2018

(Dollars in thousands, except per share data)

(unaudited)

	September 30, 2019			December 31, 2018
ASSETS
Cash and due from banks	$	57,562		$	35,685
Interest bearing deposits with banks		143,915			36,788
Cash and cash equivalents		201,477			72,473
Investment securities available for sale, at fair value		379,962			321,014
Investment securities held to maturity, at amortized cost (fair value of $699,054 and $747,323, respectively)		687,425			761,563
Restricted stock, at cost		2,371			5,754
Mortgage loans held for sale, at fair value		18,734			20,887
Other loans held for sale		2,476			5,404
Loans receivable (net of allowance for loan losses of $8,467 and $8,615, respectively)		1,560,913			1,427,983
Premises and equipment, net		111,573			87,661
Other real estate owned, net		6,653			6,223
Accrued interest receivable		9,277			9,025
Operating lease right-of-use asset		65,860			-
Goodwill		5,011			5,011
Other assets		34,189			30,299
Total Assets	$	3,085,921		$	2,753,297

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Demand – non-interest bearing	$	595,869		$	519,056
Demand – interest bearing		1,227,969			1,042,561
Money market and savings		698,991			676,993
Time deposits		217,203			154,257
Total Deposits		2,740,032			2,392,867
Short-term borrowings		-			91,422
Accrued interest payable		1,655			558
Other liabilities		12,482			12,002
Operating lease liability		69,646			-
Subordinated debt		11,263			11,259
Total Liabilities		2,835,078			2,508,108

Shareholders’ Equity
Preferred stock, par value $0.01 per share: 10,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, par value $0.01 per share: 100,000,000 shares authorized; shares issued 59,371,623 as of September 30, 2019 and 59,318,073 as of December 31, 2018; shares outstanding 58,842,778 as of September 30, 2019 and 58,789,228 as of December 31, 2018		594			593
Additional paid in capital		271,412			269,147
Accumulated deficit		(9,731	)		(8,716	)
Treasury stock at cost (503,408 shares as of September 30, 2019 and December 31, 2018)		(3,725	)		(3,725	)
Stock held by deferred compensation plan (25,437 shares as of September 30, 2019 and December 31, 2018)		(183	)		(183	)
Accumulated other comprehensive loss		(7,524	)		(11,927	)
Total Shareholders’ Equity		250,843			245,189
Total Liabilities and Shareholders’ Equity	$	3,085,921		$	2,753,297

~~(unaudited)~~

September 30,
2017

December 31,
2016

ASSETS
Cash and due from banks $ 27,181 $ 19,830
Interest bearing deposits with banks 71,601 14,724
    Cash and cash equivalents 98,782 34,554

Investment securities available for sale, at fair value 377,757 369,739
Investment securities held to maturity, at amortized cost (fair value of $411,257 and $425,183, respectively) 416,987 432,499
Restricted stock, at cost 1,678 1,366
Loans held for sale 41,711 28,065
Loans receivable (net of allowance for loan losses of $8,258 and $9,155, respectively) 1,087,147 955,817
Premises and equipment, net 71,715 57,040
Other real estate owned, net 9,169 10,174
Accrued interest receivable 6,340 5,497
Goodwill 5,011 5,011
Intangible asset - 61
Other assets 25,266 24,108
    Total Assets $ 2,141,563 $ 1,923,931

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
   Demand – non-interest bearing $ 398,794 $ 324,912
   Demand – interest bearing 745,878 605,950
   Money market and savings 619,265 635,644
   Time deposits 121,468 111,164
       Total Deposits 1,885,405 1,677,670
Accrued interest payable 577 444
Other liabilities 8,716 8,883
Subordinated debt 21,663 21,881
    Total Liabilities 1,916,361 1,708,878

Shareholders' Equity
Preferred stock, par value $0.01 per share: 10,000,000 shares authorized; no shares issued and outstanding - -
Common stock, par value $0.01 per share: 100,000,000 shares authorized; shares issued 57,507,484 as of September 30, 2017 and 57,283,712 as of December 31, 2016; shares outstanding 56,978,639 as of September 30, 2017 and 56,754,867 as of December 31, 2016 575 573
Additional paid in capital 255,752 253,570
Accumulated deficit (21,721 ) (27,888 )
Treasury stock at cost (503,408 shares as of September 30, 2017 and December 31, 2016) (3,725 ) (3,725 )
Stock held by deferred compensation plan (25,437 shares as of September 30, 2017 and
December 31, 2016)
(183 ) (183 )
Accumulated other comprehensive loss (5,496 ) (7,294 )
    Total Shareholders' Equity 225,202 215,053
    Total Liabilities and Shareholders' Equity $ 2,141,563 $ 1,923,931

(See notes to consolidated financial statements)

Republic ~~First~~First Bancorp, Inc. and Subsidiaries

Consolidated ~~Statements~~Statements of ~~Income~~

Operations

For the Three and Nine Months Ended September 30 ~~2017~~, 2019 and ~~2016~~

2018

(Dollars in thousands, except per share data)

(unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Interest income:
Interest and fees on taxable loans	$	18,298		$	16,353	$	53,827		$	45,342
Interest and fees on tax-exempt loans		409			411		1,249			1,148
Interest and dividends on taxable investment securities		6,652			6,511		21,134			19,536
Interest and dividends on tax-exempt investment securities		72			130		131			367
Interest on federal funds sold and other interest-earning assets		777			153		1,631			388
Total interest income		26,208			23,558		77,972			66,781
Interest expense:
Demand- interest bearing		3,753			1,948		11,897			4,754
Money market and savings		1,813			1,308		4,893			3,454
Time deposits		1,123			386		2,608			1,121
Other borrowings		137			770		681			1,528
Total interest expense		6,826			4,412		20,079			10,857
Net interest income		19,382			19,146		57,893			55,924
Provision for loan losses		450			500		750			1,700
Net interest income after provision for loan losses		18,932			18,646		57,143			54,224
Non-interest income:
Loan and servicing fees		257			320		1,156			839
Mortgage banking income		2,797			2,580		8,048			7,948
Gain on sales of SBA loans		944			816		2,593			2,654
Service fees on deposit accounts		1,990			1,386		5,450			3,887
Gain (loss) on sale of investment securities		520			-		1,103			(1	)
Other non-interest income		46			29		175			107
Total non-interest income		6,554			5,131		18,525			15,434
Non-interest expenses:
Salaries and employee benefits		14,314			11,203		40,378			32,731
Occupancy		2,994			1,975		8,270			5,976
Depreciation and amortization		1,740			1,285		4,700			4,107
Legal		462			276		1,024			916
Other real estate owned		799			378		1,653			881
Appraisal and other loan expenses		476			583		1,327			1,316
Advertising		698			290		1,467			916
Data processing		1,434			1,009		3,780			2,773
Insurance		301			181		752			690
Professional fees		661			498		1,864			1,476
Automated teller machine expenses		526			498		1,689			1,327
Regulatory assessments and costs		62			396		904			1,258
Taxes, other		288			243		782			733
Other operating expenses		3,069			2,018		8,412			6,564
Total non-interest expense		27,824			20,833		77,002			61,664
Income (loss) before provision (benefit) for income taxes		(2,338	)		2,944		(1,334	)		7,994
Provision (benefit) for income taxes		(516	)		622		(319	)		1,524
Net income (loss)	$	(1,822	)	$	2,322	$	(1,015	)	$	6,470
Net income (loss) per share:
Basic	$	(0.03	)	$	0.04	$	(0.02	)	$	0.11
Diluted	$	(0.03	)	$	0.04	$	(0.02	)	$	0.11

~~(unaudited)~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016
Interest income:
Interest and fees on taxable loans $ 12,717 $ 10,446 $ 35,727 $ 30,259
Interest and fees on tax-exempt loans 272 261 791 702
Interest and dividends on taxable investment securities 4,653 2,591 14,163 7,805
Interest and dividends on tax-exempt investment securities 99 173 447 526
Interest on federal funds sold and other interest-earning assets 181 149 312 299
Total interest income 17,922 13,620 51,440 39,591
Interest expense:
Demand- interest bearing 772 553 2,075 1,471
Money market and savings 788 677 2,218 1,923
Time deposits 312 301 903 625
Other borrowings 338 303 1,046 898
Total interest expense 2,210 1,834 6,242 4,917
Net interest income 15,712 11,786 45,198 34,674
Provision for loan losses - 607 500 1,557
Net interest income after provision for loan losses 15,712 11,179 44,698 33,117
Non-interest income:
Loan and servicing fees 677 328 1,330 1,128
Mortgage banking income 3,159 2,405 8,551 2,405
Gain on sales of SBA loans 831 1,630 2,315 4,212
Service fees on deposit accounts 1,067 686 2,820 1,910
Gain (loss) on sale of investment securities - 2 (61 ) 656
Net securities impairment recognized in earnings - (2 ) - (7 )
Other non-interest income 44 93 130 281
Total non-interest income 5,778 5,142 15,085 10,585
Non-interest expenses:
Salaries and employee benefits 9,829 7,731 27,800 20,334
Occupancy 1,772 1,535 5,239 4,387
Depreciation and amortization 1,292 1,051 3,588 2,816
Legal 156 158 535 312
Other real estate owned 746 702 1,704 1,610
Advertising 394 218 861 537
Data processing 785 669 2,335 1,711
Insurance 277 262 750 656
Professional fees 454 352 1,389 1,167
Regulatory assessments and costs 355 296 1,008 1,011
Taxes, other 242 243 716 495
Other operating expenses 2,863 1,796 7,729 5,287
Total non-interest expense 19,165 15,013 53,654 40,323
Income before benefit for income taxes 2,325 1,308 6,129 3,379
Provision (benefit) for income taxes 4 (32 ) (38 ) (69 )
Net income $ 2,321 $ 1,340 $ 6,167 $ 3,448
Net income per share:
Basic $ 0.04 $ 0.04 $ 0.11 $ 0.09
Diluted $ 0.04 $ 0.03 $ 0.11 $ 0.09

(See notes to consolidated financial statements)

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Loss)

For the Three and Nine Months Ended September 30 ~~2017~~, 2019 and ~~2016~~

2018

(Dollars in thousands)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018

Net income (loss)	$	(1,822	)	$	2,322		$	(1,015	)	$	6,470

Other comprehensive income (loss), net of tax
Unrealized gains (losses) on securities (pre-tax $720, ($3,202), $5,495, and $(12,210), respectively)		583			(2,500	)		4,456			(9,536	)
Reclassification adjustment for securities (gains) losses (pre-tax ($520), $-, ($1,103), and $1, respectively)		(217	)		-			(894	)		1
Net unrealized gains (losses) on securities		366			(2,500	)		3,562			(9,535	)
Net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity:
Amortization of net unrealized holding losses to income during the period (pre-tax $393, $37, $1,037, and $106 respectively)		318			29			841			83

Total other comprehensive income (loss)		684			(2,471	)		4,403			(9,452	)

Total comprehensive income (loss)	$	(1,138	)	$	(149	)	$	3,388		$	(2,982	)

~~(unaudited)~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016

Net income $ 2,321 $ 1,340 $ 6,167 $ 3,448

Other comprehensive income (loss), net of tax
Unrealized gain (loss) on securities (pre-tax $(7), $(1,082), $2,615, and $3,386, respectively) (5 ) (693 ) 1,676 2,170
Reclassification adjustment for securities losses/(gains) (pre-tax $-, $(2), $61, and $(656), respectively) - (1 ) 39 (420 )
Reclassification adjustment for impairment charge (pre-tax $-, $2, $-, and $7, respectively) - 1 - 4
Net unrealized gains (losses) on securities (5 ) (693 ) 1,715 1,754
Net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity:
Amortization of net unrealized holding losses to income during the period (pre-tax $44, $38, $129, and $133, respectively) 28 24 83 85

