Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The consolidated financial statements included in this report include the accounts of Republic Bancorp, Inc. and its wholly owned subsidiary, Republic Bank & Trust Company. As used in this report, the terms “Republic,” the “Company,” “we,” “our,” and “us” refer to Republic Bancorp, Inc. and, where the context requires, Republic Bancorp, Inc. and its subsidiary. The term the “Bank” refers to the Company’s subsidiary bank, Republic Bank & Trust Company, as well as its wholly owned subsidiary, RBT Insurance Agency LLC. The Company dissolved Republic Insurance Services, Inc., its former insurance captive subsidiary, in 2023. All significant intercompany balances and transactions are eliminated in consolidation.
Republic is an FHC headquartered in Louisville, Kentucky, which is the most populous city in Kentucky. The Bank is a Kentucky-based, state-chartered non-member financial institution that provides both traditional and non-traditional banking products and services through five reportable segments using a multitude of delivery channels. While the Bank operates primarily in its geographical market footprint where it has physical locations, its non-brick-and-mortar delivery channels allow it to reach clients across the U.S.
General Business Overview
The Company’s Executive Chair/CEO serves as the Company’s CODM. Income before income tax expense is the reportable measure of segment profit or loss that the CODM regularly reviews and utilizes to allocate resources and evaluate performance.
As of December 31, 2025, the Company was divided into five reportable segments: (I) Traditional Banking, (II) Warehouse Lending, (III) TRS, (IV) RPS, and (V) RCS. Management considers the first two segments to collectively constitute “Core Bank” or “Core Banking” operations, while the last three segments collectively constitute RPG operations. Prior to the first quarter of 2024, Republic had reported mortgage banking as a separate reportable segment.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Republic should be read in conjunction with Part II Item 8 “Financial Statements and Supplementary Data .”
Forward-looking Statements
Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to differ materially from those expressed or implied in such statements. These statements are often, but not always, identified by words or phrases such as “anticipate,” “believe,” “can,” “conclude,” “continue,” “could,” “estimate,” “expect,” “forecast,” “foresee,” “goal,” “intend,” “may,” “might,” “outlook,” “possible,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “target,” “will,” “will likely,” “would,” or similar expressions. Forward-looking statements are not historical facts; rather, they are based on current expectations, estimates, and projections about the Company’s industry, management’s beliefs, and certain assumptions made by management—many of which are inherently uncertain and beyond management’s control. For additional information regarding forward-looking statements, see the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
Accounting Standards Updates
For disclosure regarding the impact to the Company’s financial statements of ASUs, see the Footnote titled “Summary of Significant Accounting Policies” of Part II Item 8 “Financial Statements and Supplementary Data.”
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Critical Accounting 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.
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 results of operations 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 the ACLL and Provision. 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.
As of December 31, 2025, the Bank maintained an ACLL for expected credit losses inherent in Company’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 quarterly.
The Company’s CECL method is a “static-pool” method that analyzes historical closed pools of loans over their expected lives to attain a loss rate, which is then adjusted for current conditions and reasonable, supportable forecasts prior to being applied to the current balance of the analyzed pools. Due to its reasonably strong correlation to the Company's historical net loan losses, the Company has chosen to use the U.S. national unemployment rate as its primary forecasting tool. Additionally, the Company reviews and utilizes CRE and C&I vacancy rates as a secondary forecasting tool. Subsequent to the one-year forecasts, loss rates are assumed to immediately revert back to long-term historical averages. 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.
The impact of utilizing the CECL approach to calculate the ACLL is significantly influenced by the composition, characteristics, and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the ACLL, and therefore, greater volatility to the Company’s reported earnings.
See additional detail regarding the Company’s adoption of ASC 326 and the CECL method under the Footnote titled “Loans and Allowance for Credit Losses” of Part II Item 8 “Financial Statements and Supplementary Data.”
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Management evaluates the reasonableness of its Core Bank ACLL by evaluating absorption and exhaustion rates that account for CECL life-of-loan considerations. The absorption rate considers a range of total Core Bank net loan losses to the Total Core Bank ACLL using the 2008 to 2013 “Great Recession” timeframe as a baseline. The exhaustion rate considers how many years of total Core Bank gross loan charge-offs the end-of-year Core Bank ACLL could withstand based on a range of average annual net Core Bank loan losses, also using the 2008 to 2013 timeframe as a baseline. The years 2008 to 2013 represent a six-year period during which the U.S. unemployment rate rose above 8% and the Core Bank incurred a historically high period of loan losses relative to an average year of loan losses for the Core Bank. The timeframe of 2008 to 2013 is the most recent period in which the Core Bank incurred notable loan losses, and as such, Management believes is an appropriate baseline starting point in its overall absorption and exhaustion analyses.
Management considered the range of absorption rates and exhaustion rates calculated for the Core Bank as of December 31, 2025 and 2024 to be within acceptable ranges under current economic conditions. Based on management’s evaluation, a Core Bank ACLL of $66 million, or 1.24%, of total Core Bank loans, was an adequate estimate of expected losses within the loan portfolio as of December 31, 2025 and resulted in Core Banking Provision for its loans of a net charge of $6.0 million during 2025.
If the mix and amount of future charge-off percentages differ significantly from those assumptions used by management in making its determination, an adjustment to the Core Bank ACLL and the resulting effect on the income statement could be material.
The RPG ACLL as of December 31, 2025 primarily related to loans originated and held for investment through the RCS segment. RCS generally originates small-dollar, consumer credit products. For its healthcare receivable products, the Bank originates the loans, and in some instances, sells 100% of the balances and in other instances retains 100% of the balances. For its LOC products, the Bank originates these products, sells 90% or 95% of the balances within three business days of loan origination, and retains a 5% or 10% interest. RCS LOC products typically earn a higher yield but also have higher credit risk compared to loans originated through Core Banking operations, with a sizable portion of RCS clients considered subprime or near-prime borrowers.
As of December 31, 2025, the ACLL to total loans estimated for each RCS product ranged from as low as 0.25% for its healthcare-receivables portfolios to as high as 70.63% for its LOC portfolios. A lower reserve percentage was provided for RCS’s healthcare receivables as of December 31, 2025, as such receivables have recourse back to the Company’s third-party service providers.
Management only evaluates the ACLL on its active RCS products that have incurred meaningful losses since their inception, which are its LOC products. Due to the general short-term nature of these products, management utilized the current year net charge-offs for 2024 and 2025, along with the end-of-the-year ACLL to calculate each years’ absorption rate and exhaustion rate. The absorption and exhaustion rates were both considered to be within acceptable ranges as of December 31, 2025 and 2024. Based on management’s calculation, an ACLL of $19 million, or 17.15%, of total RCS loans was an adequate estimate of expected losses within the RCS portfolio as of December 31, 2025.
RPG’s TRS segment offered its RA credit product during the first two months of 2025, 2024 and 2023, and its ERA credit product during the month of December in 2025, 2024 and 2023 related to the subsequent first quarter tax filing seasons. An ACLL for losses on ERAs /RAs is estimated during the limited, short-term period the product is offered. RAs originated during the first two months of 2025, were repaid, on average, within 32 days of origination. Provisions for ERAs/RAs losses are estimated when advances are made and adjusted to actual net charge-offs as of June 30 th of each year. The ACLL for ERAs as of December 31, 2025 was $296,000 for $13 million of ERAs originated during the month of December 2025.
Related to the overall credit losses on ERAs/RAs, 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 ERA/RA approval model is based primarily on the prior-year’s tax refund funding patterns. Because much of the loan volume occurs each year before that year’s tax refund funding 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 funding patterns change materially between years.
See additional discussion regarding ERAs/RAs under the sections titled:
Part I Item 1A “Risk Factors”
Part II Item 8 “Financial Statements and Supplementary Data,” Footnote titled “Loans and Allowance for Credit Losses”
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RPG recorded a net charge of $25.6 million, $50.6 million, and $39.1 million to the Provision during 2025, 2024, and 2023, with the Provision for each year primarily due to net losses on RAs and growth in short-term, consumer loans originated through the RCS segment. If the number of future charge-offs on RAs and RCS loans differ significantly from assumptions used by management in making its determination, an adjustment to the RPG ACLL and the resulting effect on the income statement could be material.
RECENT DEVELOPMENTS
Republic Bank Finance Division Divestiture
On December 22, 2025, the Bank entered into an Asset Purchase Agreement with CAN Capital Merchant Services, Inc. (“CAN”) pursuant to which CAN is expected to purchase substantially all of the assets of RBF, a division of the Bank, consisting of approximately $82 million of loans and leases, and to assume approximately $3 million of related liabilities. CAN will also assume all on-going operations of RBF upon the closing of the transaction. Located in Marietta, Georgia, CAN is engaged in the business of alternative small business finance. Republic acquired RBF as part of its March 2023 acquisition of CBank
Per the Asset Purchase Agreement the aggregate purchase price is equal to the net book value of RBF’s assets and liabilities at Closing, plus a fixed premium. In connection with the transaction the Bank recorded a gain, net of broker commissions, of approximately $6 million during the first quarter of 2026.
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OVERVIEW
Total Company net income was $131.3 million and Diluted EPS was $6.72 for 2025, compared to net income of $101.4 million and Diluted EPS of $5.21 for 2024. The following table presents Republic’s financial performance for the years ended December 31, 2025, 2024, and 2023:
Table 1 — Summary
Percent Increase/(Decrease)
Years Ended December 31, (dollars in thousands, except per share data)
Income before income tax expense
Net income
Diluted EPS of Class A Common Stock
ROA
ROE
General highlights by reportable segment for the year ended December 31, 2025 compared to the year ended December 31, 2024 consisted of the following:
(I) Traditional Banking segment
Net income increased $7.3 million , or 13%, from 2024.
Net interest income increased $23.5 million , or 12%, compared to 2024.
Provision was a net charge of $5.5 million for 2025 compared to a net charge of $3.2 million for 2024.
As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.40 % as of December 31, 2025, compared to 1.31% as of December 31, 2024.
Noninterest income increased $8.0 million , or 20%, from 2024.
Noninterest expense increased $19.8 million , or 12%, over 2024.
Total Traditional Bank loans outstanding decreased $23 million, or 1%, during 2025.
Nonperforming loans to total loans for the Traditional Banking segment was 0.52% as of December 31, 2025, compared to 0.50% as of December 31, 2024.
Delinquent loans to total loans for the Traditional Banking segment was 0.31% as of December 31, 2025, compared to 0.22% as of December 31, 2024.
Total Traditional Bank deposits increased $192 million, or 4%, from December 31, 2024, to $4.76 billion as of December 31, 2025.
(II) Warehouse Lending segment
Net income increased $1.6 million , or 24%, over 2024.
Net interest income increased $2.2 million, or 17%, over 2024.
Provision was a net charge of $508,000 for 2025 compared to a net charge of $527,000 for 2024.
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Average committed Warehouse lines of credit increased to $1.05 billion during 2025 compared to $938 million during 2 024.
Average Warehouse LOC usage increased to 53% during 2025 compared to 50% during 2024.
(III) Tax Refund Solutions segment
Net income increased $15.6 million from 2024.
Net interest income decreased $3.9 million , or 11%, from 2024.
Provision was a net charge $9.5 million for 2025, compared to a net charge of $30.0 million for 2024.
Noninterest income was $18.0 million for 2025 compared to $15.5 million for 2024.
Within noninterest income, n et RT revenue increased $ 2.3 million , or 15 %, from 2024 to 2025.
Noninterest expense totaled $10.9 million for 2025 compared to $11.6 million for 2024.
TRS’s largest Tax Provider contract was not renewed for the 2026 Tax Season.
(IV) Republic Payment Solutions segment
Net income increased $1.0 million , or 12%, from 2024.
Net interest income increased $2.0 million , or 17%, from 2024.
Noninterest income was $3.1 million for 2025 compared to $3.3 million for 2024.
Noninterest expense totaled $4.6 million for 2025 compared to $4.1 million for 2024.
Republic Credit Solutions segment
Net income increased $4.4 million , or 19%, over 2024.
Net interest income decreased $1.2 million , or 2%, over 2024.
Provision was a net charge of $16.1 million during 2025 compared to a net charge of $20.6 million for 2024.
Noninterest income decreased $41,000 from 2024.
Noninterest expense totaled $11.8 million for 2025 compared to $14.1 million for 2024.
