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 1934
	For the quarterly period ended September 30, 2013.

or

[      ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For 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 Registrant’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 per share	25,972,897
Title of Class	Number of Shares Outstanding as of November 11, 2013

REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Part I:  Financial Information		Page
Item 1.	Financial Statements
	Consolidated balance sheets as of September 30, 2013 and December 31, 2012 (unaudited)	1
	Consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012 (unaudited)	2
	Consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2013 and 2012 (unaudited)	3
	Consolidated statements of cash flows for the nine months ended September 30, 2013 and 2012 (unaudited)	4
	Consolidated statements of changes in shareholders’ equity for the nine months ended September 30, 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	31
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4.	Controls and Procedures	49
Part II:  Other Information
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	51
Signatures		52

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

September 30, 2013 and December 31, 2012

(Dollars in thousands, except per share data)

(unaudited)

	September 30, 2013			December 31, 2012
ASSETS
Cash and due from banks	$	11,468		$	9,097
Interest bearing deposits with banks		31,498			118,907
Federal funds sold		1,339			-
Cash and cash equivalents		44,305			128,004
Investment securities available for sale, at fair value		199,722			189,259
Investment securities held to maturity, at amortized cost (fair value of $69 and $69, respectively)		69			67
Restricted stock, at cost		1,570			3,816
Loans held for sale		7,130			82
Loans receivable (net of allowance for loan losses of $8,704 and $9,542, respectively)		641,533			608,359
Premises and equipment, net		21,181			21,976
Other real estate owned, net		5,951			8,912
Accrued interest receivable		2,920			3,128
Bank owned life insurance		-			10,490
Other assets		18,487			14,565
Total Assets	$	942,868		$	988,658
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Demand – non-interest bearing	$	159,384		$	145,407
Demand – interest bearing		188,572			180,440
Money market and savings		413,970			440,120
Time deposits		83,577			123,234
Total Deposits		845,503			889,201
Accrued interest payable		309			301
Other liabilities		7,493			6,778
Subordinated debt		22,476			22,476
Total Liabilities		875,781			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		106,990			106,753
Accumulated deficit		(34,447	)		(34,228	)
Treasury stock at cost (416,303 shares)		(3,099	)		(3,099	)
Stock held by deferred compensation plan (112,542 shares)		(809	)		(809	)
Accumulated other comprehensive income (loss)		(1,813	)		1,020
Total Shareholders’ Equity		67,087			69,902
Total Liabilities and Shareholders’ Equity	$	942,868		$	988,658

(See notes to consolidated financial statements)

1

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2013 and 2012

(Dollars in thousands, except per share data)

 (unaudited)

		Three Months Ended September 30,						Nine Months Ended September 30,
		2013			2012			2013			2012
Interest income:
Interest and fees on taxable loans	$	8,060		$	8,131		$	23,888		$	24,265
Interest and fees on tax-exempt loans		86			63			266			198
Interest and dividends on taxable investment securities		1,097			1,246			3,187			3,784
Interest and dividends on tax-exempt investment securities		56			118			177			351
Interest on federal funds sold and other interest-earning assets		40			54			143			239
Total interest income		9,339			9,612			27,661			28,837
Interest expense:
Demand- interest bearing		213			211			615			567
Money market and savings		425			572			1,355			2,157
Time deposits		197			370			680			1,384
Other borrowings		278			283			834			852
Total interest expense		1,113			1,436			3,484			4,960
Net interest income		8,226			8,176			24,177			23,877
Provision for loan losses		250			850			1,175			600
Net interest income after provision for loan losses		7,976			7,326			23,002			23,277
Non-interest income:
Loan advisory and servicing fees		446			333			1,220			873
Gain on sales of SBA loans		1,106			1,141			3,863			3,337
Service fees on deposit accounts		270			234			769			670
Legal settlements		-			50			238			155
Gain on sale of investment securities		-			-			703			774
Other-than-temporary impairment losses		-			-			-			(33	)
Portion recognized in other comprehensive income (before taxes)		-			-			-			2
Net impairment loss on investment securities		-			-			-			(31	)
Bank owned life insurance income		-			20			13			55
Other non-interest income		70			53			199			143
Total non-interest income		1,892			1,831			7,005			5,976
Non-interest expenses:
Salaries and employee benefits		4,486			4,008			13,276			12,105
Occupancy		941			875			2,661			2,591
Depreciation and amortization		671			492			1,626			1,516
Legal		544			547			1,411			2,334
Other real estate owned		745			287			1,771			489
Advertising		103			57			321			207
Data processing		299			288			715			863
Insurance		155			183			466			493
Professional fees		358			326			1,040			917
Regulatory assessments and costs		327			343			912			1,032
Taxes, other		63			181			566			718
Legal settlement		1,875			-			1,875			-
Other operating expenses		1,541			1,200			3,654			3,368
Total non-interest expense		12,108			8,787			30,294			26,633
Income (loss) before benefit for income taxes		(2,240	)		370			(287	)		2,620
Benefit for income taxes		(18	)		(28	)		(68	)		(90	)
Net income (loss)	$	(2,222	)	$	398		$	(219	)	$	2,710
Net income (loss) per share:
Basic	$	(0.09	)	$	0.02		$	(0.01	)	$	0.10
Diluted	$	(0.09	)	$	0.02		$	(0.01	)	$	0.10

(See notes to consolidated financial statements)

2

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

For the Three and Nine Months Ended September 30, 2013 and 2012

(Dollars in thousands)

(unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
Net income (loss)	$	(2,222	)	$	398	$	(219	)	$	2,710
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on securities (pre-tax $(220), $1,854, $(3,717), and $2,459, respectively)		(141	)		1,188		(2,383	)		1,576
Reclassification adjustment for securities gains (pre-tax $-, $-, $703, and $774, respectively)		-			-		(450	)		(503	)
Reclassification adjustment for impairment charge (pre-tax $-, $-, $-, and $31, respectively)		-			-		-			20
Total other comprehensive income (loss)		(141	)		1,188		(2,833	)		1,093
Total comprehensive income (loss)	$	(2,363	)	$	1,586	$	(3,052	)	$	3,803

(See notes to consolidated financial statements)

3

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2013 and 2012

(Dollars in thousands)

(unaudited)

	Nine Months Ended September 30,
	2013				2012
Cash flows from operating activities
Net income (loss)		$	(219	)		$	2,710
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for loan losses			1,175				600
(Gain) loss on sale of other real estate owned			(229	)			10
Write down of other real estate owned			1,442				130
Depreciation and amortization			1,626				1,516
Stock based compensation			237				290
Gain on sale of investment securities			(703	)			(774	)
Impairment charges on investment securities			-				31
Amortization of premiums on investment securities			613				269
Proceeds from sales of SBA loans originated for sale			39,519				35,358
SBA loans originated for sale			(42,704	)			(32,185	)
Gains on sales of SBA loans originated for sale			(3,863	)			(3,337	)
Increase in value of bank owned life insurance			(13	)			(55	)
Increase in accrued interest receivable and other assets			(2,129	)			(249	)
Increase (decrease) in accrued interest payable and other liabilities			723				(38	)
Net cash provided by (used in) operating activities			(4,525	)			4,276
Cash flows from investing activities
Purchase of investment securities available for sale			(50,054	)			(60,910	)
Proceeds from the sale of securities available for sale			7,946				22,590
Proceeds from the maturity or call of securities available for sale			27,315				22,274
Proceeds from the maturity or call of securities held to maturity			-				74
Proceeds from redemption of FHLB stock			2,246				952
Net increase in loans			(34,595	)			(37,845	)
Net proceeds from sale of other real estate owned			1,994				334
Surrender proceeds on bank owned life insurance			10,503				-
Premises and equipment expenditures			(831	)			(424	)
Net cash used in investing activities			(35,476	)			(52,955	)
Cash flows from financing activities
Net (decrease) increase in demand, money market and savings deposits			(4,041	)			339
Net decrease in time deposits			(39,657	)			(84,757	)
Net cash used in financing activities			(43,698	)			(84,418	)
Net decrease in cash and cash equivalents			(83,699	)			(133,097	)
Cash and cash equivalents, beginning of year			128,004				230,955
Cash and cash equivalents, end of period		$	44,305			$	97,858
Supplemental disclosures:
Interest paid		$	3,476			$	5,363
Income taxes paid		$	185			$	-
Non-cash transfers from loans to other real estate owned		$	246			$	1,307

(See notes to consolidated financial statements)

4

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the Nine Months Ended September 30, 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 loss						(219	)											(219	)
Other comprehensive loss, net of tax															(2,833	)		(2,833	)
Stock based compensation				237														237
Balance September 30,  2013	$	265	$	106,990	$	(34,447	)	$	(3,099	)	$	(809	)	$	(1,813	)	$	67,087
Balance January 1, 2012	$	265	$	106,383	$	(37,842	)	$	(3,099	)	$	(809	)	$	(47	)	$	64,851
Net income						2,710												2,710
Other comprehensive income, net of tax															1,093			1,093
Stock based compensation				290														290
Balance September 30, 2012	$	265	$	106,673	$	(35,132	)	$	(3,099	)	$	(809	)	$	1,046		$	68,944

(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 and nine month periods ended September 30, 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.

6

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 slow pace of recovery in the current economic environment, the Company has decided to currently exclude future taxable income from its analysis of 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.

7

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 September 30, 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 55.08%		53.12% to 54.49%
Risk-free interest rate(3)	1.28% to 2.02%		1.01% to 1.61%
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 nine months ended September 30, 2013 and 2012, 127,287 shares and 61,000 shares vested, respectively.  Expense is recognized ratably over the period required to vest.  At September 30, 2013, the intrinsic value of the 1,199,780 options outstanding was $562,985, while the intrinsic value of the 306,217 exercisable (vested) options was $52,294.  During the nine months ended September 30, 2013, 84,000 options were forfeited with a weighted average grant date fair value of $289,760.

Information regarding stock based compensation for the nine months ended September 30, 2013 and 2012 is set forth below:

	2013		2012
Stock based compensation expense recognized	$	237,000	$	290,000
Number of unvested stock options		893,563		795,600
Fair value of unvested stock options	$	1,210,840	$	1,426,878
Amount remaining to be recognized as expense	$	597,709	$	548,287

The remaining amount of $597,709 will be recognized as expense through June 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 and nine months ended September 30, 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 and nine months ended September 30, 2013 and 2012 is as follows (in thousands, except per share amounts):

	Three Months Ended September  30,					Nine Months Ended September 30,
	2013			2012		2013			2012
Net income (loss) - basic and diluted	$	(2,222	)	$	398	$	(219	)	$	2,710
Weighted average shares outstanding		25,973			25,973		25,973			25,973
Net income (loss) per share – basic	$	(0.09	)	$	0.02	$	(0.01	)	$	0.10
Weighted average shares outstanding (including dilutive CSEs)		25,973			25,996		25,973			25,991
Net income (loss) per share – diluted	$	(0.09	)	$	0.02	$	(0.01	)	$	0.10

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.  The Company entered into a settlement agreement during the three month period ending September 30, 2013 in connection with litigation in which it was a defendant. The settlement agreement releases the Company from all claims and actions related to the matter.

Any litigation involves an element of uncertainty.  After reviewing pending actions with its legal counsel, 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.

9

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.

Note 5:  Investment Securities

A summary of the amortized cost and market value of securities available for sale and securities held to maturity at September 30, 2013 and December 31, 2012 is as follows:

	At September 30, 2013
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Collateralized mortgage obligations	$	122,657	$	521	$	(2,760	)	$	120,418
Mortgage-backed securities		15,007		634		(55	)		15,586
Municipal securities		8,004		97		(99	)		8,002
Corporate bonds		32,188		805		-			32,993
Asset-backed securities		19,234		324		-			19,558
Trust preferred securities		5,345		-		(2,297	)		3,048
Other securities		115		2		-			117
Total securities available for sale	$	202,550	$	2,383	$	(5,211	)	$	199,722
U.S. Government agencies	$	1	$	-	$	-		$	1
Other securities		68		-		-			68
Total securities held to maturity	$	69	$	-	$	-		$	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

10

       The maturity distribution of the amortized cost and estimated market value of investment securities by contractual maturity at September 30, 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	$	18,899	$	19,173	$	48	$	48
After 1 year to 5 years		64,862		64,836		21		21
After 5 years to 10 years		110,860		107,567		-		-
After 10 years		7,929		8,146		-		-
Total	$	202,550	$	199,722	$	69	$	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 September 30, 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 September 30, 2013 and December 31, 2012.  In addition, the Company did not hold any private issued CMO’s as September 30, 2013 and December 31, 2012.  As of September 30, 3013 and December 31, 2012, the asset-backed securities consist 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, accounting standards require 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.  There were no impairment charges (credit losses) on trust preferred securities for the three and nine months ended September 30, 2013. Impairment charges (credit losses) on trust preferred securities for the three and nine months ended September 30, 2012 amounted to $0 and $31,000, respectively.

11

The following table presents a roll-forward of the balance of credit-related impairment losses on securities held at September 30, 2013 and 2012 for which a portion of OTTI was recognized in other comprehensive income:

	September 30,
(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		-		31
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, September 30th	$	3,959	$	3,956

The Company realized gross gains on the sale of securities of $703,000 during the nine months ended September 30, 2013.  The related sale proceeds amounted to $7.9 million.  The tax provision applicable to these gross gains in 2013 amounted to approximately $253,000.  The Company realized gross gains on the sale of securities of $774,000 during the nine months ended September 30, 2012.  The related sale proceeds amounted to $22.6 million.  The tax provision applicable to these gross gains in 2012 amounted to approximately $271,000.

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 September 30, 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		$	80,855	$	2,760	$	-	$	-	$	80,855	$	2,760
Mortgage-backed securities			1,160		55		-		-		1,160		55
Municipal securities			2,344		99		-		-		2,344		99
Corporate bonds			-		-		-		-		-		-
Trust preferred securities			-		-		3,048		2,297		3,048		2,297
U.S. Government Agencies			1		-		-		-		1		-
Total		$	84,360	$	2,914	$	3,048	$	2,297	$	87,408	$	5,211

	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

12

The impairment of the investment portfolio amounted to $5.2 million on securities with a total fair value of $87.4 million at September 30, 2013.  The most significant components of this impairment are related to the collateralized mortgage obligations and the trust preferred securities held in the portfolio.  The unrealized losses on the collateralized mortgage obligations are temporary in nature and are primarily related to the recent movement in market interest rates rather than the underlying credit quality of the issuers.  The Company does currently intend to sell these securities prior to their maturity or the recovery of their cost bases and believes that it is more likely than not that it will not have to sell these securities prior to their maturity or the recovery of their cost bases.

At September 30, 2013, the investment portfolio included twenty-three collateralized mortgage obligations with a total market value of $120.4 million.  Sixteen of these securities carried an unrealized loss at September 30, 2013.  At September 30, 2013, the investment portfolio included forty-one mortgage-backed securities with a total market value of $15.6 million.  One of these securities carried an unrealized loss at September 30, 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 September 30, 2013.

The unrealized losses on the trust preferred securities are primarily the result of the secondary market for such securities becoming inactive and are also considered temporary at this time.

The following table provides additional detail about the trust preferred securities held in the portfolio as of September 30, 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	)	Caa2			6		18	%		0.37	%	$	-
Preferred Term     Securities VII	Mezzanine Notes		1,056		780		(276	)		C		12		53			0.34			2,173
TPREF Funding II	Class B Notes		739		362		(377	)		C		16		44			0.36			260
TPREF Funding III	Class B2 Notes		1,521		782		(739	)		C		17		34			0.34			480
Trapeza CDO I, LLC	Class C1 Notes		556		271		(285	)		C		9		49			0.38			470
ALESCO Preferred     Funding IV	Class B1 Notes		604		361		(243	)		C		38		14			0.36			396
ALESCO Preferred     Funding V	Class C1 Notes		820		452		(368	)		C		38		24			0.36			180
Total		$	5,345	$	3,048	$	(2,297	)				136		33	%				$	3,959

At September 30, 2013, the investment portfolio included thirteen municipal securities with a total market value of $8.0 million.  Three of these securities carried an unrealized loss totaling $0.1 million at September 30, 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 $1.3 million.  As of September 30, 2013, management found no evidence of OTTI on any of the municipal securities held in the investment securities portfolio.

13

Note 6:  Loans Receivable and Allowance for Loan Losses

The following table sets forth the Company’s gross loans by major categories as of September 30, 2013 and December 31, 2012:

(dollars in thousands)	September 30, 2013				December 31, 2012
Commercial real estate		$	328,486		$	335,561
Construction and land development			25,238			26,659
Commercial and industrial			113,302			103,768
Owner occupied real estate			150,594			126,242
Consumer and other			30,595			23,449
Residential mortgage			2,374			2,442
Total loans receivable			650,589			618,121
Deferred costs (fees)			(352	)		(220	)
Allowance for loan losses			(8,704	)		(9,542	)
Net loans receivable		$	641,533		$	608,359

A loan is considered impaired, 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. 

14

The following table summarizes information with regard to impaired loans by loan portfolio class as of September 30, 2013 and December 31, 2012:

	September 30, 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	$	10,161	$	10,281	$	-	$	19,231	$	20,000	$	-
Construction and land development		1,025		4,244		-		3,153		6,312		-
Commercial and industrial		3,064		4,352		-		3,793		7,106		-
Owner occupied real estate		547		867		-		505		505		-
Consumer and other		459		711		-		912		1,146		-
Total	$	15,256	$	20,455	$	-	$	27,594	$	35,069	$	-

With an allowance recorded:
Commercial real estate	$	606	$	606	$	134	$	6,085	$	6,085	$	1,077
Construction and land development		593		3,700		217		593		3,700		70
Commercial and industrial		3,274		5,674		815		3,147		3,255		861
Owner occupied real estate		2,920		2,920		444		3,450		3,450		860
Consumer and other		203		209		9		146		155		75
Total	$	7,596	$	13,109	$	1,619	$	13,421	$	16,645	$	2,943

Total:
Commercial real estate	$	10,767	$	10,887	$	134	$	25,316	$	26,085	$	1,077
Construction and land development		1,618		7,944		217		3,746		10,012		70
Commercial and industrial		6,338		10,026		815		6,940		10,361		861
Owner occupied real estate		3,467		3,787		444		3,955		3,955		860
Consumer and other		662		920		9		1,058		1,301		75
Total	$	22,852	$	33,564	$	1,619	$	41,015	$	51,714	$	2,943

15

         The following table presents additional information regarding the Company’s impaired loans for the three months ended September 30, 2013 and September 30, 2012:

	Three Months Ended September 30,
	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	$	12,063	$	178	$	15,728	$	186
Construction and land development		1,421		3		4,878		27
Commercial and industrial		3,034		7		4,955		28
Owner occupied real estate		465		4		673		3
Consumer and other		538		-		898		4
Total	$	17,521	$	192	$	27,132	$	248

With an allowance recorded:
Commercial real estate	$	1,925	$	10	$	9,256	$	124
Construction and land development		545		-		923		-
Commercial and industrial		3,392		14		2,480		16
Owner occupied real estate		3,013		37		3,123		48
Consumer and other		163		-		121		-
Total	$	9,038	$	61	$	15,903	$	188

Total:
Commercial real estate	$	13,988	$	188	$	24,984	$	310
Construction and land development		1,966		3		5,801		27
Commercial and industrial		6,426		21		7,435		44
Owner occupied real estate		3,478		41		3,796		51
Consumer and other		701		-		1,019		4
Total	$	26,559	$	253	$	43,035	$	436

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately $113,000 and $225,000 for the three months ended September 30, 2013 and 2012, respectively.