Total other comprehensive income (loss) 23 (669 ) 1,798 1,839

Total comprehensive income $ 2,344 $ 671 $ 7,965 $ 5,287

~~(See notes to consolidated financial statements)~~

~~Republic First Bancorp, Inc. and Subsidiaries~~

~~Consolidated Statements of Cash Flows~~

~~For the Nine Months Ended September 30, 2017 and 2016~~

~~(Dollars in thousands)~~

~~(unaudited)~~

Nine Months Ended September 30,
2017 2016
Cash flows from operating activities
Net income $ 6,167 $ 3,448
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for loan losses 500 1,557
Write down of other real estate owned 777 521
Depreciation and amortization 3,588 2,816
Stock based compensation 1,329 562
Loss (gain) on sale of investment securities 61 (656 )
Impairment charges on investment securities - 7
Amortization of premiums on investment securities 1,788 1,172
Accretion of discounts on retained SBA loans (859 ) (1,057 )
Fair value adjustments on SBA servicing assets 711 894
Proceeds from sales of SBA loans originated for sale 28,564 48,031
SBA loans originated for sale (22,395 ) (43,016 )
Gains on sales of SBA loans originated for sale (2,315 ) (4,212 )
Proceeds from sales of mortgage loans originated for sale 263,689 79,029
Mortgage loans originated for sale (274,133 ) (82,240 )
Gains on sales of mortgage loans originated for sale (7,056 ) (2,783 )
Amortization of intangible assets 61 17
Amortization of debt issuance costs 22 22
Increase in accrued interest receivable and other assets (3,720 ) (726 )
Decrease in accrued interest payable and other liabilities (34 ) (396 )
Net cash (used in) provided by operating activities (3,255 ) 2,990

Cash flows from investing activities
Purchase of investment securities available for sale (53,052 ) (117,812 )
Purchase of investment securities held to maturity (21,958 ) (69,792 )
Proceeds from the sale of securities available for sale 21,167 78,582
Proceeds from the paydowns, maturity, or call of securities available for sale 25,665 26,295
Proceeds from the paydowns, maturity, or call of securities held to maturity 36,629 21,106
Net (purchase) redemption of restricted stock (312 ) 1,693
Net increase in loans (131,100 ) (70,006 )
Net proceeds from sale of other real estate owned 357 1,387
Net cash paid in acquisition - (5,913 )
Premises and equipment expenditures (18,263 ) (12,122 )
Net cash used in investing activities (140,867 ) (146,582 )

Cash flows from financing activities
Net proceeds from exercise of stock options 615 226
Net increase in demand, money market and savings deposits 197,431 291,385
Net increase in time deposits 10,304 41,549
Decrease in short-term borrowings - (66,666 )
Net cash provided by financing activities 208,350 266,494

Net increase in cash and cash equivalents 64,228 122,902
Cash and cash equivalents, beginning of year 34,554 27,139
Cash and cash equivalents, end of period $ 98,782 $ 150,041

Supplemental disclosures
Interest paid $ 6,109 $ 5,011
Income taxes paid $ 75 $ 90
Non-cash transfers from loans to other real estate owned $ 129 $ 616
Conversion of subordinated debt to common stock $ 240 -

(See notes to consolidated financial statements)

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of ~~Changes in Shareholders' Equity~~

Cash Flows

For the NineMonths Ended September 30 ~~2017~~, 2019 and ~~2016~~

2018

(Dollars in thousands)

(unaudited)

	Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities
Net income (loss)	$	(1,015	)	$	6,470
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses		750			1,700
Write down of other real estate owned		240			18
Depreciation and amortization		4,700			4,107
Stock based compensation		2,005			1,584
Net (gain) loss on sale of investment securities		(1,103	)		1
Amortization of premiums on investment securities		2,257			2,271
Accretion of discounts on retained SBA loans		(1,083	)		(1,073	)
Fair value adjustments on SBA servicing assets		1,106			1,252
Proceeds from sales of SBA loans originated for sale		37,916			36,811
SBA loans originated for sale		(32,395	)		(34,969	)
Gains on sales of SBA loans originated for sale		(2,593	)		(2,654	)
Proceeds from sales of mortgage loans originated for sale		246,816			355,181
Mortgage loans originated for sale		(239,045	)		(335,734	)
Fair value adjustment for mortgage loans originated for sale		285			474
Gains on sales of mortgage loans originated for sale		(6,215	)		(6,400	)
Amortization of debt issuance costs		4			5
Non-cash expense related to leases		924			-
Increase in accrued interest receivable and other assets		(4,524	)		(1,278	)
Increase (decrease) in accrued interest payable and other liabilities		2,996			(1,049	)
Net cash provided by operating activities		12,026			26,717

Cash flows from investing activities
Purchase of investment securities available for sale		(150,734	)		(81,744	)
Purchase of investment securities held to maturity		-			(61,083	)
Proceeds from the sale of securities available for sale		54,742			5,713
Proceeds from the maturity or call of securities available for sale		41,571			39,409
Proceeds from the maturity or call of securities held to maturity		73,890			46,156
Redemption of restricted stock		3,383			2
Net increase in loans		(133,667	)		(217,967	)
Net proceeds from sale of other real estate owned		401			495
Premises and equipment expenditures		(28,612	)		(11,072	)
Net cash used in investing activities		(139,026	)		(280,091	)

Cash flows from financing activities
Net proceeds from exercise of stock options		261			668
Net increase in demand, money market and savings deposits		284,219			324,658
Net increase in time deposits		62,946			12,405
Repayment of short-term borrowings		(91,422	)		-
Net cash provided by financing activities		256,004			337,731

Net increase in cash and cash equivalents		129,004			84,357
Cash and cash equivalents, beginning of year		72,473			61,942
Cash and cash equivalents, end of period	$	201,477		$	146,299

Supplemental disclosures
Interest paid	$	18,982		$	10,749
Non-cash transfers from loans to other real estate owned	$	1,071		$	315
Conversion of subordinated debt to common stock	$	-		$	10,094

~~(unaudited)~~

Common
Stock

Additional Paid in Capital

Accumulated Deficit

Treasury
Stock
Stock Held by Deferred Compensation Plan Accumulated Other Comprehensive Loss
Total Shareholders' Equity

Balance January 1, 2017 $ 573 $ 253,570 $ (27,888 ) $ (3,725 ) $ (183 ) $ (7,294 ) $ 215,053

Net income 6,167 6,167
Other comprehensive income, net of
tax
1,798 1,798
Stock based compensation 1,329 1,329
Conversion of subordinated debt to common stock (36,922 shares) 240 240
Options exercised (186,850 shares) 2 613 615

Balance September 30, 2017 $ 575 $ 255,752 $ (21,721 ) $ (3,725 ) $ (183 ) $ (5,496 ) $ 225,202

Balance January 1, 2016 $ 384 $ 152,897 $ (32,833 ) $ (3,725 ) $ (183 ) $ (3,165 ) $ 113,375

Net income 3,448 3,448
Other comprehensive income, net of tax 1,839 1,839
Stock based compensation 764 764
Options exercised (80,375 shares) 226 226

Balance September 30, 2016 $ 384 $ 153,887 $ (29,385 ) $ (3,725 ) $ (183 ) $ (1,326 ) $ 119,652

(See notes to consolidated financial statements)

Republic First Bancorp, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the Three and Nine Months Ended September 30, 2019 and 2018

(Dollars in thousands)

(unaudited)

	Common Stock		Additional Paid in Capital		Accumulated Deficit			Treasury Stock			Stock Held by Deferred Compensation Plan			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity

Balance July 1, 2019	$	594	$	270,789	$	(7,909	)	$	(3,725	)	$	(183	)	$	(8,208	)	$	251,358

Net loss						(1,822	)											(1,822	)
Other comprehensive income, net of tax															684			684
Stock based compensation				623														623

Balance September 30, 2019	$	594	$	271,412	$	(9,731	)	$	(3,725	)	$	(183	)	$	(7,524	)	$	250,843

Balance January 1, 2019	$	593	$	269,147	$	(8,716	)	$	(3,725	)	$	(183	)	$	(11,927	)	$	245,189

Net loss						(1,015	)											(1,015	)
Other comprehensive income, net of tax															4,403			4,403
Stock based compensation				2,005														2,005
Options exercised (53,550 shares)		1		260														261

Balance September 30, 2019	$	594	$	271,412	$	(9,731	)	$	(3,725	)	$	(183	)	$	(7,524	)	$	250,843

Balance July 1, 2018	$	593	$	267,974	$	(13,195	)	$	(3,725	)	$	(183	)	$	(16,130	)	$	235,334

Net income						2,322												2,322
Other comprehensive loss, net of tax															(2,471	)		(2,471	)
Stock based compensation				532														532
Options exercised (28,750 shares)				107														107

Balance September 30, 2018	$	593	$	268,613	$	(10,873	)	$	(3,725	)	$	(183	)	$	(18,601	)	$	235,824

Balance January 1, 2018	$	575	$	256,285	$	(18,983	)	$	(3,725	)	$	(183	)	$	(7,509	)	$	226,460

Reclassification due to the adoption of ASU 2018-02						1,640									(1,640	)		-
Net income						6,470												6,470
Other comprehensive loss, net of tax															(9,452	)		(9,452	)
Stock based compensation				1,584														1,584
Conversion of subordinated debt to common stock (1,624,614 shares)		16		10,078														10,094
Options exercised (174,225 shares)		2		666														668

Balance September 30, 2018	$	593	$	268,613	$	(10,873	)	$	(3,725	)	$	(183	)	$	(18,601	)	$	235,824

(See notes to consolidated financial statements)

Republic First Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

Note 1: Basis of Presentation

Republic First Bancorp, Inc. (the ~~"Company"~~“Company”) is a one-bank holding company organized and incorporated under the laws of the Commonwealth of Pennsylvania. It is comprised of one wholly-owned subsidiary, Republic First Bank, which does business under the name of Republic Bank ~~("Republic"~~(“Republic”). Republic is a Pennsylvania state chartered bank that offers a variety of banking services to individuals and businesses throughout the Greater Philadelphia, Southern New Jersey, and ~~South Jersey area~~New York City markets through its offices and store locations in Philadelphia, Montgomery, Delaware, Bucks, Camden, Burlington, Atlantic, Gloucester, and ~~Gloucester~~New York Counties. On July 28, 2016, Republic acquired all of the issued and outstanding limited liability company interests of Oak Mortgage Company, LLC ("(“Oak ~~Mortgage"~~Mortgage”) and, as a result, Oak Mortgage became a wholly owned subsidiary of Republic on that date. Oak Mortgage is headquartered in Marlton, NJ and is licensed to do business in Pennsylvania, Delaware, New Jersey, and Florida. On January 1, 2018, Oak Mortgage was merged into Republic and restructured as a division with Republic. The Oak Mortgage name is still utilized for marketing and branding purposes. The Company also has ~~three~~two unconsolidated subsidiaries, which are statutory trusts established by the Company in connection with its sponsorship of ~~three~~two 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 federal and state regulations governing virtually all aspects of their activities, including but not limited to, lines of business, liquidity, investments, the payment of dividends and others. Such regulations and the cost of adherence to such regulations can have a significant impact on earnings and financial condition.

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"~~(“FASB”). The FASB sets accounting principles generally accepted in the United States of America ("(“US ~~GAAP"~~GAAP”) that are followed to ensure consistent reporting of financial condition, results of operations, and cash flows. All material inter-company transactions have been eliminated. Events occurring subsequent to the date of the balance sheet have been evaluated for potential recognition or disclosure in the consolidated financial statements.