Nonperforming loans to total loans for the RCS segment was 0.14% as of December 31, 2025, compared to 0.11% as of December 31, 2024.
Delinquent loans to total loans for the RCS segment was 7.87% as of December 31, 2025, compared to 8.00% as of December 31, 2024.
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RESULTS OF OPERATIONS
This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “ Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 6, 2025.
Net Interest Income
See the section titled “Asset/Liability Management and Market Risk” in this section of the report regarding the Bank’s interest rate sensitivity.
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 used to fund those assets. Principal interest-earning Traditional Banking assets represent investment securities and commercial and consumer loans primarily secured by real estate and/or personal property. Interest-bearing liabilities primarily consist of interest-bearing deposit accounts, SSUAR, as well as short-term and long-term borrowing sources. FHLB advances have traditionally served as a significant borrowing and liquidity source for the Bank. 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.
Over the past 15 months, the FRB has reduced the FFTR by 175 bps. The most recent cut occurred on December 10, 2025, when the FRB lowered the FFTR by 25 bps to 3.75%, marking the third consecutive monthly reduction. Earlier adjustments included a 50-bp cut in September 2024 and two 25-bp cuts in November and December 2024. The FOMC has indicated the potential for further rate reductions in 2026.
Total Company net interest income was $334.7 million during 2025 and represented a $22.5 million, or 7%, increase over 2024. Total Company NIM increased to 5.05% during 2025 compared to 4.85% for 2024. In general, notably lower interest-bearing deposit costs combined with a modest decline in interest-earning assets yields during 2025 led to NIM expansion and strong net interest income for the year.
The following were the most significant components comprising the total Company’s net interest income and NIM fluctuations by reportable segment:
Traditional Banking segment
Traditional Banking net interest income increased $23.5 million, or 12%, for 2025 compared to 2024. The increase in net interest income was primarily driven by year-over-year growth in average interest-earning assets and NIM expansion. Overall, the Traditional Bank’s NIM increased from 3.55% for 2024 to 3.88% for 2025, driven by primarily by lower interest-bearing deposit costs as well as improved loan and investment yields.
Items of note impacting the Traditional Bank’s change in net interest income and NIM between 2024 and 2025 follows:
Traditional Bank average loans decreased $18 million, from $4.60 billion in 2024 to $4.58 billion in 2025, while the weighted-average yield increased from 5.56% to 5.68%, resulting in a $4.8 million year-over-year increase in interest income. The higher yield was driven primarily by the runoff of lower-yielding loans through amortization and payoffs combined with the origination of new loans at higher rates.
The modest decline in average loan balances reflected the second-quarter 2024 sale of $67 million in RRE loans previously held for investment. In addition, on December 19, 2025, management agreed to sell $82 million of lease financing receivables, which were reclassified from held for investment to HFS as of December 31, 2025. While this reclassification did not materially impact 2025 average balances, it will affect period-to-period comparability going forward.
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From 2024 through the first nine months of 2025, management maintained a more conservative pricing strategy across its lending function. As expected, this approach resulted in slower origination volume across most product categories during that timeframe. Management shifted this strategy in the fourth quarter of 2025, contributing to a $32 million increase in average Traditional Bank loans when comparing the fourth quarter of 2025 to the fourth quarter of 2024. Given the current positively sloped shape of the yield curve, management expects to continue this pricing approach into 2026, provided market conditions remain favorable and funding costs remain stable.
Average interest-earning cash—managed as a separate but complementary component of the Company’s investment portfolio—rose $33 million, or 7%, to $505 million in 2025, compared to $473 million in 2024. This increase was driven primarily by excess liquidity generated from growth in average interest-bearing deposits. The weighted-average yield on interest-earning cash declined from 5.26% in 2024 to 4.32% in 2025, reflecting the 175-basis-point decrease in the FFTR over the past 15 months.
Beginning in 2020, the Company pursued an investment strategy focused on shorter-term securities while maintaining a significant level of excess cash at the FRB. As market conditions improved, the Company shifted its strategy in the fourth quarter of 2024 and throughout 2025, purchasing longer-duration investment securities, primarily MBSs, to take advantage of higher yields relative to overnight cash. The yield curve, which began to steepen in the fourth quarter of 2024, became positively sloped in late March 2025 and generally remained so through year-end 2025.
Average investments increased $107 million, or 16%, to $754 million in 2025 from $647 million in 2024, while the weighted-average yield rose from 3.10% to 3.88%, driving a $6.1 million, or 14%, increase in interest income. The higher year-over-year yield was driven primarily by a more favorable yield curve and the strategic redeployment of cash from maturing investments into longer-term securities that offered yields superior to overnight interest-earning cash alternatives.
The Traditional Bank’s average cost of interest-bearing liabilities decreased from 2.45% during 2024 to 2.03% for 2025 driven primarily by the following:
The weighted-average cost of total interest-bearing deposits decreased from 2.67% during 2024 to 2.26% for 2025, while average interest-bearing deposit balances grew $203 million, or 6%, for the same period, driving a $9.6 million, or 10% decline in interest expense. Included within this growth in interest-bearing deposits was a $262 million net increase in the average balances for business and consumer money market accounts, which generally pay premium rates, and a $63 million increase in average time deposits. The combined increase in average money market and time balances was partially offset by an $84 million decrease in average transaction accounts and $21 million decrease in the average balance of third-party listing service deposits.
Average FHLB advances increased from $400 million for 2024 to $410 million for 2025, while the weighted-average cost of these borrowings decreased from 4.55% to 4.33% for the same time periods. The decrease in the overall weighted-average cost reflects the benefit prior year term extension strategies and the decline in the overnight borrowing rates during 2025, which are generally tied to the FFTR.
Average noninterest-bearing deposits declined $48 million, or 4%, in 2025 compared to 2024. This decline reflects an industry-wide trend that began in late 2022, as the interest rate environment—particularly during periods of an inverted yield curve—combined with heightened deposit competition, has continued to make premium-rate interest-bearing checking and savings products more attractive to both consumer and business clients.
Management believes that further reductions to the FFTR are unlikely to benefit the Traditional Bank’s net interest income or NIM in 2026. The extent of any impact from the most recent or future FFTR decreases will depend on several factors, including the ongoing shift from noninterest-bearing to interest-bearing deposits, the steepness and shape of the yield curve, demand for the Company’s lending and deposit products, the Company’s ability to reduce deposit costs in line with rate cuts, and overall liquidity needs.
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Warehouse Lending segment
Warehouse Lending net interest income increased $2.2 million, or 17%, from 2024 to 2025, driven by a $1.9 million, or 5%, increase in total interest income and a $287,000 reduction in interest expense. Although Warehouse NIM and loan yields declined by 2 bps and 91 bps, respectively, the segment benefited from higher average outstanding balances, which grew $87 million, or 18%, year-over-year.
Average committed Warehouse lines of credit increased from $938 million in 2024 to $1.05 billion in 2025, and average LOC usage rose from 50% to 53% over the same periods.
Because consumer mortgage activity drives utilization of Warehouse LOCs, overall usage has historically been sensitive to movements in long-term interest rates. A meaningful decline in long-end rates could increase Warehouse demand by stimulating mortgage origination volume. Conversely, declines limited to the short-end of the yield curve would not be expected to materially affect Warehouse demand.
(III)
Tax Refund Solutions segment
TRS’s net interest income decreased $3.9 million, or 11%, from 2024 to 2025. Loan-related interest and fees decreased $5.3 million, or 13%, during 2025, consistent with the $72 million, or 8% decline in total ERA/RA volume for the 2025 Tax Season. In addition, TRS received a $560,000 payment during the 2024 representing a Tax Provider yield enhancement for the RA program to offset the Company’s higher funding costs. This yield enhancement was new for the 2024 Tax Season and was eliminated for the 2025 Tax Season.
As previously disclosed, the Company’s largest Tax Provider contract within TRS based on product volume expired in October 2025 and the Company did not enter into a new contract with this Tax Provider for the 2026 Tax Season (which began in December 2025).
ERAs/RAs originated through this Tax Provider represented approximately 67% of total ERA/RA dollars originated through TRS from December 2024 through February 2025. As a result, ERA/RA fee income attributable to this Tax Provider accounted for 61% of TRS’s total ERA/RA fee income for the 2025 calendar year, 88% for the fourth quarter of 2024 and 0% during the fourth quarter of 2025.
Management does not believe that the net revenue from this Tax Provider will be replaced during the 2026 calendar year.
See additional detail regarding the ERA/RA product under the Footnote titled “Loans and Allowance for Credit Losses” of Part II Item 8 “Financial Statements and Supplemental Data.”
Republic Payment Solutions segment
Net interest income from the Company’s prepaid card division increased $2.0 million, or 17%, in 2025 compared to 2024. This increase was driven primarily by a reduction in the segment’s revenue share component, as its largest marketer-servicer did not meet the minimum contractual deposit balance thresholds required to earn revenue share for 2025. By comparison, revenue share payments totaled $4.8 million in 2024 and were recorded as interest expense. Management is currently unable to predict the level of future revenue share expense as future revenue-share payments are possible but not certain.
Partially offsetting the benefit of the reduced revenue share, RPS earned a lower yield on an average balance of $340 million in prepaid program deposits during 2025, driven primarily by the 175 bp decrease in the FFTR over the past 15 months.
Historically, customer demand for prepaid card products has not been sensitive to interest rate movements, and management therefore does not expect changes in the rate environment to materially affect origination volumes. However, a declining interest rate environment would likely reduce the internal FTP credit allocated to this segment more than it would reduce any revenue-share expense, resulting in lower NIM for the segment. The magnitude of this impact will depend on the final FTP rate applied as well as the overall volume of balances generated.
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(V) Republic Credit Solutions segment
RCS’s net interest income decreased $1.2 million, or 2%, from 2024 to 2025, driven primarily by a decrease in fee income from RCS’s LOC II product. RCS’s LOC II loan fees, which are recorded as interest income on loans, decreased $1.5 million during 2025 to $27.9 million, a 5% decrease compared to the $29.4 million recorded during 2024. The decrease in fee income for the LOC II product was generally driven by a decline in new loan origination volume.
Historically, customer demand for RCS consumer loan products has not been sensitive to changes in interest rates, and management therefore does not expect rate movements to materially affect origination volumes. However, a declining interest rate environment would likely reduce the internal FTP cost allocated to this segment, which in turn would be favorable to the segment’s NIM. The magnitude of this benefit would depend on the final FTP rate applied, as well as the overall volume and mix of loans the segment originates.
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The following table presents average balances, along with the related calculations of tax-equivalent net interest income, NIM and net interest spread for the related periods.
Table 2 — Total Company Average Balance Sheets and Interest Rates
Years Ended December 31,
Average
Average
Average
Average
Average
Average
(in thousands)
Balance
Interest
Rate
Balance
Interest
Rate
Balance
Interest
Rate
ASSETS
Interest-earning assets:
Federal funds sold and other interest-earning deposits
Investment securities, including FHLB stock (a)
TRS Refund Advances (b)
RCS LOC products (b)
Other RPG loans (c)
Outstanding Warehouse lines of credit
Traditional Bank loans (c)
Total loans (d)
Total interest-earning assets
Allowance for credit losses
Noninterest-earning assets:
Noninterest-earning cash and cash equivalents
Premises and equipment, net
Bank owned life insurance
Other assets (a)
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Transaction accounts
Money market accounts
Time deposits
Reciprocal money market and time deposits
Brokered deposits
Total interest-bearing deposits
SSUARs and other short-term borrowings
Federal Home Loan Bank advances
Total interest-bearing liabilities
Noninterest-bearing liabilities and Stockholders’ equity:
Noninterest-bearing deposits
Other liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
Net interest income
Net interest spread
Net interest margin
For the purpose of this calculation, the debt securities fair market value adjustment is included as a component of other assets.
Interest income is composed either entirely or predominantly of loan fees. See the following table titled “Loan Fee Income.”
The average balance includes the principal balance of nonaccrual loans and loans HFS (not carried at fair value), and are inclusive of all loan premiums, discounts, fees and costs.
See the following table for detail of loan fees by reporting segment.
