10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ X ]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended March 31, 2013.

or

[      ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from ____ to ____.

Commission File Number:  000-17007

Republic First Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2486815
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
50 South 16th Street, Philadelphia, Pennsylvania	19102
(Address of principal executive offices)	(Zip code)

215-735-4422

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  [X]   NO  [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES  [X ]     NO  [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    [   ]	Accelerated filer     [   ]
Non-Accelerated filer   [   ] (Do not check if a smaller reporting company)	Smaller reporting company    [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES  [  ]    NO   [X]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, par value $0.01 per share	25,972,897
Title of Class	Number of Shares Outstanding as of May 9, 2013

REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Part I:  Financial Information		Page
Item 1.	Financial Statements
	Consolidated balance sheets as of March 31, 2013 and December 31, 2012 (unaudited)	1
	Consolidated statements of income for the three months ended March 31, 2013 and 2012 (unaudited)	2
	Consolidated statements of comprehensive income for the three months ended March 31, 2013 and 2012 (unaudited)	3
	Consolidated statements of cash flows for the three months ended March 31, 2013 and 2012 (unaudited)	4
	Consolidated statements of changes in shareholders’ equity for the three months ended March 31, 2013 and 2012 (unaudited)	5
	Notes to consolidated financial statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	44
Part II:  Other Information
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	46
Item 6.	Exhibits	47
Signatures		48

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

March 31, 2013 and December 31, 2012

(Dollars in thousands, except per share data)

(unaudited)

	March 31, 2013			December 31, 2012
ASSETS
Cash and due from banks	$	9,592		$	9,097
Interest bearing deposits with banks		62,337			118,907
Cash and cash equivalents		71,929			128,004
Investment securities available for sale, at fair value		173,550			189,259
Investment securities held to maturity, at amortized cost (fair value of $69 and $69, respectively)		68			67
Restricted stock, at cost		3,276			3,816
Loans held for sale		165			82
Loans receivable (net of allowance for loan losses of $9,353 and $9,542, respectively)		617,769			608,359
Premises and equipment, net		21,630			21,976
Other real estate owned, net		8,268			8,912
Accrued interest receivable		3,273			3,128
Bank owned life insurance		10,503			10,490
Other assets		15,653			14,565
Total Assets	$	926,084		$	988,658
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Demand – non-interest bearing	$	149,857		$	145,407
Demand – interest bearing		159,601			180,440
Money market and savings		425,753			440,120
Time deposits		90,927			123,234
Total Deposits		826,138			889,201
Accrued interest payable		494			301
Other liabilities		6,456			6,778
Subordinated debt		22,476			22,476
Total Liabilities		855,564			918,756
Shareholders’ Equity
Preferred stock, par value $0.01 per share: 10,000,000 shares authorized; no shares issued		-			-
Common stock, par value $0.01 per share: 50,000,000 shares authorized; shares issued 26,501,742		265			265
Additional paid in capital		106,825			106,753
Accumulated deficit		(33,236	)		(34,228	)
Treasury stock at cost (416,303 shares)		(3,099	)		(3,099	)
Stock held by deferred compensation plan		(809	)		(809	)
Accumulated other comprehensive income		574			1,020
Total Shareholders’ Equity		70,520			69,902
Total Liabilities and Shareholders’ Equity	$	926,084		$	988,658

(See notes to consolidated financial statements)

1

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

For the Three Months Ended March 31, 2013 and 2012

(Dollars in thousands, except per share data)

 (unaudited)

	Three Months Ended  March 31,
	2013			2012
Interest income
Interest and fees on taxable loans	$	7,837		$	8,020
Interest and fees on tax-exempt loans		91			70
Interest and dividends on taxable investment securities		1,047			1,269
Interest and dividends on tax-exempt investment securities		73			116
Interest on federal funds sold and other interest-earning assets		59			101
Total interest income		9,107			9,576
Interest expense
Demand- interest bearing		195			171
Money market and savings		502			863
Time deposits		279			581
Other borrowings		278			285
Total interest expense		1,254			1,900
Net interest income		7,853			7,676
Provision (credit) for loan losses		-			(750	)
Net interest income after provision (credit) for loan losses		7,853			8,426
Non-interest income
Loan advisory and servicing fees		338			211
Gain on sales of SBA loans		650			1,086
Service fees on deposit accounts		234			210
Legal settlements		238			105
Gain on sale of investment securities		703			-
Other-than-temporary impairment losses		-			(17	)
Portion recognized in other comprehensive income (before taxes)		-			-
Net impairment loss on investment securities		-			(17	)
Bank owned life insurance income		13			19
Other non-interest income		67			32
Total non-interest income		2,243			1,646
Non-interest expense
Salaries and employee benefits		4,287			4,134
Occupancy		844			844
Depreciation and amortization		483			518
Legal		364			889
Other real estate owned		917			98
Advertising		101			50
Data processing		108			264
Insurance		158			134
Professional fees		323			293
Regulatory assessments and costs		344			338
Taxes, other		250			260
Other operating expenses		951			1,014
Total non-interest expense		9,130			8,836
Income before benefit for income taxes		966			1,236
Benefit for income taxes		(26	)		(69	)
Net income	$	992		$	1,305
Net income per share
Basic	$	0.04		$	0.05
Diluted	$	0.04		$	0.05

(See notes to consolidated financial statements)

2

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31, 2013 and 2012

(Dollars in thousands)

(unaudited)

	Three Months Ended March 31,
	2013			2012
Net income	$	992		$	1,305
Other comprehensive income (loss), net of tax
Unrealized gain on securities (pre-tax $6 and $230, respectively)		4			147
Reclassification adjustment for securities gains (pre-tax $703 and $-, respectively)		(450	)		-
Reclassification adjustment for impairment charge (pre-tax $- and $17, respectively)		-			11
Total other comprehensive income (loss)		(446	)		158
Total comprehensive income	$	546		$	1,463

(See notes to consolidated financial statements)

3

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2013 and 2012

(Dollars in thousands)

(unaudited)

	Three Months Ended March 31,
	2013			2012
Cash flows from operating activities
Net income	$	992		$	1,305
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (credit) for loan losses		-			(750	)
Loss on sale of other real estate owned		-			10
Write down of other real estate owned		809			-
Depreciation and amortization		483			518
Stock based compensation		72			89
Gain on sale and call of investment securities		(703	)		-
Impairment charges on investment securities		-			17
Amortization of premiums on investment securities		177			67
Proceeds from sales of SBA loans originated for sale		6,563			11,408
SBA loans originated for sale		(5,996	)		(11,272	)
Gains on sales of SBA loans originated for sale		(650	)		(1,086	)
Increase in value of bank owned life insurance		(13	)		(19	)
Increase in accrued interest receivable and other assets		(982	)		(206	)
(Decrease) increase in accrued interest payable and other liabilities		(129	)		104
Net cash provided by operating activities		623			185
Cash flows from investing activities
Purchase of investment securities available for sale		(1,425	)		(14,775	)
Proceeds from the sale of securities available for sale		7,946			-
Proceeds from the maturity or call of securities available for sale		9,016			6,450
Proceeds from redemption of FHLB stock		540			259
Net increase in loans		(9,575	)		(14,314	)
Net proceeds from sale of other real estate owned		-			334
Premises and equipment expenditures		(137	)		(142	)
Net cash provided by (used in) investing activities		6,365			(22,188	)
Cash flows from financing activities
Net decrease in demand, money market and savings deposits		(30,756	)		(55,376	)
Net decrease in time deposits		(32,307	)		(39,861	)
Net increase in short-term borrowings		-			4,516
Net cash used in financing activities		(63,063	)		(90,721	)
Net decrease in cash and cash equivalents		(56,075	)		(112,724	)
Cash and cash equivalents, beginning of year		128,004			230,955
Cash and cash equivalents, end of period	$	71,929		$	118,231
Supplemental disclosures:
Interest paid	$	1,061		$	1,989
Non-cash transfers from loans to other real estate owned	$	165		$	-

(See notes to consolidated financial statements)

4

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the Three Months Ended March 31, 2013 and 2012

(Dollars in thousands)

(unaudited)

	Common Stock		Additional Paid in Capital		Accumulated Deficit			Treasury Stock			Stock Held by Deferred Compensation Plan			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance January 1, 2013	$	265	$	106,753	$	(34,228	)	$	(3,099	)	$	(809	)	$	1,020		$	69,902
Net income						992												992
Other comprehensive loss, net of tax															(446	)		(446	)
Stock based compensation				72														72
Balance March 31, 2013	$	265	$	106,825	$	(33,236	)	$	(3,099	)	$	(809	)	$	574		$	70,520
Balance January 1, 2012	$	265	$	106,383	$	(37,842	)	$	(3,099	)	$	(809	)	$	(47	)	$	64,851
Net income						1,305												1,305
Other comprehensive income, net of tax															158			158
Stock based compensation				89														89
Balance March 31, 2012	$	265	$	106,472	$	(36,537	)	$	(3,099	)	$	(809	)	$	111		$	66,403

(See notes to consolidated financial statements)

5

Republic First Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

Note 1:  Basis of Presentation

Republic First Bancorp, Inc. (the “Company”) is a corporation incorporated under the laws of the Commonwealth of Pennsylvania and a registered bank holding company.  The Company offers a variety of retail and commercial banking services to individuals and businesses throughout the Greater Philadelphia and Southern New Jersey area through its wholly-owned subsidiary, Republic First Bank (“Republic” or the “Bank”) which does business under the name Republic Bank.  The Company also has three unconsolidated subsidiaries, which are statutory trusts established by the Company in connection with its sponsorship of three separate issuances of trust preferred securities.

The Company and Republic encounter vigorous competition for market share in the geographic areas they serve from bank holding companies, national, regional and other community banks, thrift institutions, credit unions and other non-bank financial organizations, such as mutual fund companies, insurance companies and brokerage companies.

The Company and Republic are subject to regulations of certain state and federal agencies. These regulatory agencies periodically examine the Company and Republic for adherence to laws and regulations. As a consequence, the cost of doing business may be affected.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Republic. The Company follows accounting standards set by the Financial Accounting Standards Board (“FASB”).  The FASB sets accounting principles generally accepted in the United States of America (“U.S. GAAP”) that are followed to ensure consistent reporting of financial condition, results of operations, and cash flows.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to United States Securities and Exchange Commission (“SEC”) Form 10-Q and Article 10 of SEC Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for financial statements for a complete fiscal year.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements. The Company has evaluated subsequent events through the date of issuance of the financial data included herein.

Note 2:  Summary of Significant Accounting Policies

Risks and Uncertainties

The earnings of the Company depend primarily on the earnings of Republic.  The earnings of Republic are dependent primarily upon the level of net interest income, which is the difference between interest earned on its interest-earning assets, such as loans and investments, and the interest paid on its interest-bearing liabilities, such as deposits and borrowings. Accordingly, the Company’s results of operations are subject to risks and uncertainties surrounding Republic’s exposure to changes in the interest rate environment.

Prepayments on residential real estate mortgage and other fixed rate loans and mortgage-backed securities vary significantly and may cause significant fluctuations in interest margins.

6

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates are made by management in determining the allowance for loan losses, carrying values of other real estate owned, assessment of other than temporary impairment (“OTTI”) of investment securities, fair value of financial instruments and the realization of deferred income tax assets. Consideration is given to a variety of factors in establishing these estimates.

In estimating the allowance for loan losses, management considers current economic conditions, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews, borrowers’ perceived financial and managerial strengths, the adequacy of underlying collateral, if collateral dependent, or present value of future cash flows, and other relevant factors.  An estimate for the carrying value of other real estate owned is normally determined through appraisals which are updated on a regular basis or through agreements of sale that have been negotiated. Because the allowance for loan losses and carrying value of other real estate owned are dependent, to a great extent, on the general economy and other conditions that may be beyond the Company’s and Republic’s control, the estimates of the allowance for loan losses and the carrying values of other real estate owned could differ materially in the near term.

In estimating OTTI of investment securities, securities are evaluated on at least a quarterly basis, and more frequently when market conditions warrant such an evaluation, to determine whether a decline in their value is other than temporary.  To determine whether a loss in value is other than temporary, management utilizes criteria such as the reasons underlying the decline, the magnitude and duration of the decline, the intent to hold the security and the likelihood of the Company not being required to sell the security prior to an anticipated recovery in the fair value.  The term “other than temporary” is not intended to indicate that the decline is permanent, but indicates that the prospect for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of investment.  Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

In evaluating the Company’s ability to recover deferred tax assets, management considers all available positive and negative evidence.   Management also makes assumptions on the amount of future taxable income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.  These assumptions require management to make judgments that are consistent with the plans and estimates used to manage the Company’s business.  As a result of cumulative losses in recent years and the uncertain nature of the current economic environment, the Company has decided to currently exclude future taxable income from its analysis on the ability to recover deferred tax assets and has recorded a valuation allowance against its deferred tax assets.  An increase or decrease in the valuation allowance would result in an adjustment to income tax expense in the period and could have a significant impact on the Company’s future earnings.

Stock-Based Compensation

The Company has a Stock Option and Restricted Stock Plan (“Plan”), under which the Company may grant options, restricted stock or stock appreciation rights to the Company’s employees, directors, and certain consultants.  Under the terms of the Plan, 1.5 million shares of common stock, plus an annual increase equal to the number of shares needed to restore the maximum number of shares that may be available for grant under the Plan to 1.5 million shares, are available for such grants.  As of March 31, 2013, the only grants under the Plan have been option grants.  The Plan provides that the exercise price of each option granted equals the market price of the Company’s stock on the date of the grant.  Any option granted vests within one to five years and has a maximum term of ten years.

7

The Company utilizes the Black-Scholes option pricing model to calculate the estimated fair value of each stock option granted on the date of the grant.  A summary of the assumptions used in the Black-Scholes option pricing model for 2013 and 2012 are as follows:

	2013			2012
Dividend yield(1)		0.0	%		0.0	%
Expected volatility(2)	54.88% to 54.89		%		53.12	%
Risk-free interest rate(3)	1.28% to 1.41		%		1.36	%
Expected life(4)	7.0 years			7.0 years

(1) A dividend yield of 0.0% is utilized because cash dividends have never been paid.

(2) Expected volatility is based on Bloomberg’s seven year volatility calculation for “FRBK” stock.

(3) The risk-free interest rate is based on the seven year Treasury bond.

(4) The expected life reflects a 3 to 4 year vesting period, the maximum ten year term and review of historical behavior.

During the three months ended March 31, 2013 and 2012, 109,787 options and 21,000 options vested, respectively.  Expense is recognized ratably over the period required to vest.  At March 31, 2013, the intrinsic value of the 1,192,280 options outstanding was $294,080, while the intrinsic value of the 288,717 exercisable (vested) options was $34,681. During the three months ended March 31, 2013, 80,500 options were forfeited with a weighted average grant date fair value of $284,695.

Information regarding stock based compensation for the three months ended March 31, 2013 and 2012 is set forth below:

	2013		2012
Stock based compensation expense recognized	$	72,000	$	89,000
Number of unvested stock options		903,563		855,600
Fair value of unvested stock options	$	1,231,859	$	1,555,074
Amount remaining to be recognized as expense	$	751,865	$	734,256

The remaining amount of $751,865 will be recognized as expense through March 2017.

Earnings per Share

Earnings per share (“EPS”) consist of two separate components: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for each period presented. Diluted EPS is calculated by dividing net income by the weighted average number of common shares outstanding plus dilutive common stock equivalents (“CSEs”). CSEs consist of dilutive stock options granted through the Company’s Plan and convertible securities related to the trust preferred securities issued in 2008.  In the diluted EPS computation, the after tax interest expense on the trust preferred securities issuance is added back to the net income. For the three months ended March 31, 2013 and 2012, the effect of CSEs (convertible securities related to the trust preferred securities only) and the related add back of after tax interest expense was considered anti-dilutive and therefore was not included in the EPS calculation.

8

The calculation of EPS for the three months ended March 31, 2013 and 2012 is as follows (in thousands, except per share amounts):

	Three Months Ended March 31,
	2013		2012
Net income (basic and diluted)	$	992	$	1,305
Weighted average shares outstanding		25,973		25,973
Net income per share – basic	$	0.04	$	0.05
Weighted average shares outstanding (including dilutive CSEs)		26,015		25,976
Net income per share – diluted	$	0.04	$	0.05

Recent Accounting Pronouncements

ASU 2013-02

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Comprehensive Income.” The amendments in this ASU are intended to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income.  For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required that provide additional detail about those amounts.  This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account instead of directly to income or expense in the same reporting period.  The ASU was effective for public entities for reporting periods beginning after December 15, 2012 and did not have a material impact on the Company’s financial statements.

Note 3:  Legal Proceedings

The Company and Republic are from time to time parties (plaintiff or defendant) to lawsuits in the normal course of business.  While any litigation involves an element of uncertainty, management is of the opinion that the liability of the Company and Republic, if any, resulting from such actions will not have a material effect on the financial condition or results of operations of the Company and Republic.

Note 4:  Segment Reporting

The Company has one reportable segment: community banking. The community bank segment primarily encompasses the commercial loan and deposit activities of Republic, as well as consumer loan products in the area surrounding its stores.

9

Note 5:  Investment Securities

A summary of the amortized cost and market value of securities available for sale and securities held to maturity at March 31, 2013 and December 31, 2012 is as follows:

	At March 31, 2013
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Collateralized mortgage obligations	$	90,190	$	1,395	$	(103	)	$	91,482
Mortgage-backed securities		19,379		880		(27	)		20,232
Municipal securities		5,360		196		(5	)		5,551
Corporate bonds		32,217		854		(47	)		33,024
Asset-backed securities		19,601		288		-			19,889
Trust preferred securities		5,777		-		(2,539	)		3,238
Other securities		131		3		-			134
Total securities available for sale	$	172,655	$	3,616	$	(2,721	)	$	173,550
U.S. Government agencies	$	1	$	-	$	-		$	1
Other securities		67		1		-			68
Total securities held to maturity	$	68	$	1	$	-		$	69

	At December 31, 2012
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Collateralized mortgage obligations	$	97,959	$	1,830	$	(6	)	$	99,783
Mortgage-backed securities		20,626		1,014		-			21,640
Municipal securities		11,150		967		(16	)		12,101
Corporate bonds		32,231		639		(185	)		32,685
Asset-backed securities		19,785		135		(191	)		19,729
Trust preferred securities		5,785		-		(2,598	)		3,187
Other securities		131		3		-			134
Total securities available for sale	$	187,667	$	4,588	$	(2,996	)	$	189,259
U.S. Government agencies	$	1	$	-	$	-		$	1
Other securities		66		2		-			68
Total securities held to maturity	$	67	$	2	$	-		$	69

       The maturity distribution of the amortized cost and estimated market value of investment securities by contractual maturity at March 31, 2013 is as follows:

	Available for Sale				Held to Maturity
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year or less	$	20,105	$	20,507	$	47	$	48
After 1 year to 5 years		66,642		68,398		21		21
After 5 years to 10 years		77,801		76,206		-		-
After 10 years		8,107		8,439		-		-
Total	$	172,655	$	173,550	$	68	$	69

10

Expected maturities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without prepayment penalties.

As of March 31, 2013 and December 31, 2012, the collateralized mortgage obligations and mortgage backed securities included in the investment securities portfolio consist solely of securities issued by U.S. government sponsored agencies.  There were no private label mortgage securities held in the investment securities portfolio as of those dates. The Company did not hold any mortgage-backed securities that were rated “Alt-A” or “Subprime” as of March 31, 2013 and December 31, 2012.  In addition, the Company did not hold any private issued CMO’s as of March 31, 2013 and December 31, 2012.  As of March 31, 2013 and December 31, 2012, the asset-backed securities consisted solely of Sallie Mae bonds collateralized by student loans which are guaranteed by the U.S. Department of Education.

In instances when a determination is made that an other-than-temporary impairment exists with respect to a debt security but the investor does not intend to sell the debt security and it is more likely than not that the investor will not be required to sell the debt security prior to its anticipated recovery, FASB Accounting Standards Codification (“ASC”) 320-10, Investments – Debt and Equity Securities, requires the other-than-temporary impairment to be separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors.  The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income.  Impairment charges (credit losses) on trust preferred securities for the three months ended March 31, 2013 and 2012 amounted to $0 and $17,000, respectively.

The Company realized gross gains on the sale of securities of $703,000 during the three months ended March 31, 2013.  The related sale proceeds amounted to $7.9 million.  The tax provision applicable to these gross gains for the three months ended March 31, 2013 amounted to approximately $253,000. No securities were sold during the three months ended March 31, 2012.

The following table presents a roll-forward of the balance of credit-related impairment losses on securities held at March 31, 2013 and 2012 for which a portion of OTTI was recognized in other comprehensive income:

(dollars in thousands)	2013		2012
Beginning Balance, January 1st	$	3,959	$	3,925
Additional credit-related impairment loss on securities for which an
other-than-temporary impairment was previously recognized		-		17
Reductions for securities paid off during the period		-		-
Reductions for securities for which the amount previously recognized in other		-		-
comprehensive income was recognized in earnings because the Company		-		-
intends to sell the security		-		-
Ending Balance, March 31st,	$	3,959	$	3,942

11

The following tables show the fair value and gross unrealized losses associated with the investment portfolio, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	At March 31, 2013
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair  Value		Unrealized  Losses		Fair Value		Unrealized Losses
Collateralized mortgage obligations	$	19,395	$	103	$	-	$	-	$	19,395	$	103
Mortgage-backed securities		1,233		27		-		-		1,233		27
Municipal securities		1,420		5		-		-		1,420		5
Corporate bonds		-		-		4,953		47		4,953		47
Trust preferred securities		-		-		3,238		2,539		3,238		2,539
Total	$	22,048	$	135	$	8,191	$	2,586	$	30,239	$	2,721

	At December 31, 2012
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair  Value		Unrealized  Losses		Fair Value		Unrealized Losses
Collateralized mortgage obligations	$	9,991	$	6	$	-	$	-	$	9,991	$	6
Municipal securities		1,050		16		-		-		1,050		16
Corporate bonds		-		-		9,811		185		9,811		185
Asset-backed securities		9,218		191		-		-		9,218		191
Trust preferred securities		-		-		3,187		2,598		3,187		2,598
Total	$	20,259	$	213	$	12,998	$	2,783	$	33,257	$	2,996

The impairment of the investment portfolio totaled $2.7 million with a total fair value of $30.2 million at March 31, 2013.  The most significant component of this impairment is related to the trust preferred securities held in the portfolio.  Unrealized losses on the trust preferred securities amount to $2.5 million at March 31, 2013.  The unrealized losses associated with the trust preferred securities are a result of the secondary market for such securities becoming inactive and are considered temporary at this time.

The following table provides additional detail about trust preferred securities as of March 31, 2013.

(dollars in thousands)	Class / Tranche	Amortized Cost		Fair Value		Unrealized Losses			Lowest Credit Rating Assigned		Number of Banks Currently Performing		Deferrals / Defaults as % of Current Balance			Conditional Default Rates for 2013 and beyond			Cumulative OTTI Life to Date
Preferred Term Securities IV	Mezzanine Notes	$	49	$	40	$	(9	)	CCC			5		27	%		0.33	%	$	-
Preferred Term Securities VII	Mezzanine Notes		1,489		1,140		(349	)		C		12		49			0.34			2,173
TPREF Funding II	Class B Notes		739		338		(401	)		C		16		44			0.39			260
TPREF Funding III	Class B2 Notes		1,520		727		(793	)		C		17		35			0.33			480
Trapeza CDO I, LLC	Class C1 Notes		556		255		(301	)		C		10		47			0.38			470
ALESCO Preferred Funding IV	Class B1 Notes		604		318		(286	)		C		39		14			0.36			396
ALESCO Preferred Funding V	Class C1 Notes		820		420		(400	)		C		37		27			0.36			180
Total		$	5,777	$	3,238	$	(2,539	)				136		34	%				$	3,959

12

At March 31, 2013, the investment portfolio included eight municipal securities with a total market value of $5.6 million.  One of these securities carried an unrealized loss at March 31, 2013.  Each of the municipal securities is reviewed quarterly for impairment. Research on each issuer is completed to ensure the financial stability of the municipal entity. The largest geographic concentration was in Pennsylvania where one municipal security had a market value of $1.4 million.  As of March 31, 2013, management found no evidence of OTTI on any of the municipal securities held in the investment securities portfolio.

At March 31, 2013, the investment portfolio included thirteen collateralized mortgage obligations with a total market value of $91.5 million.  Three of these securities carried an unrealized loss at March 31, 2013.  At March 31, 2013, the investment portfolio included forty-two mortgage-backed securities with a total market value of $20.2 million.  One of these securities carried an unrealized loss at March 31, 2013.  At March 31, 2013, the investment portfolio included seven corporate bonds with a total market value of $33.0 million.  One of these securities carried an unrealized loss at March 31, 2013.  At March 31, 2013, the investment portfolio included two asset-backed securities with a total market value of $19.9 million, the majority of which (97%) is guaranteed by the U.S. Department of Education. None of these securities carried an unrealized loss at March 31, 2013.  Management found no evidence of OTTI on any of these securities and the unrealized losses are due to changes in market value resulting from changes in market interest rates and are considered temporary as of March 31, 2013.

Note 6:  Loans Receivable and Allowance for Loan Losses

The following table sets forth the Company’s gross loans by major categories as of March 31, 2013, and December 31, 2012:

(dollars in thousands)	March 31, 2013			December 31, 2012
Commercial real estate	$	332,407		$	335,561
Construction and land development		27,614			26,659
Commercial and industrial		110,785			103,768
Owner occupied real estate		129,692			126,242
Consumer and other		24,359			23,449
Residential mortgage		2,425			2,442
Total loans receivable		627,282			618,121
Deferred costs (fees)		(160	)		(220	)
Allowance for loan losses		(9,353	)		(9,542	)
Net loans receivable	$	617,769		$	608,359

A loan is considered impaired, in accordance with ASC 310, Receivables, when based on current information and events, it is probable that the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Impaired loans include nonperforming loans, but also include internally classified accruing loans. 

13

The following table summarizes information with regard to impaired loans by loan portfolio class as of March 31, 2013 and December 31, 2012:

	March 31, 2013						December 31, 2012
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial real estate	$	21,146	$	21,901	$	-	$	19,231	$	20,000	$	-
Construction and land development		3,663		9,984		-		3,153		6,312		-
Commercial and industrial		2,041		2,958		-		3,793		7,106		-
Owner occupied real estate		-		-		-		505		505		-
Consumer and other		762		1,015		-		912		1,146		-
Total	$	27,612	$	35,858	$	-	$	27,594	$	35,069	$	-

With an allowance recorded:
Commercial real estate	$	3,343	$	3,344	$	607	$	6,085	$	6,085	$	1,077
Construction and land development		-		-		-		593		3,700		70
Commercial and industrial		4,829		7,337		1,327		3,147		3,255		861
Owner occupied real estate		3,431		3,431		840		3,450		3,450		860
Consumer and other		-		-		-		146		155		75
Total	$	11,603	$	14,112	$	2,774	$	13,421	$	16,645	$	2,943

Total:
Commercial real estate	$	24,489	$	25,245	$	607	$	25,316	$	26,085	$	1,077
Construction and land development		3,663		9,984		-		3,746		10,012		70
Commercial and industrial		6,870		10,295		1,327		6,940		10,361		861
Owner occupied real estate		3,431		3,431		840		3,955		3,955		860
Consumer and other		762		1,015		-		1,058		1,301		75
Total	$	39,215	$	49,970	$	2,774	$	41,015	$	51,714	$	2,943

14

The following table presents additional information regarding the Company’s impaired loans for the three months ended March 31, 2013 and March 31, 2012:

	Three Months Ended March 31,
	2013				2012
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$	20,189	$	219	$	14,615	$	193
Construction and land development		3,408		21		3,428		30
Commercial and industrial		2,917		6		2,627		35
Owner occupied real estate		252		-		1,490		27
Consumer and other		837		1		916		2
Total	$	27,603	$	247	$	23,076	$	287

With an allowance recorded:
Commercial real estate	$	4,714	$	36	$	5,637	$	55
Construction and land development		296		-		3,428		-
Commercial and industrial		3,988		14		5,595		14
Owner occupied real estate		3,441		36		1,350		12
Consumer and other		73		-		-		-
Total	$	12,512	$	86	$	16,010	$	81

Total:
Commercial real estate	$	24,903	$	255	$	20,252	$	248
Construction and land development		3,704		21		6,856		30
Commercial and industrial		6,905		20		8,222		49
Owner occupied real estate		3,693		36		2,840		39
Consumer and other		910		1		916		2
Total	$	40,115	$	333	$	39,086	$	368

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately $209,000 and $167,000 for the three months ended March 31, 2013 and 2012, respectively.

15

The following tables provide the activity in and ending balances of the allowance for loan losses by loan portfolio class at and for the three months ended March 31, 2013 and 2012:

(dollars in thousands)	Commercial Real Estate			Construction and Land Development			Commercial and Industrial			Owner Occupied Real Estate			Consumer and Other			Residential Mortgage			Unallocated		Total
Three months ended March 31, 2013
Allowance for loan losses:
Beginning balance:	$	3,979		$	1,273		$	1,880		$	1,967		$	234		$	17		$	192	$	9,542
Charge-offs		(60	)		(55	)		-			-			(75	)		-			-		(190	)
Recoveries		-			-			1			-			-			-			-		1
Provisions (credits)		(662	)		617			455			(670	)		11			(3	)		252		-
Ending balance	$	3,257		$	1,835		$	2,336		$	1,297		$	170		$	14		$	444	$	9,353
Three months ended March 31, 2012
Allowance for loan losses:
Beginning balance:	$	7,372		$	558		$	1,928		$	1,963		$	113		$	23		$	93	$	12,050
Charge-offs		(492	)		-			(52	)		-			(1	)		-			-		(545	)
Recoveries		-			-			-			-			1			-			-		1
Provisions (credits)		(2,509	)		1,611			343			(508	)		(7	)		(3	)		323		(750	)
Ending balance	$	4,371		$	2,169		$	2,219		$	1,455		$	106		$	20		$	416	$	10,756

The following tables provide a summary of the allowance for loan losses and balance of loans receivable by loan class and by impairment method as of March 31, 2013 and December 31, 2012:

(dollars in thousands)	Commercial Real Estate		Construction and Land Development		Commercial and Industrial		Owner Occupied Real Estate		Consumer and Other		Residential Mortgage		Unallocated		Total
March 31, 2013
Allowance for loan losses:
Individually evaluated for impairment	$	607	$	-	$	1,327	$	840	$	-	$	-	$	-	$	2,774
Collectively evaluated for impairment		2,650		1,835		1,009		457		170		14		444		6,579
Total allowance for loan losses	$	3,257	$	1,835	$	2,336	$	1,297	$	170	$	14	$	444	$	9,353
Loans receivable:
Loans evaluated individually	$	24,489	$	3,663	$	6,870	$	3,431	$	762	$	-	$	-	$	39,215
Loans evaluated collectively		307,918		23,951		103,915		126,261		23,597		2,425		-		588,067
Total loans receivable	$	332,407	$	27,614	$	110,785	$	129,692	$	24,359	$	2,425	$	-	$	627,282

16

(dollars in thousands)	Commercial Real Estate		Construction and Land Development		Commercial and Industrial		Owner Occupied Real Estate		Consumer and Other		Residential Mortgage		Unallocated		Total
December 31, 2012
Allowance for loan losses:
Individually evaluated for impairment	$	1,077	$	70	$	861	$	860	$	75	$	-	$	-	$	2,943
Collectively evaluated for impairment		2,902		1,203		1,019		1,107		159		17		192		6,599
Total allowance for loan losses	$	3,979	$	1,273	$	1,880	$	1,967	$	234	$	17	$	192	$	9,542
Loans receivable:
Loans evaluated individually	$	25,316	$	3,746	$	6,940	$	3,955	$	1,058	$	-	$	-	$	41,015
Loans evaluated collectively		310,245		22,913		96,828		122,287		22,391		2,442		-		577,106
Total loans receivable	$	335,561	$	26,659	$	103,768	$	126,242	$	23,449	$	2,442	$	-	$	618,121

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due.  The following table presents the classes of the loan portfolio summarized by the past due status as of March 31, 2013 and December 31, 2012:

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Loans Receivable > 90 Days and Accruing
At March 31, 2013
Commercial real estate	$	16,835	$	8,899	$	7,822	$	33,556	$	298,851	$	332,407	$	-
Construction and land development		-		260		1,622		1,882		25,732		27,614		-
Commercial and industrial		-		640		4,642		5,282		105,503		110,785		-
Owner occupied real estate		121		1,489		463		2,073		127,619		129,692		-
Consumer and other		326		-		566		892		23,467		24,359		-
Residential mortgage		-		-		-		-		2,425		2,425		-
Total	$	17,282	$	11,288	$	15,115	$	43,685	$	583,597	$	627,282	$	-

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Loans Receivable > 90 Days and Accruing
At December 31, 2012
Commercial real estate	$	772	$	26,000	$	7,987	$	34,759	$	300,802	$	335,561	$	-
Construction and land development		-		261		1,342		1,603		25,056		26,659		-
Commercial and industrial		86		-		4,693		4,779		98,989		103,768		-
Owner occupied real estate		285		1,562		968		2,815		123,427		126,242		-
Consumer and other		-		-		1,058		1,058		22,391		23,449		202
Residential mortgage		-		-		-		-		2,442		2,442		-
Total	$	1,143	$	27,823	$	16,048	$	45,014	$	573,107	$	618,121	$	202

17

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of March 31, 2013 and December 31, 2012:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
At March 31, 2013:
Commercial real estate	$	297,516	$	9,510	$	25,381	$	-	$	332,407
Construction and land development		23,691		260		3,663		-		27,614
Commercial and industrial		103,141		640		7,004		-		110,785
Owner occupied real estate		125,362		899		3,431		-		129,692
Consumer and other		23,145		194		1,020		-		24,359
Residential mortgage		2,425		-		-		-		2,425
Total	$	575,280	$	11,503	$	40,499	$	-	$	627,282

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
At December 31, 2012:
Commercial real estate	$	300,174	$	9,174	$	26,213	$	-	$	335,561
Construction and land development		22,652		261		3,746		-		26,659
Commercial and industrial		96,051		642		7,075		-		103,768
Owner occupied real estate		121,381		906		3,955		-		126,242
Consumer and other		22,033		100		1,316		-		23,449
Residential mortgage		2,442		-		-		-		2,442
Total	$	564,733	$	11,083	$	42,305	$	-	$	618,121

The following table shows non-accrual loans by class as of March 31, 2013 and December 31, 2012:

(dollars in thousands)	March 31, 2013		December 31, 2012
Commercial real estate	$	7,822	$	7,987
Construction and land development		1,622		1,342
Commercial and industrial		4,642		4,693
Owner occupied real estate		463		968
Consumer and other		566		856
Residential mortgage		-		-
Total	$	15,115	$	15,846

Troubled Debt Restructurings

The Company adopted the amendments in Accounting Standards Update No. 2011-02 during the quarter ended September 30, 2011.  As required, the Company reassessed all restructurings that occurred on or after January 1, 2011 for identification as a potential troubled debt restructuring.  Since the adoption of this accounting guidance, the Company has identified four loan relationships as troubled debt restructurings for which the allowance for credit loss had previously been measured under a general allowance for credit losses methodology (ASC 450-20).  Upon identifying these receivables as troubled debt restructurings, the Company also identified them as impaired in accordance with the guidance under ASC 310-10-35.