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"~~(“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~~period ended September 30, ~~2017~~2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~

2019.

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 heavily 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~~Company’s results of operations are subject to risks and uncertainties surrounding ~~Republic's~~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.

Mortgage Banking Activities and Mortgage Loans Held for Sale

~~Loans~~

Mortgage loans held for sale are originated and held until sold to permanent investors. ~~On July 28, 2016, management elected to adopt~~Management has adopted the fair value option in accordance with FASB Accounting Standards Codification ~~("ASC"~~(“ASC”) 820, Fair Value Measurements and Disclosures, and record loans held for sale at fair value.

Mortgage loans held for sale originated on or subsequent to the election of the fair value option, are recorded on the balance sheet at fair value. The fair value is determined on a recurring basis by utilizing quoted prices from dealers in such securities. ~~Gains and losses on loan sales~~Changes in fair value are ~~recorded~~reflected in ~~non-interest~~mortgage banking income ~~and direct~~in the statements of income. Direct loan origination costs are recognized when incurred and are included in non-interest expense in the statements of income.

Interest Rate Lock Commitments ~~("IRLCs"~~ (“IRLCs”)

Mortgage loan commitments known as interest rate locks that relate to the origination of a mortgage that will be held for sale upon funding are considered derivative instruments under the derivatives and hedging accounting guidance FASB ASC 815, Derivatives and Hedging. Loan commitments that are classified as derivatives are recognized at fair value on the balance sheet as other assets and other liabilities with changes in their fair values recorded as mortgage banking income and included in non-interest income in the statements of income. Outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of issuance through the date of loan funding, cancellation or expiration. Loan commitments generally range between 30 and 90 days; however, the borrower is not obligated to obtain the loan. Republic is subject to fallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs. Republic uses best efforts commitments to substantially eliminate these risks. The valuation of the IRLCs issued by Republic includes the value of the servicing released premium. Republic sells loans where the servicing is released, and the servicing released premium is included in the market price. See Note 1110 Derivatives and Risk Management ~~Activities.~~

Activities for further detail of IRLCs.

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"~~(“OTTI”) of investment securities, fair value of financial instruments, ~~(see "Note 7" below),~~ 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, past loss experience, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews and regulatory examinations, ~~borrowers'~~borrowers’ perceived financial and managerial strengths, the adequacy of underlying collateral, if collateral dependent, or present value of future cash flows, and other relevant and qualitative risk factors. Subsequent to foreclosure, an estimate for the carrying value of other real estate owned is normally determined through valuations that are periodically performed by management and the assets are carried at the lower of carrying amount or fair value, less the cost to sell. 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~~Company’s and ~~Republic's~~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"~~“other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the ~~prospect~~prospects 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 the investment. Once a decline in value is determined to be other-than-temporary, the portion of the decline related to credit impairment is charged to earnings.

In evaluating the ~~Company's~~Company’s ability to recover deferred tax assets, management considers all available positive and negative evidence, including the past operating results and forecasts of future taxable income. In determining future taxable income, management makes assumptions for the amount of taxable income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require management to make judgments about the future taxable income and are consistent with the plans and estimates used to manage the business. ~~Any exclusion of or~~A material reduction in estimated future taxable income may require management to record a valuation allowance against the deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in the period and could have a significant impact on future earnings.

Stock-Based Compensation

The Company has a Stock Option and Restricted Stock Plan ("(“the 2005 ~~Plan"~~Plan”), under which the Company granted options, restricted stock or stock appreciation rights to the ~~Company's~~Company’s employees, directors, and certain consultants. The 2005 Plan became effective on November 14, 1995, and was amended and approved at the ~~Company's~~Company’s 2005 annual meeting of shareholders. Under the terms of the 2005 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 could be available for grant under the 2005 Plan to 1.5 million shares, were available for such grants. As of September 30, ~~2017,~~2019, the only grants under the 2005 Plan were option grants. The 2005 Plan provided that the exercise price of each option granted equaled the market price of the ~~Company's~~Company’s stock on the date of the grant. Options granted pursuant to the 2005 Plan vest within one to four years and have a maximum term of 10 years. The 2005 Plan terminated on November 14, 2015 in accordance with the terms and conditions specified in the Plan agreement.

On April 29, 2014 the ~~Company's~~Company’s shareholders approved the 2014 Republic First Bancorp, Inc. Equity Incentive Plan (the ~~"2014 Plan"~~“2014 Plan”), under which the Company may grant options, restricted stock, stock units, or stock appreciation rights to the ~~Company's~~Company’s employees, directors, independent contractors, and consultants. Under the terms of the 2014 Plan, 2.6 million shares of common stock, plus an annual adjustment to be no less than 10% of the outstanding shares or such lower number as the Board of Directors may determine, are available for such grants. At September 30, ~~2017,~~2019, the maximum number of common shares issuable under the 2014 Plan was ~~5.9~~6.3 million shares. During the nine months ended September 30, ~~2017, 906,500~~2019, 1.3 million options were granted under the 2014 Plan with a fair value of ~~$3,188,984.~~

$2,900,495.

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 ~~2017~~2019 and ~~2016~~2018 are as follows:

	2019			2018
Dividend yield⁽¹⁾	0.0%			0.0%
Expected volatility⁽²⁾	28.81%			28.22%
Risk-free interest rate⁽³⁾	1.42%	to	2.78%	2.35%	to	2.96%
Expected life⁽⁴⁾ (years)	6.25			6.25
Assumed forfeiture rate⁽⁵⁾	4.0%			4.0%

2017 2016
Dividend yield⁽¹⁾
0.0% 0.0%
Expected volatility⁽²⁾
45.46% to 50.09% 46.38% to 52.54%
Risk-free interest rate⁽³⁾
1.89% to 2.26% 1.23% to 1.82%
Expected life⁽⁴⁾
5.5 to 7.0 years 5.5 to 7.0 years
Assumed forfeiture rate 6.0% 10.0%

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

⁽²⁾~~Expected~~The expected volatility iswas based on ~~Bloomberg's five and one-half~~the historical volatility of the Company’s common stock price as adjusted for certain historical periods of extraordinary volatility in order to ~~seven year volatility calculation~~provide a basis for ~~"FRBK" stock.~~

a reasonable estimate of fair value.

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

⁽⁴⁾

⁽⁴⁾The expected life reflects a 1 to 4 year vesting period, the maximum ten year term and review of historical behavior.

⁽⁵⁾Forfeiture rate is determined through forfeited and expired options as a percentage of options granted over the current three year period.

During the nine months ended September 30, ~~2017~~2019 and ~~2016, 526,624 options~~2018, 842,898 shares and ~~487,550 options~~753,864 shares vested, respectively. Expense is recognized ratably over the period required to vest. At September 30, ~~2017,~~2019, the intrinsic value of the ~~3,038,450~~5,007,725 options outstanding was ~~$12,954,271,~~$780,000, while the intrinsic value of the ~~1,379,848~~2,645,960 exercisable (vested) options was ~~$7,764,313.~~$753,000. At September 30, 2018, the intrinsic value of the 3,841,275 options outstanding was $6.7 million, while the intrinsic value of the 1,905,112 exercisable (vested) options was $5.4 million. During the nine months ended September 30, ~~2017, 186,850~~2019, 53,550 options were exercised ~~with~~resulting in cash ~~received~~receipts of ~~$615,226~~$261,143 and ~~14,100~~142,875 options were forfeited with a weighted average grant date fair value of ~~$53,246.~~$381,811. During the nine months ended September 30, ~~2016, 80,375~~2018, 174,225 options were exercised ~~with~~resulting in cash ~~received~~receipts of ~~$226,271~~$668,194 and ~~38,550~~70,125 options were forfeited with a weighted average grant date fair value of ~~$55,920.~~

$215,201.

Information regarding stock based compensation for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 is set forth below:

	2019		2018
Stock based compensation expense recognized	$	2,005,000	$	1,584,000
Number of unvested stock options		2,361,765		1,936,163
Fair value of unvested stock options	$	6,095,468	$	5,499,104
Amount remaining to be recognized as expense	$	4,183,148	$	3,886,278

September 30,
2017

September 30,
2016

Stock based compensation expense recognized $ 1,329,000 $ 764,000
Number of unvested stock options 1,658,602 1,316,476
Fair value of unvested stock options $ 4,553,854 $ 2,608,986
Amount remaining to be recognized as expense $ 2,966,049 $ 1,284,071

The remaining unrecognized expense amount of ~~$2,966,049~~$4,183,148 will be recognized ratably as expense through ~~July 2021.~~

August 2023.

Earnings per Share

Earnings per share ~~("EPS"~~(“EPS”) ~~consist~~consists 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”). CSEs consist of dilutive stock options granted through the ~~Company's~~Company’s stock option plans ~~and convertible securities related to~~for 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 net income. For the three and~~ nine months ended September 30, ~~2017~~2019 and 2016, 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 calculations.

September 30, 2018.

The calculation of EPS for the three and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 is as follows (in thousands, except per share amounts):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018

Net income (loss) -basic and diluted	$	(1,822	)	$	2,322	$	(1,015	)	$	6,470

Weighted average shares outstanding		58,843			58,774		58,830			58,213

Net income (loss) per share – basic	$	(0.03	)	$	0.04	$	(0.02	)	$	0.11

Weighted average shares outstanding (including dilutive CSEs)		58,843			59,774		58,830			59,338

Net income (loss) per share – diluted	$	(0.03	)	$	0.04	$	(0.02	)	$	0.11

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016

Net income (basic and diluted) $ 2,321 $ 1,340 $ 6,167 $ 3,448

Weighted average shares outstanding 56,974 37,916 56,915 37,879
Net income per share – basic $ 0.04 $ 0.04 $ 0.11 $ 0.09
Weighted average shares outstanding (including dilutive CSEs) 58,314 38,375 58,213 38,355
Net income per share – diluted $ 0.04 $ 0.03 $ 0.11 $ 0.09

The following is a summary of securities that could potentially dilute basic earnings per common share in future ~~periods that~~periods. These securities were not included in the computation of diluted earnings per common share because ~~to do so~~the effect would have been anti-dilutive for the periods presented.

(in thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2019

2018

2019

2018

Anti-dilutive securities

Share based compensation awards

2,845

2,720

(in thousands)
Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016

Anti-dilutive securities

Share based compensation awards 1,698 2,022 1,740 2,005

Convertible securities 1,625 1,662 1,625 1,662

Total anti-dilutive securities 3,323 3,684 3,365 3,667

Recent Accounting Pronouncements

ASU 2014-09

In May 2014, the FASB issued ~~ASU~~Accounting Standards Update (“ASU”) 2014-09, ~~"Revenue~~“Revenue from Contracts with Customers (Topic 660): Summary and Amendments that Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs – Contracts with Customers (Subtopic 340-40)."” ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The guidance in this update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the codification. In August 2015, the FASB issued ASU 2015-14, Revenue fromContracts with The Company (Topic 606): Deferral of the Effective Date. The guidance in this ASU is now effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. T~~he Company's~~The Company’s revenue is comprised of net interest income and ~~noninterest~~non-interest income. The scope of the guidance explicitly excludes interest income as well as many other revenues for financial assets and liabilities including revenue derived from loans, investment securities, and derivatives. ~~Accordingly,~~This ASU was effective for the ~~majority of our revenues will not be affected.~~Company on January 1, 2018. The Company ~~is currently assessing our revenue contracts related to revenue streams that are within the scope~~adopted this ASU on a modified retrospective approach. Since there was no net income impact upon adoption of the ~~standard including loan fees, service fees on deposit accounts,~~new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary. The adoption of this ASU did not have a material impact to its financial condition, results of operations, and ~~other categories of non-interest income. We are continuing~~consolidated financial statements. Refer to ~~evaluate specific contracts, but have not identified material changes~~Note 11: Revenue Recognition for further disclosure as to the ~~timing or amount~~impact of revenue recognition. We are also continuing to evaluate changes in our disclosures associated with our revenues. We expect to adopt the standard using the modified retrospective approach in the first quarter of 2018.

