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1 min

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, ~~2022~~2023

◻ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-24649

REPUBLIC BANCORP, INC.

(Exact name of registrant as specified in its charter)


Kentucky		61-0862051
(State ofor other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

601 West Market Street, Louisville, Kentucky		40202
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (502) 584-3600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common	RBCAA	The Nasdaq Stock Market

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. ⌧ Yes ◻ No

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). ⌧ Yes ◻ No

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 ◻	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). ◻ Yes ☒ No

The number of shares outstanding of the registrant’s Class A Common Stock and Class B Common Stock, as of July 31, ~~2022~~2023 was ~~17,580,806~~17,386,257 and ~~2,160,924.~~2,156,662.

Table of Contents

TABLE OF CONTENTS



PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements.	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	6866

Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	~~117~~118

Item 4.	Controls and Procedures.	~~117~~118

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings.	~~117~~118

Item 1A.	Risk Factors.	~~118~~119

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	~~118~~120

Item 5.	Other Information.	120

Item 6.	Exhibits.	~~119~~120

	SIGNATURES	~~120~~122

Table of Contents

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

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
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
CARES Act		Coronavirus Aid, Relief, and Economic Security Act
CBank Agreement		Agreement and Plan of Merger between Republic Bancorp, Inc., CBank, and RB&T
CECL		Current Expected Credit Losses
CMO		Collateralized Mortgage Obligation
Core Bank		The Traditional Banking, Warehouse Lending, and Mortgage Banking reportable segments of the Company
COVID		Coronavirus Disease of 2019
CRE		Commercial Real Estate
DDA		Demand Deposit Account
Diluted EPS		Diluted earnings per Class A Common Share
EA		~~Easy Advance~~
Economic Aid Act		Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
ERA		Early Season Refund Advance
ESPP		Employee Stock Purchase Plan
EVP		Executive Vice President
FASB		Financial Accounting Standards Board
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
FTE		Full Time Equivalent
FTP		Funds Transfer Pricing
GAAP		Generally Accepted Accounting Principles in the United States
Green Dot		Green Dot Corporation
HEAL		Home Equity Amortizing Loan
HELOC		Home Equity Line of Credit
HTM		Held to Maturity
IRS		Internal Revenue Service
ITM		Interactive Teller Machine
Lawsuit		The lawsuit the Bank filed against Green Dot in the Delaware Court of Chancery on October 5, 2021
LGD		Loss Given Default
LIBOR		London Interbank Offered Rate
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
LTV		Loan to Value
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
OTTI		Other than Temporary Impairment
PCD		Purchased with Credit Deterioration
PD		Probability of Default
PPP		SBA's Paycheck Protection Program
Prime		The Wall Street Journal Prime Interest Rate
Provision		Provision for Expected Credit Loss Expense
PSU		Performance Stock Unit
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
Sale Transaction		Sale contemplated in the May 13, 2021 Asset Purchase Agreement between the Bank and Green Dot
SBA		U.S. Small Business Administration
Settlement Agreement		The agreement between the Bank and Green Dot that settled the Lawsuit filed by the Bank against Green Dot
SEC		Securities and Exchange Commission
SSUAR		Securities Sold Under Agreements to Repurchase
TDR		Troubled Debt Restructuring
The Captive		Republic Insurance Services, Inc.
TRS		Tax Refund Solutions segment
TRS Purchase Agreement		May 13, 2021 Asset Purchase Agreement for the sale of substantially all of the Bank's TRS assets and operations to Green Dot
TRUP		Trust Preferred Security Investment
Warehouse		Warehouse Lending segment

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in ~~thousands)~~thousands, except share data)


	June 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
ASSETS

Cash and cash equivalents	$	795,143	$	756,971	$	241,967	$	313,689
Available-for-sale debt securities, at fair value (amortized cost of $651,048 in 2022 and $492,626 in 2021, allowance for credit losses of $30 in 2022 and $0 in 2021)		622,145		495,126
Held-to-maturity debt securities (fair value of $32,978 in 2022 and $44,764 in 2021, allowance for credit losses of $50 in 2022 and $47 in 2021)		32,962		44,299
Available-for-sale debt securities, at fair value (amortized cost of $645,968 in 2023 and $663,003 in 2022, allowance for credit losses of $0 in 2023 and 2022)						604,150		620,365
Held-to-maturity debt securities (fair value of $101,190 in 2023 and $87,357 in 2022, allowance for credit losses of $10 in 2023 and $10 in 2022)						101,966		87,386
Equity securities with readily determinable fair value		189		2,620		122		111
Mortgage loans held for sale, at fair value		8,491		29,393		4,038		1,302
Consumer loans held for sale, at fair value		17,459		19,747		5,757		4,706
Consumer loans held for sale, at the lower of cost or fair value		13,777		2,937		15,787		13,169
Loans (loans carried at fair value of $45 in 2022 and $170 in 2021)		4,362,233		4,496,562
Loans (loans carried at fair value of $0 in 2023 and $2 in 2022)						5,053,142		4,515,802
Allowance for credit losses		(64,449)		(64,577)		(72,202)		(70,413)
Loans, net		4,297,784		4,431,985		4,980,940		4,445,389
Federal Home Loan Bank stock, at cost		10,311		10,311		29,395		9,146
Premises and equipment, net		33,886		36,073		33,840		31,978
Right-of-use assets		41,364		38,825		34,939		37,017
Goodwill		16,300		16,300		40,516		16,300
Other real estate owned		1,687		1,792		1,478		1,581
Bank owned life insurance		100,396		99,161		102,521		101,687
Low-income housing tax credit investments						77,426		75,324
Other assets and accrued interest receivable		120,582		108,092		94,937		76,393

TOTAL ASSETS	$	6,112,476	$	6,093,632	$	6,369,779	$	5,835,543

LIABILITIES

Deposits:
Noninterest-bearing	$	2,094,436	$	1,990,781	$	1,854,907	$	1,908,768
Interest-bearing		2,733,093		2,849,637		2,874,374		2,629,077
Total deposits		4,827,529		4,840,418		4,729,281		4,537,845

Securities sold under agreements to repurchase and other short-term borrowings		303,315		290,967		92,093		216,956
Operating lease liabilities		42,163		39,672		35,721		37,809
Federal Home Loan Bank advances		20,000		25,000		520,000		95,000
Low-income housing tax credit obligations						55,998		43,609
Other liabilities and accrued interest payable		77,295		63,343		49,715		47,711

Total liabilities		5,270,302		5,259,400		5,482,808		4,978,930

Commitments and contingent liabilities (Footnote 9)		—		—
Commitments and contingent liabilities (Footnote 10)						—		—

STOCKHOLDERS’ EQUITY

Preferred stock, 0 par value		—		—
Class A Common Stock and Class B Common Stock, 0 par value		4,663		4,702
Preferred stock, no par value						—		—
Class A Common Stock, no par value, 30,000,000 shares authorized, 17,449,709 shares (2023) and 17,584,928 shares (2022) issued and outstanding; Class B Common Stock, no par value, 5,000,000 shares authorized, 2,156,662 shares (2023) and 2,159,495 shares (2022) issued and outstanding						4,617		4,648
Additional paid in capital		140,516		139,956		142,462		141,694
Retained earnings		718,649		687,700		771,260		742,250
Accumulated other comprehensive (loss) income		(21,654)		1,874		(31,368)		(31,979)

Total stockholders’ equity		842,174		834,232		886,971		856,613

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,112,476	$	6,093,632	$	6,369,779	$	5,835,543

See accompanying footnotes to consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021

INTEREST INCOME:

Loans, including fees
$
47,916

$
49,640

$
108,931

$
117,112

Taxable investment securities

2,688

1,858

4,747

3,810

Federal Home Loan Bank stock and other

1,716

317

2,197

536

Total interest income

52,320

51,815

115,875

121,458

INTEREST EXPENSE:

Deposits

945

1,324

1,824

2,889

Securities sold under agreements to repurchase and other short-term borrowings

49

8

77

��
17

Federal Home Loan Bank advances

94

10

130

41

Subordinated note

—

169

—

341

Total interest expense

1,088

1,511

2,031

3,288

NET INTEREST INCOME

51,232

50,304

113,844

118,170

Provision for expected credit loss expense for on-balance sheet exposures (loans and investment securities)

3,705

(4,323)

12,931

10,939

NET INTEREST INCOME AFTER PROVISION

47,527

54,627

100,913

107,231

NONINTEREST INCOME:

Service charges on deposit accounts

3,363

3,071

6,589

5,944

Net refund transfer fees

3,950

5,923

16,001

18,644

Mortgage banking income

1,763

4,182

4,420

11,375

Interchange fee income

3,461

3,481

6,531

6,508

Program fees

3,885

3,342

7,739

5,551

Increase in cash surrender value of bank owned life insurance

623

600

1,235

990

Net losses on other real estate owned

(52)

(44)

(105)

(55)

Contract termination fee

—

—

5,000

—

Legal settlement

13,000

—

13,000

—

Other

573

1,093

1,157

1,712

Total noninterest income

30,566

21,648

61,567

50,669

NONINTEREST EXPENSE:

Salaries and employee benefits

28,896

27,410

58,208

56,747

Technology, equipment, and communication

7,229

7,444

14,443

14,511

Occupancy

3,224

3,251

6,664

6,810

Marketing and development

1,720

1,094

3,068

1,866

FDIC insurance expense

399

418

818

864

Interchange related expense

1,264

1,288

2,381

2,432

Legal and professional fees

804

1,466

2,169

2,680

Other

4,117

3,343

8,475

7,685

Total noninterest expense

47,653

45,714

96,226

93,595

INCOME BEFORE INCOME TAX EXPENSE

30,440

30,561

66,254

64,305

INCOME TAX EXPENSE

6,539

6,639

14,427

14,330

NET INCOME
$
23,901

$
23,922

$
51,827

$
49,975

BASIC EARNINGS PER SHARE:

Class A Common Stock
$
1.20

$
1.16

$
2.60

$
2.42

Class B Common Stock

1.09

1.05

2.37

2.20

DILUTED EARNINGS PER SHARE:

Class A Common Stock
$
1.20

$
1.16

$
2.59

$
2.41

Class B Common Stock

1.09

1.05

2.36

2.19


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
INTEREST INCOME:

Loans, including fees	$	72,200	$	48,498	$	164,809	$	110,068
Taxable investment securities		4,784		2,688		9,387		4,747
Federal Home Loan Bank stock and other		2,070		1,716		5,214		2,197
Total interest income		79,054		52,902		179,410		117,012

INTEREST EXPENSE:

Deposits		11,216		945		16,094		1,824
Securities sold under agreements to repurchase and other short-term borrowings		174		49		422		77
Federal Home Loan Bank advances		3,135		94		5,723		130
Total interest expense		14,525		1,088		22,239		2,031

NET INTEREST INCOME		64,529		51,814		157,171		114,981

Provision for expected credit loss expense for on-balance sheet exposures (loans and investment securities)		6,139		3,705		32,905		12,931

NET INTEREST INCOME AFTER PROVISION		58,390		48,109		124,266		102,050

NONINTEREST INCOME:

Service charges on deposit accounts		3,527		3,363		6,826		6,589
Net refund transfer fees		4,479		3,950		15,286		16,001
Mortgage banking income		907		1,763		1,707		4,420
Interchange fee income		3,419		3,461		6,470		6,531
Program fees		3,739		3,885		6,980		7,739
Increase in cash surrender value of bank owned life insurance		689		623		1,324		1,235
Death benefits in excess of cash surrender value of life insurance		1,728		—		1,728		—
Net losses on other real estate owned		(52)		(52)		(105)		(105)
Contract termination fee		—		—		—		5,000
Legal settlement		—		13,000		—		13,000
Other		1,215		576		2,116		1,168
Total noninterest income		19,651		30,569		42,332		61,578

NONINTEREST EXPENSE:

Salaries and employee benefits		30,764		28,896		60,725		58,208
Technology, equipment, and communication		6,920		7,229		14,148		14,443
Occupancy		3,591		3,224		6,997		6,664
Marketing and development		2,513		1,720		4,087		3,068
FDIC insurance expense		724		399		1,361		818
Interchange related expense		1,350		1,264		2,849		2,381
Legal and professional fees		829		804		1,890		2,169
Merger expense		127		—		2,200		—
Other		4,715		4,120		9,719		8,486
Total noninterest expense		51,533		47,656		103,976		96,237

INCOME BEFORE INCOME TAX EXPENSE		26,508		31,022		62,622		67,391
INCOME TAX EXPENSE		5,456		6,675		13,478		14,694
NET INCOME	$	21,052	$	24,347	$	49,144	$	52,697

BASIC EARNINGS PER SHARE:
Class A Common Stock	$	1.07	$	1.23	$	2.50	$	2.65
Class B Common Stock		0.98		1.12		2.27		2.41

DILUTED EARNINGS PER SHARE:
Class A Common Stock	$	1.07	$	1.22	$	2.50	$	2.64
Class B Common Stock		0.98		1.11		2.27		2.40

See accompanying footnotes to consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022

Net income	$	23,901	$	23,922	$	51,827	$	49,975	$	21,052	$	24,347	$	49,144	$	52,697

OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized losses on AFS debt securities		(10,133)		(614)		(31,382)		(2,643)
Unrealized gain (loss) on AFS debt securities										(4,418)		(10,133)		787		(31,382)
Unrealized gain (loss) on AFS debt security for which a portion of OTTI has been recognized in earnings		(15)		34		9		49		28		(15)		33		9
Total other comprehensive loss before income tax		(10,148)		(580)		(31,373)		(2,594)
Tax effect		2,537		145		7,845		648
Total other comprehensive loss, net of tax		(7,611)		(435)		(23,528)		(1,946)
Total other comprehensive income (loss) before income tax										(4,390)		(10,148)		820		(31,373)
Income tax benefit (expense) related to items of other comprehensive income										1,096		2,537		(209)		7,845
Total other comprehensive income (loss), net of tax										(3,294)		(7,611)		611		(23,528)

COMPREHENSIVE INCOME	$	16,290	$	23,487	$	28,299	$	48,029	$	17,758	$	16,736	$	49,755	$	29,169

See accompanying footnotes to consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


	Three Months Ended June 30, 2022												Three Months Ended June 30, 2023

	Common Stock								Accumulated				Common Stock								Accumulated
	Class A	Class B			Additional				Other		Total		Class A	Class B			Additional				Other		Total
	Shares	Shares			Paid In		Retained		Comprehensive		Stockholders’		Shares	Shares			Paid In		Retained		Comprehensive		Stockholders’
(in thousands, except per share data)	Outstanding	Outstanding	Amount		Capital		Earnings		Income (Loss)		Equity		Outstanding	Outstanding	Amount		Capital		Earnings		Income (Loss)		Equity

Balance, April 1, 2022	17,834	2,165	$	4,703	$	140,795	$	708,874	$	(14,043)	$	840,329
Balance, April 1, 2023													17,598	2,160	$	4,648	$	142,601	$	763,027	$	(28,074)	$	882,202

Net income	—	—		—		—		23,901		—		23,901	—	—		—		—		21,052		—		21,052
Net change in AOCI	—	—		—		—		—		(7,611)		(7,611)	—	—		—		—		—		(3,294)		(3,294)
Dividends declared on Common Stock:
Class A Shares ($0.341 per share)	—	—		—		—		(6,047)		—		(6,047)
Class B Shares ($0.310 per share)	—	—		—		—		(670)		—		(670)
Class A Shares ($0.374 per share)													—	—		—		—		(6,537)		—		(6,537)
Class B Shares ($0.340 per share)													—	—		—		—		(733)		—		(733)
Stock options exercised, net of shares withheld	3	—		2		88		—		—		90	—	—		—		—		—		—		—
Conversion of Class B to Class A Common Shares	4	(4)		—		—		—		—		—	3	(3)		(1)		(99)		—		—		(100)
Repurchase of Class A Common Stock	(215)	—		(43)		(1,384)		(7,409)		—		(8,836)	(156)	—		(33)		(1,131)		(5,549)		—		(6,713)
Net change in notes receivable on Class A Common Stock	—	—		—		(42)		—		—		(42)	—	—		—		(84)		—		—		(84)
Deferred compensation - Class A Common Stock:
Directors	—	—		—		82		—		—		82	4	—		—		116		—		—		116
Designated key employees	—	—		—		178		—		—		178	—	—		—		238		—		—		238
Employee stock purchase plan - Class A Common Stock	3	—		1		163		—		—		164	5	—		1		201		—		—		202
Stock-based awards - Class A Common Stock:
Performance stock units	—	—		—		38		—		—		38	—	—		—		(39)		—		—		(39)
Restricted stock	—	—		—		447		—		—		447	(5)	—		2		453		—		—		455
Stock options	—	—		—		151		—		—		151	—	—		—		206		—		—		206

Balance, June 30, 2022	17,629	2,161	$	4,663	$	140,516	$	718,649	$	(21,654)	$	842,174
Balance, June 30, 2023													17,449	2,157	$	4,617	$	142,462	$	771,260	$	(31,368)	$	886,971

Three Months Ended June 30, 2021

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, 2021

18,628

2,198

$
4,884

$
143,563

$
682,264

$
6,998

$
837,709

Net income

—

—

—

—

23,922

—

23,922

Net change in AOCI

—

—

—

—

—

(435)

(435)

Dividends declared on Common Stock:

Class A Shares ($0.308 per share)

—

—

—

—

(5,680)

—

(5,680)

Class B Shares ($0.280 per share)

—

—

—

—

(608)

—

(608)

Stock options exercised, net of shares withheld

12

—

5

(54)

—

—

(49)

Repurchase of Class A Common Stock

32

(32)

—

—

—

—

—

Conversion of Class B to Class A Common Shares

(255)

—

(51)

(1,614)

(9,096)

—

(10,761)

Net change in notes receivable on Class A Common Stock

—

—

—

(44)

—

—

(44)

Deferred compensation - Class A Common Stock:

Directors

—

—

—

95

—

—

95

Designated key employees

—

—

—

167

—

—

167

Employee stock purchase plan - Class A Common Stock

4

—

1

162

—

—

163

Stock-based awards - Class A Common Stock:

Performance stock units

—

—

—

33

—

—

33

Restricted stock

—

—

2

409

—

—

411

Stock options

—

—

—

167

—

—

167

Balance, June 30, 2021

18,421

2,166

$
4,841

$
142,884

$
690,802

$
6,563

$
845,090


	Three Months Ended June 30, 2022

	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, 2022	17,834	2,165	$	4,703	$	140,795	$	710,120	$	(14,043)	$	841,575

Net income	—	—		—		—		24,347		—		24,347
Net change in AOCI	—	—		—		—		—		(7,611)		(7,611)
Dividends declared on Common Stock:
Class A Shares ($0.341 per share)	—	—		—		—		(6,047)		—		(6,047)
Class B Shares ($0.310 per share)	—	—		—		—		(670)		—		(670)
Stock options exercised and equity awards vested, net of shares withheld	3	—		2		88		—		—		90
Conversion of Class B to Class A Common Shares	4	(4)		—		—		—		—		—
Repurchase of Class A Common Stock	(215)	—		(43)		(1,384)		(7,409)		—		(8,836)
Net change in notes receivable on Class A Common Stock	—	—		—		(42)		—		—		(42)
Deferred compensation - Class A Common Stock:
Directors	—	—		—		82		—		—		82
Designated key employees	—	—		—		178		—		—		178
Employee stock purchase plan - Class A Common Stock	3	—		1		163		—		—		164
Stock-based awards - Class A Common Stock:
Performance stock units	—	—		—		38		—		—		38
Restricted stock	—	—		—		447		—		—		447
Stock options	—	—		—		151		—		—		151

Balance, June 30, 2022	17,629	2,161	$	4,663	$	140,516	$	720,341	$	(21,654)	$	843,866

Table of Contents

Six Months Ended June 30, 2022

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, 2022

17,816

2,165

$
4,702

$
139,956

$
687,700

$
1,874

$
834,232

Net income

—

—

—

—

51,827

—

51,827

Net change in AOCI

—

—

—

—

—

(23,528)

(23,528)

Dividends declared on Common Stock:

Class A Shares ($0.682 per share)

—

—

—

—

(12,128)

—

(12,128)

Class B Shares ($0.620 per share)

—

—

—

—

(1,341)

—

(1,341)

Stock options exercised, net of shares withheld

3

—

2

40

—

—

42

Conversion of Class B to Class A Common Shares

4

(4)

—

—

—

—

—

Repurchase of Class A Common Stock

(215)

—

(43)

(1,384)

(7,409)

—

(8,836)

Net change in notes receivable on Class A Common Stock

—

—

—

18

—

—

18

Deferred compensation - Class A Common Stock:

Directors

6

—

—

211

—

—

211

Designated key employees

—

—

—

357

—

—

357

Employee stock purchase plan - Class A Common Stock

7

—

2

325

—

—

327

Stock-based awards - Class A Common Stock:

Performance stock units

—

—

—

76

—

—

76

Restricted stock

8

—

—

610

—

—

610

Stock options

—

—

—

307

—

—

307

Balance, June 30, 2022

17,629

2,161

$
4,663

$
140,516

$
718,649

$
(21,654)

$
842,174


	Six Months Ended June 30, 2023
	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, 2023	17,585	2,160	$	4,648	$	141,694	$	742,250	$	(31,979)	$	856,613

Net income	—	—		—		—		49,144		—		49,144
Net change in AOCI	—	—		—		—		—		611		611
Dividends declared on Common Stock:
Class A Shares ($0.748 per share)	—	—		—		—		(13,118)		—		(13,118)
Class B Shares ($0.680 per share)	—	—		—		—		(1,467)		—		(1,467)
Stock options exercised, net of shares withheld	—	—		(1)		(183)		—		—		(184)
Conversion of Class B to Class A Common Shares	3	(3)		—		—		—		—		—
Repurchase of Class A Common Stock	(156)	—		(34)		(1,131)		(5,549)		—		(6,714)
Net change in notes receivable on Class A Common Stock	—	—		—		—		—		—		—
Deferred compensation - Class A Common Stock:
Directors	4	—		—		226		—		—		226
Designated key employees	7	—		—		459		—		—		459
Employee stock purchase plan - Class A Common Stock	9	—		2		363		—		—		365
Stock-based awards - Class A Common Stock:
Performance stock units	—	—		—		—		—		—		—
Restricted stock	(3)	—		2		626		—		—		628
Stock options	—	—		—		408		—		—		408

Balance, June 30, 2023	17,449	2,157	$	4,617	$	142,462	$	771,260	$	(31,368)	$	886,971

Six Months Ended June 30, 2021

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, 2021

18,697

2,199

$
4,899

$
143,637

$
666,278

$
8,509

$
823,323

Net income

—

—

—

—

49,975

—

49,975

Net change in AOCI

—

—

—

—

—

(1,946)

(1,946)

Dividends declared on Common Stock:

Class A Shares ($0.616 per share)

—

—

—

—

(11,423)

—

(11,423)

Class B Shares ($0.560 per share)

—

—

—

—

(1,224)

—

(1,224)

Stock options exercised, net of shares withheld

28

—

13

(155)

—

—

(142)

Conversion of Class B to Class A Common Shares

33

(33)

—

—

—

—

—

Repurchase of Class A Common Stock

(362)

—

(75)

(2,350)

(12,804)

—

(15,229)

Net change in notes receivable on Class A Common Stock

—

—

—

50

—

—

50

Deferred compensation - Class A Common Stock:

Directors

4

—

—

209

—

—

209

Designated key employees

—

—

—

303

—

—

303

Employee stock purchase plan - Class A Common Stock

7

—

2

316

—

—

318

Stock-based awards - Class A Common Stock:

Performance stock units

—

—

—

65

—

—

65

Restricted stock

14

—

2

519

—

—

521

Stock options

—

—

—

290

—

—

290

Balance, June 30, 2021

18,421

2,166

$
4,841

$
142,884

$
690,802

$
6,563

$
845,090


	Six Months Ended June 30, 2022
	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, 2022	17,816	2,165	$	4,702	$	139,956	$	688,522	$	1,874	$	835,054

Net income	—	—		—		—		52,697		—		52,697
Net change in AOCI	—	—		—		—		—		(23,528)		(23,528)
Dividends declared on Common Stock:
Class A Shares ($0.682 per share)	—	—		—		—		(12,128)		—		(12,128)
Class B Shares ($0.620 per share)	—	—		—		—		(1,341)		—		(1,341)
Stock options exercised and equity awards vested, net of shares withheld	3	—		2		40		—		—		42
Conversion of Class B to Class A Common Shares	4	(4)		—		—		—		—		—
Repurchase of Class A Common Stock	(215)	—		(43)		(1,384)		(7,409)		—		(8,836)
Net change in notes receivable on Class A Common Stock	—	—		—		18		—		—		18
Deferred compensation - Class A Common Stock:
Directors	6	—		—		211		—		—		211
Designated key employees	—	—		—		357		—		—		357
Employee stock purchase plan - Class A Common Stock	7	—		2		325		—		—		327
Stock-based awards - Class A Common Stock:
Performance stock units	—	—		—		76		—		—		76
Restricted stock	8	—		—		610		—		—		610
Stock options	—	—		—		307		—		—		307

Balance, June 30, 2022	17,629	2,161	$	4,663	$	140,516	$	720,341	$	(21,654)	$	843,866

See accompanying footnotes to consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2023		2022
OPERATING ACTIVITIES:
Net income	$	51,827	$	49,975	$	49,144	$	52,697
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization on investment securities and low-income housing investments		1,496		2,489		2,834		1,496
Net accretion on loans and amortization of core deposit intangible and operating lease components		(2,220)		(10,894)
Net accretion and amortization on loans						(1,480)		(2,220)
Unrealized and realized losses on equity securities with readily determinable fair value		190		482		(10)		190
Depreciation of premises and equipment		4,029		4,515		3,269		4,029
Amortization of mortgage servicing rights		1,248		1,735		974		1,248
Recovery of mortgage servicing rights		—		(500)
Provision for on-balance sheet exposures		12,931		10,939		32,905		12,931
Provision for off-balance sheet exposures		48		(55)		280		48
Net gain on sale of mortgage loans held for sale		(3,919)		(11,009)		(959)		(3,919)
Origination of mortgage loans held for sale		(162,150)		(354,764)		(29,890)		(162,150)
Proceeds from sale of mortgage loans held for sale		186,971		380,239		28,113		186,971
Net gain on sale of consumer loans held for sale		(6,265)		(4,121)		(5,543)		(6,265)
Origination of consumer loans held for sale		(527,996)		(304,045)		(469,626)		(527,996)
Proceeds from sale of consumer loans held for sale		525,709		288,510		471,500		525,709
Net gain realized on sale of other real estate owned		—		(51)
Writedowns of other real estate owned		105		105		105		105
Deferred compensation expense - Class A Common Stock		568		512		685		568
Stock-based awards and ESPP expense - Class A Common Stock		1,042		923		1,060		1,042
Net gain on sale of bank premises and equipment		—		(399)
Increase in cash surrender value of bank owned life insurance		(1,235)		(990)		(1,324)		(1,235)
Gain from death benefits in excess of cash surrender value of BOLI						(1,728)		—
Net change in other assets and liabilities:
Accrued interest receivable		5		2,450		(2,585)		5
Accrued interest payable		3		(131)		629		3
Other assets		1,718		1,728		(9,184)		1,718
Other liabilities		9,889		(2,352)		(4,276)		9,602
Net cash provided by operating activities		93,994		55,291		64,893		94,577

INVESTING ACTIVITIES:
Net cash proceeds paid in acquisition						(40,970)		—
Purchases of available-for-sale debt securities		(189,820)		(111,664)		(40,000)		(189,820)
Purchases of held-to-maturity debt securities						(25,000)		—
Proceeds from calls, maturities and paydowns of equity and available-for-sale debt securities		33,340		108,201		73,554		33,340
Proceeds from calls, maturities and paydowns of held-to-maturity debt securities		11,330		7,162		10,420		11,330
Net change in outstanding warehouse lines of credit		253,872		122,641		(136,000)		253,872
Net change in other loans		(130,331)		135,473		(213,857)		(130,331)
Proceeds from redemption of Federal Home Loan Bank stock		—		5,727
Proceeds from sales of other real estate owned		—		611
Proceeds from sale of bank premises and equipment		—		637
Purchase of bank owned life insurance		—		(30,000)
Purchase of Federal Home Loan Bank stock						(20,249)		—
Investments in low-income housing tax partnerships		(5,509)		(7,684)		7,389		(5,509)
Net purchases of premises and equipment		(1,842)		(3,923)		(3,531)		(1,842)
Net cash (used in) provided by investing activities		(28,960)		227,181

Proceeds of principal and earnings from bank-owned life insurance						2,218		—
Net cash used in investing activities						(386,026)		(28,960)
FINANCING ACTIVITIES:
Net change in deposits		(12,889)		284,397		(30,242)		(13,472)
Net change in securities sold under agreements to repurchase and other short-term borrowings		12,348		(68,131)		(124,863)		12,348
Payments of Federal Home Loan Bank advances		(25,000)		(235,000)		(88,000)		(25,000)
Proceeds from Federal Home Loan Bank advances		20,000		25,000		513,000		20,000
Repurchase of Class A Common Stock		(8,836)		(15,229)		(6,714)		(8,836)
Net proceeds from Class A Common Stock purchased through employee stock purchase plan		278		272		341		278
Net proceeds from option exercises and equity awards vested - Class A Common Stock		42		(142)		(184)		42
Cash dividends paid		(12,805)		(12,219)		(13,927)		(12,805)
Net cash used in financing activities		(26,862)		(21,052)
Net cash (used in) provided by financing activities						249,411		(27,445)

NET CHANGE IN CASH AND CASH EQUIVALENTS		38,172		261,420		(71,722)		38,172
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		756,971		485,587		313,689		756,971
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	795,143	$	747,007	$	241,967	$	795,143

SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION:
Cash paid during the period for:
Interest	$	2,028	$	3,419	$	21,610	$	2,028
Income taxes		8,677		13,466		17,124		8,677

SUPPLEMENTAL NONCASH DISCLOSURES:
Mortgage servicing rights capitalized	$	1,459	$	2,475	$	200	$	1,459
Transfers from loans to real estate acquired in settlement of loans		—		64
Unfunded commitments in low-income-housing investments		10,100		—
New unfunded obligations in low-income-housing investments						—		10,100
Right-of-use assets recorded		4,956		—		1,050		4,956

See accompanying footnotes to consolidated financial statements.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –JUNE 30, ~~2022~~2023 and ~~2021~~2022 AND DECEMBER 31, ~~2021~~2022 (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~~wholly owned subsidiaries, Republic Bank & Trust Company and Republic Insurance Services, Inc. As used in this filing, the terms “Republic,” the “Company,” “we,” “our,” and “us” refer to Republic Bancorp, Inc., and, where the context requires, Republic Bancorp, Inc. and its subsidiaries. The term “Bank” refers to the Company’s subsidiary bank: Republic Bank & Trust Company. The term “Captive” refers to the Company’s insurance subsidiary: Republic Insurance Services, Inc. All significant intercompany balances and transactions are eliminated in consolidation.

Republic is a financial holding company headquartered in Louisville, Kentucky. The Bank is a Kentucky-based, state-chartered non-member financial institution that provides both traditional and non-traditional banking products through 5five reportable segments using a multitude of delivery channels. While the Bank operates primarily in its market footprint, its non-brick-and-mortar delivery channels allow it to reach clients across the U.S. The Captive is a Nevada-based, ~~wholly-owned~~wholly owned insurance subsidiary of the Company. The Captive provides property and casualty insurance coverage to the Company and the Bank, as well as a group of third-party insurance captives for which insurance may not be available or economically feasible. In May 2023, the Company’s Board of Directors voted to dissolve the Company’s Captive. The dissolution of the Captive is expected to occur during the second half of 2023.

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 of 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, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023. 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, ~~2021.~~2022.

As of June 30, ~~2022,~~2023, the Company was divided into 5five reportable segments: Traditional Banking, Warehouse, Mortgage Banking, TRS, and RCS. Management considers the first 3three segments to collectively constitute “Core Bank” or “Core Banking” operations, while the last 2two segments collectively constitute RPG operations.

Table of Contents

Core Bank

Traditional Banking segment — The Traditional Banking segment provides traditional banking products primarily to customers in the Company’s market footprint. As of June 30, ~~2022,~~2023, Republic had ~~42 full-service~~45 banking centers with locations as follows:

●

Kentucky — 2829

●

Metropolitan Louisville — 18

●

Central Kentucky — 7

●

Georgetown — 1

●

Lexington — 5

●

Shelbyville — 1

●

Northern Kentucky — 34

●Bellevue— 1

●

Covington — 1

●

Crestview Hills — 1

●

Florence — 1

●

Indiana — 3

●

Southern Indiana — 3

●

Floyds Knobs — 1

●

Jeffersonville — 1

●

New Albany — 1

●

~~Metropolitan Tampa,~~ Florida — 7

●

Metropolitan Tampa — 7

●

Ohio — 4

●

Metropolitan Cincinnati ~~Ohio~~— 4

●

Tennessee — 2

●

Metropolitan Nashville ~~Tennessee~~ — 2

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, securities sold under agreements to repurchase, as well as short-term and long-term borrowing sources. FHLB advances have traditionally been a significant borrowing source for the Bank.

Other sources of Traditional Banking income include service charges on deposit accounts, debit and credit card interchange fee income, title insurance commissions, and increases in the cash surrender value of BOLI.

Traditional Banking operating expenses consist primarily ~~of:~~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.

Warehouse Lending segment — The Core Bank provides short-term, revolving credit facilities to mortgage bankers across the United States through mortgage warehouse lines of credit. These credit facilities are primarily secured by single-family, first-lien residential real estate loans. The credit facility enables the mortgage banking clients to close single-family, first-lien residential real estate loans in their own name and temporarily fund their inventory of these closed loans until the loans are sold to investors approved by the Bank. Individual loans are expected to remain on the warehouse line for an average of 15 to 30 days. Advances for Reverse mortgage loans and construction loans typically remain on the line longer than conventional mortgage loans. Interest income and loan fees are accrued for each individual ~~loan~~advance during the time the ~~loan~~advance remains on the warehouse line and collected when the loan is sold. The Core Bank receives the sale proceeds of each loan directly from the investor and applies the funds to pay off the warehouse advance and related accrued interest and fees. The remaining proceeds are credited to the mortgage-banking client.

Table of Contents

Mortgage Banking segment — Mortgage Banking activities primarily include 15-, 20- and 30-year fixed-term, single-family, first-lien residential real estate loans that are originated and sold into the secondary market, primarily to the FHLMC and the FNMA. The Bank typically retains servicing on loans sold into the secondary ~~market for loans generated in states within its footprint and generally sells servicing for loans generated in states outside of its footprint.~~market. Administration of loans with servicing retained by the Bank includes collecting principal and interest payments, escrowing funds for property taxes and property insurance, and remitting payments to secondary market investors. The Bank receives fees for performing these standard servicing functions.

As part of the sale of loans with servicing retained, the Bank records MSRs. MSRs represent an estimate of the present value of future cash servicing income, net of estimated costs, which the Bank expects to receive on loans sold with servicing retained by the Bank. MSRs are capitalized as separate assets. This transaction is posted to net gain on sale of loans, a component of “Mortgage Banking income” in the income statement. Management considers all relevant factors, in addition to pricing considerations from other servicers, to estimate the fair value of the MSRs to be recorded when the loans are initially sold with servicing retained by the Bank. The carrying value of MSRs is initially amortized in proportion to and over the estimated period of net servicing income and subsequently adjusted quarterly based on the weighted average remaining life of the underlying loans. The MSR amortization is recorded as a reduction to net servicing income, a component of Mortgage Banking income.

With the assistance of an independent third-party, the MSRs asset is reviewed at least quarterly for impairment based on the fair value of the MSRs using groupings of the underlying loans based on predominant risk characteristics. Any impairment of a grouping is reported as a valuation allowance. A primary factor influencing the fair value is the estimated life of the underlying loans serviced. The estimated life of the loans serviced is significantly influenced by market interest rates. During a period of declining interest rates, the fair value of the MSRs is expected to decline due to increased anticipated prepayment speeds within the portfolio. Alternatively, during a period of rising interest rates, the fair value of MSRs would be expected to increase as prepayment speeds on the underlying loans would be expected to decline.

Republic Processing Group

Tax Refund Solutions segment — Through the TRS segment, the Bank is one of a limited number of financial institutions that facilitates the receipt and payment of federal and state tax refund products and offers a credit product through third-party tax preparers located throughout the U.S., as well as tax-preparation software providers (collectively, the “Tax Providers”). ~~Substantially~~The majority of all of the business generated by the TRS ~~segment~~business occurs induring the first half of ~~the~~each year. ~~The TRS segment traditionally operates at a loss during~~During the second half of ~~the~~each year, ~~during which time the segment~~TRS generates limited revenue and incurs costs preparing for the ~~upcoming~~next year’s tax season. TRS also originated $98 million of ERAs during December 2022 related to estimated tax returns that were anticipated to be filed during the first quarter 2023 tax filing season.

RTs are fee-based products whereby a tax refund is issued to the taxpayer after the Bank has received the refund from the federal or state government. There is no credit risk or borrowing cost associated with these products because they are only delivered to the taxpayer upon receipt of the tax refund directly from the governmental paying authority. Fees earned by the Company on RTs, net of revenue share, are reported as noninterest income under the line item “Net refund transfer fees.”

The ~~EA tax~~RA credit product is a loan ~~that~~made in conjunction with the filing of a taxpayer’s federal tax return, which allows athe taxpayer to borrow funds as an advance of a portion of their tax refund. The EARA product had the following features during ~~2022~~the first quarters of 2023 and ~~2021:~~2022:

●

Offered only during the first two months of each year;

●

The taxpayer was given the option to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $6,250;

●

~~NaN~~No requirement that the taxpayer pays for another bank product, such as an RT;

●

Multiple ~~funds~~ disbursement methods were available with most Tax Providers, including ~~a DDA Card,~~ direct deposit, prepaid card, or check, based on the taxpayer-customer’s election;

●

Repayment of the EARA to the Bank is deducted from the taxpayer’s tax refund proceeds; and

●

If an insufficient refund to repay the EARA occurs:

there is no recourse to the taxpayer,

no negative credit reporting on the taxpayer, and

no collection efforts against the taxpayer.

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taxable income documentation, e.g., W-2. As such, the Company generally uses paystub information to estimate the potential tax refund and 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 federal tax return in order for the tax refund to potentially be received by the Bank from the federal government to pay off the advance. The ERA product related to the first quarter 2023 tax filing season had the following features:

●

Offered only during December 2022 and January 2023;

●

The taxpayer had the option to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $1,000;

●

No requirement that the taxpayer pays for another bank product, such as an RT;

●

Multiple disbursement methods were available with most Tax Providers, including direct deposit or prepaid card, based on the taxpayer-customer’s election;

●

Repayment of the ERA to the Bank is deducted from the taxpayer’s tax refund proceeds; and

●

If an insufficient refund to repay the ERA occurs, including the failure to file a federal tax return through a Republic Tax Provider:

there is no recourse to the taxpayer,

no negative credit reporting on the taxpayer, and

no collection efforts against the taxpayer.

The Company reports fees paid for the ~~EA product~~RAs, including ERAs, as interest income on loans. ~~During 2021, EAs~~RAs that were originated related to the first quarter 2022 tax season were repaid, on average, within 32 days after the taxpayer’s tax return was submitted to the applicable taxing authority. ~~EAs~~RAs do not have a contractual due date but the Company considered ~~an EA~~a RA, related to the first quarter 2022 tax season, delinquent ~~in 2022 and 2021~~ if it remained unpaid 35 days after the taxpayer’s tax return was submitted to the applicable taxing authority. In 2023, the Company also considered a RA, related to the first quarter 2023 tax season, delinquent if it remained unpaid 35 days after the taxpayer’s tax return was submitted to the applicable taxing authority. For the ERA product originated in December of 2022 and January 2023, the Company considered it delinquent if it remained unpaid 35 days after the taxpayer’s tax return was submitted to the applicable taxing authority. The number of days for delinquency eligibility is based on management’s annual analysis of tax return processing times. Provisions on ~~EAs~~RAs are estimated when advances are made. Provisions on RAs are estimated when advances are made. Unpaid ~~EAs~~RAs, including ERAs, related to the first quarter tax season of a given year are charged-off by June 30^th30th of ~~each~~that year, with ~~EAs~~RAs collected during the second half of ~~each~~that year ~~are~~ recorded as recoveries of previously charged-off loans, unless ~~such recovery is~~they were covered under a loss guaranty arrangement. Any RAs subject to ~~guarantor reimbursement under~~ a ~~loan-loss guaranty.~~ loss guaranty arrangement that are recovered during the second half of the year are distributed to the guarantor.

Related to the overall credit losses on ~~EAs,~~RAs, including ERAs, the Bank’s ability to control losses is highly dependent upon its ability to predict the taxpayer’s likelihood to receive the tax refund as claimed on the taxpayer’s tax return. Each year, the Bank’s EARA approval model is based primarily on the prior-year’s tax refund payment patterns. Because the substantial majority of the EARA 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.

Cancelled Sale Transaction – As previously disclosed, Green Dot paid RB&T a contract termination fee of $5.0 million during the first quarter of 2022 related to the cancelled Sale Transaction.

Settlement of Lawsuit Against Green Dot - OnAs previously disclosed, on June 3, 2022, the Bank and Green Dot entered into the Settlement Agreement to fully resolve the Lawsuit that the Bank filed against Green Dot in the Delaware Court of Chancery on October 5, 2021.

~~As previously disclosed in the Company’s prior SEC filings, the~~ The Lawsuit arose from Green Dot’s inability to consummate the Sale

Transaction contemplated in the TRS Purchase Agreement through which Green Dot would purchase all of the assets and operations of the Bank’s Tax Refund Solutions business.

~~Table of Contents~~

In accordance with the Settlement Agreement, on June 6, 2022, Green Dot paid ~~$13~~$13.0 million to the Bank, which was in addition to a $5$5.0 million termination fee that Green Dot paid to the Bank during the first quarter of 2022 under the terms of the TRS Purchase Agreement. On June 6, 2022, the Bank and Green Dot ~~submitted to the Delaware Court of Chancery~~filed a stipulation of dismissal of the Lawsuit with the Delaware Court of Chancery, which was effective to dismiss the Lawsuit when filed.

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Republic Payment Solutions division—

RPS is currently managed and operated within the TRS segment. The RPS division offers general-purpose reloadable prepaid cards, payroll debit cards, and limited-purpose demand deposit accounts with linked debit cards as an issuing bank through third-party service providers. ~~For the projected near-term, as the prepaid card program matures,~~Until the operating results of the RPS division are ~~expected to be immaterial~~material to the Company’s overall results of operations, ~~and~~they will be reported as part of the TRS segment. The Company does not expect to report the RPS division ~~will not be considered~~as a separate reportable segment until such time, if any, that it meets quantitative reporting thresholds.

The Company reports fees related to RPS programs under Program fees. Additionally, the Company’s portion of interchange revenue generated by prepaid card transactions is reported as noninterest income under “Interchange fee income.”

Republic Credit Solutions segment — Through the RCS segment, the Bank offers consumer credit products. In general, the credit products are unsecured, small dollar consumer loans that are dependent on various factors. RCS loans typically earn a higher yield but also have higher credit risk compared to loans originated through the Traditional Banking segment, with a significant portion of RCS clients considered subprime or near-prime borrowers. The Bank uses third-party service providers for certain services such as marketing and loan servicing of RCS loans. Additional information regarding consumer loan products offered through RCS follows:

●

RCS line-of-credit products – Using separate third-party service providers, the Bank originates 2two line-of-credit products to generally subprime borrowers in multiple states. ~~The first of these~~ ~~2 products (the “LOC I”) has been originated by the Bank since 2014. The second (the “LOC II”) was introduced in January 2021.~~

RCS’s LOC I represented the substantial majority of RCS activity during ~~2021~~2022 and ~~2022.~~2023. Elastic Marketing, LLC and Elevate Decision Sciences, LLC, are third-party service providers for the product and are subject to the Bank’s oversight and supervision. Together, these companies provide the Bank with certain marketing, servicing, technology, and support services, while a separate ~~third party~~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. Further,~~such, up to a maximum amount of $3,500. 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~~participations sold represent a 90% interest in advances made to borrowers under the borrower’s line-of-credit account, and the participation interests are generally sold three business days following the Bank’s funding of the associated advances. Although the Bank retains a 10% participation interest in each advance, it maintains 100% ownership of the underlying LOC I account with each borrower. Loan balances held for sale through this program are carried at the lower of cost or fair value.

~~In January 2021, RCS began originating balances through its LOC II.~~ One of RCS’s ~~existing~~ third-party service providers, subject to the Bank’s oversight and supervision, provides the Bank with marketing services and loan servicing for the LOC II product. The Bank is the lender for this product and is marketed as ~~such.~~such, up to a maximum advance amount of $10,000. Furthermore, the Bank controls the loan terms and underwriting guidelines, and the Bank exercises consumer compliance oversight of this product.

The Bank sells participation interests in this product. These ~~participation interests are~~participations sold represent a 95% interest in advances made to borrowers under the borrower’s line-of-credit account, and the participation interests are generally sold three business days following the Bank’s funding of the associated advances. Although the Bank retains a 5% participation interest in each advance, it maintains 100% ownership of the underlying LOC II account with each borrower. Loan balances held for sale through this program are carried at the lower of cost or fair value.

●

RCS installment loan product – ~~In December 2019, through~~Through RCS, the Bank ~~began offering~~offers installment loans with terms ranging from 12 to 60 months to borrowers in multiple states. The same third-party service provider for RCS’s LOC II is the third-party provider for the installment loans. This third-party provider is subject to the Bank’s oversight and supervision and provides the Bank with marketing services and loan servicing for these RCS installment loans. The Bank is the lender for these RCS installment loans and is marketed as such. Furthermore, the Bank controls the loan terms and underwriting guidelines, and the Bank exercises consumer compliance oversight of this RCS installment loan product. Currently, all loan balances originated under this RCS installment loan program are carried as “held for sale” on the Bank’s balance sheet, with

~~Table of Contents~~

the intention to sell these loans to a third-party, who is an affiliate of the Bank’s third-party service provider, generally within sixteen days following the Bank’s origination of the loans. Loans originated under this RCS installment loan program are carried at fair value under a fair-value option, with the portfolio marked to market monthly.

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●

RCS healthcare receivables products – The Bank originates healthcare-receivables products across the U.S. through 2three different third-party service providers. ~~In one program,~~

For two of the programs, the Bank retains 100% of the receivables, ~~originated. In~~with recourse in the ~~other~~event of default.

For the remaining program, in some instances the Bank retains 100% of the receivables originated, with recourse in ~~some instances,~~the event of default, and in other instances, the Bank sells 100% of the receivables generally within one month of origination. Loan balances held for sale through this program are carried at the lower of cost or fair value.

The Company reports interest income and loan origination fees earned on RCS loans under “Loans, including fees,” while any gains or losses on sale and mark-to-market adjustments of RCS loans are reported as noninterest income under “Program fees.”

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Recently Adopted Accounting Standards

The following ASUs were adopted by the Company during the six months ended June 30, ~~2022:~~2023:


				Method of	Financial
ASU. No.	Topic	Nature of Update	Date Adopted	~~Method of~~ Adoption	~~Financial~~ Statement Impact
~~2020-06~~2022-02	~~Debt—~~Financial Instruments—Credit Losses (Topic 326): Troubled Debt ~~with Conversion~~Restructurings and ~~Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity~~Vintage Disclosures	This ASU ~~simplifies~~eliminates the TDR recognition and measurement guidance and, instead, requires the Company to evaluate (consistent with the accounting for ~~convertible instruments~~other loan modifications) whether a modification represents a new loan or a continuation of an existing loan. This ASU also enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. This ASU requires the Company to disclose current-period gross write-offs by ~~removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will~~year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross writeoff information must be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that areincluded in the vintage disclosures required for ~~equity contracts to qualify for~~ the ~~derivative scope exception,~~Company in accordance with ASC 326-20-50-6, which ~~will permit more equity contracts to qualify for it. The ASU also simplifies~~requires that the ~~diluted earnings per share calculation~~Company disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. (see Note 5 in ~~certain areas.~~this section of the filing)	January 1, ~~2022~~2023	Prospectively	Immaterial

~~2021-04~~2022-06	~~Earnings Per Share~~Reference Rate Reform (Topic ~~260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)~~848): ~~Issuer’s Accounting for Certain Modifications or Exchanges~~Deferral of ~~Freestanding Equity-Classified Written Call Options~~the Sunset Date of Topic 848	This ASU ~~provides~~extends the period of time preparers can utilize the reference rate reform relief guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It specifically addresses: (1) How an entity should treat a modificationin Topic 848. The objective of the ~~terms or conditions or an exchange~~guidance in Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on expectations of ~~a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) How an entity should measure~~when the ~~effect~~London Interbank Offered Rate (LIBOR) would cease being published. In 2021, the UK Financial Conduct Authority (FCA) delayed the intended cessation date of ~~a modification or an exchange~~certain tenors of a freestanding equity-classified written call option that remains equity classified after modification or exchange; and (3) How an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange.USD LIBOR to June 30, 2023.	January 1, ~~2022~~2023	Prospectively	~~Immaterial~~
					Immaterial. The Company ceased making new loans and renewing loans indexed to LIBOR on January 1, 2022.

1416

Table of Contents

Accounting Standards Update

The following not-yet-effective ASUs ~~were issued since the Company’s most recently filed Form 10-K and~~ are considered relevant to the Company’s financial statements.


			Date Adoption	Adoption	Expected
ASU. No.	Topic	Nature of Update	Required	Method	Financial Impact
~~2022-02~~	~~Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures~~	This ASU eliminates the TDR recognition and measurement guidance and, instead, requires the Company to evaluate (consistent with the accounting for other loan modifications) whether a modification represents a new loan or a continuation of an existing loan. This ASU also enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. This ASU requires the Company to disclose current-period gross writeoffs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross writeoff information must be included in the vintage disclosures required for the Company in accordance with ASC 326-20-50-6, which requires that the Company disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. (see Note 4 in this section of the filing)	~~January 1, 2023~~	~~Prospectively~~	~~The Company is currently analyzing the impact of this ASU on its financial statements.~~

2022-03	Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions	This ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.	January 1, 2024	Prospectively	Immaterial

2023-03	Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock (SEC Update)	This ASU amends the FASB Accounting Standards Codification™ for SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock.	Upon addition to the FASB Codification.	Prospectively	The Company is currently analyzing the impact of this ASU on its financial statements.

2023-02	Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)	This ASU allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.	January 1, 2024	Prospectively	The Company is currently analyzing the impact of this ASU on its financial statements.

2023-01	Leases (Topic 842): Common Control Arrangements	This ASU requires entities to determine whether a related party arrangement between entities under common control is a lease. If the arrangement is determined to be a lease, an entity must classify and account for the lease on the same basis as an arrangement with a related party (on the basis of legally enforceable terms and conditions).	January 1, 2024	Prospectively	The Company is currently analyzing the impact of this ASU on its financial statements.

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2.ACQUISITION OF CBANK

OVERVIEW

On March 15, 2023, the Company completed its acquisition of CBank (“CBank”), and its wholly owned bank subsidiary Commercial Industrial Finance (“CIF”), for approximately $51 million in cash. The primary reason for the acquisition of CBank was to expand the Company’s footprint in the Cincinnati, Ohio metropolitan statistical area.

ACQUISITION SUMMARY

The following table provides a summary of the assets acquired and liabilities assumed as recorded by CBank, the previously reported preliminary fair value adjustments necessary to adjust those acquired assets and assumed liabilities to fair value, recast adjustments to those previously reported preliminary fair values, and the expected fair values of those assets and liabilities as recorded by the Company. As provided for under GAAP, management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. The preliminary fair value adjustments and the preliminary resultant fair values shown in the following table continue to be evaluated by management and may be subject to further recast adjustments.

March 15, 2023

As Previously Reported

As Recasted


As Recorded

Fair Value

Recast

As Recorded
(in thousands)

by CBank

Adjustments (1)

Adjustments (1)

by Republic

Assets acquired:

Cash and cash equivalents

$
10,030

$
—

$
—

$
10,030
Investment securities

16,463

(4)
a

(65)
a

16,394
Loans

221,707

(4,219)
b

(150)
b

217,338
Allowance for loan and lease losses

(2,953)

1,353
c

1,391
c, j

(209)
Loans, net

218,754

(2,866)

1,241

217,129
Goodwill

954

(954)
d

—

—
Core deposit intangible

—

2,844
e

—

2,844
Premises and equipment, net

162

35
f

(24)
f

173
Other assets and accrued interest receivable

7,067

(320)
g

—

6,747

Total assets acquired

$
253,430

$
(1,265)

$
1,152

$
253,317

Liabilities assumed:

Deposits:

Noninterest-bearing

$
42,160

$
—

$
—

$
42,160
Interest-bearing

179,487

31
h

—

179,518
Total deposits

221,647

31

—

221,678

Other liabilities and accrued interest payable

4,709

96
i

50
i

4,855

Total liabilities assumed

226,356

127

50

226,533

Net assets acquired

$
27,074

$
(1,392)

$
1,102

26,784

Cash consideration paid

(51,000)

Goodwill

$
24,216

(1) The Company’s acquisition of CBank closed on March 15, 2023. The fair value adjustments reported are preliminary estimates based on information obtained subsequent to March 15, 2023 and through June 30, 2023. Management is continuing to evaluate each of its estimates and may provide additional recast adjustments in future periods based on this continuing evaluation. To the extent that additional recast adjustments are posted in future periods, the resultant fair values and the amount of goodwill recorded by the Company will change.

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Explanation of fair value and recast adjustments:

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the investment securities.

Adjustments to loans to reflect estimated fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

Adjustments to the Allowance reflect the fair value adjustment to eliminate the acquiree’s recorded allowance for loan losses and other fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

Adjustment reflects the fair value adjustment to eliminate the recorded goodwill.

Adjustment reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the premises and equipment, net.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the other assets and accrued interest receivable.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the assumed time deposits.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the other liabilities and accrued interest payable.

Adjustment reflects a change in estimated fair value based upon further evaluation of PCD loans, including cash payments received subsequent to the date of acquisition.

Goodwill of approximately $24 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the CBank acquisition and is the result of expected operational synergies and other factors. This goodwill is all attributable to the Company’s Traditional Banking segment and is expected to be deductible for tax purposes.

2.3. INVESTMENT SECURITIES

Available-for-Sale Debt Securities

The following tables summarize the amortized cost, fair value, and ACLS of AFS debt securities and the corresponding amounts of related gross unrealized gains and losses recognized in AOCI:




Gross

Gross

Allowance






Gross

Gross

Allowance



Amortized

Unrealized

Unrealized

for

Fair

Amortized

Unrealized

Unrealized

for

Fair
June 30, 2022 (in thousands)

Cost

Gains

Losses

Credit Losses

Value
June 30, 2023 (in thousands)

Cost

Gains

Losses

Credit Losses

Value

U.S. Treasury securities and U.S. Government agencies

$
400,771

$
1

$
(17,680)

$
0

$
383,092

$
431,450

$
—

$
(24,093)

$
—

$
407,357
Private label mortgage-backed security

1,156

1,322

—

0

2,478

671

1,317

—

—

1,988
Mortgage-backed securities - residential

210,571

83

(12,384)

0

198,270

183,843

13

(17,569)

—

166,287
Collateralized mortgage obligations

24,838

48

(341)

0

24,545

24,222

30

(1,505)

—

22,747
Corporate bonds

10,000

—

(34)

(30)

9,936

2,012

13

—

—

2,025
Trust preferred security

3,712

112

—

0

3,824

3,770

—

(24)

—

3,746
Total available-for-sale debt securities

$
651,048

$
1,566

$
(30,439)

$
(30)

$
622,145

$
645,968

$
1,373

$
(43,191)

$
—

$
604,150




Gross

Gross

Allowance



Amortized

Unrealized

Unrealized

for

Fair
December 31, 2021 (in thousands)

Cost

Gains

Losses

Credit Losses

Value

U.S. Treasury securities and U.S. Government agencies

$
239,880

$
473

$
(2,894)

$
0

$
237,459
Private label mortgage-backed security

1,418

1,313

—

0

2,731
Mortgage-backed securities - residential

207,697

3,525

(473)

0

210,749
Collateralized mortgage obligations

29,947

377

(30)

0

30,294
Corporate bonds

10,000

46

—

0

10,046
Trust preferred security

3,684

163

—

0

3,847
Total available-for-sale debt securities

$
492,626

$
5,897

$
(3,397)

$
0

$
495,126

~~Held-to-Maturity Debt Securities~~

~~The following tables summarize the amortized cost, fair value, and ACLS of HTM debt securities and the corresponding amounts of related gross unrecognized gains and losses:~~





Gross

Gross




Allowance

Amortized

Unrecognized

Unrecognized

Fair

for
June 30, 2022 (in thousands)

Cost

Gains

Losses

Value

Credit Losses

Mortgage-backed securities - residential

$
29

$
—

$
—

$
29

$
—
Collateralized mortgage obligations

7,772

70

(20)

7,822

—
Corporate bonds

24,966

8

(92)

24,882

(50)
Obligations of state and political subdivisions

245

—

—

245

—
Total held-to-maturity debt securities

$
33,012

$
78

$
(112)

$
32,978

$
(50)





Gross

Gross




Allowance

Amortized

Unrecognized

Unrecognized

Fair

for
December 31, 2021 (in thousands)

Cost

Gains

Losses

Value

Credit Losses

Mortgage-backed securities - residential

$
46

$
—

$
—

$
46

$
—
Collateralized mortgage obligations

9,080

158

—

9,238

—
Corporate bonds

34,975

263

(6)

35,232

(47)
Obligations of state and political subdivisions

245

3

—

248

—
Total held-to-maturity debt securities

$
44,346

$
424

$
(6)

$
44,764

$
(47)

~~Sales of Available-for-Sale Debt Securities~~

~~During the three and six months ended June 30, 2022 and 2021, there were no material gains or losses on sales or calls of AFS debt securities.~~




Gross

Gross

Allowance



Amortized

Unrealized

Unrealized

for

Fair
December 31, 2022 (in thousands)

Cost

Gains

Losses

Credit Losses

Value

U.S. Treasury securities and U.S. Government agencies

$
436,333

$
1

$
(25,193)

$
—

$
411,141
Private label mortgage-backed security

843

1,284

—

—

2,127
Mortgage-backed securities - residential

189,312

16

(17,455)

—

171,873
Collateralized mortgage obligations

22,774

21

(1,427)

—

21,368
Corporate bonds

10,000

1

—

—

10,001
Trust preferred security

3,741

114

—

—

3,855
Total available-for-sale debt securities

$
663,003

$
1,437

$
(44,075)

$
—

$
620,365

1619

Table of Contents

Held-to-Maturity Debt Securities

The following tables summarize the amortized cost, fair value, and ACLS of HTM debt securities and the corresponding amounts of related gross unrecognized gains and losses:





Gross

Gross




Allowance

Amortized

Unrecognized

Unrecognized

Fair

for
June 30, 2023 (in thousands)

Cost

Gains

Losses

Value

Credit Losses

U.S. Treasury securities and U.S. Government agencies

$
90,000

$
—

$
(725)

$
89,275

$
—
Mortgage-backed securities - residential

26

—

(1)

25

—
Collateralized mortgage obligations

6,845

50

(134)

6,761

—
Corporate bonds

4,980

25

—

5,005

(10)
Obligations of state and political subdivisions

125

—

(1)

124

—
Total held-to-maturity debt securities

$
101,976

$
75

$
(861)

$
101,190

$
(10)





Gross

Gross




Allowance

Amortized

Unrecognized

Unrecognized

Fair

for
December 31, 2022 (in thousands)

Cost

Gains

Losses

Value

Credit Losses

U.S. Treasury securities and U.S. Government agencies

$
75,000

$
106

$
—

$
75,106

$
—
Mortgage-backed securities - residential

27

—

(1)

26

—
Collateralized mortgage obligations

7,270

54

(148)

7,176

—
Corporate bonds

4,974

—

(49)

4,925

(10)
Obligations of state and political subdivisions

125

—

(1)

124

—
Total held-to-maturity debt securities

$
87,396

$
160

$
(199)

$
87,357

$
(10)

Sales of Available-for-Sale Debt Securities

During the three and six months ended June 30, 2023 and 2022, there were no material gains or losses on sales or calls of AFS debt securities.

Debt Securities by Contractual Maturity

The amortized cost and fair value of debt securities by contractual maturity as of June 30, ~~2022~~2023 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

Available-for-Sale

Held-to-Maturity

Debt Securities

Debt Securities

Debt Securities

Debt Securities


Amortized

Fair

Amortized

Fair


Amortized

Fair

Amortized

Fair
June 30, 2022 (in thousands)

Cost

Value

Cost

Value

June 30, 2023 (in thousands)

Cost

Value

Cost

Value

Due in one year or less

$
61,344

$
61,128

$
120

$
120

$
139,768

$
136,180

$
125

$
125
Due from one year to five years

349,427

331,900

25,091

25,007

293,694

273,202

94,980

94,279
Due from five years to ten years

—

—

—

—

—

—

—

—
Due beyond ten years

3,712

3,824

—

—

3,770

3,746

—

—
Private label mortgage-backed security

1,156

2,478

—

—

671

1,988

—

—
Mortgage-backed securities - residential

210,571

198,270

29

29

183,843

166,287

26

25
Collateralized mortgage obligations

24,838

24,545

7,772

7,822

24,222

22,747

6,845

6,761
Total debt securities

$
651,048

$
622,145

$
33,012

$
32,978

$
645,968

$
604,150

$
101,976

$
101,190

Table of Contents

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, ~~2022~~2023 and December 31, ~~2021,~~2022, aggregated by investment category and length of time in a continuous unrealized loss position:

Less than 12 months

12 months or more

Total

Less than 12 months

12 months or more

Total




Unrealized



Unrealized



Unrealized




Unrealized



Unrealized



Unrealized

June 30, 2022 (in thousands)

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

June 30, 2023 (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

$
296,890

$
(12,582)

$
64,902

$
(5,098)

$
361,792

$
(17,680)

$
218,670

$
(7,852)

$
188,687

$
(16,241)

$
407,357

$
(24,093)

Mortgage-backed securities - residential

193,002

(12,384)

—

—

193,002

(12,384)

63,616

(6,546)

101,546

(11,023)

165,162

(17,569)

Collateralized mortgage obligations

16,226

(341)

—

—

16,226

(341)

8,551

(525)

12,550

(980)

21,101

(1,505)

Trust preferred security

3,746

(24)

—

—

3,746

(24)

Total available-for-sale debt securities

$
506,118

$
(25,307)

$
64,902

$
(5,098)

$
571,020

$
(30,405)

$
294,583

$
(14,947)

$
302,783

$
(28,244)

$
597,366

$
(43,191)

Less than 12 months

12 months or more

Total

Less than 12 months

12 months or more

Total




Unrealized



Unrealized



Unrealized




Unrealized



Unrealized



Unrealized

December 31, 2021 (in thousands)

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

December 31, 2022 (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

$
177,138

$
(2,622)

$
9,728

$
(272)

$
186,866

$
(2,894)

$
229,372

$
(7,139)

$
171,676

$
(18,054)

$
401,048

$
(25,193)

Mortgage-backed securities - residential

84,937

(473)

—

—

84,937

(473)

105,274

(7,434)

65,520

(10,021)

170,794

(17,455)

Collateralized mortgage obligations

4,495

(30)

—

—

4,495

(30)

20,418

(1,426)

6

(1)

20,424

(1,427)

Total available-for-sale debt securities

$
266,570

$
(3,125)

$
9,728

$
(272)

$
276,298

$
(3,397)

$
355,064

$
(15,999)

$
237,202

$
(28,076)

$
592,266

$
(44,075)

As of June 30, ~~2022,~~2023, the Bank’s security portfolio consisted of ~~179~~197 securities, ~~127~~179 of which were in an unrealized loss position.