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Table 3 — Loan Fee Income
The amount of loan fee income can meaningfully impact total interest income, loan yields, NIM, and net interest spread. The following table illustrates loan fees recorded as interest income on loans by segment:
Years Ended December 31,
(in thousands)
Traditional Banking
Warehouse Lending
Total Core Bank loan fees
TRS
RCS
Total RPG loan fees
Total Company loan fees
The following table illustrates the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities impacted Republic’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
Table 4 — Total Company Volume/Rate Variance Analysis
Year Ended December 31, 2025
Year Ended December 31, 2024
Compared to
Compared to
Year Ended December 31, 2024
Year Ended December 31, 2023
Total Net
Increase / (Decrease) Due to
Total Net
Increase / (Decrease) Due to
(in thousands)
Change
Volume
Rate
Change
Volume
Rate
Interest income:
Federal funds sold and other interest-earning deposits
Investment securities, including FHLB stock
TRS Refund Advance loans*
RCS LOC products
Other RPG loans
Outstanding Warehouse lines of credit
Traditional Bank loans
Net change in interest income
Interest expense:
Transaction accounts
Money market accounts
Time deposits
Reciprocal money market and time deposits
Brokered deposits
SSUARs and other short-term borrowings
Federal Home Loan Bank advances
Net change in interest expense
Net change in net interest income
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Provision
Total Company Provision was a net charge of $31.6 million for 2025 compared to a net charge of $54.4 million for 2024.
The following were the most significant components comprising the total Company’s Provision by reportable segment:
(I) Traditional Banking segment
The Traditional Banking Provision during 2025 was a net charge of $5.5 million compared to a net charge of $3.2 million for 2024.
The net charge for 2025 was primarily driven by the following:
During the fourth quarter of 2025, the Traditional Bank recorded a $4.8 million specific allocation related to a $16 million C&I participation relationship, in which Republic is not the lead bank. This credit has been impacted by strong competition, declining revenues and rising expenses.
During the fourth quarter of 2025, the Traditional Bank recorded a net credit to the Provision of $342,000 related to the transfer of the substantial majority of its RBF loan/lease portfolio into the HFS category.
D uring the first quarter of 2025, approximately $5 million of consumer credit cards were transferred from held for investment to HFS, which generated a net credit to the Provision of $414,000. The consumer credit card sale was completed during the second quarter of 2025.
During the second quarter of 2025, as a practical expedient, the Company established a minimum loan balance threshold in assessing credits for impairment resulting in a $518,000 credit adjustment to the Provision.
The Traditional Bank recorded net charge-offs of $1.6 million during 2025.
The net charge for 2024 was primarily driven by the following:
The Traditional Bank recorded a net charge to the Provision of $747,000 during 2024 related to general formula reserves applied to Traditional Bank loans. While loan balances at the Traditional Bank decreased by $49 million during 2024, the segment continued to experience a change in loan mix, growing in categories with higher loan loss reserve requirements thus driving its higher Provision.
The Traditional Bank recorded $1.9 million in charge-offs related to three linked, broker-related marine loans during the third quarter of 2024. During the first quarter of 2025, the Traditional Bank recorded a $1.6 million insurance recovery to noninterest income associated with these loans. The Company discontinued originating broker-related marine loans during the third quarter of 2024 . As of December 31, 2025, the Bank had $3 million of broker-related marine loans remaining in its loan portfolio.
As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.40% as of December 31, 2025, compared to 1.31% as of December 31, 2024.
The Company believes, based on information presently available, that it has adequately provided for Traditional Banking loan losses as of December 31, 2025.
(II) Warehouse Lending segment
Warehouse recorded a net charge to the Provision of $508,000 during 2025 compared to a net charge of $527,000 for 2024. Provision for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances increased $203 million, or 37%, during 2025 compared to an increase of $211 million, or 62%, during 2024.
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As a percentage of total Warehouse outstanding balances, the Warehouse ACLL was 0.25% as of both December 31, 2025 and December 31, 2024.
The Company believes, based on information presently available, that it has adequately provided for Warehouse loan losses as of December 31, 2025.
(III)
Tax Refund Solutions segment
TRS recorded a net charge to the Provision of $9.5 million during 2025 compared to a net charge of $30.0 million during 2024. Substantially all TRS Provision in both periods was related to its ERA/RA products.
The Bank’s ability to control ERA/RA losses is highly dependent upon its ability to predict the taxpayer’s likelihood to receive the tax refund as claimed on the taxpayer’s tax return. In addition, the Bank’s ability to control losses for the ERA product is highly dependent upon the taxpayer returning to a Tax Provider for the filing of their final tax return. Each year, the Bank’s ERA/RA approval model is based primarily on the prior-year’s tax refund payment patterns. Because the substantial majority of the ERA/RA volume occurs each year before that year’s tax refund payment patterns can be analyzed and subsequent underwriting changes implemented, credit losses during a given year could be higher than management’s predictions if tax refund payment patterns change materially between years.
2025 Tax Season Fee Structure Changes and Corresponding Shift and Decline in Total Origination Volume:
During the fourth quarter of 2024, the Company revised its agreement with its largest Tax Provider based on product volume for the 2025 Tax Season. Under the revised structure, the ERA fee was increased and a new ERA-specific loss-cap guarantee was added, while the fee applicable to RAs was reduced. Consistent with these changes, TRS experienced a shift in product mix and an overall decline in total ERA/RA volume for the 2025 Tax Season compared to the 2024 Tax Season.
Total ERA/RA volume for the 2025 Tax Season declined $72 million, or 9%, from $874 million originated for the 2024 Tax Season to $802 million for the 2025 Tax Season. Total RA origination volume was $663 million during 2025 compared to $771 million during 2024, with originations for both periods occurring during the first quarter. Total ERA origination volume was $139 million during the 2025 Tax Season compared to $103 million during the 2024 Tax Season, with originations occurring in December 2024 and December 2023, respectively.
2026 Tax Season Contract Expiration:
As previously disclosed, the Company’s largest Tax Provider contract within TRS based on product volume, expired in October 2025, and the Company did not enter into a new contract with this Tax Provider for the 2026 Tax Season (which began in December 2025). Provision for ERAs/RAs originated through this Tax Provider represented 58% of TRS’s total ERA/RA Provision for the 2025 calendar year, 96% for the fourth quarter of 2024 and 0% for the fourth quarter of 2025. Management does not believe that the net revenue from this Tax Provider will be replaced during the 2026 calendar year.
The lower Provision during 2025 compared to 2024 related to the following factors:
Significant improvement in payments received from the U.S. Treasury to fund federal tax refunds for the first quarter 2025 Tax Season.
The 2025 Tax Season fee structure changes and corresponding shift and decline in total ERA and RA volume detailed above.
A larger percentage of ERA Provision was recorded during December 2024 compared to December 2023, effectively leading to a lower comparable Provision during 2025 versus 2024. ERA provisioning in December 2024 was based on the final loss rate realized from the ERAs originated December 2023. Included in the Provision for 2023 was a $3.9 million charge related to $ 103 million of ERAs originated in December 2023 for tax returns that were anticipated to be filed during the first quarter of 2024.
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The 2026 Tax Season contract expiration detailed earlier in this section and ERA provisioning.
During December 2024, $139 million of ERAs were originated and outstanding at period end related to tax returns that were anticipated to be filed during the first quarter 2025 Tax Season. ERA originations related to the largest Tax Provider contract totaled $123 million, resulting in a $9.5 million charge to provision during 2025. During December 2025, $13 million of ERAs were originated and outstanding at period end related to tax returns that anticipated to be filed during the first quarter 2026 Tax Season, resulting in approximately $300,000 of provision expense for 2025.
The Company believes, based on information presently available, that it has adequately provided for TRS loan losses as of December 31, 2025.
See additional detail regarding the ERA/RA products under the Footnote titled “Loans and Allowance for Credit Losses” of Part II Item 8 “Financial Statements and Supplemental Data.”
Republic Payment Solutions segment
There is no ACLL or Provision for RPS, as the segment offers prepaid and debit solutions to consumers.
Republic Credit Solutions segment
As illustrated in the following table, RCS recorded a net charge to the Provision of $16.1 million during 2025 compared to a net charge of $20.6 million for 2024. RCS recorded net charge-offs of $17.7 million during 2025 compared to $17.9 million during 2024. In addition, the RCS Provision fluctuation from 2024 to 2025 was meaningfully impacted by calculated reserve requirements tied to period-to-period balance fluctuations in the higher risk LOC II product, whose period-end balances grew nearly $4.6 million during 2024 and declined $1.6 million during 2025.
RCS recorded a net charge to the Provision of $20.6 million during 2024 compared to a net charge to the Provision of $16.5 million for 2023. The increase in the Provision during 2024 was substantially within the LOC II product and was generally in-line with its calculated required requirements tied to the increase in its period-end loan balances from 2023 to 2024.
While RCS loans generally return higher yields, they also present a greater credit risk than Traditional Banking loan products. As a percentage of total RCS loans, the RCS ACLL was 17.30% as of December 31, 2025 compared to 16.30% as of December 31, 2024.
The Company believes, based on information presently available, that it has adequately provided for RCS loan losses as of December 31, 2025.
Table 5 — Republic Credit Solutions Provision by Product Type
Years Ended December 31,
(in thousands)
Product:
Lines of credit
Healthcare receivables
Total RCS provision
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Noninterest Income
Table 6 — Analysis of Noninterest Income
Percent Increase/(Decrease)
Years Ended December 31, (dollars in thousands)
Service charges on deposit accounts
Net refund transfer fees
Mortgage banking income
Interchange fee income
Program fees
Increase in cash surrender value of bank owned life insurance
Death benefits in excess of cash surrender value of life insurance
Net losses on other real estate owned
Gain on sale of Visa Class B-1 shares
Other
Total noninterest income
Total Company noninterest income increased $10.2 million, or 14%, from 2024 to 2025.
The following were the most significant components comprising the total Company’s noninterest income fluctuation by reportable segment:
Traditional Banking segment
Noninterest income increased $8.0 million, or 20%, from 2024 to 2025, primarily driven by the following:
Mortgage Banking income increased $2.0 million, or 36% from 2024 to 2025. Approximately $1.0 million of the increase was the result of a negative fair value adjustment recorded during the first quarter of 2024 related to $67 million of correspondent loans that were re-classified from held for investment to HFS during the period. The remaining $1.0 increase related to a $32 million, or 17%, increase in the volume of fixed rate loans that were sold into the secondary market during 2025 compared to 2024. In general, mortgage activity strengthened in late 2025 as long-term market interest rates declined.
BOLI income increased $388,000 in 2025 compared to 2024 driven by appreciation in cash-surrender values within the policy plans and a §1035 policy exchange executed in 2025 to enhance the overall yield of the portfolio. BOLI assets are currently being carried at $111 million on the balance sheet.
The Bank recorded a $4.1 million gain on sale of Visa Class B-1 shares during the first quarter of 2025. The Visa Class B-1 common stock was issued to Visa’s U.S. member banks during 2008 in connection with a reorganization and Initial Public Offering.
Other noninterest income increased $2.1 million, or 56%, during 2025 compared to 2024, led by a $1.6 million insurance recovery related to a $1.9 million charge-off recorded in 2024. In addition, swap fee income increased $266,000 year over year and the Traditional Bank recognized a $328,000 non-recurring gain in 2025 related to the sale of the consumer credit card portfolio.
The Traditional Bank earns a substantial majority of its fee income related to its overdraft service program from the per item fee it assesses its customers for each insufficient-funds check or electronic debit presented for payment. The total per item fees, net of refunds, included in service charges on deposits for 2025, and 2024 was $7.4 million in both periods. The total daily overdraft charges, net of refunds, included in interest income for 2025, and 2024 was $ 1.2 million in both periods .
(II) Warehouse Lending segment
Warehouse noninterest income, which consists entirely of service charges on deposit accounts, increased $21,000 from $62,000 in 2024 to $83,000 in 2025.
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(III)
Tax Refund Solutions segment
TRS’s noninterest income increased $2.4 million, or 16%, during 2025 compared to 2024, with RT fees representing the majority of noninterest income for each period. Despite a 5.6% decrease in overall volume, RT income expanded $2.3 million, or 15%, in 2025 attributable to a 22.8% increase in the per-unit net fee earned. The better per-unit profitability was led by select product price increases combined with a minimal change in revenue share.
As previously disclosed, the Company’s largest Tax Provider contract within TRS based on product volume expired in October 2025 and the Company did not enter into a new contract with this Tax Provider for the 2026 Tax Season (which began in December 2025).
Net RT revenue generated from this Tax Provider accounted for approximately 20% of TRS’s total net RT revenue for the 2025 calendar year. The RT product is primarily earned and recognized during the first half of the year. Management does not believe that the net revenue from this Tax Provider will be replaced during the 2026 calendar year.