16

The following table presents additional information regarding the Company’s impaired loans for the nine months ended September 30, 2013 and September 30, 2012:

	Nine Months Ended September 30,
	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		$	15,865		$	599	$	14,786		$	556
Construction and land development			2,217			32		4,946			86
Commercial and industrial			2,968			18		4,509			106
Owner occupied real estate			299			4		1,013			30
Consumer and other			700			1		866			8
Total		$	22,049		$	654	$	26,120		$	786

With an allowance recorded:
Commercial real estate	$	4,565	$	71	$	7,488	$	259
Construction and land development		445		-		1,305		-
Commercial and industrial		3,628		42		3,454		35
Owner occupied real estate		3,201		110		2,315		96
Consumer and other		87		-		73		-
Total	$	11,926	$	223	$	14,635	$	390

Total:
Commercial real estate	$	20,430	$	670	$	22,274	$	815
Construction and land development		2,662		32		6,251		86
Commercial and industrial		6,596		60		7,963		141
Owner occupied real estate		3,500		114		3,328		126
Consumer and other		787		1		939		8
Total	$	33,975	$	877	$	40,755	$	1,176

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately $480,000 and $545,000 for the nine months ended September 30, 2013 and 2012, respectively.

17

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 and nine months ended September 30, 2013 and September 30, 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 September 30, 2013
Allowance for loan losses:
Beginning balance:		$	3,581			$	2,502			$	1,997			$	986			$	191			$	14		$	61			$	9,332
Charge-offs			(882	)			(5	)			-				(2	)			-				-			-				(889	)
Recoveries			-				-				10				-				1				-			-				11
Provisions (credits)			41				(473	)			(174	)			(17	)			20				-			853				250
Ending balance		$	2,740			$	2,024			$	1,833			$	967			$	212			$	14		$	914			$	8,704
Three months ended September 30, 2012
Allowance for loan losses:
Beginning balance:		$	3,961			$	1,416			$	1,816			$	1,626			$	134			$	16		$	416			$	9,385
Charge-offs			(133	)			-				(303	)			-				(1	)			-			-				(437	)
Recoveries			-				-				-				-				-				-			-				-
Provisions (credits)			794				(173	)			37				335				55				2			(200	)			850
Ending balance		$	4,622			$	1,243			$	1,550			$	1,961			$	188			$	18		$	216			$	9,798

(dollars in thousands)	Commercial Real Estate				Construction and Land Development				Commercial and Industrial				Owner Occupied Real Estate				Consumer and Other				Residential Mortgage				Unallocated			Total
Nine months ended September 30, 2013
Allowance for loan losses:
Beginning balance:		$	3,979			$	1,273			$	1,880			$	1,967			$	234			$	17			$	192		$	9,542
Charge-offs			(1,291	)			(60	)			(361	)			(321	)			(75	)			-				-			(2,108	)
Recoveries			54				-				15				-				26				-				-			95
Provisions (credits)			(2	)			811				299				(679	)			27				(3	)			722			1,175
Ending balance		$	2,740			$	2,024			$	1,833			$	967			$	212			$	14			$	914		$	8,704
Nine months ended September 30, 2012
Allowance for loan losses:
Beginning Balance:		$	7,372			$	558			$	1,928			$	1,963			$	113			$	23			$	93		$	12,050
Charge-offs			(899	)			(921	)			(1,063	)			-				(102	)			-				-			(2,985	)
Recoveries			-				105				-				-				28				-				-			133
Provisions (credits)			(1,851	)			1,501				685				(2	)			149				(5	)			123			600
Ending balance		$	4,622			$	1,243			$	1,550			$	1,961			$	188			$	18			$	216		$	9,798

18

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 September 30, 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
September 30, 2013
Allowance for loan losses:
Individually evaluated for impairment		$	134		$	217		$	815		$	444		$	9		$	-		$	-		$	1,619
Collectively evaluated for impairment			2,606			1,807			1,018			523			203			14			914			7,085
Total allowance for loan losses		$	2,740		$	2,024		$	1,833		$	967		$	212		$	14		$	914		$	8,704
Loans receivable:
Loans evaluated individually		$	10,767		$	1,618		$	6,338		$	3,467		$	662		$	-		$	-		$	22,852
Loans evaluated collectively			317,719			23,620			106,964			147,127			29,933			2,374			-			627,737
Total loans receivable		$	328,486		$	25,238		$	113,302		$	150,594		$	30,595		$	2,374		$	-		$	650,589

(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

19

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 September 30, 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 September 30, 2013
Commercial real estate	$	-	$	3,463	$	987	$	4,450	$	324,036	$	328,486	$	-
Construction and land development		-		-		1,618		1,618		23,620		25,238		-
Commercial and industrial		-		2,978		4,023		7,001		106,301		113,302		-
Owner occupied real estate		340		960		205		1,505		149,089		150,594		-
Consumer and other		40		-		662		702		29,893		30,595		-
Residential mortgage		-		-		-		-		2,374		2,374		-
Total	$	380	$	7,401	$	7,495	$	15,276	$	635,313	$	650,589	$	-

(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

20

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 September 30, 2013 and December 31, 2012:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
At September 30, 2013:
Commercial real estate	$	301,011	$	16,150	$	11,325	$	-	$	328,486
Construction and land development		23,620		-		1,618		-		25,238
Commercial and industrial		105,765		1,164		6,373		-		113,302
Owner occupied real estate		146,309		1,160		3,125		-		150,594
Consumer and other		29,600		75		920		-		30,595
Residential mortgage		2,374		-		-		-		2,374
Total	$	608,679	$	18,549	$	23,361	$	-	$	650,589

(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 September 30, 2013 and December 31, 2012:

(dollars in thousands)	September 30, 2013			December 31, 2012
Commercial real estate		$	987		$	7,987
Construction and land development			1,618			1,342
Commercial and industrial			4,023			4,693
Owner occupied real estate			205			968
Consumer and other			662			856
Residential mortgage			-			-
Total		$	7,495		$	15,846

Troubled Debt Restructurings

A modification to the contractual terms of a loan which results in a concession to a borrower that is experiencing financial difficulty is classified as a troubled debt restructuring (“TDR”).  The concessions made in a TDR are those that would not otherwise be considered for a borrower or collateral with similar risk characteristics.  A TDR is typically the result of efforts to minimize potential losses that may be incurred during loan workouts, foreclosure, or repossession of collateral at a time when collateral values are declining.  Concessions include a reduction in interest rate below current market rates, a material extension of time to the loan term or amortization period, partial forgiveness of the outstanding principal balance, acceptance of interest only payments for a period of time, or a combination of any of these conditions.

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The following table summarizes the balance of outstanding TDRs at September 30, 2013 and December 31, 2012:

(dollars in thousands)	Number of Loans		Accrual Status			Non- Accrual Status			Total TDRs
September 30, 2013
Commercial real estate		1		$	300		$	-		$	300
Construction and land development		-			-			-			-
Commercial and industrial		1			2,201			-			2,201
Owner occupied real estate		1			1,904			-			1,904
Consumer and other		-			-			-			-
Residential mortgage		-			-			-			-
Total		3		$	4,405		$	-		$	4,405
December 31, 2012
Commercial real estate		1		$	1,261		$	-		$	1,261
Construction and land development		1			2,069			-			2,069
Commercial and industrial		1			2,248			-			2,248
Owner occupied real estate		1			1,933			-			1,933
Consumer and other		-			-			-			-
Residential mortgage		-			-			-			-
Total		4		$	7,511		$	-		$	7,511

All TDRs are considered impaired and are therefore individually evaluated for impairment in the calculation of the allowance for loan losses.  Some TDRs may not ultimately result in the full collection of principal and interest as restructured and could lead to potential incremental losses.  These potential incremental losses would be factored into our estimate of the allowance for loan losses.  The level of any subsequent defaults will likely be affected by future economic conditions.  There were no loan modifications that were considered TDRs during the three and nine months ended September 30, 2013.

The Company modified one owner occupied real estate loan during the three and nine month periods ended September 30, 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.

After a loan is determined to be a TDR, we continue to track its performance under the most recent restructured terms.  There were no TDRs that subsequently defaulted during the nine month period ended September 30, 2013 nor the twelve month period ended December 31, 2012.

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 sales 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.

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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 September 30, 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
September 30, 2013
Collateralized mortgage obligations	$	120,418	$	-	$	120,418	$	-
Mortgage-backed securities		15,586		-		15,586		-
Municipal securities		8,002		-		8,002		-
Corporate bonds		32,993		-		29,987		3,006
Asset-backed securities		19,558		-		19,558		-
Trust Preferred Securities		3,048		-		-		3,048
Other securities		117		-		117		-
Securities Available for Sale	$	199,722	$	-	$	193,668	$	6,054

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

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The following table presents a reconciliation of the securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2013 and 2012:

	Three Months Ended September 30, 2013					Three Months Ended September 30, 2012
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities			Corporate Bonds		Trust Preferred Securities			Corporate Bonds
Balance,  July 1st	$	3,162		$	3,006	$	3,175		$	3,007
Unrealized gains		308			-		255			1
Paydowns		(422	)		-		(314	)		-
Impairment charges on Level 3		-			-		-			-
Balance,  September 30th	$	3,048		$	3,006	$	3,116		$	3,008

	Nine Months Ended September 30, 2013						Nine Months Ended September 30, 2012
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities			Corporate Bonds			Trust Preferred Securities			Corporate Bonds
Balance,  January 1st	$	3,187		$	3,007		$	3,410		$	3,004
Unrealized gains (losses)		301			(1	)		144			4
Paydowns		(440	)		-			(407	)		-
Impairment charges on Level 3		-			-			(31	)		-
Balance, September 30th	$	3,048		$	3,006		$	3,116		$	3,008

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 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
September 30, 2013:
Impaired loans	$	8,356	$	-	$	-	$	8,356
Other real estate owned		3,323		-		-		3,323
SBA servicing assets		3,075		-		-		3,075
December 31, 2012:
Impaired loans	$	19,876	$	-	$	-	$	19,876
Other real estate owned		3,642		-		-		3,642
SBA servicing assets		2,340		-		-		2,340

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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 September 30, 2013
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans	$	8,356	Fair Value of Collateral (1)	Appraised Value (2)	0% - 42% (26%) (4)
Other real estate owned	$	3,323	Fair Value of Collateral (1)	Appraised Value (2) Sales Price	7% - 26% (20%) (4)
SBA Servicing Assets	$	3,075	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 presentedas 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 and nine months ended September 30, 2013 and 2012:

	Three Months Ended September 30,					Nine Months Ended September 30,
(dollars in thousands)	2013			2012		2013			2012
Beginning balance	$	2,904		$	1,630	$	2,340		$	1,102
Additions		283			263		911			741
Fair value adjustments		(112	)		18		(176	)		68
Ending balance	$	3,075		$	1,911	$	3,075		$	1,911

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 September 30, 2013 and December 31, 2012.

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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 September 30, 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 than would otherwise exist.

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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. 

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.

Also included in Level 3 investment securities classified as available for sale is a single-issuer corporate bond 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 September 30, 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.

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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 June 30, 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)	September 30, 2013				December 31, 2012
SBA Servicing Asset
Fair Value of SBA Servicing Asset		$	3,075			$	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	21.3 years				21.4 years
Prepayment Speed			6.42	%			6.59	%
Effect on fair value of a 10% increase		$	(71	)		$	(55	)
Effect on fair value of a 20% increase			(139	)			(107	)
Weighted Average Discount Rate			14.01	%			14.23	%
Effect on fair value of a 10% increase		$	(146	)		$	(115	)
Effect on fair value of a 20% increase			(282	)			(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 its fair value.

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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.

29

The estimated fair values of the Company’s financial instruments were as follows at September 30, 2013 and December 31, 2012:

	Fair Value Measurements at September 30, 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	$	44,305	$	44,305		$	44,305	$	-	$	-
Investment securities available for sale		199,722		199,722			-		193,668		6,054
Investment securities held to maturity		69		69			-		69		-
Restricted stock		1,570		1,570			-		1,570		-
Loans held for sale		7,130		7,728			-		-		7,728
Loans receivable, net		641,533		634,657			-		-		634,657
SBA servicing assets		3,075		3,075			-		-		3,075
Accrued interest receivable		2,920		2,920			-		2,920		-
Financial liabilities:
Deposits
Demand, savings and money market	$	761,926	$	761,926		$	-	$	761,926	$	-
Time		83,577		84,036			-		84,036		-
Subordinated debt		22,476		17,960			-		-		17,960
Accrued interest payable		309		309			-		309		-
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

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (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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In June 2012, the federal bank regulatory agencies issued a series of proposed revisions to the agencies’ capital adequacy guidelines and prompt corrective action rules, which were designed to enhance such requirements and implement the revised standards of the Basel Committee on Banking Supervision, commonly referred to as Basel III.  In July 2013, the federal bank regulatory agencies adopted final rules, which differ in certain respects from the June 2012 proposals.

The July 2013 final rules generally implement higher minimum capital requirements, add a new common equity tier 1 capital requirement, and establish criteria that instruments must meet to be considered common equity tier 1 capital, additional tier 1 capital or tier 2 capital.  The new minimum capital to risk-adjusted assets requirements are a common equity tier 1 capital ratio of 4.5% (6.5% to be considered “well capitalized”) and a tier 1 capital ratio of 6.0%, increased from 4.0% (and increased from 6.0% to 8.0% to be considered “well capitalized”); the total capital ratio remains at 8.0% under the new rules (10.0% to be considered “well capitalized”).  Under the new rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity tier 1 capital above its minimum risk-based capital requirements in an amount greater than 2.5% of total risk-weighted assets.  The new minimum capital requirements are effective on January 1, 2015.  The capital contribution buffer requirements phase in over a three-year period beginning January 1, 2016.

The July 2013 final rules include three significant changes from the June 2012 proposals:  (i) the final rules do not change the current risk weighting for residential mortgage exposures; (ii) the final rules permit institutions, other than certain large institutions, to elect to continue to treat certain components of accumulated other comprehensive income as permitted under the current general risk-based capital rules, and not reflect unrealized gains and losses on available-for-sale securities in common equity tier 1 calculations; and (iii) the final rules permit institutions with less than $15.0 billion in assets to grandfather certain non-qualifying capital instruments (including trust preferred securities) issued prior to May 19, 2009 into tier 1 capital.

The Company and the Bank will continue to analyze these new rules and their effects on the business, operations and capital levels of the Company and the Bank.

Financial Condition

Assets

Total assets decreased by $45.8 million, or 4.6%, to $942.9 million at September 30, 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, interest bearing deposits and federal funds sold comprise this category, which consists of our most liquid assets. The aggregate amount in these three categories decreased by $83.7 million, to $44.3 million at September 30, 2013, from $128.0 million at December 31, 2012.  This decrease was primarily caused by a $43.7 million decrease in deposit balances along with a $32.3 million increase in outstanding loan balances during the first nine 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 $7.1 million at September 30, 2013 as compared to $82,000 at December 31, 2012.  This increase was driven by the timing of settlement on three loans which closed shortly after the quarter end.  Loans held for sale, as a percentage of total Company assets, were less than 1% at September 30, 2013.

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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 September 30, 2013.  Loans made to one individual customer, even if secured by different collateral, are aggregated for purposes of the lending limit.

Loans increased $32.3 million, or 5.2%, to $650.2 million at September 30, 2013, compared to $617.9 million at December 31, 2012, driven by an increase in loan demand in the commercial and industrial and owner occupied real estate categories resulting in higher originations during the first nine 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 collateralized mortgage obligations (CMO), agency mortgage-backed securities (MBS), municipal securities, corporate bonds, asset-backed securities (ABS), and pooled trust preferred securities (CDO). Available-for-sale securities totaled $199.7 million at September 30, 2013, compared to $189.3 million at December 31, 2012.  The increase was primarily due to the purchase of investment securities considered available for sale totaling $50.1 million partially offset by the proceeds from the sales and maturities of available for sale securities totaling $35.3 million during the first nine months of 2013.  At September 30, 2013, the portfolio had a net unrealized loss of $2.8 million compared to a net unrealized gain of $1.6 million at December 31, 2012.  The change in value of the investment portfolio, from an unrealized gain to an unrealized loss, was driven by an increase in market interest rates and widening asset spreads during the second and third quarters of 2013.

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 September 30, 2013 and December 31, 2012, securities held to maturity totaled $69,000 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 September 30, 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”).

At September 30, 2013 and December 31, 2012, the investment in FHLB of Pittsburgh capital stock totaled $1.4 million and $3.7 million, respectively.  At both September 30, 2013 and December 31, 2012, ACBB capital stock totaled $143,000.  During the first nine months of 2013, FHLB repurchased 61% 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. All remaining capital stock in excess of the minimum required investment was repurchased by the FHLB of Pittsburgh during the first nine months of 2013.  The FHLB also issued a dividend payment during the first, second and third quarter of 2013.

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Bank Owned Life Insurance

At September 30, 2013, the Company carried no investment in bank owned life insurance asset, compared to a $10.5 million asset at December 31, 2012.  The decrease was due to surrender proceeds of $10.5 million received as a result of the Company’s decision to liquidate this investment in the second quarter of 2013.

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 $43.7 million, or 4.9%, to $845.5 million at September 30, 2013 from $889.2 million at December 31, 2012.  The decrease was primarily the result of a reduction in certificate of deposit balances totaling $39.7 million. This decrease was primarily the result of maturities of internet-based certificates of deposit which the Company considers non-core deposits and intentionally decided not to renew.

Shareholders’ Equity

Total shareholders’ equity decreased $2.8 million to $67.1 million at September 30, 2013, compared to $69.9 million at December 31, 2012, primarily due to a reduction in accumulated other comprehensive income associated with unrealized losses in the investment securities portfolio during the first nine months of 2013.  The shift in market value of the securities portfolio resulting in accumulated other comprehensive losses of $1.8 million at September 30, 2013 compared to accumulated other comprehensive income of $1.0 million at December 31, 2012 was primarily driven by an increase in market interest rates and widening asset spreads during the period.

Results of Operations

Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012

The Company reported a net loss of $2.2 million, or $0.09 per share, for the three months ended September 30, 2013, compared to net income of $398,000, or $0.02 per share, for the three months ended September 30, 2012.  Earnings for the three month period ended September 30, 2013 were impacted by a one-time charge of $1.9 million related to a settlement agreement in connection with litigation in which the Company was a defendant.  The Company had been vigorously contesting the claims in the litigation.  However, as a result of reversals of certain prior procedural rulings in the case, the Company concluded that it would be in its best interest to avoid further litigation by executing a settlement agreement.  This settlement releases the Company from all claims and actions related to this matter.