As of December 31, ~~2021,~~2022, the Bank’s security portfolio consisted of ~~173~~179 securities, 29163 of which were in an unrealized loss position.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 10% of stockholders’ equity.

Private Label Mortgage-Backed Security

The Bank owns 1one private label mortgage-backed security with a total carrying value of ~~$2.5~~$2 million as of June 30, ~~2022.~~2023. This security is mostly backed by “Alternative A” first-lien mortgage loans, but also has an insurance “wrap” or guarantee as an added layer of protection to the security holder. This asset is illiquid, and as such, the Bank determined it to be 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 the security. This approach is beneficial for positions that are not traded in active markets or are subject to transfer restrictions, and/or where valuations are adjusted to reflect illiquidity and/or non-transferability. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support for this investment.

See additional discussion regarding the Bank’s private label mortgage-backed security under Footnote 11 “Fair Value” in this section of the filing.

Mortgage-Backed Securities and Collateralized Mortgage Obligations

As of June 30, 2023, with the exception of the $2 million private label mortgage-backed security, all other mortgage-backed securities and CMOs held by the Bank were issued by U.S. government-sponsored entities and agencies, primarily the FHLMC and FNMA. As of June 30, 2023 and December 31, 2022, there were gross unrealized losses of $19.1 million and $18.9 million related to AFS mortgage-backed securities and CMOs. Because these unrealized losses are attributable to changes in interest rates and illiquidity, and not credit quality, and because the Bank does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, management does not consider these securities to have OTTI.

1721

Table of Contents

~~See additional discussion regarding the Bank’s private label mortgage-backed security under Footnote 10 “Fair Value” in this section of the filing.~~

~~Mortgage-Backed Securities and Collateralized Mortgage Obligations~~

As of June 30, 2022, with the exception of the $2.5 million private label mortgage-backed security, all other mortgage-backed securities and CMOs held by the Bank were issued by U.S. government-sponsored entities and agencies, primarily the FHLMC and FNMA. As of June 30, 2022 and December 31, 2021, there were gross unrealized losses of $12.7 million and $503,000 related to AFS mortgage-backed securities and CMOs. Because these unrealized losses are attributable to changes in interest rates and illiquidity, and not credit quality, and because the Bank does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, management does not consider these securities to have OTTI.

~~Trust Preferred Security~~

During 2015, the Parent Company purchased a $3 million floating rate TRUP at a price of 68% of par. The coupon on this security is based on the 3-month LIBOR rate plus 159 basis points. The Company performed an initial analysis prior to acquisition and performs ongoing analysis of the credit risk of the underlying borrower in relation to its TRUP.

~~Rollforward~~Roll-forward of the Allowance for Credit Losses on Debt Securities

The table below presents a ~~rollforward~~roll-forward for the three months ended June 30, ~~2022~~2023 and ~~2021~~2022 of the ACLS on AFS and HTM debt securities:

ACLS Rollforward

Three Months Ended June 30,

2022
2021

Beginning

Charge-

Ending

Beginning

Charge-

Ending
(in thousands)

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Available-for-Sale Securities:

Corporate Bonds

$
—

$
30

$
—

$
—

$
30

$
—

$
—

$
—

$
—

$
—
Held-to-Maturity Securities:

Corporate Bonds

40

10

—

—

50

103

(47)

—

—

56

Total

$
40

$
40

$
—

$
—

$
80

$
103

$
(47)

$
—

$
—

$
56

ACLS Roll-forward

Three Months Ended June 30,

2023
2022

Beginning

Charge-

Ending

Beginning

Charge-

Ending
(in thousands)

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Available-for-Sale Securities:

Corporate Bonds

$
3

$
(3)

$
—

$
—

$
—

$
—

$
30

$
—

$
—

$
30
Held-to-Maturity Securities:

Corporate Bonds

10

—

—

—

10

40

10

—

—

50

Total

$
13

$
(3)

$
—

$
—

$
10

$
40

$
40

$
—

$
—

$
80

ACLS Rollforward

ACLS Roll-forward

Six Months Ended June 30,

Six Months Ended June 30,

2022

2021

2023

2022

Beginning

Charge-

Ending

Beginning

Charge-

Ending

Beginning

Charge-

Ending

Beginning

Charge-

Ending
(in thousands)

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Available-for-Sale Securities:

Corporate Bonds

$
—

$
30

$
—

$
—

$
30

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
30

$
—

$
—

$
30
Held-to-Maturity Securities:

Corporate Bonds

47

3

—

—

50

178

(122)

—

—

56

10

—

—

—

10

47

3

—

—

50

Total

$
47

$
33

$
—

$
—

$
80

$
178

$
(122)

$
—

$
—

$
56

$
10

$
—

$
—

$
—

$
10

$
47

$
33

$
—

$
—

$
80

The ~~Company increased the~~Company’s ACLS on its ~~AFS and~~ HTM corporate bonds during the three and six months ended June 30, ~~2022 based on increased PD and LGD estimates on these bonds.~~2023 remained unchanged from December 31, 2022.

There were 0no HTM debt securities on nonaccrual or past due ~~over 89~~90 days or more as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. All of the Company’s HTM corporate bonds were rated investment grade as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

There were 0no HTM debt securities considered collateral dependent as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

~~Table of Contents~~

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. Accrued interest on AFS debt securities totaled $2 million and $1$2 million as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. Accrued interest receivable on HTM debt securities totaled ~~$118,000~~$398,000 and ~~$89,000~~$92,000 as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Pledged Debt Securities

Debt securities pledged to secure public deposits, securities sold under agreements to repurchase, and debt securities held for other purposes, as required or permitted by law, were as follows:

(in thousands)

June 30, 2022

December 31, 2021


June 30, 2023

December 31, 2022

Amortized cost

$
97,400

$
236,047

Fair value

92,450

217,562

Carrying amount

$
415,244

$
319,650

92,450

217,562

Fair value

415,244

319,808

Table of Contents

Equity Securities

The carrying value, gross unrealized gains and losses, and fair value of equity securities with readily determinable fair values were as follows:




Gross

Gross






Gross

Gross



Amortized

Unrealized

Unrealized

Fair

Amortized

Unrealized

Unrealized

Fair

June 30, 2022 (in thousands)

Cost

Gains

Losses

Value

June 30, 2023 (in thousands)

Cost

Gains

Losses

Value

Freddie Mac preferred stock

$
—

$
189

$
—

$
189

$
—

$
122

$
—

$
122

Total equity securities with readily determinable fair values

$
—

$
189

$
—

$
189

$
—

$
122

$
—

$
122




Gross

Gross






Gross

Gross



Amortized

Unrealized

Unrealized

Fair

Amortized

Unrealized

Unrealized

Fair

December 31, 2021 (in thousands)

Cost

Gains

Losses

Value

December 31, 2022 (in thousands)

Cost

Gains

Losses

Value

Freddie Mac preferred stock

$
—

$
170

$
—

$
170

$
—

$
111

$
—

$
111

Community Reinvestment Act mutual fund

2,500

—

(50)

2,450

Total equity securities with readily determinable fair values

$
2,500

$
170

$
(50)

$
2,620

$
—

$
111

$
—

$
111

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

Gains (Losses) Recognized on Equity Securities

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021


Three Months Ended June 30, 2023

Three Months Ended June 30, 2022

(in thousands)

Realized

Unrealized

Total

Realized

Unrealized

Total


Realized

Unrealized

Total

Realized

Unrealized

Total

Freddie Mac preferred stock

$
—

$
25

$
25

$
—

$
191

$
191

$
—

$
15

$
15

$
—

$
25

$
25

Community Reinvestment Act mutual fund

(97)

—

(97)

—

16

16

—

—

—

(97)

—

(97)

Total equity securities with readily determinable fair value

$
(97)

$
25

$
(72)

$
—

$
207

$
207

$
—

$
15

$
15

$
(97)

$
25

$
(72)

Gains (Losses) Recognized on Equity Securities

Gains (Losses) Recognized on Equity Securities

Six Months Ended June 30, 2022

Six Months Ended June 30, 2021

Six Months Ended June 30, 2023

Six Months Ended June 30, 2022

(in thousands)

Realized

Unrealized

Total

Realized

Unrealized

Total

Realized

Unrealized

Total

Realized

Unrealized

Total

Freddie Mac preferred stock

$
—

$
19

$
19

$
—

$
(444)

$
(444)

$
—

$
10

$
10

$
—

$
19

$
19

Community Reinvestment Act mutual fund

(209)

—

(209)

—

(38)

(38)

—

—

—

(209)

—

(209)

Total equity securities with readily determinable fair value

$
(209)

$
19

$
(190)

$
—

$
(482)

$
(482)

$
—

$
10

$
10

$
(209)

$
19

$
(190)

1923

Table of Contents

3.4. 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 Mortgage 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 1112 “Mortgage Banking Activities” of this section of the filing.

Consumer Loans Held for Sale, at Fair Value

~~In December 2019, the~~The Bank ~~began offering~~offers RCS installment loans with terms ranging from 12 to 60 months to borrowers in multiple states. Balances originated under this RCS installment loan program are carried as “held for sale” on the Bank’s balance sheet, with the intent to sell generally within sixteen days following the Bank’s origination of the loans. Loans originated under this RCS installment loan program are carried at fair value under a fair-value option, with the portfolio marked to market monthly.

Activity for consumer loans held for sale and carried at fair value was as follows:


Three Months Ended

Six Months Ended


Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(in thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Balance, beginning of period

$
11,709

$
3,970

$
19,747

$
3,298

$
4,688

$
11,709

$
4,706

$
19,747

Origination of consumer loans held for sale

98,704

49,607

195,436

68,697

30,147

98,704

52,944

195,436

Proceeds from the sale of consumer loans held for sale

(94,435)

(41,974)

(201,083)

(60,904)

(29,889)

(94,435)

(53,449)

(201,083)

Net gain on sale of consumer loans held for sale

1,481

1,417

3,359

1,929

811

1,481

1,556

3,359

Balance, end of period

$
17,459

$
13,020

$
17,459

$
13,020

$
5,757

$
17,459

$
5,757

$
17,459

Consumer Loans Held for Sale, at the Lower of Cost or Fair Value

RCS originates for sale 90% toor 95% of the balances from its line-of-credit products and 100% for some of its healthcare receivables products. Ordinary gains or losses on the sale of these RCS products are reported as a component of “Program fees.”

Activity for consumer loans held for sale and carried at the lower of cost or market value was as follows:


Three Months Ended

Six Months Ended


Three Months Ended

Six Months Ended


June 30,

June 30,

June 30,

June 30,

(in thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Balance, beginning of period

$
3,026

$
11,701

$
2,937

$
1,478

$
12,744

$
3,026

$
13,169

$
2,937

Origination of consumer loans held for sale

184,078

137,164

332,560

235,348

232,257

184,078

416,682

332,560

Proceeds from the sale of consumer loans held for sale

(174,994)

(138,852)

(324,626)

(227,606)

(231,412)

(174,994)

(418,051)

(324,626)

Net gain on sale of consumer loans held for sale

1,667

1,399

2,906

2,192

2,198

1,667

3,987

2,906

Balance, end of period

$
13,777

$
11,412

$
13,777

$
11,412

$
15,787

$
13,777

$
15,787

$
13,777

2024

Table of Contents

4.5. LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition of the loan portfolio follows:

(in thousands)

June 30, 2022

December 31, 2021


June 30, 2023

December 31, 2022

Traditional Banking:

Residential real estate:

Owner occupied

$
832,137

$
820,731

$
1,086,751

$
911,427

Nonowner occupied

313,534

306,323

350,390

321,358

Commercial real estate

1,569,119

1,456,009

1,727,092

1,599,510

Construction & land development

137,452

129,337

179,479

153,875

Commercial & industrial

394,175

340,363

478,759

413,387

Paycheck Protection Program

14,657

56,014

Lease financing receivables

11,345

8,637

79,804

10,505

Aircraft

159,958

142,894

208,512

179,785

Home equity

214,069

210,578

255,755

241,739

Consumer:

Credit cards

15,419

14,510

17,134

15,473

Overdrafts

901

683

706

726

Automobile loans

9,579

14,448

4,177

6,731

Other consumer

1,245

1,432

6,109

626

Total Traditional Banking

3,673,590

3,501,959

4,394,668

3,855,142

Warehouse lines of credit*

596,678

850,550

539,560

403,560

Total Core Banking

4,270,268

4,352,509

4,934,228

4,258,702

Republic Processing Group*:

Tax Refund Solutions:

Easy Advances

—

—

Other TRS loans

149

50,987

Refund Advances

—

97,505

Other TRS commercial & industrial loans

193

51,767

Republic Credit Solutions

91,816

93,066

118,721

107,828

Total Republic Processing Group

91,965

144,053

118,914

257,100

Total loans**

4,362,233

4,496,562

5,053,142

4,515,802

Allowance for credit losses

(64,449)

(64,577)

(72,202)

(70,413)

Total loans, net

$
4,297,784

$
4,431,985

$
4,980,940

$
4,445,389

*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 table directly below for expanded detail.

The following table reconciles the contractually receivable and carrying amounts of loans:

(in thousands)

June 30, 2022

December 31, 2021


June 30, 2023

December 31, 2022

Contractually receivable

$
4,364,937

$
4,498,671

$
5,059,937

$
4,519,136

Unearned income

(679)

(542)

(1,303)

(835)

Unamortized premiums

111

116

1,313

99

Unaccreted discounts

(574)

(641)

(3,721)

(479)

PPP net unamortized deferred origination (fees) and costs

(303)

(1,203)

(67)

(91)

Other net unamortized deferred origination (fees) and costs

(1,259)

161

(3,017)

(2,028)

Carrying value of loans

$
4,362,233

$
4,496,562

$
5,053,142

$
4,515,802

~~Table of Contents~~

~~Paycheck Protection Program~~

The CARES Act was enacted in March 2020 and provided for the SBA’s PPP, which allowed the Bank to lend to its qualifying small business clients to assist them in their efforts to meet their cashflow needs during the COVID pandemic. The Economic Aid Act was enacted in December 2020 and provided for a second round of PPP loans. PPP loans are fully backed by the SBA and may be entirely forgiven if the loan client uses loan funds for qualifying reasons. As of June 30, 2022, net PPP loans of $15 million remained on the Traditional Bank’s balance sheet compared to $56 million as of December 31, 2021~~. PPP fees recognized by the Company for the first six months of 2022 and 2021 were~~ ~~$1.0 million and $9.4 million. PPP fees recognized by the Company for the years ended December 31, 2021 and 2020 were $17.5 million and $8.6 million.~~

2225

Table of Contents

Credit Quality Indicators

The following tables include loans by segment, risk category, and, for non-revolving loans, origination year. Loan segments and risk categories as of June 30, ~~2022~~2023 remain unchanged from those defined in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. 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 (formerly TDR.) Loan extensions and renewals classified as ~~TDRs~~loan modifications (formerly TDRs) generally receive no change in origination date upon extension or renewal.

Revolving Loans

Revolving Loans

Revolving Loans

Revolving Loans

(in thousands)

Term Loans Amortized Cost Basis by Origination Year

Amortized

Converted

Term Loans Amortized Cost Basis by Origination Year

Amortized

Converted

As of June 30, 2022

2022

2021

2020

2019

Prior

Cost Basis

to Term

Total
As of June 30, 2023

2023

2022

2021

2020

Prior

Cost Basis

to Term

Total

Residential real estate owner occupied:

Risk Rating

Pass or not rated

$
95,596

$
201,218

$
200,132

$
78,397

$
235,958

$
—

$
—

$
811,301

$
228,708

$
212,810

$
185,875

$
179,237

$
257,247

$
—

$
1,025

$
1,064,902
Special Mention

—

—

—

189

7,681

—

—

7,870

—

—

—

—

6,710

—

—

6,710
Substandard

—

4

1,089

1,356

10,517

—

—

12,966

—

1,729

1,460

1,161

10,789

—

—

15,139
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
95,596

$
201,222

$
201,221

$
79,942

$
254,156

$
—

$
—

$
832,137

$
228,708

$
214,539

$
187,335

$
180,398

$
274,746

$
—

$
1,025

$
1,086,751
YTD Gross Charge-offs

$
—

$
8

$
7

$
—

$
—

$
—

$
—

$
15

Residential real estate nonowner occupied:

Risk Rating

Pass or not rated

$
45,525

$
98,419

$
58,325

$
36,582

$
68,566

$
—

$
5,863

$
313,280

$
50,814

$
72,662

$
84,995

$
50,396

$
83,144

$
—

$
8,277

$
350,288
Special Mention

—

—

—

—

126

—

—

126

—

—

—

—

29

—

—

29
Substandard

—

38

—

—

90

—

—

128

—

—

—

—

73

—

—

73
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
45,525

$
98,457

$
58,325

$
36,582

$
68,782

$
—

$
5,863

$
313,534

$
50,814

$
72,662

$
84,995

$
50,396

$
83,246

$
—

$
8,277

$
350,390
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Commercial real estate:

Risk Rating

Pass or not rated

$
252,650

$
439,645

$
228,470

$
145,692

$
315,211

$
24,040

$
104,446

$
1,510,154

$
129,293

$
466,364

$
385,492

$
202,957

$
368,264

$
22,465

$
112,808

$
1,687,643
Special Mention

1,324

13,043

2,406

23,495

15,431

250

—

55,949

579

1,758

4,696

—

30,629

831

—

38,493
Substandard

—

—

—

—

3,016

—

—

3,016

—

—

—

—

956

—

—

956
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
253,974

$
452,688

$
230,876

$
169,187

$
333,658

$
24,290

$
104,446

$
1,569,119

$
129,872

$
468,122

$
390,188

$
202,957

$
399,849

$
23,296

$
112,808

$
1,727,092
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Construction and land development:

Risk Rating

Pass or not rated

$
50,812

$
76,293

$
5,013

$
770

$
2,744

$
1,820

$
—

$
137,452

$
38,394

$
114,290

$
25,561

$
531

$
429

$
274

$
—

$
179,479
Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Substandard

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
50,812

$
76,293

$
5,013

$
770

$
2,744

$
1,820

$
—

$
137,452

$
38,394

$
114,290

$
25,561

$
531

$
429

$
274

$
—

$
179,479
YTD Gross Charge-offs

—

—

—

—

—

—

—

—

Commercial and industrial:

Risk Rating

Pass or not rated

$
53,046

$
91,908

$
26,068

$
46,155

$
52,459

$
104,097

$
2,824

$
376,557

$
70,111

$
104,044

$
83,637

$
17,742

$
69,772

$
114,103

$
3,563

$
462,972
Special Mention

591

14,083

—

693

1,831

300

—

17,498

—

480

12,467

665

1,920

255

—

15,787
Substandard

—

—

—

120

—

—

—

120

—

—

—

—

—

—

—

—
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
53,637

$
105,991

$
26,068

$
46,968

$
54,290

$
104,397

$
2,824

$
394,175

$
70,111

$
104,524

$
96,104

$
18,407

$
71,692

$
114,358

$
3,563

$
478,759

Paycheck Protection Program:

Risk Rating

Pass or not rated

$
—

$
12,207

$
2,450

$
—

$
—

$
—

$
—

$
14,657
Special Mention

—

—

—

—

—

—

—

—
Substandard

—

—

—

—

—

—

—

—
Doubtful

—

—

—

—

—

—

—

—
Total

$
—

$
12,207

$
2,450

$
—

$
—

$
—

$
—

$
14,657
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Lease financing receivables:

Risk Rating

Pass or not rated

$
4,423

$
2,283

$
617

$
2,231

$
1,791

$
—

$
—

$
11,345

$
26,163

$
28,658

$
13,197

$
6,296

$
5,195

$
—

$
—

$
79,509
Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

162

—

—

162
Substandard

—

—

—

—

—

—

—

—

—

—

—

—

133

—

—

133
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
4,423

$
2,283

$
617

$
2,231

$
1,791

$
—

$
—

$
11,345

$
26,163

$
28,658

$
13,197

$
6,296

$
5,490

$
—

$
—

$
79,804
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Aircraft:

Risk Rating

Pass or not rated

$
32,905

$
59,236

$
39,231

$
20,316

$
8,270

$
—

$
—

$
159,958

$
43,840

$
60,247

$
49,496

$
32,309

$
22,620

$
—

$
—

$
208,512
Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Substandard

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
32,905

$
59,236

$
39,231

$
20,316

$
8,270

$
—

$
—

$
159,958

$
43,840

$
60,247

$
49,496

$
32,309

$
22,620

$
—

$
—

$
208,512
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Home equity:

Risk Rating

Pass or not rated

$
—

$
—

$
—

$
—

$
—

$
212,580

$
—

$
212,580

$
—

$
—

$
—

$
—

$
—

$
254,090

$
—

$
254,090
Special Mention

—

—

—

—

—

348

—

348

—

—

—

—

—

106

—

106
Substandard

—

—

—

—

—

1,141

—

1,141

—

—

—

—

—

1,559

—

1,559
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
—

$
—

$
—

$
—

$
—

$
214,069

$
—

$
214,069

$
—

$
—

$
—

$
—

$
—

$
255,755

$
—

$
255,755
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

2326

Table of Contents

Revolving Loans

Revolving Loans

Revolving Loans

Revolving Loans

(in thousands)

Term Loans Amortized Cost Basis by Origination Year (Continued)

Amortized

Converted

Term Loans Amortized Cost Basis by Origination Year (Continued)

Amortized

Converted

As of June 30, 2022

2022

2021

2020

2019

Prior

Cost Basis

to Term

Total

As of June 30, 2023

2023

2022

2021

2020

Prior

Cost Basis

to Term

Total

Consumer:

Risk Rating

Pass or not rated

$
828

$
682

$
280

$
3,430

$
6,065

$
15,522

$
—

$
26,807

$
1,278

$
1,474

$
690

$
107

$
5,104

$
19,444

$
—

$
28,097

Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Substandard

—

—

—

13

324

—

—

337

—

—

7

—

22

—

—

29

Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Total

$
828

$
682

$
280

$
3,443

$
6,389

$
15,522

$
—

$
27,144

$
1,278

$
1,474

$
697

$
107

$
5,126

$
19,444

$
—

$
28,126

YTD Gross Charge-offs

$
—

$
11

$
8

$
—

$
5

$
531

$
—

$
555

Warehouse:

Risk Rating

Pass or not rated

$
—

$
—

$
—

$
—

$
—

$
596,678

$
—

$
596,678

$
—

$
—

$
—

$
—

$
—

$
539,560

$
—

$
539,560

Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Total

$
—

$
—

$
—

$
—

$
—

$
596,678

$
—

$
596,678

$
—

$
—

$
—

$
—

$
—

$
539,560

$
—

$
539,560

YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

TRS:

Risk Rating

Pass or not rated

$
—

$
—

$
—

$
—

$
—

$
149

$
—

$
149

$
193

$
—

$
—

$
—

$
—

$
—

$
—

$
193

Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Total

$
—

$
—

$
—

$
—

$
—

$
149

$
—

$
149

$
193

$
—

$
—

$
—

$
—

$
—

$
—

$
193

YTD Gross Charge-offs

$
126

$
—

$
—

$
—

$
—

$
25,824

$
—

$
25,950

RCS:

Risk Rating

Pass or not rated

$
4,438

$
3,319

$
2,049

$
1,198

$
27,648

$
52,806

$
—

$
91,458

$
30,079

$
13,643

$
1,304

$
919

$
22,113

$
49,929

$
—

$
117,987

Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

358

—

358

—

—

—

—

—

734

—

734

Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Total

$
4,438

$
3,319

$
2,049

$
1,198

$
27,648

$
53,164

$
—

$
91,816

$
30,079

$
13,643

$
1,304

$
919

$
22,113

$
50,663

$
—

$
118,721

YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
6,118

$
—

$
6,118

Grand Total:

Risk Rating

Pass or not rated

$
540,223

$
985,210

$
562,635

$
334,771

$
718,712

$
1,007,692

$
113,133

$
4,262,376

$
618,873

$
1,074,192

$
830,247

$
490,494

$
833,888

$
999,865

$
125,673

$
4,973,232

Special Mention

1,915

27,126

2,406

24,377

25,069

898

—

81,791

579

2,238

17,163

665

39,450

1,192

—

61,287

Substandard

—

42

1,089

1,489

13,947

1,499

—

18,066

—

1,729

1,467

1,161

11,973

2,293

—

18,623

Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Grand Total

$
542,138

$
1,012,378

$
566,130

$
360,637

$
757,728

$
1,010,089

$
113,133

$
4,362,233

$
619,452

$
1,078,159

$
848,877

$
492,320

$
885,311

$
1,003,350

$
125,673

$
5,053,142

YTD Gross Charge-offs

$
126

$
19

$
15

$
—

$
5

$
32,473

$
—

$
32,638

Revolving Loans

Revolving Loans

Revolving Loans

Revolving Loans

(in thousands)

Term Loans Amortized Cost Basis by Origination Year

Amortized

Converted

Term Loans Amortized Cost Basis by Origination Year

Amortized

Converted

As of December 31, 2021

2021

2020

2019

2018

Prior

Cost Basis

to Term

Total
As of December 31, 2022

2022

2021

2020

2019

Prior

Cost Basis

to Term

Total

Residential real estate owner occupied:

Risk Rating

Pass or not rated

$
218,981

$
213,010

$
89,186

$
50,301

$
226,852

$
—

$
—

$
798,330

$
231,638

$
189,495

$
188,004

$
71,306

$
208,296

$
—

$
—

$
888,739
Special Mention

301

—

—

33

8,209

—

—

8,543

—

160

—

—

7,240

—

—

7,400
Substandard

45

870

679

1,189

11,075

—

—

13,858

1,230

1,103

1,501

1,460

9,994

—

—

15,288
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
219,327

$
213,880

$
89,865

$
51,523

$
246,136

$
—

$
—

$
820,731

$
232,868

$
190,758

$
189,505

$
72,766

$
225,530

$
—

$
—

$
911,427
YTD Gross Charge-offs

$
21

$
—

$
—

$
—

$
—

$
—

$
i

$
21

Residential real estate nonowner occupied:

Risk Rating

Pass or not rated

$
107,041

$
65,786

$
44,376

$
29,292

$
55,872

$
—

$
3,729

$
306,096

$
78,337

$
91,778

$
55,058

$
32,803

$
57,053

$
—

$
6,147

$
321,176
Special Mention

—

—

—

—

132

—

—

132

—

—

—

—

32

—

—

32
Substandard

—

—

—

—

95

—

—

95

—

30

—

—

120

—

—

150
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
107,041

$
65,786

$
44,376

$
29,292

$
56,099

$
—

$
3,729

$
306,323

$
78,337

$
91,808

$
55,058

$
32,803

$
57,205

$
—

$
6,147

$
321,358
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Commercial real estate:

Risk Rating

Pass or not rated

$
472,095

$
256,039

$
153,224

$
94,212

$
286,223

$
25,188

$
80,211

$
1,367,192

$
451,327

$
394,317

$
210,055

$
117,928

$
253,213

$
25,499

$
99,791

$
1,552,130
Special Mention

20,059

2,399

29,639

11,207

18,778

—

—

82,082

3,124

11,870

—

21,296

9,967

318

—

46,575
Substandard

—

111

266

2,453

3,905

—

—

6,735

—

—

—

—

805

—

—

805
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
492,154

$
258,549

$
183,129

$
107,872

$
308,906

$
25,188

$
80,211

$
1,456,009

$
454,451

$
406,187

$
210,055

$
139,224

$
263,985

$
25,817

$
99,791

$
1,599,510
YTD Gross Charge-offs

$
—

$
9

$
—

$
—

$
—

$
—

$
—

$
9

Construction and land development:

Risk Rating

Pass or not rated

$
88,743

$
30,593

$
2,599

$
1,155

$
128

$
1,925

$
—

$
125,143

$
107,153

$
43,289

$
638

$
641

$
373

$
1,781

$
—

$
153,875
Special Mention

—

524

3,670

—

—

—

—

4,194

—

—

—

—

—

—

—

—
Substandard

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
88,743

$
31,117

$
6,269

$
1,155

$
128

$
1,925

$
—

$
129,337

$
107,153

$
43,289

$
638

$
641

$
373

$
1,781

$
—

$
153,875

Commercial and industrial:

Risk Rating

Pass or not rated

$
105,148

$
34,361

$
54,524

$
18,110

$
44,972

$
60,454

$
2,541

$
320,110
Special Mention

15,015

1,921

785

34

1,956

350

—

20,061
Substandard

—

13

179

—

—

—

—

192
Doubtful

—

—

—

—

—

—

—

—
Total

$
120,163

$
36,295

$
55,488

$
18,144

$
46,928

$
60,804

$
2,541

$
340,363
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

2427

Table of Contents

Revolving Loans

Revolving Loans

Revolving Loans

Revolving Loans

(in thousands)

Term Loans Amortized Cost Basis by Origination Year (Continued)

Amortized

Converted

Term Loans Amortized Cost Basis by Origination Year (Continued)

Amortized

Converted

As of December 31, 2021

2021

2020

2019

2018

Prior

Cost Basis

to Term

Total
As of December 31, 2022

2022

2021

2020

2019

Prior

Cost Basis

to Term

Total

Paycheck Protection Program:

Commercial and industrial:

Risk Rating

Pass or not rated

$
40,607

$
15,407

$
—

$
—

$
—

$
—

$
—

$
56,014

$
116,483

$
82,431

$
17,944

$
36,254

$
36,367

$
103,257

$
4,865

$
397,601
Special Mention

—

—

—

—

—

—

—

—

536

13,239

—

—

1,756

255

—

15,786
Substandard

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
40,607

$
15,407

$
—

$
—

$
—

$
—

$
—

$
56,014

$
117,019

$
95,670

$
17,944

$
36,254

$
38,123

$
103,512

$
4,865

$
413,387
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Lease financing receivables:

Risk Rating

Pass or not rated

$
2,638

$
839

$
2,641

$
1,264

$
1,255

$
—

$
—

$
8,637

$
5,469

$
1,964

$
542

$
1,548

$
982

$
—

$
—

$
10,505
Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Substandard

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
2,638

$
839

$
2,641

$
1,264

$
1,255

$
—

$
—

$
8,637

$
5,469

$
1,964

$
542

$
1,548

$
982

$
—

$
—

$
10,505
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Aircraft:

Risk Rating

Pass or not rated

$
65,886

$
43,301

$
22,933

$
9,119

$
1,655

$
—

$
—

$
142,894

$
65,399

$
54,749

$
35,085

$
16,888

$
7,454

$
—

$
—

$
179,575
Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Substandard

—

—

—

—

—

—

—

—

—

—

—

—

210

—

—

210
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
65,886

$
43,301

$
22,933

$
9,119

$
1,655

$
—

$
—

$
142,894

$
65,399

$
54,749

$
35,085

$
16,888

$
7,664

$
—

$
—

$
179,785
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Home equity:

Risk Rating

Pass or not rated

$
—

$
—

$
—

$
—

$
—

$
208,429

$
—

$
208,429

$
—

$
—

$
—

$
—

$
—

$
240,704

$
—

$
240,704
Special Mention

—

—

—

—

—

279

—

279

—

—

—

—

—

171

—

171
Substandard

—

—

—

—

—

1,870

—

1,870

—

—

—

—

—

864

—

864
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
—

$
—

$
—

$
—

$
—

$
210,578

$
—

$
210,578

$
—

$
—

$
—

$
—

$
—

$
241,739

$
—

$
241,739
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Consumer:

Risk Rating

Pass or not rated

$
978

$
417

$
4,694

$
4,326

$
5,768

$
14,613

$
—

$
30,796

$
415

$
499

$
168

$
2,531

$
4,328

$
15,573

$
—

$
23,514
Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Substandard

—

—

22

61

194

—

—

277

—

—

—

9

33

—

—

42
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
978

$
417

$
4,716

$
4,387

$
5,962

$
14,613

$
—

$
31,073

$
415

$
499

$
168

$
2,540

$
4,361

$
15,573

$
—

$
23,556
YTD Gross Charge-offs

$
—

$
5

$
—

$
11

$
—

$
1,274

$
—

$
1,290

Warehouse:

Risk Rating

Pass or not rated

$
—

$
—

$
—

$
—

$
—

$
850,550

$
—

$
850,550

$
—

$
—

$
—

$
—

$
—

$
403,560

$
—

$
403,560
Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Substandard

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
—

$
—

$
—

$
—

$
—

$
850,550

$
—

$
850,550

$
—

$
—

$
—

$
—

$
—

$
403,560

$
—

$
403,560
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

TRS:

Risk Rating

Pass or not rated

$
—

$
—

$
—

$
—

$
—

$
50,987

$
—

$
50,987

$
—

$
—

$
—

$
—

$
—

$
149,272

$
—

$
149,272
Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Substandard

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
—

$
—

$
—

$
—

$
—

$
50,987

$
—

$
50,987

$
—

$
—

$
—

$
—

$
—

$
149,272

$
—

$
149,272
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
11,659

$
—

$
11,659

RCS:

Risk Rating

Pass or not rated

$
5,524

$
3,409

$
1,642

$
869

$
3,699

$
77,544

$
—

$
92,687

$
22,357

$
2,273

$
1,264

$
602

$
29,594

$
50,589

$
—

$
106,679
Special Mention

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Substandard

—

—

—

—

—

379

—

379

—

—

—

—

—

1,149

—

1,149
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Total

$
5,524

$
3,409

$
1,642

$
869

$
3,699

$
77,923

$
—

$
93,066

$
22,357

$
2,273

$
1,264

$
602

$
29,594

$
51,738

$
—

$
107,828
YTD Gross Charge-offs

$
—

$
—

$
—

$
—

$
—

$
11,390

$
—

$
11,390

Grand Total:

Risk Rating

Pass or not rated

$
1,107,641

$
663,162

$
375,819

$
208,648

$
626,424

$
1,289,690

$
86,481

$
4,357,865

$
1,078,578

$
860,795

$
508,758

$
280,501

$
597,660

$
990,235

$
110,803

$
4,427,330
Special Mention

35,375

4,844

34,094

11,274

29,075

629

—

115,291

3,660

25,269

—

21,296

18,995

744

—

69,964
Substandard

45

994

1,146

3,703

15,269

2,249

—

23,406

1,230

1,133

1,501

1,469

11,162

2,013

—

18,508
Doubtful

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—
Grand Total

$
1,143,061

$
669,000

$
411,059

$
223,625

$
670,768

$
1,292,568

$
86,481

$
4,496,562

$
1,083,468

$
887,197

$
510,259

$
303,266

$
627,817

$
992,992

$
110,803

$
4,515,802
YTD Gross Charge-offs

$
21

$
14

$
—

$
11

$
—

$
24,323

$
—

$
24,369

2528

Table of Contents

Allowance for Credit Losses on Loans

The following table presents the activity in the ACLL by portfolio class:

ACLL Rollforward

ACLL Roll-forward

Three Months Ended June 30,

Three Months Ended June 30,

2022

2021

2023

2022

Beginning

Charge-

Ending

Beginning

Charge-

Ending

Beginning

CBank

Charge-

Ending

Beginning

Charge-

Ending
(in thousands)

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Balance

Adjustment*

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Traditional Banking:

Residential real estate:

Owner occupied

$
8,358

$
62

$
—

$
25

$
8,445

$
9,489

$
(530)

$
—

$
18

$
8,977

$
8,798

$
—

$
1,100

$
(9)

$
10

$
9,899

$
8,358

$
62

$
—

$
25

$
8,445
Nonowner occupied

2,746

(14)

—

1

2,733

2,532

18

—

1

2,551

2,895

—

190

—

1

3,086

2,746

(14)

—

1

2,733
Commercial real estate

24,624

(284)

—

1

24,341

23,801

(506)

—

12

23,307

24,827

—

250

—

12

25,089

24,624

(284)

—

1

24,341
Construction & land development

3,893

(302)

—

—

3,591

3,593

(294)

—

—

3,299

4,452

—

359

—

—

4,811

3,893

(302)

—

—

3,591
Commercial & industrial

3,412

348

—

8

3,768

2,718

1,395

—

4

4,117

5,676

(1,008)

(365)

—

19

4,322

3,412

348

—

8

3,768
Paycheck Protection Program

—

—

—

—

—

—

—

—

—

—
Lease financing receivables

109

10

—

—

119

104

(7)

—

—

97

1,350

(376)

(149)

—

—

825

109

10

—

—

119
Aircraft

378

22

—

—

400

265

38

—

—

303

461

—

60

—

—

521

378

22

—

—

400
Home equity

4,044

(40)

—

109

4,113

4,615

(344)

—

34

4,305

4,660

—

110

—

—

4,770

4,044

(40)

—

109

4,113
Consumer:

Credit cards

944

59

(31)

22

994

930

42

(33)

10

949

1,080

—

43

(33)

13

1,103

944

59

(31)

22

994
Overdrafts

716

315

(194)

64

901

473

281

(111)

74

717

595

—

257

(186)

40

706

716

315

(194)

64

901
Automobile loans

151

(32)

—

3

122

334

(66)

—

5

273

66

—

(16)

—

3

53

151

(32)

—

3

122
Other consumer

241

(38)

(20)

17

200

533

(57)

(17)

8

467

356

—

21

(11)

16

382

241

(38)

(20)

17

200
Total Traditional Banking

49,616

106

(245)

250

49,727

49,387

(30)

(161)

166

49,362

55,216

(1,384)

1,860

(239)

114

55,567

49,616

106

(245)

250

49,727
Warehouse lines of credit

1,725

(234)

—

—

1,491

2,165

(65)

—

—

2,100

1,144

—

202

—

—

1,346

1,725

(234)

—

—

1,491
Total Core Banking

51,341

(128)

(245)

250

51,218

51,552

(95)

(161)

166

51,462

56,360

(1,384)

2,062

(239)

114

56,913

51,341

(128)

(245)

250

51,218

Republic Processing Group:

Tax Refund Solutions:

Easy Advances

8,315

564

(11,505)

2,626

—

16,019

(5,793)

(10,256)

30

—
Other TRS loans

55

(204)

(153)

302

—

10

20

(30)

—

—
Refund Advances

25,797

—

(161)

(25,824)

188

—

8,315

564

(11,505)

2,626

—
Other TRS commercial & industrial loans

184

—

(58)

(126)

—

—

55

(204)

(153)

302

—
Republic Credit Solutions

11,945

3,433

(2,411)

264

13,231

7,755

1,592

(597)

79

8,829

13,780

—

4,296

(3,018)

231

15,289

11,945

3,433

(2,411)

264

13,231
Total Republic Processing Group

20,315

3,793

(14,069)

3,192

13,231

23,784

(4,181)

(10,883)

109

8,829

39,761

—

4,077

(28,968)

419

15,289

20,315

3,793

(14,069)

3,192

13,231

Total

$
71,656

$
3,665

$
(14,314)

$
3,442

$
64,449

$
75,336

$
(4,276)

$
(11,044)

$
275

$
60,291

$
96,121

$
(1,384)

$
6,139

$
(29,207)

$
533

$
72,202

$
71,656

$
3,665

$
(14,314)

$
3,442

$
64,449

2629

Table of Contents

ACLL Rollforward

ACLL Roll-forward

Six Months Ended June 30,

Six Months Ended June 30,

2022

2021

2023
2022

Beginning

Charge-

Ending

Beginning

Charge-

Ending

Beginning

CBank

Charge-

Ending

Beginning

Charge-

Ending
(in thousands)

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Balance

Adjustment*

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Traditional Banking:

Residential real estate:

Owner occupied

$
8,647

$
(269)

$
—

$
67

$
8,445

$
9,715

$
(783)

$
—

$
45

$
8,977

$
8,909

$
—

$
980

$
(15)

$
25

$
9,899

$
8,647

$
(269)

$
—

$
67

$
8,445
Nonowner occupied

2,700

31

—

2

2,733

2,466

84

—

1

2,551

2,831

—

254

—

1

3,086

2,700

31

—

2

2,733
Commercial real estate

23,769

570

—

2

24,341

23,606

49

(428)

80

23,307

23,739

—

1,291

—

59

25,089

23,769

570

—

2

24,341
Construction & land development

4,128

(537)

—

—

3,591

3,274

25

—

—

3,299

4,123

—

688

—

—

4,811

4,128

(537)

—

—

3,591
Commercial & industrial

3,487

264

—

17

3,768

2,797

1,309

—

11

4,117

3,976

—

237

—

109

4,322

3,487

264

—

17

3,768
Paycheck Protection Program

—

—

—

—

—

—

—

—

—

—
Lease financing receivables

91

28

—

—

119

106

(9)

—

—

97

110

216

499

—

—

825

91

28

—

—

119
Aircraft

357

43

—

—

400

253

50

—

—

303

449

—

72

—

—

521

357

43

—

—

400
Home equity

4,111

(110)

—

112

4,113

4,990

(726)

—

41

4,305

4,628

—

141

—

1

4,770

4,111

(110)

—

112

4,113
Consumer:

Credit cards

934

91

(70)

39

994

929

86

(90)

24

949

996

—

155

(73)

25

1,103

934

91

(70)

39

994
Overdrafts

683

503

(408)

123

901

587

208

(249)

171

717

726

—

309

(433)

104

706

683

503

(408)

123

901
Automobile loans

186

(68)

—

4

122

399

(144)

—

18

273

87

—

(32)

(7)

5

53

186

(68)

—

4

122
Other consumer

314

(113)

(30)

29

200

577

(109)

(31)

30

467

135

—

250

(42)

39

382

314

(113)

(30)

29

200
Total Traditional Banking

49,407

433

(508)

395

49,727

49,699

40

(798)

421

49,362

50,709

216

4,844

(570)

368

55,567

49,407

433

(508)

395

49,727
Warehouse lines of credit

2,126

(635)

—

—

1,491

2,407

(307)

—

—

2,100

1,009

—

337

—

—

1,346

2,126

(635)

—

—

1,491
Total Core Banking

51,533

(202)

(508)

395

51,218

52,106

(267)

(798)

421

51,462

51,718

216

5,181

(570)

368

56,913

51,533

(202)

(508)

395

51,218

Republic Processing Group:

Tax Refund Solutions:

Easy Advances

—

8,879

(11,505)

2,626

—

—

10,226

(10,256)

30

—
Other TRS loans

96

(607)

(153)

664

—

158

(115)

(51)

8

—
Refund Advances

3,797

—

21,554

(25,824)

473

—

—

8,879

(11,505)

2,626

—
Other TRS commercial & industrial loans

91

—

35

(126)

—

—

96

(607)

(153)

664

—
Republic Credit Solutions

12,948

4,828

(5,084)

539

13,231

8,803

1,217

(1,362)

171

8,829

14,807

—

6,135

(6,118)

465

15,289

12,948

4,828

(5,084)

539

13,231
Total Republic Processing Group

13,044

13,100

(16,742)

3,829

13,231

8,961

11,328

(11,669)

209

8,829

18,695

—

27,724

(32,068)

938

15,289

13,044

13,100

(16,742)

3,829

13,231

Total

$
64,577

$
12,898

$
(17,250)

$
4,224

$
64,449

$
61,067

$
11,061

$
(12,467)

$
630

$
60,291

$
70,413

$
216

$
32,905

$
(32,638)

$
1,306

$
72,202

$
64,577

$
12,898

$
(17,250)

$
4,224

$
64,449

The cumulative loss rate used as the basis for the estimate of the Company’s ACLL as of June 30, ~~2022~~2023 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 ~~2022,~~2023, supplemented by qualitative factor adjustments for current and forecasted conditions. The Company employs one-year forecasts of unemployment and CRE values within its ACLL model, with reversion to long-term averages following the forecasted period. The cumulative loss rate within the Company’s ACLL also includes estimated losses based on an individual evaluation of loans which are either collateral dependent or which do not share risk characteristics with pooled loans, e.g., ~~TDRs.~~Loan Modifications.

For its CRE loan pool, the Company employed a one-year forecast of CRE vacancy rates through March 31, ~~2021~~2022 but discontinued use of this forecast during the second quarter of ~~2021~~2022 in favor of a one-year forecast of general CRE values. This change in forecast method had no material impact on the Company’s ACLL.

2730

Table of Contents

Nonperforming Loans and Nonperforming Assets

Detail of nonperforming loans, nonperforming assets, and select credit quality ratios follows:

(dollars in thousands)

June 30, 2022

December 31, 2021


June 30, 2023

December 31, 2022


Loans on nonaccrual status*

$
16,168

$
20,504

$
16,957

$
15,562

Loans past due 90-days-or-more and still on accrual**

42

48

547

756

Total nonperforming loans

16,210

20,552

17,504

16,318

Other real estate owned

1,687

1,792

1,478

1,581

Total nonperforming assets

$
17,897

$
22,344

$
18,982

$
17,899

Credit Quality Ratios - Total Company:

Nonperforming loans to total loans

0.37
%

0.46
%

0.35
%

0.36
%
Nonperforming assets to total loans (including OREO)

0.41

0.50

0.38

0.40

Nonperforming assets to total assets

0.29

0.37

0.30

0.31

Credit Quality Ratios - Core Bank:

Nonperforming loans to total loans

0.38
%

0.47
%

0.34
%

0.37
%
Nonperforming assets to total loans (including OREO)

0.42

0.51

0.37

0.40

Nonperforming assets to total assets

0.32

0.40

0.32

0.32

*
Loans on nonaccrual status include collateral-dependent loans.
**
Loans past due 90-days-or-more and still accruing consist of smaller balance consumer loans.

2831

Table of Contents

The following tables present the recorded investment in nonaccrual loans and loans past due 90-days-or-more and still on accrual by class of loans:

Past Due 90-Days-or-More

Past Due 90-Days-or-More

Nonaccrual

and Still Accruing Interest*

Nonaccrual

and Still Accruing Interest*
(in thousands)

June 30, 2022

December 31, 2021

June 30, 2022

December 31, 2021


June 30, 2023

December 31, 2022

June 30, 2023

December 31, 2022

Traditional Banking:

Residential real estate:

Owner occupied

$
11,538

$
12,039

$
—

$
—

$
14,432

$
13,388

$
—

$
—
Nonowner occupied

128

95

—

—

72

117

—

—
Commercial real estate

3,228

6,557

—

—

927

1,001

—

—
Construction & land development

—

—

—

—

—

—

—

—
Commercial & industrial

—

13

—

—

—

—

—

—
Paycheck Protection Program

—

—

—

—

Lease financing receivables

—

—

—

—

—

—

—

—
Aircraft

—

—

—

—

—

—

—
Home equity

1,016

1,700

—

—

1,498

815

—

—
Consumer:

Credit cards

—

—

—

—

—

—

—

—
Overdrafts

—

—

—

1

—

—

—

—
Automobile loans

36

97

—

—

27

31

—

—
Other consumer

222

3

—

—

1

210

—

—
Total Traditional Banking

16,168

20,504

—

1

16,957

15,562

—

—
Warehouse lines of credit

—

—

—

—

—

—

—

—
Total Core Banking

16,168

20,504

—

1

16,957

15,562

—

—

Republic Processing Group:

Tax Refund Solutions:

Easy Advances

—

—

—

—

Other TRS loans

—

—

—

—

Refund Advances

—

—

—

—
Other TRS commercial & industrial loans

—

—

—

—
Republic Credit Solutions

—

—

42

47

—

—

547

756
Total Republic Processing Group

—

—

42

47

—

—

547

756

Total

$
16,168

$
20,504

$
42

$
48

$
16,957

$
15,562

$
547

$
756
* Loans past due 90-days-or-more and still accruing consist of smaller balance consumer loans.

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

As of June 30, 2022

June 30, 2022

June 30, 2022

As of June 30, 2023

June 30, 2023

June 30, 2023


Nonaccrual

Nonaccrual

Total
Interest Income

Interest Income

Nonaccrual

Nonaccrual


Total

Interest Income

Interest Income

Loans with

Loans without

Nonaccrual

Recognized

Recognized

Loans with

Loans without

Nonaccrual

Recognized

Recognized
(in thousands)

ACLL

ACLL

Loans

on Nonaccrual Loans*

on Nonaccrual Loans*

ACLL

ACLL

Loans

on Nonaccrual Loans*

on Nonaccrual Loans*

Residential real estate:

Owner occupied

$
18

$
11,520

$
11,538

$
154

$
257

$
256

$
14,176

$
14,432

$
232

$
438
Nonowner occupied

37

91

128

1

1

23

49

72

1

1
Commercial real estate

3,228

—

3,228

14

644

927

—

927

87

110
Construction & land development

—

—

—

—

—

—

—

—

—

—
Commercial & industrial

—

—

—

—

—

—

—

—

—

—
Paycheck Protection Program

—

—

—

—

—
Lease financing receivables

—

—

—

—

—

—

—

—

—

—
Aircraft

—

—

—

—

—

—

—

—

—

—
Home equity

—

1,016

1,016

84

146

—

1,498

1,498

28

64
Consumer

11

247

258

48

52

1

27

28

3

6
Total

$
3,294

$
12,874

$
16,168

$
301

$
1,100

$
1,207

$
15,750

$
16,957

$
351

$
619
* Includes interest income for loans on nonaccrual as of the beginning of the period that were paid off during the period.

2932

Table of Contents

Three Months Ended

Six Months Ended

As of December 31, 2022

June 30, 2022

June 30, 2022


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

$
2,252

$
11,136

$
13,388

$
154

$
257
Nonowner occupied

56

61

117

1

1
Commercial real estate

1,001

—

1,001

14

644
Construction & land development

—

—

—

—

—
Commercial & industrial

—

—

—

—

—
Lease financing receivables

—

—

—

—

—
Aircraft

—

—

—

—

—
Home equity

—

815

815

84

146
Consumer

15

226

241

48

52
Total

$
3,324

$
12,238

$
15,562

$
301

$
1,100
* 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 six consecutive months and future contractual payments are reasonably assured. Loan Modifications (formerly TDRs prior to the adoption of ASU 2022-02) on nonaccrual status are reviewed for return to accrual status on an individual basis, with additional consideration given to performance under the modified terms.

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









June 30, 2023
Days

Days

Days

Total

Total

(dollars in thousands)

Delinquent

Delinquent

Delinquent*

Delinquent**

Current

Total

Traditional Banking:

Residential real estate:

Owner occupied

$
3,453

$
841

$
873

$
5,167

$
1,081,584

$
1,086,751

Nonowner occupied

—

—

—

—

350,390

350,390

Commercial real estate

—

—

—

—

1,727,092

1,727,092

Construction & land development

—

—

—

—

179,479

179,479

Commercial & industrial

—

—

—

—

478,759

478,759

Lease financing receivables

—

—

—

—

79,804

79,804

Aircraft

—

—

—

—

208,512

208,512

Home equity

343

106

23

472

255,283

255,755

Consumer:

Credit cards

24

9

—

33

17,101

17,134

Overdrafts

139

—

2

141

565

706

Automobile loans

—

7

3

10

4,167

4,177

Other consumer

44

8

—

52

6,057

6,109

Total Traditional Banking

4,003

971

901

5,875

4,388,793

4,394,668

Warehouse lines of credit

—

—

—

—

539,560

539,560

Total Core Banking

4,003

971

901

5,875

4,928,353

4,934,228

Republic Processing Group:

Tax Refund Solutions:

Refund Advances

—

—

—

—

—

—

Other TRS commercial & industrial loans

—

—

—

—

193

193

Republic Credit Solutions

7,058

2,438

547

10,043

108,678

118,721

Total Republic Processing Group

7,058

2,438

547

10,043

108,871

118,914

Total

$
11,061

$
3,409

$
1,448

$
15,918

$
5,037,224

$
5,053,142

Delinquency ratio***

0.22
%

0.07
%

0.03
%

0.32
%

*       All loans past due 90-days-or-more, excluding small balance consumer loans, were on nonaccrual status.
**     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.

Table of Contents

30 - 59

60 - 89

90 or More









December 31, 2022
Days

Days

Days

Total

Total

(dollars in thousands)

Delinquent

Delinquent

Delinquent*

Delinquent**

Current

Total

Traditional Banking:

Residential real estate:

Owner occupied

$
2,382

$
1,185

$
1,267

$
4,834

$
906,593

$
911,427

Nonowner occupied

—

—

—

—

321,358

321,358

Commercial real estate

604

—

—

604

1,598,906

1,599,510

Construction & land development

—

—

—

—

153,875

153,875

Commercial & industrial

177

—

—

177

413,210

413,387

Lease financing receivables

—

—

—

—

10,505

10,505

Aircraft

—

—

—

—

179,785

179,785

Home equity

56

93

26

175

241,564

241,739

Consumer:

Credit cards

50

5

—

55

15,418

15,473

Overdrafts

158

1

1

160

566

726

Automobile loans

8

—

3

11

6,720

6,731

Other consumer

43

1

—

44

582

626

Total Traditional Banking

3,478

1,285

1,297

6,060

3,849,082

3,855,142

Warehouse lines of credit

—

—

—

—

403,560

403,560

Total Core Banking

3,478

1,285

1,297

6,060

4,252,642

4,258,702

Republic Processing Group:

Tax Refund Solutions:

Refund Advances

—

—

—

—

97,505

97,505

Other TRS commercial & industrial loans

—

—

—

—

51,767

51,767

Republic Credit Solutions

6,488

1,956

756

9,200

98,628

107,828

Total Republic Processing Group

6,488

1,956

756

9,200

247,900

257,100

Total

$
9,966

$
3,241

$
2,053

$
15,260

$
4,500,542

$
4,515,802

Delinquency ratio***

0.22
%

0.07
%

0.05
%

0.34
%

*       All loans past due 90-days-or-more, excluding smaller balance consumer loans, were on nonaccrual status.
**    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.

Table of Contents

Three Months Ended

Six Months Ended

As of December 31, 2021

June 30, 2021

June 30, 2021


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

$
1,944

$
10,095

$
12,039

$
166

$
414
Nonowner occupied

31

64

95

2

3
Commercial real estate

4,105

2,452

6,557

36

51
Construction & land development

—

—

—

—

—
Commercial & industrial

—

13

13

—

1
Paycheck Protection Program

—

—

—

—

—
Lease financing receivables

—

—

—

—

—
Aircraft

—

—

—

—

—
Home equity

—

1,700

1,700

26

66
Consumer

17

83

100

2

4

$
6,097

$
14,407

$
20,504

$
232

$
539
* ~~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 include both 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 6 consecutive months and future contractual payments are reasonably assured. TDRs on nonaccrual status are reviewed for return to accrual status on an individual basis, with additional consideration given to performance under the modified terms.

~~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









June 30, 2022
Days

Days

Days

Total

Total

(dollars in thousands)

Delinquent

Delinquent

Delinquent*

Delinquent**

Current

Total

Traditional Banking:

Residential real estate:

Owner occupied

$
1,340

$
796

$
333

$
2,469

$
829,668

$
832,137

Nonowner occupied

—

—

41

41

313,493

313,534

Commercial real estate

—

—

2,142

2,142

1,566,977

1,569,119

Construction & land development

—

—

—

—

137,452

137,452

Commercial & industrial

—

321

—

321

393,854

394,175

Paycheck Protection Program

—

—

—

—

14,657

14,657

Lease financing receivables

—

—

—

—

11,345

11,345

Aircraft

—

—

—

—

159,958

159,958

Home equity

8

10

132

150

213,919

214,069

Consumer:

Credit cards

19

5

—

24

15,395

15,419

Overdrafts

196

3

—

199

702

901

Automobile loans

—

—

6

6

9,573

9,579

Other consumer

—

—

—

—

1,245

1,245

Total Traditional Banking

1,563

1,135

2,654

5,352

3,668,238

3,673,590

Warehouse lines of credit

—

—

—

—

596,678

596,678

Total Core Banking

1,563

1,135

2,654

5,352

4,264,916

4,270,268

Republic Processing Group:

Tax Refund Solutions:

Easy Advances

—

—

—

—

—

—

Other TRS loans

—

—

—

—

149

149

Republic Credit Solutions

4,914

1,143

42

6,099

85,717

91,816

Total Republic Processing Group

4,914

1,143

42

6,099

85,866

91,965

Total

$
6,477

$
2,278

$
2,696

$
11,451

$
4,350,782

$
4,362,233

Delinquency ratio***

0.15
%

0.05
%

0.06
%

0.26
%

*       ~~All loans past due 90-days-or-more, excluding small balance consumer loans, were on nonaccrual status.~~
**     ~~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.~~

~~Table of Contents~~

30 - 59

60 - 89

90 or More









December 31, 2021
Days

Days

Days

Total

Total

(dollars in thousands)

Delinquent

Delinquent

Delinquent*

Delinquent**

Current

Total

Traditional Banking:

Residential real estate:

Owner occupied

$
606

$
383

$
610

$
1,599

$
819,132

$
820,731

Nonowner occupied

—

—

—

—

306,323

306,323

Commercial real estate

—

—

5,292

5,292

1,450,717

1,456,009

Construction & land development

—

—

—

—

129,337

129,337

Commercial & industrial

8

—

13

21

340,342

340,363

Paycheck Protection Program

—

—

—

—

56,014

56,014

Lease financing receivables

—

—

—

—

8,637

8,637

Aircraft

—

—

—

—

142,894

142,894

Home equity

38

35

241

314

210,264

210,578

Consumer:

Credit cards

19

11

—

30

14,480

14,510

Overdrafts

160

3

1

164

519

683

Automobile loans

—

—

9

9

14,439

14,448

Other consumer

1

—

—

1

1,431

1,432

Total Traditional Banking

832

432

6,166

7,430

3,494,529

3,501,959

Warehouse lines of credit

—

—

—

—

850,550

850,550

Total Core Banking

832

432

6,166

7,430

4,345,079

4,352,509

Republic Processing Group:

Tax Refund Solutions:

Easy Advances

—

—

—

—

—

—

Other TRS loans

—

—

—

—

50,987

50,987

Republic Credit Solutions

5,010

978

47

6,035

87,031

93,066

Total Republic Processing Group

5,010

978

47

6,035

138,018

144,053

Total

$
5,842

$
1,410

$
6,213

$
13,465

$
4,483,097

$
4,496,562

Delinquency ratio***

0.13
%

0.03
%

0.14
%

0.30
%

*       ~~All loans past due 90-days-or-more, excluding smaller balance consumer loans, were on nonaccrual status.~~
**    ~~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.~~

~~Table of Contents~~

Collateral-Dependent Loans

The following table presents the amortized cost basis of collateral-dependent loans by class of loans:

June 30, 2022

December 31, 2021

June 30, 2023

December 31, 2022

Secured

Secured

Secured

Secured

Secured

Secured

Secured

Secured

by Real

by Personal

by Real

by Personal

by Real

by Personal

by Real

by Personal
(in thousands)

Estate

Property

Estate

Property

Estate

Property

Estate

Property

Traditional Banking:

Residential real estate:

Owner occupied

$
14,050

$
—

$
14,798

$
—

$
17,178

$
—

$
18,057

$
—
Nonowner occupied

128

—

95

—

72

—

150

—
Commercial real estate

3,020

—

6,736

—

959

—

1,041

—
Construction & land development

—

—

—

—

—

—

—

—
Commercial & industrial

—

120

—

192

—

—

—

—
Paycheck Protection Program

—

—

—

—
Lease financing receivables

—

—

—

—

—

—

—

—
Aircraft

—

—

—

—

—

—

—

210
Home equity

1,246

—

1,976

—

1,130

—

967

—
Consumer

—

281

—

274

—

30

—

26
Total Traditional Banking

$
18,444

$
401

$
23,605

$
466

$
19,339

$
30

$
20,215

$
236

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 10% to 13%, with those percentages based on annual studies performed by the Company.

~~Table of Contents~~

~~Troubled Debt Restructurings~~Loan Modification Disclosures Pursuant to ASU 2022-02

~~A TDR is a situation where, due to a borrower’s financial difficulties,~~The following table shows the ~~Bank grants a concession to the borrower that the Bank would not otherwise have considered. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed~~amortized cost of the probability that the borrower will be in payment default on any of their debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Bank’s internal underwriting policy.

~~The majority of the Bank’s commercial-related~~loans and construction TDRs involve a restructuring of financing terms, such as a reduction in the payment amount to require only interest and escrow (if required) and/or extending the maturity date of the debt. The substantial majority of the Bank’s residential real estate TDR concessions involve reducing the client’s loan payment through a rate reduction for a set period based on the borrower’s ability to service the modified loan payment. Retail loans may also be classified as TDRs due to legal modifications, such as bankruptcies.

~~Nonaccrual loans modified as TDRs typically remain on nonaccrual status and continue to be reported as nonperforming loans for a minimum of~~ ~~six~~ consecutive months. Accruing loans modified as TDRs are evaluated for nonaccrual status based on a current evaluation of the borrower’s financial condition and ability and willingness to service the modified debt. As of June 30, 2022 and December 31, 2021, $5 million and $6 million of TDRs were on nonaccrual status.

