REPUBLIC BANCORP INC /KY/ (RBCAA) Risk Factors

Item 1A.Risk Factors.

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Republic’s Class A Common Stock is traded on the NASDAQ under the symbol “RBCAA.” There is no established public trading market for the Company’s Class B Common Stock, however, the Company’s Class B Common Stock is fully convertible into the Company’s publicly-traded Class A Common Stock on a one-for-one basis.

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FACTORS THAT MAY AFFECT FUTURE RESULTS

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An investment in Republic’s common stock is subject to risks inherent in its business. There are factors, many beyond the Company’s control, which may significantly change the results or expectations of the Company. The following are the material risk factors that impact the Company of which it is currently aware. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all the other information included in this report. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially and adversely affect its business, financial condition, and results of operations in the future. The value or market price of the Company’s common stock could decline due to any of these identified or other risks, and an investor could lose all or part of their investment.

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For information regarding forward-looking statements, see the section titled “Cautionary Statement Regarding Forward-Looking Statements.”

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Risks Related to Republic’s Business and Industry

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ECONOMIC, INTEREST RATE, AND LIQUIDITY RISKS

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Fluctuations in interest rates could reduce profitability. The Bank’s asset/liability management strategy may not be able to prevent changes in interest rates from having a material adverse effect on financial condition and results of operations. The Bank’s primary source of income is from the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. The Bank expects to periodically experience “gaps” in the interest rate sensitivities of its assets and liabilities, meaning that either interest-bearing liabilities will be more sensitive to changes in market interest rates than interest-earning assets, or vice versa. In either event, if market interest rates move contrary to the Bank’s balance sheet position, earnings may be negatively affected.

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Inversion of the interest rate yield curve may reduce profitability. Changes in the slope of the “yield curve,” or the spread between short-term and long-term interest rates, could reduce the Bank’s NIM. Normally, the yield curve is upward sloping, meaning short-term rates are lower than long-term rates. Because the Bank’s interest-bearing liabilities tend to be shorter in duration than its interest-earning assets, when the yield curve flattens or even inverts, the Bank’s NIM generally decreases, as its cost of funds rises higher and at a faster pace than the yield on its interest-earning assets. A rise in the Bank’s cost of interest-bearing liabilities without a corresponding increase in the yield on its interest-earning assets would have an adverse effect on the Bank’s NIM and overall results of operations.

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The Bank may be compelled to offer market-leading interest rates to maintain sufficient funding and liquidity levels. The Bank has traditionally relied on client deposits (with approximately 8% of deposits concentrated with the Bank’s top 20 depositors as of December 31, 2025), brokered deposits, and advances from the FHLB to fund operations. Such traditional sources may be unavailable, limited, or insufficient in the future. 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 curtailed, such as its borrowing line at the FHLB, or if the Bank cannot obtain brokered deposits, the Bank may be compelled to offer market-leading interest rates to meet its funding and liquidity needs. Obtaining funds at market-leading interest rates would have an adverse impact on the Company’s net interest income and overall results of operations.

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The loss of large deposit relationships could increase the Bank’s funding costs. The Bank has several large deposit relationships that do not require collateral; therefore, cash from these accounts can generally be utilized to fund the loan portfolio. If any of these balances are moved from the Bank, the Bank would likely utilize overnight borrowing lines on a short-term basis to replace the balances. The overall cost of gathering brokered deposits and/or FHLB advances, however, could be substantially higher than the Traditional Bank deposits they replace, increasing the Bank’s funding costs and reducing the Bank’s overall results of operations.

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The proportion of Republic’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk and earnings risks in times of financial distress. Historically, uninsured deposits have been less stable than insured deposits. As a result, in the event of financial distress, uninsured depositors historically have been more likely to withdraw their deposits. The Company estimates that 41% of its total deposits as of December 31, 2025, were uninsured as they were above the FDIC’s insurance limit. If a sizable portion of these uninsured deposits were to be withdrawn within an abbreviated period of time such that additional sources of funding would be required to meet withdrawal demands, the Bank may be unable to obtain funding at favorable terms or obtain funding at all, which may have an adverse effect on its NIM. Moreover, obtaining adequate funding to meet the Bank’s deposit obligations may be more challenging during periods of elevated prevailing interest rates. The Bank’s ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits. If the Bank had to rely more on higher-cost wholesale borrowings to fund a loss of deposits, it could materially, negatively impact the Company’s results of operations.

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Prepayment of loans may negatively impact the Bank’s financial condition and results of operations. The Bank’s clients may prepay the principal amount of their outstanding loans at any time. The speeds at which such prepayments occur, as well as the size of such prepayments, are within the Bank’s clients’ discretion. If clients prepay the principal amount of their loans, and the Bank is unable to lend those funds to other clients or invest the funds at the same or higher interest rates, the Bank’s interest income will be reduced. A significant reduction in interest income would have a negative impact on the Bank’s financial condition and results of operations.

