Republic Bancorp(RBCAA) - 2025 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section details the unaudited financial statements and related notes for Republic Bancorp, Inc. Item 1. Financial Statements. This section presents the unaudited consolidated financial statements of Republic Bancorp, Inc. and its subsidiaries for the period ended March 31, 2025, including balance sheets, income statements, comprehensive income statements, stockholders' equity statements, and cash flow statements. It also includes detailed notes on accounting policies, investment securities, loans, deposits, off-balance sheet risks, fair value measurements, mortgage banking activities, interest rate swaps, earnings per share, other comprehensive income, revenue from contracts with customers, segment information, and low-income housing tax credit investments. Consolidated Balance Sheets (Unaudited) | ASSETS (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $793,020 | $432,151 | | Available-for-sale debt securities, at fair value | $609,327 | $584,155 | | Held-to-maturity debt securities | $5,612 | $10,778 | | Loans, net | $5,183,490 | $5,347,488 | | TOTAL ASSETS | $7,075,555 | $6,846,667 | | LIABILITIES (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Total deposits | $5,405,892 | $5,210,546 | | Securities sold under agreements to repurchase and other short-term borrowings | $89,718 | $103,318 | | Federal Home Loan Bank advances | $370,000 | $395,000 | | Total liabilities | $6,041,466 | $5,854,638 | | STOCKHOLDERS' EQUITY (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Total stockholders' equity | $1,034,089 | $992,029 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $7,075,555 | $6,846,667 | Consolidated Statements of Income (Unaudited) | (in thousands, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total interest income | $129,838 | $130,632 | | Total interest expense | $27,150 | $33,713 | | NET INTEREST INCOME | $102,688 | $96,919 | | Provision for expected credit loss expense | $17,672 | $30,622 | | NET INTEREST INCOME AFTER PROVISION | $85,016 | $66,297 | | Total noninterest income | $33,154 | $23,373 | | Total noninterest expense | $58,208 | $50,971 | | INCOME BEFORE INCOME TAX EXPENSE | $59,962 | $38,699 | | INCOME TAX EXPENSE | $12,694 | $8,093 | | NET INCOME | $47,268 | $30,606 | | BASIC EARNINGS PER SHARE: Class A Common Stock | $2.43 | $1.59 | | DILUTED EARNINGS PER SHARE: Class A Common Stock | $2.42 | $1.58 | Consolidated Statements of Comprehensive Income (Unaudited) | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------- | :-------------------------------- | :-------------------------------- | | Net income | $47,268 | $30,606 | | Total other comprehensive income, net of tax | $2,573 | $486 | | COMPREHENSIVE INCOME | $49,841 | $31,092 | Consolidated Statements of Stockholders' Equity (Unaudited) - For the three months ended March 31, 2025, the total stockholders' equity increased from $992,029 thousand at January 1, 2025, to $1,034,089 thousand. This increase was primarily driven by net income of $47,268 thousand and a net change in Accumulated Other Comprehensive Income (AOCI) of $2,573 thousand, partially offset by dividends declared on Common Stock totaling $8,681 thousand[17] - For the three months ended March 31, 2024, total stockholders' equity increased from $912,756 thousand at January 1, 2024, to $935,583 thousand. This was mainly due to net income of $30,606 thousand and a net change in AOCI of $486 thousand, partially offset by dividends declared on Common Stock totaling $7,782 thousand[17] Consolidated Statements of Cash Flows (Unaudited) | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $93,189 | $71,224 | | Net cash (used in) provided by investing activities | $118,213 | $(77,744) | | Net cash provided by financing activities | $149,467 | $236,316 | | NET CHANGE IN CASH AND CASH EQUIVALENTS | $360,869 | $229,796 | | CASH AND CASH EQUIVALENTS AT END OF PERIOD | $793,020 | $546,363 | Notes to Consolidated Financial Statements 1. Basis of Presentation and Summary of Significant Accounting Policies Republic Bancorp, Inc. is a financial holding company operating through five reportable segments: Traditional Banking, Warehouse Lending, Tax Refund Solutions (TRS), Republic Payment Solutions (RPS), and Republic Credit Solutions (RCS). The first two constitute 'Core Bank' and the latter three 'Republic Processing Group' (RPG). The financial statements are unaudited and prepared in accordance with U.S. GAAP for interim information. The Company adopted ASU 2024-02 on January 1, 2025, with immaterial impact, and is analyzing the impact of not-yet-effective ASUs 2023-09, 2024-03, and 2025-01. - Republic Bancorp, Inc. operates through five reportable segments: Traditional Banking, Warehouse Lending, Tax Refund Solutions (TRS), Republic Payment Solutions (RPS), and Republic Credit Solutions (RCS). Traditional Banking and Warehouse Lending form the 'Core Bank,' while TRS, RPS, and RCS form the 'Republic Processing Group' (RPG)[23] - The Company adopted ASU 2024-02, 'Codification Improvements—Amendments to Remove References to the Concepts Statements,' on January 1, 2025, with an immaterial financial statement impact[50] - The Company is currently analyzing the impact of not-yet-effective ASUs 2023-09 (Income Taxes), 2024-03 (Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures), and 2025-01 (Clarifying the Effective Date of ASU 2024-03) on its financial statements[52] 2. Investment Securities The Company's investment portfolio includes Available-for-Sale (AFS) and Held-to-Maturity (HTM) debt securities, and equity securities. As of March 31, 2025, AFS debt securities had a fair value of $609.3 million with gross unrealized losses of $15.6 million, primarily due to interest rate changes. HTM debt securities totaled $5.6 million. There were no material gains or losses on sales of AFS debt securities. Equity securities, primarily Freddie Mac preferred stock, had a fair value of $724 thousand. Available-for-Sale Debt Securities (in thousands) | Available-for-Sale Debt Securities (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Amortized Cost | $622,748 | $602,493 | | Fair Value | $609,327 | $584,155 | | Gross Unrealized Gains | $2,190 | $1,825 | | Gross Unrealized Losses | $(15,611) | $(20,163) | - As of March 31, 2025, 103 out of 182 securities in the Bank's portfolio were in an unrealized loss position. These losses are attributed to changes in interest rates and illiquidity, not credit quality, and management does not intend to sell these securities before anticipated recovery[58][60] Equity Securities (in thousands) | Equity Securities (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------- | :------------- | :---------------- | | Fair Value (Freddie Mac preferred stock) | $724 | $693 | | Unrealized Gains (Freddie Mac preferred stock) | $724 | $693 | | Total gains/losses recognized in income (3 months ended March 31) | $31 | $61 | 3. Loans Held for Sale The Bank originates mortgage and consumer loans for sale. Mortgage loans held for sale are valued at fair value, while consumer loans held for sale are carried at either fair value (RCS installment loans) or the lower of cost or fair value (RCS line-of-credit and healthcare receivables). During Q1 2025, $5 million of consumer credit cards were reclassified from held for investment to held for sale. Consumer Loans Held for Sale, at Fair Value (in thousands) | Consumer Loans Held for Sale, at Fair Value (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | Balance, beginning of period | $5,443 | $7,914 | | Origination of consumer loans held for sale | $34,347 | $35,159 | | Proceeds from the sale of consumer loans held for sale | $(32,020) | $(38,011) | | Net gain on sale of consumer loans held for sale | $832 | $1,031 | | Balance, end of period | $8,602 | $6,093 | Consumer Loans Held for Sale, at Lower of Cost or Fair Value (in thousands) | Consumer Loans Held for Sale, at Lower of Cost or Fair Value (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Balance, beginning of period | $18,632 | $16,094 | | Origination of consumer loans held for sale | $232,304 | $153,188 | | Transferred from held for investment to held for sale | $4,977 | $0 | | Proceeds from the sale of consumer loans held for sale | $(234,613) | $(158,573) | | Net gain on sale of consumer loans held for sale | $2,223 | $2,374 | | Balance, end of period | $23,523 | $13,083 | - During March 2025, management agreed to sell $5 million of consumer credit cards previously classified as held for investment, transferring them to held for sale as of March 31, 2025. The sale is expected to complete in Q2 2025[69] 4. Loans and Allowance for Credit Losses The Company's total loans decreased by $149.7 million (2.8%) from December 31, 2024, to March 31, 2025, primarily due to significant paydowns in the Tax Refund Solutions (TRS) segment. The Allowance for Credit Losses on Loans (ACLL) increased by $14.3 million (15.6%) to $106.3 million, mainly driven by the TRS segment. Nonperforming loans slightly increased to 0.43% of total loans, while delinquent loans decreased to 0.33%. Loan modifications primarily involved principal deferrals for Republic Processing Group (RPG) loans. Loan Portfolio Composition (in thousands) | Loan Portfolio Composition (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Traditional Banking | $4,566,359 | $4,569,179 | | Warehouse lines of credit | $569,502 | $550,760 | | Tax Refund Solutions | $36,185 | $190,794 | | Republic Credit Solutions | $117,747 | $128,733 | | Total loans | $5,289,793 | $5,439,466 | | Allowance for credit losses | $(106,303) | $(91,978) | | Total loans, net | $5,183,490 | $5,347,488 | ACLL Roll-forward (in thousands) | ACLL Roll-forward (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------- | :-------------------------------- | :-------------------------------- | | Beginning Balance | $91,978 | $82,130 | | Provision | $17,672 | $30,622 | | Charge-offs | $(4,525) | $(4,927) | | Recoveries | $1,178 | $877 | | Ending Balance | $106,303 | $108,702 | Nonperforming Loans and Assets (in thousands) | Nonperforming Loans and Assets (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------------------ | :------------- | :---------------- | | Total nonperforming loans | $22,850 | $22,760 | | Other real estate owned | $1,107 | $1,160 | | Total nonperforming assets | $23,957 | $23,920 | | Nonperforming loans to total loans | 0.43% | 0.42% | | ACLL to nonperforming loans | 465% | 404% | Delinquent Loans (30+ days past due, in thousands) | Delinquent Loans (30+ days past due, in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------- | :---------------- | | Total delinquent loans | $17,313 | $20,489 | | Delinquency ratio (Total loans 30+ days past due / Total loans) | 0.33% | 0.38% | - Loan modifications for borrowers experiencing financial difficulty during the three months ended March 31, 2025, primarily involved principal deferrals for 265 Republic Processing Group (RPG) loans, totaling $63 thousand in amortized cost basis[96][98] 5. Deposits Total deposits increased by $195.3 million (4%) from December 31, 2024, to March 31, 2025, reaching $5.4 billion. Core Bank deposits grew by $175.4 million, with interest-bearing deposits increasing by $149.3 million, driven by money market accounts. Republic Processing Group (RPG) deposits increased by $19.9 million, reflecting a significant decrease in wholesale brokered deposits offset by growth in interest-bearing prepaid card deposits and other noninterest-bearing deposits. Deposit Composition (in thousands) | Deposit Composition (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------- | :------------- | :---------------- | | Core Bank: | | | | Noninterest-bearing | $1,149,353 | $1,123,208 | | Interest-bearing | $3,632,520 | $3,483,250 | | Total Core Bank deposits | $4,781,873 | $4,606,458 | | Republic Processing Group: | | | | Noninterest-bearing | $225,881 | $84,556 | | Interest-bearing | $398,138 | $519,532 | | Total RPG deposits | $624,019 | $604,088 | | Total deposits | $5,405,892 | $5,210,546 | - Core Bank interest-bearing deposits increased by $149.3 million, primarily due to a $124 million growth in interest-bearing IOLTA, business, and consumer money market accounts[107][360] - RPG deposits saw a $182.7 million decrease in wholesale brokered deposits, offset by a $61.7 million increase in interest-bearing prepaid card deposits and a $139.9 million increase in other noninterest-bearing deposits[107] 6. Securities Sold Under Agreements to Repurchase and Other Short-Term Borrowings Securities sold under agreements to repurchase (SSUARs) and other short-term borrowings decreased to $89.7 million as of March 31, 2025, from $103.3 million at December 31, 2024. All SSUARs had overnight maturities. The weighted average interest rate at period-end was 0.58% (up from 0.53%), and the average outstanding balance during the quarter was $108.8 million. (dollars in thousands) | (dollars in thousands) | March 31, 2025 | December 31, 2024 | | :--------------------- | :------------- | :---------------- | | Outstanding balance at end of period | $89,718 | $103,318 | | Weighted average interest rate at end of period | 0.58% | 0.53% | | Fair value of securities pledged | $125,761 | $151,972 | (dollars in thousands) | (dollars