Republic Bancorp (RBCAA) 10-Q 2022 Q1 Quarterly report

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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 March 31, 2022

or

◻   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 of 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 April 30, 2022 was 17,834,212 and 2,164,903.

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.	63
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	98
Item 4.	Controls and Procedures.	98
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings.	98
Item 1A.	Risk Factors.	99
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	99
Item 6.	Exhibits.	100
	SIGNATURES	101

2

GLOSSARY OF TERMS

The terms identified in alphabetical order below are used throughout this Form 10-Q. You may find it helpful to refer to this page as you read this report.

Term	Definition
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
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
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
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
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
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
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
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
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
TRUP	Trust Preferred Security Investment
Warehouse	Warehouse Lending segment

3

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)

	March 31,		December 31,
	2022		2021
ASSETS
Cash and cash equivalents	$	1,077,158	$	756,971
Available-for-sale debt securities, at fair value (amortized cost of $592,264 in 2022 and $492,626 in 2021, allowance for credit losses of $0 in 2022 and $0 in 2021)		573,539		495,126
Held-to-maturity debt securities (fair value of $39,087 in 2022 and $44,764 in 2021, allowance for credit losses of $40 in 2022 and $47 in 2021)		38,795		44,299
Equity securities with readily determinable fair value		2,502		2,620
Mortgage loans held for sale, at fair value		13,302		29,393
Consumer loans held for sale, at fair value		11,709		19,747
Consumer loans held for sale, at the lower of cost or fair value		3,026		2,937
Loans (loans carried at fair value of $107 in 2022 and $170 in 2021)		4,390,243		4,496,562
Allowance for credit losses		(71,656)		(64,577)
Loans, net		4,318,587		4,431,985
Federal Home Loan Bank stock, at cost		10,311		10,311
Premises and equipment, net		34,358		36,073
Right-of-use assets		42,402		38,825
Goodwill		16,300		16,300
Other real estate owned		1,740		1,792
Bank owned life insurance		99,773		99,161
Other assets and accrued interest receivable		106,367		108,092
TOTAL ASSETS	$	6,349,869	$	6,093,632
LIABILITIES
Deposits:
Noninterest-bearing	$	2,226,714	$	1,990,781
Interest-bearing		2,860,392		2,849,637
Total deposits		5,087,106		4,840,418
Securities sold under agreements to repurchase and other short-term borrowings		287,818		290,967
Operating lease liabilities		43,204		39,672
Federal Home Loan Bank advances		20,000		25,000
Other liabilities and accrued interest payable		71,412		63,343
Total liabilities		5,509,540		5,259,400
Commitments and contingent liabilities (Footnote 9)		—		—
STOCKHOLDERS’ EQUITY
Preferred stock, 0 par value		—		—
Class A Common Stock and Class B Common Stock, 0 par value		4,703		4,702
Additional paid in capital		140,795		139,956
Retained earnings		708,874		687,700
Accumulated other comprehensive income (loss)		(14,043)		1,874
Total stockholders’ equity		840,329		834,232
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,349,869	$	6,093,632

See accompanying footnotes to consolidated financial statements.

4

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

	Three Months Ended
	March 31,
	2022		2021
INTEREST INCOME:
Loans, including fees	$	61,015	$	67,386
Taxable investment securities		2,059		1,952
Federal Home Loan Bank stock and other		481		219
Total interest income		63,555		69,557
INTEREST EXPENSE:
Deposits		879		1,565
Securities sold under agreements to repurchase and other short-term borrowings		28		9
Federal Home Loan Bank advances		36		31
Subordinated note		—		172
Total interest expense		943		1,777
NET INTEREST INCOME		62,612		67,780
Provision for expected credit loss expense for on-balance sheet exposures (loans and investment securities)		9,226		15,262
NET INTEREST INCOME AFTER PROVISION		53,386		52,518
NONINTEREST INCOME:
Service charges on deposit accounts		3,226		2,873
Net refund transfer fees		12,051		12,721
Mortgage banking income		2,657		7,193
Interchange fee income		3,070		3,027
Program fees		3,854		2,225
Increase in cash surrender value of bank owned life insurance		612		390
Net losses on other real estate owned		(53)		(11)
Contract termination fee		5,000		—
Other		584		619
Total noninterest income		31,001		29,037
NONINTEREST EXPENSE:
Salaries and employee benefits		29,312		29,337
Technology, equipment, and communication		7,214		7,043
Occupancy		3,440		3,559
Marketing and development		1,348		726
FDIC insurance expense		419		446
Interchange related expense		1,117		1,144
Legal and professional fees		1,365		1,214
Other		4,358		4,342
Total noninterest expense		48,573		47,811
INCOME BEFORE INCOME TAX EXPENSE		35,814		33,744
INCOME TAX EXPENSE		7,888		7,691
NET INCOME	$	27,926	$	26,053
BASIC EARNINGS PER SHARE:
Class A Common Stock	$	1.40	$	1.26
Class B Common Stock		1.27		1.14
DILUTED EARNINGS PER SHARE:
Class A Common Stock	$	1.40	$	1.25
Class B Common Stock		1.27		1.14

See accompanying footnotes to consolidated financial statements.

5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

	Three Months Ended
	March 31,
	2022		2021
Net income	$	27,926	$	26,053
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized losses on AFS debt securities		(21,249)		(2,029)
Unrealized gain of AFS debt security for which a portion of OTTI has been recognized in earnings		24		15
Total other comprehensive income (loss) before income tax		(21,225)		(2,014)
Tax effect		5,308		503
Total other comprehensive income (loss), net of tax		(15,917)		(1,511)
COMPREHENSIVE INCOME	$	12,009	$	24,542

See accompanying footnotes to consolidated financial statements.

6

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

	Three Months Ended March 31, 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	—	—		—		—		27,926		—		27,926
Net change in AOCI	—	—		—		—		—		(15,917)		(15,917)
Dividends declared on Common Stock:
Class A Shares ($0.341 per share)	—	—		—		—		(6,081)		—		(6,081)
Class B Shares ($0.310 per share)	—	—		—		—		(671)		—		(671)
Stock options exercised, net of shares withheld	1	—		—		(48)		—		—		(48)
Net change in notes receivable on Class A Common Stock	—	—		—		60		—		—		60
Deferred compensation - Class A Common Stock:
Directors	6	—		—		129		—		—		129
Designated key employees	—	—		—		179		—		—		179
Employee stock purchase plan - Class A Common Stock	4	—		1		162		—		—		163
Stock-based awards - Class A Common Stock:
Performance stock units	—	—		—		38		—		—		38
Restricted stock	7	—		—		163		—		—		163
Stock options	—	—		—		156		—		—		156
Balance, March 31, 2022	17,834	2,165	$	4,703	$	140,795	$	708,874	$	(14,043)	$	840,329

	Three Months Ended March 31, 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	—	—		—		—		26,053		—		26,053
Net change in AOCI	—	—		—		—		—		(1,511)		(1,511)
Dividends declared on Common Stock:
Class A Shares ($0.308 per share)	—	—		—		—		(5,743)		—		(5,743)
Class B Shares ($0.280 per share)	—	—		—		—		(616)		—		(616)
Stock options exercised, net of shares withheld	15	—		8		(92)		—		—		(84)
Conversion of Class B to Class A Common Shares	1	(1)		—		—		—		—		—
Repurchase of Class A Common Stock	(107)	—		(24)		(736)		(3,708)		—		(4,468)
Net change in notes receivable on Class A Common Stock	—	—		—		94		—		—		94
Deferred compensation - Class A Common Stock:
Directors	4	—		—		114		—		—		114
Designated key employees	—	—		—		136		—		—		136
Employee stock purchase plan - Class A Common Stock	4	—		1		154		—		—		155
Stock-based awards - Class A Common Stock:
Performance stock units	—	—		—		32		—		—		32
Restricted stock	14	—		—		110		—		—		110
Stock options	—	—		—		114		—		—		114
Balance, March 31, 2021	18,628	2,198	$	4,884	$	143,563	$	682,264	$	6,998	$	837,709

See accompanying footnotes to consolidated financial statements.

7

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Three Months Ended
	March 31,
	2022		2021
OPERATING ACTIVITIES:
Net income	$	27,926	$	26,053
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization on investment securities and low-income housing investments		1,391		1,305
Net accretion on loans and amortization of core deposit intangible and operating lease components		(1,256)		(6,846)
Unrealized losses on equity securities with readily determinable fair value		118		262
Depreciation of premises and equipment		2,038		2,247
Amortization of mortgage servicing rights		668		997
Recovery of mortgage servicing rights		—		(400)
Provision for on-balance sheet exposures		9,226		15,262
Provision for off-balance sheet exposures		(12)		26
Net gain on sale of mortgage loans held for sale		(2,460)		(6,997)
Origination of mortgage loans held for sale		(100,661)		(213,587)
Proceeds from sale of mortgage loans held for sale		119,212		203,815
Net gain on sale of consumer loans held for sale		(3,117)		(1,304)
Origination of consumer loans held for sale		(245,214)		(117,274)
Proceeds from sale of consumer loans held for sale		256,280		107,683
Net gain realized on sale of other real estate owned		—		(41)
Writedowns of other real estate owned		52		53
Deferred compensation expense - Class A Common Stock		308		250
Stock-based awards and ESPP expense - Class A Common Stock		381		288
Increase in cash surrender value of bank owned life insurance		(612)		(390)
Net change in other assets and liabilities:
Accrued interest receivable		451		1,745
Accrued interest payable		33		(65)
Other assets		795		(5,770)
Other liabilities		14,897		9,459
Net cash provided by operating activities		80,444		16,771
INVESTING ACTIVITIES:
Purchases of available-for-sale debt securities		(115,777)		(35,020)
Proceeds from calls, maturities and paydowns of available-for-sale debt securities		15,944		79,077
Proceeds from calls, maturities and paydowns of held-to-maturity debt securities		5,508		1,247
Net change in outstanding warehouse lines of credit		160,350		96,952
Net change in other loans		(54,869)		55,502
Proceeds from redemption of Federal Home Loan Bank stock		—		4,244
Proceeds from sales of other real estate owned		—		536
Investments in low-income housing tax partnerships		(3,645)		(1,510)
Net purchases of premises and equipment		(323)		(1,059)
Net cash provided by investing activities		7,188		199,969
FINANCING ACTIVITIES:
Net change in deposits		246,688		538,311
Net change in securities sold under agreements to repurchase and other short-term borrowings		(3,149)		(35,446)
Payments of Federal Home Loan Bank advances		(25,000)		(235,000)
Proceeds from Federal Home Loan Bank advances		20,000		25,000
Repurchase of Class A Common Stock		—		(4,468)
Net proceeds from Class A Common Stock purchased through employee stock purchase plan		139		132
Net proceeds from option exercises and equity awards vested - Class A Common Stock		(48)		(93)
Cash dividends paid		(6,075)		(5,906)
Net cash provided by financing activities		232,555		282,530
NET CHANGE IN CASH AND CASH EQUIVALENTS		320,187		499,270
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		756,971		485,587
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,077,158	$	984,857
SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION:
Cash paid during the period for:
Interest	$	910	$	1,842
Income taxes		470		441
SUPPLEMENTAL NONCASH DISCLOSURES:
Mortgage servicing rights capitalized	$	974	$	1,213
Transfers from loans to real estate acquired in settlement of loans		—		64
Right-of-use assets recorded		4,538		—

See accompanying footnotes to consolidated financial statements.

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –MARCH 31, 2022 and 2021 AND DECEMBER 31, 2021 (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 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 5 reportable segments using a multitude of delivery channels. While the Bank operates primarily in its market footprint, its non-brick-and-mortar delivery channels allow it to reach clients across the U.S. The Captive is a Nevada-based, wholly-owned insurance subsidiary of the Company. The Captive provides property and casualty insurance coverage to the Company and the Bank, as well as a group of third-party insurance captives for which insurance may not be available or economically feasible.

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 months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. 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.

As of March 31, 2022, the Company was divided into 5 reportable segments: Traditional Banking, Warehouse, Mortgage Banking, TRS, and RCS. Management considers the first 3 segments to collectively constitute “Core Bank” or “Core Banking” operations, while the last 2 segments collectively constitute RPG operations.

9

Core Bank

Traditional Banking segment — The Traditional Banking segment provides traditional banking products primarily to customers in the Company’s market footprint. As of March 31, 2022, Republic had 42 full-service banking centers with locations as follows:

● Kentucky — 28

● Metropolitan Louisville — 18

● Central Kentucky — 7

● Georgetown — 1

● Lexington — 5

● Shelbyville — 1

● Northern Kentucky — 3

● Covington — 1

● Crestview Hills — 1

● Florence — 1

● Southern Indiana — 3

● Floyds Knobs — 1

● Jeffersonville — 1

● New Albany — 1

● Metropolitan Tampa, Florida — 7

● Metropolitan Cincinnati, Ohio — 2

● Metropolitan Nashville, Tennessee — 2

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

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: 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. Reverse mortgage loans typically remain on the line longer than conventional mortgage loans. Interest income and loan fees are accrued for each individual loan during the time the loan 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.

10

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. 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.

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 all of the business generated by the TRS segment occurs in the first half of the year. The TRS segment traditionally operates at a loss during the second half of the year, during which time the segment incurs costs preparing for the upcoming year’s tax 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 credit product is a loan that allows a taxpayer to borrow funds as an advance of a portion of their tax refund. The EA product had the following features during 2022 and 2021:

● Offered only during the first two months of each year;

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

● NaN requirement that the taxpayer pays for another bank product, such as an RT;

● Multiple funds disbursement methods, including direct deposit, prepaid card, or check, based on the taxpayer-customer’s election;

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

● If an insufficient refund to repay the EA occurs:

o there is no recourse to the taxpayer, 

o no negative credit reporting on the taxpayer, and

o no collection efforts against the taxpayer.

The Company reports fees paid for the EA product as interest income on loans. During 2021, EAs were repaid, on average, within 32 days after the taxpayer’s tax return was submitted to the applicable taxing authority. EAs do not have a contractual due date but the Company considered an EA delinquent in 2022 and 2021 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 are estimated when advances are made. Unpaid EAs are charged-off by June 30^th of each year, with EAs collected during the second half of each year recorded as recoveries of previously charged-off loans.

Related to the overall credit losses on EAs, 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 EA approval model is based primarily on the prior-year’s tax refund payment patterns. Because the substantial majority of the EA 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.

Cancelled TRS Sale Transaction - As previously disclosed, Green Dot Corporation paid RB&T a contract termination fee of $5.0 million during the first quarter of 2022 after RB&T provided Green Dot a notice of termination of the May 2021 Purchase Agreement for the sale of substantially all of RB&T’s TRS assets and operations to Green Dot. RB&T continues to pursue other legal remedies against Green Dot related to the Sale Transaction. The Company recorded the contract termination fee within noninterest income during the first quarter of 2022.

Republic Payment Solutions division — RPS is currently managed and operated within the TRS segment. The RPS division offers general-purpose reloadable prepaid cards as an issuing bank through third-party service providers. For the projected near-term, as the

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prepaid card program matures, the operating results of the RPS division are expected to be immaterial to the Company’s overall results of operations and will be reported as part of the TRS segment. The RPS division will not be considered 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 2 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.

o RCS’s LOC I represented the substantial majority of RCS activity during 2021. Elastic Marketing, LLC and Elevate Decision Sciences, LLC are third-party service providers for the product and are subject to the Bank’s oversight and supervision. Together, these companies provide the Bank with certain marketing, servicing, technology, and support services, while a separate third party provides customer support, servicing, and other services on the Bank’s behalf. The Bank is the lender for this product and is marketed as such. Further, the Bank controls the loan terms and underwriting guidelines, and the Bank exercises consumer compliance oversight of the product. 

The Bank sells participation interests in this product. These participation interests are a 90% interest in advances made to borrowers under the borrower’s line-of-credit account, and the participation interests are generally sold three business days following the Bank’s funding of the associated advances. Although the Bank retains a 10% participation interest in each advance, it maintains 100% ownership of the underlying LOC I account with each borrower. Loan balances held for sale through this program are carried at the lower of cost or fair value.

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

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

● RCS installment loan product – In December 2019, through RCS, the Bank began offering installment loans with terms ranging from 12 to 60 months to borrowers in multiple states. The same third-party service provider for RCS’s LOC II is the third-party provider for the installment loans. This third-party provider is subject to the Bank’s oversight and supervision and provides the Bank with marketing services and loan servicing for these RCS installment loans. The Bank is the lender for these RCS installment loans and is marketed as such. Furthermore, the Bank controls the loan terms and underwriting guidelines, and the Bank exercises consumer compliance oversight of this RCS installment loan product. Currently, all loan balances originated under this RCS installment loan program are carried as “held for sale” on the Bank’s balance sheet, with the intention to sell these loans to a third-party, who is an affiliate of the Bank’s third-party service provider, generally within sixteen days following the Bank’s origination of the loans. Loans originated under this RCS installment loan program are carried at fair value under a fair-value option, with the portfolio marked to market monthly.

● RCS healthcare receivables products – The Bank originates healthcare-receivables products across the U.S. through 2 different third-party service providers. In one program, the Bank retains 100% of the receivables originated. In the other program, the Bank retains 100% of the receivables originated in some instances, and in other instances, sells 100% of the

12

receivables 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.”

Recently Adopted Accounting Standards

The following ASUs were adopted by the Company during the three months ended March 31, 2022:

ASU. No.	Topic	Nature of Update	Date Adopted	Method of Adoption	Financial Statement Impact
2020-06	Debt—Debt with Conversion 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	This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will 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 are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share calculation in certain areas.	January 1, 2022	Prospectively	Immaterial
2021-04	Earnings Per Share (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): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options	This ASU provides 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 modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) How an entity should measure the effect of a modification or an exchange 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.	January 1, 2022	Prospectively	Immaterial

13

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
2022-01	Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method	In 2017, the FASB issued a new hedging standard to better align the economic results of risk management activities with hedge accounting. One of the major provisions of that standard was the addition of the last-of-layer hedging method. For a closed portfolio of fixed-rate prepayable financial assets or one or more beneficial interests secured by a portfolio of prepayable financial instruments, such as mortgages or mortgage-backed securities, the last-of-layer method allows an entity to hedge its exposure to fair value changes due to changes in interest rates for a portion of the portfolio that is not expected to be affected by prepayments, defaults, and other events affecting the timing and amount of cash flows. Since issuing that standard, stakeholders have told the FASB that the ability to elect hedge accounting for a single layer is useful, but hedge accounting could better reflect risk management activities if expanded to allow multiple layers of a single closed portfolio to be hedged under the method. This ASU expands the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed the portfolio-layer method.	January 1, 2023	Prospectively	Immaterial
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.