Net interest income was $8.2 million for the three month period ended September 30, 2013 and September 30, 2012.  Interest income decreased $273,000 for the three months ended September 30, 2013 compared to September 30, 2012. Interest expense decreased $323,000, or 22.5%, to $1.1 million for the three months ended September 30, 2013 compared to $1.4 million for the three months ended September 30, 2012. This decrease was primarily due to a 15 basis point decrease in the rate on average deposits outstanding to 0.39%.

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Non-interest income increased by $61,000 to $1.9 million during the three months ended September 30, 2013 compared to $1.8 million during the three months ended September 30, 2012.  The increase was primarily due to a $113,000 increase in loan advisory and servicing fees.  The Company recognized $1.1 million in gains on the sale of SBA loans for the three months ended September 30, 2013 and September 30, 2012.

Non-interest expenses increased $3.3 million to $12.1 million during the three months ended September 30, 2013 compared to $8.8 million during the three months ended September 30, 2012, due to the aforementioned legal settlement.  There was also an increase in foreclosed real estate expenses in the amount of $458,000 over the prior year period primarily driven by a writedown of one property based on the current appraised value.

Return on average assets and average equity was (0.93)% and (12.94)%, respectively, during the three months ended September 30, 2013 compared to 0.17% and 2.32%, respectively, for the three months ended September 30, 2012.

Nine Months Ended September 30, 2013 compared to September 30, 2012

The Company reported a net loss of $219,000, or $0.01 per share, for the nine months ended September 30, 2013 compared to net income of $2.7 million, or $0.10 per share, for the nine months ended September 30, 2012.  The decrease in net income was primarily driven by the one-time charge of $1.9 million related to a settlement agreement in connection with litigation in which the Company was a defendant.  The Company had been vigorously contesting the claims in the litigation.  However, as a result of reversals of certain prior procedural rulings in the case, the Company concluded that it would be in its best interest to avoid further litigation by executing a settlement agreement.  This settlement releases the Company from all claims and actions related to this matter.

Net interest income for the nine months ended September 30, 2013 increased $300,000 to $24.2 million compared to $23.9 million for the nine months ended September 30, 2012.  Interest income decreased $1.2 million, or 4.1%, due to decreases in yields on loans and investment securities and interest expense decreased $1.5 million, or 29.8%, primarily due to a 21 basis point decrease in the rate on average deposits outstanding.

Non-interest income increased $1.0 million to $7.0 million during the nine months ended September 30, 2013 as compared to $6.0 million during the nine months ended September 30, 2012 primarily due to an increase in gains recognized on the sale of SBA loans and increases in loan advisory and servicing fees.

Non-interest expenses increased $3.7 million to $30.3 million during the nine months ended September 30, 2013 as compared to $26.6 million during the nine months ended September 30, 2012, primarily due to the aforementioned legal settlement and an increase of $1.3 million in foreclosed real estate expenses.  Return on average assets and average equity from continuing operations were (0.03)% and (0.42)%, respectively, during the nine months ended September 30, 2013 compared to 0.37% and 5.42%, respectively, for the nine months ended September 30, 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 September 30, 2013							For the three months ended September 30, 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	$	58,532	$	40		0.27	%	$	88,996	$	54		0.24	%
Investment securities and restricted stock		197,283		1,183		2.40	%		190,441		1,428		3.00	%
Loans receivable		641,698		8,192		5.06	%		613,190		8,228		5.34	%
Total interest-earning assets		897,513		9,415		4.16	%		892,627		9,710		4.33	%
Other assets		45,652							56,814
Total assets	$	943,165						$	949,441
Interest-earning liabilities:
Demand – non-interest bearing	$	150,915						$	134,857
Demand – interest bearing		198,341		213		0.43	%		162,270		211		0.52	%
Money market & savings		410,402		425		0.41	%		416,038		572		0.55	%
Time deposits		85,576		197		0.91	%		138,148		370		1.07	%
Total deposits		845,234		835		0.39	%		851,313		1,153		0.54	%
Total interest-bearing deposits		694,319		835		0.48	%		716,456		1,153		0.64	%
Other borrowings		22,476		278		4.91	%		22,476		283		5.01	%
Total interest-bearing liabilities		716,795		1,113		0.62	%		738,932		1,436		0.77	%
Total deposits and other borrowings		867,710		1,113		0.51	%		873,789		1,436		0.65	%
Non interest-bearing other liabilities		7,313							7,409
Shareholders’ equity		68,142							68,243
Total liabilities and shareholders’ equity	$	943,165						$	949,441
Net interest income (2)			$	8,302						$	8,274
Net interest spread						3.54	%						3.56	%
Net interest margin (2)						3.67	%						3.69	%

(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 $76 and $98 for the three months ended September 30, 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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Average Balances and Net Interest Income

	For the nine months ended September 30, 2013							For the nine months ended September 30, 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	$	69,109	$	143		0.28	%	$	123,332	$	239		0.26	%
Investment securities and restricted stock		187,616		3,459		2.46	%		184,748		4,324		3.12	%
Loans receivable		632,369		24,297		5.14	%		604,245		24,570		5.43	%
Total interest-earning assets		889,094		27,899		4.20	%		912,325		29,133		4.27	%
Other assets		52,048							56,025
Total assets	$	941,142						$	968,350
Interest-earning liabilities:
Demand – non-interest bearing	$	145,475						$	135,079
Demand – interest bearing		183,445		615		0.45	%		135,461		567		0.56	%
Money market & savings		416,867		1,355		0.43	%		436,182		2,157		0.66	%
Time deposits		96,103		680		0.95	%		164,797		1,384		1.12	%
Total deposits		841,890		2,650		0.42	%		871,519		4,108		0.63	%
Total interest-bearing deposits		696,415		2,650		0.51	%		736,440		4,108		0.75	%
Other borrowings		22,476		834		4.96	%		22,526		852		5.05	%
Total interest-bearing liabilities		718,891		3,484		0.65	%		758,966		4,960		0.87	%
Total deposits and other borrowings		864,366		3,484		0.54	%		894,045		4,960		0.74	%
Non interest-bearing other liabilities		7,439							7,529
Shareholders’ equity		69,337							66,776
Total liabilities and shareholders’ equity	$	941,142						$	968,350
Net interest income (2)			$	24,415						$	24,173
Net interest spread						3.55	%						3.40	%
Net interest margin (2)						3.67	%						3.54	%

(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 $238 and $296 for the nine months ended September 30, 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 and nine months ended September 30, 2013, as compared to the three and nine months ended September 30, 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 September 30, 2013 vs. 2012									For the nine months ended September 30, 2013 vs. 2012
	Changes due to:									Changes due to:
(dollars in thousands)	Average Volume			Average Rate			Total Change			Average Volume			Average Rate			Total Change
Interest earned:
Federal funds sold and other interest-earning assets	$	(21	)	$	7		$	(14	)	$	(113	)	$	17		$	(96	)
Securities		43			(288	)		(245	)		53			(918	)		(865	)
Loans		326			(362	)		(36	)		990			(1,263	)		(273	)
Total interest-earning assets		348			(643	)		(295	)		930			(2,164	)		(1,234	)
Interest expense:
Deposits
Interest-bearing demand deposits		38			(36	)		2			161			(113	)		48
Money market and savings		(7	)		(140	)		(147	)		(57	)		(745	)		(802	)
Time deposits		(121	)		(52	)		(173	)		(487	)		(217	)		(704	)
Total deposit interest expense		(90	)		(228	)		(318	)		(383	)		(1,075	)		(1,458	)
Other borrowings		-			(5	)		(5	)		-			(18	)		(18	)
Total interest expense		(90	)		(233	)		(323	)		(383	)		(1,093	)		(1,476	)
Net interest income	$	438		$	(410	)	$	28		$	1,313		$	(1,071	)	$	242

Net Interest Income

The Company’s total tax equivalent interest income decreased $295,000, or 3.0%, to $9.4 million for the three months ended September 30, 2013 compared to $9.7 million for the three months ended September 30, 2012.  A $28.5 million increase in average loans receivable was offset by a 28 basis point decrease in loan yields and a 60 basis point decrease in investment securities yields for the three months ended September 30, 2013 as compared to September 30, 2012. For the nine months ended September 30, 2013, total tax equivalent interest income decreased $1.2 million, or 4.2%, to $27.9 million compared to $29.1 million for the nine months ended September 30, 2012.  The increase in average loans receivable of $28.1 million was offset by a 29 basis point decrease in loan yields and a 66 basis point decrease in investment securities yields for the nine months ended September 30, 2013 as compared to September 30, 2012. 

The Company’s total interest expense decreased $323,000, or 22.5%, to $1.1 million for the three months ended September 30, 2013 compared to $1.4 million for the three months ended September 30, 2012, as the Company continues to lower the rates paid on interest bearing deposit accounts.  Total interest expense for the nine months ended September 30, 2013 decreased $1.5 million, or 29.8%, to $3.5 million as compared to $5.0 million for the nine months ended September 30, 2012.  Average deposit balances decreased $6.1 million and $29.6 million for the three and nine months ended September 30, 2013 respectively, as a result of the Company’s retail focused, customer service strategy, which emphasizes the gathering of low-cost core deposits and has enabled the Company to reduce its dependence on wholesale funding sources like higher cost internet-based certificates of deposit.  The average rate paid on interest-bearing deposits decreased 16 basis points to 0.48%, and 24 basis points to 0.51%, for the three and nine months ended September 30, 2013, respectively, compared to 0.64% and 0.75% for the same prior year periods. Average time deposit balances declined $52.6 million and $68.7 million for the three and nine months ended September 30, 2013, respectively, primarily as a result of the intentional effort to reduce balances of non-core, internet-based CDs.  The maturity and rollover of higher cost core customer time deposits resulted in the decrease in the average rate paid on time deposits of 16 basis points to 0.91%, and 17 basis points to 0.95% for the three and nine months ended September 30, 2013 as compared to the same prior year periods.  Accordingly, rates on total interest-bearing liabilities decreased 15 and 22 basis points during the three and nine months ended September 30, 2013, respectively.

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The tax equivalent net interest margin decreased 2 basis points to 3.67% for the three months ended September 30, 2013, compared to 3.69% for the three months ended September 30, 2012 and the Company’s tax equivalent net interest income remained relatively flat with a slight increase of $28,000, or 0.3%, to $8.3 million for the three months ended September 30, 2013 and September 30, 2012.  For the nine months ended September 30, 2013, the tax equivalent net interest margin increased 13 basis points to 3.67%, compared to 3.54% for the nine months ended September 30, 2012 and the Company’s tax equivalent net interest income increased $242,000, or 1.0%, to $24.4 million for the nine months ended September 30, 2013 as compared $24.2 million for the nine months ended September 30, 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 a $250,000 provision for loan losses for the three months ended September 30, 2013 compared to a $850,000 provision for the three months ended September 30, 2012.  The reduced provision recorded during the third quarter of 2013 was primarily driven by an improvement in asset quality resulting in lower specific reserve allocations in the current period.  A provision of $1.2 million was recorded for the nine months ended September 30, 2013 as compared to a provision for loan losses in the amount of $600,000 for the nine months ended September 30, 2012.  The reduced provision recorded during the first nine months of 2012 was mainly attributable to a reduction in the general reserve component of the allowance for loan losses 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.

Non-Interest Income

Total non-interest income increased $61,000 to $1.9 million for the three months ended September 30, 2013, compared to $1.8 million for the three months ended September 30, 2012.  For the nine months ended September 30, 2013, total non-interest income increased $1.0 million to $7.0 million as compared to $6.0 million for the nine months ended September 30, 2012.  The increase for the three months ended September 30, 2013 was primarily due to an increase in loan advisory and servicing fees.  The increase for the nine months ended September 30, 2013 was primarily due to an increase in gains recognized on the sale of SBA loans along with an increase in loan advisory and servicing fees.

Non-Interest Expenses

Total non-interest expenses increased $3.3 million to $12.1 million for the three months ended September 30, 2013 as compared to $8.8 million for the three months ended September 30, 2012.  For the nine months ended September 30, 2013, total non-interest expenses increased $3.7 million to $30.3 million, compared to $26.6 million for the nine months ended September 30, 2012.  The increases were primarily due to the $1.9 million one-time charge related to a legal settlement and an increase of $1.3 million in other real estate owned expenses, primarily due to writedowns on foreclosed properties.

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Benefit for Income Taxes

The Company recorded a benefit for income taxes of $18,000 for the three months ended September 30, 2013, compared to a $28,000 benefit for the three months ended September 30, 2012.  For the nine months ended September 30, 2013, the Company recorded a benefit of $68,000 compared to a benefit of $90,000 for the nine months ended September 30, 2012.  The $68,000 benefit recorded during the first nine months of 2013 was the net result of a tax benefit in the amount of $275,000 calculated on the net loss 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 $207,000.  The effective tax rates for the three-month periods ended September 30, 2013 and 2012 were 37% and 18%, respectively, and for the nine month period ended September 30, 2013 and 2012 were 96% and 27%, 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 September 30, 2013 and December 31, 2012.

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. 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 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 for tax purposes on 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.

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The net deferred tax asset balance before consideration of a valuation allowance was $19.6 million as of September 30, 2013 and $17.5 million as of December 31, 2012.  After assessment of all available tax planning strategies, the Company determined that a partial valuation allowance in the amount of $14.1 million as of September 30, 2013 and $13.9 million as of December 31, 2012 should be recorded.

The deferred tax asset will continue to be analyzed on a quarterly basis for changes affecting realizability.  When the determination is made to include projections of future taxable income as a factor in recovering the deferred tax asset, 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 $100.1 million and $99.7 million, and standby letters of credit of approximately $3.0 million and $4.3 million, at September 30, 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 $100.1 million of commitments to extend credit at September 30, 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 September 30, 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 September 30, 2013:
Total risk based capital
Republic	$	95,674		12.12	%	$	63,163		8.00	%	$	78,954		10.00	%
Company		96,213		12.18	%		63,217		8.00	%		-		-
Tier one risk based capital
Republic		86,970		11.02	%		31,581		4.00	%		47,372		6.00	%
Company		87,509		11.07	%		31,608		4.00	%		-		-
Tier one leveraged capital
Republic		86,970		9.26	%		37,548		4.00	%		46,935		5.00	%
Company		87,509		9.31	%		37,599		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 leveraged 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.

42

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.

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 $44.3 million at September 30, 2013, compared to $128.0 million at December 31, 2012.  Loan maturities and repayments are another source of asset liquidity. At September 30, 2013, Republic estimated that more than $40.0 million of loans would mature or repay in the six-month period ending March 31, 2014. Additionally, a significant portion of its investment securities are available to satisfy liquidity requirements if necessary.  At September 30, 2013, the Company had outstanding commitments (including unused lines of credit and letters of credit) of $103.1 million. Certificates of deposit scheduled to mature in one year totaled $59.0 million at September 30, 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 $349.6 million as of September 30, 2013.  As of September 30, 2013 and December 31, 2012, the Company had no outstanding term borrowings with the FHLB.  The Company had no short-term borrowings at both September 30, 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 September 30, 2013 and December 31, 2012.

Investment Securities Portfolio

At September 30, 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 $199.7 million and $189.3 million as of September 30, 2013 and December 31, 2012, respectively.  At September 30, 2013 and December 31, 2012, the portfolio had net unrealized losses of $2.8 million and net unrealized gains of $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 September 30, 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):

	September 30, 2013		December 31, 2012
Loans accruing, but past due 90 days or more	$	-	$	202
Non-accrual loans		7,495		15,846
Total non-performing loans(1)		7,495		16,048
Other real estate owned		5,951		8,912
Total non-performing assets(1)	$	13,446	$	24,960

Non-performing loans as a percentage of total loans, net  of unearned income(1)	1.15	%	2.60	%
Non-performing assets as a percentage of total assets	1.43	%	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.

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Non-performing assets have decreased substantially during the first nine months of 2013.  The Company has reduced non-performing asset balances by $11.5 million, or 46%, as of September 30, 2013 when compared to December 31, 2012.  Non-accrual loans decreased $8.3 million to $7.5 million at September 30, 2013, from $15.8 million at December 31, 2012. This decrease was primarily the result of payoffs in the amount of $6.7 million and charge-offs of $2.1 million during the first nine months of 2013. 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 September 30, 2013 and December 31, 2012, all identified impaired loans are internally classified and individually evaluated for impairment in accordance with the guidance under ASC 310.

Republic had delinquent loans as follows: (i) 30 to 59 days past due, in the aggregate principal amount of $380,000 and $1.1 million at September 30, 2013 and December 31, 2012, respectively; (ii) 60 to 89 days past due, at September 30, 2013 and December 31, 2012, in the aggregate principal amount of $7.4 and $27.8 million, respectively. 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 $2.9 million to $6.0 million at September 30, 2013 from $8.9 million at December 31, 2012 primarily due to the sale of one foreclosed property and writedowns on three other foreclosed properties during the first nine months of 2013.

  The following table presents a reconciliation of other real estate owned for the nine months ended September 30, 2013 and the year ended December 31, 2012:

(dollars in thousands)	September 30, 2013			December 31, 2012
Beginning Balance, January 1st	$	8,912		$	6,479
Additions		246			2,907
Valuation adjustments		(1,454	)		(140	)
Dispositions		(1,753	)		(334	)
Ending Balance	$	5,951		$	8,912

At September 30, 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 (“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 other available 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.

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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.

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.

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An analysis of the allowance for loan losses for the nine months ended September 30, 2013 and 2012, and the twelve months ended December 31, 2012 is as follows (dollars in thousands):

(dollars in thousands)	For the nine months ended September 30, 2013		For the twelve months ended December 31, 2012		For the nine months ended September 30, 2012
Balance at beginning of period	$	9,542	$	12,050	$	12,050
Charge-offs:
Commercial real estate		1,291		1,582		899
Construction and land development		60		1,004		921
Commercial and industrial		361		1,304		1,063
Owner occupied real estate		321		-		-
Consumer and other		75		102		102
Total charge-offs		2,108		3,992		2,985
Recoveries:
Commercial real estate		54		-		-
Construction and land development		-		105		105
Commercial and industrial		15		-		-
Owner occupied real estate		-		-		-
Consumer and other		26		29		28
Total recoveries		95		134		133
Net charge-offs		2,013		3,858		2,852
Provision for loan losses		1,175		1,350		600
Balance at end of period	$	8,704	$	9,542	$	9,798

Average loans outstanding(1)	$	632,369		$	609,943		$	604,245
As a percent of average loans:(1)
Net charge-offs (annualized)		0.43	%		0.63	%		0.63	%
Provision for loan losses (annualized)		0.25	%		0.22	%		0.13	%
Allowance for loan losses		1.38	%		1.56	%		1.62	%
Allowance for loan losses to:
Total loans, net of unearned income		1.34	%		1.54	%		1.57	%
Total non-performing loans		116.13	%		59.46	%		60.66	%

(1)Includes non-accruing loans.