in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--------------------- | :-------------------------------- | :-------------------------------- | | Average outstanding balance during the period | $108,760 | $102,592 | | Weighted average interest rate during the period | 0.51% | 0.51% | | Maximum outstanding at any month end during the period | $112,826 | $113,281 | 7. Federal Home Loan Bank Advances Federal Home Loan Bank (FHLB) advances decreased to $370 million as of March 31, 2025, from $395 million at December 31, 2024, with no overnight advances outstanding. The total weighted average cost of advances, including swaps, was 4.35%. The Bank had $722 million in available borrowing capacity from the FHLB and $100 million in unsecured lines of credit from other financial institutions. (in thousands) | (in thousands) | March 31, 2025 | December 31, 2024 | | :------------- | :------------- | :---------------- | | Overnight advances | $0 | $25,000 | | Fixed interest rate advances | $370,000 | $370,000 | | Total FHLB advances | $370,000 | $395,000 | - As of March 31, 2025, Republic had available borrowing capacity of $722 million from the FHLB and $100 million in unsecured lines of credit from other financial institutions[112] - The Bank extended $100 million of FHLB borrowings in May/June 2024 through a fixed-rate swap, locking in an annualized cost of 4.42% over five years. The total weighted average cost of all advances, including swaps, is 4.35%[113] 8. Off Balance Sheet Risks, Commitments and Contingent Liabilities The Company is exposed to off-balance sheet risks primarily through commitments to extend credit and standby letters of credit. Total commitments increased to $2.03 billion as of March 31, 2025, from $1.99 billion at December 31, 2024. The Allowance for Credit Losses on Off-Balance Sheet Credit Exposures (ACLC) increased by $20 thousand to $1.51 million, reflecting the increase in unused commitments. Commitments (in thousands) | Commitments (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------- | :------------- | :---------------- | | Unused warehouse lines of credit | $405,998 | $404,240 | | Unused home equity lines of credit | $481,676 | $478,040 | | Unused loan commitments - other | $1,128,625 | $1,093,990 | | Standby letters of credit | $11,070 | $11,282 | | Total commitments | $2,027,369 | $1,987,552 | ACLC Roll-forward (in thousands) | ACLC Roll-forward (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------- | :-------------------------------- | :-------------------------------- | | Beginning Balance | $1,490 | $1,340 | | Provision | $20 | $(110) | | Ending Balance | $1,510 | $1,230 | 9. Fair Value Fair value measurements are categorized into Level 1, 2, or 3 inputs. AFS debt securities are primarily valued using matrix pricing (Level 2), with U.S. Treasury securities at Level 1 and a private label mortgage-backed security and Trust Preferred Security at Level 3. Mortgage loans held for sale are Level 2, while consumer loans held for sale are Level 3. The Company also details fair value measurements for mortgage banking derivatives, interest rate swaps, collateral-dependent loans, and other real estate owned, with most non-recurring measurements falling into Level 3 due to unobservable inputs like appraisal discounts. - Fair value measurements are categorized into three levels: Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[121][122] - AFS debt securities are primarily valued using matrix pricing (Level 2), U.S. Treasury securities use quoted market prices (Level 1), and a private label mortgage-backed security and Trust Preferred Security are valued using Level 3 inputs due to illiquidity and unobservable bid prices[123][124][126] - Mortgage loans held for sale are classified as Level 2, while consumer loans held for sale (RCS installment loans) are Level 3, based on contractual sales terms[128] - Collateral-dependent loans and Other Real Estate Owned (OREO) are generally measured at fair value less costs to sell, often based on appraisals or BPOs with significant adjustments, resulting in Level 3 classification[132][133] Fair Value Measurements (in thousands) | Fair Value Measurements (in thousands) | Level 1 | Level 2 | Level 3 | Total Fair Value | | :----------------------------------- | :------ | :------ | :------ | :--------------- | | Financial Assets (March 31, 2025): | | | | | | Available-for-sale debt securities | $54,761 | $548,978 | $5,588 | $609,327 | | Equity securities | $0 | $724 | $0 | $724 | | Mortgage loans held for sale | $0 | $9,140 | $0 | $9,140 | | Consumer loans held for sale | $0 | $0 | $8,602 | $8,602 | | Interest rate swap agreements | $0 | $6,723 | $0 | $6,723 | | Financial Liabilities (March 31, 2025): | | | | | | Mandatory forward contracts | $0 | $69 | $0 | $69 | | Interest rate swap agreements | $0 | $8,856 | $0 | $8,856 | 10. Mortgage Banking Activities Mortgage banking activities include residential mortgage originations and servicing. Mortgage loans held for sale increased to $9.1 million as of March 31, 2025. Total mortgage banking income significantly increased to $1.8 million for Q1 2025 from $310 thousand in Q1 2024, driven by higher net gains on loan sales and fair value adjustments. The fair value of Mortgage Servicing Rights (MSRs) was $17.0 million, with a weighted average prepayment rate of 130%. The Bank uses mandatory forward sales contracts and interest rate lock loan commitments as derivatives to manage interest rate risk. Mortgage Loans Held for Sale Activity (in thousands) | Mortgage Loans Held for Sale Activity (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Balance, beginning of period | $8,312 | $3,227 | | Origination of mortgage loans held for sale | $41,233 | $27,046 | | Proceeds from the sale of mortgage loans held for sale | $(41,816) | $(18,773) | | Net gain (loss) on mortgage loans held for sale | $1,411 | $(80) | | Balance, end of period | $9,140 | $80,884 | Components of Mortgage Banking Income (in thousands) | Components of Mortgage Banking Income (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net gain (loss) recognized | $1,411 | $(80) | | Net servicing income recognized | $410 | $390 | | Total mortgage banking income | $1,821 | $310 | - The fair value of the mortgage servicing rights portfolio was $16.975 million as of March 31, 2025, with a monthly weighted average prepayment rate of 130% and a weighted average life of 4.54 years[155] - The Bank uses mandatory forward sales contracts and interest rate lock loan commitments as derivatives to manage interest rate risk on loans held for sale and rate lock commitments. These instruments typically expire within 90 days[156][158] 11. Interest Rate Swaps The Bank uses interest rate swaps for both cash flow hedging and to facilitate