||
Carrying value of loans | $ | | $ | |
20
Credit Quality Indicators
The following tables include loans by segment, risk category, and, for non-revolving loans, based upon year of origination. Loan segments and risk categories as of June 30, 2025 remain unchanged from those defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Regarding origination year, loan extensions and renewals are generally considered originated in the year extended or renewed unless the loan is classified as a loan modification. Loan extensions and renewals classified as loan modifications generally receive no change in origination date upon extension or renewal.
Revolving Loans | Revolving Loans | ||||||||||||||||||||||||||
(in thousands) | Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | ||||||||||||||||||||||||
As of June 30, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Cost Basis | to Term | Total | ||||||||||||||||||
Residential real estate owner-occupied: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | |||||||||
Special Mention | — | — | — | | — | | — | — | | ||||||||||||||||||
Substandard | — | | | | | | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | | $ | — | $ | | $ | — | $ | — | $ | | |||||||||
Residential real estate nonowner-occupied: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | |||||||||
Special Mention | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Substandard | — | — | — | — | — | | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Commercial real estate owner-occupied: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special Mention | | | — | | | | | — | | ||||||||||||||||||
Substandard | | — | — | — | — | | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Commercial real estate nonowner-occupied: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special Mention | — | — | — | — | — | | — | — | | ||||||||||||||||||
Substandard | — | — | — | — | | | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Commercial real estate multi-family: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special Mention | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Construction & land development: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Special Mention | — | — | | — | — | — | — | — | | ||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | — | ||||||||||
Commercial & industrial: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special Mention | — | | | | | | | — | | ||||||||||||||||||
Substandard | — | — | | | | | — | | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | | $ | — | $ | — | $ | — | $ | — | $ | | |||||||||
Lease financing receivables: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Special Mention | — | — | | | | | — | — | | ||||||||||||||||||
Substandard | — | | | | | — | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | | $ | | $ | — | $ | — | $ | — | $ | — | $ | |
21
Revolving Loans | Revolving Loans | |||||||||||||||||||||||||||
(in thousands) | Term Loans Amortized Cost Basis by Origination Year (Continued) | Amortized | Converted | |||||||||||||||||||||||||
As of June 30, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Cost Basis | to Term | Total | |||||||||||||||||||
Aircraft: | ||||||||||||||||||||||||||||
Risk Rating | ||||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | ||||||||||
Special Mention | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Substandard | — | — | — | — | | — | — | — | | |||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | ||||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Home equity: | ||||||||||||||||||||||||||||
Risk Rating | ||||||||||||||||||||||||||||
Pass or not rated | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | ||||||||||
Special Mention | — | — | — | — | — | — | | — | | |||||||||||||||||||
Substandard | — | — | — | — | — | — | | — | | |||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | ||||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Consumer: | ||||||||||||||||||||||||||||
Risk Rating | ||||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | ||||||||||
Special Mention | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Substandard | — | — | — | — | — | | | — | | |||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | ||||||||||
YTD Gross Charge-offs | $ | | $ | | $ | | $ | — | $ | | $ | | $ | | $ | — | $ | | ||||||||||
Warehouse: | ||||||||||||||||||||||||||||
Risk Rating | ||||||||||||||||||||||||||||
Pass or not rated | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | ||||||||||
Special Mention | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | ||||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
TRS: | ||||||||||||||||||||||||||||
Risk Rating | ||||||||||||||||||||||||||||
Pass or not rated | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | ||||||||||
Special Mention | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Total | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | ||||||||||
YTD Gross Charge-offs | $ | | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | ||||||||||
RCS: | ||||||||||||||||||||||||||||
Risk Rating | ||||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | ||||||||||
Special Mention | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | ||||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | ||||||||||
Grand Total: | ||||||||||||||||||||||||||||
Risk Rating | ||||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Special Mention | | | | | | | | — | | |||||||||||||||||||
Substandard | | | | | | | | | | |||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Grand Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
YTD Gross Charge-offs | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | |
Revolving Loans | Revolving Loans | ||||||||||||||||||||||||||
(in thousands) | Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | ||||||||||||||||||||||||
As of December 31, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Cost Basis | to Term | Total | ||||||||||||||||||
Residential real estate owner-occupied: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | |||||||||
Special Mention | — | — | — | — | | | — | — | | ||||||||||||||||||
Substandard | | | | | | | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | | $ | | $ | | $ | — | $ | — | $ | — | $ | — | $ | | |||||||||
Residential real estate nonowner-occupied: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | |||||||||
Special Mention | — | — | | — | — | | — | — | | ||||||||||||||||||
Substandard | — | — | — | — | — | | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
22
Revolving Loans | Revolving Loans | ||||||||||||||||||||||||||
(in thousands) | Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | ||||||||||||||||||||||||
As of December 31, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Cost Basis | to Term | Total | ||||||||||||||||||
Commercial real estate owner-occupied: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special Mention | | — | | | | | | — | | ||||||||||||||||||
Substandard | — | — | — | — | | | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Commercial real estate nonowner-occupied: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special Mention | — | — | — | | | | — | — | | ||||||||||||||||||
Substandard | — | — | — | — | — | | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Commercial real estate multi-family: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special Mention | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Construction & land development: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Special Mention | — | | — | — | — | — | — | — | | ||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
YTD Gross Charge-offs | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Commercial & industrial: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special Mention | | | | | | | | — | | ||||||||||||||||||
Substandard | — | | | | — | | | | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
YTD Gross Charge-offs | — | $ | — | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | | |||||||||||
Lease financing receivables: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Special Mention | — | | | | | | — | — | | ||||||||||||||||||
Substandard | — | | | | — | — | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
YTD Gross Charge-offs | — | $ | | $ | | $ | — | $ | | $ | | $ | — | $ | — | | |||||||||||
Aircraft: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Special Mention | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Substandard | — | — | — | | — | | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Home equity: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | |||||||||
Special Mention | — | — | — | — | — | — | | — | | ||||||||||||||||||
Substandard | — | — | — | — | — | — | | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | |||||||||
Consumer: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Special Mention | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Substandard | | — | — | — | — | | — | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
YTD Gross Charge-offs | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | $ | — | $ | |
23
Revolving Loans | Revolving Loans | ||||||||||||||||||||||||||
(in thousands) | Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | ||||||||||||||||||||||||
As of December 31, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Cost Basis | to Term | Total | ||||||||||||||||||
Warehouse: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | |||||||||
Special Mention | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
TRS: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | |||||||||
Special Mention | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | |||||||||
YTD Gross Charge-offs | $ | | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | |||||||||
RCS: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Special Mention | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Substandard | — | — | — | — | — | — | | — | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
YTD Gross Charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | | |||||||||
Grand Total: | |||||||||||||||||||||||||||
Risk Rating | |||||||||||||||||||||||||||
Pass or not rated | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Special Mention | | | | | | | | — | | ||||||||||||||||||
Substandard | | | | | | | | | | ||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Grand Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
YTD Gross Charge-offs | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | |
24
Allowance for Credit Losses on Loans
The following tables present the activity in the ACLL by portfolio class:
ACLL Roll-forward | |||||||||||||||||||||||||||||||
Three Months Ended June 30, | |||||||||||||||||||||||||||||||
2025 | 2024 | ||||||||||||||||||||||||||||||
Beginning | Charge- | Ending | Beginning | Charge- | Ending | ||||||||||||||||||||||||||
(in thousands) | Balance | Provision | offs | Recoveries | Balance | Balance | Provision | offs | Recoveries | Balance | |||||||||||||||||||||
Traditional Banking: | |||||||||||||||||||||||||||||||
Residential real estate: | |||||||||||||||||||||||||||||||
Owner-occupied | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||||||
Nonowner-occupied | | ( | — | — | | | ( | — | — | | |||||||||||||||||||||
Commercial real estate*: | |||||||||||||||||||||||||||||||
Owner-occupied* | | ( | — | — | | ||||||||||||||||||||||||||
Nonowner-occupied* | | ( | — | | | ||||||||||||||||||||||||||
Multi-Family* | | ( | — | — | | ||||||||||||||||||||||||||
Total commercial real estate* | | ( | — | | | | | — | | | |||||||||||||||||||||
Construction & land development | | | — | — | | | | — | — | | |||||||||||||||||||||
Commercial & industrial | | ( | ( | — | | | ( | — | | | |||||||||||||||||||||
Lease financing receivables | | | ( | | | | | ( | | | |||||||||||||||||||||
Aircraft | | ( | — | — | | | ( | — | — | | |||||||||||||||||||||
Home equity | | | — | | | | | — | — | | |||||||||||||||||||||
Consumer: | — | ||||||||||||||||||||||||||||||
Credit cards | | | ( | | | | | ( | | | |||||||||||||||||||||
Overdrafts | | | ( | | | | | ( | | | |||||||||||||||||||||
Automobile loans | | ( | — | | | | ( | — | | | |||||||||||||||||||||
Other consumer | | | ( | | | | | ( | | | |||||||||||||||||||||
Total Traditional Banking | | | ( | | | | | ( | | | |||||||||||||||||||||
Warehouse lines of credit | | | — | — | | | | — | — | | |||||||||||||||||||||
Total Core Banking | | | ( | | | | | ( | | | |||||||||||||||||||||
Republic Processing Group: | |||||||||||||||||||||||||||||||
Tax Refund Solutions: | |||||||||||||||||||||||||||||||
Refund Advances | | ( | ( | | — | | ( | ( | | — | |||||||||||||||||||||
Other TRS commercial & industrial loans | | | ( | | — | | ( | ( | | — | |||||||||||||||||||||
Republic Credit Solutions | | | ( | | | | | ( | | | |||||||||||||||||||||
Total Republic Processing Group | | | ( | | | | | ( | | | |||||||||||||||||||||
Total | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | | $ | ( | $ | | $ | | |||||||||||
* The CRE loan pool was further segmented into Owner-occupied CRE, Nonowner-occupied CRE, and Multi-family beginning in 2025. For the three months ended June 30, 2024 presented above, the Total CRE line represents the ACLL Roll-forward information for the total CRE loan pool, as previously presented.
25
ACLL Roll-forward | |||||||||||||||||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2025 | 2024 | ||||||||||||||||||||||||||||||
Beginning | Charge- | Ending | Beginning | Charge- | Ending | ||||||||||||||||||||||||||
(in thousands) | Balance | Provision | offs | Recoveries | Balance | Balance | Provision | offs | Recoveries | Balance | |||||||||||||||||||||
Traditional Banking: | |||||||||||||||||||||||||||||||
Residential real estate: | |||||||||||||||||||||||||||||||
Owner-occupied | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||||||
Nonowner-occupied | | ( | — | — | | | ( | — | | | |||||||||||||||||||||
Commercial real estate*: | |||||||||||||||||||||||||||||||
Owner-occupied* | | ( | — | — | | ||||||||||||||||||||||||||
Nonowner-occupied* | | ( | — | | | ||||||||||||||||||||||||||
Multi-Family* | | | — | — | | ||||||||||||||||||||||||||
Total commercial real estate* | | ( | — | | | | | — | | | |||||||||||||||||||||
Construction & land development | | | — | — | | | | — | — | | |||||||||||||||||||||
Commercial & industrial | | ( | ( | — | | | ( | — | | | |||||||||||||||||||||
Lease financing receivables | | ( | ( | | | | | ( | | | |||||||||||||||||||||
Aircraft | | ( | — | — | | | ( | — | — | | |||||||||||||||||||||
Home equity | | | — | | | | | — | | | |||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||
Credit cards | | ( | ( | | | | | ( | | | |||||||||||||||||||||
Overdrafts | | | ( | | | | | ( | | | |||||||||||||||||||||
Automobile loans | | ( | — | | | | ( | — | | | |||||||||||||||||||||
Other consumer | | ( | ( | | | | | ( | | | |||||||||||||||||||||
Total Traditional Banking | | ( | ( | | | | | ( | | | |||||||||||||||||||||
Warehouse lines of credit | | | — | — | | | | — | — | | |||||||||||||||||||||
Total Core Banking | | | ( | | | | | ( | | | |||||||||||||||||||||
Republic Processing Group: | |||||||||||||||||||||||||||||||
Tax Refund Solutions: | |||||||||||||||||||||||||||||||
Refund Advances | | | ( | | — | | | ( | | — | |||||||||||||||||||||
Other TRS commercial & industrial loans | | | ( | | — | | | ( | | — | |||||||||||||||||||||
Republic Credit Solutions | | | ( | | | | | ( | | | |||||||||||||||||||||
Total Republic Processing Group | | | ( | | | | | ( | | | |||||||||||||||||||||
Total | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | | $ | ( | $ | | $ | | |||||||||||
* The CRE loan pool was further segmented into Owner-occupied CRE, Nonowner-occupied CRE, and Multi-family beginning in 2025. For the six months ended June 30, 2024 presented above, the Total CRE line represents the ACLL Roll-forward information for the total CRE loan pool, as previously presented.
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 June 30, 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.
The cumulative loss rate used as the basis for the estimate of the Company’s ACLL as of June 30, 2025, was primarily based on a static pool analysis of each of the Company’s loan pools using the Company’s loss experience from 2013 through 2024, supplemented by qualitative factor adjustments for current and forecasted conditions. The Company employs
26
Nonperforming Loans and Nonperforming Assets
Detail of nonperforming loans, nonperforming assets, and select credit quality ratios follows:
(dollars in thousands) |
| June 30, 2025 | December 31, 2024 |
| ||||
Loans on nonaccrual status* | $ | | $ | | ||||
Loans past due 90-days-or-more and still on accrual** |
| |
| | ||||
Total nonperforming loans |
| |
| | ||||
Other real estate owned |
| |
| | ||||
Total nonperforming assets | $ | | $ | | ||||
Credit Quality Ratios - Total Company: | ||||||||
Nonperforming loans to total loans |
| | % |
| | % | ||
Nonperforming assets to total loans (including OREO) |
| |
| | ||||
Nonperforming assets to total assets |
| |
| | ||||
Credit Quality Ratios - Core Bank: | ||||||||
Nonperforming loans to total loans |
| | % |
| | % | ||
Nonperforming assets to total loans (including OREO) |
| |
| | ||||
Nonperforming assets to total assets |
| |
| |
* | Loans on nonaccrual status include collateral-dependent loans. |
** | Loans past due 90-days-or-more and still accruing consist of smaller balance consumer loans. |
The following tables present nonaccrual loans and loans past due 90-days-or-more and still on accrual by class of loans:
Past Due 90-Days-or-More | |||||||||||||
Nonaccrual | and Still Accruing Interest* | ||||||||||||
(in thousands) |
| June 30, 2025 |
| December 31, 2024 |
|
| June 30, 2025 |
| December 31, 2024 | ||||
Traditional Banking: | |||||||||||||
Residential real estate: | |||||||||||||
Owner-occupied | $ | | $ | | $ | — | $ | — | |||||
Nonowner-occupied |
| |
| |
| — |
| — | |||||
Commercial real estate: |
|
|
|
| |||||||||
Owner-occupied | |
| |
| — |
| — | ||||||
Nonowner-occupied | — |
| |
| — |
| — | ||||||
Multi-family | — | — | — | — | |||||||||
Construction & land development |
| — |
| — |
| — |
| — | |||||
Commercial & industrial |
| |
| |
| — |
| — | |||||
Lease financing receivables |
| |
| |
| — |
| — | |||||
Aircraft | — | | — | — | |||||||||
Home equity |
| |
| |
| — |
| — | |||||
Consumer: | |||||||||||||
Credit cards |
| — |
| — |
| — |
| — | |||||
Overdrafts |
| — |
| — |
| — |
| — | |||||
Automobile loans |
| |
| |
| — |
| — | |||||
Other consumer |
| — |
| |
| — |
| — | |||||
Total Traditional Banking | | | — | — | |||||||||
Warehouse lines of credit |
| — |
| — |
| — |
| — | |||||
Total Core Banking | | | — | — | |||||||||
Republic Processing Group: | |||||||||||||
Tax Refund Solutions: | |||||||||||||
Refund Advances | — | — | — | — | |||||||||
Other TRS commercial & industrial loans |
| — |
| — |
| — |
| — | |||||
Republic Credit Solutions | — | — | | | |||||||||
Total Republic Processing Group | — | — | | | |||||||||
Total | $ | | $ | | $ | | $ | |
* Loans past due 90-days-or-more and still accruing consist of smaller balance consumer loans.
27
Three Months Ended | Six Months Ended | ||||||||||||||
As of June 30, 2025 | June 30, 2025 | June 30, 2025 | |||||||||||||
| Nonaccrual |
| Nonaccrual |
| Total | Interest Income |
| Interest Income | |||||||
Loans with | Loans without | Nonaccrual | Recognized | Recognized | |||||||||||
(in thousands) | ACLL | ACLL | Loans | on Nonaccrual Loans* | on Nonaccrual Loans* | ||||||||||
Residential real estate: | |||||||||||||||
Owner-occupied | $ | — | $ | | $ | | $ | | $ | | |||||
Nonowner-occupied |
| — | | | | | |||||||||
Commercial real estate: |
| ||||||||||||||
Owner-occupied | | | | | | ||||||||||
Nonowner-occupied | — | — | — | | | ||||||||||
Multi-family | — | — | — | | | ||||||||||
Construction & land development |
| — | — | — | — | — | |||||||||
Commercial & industrial |
| | | | | | |||||||||
Lease financing receivables |
| — | | | — | — | |||||||||
Aircraft | — | — | — | — | — | ||||||||||
Home equity |
| — | | | | | |||||||||
Consumer | — | | | | | ||||||||||
Total | $ | | $ | | $ | | $ | | $ | |
* Includes interest income for loans on nonaccrual as of the beginning of the period that were paid off during the period.
Three Months Ended | Six Months Ended | ||||||||||||||
As of December 31, 2024 | June 30, 2024 | June 30, 2024 | |||||||||||||
| Nonaccrual |
| Nonaccrual |
| Total | Interest Income |
| Interest Income | |||||||
Loans with | Loans without | Nonaccrual | Recognized | Recognized | |||||||||||
(in thousands) | ACLL | ACLL | Loans | on Nonaccrual Loans* | on Nonaccrual Loans* | ||||||||||
Residential real estate: | |||||||||||||||
Owner-occupied | $ | | $ | | $ | | $ | | $ | | |||||
Nonowner-occupied |
| | | | — | | |||||||||
Commercial real estate: |
| ||||||||||||||
Owner-occupied | | | | | | ||||||||||
Nonowner-occupied | | | | — | — | ||||||||||
Multi-family | — | — | — | — | — | ||||||||||
Construction & land development |
| — | — | — | — | — | |||||||||
Commercial & industrial |
| | | | — | — | |||||||||
Lease financing receivables |
| — | | | — | — | |||||||||
Aircraft | — | | | — | — | ||||||||||
Home equity |
| — | | | | | |||||||||
Consumer | | — | | | | ||||||||||
Total | $ | | $ | | $ | | $ | | $ | |
* Includes interest income for loans on nonaccrual as of the beginning of the period that were paid off during the period.
Nonaccrual loans and loans past due 90-days-or-more and still on accrual both include smaller balance, primarily retail, homogeneous loans. Nonaccrual loans are typically returned to accrual status when all the principal and interest amounts contractually due are brought current and held current for
28
Delinquent Loans
The following tables present the aging of the recorded investment in loans by class of loans:
| 30 - 59 |
| 60 - 89 |
| 90 or More |
|
|
|
|
|
| |||||||
Days | Days | Days | Total | Total | ||||||||||||||
June 30, 2025 (dollars in thousands) | Delinquent | Delinquent | Delinquent* | Delinquent** | Current | Total | ||||||||||||
Traditional Banking: | ||||||||||||||||||
Residential real estate: | ||||||||||||||||||
Owner-occupied | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Nonowner-occupied |
| — |
| — |
| — |
| — |
| |
| | ||||||
Commercial real estate: |
|
| ||||||||||||||||
Owner-occupied | — | — | | | | | ||||||||||||
Nonowner-occupied | — | — | — | — | | | ||||||||||||
Multi-family | — | — | — | — | | | ||||||||||||
Construction & land development |
| — |
| — |
| — |
| — |
| |
| | ||||||
Commercial & industrial |
| |
| |
| |
| |
| |
| | ||||||
Lease financing receivables |
| |
| |
| |
| |
| |
| | ||||||
Aircraft | — | — | — | — | | | ||||||||||||
Home equity |
| |
| |
| |
| |
| |
| | ||||||
Consumer: | ||||||||||||||||||
Credit cards |
| |
| |
| — |
| |
| |
| | ||||||
Overdrafts |
| |
| |
| |
| |
| |
| | ||||||
Automobile loans |
| — |
| — |
| — |
| — |
| |
| | ||||||
Other consumer |
| |
| |
| — |
| |
| |
| | ||||||
Total Traditional Banking | | | | | | | ||||||||||||
Warehouse lines of credit |
| — |
| — |
| — |
| — |
| |
| | ||||||
Total Core Banking | | | | | | | ||||||||||||
Republic Processing Group: | ||||||||||||||||||
Tax Refund Solutions: | ||||||||||||||||||
Refund Advances | — |
| — |
| — |
| — |
| — |
| — | |||||||
Other TRS commercial & industrial loans |
| — |
| — |
| — |
| — |
| |
| | ||||||
Republic Credit Solutions | |
| |
| |
| |
| |
| | |||||||
Total Republic Processing Group | | | | | | | ||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Delinquency ratio*** |
| | % |
| | % |
| | % |
| | % |
* All loans past due 90-days-or-more, excluding small balance consumer loans, were on nonaccrual status as of June 30, 2025.
** Delinquent status may be determined by either the number of days past due or number of payments past due.
*** Represents total loans 30-days-or-more past due by aging category divided by total loans.
29
| 30 - 59 |
| 60 - 89 |
| 90 or More |
|
|
|
|
|
| |||||||
Days | Days | Days | Total | Total | ||||||||||||||
December 31, 2024 (dollars in thousands) | Delinquent | Delinquent | Delinquent* | Delinquent** | Current | Total | ||||||||||||
Traditional Banking: | ||||||||||||||||||
Residential real estate: | ||||||||||||||||||
Owner-occupied | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Nonowner-occupied |
| — |
| — |
| |
| |
| |
| | ||||||
Commercial real estate: |
|
|
|
|
|
| ||||||||||||
Owner-occupied | — | — | | | | | ||||||||||||
Nonowner-occupied | — | | — | | | | ||||||||||||
Multi-family | — | — | — | — | | | ||||||||||||
Construction & land development |
| — |
| — |
| — |
| — |
| |
| | ||||||
Commercial & industrial |
| |
| |
| |
| |
| |
| | ||||||
Lease financing receivables |
| |
| |
| |
| |
| |
| | ||||||
Aircraft | — | — | — | — | | | ||||||||||||
Home equity |
| |
| |
| |
| |
| |
| | ||||||
Consumer: | ||||||||||||||||||
Credit cards |
| |
| |
| — |
| |
| |
| | ||||||
Overdrafts |
| |
| |
| — |
| |
| |
| | ||||||
Automobile loans |
| |
| — |
| — |
| |
| |
| | ||||||
Other consumer |
| |
| |
| |
| |
| |
| | ||||||
Total Traditional Banking | | | | | | | ||||||||||||
Warehouse lines of credit |
| — |
| — |
| — |
| — |
| |
| | ||||||
Total Core Banking | | | | | | | ||||||||||||
Republic Processing Group: | ||||||||||||||||||
Tax Refund Solutions: | ||||||||||||||||||
Refund Advances | — |
| — |
| — |
| — |
| |
| | |||||||
Other TRS commercial & industrial loans |
| — |
| — |
| — |
| — |
| |
| | ||||||
Republic Credit Solutions | |
| |
| |
| |
| |
| | |||||||
Total Republic Processing Group | | | | | | | ||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Delinquency ratio*** |
| | % |
| | % |
| | % |
| | % |
* All loans past due 90-days-or-more, excluding smaller balance consumer loans, were on nonaccrual status as of December 31, 2024.
** Delinquent status may be determined by either the number of days past due or number of payments past due.
*** Represents total loans 30-days-or-more past due by aging category divided by total loans.
30
Collateral-Dependent Loans
The following table presents the amortized cost basis of collateral-dependent loans by class of loans:
June 30, 2025 | December 31, 2024 | |||||||||||
Secured |
| Secured | Secured |
| Secured | |||||||
by Real | by Personal | by Real | by Personal | |||||||||
(in thousands) | Estate | Property | Estate | Property | ||||||||
Traditional Banking: | ||||||||||||
Residential real estate: | ||||||||||||
Owner-occupied | $ | | $ | — | $ | | $ | — | ||||
Nonowner-occupied |
| |
| — |
| |
| — | ||||
Commercial real estate: |
|
|
|
| ||||||||
Owner-occupied | | — | | — | ||||||||
Nonowner-occupied | | — | | — | ||||||||
Multi-family | — | — | — | — | ||||||||
Construction & land development |
| — |
| — |
| — |
| — | ||||
Commercial & industrial |
| |
| — |
| |
| — | ||||
Lease financing receivables |
| — |
| |
| — |
| | ||||
Aircraft | — |
| | — |
| | ||||||
Home equity |
| |
| — |
| |
| — | ||||
Consumer | — |
| | — |
| | ||||||
Total Traditional Banking | $ | | $ | | $ | | $ | |
Collateral-dependent loans are generally secured by real estate or personal property. If there is insufficient collateral value to secure the Company’s recorded investment in these loans, they are charged down to collateral value less estimated selling costs, when selling costs are applicable. Selling costs range from
Loan Modifications Made to Borrowers Experiencing Financial Difficulty
The ACLL incorporates an estimate of lifetime expected credit losses using historical loss information. The Company uses a static pool loss rate method to determine an estimate which is recorded for each asset upon origination. Occasionally, the Company has reason to modify certain terms of loans for borrowers experiencing financial distress by providing the following forms of relief: forgiveness of loan principal, extension of repayment terms, interest rate reduction or an other than insignificant payment delay. The Company can make any or all of these types of concessions as part of such modifications. Since an estimate for historical losses is already included as a component of the ACLL, a change to the ACLL is generally not recorded at the time of such modifications unless the loan is individually analyzed and the modification changes the specific reserve allocation. In the event forgiveness of principal is provided, the amount of the forgiveness is charged off against the ACLL.