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CREDIT RISKS

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RAs represent a significant credit risk, and if the Bank is unable to collect a sizable portion of its RAs, it would materially, negatively impact the Company’s financial condition and results of operations. There is credit risk associated with an RA because the funds are disbursed to the taxpayer customer prior to the Bank receiving the taxpayer customer’s refund as claimed on the return. Management annually reviews and revises its RAs underwriting criteria. These changes in the RAs underwriting criteria do not ensure positive results and could have an overall material negative impact on the performance of the RA and therefore on the Company’s financial condition and results of operations.

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Because there is no recourse to the taxpayer customer if the RA is not paid off by the taxpayer customer’s tax refund, the Bank must collect all of its payments related to RAs through the refund process. Losses will generally occur on RAs when the Bank does not receive payment due to several reasons, such as IRS revenue protection strategies, including audits of returns, errors in the tax return, tax return fraud, and tax debts not previously disclosed to the Bank during its underwriting process. The Bank’s underwriting during the RA approval process takes these factors into consideration based on prior years’ payment patterns, such that if the IRS significantly alters its revenue protection strategies, if refund payment patterns for a given tax season meaningfully change, if the federal government fails to timely deliver refunds, or if the Bank is incorrect in its underwriting assumptions, the Bank could experience higher loan loss provisions above those projected. The Provision is a significant determining factor of the RPG division’s overall net earnings.

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In addition, as a result of 2015 PATH Act, the federal government mandates that tax refunds for tax returns with certain characteristics cannot receive their corresponding refunds before February 15th each year. Substantially all the tax returns driving TRS’s product volume meet the criteria of those subject to this later funding under the PATH Act. These funding delays effectively restrict the Bank’s ability to make in-season modifications to its RA underwriting model based on then-current year tax refund funding patterns, because the substantial majority of all RAs are issued prior to February 15th. As a result, the underwriting criteria that TRS establishes for the RA product at the beginning of the tax season could have a material negative impact on the performance of the RA before mitigating revisions can be made.

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Consumer loans originated through the RCS segment represent a higher credit risk. Loss rates for some RCS products have consistently been significantly higher than Traditional Bank loss rates for unsecured consumer loans. A material increase in RCS loan charge-offs would have a material adverse effect on the Bank’s financial condition and results of operations and, if such increase in RCS loan charge-offs persisted for an extended period of time, could lead to the discontinuation of the underlying products.

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Consumer installment loans originated for sale through the RCS segment represent a higher risk of loss on sale. RCS originates its installment loan product for sale and sells this product at a loss if the originated loan defaults on its first payment to RCS, which is generally 16 days following the loan’s origination date. A material increase in first payment defaults for RCS installment loans would result in a material increase in these loans being sold at a loss. Such an increase could have a material adverse impact on the program, and if such losses persisted for an extended period, it could lead to the discontinuation of the underlying product.

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Management’s changes to RPG product parameters could have a material negative impact on the performance of the RPG products. In response to changes in the legal, regulatory, and competitive environment, management annually reviews and revises RPG product parameters. Further changes in product parameters do not ensure positive results and could have an overall material negative impact on the performance of the product and therefore on the Company’s financial condition and results of operations.

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The ACLL could be insufficient to cover the Bank’s actual loan losses. The Bank makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of its loans. In determining the amount of the ACLL, the Bank considers, among other factors, its historical loss and delinquency experience and prevailing economic conditions. If its assumptions are incorrect, the ACLL may not be sufficient to cover losses inherent in its loan portfolio, resulting in additions to its ACLL. In addition, regulatory agencies periodically review the ACLL and may require the Bank to increase its Provision or recognize further loan charge-offs. A material increase in the ACLL or loan charge-offs would have a material adverse effect on the Bank’s financial condition and results of operations.

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Deterioration in the quality of the Traditional Banking loan portfolio may result in additional charge-offs, which would adversely impact the Bank’s financial condition and results of operations. When borrowers default on their loan obligations, it may result in lost principal and interest income and increased operating expenses associated with the increased allocation of management time and resources associated with collection efforts. In certain situations where collection efforts are unsuccessful or acceptable “work-out” arrangements cannot be reached or performed, the Bank may charge-off loans, either in part or in whole. Additional charge-offs will adversely affect the Bank’s financial condition and results of operations.

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The Bank’s financial condition and results of operations could be negatively impacted to the extent the Bank relies on borrower information that is false, misleading, or inaccurate. The Bank relies on the accuracy and completeness of information provided by vendors, clients, and other parties in deciding whether to extend credit and/or enter into transactions with other parties. If the Bank relies on incomplete and/or inaccurate information, the Bank may incur additional charge-offs that adversely affect its financial condition and results of operations.