~~Detail of TDRs differentiated by loan type and accrual status follows:~~


Troubled Debt

Troubled Debt

Total

Restructurings on

Restructurings on

Troubled Debt

Nonaccrual Status

Accrual Status

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

June 30, 2022 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate

64

$
3,102

75

$
7,046

139

$
10,148

Commercial real estate

1

2,142

1

883

2

3,025

Commercial & industrial

—

—

1

1

1

1

Consumer

2

14

2,446

424

2,448

438

Total troubled debt restructurings

67

$
5,258

2,523

$
8,354

2,590

$
13,612


Troubled Debt

Troubled Debt

Total

Restructurings on

Restructurings on

Troubled Debt

Nonaccrual Status

Accrual Status

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

December 31, 2021 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate

63

$
3,179

89

$
7,856

152

$
11,035

Commercial real estate

2

2,575

2

1,239

4

3,814

Commercial & industrial

2

45

1

1

3

46

Consumer

1

12

2,269

479

2,270

491

Total troubled debt restructurings

68

$
5,811

2,361

$
9,575

2,429

$
15,386

~~Table of Contents~~

The Bank considers a TDR to be performing to its modified terms if the loan is in accrual status and not past due 30-days-or-more as of the reporting date. A summary of the categories of TDR loan modifications outstanding and respective performance under modified termsleases as of June 30, ~~2022 and December 31, 2021 follows:~~


Troubled Debt

Troubled Debt




Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

June 30, 2022 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

Rate reduction

71

$
6,541

4

$
327

75

$
6,868

Principal deferral

6

558

1

157

7

715

Legal modification

48

2,344

9

221

57

2,565

Total residential TDRs

125

9,443

14

705

139

10,148



Commercial related and construction/land development loans:

Rate reduction

1

883

—

—

1

883

Principal deferral

1

1

1

2,142

2

2,143

Total commercial TDRs

2

884

1

2,142

3

3,026

Consumer loans:

Principal deferral

2,444

420

—

—

2,444

420

Legal modification

4

18

—

—

4

18

Total consumer TDRs

2,448

438

—

—

2,448

438

Total troubled debt restructurings

2,575

$
10,765

15

$
2,847

2,590

$
13,612


Troubled Debt

Troubled Debt




Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

December 31, 2021 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

Interest only payments

—

—

—

—

—

$
—

Rate reduction

82

$
7,461

4

$
303

86

7,764

Principal deferral

7

729

—

—

7

729

Legal modification

48

2,100

11

442

59

2,542

Total residential TDRs

137

10,290

15

745

152

11,035



Commercial related and construction/land development loans:

Interest only payments

—

—

—

—

—

—

Rate reduction

1

919

—

—

1

919

Principal deferral

5

477

1

2,464

6

2,941

Total commercial TDRs

6

1,396

1

2,464

7

3,860

Consumer loans:

Principal deferral

2,266

470

—

—

2,266

470

Legal modification

4

21

—

—

4

21

Total consumer TDRs

2,270

491

—

—

2,270

491

Total troubled debt restructurings

2,413

$
12,177

16

$
3,209

2,429

$
15,386

As of June 30, 2022 and December 31, 2021, 79% and 79% of the Bank’s TDR balances were performing according to their modified terms. The Bank had provided $2 million and $2 million of specific ACLL allocations to clients whose loan terms have been modified in TDRs as of June 30, 2022 and December 31, 2021. The Bank had 0 commitments to lend any additional material amounts to its existing TDR relationships as of June 30, 2022 or December 31, 2021.

~~Table of Contents~~

~~A summary of the categories of TDR loan modifications by respective performance as of June 30, 2022 and 2021~~2023 that were both experiencing financial difficulty and modified during the three months ended June 30, ~~2022~~2023, segregated by portfolio segment and ~~2021 follows:~~type of modification. The following tables shows the amortized cost of loans and leases modified by type.


Troubled Debt

Troubled Debt




Amortized Cost Basis of Modified Financing Receivables
June 30, 2023 (dollars in thousands)

Loans (#)

Rate Reduction ($)

Loans (#)

Term Extension ($)

Loans (#)

Principal Deferral ($)

Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

June 30, 2022 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

Legal modification

3

$
35

2

$
24

5

$
59

Total residential TDRs

3

35

2

24

5

59

Consumer loans:

Principal deferral

489

77

—

—

489

77

Total consumer TDRs

489

77

—

—

489

77

Total troubled debt restructurings

492

$
112

2

$
24

494

$
136

Residential real estate:

Owner occupied

—

$
—

—

$
—

6

$
547
Nonowner occupied

—

—

—

—

—

—
Home equity

—

—

—

—

4

143
Republic Processing Group

—

—

—

—

423

91
Total Loan Modifications

—

$
—

—

$
—

433

$
781


Troubled Debt

Troubled Debt




Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

June 30, 2021 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

Principal deferral

1

$
16

—

$
—

1

$
16

Legal modification

3

226

1

50

4

276

Total residential TDRs

4

242

1

50

5

292



Consumer loans:

Principal deferral

286

38

—

—

286

38

Legal modification

1

—

—

—

1

—

Total consumer TDRs

287

38

—

—

287

38

Total troubled debt restructurings

291

$
280

1

$
50

292

$
330

Total Loan Modification by Type

Accruing

Nonaccruing
June 30, 2023 (dollars in thousands)

Loans (#)

Recorded investment ($)

Loans (#)

Recorded investment ($)

Term extension

—

$
—

—

$
—
Principal deferral

423

91

10

690
Total Loan Modifications

423

$
91

10

$
690
~~The tables above are inclusive of loans that were TDRs at the end of previous periods and were re-modified, e.g., a maturity date extension during the current period.~~

AsThe following table shows the amortized cost of loans and leases as of June 30, ~~2022~~2023 that were both experiencing financial difficulty and ~~2021, 82%~~modified during the six months ended June 30, 2023, segregated by portfolio segment and ~~85%~~type of modification. The following tables shows the amortized cost of loans and leases modified by type.

Amortized Cost Basis of Modified Financing Receivables
June 30, 2023 (dollars in thousands)

Loans (#)

Rate Reduction ($)

Loans (#)

Term Extension ($)

Loans (#)

Principal Deferral ($)

Residential real estate:

Owner occupied

—

$
—

2

$
261

10

$
852
Nonowner occupied

—

—

—

—

—

—
Home equity

—

—

—

—

5

214
Republic Processing Group

—

—

—

—

424

93
Total Loan Modifications

—

$
—

2

$
261

439

$
1,159

Total Loan Modification by Type

Accruing

Nonaccruing
June 30, 2023 (dollars in thousands)

Loans (#)

Recorded investment ($)

Loans (#)

Recorded investment ($)

Term extension

—

$
—

2

$
261
Principal deferral

424

93

15

1,066
Total Loan Modifications

424

$
93

17

$
1,327

The following tables show the percentage of the ~~Bank’s TDR balances~~amortized cost of loans and leases that ~~occurred~~were modified to borrowers in financial distress as compared to the amortized cost of each segment of financing receivable.

Accruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

% of Total

% of Total

Amortized

of Financing

Amortized

of Financing
(dollars in thousands)

Loans (#)

Cost Basis ($)

Receivable

Loans

Cost Basis

Receivable

Republic Processing Group

423

$
91

0.08
%

424

93

0.08

Total Accruing Loan Modifications

423

$
91

NM

424

$
93

0.00

Nonaccruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

% of Total

% of Total

Amortized

of Financing

Amortized

of Financing
(dollars in thousands)

Loans (#)

Cost Basis ($)

Receivable

Loans

Cost Basis

Receivable

Residential real estate:

Owner occupied

6

$
547

0.05
%

12

$
1,113

0.10
%
Home equity

4

143

0.06

5

214

0.08

Total Nonaccruing Loan Modifications

10

$
690

0.01
%

17

$
1,327

0.03

There were no commitments to lend additional amounts to the borrowers included in the previous table.

The Company closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table shows the performance of such loans and leases that have been modified during the ~~second quarters~~three and six months ended June 30, 2023.

Accruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

30-89 Days

90+ Days

30-89 Days

90+ Days
(in thousands)

Current

Past Due

Past Due

Current

Past Due

Past Due

Republic Processing Group

$
91

$
—

$
—

93

—

—
Total Accruing Loan Modifications

$
91

$
—

$
—

$
93

$
—

$
—

Nonaccruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

30-89 Days

90+ Days

30-89 Days

90+ Days
(in thousands)

Current

Past Due

Past Due

Current

Past Due

Past Due

Residential real estate:

Owner occupied

$
379

$
—

$
168

$
945

$
—

$
168
Nonowner occupied

—

—

—

—

—

—
Home equity

143

—

—

214

—

—
Total Nonaccruing Loan Modifications

$
522

$
—

$
168

$
1,159

$
—

$
168

There were two loans and leases with a total balance of ~~2022~~$168,000 that had a payment default during the three months and ~~2021 were performing according to their modified terms. The Bank provided approximately $36,000~~six months ended June 30, 2023 and ~~$18,000 in specific ACLL allocations to clients whose loan terms~~ were modified in ~~TDRs during~~ the ~~second quarters of 2022 and 2021.~~twelve months prior to that default to borrowers experiencing financial difficulty.

~~There was 0 significant change between~~Upon the ~~pre~~Company’s determination that a modified loan or lease has subsequently been deemed uncollectible, the loan or lease is written off. Therefore, the amortized cost of the loan is reduced by the uncollectible amount and ~~post modification~~the allowance for loan ~~balances for~~and lease losses is adjusted by the ~~three months ending June 30, 2022 and 2021.~~
same amount.

Table of Contents

Troubled Debt Restructuring (TDR) Disclosures Prior to the Adoption of ASU 2022-02

A summary of the categories of TDR loan modifications by respective performance as of June 30, 2022 ~~and 2021~~that were modified during the three months ended June 30, 2022 follows:


Troubled Debt

Troubled Debt




Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

June 30, 2022 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

Legal modification

3

$
35

2

$
24

5

$
59

Total residential TDRs

3

35

2

24

5

59



Consumer loans:

Principal deferral

489

77

—

—

489

77

Total consumer TDRs

489

77

—

—

489

77

Total troubled debt restructurings

492

$
112

2

$
24

494

$
136

A summary of the categories of TDR loan modifications by respective performance as of June 30, 2022 that were modified during the six months ended June 30, 2022 follows:


Troubled Debt

Troubled Debt




Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

June 30, 2022 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

Legal modification

5

$
477

3

$
51

8

$
528

Total residential TDRs

5

477

3

51

8

528

Consumer loans:

Principal deferral

489

77

—

—

489

77

Total consumer TDRs

489

77

—

—

489

77

Total troubled debt restructurings

494

$
554

3

$
51

497

$
605

The classification between nonperforming and ~~2021 follows:~~performing was determined at the time of modification. Modification programs focus on extending maturity dates or modifying payment patterns with most TDRs experiencing a combination of concessions. Modifications do not result in the contractual forgiveness of principal or interest. There were no modifications during the three months or six months ended June 30, 2022 that resulted in an interest rate below market rate.

There were two TDRs with a recorded investment of $24,000 which had a payment default within the twelve months following modification during the three months ended June 30, 2022. There were three TDRs with a recorded investment of $51,000 which had a payment default within the twelve months following modification during the six months ended June 30, 2022. Default occurs when a loan or lease is 90 days or more past due under the modified terms or transferred to nonaccrual.


Troubled Debt

Troubled Debt




Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

June 30, 2022 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

��

Legal modification

5

$
477

3

$
51

8

$
528

Total residential TDRs

5

477

3

51

8

528



Consumer loans:

Principal deferral

489

77

—

—

489

77

Total consumer TDRs

489

77

—

—

489

77

Total troubled debt restructurings

494

$
554

3

$
51

497

$
605


Troubled Debt

Troubled Debt




Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

June 30, 2021 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

Principal deferral

1

$
161

—

$
—

1

161

Legal modification

5

279

3

255

8

534

Total residential TDRs

6

440

3

255

9

695

Consumer loans:

Principal deferral

589

69

—

—

589

69

Legal modification

2

3

—

—

2

3

Total consumer TDRs

591

72

—

—

591

72

Total troubled debt restructurings

597

$
512

3

$
255

600

$
767

~~The tables above are inclusive of loans that were TDRs at the end of previous periods and were re-modified, e.g., a maturity date extension during the current period.~~

As of June 30, 2022 and 2021, 92% and 67% of the Bank’s TDR balances that occurred during the first six months of 2022 and 2021 were performing according to their modified terms. The Bank provided approximately $36,000 and $35,000 in specific ACLL allocations to clients whose loan terms were modified in TDRs during the first six months of 2022 and 2021.

~~There was 0 significant change between the pre and post modification loan balances for the six months ending June 30, 2022 and 2021.~~

3637

Table of Contents

The following table ~~presents~~shows the recorded investment of loans ~~by class modified~~and leases classified as troubled debt restructurings ~~within the previous 12 months~~as of ~~June 30, 2022 and 2021 and for which there was a payment default during the three and/or six months ended June 30, 2022 and 2021.~~December 31, 2022.

Three Months Ended

Six Months Ended


Troubled Debt

Troubled Debt




June 30,

June 30,

Restructurings

Restructurings

Total

2022

2021

2022

2021

Performing to

Not Performing to

Troubled Debt




Recorded

Number of

Recorded

Number of

Recorded

Number of

Recorded


Modified Terms

Modified Terms

Restructurings

(dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Loans

Investment


Number of

Recorded

Number of

Recorded

Number of

Recorded

Residential real estate:

Owner occupied

2

$
40

2

$
121

2

$
40

6

$
293

Commercial real estate

—

—

1

127

—

—

1

127

Home equity

1

11

—

—

2

24

—

—

December 31, 2022 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Total

3

$
51

3

$
248

4

$
64

7

$
420

Residential real estate loans (including home equity loans):

Rate reduction

67

$
6,305

3

$
242

70

$
6,547

Principal deferral

7

699

—

—

7

699

Legal modification

67

3,149

6

377

73

3,526

Total residential TDRs

141

10,153

9

619

150

10,772

Commercial related and construction/land development loans:

Rate reduction

1

847

—

—

1

847

Principal deferral

1

1

—

—

1

1

Total commercial TDRs

2

848

—

—

2

848

Consumer loans:

Principal deferral

2,320

393

—

—

2,320

393

Legal modification

3

13

—

—

3

13

Total consumer TDRs

2,323

406

—

—

2,323

406

Total troubled debt restructurings

2,466

$
11,407

9

$
619

2,475

$
12,026

There was no significant change between the pre and post modification loan balances for the three months ending June 30, 2022.

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, 2022

December 31, 2021

June 30, 2023

December 31, 2022

Commercial real estate

$
1,687

$
1,792

$
1,478

$
1,581

Total other real estate owned

$
1,687

$
1,792

$
1,478

$
1,581

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, 2022

December 31, 2021


June 30, 2023

December 31, 2022

Recorded investment in consumer residential real estate mortgage loans in the process of foreclosure

$
751

$
508

$
1,611

$
909

3738

Table of Contents

~~Easy~~Refund Advances
The Company’s TRS segment offered its EARA product during the first two months of 2023 and 2022, along with its ERA product which was offered during December 2022 and ~~2021. During~~the first two weeks of 2023. The ERA originations during December 2022 and the first two weeks of 2023 were made in relation to estimated tax returns that were anticipated to be filed during the first quarter 2023 tax season. The Company originated $98 million of ~~each year, the Company bases its estimated Provision for EAs on the current year’s EA delinquency information and prior years’ tax refund payment patterns subsequent to~~ERAs during December 2022 that were made in anticipation of the first ~~quarter. Unpaid EAs~~quarter 2023 tax season. Each year, all unpaid RAs, including ERAs, are ~~charged-off~~charged off by June 30^th of, and each ~~year, with EAs collected during~~quarter thereafter, any credits to the ~~second half of each year are recorded as recoveries~~Provision for RAs, including ERAs, match the recovery of previously charged-off ~~loans unless such recovery is subject to guarantor reimbursement under a loan-loss guaranty.~~accounts.
Information regarding ~~EAs~~RAs follows:

Three Months Ended

Six Months Ended


June 30,

June 30,
(dollars in thousands)

2022

2021

2022

2021

Easy Advances originated

$
—

$
—

$
311,207

$
250,045

Net charge (credit) to the Provision for Easy Advances

564

(5,793)

8,879

10,226

Provision to total Easy Advances originated

NA

NA

2.85
%

4.09
%

Easy Advances net charge-offs

$
8,879

$
10,226

$
8,879

$
10,226

Easy Advances net charge-offs (recoveries) to total Easy Advances originated

NA

NA

2.85
%

4.09
%

Three Months Ended

Six Months Ended


June 30,


June 30,
(dollars in thousands)

2023

2022


2023

2022

Refund Advances originated during the period

$
—

$
—

$
737,047

$
311,207

Net charge to the Provision for RAs, including ERAs

(161)

564

21,554

8,879

Provision as a percentage of RAs, including ERAs, originated during the period

NA

NA

2.92
%

2.85
%
Refund Advances net charge-offs (recoveries)

$
25,636

$
8,879

$
25,351

$
8,879

Refund Advances net charge-offs (recoveries) to total Refund Advances originated during the period

NA

NA

3.44
%

2.85
%

5.6. DEPOSITS

The composition of the deposit portfolio follows:

(in thousands)

June 30, 2022

December 31, 2021


June 30, 2023

December 31, 2022

Core Bank:

Demand

$
1,338,061

$
1,381,522

$
1,161,743

$
1,336,082

Money market accounts

775,560

789,876

851,090

707,272

Savings

331,508

311,624

289,209

323,015

Reciprocal money market

169,619

28,635

Individual retirement accounts (1)

41,305

43,724

34,227

38,640

Time deposits, $250 and over (1)

51,976

81,050

91,036

54,855

Other certificates of deposit (1)

132,536

154,174

186,053

129,324

Reciprocal money market and time deposits (1)

52,862

77,950

Reciprocal time deposits (1)

73,205

7,405

Wholesale brokered deposits (1)

8,033

—

Total Core Bank interest-bearing deposits

2,723,808

2,839,920

2,864,215

2,625,228

Total Core Bank noninterest-bearing deposits

1,676,974

1,579,173

1,405,543

1,464,493

Total Core Bank deposits

4,400,782

4,419,093

4,269,758

4,089,721

Republic Processing Group:

Money market accounts

9,285

9,717

10,159

3,849

Total RPG interest-bearing deposits

9,285

9,717

10,159

3,849

Brokered prepaid card deposits

319,455

320,907

344,441

328,655

Other noninterest-bearing deposits

98,007

90,701

104,923

115,620

Total RPG noninterest-bearing deposits

417,462

411,608

449,364

444,275

Total RPG deposits

426,747

421,325

459,523

448,124

Total deposits

$
4,827,529

$
4,840,418

$
4,729,281

$
4,537,845

(1) Includes time ~~deposit~~deposits.

3839

Table of Contents

6.7. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER SHORT-TERM BORROWINGS

Securities sold under agreements to repurchase 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 2two percent more in securities than the associated repurchase agreements. All such securities are under the Bank’s control.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, all securities sold under agreements to repurchase had overnight maturities. Additional information regarding securities sold under agreements to repurchase and other short-term borrowings follows:

(dollars in thousands)

June 30, 2022


December 31, 2021



June 30, 2023


December 31, 2022


Outstanding balance at end of period

$
303,315

$
290,967

$
92,093

$
216,956

Weighted average interest rate at end of period

0.09
%

0.04
%

0.43
%

0.41
%

Fair value of securities pledged:

U.S. Treasury securities and U.S. Government agencies

$
304,203

$
108,813

$
92,450

$
254,296

Mortgage backed securities - residential

42,422

167,561

Collateralized mortgage obligations

1,190

33,441

Total securities pledged

$
347,815

$
309,815

$
92,450

$
254,296

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(dollars in thousands)

2022


2021


2022


2021


2023


2022


2023


2022

Average outstanding balance during the period

$
294,388

$
169,888

$
297,263

$
181,216

$
117,852

$
294,388

$
160,146

$
297,263

Average interest rate during the period

0.07
%

0.02
%

0.05
%

0.02
%

Weighted average interest rate during the period

0.59
%

0.07
%

0.53
%

0.05
%

Maximum outstanding at any month end during the period

$
303,315

$
174,928

$
303,315

$
200,704

$
121,835

$
303,315

$
224,067

$
303,315

3940

Table of Contents

7.8. RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

The Company records as operating lease liabilities the present value of its required minimum lease payments plus any amounts probable of being owed under a residual value guarantee. Offsetting these operating lease liabilities, the Company records right-of-use assets for the underlying leased property.

As of June 30, ~~2022,~~2023, the Company was under 45 separate and distinct operating lease contracts to lease the land and/or buildings for 3738 of its offices, with 12 such operating leases contracted with a related party of the Company. As of June 30, ~~2022,~~2023, payments on 22 of the Company’s operating leases were considered variable because such payments were adjustable based on periodic changes in the Consumer Price Index.

The Company recorded a renewal to one ~~new third-party office lease, renewed 1 of its existing related-party leases, and extended 4~~ of its third-party leases during the first six months of ~~2022,~~2023 with a ~~related~~ total right-of-use asset value of ~~$5.0~~$1.1 million ~~connected to this 2022 activity.~~and recorded two new third-party leases during the first six months of 2023 with a total right-of-use asset value of $278,000.

The following table presents information concerning the Company’s operating lease expense recorded as a noninterest expense within the “Occupancy” category for the three and six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,
(in thousands)

2022

2021


2022

2021
(dollars in thousands)

2023

2022


2023

2022

Operating lease expense:

Related Party:

Variable lease expense

$
1,269

$
1,218

$
2,535

$
2,438

$
1,205

$
1,269

$
2,429

$
2,535
Fixed lease expense

57

34

92

68

58

57

117

92
Third Party:

Third-Party:

Variable lease expense

220

197

417

393

369

220

680

417
Fixed lease expense

349

342

693

684

386

349

775

693
Total operating lease expense

$
1,895

$
1,791

$
3,737

$
3,583

$
2,018

$
1,895

$
4,001

$
3,737

Other information concerning operating leases:

Cash paid for amounts included in the measurement of operating lease liabilities

$
1,707

$
1,799

$
3,412

$
3,597

$
1,771

$
1,705

$
3,500

$
3,412
Cash paid for variable rent payments not included in measurement of operating lease liabilities

151

—

302

—

151

151

302

302
Short-term lease payments not included in the measurement of lease liabilities

—

—

—

—

—

—

—

—

The following table presents the weighted average remaining term and weighted average discount rate for the Company’s non-short-term operating leases as of June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


June 30, 2022

December 31, 2021


June 30, 2023

December 31, 2022

Weighted average remaining term in years

8.39

7.57

7.96

8.44

Weighted average discount rate

2.64
%

3.05
%

2.13
%

2.10
%

~~Table of Contents~~

The following table presents a maturity schedule of the Company’s operating lease liabilities based on undiscounted cash flows, and a reconciliation of those undiscounted cash flows to the operating lease liabilities recognized on the Company’s balance sheet as of June 30, ~~2022:~~2023:

Year (dollars in thousands)

Related Party

Third Party

Total

Year (in thousands)

Related Party

Third-Party

Total

2022

$
2,123

$
1,309

$
3,432

2023

4,274

2,429

6,703

$
1,923

$
1,322

$
3,245

2024

4,189

1,928

6,117

3,726

2,447

6,173

2025

4,053

1,396

5,449

3,570

1,842

5,412

2026

4,124

1,100

5,224

3,640

1,491

5,131

2027

3,680

1,160

4,840

Thereafter

16,375

4,313

20,688

11,751

3,630

15,381
��
Total undiscounted cash flows

$
35,138

$
12,475

$
47,613

$
28,290

$
11,892

$
40,182

Discount applied to cash flows

(3,398)

(2,052)

(5,450)

(3,035)

(1,426)

(4,461)

Total discounted cash flows reported as operating lease liabilities

$
31,740

$
10,423

$
42,163

$
25,255

$
10,466

$
35,721

Table of Contents

8.9. FEDERAL HOME LOAN BANK ADVANCES

FHLB advances were as follows:

(in thousands)

June 30, 2022

December 31, 2021


June 30, 2023

December 31, 2022

Overnight advances

$
—

$
25,000

$
450,000

$
75,000

Fixed interest rate advances

20,000

—

70,000

20,000

Total FHLB advances

$
20,000

$
25,000

$
520,000

$
95,000

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, ~~2022~~2023 and December 31, ~~2021,~~2022, Republic had available borrowing capacity of ~~$905~~$543 million and $900 million, respectively, from the FHLB. In addition to its borrowing capacity with the FHLB, Republic also had unsecured lines of credit totaling $125 million available through various other financial institutions as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Aggregate future principal payments on FHLB advances based on contractual maturity and the weighted average cost of such advances are detailed below:




Weighted




Weighted

Average

Average

Year (dollars in thousands)

Principal

Rate

Principal

Rate

2022

$
—

—
%
2023

—

—

$
450,000

5.09
%
2024

—

—

—

—

2025

—

—

—

—

2026

—

—

20,000

1.89

2027

20,000

1.89

50,000

4.17

2028

—

—

Total

$
20,000

1.89
%

$
520,000

4.88
%

~~Table of Contents~~

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

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(dollars in thousands)

2022


2021


2022


2021


2023


2022


2023


2022

Average outstanding balance during the period

$
—

$
25,000

$
—

$
32,597

$
226,659

$
—

$
226,006

$
—

Average interest rate during the period

—
%

0.16
%

—
%

0.16
%
Weighted average interest rate during the period

5.20
%

—
%

4.82
%

—
%
Maximum outstanding at any month end during the period

$
—

$
25,000

$
—

$
25,000

$
450,000

$
—

$
450,000

$
—

The following table illustrates real estate loans pledged to collateralize advances and letters of credit with the FHLB:

(in thousands)

June 30, 2022

December 31, 2021


June 30, 2023

December 31, 2022

First lien, single family residential real estate

$
1,036,228

$
1,041,461

$
1,303,563

$
1,106,287

Home equity lines of credit

193,447

186,396

232,304

219,644

Table of Contents

9.10. OFF BALANCE SHEET RISKS, COMMITMENTS AND CONTINGENT LIABILITIES

~~COVID Pandemic~~

COVID was declared a pandemic by the World Health Organization on March 11, 2020. Since March 2020, jurisdictions within and outside the U.S. have imposed economic and social restrictions on the population, in general, and non-essential businesses to slow the spread of COVID. These restrictions, in combination with the public’s response to them, have disrupted supply chains and effectively suspended or curtailed economic activity for many industries across the U.S. and the world. Industries within the Company’s market footprint have been impacted by these supply chain disruptions as well as the corresponding inflationary pressures driven by them in combination with on-going governmental stimulus programs.

The future potential financial impact of the COVID pandemic is still unknown at this time. This pandemic and the public’s response to it could cause the Company to experience a material adverse impact on its business operations, asset valuations, financial condition, and results of operations. Material adverse impacts may include all or a combination of valuation impairments on the Company’s intangible assets, investments, loans, MSRs, deferred tax assets, or counterparty risk derivatives.

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, 2022

December 31, 2021


June 30, 2023

December 31, 2022

Unused warehouse lines of credit

$
865,822

$
565,950

$
440,940

$
733,940

Unused home equity lines of credit

368,820

348,681

430,954

410,057

Unused loan commitments - other

828,583

828,229

1,175,149

951,021

Standby letters of credit

10,951

11,305

10,232

9,735

FHLB letter of credit

643

643

233

643

Total commitments

$
2,074,819

$
1,754,808

$
2,057,508

$
2,105,396

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.

Table of Contents

The following tables present a ~~rollforward~~roll-forward of the ACLC for the three and six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:

ACLC Rollforward

ACLC Roll-forward

Three Months Ended

Three Months Ended

2022

2021

2023

2022

Beginning

Charge-

Ending

Beginning

Charge-

Ending

Beginning

Charge-

Ending

Beginning

Charge-

Ending
(in thousands)

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Loan Commitments

Unused warehouse lines of credit

$
130

$
32

$
—

$
—

$
162

$
116

$
24

$
—

$
—

$
140

$
198

$
(53)

$
—

$
—

$
145

$
130

$
32

$
—

$
—

$
162
Unused home equity lines of credit

256

21

—

—

277

194

19

—

—

213

341

12

—

—

353

256

21

—

—

277
Unused construction lines of credit

547

86

—

—

633

—

—

—

—

—
Unused loan commitments - other

654

7

—

—

661

705

(124)

—

—

581

374

25

—

—

399

654

7

—

—

661

Total

$
1,040

$
60

$
—

$
—

$
1,100

$
1,015

$
(81)

$
—

$
—

$
934

$
1,460

$
70

$
—

$
—

$
1,530

$
1,040

$
60

$
—

$
—

$
1,100

ACLC Rollforward

ACLC Roll-forward

Six Months Ended June 30,

Six Months Ended June 30,

2022

2021

2023

2022

Beginning

Charge-

Ending

Beginning

Charge-

Ending

Beginning

Charge-

Ending

Beginning

Charge-

Ending
(in thousands)

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Loan Commitments

Unused warehouse lines of credit

$
154

$
8

$
—

$
—

$
162

$
79

$
61

$
—

$
—

$
140

$
190

$
(45)

$
—

$
—

$
145

$
154

$
8

$
—

$
—

$
162
Unused home equity lines of credit

247

30

—

—

277

173

40

—

—

213

332

21

—

—

353

247

30

—

—

277
Unused construction lines of credit

384

249

—

—

633

—

—

—

—

—
Unused loan commitments - other

651

10

—

—

661

737

(156)

—

—

581

344

55

—

—

399

651

10

—

—

661

Total

$
1,052

$
48

$
—

$
—

$
1,100

$
989

$
(55)

$
—

$
—

$
934

$
1,250

$
280

$
—

$
—

$
1,530

$
1,052

$
48

$
—

$
—

$
1,100

The Company increased its ACLC during the three and six months ended June 30, ~~2022~~2023 based primarily on ~~an increase~~a change in ~~total unused commitments.~~the loan mix to loans with higher reserve rates.

Table of Contents

~~10.~~11. 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.

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 mortgage-backed security, 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 mortgage-backed security 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 in this section of the filing under Footnote 23 “Investment Securities” for additional discussion regarding the Bank’s private label mortgage-backed security.

For its TRUP investment, the Company considered the most recent bid price for the same instrument to approximate market value as of June 30, ~~2022.~~2023. 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: Quoted market prices in an active market are available for the Bank’s Community Reinvestment Act mutual fund investment and fall within Level 1 of the fair value hierarchy.

The fair value of the Company’s Freddie Mac preferred stock is determined by matrix pricing, as described above (Level 2 inputs).

Mortgage loans held for sale, at fair value: The fair value of mortgage loans held for sale is determined using quoted secondary market prices. Mortgage loans held for sale are classified as Level 2 in the fair value hierarchy.

Consumer loans held for sale, at fair value: In December 2019, the Bank began offering RCS installment loans with terms ranging from 12 to 60 months to borrowers in multiple states. Balances originated under this RCS installment loan program are carried as “held for sale” on the Bank’s balance sheet, with the intent to sell within sixteen days following the Bank’s origination of the loans. Loans originated under this RCS installment loan program are carried at fair value under a fair-value option, with the portfolio marked to market monthly. 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.

Table of Contents

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.

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 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.

Table of Contents

~~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. Information as of June 30, 2022 is presented net of any applicable ACL.~~

Fair Value Measurements at

June 30, 2022 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

$
230,771

$
152,321

$
—

$
383,092

Private label mortgage-backed security

—

—

2,478

2,478

Mortgage-backed securities - residential

—

198,270

—

198,270

Collateralized mortgage obligations

—

24,545

—

24,545

Corporate bonds

—

9,936

—

9,936

Trust preferred security

—

—

3,824

3,824

Total available-for-sale debt securities

$
230,771

$
385,072

$
6,302

$
622,145

Equity securities with readily determinable fair value:

Freddie Mac preferred stock

$
—

$
189

$
—

$
189

Total equity securities with readily determinable fair value

$
—

$
189

$
—

$
189

Mortgage loans held for sale

$
—

$
8,491

$
—

$
8,491

Consumer loans held for sale

—

—

17,459

17,459

Consumer loans held for investment

—

—

45

45

Rate lock loan commitments

—

220

—

220

Mandatory forward contracts

—

359

—

359

Interest rate swap agreements

—

4,501

—

4,501

Financial liabilities:

Interest rate swap agreements

$
—

$
4,501

$
—

$
4,501

~~Table of Contents~~

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. Information as of June 30, 2023 is presented net of any applicable ACL.

Fair Value Measurements at

June 30, 2023 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

$
174,323

$
233,034

$
—

$
407,357

Private label mortgage-backed security

—

—

1,988

1,988

Mortgage-backed securities - residential

—

166,287

—

166,287

Collateralized mortgage obligations

—

22,747

—

22,747

Corporate bonds

—

2,025

—

2,025

Trust preferred security

—

—

3,746

3,746

Total available-for-sale debt securities

$
174,323

$
424,093

$
5,734

$
604,150

Equity securities with readily determinable fair value:

Freddie Mac preferred stock

$
—

$
122

$
—

$
122

Total equity securities with readily determinable fair value

$
—

$
122

$
—

$
122

Mortgage loans held for sale

$
—

$
4,038

$
—

$
4,038

Consumer loans held for sale

—

—

5,757

5,757

Rate lock loan commitments

—

189

—

189

Interest rate swap agreements

—

7,829

—

7,829

Financial liabilities:

Mandatory forward contracts

$
—

$
61

$
—

$
61

Interest rate swap agreements

—

7,829

—

7,829

Fair Value Measurements at

December 31, 2022 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

$
193,385

$
217,756

$
—

$
411,141

Private label mortgage-backed security

—

—

2,127

2,127

Mortgage-backed securities - residential

—

171,873

—

171,873

Collateralized mortgage obligations

—

21,368

—

21,368

Corporate bonds

—

10,001

—

10,001

Trust preferred security

—

—

3,855

3,855

Total available-for-sale debt securities

$
193,385

$
420,998

$
5,982

$
620,365

Equity securities with readily determinable fair value:

Freddie Mac preferred stock

$
—

$
111

$
—

$
111

Total equity securities with readily determinable fair value

$
—

$
111

$
—

$
111

Mortgage loans held for sale

$
—

$
1,302

$
—

$
1,302

Consumer loans held for sale

—

—

4,706

4,706

Consumer loans held for investment

—

—

2

2

Rate lock loan commitments

—

2

—

2

Interest rate swap agreements

—

8,128

—

8,128

Financial liabilities:

Mandatory forward contracts

$
—

$
67

$
—

$
67

Interest rate swap agreements

—

8,128

—

8,128

Table of Contents

Fair Value Measurements at

December 31, 2021 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

$
70,112

$
167,347

$
—

$
237,459

Private label mortgage-backed security

—

—

2,731

2,731

Mortgage-backed securities - residential

—

210,749

—

210,749

Collateralized mortgage obligations

—

30,294

—

30,294

Corporate bonds

—

10,046

—

10,046

Trust preferred security

—

—

3,847

3,847

Total available-for-sale debt securities

$
70,112

$
418,436

$
6,578

$
495,126

Equity securities with readily determinable fair value:

Freddie Mac preferred stock

$
—

$
170

$
—

$
170

Community Reinvestment Act mutual fund

2,450

—

—

2,450

Total equity securities with readily determinable fair value

$
2,450

$
170

$
—

$
2,620

Mortgage loans held for sale

$
—

$
29,393

$
—

$
29,393

Consumer loans held for sale

—

—

19,747

19,747

Consumer loans held for investment

—

—

170

170

Rate lock loan commitments

—

1,404

—

1,404

Mandatory forward contracts

—

66

—

66

Interest rate swap agreements

—

5,786

—

5,786

Financial liabilities:

Interest rate swap agreements

—

5,786

—

5,786

All transfers between levels are generally recognized at the end of each quarter. There were 0no transfers into or out of Level 1, 2, or 3 assets during the three months and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

Private Label Mortgage-Backed Security

The following table presents a reconciliation of the Bank’s private label mortgage-backed security measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


Three Months Ended

Six Months Ended


Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,
(in thousands)

2022

2021

2022

2021


2023

2022

2023

2022

Balance, beginning of period

$
2,602

$
2,863

$
2,731

$
2,957

$
2,010

$
2,602

$
2,127

$
2,731
Total gains or losses included in earnings:

Net change in unrealized gain

(15)

34

9

49

26

(15)

32

9
Principal paydowns

(109)

(73)

(262)

(182)

(48)

(109)

(171)

(262)
Balance, end of period

$
2,478

$
2,824

$
2,478

$
2,824

$
1,988

$
2,478

$
1,988

$
2,478

The fair value of the Bank’s single private label mortgage-backed security 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 mortgage-backed security 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 mortgage-backed security follows:


Fair

Valuation




June 30, 2023 (dollars in thousands)

Value

Technique

Unobservable Inputs

Range

Private label mortgage-backed security

$
1,988

Discounted cash flow

(1) Constant prepayment rate

2.7% - 4.5%

(2) Probability of default

1.8% - 9.3%

(3) Loss severity

12% - 35%


Fair

Valuation




December 31, 2022 (dollars in thousands)

Value

Technique

Unobservable Inputs

Range

Private label mortgage-backed security

$
2,127

Discounted cash flow

(1) Constant prepayment rate

4.5% - 4.7%

(2) Probability of default

1.8% - 9.3%

(3) Loss severity

25% - 35%

Table of Contents

~~Quantitative information about recurring Level 3 fair value measurement inputs for the Bank’s single private label mortgage-backed security follows:~~


Fair

Valuation




June 30, 2022 (dollars in thousands)

Value

Technique

Unobservable Inputs

Range

Private label mortgage-backed security

$
2,478

Discounted cash flow

(1) Constant prepayment rate

4.5% - 5.4%

(2) Probability of default

1.8% - 9.3%

(3) Loss severity

50% - 75%


Fair

Valuation




December 31, 2021 (dollars in thousands)

Value

Technique

Unobservable Inputs

Range

Private label mortgage-backed security

$
2,731

Discounted cash flow

(1) Constant prepayment rate

4.5% - 5.7%

(2) Probability of default

1.8% - 9.3%

(3) Loss severity

50% - 75%

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


Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(in thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Balance, beginning of period

$
3,725

$
3,650

$
3,847

$
3,800

$
4,001

$
3,725

$
3,855

$
3,847

Total gains or losses included in earnings:

Discount accretion

14

13

28

26

15

14

29

28

Net change in unrealized gain

85

37

(51)

(126)

(270)

85

(138)

(51)

Balance, end of period

$
3,824

$
3,700

$
3,824

$
3,700

$
3,746

$
3,824

$
3,746

$
3,824

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.

~~Table of Contents~~

~~Mortgage~~Collateral-Dependent Loans ~~Held for Sale~~

The ~~Bank has elected~~following table presents the ~~fair value option for mortgage~~amortized cost basis of collateral-dependent loans ~~held for sale. These~~by class of loans:

June 30, 2023

December 31, 2022

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

$
17,178

$
—

$
18,057

$
—
Nonowner occupied

72

—

150

—
Commercial real estate

959

—

1,041

—
Construction & land development

—

—

—

—
Commercial & industrial

—

—

—

—
Lease financing receivables

—

—

—

—
Aircraft

—

—

—

210
Home equity

1,130

—

967

—
Consumer

—

30

—

26
Total Traditional Banking

$
19,339

$
30

$
20,215

$
236

Collateral-dependent loans are ~~intended for sale and~~generally secured by real estate or personal property. If there is insufficient collateral value to secure the ~~Bank believes that the fair~~Company’s recorded investment in these loans, they are charged down to collateral value ~~is the best indicator of the resolution of these loans. Interest income is recorded~~less estimated selling costs, when selling costs are applicable. Selling costs range from 10% to 13%, with those percentages based on annual studies performed by the ~~contractual terms~~Company.

Loan Modification Disclosures Pursuant to ASU 2022-02

The following table shows the amortized cost of ~~the~~ loans and ~~in accordance with Bank policy for such instruments. NaN of these loans were past due 90-days-or-more or on nonaccrual~~leases as of June 30, ~~2022~~2023 that were both experiencing financial difficulty and ~~December 31, 2021.~~modified during the three months ended June 30, 2023, segregated by portfolio segment and type of modification. The following tables shows the amortized cost of loans and leases modified by type.

Amortized Cost Basis of Modified Financing Receivables
June 30, 2023 (dollars in thousands)

Loans (#)

Rate Reduction ($)

Loans (#)

Term Extension ($)

Loans (#)

Principal Deferral ($)

Residential real estate:

Owner occupied

—

$
—

—

$
—

6

$
547
Nonowner occupied

—

—

—

—

—

—
Home equity

—

—

—

—

4

143
Republic Processing Group

—

—

—

—

423

91
Total Loan Modifications

—

$
—

—

$
—

433

$
781

Total Loan Modification by Type

Accruing

Nonaccruing
June 30, 2023 (dollars in thousands)

Loans (#)

Recorded investment ($)

Loans (#)

Recorded investment ($)

Term extension

—

$
—

—

$
—
Principal deferral

423

91

10

690
Total Loan Modifications

423

$
91

10

$
690

The following table shows the amortized cost of loans and leases as of June 30, 2023 that were both experiencing financial difficulty and modified during the six months ended June 30, 2023, segregated by portfolio segment and type of modification. The following tables shows the amortized cost of loans and leases modified by type.

Amortized Cost Basis of Modified Financing Receivables
June 30, 2023 (dollars in thousands)

Loans (#)

Rate Reduction ($)

Loans (#)

Term Extension ($)

Loans (#)

Principal Deferral ($)

Residential real estate:

Owner occupied

—

$
—

2

$
261

10

$
852
Nonowner occupied

—

—

—

—

—

—
Home equity

—

—

—

—

5

214
Republic Processing Group

—

—

—

—

424

93
Total Loan Modifications

—

$
—

2

$
261

439

$
1,159

Total Loan Modification by Type

Accruing

Nonaccruing
June 30, 2023 (dollars in thousands)

Loans (#)

Recorded investment ($)

Loans (#)

Recorded investment ($)

Term extension

—

$
—

2

$
261
Principal deferral

424

93

15

1,066
Total Loan Modifications

424

$
93

17

$
1,327

The following tables show the percentage of the amortized cost of loans and leases that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financing receivable.

Accruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

% of Total

% of Total

Amortized

of Financing

Amortized

of Financing
(dollars in thousands)

Loans (#)

Cost Basis ($)

Receivable

Loans

Cost Basis

Receivable

Republic Processing Group

423

$
91

0.08
%

424

93

0.08

Total Accruing Loan Modifications

423

$
91

NM

424

$
93

0.00

Nonaccruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

% of Total

% of Total

Amortized

of Financing

Amortized

of Financing
(dollars in thousands)

Loans (#)

Cost Basis ($)

Receivable

Loans

Cost Basis

Receivable

Residential real estate:

Owner occupied

6

$
547

0.05
%

12

$
1,113

0.10
%
Home equity

4

143

0.06

5

214

0.08

Total Nonaccruing Loan Modifications

10

$
690

0.01
%

17

$
1,327

0.03

There were no commitments to lend additional amounts to the borrowers included in the previous table.

The ~~aggregate fair value, contractual balance,~~Company closely monitors the performance of loans and ~~unrealized gain were as follows:~~

(in thousands)

June 30, 2022

December 31, 2021

Aggregate fair value

$
8,491

$
29,393

Contractual balance

8,363

28,668

Unrealized gain

128

725

leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The ~~total amount~~following table shows the performance of ~~gains~~such loans and ~~losses from changes in fair value included in earnings for~~leases that have been modified during the three and six months ended June 30, ~~2022 and 2021 for mortgage loans held for sale are presented in the following table:~~2023.

Accruing Loan Modifications


Three Months Ended

Six Months Ended


Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

June 30,

June 30,

30-89 Days

90+ Days

30-89 Days

90+ Days
(in thousands)

2022

2021

2022

2021

Current

Past Due

Past Due

Current

Past Due

Past Due

Interest income

$
153

$
140

$
357

$
549

Change in fair value

109

(143)

(597)

(1,154)

Total included in earnings

$
262

$
(3)

$
(240)

$
(605)

Republic Processing Group

$
91

$
—

$
—

93

—

—
Total Accruing Loan Modifications

$
91

$
—

$
—

$
93

$
—

$
—

Nonaccruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

30-89 Days

90+ Days

30-89 Days

90+ Days
(in thousands)

Current

Past Due

Past Due

Current

Past Due

Past Due

Residential real estate:

Owner occupied

$
379

$
—

$
168

$
945

$
—

$
168
Nonowner occupied

—

—

—

—

—

—
Home equity

143

—

—

214

—

—
Total Nonaccruing Loan Modifications

$
522

$
—

$
168

$
1,159

$
—

$
168

~~Consumer Loans Held for Sale~~There were two loans and leases with a total balance of $168,000 that had a payment default during the three months and six months ended June 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

~~RCS carries loans originated through its installment~~Upon the Company’s determination that a modified loan ~~program at fair value. Interest income~~or lease has subsequently been deemed uncollectible, the loan or lease is ~~recorded based on~~written off. Therefore, the ~~contractual terms~~amortized cost of the loan is reduced by the uncollectible amount and ~~in accordance with Bank policy~~the allowance for ~~such instruments. NaN~~ ~~of these loans were past due 90-days-or-more or on nonaccrual as of June 30, 2022~~loan and ~~December 31, 2021.~~

~~The significant unobservable inputs in~~lease losses is adjusted by 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.

~~The following table presents quantitative information about recurring Level 3 fair value measurement inputs for installment loans:~~


Fair

Valuation




June 30, 2022 (dollars in thousands)

Value

Technique

Unobservable Inputs

Rate

Consumer loans held for sale

$
17,459

Contract Terms

(1) Net Premium

0.15%

(2) Discounted Sales

10.00%


Fair

Valuation




December 31, 2021 (dollars in thousands)

Value

Technique

Unobservable Inputs

Rate

Consumer loans held for sale

$
19,747

Contract Terms

(1) Net Premium

1.4%

(2) Discounted Sales

5.00%
same amount.

5035

Table of Contents

~~The aggregate fair value, contractual balance, and unrealized gain on consumer loans held for sale, at fair value,~~Troubled Debt Restructuring (TDR) Disclosures Prior to the Adoption of ASU 2022-02

A summary of the categories of TDR loan modifications by respective performance as of June 30, 2022 that were asmodified during the three months ended June 30, 2022 follows:

(in thousands)

June 30, 2022

December 31, 2021

Aggregate fair value

$
17,459

$
19,747

Contractual balance

17,563

19,633

Unrealized gain

(104)

114


Troubled Debt

Troubled Debt




Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

June 30, 2022 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

Legal modification

3

$
35

2

$
24

5

$
59

Total residential TDRs

3

35

2

24

5

59



Consumer loans:

Principal deferral

489

77

—

—

489

77

Total consumer TDRs

489

77

—

—

489

77

Total troubled debt restructurings

492

$
112

2

$
24

494

$
136

A summary of the categories of TDR loan modifications by respective performance as of June 30, 2022 that were modified during the six months ended June 30, 2022 follows:


Troubled Debt

Troubled Debt




Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

June 30, 2022 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

Legal modification

5

$
477

3

$
51

8

$
528

Total residential TDRs

5

477

3

51

8

528

Consumer loans:

Principal deferral

489

77

—

—

489

77

Total consumer TDRs

489

77

—

—

489

77

Total troubled debt restructurings

494

$
554

3

$
51

497

$
605

The ~~total amount~~classification between nonperforming and performing was determined at the time of ~~net gains from changes in fair value included in earnings for consumer loans held for sale, at fair value, are presented~~modification. Modification programs focus on extending maturity dates or modifying payment patterns with most TDRs experiencing a combination of concessions. Modifications do not result in the ~~following table:~~contractual forgiveness of principal or interest. There were no modifications during the three months or six months ended June 30, 2022 that resulted in an interest rate below market rate.


Three Months Ended

Six Months Ended

June 30,

June 30,
(in thousands)

2022

2021

2022

2021

Interest income

$
2,990

$
1,397

$
5,880

$
1,968
Change in fair value

(181)

63

(218)

78
Total included in earnings

$
2,809

$
1,460

$
5,662

$
2,046
There were two TDRs with a recorded investment of $24,000 which had a payment default within the twelve months following modification during the three months ended June 30, 2022. There were three TDRs with a recorded investment of $51,000 which had a payment default within the twelve months following modification during the six months ended June 30, 2022. Default occurs when a loan or lease is 90 days or more past due under the modified terms or transferred to nonaccrual.

5137

Table of Contents

The following table shows the recorded investment of loans and leases classified as troubled debt restructurings as of December 31, 2022.


Troubled Debt

Troubled Debt




Restructurings

Restructurings

Total

Performing to

Not Performing to

Troubled Debt

Modified Terms

Modified Terms

Restructurings


Number of

Recorded

Number of

Recorded

Number of

Recorded

December 31, 2022 (dollars in thousands)

Loans

Investment

Loans

Investment

Loans

Investment

Residential real estate loans (including home equity loans):

Rate reduction

67

$
6,305

3

$
242

70

$
6,547

Principal deferral

7

699

—

—

7

699

Legal modification

67

3,149

6

377

73

3,526

Total residential TDRs

141

10,153

9

619

150

10,772



Commercial related and construction/land development loans:

Rate reduction

1

847

—

—

1

847

Principal deferral

1

1

—

—

1

1

Total commercial TDRs

2

848

—

—

2

848

Consumer loans:

Principal deferral

2,320

393

—

—

2,320

393

Legal modification

3

13

—

—

3

13

Total consumer TDRs

2,323

406

—

—

2,323

406

Total troubled debt restructurings

2,466

$
11,407

9

$
619

2,475

$
12,026

There was no significant change between the pre and post modification loan balances for the three months ending June 30, 2022.

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, 2023

December 31, 2022

Commercial real estate

$
1,478

$
1,581

Total other real estate owned

$
1,478

$
1,581

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, 2023

December 31, 2022

Recorded investment in consumer residential real estate mortgage loans in the process of foreclosure

$
1,611

$
909

Table of Contents

Refund Advances
The Company’s TRS segment offered its RA product during the first two months of 2023 and 2022, along with its ERA product which was offered during December 2022 and the first two weeks of 2023. The ERA originations during December 2022 and the first two weeks of 2023 were made in relation to estimated tax returns that were anticipated to be filed during the first quarter 2023 tax season. The Company originated $98 million of ERAs during December 2022 that were made in anticipation of the first quarter 2023 tax season. Each year, all unpaid RAs, including ERAs, are charged off by June 30^th, and each quarter thereafter, any credits to the Provision for RAs, including ERAs, match the recovery of previously charged-off accounts.
Information regarding RAs follows:

Three Months Ended

Six Months Ended


June 30,


June 30,
(dollars in thousands)

2023

2022


2023

2022

Refund Advances originated during the period

$
—

$
—

$
737,047

$
311,207

Net charge to the Provision for RAs, including ERAs

(161)

564

21,554

8,879

Provision as a percentage of RAs, including ERAs, originated during the period

NA

NA

2.92
%

2.85
%
Refund Advances net charge-offs (recoveries)

$
25,636

$
8,879

$
25,351

$
8,879

Refund Advances net charge-offs (recoveries) to total Refund Advances originated during the period

NA

NA

3.44
%

2.85
%

6.DEPOSITS

The composition of the deposit portfolio follows:

(in thousands)

June 30, 2023

December 31, 2022

Core Bank:

Demand

$
1,161,743

$
1,336,082

Money market accounts

851,090

707,272

Savings

289,209

323,015

Reciprocal money market

169,619

28,635

Individual retirement accounts (1)

34,227

38,640

Time deposits, $250 and over (1)

91,036

54,855

Other certificates of deposit (1)

186,053

129,324

Reciprocal time deposits (1)

73,205

7,405

Wholesale brokered deposits (1)

8,033

—

Total Core Bank interest-bearing deposits

2,864,215

2,625,228

Total Core Bank noninterest-bearing deposits

1,405,543

1,464,493

Total Core Bank deposits

4,269,758

4,089,721

Republic Processing Group:

Money market accounts

10,159

3,849

Total RPG interest-bearing deposits

10,159

3,849

Brokered prepaid card deposits

344,441

328,655

Other noninterest-bearing deposits

104,923

115,620

Total RPG noninterest-bearing deposits

449,364

444,275

Total RPG deposits

459,523

448,124

Total deposits

$
4,729,281

$
4,537,845

(1) Includes time deposits.

Table of Contents

7. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER SHORT-TERM BORROWINGS

Securities sold under agreements to repurchase 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 two percent more in securities than the associated repurchase agreements. All such securities are under the Bank’s control.

As of June 30, 2023 and December 31, 2022, all securities sold under agreements to repurchase had overnight maturities. Additional information regarding securities sold under agreements to repurchase and other short-term borrowings follows:

(dollars in thousands)

June 30, 2023


December 31, 2022


Outstanding balance at end of period

$
92,093

$
216,956

Weighted average interest rate at end of period

0.43
%

0.41
%

Fair value of securities pledged:

U.S. Treasury securities and U.S. Government agencies

$
92,450

$
254,296

Total securities pledged

$
92,450

$
254,296

Three Months Ended

Six Months Ended

June 30,

June 30,

(dollars in thousands)

2023


2022


2023


2022

Average outstanding balance during the period

$
117,852

$
294,388

$
160,146

$
297,263

Weighted average interest rate during the period

0.59
%

0.07
%

0.53
%

0.05
%

Maximum outstanding at any month end during the period

$
121,835

$
303,315

$
224,067

$
303,315

Table of Contents

8.RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

The Company records as operating lease liabilities the present value of its required minimum lease payments plus any amounts probable of being owed under a residual value guarantee. Offsetting these operating lease liabilities, the Company records right-of-use assets for the underlying leased property.

As of June 30, 2023, the Company was under 45 separate and distinct operating lease contracts to lease the land and/or buildings for 38 of its offices, with 12 such operating leases contracted with a related party of the Company. As of June 30, 2023, payments on 22 of the Company’s operating leases were considered variable because such payments were adjustable based on periodic changes in the Consumer Price Index.

The Company recorded a renewal to one of its third-party leases during the first six months of 2023 with a total right-of-use asset value of $1.1 million and recorded two new third-party leases during the first six months of 2023 with a total right-of-use asset value of $278,000.

The following table presents information concerning the Company’s operating lease expense recorded as a noninterest expense within the “Occupancy” category for the three and six months ended June 30, 2023 and 2022:

Three Months Ended

Six Months Ended

June 30,

June 30,
(dollars in thousands)

2023

2022


2023

2022

Operating lease expense:

Related Party:

Variable lease expense

$
1,205

$
1,269

$
2,429

$
2,535
Fixed lease expense

58

57

117

92
Third-Party:

Variable lease expense

369

220

680

417
Fixed lease expense

386

349

775

693
Total operating lease expense

$
2,018

$
1,895

$
4,001

$
3,737

Other information concerning operating leases:

Cash paid for amounts included in the measurement of operating lease liabilities

$
1,771

$
1,705

$
3,500

$
3,412
Cash paid for variable rent payments not included in measurement of operating lease liabilities

151

151

302

302
Short-term lease payments not included in the measurement of lease liabilities

—

—

—

—

The following table presents the weighted average remaining term and weighted average discount rate for the Company’s non-short-term operating leases as of June 30, 2023 and December 31, 2022:


June 30, 2023

December 31, 2022

Weighted average remaining term in years

7.96

8.44

Weighted average discount rate

2.13
%

2.10
%

The following table presents a maturity schedule of the Company’s operating lease liabilities based on undiscounted cash flows, and a reconciliation of those undiscounted cash flows to the operating lease liabilities recognized on the Company’s balance sheet as of June 30, 2023:

Year (in thousands)

Related Party

Third-Party

Total

2023

$
1,923

$
1,322

$
3,245

2024

3,726

2,447

6,173

2025

3,570

1,842

5,412

2026

3,640

1,491

5,131

2027

3,680

1,160

4,840

Thereafter

11,751

3,630

15,381
��
Total undiscounted cash flows

$
28,290

$
11,892

$
40,182

Discount applied to cash flows

(3,035)

(1,426)

(4,461)

Total discounted cash flows reported as operating lease liabilities

$
25,255

$
10,466

$
35,721

Table of Contents

9.FEDERAL HOME LOAN BANK ADVANCES

FHLB advances were as follows:

(in thousands)

June 30, 2023

December 31, 2022

Overnight advances

$
450,000

$
75,000

Fixed interest rate advances

70,000

20,000

Total FHLB advances

$
520,000

$
95,000

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, 2023 and December 31, 2022, Republic had available borrowing capacity of $543 million and $900 million, respectively, from the FHLB. In addition to its borrowing capacity with the FHLB, Republic also had unsecured lines of credit totaling $125 million available through various other financial institutions as of June 30, 2023 and December 31, 2022.

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

2023

$
450,000

5.09
%
2024

—

—

2025

—

—

2026

20,000

1.89

2027

50,000

4.17

2028

—

—

Total

$
520,000

4.88
%

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)

2023


2022


2023


2022

Average outstanding balance during the period

$
226,659

$
—

$
226,006

$
—

Weighted average interest rate during the period

5.20
%

—
%

4.82
%

—
%
Maximum outstanding at any month end during the period

$
450,000

$
—

$
450,000

$
—

The following table illustrates real estate loans pledged to collateralize advances and letters of credit with the FHLB:

(in thousands)

June 30, 2023

December 31, 2022

First lien, single family residential real estate

$
1,303,563

$
1,106,287

Home equity lines of credit

232,304

219,644

Table of Contents

10.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, 2023

December 31, 2022

Unused warehouse lines of credit

$
440,940

$
733,940

Unused home equity lines of credit

430,954

410,057

Unused loan commitments - other

1,175,149

951,021

Standby letters of credit

10,232

9,735

FHLB letter of credit

233

643

Total commitments

$
2,057,508

$
2,105,396

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.

Table of Contents

~~Assets measured at fair value on~~The following tables present a ~~non-recurring basis~~ ~~are summarized below:~~roll-forward of the ACLC for the three and six months ended June 30, 2023 and 2022:

Fair Value Measurements at

June 30, 2022 Using:


Quoted Prices in

Significant





ACLC Roll-forward

Active Markets

Other

Significant

Three Months Ended

for Identical

Observable

Unobservable

Total

2023

2022

Assets

Inputs

Inputs

Fair

Beginning

Charge-

Ending

Beginning

Charge-

Ending
(in thousands)

(Level 1)

(Level 2)

(Level 3)

Value

Balance

Provision

offs

Recoveries

Balance

Balance

Provision

offs

Recoveries

Balance

Collateral-dependent loans:

Residential real estate:

Owner occupied

$
—

$
—

$
1,345

$
1,345

Commercial real estate

—

—

2,475

2,475

Total collateral-dependent loans*

$
—

$
—

$
3,820

$
3,820

Loan Commitments

Unused warehouse lines of credit

$
198

$
(53)

$
—

$
—

$
145

$
130

$
32

$
—

$
—

$
162
Unused home equity lines of credit

341

12

—

—

353

256

21

—

—

277
Unused construction lines of credit

547

86

—

—

633

—

—

—

—

—
Unused loan commitments - other

374

25

—

—

399

654

7

—

—

661

Other real estate owned:

Commercial real estate

$
—

$
—

$
1,687

$
1,687

Total other real estate owned

$
—

$
—

$
1,687

$
1,687

Total

$
1,460

$
70

$
—

$
—

$
1,530

$
1,040

$
60

$
—

$
—

$
1,100

*
~~The difference between the carrying value and the fair value of collateral-dependent loans measured at fair value is reconciled in a subsequent table of this Footnote.~~

Fair Value Measurements at

December 31, 2021 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

$
—

$
—

$
1,626

$
1,626
Commercial real estate

—

—

2,841

2,841
Home equity

—

—

378

378
Total collateral-dependent loans*

$
—

$
—

$
4,845

$
4,845

Other real estate owned:

Residential real estate

$
—

$
—

$
1,792

$
1,792
Total other real estate owned

$
—

$
—

$
1,792

$
1,792

*

ACLC Roll-forward

Six Months Ended June 30,

2023

2022

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

$
190

$
(45)

$
—

$
—

$
145

$
154

$
8

$
—

$
—

$
162
Unused home equity lines of credit

332

21

—

—

353

247

30

—

—

277
Unused construction lines of credit

384

249

—

—

633

—

—

—

—

—
Unused loan commitments - other

344

55

—

—

399

651

10

—

—

661

Total

$
1,250

$
280

$
—

$
—

$
1,530

$
1,052

$
48

$
—

$
—

$
1,100

The Company increased its ACLC during the three and six months ended June 30, 2023 based primarily on a change in the loan mix to loans with higher reserve rates.

~~The difference between the carrying value and the fair value of collateral-dependent loans measured at fair value is reconciled in a subsequent table of this Footnote.~~

5244

Table of Contents

11.FAIR VALUE

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 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.

The Bank used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

The Bank’s U.S. Treasury securities are based on quoted market prices (Level 1 inputs) and considered highly liquid.

See in this section of the filing under Footnote 3 “Investment Securities” for additional discussion regarding the Bank’s private label mortgage-backed security.

For its TRUP investment, the Company considered the most recent bid price for the same instrument to approximate market value as of June 30, 2023. 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.

The fair value of the Company’s Freddie Mac preferred stock is determined by matrix pricing, as described above (Level 2 inputs).

Table of Contents

~~The following tables present quantitative information about Level 3 fair value measurements for financial instruments~~Assets and liabilities measured at fair value on a ~~non-recurring~~recurring basis:, including financial assets and liabilities for which the Bank has elected the fair value option, are summarized below. Information as of June 30, 2023 is presented net of any applicable ACL.









