REPUBLIC BANCORP INC /KY/

Previous wording

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.

Current wording

Republic’s consolidated financial statements and accompanying notes have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates.

Previous wording

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.

Current wording

Management continually evaluates the accounting policies and estimates used in preparing the consolidated financial statements. Estimates and assumptions are based on historical experience, accounting and regulatory guidance, and information obtained from independent third parties, when applicable. Actual results may differ from those estimates.

Previous wording

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.

Current wording

Critical accounting policies are those that management believes are most important to the portrayal of the Company's financial condition and results of operations and require the use of difficult, subjective, or complex judgments. In determining whether an accounting policy is critical, management considers several factors, including the significance of the estimates to the financial statements, the degree of judgment involved, the availability of observable or independently verifiable information, the sensitivity of the estimates to changes in economic conditions, and the extent to which alternative accounting methods may be applied under GAAP. Management has discussed its critical accounting policies and the process used to identify them with the Audit Committee.

Previous wording

As of March 31, 2026, 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.

Current wording

As of June 30, 2026, the Bank maintained an ACLL for expected credit losses inherent in the loan portfolio, including overdrawn deposit accounts. Management evaluates the adequacy of the ACLL on a monthly basis and reviews the ACLL with both the Audit Committee and Board quarterly.

Previous wording

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.

Current wording

The Company estimates the ACLL using a static-pool CECL methodology that analyzes historical loan pools over their expected lives to derive loss rates, which are adjusted for current conditions and reasonable and supportable forecasts before being applied to the outstanding balances of the respective loan pools. Due to its historical correlation with the Company's net charge-off experience, the U.S. unemployment rate serves as the primary economic forecast variable. CRE and C&I vacancy rates are also considered as secondary forecast variables. Following the one-year reasonable and supportable forecast period, loss rates are assumed to revert immediately to long-term historical averages. Historical loss rates are further adjusted for current conditions, including changes in underwriting standards, portfolio composition, loan terms, delinquency trends, property values, and other relevant environmental factors.

Previous wording

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.

Current wording

The ACLL is significantly influenced by the composition, characteristics, and credit quality of the Company’s loan portfolio, as well as the economic conditions and forecasts incorporated into the CECL model. Changes in these or other relevant factors may result in increased volatility in the ACLL and, consequently, the Company's earnings.

Previous wording

The Company’s Executive Chair/CEOserves 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.

Current wording

Reportable segments are determined based on the products and services offered and the level of information provided to the CODM. The CODM uses this information to review the performance of various components of the business, including banking centers and business units, which are aggregated when their operating performance, products and services, and clients are similar. The Company’s Executive Chair and CEO serves as the Company’s CODM. Income before income tax expense is the measure of segment profit or loss regularly reviewed by the CODM and used to allocate resources and evaluate performance.

Previous wording

The Traditional Bank segment provides traditional banking products and services primarily to customers in the Company’s market footprint, with all products and services generally offered under the Company’s traditional RB&T brand. As of March 31, 2026, Republic had 47 full-service banking centers with locations as follows:

Current wording

The Traditional Banking segment provides traditional banking products and services primarily to customers in the Company’s market footprint, with all products and services generally offered under the Company’s traditional RB&T brand. As of June 30, 2026, Republic had 47 full-service banking centers with locations as follows:

Previous wording

Traditional Bank 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 Bank 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, and 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.

Current wording

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, and 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.

Previous wording

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

Current wording

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

Previous wording

Traditional Bank operating expenses consist primarily of salaries and employee benefits; technology, equipment, and communication; occupancy; interchange related expense; marketing and development; FDIC insurance expense; and various other general and administrative costs. Traditional Bank results of operations are significantly impacted by general economic and competitive conditions, particularly changes in market interest rates, government laws and policies, and actions of regulatory agencies.

Current wording

Traditional Banking operating expenses consist primarily of salaries and employee benefits, technology, equipment and communication costs, occupancy expenses, marketing and development expenses, FDIC insurance, interchange and card processing fees, legal and professional services, and other general and administrative expenses. Traditional Banking results are significantly influenced by general economic and competitive conditions, including changes in market interest rates, governmental laws and policies, and regulatory actions.