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The Traditional Bank uses appraisals as part of the decision process to make a loan for, or secured by, real property. In addition, appraisals are used to value a loan if it becomes “collateral dependent” as a problem credit. Appraisals do not ensure the value of the real property collateral. As part of the new loan process or in valuing a collateral dependent problem credit, the Bank generally requires an independent third-party appraisal of the real property. An appraisal, however, is only an estimate of the value of the property at the time the appraisal is made. An error in fact or judgment could adversely affect the reliability of the appraisal. In addition, events occurring after the appraisal may cause the value of the real estate to decrease. As a result of any of these factors, the value of collateral securing a loan may be less than supposed, and if a default occurs, the Bank may not recover the outstanding balance of the loan. Approximately 38% of the Traditional Bank’s portfolio is secured by RRE and 40% is secured by CRE properties as of December 31, 2025. Both of these loan types are heavily dependent upon third-party appraisals in the decision process. Additional charge-offs in either of these portfolios as a result of inaccurate appraisals could adversely affect the Bank’s financial condition and results of operations.

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The Warehouse Lending business is subject to numerous risks that may have a material adverse impact on the Bank’s financial statements and results of operations. Risks associated with warehouse loans include, without limitation, (i) credit risks relating to the mortgage bankers that borrow from the Bank, including but not limited to bankruptcy, (ii) the risk of intentional misrepresentation or fraud by any of such mortgage bankers and their third-party service providers, (iii) changes in the market value of mortgage loans originated by the mortgage banker during the time in warehouse, the sale of which is the expected source of repayment of the borrowings under a warehouse LOC, or (iv) unsalable or impaired mortgage loans so originated, which could lead to decreased collateral value and the failure of a purchaser of the mortgage loan to purchase the loan from the mortgage banker. Failure to mitigate these risks could have a material adverse impact on the Bank’s financial statements and results of operations.

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The Bank holds a significant amount of BOLI, which creates credit risk relative to the insurers and liquidity risk relative to the product. The Bank holds BOLI on certain employees. The eventual repayment of the cash surrender value is subject to the ability of the various insurance companies to pay death benefits or to return the cash surrender value to the Bank if needed for liquidity purposes. The Bank continually monitors the financial strength of the various insurance companies that carry these policies. However, any one of these companies could experience a decline in financial strength, which could impair its ability to pay benefits or return the Bank’s cash surrender value. If the Bank needs to liquidate these policies for liquidity purposes, it would be subject to taxation on the increase in cash surrender value and penalties for early termination, both of which would adversely impact earnings.

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OPERATIONAL AND STRATEGIC RISKS

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RPG products represent a significant operational risk, and RPG relies heavily on the accuracy and timeliness of data received from the Bank’s third-party marketers and service providers. To conduct its RPG businesses, the Bank must implement and test new systems, train associates for new products and changes to existing products, and process information and data received from third-party marketers and service providers. Due to the high volume of transaction activity across all the RPG product lines, the Bank relies heavily on the communications and information systems of the Bank, as well as the communications and information systems of its third-party providers to operate these products. Any failure, sustained interruption, or breach in security, including the cybersecurity, of these systems could result in failures or disruptions in client relationship management and other systems. If the Bank were unable to properly service this business as a result of inaccurate or untimely data from its third-party marketers and service providers, it could materially impact earnings.

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RCS revenues and earnings are highly concentrated in its LOC products. The discontinuation of these LOC products, or a substantial change in the terms under which these products are offered, would have a material adverse effect on the Company’s financial condition and results of operations.

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Many of the RCS programs are heavily reliant on the ability of the Bank to sell all or a sizable portion of the loans originated to a third party in order to fund the programs. If the Bank were unable to sell these loans to a third-party purchaser for any reason, RCS would likely cease originating new loans under that product line, which would significantly and negatively impact the overall earnings of RCS. RCS originates installment loans and lines of credits through its various product lines. For some of its installment products, RCS sells 100% of the balances after its origination. For its LOC products, the Bank sells a 90% or 95% participation in the product after origination, depending upon the product. If the Bank were unable to sell these loan balances for any reason, RCS would likely cease originating new loans for that particular product as soon as practical under the terms of its various agreements. The inability of RCS to originate new loans under any of its higher-yield RCS products would cause a material adverse impact to the results of operation of RCS.

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In addition, the agreements between the Bank and the consumer for many of its LOC products do not allow RCS to stop originating new customer draws on that product if RCS chooses to exit the product line. For these products, if the Bank were unable to sell these balances for any reason, RCS would retain 100% of the balances it originates on those products. In those circumstances, the credit risk for the Bank would increase substantially, as it would then be responsible for 100% of any charge-offs for these loans, as opposed to 5% or 10%, when it is able to sell participating balances to a third-party purchaser. While the Bank would also be retaining 100% of the revenue from these balances as well, there is no guarantee the additional revenue would offset the charge-offs in the event of an economic downturn. Such an increase in charge-offs could have a material adverse impact on the results of operations of the RCS segment and the Company, as a whole.