During the three months ended June 30, 2025, the Company modified
Foreclosures
The following table presents the carrying amount of foreclosed properties held as a result of the Bank obtaining physical possession of such properties:
(in thousands) | June 30, 2025 | December 31, 2024 |
| ||||
Commercial real estate: | |||||||
Owner-occupied | $ | — |
| $ | — | ||
Nonowner-occupied | | | |||||
Multi-family | — | — | |||||
Total other real estate owned | $ | |
| $ | |
31
The following table presents the recorded investment in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to requirements of the applicable jurisdiction:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 | ||
Recorded investment in consumer residential real estate mortgage loans in the process of foreclosure |
| $ | |
| $ | |
Refund Advances
The Company’s TRS segment offered (i) its RA product during the first
Information regarding calendar year activities for RAs follows:
Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, |
| June 30, | ||||||||||||||
(dollars in thousands) |
| 2025 | 2024 |
| 2025 |
| 2024 | ||||||||||
Refund Advances originated |
| $ | — | $ | — |
| $ | | $ | | |||||||
Net charge (credit) to the Provision for RAs, including ERAs |
| ( | ( |
| | | |||||||||||
Provision as a percentage of RAs originated, including ERAs | NA | NA | | % | | % | |||||||||||
Refund Advances net charge-offs |
| $ | | $ | |
| $ | | $ | | |||||||
Refund Advances net charge-offs to total Refund Advances originated | NA | NA | | % | | % |
32
5. DEPOSITS
The composition of the deposit portfolio follows:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 |
| ||
Core Bank: | |||||||
Demand | $ | | $ | | |||
Money market |
| |
| | |||
Savings |
| |
| | |||
Reciprocal money market |
| |
| | |||
Individual retirement accounts (1) |
| |
| | |||
Time deposits, $250 and over (1) |
| |
| | |||
Other certificates of deposit (1) |
| |
| | |||
Reciprocal time deposits (1) |
| |
| | |||
Wholesale brokered deposits (1) | | | |||||
Total Core Bank interest-bearing deposits |
| |
| | |||
Total Core Bank noninterest-bearing deposits | | | |||||
Total Core Bank deposits | | | |||||
Republic Processing Group: | |||||||
Wholesale brokered deposits (1) | | | |||||
Interest-bearing prepaid card deposits | | | |||||
Money market | | | |||||
Total RPG interest-bearing deposits | | | |||||
Noninterest-bearing prepaid card deposits | | | |||||
Other noninterest-bearing deposits | | | |||||
Total RPG noninterest-bearing deposits | | | |||||
Total RPG deposits | | | |||||
Total deposits | $ | | $ | |
(1) | Represents time deposits. |
33
6. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER SHORT-TERM BORROWINGS
SSUAR consist of short-term excess funds from correspondent banks, repurchase agreements, and overnight liabilities to deposit clients arising from the Bank’s treasury management program. While comparable to deposits in their transactional nature, these overnight liabilities to clients are in the form of repurchase agreements. Repurchase agreements collateralized by securities are treated as financings; accordingly, the securities involved with the agreements are recorded as assets and are held by a safekeeping agent and the obligations to repurchase the securities are reflected as liabilities. Should the fair value of currently pledged securities fall below the associated repurchase agreements, the Bank would be required to pledge additional securities. To mitigate the risk of under collateralization, the Bank typically pledges at least
As of June 30, 2025 and December 31, 2024, all SSUAR had overnight maturities. Additional information regarding SSUAR and other short-term borrowings follows:
(dollars in thousands) |
| June 30, 2025 |
|
| December 31, 2024 |
| |||
Outstanding balance at end of period | $ | | $ | | |||||
Weighted average interest rate at end of period |
| | % |
| | % | |||
Fair value of securities pledged: | |||||||||
U.S. Treasury securities and U.S. Government agencies | $ | | $ | | |||||
Total securities pledged | $ | | $ | |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(dollars in thousands) | 2025 |
| 2024 |
|
| 2025 |
|
| 2024 | |||||||
Average outstanding balance during the period | $ | |
| $ | | $ | |
| $ | | ||||||
Weighted average interest rate during the period | % | | % | % | | % | ||||||||||
Maximum outstanding at any month end during the period | $ | |
| $ | | $ | |
| $ | |
34
7. FEDERAL HOME LOAN BANK ADVANCES
FHLB advances were as follows:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 | ||
Overnight advances | $ | — | $ | | ||
Fixed interest rate advances |
| |
| | ||
Total FHLB advances | $ | | $ | |
Each FHLB advance is payable at its maturity date, with a prepayment penalty for fixed rate advances that are paid off earlier than maturity.
FHLB advances are collateralized by a blanket pledge of eligible real estate loans. As of June 30, 2025, and December 31, 2024, Republic had available borrowing capacity of $
Aggregate future principal payments on FHLB advances based on contractual maturity and the weighted average cost of such advances are detailed below:
|
|
| Weighted |
| ||
Average |
| |||||
Year (dollars in thousands) | Principal | Rate |
| |||
2026 |
| $ | |
| | % |
2027 |
| |
| | ||
2028 |
| |
| | ||
Total | $ | |
| | % |
As more fully disclosed in Footnote 11 “Interest Rate Swaps” in this section of the filing, the Bank elected to extend $
Due to their nature, the Bank considers average balance information more meaningful than period-end balances for its overnight borrowings from the FHLB. Information regarding overnight FHLB advances follows:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(dollars in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||||
Average outstanding balance during the period |
| $ | — |
| $ | |
| $ | |
| $ | | ||||
Weighted average interest rate during the period | — | % | | % | | % | | % | ||||||||
Maximum outstanding at any month end during the period |
| $ | — |
| $ | — |
| $ | |
| $ | |
The following table illustrates real estate loans pledged to collateralize advances and letters of credit with the FHLB:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 |
| ||
First-lien, single family residential real estate | $ | | $ | | |||
Home equity lines of credit |
| |
| | |||
Multi-family commercial real estate |
| |
| | |||
Commercial real estate | | |
35
8. OFF BALANCE SHEET RISKS, COMMITMENTS AND CONTINGENT LIABILITIES
Commitments to Extend Credit
The Company, in the normal course of business, is party to financial instruments with off balance sheet risk. These financial instruments primarily include commitments to extend credit and standby letters of credit. The contract or notional amounts of these instruments reflect the potential future obligations of the Company pursuant to those financial instruments. Creditworthiness for all instruments is evaluated on a case-by-case basis in accordance with the Company’s credit policies. Collateral from the client may be required based on the Company’s credit evaluation of the client and may include business assets of commercial clients, as well as personal property and real estate of individual clients or guarantors.
The Company also extends binding commitments to clients and prospective clients. Such commitments assure a borrower of financing for a specified period of time at a specified rate. The risk to the Company under such loan commitments is limited by the terms of the contracts. For example, the Company may not be obligated to advance funds if the client’s financial condition deteriorates or if the client fails to meet specific covenants.
An approved but unfunded loan commitment represents a potential credit risk and a liquidity risk, since the Company’s client(s) may demand immediate cash that would require funding. In addition, unfunded loan commitments represent interest rate risk as market interest rates may rise above the rate committed to the Company’s client. Since a portion of these loan commitments normally expire unused, the total amount of outstanding commitments at any point in time may not require future funding.
The following table presents the Company’s commitments, exclusive of mortgage banking loan commitments, for each period ended:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 | |||
Unused warehouse lines of credit | $ | | $ | | |||
Unused home equity lines of credit |
| |
| | |||
Unused loan commitments - other |
| |
| | |||
Standby letters of credit |
| |
| | |||
Total commitments | $ | | $ | |
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a client to a third-party. The terms and risk of loss involved in issuing standby letters of credit are similar to those involved in issuing loan commitments and extending credit. In addition to credit risk, the Company also has liquidity risk associated with standby letters of credit because funding for these obligations could be required immediately. The Company does not deem this risk to be material.
36
The following tables present a roll-forward of the ACLC for the three and six months ended June 30, 2025 and 2024:
ACLC Roll-forward | |||||||||||||||||||||||||||||||
Three Months Ended June 30, | |||||||||||||||||||||||||||||||
2025 | 2024 | ||||||||||||||||||||||||||||||
Beginning | Charge- | Ending | Beginning | Charge- | Ending | ||||||||||||||||||||||||||
(in thousands) | Balance | Provision | offs | Recoveries | Balance | Balance | Provision | offs | Recoveries | Balance | |||||||||||||||||||||
Loan Commitments | |||||||||||||||||||||||||||||||
Unused warehouse lines of credit | $ | | $ | ( | $ | — | $ | — | $ | | $ | | $ | ( | $ | — | $ | — | $ | | |||||||||||
Unused home equity lines of credit | | ( | — | — | | | | — | — | | |||||||||||||||||||||
Unused construction lines of credit | | ( | — | — | | | ( | — | — | | |||||||||||||||||||||
Unused RCS lines of credit | | | — | — | | — | — | — | — | — | |||||||||||||||||||||
Unused loan commitments - other | | | — | — | | | ( | — | — | | |||||||||||||||||||||
Total | $ | | $ | ( | $ | — | $ | — | $ | | $ | | $ | ( | $ | — | $ | — | $ | | |||||||||||
ACLC Roll-forward | |||||||||||||||||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2025 | 2024 | ||||||||||||||||||||||||||||||
Beginning | Charge- | Ending | Beginning | Charge- | Ending | ||||||||||||||||||||||||||
(in thousands) | Balance | Provision | offs | Recoveries | Balance | Balance | Provision | offs | Recoveries | Balance | |||||||||||||||||||||
Loan Commitments | |||||||||||||||||||||||||||||||
Unused warehouse lines of credit | $ | | $ | | $ | — | $ | — | $ | | $ | | $ | ( | $ | — | $ | — | $ | | |||||||||||
Unused home equity lines of credit | | | — | — | | | | — | — | | |||||||||||||||||||||
Unused construction lines of credit | | | — | — | | | ( | — | — | | |||||||||||||||||||||
Unused RCS lines of credit | | ( | — | — | | — | — | — | — | — | |||||||||||||||||||||
Unused loan commitments - other | | | — | — | | | ( | — | — | | |||||||||||||||||||||
Total | $ | | $ | | $ | — | $ | — | $ | | $ | | $ | ( | $ | — | $ | — | $ | | |||||||||||
37
9. FAIR VALUE
Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Authoritative guidance requires maximization of use of observable inputs and minimization of use of unobservable inputs in fair value measurements. Where there exists limited or no observable market data, the Company derives its own estimates by generally considering characteristics of the asset/liability, the current economic and competitive environment and other factors. For this reason, results cannot be determined with precision and may not be realized on an actual sale or immediate settlement of the asset or liability.
The Bank used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:
Available-for-sale debt securities: Except for the Bank’s U.S. Treasury securities, its private label MBS, and its TRUP investment, the fair value of AFS debt securities is typically determined by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
The Bank’s U.S. Treasury securities are based on quoted market prices (Level 1 inputs) and considered highly liquid.
The Bank’s private label MBS remains illiquid, and as such, the Bank classifies this security as a Level 3 security in accordance with ASC Topic 820, Fair Value Measurement. Based on this determination, the Bank utilized an income valuation model (present value model) approach in determining the fair value of this security.
See Footnote 2 “Investment Securities” for additional discussion regarding the Bank’s private label MBS.
The Company acquired its TRUP investment in 2015 and considers the most recent bid price for the same instrument to approximate market value as of June 30, 2025. The Company’s TRUP investment is considered highly illiquid and also valued using Level 3 inputs, as the most recent bid price for this instrument is not always considered generally observable.
Equity securities with readily determinable fair value: The fair value of the Company’s Freddie Mac preferred stock is determined based on market prices of similar securities, as described above (Level 2 inputs).
Mortgage loans held for sale, at fair value: The fair value of mortgage loans HFS is determined using quoted secondary market prices. Mortgage loans HFS are classified as Level 2 in the fair value hierarchy.
Consumer loans held for sale, at fair value: The fair value for these loans is based on contractual sales terms, Level 3 inputs.
Consumer loans held for investment, at fair value: The Bank held an immaterial amount of consumer loans at fair value through a consumer loan program the Company is currently unwinding. The fair value of these loans was based on the discounted cash flows of the underlying loans, Level 3 inputs. Further disclosure of these loans is considered immaterial and thus omitted.
38
Mortgage banking derivatives: Mortgage banking derivatives used in the ordinary course of business primarily consist of mandatory forward sales contracts (“forward contracts”) and interest rate lock loan commitments. The fair value of the Bank’s derivative instruments is primarily measured by obtaining pricing from broker-dealers recognized to be market participants. The pricing is derived from market observable inputs that can generally be verified and do not typically involve significant judgment by the Bank. Forward contracts and rate lock loan commitments are classified as Level 2 in the fair value hierarchy.
Interest rate swap agreements: Interest rate swaps are recorded at fair value on a recurring basis. The Company values its interest rate swaps using a third-party valuation service and classifies such valuations as Level 2. Valuations of these interest rate swaps are also received from the relevant dealer counterparty and validated against the Company’s calculations. The Company has considered counterparty credit risk in the valuation of its interest rate swap assets and has considered its own credit risk in the valuation of its interest rate swap liabilities.
Discussion of assets measured at fair value on a non-recurring basis follows:
Collateral-dependent loans: Collateral-dependent loans generally reflect partial charge-downs to their respective fair value, which is commonly based on recent real estate appraisals or BPOs. These appraisals or BPOs may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the process by the independent experts to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Collateral-dependent loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
Other real estate owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals or BPOs. These appraisals or BPOs may utilize a single approach or a combination of approaches, including comparable sales and the income approach. Adjustments are routinely made in the process by the independent experts to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.
Appraisals for collateral-dependent loans, impaired premises and OREO are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Bank. Once the appraisal is received, a member of the Bank’s CCAD reviews the assumptions and approaches utilized in the appraisal, as well as the overall resulting fair value in comparison with independent data sources, such as recent market data or industry-wide statistics. On at least an annual basis, the Bank performs a back test of collateral appraisals by comparing actual selling prices on recent collateral sales to the most recent appraisal of such collateral. Back tests are performed for each collateral class, e.g., residential real estate or CRE, and may lead to additional adjustments to the value of unliquidated collateral of similar class.
Mortgage servicing rights: At least quarterly, MSRs are evaluated for impairment based upon the fair value of the MSRs as compared to carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded, and the respective individual tranche is carried at fair value. If the carrying amount of an individual tranche does not exceed fair value, impairment is reversed if previously recognized and the carrying value of the individual tranche is based on the amortization method. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and can generally be validated against available market data (Level 2).
39
Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Bank has elected the fair value option, are summarized below.
Fair Value Measurements at | ||||||||||||
June 30, 2025 Using: | ||||||||||||
| Quoted Prices in |
| Significant |
|
|
|
| |||||
Active Markets | Other | Significant | ||||||||||
for Identical | Observable | Unobservable | Total | |||||||||
Assets | Inputs | Inputs | Fair | |||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | Value | ||||||||
Financial assets: | ||||||||||||
Available-for-sale debt securities: | ||||||||||||
U.S. Treasury securities and U.S. Government agencies | $ | | $ | | $ | — | $ | | ||||
Private label mortgage-backed security |
| — |
| — |
| |
| | ||||
Mortgage-backed securities - residential |
| — |
| |
| — |
| | ||||
Collateralized mortgage obligations |
| — |
| |
| — |
| | ||||
Corporate bonds | — | | — | | ||||||||
Trust preferred security |
| — |
| — |
| |
| | ||||
Total available-for-sale debt securities | $ | | $ | | $ | | $ | | ||||
Equity securities with readily determinable fair value: | ||||||||||||
Freddie Mac preferred stock | $ | — | $ | | $ | — | $ | | ||||
Total equity securities with readily determinable fair value | $ | — | $ | | $ | — | $ | | ||||
Mortgage loans held for sale | $ | — | $ | | $ | — | $ | | ||||
Consumer loans held for sale | — | — | | | ||||||||
Rate lock commitments |
| — |
| |
| — |
| | ||||
Interest rate swap agreements - Bank clients and institutional swap dealer | — | | — | | ||||||||
Financial liabilities: | ||||||||||||
Mandatory forward contracts | $ | — | $ | | $ | — | $ | | ||||
Interest rate swap agreements - Bank clients and institutional swap dealer | — | | — | | ||||||||
Interest rate swap agreements on FHLB advances | — | | — | |
Fair Value Measurements at | ||||||||||||
December 31, 2024 Using: | ||||||||||||
| Quoted Prices in |
| Significant |
|
|
|
| |||||
Active Markets | Other | Significant | ||||||||||
for Identical | Observable | Unobservable | Total | |||||||||
Assets | Inputs | Inputs | Fair | |||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | Value | ||||||||
Financial assets: | ||||||||||||
Available-for-sale debt securities: | ||||||||||||
U.S. Treasury securities and U.S. Government agencies | $ | | $ | | $ | — | $ | | ||||
Private label mortgage-backed security |
| — |
| — |
| |
| | ||||
Mortgage-backed securities - residential |
| — |
| |
| — |
| | ||||
Collateralized mortgage obligations |
| — |
| |
| — |
| | ||||
Corporate bonds | — | | — | | ||||||||
Trust preferred security |
| — |
| — |
| |
| | ||||
Total available-for-sale debt securities | $ | | $ | | $ | | $ | | ||||
Equity securities with readily determinable fair value: | ||||||||||||
Freddie Mac preferred stock | $ | — | $ | | $ | — | $ | | ||||
Total equity securities with readily determinable fair value | $ | — | $ | | $ | — | $ | | ||||
Mortgage loans held for sale | $ | — | $ | | $ | — | $ | | ||||
Consumer loans held for sale | — | — | | | ||||||||
Rate lock commitments |
| — |
| |
| — |
| | ||||
Mandatory forward contracts | — | | — | | ||||||||
Interest rate swap agreements - Bank clients and institutional swap dealer | — | | — | | ||||||||
Financial liabilities: | ||||||||||||
Interest rate swap agreements - Bank clients and institutional swap dealer | $ | — | $ | | $ | — | $ | | ||||
Interest rate swap agreements on FHLB advances | — | | — |
| |
All transfers between levels are generally recognized at the end of each quarter. There were
40
Private Label Mortgage-Backed Security
The following table presents a reconciliation of the Bank’s private label MBS measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
Three Months Ended |
| Six Months Ended | |||||||||
June 30, | June 30, | ||||||||||
(dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||
Balance, beginning of period | $ | | $ | | $ | | $ | | |||
Total gains or losses included in earnings: | |||||||||||
Net change in unrealized gain (loss) |
| — |
| ( |
| |
| | |||
Principal paydowns |
| ( |
| ( |
| ( |
| ( | |||
Balance, end of period | $ | | $ | | $ | | $ | |
The fair value of the Bank’s single private label MBS is supported by analysis prepared by an independent third-party. The third-party’s approach to determining fair value involved several steps: 1) detailed collateral analysis of the underlying mortgages, including consideration of geographic location, original loan-to-value, and the weighted average FICO score of the borrowers; 2) collateral performance projections for each pool of mortgages underlying the security (probability of default, severity of default, and prepayment probabilities) and 3) discounted cash flow modeling.
The significant unobservable inputs in the fair value measurement of the Bank’s single private label MBS are prepayment rates, probability of default, and loss severity in the event of default. Significant fluctuations in any of those inputs in isolation would result in a significantly different fair value measurement.
Quantitative information about recurring Level 3 fair value measurement inputs for the Bank’s single private label MBS follows:
|
|
|
|
|
| |||||
June 30, 2025 (dollars in thousands) | Fair Value | Valuation Technique | Unobservable Inputs | Range (1) |
| |||||
Private label mortgage-backed security | $ | |
|
| (1) Constant prepayment rate |
| ||||
| (2) Probability of default |
| ||||||||
| (3) Loss severity |
|
(1) The bank owns one private label mortgage-back security; therefore, the range presented is equivalent to the weighted average range.
| Fair |
| Valuation |
|
|
|
| |||
December 31, 2024 (dollars in thousands) | Value | Technique | Unobservable Inputs | Range (1) |
| |||||
Private label mortgage-backed security | $ | |
|
| (1) Constant prepayment rate |
| ||||
| (2) Probability of default |
| ||||||||
| (3) Loss severity |
|
(1) The bank owns one private label mortgage-back security; therefore, the range presented is equivalent to the weighted average range.
41
Trust Preferred Security
The following table presents a reconciliation of the Company’s TRUP measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
| Three Months Ended |
| Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||||
(dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||
Balance, beginning of period | $ | | $ | | $ | | $ | | |||||
Total gains or losses included in earnings: | |||||||||||||
Discount accretion | | | | | |||||||||
Net change in unrealized gain (loss) |
| ( |
| |
| |
| ( | |||||
Balance, end of period | $ | | $ | | $ | | $ | |
The fair value of the Company’s TRUP investment is based on the most recent bid price for this instrument, as provided by a third-party broker.
Mortgage Loans Held for Sale
The Bank has elected the fair value option for mortgage loans HFS. These loans are intended for sale and the Bank believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loans and in accordance with Bank policy for such instruments.
The aggregate fair value, contractual balance, and unrealized gain were as follows:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 |
| ||
Aggregate fair value | $ | | $ | | |||
Contractual balance |
| |
| | |||
Unrealized gain |
| |
| |
The total amount of net gains from changes in fair value included in earnings for mortgage loans HFS, at fair value, are presented in the following table:
| Three Months Ended | Six Months Ended |
| |||||||||||
June 30, | June 30, | |||||||||||||
(dollars in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | |||||||
Interest income | $ | | $ | | $ | | $ | | ||||||
Change in fair value |
| |
| ( |
| ( |
| | ||||||
Total included in earnings | $ | | $ | | $ | | $ | |
Consumer Loans Held for Sale
RCS carries loans originated through its installment loan program at fair value. Interest income is recorded based on the contractual terms of the loan and in accordance with Bank policy for such instruments.
The significant unobservable inputs in the fair value measurement of the Bank’s short-term installment loans are the net contractual premiums and level of loans sold at a discount price. Significant fluctuations in any of those inputs in isolation would result in a significantly lower/higher fair value measurement.
42
The following table presents quantitative information about recurring Level 3 fair value measurement inputs for installment loans:
| Fair |
| Valuation |
|
|
| |||
June 30, 2025 (dollars in thousands) | Value | Technique | Unobservable Inputs | Rate | |||||
Consumer loans held for sale | $ | |
| Contract Terms |
| (1) Net Premium |
| | |
| (2) Discounted Sales |
| |
| Fair |
| Valuation |
|
|
| |||
December 31, 2024 (dollars in thousands) | Value | Technique | Unobservable Inputs | Rate | |||||
Consumer loans held for sale | $ | |
| Contract Terms |
| (1) Net Premium |
| | |
| (2) Discounted Sales |
| |
The aggregate fair value, contractual balance, and unrealized gain on consumer loans HFS, at fair value, were as follows:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 | |||
Aggregate fair value | $ | | $ | | |||
Contractual balance |
| |
| | |||
Unrealized loss |
| ( |
| ( |
The total amount of net gains from changes in fair value included in earnings for consumer loans HFS, at fair value, are presented in the following table:
| Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | |||||||||||||
(dollars in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | |||||||
Interest income | $ | | $ | | $ | | $ | | ||||||
Change in fair value |
| ( |
| ( |
| ( |
| ( | ||||||
Total included in earnings | $ | | $ | | $ | | $ | |
Assets measured at fair value on a non-recurring basis are summarized below:
Fair Value Measurements at | ||||||||||||
June 30, 2025 Using: | ||||||||||||
| Quoted Prices in |
| Significant |
|
|
| ||||||
Active Markets | Other | Significant | ||||||||||
for Identical | Observable | Unobservable | Total | |||||||||
Assets | Inputs | Inputs | Fair | |||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | Value | ||||||||
Collateral-dependent loans: | ||||||||||||
Commercial real estate: |
| |||||||||||
Owner-occupied | $ | — | $ | — | $ | | $ | | ||||
Total collateral-dependent loans | $ | — | $ | — | $ | | $ | | ||||
Other real estate owned: | ||||||||||||
Commercial real estate: | ||||||||||||
Nonowner-occupied | $ | — | $ | — | $ | | $ | | ||||
Total other real estate owned | $ | — | $ | — | $ | | $ | |
43
Fair Value Measurements at | ||||||||||||
December 31, 2024 Using: | ||||||||||||
| Quoted Prices in |
| Significant |
|
|
| ||||||
Active Markets | Other | Significant | ||||||||||
for Identical | Observable | Unobservable | Total | |||||||||
Assets | Inputs | Inputs | Fair | |||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | Value | ||||||||
Collateral-dependent loans: | ||||||||||||
Residential real estate: | ||||||||||||
Owner-occupied | $ | — | $ | — | $ | | $ | | ||||
Total collateral-dependent loans | $ | — | $ | — | $ | | $ | | ||||
Other real estate owned: | ||||||||||||
Commercial real estate | ||||||||||||
Nonowner-occupied | $ | — | $ | — | $ | | $ | | ||||
Total other real estate owned | $ | — | $ | — | $ | | $ | |
The following tables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis:
|
|
|
|
|
|
| Range | ||
Fair | Valuation | Unobservable | (Weighted | ||||||
June 30, 2025 (dollars in thousands) | Value | Technique | Inputs | Average) | |||||
Collateral-dependent loans - commercial real estate owner-occupied | $ | |
| Appraisal |
| Appraisal discounts |
| ||
Other real estate owned - commercial real estate nonowner-occupied | $ | |
| Appraisal |
| Appraisal discounts |
|
|
|
|
|
|
|
| Range | ||
Fair | Valuation | Unobservable | (Weighted | ||||||
December 31, 2024 (dollars in thousands) | Value | Technique | Inputs | Average) | |||||
Collateral-dependent loans - residential real estate owner-occupied | $ | |
| Appraisal |
| Appraisal discounts |
| ||
Other real estate owned - commercial real estate | $ | |
| Appraisal |
| Appraisal discounts |
|
Collateral-Dependent Loans
Collateral-dependent loans are generally measured for loss using the fair value for reasonable disposition of the underlying collateral. The Bank’s practice is to obtain new or updated appraisals or BPOs on the loans subject to the initial review and then to evaluate the need for an update to this value on an as necessary or possibly annual basis thereafter (depending on the market conditions impacting the value of the collateral). The Bank may discount the valuation amount as necessary for selling costs and past due real estate taxes. If a new or updated appraisal or BPO is not available at the time of a loan’s loss review, the Bank may apply a discount to the existing value of an old valuation to reflect the property’s current estimated value if it is believed to have deteriorated in either: (i) the physical or economic aspects of the subject property or (ii) material changes in market conditions. The review generally results in a partial charge-off of the loan if fair value, less selling costs, are below the loan’s carrying value. Collateral-dependent loans are valued within Level 3 of the fair value hierarchy.
During the three and six months ended June 30, 2025, and 2024, the Provision on collateral-dependent loans was not material.
Other Real Estate Owned
Details of OREO carrying value and write downs follows:
| |||||||
(in thousands) | June 30, 2025 |
| December 31, 2024 |
| |||
Other real estate owned carried at fair value | $ | | $ | | |||
Total carrying value of other real estate owned | $ | | $ | |
44
| Three Months Ended | Six Months Ended |
| ||||||||||
June 30, | June 30, | ||||||||||||
(in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||
Other real estate owned write-downs during the period | $ | | $ | | $ | | $ | |
The carrying amounts and estimated exit price fair values of all financial instruments follow:
Fair Value Measurements at | |||||||||||||||
June 30, 2025: | |||||||||||||||
|
|
|
|
|
|
|
| Total | |||||||
Carrying | Fair | ||||||||||||||
(in thousands) | Value | Level 1 | Level 2 | Level 3 | Value | ||||||||||
Assets: | |||||||||||||||
Cash and cash equivalents | $ | | $ | | $ | — | $ | — | $ | | |||||
Available-for-sale debt securities |
| |
| |
| |
| |
| | |||||
Held-to-maturity debt securities |
| |
| — |
| |
| — |
| | |||||
Equity securities with readily determinable fair values | | — | | — | | ||||||||||
Mortgage loans held for sale, at fair value |
| |
| — |
| |
| — |
| | |||||
Consumer loans held for sale, at fair value | | — | — | | | ||||||||||
Consumer loans held for sale, at the lower of cost or fair value | | — | — | | | ||||||||||
Loans, net |
| |
| — |
| — |
| |
| | |||||
Federal Home Loan Bank stock |
| |
| — |
| — |
| — |
| NA | |||||
Accrued interest receivable |
| |
| — |
| |
| — |
| | |||||
Mortgage servicing rights | | — | | — | | ||||||||||
Rate lock commitments | | — | | — | | ||||||||||
Interest rate swap agreements - Bank clients and institutional swap dealer | | — | | — | | ||||||||||
Liabilities: | |||||||||||||||
Noninterest-bearing deposits | $ | | $ | — | $ | | $ | — | $ | | |||||
Transaction deposits |
| |
| — |
| |
| — |
| | |||||
Time deposits |
| |
| — |
| |
| — |
| | |||||
Securities sold under agreements to repurchase and other short-term borrowings |
| |
| — |
| |
| — |
| | |||||
Federal Home Loan Bank advances |
| |
| — |
| |
| — |
| | |||||
Accrued interest payable |
| |
| — |
| |
| — |
| | |||||
Mandatory forward contracts | | — | | — | | ||||||||||
Interest rate swap agreements - Bank clients and institutional swap dealer | | — | | — | | ||||||||||
Interest rate swap agreements on FHLB advances | | — | | — | |
Fair Value Measurements at | |||||||||||||||
December 31, 2024: | |||||||||||||||
|
|
|
|
|
|
|
|
| Total | ||||||
Carrying | Fair | ||||||||||||||
(in thousands) | Value | Level 1 | Level 2 | Level 3 | Value | ||||||||||
Assets: | |||||||||||||||
Cash and cash equivalents | $ | | $ | | $ | — | $ | — | $ | | |||||
Available-for-sale debt securities |
| |
| |
| |
| |
| | |||||
Held-to-maturity debt securities |
| |
| — |
| |
| — |
| | |||||
Equity securities with readily determinable fair values | | — | | — | | ||||||||||
Mortgage loans held for sale, at fair value |
| |
| — |
| |
| — |
| | |||||
Consumer loans held for sale, at fair value | | — | — | | | ||||||||||
Consumer loans held for sale, at the lower of cost or fair value | | — | — | | | ||||||||||
Loans, net |
| |
| — |
| — |
| |
| | |||||
Federal Home Loan Bank stock |
| |
| — |
| — |
| — |
| NA | |||||
Accrued interest receivable |
| |
| — |
| |
| — |
| | |||||
Mortgage servicing rights | | — | | — | | ||||||||||
Rate lock commitments | | — | | — | | ||||||||||
Mandatory forward contracts | | — | | — | | ||||||||||
Interest rate swap agreements - Bank clients and institutional swap dealer | | — | | — | | ||||||||||
Liabilities: | |||||||||||||||
Noninterest-bearing deposits | $ | | $ | — | $ | | $ | — | $ | | |||||
Transaction deposits |
| |
| — |
| |
| — |
| | |||||
Time deposits |
| |
| — |
| |
| — |
| | |||||
Deposits of discontinued operations | — | — | — | — | — | ||||||||||
Securities sold under agreements to repurchase and other short-term borrowings |
| |
| — |
| |
| — |
| | |||||
Federal Home Loan Bank advances |
| |
| — |
| |
| — |
| | |||||
Accrued interest payable |
| |
| — |
| |
| — |
| | |||||
Interest rate swap agreements - Bank clients and institutional swap dealer | | — | | — | | ||||||||||
Interest rate swap agreements on FHLB advances | | — | | — | |
45
10. MORTGAGE BANKING ACTIVITIES
Mortgage banking activities primarily include residential mortgage originations and servicing.