Range

Fair Value Measurements at

Fair

Valuation

Unobservable

(Weighted

June 30, 2023 Using:

June 30, 2022 (dollars in thousands)

Value

Technique

Inputs

Average)


Quoted Prices in

Significant




Collateral-dependent loans - residential real estate owner occupied

$
1,345

Sales comparison approach

Adjustments determined for differences between comparable sales

0% - 41% (11%)

Active Markets

Other

Significant

Collateral-dependent loans - commercial real estate

$
2,475

Sales comparison approach

Adjustments determined for differences between comparable sales

12% - 13% (12%)

for Identical

Observable

Unobservable

Total

Other real estate owned - commercial real estate

$
1,687

Sales comparison approach

Adjustments determined for differences between comparable sales

37% (37%)

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

$
174,323

$
233,034

$
—

$
407,357

Private label mortgage-backed security

—

—

1,988

1,988

Mortgage-backed securities - residential

—

166,287

—

166,287

Collateralized mortgage obligations

—

22,747

—

22,747

Corporate bonds

—

2,025

—

2,025

Trust preferred security

—

—

3,746

3,746

Total available-for-sale debt securities

$
174,323

$
424,093

$
5,734

$
604,150

Equity securities with readily determinable fair value:

Freddie Mac preferred stock

$
—

$
122

$
—

$
122

Total equity securities with readily determinable fair value

$
—

$
122

$
—

$
122

Mortgage loans held for sale

$
—

$
4,038

$
—

$
4,038

Consumer loans held for sale

—

—

5,757

5,757

Rate lock loan commitments

—

189

—

189

Interest rate swap agreements

—

7,829

—

7,829

Financial liabilities:

Mandatory forward contracts

$
—

$
61

$
—

$
61

Interest rate swap agreements

—

7,829

—

7,829









Range

Fair

Valuation

Unobservable

(Weighted
December 31, 2021 (dollars in thousands)

Value

Technique

Inputs

Average)

Collateral-dependent loans - residential real estate owner occupied

$
1,626

Sales comparison approach

Adjustments determined for differences between comparable sales

0% - 51% (10%)

Collateral-dependent loans - commercial real estate

$
2,841

Sales comparison approach

Adjustments determined for differences between comparable sales

12% - 13% (12%)

Collateral-dependent loans - home equity

$
378

Sales comparison approach

Adjustments determined for differences between comparable sales

2%-4% (3%)

Other real estate owned - commercial real estate

$
1,792

Sales comparison approach

Adjustments determined for differences between comparable sales

33% (33%)

Fair Value Measurements at

December 31, 2022 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

$
193,385

$
217,756

$
—

$
411,141

Private label mortgage-backed security

—

—

2,127

2,127

Mortgage-backed securities - residential

—

171,873

—

171,873

Collateralized mortgage obligations

—

21,368

—

21,368

Corporate bonds

—

10,001

—

10,001

Trust preferred security

—

—

3,855

3,855

Total available-for-sale debt securities

$
193,385

$
420,998

$
5,982

$
620,365

Equity securities with readily determinable fair value:

Freddie Mac preferred stock

$
—

$
111

$
—

$
111

Total equity securities with readily determinable fair value

$
—

$
111

$
—

$
111

Mortgage loans held for sale

$
—

$
1,302

$
—

$
1,302

Consumer loans held for sale

—

—

4,706

4,706

Consumer loans held for investment

—

—

2

2

Rate lock loan commitments

—

2

—

2

Interest rate swap agreements

—

8,128

—

8,128

Financial liabilities:

Mandatory forward contracts

$
—

$
67

$
—

$
67

Interest rate swap agreements

—

8,128

—

8,128

5347

Table of Contents

All transfers between levels are generally recognized at the end of each quarter. There were no transfers into or out of Level 1, 2, or 3 assets during the three months and six months ended June 30, 2023 and 2022.

Private Label Mortgage-Backed Security

The following table presents a reconciliation of the Bank’s private label mortgage-backed security measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


Three Months Ended

Six Months Ended

June 30,

June 30,
(in thousands)

2023

2022

2023

2022

Balance, beginning of period

$
2,010

$
2,602

$
2,127

$
2,731
Total gains or losses included in earnings:

Net change in unrealized gain

26

(15)

32

9
Principal paydowns

(48)

(109)

(171)

(262)
Balance, end of period

$
1,988

$
2,478

$
1,988

$
2,478

The fair value of the Bank’s single private label mortgage-backed security 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 mortgage-backed security 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 mortgage-backed security follows:


Fair

Valuation




June 30, 2023 (dollars in thousands)

Value

Technique

Unobservable Inputs

Range

Private label mortgage-backed security

$
1,988

Discounted cash flow

(1) Constant prepayment rate

2.7% - 4.5%

(2) Probability of default

1.8% - 9.3%

(3) Loss severity

12% - 35%


Fair

Valuation




December 31, 2022 (dollars in thousands)

Value

Technique

Unobservable Inputs

Range

Private label mortgage-backed security

$
2,127

Discounted cash flow

(1) Constant prepayment rate

4.5% - 4.7%

(2) Probability of default

1.8% - 9.3%

(3) Loss severity

25% - 35%

Table of Contents

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,

(in thousands)

2023

2022

2023

2022

Balance, beginning of period

$
4,001

$
3,725

$
3,855

$
3,847

Total gains or losses included in earnings:

Discount accretion

15

14

29

28

Net change in unrealized gain

(270)

85

(138)

(51)

Balance, end of period

$
3,746

$
3,824

$
3,746

$
3,824

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.

Collateral-Dependent Loans

The following table presents the amortized cost basis of collateral-dependent loans by class of loans:

June 30, 2023

December 31, 2022

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

$
17,178

$
—

$
18,057

$
—
Nonowner occupied

72

—

150

—
Commercial real estate

959

—

1,041

—
Construction & land development

—

—

—

—
Commercial & industrial

—

—

—

—
Lease financing receivables

—

—

—

—
Aircraft

—

—

—

210
Home equity

1,130

—

967

—
Consumer

—

30

—

26
Total Traditional Banking

$
19,339

$
30

$
20,215

$
236

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 10% to 13%, with those percentages based on annual studies performed by the Company.

Loan Modification Disclosures Pursuant to ASU 2022-02

The following table shows the amortized cost of loans and leases as of June 30, 2023 that were both experiencing financial difficulty and modified during the three months ended June 30, 2023, segregated by portfolio segment and type of modification. The following tables shows the amortized cost of loans and leases modified by type.

Amortized Cost Basis of Modified Financing Receivables
June 30, 2023 (dollars in thousands)

Loans (#)

Rate Reduction ($)

Loans (#)

Term Extension ($)

Loans (#)

Principal Deferral ($)

Residential real estate:

Owner occupied

—

$
—

—

$
—

6

$
547
Nonowner occupied

—

—

—

—

—

—
Home equity

—

—

—

—

4

143
Republic Processing Group

—

—

—

—

423

91
Total Loan Modifications

—

$
—

—

$
—

433

$
781

Total Loan Modification by Type

Accruing

Nonaccruing
June 30, 2023 (dollars in thousands)

Loans (#)

Recorded investment ($)

Loans (#)

Recorded investment ($)

Term extension

—

$
—

—

$
—
Principal deferral

423

91

10

690
Total Loan Modifications

423

$
91

10

$
690

The following table shows the amortized cost of loans and leases as of June 30, 2023 that were both experiencing financial difficulty and modified during the six months ended June 30, 2023, segregated by portfolio segment and type of modification. The following tables shows the amortized cost of loans and leases modified by type.

Amortized Cost Basis of Modified Financing Receivables
June 30, 2023 (dollars in thousands)

Loans (#)

Rate Reduction ($)

Loans (#)

Term Extension ($)

Loans (#)

Principal Deferral ($)

Residential real estate:

Owner occupied

—

$
—

2

$
261

10

$
852
Nonowner occupied

—

—

—

—

—

—
Home equity

—

—

—

—

5

214
Republic Processing Group

—

—

—

—

424

93
Total Loan Modifications

—

$
—

2

$
261

439

$
1,159

Total Loan Modification by Type

Accruing

Nonaccruing
June 30, 2023 (dollars in thousands)

Loans (#)

Recorded investment ($)

Loans (#)

Recorded investment ($)

Term extension

—

$
—

2

$
261
Principal deferral

424

93

15

1,066
Total Loan Modifications

424

$
93

17

$
1,327

The following tables show the percentage of the amortized cost of loans and leases that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financing receivable.

Accruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

% of Total

% of Total

Amortized

of Financing

Amortized

of Financing
(dollars in thousands)

Loans (#)

Cost Basis ($)

Receivable

Loans

Cost Basis

Receivable

Republic Processing Group

423

$
91

0.08
%

424

93

0.08

Total Accruing Loan Modifications

423

$
91

NM

424

$
93

0.00

Nonaccruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

% of Total

% of Total

Amortized

of Financing

Amortized

of Financing
(dollars in thousands)

Loans (#)

Cost Basis ($)

Receivable

Loans

Cost Basis

Receivable

Residential real estate:

Owner occupied

6

$
547

0.05
%

12

$
1,113

0.10
%
Home equity

4

143

0.06

5

214

0.08

Total Nonaccruing Loan Modifications

10

$
690

0.01
%

17

$
1,327

0.03

There were no commitments to lend additional amounts to the borrowers included in the previous table.

The Company closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table shows the performance of such loans and leases that have been modified during the three and six months ended June 30, 2023.

Accruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

30-89 Days

90+ Days

30-89 Days

90+ Days
(in thousands)

Current

Past Due

Past Due

Current

Past Due

Past Due

Republic Processing Group

$
91

$
—

$
—

93

—

—
Total Accruing Loan Modifications

$
91

$
—

$
—

$
93

$
—

$
—

Nonaccruing Loan Modifications

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

30-89 Days

90+ Days

30-89 Days

90+ Days
(in thousands)

Current

Past Due

Past Due

Current

Past Due

Past Due

Residential real estate:

Owner occupied

$
379

$
—

$
168

$
945

$
—

$
168
Nonowner occupied

—

—

—

—

—

—
Home equity

143

—

—

214

—

—
Total Nonaccruing Loan Modifications

$
522

$
—

$
168

$
1,159

$
—

$
168

There were two loans and leases with a total balance of $168,000 that had a payment default during the three months and six months ended June 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

Upon the Company’s determination that a modified loan or lease has subsequently been deemed uncollectible, the loan or lease is written off. Therefore, the amortized cost of the loan is reduced by the uncollectible amount and the allowance for loan and lease losses is adjusted by the same amount.

Table of Contents

The following tables present a roll-forward of the ACLC for the three and six months ended June 30, 2023 and 2022:

ACLC Roll-forward

Three Months Ended

2023

2022

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

$
198

$
(53)

$
—

$
—

$
145

$
130

$
32

$
—

$
—

$
162
Unused home equity lines of credit

341

12

—

—

353

256

21

—

—

277
Unused construction lines of credit

547

86

—

—

633

—

—

—

—

—
Unused loan commitments - other

374

25

—

—

399

654

7

—

—

661

Total

$
1,460

$
70

$
—

$
—

$
1,530

$
1,040

$
60

$
—

$
—

$
1,100

ACLC Roll-forward

Six Months Ended June 30,

2023

2022

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

$
190

$
(45)

$
—

$
—

$
145

$
154

$
8

$
—

$
—

$
162
Unused home equity lines of credit

332

21

—

—

353

247

30

—

—

277
Unused construction lines of credit

384

249

—

—

633

—

—

—

—

—
Unused loan commitments - other

344

55

—

—

399

651

10

—

—

661

Total

$
1,250

$
280

$
—

$
—

$
1,530

$
1,052

$
48

$
—

$
—

$
1,100

The Company increased its ACLC during the three and six months ended June 30, 2023 based primarily on a change in the loan mix to loans with higher reserve rates.

Table of Contents

11.FAIR VALUE

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 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.

The Bank used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

The Bank’s U.S. Treasury securities are based on quoted market prices (Level 1 inputs) and considered highly liquid.

See in this section of the filing under Footnote 3 “Investment Securities” for additional discussion regarding the Bank’s private label mortgage-backed security.

The fair value of the Company’s Freddie Mac preferred stock is determined by matrix pricing, as described above (Level 2 inputs).

Table of Contents

The following table presents quantitative information about recurring Level 3 fair value measurement inputs for installment loans:


Fair

Valuation




June 30, 2023 (dollars in thousands)

Value

Technique

Unobservable Inputs

Rate

Consumer loans held for sale

$
5,757

Contract Terms

(1) Net Premium

0.15%

(2) Discounted Sales

10.00%


Fair

Valuation




December 31, 2022 (dollars in thousands)

Value

Technique

Unobservable Inputs

Rate

Consumer loans held for sale

$
4,706

Contract Terms

(1) Net Premium

0.15%

(2) Discounted Sales

10.00%

The aggregate fair value, contractual balance, and unrealized gain on consumer loans held for sale, at fair value, were as follows:

(in thousands)

June 30, 2023

December 31, 2022

Aggregate fair value

$
5,757

$
4,706

Contractual balance

5,791

4,734

Unrealized loss

(34)

(28)

The total amount of net gains from changes in fair value included in earnings for consumer loans held for sale, at fair value, are presented in the following table:


Three Months Ended

Six Months Ended

June 30,

June 30,

(in thousands)

2023

2022

2023

2022

Interest income

$
949

$
2,990

$
1,714

$
5,880

Change in fair value

(9)

(181)

(6)

(218)

Total included in earnings

$
940

$
2,809

$
1,708

$
5,662

Assets measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements at

June 30, 2023 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

$
—

$
—

$
1,198

$
1,198

Commercial real estate

—

—

851

851

Total collateral-dependent loans*

$
—

$
—

$
2,049

$
2,049

Other real estate owned:

Commercial real estate

$
—

$
—

$
1,478

$
1,478

Total other real estate owned

$
—

$
—

$
1,478

$
1,478

*
The difference between the carrying value and the fair value of collateral-dependent loans measured at fair value is reconciled in a subsequent table of this Footnote.

Table of Contents

Fair Value Measurements at

December 31, 2022 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

$
—

$
—

$
1,456

$
1,456
Commercial real estate

—

—

906

906
Total collateral-dependent loans*

$
—

$
—

$
2,362

$
2,362

Other real estate owned:

Residential real estate

$
—

$
—

$
1,581

$
1,581
Total other real estate owned

$
—

$
—

$
1,581

$
1,581

*
The difference between the carrying value and the fair value of collateral-dependent loans measured at fair value is reconciled in a subsequent table of this Footnote.

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, 2023 (dollars in thousands)

Value

Technique

Inputs

Average)

Collateral-dependent loans - residential real estate owner occupied

$
1,198

Sales comparison approach

Adjustments determined for differences between comparable sales

0% - 35% (11.1%)

Collateral-dependent loans - commercial real estate

$
851

Sales comparison approach

Adjustments determined for differences between comparable sales

16% (16%)

Other real estate owned - commercial real estate

$
1,478

Sales comparison approach

Adjustments determined for differences between comparable sales

39% (39%)









Range

Fair

Valuation

Unobservable

(Weighted
December 31, 2022 (dollars in thousands)

Value

Technique

Inputs

Average)

Collateral-dependent loans - residential real estate owner occupied

$
1,456

Sales comparison approach

Adjustments determined for differences between comparable sales

0% - 41% (11%)

Collateral-dependent loans - commercial real estate

$
906

Sales comparison approach

Adjustments determined for differences between comparable sales

16% (16%)

Other real estate owned - commercial real estate

$
1,581

Sales comparison approach

Adjustments determined for differences between comparable sales

39% (39%)

Table of Contents

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~~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.

~~Collateral-dependent~~The Provision on collateral-dependent loans ~~are as~~ follows:

(in thousands)

June 30, 2022

December 31, 2021


Carrying amount of loans measured at fair value

$
4,024

$
4,928

Estimated selling costs considered in carrying amount

714

842

Valuation allowance

(918)

(925)

Total fair value

$
3,820

$
4,845


Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(in thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Provision on collateral-dependent loans

$
(7)

$
45

$
(4)

$
45

$
—

$
(7)

$
(14)

$
(4)

Other Real Estate Owned

Details of other real estate owned carrying value and write downs follows:





(in thousands)

June 30, 2022

December 31, 2021


June 30, 2023

December 31, 2022


Other real estate owned carried at fair value

$
1,687

$
1,792

$
1,478

$
1,581

Other real estate owned carried at cost

—

—

Total carrying value of other real estate owned

$
1,687

$
1,792

$
1,478

$
1,581

Other real estate owned write-downs during the years ended

$
105

$
211


Three Months Ended

Six Months Ended


Three Months Ended

Six Months Ended


June 30,

June 30,

June 30,

June 30,

(in thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Other real estate owned write-downs during the period

$
54

$
52

$
105

$
105

$
52

$
54

$
105

$
105

5452

Table of Contents

The carrying amounts and estimated exit price fair values of all financial instruments follow:

Fair Value Measurements at

Fair Value Measurements at

June 30, 2022:

June 30, 2023:










Total











Total

Carrying

Fair

Carrying

Fair

(in thousands)

Value

Level 1

Level 2

Level 3

Value

Value

Level 1

Level 2

Level 3

Value

Assets:

Cash and cash equivalents

$
795,143

$
795,143

$
—

$
—

$
795,143

$
241,967

$
241,967

$
—

$
—

$
241,967

Available-for-sale debt securities

622,145

230,771

385,072

6,302

622,145

604,150

174,323

424,093

5,734

604,150

Held-to-maturity debt securities

32,962

—

32,978

—

32,978

101,966

—

101,190

—

101,190

Equity securities with readily determinable fair values

189

—

189

—

189

122

—

122

—

122

Mortgage loans held for sale, at fair value

8,491

—

8,491

—

8,491

4,038

—

4,038

—

4,038

Consumer loans held for sale, at fair value

17,459

—

—

17,459

17,459

5,757

—

—

5,757

5,757

Consumer loans held for sale, at the lower of cost or fair value

13,777

—

—

13,777

13,777

15,787

—

—

15,787

15,787

Loans, net

4,297,784

—

—

4,165,381

4,165,381

4,980,940

—

—

4,725,917

4,725,917

Federal Home Loan Bank stock

10,311

—

—

—

NA

29,395

—

—

—

NA

Accrued interest receivable

9,872

—

9,872

—

9,872

16,157

—

2,624

13,533

16,157

Mortgage servicing rights

9,407

—

16,568

—

16,568

7,995

—

16,955

—

16,955

Rate lock loan commitments

220

—

220

—

220

189

—

189

—

189

Mandatory forward contracts

359

—

359

—

359

Interest rate swap agreements

4,501

—

4,501

—

4,501

7,829

—

7,829

—

7,829

Liabilities:

Noninterest-bearing deposits

$
2,094,436

$
—

$
2,094,436

$
—

$
2,094,436

$
1,854,907

$
—

$
1,854,907

$
—

$
1,854,907

Transaction deposits

2,499,250

—

2,499,250

—

2,499,250

2,489,853

—

2,489,853

—

2,489,853

Time deposits

233,843

—

230,849

—

230,849

384,521

—

378,663

—

378,663

Securities sold under agreements to repurchase and other short-term borrowings

303,315

—

303,315

—

303,315

92,450

—

92,450

—

92,450

Federal Home Loan Bank advances

20,000

—

21,766

—

21,766

520,000

—

516,307

—

516,307

Accrued interest payable

162

—

162

—

162

868

—

868

—

868

Rate lock loan commitments

189

—

189

—

189

Mandatory forward contracts

61

—

61

—

61

Interest rate swap agreements

4,501

—

4,501

—

4,501

7,829

—

7,829

—

7,829

5553

Table of Contents

Fair Value Measurements at

Fair Value Measurements at

December 31, 2021:

December 31, 2022:










Total










Total

Carrying

Fair

Carrying

Fair

(in thousands)

Value

Level 1

Level 2

Level 3

Value

Value

Level 1

Level 2

Level 3

Value

Assets:

Cash and cash equivalents

$
756,971

$
756,971

$
—

$
—

$
756,971

$
313,689

$
313,689

$
—

$
—

$
313,689

Available-for-sale debt securities

495,126

70,112

418,436

6,578

495,126

620,365

193,385

420,998

5,982

620,365

Held-to-maturity debt securities

44,299

—

44,764

—

44,764

87,386

—

87,357

—

87,357

Equity securities with readily determinable fair values

2,620

2,450

170

—

2,620

111

—

111

—

111

Mortgage loans held for sale, at fair value

29,393

—

29,393

—

29,393

1,302

—

1,302

—

1,302

Consumer loans held for sale, at fair value

19,747

—

—

19,747

19,747

4,706

—

—

4,706

4,706

Consumer loans held for sale, at the lower of cost or fair value

2,937

—

—

2,937

2,937

13,169

—

—

13,169

13,169

Loans, net

4,431,985

—

—

4,445,244

4,445,244

4,445,389

—

—

4,276,423

4,276,423

Federal Home Loan Bank stock

10,311

—

—

—

NA

9,146

—

—

—

NA

Accrued interest receivable

9,877

—

9,877

—

9,877

13,572

—

2,462

11,110

13,572

Mortgage servicing rights

9,196

—

11,540

—

11,540

8,769

—

17,592

—

17,592

Rate lock loan commitments

1,404

—

1,404

—

1,404

2

—

2

—

2

Mandatory forward contracts

66

—

66

—

66

Interest rate swap agreements

5,786

—

5,786

—

5,786

8,128

—

8,128

—

8,128

Liabilities:

Noninterest-bearing deposits

$
1,990,781

$
—

$
1,990,781

$
—

$
1,990,781

$
1,908,768

$
—

$
1,908,768

$
—

$
1,908,768

Transaction deposits

2,553,423

—

2,553,423

—

2,553,423

2,398,853

—

2,398,853

—

2,398,853

Time deposits

296,214

—

298,236

—

298,236

230,224

—

223,912

—

223,912

Securities sold under agreements to repurchase and other short-term borrowings

290,967

—

290,967

—

290,967

216,956

—

216,956

—

216,956

Federal Home Loan Bank advances

25,000

—

25,000

—

25,000

95,000

—

93,044

—

93,044

Accrued interest payable

159

—

159

—

159

239

—

239

—

239

Mandatory forward contracts

67

—

67

—

67

Interest rate swap agreements

5,786

—

5,786

—

5,786

8,128

—

8,128

—

8,128

5654

Table of Contents

~~11.~~12. MORTGAGE BANKING ACTIVITIES

Mortgage Banking activities primarily include residential mortgage originations and servicing.

Activity for mortgage loans held for sale, at fair value, was as follows:


Three Months Ended

Six Months Ended


Three Months Ended

Six Months Ended


June 30,

June 30,

June 30,

June 30,

(in thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Balance, beginning of period

$
13,302

$
63,636

$
29,393

$
46,867

$
1,034

$
13,302

$
1,302

$
29,393

Origination of mortgage loans held for sale

61,489

141,177

162,150

354,764

13,948

61,489

29,890

162,150

Proceeds from the sale of mortgage loans held for sale

(67,759)

(176,424)

(186,971)

(380,239)

(11,483)

(67,759)

(28,113)

(186,971)

Net gain on sale of mortgage loans held for sale

1,459

4,012

3,919

11,009

539

1,459

959

3,919

Balance, end of period

$
8,491

$
32,401

$
8,491

$
32,401

$
4,038

$
8,491

$
4,038

$
8,491

The following table presents the components of Mortgage Banking income:


Three Months Ended

Six Months Ended


Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(in thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Net gain realized on sale of mortgage loans held for sale

$
2,674

$
5,711

$
5,407

$
13,756

$
357

$
2,674

$
605

$
5,407

Net change in fair value recognized on loans held for sale

109

(143)

(597)

(1,154)

47

109

39

(597)

Net change in fair value recognized on rate lock loan commitments

(222)

299

(1,184)

(2,338)

93

(222)

187

(1,184)

Net change in fair value recognized on forward contracts

(1,102)

(1,855)

293

745

42

(1,102)

128

293

Net gain recognized

1,459

4,012

3,919

11,009

539

1,459

959

3,919

Loan servicing income

884

808

1,749

1,601

852

884

1,722

1,749

Amortization of mortgage servicing rights

(580)

(738)

(1,248)

(1,735)

(484)

(580)

(974)

(1,248)

Change in mortgage servicing rights valuation allowance

—

100

—

500

—

—

—

—

Net servicing income recognized

304

170

501

366

368

304

748

501

Total Mortgage Banking income

$
1,763

$
4,182

$
4,420

$
11,375

$
907

$
1,763

$
1,707

$
4,420

Activity for capitalized mortgage servicing rights was as follows:


Three Months Ended

Six Months Ended


Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,
(in thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Balance, beginning of period

$
9,502

$
7,711

$
9,196

$
7,095

$
8,406

$
9,502

$
8,769

$
9,196
Additions

485

1,262

1,459

2,475

73

485

200

1,459
Amortized to expense

(580)

(738)

(1,248)

(1,735)

(484)

(580)

(974)

(1,248)
Change in valuation allowance

—

100

—

500

—

—

—

—
Balance, end of period

$
9,407

$
8,335

$
9,407

$
8,335

$
7,995

$
9,407

$
7,995

$
9,407

Activity in the valuation allowance for capitalized mortgage servicing rights follows:


Three Months Ended

Six Months Ended


Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(in thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Beginning valuation allowance

$
0

$
100

$
0

$
500

$
—

$
—

$
—

$
—

Charge during the period

0

(100)

0

(500)

—

—

—

—

Ending valuation allowance

$
0

$
0

$
0

$
0

$
—

$
—

$
—

$
—

5755

Table of Contents

Other information relating to mortgage servicing rights follows:

(dollars in thousands)

June 30, 2022


December 31, 2021


June 30, 2023


December 31, 2022

Fair value of mortgage servicing rights portfolio

$
16,568

$
11,540

$
16,955

$
17,145

Monthly weighted average prepayment rate of unpaid principal balance*

128
%

208
%

121
%

127
%

Discount rate

10.17
%

10.15
%

10.29
%

10.21
%

Weighted average foreclosure rate

0.15
%

0.19
%

0.07
%

0.10
%

Weighted average life in years

7.55

5.93

7.68

7.54

*
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 held for sale. 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 90 days from the date of issuance. Notional amounts are amounts on which calculations and payments are based, but which do not represent credit exposure, as credit exposure is limited to the amounts required to be received or paid.

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 held for sale and rate lock loan commitments. As market interest rates fluctuate, the fair value of mortgage loans held for sale 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.~~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 held for sale and rate lock commitments. The objective of this activity is to minimize the exposure to losses on rate loan lock ~~loan~~ commitments and loans held for sale 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 held for sale and mortgage banking derivatives as of the period ends presented:

June 30, 2022

December 31, 2021

June 30, 2023

December 31, 2022

Notional

Notional

Notional

Notional

(in thousands)

Amount

Fair Value

Amount

Fair Value

Amount

Fair Value

Amount

Fair Value

Included in Mortgage loans held for sale:

Mortgage loans held for sale, at fair value

$
8,363

$
8,491

$
28,668

$
29,393

$
3,961

$
4,038

$
1,265

$
1,302

Included in other assets:

Rate lock loan commitments

$
28,072

$
220

$
56,736

$
1,404

$
12,896

$
189

$
4,118

$
2

Mandatory forward contracts

29,812

359

70,812

66

—

—

—

—

Included in other liabilities:

Mandatory forward contracts

10,057

61

4,009

67

5856

Table of Contents

~~12.~~13. INTEREST RATE SWAPS

Non-hedge Interest Rate Swaps

The Bank enters into interest rate swaps to facilitate client transactions and meet their financing needs. Upon entering into these instruments, ~~to meet client needs,~~ 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, 2022

December 31, 2021


June 30, 2023

December 31, 2022

Notional

Notional

Notional

Notional

(in thousands)

Bank Position

Amount

Fair Value

Amount

Fair Value


Bank Position

Amount

Fair Value

Amount

Fair Value

Interest rate swaps with Bank clients - Assets

Pay variable/receive fixed

$
22,009

$
595

$
107,502

$
5,786

Pay variable/receive fixed

$
42,932

$
1,224

$
40,032

$
1,386

Interest rate swaps with Bank clients - Liabilities

Pay variable/receive fixed

93,757

(4,501)

16,423

(298)

Pay variable/receive fixed

100,126

(6,605)

91,636

(6,742)

Interest rate swaps with Bank clients - Total

Pay variable/receive fixed

$
115,766

$
(3,906)

$
123,925

$
5,488

Pay variable/receive fixed

$
143,058

$
(5,381)

$
131,668

$
(5,356)

Offsetting interest rate swaps with institutional swap dealer

Pay fixed/receive variable

115,766

3,906

123,925

(5,488)

Offsetting interest rate swaps with institutional swap dealer - Assets

Pay fixed/receive variable

100,126

6,605

91,636

6,742

Offsetting interest rate swaps with institutional swap dealer - Liabilities

Pay fixed/receive variable

42,932

(1,224)

40,032

(1,386)

Offsetting interest rate swaps with institutional swap dealer - Total

Pay fixed/receive variable

$
143,058

$
5,381

$
131,668

$
5,356

Total

$
231,532

$
—

$
247,850

$
—

$
286,116

$
—

$
263,336

$
—

The Bank is required to pledge securities as collateral when the Bank is in a net loss position for all swaps with dealer counterparties when such net loss positions exceed $250,000. The fair value of cash or investment securities pledged as collateral by the Bank to cover such net loss positions totaled $0$4.9 million and ~~$6.8 million~~$560,000 as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

5957

Table of Contents

~~13.~~14. EARNINGS PER SHARE

The Company calculates earnings per share 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 earnings per share between the two classes of common stock results from the 10% per share cash dividend premium paid on Class A Common Stock over that paid on Class B Common Stock.

A reconciliation of the combined Class A and Class B Common Stock numerators and denominators of the earnings per share and diluted earnings per share computations is presented below:



Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,
(in thousands, except per share data)



2022

2021

2022

2021


2023

2022

2023

2022

Net income

$
23,901

$
23,922

$
51,827

$
49,975

$
21,052

$
24,347

$
49,144

$
52,697
Dividends declared on Common Stock:

Class A Shares

(6,047)

(5,680)

(12,128)

(11,423)

(6,537)

(6,047)

(13,118)

(12,128)
Class B Shares

(670)

(608)

(1,341)

(1,224)

(733)

(670)

(1,467)

(1,341)
Undistributed net income for basic earnings per share

17,184

17,634

38,358

37,328

13,782

17,630

34,559

39,228
Weighted average potential dividends on Class A shares upon exercise of dilutive options

(21)

(17)

(49)

(40)

(8)

(21)

(39)

(49)
Undistributed net income for diluted earnings per share

$
17,163

$
17,617

$
38,309

$
37,288

$
13,774

$
17,609

$
34,520

$
39,179

Weighted average shares outstanding:

Class A Shares

17,946

18,712

17,968

18,761

17,726

17,946

17,750

17,968
Class B Shares

2,161

2,182

2,163

2,190

2,158

2,161

2,159

2,163
Effect of dilutive securities on Class A Shares outstanding

62

55

71

65

22

62

52

71
Weighted average shares outstanding including dilutive securities

20,169

20,949

20,202

21,016

19,906

20,169

19,961

20,202

Basic earnings per share:

Class A Common Stock:

Per share dividends distributed

$
0.34

$
0.31

$
0.68

$
0.62

$
0.37

$
0.34

$
0.75

$
0.68
Undistributed earnings per share*

0.86

0.85

1.92

1.80

0.70

0.89

1.75

1.97
Total basic earnings per share - Class A Common Stock

$
1.20

$
1.16

$
2.60

$
2.42

$
1.07

$
1.23

$
2.50

$
2.65

Class B Common Stock:

Per share dividends distributed

$
0.31

$
0.28

$
0.62

$
0.56

$
0.34

$
0.31

$
0.68

$
0.62
Undistributed earnings per share*

0.78

0.77

1.75

1.64

0.64

0.81

1.59

1.79
Total basic earnings per share - Class B Common Stock

$
1.09

$
1.05

$
2.37

$
2.20

$
0.98

$
1.12

$
2.27

$
2.41

Diluted earnings per share:

Class A Common Stock:

Per share dividends distributed

$
0.34

$
0.31

$
0.68

$
0.62

$
0.37

$
0.34

$
0.75

$
0.68
Undistributed earnings per share*

0.86

0.85

1.91

1.79

0.70

0.88

1.75

1.96
Total diluted earnings per share - Class A Common Stock

$
1.20

$
1.16

$
2.59

$
2.41

$
1.07

$
1.22

$
2.50

$
2.64

Class B Common Stock:

Per share dividends distributed

$
0.31

$
0.28

$
0.62

$
0.56

$
0.34

$
0.31

$
0.68

$
0.62
Undistributed earnings per share*

0.78

0.77

1.74

1.63

0.64

0.80

1.59

1.78
Total diluted earnings per share - Class B Common Stock

$
1.09

$
1.05

$
2.36

$
2.19

$
0.98

$
1.11

$
2.27

$
2.40
*
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 10% premium. The resulting pro-rated, undistributed net income for each class is then divided by the weighted average shares for each class.

Stock options excluded from the detailed earnings per share calculation because their impact was antidilutive are as follows:


Three Months Ended

Six Months Ended


Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,


2022

2021

2022

2021


2023

2022

2023

2022

Antidilutive stock options

187,000

149,000

186,000

169,000

245,148

187,000

245,898

186,000

Average antidilutive stock options

184,000

149,000

178,000

166,000

120,682

184,000

245,565

178,000

6058

Table of Contents

~~14.~~15. OTHER COMPREHENSIVE INCOME

OCI components and related tax effects were as follows:


Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(in thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Available-for-Sale Debt Securities:

Unrealized losses on AFS debt securities

$
(10,133)

$
(614)

$
(31,382)

$
(2,643)
Unrealized gain (loss) on AFS debt securities

$
(4,418)

$
(10,133)

$
787

$
(31,382)

Unrealized gain (loss) on AFS debt security for which a portion of OTTI has been recognized in earnings

(15)

34

9

49

28

(15)

33

9

Net losses

(10,148)

(580)

(31,373)

(2,594)
Tax effect

2,537

145

7,845

648
Net gains (losses)

(4,390)

(10,148)

820

(31,373)

Income tax benefit (expense) related to items of other comprehensive income

1,096

2,537

(209)

7,845

Net of tax

(7,611)

(435)

$
(23,528)

$
(1,946)

(3,294)

(7,611)

$
611

$
(23,528)

The following is a summary of the AOCI balances, net of tax:




2022





2023


(in thousands)

December 31, 2021

Change

June 30, 2022

December 31, 2022

Change

June 30, 2023

Unrealized gain (loss) on AFS debt securities

$
890

$
(23,535)

$
(22,645)

$
(32,934)

$
578

$
(32,356)

Unrealized gain on AFS debt security for which a portion of OTTI has been recognized in earnings

984

7

991

955

33

988

Total unrealized gain (loss)

$
1,874

$
(23,528)

$
(21,654)

$
(31,979)

$
611

$
(31,368)




2021





2022


(in thousands)

December 31, 2020

Change

June 30, 2021

December 31, 2021

Change

June 30, 2022

Unrealized gain on AFS debt securities

$
7,571

$
(1,982)

$
5,589

Unrealized gain (loss) on AFS debt securities

$
890

$
(23,535)

$
(22,645)

Unrealized gain on AFS debt security for which a portion of OTTI has been recognized in earnings

938

36

974

984

7

991

Total unrealized gain (loss)

$
8,509

$
(1,946)

$
6,563

$
1,874

$
(23,528)

$
(21,654)

6159

Table of Contents

~~15.~~16. 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, 2022

Three Months Ended June 30, 2023

Core Banking

Republic Processing Group

Core Banking

Republic Processing Group

Total

Tax

Republic

Total

Tax

Republic

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

(dollars in thousands)

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Net interest income (1)

$
39,158

$
3,886

$
153


$
43,197

$
1,638

$
6,397

$
8,035

$
51,232

$
48,682

$
2,642

$
61


$
51,385

$
4,010

$
9,134

$
13,144

$
64,529

Noninterest income:

Service charges on deposit accounts

3,355

12

—

3,367

(4)

—

(4)

3,363

3,516

11

—

3,527

—

—

—

3,527

Net refund transfer fees

—

—

—

—

3,950

—

3,950

3,950

—

—

—

—

4,479

—

4,479

4,479

Mortgage banking income (1)

—

—

1,763

1,763

—

—

—

1,763

—

—

907

907

—

—

—

907

Interchange fee income

3,389

—

—

3,389

72

—

72

3,461

3,375

—

—

3,375

44

—

44

3,419

Program fees (1)

—

—

—

—

736

3,149

3,885

3,885

—

—

—

—

728

3,011

3,739

3,739

Increase in cash surrender value of BOLI (1)

623

—

—

623

—

—

—

623

689

—

—

689

—

—

—

689

Death benefits in excess of cash surrender value of life insurance

1,728

—

—

1,728

—

—

—

1,728

Net losses on OREO

(52)

—

—

(52)

—

—

—

(52)

(52)

—

—

(52)

—

—

—

(52)

Legal settlement

—

—

—

—

13,000

—

13,000

13,000

—

—

—

—

—

—

—

—

Other

416

—

46

462

111

—

111

573

1,074

—

27

1,101

74

40

114

1,215

Total noninterest income

7,731

12

1,809

9,552

17,865

3,149

21,014

30,566

10,330

11

934

11,275

5,325

3,051

8,376

19,651

Total net revenue

$
46,889

$
3,898

$
1,962

$
52,749

$
19,503

$
9,546

$
29,049

$
81,798

$
59,012

$
2,653

$
995

$
62,660

$
9,335

$
12,185

$
21,520

$
84,180

Net-revenue concentration (2)

57
%

5
%

2
%

64
%

24
%

12
%

36
%

100
%

71
%

3
%

1
%

75
%

11
%

14
%

25
%

100
%

Three Months Ended June 30, 2021

Three Months Ended June 30, 2022

Core Banking

Republic Processing Group

Core Banking

Republic Processing Group

Total

Tax

Republic

Total

Tax

Republic

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

(dollars in thousands)

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Net interest income (1)

$
38,278

$
6,324

$
140


$
44,742

$
623

$
4,939

$
5,562

$
50,304

$
39,158

$
3,886

$
153


$
43,197

$
1,638

$
6,979

$
8,617

$
51,814

Noninterest income:

Service charges on deposit accounts

3,061

14

—

3,075

(4)

—

(4)

3,071

3,355

12

—

3,367

(4)

—

(4)

3,363

Net refund transfer fees

2

—

—

2

5,921

—

5,921

5,923

—

—

—

—

3,950

—

3,950

3,950

Mortgage banking income (1)

—

—

4,182

4,182

—

—

—

4,182

—

—

1,763

1,763

—

—

—

1,763

Interchange fee income

3,367

—

—

3,367

114

—

114

3,481

3,389

—

—

3,389

72

—

72

3,461

Program fees (1)

—

—

—

—

715

2,627

3,342

3,342

—

—

—

—

736

3,149

3,885

3,885

Increase in cash surrender value of BOLI (1)

600

—

—

600

—

—

—

600

623

—

—

623

—

—

—

623

Net losses on OREO

(44)

—

—

(44)

—

—

—

(44)

(52)

—

—

(52)

—

—

—

(52)

Legal settlement

—

—

—

—

13,000

—

13,000

13,000

Other

986

—

50

1,036

57

—

57

1,093

419

—

46

465

111

—

111

576

Total noninterest income

7,972

14

4,232

12,218

6,803

2,627

9,430

21,648

7,734

12

1,809

9,555

17,865

3,149

21,014

30,569

Total net revenue

$
46,250

$
6,338

$
4,372

$
56,960

$
7,426

$
7,566

$
14,992

$
71,952

$
46,892

$
3,898

$
1,962

$
52,752

$
19,503

$
10,128

$
29,631

$
82,383

Net-revenue concentration (2)

64
%

9
%

6
%

79
%

10
%

11
%

21
%

100
%

57
%

5
%

2
%

64
%

24
%

12
%

36
%

100
%

(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.

6260

Table of Contents

Six Months Ended June 30, 2022

Six Months Ended June 30, 2023

Core Banking

Republic Processing Group

Core Banking

Republic Processing Group

Total

Tax

Republic

Total

Tax

Republic

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

(dollars in thousands)

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Net interest income (1)

$
75,306

$
8,401

$
357


$
84,064

$
17,042

$
12,738

$
29,780

$
113,844

$
98,789

$
4,729

$
122


$
103,640

$
35,775

$
17,756

$
53,531

$
157,171

Noninterest income:

Service charges on deposit accounts

6,574

25

—

6,599

(10)

—

(10)

6,589

6,804

22

—

6,826

—

—

—

6,826

Net refund transfer fees

—

—

—

—

16,001

—

16,001

16,001

—

—

—

—

15,286

—

15,286

15,286

Mortgage banking income (1)

—

—

4,420

4,420

—

—

—

4,420

—

—

1,707

1,707

—

—

—

1,707

Interchange fee income

6,401

—

—

6,401

130

—

130

6,531

6,381

—

—

6,381

89

—

89

6,470

Program fees (1)

—

—

—

—

1,463

6,276

7,739

7,739

—

—

—

—

1,435

5,545

6,980

6,980

Increase in cash surrender value of BOLI (1)

1,235

—

—

1,235

—

—

—

1,235

1,324

—

—

1,324

—

—

—

1,324

Death benefits in excess of cash surrender value of life insurance (1)

1,728

—

—

1,728

—

—

—

1,728

Net losses on OREO

(105)

—

—

(105)

—

—

—

(105)

(105)

—

—

(105)

—

—

—

(105)

Contract termination fee

—

—

—

—

5,000

—

5,000

5,000

Legal settlement

—

—

—

—

13,000

—

13,000

13,000

Other

860

—

80

940

217

—

217

1,157

1,852

—

44

1,896

155

65

220

2,116

Total noninterest income

14,965

25

4,500

19,490

35,801

6,276

42,077

61,567

17,984

22

1,751

19,757

16,965

5,610

22,575

42,332

Total net revenue

$
90,271

$
8,426

$
4,857

$
103,554

$
52,843

$
19,014

$
71,857

$
175,411

$
116,773

$
4,751

$
1,873

$
123,397

$
52,740

$
23,366

$
76,106

$
199,503

Net-revenue concentration (2)

51
%

5
%

3
%

59
%

30
%

11
%

41
%

100
%

59
%

2
%

1
%

62
%

26
%

12
%

38
%

100
%

Six Months Ended June 30, 2021

Six Months Ended June 30, 2022

Core Banking

Republic Processing Group

Core Banking

Republic Processing Group

Total

Tax

Republic

Total

Tax

Republic

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

(dollars in thousands)

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Net interest income (1)

$
79,380

$
13,096

$
549


$
93,025

$
15,299

$
9,846

$
25,145

$
118,170

$
75,306

$
8,401

$
357


$
84,064

$
17,042

$
13,875

$
30,917

$
114,981

Noninterest income:

Service charges on deposit accounts

5,926

28

—

5,954

(10)

—

(10)

5,944

6,574

25

—

6,599

(10)

—

(10)

6,589

Net refund transfer fees

2

—

—

2

18,642

—

18,642

18,644

—

—

—

—

16,001

—

16,001

16,001

Mortgage banking income (1)

—

—

11,375

11,375

—

—

—

11,375

—

—

4,420

4,420

—

—

—

4,420

Interchange fee income

6,336

—

—

6,336

172

—

172

6,508

6,401

—

—

6,401

130

—

130

6,531

Program fees (1)

—

—

—

—

1,611

3,940

5,551

5,551

—

—

—

—

1,463

6,276

7,739

7,739

Increase in cash surrender value of BOLI (1)

990

—

—

990

—

—

—

990

1,235

—

—

1,235

—

—

—

1,235

Net losses on OREO

(55)

—

—

(55)

—

—

—

(55)

(105)

—

—

(105)

—

—

—

(105)

Contract termination fee

—

—

—

—

5,000

—

5,000

5,000

Legal settlement

—

—

—

—

13,000

—

13,000

13,000

Other

1,557

—

78

1,635

77

—

77

1,712

871

—

80

951

217

—

217

1,168

Total noninterest income

14,756

28

11,453

26,237

20,492

3,940

24,432

50,669

14,976

25

4,500

19,501

35,801

6,276

42,077

61,578

Total net revenue

$
94,136

$
13,124

$
12,002

$
119,262

$
35,791

$
13,786

$
49,577

$
168,839

$
90,282

$
8,426

$
4,857

$
103,565

$
52,843

$
20,151

$
72,994

$
176,559

Net-revenue concentration (2)

56
%

8
%

7
%

71
%

21
%

8
%

29
%

100
%

51
%

5
%

3
%

59
%

30
%

11
%

41
%

100
%

(3) This revenue is not subject to ASC 606.
(4) 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 United States, 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.

Table of Contents

RT fees generally receive first priority when applying fees against the taxpayer’s refund, with the Bank’s share of RT fees generally

~~Table of Contents~~

superior to the claims of other third-party service providers, including the Tax Providers. The remainder of the refund is disbursed to the taxpayer by a Bank check, ~~printed at a tax office,~~ 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 ~~fulfillment~~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 writedowns 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 writedowns taken by the Company during the property’s holding period are generally at least 10% per year but may be higher based on updated real estate appraisals or BPOs. Incremental expenditures to bring OREO to salable condition are generally expensed ~~as-incurred.~~as incurred.

Contract termination fee – During the first quarter of 2022, RB&T provided Green Dot a notice of termination for the May 2021 Purchase Agreement for the sale of substantially all of RB&T’s TRS assets and operations to Green Dot. As a result of this contract termination, Green Dot paid RB&T a contract termination fee of ~~$5.0~~$5.0 million during the same quarter.

Legal settlement – During the second quarter of 2022, Green Dot paid Republic Bank $13 million in settlement of a lawsuit.

6462

Table of Contents

~~16.~~17. 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.

The nature of segment operations and the primary drivers of net revenue by reportable segment are provided below:


Reportable Segment:	Nature of Operations:	Primary Drivers of Net Revenue:

Core Banking:

Traditional Banking	Provides traditional banking products to clients in its market footprint primarily via its network of banking centers and to clients outside of its market footprint primarily via its digital delivery channels.	Loans, investments, and deposits

Warehouse Lending	Provides short-term, revolving credit facilities to mortgage bankers across the United States.	Mortgage warehouse lines of credit

Mortgage Banking	Primarily originates, sells, and services long-term, single-family, first-lien residential real estate loans primarily to clients in the Bank's market footprint.	Loan sales and servicing

Republic Processing Group:

Tax Refund Solutions	TRS offers tax-related credit products and facilitates the receipt and payment of federal and state tax refunds through Refund Transfer products. The RPS division of TRS offers general-purpose reloadable cards. TRS and RPS products are primarily provided to clients outside of the Bank’s market footprint.	Loans, refund transfers, and prepaid cards.

Republic Credit Solutions	Offers consumer credit products. RCS products are primarily provided to clients outside of the Bank’s market footprint, with a substantial portion of RCS clients considered subprime or near-prime borrowers.	Unsecured, consumer loans

The accounting policies used for Republic’s reportable segments are generally the same as those described in the summary of significant accounting policies in the Company’s ~~2021~~2022 Annual Report on Form 10-K. Republic evaluates segment performance using operating income. The Company allocates goodwill to the Traditional Banking segment. Republic generally allocates income taxes based on income before income tax expense unless reasonable and specific segment allocations can be made. The Company makes transactions among reportable segments at carrying value.

6563

Table of Contents

Segment information follows:

Three Months Ended June 30, 2022

Three Months Ended June 30, 2023

Core Banking

Republic Processing Group

Core Banking

Republic Processing Group

Total

Tax

Republic

Total

Tax

Republic

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

(dollars in thousands)

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Net interest income

$
39,158

$
3,886

$
153


$
43,197

$
1,638

$
6,397

$
8,035

$
51,232

$
48,682

$
2,642

$
61


$
51,385

$
4,010

$
9,134

$
13,144

$
64,529

Provision for expected credit loss expense

146

(234)

—

(88)

360

3,433

3,793

3,705

1,860

202

—

2,062

(219)

4,296

4,077

6,139

Net refund transfer fees

—

—

—

—

3,950

—

3,950

3,950

—

—

—

—

4,479

—

4,479

4,479

Mortgage banking income

—

—

1,763

1,763

—

—

—

1,763

—

—

907

907

—

—

—

907

Program fees

—

—

—

—

736

3,149

3,885

3,885

—

—

—

—

728

3,011

3,739

3,739

Legal settlement

—

—

—

—

13,000

—

13,000

13,000

Other noninterest income

7,731

12

46

7,789

179

—

179

7,968

10,330

11

27

10,368

118

40

158

10,526

Total noninterest income

7,731

12

1,809

9,552

17,865

3,149

21,014

30,566

10,330

11

934

11,275

5,325

3,051

8,376

19,651

Total noninterest expense

38,314

1,035

2,832

42,181

3,533

1,939

5,472

47,653

42,153

1,008

2,322

45,483

3,143

2,907

6,050

51,533

Income (loss) before income tax expense

8,429

3,097

(870)

10,656

15,610

4,174

19,784

30,440

14,999

1,443

(1,327)

15,115

6,411

4,982

11,393

26,508

Income tax expense (benefit)

1,647

692

(191)

2,148

3,465

926

4,391

6,539

2,941

322

(292)

2,971

1,391

1,094

2,485

5,456

Net income (loss)

$
6,782

$
2,405

$
(679)

$
8,508

$
12,145

$
3,248

$
15,393

$
23,901

$
12,058

$
1,121

$
(1,035)

$
12,144

$
5,020

$
3,888

$
8,908

$
21,052

Period-end assets

$
4,997,734

$
596,031

$
22,342

$
5,616,107

$
382,156

$
114,213

$
496,369

$
6,112,476

$
5,271,050

$
540,106

$
16,147

$
5,827,303

$
415,428

$
127,048

$
542,476

$
6,369,779

Net interest margin

3.06
%

2.69
%

NM

3.02
%

NM

NM

NM

3.51
%

3.77
%

2.28
%

NM

3.65
%

NM

NM

NM

4.46
%

Net-revenue concentration*

57
%

5
%

2
%

64
%

24
%

12
%

36
%

100
%

71
%

3
%

1
%

75
%

11
%

14
%

25
%

100
%

Three Months Ended June 30, 2021

Three Months Ended June 30, 2022

Core Banking

Republic Processing Group

Core Banking

Republic Processing Group









Total


Tax

Republic












Total


Tax

Republic




Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

(dollars in thousands)

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Net interest income

$
38,278

$
6,324

$
140

$
44,742

$
623

$
4,939

$
5,562

$
50,304

$
39,158

$
3,886

$
153

$
43,197

$
1,638

$
6,979

$
8,617

$
51,814

Provision for expected credit loss expense

(77)

(65)

—

(142)

(5,773)

1,592

(4,181)

(4,323)

146

(234)

—

(88)

360

3,433

3,793

3,705

Net refund transfer fees

2

—

—

2

5,921

—

5,921

5,923

—

—

—

—

3,950

—

3,950

3,950

Mortgage banking income

—

—

4,182

4,182

—

—

—

4,182

—

—

1,763

1,763

—

—

—

1,763

Program fees

—

—

—

—

715

2,627

3,342

3,342

—

—

—

—

736

3,149

3,885

3,885

Legal settlement

—

—

—

—

13,000

—

13,000

13,000

Other noninterest income

7,970

14

50

8,034

167

—

167

8,201

7,734

12

46

7,792

179

—

179

7,971

Total noninterest income

7,972

14

4,232

12,218

6,803

2,627

9,430

21,648

7,734

12

1,809

9,555

17,865

3,149

21,014

30,569

Total noninterest expense

36,939

1,066

3,006

41,011

3,697

1,006

4,703

45,714

38,317

1,035

2,832

42,184

3,533

1,939

5,472

47,656

Income before income tax expense

9,388

5,337

1,366

16,091

9,502

4,968

14,470

30,561

8,429

3,097

(870)

10,656

15,610

4,756

20,366

31,022

Income tax expense

1,555

1,227

301

3,083

2,326

1,230

3,556

6,639

1,652

692

(191)

2,153

3,465

1,057

4,522

6,675

Net income

$
7,833

$
4,110

$
1,065

$
13,008

$
7,176

$
3,738

$
10,914

$
23,922

$
6,777

$
2,405

$
(679)

$
8,503

$
12,145

$
3,699

$
15,844

$
24,347

Period-end assets

$
4,774,765

$
840,083

$
46,816

$
5,661,664

$
389,999

$
131,647

$
521,646

$
6,183,310

$
4,997,734

$
596,031

$
22,342

$
5,616,107

$
382,156

$
114,213

$
496,369

$
6,112,476

Net interest margin

2.97
%

3.48
%

NM

3.03
%

NM

NM

NM

3.33
%

3.06
%

2.69
%

NM

3.02
%

NM

NM

NM

3.55
%

Net-revenue concentration*

64
%

9
%

6
%

79
%

10
%

11
%

21
%

100
%

57
%

5
%

2
%

64
%

24
%

12
%

36
%

100
%

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

6664

Table of Contents

Six Months Ended June 30, 2022

Six Months Ended June 30, 2023

Core Banking

Republic Processing Group

Core Banking

Republic Processing Group









Total


Tax

Republic












Total


Tax

Republic




Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

(dollars in thousands)

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Net interest income

$
75,306

$
8,401

$
357

$
84,064

$
17,042

$
12,738

$
29,780

$
113,844

$
98,789

$
4,729

$
122

$
103,640

$
35,775

$
17,756

$
53,531

$
157,171

Provision for expected credit loss expense

466

(635)

—

(169)

8,272

4,828

13,100

12,931

4,844

337

—

5,181

21,589

6,135

27,724

32,905

Net refund transfer fees

—

—

—

—

16,001

—

16,001

16,001

—

—

—

—

15,286

—

15,286

15,286

Mortgage banking income

—

—

4,420

4,420

—

—

—

4,420

—

—

1,707

1,707

—

—

—

1,707

Program fees

—

—

—

—

1,463

6,276

7,739

7,739

—

—

—

—

1,435

5,545

6,980

6,980

Contract termination fee

—

—

—

—

5,000

—

5,000

5,000

Legal settlement

—

—

—

—

13,000

—

13,000

13,000

Other noninterest income

14,965

25

80

15,070

337

—

337

15,407

17,984

22

44

18,050

244

65

309

18,359

Total noninterest income

14,965

25

4,500

19,490

35,801

6,276

42,077

61,567

17,984

22

1,751

19,757

16,965

5,610

22,575

42,332

Total noninterest expense

76,533

1,987

5,522

84,042

8,678

3,506

12,184

96,226

83,005

1,976

4,876

89,857

8,791

5,328

14,119

103,976

Income (loss) before income tax expense

13,272

7,074

(665)

19,681

35,893

10,680

46,573

66,254

28,924

2,438

(3,003)

28,359

22,360

11,903

34,263

62,622

Income tax expense (benefit)

2,119

1,596

(146)

3,569

8,371

2,487

10,858

14,427

6,023

545

(661)

5,907

4,932

2,639

7,571

13,478

Net income (loss)

$
11,153

$
5,478

$
(519)

$
16,112

$
27,522

$
8,193

$
35,715

$
51,827

$
22,901

$
1,893

$
(2,342)

$
22,452

$
17,428

$
9,264

$
26,692

$
49,144

Period-end assets

$
4,997,734

$
596,031

$
22,342

$
5,616,107

$
382,156

$
114,213

$
496,369

$
6,112,476

$
5,271,050

$
540,106

$
16,147

$
5,827,303

$
415,428

$
127,048

$
542,476

$
6,369,779

Net interest margin

2.98
%

2.89
%

NM

2.97
%

NM

NM

NM

3.90
%

3.92
%

2.39
%

NM

3.81
%

NM

NM

NM

5.48
%

Net-revenue concentration*

51
%

5
%

3
%

59
%

30
%

11
%

41
%

100
%

59
%

2
%

1
%

62
%

26
%

12
%

38
%

100
%

Six Months Ended June 30, 2021

Six Months Ended June 30, 2022

Core Banking

Republic Processing Group

Core Banking

Republic Processing Group









Total


Tax

Republic












Total


Tax

Republic




Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

Traditional

Warehouse

Mortgage

Core

Refund

Credit

Total

Total

(dollars in thousands)

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Banking

Lending

Banking

Banking

Solutions

Solutions

RPG

Company

Net interest income

$
79,380

$
13,096

$
549

$
93,025

$
15,299

$
9,846

$
25,145

$
118,170

$
75,306

$
8,401

$
357

$
84,064

$
17,042

$
13,875

$
30,917

$
114,981

Provision for expected credit loss expense

(82)

(307)

—

(389)

10,111

1,217

11,328

10,939

466

(635)

—

(169)

8,272

4,828

13,100

12,931

Net refund transfer fees

2

—

—

2

18,642

—

18,642

18,644

—

—

—

—

16,001

—

16,001

16,001

Mortgage banking income

—

—

11,375

11,375

—

—

—

11,375

—

—

4,420

4,420

—

—

—

4,420

Program fees

—

—

—

—

1,611

3,940

5,551

5,551

—

—

—

—

1,463

6,276

7,739

7,739

Contract termination fee

—

—

—

—

5,000

—

5,000

5,000

Legal settlement

—

—

—

—

13,000

—

13,000

13,000

Other noninterest income

14,754

28

78

14,860

239

—

239

15,099

14,976

25

80

15,081

337

—

337

15,418

Total noninterest income

14,756

28

11,453

26,237

20,492

3,940

24,432

50,669

14,976

25

4,500

19,501

35,801

6,276

42,077

61,578

Total noninterest expense

74,267

2,094

6,127

82,488

8,999

2,108

11,107

93,595

76,544

1,987

5,522

84,053

8,678

3,506

12,184

96,237

Income before income tax expense

19,951

11,337

5,875

37,163

16,681

10,461

27,142

64,305

13,272

7,074

(665)

19,681

35,893

11,817

47,710

67,391

Income tax expense

3,680

2,661

1,293

7,634

4,096

2,600

6,696

14,330

2,120

1,596

(146)

3,570

8,371

2,753

11,124

14,694

Net income

$
16,271

$
8,676

$
4,582

$
29,529

$
12,585

$
7,861

$
20,446

$
49,975

$
11,152

$
5,478

$
(519)

$
16,111

$
27,522

$
9,064

$
36,586

$
52,697

Period-end assets

$
4,774,765

$
840,083

$
46,816

$
5,661,664

$
389,999

$
131,647

$
521,646

$
6,183,310

$
4,997,734

$
596,031

$
22,342

$
5,616,107

$
382,156

$
114,213

$
496,369

$
6,112,476

Net interest margin

3.21
%

3.45
%

NM

3.24
%

NM

NM

NM

3.98
%

2.98
%

2.89
%

NM

2.97
%

NM

NM

NM

3.94
%

Net-revenue concentration*

56
%

8
%

7
%

71
%

21
%

8
%

29
%

100
%

51
%

5
%

3
%

59
%

30
%

11
%

41
%

100
%

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

6765

Table of Contents

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~~wholly owned subsidiaries, Republic Bank & Trust Company and Republic Insurance Services, Inc. As used in this filing, the terms “Republic,” the “Company,” “we,” “our,” and “us” refer to Republic Bancorp, Inc., and, where the context requires, Republic Bancorp, Inc. and its subsidiaries. The term the “Bank” refers to the Company’s subsidiary bank: Republic Bank & Trust Company. The term the “Captive” refers to the Company’s insurance subsidiary: Republic Insurance Services, Inc. All significant intercompany balances and transactions are eliminated in consolidation.

Republic is a financial holding company headquartered in Louisville, Kentucky. The Bank is a Kentucky-based, state-chartered non-member financial institution that provides both traditional and non-traditional banking products through five reportable segments using a multitude of delivery channels. While the Bank operates primarily in its market footprint, its non-brick-and-mortar delivery channels allow it to reach clients across the U.S. The Captive is a Nevada-based, ~~wholly-owned~~wholly owned insurance subsidiary of the Company. The Captive provides property and casualty insurance coverage to the Company and the Bank, as well as a group of third-party insurance captives for which insurance may not be available or economically feasible. In May 2023, the Company’s Board of Directors voted to dissolve the Captive. The dissolution of the Captive is expected to occur during the second half of 2023.

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

Forward-looking statements discuss matters that are not historical facts. As forward-looking statements discuss future events or conditions, the statements often include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would,” “potential,” or similar expressions. Do not rely on forward-looking statements. Forward-looking statements detail management’s expectations regarding the future and are not guarantees. Forward-looking statements are assumptions based on information known to management only as of the date the statements are made and management undertakes no obligation to update forward-looking statements, except as required by applicable law.

Broadly speaking, forward-looking statements include:

● ~~the potential impact of the COVID pandemic on Company operations;~~
● the potential impact of inflation on Company operations;
● projections of revenue, income, expenses, losses, earnings per share, capital expenditures, dividends, capital structure, loan volume, loan growth, deposit growth, or other financial items;
● descriptions of plans or objectives for future operations, products, or services;
● descriptions and projections related to management strategies for loans, deposits, investments, and borrowings;
● forecasts of future economic performance; and
● descriptions of assumptions underlying or relating to any of the foregoing.

Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by the forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties, including, but not limited to the following:

● the impact of ~~the COVID pandemic on the Company’s operations and credit losses;~~
● ~~the impact of~~ inflation on the Company’s operations and credit losses;
● litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future;
● natural disasters impacting the Company’s operations;
● changes in political and economic conditions;
● the impact of bank failures and potential bank failures to the industry, the Bank’s deposit base and the FDIC’s deposit insurance fund;
● the discontinuation of LIBOR;
● the magnitude and frequency of changes to the FFTR implemented by the FOMC of the FRB;
● long-term and short-term interest rate fluctuations and the overall shape and steepness of the U.S. Treasury yield curve, as well as their impact on the Company’s net interest income and Mortgage Banking operations;
● competitive product and pricing pressures in each of the Company’s five reportable segments;
● equity and fixed income market fluctuations;
● client bankruptcies and loan defaults;
● ~~recession;~~

6866

Table of Contents

●

recession;

●

future acquisitions;

●

integrations of acquired businesses;

●

changes in technology;

●

changes in applicable laws and regulations or the interpretation and enforcement thereof;

●

changes in fiscal, monetary, regulatory, and tax policies;

●

changes in accounting standards;

●

monetary fluctuations;

●

changes to the Company’s overall internal control environment;

●

~~success~~the ability of the Company to remediate its material weaknesses in ~~gaining regulatory approvals when required;~~its internal control over financial reporting;

●

the Company’s ability to qualify for future R&D federal tax credits;

●

the ability for Tax Providers to successfully market and realize the expected RA and RT volume anticipated by TRS;

●

information security breaches or cyber security attacks involving either the Company or one of the Company’s third-party service providers; and

●

other risks and uncertainties reported from time to time in the Company’s filings with the SEC, including Part I1 Item 1A “Risk ~~Factors~~Factors.” of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and Part II Item 1A ~~“Risk~~“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 ~~fiscal~~ year ended December 31, ~~2021.~~2022.

Management continually evaluates the Company’s accounting policies and estimates that it uses to prepare the consolidated financial statements. In general, management’s estimates and assumptions are based on historical experience, accounting and regulatory guidance, and information obtained from independent third-party professionals. Actual results may differ from those estimates made by management.

Critical accounting policies are those that management believes are the most important to the portrayal of the Company’s financial condition and operating results and require management to make estimates that are difficult, subjective and complex. Most accounting policies are not considered by management to be critical accounting policies. Several factors are considered in determining whether or not a policy is critical in the preparation of the financial statements. These factors include, among other things, whether the estimates have a significant impact on the financial statements, the nature of the estimates, the ability to readily validate the estimates with other information including independent third parties or available pricing, sensitivity of the estimates to changes in economic conditions and whether alternative methods of accounting may be utilized under GAAP. Management has discussed each critical accounting policy and the methodology for the identification and determination of critical accounting policies with the Company’s Audit Committee.