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Difficult or volatile market conditions in the national financial markets, the U.S. economy generally, or the Company’s markets in particular may adversely affect the Company’s lending activity or other businesses, as well as its financial condition. The Company’s business and financial performance are vulnerable to weak economic conditions in the financial markets and economic conditions generally and specifically in the markets in which the Company operates. The Company conducts its Core Banking operations across Kentucky (Louisville MSA/central/northern), Indiana (southern), Florida (Tampa MSA), Ohio (Cincinnati MSA), and Tennessee (Nashville MSA). Because of this geographic concentration, the Company’s financial condition and results of operations depend heavily on economic conditions within these specific markets. A favorable business environment is typically characterized by sustained economic growth, low inflation, low unemployment, strong business and investor confidence, solid business earnings, and healthy capital markets. Conversely, unfavorable or uncertain economic and market conditions may arise from a decline in economic growth locally or nationally; reductions in business activity or consumer confidence; limited availability or increased cost of credit and capital; rising inflation or interest rates; elevated unemployment; commodity price volatility; natural disasters; or a combination of these or other factors. Any regional or local economic downturn affecting the Company’s geographic markets—particularly one that impacts existing or prospective borrowers, depositors, or real estate values—could adversely affect the Company’s profitability more significantly than competitors with more geographically diversified operations.

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The Company operates in a highly competitive banking and financial services environment and competes with significantly larger regional, national, and international institutions, many of which have limited or no physical presence in the Company’s markets and instead compete through digital channels and other electronic delivery platforms. In addition, banking and financial services competitors—including newly formed institutions—may enter the Company’s geographic markets through branch expansion or acquisitions of existing competitors. FinTech companies continue to emerge and expand in key areas of banking, further intensifying competition. Many competitors possess substantially greater financial resources, higher lending limits, broader geographic reach, and, in some cases, lower cost structures, and may offer products and services that the Company does not or cannot provide. Certain non-bank competitors are also subject to fewer regulatory constraints. Increased competition may result in reduced loan and deposit volumes, compressed interest margins, or more favorable pricing and terms for customers, any of which could have a material adverse effect on the Company’s business, financial condition, results of operations, or liquidity.

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Clients may pursue alternatives to traditional bank deposits, which could reduce the Bank’s access to a relatively inexpensive and stable source of funding. Checking and savings account balances, as well as other forms of client deposits, may decline if clients perceive alternative investments—such as equity or bond markets, money-market funds, or other higher-yield financial products—as offering superior expected returns. If clients reallocate funds away from deposit accounts in favor of these alternatives, the Bank could experience deposit outflows, resulting in a loss of low-cost funding. Replacing these deposits with higher-cost funding sources, such as brokered deposits or wholesale borrowings, would increase the Bank’s overall funding costs and could negatively impact its NIM and results of operations.

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The Company may be adversely affected by the soundness of other financial institutions. Financial services institutions are interrelated because of trading, clearing, counterparty, or other relationships. The Company has exposure to many different industries and counterparties and routinely executes transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose the Company to credit risk in the event of a default by a counterparty or client. In addition, the Company’s credit risk may be exacerbated when the collateral held by the Company cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company. Any such losses could have a material adverse effect on the Company’s financial condition and results of operations.

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The Company’s information systems may experience an interruption that could adversely impact the Company’s financial condition and results of operations. The Company relies heavily on communications and information systems to conduct its business. Any failure or interruption of these systems could result in failures or disruptions in client relationship management, general ledger, deposit, loan, and other systems. While the Company has policies and procedures designed to prevent or limit the impact of the failure or interruption of information systems, there can be no assurance that any such failures or interruptions will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures or interruptions of the Company’s information systems could damage the Company’s reputation, result in a loss of client business, subject the Company to additional regulatory scrutiny, or expose the Company to civil litigation and possible financial liability, any of which could have a material adverse effect on the Company’s financial condition and results of operations.

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The Company’s operations could be impacted if its third-party service providers experience difficulty. The Company depends on several relationships with third-party service providers, including core systems processing and web hosting. These providers are well-established vendors that provide these services to a sizable number of financial institutions. If these third-party service providers experience difficulty, including but not limited to a cybersecurity incident, or terminate their services, and the Company is unable to replace them with other providers, its operations could be interrupted, which would adversely impact its business.

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The Company’s operations, including third-party and client interactions, are increasingly done via electronic means, and this has increased the risks related to cybersecurity threats. The Company is exposed to the risk of cyber-attacks in the normal course of business and incurs substantial cybersecurity protection costs. In general, cyber incidents can result from deliberate attacks or unintentional events. Management has observed an increased level of attention in the industry focused on cyber-attacks that include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such as by causing denial-of-service attacks on websites. Further, the rapid evolution and increased adoption of AI technologies may further intensify cybersecurity risks by making cyber-attacks more difficult to detect, contain or mitigate. Cyber-attacks may be carried out directly against the Company, or against the Company’s clients or service providers/vendors by third parties or insiders using techniques that range from highly sophisticated efforts to electronically circumvent network security or overwhelm