Activity for mortgage loans HFS, at fair value, was as follows:
| Three Months Ended | Six Months Ended |
| ||||||||||
June 30, | June 30, | ||||||||||||
(in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||
Balance, beginning of period | $ | | $ | | $ | | $ | | |||||
Origination of mortgage loans held for sale |
| |
| |
| |
| | |||||
Transferred from held for investment to held for sale | — | ( | — | | |||||||||
Proceeds from the sale of mortgage loans held for sale |
| ( |
| ( |
| ( |
| ( | |||||
Net gain on mortgage loans held for sale |
| |
| |
| |
| | |||||
Balance, end of period | $ | | $ | | $ | | $ | |
The following table presents the components of mortgage banking income:
| Three Months Ended |
| Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||||
(in thousands) | 2025 |
| 2024 | 2025 |
| 2024 | ||||||||
Net gain realized on sale of mortgage loans held for sale | $ | | $ | | $ | | $ | | ||||||
Fair value adjustment for correspondent loans reclassified to held for sale | — | — | — | ( | ||||||||||
Net change in fair value recognized on loans held for sale |
| |
| ( |
| ( |
| | ||||||
Net change in fair value recognized on rate lock loan commitments |
| |
| ( |
| |
| | ||||||
Net change in fair value recognized on forward contracts |
| ( |
| |
| ( |
| | ||||||
Net gain recognized |
| |
| |
| |
| | ||||||
Loan servicing income |
| |
| |
| |
| | ||||||
Amortization of mortgage servicing rights |
| ( |
| ( |
| ( |
| ( | ||||||
Net servicing income recognized |
| |
| |
| |
| | ||||||
Total mortgage banking income | $ | | $ | | $ | | $ | |
Activity for capitalized MSRs was as follows:
| Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | |||||||||||
(in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
Balance, beginning of period | $ | | $ | | $ | | $ | | ||||
Additions |
| |
| |
| |
| | ||||
Amortized to expense |
| ( |
| ( |
| ( |
| ( | ||||
Balance, end of period | $ | | $ | | $ | | $ | |
There was
46
Other information relating to MSRs follows:
(dollars in thousands) |
| June 30, 2025 |
|
| December 31, 2024 |
| |||
Fair value of mortgage servicing rights portfolio | $ | | $ | | |||||
Monthly weighted average prepayment rate of unpaid principal balance* |
| | % |
| | % | |||
Discount rate | | % | | % | |||||
Weighted average foreclosure rate | | % | | % | |||||
Weighted average life in years |
|
|
* | Rates are applied to individual tranches with similar characteristics. |
Mortgage banking derivatives used in the ordinary course of business primarily consist of mandatory forward sales contracts and interest rate lock loan commitments. Mandatory forward contracts represent future commitments to deliver loans at a specified price and date and are used to manage interest rate risk on loan commitments and mortgage loans HFS. Interest rate lock loan commitments represent commitments to fund loans at a specific rate. These derivatives involve underlying items, such as interest rates, and are designed to transfer risk. Substantially all of these instruments expire within
Mandatory forward contracts also contain an element of risk in that the counterparties may be unable to meet the terms of such agreements. In the event the counterparties fail to deliver commitments or are unable to fulfill their obligations, the Bank could potentially incur significant additional costs by replacing the positions at then current market rates. The Bank manages its risk of exposure by limiting counterparties to those banks and institutions deemed appropriate by management and the Board of Directors. The Bank does not expect any counterparty to default on their obligations and therefore, the Bank does not expect to incur any cost related to counterparty default.
The Bank is exposed to interest rate risk on loans HFS and rate lock loan commitments. As market interest rates fluctuate, the fair value of mortgage loans held HFS and rate lock commitments will decline or increase. To offset this interest rate risk the Bank enters into derivatives, such as mandatory forward contracts to sell loans or purchase TBA securities. The fair value of these mandatory forward contracts will fluctuate as market interest rates fluctuate, and the change in the value of these instruments is expected to largely, though not entirely, offset the change in fair value of loans HFS and rate lock commitments. The objective of this activity is to minimize the exposure to losses on rate loan lock commitments and loans HFS due to market interest rate fluctuations. The net effect of derivatives on earnings will depend on risk management activities and a variety of other factors, including market interest rate volatility; the amount of rate lock commitments that close; the ability to fill the forward contracts before expiration; and the time period required to close and sell loans.
The following table includes the notional amounts and fair values of mortgage loans HFS and mortgage banking derivatives as of the period ends presented:
June 30, 2025 |
| December 31, 2024 | |||||||||||
Notional | Notional | ||||||||||||
(in thousands) | Amount |
| Fair Value | Amount |
| Fair Value | |||||||
Included in Mortgage loans held for sale: | |||||||||||||
Mortgage loans held for sale, at fair value | $ | | $ | | $ | | $ | | |||||
Included in other assets: | |||||||||||||
Rate lock loan commitments | $ | | $ | | $ | | $ | | |||||
Mandatory forward contracts | — | — | | | |||||||||
Included in other liabilities: | |||||||||||||
Mandatory forward contracts | $ | | $ | | $ | — | $ | — |
47
11. INTEREST RATE SWAPS
Interest rate swap derivatives are reported at fair value in other assets or other liabilities. The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies for hedge accounting as part of a cash flow hedging relationship. For a derivative designated as a cash flow hedge, the effective portion of the derivative’s unrealized gain or loss is recorded as a component of OCI. The amount included in AOCI would be reclassified to current earnings should the hedge no longer be considered effective. Derivatives not designated as hedges are economic derivatives with the gain or loss recognized in current period earnings.
Interest Rate Swaps Used as Cash Flow Hedges
The Bank entered into
The following tables reflect information about swaps designated as cash flow hedges as of June 30, 2025 and December 31, 2024:
June 30, 2025 | December 31, 2024 | |||||||||||||
Notional | Notional | |||||||||||||
(in thousands) |
| Bank Position |
| Amount |
| Fair Value |
| Amount |
| Fair Value | ||||
Interest rate swaps on FHLB advances - Other liabilities and accrued interest payable |
| Pay fixed/receive variable |
| $ | |
| $ | ( |
| $ | |
| $ | ( |
Total |
| $ | | $ | ( | $ | | $ | ( |
June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||
Unrealized | Unrealized | |||||||||||||||||||||||
Notional | Pay | Receive | Assets / | Gain (Loss) | Assets / | Gain (Loss) | ||||||||||||||||||
(dollars in thousands) |
| Amount |
| Rate |
| Rate |
| Term | Bank Position |
| (Liabilities) |
| in AOCI |
| (Liabilities) |
| in AOCI | |||||||
Interest rate swaps on FHLB advances - Other liabilities and accrued interest payable |
| $ | |
| | % |
| 1M SOFR |
| 5/2024 - 6/2029 | Pay fixed/receive variable |
| $ | |
| $ | ( |
| $ | |
| $ | ( | |
Total |
| $ | | $ | | $ | ( | $ | | $ | ( |
The following table reflects the total interest expense recorded on these swap transactions in the consolidated statements of income for the three and six months ended June 30, 2025 and 2024:
| Three Months Ended | Six Months Ended |
| ||||||||||
June 30, | June 30, | ||||||||||||
(in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||
Interest rate swaps on FHLB advances | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Total interest (benefit) expense on swap transactions | $ | ( | $ | ( | $ | ( | $ | ( |
The following table presents the net gains (losses) recorded in OCI and the consolidated statements of income relating to the swaps designated as cash flow hedges for the three and six months ended June 30, 2025:
Three Months Ended | Six Months Ended | |||||||
June 30, | June 30, | |||||||
(in thousands) |
| 2025 |
| 2025 | ||||
Losses recognized in OCI on derivative (effective portion) |
| $ | ( |
| $ | ( | ||
Losses reclassified from OCI on derivative (effective portion) | ( |
| ( | |||||
Gains (losses) recognized in income on derivative (ineffective portion) | — |
| — |
48
Non-hedge Interest Rate Swaps
The Bank also 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.
Interest rate swap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty or client owes the Bank, and results in credit risk to the Bank. When the fair value of a derivative instrument contract is negative, the Bank owes the client or counterparty, and therefore, has no credit risk.
A summary of the Bank’s interest rate swaps related to clients is included in the following table:
| June 30, 2025 | December 31, 2024 | |||||||||||||
Notional | Notional | ||||||||||||||
(in thousands) |
| Bank Position | Amount |
| Fair Value |
| Amount |
| Fair Value | ||||||
Interest rate swaps with Bank clients - Other assets and accrued interest receivable |
| Pay variable/receive fixed |
| $ | | $ | |
| $ | | $ | | |||
Interest rate swaps with Bank clients - Other liabilities and accrued interest payable |
| Pay variable/receive fixed |
| |
| ( |
| |
| ( | |||||
Interest rate swaps with Bank clients - Total |
| Pay variable/receive fixed |
| $ | |
| $ | |
| $ | |
| $ | ( | |
Offsetting interest rate swaps with institutional swap dealer - Other assets and accrued interest receivable | Pay fixed/receive variable | | | | | ||||||||||
Offsetting interest rate swaps with institutional swap dealer - Other liabilities and accrued interest payable | Pay fixed/receive variable | | ( | | ( | ||||||||||
Offsetting interest rate swaps with institutional swap dealer - Total | Pay fixed/receive variable | $ | |
| $ | ( |
| $ | |
| $ | | |||
Total |
| $ | | $ | — |
| $ | | $ | — |
The Bank and its counterparties are required to pledge securities or cash as collateral when either party is in a net loss position exceeding $
49
12. EARNINGS PER SHARE
The Company calculates EPS under the two-class method. Under the two-class method, earnings available to common shareholders for the period are allocated between Class A Common Stock and Class B Common Stock according to dividends declared (or accumulated) and participation rights in undistributed earnings. The difference in EPS between the two classes of common stock results from the
A reconciliation of the combined Class A and Class B Common Stock numerators and denominators of the basic and diluted EPS computations is presented below:
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
(in thousands, except per share data) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Net income | $ | | $ | | $ | | $ | | |||
Dividends declared on Common Stock: | |||||||||||
Class A Shares | ( | ( | ( | ( | |||||||
Class B Shares | ( | ( | ( | ( | |||||||
Undistributed net income for basic earnings per share | | | | | |||||||
Weighted average potential dividends on Class A shares upon exercise of dilutive options | ( | ( | ( | ( | |||||||
Undistributed net income for diluted earnings per share | $ | | $ | | $ | | $ | | |||
Weighted average shares outstanding: | |||||||||||
Class A Shares |
| |
| |
| |
| | |||
Class B Shares | | | | | |||||||
Effect of dilutive securities on Class A Shares outstanding |
| |
| |
| |
| | |||
Weighted average shares outstanding including dilutive securities |
| |
| |
| |
| | |||
Basic earnings per share: | |||||||||||
Class A Common Stock: | |||||||||||
Per share dividends distributed | $ | | $ | | $ | | $ | | |||
Undistributed earnings per share* | | | | | |||||||
Total basic earnings per share - Class A Common Stock | $ | | $ | | $ | | $ | | |||
Class B Common Stock: | |||||||||||
Per share dividends distributed | $ | | $ | | $ | | $ | | |||
Undistributed earnings per share* | | | | | |||||||
Total basic earnings per share - Class B Common Stock | $ | | $ | | $ | | $ | | |||
Diluted earnings per share: | |||||||||||
Class A Common Stock: | |||||||||||
Per share dividends distributed | $ | | $ | | $ | | $ | | |||
Undistributed earnings per share* | | | | | |||||||
Total diluted earnings per share - Class A Common Stock | $ | | $ | | $ | | $ | | |||
Class B Common Stock: | |||||||||||
Per share dividends distributed | $ | | $ | | $ | | $ | | |||
Undistributed earnings per share* | | | | | |||||||
Total diluted earnings per share - Class B Common Stock | $ | | $ | | $ | | $ | |
* | To arrive at undistributed earnings per share, undistributed net income is first prorated between Class A and Class B Common Shares, with Class A Common Shares receiving a |
Stock options excluded from the detailed EPS calculation because their impact was antidilutive are as follows:
Three Months Ended | Six Months Ended | ||||||||
June 30, | June 30, | ||||||||
2025 |
| 2024 |
| 2025 |
| 2024 | |||
Antidilutive stock options | |
| |
| | | |||
Average antidilutive stock options | |
| |
| | |
50
13. OTHER COMPREHENSIVE INCOME
OCI components and related tax effects were as follows:
| Three Months Ended |
| Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||||
(in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||
Available-for-Sale Debt Securities: | |||||||||||||
Unrealized gain on AFS debt securities | $ | | $ | | $ | | $ | | |||||
Income tax expense related to items of other comprehensive income |
| ( |
| ( |
| ( |
| ( | |||||
Net of tax |
| |
| | $ | | $ | | |||||
Derivatives: | |||||||||||||
Change in fair value of derivatives |
| ( |
| ( |
| ( |
| ( | |||||
Reclassification amount for net derivative losses realized in income |
| ( |
| ( |
| ( |
| ( | |||||
Net losses |
| ( |
| ( |
| ( |
| ( | |||||
Tax effect |
| |
| |
| |
| | |||||
Net of tax |
| ( |
| ( |
| ( |
| ( | |||||
Total other comprehensive income components, net of tax | $ | | $ | | $ | | $ | |
The following is a summary of the AOCI balances, net of tax:
|
| Change |
| ||||||
(in thousands) | December 31, 2024 | Six Months Ended June 30, 2025 | June 30, 2025 | ||||||
Unrealized gain (loss) on AFS debt securities | $ | ( | $ | | $ | ( | |||
Unrealized loss on derivatives |
| ( |
| ( |
| ( | |||
Total unrealized gain (loss) | $ | ( | $ | | $ | ( |
|
| Change |
| ||||||
(in thousands) | December 31, 2023 | Six Months Ended June 30, 2024 | June 30, 2024 | ||||||
Unrealized gain (loss) on AFS debt securities | $ | ( | $ | | $ | ( | |||
Unrealized gain (loss) on derivatives | — | ( | ( | ||||||
Total unrealized gain (loss) | $ | ( | $ | | $ | ( |
51
14. REVENUE FROM CONTRACTS WITH CUSTOMERS
The following tables present the Company’s net revenue and net revenue concentration by reportable segment:
Three Months Ended June 30, 2025 |
| |||||||||||||||||||||||||||||
Core Banking | Republic Processing Group |
| ||||||||||||||||||||||||||||
Total | Tax | Republic | Republic | |||||||||||||||||||||||||||
Traditional | Warehouse | Core | Refund | Payment | Credit | Total | Total |
| ||||||||||||||||||||||
(dollars in thousands) | Banking | Lending | Banking | Solutions | Solutions | Solutions | RPG | Company |
| |||||||||||||||||||||
Net interest income (1) | $ | | $ | |
| $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||
Noninterest income: | ||||||||||||||||||||||||||||||
Service charges on deposit accounts | | | | — | — | — | — | | ||||||||||||||||||||||
Net refund transfer fees |
| — |
| — |
| — |
| |
| — |
| — |
| |
| | ||||||||||||||
Mortgage banking income (1) |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||||||||||
Interchange fee income | | — | | | | — | | | ||||||||||||||||||||||
Program fees (1) | — | — | — | — | | | | | ||||||||||||||||||||||
Increase in cash surrender value of BOLI (1) | | — | | — | — | — | — | | ||||||||||||||||||||||
Net losses on OREO | ( | — | ( | — | — | — | — | ( | ||||||||||||||||||||||
Gain on sale of Visa Class B-1 Shares (1) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
Other |
| |
| — |
| |
| |
| — |
| — |
| |
| | ||||||||||||||
Total noninterest income |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Total net revenue | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Net-revenue concentration (2) | | % | | % | | % | | % | | % | | % | | % | | % | ||||||||||||||
Three Months Ended June 30, 2024 |
| |||||||||||||||||||||||||||||
Core Banking | Republic Processing Group |
| ||||||||||||||||||||||||||||
Total | Tax | Republic | Republic | |||||||||||||||||||||||||||
Traditional | Warehouse | Core | Refund | Payment | Credit | Total | Total |
| ||||||||||||||||||||||
(dollars in thousands) | Banking | Lending | Banking | Solutions | Solutions | Solutions | RPG | Company |
| |||||||||||||||||||||
Net interest income (1) | $ | | $ | |
| $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||
Noninterest income: | ||||||||||||||||||||||||||||||
Service charges on deposit accounts | | | | — | — | — | — | | ||||||||||||||||||||||
Net refund transfer fees |
| — |
| — |
| — |
| |
| — |
| — |
| |
| | ||||||||||||||
Mortgage banking income (1) |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||||||||||
Interchange fee income | | — | | | | | | | ||||||||||||||||||||||
Program fees (1) | — | — | — | — | | | | | ||||||||||||||||||||||
Increase in cash surrender value of BOLI (1) | | — | | — | — | — | — | | ||||||||||||||||||||||
Net losses on OREO | ( | — | ( | — | — | — | — | ( | ||||||||||||||||||||||
Other |
| |
| — |
| |
| |
| — |
| — |
| |
| | ||||||||||||||
Total noninterest income |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Total net revenue | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Net-revenue concentration (2) | | % | | % | | % | | % | | % | | % | | % | | % | ||||||||||||||
(1) | This revenue is not subject to ASC 606. |
(2) | Net revenue represents net interest income plus total noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue. |
52
Six Months Ended June 30, 2025 |
| |||||||||||||||||||||||||||||
Core Banking | Republic Processing Group |
| ||||||||||||||||||||||||||||
Total | Tax | Republic | Republic | |||||||||||||||||||||||||||
Traditional | Warehouse | Core | Refund | Payment | Credit | Total | Total |
| ||||||||||||||||||||||
(dollars in thousands) | Banking | Lending | Banking | Solutions | Solutions | Solutions | RPG | Company |
| |||||||||||||||||||||
Net interest income (1) | $ | | $ | |
| $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||
Noninterest income: | ||||||||||||||||||||||||||||||
Service charges on deposit accounts | | | | — | — | | | | ||||||||||||||||||||||
Net refund transfer fees |
| — |
| — |
| — |
| |
| — |
| — |
| |
| | ||||||||||||||
Mortgage banking income (1) |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||||||||||
Interchange fee income | | — | | | | — | | | ||||||||||||||||||||||
Program fees (1) | — | — | — | — | | | | | ||||||||||||||||||||||
Increase in cash surrender value of BOLI (1) | | — | | — | — | — | — | | ||||||||||||||||||||||
Net losses on OREO | ( | — | ( | — | — | — | — | ( | ||||||||||||||||||||||
Gain on sale of Visa Class B-1 Shares (1) | | — | | — | — | — | — | | ||||||||||||||||||||||
Other |
| |
| — |
| |
| |
| — |
| — |
| |
| | ||||||||||||||
Total noninterest income |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Total net revenue | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Net-revenue concentration (2) | | % | | % | | % | | % | | % | | % | | % | | % | ||||||||||||||
Six Months Ended June 30, 2024 |
| |||||||||||||||||||||||||||||
Core Banking | Republic Processing Group |
| ||||||||||||||||||||||||||||
Total | Tax | Republic | Republic | |||||||||||||||||||||||||||
Traditional | Warehouse | Core | Refund | Payment | Credit | Total | Total |
| ||||||||||||||||||||||
(dollars in thousands) | Banking | Lending | Banking | Solutions | Solutions | Solutions | RPG | Company |
| |||||||||||||||||||||
Net interest income (1) | $ | | $ | |
| $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||
Noninterest income: | ||||||||||||||||||||||||||||||
Service charges on deposit accounts | | | | — | — | | | | ||||||||||||||||||||||
Net refund transfer fees |
| — |
| — |
| — |
| |
| — |
| — |
| |
| | ||||||||||||||
Mortgage banking income (1) |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||||||||||
Interchange fee income | | — | | | | | | | ||||||||||||||||||||||
Program fees (1) | — | — | — | — | | | | | ||||||||||||||||||||||
Increase in cash surrender value of BOLI (1) | | — | | — | — | — | — | | ||||||||||||||||||||||
Net losses on OREO | ( | — | ( | — | — | — | — | ( | ||||||||||||||||||||||
Other |
| |
| — |
| |
| |
| — |
| — |
| |
| | ||||||||||||||
Total noninterest income |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Total net revenue | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Net-revenue concentration (2) | | % | | % | | % | | % | | % | | % | | % | | % | ||||||||||||||
(1) | This revenue is not subject to ASC 606. |
(2) | Net revenue represents net interest income plus total noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue. |
The following represents information for significant revenue streams subject to ASC 606:
Service charges on deposit accounts – The Company earns revenue for account-based and event-driven services on its retail and commercial deposit accounts. Contracts for these services are generally in the form of deposit agreements, which disclose fees for deposit services. Revenue for event-driven services is recognized in close proximity or simultaneously with service performance. Revenue for certain account-based services may be recognized at a point in time or over the period the service is rendered, typically no longer than a month. Examples of account-based and event-driven service charges on deposits include per item fees, paper-statement fees, check-cashing fees, and analysis fees.
Net refund transfer fees – An RT is a fee-based product offered by the Bank through third-party tax preparers located throughout the U.S., as well as tax-preparation software providers (collectively, the “Tax Providers”), with the Bank acting as an independent contractor of the Tax Providers. An RT allows a taxpayer to pay any applicable tax preparation and filing related fees directly from his federal or state government tax refund, with the remainder of the tax refund disbursed directly to the taxpayer. RT fees and all applicable tax preparation, transmitter, audit, and any other taxpayer authorized amounts are deducted from the tax refund by either the Bank or the Bank’s service provider and automatically forwarded to the appropriate party as authorized by the taxpayer. RT fees generally receive first priority when applying fees against the taxpayer’s refund, with the Bank’s share of RT fees generally superior to the claims of other
53
third-party service providers, including the Tax Providers. The remainder of the refund is disbursed to the taxpayer by a Bank check, direct deposit to the taxpayer’s personal bank account, or loaded to a prepaid card.
The Company executes contracts with individual Tax Providers to offer RTs to their taxpayer customers. RT revenue is recognized by the Bank immediately after the taxpayer’s refund is disbursed in accordance with the RT contract with the taxpayer customer. The fee paid by the taxpayer for the RT is shared between the Bank and the Tax Providers based on contracts executed between the parties.
The Company presents RT revenue net of any amounts shared with the Tax Providers. The Bank’s share of RT revenue is generally based on the obligations undertaken by the Tax Provider for each individual RT program, with more obligations generally corresponding to higher RT revenue share. The significant majority of net RT revenue is recognized and obligations under RT contracts fulfilled by the Bank during the first half of each year. Incremental expenses associated with the fulfilment of RT contracts are generally expensed during the first half of the year.
Interchange fee income – As an “issuing bank” for card transactions, the Company earns interchange fee income on transactions executed by its cardholders with various third-party merchants. Through third-party intermediaries, merchants compensate the Company for each transaction for the ability to efficiently settle the transaction, and for the Company’s willingness to accept certain risks inherent in the transaction. There is no written contract between the merchant and the Company, but a contract is implied between the two parties by customary business practices. Interchange fee income is recognized almost simultaneously by the Company upon the completion of a related card transaction.
The Company compensates its cardholders by way of cash or other “rewards” for generating card transactions. These rewards are disclosed in cardholder agreements between the Company and its cardholders. Reward costs are accrued over time based on card transactions generated by the cardholder. Interchange fee income is presented net of reward costs within noninterest income.
Net gains/(losses) on other real estate – The Company routinely sells OREO it has acquired through loan foreclosure. Net gains/(losses) on OREO reflect both 1) the gain or loss recognized upon an executed deed and 2) mark-to-market write-downs the Company takes on its OREO inventory.
The Company generally recognizes gains or losses on OREO at the time of an executed deed, although gains may be recognized over a financing period if the Company finances the sale. For financed OREO sales, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on sale, the Company adjusts the transaction price and related gain/(loss) on sale if a significant financing component is present.
Mark-to-market write-downs taken by the Company during the holding period are generally at least
54
15. SEGMENT INFORMATION
Reportable segments are determined by the type of products and services offered and the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business (such as banking centers and business units), which are then aggregated if operating performance, products/services, and clients are similar.
As of June 30, 2025, the Company was divided into
The Company’s Executive Chair and Chief Executive Officer serve as the Company’s CODM’s. Income (loss) before income tax expense is the reportable measure of segment profit or loss that the CODM’s regularly review and utilize to allocate resources and assess performance.
The nature of segment operations and the primary drivers of net revenue by reportable segment are provided below:
Reportable Segment: | Nature of Operations: | Primary Drivers of Net Revenue: | ||
Core Banking: | ||||
Traditional Banking | Provides traditional banking products to clients in its market footprint primarily via its network of banking centers and to clients outside of its market footprint primarily via its digital delivery channels. | Net interest income | ||
Warehouse Lending | Provides short-term, revolving credit facilities to mortgage bankers across the United States. | Net interest income | ||
Republic Processing Group: | ||||
Tax Refund Solutions | Offers tax-related credit products and facilitates the receipt and payment of federal and state tax refunds through Refund Transfer products. TRS products are primarily provided to clients outside of the Bank’s market footprint. | Net interest income and Net refund transfer fees | ||
Republic Payment Solutions | Offers general-purpose reloadable cards. RPS products are primarily provided to clients outside of the Bank’s market footprint. | Net interest income and Program fees | ||
Republic Credit Solutions | Offers consumer credit products. RCS products are primarily provided to clients outside of the Bank’s market footprint, with a substantial portion of RCS clients considered subprime or near-prime borrowers. | Net interest income and Program fees |
The accounting policies used for Republic’s reportable segments are the same as those described in the summary of significant accounting policies. Segment performance is evaluated using operating income before income taxes. Goodwill is allocated to the Traditional Banking segment. Income taxes are generally allocated based on income before income tax expense unless specific segment allocations can be reasonably made.
Transactions among reportable segments are made at carrying value. Net Interest income is reflected within each applicable business segment based on the underlying financial instruments assigned to each segment as well as the impact of the Company’s internal FTP applied to each instrument. FTP is allocated from the Traditional Bank to each segment based on the assumed terms of the underlying financial instruments within that segment in combination with applicable market interest rates matching the assumed terms of each instrument.