Republic believes its critical accounting policies and estimates relate to its ACLL and Provision.

ACLL and Provision — As of June 30, ~~2022,~~2023, the Bank maintained an ACLL for expected credit losses inherent in the Bank’s loan portfolio, which includes overdrawn deposit accounts. Management evaluates the adequacy of the ACLL monthly and presents and discusses the ACLL with the Audit Committee and the Board of Directors quarterly.

Management’s evaluation of the appropriateness of the ACLL is often the most critical accounting estimate for a financial institution, as the ACLL requires significant reliance on the use of estimates and significant judgment as to the reliance on historical loss rates, consideration of quantitative and qualitative economic factors, and the reliance on a reasonable and supportable forecast.

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Adjustments to the historical loss rate for current conditions include differences in underwriting standards, portfolio mix or term, delinquency level, as well as for changes in environmental conditions, such as changes in property values or other relevant factors. One-year forecast adjustments to the historical loss rate are based on the U.S. national unemployment rate and CRE values. Subsequent to the one-year forecasts, loss rates are assumed to immediately revert back to long-term historical averages.

The ACLL is significantly influenced by the composition, characteristics and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the ACLL, and therefore, greater volatility to the Company’s reported earnings.

BUSINESS SEGMENT COMPOSITION

As of June 30, ~~2022,~~2023, the Company was divided into five reportable segments: Traditional Banking, Warehouse, Mortgage Banking, TRS, and RCS. Management considers the first three segments to collectively constitute “Core Bank” or “Core Banking” operations, while the last two segments collectively constitute RPG operations.

(I) Traditional Banking segment

The Traditional Banking segment provides traditional banking products primarily to customers in the Company’s market footprint. As of June 30, ~~2022,~~2023, Republic had ~~42 full-service~~45 banking centers with locations as follows:

●
Kentucky — 2829
●
Metropolitan Louisville — 18
●
Central Kentucky — 7
●
Georgetown — 1
●
Lexington — 5
●
Shelbyville — 1
●
Northern Kentucky — 34
●Bellevue— 1
●
Covington — 1
●
Crestview Hills — 1
●
Florence — 1
●
Indiana — 3
●
Southern Indiana — 3
●
Floyds Knobs — 1
●
Jeffersonville — 1
●
New Albany — 1
●
~~Metropolitan Tampa,~~ Florida — 7
●
Metropolitan Tampa — 7
●
Ohio — 4
●
Metropolitan Cincinnati ~~Ohio~~— 4
●
Tennessee — 2
●
Metropolitan Nashville ~~Tennessee~~ — 2

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

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

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

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

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

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Construction and Land Development Lending — The Bank originates business loans for the construction of both single-family, residential properties and commercial properties (apartment complexes, shopping centers, office buildings). While not a focus for the Bank, the Bank may originate loans for the acquisition and development of residential or commercial land into buildable lots.

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

Aircraft Lending — ~~In October 2017, the Bank created an Aircraft Lending division.~~ Aircraft loans are typically made to purchase or refinance personal aircrafts, along with engine overhauls and avionic upgrades. Loans range between ~~$55,000~~$200,000 and ~~$3,000,000~~$4,000,000 in size and have terms up to 20 years. The aircraft loan program is open to all ~~states, except for Alaska and Hawaii.~~

fifty states. The credit characteristics of an aircraft borrower are higher than a typical consumer in that they must demonstrate and indicate a higher degree of credit worthiness for approval.

The Bank’s other Traditional Banking activities generally consist of the following:

Private Banking — The Bank provides financial products and services to high-net-worth individuals through its Private Banking department. The Bank’s Private Banking officers have extensive banking experience and are trained to meet the unique financial needs of this clientele.

Treasury Management Services — The Bank provides various deposit products designed for commercial business clients located throughout its market footprint. Lockbox processing, remote deposit capture, business on-line banking, account reconciliation, and ACH processing are additional services offered to commercial businesses through the Bank’s Treasury Management department. Treasury Management officers work closely with commercial and retail officers to support the cash management needs of Bank clients.

~~Digital Experience~~Correspondent Lending — The Bank began acquiring single family, first lien mortgage loans for investment through its Correspondent Lending channel during the first quarter of 2023. Correspondent Lending generally involves the Bank acquiring, primarily from its Warehouse 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 through the Correspondent Lending channel will be amortized into interest income on the level-yield method over the expected life of the loan. Loans acquired through the Correspondent Lending channel are generally made to borrowers outside of the Bank’s historical market footprint.

Internet Banking — The Bank expands its market penetration and service delivery of its RB&T brand by offering clients Internet Banking services and products through its website, www.republicbank.com.

Mobile Banking — The Bank allows clients to easily and securely access and manage their accounts through its mobile banking application.

Other Banking Services — The Bank also provides title insurance and other financial institution related products and services.

Bank Acquisitions — The Bank maintains an acquisition strategy to selectively grow its franchise as a complement to its organic growth strategies.

See additional detail regarding the Traditional Banking segment under Footnote 1617 “Segment Information” of Part I Item 1 “Financial Statements.”

(II) Warehouse ~~Lending segment~~

The Core Bank provides short-term, revolving credit facilities to mortgage bankers across the United States through mortgage warehouse lines of credit. These credit facilities are primarily secured by single-family, first-lien residential real estate loans. The credit facility enables the mortgage banking clients to close single-family, first-lien residential real estate loans in their own name and

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temporarily fund their inventory of these closed loans until the loans are sold to investors approved by the Bank. Individual loans are expected to remain on the warehouse line for an average of 15 to 30 days. Advances for Reverse mortgage loans and construction loans typically remain on the line longer than conventional mortgage loans. Interest income and loan fees are accrued for each individual ~~loan~~advance during the time the ~~loan~~advance remains on the warehouse line and collected when the loan is sold. The Core Bank receives the sale proceeds of each loan directly from the investor and applies the funds to pay off the warehouse advance and related accrued interest and fees. The remaining proceeds are credited to the mortgage-banking client.

See additional detail regarding the Warehouse ~~Lending segment~~ under Footnote 1617 “Segment Information” of Part I Item 1 “Financial Statements.”

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(III) Mortgage Banking segment

Mortgage Banking activities primarily include 15-, 20- and 30-year fixed-term, single-family, first-lien residential real estate loans that are originated and sold into the secondary market, primarily to the FHLMC and the FNMA. The Bank typically retains servicing on loans sold into the secondary ~~market for loans generated in states within its footprint and generally sells servicing for loans generated in states outside of its footprint.~~market. Administration of loans with servicing retained by the Bank includes collecting principal and interest payments, escrowing funds for property taxes and property insurance, and remitting payments to secondary market investors. The Bank receives fees for performing these standard servicing functions.

See additional detail regarding the Mortgage Banking segment under Footnote 1112 “Mortgage Banking Activities” and Footnote 1617 “Segment Information” of Part I Item 1 “Financial Statements.”

(IV) Tax Refund Solutions segment

Through the TRS segment, the Bank is one of a limited number of financial institutions that facilitates the receipt and payment of federal and state tax refund products and offers a credit product through third-party tax preparers located throughout the U.S., as well as tax-preparation software providers (collectively, the “Tax Providers”). ~~Substantially~~The majority of all 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. TRS also originated $98 million of ERAs during December 2022 related to tax returns that were anticipated to be filed during the first quarter 2023 tax filing season.

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●

Offered only during the first two months of each year;

●

The taxpayer was given the option to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $6,250;

●

No requirement that the taxpayer pays for another bank product, such as an RT;

●

Multiple ~~funds~~ disbursement methods were available with most Tax Providers, including ~~a DDA Card,~~ direct deposit, prepaid card, or check, based on the taxpayer-customer’s election;

●

Repayment of the EARA to the Bank is deducted from the taxpayer’s tax refund proceeds; and

●

If an insufficient refund to repay the EARA occurs:

there is no recourse to the taxpayer,

no negative credit reporting on the taxpayer, and

no collection efforts against the taxpayer.

The ERA credit product is also a loan that allows a taxpayer to borrow funds as an advance of a portion of their tax refund. Unlike the RA product described immediately above, however, which is originated in conjunction with the filing of the taxpayer’s federal tax return, an ERA is originated prior to the filing of the taxpayer’s federal tax return and prior to the taxpayer receiving their year-end taxable income documentation, e.g., W-2. As such, the Company generally uses paystub information to estimate the tax refund and 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 federal tax return in order for the tax refund to potentially be received by the Bank from the federal government to pay off the advance. The ERA product related to the first quarter 2023 tax filing season had the following features:

●

Offered only during December 2022 and January 2023;

●

The taxpayer had the option to choose from multiple loan-amount tiers, subject to underwriting, up to a maximum advance amount of $1,000;

●

No requirement that the taxpayer pays for another bank product, such as an RT;

●

Multiple disbursement methods were available with most Tax Providers, including direct deposit or prepaid card, based on the taxpayer-customer’s election;

●

Repayment of the ERA to the Bank is deducted from the taxpayer’s tax refund proceeds; and

●

If an insufficient refund to repay the ERA occurs, including the failure to file a federal tax return through a Republic Tax Provider:

there is no recourse to the taxpayer,

no negative credit reporting on the taxpayer, and

no collection efforts against the taxpayer.

The Company reports fees paid for the ~~EA product~~RAs, including ERAs, as interest income on loans. ~~During 2021, EAs~~RAs that were originated related to the first quarter 2022 tax season were repaid, on average, within 32 days after the taxpayer’s tax return was submitted to the applicable taxing authority. ~~EAs~~RAs do not have a contractual due date but the Company considered ~~an EA~~a RA, related to the first quarter 2022 tax season, delinquent if it remained unpaid 35 days after the taxpayer’s tax return was submitted to the applicable taxing authority. In 2023, the Company also considered a RA, related to the first quarter 2023 tax season, delinquent if it remained unpaid 35 days after the taxpayer’s tax return was submitted to the applicable taxing authority. For the ERA product originated in December of 2022 and ~~2021~~January 2023, the Company considered it delinquent if it remained unpaid 35 days after the taxpayer’s tax return was submitted to the applicable taxing authority. The number of days for delinquency eligibility is based on management’s annual analysis of tax return processing times. Provisions on ~~EAs~~RAs are estimated when advances are made. Unpaid ~~EAs~~RAs, including ERAs, related to the first quarter tax season of a given year are charged-off by June 30^th30th of ~~each~~that year, with ~~EAs~~RAs collected during the second half of ~~each~~that year ~~are~~ recorded as recoveries of previously charged-off loans, unless ~~such recovery is~~they were covered under a loss guaranty arrangement. Any RAs subject to ~~guarantor reimbursement under~~ a ~~loan-loss guaranty.~~ loss guaranty arrangement that are recovered during the second half of the year are distributed to the guarantor.

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In response to changes in the legal, regulatory, and competitive environment, management annually reviews and revises the ~~EAs~~RA, including the ERA, product parameters. Further changes in EAthe RA product parameters do not ensure positive results and could have an overall material

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negative impact on the performance of ~~the EA~~all RA product ~~offering~~offerings and therefore on the Company’s financial condition and results of operations.

See additional detail regarding the EARA product under Footnote 45 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements.”

~~Settlement of Lawsuit Against Green Dot~~Cancelled Sale Transaction - ~~On June 3, 2022, the Bank and Green Dot entered into the Settlement Agreement to fully resolve the Lawsuit that the Bank filed against Green Dot in the Delaware Court of Chancery on October 5, 2021.~~

As previously disclosed, ~~in the Company’s prior SEC filings, the Lawsuit arose from Green Dot’s inability to consummate the Sale~~

~~Transaction contemplated in the TRS Purchase Agreement through which~~ Green Dot ~~would purchase all of the assets and operations of the Bank’s Tax Refund Solutions business.~~

~~In accordance with the Settlement Agreement, on June 6, 2022, Green Dot~~Corporation paid ~~$13 million to the Bank, which was in addition to~~RB&T a ~~$5 million~~contract termination fee ~~that Green Dot paid to the Bank~~of $5.0 million during the first quarter of 2022 ~~under~~and a legal settlement of $13.0 million during the ~~terms~~second quarter of ~~the TRS Purchase Agreement. On June 6,~~ 2022 ~~the Bank and Green Dot submitted~~related to the ~~Delaware Court of Chancery a stipulation of dismissal of the Lawsuit, which was effective to dismiss the Lawsuit when filed.~~cancelled Sale Transaction.

Republic Payment Solutions division

(V) Republic Credit Solutions segment

●

RCS line-of-credit products – Using separate third-party service providers, the Bank originates two line-of-credit products to generally subprime borrowers in multiple states. ~~The first of these two products (the “LOC I”) has been originated by the Bank since 2014. The second (the “LOC II”) was introduced in January 2021.~~

RCS’s LOC I represented the substantial majority of RCS activity during 2022 and ~~2021.~~2023. Elastic Marketing, LLC and Elevate Decision Sciences, LLC, are third-party service providers for the product and are subject to the Bank’s oversight and supervision. Together, these companies provide the Bank with certain marketing, servicing, technology, and support services, while a separate ~~third party~~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. ~~Further,~~Furthermore, the Bank controls the loan terms and underwriting guidelines, and the Bank exercises consumer compliance oversight of the product.

~~In January 2021, RCS began originating balances through its LOC II.~~ One of RCS’s existing third-party service providers, subject to the Bank’s oversight and supervision, provides the Bank with marketing services and loan

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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.

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RCS healthcare receivables products – The Bank originates healthcare-receivables products across the U.S. through ~~two~~three different third-party service providers. ~~In one program,~~

For two of the programs, the Bank retains 100% of the receivables, ~~originated. In~~with recourse in the ~~other~~event of default.

OVERVIEW (Three Months Ended June 30, ~~2022~~2023 Compared to Three Months Ended June 30, ~~2021)~~2022)

Total Company net income for the second quarter of ~~2022~~2023 was ~~$23.9~~$21.1 million, ~~equaling net income~~a decrease of $3.3 million from the same period in 2022. Diluted EPS also decreased to $1.07 for the second quarter of 2023 compared to $1.22 for the same period in ~~2021. Diluted EPS increased to $1.20 for the second quarter of 2022 compared to $1.16 for the same period~~2022. The decrease in ~~2021. The consistent~~ net income primarily reflected the ~~following:~~following by reportable segment:

● ~~The benefit of a $13.0 million pre-tax legal settlement;~~

● ~~An $8.0 million negative swing in Provision;~~

● ~~A $4.4 million decrease in PPP income within interest income; and~~

● ~~A $2.4 million decrease in Mortgage Banking income.~~

Compared to the second quarter of 2022, the second quarter of 2021 was significantly and positively impacted by significantly lower than expected losses on EA loans, strong fee income from the PPP, and higher demand for mortgage refinancing, driving strong mortgage banking income.

~~The following are general highlights by reportable segment:~~

Traditional Banking segment

● Net income ~~decreased $1.1~~increased $5.3 million, ~~13%~~78%, for the second quarter of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

● Net interest income increased ~~$880,000,~~$9.5 million, or 2%24%, for the second quarter of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

● Provision was a net charge of $1.9 million for the second quarter of 2023 compared to a net charge of $146,000 for the same period in 2022.

● Noninterest income increased $2.6 million, or 34%, for the second quarter of 2023 compared to the same period in 2022.

● Noninterest expense increased $3.8 million, or 10%, for the second quarter of 2023 compared to the same period in 2022.

Warehouse

● Net income decreased $1.3 million or 53%, for the second quarter of 2023 compared to the same period in 2022.

● Net interest income decreased $1.2 million, or 32%, for the second quarter of 2023 compared to the same period in 2022.

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The Warehouse Provision was a net charge of ~~$146,000~~$202,000 for the second quarter of ~~2022~~2023 compared to ~~a net credit of $77,000 for the same period in 2021.~~

●

~~Noninterest income decreased $241,000 million, or 3%, for the second quarter of 2022 compared to the same period in 2021.~~

●

~~Noninterest expense increased $1.4 million, or 4%, for the second quarter of 2022 compared to the same period in 2021.~~

~~Warehouse Lending segment~~

●

~~Net income decreased $1.7 million or 41%, for the second quarter of 2022 compared to the same period in 2021.~~

●

~~Net interest income decreased $2.4 million, or 39%, for the second quarter of 2022 compared to the same period in 2021.~~

●

~~The Warehouse Provision was~~ a net credit of $234,000 for the ~~second quarter of 2022 compared to a net credit of $65,000 for the~~ same period in ~~2021.~~2022.

●

Average committed Warehouse lines ~~remained at~~decreased to $1.0 billion in the second quarter of 2023 compared to $1.4 billion in the second quarter of ~~2022 compared to the second quarter of 2021.~~2022.

●

Average line usage was ~~41%~~47% during the second quarter of ~~2022~~2023 compared to ~~51%~~41% during the same period in ~~2021.~~2022.

Mortgage Banking segment

●

Within the Mortgage Banking segment, mortgage banking income decreased ~~$2.4 million,~~$856,000, or ~~58%~~49%, during the second quarter of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

●

Overall, Republic’s proceeds from the sale of secondary market loans totaled $12 million during the second quarter of 2023 compared to $68 million during the same period in 2022, with the Company’s cash-gain-as-a-percent-of-loans-sold decreased to 2.83% for the second quarter of 2023 from 2.85% for the second quarter of 2022.

Tax Refund Solutions segment

●

Net income decreased $7.1 million, or 59%, for the second quarter of 2023 compared to the same period in 2022.

●

Net interest income increased $2.4 million for the second quarter of 2023 compared to the same period in 2022.

●

Overall, TRS recorded a net credit to the Provision of $219,000 during the second quarter of 2023 compared to a net charge to the Provision of $360,000 for the same period in 2022.

●

Noninterest income decreased $12.5 million, or 70%, for the second quarter of 2023 compared to the same period in 2022.

●

Net RT revenue increased $529,000, or 13%, for the second quarter of 2023 compared to the same period in 2022.

●

Noninterest expense was $3.1 million for the second quarter of 2023 compared to $3.5 million for the same period in 2022.

Republic Credit Solutions segment

●

Net income increased $189,000, or 5%, for the second quarter of 2023 compared to the same period in 2022.

●

Net interest income increased $2.2 million, or 31%, for the second quarter of 2023 compared to the same period in 2022.

●

Overall, RCS recorded a net charge to the Provision of $4.3 million during the second quarter of 2023 compared to a net charge of $3.4 million for the same period in 2022.

●

Noninterest income decreased $98,000, or 3%, from the second quarter of 2022 to the second quarter of 2023.

●

Noninterest expense was $2.9 million for the second quarter of 2023 and $1.9 million for the same period in 2022.

RESULTS OF OPERATIONS (Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022)

Net Interest Income

Banking operations are significantly dependent upon net interest income. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities and the interest expense on interest-bearing liabilities used to fund those assets, such as interest-bearing deposits, securities sold under agreements to repurchase, and FHLB advances. Net interest income is impacted by both changes in the amount and composition of interest-earning assets and interest-bearing liabilities, as well as market interest rates.

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See the section titled “Asset/Liability Management and Market Risk” in this section of the filing regarding the Bank’s interest rate sensitivity.

A large amount of the Company’s financial instruments tracks closely with, or is primarily indexed to, either the FFTR, Prime, or LIBOR. These rates trended lower beginning in the first quarter of 2020 with the onset of the COVID pandemic, as the FOMC reduced the FFTR to approximately 25 basis points. During 2022 inflation rose to levels not seen in approximately 40 years. In response, the FOMC began executing a quantitative tightening program by reducing its balance sheet, selling certain types of bonds in the market, and repeatedly increasing the FFTR. The FOMC’s increases to the FFTR during 2022 and the first three months of 2023 included the following:

Table 1 — Increases to the Federal Funds Target Rate since January 1, 2022

Increase to

FFTR
Date

the FFTR

after Increase

March 17, 2022

0.25
%

0.50
%
May 5, 2022

0.50

1.00

June 16, 2022

0.75

1.75

July 27, 2022

0.75

2.50

September 21, 2022

0.75

3.25

November 2, 2022

0.75

4.00

December 15, 2022

0.50

4.50

February 2, 2023

0.25

4.75

March 23, 2023

0.25

5.00

May 4, 2023

0.25

5.25

The FOMC’s actions and signals continued to place upward pressure on short-term market interest rates throughout the second half of 2022 and the first six months of 2023. While long-term interest rates initially rose in tandem with the increases to the FFTR through the middle part of 2022, they generally moved lower than short-term rates during the second half of 2022 and maintained a relative lower level into 2023 as the market generally began to anticipate a recession to take place in 2023. As a result of the increase in short-term interest rates and the moderation of long-term interest rates, the yield curve has been inverted for several months, with short-term rates generally higher than long-term rates on the yield curve. Further monetary tightening by the FOMC in the future will likely cause short-term interest rates to continue to increase. At this time, the future of long-term market interest rates remains uncertain. Increases in short-term market interest rates are expected to impact the various business segments of the Company differently and will be discussed in further detail in the sections below.

Total Company net interest income was $64.5 million during the second quarter of 2023 and represented an increase of $12.7 million, or 25%, from the second quarter of 2022. The Total Company net interest margin increased to 4.46% during the second quarter of 2023 compared to 3.55% for the same period in 2022.

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

Traditional Banking segment

Net interest income and NIM within the Traditional Bank were substantially higher from the second quarter of 2022 to the second quarter of 2023 as the increase in yield for its interest-earning assets substantially outpaced the increased cost of its interest-bearing liabilities on a year-over-year basis. Overall, the Traditional Bank’s net interest income increased $9.5 million, or 24%, and its NIM expanded 71 basis points from the second quarter of 2022 to 3.77% for the second quarter of 2023. Driving this change in net interest income and NIM between the second quarter of 2022 and the second quarter of 2023 were the following:

● Traditional Bank average loans grew from $3.6 billion with a weighted-average yield of 3.92% during the second quarter of 2022 to $4.3 billion with a weighted average yield of 4.98% during the second quarter of 2023. As previously noted, loan growth remained particularly strong within the Traditional Bank during the first six months of 2023, while the acquisition of CBank added approximately $217 million to the Traditional Bank’s average loans during the second quarter of 2023.

● Average investments grew to $775 million with a weighted-average yield of 2.73% during the second quarter of 2023 from $691 million with a weighted-average yield of 1.60% for the second quarter of 2022. As part of its overall interest rate risk management strategy, the Traditional Bank generally maintains an investment portfolio with a shorter overall duration as compared to its peers. This strategy is generally favorable to net interest income in a rising interest rate environment.

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The Traditional Bank’s average noninterest-bearing deposits decreased from $1.6 billion during the second quarter of 2022 to $1.4 billion for the second quarter of 2023. This decrease in average noninterest-bearing deposits was funded through a decrease in interest-earning cash balances and an increase in FHLB borrowings.

●

The Traditional Bank’s weighted-average cost of interest-bearing liabilities increased from 0.09% during the second quarter of 2022 to 1.43% for the second quarter of 2023. Further segmenting the Traditional Bank’s interest-bearing liabilities:

The weighted-average cost of total interest-bearing deposits increased from 0.14% during the second quarter of 2022 to 1.59% for the second quarter of 2023. In addition, average interest-bearing deposits grew $53 million from the second quarter of 2022 to the second quarter of 2023.

The average balance of FHLB borrowings increased from $20 million for the second quarter of 2022 to $256 million for the second quarter of 2023. In addition, the weighted-average cost of these borrowings increased from 1.88% to 4.90% for the same time periods. As noted above, this increase in the average balance of borrowings was generally driven by a period-to-period decline in average deposit balances.

●

Average interest-earning cash was $111 million with a weighted-average yield of 5.63% during the second quarter of 2023 compared to $810 million with a weighted-average yield of 0.81% for the second quarter of 2022. The decline in average cash balances was driven generally by a decline in average deposit balances for the same periods.

As previously disclosed, short-term interest rates have risen dramatically since March of 2022 as a result of FOMC monetary actions. Short-term rates could further increase during the third quarter of 2023 as a result of continued monetary tightening by the FOMC. Over the past 18 months, increases in short-term interest rates were generally favorable to the Traditional Bank’s net interest income and net interest margin primarily as a result of the substantial amount of immediately-repricing, interest-earning cash it maintained on its balance sheet and its ability to sustain a low cost of deposits in relation to the rising FFTR. During the third quarter of 2022, however, the Traditional Bank began to use its excess cash to fund a decline in deposit balances. This trend of declining interest-earning cash to fund decreasing deposit balances continued into the second quarter of 2023. In addition, during the first quarter of 2023, the cost of the Traditional Bank’s interest-bearing deposits began to increase more significantly during the latter part of the quarter due to customer pricing pressures. This trend of increasing deposit costs continued throughout the second quarter of 2023.

As a result of the declining cash balances and the additional customer pricing pressures, the Bank began to experience a diminishing benefit to its net interest income and net interest margin with additional increases in the FFTR during the first quarter of 2023 which continued into the second quarter of 2023. Management believes the Traditional Bank will continue to experience net interest margin compression on a linked quarter basis during the remainder of 2023 as a result of the negative impact of 1) lower interest-earning cash and low-cost deposit balances; 2) larger, higher-costing average balances of FHLB borrowings; and 3) a continuing rise in the cost of interest-bearing deposits in order to maintain client balances. Additional variables which may also impact the Traditional Bank’s net interest income and net interest margin in the future include, but are not limited to, the actual steepness and shape of the yield curve, future demand for the Traditional Bank’s financial products, and the Traditional Bank’s overall future liquidity needs.

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

Net interest income within Warehouse decreased $1.2 million, or 32%, from the second quarter of 2022 to the second quarter of 2023, driven by decreases in both average outstanding balances and net interest margin. Overall average outstanding Warehouse balances declined from $579 million during the second quarter of 2022 to $463 million for the second quarter of 2023, as home-mortgage refinancing dipped from a significantly higher volume in early 2022. Driving this decrease in average outstanding balances was a decline in committed lines-of-credit to $1.0 billion as June 30, 2023 from $1.4 billion as of June 30, 2022. Concurrent with the decline in committed lines of credit, the average usage rates for Warehouse lines decreased to 47% during the second quarter of 2023 from 41% for the first quarter of 2022.

The Warehouse net interest margin compressed 41 basis points from 2.69% during the second quarter of 2022 to 2.28% during the second quarter of 2023. The decline in the Warehouse net interest margin occurred as its funding costs, as charged through the Company’s internal FTP methodology, generally rose in tandem with the increase in short-term interest rates since rates began rising in March 2022, while its yield increases were delayed until the adjustable rates on its clients’ lines of credit surpassed their contractual interest rate floors. These interest rate floors benefited the Warehouse’s net interest margin substantially during 2020 and 2021 when

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market rates declined to historical lows but have produced margin compression since the onset of the FFTR increases during the first quarter of 2022.

Additional increases in long-term market interest rates will likely lead to a continued reduction in average outstanding balances driven by a decline in demand from Warehouse clients, as higher long-term interest rates generally drive lower demand for Warehouse borrowings. In addition, because the yield on Warehouse lines of credit are generally ties to short-term interest rates, additional increases in short-term interest rates could cause further competitive pricing pressures for the industry and the Core Bank, driving down the yield Warehouse earns on its lines of credits.

Tax Refund Solutions segment

TRS’s net interest income increased $2.4 million for the second quarter of 2023 compared to the same period in 2022, driven primarily by an increase interest income on TRS’s prepaid card balances as a function of the Company’s FTP methodology and a rise in interest rates.

The prepaid card product component of TRS drove a $3.3 million increase to net interest income for the segment. This increase was generally driven by a higher crediting rate applied through the Company’s internal FTP. The prepaid card FTP credit yield was 4.52% for average prepaid card-related balances of $362 million during the first quarter of 2023 compared to 0.83% for average prepaid card-related balances of $377 million during the first quarter of 2022.

Republic Credit Solutions segment

RCS’s net interest income increased $2.2 million, or 31%, from the second quarter of 2022 to the second quarter of 2023. The increase was driven primarily by an increase in fee income from RCS’s LOC II product.

RCS’s LOC loan fees, which are recorded as interest income on loans, increased to $8.4 million during the second quarter of 2023 compared to $6.4 million during the same period in 2022. The Company first piloted this product during the first quarter of 2021 with limited outstanding balances during the pilot phase. It began to ramp up origination volume for the product during early 2022 and has steadily increased its volume since then, leading to corresponding higher year-over-year revenue.

Overall customer demand for the RCS segment’s products is not assumed to be interest rate sensitive and therefore management does not believe a rising interest rate environment will impact origination volume for its various consumer loan products. A rising interest rate environment, however, likely will impact the Company’s internal FTP cost allocated to this segment. As a result, the impact of rising interest rates to RCS during 2023 will be negative to the segment’s financial results, although the exact amount of the negative impact will depend on the internal FTP cost assigned as well as the overall volume and mix of loans it generates.

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The following table presents the average balance sheets for the three-month periods ended June 30, 2023 and 2022, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

Table 2 — Total Company Average Balance Sheets and Interest Rates

Three Months Ended June 30, 2023

Three Months Ended June 30, 2022


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

$
114,368

$
1,558

5.45
%


$
813,956

$
1,638

0.80
%

Investment securities, including FHLB stock (1)

774,829

5,296

2.73

691,427

2,766

1.60

TRS Refund Advance loans (2)

28,203

40

0.57

12,680

81

2.56

RCS LOC products (2)

32,876

8,417

102.41

27,119

6,364

93.87

Other RPG loans (3) (6)

100,960

1,948

7.72

91,007

1,387

6.10

Outstanding Warehouse lines of credit (4) (6)

462,755

8,520

7.36

578,676

5,074

3.51

All other Core Bank loans (5) (6)

4,279,373

53,275

4.98

3,629,950

35,592

3.92

Total interest-earning assets

5,793,364

79,054

5.46

5,844,815

52,902

3.62

Allowance for credit losses

(96,720)

(72,037)

Noninterest-earning assets:

Noninterest-earning cash and cash equivalents

113,865

172,382

Premises and equipment, net

33,967

34,322

Bank owned life insurance

102,599

100,152

Other assets (1)

210,350

164,091

Total assets

$
6,157,425

$
6,243,725

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest-bearing liabilities:

Transaction accounts

$
1,481,583

$
2,564

0.69
%

$
1,698,754

$
169

0.04
%

Money market accounts

836,763

4,740

2.27

788,534

168

0.09

Time deposits

287,102

1,900

2.65

233,644

574

0.98

Reciprocal money market and time deposits

186,707

1,550

3.32

59,009

34

0.23

Wholesale brokered deposits

36,578

462

5.05

—

—

—

Total interest-bearing deposits

2,828,733

11,216

1.59

2,779,941

945

0.14

SSUARs and other short-term borrowings

117,852

174

0.59

294,388

49

0.07

Federal Home Loan Bank advances and other long-term borrowings

256,000

3,135

4.90

20,000

94

1.88

Total interest-bearing liabilities

3,202,585

14,525

1.81

3,094,329

1,088

0.14

Noninterest-bearing liabilities and Stockholders’ equity:

Noninterest-bearing deposits

1,927,486

2,196,794

Other liabilities

132,687

100,062

Stockholders’ equity

894,667

852,540

Total liabilities and stockholders’ equity

$
6,157,425

$
6,243,725

Net interest income

$
64,529

$
51,814

Net interest spread

3.65
%

3.48
%

Net interest margin

4.46
%

3.55
%

(1) For the purpose of this calculation, the fair market value adjustment on debt securities is included as a component of other assets.
(2) Interest income for Refund Advances and RCS line-of-credit products is composed entirely of loan fees.
(3) Interest income includes loan fees of $24,000 and $2,000 for the three months ended June 30, 2023 and 2022.
(4) Interest income includes loan fees of $300,000 and $500,000 for the three months ended June 30, 2023 and 2022.
(5) Interest income includes loan fees of $1.4 million and $1.5 million for the three months ended June 30, 2023 and 2022.
(6) Average balances for loans include the principal balance of nonaccrual loans and loans held for sale, and are inclusive of all loan premiums, discounts, fees and costs.

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Table 3 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, 2023

Compared to

Three Months Ended June 30, 2022

Total Net

Increase / (Decrease) Due to

(in thousands)

Change

Volume

Rate


Interest income:

Federal funds sold and other interest-earning deposits

$
(80)

$
(2,461)

$
2,381

Investment securities, including FHLB stock

2,530

368

2,162

TRS Refund Advance loans

(41)

52

(93)

RCS LOC products

2,053

1,437

616

Other RPG loans

561

675

(114)

Outstanding Warehouse lines of credit

3,446

(1,189)

4,635

All other Core Bank loans

17,683

6,729

10,954

Net change in interest income

26,152

5,611

20,541

Interest expense:

Transaction accounts

2,395

(24)

2,419

Money market accounts

4,572

11

4,561

Time deposits

1,326

158

1,168

Reciprocal money market and time deposits

1,516

211

1,305

Wholesale brokered deposits

462

462

—

SSUARs and other short-term borrowings

125

(46)

171

Federal Home Loan Bank advances

3,041

2,676

365

Net change in interest expense

13,437

3,448

9,989

Net change in net interest income

$
12,715

$
2,163

$
10,552

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Provision

Total Company Provision was a net charge of $6.1 million for the second quarter of 2023 compared to a net charge of $3.7 million for the same period in 2022.

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 2023 was a net charge of $1.9 million compared to a net charge of $146,000 for the second quarter of 2022. An analysis of the Provision for the second quarter of 2023 compared to the same period in 2022 follows:

●

For the second quarter of 2023, the Traditional Bank Provision primarily reflected the following:

The Traditional Bank recorded approximately $3.9 million in general formula reserves for $229 million of loan growth during the second quarter of 2023. Approximately $1.0 million of this increase was due to additional qualitative factor reserves generally related to uncertain market conditions brought about by high inflation, government actions to combat inflation, and elevated vacancy rates for commercial office space.

Offsetting the above, the Traditional Bank recognized a $2.0 million credit to the Provision during the second quarter of 2023 driven primarily by the release of $1.5 million in COVID-related reserves as the federal government declared an official end to the COVID pandemic effective May 2023.

● The net credit during the second quarter of 2022 was primarily driven by $1.5 million of additional Provision driven by formula reserves primarily tied to general loan growth. Traditional Bank loans grew $106 million from March 31, 2022 to June 30, 2022. Offsetting the above was the release of approximately $1.4 million in reserves following the payoff or upgrade of loans previously downgraded during the height of the pandemic.

As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.26% as of June 30, 2023 compared to 1.29% as of December 31, 2022 and 1.35% as of June 30, 2022. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses as of June 30, 2023.

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

Warehouse

Warehouse recorded a net charge to the Provision of $202,000 for the second quarter of 2023 compared to a net credit of $234,000 for the same period in 2022. Provision for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances increased $81 million during the second quarter of 2023 compared to a decrease of $93 million during the second quarter of 2022.

As a percentage of total Warehouse outstanding balances, the Warehouse ACLL was 0.25% as of June 30, 2023, December 31, 2022, and June 30, 2022. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses as of June 30, 2023.

Tax Refund Solutions segment

TRS recorded a net credit to the Provision of $219,000 during the second quarter of 2023 compared to a net charge of $360,000 for the same period in 2022. Substantially all TRS Provision in both periods was related to its RA product.

RAs related to the first quarter 2023 tax filing season were only originated during December of 2022 and the first two months of 2023. RAs related to the first quarter 2022 tax filing season were only originated during the first two months of 2022. As is the case each year as of March 31^st, the Allowance related to RAs is an estimate with that estimate finalized during the second quarter when all uncollected RAs are ultimately charged off as of June 30th. The final charge-off figures posted during the second quarter of a calendar year can be meaningfully different (higher or lower) than its March 31^st estimate based on actual paydowns received during the second

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quarter. RAs collected during the second half of a year are recorded as recoveries of previously charged-off loans, unless they were 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.

TRS’s incurred loss rate for RAs as of June 30, 2022 was 2.85% of total originations and it finished 2022 with a RA loss rate of 2.20% of total RAs originated. As of June 30, 2023, TRS’s incurred loss rate related to RAs that were associated with the first quarter 2023 tax filing season was 3.09% of the $835 million of the total loans originated during December 2022 and the first two months of 2023. 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, 2023, with approximately $1.0 million of the RAs expected to be recovered during the third quarter of 2023 under a loan-loss guaranty.

For factors affecting the comparison of the TRS results of operations for the second quarter of 2023 and the second quarter of 2022, see section titled “OVERVIEW (Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022) - Tax Refund Solutions.”

See additional detail regarding the RA product under Footnote 5 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements.”

Table 4 — Refund Advance Performance

(dollars in thousands)

2023 Tax Season

2022 Tax Season

2023/2022 Change

RAs originated during the tax season
(a)

$
834,552

$
311,207

$
523,345

RA net charge-offs (recoveries) recorded ($):

RA net losses recognized for the six months ended June 30,
(b)

$
25,823

$
8,879

$
16,944

Provision expense recorded during the six months ended June 30,
(c)

25,798

8,315

17,483

Second quarter Provision true-up for three months ended June 30,
(d)

$
25

$
564

$
(539)

RA net charge-offs (recoveries) recorded (%):

RA net losses recognized for the six months ended June 30,
(b)/(a)

3.09
%

2.85
%

0.24
%
Provision expense recorded during the six months ended June 30,
(c)/(a)

3.09

2.67

0.42

Second quarter Provision true-up for three months ended June 30,
(d)/(a)

-
%

0.18
%

(0.18)
%

See additional detail regarding the RA product under Footnote 5 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements.”

Republic Credit Solutions segment

As illustrated in Table 5 below, RCS recorded a net charge to the Provision of $4.3 million during the second quarter of 2023 compared to a net charge to the Provision of $3.4 million for the same period in 2022. The increase in the Provision was driven primarily by a $638,000 increase in net charge-offs and a $221,000 increase in general formula reserves for RCS’s LOC product. Overall, net charge-offs and general formula reserves for RCS’s LOC II product increased $726,000 and $509,000 driven by a $6.2 million, or 146%, increase in outstanding spot balances from the second quarter of 2022 to the second quarter of 2023. Partially offsetting the increase in Provision related to the RCS LOC II product, net charge-offs and general formula reserves for RCS’s LOC I product decreased $88,000 and $288,000 for the second quarter of 2023 compared to second quarter of 2022.

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 12.88% as of June 30, 2023, 13.73% as of December 31, 2022, and 14.41% as of June 30, 2022. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses as of June 30, 2023.

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

Table 5 — RCS Provision by Product

Three Months Ended Jun. 30,

(dollars in thousands)

2023

2022

$ Change

% Change

Product:

Lines of credit

$
4,285

$
3,428

$
857

25
%

Healthcare receivables

11

5

6

120

Total

$
4,296

$
3,433

$
863

25
%

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Table 6 — Summary of Loan and Lease Loss Experience

Three Months Ended

June 30,

(dollars in thousands)

2023

2022

ACLL at beginning of period

$
96,121

$
71,656

CBank Fair Value Adjustment

(1,384)

—

Charge-offs:

Traditional Banking:

Residential real estate

(9)

—

Consumer

(230)

(245)

Total Traditional Banking

(239)

(245)

Warehouse lines of credit

—

—

Total Core Banking

(239)

(245)

Republic Processing Group:

Tax Refund Solutions:

Refund Advances

(25,824)

(11,505)

Other TRS loans

(126)

(153)

Republic Credit Solutions

(3,018)

(2,411)

Total Republic Processing Group

(28,968)

(14,069)

Total charge-offs

(29,207)

(14,314)

Recoveries:

Traditional Banking:

Residential real estate

11

26

Commercial real estate

12

1

Commercial & industrial

19

8

Home equity

—

109

Consumer

72

106

Total Traditional Banking

114

250

Warehouse lines of credit

—

—

Total Core Banking

114

250

Republic Processing Group:

Tax Refund Solutions:

Refund Advances

188

2,626

Other TRS commercial & industrial loans

—

302

Republic Credit Solutions

231

264

Total Republic Processing Group

419

3,192

Total recoveries

533

3,442

Net loan recoveries (charge-offs)

(28,674)

(10,872)

Provision - Core Banking

2,062

(128)

Provision - RPG

4,077

3,793

Total Provision

6,139

3,665

ACLL at end of period

$
72,202

$
64,449

Credit Quality Ratios - Total Company:

ACLL to total loans

1.43
%

1.48
%
ACLL to nonperforming loans

412

398

Net loan charge-offs (recoveries) to average loans

2.34

1.00

Credit Quality Ratios - Core Banking:

ACLL to total loans

1.15
%

1.20
%
ACLL to nonperforming loans

336

317

Net loan charge-offs (recoveries) to average loans

0.01

—

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Table 7 — 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,

2023

2022

Traditional Banking:

Residential real estate:

Owner occupied

—
%

(0.01)
%
Nonowner occupied

—

—

Commercial real estate

—

—

Construction & land development

(0.02)

(0.01)

Commercial & industrial

—

—

Lease financing receivables

—

—

Aircraft

—

—

Home equity

—

(0.20)

Consumer:

Credit cards

0.45

0.22

Overdrafts

70.38

67.77

Automobile loans

(0.31)

(0.13)

Other consumer

(0.31)

0.55

Total Traditional Banking

0.01

—

Warehouse lines of credit

—

—

Total Core Banking

0.01

—

Republic Processing Group:

Tax Refund Solutions:

Refund Advances*

364.01

280.08

Other TRS commercial & industrial loans

9.91

(303.76)

Republic Credit Solutions

2.34

2.36

Total Republic Processing Group

18.73

10.46

Total

2.37
%

1.00
%

*     All loss rates above are based on net charge-offs as a function of average outstanding portfolio balances. Refund Advances are originated during the first two months of each year, with all RAs charged-off by June 30^th 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 total average loans increased from 1.00% during the second quarter of 2022 to net charge-offs to total average loans of 2.37% during the second quarter of 2023. The 137 basis-point increase was driven primarily by net charge-offs within the Company’s TRS operations.

From the second quarter of 2022 to the second quarter of 2023, TRS experienced a $14.3 million increase in net RA charge-offs due to the $523 million increase in year-over-year tax-season origination volume.

From the second quarter of 2022 to the second quarter of 2023, RCS experienced a $607,000 increase in net charge-offs primarily driven by an increase in net charge-offs within RCS’s LOC II product. Net charge-offs within this product increased $726,000 from the second quarter of 2022 to the second quarter of 2023. This product was first piloted during the first quarter of 2021. RCS began to ramp up origination volume for the RCS LOC II product during early 2022 and has steadily increased its volume since then, leading to corresponding higher year-over-year net charge-offs in the product.

During the second quarters of 2023 and 2022, the Company’s Core Bank net charge-offs to average Core Bank loans remained near zero.

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Noninterest Income

Total Company noninterest income decreased $10.9 million during the second quarter of 2023 compared to the same period in 2022.

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 $2.6 million, or 34%, for the second quarter of 2023 compared to the same period in 2022, primarily driven by a $1.7 million death benefit payment received during the second quarter of 2023 in excess of the cash surrender value of a BOLI policy.

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 three months ended June 30, 2023 and 2022 were $1.8 million and $1.7 million. The total daily overdraft charges, net of refunds, included in interest income for the three months ended June 30, 2023 and 2022 were $316,000 and $308,000.

Mortgage Banking segment

A decrease in Mortgage banking income for the second quarter of 2023 was generally caused by substantially higher long-term market interest rates, which led to a significant slowdown in the origination of mortgage loans to be sold into the secondary market. For the second quarter of 2023, the 30-year mortgage rate was hovering near 7.0% for the entire quarter. As a result, the Core Bank sold $12 million in secondary market loans and achieved an average cash-gain-as-a-percent-of-loans-sold of 2.60% during the second quarter of 2023 compared to sales of $68 million with comparable cash-gain-as-a-percent-of-loans-sold of 2.85% during the second quarter of 2022 when mortgage rates were notably lower.

With the FOMC continuing its quantitative tightening program during 2023, management believes it is likely that the Core Bank’s mortgage origination volume will continue to be negatively impacted by higher interest rates causing additional declines in mortgage banking income throughout 2023.

Tax Refund Solutions segment

TRS’s noninterest income decreased $12.5 million during the second quarter of 2023 compared to the same period in 2022, primarily driven by the $13 million legal settlement it received during the second quarter of 2022.

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Republic Credit Solutions segment

RCS’s noninterest income decreased $98,000, or 3%, during the second quarter of 2023 compared to the same period in 2022, with program fees representing the entirety of RCS’s noninterest income. The decrease in RCS program fees primarily reflected lower sales volume and corresponding gains from RCS’s installment loan product which were substantially offset by higher sales volume and gains from RCS’s LOC II product.

Proceeds from the sale of RCS's installment loan product totaled $261 million during the second quarter of 2023, a 3% decrease from the same period in 2022. Conversely, RCS sold approximately $106 million of balances for the LOC II product during the second quarter of 2023, an increase of 153% over the second quarter of 2022. The decrease in the RCS installment product volume was deliberately driven while a new credit model remained under testing during the second quarter of 2023. Related to the increase in the LOC II volume, RCS began to ramp up origination volume for this product during early 2022 and has steadily increased its volume since then, leading to corresponding higher year-over-year net program revenue.

The following table presents RCS program fees by product:

Table 8 — RCS Program Fees by Product

Three Months Ended Jun. 30,

(dollars in thousands)

2023

2022

$ Change

% Change

Product:

Lines of credit

$
2,150

$
1,630

$
520

32
%

Healthcare receivables

48

38

10

26

Installment loans*

813

1,481

(668)

(45)

Total

$
3,011

$
3,149

$
(138)

(4)
%

*
The Company has elected the fair value option for this product, with mark-to-market adjustments recorded as a component of program fees.

Noninterest Expense

Total Company noninterest expense increased $3.9 million, or 8%, during the second quarter of 2023 compared to the same period in 2022.

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

Traditional Banking segment

Traditional Banking noninterest expense increased $3.8 million, or 10%, for the second quarter of 2023 compared to the same period in 2022. The following primarily drove the change in noninterest expense:

● Noninterest expense associated with the acquired CBank operations totaled $2.0 million across all categories for the second quarter of 2023, with no such expenses for the second quarter of 2022.

● Legacy Salaries and Benefits expense increased $1.2 million, or 5%, to $24.0 million for the second quarter of 2023. The most notable change within this category was as follows:

o Direct Legacy salaries increased a net $808,000, or 4%, due primarily to the additional cost of annual merit increases.

Mortgage Banking segment

Noninterest expense at the Mortgage Banking segment decreased $510,000, or 18%, during the second quarter of 2023 compared to the same period in 2022, primarily due to a $281,000 reduction in overhead salaries allocated to the Mortgage Banking segment and a $146,000 reduction in mortgage commissions, with both reductions resulting from the previously discussed slowdown in mortgage origination volume.

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Republic Credit Solutions segment

Noninterest expense at the RCS segment increased $968,000, or 50%, during the second quarter of 2023 compared to the same period in 2022. Approximately $745,000 of this increase was concentrated within the LOC II product and was a result of a year-over-year increase in marketing activity for the product.

OVERVIEW (Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022)

Total Company net income for the first six months of 2023 was $49.1 million, a $3.6 million, or 7%, decrease from the same period in 2022. Diluted EPS decreased to $2.50 for the first six months of 2023 compared to $2.64 for the same period in 2022. The decrease in net income primarily reflected the following:

Traditional Banking segment

● Net income increased $11.7 million, or 105%, for the first six months of 2023 compared to the same period in 2022.

● Net interest income increased $23.5 million, or 31%, for the first six months of 2023 compared to the same period in 2022.

● Provision was a net charge of $4.8 million for the first six months of 2022 compared to a net charge of $466,000 for the same period in 2022.

● Noninterest income increased $3.0 million, or 20%, for the first six months of 2023 compared to the same period in 2022.

● Noninterest expense increased $6.5 million, or 8%, for the first six months of 2023 compared to the same period in 2022.

● Total Traditional Bank loans increased $540 million, or 14%, during the first six months of 2023.

● Total nonperforming loans to total loans for the Traditional Banking segment was 0.39% as of June 30, 2023 compared to 0.40% as of December 31, 2022.

● Delinquent loans to total loans for the Traditional Banking segment was 0.13% as of June 30, 2023 compared to 0.16% as of December 31, 2022.

● Total Traditional Bank deposits increased $184 million from December 31, 2022 to $4.2 billion as of June 30, 2023.

Warehouse

● Net income decreased $3.6 million, or 65%, for the first six months of 2023 compared to the same period in 2022.

● Net interest income decreased $3.7 million, or 44%, for the first six months of 2023 compared to the same period in 2022.

● The Warehouse Provision was a net charge of $337,000 for the first six months of 2023 compared to a net credit of $635,000 for the same period in 2022.

● Average committed Warehouse lines declined to $1.0 billion for the first six months of 2023 from $1.4 billion for first six months of 2022.

● Average line usage was 40% during the first six months of 2023 compared to 42% during the same period in 2022.

Mortgage Banking segment

● Within the Mortgage Banking segment, mortgage banking income decreased $2.7 million, or 61%, during the first six months of 2023 compared to the same period in 2022.

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●

Overall, Republic’s proceeds from sale of secondary market loans totaled ~~$68~~$28 million during the ~~second quarter~~first six months of ~~2022~~2023 compared to ~~$176~~$187 million during the same period in ~~2021,~~2022, with the Company’s cash-gain-as-a-percent-of-loans-sold ~~remaining at 2.85%~~increasing to 2.19% from 2.23% from period to period.

Tax Refund Solutions segment

●

Net income ~~increased $5.0~~decreased $10.1 million, or ~~69%~~37%, for the ~~second quarter~~first six months of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

●

Net interest income increased ~~$1.0~~$18.7 million, or ~~163%~~110%, for the ~~second quarter~~first six months of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

●

Total RA originations were $737 million during the first six months of 2023 compared to $311 million for the first six months of 2022. Originations for both six month periods all occurred during the first quarter of these periods.

●

Overall, TRS recorded a net charge to the Provision of ~~$360,000~~$21.6 million during the ~~second quarter~~first six months of ~~2022~~2023 compared to a net ~~credit~~charge to the Provision of ~~$5.8~~$8.3 million for the same period in ~~2021.~~2022.

●

Noninterest income ~~increased $11.1~~decreased $18.8 million for the ~~second quarter~~first six months of ~~2022~~2023 compared to the same period in ~~2021. Noninterest income for the second quarter of 2022 included the receipt of a $13.0 million non-recurring legal settlement payment.~~2022.

●

Net RT revenue decreased ~~$2.0 million~~$715,000 for the ~~second quarter~~first six months of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

●

Noninterest expense was ~~$3.5~~$8.8 million for the ~~second quarter~~first six months of ~~2022~~2023 compared to ~~$3.7~~$8.7 million for the same period in ~~2021.~~2022.

TRS had multiple factors during 2021 and 2022 that impacted and will continue to impact its 2022 performance and the comparability of that performance to the same periods in 2021. By year, these factors discussed below include, but may not be limited to, the following:

~~2021~~

~~The start of the IRS processing season was delayed approximately two weeks later than a typical tax season; and~~

~~The Company believes stimulus programs from the Federal Government and pandemic-related restrictions during early 2021 negatively impacted demand for TRS’s RT and EA products.~~

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~~2022~~

1) TRS amended one of its existing third-party contracts to provide for a small revenue share from Republic to the third party, along with a cap on loan losses from the third party to Republic for all EA products originated through this provider;

2) ~~TRS experienced a loss of RT and EA product volume to Green Dot directly following the execution of the TRS Purchase Agreement;~~

3) Although to a lesser degree than in the 2021 tax season, Company management believes stimulus programs from the Federal Government during the latter half of 2021 negatively impacted the 2022 tax season;

4) ~~The Bank received a $5.0 million non-recurring termination fee in January 2022 following the cancellation of the Sales Transaction; and~~

5) ~~The Bank received a $13.0 million non-recurring legal settlement payment in June 2022 upon settling its lawsuit against Green Dot.~~

As it relates to factors impacting 2021, the processing season with the IRS started approximately two weeks later than normal. As a result, RT funding volume and loan repayments from the IRS lagged normal funding patterns in non-COVID-impacted years and effectively pushed RT revenue and loan recovery activity later into the 2021 calendar year. In addition, government stimulus programs during 2021 negatively impacted demand for TRS EA and RT products.

Conversely, the timing of the IRS tax season during the second quarter of 2022 was more in-line with non-COVID seasons than the second quarter of 2021. As a result, the Company believes that it likely received an unusually high percentage of its funded RT volume in the second quarter of 2021 as compared to 2022, and that it likely received an unusually high percentage of its EA loan repayments in the second quarter of 2021 as compared to 2022. This estimated timing, if correct, generally provided less favorable second quarter 2022 results for TRS as compared to the second quarter of 2021, and will likely provide for less favorable quarterly comparisons throughout the remainder of 2022 as compared to 2021.

In addition to the more normal timing of the tax season in 2022 as compared to 2021, the 2022 tax season was also favorably impacted by a contractual change with one of the Company’s large Tax Providers. As a result of the amended contract, TRS provides this tax provider a revenue share, while this tax provider covers certain overhead costs of the program and furnishes to RB&T a loan loss guaranty for EAs originated through this provider. Through this specific provider, TRS originated $172 million of EAs during the first quarter of 2022 as compared to $135 million originated during the first quarter of 2021. The net cost of the revenue share to the provider from RB&T was approximately $275,000 for the $172 million of EA volume.

Negatively impacting the second quarter 2022 tax season as compared to the second quarter of 2021 was a loss of RT and EA volume by RB&T to Green Dot from certain third-party Tax Providers following the execution of the TRS Purchase Agreement. While TRS was able to partially offset this lost volume through higher volume from other existing relationships, the loss of volume to Green Dot had a negative impact to the overall results of TRS for 2022 and may continue to have a negative impact to the overall results of TRS well into the future if TRS is unable to win this business back through its normal solicitation process.

As a net result of all the factors in the preceding paragraphs and excluding the receipt of a nonrecurring $13 million legal settlement payment, TRS experienced a significant net decrease to its second quarter 2022 tax results as compared to the first quarter of 2021. Management believes TRS’s results of operations, and more specifically RT revenue and net recoveries for previously charged-off EAs for the remainder of 2022, will likely be negative as compared to the same periods in 2021.

Republic Credit Solutions segment

● Net income ~~decreased $490,000,~~increased $200,000, or ~~13%~~2%, for the ~~second quarter~~first six months of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

● Net interest income increased ~~$1.5~~$3.9 million, or ~~30%~~28%, for the ~~second quarter~~first six months of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

● Overall, RCS recorded a net charge to the Provision of ~~$3.4~~$6.1 million during the ~~second quarter~~first six months of 2022 compared to a net charge of ~~$1.6~~$4.8 million for the same period in ~~2021.~~2022.

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●

Noninterest income ~~increased $522,000,~~decreased $666,000, or ~~20%~~11%, from the ~~second quarter~~first six months of ~~2021~~2022 to the ~~second quarter~~first six months of ~~2022.~~2023.

●

Noninterest expense was ~~$1.9~~$5.3 million for the ~~second quarter~~first six months of ~~2022~~2023 and ~~$1.0~~$3.5 million for the same period in ~~2021.~~2022.

●

Total nonperforming loans to total loans for the RCS segment was 0.46% as of June 30, 2023 compared to 0.70% as of December 31, 2022.

●

Delinquent loans to total loans for the RCS segment was 8.46% as of June 30, 2023 compared to 8.53% as of December 31, 2022.

RESULTS OF OPERATIONS (~~Three~~Six Months Ended June 30, ~~2022~~2023 Compared to ~~Three~~Six Months Ended June 30, ~~2021)~~2022)

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.

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A large amount of the Company’s financial instruments ~~track~~tracks closely with, or ~~are~~is primarily indexed to, either the FFTR or Prime, or LIBOR. These rates trended lower beginning in the first quarter of 2020 with the onset of the COVID pandemic, as the FOMC reduced the FFTR to approximately 25 basis ~~points during 2020. With the rise of~~points. During 2022 inflation ~~during the latter half of 2021 and a steep inflationary rise during the first half of 2022, representing inflationary~~rose to levels not seen in approximately 40 ~~years,~~years. In response, the FOMC began executing a quantitative tightening program by reducing its balance sheet, selling certain types of bonds in the market, and repeatedly increasing the FFTR. The FOMC’s increases to the FFTR ~~included a 25-basis-point increase in March 2022, another 50-basis-point increase in May~~during 2022 and ~~another 75-basis-point increase in June 2022 (the highest one-time increase in 28 years). The FOMC also increased~~ the ~~FFTR by another 75 basis points in July 2022. Along with these increases,~~first three months of 2023 included the ~~FOMC continued to signal that additional 2022 FFTR increases are likely.~~following:

Table 9 — Increases to the Federal Funds Target Rate since January 1, 2022

Increase to

FFTR
Date

the FFTR

after Increase

March 17, 2022

0.25
%

0.50
%
May 5, 2022

0.50

1.00

June 16, 2022

0.75

1.75

July 27, 2022

0.75

2.50

September 21, 2022

0.75

3.25

November 2, 2022

0.75

4.00

December 15, 2022

0.50

4.50

February 2, 2023

0.25

4.75

March 23, 2023

0.25

5.00

May 4, 2023

0.25

5.25

The FOMC’s actions and signals continued to place upward pressure on ~~long-term~~short-term market interest rates ~~for bonds~~throughout the second half of 2022 and ~~loans~~the first six months of 2023. While long-term interest rates initially rose in tandem with the increases to the FFTR through the middle part of 2022, they generally moved lower than short-term rates during the second ~~quarter~~half of ~~2022.~~2022 and maintained a relative lower level into 2023 as the market generally began to anticipate a recession to take place in 2023. As a result of the increase in short-term interest rates and the moderation of long-term interest rates, the yield curve has been inverted for several months, with short-term rates generally higher than long-term rates on the yield curve. Further monetary tightening by the ~~Federal Reserve~~FOMC in the future will likely cause ~~both~~ short-term ~~and~~interest rates to continue to increase. At this time, the future of long-term market interest rates ~~to increase during the remainder of 2022.~~remains uncertain. Increases in short-term market interest rates are expected to impact the various business segments of the Company differently and will be discussed in further detail in the sections below.

Total Company net interest income was ~~$51.2~~$157.2 million during the ~~second quarter~~first six months of ~~2022~~2023 and represented an increase of ~~$928,000, or 2%,~~$42.2 million from the ~~second quarter~~first six months of ~~2021.~~2022. Total Company net interest margin ~~increased~~expanded to ~~3.51%~~5.48% during the ~~second quarter~~first six months of 2022 compared to ~~3.33%~~3.94% for the same period in ~~2021.~~2022.

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

Traditional Banking segment

The Traditional Banking’s net interest income increased ~~$880,000,~~$23.5 million, or 2%31%, for the ~~second quarter~~first six months of ~~2022~~2023 compared to the same period in ~~2021.~~2022. Traditional Banking’s net interest margin was ~~3.06%~~3.92% for the ~~second quarter~~first six months of ~~2022,~~2023, an increase of ~~nine~~94 basis points from the same period in ~~2021.~~2022.

The increase in the Traditional Bank’s net interest income ~~and net interest margin~~ during the ~~second quarter~~first six months of ~~2022~~2023 was primarily attributable to the following factors:

● Traditional Bank ~~net interest income, excluding PPP fees and interest, increased $5.3~~average loans grew from $3.6 billion with a weighted-average yield of 3.93% for the first six months of 2022 to $4.1 billion with a weighted average yield of 4.79% for the first six months of 2023. In addition, the acquisition of CBank added approximately $130 million ~~or 16%, from~~to the ~~second quarter~~Traditional Bank’s average loans during the first six months of ~~2021, as average non-PPP loans at~~2023. As discussed in the section titled “Loans” within this document, loan growth remained particularly strong within the Traditional Bank ~~grew from $3.3 billion for~~during the ~~second quarter~~first six months of 2021 to $3.6 billion for the second quarter of 2022. Additionally, increases in the FFTR during 2022 have benefitted the Traditional Bank’s high level of interest-earning cash on its balance sheet, as well as its loan and investment portfolio yields, although to a lesser degree. As a result, the Traditional Bank’s yield on interest earning assets, excluding PPP, increased 20 basis points from the second quarter of 2021 to the second quarter of 2022.2023.

● ~~Offsetting~~Average investments grew to $774 million with a weighted-average yield of 2.67% during the ~~above increase,~~first six months of 2023 from $649 million with a weighted-average yield of 1.50% for the first six months of 2022. As part of its overall interest rate risk management strategy, the Traditional Bank ~~recognized $167,000 of fees and interest on its PPP~~generally maintains an investment portfolio ~~during the second quarter of 2022~~with a shorter overall duration as compared to $4.6 million of similar fees and interest during the second quarter of 2021. The $4.4 million decrease in PPP fees and interest primarily highlighted the short-term nature of the PPP, as approximately 97% of all fees and interest eligible to be recognized under the program by the Traditional Bank were recognized during 2020 and 2021.its peers.

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●

The Traditional Bank’s average noninterest bearing deposits decreased from $1.6 billion during the first six months of 2022 to $1.4 billion for the first six months of 2023. This decrease in average noninterest-bearing deposits was funded through a decrease in interest-earning cash balances and an increase in FHLB borrowings.

●

The Traditional Bank’s cost of average cost of interest-bearing liabilities increased from 0.12% during the first six months of 2022 to 0.88% for the first six months of 2023. The following two bullets further segments this impact in the Traditional Bank’s cost of interest-bearing liabilities.

The weighted-average cost of total interest-bearing deposits increased from 0.13% during the first six months of 2022 to 1.17% for the first six months of 2023. In addition, average interest-bearing deposits decreased $51 million from the first six months of 2023 to the first six months of 2023 leading to an increase in higher-costing FHLB borrowings.

The average balance of FHLB borrowings increased from $22 million for the first six months of 2022 to $251 million for the first six months of 2023. In addition, the weighted-average cost of these borrowings increased from 1.20% to 4.57% for the same time periods. As noted above, this increase in the average balance of borrowings was generally driven by period-to-period decline in average deposit balances.

●

Average interest-earning cash was $174 million with a weighted-average yield of 4.90% during the first six months of 2023 compared to $834 million with a weighted-average yield of 0.50% for the first six months of 2022. The decline in average cash balances was driven generally by a decline in average deposit balances for the same periods.