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websites to more traditional intelligence gathering and social engineering aimed at obtaining information necessary to gain access. While the Company, to its knowledge, has not incurred any material losses related to cyber-attacks, the Bank may incur substantial costs and suffer other negative consequences if the Bank, the Bank’s clients, or one of the Bank’s third-party service providers fall victim to successful cyber-attacks. Such negative consequences could include: remediation costs for stolen assets or information; system repairs; consumer protection costs; increased cybersecurity protection costs that may include organizational changes; deploying additional personnel and protection technologies, training employees, and engaging third-party experts and consultants; lost revenues resulting from unauthorized use of proprietary information or the failure to retain or attract clients following an attack; litigation and payment of damages; and reputational damage adversely affecting client or investor confidence.

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The evolving federal “AI Action Plan” and related regulatory initiatives could increase compliance costs, constrain the Company’s use of AI, and expose the Company to new legal, operational, and reputational risks. The U.S. federal government has announced an “AI Action Plan” pursuant to a January 2025 Executive Order directing federal agencies to develop a coordinated framework for the governance, development, and use of AI. The Company is in the initial stages of incorporating AI into its business activities to increase employee productivity. The Company has not deployed AI-driven systems in critical decision making or client-facing processes. While the scope, timing, and final form of the AI Action Plan and any resulting laws, regulations, supervisory guidance, or enforcement priorities remain uncertain, these initiatives may significantly affect how financial institutions develop, deploy, and oversee AI-enabled systems.

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The AI Action Plan may result in new or enhanced requirements related to model governance, data usage, explainability, human oversight, testing, recordkeeping, vendor management, and accountability for AI-driven outcomes. Compliance with these requirements could require substantial investments in technology, personnel, controls, documentation, and third-party risk management, and may reduce the efficiency or effectiveness of certain AI-enabled processes. In addition, heightened regulatory scrutiny of AI systems—particularly in areas such as fair lending, consumer protection, privacy, and model risk management—could increase the risk of supervisory findings, enforcement actions, civil litigation, or reputational harm, even where AI systems are designed and implemented in good faith. The use of third-party AI models or data sources may further increase these risks if such vendors fail to meet evolving regulatory expectations or contractual standards.

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If the AI Action Plan or related regulatory actions limit the Company’s ability to use AI technologies, require material changes to existing systems, or impose inconsistent or overlapping obligations across federal and state regulators, operating costs could increase and the Company’s ability to compete with other financial institutions or non-bank competitors could be adversely affected. Any of these outcomes could have a material adverse effect on our business, financial condition, results of operations, or reputation.

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The adoption of cryptocurrency and blockchain technology has rapidly expanded in recent years, and future regulatory changes may lead to additional growth of digital assets. In the past year, there has been an increased governmental focus on digital assets with the passage of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, which was signed into law in July 2025 and provides a regulatory framework for the adoption and issuance of stablecoins. Cryptocurrency and other new forms of payment could result in increased BSA/AML compliance risks, particularly with respect to “know-your-customer” and transaction monitoring requirements. In addition, future regulatory developments may increase the ability of Fin-tech’s and other competitors to compete with traditional banks, including through the use of cryptocurrency and other digital assets or alternative payment systems.

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New lines of business or new products and services may subject the Company to additional risks. From time to time, the Company may develop and grow new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, the Company may invest considerable amounts of time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of the Company’s system of internal control. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, financial condition and results of operations. All service offerings, including current offerings and those that may be provided in the future, may become riskier due to changes in economic, competitive, and market conditions beyond the Company’s control.

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The Company is dependent upon retaining and recruiting key qualified personnel and the loss of one or more of these key individuals could curtail its growth and adversely affect its prospects. The Company is materially dependent upon the ability and experience of a number of its key management personnel who have substantial experience with Company operations, including specialized products and services, and the markets in which the Company offers services. It is possible that the loss of the services of one or more of its key personnel would have an adverse effect on operations. Management believes that future results also will depend in part upon attracting and retaining highly skilled and qualified management, as well as sales and marketing personnel. The failure to attract or retain, including as a result of an untimely death or illness, key personnel, or to find suitable replacements for them, could have a negative effect on Company operating results. Competition for such personnel is intense, and management cannot be sure that the Company will be successful in attracting or retaining such personnel.

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REGULATORY AND LEGAL RISKS

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The Bank’s RPG products represent a significant legal, compliance, and regulatory risk, and if the Bank fails to comply with all statutory and regulatory requirements, it could have a material negative impact on earnings. Federal and state laws and regulations govern numerous matters relating to the offering of consumer loan products and consumer deposits. Failure to comply with disclosure requirements or with laws relating to the permissibility of interest rates and fees charged could have a material negative impact on earnings. In addition, failure to comply with applicable laws and regulations could also expose the Bank to civil money penalties and litigation risk, including client and shareholder actions. Various states and consumer groups have, from time to time, questioned the fairness of the products offered by RPG. Initiatives at the federal and state level, including by governmental agencies and consumer groups, could result in regulatory, governmental, or legislative action or litigation, which could have a material adverse effect on the Company’s RPG operations. If the Company can no longer offer or must substantially alter its RPG products, it will have a material negative impact on earnings.