18

The following table summarizes information in regard to troubled debt restructurings for the period ended March 31, 2013 and December 31, 2012:

(dollars in thousands)	Accrual Status		Non-Accrual Status		Total Modifications
March 31, 2013
Commercial real estate	$	908	$	-	$	908
Construction and land development		2,041		-		2,041
Commercial and industrial		2,228		-		2,228
Owner occupied real estate		1,923		-		1,923
Consumer and other		-		-		-
Residential mortgage		-		-		-
Total	$	7,100	$	-	$	7,100
December 31, 2012
Commercial real estate	$	1,261	$	-	$	1,261
Construction and land development		2,069		-		2,069
Commercial and industrial		2,248		-		2,248
Owner occupied real estate		1,933		-		1,933
Consumer and other		-		-		-
Residential mortgage		-		-		-
Total	$	7,511	$	-	$	7,511

       There were no new troubled debt restructuring identified during the three month period ended March 31, 2013.  There were no troubled debt restructurings that subsequently defaulted.  There were two new troubled debt restructurings identified during the year ended December 31, 2012.  There were no troubled debt restructurings that subsequently defaulted during this period.

The Company modified one owner occupied real estate loan during the year ended December 31, 2012.  In accordance with the modified terms of this owner occupied real estate loan, the Company extended the maturity date of the loan.  In addition the effective interest rate of the modified loan was reduced when compared to the interest rate of the original loan.  The owner occupied real estate loan has been and continues to be an accruing loan.  The borrower has remained current since the modification.The pre-modification and post-modification balances were each $1,946,000.

The Company modified one commercial and industrial loan during the year ended December 31, 2012. In accordance with the modified terms of the commercial and industrial loan, the Company implemented a hard maturity date whereas the loan had formerly been a demand note.  The loan has also been converted from interest only payments to a term-out of the debt on this loan.  In addition, the Company modified the amortization time frame and reduced the effective interest rate when compared to the interest rate of the original loan.  The Company also extended the maturity date of the loan.  The commercial and industrial loan has been and continues to be an accruing loan. The borrower has remained current since the modification. The pre-modification and post-modification balances were each $2,248,000.

The Company modified one commercial real estate loan and one construction and land development loan during the year ended December 31, 2011.  As a result of the modified terms of the new commercial estate loan, the Company accelerated the maturity date of the loan.  The effective interest rate of the modified commercial real estate loan was reduced when compared to the interest rate of the original loan.  The commercial real estate loan has also been converted to interest only payments for a period of time.  The commercial real estate loan has been and continues to be an accruing loan. The borrower has remained current since the modification. The pre-modification and post-modification balances were $2,535,000 and $2,565,000, respectively. As a result of the modified terms of the new construction and land development loan, the Company extended the maturity date of the loan.  The effective interest rate of the modified construction and land development loan was reduced when compared to the interest rate of the original loan. The construction and land development loan has been and continues to be an accruing loan.  The borrower has remained current since the modification. The pre-modification and post-modification balances were each $2,625,000.

19

Note 7:  Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated.  The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates.  As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

The Company follows the guidance issued under ASC 820-10, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value under GAAP, and identifies required disclosures on fair value measurements.

ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under ASC 820-10 are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

 An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

20

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2013 and December 31, 2012 were as follows:

(dollars in thousands)	Total		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
March 31, 2013
Collateralized mortgage obligations	$	91,482	$	-	$	91,482	$	-
Mortgage-backed securities		20,232		-		20,232		-
Municipal securities		5,551		-		5,551		-
Corporate bonds		33,024		-		30,017		3,007
Asset-backed securities		19,889		-		19,889		-
Trust Preferred Securities		3,238		-		-		3,238
Other securities		134		-		134		-
Securities Available for Sale	$	173,550	$	-	$	167,305	$	6,245
December 31, 2012
Collateralized mortgage obligations	$	99,783	$	-	$	99,783	$	-
Mortgage-backed securities		21,640		-		21,640		-
Municipal securities		12,101		-		12,101		-
Corporate bonds		32,685		-		29,678		3,007
Asset-backed securities		19,729		-		19,729		-
Trust Preferred Securities		3,187		-		-		3,187
Other securities		134		-		134		-
Securities Available for Sale	$	189,259	$	-	$	183,065	$	6,194

The following table presents a reconciliation of the securities available for sales measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31, 2013					Three Months Ended March 31, 2012
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities			Corporate Bonds		Trust Preferred Securities			Corporate Bonds
Balance, January 1,	$	3,187		$	3,007	$	3,410		$	3,004
Unrealized gains (losses)		58			-		6			3
Paydowns		(7	)		-		-			-
Impairment charges on Level 3		-			-		(17	)		-
Balance, March 31,	$	3,238		$	3,007	$	3,399		$	3,007

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For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2013 and December 31, 2012 were as follows:

(dollars in thousands)	Total		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
March 31, 2013:
Impaired loans	$	9,291	$	-	$	-	$	9,291
Other real estate owned		3,431		-		-		3,431
SBA servicing assets		2,491		-		-		2,491
December 31, 2012:
Impaired loans	$	19,876	$	-	$	-	$	19,876
Other real estate owned		3,642		-		-		3,642
SBA servicing assets		2,340		-		-		2,340

The table below presents additional quantitative information about level 3 assets measured at fair value on a nonrecurring basis (dollars in thousands):

		Quantitative Information about Level 3 Fair Value Measurements March 31, 2013
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range Weighted Average
Impaired loans	$ 9,291		Fair Value of Collateral (1)	Appraised Value (2)	0% - 43% (23%) (4)
Other real estate owned	$ 3,431		Fair Value of Collateral (1)	Appraised Value (2) Sales Price	8% - 18% (9%) (4)
SBA Servicing Assets	$ 2,491		Fair Value	Individual Loan Valuation (3)	(3)

(1)    Fair value is generally determined through independent appraisals of the underlying collateral, which include Level 3 inputs that are not identifiable.

(2)   Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

(3)   There is a lack of transactional data in this market place for the non-guaranteed portion of SBA loans.

(4)   The range and weighted average of qualitative factors such as economic conditions and estimated liquidation expenses are presented as a percent of the appraised value.

The significant unobservable inputs for impaired loans and other real estate owned are the appraised value or an agreed upon sales price.  These values are adjusted for estimated costs to sell which are incremental direct costs to transact a sale such as broker commissions, legal fees, closing costs and title transfer fees. The costs must be considered essential to the sale and would not have been incurred if the decision to sell had not been made. The costs to sell are based on costs associated with the Company’s actual sales of other real estate owned which are assessed annually.

The following table presents an analysis of the activity in the SBA servicing assets for the three months ended March 31, 2013 and 2012:

(dollars in thousands)	2013		2012
Beginning balance, January 1st	$	2,340	$	1,102
Additions		146		241
Fair value adjustments		5		8
Ending balance, March 31st	$	2,491	$	1,351

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Fair Value Assumptions

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.  The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at March 31, 2013 and December 31, 2012.

Cash and Cash Equivalents (Carried at Cost)

The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values.

Investment Securities

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.  For certain securities, which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments, are generally based on available market evidence (Level 3).  In the absence of such evidence, management’s best estimate is used.  Management’s best estimate consists of both internal and external support on certain Level 3 investments.  Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) were used to support fair values of certain Level 3 investments.

The types of instruments valued based on matrix pricing in active markets include all of the Company’s U.S. government and agency securities, corporate bonds, asset backed securities, and municipal obligations. Such instruments are generally classified within Level 2 of the fair value hierarchy. As required by ASC 820-10, the Company does not adjust the matrix pricing for such instruments.

Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, and may be adjusted to reflect illiquidity and/or non-transferability, with such adjustment generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows. The Level 3 investment securities classified as available for sale are comprised of various issues of trust preferred securities and a single corporate bond.

 The trust preferred securities are pools of similar securities that are grouped into an asset structure commonly referred to as collateralized debt obligations (“CDOs”) which consist of the debt instruments of various banks, diversified by the number of participants in the security as well as geographically. The secondary market for these securities has become inactive, and therefore these securities are classified as Level 3 securities. The fair value analysis does not reflect or represent the actual terms or prices at which any party could purchase the securities. There is currently a limited secondary market for the securities and there can be no assurance that any secondary market for the securities will expand.

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An independent, third party pricing service is used to estimate the current fair market value of each CDO held in the investment securities portfolio. The calculations used to determine fair value are based on the attributes of the trust preferred securities, the financial condition of the issuers of the trust preferred securities, and market based assumptions. The INTEX CDO Deal Model Library was utilized to obtain information regarding the attributes of each security and its specific collateral as of March 31, 2013 and December 31, 2012. Financial information on the issuers was also obtained from Bloomberg, the FDIC, the Office of Thrift Supervision and SNL Financial. Both published and unpublished industry sources were utilized in estimating fair value. Such information includes loan prepayment speed assumptions, discount rates, default rates, and loss severity percentages. Due to the current state of the global capital and financial markets, the fair market valuation is subject to greater uncertainty that would otherwise exist.

The fair market valuation for each CDO was determined based on discounted cash flow analyses. The cash flows are primarily dependent on the estimated speeds at which the trust preferred securities are expected to prepay, the estimated rates at which the trust preferred securities are expected to defer payments, the estimated rates at which the trust preferred securities are expected to default, and the severity of the losses on securities that do default. 

Prepayment Assumptions. CDOs generally allow for prepayments without a prepayment penalty any time after five years.  Due to the lack of new CDOs and the relative poor conditions of the financial institution industry, the rates of voluntary prepayments are estimated at 1% for both March 31, 2013 and December 31, 2012.

Prepayments affect the securities in three ways. First, prepayments lower the absolute amount of excess spread, an important credit enhancement. Second, the prepayments are directed to the senior tranches, the effect of which is to increase the overcollateralization of the mezzanine layer, the layer at which the Company is located in each of the securities. However, the prepayments can lead to adverse selection in which the strongest institutions have prepaid, leaving the weaker institutions in the pool, thus mitigating the effect of the increased overcollateralization. Third, prepayments can limit the numeric and geographic diversity of the pool, leading to concentration risks.

Deferral and Default Rates. Bank pooled trust preferred securities include a provision that allows the issuing bank to defer interest payments for up to five years. The estimates for the rates of deferral are based on the financial condition of the trust preferred issuers in the pool. Estimates for the conditional default rates are based on the bank pooled trust preferred securities themselves as well as the financial condition of the trust preferred issuers in the pool.

Estimates for the near-term rates of deferral and conditional default are based on key financial ratios relating to the financial institutions’ capitalization, asset quality, profitability and liquidity. Each bank in each security is evaluated based on ratings from outside services including Standard & Poors, Moody’s, Fitch, Bankrate.com and The Street.com. Recent stock price information is considered, as well as the 52 week high and low, for each bank in each security. Also, the receipt and repayment of TARP funding is considered, and if so, the amount.  Finally, each bank’s ability to generate capital (internally or externally), which is predictive of a troubled bank’s ability to recover, is considered.   

Loss Severity. The fact that an issuer defaults on a loan, does not necessarily mean that the investor will lose all of their investment. Thus, it is important to understand not only the default assumption, but also the expected loss given a default, or the loss severity assumption.  

Both Standard & Poors and Moody’s Analytics have performed and published research that indicates that recoveries on CDOs are low (less than 20%). The loss severity estimates are estimated at a range of 80% to 100%.

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Bond Waterfall. The CDOs have several tranches: senior tranches, mezzanine tranches and the residual or income tranches. The Company invested in the mezzanine tranches in each of the CDOs currently in the investment securities portfolio. The senior and mezzanine tranches were over-collateralized at issuance, meaning that the par value of the underlying collateral was more than the balance issued on the tranches. The terms generally provide that if the performing collateral balances fall below certain triggers, then income is diverted from the residual tranches to pay the senior and mezzanine tranches. However, if significant deferrals occur, income could also be diverted from the mezzanine tranches to pay the senior tranches.

The INTEX desktop model calculates collateral cash flows based on the attributes of the CDOs as of the collateral cut-off date of March 15, 2013 and certain valuation input assumptions for the underlying collateral.  Allocations of the cash flows to securities are based on the overcollateralization and interest coverage tests (triggers), events of default and liquidation, deferrals of interest, mandatory auction calls, optional redemptions and any interest rate hedge agreements.

Internal Rate of Return. Internal rates of return are the pre-tax yield rates used to discount the future cash flow stream expected from the collateral cash flow. The marketplace for the CDOs at March 31, 2013 and December 31, 2012 was not active. This is evidenced by a significant widening of the bid/ask spreads in the markets in which the CDOs trade and then by a significant decrease in the volume of trades relative to historical levels. The new issue market is also inactive and few new trust preferred securities have been issued since 2007.

Increases (decreases) in actual or expected issuer defaults tend to decrease (increase) the fair value of the Company’s senior and mezzanine tranches of CDOs.  The values of the Company’s mezzanine tranches of CDOs are also affected by expected future interest rates.  However, due to the structure of each security, timing of cash flows, and secondary effects on the financial performance of the underlying issuers, the effects of changes in future interest rates on the fair value of the Company’s holdings are not quantifiably estimable.

ASC 820-10 provides guidance on the discount rates to be used when a market is not active. The discount rate should take into account the time value of money, price for bearing the uncertainty in the cash flows and other case specific factors that would be considered by market participants, including a liquidity adjustment. The discount rate used is a LIBOR 3-month and LIBOR 6-month forward-looking curve plus a range of 412 to 1052 basis points.

Also included in Level 3 investment securities classified as available for sale is a single-issuer corporate bond transferred from Level 2 in 2010 since the bond is not actively traded.  Impairment would depend on the repayment ability of the underlying issuer, which is assessed through a detailed quarterly review of the issuer’s financial statements.  The issuer is a “well capitalized” financial institution as defined by federal banking regulations and has demonstrated the ability to raise additional capital, when necessary, through the public capital markets.  The fair value of this corporate bond is estimated by obtaining a price of a comparable floating rate debt instrument through Bloomberg.

Loans Receivable, including Loans Held For Sale (Carried at Cost)

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.  Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.  Due to the significant judgment involved in evaluating credit quality, loans are classified within Level 3 of the fair value hierarchy.

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Impaired Loans (Carried at Lower of Cost or Fair Value)

Impaired loans are those that the Company has measured impairment based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third party appraisals of the properties, or discounted cash flows based upon the expected proceeds.  These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.  The fair value consists of the loan balances less any valuation allowance.  The valuation allowance amount is calculated as the difference between the recorded investment in a loan and the present value of expected future cash flows or it is calculated based on discounted collateral values if the loans are collateral dependent.

Other Real Estate Owned (Carried at Lower of Cost or Fair Value)

These assets are carried at the lower of cost or fair value.  At March 31, 2013 these assets are carried at current fair value.

SBA Servicing Asset (Carried at Fair Value)

The SBA servicing asset is initially recorded when loans are sold and the servicing rights are retained and recorded on the balance sheet.  Updated fair values are obtained on a quarterly basis and adjustments are presented as loan advisory and servicing fees on the statement of operations. The valuation begins with the projection of future cash flows for each asset based on their unique characteristics, our market-based assumptions for prepayment speeds and estimated losses and recoveries.  The present value of the future cash flows are then calculated utilizing our market-based discount ratio assumptions.  In all cases, we model expected payments for every loan for each quarterly period in order to create the most detailed cash flow stream possible.

The Company uses assumptions and estimates in determining the impairment of the SBA servicing asset.  These assumptions include prepayment speeds and discount rates commensurate with the risks involved and comparable to assumptions used by participants to value and bid serving rights available for sale in the market.  At March 31, 2013 and December 31, 2012, the sensitivity of the current fair value of the SBA loan servicing rights to immediate 10% and 20% adverse changes in key assumptions are included in the accompanying table.

(dollars in thousands)	March 31, 2013			December 31, 2012
SBA Servicing Asset
Fair Value of SBA Servicing Asset	$	2,491		$	2,340
Composition of SBA Loans Serviced for Others
Fixed-rate SBA loans		0	%		0	%
Adjustable-rate SBA loans		100	%		100	%
Total		100	%		100	%
Weighted Average Remaining Term	21.1 years			21.4 years
Prepayment Speed		6.61	%		6.59	%
Effect on fair value of a 10% increase	$	(59	)	$	(55	)
Effect on fair value of a 20% increase		(116	)		(107	)
Weighted Average Discount Rate		13.18	%		14.23	%
Effect on fair value of a 10% increase	$	(115	)	$	(115	)
Effect on fair value of a 20% increase		(222	)		(222	)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance.  As indicated, changes in value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in value may not be linear.  Also in this table, the effect of an adverse variation in a particular assumption on the value of the SBA servicing rights is calculated without changing any other assumption.  While in reality, changes in one factor may magnify or counteract the effect of the change.

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Restricted Stock (Carried at Cost)

The carrying amount of restricted stock approximates fair value, and considers the limited marketability of such securities.

Accrued Interest Receivable and Payable (Carried at Cost)

The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.

Deposit Liabilities (Carried at Cost)

The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Subordinated Debt (Carried at Cost)

Fair values of subordinated debt are estimated using discounted cash flow analysis, based on market rates currently offered on such debt with similar credit risk characteristics, terms and remaining maturity.  Due to the significant judgment involved in developing the spreads used to value the subordinated debt, it is classified within level 3 of the fair value hierarchy.

Off-Balance Sheet Financial Instruments (Disclosed at notional amounts)

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing.

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The estimated fair values of the Company’s financial instruments were as follows at March 31, 2013 and December 31, 2012:

	Fair Value Measurements at March 31, 2013
(dollars in thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
Balance Sheet Data
Financial assets:
Cash and cash equivalents	$	71,929	$	71,929	$	71,929	$	-	$	-
Investment securities available for sale		173,550		173,550		-		167,305		6,245
Investment securities held to maturity		68		69		-		69		-
Restricted stock		3,276		3,276		-		3,276		-
Loans held for sale		165		165		-		-		165
Loans receivable, net		617,769		614,714		-		-		614,714
SBA servicing assets		2,491		2,491		-		-		2,491
Accrued interest receivable		3,273		3,273		-		3,273		-
Financial liabilities:
Deposits
Demand, savings and money market	$	735,211	$	735,211	$	-	$	735,211	$	-
Time		90,927		91,636		-		91,636		-
Subordinated debt		22,476		18,392		-		-		18,392
Accrued interest payable		494		494		-		494		-
Off-Balance Sheet Data
Commitments to extend credit		-		-
Standby letters-of-credit		-		-

	Fair Value Measurements at December 31, 2012
(dollars in thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
Balance Sheet Data
Financial assets:
Cash and cash equivalents	$	128,004	$	128,004	$	128,004	$	-	$	-
Investment securities available for sale		189,259		189,259		-		183,065		6,194
Investment securities held to maturity		67		69		-		69		-
Restricted stock		3,816		3,816		-		3,816		-
Loans held for sale		82		82		-		-		82
Loans receivable, net		608,359		603,237		-		-		603,237
SBA servicing assets		2,340		2,340		-		-		2,340
Accrued interest receivable		3,128		3,128		-		3,128		-
Financial liabilities:
Deposits
Demand, savings and money market	$	765,967	$	765,967	$	-	$	765,967	$	-
Time		123,234		124,044		-		124,044		-
Subordinated debt		22,476		20,187		-		-		20,187
Accrued interest payable		301		301		-		301		-
Off-Balance Sheet Data
Commitments to extend credit		-		-
Standby letters-of-credit		-		-

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ITEM 2:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management’s discussion and analysis of the Company’s financial condition, changes in financial condition, and results of operations in the accompanying consolidated financial statements.  This discussion should be read in conjunction with the accompanying notes to the consolidated financial statements.

Certain statements in this report may be considered to be “forward-looking statements” as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995, such as statements that include the words “would be,” “could be,” “should be,” “probability,” “risk,” “target,” “objective,” “may,” “will,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and similar expressions or variations on such expressions.  The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements.  For example, risks and uncertainties can arise with changes in: general economic conditions, including turmoil in the financial markets and related efforts of government agencies to stabilize the financial system; business conditions in the financial services industry, including competitive pressure among financial services companies, new service and product offerings by competitors, price pressures and similar items. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof.  The Company undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof, except as may be required by applicable laws or regulations.  Readers should carefully review the risk factors described in the Form 10-K for the year ended December 31, 2012 and other documents the Company files from time to time with the SEC, such as Quarterly Reports on Form 10-Q, and any Current Reports on Form 8-K, as well as other filings.

Regulatory Reform and Legislation

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).  The Dodd-Frank Act has and will continue to have a broad impact on the financial services industry, including significant regulatory and compliance changes including, among other things, (i) enhanced resolution authority of troubled and failing banks and their holding companies; (ii) increased capital and liquidity requirements; (iii) increased regulatory examination fees; (iv) changes to assessments to be paid to the FDIC for federal deposit insurance; and (v) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector.  Additionally, the Dodd-Frank Act establishes a new framework for systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Consumer Financial Protection Bureau, the Federal Reserve, the Office of the Comptroller of the Currency, and the FDIC.  A summary of certain provisions of the Dodd-Frank Act is set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Many of the requirements called for in the Dodd-Frank Act will be implemented over time, and most will be subject to implementing regulations over the course of several years.  Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies and through regulations, the full extent of the impact such requirements will have on financial institutions’ operations is unclear.  The changes resulting from the Dodd-Frank Act may impact the profitability of the Company’s business activities, require changes to certain of the Company’s business practices, impose upon the Company more stringent capital, liquidity and leverage ratio requirements or otherwise adversely affect the Company’s business. These changes may also require the Company to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.

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On June 6, 2012, federal bank regulatory agencies issued a series of proposed rules to revise the risk-based and leverage capital requirements and the method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” (“Basel III”). The proposed rules would apply to all insured banks and savings associations, top-tier bank holding companies domiciled in the United States with more than $500 million in assets, and savings and loan holding companies domiciled in the United States (“banking organizations”).  The proposed rules, if adopted, would establish new higher capital ratio requirements, narrow the definitions of capital, impose new operating restrictions on banking organizations with insufficient capital buffers and increase the risk weighting of certain assets. Among other things, the proposed rules, if adopted, would establish a new common equity Tier 1 minimum capital requirement, impose a higher minimum Tier 1 capital requirement, and assign higher risk weightings (150%) to (i) exposures that are more than 90 days past due or are on nonaccrual status and (ii) certain credit facilities that finance the acquisition, development or construction of real property. The proposed rules also limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of a specified amount of common equity Tier 1 capital in addition to the minimum risk-based capital requirements. The comment period for the notices of proposed rulemakings ended on October 22, 2012.  Under the proposed rules, Basel III was to be implemented beginning January 1, 2013 and fully phased in by January 1, 2019. The U.S. federal banking agencies announced on November 9, 2012 that they did not expect the proposed rules to become effective on January 1, 2013 and did not indicate the likely new effective date.

Financial Condition

Assets

Total assets decreased by $62.6 million, or 6.3%, to $926.1 million at March 31, 2013, compared to $988.7 million at December 31, 2012, mainly due to decreases in cash and cash equivalents and deposit balances.

Cash and Cash Equivalents

Cash and due from banks and interest bearing deposits comprise this category, which consists of our most liquid assets. The aggregate amount in these two categories decreased by $56.1 million, to $71.9 million at March 31, 2013, from $128.0 million at December 31, 2012.  This decrease was primarily caused by a $63.1 million decrease in deposit balances and a $9.2 million growth in outstanding loan balances, offset by the proceeds from the sales and maturities of $17.0 million of investment securities during the first three months of 2013.

Loans Held for Sale

Loans held for sale are comprised of loans guaranteed by the U.S. Small Business Administration (“SBA”) which the Company usually originates with the intention of selling in the future.  Total SBA loans held for sale were $165,000 at March 31, 2013 as compared to $82,000 at December 31, 2012.  Loans held for sale, as a percentage of total Company assets, were less than 1% at March 31, 2013.

Loans Receivable

The loan portfolio represents our largest asset category and is our most significant source of interest income. Our lending strategy is focused on small and medium size businesses and professionals that seek highly personalized banking services.  The loan portfolio consists of secured and unsecured commercial loans including commercial real estate, construction loans, residential mortgages, automobile loans, home improvement loans, home equity loans and lines of credit, overdraft lines of credit and others. Commercial loans typically range between $250,000 and $5,000,000 but customers may borrow significantly larger amounts up to our legal lending limit to a customer, which was approximately $14.8 million at March 31, 2013.  Loans made to one individual customer, even if secured by different collateral, are aggregated for purposes of the lending limit.

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Loans increased $9.2 million, or 1.5%, to $627.1 million at March 31, 2013, compared to $617.9 million at December 31, 2012, driven by an increase in loan demand resulting in higher originations in the commercial and industrial and owner occupied real estate categories during the first three months of 2013.

Investment Securities

Investment securities considered available-for-sale are investments which may be sold in response to changing market and interest rate conditions, and for liquidity and other purposes.  Our investment securities classified as available-for-sale consist primarily of U.S. Government agency mortgage-backed securities (MBS), agency collateralized mortgage obligations (CMO), corporate bonds, municipal securities, asset-backed securities (ABS), and pooled trust preferred securities (CDO). Available-for-sale securities totaled $173.6 million at March 31, 2013, compared to $189.3 million at December 31, 2012.  The decrease was primarily due to proceeds from the sales and maturities of securities totaling $17.0 million partially offset by purchase of investment securities considered available for sale totaling $1.4 million during the first three months of 2013.  At March 31, 2013, the portfolio had a net unrealized gain of $895,000 compared to a net unrealized gain of $1.6 million at December 31, 2012.

Investment securities held-to-maturity are investments for which there is the intent and ability to hold the investment to maturity. These investments are carried at amortized cost. The held-to-maturity portfolio consists primarily of debt securities. At March 31, 2013 and December 31, 2012, securities held to maturity totaled $68,000 and $67,000, respectively. At both dates, respective carrying values approximated market values.

Restricted Stock

Restricted stock, which represents required investment in the capital stock of correspondent banks related to available credit facilities, is carried at cost as of March 31, 2013 and December 31, 2012.  As of those dates, restricted stock consisted of investments in the capital stock of the Federal Home Loan Bank of Pittsburgh (“FHLB”) and Atlantic Central Bankers Bank (“ACBB”).  During the first quarter of 2013, FHLB repurchased 15% of Republic’s total restricted stock outstanding, continuing its recent policy of quarterly repurchases of capital stock in excess of the minimum required investment. In 2012, the FHLB repurchased 29% of Republic’s total restricted stock outstanding. Decisions regarding any future repurchases of restricted stock by the FHLB of Pittsburgh will be made on a quarterly basis.  The FHLB also issued a dividend payment during the first quarter of 2013.

At March 31, 2013 and December 31, 2012, the investment in FHLB of Pittsburgh capital stock totaled $3.1 million and $3.7 million, respectively.  At both March 31, 2013 and December 31, 2012, ACBB capital stock totaled $143,000.

Deposits

Deposits, which include non-interest and interest-bearing demand deposits, money market, savings and time deposits, are Republic’s major source of funding. Deposits are generally solicited from the Company’s market area through the offering of a variety of products to attract and retain customers, with a primary focus on multi-product relationships.

Total deposits decreased by $63.1 million, or 7.1%, to $826.1 million at March 31, 2013 from $889.2 million at December 31, 2012.  The decrease was the result of reductions in interest bearing demand and money market accounts of $35.2 million and certificates of deposit of $32.3 million, offset by a $4.5 million increase in non-interest bearing demand accounts. The decrease in interest-bearing demand and money market accounts was primarily driven by the timing of cash flow requirements for certain large deposit relationships during the first quarter of 2013. The decrease in certificates of deposit was the result of maturities of internet-based certificates of deposit which the Company considers non-core deposits and intentionally decided not to renew.

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Shareholders’ Equity

Total shareholders’ equity increased $618,000 to $70.5 million at March 31, 2013, compared to $69.9 million at December 31, 2012, primarily due to the net income recognized during the first three months of 2013 offset by an accumulated other comprehensive loss associated with a reclassification adjustment for securities gains.

Results of Operations

Three Months Ended March 31, 2013Compared to Three Months Ended March 31, 2012

The Company reported net income of $992,000, or $0.04 per share, for the three months ended March 31, 2013, compared to net income of $1.3 million, or $0.05 per share, for the three months ended March 31, 2012.  The decrease in net income was primarily driven by a negative (credit) provision for loan losses recorded in the first quarter of 2012 which was mainly attributable to a reduction in the general reserve component of the allowance for loan loss calculation caused by an adjustment to the analysis of historical losses during the period and OREO writedowns recorded in the first quarter of 2013.

Net interest income for the three month period ended March 31, 2013 was $7.9 million compared to $7.7 million for the three months ended March 31, 2012.  Interest income decreased $469,000 for the three months ended March 31, 2013 compared to March 31, 2012. Interest expense decreased $646,000, or 34.0%, to $1.3 million for the three months ended March 31, 2013 compared to $1.9 million for the three months ended March 31, 2012. This decrease was primarily due to a 27 basis point decrease in the rate on average deposits outstanding to 0.46%.

Non-interest income increased by $597,000 to $2.2 million during the three months ended March 31, 2013 compared to $1.6 million during the three months ended March 31, 2012. The Company recognized gains on the sale of investment securities totaling $703,000 and also recorded income from legal settlements in the amount of $238,000 during the quarter. These were offset by a $436,000 decrease in gains recognized on sale of SBA loans for the three months ended March 31, 2013 compared to March 31, 2012 as a result of lower SBA loan originations during the current period.