~~Table 1 — Traditional Bank Net Interest Income and Net Interest Margin Excluding PPP (Non-GAAP)~~

The Company earns fees and a coupon interest rate of 1.0% on its PPP portfolio. Due to the short-term nature of the PPP, management believes Traditional Bank net interest income excluding PPP fees and coupon interest is a more appropriate measure to analyze the performance of the Traditional Bank’s net interest income and net interest margin. The following table reconciles Traditional Bank net interest income and net interest margin to Traditional Bank net interest income and net interest margin excluding PPP fees and interest, a non-GAAP measure.

Net Interest Income

Interest-Earning Assets

Net Interest Margin

Three Months Ended Jun. 30,

Three Months Ended Jun. 30,

Three Months Ended Jun. 30,

(dollars in thousands)


2022

2021

$ Change

% Change


2022

2021

$ Change

% Change


2022

2021

% Change

Traditional Banking - GAAP

$
39,158

$
38,278

$
880

2
%

$
5,121,492

$
5,149,602

$
(28,110)

(1)
%

3.06
%

2.97
%

0.09
%
Less: Impact of PPP fees and interest

167

4,582

(4,415)

(96)

16,668

349,643

(332,975)

(95)

—

0.16

(0.16)

Traditional Banking ex PPP fees and interest - non-GAAP

$
38,991

$
33,696

$
5,295

16

$
5,104,824

$
4,799,959

$
304,865

6

3.06

2.81

0.25

As previously disclosed, ~~both~~ short-term ~~and long-term market~~ interest rates ~~are expected to continue increasing during the remainder~~have risen dramatically since March of 2022 as a result of ~~expected~~FOMC monetary actions. Short-term rates could further increase during the third quarter of 2023 as a result of continued monetary tightening by the FOMC. ~~Additional~~Over the past 18 months, increases in short-term interest rates ~~and overall market rates are~~were generally ~~believed by management to be~~ favorable to the Traditional Bank’s net interest income and net interest margin primarily as a result of the substantial amount of immediately-repricing, interest-earning cash it maintained on its balance sheet and its ability to sustain a low cost of deposits in ~~the near term, while decreases in short-term interest rates and overall market rates are generally believed by management to be unfavorable~~relation to the rising FFTR. During the third quarter of 2022, however, the Traditional Bank began to use its excess cash to fund a decline in deposit balances. This trend of declining interest-earning cash to fund decreasing deposit balances continued into the second quarter of 2023. In addition, during the first quarter of 2023, the cost of the Traditional Bank’s interest-bearing deposits began to increase more significantly during the latter part of the quarter due to customer pricing pressures. This trend of increasing deposit costs continued throughout the second quarter of 2023.

As a result of the declining cash balances and the additional customer pricing pressures, the Bank began to experience a diminishing benefit to its net interest income and net interest margin with additional increases in the ~~near term.~~

~~Increases in market interest rates, however, could have a negative impact on net interest income and~~FFTR during the first quarter of 2023 which continued into the second quarter of 2023. Management believes the Traditional Bank will continue to experience net interest margin ifcompression on a linked quarter basis during the ~~Traditional Bank is unable to maintain its~~remainder of 2023 as a result of the negative impact of 1) lower interest-earning cash and low-cost deposit balances; 2) larger, higher-costing average balances of FHLB borrowings; and 3) a continuing rise in the cost of ~~those~~interest-bearing deposits ~~at the levels assumed~~ in ~~its interest-rate-risk model. In addition, a flattening or inversion of the yield curve, causing the spread between long-term interest rates and short-term interest rates~~order to ~~decrease, could negatively impact the Traditional Bank’s net interest income and net interest margin. Variables~~maintain client balances. Additional variables which may also impact the Traditional Bank’s net interest income and net interest margin in the future include, but are not limited to, the actual steepness and shape of the yield curve, future demand for the Traditional Bank’s financial products, and the Traditional Bank’s overall future liquidity needs.

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Warehouse ~~Lending segment~~

Net interest income within ~~the~~ Warehouse ~~segment~~ decreased ~~$2.4~~$3.7 million, or ~~39%~~44%, from the ~~second quarter~~first six months of ~~2021~~2022 to the ~~second quarter~~first six months of ~~2022,~~2023, driven by decreases in both average outstanding balances and net interest margin. Overall average outstanding Warehouse balances declined from ~~$727~~$582 million during the ~~second quarter~~first six months of ~~2021~~2022 to ~~$579~~$397 million for the ~~second quarter~~first six months of 2022, as home-mortgage refinancing dipped from historically high volume in early 2021. The Warehouse net interest margin compressed 79 basis points from 3.48% during the second quarter of 2021 to 2.69% during the second quarter of 2022, as competitive forces began driving down the contractual interest rates on the Company’s Warehouse lines during the third quarter of 2021.

~~In general, the decline in net interest income within Warehouse Lending was~~2023, driven largely by athe sharp rise in long-term interest rates during ~~the first half of~~ 2022, which ~~led to a decrease~~depressed mortgage-refinancing demand and resulted in ~~mortgage refinancing demand,~~ a sharp drop in Warehouse line ~~usage, and an overall decrease in outstanding Warehouse balances.~~ usage.

In addition, ~~Warehouse’s~~the Warehouse net interest margin ~~was negatively impacted~~decreased 50 basis points from 2.89% during the ~~second quarter~~first six months of 2022 to 2.39% during the first six months of 2023. The decline in the Warehouse net interest margin occurred as ~~many~~its funding costs, as charged through the Company’s internal FTP methodology, generally rose in tandem with the increase in short-term interest rates since rates began rising in March 2022, while its yield increases were delayed until the adjustable ~~rate Warehouse~~rates on its clients’ lines ~~remained below~~of credit surpassed their contractual interest rate floors. These interest rate floors ~~which benefitted Warehouse’s~~benefited the Warehouse net interest margin ~~significantly~~substantially during 2020 and 2021 when market rates declined to historical lows ~~negatively impacted its net interest~~but have produced margin compression since the onset of the FFTR increases during the first half of 2022, as its cost of funding rose while its loan yield remained relatively stable. The negative impact of these floors is expected to diminish in the near term as interest rates on many Warehouse lines are expected to begin exceeding their floors during the third quarter of ~~2022, assuming projected FFTR increases, currently projected by the financial markets, come to fruition.~~2022.

Committed Warehouse lines-of-credit ~~remained at~~decreased from $1.4 billion ~~from~~as of June 30, ~~2021~~2022 to $1.0 billion as of June 30, ~~2022,~~2023, while average usage rates for Warehouse lines were ~~41%~~40% and ~~51%~~42%, respectively, during the ~~second quarters~~first six months of ~~2022~~2023 and ~~2021.~~2022.

Additional increases in ~~short-term~~long-term market interest rates ~~and overall market rates are generally believed by management~~will likely lead to ~~be favorable to Warehouse’s net interest income and net interest margin in the near term, however, the benefit of an increase in rates could be partially or entirely offset by~~ a continued reduction in average outstanding balances driven by a decline in demand from Warehouse clients, as higher long-term interest rates generally drive lower demand for Warehouse borrowings. In addition, ~~a lower demand for~~because the yield on Warehouse

~~Table~~ lines of ~~Contents~~

~~borrowings~~credit are generally tied to short-term interest rates, additional increases in short-term interest rates could cause ~~additional~~further competitive pricing pressures for the industry and the Core Bank, driving down the yield Warehouse earns on its lines of credits.

Tax Refund Solutions segment

~~TRS’s~~Net interest income within the TRS segment was up $18.7 million from the first six months of 2022 to the first six months of 2023. Net interest income at TRS includes income from its prepaid card products as well as the income associated with its tax-related credit products.

The prepaid card product component of TRS drove a $6.3 million increase to net interest income for the segment. This increase was generally driven by a higher crediting rate applied through the Company’s internal FTP. The prepaid card FTP credit yield was 4.28% for average prepaid card-related balances of $359 million during the first six months of 2023 compared to 0.61% for average prepaid card-related balances of $375 million during the first six months of 2022.

Related to the segment’s tax-related products, net interest income increased ~~$1.0~~$12.5 million for the ~~second quarter~~first six months of ~~2022~~2023 compared to the ~~same~~first six months of 2022. Loan-related interest and fees increased $17.0 million for the period ~~in 2021,~~and was driven primarily by ana $426 million increase in ~~outstanding commercial loan balances and an~~RA origination volume, most of which resulted from a new contract with a large national tax preparation provider. This increase in ~~interest income on TRS’s prepaid card balances~~loan revenue was partially offset by a $4.5 million increase to the segment’s net cost of funds as a function of the Company’s FTP methodology and a rise in interest rates. For factors affecting the comparison of the TRS results of operations for the second quarter of 2022 and the second quarter of 2021, see section titled ~~“OVERVIEW (Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021) - Tax Refund Solutions.”~~applied through its internal FTP.

See additional detail regarding the RA product under Footnote 5“Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements.”

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Republic Credit Solutions segment

RCS’s net interest income increased ~~$1.5~~$3.9 million, or ~~30%~~28%, from the ~~second quarter~~first six months of ~~2021~~2022 to the ~~second quarter~~first six months of ~~2022.~~2023. The increase was driven primarily by an increase in fee income from RCS’s LOC ~~products partially offset by a decrease in interest income from RCS’s hospital receivables.~~II product.

RCS’s LOC II loan fees, which are recorded as interest income on loans, increased to ~~$5.8~~$7.7 million during the ~~second quarter~~first six months of ~~2022~~2023 compared to ~~$3.8~~$3.3 million during the same period in 2021. Interest income on RCS’s LOC I product increased $1.1 million, driven by a $6 million increase in average outstanding balances for this product from the second quarter of 2021 to the second quarter of 2022. ~~Interest income on RCS’s LOC II product increased $855,000, as the~~The Company first piloted this product during the first quarter of 2021 with limited outstanding balances during the pilot phase. It began to ramp up origination volume for the product during early 2022 and has steadily increased its volume since then, leading to corresponding higher year-over-year revenue.

Interest income from RCS’s hospital receivables decreased $385,000 from the second quarter of 2021 to the second quarter of 2022 resulting from a $38 million decrease in average receivables from period to period.

Overall ~~product~~customer demand for the RCS ~~segment~~segment’s products is not assumed to be interest rate sensitive and therefore management does not believe a rising interest rate environment will impact ~~demand~~origination volume for its various consumer loan products. A rising interest rate environment, however, likely will impact the Company’s internal FTP cost allocated to this segment. As a result, the impact of rising interest rates to RCS during ~~2022~~2023 will be negative to the segment’s financial results, although the exact amount of the negative impact will depend on the internal FTP cost assigned, as well as the overall volume and mix of loans it generates.

The following table presents the average balance sheets for the six-month periods ended June 30, 2023 and 2022, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

7992

Table of Contents

Table 211 — Total Company Average Balance Sheets and Interest Rates

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021


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

$
813,956

$
1,638

0.80
%


$
938,728

$
262

0.11
%

Investment securities, including FHLB stock (1)

691,427

2,766

1.60

562,509

1,913

1.36

TRS Easy Advance loans (2)

12,680

81

2.56

17,220

294

6.83

RCS LOC products (2)

27,119

5,782

85.28

16,462

3,837

93.23

Other RPG loans (3) (7)

91,007

1,387

6.10

105,217

1,190

4.52

Outstanding Warehouse lines of credit (4) (7)

578,676

5,074

3.51

727,091

6,824

3.75

Paycheck Protection Program loans (5) (7)

16,668

167

4.01

349,643

4,582

5.24

All other Core Bank loans (6) (7)

3,613,282

35,425

3.92

3,331,114

32,913

3.95

Total interest-earning assets

5,844,815

52,320

3.58

6,047,984

51,815

3.43

Allowance for credit losses

(72,037)

(74,258)

Noninterest-earning assets:

Noninterest-earning cash and cash equivalents

172,382

144,327

Premises and equipment, net

34,322

39,119

Bank owned life insurance

100,152

97,257

Other assets (1)

164,090

186,133

Total assets

$
6,243,724

$
6,440,562

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest-bearing liabilities:

Transaction accounts

$
1,698,754

$
168

0.04
%

$
1,599,721

$
93

0.02
%

Money market accounts

788,534

168

0.09

773,838

93

0.05

Time deposits

233,644

575

0.98

303,468

930

1.23

Reciprocal money market and time deposits

59,009

34

0.23

319,509

206

0.26

Brokered deposits

—

—

—

23,632

2

0.03

Total interest-bearing deposits

2,779,941

945

0.14

3,020,168

1,324

0.18

SSUARs and other short-term borrowings

294,388

49

0.07

169,888

8

0.02

Federal Home Loan Bank advances

20,000

94

1.88

25,000

10

0.16

Subordinated note

—

—

—

41,240

169

1.64

Total interest-bearing liabilities

3,094,329

1,088

0.14

3,256,296

1,511

0.19

Noninterest-bearing liabilities and Stockholders’ equity:

Noninterest-bearing deposits

2,197,300

2,226,070

Other liabilities

100,937

108,891

Stockholders’ equity

851,158

849,305

Total liabilities and stockholders’ equity

$
6,243,724

$
6,440,562

Net interest income

$
51,232

$
50,304

Net interest spread

3.44
%

3.24
%

Net interest margin

3.51
%

3.33
%

Six Months Ended June 30, 2023

Six Months Ended June 30, 2022

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

$
177,439

$
4,259

4.80
%


$
837,757

$
2,067

0.49
%

Investment securities, including FHLB stock (1)

774,006

10,342

2.67

649,040

4,877

1.50

TRS Refund Advance loans (2)

138,180

31,445

45.51

48,420

13,525

55.87

RCS LOC products (2)

31,986

16,378

102.41

26,701

12,621

94.54

Other RPG loans (3) (6)

121,353

4,574

7.54

105,879

3,372

6.37

Outstanding Warehouse lines of credit (4) (6)

396,603

14,240

7.18

581,581

9,953

3.42

All other Core Bank loans (5) (6)

4,097,391

98,172

4.79

3,584,718

70,597

3.94

Total interest-earning assets

5,736,958

179,410

6.25

5,834,096

117,012

4.01

Allowance for credit loss

(89,995)

(70,670)

Noninterest-earning assets:

Noninterest-earning cash and cash equivalents

204,382

262,772

Premises and equipment, net

33,104

34,888

Bank owned life insurance

102,303

99,844

Other assets (1)

198,327

172,388

Total assets

$
6,185,079

$
6,333,318

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest-bearing liabilities:

Transaction accounts

$
1,562,729

$
4,306

0.55
%

$
1,695,456

$
266

0.03
%

Money market accounts

792,936

6,846

1.73

793,709

261

0.07

Time deposits

256,644

2,759

2.15

247,596

1,215

0.98

Reciprocal money market and time deposits

115,674

1,721

2.98

66,826

82

0.25

Wholesale brokered deposits

18,390

462

5.02

—

—

—

Total interest-bearing deposits

2,746,373

16,094

1.17

2,803,587

1,824

0.13

SSUARs and other short-term borrowings

160,146

422

0.53

297,263

77

0.05

Federal Home Loan Bank advances and other long-term borrowings

250,702

5,723

4.57

21,657

130

1.20

Total interest-bearing liabilities

3,157,221

22,239

1.41

3,122,507

2,031

0.13

Noninterest-bearing liabilities and Stockholders’ equity:

Noninterest-bearing deposits

2,007,877

2,254,194

Other liabilities

133,002

106,320

Stockholders’ equity

886,979

850,297

Total liabilities and stock-holders’ equity

$
6,185,079

$
6,333,318

Net interest income

$
157,171

$
114,981

Net interest spread

4.84
%

3.88
%

Net interest margin

5.48
%

3.94
%

(1) For the purpose of this calculation, the fair market value adjustment on debt securities is included as a component of other assets.
(2) Interest income for ~~Easy~~Refund Advances and RCS line-of-credit products is composed entirely of loan fees.
(3) Interest income includes loan fees of ~~$2,000~~$957,000 and ~~$4,000~~$664,000 for the ~~three~~six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.
(4) Interest income includes loan fees of ~~$500,000~~$542,000 and ~~$789,000~~$1.1 million for the ~~three~~six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.
(5) Interest income includes loan fees of ~~$124,000~~$2.3 million and ~~$3.7~~$3.0 million for the ~~three~~six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.
(6) ~~Interest income includes loan fees of $1.5 million and $963,000 for the three months ended June 30, 2022 and 2021.~~
~~(7)~~ Average balances for loans include the principal balance of nonaccrual loans and loans held for sale, and are inclusive of all loan premiums, discounts, fees and costs.

8093

Table of Contents

Table 312 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 312 — Total Company Volume/Rate Variance Analysis

Three Months Ended June 30, 2022

Compared to

Three Months Ended June 30, 2021

Total Net

Increase / (Decrease) Due to

(in thousands)

Change

Volume

Rate


Interest income:

Federal funds sold and other interest-earning deposits

$
1,376

$
(39)

$
1,415

Investment securities, including FHLB stock

853

482

371

TRS Easy Advance loans*

(213)

59

(272)

RCS LOC products

1,945

2,297

(352)

Other RPG loans

197

(176)

373

Outstanding Warehouse lines of credit

(1,750)

(1,324)

(426)

Paycheck Protection Program loans

(4,415)

(3,540)

(875)

All other Core Bank loans

2,512

2,768

(256)

Net change in interest income

505

527

(22)

Interest expense:

Transaction accounts

75

6

69

Money market accounts

75

2

73

Time deposits

(355)

(191)

(164)

Reciprocal money market and time deposits

(172)

(152)

(20)

Brokered deposits

(2)

(2)

—

SSUARs and other short-term borrowings

41

9

32

Federal Home Loan Bank advances

84

(3)

87

Subordinated note

(169)

(169)

—

Net change in interest expense

(423)

(500)

77

Net change in net interest income

$
928

$
1,027

$
(99)

* Since interest income for Easy Advances is composed entirely of loan fees and EAs are only offered during the first two months of each year, volume and rate measurements for this product are based on total EAs originated instead of average EA balances during the period. EA originations totaled $311 million and $250 million for the three months ended June 30, 2022 and 2021. The unannualized EA yield as a function of total EA originations was 0.03% and 0.12% for the three months ended June 30, 2022 and 2021.

Six Months Ended June 30, 2023

Compared to

Six Months Ended June 30, 2022

Total Net

Increase / (Decrease) Due to

(in thousands)

Change

Volume

Rate

Interest income:

Federal funds sold and other interest-earning deposits

$
2,192

$
(2,807)

$
4,999

Investment securities, including FHLB stock

5,465

1,084

4,381

TRS Refund Advance loans

17,920

20,849

(2,929)

RCS LOC products

3,757

2,644

1,113

Other RPG loans

1,202

1,529

(327)

Outstanding Warehouse lines of credit

4,287

(3,946)

8,233

All other Core Bank loans

27,575

10,355

17,220

Net change in interest income

62,398

29,708

32,690

Interest expense:

Transaction accounts

4,040

(23)

4,063

Money market accounts

6,585

(1)

6,586

Time deposits

1,544

46

1,498

Reciprocal money market and time deposits

1,639

101

1,538

Wholesale brokered deposits

462

462

—

SSUARs and other short-term borrowings

345

(51)

396

Federal Home Loan Bank advances

5,593

4,421

1,172

Net change in interest expense

20,208

4,955

15,253

Net change in net interest income

$
42,190

$
24,753

$
17,437

8194

Table of Contents

Provision

Total Company Provision was a net charge of ~~$3.7 million for the second quarter of 2022 compared to a net credit of $4.3 million for the same period in 2021.~~

~~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 2022 was a net charge of $146,000 compared to a net credit of $77,000 for the second quarter of 2021. An analysis of the Provision for the second quarter of 2022 compared to the same period in 2021 follows:

●

~~For the second quarter of 2022, the Traditional Bank Provision primarily reflected the following:~~

Approximately $1.5 million of additional Provision driven by formula reserves primarily tied to general loan growth. Non-PPP Traditional Bank loans grew $106 million from March 31, 2022 to June 30, 2022.

~~Offsetting the above was the release of approximately $1.4 million in reserves following the payoff or upgrade of loans previously downgraded during the height of the pandemic.~~

●

For the second quarter of 2021, the Traditional Bank Provision was a net credit, generally based on an improving economic outlook in conjunction with limited charge-offs incurred by the Traditional Bank since making significant life-of-loan reserves during 2020 following the onset of the pandemic. The net credit recorded during the second quarter of 2021 primarily included ACLL releases for the residential real estate, CRE, and HELOC portfolios offset by additional reserves for certain Special Mention loans with continued signs of pandemic-related hardship through June 30, 2021.

As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.35% as of June 30, 2022 compared to 1.41% as of December 31, 2021 and 1.37% as of June 30, 2021. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses as of June 30, 2022.

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

~~Warehouse Lending segment~~

Warehouse recorded a net credit to the Provision of $234,000 for the second quarter of 2022 compared to a net credit of $65,000 for the same period in 2021. Provision for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances decreased $93 million during the second quarter of 2022 compared to a decrease of $26 million during the second quarter of 2021.

As a percentage of total Warehouse outstanding balances, the Warehouse ACLL was 0.25% as of June 30, 2022, December 31, 2021, and June 30, 2021. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses as of June 30, 2022.

~~Tax Refund Solutions segment~~

~~The TRS Provision swung from a net credit of $5.8 million during the second quarter of 2021 to a net charge of $360,000 during the second quarter of 2022.~~ While the overall net total Provision for TRS is a positive benefit on a year-to-date basis, the later timing of payments received during 2021 versus 2022 resulted in a large credit to the Provision during the second quarter of 2021 versus a minimal additional expense to the Provision during the second quarter of 2022. EAs are originated only during the first two months of each year, with losses on those originations initially estimated during the same origination period. All unpaid EAs are charged off by June 30th of each year, with first quarter loss estimates trued-up to actual charge-offs incurred through a second quarter Provision charge or credit. EAs collected during the second half of each year are recorded as recoveries of previously charged-off loans unless such recovery is subject to guarantor reimbursement under a loan-loss guaranty.

~~Table of Contents~~

During the second quarter of 2022, TRS trued-up its first quarter EA loss estimate with a charge to the Provision of $564,000, increasing its weighted average net EA loss rate from an estimated 2.67% as of March 31, 2022 to 2.85% as of June 30, 2022. During the second quarter of 2021, TRS trued-up its first quarter EA loss estimate with a credit to the Provision of $5.8 million, decreasing its weighted average net EA loss rate from 6.41% as of March 31, 2021 to 4.09% as of June 30, 2021. The significant true-up credit to the Provision during the second quarter of 2021 resulted primarily from a higher volume of loan payments received by the Company during the second quarter, exceeding the conservative estimates originally made by the Company during the first quarter of 2021 when the tax season experienced a two-week delay to its start.

~~For the 2022 and 2021 tax seasons, the following table presents information regarding EA originations, actual charge-offs, first quarter Provision estimates, and second quarter Provision true-ups:~~

(dollars in thousands)

2022 Tax Season

2021 Tax Season

2022/2021 Change

EAs originated during the first two months of the year
(a)

$
311,207

$
250,045

$
61,162

Actual EA losses incurred compared to loss estimates ($):

Actual losses recognized for the first six months ended June 30,
(b)

$
8,879

$
10,226

$
(1,347)

First quarter Provision estimate made during three months ended March 31,
(c)

8,315

16,019

(7,704)

Second quarter Provision true-up for three months ended June 30,
(d)

$
564

$
(5,793)

$
6,357

EA actual losses incurred compared to loss estimates (%):

Actual losses recognized for the first six months ended June 30,
(b)/(a)

2.85
%

4.09
%

(1.24)
%
First quarter Provision estimate made during three months ended March 31,
(c)/(a)

2.67

6.41

(3.74)

Second quarter Provision true-up for three months ended June 30,
(d)/(a)

0.18
%

(2.32)
%

2.50
%

In-line with its customary June 30th charge-off policy for EA loans, with approximately $2.6 million of the EA loans having been recovered during the second quarter of 2022 under a loan-loss guaranty, the Company completely charged-off all remaining unpaid EAs as of June 30, 2022. EA payments received after June 30^th ~~will be credited as a direct recovery to the Provision in the period it is received unless such payment is subject to guarantor reimbursement under the previously mentioned loan-loss guaranty.~~

~~For factors affecting the comparison of the TRS results of operations for the second quarter of 2022 and the second quarter of 2021, see section titled~~ ~~“OVERVIEW (Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021) - Tax Refund Solutions.”~~

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

~~Republic Credit Solutions segment~~

As illustrated in Table 4 below, RCS recorded a net charge to the Provision of $3.4 million during the second quarter of 2022 compared to a net charge to the Provision of $1.6 million for the same period in 2021. The increase in the Provision was driven primarily by a $1.6 million increase in net charge-offs on RCS’s line-of-credit products. Net charge-offs for RCS’s LOC I product increased to $1.5 million for the second quarter of 2022 from $520,000 during the second quarter of 2021, with government stimulus programs generally driving down usage of this product during the second quarter of 2021. Net charge-offs for RCS’s LOC II product were $621,000 for the second quarter of 2022 compared to no net charge-offs during the second quarter of 2021.

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 14.41% as of June 30, 2022, 13.91% as of December 31, 2021, and 7.68% as of June 30, 2021. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses as of June 30, 2022.

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

~~Table 4 — RCS Provision by Product~~

Three Months Ended Jun. 30,

(dollars in thousands)

2022

2021

$ Change

% Change

Product:

Lines of credit

$
3,428

$
1,581

$
1,847

117
%
Hospital receivables

5

11

(6)

(55)

Total

$
3,433

$
1,592

$
1,841

116
%

~~Table of Contents~~

~~Table 5 — Summary of Loan and Lease Loss Experience~~

Three Months Ended

June 30,

(dollars in thousands)

2022

2021

ACLL at beginning of period

$
71,656

$
75,336

Charge-offs:

Traditional Banking:

Commercial real estate

—

—

Consumer

(245)

(161)

Total Traditional Banking

(245)

(161)

Warehouse lines of credit

—

—

Total Core Banking

(245)

(161)

Republic Processing Group:

Tax Refund Solutions:

Easy Advances

(11,505)

(10,256)

Other TRS loans

(153)

(30)

Republic Credit Solutions

(2,411)

(597)

Total Republic Processing Group

(14,069)

(10,883)

Total charge-offs

(14,314)

(11,044)

Recoveries:

Traditional Banking:

Residential real estate

26

19

Commercial real estate

1

12

Commercial & industrial

8

4

Home equity

109

34

Consumer

106

97

Total Traditional Banking

250

166

Warehouse lines of credit

—

—

Total Core Banking

250

166

Republic Processing Group:

Tax Refund Solutions:

Easy Advances

2,626

30

Other TRS loans

302

—

Republic Credit Solutions

264

79

Total Republic Processing Group

3,192

109

Total recoveries

3,442

275

Net loan recoveries (charge-offs)

(10,872)

(10,769)

Provision - Core Banking

(128)

(95)

Provision - RPG

3,793

(4,181)

Total Provision

3,665

(4,276)

ACLL at end of period

$
64,449

$
60,291

Credit Quality Ratios - Total Company:

ACLL to total loans

1.48
%

1.32
%
ACLL to nonperforming loans

398

270

Net loan charge-offs (recoveries) to average loans

1.00

0.95

Credit Quality Ratios - Core Banking:

ACLL to total loans

1.20
%

1.16
%
ACLL to nonperforming loans

317

238

Net loan charge-offs (recoveries) to average loans

—

—

~~Table of Contents~~

~~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,

2022

2021

Traditional Banking:

Residential real estate:

Owner occupied

(0.01)
%

(0.01)
%
Nonowner occupied

—

—

Commercial real estate

—

—

Construction & land development

(0.01)

—

Commercial & industrial

—

—

Paycheck Protection Program

—

—

Lease financing receivables

—

—

Aircraft

—

—

Home equity

(0.20)

(0.06)

Consumer:

Credit cards

0.22

0.59

Overdrafts

67.77

26.81

Automobile loans

(0.13)

(0.09)

Other consumer

0.55

0.75

Total Traditional Banking

—

—

Warehouse lines of credit

—

—

Total Core Banking

—

—

Republic Processing Group:

Tax Refund Solutions:

Easy Advances*

280.08

237.36

Other TRS loans

(303.76)

12.02

Republic Credit Solutions

2.36

0.47

Total Republic Processing Group

10.46

8.35

Total

1.00
%

0.95
%

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

The Company’s net charge-offs to average total Company loans increased from 0.95% during the second quarter of 2021 to 1.00 % during the second quarter of 2022, with net charge-offs increasing $103,000 and average total Company loans decreasing $207 million, or 5%. The increase in net charge-offs was primarily driven by a $103,000 increase in net charge-offs within the Company’s RPG operations, which has historically conducted higher-risk lending activities than the Company’s Core Banking operations.

From the second quarter of 2021 to the second quarter of 2022, RPG experienced a $1.7 million decrease in net charge-offs within its TRS segment, as TRS amended one of its existing Tax Provider contracts to place a cap on loan losses from EAs originated through this Tax Provider. For factors affecting the comparison of the TRS results of operations for the second quarter of 2022 and the second quarter of 2021, see section titled ~~“OVERVIEW (Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021) - Tax Refund Solutions.”~~

From the second quarter of 2021 to the second quarter of 2022, RPG experienced a $1.6 million increase in net charge-offs within its RCS segment. Net charge-offs for RCS’s LOC I product increased to $1.5 million for the second quarter of 2022 from $520,000 for the second quarter of 2021, with government stimulus programs generally driving down usage of this product during the second quarter of 2021. Net charge-offs for RCS’s LOC II product were $621,000 for the second quarter of 2022 compared to no net charge-offs for the second quarter of 2021, with this product first piloted during the first quarter of 2021.

~~During the second quarters of 2022 and 2021, the Company’s Core Bank net charge-offs to average Core Bank loans remained near zero.~~

~~Table of Contents~~

~~Noninterest Income~~

~~Total Company noninterest income increased $8.9 million during the second quarter of 2022 compared to the same period in 2021.~~

~~The following were the most significant components comprising the total Company’s noninterest income by reportable segment:~~

~~Traditional Banking segment~~

~~Traditional Banking’s noninterest income decreased $241,000, or 3%, for the second quarter of 2022 compared to the same period in 2021, driven primarily by the following:~~

●

~~The Traditional Bank’s Other Noninterest Income for the second quarter of 2021 included a $399,000 non-recurring gain recognized from the sale of a former banking center in Hudson, Florida.~~

●

Partially offsetting the above, Service Charges on Deposit Accounts increased $294,000, driven by a 1,443 count increase in the Traditional Bank’s transactional accounts from June 30, 2021 to June 30, 2022.

The 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, 2022 and 2021 were $1.7 million and $1.3 million. The total daily overdraft charges, net of refunds, included in interest income for the three months ended June 30, 2022 and 2021 were $308,000 and $257,000.

~~Mortgage Banking segment~~

A significant rise in long-term interest rates during 2022 led to a significant slowdown in the origination and subsequent sale of mortgage loans into the secondary market. As a result, Mortgage Banking income decreased from $4.2 million during the second quarter of 2021 to $1.8 million for the second quarter of 2022. For the second quarter of 2022, the Bank sold $68 million in secondary market loans and achieved an average cash-gain-as-a-percent-of-loans-sold during the quarter of 2.85%. During the second quarter of 2021, however, long-term interest rates were closer to historical lows, driving secondary market loan sales of $176 million with comparable cash-gain-as-a-percent-of-loans-sold consistent at 2.85%.

With the FOMC moving forward with its quantitative tightening program during 2022, management believes it is likely that the Core Bank’s mortgage origination volume will continue to be negatively impacted by rising interest rates causing additional declines in mortgage banking income throughout 2022.

~~Tax Refund Solutions segment~~

TRS’s noninterest income increased $11.1 million, or 163%, during the second quarter of 2022 compared to the same period in 2021. As previously disclosed, Green Dot paid RB&T $13.0 million during the second quarter of 2022 to settle RB&T’s lawsuit against Green Dot.

Regarding TRS’s RT product, net RT revenue decreased $2.0 million, or 33%, from $5.9 million for the second quarter of 2021 to $4.0 million for the same period in 2022. The decrease was primarily driven by an 8% overall decrease in RT volume from the 2021 to the 2022 tax season, with 4% of that decrease driven by the loss of one of TRS’s tax providers following the announcement of the now-cancelled May 2021 Asset Purchase Agreement. Also impacting the decrease in net RT fees from the second quarter of 2021 to the second quarter of 2022 was the previously mentioned two-week delay in the 2021 tax season, which pushed a greater percentage of RT volume into the second quarter of 2021.

~~For factors affecting the comparison of the TRS results of operations for the second quarter of 2022 and the second quarter of 2021, see section titled~~ ~~“OVERVIEW (Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021) - Tax Refund Solutions.”~~

~~Table of Contents~~

~~Republic Credit Solutions segment~~

RCS’s noninterest income increased $522,000, or 20%, during the second quarter of 2022 compared to the same period in 2021, with program fees representing the entirety of RCS’s noninterest income. The increase in RCS program fees primarily reflected higher sales volume from RCS’s line of credit and installment loan products, as sales volume was negatively impacted during the second quarter of 2021 by federal government stimulus programs implemented to combat the economic impact of the COVID pandemic. Proceeds from the sale of RCS loan products totaled $269 million during the second quarter of 2022, a 49% increase from the same period in 2021.

~~The following table presents RCS program fees by product:~~

~~Table 7 — RCS Program Fees by Product~~

Three Months Ended Jun. 30,

(dollars in thousands)

2022

2021

$ Change

% Change

Product:

Lines of credit

$
1,630

$
1,147

$
483

42
%

Hospital receivables

38

63

(25)

(40)

Installment loans*

1,481

1,417

64

5

Total

$
3,149

$
2,627

$
522

20
%

*
~~The Company has elected the fair value option for this product, with mark-to-market adjustments recorded as a component of program fees.~~

~~Noninterest Expense~~

~~Total Company noninterest expense increased $1.9 million, or 4%, during the second quarter of 2022 compared to the same period in 2021.~~

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

~~Traditional Banking segment~~

Traditional Banking noninterest expense increased $1.4 million, or 4%, for the second quarter of 2022 compared to the same period in 2021. The following primarily drove the change in noninterest expense:

● ~~Other expenses increased $801,000, with the following other expenses reflecting the largest increases:~~

o ~~Meals, Entertainment, and Travel expenses, in total, increased $301,000, with in-person business travel and community outreach increasing during the quarter toward pre-pandemic levels.~~

o ~~Fraud and other losses, primarily losses on debit and credit card disputes, increased $230,000, as the Bank’s clients experienced a general increase in these categories during 2022.~~

o ~~Provision for losses on off-balance sheet commitments increased $141,000, driven primarily by an increase in the Bank’s committed but unused lines of credit during the previous 12 months.~~

● Salaries and benefits expense increased approximately $798,000, or 4%, primarily driven by an increase in health benefits costs and annual merit increases partially offset by a 49-count decrease in FTEs from period to period.

~~Republic Credit Solutions segment~~

Noninterest expense at the RCS segment increased $933,000, or 93%, during the second quarter of 2022 compared to the same period in 2021, primarily due to increased marketing of RCS’s LOC II product. The LOC II product was first piloted during the first quarter of 2021.

~~Table of Contents~~

~~OVERVIEW~~ ~~(Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021)~~

Total Company net income for the first six months of 2022 was $51.8 million, a $1.9 million, or 4%, increase from the same period in 2021. Diluted EPS increased to $2.59 for the first six months of 2022 compared to $2.41 for the same period in 2021. The increase in net income primarily reflected the following:

● ~~The benefit of a $13.0 million pre-tax legal settlement;~~

● ~~The benefit of a $5.0 million pre-tax contract termination fee;~~

● ~~A $10.2 million decrease in PPP income within interest income; and~~

● ~~A $7.0 million decrease in Mortgage Banking income.~~

Compared to the first six months of 2022, the first six months of 2021 was significantly and positively impacted by strong fee income from the PPP and higher demand for mortgage refinancing, driving strong mortgage banking income.

~~The following are general highlights by reportable segment:~~

~~Traditional Banking segment~~

● ~~Net income decreased $5.1 million, or 31%, for the first six months of 2022 compared to the same period in 2021.~~

● ~~Net interest income decreased $4.1 million, or 5%, for the first six months of 2022 compared to the same period in 2021.~~

● ~~Provision was a net charge of $466,000 for the first six months of 2022 compared to a net credit of $82,000 for the same period in 2021.~~

● ~~Noninterest income increased $209,000, or 1%, for the first six months of 2022 compared to the same period in 2021.~~

● ~~Noninterest expense increased $2.3 million, or 3%, for the first six months of 2022 compared to the same period in 2021.~~

● ~~Total Traditional Bank loans increased $172 million, or 5%, during the first six months of 2022, driven primarily by strong CRE loan growth.~~

● ~~Total nonperforming loans to total loans for the Traditional Banking segment was 0.44% as of June 30, 2022 compared to 0.59% as of December 31, 2021.~~

● ~~Delinquent loans to total loans for the Traditional Banking segment was 0.15% as of June 30, 2022 compared to 0.21% as of December 31, 2021.~~

● ~~Total Traditional Bank deposits remained at $4.3 billion from December 31, 2021 to June 30, 2022.~~

~~Warehouse Lending segment~~

● ~~Net income decreased $3.2 million, or 37%, for the first six months of 2022 compared to the same period in 2021.~~

● ~~Net interest income decreased $4.7 million, or 36%, for the first six months of 2022 compared to the same period in 2021.~~

● ~~The Warehouse Provision was a net credit of $635,000 for the first six months of 2022 compared to a net credit of $307,000 for the same period in 2021.~~

● ~~Average committed Warehouse lines remained at $1.4 billion in the first six months of 2022 compared to the first six months of 2021.~~

~~Table of Contents~~

●

~~Average line usage was 42% during the first six months of 2022 compared to 52% during the same period in 2021.~~

~~Mortgage Banking segment~~

●

~~Within the Mortgage Banking segment, mortgage banking income decreased $7.0 million, or 61%, during the first six months of 2022 compared to the same period in 2021.~~

●

Overall, Republic’s proceeds from sale of secondary market loans totaled $187 million during the first six months of 2022 compared to $380 million during the same period in 2021, with the Company’s cash-gain-as-a-percent-of-loans-sold decreasing to 2.23% from 3.26% from period to period.

~~Tax Refund Solutions segment~~

●

~~Net income increased $14.9 million, or 119%, for the first six months of 2022 compared to the same period in 2021.~~

●

~~Net interest income increased $1.7 million, or 11%, for the first six months of 2022 compared to the same period in 2021.~~

●

~~Total EA originations were $311 million during the first six months of 2022 compared to $250 million for the first six months of 2021.~~

●

~~Overall, TRS recorded a net charge to the Provision of $8.3 million during the first six months of 2022 compared to a net charge to the Provision of $10.1 million for the same period in 2021.~~

●

Noninterest income increased $15.3 million for the first six months of 2022 compared to the same period in 2021. Noninterest income for the first six months of 2022 included a $5.0 million non-recurring contract termination fee and the receipt of a $13.0 million non-recurring legal settlement payment.

●

~~Net RT revenue decreased $2.6 million for the first six months of 2022 compared to the same period in 2021.~~

●

~~Noninterest expense was $8.7 million for the first six months of 2022 compared to $9.0 million for the same period in 2021.~~

~~2021~~

~~The start of the IRS processing season was delayed approximately two weeks later than a typical tax season; and~~

~~The Company believes stimulus programs from the Federal Government and pandemic-related restrictions during early 2021 negatively impacted demand for TRS’s RT and EA products.~~

~~2022~~

TRS amended one of its existing third-party contracts to provide for a small revenue share from Republic to the third party, along with a cap on loan losses from the third party to Republic for all EA products originated through this provider;

~~TRS experienced a loss of RT and EA product volume to Green Dot directly following the execution of the TRS Purchase Agreement;~~

~~Although to a lesser degree than in the 2021 tax season, management believes stimulus programs from the Federal Government during the latter half of 2021 negatively impacted the 2022 tax season;~~

~~The Bank received a $5.0 million non-recurring termination fee in January 2022 following the cancellation of the Sales Transaction; and~~

~~Table of Contents~~

~~The Bank received a $13.0 million non-recurring legal settlement in June 2022 upon settling its lawsuit against Green Dot.~~

As it relates to factors impacting 2021, the processing season with the IRS started approximately two weeks later than normal. As a result, RT funding volume and loan repayments from the IRS lagged normal funding patterns in non-COVID-impacted years and effectively pushed RT revenue and loan recovery activity later into the 2021 calendar year. In addition, government stimulus programs during 2021 negatively impacted demand for TRS EA and RT products.

Conversely, the timing of the IRS tax season during the first six months of 2022 was more in-line with non-COVID seasons than the first six months of 2021. As a result, the Company believes that it likely received a greater percentage of its funded RT volume in the first six months of 2022 as compared to 2021, and that it likely received a greater percentage of its EA loan repayments in the first six months of 2022 than it did during 2021. This estimated timing, if correct, generally provided more favorable results for TRS during the first six months of 2022 as compared to the first six months of 2021, but will likely provide for less favorable quarterly comparisons throughout the remainder of 2022 as compared to 2021.

In addition to the more normal timing of the tax season in 2022 as compared to 2021, the first six months of 2022 tax season was also favorably impacted by a contractual change with one of the Company’s large Tax Providers. As a result of the amended contract, TRS provides this tax provider a revenue share, while this tax provider covers certain overhead costs of the program and furnishes to RB&T a loan loss guaranty for EAs originated through this provider. Through this specific provider, TRS originated $172 million of EAs during the first six months of 2022 as compared to $135 million originated during the first six months of 2021. The net cost of the revenue share to the provider from RB&T was approximately $275,000 for the $172 million of EA volume. Under the amended contract, during the first six months of 2022 the net benefit to TRS of the covered overhead costs and to the Provision from the loan loss guaranty was approximately $2.8 million.

Negatively impacting the first six months of the 2022 tax season as compared to the first six months of 2021 was a loss of RT and EA volume by RB&T to Green Dot from certain third-party Tax Providers following the execution of the TRS Purchase Agreement. While TRS was able to partially offset this lost volume through higher volume from other existing relationships, the loss of volume to Green Dot will have a negative impact to the overall results of TRS for 2022 and well into the future if TRS is unable to win this business back through its normal solicitation process.

As a net result of all the factors in the preceding paragraphs, TRS experienced a significant net positive improvement to its first six months of 2022 tax results as compared to the first six months of 2021. Because many of these factors may only be timing in nature, management believes TRS’s results of operations, and more specifically RT revenue and net recoveries for previously charged-off EAs for the remainder of 2022, will likely be negative as compared to the same periods in 2021.

~~Republic Credit Solutions segment~~

●

~~Net income increased $332,000, or 4%, for the first six months of 2022 compared to the same period in 2021.~~

●

~~Net interest income increased $2.9 million, or 29%, for the first six months of 2022 compared to the same period in 2021.~~

●

~~Overall, RCS recorded a net charge to the Provision of $4.8 million during the first six months of 2022 compared to a net charge of $1.2 million for the same period in 2021.~~

●

~~Noninterest income increased $2.3 million, or 59%, from the first six months of 2022 to the first six months of 2022.~~

●

~~Noninterest expense was $3.5 million for the first six months of 2022 and $2.1 million for the same period in 2021.~~

●

~~Total nonperforming loans to total loans for the RCS segment was 0.05% as of June 30, 2022 and December 31, 2021.~~

●

~~Delinquent loans to total loans for the RCS segment was 6.64% as of June 30, 2022 compared to 6.48% as of December 31, 2021.~~

~~Table of Contents~~

~~RESULTS OF OPERATIONS~~ ~~(Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021)~~

~~Net Interest Income~~

Banking operations are significantly dependent upon net interest income. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities, and the interest expense on interest-bearing liabilities used to fund those assets, such as interest-bearing deposits, securities sold under agreements to repurchase, and FHLB advances. Net interest income is impacted by both changes in the amount and composition of interest-earning assets and interest-bearing liabilities, as well as market interest rates.

~~See the section titled “Asset/Liability Management and Market Risk” in this section of the filing regarding the Bank’s interest rate sensitivity.~~

A large amount of the Company’s financial instruments track closely with, or are primarily indexed to, either the FFTR, Prime, or LIBOR. These rates trended lower with the onset of the COVID pandemic, as the FOMC reduced the FFTR to approximately 25 basis points during 2020. With the rise of inflation during the latter half of 2021 and a steep inflationary rise during the first half of 2022, representing inflationary levels not seen in approximately 40 years, the FOMC began executing a quantitative tightening program by reducing its balance sheet, selling certain types of bonds in the market, and repeatedly increasing the FFTR. The increases to the FFTR included a 25-basis-point increase in March 2022, another 50-basis-point increase in May 2022, and another 75-basis-point increase in June 2022 (the highest one-time increase in 28 years). The FOMC also increased the FFTR by another 75 basis points in July 2022. Along with these increases, the FOMC continued to signal that additional 2022 FFTR increases were likely.

The FOMC’s actions and signals continued to place upward pressure on long-term market interest rates for bonds and loans during the second quarter of 2022. Further monetary tightening by the Federal Reserve in the future will likely cause both short-term and long-term market interest rates to increase during the remainder of 2022. Increases in market interest rates are expected to impact the various business segments of the Company differently and will be discussed in further detail in the sections below.

Total Company net interest income was $113.8 million during the first six months of 2022 and represented a decrease of $4.3 million, or 4%, from the first six months of 2021. Total Company net interest margin decreased to 3.90% during the first six months of 2022 compared to 3.98% for the same period in 2021.

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

~~Traditional Banking segment~~

The Traditional Banking’s net interest income decreased $4.1 million, or 5%, for the first six months of 2022 compared to the same period in 2021. Traditional Banking’s net interest margin was 2.98% for the first six months of 2022, a decrease of 23 basis points from the same period in 2021.

~~The decrease in the Traditional Bank’s net interest income and net interest margin during the first six months of 2022 was primarily attributable to the following factors:~~

●

The Traditional Bank recognized $1.1 million of fees and interest on its PPP portfolio during the first six months of 2022 compared to $11.3 million of similar income during the same period in 2021. The $10.2 million decrease in PPP fees and interest primarily highlighted the short-term nature of this program, which was closer to its peak during the first six months of 2021.

●

Offsetting the decrease above, Traditional Bank net interest income, excluding PPP fees and interest, increased $6.1 million, or 9%, from the first six months of 2021, as average non-PPP loans at the Traditional Bank grew from $3.3 billion for the first six months of 2021 to $3.5 billion for the first six months of 2022. Offsetting the benefit of growth in non-PPP Traditional Bank loans was a 2-basis point decrease in the Traditional Bank’s net interest margin excluding PPP loans and related fees and interest. The Traditional Bank’s net interest margin, excluding the PPP-related elements, declined from 2.97% for the first six months of 2021 to 2.95% for the first six months of 2022.

~~Table of Contents~~

~~Table 8 — Traditional Bank Net Interest Income and Net Interest Margin Excluding PPP (Non-GAAP)~~

Net Interest Income

Interest-Earning Assets

Net Interest Margin

Six Months Ended Jun. 30,

Six Months Ended Jun. 30,

Six Months Ended Jun. 30,

(dollars in thousands)


2022

2021

$ Change

% Change


2022

2021

$ Change

% Change


2022

2021

% Change

Traditional Banking - GAAP

$
75,306

$
79,380

$
(4,074)

(5)
%

$
5,053,387

$
4,946,416

$
106,971

2
%

2.98
%

3.21
%

(0.23)
%
Less: Impact of PPP fees and interest

1,123

11,280

(10,157)

(90)

23,596

357,163

(333,567)

(93)

0.03

0.24

(0.21)

Traditional Banking ex PPP fees and interest - non-GAAP

$
74,183

$
68,100

$
6,083

9

$
5,029,791

$
4,589,253

$
440,538

10

2.95

2.97

(0.02)

As previously disclosed, both short-term and long-term market interest rates are expected to continue to increase during 2022 as a result of expected monetary tightening by the FOMC. Additional increases in short-term interest rates and overall market rates are generally believed by management to be favorable to the Traditional Bank’s net interest income and net interest margin in the near term, while decreases in short-term interest rates and overall market rates are generally believed by management to be unfavorable to the Traditional Bank’s net interest income and net interest margin in the near term.

Increases in market interest rates, however, could have a negative impact on net interest income and net interest margin if the Traditional Bank is unable to maintain its deposit balances and the cost of those deposits at the levels assumed in its interest-rate-risk model. In addition, a flattening or inversion of the yield curve, causing the spread between long-term interest rates and short-term interest rates to decrease, could negatively impact the Traditional Bank’s net interest income and net interest margin. Variables which may impact the Traditional Bank’s net interest income and net interest margin in the future include, but are not limited to, the actual steepness of the yield curve, future demand for the Traditional Bank’s financial products, and the Traditional Bank’s overall future liquidity needs.

~~Warehouse Lending segment~~

Net interest income within the Warehouse segment decreased $4.7 million, or 36%, from the first six months of 2021 to the first six months of 2022, driven by decreases in both average outstanding balances and net interest margin. Overall average outstanding Warehouse balances declined from $758 million during the first six months of 2021 to $582$32.9 million for the first six months of 2022, as home-mortgage refinancing dipped from historically high volume in early 2021. The Warehouse net interest margin compressed 56 basis points from 3.45% during the first six months of 2021 to 2.89% during the first six months of 2022, as competitive forces began driving down the contractual interest rates on the Company’s Warehouse lines during the third quarter of 2021.

In general, the decline in net interest income within Warehouse Lending was driven largely by a sharp rise in long-term interest rates during the first half of 2022, which led to a decrease in mortgage refinancing demand, a sharp drop in Warehouse line usage, and an overall decrease in outstanding Warehouse balances. In addition, Warehouse’s net interest margin was negatively impacted during the first six months of 2022, as many adjustable rate Warehouse lines remained below their interest rate floors. These interest rate floors, which benefitted Warehouse’s net interest margin significantly during 2020 and 2021 when market rates declined to historical lows, negatively impacted its net interest margin during the first half of 2022, as its cost of funding rose while its loan yield remained relatively stable. The negative impact of these floors is expected to diminish in the near term as interest rates on many Warehouse lines are expected to begin exceeding their floors during the third quarter of 2022, assuming projected FFTR increases, currently projected by the financial markets, come to fruition.

Committed Warehouse lines-of-credit remained at $1.4 billion from June 30, 2021 to June 30, 2022, while average usage rates for Warehouse lines were 42% and 52%, respectively, during the first six months of 2022 and 2021.

Additional increases in short-term interest rates and overall market rates are generally believed by management to be favorable to Warehouse’s net interest income and net interest margin in the near term, however, the benefit of an increase in rates could be partially or entirely offset by a reduction in average outstanding balances driven by a decline in demand from Warehouse clients, as higher long-term interest rates generally drive lower demand for Warehouse borrowings. In addition, a lower demand for Warehouse

~~Table of Contents~~

~~borrowings could cause additional competitive pricing pressures for the industry, driving down the yield Warehouse earns on its lines of credits.~~

~~Tax Refund Solutions segment~~

~~TRS’s net interest income increased $1.7 million for the first six months of 2022~~2023 compared to the same period in 2021, driven by an increase in EA fees, an increase in outstanding commercial loan balances, and an increase in interest income on TRS’s prepaid card balances as a function of the Company’s FTP methodology and a rise in interest rates. TRS’s EA product earned $13.5 million in interest income during the first six months of 2022, a $442,000 increase from the first six months of 2021 resulting primarily from a $61 million increase in EA originations from period to period. For factors affecting the comparison of the TRS results of operations for the first six months of 2022 and the first six months of 2021, see section titled ~~“OVERVIEW (Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021) - Tax Refund Solutions.”~~

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

~~Republic Credit Solutions segment~~

RCS’s net interest income increased $2.9 million, or 29%, from the first six months of 2021 to the first six months of 2022. The increase was driven primarily by an increase in fee income from RCS’s LOC products partially offset by a decrease in interest income from RCS’s hospital receivables.

~~RCS’s LOC loan fees, which are recorded as interest income on loans, increased to $11.5 million during the first six months of 2022 compared to $7.7 million during the same period in 2021.~~

Interest income on RCS’s LOC I product increased $2.0 million, driven by a $5 million increase in average outstanding balances for this product from the first six months of 2021 to the first six months of 2022. Interest income on RCS’s LOC II product increased $1.8 million, as the Company first piloted this product during the first six months of 2021 with limited outstanding balances during the pilot phase.

Interest income from RCS’s hospital receivables decreased $774,000 from the first six months 2021 to the same period in 2022 resulting from a $36 million decrease in average receivables from period to period.

Overall product demand for the RCS segment is not assumed to be interest rate sensitive and therefore management does not believe a rising interest rate environment will impact demand for its various consumer loan products. A rising interest rate environment, however, likely will impact the Company’s internal FTP cost allocated to this segment. As a result, the impact of rising interest rates to RCS during 2022 will be negative to the segment’s financial results, although the exact amount of the negative impact will depend on the internal FTP cost assigned, as well as, the overall volume and mix of loans it generates.

~~Table of Contents~~

~~Table 9 — Total Company Average Balance Sheets and Interest Rates~~

Six Months Ended June 30, 2022

Six Months Ended June 30, 2021

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

$
837,757

$
2,067

0.49
%


$
725,764

$
416

0.11
%

Investment securities, including FHLB stock (1)

649,040

4,877

1.50

563,243

3,930

1.40

TRS Easy Advance loans (2)

48,420

13,525

55.87

53,276

13,083

49.11

RCS LOC products (2)

26,701

11,484

86.02

16,536

7,686

92.96

Other RPG loans (3) (7)

105,879

3,372

6.37

122,225

3,984

6.52

Outstanding Warehouse lines of credit (4) (7)

581,581

9,953

3.42

758,493

14,194

3.74

Paycheck Protection Program loans (5) (7)

23,596

1,123

9.52

357,163

11,280

6.32

All other Core Bank loans (6) (7)

3,561,122

69,474

3.90

3,337,969

66,885

4.01

Total interest-earning assets

5,834,096

115,875

3.97

5,934,669

121,458

4.09

Allowance for credit loss

(70,670)

(70,390)

Noninterest-earning assets:

Noninterest-earning cash and cash equivalents

262,772

196,793

Premises and equipment, net

34,888

39,152

Bank owned life insurance

99,844

82,837

Other assets (1)

172,389

188,785

Total assets

$
6,333,319

$
6,371,846

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest-bearing liabilities:

Transaction accounts

$
1,695,456

$
266

0.03
%

$
1,542,685

$
175

0.02
%

Money market accounts

793,709

261

0.07

753,198

196

0.05

Time deposits

247,596

1,215

0.98

309,155

2,035

1.32

Reciprocal money market and time deposits

66,826

82

0.25

316,493

461

0.29

Brokered deposits

—

—

—

43,369

22

0.10

Total interest-bearing deposits

2,803,587

1,824

0.13

2,964,900

2,889

0.19

SSUARs and other short-term borrowings

297,263

77

0.05

181,216

17

0.02

Federal Home Loan Bank advances

21,657

130

1.20

34,033

41

0.24

Subordinated note

—

—

—

41,240

341

1.65

Total interest-bearing liabilities

3,122,507

2,031

0.13

3,221,389

3,288

0.20

Noninterest-bearing liabilities and Stockholders’ equity:

Noninterest-bearing deposits

2,255,104

2,186,274

Other liabilities

106,603

121,357

Stockholders’ equity

849,105

842,826

Total liabilities and stock-holders’ equity

$
6,333,319

$
6,371,846

Net interest income

$
113,844

$
118,170

Net interest spread

3.84
%

3.89
%

Net interest margin

3.90
%

3.98
%

~~(1)~~ ~~For the purpose of this calculation, the fair market value adjustment on debt securities is included as a component of other assets.~~
~~(2)~~ ~~Interest income for Easy Advances and RCS line-of-credit products is composed entirely of loan fees.~~
~~(3)~~ ~~Interest income includes loan fees of $664,000 and $1.7 million for the six months ended June 30, 2022 and 2021.~~
~~(4)~~ ~~Interest income includes loan fees of $1.1 million and $1.7 million for the six months ended June 30, 2022 and 2021.~~
~~(5)~~ ~~Interest income includes loan fees of $1.0 million and $9.4 million for the six months ended June 30, 2022 and 2021.~~
~~(6)~~ ~~Interest income includes loan fees of $3.0 million and $1.9 million for the six months ended June 30, 2022 and 2021.~~
~~(7)~~ ~~Average balances for loans include the principal balance of nonaccrual loans and loans held for sale, and are inclusive of all loan premiums, discounts, fees and costs.~~

~~Table of Contents~~

Table 10 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 10 — Total Company Volume/Rate Variance Analysis~~

Six Months Ended June 30, 2022

Compared to

Six Months Ended June 30, 2021

Total Net

Increase / (Decrease) Due to

(in thousands)

Change

Volume

Rate

Interest income:

Federal funds sold and other interest-earning deposits

$
1,651

$
73

$
1,578

Investment securities, including FHLB stock

947

629

318

TRS Easy Advance loans*

442

2,880

(2,438)

RCS LOC products

3,798

4,410

(612)

Other RPG loans

(612)

(523)

(89)

Outstanding Warehouse lines of credit

(4,241)

(3,103)

(1,138)

Paycheck Protection Program loans

(10,157)

(13,997)

3,840

All other Core Bank loans

2,589

4,387

(1,798)

Net change in interest income

(5,583)

(5,244)

(339)

Interest expense:

Transaction accounts

91

19

72

Money market accounts

65

11

54

Time deposits

(820)

(360)

(460)

Reciprocal money market and time deposits

(379)

(315)

(64)

Brokered deposits

(22)

(22)

—

SSUARs and other short-term borrowings

60

19

41

Federal Home Loan Bank advances

89

(20)

109

Subordinated note

(341)

(341)

—

Net change in interest expense

(1,257)

(1,009)

(248)

Net change in net interest income

$
(4,326)

$
(4,235)

$
(91)

* Since interest income for Easy Advances is composed entirely of loan fees and EAs are only offered during the first two months of each year, volume and rate measurements for this product are based on total EAs originated instead of average EA balances during the period. EA originations totaled $311 million and $250 million for the six months ended June 30, 2022 and 2021. The unannualized EA yield as a function of total EA originations was 4.35% and 5.23% for the six months ended June 30, 2022 and 2021.

~~Table of Contents~~

~~Provision~~

~~Total Company Provision was~~ a net charge of $12.9 million for the ~~first six months of 2022 compared to a net charge of $10.9 million for the~~ same period in ~~2021.~~2022.

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 ~~2022~~2023 was a net charge of ~~$466,000~~$4.8 million compared to a net ~~credit~~charge of ~~$82,000~~$466,000 for the first six months of ~~2021.~~2022. An analysis of the Provision for the first six months of ~~2022~~2023 compared to the same period in ~~2021~~2022 follows:

●

For the first six months of 2023, the Traditional Bank Provision primarily reflected the following:

The Traditional Bank incurred a net charge of $2.7 million during the first quarter of 2023 for the Day-1 Provision associated with the acquired CBank non-PCD loans.

The Traditional Bank recorded approximately $6.9 million in general formula reserves for $540 million of loan growth during the first six months of 2023. Approximately $1.0 million of these general formula reserves was due to an increase in the Traditional Bank’s qualitative factor reserves generally related to uncertain market conditions brought about by high inflation, government actions to combat inflation, and elevated vacancy rates for commercial office space.

Offsetting the above, the Traditional Bank recognized a $2.7 million credit to the Provision during the first six months of 2023 driven primarily by the release of $1.5 million in COVID-related reserves. The release of these reserves coincided with the federal government’s declaration of the official end to the COVID pandemic in May of 2023.

●

For the first six months of 2022, the Traditional Bank Provision primarily reflected the following:

Approximately $2.5 million of additional Provision driven by formula reserves tied to general loan growth. Non-PPP Traditional Bank loans grew $213 million from December 31, 2021 to June 30, 2022.

Offsetting the above was the release of approximately $2.0 million of reserves following the payoff or upgrade of loans previously downgraded during the height of the pandemic.

●

For the first six months of 2021, there was a minimal net credit to the Traditional Bank Provision, generally based on an improving economic outlook in conjunction with limited charge-offs incurred by the Traditional Bank since making significant life-of-loan reserves during 2020 following the onset of the pandemic. The net credit recorded during the first six months of 2021 primarily included ACLL releases for the residential real estate, CRE, and HELOC portfolios offset by additional reserves for certain Special Mention loans with continued signs of pandemic-related hardship through June 30, 2021.

As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.26% as of June 30, 2023 compared to 1.29% as of December 31, 2022 and 1.35% as of June 30, ~~2022 compared to 1.41% as of December 31, 2021 and 1.37% as of June 30, 2021.~~2022. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses as of June 30, ~~2022.~~2023.

Warehouse ~~Lending segment~~

Warehouse recorded a net ~~credit~~charge to the Provision of ~~$635,000~~$337,000 for the first six months of ~~2022~~2023 compared to a net credit of ~~$307,000~~$635,000 for the same period in ~~2021.~~2022. Provision for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances ~~decreased~~increased $136 million during the first six months of 2023 compared to a decrease of $254 million during the first six months of ~~2022 compared to a decrease of $123 million during the first six months of 2021.~~2022.

As a percentage of total Warehouse outstanding balances, the Warehouse ACLL was 0.25% as of June 30, ~~2022,~~2023, December 31, ~~2021,~~2022, and June 30, ~~2021.~~2022. The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses as of June 30, ~~2022.~~2023.

Table of Contents

Tax Refund Solutions segment

TRS recorded a net charge to the Provision of ~~$8.3~~$21.6 million during the first six months of ~~2022~~2023 compared to a net charge of ~~$10.1~~$8.3 million for the same period in ~~2021.~~2022. Substantially all TRS Provision in both periods was related to its EARA product.

TRS recorded a charge to the Provision for EARA loans of ~~$8.9~~$21.6 million, or ~~2.85%~~2.92% of its ~~$311~~$737 million in ~~EAs~~RAs originated during the first six months of 2022 compared to a charge to the Provision of ~~$10.2~~$8.9 million, or ~~4.09%~~2.85% of its ~~$250~~$311 million of ~~EAs~~RAs originated during the first six months of ~~2021.~~2022. The ~~decrease~~increase in Provision for the first six months of ~~2022~~2023 was primarily due to the ~~following two factors:~~increased volume from the previously mentioned new contract with a large national tax preparation provider, which generated approximately $462 million in new RA volume related to the first quarter 2023 tax filing season.

TRS received a contractual guaranty during 2022 that limits its EA losses for EAs originated through one of its largest Tax Providers. Through this particular provider, TRS originated $172 million of EAs during the first six months of 2022. The net benefit to the Provision for TRS during the first six months of 2022 was approximately $2.6 million.