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The Company is significantly impacted by the regulatory, fiscal, and monetary policies of federal and state governments that could negatively impact the Company’s liquidity position and earnings. These policies can materially affect the value of the Company’s financial instruments and can also adversely affect the Company’s clients and their ability to repay their outstanding loans. In addition, failure to comply with laws, regulations or policies, or adverse examination findings, could result in significant penalties, negatively impact operations, or result in other sanctions against the Company. The Board of Governors of the Federal Reserve System regulates the supply of money and credit in the U.S. Its policies determine, in large part, the Company’s cost of funds for lending and investing and the return the Company earns on these loans and investments, all of which impact NIM.

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The Company and the Bank are heavily regulated at both the federal and state levels and are subject to various routine and non-routine examinations by federal and state regulators. This regulatory oversight is primarily intended to protect depositors, the DIF, and the banking system, not the shareholders of the Company. Changes in policies, regulations and statutes, or the interpretation thereof, could significantly impact the product offerings of Republic causing the Company to terminate or modify its product offerings in a manner that could materially adversely affect the earnings of the Company.

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Federal and state laws and regulations govern numerous aspects of the business of banking, including changes in the ownership or control of banks and BHC’s, maintenance of adequate capital and the financial condition of a financial institution, permissible types, amounts and terms of extensions of credit and investments, permissible non-banking activities, the level of reserves against deposits and restrictions on dividend payments. Various federal and state regulatory agencies possess cease and desist powers and other authority to prevent or remedy unsafe or unsound practices or violations of law by banks subject to their regulations. The FRB possesses similar powers with respect to BHC’s. These, and other restrictions, can limit in varying degrees the way Republic conducts its business.

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Federal and state laws and regulations also govern numerous matters relating to the offering of banking products. Failure to comply with these laws and regulations, including those mandating disclosure requirements or relating to the permissibility of interest rates and fees charged, could have a material negative impact on earnings. In addition, failure to comply with applicable laws and regulations could also expose the Bank to civil money penalties and litigation risk, including shareholder actions. Initiatives of the current President and the current Congress, along with actions of the states, governmental agencies, and consumer groups, could result in regulatory, governmental, or legislative action or litigation that could have a material adverse effect on the Company’s operations.

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Legislative and regulatory actions taken now or in the future may increase Republic’s costs and impact its business, governance structure, financial condition, or results of operations. Enacted financial reform legislation has changed and will continue to change the bank regulatory framework. Ongoing uncertainty and adverse developments in the financial services industry and the domestic and international credit markets, and the effect of new legislation and regulatory actions in response to these conditions, may adversely affect Company operations by restricting business activities, including the Company’s ability to originate or sell loans, modify loan terms, or foreclose on property securing loans. These measures are likely to increase the Company’s costs of doing business and may have a significant adverse effect on the Company’s lending activities, financial performance, and operating flexibility. In addition, these risks could affect the performance and value of the Company’s loan and investment securities portfolios, which also would negatively affect financial performance.

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Federal and state regulatory agencies frequently adopt changes to their regulations or change the manner in which existing regulations are applied. Regulatory or legislative changes to laws applicable to the financial services industry, if enacted or adopted, may impact the profitability of the Company’s business activities, require more oversight or change certain business practices, including the ability to offer new products, obtain financing, attract deposits, make loans and achieve satisfactory interest spreads, and could expose Republic to additional costs, including increased compliance costs. These changes also may require Republic to invest significant management attention and resources to make any necessary changes to operations and could have an adverse effect on its business, financial condition, and results of operations.

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Use of third parties creates a third-party management risk. If RB&T’s third-party service providers fail to comply with all the statutory and regulatory requirements for products offered or if RB&T fails to properly monitor its third-party service providers offering these products, it could have a material negative impact on earnings. The Bank, including RPG, and its third-party service providers operate in a highly regulated environment and deliver products and services that are subject to strict legal and regulatory requirements. Failure by the Bank’s third-party service providers to comply with, or failure of the Bank to properly monitor the compliance of its third-party service providers with, laws and regulations could result in fines and penalties that materially and adversely affect the Bank’s earnings. Such penalties could include the discontinuance of any or all third-party program manager products and services.