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2. 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
	Amortized		Unrealized		Unrealized		for		Fair
March 31, 2022 (in thousands)	Cost		Gains		Losses		Credit Losses		Value
U.S. Treasury securities and U.S. Government agencies	$	326,030	$	72	$	(13,142)	$	0	$	312,960
Private label mortgage-backed security		1,265		1,337		—		0		2,602
Mortgage-backed securities - residential		223,924		566		(7,589)		0		216,901
Collateralized mortgage obligations		27,347		176		(224)		0		27,299
Corporate bonds		10,000		52		—		0		10,052
Trust preferred security		3,698		27		—		0		3,725
Total available-for-sale debt securities	$	592,264	$	2,230	$	(20,955)	$	0	$	573,539

			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
March 31, 2022 (in thousands)	Cost		Gains		Losses		Value		Credit Losses
Mortgage-backed securities - residential	$	32	$	—	$	—	$	32	$	—
Collateralized mortgage obligations		8,591		116		—		8,707		—
Corporate bonds		29,967		140		(4)		30,103		(40)
Obligations of state and political subdivisions		245		—		—		245		—
Total held-to-maturity debt securities	$	38,835	$	256	$	(4)	$	39,087	$	(40)

			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 months ended March 31, 2022 and 2021, there were no material gains or losses on sales or calls of AFS debt securities.

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Debt Securities by Contractual Maturity

The amortized cost and fair value of debt securities by contractual maturity as of March 31, 2022 follow. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are detailed separately.

	Available-for-Sale				Held-to-Maturity
	Debt Securities				Debt Securities
	Amortized		Fair		Amortized		Fair
March 31, 2022 (in thousands)	Cost		Value		Cost		Value
Due in one year or less	$	50,684	$	50,690	$	120	$	121
Due from one year to five years		275,346		263,031		30,092		30,227
Due from five years to ten years		10,000		9,238		—		—
Due beyond ten years		3,698		3,778		—		—
Private label mortgage-backed security		1,265		2,602		—		—
Mortgage-backed securities - residential		223,924		216,901		32		32
Collateralized mortgage obligations		27,347		27,299		8,591		8,707
Total debt securities	$	592,264	$	573,539	$	38,835	$	39,087

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

	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
March 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	$	226,199	$	(9,197)	$	56,055	$	(3,945)	$	282,254	$	(13,142)
Mortgage-backed securities - residential		168,927		(7,589)		—		—		168,927		(7,589)
Collateralized mortgage obligations		10,878		(224)		—		—		10,878		(224)
Total available-for-sale debt securities	$	406,004	$	(17,010)	$	56,055	$	(3,945)	$	462,059	$	(20,955)

													���
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
December 31, 2021 (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)
Mortgage-backed securities - residential		84,937		(473)		—		—		84,937		(473)
Collateralized mortgage obligations		4,495		(30)		—		—		4,495		(30)
Total available-for-sale debt securities	$	266,570	$	(3,125)	$	9,728	$	(272)	$	276,298	$	(3,397)

As of March 31, 2022, the Bank’s security portfolio consisted of 180 securities, 69 of which were in an unrealized loss position.

As of December 31, 2021, the Bank’s security portfolio consisted of 173 securities, 29 of which were in an unrealized loss position.

As of March 31, 2022 and December 31, 2021, 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 1 private label mortgage-backed security with a total carrying value of $2.6 million as of March 31, 2022. 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.

16

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 March 31, 2022, with the exception of the $2.6 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 March 31, 2022 and December 31, 2021, there were gross unrealized losses of $7.8 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 of the Allowance for Credit Losses on Debt Securities

The table below presents a rollforward for the three months ended March 31, 2022 and 2021 of the ACLS on AFS and HTM debt securities:

	ACLS Rollforward
	Three Months Ended March 31,
	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	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Held-to-Maturity Securities:
Corporate Bonds		47		(7)		—		—		40		178		(75)		—		—		103
Total	$	47	$	(7)	$	—	$	—	$	40	$	178	$	(75)	$	—	$	—	$	103

The Company decreased the ACLS on its HTM corporate bonds during the three months ended March 31, 2022 based on improved PD and LGD estimates on these bonds.

There were 0 HTM debt securities on nonaccrual or past due over 89 days as of March 31, 2022 and December 31, 2021. All of the Company’s HTM corporate bonds were rated investment grade as of March 31, 2022 and December 31, 2021.

There were 0 HTM debt securities considered collateral dependent as of March 31, 2022 and December 31, 2021.

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 $1 million and $1 million as of March 31, 2022 and December 31, 2021. Accrued interest receivable on HTM debt securities totaled $81,000 and $89,000 as of March 31, 2022 and December 31, 2021.

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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)	March 31, 2022		December 31, 2021
Carrying amount	$	330,853	$	319,650
Fair value		330,853		319,808

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
	Amortized		Unrealized		Unrealized		Fair
March 31, 2022 (in thousands)	Cost		Gains		Losses		Value
Freddie Mac preferred stock	$	—	$	164	$	—	$	164
Community Reinvestment Act mutual fund		2,500		—		(162)		2,338
Total equity securities with readily determinable fair values	$	2,500	$	164	$	(162)	$	2,502

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2021 (in thousands)	Cost		Gains		Losses		Value
Freddie Mac preferred stock	$	—	$	170	$	—	$	170
Community Reinvestment Act mutual fund		2,500		—		(50)		2,450
Total equity securities with readily determinable fair values	$	2,500	$	170	$	(50)	$	2,620

For equity securities with readily determinable fair values, the gross realized and unrealized gains and losses recognized in the Company’s consolidated statements of income were as follows:

	Gains (Losses) Recognized on Equity Securities
	Three Months Ended March 31, 2022						Three Months Ended March 31, 2021
(in thousands)	Realized		Unrealized		Total		Realized		Unrealized		Total
Freddie Mac preferred stock	$	—	$	(6)	$	(6)	$	—	$	(222)	$	(222)
Community Reinvestment Act mutual fund		—		(112)		(112)		—		(40)		(40)
Total equity securities with readily determinable fair value	$	—	$	(118)	$	(118)	$	—	$	(262)	$	(262)

18

3. LOANS HELD FOR SALE

In the ordinary course of business, the Bank originates for sale mortgage loans and consumer loans. Mortgage loans originated for sale are primarily originated and sold into the secondary market through the Bank’s 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 11 “Mortgage Banking Activities” of this section of the filing.

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 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
	March 31,
(in thousands)	2022		2021
					��
Balance, beginning of period	$	19,747	$	3,298
Origination of consumer loans held for sale		96,732		19,090
Proceeds from the sale of consumer loans held for sale		(106,648)		(18,930)
Net gain on sale of consumer loans held for sale		1,878		512
Balance, end of period	$	11,709	$	3,970

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

RCS originates for sale 90% to 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
	March 31,
(in thousands)	2022		2021
Balance, beginning of period	$	2,937	$	1,478
Origination of consumer loans held for sale		148,482		98,184
Proceeds from the sale of consumer loans held for sale		(149,632)		(88,753)
Net gain on sale of consumer loans held for sale		1,239		792
Balance, end of period	$	3,026	$	11,701

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4. LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition of the loan portfolio follows:

(in thousands)	March 31, 2022		December 31, 2021
Traditional Banking:
Residential real estate:
Owner occupied	$	808,658	$	820,731
Nonowner occupied		314,933		306,323
Commercial real estate		1,556,575		1,456,009
Construction & land development		129,970		129,337
Commercial & industrial		342,175		340,363
Paycheck Protection Program		18,276		56,014
Lease financing receivables		10,396		8,637
Aircraft		151,284		142,894
Home equity		210,364		210,578
Consumer:
Credit cards		14,654		14,510
Overdrafts		716		683
Automobile loans		11,846		14,448
Other consumer		939		1,432
Total Traditional Banking		3,570,786		3,501,959
Warehouse lines of credit*		690,200		850,550
Total Core Banking		4,260,986		4,352,509
Republic Processing Group*:
Tax Refund Solutions:
Easy Advances		16,475		—
Other TRS loans		25,132		50,987
Republic Credit Solutions		87,650		93,066
Total Republic Processing Group		129,257		144,053
Total loans**		4,390,243		4,496,562
Allowance for credit losses		(71,656)		(64,577)
Total loans, net	$	4,318,587	$	4,431,985

*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)	March 31, 2022		December 31, 2021
Contractually receivable	$	4,392,499	$	4,498,671
Unearned income		(529)		(542)
Unamortized premiums		121		116
Unaccreted discounts		(598)		(641)
PPP net unamortized deferred origination (fees) and costs		(428)		(1,203)
Other net unamortized deferred origination (fees) and costs		(822)		161
Carrying value of loans	$	4,390,243	$	4,496,562

20

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 March 31, 2022, net PPP loans of $18 million remained on the Traditional Bank’s balance sheet, including $3 million in loan balances originated during 2020 and $15 million in loan balances originated during 2021. PPP fees recognized by the Company for the first quarters of 2022 and 2021 were $879,000 and $5.8 million. PPP fees recognized by the Company for the years ended December 31, 2021 and 2020 were $17.5 million and $8.6 million.

21

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 March 31, 2022 remain unchanged from those defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Regarding origination year, loan extensions and renewals are generally considered originated in the year extended or renewed unless the loan is classified as a TDR. Loan extensions and renewals classified as TDRs generally receive no change in origination date upon extension or renewal.

												Revolving Loans		Revolving Loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year											Amortized		Converted
As of March 31, 2022	2022		2021			2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate owner occupied:
Risk Rating
Pass or not rated	$	34,689	$	208,741		$	206,086	$	83,162	$	254,051	$	—	$	—	$	786,729
Special Mention		—		296			—		—		8,131		—		—		8,427
Substandard		—		—			1,125		1,034		11,343		—		—		13,502
Doubtful		—		—			—		—		—		—		—		—
Total	$	34,689	$	209,037		$	207,211	$	84,196	$	273,525	$	—	$	—	$	808,658
Residential real estate nonowner occupied:
Risk Rating
Pass or not rated	$	24,117	$	102,088		$	63,823	$	41,166	$	77,944	$	—	$	5,534	$	314,672
Special Mention		—		—			—		—		129		—		—		129
Substandard		—		41			—		—		91		—		—		132
Doubtful		—		—			—		—		—		—		—		—
Total	$	24,117	$	102,129		$	63,823	$	41,166	$	78,164	$	—	$	5,534	$	314,933
Commercial real estate:
Risk Rating
Pass or not rated	$	170,095	$	474,706		$	240,041	$	155,065	$	338,934	$	—	$	96,789	$	1,475,630
Special Mention		1,324		20,147			2,386		23,951		28,723		—		—		76,531
Substandard		—		—			—		—		4,414		—		—		4,414
Doubtful		—		—			—		—		—		—		—		—
Total	$	171,419	$	494,853		$	242,427	$	179,016	$	372,071	$	—	$	96,789	$	1,556,575
Construction and land development:
Risk Rating
Pass or not rated	$	22,171	$	82,541		$	15,265	$	794	$	6,333	$	—	$	—	$	127,104
Special Mention		—		533			—		2,333		—		—		—		2,866
Substandard		—		—			—		—		—		—		—		—
Doubtful		—		—			—		—		—		—		—		—
Total	$	22,171	$	83,074		$	15,265	$	3,127	$	6,333	$	—	$	—	$	129,970
					���
Commercial and industrial:
Risk Rating
Pass or not rated	$	31,331	$	142,205		$	31,386	$	55,176	$	59,798	$	—	$	2,457	$	322,353
Special Mention		900		14,594			1,460		739		1,980		—		—		19,673
Substandard		—		—			—		149		—		—		—		149
Doubtful		—		—			—		—		—		—		—		—
Total	$	32,231	$	156,799		$	32,846	$	56,064	$	61,778	$	—	$	2,457	$	342,175
Paycheck Protection Program:
Risk Rating
Pass or not rated	$	—	$	15,132		$	3,144	$	—	$	—	$	—	$	—	$	18,276
Special Mention		—		—			—		—		—		—		—		—
Substandard		—		—			—		—		—		—		—		—
Doubtful		—		—			—		—		—		—		—		—
Total	$	—	$	15,132		$	3,144	$	—	$	—	$	—	$	—	$	18,276
Lease financing receivables:
Risk Rating
Pass or not rated	$	2,713	$	2,401		$	795	$	2,380	$	2,107	$	—	$	—	$	10,396
Special Mention		—		—			—		—		—		—		—		—
Substandard		—		—			—		—		—		—		—		—
Doubtful		—		—			—		—		—		—		—		—
Total	$	2,713	$	2,401		$	795	$	2,380	$	2,107	$	—	$	—	$	10,396
Aircraft:
Risk Rating
Pass or not rated	$	13,768	$	63,842		$	41,934	$	21,847	$	9,893	$	—	$	—	$	151,284
Special Mention		—		—			—		—		—		—		—		—
Substandard		—		—			—		—		—		—		—		—
Doubtful		—		—			—		—		—		—		—		—
Total	$	13,768	$	63,842		$	41,934	$	21,847	$	9,893	$	—	$	—	$	151,284
Home equity:
Risk Rating
Pass or not rated	$	—	$	—		$	—	$	—	$	—	$	208,428	$	—	$	208,428
Special Mention		—		—			—		—		—		336		—		336
Substandard		—		—			—		—		—		1,600		—		1,600
Doubtful		—		—			—		—		—		—		—		—
Total	$	—	$	—		$	—	$	—	$	—	$	210,364	$	—	$	210,364

22

											Revolving Loans		Revolving Loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year (Continued)										Amortized		Converted
As of March 31, 2022	2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Consumer:
Risk Rating
Pass or not rated	$	341	$	817	$	454	$	4,059	$	7,565	$	14,746	$	—	$	27,982
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		15		158		—		—		173
Doubtful		—		—		—		—		—		—		—		—
Total	$	341	$	817	$	454	$	4,074	$	7,723	$	14,746	$	—	$	28,155
Warehouse:
Risk Rating
Pass or not rated	$	—	$	—	$	—	$	—	$	—	$	690,200	$	—	$	690,200
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	690,200	$	—	$	690,200
TRS:
Risk Rating
Pass or not rated	$	—	$	25,000	$	—	$	—	$	—	$	16,607	$	—	$	41,607
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	—	$	25,000	$	—	$	—	$	—	$	16,607	$	—	$	41,607
RCS:
Risk Rating
Pass or not rated	$	1,768	$	3,971	$	2,492	$	1,323	$	25,777	$	51,964	$	—	$	87,295
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		355		—		355
Doubtful		—		—		—		—		—		—		—		—
Total	$	1,768	$	3,971	$	2,492	$	1,323	$	25,777	$	52,319	$	—	$	87,650
Grand Total:
Risk Rating
Pass or not rated	$	300,993	$	1,121,444	$	605,420	$	364,972	$	782,402	$	981,945	$	104,780	$	4,261,956
Special Mention		2,224		35,570		3,846		27,023		38,963		336		—		107,962
Substandard		—		41		1,125		1,198		16,006		1,955		—		20,325
Doubtful		—		—		—		—		—		—		—		—
Grand Total	$	303,217	$	1,157,055	$	610,391	$	393,193	$	837,371	$	984,236	$	104,780	$	4,390,243

											Revolving Loans		Revolving Loans
(in thousands)	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
Residential real estate owner occupied:
Risk Rating
Pass or not rated	$	218,981	$	213,010	$	89,186	$	50,301	$	226,852	$	—	$	—	$	798,330
Special Mention		301		—		—		33		8,209		—		—		8,543
Substandard		45		870		679		1,189		11,075		—		—		13,858
Doubtful		—		—		—		—		—		—		—		—
Total	$	219,327	$	213,880	$	89,865	$	51,523	$	246,136	$	—	$	—	$	820,731
Residential real estate nonowner occupied:
Risk Rating
Pass or not rated	$	107,041	$	65,947	$	44,376	$	29,292	$	55,872	$	—	$	3,568	$	306,096
Special Mention		—		—		—		—		132		—		—		132
Substandard		—		—		—		—		95		—		—		95
Doubtful		—		—		—		—		—		—		—		—
Total	$	107,041	$	65,947	$	44,376	$	29,292	$	56,099	$	—	$	3,568	$	306,323
Commercial real estate:
Risk Rating
Pass or not rated	$	487,669	$	260,182	$	156,748	$	94,212	$	286,223	$	—	$	82,158	$	1,367,192
Special Mention		20,059		2,399		29,639		11,207		18,778		—		—		82,082
Substandard		—		111		266		2,453		3,905		—		—		6,735
Doubtful		—		—		—		—		—		—		—		—
Total	$	507,728	$	262,692	$	186,653	$	107,872	$	308,906	$	—	$	82,158	$	1,456,009
Construction and land development:
Risk Rating
Pass or not rated	$	89,078	$	32,046	$	2,599	$	1,155	$	265	$	—	$	—	$	125,143
Special Mention		—		524		3,670		—		—		—		—		4,194
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		���		—		—		—
Total	$	89,078	$	32,570	$	6,269	$	1,155	$	265	$	—	$	—	$	129,337
Commercial and industrial:
Risk Rating
Pass or not rated	$	150,820	$	44,481	$	59,186	$	18,110	$	44,972	$	—	$	2,541	$	320,110
Special Mention		15,365		1,921		785		34		1,956		—		—		20,061
Substandard		—		13		179		—		—		—		—		192
Doubtful		—		—		—		—		—		—		—		—
Total	$	166,185	$	46,415	$	60,150	$	18,144	$	46,928	$	—	$	2,541	$	340,363

23

											Revolving Loans		Revolving Loans
(in thousands)	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
Paycheck Protection Program:
Risk Rating
Pass or not rated	$	40,607	$	15,407	$	—	$	—	$	—	$	—	$	—	$	56,014
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	40,607	$	15,407	$	—	$	—	$	—	$	—	$	—	$	56,014
Lease financing receivables:
Risk Rating
Pass or not rated	$	2,638	$	839	$	2,641	$	1,264	$	1,255	$	—	$	—	$	8,637
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	2,638	$	839	$	2,641	$	1,264	$	1,255	$	—	$	—	$	8,637
Aircraft:
Risk Rating
Pass or not rated	$	65,886	$	43,301	$	22,933	$	9,119	$	1,655	$	—	$	—	$	142,894
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	65,886	$	43,301	$	22,933	$	9,119	$	1,655	$	—	$	—	$	142,894
Home equity:
Risk Rating
Pass or not rated	$	—	$	—	$	—	$	—	$	—	$	208,429	$	—	$	208,429
Special Mention		—		—		—		—		—		279		—		279
Substandard		—		—		—		—		—		1,870		—		1,870
Doubtful		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	210,578	$	—	$	210,578
Consumer:
Risk Rating
Pass or not rated	$	978	$	417	$	4,694	$	4,326	$	5,768	$	14,613	$	—	$	30,796
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		22		61		194		—		—		277
Doubtful		—		—		—		—		—		—		—		—
Total	$	978	$	417	$	4,716	$	4,387	$	5,962	$	14,613	$	—	$	31,073
Warehouse:
Risk Rating
Pass or not rated	$	—	$	—	$	—	$	—	$	—	$	850,550	$	—	$	850,550
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	850,550	$	—	$	850,550
TRS:
Risk Rating
Pass or not rated	$	—	$	—	$	—	$	—	$	—	$	50,987	$	—	$	50,987
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	50,987	$	—	$	50,987
RCS:
Risk Rating
Pass or not rated	$	5,524	$	3,409	$	1,642	$	869	$	3,699	$	77,544	$	—	$	92,687
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		379		—		379
Doubtful		—		—		—		—		—		—		—		—
Total	$	5,524	$	3,409	$	1,642	$	869	$	3,699	$	77,923	$	—	$	93,066
Grand Total:
Risk Rating
Pass or not rated	$	1,169,222	$	679,039	$	384,005	$	208,648	$	626,561	$	1,202,123	$	88,267	$	4,357,865
Special Mention		35,725		4,844		34,094		11,274		29,075		279		—		115,291
Substandard		45		994		1,146		3,703		15,269		2,249		—		23,406
Doubtful		—		—		—		—		—		—		—		—
Grand Total	$	1,204,992	$	684,877	$	419,245	$	223,625	$	670,905	$	1,204,651	$	88,267	$	4,496,562