~~Table of Contents~~

In addition to its contractual guaranty discussed in the previous bullet (1), TRS experienced delayed EA paydowns during the first six months of 2021 with the start of the IRS tax season delayed into mid-February 2021, combined with federal government stimulus programs during the first six months of 2021, which generally utilized resources of the IRS and U.S. Treasury to administer the programs.

In-line with its customary June 30th charge-off policy for EA loans, with approximately $2.6 million of the EA loans having been recovered during the second quarter of 2022 under a loan-loss guaranty, the Company completely charged-offWith all ~~remaining~~ unpaid ~~EAs~~RAs charged off as of June 30, ~~2022. EA~~2023, any payments received ~~after June 30~~^thfor unguaranteed RAs during the third and fourth quarter of 2023 will ~~be credited as a direct~~represent recovery credits directly to ~~the Provision in the period it is received unless such payment is subject to guarantor reimbursement under the previously mentioned loan-loss guaranty.~~

~~For factors affecting the comparison of the TRS results of operations for the first six months of 2022 and the first six months of 2021, see section titled~~ ~~“OVERVIEW (Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021) - Tax Refund Solutions.”~~income.

See additional detail regarding the EARA product under Footnote 45 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements.”

Republic Credit Solutions segment

As illustrated in Table 1113 below, RCS recorded a net charge to the Provision of ~~$4.8~~$6.1 million during the first six months of ~~2022~~2023 compared to a net charge to the Provision of ~~$1.2~~$4.8 million for the same period in ~~2021.~~2022. The increase in the Provision was driven primarily by a ~~$3.4~~$1.2 million increase in net charge-offs ~~on RCS’s line-of-credit products. Net charge-offs~~and a $620,000 Allowance build for RCS’s LOC I product increased to $3.2 million for the first six months of 2022 from $1.2 million during the first six months of 2021, with government stimulus programs generally driving down usage of this product during the first six months of 2021.II product. Net charge-offs for RCS’s LOC II product were ~~$1.3~~$2.5 million for the first six months of ~~2022~~2023 compared to no$1.3 million of net charge-offs during the first six months of 2022. As previously disclosed in the quarterly discussion, this product was first piloted during the first quarter of 2021. RCS began to ramp up origination volume for the RCS LOC II product during early 2022 and has steadily increased its volume since then leading to corresponding higher year-over-year net charge-offs in the product.

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 12.88% as of June 30, 2023, 13.73% as of December 31, 2022, and 14.41% as of June 30, ~~2022, 13.91% as of December 31, 2021, and 7.68% as of June 30, 2021.~~2022. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses as of June 30, ~~2022.~~2023.

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

Table 1113 — RCS Provision by Product


	Six Months Ended Jun. 30,								Six Months Ended Jun. 30,
(in thousands)	2022			2021	$ Change		% Change		2023			2022	$ Change		% Change
Product:
Lines of credit	$	4,831	$	1,207	$	3,624	300	%	$	6,111	$	4,831	$	1,280	26	%
Hospital receivables		(3)		10		(13)	(130)			24		(3)		27	NM
Total	$	4,828	$	1,217	$	3,611	297	%	$	6,135	$	4,828	$	1,307	27	%

Table of Contents

Table 14 — Summary of Loan and Lease Loss Experience

Six Months Ended

June 30,

(dollars in thousands)

2023

2022

ACLL at beginning of period

$
70,413

$
64,577

CBank Initial Recognition of ACLL

216

—

Charge-offs:

Traditional Banking:

Residential real estate

(15)

—

Consumer

(555)

(508)

Total Traditional Banking

(570)

(508)

Warehouse lines of credit

—

—

Total Core Banking

(570)

(508)

Republic Processing Group:

Tax Refund Solutions:

Refund Advances

(25,824)

(11,505)

Other TRS commercial & industrial loans

(126)

(153)

Republic Credit Solutions

(6,118)

(5,084)

Total Republic Processing Group

(32,068)

(16,742)

Total charge-offs

(32,638)

(17,250)

Recoveries:

Traditional Banking:

Residential real estate

26

69

Commercial real estate

59

2

Commercial & industrial

109

17

Home equity

1

112

Consumer

173

195

Total Traditional Banking

368

395

Warehouse lines of credit

—

—

Total Core Banking

368

395

Republic Processing Group:

Tax Refund Solutions:

Refund Advances

473

2,626

Other TRS commercial & industrial loans

—

664

Republic Credit Solutions

465

539

Total Republic Processing Group

938

3,829

Total recoveries

1,306

4,224

Net loan charge-offs

(31,332)

(13,026)

Provision - Core Banking

5,181

(202)

Provision - RPG

27,724

13,100

Total Provision

32,905

12,898

ACLL at end of period

$
72,202

$
64,449

Credit Quality Ratios - Total Company:

ACLL to total loans

1.43
%

1.48
%
ACLL to nonperforming loans

412

422

Net loan charge-offs to average loans

1.31

0.60

Credit Quality Ratios - Core Banking:

ACLL to total loans

1.15
%

1.20
%
ACLL to nonperforming loans

336

303

Net loan charge-offs to average loans

0.01

0.01

Table of Contents

Table ~~12 — Summary of Loan and Lease Loss Experience~~

Six Months Ended

June 30,

(dollars in thousands)

2022

2021

ACLL at beginning of period

$
64,577

$
61,067

Charge-offs:

Traditional Banking:

Commercial real estate

—

(428)

Consumer

(508)

(370)

Total Traditional Banking

(508)

(798)

Warehouse lines of credit

—

—

Total Core Banking

(508)

(798)

Republic Processing Group:

Tax Refund Solutions:

Easy Advances

(11,505)

(10,256)

Other TRS loans

(153)

(51)

Republic Credit Solutions

(5,084)

(1,362)

Total Republic Processing Group

(16,742)

(11,669)

Total charge-offs

(17,250)

(12,467)

Recoveries:

Traditional Banking:

Residential real estate

69

46

Commercial real estate

2

80

Commercial & industrial

17

11

Home equity

112

41

Consumer

195

243

Total Traditional Banking

395

421

Warehouse lines of credit

—

—

Total Core Banking

395

421

Republic Processing Group:

Tax Refund Solutions:

Easy Advances

2,626

30

Other TRS loans

664

8

Republic Credit Solutions

539

171

Total Republic Processing Group

3,829

209

Total recoveries

4,224

630

Net loan charge-offs

(13,026)

(11,837)

Provision - Core Banking

(202)

(267)

Provision - RPG

13,100

11,328

Total Provision

12,898

11,061

ACLL at end of period

$
64,449

$
60,291

Credit Quality Ratios - Total Company:

ACLL to total loans

1.48
%

1.32
%
ACLL to nonperforming loans

398

270

Net loan charge-offs to average loans

0.60

0.51

Credit Quality Ratios - Core Banking:

ACLL to total loans

1.20
%

1.16
%
ACLL to nonperforming loans

317

238

Net loan charge-offs to average loans

0.01

0.02

~~Table of Contents~~

~~Table 13~~15 — Annualized Net Loan Charge-offs (Recoveries) to Average Loans by Loan Category


	Net Loan Charge-Offs (Recoveries) to Average Loans				Net Loan Charge-Offs (Recoveries) to Average Loans
	Six Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2023		2022

Traditional Banking:
Residential real estate:
Owner occupied	(0.02)	%	(0.01)	%	—	%	(0.02)	%
Nonowner occupied	—		—		—		—
Commercial real estate	—		0.05		(0.01)		—
Construction & land development	—		—		—		—
Commercial & industrial	(0.01)		(0.01)		(0.05)		(0.01)
Paycheck Protection Program	—		—
Lease financing receivables	—		—		—		—
Aircraft	—		—		—		—
Home equity	(0.11)		(0.04)		—		(0.11)
Consumer:
Credit cards	0.39		0.84		0.55		0.39
Overdrafts	79.18		24.51		82.64		79.18
Automobile loans	(0.06)		(0.18)		0.09		(0.06)
Other consumer	0.12		—		0.08		0.12
Total Traditional Banking	0.01		0.02		0.01		0.01
Warehouse lines of credit	—		—		—		—
Total Core Banking	0.01		0.02		0.01		0.01

Republic Processing Group:
Tax Refund Solutions:
Easy Advances*	71.16		74.92
Refund Advances*					35.70		71.16
Other TRS loans	(10.54)		0.63		0.88		(10.54)
Republic Credit Solutions	9.09		2.18		9.74		9.09
Total Republic Processing Group	19.16		15.40		21.68		19.16
Total	0.60	%	0.51	%	1.32	%	0.60	%

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

The Company’s net charge-offs to average total Company loans increased from ~~0.51% during the first six months of 2021 to 0.60 %~~0.60% during the first six months of 2022 to 1.32% during the first six months of 2023, with net charge-offs increasing ~~$1.2~~$18.3 million and average total Company loans ~~decreasing $298~~increasing $536 million, or 6%12%. ~~The~~As discussed in more detail above, the increase in net charge-offs was primarily driven by ~~a $1.5~~an $18.2 million increase in net charge-offs within the Company’s ~~RPG operations, which has historically conducted higher-risk lending activities than the Company’s Core Banking~~TRS and RCS operations.

From the first six months of 2021 to the first six months of 2022, RPG experienced a $3.4 million increase in net charge-offs within its RCS segment. Net charge-offs for RCS’s LOC I product increased to $3.2 million for the first six months of 2022 from $1.2 million for the first six months of 2021, with government stimulus programs generally driving down usage of this product during the first six months of 2021. Net charge-offs for RCS’s LOC II product were $1.3 million for the first six months of 2022 compared to no net charge-offs for the first six months of 2021, with this product first piloted during the first quarter of 2021.

From the first six months of 2021 to the first six months of 2022, RPG experienced a $1.9 million decrease in net charge-offs within its TRS segment, as TRS amended one of its existing Tax Provider contracts to place a cap on loan losses from EAs originated through this Tax Provider. For factors affecting the comparison of the TRS results of operations for the first six months of 2022 and the first six months of 2021, see section titled ~~“OVERVIEW (Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021) - Tax Refund Solutions.”~~

During the first six months of ~~2022~~2023 and ~~2021,~~2022, the Company’s Core Bank net charge-offs to average Core Bank loans remained near zero.

9998

Table of Contents

Noninterest Income

Total Company noninterest income ~~increased $10.9~~decreased $19.2 million during the first six months of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

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 ~~$209,000,~~$3.0 million, or 1%20%, for the first six months of ~~2022~~2023 compared to the same period in ~~2021,~~2022, driven primarily by a ~~$648,000 increase~~$1.7 million death benefit payment received during the second quarter of 2023 in ~~Service Charges on Deposit Accounts offset by a $399,000 nonrecurring gain on sale~~excess of the cash surrender value of a ~~former banking center recorded during the first six months of 2021.~~BOLI policy.

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, 2023 and 2022 ~~and 2021~~ were ~~$3.2~~$3.5 million and ~~$2.5~~$3.2 million. The total daily overdraft charges, net of refunds, included in interest income for the six months ended June 30, 2023 and 2022 were $610,000 and ~~2021 were $597,000 and $506,000.~~$597,000.

Mortgage Banking segment

A ~~significant rise~~decrease in ~~long-term interest rates during~~Mortgage banking income for the first six months of ~~2022~~2023 was generally caused by substantially higher market long-term interest rates, which led to a significant slowdown in the origination ~~and subsequent sale~~ of mortgage loans to be sold into the secondary market. ~~As a result, Mortgage Banking income decreased from $11.4 million during the first six months of 2021 to $4.4 million for the first six months of 2022.~~ For the first six months of ~~2022,~~2023, the 30-year mortgage rate was hovering near 7.0% for the entire period. As a result, the Bank sold ~~$187~~$28 million in secondary market loans and achieved an average cash-gain-as-a-percent-of-loans-sold ~~during the quarter~~ of ~~2.23%. During~~2.19% during the first six months of ~~2021,~~2023. During the first two months of 2022, however, long-term interest rates were closer to historical lows, driving secondary market loan sales of ~~$380~~$187 million with comparable cash-gain-as-a-percent-of-loans-sold of ~~3.26%~~2.23%.

With the FOMC ~~moving forward with~~continuing its quantitative tightening program during ~~2022,~~the second half of 2023, management believes it is likely that the Core Bank’s mortgage origination volume will continue to be negatively impacted by ~~rising~~higher interest rates causing additional declines in mortgage banking income throughout ~~2022.~~2023.

Tax Refund Solutions segment

TRS’s noninterest income ~~increased $15.3~~decreased $18.8 million, or ~~75%~~53%, during the first six months of ~~2022~~2023 compared to the same period in ~~2021.~~2022. Green Dot paid RB&T a total of $18 million in nonrecurring payments during the first six months of 2022 related to the now-cancelled TRS Purchase Agreement. These nonrecurring payments included the following:

●

A contract termination fee of $5.0 million in January 2022 after RB&T provided Green Dot a notice of termination of the May 2021 TRS Purchase Agreement for the sale of substantially all of RB&T’s TRS assets and operations to Green Dot.

●

A legal settlement of $13.0 million in June 2022 regarding RB&T’s lawsuit against Green Dot.

Regarding TRS’s RT product, net RT revenue decreased ~~14%~~4% from ~~$18.6~~$16.0 million during the first six months of ~~2021~~2022 to ~~$16.0~~$15.3 million during the same period in ~~2022.~~ ~~The decrease was primarily driven by an 8% overall decrease in~~2023. RT volume from the 2021 to the 2022 tax season, with 4% of that decrease driven by the loss of one of TRS’s tax providers following the announcement of the now-cancelled May 2021 Asset Purchase Agreement.

~~For factors affecting the comparison of the TRS results of operations~~revenue for the first ~~six months~~quarter of ~~2022 and~~2023 was negatively impacted by a general decline in overall RT demand across the ~~first six months of 2021, see section titled~~ industry.~~“OVERVIEW (Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021) - Tax Refund Solutions.”~~

~~100~~99

Table of Contents

Republic Credit Solutions segment

RCS’s noninterest income ~~increased $2.3 million,~~decreased $666,000, or ~~59%~~11%, during the first six months of ~~2022~~2023 compared to the same period in ~~2021,~~2022, with program fees representing the ~~entirety~~substantial majority of RCS’s noninterest income. The ~~increase~~decrease in RCS program fees primarily reflected lower sales volume and corresponding gains from RCS’s installment loan product which were substantially offset by higher sales volume and gains from RCS’s line of credit and installment loan products as sales volume was negatively impacted during the first six months of 2021 by federal government stimulus programs implemented to combat the economic impact of the COVID pandemic. LOC II product.

Proceeds from the sale of ~~RCS~~RCS's installment loan ~~products~~product totaled ~~$526~~$472 million during the first six months of ~~2022, an 82% increase~~2023, a 10% decrease from the same period in ~~2021.~~2022. Conversely, RCS sold approximately $183 million of balances for the LOC II product during the first six months of 2023, an increase of 163% over the first six months of 2022. The decrease in the RCS installment product volume was purposely driven while a new credit model was being tested and modified. Related to the increase in the LOC II volume, RCS began to ramp up origination volume for this product during early 2022 and has steadily increased its volume since then leading to corresponding higher year-over-year net program revenue.

The following table presents RCS program fees by product:

Table 1416 — RCS Program Fees by Product


	Six Months Ended Jun. 30,								Six Months Ended Jun. 30,
(dollars in thousands)	2022		2021		$ Change		% Change		2023		2022		$ Change		% Change
Product:
Lines of credit	$	2,818	$	1,899	$	919	48	%	$	3,892	$	2,818	$	1,074	38	%
Hospital receivables		99		111		(12)	(11)			97		99		(2)	(2)
Installment loans*		3,359		1,930		1,429	74			1,556		3,359		(1,803)	(54)
Total	$	6,276	$	3,940	$	2,336	59	%	$	5,545	$	6,276	$	(731)	(12)	%

*	The Company has elected the fair value option for this product, with mark-to-market adjustments recorded as a component of program fees.

Noninterest Expense

Total Company noninterest expense increased ~~$2.6~~$7.7 million, or 3%8%, during the first six months of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

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

Traditional Banking segment

Traditional Banking noninterest expense increased ~~$2.3~~$6.5 million for the first six months of ~~2022~~2023 compared to the same period in ~~2021.~~2022. The following primarily drove the change in noninterest expense:

●

~~Other~~Noninterest expenses ~~increased $1.5 million,~~associated with the ~~following other~~acquired CBank operations were $4.4 million across all categories for the first six months of 2023, with no such expenses ~~reflecting~~for the ~~largest increases:~~first six months of 2022. The figure for the first six months of 2023 includes $2.2 million in merger related expenses that are not expected to recur in the future.

●

Legacy Salaries and Benefits expense increased a net $1.3 million, or 3%, to $47.3 million for the first six months of 2022. The most notable changes within this category were as follows:

~~Meals, Entertainment, and Travel expenses, in total,~~Direct legacy salaries increased ~~$520,000,~~ ~~with in-person business travel and community outreach increasing during~~a net $395,000, or 1%, due primarily to the ~~quarter toward pre-pandemic levels.~~cost of annual merit increases.

~~Fraud losses, primarily check fraud,~~Legacy Overhead salaries increased ~~$473,000,~~ $1.8 million, as a greater portion of overhead salaries was allocated to the ~~Bank’s clients experienced a general increase~~Traditional Banking segment than the Mortgage Banking segment during the first six months 2023 compared to the same period in ~~fraudulent check activity~~2022. Overhead salaries are allocated to the Traditional Banking and the Mortgage Banking segments each period based on each segment’s pro rata mortgage production, with salaries allocated to Mortgage Banking higher in 2022 when mortgage production was greater during ~~2022.~~the first six months of the year.

~~Charitable contributions increased $217,000, with these outlays also progressing towards pre-pandemic levels following the reduction of various restrictions.~~

●

~~Salaries and benefits expense increased approximately $618,000, or 1%,~~ ~~primarily driven by annual merit increases partially offset by a 49-count decrease in FTE’s and a decrease in health benefits costs.~~

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●

Legacy technology expenses declined $615,000 as the Traditional Bank continued to combine technology platforms as part of a Company-wide efficiency initiative.

●

Interchange related expenses increased $382,000 due to higher debit card and credit card purchasing activity.

●

FDIC Insurance expense increased $276,000 due to higher premiums charged by the FDIC in 2023.

~~Tax Refund Solutions~~Mortgage Banking segment

Noninterest expense at the ~~TRS~~Mortgage Banking segment decreased ~~$321,000,~~$646,000, or 4%12%, during the first six months of ~~2022~~2023 compared to the same period in ~~2021,~~2022, primarily due to ~~consulting costs incurred during 2021 connected~~a $304,000 reduction in overhead salaries allocated to the ~~now-cancelled TRS Purchase Agreement.~~Mortgage Banking segment and a $149,000 reduction in mortgage commissions, with both reductions resulting from the previously discussed slowdown in mortgage origination volume.

The Company records a credit offset to salary expense for each loan it originates and recognizes the cost of that credit as an adjustment to the loan’s yield over its estimated life. The amount of credit benefit to salary expense during a given period is determined by the overall loan origination volume during that period.

Republic Credit Solutions segment

Noninterest expense at the RCS segment increased ~~$1.4~~$1.8 million, or ~~66%~~52%, during the first six months of ~~2022~~2023 compared to the same period in ~~2021, primarily due to increased marketing~~2022. Approximately $867,000 of ~~RCS’s LOC II product. The~~this increase was concentrated within the LOC II product and was ~~first piloted during~~a result of a year-over-year increase in marketing activity for the ~~first quarter~~product. Approximately $532,000 of ~~2021.~~the increase was within Salaries and Benefits and was primarily the result of annual merit increases.

COMPARISON OF FINANCIAL CONDITION AS OF JUNE 30, ~~2022~~2023 AND DECEMBER 31, ~~2021~~2022

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 ~~$795~~$242 million in cash and cash equivalents as of June 30, ~~2022~~2023 compared to ~~$757~~$314 million as of December 31, ~~2021. Although~~2022. Comparing average balances for the second quarters of 2023 and 2022, the Company ~~deployed some~~had average interest-earning cash and cash equivalent balances of its excess cash through the purchase of long-term investment securities during the fourth quarter of 2021and the first quarter of 2022 as a result of movements in the yield curve, it has maintained an overall general strategy of keeping a large amount of cash on balance sheet$114 million for ~~interest rate risk protection. This strategy benefitted the Traditional Bank’s net interest income during~~ the second quarter of ~~2022 as~~2023 compared to $814 million for the ~~FOMC began raising the FFTR.~~second quarter of 2022. The decline in average interest-earning cash balances from period to period was driven generally by a decrease in average deposits and an increase in average loan balances.

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, 2022 Compared to Three Months Ended June 30, 2021) and “RESULTS OF OPERATIONS (Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021).

For cash held at the FRB, the Bank earns a yield on amounts ~~exceeding~~more than required reserves. This cash earned a weighted-average yield of ~~0.49%~~4.82% during the first six months of ~~2022~~2023 with a spot balance yield of ~~1.65%~~5.15% on June 30, ~~2022.~~2023. For cash held within the Bank’s banking center and ATM networks, the Bank does not earn interest.

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Investment Securities

Table 1517 — Purchases of Investment Securities


	Six Months Ended June 30, 2022						Six Months Ended June 30, 2023
	Purchase		Yield to		Average		Purchase		Yield to		Average
(in thousands)	Cost		Maturity		Life		Cost		Maturity		Life

Purchases by Class for the Three Months Ended March 31, 2022
U.S. Treasury	$	85,614	1.51	%	2.5	yrs
Purchases by Class for the Three Months Ended March 31, 2023
Corporate (acquired as a part of the CBank acquisition)							$	2,017	6.05	%	2.60	yrs
U.S. Government Agencies		10,028	1.39		10.0			50,000	5.38		2.50
Mortgage-backed securities - residential		20,134	1.25		10.0
Mortgage-backed securities - residential (acquired as a part of the CBank acquisition)								14,442	4.56		9.10
Total	$	115,776	1.45		4.4	yrs	$	66,459	5.38		2.50	yrs

Purchases by Class for the Three Months Ended June 30, 2022
U.S. Treasury	$	74,043	2.62	%	2.1	yrs
Purchases by Class for the Three Months Ended June 30, 2023
U.S. Government Agencies							$	15,000	5.75	%	2.91	yrs
Total	$	74,043	2.62		2.1	yrs	$	15,000	5.75		2.91	yrs

Total Purchases for the Six Months Ended June 30, 2022	$	189,819	1.91	%	3.5	yrs
Total Purchases for the Six Months Ended June 30, 2023							$	81,459	5.32	%	3.75	yrs

~~During~~Republic’s investment portfolio increased $19 million from December 31, 2022 to June 30, 2023, driven by $40 million in portfolio purchases, $16 million of investments acquired as part of the ~~second quarter, management generally targeted purchases~~CBank merger, and a $20 million increase in FHLB stock. These increases were offsets by portfolio declines of ~~investment securities with~~$40 million from calls and maturities of ~~approximately two years. While the Company will likely continue to replace some of its maturing investments with new purchases, it will likely maintain~~debt securities, $18 million in paydowns on mortgage-backed securities, and a ~~general policy of limited growth~~$1 million increase in the ~~total securities~~ portfolio ~~in the near-term as long as its yield on interest-earning cash continues to rise in proportion to future FFTR increases.~~market value.

The overall timing and amount of any purchases will depend on 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 interest rate environment at the time, as well as the anticipated interest rate environment in the near and long term.

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Table 1618 — Loan Portfolio Composition


(dollars in thousands)	June 30, 2022		December 31, 2021		$ Change		% Change		June 30, 2023		December 31, 2022		$ Change		% Change

Traditional Banking:
Residential real estate:
Owner occupied	$	832,137	$	820,731	$	11,406	1	%	$	1,086,751	$	911,427	$	175,324	19	%
Nonowner occupied		313,534		306,323		7,211	2			350,390		321,358		29,032	9
Commercial real estate		1,569,119		1,456,009		113,110	8			1,727,092		1,599,510		127,582	8
Construction & land development		137,452		129,337		8,115	6			179,479		153,875		25,604	17
Commercial & industrial		394,175		340,363		53,812	16			478,759		413,387		65,372	16
Paycheck Protection Program		14,657		56,014		(41,357)	(74)
Lease financing receivables		11,345		8,637		2,708	31			79,804		10,505		69,299	660
Aircraft		159,958		142,894		17,064	12			208,512		179,785		28,727	16
Home equity		214,069		210,578		3,491	2			255,755		241,739		14,016	6
Consumer:
Credit cards		15,419		14,510		909	6			17,134		15,473		1,661	11
Overdrafts		901		683		218	32			706		726		(20)	(3)
Automobile loans		9,579		14,448		(4,869)	(34)			4,177		6,731		(2,554)	(38)
Other consumer		1,245		1,432		(187)	(13)			6,109		626		5,483	876
Total Traditional Banking		3,673,590		3,501,959		171,631	5			4,394,668		3,855,142		539,526	14
Warehouse lines of credit*		596,678		850,550		(253,872)	(30)			539,560		403,560		136,000	34
Total Core Banking		4,270,268		4,352,509		(82,241)	(2)			4,934,228		4,258,702		675,526	16

*Republic Processing Group:**
Tax Refund Solutions:
Easy Advances		—		—		—	NM
Other TRS loans		149		50,987		(50,838)	(100)
Refund Advances										—		97,505		(97,505)	(100)
Other TRS commercial & industrial loans										193		51,767		(51,574)	(100)
Republic Credit Solutions		91,816		93,066		(1,250)	(1)			118,721		107,828		10,893	10
Total Republic Processing Group		91,965		144,053		(52,088)	(36)			118,914		257,100		(138,186)	(54)

Total loans**		4,362,233		4,496,562		(134,329)	(3)			5,053,142		4,515,802		537,340	12
Allowance for credit losses		(64,449)		(64,577)		128	(0)			(72,202)		(70,413)		(1,789)	3

Total loans, net	$	4,297,784	$	4,431,985	$	(134,201)	(3)		$	4,980,940	$	4,445,389	$	535,551	12

*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~~increased by ~~$134~~$537 million, or 3%12%, during the first six months of 2022 to ~~$4.4~~$5.1 billion as of June 30, ~~2022.~~2023. The most significant components comprising the change in loans by reportable segment follow:

Traditional Banking segment

Period-end balances for Traditional Banking loans increased ~~$172~~$540 million, or 5%14%, from December 31, ~~2021~~2022 to June 30, ~~2022.~~2023. The following primarily drove the change in loan balances during the first six months of ~~2022:~~2023:

●

The Traditional Bank acquired loans and leases with a fair value of $216 million in connection with the CBank acquisition.

●

The Traditional Bank’s legacy CRE portfolio, which excludes the CRE loans acquired from CBank, grew ~~$113~~$54 million, or 8%3%, during the first six months of ~~2022,~~2023, as the Traditional Bank experienced strong loan demand within its Corporate Lending, ~~division, its~~ Private ~~CRE,~~Banking and Commercial ~~Banking division, and~~Real Estate divisions in its ~~Northern Kentucky/Cincinnati~~Louisville market.

●

With mortgage refinance volume at all-time record levels during 2020 and 2021, balances of 1-4 family loans, including HELOCs, generally declined as the vast majority of the volume of refinancings was sold into the secondary market. This trend began to change in mid to late 2022, however, as a significant rise in long-term, fixed-rate mortgages caused portfolio level ARM loans to become generally more attractive than secondary market loans. As a result, ~~residential real estate loans increased $19 million during~~ the ~~first six months of 2022, while HELOCs increased $4 million during the same period.~~Traditional Bank’s legacy

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residential real estate portfolio, which excludes the residential real estate loans acquired from CBank, increased $89 million during the first six months of 2023.

●

~~Offsetting~~After a multi-year pause in operations, the ~~growth above,~~Traditional Bank’s Corresponding Lending Division began purchasing loans again during the first ~~six months~~quarter of ~~2022, the Core Bank’s PPP portfolio decreased $41~~2023. The loans purchased are all 1-4 Family, first-lien mortgages with fixed rate terms of generally five or seven years. Through June 30, 2023, this division had acquired approximately $96 million ~~as this temporary government program continued to wind down.~~of loans with an expected average yield of 5.13%.

Warehouse ~~Lending segment~~

Outstanding Warehouse period-end balances ~~decreased $254~~increased $136 million from December 31, ~~2021~~2022 to June 30, ~~2022.~~2023. Due to the volatility and seasonality of the mortgage market, it is difficult to project future outstanding balances of Warehouse lines of credit. The growth of the Bank’s Warehouse ~~Lending~~ business greatly depends on the overall mortgage market and typically follows industry trends. Since its entrance into this business during 2011, the Bank has experienced volatility in the Warehouse portfolio consistent with overall demand for mortgage products. Weighted average quarterly usage rates on the Bank’s Warehouse lines have ranged from a low of 31% during the ~~fourth~~first quarter of ~~2013~~2023 to a high of 71% during the fourth quarter of 2019. On an annual basis, weighted average usage rates on the Bank’s Warehouse lines have ranged from a low of ~~40%~~39% during ~~2013~~2022 to a high of 66% during 2020.

As previously discussed, additional increases in ~~short-term~~long-term market interest rates ~~and overall market rates are generally believed by management~~will likely lead to ~~be unfavorable to Warehouse’s client demand, likely leading to~~ a continued reduction in average outstanding balances driven by a decline in demand from Warehouse clients, as higher long-term interest rates generally drive lower demand for Warehouse borrowings. In addition, because the yield on Warehouse lines of credit are generally tied to short-term interest rates, additional increases in short-term interest rates could cause further competitive pricing pressures for the industry and the Core Bank, driving down the yield Warehouse earns on its lines of credits.

Tax Refund Solutions segment

Outstanding TRS loans decreased ~~$51~~$98 million from December 31, ~~2021~~2022 to June 30, ~~2022~~2023 primarily reflecting ~~a $51 million reduction in other~~the substantial paydown of ERAs originated during December 2022. In addition, TRS ~~loans. Other TRS loans as~~also received substantial paydowns of ~~December 31, 2021 were primarily~~ commercial loans ~~to Tax Providers. These loans are typically~~ made induring the fourth quarter of 2022 to third-party tax-related businesses for their cash flow needs for the first quarter tax season. RAs, including ERAs, are only made during the December of the previous year and the first two months of each year, ~~and fully repaid~~with all unpaid RAs charged off by ~~the end~~June 30^th of ~~the first six months of the following~~each year.

Allowance for Credit Losses

As of June 30, ~~2022,~~2023, the Bank maintained an ACLL for expected credit losses inherent in the Bank’s loan portfolio, which includes overdrawn deposit accounts. The Bank also maintained an ACLS and an ACLC for expected losses in its securities portfolio and its off-balance sheet credit exposures, respectively. Management evaluates the adequacy of the ACLL monthly, and the adequacy of the ACLS and ACLC quarterly. All ACLs are presented and discussed with the Audit Committee and the Board of Directors quarterly.

The Company’s ACLL ~~decreased $128,000~~increased $2 million from ~~$65~~$70 million as of December 31, ~~2021~~2022 to ~~$64~~$72 million as of June 30, ~~2022.~~2023. As a percent of total loans, the total Company’s ACLL increased to ~~1.48%~~1.43% as of June 30, ~~2022~~2023 compared to ~~1.44%~~1.56% as of December 31, ~~2021.~~2022. An analysis of the ACL by reportable segment follows:

Traditional Banking segment

The Traditional Banking ACLL increased approximately ~~$320,000~~$324,000 to ~~$50~~$56 million as of June 30, ~~2022~~2023, generally driven primarily by formula reserves tied to loan growth during the first six months of 2022 partially offset by the $1.5 million release of COVID-related reserves. The release of these reserves ~~released following~~coincided with the ~~payoff or upgrade of loans downgraded during the height~~federal government’s declaration of the ~~pandemic.~~ official end to the COVID pandemic in May of 2023.

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Warehouse ~~Lending segment~~

The Warehouse ACLL decreased to approximately ~~$1.5~~$1.3 million, and the Warehouse ACLL to total Warehouse loans remained at 0.25% when comparing June 30, ~~2022~~2023 to December 31, ~~2021.~~2022. As of June 30, ~~2022,~~2023, the Warehouse ACLL was entirely qualitative in nature with no adjustments to the qualitative reserve percentage required for the first six months of 2022.

Tax Refund Solutions

The TRS ACLL decreased $4 million from $4 million as of December 31, 2022 to $0 as of June 30, 2023, with this decrease driven by the charge-off of all unpaid ERAs originated during December 2022.

Republic Credit Solutions segment

The RCS ACLL increased ~~$283,000 from $13 million as of December 31, 2021~~$482,000 to ~~$13~~$15 million as of June 30, ~~2022.~~2023, with this increase driven by an increase in the RCS LOC II spot balance and a change in the RCS loan mix as the outstanding healthcare receivable spot balance increased and the RCS LOC I spot balance decreased.

RCS maintained an ACLL for two distinct credit products offered as of June 30, ~~2022,~~2023, including its line-of-credit products and its healthcare-receivables products. As of June 30, ~~2022,~~2023, 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 ~~56%~~51.91% for its ~~LOC II product.~~line-of-credit products. The lower reserve percentage of 0.25% was provided for RCS’s healthcare receivables, as such receivables have recourse back to the third-party providers.

Table 1719 — Management’s Allocation of the Allowance for Credit Losses on Loans


	June 30, 2022							December 31, 2021						June 30, 2023							December 31, 2022
				Percent of		Percent of					Percent of		Percent of				Percent of		Percent of					Percent of		Percent of
				Loans to		ACLL to					Loans to		ACLL to				Loans to		ACLL to					Loans to		ACLL to
				Total		Total					Total		Total				Total		Total					Total		Total
(dollars in thousands)		ACLL		Loans*		Loan Class			ACLL		Loans*		Loan Class*
(in thousands)															ACLL		Loans*		Loan Class			ACLL		Loans*		Loan Class*

Traditional Banking:
Residential real estate:
Owner occupied		$	8,445	20	%	1.01	%		$	8,647	19	%	1.05		$	9,899	23	%	0.91	%		$	8,909	21	%	0.98	%
Nonowner occupied			2,733	7		0.87				2,700	7		0.88			3,086	7		0.88				2,831	7		0.88
Commercial real estate			24,341	36		1.55				23,769	32		1.63			25,089	35		1.45				23,739	36		1.48
Construction & land development			3,591	3		2.61				4,128	3		3.19			4,811	4		2.68				4,123	3		2.68
Commercial & industrial			3,768	9		0.96				3,487	8		1.02			4,322	9		0.90				3,976	9		0.97
Paycheck Protection Program			—	—		—				—	1		—
Lease financing receivables			119	—		1.05				91	—		1.05			825	2		1.03				110	—		1.05
Aircraft			400	4		0.25				357	3		0.25			521	4		0.25				449	4		0.25
Home equity			4,113	5		1.92				4,111	5		1.95			4,770	5		1.87				4,628	5		1.91
Consumer:			—	—		—
Credit cards			994	—		6.45				934	—		6.44			1,103	—		6.44				996	—		6.44
Overdrafts			901	—		100.00				683	—		100.00			706	—		100.00				726	—		100.00
Automobile loans			122	—		1.27				186	—		1.29			53	—		1.27				87	—		1.29
Other consumer			200	—		16.06				314	—		21.93			382	—		6.25				135	—		21.57
Total Traditional Banking			49,727	84		1.35				49,407	78		1.41			55,567	89		1.26				50,709	85		1.32
Warehouse lines of credit			1,491	14		0.25				2,126	19		0.25			1,346	11		0.25				1,009	9		0.25
Total Core Banking			51,218	98		1.20				51,533	97		1.18			56,913	100		1.15				51,718	94		1.20

Republic Processing Group:
Tax Refund Solutions:
Easy Advances			—	—		—				—	—		—
Other TRS loans			—	—		—				96	1		0.19
Refund Advances																—	—		—				3,797	2		4
Other TRS commercial & industrial loans																—	—		—				91	1		0.18
Republic Credit Solutions			13,231	2		14.41				12,948	2		13.91			15,289	3		12.88				14,807	3		13.73
Total Republic Processing Group			13,231	2		14.39				13,044	3		9.06			15,289	3		12.86				18,695	6		7.27
Total		$	64,449	100		1.48			$	64,577	100		1.44		$	72,202	103		1.43			$	70,413	100		1.56

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

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Asset Quality

Classified and Special Mention Loans

The Bank applies credit quality indicators, or ratings, to individual loans based on internal Bank policies. Such internal policies are informed by regulatory standards. Loans rated “Loss,” “Doubtful,” “Substandard,” and PCD-Substandard are considered “Classified.” Loans rated “Special Mention” or PCD-Special Mention are considered Special Mention. The Bank’s Classified and Special Mention loans decreased approximately ~~$39~~$9 million during the first six months of ~~2022,~~2023, driven primarily by commercial-purpose loans repaid or upgraded to a Pass rating during the first six months of 2022.

See Footnote 45 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements” for additional discussion regarding Classified and Special Mention loans.

Table 1820 — Classified and Special Mention Loans


(dollars in thousands)	June 30, 2022		December 31, 2021		$ Change		% Change		June 30, 2023		December 31, 2022		$ Change		% Change

Loss	$	—	$	—	$	—	—	%	$	—	$	—	$	—	—	%
Doubtful		—		—		—	—			—		—		—	—
Substandard		16,471		21,714		(5,243)	(24)			16,727		17,010		(283)	(2)
PCD - Substandard		1,595		1,692		(97)	(6)			1,896		1,498		398	27
Total Classified Loans		18,066		23,406		(5,340)	(23)			18,623		18,508		115	1

Special Mention		81,034		114,496		(33,462)	(29)			60,801		69,246		(8,445)	(12)
PCD - Special Mention		757		795		(38)	(5)			486		718		(232)	(32)
Total Special Mention Loans		81,791		115,291		(33,500)	(29)			61,287		69,964		(8,677)	(12)

Total Classified and Special Mention Loans	$	99,857	$	138,697	$	(38,840)	(28)	%	$	79,910	$	88,472	$	(8,562)	(10)	%

Nonperforming Loans

Nonperforming loans include loans on nonaccrual status and loans past due 90-days-or-more and still accruing. The nonperforming loan category includes TDRs totaling approximately $5$0 million and $6$2 million as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Nonperforming loans to total loans decreased to ~~0.37%~~0.35% at June 30, ~~2022~~2023 from ~~0.46%~~0.36% at December 31, ~~2021,~~2022, as the total balance of nonperforming loans ~~decreased~~increased by $4$1 million, or ~~21%~~6%, while total loans ~~decreased $134~~increased $536 million, or 3%12%, during the first six months of ~~2022.~~2023. As presented in Tables 2221 and 2322 below, the decrease in nonperforming loans during ~~2022,~~2023, including the nonaccrual loan component, was primarily driven by the refinancing of $5$8 million of these loans to another financial institution.

The ACLL to total nonaccrual loans ~~increased~~decreased to ~~399%~~412% as of June 30, ~~2022~~2023 from ~~315%~~432% as of December 31, ~~2021,~~2022, as the total ACLL ~~decreased $128,000~~increased $2 million and the balance of nonaccrual loans ~~decreased~~increased by $4$1 million, or ~~21%~~9%. The driver of the ~~decrease~~increase in ~~nonaccrual loans~~ACLL was primarily RAs originated through the ~~refinancing out of~~Company’s TRS segment, which was partially offset by loan growth in the ~~Bank of $5 million of these loans~~Traditional Banking segment during the ~~first six months of 2022.~~second quarter.

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Table 1921 — Nonperforming Loans and Nonperforming Assets Summary


(dollars in thousands)	June 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022

Loans on nonaccrual status*	$	16,168		$	20,504		$	16,957		$	15,562
Loans past due 90-days-or-more and still on accrual**		42			48			547			756
Total nonperforming loans		16,210			20,552			17,504			16,318
Other real estate owned		1,687			1,792			1,478			1,581
Total nonperforming assets	$	17,897		$	22,344		$	18,982		$	17,899

Credit Quality Ratios - Total Company:
ACLL to total loans		1.48	%		1.44	%		1.43	%		1.56	%
Nonaccrual loans to total loans		0.37			0.46			0.34			0.34
ACLL to nonaccrual loans		399			315			426			452
Nonperforming loans to total loans		0.37			0.46			0.35			0.36
Nonperforming assets to total loans (including OREO)		0.41			0.50			0.38			0.40
Nonperforming assets to total assets		0.29			0.37			0.30			0.31

Credit Quality Ratios - Core Bank:
ACLL to total loans		1.20	%		1.18	%		1.15	%		1.21	%
Nonaccrual loans to total loans		0.38			0.47			0.34			0.37
ACLL to nonaccrual loans		317			251			336			332
Nonperforming loans to total loans		0.38			0.47			0.34			0.37
Nonperforming assets to total loans (including OREO)		0.42			0.51			0.37			0.40
Nonperforming assets to total assets		0.32			0.40			0.32			0.32

*	Loans on nonaccrual status include collateral-dependent loans. See Footnote 45 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements” for additional discussion regarding collateral-dependent loans.

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

Table 2022 — Nonperforming Loan Composition


	June 30, 2022					December 31, 2021					June 30, 2023					December 31, 2022
				Percent of					Percent of					Percent of					Percent of
				Total					Total					Total					Total
(dollars in thousands)	Balance			Loan Class		Balance			Loan Class		Balance			Loan Class		Balance			Loan Class

Traditional Banking:
Residential real estate:
Owner occupied		$	11,538	1.39	%		$	12,039	1.47	%		$	14,432	1.33	%		$	13,388	1.47	%
Nonowner occupied			128	0.04				95	0.03				72	0.02				117	0.04
Commercial real estate			3,228	0.21				6,557	0.45				927	0.05				1,001	0.06
Construction & land development			—	—				—	—				—	—				—	—
Commercial & industrial			—	—				13	0.00				—	—				—	—
Paycheck Protection Program			—	—				—	—
Lease financing receivables			—	—				—	—				—	—				—	—
Aircraft			—	—				—	—				—	—				—	—
Home equity			1,016	0.47				1,700	0.81				1,498	0.59				815	0.34
Consumer:
Credit cards			—	—				—	—				—	—				—	—
Overdrafts			—	—				1	0.15				—	—				—	—
Automobile loans			36	0.38				97	0.67				27	0.65				31	0.46
Other consumer			222	17.83				3	0.21				1	0.02				210	33.55
Total Traditional Banking			16,168	0.44				20,505	0.59				16,957	0.39				15,562	0.40
Warehouse lines of credit			—	—				—	—				—	—				—	—
Total Core Banking			16,168	0.38				20,505	0.47				16,957	0.34				15,562	0.37

Republic Processing Group:
Tax Refund Solutions:
Easy Advances			—	—				—	—
Other TRS loans			—	—				—	—
Refund Advances													—	—				—	—
Other TRS commercial & industrial loans													—	—				—	—
Republic Credit Solutions			42	0.05				47	0.05				547	0.46				756	0.70
Total Republic Processing Group			42	0.05				47	0.03				547	0.46				756	0.29

Total nonperforming loans		$	16,210	0.37	%		$	20,552	0.46	%		$	17,504	0.35	%		$	16,318	0.36	%

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Table 2123 — Stratification of Nonperforming Loans


	Number of Nonperforming Loans and Recorded Investment												Number of Nonperforming Loans and Recorded Investment
					Balance												Balance
June 30, 2022		Balance			> $100 &			Balance			Total
June 30, 2023														Balance			> $100 &			Balance			Total
(dollars in thousands)	No.	<= $100		No.	<= $500		No.	> $500		No.	Balance		No.	<= $100		No.	<= $500		No.	> $500		No.	Balance

Traditional Banking:
Residential real estate:
Owner occupied	145	$	4,669	30	$	5,403	1	$	1,466	176	$	11,538	125	$	4,421	48	$	7,652	2	$	2,359	175	$	14,432
Nonowner occupied	4		128	—		—	—		—	4		128	3		72	—		—	—		—	3		72
Commercial real estate	—		—	1		251	2		2,977	3		3,228	—		—	1		212	1		715	2		927
Construction & land development	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—
Commercial & industrial	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—
Paycheck Protection Program	—		—	—		—	—		—	—		—
Lease financing receivables	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—
Aircraft	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—
Home equity	27		714	2		302	—		—	29		1,016	32		905	2		593	—		—	34		1,498
Consumer:
Credit cards	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—
Overdrafts	NM		—	—		—	—		—	NM		—	NM		—	—		—	—		—	NM		—
Automobile loans	6		36	—		—	—		—	6		36	5		27	—		—	—		—	5		27
Other consumer	3		2	1		220	—		—	4		222	1		1	—		—	—		—	1		1
Total Traditional Banking	185		5,549	34		6,176	3		4,443	222		16,168	166		5,426	51		8,457	3		3,074	220		16,957
Warehouse lines of credit	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—
Total Core Banking	185		5,549	34		6,176	3		4,443	222		16,168	166		5,426	51		8,457	3		3,074	220		16,957

Republic Processing Group:
Tax Refund Solutions:
Easy Advances	—		—	—		—	—		—	—		—
Other TRS loans	—		—	—		—	—		—	—		—
Refund Advances													—		—	—		—	—		—	—		—
Other TRS commercial & industrial loans													—		—	—		—	—		—	—		—
Republic Credit Solutions	NM		42	—		—	—		—	NM		42	NM		—	—		—	—		547	NM		547
Total Republic Processing Group	NM		42	—		—	—		—	NM		42	NM		—	—		—	—		547	NM		547

Total	185	$	5,591	34	$	6,176	3	$	4,443	222	$	16,210	166	$	5,426	51	$	8,457	3	$	3,621	220	$	17,504


	Number of Nonperforming Loans and Recorded Investment												Number of Nonperforming Loans and Recorded Investment
					Balance												Balance
December 31, 2021		Balance			> $100 &			Balance			Total
December 31, 2022														Balance			> $100 &			Balance			Total
(dollars in thousands)	No.	<= $100		No.	<= $500		No.	> $500		No.	Balance		No.	<= $100		No.	<= $500		No.	> $500		No.	Balance

Traditional Banking:
Residential real estate:
Owner occupied	146	$	5,042	27	$	4,857	2	$	2,140	175	$	12,039	134	$	4,650	45	$	7,353	1	$	1,385	180	$	13,388
Nonowner occupied	3		95	—		—	—		—	3		95	4		117	—		—	—		—	4		117
Commercial real estate	—		—	4		872	3		5,685	7		6,557	—		—	1		232	1		769	2		1,001
Construction & land development	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—
Commercial & industrial	1		13	—		—	—		—	1		13	—		—	—		—	—		—	—		—
Paycheck Protection Program	—		—	—		—	—		—	—		—
Lease financing receivables	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—
Aircraft	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—
Home equity	25		695	5		1,005	—		—	30		1,700	28		711	1		104	—		—	29		815
Consumer:
Credit cards	—		—	—		—	—		—	NM		—	—		—	—		—	—		—	—		—
Overdrafts	NM		1	—		—	—		—	NM		1	NM		—	—		—	—		—	NM		—
Automobile loans	13		97	—		—	—		—	13		97	6		31	—		—	—		—	6		31
Other consumer	4		3	—		—	—		—	4		3	—		—	1		210	—		—	1		210
Total Traditional Banking	192		5,946	36		6,734	5		7,825	233		20,505	172		5,509	48		7,899	2		2,154	222		15,562
Warehouse lines of credit	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—
Total Core Banking	192		5,946	36		6,734	5		7,825	233		20,505	172		5,509	48		7,899	2		2,154	222		15,562

Republic Processing Group:
Tax Refund Solutions:
Easy Advances	—		—	—		—	—		—	—		—
Other TRS loans	—		—	—		—	—		—	—		—
Refund Advances													—		—	—		—	—		—	—		—
Other TRS commercial & industrial loans													—		—	—		—	—		—	—		—
Republic Credit Solutions	NM		47	—		—	—		—	NM		47	NM		—	—		—	—		756	NM		756
Total Republic Processing Group	NM		47	—		—	—		—	NM		47	NM		—	—		—	—		756	NM		756

Total	192	$	5,993	36	$	6,734	5	$	7,825	233	$	20,552	172	$	5,509	48	$	7,899	2	$	2,910	222	$	16,318

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Table 2224 — ~~Rollforward~~Roll-forward of Nonperforming Loans


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
(in thousands)	2022		2021		2022		2021		2023		2022		2023		2022

Nonperforming loans at the beginning of the period	$	16,966	$	22,520	$	20,552	$	23,595	$	16,610	$	16,966	$	16,318	$	20,552
Loans added to nonperforming status during the period that remained nonperforming at the end of the period		1,313		1,042		2,324		1,772		3,432		1,313		5,267		2,324
Loans removed from nonperforming status during the period that were nonperforming at the beginning of the period (see table below)		(1,381)		(934)		(5,633)		(2,838)		(1,917)		(1,381)		(3,193)		(5,633)
Principal balance paydowns of loans nonperforming at both period ends		(699)		(490)		(1,028)		(860)		(392)		(699)		(680)		(1,028)
Net change in principal balance of other loans nonperforming at both period ends*		11		206		(5)		675		(229)		11		(208)		(5)

Nonperforming loans at the end of the period	$	16,210	$	22,344	$	16,210	$	22,344	$	17,504	$	16,210	$	17,504	$	16,210

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

Table 2325 — Detail of Loans Removed from Nonperforming Status


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
(in thousands)	2022		2021		2022		2021		2023		2022		2023		2022

Loans charged off	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans transferred to OREO		—		—		—		—		—		—		—		—
Loans refinanced at other institutions		(1,381)		(752)		(5,429)		(2,650)
Loan payoffs and paydowns										(1,463)		(1,381)		(1,518)		(5,429)
Loans returned to accrual status		—		(182)		(204)		(188)		(454)		—		(1,675)		(204)

Total loans removed from nonperforming status during the period that were nonperforming at the beginning of the period	$	(1,381)	$	(934)	$	(5,633)	$	(2,838)	$	(1,917)	$	(1,381)	$	(3,193)	$	(5,633)

Based on the Bank’s review as of June 30, ~~2022,~~2023, 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 ~~0.26%~~0.32% as of June 30, ~~2022~~2023 from ~~0.30%~~0.34% as of December 31, ~~2021.~~2022. Core Bank delinquent loans to total Core Bank loans decreased to ~~0.13%~~0.12% as of June 30, ~~2022~~2023 from ~~0.17%~~0.14% as of December 31, ~~2021.~~2022. With the exception of small-dollar consumer loans, all Traditional Bank loans past due 90-days-or-more as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were on nonaccrual status.

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Table 2426 — Delinquent Loan Composition*


	June 30, 2022					December 31, 2021					June 30, 2023					December 31, 2022
				Percent of					Percent of					Percent of					Percent of
				Total					Total					Total					Total
(dollars in thousands)	Balance			Loan Class		Balance			Loan Class		Balance			Loan Class		Balance			Loan Class

Traditional Banking:
Residential real estate:
Owner occupied		$	2,469	0.30	%		$	1,599	0.19	%		$	5,167	0.48	%		$	4,834	0.53	%
Nonowner occupied			41	0.01				—	—				—	—				—	—
Commercial real estate			2,142	0.14				5,292	0.36				—	—				604	0.04
Construction & land development			—	—				—	—				—	—				—	—
Commercial & industrial			321	0.08				21	0.01				—	—				177	0.04
Paycheck Protection Program			—	—				—	—
Lease financing receivables			—	—				—	—				—	—				—	—
Aircraft			—	—				—	—				—	—				—	—
Home equity			150	0.07				314	0.15				472	0.18				175	0.07
Consumer:
Credit cards			24	0.16				30	0.21				33	0.19				55	0.36
Overdrafts			199	22.09				164	24.01				141	19.97				160	22.04
Automobile loans			6	0.06				9	0.06				10	0.24				11	0.16
Other consumer			—	—				1	0.07				52	0.85				44	7.03
Total Traditional Banking			5,352	0.15				7,430	0.21				5,875	0.13				6,060	0.16
Warehouse lines of credit			—	—				—	—				—	—				—	—
Total Core Banking			5,352	0.13				7,430	0.17				5,875	0.12				6,060	0.14

Republic Processing Group:
Tax Refund Solutions:
Easy Advances			—	—				—	—
Other TRS loans			—	—				—	—
Refund Advances													—	—				—	—
Other TRS commercial & industrial loans													—	—				—	—
Republic Credit Solutions			6,099	6.64				6,035	6.48				10,043	8.46				9,200	8.53
Total Republic Processing Group			6,099	6.63				6,035	4.19				10,043	8.45				9,200	3.58

Total delinquent loans		$	11,451	0.26	%		$	13,465	0.30	%		$	15,918	0.32	%		$	15,260	0.34	%

* 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.

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Table 2527 — ~~Rollforward~~Roll-forward of Delinquent Loans


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
(in thousands)	2022		2021		2022		2021		2023		2022		2023		2022

Delinquent loans at the beginning of the period	$	16,215	$	14,986	$	13,465	$	19,947	$	36,124	$	16,215	$	15,260	$	13,465
Loans added to delinquency status during the period and remained in delinquency status at the end of the period		1,714		2,717		2,348		3,276		2,761		1,714		4,588		2,348
Loans removed from delinquency status during the period that were in delinquency status at the beginning of the period (see table below)		(1,944)		(1,425)		(4,104)		(3,016)		(2,410)		(1,944)		(4,684)		(4,104)
Principal balance paydowns of loans delinquent at both period ends		(344)		(31)		(348)		(54)		(46)		(344)		(49)		(348)
Net change in principal balance of other loans delinquent at both period ends*		(4,190)		2,471		90		(1,435)		(20,511)		(4,190)		803		90
Delinquent loans at the end of period	$	11,451	$	18,718	$	11,451	$	18,718	$	15,918	$	11,451	$	15,918	$	11,451

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

Table 2628 — Detail of Loans Removed from Delinquent Status


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
(in thousands)	2022		2021		2022		2021		2023		2022		2023		2022

Loans charged off	$	(1)	$	(2)	$	(1)	$	(1)	$	—	$	(1)	$	(1)	$	(1)
Easy Advances paid off or charged off		—		—		—		—
Refund Advances paid off or charged off										—		—		—		—
Loans transferred to OREO		—		—		—		—		—		—		—		—
Loans refinanced at other institutions		(601)		(667)		(3,676)		(1,796)
Loan payoffs and paydowns										(1,389)		(601)		(1,629)		(3,676)
Loans paid current		(1,342)		(756)		(427)		(1,219)		(1,021)		(1,342)		(3,054)		(427)

Total loans removed from delinquency status during the period that were in delinquency status at the beginning of the period	$	(1,944)	$	(1,425)	$	(4,104)	$	(3,016)	$	(2,410)	$	(1,944)	$	(4,684)	$	(4,104)

Collateral-Dependent Loans and ~~Troubled Debt Restructurings~~Loan Modifications

When management determines that a loan is collateral dependent and foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs, if appropriate. The Bank’s policy is to charge-off all or that portion of its recorded investment in collateral-dependent loans upon a determination that it expects the full amount of contractual principal and interest will not be collected.

A loan modification (formerly a TDR prior to the adoption of ASU 2022-02) is a situation where, due to a borrower’s financial difficulties, the Bank grants a concession to the borrower that the Bank would not otherwise have considered. The majority of the Bank’s ~~TDRs~~loan modifications involve a restructuring of loan terms such as a temporary reduction in the payment amount to require only interest and escrow (if required), reducing the loan’s interest rate, and/or extending the maturity date of the debt. Nonaccrual loans modified as ~~TDRs~~loan modifications remain on nonaccrual status and continue to be reported as nonperforming loans. Accruing loans modified as ~~TDRs~~loan modifications are evaluated for nonaccrual status based on a current evaluation of the borrower’s financial condition and ability and willingness to service the modified debt. With the adoption of ASU 2022-02 in 2023, all loan modifications will now be recognized as collateral-dependent. As of June 30, 2023 there were $1.3 million collateral-dependent loan modifications.

Table 2729 — Collateral-Dependent Loans and Troubled Debt Restructurings


(dollars in thousands)	June 30, 2022		December 31, 2021		$ Change		% Change		December 31, 2022

Cashflow-dependent TDRs	$	5,399	$	5,960	$	(561)	(9)	%	$	5,761
Collateral-dependent TDRs		8,213		9,426		(1,213)	(13)			6,265
Total TDRs		13,612		15,386		(1,774)	(12)			12,026
Collateral-dependent loans (which are not TDRs)		10,632		14,645		(4,013)	(27)			14,186
Total recorded investment in TDRs and collateral-dependent loans	$	24,244	$	30,031	$	(5,787)	(19)	%	$	26,212

See Footnote 45 “Loans and Allowance for Credit Losses” of Part I Item 1 “Financial Statements” for additional discussion regarding collateral-dependent loans and TDRs.

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Deposits

Table 2830 — Deposit Composition


(dollars in thousands)	June 30, 2022		December 31, 2021		$ Change		% Change
(in thousands)									June 30, 2023		December 31, 2022		$ Change		% Change

Core Bank:
Demand	$	1,338,061	$	1,381,522	$	(43,461)	(3)	%	$	1,161,743	$	1,336,082	$	(174,339)	(13)	%
Money market accounts		775,560		789,876		(14,316)	(2)			851,090		707,272		143,818	20
Savings		331,508		311,624		19,884	6			289,209		323,015		(33,806)	(10)
Reciprocal money market										169,619		28,635		140,984	492
Individual retirement accounts (1)		41,305		43,724		(2,419)	(6)			34,227		38,640		(4,413)	(11)
Time deposits, $250 and over (1)		51,976		81,050		(29,074)	(36)			91,036		54,855		36,181	66
Other certificates of deposit (1)		132,536		154,174		(21,638)	(14)			186,053		129,324		56,729	44
Reciprocal money market and time deposits (1)		52,862		77,950		(25,088)	(32)
Reciprocal time deposits (1)										73,205		7,405		65,800	889
Wholesale brokered deposits (1)										8,033		—		8,033	—
Total Core Bank interest-bearing deposits		2,723,808		2,839,920		(116,112)	(4)			2,864,215		2,625,228		238,987	9
Total Core Bank noninterest-bearing deposits		1,676,974		1,579,173		97,801	6			1,405,543		1,464,493		(58,950)	(4)
Total Core Bank deposits		4,400,782		4,419,093		(18,311)	(0)			4,269,758		4,089,721		180,037	4

Republic Processing Group:
Money market accounts		9,285		9,717		(432)	(4)			10,159		3,849		6,310	164
Total RPG interest-bearing deposits		9,285		9,717		(432)	(4)			10,159		3,849		6,310	164

Brokered prepaid card deposits		319,455		320,907		(1,452)	(0)			344,441		328,655		15,786	5
Other noninterest-bearing deposits		98,007		90,701		7,306	8			104,923		115,620		(10,697)	(9)
Total RPG noninterest-bearing deposits		417,462		411,608		5,854	1			449,364		444,275		5,089	1
Total RPG deposits		426,747		421,325		5,422	1			459,523		448,124		11,399	3

Total deposits	$	4,827,529	$	4,840,418	$	(12,889)	(0)	%	$	4,729,281	$	4,537,845	$	191,436	4	%

(1)	Includes time deposit

Total ~~Company~~ deposits ~~decreased $13~~increased $191 million from December 31, ~~2021~~2022 to ~~$4.8~~$4.7 billion as of June 30, 2023. Total Core Bank deposits increased by $180 million with the CBank acquisition resulting in $191 million of this growth. Core Bank legacy deposits, which excludes the deposits assumed from the CBank acquisition, decreased $11 million, or 0.3%, from December 31, 2022. Within the Core Bank’s legacy deposits, interest-bearing deposits increased $99 million and noninterest-bearing deposits decreased $110 million.

As it relates to the decrease of $110 million in Core Bank legacy noninterest-bearing deposits, Management believes two factors generally drove this overall decline. The first is a general decline in liquidity among both businesses and consumers as the excess liquidity created during the COVID pandemic continued to wane. Second, Management believes that the substantial increase in market interest rates over the past year has caused the difference between what a client can earn for an interest-bearing deposit versus the client’s lack of a financial return for a noninterest-bearing deposit to become large enough to cause some clients to pursue other opportunities for their cash both inside and outside the Bank.

~~Total Core Bank deposits decreased minimally by $18 million with a $116 million decrease interest-bearing deposits offset by a $98~~Related to the $99 million increase in ~~noninterest-bearing deposits.~~Core Bank legacy interest-bearing deposits, all of this increased occurred during the second quarter of 2023 as Core Bank legacy interest-bearing deposits were down $122 million for the first quarter of 2023. The ~~net decrease~~substantial majority of this increase was in the Bank’s CDARs and ICS product types.

CDARs accounts represent reciprocal, term certificate-of-deposit accounts and ICS accounts represent liquid money market accounts in which:

The Bank receives large client deposits above the FDIC insurance limit of $250,000;

The Bank places these large deposits into like term CDs or money market accounts in a nationwide network of banks in amounts under the FDIC insurance threshold of $250,000 in order to receive full FDIC insurance on the total deposit amount; and

The Bank receives an equivalent amount of deposits back from the network of banks from numerous clients of theirs, under the $250,000 FDIC insurance limit for each of those clients.

These balances grew $184 million for the first six months of ~~2022, compares unfavorably~~2023 with $123 million of this growth occurring during the second quarter when the Bank significantly increased its offering rates to, in general, well-above 4% in order to combat deposit run-off. In

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addition to the ~~net growth in deposits~~higher offering rates available through these two products, CDARs and ICS accounts are also attractive to clients because they offer clients the ability to receive full FDIC insurance for ~~the previous two calendar years when~~their deposit ~~growth generally reached historical highs for the Company. Management believes the Company is more likely~~balances up to experience slower overall growth in its deposits over the foreseeable future as the excess liquidity in the United States is expected to decline due to the tightening of monetary and fiscal policy by the Federal Government.$50 million per client.

Management believes the higher offering rates it is paying for its interest-bearing deposits as of June 30, 2023 will continue to raise the Traditional Bank's overall cost of funds into the second half of 2023 and cause further contraction to its net interest margin on a linked-quarter basis. This strategy is subject to change depending upon several factors including, but not limited to, the Bank’s current and projected overall liquidity positions, its clients’ demand for its loans and deposit products, the Bank’s overall interest rate risk position, the interest rate environment at the time, as well as the projected interest rate environment for the near term and the long term.