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The Bank’s “Overdraft Honor” program represents a significant business risk, and if the Bank terminated the program, it would materially impact the earnings of the Bank. There can be no assurance that Congress, the Bank’s regulators, or others will not impose additional limitations on this program or prohibit the Bank from offering the program. The Bank’s “Overdraft Honor” program permits eligible customers to opt into the Bank’s overdraft program and overdraft their checking accounts up to a limit that is calculated and assigned each day for the Bank’s customary overdraft fee(s). Generally, to be eligible for the Overdraft Honor program, customers must qualify for one of the Bank’s traditional checking products when the account is opened and have recurring deposit activity. During the first 30 days after an account is opened, a client may participate in the Overdraft Honor program with a small, fixed limit amount depending upon the account type. After the initial 30-day period a daily overdraft limit is calculated based upon deposits and other activity in the account. If an overdraft occurs, the Bank may pay the overdraft, at its discretion, up to the client’s individual overdraft limit. Under regulatory guidelines, customers utilizing the Overdraft Honor program may remain in overdraft status for no more than 60 days before it must be closed and charged off. Substantially altering this program, or terminating it altogether, would have an adverse impact to the Company’s results of operations.

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Loans originated through the Bank’s Consumer Direct and Correspondent Lending channels subject the Bank to regulatory and legal risks that the Bank does not have through its historical origination and servicing channels. Loans serviced outside the Bank’s traditional footprint also subject the Bank to various state-level servicing laws and regulations that are different than those within the Bank’s traditional footprint and may impact the Bank’s ability to collect a deficiency and timely foreclose on a loan. Failure by the Bank to properly comply with these various state-level laws and regulations could subject the Bank to fines and penalties that materially and adversely affect the Bank’s earnings. Such penalties could include the discontinuance of the Consumer Direct Channel or Correspondent Lending operations. Failure to appropriately manage these additional risks could lead to regulatory and compliance risks, as well as create burdens that reduce profitability or cause operating losses from these origination channels.

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Republic’s management is required to evaluate the effectiveness of the Company’s disclosure controls and internal control over financial reporting. If the Company is unable to maintain effective disclosure controls and internal control over financial reporting, investors may lose confidence in the accuracy of the Company’s financial reports. As a public company, the Company is required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act requires that management evaluate and determine the effectiveness of the Company’s internal control over financial

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reporting. Additionally, the Company’s independent registered public accounting firm is required to deliver an attestation report on the effectiveness of the Company’s internal control over financial reporting.

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In order to maintain and improve the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting, the Company has expended and anticipates that it will continue to expend significant resources, including for accounting, internal audit, and compliance costs, along with significant management oversight. If any of these new or improved controls and systems do not perform as expected, the Company may experience further deficiencies in its controls.

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The Company’s current controls and any new controls that it develops may become inadequate because of changes in conditions in its business. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm the Company’s results of operations, cause the Company to fail to meet its reporting obligations, and adversely affect the results of periodic management evaluations and the Company’s independent registered public accounting firm’s attestation reports required by the SEC. Ineffective internal control over financial reporting could diminish investor confidence, negatively affect the price of the Company’s Class A common stock, and could result in the Company’s delisting from the NASDAQ. See Item 9A. “Controls and Procedures” for further discussion.

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The Company is required to use judgment in applying accounting policies and different estimates and assumptions in the application of these policies could result in a decrease in capital and/or other material changes to the Company’s reports of financial condition and results of operations. Material estimates that are particularly susceptible to meaningful change relate to the determination of the ACLL, the fair value of certain financial instruments, particularly securities, goodwill, and purchase accounting. While the Company has identified those accounting policies that it considers critical and has procedures in place to facilitate the associated judgments, different assumptions in the application of these policies could have a material adverse effect on the Company’s financial condition and results of operations.

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The Company may be adversely affected by changes in tax laws. Any change in federal or state tax laws or regulations, including any increase in the federal corporate income tax rate from the current level of 21%, could have a material adverse effect on the Company’s financial condition and results of operations.

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The Company may be subject to examinations by taxing authorities that could adversely affect the Company’s financial condition and results of operations. Republic is subject to multiple taxing jurisdictions outside of those in which its branches are located. In the normal course of business, the Company may be subject to examinations from federal and state taxing authorities regarding the amount of taxes due in connection with investments it has made and the businesses in which the Company is engaged. Federal and state taxing authorities have continued to be aggressive in challenging tax positions taken by financial institutions. The challenges made by taxing authorities may result in adjustments to the timing or amount of taxable income or deductions or the allocation of income among tax jurisdictions. If any such challenges are made and are not resolved in the Company’s favor, they could have an adverse effect on the Company’s financial condition and results of operations.

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Risks Related to Acquisition Activity

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The Company’s ability to successfully complete acquisitions will affect its ability to grow and compete effectively in its market footprint. The Company pursues a policy of strategic growth through acquisitions to supplement organic growth. The Company’s efforts to acquire other financial institutions and financial service companies or branches may not be successful. Numerous potential acquirers exist for many acquisition candidates, creating intense competition, which affects the purchase price for which the institutions can be acquired. In many cases, the Company’s competitors have significantly greater resources than the Company has, and greater flexibility to structure the consideration for the transaction. The Company may also not be the successful bidder in acquisition opportunities that it pursues due to the willingness or ability of other potential acquirers to propose a higher purchase price or more attractive terms and conditions than the Company is willing or able to propose. Further, there can be no assurance that the Company will be able to secure any regulatory approvals required for the Company to acquire another financial institution, financial services company, or branch. Additionally, the pursuit and completion of acquisitions may divert the attention of management away from the operation of our existing business. The Company intends to continue to pursue acquisition opportunities in its market footprint. The risks presented by the acquisition of other financial institutions could adversely affect the Bank’s financial condition and results of operations.