24

Allowance for Credit Losses on Loans

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

	ACLL Rollforward
	Three Months Ended March 31,
	2022										2021
	Beginning				Charge-				Ending			Beginning			Charge-				Ending
(in thousands)	Balance		Provision		offs		Recoveries		Balance			Balance	Provision		offs		Recoveries		Balance
Traditional Banking:
Residential real estate:
Owner occupied	$	8,647	$	(331)	$	—	$	42	$	8,358	$	9,715	$	(253)	$	—	$	27	$	9,489
Nonowner occupied		2,700		45		—		1		2,746		2,466		66		—		—		2,532
Commercial real estate		23,769		854		—		1		24,624		23,606		555		(428)		68		23,801
Construction & land development		4,128		(235)		—		—		3,893		3,274		319		—		—		3,593
Commercial & industrial		3,487		(84)		—		9		3,412		2,797		(86)		—		7		2,718
Paycheck Protection Program		—		—		—		—		—		—		—		—		—		—
Lease financing receivables		91		18		—		—		109		106		(2)		—		—		104
Aircraft		357		21		—		—		378		253		12		—		—		265
Home equity		4,111		(70)		—		3		4,044		4,990		(382)		—		7		4,615
Consumer:
Credit cards		934		32		(39)		17		944		929		44		(57)		14		930
Overdrafts		683		188		(214)		59		716		587		(73)		(138)		97		473
Automobile loans		186		(36)		—		1		151		399		(78)		—		13		334
Other consumer		314		(75)		(10)		12		241		577		(52)		(14)		22		533
Total Traditional Banking		49,407		327		(263)		145		49,616		49,699		70		(637)		255		49,387
Warehouse lines of credit		2,126		(401)		—		—		1,725		2,407		(242)		—		—		2,165
Total Core Banking		51,533		(74)		(263)		145		51,341		52,106		(172)		(637)		255		51,552
Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—		8,315		—		—		8,315		—		16,019		—		—		16,019
Other TRS loans		96		(403)		—		362		55		158		(135)		(22)		9		10
Republic Credit Solutions		12,948		1,395		(2,673)		275		11,945		8,803		(375)		(766)		93		7,755
Total Republic Processing Group		13,044		9,307		(2,673)		637		20,315		8,961		15,509		(788)		102		23,784
Total	$	64,577	$	9,233	$	(2,936)	$	782	$	71,656	$	61,067	$	15,337	$	(1,425)	$	357	$	75,336

The cumulative loss rate used as the basis for the estimate of the Company’s ACLL as of March 31, 2022 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, 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.

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

25

Nonperforming Loans and Nonperforming Assets

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

(dollars in thousands)	March 31, 2022			December 31, 2021
Loans on nonaccrual status*	$	16,935		$	20,504
Loans past due 90-days-or-more and still on accrual**		31			48
Total nonperforming loans		16,966			20,552
Other real estate owned		1,740			1,792
Total nonperforming assets	$	18,706		$	22,344
Credit Quality Ratios - Total Company:
Nonperforming loans to total loans		0.39	%		0.46	%
Nonperforming assets to total loans (including OREO)		0.43			0.50
Nonperforming assets to total assets		0.29			0.37
Credit Quality Ratios - Core Bank:
Nonperforming loans to total loans		0.40	%		0.47	%
Nonperforming assets to total loans (including OREO)		0.44			0.51
Nonperforming assets to total assets		0.33			0.40

* Loans on nonaccrual status include collateral-dependent loans.

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

26

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
	Nonaccrual				and Still Accruing Interest*
(in thousands)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Traditional Banking:
Residential real estate:
Owner occupied	$	11,728	$	12,039	$	—	$	—
Nonowner occupied		132		95		—		—
Commercial real estate		3,581		6,557		—		—
Construction & land development		—		—		—		—
Commercial & industrial		—		13		—		—
Paycheck Protection Program		—		—		—		—
Lease financing receivables		—		—		—		—
Aircraft		—		—		—		—
Home equity		1,431		1,700		—		—
Consumer:
Credit cards		—		—		—		—
Overdrafts		—		—		—		1
Automobile loans		60		97		—		—
Other consumer		3		3		—		—
Total Traditional Banking		16,935		20,504		—		1
Warehouse lines of credit		—		—		—		—
Total Core Banking		16,935		20,504		—		1
Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—		—		—		—
Other TRS loans		—		—		—		—
Republic Credit Solutions		—		—		31		47
Total Republic Processing Group		—		—		31		47
Total	$	16,935	$	20,504	$	31	$	48

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

							Three Months Ended
	As of March 31, 2022						March 31, 2022
	Nonaccrual		Nonaccrual		Total		Interest Income
	Loans with		Loans without		Nonaccrual		Recognized
(in thousands)	ACLL		ACLL		Loans		on Nonaccrual Loans*
Residential real estate:
Owner occupied	$	1,924	$	9,804	$	11,728	$	230
Nonowner occupied		30		102		132		1
Commercial real estate		3,581		—		3,581		630
Construction & land development		—		—		—		—
Commercial & industrial		—		—		—		—
Paycheck Protection Program		—		—		—		—
Lease financing receivables		—		—		—		—
Aircraft		—		—		—		—
Home equity		—		1,431		1,431		44
Consumer		30		33		63		46
Total	$	5,565	$	11,370	$	16,935	$	951

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

27

							Three Months Ended
	As of December 31, 2021						March 31, 2021
	Nonaccrual		Nonaccrual		Total		Interest Income
	Loans with		Loans without		Nonaccrual		Recognized
(in thousands)	ACLL		ACLL		Loans		on Nonaccrual Loans*
Residential real estate:
Owner occupied	$	1,944	$	10,095	$	12,039	$	191
Nonowner occupied		31		64		95		2
Commercial real estate		4,105		2,452		6,557		29
Construction & land development		—		—		—		—
Commercial & industrial		—		13		13		—
Paycheck Protection Program		—		—		—		—
Lease financing receivables		—		—		—		—
Aircraft		—		—		—		—
Home equity		—		1,700		1,700		17
Consumer		17		83		100		2
	$	6,097	$	14,407	$	20,504	$	241

* 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
March 31, 2022	Days			Days			Days			Total			Total
(dollars in thousands)	Delinquent			Delinquent			Delinquent*			Delinquent**			Current		Total
Traditional Banking:
Residential real estate:
Owner occupied	$	1,043		$	1,211		$	374		$	2,628		$	806,030	$	808,658
Nonowner occupied		—			—			41			41			314,892		314,933
Commercial real estate		—			—			2,464			2,464			1,554,111		1,556,575
Construction & land development		—			—			—			—			129,970		129,970
Commercial & industrial		—			—			—			—			342,175		342,175
Paycheck Protection Program		—			—			—			—			18,276		18,276
Lease financing receivables		—			—			—			—			10,396		10,396
Aircraft		—			—			—			—			151,284		151,284
Home equity		313			—			242			555			209,809		210,364
Consumer:
Credit cards		32			7			—			39			14,615		14,654
Overdrafts		115			4			—			119			597		716
Automobile loans		9			—			8			17			11,829		11,846
Other consumer		—			—			—			—			939		939
Total Traditional Banking		1,512			1,222			3,129			5,863			3,564,923		3,570,786
Warehouse lines of credit		—			—			—			—			690,200		690,200
Total Core Banking		1,512			1,222			3,129			5,863			4,255,123		4,260,986
Republic Processing Group:
Tax Refund Solutions:
Easy Advances		4,524			—			—			4,524			11,951		16,475
Other TRS loans		160			—			—			160			24,972		25,132
Republic Credit Solutions		4,551			1,086			31			5,668			81,982		87,650
Total Republic Processing Group		9,235			1,086			31			10,352			118,905		129,257
Total	$	10,747		$	2,308		$	3,160		$	16,215		$	4,374,028	$	4,390,243
Delinquency ratio***		0.24	%		0.05	%		0.07	%		0.37	%

*       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.

28

	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.

29

Collateral-Dependent Loans

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

	March 31, 2022				December 31, 2021
	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	$	14,672	$	—	$	14,798	$	—
Nonowner occupied		132		—		95		—
Commercial real estate		4,414		—		6,736		—
Construction & land development		—		—		—		—
Commercial & industrial		—		150		—		192
Paycheck Protection Program		—		—		—		—
Lease financing receivables		—		—		—		—
Aircraft		—		—		—		—
Home equity		1,706		—		1,976		—
Consumer		—		85		—		274
Total Traditional Banking	$	20,924	$	235	$	23,605	$	466

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.

30

Troubled Debt Restructurings

A TDR is a situation where, due to a borrower’s financial difficulties, the Bank grants a concession to the borrower that the Bank would not otherwise have considered. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed 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 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 March 31, 2022 and December 31, 2021, $6 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
March 31, 2022 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate	63	$	3,516	84	$	7,576	147	$	11,092
Commercial real estate	1		2,464	2		1,209	3		3,673
Commercial & industrial	—		—	1		1	1		1
Consumer	1		11	2,318		410	2,319		421
Total troubled debt restructurings	65	$	5,991	2,405	$	9,196	2,470	$	15,187

	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
Construction & land development	—		—	—		—	—		—
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

31

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 terms as of March 31, 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
March 31, 2022 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Rate reduction	76	$	7,000	5	$	430	81	$	7,430
Principal deferral	7		721	—		—	7		721
Legal modification	54		2,822	5		119	59		2,941
Total residential TDRs	137		10,543	10		549	147		11,092
Commercial related and construction/land development loans:
Rate reduction	1		894	—		—	1		894
Principal deferral	2		316	1		2,464	3		2,780
Total commercial TDRs	3		1,210	1		2,464	4		3,674
Consumer loans:
Principal deferral	2,316		406	—		—	2,316		406
Legal modification	3		15	—		—	3		15
Total consumer TDRs	2,319		421	—		—	2,319		421
Total troubled debt restructurings	2,459	$	12,174	11	$	3,013	2,470	$	15,187

	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 March 31, 2022 and December 31, 2021, 80% 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 March 31, 2022 and December 31, 2021. The Bank had 0 commitments to lend any additional material amounts to its existing TDR relationships as of March 31, 2022 or December 31, 2021.

32

A summary of the categories of TDR loan modifications by respective performance as of March 31, 2022 and 2021 that were modified during the three months ended March 31, 2022 and 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
March 31, 2022 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Legal modification	6	$	772	—	$	—	6	$	772
Total residential TDRs	6		772	—		—	6		772
Consumer loans:
Legal modification	258		42	—		—	258		42
Total consumer TDRs	258		42	—		—	258		42
Total troubled debt restructurings	264	$	814	—	$	—	264	$	814

	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
March 31, 2021 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Principal deferral	1	$	163	—	$	—	1		163
Legal modification	4		98	2		174	6		272
Total residential TDRs	5		261	2		174	7		435
Consumer loans:
Principal deferral	385		42	—		—	385		42
Legal modification	1		3	1		12	2		15
Total consumer TDRs	386		45	1		12	387		57
Total troubled debt restructurings	391	$	306	3	$	186	394	$	492

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 March 31, 2022 and 2021, 100% and 62% of the Bank’s TDR balances that occurred during the first quarter of 2022 and 2021 were performing according to their modified terms. The Bank provided approximately $28,000 and $29,000 in specific ACLL allocations to clients whose loan terms were modified in TDRs during the first quarters of 2022 and 2021.

There was 0 significant change between the pre and post modification loan balances for the three months ending March 31, 2022 and 2021.

33

The following table presents loans by class modified as troubled debt restructurings within the previous 12 months of March 31, 2022 and 2021 and for which there was a payment default during the three months ended March 31, 2022 and 2021.

	Three Months Ended
	March 31,
	2022			2021
	Number of	Recorded		Number of	Recorded
(dollars in thousands)	Loans	Investment		Loans	Investment
Residential real estate:
Owner occupied	—	$	—	3	$	285
Home equity	—		—	1		20
Consumer	—		—	1		12
Total	—	$	—	5	$	317

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)	March 31, 2022		December 31, 2021
Commercial real estate	$	1,740	$	1,792
Total other real estate owned	$	1,740	$	1,792

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)	March 31, 2022		December 31, 2021
Recorded investment in consumer residential real estate mortgage loans in the process of foreclosure	$	809	$	508

34

Easy Advances

The Company’s TRS segment offered its EA product during the first two months of 2022 and 2021. During the first quarter 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 the first quarter. Each year, all unpaid EAs are charged off by June 30^th, and each quarter thereafter, any credits to the Provision for EAs matches the recovery of previously charged-off accounts.

Information regarding EAs follows:

	Three Months Ended
	March 31,
(dollars in thousands)	2022			2021
Easy Advances originated	$	311,207		$	250,045
Net charge to the Provision for Easy Advances		8,315			16,019
Provision to total Easy Advances originated		2.67	%		6.41	%
Easy Advances net charge-offs (recoveries)	$	—		$	—
Easy Advances net charge-offs (recoveries) to total Easy Advances originated		—	%		—	%

5. DEPOSITS

The composition of the deposit portfolio follows:

(in thousands)	March 31, 2022		December 31, 2021
Core Bank:
Demand	$	1,415,655	$	1,381,522
Money market accounts		793,953		789,876
Savings		327,358		311,624
Individual retirement accounts (1)		42,149		43,724
Time deposits, $250 and over (1)		60,738		81,050
Other certificates of deposit (1)		139,735		154,174
Reciprocal money market and time deposits (1)		70,030		77,950
Brokered deposits (1)		—		—
Total Core Bank interest-bearing deposits		2,849,618		2,839,920
Total Core Bank noninterest-bearing deposits		1,630,926		1,579,173
Total Core Bank deposits		4,480,544		4,419,093
Republic Processing Group:
Money market accounts		10,774		9,717
Total RPG interest-bearing deposits		10,774		9,717
Brokered prepaid card deposits		412,746		320,907
Other noninterest-bearing deposits		183,042		90,701
Total RPG noninterest-bearing deposits		595,788		411,608
Total RPG deposits		606,562		421,325
Total deposits	$	5,087,106	$	4,840,418

(1) Includes time deposit.

35

6. 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 2 percent more in securities than the associated repurchase agreements. All such securities are under the Bank’s control.

As of March 31, 2022 and December 31, 2021, all securities sold under agreements to repurchase had overnight maturities. Additional information regarding securities sold under agreements to repurchase follows:

(dollars in thousands)	March 31, 2022			December 31, 2021
Outstanding balance at end of period	$	287,818		$	290,967
Weighted average interest rate at end of period		0.04	%		0.04	%
Fair value of securities pledged:
U.S. Treasury securities and U.S. Government agencies	$	274,541		$	108,813
Mortgage backed securities - residential		46,902			167,561
Collateralized mortgage obligations		—			33,441
Total securities pledged	$	321,443		$	309,815

	Three Months Ended
	March 31,
(dollars in thousands)	2022			2021
Average outstanding balance during the period	$	300,169		$	192,669
Average interest rate during the period		0.04	%		0.02	%
Maximum outstanding at any month end during the period	$	299,376		$	200,704

36

7. 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 March 31, 2022, the Company was under 44 separate and distinct operating lease contracts to lease the land and/or buildings for 35 of its offices, with 12 such operating leases contracted with a related party of the Company. As of March 31, 2022, 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 1 of its related-party leases and the extension of 3 of its third party leases during the first quarter of 2022 with a total right-of-use asset value of $4.5 million.

The following table presents information concerning the Company’s operating lease expense recorded as a noninterest expense within the “Occupancy” category for the three months ended March 31, 2022 and 2021:

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Operating lease expense:
Related Party:
Variable lease expense	$	1,265	$	1,220
Fixed lease expense		35		34
Third Party:
Variable lease expense		197		197
Fixed lease expense		345		341
Short-term lease expense		—		—
Total operating lease expense	$	1,842	$	1,792
Other information concerning operating leases:
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,705	$	1,798
Cash paid for variable rent payments not included in measurement of operating lease liabilities		151		—
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 March 31, 2022 and December 31, 2021:

	March 31, 2022			December 31, 2021
Weighted average remaining term in years		8.61			7.57
Weighted average discount rate		2.64	%		3.05	%

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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 March 31, 2022:

Year (dollars in thousands)	Related Party		Third Party		Total
2022	$	3,185	$	1,939	$	5,124
2023		4,274		2,323		6,597
2024		4,189		1,814		6,003
2025		4,053		1,279		5,332
2026		4,124		1,025		5,149
Thereafter		16,375		4,286		20,661
Total undiscounted cash flows	$	36,200	$	12,666	$	48,866
Discount applied to cash flows		(3,588)		(2,074)		(5,662)
Total discounted cash flows reported as operating lease liabilities	$	32,612	$	10,592	$	43,204

8. FEDERAL HOME LOAN BANK ADVANCES

FHLB advances were as follows:

(in thousands)	March 31, 2022		December 31, 2021
Overnight advances	$	—	$	25,000
Fixed interest rate advances		20,000		—
Total FHLB advances	$	20,000	$	25,000

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 March 31, 2022 and December 31, 2021, Republic had available borrowing capacity of $888 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 March 31, 2022 and December 31, 2021.

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
2022	$	—	—	%
2023		—	—
2024		—	—
2025		—	—
2026		—	—
2027		20,000	1.89
Total	$	20,000	1.89	%

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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
	March 31,
(dollars in thousands)	2022			2021
Average outstanding balance during the period	$	1,711		$	40,278
Average interest rate during the period		0.15	%		0.17	%
Maximum outstanding at any month end during the period	$	25,000		$	25,000

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

(in thousands)	March 31, 2022		December 31, 2021
First lien, single family residential real estate	$	1,019,268	$	1,041,461
Home equity lines of credit		186,222		186,396

39

9. 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.

While vaccines for the virus began rolling out during 2021, 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)	March 31, 2022		December 31, 2021
Unused warehouse lines of credit	$	713,800	$	565,950
Unused home equity lines of credit		357,242		348,681
Unused loan commitments - other		817,085		828,229
Standby letters of credit		11,310		11,305
FHLB letter of credit		643		643
Total commitments	$	1,900,080	$	1,754,808

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.

40

The following tables present a rollforward of the ACLC for the three months ended March 31, 2022 and 2021:

	ACLC Rollforward
	Three Months Ended March 31,
	2022										2021
	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	$	154	$	(24)	$	—	$	—	$	130	$	79	$	37	$	—	$	—	$	116
Unused home equity lines of credit		247		9		—		—		256		173		21		—		—		194
Unused loan commitments - other		651		3		—		—		654		737		(32)		—		—		705
Total	$	1,052	$	(12)	$	—	$	—	$	1,040	$	989	$	26	$	—	$	—	$	1,015

The Company decreased its ACLC during the three months ended March 31, 2022 based on a decrease in the expected loss rate for its unused commitments.