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 $125 million, or 58%, during the first six months of 2023 to $92 million as of June 30, 2023. SSUARs generally represent large customer relationships deposited into the Bank that require security collateral above the $250,000 FDIC insurance limit of the Bank. Due to the size of the underlying relationships, large fluctuations in the underlying account balances from period to period are common.

While the Bank has changed its pricing strategy with deposits in order to retain and attract funds, it has not generally changed its pricing strategy with SSUARs. As a result, its SSUAR balances have continued to decline during the first six months of 2023. At this time, management is not contemplating a change in its pricing strategy for SSUARs, and as a result, a further decline in outstanding balances is possible. The Bank’s SSUAR pricing strategy, however, is subject to change depending upon several factors including, but not limited to, the Bank’s current and projected overall liquidity positions, its clients’ demand for its loans and deposit products, the Bank’s overall interest rate risk position, the interest rate environment at the time, as well as the projected interest rate environment for the near term and the long term.

Federal Home Loan Bank Advances

As of June 30, 2023, the Company’s $520 million of total FHLB advances had a weighted-average maturity of 0.68 years and a weighted-average cost of 4.88%. The Bank held ~~$20~~$70 million of long-term FHLB advances as of June 30, ~~2022~~2023 compared to ~~$25~~$20 million of ~~overnight~~long-term FHLB advances as of December 31, ~~2021.~~2022. Approximately $450 million of these borrowings were overnight in nature as of June 30, 2023 compared to $75 million as of December 31, 2022. The Company has utilized FHLB advances over the past year to fund its deposit outflow and overall loan growth. During the ~~first six months~~second quarter of ~~2022,~~2023, the Bank extended the ~~term on $20~~maturity for $50 million of ~~its FHLB advances in anticipation~~these borrowings due to the inverted yield curve and the more attractive cost for longer term borrowings as compared to the cost of ~~increasing long-term interest rates and repaid the remaining $5 million. As of June 30, 2022, the Company’s $20 million of FHLB advances~~overnight borrowings. Overall, these extended term borrowings had a weighted average maturity of ~~five~~5 years and a weighted average cost of ~~1.89%~~4.17%.

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~~maintains sufficient liquidity to ~~facilitate client transactions~~fund routine loan demand and ~~meet their financing needs. Upon entering into these instruments,~~routine deposit withdrawal activity. Liquidity is managed by maintaining sufficient liquid assets, primarily in the ~~Bank enters into offsetting positions in order to minimize~~form of cash, cash equivalents, and unencumbered investment securities. Funding and cash flows can also be realized through deposit product promotions, the ~~Bank’s interest rate risk. These swaps are derivatives, but are not designated as hedging instruments,~~sale of AFS debt securities, principal paydowns on loans and ~~therefore changes in fair value are reported in current year earnings.~~mortgage-backed securities, and proceeds realized from loans held for sale.

See Footnote 1213 “Interest Rate Swaps” of Part I Item 1 “Financial Statements” for additional discussion regarding the Bank’s interest rate swaps.

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Liquidity

The Bank maintains sufficient liquidity to fund routine loan demand and routine deposit withdrawal activity. Liquidity is managed by maintaining sufficient liquid assets, primarily in the form of cash, cash equivalents, and ~~unincumbered~~unencumbered investment securities. Funding and cash flows can also be realized through deposit product promotions, the sale of AFS debt securities, principal paydowns on loans and mortgage-backed securities, and proceeds realized from loans held for sale.

Table 2931 — Liquid Assets and Borrowing Capacity

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


(in thousands)	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022

Cash and cash equivalents	$	795,143	$	756,971	$	241,967	$	313,689
Unincumbered debt securities		239,863		219,775
Unencumbered debt securities						515,603		438,052
Total liquid assets		1,035,006		976,746		757,570		751,741

Borrowing capacity with the FHLB		904,785		900,424
Borrowing capacity through unsecured credit lines		125,000		125,000
Total borrowing capacity		1,029,785		1,025,424
Available borrowing capacity with the FHLB						542,656		899,362
Available borrowing capacity through unsecured credit lines						125,000		125,000
Total available borrowing capacity						667,656		1,024,362

Total liquid assets and borrowing capacity	$	2,064,791	$	2,002,170
Total liquid assets and available borrowing capacity					$	1,425,226	$	1,776,103

The ~~Bank~~Company had a loan to deposit ratio (excluding wholesale brokered deposits) of ~~97%~~107% as of June 30, ~~2022~~2023 and 99% as of December 31, ~~2021.~~2022. Republic’s banking centers and its website, www.republicbank.com, provide access to retail deposit markets. These retail deposit products, if offered at attractive rates, have historically been a source of additional funding when needed. If the Bank were to lose a significant funding source, such as a few major depositors, or if any of its lines of credit were cancelled, or if the Bank cannot obtain brokered deposits, the Bank would be compelled to offer market leading deposit interest rates to meet its funding and liquidity needs.

As noted in the sections above titled “Deposits” and “Securities Sold Under Agreements to Repurchase and Other Short-term Borrowings”, the Bank implemented a general strategy during 2022 and most of the first quarter of 2023 to maintain a low beta for its client-related interest-bearing liabilities as part of its overall strategy to increase its net interest margin and net interest income. As a result of this strategy, however, the Bank did experience a decline in both personal and business deposit balances and SSUAR balances as some clients moved their funds to more attractive offerings outside of the Bank. In response to this deposit outflow, during the second quarter of 2023 the Bank began marketing some deposit products, such as money market accounts and short-term certificates of deposit, with higher offering rates. This strategy appears to have generally reversed the outflow of deposits during late May and June of 2023. These higher offering rates also raised the Traditional Bank's overall cost of funds meaningfully during the second quarter of 2023 and caused contraction to its net interest margin on a linked-quarter basis. Management is unsure if these higher offering rates will continue to prevent future deposit outflows or if the Bank may be required to raise its offering rates more in order to prevent future deposit outflows. The Bank’s overall deposit and SSUAR pricing strategies are subject to change depending upon several factors including, but not limited to, the Bank’s current and projected overall liquidity positions, its clients’ demand for its loans and deposit products, the Bank’s overall interest rate risk position, the interest rate environment at the time, as well as the projected interest rate environment for the near term and the long term.

As of June 30, ~~2022,~~2023, the Bank had approximately ~~$1.4 billion~~$723 million in deposits from ~~234~~166 large non-sweep deposit relationships, including reciprocal deposits, where the individual relationship exceeded $2 million. Total uninsured deposits for the Bank were $1.7 billion, or 36%, of total deposits as of June 30, 2023. The 20 largest non-sweep deposit relationships represented approximately ~~$523~~$233 million, or ~~11%~~5%, of the Company’s total deposit balances as of ~~as of~~ June 30, ~~2022.~~2023. These accounts do not require collateral; therefore, cash from these accounts can generally be utilized to fund the loan portfolio. If any of these balances were moved from the Bank, the Bank would likely utilize overnight borrowing lines in the short-term to replace the balances. On a longer-term basis, the Bank would likely utilize wholesale-brokered deposits to replace withdrawn balances, or alternatively, higher-cost internet-sourced deposits. Based on past experience utilizing brokered deposits and internet-sourced deposits, the Bank believes it can quickly obtain these types of deposits if needed. The overall cost of gathering these types of deposits, however, could be substantially higher than the Traditional Bank deposits they replace, potentially decreasing the Bank’s earnings.

The Bank’s liquidity is impacted by its ability to sell certain investment securities, which is limited due to the level of investment securities that are needed to secure public deposits, securities sold under agreements to repurchase, FHLB borrowings, and for other ~~purposes, as required by law. As of June 30, 2022 and December 31, 2021, these pledged investment securities had a fair value of $415 million and $320 million.~~

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purposes, as required by law. As of June 30, 2023 and December 31, 2022, these pledged investment securities had a fair value of $89 million and $218 million.

Capital

Total stockholders’ equity increased from ~~$834~~$857 million as of December 31, ~~2021~~2022 to ~~$842~~$887 million as of June 30, ~~2022.~~2023. The increase in stockholders’ equity was primarily attributable to net income earned during ~~2022~~2023 reduced primarily by cash dividends ~~declared, repurchases of Class A Common shares, and a $24 million decrease in AOCI.~~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, ~~2022,~~2023, RB&T could, without prior approval, declare dividends of approximately ~~$135~~$116 million. Any payment of dividends in the future will depend, in large part, on the Company’s earnings, capital requirements, financial condition, and other factors considered relevant by the Company’s Board of Directors.

Regulatory Capital Requirements — The Company and the Bank are subject to capital regulations in accordance with Basel III, as administered by banking regulators. Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Republic’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Parent Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items, as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators regarding components, risk weightings, and other factors.

Banking regulators have categorized the Bank as well capitalized. For prompt corrective action, the regulations in accordance with Basel III define “well capitalized” as a 10.0% Total Risk-Based Capital ratio, a 6.5% Common Equity Tier 1 Risk-Based Capital ratio, an 8.0% Tier 1 Risk-Based Capital ratio, and a 5.0% Tier 1 Leverage ratio. Additionally, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, the Company and Bank must hold a capital conservation buffer of 2.5% composed of Common Equity Tier 1 Risk-Based Capital above their minimum risk-based capital requirements.

Republic continues to exceed the regulatory requirements for Total Risk-Based Capital, Common Equity Tier I Risk-Based Capital, Tier I Risk Based-Capital, and Tier I Leverage Capital. Republic and the Bank intend to maintain a capital position that meets or exceeds the “well-capitalized” requirements as defined by the FRB and the FDIC, in addition to the Capital Conservation Buffer. Republic’s average stockholders’ equity to average assets ratio was ~~13.41%~~14.34% as of June 30, ~~2022~~2023 and 13.41% as of December 31, ~~2021.~~2022. Formal measurements of the capital ratios for Republic and the Bank are performed by the Company at each quarter end.

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Table 3032 — Capital Ratios (1)


	As of June 30, 2022				As of December 31, 2021				As of June 30, 2023				As of December 31, 2022
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio

Total capital to risk-weighted assets
Republic Bancorp, Inc.	$	910,392	18.07	%	$	878,488	17.47	%	$	947,620	16.39	%	$	941,865	17.92	%
Republic Bank & Trust Company		880,873	17.51			861,815	17.14			906,748	15.69			904,592	17.23

Common equity tier 1 capital to risk-weighted assets
Republic Bancorp, Inc.	$	853,027	16.94	%	$	823,504	16.37	%	$	878,533	15.20	%	$	877,735	16.70	%
Republic Bank & Trust Company		823,508	16.37			806,831	16.05			837,661	14.50			840,462	16.01

Tier 1 (core) capital to risk-weighted assets
Republic Bancorp, Inc.	$	853,027	16.94	%	$	823,504	16.37	%	$	878,533	15.20	%	$	877,735	16.70	%
Republic Bank & Trust Company		823,508	16.37			806,831	16.05			837,661	14.50			840,462	16.01

Tier 1 leverage capital to average assets
Republic Bancorp, Inc.	$	853,027	13.69	%	$	823,504	13.35	%	$	878,533	14.36	%	$	877,735	14.81	%
Republic Bank & Trust Company		823,508	13.18			806,831	13.10			837,661	13.49			840,462	14.09

(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 106 basis points lower than those presented in the table above as of June 30, ~~2022~~2023 and approximately 10 basis points lower than those presented in the table above as of December 31, ~~2021.~~2022.

Asset/Liability Management and Market Risk

Asset/liability management is designed to ensure safety and soundness, maintain liquidity, meet regulatory capital standards, and achieve acceptable net interest income based on the Bank’s risk tolerance. Interest rate risk is the exposure to adverse changes in net interest income as a result of market fluctuations in interest rates. The Bank, on an ongoing basis, monitors interest rate and liquidity risk in order to implement appropriate funding and balance sheet strategies. Management considers interest rate risk to be a significant risk to the Bank’s overall earnings and balance sheet.

The interest sensitivity profile of the Bank at any point in time will be impacted by a number of factors. These factors include the mix of interest sensitive assets and liabilities, as well as their relative pricing schedules. It is also influenced by changes in market interest rates, deposit and loan balances, and other factors.

The Bank utilizes earnings simulation models as tools to measure interest rate sensitivity, including both a static and dynamic earnings simulation model. A static simulation model is based on current exposures and assumes a constant balance sheet. In contrast, a dynamic simulation model relies on detailed assumptions regarding changes in existing business lines, new business, and changes in management and customer behavior. While the Bank runs the static simulation model as one measure of interest rate risk, historically, the Bank has utilized its dynamic earnings simulation model as its primary interest rate risk tool to measure the potential changes in market interest rates and their subsequent effects on net interest income for a one-year time period. This dynamic model projects a “Base” case net interest income over the next 12 months and the effect on net interest income of instantaneous movements in interest rates between various basis point increments equally across all points on the yield curve. Many assumptions based on growth expectations and on the historical behavior of the Bank’s ~~deposit~~loans and ~~loan rates~~deposits 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.

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As of June 30, ~~2022, the Company ran~~2023, a dynamic simulation model was run for interest rate changes from “Down ~~100”~~200” basis points to “Up ~~400”~~300” basis points. The following table illustrates the Bank’s projected percent change from its Base net interest income over the period beginning July 1, ~~2022~~2023 and ending June 30, ~~2023~~2024 based on instantaneous movements in interest rates from Down ~~100~~200 to Up ~~400~~300 basis points equally across all points on the yield curve. The Bank’s dynamic earnings simulation model includes secondary market loan fees and excludes Traditional Bank loan fees.

Table 3133 — Bank Interest Rate Sensitivity


	Change in Rates															Change in Rates
	-100			+100			+200			+300			+400			-200		-100		+100		+200		+300
	Basis Points			Basis Points			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, 2022		(1.8)	%		1.6	%		4.0	%		6.6	%		9.3	%
% Change from base net interest income as of December 31, 2021		1.3	%		(0.6)	%		0.7	%		4.7	%		9.3	%
% Change from base net interest income as of June 30, 2023																7.2	%	2.0	%	(0.9)	%	(1.7)	%	(2.3)	%
% Change from base net interest income as of December 31, 2022																(2.8)	%	(0.6)	%	1.8	%	3.7	%	5.7	%

~~For the Up-100, Up-200, and Up-300 scenarios, the June 30, 2022 simulation reflected a more positive outcome~~Notable changes for the Bank’s ~~net~~ interest ~~income than the comparable~~rate sensitivity projections from December 31, ~~2021 simulation. For~~2022 to June 30, 2023 occurred in all the ~~Down-100 scenario,~~scenarios. In general, the ~~December 2021 simulation reflected a more positive outcome than~~period-to-period declines in the ~~June 2022 simulation. The Up-400 scenario saw no change in expectation~~up-rate scenarios were generally tied to three main factors. First, the Company’s average interest-earning cash balances further declined from December to June. ~~For~~As a result, the ~~Up-rate~~benefit the Company expects to receive from rising short-term interest rates, as a result of its immediately repricing interest-earning cash, decreased. Second, the Company increased its assumed deposit betas from December to June in anticipation of a more competitive deposit gathering and retention environment. These higher deposit betas resulted in higher projected costs for the Company’s interest-bearing deposits in a rising rate environment. Third, net interest income is projected to decline in the up-rate scenarios due to the increased amount of immediately repricing overnight borrowings on the Company’s balance sheet as of June 30, 2023 as compared to December 31, 2022.

Conversely in the down rate scenarios, the ~~changes~~Company’s interest rate risk position notably improved. This improvement was generally tied to three factors. The first factor is a notable increase above current levels for mortgage banking income as refinance activity is assumed to increase with a decline in ~~simulation outcomes from December 2021 to June 2022 were primarily due, in general, to a positive impact to~~interest rates. Second, net interest income is expected to improve due to the assumed benefit for ~~those loans with rates that are no longer below their~~ interest rate floors related to loans, which are projected to take effect with a substantial drop in interest rates. Third, net interest income is projected to improve in the down rate scenarios due to the increased amount of immediately repricing overnight borrowings on the Company’s balance sheet as of June ~~2022~~30, 2023 as compared to December ~~2021 when the base market interest rates were considerably lower.~~31, 2022.

For further discussion of interest-bearing deposit betas, see section titled “Deposits” in this Form 10-Q.

LIBOR Exposure

In July 2017, the Financial Conduct Authority (“FCA”), the authority regulating LIBOR, along with various other regulatory bodies, announced that LIBOR would likely be discontinued at the end of 2021. Subsequent to that announcement, in November 2020, the FCA announced that many tenors of LIBOR would continue to be published through June 2023. In compliance with regulatory guidance, the Bank discontinued referencing LIBOR for new financial instruments during 2021 and chose SOFR to be its primary alternative reference rate for most transaction types upon the discontinuance or unavailability of LIBOR.

Regarding its legacy assets that reference LIBOR, the Bank has previously disclosed that the underlying contracts for these assets may not include adequate “fallback” language to use alternative indexes and margins when LIBOR ~~ceases.~~ceased. However, on March 15, 2022, President Biden signed into law the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Law”)~~, which is designed to accomplish the following:~~

●

Establish a clear and uniform process, on a nationwide basis, for replacing LIBOR in existing contracts the terms of which do not provide for the use of a clearly defined or practicable replacement benchmark rate, without affecting the ability of parties to use any appropriate benchmark rate in new contracts;

●

~~Preclude litigation related to existing contracts, the terms of which do not provide for the use of a clearly defined or practicable replacement benchmark rate;~~

●

~~Allow existing contracts that reference LIBOR but provide for the use of a clearly defined and practicable replacement rate to operate according to their terms; and~~

●

~~Address LIBOR references in federal law.~~

~~With limited exception, the~~. The LIBOR Law ~~generally covers legacy LIBOR contracts with no or inadequate fallback provisions. Additionally, under the LIBOR Law,~~provides for a statutory transition to a replacement rate selected by ~~September 11, 2022,~~ the Board of Governors of the Federal Reserve System (the ~~“Board”~~“FRS Board”) ~~must issue~~based on the SOFR for contracts referencing LIBOR that contain no or ineffective fallback provisions, unless a replacement rate is selected by a determining person as outlined in the statute.

On December 16, 2022, under the LIBOR Law, the FRS Board issued final regulations ~~to give effect to the law, including~~(the “LIBOR Regulations”) that included the selection of ~~a Board-Selected Benchmark Replacement that is~~an FRS Board-selected benchmark replacement rate based on SOFR and ~~incorporates~~incorporated an applicable tenor spread adjustment ~~and the identification of any related conforming changes.~~

~~As of June 30, 2022, the Company had approximately $773 million of legacy assets that reference~~(“Selected Benchmark Rate”). The Selected Benchmark Rate replaced LIBOR with short-term Warehouse loans representing $331 million of these assets and commercial and mortgage loans primarily making up the remainder. As of June 30, 2022, of the Bank’s legacy assets that reference LIBOR, approximately $406 million of those assets were scheduled to maturein certain financial contracts after June 30, 2023. ~~These amounts exclude derivative assets and liabilities on the Company’s consolidated balance sheet. As of June 30, 2022, the notional amount~~Substantially all of the Company’s ~~LIBOR-referenced interest rate derivative contracts was approximately $232 million, with $230 million~~financial instruments transitioned to the Selected Benchmark as of ~~such notional amount scheduled to mature after June 30,~~July 1, 2023.

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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, ~~2022~~2023 Compared to Three Months Ended June 30, ~~2021)~~2022) and “RESULTS OF OPERATIONS (Six Months Ended June 30, ~~2022~~2023 Compared to Six Months Ended June 30, ~~2021.~~2022.”

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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.

Evaluation of Disclosure 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 not effective as of the end of the period covered by this ~~report.~~ report because of material weaknesses in our internal control over financial reporting, as described in Management’s Report on Internal Control over Financial Reporting in “Item 9A. Controls and Procedures” in its Annual Report on Form 10-K for the year ended December 31, 2022.

In addition, other than the measures described below taken in response to the material weaknesses, 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.

Material Weakness Remediation Efforts

The Company has commenced the implementation of some remediation measures with respect to the material weaknesses as outlined in its Annual Report on Form 10-K for the year ended December 31, 2022. As part of its remediation efforts for its material weaknesses, Management has completed the following:

● Enhanced its internal monthly financial reporting during the first quarter of 2023 to provide a more detailed yield analysis at the product level for the performance of each RCS product.

● In July 2023, the Company hired and designated a new Chief Accounting Officer for the RPG operations. This new position reports up through the Chief Financial Officer of the Company and not to the business unit. This position has day-to-day responsibilities overseeing the financial reporting of the RPG segment.

● In July 2023, the Company’s Board of Directors approved a new policy with enhanced reconciliation policies and procedures. This revised policy provides better guidance to reconciliation personnel for escalation requirements of reconciliation items as well as internal responsibilities for resolving reconciliation issues.

In addition, the Company continues the planning process for those remediation measures that have not yet been implemented. Management cannot determine when all its remediation plans will be fully completed, and Management cannot provide any assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts.

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.

~~117~~118

Table of Contents

Item 1A.Risk Factors.

FACTORS THAT MAY AFFECT FUTURE RESULTS

~~There~~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 ~~fiscal~~ year ended December 31, ~~2021.~~2022. You should carefully consider the risk factors discussed below and in Republic’s ~~2021~~2022 Form 10-K, which could materially affect ~~its~~the Company’s business, financial condition ~~or future results.~~and results of operations in the future.

Recent negative developments in the banking industry could adversely affect our current and projected business operations and our financial condition and results of operations. Recent bank failures and their related negative media attention have generated significant market trading volatility among publicly traded bank holding companies and, in particular, bank holding companies for regional, and community banks. These developments have negatively impacted customer confidence in regional and community banks, which could prompt customers to maintain their deposits with larger financial institutions. Further, competition for deposits has increased in recent periods, and the cost of funding has similarly increased, putting pressure on our net interest margin. If we were required to sell a portion of our securities portfolio to address liquidity needs, we may incur losses, including as a result of the negative impact of rising interest rates on the value of our securities portfolio, which could negatively affect our earnings.

The proportion of our deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk and earnings risks in times of financial distress. A significant factor in the two recent bank failures that occurred during the first quarter of 2023 appears to have been the proportion of the deposits held by each institution that exceeded FDIC insurance limits. In these two failures, the estimated percentage of uninsured deposits to total deposits, as previously disclosed, were at, or approaching, 90%. In response to these failures, many large depositors across the industry have withdrawn deposits in excess of applicable deposit insurance limits and deposited these funds in other financial institutions and, in many instances, moved these funds into money market mutual funds or other similar securities accounts in an effort to diversify the risk of further bank failure(s).

Uninsured deposits historically have been less stable than insured deposits. As a result, in the event of financial distress, uninsured depositors historically have been more likely to withdraw their deposits. The Company estimates that 36% of its total deposits as of June 30, 2023, were uninsured as they were above the FDIC’s insurance limit. If a significant portion of these uninsured deposits were to be withdrawn within a short period of time such that additional sources of funding would be required to meet withdrawal demands, RB&T may be unable to obtain funding at favorable terms, which may have an adverse effect on our net interest margin. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated prevailing interest rates, such as the present period. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits. This spread may be exacerbated by higher prevailing interest rates.

We may experience additional increases in FDIC insurance assessments. The FDIC deposit insurance fund has recently incurred losses with the resolution of bank failures during the first quarter of 2023. As a result, the FDIC issued a notice of proposed rulemaking for a special assessment in May 2023. It is possible that our regular deposit insurance assessment rates, which were already expected to increase significantly during 2023 over 2022, will further increase should the FDIC alter its assessment rate schedule or calculation methodology for financial institutions as a result of these recent bank failures. Although we cannot predict the specific timing and terms of any special assessment or any other increase in our deposit insurance assessment rates, any increase in our assessment fees could have a materially adverse effect on our results of operations and financial condition.

119

Table of Contents

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 ~~2022~~2023 are included in the following table:

Total Number of

Maximum Number

Total Number of

Maximum Number

Shares Purchased

of Shares that May

Shares Purchased

of Shares that May

as Part of Publicly

Yet Be Purchased

as Part of Publicly

Yet Be Purchased

Total Number of

Average Price

Announced Plans

Under the Plan

Total Number of

Average Price

Announced Plans

Under the Plan

Period

Shares Purchased

Paid Per Share

or Programs

or Programs


Shares Purchased

Paid Per Share

or Programs

or Programs


April 1 - April 30

—

$
—

—

270,328

3,900

$
38.22

3,900

486,100

May 1 - May 31

76,651

43.47

76,651

193,677

69,847

40.26

69,847

416,253

June 1 - June 30

138,500

46.77

138,500

55,177

82,066

44.92

82,066

334,187

Total

215,151

$
45.59

215,151

55,177

155,813

$
42.66

155,813

334,187

The Company repurchased ~~215,151~~155,813 shares of its Class A Common Stock during the second quarter of ~~2022.~~2023. In addition, in connection with employee stock awards, there were 432 shares withheld upon exercise of stock options to satisfy the withholding taxes. On ~~January 27, 2021,~~October 25, 2022, the Board of Directors of Republic Bancorp, Inc. increased the Company’s existing authorization to purchase shares of its Class A Common Stock to 1,000,000 shares. On November 17, 2021, the Board of Directors of Republic Bancorp, Inc. increased the Company’s existing authorization to purchase shares of its Class A Common Stock by an additional 250,000500,000 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, ~~2022,~~2023, the Company had ~~55,177~~334,187 shares which could be repurchased under its current share repurchase programs. ~~On July 20, 2022, the Board of Directors of Republic Bancorp, Inc. increased the Company’s existing authorization to purchase shares of its Class A Common Stock by an additional 200,000 shares.~~

During the ~~first six months~~second quarter of ~~2022,~~2023, there were ~~4,000~~2,833 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.

~~118~~Item 5.Other Information.

~~Table~~Rule 10b5-1 Trading Plans

During the three months ended June 30, 2023, none of ~~Contents~~our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.

Item 6.Exhibits.

The following exhibits are filed or furnished as a part of this report:

Exhibit Number

Description of Exhibit

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*

Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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, ~~2022~~2023 and December 31, ~~2021,~~2022, (ii) Consolidated Statements of Income and Comprehensive Income for the Three and Six Months ~~Ended~~ended June 30, ~~2022~~2023 and ~~2021,~~2022, (iii) Consolidated Statements of Stockholders’ Equity for the Three and Six

120

Table of Contents

		Months ~~Ended~~ended June 30, ~~2022~~2023 and ~~2021,~~2022, (iv) Consolidated Statements of Cash Flows for the Six Months ~~Ended~~ended June 30, ~~2022~~2023 and ~~2021~~2022 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.

~~119~~121

Table of Contents

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 ~~5, 2022~~4, 2023

/s/ Steven E. Trager

By: Steven E. Trager

Executive Chair ~~(Principal~~and Chief Executive ~~Officer)~~Officer

Principal Financial Officer:

Date: August ~~5, 2022~~4, 2023

/s/ Kevin Sipes

By: Kevin Sipes

Executive Vice President, Chief Financial

Officer and Chief Accounting Officer ~~(Principal Financial Officer)~~

~~120~~122


	Three Months Ended June 30, 2021

	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, 2021	18,628	2,198	$	4,884	$	143,563	$	682,264	$	6,998	$	837,709

Net income	—	—		—		—		23,922		—		23,922
Net change in AOCI	—	—		—		—		—		(435)		(435)
Dividends declared on Common Stock:
Class A Shares ($0.308 per share)	—	—		—		—		(5,680)		—		(5,680)
Class B Shares ($0.280 per share)	—	—		—		—		(608)		—		(608)
Stock options exercised, net of shares withheld	12	—		5		(54)		—		—		(49)
Repurchase of Class A Common Stock	32	(32)		—		—		—		—		—
Conversion of Class B to Class A Common Shares	(255)	—		(51)		(1,614)		(9,096)		—		(10,761)
Net change in notes receivable on Class A Common Stock	—	—		—		(44)		—		—		(44)
Deferred compensation - Class A Common Stock:
Directors	—	—		—		95		—		—		95
Designated key employees	—	—		—		167		—		—		167
Employee stock purchase plan - Class A Common Stock	4	—		1		162		—		—		163
Stock-based awards - Class A Common Stock:
Performance stock units	—	—		—		33		—		—		33
Restricted stock	—	—		2		409		—		—		411
Stock options	—	—		—		167		—		—		167

Balance, June 30, 2021	18,421	2,166	$	4,841	$	142,884	$	690,802	$	6,563	$	845,090


	Six Months Ended June 30, 2021
	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, 2021	18,697	2,199	$	4,899	$	143,637	$	666,278	$	8,509	$	823,323

Net income	—	—		—		—		49,975		—		49,975
Net change in AOCI	—	—		—		—		—		(1,946)		(1,946)
Dividends declared on Common Stock:
Class A Shares ($0.616 per share)	—	—		—		—		(11,423)		—		(11,423)
Class B Shares ($0.560 per share)	—	—		—		—		(1,224)		—		(1,224)
Stock options exercised, net of shares withheld	28	—		13		(155)		—		—		(142)
Conversion of Class B to Class A Common Shares	33	(33)		—		—		—		—		—
Repurchase of Class A Common Stock	(362)	—		(75)		(2,350)		(12,804)		—		(15,229)
Net change in notes receivable on Class A Common Stock	—	—		—		50		—		—		50
Deferred compensation - Class A Common Stock:
Directors	4	—		—		209		—		—		209
Designated key employees	—	—		—		303		—		—		303
Employee stock purchase plan - Class A Common Stock	7	—		2		316		—		—		318
Stock-based awards - Class A Common Stock:
Performance stock units	—	—		—		65		—		—		65
Restricted stock	14	—		2		519		—		—		521
Stock options	—	—		—		290		—		—		290

Balance, June 30, 2021	18,421	2,166	$	4,841	$	142,884	$	690,802	$	6,563	$	845,090


	March 15, 2023
	As Previously Reported					As Recasted

	As Recorded		Fair Value			Recast			As Recorded
(in thousands)	by CBank		Adjustments (1)			Adjustments (1)			by Republic

Assets acquired:

Cash and cash equivalents	$	10,030	$	—		$	—		$	10,030
Investment securities		16,463		(4)	a		(65)	a		16,394
Loans		221,707		(4,219)	b		(150)	b		217,338
Allowance for loan and lease losses		(2,953)		1,353	c		1,391	c, j		(209)
Loans, net		218,754		(2,866)			1,241			217,129
Goodwill		954		(954)	d		—			—
Core deposit intangible		—		2,844	e		—			2,844
Premises and equipment, net		162		35	f		(24)	f		173
Other assets and accrued interest receivable		7,067		(320)	g		—			6,747

Total assets acquired	$	253,430	$	(1,265)		$	1,152		$	253,317

Liabilities assumed:

Deposits:
Noninterest-bearing	$	42,160	$	—		$	—		$	42,160
Interest-bearing		179,487		31	h		—			179,518
Total deposits		221,647		31			—			221,678

Other liabilities and accrued interest payable		4,709		96	i		50	i		4,855

Total liabilities assumed		226,356		127			50			226,533

Net assets acquired	$	27,074	$	(1,392)		$	1,102			26,784

Cash consideration paid										(51,000)

Goodwill									$	24,216


			Gross		Gross		Allowance						Gross		Gross		Allowance
	Amortized		Unrealized		Unrealized		for		Fair		Amortized		Unrealized		Unrealized		for		Fair
June 30, 2022 (in thousands)	Cost		Gains		Losses		Credit Losses		Value
June 30, 2023 (in thousands)											Cost		Gains		Losses		Credit Losses		Value

U.S. Treasury securities and U.S. Government agencies	$	400,771	$	1	$	(17,680)	$	0	$	383,092	$	431,450	$	—	$	(24,093)	$	—	$	407,357
Private label mortgage-backed security		1,156		1,322		—		0		2,478		671		1,317		—		—		1,988
Mortgage-backed securities - residential		210,571		83		(12,384)		0		198,270		183,843		13		(17,569)		—		166,287
Collateralized mortgage obligations		24,838		48		(341)		0		24,545		24,222		30		(1,505)		—		22,747
Corporate bonds		10,000		—		(34)		(30)		9,936		2,012		13		—		—		2,025
Trust preferred security		3,712		112		—		0		3,824		3,770		—		(24)		—		3,746
Total available-for-sale debt securities	$	651,048	$	1,566	$	(30,439)	$	(30)	$	622,145	$	645,968	$	1,373	$	(43,191)	$	—	$	604,150


	Available-for-Sale				Held-to-Maturity				Available-for-Sale				Held-to-Maturity
	Debt Securities				Debt Securities				Debt Securities				Debt Securities
	Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair
June 30, 2022 (in thousands)	Cost		Value		Cost		Value
June 30, 2023 (in thousands)									Cost		Value		Cost		Value

Due in one year or less	$	61,344	$	61,128	$	120	$	120	$	139,768	$	136,180	$	125	$	125
Due from one year to five years		349,427		331,900		25,091		25,007		293,694		273,202		94,980		94,279
Due from five years to ten years		—		—		—		—		—		—		—		—
Due beyond ten years		3,712		3,824		—		—		3,770		3,746		—		—
Private label mortgage-backed security		1,156		2,478		—		—		671		1,988		—		—
Mortgage-backed securities - residential		210,571		198,270		29		29		183,843		166,287		26		25
Collateralized mortgage obligations		24,838		24,545		7,772		7,822		24,222		22,747		6,845		6,761
Total debt securities	$	651,048	$	622,145	$	33,012	$	32,978	$	645,968	$	604,150	$	101,976	$	101,190


	Less than 12 months				12 months or more				Total				Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized				Unrealized				Unrealized				Unrealized
June 30, 2022 (in thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
June 30, 2023 (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	$	296,890	$	(12,582)	$	64,902	$	(5,098)	$	361,792	$	(17,680)	$	218,670	$	(7,852)	$	188,687	$	(16,241)	$	407,357	$	(24,093)
Mortgage-backed securities - residential		193,002		(12,384)		—		—		193,002		(12,384)		63,616		(6,546)		101,546		(11,023)		165,162		(17,569)
Collateralized mortgage obligations		16,226		(341)		—		—		16,226		(341)		8,551		(525)		12,550		(980)		21,101		(1,505)
Trust preferred security														3,746		(24)		—		—		3,746		(24)
Total available-for-sale debt securities	$	506,118	$	(25,307)	$	64,902	$	(5,098)	$	571,020	$	(30,405)	$	294,583	$	(14,947)	$	302,783	$	(28,244)	$	597,366	$	(43,191)


	ACLS Rollforward
	Three Months Ended June 30,
	2022										2021
	Beginning				Charge-				Ending			Beginning				Charge-				Ending
(in thousands)	Balance		Provision		offs		Recoveries		Balance			Balance		Provision		offs		Recoveries		Balance

Available-for-Sale Securities:
Corporate Bonds	$	—	$	30	$	—	$	—	$	30		$	—	$	—	$	—	$	—	$	—
Held-to-Maturity Securities:
Corporate Bonds		40		10		—		—		50			103		(47)		—		—		56

Total	$	40	$	40	$	—	$	—	$	80		$	103	$	(47)	$	—	$	—	$	56


	ACLS Roll-forward
	Three Months Ended June 30,
	2023										2022
	Beginning				Charge-				Ending			Beginning				Charge-				Ending
(in thousands)	Balance		Provision		offs		Recoveries		Balance			Balance		Provision		offs		Recoveries		Balance

Available-for-Sale Securities:
Corporate Bonds	$	3	$	(3)	$	—	$	—	$	—		$	—	$	30	$	—	$	—	$	30
Held-to-Maturity Securities:
Corporate Bonds		10		—		—		—		10			40		10		—		—		50

Total	$	13	$	(3)	$	—	$	—	$	10		$	40	$	40	$	—	$	—	$	80


	ACLS Rollforward																				ACLS Roll-forward
	Six Months Ended June 30,																				Six Months Ended June 30,
	2022										2021										2023										2022
	Beginning				Charge-				Ending		Beginning				Charge-				Ending		Beginning				Charge-				Ending		Beginning				Charge-				Ending
(in thousands)	Balance		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance

Available-for-Sale Securities:
Corporate Bonds	$	—	$	30	$	—	$	—	$	30	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	30	$	—	$	—	$	30
Held-to-Maturity Securities:
Corporate Bonds		47		3		—		—		50		178		(122)		—		—		56		10		—		—		—		10		47		3		—		—		50

Total	$	47	$	33	$	—	$	—	$	80	$	178	$	(122)	$	—	$	—	$	56	$	10	$	—	$	—	$	—	$	10	$	47	$	33	$	—	$	—	$	80


	Gains (Losses) Recognized on Equity Securities												Gains (Losses) Recognized on Equity Securities
	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021						Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
(in thousands)	Realized		Unrealized		Total		Realized		Unrealized		Total		Realized		Unrealized		Total		Realized		Unrealized		Total

Freddie Mac preferred stock	$	—	$	25	$	25	$	—	$	191	$	191	$	—	$	15	$	15	$	—	$	25	$	25
Community Reinvestment Act mutual fund		(97)		—		(97)		—		16		16		—		—		—		(97)		—		(97)
Total equity securities with readily determinable fair value	$	(97)	$	25	$	(72)	$	—	$	207	$	207	$	—	$	15	$	15	$	(97)	$	25	$	(72)


											Revolving Loans		Revolving Loans														Revolving Loans		Revolving Loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year										Amortized		Converted				Term Loans Amortized Cost Basis by Origination Year										Amortized		Converted
As of June 30, 2022	2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
As of June 30, 2023																	2023		2022		2021		2020		Prior		Cost Basis		to Term		Total

Residential real estate owner occupied:
Risk Rating
Pass or not rated	$	95,596	$	201,218	$	200,132	$	78,397	$	235,958	$	—	$	—	$	811,301	$	228,708	$	212,810	$	185,875	$	179,237	$	257,247	$	—	$	1,025	$	1,064,902
Special Mention		—		—		—		189		7,681		—		—		7,870		—		—		—		—		6,710		—		—		6,710
Substandard		—		4		1,089		1,356		10,517		—		—		12,966		—		1,729		1,460		1,161		10,789		—		—		15,139
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	95,596	$	201,222	$	201,221	$	79,942	$	254,156	$	—	$	—	$	832,137	$	228,708	$	214,539	$	187,335	$	180,398	$	274,746	$	—	$	1,025	$	1,086,751
YTD Gross Charge-offs																	$	—	$	8	$	7	$	—	$	—	$	—	$	—	$	15

Residential real estate nonowner occupied:
Risk Rating
Pass or not rated	$	45,525	$	98,419	$	58,325	$	36,582	$	68,566	$	—	$	5,863	$	313,280	$	50,814	$	72,662	$	84,995	$	50,396	$	83,144	$	—	$	8,277	$	350,288
Special Mention		—		—		—		—		126		—		—		126		—		—		—		—		29		—		—		29
Substandard		—		38		—		—		90		—		—		128		—		—		—		—		73		—		—		73
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	45,525	$	98,457	$	58,325	$	36,582	$	68,782	$	—	$	5,863	$	313,534	$	50,814	$	72,662	$	84,995	$	50,396	$	83,246	$	—	$	8,277	$	350,390
YTD Gross Charge-offs																	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate:
Risk Rating
Pass or not rated	$	252,650	$	439,645	$	228,470	$	145,692	$	315,211	$	24,040	$	104,446	$	1,510,154	$	129,293	$	466,364	$	385,492	$	202,957	$	368,264	$	22,465	$	112,808	$	1,687,643
Special Mention		1,324		13,043		2,406		23,495		15,431		250		—		55,949		579		1,758		4,696		—		30,629		831		—		38,493
Substandard		—		—		—		—		3,016		—		—		3,016		—		—		—		—		956		—		—		956
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	253,974	$	452,688	$	230,876	$	169,187	$	333,658	$	24,290	$	104,446	$	1,569,119	$	129,872	$	468,122	$	390,188	$	202,957	$	399,849	$	23,296	$	112,808	$	1,727,092
YTD Gross Charge-offs																	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction and land development:
Risk Rating
Pass or not rated	$	50,812	$	76,293	$	5,013	$	770	$	2,744	$	1,820	$	—	$	137,452	$	38,394	$	114,290	$	25,561	$	531	$	429	$	274	$	—	$	179,479
Special Mention		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	50,812	$	76,293	$	5,013	$	770	$	2,744	$	1,820	$	—	$	137,452	$	38,394	$	114,290	$	25,561	$	531	$	429	$	274	$	—	$	179,479
YTD Gross Charge-offs																		—		—		—		—		—		—		—		—

Commercial and industrial:
Risk Rating
Pass or not rated	$	53,046	$	91,908	$	26,068	$	46,155	$	52,459	$	104,097	$	2,824	$	376,557	$	70,111	$	104,044	$	83,637	$	17,742	$	69,772	$	114,103	$	3,563	$	462,972
Special Mention		591		14,083		—		693		1,831		300		—		17,498		—		480		12,467		665		1,920		255		—		15,787
Substandard		—		—		—		120		—		—		—		120		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	53,637	$	105,991	$	26,068	$	46,968	$	54,290	$	104,397	$	2,824	$	394,175	$	70,111	$	104,524	$	96,104	$	18,407	$	71,692	$	114,358	$	3,563	$	478,759

Paycheck Protection Program:
Risk Rating
Pass or not rated	$	—	$	12,207	$	2,450	$	—	$	—	$	—	$	—	$	14,657
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	—	$	12,207	$	2,450	$	—	$	—	$	—	$	—	$	14,657
YTD Gross Charge-offs																	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Lease financing receivables:
Risk Rating
Pass or not rated	$	4,423	$	2,283	$	617	$	2,231	$	1,791	$	—	$	—	$	11,345	$	26,163	$	28,658	$	13,197	$	6,296	$	5,195	$	—	$	—	$	79,509
Special Mention		—		—		—		—		—		—		—		—		—		—		—		—		162		—		—		162
Substandard		—		—		—		—		—		—		—		—		—		—		—		—		133		—		—		133
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	4,423	$	2,283	$	617	$	2,231	$	1,791	$	—	$	—	$	11,345	$	26,163	$	28,658	$	13,197	$	6,296	$	5,490	$	—	$	—	$	79,804
YTD Gross Charge-offs																	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Aircraft:
Risk Rating
Pass or not rated	$	32,905	$	59,236	$	39,231	$	20,316	$	8,270	$	—	$	—	$	159,958	$	43,840	$	60,247	$	49,496	$	32,309	$	22,620	$	—	$	—	$	208,512
Special Mention		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	32,905	$	59,236	$	39,231	$	20,316	$	8,270	$	—	$	—	$	159,958	$	43,840	$	60,247	$	49,496	$	32,309	$	22,620	$	—	$	—	$	208,512
YTD Gross Charge-offs																	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Home equity:
Risk Rating
Pass or not rated	$	—	$	—	$	—	$	—	$	—	$	212,580	$	—	$	212,580	$	—	$	—	$	—	$	—	$	—	$	254,090	$	—	$	254,090
Special Mention		—		—		—		—		—		348		—		348		—		—		—		—		—		106		—		106
Substandard		—		—		—		—		—		1,141		—		1,141		—		—		—		—		—		1,559		—		1,559
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	214,069	$	—	$	214,069	$	—	$	—	$	—	$	—	$	—	$	255,755	$	—	$	255,755
YTD Gross Charge-offs																	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


	ACLL Rollforward																				ACLL Roll-forward
	Three Months Ended June 30,																				Three Months Ended June 30,
	2022										2021										2023												2022
	Beginning				Charge-				Ending		Beginning				Charge-				Ending		Beginning		CBank				Charge-				Ending		Beginning				Charge-				Ending
(in thousands)	Balance		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance		Balance		Adjustment*		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance

Traditional Banking:
Residential real estate:
Owner occupied	$	8,358	$	62	$	—	$	25	$	8,445	$	9,489	$	(530)	$	—	$	18	$	8,977	$	8,798	$	—	$	1,100	$	(9)	$	10	$	9,899	$	8,358	$	62	$	—	$	25	$	8,445
Nonowner occupied		2,746		(14)		—		1		2,733		2,532		18		—		1		2,551		2,895		—		190		—		1		3,086		2,746		(14)		—		1		2,733
Commercial real estate		24,624		(284)		—		1		24,341		23,801		(506)		—		12		23,307		24,827		—		250		—		12		25,089		24,624		(284)		—		1		24,341
Construction & land development		3,893		(302)		—		—		3,591		3,593		(294)		—		—		3,299		4,452		—		359		—		—		4,811		3,893		(302)		—		—		3,591
Commercial & industrial		3,412		348		—		8		3,768		2,718		1,395		—		4		4,117		5,676		(1,008)		(365)		—		19		4,322		3,412		348		—		8		3,768
Paycheck Protection Program		—		—		—		—		—		—		—		—		—		—
Lease financing receivables		109		10		—		—		119		104		(7)		—		—		97		1,350		(376)		(149)		—		—		825		109		10		—		—		119
Aircraft		378		22		—		—		400		265		38		—		—		303		461		—		60		—		—		521		378		22		—		—		400
Home equity		4,044		(40)		—		109		4,113		4,615		(344)		—		34		4,305		4,660		—		110		—		—		4,770		4,044		(40)		—		109		4,113
Consumer:
Credit cards		944		59		(31)		22		994		930		42		(33)		10		949		1,080		—		43		(33)		13		1,103		944		59		(31)		22		994
Overdrafts		716		315		(194)		64		901		473		281		(111)		74		717		595		—		257		(186)		40		706		716		315		(194)		64		901
Automobile loans		151		(32)		—		3		122		334		(66)		—		5		273		66		—		(16)		—		3		53		151		(32)		—		3		122
Other consumer		241		(38)		(20)		17		200		533		(57)		(17)		8		467		356		—		21		(11)		16		382		241		(38)		(20)		17		200
Total Traditional Banking		49,616		106		(245)		250		49,727		49,387		(30)		(161)		166		49,362		55,216		(1,384)		1,860		(239)		114		55,567		49,616		106		(245)		250		49,727
Warehouse lines of credit		1,725		(234)		—		—		1,491		2,165		(65)		—		—		2,100		1,144		—		202		—		—		1,346		1,725		(234)		—		—		1,491
Total Core Banking		51,341		(128)		(245)		250		51,218		51,552		(95)		(161)		166		51,462		56,360		(1,384)		2,062		(239)		114		56,913		51,341		(128)		(245)		250		51,218

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		8,315		564		(11,505)		2,626		—		16,019		(5,793)		(10,256)		30		—
Other TRS loans		55		(204)		(153)		302		—		10		20		(30)		—		—
Refund Advances																						25,797		—		(161)		(25,824)		188		—		8,315		564		(11,505)		2,626		—
Other TRS commercial & industrial loans																						184		—		(58)		(126)		—		—		55		(204)		(153)		302		—
Republic Credit Solutions		11,945		3,433		(2,411)		264		13,231		7,755		1,592		(597)		79		8,829		13,780		—		4,296		(3,018)		231		15,289		11,945		3,433		(2,411)		264		13,231
Total Republic Processing Group		20,315		3,793		(14,069)		3,192		13,231		23,784		(4,181)		(10,883)		109		8,829		39,761		—		4,077		(28,968)		419		15,289		20,315		3,793		(14,069)		3,192		13,231

Total	$	71,656	$	3,665	$	(14,314)	$	3,442	$	64,449	$	75,336	$	(4,276)	$	(11,044)	$	275	$	60,291	$	96,121	$	(1,384)	$	6,139	$	(29,207)	$	533	$	72,202	$	71,656	$	3,665	$	(14,314)	$	3,442	$	64,449


					Past Due 90-Days-or-More								Past Due 90-Days-or-More
	Nonaccrual				and Still Accruing Interest*				Nonaccrual				and Still Accruing Interest*
(in thousands)	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022

Traditional Banking:
Residential real estate:
Owner occupied	$	11,538	$	12,039	$	—	$	—	$	14,432	$	13,388	$	—	$	—
Nonowner occupied		128		95		—		—		72		117		—		—
Commercial real estate		3,228		6,557		—		—		927		1,001		—		—
Construction & land development		—		—		—		—		—		—		—		—
Commercial & industrial		—		13		—		—		—		—		—		—
Paycheck Protection Program		—		—		—		—
Lease financing receivables		—		—		—		—		—		—		—		—
Aircraft		—		—		—		—		—				—		—
Home equity		1,016		1,700		—		—		1,498		815		—		—
Consumer:
Credit cards		—		—		—		—		—		—		—		—
Overdrafts		—		—		—		1		—		—		—		—
Automobile loans		36		97		—		—		27		31		—		—
Other consumer		222		3		—		—		1		210		—		—
Total Traditional Banking		16,168		20,504		—		1		16,957		15,562		—		—
Warehouse lines of credit		—		—		—		—		—		—		—		—
Total Core Banking		16,168		20,504		—		1		16,957		15,562		—		—

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—		—		—		—
Other TRS loans		—		—		—		—
Refund Advances										—		—		—		—
Other TRS commercial & industrial loans										—		—		—		—
Republic Credit Solutions		—		—		42		47		—		—		547		756
Total Republic Processing Group		—		—		42		47		—		—		547		756

Total	$	16,168	$	20,504	$	42	$	48	$	16,957	$	15,562	$	547	$	756


	30 - 59			60 - 89			90 or More
June 30, 2023	Days			Days			Days			Total			Total
(dollars in thousands)	Delinquent			Delinquent			Delinquent*			Delinquent**			Current		Total

Traditional Banking:
Residential real estate:
Owner occupied	$	3,453		$	841		$	873		$	5,167		$	1,081,584	$	1,086,751
Nonowner occupied		—			—			—			—			350,390		350,390
Commercial real estate		—			—			—			—			1,727,092		1,727,092
Construction & land development		—			—			—			—			179,479		179,479
Commercial & industrial		—			—			—			—			478,759		478,759
Lease financing receivables		—			—			—			—			79,804		79,804
Aircraft		—			—			—			—			208,512		208,512
Home equity		343			106			23			472			255,283		255,755
Consumer:
Credit cards		24			9			—			33			17,101		17,134
Overdrafts		139			—			2			141			565		706
Automobile loans		—			7			3			10			4,167		4,177
Other consumer		44			8			—			52			6,057		6,109
Total Traditional Banking		4,003			971			901			5,875			4,388,793		4,394,668
Warehouse lines of credit		—			—			—			—			539,560		539,560
Total Core Banking		4,003			971			901			5,875			4,928,353		4,934,228

Republic Processing Group:
Tax Refund Solutions:
Refund Advances		—			—			—			—			—		—
Other TRS commercial & industrial loans		—			—			—			—			193		193
Republic Credit Solutions		7,058			2,438			547			10,043			108,678		118,721
Total Republic Processing Group		7,058			2,438			547			10,043			108,871		118,914

Total	$	11,061		$	3,409		$	1,448		$	15,918		$	5,037,224	$	5,053,142
Delinquency ratio***		0.22	%		0.07	%		0.03	%		0.32	%


	30 - 59			60 - 89			90 or More
December 31, 2021	Days			Days			Days			Total			Total
(dollars in thousands)	Delinquent			Delinquent			Delinquent*			Delinquent**			Current		Total

Traditional Banking:
Residential real estate:
Owner occupied	$	606		$	383		$	610		$	1,599		$	819,132	$	820,731
Nonowner occupied		—			—			—			—			306,323		306,323
Commercial real estate		—			—			5,292			5,292			1,450,717		1,456,009
Construction & land development		—			—			—			—			129,337		129,337
Commercial & industrial		8			—			13			21			340,342		340,363
Paycheck Protection Program		—			—			—			—			56,014		56,014
Lease financing receivables		—			—			—			—			8,637		8,637
Aircraft		—			—			—			—			142,894		142,894
Home equity		38			35			241			314			210,264		210,578
Consumer:
Credit cards		19			11			—			30			14,480		14,510
Overdrafts		160			3			1			164			519		683
Automobile loans		—			—			9			9			14,439		14,448
Other consumer		1			—			—			1			1,431		1,432
Total Traditional Banking		832			432			6,166			7,430			3,494,529		3,501,959
Warehouse lines of credit		—			—			—			—			850,550		850,550
Total Core Banking		832			432			6,166			7,430			4,345,079		4,352,509

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—			—			—			—			—		—
Other TRS loans		—			—			—			—			50,987		50,987
Republic Credit Solutions		5,010			978			47			6,035			87,031		93,066
Total Republic Processing Group		5,010			978			47			6,035			138,018		144,053

Total	$	5,842		$	1,410		$	6,213		$	13,465		$	4,483,097	$	4,496,562
Delinquency ratio***		0.13	%		0.03	%		0.14	%		0.30	%


	Troubled Debt			Troubled Debt			Total
	Restructurings on			Restructurings on			Troubled Debt
	Nonaccrual Status			Accrual Status			Restructurings
	Number of	Recorded		Number of	Recorded		Number of	Recorded
June 30, 2022 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate	64	$	3,102	75	$	7,046	139	$	10,148
Commercial real estate	1		2,142	1		883	2		3,025
Commercial & industrial	—		—	1		1	1		1
Consumer	2		14	2,446		424	2,448		438
Total troubled debt restructurings	67	$	5,258	2,523	$	8,354	2,590	$	13,612


	Troubled Debt			Troubled Debt						Amortized Cost Basis of Modified Financing Receivables
June 30, 2023 (dollars in thousands)										Loans (#)	Rate Reduction ($)		Loans (#)	Term Extension ($)		Loans (#)	Principal Deferral ($)
	Restructurings			Restructurings			Total
	Performing to			Not Performing to			Troubled Debt
	Modified Terms			Modified Terms			Restructurings
	Number of	Recorded		Number of	Recorded		Number of	Recorded
June 30, 2022 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment

Residential real estate loans (including home equity loans):
Legal modification	3	$	35	2	$	24	5	$	59
Total residential TDRs	3		35	2		24	5		59

Consumer loans:
Principal deferral	489		77	—		—	489		77
Total consumer TDRs	489		77	—		—	489		77

Total troubled debt restructurings	492	$	112	2	$	24	494	$	136
Residential real estate:
Owner occupied										—	$	—	—	$	—	6	$	547
Nonowner occupied										—		—	—		—	—		—
Home equity										—		—	—		—	4		143
Republic Processing Group										—		—	—		—	423		91
Total Loan Modifications										—	$	—	—	$	—	433	$	781


	Total Loan Modification by Type
	Accruing			Nonaccruing
June 30, 2023 (dollars in thousands)	Loans (#)	Recorded investment ($)		Loans (#)	Recorded investment ($)

Term extension	—	$	—	—	$	—
Principal deferral	423		91	10		690
Total Loan Modifications	423	$	91	10	$	690


	Accruing Loan Modifications
	Three Months Ended June 30, 2023					Six Months Ended June 30, 2023
				% of Total					% of Total
		Amortized		of Financing			Amortized		of Financing
(dollars in thousands)	Loans (#)	Cost Basis ($)		Receivable		Loans	Cost Basis		Receivable

Republic Processing Group	423	$	91	0.08	%	424		93	0.08
Total Accruing Loan Modifications	423	$	91	NM		424	$	93	0.00


	Nonaccruing Loan Modifications
	Three Months Ended June 30, 2023					Six Months Ended June 30, 2023
				% of Total					% of Total
		Amortized		of Financing			Amortized		of Financing
(dollars in thousands)	Loans (#)	Cost Basis ($)		Receivable		Loans	Cost Basis		Receivable

Residential real estate:
Owner occupied	6	$	547	0.05	%	12	$	1,113	0.10	%
Home equity	4		143	0.06		5		214	0.08
Total Nonaccruing Loan Modifications	10	$	690	0.01	%	17	$	1,327	0.03


Year (dollars in thousands)	Related Party		Third Party		Total
Year (in thousands)							Related Party		Third-Party		Total

2022	$	2,123	$	1,309	$	3,432
2023		4,274		2,429		6,703	$	1,923	$	1,322	$	3,245
2024		4,189		1,928		6,117		3,726		2,447		6,173
2025		4,053		1,396		5,449		3,570		1,842		5,412
2026		4,124		1,100		5,224		3,640		1,491		5,131
2027								3,680		1,160		4,840
Thereafter		16,375		4,313		20,688		11,751		3,630		15,381	��
Total undiscounted cash flows	$	35,138	$	12,475	$	47,613	$	28,290	$	11,892	$	40,182
Discount applied to cash flows		(3,398)		(2,052)		(5,450)		(3,035)		(1,426)		(4,461)
Total discounted cash flows reported as operating lease liabilities	$	31,740	$	10,423	$	42,163	$	25,255	$	10,466	$	35,721


			Weighted				Weighted
			Average				Average
Year (dollars in thousands)	Principal		Rate		Principal		Rate

2022	$	—	—	%
2023		—	—		$	450,000	5.09	%
2024		—	—			—	—
2025		—	—			—	—
2026		—	—			20,000	1.89
2027		20,000	1.89			50,000	4.17
2028						—	—
Total	$	20,000	1.89	%	$	520,000	4.88	%


	ACLC Rollforward																				ACLC Roll-forward
	Three Months Ended																				Three Months Ended
	2022										2021										2023										2022
	Beginning				Charge-				Ending		Beginning				Charge-				Ending		Beginning				Charge-				Ending		Beginning				Charge-				Ending
(in thousands)	Balance		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance

Loan Commitments
Unused warehouse lines of credit	$	130	$	32	$	—	$	—	$	162	$	116	$	24	$	—	$	—	$	140	$	198	$	(53)	$	—	$	—	$	145	$	130	$	32	$	—	$	—	$	162
Unused home equity lines of credit		256		21		—		—		277		194		19		—		—		213		341		12		—		—		353		256		21		—		—		277
Unused construction lines of credit																						547		86		—		—		633		—		—		—		—		—
Unused loan commitments - other		654		7		—		—		661		705		(124)		—		—		581		374		25		—		—		399		654		7		—		—		661

Total	$	1,040	$	60	$	—	$	—	$	1,100	$	1,015	$	(81)	$	—	$	—	$	934	$	1,460	$	70	$	—	$	—	$	1,530	$	1,040	$	60	$	—	$	—	$	1,100


	Fair Value Measurements at
	June 30, 2022 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	$	230,771	$	152,321	$	—	$	383,092
Private label mortgage-backed security		—		—		2,478		2,478
Mortgage-backed securities - residential		—		198,270		—		198,270
Collateralized mortgage obligations		—		24,545		—		24,545
Corporate bonds		—		9,936		—		9,936
Trust preferred security		—		—		3,824		3,824
Total available-for-sale debt securities	$	230,771	$	385,072	$	6,302	$	622,145

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	189	$	—	$	189
Total equity securities with readily determinable fair value	$	—	$	189	$	—	$	189

Mortgage loans held for sale	$	—	$	8,491	$	—	$	8,491
Consumer loans held for sale		—		—		17,459		17,459
Consumer loans held for investment		—		—		45		45
Rate lock loan commitments		—		220		—		220
Mandatory forward contracts		—		359		—		359
Interest rate swap agreements		—		4,501		—		4,501

Financial liabilities:
Interest rate swap agreements	$	—	$	4,501	$	—	$	4,501


	Fair Value Measurements at
	June 30, 2023 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	$	174,323	$	233,034	$	—	$	407,357
Private label mortgage-backed security		—		—		1,988		1,988
Mortgage-backed securities - residential		—		166,287		—		166,287
Collateralized mortgage obligations		—		22,747		—		22,747
Corporate bonds		—		2,025		—		2,025
Trust preferred security		—		—		3,746		3,746
Total available-for-sale debt securities	$	174,323	$	424,093	$	5,734	$	604,150

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	122	$	—	$	122
Total equity securities with readily determinable fair value	$	—	$	122	$	—	$	122

Mortgage loans held for sale	$	—	$	4,038	$	—	$	4,038
Consumer loans held for sale		—		—		5,757		5,757
Rate lock loan commitments		—		189		—		189
Interest rate swap agreements		—		7,829		—		7,829

Financial liabilities:
Mandatory forward contracts	$	—	$	61	$	—	$	61
Interest rate swap agreements		—		7,829		—		7,829


	Fair Value Measurements at
	December 31, 2022 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	$	193,385	$	217,756	$	—	$	411,141
Private label mortgage-backed security		—		—		2,127		2,127
Mortgage-backed securities - residential		—		171,873		—		171,873
Collateralized mortgage obligations		—		21,368		—		21,368
Corporate bonds		—		10,001		—		10,001
Trust preferred security		—		—		3,855		3,855
Total available-for-sale debt securities	$	193,385	$	420,998	$	5,982	$	620,365

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	111	$	—	$	111
Total equity securities with readily determinable fair value	$	—	$	111	$	—	$	111

Mortgage loans held for sale	$	—	$	1,302	$	—	$	1,302
Consumer loans held for sale		—		—		4,706		4,706
Consumer loans held for investment		—		—		2		2
Rate lock loan commitments		—		2		—		2
Interest rate swap agreements		—		8,128		—		8,128

Financial liabilities:
Mandatory forward contracts	$	—	$	67	$	—	$	67
Interest rate swap agreements		—		8,128		—		8,128


	Fair Value Measurements at
	December 31, 2021 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	$	70,112	$	167,347	$	—	$	237,459
Private label mortgage-backed security		—		—		2,731		2,731
Mortgage-backed securities - residential		—		210,749		—		210,749
Collateralized mortgage obligations		—		30,294		—		30,294
Corporate bonds		—		10,046		—		10,046
Trust preferred security		—		—		3,847		3,847
Total available-for-sale debt securities	$	70,112	$	418,436	$	6,578	$	495,126

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	170	$	—	$	170
Community Reinvestment Act mutual fund		2,450		—		—		2,450
Total equity securities with readily determinable fair value	$	2,450	$	170	$	—	$	2,620

Mortgage loans held for sale	$	—	$	29,393	$	—	$	29,393
Consumer loans held for sale		—		—		19,747		19,747
Consumer loans held for investment		—		—		170		170
Rate lock loan commitments		—		1,404		—		1,404
Mandatory forward contracts		—		66		—		66
Interest rate swap agreements		—		5,786		—		5,786

Financial liabilities:
Interest rate swap agreements		—		5,786		—		5,786


	Fair		Valuation
June 30, 2023 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage-backed security	$	1,988	Discounted cash flow	(1) Constant prepayment rate	2.7% - 4.5%

				(2) Probability of default	1.8% - 9.3%

				(3) Loss severity	12% - 35%


	Fair		Valuation
December 31, 2022 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage-backed security	$	2,127	Discounted cash flow	(1) Constant prepayment rate	4.5% - 4.7%

				(2) Probability of default	1.8% - 9.3%

				(3) Loss severity	25% - 35%


	Fair		Valuation
December 31, 2021 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage-backed security	$	2,731	Discounted cash flow	(1) Constant prepayment rate	4.5% - 5.7%

				(2) Probability of default	1.8% - 9.3%

				(3) Loss severity	50% - 75%