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Successful Company acquisitions present many risks that could adversely affect the Company’s financial condition and results of operations. An institution that the Company acquires may have unknown asset quality issues or unknown or contingent liabilities that the Company did not discover or fully recognize in the due diligence process, thereby resulting in unanticipated losses. The acquisition of other institutions also typically requires the integration of different corporate cultures, loan and deposit products, pricing strategies, data processing systems and other technologies, accounting, internal audit and financial reporting systems, operating systems and internal controls, marketing programs, and personnel of the acquired institution, to make the transaction economically advantageous. The integration process is complicated and time consuming and could divert the Company’s attention from other business concerns and may be disruptive to its clients and the clients of the acquired institution. The Company’s failure to successfully integrate an acquired institution could result in the loss of key clients and employees and prevent the Company from achieving expected synergies and cost savings. Acquisitions and failed acquisitions also result in professional fees and may result in creating goodwill that could become impaired, thereby requiring the Company to recognize further charges. The Company may finance acquisitions with borrowed funds, thereby increasing the Company’s leverage and reducing liquidity, or with potentially dilutive issuances of equity securities.

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Risks Related to the Company’s Common Stock

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The Company’s common stock generally has a low average daily trading volume, which limits shareholders’ ability to quickly accumulate or quickly sell large numbers of shares of Republic’s common stock without causing wide price fluctuations. Republic’s common stock price can fluctuate widely in response to a variety of factors, as detailed in the next risk factor. A low average daily stock trading volume can lead to significant price swings even when a relatively small number of shares are being traded.

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The market price for the Company’s common stock may be volatile. The market price of the Company’s common stock could fluctuate substantially in the future in response to several factors, including those discussed below. Some of the factors that may cause the price of the Company’s common stock to fluctuate include, but are not limited to:

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In addition, the stock market, in general, has historically experienced extreme price and volume fluctuations. This is due, in part, to investors’ shifting perceptions of the effect of changes and potential changes in the economy on various industry sectors. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their performance or prospects. These broad market fluctuations may adversely affect the market price of the Company’s common stock, notwithstanding its actual or anticipated cash flows, financial condition and results of operations. The Company expects that the market price of its common stock will continue to fluctuate due to many factors, including prevailing interest rates, other economic conditions, operating performance, and investor perceptions of the outlook for the Company specifically and the banking industry in general. There can be no assurance about the level of the market price of the Company’s common stock in the future or that investors will be able to resell their shares at times or at prices they find attractive.

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The Company’s insiders hold voting rights that give them significant control over matters requiring shareholder approval. The Company’s Executive Chair/CEO and Vice Chair hold substantial voting authority over the Company’s Class A Common Stock and Class B Common Stock. Each share of Class A Common Stock is entitled to one vote and each share of Class B Common Stock is entitled to ten votes. This group generally votes together on matters presented to shareholders for approval. These actions may include, for example, the election of directors, the adoption of amendments to corporate documents, the approval of mergers and acquisitions or sales of assets, and the continuation of the Company as a registered company with obligations to file periodic reports and other filings with the SEC. Consequently, other shareholders’ ability to influence Company actions through their vote may be limited and the non-insider shareholders may not have sufficient voting power to approve a change in control even if a significant premium is being offered for their shares. Majority shareholders may not vote their shares in accordance with minority shareholder interests.

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The Company is classified as a “controlled company” for purposes of the NASDAQ Listing Rules and, as a result, it qualifies for certain exemptions from certain corporate governance requirements. Shareholders may not have the same protections afforded to shareholders of companies that are subject to such requirements. As of the date of this report, the Trager family controls a majority of the voting power of the Company’s outstanding common stock. As a result, the Company is classified as a “controlled company” within the meaning of the corporate governance standards of the NASDAQ Listing Rules. Under the NASDAQ Listing Rules, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain stock exchange corporate governance requirements, including:

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Although the Company is permitted to rely on these exemptions, it has not historically elected to reduce its corporate governance practices on this basis. Nonetheless, because the Company qualifies as a controlled company, shareholders may not have the same protections afforded to shareholders of companies that are fully subject to all NASDAQ corporate governance requirements.

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An investment in the Company’s common stock is not an insured deposit. The Company’s common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in the Company’s common stock is inherently risky for the reasons described in this section and elsewhere in this report and is subject to the same market forces that affect the price of common stock in any company. As a result, if an individual acquires the Company’s common stock, the shareholder could lose some or all of that investment.

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