client transactions. Three swaps designated as cash flow hedges for FHLB advances had a notional amount of $100 million and a fair value of $(2.1) million as of March 31, 2025. Non-hedge swaps, used for client transactions, had a total notional amount of $465.3 million, with offsetting positions to minimize risk, resulting in a net fair value of $0. Counterparties and the Bank are required to pledge collateral for net loss positions exceeding $250,000. - The Bank has three interest rate swap agreements designated as cash flow hedges for FHLB advances, with a notional amount of $100 million and a fair value of $(2.133) million as of March 31, 2025. The effective portion of unrealized gains/losses is recorded in OCI[161][162] - Non-hedge interest rate swaps are used to facilitate client transactions, with offsetting positions to minimize the Bank's interest rate risk. Changes in their fair value are recognized in current period earnings[163] Non-hedge Interest Rate Swaps (in thousands) | Non-hedge Interest Rate Swaps (in thousands) | March 31, 2025 Notional Amount | March 31, 2025 Fair Value | December 31, 2024 Notional Amount | December 31, 2024 Fair Value | | :------------------------------------------- | :----------------------------- | :------------------------ | :----------------------------- | :------------------------ | | Interest rate swaps with Bank clients - Total | $232,660 | $(1,037) | $232,328 | $(4,448) | | Offsetting interest rate swaps with institutional swap dealer - Total | $232,660 | $1,037 | $232,328 | $4,448 | | Total | $465,320 | $0 | $464,656 | $0 | 12. Earnings Per Share The Company calculates earnings per share using the two-class method, distinguishing between Class A and Class B Common Stock due to a 10% cash dividend premium on Class A shares. For the three months ended March 31, 2025, basic EPS for Class A was $2.43 and diluted EPS was $2.42. For the same period in 2024, basic EPS for Class A was $1.59 and diluted EPS was $1.58. - The Company uses the two-class method for EPS calculation, allocating earnings based on dividends and participation rights, with Class A Common Stock receiving a 10% cash dividend premium over Class B[167] Earnings Per Share (Class A Common Stock) | Earnings Per Share (Class A Common Stock) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Basic Earnings Per Share | $2.43 | $1.59 | | Diluted Earnings Per Share | $2.42 | $1.58 | - Antidilutive stock options excluded from the diluted EPS calculation were 43,612 for Q1 2025 and 52,781 for Q1 2024[169] 13. Other Comprehensive Income Total other comprehensive income (OCI), net of tax, was $2.573 million for the three months ended March 31, 2025, compared to $486 thousand for the same period in 2024. This change was primarily driven by a net unrealized gain on AFS debt securities of $3.687 million, partially offset by a net unrealized loss on derivatives of $(1.114) million, both net of tax. OCI Components (in thousands, net of tax) | OCI Components (in thousands, net of tax) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Unrealized gain on AFS debt securities | $3,687 | $486 | | Net losses on derivatives | $(1,114) | $0 | | Total other comprehensive income components, net of tax | $2,573 | $486 | AOCI Balances (in thousands, net of tax) | AOCI Balances (in thousands, net of tax) | December 31, 2024 | Change (Q1 2025) | March 31, 2025 | | :------------------------------------- | :---------------- | :--------------- | :------------- | | Unrealized gain (loss) on AFS debt securities | $(13,753) | $3,687 | $(10,066) | | Unrealized loss on derivatives | $(485) | $(1,114) | $(1,599) | | Total unrealized gain (loss) | $(14,238) | $2,573 | $(11,665) | 14. Revenue from Contracts with Customers Total net revenue for the Company increased to $135.8 million for Q1 2025, up from $120.3 million in Q1 2024. Core Banking contributed 53% of net revenue, while Republic Processing Group (RPG) contributed 47%. Key revenue streams subject to ASC 606 include service charges on deposit accounts, net refund transfer fees, interchange fee income, and net gains/losses on other real estate owned (OREO). Total Net Revenue (in thousands) | Total Net Revenue (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------- | :-------------------------------- | :-------------------------------- | | Total net revenue | $135,842 | $120,292 | | Net-revenue concentration: | | | | Core Banking | 53% | 48% | | Republic Processing Group | 47% | 52% | - Service charges on deposit accounts are earned for account-based and event-driven services, recognized in close proximity to service performance or over the service period[173] - Net refund transfer fees are recognized immediately after a taxpayer's refund is disbursed, with the fee shared between the Bank and Tax Providers[174][175] - Interchange fee income is earned as an 'issuing bank' on card transactions and recognized almost simultaneously upon transaction completion, presented net of cardholder reward costs[177][178] - Net gains/losses on OREO reflect gains/losses upon executed deeds and mark-to-market write-downs during the holding period, with write-downs generally at least 10% annually[179][181] 15. Segment Information The Company operates through five reportable segments: Traditional Banking, Warehouse Lending (forming 'Core Banking'), Tax Refund Solutions (TRS), Republic Payment Solutions (RPS), and Republic Credit Solutions (RCS) (forming 'Republic Processing Group'). Segment performance is evaluated based on income before income taxes. Net interest income is allocated using an internal Funds Transfer Pricing (FTP) model. For Q1 2025, total net income was $47.3 million, with Core Banking contributing $17.4 million and RPG contributing $29.9 million. - The Company's five reportable segments are Traditional Banking, Warehouse Lending (Core Banking), Tax Refund Solutions (TRS), Republic Payment Solutions (RPS), and Republic Credit Solutions (RCS) (Republic Processing Group)[184] - Segment performance is evaluated using income before income tax expense, and net interest income is allocated based on underlying financial instruments and an internal Funds Transfer Pricing (FTP) model[185][186][187] Segment Net Income (in thousands) | Segment Net Income (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Traditional Banking | $15,712 | $12,283 | | Warehouse Lending | $1,649 | $839 | | Total Core Banking | $17,361 | $13,122 | | Tax Refund Solutions | $19,611 | $8,793 | | Republic Payment Solutions | $2,895 | $2,567 | | Republic Credit Solutions | $7,401 | $6,124 | | Total Republic Processing Group | $29,907 | $17,484 | | Total Company | $47,268 | $30,606 | 16. Low-Income Housing Tax Credit Investments