Non-interest expenses increased $294,000 to $9.1 million during the three months ended March 31, 2013 compared to $8.8 million during the three months ended March 31, 2012 as OREO writedowns of $809,000 were recognized during the quarter.  The OREO writedowns were partially offset by a decrease in legal expense of $525,000. Data processing costs were also lower in the first quarter of 2013 as a result of a refund received during the period from a service provider.

Return on average assets and average equity was 0.42% and 5.76%, respectively, during the three months ended March 31, 2013 compared to 0.53% and 8.03%, respectively, for the three months ended March 31, 2012.

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Analysis of Net Interest Income

Historically, the Company’s earnings have depended primarily upon Republic’s net interest income, which is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income is affected by changes in the mix of the volume and rates of interest-earning assets and interest-bearing liabilities. The following table provides an analysis of net interest income, setting forth for the periods’ (i) average assets, liabilities, and shareholders’ equity, (ii) interest income earned on interest-earning assets and interest expense on interest-bearing liabilities, (iii) annualized average yields earned on interest-earning assets and average rates on interest-bearing liabilities, and (iv) Republic’s annualized net interest margin (net interest income as a percentage of average total interest-earning assets).  Averages are computed based on daily balances.  Non-accrual loans are included in average loans receivable.  All yields are adjusted for tax equivalency.

Average Balances and Net Interest Income

	For the three months ended March 31, 2013							For the three months ended March 31, 2012
(dollars in thousands)	Average Balance		Interest		Yield/ Rate(1)			Average Balance		Interest		Yield/ Rate(1)
Interest-earning assets:
Federal funds sold and other interest-earning assets	$	86,685	$	59		0.28	%	$	162,103	$	101		0.25	%
Investment securities and restricted stock		183,387		1,159		2.53	%		178,650		1,447		3.24	%
Loans receivable		621,642		7,977		5.20	%		592,828		8,127		5.51	%
Total interest-earning assets		891,714		9,195		4.18	%		933,581		9,675		4.17	%
Other assets		59,736							55,168
Total assets	$	951,450						$	988,749
Interest-earning liabilities:
Demand – non-interest bearing	$	144,045						$	144,855
Demand – interest bearing		170,868		195		0.46	%		117,794		171		0.58	%
Money market & savings		422,766		502		0.48	%		431,106		863		0.81	%
Time deposits		114,054		279		0.99	%		199,523		581		1.17	%
Total deposits		851,733		976		0.46	%		893,278		1,615		0.73	%
Total interest-bearing deposits		707,688		976		0.56	%		748,423		1,615		0.87	%
Other borrowings		22,476		278		5.02	%		22,575		285		5.80	%
Total interest-bearing liabilities		730,164		1,254		0.70	%		770,998		1,900		0.99	%
Total deposits and other borrowings		874,209		1,254		0.58	%		915,853		1,900		0.83	%
Non interest-bearing other liabilities		7,343							7,518
Shareholders’ equity		69,898							65,378
Total liabilities and shareholders’ equity	$	951,450						$	988,749
Net interest income (2)			$	7,941						$	7,775
Net interest spread						3.48	%						3.18	%
Net interest margin (2)						3.61	%						3.35	%

(1)Yields on investments are calculated based on amortized cost.

(2)Net interest income and net interest margin are presented on a tax equivalent basis.  Net interest income has been increased over the financial statement amount by $88 and $99 for the three months ended March 31, 2013 and 2012, respectively, to adjust for tax equivalency. The tax equivalent net interest margin is calculated by dividing tax equivalent net interest income by average total interest earning assets.

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Rate/Volume Analysis of Changes in Net Interest Income

Net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense. The following table sets forth an analysis of volume and rate changes in net interest income for the three months ended March 31, 2013, as compared to the three months ended March 31, 2012. For purposes of this table, changes in interest income and expense are allocated to volume and rate categories based upon the respective changes in average balances and average rates.

	For the three months ended March 31, 2013 vs. 2012
	Changes due to:
(dollars in thousands)	Average Volume			Average Rate			Total Change
Interest earned:
Federal funds sold and other interest-earning assets	$	(51	)	$	9		$	(42	)
Securities		30			(318	)		(288	)
Loans		335			(485	)		(150	)
Total interest-earning assets		314			(794	)		(480	)
Interest expense:
Deposits
Interest-bearing demand deposits		60			(36	)		24
Money market and savings		(6	)		(355	)		(361	)
Time deposits		(209	)		(93	)		(302	)
Total deposit interest expense		(155	)		(484	)		(639	)
Other borrowings		-			(7	)		(7	)
Total interest expense		(155	)		(491	)		(646	)
Net interest income	$	469		$	(303	)	$	166

Net Interest Income

The Company’s total tax equivalent interest income decreased $480,000, or 5.0%, to $9.2 million for the three months ended March 31, 2013 compared to $9.7 million for the three months ended March 31, 2012.  A $28.8 million increase in average loans receivable was offset by a 31 basis point decrease in loan yields and a 71 basis point decrease in investment securities yields for the three months ended March 31, 2013 as compared March 31, 2012. 

The Company’s total interest expense decreased by $646,000, or 34.0%, to $1.3 million for the three months ended March 31, 2013 compared to $1.9 million for the three months ended March 31, 2012, as the Company continues to lower the rates paid on interest bearing deposit accounts.  Average deposit balances decreased $41.5 million for the three months ended March 31, 2013.  The average rate paid on interest-bearing deposits decreased 31 basis points to 0.56% for the three months ended March 31, 2013 compared to 0.87% for the same prior year period as a result of the Company’s retail focused, customer service strategy which emphasizes the gathering of low-cost core deposits. The average rate paid on money market and savings deposits decreased 33 basis points to 0.48% for the three months ended March 31, 2013 compared to 0.81% for the same prior year period.  Average time deposit balances declined $85.5 million for the three months ended March 31, 2013 as compared to the same prior year period.  The maturity and roll-off of higher cost time deposits resulted in the decrease in the average rate paid on time deposits of 18 basis points to 0.99% for the three months ended March 31, 2013 as compared to the same prior year period.  Accordingly, rates on total interest-bearing liabilities decreased 29 basis points during the three months ended March 31, 2013.

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The tax equivalent net interest margin increased 26 basis points to 3.61% for the three months ended March 31, 2013, compared to 3.35% for the three months ended March 31, 2012 and the Company’s tax equivalent net interest income increased $166,000, or 2.1%, to $7.9 million for the three months ended March 31, 2013 as compared to $7.8 million for the three months ended March 31, 2012. 

Provision for Loan Losses

The provision for loan losses is charged to operations in an amount necessary to bring the total allowance for loan losses to a level that management believes is adequate to absorb inherent losses in the loan portfolio.  The Company recorded no provision for loan losses for the three months ended March 31, 2013 compared to a $750,000 negative (credit) provision for the three months ended March 31, 2012. During the first quarter of 2013, increases in allowances required for loans individually evaluated for impairment were offset by several decreases resulting in no required provision for loan losses in the period on a net basis. The negative provision recorded during the first quarter of 2012 was mainly attributable to a reduction in the general reserve component of the allowance for loan loss calculation caused by an adjustment to the analysis of historical losses during the period.  See disclosure under “Credit Quality” and “Allowance for Loan Losses” for further discussion.

Benefit for Income Taxes

The Company recorded a benefit for income taxes of $26,000 for the three months ended March 31, 2013, compared to a $69,000 benefit for the three months ended March 31, 2012. The $26,000 benefit recorded during the first three months of 2013 was the net result of a tax provision in the amount of $270,000 calculated on the net profit generated during the period using the Company’s normal estimated tax rate, offset by an adjustment to the deferred tax asset valuation allowance in the amount of $296,000.  The effective tax rates for the three-month periods ended March 31, 2013 and 2012 were 28% and 30%, respectively, excluding an adjustment to the deferred tax asset valuation allowance.

The Company evaluates the carrying amount of its deferred tax assets on a quarterly basis or more frequently, if necessary, in accordance with the guidance provided in Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 740 (ASC 740), in particular, applying the criteria set forth therein to determine whether it is more likely than not (i.e. a likelihood of more than 50%) that some portion, or all, of the deferred tax asset will not be realized within its life cycle, based on the weight of available evidence.  If management makes a determination based on the available evidence that it is more likely than not that some portion or all of the deferred tax assets will not be realized in future periods, a valuation allowance is calculated and recorded.  These determinations are inherently subjective and dependent upon estimates and judgments concerning management’s evaluation of both positive and negative evidence.

In conducting the deferred tax asset analysis, the Company believes it is important to consider the unique characteristics of an industry or business.  In particular, characteristics such as business model, level of capital and reserves held by financial institutions and their ability to absorb potential losses are important distinctions to be considered for bank holding companies like the Company. In addition, it is also important to consider that NOLs for federal income tax purposes can generally be carried back two years and carried forward for a period of twenty years. In order to realize our deferred tax assets, we must generate sufficient taxable income in such future years.

In assessing the need for a valuation allowance, the Company carefully weighed both positive and negative evidence currently available.  Judgment is required when considering the relative impact of such evidence. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which it can be objectively verified. A cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome. Based on the analysis of available positive and negative evidence, the Company determined that a valuation allowance should be recorded as of March 31, 2013 and December 31, 2012.

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When calculating an estimate for a valuation allowance, the Company assessed the possible sources of taxable income available under tax law to realize a tax benefit for deductible temporary differences and carryforwards as defined in ASC 740-10-30-18. As a result of cumulative losses in recent years and the uncertain nature of the current economic environment, the Company did not use projections of future taxable income, exclusive of reversing temporary timing differences and carryforwards, as a factor. The Company will exclude future taxable income as a factor until it can show consistent and sustainable profitability.

The Company did assess tax planning strategies as defined under ASC 740-10-30-18 to determine the amount of a valuation allowance. Strategies reviewed included the sale of investment securities and loans with fair values greater than book values, redeployment of cash and cash equivalents into higher yielding investment options, a switch from tax-exempt to taxable investments and loans, and the election of a decelerated depreciation method tax purposes for future fixed asset purchases. The Company believes that these tax planning strategies are (a) prudent and feasible, (b) steps that the Company would not ordinarily take, but would take to prevent an operating loss or tax credit carryforward from expiring unused, and (c) would result in the realization of existing deferred tax assets. These tax planning strategies, if implemented, would result in taxable income in the first full reporting period after deployment and accelerate the recovery of deferred tax asset balances if faced with the inability to recover those assets or the risk of potential expiration. The Company believes that these are viable tax planning strategies and appropriately considered in the analysis at this time, but may not align with the strategic direction of the organization today and therefore, has no present intention to implement such strategies.

The net deferred tax asset balance before consideration of a valuation allowance was $17.6 million as of March 31, 2013 and $17.5 million as of December 31, 2012.  The tax planning strategies assessed resulted in the projected realization of approximately $4.0 million in tax assets which can be considered more likely than not to be realized as of March 31, 2013 and $3.6 million as of December 31, 2012. Accordingly, the Company recorded a partial valuation allowance related to the deferred tax asset balance in the amount of $13.6 million as of March 31, 2013 and $13.9 million as of December 31, 2012.

The deferred tax asset will continue to be analyzed on a quarterly basis for changes affecting realizability.  As the Company continues to record consecutive quarters of profitable results, projections of future taxable income become more reliable and can again be used as a factor in assessing the ability to fully realize the deferred tax asset.  When the determination is made to include projections of future taxable income as a factor, the valuation allowance will be reduced accordingly resulting in a corresponding increase in net income.

Commitments, Contingencies and Concentrations

Financial instruments, whose contract amounts represent potential credit risk, were commitments to extend credit of approximately $86.4 million and $99.7 million, and standby letters of credit of approximately $3.6 million and $4.3 million, at March 31, 2013 and December 31, 2012, respectively. These financial instruments constitute off-balance sheet arrangements.  Commitments often expire without being drawn upon.  Substantially all of the $86.4 million of commitments to extend credit at March 31, 2013 were committed as variable rate credit facilities.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment. The Company’s commitments generally have fixed expiration dates or other termination clauses and many require the payment of fees.  Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In issuing commitments, the Company evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral required in connection with any commitment is based on management’s credit evaluation of the customer.  The type of required collateral varies, but may include real estate, marketable securities, pledged deposits, equipment and accounts receivable.

Standby letters of credit are conditional commitments that guarantee the performance of a customer to a third party.  The credit risk and collateral policy involved in issuing letters of credit is essentially the same as that involved in issuing loan commitments.  The amount of collateral which may be pledged to secure a letter of credit is based on management’s credit evaluation of the customer.  The type of collateral which may be held varies, but may include real estate, marketable securities, pledged deposits, equipment and accounts receivable.

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Regulatory Matters

The following table presents the capital regulatory ratios for both Republic and the Company as of March 31, 2013, and December 31, 2012 (dollars in thousands):

	Actual					For Capital Adequacy Purposes					To be well capitalized under regulatory capital guidelines
	Amount		Ratio			Amount		Ratio			Amount		Ratio
At March 31, 2013:
Total risk based capital
Republic	$	97,428		12.85	%	$	60,659		8.00	%	$	75,824		10.00	%
Company		97,746		12.88	%		60,714		8.00	%		-		-
Tier one risk based capital
Republic		88,075		11.62	%		30,330		4.00	%		45,494		6.00	%
Company		88,393		11.65	%		30,357		4.00	%		-		-
Tier one leveraged capital
Republic		88,075		9.30	%		37,873		4.00	%		47,341		5.00	%
Company		88,393		9.32	%		37,924		4.00	%		-		-
At December 31, 2012:
Total risk based capital
Republic	$	96,366		12.70	%	$	60,685		8.00	%	$	75,857		10.00	%
Company		97,006		12.73	%		60,971		8.00	%		-		-
Tier one risk based capital
Republic		86,883		11.45	%		30,343		4.00	%		45,514		6.00	%
Company		87,479		11.48	%		30,485		4.00	%		-		-
Tier one leveraged capital
Republic		86,883		8.96	%		38,786		4.00	%		48,483		5.00	%
Company		87,479		9.01	%		38,838		4.00	%		-		-

Dividend Policy

The Company has not paid any cash dividends on its common stock.  The Company has no plans to pay cash dividends in 2013.  The Company’s ability to pay dividends depends primarily on receipt of dividends from the Company’s subsidiary, Republic.  Dividend payments from Republic are subject to legal and regulatory limitations.  The ability of Republic to pay dividends is also subject to profitability, financial condition, capital expenditures and other cash flow requirements.

Liquidity

Financial institutions must maintain liquidity to meet day-to-day requirements of depositors and borrowers, time investment purchases to market conditions and provide a cushion against unforeseen needs.  Liquidity needs can be met by either reducing assets or increasing liabilities.  The most liquid assets consist of cash and amounts due from banks.

Regulatory authorities require the Company to maintain certain liquidity ratios in order for funds to be available to satisfy commitments to borrowers and the demands of depositors. In response to these requirements, the Company has formed an asset/liability committee (ALCO), comprised of certain members of Republic’s board of directors and senior management to monitor such ratios. The ALCO committee is responsible for managing the liquidity position and interest sensitivity. That committee’s primary objective is to maximize net interest income while configuring Republic’s interest-sensitive assets and liabilities to manage interest rate risk and provide adequate liquidity for projected needs. The ALCO committee meets on a quarterly basis or more frequently if deemed necessary.

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The Company’s target and actual liquidity levels are determined by comparisons of the estimated repayment and marketability of interest-earning assets with projected future outflows of deposits and other liabilities. The Company’s most liquid assets, comprised of cash and cash equivalents on the balance sheet, totaled $71.9 million at March 31, 2013, compared to $128.0 million at December 31, 2012.  Loan maturities and repayments are another source of asset liquidity. At March 31, 2013, Republic estimated that more than $40.0 million of loans would mature or repay in the six-month period ending September 30, 2013. Additionally, the majority of its investment securities are available to satisfy liquidity requirements if necessary.  At March 31, 2013, the Company had outstanding commitments (including unused lines of credit and letters of credit) of $90.0 million. Certificates of deposit scheduled to mature in one year totaled $65.7 million at March 31, 2013. The Company anticipates that it will have sufficient funds available to meet its current commitments.

Daily funding requirements have historically been satisfied by generating core deposits and certificates of deposit with competitive rates, buying federal funds or utilizing the credit facilities of the Federal Home Loan Bank System (“FHLB”). The Company has established a line of credit with the FHLB of Pittsburgh with total borrowing capacity in the amount of $296.6 million as of March 31, 2013.  As of March 31, 2013 and December 31, 2012, the Company had no outstanding term borrowings with the FHLB.  The Company had no short-term borrowings at both March 31, 2013 and December 31, 2012.  The Company has also established a contingency line of credit of $10.0 million with Atlantic Central Bankers Bank (“ACBB”) to assist in managing its liquidity position. The Company had no amounts outstanding against the ACBB line of credit at both March 31, 2013 and December 31, 2012.

Investment Securities Portfolio

At March 31, 2013, the Company identified certain investment securities that were being held for indefinite periods of time, including securities that will be used as part of the Company’s asset/liability management strategy and that may be sold in response to changes in interest rates, prepayments and similar factors.  These securities are classified as available for sale and are intended to increase the flexibility of the Company’s asset/liability management.  Available for sale securities consist primarily of U.S Government Agency mortgage-backed securities (MBS), agency collateralized mortgage obligations (CMO), municipal securities, corporate bonds, asset-backed securities and pooled trust preferred securities (CDO).  Available-for-sale securities totaled $173.6 million and $189.3 million as of March 31, 2013 and December 31, 2012, respectively.  At March 31, 2013 and December 31, 2012, the portfolio had net unrealized gains of $895,000 and $1.6 million, respectively.

Loan Portfolio

The Company’s loan portfolio consists of secured and unsecured commercial loans including commercial real estate, construction loans, residential mortgages, automobile loans, home improvement loans, home equity loans and lines of credit, overdraft lines of credit and others.  Commercial loans are primarily secured term loans made to small to medium-sized businesses and professionals for working capital, asset acquisition and other purposes. Commercial loans are originated as either fixed or variable rate loans with typical terms of 1 to 5 years. Republic’s commercial loans typically range between $250,000 and $5,000,000 million but customers may borrow significantly larger amounts up to Republic’s combined legal lending limit, which was approximately $14.8 million at March 31, 2013.  Individual customers may have several loans often secured by different collateral.

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Credit Quality

Republic’s written lending policies require specified underwriting, loan documentation and credit analysis standards to be met prior to funding, with independent credit department approval for the majority of new loan balances. A committee consisting of senior management and certain members of the board of directors oversees the loan approval process to monitor that proper standards are maintained, while approving the majority of commercial loans.

Loans, including impaired loans, are generally classified as non-accrual if they are past due as to maturity or payment of interest or principal for a period of more than 90 days, unless such loans are well-secured and in the process of collection. Loans that are on a current payment status or past due less than 90 days may also be classified as non-accrual if repayment in full of principal and/or interest is in doubt.

Loans may be returned to accrual status when all principal and interest amounts contractually due are reasonably assured of repayment within an acceptable period of time, and there is a sustained period of repayment performance by the borrower, in accordance with the contractual terms.

While a loan is classified as non-accrual or as an impaired loan and the future collectability of the recorded loan balance is doubtful, collections of interest and principal are generally applied as a reduction to principal outstanding. When the future collectability of the recorded loan balance is expected, interest income may be recognized on a cash basis. For non-accrual loans, which have been partially charged off, recognition of interest on a cash basis is limited to that which would have been recognized on the recorded loan balance at the contractual interest rate. Cash interest receipts in excess of that amount are recorded as recoveries to the allowance for loan losses until prior charge-offs have been fully recovered.

The following table shows information concerning loan delinquency and non-performing assets as of the dates indicated (dollars in thousands):

	March 31,  2013			December 31, 2012
Loans accruing, but past due 90 days or more	$	-		$	202
Non-accrual loans		15,115			15,846
Total non-performing loans(1)		15,115			16,048
Other real estate owned		8,268			8,912
Total non-performing assets(1)	$	23,383		$	24,960
Non-performing loans as a percentage of total loans, net of unearned income(1)		2.41	%		2.60	%
Non-performing assets as a percentage of total assets		2.52	%		2.52	%

(1)   Non-performing loans are comprised of (i) loans that are on non-accrual basis and (ii) accruing loans that are 90 days or more past due. Non-performing assets are composed of non-performing loans and other real estate owned.

Non-accrual loans decreased $731,000 to $15.1 million at March 31, 2013, from $15.8 million at December 31, 2012. This decrease was primarily the result of a payoff in the amount of $551,000 during the current period. In addition to non-accrual loans, impaired loans also include loans that are currently performing but potential credit concerns with the borrowers’ financial condition have caused management to have doubts as to the ability of such borrowers to continue to comply with present repayment terms. At March 31, 2013 and December 31, 2012, all identified impaired loans are included in the preceding table, or are internally classified and individually evaluated for impairment in accordance with the guidance under ASC 310.

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Republic had delinquent loans as follows: (i) 30 to 59 days past due, in the aggregate principal amount of $17.3 million and $1.1 million at March 31, 2013 and December 31, 2012, respectively; (ii) 60 to 89 days past due, at March 31, 2013 and December 31, 2012, in the aggregate principal amount of $11.3 and $27.8 million, respectively. During the first quarter of 2013 one significant loan relationship transferred from the 60-89 day category to the 30-59 day category as a result of timing of the due date in the quarter. Delinquent loans are currently in the process of collection and management believes they are supported by adequate collateral.

Other Real Estate Owned

The balance of other real estate owned decreased by $644,000 to $8.3 million at March 31, 2013 from $8.9 million at December 31, 2012 primarily due to writedowns on two foreclosed properties during the current period.

The following table presents a reconciliation of other real estate owned for the three months ended March 31, 2013 and the year ended December 31, 2012:

(dollars in thousands)	March 31, 2013			December 31, 2012
Beginning Balance, January 1st	$	8,912		$	6,479
Additions		165			2,907
Valuation adjustments		(809	)		(140	)
Dispositions		-			(334	)
Ending Balance	$	8,268		$	8,912

At March 31, 2013, the Company had no credit exposure to “highly leveraged transactions” as defined by the FDIC.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. The Company evaluates the need to establish an allowance against loan losses on a quarterly basis. When an increase in this allowance is necessary, a provision for loan losses is charged to earnings. The allowance for loan losses consists of three components. The first component is allocated to individually evaluated loans found to be impaired and is calculated in accordance with ASC 310. The second component is allocated to all other loans that are not individually identified as impaired pursuant to ASC 310-10 (“non-impaired loans”). This component is calculated for all non-impaired loans on a collective basis in accordance with ASC 450. The third component is an unallocated allowance to account for a level of imprecision in management’s estimation process.

The Company evaluates loans for impairment and potential charge-off on a quarterly basis.  Management regularly monitors the condition of borrowers and assesses both internal and external factors in determining whether any loan relationships have deteriorated. Any loan rated as substandard or lower will have an individual collateral evaluation analysis prepared to determine if a deficiency exists. We first evaluate the primary repayment source.  If the primary repayment source is seriously inadequate and unlikely to repay the debt, we then look to the secondary and/or tertiary repayment sources. Secondary sources are conservatively reviewed for liquidation values. Updated appraisals and financial data are obtained to substantiate current values.  If the reviewed sources are deemed to be inadequate to cover the outstanding principal and any costs associated with the resolution of the troubled loan, an estimate of the deficient amount will be calculated and a specific allocation of loan loss reserve is recorded.

Factors considered in the calculation of the allowance for non-impaired loans include several qualitative and quantitative factors such as historical loss experience, trends in delinquency and nonperforming loan balances, changes in risk composition and underwriting standards, experience and ability of management, and general economic conditions along with other external factors. Historical loss experience is analyzed by reviewing charge-offs over a three year period to determine loss rates consistent with the loan categories depicted in the allowance for loan loss table below.

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Prior to the first quarter of 2012, historical losses for all commercial loans secured by real estate were aggregated into one group for purposes of calculating a loss rate for loans collectively evaluated for impairment in the allowance for loan loss calculation. During the first quarter of 2012, management elected to disaggregate this grouping into five separate categories based on distinct risk factors to provide a more detailed estimate for the allowance calculation. This change resulted in a reduction of approximately $2.6 million in the estimated allowance required for non-impaired loans in the first quarter of 2012 due to the application of lower loss rates to a larger segment of the commercial real estate portfolio with a lower risk profile.

The factors supporting the allowance for loan losses do not diminish the fact that the entire allowance for loan losses is available to absorb losses in the loan portfolio and related commitment portfolio, respectively. The Company’s principal focus, therefore, is on the adequacy of the total allowance for loan losses. The allowance for loan losses is subject to review by banking regulators. The Company’s primary bank regulators regularly conduct examinations of the allowance for loan losses and make assessments regarding the adequacy and the methodology employed in their determination.

41

An analysis of the allowance for loan losses for the three months ended March 31, 2013 and 2012, and the twelve months ended December 31, 2012 is as follows (dollars in thousands):

	For the three months ended March 31, 2013			For the twelve months ended December 31, 2012			For the three months ended March 31, 2012
Balance at beginning of period	$	9,542		$	12,050		$	12,050
Charge-offs:
Commercial real estate		60			1,582			492
Construction and land development		55			1,004			-
Commercial and industrial		-			1,304			52
Owner occupied real estate		-			-			-
Consumer and other		75			102			1
Residential mortgage		-			-			-
Total charge-offs		190			3,992			545
Recoveries:
Commercial real estate		-			-			-
Construction and land development		-			105			-
Commercial and industrial		1			-			-
Owner occupied real estate		-			-			-
Consumer and other		-			29			1
Residential mortgage		-			-			-
Total recoveries		1			134			1
Net charge-offs		189			3,858			544
Provision (credit) for loan losses		-			1,350			(750	)
Balance at end of period	$	9,353		$	9,542		$	10,756
Average loans outstanding(1)	$	621,642		$	609,943		$	592,828
As a percent of average loans:(1)
Net charge-offs (annualized)		0.12	%		0.63	%		0.37	%
Provision (credit) for loan losses (annualized)		0.00	%		0.22	%		(0.51	%)
Allowance for loan losses		1.50	%		1.56	%		1.81	%
Allowance for loan losses to:
Total loans, net of unearned income		1.49	%		1.54	%		1.78	%
Total non-performing loans		61.88	%		59.46	%		100.32	%

(1) Includes non-accruing loans.

The Company did not record a provision for loan losses during the three month period ended March 31, 2013 compared to a negative (credit) provision for loan losses of $750,000 for the three month period ended March 31, 2012. During the first quarter of 2013, increases in allowances required for loans individually evaluated for impairment were offset by several decreases resulting in no required provision for loan losses in the period on a net basis. The changes in allowance requirements in the first quarter of 2013 were primarily the result of changes in estimated collateral values driven by updated appraisals received during the period. The negative provision recorded in the first quarter of 2012 was driven by a reduction in allowance for loan losses related to non-impaired loans evaluated collectively for impairment due to a change in the analysis of historical losses as described above.

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The allowance for loan losses as a percentage of non-performing loans (coverage ratio) was 61.88% at March 31, 2013, compared to 59.46% at December 31, 2012 and 100.32% at March 31, 2012.  Total non-performing loans were $15.1 million, $16.0 million and $10.7 million at March 31, 2013, December 31, 2012 and March 31, 2012, respectively.

Our credit monitoring process assesses the ultimate collectability of an outstanding loan balance from all potential sources. When a loan is determined to be uncollectible it is charged-off against the allowance for loan losses. Unsecured commercial loans and all consumer loans are charged-off immediately upon reaching the 90-day delinquency mark unless they are well secured and in the process of collection.  The timing on charge-offs of all other loan types is subjective and will be recognized when management determines that full repayment, either from the cash flow of the borrower, collateral sources, and/or guarantors, will not be sufficient and that repayment is unlikely.  A full or partial charge-off is recognized equal to the amount of the estimated deficiency calculation.

Serious delinquency is often the first indicator of a potential charge-off. Reductions in appraised collateral values and deteriorating financial condition of borrowers and guarantors are factors considered when evaluating potential charge-offs. The likelihood of possible recoveries or improvements in a borrower’s financial condition are also assessed when considering a charge-off.

The Company recorded net charge-offs of $0.2 million during the three month period ended March 31, 2013, compared to $0.5 million during the three month period ended March 31, 2012.

Partial charge-offs of non-performing and impaired loans can significantly reduce the coverage ratio and other credit loss statistics due to the fact that the balance of the allowance for loan losses will be reduced while still carrying the remainder of a non-performing loan balance in the impaired loan category.  The amount of non-performing loans for which partial charge-offs have been recorded amounted to $11.0 million at March 31, 2013 compared to $11.3 million at December 31, 2012. The Company’s charge-off policy is reviewed on an annual basis and updated as necessary.  During the three month period ended March 31, 2013, there were no changes made to this policy.

Recent Accounting Pronouncements

ASU 2013-02

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Comprehensive Income.” The amendments in this ASU are intended to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income.  For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required that provide additional detail about those amounts.  This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account instead of directly to income or expense in the same reporting period.  The ASU was effective for public entities for reporting periods beginning after December 15, 2012 and did not have a material impact on the Company’s financial statements.

Effects of Inflation

The majority of assets and liabilities of a financial institution are monetary in nature. Therefore, a financial institution differs greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories.  Management believes that the most significant impact of inflation on its financial results is through the Company’s need and ability to react to changes in interest rates.  Management attempts to maintain an essentially balanced position between rate sensitive assets and liabilities over a one-year time horizon in order to protect net interest income from being affected by wide interest rate fluctuations.

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ITEM 3: QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK

There has been no material change in the Company’s assessment of its sensitivity to market risk since its presentation in the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on March 15, 2013.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures  

The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 The Company’s management, with the participation of the principal executive officer and the principal financial officer, conducted an evaluation, as of the end of the period covered by this report, of the effectiveness of the Company’s disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e). Based on this evaluation, the principal executive officer and the principal financial officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e), were effective at the reasonable assurance level.

Changes in Internal Controls

The principal executive officer and principal financial officer also conducted an evaluation of the Company’s internal control over financial reporting (“Internal Control”) to determine whether any changes in Internal Control occurred during the quarter ended March 31, 2013 that have materially affected or which are reasonably likely to materially affect Internal Control.  Based on that evaluation, there has been no such change during the quarter ended March 31, 2013.

Limitations on the Effectiveness of Controls

Control systems, no matter how well designed and operated, can provide only reasonable, not an absolute, level of assurance that the objectives of the control system are met.  The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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PART II.   OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

The Company and Republic are from time to time parties (plaintiff or defendant) to lawsuits in the normal course of business. While any litigation involves an element of uncertainty, management is of the opinion that the liability of the Company and Republic, if any, resulting from such actions will not have a material effect on the financial condition or results of operations of the Company and Republic.

ITEM 1A. RISK FACTORS

Significant risk factors could adversely affect the Company’s business, financial condition and results of operation.  Risk factors discussing these risks can be found in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 and below.  The risk factors in the Company’s Annual Report on Form 10-K have not materially changed. You should carefully consider these risk factors. The risks described in the Company’s Form 10-K and below are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Our operations and the operations of our vendors, suppliers and customers may be subject to disruption from events beyond our control.

Our operations and the operations of our vendors, suppliers and customers may be subject to disruption from a variety of causes, including work stoppages, financial difficulties, acts of war, terrorism, fire, earthquakes, flooding or other natural disasters.  If a major disruption were to occur it could result in suspension of operations, harm to people or the environment, delays in our ability to provide banking services, or the inability of customers to repay loan obligations.  Adverse consequences may also result with regard to the disruption in the operations of our vendors, suppliers and customers which could have a material effect upon our business.

As a result of Hurricane Sandy which made landfall across the northeastern part of the U.S. on October 29, 2012, the operations of the Company and some of its vendors, suppliers and customers were affected by the loss of electricity, flooding and other disruptions to operations.  No losses or disruptions have been identified that would have a material impact on our financial condition or results of operations.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5.  OTHER INFORMATION

On May 10, 2013, the Company and the Bank entered into a new employment agreement, effective June 1, 2013 (the “Agreement”), with Harry D. Madonna, Chairman of the boards of directors of the Company and the Bank, President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank.  The Agreement replaces and supersedes the existing employment agreement between Mr. Madonna, the Company and the Bank, which had a term expiring on December 31, 2013.