Republic Payment Solutions segment
RPS’s noninterest income decreased $172,000, or 5%, for 2025 compared to 2024. RPS program fees, which are volume based and represent a portion of the net interchange revenue earned for cardholder activity, drove the noninterest income decline.
Republic Credit Solutions segment
RCS’s noninterest income decreased $41,000, during 2025 compared to 2024, with program fees representing the substantial majority of RCS’s noninterest income. As noted in the following table, lower sales volume from RCS’s LOC products from 2024 to 2025 was offset by expansion within the installment products.
The following table presents program fees by RPG Segment:
Table 7 — Program Fees by Republic Processing Group Segment
Years Ended December 31,
(in thousands)
Segment:
TRS
RPS
RCS
Total RPG program fees
The following table presents RCS program fees by product type:
Table 8 — Program Fees by Republic Credit Solutions Product
Years Ended December 31,
(in thousands)
Product:
Lines of credit
Healthcare receivables
Installment loans*
Total RCS program fees
*The Company has elected the fair value option for this product, with mark-to-market adjustments recorded as a component of Program Fees.
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Noninterest Expense
Table 9 — Analysis of Noninterest Expense
Percent Increase/(Decrease)
Years Ended December 31, (dollars in thousands)
Salaries and employee benefits
Technology, equipment, and communication
Occupancy
Marketing and development
FDIC insurance expense
Interchange related expense
Legal and professional fees
Merger expense
Core conversion and related contract consulting fees
Other
Total noninterest expense
Total Company noninterest expense increased $17.5 million, or 9%, during 2025 compared to 2024.
The following were the most significant components comprising the total Company’s noninterest expense fluctuation by reportable segment:
Traditional Banking segment
Traditional Bank noninterest expense increased $19.8 million, or 12%, for 2025 compared to the same period in 2024, driven primarily by the following:
Salaries and employee benefits increased by a combined $7.1 million, or 7%, driven primarily by a $2.5 million increase in health insurance claims and a $3.1 million increase in bonus-related expenses. The larger bonus-related expenses for 2025 were consistent with the Company’s strong operating results compared to plan.
Technology, equipment, and communication expenses increased $3.5 million, or 13%, over 2024. The increase in Technology expense was driven primarily by expanded data storage, enhanced security, and new ancillary systems, including additional costs resulting from the transition to a new call center management system. Also, 2024 included a $450,000 refund related to a prior year contract billing dispute. In addition, the Company operated on a month-to-month contract basis from July to mid-October, as it transitioned to a new core system provider. Under the month-to-month contract terms, the Company paid a 25% premium above its previous contractual run rate. Management expects to incur a net benefit in technology costs in the future as a result of the new call center management system and core system conversion.
Marketing and development expenses increased $1.0 million, or 28%, over 2024 driven primarily by the Bank’s current marketing campaigns which include a new branding initiative. Overall, Traditional Banking marketing expenses are expected to remain near current levels into the near future.
Interchange related expense increased $576,000, or 10%, for the year ended December 31, 2025 compared to the prior year, consistent with the increase in transaction volume and customer base expansion.
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The Traditional Bank recorded $6.2 million during 2025, primarily during the first quarter, for deconversion and consulting fees related to its Core System contract. Included within these costs were the following:
Approximately $4.1 million of the expense related to contract negotiation assistance from a third-party consultant that was calculated as a percentage of anticipated savings over the five-year term of the new contract. Republic projects a savings in excess of $16 million over the contract’s five-year term.
Approximately $2.1 million of this expense related to data conversion and secondary system migration costs in preparation for the conversion to the core conversion.
Warehouse Lending segment
Noninterest expense at the Warehouse Lending segment increased $157,000, or 4%, during 2024 to 2025.
(III) Tax Refund Solutions segment
Noninterest expense at the TRS segment decreased $740,000, or 6%, during 2025 compared to 2024, as various underwriting and administrative related expenses declined consistent with ERA/RA volume.
Republic Payment Solutions segment
Noninterest expense at the RPS segment increased $536,000, or 13%, during 2025 compared to 2024, primarily due to a $657,000 increase in salary and employee benefits resulting from an increase in allocated staff.
(V) Republic Credit Solutions segment
Noninterest expense at the RCS segment decreased $2.3 million, or 16%, during 2025 compared 2024, driven primarily by a $2.5 million, or 47%, reduction in marketing and development expenses, which generally fluctuate in-line with o verall origination volume. Under the terms of the Company’s contract with its LOC II marketer-servicer, RCS reimburses the marketer-servicer a certain dollar amount for marketing costs based on each new product originated during the period.
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FINANCIAL CONDITION
Overview
Total assets increased $195 million, or 3%, to $7.04 billion at December 31, 2025 from $6.85 billion at December 31, 2024, driven primarily by expansion within the investment portfolio.
Total liabilities increased $85 million, or 1%, to $5.94 billion at December 31, 2025 from $5.85 billion at December 31, 2024, due mainly to a $111 million, or 28%, increase in total FHLB advances outstanding.
Stockholders’ equity increased $110 million, or 11%, to $1.10 billion at December 31, 2025, compared to $992 million at December 31, 2024. This increase reflected net income of $131.3 million and an improvement in AOCI, partially offset by $35 million of cash dividends declared during 2025. The improvement in AOCI was attributable to changes in the interest-rate environment and the corresponding impact on the valuation of the AFS debt-securities portfolio and cash-flow-hedging derivatives.
Cash and Cash Equivalents
Cash and cash equivalents include cash, deposits with other financial institutions with original maturities of less than 90 days, and federal funds sold. The Company had $220 million in cash and cash equivalents as of December 31, 2025, compared to $432 million as of December 31, 2024. Average interest-earning cash and cash equivalents totaled $671 million for 2025, compared to $612 million for 2024. For cash held at the FRB, the Bank earns a yield on balances in excess of required reserves, with these funds earning a weighted-average yield of 4.33% during 2025 compared to 5.26% during 2024. Cash held within the Bank’s banking centers and ATM/ITM networks does not earn interest. Despite the year-over-year increase in average interest-earning cash balances, the Company has, over the past several months, deployed a higher percentage of its excess cash into investment securities resulting in a decrease in period-end cash balances.
In prior years, the Company maintained elevated cash balances during the fourth quarter due to near-term funding requirements for ERAs/RAs related to the upcoming Tax Season. As previously disclosed, the Company’s largest Tax Provider contract within TRS, based on product volume, expired in October 2025, and the Company did not enter into a replacement agreement. Consistent with the non-renewal of this contract, the Company did not acquire any short-term brokered deposits at year-end 2025, compared to $200 million acquired at year-end 2024.
Beginning in 2020, the Company employed an investment strategy focused on purchasing securities with shorter-term durations while maintaining significant excess cash at the FRB. Beginning in the fourth quarter of 2024 and continuing throughout 2025, the Company shifted to purchasing longer-duration investment securities in response to a more favorable yield curve and the relatively higher yields available compared to overnight cash. The yield curve, which began to steepen during the fourth quarter of 2024, became positively sloped in late March 2025 and remained so through year-end 2025.
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Investment Securities
Table 10 — Investment Securities Portfolio
December 31, (in thousands)
Available-for-sale debt securities (fair value):
U.S. Treasury securities and U.S. Government agencies
Private label mortgage-backed security
Mortgage-backed securities - residential
Collateralized mortgage obligations
Corporate bonds
Trust preferred security
Total available-for-sale debt securities
Held-to-maturity debt securities (amortized cost):
Mortgage backed securities - residential
Collateralized mortgage obligations
Corporate bonds
Total held-to-maturity debt securities
Equity securities with a readily determinable fair value (fair value):
Freddie Mac preferred stock
Total equity securities with a readily determinable fair value
Total investment securities
The primary purpose of the Company’s investment securities portfolio is to provide a stable source of interest income and serve as an important liquidity management tool. In managing overall balance-sheet composition, the Company seeks to balance earnings generation with credit quality and liquidity considerations.
At December 31, 2025, the Company’s AFS debt securities primarily consisted of U.S. Treasury securities and U.S. Government agency obligations, including agency MBSs and agency CMOs. The agency MBSs consist mainly of hybrid mortgage securities and other ARM-based securities underwritten and guaranteed by GNMA, FHLMC, or FNMA. The agency CMOs held in the portfolio are predominantly floating-rate securities that reset monthly. A portion of the investment portfolio is pledged to support client SSUAR balances, while remaining eligible securities not pledged for SSUARs may be pledged to the FHLB as collateral for the Bank’s borrowing capacity.
Beginning in 2020, the Company employed an investment strategy focused on purchasing securities with shorter-term durations while maintaining significant excess cash at the FRB. Beginning in the fourth quarter of 2024 and continuing throughout 2025, the Company shifted to purchasing longer-duration investment securities in response to a more favorable yield curve and the relatively higher yields available compared to overnight cash. The yield curve, which began to steepen during the fourth quarter of 2024, became positively sloped in late March 2025 and remained so through year-end 2025. As a result of this strategy, Republic’s investment portfolio increased $295 million, or 50%, from December 31, 2024, to December 31, 2025. This growth was driven by $771 million of securities purchases, partially offset by $492 million in calls and maturities of debt securities and paydowns on MBS’s.
Strategies for the investment securities portfolio are influenced by economic and market conditions, loan demand, deposit mix, and liquidity needs. The Company’s investment management strategy for 2026 and beyond will depend on a variety of factors, including the Company’s current and projected liquidity position, customer demand for loan and deposit products, the Company’s overall interest-rate-risk profile, the shape of the yield curve and prevailing interest-rate environment, as well as expectations for short-term and long-term interest-rate trends.
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Table 11 — Available-for-Sale Debt Securities
Weighted
Weighted
Average
Amortized
Fair
Average
Maturity in
December 31, 2025 (dollars in thousands)
Cost
Value
Yield
Years
U.S. Treasury securities and U.S. Government agencies:
Due in one year or less
Due from one year to five years
Total U.S. Treasury securities and U.S. Government agencies
Corporate bonds, due in one year or less
Trust preferred security, due beyond ten years
Private label mortgage backed security
Total mortgage backed securities - residential
Total collateralized mortgage obligations
Total available-for-sale debt securities
Table 12 — Held-to-Maturity Debt Securities
Weighted
Weighted
Average
Amortized
Fair
Average
Maturity in
December 31, 2025 (dollars in thousands)
Cost
Value
Yield
Years
Total mortgage backed securities - residential
Total collateralized mortgage obligations
Total held-to-maturity debt securities
Actual maturities for MBS may differ from contractual maturities due to prepayments on underlying collateral.
See the Footnote titled “Investment Securities” of Part II Item 8 “Financial Statements and Supplementary Data” for further information regarding the Bank’s investment securities.
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Loan Portfolio
Table 13 — Loan Portfolio Composition
Years Ended December 31, (in thousands)
Traditional Banking:
Residential real estate:
Owner-occupied
Nonowner-occupied
Commercial real estate:
Owner-occupied
Nonowner-occupied
Multi-family
Construction & land development
Commercial & industrial
Lease financing receivables
Aircraft*
Home equity
Consumer:
Credit cards
Overdrafts
Automobile loans
Other consumer
Total Traditional Banking
Warehouse lines of credit*
Total Core Banking
Republic Processing Group*:
Tax Refund Solutions:
Refund Advances
Other TRS commercial & industrial loans
Republic Credit Solutions
Total Republic Processing Group
Total loans**
Allowance for credit losses
Total loans, net
Note: Loan segments as of December 31, 2024 changed from those defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as the CRE loan pool was further segmented into Owner-occupied CRE, Nonowner-occupied CRE, and Multi-family beginning in 2025.
*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.
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The Company’s credit exposure is diversified across both commercial and consumer borrowers, with no single industry representing more than 10% of total loans outstanding. Although the loan portfolio is broadly diversified, a borrower’s ability to meet contractual obligations remains influenced by the economic conditions and industry dynamics affecting that borrower. Loans outstanding and related unfunded commitments are primarily concentrated within the Company’s core market footprint, which includes Kentucky, Indiana, Florida, Ohio, and Tennessee.