Topic 606.

ASU 2016-01

In January 2016, the FASB issued ~~Accounting Standards Update ("ASU")~~ASU No. 2016-01, Financial Instruments - Overall. The guidance in this ASU among other things, (1) requires equity investments with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (3) eliminates the requirement for public businesses entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (4) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (5) requires an entity to present separately in other comprehensive income the portion of the change in fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (6) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (7) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. The guidance in this ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The guidance was effective for the Company ~~has evaluated this~~on January 1, 2018 and was adopted using a modified retrospective approach. The adoption of ASU ~~and it is~~No. 2016-01 on January 1, 2018 did not ~~expected to~~ have a ~~significant~~material impact on the Company’s Consolidated Financial Statements. In accordance with (4) above, the Company measured the fair value of its ~~financial condition or results~~loan portfolio as of ~~operations.~~

December 31, 2018 using an exit price notion (see Note 7 Fair Value of Financial Instruments).

ASU 2016-02

In February 2016, the FASB issued ~~Accounting Standards Update ("ASU")~~ASU No. 2016-02, Leases. From the ~~Company's~~Company’s perspective, the new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases ~~will be~~are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement for lessees. From the landlord perspective, the new standard requires a lessor to classify leases as either sales-type, finance or operating. A lease ~~will be~~is treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor ~~doesn't~~doesn’t convey risks and rewards or control, an operating lease results. The new standard iswas effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A

In July 2018, the FASB issued ASU 2018-11 “Leases (Topic 842): Targeted Improvements,” which provided lessees the option to apply the new leasing standard to all open leases as of the adoption date. Prior to this ASU issuance, a modified retrospective transition approach ~~is required~~was required.

In December 2018, the FASB issued ASU 2018-20 "Leases (Topic 842): Narrow-Scope Improvements for Lessors," which provided lessors a policy election to not evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs. Additionally, the update requires certain lessors to exclude from variable payments lessor costs paid by lessees directly to third parties.

The Company adopted this ASU on January 1, 2019. The Company recognized an ROU asset of $34.2 million and total operating lease liability obligations of $35.1 million at January 1, 2019. Capital ratios remained in compliance with the regulatory definition of well capitalized. There were no material changes to the recognition of operating lease expense in the consolidated statements of income. The Company adopted certain practical expedients available under the new guidance, which did not require it to (1) reassess whether any expired or existing contracts contain leases, (2) reassess the lease classification for ~~capital~~any expired or existing leases, (3) reassess initial direct costs for any existing leases, and ~~operating leases existing~~(4) evaluate whether certain sales taxes and other similar taxes are lessor costs. The Company elected the use-of-hindsight practical expedient. Additionally, the Company elected to apply the new lease guidance at ~~or entered into after,~~the adoption date, rather than at the beginning of the earliest ~~comparative~~ period presented in the financial statements, with certain practical expedients available. A modified retrospective transition approach is required for lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. After evaluating the impact of the pending adoption of the new standard on its consolidated financial statements, the Company expects an increase of assets and liabilities on the Company's consolidated financial statements.

~~ASU 2016-09~~

In March 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 will amend current guidance such that all excess tax benefits and tax deficiencies related to share-based payment awards will be recognized as income tax expense or benefit in the income statement during the period in which they occur. Additionally, excess tax benefits will be classified along with other income tax cash flows as an operating activity rather than a financing activity. ASU 2016-09 also provides that any entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, which is the current requirement, or account for forfeitures when they occur. ASU 2016-09 was effective January 1, 2017. It currently does not have a material impact on the Company's consolidated financial statements, however depending upon the exercise timing of share based awards, the ASU could have a material impact on the consolidated financial statements going forward.

presented.

ASU 2016-13

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Company is currently evaluating the impact of this ASU, continuing its implementation efforts and reviewing the loss modeling requirements consistent with lifetime expected loss estimates. Calculations of expected losses under the new guidance are currently being run parallel to the calculations under existing guidance to assess and evaluate the potential impact to the Company’s financial statements. The Company expects that the new model will include different assumptions used in calculating credit losses, such as estimating losses over the estimated life of a financial asset and will consider expected future changes in macroeconomic conditions. The adoption of this ASU may result in an increase to the Company's allowance for loan losses which will depend upon the nature and characteristics of the Company's loan portfolio at the adoption date, as well as the macroeconomic conditions and forecasts at that date. For the Company, this update will be effective for interim and annual periods beginning after December 15, 2019. ~~The Company has not yet determined the impact the adoption of ASU 2016-13 will have on the consolidated financial statements.~~

ASU 2016-15

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The ASU addresses classification of certain cash receipts and cash payments in the statement of cash flows. The new guidance ~~is effective~~was adopted on January 1, 2018, on a retrospective ~~basis, with early~~basis. The adoption ~~permitted. This new accounting guidance will~~of 2016-15 did not result ~~in some~~any changes in ~~classification~~classifications in the Consolidated Statement of Cash Flows, which the Company does not expect will be significant, and will not have a material impact on the consolidated financial statements. Due to the current nature of the Company's operations and financial assets and liabilities in relation to the cash flow classifications impacted by the ASU, the Company has determined that the adoption of ASU 2016-15 will not have a material impact on the Company's financial statements.

Flows.

~~ASU-2017-01~~

ASU 2017-01

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805). The ASU clarifies the definition of a business in ASC 805. The FASB issued the ASU in response to stakeholder feedback that the definition of a business in ASC 805 is being applied too broadly. In addition, stakeholders said that analyzing transactions under the current definition is difficult and costly. Concerns about the definition of a business were among the primary issues raised in connection with the Financial Accounting ~~Foundation's~~Foundation’s post-implementation review report on FASB Statement No. 141(R), Business Combinations (codified in ASC 805). The amendments in the ASU are intended to make application of the guidance more consistent and cost-efficient. The ASU is effective for public business entities in annual periods beginning after December 15, 2017, including interim periods therein. For all other entities, the ASU is effective in annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The ASU must be applied prospectively on or after the effective date, and no disclosures for a change in accounting principle are required at transition. Early adoption is permitted for transactions (i.e., acquisitions or dispositions) that occurred before the issuance date or effective date of the standard if the transactions were not reported in financial statements that have been issued or made available for issuance. ~~The~~Unless the Company ~~has not yet determined~~enters into a business combination, the impact of the ~~adoption of~~ ASU ~~2017-01~~ will not have a material impact on the consolidated financial statements.

ASU 2017-04

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test For Goodwill Impairment. The ASU simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test. Instead, if ~~"the~~“the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit."” For public business entities that are SEC filers, the ASU is effective for annual and any interim impairment tests for periods beginning after December 15, 2019. The Company ~~has not yet determined~~early adopted this ASU on July 1, 2018 using the ~~impact the~~simplified method. The adoption of ASU 2017-04 ~~will~~did not have a material impact on the consolidated financial statements.

ASU 2017-08

In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Earlier application is permitted for all entities, including adoption in an interim period. If an entity early adopts the ASU in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The ~~Company has not yet determined the impact the~~ adoption of ASU 2017-08 ~~will~~did not have a material impact on the consolidated financial statements.

ASU 2017-09

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation: Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification in ASC 718. The ASU also provides that modification accounting is only required if the fair value, vesting conditions, or the classification of the award as equity or a liability changes as a result of the change in terms or conditions. The amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The ASU became effective January 1, 2018 on a prospective basis for awards modified on or after the adoption date. The adoption of ASU-2017-09 did not have a material impact on the consolidated financial statements.

ASU 2018-02

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows for reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act described in the "Income Taxes" section below. The amount of the reclassification should include the effect of the change in the federal corporate income tax rate related to items remaining in accumulated other comprehensive income (loss). The ASU would require an entity to disclose whether it elects to reclassify stranded tax effects from accumulated other comprehensive income (loss) to retained earnings in the period of adoption and, more generally, a description of the accounting policy for releasing income tax effects from accumulated other comprehensive income (loss). The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption of the amendments in this update is permitted for periods for which financial statements have not yet been issued or made available for issuance, including in the period the Act was enacted. The Company adopted this ASU on January 1, 2018, by recording the reclassification adjustment to its beginning retained earnings in the amount of $1.6 million. The Company utilized the portfolio approach when releasing tax effects from AOCI for its investment securities.

ASU 2018-03

In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10). The ASU was issued to clarify certain aspects of ASU 2016-01 such as treatment for discontinuations and adjustments for equity securities without a readily determinable market value, forward contracts and purchased options, presentation requirements for certain fair value option liabilities, fair value option liabilities denominated in a foreign currency, and transition guidance for equity securities without a readily determinable fair value. The Company adopted this ASU on January 1, 2018. The adoption of this ASU did not have a significant impact on the Company’s financial condition, results of operations and consolidated financial statements.

ASU 2018-07

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718). The ASU simplifies the accounting for share based payments granted to non-employees for goods and services. The ASU applies to all share based payment transactions in which a grantor acquires goods or services from non-employees to be used or consumed in a grantor’s own operations by issuing share based payment awards. With the amended guidance from ASU 2018-07, non-employees share based payments are measured with an estimate of the fair value of the equity of the business is obligated to issue at the grant date (the date that the business and the stock award recipient agree to the terms of the award). Compensation would be recognized in the same period and in the same manner as if the entity had paid cash for goods and services instead of stock. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company adopted this ASU on January 1, 2019. The adoption of this ASU did not have a significant impact on the Company’s financial condition, results of operations, and consolidated financial statements.

Note 3: Legal Proceedings

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

Note 4: Segment Reporting

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

Mortgage loans in Delaware and Florida are primarily made to local customers that have second homes (vacation) in Delaware and Florida. We do not have loan production offices in those states.