Previous wording

Traditional Bank lending activities consist of the following:

Current wording

Traditional Banking lending activities consist of the following:

Previous wording

Single-family, first-lien RRE loans with fixed-rate periods of 15, 20, and 30 years are primarily originated and sold into the secondary market. MSR’s attached to the sold portfolio are either sold along with the loan or retained. Loans sold into the secondary market, along with their corresponding MSR’s, are included as a component of the Company’s Traditional Bank segment, as discussed elsewhere in this report. The Bank, as it has in the past, may retain such longer-term, fixed-rate loans from time to time in the future to help combat NIM compression.

Current wording

Single-family, first-lien RRE loans with fixed-rate periods of 15, 20, and 30 years are primarily originated and sold into the secondary market. MSR’s attached to the sold portfolio are either sold along with the loan or retained. Loans sold into the secondary market, along with their corresponding MSR’s, are included as a component of the Company’s Traditional Banking segment, as discussed elsewhere in this report. The Bank, as it has in the past, may retain such longer-term, fixed-rate loans from time to time in the future to help combat NIM compression.

Previous wording

CRE and multi-family loans are typically secured by improved property such as office buildings, medical facilities, retail centers, warehouses, apartment buildings, condominiums, schools, religious institutions, and other types of commercial use property. TheCRE Banking group, which launched in 2022, focuses on large CRE projects, typically in amounts from $5 million to $25 million. Borrowers are generally single-asset entities and the underlying collateral is nonowner-occupied. Primary underwriting considerations are cash flow projections (current and historical), financial capacity of sponsors, and collateral value financed.

Current wording

CRE and multi-family loans are typically secured by improved property such as office buildings, medical facilities, retail centers, warehouses, apartment buildings, condominiums, schools, religious institutions, and other types of CRE use property. TheCRE Banking group, which launched in 2022, focuses on large CRE projects, typically in amounts from $5 million to $25 million. Borrowers are generally single-asset entities and the underlying collateral is nonowner-occupied. Primary underwriting considerations are cash flow projections (current and historical), financial capacity of sponsors, and collateral value financed.

Previous wording

TheBusiness Banking group, reporting under Retail Banking in most markets, focuses on locally based small businesses in the Bank’s market footprint with primary annual revenues up to $10 million and borrowings between $350,000 and $1 million. The needs of these clients range from expansion or acquisition financing, equipment financing, owner-occupied real estate financing, and smaller operating lines of credit.

Current wording

TheBusiness Banking group, reporting under Retail Banking in most markets, focuses on locally based small businesses in the Bank’s market footprint with primarily annual revenues up to $10 million and borrowings between $350,000 and $1 million. The needs of these clients range from expansion or acquisition financing, equipment financing, owner-occupied real estate financing, and smaller operating lines of credit.

Previous wording

Lease financing receivables, which are generally direct financing leases, are reported at their principal balance outstanding, including any lease residual amount, net of any unearned income, deferred loan fees and costs, and applicable ACLL. Leasing income is recognized on the basis that achieves a constant periodic rate of return on the outstanding lease financing balances over the lease terms. During the fourth quarter of 2025, approximately $82 million of loans and leases were reclassified from held for investment to HFS, asthe Bank entered into an Asset Purchase Agreement to sell its St. Louis-based RBF operations during December 2025. The transaction closed in February 2026 and the Traditional Bank recorded a gain, net of broker commissions, of $5.8 million during the first quarter of 2026.

Current wording

Lease financing receivables, which are generally direct financing leases, are reported at their principal balance outstanding, including any lease residual amount, net of any unearned income, deferred loan fees and costs, and applicable ACLL. Leasing income is recognized on the basis that achieves a constant periodic rate of return on the outstanding lease financing balances over the lease terms. During December 2025, approximately $82 million of loans and leases were transferred from held for investment to HFS, asthe Bank entered into an Asset Purchase Agreement to sell its St. Louis-based RBF operations. The sale was completed during the first quarter of 2026, resulting in a $5.8 million pre-tax gain, net of broker commissions.

Previous wording

Construction & Land Development Lending — The Bank originates business loans for the construction of both single-family, residential properties and commercial properties (apartment complexes, shopping centers and office buildings) to borrowers primarily located within the Bank’s market footprint or in an adjoining market. While not a major focus for the Bank, the Bank may originate loans for the acquisition and development of residential or commercial land into buildable lots.

Current wording

Construction & Land Development Lending — The Bank originates business loans for the construction of both single-family, RRE properties and CRE properties (apartment complexes, shopping centers and office buildings) to borrowers primarily located within the Bank’s market footprint or in an adjoining market. While not a major focus for the Bank, the Bank may originate loans for the acquisition and development of RRE or CRE land into buildable lots.