The Company recorded a provision for loan losses in the amount of $1.2 million during the nine month period ended September 30, 2013 compared to a provision of 600,000 for the nine month period ended September 30, 2012. During the first nine months of 2013, decreases in allowances required for loans individually evaluated for impairment were primarily the result of a reduction in the balance of loans individually evaluated for impairment of $18.2 million to $22.9 million at September 30, 2013 from $41.0 million at December 31, 2012. The provision recorded in the first nine months of 2012 was driven by a reduction in the 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 previously.

The allowance for loan losses as a percentage of non-performing loans (coverage ratio) was 116.13% at September 30, 2013, compared to 59.46% at December 31, 2012 and 60.7% at September 30, 2012. Total non-performing loans were $7.5 million, $16.0 million and $16.2 million at September 30, 2013, December 31, 2012 and September 30, 2012, respectively.  The significant increase in the coverage ratio at September 30, 2013 was driven by a $11.5 million reduction in nonperforming assets during the first nine months of 2013.

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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 $2.0 million during the nine month period ended September 30, 2013, compared to $2.9 million during the nine month period ended September 30, 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 $6.4 million at September 30, 2013 compared to $11.3 million at December 31, 2012.

The following table provides additional analysis of partially charged-off loans.

	September 30, 2013			December 31, 2012
Total nonperforming loans	$	7,495		$	16,048
Nonperforming and impaired loans with partial charge-offs		6,406			11,284
Ratio of nonperforming loans with partial charge-offs to total loans		0.99	%		1.83	%
Ratio of nonperforming loans with partial charge-offs to total nonperforming loans		85.47	%		70.31	%
Coverage ratio net of nonperforming loans with partial charge-offs		135.87	%		84.56	%

The Company’s charge-off policy is reviewed on an annual basis and updated as necessary.  During the nine month period ended September 30, 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

48

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.

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 September 30, 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 September 30, 2013.

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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.

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 Form 10-Q for the quarter ended June 30, 2013.  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 Form 10-Q 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.

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.

ITEM 5.  OTHER INFORMATION

None.

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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
3.1	Amended and Restated Articles of Incorporation of Republic First Bancorp, Inc.	Incorporated by reference to Form 8-K filed May 13, 2010
3.2	Amended and Restated By-Laws of Republic First Bancorp, Inc.	Incorporated by reference to Form S-1 filed April 23, 2010  (333-166286)
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 September 30, 2013, formatted in XBRL (eXtensible Business Reporting Language); (i) Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, (ii) Consolidated Statements of Income for the three and nine months ended September 30, 2013 and 2012, (iii)  Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012, (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012, (v) Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2013  and 2012, and (vi) Notes to Consolidated Financial Statements.

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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:  November 12, 2013	By:	/s/ Harry D. Madonna
		Harry D. Madonna
		Chairman, President and Chief Executive Officer (principal executive officer)
Date:  November 12, 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-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 September 30, 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: November 12, 2013	/s/ Harry D. Madonna
	Chairman, President and Chief Executive Officer

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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 September 30, 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: November 12, 2013	/s/ Frank A. Cavallaro
	Executive Vice President and Chief Financial Officer

54

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 September 30, 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: November 12, 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.

55

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 September 30, 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: November 12, 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.

56

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2013

Summary Of Significant Accounting Policies [Abstract]

Summary of Assumptions

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 55.08%		53.12% to 54.49%
Risk-free interest rate(3)	1.28% to 2.02%		1.01% to 1.61%
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.

Summary of Stock-Based Compensation

Information regarding stock based compensation for the nine months ended September 30, 2013 and 2012 is set forth below:

	2013		2012
Stock based compensation expense recognized	$	237,000	$	290,000
Number of unvested stock options		893,563		795,600
Fair value of unvested stock options	$	1,210,840	$	1,426,878
Amount remaining to be recognized as expense	$	597,709	$	548,287

Calculation of EPS

The calculation of EPS for the three and nine months ended September 30, 2013 and 2012 is as follows (in thousands, except per share amounts):

	Three Months Ended September  30,					Nine Months Ended September 30,
	2013			2012		2013			2012
Net income (loss) - basic and diluted	$	(2,222	)	$	398	$	(219	)	$	2,710
Weighted average shares outstanding		25,973			25,973		25,973			25,973
Net income (loss) per share – basic	$	(0.09	)	$	0.02	$	(0.01	)	$	0.10
Weighted average shares outstanding (including dilutive CSEs)		25,973			25,996		25,973			25,991
Net income (loss) per share – diluted	$	(0.09	)	$	0.02	$	(0.01	)	$	0.10

XML

Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Interest income:
Interest and fees on taxable loans	$ 8,060	$ 8,131	$ 23,888	$ 24,265
Interest and fees on tax-exempt loans	86	63	266	198
Interest and dividends on taxable investment securities	1,097	1,246	3,187	3,784
Interest and dividends on tax-exempt investment securities	56	118	177	351
Interest on federal funds sold and other interest-earning assets	40	54	143	239
Total interest income	9,339	9,612	27,661	28,837
Interest expense:
Demand- interest bearing	213	211	615	567
Money market and savings	425	572	1,355	2,157
Time deposits	197	370	680	1,384
Other borrowings	278	283	834	852
Total interest expense	1,113	1,436	3,484	4,960
Net interest income	8,226	8,176	24,177	23,877
Provision for loan losses	250	850	1,175	600
Net interest income after provision for loan losses	7,976	7,326	23,002	23,277
Non-interest income:
Loan advisory and servicing fees	446	333	1,220	873
Gain on sales of SBA loans	1,106	1,141	3,863	3,337
Service fees on deposit accounts	270	234	769	670
Legal settlements	0	50	238	155
Gain on sale of investment securities	0	0	703	774
Other-than-temporary impairment losses	0	0	0	(33)
Portion recognized in other comprehensive income (before taxes)	0	0	0	2
Net impairment loss on investment securities	0	0	0	(31)
Bank owned life insurance income	0	20	13	55
Other non-interest income	70	53	199	143
Total non-interest income	1,892	1,831	7,005	5,976
Non-interest expenses:
Salaries and employee benefits	4,486	4,008	13,276	12,105
Occupancy	941	875	2,661	2,591
Depreciation and amortization	671	492	1,626	1,516
Legal	544	547	1,411	2,334
Other real estate owned	745	287	1,771	489
Advertising	103	57	321	207
Data processing	299	288	715	863
Insurance	155	183	466	493
Professional fees	358	326	1,040	917
Regulatory assessments and costs	327	343	912	1,032
Taxes, other	63	181	566	718
Legal settlement	1,875	0	1,875	0
Other operating expenses	1,541	1,200	3,654	3,368
Total non-interest expense	12,108	8,787	30,294	26,633
Income (loss) before benefit for income taxes	(2,240)	370	(287)	2,620
Benefit for income taxes	(18)	(28)	(68)	(90)
Net income (loss)	$ (2,222)	$ 398	$ (219)	$ 2,710
Net income (loss) per share:
Basic (in dollars per share)	$ (0.09)	$ 0.02	$ (0.01)	$ 0.10
Diluted (in dollars per share)	$ (0.09)	$ 0.02	$ (0.01)	$ 0.10

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

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.

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 slow pace of recovery in the current economic environment, the Company has decided to currently exclude future taxable income from its analysis of 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 September 30, 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 55.08%		53.12% to 54.49%
Risk-free interest rate(3)	1.28% to 2.02%		1.01% to 1.61%
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 nine months ended September 30, 2013 and 2012, 127,287 shares and 61,000 shares vested, respectively.  Expense is recognized ratably over the period required to vest.  At September 30, 2013, the intrinsic value of the 1,199,780 options outstanding was $562,985, while the intrinsic value of the 306,217 exercisable (vested) options was $52,294.  During the nine months ended September 30, 2013, 84,000 options were forfeited with a weighted average grant date fair value of $289,760.

Information regarding stock based compensation for the nine months ended September 30, 2013 and 2012 is set forth below:

	2013		2012
Stock based compensation expense recognized	$	237,000	$	290,000
Number of unvested stock options		893,563		795,600
Fair value of unvested stock options	$	1,210,840	$	1,426,878
Amount remaining to be recognized as expense	$	597,709	$	548,287

The remaining amount of $597,709 will be recognized as expense through June 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 and nine months ended September 30, 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 and nine months ended September 30, 2013 and 2012 is as follows (in thousands, except per share amounts):

	Three Months Ended September  30,					Nine Months Ended September 30,
	2013			2012		2013			2012
Net income (loss) - basic and diluted	$	(2,222	)	$	398	$	(219	)	$	2,710
Weighted average shares outstanding		25,973			25,973		25,973			25,973
Net income (loss) per share – basic	$	(0.09	)	$	0.02	$	(0.01	)	$	0.10
Weighted average shares outstanding (including dilutive CSEs)		25,973			25,996		25,973			25,991
Net income (loss) per share – diluted	$	(0.09	)	$	0.02	$	(0.01	)	$	0.10

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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Summary of Significant Accounting Policies (Calculation Of EPS) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Summary Of Significant Accounting Policies [Abstract]
Net income (loss) (basic and diluted)	$ (2,222)	$ 398	$ (219)	$ 2,710
Weighted average shares outstanding (in shares)	25,973	25,973	25,973	25,973
Net income (loss) per share - basic (in dollars per share)	$ (0.09)	$ 0.02	$ (0.01)	$ 0.10
Weighted average shares outstanding (including dilutive CSEs) (in shares)	25,973	25,996	25,973	25,991
Net income (loss) per share - diluted	$ (0.09)	$ 0.02	$ (0.01)	$ 0.10

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2013

Investment Securities [Abstract]

Unrealized Gain (Loss) on Investments

A summary of the amortized cost and market value of securities available for sale and securities held to maturity at September 30, 2013 and December 31, 2012 is as follows:

	At September 30, 2013
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Collateralized mortgage obligations	$	122,657	$	521	$	(2,760	)	$	120,418
Mortgage-backed securities		15,007		634		(55	)		15,586
Municipal securities		8,004		97		(99	)		8,002
Corporate bonds		32,188		805		-			32,993
Asset-backed securities		19,234		324		-			19,558
Trust preferred securities		5,345		-		(2,297	)		3,048
Other securities		115		2		-			117
Total securities available for sale	$	202,550	$	2,383	$	(5,211	)	$	199,722
U.S. Government agencies	$	1	$	-	$	-		$	1
Other securities		68		-		-			68
Total securities held to maturity	$	69	$	-	$	-		$	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

The maturity distribution of the amortized cost and estimated market value of investment securities by contractual maturity at September 30, 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	$	18,899	$	19,173	$	48	$	48
After 1 year to 5 years		64,862		64,836		21		21
After 5 years to 10 years		110,860		107,567		-		-
After 10 years		7,929		8,146		-		-
Total	$	202,550	$	199,722	$	69	$	69

Schedule of Credit-Related Impairment Losses on Securities

The following table presents a roll-forward of the balance of credit-related impairment losses on securities held at September 30, 2013 and 2012 for which a portion of OTTI was recognized in other comprehensive income:

	September 30,
(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		-		31
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, September 30th	$	3,959	$	3,956

Schedule of Unrealized Loss on Investments

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 September 30, 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		$	80,855	$	2,760	$	-	$	-	$	80,855	$	2,760
Mortgage-backed securities			1,160		55		-		-		1,160		55
Municipal securities			2,344		99		-		-		2,344		99
Corporate bonds			-		-		-		-		-		-
Trust preferred securities			-		-		3,048		2,297		3,048		2,297
U.S. Government Agencies			1		-		-		-		1		-
Total		$	84,360	$	2,914	$	3,048	$	2,297	$	87,408	$	5,211

	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

The following table provides additional detail about the trust preferred securities held in the portfolio as of September 30, 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	)	Caa2			6		18	%		0.37	%	$	-
Preferred Term     Securities VII	Mezzanine Notes		1,056		780		(276	)		C		12		53			0.34			2,173
TPREF Funding II	Class B Notes		739		362		(377	)		C		16		44			0.36			260
TPREF Funding III	Class B2 Notes		1,521		782		(739	)		C		17		34			0.34			480
Trapeza CDO I, LLC	Class C1 Notes		556		271		(285	)		C		9		49			0.38			470
ALESCO Preferred     Funding IV	Class B1 Notes		604		361		(243	)		C		38		14			0.36			396
ALESCO Preferred     Funding V	Class C1 Notes		820		452		(368	)		C		38		24			0.36			180
Total		$	5,345	$	3,048	$	(2,297	)				136		33	%				$	3,959

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Loans Receivable and Allowance for Loan Losses (Nonaccrual Loans By Classes Of The Loan Portfolio) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable Nonaccrual Status [Line Items]
Non-Accrual Status	$ 7,495	$ 15,846
Commercial Real Estate [Member]
Financing Receivable Nonaccrual Status [Line Items]
Non-Accrual Status	987	7,987
Construction and Land Development [Member]
Financing Receivable Nonaccrual Status [Line Items]
Non-Accrual Status	1,618	1,342
Commercial and Industrial [Member]
Financing Receivable Nonaccrual Status [Line Items]
Non-Accrual Status	4,023	4,693
Owner occupied Real Estate [Member]
Financing Receivable Nonaccrual Status [Line Items]
Non-Accrual Status	205	968
Consumer and Other [Member]
Financing Receivable Nonaccrual Status [Line Items]
Non-Accrual Status	662	856
Residential Mortgage [Member]
Financing Receivable Nonaccrual Status [Line Items]
Non-Accrual Status	$ 0	$ 0

XML

Investment Securities (Investments Classified by Contractual Maturity Date) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Investment Securities [Abstract]
Available for Sale: Amortized Cost: Due in 1 year or less	$ 18,899
Available for Sale: Amortized Cost: After 1 year to 5 years	64,862
Available for Sale: Amortized Cost: After 5 years to 10 years	110,860
Available for Sale: Amortized Cost: After 10 years	7,929
Available for Sale: Amortized Cost: Total	202,550
Available for Sale: Fair Value: Due in 1 year or less	19,173
Available for Sale: Fair Value: After 1 year to 5 years	64,836
Available for Sale: Fair Value: After 5 years to 10 years	107,567
Available for Sale: Fair Value: After 10 years	8,146
Investment securities available for sale, Carrying Amount	199,722	189,259
Held to Maturity: Amortized Cost: Due in 1 year or less	48
Held to Maturity: Amortized Cost: After 1 year to 5 years	21
Held-to-Maturity: After 5 years to 10 years	0
Held-to-Maturity: After 10 years	0
Held to Maturity: Amortized Cost: Total	69	67
Held to Maturity: Fair Value: Due in 1 year or less	48
Held to Maturity: Fair Value: After 1 year to 5 years	21
Held-to-Maturity: After 5 years to 10 years	0
Held-to-Maturity: After 10 years	0
Held to Maturity: Fair Value: Total	$ 69	$ 69

XML

Investment Securities (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Schedule of Investments [Line Items]
Gain on sale of investment securities	$ 0	$ 0	$ 703,000	$ 774,000
Sale proceeds from sale of securities	7,946,000		7,946,000	22,590,000
Income tax provision on gross gain on sale of securities	253,000			271,000
Additional credit-related impairment loss on securities for which an other-than-temporary impairment was previously recognized	0		0	31,000
Municipal Securities [Member]
Schedule of Investments [Line Items]
Market value of securities in the Pennsylvania geographical area with the highest concentration of municipal securities	$ 1,300,000		$ 1,300,000
Number of securities in investment portfolio number	13		13
Securities in unrealized loss positions, number of positions	3		3
Number of securities in the geographical area with the highest concentration of municipal securities	1		1
Number of municipal securities with OTTI impairment	0		0
Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Number of securities in investment portfolio number	23		23
Securities in unrealized loss positions, number of positions	16		16
Mortgage-backed Securities [Member]
Schedule of Investments [Line Items]
Number of securities in investment portfolio number	41		41
Securities in unrealized loss positions, number of positions	1		1

XML

Fair Value Measurement of Financial Instruments (Fair Value, by Balance Sheet Grouping) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Financial Assets [Abstract]
Investment securities available for sale	$ 199,722		$ 189,259
Investment securities held to maturity	69		69
SBA servicing assets	3,075	2,904	2,340	1,911	1,630	1,102
Carrying Amount [Member]
Financial Assets [Abstract]
Cash and cash equivalents	44,305		128,004
Investment securities available for sale	199,722		189,259
Investment securities held to maturity	69		67
Restricted stock	1,570		3,816
Loans held for sale	7,130		82
Loans receivable, net	641,533		608,359
SBA servicing assets	3,075		2,340
Accrued interest receivable	2,920		3,128
Financial Liabilities [Abstract]
Demand, savings and money market	761,926		765,967
Time	83,577		123,234
Subordinated debt	22,476		22,476
Accrued interest payable	309		301
Off Balance Sheet Data [Abstract]
Commitments to extend credit	0		0
Standby letters of credit	0		0
Fair Value [Member]
Financial Assets [Abstract]
Cash and cash equivalents	44,305		128,004
Investment securities available for sale	199,722		189,259
Investment securities held to maturity	69		69
Restricted stock	1,570		3,816
Loans held for sale	7,728		82
Loans receivable, net	634,657		603,237
SBA servicing assets	3,075		2,340
Accrued interest receivable	2,920		3,128
Financial Liabilities [Abstract]
Demand, savings and money market	761,926		765,967
Time	84,036		124,044
Subordinated debt	17,960		20,187
Accrued interest payable	309		301
Off Balance Sheet Data [Abstract]
Commitments to extend credit	0		0
Standby letters of credit	0		0
Fair Value, Inputs, Level 1 [Member]
Financial Assets [Abstract]
Cash and cash equivalents	44,305		128,004
Investment securities available for sale	0		0
Investment securities held to maturity	0		0
Restricted stock	0		0
Loans held for sale	0		0
Loans receivable, net	0		0
SBA servicing assets	0		0
Accrued interest receivable	0		0
Financial Liabilities [Abstract]
Demand, savings and money market	0		0
Time	0		0
Subordinated debt	0		0
Accrued interest payable	0		0
Significant Other Observable Inputs [Member]
Financial Assets [Abstract]
Cash and cash equivalents	0		0
Investment securities available for sale	193,668		183,065
Investment securities held to maturity	69		69
Restricted stock	1,570		3,816
Loans held for sale	0		0
Loans receivable, net	0		0
SBA servicing assets	0		0
Accrued interest receivable	2,920		3,128
Financial Liabilities [Abstract]
Demand, savings and money market	761,926		765,967
Time	84,036		124,044
Subordinated debt	0		0
Accrued interest payable	309		301
Significant Unobservable Inputs [Member]
Financial Assets [Abstract]
Cash and cash equivalents	0		0
Investment securities available for sale	6,054		6,194
Investment securities held to maturity	0		0
Restricted stock	0		0
Loans held for sale	7,728		82
Loans receivable, net	634,657		603,237
SBA servicing assets	3,075		2,340
Accrued interest receivable	0		0
Financial Liabilities [Abstract]
Demand, savings and money market	0		0
Time	0		0
Subordinated debt	17,960		20,187
Accrued interest payable	$ 0		$ 0

XML

Loans Receivable and Allowance for Loan Losses, Narrative (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Loans and Leases Receivable Disclosure [Abstract]
Loans and Leases Receivable, Impaired, Interest Lost on Nonaccrual Loans	$ 113,000	$ 225,000	$ 480,000	$ 545,000