55
Segment information follows:
Three Months Ended June 30, 2025 |
| |||||||||||||||||||||||||||||
Core Banking | Republic Processing Group |
| ||||||||||||||||||||||||||||
Total | Tax | Republic | Republic | |||||||||||||||||||||||||||
Traditional | Warehouse | Core | Refund | Payment | Credit | Total | Total |
| ||||||||||||||||||||||
(dollars in thousands) | Banking | Lending | Banking | Solutions | Solutions | Solutions | RPG | Company |
| |||||||||||||||||||||
Net interest income | $ | | $ | |
| $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||
Provision for expected credit loss expense |
| |
| |
| |
| ( |
| — |
| |
| |
| | ||||||||||||||
Net refund transfer fees |
| — |
| — |
| — |
| |
| — |
| — |
| |
| | ||||||||||||||
Mortgage banking income |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||||||||||
Program fees | — | — | — | — | | | | | ||||||||||||||||||||||
Gain on sale of Visa Class B-1 shares | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
Other noninterest income (1) |
| |
| |
| |
| |
| |
| — |
| |
| | ||||||||||||||
Total noninterest income |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Salaries and employee benefits | | | | | | | | | ||||||||||||||||||||||
Technology, Equipment, and Communication | | | | | | | | | ||||||||||||||||||||||
Occupancy | | | | | | | | | ||||||||||||||||||||||
Marketing and development | | — | | | — | ( | | | ||||||||||||||||||||||
Core conversion and contract consulting fees | | — | | — | — | — | — | | ||||||||||||||||||||||
Other noninterest expense (2) | | | | | | | | | ||||||||||||||||||||||
Total noninterest expense |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Income (loss) before income tax expense |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Income tax expense (benefit) | | | | | | | | | ||||||||||||||||||||||
Net income (loss) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Period-end assets | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Period-end loans | $ | | $ | | | $ | | $ | — | $ | | $ | | $ | | |||||||||||||||
Period-end deposits | $ | | $ | | | $ | | $ | | $ | | $ | | $ | | |||||||||||||||
Net interest margin |
| | % |
| | % |
| | % |
| NM |
| | % |
| NM |
| NM |
| | % | |||||||||
Net-revenue concentration* | | % | | % | | % | | % | | % | | % | | % | | % | ||||||||||||||
Three Months Ended June 30, 2024 |
| |||||||||||||||||||||||||||||
Core Banking | Republic Processing Group |
| ||||||||||||||||||||||||||||
|
|
|
| Total |
|
| Tax | Republic | Republic |
|
|
| ||||||||||||||||||
Traditional | Warehouse | Core | Refund | Payment | Credit | Total | Total |
| ||||||||||||||||||||||
(dollars in thousands) | Banking | Lending | Banking | Solutions | Solutions | Solutions | RPG | Company |
| |||||||||||||||||||||
Net interest income | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Provision for expected credit loss expense |
| |
| |
| |
| ( |
| — |
| |
| |
| | ||||||||||||||
Net refund transfer fees |
| — |
| — |
| — |
| |
| — |
| — |
| |
| | ||||||||||||||
Mortgage banking income |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||||||||||
Program fees | — | — | — | — | | | | | ||||||||||||||||||||||
Other noninterest income (1) |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Total noninterest income |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Salaries and employee benefits | | | | | | | | | ||||||||||||||||||||||
Technology, Equipment, and Communication | | | | | — | | | | ||||||||||||||||||||||
Occupancy | | | | | | | | | ||||||||||||||||||||||
Marketing and development | | — | | ( | | | | | ||||||||||||||||||||||
Other noninterest expense (2) | | | | | | | | | ||||||||||||||||||||||
Total noninterest expense |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Income before income tax expense |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Income tax expense |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Net income | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Period-end assets | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Period-end loans | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | $ | | ||||||||||||||
Period-end deposits | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Net interest margin |
| | % |
| | % |
| | % |
| NM |
| | % |
| NM |
| NM |
| | % | |||||||||
Net-revenue concentration* | | % | | % | | % | | % | | % | | % | | % | | % | ||||||||||||||
* Net revenue represents net interest income plus total noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue.
(1) Other noninterest income includes Service charges on deposit accounts, Interchange fee income, Increase in cash surrender value of BOLI, Net losses on OREO and Other noninterest income.
(2) Other noninterest expense includes FDIC insurance expense, Interchange related expense, Legal and professional fees, and Other noninterest expense.
NM – Not Meaningful
56
Six Months Ended June 30, 2025 |
| |||||||||||||||||||||||||||||
Core Banking | Republic Processing Group |
| ||||||||||||||||||||||||||||
|
|
|
| Total |
|
| Tax | Republic | Republic |
|
|
| ||||||||||||||||||
Traditional | Warehouse | Core | Refund | Payment | Credit | Total | Total |
| ||||||||||||||||||||||
(dollars in thousands) | Banking | Lending | Banking | Solutions | Solutions | Solutions | RPG | Company |
| |||||||||||||||||||||
Net interest income | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Provision for expected credit loss expense |
| ( |
| |
| |
| |
| — |
| |
| |
| | ||||||||||||||
Net refund transfer fees |
| — |
| — |
| — |
| |
| — |
| — |
| |
| | ||||||||||||||
Mortgage banking income |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||||||||||
Program fees | — | — | — | — | | | | | ||||||||||||||||||||||
Gain on sale of Visa Class B-1 shares | | — | | — | — | — | — | | ||||||||||||||||||||||
Other noninterest income (1) |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Total noninterest income |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Salaries and employee benefits | | | | | | | | | ||||||||||||||||||||||
Technology, Equipment, and Communication | | | | | | | | | ||||||||||||||||||||||
Occupancy | | | | | | | | | ||||||||||||||||||||||
Marketing and development | | — | | | — | | | | ||||||||||||||||||||||
Core conversion and contract consulting fees | | — | | — | — | — | — | | ||||||||||||||||||||||
Other noninterest expense (2) | | | | | | | | | ||||||||||||||||||||||
Total noninterest expense |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Income (loss) before income tax expense |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||||||||
Income tax expense (benefit) | | | | | | | | | ||||||||||||||||||||||
Net income (loss) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Period-end assets | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Period-end loans | $ | | $ | | | $ | | $ | — | $ | | $ | | $ | | |||||||||||||||
Period-end deposits | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Net interest margin |
| | % |
| | % |
| | % |
| NM |
| | % |
| NM |
| NM |
| | % | |||||||||
Net-revenue concentration* | | % | | % | | % | | % | | % | | % | | % | | % | ||||||||||||||
Six Months Ended June 30, 2024 |
| |||||||||||||||||||||||||||||
Core Banking | Republic Processing Group |
| ||||||||||||||||||||||||||||
|
|
|
| Total |
|
| Tax | Republic | Republic |
|
|
| ||||||||||||||||||
Traditional | Warehouse | Core | Refund | Payment | Credit | Total | Total |
| ||||||||||||||||||||||
(dollars in thousands) | Banking | Lending | Banking | Solutions | Solutions | Solutions | RPG | Company |
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Net interest income | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Provision for expected credit loss expense |
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Net refund transfer fees |
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| — |
| — |
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| — |
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Mortgage banking income |
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| — |
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Program fees | — | — | — | — | | | | | ||||||||||||||||||||||
Other noninterest income (1) |
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Total noninterest income |
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Salaries and employee benefits | | | | | | | | | ||||||||||||||||||||||
Technology, Equipment, and Communication | | | | | | | | | ||||||||||||||||||||||
Occupancy | | | | | | | | | ||||||||||||||||||||||
Marketing and development | | — | | | | | | | ||||||||||||||||||||||
Other noninterest expense (2) | | | | | | | | | ||||||||||||||||||||||
Total noninterest expense |
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Income before income tax expense |
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Income tax expense |
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Net income | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Period-end assets | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Period-end loans | $ | | $ | | $ | | $ | | $ | — | $ | | $ | | $ | | ||||||||||||||
Period-end deposits | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Net interest margin |
| | % |
| | % |
| | % |
| NM |
| | % |
| NM |
| NM |
| | % | |||||||||
Net-revenue concentration* | | % | | % | | % | | % | | % | | % | | % | | % | ||||||||||||||
* Net revenue represents net interest income plus total noninterest income. Net-revenue concentration equals segment-level net revenue divided by total Company net revenue.
(1) Other noninterest income includes Service charges on deposit accounts, Interchange fee income, Increase in cash surrender value of BOLI, Net losses on OREO, and Other noninterest income.
(2) Other noninterest expense includes FDIC insurance expense, Interchange related expense, Legal and professional fees, and Other noninterest expense.
NM – Not Meaningful
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16. LOW-INCOME HOUSING TAX CREDIT INVESTMENTS
The Company is a limited partner in several low-income housing partnerships whose purpose is to invest in qualified affordable housing. The Company expects to recover its remaining investments in these partnerships through the use of tax credits that are generated by the investments. These investments are included in other assets and accrued interest receivable on the Consolidated Balance Sheets, with any unfunded obligations included in other liabilities and accrued interest payable. The investments are amortized as a component of income tax expense.
The following table summarizes information related to the Company’s qualified low-income housing investments and obligations:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 | |||||||||
Unfunded | Unfunded | ||||||||||||
Investment | Accounting Method | Investments | Obligations (2) | Investments | Obligations (1) | ||||||||
Low-income housing tax credit - Gross | Proportional amortization | $ | | $ | | $ | | $ | | ||||
Life-to-date amortization | ( | NA | ( | NA | |||||||||
Low-income housing tax credit - Net | $ | | $ | | $ | | $ | |
(1) | All obligations will be paid by the Company by December 31, 2038. |
(2) | All obligations will be paid by the Company by December 31, 2039. |
The following table summarizes the amortization expense and tax credits recognized in income tax expense for the Company’s qualified low-income housing investments for the three and six months ended June 30, 2025 and 2024, respectively:
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
(in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||
| $ | | $ | | $ | | |||||||
Tax credits recognized | ( | ( | ( | ( |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The consolidated financial statements include the accounts of Republic Bancorp, Inc. (the “Parent Company”) and its wholly owned subsidiary, Republic Bank & Trust Company. 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 subsidiary. The term the “Bank” refers to the Company’s subsidiary bank, Republic Bank & Trust Company, as well as, its wholly owned subsidiary, RBT Insurance Agency LLC. 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 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 statement. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believe,” “can,” “conclude,” “continue,” “could,” “estimate,” “expect,” “forecast,” “foresee,” “goal,” “intend,” “may,” “might,” “outlook,” “possible,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “target,” “will,” “will likely,” “would,” or other similar expressions. These forward-looking statements are not historical facts and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control.
Forward-looking statements detail management’s expectations regarding the future and are 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 to reflect events or circumstances that occur after the date forward-looking statements are made, except as required by applicable law.
There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things:
● | litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future; |
● | long-term and short-term interest rate fluctuations and the overall shape of the U.S. Treasury yield curve, as well as the corresponding impact on the Company’s net interest income and mortgage banking operations; |
● | the magnitude and frequency of changes to the FFTR implemented by the FOMC of the FRB; |
● | changes in fiscal, monetary, and/or regulatory policies; |
● | changes in tax policies including, but not limited to, changes in federal and state statutory rates; |
● | changes in, or forecasts of, future political and economic conditions, inflation or recession and efforts to control related developments; |
● | ability to effectively navigate an economic slowdown or other economic or market disruptions; |
● | behavior of securities and capital markets, including changes in interest rates, market volatility and liquidity; |
● | ability to effectively manage capital and liquidity; |
● | accuracy of assumptions and estimates used in establishing the ACLL, ACLC, credit exposures and other estimates; |
● | changes in the credit quality of the Company’s customers and counterparties, deteriorating asset quality and charge-off levels; |
● | impairment of investment securities, goodwill, MSRs, other intangible assets and/or DTAs; |
● | competitive product and pricing pressures in each of the Company’s five reportable segments; |
● | projections of revenue, expenses, capital expenditures, losses, EPS, dividends, capital structure, etc.; |
● | integration of acquired financial institutions, businesses, or future acquisitions; |
● | changes in technology instituted by the Company, its counterparties, or competitors; |
● | changes to or the effectiveness of the Company’s overall internal control environment; |
● | adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting; |
● | changes in applicable ASUs, including the introduction of new ASUs; |
● | changes in investor sentiment or behavior; |
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● | changes in consumer/business spending or savings behavior; |
● | ability to appropriately address social, environmental and sustainability concerns that may arise from business activities; |
● | occurrence of natural or human-caused disasters or calamities, including health emergencies, the spread of infectious diseases, pandemics or outbreaks of hostilities, and the Company’s ability to deal effectively with disruptions caused by the foregoing; |
● | ability to maintain the security of the Company’s financial, accounting, technology, data processing and other operational systems and facilities; |
● | ability to withstand disruptions that may be caused by any failure of the Company’s operational systems or those of third- parties; |
● | the Company’s ability to effectively defend itself against cyberattacks or other attempts by unauthorized parties to access information of its vendors, or its customers or to disrupt systems; |
● | the Company’s ability to qualify for future research and development federal tax credits; |
● | the ability for Tax Providers to successfully market and realize the expected RA and RT volume anticipated by TRS; |
● | the impacts of actual or proposed tariffs to the U.S. economy, market interest rates, and the Company’s results of operations; |
● | the ability of the Company to achieve savings from its new call center management system; |
● | 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 fourth quarter 2025 target date; |
● | the ability of RPS’ largest segment marketer-servicer to meet minimum contractual average deposit thresholds to earn revenue share payments; |
● | the overall future impact of the non-renewal of the Company’s contract with its largest marketer-servicer within TRS; |
● | the Company’s ability to replace RA and RT volume and revenue related to the above contract non-renewal; 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.
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ACLL and Provision — As of June 30, 2025, the Bank maintains 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.
Within the ACLL model, the Company utilizes the “static-pool” method. This method analyzes historical closed pools of loans over their expected lives to attain a loss rate, which is then adjusted for current conditions and reasonable, supportable forecasts prior to being applied to the current balance of the analyzed pools. Due to its reasonably strong correlation to the Company's historical net loan losses, the Company has chosen to use the U.S. national unemployment rate as its primary forecasting tool. For its CRE loan pool, the Company employs a one-year forecast of general CRE values.
Adjustments to the historical loss rate for current conditions include differences in underwriting standards, portfolio mix or term, delinquency level, as well as for changes in environmental conditions, such as changes in property values or other relevant factors. One-year forecast adjustments to the historical loss rate are based on the U.S. national unemployment rate and CRE values. Subsequent to the one-year forecasts, loss rates are assumed to immediately revert back to long-term historical averages.
The impact of utilizing the CECL approach to calculate the ACLL is significantly influenced by the composition, characteristics, and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the ACLL, and therefore, greater volatility to the Company’s reported earnings.
During the first quarter of 2025, the Company further segmented its CRE portfolio into Owner Occupied CRE, Nonowner Occupied CRE, and Multi-family. The Multi-family portfolio consists of properties with five or more dwelling units in structures (including apartment buildings and apartment hotels) used primarily to accommodate households on a more-or-less permanent basis. 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. 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 June 30, 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.
The Company’s Executive Chair and Chief Executive Officer serve as the Company’s CODM’s. Income (loss) before income tax expense is the reportable measure of segment profit or loss that the CODM’s regularly review and utilize to allocate resources and assess performance.
Prior to the first quarter of 2024, Republic had reported mortgage banking as a separate reportable segment under Core Banking. Due to the quantitative and qualitative immateriality of this division, Management concluded its mortgage banking operations no longer constituted a separate reportable segment for SEC reporting purposes and now includes these results in the Traditional Banking segment. All prior period mortgage banking results of operations have been reclassified into the Traditional Banking segment.
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Core Bank
The Core Bank consists of the Traditional Banking and Warehouse Lending segments.
(I) | Traditional Banking segment |
The Traditional Banking segment, which also includes the results of the former mortgage banking segment, provides traditional banking products primarily to customers in the Company’s market footprint ,with all products and services generally offered under the Company’s traditional RB&T brand. As of June 30, 2025, Republic had 47 full-service 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.
Traditional Banking results of operations are primarily dependent upon net interest income, which represents the difference between the interest income and fees on interest-earning assets and the interest expense on interest-bearing liabilities. Principal interest-earning Traditional Banking assets represent investment securities and commercial and consumer loans primarily secured by real estate and/or personal property. Interest-bearing liabilities primarily consist of interest-bearing deposit accounts, SSUAR, as well as short-term and long-term borrowing sources. FHLB advances have traditionally served as a significant borrowing and liquidity source for the Bank.
Other sources of Traditional Banking income include service charges on consumer and commercial deposit accounts, mortgage banking income, debit and credit card interchange fee income, title insurance commissions, swap fee income and increases in the cash surrender value of BOLI.
Traditional Banking operating expenses consist primarily of salaries and employee benefits; technology, equipment, and communication; occupancy; interchange related expense; marketing and development; FDIC insurance expense, and various other general and administrative costs. Traditional Banking results of operations are significantly impacted by general economic and competitive conditions, particularly changes in market interest rates, government laws and policies, and actions of regulatory agencies.
Traditional Bank 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.
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During 2023, the Bank purchased a block of single-family, first-lien mortgage loans for investment through its Correspondent Lending Channel, with these loans secured by owner-occupied collateral generally located outside of the Bank’s market footprint. During the first quarter of 2024, Management elected to sell $67 million of these loans and the sale was completed during the second quarter of 2024.
The Bank offers single-family, first-lien residential real estate ARMs with interest rate adjustments tied to various market indices with specified minimum and maximum adjustments. The Bank generally charges a premium interest rate for its ARMs if the property is nonowner-occupied. The interest rates on the majority of ARMs are adjusted after their fixed rate periods on an annual or semi-annual basis, with most having annual and lifetime limitations on upward rate adjustments to the loan. These loans typically feature amortization periods of up to 30 years and have fixed interest-rate periods generally ranging from five to ten years, with demand dependent upon market conditions. While there is no requirement for clients to refinance their loans at the end of the fixed-rate period, clients have historically done so the majority of the time, as most clients are interest-rate-risk averse on their first mortgage loans.
Single-family, first-lien residential real estate loans with fixed-rate periods of 15, 20, and 30 years are primarily originated and sold into the secondary market. MSRs attached to the sold portfolio are either sold along with the loan or retained. Loans sold into the secondary market, along with their corresponding MSRs, are included as a component of the Company’s Traditional Banking segment, as discussed elsewhere in this filing. The Bank, as it has in the past, may retain such longer-term, fixed-rate loans from time to time in the future to help combat NIM compression. Any such loans retained on the Company’s balance sheet would be reported as a component of the Traditional Banking segment.
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.
The Bank does, on occasion, purchase single-family, first-lien residential real estate loans made to low-to-moderate income borrowers and/or secured by property located in low-to-moderate income areas, which assists the Bank in meeting its obligations under the CRA. In connection with loan purchases, the Bank receives various representations and warranties from the sellers regarding the quality and characteristics of the loans.
Commercial Lending — As described in detail below, the Bank conducts commercial lending activities primarily through the following groups/divisions: Corporate Banking, CRE Banking, Commercial Banking, Business Banking, Private Banking, and Retail Banking channels and clients are primarily located within the Bank’s market footprint or in an adjoining market. In general, all commercial lending credit approvals and processing are prepared and underwritten through the Bank’s centralized CCAD.
Credit opportunities are generally driven by the following: companies expanding their businesses; companies acquiring new businesses; and/or companies refinancing existing debt from other institutions. The Bank has a primary focus on C&I lending, CRE, and multi-family lending.
C&I loans typically include those secured by general business assets, which consist of equipment, accounts receivable, inventory, and other business assets owned by the borrower/guarantor. Credit facilities include annually renewable LOCs and term loans with maturities typically from three to five years and may also involve financial covenant requirements. These requirements are monitored by the Bank’s CCAD. Underwriting for C&I loans is based on the borrower’s capacity to repay
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these loans from operating cash flows, typically measured by EBITDA (earnings before interest, taxes, depreciation and amortization), with capital strength, collateral, and management experience also important underwriting considerations. The targeted C&I credit size for client relationships is typically between $1 million and $10 million, with higher targets between $10 million and $35 million targeted by the Corporate Banking group.
CRE and multi-family loans are typically secured by improved property such as office buildings, medical facilities, retail centers, warehouses, apartment buildings, condominiums, schools, religious institutions, and other types of commercial use property. The CRE Banking group, which launched in 2022, focuses on large CRE projects, typically in amounts from $5 million to $25 million. Borrowers are generally single-asset entities, mostly nonowner-occupied CRE. Primary underwriting considerations are cash flow projections (current and historical), financial capacity of sponsors, and collateral value financed. Fixed rate financing and reciprocal interest rate swaps are used as well. Given the size of these credits, the Bank generally seeks established, well-known borrowers and projects with low credit risk.
The Commercial Banking group focuses on small and medium sized C&I and owner-occupied CRE opportunities. Borrowers are generally single-asset entities and loan sizes typically range from $1 million to $5 million. As with Corporate Banking, the primary underwriting considerations are cash flow projections (current and historical), quality of leases, financial capacity of sponsors, and collateral value of property financed. Interest rates offered are based on both fixed and variable interest-rate formulas.
The Business Banking group, reporting under Retail Banking in most markets, focuses on locally based small businesses in the Bank’s market footprint with primary annual revenues up to $10 million and borrowings between $350,000 and $1 million. The needs of these clients range from expansion or acquisition financing, equipment financing, owner-occupied real estate financing, and smaller operating lines of credit.
The Bank is an SBA Preferred Lending Partner, which allows the Bank to underwrite and approve its own SBA loans in an expedited manner. The Bank makes loans to borrowers generally up to $3 million under the SBA “7A Program,” as well as utilize the “504 Program” for owner-occupied CRE opportunities. The Bank’s lenders utilize programs of the SBA to reduce credit risk exposure.
Construction & 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) to borrowers primarily located within the Bank’s market footprint or in an adjoining market. While not a focus for the Bank, the Bank may originate loans for the acquisition and development of residential or commercial land into buildable lots.
Single-family, residential-construction loans are made in the Bank’s market area to established homebuilders with solid financial records. The majority of these loans are made for “contract” homes that the builder has already pre-sold to a homebuyer.
Commercial-construction loans are made in the Bank’s market to established commercial builders/developers with solid financial records. Typically, these loans are made for investment properties and have tenants pre-committed for some or all of the space. Generally, commercial-construction loans are made for the duration of the construction period and slightly beyond and will either convert to permanent financing with the Bank or with another lender at or before maturity.
Construction-to-permanent loans are another type of construction-related financing that the Bank offers. These loans are made to borrowers who are going to build a property and retain it for ownership after construction completion. These loans are offered on both owner-occupied and nonowner-occupied CRE.
Consumer Lending — Traditional Banking consumer loans include home improvement and home equity loans, other secured and unsecured personal loans, and credit cards originated to borrowers primarily located within the Bank’s market footprint or in an adjoining market. In 2024, the Traditional Bank ceased originating new consumer credit cards and sold its $5 million portfolio in the second quarter of 2025. 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 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 with borrowers across the U.S. Loans typically range between $200,000 and $4 million in size and have terms up to 20 years. 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.
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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 dating back to 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 first quarter of 2024, Management elected to sell $67 million of these loans and the sale was completed during the second quarter of 2024.
Internet Banking — The Bank expands its market penetration and service delivery of its RB&T brand by offering clients Internet Banking services and products through its website, www.republicbank.com.
Mobile Banking — The Bank allows clients to 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 U.S. through mortgage warehouse lines of credit. These credit facilities are primarily secured by single-family, first-lien residential real estate loans. The credit facility enables the mortgage banking clients to close single-family, first-lien residential real estate loans in their own name and temporarily fund their inventory of these closed loans until the loans are sold to investors approved by the Bank. Individual advances for loans are expected to remain on the warehouse LOC for an average of 15 to 30 days. Advances for reverse mortgage loans and construction loans typically remain on the LOC 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 LOC and is 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.”
Republic Processing Group
(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 third-party tax preparers located throughout the U.S., as well as tax-preparation software providers that offer Republic Bank ERAs, RAs, and RTs (collectively, the “Tax Providers”). The majority of 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
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next year’s tax season. During December 2024 and 2003, TRS originated ERAs related to tax returns that were anticipated to be filed during the first quarter of the following 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 via deduction from the taxpayer’s tax refund proceeds; and |
● | If a tax refund is insufficient to repay the ERA, including but not limited to the failure to file a final federal tax return through a Republic Tax Provider: |
● | there is no recourse to the taxpayer, |
● | no negative credit reporting on the taxpayer, and |
● | no collection efforts against the taxpayer. |
The Company reports fees paid for 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. Since RAs do not have a contractual due date, the Company considered an RA delinquent during 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 first quarter tax filing season of a given year are considered delinquent at June 30th of that year and charged-off. In addition, as of June 30, 2025, RAs that were subject to Tax Provider loan loss guarantees were charged-off and immediately recorded as recoveries of previously charged-off loans with corresponding receivables recorded in other assets for the Tax Provider guarantees. Those corresponding receivables are expected to be
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settled during the third quarter of 2025. RAs collected during the second half of the year, not subject to loan loss guarantee arrangements, are recorded as recoveries of previously charged-off loans.
Related to the overall credit losses on RAs, including ERAs, the Bank’s ability to control losses is highly dependent upon its ability to predict the taxpayer’s likelihood to receive the tax refund as claimed on the taxpayer’s tax return. 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 on Loans” of Part I Item 1 “Financial Statements.”
(IV) Republic Payment Solutions segment
The RPS segment offers a range of payment-related products and services to consumers through third-party service providers. Through the Bank, the RPS segment offers both issuing solutions and money movement capabilities.
Issuing Solutions:
The RPS segment offers prepaid and debit solutions primarily marketed to the consumer industry. Prepaid solutions include the issuing of payroll and general purpose reloadable cards. Characteristics of these cards include the following:
● | Similar to a traditional debit card with features including traditional point of sale purchasing, automatic teller machine 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 payroll and general purpose reloadable cards generally distributed through retail locations and reloadable through participating retail load networks. |
Debit solutions include the issuing of DDAs, savings accounts and/or debit cards. In addition to offering traditional point of sale purchasing, automated teller machine withdrawals, and direct deposit options, these accounts may include overdraft protection.
Money Movement:
Through the Bank, the RPS segment participates in traditional money movement solutions including ACH transactions, wire transfer, check processing, and the Mastercard Remote Payment and Presentment Service. These capabilities are also complementary products facilitating the movement of money for other RPG 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.” The Company began sharing interest income revenue with its largest prepaid marketer-servicer during 2024, with the interest shared reported as “Interest expense on deposits.” The Company has not shared interest income revenue with its largest prepaid marketer-servicer for the three and six months ended June 30, 2025, as minimum deposit balance thresholds were not met.
(V) Republic Credit Solutions segment
Through the Bank, the RCS segment 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
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to loans originated through the Traditional Banking segment, with a significant portion of RCS clients considered subprime or near-prime borrowers. Through the Bank, RCS uses third-party service providers for certain services such as marketing and loan servicing for (1) RCS’ LOC products, (2) RCS’ installment loan product and (3) RCS’ healthcare receivables products.
LOC Products:
Through the Bank, RCS uses third-party service providers, to originate two LOC products to generally subprime or near-prime borrowers. 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 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 LOC 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 HFS 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 HFS through this program are carried at the lower of cost or fair value.
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 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 HFS 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 16 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.
Healthcare Receivables Products:
Through RCS, 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 HFS through this program are carried at the lower of cost or fair value.
For the RCS LOC 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 “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 “Program fees.”
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RECENT DEVELOPMENTS
The One Big Beautiful Bill Act
On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic research and development expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes were not reflected in the income tax provision for the period ended June 30, 2025, as enactment occurred after the balance sheet date. The Company is currently evaluating the impact on future periods.
Expiration of Largest Tax Provider Contract
All ERAs and RAs originated through TRS are done during the three-month period of December through February each year. As previously disclosed, the Company’s largest Tax Provider contract within TRS in terms of product volume expires in October 2025 and the Company does not expect to enter into a new contract with this Tax Provider to replace its existing contract. For the 2025 calendar year, Management estimates that this existing large Tax Provider contract will contribute pre-tax net income equating to approximately 27% of the total TRS pre-tax net income for the previous 12 months as of June 30, 2025.