Previous wording

Single-family, residential-construction loans are made in the Bank’s market area to established homebuilders with solid financial records. The majority of these loans are made for “contract” homes that the builder has already pre-sold to a homebuyer.

Current wording

Single-family, RRE-construction loans are made in the Bank’s market area to established homebuilders with solid financial records. The majority of these loans are made for “contract” homes that the builder has already pre-sold to a homebuyer.

Previous wording

**Consumer Lending —**Traditional Bank consumer loans include home improvement and home equity loans, other secured and unsecured personal loans, and credit cards originated to borrowers primarily located within the Bank’s market footprint or in an adjoining market. In 2024, the Traditional Bank ceased originating new consumer credit cards and sold its $5 million portfolio in the second quarter of 2025, recognizing a $328,000 pre-tax gain in other noninterest income. With the exception of home equity loans, which are actively marketed in conjunction with single-family, first-lien RRE loans, other Traditional Banking consumer loan products, while available, are not and have not been actively promoted within the Bank’s markets.

Current wording

**Consumer Lending —**Traditional Banking consumer loans include home improvement and home equity loans, other secured and unsecured personal loans, and credit cards originated to borrowers primarily located within the Bank’s market footprint or in an adjoining market. In 2024, the Traditional Banking segment ceased originating new consumer credit cards and sold its $5 million portfolio in the second quarter of 2025, recognizing a $328,000 pre-tax net gain in other noninterest income. With the exception of home equity loans, which are actively marketed in conjunction with single-family, first-lien RRE loans, other Traditional Banking consumer loan products, while available, are not and have not been actively promoted within the Bank’s markets.

Previous wording

Since its introduction in December of 2022, the ERA loan product has been structured similarly to the RA, with the primary differences being the timing of when the ERAs are originated and the documentation available to underwrite the ERAs. The ERA is originated prior to the taxpayer receiving their fiscal year taxable income documentation, such as Form W-2, and the filing of the taxpayer’s final federal tax return. As such, the Company generally uses paystub information to underwrite the ERA. The repayment of the ERA is incumbent upon the taxpayer client returning to the Bank’s Tax Provider for the filing of their final federal tax return in order for the tax refund to potentially be received by the Bank from the federal government to pay off the advance. The ERA product had the following features during the 2025 and 2026 Tax Seasons:

Current wording

The ERA loan product is structured similarly to the RA, with the primary differences being the timing of when the ERAs are originated and the documentation available to underwrite the ERAs. The ERA is originated prior to the taxpayer receiving their fiscal year taxable income documentation, such as Form W-2, and the filing of the taxpayer’s final federal tax return. As such, the Company generally uses paystub information to underwrite the ERA. The repayment of the ERA is incumbent upon the taxpayer client returning to the Bank’s Tax Provider for the filing of their final federal tax return in order for the tax refund to potentially be received by the Bank from the federal government to pay off the advance. The ERA product had the following features during the 2025 and 2026 Tax Seasons:

Previous wording

The Company reports fees earned forERAs/RAsas “Interest income on loans.” The number of days for delinquency eligibility is based on management’s annual analysis of tax return processing times. RAs, including ERAs that were originated related to the first quarter 2025 Tax Season were repaid, on average, within 32 days after the taxpayer’s tax return was submitted to the applicable taxing authority. Since ERAs/RAs do not have a contractual due date, the Company considered the advance delinquent during 2026 if it remained unpaid 35 days after the taxpayer’s tax return was submitted to the applicable taxing authority.

Current wording

The Company reports fees earned forERAs/RAsas “Interest income on loans.”

Previous wording

Provisions on ERAs/RAs are estimated when advances are made. Unpaid ERAs/RAs, related to the first quarter tax filing season of a given year are considered delinquent at June 30th of that year and charged-off. In addition, RAs that are subject to Tax Provider loan loss guarantees will be charged-off as of June 30th and immediately recorded as recoveries of previously charged-off loans with corresponding receivables recorded in other assets for the Tax Provider guarantees. Corresponding receivables are settled during the third quarter of each year. RAs collected during the second half of each year, not subject to loan loss guarantee arrangements, are recorded as recoveries of previously charged-off loans.