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, ~~2017~~2019 and December 31, ~~2016~~2018 is as follows:

	At September 30, 2019
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

U.S. Government agencies	$	29,404	$	16	$	-		$	29,420
Collateralized mortgage obligations		254,439		2,641		(691	)		256,389
Agency mortgage-backed securities		23,889		93		(81	)		23,901
Municipal securities		4,065		17		-			4,082
Corporate bonds		69,499		9		(3,338	)		66,170
Total securities available for sale	$	381,296	$	2,776	$	(4,110	)	$	379,962

U.S. Government agencies	$	98,481	$	1,192	$	(97	)	$	99,576
Collateralized mortgage obligations		448,807		9,962		(620	)		458,149
Agency mortgage-backed securities		140,137		1,768		(576	)		141,329
Total securities held to maturity	$	687,425	$	12,922	$	(1,293	)	$	699,054

	At December 31, 2018
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Collateralized mortgage obligations	$	197,812	$	567	$	(2,120	)	$	196,259
Agency mortgage-backed securities		39,105		5		(611	)		38,499
Municipal securities		20,807		64		(232	)		20,639
Corporate bonds		62,583		87		(3,396	)		59,274
Asset-backed securities		6,433		-		(90	)		6,343
Total securities available for sale	$	326,740	$	723	$	(6,449	)	$	321,014

U.S. Government agencies	$	107,390	$	-	$	(3,772	)	$	103,618
Collateralized mortgage obligations		500,690		570		(5,793	)		495,467
Agency mortgage-backed securities		153,483		-		(5,245	)		148,238
Total securities held to maturity	$	761,563	$	570	$	(14,810	)	$	747,323

At September 30, 2017

(dollars in thousands)

Amortized Cost
Gross Unrealized Gains Gross Unrealized Losses
Fair
Value

Collateralized mortgage obligations $ 244,170 $ 73 $ (4,239 ) $ 240,004
Agency mortgage-backed securities 43,906 3 (1,107 ) 42,802
Municipal securities 15,600 130 (71 ) 15,659
Corporate bonds 66,659 97 (2,427 ) 64,329
Asset-backed securities 13,858 1 (4 ) 13,855
Trust preferred securities 1,545 - (437 ) 1,108
Total securities available for sale $ 385,738 $ 304 $ (8,285 ) $ 377,757

U.S. Government agencies $ 104,446 $ 105 $ (1,710 ) $ 102,841
Collateralized mortgage obligations 179,928 512 (2,413 ) 178,027
Agency mortgage-backed securities 131,613 22 (2,246 ) 129,389
Other securities 1,000 - - 1,000
Total securities held to maturity $ 416,987 $ 639 $ (6,369 ) $ 411,257

At December 31, 2016

(dollars in thousands)

Amortized Cost
Gross Unrealized Gains Gross Unrealized Losses
Fair
Value

Collateralized mortgage obligations $ 230,252 $ 145 $ (5,632 ) $ 224,765
Agency mortgage-backed securities 37,973 32 (1,295 ) 36,710
Municipal securities 26,825 151 (429 ) 26,547
Corporate bonds 66,718 8 (1,978 ) 64,748
Asset-backed securities 15,565 - (416 ) 15,149
Trust preferred securities 3,063 - (1,243 ) 1,820
Total securities available for sale $ 380,396 $ 336 $ (10,993 ) $ 369,739

U.S. Government agencies $ 98,538 $ 8 $ (2,238 ) $ 96,308
Collateralized mortgage obligations 202,990 793 (2,553 ) 201,230
Agency mortgage-backed securities 129,951 1 (3,327 ) 126,625
Other securities 1,020 - - 1,020
Total securities held to maturity $ 432,499 $ 802 $ (8,118 ) $ 425,183

The following table presents investment securities by stated maturity at September 30, ~~2017.~~2019. Collateralized mortgage obligations and agency mortgage-backed securities have expected maturities that differ from contractual maturities because borrowers have the right to call or prepay with or without prepayment penalties and, therefore, these securities are classified separately with no specific maturity date.

	Available for Sale				Held to Maturity
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year or less	$	3,439	$	3,448	$	-	$	-
After 1 year to 5 years		20,839		20,855		11,487		11,617
After 5 years to 10 years		75,690		72,478		86,994		87,959
After 10 years		3,000		2,891		-		-
Collateralized mortgage obligations		254,439		256,389		448,807		458,149
Agency mortgage-backed securities		23,889		23,901		140,137		141,329
Total	$	381,296	$	379,962	$	687,425	$	699,054

Available for Sale Held to Maturity

(dollars in thousands)

Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value

Due in 1 year or less $ 1,154 $ 1,160 $ 1,000 $ 1,000
After 1 year to 5 years 10,603 10,675 6,038 6,046
After 5 years to 10 years 60,860 59,395 98,408 96,795
After 10 years 25,045 23,721 - -
Collateralized mortgage obligations 244,170 240,004 179,928 178,027
Agency mortgage-backed securities 43,906 42,802 131,613 129,389
Total $ 385,738 $ 377,757 $ 416,987 $ 411,257

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

The ~~Company's~~Company’s investment securities portfolio consists primarily of debt securities issued by U.S. government agencies, U.S. government-sponsored agencies, state governments, local municipalities and certain corporate entities. There were no private label mortgage-backed securities ~~("MBS"~~(“MBS��) or collateralized mortgage obligations ~~("CMO"~~(“CMO”) held in the investment securities portfolio as of September 30, ~~2017~~2019 and December 31, ~~2016.~~2018. There were also no MBS or CMO securities that were rated ~~"Alt-A"~~“Alt-A” or ~~"sub-prime"~~“sub-prime” as of those dates.

The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. Net unrealized gains and losses in the available for sale portfolio are included in ~~shareholders'~~shareholders’ equity as a component of accumulated other comprehensive income or loss, net of tax. Securities classified as held to maturity are carried at amortized cost. An unrealized loss exists when the current fair value of an individual security is less than the amortized cost basis.

The Company regularly evaluates investment securities that are in an unrealized loss position in order to determine if the decline in fair value is other than temporary. Factors considered in the evaluation include the current economic climate, the length of time and the extent to which the fair value has been below cost, the current interest rate environment and the rating of each security. An ~~other-than-temporary impairment ("OTTI")~~OTTI loss must be recognized for a debt security in an unrealized loss position if the Company intends to sell the security or it is more likely than not that it will be required to sell the security prior to recovery of the amortized cost basis. The amount of OTTI loss recognized is equal to the difference between the fair value and the amortized cost basis of the security that is attributed to credit deterioration. Accounting standards require the evaluation of the expected cash flows to be received to determine if a credit loss has occurred. In the event of a credit loss, that amount must be recognized against income in the current period. The portion of the unrealized loss related to other factors, such as liquidity conditions in the market or the current interest rate environment, is recorded in accumulated other comprehensive income (loss) for investment securities classified available for sale.

There were no impairment charges (credit losses) ~~were incurred~~ on ~~trust preferred~~any securities ~~during~~held in the portfolio for the three and nine ~~month periods~~months ended September 30, ~~2017. Impairment charges on trust preferred securities for the three month period ended~~2019 and September 30, ~~2016 amounted to $2,000. Impairment charges on trust preferred securities for the nine month period ended September 30, 2016 amounted to $7,000.~~

2018.

The following table presents a roll-forward of the balance of credit-related impairment losses on securities held at September 30, ~~2017~~2019 and ~~2016~~2018 for which a portion of OTTI was recognized in other comprehensive income:

(dollars in thousands)	2019		2018
Beginning Balance, January 1^st	$	-	$	274
Additional credit-related impairment loss on securities for which an other-than-temporary impairment was previously recognized		-		-
Reductions for securities sold during the period		-		-
Ending Balance, September 30^th	$	-	$	274

(dollars in thousands) 2017 2016

Beginning Balance, January 1^st
$ 937 $ 930
Additional credit-related impairment loss on securities for which an
other-than-temporary impairment was previously recognized - 7
Reductions for securities sold during the period (483 ) -
Ending Balance, September 30^th
$ 454 $ 937

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 in the available for sale and held to maturity section:

	At September 30, 2019
	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	$	55,237	$	623	$	9,339	$	68	$	64,576	$	691
Agency mortgage-backed securities		2,716		8		8,742		73		11,458		81
Corporate bonds		11,390		110		51,772		3,228		63,162		3,338
Total Available for Sale	$	69,343	$	741	$	69,853	$	3,369	$	139,196	$	4,110

	At September 30, 2019
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government agencies	$	13,938	$	70	$	3,750	$	27	$	17,688	$	97
Collateralized mortgage obligations		2,575		11		68,023		609		70,598		620
Agency mortgage-backed securities		-		-		69,551		576		69,551		576
Total Held to Maturity	$	16,513	$	81	$	141,324	$	1,212	$	157,837	$	1,293

At September 30, 2017
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 $ 106,932 $ 1,875 $ 85,469 $ 2,364 $ 192,401 $ 4,239
Agency mortgage-backed securities 37,066 994 5,064 113 42,130 1,107
Municipal securities 4,278 24 2,591 47 6,869 71
Corporate bonds 19,638 362 32,935 2,065 52,573 2,427
Asset backed securities - - 6,006 4 6,006 4
Trust preferred securities - - 1,108 437 1,108 437
Total Available for Sale $ 167,914 $ 3,255 $ 133,173 $ 5,030 $ 301,087 $ 8,285

	At December 31, 2018
	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	$	58,883	$	270	$	83,377	$	1,850	$	142,260	$	2,120
Agency mortgage-backed securities		1,134		10		16,768		601		17,902		611
Municipal securities		1,549		7		12,154		225		13,703		232
Corporate bonds		-		-		53,189		3,396		53,189		3,396
Asset backed securities		6,343		90		-		-		6,343		90
Total Available for Sale	$	67,909	$	377	$	165,488	$	6,072	$	233,397	$	6,449

At September 30, 2017
Less than 12 months 12 months or more Total

(dollars in thousands)
Fair
Value
Unrealized Losses
Fair
Value
Unrealized Losses
Fair
Value
Unrealized Losses

U.S. Government agencies $ 76,631 $ 1,267 $ 14,157 $ 443 $ 90,788 $ 1,710
Collateralized mortgage obligations 89,374 1,470 49,751 943 139,125 2,413
Agency mortgage-backed securities 79,935 1,691 17,499 555 97,434 2,246
Total Held to Maturity $ 245,940 $ 4,428 $ 81,407 $ 1,941 $ 327,347 $ 6,369

	At December 31, 2018
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government agencies	$	5,351	$	26	$	98,267	$	3,746	$	103,618	$	3,772
Collateralized mortgage obligations		44,574		475		173,467		5,318		218,041		5,793
Agency mortgage-backed securities		-		-		119,243		5,245		119,243		5,245
Total Held to Maturity	$	49,925	$	501	$	390,977	$	14,309	$	440,902	$	14,810

At December 31, 2016
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 $ 192,308 $ 5,380 $ 7,579 $ 252 $ 199,887 $ 5,632
Agency mortgage-backed securities 29,916 1,260 3,199 35 33,115 1,295
Municipal securities 15,414 429 - - 15,414 429
Corporate bonds 32,257 1,708 10,726 270 42,983 1,978
Asset backed securities - - 15,149 416 15,149 416
Trust preferred securities - - 1,820 1,243 1,820 1,243
Total Available for Sale $ 269,895 $ 8,777 $ 38,473 $ 2,216 $ 308,368 $ 10,993

At December 31, 2016
Less than 12 months 12 months or more Total

(dollars in thousands)
Fair
Value
Unrealized Losses
Fair
Value
Unrealized Losses
Fair
Value
Unrealized Losses

U.S. Government agencies $ 67,725 $ 2,198 $ 3,586 $ 40 $ 71,311 $ 2,238
Collateralized mortgage obligations 108,974 2,469 8,572 84 117,546 2,553
Agency mortgage-backed securities 97,725 3,327 - - 97,725 3,327
Total Held to Maturity $ 274,424 $ 7,994 $ 12,158 $ 124 $ 286,582 $ 8,118

Unrealized losses on securities in the investment portfolio amounted to ~~$14.7~~$5.4 million with a total fair value of ~~$628.4~~$297.0 million as of September 30, ~~2017~~2019 compared to unrealized losses of ~~$19.1~~$21.3 million with a total fair value of ~~$595.0~~$674.3 million as of December 31, ~~2016.~~2018. The Company believes the unrealized losses presented in the tables above are temporary in nature and primarily related to market interest rates or limited trading activity in particular type of security rather than the underlying credit quality of the issuers. The Company does not believe that these losses are other than temporary and does not currently intend to sell or believe it will be required to sell securities in an unrealized loss position prior to maturity or recovery of the amortized cost bases.

The Company held ~~nine~~four U.S. Government agency securities, ~~fifty-seven~~twenty-nine collateralized mortgage obligations and ~~twenty-one~~seventeen agency mortgage-backed securities that were in an unrealized loss position at September 30, ~~2017.~~2019. Principal and interest payments of the underlying collateral for each of these securities are backed by U.S. Government sponsored agencies and carry minimal credit risk. Management found no evidence of OTTI on any of these securities and believes the unrealized losses are due to fluctuations in fair values resulting from changes in market interest rates and are considered temporary as of September 30, ~~2017.~~

2019.