XML

Fair Value of Financial Instruments (Schedule of Fair Value, Assets and Liabilities Measured On Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 199,722	$ 189,259
Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateralized mortgage obligations	120,418	99,783
Mortgage-backed securities	15,586	21,640
Municipal securities	8,002	12,101
Corporate bonds	32,993	32,685
Asset-backed securities	19,558	19,729
Trust preferred securities	3,048	3,187
Other securities	117	134
Available-for-sale Securities	199,722	189,259
Quoted Prices in Active Markets for Identical Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
Quoted Prices in Active Markets for Identical Assets [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateralized mortgage obligations	0	0
Mortgage-backed securities	0	0
Municipal securities	0	0
Corporate bonds	0	0
Asset-backed securities	0	0
Trust preferred securities	0	0
Other securities	0	0
Available-for-sale Securities	0	0
Significant Other Observable Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	193,668	183,065
Significant Other Observable Inputs [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateralized mortgage obligations	120,418	99,783
Mortgage-backed securities	15,586	21,640
Municipal securities	8,002	12,101
Corporate bonds	29,987	29,678
Asset-backed securities	19,558	19,729
Trust preferred securities	0	0
Other securities	117	134
Available-for-sale Securities	193,668	183,065
Significant Unobservable Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	6,054	6,194
Significant Unobservable Inputs [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateralized mortgage obligations	0	0
Mortgage-backed securities	0	0
Municipal securities	0	0
Corporate bonds	3,006	3,007
Asset-backed securities	0	0
Trust preferred securities	3,048	3,187
Other securities	0	0
Available-for-sale Securities	$ 6,054	$ 6,194

XML

Loans Receivable and Allowance for Loan Losses (Gross Loans By Loan Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable Portfolio Summary [Line Items]
Total loans receivable	$ 650,589		$ 618,121
Deferred costs (fees)	(352)		(220)
Allowance for loan losses	(8,704)	(9,332)	(9,542)	(9,798)	(9,385)	(12,050)
Net loans receivable	641,533		608,359
Commercial Real Estate [Member]
Financing Receivable Portfolio Summary [Line Items]
Total loans receivable	328,486		335,561
Allowance for loan losses	(2,740)	(3,581)	(3,979)	(4,622)	(3,961)	(7,372)
Construction and Land Development [Member]
Financing Receivable Portfolio Summary [Line Items]
Total loans receivable	25,238		26,659
Allowance for loan losses	(2,024)	(2,502)	(1,273)	(1,243)	(1,416)	(558)
Commercial and Industrial [Member]
Financing Receivable Portfolio Summary [Line Items]
Total loans receivable	113,302		103,768
Allowance for loan losses	(1,833)	(1,997)	(1,880)	(1,550)	(1,816)	(1,928)
Owner occupied Real Estate [Member]
Financing Receivable Portfolio Summary [Line Items]
Total loans receivable	150,594		126,242
Allowance for loan losses	(967)	(986)	(1,967)	(1,961)	(1,626)	(1,963)
Consumer and Other [Member]
Financing Receivable Portfolio Summary [Line Items]
Total loans receivable	30,595		23,449
Allowance for loan losses	(212)	(191)	(234)	(188)	(134)	(113)
Residential Mortgage [Member]
Financing Receivable Portfolio Summary [Line Items]
Total loans receivable	2,374		2,442
Allowance for loan losses	$ (14)	$ (14)	$ (17)	$ (18)	$ (16)	$ (23)

XML

Fair Value of Financial Instruments (Fair Value Inputs, Assets, Quantitative Information) (Details) (Level 3 [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Impaired Loans [Member]
Fair Value Measurements, Quantitative Information [Line Items]
Fair Value	$ 8,356
Valuation Technique	Fair Value of Collateral	[1]
Unobservable Input	Appraised Value	[2]
Other Real Estate Owned [Member]
Fair Value Measurements, Quantitative Information [Line Items]
Fair Value	3,323
Valuation Technique	Fair Value of Collateral	[1]
Unobservable Input	Appraised Value Sales Price	[2]
SBA Servicing Assets [Member]
Fair Value Measurements, Quantitative Information [Line Items]
Fair Value	$ 3,075
Valuation Technique	Fair Value
Unobservable Input	Individual Loan Valuation	[3]
Minimum [Member] | Impaired Loans [Member] | Fair Value Approach [Member]
Fair Value Measurements, Quantitative Information [Line Items]
Appraised value	0.00%	[4]
Minimum [Member] | Other Real Estate Owned [Member] | Fair Value Approach [Member]
Fair Value Measurements, Quantitative Information [Line Items]
Appraised value	7.00%	[4]
Maximum [Member] | Impaired Loans [Member] | Fair Value Approach [Member]
Fair Value Measurements, Quantitative Information [Line Items]
Appraised value	42.00%	[4]
Maximum [Member] | Other Real Estate Owned [Member] | Fair Value Approach [Member]
Fair Value Measurements, Quantitative Information [Line Items]
Appraised value	26.00%	[4]
Weighted Average [Member] | Impaired Loans [Member] | Fair Value Approach [Member]
Fair Value Measurements, Quantitative Information [Line Items]
Appraised value	26.00%	[4]
Weighted Average [Member] | Other Real Estate Owned [Member] | Fair Value Approach [Member]
Fair Value Measurements, Quantitative Information [Line Items]
Appraised value	20.00%	[4]

[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.

XML

Investment Securities (Unrealized Gain (Loss) on Investments) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Schedule of Investments [Line Items]
Amortized Cost	$ 202,550	$ 187,667
Gross Unrealized Gains	2,383	4,588
Gross Unrealized Losses	(5,211)	(2,996)
Fair Value	199,722	189,259
Held-to-maturity Securities	69	67
Held-to-maturity Securities, Unrecognized Holding Gains	0	2
Held-to-maturity Securities, Unrecognized Holding Losses	0	0
Fair Value	69	69
Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Amortized Cost	122,657	97,959
Gross Unrealized Gains	521	1,830
Gross Unrealized Losses	(2,760)	(6)
Fair Value	120,418	99,783
Mortgage-backed Securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	15,007	20,626
Gross Unrealized Gains	634	1,014
Gross Unrealized Losses	(55)	0
Fair Value	15,586	21,640
Municipal Securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	8,004	11,150
Gross Unrealized Gains	97	967
Gross Unrealized Losses	(99)	(16)
Fair Value	8,002	12,101
Corporate Bonds [Member]
Schedule of Investments [Line Items]
Amortized Cost	32,188	32,231
Gross Unrealized Gains	805	639
Gross Unrealized Losses	0	(185)
Fair Value	32,993	32,685
Asset-backed Securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	19,234	19,785
Gross Unrealized Gains	324	135
Gross Unrealized Losses	0	(191)
Fair Value	19,558	19,729
Trust Preferred Securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	5,345	5,785
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(2,297)	(2,598)
Fair Value	3,048	3,187
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Held-to-maturity Securities	1	1
Held-to-maturity Securities, Unrecognized Holding Gains	0	0
Held-to-maturity Securities, Unrecognized Holding Losses	0	0
Fair Value	1	1
Other Securities [Member]
Schedule of Investments [Line Items]
Amortized Cost	115	131
Gross Unrealized Gains	2	3
Gross Unrealized Losses	0	0
Fair Value	117	134
Held-to-maturity Securities	68	66
Held-to-maturity Securities, Unrecognized Holding Gains	0	2
Held-to-maturity Securities, Unrecognized Holding Losses	0	0
Fair Value	$ 68	$ 68

XML

Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Consolidated Statements of Comprehensive Income (Loss) [Abstract]
Other Comprehensive Income, (Loss) Unrealized Holding Gain (Loss) on Securities Arising During Period, before Tax	$ (220)	$ 1,854	$ (3,717)	$ 2,459
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, before Tax	0	0	703	774
Other Comprehensive Income, Reclassification Adjustment for Write-down of Securities Included in Net Income, before Tax	$ 0	$ 0	$ 0	$ 31

XML

Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (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 (loss)			2,710				2,710
Other comprehensive income (loss), net of tax						1,093	1,093
Stock based compensation		290					290
Shareholders' equity, ending at Sep. 30, 2012	265	106,673	(35,132)	(3,099)	(809)	1,046	68,944
Shareholders' equity, beginning at Dec. 31, 2012	265	106,753	(34,228)	(3,099)	(809)	1,020	69,902
Net income (loss)			(219)				(219)
Other comprehensive income (loss), net of tax						(2,833)	(2,833)
Stock based compensation		237					237
Shareholders' equity, ending at Sep. 30, 2013	$ 265	$ 106,990	$ (34,447)	$ (3,099)	$ (809)	$ (1,813)	$ 67,087

XML

Legal Proceedings

9 Months Ended

Sep. 30, 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.  The Company entered into a settlement agreement during the three month period ending September 30, 2013 in connection with litigation in which it was a defendant. The settlement agreement releases the Company from all claims and actions related to the matter.

Any litigation involves an element of uncertainty.  After reviewing pending actions with its legal counsel, 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.

XML

Basis of Presentation

9 Months Ended

Sep. 30, 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 and nine month periods ended September 30, 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 of Financial Instruments (Fair Value, Assets Measured On Recurring Basis, Unobservable Input Reconciliation) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Impairment charges on level 3	$ 0	$ 0	$ 0	$ 33
Trust Preferred Securities [Member] | Level 3 [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance, beginning	3,162	3,175	3,187	3,410
Unrealized gains (losses)	308	255	301	144
Paydowns	(422)	(314)	(440)	(407)
Impairment charges on level 3	0	0	0	(31)
Balance, ending	3,048	3,116	3,048	3,116
Corporate Bonds [Member] | Level 3 [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance, beginning	3,006	3,007	3,007	3,004
Unrealized gains (losses)	0	1	(1)	4
Paydowns	0	0	0	0
Impairment charges on level 3	0	0	0	0
Balance, ending	$ 3,006	$ 3,008	$ 3,006	$ 3,008

XML

Investment Securities (Schedule of Credit-Related Impairment Losses on Securities) (Details) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013	Sep. 30, 2012
Investment Securities [Abstract]
Beginning Balance		$ 3,959,000	$ 3,925,000
Additional credit-related impairment loss on securities for which an other-than-temporary impairment was previously recognized	0	0	31,000
Reductions for securities paid off during the period		0	0
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		0	0
Ending Balance	$ 3,959,000	$ 3,959,000	$ 3,956,000

XML

Loans Receivable and Allowance for Loan Losses (Impaired Loans By Loan Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	$ 15,256	$ 27,594
Impaired Loans with an allowance recorded: Recorded Investment	7,596	13,421
Total Recorded Investment	22,852	41,015
Impaired Loans with no related allowance: Unpaid Principal Balance	20,455	35,069
Impaired Loans with an allowance recorded: Unpaid Principal Balance	13,109	16,645
Total Unpaid Principal Balance	33,564	51,714
Impaired Loans with an allowance recorded: Related Allowance	1,619	2,943
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	10,161	19,231
Impaired Loans with an allowance recorded: Recorded Investment	606	6,085
Total Recorded Investment	10,767	25,316
Impaired Loans with no related allowance: Unpaid Principal Balance	10,281	20,000
Impaired Loans with an allowance recorded: Unpaid Principal Balance	606	6,085
Total Unpaid Principal Balance	10,887	26,085
Impaired Loans with an allowance recorded: Related Allowance	134	1,077
Construction and Land Development [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,025	3,153
Impaired Loans with an allowance recorded: Recorded Investment	593	593
Total Recorded Investment	1,618	3,746
Impaired Loans with no related allowance: Unpaid Principal Balance	4,244	6,312
Impaired Loans with an allowance recorded: Unpaid Principal Balance	3,700	3,700
Total Unpaid Principal Balance	7,944	10,012
Impaired Loans with an allowance recorded: Related Allowance	217	70
Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	3,064	3,793
Impaired Loans with an allowance recorded: Recorded Investment	3,274	3,147
Total Recorded Investment	6,338	6,940
Impaired Loans with no related allowance: Unpaid Principal Balance	4,352	7,106
Impaired Loans with an allowance recorded: Unpaid Principal Balance	5,674	3,255
Total Unpaid Principal Balance	10,026	10,361
Impaired Loans with an allowance recorded: Related Allowance	815	861
Owner occupied Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	547	505
Impaired Loans with an allowance recorded: Recorded Investment	2,920	3,450
Total Recorded Investment	3,467	3,955
Impaired Loans with no related allowance: Unpaid Principal Balance	867	505
Impaired Loans with an allowance recorded: Unpaid Principal Balance	2,920	3,450
Total Unpaid Principal Balance	3,787	3,955
Impaired Loans with an allowance recorded: Related Allowance	444	860
Consumer and Other [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	459	912
Impaired Loans with an allowance recorded: Recorded Investment	203	146
Total Recorded Investment	662	1,058
Impaired Loans with no related allowance: Unpaid Principal Balance	711	1,146
Impaired Loans with an allowance recorded: Unpaid Principal Balance	209	155
Total Unpaid Principal Balance	920	1,301
Impaired Loans with an allowance recorded: Related Allowance	$ 9	$ 75

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	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Credit quality [Line Items]
Total loans receivable	$ 650,589	$ 618,121
Commercial Real Estate [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	328,486	335,561
Construction and Land Development [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	25,238	26,659
Commercial and Industrial [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	113,302	103,768
Owner occupied Real Estate [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	150,594	126,242
Consumer and Other [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	30,595	23,449
Residential Mortgage [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	2,374	2,442
Pass [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	608,679	564,733
Pass [Member] | Commercial Real Estate [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	301,011	300,174
Pass [Member] | Construction and Land Development [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	23,620	22,652
Pass [Member] | Commercial and Industrial [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	105,765	96,051
Pass [Member] | Owner occupied Real Estate [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	146,309	121,381
Pass [Member] | Consumer and Other [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	29,600	22,033
Pass [Member] | Residential Mortgage [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	2,374	2,442
Special Mention [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	18,549	11,083
Special Mention [Member] | Commercial Real Estate [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	16,150	9,174
Special Mention [Member] | Construction and Land Development [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	0	261
Special Mention [Member] | Commercial and Industrial [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	1,164	642
Special Mention [Member] | Owner occupied Real Estate [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	1,160	906
Special Mention [Member] | Consumer and Other [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	75	100
Special Mention [Member] | Residential Mortgage [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	0	0
Substandard [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	23,361	42,305
Substandard [Member] | Commercial Real Estate [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	11,325	26,213
Substandard [Member] | Construction and Land Development [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	1,618	3,746
Substandard [Member] | Commercial and Industrial [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	6,373	7,075
Substandard [Member] | Owner occupied Real Estate [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	3,125	3,955
Substandard [Member] | Consumer and Other [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	920	1,316
Substandard [Member] | Residential Mortgage [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	0	0
Doubtful [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	0	0
Doubtful [Member] | Commercial Real Estate [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	0	0
Doubtful [Member] | Construction and Land Development [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	0	0
Doubtful [Member] | Commercial and Industrial [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	0	0
Doubtful [Member] | Owner occupied Real Estate [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	0	0
Doubtful [Member] | Consumer and Other [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	0	0
Doubtful [Member] | Residential Mortgage [Member]
Financing Receivable, Credit quality [Line Items]
Total loans receivable	$ 0	$ 0

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Fair Value Measurements and Fair Values of Financial Instruments (Sensitivity Analysis) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Jun. 30, 2013	Sep. 30, 2012	Jun. 30, 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	$ 3,075	$ 2,340	$ 2,904	$ 1,911	$ 1,630	$ 1,102
Compositions Of SBA Loans Service For Other Loans	100.00%	100.00%
Weighted Average Remaining Term	21 years 3 months 18 days	21 years 4 months 24 days
Prepayment Speed	6.42%	6.59%
Prepayment Speed: Effect on fair value of a 10% increase	(71)	(55)
Prepayment Speed: Effect on fair value of a 20% increase	(139)	(107)
Weighted Average Discount Rate	14.01%	14.23%
Discount Rate: Effect on fair value of a 10% increase	(146)	(115)
Discount Rate: Effect on fair value of a 20% increase	$ (282)	$ (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

Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Consolidated Balance Sheets [Abstract]
Investments securities held to maturity at fair value	$ 69	$ 69
Allowance for loan losses	$ 8,704	$ 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
Deferred Compensation Plan, Shares	112,542	112,542

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Loans Receivable and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2013

Loans and Leases Receivable Disclosure [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 September 30, 2013 and December 31, 2012:

(dollars in thousands)	September 30, 2013				December 31, 2012
Commercial real estate		$	328,486		$	335,561
Construction and land development			25,238			26,659
Commercial and industrial			113,302			103,768
Owner occupied real estate			150,594			126,242
Consumer and other			30,595			23,449
Residential mortgage			2,374			2,442
Total loans receivable			650,589			618,121
Deferred costs (fees)			(352	)		(220	)
Allowance for loan losses			(8,704	)		(9,542	)
Net loans receivable		$	641,533		$	608,359

A loan is considered impaired, 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 September 30, 2013 and December 31, 2012:

	September 30, 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	$	10,161	$	10,281	$	-	$	19,231	$	20,000	$	-
Construction and land development		1,025		4,244		-		3,153		6,312		-
Commercial and industrial		3,064		4,352		-		3,793		7,106		-
Owner occupied real estate		547		867		-		505		505		-
Consumer and other		459		711		-		912		1,146		-
Total	$	15,256	$	20,455	$	-	$	27,594	$	35,069	$	-

With an allowance recorded:
Commercial real estate	$	606	$	606	$	134	$	6,085	$	6,085	$	1,077
Construction and land development		593		3,700		217		593		3,700		70
Commercial and industrial		3,274		5,674		815		3,147		3,255		861
Owner occupied real estate		2,920		2,920		444		3,450		3,450		860
Consumer and other		203		209		9		146		155		75
Total	$	7,596	$	13,109	$	1,619	$	13,421	$	16,645	$	2,943

Total:
Commercial real estate	$	10,767	$	10,887	$	134	$	25,316	$	26,085	$	1,077
Construction and land development		1,618		7,944		217		3,746		10,012		70
Commercial and industrial		6,338		10,026		815		6,940		10,361		861
Owner occupied real estate		3,467		3,787		444		3,955		3,955		860
Consumer and other		662		920		9		1,058		1,301		75
Total	$	22,852	$	33,564	$	1,619	$	41,015	$	51,714	$	2,943

         The following table presents additional information regarding the Company’s impaired loans for the three months ended September 30, 2013 and September 30, 2012:

	Three Months Ended September 30,
	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	$	12,063	$	178	$	15,728	$	186
Construction and land development		1,421		3		4,878		27
Commercial and industrial		3,034		7		4,955		28
Owner occupied real estate		465		4		673		3
Consumer and other		538		-		898		4
Total	$	17,521	$	192	$	27,132	$	248

With an allowance recorded:
Commercial real estate	$	1,925	$	10	$	9,256	$	124
Construction and land development		545		-		923		-
Commercial and industrial		3,392		14		2,480		16
Owner occupied real estate		3,013		37		3,123		48
Consumer and other		163		-		121		-
Total	$	9,038	$	61	$	15,903	$	188

Total:
Commercial real estate	$	13,988	$	188	$	24,984	$	310
Construction and land development		1,966		3		5,801		27
Commercial and industrial		6,426		21		7,435		44
Owner occupied real estate		3,478		41		3,796		51
Consumer and other		701		-		1,019		4
Total	$	26,559	$	253	$	43,035	$	436

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately $113,000 and $225,000 for the three months ended September 30, 2013 and 2012, respectively.