Other notable items in the Company’s financial statements impacted by this contract not being renewed include the following:
● | ERAs and RAs originated through this Tax Provider represented approximately 63% of the total dollars of ERAs and RAs originated through TRS from December 2024 through February 2025. As a result of these originations, RA/ERA fee income reported in interest income on loans related to this Tax Provider represented 63% of total RA/ERA fee income for the first six months of 2025, and 89% for the fourth quarter of 2024. Net RA/ERA fee income during the second quarter of 2025 was immaterial. |
● | Provision for RAs/ERAs originated through this Tax Provider represented 72% of the TRS Provision for the second quarter of 2025 (the Provision for the second quarter of 2025 was a net credit for both TRS, as a whole, and for RAs/ERAs originated through this Tax Provider). The Provision for this Tax Provider was 56% of the total TRS Provision for the first six months of 2025, and 96% of the total TRS Provision for the fourth quarter of 2024. |
● | Net RT revenue generated through this Tax Provider during the second quarter and first six months of 2025 represented approximately 6% and 20% of the total net RT revenue generated through TRS for the respective periods. Net RT revenue during the fourth quarter of 2024 was immaterial. |
OVERVIEW (Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024)
Total Company net income for the second quarter of 2025 was $31.5 million, an increase of $6.3 million, or 25%, over the same period in 2024. Diluted EPS also increased to $1.61 for the second quarter of 2025 compared to $1.30 for the same period in 2024. The increase in net income primarily reflected the following by reportable segment:
Traditional Banking segment
● | Net income increased $3.2 million, or 24%, from the second quarter of 2024 to the second quarter of 2025. |
● | Net interest income increased $6.5 million, or 13%, from the second quarter of 2024 to the second quarter of 2025. |
● | Provision was a net charge of $517,000 for the second quarter of 2025 compared to a net charge of $915,000 for the same period in 2024. |
● | Noninterest income increased $399,000, or 4%, from the second quarter of 2024 to the second quarter of 2025. |
● | Noninterest expense increased $2.9 million, or 7%, from the second quarter of 2024 to the second quarter of 2025. |
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Warehouse Lending segment
● | Net income increased $450,000, or 33%, from the second quarter of 2024 to the second quarter of 2025. |
● | Net interest income increased $635,000, or 22%, from the second quarter of 2024 to the second quarter of 2025. |
● | The Warehouse Provision was a net charge of $255,000 for the second quarter of 2025 compared to a net charge of $214,000 for the same period in 2024. |
● | Average committed Warehouse lines of credit increased to $995 million for the second quarter of 2025 from $940 million for the second quarter of 2024. |
● | Average LOC usage was 57% during the second quarter of 2025 compared to 49% during the same period in 2024. |
Tax Refund Solutions segment
● | Net income increased $241,000, or 8%, from the second quarter of 2024 to the second quarter of 2025. |
● | Net interest income decreased $761,000 from the second quarter of 2024 to the second quarter of 2025. |
● | TRS recorded a net credit to the Provision of $3.9 million during the second quarter of 2025 compared to a net credit of $1.2 million for the same period in 2024. |
● | Noninterest income decreased $1.2 million, or 30%, from the second quarter of 2024 to the second quarter of 2025. |
● | Within noninterest income, net RT revenue decreased $1.2 million, or 33%, from the second quarter of 2024 to the second quarter of 2025. |
● | Noninterest expense was $2.5 million for the second quarter of 2025 compared to $2.0 million for the same period in 2024. |
Republic Payment Solutions segment
● | Net income increased $342,000, or 16%, from the second quarter of 2024 to the second quarter of 2025. |
● | Net interest income increased $633,000, or 22%, from the second quarter of 2024 to the second quarter of 2025. |
● | Noninterest income was $736,000 for the second quarter of 2025 compared to $761,000 for the second quarter of 2024. |
● | Noninterest expense was $1.2 million for the second quarter of 2025 compared to $1.0 million for the second quarter of 2024. |
Republic Credit Solutions segment
● | Net income increased $2.0 million, or 40%, from the second quarter of 2024 to the second quarter of 2025. |
● | Net interest income increased $694,000, or 6%, from the second quarter of 2024 to the second quarter of 2025. |
● | Overall, RCS recorded a net charge to the Provision of $5.0 million during the second quarter of 2025 compared to a net charge of $5.2 million for the same period in 2024. |
● | Noninterest income increased $77,000, or 2%, from the second quarter of 2024 to the second quarter of 2025. |
● | Noninterest expense was $2.4 million for the second quarter of 2025 and $4.0 million for the same period in 2024. |
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RESULTS OF OPERATIONS (Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024)
Net Interest Income
See the section titled “Asset/Liability Management and Market Risk” in this section of the filing regarding the Bank’s interest rate sensitivity.
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, SSUAR 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.
Since April 2025, when the President proposed the implementation of broad-based sweeping tariffs against many of the U.S.’s global trading partners, there have been numerous policy changes that have triggered ongoing financial volatility. While the FRB has maintained its FFTR at a range of 4.25% to 4.50%, recent FOMC commentary has indicated possible rate cuts in the second half of 2025.
Total Company net interest income was $76.2 million during the second quarter of 2025 compared to $68.5 million during the second quarter of 2024, representing a $7.7 million or 11% increase. The Total Company NIM increased 25 basis points to 4.61% during the second quarter of 2025 compared to 4.36% during the second 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 $56.4 million for the second quarter of 2025, a $6.5 million, or 13%, increase from $49.9 million during the second quarter of 2024 and was driven primarily by NIM expansion.
The Traditional Bank’s NIM increased from 3.53% during the second quarter of 2024 to 3.84% during the second quarter of 2025, the rise in its interest-earning asset yields outpacing the rise in funding costs.
Items of note impacting the Traditional Bank’s change in net interest income and NIM between the second quarter of 2024 and the second quarter of 2025 were as follows:
● | Traditional Bank average loans declined from $4.62 billion with a weighted-average yield of 5.57% during the second quarter of 2024 to $4.59 billion with a weighted average yield of 5.69% during the second 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. The increased period-over-period yield on loans was driven by the replacement of lower yielding loans in the portfolio through principal amortization and payoffs with new originations at a higher yield. 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 $623 million with a weighted-average yield of 4.45% during the second quarter of 2025 compared to $393 million with a weighted-average yield of 5.46% for the second quarter of 2024. The lower yield on cash for the quarter was driven by a 100-basis-point decrease in the FFTR from the second quarter of 2024 to the second quarter of 2025. The growth in cash balances was primarily driven by excess funds from interest-bearing deposit growth, including cash from a $131 million short-term brokered CD obtained during April 2025 that matures in July 2025. |
● | Average investments totaled $686 million with a weighted-average yield of 3.71% during the second quarter of 2025 compared to $670 million with a weighted-average yield of 3.09% for the second quarter of 2024. The increased period-over-period yield on investments was driven by the redeployment of cash from maturing investments into new purchases with longer durations and higher yields. The Company began buying investment securities with longer durations, such MBS’s, during 2025 as a result of a more favorable yield curve and the more attractive yield for these longer-duration securities above the overnight cash yield. |
● | The weighted-average cost of total interest-bearing deposits decreased from 2.79% during the second quarter of 2024 to 2.34% for the second quarter of 2025, while average interest-bearing deposit balances grew $223 million, or 6%, for the same periods. Included within this growth in interest-bearing deposits was a $280 million net increase in the average balances for business |
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and consumer money market accounts, which generally pay premium rates. The increase in money market balances was partially offset by an $85 million decrease in the average balance of third-party listing service deposits. In addition, the Company obtained a $131 million brokered CD during April 2025 that added $110 million to average deposit balances during the second quarter of 2025. This CD matures in July 2025. |
● | Average noninterest-bearing deposits decreased $38 million from the second quarter of 2024 to the second 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 the then-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 NIM. The amount of such impact to the Traditional Bank’s net interest income and NIM 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 segment
Net interest income within Warehouse increased $635,000, or 22%, from the second quarter of 2024 to the second quarter of 2025.
The rise in Warehouse net interest income was primarily driven by a $110 million, or 24%, increase in average outstanding Warehouse balances from $457 million during the second quarter of 2024 to $567 million for the second quarter of 2025. Average committed Warehouse LOCs increased from $940 million to $995 million during these same periods, while higher demand caused average usage rates for Warehouse LOC to increase from 49% during the second quarter of 2024 to 57% for the second quarter of 2025.
Because consumer mortgage demand drives the usage of Warehouse LOCs, overall LOC 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.
Tax Refund Solutions segment
TRS’s net interest income decreased $761,000 for the second quarter of 2025 compared to the same period in 2024. Loan-related interest and fees decreased $731,000 for the quarter and was driven primarily by a $560,000 payment received during the second quarter of 2024 representing a Tax Provider yield enhancement for the RA program to help offset the Company’s higher funding costs. This yield enhancement was new for the 2024 tax season and eliminated for the 2025 tax season.
Republic Payment Solutions segment
Net interest income from the Company’s prepaid card division increased $633,000 from the second quarter of 2024 to the second quarter of 2025. Driving this increase at RPS was a reduction in the segment’s revenue share component, as the Company’s largest marketer-servicer did not achieve the minimal contractual thresholds for average deposit balances in order to earn a revenue share for the second quarter of 2025. By contrast, this revenue share equated to $1.3 million during the second 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 this marketer-servicer are at levels near the thresholds necessary to achieve a revenue share, making a future revenue share possible, but not certain.
Partially offsetting the positive benefit of the decreased revenue share, RPS earned a lower yield of 4.28% for its $350 million average of prepaid program balances for the second quarter of 2025 compared to a yield of 5.03% for the $360 million in average prepaid card balances for the second quarter of 2024. The lower earnings rate was driven by a decrease in the FFTR of 100 basis points from the second quarter of 2024 to the second quarter of 2025.
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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 any revenue share the Company pays for the product, decreasing the segment's NIM.
Republic Credit Solutions segment
RCS’s net interest income increased $694,000, or 6%, from the second quarter of 2024 to the second quarter of 2025. The increase was driven primarily by an increase in fee income from RCS’s LOC II product, as net interest income increased $388,000 to $7.1 million from the second quarter of 2024 to the second quarter of 2025. The rise in net interest income for this LOC product was driven primarily by a period-to-period increase in average outstanding loan balances of approximately $3 million.
Overall customer demand for the RCS segment’s products has historically not been interest rate sensitive and therefore management does not believe a changing interest rate environment would materially impact origination volume for its various consumer loan products. A decreasing interest rate environment would positively impact the Company’s internal FTP cost allocated to this segment, which would increase the NIM for the segment. The exact amount of the impact would depend on the final internal FTP cost assigned, as well as the overall volume and mix of loans the segment generates.
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The following table presents the average balance sheets for the three-month periods ended June 30, 2025, and 2024, along with the related calculations of tax-equivalent net interest income, NIM and net interest spread for the related periods.
Table 1 — Total Company Average Balance Sheets and Interest Rates
Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | |||||||||||||||||||
| Average |
|
| Average | Average |
|
| Average | ||||||||||||
(dollars in thousands) |
| Balance |
| Interest |
| Rate | Balance |
| Interest |
| Rate | |||||||||
ASSETS | ||||||||||||||||||||
Interest-earning assets: |
| |||||||||||||||||||
Federal funds sold and other interest-earning deposits | $ | 622,909 | $ | 6,917 |
| 4.45 | % |
|
| $ | 393,095 | $ | 5,334 |
| 5.46 | % | ||||
Investment securities, including FHLB stock (a) | 686,223 | 6,346 |
| 3.71 | 670,114 | 5,144 |
| 3.09 | ||||||||||||
TRS Refund Advances (b) | 26,353 | 25 | 0.38 | 37,103 | 742 | 8.04 | ||||||||||||||
RCS LOC products (b) | 46,252 | 12,434 | 107.83 | 42,011 | 11,272 | 107.91 | ||||||||||||||
Other RPG loans |
| 92,012 |
| 1,559 |
| 6.80 |
| 104,042 |
| 2,069 |
| 8.00 | ||||||||
Outstanding Warehouse lines of credit | 566,707 | 9,803 | 6.94 | 456,908 | 9,064 | 7.98 | ||||||||||||||
Traditional Bank loans (c) |
| 4,587,342 |
| 65,119 |
| 5.69 |
| 4,622,655 |
| 64,075 |
| 5.57 | ||||||||
Total loans (d) | 5,318,666 | 88,940 | 6.71 | 5,262,719 | 87,222 | 6.67 | ||||||||||||||
Total interest-earning assets |
| 6,627,798 |
| 102,203 |
| 6.19 |
| 6,325,928 |
| 97,700 |
| 6.21 | ||||||||
Allowance for credit losses |
| (105,726) |
| (108,194) | ||||||||||||||||
Noninterest-earning assets: | ||||||||||||||||||||
Noninterest-earning cash and cash equivalents |
| 125,098 |
| 102,712 | ||||||||||||||||
Premises and equipment, net |
| 33,250 |
| 33,452 | ||||||||||||||||
Bank owned life insurance |
| 108,416 |
| 105,128 | ||||||||||||||||
Other assets (a) |
| 273,195 |
| 247,858 | ||||||||||||||||
Total assets | $ | 7,062,031 | $ | 6,706,884 | ||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||
Transaction accounts | $ | 1,699,450 | $ | 2,557 |
| 0.60 | % | $ | 1,821,025 | $ | 6,323 |
| 1.40 | % | ||||||
Money market accounts |
| 1,406,053 | 10,183 |
| 2.90 |
| 1,120,833 | 9,652 |
| 3.46 | ||||||||||
Time deposits |
| 445,129 | 4,168 |
| 3.76 |
| 387,150 | 3,859 |
| 4.01 | ||||||||||
Reciprocal money market and time deposits | 318,576 |
| 2,622 |
| 3.30 |
| 334,496 |
| 3,514 |
| 4.23 | |||||||||
Brokered deposits |
| 212,001 |
| 2,320 |
| 4.39 |
| 184,734 |
| 2,425 |
| 5.28 | ||||||||
Total interest-bearing deposits |
| 4,081,209 |
| 21,850 |
| 2.15 |
| 3,848,238 | 25,773 |
| 2.69 | |||||||||
SSUARs and other short-term borrowings |
| 87,760 | 140 |
| 0.64 |
| 88,326 | 132 |
| 0.60 | ||||||||||
Federal Home Loan Bank advances |
| 370,000 | 4,011 |
| 4.35 |
| 305,604 | 3,259 |
| 4.29 | ||||||||||
Total interest-bearing liabilities |
| 4,538,969 |
| 26,001 |
| 2.30 |
| 4,242,168 | 29,164 |
| 2.77 | |||||||||
Noninterest-bearing liabilities and Stockholders’ equity: | ||||||||||||||||||||
Noninterest-bearing deposits |
| 1,323,622 |
| 1,366,862 | ||||||||||||||||
Other liabilities |
| 143,941 |
| 144,108 | ||||||||||||||||
Stockholders’ equity |
| 1,055,499 |
| 953,746 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 7,062,031 | $ | 6,706,884 | ||||||||||||||||
Net interest income | $ | 76,202 | $ | 68,536 | ||||||||||||||||
Net interest spread |
| 3.89 | % |
| 3.44 | % | ||||||||||||||
Net interest margin |
| 4.61 | % |
| 4.36 | % | ||||||||||||||
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 TRS Refund Advances and RCS LOC products is composed entirely of loan fees. |
c) | Average balances for loans include the principal balance of nonaccrual loans and loans HFS, and are inclusive of all loan premiums, discounts, fees and costs. |
d) | See table 2 for detail of loan fees by reporting segment. |
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The following table illustrates loan fees recorded as interest income on loans, by segment, for the second quarters ended June 30, 2025, and 2024.
Table 2 — Loan Fee Income
Three months ended June 30, | ||||||
(dollars in thousands) | 2025 | 2024 | ||||
Traditional Banking | $ | 1,367 | $ | 1,281 | ||
Warehouse Lending | 369 | 322 | ||||
Total Core Bank | 1,736 | 1,603 | ||||
TRS | 25 | 756 | ||||
RCS | 12,434 | 11,272 | ||||
Total RPG | 12,459 | 12,028 | ||||
Total loan fees - Total Company | $ | 14,195 | $ | 13,631 |
The following table 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 3 — Total Company Volume/Rate Variance Analysis
Three Months Ended June 30, 2025 | ||||||||||
Compared to | ||||||||||
Three Months Ended June 30, 2024 | ||||||||||
Total Net | Increase / (Decrease) Due to | |||||||||
(in thousands) |
| Change |
| Volume |
| Rate |
| |||
Interest income: | ||||||||||
Federal funds sold and other interest-earning deposits | $ | 1,583 | $ | 2,683 | $ | (1,100) | ||||
Investment securities, including FHLB stock | 1,202 | 126 | 1,076 | |||||||
TRS Refund Advance loans* | (717) | (167) | (550) | |||||||
RCS LOC products | 1,162 | 1,140 | 22 | |||||||
Other RPG loans |
| (510) |
| (223) |
| (287) | ||||
Outstanding Warehouse lines of credit | 739 | 1,992 | (1,253) | |||||||
Traditional Bank loans |
| 1,044 |
| (492) |
| 1,536 | ||||
Net change in interest income |
| 4,503 |
| 5,059 |
| (556) | ||||
Interest expense: | ||||||||||
Transaction accounts |
| (3,766) |
| (396) | (3,370) | |||||
Money market accounts |
| 531 |
| 2,213 | (1,682) | |||||
Time deposits |
| 309 |
| 552 | (243) | |||||
Reciprocal money market and time deposits | (892) |
| (160) | (732) | ||||||
Brokered deposits | (105) | 148 |
| (253) | ||||||
SSUARs and other short-term borrowings |
| 8 |
| (1) | 9 | |||||
Federal Home Loan Bank advances |
| 752 |
| 696 |
| 56 | ||||
Net change in interest expense |
| (3,163) |
| 3,052 |
| (6,215) | ||||
Net change in net interest income | $ | 7,666 | $ | 2,007 | $ | 5,659 |
* Since interest income for RAs is composed entirely of loan fees and RAs are only offered during the first two months of each year, volume and rate measurements for this product are not a meaningful metric for the periods presented above.
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Provision
Total Company Provision was a net charge of $1.8 million for the second quarter of 2025 compared to a net charge of $5.1 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 second quarter of 2025 was a net charge of $517,000 compared to a net charge of $915,000 for the second quarter of 2024.
The net charge of $517,000 for the second quarter of 2025 was driven by the following:
● | The Traditional Bank recorded a net charge to the Provision of $722,000 during the second quarter of 2025 related to a change in loan mix toward loans with higher formula reserve requirements in addition to $313,000 in net charge-offs. While loan balances at the Traditional Bank increased only $16 million during the second quarter, growth occurred in categories such as C&D, with higher loan loss reserve requirements. |
● | Partially offsetting the above, in the second quarter of 2025, as a practical expedient, the Company established a minimum loan balance threshold in assessing credits for impairment that resulted in a $518,000 credit to Provision. |
The net charge of $915,000 for the second quarter of 2024 was primarily driven by the following:
● | Traditional Bank provisioning during the second quarter of 2024 substantially related to general formula reserves in addition to $232,000 in net charge-offs. While loan balances at the Traditional Bank increased only $16 million during the second quarter, the segment continued to experience a change in loan mix, growing in categories with higher loan loss reserve requirements. |
As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.29% as of June 30, 2025, compared to 1.31% as of December 31, 2024, and 1.30% as of June 30, 2024. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses as of June 30, 2025.
See the sections titled “Allowance for Credit Losses on Loans” 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 $255,000 for the second quarter of 2025 compared to a net charge of $214,000 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 $102 million during the second quarter of 2025 compared to an increase of $86 million during the second quarter of 2024.
As a percentage of total Warehouse outstanding balances, the Warehouse ACLL was 0.25% as of June 30, 2025, December 31, 2024, and June 30, 2024. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses as of June 30, 2025.
Tax Refund Solutions segment
TRS recorded a net credit to the Provision of $3.9 million during the second quarter of 2025 compared to a net credit of $1.2 million for the same period in 2024. Substantially all TRS Provision in both periods was related to its RA and ERAs products.
RAs related to the 2025 tax filing season were only originated during December of 2024 and the first two months of 2025, while RAs related to the 2024 tax filing season were only originated during December of 2023 and the first two months of 2024. As is the case each year as of March 31st, the ACLL 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-offs posted during the second quarter of a calendar year can be different (higher or lower) than the Company’s March 31st Provision estimate based on actual paydowns received during the second quarter. RAs
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collected during the second half of the year are recorded as recoveries of previously charged-off loans unless they are covered under a loss guaranty arrangement. Any RAs subject to a loss guaranty arrangement that are recovered during the second half of the year are distributed to the guarantor.
For the second quarter of 2025, TRS recorded a net credit to the Provision of $3.9 million to bring its preliminary March 31, 2025, ACLL estimate in-line with its final June 30, 2025, charge-offs. TRS’s incurred loss rate for unguaranteed RAs as of June 30, 2025, was 2.81% of total of the $801 million of the total loans originated during December 2024 and the first two months of 2025.
During the second quarter of 2024, TRS recorded a net credit to the Provision of $1.2 million. TRS’s incurred loss rate for unguaranteed RAs as of June 30, 2024, was 3.30% of total of the $874 million of the total loans originated during December 2023 and the first two months of 2024.
In-line with its customary June 30th charge-off policy for RA loans, the Company completely charged-off all remaining unpaid RAs as of June 30, 2025, with approximately $2.3 million of the RAs that are expected to be recovered under loan-loss guaranty arrangements with Tax Providers recorded as receivables in other assets on the balance sheet.
For factors affecting the comparison of the TRS results of operations for the second quarter of 2025 and the second quarter of 2024, see section titled “OVERVIEW (Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024) - Tax Refund Solutions.”
See additional detail regarding the RA product under Footnote 4 “Loans and Allowance for Credit Losses on Loans” of Part I Item 1 “Financial Statements.”
Republic Payment Solutions segment
There is no ACLL or Provision for RPS, as the segment offers prepaid and debit solutions to consumers.
Republic Credit Solutions segment
As illustrated in the following table, RCS recorded a net charge to the Provision of $5.0 million during the second quarter of 2025 compared to a net charge to the Provision of $5.2 million for the same period in 2024. RCS recorded net charge-offs of $4.0 million during the second quarters of 2025 of 2024.
RCS ending loan balances decreased by $10 million during the first six months of 2025, driven by declines in the healthcare receivables programs.
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 17.67% as of June 30, 2025, 16.30% as of December 31, 2024, and 15.44% as of June 30, 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 June 30, 2025.
The following table presents net charges to the RCS Provision by product:
Table 4 — Republic Credit Solutions Provision by Product
Three Months Ended June 30, | |||||||||||||
(dollars in thousands) | 2025 | 2024 | $ Change | % Change | |||||||||
Product: | |||||||||||||
Lines of credit | $ | 4,985 | $ | 5,211 | $ | (226) | (4) | % | |||||
Healthcare receivables | (2) | (15) | 13 | (87) | |||||||||
Total | $ | 4,983 | $ | 5,196 | $ | (213) | (4) | % |
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Table 5 — Summary of Loan and Lease Loss Experience
| Three Months Ended | ||||||||
June 30, | |||||||||
(dollars in thousands) |
| 2025 | 2024 | ||||||
ACLL at beginning of period | $ | 106,303 | $ | 108,702 | |||||
Charge-offs: | |||||||||
Traditional Banking: | |||||||||
Residential real estate | (11) |
| (39) | ||||||
Commercial & industrial |
| (18) |
| — | |||||
Lease financing receivables |
| (127) |
| (34) | |||||
Home equity |
| — |
| — | |||||
Consumer | (314) | (259) | |||||||
Total Traditional Banking | (470) | (332) | |||||||
Warehouse lines of credit |
| — |
| — | |||||
Total Core Banking | (470) | (332) | |||||||
Republic Processing Group: | |||||||||
Tax Refund Solutions: | |||||||||
Refund Advances | (24,893) |
| (32,556) | ||||||
Other TRS loans | (166) |
| (137) | ||||||
Republic Credit Solutions | (4,384) |
| (4,315) | ||||||
Total Republic Processing Group | (29,443) | (37,008) | |||||||
Total charge-offs |
| (29,913) |
| (37,340) | |||||
Recoveries: | |||||||||
Traditional Banking: | |||||||||
Residential real estate | 23 | 21 | |||||||
Commercial real estate |
| 3 |
| 3 | |||||
Commercial & industrial |
| — |
| 1 | |||||
Lease financing receivables |
| 17 |
| 9 | |||||
Home equity |
| 26 |
| — | |||||
Consumer | 88 | 66 | |||||||
Total Traditional Banking | 157 | 100 | |||||||
Warehouse lines of credit |
| — |
| — | |||||
Total Core Banking | 157 | 100 | |||||||
Republic Processing Group: | |||||||||
Tax Refund Solutions: | |||||||||
Refund Advances | 3,008 |
| 3,792 | ||||||
Other TRS commercial & industrial loans | 2 |
| 14 | ||||||
Republic Credit Solutions | 380 |
| 270 | ||||||
Total Republic Processing Group | 3,390 | 4,076 | |||||||
Total recoveries |
| 3,547 |
| 4,176 | |||||
Net loan recoveries (charge-offs) |
| (26,366) |
| (33,164) | |||||
Provision - Core Bank Loans |
| 772 |
| 1,135 | |||||
Provision - RPG Loans |
| 1,051 |
| 4,014 | |||||
Total Provision for All Loans |
| 1,823 |
| 5,149 | |||||
ACLL at end of period | $ | 81,760 | $ | 80,687 | |||||
Credit Quality Ratios - Total Company: | |||||||||
ACLL to total loans |
| 1.52 | % |
| 1.53 | % | |||
ACLL to nonperforming loans |
| 378 |
| 393 | |||||
Net loan charge-offs (recoveries) to average loans | 1.99 |
| 2.52 | ||||||
Credit Quality Ratios - Core Banking: | |||||||||
ACLL to total loans |
| 1.16 | % |
| 1.19 | % | |||
ACLL to nonperforming loans |
| 282 |
| 308 | |||||
Net loan charge-offs (recoveries) to average loans | 0.02 | 0.02 |
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Table 6 — Annualized Net Loan Charge-offs (Recoveries) to Average Loans by Loan Category
Net Loan Charge-Offs (Recoveries) to Average Loans | |||||||
Three Months Ended | |||||||
June 30, | |||||||
2025 | 2024 | ||||||
Traditional Banking: | |||||||
Residential real estate: | |||||||
Owner-occupied | — | % | 0.01 | % | |||
Nonowner-occupied | — | — | |||||
Commercial real estate: | |||||||
Owner-occupied | — | — | |||||
Nonowner-occupied | — | — | |||||
Multi-Family | — | — | |||||
Construction & land development | — | — | |||||
Commercial & industrial | 0.01 | — | |||||
Lease financing receivables | 0.47 | 0.11 | |||||
Aircraft | — | — | |||||
Home equity | (0.03) | — | |||||
Consumer: | |||||||
Credit cards | 0.85 | 1.02 | |||||
Overdrafts | 100.67 | 70.66 | |||||
Automobile loans | (1.88) | (0.34) | |||||
Other consumer | 0.04 | 0.41 | |||||
Total Traditional Banking | 0.0.3 | 0.02 | |||||
Warehouse lines of credit | — | — | |||||
Total Core Banking | 0.02 | 0.02 | |||||
Republic Processing Group: | |||||||
Tax Refund Solutions: | |||||||
Refund Advances* | 332.17 | 310.07 | |||||
Other TRS commercial & industrial loans | 62.93 | 55.22 | |||||
Republic Credit Solutions | 12.86 | 3.04 | |||||
Total Republic Processing Group | 63.31 | 19.26 | |||||
Total | 1.99 | % | 2.52 | % |
* All loss rates above are based on net charge-offs as a function of average outstanding portfolio balances. RAs 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.
Total Company’s net charge-offs to average total Company loans decreased from 2.52% during the second quarter of 2024 to 1.99% during the second quarter of 2025, with net charge-offs decreasing $6.8 million, or 20%, and average total Company loans increasing $56 million, or 1%. The decrease in net charge-offs was driven by a $6.7 million decline in net charge-offs within the TRS segment related to significantly better payments received from the U.S. Treasury to pay off RAs and ERAs through June 30, 2025, compared to the same period in the prior year.
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Noninterest Income
Total Company noninterest income decreased $702,000, or 4%, during the second 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 $399,000, or 4%, from the second quarter of 2024 compared to the second quarter of 2025. The increase in noninterest income was primarily driven by a $284,000 increase in mortgage banking income, which resulted a modest period-over-period improvement in pricing received on fixed rate loans sold into the secondary market. Other income also increased $280,000 for the second quarter of 2025 compared to the second quarter of 2024 and was driven primarily by a $328,000 net gain on sale of the Bank’s consumer credit card portfolio which was completed during the quarter.
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 June 30, 2025, and 2024 were $1.7 million and $1.8 million. The total daily overdraft charges, net of refunds, included in interest income for the three months ended June 30, 2025, and 2024 were $287,000 and $298,000.
Tax Refund Solutions segment
TRS’s noninterest income decreased from $3.9 million for the second quarter of 2024 to $2.7 million for the second quarter of 2025, led by a $1.2 million decline in Net RT fees. The lower Net RT Fees collected was attributable to a 17% decline in number tax refunds funded during the second quarter of 2025 versus the second quarter of 2024, with a greater percentage of RT volume received and funded during the first quarter 2025 as compared to 2024.