All municipal securities held in the investment portfolio are reviewed on least a quarterly basis for impairment. Each bond carries an investment grade rating by either ~~Moody's~~Moody’s or Standard & ~~Poor's.~~Poor’s. In addition, the Company periodically conducts its own independent review on each issuer to ensure the financial stability of the municipal entity. The largest geographic concentration was in Pennsylvania and New Jersey and consisted of either general obligation or revenue bonds backed by the taxing power of the issuing municipality. At September 30, ~~2017, there were ten~~2019, the investment portfolio included no municipal securities that were in an unrealized loss position. ~~Management believes the unrealized losses were the result of movements in long-term interest rates and are not reflective of credit deterioration.~~

At September 30, ~~2017,~~2019, the investment portfolio included one asset-backed security that was in an unrealized loss position. The asset-backed securities held in the investment securities portfolio consist solely of Sallie Mae bonds, collateralized by student loans which are guaranteed by the U.S. Department of Education. Management believes the unrealized loss on this security was driven by changes in market interest rates and not a result of credit deterioration. At September 30, 2017, the investment portfolio included sixeight corporate bonds that were in an unrealized loss position. Management believes the unrealized losses on these securities were also driven by changes in market interest rates and not a result of credit deterioration.

The unrealized ~~losses~~loss on the trust preferred ~~securities are~~security at September 30, 2018 was primarily the result of the secondary market becoming inactive for such ~~securities becoming inactive~~a security and ~~are also~~was considered temporary at ~~this~~that time. ~~The following table provides additional detail about~~During 2018, management received several inquiries regarding the availability of the remaining trust preferred ~~securities held~~CDO security and noted an increased level of trading in this type of security. As a result of the ~~portfolio as~~increased activity and the level of ~~September 30, 2017.~~

(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 2018 and beyond
Cumulative OTTI Life to Date
TPREF Funding II Class B Notes $ 725 $ 489 $ (236 ) C 19 29 % 0.42 % $ 274
ALESCO Preferred Funding V Class C1 Notes 820 619 (201 ) C 39 14 0.49 180
Total $ 1,545 $ 1,108 $ (437 ) 58 21 % $ 454

~~There were no proceeds from~~bids received, management elected to sell the remaining CDO security in December 2018.

Proceeds associated with the sale of ~~investment~~ securities available for sale during the three months ended September 30, ~~2017.~~2019 were $11.5 million. The tax provision applicable to the net gains of $520,000 for the three months ended September 30, 2019 amounted to $132,000. Proceeds ~~from~~associated with the sale of ~~investment~~ securities available for sale during the nine months ended September 30, ~~2017 was $21.2~~2019 were $54.7 million. Gross gains of ~~$487,000 were realized on these sales which were offset by gross losses of $548,000. The tax provision applicable to the net losses for the nine months ended September 30, 2017 was $22,000.~~

There were no proceeds from the sale of investment securities during the three months ended September 30, 2016. Proceeds from the sale of investment securities during the nine months ended September 30, 2016 was $78.6 million. Gross gains of $680,000$1.2 million and gross losses of ~~$24,000~~$67,000 were realized on these sales. The tax provision applicable to the net gains of $1.1 million for the nine months ended September 30, ~~2016~~2019 amounted to $280,000.

There were no proceeds from the sale of investments securities for the three months ended September 30, 2018. During the nine months ended September 30, 2018, the proceeds from the sale of investment securities were $5.7 million. A gross loss of $1,000 was ~~$235,000.~~realized on the sale of investment securities for the nine months ended September 30, 2018.

Note 6: Loans Receivable and Allowance for Loan Losses

The following table sets forth the ~~Company's~~Company’s gross loans by major ~~categories~~category as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

(dollars in thousands)	September 30, 2019			December 31, 2018

Commercial real estate	$	570,327		$	515,738
Construction and land development		109,582			121,042
Commercial and industrial		187,837			200,423
Owner occupied real estate		397,843			367,895
Consumer and other		98,034			91,152
Residential mortgage		205,498			140,364
Total loans receivable		1,569,121			1,436,614
Deferred costs (fees)		259			(16	)
Allowance for loan losses		(8,467	)		(8,615	)
Net loans receivable	$	1,560,913		$	1,427,983

(dollars in thousands) September 30, 2017 December 31, 2016

Commercial real estate $ 415,532 $ 378,519
Construction and land development 93,657 61,453
Commercial and industrial 163,085 174,744
Owner occupied real estate 297,880 276,986
Consumer and other 71,888 63,660
Residential mortgage 53,384 9,682
Total loans receivable 1,095,426 965,044
Deferred fees (21 ) (72 )
Allowance for loan losses (8,258 ) (9,155 )
Net loans receivable $ 1,087,147 $ 955,817

The Company disaggregates its loan portfolio into groups of loans with similar risk characteristics for purposes of estimating the allowance for loan losses. The ~~Company's~~Company’s loan groups include commercial real estate, construction and land development, commercial and industrial, owner occupied real estate, consumer, and residential mortgages. The loan groups are also considered classes for purposes of monitoring and assessing credit quality based on certain risk characteristics.

The following tables provide the activity in and ending balances of the allowance for loan losses by loan portfolio class at and for the three months ended September 30, 2019 and 2018:

(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, 2019
Allowance for loan losses:

Beginning balance:	$	2,673	$	631		$	875		$	2,158	$	562		$	1,124	$	33		$	8,056
Charge-offs		-		-			(72	)		-		(29	)		-		-			(101	)
Recoveries		-		-			59			1		2			-		-			62
Provisions (credits)		198		(10	)		(79	)		31		36			205		69			450

Ending balance	$	2,871	$	621		$	783		$	2,190	$	571		$	1,329	$	102		$	8,467

Three months ended September 30, 2018
Allowance for loan losses:

Beginning balance:	$	2,039	$	772		$	1,449		$	1,856	$	509		$	638	$	303		$	7,566
Charge-offs		-		-			-			-		(1	)		-		-			(1	)
Recoveries		17		-			1			-		1			-		-			19
Provisions (credits)		202		34			193			156		38			103		(226	)		500

Ending balance	$	2,258	$	806		$	1,643		$	2,012	$	547		$	741	$	77		$	8,084

The following tables provide the activity in and ending balances of the allowance for loan losses by loan portfolio class at and for the nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018:

(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, 2019
Allowance for loan losses:

Beginning balance:	$	2,462		$	777		$	1,754		$	2,033		$	577		$	894	$	118		$	8,615
Charge-offs		-			-			(1,002	)		-			(117	)		-		-			(1,119	)
Recoveries		-			-			213			1			7			-		-			221
Provisions (credits)		409			(156	)		(182	)		156			104			435		(16	)		750

Ending balance	$	2,871		$	621		$	783		$	2,190		$	571		$	1,329	$	102		$	8,467

Nine months ended September 30, 2018
Allowance for loan losses:

Beginning balance:	$	3,774		$	725		$	1,317		$	1,737		$	573		$	392	$	81		$	8,599
Charge-offs		(1,535	)		-			(151	)		(465	)		(213	)		-		-			(2,364	)
Recoveries		50			-			77			20			2			-		-			149
Provisions (credits)		(31	)		81			400			720			185			349		(4	)		1,700

Ending balance	$	2,258		$	806		$	1,643		$	2,012		$	547		$	741	$	77		$	8,084

(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, 2017
Allowance for loan losses:

Beginning balance: $ 3,171 $ 580 $ 2,496 $ 1,598 $ 544 $ 238 $ 827 $ 9,454
Charge-offs - - (1,195 ) (49 ) (4 ) - - (1,248 )
Recoveries 47 - 5 - - - - 52
Provisions (credits) 381 69 (85 ) 87 11 85 (548 ) -
Ending balance $ 3,599 $ 649 $ 1,221 $ 1,636 $ 551 $ 323 $ 279 $ 8,258

Three months ended September 30, 2016
Allowance for loan losses:

Beginning balance: $ 3,293 $ 365 $ 3,136 $ 1,366 $ 324 $ 11 $ 266 $ 8,761
Charge-offs - (3 ) - - - - - (3 )
Recoveries - - 88 - - - - 88
Provisions (credits) 9 137 (79 ) 251 16 31 242 607
Ending balance $ 3,302 $ 499 $ 3,145 $ 1,617 $ 340 $ 42 $ 508 $ 9,453

(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, 2017
Allowance for loan losses:

Beginning balance: $ 3,254 $ 557 $ 2,884 $ 1,382 $ 588 $ 58 $ 432 $ 9,155
Charge-offs - - (1,347 ) (157 ) (12 ) - - (1,516 )
Recoveries 54 - 64 - 1 - - 119
Provisions (credits) 291 92 (380 ) 411 (26 ) 265 (153 ) 500
Ending balance $ 3,599 $ 649 $ 1,221 $ 1,636 $ 551 $ 323 $ 279 $ 8,258

Nine months ended September 30, 2016
Allowance for loan losses:

Beginning Balance: $ 2,393 $ 338 $ 2,932 $ 2,030 $ 295 $ 14 $ 701 $ 8,703
Charge-offs - (3 ) (18 ) (954 ) - - - (975 )
Recoveries 6 - 162 - - - - 168
Provisions (credits) 903 164 69 541 45 28 (193 ) 1,557
Ending balance $ 3,302 $ 499 $ 3,145 $ 1,617 $ 340 $ 42 $ 508 $ 9,453

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, ~~2017~~2019 and December 31, ~~2016:~~2018:

(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, 2019
Allowance for loan losses:
Individually evaluated for impairment	$	262	$	-	$	35	$	291	$	-	$	-	$	-	$	588
Collectively evaluated for impairment		2,609		621		748		1,899		571		1,329		102		7,879
Total allowance for loan losses	$	2,871	$	621	$	783	$	2,190	$	571	$	1,329	$	102	$	8,467

Loans receivable:
Loans evaluated individually	$	11,257	$	-	$	3,608	$	3,532	$	961	$	768	$	-	$	20,126
Loans evaluated collectively		559,070		109,582		184,229		394,311		97,073		204,730		-		1,548,995
Total loans receivable	$	570,327	$	109,582	$	187,837	$	397,843	$	98,034	$	205,498	$	-	$	1,569,121

(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, 2018
Allowance for loan losses:
Individually evaluated for impairment	$	295	$	-	$	867	$	217	$	94	$	-	$	-	$	1,473
Collectively evaluated for impairment		2,167		777		887		1,816		483		894		118		7,142
Total allowance for loan losses	$	2,462	$	777	$	1,754	$	2,033	$	577	$	894	$	118	$	8,615

Loans receivable:
Loans evaluated individually	$	10,947	$	-	$	3,662	$	2,560	$	861	$	-	$	-	$	18,030
Loans evaluated collectively		504,791		121,042		196,761		365,335		90,291		140,364		-		1,418,584
Total loans receivable	$	515,738	$	121,042	$	200,423	$	367,895	$	91,152	$	140,364	$	-	$	1,436,614

(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, 2017

Allowance for loan losses:

Individually evaluated for impairment $ 1,834 $ - $ 337 $ 190 $ 218 $ - $ - $ 2,579
Collectively evaluated for impairment 1,765 649 884 1,446 333 323 279 5,679
Total allowance for loan losses $ 3,599 $ 649 $ 1,221 $ 1,636 $ 551 $ 323 $ 279 $ 8,258

Loans receivable:
Loans evaluated individually $ 13,393 $ - $ 3,852 $ 3,490 $ 1,267 $ - $ - $ 22,002
Loans evaluated collectively 402,139 93,657 159,233 294,390 70,621 53,384 - 1,073,424
Total loans receivable $ 415,532 $ 93,657 $ 163,085 $ 297,880 $ 71,888 $ 53,384 $ - $ 1,095,426

(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, 2016

Allowance for loan losses:

Individually evaluated for impairment $ 1,277 $ - $ 1,624 $ 274 $ 293 $ - $ - $ 3,468
Collectively evaluated for impairment 1,977 557 1,260 1,108 295 58 432 5,687
Total allowance for loan losses $ 3,254 $ 557 $ 2,884 $ 1,382 $ 588 $ 58 $ 432 $ 9,155

Loans receivable:
Loans evaluated individually $ 19,245 $ - $ 5,180 $ 2,325 $ 1,290 $ 130 $ - $ 28,170
Loans evaluated collectively 359,274 61,453 169,564 274,661 62,370 9,552 - 936,874
Total loans receivable $ 378,519 $ 61,453 $ 174,744 $ 276,986 $ 63,660 $ 9,682 $ - $ 965,044

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, ~~2017~~2019 and December 31, ~~2016:~~2018:

	September 30, 2019						December 31, 2018
(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	$	7,243	$	7,248	$	-	$	6,332	$	6,337	$	-
Construction and land development		-		-		-		-		-		-
Commercial and industrial		3,229		6,589		-		1,655		5,418		-
Owner occupied real estate		1,775		1,924		-		1,905		2,013		-
Consumer and other		961		1,256		-		710		1,082		-
Residential mortgage		768		768		-		-		-		-
Total	$	13,976	$	17,785	$	-	$	10,602	$	14,850	$	-

With an allowance recorded:
Commercial real estate	$	4,014	$	4,536	$	262	$	4,615	$	5,498	$	295
Construction and land development		-		-		-		-		-		-
Commercial and industrial		379		394		35		2,007		2,195		867
Owner occupied real estate		1,757		1,757		291		655		704		217
Consumer and other		-		-		-		151		158		94
Residential mortgage		-		-		-		-		-		-
Total	$	6,150	$	6,687	$	588	$	7,428	$	8,555	$	1,473

Total:
Commercial real estate	$	11,257	$	11,784	$	262	$	10,947	$	11,835	$	295
Construction and land development		-		-		-		-		-		-
Commercial and industrial		3,608		6,983		35		3,662		7,613		867
Owner occupied real estate		3,532		3,681		291		2,560		2,717		217
Consumer and other		961		1,256		-		861		1,240		94
Residential mortgage		768		768		-		-		-		-
Total	$	20,126	$	24,472	$	588	$	18,030	$	23,405	$	1,473

September 30, 2017 December 31, 2016

(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 $ 7,003 $ 7,007 $ - $ 12,347 $ 12,348 $ -
Construction and land development - - - - - -
Commercial and industrial 2,490 6,403 - 1,955 3,111 -
Owner occupied real estate 2,471 2,633 - 621 733 -
Consumer and other 920 1,236 - 687 976 -
Residential mortgage - - - 130 130 -
Total $ 12,884 $ 17,279 $ - $ 15,740 $ 17,298 $ -

With an allowance recorded:
Commercial real estate $ 6,389 $ 6,403 $ 1,834 $ 6,898 $ 6,912 $ 1,277
Construction and land development - - - - - -
Commercial and industrial 1,363 1,380 337 3,225 5,892 1,624
Owner occupied real estate 1,019 1,019 190 1,704 1,704 274
Consumer and other 347 377 218 603 627 293
Residential mortgage - - - - - -
Total $ 9,118 $ 9,179 $ 2,579 $ 12,430 $ 15,135 $ 3,468

Total:
Commercial real estate $ 13,393 $ 13,410 $ 1,834 $ 19,245 $ 19,260 $ 1,277
Construction and land development - - - - - -
Commercial and industrial 3,852 7,783 337 5,180 9,003 1,624
Owner occupied real estate 3,490 3,652 190 2,325 2,437 274
Consumer and other 1,267 1,613 218 1,290 1,603 293
Residential mortgage - - - 130 130 -
Total $ 22,002 $ 26,458 $ 2,579 $ 28,170 $ 32,433 $ 3,468

The following table presents additional information regarding the ~~Company's~~Company’s impaired loans for the three months ended September 30, ~~2017~~2019 and September 30, ~~2016:~~2018:

	Three Months Ended September 30,
	2019				2018
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$	7,004	$	80	$	9,748	$	72
Construction and land development		-		-		-		-
Commercial and industrial		2,821		19		2,566		12
Owner occupied real estate		1,801		12		2,255		15
Consumer and other		931		4		647		10
Residential mortgage		640		1		-		-
Total	$	13,197	$	116	$	15,216	$	109

With an allowance recorded:
Commercial real estate	$	4,114	$	-	$	3,976	$	-
Construction and land development		-		-		-		-
Commercial and industrial		572		-		1,948		1
Owner occupied real estate		1,492		12		905		6
Consumer and other		12		-		169		-
Residential mortgage		-		-		-		-
Total	$	6,190	$	12	$	6,998	$	7

Total:
Commercial real estate	$	11,118	$	80	$	13,724	$	72
Construction and land development		-		-		-		-
Commercial and industrial		3,393		19		4,514		13
Owner occupied real estate		3,293		24		3,160		21
Consumer and other		943		4		816		10
Residential mortgage		640		1		-		-
Total	$	19,387	$	128	$	22,214	$	116

Three Months Ended September 30,
2017 2016

(dollars in thousands)
Average Recorded Investment

Interest
Income Recognized
Average Recorded Investment
Interest
Income Recognized

With no related allowance recorded:
Commercial real estate $ 7,024 $ 106 $ 12,188 $ 65
Construction and land development - - 22 -
Commercial and industrial 2,366 8 1,611 9
Owner occupied real estate 2,313 17 665 3
Consumer and other 923 9 1,027 5
Residential mortgage - - - -
Total $ 12,626 $ 140 $ 15,513 $ 82

With an allowance recorded:
Commercial real estate $ 6,391 $ 4 $ 6,058 $ 19
Construction and land development - - 43 -
Commercial and industrial 2,118 16 3,607 18
Owner occupied real estate 1,100 8 1,977 9
Consumer and other 346 2 278 2
Residential mortgage - - - -
Total $ 9,955 $ 30 $ 11,963 $ 48

Total:
Commercial real estate $ 13,415 $ 110 $ 18,246 $ 84
Construction and land development - - 65 -
Commercial and industrial 4,484 24 5,218 27
Owner occupied real estate 3,413 25 2,642 12
Consumer and other 1,269 11 1,305 7
Residential mortgage - - - -
Total $ 22,581 $ 170 $ 27,476 $ 130

The following table presents additional information regarding the ~~Company's~~Company’s impaired loans for the nine months ended September 30, ~~2017~~2019 and September 30, ~~2016:~~2018:

	Nine Months Ended September 30,
	2019				2018
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$	6,532	$	220	$	11,454	$	216
Construction and land development		-		-		-		-
Commercial and industrial		2,001		19		3,762		45
Owner occupied real estate		1,853		40		2,367		43
Consumer and other		871		12		645		12
Residential mortgage		384		2		-		-
Total	$	11,641	$	293	$	18,228	$	316

With an allowance recorded:
Commercial real estate	$	4,314	$	-	$	2,692	$	-
Construction and land development		-		-		-		-
Commercial and industrial		956		-		1,826		4
Owner occupied real estate		962		24		1,047		18
Consumer and other		38		-		201		1
Residential mortgage		-		-		-		-
Total	$	6,270	$	24	$	5,766	$	23

Total:
Commercial real estate	$	10,846	$	220	$	14,146	$	216
Construction and land development		-		-		-		-
Commercial and industrial		2,957		19		5,588		49
Owner occupied real estate		2,815		64		3,414		61
Consumer and other		909		12		846		13
Residential mortgage		384		2		-		-
Total	$	17,911	$	317	$	23,994	$	339

Nine Months Ended September 30,
2017 2016

(dollars in thousands)
Average Recorded Investment
Interest Income Recognized Average Recorded Investment Interest Income Recognized
With no related allowance recorded:
Commercial real estate $ 9,657 $ 271 $ 11,954 $ 197
Construction and land development - - 72 -
Commercial and industrial 2,149 26 1,797 30
Owner occupied real estate 1,719 46 647 6
Consumer and other 837 17 901 11
Residential mortgage 33 1 - -
Total $ 14,395 $ 361 $ 15,371 $ 244

With an allowance recorded:
Commercial real estate $ 6,575 $ 13 $ 3,844 $ 43
Construction and land development - - 15 -
Commercial and industrial 2,710 50 3,389 56
Owner occupied real estate 1,437 22 2,205 23
Consumer and other 438 8 252 7
Residential mortgage - - - -
Total $ 11,160 $ 93 $ 9,705 $ 129

Total:
Commercial real estate $ 16,232 $ 284 $ 15,798 $ 240
Construction and land development - - 87 -
Commercial and industrial 4,859 76 5,186 86
Owner occupied real estate 3,156 68 2,852 29
Consumer and other 1,275 25 1,153 18
Residential mortgage 33 1 - -
Total $ 25,555 $ 454 $ 25,076 $ 373

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, ~~2017~~2019 and December 31, ~~2016:~~2018:

(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, 2019
Commercial real estate	$	93	$	-	$	4,269	$	4,362	$	565,965	$	570,327	$	-
Construction and land development		-		-		-		-		109,582		109,582		-
Commercial and industrial		-		-		3,608		3,608		184,229		187,837		-
Owner occupied real estate		-		28		2,317		2,345		395,498		397,843		-
Consumer and other		83		9		1,090		1,182		96,852		98,034		129
Residential mortgage		-		-		768		768		204,730		205,498		-
Total	$	176	$	37	$	12,052	$	12,265	$	1,556,856	$	1,569,121	$	129

(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, 2018
Commercial real estate	$	339	$	921	$	4,631	$	5,891	$	509,847	$	515,738	$	-
Construction and land development		-		-		-		-		121,042		121,042		-
Commercial and industrial		280		-		3,661		3,941		196,482		200,423		-
Owner occupied real estate		-		653		1,188		1,841		366,054		367,895		-
Consumer and other		214		-		861		1,075		90,077		91,152		-
Residential mortgage		302		-		-		302		140,062		140,364		-
Total	$	1,135	$	1,574	$	10,341	$	13,050	$	1,423,564	$	1,436,614	$	-

(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, 2017
Commercial real estate $ 129 $ - $ 8,975 $ 9,104 $ 406,428 $ 415,532 $ 2,538
Construction and land development - - - - 93,657 93,657 -
Commercial and industrial 767 - 2,100 2,867 160,218 163,085 -
Owner occupied real estate 451 - 1,816 2,267 295,613 297,880 192
Consumer and other 149 35 859 1,043 70,845 71,888 -
Residential mortgage - - - - 53,384 53,384 -
Total $ 1,496 $ 35 $ 13,750 $ 15,281 $ 1,080,145 $ 1,095,426 $ 2,730

(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, 2016
Commercial real estate $ - $ 9 $ 13,089 $ 13,098 $ 365,421 $ 378,519 $ -
Construction and land development - - - - 61,453 61,453 -
Commercial and industrial 568 - 3,151 3,719 171,025 174,744 -
Owner occupied real estate 468 - 1,718 2,186 274,800 276,986 172
Consumer and other 24 22 808 854 62,806 63,660 -
Residential mortgage - - 130 130 9,552 9,682 130
Total $ 1,060 $ 31 $ 18,896 $ 19,987 $ 945,057 $ 965,044 $ 302

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~~Company’s internal risk rating system as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
At September 30, 2019:
Commercial real estate	$	565,187	$	92	$	5,048	$	-	$	570,327
Construction and land development		109,582		-		-		-		109,582
Commercial and industrial		184,229		-		3,328		280		187,837
Owner occupied real estate		392,245		2,066		3,532		-		397,843
Consumer and other		97,073		-		961		-		98,034
Residential mortgage		204,608		122		768		-		205,498
Total	$	1,552,924	$	2,280	$	13,637	$	280	$	1,569,121