Current wording

Provisions on ERAs/RAs are estimated when advances are made. Unpaid ERAs/RAs, related to the first quarter tax filing season of a given year are considered delinquent at June 30th of that year and charged-off. In addition, RAs that are subject to Tax Provider loan loss guarantees are charged-off and immediately recorded as recoveries of previously charged-off loans with corresponding receivables recorded in other assets for the Tax Provider guarantees. Corresponding receivables are settled during the third quarter of each year. RAs collected during the second half of each year, not subject to loan loss guarantee arrangements, are recorded as recoveries of previously charged-off loans.

Previous wording

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. 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.

Current wording

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 of receiving 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 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.

Previous wording

preparation and filing related fees directly from his federal or state government tax refund, with the remainder of the tax refund disbursed directly to the taxpayer. RT fees and all applicable tax preparation, transmitter, audit, and any other taxpayer authorized amounts are deducted from the tax refund by either the Bank or the Bank’s service provider and automatically forwarded to the appropriate party as authorized by the taxpayer. The remainder of the refund is disbursed to the taxpayer by a Bank check, direct deposit to the taxpayer’s personal bank account, or loaded to a prepaid card.

Current wording

RTs are fee-based products whereby a tax refund is issued to the taxpayer after the Bank has received the refund from the federal or state government. There is no credit risk or borrowing cost associated with these products because they are only delivered to the taxpayer upon receipt of the tax refund directly from the governmental paying authority. An RT allows a taxpayer to pay any applicable tax preparation and filing related fees directly from his federal or state government tax refund, with the remainder of the tax refund disbursed directly to the taxpayer. RT fees and all applicable tax preparation, transmitter, audit, and any other taxpayer authorized amounts are deducted from the tax refund by either the Bank or the Bank’s service provider and automatically forwarded to the appropriate party as authorized by the taxpayer. The remainder of the refund is disbursed to the taxpayer by a Bank check, direct deposit to the taxpayer’s personal bank account, or loaded to a prepaid card.

Previous wording

The Company presents RT revenue net of any amounts shared with the Tax Providers. The Bank’s share of RT revenue is generally based on the obligations undertaken by the Tax Provider for each individual RT program, with more obligations generally corresponding to higher RT revenue share. The significant majority of net RT revenue is recognized and obligations under RT contracts fulfilled by the Bank during the first half of each year. Incremental expenses associated with the fulfilment of RT contracts are generally expensed during the first half of each year. Fees earned by the Company on RTs, net of revenue share, are reported as noninterest income under the line item “Net refund transfer fees.”

Current wording

The Company presents RT revenue net of any amounts shared with the Tax Providers. The Bank’s share of RT revenue is generally based on the responsibilities undertaken by the Tax Provider for each individual RT program, with more responsibilities assumed by the Tax Provider generally corresponding to higher RT revenue share earned by the Tax Provider. The significant majority of net RT revenue is recognized and obligations under RT contracts fulfilled by the Bank during the first half of each year. Incremental expenses associated with the fulfilment of RT contracts are generally expensed during the first half of each year. Fees earned by the Company on RTs, net of revenue share, are reported as noninterest income under the line item “Net refund transfer fees.”

Previous wording

The Company reports its share of client-related charges and fees for RPS programs as noninterest income under “Program fees.” Additionally, the Company’s portion of interchange revenue generated by prepaid card transactions is reported as noninterest income under “Interchange fee income.” The Company began sharing interest income revenue with its largest prepaid marketer-servicer during 2024, with the interest shared reported as “Interest expense on deposits.” The Company did not share interest income revenue with its largest prepaid marketer-servicer during 2025 and the first three months of 2026, as minimum deposit balance thresholds were not met.

Current wording

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

Previous wording

Through the RCS segment, the Bank uses third-party service providers to originate two line-of-credit products (“LOC I” and “LOC II”) offered generally to subprime or near-prime borrowers across multiple states. These service providers, operating under the Bank’s oversight and supervision, perform certain marketing, servicing, technology, and support functions. In addition, a separate third-party provides customer support, servicing, and other operational services on the Bank’s behalf. The Bank is the lender for both products and is marketed as such. The Bank establishes and controls the loan terms and underwriting guidelines and exercises consumer-compliance oversight over each product. The Bank sells participation interests in these products as follows:

Current wording

Through the RCS segment, the Bank originates two line of credit products (“LOC I” and “LOC II”) offered generally to subprime or near-prime borrowers across multiple states. These service providers, operating under the Bank’s oversight and supervision, perform certain marketing, servicing, technology, and support functions. In addition, a separate third-party provides customer support, servicing, and other operational services on the Bank’s behalf. The Bank is the lender for both products and is marketed as such. The Bank establishes and controls the loan terms and underwriting guidelines and exercises consumer-compliance oversight over each product. The Bank sells participation interests in these products as follows:

Previous wording

Through the RCS segment, the Bank originates healthcare receivables products across the U.S. through three different third-party service providers. For two of the programs, the Bank retains 100% of the receivables, with recourse in the event of default. For the remaining program, in some instances the Bank retains 100% of the receivables originated, with recourse in the event of default, and in other instances, the Bank sells 100% of the receivables generally within one month of origination. Loan balances HFS through this program are carried at the lower of cost or fair value.

Current wording

Through the RCS segment, the Bank originates healthcare receivables products across the U.S. through two different third-party service providers. For one of the programs, the Bank retains 100% of the receivables, with recourse in the event of default. For the other program, in some instances the Bank retains 100% of the receivables originated, with recourse in the event of default, and in other instances, the Bank sells 100% of the receivables generally within one month of origination. Loan balances HFS through this program are carried at the lower of cost or fair value.

Previous wording

As previously disclosed, TRS’ largest Tax Provider contract based on product volume and revenue was not renewed for the 2026 Tax Season (which began in December 2025). In total, this relationship contributed $8.4 million of net income to first quarter 2025 operating results, consisting of: $17.7 million in net interest income, $9.0 million in provision expense, $3.1 million in RT fees and $967,000 in noninterest expense.

Current wording

As previously disclosed, TRS’ largest Tax Provider contract based on product volume and revenue was not renewed for the 2026 Tax Season (which began in December 2025). In total, this relationship contributed $1.7 million of net income to second quarter 2025 operating results, consisting of: $37,000 of net interest income, $2.3 million of Provision recoveries, $613,000 in net RT fees, $751,000 in noninterest expense, and $471,000 in estimated income tax expense.

Previous wording

Traditional Bank results of operations are primarily dependent upon net interest income, which represents the spread between interest income and fees on interest-earning assets and interest expense on interest-bearing liabilities used to fund those assets. Interest-earning assets primarily consist of investment securities and commercial and consumer loans secured by real estate and/or personal property, while funding sources include interest-bearing deposit accounts, SSUAR, and short- and long-term borrowings. FHLB advances have historically served as a significant source of wholesale funding and liquidity. Accordingly, net interest income is influenced by changes in the volume and mix of interest-earning assets and liabilities, as well as movements in market interest rates.

Current wording

Traditional Banking results of operations are primarily dependent upon net interest income, which represents the spread between interest income and fees on interest-earning assets and interest expense on interest-bearing liabilities used to fund those assets. Interest-earning assets primarily consist of investment securities and commercial and consumer loans secured by real estate and/or personal property, while funding sources include interest-bearing deposit accounts, SSUAR, and short- and long-term borrowings. FHLB advances have historically served as a significant source of wholesale funding and liquidity. Accordingly, net interest income is influenced by changes in the volume and mix of interest-earning assets and liabilities, as well as movements in market interest rates.

Previous wording

Management believes that additional reductions in the FFTR are unlikely to positively impact the Traditional Bank’s net interest income or net interest margin. The ultimate impact of recent or future FFTR decreases will depend on several factors, including the continued shift from noninterest-bearing to interest-bearing deposits, the shape and steepness of the yield curve, customer demand for the Company’s lending and deposit products, the Company’s ability to lower deposit costs in line with benchmark rate declines, and overall liquidity requirements.

Current wording

Based on the Company’s overall interest rate risk position, Management believes that increases in interest rates across the yield curve generally would have a favorable impact on the Company's net interest income, while declines in interest rates generally would have a negative impact on the Company’s net interest income. The ultimate impact of future changes in the FFTR will depend on several factors, including continued migration from noninterest-bearing to interest-bearing deposits, the shape and steepness of the yield curve, customer demand for the Company’s lending and deposit products, the Company’s ability to manage deposit costs relative to changes in benchmark rates and yields on interest-earning assets, and the Company’s overall liquidity requirements.