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10. 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 2 “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 March 31, 2022. 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.

42

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.

43

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 March 31, 2022 is presented net of any applicable ACL.

	Fair Value Measurements at
	March 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	$	153,119	$	159,841	$	—	$	312,960
Private label mortgage-backed security		—		—		2,602		2,602
Mortgage-backed securities - residential		—		216,901		—		216,901
Collateralized mortgage obligations		—		27,299		—		27,299
Corporate bonds		—		10,052		—		10,052
Trust preferred security		—		—		3,725		3,725
Total available-for-sale debt securities	$	153,119	$	414,093	$	6,327	$	573,539
Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	164	$	—	$	164
Community Reinvestment Act mutual fund		2,338		—		—		2,338
Total equity securities with readily determinable fair value	$	2,338	$	164	$	—	$	2,502
Mortgage loans held for sale	$	—	$	13,302	$	—	$	13,302
Consumer loans held for sale		—		—		11,709		11,709
Consumer loans held for investment		—		—		107		107
Rate lock loan commitments		—		442		—		442
Mandatory forward contracts		—		1,461		—		1,461
Interest rate swap agreements		—		2,537		—		2,537
Financial liabilities:
Interest rate swap agreements	$	—	$	2,537	$	—	$	2,537

44

	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 0 transfers into or out of Level 1, 2, or 3 assets during the three months ended March 31, 2022 and 2021.

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
	March 31,
(in thousands)	2022		2021
Balance, beginning of period	$	2,731	$	2,957
Total gains or losses included in earnings:
Net change in unrealized gain		24		15
Principal paydowns		(153)		(109)
Balance, end of period	$	2,602	$	2,863

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.

45

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

	Fair		Valuation
March 31, 2022 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range
Private label mortgage-backed security	$	2,602	Discounted cash flow	(1) Constant prepayment rate	4.5% - 5.7%
				(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
	March 31,
(in thousands)	2022		2021
Balance, beginning of period	$	3,847	$	3,800
Total gains or losses included in earnings:
Discount accretion		14		13
Net change in unrealized gain		(136)		(163)
Balance, end of period	$	3,725	$	3,650

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.

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Mortgage Loans Held for Sale

The Bank has elected the fair value option for mortgage loans held for sale. These loans are intended for sale and the Bank believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loans and in accordance with Bank policy for such instruments. NaN of these loans were past due 90-days-or-more or on nonaccrual as of March 31, 2022 and December 31, 2021.

The aggregate fair value, contractual balance, and unrealized gain were as follows:

(in thousands)	March 31, 2022		December 31, 2021
Aggregate fair value	$	13,302	$	29,393
Contractual balance		13,283		28,668
Unrealized gain		19		725

The total amount of gains and losses from changes in fair value included in earnings for the three and three months ended March 31, 2022 and 2021 for mortgage loans held for sale are presented in the following table:

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Interest income	$	204	$	409
Change in fair value		(706)		(1,011)
Total included in earnings	$	(502)	$	(602)

Consumer Loans Held for Sale

RCS carries loans originated through its installment loan program at fair value. Interest income is recorded based on the contractual terms of the loan and in accordance with Bank policy for such instruments. NaN of these loans were past due 90-days-or-more or on nonaccrual as of March 31, 2022 and December 31, 2021.

The significant unobservable inputs in the fair value measurement of the Bank’s short-term installment loans are the net contractual premiums and level of loans sold at a discount price. Significant fluctuations in any of those inputs in isolation would result in a significantly lower/higher fair value measurement.

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

	Fair		Valuation
March 31, 2022 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate
Consumer loans held for sale	$	11,709	Contract Terms	(1) Net Premium	1.4%
				(2) Discounted Sales	5.00%

	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%

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

(in thousands)	March 31, 2022		December 31, 2021
Aggregate fair value	$	11,709	$	19,747
Contractual balance		11,632		19,633
Unrealized gain		77		114

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
	March 31,
(in thousands)	2022		2021
Interest income	$	2,890	$	571
Change in fair value		(37)		16
Total included in earnings	$	2,853	$	587

48

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

	Fair Value Measurements at
	March 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	$	—	$	—	$	1,558	$	1,558
Commercial real estate		—		—		2,814		2,814
Home equity		—		—		290		290
Total collateral-dependent loans*	$	—	$	—	$	4,662	$	4,662
Other real estate owned:
Commercial real estate	$	—	$	—	$	1,740	$	1,740
Total other real estate owned	$	—	$	—	$	1,740	$	1,740

	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

* 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.

49

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
March 31, 2022 (dollars in thousands)	Value		Technique	Inputs	Average)
Collateral-dependent loans - residential real estate owner occupied	$	1,558	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 44% (9%)
Collateral-dependent loans - commercial real estate	$	2,814	Sales comparison approach	Adjustments determined for differences between comparable sales	12% - 13% (12%)
Collateral-dependent loans - home equity	$	290	Sales comparison approach	Adjustments determined for differences between comparable sales	2% (2%)
Other real estate owned - commercial real estate	$	1,740	Sales comparison approach	Adjustments determined for differences between comparable sales	33% (33%)

					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%)

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Collateral-Dependent Loans

Collateral-dependent loans are generally measured for loss using the fair value for reasonable disposition of the underlying collateral. The Bank’s practice is to obtain new or updated appraisals or BPOs on the loans subject to the initial review and then to evaluate the need for an update to this value on an as-necessary or possibly annual basis thereafter (depending on the market conditions impacting the value of the collateral). The Bank may discount the valuation amount as necessary for selling costs and past due real estate taxes. If a new or updated appraisal or BPO is not available at the time of a loan’s loss review, the Bank may apply a discount to the existing value of an old valuation to reflect the property’s current estimated value if it is believed to have deteriorated in either: (i) the physical or economic aspects of the subject property or (ii) material changes in market conditions. The review generally results in a partial charge-off of the loan if fair value, less selling costs, are below the loan’s carrying value. Collateral-dependent loans are valued within Level 3 of the fair value hierarchy.

Collateral-dependent loans are as follows:

(in thousands)	March 31, 2022		December 31, 2021
Carrying amount of loans measured at fair value	$	4,762	$	4,928
Estimated selling costs considered in carrying amount		822		842
Valuation allowance		(922)		(925)
Total fair value	$	4,662	$	4,845

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Provision on collateral-dependent loans	$	(4)	$	—

Other Real Estate Owned

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

(in thousands)	March 31, 2022		December 31, 2021
Other real estate owned carried at fair value	$	1,740	$	1,792
Other real estate owned carried at cost		—		—
Total carrying value of other real estate owned	$	1,740	$	1,792

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Other real estate owned write-downs during the period	$	52	$	53

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

			Fair Value Measurements at
			March 31, 2022:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value
Assets:
Cash and cash equivalents	$	1,077,158	$	1,077,158	$	—	$	—	$	1,077,158
Available-for-sale debt securities		573,539		153,119		414,093		6,327		573,539
Held-to-maturity debt securities		38,795		—		39,087		—		39,087
Equity securities with readily determinable fair values		2,502		2,338		164		—		2,502
Mortgage loans held for sale, at fair value		13,302		—		13,302		—		13,302
Consumer loans held for sale, at fair value		11,709		—		—		11,709		11,709
Consumer loans held for sale, at the lower of cost or fair value		3,026		—		—		3,026		3,026
Loans, net		4,318,587		—		—		4,272,818		4,272,818
Federal Home Loan Bank stock		10,311		—		—		—		NA
Accrued interest receivable		9,426		—		9,426		—		9,426
Mortgage servicing rights		9,502		—		15,296		—		15,296
Rate lock loan commitments		442		—		442		—		442
Mandatory forward contracts		1,461		—		1,461		—		1,461
Interest rate swap agreements		2,537		—		2,537		—		2,537
Liabilities:
Noninterest-bearing deposits	$	2,226,714	$	—	$	2,226,714	$	—	$	2,226,714
Transaction deposits		2,600,920		—		2,600,920		—		2,600,920
Time deposits		259,472		—		257,598		—		257,598
Securities sold under agreements to repurchase and other short-term borrowings		287,818		—		287,818		—		287,818
Federal Home Loan Bank advances		20,000		—		21,860		—		21,860
Accrued interest payable		192		—		192		—		192
Interest rate swap agreements		2,537		—		2,537		—		2,537

52

			Fair Value Measurements at
			December 31, 2021:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value
Assets:
Cash and cash equivalents	$	756,971	$	756,971	$	—	$	—	$	756,971
Available-for-sale debt securities		495,126		70,112		418,436		6,578		495,126
Held-to-maturity debt securities		44,299		—		44,764		—		44,764
Equity securities with readily determinable fair values		2,620		2,450		170		—		2,620
Mortgage loans held for sale, at fair value		29,393		—		29,393		—		29,393
Consumer loans held for sale, at fair value		19,747		—		—		19,747		19,747
Consumer loans held for sale, at the lower of cost or fair value		2,937		—		—		2,937		2,937
Loans, net		4,431,985		—		—		4,445,244		4,445,244
Federal Home Loan Bank stock		10,311		—		—		—		NA
Accrued interest receivable		9,877		—		9,877		—		9,877
Mortgage servicing rights		9,196		—		11,540		—		11,540
Rate lock loan commitments		1,404		—		1,404		—		1,404
Mandatory forward contracts		66		—		66		—		66
Interest rate swap agreements		5,786		—		5,786		—		5,786
Liabilities:
Noninterest-bearing deposits	$	1,990,781	$	—	$	1,990,781	$	—	$	1,990,781
Transaction deposits		2,553,423		—		2,553,423		—		2,553,423
Time deposits		296,214		—		298,236		—		298,236
Securities sold under agreements to repurchase and other short-term borrowings		290,967		—		290,967		—		290,967
Federal Home Loan Bank advances		25,000		—		25,000		—		25,000
Accrued interest payable		159		—		159		—		159
Interest rate swap agreements		5,786		—		5,786		—		5,786

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11. 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
	March 31,
(in thousands)	2022		2021
Balance, beginning of period	$	29,393	$	46,867
Origination of mortgage loans held for sale		100,661		213,587
Proceeds from the sale of mortgage loans held for sale		(119,212)		(203,815)
Net gain on sale of mortgage loans held for sale		2,460		6,997
Balance, end of period	$	13,302	$	63,636

The following table presents the components of Mortgage Banking income:

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Net gain realized on sale of mortgage loans held for sale	$	2,733	$	8,045
Net change in fair value recognized on loans held for sale		(706)		(1,011)
Net change in fair value recognized on rate lock loan commitments		(962)		(2,637)
Net change in fair value recognized on forward contracts		1,395		2,600
Net gain recognized		2,460		6,997
Loan servicing income		865		793
Amortization of mortgage servicing rights		(668)		(997)
Change in mortgage servicing rights valuation allowance		—		400
Net servicing income recognized		197		196
Total Mortgage Banking income	$	2,657	$	7,193

Activity for capitalized mortgage servicing rights was as follows:

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Balance, beginning of period	$	9,196	$	7,095
Additions		974		1,213
Amortized to expense		(668)		(997)
Change in valuation allowance		—		400
Balance, end of period	$	9,502	$	7,711

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

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Beginning valuation allowance	$	0	$	500
Charge during the period		0		(400)
Ending valuation allowance	$	0	$	100

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Other information relating to mortgage servicing rights follows:

(dollars in thousands)	March 31, 2022			December 31, 2021
Fair value of mortgage servicing rights portfolio	$	15,296		$	11,540
Monthly weighted average prepayment rate of unpaid principal balance*		140	%		208	%
Discount rate		10.17	%		10.15	%
Weighted average foreclosure rate		0.14	%		0.19	%
Weighted average life in years		7.34			5.93

* 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. 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 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:

	March 31, 2022				December 31, 2021
	Notional				Notional
(in thousands)	Amount		Fair Value		Amount		Fair Value
Included in Mortgage loans held for sale:
Mortgage loans held for sale, at fair value	$	13,283	$	13,302	$	28,668	$	29,393
Included in other assets:
Rate lock loan commitments	$	46,981	$	442	$	56,736	$	1,404
Mandatory forward contracts		45,608		1,461		70,812		66

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12. 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:

		March 31, 2022				December 31, 2021
		Notional				Notional
(in thousands)	Bank Position	Amount		Fair Value		Amount		Fair Value
Interest rate swaps with Bank clients - Assets	Pay variable/receive fixed	$	51,584	$	1,883	$	107,502	$	5,786
Interest rate swaps with Bank clients - Liabilities	Pay variable/receive fixed		71,222		(2,537)		16,423		(298)
Interest rate swaps with Bank clients - Total	Pay variable/receive fixed	$	122,806	$	(654)	$	123,925	$	5,488
Offsetting interest rate swaps with institutional swap dealer	Pay fixed/receive variable		122,806		654		123,925		(5,488)
Total		$	245,612	$	—	$	247,850	$	—

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 $873,000 and $6.8 million as of March 31, 2022 and December 31, 2021.

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13. 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
	March 31,
(in thousands, except per share data)	2022		2021
Net income	$	27,926	$	26,053
Dividends declared on Common Stock:
Class A Shares		(6,081)		(5,743)
Class B Shares		(671)		(616)
Undistributed net income for basic earnings per share		21,174		19,694
Weighted average potential dividends on Class A shares upon exercise of dilutive options		(27)		(20)
Undistributed net income for diluted earnings per share	$	21,147	$	19,674
Weighted average shares outstanding:
Class A Shares		17,980		18,798
Class B Shares		2,165		2,199
Effect of dilutive securities on Class A Shares outstanding		80		65
Weighted average shares outstanding including dilutive securities		20,225		21,062
Basic earnings per share:
Class A Common Stock:
Per share dividends distributed	$	0.34	$	0.31
Undistributed earnings per share*		1.06		0.95
Total basic earnings per share - Class A Common Stock	$	1.40	$	1.26
Class B Common Stock:
Per share dividends distributed	$	0.31	$	0.28
Undistributed earnings per share*		0.96		0.86
Total basic earnings per share - Class B Common Stock	$	1.27	$	1.14
Diluted earnings per share:
Class A Common Stock:
Per share dividends distributed	$	0.34	$	0.31
Undistributed earnings per share*		1.06		0.94
Total diluted earnings per share - Class A Common Stock	$	1.40	$	1.25
Class B Common Stock:
Per share dividends distributed	$	0.31	$	0.28
Undistributed earnings per share*		0.96		0.86
Total diluted earnings per share - Class B Common Stock	$	1.27	$	1.14

* 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
	March 31,
	2022	2021
Antidilutive stock options	186,000	154,000
Average antidilutive stock options	175,000	154,000

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14. OTHER COMPREHENSIVE INCOME

OCI components and related tax effects were as follows:

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Available-for-Sale Debt Securities:
Unrealized losses on AFS debt securities	$	(21,249)	$	(2,029)
Unrealized gain of AFS debt security for which a portion of OTTI has been recognized in earnings		24		15
Net losses		(21,225)		(2,014)
Tax effect		5,308		503
Net of tax	$	(15,917)	$	(1,511)

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

			2022
(in thousands)	December 31, 2021		Change		March 31, 2022
Unrealized gain (loss) on AFS debt securities	$	890	$	(15,935)	$	(15,045)
Unrealized gain on AFS debt security for which a portion of OTTI has been recognized in earnings		984		18		1,002
Total unrealized gain (loss)	$	1,874	$	(15,917)	$	(14,043)

			2021
(in thousands)	December 31, 2020		Change		March 31, 2021
Unrealized gain on AFS debt securities	$	7,571	$	(1,522)	$	6,049
Unrealized gain (loss) on AFS debt security for which a portion of OTTI has been recognized in earnings		938		11		949
Total unrealized gain (loss)	$	8,509	$	(1,511)	$	6,998

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15. REVENUE FROM CONTRACTS WITH CUSTOMERS

The following tables present the Company’s net revenue and net revenue concentration by reportable segment:

	Three Months Ended March 31, 2022
	Core Banking												Republic Processing Group
										Total			Tax			Republic
	Traditional			Warehouse			Mortgage			Core			Refund			Credit			Total			Total
(dollars in thousands)	Banking			Lending			Banking			Banking			Solutions			Solutions			RPG			Company
Net interest income (1)	$	36,148		$	4,515		$	204		$	40,867		$	15,404		$	6,341		$	21,745		$	62,612
Noninterest income:
Service charges on deposit accounts		3,219			13			—			3,232			(6)			—			(6)			3,226
Net refund transfer fees		—			—			—			—			12,051			—			12,051			12,051
Mortgage banking income (1)		—			—			2,657			2,657			—			—			—			2,657
Interchange fee income		3,012			—			—			3,012			58			—			58			3,070
Program fees (1)		—			—			—			—			727			3,127			3,854			3,854
Increase in cash surrender value of BOLI (1)		612			—			—			612			—			—			—			612
Net losses on OREO		(53)			—			—			(53)			—			—			—			(53)
Contract termination fee		—			—			—			—			5,000			—			5,000			5,000
Other		444			—			34			478			106			—			106			584
Total noninterest income		7,234			13			2,691			9,938			17,936			3,127			21,063			31,001
Total net revenue	$	43,382		$	4,528		$	2,895		$	50,805		$	33,340		$	9,468		$	42,808		$	93,613
Net-revenue concentration (2)		46	%		5	%		3	%		54	%		36	%		10	%		46	%		100	%

	Three Months Ended March 31, 2021
	Core Banking												Republic Processing Group
										Total			Tax			Republic
	Traditional			Warehouse			Mortgage			Core			Refund			Credit			Total			Total
(dollars in thousands)	Banking			Lending			Banking			Banking			Solutions			Solutions			RPG			Company
Net interest income (1)	$	41,102		$	6,772		$	409		$	48,283		$	14,676		$	4,821		$	19,497		$	67,780
Noninterest income:
Service charges on deposit accounts		2,865			14			—			2,879			(6)			—			(6)			2,873
Net refund transfer fees		—			—			—			—			12,721			—			12,721			12,721
Mortgage banking income (1)		—			—			7,193			7,193			—			—			—			7,193
Interchange fee income		2,969			—			—			2,969			58			—			58			3,027
Program fees (1)		—			—			—			—			896			1,329			2,225			2,225
Increase in cash surrender value of BOLI (1)		390			—			—			390			—			—			—			390
Net losses on OREO		(11)			—			—			(11)			—			—			—			(11)
Other		571			—			28			599			20			—			20			619
Total noninterest income		6,784			14			7,221			14,019			13,689			1,329			15,018			29,037
Total net revenue	$	47,886		$	6,786		$	7,630		$	62,302		$	28,365		$	6,150		$	34,515		$	96,817
Net-revenue concentration (2)		50	%		7	%		8	%		65	%		29	%		6	%		35	%		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.