Total Company gross loans increased $7 million during 2025, reaching $5.45 billion outstanding as of December 31, 2025. The most significant components comprising the change in loans by reportable segment follow:
(I) Traditional Banking segment
Traditional Banking period-end loan balances decreased $23 million, or 1%, from December 31, 2024 to December 31, 2025. Excluding the $82 million of RBF lease-financing receivables that were reclassified from held for investment to HFS, the Traditional Bank would have generated $59 million of year-over-year loan growth. The primary drivers of the decline in Traditional Banking loan balances are as follows:
For 2024 and the first nine months of 2025, management maintained a stricter pricing strategy across all lending types in response to then-current economic conditions. As expected, this approach resulted in slower origination volume across most product categories during the period. In the fourth quarter of 2025, however, supported by a more positively sloped yield curve, the Traditional Bank achieved its first quarter-over-prior-quarter average loan balance growth of the year, with average loans increasing by $32 million.
During the fourth quarter of 2025, approximately $82 million of lease finance receivables were reclassified from held for investment to HFS as the Bank entered into an Asset Purchase Agreement to sell its St. Louis-based RBF operations. The transaction closed in February 2026, and the Company recorded a gain of approximately $6 million, net of broker commissions, as a result of the sale during the first quarter of 2026.
Increased LOC usage within the Traditional Bank HELOC and C&I portfolios was more than offset by contraction within the Lease Financing Receivable, RRE, CRE and aircraft lending portfolios.
During March 2025, the Company reached an agreement to sell approximately $5 million of consumer credit cards that were previously classified as held for investment. The sale of these credit cards was completed during the second quarter of 2025.
During March 2024 , the Company reached an agreement to sell approximately $67 million of correspondent loans that were previously classified as held for investment. The sale of these loans was completed during the second quarter of 2024.
(II) Warehouse Lending segment
Outstanding Warehouse period-end balances increased $203 million, or 37%, from December 31, 2024, to December, 2025. Average committed Warehouse lines of credit increased from $938 million for the year ended December 31, 2024, to $1.05 billion during 2025, with higher demand driving average usage rates for Warehouse lines of credit from 50% to 53% for the same periods.
Due to mortgage-market volatility and seasonality, projecting future outstanding balances for Warehouse lines of credit remains challenging; however, portfolio expansion has historically aligned with broader industry trends. Since entering the business in 2011, the Bank has experienced fluctuations in Warehouse balances consistent with overall mortgage-origination activity. Weighted-average quarterly usage rates have ranged from a low of 31% during the first quarter of 2023 to a high of 71% during the fourth quarter of 2019. On an annual basis, weighted-average usage rates have ranged from a low of 39% during 2022 to a high of 66% during 2020.
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(III)
Tax Refund Solutions segment
As previously disclosed, the Company’s largest Tax Provider contract within TRS based on product volume expired in October 2025 and the Company did not enter into a new contract with this Tax Provider for the 2026 Tax Season (which began in December 2025).
ERAs/RAs originated through this Tax Provider represented approximately 67% of total ERA/RA dollars originated through TRS from December 2024 through February 2025. As a result, ERA/RA fee income attributable to this Tax Provider accounted for 61% of TRS’s total ERA/RA fee income for the 2025 calendar year, 88% for the fourth quarter of 2024 and 0% during the fourth quarter of 2025.
During December 2024, $139 million of ERAs were originated and outstanding at period end related to tax returns that were anticipated to be filed during the first quarter 2025 Tax Season. ERA originations related to the largest Tax Provider contract totaled $123 million, during 2025. During December 2025, $13 million of ERAs were originated and outstanding at period end related to tax returns that anticipated to be filed during the first quarter 2026 Tax Season.
Republic Credit Solutions segment
Outstanding period-end RCS balances decreased $15 million, or 12%, to $114 million as of December 31, 2025, consistent with pay off activity and decreased origination volume primarily associated with the healthcare receivable and LOC products.
Republic Payment Solutions segment
There are no outstanding loans at RPS, as the segment offers prepaid and debit solutions to consumers.
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The following table presents the maturity distribution and rate sensitivity of the loan portfolio:
Table 14 — Selected Loan Distribution
Over One
Over Five
One Year
Through
Through
Over
December 31, 2025 (in thousands)
Total
Or Less
Five Years
15 Years
15 Years
Fixed rate loan maturities:
Residential real estate:
Owner-occupied
Nonowner-occupied
Commercial real estate:
Owner-occupied
Nonowner-occupied
Multi-Family
Construction & land development
Commercial & industrial
Lease financing receivables
Aircraft
Warehouse lines of credit
Home equity
Consumer
Total fixed rate loans
Variable rate loan maturities:
Residential real estate:
Owner-occupied
Nonowner-occupied
Commercial real estate
Owner-occupied
Nonowner-occupied
Multi-Family
Construction & land development
Commercial & industrial
Lease financing receivables
Aircraft
Warehouse lines of credit
Home equity
Consumer
Total variable rate loans
Total:
Residential real estate:
Owner-occupied
Nonowner-occupied
Commercial real estate
Owner-occupied
Nonowner-occupied
Multi-Family
Construction & land development
Commercial & industrial
Lease financing receivables
Aircraft
Warehouse lines of credit
Home equity
Consumer
Total loans
Loans at maturity interval to overall total loans
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Allowance for Credit Losses
The Bank maintains an ACLL on the balance for expected credit losses inherent in the Bank’s loan portfolio, which includes overdrawn deposit accounts. The Bank also maintains an ACLC for expected OBS credit exposure losses. Management evaluates the adequacy of the ACLL monthly and the adequacy of the ACLC for OBS quarterly. The ACLL calculation is presented to and discussed with the Audit Committee and the Board on a quarterly basis.
The Company’s ACLL decreased to $85 million at December 31, 2025, compared to $92 million at December 31, 2024, with the total Company ACLL as a percentage of total loans declining to 1.57% at year-end 2025 from 1.69% at year-end 2024.
The most significant components comprising the change in ACLL by reportable segment follow:
(I) Traditional Banking segment
While Traditional Bank loan balances decreased $23 million during 2025, the corresponding ACLL increased $4 million to $64 million as of December 31, 2025, primarily due to the following:
During the fourth quarter of 2025, the Traditional Bank recorded a specific allocation of approximately $4.8 million related to a $16 million C&I participation relationship in which Republic is not the lead bank. This credit has been negatively affected by strong competition, declining revenues, and rising expenses.
Throughout 2025, the Traditional Banking ACLL continued to reflect a shift in loan mix, as growth occurred in categories that carry higher loan-loss reserve requirements.
During the fourth quarter of 2025, approximately $82 million of loans and leases were reclassified from held for investment to HFS as the Bank entered into an Asset Purchase Agreement to sell its St. Louis-based RBF operations. As a result of this reclassification, the Company reversed approximately $850,000 of reserves related to the performing loans. The Company also maintained a specific reserve of approximately $508,000 related to loans not expected to be sold in the transaction.
As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.40% as of December 31, 2025, compared to 1.31% as of December 31, 2024.
Warehouse Lending segment
The Warehouse ACLL increased $508,000 to $1.9 million, while the Warehouse ACLL as a percentage of total Warehouse loans remained at 0.25% when comparing December 31, 2025 to December 31, 2024. Outstanding Warehouse period-end balances increased $203 million, or 37%, over the same period As of December 31, 2025, the Warehouse ACLL remained entirely qualitative in nature, with no adjustments required to the qualitative reserve percentage for 2025.
(III) Tax Refund Solutions segment
The TRS ACLL decreased approximately $10 million from December 31, 2024 to approximately $300,000 as of December 31, 2025, reflecting the impact of the previously-disclosed non-renewal of a large tax provider contract, which significantly impacted period-to-period comparability. During the fourth quarter of 2024, ERA originations through this Tax Provider totaled $123 million, resulting in a $10 million ACLL at year-end. ERAs are primarily originated during December of each year in connection with the upcoming first-quarter tax filing season.
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Republic Credit Solutions segment
The RCS ACLL decreased $2 million to $19 million as of December 31, 2025, primarily due to declines in spot loan balances within the LOC II and healthcare receivables products.
RCS maintained an ACLL for two distinct credit products as of December 31, 2025: its LOC products and its healthcare receivables products. As of year-end, the ACLL-to-total-loans percentage for these products ranged from as low as 0.25% for healthcare receivables to as high as 70.63% for LOC products. The lower reserve percentage for healthcare receivables reflects the recourse the Bank maintains to the third-party service providers for these balances.
While RCS loans generally return higher yields, they also present a greater credit risk than Traditional Banking loan products. As a percentage of total RCS loans, the RCS ACLL was 17.15% as of December 31, 2025 compared to 16.30% as of December 31, 2024. The RCS segment continued to experience a change in loan mix, growing in categories with higher loan loss reserve requirements thus driving its higher ACLL for the quarter.
For additional discussion regarding Republic’s methodology for determining the adequacy of the ACLL, see the section titled “Critical Accounting Policies and Estimates” in this section of the report.
See additional detail regarding RCS’ loan products under Item 1 “Business.”
Republic Payment Solutions segment
There is no ACLL or Provision for RPS, as the segment offers prepaid and debit solutions to consumers.
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Table 15 — Summary of Loan and Lease Loss Experience
Years Ended December 31, (in thousands)
ACLL at beginning of period
CBank Fair Value Adjustment
Charge-offs:
Traditional Banking:
Residential real estate
Commercial real estate
Construction & land development
Commercial & industrial
Lease financing receivables
Home equity
Consumer
Total Traditional Banking
Warehouse lines of credit
Total Core Banking
Republic Processing Group:
Tax Refund Solutions:
Refund Advances
Other TRS loans
Republic Credit Solutions
Total Republic Processing Group
Total charge-offs
Recoveries:
Traditional Banking:
Residential real estate
Commercial real estate
Commercial & industrial
Lease financing receivables
Home equity
Consumer
Total Traditional Banking
Warehouse lines of credit
Total Core Banking
Republic Processing Group:
Tax Refund Solutions:
Refund Advances
Other TRS commercial & industrial loans
Republic Credit Solutions
Total Republic Processing Group
Total recoveries
Net loan recoveries (charge-offs)
Provision - Core Bank Loans
Provision - RPG Loans
Total Provision for All Loans
ACLL at end of period
Credit Quality Ratios - Total Company:
ACLL to total loans
ACLL to nonperforming loans
Net loan charge-offs (recoveries) to average loans
Credit Quality Ratios - Core Banking:
ACLL to total loans
ACLL to nonperforming loans
Net loan charge-offs (recoveries) to average loans
Note: Loan segments as of December 31, 2024 changed from those defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as the CRE loan pool was further segmented into Owner-occupied CRE, Nonowner-occupied CRE, and Multi-family beginning in 2025.
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Table 16 — Net Loan Charge-offs (Recoveries) to Average Loans by Loan Category
Net Loan Charge-Offs (Recoveries) to Average Loans
Years Ended December 31,
Traditional Banking:
Residential real estate:
Owner-occupied
Nonowner-occupied
Commercial real estate:
Owner-occupied
Nonowner-occupied
Multi-Family
Total commercial real estate
Construction & land development
Commercial & industrial
Lease financing receivables
Aircraft
Home equity
Consumer:
Credit cards
Overdrafts
Automobile loans
Other consumer
Total Traditional Banking
Warehouse lines of credit
Total Core Banking
Republic Processing Group:
Tax Refund Solutions:
Refund Advances*
Other TRS commercial & industrial loans
Republic Credit Solutions
Total Republic Processing Group
Total
Note: Loan segments as of December 31, 2024 changed from those defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as the CRE loan pool was further segmented into Owner-occupied CRE, Nonowner-occupied CRE, and Multi-family beginning in 2025.
* All loss rates above are based on net charge-offs as a function of average outstanding portfolio balances. RAs are originated during the first two months of each year, and ERAs for the upcoming first quarter tax filing season are originated during the fourth quarter of the year. All RAs, including ERAs, are charged-off by June 30 th of each year.
Total Company net charge-offs to average total loans decreased from 0.84% in 2024 to 0.71% in 2025, reflecting a $6.3 million, or 14%, decline in net charge-offs and a $43 million increase in average total Company loans over the same periods. The reduction in net charge-offs was driven primarily by a $5.1 million, or 21%, year-to-year decrease in net charge-offs within the Company’s TRS operations, attributable to significantly improved payment performance from the U.S. Treasury on ERAs/RAs during the 2025 Tax Season.