For factors affecting the comparison of the TRS results of operations for the first quarter of 2024 and the first quarter of 2023, see section titled “OVERVIEW (Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024) - Tax Refund Solutions.”
Noninterest Expense
Total Company noninterest expense increased $2.0 million, or 4%, during the second quarter of 2025 compared to the same period in 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 $2.9 million, or 7%, for the second quarter of 2025 compared to the same period in 2024. Notable variances within the noninterest expense category included:
● | Salaries and benefits increased $1.2 million, or 5%, driven by a $691,000 increase in estimated bonus-related expenses and a $524,000 increase in health insurance claims. The larger estimated bonus-related expenses for the second quarter of 2025 were due to an increased probability of a larger bonus payout for the year based on the Company’s strong operating results. |
● | Technology expenses increased $1.0 million, or 16%, over the second quarter of 2024. The increase in Technology expense was driven by enhanced security and new ancillary systems, including 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. |
Republic Credit Solutions segment
Noninterest expense at the RCS segment decreased $1.6 million, or 40%, during the second quarter of 2025 compared to the same period in 2024, driven by a $1.7 million reduction in marketing expenses. The favorable decline in Marketing expenses included a $763,000 reimbursement for a prior period billing dispute.
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OVERVIEW (Six months ended June 30, 2025, Compared to Six months ended June 30, 2024)
Total Company net income for the first six months of 2025 was $78.8 million, and $22.9 million, or 41%, increase from the same period in 2024. Diluted EPS increased to $4.03 for the first six months of 2025 compared to $2.87 for the same period in 2024. The increase in net income primarily reflected the following:
Traditional Banking segment
● | Net income increased $6.7 million, or 26%, for the first six months of 2025 compared to the same period in 2024. |
● | Net interest income increased $11.5 million, or 12%, for the first six months of 2025 compared to the same period in 2024. |
● | Provision was a net credit of $252,000 for the first six months of 2025 compared to a net charge of $1.3 million for the same period in 2024. |
● | As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.29% as of June 30, 2025, compared to 1.30% as of June 30, 2024. |
● | Noninterest income increased $7.5 million, or 41%, for the first six months of 2025 compared to the same period in 2024. |
● | Noninterest expense increased $11.4 million, or 14%, for the first six months of 2025 compared to the same period in 2024. |
● | Total Traditional Bank loans outstanding increased $13 million during the first six months of 2025. |
● | Total nonperforming loans to total loans for the Traditional Banking segment was 0.47% as of June 30, 2025, compared to 0.50% as of December 31, 2024. |
● | Delinquent loans to total loans for the Traditional Banking segment was 0.22% as of June 30, 2025, unchanged from 0.22% as of December 31, 2024. |
● | Total Traditional Bank deposits increased $278 million, or 6%, from December 31, 2024, to $4.85 billion as of June 30, 2025. |
Warehouse Lending segment
● | Net income increased $1.3 million, or 57%, for the first six months of 2025 compared to the same period in 2024. |
● | Net interest income increased $1.4 million, or 27%, for the first six months of 2025 compared to the same period in 2024. |
● | The Warehouse Provision was a net charge of $302,000 for the first six months of 2025 compared to a net charge of $523,000 for the same period in 2024. |
● | Average committed Warehouse lines of credit increased to $981 million for the first six months of 2025 from $935 million for first six months of 2024. |
● | Average LOC usage increased to 52% during the first six months of 2025 compared to 43% during the same period in 2024. |
Tax Refund Solutions segment
● | Net income increased $11.1 million, or 93%, for the first six months of 2025 compared to the same period in 2024. |
● | Net interest income decreased $1.9 million, or 6%, for the first six months of 2025 compared to the same period in 2024. |
● | Total RA originations were $663 million during the first six months of 2025 compared to $771 million for the first six months of 2024. Originations for both six month periods occurred during the first quarter of the respective periods. |
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● | TRS originated $139 million of ERAs during the fourth quarter of 2024 related to the anticipated filing of tax returns for the upcoming first quarter 2025 tax filing season compared to $103 million during the fourth quarter of 2023 related to the anticipated filing of tax returns for the first quarter of 2024. |
● | TRS recorded a net charge to the Provision of $11.5 million during the first six months of 2025 compared to a net charge to the Provision of $24.6 million for the same period in 2024. |
● | Noninterest income increased $1.9 million, or 13%, for the first six months of 2025 compared to the same period in 2024. |
● | Within noninterest income, net RT revenue increased $1.8 million, or 13% for the first six months of 2025 compared to the same period in 2024. |
● | Noninterest expense totaled $5.7 million for the first six months of 2025 compared to $6.5 million for the same period in 2024. |
Republic Payment Solutions segment
● | Net income increased $670,000, or 14%, for the first six months of 2025 compared to the same period in 2024. |
● | Net interest income increased $1.1 million, or 17%, for the first six months of 2025 compared to the same period in 2024. |
● | Noninterest income was $1.5 million for the first six months of 2025 unchanged from $1.5 million for the first six months of 2024. |
● | Noninterest expense totaled $2.2 million for the first six months of 2025 compared to $2.0 million for the first six months of 2024. |
Republic Credit Solutions segment
● | Net income increased $3.3 million, or 30%, for the first six months of 2025 compared to the same period in 2024. |
● | Net interest income increased $1.2 million, or 5%, for the first six months of 2025 compared to the same period in 2024. |
● | RCS recorded a net charge to the Provision of $8.0 million during the first six months of 2025 compared to a net charge of $9.4 million for the same period in 2024. |
● | Noninterest income decreased $274,000, or 4%, from the first six months of 2024 to the first six months of 2025. |
● | Noninterest expense totaled $5.5 million for the first six months of 2025 and $7.2 million for the same period in 2024. |
● | Total nonperforming loans to total loans for the RCS segment was 0.09% as of June 30, 2025, compared to 0.11% as of December 31, 2024. |
● | Delinquent loans to total loans for the RCS segment was 7.67% as of June 30, 2025, compared to 8.00% as of December 31, 2024. |
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RESULTS OF OPERATIONS (Six months ended June 30, 2025, Compared to Six months ended June 30, 2024)
Net Interest Income
See the section titled “Asset/Liability Management and Market Risk” in this section of the filing regarding the Bank’s interest rate sensitivity.
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, SSUAR 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.
Since April 2025, when the President proposed the implementation of broad-based sweeping tariffs against many of the U.S.’s global trading partners, there have been numerous policy changes that have triggered ongoing financial volatility. While the FRB has maintained its FFTR at a range of 4.25% to 4.50%, recent FOMC commentary has indicated possible rate cuts in the second half of 2025.
Total Company net interest income was $178.9 million during the first six months of 2025 and represented an increase of $13.4 million, or 8%, from the first six months of 2024. Total Company NIM increased to 5.44% during the first six months of 2025 from 5.13% for the first six months 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 increased $11.5 million, or 12%, for the first six months of 2025 compared to the same period in 2024, benefitted from period-over-period growth in average interest-earning assets and a NIM expansion. Traditional Banking’s NIM was 3.81% for the first six months of 2025, an increase of 38 basis points from the first six months of 2024, as the rise in its interest-earning asset yields outpacing the rise in funding costs.
The increase in the Traditional Bank’s net interest income and NIM during the first six months of 2025 was primarily attributable to the following factors:
● | Traditional Bank average loans declined from $4.63 billion with a weighted-average yield of 5.51% during the first six months of 2024 to $4.58 billion with a weighted average yield of 5.65% during the first six months of 2025. While the weighted-average yield earned on Traditional Bank loans increased 14 basis points, the average balance was impacted by the second quarter 2024 sale of $67 million in residential real estate loans 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” section of this document. |
● | Average interest-earning cash, which is managed as a separate but complementary component of the Company’s overall investment portfolio, was $570 million with a weighted-average yield of 4.45% during the first six months of 2025 compared to $424 million with a weighted-average yield of 5.52% for the first six months of 2024. The lower yield on cash for the first six months of 2025 was driven by a 100-basis-point decrease in the FFTR from the second quarter of 2024 to the second quarter of 2025. The growth in cash balances was primarily driven by excess funds from interest-bearing deposit growth, including cash from a $131 million short-term brokered CD obtained during April 2025 that matures in July 2025. |
● | Average investments decreased to $653 million with a weighted-average yield of 3.60% during the first six months of 2025 from $701 million with a weighted-average yield of 3.03% for the first six months of 2024. The increased period-over-period yield on investments was driven by the redeployment of cash from maturing investments into new purchases with longer durations and higher yields. The Company began buying investment securities with longer durations, such MBS’s, during 2025 as a result of a more favorable yield curve and the more attractive yield for these longer-duration securities above the overnight cash yield. |
● | The Traditional Bank’s average cost of interest-bearing liabilities decreased from 2.59% during the first six months of 2024 to 2.09% for the first six months of 2025. |
83
o | While the weighted-average cost of total interest-bearing deposits decreased from 2.74% during the first six months of 2024 to 2.30% for the first six months of 2025, average interest-bearing deposits expanded $163 million, or 5%, from the first six months of 2024 to the first six months of 2025. Average balance growth of $275 million in business and consumer money market accounts, which generally pay premium rates, was partially offset by $100 million of contraction in lower-costing transaction accounts. |
o | The average balance of FHLB advances increased from $421 million for the first six months of 2024 to $445 million for the first six months of 2025. The weighted-average cost of these borrowings decreased from 4.70% to 4.37% for the same time periods. The decrease in the overall weighted-average cost of FHLB advances resulted primarily from previous term extension strategies implemented earlier in 2024 to take advantage of the then-inverted yield curve. |
● | The Traditional Bank’s average noninterest-bearing deposits decreased from $1.21 billion during the first six months of 2024 to $1.14 billion for the first six months of 2025, as the then-inverted yield curve and competition for deposits continued to make interest-bearing deposits a more attractive on-going alternative for consumer and business deposit accounts. |
Management believes that any future reductions to the FFTR will likely not benefit the Traditional Bank’s net interest income and NIM. The amount of such impact to the Traditional Bank’s net interest income and NIM 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.
Warehouse Lending segment
Net interest income within Warehouse rose $1.4 million, or 27%, from the first six months of 2024 to the first six months of 2025, as total interest income increased $2.1 million and total interest expense increased $699,000. While Warehouse NIM and loan yields declined two basis points and 99 basis points, respectively during the first six months of 2025 compared to the same period in 2024, average outstanding balances expanded $114 million, or 29%, driving the overall increase in net interest income. Average committed Warehouse lines of credit increased from $935 million as June 30, 2024, to $981 million as of June 30, 2025, while average usage rates for Warehouse lines increased from 43% to 52% during the same periods.
Consumer mortgage demand drives Warehouse LOC usage and the Warehouse segment has historically been sensitive 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 substantially on the short-end of the yield curve, Warehouse demand would not likely be materially impacted.
Tax Refund Solutions segment
TRS’s net interest income decreased $1.9 million, or 6%, from the first six months of 2024 to the first six months of 2025. Loan-related interest and fees decreased $2.9 million for the first six months of 2025, consistent with 8% decline in tax season origination volume. In addition, TRS received a $560,000 payment during the second quarter of 2024 representing a Tax Provider yield enhancement for the RA program to help offset the Company’s higher funding costs. This yield enhancement was new for the 2024 tax season and eliminated for the 2025 tax season.
Republic Payment Solutions
Net interest income from the Company’s prepaid card division increased $1.1 million for the first six months of 2025 compared to the same period in 2024. Driving this increase at RPS was a reduction in the segment’s revenue share component for the first six months of 2025, as the RPS’s largest marketer-servicer did not achieve the minimal contractual thresholds for average deposit balances in order to earn a revenue share for the current year. By contrast, this revenue share totaled $2.3 million during the first six months 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 this marketer-servicer are at levels near the thresholds necessary to achieve a revenue share, making a future revenue share possible, but not certain.
Partially offsetting the positive benefit of the decreased revenue share, RPS earned a lower yield of 4.42% applied to the $362 million average of prepaid program balances for the first six months of 2025 compared to a yield of 5.05% for the $368 million in average
84
prepaid card balances for the first six months of 2024. The lower earnings rate was driven by a decrease in the FFTR of 100 basis points from the first six months of 2024 to the first six months 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 internally assigned net FTP funding credit more than it would impact any revenue share the Company pays for the product, decreasing the segment's NIM.
Republic Credit Solutions segment
RCS’s net interest income increased $1.2 million, or 5%, from the first six months of 2024 to the first six months of 2025. The increase was driven primarily by an increase in fee income from RCS’s LOC II product as net interest income increased $550,000 to $13.9 million from the first six months of 2024 to the same period in 2025. The rise in net interest income for this LOC product was driven primarily by a period-to-period increase in average outstanding loan balances.
Overall customer demand for the RCS segment’s products has historically not been interest rate sensitive and therefore management does not believe a changing interest rate environment would materially impact origination volume for its various consumer loan products. A decreasing interest rate environment would positively impact the Company’s internal FTP cost allocated to this segment, which would increase the NIM for the segment. The exact amount of the impact would depend on the final internal FTP cost assigned, as well as the overall volume and mix of loans the segment generates.
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The following table presents the average balance sheets for the six-month periods ended June 30, 2025, and 2024, along with the related calculations of net interest income, NIM and net interest spread for the related periods.
Table 7 — Total Company Average Balance Sheets and Interest Rates
Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | |||||||||||||||||||
Average |
|
| Average | Average |
|
| Average | |||||||||||||
(dollars in thousands) | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||
ASSETS | ||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||
Federal funds sold and other interest-earning deposits | $ | 570,140 | $ | 12,587 |
| 4.45 | % |
| $ | 423,761 | $ | 11,623 |
| 5.52 | % | |||||
Investment securities, including FHLB stock (a) | 653,058 | 11,657 |
| 3.60 | 701,396 | 10,580 |
| 3.03 | ||||||||||||
TRS Refund Advance loans (b) | 150,923 | 33,315 | 44.51 | 162,454 | 35,393 | 43.81 | ||||||||||||||
RCS LOC products (b) | 45,885 | 24,671 | 108.43 | 41,675 | 22,644 | 109.27 | ||||||||||||||
Other RPG loans |
| 116,435 | 3,563 |
| 6.17 |
| 126,930 | 5,365 |
| 8.50 | ||||||||||
Outstanding Warehouse lines of credit | 512,980 | 17,793 | 6.99 | 398,670 | 15,817 | 7.98 | ||||||||||||||
Traditional Bank loans (c) |
| 4,581,598 | 128,455 |
| 5.65 |
| 4,628,802 | 126,910 |
| 5.51 | ||||||||||
Total loans (d) | 5,407,821 | 207,797 | 7.75 | 5,358,531 | 206,129 | 7.74 | ||||||||||||||
Total interest-earning assets |
| 6,631,019 |
| 232,041 |
| 7.06 |
| 6,483,688 |
| 228,332 |
| 7.08 | ||||||||
Allowance for credit loss |
| (104,008) |
| (102,320) | ||||||||||||||||
Noninterest-earning assets: | ||||||||||||||||||||
Noninterest-earning cash and cash equivalents |
| 256,814 |
| 191,665 | ||||||||||||||||
Premises and equipment, net |
| 32,883 |
| 33,671 | ||||||||||||||||
Bank owned life insurance |
| 108,010 |
| 104,716 | ||||||||||||||||
Other assets (a) |
| 273,420 |
| 251,809 | ||||||||||||||||
Total assets | $ | 7,198,138 | $ | 6,963,229 | ||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||
Transaction accounts | $ | 1,717,873 | $ | 5,224 |
| 0.61 | % | $ | 1,827,296 | $ | 12,053 |
| 1.33 | % | ||||||
Money market accounts |
| 1,377,543 | 19,658 |
| 2.88 |
| 1,093,439 | 18,459 |
| 3.39 | ||||||||||
Time deposits |
| 429,194 | 8,140 |
| 3.82 |
| 380,195 | 7,440 |
| 3.94 | ||||||||||
Reciprocal money market and time deposits | 307,536 | 5,100 | 3.34 | 322,697 | 6,746 | 4.20 | ||||||||||||||
Brokered deposits |
| 229,563 | 5,106 |
| 4.49 |
| 302,915 | 8,071 |
| 5.36 | ||||||||||
Total interest-bearing deposits |
| 4,061,709 |
| 43,228 |
| 2.15 |
| 3,926,542 |
| 52,769 |
| 2.70 | ||||||||
SSUARs and other short-term borrowings |
| 98,202 |
| 277 |
| 0.57 |
| 95,459 |
| 262 |
| 0.55 | ||||||||
Federal Home Loan Bank advances |
| 444,972 |
| 9,646 |
| 4.37 |
| 420,907 |
| 9,846 |
| 4.70 | ||||||||
Total interest-bearing liabilities |
| 4,604,883 |
| 53,151 |
| 2.33 |
| 4,442,908 |
| 62,877 |
| 2.85 | ||||||||
Noninterest-bearing liabilities and Stockholders’ equity: | ||||||||||||||||||||
Noninterest-bearing deposits |
| 1,406,890 |
| 1,428,455 | ||||||||||||||||
Other liabilities |
| 147,103 |
| 148,472 | ||||||||||||||||
Stockholders’ equity |
| 1,039,262 |
| 943,394 | ||||||||||||||||
Total liabilities and stock-holders’ equity | $ | 7,198,138 | $ | 6,963,229 | ||||||||||||||||
Net interest income | $ | 178,890 | $ | 165,455 | ||||||||||||||||
Net interest spread |
| 4.73 | % |
| 4.23 | % | ||||||||||||||
Net interest margin |
| 5.44 | % |
| 5.13 | % | ||||||||||||||
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 TRS RAs and RCS LOC products is composed entirely of loan fees. |
c) | Average balances for loans include the principal balance of nonaccrual loans and loans HFS, and are inclusive of all loan premiums, discounts, fees and costs. |
d) | See table 8 for detail of loan fees by reporting segment. |
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The following table illustrates loan fees recorded as interest income on loans, by segment, for the six months ended June 30, 2025, and 2024.
Table 8 — Loan Fee Income
Six months ended June 30, | ||||||
(dollars in thousands) | 2025 | 2024 | ||||
Traditional Banking | $ | 2,658 | $ | 2,647 | ||
Warehouse Lending | 679 | 585 | ||||
Total Core Bank | 3,337 | 3,232 | ||||
TRS | 33,700 | 36,627 | ||||
RCS | 24,671 | 22,644 | ||||
Total RPG | 58,371 | 59,271 | ||||
Total loan fees - Total Company | $ | 61,708 | $ | 62,503 |
The following table 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 9 — Total Company Volume/Rate Variance Analysis
Six Months Ended June 30, 2025 | ||||||||||
Compared to | ||||||||||
Six Months Ended June 30, 2024 | ||||||||||
Total Net | Increase / (Decrease) Due to | |||||||||
(in thousands) | Change |
| Volume |
| Rate | |||||
Interest income: | ||||||||||
Federal funds sold and other interest-earning deposits | $ | 964 | $ | 3,497 | $ | (2,533) | ||||
Investment securities, including FHLB stock | 1,077 | (760) | 1,837 | |||||||
TRS Refund Advance loans* | (2,078) | (2,533) | 455 | |||||||
RCS LOC products | 2,027 | 2,264 | (237) | |||||||
Other RPG loans |
| (1,802) |
| (412) |
| (1,390) | ||||
Outstanding Warehouse lines of credit | 1,976 | 4,118 | (2,142) | |||||||
Traditional Bank loans |
| 1,545 |
| (1,293) |
| 2,838 | ||||
Net change in interest income |
| 3,709 |
| 4,881 |
| (1,172) | ||||
Interest expense: | ||||||||||
Transaction accounts |
| (6,829) |
| (677) | (6,152) | |||||
Money market accounts |
| 1,199 |
| 4,309 | (3,110) | |||||
Time deposits |
| 700 |
| 933 | (233) | |||||
Reciprocal money market and time deposits | (1,646) |
| (302) | (1,344) | ||||||
Brokered deposits | (2,965) | (2,028) |
| (937) | ||||||
SSUARs and other short-term borrowings |
| 15 |
| 7 | 8 | |||||
Federal Home Loan Bank advances |
| (200) |
| 542 |
| (742) | ||||
Net change in interest expense |
| (9,726) |
| 2,784 |
| (12,510) | ||||
Net change in net interest income | $ | 13,435 | $ | 2,097 | $ | 11,338 |
* Since interest income for RAs is composed entirely of loan fees and RAs are only offered during the first two months of each year, volume and rate measurements for this product are not a meaningful metric for the periods presented above.
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Provision
Total Company Provision was a net charge of $19.5 million for the first six months of 2025 compared to a net charge of $35.8 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 six months of 2025 was a net credit of $252,000 compared to a net charge of $1.3 million for the first six months of 2024. An analysis of the Provision for the first six months of 2025 compared to the same period in 2024 follows:
For the first six months of 2025, the net credit of $252,000 to the Provision for the Traditional Bank primarily reflected the following:
● | In the second quarter of 2025, as a practical expedient, the Company established a minimum loan balance threshold in assessing credits for impairment resulting in a $518,000 credit to Provision. |
● | During the first quarter of 2025, approximately $5 million of consumer credit cards were reclassified from held for investment into HFS, which generated a credit to Provision of $414,000. The consumer credit card sale was completed during the second quarter of 2025. |
● | While loan balances at the Traditional Bank increased slightly, or $13 million, during the first six months of 2025, the segment continued to experience a change in loan mix, growing in categories with higher loan loss reserve requirements. |
● | The Traditional Bank recorded net charge-offs of $449,000 during the first six months of 2025. |
For the first six months of 2024, the net charge of $1.3 million to the Provision for the Traditional Bank primarily reflected the following:
● | The Traditional Bank recorded a net charge to the Provision of $860,000 during the first six months of 2024 related to general formula reserves applied to Traditional Bank loans. While loan balances at the Traditional Bank decreased by $29 million during the first six months of 2024, the segment continued to experience a change in loan mix, growing in categories with higher loan loss reserve requirements thus driving the Provision fluctuation for the period. |
● | The Traditional Bank recorded net charge-offs of $412,000 during the first six months of 2024. |
As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.29% as of June 30, 2025, compared to 1.31% as of December 31, 2024, and 1.30% as of June 30, 2024. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses as of June 30, 2025.
See the sections titled “Allowance for Credit Losses on Loans” 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 $302,000 for the first six months of 2025 compared to a net charge of $523,000 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 $121 million during the first six months of 2025 compared to an increase of $209 million during the first six months of 2024.
As a percentage of total Warehouse outstanding balances, the Warehouse ACLL was 0.25% as of June 30, 2025, December 31, 2024, and June 30, 2024. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses as of June 30, 2025.
88
Tax Refund Solutions segment
TRS recorded a net charge to the Provision of $11.5 million during the first six months of 2025 compared to a net charge of $24.6 million for the same period in 2024.
ERAs/RAs related to the first quarter 2025 tax filing season were only originated during December of 2024 and the first two months of 2025, while ERAs/RAs related to the first quarter 2024 tax filing season were only originated during December of 2023 and the first two months of 2024. As is the case each year, as of March 31st the ACLL related to ERAs/RAs represented an estimate to be finalized on June 30th when all uncollected ERAs/RAs are ultimately charged-off. ERAs/RAs collected during the second half of each year are recorded as recoveries of previously charged-off loans unless they are covered under a loss guaranty arrangement. Any ERAs subject to a loss guaranty arrangement that are recovered during the second half of the year would be distributed to the guarantor.
During the fourth quarter of 2024, the Company revised its agreement with its largest third-party marketer-servicer for ERAs/RAs for the 2025 Tax Season. In addition to a new loss cap guarantee specific to ERAs for the 2025 Tax Season, the fee specific to ERAs for the 2025 Tax Season was increased with the fee applicable to in-season RAs for the 2025 Tax Season being reduced.
Total ERA/RA volume for the 2025 tax filing season totaled $801 million, representing a $73 million, or 8%, decline from the $874 million originated for the 2024 tax filing season. RA origination volume totaled $663 million during the first six months of 2025 compared to $771 million for the first six months of 2024. ERA origination volume totaled $139 million during the fourth quarter of 2024 related to the anticipated filing of tax returns for the upcoming first quarter 2025 tax filing season compared to $103 million during the fourth quarter of 2023 related to the anticipated filing of tax returns for the first quarter of 2024.
The lower Provision during the first six months of 2025 compared to the same period in 2024 related to the following factors:
● | The fee structure changes, and total ERA/RA volume decline detailed above; |
● | A significant improvement in payments received from the U.S. Treasury to fund federal tax refunds for the first quarter 2025 tax filing season; 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 six months of 2025 than the first six months 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 ACLL calculation. |
As of June 30, 2025, TRS’s incurred loss rate related to unguaranteed loans associated with the first quarter 2025 tax filing season was 2.81% of the $801 million total originations. In-line with its customary June 30th charge-off policy for TRS loans, the Company completely charged-off all remaining unpaid ERAa/RAs as of June 30, 2025, with approximately $2.3 million of loans expected to be recovered under loan-loss guarantee arrangements with Tax Providers recorded as receivables in other assets on the balance sheet.
As of June 30, 2024, TRS’s incurred loss rate related to unguaranteed loans associated with the first quarter 2024 tax filing season was 3.30% of the $874 million of total originations. In June 2024, the Company charged off all unpaid TRS loans which equated to 3.22% of total originations. The final loss rate of unguaranteed RAs/ERAs for the 2024 Tax Season was 2.81% of originations.
See additional detail regarding the ERA/RA products under Footnote 4 “Loans and Allowance for Credit Losses on Loans” of Part I Item 1 “Financial Statements.”
Republic Credit Solutions segment
As illustrated in the following table, RCS recorded a net charge to the Provision of $8.0 million during the first six months of 2025 compared to a net charge to the Provision of $9.4 million for the same period in 2024. RCS recorded net charge-offs of $7.9 million during the first six months of 2025 compared to net charge-offs of $8.2 million during the first six months of 2024.
RCS ending loan balances decreased by $10 million during the first six months of 2025, entirely related to the healthcare receivables programs. During the first six months of 2024, loan balances decreased by $6 million also led by the healthcare receivables programs.
89
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 17.67% as of June 30, 2025, 16.30% as of December 31, 2024, and 15.44% as of June 30, 2024. The RCS segment has continued to experience a change in loan mix, growing in categories with higher loan loss reserve requirements thus driving its higher ACLL for the first six months of 2025. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses as of June 30, 2025.