The Agreement provides for Mr. Madonna’s continuing service as Chairman of the boards of directors of the Company and the Bank, President and Chief Executive Officer of the Company and President of the Bank for an initial term of three years beginning June 1, 2013, subject to annual renewals thereafter absent notice of nonrenewal by either party at least six months prior to an annual renewal date.  The Company and the Bank may also terminate Mr. Madonna’s employment at any time for specified events of “Good Reason” (defined as breach of fiduciary duty to the Company and the Bank involving personal profit which causes material harm to the Company and the Bank, conviction of a felony or willful violation of any banking law or regulation or a crime of moral turpitude, and grossly negligent performance of duties under the Agreement resulting in material impairment of the Company’s financial condition).   Mr. Madonna may terminate the Agreement with six months prior notice.  Mr. Madonna may also terminate the Agreement for specified events of “Good Cause” (defined as an uncured failure by the Company or the Bank to comply in any material respect with any material provision of the Agreement following written notice of noncompliance, a change in Mr. Madonna’s substantive duties, a change in location of business, or a “Change in Control” (as defined below)).

Mr. Madonna will be paid an initial annual base salary of $500,000 under the Agreement.  Mr. Madonna is eligible to receive annual increases in base salary in the sole discretion of the Compensation Committees of the Company and the Bank after taking into account criteria determined in advance by the Committees, and bonuses based on a percent of annual base salary in the sole discretion of the Compensation Committees of the Company and the Bank upon achievement of  established criteria.  The Agreement also provides that annually, based on meeting or exceeding  criteria established for this purpose from year to year, Mr. Madonna will receive on  an annual basis during the term of his employment, options to purchase such number of shares of the Company’s common stock (at a per share exercise price equal to fair market value of the stock on the date of grant) determined at the discretion of the committee charged with the responsibility for grants under the Company’s stock incentive plan, which determination shall be made taking into account  criteria set by such committee in advance.  Such options will vest one year from the date of grant.  Mr. Madonna will also be entitled to certain other customary perquisites, including use of an automobile and reimbursement of related operating expenses,  health and disability insurance available to all employees, and reimbursement for travel, entertainment and club dues and expenses.  Under the Agreement, the Company and the Bank also agree to reimburse Mr. Madonna for the cost of term life insurance policies providing a death benefit in the amount of $4.0 million.

The Agreement provides for certain severance and change in control benefits to Mr. Madonna.  In the event of termination of Mr. Madonna’s employment for any reason, including a merger or sale of the Company or the Bank or transfer of a majority of the stock of the Company or the Bank (a “Change in Control”) or failure by the Company and the Bank to continue his employment at the termination of the Agreement or any subsequent employment agreement, or if Mr. Madonna is not elected a member of the boards of directors of the Company or the Bank or upon agreement that Mr. Madonna is to transition from service as chief executive officer to service as a non-employee director of the Company and the Bank, Mr. Madonna would be entitled to receive (i) a severance payment equal to three times his annual base salary plus three times his average bonus over the prior three years and (ii) five years of continued health and other benefits and life insurance or cash in an amount equal to the cost of such insurance.  Mr. Madonna would not be entitled to any severance or other payments in the event that his employment terminates as a result of death, resignation by him without Good Cause, or termination by the Company or the Bank for Good Reason.  Subject to compliance with Section 409A of the Internal Revenue Code, all severance payments are to be made in a lump sum within 30 days after the applicable termination event.

In the event that a Transaction Change in Control is consummated, a merger or sale of the Company or the Bank, while Mr. Madonna remains employed by the Company and the Bank or remains serving as a non-employee director (or within one year after Mr. Madonna ceases to provide any services to either the Company or the Bank in any capacity), he will be entitled, in addition to any other compensation payable to him under the Agreement, to a transaction bonus in an amount determined by the Compensation Committees of the Company and the Bank, which amount cannot be less than $1.0 million.  The transaction bonus is payable within 30 days following consummation of the transaction giving rise to payment of such bonus.

The Agreement provides for non-disclosure by Mr. Madonna of any confidential information relating to the business of the Company or the Bank during or after the period of his employment, except in the course of employment related duties.  In the event that the amounts and benefits payable under the Agreement are such that Mr. Madonna becomes subject to the excise tax provisions of Section 4999 of the Internal Revenue Code, Mr. Madonna will be entitled to receive a tax gross-up payment to reimburse him for the amount of such excise taxes.  He will also receive a tax gross-up payment for certain other taxes payable by him with respect to certain perquisites under the Agreement.

A copy of the Agreement is filed as Exhibit 10.5 to this Form 10-Q.

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ITEM 6.  EXHIBITS

The following Exhibits are filed as part of this report.  (Exhibit numbers correspond to the exhibits required by Item 601 of Regulation S-K for quarterly reports on Form 10-Q).

Exhibit Number	Description	Location
10.1	Amendment to Employment Agreement, by and between Andrew J. Logue and Republic First Bank, dated March 13, 2013.*	Filed herewith
10.2	Amendment to Employment Agreement, by and between Rhonda Costello and Republic First Bank, dated March 13, 2013.*	Filed herewith
10.3	Letter Agreement, by and between Jay Neilon and the Company, dated March 13, 2013.*	Filed herewith
10.4	Letter Agreement, by and between Frank A. Cavallaro and the Company, dated March 13, 2013.*	Filed herewith
10.5	Employment Agreement, by and between Harry D. Madonna, the Company and Republic First Bank, dated May 10, 2013. *	Filed herewith
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chairman and Chief Executive Officer of Republic First Bancorp, Inc.	Filed herewith
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Republic First Bancorp, Inc.	Filed herewith
32.1	Section 1350 Certification of Harry D. Madonna	Furnished herewith
32.2	Section 1350 Certification of Frank A. Cavallaro	Furnished herewith
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, formatted in XBRL (eXtensible Business Reporting Language); (i) Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, (ii) Consolidated Statements of Income for the three months ended March 31, 2013 and 2012, (iii)  Consolidated Statements of Comprehensive Income for the three months ended March 31, 2013 and 2012, (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012, (v) Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2013  and 2012, and (vi) Notes to Consolidated Financial Statements.	**

*   Constitutes a management compensation agreement or arrangement

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

47

SIGNATURES

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

		REPUBLIC FIRST BANCORP, INC.
Date:  May 10, 2013	By:	/s/ Harry D. Madonna
		Harry D. Madonna
		Chairman, President and Chief Executive Officer (principal executive officer)
Date:  May 10, 2013	By:	/s/ Frank A. Cavallaro
		Frank A. Cavallaro
		Executive Vice President and Chief Financial Officer (principal financial and accounting officer)

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EX-10.1

Exhibit 10.1

AMENDMENT TO EMPLOYMENT AGREEMENT

This Amendment dated March 13, 2013 (the “Amendment”) to the Employment Agreement (the “Agreement”) dated August 20, 2008, as amended on April 26, 2010, by and between Republic First Bank (the “Bank”), a wholly-owned subsidiary of Republic First Bancorp, Inc. (the “Company”), and Andrew J. Logue (the “Employee”).

WHEREAS, the parties thereto desire to change certain terms of the Agreement.

NOW, THEREFORE, in consideration of their mutual promises set forth below and intending to be legally bound hereby, the parties agree as follows:

The following paragraph is added to Section 5.A(1) of the Agreement:

“If the Employee’s employment with the Bank ceases due to a termination by the Bank upon a Change in Control, the Employee shall be entitled to a severance payment (the “Severance Payment”) equal to the sum of the Employee’s annual base salary for the preceding 12 months (“Prior Base Salary”). The Severance Payment is payable within fifteen (15) days of such termination, provided, however, that if upon such termination, the Employee is offered a position at a successor to the Company or to the Company’s business with compensation (annual base salary, plus other annual compensation) that is substantially similar to or greater than the Employee’s compensation at the Bank immediately prior to such termination, no Severance Payment is payable by the Bank to the Employee.

IN WITNESS WHEREOF, the Bank has caused this Amendment to the Agreement to be executed by its duly authorized officer, and Employee has executed this Amendment to the Agreement, in each case as of the date first written above.

BANK:
By:	/s/ Harry D. Madonna
	Harry D. Madonna Chief Executive Officer
EMPLOYEE:
By:	/s/ Andrew J. Logue
	Andrew J. Logue

EX-10.2

Exhibit 10.2

AMENDMENT TO EMPLOYMENT AGREEMENT

This Amendment dated March 13, 2013 (the “Amendment”) to the Employment Agreement (the “Agreement”) dated August 25, 2008 by and between Republic First Bank (the “Bank”), a wholly-owned subsidiary of Republic First Bancorp, Inc. (the “Company”), and Rhonda S. Costello (the “Employee”).

WHEREAS, the parties thereto desire to change certain terms of the Agreement.

NOW, THEREFORE, in consideration of their mutual promises set forth below and intending to be legally bound hereby, the parties agree as follows:

The following paragraph is added to Section 5.A(1) of the Agreement:

“If the Employee’s employment with the Bank ceases due to a termination by the Bank upon a Change in Control, the Employee shall be entitled to a severance payment (the “Severance Payment”) equal to the sum of the Employee’s annual base salary for the preceding 12 months (“Prior Base Salary”). The Severance Payment is payable within fifteen (15) days of such termination, provided, however, that if upon such termination, the Employee is offered a position at a successor to the Company or to the Company’s business with compensation (annual base salary, plus other annual compensation) that is substantially similar to or greater than the Employee’s compensation at the Bank immediately prior to such termination, no Severance Payment is payable by the Bank to the Employee.

IN WITNESS WHEREOF, the Bank has caused this Amendment to the Agreement to be executed by its duly authorized officer, and Employee has executed this Amendment to the Agreement, in each case as of the date first written above.

BANK:
By:	/s/ Harry D. Madonna
	Harry D. Madonna Chief Executive Officer
EMPLOYEE:
By:	/s/ Rhonda S. Costello
	Rhonda S. Costello

EX-10.3

Exhibit 10.3

[ON REPUBLIC BANK LETTERHEAD]

March 13, 2013

Mr. Jay Neilon

Dear Jay,

This letter (the “Letter”) constitutes a severance agreement between Republic First Bancorp, Inc. (the “Company”) and you (the “Employee”).

If the Employee’s employment with the Company and/or Republic First Bank, a wholly-owned subsidiary of the Company (the “Bank”), ceases due to a termination by the Company and/or the Bank upon a Change in Control, the Employee shall be entitled to a severance payment (the “Severance Payment”) equal to the sum of the Employee’s annual base salary for the preceding 12 months (“Prior Base Salary”).  The Severance Payment is payable within fifteen (15) days of such termination, provided, however, that if upon such termination, the Employee is offered a position at a successor to the Company or to the Company’s business with compensation (annual base salary, plus other annual compensation) that is substantially similar to or greater than the Employee’s compensation at the Company and/or the Bank immediately prior to such termination, no Severance Payment is payable by the Company or the Bank to the Employee.

“Change in Control” means the occurrence of any of the following in one transaction or a series of related transactions: (a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming a “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the Company’s then outstanding securities; (b) a consolidation, share exchange, reorganization or merger of the Company resulting in the stockholders of the Company immediately prior to such event not owning at least a majority of the voting power of the resulting entity’s securities outstanding immediately following such event; or (c) the sale or other disposition of all or substantially all the assets of the Company, other than in connection with a bankruptcy proceeding. The foregoing notwithstanding, a transaction (or a series of related transactions) will not constitute a Change in Control if such transaction results in the Company, any successor to the Company, or any successor to the Company’s business, being controlled, directly or indirectly, by the same person(s) who controlled the Company, directly or indirectly, immediately before such transaction(s).

If the Severance Payment due to the Employee would (if paid or provided) constitute an Excess Parachute Payment (as such term is defined in Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”)), then notwithstanding any other provision of this Letter or any other commitment to the Employee, the Severance Payment will be limited to the minimum extent necessary to ensure that no portion thereof will fail to be tax-deductible by reason of Section 280G of the Code. The determination of whether the Severance Payment would (if paid or provided) constitute an Excess Parachute Payment will be made by the Bank, in good faith and in its sole discretion. If multiple payments or benefits are subject to reduction under this paragraph, payments or benefits will be reduced in the order that maximizes the Employee's net after-tax economic position, as determined by the Bank. If, notwithstanding the initial application of this paragraph, the Internal Revenue Service determines that the Severance Payment provided to the Employee constituted an Excess Parachute Payment, this paragraph will be reapplied based on the Internal Revenue Service’s determination and the Employee will be required to promptly repay to the Bank any amount in excess of the payment limit of this paragraph.

If a cessation of employment giving rise to payments described in this Letter is not a “Separation from Service” within the meaning of Treas. Reg. § 1.409A-1(h)(1) (or any successor provision), then the amounts otherwise payable pursuant to those sections will instead be deferred without interest and will not be paid until the Employee experiences a Separation from Service. In addition, to the extent compliance with the requirements of Treas. Reg. § 1.409A-3(i)(2) (or any successor provision) is necessary to avoid the application of an additional tax under Section 409A of the Code to payments due to the Employee upon or following his Separation from Service, then notwithstanding any other provision of this Letter (or any otherwise applicable plan, policy, agreement or arrangement), any such payments that are otherwise due within six months following the Employee’s Separation from Service (taking into account the preceding sentence) will be deferred without interest and paid to the Employee in a lump sum immediately following that six month period. This paragraph should not be construed to prevent the application of Treas. Reg. § 1.409A-l(b)(9)(iii)(or any successor provision) to any amount payable to Employee. For purposes of the application of Treas. Reg. § 1.409A-I (b)(4)(or any successor provision), each payment in a series of payments will be deemed a separate payment.

This Letter shall not confer upon the Employee any right to continue in the employment of the Bank.  Nothing in this Letter shall affect any right which the Bank may have to terminate the employment of the Employee.

Sincerely,

/s/ Harry D. Madonna

Harry D. Madonna

Chief Executive Officer

Accepted and agreed, as of

the date first written above, by:

     /s/ Jay Neilon

Jay Neilon

EX-10.4

Exhibit 10.4

[ON REPUBLIC BANK LETTERHEAD]

March 13, 2013

Mr. Frank Cavallaro

Dear Frank,

This letter (the “Letter”) constitutes a severance agreement between Republic First Bancorp, Inc. (the “Company”) and you (the “Employee”).

If the Employee’s employment with the Company and/or Republic First Bank, a wholly-owned subsidiary of the Company (the “Bank”), ceases due to a termination by the Company and/or the Bank upon a Change in Control, the Employee shall be entitled to a severance payment (the “Severance Payment”) equal to the sum of the Employee’s annual base salary for the preceding 12 months (“Prior Base Salary”).  The Severance Payment is payable within fifteen (15) days of such termination, provided, however, that if upon such termination, the Employee is offered a position at a successor to the Company or to the Company’s business with compensation (annual base salary, plus other annual compensation) that is substantially similar to or greater than the Employee’s compensation at the Company and/or the Bank immediately prior to such termination, no Severance Payment is payable by the Company or the Bank to the Employee.

“Change in Control” means the occurrence of any of the following in one transaction or a series of related transactions: (a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming a “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the Company’s then outstanding securities; (b) a consolidation, share exchange, reorganization or merger of the Company resulting in the stockholders of the Company immediately prior to such event not owning at least a majority of the voting power of the resulting entity’s securities outstanding immediately following such event; or (c) the sale or other disposition of all or substantially all the assets of the Company, other than in connection with a bankruptcy proceeding. The foregoing notwithstanding, a transaction (or a series of related transactions) will not constitute a Change in Control if such transaction results in the Company, any successor to the Company, or any successor to the Company’s business, being controlled, directly or indirectly, by the same person(s) who controlled the Company, directly or indirectly, immediately before such transaction(s).

If the Severance Payment due to the Employee would (if paid or provided) constitute an Excess Parachute Payment (as such term is defined in Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”)), then notwithstanding any other provision of this Letter or any other commitment to the Employee, the Severance Payment will be limited to the minimum extent necessary to ensure that no portion thereof will fail to be tax-deductible by reason of Section 280G of the Code. The determination of whether the Severance Payment would (if paid or provided) constitute an Excess Parachute Payment will be made by the Bank, in good faith and in its sole discretion. If multiple payments or benefits are subject to reduction under this paragraph, payments or benefits will be reduced in the order that maximizes the Employee's net after-tax economic position, as determined by the Bank. If, notwithstanding the initial application of this paragraph, the Internal Revenue Service determines that the Severance Payment provided to the Employee constituted an Excess Parachute Payment, this paragraph will be reapplied based on the Internal Revenue Service’s determination and the Employee will be required to promptly repay to the Bank any amount in excess of the payment limit of this paragraph.

If a cessation of employment giving rise to payments described in this Letter is not a “Separation from Service” within the meaning of Treas. Reg. § 1.409A-1(h)(1) (or any successor provision), then the amounts otherwise payable pursuant to those sections will instead be deferred without interest and will not be paid until the Employee experiences a Separation from Service. In addition, to the extent compliance with the requirements of Treas. Reg. § 1.409A-3(i)(2) (or any successor provision) is necessary to avoid the application of an additional tax under Section 409A of the Code to payments due to the Employee upon or following his Separation from Service, then notwithstanding any other provision of this Letter (or any otherwise applicable plan, policy, agreement or arrangement), any such payments that are otherwise due within six months following the Employee’s Separation from Service (taking into account the preceding sentence) will be deferred without interest and paid to the Employee in a lump sum immediately following that six month period. This paragraph should not be construed to prevent the application of Treas. Reg. § 1.409A-l(b)(9)(iii)(or any successor provision) to any amount payable to Employee. For purposes of the application of Treas. Reg. § 1.409A-I (b)(4)(or any successor provision), each payment in a series of payments will be deemed a separate payment.

This Letter shall not confer upon the Employee any right to continue in the employment of the Bank.  Nothing in this Letter shall affect any right which the Bank may have to terminate the employment of the Employee.

Sincerely,

/s/ Harry D. Madonna

Harry D. Madonna

Chief Executive Officer

Accepted and agreed, as of

the date first written above, by:

   /s/ Frank Cavallaro   

Frank Cavallaro

EX-10.5

Exhibit 10.5

EMPLOYMENT AGREEMENT

THIS AGREEMENT, entered into this 10th day of May, 2013, by and between Republic First Bancorp, Inc., a Pennsylvania bank holding corporation (the “Company”), Republic First Bank, a Pennsylvania bank (the “Bank”), and Harry D. Madonna (the “Executive”).

WHEREAS, the Bank is a wholly-owned subsidiary of the Company; and

WHEREAS, the Company, the Bank and the Executive are parties to an Employment Agreement dated January 1, 2010 (the “Prior Employment Agreement”); and

WHEREAS, the Company and the Bank desire to continue to employ the Executive as Chairman of their respective boards of directors (the “Boards”), Chief Executive Officer and President of the Company and Chief Executive Officer of the Bank, upon the terms and conditions set forth in this Employment Agreement; and

WHEREAS, the Executive desires to continue to be employed in such capacities by the Company and the Bank (Bank and Company are sometimes hereinafter referred to jointly as the “Employers”), subject to the terms and conditions of this Agreement;

NOW THEREFORE, in consideration of the mutual promises contained herein, and other good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

1.Term.  This Agreement shall be effective as of June 1, 2013 (“Effective Date”) and shall continue until terminated as provided for in Paragraph 4 below.

2.Duties and Employment.  The Employers hereby employ the Executive as Chairman of the Boards, and Chief Executive Officer and President of the Company and Chief Executive Officer of the Bank, pursuant to the terms hereof.  The Executive shall faithfully

perform such duties as are customarily required of a Chairman, President and Chief Executive Officer and shall devote such time, energy and attention to those duties and to such other duties as may be reasonably assigned to him by the Boards pursuant to the terms of this Agreement; provided that nothing contained herein shall prohibit the Executive from making personal investments (provided that such investments do not interfere with his duties hereunder) or participating or engaging in community, charitable, educational and other business activities that do not materially interfere with his duties hereunder.  In addition, it is understood by the Employers and the Executive that during the period the Executive is employed pursuant to this Agreement, the Employers shall provide the Executive with certain perquisites, including office space in the Bank’s premises and secretarial support for the Executive which may be used by the Executive for purposes that are extraneous to the Executive’s duties hereunder (such activities being referred to herein as “Extraneous Activities”), and such Extraneous Activities shall in no event be considered to be in conflict with the Executive’s obligations to provide services to the Bank and/or the Company under this Agreement; provided that these Extraneous Activities do not create a conflict of interest with the interests of the Company or the Bank; and provided, further, that these Extraneous Activities and the use of the Bank’s resources in connection with such activities is, in all events, subject to review by the Compensation Committees (as defined below), and its determination of the reasonableness of any such arrangements.  The Executive may also, at his expense, provide additional compensation to the Bank’s personnel in connection with work done by them relating the Executive’s Extraneous Activities, which additional compensation shall not be considered to conflict with duty of loyalty owed by the Executive or any such Bank personnel to the Company or the Bank.

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3.Compensation.

(a)Regular Compensation.  For all services rendered by the Executive under this Agreement, the Employers shall pay the Executive in accordance with the normal payment practices of the Employers an annual base salary of Five Hundred Thousand Dollars ($500,000) (the “Base Salary”).  The Base Salary may be increased, but not decreased, at the sole discretion of the Compensation Committees of the Boards (the “Compensation Committees”), which determination shall be made taking into account objective financial criteria as determined in advance by the Compensation Committees.

(b)Stock and Other Compensation Plans.  The Executive shall be eligible to participate in any stock purchase, stock grant, stock option, retirement, savings, or other compensation plans presently or hereafter maintained by the Company or the Bank for its senior executives.  Except as set forth in this subsection, eligibility in no way guarantees the Executive’s receipt of any stock grant, stock option or other compensation pursuant to such stock plans, which shall be in the sole discretion of the respective Compensation Committees, except that, based on criteria established for this purpose from year to year, as of December 31 of each year so long as the Executive remains employed under the terms of this Agreement, the Executive will annually be granted options with respect to a number of shares of Company stock that is determined at the discretion of the committee charged with responsibility for grants made under the Company’s stock incentive plan (the “Stock Plan”), which determination shall be made taking into account objective financial criteria as determined in advance by that committee.  All options granted to the Executive shall be at a purchase price per share equal to the fair market value of a share determined as of the date of grant, which options shall be vested as described below, but subject in all regards to the availability of shares under the terms of the Stock Plan and to such terms and conditions as are applicable under the Stock Plan.  In addition, and in light of the Executive’s having attained what the Compensation Committees believe to be a reasonable retirement age, all equity-based awards currently held by the Executive shall be fully vested one year from the date of grant.  The Compensation Committees, or their designated committees or officers, shall consider awarding any additional stock based compensation, and the terms thereof, at least annually.

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(c)Annual Bonuses.  The Executive shall also be able to earn an annual bonus based on a percent of his annual Base Salary, or on such other basis as may be established from time to time, based on criteria established for that purpose from year to year by the Compensation Committees, which criteria may, by way of illustration only, include, for the Company, net income, stock price, new programs, etc. or, as to the Bank, net income, core deposits, loan growth, income from loan programs, and such other criteria as shall be set by the Compensation Committees.

(d)Transaction Bonus.  In addition to any other compensation payable to the Executive hereunder, the Executive shall be entitled to a Transaction Bonus in the event a Transaction Change of Control, which for purposes of this Section 3(d) means “merger or sale or transfer of a majority of the stock of the Bank or Company” is consummated while the Executive remains employed by the Companies, or while he serves on the Boards of Directors, or within one (1) year after the latter of those dates.  For these purposes, the Transaction Bonus shall equal to an amount determined at the discretion of the Compensation Committees; provided, however, that the amount so determined shall in no event be less than One Million Dollars ($1,000,000).

(e)Payment of Bonuses.  All bonuses provided for under this Section 3 shall be paid no later than the end of the “applicable 2 ½ month period” as that phrase is used for purposes of Treasury Regulation Section 1.409A-1(b)(4), so that all bonuses shall be exempt from any requirements that are imposed under Section 409A of the Code.   In addition, the Transaction Bonus shall be paid in all events within thirty days following the consummation of the transaction giving rise to the payment provided for under Section 3(d), above.

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(f)Health, Disability and Retirement.  The Employers shall maintain such medical and disability insurance coverage (in an amount equal to at least the Executive’s annual base salary) and such retirement plan or plans for the Executive and his dependents as it maintains for other senior the Executives.  The Executive shall be entitled to four (4) weeks paid vacation per annum.  

(g)Automobile.  During the term of this Agreement, the Employers shall provide the Executive with an automobile comparable to the one currently provided to the Executive.  The Employers shall also pay or reimburse the Executive for all reasonable expenses associated with the operation, maintenance and insurance of such automobile, including expenses for parking spaces convenient to the Employers, and including a mobile telephone and other mobile communication devices as the Executive shall determine are required.

(h)Life Insurance Policy.  The Employers agree to reimburse the Executive for the costs of term life insurance policies providing a death benefit equal to four million dollars ($4,000,000) and such other terms and conditions as may be accepted by the Executive, the beneficiary of which shall be designated by the Executive.

(i)Travel Expenses.  During the term of this Agreement, the Executive shall be reimbursed for normal and reasonable travel expenses incurred on behalf of the Company or the Bank.

(j)Entertainment Expenses.  The Executive will be reimbursed for all reasonable expenses incurred by the Executive in fulfillment of his duties on behalf of the Company or the Bank, including entertainment, business meals and the like.

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(k)Other Benefits.  The Executive will be reimbursed for, or the Employers will pay directly, the initiation fees, annual dues and expenses of membership in a lunch club and a golf or country club for the Executive and his spouse.

(l)Approvals.  All expenses incurred by the Executive under subparagraphs (i), (j) and (k) hereof shall be approved by the Chief Financial Officer of the Company or his designee provided appropriate documentation of such expenses, consistent with the Company’s reimbursement policies, has been provided in connection with any request for reimbursement.

4.Term; Termination.

(a)Unless earlier terminated in accordance with the provisions of this Section 4, the Executive’s employment under this Agreement shall be for a three-year period commencing on the date first set forth above; provided, however, in the event neither party shall have given written notice that they desire to terminate the Agreement within six (6) months of the termination date, the Agreement shall automatically continue annually thereafter.  In the event the Company provides notice of its desire not to renew the Agreement pursuant to this Section 4(a), the termination of the Executive’s employment shall be treated as a termination of employment by the Company without Good Reason.

(b)The Executive may terminate this Agreement upon six (6) months written notice to the respective Employers.

(c)This Agreement shall automatically terminate upon the death of the Executive without any additional payments of salary or other benefits to the Executive except as may be required by law and as set forth in this Agreement.

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(d)This Agreement shall automatically terminate upon the Executive’s “total disability,” which shall be defined as total disability under the Executive’s disability insurance policy.

(e)The Company may terminate the Executive immediately for “Good Reason.” For purposes of this Agreement, “Good Reason” shall mean (i) breach of a fiduciary duty to the Employers involving personal profit and which causes material harm to the Employers, (ii) conviction of a felony or willful violation of any banking law or regulation or a crime of moral turpitude, and (iii) gross negligent performance of the duties under this Agreement resulting in a material impairment of Company’s financial condition.

(f)The Executive may terminate this Agreement for “Good Cause.” For purposes of this Agreement, “Good Cause” shall mean failure of either of the Employers to comply in any material respect with any material provision of this Agreement, a material change in the substantive duties of the Executive or a material change in location of the Executive’s principal workplace, which condition is not been cured within thirty (30) days after a written notice of such condition has been given by the Executive to one or both of the Employers (such notice being provided within ninety (90) days of the initial existence of such condition) ,or a Change of Control as that term is defined hereinafter.  The termination of the Executive’s employment shall not be deemed to be a termination for Good Cause under this Section 4(f) unless the Executive actually terminates employment within one (1) year of the initial existence of the condition constituting Good Cause for resignation.

5.Termination.

(a)In the event of the termination of the Executive’s employment for any reason, including a merger or sale of the Company or the Bank or sale or transfer of a majority of

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the stock of the Bank or the Company (any one of which shall be a “Change of Control”) or failure of the Employers to continue the Executive’s employment at the termination of this Agreement or any subsequent employment agreement, or if the Executive is not elected as a member of the Boards or upon agreement that Executive is to transition from service as Chief Executive Officer to service as a non-employee member of the Boards (individually, a “Termination Event”), but excluding the Executive’s death or resignation by the Executive without Good Cause or termination of the Executive for Good Reason as set forth in Section 4(e), as consideration for the Executive’s services to the Employers prior to the Executive’s termination, the Employers shall pay to the Executive a sum equal to three times the amount of the Executive’s annual Base Salary in effect immediately prior to his termination plus three (3) times the average bonus paid to the Executive over the prior three years.  For a period of five (5) years after termination of his employment the Employers shall also pay to the Executive in cash additional amounts that correspond to the amounts the Employers would have paid in premiums for the life insurance policies covering the Executive, and shall provide, at no cost to the Executive, continuation of his health and other benefits in effect immediately prior to his termination.  In the event such continuation of benefits is not able to be provided by the Employers’ group insurance plans or policies, the Employers shall pay to the Executive in cash an amount which will permit the Executive to purchase comparable insurance policies.  The total benefits set forth in this Section 5(a) shall hereinafter be referred to as “Severance Benefits”.  All Severance Benefits from a Termination Event under the Section 5(a) shall be paid to the Executive within thirty (30) days of occurrence of the Termination Event, except to the extent another payment date is expressly set forth herein.

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In addition, in the event a transaction is consummated that would result in a payment to the Executive of a Transaction Bonus under Section 3(d), above, without regard to the requirement in Section 3(d) that such transaction be consummated while the Executive is employed by the Companies, and such transaction is consummated while the Executive is serving as a non-employee member of the Boards, or within one (1) year following the date as of which the Executive ceases to provide services to either of the Companies in any capacity, the Transaction Bonus, as defined in Section 3(d), above, shall be paid to the Executive as soon as practicable following the consummation of such transaction, consistent with the timing requirements set forth in Section 3(d).  The payment of the Transaction Bonus pursuant to this Section 5(a) is understood as being subject to a substantial risk of forfeiture until the consummation of a transaction that creates a right of the Executive to receive such bonus payment and is, therefore, understood to be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) by reason of the short-term deferral rules of Treasury Regulation Section 1.409A-1(b)(4).

(b)Notwithstanding the preceding provisions of this Section 5, in the event that (and to the extent that) the payment and benefit provisions are determined to be contrary to (and in excess of) those permitted under any applicable federal or state banking authority law, rule or regulation, then the benefits provided under this Section 5 shall be reduced by such amount (but no more than such amount) as may be required to comply with such law, rule or regulation.  The Executive shall be entitled to elect which payments and benefits shall be reduced and in what manner, subject to recommendation by the Compensation Committees, and reasonable approval of the Boards and to the extent permitted by such federal or state banking authority law, rule or regulation.

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(c)Following the Executive’s termination of employment, the Executive may, subject to any applicable requirements or approvals pursuant to the corporate charter or by-laws of the Employers, continue as a member of the board of directors of the Company and/or the Bank and will, in connection with such continued service, be provided with office space and secretarial or other support similar to the office space and support provided to the Executive during the term of the Executive’s employment.  In addition, the Executive shall be permitted to continue to engage in Extraneous Activities and shall have available to him the same perquisites as are available to him for use in connection with his Extraneous Activities on terms comparable to those set out in Section 2, above.

6.Confidentiality.  The Executive acknowledges that, in the course of his employment by the Employers, he will have access to confidential information, trade secrets, and unique business procedures which are the valuable property of the Employers.  The Executive agrees not to disclose for any reason, directly or indirectly, any confidential, trade secret or other proprietary information, as determined by the Employers in their reasonable discretion, at any time, during or after the period the Executive is employed by the Employers, for any purpose other than to perform his assigned duties on behalf of the Employers.

7.Remedy.  The Employers and the Executive acknowledge and agree that any breach of Paragraph 6 of this Agreement would cause irreparable injury to the Employers as the case may be, and that the Employers’ remedy at law for any breach of any of the Executive’s obligations under Paragraph 6 hereof would be inadequate, and the Executive agrees and consents that temporary and permanent injunctive relief may be granted in any proceeding which may be brought to enforce any provision of Paragraph 6 hereof without the necessity of proof that the Employers’ remedy at law is inadequate and the Employers shall have the right, in their sole discretion to, in addition to any other remedy it may be entitled to under law or in equity, set off any amounts due the Executive under this Agreement or otherwise as partial damages for violations of such paragraph by the Executive.