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

59

fees and all applicable tax preparation, transmitter, audit, and any other taxpayer authorized amounts are deducted from the tax refund by either the Bank or the Bank’s service provider and automatically forwarded to the appropriate party as authorized by the taxpayer. RT fees generally receive first priority when applying fees against the taxpayer’s refund, with the Bank’s share of RT fees generally superior to the claims of other 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 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.

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 million during the quarter.

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16. SEGMENT INFORMATION

Reportable segments are determined by the type of products and services offered and the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business (such as banking centers and business units), which are then aggregated if operating performance, products/services, and clients are similar.

As of March 31, 2022, the Company was divided into 5 reportable segments: Traditional Banking, Warehouse, Mortgage Banking, TRS, and RCS. Management considers the first 3 segments to collectively constitute “Core Bank” or “Core Banking” operations, while the last 2 segments collectively constitute RPG operations.

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 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.

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Segment information follows:

	Three Months Ended March 31, 2022
	Core Banking												Republic Processing Group
										Total			Tax			Republic
	Traditional			Warehouse			Mortgage			Core			Refund			Credit			Total			Total
(dollars in thousands)	Banking			Lending			Banking			Banking			Solutions			Solutions			RPG			Company
Net interest income	$	36,148		$	4,515		$	204		$	40,867		$	15,404		$	6,341		$	21,745		$	62,612
Provision for expected credit loss expense		320			(401)			—			(81)			7,912			1,395			9,307			9,226
Net refund transfer fees		—			—			—			—			12,051			—			12,051			12,051
Mortgage banking income		—			—			2,657			2,657			—			—			—			2,657
Program fees		—			—			—			—			727			3,127			3,854			3,854
Contract termination fee		—			—			—			—			5,000			—			5,000			5,000
Other noninterest income		7,234			13			34			7,281			158			—			158			7,439
Total noninterest income		7,234			13			2,691			9,938			17,936			3,127			21,063			31,001
Total noninterest expense		38,219			952			2,690			41,861			5,145			1,567			6,712			48,573
Income before income tax expense		4,843			3,977			205			9,025			20,283			6,506			26,789			35,814
Income tax expense		472			904			45			1,421			4,906			1,561			6,467			7,888
Net income	$	4,371		$	3,073		$	160		$	7,604		$	15,377		$	4,945		$	20,322		$	27,926
Period-end assets	$	4,984,918		$	689,204		$	28,573		$	5,702,695		$	552,101		$	95,073		$	647,174		$	6,349,869
Net interest margin		2.90	%		3.09	%		NM			2.92	%		NM			NM			NM			4.30	%
Net-revenue concentration*		46	%		5	%		3	%		54	%		36	%		10	%		46	%		100	%

	Three Months Ended March 31, 2021
	Core Banking												Republic Processing Group
										Total			Tax			Republic
	Traditional			Warehouse			Mortgage			Core			Refund			Credit			Total			Total
(dollars in thousands)	Banking			Lending			Banking			Banking			Solutions			Solutions			RPG			Company
Net interest income	$	41,102		$	6,772		$	409		$	48,283		$	14,676		$	4,821		$	19,497		$	67,780
Provision for expected credit loss expense		(5)			(242)			—			(247)			15,884			(375)			15,509			15,262
Net refund transfer fees		—			—			—			—			12,721			—			12,721			12,721
Mortgage banking income		—			—			7,193			7,193			—			—			—			7,193
Program fees		—			—			—			—			896			1,329			2,225			2,225
Other noninterest income		6,784			14			28			6,826			72			—			72			6,898
Total noninterest income		6,784			14			7,221			14,019			13,689			1,329			15,018			29,037
Total noninterest expense		37,328			1,028			3,121			41,477			5,302			1,032			6,334			47,811
Income before income tax expense		10,563			6,000			4,509			21,072			7,179			5,493			12,672			33,744
Income tax expense		2,125			1,434			992			4,551			1,770			1,370			3,140			7,691
Net income	$	8,438		$	4,566		$	3,517		$	16,521		$	5,409		$	4,123		$	9,532		$	26,053
Period-end assets	$	4,789,840		$	865,655		$	78,760		$	5,734,255		$	625,690		$	116,595		$	742,285		$	6,476,540
Net interest margin		3.47	%		3.43	%		NM			3.46	%		NM			NM			NM			4.66	%
Net-revenue concentration*		50	%		7	%		8	%		65	%		29	%		6	%		35	%		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.

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

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

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

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;

● projections of revenue, income, expenses, losses, earnings per share, capital expenditures, dividends, capital structure, 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;

● litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future;

● natural disasters impacting the Company’s operations;

● changes in political and economic conditions;

● the discontinuation of LIBOR;

● the magnitude and frequency of changes to the FFTR implemented by the FOMC of the FRB;

● long-term and short-term interest rate fluctuations and the overall steepness of the U.S. Treasury yield curve, as well as their impact on the Company’s net interest income and Mortgage Banking operations;

● competitive product and pricing pressures in each of the Company’s five reportable segments;

● equity and fixed income market fluctuations;

● client bankruptcies and loan defaults;

● inflation;

● recession;

● future acquisitions;

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● 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 in gaining regulatory approvals when required;

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

● 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 I Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and Part II Item 1A “Risk Factors” of the current filing.

Accounting Standards Update

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Republic’s consolidated financial statements and accompanying footnotes have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods.

A summary of the Company's significant accounting policies is set forth in Part II “Item 8. Financial Statements and Supplementary Data” of its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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

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

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

ACLL and Provision — As of March 31, 2022, the Bank maintained an ACLL for expected credit losses inherent in the Bank’s loan portfolio, which includes overdrawn deposit accounts. Management evaluates the adequacy of the ACLL monthly and presents and discusses the ACLL with the Audit Committee and the Board of Directors quarterly.

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

Adjustments to the historical loss rate for current conditions include differences in underwriting standards, portfolio mix or term, delinquency level, as well as for changes in environmental conditions, such as changes in property values or other relevant factors.

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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 March 31, 2022, 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 March 31, 2022, Republic had 42 full-service banking centers with locations as follows:

● Kentucky — 28

● Metropolitan Louisville — 18

● Central Kentucky — 7

● Georgetown — 1

● Lexington — 5

● Shelbyville — 1

● Northern Kentucky — 3

● Covington — 1

● Crestview Hills — 1

● Florence — 1

● Southern Indiana — 3

● Floyds Knobs — 1

● Jeffersonville — 1

● New Albany — 1

● Metropolitan Tampa, Florida — 7

● Metropolitan Cincinnati, Ohio — 2

● Metropolitan Nashville, Tennessee — 2

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

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

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

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

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

Construction and Land Development Lending — The Bank originates business loans for the construction of both single-family, residential properties and commercial properties (apartment complexes, shopping centers, office buildings). While not a

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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 and $3,000,000 in size and have terms up to 20 years. The aircraft loan program is open to all states, except for Alaska and Hawaii.

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.

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 16 “Segment Information” of Part I Item 1 “Financial Statements.”

(II)  Warehouse Lending segment

The Core Bank provides short-term, revolving credit facilities to mortgage bankers across the United States through mortgage warehouse lines of credit. These credit facilities are primarily secured by single-family, first-lien residential real estate loans. The credit facility enables the mortgage banking clients to close single-family, first-lien residential real estate loans in their own name and temporarily fund their inventory of these closed loans until the loans are sold to investors approved by the Bank. Individual loans are expected to remain on the warehouse line for an average of 15 to 30 days. Reverse mortgage loans typically remain on the line longer than conventional mortgage loans. Interest income and loan fees are accrued for each individual loan during the time the loan 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 16 “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. 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 11 “Mortgage Banking Activities” and Footnote 16 “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 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.

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 credit product is a loan that allows a taxpayer to borrow funds as an advance of a portion of their tax refund. The EA product had the following features during 2022 and 2021:

● Offered only during the first two months of each year;

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

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

● Multiple funds disbursement methods, including direct deposit, prepaid card, or check, based on the taxpayer-customer’s election;

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

● If an insufficient refund to repay the EA occurs:

o there is no recourse to the taxpayer, 

o no negative credit reporting on the taxpayer, and

o no collection efforts against the taxpayer.

The Company reports fees paid for the EA product as interest income on loans. During 2021, EAs were repaid, on average, within 32 days after the taxpayer’s tax return was submitted to the applicable taxing authority. EAs do not have a contractual due date but the Company considered an EA delinquent in 2022 and 2021 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 are estimated when advances are made. Unpaid EAs are charged-off by June 30^th of each year, with EAs collected during the second half of each year recorded as recoveries of previously charged-off loans.

Related to the overall credit losses on EAs, 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 EA approval model is based primarily on the prior-year’s tax refund payment patterns. Because the substantial majority of the EA 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 EAs product parameters. Further changes in EA product parameters do not ensure positive results and could have an overall material negative impact on the performance of the EA product offering and therefore on the Company’s financial condition and results of operations.

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

Cancelled TRS Sale Transaction - As previously disclosed, Green Dot Corporation paid RB&T a contract termination fee of $5.0 million during the first quarter of 2022 after RB&T provided Green Dot a notice of termination of the May 2021 Purchase Agreement for the sale of substantially all of RB&T’s TRS assets and operations to Green Dot. RB&T continues to pursue other legal remedies against Green Dot related to the Sale Transaction. The Company recorded the contract termination fee within noninterest income during the first quarter of 2022.

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, the operating results of the RPS division are expected to be immaterial to the Company’s overall results of operations and will be reported as part of the TRS segment. The RPS division will not be considered 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.”

 (V) Republic Credit Solutions segment

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

● RCS line-of-credit products – Using separate third-party service providers, the Bank originates two line-of-credit products to generally subprime borrowers in multiple states. 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.

o RCS’s LOC I represented the substantial majority of RCS activity during 2021. Elastic Marketing, LLC and Elevate Decision Sciences, LLC are third-party service providers for the product and are subject to the Bank’s oversight and supervision. Together, these companies provide the Bank with certain marketing, servicing, technology, and support services, while a separate third party provides customer support, servicing, and other services on the Bank’s behalf. The Bank is the lender for this product and is marketed as such. Further, the Bank controls the loan terms and underwriting guidelines, and the Bank exercises consumer compliance oversight of the product. 

The Bank sells participation interests in this product. These participation interests are a 90% interest in advances made to borrowers under the borrower’s line-of-credit account, and the participation interests are generally sold three business days following the Bank’s funding of the associated advances. Although the Bank retains a 10% participation interest in each advance, it maintains 100% ownership of the underlying LOC I account with each borrower. Loan balances held for sale through this program are carried at the lower of cost or fair value.

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

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

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● RCS installment loan product – In December 2019, through RCS, the Bank began offering installment loans with terms ranging from 12 to 60 months to borrowers in multiple states. The same third-party service provider for RCS’s LOC II is the third-party provider for the installment loans. This third-party provider is subject to the Bank’s oversight and supervision and provides the Bank with marketing services and loan servicing for these RCS installment loans. The Bank is the lender for these RCS installment loans and is marketed as such. Furthermore, the Bank controls the loan terms and underwriting guidelines, and the Bank exercises consumer compliance oversight of this RCS installment loan product. Currently, all loan balances originated under this RCS installment loan program are carried as “held for sale” on the Bank’s balance sheet, with the intention to sell these loans to a third-party, who is an affiliate of the Bank’s third-party service provider, generally within sixteen days following the Bank’s origination of the loans. Loans originated under this RCS installment loan program are carried at fair value under a fair-value option, with the portfolio marked to market monthly.

● RCS healthcare receivables products – The Bank originates healthcare-receivables products across the U.S. through two different third-party service providers. In one program, the Bank retains 100% of the receivables originated. In the other program, the Bank retains 100% of the receivables originated in some instances, and in other instances, sells 100% of the receivables 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.”

OVERVIEW (Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021)

Total Company net income for the first quarter of 2022 was $27.9 million, a $1.9 million, or 7%, increase from the same period in 2021. Diluted EPS increased to $1.40 for first quarter of 2022 compared to $1.25 for the same period in 2021. The increase in net income primarily reflected the benefit of a $5.0 million pre-tax contract termination fee and a positive reduction in Provision, partially offset by a decrease in net interest income and Mortgage Banking income. Compared to the first quarter of 2022, the first quarter of 2021 was significantly and positively impacted by strong fee income from the Paycheck Protection Program 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 $4.1 million, or 48%, for the first quarter of 2022 compared to the same period in 2021.

● Net interest income decreased $5.0 million, or 12%, for the first quarter of 2022 compared to the same period in 2021.

● Provision was a net charge of $320,000 for the first quarter of 2022 compared to a net credit of $5,000 for the same period in 2021.

● Noninterest income increased $450,000, or 7%, for the first quarter of 2022 compared to the same period in 2021.

● Noninterest expense increased $891,000, or 2%, for the first quarter of 2022 compared to the same period in 2021.

● Total Traditional Bank loans increased $69 million, or 2%, during the first quarter of 2022, driven primarily by strong CRE loan growth.

● Total nonperforming loans to total loans for the Traditional Banking segment was 0.47% as of March 31, 2022 compared to 0.59% as of December 31, 2021.

● Delinquent loans to total loans for the Traditional Banking segment was 0.16% as of March 31, 2022 compared to 0.21% as of December 31, 2021.

● Total Traditional Bank deposits increased $94 million, or 2%, during the first quarter of 2022.

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Warehouse Lending segment

● Net income decreased $1.5 million, or 33%, for the first quarter of 2022 compared to the same period in 2021.

● Net interest income decreased $2.3 million, or 33%, for the first quarter of 2022 compared to the same period in 2021.

● The Warehouse Provision was a net credit of $401,000 for the first quarter of 2022 compared to a net credit of $242,000 for the same period in 2021.

● Average committed Warehouse lines decreased to $1.4 billion in the first quarter of 2022 compared to $1.5 billion in the first quarter of 2021.

● Average line usage was 42% during the first quarter of 2022 compared to 54% during the same period in 2021.

Mortgage Banking segment

● Within the Mortgage Banking segment, mortgage banking income decreased $4.5 million, or 63%, during the first quarter of 2022 compared to the same period in 2021.

● Overall, Republic’s proceeds from sale of secondary market loans totaled $119 million during the first quarter of 2022 compared to $204 million during the same period in 2021, with the Company’s cash-gain-as-a-percent-of-loans-sold decreasing to 2.29% from 3.95% from period to period.

Tax Refund Solutions segment

● Net income increased $10.0 million, or 184%, for the first quarter of 2022 compared to the same period in 2021.

● Net interest income increased $728,000, or 5%, for the first quarter of 2022 compared to the same period in 2021.

● Total EA originations were $311 million during the first quarter of 2022 compared to $250 million for the first quarter of 2021.

● Overall, TRS recorded a net charge to the Provision of $7.9 million during the first quarter of 2022 compared to a net charge to the Provision of $15.9 million for the same period in 2021.

● Noninterest income increased $4.2 million for the first quarter of 2022 compared to the same period in 2021. Noninterest income for the first quarter of 2022 included a $5.0 million contract termination fee.

● Net RT revenue decreased $670,000 for the first quarter of 2022 compared to the same period in 2021.

● Noninterest expense was $5.1 million for the first quarter of 2022 compared to $5.3 million for the same period in 2021.

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

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

2) The Company believes stimulus programs from the Federal Government and pandemic-related restrictions during early 2021 negatively impacted demand for TRS’s RT and 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 Purchase Agreement;

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

4) The Bank received a $5.0 million termination fee in January 2022 following the cancellation of the Sales Transaction.

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 quarter of 2022 was more in-line with non-COVID seasons than the first quarter of 2021. As a result, the Company believes that it likely received a greater percentage of its funded RT volume in the first quarter of 2022 as compared to 2021, and that it likely received a greater percentage of its EA loan repayments in the first quarter of 2022 than it did during 2021. This estimated timing, if correct, generally provided more favorable first quarter 2022 results for TRS as compared to the first quarter 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 quarter 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 $268,000 for the $172 million of EA volume. Under the amended contract, during the first quarter of 2022 the net benefit to TRS of the covered overhead costs and to the Provision from the loan loss guaranty was approximately $3.0 million.

Negatively impacting the first quarter 2022 tax season as compared to the first 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 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 from Green Dot 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 quarter 2022 tax results as compared to the first quarter 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 $822,000, or 20%, for the first quarter of 2022 compared to the same period in 2021.

● Net interest income increased $1.5 million, or 32%, for the first quarter of 2022 compared to the same period in 2021.

● Overall, RCS recorded a net charge to the Provision of $1.4 million during the first quarter of 2022 compared to a net credit of $375,000 for the same period in 2021.

● Noninterest income increased $1.8 million, or 135%, from the first quarter of 2022 to the first quarter of 2022.

● Noninterest expense was $1.6 million for the first quarter of 2022 and $1.0 million for the same period in 2021.

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● Total nonperforming loans to total loans for the RCS segment was 0.04% as of March 31, 2022 compared to 0.05% as of December 31, 2021.

● Delinquent loans to total loans for the RCS segment was 6.47% as of March 31, 2022 compared to 6.48% as of December 31, 2021.

RESULTS OF OPERATIONS (Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 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 market 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 early 2022, the FOMC increased the FFTR and announced the end to its quantitative easing program in March 2022. In addition, the FOMC also signaled a more aggressive and hawkish approach to its monetary policies, including additional and larger increases to the FFTR, and monetary tightening through reducing the size of its balance sheet and selling certain types of bonds in the market.

The FOMC’s actions and signals continued to place upward pressure on long-term market interest rates for bonds and loans during the first 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 $62.6 million during the first quarter of 2022 and represented a decrease of $5.2 million, or 8%, from the first quarter of 2021. Total Company net interest margin decreased to 4.30% during the first quarter of 2022 compared to 4.66% 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 $5.0 million, or 12%, for the first quarter of 2022 compared to the same period in 2021. Traditional Banking’s net interest margin was 2.90% for the first quarter of 2022, a decrease of 57 basis points from the same period in 2021.

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.

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	Net Interest Income								Interest-Earning Assets								Net Interest Margin
	Three Months Ended Mar. 31,								Three Months Ended Mar. 31,								Three Months Ended Mar. 31,
(dollars in thousands)	2022		2021		$ Change		% Change		2022		2021		$ Change		% Change		2022		2021		% Change
Traditional Banking - GAAP	$	36,148	$	41,102	$	(4,954)	(12)	%	$	4,984,524	$	4,740,971	$	243,553	5	%	2.90	%	3.47	%	(0.57)	%
Less: Impact of PPP fees and interest		955		6,698		(5,743)	(86)			30,601		364,765		(334,164)	(92)		0.06		0.33		(0.27)
Traditional Banking ex PPP fees and interest - non-GAAP	$	35,193	$	34,404	$	789	2		$	4,953,923	$	4,376,206	$	577,717	13		2.84		3.14		(0.30)

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

● The Traditional Bank recognized $955,000 of fees and interest on its PPP portfolio during the first quarter of 2022 compared to $6.7 million of similar income during the same period in 2021. The $5.7 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 quarter of 2021.

To facilitate pandemic relief for the communities it serves, the Traditional Bank originated 3,700 PPP loans totaling $528 million during 2020 and another 1,900 PPP loans totaling $210 million in early 2021. As of March 31, 2022, net PPP loans of $18 million remained on the Traditional Bank’s balance sheet, including $3 million in loan balances originated during 2020 and $15 million in loan balances originated during 2021.