The following table presents net charges to the RCS Provision by product:
Table 10 — Republic Credit Solutions Provision by Product
Six Months Ended June 30, | ||||||||||||
(dollars in thousands) | 2025 | 2024 | $ Change | % Change | ||||||||
Product: | ||||||||||||
Lines of credit | $ | 7,975 | $ | 9,395 | $ | (1,420) | (15) | % | ||||
Healthcare receivables | (25) | (18) | (7) | 39 | ||||||||
Total | $ | 7,950 | $ | 9,377 | $ | (1,427) | (15) | % |
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Table 11 — Summary of Loan and Lease Loss Experience
Six Months Ended | ||||||||
June 30, | ||||||||
(dollars in thousands) | 2025 | 2024 | ||||||
ACLL at beginning of period | $ | 91,978 | $ | 82,130 | ||||
Charge-offs: | ||||||||
Traditional Banking: | ||||||||
Residential real estate | (29) |
| (52) | |||||
Commercial & industrial |
| (18) |
| — | ||||
Lease financing receivables |
| (138) |
| (58) | ||||
Consumer | (556) | (604) | ||||||
Total Traditional Banking | (741) | (714) | ||||||
Warehouse lines of credit |
| — |
| — | ||||
Total Core Banking | (741) | (714) | ||||||
Republic Processing Group: | ||||||||
Tax Refund Solutions: | ||||||||
Refund Advances | (24,893) |
| (32,556) | |||||
Other TRS commercial & industrial loans | (165) |
| (137) | |||||
Republic Credit Solutions | (8,638) |
| (8,860) | |||||
Total Republic Processing Group | (33,696) | (41,553) | ||||||
Total charge-offs |
| (34,437) |
| (42,267) | ||||
Recoveries: | ||||||||
Traditional Banking: | ||||||||
Residential real estate | 63 | 80 | ||||||
Commercial real estate |
| 3 |
| 23 | ||||
Commercial & industrial |
| — |
| 2 | ||||
Lease financing receivables |
| 22 |
| 22 | ||||
Home equity |
| 27 |
| 1 | ||||
Consumer | 177 | 174 | ||||||
Total Traditional Banking | 292 | 302 | ||||||
Warehouse lines of credit |
| — |
| — | ||||
Total Core Banking | 292 | 302 | ||||||
Republic Processing Group: | ||||||||
Tax Refund Solutions: | ||||||||
Refund Advances | 3,699 |
| 4,067 | |||||
Other TRS commercial & industrial loans | 3 |
| 44 | |||||
Republic Credit Solutions | 730 |
| 640 | |||||
Total Republic Processing Group | 4,432 | 4,751 | ||||||
Total recoveries |
| 4,724 |
| 5,053 | ||||
Net loan charge-offs |
| (29,713) |
| (37,214) | ||||
Provision - Core Banking |
| 50 |
| 1,802 | ||||
Provision - RPG |
| 19,445 |
| 33,969 | ||||
Total Provision |
| 19,495 |
| 35,771 | ||||
ACLL at end of period | $ | 81,760 | $ | 80,687 | ||||
Credit Quality Ratios - Total Company: | ||||||||
ACLL to total loans |
| 1.52 | % |
| 1.53 | % | ||
ACLL to nonperforming loans |
| 378 |
| 393 | ||||
Net loan charge-offs to average loans |
| 1.11 |
| 1.40 | ||||
Credit Quality Ratios - Core Banking: | ||||||||
ACLL to total loans |
| 1.16 | % |
| 1.19 | % | ||
ACLL to nonperforming loans |
| 282 |
| 308 | ||||
Net loan charge-offs to average loans | 0.02 | 0.02 |
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Table 12 — Annualized Net Loan Charge-offs (Recoveries) to Average Loans by Loan Category
Net Loan Charge-Offs (Recoveries) to Average Loans | |||||||
Six Months Ended | |||||||
June 30, | |||||||
2025 | 2024 | ||||||
Traditional Banking: | |||||||
Residential real estate: | |||||||
Owner occupied | (0.01) | % | — | % | |||
Nonowner occupied | — | — | |||||
Commercial real estate: | |||||||
Owner-occupied | — | — | |||||
Nonowner-occupied | — | — | |||||
Multi-Family | — | — | |||||
Construction & land development | — | — | |||||
Commercial & industrial | 0.01 | — | |||||
Lease financing receivables | 0.25 | 0.08 | |||||
Aircraft | — | — | |||||
Home equity | — | — | |||||
Consumer: | |||||||
Credit cards | 0.58 | 1.28 | |||||
Overdrafts | 83.63 | 74.84 | |||||
Automobile loans | (1.41) | (0.43) | |||||
Other consumer | 0.07 | 0.44 | |||||
Total Traditional Banking | 0.02 | 0.02 | |||||
Warehouse lines of credit | — | — | |||||
Total Core Banking | 0.02 | 0.02 | |||||
Republic Processing Group: | |||||||
Tax Refund Solutions: | |||||||
Refund Advances* | 27.34 | 34.58 | |||||
Other TRS loans | 1.34 | 0.78 | |||||
Republic Credit Solutions | 12.56 | 12.19 | |||||
Total Republic Processing Group | 19.18 | 22.76 | |||||
Total | 1.11 | % | 1.40 | % |
* All loss rates above are based on net charge-offs as a function of average outstanding portfolio balances. RAs 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 1.40% during the first six months of 2024 to 1.11% during the first six months of 2025, with net charge-offs decreasing $7.5 million, or 20%, and average total Company loans increasing $49 million, or 1% over the same periods. As discussed in more detail above, the decrease in net charge-offs was primarily driven by a $7.3 million decrease in period-over-period net charge-offs within the Company’s TRS segment related to significantly better payments received from the U.S. Treasury to pay off ERAs/RAs during the 2025 tax season.
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Noninterest Income
Total Company noninterest income increased $9.1 million, or 22%, during the first six months 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 $7.5 million, or 41%, for the first six months of 2025 compared to the same period in 2024, driven by the following:
● | Mortgage Banking income increased $1.8 million from the first six months of 2024 to the first six months 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 $67 million of correspondent loans that were re-designated from held for investment to HFS during the period. The remaining $800,000 increase related to a $20 million increase in the volume of fixed rate loans that were sold into the secondary market during the first six months of 2025 compared to the first six months of 2024 in addition to better pricing received on loans sold, especially during the second quarter. |
● | The Traditional Bank recorded a $4.1 million gain on sale of Visa Class B-1 shares during the first quarter of 2025. 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 during the first quarter of 2025 related to a $1.9 million charge-off recorded during the third quarter of 2024. |
● | The Traditional Bank also 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 six months ended June 30, 2025, and 2024 were $3.5 million and $3.5 million. The total daily overdraft charges, net of refunds, included in interest income for the six months ended June 30, 2025, and 2024 were $582,000 and $599,000. |
Tax Refund Solutions segment
TRS’s noninterest income increased $1.9 million, or 13%, during the first six months of 2025 compared to the same period in 2024 with RT fees representing the majority of noninterest income for each period. Total RT fees increased $1.8 million during these periods, consistent with a 30% increase in the net revenue earned for each RT product, which more than offset a 5% decline in funded RT volume. 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 six months of 2025 and the first six months of 2024, see section titled “OVERVIEW (Six Months Ended March 31, 2025, Compared to Six Months Ended March 31, 2024) - Tax Refund Solutions.”
Noninterest Expense
Total Company noninterest expense increased $9.2 million, or 9%, during the first six months of 2025 compared to the same period in 2024.
The following were the most significant components comprising the increase in noninterest expense by reportable segment:
Traditional Banking segment
Traditional Bank noninterest expense increased $11.4 million, or 14%, for the first six months of 2025 compared to the same period in 2024. The following drove the change in noninterest expense:
Salaries and employee benefits increased by a combined $2.9 million, or 6%, driven by a $1.7 million increase in estimated bonus-related expenses. The larger estimated bonus-related expenses for the first six months of 2025 were attributable to an increased
93
probability of a larger bonus payout for the year based on the Company’s strong operating results. Additionally, elevated health insurance claims activity during the first six months of 2025 led to a $771,000 increase in employee benefits expense.
Technology, equipment and communication expenses increased $2.0 million, or 16%, over the first six months of 2024. The increase in Technology expense was driven by enhanced security and new ancillary systems, including 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 $5.9 million of expense during the six months of 2025 for Core Contract deconversion and consulting fees, with $5.7 million of the expense recorded during the first quarter of 2025. Approximately $1.8 million of this expense was related to data conversion and secondary system migration costs in preparation for the conversion to the new Core. Approximately $4.1 million of the expense related to contract negotiation assistance from a third-party consultant determined based on a percentage of anticipated savings over the five-year term of the new contract. Republic projects total savings in excess of $16 million over the contract’s five-year term. The Company is currently targeting the fourth quarter of 2025 to launch a new core system.
Republic Credit Solutions segment
Noninterest expense at the RCS segment decreased $1.7 million, or 23%, during the first six months of 2025 compared to the same period in 2024. The most notable items driving this increase were in the LOC II product, including a $282,000 increase in third-party servicing costs for growth in the product and a $2.0 million decrease in marketing and development expenses. Approximately $763,000 of the marketing and development expense decline related to reimbursement for a prior period billing dispute.
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COMPARISON OF FINANCIAL CONDITION AS OF JUNE 30, 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 $485 million in cash and cash equivalents as of June 30, 2025, compared to $432 million as of December 31, 2024. Comparing average balances for the first six months of 2025 and 2024, the Company had average interest-earning cash and cash equivalent balances of $570 million for the first six months of 2025 compared to $424 million for the first six months of 2024.
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 six months of 2025. For cash held within the Bank’s banking center and automated teller machine networks, the Bank does not earn interest.
Investment Securities
Table 13 — Purchases of Investment Securities
| Six Months Ended June 30, 2025 | |||||||||
Purchase | Yield to | Estimated Weighted | ||||||||
(dollars in thousands) | Cost | Maturity | Average Life | |||||||
Purchases by Class for the Three Months Ended March 31, 2025 | ||||||||||
U.S. Government Agencies | $ | 55,000 | 5.01 | % | 4.86 | yrs | ||||
Mortgage-backed securities - residential | 79,584 | 5.20 | 5.53 | |||||||
Total | $ | 134,584 | 5.12 | 5.26 | yrs | |||||
Purchases by Class for the Three Months Ended June 30, 2025 | ||||||||||
U.S. Government Agencies | $ | 35,000 | 4.71 | % | 3.00 | yrs | ||||
Mortgage-backed securities - residential | 149,198 | 5.11 | 3.62 | |||||||
Total | $ | 184,198 | 5.04 | 3.50 | yrs | |||||
Total Purchases for the Six Months Ended June 30, 2025 | $ | 318,782 | 5.07 | % | 3.77 | yrs |
Republic’s total investment portfolio increased $116 million, or 20%, from December 31, 2024, to June 30, 2025. The increase was driven by $319 million of securities purchases, partially offset by $211 million in calls and maturities of debt securities and paydowns on MBS. During 2025, the Company began buying MBS investment securities with longer durations, as a result of a more favorable yield curve and the more attractive yield for these longer-duration securities above the overnight cash yield.
The Company’s overall investment management strategy for the remainder of 2025 and beyond will be dependent upon many factors including, but not limited to, the Company’s overall current and projected liquidity positions, its customers’ demand for its loans and deposit products, the Company’s overall interest rate risk position, the steepness of the yield curve and the overall interest rate environment at the time, as well as the projected interest rate environment for the near-term and the long-term.
Federal Home Loan Bank Stock
FHLB stock holdings were unchanged at $25 million at June 30, 2025, and December 31, 2024. FHLB members are required to hold certain levels of FHLB stock in relation to the amount of their borrowings, thus FHLB stock holdings will fluctuate consistently with borrowing activity from period to period.
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Loans
The composition of the loan portfolio follows:
Table 14 — Loan Portfolio Composition
(dollars in thousands) |
|
| June 30, 2025 |
| December 31, 2024 | $ Change | % Change | ||||||
Traditional Banking: | |||||||||||||
Residential real estate: | |||||||||||||
Owner-occupied | $ | 1,031,898 | $ | 1,032,459 | $ | (561) | (0) | % | |||||
Nonowner-occupied |
| 303,357 |
| 318,096 |
| (14,739) | (5) | ||||||
Commercial real estate: |
| ||||||||||||
Owner-occupied | 650,771 |
| 659,216 |
| (8,445) | (1) | |||||||
Nonowner-occupied | 818,367 |
| 840,517 |
| (22,150) | (3) | |||||||
Multi-Family | 319,905 |
| 313,444 |
| 6,461 | 2 | |||||||
Construction & land development |
| 258,817 |
| 244,121 |
| 14,696 | 6 | ||||||
Commercial & industrial |
| 481,219 |
| 460,245 |
| 20,974 | 5 | ||||||
Lease financing receivables |
| 96,547 |
| 93,304 |
| 3,243 | 3 | ||||||
Aircraft* |
| 211,910 |
| 226,179 |
| (14,269) | (6) | ||||||
Home equity |
| 387,599 |
| 353,441 |
| 34,158 | 10 | ||||||
Consumer: | |||||||||||||
Credit cards | 10,315 |
| 16,464 |
| (6,149) | (37) | |||||||
Overdrafts | 826 |
| 982 |
| (156) | (16) | |||||||
Automobile loans | 916 |
| 1,156 |
| (240) | (21) | |||||||
Other consumer | 9,705 |
| 9,555 |
| 150 | 2 | |||||||
Total Traditional Banking | 4,582,152 | 4,569,179 | 12,973 | 0 | |||||||||
Warehouse lines of credit* |
| 671,773 |
| 550,760 |
| 121,013 | 22 | ||||||
Total Core Banking | 5,253,925 | 5,119,939 | 133,986 | 3 | |||||||||
Republic Processing Group*: | |||||||||||||
Tax Refund Solutions: |
|
|
| ||||||||||
Refund Advances |
| — |
| 138,614 |
| (138,614) | (100) | ||||||
Other TRS commercial & industrial loans | 95 | 52,180 | (52,085) | (100) | |||||||||
Republic Credit Solutions |
| 119,000 |
| 128,733 |
| (9,733) | (8) | ||||||
Total Republic Processing Group |
| 119,095 |
| 319,527 |
| (200,432) | (63) | ||||||
Total loans** | 5,373,020 | 5,439,466 | (66,446) | (1) | |||||||||
Allowance for credit losses |
| (81,760) |
| (91,978) |
| 10,218 | (11) | ||||||
Total loans, net | $ | 5,291,260 | $ | 5,347,488 | $ | (56,228) | (1) |
*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 $66 million, or 1%, during the first six months of 2025 to $5.37 billion as of June 30, 2025. The most significant components comprising the change in loans by reportable segment follow:
Traditional Banking segment
Period-end Traditional Banking loan balances increased $13 million from December 31, 2024, to June 30, 2025, highlighted by increased LOC usage within the HELOC and C&I portfolios. During March 2025, the Company reached an agreement to sell approximately $5 million of consumer credit cards that were previously classified as held for investment. The sale of these credit cards was 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 at times less-favorable 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 a generally stricter pricing strategy as long as the
96
yield curve remains inverted, or flat, and incremental funding costs remain elevated. It is possible a stricter pricing policy could cause loan payoffs and paydowns to outpace new originations, leading to a possible decline in the Traditional Bank’s loan balances during the remainder of 2025.
Warehouse Lending segment
Outstanding Warehouse period-end balances increased $121 million, or 22%, from December 31, 2024, to June 30, 2025, representing the highest level achieved since March of 2022. Average committed Warehouse lines of credit increased from $938 million for the year ended December 31, 2024, to $981 million during the six months ended June 30, 2025, with higher demand driving average usage rates for Warehouse lines of credit from 50% during to 52% for the respective periods.
Due to mortgage market volatility and seasonality, it is challenging to accurately project future outstanding balances of Warehouse lines of credit, however expansion within the portfolio has historically followed 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 of credit 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 of credit have ranged from a low of 39% during 2022 to a high of 66% during 2020.
Tax Refund Solutions segment
TRS loan balances as of December 31, 2024, included ERAs of $139 million originated during December 2024 and $52 million of Commercial-related loan balances to tax providers during the fourth quarter of 2024 to assist Tax Providers with their short-term cashflow needs. These balances paid down to $0 as of June 30, 2025, or were charged off in line with the Company’s charge-off policy.
Allowance for Credit Losses on Loans
As of June 30, 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 ACLC for expected OBS credit exposure losses. Management evaluates the adequacy of the ACLL monthly, and the adequacy of the ACLC quarterly. All ACLs are presented and discussed with the Audit Committee and the Board of Directors quarterly.
The Company’s ACLL decreased to $82 million at June 30, 2025, compared to $92 million at December 31, 2024, with the total Company ACLL percent of total loans decreased to 1.52% as of June 30, 2025, compared to 1.69% as of December 31, 2024. An analysis of the ACLL by reportable segment follows:
Traditional Banking segment
While loan balances at the Traditional Bank increased slightly, or $13 million, during the first six months of 2025, the ACLL decreased $701,000 to $59 million as of June 30, 2025. In the second quarter of 2025, as a practical expedient, the Company established a minimum loan balance threshold in assessing credits for impairment that resulted in a $518,000 reduction in both the ACLL and Provision.
Warehouse Lending segment
The Warehouse ACLL increased $302,000, or 22%, to $2 million, while Warehouse ACLL to total Warehouse loans remained at 0.25% when comparing June 30, 2025, to December 31, 2024. Outstanding Warehouse period-end balances increased $121 million, or 22%, from December 31, 2024, to June 30, 2025, representing the highest level achieved since March of 2022. As of June 30, 2025, the Warehouse ACLL was entirely qualitative in nature with no adjustments to the qualitative reserve percentage required for the first six months of 2025.
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Tax Refund Solutions segment
The TRS ACLL decreased $10 million from December 31, 2024, to $0 as of June 30, 2025, with this decrease driven by the June 30, 2025, charge-off of all unpaid ERAs and Commercial-related loan balances to tax providers originated in December 2024.
Republic Credit Solutions segment
The RCS ACLL increased $42,000 to $21 million as of June 30, 2025, driven by an increase in the RCS LOC II spot loan balances and a change in the RCS loan mix as the outstanding RCS LOC I and healthcare receivables spot loan balances decreased.
RCS maintained an ACLL for two distinct credit products offered as of June 30, 2025, including its LOC 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 LOC 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.
The following table sets forth management’s allocation of the ACLL by loan class. The ACLL allocation is based on management’s assessment of economic conditions, historical loss experience, forecasting for unemployment and vacancy rates, and various other life-of-loan and forecast considerations, as well as qualitative factors.
Table 15 — Management’s Allocation of the Allowance for Credit Losses on Loans
June 30, 2025 | December 31, 2024 | |||||||||||||||||
| Percent of |
|
| Percent of |
| Percent of |
|
| Percent of | |||||||||
Loans to | ACLL to | Loans to | ACLL to | |||||||||||||||
Total | Total | Total | Total | |||||||||||||||
(dollars in thousands) |
| ACLL | Loans* | Loan Class |
| ACLL | Loans* | Loan Class* | ||||||||||
Traditional Banking: | ||||||||||||||||||
Residential real estate: | ||||||||||||||||||
Owner-occupied | $ | 10,626 | 19 | % | 1.03 | % | $ | 10,849 |
| 20 | % |
| 1.05 | % | ||||
Nonowner-occupied |
| 3,883 | 6 | 1.28 |
| 4,140 |
| 6 |
| 1.30 | ||||||||
Commercial real estate |
| |||||||||||||||||
Owner-occupied | 7,143 | 12 | 1.10 | 7,425 | 12 | 1.13 | ||||||||||||
Nonowner-occupied | 11,952 | 15 | 1.46 | 12,474 | 16 | 1.48 | ||||||||||||
Multi-Family | 2,751 | 6 | 0.86 | 2,657 | 6 | 0.85 | ||||||||||||
Total commercial real estate | 21,846 | 33 | 1.22 | 22,556 |
| 34 |
| 1.24 | ||||||||||
Construction & land development |
| 8,725 | 5 | 3.37 |
| 8,227 |
| 4 |
| 3.37 | ||||||||
Commercial & industrial | 2,455 | 9 | 0.51 | 2,527 | 8 | 0.55 | ||||||||||||
Lease financing receivables | 983 | 2 | 1.02 | 1,117 | 2 | 1.20 | ||||||||||||
Aircraft | 530 | 4 | 0.25 | 565 | 4 | 0.25 | ||||||||||||
Home equity | 8,106 | 7 | 2.09 | 7,378 | 6 | 2.09 | ||||||||||||
Consumer: | ||||||||||||||||||
Credit cards | 990 | — | 9.60 | 1,379 | — | 8.38 | ||||||||||||
Overdrafts | 656 | — | 79.42 | 724 | — | 73.73 | ||||||||||||
Automobile loans | 2 | — | 0.22 | 11 | — | 0.95 | ||||||||||||
Other consumer | 253 | — | 2.61 | 283 | — | 2.96 | ||||||||||||
Total Traditional Banking | 59,055 | 85 | 1.29 | 59,756 | 84 | 1.31 | ||||||||||||
Warehouse lines of credit | 1,676 | 13 | 0.25 | 1,374 | 10 | 0.25 | ||||||||||||
Total Core Banking | 60,731 | 98 | 1.16 | 61,130 | 94 | 1.19 | ||||||||||||
Republic Processing Group: | ||||||||||||||||||
Tax Refund Solutions: |
|
| ||||||||||||||||
Refund Advances |
| — | — | — |
| 9,793 |
| 3 |
| 7.06 | ||||||||
Other TRS commercial & industrial loans |
| — | — | — |
| 68 |
| 1 |
| 0.13 | ||||||||
Republic Credit Solutions | 21,029 | 2 | 17.67 | 20,987 | 2 | 16.30 | ||||||||||||
Total Republic Processing Group | 21,029 | 2 | 17.66 | 30,848 | 6 | 9.65 | ||||||||||||
Total | $ | 81,760 | 100 | 1.52 | $ | 91,978 |
| 100 |
| 1.69 | ||||||||
* Values of less than 50 basis points are rounded down to zero.
98
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.” The Bank’s Classified loans increased by $21 million while Special Mention loans decreased approximately $31 million during the first six months of 2025.
In the second quarter of 2025, the Company downgraded a $22 million hospitality relationship from Special Mention to Substandard based on the overall performance of the underlying operations. Based on the value of the collateral securing the relationship and current exit strategy, no future loss is currently expected. The Company does not have a material concentration of hospitality credits.
See Footnote 4 “Loans and Allowance for Credit Losses on Loans” of Part I Item 1 “Financial Statements” for additional discussion regarding Classified and Special Mention loans.
Table 16 — Classified and Special Mention Loans
(dollars in thousands) |
| June 30, 2025 |
| December 31, 2024 | $ Change | % Change | |||||||
Loss | $ | — | $ | — | $ | — | — | % | |||||
Doubtful |
| — |
| — | — | — | |||||||
Substandard |
| 49,148 |
| 27,350 | 21,798 | 80 | |||||||
PCD - Substandard |
| 904 |
| 1,378 | (474) | (34) | |||||||
Total Classified Loans |
| 50,052 |
| 28,728 | 21,324 | 74 | |||||||
Special Mention |
| 23,341 |
| 53,924 | (30,583) | (57) | |||||||
PCD - Special Mention |
| — |
| 359 | (359) | (100) | |||||||
Total Special Mention Loans |
| 23,341 |
| 54,283 | (30,942) | (57) | |||||||
Total Classified and Special Mention Loans | $ | 73,393 | $ | 83,011 | $ | (9,618) | (12) | % |
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 decreased to 0.40% as of June 30, 2025, from 0.42% as of December 31, 2024, as the total balance of nonperforming loans decreased by $1 million, or 5%, while total loans decreased $66 million during the first six months of 2025.
The ACLL to total nonperforming loans decreased to 378% as of June 30, 2025, from 404% as of December 31, 2024, as the total ACLL decreased $10 million and the balance of nonperforming loans decreased by $1 million.
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Table 17 — Nonperforming Loans and Nonperforming Assets Summary
(dollars in thousands) |
| June 30, 2025 |
| December 31, 2024 |
| ||
Loans on nonaccrual status* | $ | 21,537 | $ | 22,619 | |||
Loans past due 90-days-or-more and still on accrual** |
| 105 |
| 141 | |||
Total nonperforming loans |
| 21,642 |
| 22,760 | |||
Other real estate owned |
| 1,054 |
| 1,160 | |||
Total nonperforming assets | $ | 22,696 | $ | 23,920 | |||
Credit Quality Ratios - Total Company: | |||||||
ACLL to total loans | 1.52 | % | 1.69 | % | |||
Nonaccrual loans to total loans | 0.40 | 0.42 | |||||
ACLL to nonperforming loans | 378 | 404 | |||||
Nonperforming loans to total loans |
| 0.40 |
| 0.42 | |||
Nonperforming assets to total loans (including OREO) |
| 0.42 |
| 0.44 | |||
Nonperforming assets to total assets |
| 0.33 |
| 0.35 | |||
Credit Quality Ratios - Core Bank: | |||||||
ACLL to total loans |
| 1.16 | % | 1.19 | % | ||
Nonaccrual loans to total loans | 0.41 | 0.44 | |||||
ACLL to nonperforming loans | 282 | 270 | |||||
Nonperforming loans to total loans |
| 0.41 | 0.44 | ||||
Nonperforming assets to total loans (including OREO) |
| 0.43 |
| 0.46 | |||
Nonperforming assets to total assets |
| 0.35 |
| 0.39 |
* | Loans on nonaccrual status include collateral-dependent loans. See Footnote 4 “Loans and Allowance for Credit Losses on Loans” 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 18 — Nonperforming Loan Composition
June 30, 2025 | December 31, 2024 | ||||||||||||
Percent of | Percent of | ||||||||||||
| Total | Total | |||||||||||
(dollars in thousands) | Balance | Loan Class | Balance | Loan Class | |||||||||
| |||||||||||||
Traditional Banking: | |||||||||||||
Residential real estate: |
| ||||||||||||
Owner-occupied |
| $ | 17,095 | 1.66 | % |
| $ | 17,331 | 1.68 | % | |||
Nonowner-occupied |
|
|
| 54 | 0.02 |
| 81 | 0.03 | |||||
Commercial real estate: |
|
|
|
| |||||||||
Owner-occupied | 706 | 0.11 | 424 | 0.06 | |||||||||
Nonowner-occupied | — | — | 799 | 0.10 | |||||||||
Multi-Family | — | — | — | — | |||||||||
Construction & land development |
|
|
| — | — |
| — | — | |||||
Commercial & industrial |
|
|
| 635 | 0.13 |
| 860 | 0.19 | |||||
Lease financing receivables |
|
|
| 91 | 0.09 |
| 147 | 0.16 | |||||
Aircraft | — | — |
| 56 | 0.02 | ||||||||
Home equity |
|
|
| 2,953 | 0.76 |
|
| 2,359 | 0.67 | ||||
Consumer: |
| ||||||||||||
Credit cards | — | — | — | — | |||||||||
Overdrafts | — | — | — | — | |||||||||
Automobile loans | 3 | 0.33 | 5 | 0.43 | |||||||||
Other consumer | — | — | 557 | 5.83 | |||||||||
Total Traditional Banking | 21,537 | 0.47 | 22,619 | 0.50 | |||||||||
Warehouse lines of credit |
|
|
| — | — |
| — | — | |||||
Total Core Banking | 21,537 | 0.41 | 22,619 | 0.44 | |||||||||
Republic Processing Group: | |||||||||||||
Tax Refund Solutions: |
|
|
|
| |||||||||
Refund Advances |
|
|
| — | — |
| — | — | |||||
Other TRS commercial & industrial loans | — | — | — | — | |||||||||
Republic Credit Solutions |
|
|
| 105 | 0.09 |
| 141 | 0.11 | |||||
Total Republic Processing Group |
|
| 105 | 0.09 |
| 141 | 0.04 | ||||||
| |||||||||||||
Total nonperforming loans |
| $ | 21,642 | 0.40 | % | $ | 22,760 | 0.42 | % | ||||
|
100
Table 19 — Stratification of Nonperforming Loans
Number of Nonperforming Loans and Recorded Investment |
| |||||||||||||||||||||||
|
|
|
| Balance |
|
|
|
|
| |||||||||||||||
Balance | > $100 & | Balance | Total |
| ||||||||||||||||||||
June 30, 2025 (dollars in thousands) | No. | <= $100 | No. | <= $500 | No. | > $500 | No. | Balance |
| |||||||||||||||
|
|
|
| |||||||||||||||||||||
Traditional Banking: | ||||||||||||||||||||||||
Residential real estate: | ||||||||||||||||||||||||
Owner-occupied |
| 137 | $ | 4,887 |
| 69 | $ | 10,381 |
| 2 | $ | 1,827 |
| 208 | $ | 17,095 | ||||||||
Nonowner-occupied |
| 2 |
| 54 |
| — |
| — |
| — |
| — |
| 2 |
| 54 | ||||||||
Commercial real estate: |
|
|
|
|
|
|
|
| ||||||||||||||||
Owner-occupied | — | — | 2 | 706 | — |
| — | 2 |
| 706 | ||||||||||||||
Nonowner-occupied | — | — | — | — | — |
| — | — |
| — | ||||||||||||||
Multi-Family | — | — | — | — | — |
| — | — |
| — | ||||||||||||||
Construction & land development |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Commercial & industrial |
| 2 |
| 19 |
| 2 |
| 616 |
| — |
| — |
| 4 |
| 635 | ||||||||
Lease financing receivables |
| 5 |
| 91 |
| — |
| — |
| — |
| — |
| 5 |
| 91 | ||||||||
Aircraft | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||
Home equity |
| 44 |
| 1,488 |
| 9 |
| 1,465 |
| — |
| — |
| 53 |
| 2,953 | ||||||||
Consumer: | ||||||||||||||||||||||||
Credit cards |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Overdrafts | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||
Automobile loans | 1 |
| 3 |
| — |
| — |
| — |
| — |
| 1 |
| 3 | |||||||||
Other consumer | — | — | — |
| — | — | — | — |
| — | ||||||||||||||
Total Traditional Banking | 191 | 6,542 | 82 | 13,168 | 2 | 1,827 | 275 | 21,537 | ||||||||||||||||
Warehouse lines of credit |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Total Core Banking | 191 | 6,542 | 82 | 13,168 | 2 | 1,827 | 275 | 21,537 | ||||||||||||||||
Republic Processing Group: | ||||||||||||||||||||||||
Tax Refund Solutions: | ||||||||||||||||||||||||
Refund Advances | — | — | — | — | — | — | — |
| — | |||||||||||||||
Other TRS commercial & industrial loans | — | — | — | — | — | — | — |
| — | |||||||||||||||
Republic Credit Solutions | NM | 105 | — | — | — | — | NM |
| 105 | |||||||||||||||
Total Republic Processing Group | NM | 105 | — | — | — | — | NM | 105 | ||||||||||||||||
Total |
| 191 | $ | 6,647 |
| 82 | $ | 13,168 |
| 2 | $ | 1,827 |
| 275 | $ | 21,642 | ||||||||
Number of Nonperforming Loans and Recorded Investment |
| |||||||||||||||||||||||
|
|
|
| Balance |
|
|
|
|
| |||||||||||||||
Balance | > $100 & | Balance | Total |
| ||||||||||||||||||||
December 31, 2024 (dollars in thousands) | No. | <= $100 | No. | <= $500 | No. | > $500 | No. | Balance |
| |||||||||||||||
Traditional Banking: | ||||||||||||||||||||||||
Residential real estate: | ||||||||||||||||||||||||
Owner-occupied |
| 140 | $ | 5,119 |
| 65 | $ | 10,247 |
| 2 | $ | 1,965 |
| 207 | $ | 17,331 | ||||||||
Nonowner-occupied |
| 3 |
| 81 |
| — |
| — |
| — |
| — |
| 3 |
| 81 | ||||||||
Commercial real estate: |
|
|
|
|
|
|
|
| ||||||||||||||||
Owner-occupied | — | — | 2 | 424 | — | — | 2 | 424 | ||||||||||||||||
Nonowner-occupied | — | — | 1 | 275 | 1 | 524 | 2 | 799 | ||||||||||||||||
Multi-Family | — | — | — | — | — | — | — | — | ||||||||||||||||
Construction & land development |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Commercial & industrial |
| 4 |
| 182 |
| 2 |
| 678 |
| — |
| — |
| 6 |
| 860 | ||||||||
Lease financing receivables |
| — |
| — |
| 1 |
| 147 |
| — |
| — |
| 1 |
| 147 | ||||||||
Aircraft | 1 |
| 56 |
| — |
| — |
| — |
| — |
| 1 |
| 56 | |||||||||
Home equity |
| 37 |
| 1,288 |
| 7 |
| 1,071 |
| — |
| — |
| 44 |
| 2,359 | ||||||||
Consumer: | ||||||||||||||||||||||||
Credit cards |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Overdrafts | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||
Automobile loans | 1 |
| 5 |
| — |
| — |
| — |
| — |
| 1 |
| 5 | |||||||||
Other consumer | 2 | 57 | — |
| — | 1 | 556 | 3 |
| 613 | ||||||||||||||
Total Traditional Banking | 188 | 6,788 | 78 | 12,842 | 4 | 3,045 | 270 | 22,675 | ||||||||||||||||
Warehouse lines of credit |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||
Total Core Banking | 188 | 6,788 | 78 | 12,842 | 4 | 3,045 | 270 | 22,675 | ||||||||||||||||
Republic Processing Group: | ||||||||||||||||||||||||
Tax Refund Solutions: | ||||||||||||||||||||||||
Refund Advances | — | — | — | — | — | — | — |
| — | |||||||||||||||
Other TRS commercial & industrial loans | — | — | — | — | — | — | — |
| — | |||||||||||||||
Republic Credit Solutions | — | — | 1 | 141 | — | — | 1 |
| 141 | |||||||||||||||
Total Republic Processing Group | — | — | 1 | 141 | — | — | 1 | 141 | ||||||||||||||||
Total |
| 188 | $ | 6,788 |
| 79 | $ | 12,983 |
| 4 | $ | 3,045 |
| 271 | $ | 22,816 | ||||||||
101
Table 20 — Roll-forward of Nonperforming Loans
| Three Months Ended |
| Six Months Ended |
| |||||||||
June 30, | June 30, | ||||||||||||
(in thousands) | 2025 | 2024 | 2025 | 2024 |
| ||||||||
Nonperforming loans at the beginning of the period | $ | 22,850 | $ | 21,374 | $ | 22,760 | $ | 20,618 | |||||
Loans added to nonperforming status during the period that remained nonperforming at the end of the period |
| 1,862 |
| 2,978 |
| 4,111 |
| 4,656 | |||||
Loans removed from nonperforming status during the period that were nonperforming at the beginning of the period (see table below) |
| (2,518) |
| (1,902) |
| (4,191) |
| (2,573) | |||||
Principal balance paydowns of loans nonperforming at both period ends | (536) | (408) | (946) | (1,323) | |||||||||
Net change in principal balance of other nonperforming loans* |
| (16) |
| (1,501) |
| (92) |
| (837) | |||||
Nonperforming loans at the end of the period | $ | 21,642 | $ | 20,541 | $ | 21,642 | $ | 20,541 |
* | Includes small consumer portfolios, e.g., RCS loans. |
Table 21 — Detail of Loans Removed from Nonperforming Status
| Three Months Ended |
| Six Months Ended | |||||||||
June 30, | June 30, | |||||||||||
(in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Loans charged-off | $ | — | $ | — | $ | — | $ | (13) | ||||
Loans transferred to OREO |
| — |
| — |
| — |
| (169) | ||||
Loan payoffs and paydowns |
| (1,727) |
| — |
| (2,571) |
| (155) | ||||
Loans returned to accrual status |
| (791) |
| (1,902) |
| (1,620) |
| (2,236) | ||||
Total loans removed from nonperforming status during the period that were nonperforming at the beginning of the period | $ | (2,518) | $ | (1,902) | $ | (4,191) | $ | (2,573) |
Based on the Bank’s review as of June 30, 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 0.36% as of June 30, 2025, from 0.38% as of December 31, 2024. Core Bank delinquent loans to total Core Bank loans decreased to 0.19% as of June 30, 2025, from 0.20% as of December 31, 2024. Except for small-dollar consumer loans, all Traditional Bank loans past due 90-days-or-more as of June 30, 2025, and December 31, 2024, were on nonaccrual status.