Previous wording

Items of note impacting the Traditional Bank’s change in net interest income and NIM between the first quarter of 2025 and the first quarter of 2026 were as follows:

Current wording

Items of note impacting the Traditional Bank’s change in net interest income and NIM between the second quarter of 2025 and the second quarter of 2026 were as follows:

Previous wording

The Traditional Bank’s average cost of interest-bearing liabilities decreased from 2.06% during the first quarter of 2025 to 1.65% during the first quarter of 2026 driven primarily by the following:

Current wording

The Traditional Bank’s average cost of interest-bearing liabilities decreased 43 basis points from 2.12% during the second quarter of 2025 to 1.69% during the second quarter of 2026 driven primarily by the following:

Previous wording

Net interest income from the Company’s prepaid card division decreased $957,000, or 24%, from the first quarter of 2025 to the first quarter of 2026. Driving this decrease, RPS earned a reduced yield of 3.69% for its $347 million average of prepaid program balances for the first quarter of 2026 compared to a yield of 4.55% for the $373 million in average prepaid card balances for the first quarter of 2025. The lower earnings rate reflected the 75 basis point decline in the FFTR between the first quarter of 2025 and the first quarter of 2026.

Current wording

Net interest income from the Company’s prepaid card division decreased $557,000, or 16%, from the second quarter of 2025 to the second quarter of 2026. The decline in net interest income reflected a lower yield earned on the segment’s funding source. The lower yield primarily resulted from the 75 basis point decline in the FFTR between the second quarters of 2025 and 2026. As a result, RPS earned a yield of 3.67% on average deposit balances of $370 million during the second quarter of 2026, compared with a yield of 4.28% on average deposit balances of $350 million during the second quarter of 2025.

Previous wording

Additionally, the RPS segment’s largest marketer-servicer did not achieve the minimal contractual thresholds for average deposit balances in order to earn a revenue share for the first quarter of 2025 and 2026. At this time, Management is uncertain how much the revenue share component may be in the future, as deposit balances originated through this marketer-servicer are at levels near the thresholds necessary to achieve a revenue share, making a future revenue share possible, but not certain.

Current wording

The RPS segment’s largest marketer-servicer did not achieve the minimum contractual thresholds for average deposit balances in order to earn a revenue share for the second quarter of 2025 and 2026. At this time, Management is uncertain how much the revenue share component may be in the future, as deposit balances originated through this marketer-servicer are at levels near the thresholds necessary to achieve a revenue share, making a future revenue share possible, but not certain.

Previous wording

Total Company Provision was a net charge of $9.8 million for the first quarter of 2026 compared to a net charge of $17.7 million for the same period in 2025, primarily driven by the TRS segment.

Current wording

Total Company Provision was a net charge of $5.2 million for the second quarter of 2026 compared to a net charge of $1.8 million for the same period in 2025.

Previous wording

The Traditional Bank Provision during the first quarter of 2026 was a net charge of $705,000 compared to a net credit of $769,000 for the first quarter of 2025.

Current wording

Traditional Banking Provision during the second quarter of 2026 was a net credit of $143,000 compared to a net charge of $517,000 for the second quarter of 2025.

Previous wording

As a percentage of total Traditional Bank loans, the Traditional Banking ACLL was 1.39% as of March 31, 2026, compared to 1.40% as of December 31, 2025, and 1.29% as of March 31, 2025.

Current wording

As a percentage of total Traditional Banking loans, the Traditional Banking ACLL was 1.37% as of June 30, 2026, compared to 1.40% as of December 31, 2025, and 1.29% as of June 30, 2025.

Previous wording

Warehouse recorded a net credit to the Provision of $311,000 for the first quarter of 2026 compared to a net charge of $47,000 for the same period in 2025. Provision for both periods reflected changes in general reserves consistent with changes in outstanding period-end balances. Outstanding Warehouse period-end balances decreased $124 million during the first quarter of 2026 compared to an increase of $19 million during the first quarter of 2025.

Current wording

Warehouse recorded a net credit to the Provision of $38,000 for the second quarter of 2026 compared to a net charge of $255,000 for the same period in 2025. Provision for both periods reflected changes in general reserves consistent with changes in outstanding period end balances. Outstanding Warehouse period end balances decreased $16 million during the second quarter of 2026 compared to an increase of $102 million during the second quarter of 2025.

Previous wording

Substantially all TRS Provision in both periods was related to its ERA/RA products.

Current wording

Substantially all TRS Provision in both periods was related to its ERA and RA products.