● Traditional Bank net interest income, excluding PPP fees and interest, increased $789,000, or 2%, from the first quarter of 2021, as average non-PPP loans at the Traditional Bank grew from $3.3 billion for the first quarter of 2021 to $3.5 billion for the first quarter of 2022. Offsetting the benefit of growth in non-PPP Traditional Bank loans was a 30-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 3.14% for the first quarter of 2021 to 2.84% for the first quarter of 2022.

The decline in the net interest margin was substantially driven by the Company’s internal Funds Transfer Pricing methodology in combination with the change in the timing of cash received for tax refunds at TRS during 2022 as compared to 2021. More specifically, as part of its internal FTP process, the Traditional Bank purchases the cash from the deposits of the various business segments and sells cash to the various business segments for loans funded by those segments. The FTP price (or interest) paid or earned by the Traditional Bank for those internal FTP transactions may not be indicative of the real interest earned or paid for the Traditional Bank in the actual market. As a result, the Traditional Bank often earns a lower, and sometimes negative, spread on this cash, negatively impacting its net interest margin. With the tax refund season delayed during 2021, the cash purchased by the Traditional Bank from TRS was significantly more during the first quarter of 2022 as compared to the first quarter of 2021, resulting in the Traditional Bank having substantially more cash during the first quarter of 2022 than 2021 and generating a lower overall net interest margin.

As previously disclosed, both short-term and long-term market interest rates are expected 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.

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Warehouse Lending segment

Net interest income within the Warehouse segment decreased $2.3 million, or 33%, from the first quarter of 2021 to the first quarter of 2022, driven by decreases in both average outstanding balances and net interest margin. Overall average outstanding Warehouse balances declined from $790 million during the first quarter of 2021 to $585 million for the first quarter of 2022, as home-mortgage refinancing dipped from historically high volume in early 2021. The Warehouse net interest margin compressed 43 basis points from 3.43% during the first quarter of 2021 to 3.09% during the first 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.

Committed Warehouse lines-of-credit remained at $1.4 billion from March 31, 2021 to March 31, 2022, while average usage rates for Warehouse lines were 42% and 54%, respectively, during the first quarters 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 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 $728,000 for the first quarter of 2022 compared to the same period in 2021. TRS’s EA product earned $13.4 million in interest income during the first quarter of 2022, a $655,000 increase from the first quarter 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 quarter of 2022 and the first quarter of 2021, see section titled “OVERVIEW (Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 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 $1.5 million, or 32%, from the first quarter of 2021 to the first quarter of 2022. The increase was driven primarily by an increase in fee income from RCS’s LOC products. Loan fees on these products, recorded as interest income on loans, increased to $5.7 million during the first quarter of 2022 compared to $3.8 million during the same period in 2021.

Interest income on RCS’s LOC I product increased $917,000, driven by a $5 million increase in average outstanding balances for this product from the first quarter of 2021 to the first quarter of 2022. Interest income on RCS’s LOC II product increased $912,000, as the Company first piloted this product during the first quarter of 2021 with limited outstanding balances during the pilot phase.

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.

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Table 2 — Total Company Average Balance Sheets and Interest Rates

	Three Months Ended March 31, 2022						Three Months Ended March 31, 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	$	861,822	$	429	0.20	%	$	510,433	$	154	0.12	%
Investment securities, including FHLB stock (1)		606,182		2,111	1.39			563,985		2,017	1.43
TRS Easy Advance loans (2)		84,557		13,444	63.60			89,732		12,789	57.01
RCS LOC products (2)		26,279		5,702	86.79			16,284		3,770	92.61
Other RPG loans (3) (7)		120,917		1,984	6.56			139,729		2,789	7.98
Outstanding Warehouse lines of credit (4) (7)		584,519		4,878	3.34			790,244		7,370	3.73
Paycheck Protection Program loans (5) (7)		30,601		955	12.48			288,115		6,698	9.30
All other Core Bank loans (6) (7)		3,508,382		34,052	3.88			3,421,552		33,970	3.97
Total interest-earning assets		5,823,259		63,555	4.37			5,820,074		69,557	4.78
Allowance for credit loss		(69,287)						(66,561)
Noninterest-earning assets:
Noninterest-earning cash and cash equivalents		354,165						249,842
Premises and equipment, net		35,460						39,185
Bank owned life insurance		99,532						68,257
Other assets (1)		180,779						191,497
Total assets	$	6,423,908					$	6,302,294
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Transaction accounts	$	1,692,120	$	97	0.02	%	$	1,485,015	$	82	0.02	%
Money market accounts		798,943		94	0.05			732,328		103	0.06
Time deposits		261,703		640	0.98			314,904		1,105	1.40
Reciprocal money market and time deposits		74,730		48	0.26			313,445		255	0.33
Brokered deposits		—		—	—			63,325		20	0.13
Total interest-bearing deposits		2,827,496		879	0.12			2,909,017		1,565	0.22
Securities sold under agreements to repurchase and other short-term borrowings		300,169		28	0.04			192,669		9	0.02
Federal Home Loan Bank advances		23,333		36	0.62			43,167		31	0.29
Subordinated note		—		—	—			41,240		172	1.67
Total interest-bearing liabilities		3,150,998		943	0.12			3,186,093		1,777	0.22
Noninterest-bearing liabilities and Stockholders’ equity:
Noninterest-bearing deposits		2,313,549						2,146,036
Other liabilities		112,331						133,953
Stockholders’ equity		847,030						836,212
Total liabilities and stock-holders’ equity	$	6,423,908					$	6,302,294
Net interest income			$	62,612					$	67,780
Net interest spread					4.25	%					4.56	%
Net interest margin					4.30	%					4.66	%

(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 $662,000 and $1.7 million for the three months ended March 31, 2022 and 2021.

(4) Interest income includes loan fees of $574,000 and $871,000 for the three months ended March 31, 2022 and 2021.

(5) Interest income includes loan fees of $879,000 and $5.8 million for the three months ended March 31, 2022 and 2021.

(6) Interest income includes loan fees of $1.5 million and $895,000 for the three months ended March 31, 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.

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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 March 31, 2022
		Compared to
		Three Months Ended March 31, 2021
	Total Net		Increase / (Decrease) Due to
(in thousands)	Change		Volume		Rate
Interest income:
Federal funds sold and other interest-earning deposits	$	275	$	141	$	134
Investment securities, including FHLB stock		94		148		(54)
TRS Easy Advance loans*		655		2,831		(2,176)
RCS LOC I product		1,932		1,250		682
Other RPG loans		(805)		363		(1,168)
Outstanding Warehouse lines of credit		(2,492)		(1,942)		(550)
Paycheck Protection Program loans		(5,743)		(8,570)		2,827
All other Core Bank loans		82		299		(217)
Net change in interest income		(6,002)		(5,480)		(522)
Interest expense:
Transaction accounts		15		12		3
Money market accounts		(9)		9		(18)
Time deposits		(465)		(166)		(299)
Reciprocal money market and time deposits		(207)		(162)		(45)
Brokered deposits		(20)		(20)		—
Securities sold under agreements to repurchase and other short-term borrowings		19		7		12
Federal Home Loan Bank advances		5		(19)		24
Subordinated note		(172)		(172)		—
Net change in interest expense		(834)		(511)		(323)
Net change in net interest income	$	(5,168)	$	(4,969)	$	(199)

* *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 quarters ended March 31, 2022 and 2021. The unannualized EA yield as a function of total EA originations was 4.32% and 5.11% for the quarters ended March 31, 2022 and 2021.

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Provision

Total Company Provision was a net charge of $9.2 million for the first quarter of 2022 compared to a net charge of $15.3 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 first quarter of 2022 was a net charge of $320,000 compared to a net credit of $5,000 for the first quarter of 2021. An analysis of the Provision for the first quarter of 2022 compared to the same period in 2021 follows:

● For the first quarter of 2022, the Traditional Bank Provision primarily reflected formula reserves tied to general loan growth.  Non-PPP Traditional Bank loans grew $107 million from December 31, 2021 to March 31, 2022.

● For the first quarter of 2021, there was a minimal net credit to the Traditional Bank Provision during the quarter as the Traditional Bank non-PPP loan balances declined by approximately $51 million from December 31, 2020 to March 31, 2021.

As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.39% as of March 31, 2022 compared to 1.41% as of December 31, 2021 and 1.35% as of March 31, 2021. The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses as of March 31, 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 $401,000 for the first quarter of 2022 compared to a net credit of $242,000 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 $160 million during the first quarter of 2022 compared to a decrease of $97 million during the first quarter of 2021.

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

Tax Refund Solutions segment

TRS recorded a net charge to the Provision of $7.9 million during the first quarter of 2022 compared to a net charge of $15.9 million for the same period in 2021. Substantially all TRS Provision in both periods was related to its EA product.

TRS recorded a charge to the Provision for EA loans of $8.3 million, or 2.67% of its $311 million in EAs originated during the first quarter of 2022 compared to a charge to the Provision of $16.0 million, or 6.41% of its $250 million of EAs originated during the first quarter of 2021. The decrease in Provision for the first quarter of 2022 was primarily due to the following two factors:

1) 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 quarter of 2022. The net benefit to the Provision for TRS during the first quarter of 2022 was approximately $2.6 million.

2) In addition to its contractual guaranty discussed in the previous bullet (1), TRS experienced delayed EA paydowns during the first quarter of 2021 with the start of the IRS tax season delayed into mid-February 2021, combined with federal government stimulus programs during the first quarter of 2021, which generally utilized resources of the IRS and U.S. Treasury to administer the programs.

EAs are only originated during the first two months of each year, with all uncollected EAs charged off by June 30^th of each year. EAs collected during the second half of each year are recorded as recoveries of previously charged-off loans. TRS’s loss rate as of June 30, 2021 was 4.09% of total originations and it finished 2021 with an EA loss rate of 2.69% of total EAs originated.

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For factors affecting the comparison of the TRS results of operations for the first quarter of 2022 and the first quarter of 2021, see section titled “OVERVIEW (Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 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 $1.4 million during the first quarter of 2022 compared to a net credit to the Provision of $375,000 for the same period in 2021. The increase in the Provision was driven primarily by a $1.7 million increase in net charge-offs on RCS’s line-of-credit products. Net charge-offs for RCS’s LOC I product increased to $1.7 million for the first quarter of 2022 from $672,000 during the first quarter of 2021, with government stimulus programs generally driving down usage of this product during the first quarter of 2021. Net charge-offs for RCS’s LOC II product were $672,000 for the first quarter of 2022, with no charge-offs for this product during its pilot phase during the first 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 13.63% as of March 31, 2022, 13.91% as of December 31, 2021, and 7.16% as of March 31, 2021. The Company believes, based on information presently available, that it has adequately provided for RCS loan losses as of March 31, 2022.

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

Table 4 — RCS Provision by Product

	Three Months Ended Mar. 31,
(in thousands)	2022			2021	$ Change		% Change
Product:
Lines of credit	$	1,403	$	(374)	$	1,777	(475)	%
Hospital receivables		(8)		(1)		(7)	NM
Total	$	1,395	$	(375)	$	1,770	(472)	%

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Table 5 — Summary of Loan and Lease Loss Experience

	Three Months Ended
	March 31,
(dollars in thousands)	2022			2021
ACLL at beginning of period	$	64,577		$	61,067
Charge-offs:
Traditional Banking:
Commercial real estate		—			(428)
Consumer		(263)			(209)
Total Traditional Banking		(263)			(637)
Warehouse lines of credit		—			—
Total Core Banking		(263)			(637)
Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—			—
Other TRS loans		—			(22)
Republic Credit Solutions		(2,673)			(766)
Total Republic Processing Group		(2,673)			(788)
Total charge-offs		(2,936)			(1,425)
Recoveries:
Traditional Banking:
Residential real estate		43			27
Commercial real estate		1			68
Commercial & industrial		9			7
Home equity		3			7
Consumer		89			146
Total Traditional Banking		145			255
Warehouse lines of credit		—			—
Total Core Banking		145			255
Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—			—
Other TRS loans		362			9
Republic Credit Solutions		275			93
Total Republic Processing Group		637			102
Total recoveries		782			357
Net loan charge-offs		(2,154)			(1,068)
Provision - Core Banking		(74)			(172)
Provision - RPG		9,307			15,509
Total Provision		9,233			15,337
ACLL at end of period	$	71,656		$	75,336
Credit Quality Ratios - Total Company:
ACLL to total loans		1.63	%		1.61	%
ACLL to nonperforming loans		422			335
Net loan charge-offs to average loans		0.20			0.09
Credit Quality Ratios - Core Banking:
ACLL to total loans		1.20	%		1.14	%
ACLL to nonperforming loans		303			234
Net loan charge-offs to average loans		0.01			0.03

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Table 6 — Annualized Net Loan Charge-offs (Recoveries) to Average Loans by Loan Category

	Net Loan Charge-Offs (Recoveries) to Average Loans
	Three Months Ended
	March 31,
	2022		2021
Traditional Banking:
Residential real estate:
Owner occupied	—	%	(0.01)	%
Nonowner occupied	—		—
Commercial real estate	—		0.11
Construction & land development	—		—
Commercial & industrial	—		(0.01)
Paycheck Protection Program	—		—
Lease financing receivables	—		—
Aircraft	—		—
Home equity	(0.01)		(0.01)
Consumer:
Credit cards	0.58		1.14
Overdrafts	90.70		29.00
Automobile loans	(0.03)		0.09
Other consumer	(0.26)		(0.65)
Total Traditional Banking	0.01		0.04
Warehouse lines of credit	—		—
Total Core Banking	0.01		0.03
Republic Processing Group:
Tax Refund Solutions:
Easy Advances*	—		—
Other TRS loans	(1.16)		0.17
Republic Credit Solutions	2.62		0.62
Total Republic Processing Group	0.97		0.28
Total	0.20	%	0.09	%

*     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 0.09% during the first quarter of 2021 to 0.20 % during the first quarter of 2022, with net charge-offs increasing $1.1 million, or 102%, and average total Company loans decreasing $390 million, or 8%. The increase in net charge-offs was primarily driven by a $1.4 million increase in net charge-offs within the Company’s RPG operations, which has historically conducted higher-risk lending activities that the Company’s Core Banking operations.

From the first quarter of 2021 to the first quarter of 2022, RPG experienced a $1.7 million increase in net charge-offs within its RCS segment. Net charge-offs for RCS’s LOC I product increased to $1.7 million for the first quarter of 2022 from $672,000 for the first quarter of 2021, with government stimulus programs generally driving down usage of this product during the first quarter of 2021. Net charge-offs for RCS’s LOC II product were $672,000 for the first quarter of 2022, with no charge-offs for this product during its pilot phase during the first quarter of 2021.

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

Noninterest Income

Total Company noninterest income increased $2.0 million during the first 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 increased $450,000, or 7%, for the first quarter of 2022 compared to the same period in 2021, driven primarily by a $354,000 increase in Service Charges on Deposit Accounts.

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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 March 31, 2022 and 2021 were $1.6 million and $1.2 million. The total daily overdraft charges, net of refunds, included in interest income for the three months ended March 31, 2022 and 2021 were $288,000 and $249,000.

Mortgage Banking segment

A significant rise in long-term interest rates during the first quarter of 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 $7.2 million during the first quarter of 2021 to $2.7 million for the first quarter of 2022. For the first quarter of 2022, the Bank sold $119 million in secondary market loans and achieved an average cash-gain-as-a-percent-of-loans-sold during the quarter of 2.29%. During the first quarter of 2021, however, long-term interest rates were still near historical lows, driving secondary market loan sales of $204 million with comparable cash-gain-as-a-percent-of-loans-sold of 3.95%.

With the FOMC forecasting an end to its quantitative easing program in March 2022 and a more aggressive and hawkish approach to its monetary policies 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 $4.2 million, or 31%, during the first quarter of 2022 compared to the same period in 2021. As previously disclosed, Green Dot paid RB&T a contract termination fee of $5.0 million during the first quarter of 2022 after RB&T provided Green Dot a notice of termination of the Purchase Agreement for the sale of substantially all of RB&T’s TRS assets and operations to Green Dot. RB&T maintains that its notice of termination of the Purchase Agreement and corresponding payment of the $5.0 million termination fee does not release Green Dot from any liability, in addition to the termination fee, related to the Sale Transaction occurring before RB&T’s notice of termination.

Regarding TRS’s RT product, net RT revenue decreased 5% from $12.7 million during the first quarter of 2021 to $12.1 million during the same period in 2022. RT revenue for the first quarter of 2022 was negatively impacted by the departure of one of TRS’s Tax Providers, who ended their relationship with the Bank following the announcement of the Purchase Agreement. The loss of this revenue was partially offset during the first quarter of 2022 by higher RT volume from TRS’s remaining Tax Providers. The higher first quarter 2022 RT volume from the remaining Tax Providers was partially driven by the two-week delay in the 2021 tax season, with this year-over-year difference in volume expected to recede as the 2022 tax season winds down and the impact of the 2021 delay diminishes.

For factors affecting the comparison of the TRS results of operations for the first quarter of 2022 and the first quarter of 2021, see section titled “OVERVIEW (Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021) - Tax Refund Solutions.”

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Republic Credit Solutions segment

RCS’s noninterest income increased $1.8 million, or 135%, during the first 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 first 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 $256 million during the first quarter of 2022, a 138% 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 Mar. 31,
(in thousands)	2022		2021		$ Change		% Change
Product:
Lines of credit	$	1,188	$	768	$	420	55	%
Hospital receivables		61		48		13	27
Installment loans*		1,878		513		1,365	NM
Total	$	3,127	$	1,329	$	1,798	135	%

* 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 $762,000, or 2%, during the first 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 $891,000 for the first quarter of 2022 compared to the same period in 2021. The following primarily drove the change in noninterest expense:

● Other expenses increased $726,000. Within this increase the most notable change was a $250,000 increase in fraud losses, as the Bank’s clients experienced an increase in fraudulent check activity during the quarter. As required by regulation, the Traditional Bank reimburses its clients for these specific types of check fraud losses as they are incurred.

● Salaries and benefits expense decreased approximately $180,000, or 1%, primarily driven by a reduction in health benefits costs partially offset by annual merit increases and a 34-count decrease in FTE’s from period to period.

Mortgage Banking segment

Noninterest expense at the Mortgage Banking segment decreased $431,000, or 14%, during the first quarter of 2022 compared to the same period in 2021, primarily due to a reduction in mortgage commissions, which declined consistent with the previously discussed period-to-period decrease in mortgage origination volume.

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COMPARISON OF FINANCIAL CONDITION AS OF MARCH 31, 2022 AND DECEMBER 31, 2021

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 $1.1 billion in cash and cash equivalents as of March 31, 2022 compared to $757 million as of December 31, 2021. The growth in cash balances was driven by continued growth in deposit balances, including $100 million of short-term tax refund deposits at TRS. As described in the “Investment Securities” section below, management began some deployment of its excess cash through the purchase of longer-term investment securities during the fourth quarter of 2021, with additional purchases made during the first quarter of 2022 as a result of a recent steepening of the yield curve.