Total Traditional Bank net charge-offs to average total loans decreased from 0.05% in 2024 to 0.03% in 2025, driven by a $914,000, or 37%, decline in net charge-offs, alongside an $18 million decrease in average Traditional Bank loans over the same periods. While 2025 reflected elevated charge-offs within the lease-financing receivable and C&I portfolios, 2024 included $1.9 million in charge-offs related to three linked, broker-related marine loans. During the first quarter of 2025, the Traditional Bank recorded a $1.6 million insurance recovery in noninterest income associated with these broker-related loans. The Company discontinued originating broker-related marine loans in 2024 and had $3 million outstanding as of December 31, 2025.
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During the fourth quarter of 2025, the Traditional Bank recorded a $4.8 million specific allocation related to a $16 million C&I participation relationship, in which Republic is not the lead bank.
The following table sets forth management’s allocation of the ACLL by loan class. The allocation reflects management’s assessment of prevailing economic conditions, historical loss experience, forecasts for unemployment and vacancy rates, and various other life-of-loan and forward-looking considerations, as well as qualitative factors.
Table 17 — Management’s Allocation of the Allowance for Credit Losses on Loans
December 31, 2025
December 31, 2024
Percent of
Percent of
Percent of
Percent of
Loans to
ACLL to
Loans to
ACLL to
Total
Total
Total
Total
(dollars in thousands)
ACLL
Loans*
Loan Class
ACLL
Loans*
Loan Class*
Traditional Banking:
Residential real estate:
Owner-occupied
Nonowner-occupied
Commercial real estate
Owner-occupied
Nonowner-occupied
Multi-Family
Total commercial real estate
Construction & land development
Commercial & industrial
Lease financing receivables
Aircraft
Home equity
Consumer:
Credit cards
Overdrafts
Automobile loans
Other consumer
Total Traditional Banking
Warehouse lines of credit
Total Core Banking
Republic Processing Group:
Tax Refund Solutions:
Refund Advances
Other TRS commercial & industrial loans
Republic Credit Solutions
Total Republic Processing Group
Total
Note: Loan segments as of December 31, 2024 changed from those defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as the CRE loan pool was further segmented into Owner-occupied CRE, Nonowner-occupied CRE, and Multi-family beginning in 2025.
*See the Table titled “Loan Portfolio Composition” in this section of the report for loan portfolio balances. Values of less than 50 bps in the table above are rounded down to zero.
Management believes, based on information presently available, that it has adequately provided for loan and lease credit losses as of December 31, 2025.
For additional discussion regarding Republic’s methodology for determining the adequacy of the ACLL, see the section titled “Critical Accounting Policies and Estimates” in this section of the report.
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Asset Quality
Classified and Special Mention Loans
The Bank applies credit quality indicators, or ratings, to individual loans based on internal Bank policies, which are informed by regulatory standards. Loans rated “Loss,” “Doubtful,” “Substandard,” and PCD-Substandard are considered “Classified.”
Total Classified loans increased by $22 million from December 31, 2024 to December 31, 2025, while Special Mention loans decreased approximately $19 million for the same period.
During the fourth quarter of 2025, the Traditional Bank downgraded a $16 million C&I participation relationship, in which Republic is not the lead bank, from Pass to Substandard and recorded a $4.8 million specific allocation. This credit has been negatively affected by strong competition, declining revenues, and rising operating expenses. The Company does not have a material concentration in this credit type. The Company does not have a material concentration of credits of this nature.
In the second quarter of 2025, the Company downgraded a $22 million hospitality relationship from Special Mention to Substandard based on the overall performance of the underlying operations. This relationship was graded Special Mention at December 31, 2024. This relationship exited the Bank in the fourth quarter of 2025, with no loss recognized.
See the Footnote titled “Loans and Allowance for Credit Losses” of Part II Item 8 “Financial Statements and Supplementary Data” for additional discussion regarding Classified and Special Mention loans.
Table 18 — Classified and Special Mention Loans
December 31, (dollars in thousands)
Loss
Doubtful
Substandard
PCD - Substandard
Total Classified Loans
Special Mention
PCD - Special Mention
Total Special Mention Loans
Total Classified and Special Mention Loans
Nonperforming Loans
Nonperforming loans include loans on nonaccrual status and loans past due 90-days-or-more and still accruing. Nonperforming loans to total loans increased to 0.44% as of December 31, 2025, from 0.42% as of December 31, 2024, as the total balance of nonperforming loans increased by $1 million and total loans increased $7 million.
The ACLL to total nonperforming loans decreased to 356% as of December 31, 2025, from 404% as of December 31, 2024, as the total ACLL decreased $7 million and the balance of nonperforming loans increased by $1 million.
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Table 19 — Nonperforming Loans and Nonperforming Assets Summary
December 31, (dollars in thousands)
Loans on nonaccrual status*
Loans past due 90-days-or-more and still on accrual**
Total nonperforming loans
Other real estate owned
Total nonperforming assets
Credit Quality Ratios - Total Company:
ACLL to total loans
ACLL to nonperforming loans
Nonperforming loans to total loans
Nonperforming assets to total loans (including OREO)
Nonperforming assets to total assets
Credit Quality Ratios - Core Bank:
ACLL to total loans
ACLL to nonperforming loans
Nonperforming loans to total loans
Nonperforming assets to total loans (including OREO)
Nonperforming assets to total assets
* Loans on nonaccrual status include collateral-dependent loans. See the Footnote titled “Loans and Allowance for Credit Losses” of Part II Item 8 “Financial Statements and Supplementary Data” for the components within the nonaccrual loans to total loans and ACLL to nonaccrual loans ratios, as well as additional discussion regarding nonaccrual loans and collateral-dependent loans.
** Loans past due 90-days-or-more and still accruing consist of smaller balance consumer loans.
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Table 20 — Nonperforming Loan Composition
December 31, (dollars in thousands)
Balance
Percent of Total Loan Class
Balance
Percent of Total Loan Class
Traditional Banking:
Residential real estate:
Owner-occupied
Nonowner-occupied
Commercial real estate:
Owner-occupied
Nonowner-occupied
Multi-Family
Construction & land development
Commercial & industrial
Lease financing receivables
Aircraft
Home equity
Consumer:
Credit cards
Overdrafts
Automobile loans
Other consumer
Total Traditional Banking
Warehouse lines of credit
Total Core Banking
Republic Processing Group:
Tax Refund Solutions:
Refund Advances
Other TRS commercial & industrial loans
Republic Credit Solutions
Total Republic Processing Group
Total nonperforming loans
Note: Loan segments as of December 31, 2024 changed from those defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as the CRE loan pool was further segmented into Owner-occupied CRE, Nonowner-occupied CRE, and Multi-family beginning in 2025.
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Table 21 — Stratification of Nonperforming Loans
Number of Nonperforming Loans and Recorded Investment
Balance
Balance
Balance
Total
December 31, 2025 (dollars in thousands)
Balance
Traditional Banking:
Residential real estate:
Owner-occupied
Nonowner-occupied
Commercial real estate:
Owner-occupied
Nonowner-occupied
Multi-Family
Construction & land development
Commercial & industrial
Lease financing receivables
Aircraft
Home equity
Consumer:
Credit cards
Overdrafts
Automobile loans
Other consumer
Total Traditional Banking
Warehouse lines of credit
Total Core Banking
Republic Processing Group:
Tax Refund Solutions:
Refund Advances
Other TRS commercial & industrial loans
Republic Credit Solutions
Total Republic Processing Group
Total
Number of Nonperforming Loans and Recorded Investment
Balance
Balance
Balance
Total
December 31, 2024 (dollars in thousands)
Balance
Traditional Banking:
Residential real estate:
Owner-occupied
Nonowner-occupied
Commercial real estate:
Owner-occupied
Nonowner-occupied
Multi-Family
Construction & land development
Commercial & industrial
Lease financing receivables
Aircraft
Home equity
Consumer:
Credit cards
Overdrafts
Automobile loans
Other consumer
Total Traditional Banking
Warehouse lines of credit
Total Core Banking
Republic Processing Group:
Tax Refund Solutions:
Refund Advances
Other TRS commercial & industrial loans
Republic Credit Solutions
Total Republic Processing Group
Total
NM – Not meaningful. RCS loans are small dollar homogenous consumer loans.
Note: Loan segments as of December 31, 2024 changed from those defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as the CRE loan pool was further segmented into Owner-occupied CRE, Nonowner-occupied CRE, and Multi-family beginning in 2025.
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Table 22 — Rollforward of Nonperforming Loans
Years Ended December 31, (in thousands)
Nonperforming loans at the beginning of the period
Loans added to nonperforming status during the period that remained nonperforming at the end of the period
Loans removed from nonperforming status during the period that were nonperforming at the beginning of the period (see table below)
Principal balance paydowns of loans nonperforming at both period ends
Net change in principal balance of other nonperforming loans*
Nonperforming loans at the end of the period
*Includes RCS loans which are small dollar homogenous consumer loans.
Table 23 — Detail of Loans Removed from Nonperforming Status
Years Ended December 31, (in thousands)
Loans charged-off
Loans transferred to OREO
Loan payoffs and paydowns
Loans returned to accrual status
Total loans removed from nonperforming status during the period that were nonperforming at the beginning of the period
Interest income that would have been recorded if nonaccrual loans were on a current basis in accordance with their original terms was $1.5 million, $703,000, and $912,000 in 2025, 2024 and 2023.
Based on the Bank’s review as of December 31, 2025, management believes that its reserves are adequate to absorb expected losses on all nonperforming credits.
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Delinquent Loans
Total Company delinquent loans to total loans increased to 0.42% as of December 31, 2025, from 0.38% as of December 31, 2024. Core Bank delinquent loans to total Core Bank loans increased to 0.26% as of December 31, 2025, from 0.20% as of December 31, 2024. Except for small-dollar consumer loans, all Traditional Bank loans past due 90-days-or-more as of December 31, 2025, and December 31, 2024, were on nonaccrual status.
Table 24 — Delinquent Loan Composition *
Percent of
Percent of
Total
Total
Years Ended December 31, (in thousands)
Balance
Loan Class
Balance
Loan Class
Traditional Banking:
Residential real estate:
Owner-occupied
Nonowner-occupied
Commercial real estate:
Construction & land development
Commercial & industrial
Lease financing receivables
Aircraft
Home equity
Consumer:
Credit cards
Overdrafts
Automobile loans
Other consumer
Total Traditional Banking
Warehouse lines of credit
Total Core Banking
Republic Processing Group:
Tax Refund Solutions:
Refund Advances
Other TRS commercial & industrial loans
Republic Credit Solutions
Total Republic Processing Group
Total delinquent loans
Note: Loan segments as of December 31, 2024 changed from those defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as the CRE loan pool was further segmented into Owner-occupied CRE, Nonowner-occupied CRE, and Multi-family beginning in 2025.
*Represents total loans 30-days-or-more past due. Delinquent status may be determined by either the number of days past due or number of payments past due.
Table 25 — Rollforward of Delinquent Loans
Years Ended December 31, (in thousands)
Delinquent loans at the beginning of the period
Loans added to delinquency status during the period and remained in delinquency status at the end of the period
Loans removed from delinquency status during the period that were in delinquency status at the beginning of the period (see table below)
Principal balance paydowns of loans delinquent at both period ends
Net change in principal balance of other delinquent loans*
Delinquent loans at the end of period
*Includes RCS loans which are small dollar homogenous consumer loans.
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Table 26 — Detail of Loans Removed from Delinquent Status
Years Ended December 31, (in thousands)
Loans charged-off
Loans transferred to OREO
Loan payoffs and paydowns
Loans paid current
Total loans removed from delinquency status during the period that were in delinquency status at the beginning of the period
Collateral-Dependent Loans and Loan Modifications
When management determines that a loan is collateral dependent and that foreclosure is probable, expected credit losses are measured using the fair value of the collateral as of the reporting date, adjusted for estimated selling costs, when applicable.
In accordance with the Bank’s charge-off policy, the Bank will charge-off all, or the portion of, its recorded investment in a collateral-dependent loan when it concludes that the full amount of contractual principal and interest is not expected to be collected.
A loan modification occurs when, due to a borrower’s financial difficulties, the Bank grants a concession that it would not otherwise consider. Most modifications involve restructuring the loan’s original terms, including—depending on the borrower’s circumstances—a temporary payment reduction requiring only interest and escrow (if applicable), a reduction in the contractual interest rate, and/or an extension of the loan’s maturity date.