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8.Indemnification.  The Employers shall indemnify the Executive to the full extent permitted by law and by the by-laws or certificates of incorporation of the Company and the Banks for the benefit of its respective officers or directors as in effect on the date hereof.

9.Notices.  Any and all notices, designations, consents, offers, acceptances, or any other communications provided for herein shall be given in writing by registered or certified mail, return receipt requested to the addresses set forth below or as may be changed by the parties:

If to Company or Bank:

Two Liberty Place

50 S. 16th Street, Suite 2400

Philadelphia, PA 19102

Attention: Chairman of the Board

If to the Executive:

Harry D. Madonna

1235 Country Club Road

Gladwyne, PA 19035-1043

10.Invalid Provisions.  The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and the Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted.

11.Modification.  No change or modification of this Agreement shall be enforceable against any party unless the same is in writing and signed by the party against whom enforcement is sought.

12.Entire Agreement.  This Agreement represents the entire agreement between the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings with respect thereto.  The Prior Employment Agreement is hereby terminated effective midnight on the day prior to the Effective Date.

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13.Representation of the Employers.  The Employers represent and warrant that the execution of this Agreement by the Employers has been duly authorized by resolution of their respective Compensation Committees.

14.Headings.  Any heading preceding the text of the several paragraphs hereof are inserted solely for the convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.

15.Successors; Assigns.  This Agreement shall inure to the benefit of, and be binding upon, the parties hereto, and their respective heirs, executors, administrators, successors and, to the extent permitted herein, assigns.  Notwithstanding the foregoing, no party hereto may assign its rights or obligations hereunder.

16.Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania.

17.Disputes.  In the event any dispute shall arise between the Executive and the Company or the Bank as to the terms or interpretation of this Agreement, whether instituted by formal legal proceedings or otherwise, including any action taken by the Company or the Bank, the Company and the Bank shall reimburse the Executive for all costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings, or actions, notwithstanding the ultimate outcome thereof.  Such reimbursement shall be paid within ten (10) days of the Executive furnishing to the Company and the Bank written evidence, which may be in the form, among other things, of a cancelled check or receipt, of any costs or expenses incurred by the Executive.  Any such request for reimbursement by the Executive shall be made no more frequently than at thirty (30) day intervals.

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18.Payment of Tax Gross-Ups.  In connection with certain payments provided for under this Agreement, the Employers shall also pay to the Executive a Tax Gross-Up Payment (as defined below).

(a) A Tax Gross-Up Payment shall be made so as to make the Executive whole with respect to all taxes imposed on income recognized by the Executive pursuant to the following sections of this Agreement:

(i)Imputed income attributable to disability coverage pursuant to Section 3(f);

(ii)Income attributable to use of an automobile pursuant to Section 3(g);

(iii)Imputed income attributable to employer provide life insurance under Section 3(h); and

(iv)Income attributable to payment or reimbursement of other items pursuant to Section 3(k).

(b)In addition, in the event excise taxes are imposed under Code Section 4999 as a result of payments or benefits being deemed to be contingent on a Change of Control transaction, either by reason of express provisions of this Agreement or otherwise, and to the extent the Change of Control transaction cannot be structured so as to avoid such excise taxes, a Tax Gross-Up Payment shall be made to the Executive, as follows:  The Employers shall pay to the Executive, in addition to any other amounts payable under this Agreement, a Tax Gross-Up Payment sufficient to leave the Executive with an amount at least equal to the amount of the excise tax imposed on the Executive pursuant to Code Section 4999.  In determining the amount of this Tax Gross-Up Payment, the following provisions shall be applicable:

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(i)All calculations required to be made in order to determine the amount payable as a Tax Gross-Up Payment under the preceding paragraph shall be made by the Employers’ independent certified public accountants within thirty (30) days of the Termination of the Executive’s employment, subject to the right of the Executive’s representative to review the same; and

(ii)In the event the amounts paid by the Employers hereunder are subsequently determined, for any reason, to be less than the amounts which should have been paid (as properly calculated hereunder) (“Deficiency Amount”), the Employers will, within thirty (30) days of such determination, pay to the Executive the Deficiency Amount, together with interest at the greater of the above-referenced rate or the interest he may be required to pay to the respective taxing authorities.

(c)For purposes of this Agreement, a “Tax Gross-Up Payment” means, in general, with respect to any amount of taxable income or imputed income item (the “Income Item”), an additional payment to the Executive that is sufficient, net of all applicable federal, state and local taxes imposed on the applicable payment or income, so that the Executive shall retain an amount at least equal to all applicable federal, state and local taxes imposed on the Income Item, and, with respect to any Change in Control Payments, the amount determined under Section 18(b), above.

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19.Intent to Comply with Code Section 409A.  With respect to any amounts payable under this Agreement to which Code Section 409A is determined to be applicable, and notwithstanding anything in this Agreement to the contrary, such payments shall be made only at a time and in a manner that complies with all applicable provision of Code Section 409A.  This Agreement is intended to comply with Code Section 409A and applicable Treasury Regulations or other guidance as may be issued by the Treasury Department or the Internal Revenue Service interpreting Code Section 409A so as to avoid the imposition of tax on the Executive under Code Section 409A, and shall in all instances be interpreted in a manner consistent with such intent.  The provisions of this Section 19 are intended to be applicable only to payments under this Agreement treated as nonqualified deferred compensation subject to the provisions of Code Section 409A.  This Section 19 as included in this Agreement shall, therefore, be without effect as to any payments that are not nonqualified deferred compensation payments for purposes of Code Section 409A.

(a)In connection with the intent of this Section 19, any payment that constitutes a nonqualified deferred compensation payment for purposes of Code Section 409A that would, but for this Section 19, be in violation of the rule set forth in Code Section 409A(a)(2)(B)(i) (prohibiting payments to any “specified employee” before the date which is six months after such employee’s Separation from Service) shall be paid to the Executive as soon as practicable following the six month anniversary of the Executive’s termination of employment.  In addition, any amounts that are payable to the Executive as a reimbursement shall be paid consistent with the requirements of Treasury Regulation Section 1.409A-3, including the requirement that such reimbursement be made on or before the last day of the calendar year following the calendar year in which the expense was incurred.

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(b)Payments that are required to be made to the Executive as a result of the Executive’s termination shall only be payable following the Executive’s Separation from Service.

(c)Notwithstanding anything in this Agreement to the contrary, no right of set-off of the Employers shall apply to any amounts payable to the Executive that constitute a payment of nonqualified deferred compensation to which Code Section 409A applies.

(d)In addition, any payment that constitutes a nonqualified deferred compensation payment for purposes of Code Section 409A that, but for this Section 19, may be made either in a series of payments or in a single lump sum, shall in all events be made only in the form of a lump sum payment which payment shall be made to the Executive as soon as practicable on or after the first date as of which such payment may be made without violating the rules of Code Section 409A.

(e)For purposes of this Agreement, the term “Separation from Service” shall have the same meaning as is applicable to that phrase is it is used for purposes of Code Section 409A and as that phrase is defined in Treasury Regulation Section 1.409A-1(h).  In interpreting this definition, to the extent consistent with the requirements of the applicable Treasury Regulations, the Executive shall be considered to have separated from service as of the date that the Employers and the Executive reasonably anticipate that the Executive’s duties, if any, will involve the Executive providing services that constitute a level that is less than 50 percent of the average level of bona fide services provided by the Executive during the immediately preceding 12 months.

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(f)All reimbursements and Tax Gross-Up Payments to the Executive shall be paid to the Executive at a time and in a manner that is consistent with the requirements of Treasury Regulation Sections 1.409A-3(i)(1)(iv) and (v), as applicable.

(g)All payments required to be made by reason of a specific event shall in all events be paid within ninety (90) days following such event and, if such ninety (90) day period spans two calendar years, such payment shall be made during the second of such two calendar years.

IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals the date and year above first written.

REPUBLIC FIRST BANCORP, INC.
By:	/s/ Frank A. Cavallaro
	Its CFO
	Frank A. Cavallaro
	[Print Name]
REPUBLIC FIRST BANK
By:	/s/ Frank A. Cavallaro
	Its CFO
	Frank A. Cavallaro
	[Print Name]
	/s/ Harry D. Madonna
	HARRY D. MADONNA

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EX-31.1

Exhibit 31.1

REPUBLIC FIRST BANCORP, INC.

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Harry D. Madonna, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 of Republic First Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 10, 2013	/s/ Harry D. Madonna
	Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

REPUBLIC FIRST BANCORP, INC.

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Frank A. Cavallaro, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 of Republic First Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 10, 2013	/s/ Frank A. Cavallaro
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, as filed with the Securities and Exchange Commission by Republic First Bancorp, Inc. (the "Company") on the date hereof (the "Report"), I, Harry D. Madonna, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 10, 2013	/s/ Harry D. Madonna
	Chairman, President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, as filed with the Securities and Exchange Commission by Republic First Bancorp, Inc. (the "Company") on the date hereof (the "Report"), I, Frank A. Cavallaro, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 10, 2013	/s/ Frank A. Cavallaro
	Executive Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

XML

Fair Value of Financial Instruments (Schedule of Fair Value, Assets and Liabilities Measured On Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	$ 173,550	$ 189,259
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	167,305	183,065
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	6,245	6,194
Collateralized Mortgage Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	91,482	99,783
Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	91,482	99,783
Mortgage-backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	20,232	21,640
Mortgage-backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	20,232	21,640
Municipal securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	5,551	12,101
Municipal securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	5,551	12,101
Corporate bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	33,024	32,685
Corporate bonds [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	30,017	29,678
Corporate bonds [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	3,007	3,007
Asset-backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	19,889	19,729
Asset-backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	19,889	19,729
Trust Preferred Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	3,238	3,187
Trust Preferred Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	3,238	3,187
Other securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	134	134
Other securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	$ 134	$ 134

XML

Loans Receivable and Allowance for Loan Losses (Average Of Impaired Loans And Related Interest Income By Loan Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	$ 27,603	$ 23,076
Impaired Loans with no related allowance recorded: Interest Income Recognized	247	287
Impaired Loans with an allowance recorded: Average Recorded Investment	12,512	16,010
Impaired Loans with an allowance recorded: Interest Income Recognized	86	81
Total Average Recorded Investment	40,115	39,086
Total Interest Income Recognized	333	368
Loans and Leases Receivable, Impaired, Interest Lost on Nonaccrual Loans	209	167
Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	20,189	14,615
Impaired Loans with no related allowance recorded: Interest Income Recognized	219	193
Impaired Loans with an allowance recorded: Average Recorded Investment	4,714	5,637
Impaired Loans with an allowance recorded: Interest Income Recognized	36	55
Total Average Recorded Investment	24,903	20,252
Total Interest Income Recognized	255	248
Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	3,408	3,428
Impaired Loans with no related allowance recorded: Interest Income Recognized	21	30
Impaired Loans with an allowance recorded: Average Recorded Investment	296	3,428
Total Average Recorded Investment	3,704	6,856
Total Interest Income Recognized	21	30
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	2,917	2,627
Impaired Loans with no related allowance recorded: Interest Income Recognized	6	35
Impaired Loans with an allowance recorded: Average Recorded Investment	3,988	5,595
Impaired Loans with an allowance recorded: Interest Income Recognized	14	14
Total Average Recorded Investment	6,905	8,222
Total Interest Income Recognized	20	49
Owner occupied real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	252	1,490
Impaired Loans with no related allowance recorded: Interest Income Recognized		27
Impaired Loans with an allowance recorded: Average Recorded Investment	3,441	1,350
Impaired Loans with an allowance recorded: Interest Income Recognized	36	12
Total Average Recorded Investment	3,693	2,840
Total Interest Income Recognized	36	39
Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	837	916
Impaired Loans with no related allowance recorded: Interest Income Recognized	1	2
Impaired Loans with an allowance recorded: Average Recorded Investment	73
Total Average Recorded Investment	910	916
Total Interest Income Recognized	$ 1	$ 2

XML

Investment Securities (Narrative) (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2013 security	Mar. 31, 2012	Dec. 31, 2012 security
Schedule of Investments [Line Items]
Market value of securities in the geographical area with the highest concentration of municipal securities	$ 1,400,000
Number of private mortgage backed securities	0		0
Number of securities rated "Alt-A" or "Subprime"	0		0
Number of private issued CMOs	0		0
Gain on sale of investment securities	703,000	0
Income Tax Expense (Benefit)	(26,000)	(69,000)
Impairment of the investment portfolio	2,721,000		2,996,000
Total fair value of the investment portfolio	30,239,000		33,257,000
Investment securities available for sale, at fair value	173,550,000		189,259,000
Number of securities in the geographical area with the highest concentration of municipal securities	1
Number of municipal securities with OTTI impairment	0
Municipal securities [Member]
Schedule of Investments [Line Items]
Impairment of the investment portfolio	5,000		16,000
Total fair value of the investment portfolio	1,420,000		1,050,000
Investment securities available for sale, at fair value	5,551,000		12,101,000
Corporate bonds [Member]
Schedule of Investments [Line Items]
Impairment of the investment portfolio	47,000		185,000
Total fair value of the investment portfolio	4,953,000		9,811,000
Number of municipal securities in investment portfolio	8
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	1
Investment securities available for sale, at fair value	33,024,000		32,685,000
Other securities [Member]
Schedule of Investments [Line Items]
Investment securities available for sale, at fair value	134,000		134,000
Available-for-sale Securities [Member]
Schedule of Investments [Line Items]
Income Tax Expense (Benefit)	253,000
Asset-backed Securities [Member]
Schedule of Investments [Line Items]
Impairment of the investment portfolio			191,000
Total fair value of the investment portfolio			9,218,000
Investment securities available for sale, at fair value	$ 19,889,000		$ 19,729,000

XML

Fair Value of Financial Instruments (Fair Value Inputs, Assets, Quantitative Information) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Dec. 31, 2012
Impaired Loans [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 9,291		$ 19,876
Valuation Technique	Fair Value of Collateral (1)	[1]
Unobservable Input	Appraised Value (2)	[2]
Other Real Estate Owned [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	3,431		3,642
Valuation Technique	Fair Value of Collateral (1)	[1]
Unobservable Input	Appraised Value (2) Sales Price	[2]
SBA Servicing Assets [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 2,491		$ 2,340
Valuation Technique	Fair Value
Unobservable Input	Individual Loan Valuation (3)
Minimum [Member] | Impaired Loans [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Inputs, Discount Rate	0.00%	[3]
Minimum [Member] | Other Real Estate Owned [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Inputs, Discount Rate	8.00%	[3]
Maximum [Member] | Impaired Loans [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Inputs, Discount Rate	43.00%	[3]
Maximum [Member] | Other Real Estate Owned [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Inputs, Discount Rate	18.00%	[3]
Weighted Average [Member] | Impaired Loans [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Inputs, Discount Rate	23.00%	[3]
Weighted Average [Member] | Other Real Estate Owned [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Inputs, Discount Rate	9.00%	[3]
Weighted Average [Member] | SBA Servicing Assets [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Inputs, Discount Rate	(3.00%)

[1] (1) Fair value is generally determined through independent appraisals of the underlying collateral, which include Level 3 inputs that are not identifiable.

[2] (2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

[3] (4) The range and weighted average of qualitative factors such as economic conditions and estimated liquidation expenses are presented as a percent of the appraised value.

XML

Loans Receivable and Allowance for Loan Losses (Nonaccrual Loans By Classes Of The Loan Portfolio) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Non-Accrual Status	$ 15,115	$ 15,846
Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Non-Accrual Status	7,822	7,987
Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Non-Accrual Status	1,622	1,342
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Non-Accrual Status	4,642	4,693
Owner occupied real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Non-Accrual Status	463	968
Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Non-Accrual Status	$ 566	$ 856

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2013

Basis of Presentation [Abstract]

Basis of Presentation

Note 1: Basis of Presentation

Republic First Bancorp, Inc. (the "Company") is a corporation incorporated under the laws of the Commonwealth of Pennsylvania and a registered bank holding company. The Company offers a variety of retail and commercial banking services to individuals and businesses throughout the Greater Philadelphia and Southern New Jersey area through its wholly-owned subsidiary, Republic First Bank ("Republic" or the "Bank") which does business under the name Republic Bank. The Company also has three unconsolidated subsidiaries, which are statutory trusts established by the Company in connection with its sponsorship of three separate issuances of trust preferred securities.

The Company and Republic encounter vigorous competition for market share in the geographic areas they serve from bank holding companies, national, regional and other community banks, thrift institutions, credit unions and other non-bank financial organizations, such as mutual fund companies, insurance companies and brokerage companies.

The Company and Republic are subject to regulations of certain state and federal agencies. These regulatory agencies periodically examine the Company and Republic for adherence to laws and regulations. As a consequence, the cost of doing business may be affected.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Republic. The Company follows accounting standards set by the Financial Accounting Standards Board ("FASB").  The FASB sets accounting principles generally accepted in the United States of America ("U.S. GAAP") that are followed to ensure consistent reporting of financial condition, results of operations, and cash flows.   

        The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to United States Securities and Exchange Commission ("SEC") Form 10-Q and Article 10 of SEC Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for financial statements for a complete fiscal year.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements. The Company has evaluated subsequent events through the date of issuance of the financial data included herein.

XML

Fair Value Measurements and Fair Values of Financial Instruments (SBA Servicing Assets) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Fair Value of Financial Instruments [Abstract]
Beginning balance, January 1st	$ 2,340	$ 1,102
Additions	146	241
Fair value adjustments	5	8
Ending balance, March 31st	$ 2,491	$ 1,351

XML

Investment Securities (Schedule of Unrealized Loss on Investments) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	$ 22,048	$ 20,259
12 Months or more: Fair Value	8,191	12,998
Total: Fair Value	30,239	33,257
Less than 12 Months: Unrealized Losses	135	213
12 Months or more: Unrealized Losses	2,586	2,783
Total: Unrealized Losses	2,721	2,996
Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	19,395	9,991
Total: Fair Value	19,395	9,991
Less than 12 Months: Unrealized Losses	103	6
Total: Unrealized Losses	103	6
Mortgage-backed Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	1,233
Total: Fair Value	1,233
Less than 12 Months: Unrealized Losses	27
Total: Unrealized Losses	27
Municipal securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	1,420	1,050
Total: Fair Value	1,420	1,050
Less than 12 Months: Unrealized Losses	5	16
Total: Unrealized Losses	5	16
Corporate bonds [Member]
Schedule of Investments [Line Items]
12 Months or more: Fair Value	4,953	9,811
Total: Fair Value	4,953	9,811
12 Months or more: Unrealized Losses	47	185
Total: Unrealized Losses	47	185
Asset-backed Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value		9,218
Total: Fair Value		9,218
Less than 12 Months: Unrealized Losses		191
Total: Unrealized Losses		191
Trust Preferred Securities [Member]
Schedule of Investments [Line Items]
12 Months or more: Fair Value	3,238	3,187
Total: Fair Value	3,238	3,187
12 Months or more: Unrealized Losses	2,539	2,598
Total: Unrealized Losses	$ 2,539	$ 2,598

XML

Investment Securities (Schedule of Credit-Related Impairment Losses on Securities) (Details) (USD $)
In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Investment Securities [Abstract]

Beginning Balance

$ 3,959

$ 3,925

Additional credit-related impairment loss on securities for which an other-than-temporary impairment was previously recognized

0

17

Ending Balance

$ 3,959

$ 3,942

Other than Temporary Impairment Losses Methodology

In instances when a determination is made that an other-than-temporary impairment exists with respect to a debt security but the investor does not intend to sell the debt security and it is more likely than not that the investor will not be required to sell the debt security prior to its anticipated recovery, FASB Accounting Standards Codification ("ASC") 320-10, Investments – Debt and Equity Securities, requires the other-than-temporary impairment to be separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors.  The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income.  Impairment charges (credit losses) on trust preferred securities for the three months ended March 31, 2013 and 2012 amounted to $0 and $17,000, respectively.

The Company realized gross gains on the sale of securities of $703,000 during the three months ended March 31, 2013.  The related sale proceeds amounted to $7.9 million.  The tax provision applicable to these gross gains for the three months ended March 31, 2013 amounted to approximately $253,000. No securities were sold during the three months ended March 31, 2012.

XML

Fair Value Measurements and Fair Values of Financial Instruments (Sensitivity Analysis) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
Fair value of SBA Servicing Asset	$ 2,491	$ 2,340	$ 1,351	$ 1,102
Weighted Average Remaining Term	21 years 1 month 6 days	21 years 4 months 24 days
Prepayment Speed	6.61%	6.59%
Prepayment Speed: Effect on fair value of a 10% increase	(59)	(55)
Prepayment Speed: Effect on fair value of a 20% increase	(116)	(107)
Weighted Average Discount Rate	13.18%	14.23%
Discount Rate: Effect on fair value of a 10% increase	(115)	(115)
Discount Rate: Effect on fair value of a 20% increase	$ (222)	$ (222)
Fixed Rate SBA Loans [Member]
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
Compositions Of SBA Loans Service For Other Loans	0.00%	0.00%
Adjustable Rate SBA Loans [Member]
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
Compositions Of SBA Loans Service For Other Loans	100.00%	100.00%

XML

Investment Securities (Schedule of Trust Preferred Securities) (Details) (USD $) In Thousands, unless otherwise specified					3 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2013 Preferred Term Securities IV [Member] entity	Mar. 31, 2013 Preferred Term Securities VII [Member] entity	Mar. 31, 2013 TPREF Funding II [Member] entity	Mar. 31, 2013 TPREF Funding III [Member] entity	Mar. 31, 2013 Trapeza CDO I, LLC [Member] entity	Mar. 31, 2013 ALESCO Preferred Funding IV [Member] entity	Mar. 31, 2013 ALESCO Preferred Funding V [Member] entity	Mar. 31, 2013 Trust Preferred Securities [Member] entity	Dec. 31, 2012 Trust Preferred Securities [Member]
Schedule of Investments [Line Items]
Class / Tranche					Mezzanine Notes	Mezzanine Notes	Class B Notes	Class B2 Notes	Class C1 Notes	Class B1 Notes	Class C1 Notes
Available-for-sale Securities, Amortized Cost Basis	$ 172,655	$ 187,667			$ 49	$ 1,489	$ 739	$ 1,520	$ 556	$ 604	$ 820	$ 5,777	$ 5,785
Available-for-sale Securities	173,550	189,259			40	1,140	338	727	255	318	420	3,238	3,187
Gross Unrealized Losses	(2,721)	(2,996)			(9)	(349)	(401)	(793)	(301)	(286)	(400)	(2,539)	(2,598)
Lowest Credit Rating Assigned					CCC	C	C	C	C	C	C
Number of banks currently performing					5	12	16	17	10	39	37	136
Deferrals / Defaults as % of Current Balance					27.00%	49.00%	44.00%	35.00%	47.00%	14.00%	27.00%	34.00%
Conditional Default Rates for 2013 and beyond					0.33%	0.34%	0.39%	0.33%	0.38%	0.36%	0.36%
Cumulative OTTI Life to Date	$ 3,959	$ 3,959	$ 3,942	$ 3,925		$ 2,173	$ 260	$ 480	$ 470	$ 396	$ 180	$ 3,959

XML

Loans Receivable and Allowance for Loan Losses (Gross Loans By Loan Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	$ 627,282	$ 618,121
Deferred costs (fees)	(160)	(220)
Allowance for loan losses	(9,353)	(9,542)	(9,542)	(10,756)	(12,050)
Net loans receivable	617,769	608,359
Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	332,407	335,561
Allowance for loan losses	(3,257)	(3,979)	(3,979)	(4,371)	(7,372)
Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	27,614	26,659
Allowance for loan losses	(1,835)	(1,273)	(1,273)	(2,169)	(558)
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	110,785	103,768
Allowance for loan losses	(2,336)	(1,880)	(1,880)	(2,219)	(1,928)
Owner occupied real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	129,692	126,242
Allowance for loan losses	(1,297)	(1,967)	(1,967)	(1,455)	(1,963)
Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	24,359	23,449
Allowance for loan losses	(170)	(234)	(234)	(106)	(113)
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	2,425	2,442
Allowance for loan losses	$ (14)	$ (17)	$ (17)	$ (20)	$ (23)

XML

Consolidated Statements of Changes in Shareholders' Equity (USD $) In Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Treasury Stock [Member]	Stock Held by Deferred Compensation Plan [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Shareholders' equity, beginning at Dec. 31, 2011	$ 265	$ 106,383	$ (37,842)	$ (3,099)	$ (809)	$ (47)	$ 64,851
Net income			1,305				1,305
Other comprehensive income (loss), net of tax						158	158
Stock based compensation		89					89
Shareholders' equity, ending at Mar. 31, 2012	265	106,472	(36,537)	(3,099)	(809)	111	66,403
Shareholders' equity, beginning at Dec. 31, 2012	265	106,753	(34,228)	(3,099)	(809)	1,020	69,902
Net income			992				992
Other comprehensive income (loss), net of tax						(446)	(446)
Stock based compensation		72					72
Shareholders' equity, ending at Mar. 31, 2013	$ 265	$ 106,825	$ (33,236)	$ (3,099)	$ (809)	$ 574	$ 70,520

XML

Loans Receivable and Allowance for Loan Losses (Impaired Loans By Loan Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	$ 27,612	$ 27,594
Impaired Loans with an allowance recorded: Recorded Investment	11,603	13,421
Total Recorded Investment	39,215	41,015
Impaired Loans with no related allowance: Unpaid Principal Balance	35,858	35,069
Impaired Loans with an allowance recorded: Unpaid Principal Balance	14,112	16,645
Total Unpaid Principal Balance	49,970	51,714
Impaired Loans with an allowance recorded: Related Allowance	2,774	2,943
Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	21,146	19,231
Impaired Loans with an allowance recorded: Recorded Investment	3,343	6,085
Total Recorded Investment	24,489	25,316
Impaired Loans with no related allowance: Unpaid Principal Balance	21,901	20,000
Impaired Loans with an allowance recorded: Unpaid Principal Balance	3,344	6,085
Total Unpaid Principal Balance	25,245	26,085
Impaired Loans with an allowance recorded: Related Allowance	607	1,077
Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	3,663	3,153
Impaired Loans with an allowance recorded: Recorded Investment		593
Total Recorded Investment	3,663	3,746
Impaired Loans with no related allowance: Unpaid Principal Balance	9,984	6,312
Impaired Loans with an allowance recorded: Unpaid Principal Balance		3,700
Total Unpaid Principal Balance	9,984	10,012
Impaired Loans with an allowance recorded: Related Allowance		70
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	2,041	3,793
Impaired Loans with an allowance recorded: Recorded Investment	4,829	3,147
Total Recorded Investment	6,870	6,940
Impaired Loans with no related allowance: Unpaid Principal Balance	2,958	7,106
Impaired Loans with an allowance recorded: Unpaid Principal Balance	7,337	3,255
Total Unpaid Principal Balance	10,295	10,361
Impaired Loans with an allowance recorded: Related Allowance	1,327	861
Owner occupied real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		505
Impaired Loans with an allowance recorded: Recorded Investment	3,431	3,450
Total Recorded Investment	3,431	3,955
Impaired Loans with no related allowance: Unpaid Principal Balance		505
Impaired Loans with an allowance recorded: Unpaid Principal Balance	3,431	3,450
Total Unpaid Principal Balance	3,431	3,955
Impaired Loans with an allowance recorded: Related Allowance	840	860
Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	762	912
Impaired Loans with an allowance recorded: Recorded Investment		146
Total Recorded Investment	762	1,058
Impaired Loans with no related allowance: Unpaid Principal Balance	1,015	1,146
Impaired Loans with an allowance recorded: Unpaid Principal Balance		155
Total Unpaid Principal Balance	1,015	1,301
Impaired Loans with an allowance recorded: Related Allowance		$ 75

XML

Fair Value of Financial Instruments (Fair Value, Assets Measured On Recurring Basis, Unobservable Input Reconciliation) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013 Trust Preferred Securities [Member]	Mar. 31, 2012 Trust Preferred Securities [Member]	Mar. 31, 2012 Corporate bonds [Member]	Mar. 31, 2013 Corporate bonds [Member]	Dec. 31, 2012 Corporate bonds [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance,			$ 3,187	$ 3,410	$ 3,004	$ 3,007	$ 3,007
Unrealized gains (losses)			58	6	3
Paydowns			(7)
Impairment charges on level 3	0	17		(17)
Balance,			$ 3,238	$ 3,399	$ 3,007	$ 3,007	$ 3,007

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
ASSETS
Cash and due from banks	$ 9,592	$ 9,097
Interest bearing deposits with banks	62,337	118,907
Cash and cash equivalents	71,929	128,004
Investment securities available for sale, at fair value	173,550	189,259
Investment securities held to maturity, at amortized cost (fair value of $69 and $69, respectively)	68	67
Restricted stock, at cost	3,276	3,816
Loans held for sale	165	82
Loans receivable (net of allowance for loan losses of $9,353 and $9,542, respectively)	617,769	608,359
Premises and equipment, net	21,630	21,976
Other real estate owned, net	8,268	8,912
Accrued interest receivable	3,273	3,128
Bank owned life insurance	10,503	10,490
Other assets	15,653	14,565
Total Assets	926,084	988,658
Liabilities
Deposits: Demand - non-interest bearing	149,857	145,407
Deposits: Demand - interest bearing	159,601	180,440
Deposits: Money market and savings	425,753	440,120
Deposits: Time deposits	90,927	123,234
Total Deposits	826,138	889,201
Accrued interest payable	494	301
Other liabilities	6,456	6,778
Subordinated debt	22,476	22,476
Total Liabilities	855,564	918,756
Shareholders' Equity
Preferred stock, par value $0.01 per share: 10,000,000 shares authorized; no shares issued	0	0
Common stock, par value $0.01 per share: 50,000,000 shares authorized; shares issued 26,501,742	265	265
Additional paid in capital	106,825	106,753
Accumulated deficit	(33,236)	(34,228)
Treasury stock at cost (416,303 shares)	(3,099)	(3,099)
Stock held by deferred compensation plan	(809)	(809)
Accumulated other comprehensive income	574	1,020
Total Shareholders' Equity	70,520	69,902
Total Liabilities and Shareholders' Equity	$ 926,084	$ 988,658

XML

Fair Value Measurement of Financial Instruments (Fair Value, by Balance Sheet Grouping) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Carrying Amount	$ 71,929	$ 128,004	$ 118,231	$ 230,955
Investment securities available for sale, Carrying Amount	173,550	189,259
Investment securities held to maturity, Carrying Amount	68	67
Restricted stock, Carrying Amount	3,276	3,816
Loans held for sale, Carrying Amount	165	82
Loans receivable, net, Carrying Amount	617,769	608,359
SBA servicing assets	2,491	2,340
Accrued interest receivable, Carrying Amount	3,273	3,128
Demand, Savings and Money Market, Carrying Amount	735,211	765,967
Deposits: Time deposits	90,927	123,234
Subordinated debt	22,476	22,476
Accrued interest payable, Carrying Amount	494	301
Cash and cash equivalents	71,929	128,004
Investment securities available for sale	173,550	189,259
Investment securities held to maturity	69	69
Restricted Stock	3,276	3,816
Loans held for sale	165	82
Loans receivable, net	614,714	603,237
SBA servicing assets	2,491	2,340	1,351	1,102
Accrued interest receivable	3,273	3,128
Deposits: Demand, savings and money market	735,211	765,967
Deposits: Time	91,636	124,044
Subordinated debt	18,392	20,187
Accrued interest payable	494	301
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	71,929	128,004
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	167,305	183,065
Investment securities held to maturity	69	69
Restricted Stock	3,276	3,816
Accrued interest receivable	3,273	3,128
Deposits: Demand, savings and money market	735,211	765,967
Deposits: Time	91,636	124,044
Accrued interest payable	494	301
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	6,245	6,194
Loans held for sale	165	82
Loans receivable, net	614,714	603,237
SBA servicing assets	2,491	2,340
Subordinated debt	$ 18,392	$ 20,187

XML

Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Consolidated Statements of Comprehensive Income [Abstract]
Other Comprehensive Income, Unrealized Holding Gain (Loss) on Securities Arising During Period, before Tax	$ 6	$ 230
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, before Tax	703	0
Other Comprehensive Income, Reclassification Adjustment for Write-down of Securities Included in Net Income, before Tax	$ 0	$ 17