For cash held at the FRB, the Bank earns a yield on amounts more than required reserves. This cash earned a weighted-average yield of 0.20% during the first quarter of 2022 with a spot balance yield of 0.40% on March 31, 2022. For cash held within the Bank’s banking center and ATM networks, the Bank does not earn interest.

Investment Securities

During the first quarter of 2022, the Bank purchased $116 million in investment debt securities, allocated among $86 million in U.S. Treasuries, a $20 million MBS, and a $10 million U.S. government agency security. The U.S. Treasuries had an expected weighted-average yield of approximately 1.51% and a weighted average life at purchase of 2.5 years. The MBS had an expected yield of approximately 1.25% and a stated maturity at purchase of 10 years. The U.S. Government agency had an expected yield of approximately 1.39% and a maturity of 10 years.

Entering the second quarter of 2022, management believes investment securities with a maturity of approximately two years offer an attractive risk-based return as compared to overnight cash at the Federal Reserve. As a result, management anticipates the Company will make additional purchases of investment securities during the second quarter of 2022 targeting a maturity of approximately two years. The overall timing of these purchases and the amount of these 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 8 — Loan Portfolio Composition

(dollars in thousands)	March 31, 2022		December 31, 2021		$ Change		Percent Change
Traditional Banking:
Residential real estate:
Owner occupied	$	808,658	$	820,731	$	(12,073)	(1)	%
Nonowner occupied		314,933		306,323		8,610	3
Commercial real estate		1,556,575		1,456,009		100,566	7
Construction & land development		129,970		129,337		633	0
Commercial & industrial		342,175		340,363		1,812	1
Paycheck Protection Program		18,276		56,014		(37,738)	(67)
Lease financing receivables		10,396		8,637		1,759	20
Aircraft		151,284		142,894		8,390	6
Home equity		210,364		210,578		(214)	(0)
Consumer:
Credit cards		14,654		14,510		144	1
Overdrafts		716		683		33	5
Automobile loans		11,846		14,448		(2,602)	(18)
Other consumer		939		1,432		(493)	(34)
Total Traditional Banking		3,570,786		3,501,959		68,827	2
Warehouse lines of credit*		690,200		850,550		(160,350)	(19)
Total Core Banking		4,260,986		4,352,509		(91,523)	(2)
Republic Processing Group*:
Tax Refund Solutions:
Easy Advances		16,475		—		16,475	NM
Other TRS loans		25,132		50,987		(25,855)	(51)
Republic Credit Solutions		87,650		93,066		(5,416)	(6)
Total Republic Processing Group		129,257		144,053		(14,796)	(10)
Total loans**		4,390,243		4,496,562		(106,319)	(2)
Allowance for credit losses		(71,656)		(64,577)		(7,079)	11
Total loans, net	$	4,318,587	$	4,431,985	$	(113,398)	(3)

*Identifies loans to borrowers located primarily outside of the Bank’s market footprint.

**Total loans are presented inclusive of premiums, discounts and net loan origination fees and costs.

Gross loans decreased by $106 million, or 2%, during the first quarter of 2022 to $4.4 billion as of March 31, 2022. The most significant components comprising the change in loans by reportable segment follow:

Traditional Banking segment

Period-end balances for Traditional Banking loans increased $69 million, or 2%, from December 31, 2021 to March 31, 2022. The following primarily drove the change in loan balances during the first quarter of 2022:

● CRE loans grew $101 million, or 7%, during the first quarter of 2022, as the Traditional Bank experienced strong loan demand within its Corporate Lending division and its Northern Kentucky/Cincinnati market.

● Offsetting the growth above, during the first quarter of 2022, the Core Bank’s PPP portfolio decreased $38 million, as this temporary government program continued to wind down.

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 cash-flow 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 March 31,

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2022, net PPP loans of $18 million remained on the Traditional Bank’s balance sheet, including $3 million in loan balances originated during 2020 and $15 million in loan balances originated during 2022.

Warehouse Lending segment

Outstanding Warehouse period-end balances decreased $160 million from December 31, 2021 to March 31, 2022. Due to the volatility and seasonality of the mortgage market, it is difficult to project future outstanding balances of Warehouse lines of credit. The growth of the Bank’s Warehouse Lending business greatly depends on the overall mortgage market and typically follows industry trends. Since its entrance into this business during 2011, the Bank has experienced volatility in the Warehouse portfolio consistent with overall demand for mortgage products. Weighted average quarterly usage rates on the Bank’s Warehouse lines have ranged from a low of 31% during the fourth quarter of 2013 to a high of 71% during the fourth quarter of 2019. On an annual basis, weighted average usage rates on the Bank’s Warehouse lines have ranged from a low of 40% during 2013 to a high of 66% during 2020.

As previously discussed, additional increases in short-term interest rates and overall market rates are generally believed by management to be unfavorable to Warehouse’s client demand, likely leading to a reduction in average outstanding balances as higher long-term interest rates generally drive lower demand for Warehouse borrowings.

Tax Refund Solutions segment

Outstanding TRS loans decreased $9 million from December 31, 2021 to March 31, 2022 primarily reflecting $16 million of unpaid EAs partially offset by a $25 million reduction in other TRS loans. EAs are only made during the first two months of each year, with all unpaid EAs charged off by June 30^th of each year. Other TRS loans as of December 31, 2021 were primarily commercial loans to Tax Providers. These loans are typically made in the fourth quarter of each year and fully repaid by the end of the first quarter of the following year.

Republic Credit Solutions segment

Outstanding RCS loans decreased $5 million from December 31, 2021 to March 31, 2022 primarily reflecting a $2 million decrease in outstanding balances for RCS’s LOC I product and a $2 million decrease in hospital receivables.

Allowance for Credit Losses

As of March 31, 2022, the Bank maintained an ACLL for expected credit losses inherent in the Bank’s loan portfolio, which includes overdrawn deposit accounts. The Bank also maintained an ACLS and an ACLC for expected losses in its securities portfolio and its off-balance sheet credit exposures, respectively. Management evaluates the adequacy of the ACLL monthly, and the adequacy of the ACLS and ACLC quarterly. All ACLs are presented and discussed with the Audit Committee and the Board of Directors quarterly.

The Company’s ACLL increased $7 million from $65 million as of December 31, 2021 to $72 million as of March 31, 2022. As a percent of total loans, the total Company’s ACLL increased to 1.63% as of March 31, 2022 compared to 1.44% as of December 31, 2021. An analysis of the ACL by reportable segment follows:

Traditional Banking segment

The Traditional Banking ACLL increased approximately $209,000 to $50 million as of March 31, 2022 driven primarily by formula reserves tied to loan growth during the first quarter of 2022.  

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Warehouse Lending segment

The Warehouse ACLL decreased to approximately $1.7 million, and the Warehouse ACLL to total Warehouse loans remained at 0.25% when comparing March 31, 2022 to December 31, 2021. As of March 31, 2022, the Warehouse ACLL was entirely qualitative in nature with no adjustments to the qualitative reserve percentage required for the first quarter of 2022. 

Tax Refund Solutions segment

The TRS ACLL increased to $8 million as of March 31, 2022 from $96,000 as of December 31, 2021, driven primarily by estimated losses on TRS’s EA product. Due to the seasonal nature of the EA, estimated reserves are generally made during the first two months of the year when the product is offered, with losses charged against those reserves in the second quarter of each year. Based on the timing of EA reserves versus charge-offs, the ACLL for EAs to total remaining outstanding EAs is relatively substantial at the end of the first quarter, or 50% and 52% as of March 31, 2022 and March 31, 2021. The Company provided an ACLL for expected losses equal to 2.67% of total originations during the first quarter of 2022 as compared to 6.41% during the first quarter of 2021 because a lower percentage of EAs remained outstanding as of March 31, 2022 compared to March 31, 2021.  Management believes it has adequately adjusted its expected loss rate to absorb EA losses based on information known through the date of this filing.

Republic Credit Solutions segment

The RCS ACLL decreased $1 million from $13 million as of December 31, 2021 to $12 million as of March 31, 2022, with this decrease driven by a decrease in RCS loan balances.

RCS maintained an ACLL for two distinct credit products offered as of March 31, 2022, including its line-of-credit products and its healthcare-receivables products. As of March 31, 2022, the ACLL to total loans estimated for each RCS product ranged from as low as 0.25% for its healthcare-receivables products to as high as 49% for its line-of-credit products. The lower reserve percentage of 0.25% was provided for RCS’s healthcare receivables, as such receivables have recourse back to the third-party providers.

Asset Quality

COVID Loan Accommodations

The CARES Act provided several forms of economic relief designed to defray the impact of COVID. In April 2020, through its own independent relief efforts and CARES Act provisions, the Company began offering loan accommodations through deferrals and forbearances. These accommodations were generally under three-month terms for commercial clients, with residential and consumer accommodations in line with prevailing regulatory and legal parameters. Loans that received an accommodation were generally not considered troubled debt restructurings by the Company if such loans were not greater than 30 days past due as of December 31, 2019.

As of March 31, 2022, $148,000, or less than 1% of the Company’s Traditional Bank portfolio remained under a COVID hardship accommodation.

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 $10 million during the first quarter of 2022, driven primarily by commercial-purpose loans repaid or upgraded to a Pass rating during the first quarter of 2022.

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

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Table 9 — Classified and Special Mention Loans

(dollars in thousands)	March 31, 2022		December 31, 2021		$ Change		% Change
Loss	$	—	$	—	$	—	—	%
Doubtful		—		—		—	—
Substandard		18,681		21,714		(3,033)	(14)
PCD* - Substandard		1,644		1,692		(48)	(3)
Total Classified Loans		20,325		23,406		(3,081)	(13)
Special Mention		107,186		114,496		(7,310)	(6)
PCD* - Special Mention		776		795		(19)	(2)
Total Special Mention Loans		107,962		115,291		(7,329)	(6)
Total Classified and Special Mention Loans	$	128,287	$	138,697	$	(10,410)	(8)	%

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 $6 million and $6 million as of March 31, 2022 and December 31, 2021.

Nonperforming loans to total loans decreased to 0.39% at March 31, 2022 from 0.46% at December 31, 2021, as the total balance of nonperforming loans decreased by $4 million, or 17%, while total loans decreased $106 million, or 2%, during the first quarter of 2022. As presented in Tables 13 and 14 below, the decrease in nonperforming loans during 2022, including the nonaccrual loan component, was primarily driven by the refinancing of $5 million of these loans to another financial institution.

The ACLL to total nonperforming loans increased to 423% as of March 31, 2022 from 315% as of December 31, 2021, as the total ACLL increased $7 million, or 11%, and the balance of nonperforming loans decreased by $4 million, or 17%. The driver of the increase in ACLL was primarily EAs originated through the Company’s TRS segment, while the driver of the decrease in nonperforming loans was primarily the refinancing out of the Bank of $5 million of these loans during the first quarter of 2022.

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Table 10 — Nonperforming Loans and Nonperforming Assets Summary

(dollars in thousands)	March 31, 2022			December 31, 2021
Loans on nonaccrual status*	$	16,935		$	20,504
Loans past due 90-days-or-more and still on accrual**		31			48
Total nonperforming loans		16,966			20,552
Other real estate owned		1,740			1,792
Total nonperforming assets	$	18,706		$	22,344
Credit Quality Ratios - Total Company:
ACLL to total loans		1.63	%		1.44	%
Nonaccrual loans to total loans		0.39			0.46
ACLL to nonaccrual loans		423			315
Nonperforming loans to total loans		0.39			0.46
Nonperforming assets to total loans (including OREO)		0.43			0.50
Nonperforming assets to total assets		0.29			0.37
Credit Quality Ratios - Core Bank:
ACLL to total loans		1.20	%		1.18	%
Nonaccrual loans to total loans		0.40			0.47
ACLL to nonaccrual loans		303			251
Nonperforming loans to total loans		0.40			0.47
Nonperforming assets to total loans (including OREO)		0.44			0.51
Nonperforming assets to total assets		0.33			0.40

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

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

Table 11 — Nonperforming Loan Composition

	March 31, 2022					December 31, 2021
				Percent of					Percent of
				Total					Total
(dollars in thousands)	Balance			Loan Class		Balance			Loan Class
Traditional Banking:
Residential real estate:
Owner occupied		$	11,728	1.45	%		$	12,039	1.47	%
Nonowner occupied			132	0.04				95	0.03
Commercial real estate			3,581	0.23				6,557	0.45
Construction & land development			—	—				—	—
Commercial & industrial			—	—				13	0.00
Paycheck Protection Program			—	—				—	—
Lease financing receivables			—	—				—	—
Aircraft			—	—				—	—
Home equity			1,431	0.68				1,700	0.81
Consumer:
Credit cards			—	—				—	—
Overdrafts			—	—				1	0.15
Automobile loans			60	0.51				97	0.67
Other consumer			3	0.32				3	0.21
Total Traditional Banking			16,935	0.47				20,505	0.59
Warehouse lines of credit			—	—				—	—
Total Core Banking			16,935	0.40				20,505	0.47
Republic Processing Group:
Tax Refund Solutions:
Easy Advances			—	—				—	—
Other TRS loans			—	—				—	—
Republic Credit Solutions			31	0.04				47	0.05
Total Republic Processing Group			31	0.02				47	0.03
Total nonperforming loans		$	16,966	0.39	%		$	20,552	0.46	%

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Table 12 — Stratification of Nonperforming Loans

	Number of Nonperforming Loans and Recorded Investment
					Balance
March 31, 2022		Balance			> $100 &			Balance			Total
(dollars in thousands)	No.	<= $100		No.	<= $500		No.	> $500		No.	Balance
Traditional Banking:
Residential real estate:
Owner occupied	148	$	4,853	31	$	5,370	1	$	1,505	180	$	11,728
Nonowner occupied	4		132	—		—	—		—	4		132
Commercial real estate	—		—	1		264	2		3,317	3		3,581
Construction & land development	—		—	—		—	—		—	—		—
Commercial & industrial	—		—	—		—	—		—	—		—
Paycheck Protection Program	—		—	—		—	—		—	—		—
Lease financing receivables	—		—	—		—	—		—	—		—
Aircraft	—		—	—		—	—		—	—		—
Home equity	25		643	5		788	—		—	30		1,431
Consumer:
Credit cards	—		—	—		—	—		—	—		—
Overdrafts	NM		—	—		—	—		—	NM		—
Automobile loans	7		60	—		—	—		—	7		60
Other consumer	3		3	—		—	—		—	3		3
Total Traditional Banking	187		5,691	37		6,422	3		4,822	227		16,935
Warehouse lines of credit	—		—	—		—	—		—	—		—
Total Core Banking	187		5,691	37		6,422	3		4,822	227		16,935
Republic Processing Group:
Tax Refund Solutions:
Easy Advances	—		—	—		—	—		—	—		—
Other TRS loans	—		—	—		—	—		—	—		—
Republic Credit Solutions	NM		31	—		—	—		—	NM		31
Total Republic Processing Group	NM		31	—		—	—		—	NM		31
Total	187	$	5,722	37	$	6,422	3	$	4,822	227	$	16,966

	Number of Nonperforming Loans and Recorded Investment
					Balance
December 31, 2021		Balance			> $100 &			Balance			Total
(dollars in thousands)	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
Nonowner occupied	3		95	—		—	—		—	3		95
Commercial real estate	—		—	4		872	3		5,685	7		6,557
Construction & land development	—		—	—		—	—		—	—		—
Commercial & industrial	1		13	—		—	—		—	1		13
Paycheck Protection Program	—		—	—		—	—		—	—		—
Lease financing receivables	—		—	—		—	—		—	—		—
Aircraft	—		—	—		—	—		—	—		—
Home equity	25		695	5		1,005	—		—	30		1,700
Consumer:
Credit cards	—		—	—		—	—		—	NM		—
Overdrafts	NM		1	—		—	—		—	NM		1
Automobile loans	13		97	—		—	—		—	13		97
Other consumer	4		3	—		—	—		—	4		3
Total Traditional Banking	192		5,946	36		6,734	5		7,825	233		20,505
Warehouse lines of credit	—		—	—		—	—		—	—		—
Total Core Banking	192		5,946	36		6,734	5		7,825	233		20,505
Republic Processing Group:
Tax Refund Solutions:
Easy Advances	—		—	—		—	—		—	—		—
Other TRS loans	—		—	—		—	—		—	—		—
Republic Credit Solutions	NM		47	—		—	—		—	NM		47
Total Republic Processing Group	NM		47	—		—	—		—	NM		47
Total	192	$	5,993	36	$	6,734	5	$	7,825	233	$	20,552

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Table 13 — Rollforward of Nonperforming Loans

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Nonperforming loans at the beginning of the period	$	20,552	$	23,595
Loans added to nonperforming status during the period that remained nonperforming at the end of the period		1,607		846
Loans removed from nonperforming status during the period that were nonperforming at the beginning of the period (see table below)		(4,799)		(1,891)
Principal balance paydowns of loans nonperforming at both period ends		(378)		(499)
Net change in principal balance of other loans nonperforming at both period ends*		(16)		470
Nonperforming loans at the end of the period	$	16,966	$	22,521

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

Table 14 — Detail of Loans Removed from Nonperforming Status

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Loans charged off	$	—	$	—
Loans transferred to OREO		—		—
Loans refinanced at other institutions		(4,595)		(1,891)
Loans returned to accrual status		(204)		—
Total loans removed from nonperforming status during the period that were nonperforming at the beginning of the period	$	(4,799)	$	(1,891)

Based on the Bank’s review as of March 31, 2022, management believes that its reserves are adequate to absorb expected losses on all nonperforming loans.

Delinquent Loans

Total Company delinquent loans to total loans increased to 0.37% as of March 31, 2022 from 0.30% as of December 31, 2021. Core Bank delinquent loans to total Core Bank loans decreased to 0.14% as of March 31, 2022 from 0.17% as of December 31, 2021. With the exception of small-dollar consumer loans, all Traditional Bank loans past due 90-days-or-more as of March 31, 2022 and December 31, 2021 were on nonaccrual status.