The Company invests in low-income housing partnerships, expecting to recover investments through tax credits. These investments are amortized as a component of income tax expense. As of March 31, 2025, net investments totaled $53.188 million, with unfunded obligations of $49.820 million. For Q1 2025, amortization expense was $2.305 million, and tax credits recognized were $(3.175) million. - The Company's low-income housing investments are accounted for using the proportional amortization method, with recovery expected through tax credits[190][191] Low-Income Housing Tax Credit Investments (in thousands) | Low-Income Housing Tax Credit Investments (in thousands) | March 31, 2025 | December 31, 2024 | | :----------------------------------------------------- | :------------- | :---------------- | | Investments (Gross) | $77,392 | $72,415 | | Life-to-date amortization | $(24,204) | $(21,899) | | Investments (Net) | $53,188 | $50,516 | | Unfunded Obligations | $49,820 | $54,797 | Amortization and Tax Credits (in thousands) | Amortization and Tax Credits (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Amortization expense | $2,305 | $1,783 | | Tax credits recognized | $(3,175) | $(2,691) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on the Company's financial performance and condition, including an overview of critical accounting policies, business segments, recent developments, and a detailed comparison of results of operations and financial condition for the three months ended March 31, 2025, versus March 31, 2024, and March 31, 2025, versus December 31, 2024. It also discusses forward-looking statements, critical accounting estimates related to the Allowance for Credit Losses (ACLL), and asset/liability management strategies. Forward-looking Statements - Forward-looking statements discuss future events or conditions and include projections of financial items, descriptions of future plans, and management strategies. They are based on information known at the time and are not guarantees, subject to various known and unknown risks and uncertainties[195][196][198] - Key risks and uncertainties include inflation, litigation, natural disasters, changes in economic conditions, interest rate fluctuations, competitive pressures, market volatility, client bankruptcies, regulatory changes, accounting standard changes, cybersecurity attacks, and the success of new core system implementation[198][200] Critical Accounting Policies and Estimates - The preparation of financial statements requires management to make estimates and assumptions, with critical accounting policies being those most important to financial condition and operating results, requiring difficult, subjective, and complex estimates[199][202][203] - The Allowance for Credit Losses on Loans (ACLL) and Provision are considered critical accounting estimates, relying significantly on historical loss rates, quantitative and qualitative economic factors, and reasonable/supportable forecasts[204][205] - During Q1 2025, the Commercial Real Estate portfolio was further segmented into Owner Occupied, Nonowner Occupied, and Multi-family to provide better granularity to the ACLL, though this did not have a material impact as of March 31, 2025[208] Business Segment Composition - The Company is divided into five reportable segments: Traditional Banking, Warehouse Lending (collectively 'Core Bank'), Tax Refund Solutions (TRS), Republic Payment Solutions (RPS), and Republic Credit Solutions (RCS) (collectively 'Republic Processing Group')[209] - Traditional Banking provides traditional banking products primarily to customers in its market footprint through 47 banking centers across Kentucky, Indiana, Florida, Ohio, and Tennessee[211][217] - Warehouse Lending offers short-term, revolving credit facilities to mortgage bankers nationwide, primarily secured by single-family, first-lien residential real estate loans, with individual loans typically on the line for 15-30 days[228] - TRS facilitates federal and state tax refund products and offers Refund Advance (RA) and Early Season Refund Advance (ERA) credit products through Tax Providers, with most business occurring in the first half of the year[229][230][231] - RPS offers prepaid and debit solutions (payroll and GPR cards, DDA/savings accounts) and money movement capabilities (ACH, wire transfer, check processing) to consumers through third-party providers[238][239][240][241][242] - RCS offers unsecured, small-dollar consumer credit products, including line-of-credit products (LOC I and LOC II with 90% and 95% participation interests sold, respectively) and installment loans, primarily to subprime or near-prime borrowers[243][245][246] Recent Developments - The Company's largest Tax Provider contract within TRS, which expires in October 2025, is not expected to be renewed. This provider accounted for approximately 67% of total ERA/RA originations and 22% of net RT revenue for Q1 2025, representing about 26% of TRS's pre-tax net income for the 12 months ended March 31, 2025[248][249][250] Overview (Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024) - Total Company net income for Q1 2025 increased by $16.7 million (54.5%) to $47.3 million compared to $30.6 million in Q1 2024. Diluted EPS rose from $1.58 to $2.42[13][251] - Traditional Banking: Net income increased $3.4 million (28%), driven by a $5.1 million (10%) rise in net interest income and a $7.1 million (85%) increase in noninterest income, partially offset by an $8.5 million (21%) increase in noninterest expense[254] - Warehouse Lending: Net income increased $810,000 (97%), with net interest income up $771,000 (34%) due to a $118 million increase in average outstanding balances and higher line usage (47% vs. 37%)[255] - Tax Refund Solutions (TRS): Net income increased $10.8 million (123%), despite a $1.1 million (4%) decrease in net interest income. Noninterest income increased $3.1 million (28%), primarily from net RT revenue, while noninterest expense decreased from $4.5 million to $3.2 million. Provision decreased from $25.8 million to $15.4 million[256] - Republic Payment Solutions (RPS): Net income increased $328,000 (13%), with net interest income up $486,000 (14%). Noninterest income remained stable, and noninterest expense slightly increased[257] - Republic Credit Solutions (RCS): Net income increased $1.3 million (21%), with net interest income up $548,000 (5%). Provision decreased from $4.2 million to $3.0 million, while noninterest income decreased $351,000 (10%)[258][260] Results of Operations (Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024) This section details the changes in net interest income, provision for credit losses, noninterest