The following table presents additional information regarding the Company’s impaired loans for the nine months ended September 30, 2013 and September 30, 2012:

	Nine Months Ended September 30,
	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		$	15,865		$	599	$	14,786		$	556
Construction and land development			2,217			32		4,946			86
Commercial and industrial			2,968			18		4,509			106
Owner occupied real estate			299			4		1,013			30
Consumer and other			700			1		866			8
Total		$	22,049		$	654	$	26,120		$	786

With an allowance recorded:
Commercial real estate	$	4,565	$	71	$	7,488	$	259
Construction and land development		445		-		1,305		-
Commercial and industrial		3,628		42		3,454		35
Owner occupied real estate		3,201		110		2,315		96
Consumer and other		87		-		73		-
Total	$	11,926	$	223	$	14,635	$	390

Total:
Commercial real estate	$	20,430	$	670	$	22,274	$	815
Construction and land development		2,662		32		6,251		86
Commercial and industrial		6,596		60		7,963		141
Owner occupied real estate		3,500		114		3,328		126
Consumer and other		787		1		939		8
Total	$	33,975	$	877	$	40,755	$	1,176

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately $480,000 and $545,000 for the nine months ended September 30, 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 and nine months ended September 30, 2013 and September 30, 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 September 30, 2013
Allowance for loan losses:
Beginning balance:		$	3,581			$	2,502			$	1,997			$	986			$	191			$	14		$	61			$	9,332
Charge-offs			(882	)			(5	)			-				(2	)			-				-			-				(889	)
Recoveries			-				-				10				-				1				-			-				11
Provisions (credits)			41				(473	)			(174	)			(17	)			20				-			853				250
Ending balance		$	2,740			$	2,024			$	1,833			$	967			$	212			$	14		$	914			$	8,704
Three months ended September 30, 2012
Allowance for loan losses:
Beginning balance:		$	3,961			$	1,416			$	1,816			$	1,626			$	134			$	16		$	416			$	9,385
Charge-offs			(133	)			-				(303	)			-				(1	)			-			-				(437	)
Recoveries			-				-				-				-				-				-			-				-
Provisions (credits)			794				(173	)			37				335				55				2			(200	)			850
Ending balance		$	4,622			$	1,243			$	1,550			$	1,961			$	188			$	18		$	216			$	9,798

(dollars in thousands)	Commercial Real Estate				Construction and Land Development				Commercial and Industrial				Owner Occupied Real Estate				Consumer and Other				Residential Mortgage				Unallocated			Total
Nine months ended September 30, 2013
Allowance for loan losses:
Beginning balance:		$	3,979			$	1,273			$	1,880			$	1,967			$	234			$	17			$	192		$	9,542
Charge-offs			(1,291	)			(60	)			(361	)			(321	)			(75	)			-				-			(2,108	)
Recoveries			54				-				15				-				26				-				-			95
Provisions (credits)			(2	)			811				299				(679	)			27				(3	)			722			1,175
Ending balance		$	2,740			$	2,024			$	1,833			$	967			$	212			$	14			$	914		$	8,704
Nine months ended September 30, 2012
Allowance for loan losses:
Beginning Balance:		$	7,372			$	558			$	1,928			$	1,963			$	113			$	23			$	93		$	12,050
Charge-offs			(899	)			(921	)			(1,063	)			-				(102	)			-				-			(2,985	)
Recoveries			-				105				-				-				28				-				-			133
Provisions (credits)			(1,851	)			1,501				685				(2	)			149				(5	)			123			600
Ending balance		$	4,622			$	1,243			$	1,550			$	1,961			$	188			$	18			$	216		$	9,798

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 September 30, 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
September 30, 2013
Allowance for loan losses:
Individually evaluated for impairment		$	134		$	217		$	815		$	444		$	9		$	-		$	-		$	1,619
Collectively evaluated for impairment			2,606			1,807			1,018			523			203			14			914			7,085
Total allowance for loan losses		$	2,740		$	2,024		$	1,833		$	967		$	212		$	14		$	914		$	8,704
Loans receivable:
Loans evaluated individually		$	10,767		$	1,618		$	6,338		$	3,467		$	662		$	-		$	-		$	22,852
Loans evaluated collectively			317,719			23,620			106,964			147,127			29,933			2,374			-			627,737
Total loans receivable		$	328,486		$	25,238		$	113,302		$	150,594		$	30,595		$	2,374		$	-		$	650,589

(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 September 30, 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 September 30, 2013
Commercial real estate	$	-	$	3,463	$	987	$	4,450	$	324,036	$	328,486	$	-
Construction and land development		-		-		1,618		1,618		23,620		25,238		-
Commercial and industrial		-		2,978		4,023		7,001		106,301		113,302		-
Owner occupied real estate		340		960		205		1,505		149,089		150,594		-
Consumer and other		40		-		662		702		29,893		30,595		-
Residential mortgage		-		-		-		-		2,374		2,374		-
Total	$	380	$	7,401	$	7,495	$	15,276	$	635,313	$	650,589	$	-

(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 September 30, 2013 and December 31, 2012:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
At September 30, 2013:
Commercial real estate	$	301,011	$	16,150	$	11,325	$	-	$	328,486
Construction and land development		23,620		-		1,618		-		25,238
Commercial and industrial		105,765		1,164		6,373		-		113,302
Owner occupied real estate		146,309		1,160		3,125		-		150,594
Consumer and other		29,600		75		920		-		30,595
Residential mortgage		2,374		-		-		-		2,374
Total	$	608,679	$	18,549	$	23,361	$	-	$	650,589

(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 September 30, 2013 and December 31, 2012:

(dollars in thousands)	September 30, 2013			December 31, 2012
Commercial real estate		$	987		$	7,987
Construction and land development			1,618			1,342
Commercial and industrial			4,023			4,693
Owner occupied real estate			205			968
Consumer and other			662			856
Residential mortgage			-			-
Total		$	7,495		$	15,846

Troubled Debt Restructurings

A modification to the contractual terms of a loan which results in a concession to a borrower that is experiencing financial difficulty is classified as a troubled debt restructuring (“TDR”).  The concessions made in a TDR are those that would not otherwise be considered for a borrower or collateral with similar risk characteristics.  A TDR is typically the result of efforts to minimize potential losses that may be incurred during loan workouts, foreclosure, or repossession of collateral at a time when collateral values are declining.  Concessions include a reduction in interest rate below current market rates, a material extension of time to the loan term or amortization period, partial forgiveness of the outstanding principal balance, acceptance of interest only payments for a period of time, or a combination of any of these conditions.

The following table summarizes the balance of outstanding TDRs at September 30, 2013 and December 31, 2012:

(dollars in thousands)	Number of Loans		Accrual Status			Non- Accrual Status			Total TDRs
September 30, 2013
Commercial real estate		1		$	300		$	-		$	300
Construction and land development		-			-			-			-
Commercial and industrial		1			2,201			-			2,201
Owner occupied real estate		1			1,904			-			1,904
Consumer and other		-			-			-			-
Residential mortgage		-			-			-			-
Total		3		$	4,405		$	-		$	4,405
December 31, 2012
Commercial real estate		1		$	1,261		$	-		$	1,261
Construction and land development		1			2,069			-			2,069
Commercial and industrial		1			2,248			-			2,248
Owner occupied real estate		1			1,933			-			1,933
Consumer and other		-			-			-			-
Residential mortgage		-			-			-			-
Total		4		$	7,511		$	-		$	7,511

All TDRs are considered impaired and are therefore individually evaluated for impairment in the calculation of the allowance for loan losses.  Some TDRs may not ultimately result in the full collection of principal and interest as restructured and could lead to potential incremental losses.  These potential incremental losses would be factored into our estimate of the allowance for loan losses.  The level of any subsequent defaults will likely be affected by future economic conditions.  There were no loan modifications that were considered TDRs during the three and nine months ended September 30, 2013.

The Company modified one owner occupied real estate loan during the three and nine month periods ended September 30, 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.

After a loan is determined to be a TDR, we continue to track its performance under the most recent restructured terms.  There were no TDRs that subsequently defaulted during the nine month period ended September 30, 2013 nor the twelve month period ended December 31, 2012.

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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Consolidated Statements of Comprehensive Income (Loss) [Abstract]
Net income (loss)	$ (2,222)	$ 398	$ (219)	$ 2,710
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on securities (pre-tax $(220), $1,854, $(3,717), and $2,459, respectively)	(141)	1,188	(2,383)	1,576
Reclassification adjustment for securities gains (pre-tax $-, $-, $703, and $774, respectively)	0	0	(450)	(503)
Reclassification adjustment for impairment charge (pre-tax $-, $14, $-, and $31, respectively)	0	0	0	20
Total other comprehensive income (loss)	(141)	1,188	(2,833)	1,093
Total comprehensive income (loss)	$ (2,363)	$ 1,586	$ (3,052)	$ 3,803

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Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
ASSETS
Cash and due from banks	$ 11,468	$ 9,097
Interest bearing deposits with banks	31,498	118,907
Federal funds sold	1,339	0
Cash and cash equivalents	44,305	128,004
Investment securities available for sale	199,722	189,259
Investment securities held to maturity, at amortized cost (fair value of $69 and $69, respectively)	69	67
Restricted stock, at cost	1,570	3,816
Loans held for sale	7,130	82
Loans receivable (net of allowance for loan losses of $8,704 and $9,542, respectively)	641,533	608,359
Premises and equipment, net	21,181	21,976
Other real estate owned, net	5,951	8,912
Accrued interest receivable	2,920	3,128
Bank owned life insurance	0	10,490
Other assets	18,487	14,565
Total Assets	942,868	988,658
Deposits
Demand - non-interest bearing	159,384	145,407
Demand - interest bearing	188,572	180,440
Money market and savings	413,970	440,120
Time deposits	83,577	123,234
Total Deposits	845,503	889,201
Accrued interest payable	309	301
Other liabilities	7,493	6,778
Subordinated debt	22,476	22,476
Total Liabilities	875,781	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	106,990	106,753
Accumulated deficit	(34,447)	(34,228)
Treasury stock at cost (416,303 shares)	(3,099)	(3,099)
Stock held by deferred compensation plan (112,542 shares)	(809)	(809)
Accumulated other comprehensive income (loss)	(1,813)	1,020
Total Shareholders' Equity	67,087	69,902
Total Liabilities and Shareholders' Equity	$ 942,868	$ 988,658

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Investment Securities (Schedule of Unrealized Loss on Investments) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	$ 84,360	$ 20,259
12 Months or more: Fair Value	3,048	12,998
Total: Fair Value	87,408	33,257
Less than 12 Months: Unrealized Losses	2,914	213
12 Months or more: Unrealized Losses	2,297	2,783
Total: Unrealized Losses	5,211	2,996
Collateralized Mortgage Obligations [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	80,855	9,991
12 Months or more: Fair Value	0	0
Total: Fair Value	80,855	9,991
Less than 12 Months: Unrealized Losses	2,760	6
12 Months or more: Unrealized Losses	0	0
Total: Unrealized Losses	2,760	6
Mortgage-backed Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	1,160
12 Months or more: Fair Value	0
Total: Fair Value	1,160
Less than 12 Months: Unrealized Losses	55
12 Months or more: Unrealized Losses	0
Total: Unrealized Losses	55
Municipal Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	2,344	1,050
12 Months or more: Fair Value	0	0
Total: Fair Value	2,344	1,050
Less than 12 Months: Unrealized Losses	99	16
12 Months or more: Unrealized Losses	0	0
Total: Unrealized Losses	99	16
Corporate Bonds [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	0	0
12 Months or more: Fair Value	0	9,811
Total: Fair Value	0	9,811
Less than 12 Months: Unrealized Losses	0	0
12 Months or more: Unrealized Losses	0	185
Total: Unrealized Losses	0	185
Asset-backed Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value		9,218
12 Months or more: Fair Value		0
Total: Fair Value		9,218
Less than 12 Months: Unrealized Losses		191
12 Months or more: Unrealized Losses		0
Total: Unrealized Losses		191
Trust Preferred Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	0	0
12 Months or more: Fair Value	3,048	3,187
Total: Fair Value	3,048	3,187
Less than 12 Months: Unrealized Losses	0	0
12 Months or more: Unrealized Losses	2,297	2,598
Total: Unrealized Losses	2,297	2,598
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Less than 12 Months: Fair Value	1
12 Months or more: Fair Value	0
Total: Fair Value	1
Less than 12 Months: Unrealized Losses	0
12 Months or more: Unrealized Losses	0
Total: Unrealized Losses	$ 0

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Summary of Significant Accounting Policies (Summary of Stock-Based Compensation) (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Summary Of Significant Accounting Policies [Abstract]
Stock based compensation expense recognized	$ 237,000	$ 290,000
Number of unvested stock options (in shares)	893,563	795,600
Fair value of unvested stock options	1,210,840	1,426,878
Amount remaining to be recognized as expense	$ 597,709	$ 548,287

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Fair Value Measurements and Fair Values of Financial Instruments (SBA Servicing Assets) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Fair Value of Financial Instruments [Abstract]
Beginning balance, January 1st	$ 2,904	$ 1,630	$ 2,340	$ 1,102
Additions	283	263	911	741
Fair value adjustments	(112)	18	(176)	68
Ending balance, September 30th	$ 3,075	$ 1,911	$ 3,075	$ 1,911

XML

Loans Receivable and Allowance for Loan Losses (Troubled Debt Restructuring) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013 Numberofloans	Dec. 31, 2012 Numberofloans
Financing Receivable, Modifications [Line Items]
Number of loans	3	4
Accrual status	$ 4,405	$ 7,511
Non-accrual status	0	0
Total TDRs	4,405	7,511
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	1	1
Accrual status	300	1,261
Non-accrual status	0	0
Total TDRs	300	1,261
Construction and Land Development [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	0	1
Accrual status	0	2,069
Non-accrual status	0	0
Total TDRs	0	2,069
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	1	1
Accrual status	2,201	2,248
Non-accrual status	0	0
Total TDRs	2,201	2,248
Owner occupied Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	1	1
Accrual status	1,904	1,933
Non-accrual status	0	0
Total TDRs	1,904	1,933
Consumer and Other [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	0	0
Accrual status	0	0
Non-accrual status	0	0
Total TDRs	0	0
Residential Mortgage [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	0	0
Accrual status	0	0
Non-accrual status	0	0
Total TDRs	$ 0	$ 0

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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		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	$ 9,332	$ 9,385	$ 9,542	$ 12,050
Charge-offs	(889)	(437)	(2,108)	(2,985)
Recoveries	11	0	95	133
Provision (credit) for loan losses	250	850	1,175	600
Ending balance:	8,704	9,798	8,704	9,798
Allowance for loan losses ending balance: individually evaluated for impairment	1,619		1,619		2,943
Allowance for loan losses ending balance: collectively evaluated for impairment	7,085		7,085		6,599
Allowance for loan losses	8,704	9,798	8,704	9,798
Loans receivable ending balance: individually evaluated for impairment	22,852		22,852		41,015
Loans receivable ending balance: collectively evaluated for impairment	627,737		627,737		577,106
Total loans receivable	650,589		650,589		618,121
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	3,581	3,961	3,979	7,372
Charge-offs	(882)	(133)	(1,291)	(899)
Recoveries	0	0	54	0
Provision (credit) for loan losses	41	794	(2)	(1,851)
Ending balance:	2,740	4,622	2,740	4,622
Allowance for loan losses ending balance: individually evaluated for impairment	134		134		1,077
Allowance for loan losses ending balance: collectively evaluated for impairment	2,606		2,606		2,902
Allowance for loan losses	2,740	4,622	2,740	4,622
Loans receivable ending balance: individually evaluated for impairment	10,767		10,767		25,316
Loans receivable ending balance: collectively evaluated for impairment	317,719		317,719		310,245
Total loans receivable	328,486		328,486		335,561
Construction and Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	2,502	1,416	1,273	558
Charge-offs	(5)	0	(60)	(921)
Recoveries	0	0	0	105
Provision (credit) for loan losses	(473)	(173)	811	1,501
Ending balance:	2,024	1,243	2,024	1,243
Allowance for loan losses ending balance: individually evaluated for impairment	217		217		70
Allowance for loan losses ending balance: collectively evaluated for impairment	1,807		1,807		1,203
Allowance for loan losses	2,024	1,243	2,024	1,243
Loans receivable ending balance: individually evaluated for impairment	1,618		1,618		3,746
Loans receivable ending balance: collectively evaluated for impairment	23,620		23,620		22,913
Total loans receivable	25,238		25,238		26,659
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	1,997	1,816	1,880	1,928
Charge-offs	0	(303)	(361)	(1,063)
Recoveries	10	0	15	0
Provision (credit) for loan losses	(174)	37	299	685
Ending balance:	1,833	1,550	1,833	1,550
Allowance for loan losses ending balance: individually evaluated for impairment	815		815		861
Allowance for loan losses ending balance: collectively evaluated for impairment	1,018		1,018		1,019
Allowance for loan losses	1,833	1,550	1,833	1,550
Loans receivable ending balance: individually evaluated for impairment	6,338		6,338		6,940
Loans receivable ending balance: collectively evaluated for impairment	106,964		106,964		96,828
Total loans receivable	113,302		113,302		103,768
Owner occupied Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	986	1,626	1,967	1,963
Charge-offs	(2)	0	(321)	0
Recoveries	0	0	0	0
Provision (credit) for loan losses	(17)	335	(679)	(2)
Ending balance:	967	1,961	967	1,961
Allowance for loan losses ending balance: individually evaluated for impairment	444		444		860
Allowance for loan losses ending balance: collectively evaluated for impairment	523		523		1,107
Allowance for loan losses	967	1,961	967	1,961
Loans receivable ending balance: individually evaluated for impairment	3,467		3,467		3,955
Loans receivable ending balance: collectively evaluated for impairment	147,127		147,127		122,287
Total loans receivable	150,594		150,594		126,242
Consumer and Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	191	134	234	113
Charge-offs	0	(1)	(75)	(102)
Recoveries	1	0	26	28
Provision (credit) for loan losses	20	55	27	149
Ending balance:	212	188	212	188
Allowance for loan losses ending balance: individually evaluated for impairment	9		9		75
Allowance for loan losses ending balance: collectively evaluated for impairment	203		203		159
Allowance for loan losses	212	188	212	188
Loans receivable ending balance: individually evaluated for impairment	662		662		1,058
Loans receivable ending balance: collectively evaluated for impairment	29,933		29,933		22,391
Total loans receivable	30,595		30,595		23,449
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	14	16	17	23
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision (credit) for loan losses	0	2	(3)	(5)
Ending balance:	14	18	14	18
Allowance for loan losses ending balance: individually evaluated for impairment	0		0		0
Allowance for loan losses ending balance: collectively evaluated for impairment	14		14		17
Allowance for loan losses	14	18	14	18
Loans receivable ending balance: individually evaluated for impairment	0		0		0
Loans receivable ending balance: collectively evaluated for impairment	2,374		2,374		2,442
Total loans receivable	2,374		2,374		2,442
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance:	61	416	192	93
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision (credit) for loan losses	853	(200)	722	123
Ending balance:	914	216	914	216
Allowance for loan losses ending balance: individually evaluated for impairment	0		0		0
Allowance for loan losses ending balance: collectively evaluated for impairment	914		914		192
Allowance for loan losses	914	216	914	216
Loans receivable ending balance: individually evaluated for impairment	0		0		0
Loans receivable ending balance: collectively evaluated for impairment	0		0		0
Total loans receivable	$ 0		$ 0		$ 0