XML

Loans Receivable and Allowance for Loan Losses (Past Due Financing Receivables) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
30-59 Days Past Due	$ 17,282	$ 1,143
60 to 89 Days Past Due	11,288	27,823
Greater than 90 Days	15,115	16,048
Total Past Due	43,685	45,014
Current	583,597	573,107
Total loans receivable	627,282	618,121
Loans Receivable > 90 Days and Accruing		202
Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
30-59 Days Past Due	16,835	772
60 to 89 Days Past Due	8,899	26,000
Greater than 90 Days	7,822	7,987
Total Past Due	33,556	34,759
Current	298,851	300,802
Total loans receivable	332,407	335,561
Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
60 to 89 Days Past Due	260	261
Greater than 90 Days	1,622	1,342
Total Past Due	1,882	1,603
Current	25,732	25,056
Total loans receivable	27,614	26,659
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
30-59 Days Past Due		86
60 to 89 Days Past Due	640
Greater than 90 Days	4,642	4,693
Total Past Due	5,282	4,779
Current	105,503	98,989
Total loans receivable	110,785	103,768
Owner occupied real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
30-59 Days Past Due	121	285
60 to 89 Days Past Due	1,489	1,562
Greater than 90 Days	463	968
Total Past Due	2,073	2,815
Current	127,619	123,427
Total loans receivable	129,692	126,242
Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
30-59 Days Past Due	326
Greater than 90 Days	566	1,058
Total Past Due	892	1,058
Current	23,467	22,391
Total loans receivable	24,359	23,449
Loans Receivable > 90 Days and Accruing		202
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Current	2,425	2,442
Total loans receivable	$ 2,425	$ 2,442

XML

Summary of Significant Accounting Policies (Summary Of Assumptions) (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Dividend yield	0.00%	0.00%
Expected volatility	53.12%	53.12%
Risk-free interest rate	1.36%	1.36%
Expected life	7 years	7 years
Maximum [Member]
Expected volatility	54.89%
Risk-free interest rate	1.41%
Minimum [Member]
Expected volatility	54.88%
Risk-free interest rate	1.28%

XML

Loans Receivable and Allowance for Loan Losses (Classes Of The Loan Portfolio Summarized By The Aggregate Risk Rating) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	$ 627,282	$ 618,121
Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	332,407	335,561
Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	27,614	26,659
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	110,785	103,768
Owner occupied real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	129,692	126,242
Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	24,359	23,449
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	2,425	2,442
Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	575,280	564,733
Pass [Member] | Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	297,516	300,174
Pass [Member] | Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	23,691	22,652
Pass [Member] | Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	103,141	96,051
Pass [Member] | Owner occupied real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	125,362	121,381
Pass [Member] | Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	23,145	22,033
Pass [Member] | Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	2,425	2,442
Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	11,503	11,083
Special Mention [Member] | Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	9,510	9,174
Special Mention [Member] | Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	260	261
Special Mention [Member] | Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	640	642
Special Mention [Member] | Owner occupied real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	899	906
Special Mention [Member] | Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	194	100
Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	40,499	42,305
Substandard [Member] | Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	25,381	26,213
Substandard [Member] | Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	3,663	3,746
Substandard [Member] | Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	7,004	7,075
Substandard [Member] | Owner occupied real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	3,431	3,955
Substandard [Member] | Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total loans receivable	$ 1,020	$ 1,316

XML

Summary of Significant Accounting Policies (Calculation Of EPS) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Summary Of Significant Accounting Policies [Abstract]
Net income	$ 992	$ 1,305
Weighted average shares outstanding	25,973	25,973
Net income per share - basic	$ 0.04	$ 0.05
Weighted average shares outstanding (including dilutive CSEs)	26,015	25,976
Net income per share - diluted	$ 0.04	$ 0.05

XML

Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows from operating activities:
Net income	$ 992	$ 1,305
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision (credit) for loan losses	0	(750)
Loss on sale of other real estate owned	0	10
Write down of other real estate owned	809	0
Depreciation and amortization	483	518
Stock based compensation	72	89
Gain on sale and call of investment securities	(703)	0
Impairment charges on investment securities	0	17
Amortization of premiums on investment securities	177	67
Proceeds from sales of SBA loans originated for sale	6,563	11,408
SBA loans originated for sale	(5,996)	(11,272)
Gains on sales of SBA loans originated for sale	(650)	(1,086)
Increase in value of bank owned life insurance	(13)	(19)
Increase in accrued interest receivable and other assets	982	206
(Decrease) increase in accrued interest payable and other liabilities	129	(104)
Net cash provided by operating activities	623	185
Cash flows from investing activities:
Purchase of investment securities available for sale	(1,425)	(14,775)
Proceeds from the sale of securities available for sale	7,946	0
Proceeds from maturity or call of securities available for sale	9,016	6,450
Proceeds from redemption of FHLB stock	540	259
Net increase in loans	(9,575)	(14,314)
Net proceeds from sale of other real estate owned	0	334
Premises and equipment expenditures	(137)	(142)
Net cash provided by (used in) investing activities	6,365	(22,188)
Cash flow from financing activities:
Net increase in demand, money market and savings deposits	(30,756)	(55,376)
Net decrease in time deposits	(32,307)	(39,861)
Net increase in short-term borrowings	0	4,516
Net cash used in financing activities	(63,063)	(90,721)
Net decrease in cash and cash equivalents	(56,075)	(112,724)
Cash and cash equivalents, beginning of year	128,004	230,955
Cash and cash equivalents, end of period	71,929	118,231
Supplemental disclosures:
Interest paid	1,061	1,989
Non-cash transfers from loans to other real estate owned	$ 165	$ 0

XML

Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Consolidated Balance Sheets [Abstract]
Investments securities held to maturity at fair value	$ 69	$ 69
Allowance for loan losses	$ 9,353	$ 9,542
Preferred stock, par value	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	0	0
Common stock par value	$ 0.01	$ 0.01
Common Stock, Shares Authorized	50,000,000	50,000,000
Common Stock, Shares, Issued	26,501,742	26,501,742
Treasury Stock, Shares	416,303	416,303

XML

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2013

Summary Of Significant Accounting Policies [Abstract]

Summary of Assumptions [Table Text Block]

	2013	2012
Dividend yield(1)	0.0%	0.0%
Expected volatility(2)	54.88% to 54.89%	53.12%
Risk-free interest rate(3)	1.28% to 1.41%	1.36%
Expected life(4)	7.0 years	7.0 years

Summary of Stock-Based Compensation [Table Text Block]

	2013	2012
Stock based compensation expense recognized	$      72,000	$      89,000
Number of unvested stock options	903,563	855,600
Fair value of unvested stock options	$ 1,231,859	$ 1,555,074
Amount remaining to be recognized as expense	$    751,865	$    734,256

Calculation of EPS [Table Text Block]

	Three Months Ended  March 31,
	2013	2012
Net income (basic and diluted)	$        992	$       1,305
Weighted average shares outstanding	25,973	25,973
Net income per share – basic	$        0.04	$         0.05
Weighted average shares outstanding (including                   dilutive CSEs)	26,015	25,976
Net income per share – diluted	$      0.04	$         0.05

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2013	May 09, 2013
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2013
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013
Entity Registrant Name	REPUBLIC FIRST BANCORP INC
Entity Central Index Key	0000834285
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		25,972,897

XML

Investment Securities (Tables)

3 Months Ended

Mar. 31, 2013

Investment Securities [Abstract]

Unrealized Gain (Loss) on Investments [Table Text Block]

At March 31, 2013
(dollars in thousands)	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Collateralized mortgage obligations	$     90,190	$       1,395	$        (103)	$    91,482
Mortgage-backed securities	19,379	880	(27)	20,232
Municipal securities	5,360	196	(5)	5,551
Corporate bonds	32,217	854	(47)	33,024
Asset-backed securities	19,601	288	-	19,889
Trust preferred securities	5,777	-	(2,539)	3,238
Other securities	131	3	-	134
Total securities available for sale	$   172,655	$       3,616	$     (2,721)	$  173,550
U.S. Government agencies	$               1	$                -	$              -	$              1
Other securities	67	1	-	68
Total securities held to maturity	$             68	$               1	$              -	$            69

	At December 31, 2012
(dollars in thousands)	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Collateralized mortgage obligations	$  97,959	$    1,830	$           (6)	$ 99,783
Mortgage-backed securities	20,626	1,014	-	21,640
Municipal securities	11,150	967	(16)	12,101
Corporate bonds	32,231	639	(185)	32,685
Asset-backed securities	19,785	135	(191)	19,729
Trust preferred securities	5,785	-	(2,598)	3,187
Other securities	131	3	-	134
Total securities available for sale	$ 187,667	$    4,588	$     (2,996)	$ 189,259
U.S. Government agencies	$           1	$            -	$              -	$          1
Other securities	66	2	-	68
Total securities held to maturity	$         67	$           2	$              -	$        69

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available for Sale		Held to Maturity
(dollars in thousands)	Amortized Cost	Fair Value	Amortized Cost	Fair Value
Due in 1 year or less	$       20,105	$       20,507	$                47	$               48
After 1 year to 5 years	66,642	68,398	21	21
After 5 years to 10 years	77,801	76,206	-	-
After 10 years	8,107	8,439	-	-
Total	$     172,655	$     173,550	$               68	$               69

Schedule of Credit-Related Impairment Losses on Securities [Table Text Block]

(dollars in thousands)	2013	2012
Beginning Balance, January 1st	$           3,959	$           3,925
Additional credit-related impairment loss on securities for which an
other-than-temporary impairment was previously recognized	-	17
Reductions for securities paid off during the period	-	-
Reductions for securities for which the amount previously recognized in other	-	-
comprehensive income was recognized in earnings because the Company	-	-
intends to sell the security	-	-
Ending Balance, March 31st,	$           3,959	$           3,942

Schedule of Unrealized Loss on Investments [Table Text Block]

The following tables show the fair value and gross unrealized losses associated with the investment portfolio, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	At March 31, 2013
	Less than 12 months		12 months or more		Total
(dollars in thousands)	Fair Value	Unrealized Losses	Fair     Value	Unrealized                     Losses	Fair Value	Unrealized Losses
Collateralized  mortgage       obligations	$          19,395	$        103	$                 -	$                 -	$        19,395	$               103
Mortgage-backed securities	1,233	27	-	-	1,233	27
Municipal securities	1,420	5	-	-	1,420	5
Corporate bonds	-	-	4,953	47	4,953	47
Trust preferred securities	-	-	3,238	2,539	3,238	2,539
Total	$           22,048	$        135	$          8,191	$        2,586	$       30,239	$              2,721

	At December 31, 2012
	Less than 12 months		12 months or more		Total
(dollars in thousands)	Fair Value	Unrealized Losses	Fair     Value	Unrealized                     Losses	Fair Value	Unrealized Losses
Collateralized  mortgage       obligations	$            9,991	$             6	$                  -	$                 -	$          9,991	$                   6
Municipal securities	1,050	16	-	-	1,050	16
Corporate bonds	-	-	9,811	185	9,811	185
Asset-backed securities	9,218	191	-	-	9,218	191
Trust preferred securities	-	-	3,187	2,598	3,187	2,598
Total	$           20,259	$         213	$       12,998	$        2,783	$        33,257	$              2,996

Schedule of Trust Preferred Securities [Table Text Block]

(dollars in thousands)	Class / Tranche	Amortized Cost	Fair Value	Unrealized Losses	Lowest Credit Rating Assigned	Number of Banks Currently Performing	Deferrals / Defaults as % of Current Balance	Conditional Default Rates for 2013 and beyond	Cumulative OTTI Life to Date
Preferred Term Securities IV	Mezzanine    Notes	$              49	$           40	$               (9)	CCC	5	27%	0.33%	$              -
Preferred Term       Securities VII	Mezzanine    Notes	1,489	1,140	(349)	C	12	49	0.34	2,173
TPREF Funding II	Class B Notes	739	338	(401)	C	16	44	0.39	260
TPREF Funding III	Class B2 Notes	1,520	727	(793)	C	17	35	0.33	480
Trapeza CDO I, LLC	Class C1 Notes	556	255	(301)	C	10	47	0.38	470
ALESCO Preferred     Funding IV	Class B1 Notes	604	318	(286)	C	39	14	0.36	396
ALESCO Preferred     Funding V	Class C1 Notes	820	420	(400)	C	37	27	0.36	180
Total		$         5,777	$       3,238	$         (2,539)		136	34%		$         3,959

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Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Interest Income
Interest and fees on taxable loans	$ 7,837	$ 8,020
Interest and fees on tax-exempt loans	91	70
Interest and dividends on taxable investment securities	1,047	1,269
Interest and dividends on tax-exempt investment securities	73	116
Interest on federal funds sold and other interest-earning assets	59	101
Total interest income	9,107	9,576
Interest expense:
Demand- interest bearing	195	171
Money market and savings	502	863
Time deposits	279	581
Other borrowings	278	285
Total interest expense	1,254	1,900
Net interest income	7,853	7,676
Provision (credit) for loan losses	0	(750)
Net interest income after provision for loan losses	7,853	8,426
Non-interest income:
Loan advisory and servicing fees	338	211
Gain on sales of SBA loans	650	1,086
Service fees on deposit accounts	234	210
Legal settlements	238	105
Gain on sale of investment securities	703	0
Other-than-temporary impairment losses	0	(17)
Portion recognized in other comprehensive income (before taxes)	0	0
Net impairment loss on investment securities	0	(17)
Gain on sale of other real estate owned	0	10
Bank owned life insurance income	13	19
Other non-interest income	67	32
Total non-interest income	2,243	1,646
Non-interest expense:
Salaries and employee benefits	4,287	4,134
Occupancy	844	844
Depreciation and amortization	483	518
Legal	364	889
Other real estate owned	917	98
Advertising	101	50
Data processing	108	264
Insurance	158	134
Professional fees	323	293
Regulatory assessments and costs	344	338
Taxes, other	250	260
Other operating expenses	951	1,014
Total non-interest expense	9,130	8,836
Income before benefit for income taxes	966	1,236
Benefit for income taxes	(26)	(69)
Net income	$ 992	$ 1,305
Net income per share:
Basic	$ 0.04	$ 0.05
Diluted	$ 0.04	$ 0.05

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Segment Reporting

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Segment Reporting

Note 4: Segment Reporting

The Company has one reportable segment: community banking. The community bank segment primarily encompasses the commercial loan and deposit activities of Republic, as well as consumer loan products in the area surrounding its stores.

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Legal Proceedings

3 Months Ended

Mar. 31, 2013

Legal Proceedings [Abstract]

Legal Proceedings

Note 3: Legal Proceedings

          The Company and Republic are from time to time parties (plaintiff or defendant) to lawsuits in the normal course of business.  While any litigation involves an element of uncertainty, management is of the opinion that the liability of the Company and Republic, if any, resulting from such actions will not have a material effect on the financial condition or results of operations of the Company and Republic.

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Summary of Significant Accounting Policies (Summary of Stock-Based Compensation) (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Summary Of Significant Accounting Policies [Abstract]
Stock based compensation expense recognized	$ 72,000	$ 89,000
Number of unvested stock options	903,563	855,600
Fair value of unvested stock options	1,231,859	1,555,074
Amount remaining to be recognized as expense	$ 751,865	$ 734,256

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Loans Receivable and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2013

Loans Receivable and Allowance for Loan Losses [Abstract]

Gross Loans By Loan Portfolio Class [Table Text Block]

(dollars in thousands)	March 31, 2013	December 31, 2012
Commercial real estate	$        332,407	$     335,561
Construction and land development	27,614	26,659
Commercial and industrial	110,785	103,768
Owner occupied real estate	129,692	126,242
Consumer and other	24,359	23,449
Residential mortgage	2,425	2,442
Total loans receivable	627,282	618,121
Deferred costs (fees)	(160)	(220)
Allowance for loan losses	(9,353)	(9,542)
Net loans receivable	$        617,769	$     608,359

Impaired Loans By Loan Portfolio Class [Table Text Block]

The following table summarizes information with regard to impaired loans by loan portfolio class as of March 31, 2013 and December 31, 2012:

		March 31, 2013				December 31, 2012
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance	Recorded Investment		Unpaid Principal Balance	Related Allowance
With no related allowance recorded:
Commercial real estate	$    21,146		$     21,901	$               -	$    19,231		$    20,000	$               -
Construction and land development	3,663		9,984	-	3,153		6,312	-
Commercial and industrial	2,041		2,958	-	3,793		7,106	-
Owner occupied real estate	-		-	-	505		505	-
Consumer and other	762		1,015	-	912		1,146	-
Total	$    27,612		$     35,858	$               -	$    27,594		$     35,069	$               -

With an allowance recorded:
Commercial real estate	$    3,343	$       3,344	$          607	$    6,085	$       6,085	$       1,077
Construction and land development	-	-	-	593	3,700	70
Commercial and industrial	4,829	7,337	1,327	3,147	3,255	861
Owner occupied real estate	3,431	3,431	840	3,450	3,450	860
Consumer and other	-	-	-	146	155	75
Total	$   11,603	$     14,112	$       2,774	$   13,421	$     16,645	$       2,943

Total:
Commercial real estate	$  24,489	$     25,245	$          607	$  25,316	$     26,085	$       1,077
Construction and land development	3,663	9,984	-	3,746	10,012	70
Commercial and industrial	6,870	10,295	1,327	6,940	10,361	861
Owner occupied real estate	3,431	3,431	840	3,955	3,955	860
Consumer and other	762	1,015	-	1,058	1,301	75
Total	$   39,215	$      49,970	$       2,774	$   41,015	$      51,714	$       2,943

Average Of Impaired Loans And Related Interest Income By Loan Portfolio Class [Table Text Block]

The following table presents additional information regarding the Company's impaired loans for the three months ended March 31, 2013 and March 31, 2012:

	Three Months Ended March 31,
	2013		2012
(dollars in thousands)	Average Recorded Investment	Interest Income Recognized	Average Recorded Investment	Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$   20,189	$        219	$   14,615	$        193
Construction and land development	3,408	21	3,428	30
Commercial and industrial	2,917	6	2,627	35
Owner occupied real estate	252	-	1,490	27
Consumer and other	837	1	916	2
Total	$   27,603	$        247	$   23,076	$        287

With an allowance recorded:
Commercial real estate	$     4,714	$          36	$     5,637	$          55
Construction and land development	296	-	3,428	-
Commercial and industrial	3,988	14	5,595	14
Owner occupied real estate	3,441	36	1,350	12
Consumer and other	73	-	-	-
Total	$   12,512	$          86	$   16,010	$          81

Total:
Commercial real estate	$   24,903	$       255	$   20,252	$       248
Construction and land development	3,704	21	6,856	30
Commercial and industrial	6,905	20	8,222	49
Owner occupied real estate	3,693	36	2,840	39
Consumer and other	910	1	916	2
Total	$   40,115	$       333	$   39,086	$       368

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately $209,000 and $167,000 for the three months ended March 31, 2013 and 2012, respectively.

Activity In And Ending Balances Of The Allowance For Loan Losses By Loan Portfolio Class [Table Text Block]

The following tables provide the activity in and ending balances of the allowance for loan losses by loan portfolio class at and for the three months ended March 31, 2013 and 2012:

(dollars in thousands)	Commercial Real Estate	Construction and Land Development	Commercial and Industrial	Owner Occupied Real Estate	Consumer and Other	Residential Mortgage	Unallocated	Total
Three months ended March 31, 2013
Allowance for loan losses:
Beginning balance:	$       3,979	$       1,273	$   1,880	$        1,967	$        234	$        17	$      192	$    9,542
Charge-offs	(60)	(55)	-	-	(75)	-	-	(190)
Recoveries	-	-	1	-	-	-	-	1
Provisions (credits)	(662)	617	455	(670)	11	(3)	252	-
Ending balance	$       3,257	$       1,835	$    2,336	$         1,297	$        170	$        14	$        444	$     9,353
Three months ended March 31, 2012
Allowance for loan losses:
Beginning balance:	$       7,372	$          558	$   1,928	$         1,963	$        113	$        23	$        93	$   12,050
Charge-offs	(492)	-	(52)	-	(1)	-	-	(545)
Recoveries	-	-	-	-	1	-	-	1
Provisions (credits)	(2,509)	1,611	343	(508)	(7)	(3)	323	(750)
Ending balance	$       4,371	$       2,169	$   2,219	$         1,455	$        106	$        20	$        416	$  10,756

The following tables provide a summary of the allowance for loan losses and balance of loans receivable by loan class and by impairment method as of March 31, 2013 and December 31, 2012:

(dollars in thousands)	Commercial Real Estate	Construction and Land Development	Commercial and Industrial	Owner Occupied Real Estate	Consumer and Other	Residential Mortgage	Unallocated	Total
March 31, 2013
Allowance for loan losses:
Individually evaluated for impairment	$          607	$                   -	$       1,327	$     840	$       -	$               -	$             -	$     2,774
Collectively evaluated for impairment	2,650	1,835	1,009	457	170	14	444	6,579
Total allowance for loan losses	$         3,257	$          1,835	$       2,336	$     1,297	$           170	$             14	$         444	$      9,353
Loans receivable:
Loans evaluated individually	$     24,489	$            3,663	$       6,870	$             3,431	$         762	$               -	$             -	$     39,215
Loans evaluated collectively	307,918	23,951	103,915	126,261	23,597	2,425	-	588,067
Total loans receivable	$   332,407	$                          27,614	$   110,785	$        129,692	$      24,359	$        2,425	$           -	$   627,282

(dollars in thousands)	Commercial Real Estate	Construction and Land Development	Commercial and Industrial	Owner Occupied Real Estate	Consumer and Other	Residential Mortgage	Unallocated	Total
December 31, 2012
Allowance for loan losses:
Individually evaluated for impairment	$       1,077	$           70	$          861	$     860	$             75	$               -	$              -	$       2,943
Collectively evaluated for impairment	2,902	1,203	1,019	1,107	159	17	192	6,599
Total allowance for loan losses	$        3,979	$     1,273	$       1,880	$     1,967	$           234	$            17	$         192	$        9,542
Loans receivable:
Loans evaluated individually	$     25,316	$       3,746	$        6,940	$            3,955	$       1,058	$               -	$             -	$      41,015
Loans evaluated collectively	310,245	22,913	96,828	122,287	22,391	2,442	-	577,106
Total loans receivable	$   335,561	$                          26,659	$    103,768	$     126,242	$      23,449	$          2,442	$           -	$    618,121

Past Due Financing Receivables [Table Text Block]

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of March 31, 2013 and December 31, 2012:

(dollars in thousands)	30-59 Days Past Due	60-89 Days Past Due	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable	Loans Receivable > 90 Days and Accruing
At March 31, 2013
Commercial real estate	$     16,835	$       8,899	$       7,822	$     33,556	$  298,851	$   332,407	$            -
Construction and land                   development	-	260	1,622	1,882	25,732	27,614	-
Commercial and industrial	-	640	4,642	5,282	105,503	110,785	-
Owner occupied real estate	121	1,489	463	2,073	127,619	129,692	-
Consumer and other	326	-	566	892	23,467	24,359	-
Residential mortgage	-	-	-	-	2,425	2,425	-
Total	$     17,282	$     11,288	$     15,115	$     43,685	$   583,597	$   627,282	$             -

(dollars in thousands)	30-59 Days Past Due	60-89 Days Past Due	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable	Loans Receivable > 90 Days and Accruing
At December 31, 2012
Commercial real estate	$          772	$     26,000	$       7,987	$     34,759	$  300,802	$   335,561	$             -
Construction and land development	-	261	1,342	1,603	25,056	26,659	-
Commercial and industrial	86	-	4,693	4,779	98,989	103,768	-
Owner occupied real estate	285	1,562	968	2,815	123,427	126,242	-
Consumer and other	-	-	1,058	1,058	22,391	23,449	202
Residential mortgage	-	-	-	-	2,442	2,442	-
Total	$       1,143	$     27,823	$     16,048	$     45,014	$   573,107	$   618,121	$        202

Classes Of The Loan Portfolio Summarized By The Aggregate Risk Rating [Table Text Block]

(dollars in thousands)	Pass	Special Mention	Substandard	Doubtful	Total
At March 31, 2013:
Commercial real estate	$     297,516	$           9,510	$         25,381	$               -	$     332,407
Construction and land development	23,691	260	3,663	-	27,614
Commercial and industrial	103,141	640	7,004	-	110,785
Owner occupied real estate	125,362	899	3,431	-	129,692
Consumer and other	23,145	194	1,020	-	24,359
Residential mortgage	2,425	-	-	-	2,425
Total	$     575,280	$         11,503	$        40,499	$               -	$     627,282

(dollars in thousands)	Pass	Special Mention	Substandard	Doubtful	Total
At December 31, 2012:
Commercial real estate	$     300,174	$           9,174	$         26,213	$               -	$     335,561
Construction and land development	22,652	261	3,746	-	26,659
Commercial and industrial	96,051	642	7,075	-	103,768
Owner occupied real estate	121,381	906	3,955	-	126,242
Consumer and other	22,033	100	1,316	-	23,449
Residential mortgage	2,442	-	-	-	2,442
Total	$     564,733	$         11,083	$        42,305	$               -	$     618,121

Nonaccrual Loans By Classes Of The Loan Portfolio [Table Text Block]

The following table shows non-accrual loans by class as of March 31, 2013 and December 31, 2012:

(dollars in thousands)	March 31, 2013	December 31, 2012
Commercial real estate	$         7,822	$         7,987
Construction and land development	1,622	1,342
Commercial and industrial	4,642	4,693
Owner occupied real estate	463	968
Consumer and other	566	856
Residential mortgage	-	-
Total	$       15,115	$       15,846

Troubled Debt Restructurings [Table Text Block]

(dollars in thousands)	Accrual Status	Non-Accrual Status	Total Modifications
March 31, 2013:
Commercial real estate	$       908	$            -	$          908
Construction and land development	2,041	-	2,041
Commercial and industrial	2,228	-	2,228
Owner occupied real estate	1,923	-	1,923
Consumer and other	-	-	-
Residential mortgage	-	-	-
Total	$    7,100	$            -	$       7,100
December 31, 2012:
Commercial real estate	$    1,261	$            -	$       1,261
Construction and land development	2,069	-	2,069
Commercial and industrial	2,248	-	2,248
Owner occupied real estate	1,933	-	1,933
Consumer and other	-	-	-
Residential mortgage	-	-	-
Total	$    7,511	$            -	$       7,511

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2013

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 7: Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company's financial instruments; however, there are inherent weaknesses in any estimation technique.Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated.The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates.As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

The Company follows the guidance issued under ASC 820-10, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value under GAAP, and identifies required disclosures on fair value measurements.

ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820-10 are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

 An asset's or liability's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2013 and December 31, 2012 were as follows:

(dollars in thousands)	Total	(Level 1) Quoted Prices in Active Markets for Identical Assets	(Level 2) Significant Other Observable Inputs	(Level 3) Significant Unobservable Inputs
March 31, 2013:
Collateralized mortgage obligations	$      91,482	$                  -	$       91,482	$                    -
Mortgage-backed securities	20,232	-	20,232	-
Municipal securities	5,551	-	5,551	-
Corporate bonds	33,024	-	30,017	3,007
Asset-backed securities	19,889	-	19,889	-
Trust Preferred Securities	3,238	-	-	3,238
Other securities	134	-	134	-
Securities Available for Sale	$      173,550	$                  -	$     167,305	$           6,245
December 31, 2012:
Collateralized mortgage obligations	$       99,783	$                  -	$       99,783	$                    -
Mortgage-backed securities	21,640	-	21,640	-
Municipal securities	12,101	-	12,101	-
Corporate bonds	32,685	-	29,678	3,007
Asset-backed securities	19,729	-	19,729	-
Trust Preferred Securities	3,187	-	-	3,187
Other securities	134	-	134	-
Securities Available for Sale	$     189,259	$                  -	$     183,065	$           6,194

The following table presents a reconciliation of the securities available for sales measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2013 and 2012

	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities	Corporate Bonds	Trust Preferred Securities	Corporate Bonds
Balance, January 1,	$         3,187	$         3,007	$         3,410	$           3,004
Unrealized gains (losses)	58	-	6	3
Paydowns	(7)	-	-	-
Impairment charges on Level 3	-	-	(17)	-
Balance, March 31,	$         3,238	$         3,007	$        3,399	$             3,007

 

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2013 and December 31, 2012 were as follows:

(dollars in thousands)	Total	(Level 1) Quoted Prices in Active Markets for Identical Assets	(Level 2) Significant Other Observable Inputs	(Level 3) Significant Unobservable Inputs
March 31, 2013:
Impaired loans	$         9,291	$                 -	$                 -	$         9,291
Other real estate owned	3,431	-	-	3,431
SBA servicing assets	2,491	-	-	2,491
December 31, 2012:
Impaired loans	$       19,876	$                 -	$                 -	$       19,876
Other real estate owned	3,642	-	-	3,642
SBA servicing assets	2,340	-	-	2,340

The table below presents additional quantitative information about level 3 assets measured at fair value on a nonrecurring basis (dollars in thousands):

		Quantitative Information about Level 3 Fair Value Measurements March 31, 2013
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range Weighted    Average
Impaired loans	$           9,291		Fair Value of Collateral (1)	Appraised Value (2)	0% - 43% (23%)
Other real estate owned	$           3,431		Fair Value of Collateral (1)	Appraised Value (2) Sales Price	8% - 18% (9%)
SBA Servicing Assets	$           2,491		Fair Value	Individual Loan Valuation (3)	(3)

   

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which include Level 3 inputs that are    

         not identifiable.

  (2)    Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

   (3)   There is a lack of transactional data in this market place for the non-guaranteed portion of SBA loans.

   (4)   The range and weighted average of qualitative factors such as economic conditions and estimated liquidation expenses are presented as a percent of the appraised value.

The significant unobservable inputs for impaired loans and other real estate owned are the appraised value or an agreed upon sales price. These values are adjusted for estimated costs to sell which are incremental direct costs to transact a sale such as broker commissions, legal fees, closing costs and title transfer fees. The costs must be considered essential to the sale and would not have been incurred if the decision to sell had not been made. The costs to sell are based on costs associated with the Company's actual sales of other real estate owned which are assessed annually.

The following table presents an analysis of the activity in the SBA servicing assets for the three months ended March 31, 2013 and 2012

(dollars in thousands)	2013	2012
Beginning balance, January 1st	$       2,340	$       1,102
Additions	146	241
Fair value adjustments	5	8
Ending balance, March 31st	$       2,491	$       1,351

Fair Value Assumptions

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company's assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company's disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company's financial instruments at March 31, 2013 and December 31, 2012.

Cash and Cash Equivalents (Carried at Cost)

The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets' fair values.

Investment Securities

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted prices.  For certain securities, which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments, are generally based on available market evidence (Level 3).  In the absence of such evidence, management's best estimate is used.  Management's best estimate consists of both internal and external support on certain Level 3 investments.  Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) were used to support fair values of certain Level 3 investments.

The types of instruments valued based on matrix pricing in active markets include all of the Company's U.S. government and agency securities, corporate bonds, asset backed securities, and municipal obligations. Such instruments are generally classified within Level 2 of the fair value hierarchy. As required by ASC 820-10, the Company does not adjust the matrix pricing for such instruments.

Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, and may be adjusted to reflect illiquidity and/or non-transferability, with such adjustment generally based on available market evidence. In the absence of such evidence, management's best estimate is used. Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows. The Level 3 investment securities classified as available for sale are comprised of various issues of trust preferred securities and a single corporate bond.

The trust preferred securities are pools of similar securities that are grouped into an asset structure commonly referred to as collateralized debt obligations ("CDOs") which consist of the debt instruments of various banks, diversified by the number of participants in the security as well as geographically.The secondary market for these securities has become inactive, and therefore these securities are classified as Level 3 securities. The fair value analysis does not reflect or represent the actual terms or prices at which any party could purchase the securities. There is currently a limited secondary market for the securities and there can be no assurance that any secondary market for the securities will expand.

An independent, third party pricing service is used to estimate the current fair market value of each CDO held in the investment securities portfolio. The calculations used to determine fair value are based on the attributes of the trust preferred securities, the financial condition of the issuers of the trust preferred securities, and market based assumptions. The INTEX CDO Deal Model Library was utilized to obtain information regarding the attributes of each security and its specific collateral as of March 31, 2013 and December 31, 2012. Financial information on the issuers was also obtained from Bloomberg, the FDIC, the Office of Thrift Supervision and SNL Financial. Both published and unpublished industry sources were utilized in estimating fair value. Such information includes loan prepayment speed assumptions, discount rates, default rates, and loss severity percentages. Due to the current state of the global capital and financial markets, the fair market valuation is subject to greater uncertainty that would otherwise exist.