income, and noninterest expense for the three months ended March 31, 2025, compared to the same period in 2024. Net interest income increased by $5.8 million, driven by a higher net interest margin. The total provision for credit losses decreased significantly, primarily due to lower estimated loan losses in TRS. Noninterest income saw a substantial increase, mainly from mortgage banking and a gain on Visa shares, while noninterest expense rose due to higher salaries, technology costs, and core conversion fees. Net Interest Income - Total Company net interest income increased by $5.8 million (6%) to $102.7 million in Q1 2025, up from $96.9 million in Q1 2024. The net interest margin (NIM) increased by 41 basis points to 6.28%[267] - Traditional Banking's net interest income increased by $5.1 million (10%) to $53.3 million, with NIM rising from 3.33% to 3.79%. This was driven by a higher NIM and growth in average interest-earning assets[268] - Warehouse Lending's net interest income increased by $771,000 (34%), primarily due to a $118 million (35%) increase in average outstanding Warehouse balances and higher average line usage (47% vs. 37%)[273] - Republic Payment Solutions' net interest income increased by $486,000, mainly due to a reduction in the segment's revenue share component, as the largest marketer-servicer did not meet contractual thresholds for revenue share in Q1 2025[276][277] - Management believes future reductions to the Federal Funds Target Rate (FFTR) will likely negatively impact the Company's net interest income and NIM, especially for Traditional Banking, due to the continuing shift from noninterest-bearing to interest-bearing deposits and potential pricing floors[266][271] Net Change in Net Interest Income (in thousands) | Net Change in Net Interest Income (in thousands) | Total Net Change | Increase / (Decrease) Due to Volume | Increase / (Decrease) Due to Rate | | :--------------------------------------------- | :--------------- | :---------------------------------- | :------------------------------ | | Net change in interest income | $(794) | $844 | $(1,638) | | Net change in interest expense | $(6,563) | $(178) | $(6,385) | | Net change in net interest income | $5,769 | $1,022 | $4,747 | Provision for Expected Credit Loss Expense - Total Company Provision was a net charge of $17.7 million for Q1 2025, a significant decrease from $30.6 million in Q1 2024[289] - Traditional Banking: Recorded a net credit of $769,000 in Q1 2025 (vs. net charge of $358,000 in Q1 2024), driven by a $414,000 credit from reclassifying consumer credit cards to held for sale and a $491,000 credit due to general improvement in historical loss rates[290] - Warehouse Lending: Recorded a net charge of $47,000 in Q1 2025 (vs. $309,000 in Q1 2024), reflecting changes in general reserves consistent with outstanding period-end balances[293] - Tax Refund Solutions (TRS): Recorded a net charge of $15.4 million in Q1 2025 (vs. $25.8 million in Q1 2024), primarily due to better U.S. Treasury payments and a larger percentage of ERA Provision recorded in Q4 2024[295] - Republic Credit Solutions (RCS): Recorded a net charge of $3.0 million in Q1 2025 (vs. $4.2 million in Q1 2024), mainly due to a $1.1 million decrease in Provision for the LOC II product, driven by declining period-end loan balances[297][301] Credit Quality Ratios - Total Company | Credit Quality Ratios - Total Company | March 31, 2025 | March 31, 2024 | | :------------------------------------ | :------------- | :------------- | | ACLL to total loans | 2.01% | 2.08% | | ACLL to nonperforming loans | 465% | 509% | | Net loan charge-offs (recoveries) to average loans | 0.24% | 0.30% | - The Company's net charge-offs to average total Company loans decreased from 0.30% in Q1 2024 to 0.24% in Q1 2025, driven by a $659,000 decrease in RPG net charge-offs[308] Noninterest Income - Total Company noninterest income increased by $9.8 million in Q1 2025 compared to Q1 2024[310] - Traditional Banking: Noninterest income increased $7.1 million (85%), primarily due to a $1.5 million increase in Mortgage Banking income (including a negative fair value adjustment in Q1 2024), a $4.1 million gain on sale of Visa Class B-1 shares, and a $1.6 million insurance recovery[310][312] - Tax Refund Solutions (TRS): Noninterest income increased from $10.9 million to $13.9 million, driven by a $3.1 million increase in net RT fees due to a 30% increase in per-unit profitability from price increases and minimal changes in revenue sharing[315] Noninterest Expense - Total Company noninterest expense increased to $58.2 million for Q1 2025, up from $51.0 million in Q1 2024[313] - Traditional Banking: Noninterest expense increased $8.5 million (21%). Key drivers included a $1.6 million (7%) increase in salaries and employee benefits (due to higher bonus-related expenses), a $296,000 (24%) increase in equipment expenses (obsolete fixed assets write-down), and a $625,000 (13%) increase in technology expenses (enhanced security, new ancillary systems)[314][316] - The Traditional Bank also recorded $5.7 million in Core Contract deconversion and consulting fees, including $4.1 million for contract negotiation assistance (based on anticipated savings of over $16 million over five years) and $1.6 million for data conversion and system migration costs for a new core system targeting Q3 2025 launch[321] Comparison of Financial Condition as of March 31, 2025 and December 31, 2024 This section compares the Company's financial condition at March 31, 2025, to December 31, 2024. Cash and cash equivalents significantly increased due to a strategic decision to hold more liquid assets. The investment portfolio grew slightly, while gross loans decreased, primarily in the Tax Refund Solutions segment. The Allowance for Credit Losses on Loans (ACLL) increased, mainly for Refund Advances. Asset quality metrics showed a slight increase in nonperforming loans but a decrease in delinquent loans. Deposits increased overall, with Core Bank growth and shifts within RPG. FHLB advances decreased, and liquidity remained strong with substantial borrowing capacity. Total stockholders' equity increased, and regulatory capital ratios exceeded 'well-capitalized' requirements. Cash and Cash Equivalents - Cash and cash equivalents increased significantly to $793 million as of March 31, 2025, from $432 million at December 31, 2024. This increase was a strategic decision to maintain additional on-balance sheet liquidity due to the inverted yield curve, making overnight cash more appealing than longer-term investments[317][318] - Average interest-earning cash and cash equivalent balances were $517 million for Q1 2025, compared to $454 million for