102
Table 22 — Delinquent Loan Composition*
June 30, 2025 | December 31, 2024 | ||||||||||||
Percent of | Percent of | ||||||||||||
Total | Total | ||||||||||||
(dollars in thousands) |
| Balance | Loan Class | Balance | Loan Class | ||||||||
Traditional Banking: | |||||||||||||
Residential real estate: | |||||||||||||
Owner-occupied |
| $ | 7,335 | 0.71 | % |
| $ | 7,015 | 0.68 | % | |||
Nonowner-occupied |
|
| — | — |
|
| 21 | 0.01 | |||||
Commercial real estate: |
|
|
|
| |||||||||
Owner-occupied | 263 | 0.04 | 244 | 0.04 | |||||||||
Nonowner-occupied | — | — | 275 | 0.03 | |||||||||
Multi-Family | — | — | — | — | |||||||||
Construction & land development |
|
| — | — |
|
| — | — | |||||
Commercial & industrial |
|
| 661 | 0.14 |
|
| 904 | 0.20 | |||||
Lease financing receivables | 114 | 0.12 | 75 | 0.08 | |||||||||
Aircraft | — | — | — | — | |||||||||
Home equity | 1,397 | 0.36 | 1,396 | 0.39 | |||||||||
Consumer: | |||||||||||||
Credit cards | 13 | 0.13 | 28 | 0.17 | |||||||||
Overdrafts | 123 | 14.89 | 173 | 17.62 | |||||||||
Automobile loans | — | — | 11 | 0.95 | |||||||||
Other consumer | 47 | 0.48 | 43 | 0.45 | |||||||||
Total Traditional Banking | 9,953 | 0.22 | 10,185 | 0.22 | |||||||||
Warehouse lines of credit | — | — | — | — | |||||||||
Total Core Banking | 9,953 | 0.19 | 10,185 | 0.20 | |||||||||
Republic Processing Group: |
|
| |||||||||||
Tax Refund Solutions: |
|
| |||||||||||
Refund Advances |
|
| — | — |
|
| — | — | |||||
Other TRS commercial & industrial loans |
|
| — | — |
|
| — | — | |||||
Republic Credit Solutions |
|
| 9,133 | 7.67 |
|
| 10,304 | 8.00 | |||||
Total Republic Processing Group |
|
| 9,133 | 7.67 |
|
| 10,304 | 3.22 | |||||
|
| ||||||||||||
Total delinquent loans |
| $ | 19,086 | 0.36 | % |
| $ | 20,489 | 0.38 | % | |||
* 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.
103
Table 23 — Roll-forward of Delinquent Loans
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
(in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Delinquent loans at the beginning of the period | $ | 17,313 | $ | 21,412 | $ | 20,489 | $ | 22,092 | |||
Loans added to delinquency status during the period and remained in delinquency status at the end of the period |
| 4,283 |
| 3,455 |
| 5,010 |
| 4,296 | |||
Loans removed from delinquency status during the period that were in delinquency status at the beginning of the period (see table below) |
| (3,192) |
| (1,866) |
| (5,029) |
| (2,438) | |||
Principal balance paydowns of loans delinquent at both period ends | (111) | (99) | (187) | (716) | |||||||
Net change in principal balance of other delinquent loans* |
| 793 |
| (3,619) |
| (1,197) |
| (3,951) | |||
Delinquent loans at the end of period | $ | 19,086 | $ | 19,283 | $ | 19,086 | $ | 19,283 |
* | Includes small consumer portfolios, e.g., RCS loans. |
Table 24 — Detail of Loans Removed from Delinquent Status
| Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | ||||||||||||
(in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
| |||||||||||||
Loans charged-off | $ | — | $ | — | $ | — | $ | (15) | |||||
Loans transferred to OREO |
| — |
| — |
| — |
| (169) | |||||
Loan payoffs and paydowns |
| (475) |
| (360) |
| (1,631) |
| (426) | |||||
Loans paid current |
| (2,717) |
| (1,506) |
| (3,398) |
| (1,828) | |||||
Total loans removed from delinquency status during the period that were in delinquency status at the beginning of the period | $ | (3,192) | $ | (1,866) | $ | (5,029) | $ | (2,438) |
Premises and Equipment
Premises and equipment are presented on the consolidated balance sheets net of related accumulated depreciation on the respective assets, as well as fair value adjustments associated with purchase accounting. Premises and equipment increased $4 million, or 13%, between December 31, 2024, and June 30, 2025. The Company’s branch network currently consists of 47 locations throughout Kentucky, Indiana, Florida, Ohio, and Tennessee.
Right-of-Use Assets and Operating Lease Liabilities
The Company records right-of-use assets for the underlying leased property. Operating lease liabilities represent the present value of its required minimum lease payments plus any amounts probable of being owed under a residual value guarantee.
Goodwill
At June 30, 2025, and December 31, 2024, the Company had $41 million in goodwill recorded on its balance sheet. Goodwill of $24 million is attributed to the 2023 CBank acquisition. Additionally, goodwill totaling $6 million and $10 million is attributed to the acquisitions of Cornerstone Community Bank and GulfStream Community Bank in 2016 and 2006, respectively. The acquisitions of Tennessee Commerce Bank and First Commercial Bank in 2012 resulted in bargain purchase gains.
Events that may trigger goodwill impairment include deterioration in economic conditions, a decline in market-dependent multiples or metrics (i.e., stock price declining below tangible book value), negative trends in overall financial performance and regulatory actions. At September 30, 2024, the Company performed its annual qualitative assessment to determine if it was more-likely-than-not that the fair value of the reporting units exceeded their carrying value, including goodwill. The qualitative assessment indicated that it was not more-likely-than-not that the carrying value of the reporting units exceeded their fair value.
Bank Owned Life Insurance
BOLI assets increased $2 million, or 2%, to $109 million at June 30, 2025, compared to $107 million at December 31, 2024, the increase being attributed to general appreciation of the cash surrender values within the policy plans experienced during the first six months of 2025.
104
Core Deposit Intangibles
CDIs arising from business acquisitions are initially measured at fair value and are then amortized on an accelerated method based on their useful lives. As of June 30, 2025, and December 31, 2024, the Company’s CDI assets totaled $1.7 million and $2.0 million, respectively.
Other Assets and Other Liabilities
Other assets increased $3.0 million, or 2%, to $200 million between December 31, 2024, and June 30, 2025. Other liabilities increased $7 million, or 7%, to $116 million over the same period. The increase in other assets stems from the largely offsetting impact of recording additional tax credit investment assets. The increase in other liabilities was driven largely by a reduction in various accrued liabilities, such as employee incentive compensation and other benefit-related accruals.
Deposits
Table 25 — Deposit Composition
(dollars in thousands) |
| June 30, 2025 |
| December 31, 2024 | $ Change | % Change | ||||||
Core Bank: | ||||||||||||
Demand | $ | 1,132,866 | $ | 1,166,517 | $ | (33,651) | (3) | % | ||||
Money market |
| 1,387,704 |
| 1,295,024 | 92,680 | 7 | ||||||
Savings |
| 228,469 |
| 238,596 | (10,127) | (4) | ||||||
Reciprocal money market |
| 237,668 |
| 212,033 | 25,635 | 12 | ||||||
Individual retirement accounts (1) |
| 35,042 |
| 34,543 | 499 | 1 | ||||||
Time deposits, $250 and over (1) |
| 144,867 |
| 129,593 | 15,274 | 12 | ||||||
Other certificates of deposit (1) |
| 275,271 |
| 239,643 | 35,628 | 15 | ||||||
Reciprocal time deposits (1) | 75,104 | 80,016 | (4,912) | (6) | ||||||||
Wholesale brokered deposits (1) |
| 218,746 |
| 87,285 | 131,461 | 151 | ||||||
Total Core Bank interest-bearing deposits | 3,735,737 | 3,483,250 | 252,487 | 7 | ||||||||
Total Core Bank noninterest-bearing deposits |
| 1,151,511 |
| 1,123,208 | 28,303 | 3 | ||||||
Total Core Bank deposits |
| 4,887,248 |
| 4,606,458 | 280,790 | 6 | ||||||
Republic Processing Group: | ||||||||||||
Wholesale brokered deposits (1) | 14,341 | 199,964 | (185,623) | (93) | ||||||||
Interest-bearing prepaid card deposits | 320,056 | 296,921 | 23,135 | 8 | ||||||||
Money market accounts | 24,089 | 22,647 | 1,442 | 6 | ||||||||
Total RPG interest-bearing deposits | 358,486 | 519,532 | (161,046) | (31) | ||||||||
Noninterest-bearing prepaid card deposits | 4,285 | 2,842 | 1,443 | 51 | ||||||||
Other noninterest-bearing deposits | 67,220 | 81,714 | (14,494) | (18) | ||||||||
Total RPG noninterest-bearing deposits | 71,505 | 84,556 | (13,051) | (15) | ||||||||
Total RPG deposits | 429,991 | 604,088 | (174,097) | (29) | ||||||||
Total deposits | $ | 5,317,239 | $ | 5,210,546 | $ | 106,693 | 2 | % |
(1) | Represents time deposits |
Total deposits increased $107 million, or 2%, from December 31, 2024, to $5.32 billion as of June 30, 2025.
Total Core Bank deposits increased by $281 million, or 6%, from December 31, 2024. Within the Core Bank’s deposits, interest-bearing deposits increased $253 million and noninterest-bearing deposits increased $28 million.
Total Core Bank time deposits increased $178 million during the first six months of 2025, with $131 million of the increase attributed to a brokered CD with a 4.15% APY and 3-month maturity purchased in April for short-term liquidity purposes. In addition, consumer and money market accounts, which pay premium rates, increased $93 million, or 7% during the first six months of 2025, as the Core Bank continues to experience general migration from low and noninterest-bearing accounts to higher costing accounts.
While the Core Bank period-end noninterest-bearing deposits increased $28 million for the first six months of 2025, the average balances of Core Bank noninterest-bearing deposits for the first six months of 2025 decreased $27 million compared to the fourth quarter of 2024. Overall, the Core Bank’s noninterest-bearing deposits have experienced a general quarterly decline in balances dating back to the fourth quarter of 2022.
105
RPG Deposits
Within RPG, period-end total deposit balances decreased $174 million, or 29%. 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, while Prepaid card balances increased by approximately $12 million, or 3%, due primarily to growth in balances from the segment’s largest marketer-servicer.
As previously disclosed, RPS began sharing a sizable portion of the interest revenue it earns on its prepaid card balances with its prepaid card marketer-servicers during the first quarter of 2024. This revenue share is reported as interest expense on deposits. As a result, all prepaid card deposit balances subject to a revenue share arrangement will be reported as interest-bearing deposits on an on-going basis, as long as they remain subject to a revenue share arrangement. Conversely, for any periods reported prior to 2024, these deposits will remain noninterest-bearing as they were not subject to a revenue share arrangement during those periods.
Securities Sold Under Agreements to Repurchase and Other Short-term Borrowings
SSUARs are collateralized by securities and are treated as financings; accordingly, the securities involved with the agreements are recorded as assets and are held by a safekeeping agent and the obligations to repurchase the securities are reflected as liabilities. All securities underlying the agreements are under the Bank’s control.
SSUARs decreased $31 million, or 30%, during 2025 to $72 million as of June 30, 2025. SSUARs represent large customer relationships deposited into the Bank that require security collateral above the $250,000 FDIC insurance limit of the Bank. Due to the size of the underlying relationships, large fluctuations in the underlying account balances from period to period are common.
Federal Home Loan Bank Advances
FHLB advances totaled $370 million as of June 30, 2025, compared to $395 million as of December 31, 2024. There were no overnight borrowings as of June 30, 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 June 30, 2025, the Company’s $370 million of FHLB advances had a weighted-average maturity of just over 3 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 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’s 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 HFS.
106
Table 26 — Liquid Assets and Borrowing Capacity
The Bank’s liquid assets and borrowing capacity included the following:
(in thousands) |
| June 30, 2025 |
| December 31, 2024 | |||
Cash and cash equivalents | $ | 484,808 | $ | 432,151 | |||
Unencumbered debt securities |
| 516,685 |
| 432,183 | |||
Total liquid assets | 1,001,493 | 864,334 | |||||
Available borrowing capacity with the FHLB |
| 734,538 |
| 755,288 | |||
Available borrowing capacity with the FRB |
| 46,759 |
| 45,880 | |||
Available borrowing capacity through unsecured credit lines |
| 100,000 |
| 100,000 | |||
Total available borrowing capacity | 881,297 | 901,168 | |||||
Total liquid assets and available borrowing capacity | $ | 1,882,790 | $ | 1,765,502 |
The Bank had a period-end loan-to-deposit ratio (excluding brokered deposits) of 106% as of June 30, 2025, and 111% as of December 31, 2024. Republic’s banking centers and its website, www.republicbank.com, provide access to retail deposit markets. These retail deposit products, if offered at attractive rates, have historically been a source of additional funding when needed. If the Bank were to lose a significant funding source, such as a few major depositors, or if any of its lines of credit were cancelled, or if the Bank cannot obtain brokered deposits, the Bank would be compelled to offer market leading deposit interest rates to meet its funding and liquidity needs.
As of June 30, 2025, the Bank had approximately $1.1 billion in deposits from 235 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 $2.0 billion, or 37%, of total deposits as of June 30, 2025. The 20 largest non-sweep deposit relationships represented approximately $321 million, or 6%, of the Company’s total deposit balances as of June 30, 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 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, SSUAR, FHLB advances, and for other purposes, as required by law. As of June 30, 2025, and December 31, 2024, these pledged investment securities had a fair value of $114 million and $152 million.
Capital
Total stockholders’ equity increased from $992 million as of December 31, 2024, to $1.1 billion as of June 30, 2025. The increase in stockholders’ equity was attributable to net income earned during the first six 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 July 1, 2025, RB&T could, without prior approval, declare dividends of approximately $151 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.
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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 OBS 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, 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 14.44% as of June 30, 2025, and 14.02% 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 27 — Capital Ratios (1)
As of June 30, 2025 | As of December 31, 2024 | |||||||||||
(dollars in thousands) |
| Amount |
| Ratio | Amount |
| Ratio | |||||
Total capital to risk-weighted assets | ||||||||||||
Republic Bancorp, Inc. | $ | 1,102,805 |
| 17.86 | % | $ | 1,042,149 |
| 16.98 | % | ||
Republic Bank & Trust Company |
| 1,045,586 |
| 16.95 |
| 989,800 |
| 16.14 | ||||
Common equity tier 1 capital to risk-weighted assets | ||||||||||||
Republic Bancorp, Inc. | $ | 1,026,876 |
| 16.63 | % | $ | 965,243 |
| 15.73 | % | ||
Republic Bank & Trust Company |
| 968,413 |
| 15.70 |
| 912,968 |
| 14.89 | ||||
Tier 1 (core) capital to risk-weighted assets | ||||||||||||
Republic Bancorp, Inc. | $ | 1,026,876 |
| 16.63 | % | $ | 965,243 |
| 15.73 | % | ||
Republic Bank & Trust Company |
| 968,413 |
| 15.70 |
| 912,968 |
| 14.89 | ||||
Tier 1 leverage capital to average assets | ||||||||||||
Republic Bancorp, Inc. | $ | 1,026,876 |
| 14.63 | % | $ | 965,243 |
| 14.07 | % | ||
Republic Bank & Trust Company |
| 968,413 |
| 13.78 |
| 912,968 |
| 13.29 |
(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 3 basis points lower than those presented in the table above as of December 31, 2024. This five-year transition option is no longer applicable for periods subsequent to 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 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.
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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 June 30, 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 July 1, 2025, and ending June 30, 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 28 — Bank Interest Rate Sensitivity
Change in Rates | ||||||||||||||||||||||||
-400 |
| -300 |
| -200 |
| -100 |
| +100 |
| +200 |
| +300 |
| +400 |
| |||||||||
Basis Points | Basis Points | Basis Points | Basis Points | Basis Points | Basis Points | Basis Points | Basis Points | |||||||||||||||||
% Change from base net interest income as of June 30, 2025 | (2.1) | % | (2.6) | % | (5.0) | % | (2.6) | % | 2.7 | % | 5.5 | % | 8.1 | % | 10.8 | % | ||||||||
% Change from base net interest income as of December 31, 2024 | 3.4 | % | 4.4 | % | (0.2) | % | 0.2 | % | 1.5 | % | 3.1 | % | 4.4 | % | 6.0 | % |
The results of the interest rate sensitivity analysis performed as of June 30, 2025, were derived from subjective assumptions the Company uses in its earnings simulation model, particularly in relation to deposit betas, which measure how responsive management’s deposit repricing may be to changes in market rates based on historical data. Management uses different betas in the rising and falling rate scenarios to better simulate expected earnings trends.
The Company’s current interest rate sensitivity analysis projects that increases in market interest rates (in all illustrated scenarios) would have a positive effect on net interest income, while decreases in market interest rates (in all illustrated scenarios) would have a negative impact. These results depict an asset-sensitive interest rate risk profile.
In comparing the Company’s interest rate sensitivity projections from December 31, 2024, to June 30, 2025, there were notable changes in all illustrated scenarios. In declining market interest rate scenarios, the Company projects that the rates the Company pays for its non-maturity, interest-bearing deposits cannot be lowered sufficiently to offset the decrease in interest income associated with its declining asset yields. Conversely, the Company projects a notable improvement in all illustrated scenarios, as the yield the Company projects it will earn for its interest-earning assets is expected to increase more than the increase in its projected funding costs.
More specifically, driving the period-to-period improvement in net interest income in the illustrated up-rate scenarios are the following:
● | The Company had higher average interest-earning cash balances as of June 30, 2025, with yields that increase immediately in up-rate scenarios; and |
● | The Company had higher floating rate loan balances as of June 30, 2025, most notably within the Warehouse lending portfolio, with yields that increase immediately in an up-rate scenario. |
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More specifically, driving the period-to-period deterioration in net interest income in the illustrated down-rate scenarios are the following:
● | The elevated average interest-earning cash balances that are projected to benefit net interest income in the illustrated up-rate scenarios is projected to drive corresponding declines to net interest income in the illustrated down-rate rate scenarios; and |
● | Management lowered its deposit beta assumptions to assume that, due to greater competition for deposits and liquidity, it will not be able to sufficiently lower the rates the Company pays for its premium rate, non-maturity interest-bearing deposits in order to offset the projected decline in the Company’s interest-earning assets yields. |
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 June 30, 2025 Compared to Three Months Ended June 30, 2024) and “RESULTS OF OPERATIONS (Six months ended June 30, 2025 Compared to Six months ended June 30, 2024).”
Item 3.Quantitative and Qualitative Disclosures about Market Risk.
Information required by this item is included under Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Item 4.Controls and Procedures.
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.
PART II — OTHER INFORMATION
Item 1.Legal Proceedings.
In the ordinary course of operations, Republic and the Bank are defendants in various legal proceedings. There is no proceeding, pending, or threatened litigation in which Republic and the Bank are a defendant, to the knowledge of management, in which an adverse decision could result in a material adverse change in the business or consolidated financial position of Republic or the Bank.
Item 1A.Risk Factors.
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 fourth 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
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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.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Details of Republic’s Class A Common Stock purchases during the second quarter of 2025 are included in the following table:
Total Number of | Maximum Number | ||||||||
Shares Purchased | of Shares that May | ||||||||
as Part of Publicly | Yet Be Purchased | ||||||||
Total Number of | Average Price | Announced Plans | Under the Plan | ||||||
Three Months Ended June 30, 2025 |
| Shares Purchased |
| Paid Per Share |
| or Programs |
| or Programs | |
April 1 - April 30 |
| — |
| $ | — |
| — | 434,410 | |
May 1 - May 31 |
| 1,015 |
| 70.62 |
| 1,015 | 433,395 | ||
June 1 - June 30 |
| — |
| — |
| — | 433,395 | ||
Total |
| 1,015 |
| $ | — |
| 1,015 |
| 433,395 |
The Company repurchased 1,015 shares of its Class A Common Stock during the second quarter of 2025. In addition, in connection with employee stock awards, there were 1,988 shares withheld upon exercise of stock options to satisfy the withholding taxes. On January 24, 2024, the Board of Directors of Republic Bancorp, Inc. increased the Company’s existing authorization to purchase shares of its Class A Common Stock by 400,000 shares. The repurchase program will remain effective until the total number of shares authorized is repurchased or until Republic’s Board of Directors terminates the program. As of June 30, 2025 the Company had 433,395 shares which could be repurchased under its current share repurchase programs.
During the second quarter of 2025, there were 1,214 shares of Class A Common Stock issued upon conversion of shares of Class B Common Stock by stockholders of Republic in accordance with the share-for-share conversion option of the Class B Common Stock. The exemption from registration of newly issued Class A Common Stock relies upon Section (3)(a)(9) of the Securities Act of 1933.
There were no equity securities of the registrant sold without registration during the quarter covered by this report.
Item 5.Other Information.
Rule 10b5-1 Trading Plans
During the three months ended June 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
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Item 6.Exhibits.
The following exhibits are filed or furnished as a part of this report:
Exhibit Number | Description of Exhibit | |
10.1 | ||
31.1 | Certification of Principal Executive Officer pursuant to the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Principal Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 | |
32* | ||
101 | The following financial statements from the Company’s quarterly report on Form 10-Q were formatted in iXBRL(Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024, (ii) Consolidated Statements of Income and Comprehensive Income for the Three and six months ended June 30, 2025 and 2024, (iii) Consolidated Statements of Stockholders’ Equity for the Three and six months ended June 30, 2025 and 2024, (iv) Consolidated Statements of Cash Flows for the Six months ended June 30, 2025 and 2024 and (v) Notes to Consolidated Financial Statements | |
104 | Cover Page Interactive Data File formatted in iXBRL and contained in Exhibit 101. |
* | This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
REPUBLIC BANCORP, INC. | ||||
(Registrant) | ||||
Principal Executive Officer: | ||||
Date: August 7, 2025 |
|
| /s/ Steven E. Trager | |
By: Steven E. Trager | ||||
Executive Chair and Chief Executive Officer | ||||
Principal Financial Officer: | ||||
Date: August 7, 2025 | /s/ Kevin Sipes | |||
By: Kevin Sipes | ||||
Executive Vice President, Chief Financial | ||||
Officer and Chief Accounting Officer |
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