Loans on nonaccrual status that are subsequently modified continue to remain on nonaccrual and are reported as nonperforming until the borrower demonstrates sustained repayment capacity in accordance with the modified terms.
Accruing loans that are modified are evaluated for nonaccrual classification based on a current assessment of the borrower’s financial condition and their demonstrated ability and willingness to repay under the modified terms.
Collateral-dependent loan modifications made during 2025 totaled $5 million and there were $33 million of collateral-dependent loans outstanding on the Company’s balance sheet at December 31, 2025.
Collateral-dependent loan modifications made during 2024 totaled $885,000 and there were $30 million of collateral-dependent loans outstanding on the Company’s balance sheet at December 31, 2024.
Federal Home Loan Bank Stock
FHLB stock holdings increased $8 million, or 31%, to $32 million at December 31, 2025, compared to $25 million at December 31, 2024. As FHLB members are required to hold specified levels of FHLB stock based on the amount of outstanding advances, the Company’s FHLB stock holdings fluctuate in line with its borrowing activity from period to period.
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Premises and Equipment
Premises and equipment are presented on the consolidated balance sheets net of related accumulated depreciation, as well as fair-value adjustments associated with purchase accounting. Premises and equipment increased $4 million, or 11%, between December 31, 2024 and December 31, 2025. The Company’s branch network currently consists of 47 locations across Kentucky, Indiana, Florida, Ohio, and Tennessee.
Right-of-Use Assets and Operating Lease Liabilities
The Company records right-of-use assets for the underlying leased property. Operating lease liabilities represent the present value of its required minimum lease payments plus any amounts probable of being owed under a residual value guarantee.
Goodwill
At December 31, 2025 and December 31, 2024, the Company had $41 million of goodwill recorded on its balance sheet. Of this amount, $24 million related to the CBank acquisition (2023), while Goodwill of $6 million and $10 million were attributed to the acquisitions of Cornerstone Community Bank (2016) and GulfStream Community Bank (2006).
Events that may trigger goodwill impairment include deterioration in economic conditions, declines in market-dependent valuation metrics (such as the Company’s stock price falling below tangible book value), negative trends in overall financial performance, and regulatory actions. As of September 30, 2025, the Company performed its annual qualitative assessment to evaluate whether it was more-likely-than-not that the fair value of its reporting units exceeded their carrying value, including goodwill. The qualitative assessment indicated that it was not more-likely-than-not that the carrying value of the reporting units exceeded their fair value.
Core Deposit Intangible Assets
CDIs arising from business acquisitions are initially measured at fair value and are subsequently amortized using an accelerated method over their estimated useful lives. As of December 31, 2025 and December 31, 2024, the Company’s CDI assets totaled $1.5 million and $2.0 million, respectively.
Other Real Estate Owned
The fair value of OREO represents the estimated amount management expects to realize upon the sale of the property, net of estimated costs to sell. Fair value estimates are based on the most recent available real estate appraisals, adjusted as necessary for factors such as property type, the age of the appraisal, the current condition and status of the property, and other relevant market or property-specific considerations.
Table 27 — Rollforward of Other Real Estate Owned Activity
Years Ended December 31, (in thousands)
OREO at beginning of period
Transfer from loans to OREO
Proceeds from sale*
Net gain on sale
Writedowns
OREO at end of period
*Inclusive of non-cash proceeds where the Bank financed the sale of the property.
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Bank Owned Life Insurance
BOLI offers tax advantaged noninterest income that serves to offset employee benefits expenses. BOLI assets increased $4 million, or 3%, to $111 million at December 31, 2025, compared to $107 million at December 31, 2024. The increase was driven by appreciation in cash-surrender values within the policy plans and a §1035 policy exchange executed in 2025 to enhance the overall yield of the portfolio.
Table 28 — Rollforward of Bank Owned Life Insurance
Years ended December 31, (in thousands)
BOLI at beginning of period
BOLI acquired
Death benefits paid from cash surrender value
Increase in cash surrender value
BOLI at end of period
Other Assets and Other Liabilities
Other assets increased $4 million, or 2%, to $201 million between December 31, 2024, and December 31, 2025. Other liabilities increased $1 million, or 1%, to $110 million over the same period.
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Deposits
Table 29 — Deposit Composition
December 31, (dollars in thousands)
Core Bank:
Demand
Money market
Savings
Reciprocal money market
Individual retirement accounts (1)
Time deposits, $250 and over (1)
Other certificates of deposit (1)
Reciprocal time deposits (1)
Wholesale brokered deposits (1)
Total Core Bank interest-bearing deposits
Total Core Bank noninterest-bearing deposits
Total Core Bank deposits
Republic Processing Group:
Wholesale brokered deposits (1)
Interest-bearing prepaid card deposits
Money market accounts
Total RPG interest-bearing deposits
Noninterest-bearing prepaid card deposits
Other noninterest-bearing deposits
Total RPG noninterest-bearing deposits
Total RPG deposits
Total deposits
Represents time deposits.
Total Company deposits decreased $7 million from December 31, 2024, to $5.20 billion as of December 31, 2025.
Core Bank
Total Core Bank deposits increased by $203 million, or 4%, from December 31, 2024 to December 31, 2025, as a $224 million increase in interest-bearing deposits was partially offset by a $21 million decline in noninterest-bearing deposits over the same period.
Core Bank consumer and money market accounts—which generally pay premium rates—grew $203 million, or 16%, during 2025. Time deposits also increased $77 million, ending the year at $481 million. These increases within the interest-bearing deposit category were partially offset by a $55 million decline in NOW/savings accounts, which include lower costing Traditional Bank client accounts and higher costing third party listing service accounts. The Core Bank continues to experience a migration from lower-costing interest-bearing and noninterest-bearing deposits into higher-costing deposit categories as customers respond to the current rate environment.
While Core Bank period-end noninterest-bearing deposits decreased $21 million for the 2025, the average balances of Core Bank noninterest-bearing deposits for 2025 decreased $44 million, or 4%, compared to 2024. Overall, the Core Bank’s noninterest-bearing deposits have experienced a general quarterly decline in balances dating back to the fourth quarter of 2022.
Management believes the Company is more likely to experience slower overall growth, and possibly, contraction in its noninterest-bearing deposits over the near future.
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Republic Processing Group
Within RPG, period-end total deposit balances decreased $210 million, or 35%, during 2025. Of this decline, $200 million related to the scheduled maturity of short-term brokered deposits that had been used to partially fund TRS ERA/RA loan volume for the 2025 Tax Season. The Company did not utilize short-term brokered deposits during the fourth quarter of 2025 to fund the upcoming 2026 Tax Season.
Deposits related to the RPS prepaid card program declined $20 million, or 6%, during 2025 driven primarily by a contraction in balances from the segment’s largest marketer-servicer. As previously disclosed, RPS began sharing a sizable portion of the interest income earned on its prepaid card balances with its prepaid card marketer-servicer beginning in the first quarter of 2024. This revenue share, recorded as interest expense on deposits, totaled $4.8 million in 2024. However, throughout 2025, program balances did not reach the minimum contractual thresholds required to earn a revenue share. Partially offsetting the favorable reduction in revenue share expense, RPS earned a lower yield on average prepaid program balances during the year due to reductions in the overnight FFTR.
All prepaid card deposit balances subject to a revenue-share arrangement are reported as interest-bearing deposits for as long as they remain subject to such arrangements. Conversely, for any periods reported prior to 2024, these balances are classified as noninterest-bearing deposits, as they were not subject to a revenue-share arrangement during those periods.
Table 30 — Average Deposits
Average
Average
Average
Average
Average
Average
Years ended December 31, (dollars in thousands)
Balance
Rate
Balance
Rate
Balance
Rate
Transaction accounts
Money market accounts
Time deposits
Reciprocal money market accounts
Reciprocal time deposits
Brokered deposits
Total average interest-bearing deposits
Total average noninterest-bearing deposits
Total average deposits
Table 31 — Maturity Schedule of Time Deposits in Excess of the FDIC Limit and Estimated Time Deposits that are Otherwise Uninsured as of December 31, 2025
Individual Instruments
Estimated
Estimated
that Meet or Exceed the
Otherwise Uninsured
Otherwise Insured
Maturity (dollars in thousands)
FDIC Insurance Limit
Time Deposits
Time Deposits
Three months or less
Over three months through six months
Over six months through 12 months
Over 12 months
Total
The Bank held total estimated uninsured deposits of $2.15 billion as of December 31, 2025 and $1.91 billion as of December 31, 2024.
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Securities Sold Under Agreements to Repurchase
SSUARs are collateralized by securities and are accounted for as financings. Accordingly, the securities underlying these agreements are recorded as assets and held by a safekeeping agent, while the related obligations to repurchase the securities are recorded as liabilities. All underlying securities remain under the Bank’s control throughout the term of the agreements. SSUARs generally represent large customer deposit relationships that require collateralization in excess of the $250,000 FDIC insurance limit, and the Bank pledges securities to satisfy these collateral requirements.
SSUARs decreased $15 million, or 14%, during 2025 to $89 million as of December 31, 2025. Due to the size of the underlying relationships, large fluctuations in the underlying account balances from period to period are common.
Table 32 — Securities Sold Under Agreements to Repurchase
As of and for the Years Ended December 31, (dollars in thousands)
Outstanding balance at end of period
Weighted-average interest rate at period end
Average outstanding balance during the period
Average interest rate during the period
Maximum outstanding at any month end
Federal Home Loan Bank Advances
FHLB advances totaled $506 million as of December 31, 2025, compared to $395 million as of December 31, 2024. Overnight borrowings increased to $130 million at year-end 2025 from $25 million at year-end 2024 and were generally utilized to fund growth in outstanding Warehouse balances.
The Bank’s utilization of FHLB advances during any given period depends on several factors, including asset growth, deposit growth, current earnings, and expectations for future interest rates. More recently, the Company has used FHLB advances to partially offset outflows in noninterest-bearing deposits and to support overall loan growth.
During the second quarter of 2024, the Bank elected to extend $100 million of FHLB borrowings through a third-party fixed-rate swap executed in May and June. The transaction allowed the Bank to capitalize on the then-inverted yield curve and reduce its overall borrowing costs. As a result, the Bank effectively locked in an annualized cost of 4.42% on this $100 million over a five-year term.
As of December 31, 2025, the Company’s outstanding term FHLB advances had a weighted-average maturity of 1.98 years and a weighted-average cost of 4.16%, both including the impact of the related swaps. Overall use of FHLB advances during a given year is dependent upon many factors including asset growth, deposit growth, current earnings, and expectations of future interest rates, among others.
Table 33 — Federal Home Loan Bank Advances
As of and for the Years Ended December 31, (dollars in thousands)
Outstanding balance at end of period
Weighted-average interest rate at period end
Average outstanding balance during the period
Average interest rate during the period
Maximum outstanding at any month end
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Interest Rate Swaps
Interest rate swap derivatives are reported at fair value in other assets or other liabilities. The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies for hedge accounting as part of a cash flow hedging relationship. For a derivative designated as a cash flow hedge, the effective portion of the derivative’s unrealized gain or loss is recorded as a component of OCI. The amount included in AOCI would be reclassified to current earnings should the hedge no longer be considered effective. Derivatives not designated as hedges are economic derivatives with the gain or loss recognized in current period earnings.
Interest Rate Swaps Used as Cash Flow Hedges
The Bank entered into three interest rate swap agreements during the second quarter of 2024 related to FHLB advances tied to the 1-month SOFR index. The counterparty for all three swaps met the Bank’s credit standards and the Bank believes that the credit risk inherent in the swap contracts is not significant. As of August 8, 2024 the Bank designated the swaps to be effective for hedge accounting purposes. The Bank expects the hedges to remain fully effective during the remaining term of the swaps.
Non-hedge Interest Rate Swaps
The Bank also enters into interest rate swaps to facilitate client transactions and meet their financing needs. Upon entering into these instruments, the Bank enters into offsetting positions in order to minimize the Bank’s interest rate risk. These swaps are derivatives, but are not designated as hedging instruments, and therefore changes in fair value are reported in current year earnings.
Interest rate swap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty or client owes the Bank, and results in credit risk to the Bank. When the fair value of a derivative instrument contract is negative, the Bank owes the client or counterparty, and therefore, has no credit risk.