Q1 2024, earning a weighted-average yield of 4.45% for cash held at the FRB[317][319] Investment Securities - Republic's total investment portfolio increased by $22 million from December 31, 2024, to March 31, 2025, driven by $135 million in security purchases and $2 million in FHLB stock, partially offset by calls, maturities, and paydowns[320] Purchases of Investment Securities (in thousands) | Purchases of Investment Securities (in thousands) | Purchase Cost | Yield to Maturity | Estimated Weighted Average Life | | :---------------------------------------------- | :------------ | :---------------- | :------------------------------ | | U.S. Government Agencies | $55,000 | 5.01% | 4.86 yrs | | Mortgage-backed securities | $79,584 | 5.20% | 5.53 yrs | | Total | $134,584 | 5.12% | 5.26 yrs | Loan Portfolio - Gross loans decreased by $150 million (2.8%) during Q1 2025 to $5.3 billion as of March 31, 2025[324] - Traditional Banking: Period-end balances decreased by $3 million (less than 1%). Management maintained a stricter pricing strategy due to the inverted yield curve and elevated funding costs, potentially leading to further declines if payoffs outpace originations[324][325] - Warehouse Lending: Outstanding balances increased by $19 million. The business is volatile and seasonal, highly dependent on the overall mortgage market and industry trends[327] - Tax Refund Solutions (TRS): Outstanding loans decreased by $155 million, primarily due to substantial paydowns of ERAs originated in December 2024 and commercial loans made to tax-related businesses[328][329] Loan Portfolio Composition (in thousands) | Loan Portfolio Composition (in thousands) | March 31, 2025 | December 31, 2024 | $ Change | % Change | | :------------------------------------ | :------------- | :---------------- | :------- | :------- | | Traditional Banking | $4,566,359 | $4,569,179 | $(2,820) | (0.1)% | | Warehouse lines of credit | $569,502 | $550,760 | $18,742 | 3.4% | | Tax Refund Solutions | $36,185 | $138,614 | $(108,270) | (78.1)% | | Republic Credit Solutions | $117,747 | $128,733 | $(10,986) | (8.5)% | | Total loans | $5,289,793 | $5,439,466 | $(149,673) | (2.8)% | Allowance for Credit Losses - The Company's Allowance for Credit Losses on Loans (ACLL) increased to $106 million at March 31, 2025, from $92 million at December 31, 2024. As a percentage of total loans, ACLL increased from 1.69% to 2.01%[331] - Traditional Banking: ACLL decreased by approximately $905,000 to $59 million, primarily due to a reduction in reserve requirements from a decrease in life-of-loan historical loss rates[331][332] - Warehouse Lending: ACLL remained at approximately $1 million, or 0.25% of total Warehouse loans, with no adjustments to the qualitative reserve percentage[333] - Tax Refund Solutions (TRS): ACLL increased, primarily for estimated Refund Advances (RAs) originated in Q1 2025. Total Allowance for RAs was $26.0 million (3.22% of originations) as of March 31, 2025. The final charge-off figures are finalized in Q2[334][336] - Republic Credit Solutions (RCS): ACLL decreased by $1 million to $20 million, driven by a decrease in LOC I and LOC II spot loan balances. ACLL to total loans for RCS ranged from 0.25% (healthcare receivables) to 70.63% (line-of-credit products)[337] Management's Allocation of ACLL (in thousands) | Management's Allocation of ACLL (in thousands) | March 31, 2025 ACLL | March 31, 2025 % of Loans to Total | March 31, 2025 ACLL to Loan Class | December 31, 2024 ACLL | December 31, 2024 % of Loans to Total | December 31, 2024 ACLL to Loan Class | | :--------------------------------------------- | :------------------ | :---------------------------------- | :------------------------------- | :------------------- | :---------------------------------- | :------------------------------- | | Traditional Banking | $58,851 | 86% | 1.29% | $59,756 | 84% | 1.31% | | Warehouse lines of credit | $1,421 | 11% | 0.25% | $1,374 | 10% | 0.25% | | Tax Refund Solutions | $25,819 | 1% | 85.09% | $9,793 | 3% | 7.06% | | Republic Credit Solutions | $20,050 | 2% | 17.03% | $20,987 | 2% | 16.30% | | Total | $106,303 | 100% | 2.01% | $91,978 | 100% | 1.69% | Asset Quality - Classified and Special Mention loans increased by approximately $1.5 million during Q1 2025, primarily due to a $3.2 million increase in residential real estate substandard loans[340] Classified and Special Mention Loans (in thousands) | Classified and Special Mention Loans (in thousands) | March 31, 2025 | December 31, 2024 | $ Change | % Change | | :------------------------------------------------ | :------------- | :---------------- | :------- | :------- | | Total Classified Loans | $31,730 | $28,728 | $3,002 | 10% | | Total Special Mention Loans | $52,756 | $54,283 | $(1,527) | (3)% | | Total Classified and Special Mention Loans | $84,486 | $83,011 | $1,475 | 2% | - Nonperforming loans to total loans increased slightly to 0.43% as of March 31, 2025, from 0.42% at December 31, 2024. The ACLL to total nonperforming loans increased to 465% from 404%[343][344] Nonperforming Loans and Assets Summary (in thousands) | Nonperforming Loans and Assets Summary (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------------------------------------- | :------------- | :---------------- | | Total nonperforming loans | $22,850 | $22,760 | | Nonperforming loans to total loans | 0.43% | 0.42% | | ACLL to nonperforming loans | 465% | 404% | - Total Company delinquent loans (30+ days past due) to total loans decreased to 0.33% as of March 31, 2025, from 0.38% at December 31, 2024[352] Delinquent Loan Composition (in thousands) | Delinquent Loan Composition (in thousands) | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Total delinquent loans | $17,313 | $20,489 | | Delinquency ratio | 0.33% | 0.38% | Deposits - Total period-end deposits increased by $195 million (4%) from December 31, 2024, to $5.4 billion as of March 31, 2025[359] - Core Bank: Deposits increased by $175 million, with interest-bearing deposits up $149 million (driven by IOLTA, business, and consumer money market accounts) and noninterest-bearing deposits up $26 million[359][360] - Republic Processing Group (RPG): Deposits increased by $20 million, a net result of a $161 million increase in noninterest-bearing TRS deposits (from RTs), a $200 million decline in interest-bearing TRS brokered deposits, a $7 million increase in RCS deposits, and a $51 million increase in prepaid card balances[361][366] Deposit Composition (in thousands) | Deposit Composition (in thousands) | March 31, 2025 | December 31, 2024 | $ Change | % Change | | :------------------------------- | :------------- | :---------------- | :------- | :------- | | Total