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Table 15 — Delinquent Loan Composition* 

	March 31, 2022					December 31, 2021
				Percent of					Percent of
				Total					Total
(dollars in thousands)	Balance			Loan Class		Balance			Loan Class
Traditional Banking:
Residential real estate:
Owner occupied		$	2,628	0.32	%		$	1,599	0.19	%
Nonowner occupied			41	0.01				—	—
Commercial real estate			2,464	0.16				5,292	0.36
Construction & land development			—	—				—	—
Commercial & industrial			—	—				21	0.01
Paycheck Protection Program			—	—				—	—
Lease financing receivables			—	—				—	—
Aircraft			—	—				—	—
Home equity			555	0.26				314	0.15
Consumer:
Credit cards			39	0.27				30	0.21
Overdrafts			119	16.62				164	24.01
Automobile loans			17	0.14				9	0.06
Other consumer			—	—				1	0.07
Total Traditional Banking			5,863	0.16				7,430	0.21
Warehouse lines of credit			—	—				—	—
Total Core Banking			5,863	0.14				7,430	0.17
Republic Processing Group:
Tax Refund Solutions:
Easy Advances			4,524	27.46				—	—
Other TRS loans			160	0.64				—	—
Republic Credit Solutions			5,668	6.47				6,035	6.48
Total Republic Processing Group			10,352	8.01				6,035	4.19
Total delinquent loans		$	16,215	0.37	%		$	13,465	0.30	%

*     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 16 — Rollforward of Delinquent Loans

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Delinquent loans at the beginning of the period	$	13,465	$	19,947
Loans that became delinquent during the period - Easy Advances*		4,524		—
Loans added to delinquency status during the period and remained in delinquency status at the end of the period		2,103		992
Loans removed from delinquency status during the period that were in delinquency status at the beginning of the period (see table below)		(3,604)		(2,017)
Principal balance paydowns of loans delinquent at both period ends		(28)		(29)
Net change in principal balance of other loans delinquent at both period ends**		(245)		(3,907)
Delinquent loans at the end of period	$	16,215	$	14,986

* EAs do not have a contractual due date but the Company considered an EA delinquent in 2022 and 2021 if it remained unpaid 35 days after the taxpayer’s tax return was submitted to the applicable taxing authority.

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

Table 17 — Detail of Loans Removed from Delinquent Status

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Loans charged off	$	(1)	$	—
Easy Advances paid off or charged off		—		—
Loans transferred to OREO		—		—
Loans refinanced at other institutions		(3,418)		(1,270)
Loans paid current		(185)		(747)
Total loans removed from delinquency status during the period that were in delinquency status at the beginning of the period	$	(3,604)	$	(2,017)

Collateral-Dependent Loans and Troubled Debt Restructurings

When management determines that a loan is collateral dependent and foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs, if appropriate. The Bank’s policy is to charge-off all or that portion of its recorded investment in collateral-dependent loans upon a determination that it expects the full amount of contractual principal and interest will not be collected.

A TDR is a situation where, due to a borrower’s financial difficulties, the Bank grants a concession to the borrower that the Bank would not otherwise have considered. The majority of the Bank’s TDRs involve a restructuring of loan terms such as a temporary reduction in the payment amount to require only interest and escrow (if required), reducing the loan’s interest rate, and/or extending the maturity date of the debt. Nonaccrual loans modified as TDRs remain on nonaccrual status and continue to be reported as nonperforming loans. Accruing loans modified as TDRs are evaluated for nonaccrual status based on a current evaluation of the borrower’s financial condition and ability and willingness to service the modified debt.

Table 18 — Collateral-Dependent Loans and Troubled Debt Restructurings

(dollars in thousands)	March 31, 2022		December 31, 2021		$ Change		% Change
Cashflow-dependent TDRs	$	4,963	$	5,960	$	(997)	(17)	%
Collateral-dependent TDRs		10,224		9,426		798	8
Total TDRs		15,187		15,386		(199)	(1)
Collateral-dependent loans (which are not TDRs)		10,935		14,645		(3,710)	(25)
Total recorded investment in TDRs and collateral-dependent loans	$	26,122	$	30,031	$	(3,909)	(13)	%

See Footnote 4 “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 19 — Deposit Composition

(dollars in thousands)	March 31, 2022		December 31, 2021		$ Change		% Change
Core Bank:
Demand	$	1,415,655	$	1,381,522	$	34,133	2	%
Money market accounts		793,953		789,876		4,077	1
Savings		327,358		311,624		15,734	5
Individual retirement accounts (1)		42,149		43,724		(1,575)	(4)
Time deposits, $250 and over (1)		60,738		81,050		(20,312)	(25)
Other certificates of deposit (1)		139,735		154,174		(14,439)	(9)
Reciprocal money market and time deposits (1)		70,030		77,950		(7,920)	(10)
Brokered deposits (1)		—		—		—	—
Total Core Bank interest-bearing deposits		2,849,618		2,839,920		9,698	0
Total Core Bank noninterest-bearing deposits		1,630,926		1,579,173		51,753	3
Total Core Bank deposits		4,480,544		4,419,093		61,451	1
Republic Processing Group:
Money market accounts		10,774		9,717		1,057	11
Total RPG interest-bearing deposits		10,774		9,717		1,057	11
Brokered prepaid card deposits		412,746		320,907		91,839	29
Other noninterest-bearing deposits		183,042		90,701		92,341	102
Total RPG noninterest-bearing deposits		595,788		411,608		184,180	45
Total RPG deposits		606,562		421,325		185,237	44
Total deposits	$	5,087,106	$	4,840,418	$	246,688	5	%

(1) Includes time deposit

Total Company deposits increased $247 million, or 5%, from December 31, 2021 to $5.1 billion as of March 31, 2022.

Total Core Bank deposits increased minimally by $61 million, or 1%, with no notable changes during the quarter.

Total RPG deposits increased $185 million, or 44%, for the first quarter of 2022, with the following primarily driving growth:

● RPG noninterest-bearing deposits growth was primarily driven by the following:

● RPG’s other noninterest-bearing deposits increased approximately $92 million due to seasonal short-term RT deposits generated within the TRS segment. These deposits are expected to exit the Bank during the next quarter.

● RPS’s prepaid card balances within its RPS division of TRS increased $92 million, driven primarily by tax-refund related deposits loaded onto prepaid cards during the first quarter of 2022.

Federal Home Loan Bank Advances

The Bank held $20 million of long-term FHLB advances at March 31, 2022 compared to $25 million of overnight FHLB advances as of December 31, 2021. During the first quarter of 2022, the Bank extended the term on $20 million of its FHLB advances in anticipation of increasing long-term interest rates and repaid the remaining $5 million. As of March 31, 2022, the Company’s $20 million of FHLB advances had a weighted average maturity of five years and a weighted average cost of 1.89%.

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.

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Interest Rate Swaps

The Bank enters into interest rate swaps to facilitate client transactions and meet their financing needs. Upon entering into these instruments, the Bank enters into offsetting positions in order to minimize the Bank’s interest rate risk. These swaps are derivatives, but are not designated as hedging instruments, and therefore changes in fair value are reported in current year earnings.

See Footnote 12 “Interest Rate Swaps” of Part I Item 1 “Financial Statements” for additional discussion regarding the Bank’s interest rate swaps.

Liquidity

The Bank maintains sufficient liquidity to fund routine loan demand and routine deposit withdrawal activity. Liquidity is managed by maintaining sufficient liquid assets, primarily in the form of cash, cash equivalents, and unincumbered investment securities. Funding and cash flows can also be realized through deposit product promotions, the sale of AFS debt securities, principal paydowns on loans and mortgage-backed securities, and proceeds realized from loans held for sale.

Table 20 — Liquid Assets and Borrowing Capacity

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

(in thousands)	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	1,077,158	$	756,971
Unincumbered debt securities		281,521		219,775
Total liquid assets		1,358,679		976,746
Borrowing capacity with the FHLB		887,520		900,424
Borrowing capacity through unsecured credit lines		125,000		125,000
Total borrowing capacity		1,012,520		1,025,424
Total liquid assets and borrowing capacity	$	2,371,199	$	2,002,170

The Bank had a loan to deposit ratio (excluding brokered deposits) of 94% as of March 31, 2022 and 99% as of December 31, 2021. Republic’s banking centers and its website, www.republicbank.com, provide access to retail deposit markets. These retail deposit products, if offered at attractive rates, have historically been a source of additional funding when needed. If the Bank were to lose a significant funding source, such as a few major depositors, or if any of its lines of credit were cancelled, or if the Bank cannot obtain brokered deposits, the Bank would be compelled to offer market leading deposit interest rates to meet its funding and liquidity needs.

As of March 31, 2022, the Bank had approximately $1.5 billion in deposits from 244 large non-sweep deposit relationships, including reciprocal deposits, where the individual relationship exceeded $2 million. The 20 largest non-sweep deposit relationships represented approximately $520 million, or 10%, of the Company’s total deposit balances as of as of March 31, 2022. These accounts do not require collateral; therefore, cash from these accounts can generally be utilized to fund the loan portfolio. If any of these balances were moved from the Bank, the Bank would likely utilize overnight borrowing lines in the short-term to replace the balances. On a longer-term basis, the Bank would likely utilize wholesale-brokered deposits to replace withdrawn balances, or alternatively, higher-cost internet-sourced deposits. Based on past experience utilizing brokered deposits and internet-sourced deposits, the Bank believes it can quickly obtain these types of deposits if needed. The overall cost of gathering these types of deposits, however, could be substantially higher than the Traditional Bank deposits they replace, potentially decreasing the Bank’s earnings.

The Bank’s liquidity is impacted by its ability to sell certain investment securities, which is limited due to the level of investment securities that are needed to secure public deposits, securities sold under agreements to repurchase, FHLB borrowings, and for other purposes, as required by law. As of March 31, 2022 and December 31, 2021, these pledged investment securities had a fair value of $331 million and $320 million.

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Capital

Total stockholders’ equity increased from $834 million as of December 31, 2021 to $840 million as of March 31, 2022. The increase in stockholders’ equity was primarily attributable to net income earned during 2022 reduced primarily by cash dividends declared.

Common Stock — The Class A Common shares are entitled to cash dividends equal to 110% of the cash dividend paid per share on Class B Common Stock. Class A Common shares have one vote per share and Class B Common shares have ten votes per share. Class B Common shares may be converted, at the option of the holder, to Class A Common shares on a share for share basis. The Class A Common shares are not convertible into any other class of Republic’s capital stock.

Dividend Restrictions — The Parent Company’s principal source of funds for dividend payments are dividends received from RB&T. Banking regulations limit the amount of dividends that may be paid to the Parent Company by the Bank without prior approval of the respective states’ banking regulators. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years. As of April 1, 2022, RB&T could, without prior approval, declare dividends of approximately $123 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 13.19% as of March 31, 2022 compared to 13.41% as of December 31, 2021. 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 21 — Capital Ratios (1)

	As of March 31, 2022				As of December 31, 2021
(dollars in thousands)	Amount		Ratio		Amount		Ratio
Total capital to risk-weighted assets
Republic Bancorp, Inc.	$	906,036	18.13	%	$	878,488	17.47	%
Republic Bank & Trust Company		873,513	17.49			861,815	17.14
Common equity tier 1 capital to risk-weighted assets
Republic Bancorp, Inc.	$	843,538	16.88	%	$	823,504	16.37	%
Republic Bank & Trust Company		811,075	16.24			806,831	16.05
Tier 1 (core) capital to risk-weighted assets
Republic Bancorp, Inc.	$	843,538	16.88	%	$	823,504	16.37	%
Republic Bank & Trust Company		811,075	16.24			806,831	16.05
Tier 1 leverage capital to average assets
Republic Bancorp, Inc.	$	843,538	13.15	%	$	823,504	13.35	%
Republic Bank & Trust Company		811,075	12.65			806,831	13.10

(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 15 basis points lower than those presented in the table above as of March 31, 2022 and December 31, 2021.

Asset/Liability Management and Market Risk

Asset/liability management is designed to ensure safety and soundness, maintain liquidity, meet regulatory capital standards, and achieve acceptable net interest income based on the Bank’s risk tolerance. Interest rate risk is the exposure to adverse changes in net interest income as a result of market fluctuations in interest rates. The Bank, on an ongoing basis, monitors interest rate and liquidity risk in order to implement appropriate funding and balance sheet strategies. Management considers interest rate risk to be a significant risk to the Bank’s overall earnings and balance sheet.

The interest sensitivity profile of the Bank at any point in time will be impacted by a number of factors. These factors include the mix of interest sensitive assets and liabilities, as well as their relative pricing schedules. It is also influenced by changes in market interest rates, deposit and loan balances, and other factors.

The Bank utilizes earnings simulation models as tools to measure interest rate sensitivity, including both a static and dynamic earnings simulation model. A static simulation model is based on current exposures and assumes a constant balance sheet. In contrast, a dynamic simulation model relies on detailed assumptions regarding changes in existing business lines, new business, and changes in management and customer behavior. While the Bank runs the static simulation model as one measure of interest rate risk, historically, the Bank has utilized its dynamic earnings simulation model as its primary interest rate risk tool to measure the potential changes in market interest rates and their subsequent effects on net interest income for a one-year time period. This dynamic model projects a “Base” case net interest income over the next 12 months and the effect on net interest income of instantaneous movements in interest rates between various basis point increments equally across all points on the yield curve. Many assumptions based on growth expectations and on the historical behavior of the Bank’s deposit and loan rates and their related balances in relation to changes in interest rates are incorporated into this dynamic model. These assumptions are inherently uncertain and, as a result, the dynamic model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to the actual timing, magnitude and frequency of interest rate changes, the actual timing and magnitude of changes in loan and deposit balances, as well as the actual changes in market conditions and the application and timing of various management strategies as compared to those projected in the various simulated models. Additionally, actual results could differ materially from the model if interest rates do not move equally across all points on the yield curve.

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As of March 31, 2022, a dynamic simulation model was run for interest rate changes from “Down 100” basis points to “Up 400” basis points. The following table illustrates the Bank’s projected percent change from its Base net interest income over the period beginning April 1, 2022 and ending March 31, 2023 based on instantaneous movements in interest rates from Down 100 to Up 400 basis points equally across all points on the yield curve. The Bank’s dynamic earnings simulation model includes secondary market loan fees and excludes Traditional Bank loan fees.

Table 22 — Bank Interest Rate Sensitivity

	Change in Rates
	-100			+100			+200			+300			+400
	Basis Points			Basis Points			Basis Points			Basis Points			Basis Points
% Change from base net interest income as of March 31, 2022		2.0	%		0.2	%		2.5	%		4.9	%		7.7	%
% Change from base net interest income as of December 31, 2021		1.3	%		(0.6)	%		0.7	%		4.7	%		9.3	%

For the Down-100, Up-100, Up-200, and Up-300 scenarios, the March 31, 2022 simulation reflected a more positive outcome for the Bank’s net interest income than the comparable December 31, 2021 simulation. For the Up-400 scenario, the December 2021 simulation reflected a more positive outcome than the March 2022 simulation. The changes in simulation outcomes from December 2021 to March 2022 was primarily due to the following:

● The positive impact from the growth in interest-earning cash balances from December 2021 to March 2022;

● The negative impact from a larger projected decline in secondary market fees for the March 2022 Up-400 simulation than previously projected for the December 2021 simulation.

LIBOR Exposure

In July 2017, the Financial Conduct Authority (“FCA”), the authority regulating LIBOR, along with various other regulatory bodies, announced that LIBOR would likely be discontinued at the end of 2021. Subsequent to that announcement, in November 2020, the FCA announced that many tenors of LIBOR would continue to be published through June 2023. In compliance with regulatory guidance, the Bank discontinued referencing LIBOR for new financial instruments during 2021 and chose SOFR to be its primary alternative reference rate for most transaction types upon the discontinuance or unavailability of LIBOR.

Regarding its legacy assets that reference LIBOR, the Bank has previously disclosed that the underlying contracts for these assets may not include adequate “fallback” language to use alternative indexes and margins when LIBOR ceases. However, on March 15, 2022, President Biden signed into law the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Law”), which is designed to accomplish the following:

● Establish a clear and uniform process, on a nationwide basis, for replacing LIBOR in existing contracts the terms of which do not provide for the use of a clearly defined or practicable replacement benchmark rate, without affecting the ability of parties to use any appropriate benchmark rate in new contracts;

● Preclude litigation related to existing contracts, the terms of which do not provide for the use of a clearly defined or practicable replacement benchmark rate;

● Allow existing contracts that reference LIBOR but provide for the use of a clearly defined and practicable replacement rate to operate according to their terms; and

● Address LIBOR references in federal law.

With limited exception, the LIBOR Law generally covers legacy LIBOR contracts with no or inadequate fallback provisions. Additionally, under the LIBOR Law, by September 11, 2022, the Board of Governors of the Federal Reserve System (the “Board”) must issue regulations to give effect to the law, including the selection of a Board-Selected Benchmark Replacement that is based on SOFR and incorporates an applicable tenor spread adjustment and the identification of any related conforming changes.

As of March 31, 2022, the Company had approximately $1.1 billion of legacy assets that reference LIBOR, with short-term Warehouse loans representing $631 million of these assets and commercial and mortgage loans primarily making up the remainder. As of March 31, 2021, of the Bank’s legacy assets that reference LIBOR, approximately $434 million of those assets were scheduled to mature after June 30, 2023. These amounts exclude derivative assets and liabilities on the Company’s consolidated balance sheet.

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As of March 31, 2022, the notional amount of the Company’s LIBOR-referenced interest rate derivative contracts was approximately $246 million, with $230 million of such notional scheduled to mature after June 30, 2023.

For additional discussion regarding the Bank’s net interest income, see the sections titled “Net Interest Income” in this section of the filing under “RESULTS OF OPERATIONS (Three months ended March 31, 2022 Compared to Three months ended March 31, 2021.”)

Item 3.Quantitative and Qualitative Disclosures about Market Risk.

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

Item 4.Controls and Procedures.

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

PART II — OTHER INFORMATION

Item 1.Legal Proceedings.

See Footnote 1 “Basis of Presentation and Summary of Significant Accounting Policies” of Part I Item 1 “Financial Statements” for discussion regarding the Bank’s lawsuit against Green Dot.

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.

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Item 1A.Risk Factors.

FACTORS THAT MAY AFFECT FUTURE RESULTS

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. You should carefully consider the risk factors discussed in Republic’s 2021 Form 10-K, which could materially affect its business, financial condition, or future results.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Details of Republic’s Class A Common Stock purchases during the first quarter of 2022 are included in the following table:

				Total Number of	Maximum Number
				Shares Purchased	of Shares that May
				as Part of Publicly	Yet Be Purchased
	Total Number of	Average Price		Announced Plans	Under the Plan
Period	Shares Purchased	Paid Per Share		or Programs	or Programs
January 1 - January 31	—	$	—	—	270,328
February 1 - February 28	—		—	—	270,328
March 1 - March 31	—		—	—	270,328
Total	—	$	—	—	270,328

The Company did not repurchase any of its shares during the first quarter of 2022. In addition, in connection with employee stock awards, there were 945 shares withheld upon exercise of stock options to satisfy the withholding taxes and exercise price. On January 27, 2021, 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 250,000 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 March 31, 2022, the Company had 270,328 shares which could be repurchased under its current share repurchase programs.

During the first quarter of 2022, there were no 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.

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Item 6.Exhibits.

The following exhibits are filed or furnished as a part of this report:

Exhibit Number	Description of Exhibit
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 March 31, 2022 and December 31, 2021, (ii) Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2022 and 2021, (iii) Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021, (iv) Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 and (v) Notes to Consolidated Financial Statements
104	Cover Page Interactive Data File formatted in iXBRL and contained in Exhibit 101.

* This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	REPUBLIC BANCORP, INC.
	(Registrant)
	Principal Executive Officer:
Date: May 6, 2022	/s/ Steven E. Trager
	By: Steven E. Trager
	Executive Chair (Principal Executive Officer)
	Principal Financial Officer:
Date: May 6, 2022	/s/ Kevin Sipes
	By: Kevin Sipes
	Executive Vice President, Chief Financial
	Officer and Chief Accounting Officer (Principal Financial Officer)

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