The fair market valuation for each CDO was determined based on discounted cash flow analyses. The cash flows are primarily dependent on the estimated speeds at which the trust preferred securities are expected to prepay, the estimated rates at which the trust preferred securities are expected to defer payments, the estimated rates at which the trust preferred securities are expected to default, and the severity of the losses on securities that do default. 

Prepayment Assumptions. CDOs generally allow for prepayments without a prepayment penalty any time after five years. Due to the lack of new CDOs and the relative poor conditions of the financial institution industry, the rates of voluntary prepayments are estimated at 1% for both March 31, 2013 and December 31, 2012.

Prepayments affect the securities in three ways. First, prepayments lower the absolute amount of excess spread, an important credit enhancement. Second, the prepayments are directed to the senior tranches, the effect of which is to increase the overcollateralization of the mezzanine layer, the layer at which the Company is located in each of the securities. However, the prepayments can lead to adverse selection in which the strongest institutions have prepaid, leaving the weaker institutions in the pool, thus mitigating the effect of the increased overcollateralization. Third, prepayments can limit the numeric and geographic diversity of the pool, leading to concentration risks.

Deferral and Default Rates. Bank pooled trust preferred securities include a provision that allows the issuing bank to defer interest payments for up to five years. The estimates for the rates of deferral are based on the financial condition of the trust preferred issuers in the pool. Estimates for the conditional default rates are based on the bank pooled trust preferred securities themselves as well as the financial condition of the trust preferred issuers in the pool.

Estimates for the near-term rates of deferral and conditional default are based on key financial ratios relating to the financial institutions' capitalization, asset quality, profitability and liquidity. Each bank in each security is evaluated based on ratings from outside services including Standard & Poors, Moody's, Fitch, Bankrate.com and The Street.com. Recent stock price information is considered, as well as the 52 week high and low, for each bank in each security. Also, the receipt and repayment of TARP funding is considered, and if so, the amount. Finally, each bank's ability to generate capital (internally or externally), which is predictive of a troubled bank's ability to recover, is considered.  

Loss Severity. The fact that an issuer defaults on a loan, does not necessarily mean that the investor will lose all of their investment. Thus, it is important to understand not only the default assumption, but also the expected loss given a default, or the loss severity assumption.  

Both Standard & Poors and Moody's Analytics have performed and published research that indicates that recoveries on CDOs are low (less than 20%). The loss severity estimates are estimated at a range of 80% to 100%.

Bond Waterfall. The CDOs have several tranches: senior tranches, mezzanine tranches and the residual or income tranches. The Company invested in the mezzanine tranches in each of the CDOs currently in the investment securities portfolio. The senior and mezzanine tranches were over-collateralized at issuance, meaning that the par value of the underlying collateral was more than the balance issued on the tranches. The terms generally provide that if the performing collateral balances fall below certain triggers, then income is diverted from the residual tranches to pay the senior and mezzanine tranches. However, if significant deferrals occur, income could also be diverted from the mezzanine tranches to pay the senior tranches.

The INTEX desktop model calculates collateral cash flows based on the attributes of the CDOs as of the collateral cut-off date of March 15, 2013 and certain valuation input assumptions for the underlying collateral. Allocations of the cash flows to securities are based on the overcollateralization and interest coverage tests (triggers), events of default and liquidation, deferrals of interest, mandatory auction calls, optional redemptions and any interest rate hedge agreements.

Internal Rate of Return. Internal rates of return are the pre-tax yield rates used to discount the future cash flow stream expected from the collateral cash flow. The marketplace for the CDOs at March 31, 2013 and December 31, 2012 was not active. This is evidenced by a significant widening of the bid/ask spreads in the markets in which the CDOs trade and then by a significant decrease in the volume of trades relative to historical levels. The new issue market is also inactive and few new trust preferred securities have been issued since 2007.

Increases (decreases) in actual or expected issuer defaults tend to decrease (increase) the fair value of the Company's senior and mezzanine tranches of CDOs. The values of the Company's mezzanine tranches of CDOs are also affected by expected future interest rates. However, due to the structure of each security, timing of cash flows, and secondary effects on the financial performance of the underlying issuers, the effects of changes in future interest rates on the fair value of the Company's holdings are not quantifiably estimable.

ASC 820-10 provides guidance on the discount rates to be used when a market is not active. The discount rate should take into account the time value of money, price for bearing the uncertainty in the cash flows and other case specific factors that would be considered by market participants, including a liquidity adjustment. The discount rate used is a LIBOR 3-month and LIBOR 6-month forward-looking curve plus a range of 412 to 1052 basis points.

Also included in Level 3 investment securities classified as available for sale is a single-issuer corporate bond transferred from Level 2 in 2010 since the bond is not actively traded. Impairment would depend on the repayment ability of the underlying issuer, which is assessed through a detailed quarterly review of the issuer's financial statements. The issuer is a "well capitalized" financial institution as defined by federal banking regulations and has demonstrated the ability to raise additional capital, when necessary, through the public capital markets. The fair value of this corporate bond is estimated by obtaining a price of a comparable floating rate debt instrument through Bloomberg.

Loans Receivable, including Loans Held For Sale (Carried at Cost)

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.  Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Due to the significant judgment involved in evaluating credit quality, loans are classified within Level 3 of the fair value hierarchy.

Impaired Loans (Carried at Lower of Cost or Fair Value)

Impaired loans are those that the Company has measured impairment based on the fair value of the loan's collateral. Fair value is generally determined based upon independent third party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of the loan balances less any valuation allowance. The valuation allowance amount is calculated as the difference between the recorded investment in a loan and the present value of expected future cash flows or it is calculated based on discounted collateral values if the loans are collateral dependent.

Other Real Estate Owned (Carried at Lower of Cost or Fair Value)

These assets are carried at the lower of cost or fair value.  At March 31, 2013 these assets are carried at current fair value.

SBA Servicing Asset (Carried at Fair Value)

The SBA servicing asset is initially recorded when loans are sold and the servicing rights are retained and recorded on the balance sheet. Updated fair values are obtained on a quarterly basis and adjustments are presented as loan advisory and servicing fees on the statement of operations. The valuation begins with the projection of future cash flows for each asset based on their unique characteristics, our market-based assumptions for prepayment speeds and estimated losses and recoveries. The present value of the future cash flows are then calculated utilizing our market-based discount ratio assumptions. In all cases, we model expected payments for every loan for each quarterly period in order to create the most detailed cash flow stream possible.

The Company uses assumptions and estimates in determining the impairment of the SBA servicing asset. These assumptions include prepayment speeds and discount rates commensurate with the risks involved and comparable to assumptions used by participants to value and bid serving rights available for sale in the market. At March 31, 2013 and December 31, 2012, the sensitivity of the current fair value of the SBA loan servicing rights to immediate 10% and 20% adverse changes in key assumptions are included in the accompanying table.

(dollars in thousands)		March 31, 2013		December 31, 2012
SBA Servicing Asset
Fair Value of SBA Servicing Asset	$        2,491		$        2,340
Composition of SBA Loans Serviced for Others
Fixed-rate SBA loans	0%		0%
Adjustable-rate SBA loans	100%		100%
Total	100%		100%
Weighted Average Remaining Term	21.1 years		21.4 years
Prepayment Speed	6.61%		6.59%
Effect on fair value of a 10% increase	$           (59)		$           (55)
Effect on fair value of a 20% increase	(116)		(107)
Weighted Average Discount Rate	13.18%		14.23%
Effect on fair value of a 10% increase	$        (115)		$        (115)
Effect on fair value of a 20% increase	(222)		(222)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance.As indicated, changes in value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in value may not be linear.Also in this table, the effect of an adverse variation in a particular assumption on the value of the SBA servicing rights is calculated without changing any other assumption.While in reality, changes in one factor may magnify or counteract the effect of the change.

Restricted Stock (Carried at Cost)

The carrying amount of restricted stock approximates fair value, and considers the limited marketability of such securities.

Accrued Interest Receivable and Payable (Carried at Cost)

The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.

Deposit Liabilities (Carried at Cost)

The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Subordinated Debt (Carried at Cost)

Fair values of subordinated debt are estimated using discounted cash flow analysis, based on market rates currently offered on such debt with similar credit risk characteristics, terms and remaining maturity.Due to the significant judgment involved in developing the spreads used to value the subordinated debt, it is classified within level 3 of the fair value hierarchy.

Off-Balance Sheet Financial Instruments (Disclosed at notional amounts)

Fair values for the Company's off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties' credit standing.

The estimated fair values of the Company's financial instruments were as follows at March 31, 2013 and December 31, 2012:

	Fair Value Measurements at March 31, 2013
(dollars in thousands)	Carrying Amount	Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs  (Level 2)	Significant Unobservable Inputs  (Level 3)
Balance Sheet Data
Financial assets:
Cash and cash equivalents	$         71,929	$         71,929	$         71,929	$                  -	$                  -
Investment securities available for sale	173,550	173,550	-	167,305	6,245
Investment securities held to maturity	68	69	-	69	-
Restricted stock	3,276	3,276	-	3,276	-
Loans held for sale	165	165	-	-	165
Loans receivable, net	617,769	614,714	-	-	614,714
SBA servicing assets	2,491	2,491	-	-	2,491
Accrued interest receivable	3,273	3,273	-	3,273	-
Financial liabilities:
Deposits
Demand, savings and money market	$      735,211	$      735,211	$                  -	$    735,211	$                  -
Time	90,927	91,636	-	91,636	-
Subordinated debt	22,476	18,392	-	-	18,392
Accrued interest payable	494	494	-	494	-
Off-Balance Sheet Data
Commitments to extend credit	-	-
Standby letters-of-credit	-	-

	Fair Value Measurements at December 31, 2012
(dollars in thousands)	Carrying Amount	Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs  (Level 2)	Significant Unobservable Inputs  (Level 3)
Balance Sheet Data
Financial assets:
Cash and cash equivalents	$      128,004	$      128,004	$       128,004	$                  -	$                  -
Investment securities available for sale	189,259	189,259	-	183,065	6,194
Investment securities held to maturity	67	69	-	69	-
Restricted stock	3,816	3,816	-	3,816	-
Loans held for sale	82	82	-	-	82
Loans receivable, net	608,359	603,237	-	-	603,237
SBA servicing assets	2,340	2,340	-	-	2,340
Accrued interest receivable	3,128	3,128	-	3,128	-
Financial liabilities:
Deposits
Demand, savings and money market	$      765,967	$      765,967	$                  -	$    765,967	$                  -
Time	123,234	124,044	-	124,044	-
Subordinated debt	22,476	20,187	-	-	20,187
Accrued interest payable	301	301	-	301	-
Off-Balance Sheet Data
Commitments to extend credit	-	-
Standby letters-of-credit	-	-

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Investment Securities

3 Months Ended

Mar. 31, 2013

Investment Securities [Abstract]

Investment Securities

Note 5: Investment Securities

A summary of the amortized cost and market value of securities available for sale and securities held to maturity at March 31, 2013 and December 31, 2012 is as follows:

At March 31, 2013
(dollars in thousands)	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Collateralized mortgage obligations	$     90,190	$       1,395	$        (103)	$    91,482
Mortgage-backed securities	19,379	880	(27)	20,232
Municipal securities	5,360	196	(5)	5,551
Corporate bonds	32,217	854	(47)	33,024
Asset-backed securities	19,601	288	-	19,889
Trust preferred securities	5,777	-	(2,539)	3,238
Other securities	131	3	-	134
Total securities available for sale	$   172,655	$       3,616	$     (2,721)	$  173,550
U.S. Government agencies	$               1	$                -	$              -	$              1
Other securities	67	1	-	68
Total securities held to maturity	$             68	$               1	$              -	$            69

	At December 31, 2012
(dollars in thousands)	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Collateralized mortgage obligations	$  97,959	$    1,830	$           (6)	$ 99,783
Mortgage-backed securities	20,626	1,014	-	21,640
Municipal securities	11,150	967	(16)	12,101
Corporate bonds	32,231	639	(185)	32,685
Asset-backed securities	19,785	135	(191)	19,729
Trust preferred securities	5,785	-	(2,598)	3,187
Other securities	131	3	-	134
Total securities available for sale	$ 187,667	$    4,588	$     (2,996)	$ 189,259
U.S. Government agencies	$           1	$            -	$              -	$          1
Other securities	66	2	-	68
Total securities held to maturity	$         67	$           2	$              -	$        69

The maturity distribution of the amortized cost and estimated market value of investment securities by contractual maturity at March 31, 2013 is as follows:

	Available for Sale		Held to Maturity
(dollars in thousands)	Amortized Cost	Fair Value	Amortized Cost	Fair Value
Due in 1 year or less	$       20,105	$       20,507	$                47	$               48
After 1 year to 5 years	66,642	68,398	21	21
After 5 years to 10 years	77,801	76,206	-	-
After 10 years	8,107	8,439	-	-
Total	$     172,655	$     173,550	$               68	$               69

Expected maturities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without prepayment penalties.

       As of March 31, 2013 and December 31, 2012, the collateralized mortgage obligations and mortgage backed securities included in the investment securities portfolio consist solely of securities issued by U.S. government sponsored agencies.  There were no private label mortgage securities held in the investment securities portfolio as of those dates. The Company did not hold any mortgage-backed securities that were rated "Alt-A" or "Subprime" as of March 31, 2013 and December 31, 2012.  In addition, the Company did not hold any private issued CMO's as of March 31, 2013 and December 31, 2012.  As of March 31, 2013 and December 31, 2012, the asset-backed securities consisted solely of Sallie Mae bonds collateralized by student loans which are guaranteed by the U.S. Department of Education.

In instances when a determination is made that an other-than-temporary impairment exists with respect to a debt security but the investor does not intend to sell the debt security and it is more likely than not that the investor will not be required to sell the debt security prior to its anticipated recovery, FASB Accounting Standards Codification ("ASC") 320-10, Investments – Debt and Equity Securities, requires the other-than-temporary impairment to be separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors.  The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income.  Impairment charges (credit losses) on trust preferred securities for the three months ended March 31, 2013 and 2012 amounted to $0 and $17,000, respectively.

The Company realized gross gains on the sale of securities of $703,000 during the three months ended March 31, 2013.  The related sale proceeds amounted to $7.9 million.  The tax provision applicable to these gross gains for the three months ended March 31, 2013 amounted to approximately $253,000. No securities were sold during the three months ended March 31, 2012.

The following table presents a roll-forward of the balance of credit-related impairment losses on securities held at March 31, 2013 and 2012 for which a portion of OTTI was recognized in other comprehensive income:

(dollars in thousands)	2013	2012
Beginning Balance, January 1st	$           3,959	$           3,925
Additional credit-related impairment loss on securities for which an
other-than-temporary impairment was previously recognized	-	17
Reductions for securities paid off during the period	-	-
Reductions for securities for which the amount previously recognized in other	-	-
comprehensive income was recognized in earnings because the Company	-	-
intends to sell the security	-	-
Ending Balance, March 31st,	$           3,959	$           3,942

The following tables show the fair value and gross unrealized losses associated with the investment portfolio, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	At March 31, 2013
	Less than 12 months		12 months or more		Total
(dollars in thousands)	Fair Value	Unrealized Losses	Fair     Value	Unrealized                     Losses	Fair Value	Unrealized Losses
Collateralized  mortgage       obligations	$          19,395	$        103	$                 -	$                 -	$        19,395	$               103
Mortgage-backed securities	1,233	27	-	-	1,233	27
Municipal securities	1,420	5	-	-	1,420	5
Corporate bonds	-	-	4,953	47	4,953	47
Trust preferred securities	-	-	3,238	2,539	3,238	2,539
Total	$           22,048	$        135	$          8,191	$        2,586	$       30,239	$              2,721

	At December 31, 2012
	Less than 12 months		12 months or more		Total
(dollars in thousands)	Fair Value	Unrealized Losses	Fair     Value	Unrealized                     Losses	Fair Value	Unrealized Losses
Collateralized  mortgage       obligations	$            9,991	$             6	$                  -	$                 -	$          9,991	$                   6
Municipal securities	1,050	16	-	-	1,050	16
Corporate bonds	-	-	9,811	185	9,811	185
Asset-backed securities	9,218	191	-	-	9,218	191
Trust preferred securities	-	-	3,187	2,598	3,187	2,598
Total	$           20,259	$         213	$       12,998	$        2,783	$        33,257	$              2,996

The impairment of the investment portfolio totaled $2.7 million with a total fair value of $30.2 million at March 31, 2013.  The most significant component of this impairment is related to the trust preferred securities held in the portfolio.  Unrealized losses on the trust preferred securities amount to $2.5 million at March 31, 2013.  The unrealized losses associated with the trust preferred securities are a result of the secondary market for such securities becoming inactive and are considered temporary at this time.

The following table provides additional detail about trust preferred securities as of March 31, 2013.

(dollars in thousands)	Class / Tranche	Amortized Cost	Fair Value	Unrealized Losses	Lowest Credit Rating Assigned	Number of Banks Currently Performing	Deferrals / Defaults as % of Current Balance	Conditional Default Rates for 2013 and beyond	Cumulative OTTI Life to Date
Preferred Term Securities IV	Mezzanine    Notes	$              49	$           40	$               (9)	CCC	5	27%	0.33%	$              -
Preferred Term       Securities VII	Mezzanine    Notes	1,489	1,140	(349)	C	12	49	0.34	2,173
TPREF Funding II	Class B Notes	739	338	(401)	C	16	44	0.39	260
TPREF Funding III	Class B2 Notes	1,520	727	(793)	C	17	35	0.33	480
Trapeza CDO I, LLC	Class C1 Notes	556	255	(301)	C	10	47	0.38	470
ALESCO Preferred     Funding IV	Class B1 Notes	604	318	(286)	C	39	14	0.36	396
ALESCO Preferred     Funding V	Class C1 Notes	820	420	(400)	C	37	27	0.36	180
Total		$         5,777	$       3,238	$         (2,539)		136	34%		$         3,959

At March 31, 2013, the investment portfolio included eight municipal securities with a total market value of $5.6 million. One of these securities carried an unrealized loss at March 31, 2013. Each of the municipal securities is reviewed quarterly for impairment. Research on each issuer is completed to ensure the financial stability of the municipal entity. The largest geographic concentration was in Pennsylvania where one municipal security had a market value of $1.4 million. As of March 31, 2013, management found no evidence of OTTI on any of the municipal securities held in the investment securities portfolio.

      At March 31, 2013, the investment portfolio included thirteen collateralized mortgage obligations with a total market value of $91.5 million.  Three of these securities carried an unrealized loss at March 31, 2013.  At March 31, 2013, the investment portfolio included forty-two mortgage-backed securities with a total market value of $20.2 million.  One of these securities carried an unrealized loss at March 31, 2013.  At March 31, 2013, the investment portfolio included seven corporate bonds with a total market value of $33.0 million.  One of these securities carried an unrealized loss at March 31, 2013.  At March 31, 2013, the investment portfolio included two asset-backed securities with a total market value of $19.9 million, the majority of which (97%) is guaranteed by the U.S. Department of Education. None of these securities carried an unrealized loss at March 31, 2013.  Management found no evidence of OTTI on any of these securities and the unrealized losses are due to changes in market value resulting from changes in market interest rates and are considered temporary as of March 31, 2013.

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Loans Receivable and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2013

Loans Receivable and Allowance for Loan Losses [Abstract]

Loans Receivable and Allowance for Loan Losses

Note 6: Loans Receivable and Allowance for Loan Losses

The following table sets forth the Company's gross loans by major categories as of March 31, 2013, and December 31, 2012:

(dollars in thousands)	March 31, 2013	December 31, 2012
Commercial real estate	$        332,407	$     335,561
Construction and land development	27,614	26,659
Commercial and industrial	110,785	103,768
Owner occupied real estate	129,692	126,242
Consumer and other	24,359	23,449
Residential mortgage	2,425	2,442
Total loans receivable	627,282	618,121
Deferred costs (fees)	(160)	(220)
Allowance for loan losses	(9,353)	(9,542)
Net loans receivable	$        617,769	$     608,359

        A loan is considered impaired, in accordance with ASC 310, Receivables, when based on current information and events, it is probable that the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Impaired loans include nonperforming loans, but also include internally classified accruing loans.

The following table summarizes information with regard to impaired loans by loan portfolio class as of March 31, 2013 and December 31, 2012:

		March 31, 2013				December 31, 2012
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance	Recorded Investment		Unpaid Principal Balance	Related Allowance
With no related allowance recorded:
Commercial real estate	$    21,146		$     21,901	$               -	$    19,231		$    20,000	$               -
Construction and land development	3,663		9,984	-	3,153		6,312	-
Commercial and industrial	2,041		2,958	-	3,793		7,106	-
Owner occupied real estate	-		-	-	505		505	-
Consumer and other	762		1,015	-	912		1,146	-
Total	$    27,612		$     35,858	$               -	$    27,594		$     35,069	$               -

With an allowance recorded:
Commercial real estate	$    3,343	$       3,344	$          607	$    6,085	$       6,085	$       1,077
Construction and land development	-	-	-	593	3,700	70
Commercial and industrial	4,829	7,337	1,327	3,147	3,255	861
Owner occupied real estate	3,431	3,431	840	3,450	3,450	860
Consumer and other	-	-	-	146	155	75
Total	$   11,603	$     14,112	$       2,774	$   13,421	$     16,645	$       2,943

Total:
Commercial real estate	$  24,489	$     25,245	$          607	$  25,316	$     26,085	$       1,077
Construction and land development	3,663	9,984	-	3,746	10,012	70
Commercial and industrial	6,870	10,295	1,327	6,940	10,361	861
Owner occupied real estate	3,431	3,431	840	3,955	3,955	860
Consumer and other	762	1,015	-	1,058	1,301	75
Total	$   39,215	$      49,970	$       2,774	$   41,015	$      51,714	$       2,943

The following table presents additional information regarding the Company's impaired loans for the three months ended March 31, 2013 and March 31, 2012:

	Three Months Ended March 31,
	2013		2012
(dollars in thousands)	Average Recorded Investment	Interest Income Recognized	Average Recorded Investment	Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$   20,189	$        219	$   14,615	$        193
Construction and land development	3,408	21	3,428	30
Commercial and industrial	2,917	6	2,627	35
Owner occupied real estate	252	-	1,490	27
Consumer and other	837	1	916	2
Total	$   27,603	$        247	$   23,076	$        287

With an allowance recorded:
Commercial real estate	$     4,714	$          36	$     5,637	$          55
Construction and land development	296	-	3,428	-
Commercial and industrial	3,988	14	5,595	14
Owner occupied real estate	3,441	36	1,350	12
Consumer and other	73	-	-	-
Total	$   12,512	$          86	$   16,010	$          81

Total:
Commercial real estate	$   24,903	$       255	$   20,252	$       248
Construction and land development	3,704	21	6,856	30
Commercial and industrial	6,905	20	8,222	49
Owner occupied real estate	3,693	36	2,840	39
Consumer and other	910	1	916	2
Total	$   40,115	$       333	$   39,086	$       368

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately $209,000 and $167,000 for the three months ended March 31, 2013 and 2012, respectively.

The following tables provide the activity in and ending balances of the allowance for loan losses by loan portfolio class at and for the three months ended March 31, 2013 and 2012:

(dollars in thousands)	Commercial Real Estate	Construction and Land Development	Commercial and Industrial	Owner Occupied Real Estate	Consumer and Other	Residential Mortgage	Unallocated	Total
Three months ended March 31, 2013
Allowance for loan losses:
Beginning balance:	$       3,979	$       1,273	$   1,880	$        1,967	$        234	$        17	$      192	$    9,542
Charge-offs	(60)	(55)	-	-	(75)	-	-	(190)
Recoveries	-	-	1	-	-	-	-	1
Provisions (credits)	(662)	617	455	(670)	11	(3)	252	-
Ending balance	$       3,257	$       1,835	$    2,336	$         1,297	$        170	$        14	$        444	$     9,353
Three months ended March 31, 2012
Allowance for loan losses:
Beginning balance:	$       7,372	$          558	$   1,928	$         1,963	$        113	$        23	$        93	$   12,050
Charge-offs	(492)	-	(52)	-	(1)	-	-	(545)
Recoveries	-	-	-	-	1	-	-	1
Provisions (credits)	(2,509)	1,611	343	(508)	(7)	(3)	323	(750)
Ending balance	$       4,371	$       2,169	$   2,219	$         1,455	$        106	$        20	$        416	$  10,756

The following tables provide a summary of the allowance for loan losses and balance of loans receivable by loan class and by impairment method as of March 31, 2013 and December 31, 2012:

(dollars in thousands)	Commercial Real Estate	Construction and Land Development	Commercial and Industrial	Owner Occupied Real Estate	Consumer and Other	Residential Mortgage	Unallocated	Total
March 31, 2013
Allowance for loan losses:
Individually evaluated for impairment	$          607	$                   -	$       1,327	$     840	$       -	$               -	$             -	$     2,774
Collectively evaluated for impairment	2,650	1,835	1,009	457	170	14	444	6,579
Total allowance for loan losses	$         3,257	$          1,835	$       2,336	$     1,297	$           170	$             14	$         444	$      9,353
Loans receivable:
Loans evaluated individually	$     24,489	$            3,663	$       6,870	$             3,431	$         762	$               -	$             -	$     39,215
Loans evaluated collectively	307,918	23,951	103,915	126,261	23,597	2,425	-	588,067
Total loans receivable	$   332,407	$                          27,614	$   110,785	$        129,692	$      24,359	$        2,425	$           -	$   627,282

(dollars in thousands)	Commercial Real Estate	Construction and Land Development	Commercial and Industrial	Owner Occupied Real Estate	Consumer and Other	Residential Mortgage	Unallocated	Total
December 31, 2012
Allowance for loan losses:
Individually evaluated for impairment	$       1,077	$           70	$          861	$     860	$             75	$               -	$              -	$       2,943
Collectively evaluated for impairment	2,902	1,203	1,019	1,107	159	17	192	6,599
Total allowance for loan losses	$        3,979	$     1,273	$       1,880	$     1,967	$           234	$            17	$         192	$        9,542
Loans receivable:
Loans evaluated individually	$     25,316	$       3,746	$        6,940	$            3,955	$       1,058	$               -	$             -	$      41,015
Loans evaluated collectively	310,245	22,913	96,828	122,287	22,391	2,442	-	577,106
Total loans receivable	$   335,561	$                          26,659	$    103,768	$     126,242	$      23,449	$          2,442	$           -	$    618,121

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of March 31, 2013 and December 31, 2012:

(dollars in thousands)	30-59 Days Past Due	60-89 Days Past Due	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable	Loans Receivable > 90 Days and Accruing
At March 31, 2013
Commercial real estate	$     16,835	$       8,899	$       7,822	$     33,556	$  298,851	$   332,407	$            -
Construction and land                   development	-	260	1,622	1,882	25,732	27,614	-
Commercial and industrial	-	640	4,642	5,282	105,503	110,785	-
Owner occupied real estate	121	1,489	463	2,073	127,619	129,692	-
Consumer and other	326	-	566	892	23,467	24,359	-
Residential mortgage	-	-	-	-	2,425	2,425	-
Total	$     17,282	$     11,288	$     15,115	$     43,685	$   583,597	$   627,282	$             -

(dollars in thousands)	30-59 Days Past Due	60-89 Days Past Due	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable	Loans Receivable > 90 Days and Accruing
At December 31, 2012
Commercial real estate	$          772	$     26,000	$       7,987	$     34,759	$  300,802	$   335,561	$             -
Construction and land development	-	261	1,342	1,603	25,056	26,659	-
Commercial and industrial	86	-	4,693	4,779	98,989	103,768	-
Owner occupied real estate	285	1,562	968	2,815	123,427	126,242	-
Consumer and other	-	-	1,058	1,058	22,391	23,449	202
Residential mortgage	-	-	-	-	2,442	2,442	-
Total	$       1,143	$     27,823	$     16,048	$     45,014	$   573,107	$   618,121	$        202

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of March 31, 2013 and December 31, 2012

(dollars in thousands)	Pass	Special Mention	Substandard	Doubtful	Total
At March 31, 2013:
Commercial real estate	$     297,516	$           9,510	$         25,381	$               -	$     332,407
Construction and land development	23,691	260	3,663	-	27,614
Commercial and industrial	103,141	640	7,004	-	110,785
Owner occupied real estate	125,362	899	3,431	-	129,692
Consumer and other	23,145	194	1,020	-	24,359
Residential mortgage	2,425	-	-	-	2,425
Total	$     575,280	$         11,503	$        40,499	$               -	$     627,282

(dollars in thousands)	Pass	Special Mention	Substandard	Doubtful	Total
At December 31, 2012:
Commercial real estate	$     300,174	$           9,174	$         26,213	$               -	$     335,561
Construction and land development	22,652	261	3,746	-	26,659
Commercial and industrial	96,051	642	7,075	-	103,768
Owner occupied real estate	121,381	906	3,955	-	126,242
Consumer and other	22,033	100	1,316	-	23,449
Residential mortgage	2,442	-	-	-	2,442
Total	$     564,733	$         11,083	$        42,305	$               -	$     618,121

:

The following table shows non-accrual loans by class as of March 31, 2013 and December 31, 2012:

(dollars in thousands)	March 31, 2013	December 31, 2012
Commercial real estate	$         7,822	$         7,987
Construction and land development	1,622	1,342
Commercial and industrial	4,642	4,693
Owner occupied real estate	463	968
Consumer and other	566	856
Residential mortgage	-	-
Total	$       15,115	$       15,846

Troubled Debt Restructurings

The Company adopted the amendments in Accounting Standards Update No. 2011-02 during the quarter ended September 30, 2011. As required, the Company reassessed all restructurings that occurred on or after January 1, 2011 for identification as a potential troubled debt restructuring. Since the adoption of this accounting guidance, the Company has identified four loan relationships as troubled debt restructurings for which the allowance for credit loss had previously been measured under a general allowance for credit losses methodology (ASC 450-20). Upon identifying these receivables as troubled debt restructurings, the Company also identified them as impaired in accordance with the guidance under ASC 310-10-35.

The following table summarizes information in regard to troubled debt restructurings for the period ended March 31, 2013 and December 31, 2012:

(dollars in thousands)	Accrual Status	Non-Accrual Status	Total Modifications
March 31, 2013:
Commercial real estate	$       908	$            -	$          908
Construction and land development	2,041	-	2,041
Commercial and industrial	2,228	-	2,228
Owner occupied real estate	1,923	-	1,923
Consumer and other	-	-	-
Residential mortgage	-	-	-
Total	$    7,100	$            -	$       7,100
December 31, 2012:
Commercial real estate	$    1,261	$            -	$       1,261
Construction and land development	2,069	-	2,069
Commercial and industrial	2,248	-	2,248
Owner occupied real estate	1,933	-	1,933
Consumer and other	-	-	-
Residential mortgage	-	-	-
Total	$    7,511	$            -	$       7,511

There were no new troubled debt restructuring identified during the three month period ended March 31, 2013. There were no troubled debt restructurings that subsequently defaulted.

There were two new troubled debt restructurings identified during the year ended December 31, 2012. There were no troubled debt restructurings that subsequently defaulted during this period

The Company modified one owner occupied real estate loan during the year ended December 31, 2012. In accordance with the modified terms of this owner occupied real estate loan, the Company extended the maturity date of the loan. In addition the effective interest rate of the modified loan was reduced when compared to the interest rate of the original loan. The owner occupied real estate loan has been and continues to be an accruing loan. The borrower has remained current since the modification.The pre-modification and post-modification balances were each $1,946,000.

The Company modified one commercial and industrial loan during the year ended December 31, 2012. In accordance with the modified terms of the commercial and industrial loan, the Company implemented a hard maturity date whereas the loan had formerly been a demand note. The loan has also been converted from interest only payments to a term-out of the debt on this loan. In addition, the Company modified the amortization time frame and reduced the effective interest rate when compared to the interest rate of the original loan. The Company also extended the maturity date of the loan. The commercial and industrial loan has been and continues to be an accruing loan. The borrower has remained current since the modification. The pre-modification and post-modification balances were each $2,248,000.

The Company modified one commercial real estate loan and one construction and land development loan during the year ended December 31, 2011. As a result of the modified terms of the new commercial estate loan, the Company accelerated the maturity date of the loan. The effective interest rate of the modified commercial real estate loan was reduced when compared to the interest rate of the original loan. The commercial real estate loan has also been converted to interest only payments for a period of time. The commercial real estate loan has been and continues to be an accruing loan. The borrower has remained current since the modification. The pre-modification and post-modification balances were $2,535,000 and $2,565,000, respectively. As a result of the modified terms of the new construction and land development loan, the Company extended the maturity date of the loan. The effective interest rate of the modified construction and land development loan was reduced when compared to the interest rate of the original loan. The construction and land development loan has been and continues to be an accruing loan. The borrower has remained current since the modification. The pre-modification and post-modification balances were each $2,625,000.