Core Bank deposits | $4,781,873 | $4,606,458 | $175,415 | 4% | | Total Republic Processing Group deposits | $624,019 | $604,088 | $19,931 | 3% | | Total deposits | $5,405,892 | $5,210,546 | $195,346 | 4% | Federal Home Loan Bank Advances - Total FHLB advances decreased to $370 million as of March 31, 2025, from $395 million at December 31, 2024, with no overnight borrowings outstanding. The weighted-average maturity was 3.11 years, and the weighted-average cost was 4.35% (including swaps)[362][363] Interest Rate Swaps - The Bank uses interest rate swaps for client transactions and to manage interest rate risk, entering into offsetting positions for non-hedge swaps. Additionally, $100 million in notional balance sheet related interest rate swaps were entered into in Q2 2024 to leverage attractive long-term pricing from the inverted yield curve[364][365] Liquidity - The Bank maintains sufficient liquidity through liquid assets (cash, cash equivalents, unencumbered investment securities) and borrowing capacity (FHLB, Federal Reserve, unsecured credit lines). Total liquid assets and available borrowing capacity increased to $2.1 billion as of March 31, 2025, from $1.77 billion at December 31, 2024[366][367][368] Liquid Assets and Borrowing Capacity (in thousands) | Liquid Assets and Borrowing Capacity (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------- | :---------------- | | Total liquid assets | $1,201,797 | $864,334 | | Total available borrowing capacity | $896,758 | $901,168 | | Total liquid assets and available borrowing capacity | $2,098,555 | $1,765,502 | - The loan-to-deposit ratio (excluding brokered deposits) was 100% as of March 31, 2025, down from 111% at December 31, 2024. Uninsured deposits totaled $1.9 billion (36% of total deposits)[369][370] Capital - Total stockholders' equity increased from $992 million at December 31, 2024, to $1.0 billion at March 31, 2025, primarily due to net income, offset by cash dividends[372] - The Company and the Bank exceed all 'well-capitalized' regulatory requirements under Basel III, including Total Risk-Based Capital, Common Equity Tier 1 Risk-Based Capital, Tier 1 Risk-Based Capital, and Tier 1 Leverage ratios[376][377][378] Capital Ratios | Capital Ratios | March 31, 2025 Ratio | December 31, 2024 Ratio | | :----------------------------- | :------------------- | :-------------------- | | Total capital to risk-weighted assets (Republic Bancorp, Inc.) | 17.84% | 16.98% | | Common equity tier 1 capital to risk-weighted assets (Republic Bancorp, Inc.) | 16.58% | 15.73% | | Tier 1 (core) capital to risk-weighted assets (Republic Bancorp, Inc.) | 16.58% | 15.73% | | Tier 1 leverage capital to average assets (Republic Bancorp, Inc.) | 13.75% | 14.07% | - The deferral of CECL impact on regulatory capital (elected in 2020) resulted in regulatory capital ratios being approximately 0 basis points lower at March 31, 2025, and 3 basis points lower at December 31, 2024, if not for the deferral[381] Asset/Liability Management and Market Risk - Asset/liability management aims to ensure safety, liquidity, regulatory capital compliance, and acceptable net interest income. Interest rate risk is a significant concern, monitored through static and dynamic earnings simulation models[383][385] Bank Interest Rate Sensitivity (% Change from base net interest income) | Bank Interest Rate Sensitivity (% Change from base net interest income) | -400 Basis Points | -300 Basis Points | -200 Basis Points | -100 Basis Points | +100 Basis Points | +200 Basis Points | +300 Basis Points | +400 Basis Points | | :------------------------------------------------------------------ | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | | As of March 31, 2025 | (2.3)% | (2.3)% | (5.5)% | (2.8)% | 3.0% | 6.1% | 8.9% | 12.0% | | As of December 31, 2024 | 3.4% | 4.4% | (0.2)% | 0.2% | 1.5% | 3.1% | 4.4% | 6.0% | - As of March 31, 2025, the Bank's earnings are more sensitive to fluctuations in short-term interest rates. Up-rate scenarios improved due to higher interest-earning cash balances, while down-rate scenarios deteriorated due to these same cash balances and lower deposit beta assumptions, partially offset by assumed increases in mortgage banking income[387][388][389][390] Item 3. Quantitative and Qualitative Disclosures about Market Risk. Information regarding quantitative and qualitative disclosures about market risk is incorporated by reference from Item 2, 'Management's Discussion and Analysis of Financial Condition and Results of Operations,' specifically the 'Asset/Liability Management and Market Risk' section. - Information required by this item is included under Part I, Item 2. 'Management's Discussion and Analysis of Financial Condition and Results of Operations,' specifically the 'Asset/Liability Management and Market Risk' section[390] Item 4. Controls and Procedures. As of March 31, 2025, Republic Bancorp, Inc.'s management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective. No material changes to internal control over financial reporting occurred during the quarter. - As of March 31, 2025, the Company's disclosure controls and procedures were evaluated and deemed effective by management, including the CEO and CFO[391] - No material changes in the Company's internal control over financial reporting occurred during the fiscal quarter ended March 31, 2025[391] PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other information, and exhibits. Item 1. Legal Proceedings. In the ordinary course of business, Republic Bancorp, Inc. and its subsidiary bank are involved in various legal proceedings. Management is not aware of any pending or threatened litigation that, if decided adversely, would result in a material adverse change to the Company's business or consolidated financial position. - Republic and the Bank are defendants in various legal proceedings in the ordinary course of operations[392] - Management is not aware of any pending or threatened litigation where an adverse decision could materially impact the Company's business or financial position[392] Item 1A. Risk Factors. This section highlights additional risk factors beyond those disclosed in the 2024 Form 10-K, specifically focusing on the operational risks associated with the planned conversion of the Company's core customer operating system in Q3 2025. Potential adverse impacts include technology disruptions, data loss, transaction errors, reputational damage, customer loss, regulatory scrutiny, and financial liability. - The Company plans to convert its core customer operating system during Q3 2025, which poses significant operational risks[394] - Potential adverse developments from the core system conversion include