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Loans Receivable and Allowance for Loan Losses (Past Due Financing Receivables) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Past Due [Line Items]
30-59 Days Past Due	$ 380	$ 1,143
60 to 89 Days Past Due	7,401	27,823
Greater than 90 Days	7,495	16,048
Total Past Due	15,276	45,014
Current	635,313	573,107
Total loans receivable	650,589	618,121
Loans Receivable > 90 Days and Accruing	0	202
Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
30-59 Days Past Due	0	772
60 to 89 Days Past Due	3,463	26,000
Greater than 90 Days	987	7,987
Total Past Due	4,450	34,759
Current	324,036	300,802
Total loans receivable	328,486	335,561
Loans Receivable > 90 Days and Accruing	0	0
Construction and Land Development [Member]
Financing Receivable, Past Due [Line Items]
30-59 Days Past Due	0	0
60 to 89 Days Past Due	0	261
Greater than 90 Days	1,618	1,342
Total Past Due	1,618	1,603
Current	23,620	25,056
Total loans receivable	25,238	26,659
Loans Receivable > 90 Days and Accruing	0	0
Commercial and Industrial [Member]
Financing Receivable, Past Due [Line Items]
30-59 Days Past Due	0	86
60 to 89 Days Past Due	2,978	0
Greater than 90 Days	4,023	4,693
Total Past Due	7,001	4,779
Current	106,301	98,989
Total loans receivable	113,302	103,768
Loans Receivable > 90 Days and Accruing	0	0
Owner occupied Real Estate [Member]
Financing Receivable, Past Due [Line Items]
30-59 Days Past Due	340	285
60 to 89 Days Past Due	960	1,562
Greater than 90 Days	205	968
Total Past Due	1,505	2,815
Current	149,089	123,427
Total loans receivable	150,594	126,242
Loans Receivable > 90 Days and Accruing	0	0
Consumer and Other [Member]
Financing Receivable, Past Due [Line Items]
30-59 Days Past Due	40	0
60 to 89 Days Past Due	0	0
Greater than 90 Days	662	1,058
Total Past Due	702	1,058
Current	29,893	22,391
Total loans receivable	30,595	23,449
Loans Receivable > 90 Days and Accruing	0	202
Residential Mortgage [Member]
Financing Receivable, Past Due [Line Items]
30-59 Days Past Due	0	0
60 to 89 Days Past Due	0	0
Greater than 90 Days	0	0
Total Past Due	0	0
Current	2,374	2,442
Total loans receivable	2,374	2,442
Loans Receivable > 90 Days and Accruing	$ 0	$ 0

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Investment Securities

9 Months Ended

Sep. 30, 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 September 30, 2013 and December 31, 2012 is as follows:

	At September 30, 2013
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Collateralized mortgage obligations	$	122,657	$	521	$	(2,760	)	$	120,418
Mortgage-backed securities		15,007		634		(55	)		15,586
Municipal securities		8,004		97		(99	)		8,002
Corporate bonds		32,188		805		-			32,993
Asset-backed securities		19,234		324		-			19,558
Trust preferred securities		5,345		-		(2,297	)		3,048
Other securities		115		2		-			117
Total securities available for sale	$	202,550	$	2,383	$	(5,211	)	$	199,722
U.S. Government agencies	$	1	$	-	$	-		$	1
Other securities		68		-		-			68
Total securities held to maturity	$	69	$	-	$	-		$	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 September 30, 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	$	18,899	$	19,173	$	48	$	48
After 1 year to 5 years		64,862		64,836		21		21
After 5 years to 10 years		110,860		107,567		-		-
After 10 years		7,929		8,146		-		-
Total	$	202,550	$	199,722	$	69	$	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 September 30, 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 September 30, 2013 and December 31, 2012.  In addition, the Company did not hold any private issued CMO’s as September 30, 2013 and December 31, 2012.  As of September 30, 3013 and December 31, 2012, the asset-backed securities consist 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, accounting standards require 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.  There were no impairment charges (credit losses) on trust preferred securities for the three and nine months ended September 30, 2013. Impairment charges (credit losses) on trust preferred securities for the three and nine months ended September 30, 2012 amounted to $0 and $31,000, respectively.

The following table presents a roll-forward of the balance of credit-related impairment losses on securities held at September 30, 2013 and 2012 for which a portion of OTTI was recognized in other comprehensive income:

	September 30,
(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		-		31
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, September 30th	$	3,959	$	3,956

The Company realized gross gains on the sale of securities of $703,000 during the nine months ended September 30, 2013.  The related sale proceeds amounted to $7.9 million.  The tax provision applicable to these gross gains in 2013 amounted to approximately $253,000.  The Company realized gross gains on the sale of securities of $774,000 during the nine months ended September 30, 2012.  The related sale proceeds amounted to $22.6 million.  The tax provision applicable to these gross gains in 2012 amounted to approximately $271,000.

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 September 30, 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		$	80,855	$	2,760	$	-	$	-	$	80,855	$	2,760
Mortgage-backed securities			1,160		55		-		-		1,160		55
Municipal securities			2,344		99		-		-		2,344		99
Corporate bonds			-		-		-		-		-		-
Trust preferred securities			-		-		3,048		2,297		3,048		2,297
U.S. Government Agencies			1		-		-		-		1		-
Total		$	84,360	$	2,914	$	3,048	$	2,297	$	87,408	$	5,211

	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 amounted to $5.2 million on securities with a total fair value of $87.4 million at September 30, 2013.  The most significant components of this impairment are related to the collateralized mortgage obligations and the trust preferred securities held in the portfolio.  The unrealized losses on the collateralized mortgage obligations are temporary in nature and are primarily related to the recent movement in market interest rates rather than the underlying credit quality of the issuers.  The Company does currently intend to sell these securities prior to their maturity or the recovery of their cost bases and believes that it is more likely than not that it will not have to sell these securities prior to their maturity or the recovery of their cost bases.

At September 30, 2013, the investment portfolio included twenty-three collateralized mortgage obligations with a total market value of $120.4 million.  Sixteen of these securities carried an unrealized loss at September 30, 2013.  At September 30, 2013, the investment portfolio included forty-one mortgage-backed securities with a total market value of $15.6 million.  One of these securities carried an unrealized loss at September 30, 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 September 30, 2013.

The unrealized losses on the trust preferred securities are primarily the result of the secondary market for such securities becoming inactive and are also considered temporary at this time.

The following table provides additional detail about the trust preferred securities held in the portfolio as of September 30, 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	)	Caa2			6		18	%		0.37	%	$	-
Preferred Term     Securities VII	Mezzanine Notes		1,056		780		(276	)		C		12		53			0.34			2,173
TPREF Funding II	Class B Notes		739		362		(377	)		C		16		44			0.36			260
TPREF Funding III	Class B2 Notes		1,521		782		(739	)		C		17		34			0.34			480
Trapeza CDO I, LLC	Class C1 Notes		556		271		(285	)		C		9		49			0.38			470
ALESCO Preferred     Funding IV	Class B1 Notes		604		361		(243	)		C		38		14			0.36			396
ALESCO Preferred     Funding V	Class C1 Notes		820		452		(368	)		C		38		24			0.36			180
Total		$	5,345	$	3,048	$	(2,297	)				136		33	%				$	3,959

At September 30, 2013, the investment portfolio included thirteen municipal securities with a total market value of $8.0 million.  Three of these securities carried an unrealized loss totaling $0.1 million at September 30, 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 $1.3 million.  As of September 30, 2013, management found no evidence of OTTI on any of the municipal securities held in the investment securities portfolio.

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Investment Securities (Schedule of Trust Preferred Securities) (Details) (USD $) In Thousands, unless otherwise specified					9 Months Ended
	Sep. 30, 2013 Numberofloans	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2013 Preferred Term Securities IV [Member] Numberofloans	Sep. 30, 2013 Preferred Term Securities VII [Member] Numberofloans	Sep. 30, 2013 TPREF Funding II [Member] Numberofloans	Sep. 30, 2013 TPREF Funding III [Member] Numberofloans	Sep. 30, 2013 Trapeza CDO I, LLC [Member] Numberofloans	Sep. 30, 2013 ALESCO Preferred Funding IV [Member] Numberofloans	Sep. 30, 2013 ALESCO Preferred Funding V [Member] Numberofloans	Sep. 30, 2013 Trust Preferred Securities [Member]	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	$ 202,550	$ 187,667			$ 49	$ 1,056	$ 739	$ 1,521	$ 556	$ 604	$ 820	$ 5,345	$ 5,785
Investment securities available for sale	199,722	189,259			40	780	362	782	271	361	452	3,048	3,187
Unrealized Losses	(5,211)	(2,996)			(9)	(276)	(377)	(739)	(285)	(243)	(368)	(2,297)	(2,598)
Lowest Credit Rating Assigned					Caa2	C	C	C	C	C	C
Number of banks currently performing	136				6	12	16	17	9	38	38
Deferrals / Defaults as % of Current Balance	33.00%				18.00%	53.00%	44.00%	34.00%	49.00%	14.00%	24.00%
Conditional Default Rates for 2013 and beyond					0.37%	0.34%	0.36%	0.34%	0.38%	0.36%	0.36%
Cumulative OTTI Life to Date	$ 3,959	$ 3,959	$ 3,956	$ 3,925	$ 0	$ 2,173	$ 260	$ 480	$ 470	$ 396	$ 180

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Fair Value of Financial Instruments (Schedule of Fair Value Measurements, Nonrecurring) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
SBA servicing assets	$ 3,075	$ 2,904	$ 2,340	$ 1,911	$ 1,630	$ 1,102
Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	8,356		19,876
Other real estate owned	3,323		3,642
SBA servicing assets	3,075		2,340
Quoted Prices in Active Markets for Identical Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
SBA servicing assets	0		0
Quoted Prices in Active Markets for Identical Assets [Member] | Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	0		0
Other real estate owned	0		0
SBA servicing assets	0		0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
SBA servicing assets	0		0
Fair Value, Inputs, Level 2 [Member] | Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	0		0
Other real estate owned	0		0
SBA servicing assets	0		0
Significant Unobservable Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
SBA servicing assets	3,075		2,340
Significant Unobservable Inputs [Member] | Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	8,356		19,876
Other real estate owned	3,323		3,642
SBA servicing assets	$ 3,075		$ 2,340

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Summary Of Significant Accounting Policies [Abstract]

Risk and Uncertainties

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

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 slow pace of recovery in the current economic environment, the Company has decided to currently exclude future taxable income from its analysis of 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

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 September 30, 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 55.08%		53.12% to 54.49%
Risk-free interest rate(3)	1.28% to 2.02%		1.01% to 1.61%
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 nine months ended September 30, 2013 and 2012, 127,287 shares and 61,000 shares vested, respectively.  Expense is recognized ratably over the period required to vest.  At September 30, 2013, the intrinsic value of the 1,199,780 options outstanding was $562,985, while the intrinsic value of the 306,217 exercisable (vested) options was $52,294.  During the nine months ended September 30, 2013, 84,000 options were forfeited with a weighted average grant date fair value of $289,760.

Information regarding stock based compensation for the nine months ended September 30, 2013 and 2012 is set forth below:

	2013		2012
Stock based compensation expense recognized	$	237,000	$	290,000
Number of unvested stock options		893,563		795,600
Fair value of unvested stock options	$	1,210,840	$	1,426,878
Amount remaining to be recognized as expense	$	597,709	$	548,287

The remaining amount of $597,709 will be recognized as expense through June 2017.

Earnings per Share

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 and nine months ended September 30, 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 and nine months ended September 30, 2013 and 2012 is as follows (in thousands, except per share amounts):

	Three Months Ended September  30,					Nine Months Ended September 30,
	2013			2012		2013			2012
Net income (loss) - basic and diluted	$	(2,222	)	$	398	$	(219	)	$	2,710
Weighted average shares outstanding		25,973			25,973		25,973			25,973
Net income (loss) per share – basic	$	(0.09	)	$	0.02	$	(0.01	)	$	0.10
Weighted average shares outstanding (including dilutive CSEs)		25,973			25,996		25,973			25,991
Net income (loss) per share – diluted	$	(0.09	)	$	0.02	$	(0.01	)	$	0.10

New Accounting Pronouncements, 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.

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Segment Reporting

9 Months Ended

Sep. 30, 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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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities
Net income (loss)	$ (219)	$ 2,710
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for loan losses	1,175	600
(Gain) loss on sale of other real estate owned	(229)	10
Write down of other real estate owned	1,442	130
Depreciation and amortization	1,626	1,516
Stock based compensation	237	290
Gain on sale of investment securities	(703)	(774)
Impairment charges on investment securities	0	31
Amortization of premiums on investment securities	613	269
Proceeds from sales of SBA loans originated for sale	39,519	35,358
SBA loans originated for sale	(42,704)	(32,185)
Gains on sales of SBA loans originated for sale	(3,863)	(3,337)
Increase in value of bank owned life insurance	(13)	(55)
Increase in accrued interest receivable and other assets	(2,129)	(249)
Increase (decrease) in accrued interest payable and other liabilities	723	(38)
Net cash provided by (used in) operating activities	(4,525)	4,276
Cash flows from investing activities
Purchase of investment securities available for sale	(50,054)	(60,910)
Proceeds from the sale of securities available for sale	7,946	22,590
Proceeds from maturity or call of securities available for sale	27,315	22,274
Proceeds from the maturity or call of securities held to maturity	0	74
Proceeds from redemption of FHLB stock	2,246	952
Net increase in loans	(34,595)	(37,845)
Net proceeds from sale of other real estate owned	1,994	334
Surrender proceeds on bank owned life insurance	10,503	0
Premises and equipment expenditures	(831)	(424)
Net cash used in investing activities	(35,476)	(52,955)
Cash flow from financing activities
Net (decrease) increase in demand, money market and savings deposits	(4,041)	339
Net decrease in time deposits	(39,657)	(84,757)
Net cash used in financing activities	(43,698)	(84,418)
Net decrease in cash and cash equivalents	(83,699)	(133,097)
Cash and cash equivalents, beginning of year	128,004	230,955
Cash and cash equivalents, end of period	44,305	97,858
Supplemental disclosures:
Interest paid	3,476	5,363
Income taxes paid	185	0
Non-cash transfers from loans to other real estate owned	$ 246	$ 1,307

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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		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Schedule Of Financing Receivable Impaired Investment [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	$ 17,521	$ 27,132	$ 22,049	$ 26,120
Impaired Loans with no related allowance recorded: Interest Income Recognized	192	248	654	786
Impaired Loans with an allowance recorded: Average Recorded Investment	9,038	15,903	11,926	14,635
Impaired Loans with an allowance recorded: Interest Income Recognized	61	188	223	390
Total Average Recorded Investment	26,559	43,035	33,975	40,755
Total Interest Income Recognized	253	436	877	1,176
Commercial Real Estate [Member]
Schedule Of Financing Receivable Impaired Investment [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	12,063	15,728	15,865	14,786
Impaired Loans with no related allowance recorded: Interest Income Recognized	178	186	599	556
Impaired Loans with an allowance recorded: Average Recorded Investment	1,925	9,256	4,565	7,488
Impaired Loans with an allowance recorded: Interest Income Recognized	10	124	71	259
Total Average Recorded Investment	13,988	24,984	20,430	22,274
Total Interest Income Recognized	188	310	670	815
Construction and Land Development [Member]
Schedule Of Financing Receivable Impaired Investment [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	1,421	4,878	2,217	4,946
Impaired Loans with no related allowance recorded: Interest Income Recognized	3	27	32	86
Impaired Loans with an allowance recorded: Average Recorded Investment	545	923	445	1,305
Impaired Loans with an allowance recorded: Interest Income Recognized	0	0	0	0
Total Average Recorded Investment	1,966	5,801	2,662	6,251
Total Interest Income Recognized	3	27	32	86
Commercial and Industrial [Member]
Schedule Of Financing Receivable Impaired Investment [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	3,034	4,955	2,968	4,509
Impaired Loans with no related allowance recorded: Interest Income Recognized	7	28	18	106
Impaired Loans with an allowance recorded: Average Recorded Investment	3,392	2,480	3,628	3,454
Impaired Loans with an allowance recorded: Interest Income Recognized	14	16	42	35
Total Average Recorded Investment	6,426	7,435	6,596	7,963
Total Interest Income Recognized	21	44	60	141
Owner occupied Real Estate [Member]
Schedule Of Financing Receivable Impaired Investment [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	465	673	299	1,013
Impaired Loans with no related allowance recorded: Interest Income Recognized	4	3	4	30
Impaired Loans with an allowance recorded: Average Recorded Investment	3,013	3,123	3,201	2,315
Impaired Loans with an allowance recorded: Interest Income Recognized	37	48	110	96
Total Average Recorded Investment	3,478	3,796	3,500	3,328
Total Interest Income Recognized	41	51	114	126
Consumer and Other [Member]
Schedule Of Financing Receivable Impaired Investment [Line Items]
Impaired Loans with no related allowance recorded: Average Recorded Investment	538	898	700	866
Impaired Loans with no related allowance recorded: Interest Income Recognized	0	4	1	8
Impaired Loans with an allowance recorded: Average Recorded Investment	163	121	87	73
Impaired Loans with an allowance recorded: Interest Income Recognized	0	0	0	0
Total Average Recorded Investment	701	1,019	787	939
Total Interest Income Recognized	$ 0	$ 4	$ 1	$ 8

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Loans Receivable and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2013

Loans and Leases Receivable Disclosure [Abstract]

Gross Loans By Loan Portfolio Class

The following table sets forth the Company’s gross loans by major categories as of September 30, 2013 and December 31, 2012:

(dollars in thousands)	September 30, 2013				December 31, 2012
Commercial real estate		$	328,486		$	335,561
Construction and land development			25,238			26,659
Commercial and industrial			113,302			103,768
Owner occupied real estate			150,594			126,242
Consumer and other			30,595			23,449
Residential mortgage			2,374			2,442
Total loans receivable			650,589			618,121
Deferred costs (fees)			(352	)		(220	)
Allowance for loan losses			(8,704	)		(9,542	)
Net loans receivable		$	641,533		$	608,359

Impaired Loans By Loan Portfolio Class

The following table summarizes information with regard to impaired loans by loan portfolio class as of September 30, 2013 and December 31, 2012:

	September 30, 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	$	10,161	$	10,281	$	-	$	19,231	$	20,000	$	-
Construction and land development		1,025		4,244		-		3,153		6,312		-
Commercial and industrial		3,064		4,352		-		3,793		7,106		-
Owner occupied real estate		547		867		-		505		505		-
Consumer and other		459		711		-		912		1,146		-
Total	$	15,256	$	20,455	$	-	$	27,594	$	35,069	$	-

With an allowance recorded:
Commercial real estate	$	606	$	606	$	134	$	6,085	$	6,085	$	1,077
Construction and land development		593		3,700		217		593		3,700		70
Commercial and industrial		3,274		5,674		815		3,147		3,255		861
Owner occupied real estate		2,920		2,920		444		3,450		3,450		860
Consumer and other		203		209		9		146		155		75
Total	$	7,596	$	13,109	$	1,619	$	13,421	$	16,645	$	2,943

Total:
Commercial real estate	$	10,767	$	10,887	$	134	$	25,316	$	26,085	$	1,077
Construction and land development		1,618		7,944		217		3,746		10,012		70
Commercial and industrial		6,338		10,026		815		6,940		10,361		861
Owner occupied real estate		3,467		3,787		444		3,955		3,955		860
Consumer and other		662		920		9		1,058		1,301		75
Total	$	22,852	$	33,564	$	1,619	$	41,015	$	51,714	$	2,943

Average Of Impaired Loans And Related Interest Income By Loan Portfolio Class

The following table presents additional information regarding the Company’s impaired loans for the three months ended September 30, 2013 and September 30, 2012:

	Three Months Ended September 30,
	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	$	12,063	$	178	$	15,728	$	186
Construction and land development		1,421		3		4,878		27
Commercial and industrial		3,034		7		4,955		28
Owner occupied real estate		465		4		673		3
Consumer and other		538		-		898		4
Total	$	17,521	$	192	$	27,132	$	248

With an allowance recorded:
Commercial real estate	$	1,925	$	10	$	9,256	$	124
Construction and land development		545		-		923		-
Commercial and industrial		3,392		14		2,480		16
Owner occupied real estate		3,013		37		3,123		48
Consumer and other		163		-		121		-
Total	$	9,038	$	61	$	15,903	$	188

Total:
Commercial real estate	$	13,988	$	188	$	24,984	$	310
Construction and land development		1,966		3		5,801		27
Commercial and industrial		6,426		21		7,435		44
Owner occupied real estate		3,478		41		3,796		51
Consumer and other		701		-		1,019		4
Total	$	26,559	$	253	$	43,035	$	436

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately $113,000 and $225,000 for the three months ended September 30, 2013 and 2012, respectively.