A summary of the Bank’s interest rate swaps related to clients follows:
Table 34 — Non-hedge Interest Rate Swaps
Notional
Notional
(in thousands)
Bank Position
Amount
Fair Value
Amount
Fair Value
Interest rate swaps with Bank clients - Other assets and accrued interest receivable
Pay variable/receive fixed
Interest rate swaps with Bank clients - Other liabilities and accrued interest payable
Pay variable/receive fixed
Interest rate swaps with Bank clients - Total
Pay variable/receive fixed
Offsetting interest rate swaps with institutional swap dealer - Other assets and accrued interest receivable
Pay fixed/receive variable
Offsetting interest rate swaps with institutional swap dealer - Other liabilities and accrued interest payable
Pay fixed/receive variable
Offsetting interest rate swaps with institutional swap dealer - Total
Pay fixed/receive variable
Total
See the Footnote titled “Interest Rate Swaps” of Part II Item 8 “Financial Statements and Supplementary Data” for further information regarding the Bank’s interest rate swaps.
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Liquidity
The Bank maintains sufficient liquidity to fund routine loan demand and routine deposit withdrawal activity. Liquidity is managed by maintaining sufficient liquid assets, primarily in the form of cash, cash equivalents, and unencumbered investment securities. Funding and cash flows can also be realized through deposit product promotions, the sale of AFS debt securities, principal paydowns on loans and MBSs, and proceeds realized from loans HFS.
Table 35 — Liquid Assets and Borrowing Capacity
The Company’s liquid assets and borrowing capacity included the following:
December 31, (in thousands)
Cash and cash equivalents
Unencumbered debt securities
Total liquid assets
Available borrowing capacity with the FHLB
Available borrowing capacity with the FRB
Available borrowing capacity through unsecured credit lines
Total available borrowing capacity
Total liquid assets and available borrowing capacity
Republic had a period-end loan-to-deposit ratio (excluding brokered deposits) of 107% as of December 31, 2025 and 111% as of December 31, 2024. Republic’s banking centers and its website, www.republicbank.com, provide access to retail deposit markets. These retail deposit products, if offered at attractive rates, have historically been a source of additional funding when needed. If the Bank were to lose a significant funding source, such as a few major depositors, or if any of its lines of credit were cancelled, or if the Bank cannot obtain brokered deposits, the Bank would be compelled to offer market leading deposit interest rates to meet its funding and liquidity needs.
As of December 31, 2025, the Bank had approximately $1.2 billion in deposits from 217 large non-sweep deposit relationships, including reciprocal deposits, where the individual relationship exceeded $2 million for a depositor’s taxpayer identification number. Total uninsured deposits for the Bank were $2.2 billion, or 41%, of total deposits as of December 31, 2025. The 20 largest non-sweep deposit relationships represented approximately $421 million, or 8%, of the Company’s total deposit balances as of December 31, 2025. These accounts do not require collateral; therefore, cash from these accounts can generally be utilized to fund the loan portfolio. If any of these balances were moved from the Bank, the Bank would likely utilize overnight borrowing lines in the short-term to replace the balances. On a longer-term basis, the Bank would likely utilize wholesale-brokered deposits to replace withdrawn balances, or alternatively, higher-cost internet-sourced deposits. Based on experience utilizing brokered deposits and internet-sourced deposits, the Bank believes it can quickly obtain these types of deposits if needed. The overall cost of gathering these types of deposits, however, could be substantially higher than the Traditional Bank deposits they replace, potentially decreasing the Bank’s earnings.
The Bank’s liquidity is impacted by its ability to sell certain investment securities, which is limited due to the level of investment securities that are needed to secure public deposits, SSUAR, FHLB advances, and for other purposes, as required by law. As of December 31, 2025, and December 31, 2024, these pledged investment securities had a fair value of $131 million and $152 million.
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Capital
Table 36 — Capital
Information pertaining to the Company’s capital balances and ratios follows:
As of and for the Years Ended December 31, (dollars in thousands, except per share data)
Stockholders’ equity
Book value per share at December 31,
Tangible book value per share at December 31,
Dividends declared per share - Class A Common Stock
Dividends declared per share - Class B Common Stock
Average stockholders’ equity to average total assets
Total risk-based capital
Common equity tier 1 capital
Tier 1 risk-based capital
Tier 1 leverage capital
Dividend payout ratio
Dividend yield
*See the section titled “Non-GAAP Financial Measures” at the end of this section of the report.
The Company and the Bank elected in 2020 to defer the regulatory capital impact of adopting CECL. The deferral period spanned five years and allowed 100% of the estimated CECL impact to be deferred during the first two years, followed by a phased-in recognition over the subsequent three years. Absent this election, the Company’s regulatory capital ratios as of December 31, 2024 would have been approximately 3 bps lower than the ratios presented in the table above.
Total stockholders’ equity increased from $992 million as of December 31, 2024, to $1.10 billion as of December 31, 2025. The increase in stockholders’ equity was attributable to net income earned during 2025 reduced primarily by cash dividends declared.
See Part II, Item 5. “Unregistered Sales of Equity Securities and Use of Proceeds” for additional detail regarding stock repurchases and stock buyback programs.
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 January 1, 2026, RB&T could, without prior approval, declare dividends of approximately $179 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.
Regulatory Capital Requirements — The Company and the Bank are subject to capital regulations in accordance with Basel III, as administered by banking regulators. Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Republic’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Parent Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain OBS items, as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators regarding components, risk weightings, and other factors.
Banking regulators have categorized the Bank as well capitalized. For prompt corrective action, the regulations in accordance with Basel III define “well capitalized” as a 10.0% Total Risk-Based Capital ratio, a 6.5% Common Equity Tier 1 Risk-Based Capital ratio, an
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8.0% Tier 1 Risk-Based Capital ratio, and a 5.0% Tier 1 Leverage ratio. Additionally, to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, the Company and Bank must hold a capital conservation buffer of 2.5% composed of Common Equity Tier 1 Risk-Based Capital above their minimum risk-based capital requirements.
Republic continues to exceed the regulatory requirements for Total Risk Based Capital, Common Equity Tier I Risk Based Capital, Tier I Risk Based Capital and Tier I Leverage Capital. Republic and the Bank intend to maintain a capital position that meets or exceeds the “well-capitalized” requirements as defined by the FRB and the FDIC, in addition to the Capital Conservation Buffer. Formal measurements of the capital ratios for Republic and the Bank are performed by the Company at each quarter end.
Contractual Obligations and Commitments
The Company or the Bank has required future payments under various contractual obligations and other commitments.
See the following titled Footnotes within Part II Item 8 “Financial Statements and Supplementary Data” for additional detail regarding contractual obligations and other commitments of the Company or Bank :
“Right-of-Use Assets and Operating Lease Liabilities”
“Deposits”
“Securities Sold Under Agreements to Repurchase”
“Off-Balance Sheet Risks, Commitments, and Contingent Liabilities”
“Benefit Plans”
“Low Income Housing Tax Credit Investments”
In addition, the Bank maintains contractual obligations for its technological needs, including its enterprise risk management application, customer relationship management application, internet banking platform, and its core accounting application.
Asset/Liability Management and Market Risk
Asset/liability management is designed to ensure safety and soundness, maintain liquidity, meet regulatory capital standards, and achieve acceptable net interest income based on the Bank’s risk tolerance. Interest rate risk is the exposure to adverse changes in net interest income as a result of market fluctuations in interest rates. The Bank, on an ongoing basis, monitors interest rate and liquidity risk to implement appropriate funding and balance sheet strategies. Management considers interest rate risk to be a significant risk to the Bank’s overall earnings and balance sheet.
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 bp 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 December 31, 2025, a dynamic simulation model was run for interest rate changes from “Down 400” bps to “Up 400” bps. The following table illustrates the Bank’s projected percent change from its Base net interest income over the period beginning January 1, 2026, and ending December 31, 2026, based on instantaneous movements in interest rates from Down 400 to Up 400 bps equally across all points on the yield curve. The Bank’s dynamic earnings simulation model includes secondary market loan fees, which are a component of mortgage banking income within noninterest income and excludes Traditional Bank loan fees.
Table 37 — Bank Interest Rate Sensitivity
Change in Rates
Basis Points
Basis Points
Basis Points
Basis Points
Basis Points
Basis Points
Basis Points
Basis Points
% Change from base net interest income as of December 31, 2025
% Change from base net interest income as of December 31, 2024
The results of the interest rate sensitivity analysis performed as of December 31, 2025, were derived from subjective assumptions the Company uses in its earnings simulation model, particularly in relation to deposit betas, which measure how responsive management’s deposit repricing may be to changes in market rates based on historical data. Management uses different betas in the rising and falling rate scenarios to better simulate expected earnings trends.
The Company’s current interest rate sensitivity analysis projects that increases in market interest rates (in all illustrated scenarios) would have a positive effect on net interest income, while decreases in market interest rates (in all illustrated scenarios) would have a negative impact. These results depict an asset-sensitive interest rate risk profile.
In comparing the Company’s interest rate sensitivity projections from December 31, 2024, to December 31, 2025, there were notable changes in all illustrated scenarios. In declining market interest rate scenarios, the Company projects that the rates the Company pays for its non-maturity, interest-bearing deposits cannot be lowered sufficiently to offset the decrease in interest income associated with its declining asset yields. Conversely, the Company projects a notable improvement in all illustrated scenarios, as the yield the Company projects it will earn for its interest-earning assets is expected to increase more than the increase in its projected funding costs.
More specifically, driving the period-to-period improvement in net interest income in the illustrated up-rate scenarios are the following:
The Company had higher floating rate loan balances as of December 31, 2025, most notably within the Warehouse lending portfolio, with yields that increase immediately in an up-rate scenario. More specifically, driving the period-to-period deterioration in net interest income in the illustrated down-rate scenarios are the following:
The elevated average interest-earning cash balances that are projected to benefit net interest income in the illustrated up-rate scenarios are projected to drive corresponding declines to net interest income in the illustrated down-rate rate scenarios; and
Management lowered its deposit beta assumptions to assume that, due to greater competition for deposits and liquidity, it will not be able to sufficiently lower the rates the Company pays for its premium rate, non-maturity interest-bearing deposits in order to offset the projected decline in the Company’s interest-earning assets yields.
For additional discussion regarding the Bank’s net interest income, see the sections titled “Net Interest Income” in this section of the report under “RESULTS OF OPERATIONS.”
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Non-GAAP Financial Measures
The following table provides a reconciliation of total stockholders’ equity in accordance with GAAP to tangible stockholders’ equity, a non-GAAP disclosure. The Company provides the tangible book value per share, a non-GAAP measure, in addition to those defined by banking regulators, because of its widespread use by investors to evaluate capital adequacy.
(dollars in thousands, except per share data)
December 31, 2025
December 31, 2024
Total stockholders' equity - GAAP (a)
Less: Goodwill
Less: Mortgage servicing rights
Less: Core deposit intangible
Tangible stockholders' equity - Non-GAAP (c)
Total assets - GAAP (b)
Less: Goodwill
Less: Mortgage servicing rights
Less: Core deposit intangible
Tangible assets - Non-GAAP (d)
Total stockholders' equity to total assets - GAAP (a/b)
Tangible stockholders' equity to tangible assets - Non-GAAP (c/d)
Number of shares outstanding (e)
Book value per share - GAAP (a/e)
Tangible book value per share - Non-GAAP (c/e)
The efficiency ratio, a non-GAAP measure, equals total noninterest expense divided by the sum of net interest income and noninterest income (total revenue). The adjusted efficiency ratio, a non-GAAP measure with no GAAP comparable, excludes notable nonrecurring revenues and expenses related to the gain on the sale of Visa Class B-1 shares, gain on sale of consumer credit cards, insurance proceeds, expenses related to the Bank’s planned core system conversion, as well as merger expenses.
Years Ended
(dollars in thousands)
December 31, 2025
December 31, 2024
December 31, 2023
Net interest income - GAAP (a)
Noninterest income - GAAP (b)
Total net revenue - GAAP (c)
Less: Gain on sale of Visa Class B-1 shares
Less: Gain on sale of consumer credit card portfolio
Less: Insurance proceeds
Less: BOLI benefit payment received
Total adjusted revenue - Non-GAAP (e)
Noninterest expense - GAAP (d)
Less: Merger expenses
Less: Core conversion and contract consulting fees
Total adjusted noninterest expense - Non-GAAP (f)
Efficiency Ratio - GAAP (d/c)
Adjusted Efficiency Ratio - Non-GAAP (f/e)