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Summary of Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2013

Summary Of Significant Accounting Policies [Abstract]

Risks and Uncertainties [Policy Text Block]

Risks and Uncertainties

The earnings of the Company depend primarily on the earnings of Republic. The earnings of Republic are dependent primarily upon the level of net interest income, which is the difference between interest earned on its interest-earning assets, such as loans and investments, and the interest paid on its interest-bearing liabilities, such as deposits and borrowings. Accordingly, the Company's results of operations are subject to risks and uncertainties surrounding Republic's exposure to changes in the interest rate environment.

       Prepayments on residential real estate mortgage and other fixed rate loans and mortgage-backed securities vary significantly and may cause significant fluctuations in interest margins.

Use of Estimates [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates are made by management in determining the allowance for loan losses, carrying values of other real estate owned, assessment of other than temporary impairment ("OTTI") of investment securities, fair value of financial instruments and the realization of deferred income tax assets. Consideration is given to a variety of factors in establishing these estimates.

         In estimating the allowance for loan losses, management considers current economic conditions, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews, borrowers' perceived financial and managerial strengths, the adequacy of underlying collateral, if collateral dependent, or present value of future cash flows, and other relevant factors.  An estimate for the carrying value of other real estate owned is normally determined through appraisals which are updated on a regular basis or through agreements of sale that have been negotiated. Because the allowance for loan losses and carrying value of other real estate owned are dependent, to a great extent, on the general economy and other conditions that may be beyond the Company's and Republic's control, the estimates of the allowance for loan losses and the carrying values of other real estate owned could differ materially in the near term.

In estimating OTTI of investment securities, securities are evaluated on at least a quarterly basis, and more frequently when market conditions warrant such an evaluation, to determine whether a decline in their value is other than temporary. To determine whether a loss in value is other than temporary, management utilizes criteria such as the reasons underlying the decline, the magnitude and duration of the decline, the intent to hold the security and the likelihood of the Company not being required to sell the security prior to an anticipated recovery in the fair value. The term "other than temporary" is not intended to indicate that the decline is permanent, but indicates that the prospect for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of investment. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

      In evaluating the Company's ability to recover deferred tax assets, management considers all available positive and negative evidence.   Management also makes assumptions on the amount of future taxable income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.  These assumptions require management to make judgments that are consistent with the plans and estimates used to manage the Company's business.  As a result of cumulative losses in recent years and the uncertain nature of the current economic environment, the Company has decided to currently exclude future taxable income from its analysis on the ability to recover deferred tax assets and has recorded a valuation allowance against its deferred tax assets.  An increase or decrease in the valuation allowance would result in an adjustment to income tax expense in the period and could have a significant impact on the Company's future earnings.

Stock-Based Compensation [Policy Text Block]

Stock-Based Compensation

The Company has a Stock Option and Restricted Stock Plan ("Plan"), under which the Company may grant options, restricted stock or stock appreciation rights to the Company's employees, directors, and certain consultants. Under the terms of the Plan, 1.5 million shares of common stock, plus an annual increase equal to the number of shares needed to restore the maximum number of shares that may be available for grant under the Plan to 1.5 million shares, are available for such grants. As of March 31, 2013, the only grants under the Plan have been option grants. The Plan provides that the exercise price of each option granted equals the market price of the Company's stock on the date of the grant. Any option granted vests within one to five years and has a maximum term of ten years.

The Company utilizes the Black-Scholes option pricing model to calculate the estimated fair value of each stock option granted on the date of the grant. A summary of the assumptions used in the Black-Scholes option pricing model for 2013 and 2012 are as follows:

	2013	2012
Dividend yield(1)	0.0%	0.0%
Expected volatility(2)	54.88% to 54.89%	53.12%
Risk-free interest rate(3)	1.28% to 1.41%	1.36%
Expected life(4)	7.0 years	7.0 years

⁽¹⁾ A dividend yield of 0.0% is utilized because cash dividends have never been paid.

⁽²⁾ Expected volatility is based on Bloomberg's seven year volatility calculation for "FRBK" stock.

⁽³⁾ The risk-free interest rate is based on the seven year Treasury bond.

⁽⁴⁾ The expected life reflects a 3 to 4 year vesting period, the maximum ten year term and review of historical behavior.

During the three months ended March 31, 2013 and 2012, 109,787 options and 21,000 options vested, respectively. Expense is recognized ratably over the period required to vest. At March 31, 2013, the intrinsic value of the 1,192,280 options outstanding was $294,080, while the intrinsic value of the 288,717 exercisable (vested) options was $34,681. During the three months ended March 31, 2013, 80,500 options were forfeited with a weighted average grant date fair value of $284,695.

Information regarding stock based compensation for the three months ended March 31, 2013 and 2012 is set forth below:

	2013	2012
Stock based compensation expense recognized	$      72,000	$      89,000
Number of unvested stock options	903,563	855,600
Fair value of unvested stock options	$ 1,231,859	$ 1,555,074
Amount remaining to be recognized as expense	$    751,865	$    734,256

The remaining amount of $751,865 will be recognized as expense through March 2017.

Earnings per Share [Policy Text Block]

Earnings per Share

Earnings per share ("EPS") consist of two separate components: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for each period presented. Diluted EPS is calculated by dividing net income by the weighted average number of common shares outstanding plus dilutive common stock equivalents ("CSEs"). CSEs consist of dilutive stock options granted through the Company's Plan and convertible securities related to the trust preferred securities issued in 2008. In the diluted EPS computation, the after tax interest expense on the trust preferred securities issuance is added back to the net income. For the three months ended March 31, 2013 and 2012, the effect of CSEs (convertible securities related to the trust preferred securities only) and the related add back of after tax interest expense was considered anti-dilutive and therefore was not included in the EPS calculation..

The calculation of EPS for the three months ended March 31, 2013 and 2012 is as follows (in thousands, except per share amounts):

	Three Months Ended  March 31,
	2013	2012
Net income (basic and diluted)	$        992	$       1,305
Weighted average shares outstanding	25,973	25,973
Net income per share – basic	$        0.04	$         0.05
Weighted average shares outstanding (including                   dilutive CSEs)	26,015	25,976
Net income per share – diluted	$      0.04	$         0.05

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

ASU 2013-02

       In February 2013, the FASB issued ASU 2013-02, "Reporting of Amounts Reclassified Out of Comprehensive Income." The amendments in this ASU are intended to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income.  For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required that provide additional detail about those amounts.  This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account instead of directly to income or expense in the same reporting period.  The ASU was effective for public entities for reporting periods beginning after December 15, 2012 and did not have a material impact on the Company's financial statements.

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Loans Receivable and Allowance for Loan Losses (Activity In And Ending Balances Of The Allowance For Loan Losses By Loan Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012	Jun. 30, 2012	Jun. 30, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	$ 9,542			$ 9,542	$ 12,050
Charge-offs	(190)	(545)
Recoveries	1	1
Provision (credit) for loan losses	0	(750)
Ending balance:	9,353	10,756		9,542	12,050
Allowance for loan losses ending balance: individually evaluated for impairment	2,774		2,943
Allowance for loan losses ending balance: collectively evaluated for impairment	6,579		6,599
Allowance for loan losses	9,353	10,756		9,542	12,050
Loans receivable ending balance: individually evaluated for impairment	39,215		41,015
Loans receivable ending balance: collectively evaluated for impairment	588,067		577,106
Total loans receivable	627,282		618,121
Commercial real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	3,979			3,979	7,372
Charge-offs	(60)	(492)
Provision (credit) for loan losses	(662)	(2,509)
Ending balance:	3,257	4,371		3,979	7,372
Allowance for loan losses ending balance: individually evaluated for impairment	607		1,077
Allowance for loan losses ending balance: collectively evaluated for impairment	2,650		2,902
Allowance for loan losses	3,257	4,371		3,979	7,372
Loans receivable ending balance: individually evaluated for impairment	24,489		25,316
Loans receivable ending balance: collectively evaluated for impairment	307,918		310,245
Total loans receivable	332,407		335,561
Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	1,273			1,273	558
Charge-offs	(55)
Provision (credit) for loan losses	617	1,611
Ending balance:	1,835	2,169		1,273	558
Allowance for loan losses ending balance: individually evaluated for impairment			70
Allowance for loan losses ending balance: collectively evaluated for impairment	1,835		1,203
Allowance for loan losses	1,835	2,169		1,273	558
Loans receivable ending balance: individually evaluated for impairment	3,663		3,746
Loans receivable ending balance: collectively evaluated for impairment	23,951		22,913
Total loans receivable	27,614		26,659
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	1,880			1,880	1,928
Charge-offs		(52)
Recoveries	1
Provision (credit) for loan losses	455	343
Ending balance:	2,336	2,219		1,880	1,928
Allowance for loan losses ending balance: individually evaluated for impairment	1,327		861
Allowance for loan losses ending balance: collectively evaluated for impairment	1,009		1,019
Allowance for loan losses	2,336	2,219		1,880	1,928
Loans receivable ending balance: individually evaluated for impairment	6,870		6,940
Loans receivable ending balance: collectively evaluated for impairment	103,915		96,828
Total loans receivable	110,785		103,768
Owner occupied real estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	1,967			1,967	1,963
Provision (credit) for loan losses	(670)	(508)
Ending balance:	1,297	1,455		1,967	1,963
Allowance for loan losses ending balance: individually evaluated for impairment	840		860
Allowance for loan losses ending balance: collectively evaluated for impairment	457		1,107
Allowance for loan losses	1,297	1,455		1,967	1,963
Loans receivable ending balance: individually evaluated for impairment	3,431		3,955
Loans receivable ending balance: collectively evaluated for impairment	126,261		122,287
Total loans receivable	129,692		126,242
Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	234			234	113
Charge-offs	(75)	(1)
Recoveries		1
Provision (credit) for loan losses	11	(7)
Ending balance:	170	106		234	113
Allowance for loan losses ending balance: individually evaluated for impairment			75
Allowance for loan losses ending balance: collectively evaluated for impairment	170		159
Allowance for loan losses	170	106		234	113
Loans receivable ending balance: individually evaluated for impairment	762		1,058
Loans receivable ending balance: collectively evaluated for impairment	23,597		22,391
Total loans receivable	24,359		23,449
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	17			17	23
Provision (credit) for loan losses	(3)	(3)
Ending balance:	14	20		17	23
Allowance for loan losses ending balance: collectively evaluated for impairment	14		17
Allowance for loan losses	14	20		17	23
Loans receivable ending balance: collectively evaluated for impairment	2,425		2,442
Total loans receivable	2,425		2,442
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	192			192	93
Provision (credit) for loan losses	252	323
Ending balance:	444	416		192	93
Allowance for loan losses ending balance: collectively evaluated for impairment	444		192
Allowance for loan losses	$ 444	$ 416		$ 192	$ 93

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Summary of Significant Accounting Policies Stock-Based Compensation (Narrative) (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Shares of common stock available for grant	1,500,000
Vested shares	109,787	21,000
Outstanding options	1,192,280
Intrinsic value of outstanding shares	$ 294,080
Exercisable options	288,717
Instrinsic value of exerciseable shares	34,681
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period, Weighted Average Grant Date Fair Value	$ 284,695
Forfeited shares	80,500
Minimum [Member]
Vesting Period	1 year
Maximum [Member]
Vesting Period	5 years
Maximum Term [Member]
Vesting Period	10 years

XML

Investment Securities (Unrealized Gain (Loss) on Investments) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Schedule of Investments [Line Items]
Amortized Cost	$ 172,655	$ 187,667
Gross Unrealized Gains	3,616	4,588
Gross Unrealized Losses	(2,721)	(2,996)
Fair Value	173,550	189,259
Held-to-maturity Securities	68	67
Held-to-maturity Securities, Unrecognized Holding Gain	1	2
Fair Value	69	69
Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	90,190	97,959
Gross Unrealized Gains	1,395	1,830
Gross Unrealized Losses	(103)	(6)
Fair Value	91,482	99,783
Mortgage-backed Securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	19,379	20,626
Gross Unrealized Gains	880	1,014
Gross Unrealized Losses	(27)
Fair Value	20,232	21,640
Municipal securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	5,360	11,150
Gross Unrealized Gains	196	967
Gross Unrealized Losses	(5)	(16)
Fair Value	5,551	12,101
Corporate bonds [Member]
Schedule of Investments [Line Items]
Amortized Cost	32,217	32,231
Gross Unrealized Gains	854	639
Gross Unrealized Losses	(47)	(185)
Fair Value	33,024	32,685
Asset-backed Securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	19,601	19,785
Gross Unrealized Gains	288	135
Gross Unrealized Losses		(191)
Fair Value	19,889	19,729
Trust Preferred Securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	5,777	5,785
Gross Unrealized Losses	(2,539)	(2,598)
Fair Value	3,238	3,187
U.S. Government agencies [Member]
Schedule of Investments [Line Items]
Held-to-maturity Securities	1	1
Fair Value	1	1
Other securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	131	131
Gross Unrealized Gains	3	3
Fair Value	134	134
Held-to-maturity Securities	67	66
Held-to-maturity Securities, Unrecognized Holding Gain	1	2
Fair Value	$ 68	$ 68

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Fair Value of Financial Instruments (Schedule of Fair Value Measurements, Nonrecurring) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 9,291	$ 19,876
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	9,291	19,876
Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	3,431	3,642
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	3,431	3,642
SBA Servicing Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	2,491	2,340
SBA Servicing Assets [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 2,491	$ 2,340

XML

Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 992	$ 1,305
Other comprehensive income (loss), net of tax
Unrealized gain on securities (pre-tax $6 and $230, respectively)	4	147
Reclassification adjustment for securities gains (pre-tax $703 and $-, respectively)	(450)	0
Reclassification adjustment for impairment charge (pre-tax $- and $17, respectively)	0	11
Total other comprehensive income (loss)	(446)	158
Total comprehensive income	$ 546	$ 1,463

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2013

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

Note 2: Summary of Significant Accounting Policie

Risks and Uncertainties

The earnings of the Company depend primarily on the earnings of Republic. The earnings of Republic are dependent primarily upon the level of net interest income, which is the difference between interest earned on its interest-earning assets, such as loans and investments, and the interest paid on its interest-bearing liabilities, such as deposits and borrowings. Accordingly, the Company's results of operations are subject to risks and uncertainties surrounding Republic's exposure to changes in the interest rate environment.

       Prepayments on residential real estate mortgage and other fixed rate loans and mortgage-backed securities vary significantly and may cause significant fluctuations in interest margins.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates are made by management in determining the allowance for loan losses, carrying values of other real estate owned, assessment of other than temporary impairment ("OTTI") of investment securities, fair value of financial instruments and the realization of deferred income tax assets. Consideration is given to a variety of factors in establishing these estimates.

         In estimating the allowance for loan losses, management considers current economic conditions, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews, borrowers' perceived financial and managerial strengths, the adequacy of underlying collateral, if collateral dependent, or present value of future cash flows, and other relevant factors.  An estimate for the carrying value of other real estate owned is normally determined through appraisals which are updated on a regular basis or through agreements of sale that have been negotiated. Because the allowance for loan losses and carrying value of other real estate owned are dependent, to a great extent, on the general economy and other conditions that may be beyond the Company's and Republic's control, the estimates of the allowance for loan losses and the carrying values of other real estate owned could differ materially in the near term.

In estimating OTTI of investment securities, securities are evaluated on at least a quarterly basis, and more frequently when market conditions warrant such an evaluation, to determine whether a decline in their value is other than temporary. To determine whether a loss in value is other than temporary, management utilizes criteria such as the reasons underlying the decline, the magnitude and duration of the decline, the intent to hold the security and the likelihood of the Company not being required to sell the security prior to an anticipated recovery in the fair value. The term "other than temporary" is not intended to indicate that the decline is permanent, but indicates that the prospect for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of investment. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

      In evaluating the Company's ability to recover deferred tax assets, management considers all available positive and negative evidence.   Management also makes assumptions on the amount of future taxable income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.  These assumptions require management to make judgments that are consistent with the plans and estimates used to manage the Company's business.  As a result of cumulative losses in recent years and the uncertain nature of the current economic environment, the Company has decided to currently exclude future taxable income from its analysis on the ability to recover deferred tax assets and has recorded a valuation allowance against its deferred tax assets.  An increase or decrease in the valuation allowance would result in an adjustment to income tax expense in the period and could have a significant impact on the Company's future earnings.

Stock-Based Compensation

The Company has a Stock Option and Restricted Stock Plan ("Plan"), under which the Company may grant options, restricted stock or stock appreciation rights to the Company's employees, directors, and certain consultants. Under the terms of the Plan, 1.5 million shares of common stock, plus an annual increase equal to the number of shares needed to restore the maximum number of shares that may be available for grant under the Plan to 1.5 million shares, are available for such grants. As of March 31, 2013, the only grants under the Plan have been option grants. The Plan provides that the exercise price of each option granted equals the market price of the Company's stock on the date of the grant. Any option granted vests within one to five years and has a maximum term of ten years.

The Company utilizes the Black-Scholes option pricing model to calculate the estimated fair value of each stock option granted on the date of the grant. A summary of the assumptions used in the Black-Scholes option pricing model for 2013 and 2012 are as follows:

	2013	2012
Dividend yield(1)	0.0%	0.0%
Expected volatility(2)	54.88% to 54.89%	53.12%
Risk-free interest rate(3)	1.28% to 1.41%	1.36%
Expected life(4)	7.0 years	7.0 years

⁽¹⁾ A dividend yield of 0.0% is utilized because cash dividends have never been paid.

⁽²⁾ Expected volatility is based on Bloomberg's seven year volatility calculation for "FRBK" stock.

⁽³⁾ The risk-free interest rate is based on the seven year Treasury bond.

⁽⁴⁾ The expected life reflects a 3 to 4 year vesting period, the maximum ten year term and review of historical behavior.

During the three months ended March 31, 2013 and 2012, 109,787 options and 21,000 options vested, respectively. Expense is recognized ratably over the period required to vest. At March 31, 2013, the intrinsic value of the 1,192,280 options outstanding was $294,080, while the intrinsic value of the 288,717 exercisable (vested) options was $34,681. During the three months ended March 31, 2013, 80,500 options were forfeited with a weighted average grant date fair value of $284,695.

Information regarding stock based compensation for the three months ended March 31, 2013 and 2012 is set forth below:

	2013	2012
Stock based compensation expense recognized	$      72,000	$      89,000
Number of unvested stock options	903,563	855,600
Fair value of unvested stock options	$ 1,231,859	$ 1,555,074
Amount remaining to be recognized as expense	$    751,865	$    734,256

The remaining amount of $751,865 will be recognized as expense through March 2017.

Earnings per Share

Earnings per share ("EPS") consist of two separate components: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for each period presented. Diluted EPS is calculated by dividing net income by the weighted average number of common shares outstanding plus dilutive common stock equivalents ("CSEs"). CSEs consist of dilutive stock options granted through the Company's Plan and convertible securities related to the trust preferred securities issued in 2008.  In the diluted EPS computation, the after tax interest expense on the trust preferred securities issuance is added back to the net income. For the three months ended March 31, 2013 and 2012, the effect of CSEs (convertible securities related to the trust preferred securities only) and the related add back of after tax interest expense was considered anti-dilutive and therefore was not included in the EPS calculation..

The calculation of EPS for the three months ended March 31, 2013 and 2012 is as follows (in thousands, except per share amounts):

	Three Months Ended  March 31,
	2013	2012
Net income (basic and diluted)	$        992	$       1,305
Weighted average shares outstanding	25,973	25,973
Net income per share – basic	$        0.04	$         0.05
Weighted average shares outstanding (including                   dilutive CSEs)	26,015	25,976
Net income per share – diluted	$      0.04	$         0.05

 

Recent Accounting Pronouncements

ASU 2013-02

       In February 2013, the FASB issued ASU 2013-02, "Reporting of Amounts Reclassified Out of Comprehensive Income." The amendments in this ASU are intended to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income.  For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required that provide additional detail about those amounts.  This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account instead of directly to income or expense in the same reporting period.  The ASU was effective for public entities for reporting periods beginning after December 15, 2012 and did not have a material impact on the Company's financial statements.

 

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Investment Securities (Investments Classified by Contractual Maturity Date) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Investment Securities [Abstract]
Available for Sale: Amortized Cost: Due in 1 year or less	$ 20,105
Available for Sale: Amortized Cost: After 1 year to 5 years	66,642
Available for Sale: Amortized Cost: After 5 years to 10 years	77,801
Available for Sale: Amortized Cost: After 10 years	8,107
Available for Sale: Amortized Cost: Total	172,655
Available for Sale: Estimated Fair Value: Due in 1 year or less	20,507
Available for Sale: Estimated Fair Value: After 1 year to 5 years	68,398
Available for Sale: Estimated Fair Value: After 5 years to 10 years	76,206
Available for Sale: Estimated Fair Value: After 10 years	8,439
Investment securities available for sale, Carrying Amount	173,550	189,259
Held to Maturity: Amortized Cost: Due in 1 year or less	47
Held to Maturity: Amortized Cost: After 1 year to 5 years	21
Held to Maturity: Amortized Cost: Total	68
Held to Maturity: Estimated Fair Value: Due in 1 year or less	48
Held to Maturity: Estimated Fair Value: After 1 year to 5 years	21
Held to Maturity: Estimated Fair Value: Total	$ 69

XML

Loans Receivable and Allowance for Loan Losses (Troubled Debt Restructuring) (Details) (USD $)
In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2013

loan

Dec. 31, 2012

Financing Receivable, Modifications [Line Items]

Financing Receivable, Modifications, Nature and Extent of Transaction

The Company modified one owner occupied real estate loan during the year ended December 31, 2012. In accordance with the modified terms of this owner occupied real estate loan, the Company extended the maturity date of the loan. In addition the effective interest rate of the modified loan was reduced when compared to the interest rate of the original loan. The owner occupied real estate loan has been and continues to be an accruing loan. The borrower has remained current since the modification.The pre-modification and post-modification balances were each $1,946,000.

The Company modified one commercial and industrial loan during the year ended December 31, 2012. In accordance with the modified terms of the commercial and industrial loan, the Company implemented a hard maturity date whereas the loan had formerly been a demand note. The loan has also been converted from interest only payments to a term-out of the debt on this loan. In addition, the Company modified the amortization time frame and reduced the effective interest rate when compared to the interest rate of the original loan. The Company also extended the maturity date of the loan. The commercial and industrial loan has been and continues to be an accruing loan. The borrower has remained current since the modification. The pre-modification and post-modification balances were each $2,248,000.

The Company modified one commercial real estate loan and one construction and land development loan during the year ended December 31, 2011. As a result of the modified terms of the new commercial estate loan, the Company accelerated the maturity date of the loan. The effective interest rate of the modified commercial real estate loan was reduced when compared to the interest rate of the original loan. The commercial real estate loan has also been converted to interest only payments for a period of time. The commercial real estate loan has been and continues to be an accruing loan. The borrower has remained current since the modification. The pre-modification and post-modification balances were $2,535,000 and $2,565,000, respectively. As a result of the modified terms of the new construction and land development loan, the Company extended the maturity date of the loan. The effective interest rate of the modified construction and land development loan was reduced when compared to the interest rate of the original loan. The construction and land development loan has been and continues to be an accruing loan. The borrower has remained current since the modification. The pre-modification and post-modification balances were each $2,625,000.

Loans identified as troubled debt restructurings

0

Subsequent defaulted restructurings

0

Total Modifications

$ 7,100

$ 7,511

Accrual Status [Member]

Financing Receivable, Modifications [Line Items]

Total Modifications

7,100

7,511

Commercial real estate [Member]

Financing Receivable, Modifications [Line Items]

Total Modifications

908

1,261

Commercial real estate [Member] | Accrual Status [Member]

Financing Receivable, Modifications [Line Items]

Total Modifications

908

1,261

Construction and Land Development [Member]

Financing Receivable, Modifications [Line Items]

Total Modifications

2,041

2,069

Construction and Land Development [Member] | Accrual Status [Member]

Financing Receivable, Modifications [Line Items]

Total Modifications

2,041

2,069

Commercial and Industrial [Member]

Financing Receivable, Modifications [Line Items]

Total Modifications

2,228

2,248

Commercial and Industrial [Member] | Accrual Status [Member]

Financing Receivable, Modifications [Line Items]

Total Modifications

2,228

2,248

Owner occupied real estate [Member]

Financing Receivable, Modifications [Line Items]

Total Modifications

1,923

1,933

Owner occupied real estate [Member] | Accrual Status [Member]

Financing Receivable, Modifications [Line Items]

Total Modifications

$ 1,923

$ 1,933

XML

Fair Value Measurements and Fair Values of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value of Financial Instruments [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

(dollars in thousands)	Total	(Level 1) Quoted Prices in Active Markets for Identical Assets	(Level 2) Significant Other Observable Inputs	(Level 3) Significant Unobservable Inputs
March 31, 2013:
Collateralized mortgage obligations	$      91,482	$                  -	$       91,482	$                    -
Mortgage-backed securities	20,232	-	20,232	-
Municipal securities	5,551	-	5,551	-
Corporate bonds	33,024	-	30,017	3,007
Asset-backed securities	19,889	-	19,889	-
Trust Preferred Securities	3,238	-	-	3,238
Other securities	134	-	134	-
Securities Available for Sale	$      173,550	$                  -	$     167,305	$           6,245
December 31, 2012:
Collateralized mortgage obligations	$       99,783	$                  -	$       99,783	$                    -
Mortgage-backed securities	21,640	-	21,640	-
Municipal securities	12,101	-	12,101	-
Corporate bonds	32,685	-	29,678	3,007
Asset-backed securities	19,729	-	19,729	-
Trust Preferred Securities	3,187	-	-	3,187
Other securities	134	-	134	-
Securities Available for Sale	$     189,259	$                  -	$     183,065	$           6,194

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities	Corporate Bonds	Trust Preferred Securities	Corporate Bonds
Balance, January 1,	$         3,187	$         3,007	$         3,410	$           3,004
Unrealized gains (losses)	58	-	6	3
Paydowns	(7)	-	-	-
Impairment charges on Level 3	-	-	(17)	-
Balance, March 31,	$         3,238	$         3,007	$        3,399	$             3,007

Fair Value Measurements, Nonrecurring [Table Text Block]

(dollars in thousands)	Total	(Level 1) Quoted Prices in Active Markets for Identical Assets	(Level 2) Significant Other Observable Inputs	(Level 3) Significant Unobservable Inputs
March 31, 2013:
Impaired loans	$         9,291	$                 -	$                 -	$         9,291
Other real estate owned	3,431	-	-	3,431
SBA servicing assets	2,491	-	-	2,491
December 31, 2012:
Impaired loans	$       19,876	$                 -	$                 -	$       19,876
Other real estate owned	3,642	-	-	3,642
SBA servicing assets	2,340	-	-	2,340

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

The following table presents a reconciliation of the securities available for sales measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2013 and 2012

	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities	Corporate Bonds	Trust Preferred Securities	Corporate Bonds
Balance, January 1,	$         3,187	$         3,007	$         3,410	$           3,004
Unrealized gains (losses)	58	-	6	3
Paydowns	(7)	-	-	-
Impairment charges on Level 3	-	-	(17)	-
Balance, March 31,	$         3,238	$         3,007	$        3,399	$             3,007

 

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2013 and December 31, 2012 were as follows:

(dollars in thousands)	Total	(Level 1) Quoted Prices in Active Markets for Identical Assets	(Level 2) Significant Other Observable Inputs	(Level 3) Significant Unobservable Inputs
March 31, 2013:
Impaired loans	$         9,291	$                 -	$                 -	$         9,291
Other real estate owned	3,431	-	-	3,431
SBA servicing assets	2,491	-	-	2,491
December 31, 2012:
Impaired loans	$       19,876	$                 -	$                 -	$       19,876
Other real estate owned	3,642	-	-	3,642
SBA servicing assets	2,340	-	-	2,340

The table below presents additional quantitative information about level 3 assets measured at fair value on a nonrecurring basis (dollars in thousands):

		Quantitative Information about Level 3 Fair Value Measurements March 31, 2013
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range Weighted    Average
Impaired loans	$          9,291		Fair Value of Collateral (1)	Appraised Value (2)	0% - 43% (23%)
Other real estate owned	$           3,431		Fair Value of Collateral (1)	Appraised Value (2) Sales Price	8% - 18% (9%)
SBA Servicing Assets	$           2,491		Fair Value	Individual Loan Valuation (3)	(3)

   

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which include Level 3 inputs that are    

         not identifiable.

  (2)    Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

   (3)   There is a lack of transactional data in this market place for the non-guaranteed portion of SBA loans.

   (4)   The range and weighted average of qualitative factors such as economic conditions and estimated liquidation expenses are presented as a percent of the appraised value.

Schedule of Servicing Assets at Fair Value [Table Text Block]

(dollars in thousands)	2013	2012
Beginning balance, January 1st	$       2,340	$       1,102
Additions	146	241
Fair value adjustments	5	8
Ending balance, March 31st	$       2,491	$       1,351

Schedule of Sensitivity Analysis of Fair Value, Transferor's Interests in Transferred Financial Assets [Table Text Block]

(dollars in thousands)		March 31, 2013		December 31, 2012
SBA Servicing Asset
Fair Value of SBA Servicing Asset	$        2,491		$        2,340
Composition of SBA Loans Serviced for Others
Fixed-rate SBA loans	0%		0%
Adjustable-rate SBA loans	100%		100%
Total	100%		100%
Weighted Average Remaining Term	21.1 years		21.4 years
Prepayment Speed	6.61%		6.59%
Effect on fair value of a 10% increase	$           (59)		$           (55)
Effect on fair value of a 20% increase	(116)		(107)
Weighted Average Discount Rate	13.18%		14.23%
Effect on fair value of a 10% increase	$        (115)		$        (115)
Effect on fair value of a 20% increase	(222)		(222)

Fair Value, by Balance Sheet Grouping [Table Text Block]

The estimated fair values of the Company's financial instruments were as follows at March 31, 2013 and December 31, 2012:

	Fair Value Measurements at March 31, 2013
(dollars in thousands)	Carrying Amount	Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs  (Level 2)	Significant Unobservable Inputs  (Level 3)
Balance Sheet Data
Financial assets:
Cash and cash equivalents	$         71,929	$         71,929	$         71,929	$                  -	$                  -
Investment securities available for sale	173,550	173,550	-	167,305	6,245
Investment securities held to maturity	68	69	-	69	-
Restricted stock	3,276	3,276	-	3,276	-
Loans held for sale	165	165	-	-	165
Loans receivable, net	617,769	614,714	-	-	614,714
SBA servicing assets	2,491	2,491	-	-	2,491
Accrued interest receivable	3,273	3,273	-	3,273	-
Financial liabilities:
Deposits
Demand, savings and money market	$      735,211	$      735,211	$                  -	$    735,211	$                  -
Time	90,927	91,636	-	91,636	-
Subordinated debt	22,476	18,392	-	-	18,392
Accrued interest payable	494	494	-	494	-
Off-Balance Sheet Data
Commitments to extend credit	-	-
Standby letters-of-credit	-	-

	Fair Value Measurements at December 31, 2012
(dollars in thousands)	Carrying Amount	Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs  (Level 2)	Significant Unobservable Inputs  (Level 3)
Balance Sheet Data
Financial assets:
Cash and cash equivalents	$      128,004	$      128,004	$       128,004	$                  -	$                  -
Investment securities available for sale	189,259	189,259	-	183,065	6,194
Investment securities held to maturity	67	69	-	69	-
Restricted stock	3,816	3,816	-	3,816	-
Loans held for sale	82	82	-	-	82
Loans receivable, net	608,359	603,237	-	-	603,237
SBA servicing assets	2,340	2,340	-	-	2,340
Accrued interest receivable	3,128	3,128	-	3,128	-
Financial liabilities:
Deposits
Demand, savings and money market	$      765,967	$      765,967	$                  -	$    765,967	$                  -
Time	123,234	124,044	-	124,044	-
Subordinated debt	22,476	20,187	-	-	20,187
Accrued interest payable	301	301	-	301	-
Off-Balance Sheet Data
Commitments to extend credit	-	-
Standby letters-of-credit	-	-