The following table presents additional information regarding the Company’s impaired loans for the nine months ended September 30, 2013 and September 30, 2012:

	Nine Months Ended September 30,
	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		$	15,865		$	599	$	14,786		$	556
Construction and land development			2,217			32		4,946			86
Commercial and industrial			2,968			18		4,509			106
Owner occupied real estate			299			4		1,013			30
Consumer and other			700			1		866			8
Total		$	22,049		$	654	$	26,120		$	786

With an allowance recorded:
Commercial real estate	$	4,565	$	71	$	7,488	$	259
Construction and land development		445		-		1,305		-
Commercial and industrial		3,628		42		3,454		35
Owner occupied real estate		3,201		110		2,315		96
Consumer and other		87		-		73		-
Total	$	11,926	$	223	$	14,635	$	390

Total:
Commercial real estate	$	20,430	$	670	$	22,274	$	815
Construction and land development		2,662		32		6,251		86
Commercial and industrial		6,596		60		7,963		141
Owner occupied real estate		3,500		114		3,328		126
Consumer and other		787		1		939		8
Total	$	33,975	$	877	$	40,755	$	1,176

Activity In And Ending Balances Of The Allowance For Loan Losses By Loan Portfolio Class

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 and nine months ended September 30, 2013 and September 30, 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 September 30, 2013
Allowance for loan losses:
Beginning balance:		$	3,581			$	2,502			$	1,997			$	986			$	191			$	14		$	61			$	9,332
Charge-offs			(882	)			(5	)			-				(2	)			-				-			-				(889	)
Recoveries			-				-				10				-				1				-			-				11
Provisions (credits)			41				(473	)			(174	)			(17	)			20				-			853				250
Ending balance		$	2,740			$	2,024			$	1,833			$	967			$	212			$	14		$	914			$	8,704
Three months ended September 30, 2012
Allowance for loan losses:
Beginning balance:		$	3,961			$	1,416			$	1,816			$	1,626			$	134			$	16		$	416			$	9,385
Charge-offs			(133	)			-				(303	)			-				(1	)			-			-				(437	)
Recoveries			-				-				-				-				-				-			-				-
Provisions (credits)			794				(173	)			37				335				55				2			(200	)			850
Ending balance		$	4,622			$	1,243			$	1,550			$	1,961			$	188			$	18		$	216			$	9,798

(dollars in thousands)	Commercial Real Estate				Construction and Land Development				Commercial and Industrial				Owner Occupied Real Estate				Consumer and Other				Residential Mortgage				Unallocated			Total
Nine months ended September 30, 2013
Allowance for loan losses:
Beginning balance:		$	3,979			$	1,273			$	1,880			$	1,967			$	234			$	17			$	192		$	9,542
Charge-offs			(1,291	)			(60	)			(361	)			(321	)			(75	)			-				-			(2,108	)
Recoveries			54				-				15				-				26				-				-			95
Provisions (credits)			(2	)			811				299				(679	)			27				(3	)			722			1,175
Ending balance		$	2,740			$	2,024			$	1,833			$	967			$	212			$	14			$	914		$	8,704
Nine months ended September 30, 2012
Allowance for loan losses:
Beginning Balance:		$	7,372			$	558			$	1,928			$	1,963			$	113			$	23			$	93		$	12,050
Charge-offs			(899	)			(921	)			(1,063	)			-				(102	)			-				-			(2,985	)
Recoveries			-				105				-				-				28				-				-			133
Provisions (credits)			(1,851	)			1,501				685				(2	)			149				(5	)			123			600
Ending balance		$	4,622			$	1,243			$	1,550			$	1,961			$	188			$	18			$	216		$	9,798

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 September 30, 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
September 30, 2013
Allowance for loan losses:
Individually evaluated for impairment		$	134		$	217		$	815		$	444		$	9		$	-		$	-		$	1,619
Collectively evaluated for impairment			2,606			1,807			1,018			523			203			14			914			7,085
Total allowance for loan losses		$	2,740		$	2,024		$	1,833		$	967		$	212		$	14		$	914		$	8,704
Loans receivable:
Loans evaluated individually		$	10,767		$	1,618		$	6,338		$	3,467		$	662		$	-		$	-		$	22,852
Loans evaluated collectively			317,719			23,620			106,964			147,127			29,933			2,374			-			627,737
Total loans receivable		$	328,486		$	25,238		$	113,302		$	150,594		$	30,595		$	2,374		$	-		$	650,589

(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

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 September 30, 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 September 30, 2013
Commercial real estate	$	-	$	3,463	$	987	$	4,450	$	324,036	$	328,486	$	-
Construction and land development		-		-		1,618		1,618		23,620		25,238		-
Commercial and industrial		-		2,978		4,023		7,001		106,301		113,302		-
Owner occupied real estate		340		960		205		1,505		149,089		150,594		-
Consumer and other		40		-		662		702		29,893		30,595		-
Residential mortgage		-		-		-		-		2,374		2,374		-
Total	$	380	$	7,401	$	7,495	$	15,276	$	635,313	$	650,589	$	-

(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]

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 September 30, 2013 and December 31, 2012:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
At September 30, 2013:
Commercial real estate	$	301,011	$	16,150	$	11,325	$	-	$	328,486
Construction and land development		23,620		-		1,618		-		25,238
Commercial and industrial		105,765		1,164		6,373		-		113,302
Owner occupied real estate		146,309		1,160		3,125		-		150,594
Consumer and other		29,600		75		920		-		30,595
Residential mortgage		2,374		-		-		-		2,374
Total	$	608,679	$	18,549	$	23,361	$	-	$	650,589

(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

The following table shows non-accrual loans by class as of September 30, 2013 and December 31, 2012:

(dollars in thousands)	September 30, 2013			December 31, 2012
Commercial real estate		$	987		$	7,987
Construction and land development			1,618			1,342
Commercial and industrial			4,023			4,693
Owner occupied real estate			205			968
Consumer and other			662			856
Residential mortgage			-			-
Total		$	7,495		$	15,846

Troubled Debt Restructurings

The following table summarizes the balance of outstanding TDRs at September 30, 2013 and December 31, 2012:

(dollars in thousands)	Number of Loans		Accrual Status			Non- Accrual Status			Total TDRs
September 30, 2013
Commercial real estate		1		$	300		$	-		$	300
Construction and land development		-			-			-			-
Commercial and industrial		1			2,201			-			2,201
Owner occupied real estate		1			1,904			-			1,904
Consumer and other		-			-			-			-
Residential mortgage		-			-			-			-
Total		3		$	4,405		$	-		$	4,405
December 31, 2012
Commercial real estate		1		$	1,261		$	-		$	1,261
Construction and land development		1			2,069			-			2,069
Commercial and industrial		1			2,248			-			2,248
Owner occupied real estate		1			1,933			-			1,933
Consumer and other		-			-			-			-
Residential mortgage		-			-			-			-
Total		4		$	7,511		$	-		$	7,511

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 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 sales 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 September 30, 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
September 30, 2013
Collateralized mortgage obligations	$	120,418	$	-	$	120,418	$	-
Mortgage-backed securities		15,586		-		15,586		-
Municipal securities		8,002		-		8,002		-
Corporate bonds		32,993		-		29,987		3,006
Asset-backed securities		19,558		-		19,558		-
Trust Preferred Securities		3,048		-		-		3,048
Other securities		117		-		117		-
Securities Available for Sale	$	199,722	$	-	$	193,668	$	6,054

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 sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2013 and 2012:

	Three Months Ended September 30, 2013					Three Months Ended September 30, 2012
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities			Corporate Bonds		Trust Preferred Securities			Corporate Bonds
Balance,  July 1st	$	3,162		$	3,006	$	3,175		$	3,007
Unrealized gains		308			-		255			1
Paydowns		(422	)		-		(314	)		-
Impairment charges on Level 3		-			-		-			-
Balance,  September 30th	$	3,048		$	3,006	$	3,116		$	3,008

	Nine Months Ended September 30, 2013						Nine Months Ended September 30, 2012
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities			Corporate Bonds			Trust Preferred Securities			Corporate Bonds
Balance,  January 1st	$	3,187		$	3,007		$	3,410		$	3,004
Unrealized gains (losses)		301			(1	)		144			4
Paydowns		(440	)		-			(407	)		-
Impairment charges on Level 3		-			-			(31	)		-
Balance, September 30th	$	3,048		$	3,006		$	3,116		$	3,008

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 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
September 30, 2013:
Impaired loans	$	8,356	$	-	$	-	$	8,356
Other real estate owned		3,323		-		-		3,323
SBA servicing assets		3,075		-		-		3,075
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 September 30, 2013
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range Weighted Average
Impaired loans	$	8,356	Fair Value of Collateral (1)	Appraised Value (2)	0% - 42% (26%) (4)
Other real estate owned	$	3,323	Fair Value of Collateral (1)	Appraised Value (2) Sales Price	7% - 26% (20%) (4)
SBA Servicing Assets	$	3,075	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 presentedas 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 and nine months ended September 30, 2013 and 2012:

	Three Months Ended September 30,					Nine Months Ended September 30,
(dollars in thousands)	2013			2012		2013			2012
Beginning balance	$	2,904		$	1,630	$	2,340		$	1,102
Additions		283			263		911			741
Fair value adjustments		(112	)		18		(176	)		68
Ending balance	$	3,075		$	1,911	$	3,075		$	1,911

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 September 30, 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 September 30, 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 than 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. 

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.

Also included in Level 3 investment securities classified as available for sale is a single-issuer corporate bond 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 September 30, 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 June 30, 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)	September 30, 2013				December 31, 2012
SBA Servicing Asset
Fair Value of SBA Servicing Asset		$	3,075			$	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	21.3 years				21.4 years
Prepayment Speed			6.42	%			6.59	%
Effect on fair value of a 10% increase		$	(71	)		$	(55	)
Effect on fair value of a 20% increase			(139	)			(107	)
Weighted Average Discount Rate			14.01	%			14.23	%
Effect on fair value of a 10% increase		$	(146	)		$	(115	)
Effect on fair value of a 20% increase			(282	)			(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 its 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 September 30, 2013 and December 31, 2012:

	Fair Value Measurements at September 30, 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	$	44,305	$	44,305		$	44,305	$	-	$	-
Investment securities available for sale		199,722		199,722			-		193,668		6,054
Investment securities held to maturity		69		69			-		69		-
Restricted stock		1,570		1,570			-		1,570		-
Loans held for sale		7,130		7,728			-		-		7,728
Loans receivable, net		641,533		634,657			-		-		634,657
SBA servicing assets		3,075		3,075			-		-		3,075
Accrued interest receivable		2,920		2,920			-		2,920		-
Financial liabilities:
Deposits
Demand, savings and money market	$	761,926	$	761,926		$	-	$	761,926	$	-
Time		83,577		84,036			-		84,036		-
Subordinated debt		22,476		17,960			-		-		17,960
Accrued interest payable		309		309			-		309		-
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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Summary of Significant Accounting Policies (Summary Of Assumptions) (Details)	9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012
Dividend yield (in hundredths)	0.00%	[1]	0.00%	[1]
Expected life	7 years	[2]	7 years	[2]
Minimum [Member]
Expected volatility (in hundredths)	54.88%	[3]	53.12%	[3]
Risk-free interest rate (in hundredths)	1.28%	[4]	1.01%	[4]
Maximum [Member]
Expected volatility (in hundredths)	55.08%	[3]	54.49%	[3]
Risk-free interest rate (in hundredths)	2.02%	[4]	1.61%	[4]

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

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

[3] Expected volatility is based on Bloomberg’s seven year volatility calculation for “FRBK” stock.

[4] The risk-free interest rate is based on the seven year Treasury bond.

XML

Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value of Financial Instruments [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 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
September 30, 2013
Collateralized mortgage obligations	$	120,418	$	-	$	120,418	$	-
Mortgage-backed securities		15,586		-		15,586		-
Municipal securities		8,002		-		8,002		-
Corporate bonds		32,993		-		29,987		3,006
Asset-backed securities		19,558		-		19,558		-
Trust Preferred Securities		3,048		-		-		3,048
Other securities		117		-		117		-
Securities Available for Sale	$	199,722	$	-	$	193,668	$	6,054

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

The following table presents a reconciliation of the securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2013 and 2012:

	Three Months Ended September 30, 2013					Three Months Ended September 30, 2012
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities			Corporate Bonds		Trust Preferred Securities			Corporate Bonds
Balance,  July 1st	$	3,162		$	3,006	$	3,175		$	3,007
Unrealized gains		308			-		255			1
Paydowns		(422	)		-		(314	)		-
Impairment charges on Level 3		-			-		-			-
Balance,  September 30th	$	3,048		$	3,006	$	3,116		$	3,008

	Nine Months Ended September 30, 2013						Nine Months Ended September 30, 2012
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities			Corporate Bonds			Trust Preferred Securities			Corporate Bonds
Balance,  January 1st	$	3,187		$	3,007		$	3,410		$	3,004
Unrealized gains (losses)		301			(1	)		144			4
Paydowns		(440	)		-			(407	)		-
Impairment charges on Level 3		-			-			(31	)		-
Balance, September 30th	$	3,048		$	3,006		$	3,116		$	3,008

Fair Value Measurements, Nonrecurring

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 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
September 30, 2013:
Impaired loans	$	8,356	$	-	$	-	$	8,356
Other real estate owned		3,323		-		-		3,323
SBA servicing assets		3,075		-		-		3,075
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

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 September 30, 2013
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range Weighted Average
Impaired loans	$	8,356	Fair Value of Collateral (1)	Appraised Value (2)	0% - 42% (26%) (4)
Other real estate owned	$	3,323	Fair Value of Collateral (1)	Appraised Value (2) Sales Price	7% - 26% (20%) (4)
SBA Servicing Assets	$	3,075	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 presentedas a percent of the appraised value.

Schedule of Servicing Assets at Fair Value

The following table presents an analysis of the activity in the SBA servicing assets for the three and nine months ended September 30, 2013 and 2012:

	Three Months Ended September 30,					Nine Months Ended September 30,
(dollars in thousands)	2013			2012		2013			2012
Beginning balance	$	2,904		$	1,630	$	2,340		$	1,102
Additions		283			263		911			741
Fair value adjustments		(112	)		18		(176	)		68
Ending balance	$	3,075		$	1,911	$	3,075		$	1,911

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

At June 30, 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)	September 30, 2013				December 31, 2012
SBA Servicing Asset
Fair Value of SBA Servicing Asset		$	3,075			$	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	21.3 years				21.4 years
Prepayment Speed			6.42	%			6.59	%
Effect on fair value of a 10% increase		$	(71	)		$	(55	)
Effect on fair value of a 20% increase			(139	)			(107	)
Weighted Average Discount Rate			14.01	%			14.23	%
Effect on fair value of a 10% increase		$	(146	)		$	(115	)
Effect on fair value of a 20% increase			(282	)			(222	)

Fair Value, by Balance Sheet Grouping

The estimated fair values of the Company’s financial instruments were as follows at September 30, 2013 and December 31, 2012:

	Fair Value Measurements at September 30, 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	$	44,305	$	44,305		$	44,305	$	-	$	-
Investment securities available for sale		199,722		199,722			-		193,668		6,054
Investment securities held to maturity		69		69			-		69		-
Restricted stock		1,570		1,570			-		1,570		-
Loans held for sale		7,130		7,728			-		-		7,728
Loans receivable, net		641,533		634,657			-		-		634,657
SBA servicing assets		3,075		3,075			-		-		3,075
Accrued interest receivable		2,920		2,920			-		2,920		-
Financial liabilities:
Deposits
Demand, savings and money market	$	761,926	$	761,926		$	-	$	761,926	$	-
Time		83,577		84,036			-		84,036		-
Subordinated debt		22,476		17,960			-		-		17,960
Accrued interest payable		309		309			-		309		-
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		-		-

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 11, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	REPUBLIC FIRST BANCORP INC
Entity Central Index Key	0000834285
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		25,972,897
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013

XML

Summary of Significant Accounting Policies (Stock-Based Compensation) (Narrative) (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Shares of common stock available for grant (in shares)	1,500,000
Vested shares (in shares)	127,287	61,000
Outstanding options (in shares)	1,199,780
Intrinsic value of outstanding shares	$ 562,985
Exercisable (vested) options	306,217
Instrinsic value of exerciseable shares	52,294
Forfeitures and expirations, weighted average grant date fair value	$ 289,760
Forfeited shares (in shares)	84,000
Minimum [Member]
Vesting period	1 year
Vesting period used in stock option valuation	3 years
Maximum [Member]
Vesting period	5 years
Vesting period used in stock option valuation	4 years
Maximum Term [Member]
Vesting period	10 years
Vesting period used in stock option valuation	10 years