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
At December 31, 2018:
Commercial real estate	$	510,186	$	921	$	4,631	$	-	$	515,738
Construction and land development		121,042		-		-		-		121,042
Commercial and industrial		196,751		10		3,382		280		200,423
Owner occupied real estate		364,032		1,303		2,560		-		367,895
Consumer and other		90,291		-		861		-		91,152
Residential mortgage		140,240		124		-		-		140,364
Total	$	1,422,542	$	2,358	$	11,434	$	280	$	1,436,614

(dollars in thousands)

Pass

Special
Mention

Substandard

Doubtful

Total

At September 30, 2017:
Commercial real estate $ 407,787 $ 838 $ 6,907 $ - $ 415,532
Construction and land development 93,657 - - - 93,657
Commercial and industrial 158,304 929 3,572 280 163,085
Owner occupied real estate 294,390 - 3,490 - 297,880
Consumer and other 70,621 - 1,267 - 71,888
Residential mortgage 53,257 127 - - 53,384
Total $ 1,078,016 $ 1,894 $ 15,236 $ 280 $ 1,095,426

(dollars in thousands)

Pass

Special
Mention

Substandard

Doubtful

Total

At December 31, 2016:
Commercial real estate $ 364,066 $ 877 $ 13,576 $ - $ 378,519
Construction and land development 61,453 - - - 61,453
Commercial and industrial 168,958 606 3,751 1,429 174,744
Owner occupied real estate 274,150 511 2,325 - 276,986
Consumer and other 62,370 - 1,290 - 63,660
Residential mortgage 9,552 - 130 - 9,682
Total $ 940,549 $ 1,994 $ 21,072 $ 1,429 $ 965,044

The following table shows non-accrual loans by class as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

(dollars in thousands)	September 30, 2019		December 31, 2018

Commercial real estate	$	4,269	$	4,631
Construction and land development		-		-
Commercial and industrial		3,608		3,661
Owner occupied real estate		2,317		1,188
Consumer and other		961		861
Residential mortgage		768		-
Total	$	11,923	$	10,341

(dollars in thousands)
September 30,
2017

December 31,
2016

Commercial real estate $ 6,437 $ 13,089
Construction and land development - -
Commercial and industrial 2,100 3,151
Owner occupied real estate 1,624 1,546
Consumer and other 859 808
Residential mortgage - -
Total $ 11,020 $ 18,594

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately ~~$127,000~~$145,000 and ~~$372,000~~$378,000 for the three and nine months ended September 30, ~~2017,~~2019, respectively, and ~~$271,000~~$156,000 and ~~$784,000~~$519,000 for the three and nine months ended September 30, ~~2016,~~2018, respectively.

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"~~(“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~~information with regard to outstanding ~~TDRs~~troubled debt restructurings at September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

(dollars in thousands)	Number of Loans		Accrual Status		Non- Accrual Status		Total TDRs
September 30, 2019
Commercial real estate		1	$	6,209	$	-	$	6,209
Construction and land development		-		-		-		-
Commercial and industrial		-		-		-		-
Owner occupied real estate		-		-		-		-
Consumer and other		-		-		-		-
Residential mortgage		-		-		-		-
Total		1	$	6,209	$	-	$	6,209

December 31, 2018
Commercial real estate		1	$	6,316	$	-	$	6,316
Construction and land development		-		-		-		-
Commercial and industrial		3		-		1,224		1,224
Owner occupied real estate		1		-		242		242
Consumer and other		-		-		-		-
Residential mortgage		-		-		-		-
Total		5	$	6,316	$	1,466	$	7,782

(dollars in thousands)
Number of Loans Accrual Status Non-Accrual Status Total TDRs
September 30, 2017
Commercial real estate 1 $ 6,486 $ - $ 6,486
Construction and land development - - - -
Commercial and industrial 2 1,184 349 1,533
Owner occupied real estate 1 243 - 243
Consumer and other - - - -
Residential mortgage - - - -
Total 4 $ 7,913 $ 349 $ 8,262

December 31, 2016
Commercial real estate 1 $ 5,669 $ - $ 5,669
Construction and land development - - - -
Commercial and industrial 2 228 349 577
Owner occupied real estate - - - -
Consumer and other - - - -
Residential mortgage - - - -
Total 3 $ 5,897 $ 349 $ 6,246

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 ~~the Company's~~our estimate of the allowance for loan losses. The level of any subsequent defaults will likely be affected by future economic conditions.

~~The Company made no loan modifications during the three months ended September 30, 2017.~~

The Company modified one commercial and industrial loan during the nine months ended September 30, 2017. In accordance with the modified terms of the commercial and industrial loan, the principal balance of $975,000 was converted from a line of credit to a term loan with a five year maturity. This commercial and industrial loan has been and continues to be an accruing loan.

The Company modified one owner occupied real estate loan during the nine months ended September 30, 2017. In accordance with the modified terms of the owner occupied loan of $245,000, certain concessions have been granted, including a reduction in the interest rate and an extension of the maturity date of the loan. The owner occupied loan has been and continues to be an accruing loan.

The Company modified one commercial real estate loan in the amount of $6.5 million during the nine months ended September 30, 2017 that met the criteria of a TDR. This loan was transferred to non-accrual status during the second quarter of 2015 as a result of delinquency caused by tenant vacancies. The Company restructured the loan based on new leases obtained by the borrower. In accordance with the modified terms of the loan, certain concessions have been granted, including an increase in the principal balance of $421,000 and a reduction in the interest rate. Due to a performance period of six months, the loan was returned to accrual status in the third quarter of 2017.

There were no loan modifications made during the three and nine months ended September 30, ~~2016~~2019 that met the criteria of a TDR.

There were no residential mortgages in the process of foreclosure as of September 30, 2017 and December 31, 2016. Other real estate owned relating to residential real estate was $42,000 and $126,000 at September 30, 2017 and December 31, 2016.

After a loan is determined to be a TDR, the Company continues to track its performance under the most recent restructured terms. There were no TDRs that subsequently defaulted during the three and nine months ended September 30, ~~2017.~~2019. There were nothree TDRs that subsequently defaulted during the year ended December 31, ~~2016.~~2018.

There was one residential mortgage in the process of foreclosure as of September 30, 2019. There were no residential mortgages in the process of foreclosure as of December 31, 2018. There was no other real estate owned relating to residential real estate at September 30, 2019 and December 31, 2018.

Note 7:7: Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of the ~~Company's~~Company’s financial ~~instruments,~~instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a ~~sale~~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, Fair Value Measurement, which defines fair value, establishes a framework for measuring fair value under GAAP, and identifies required disclosures on fair value measurements.

ASC 820 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 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 or ~~liability's~~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 ~~and liabilities~~ measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, ~~2017~~2019 and December 31, ~~2016~~2018 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, 2019
Assets:

U.S. Government agencies	$	29,420	$	-	$	29,420	$	-
Collateralized mortgage obligations		256,389		-		256,389		-
Agency mortgage-backed securities		23,901		-		23,901		-
Municipal securities		4,082		-		4,082		-
Corporate bonds		66,170		-		63,279		2,891
Securities Available for Sale	$	379,962	$	-	$	377,071	$	2,891

Mortgage Loans Held for Sale	$	18,734	$	-	$	18,734	$	-
SBA Servicing Assets		4,504		-		-		4,504
Interest Rate Lock Commitments		506		-		506		-
Best Efforts Forward Loan Sales Commitments		43		-		43		-
Mandatory Forward Loan Sales Commitments		27		-		27		-

Liabilities:

Interest Rate Lock Commitments		2		-		2		-
Best Efforts Forward Loan Sales Commitments		126		-		126		-
Mandatory Forward Loan Sales Commitments		79		-		79		-

December 31, 2018
Assets:

Collateralized mortgage obligations	$	196,259	$	-	$	196,259	$	-
Agency mortgage-backed securities		38,499		-		38,499		-
Municipal securities		20,639		-		20,639		-
Corporate bonds		59,274		-		56,205		3,069
Asset-backed securities		6,343		-		6,343		-
Securities Available for Sale	$	321,014	$	-	$	317,945	$	3,069

Mortgage Loans Held for Sale	$	20,887	$	-	$	20,887	$	-
SBA Servicing Assets		4,785		-		-		4,785
Interest Rate Lock Commitments		410		-		410		-
Best Efforts Forward Loan Sales Commitments		5		-		5		-
Mandatory Forward Loan Sales Commitments		10		-		10		-

Liabilities:

Interest Rate Lock Commitments		-		-		-		-
Best Efforts Forward Loan Sales Commitments		138		-		138		-
Mandatory Forward Loan Sales Commitments		230		-		230		-

(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, 2017
Assets:

Collateralized mortgage obligations $ 240,004 $ - $ 240,004 $ -
Agency mortgage-backed securities 42,802 - 42,802 -
Municipal securities 15,659 - 15,659 -
Corporate bonds 64,329 - 61,304 3,025
Asset-backed securities 13,855 - 13,855 -
Trust Preferred Securities 1,108 - - 1,108
Securities Available for Sale $ 377,757 $ - $ 373,624 $ 4,133

Mortgage Loans Held for Sale $ 41,411 $ - $ 41,411 $ -
SBA Servicing Assets 5,387 - - 5,387
Interest Rate Lock Commitments 635 - 635 -
Best Efforts Forward Loan Sales Commitments 13 - 13 -
Mandatory Forward Loan Sales Commitments 51 - 51 -

Liabilities:

Interest Rate Lock Commitments 1 - 1 -
Best Efforts Forward Loan Sales Commitments 125 - 125 -
Mandatory Forward Loan Sales Commitments 137 - 137 -

December 31, 2016
Assets:

Collateralized mortgage obligations $ 224,765 $ - $ 224,765 $ -
Agency mortgage-backed securities 36,710 - 36,710 -
Municipal securities 26,547 - 26,547 -
Corporate bonds 64,748 - 61,777 2,971
Asset-backed securities 15,149 - 15,149 -
Trust Preferred Securities 1,820 - - 1,820
Securities Available for Sale $ 369,739 $ - $ 364,948 $ 4,791

Mortgage Loans Held for Sale $ 23,911 $ - $ 23,911 $ -
SBA Servicing Assets 5,352 - - 5,352
Interest Rate Lock Commitments 439 - 439 -
Best Efforts Forward Loan Sales Commitments 103 - 103 -
Mandatory Forward Loan Sales Commitments 229 - 229 -

Liabilities:

Interest Rate Lock Commitments 55 - 55 -
Best Efforts Forward Loan Sales Commitments 125 - 125 -
Mandatory Forward Loan Sales Commitments 38 - 38 -

The following ~~table presents~~tables present an analysis of the activity in the SBA servicing assets for the three and nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018:

	Three Months Ended September 30,
(dollars in thousands)	2019			2018
Beginning balance, July 1^st	$	4,593		$	4,977
Additions		272			297
Fair value adjustments		(361	)		(419	)
Ending balance, September 30^th	$	4,504		$	4,855

	Nine Months Ended September 30,
(dollars in thousands)	2019			2018
Beginning balance, January 1^st	$	4,785		$	5,243
Additions		825			864
Fair value adjustments		(1,106	)		(1,252	)
Ending balance, September 30^th	$	4,504		$	4,855

Three Months Ended
September 30,

Nine Months Ended
September 30,
(dollars in thousands) 2017 2016 2017 2016
Beginning balance $ 5,194 $ 5,118 $ 5,352 $ 4,886
Additions 268 503 746 1,305
Fair value adjustments (75) (324) (711) (894)
Ending balance $ 5,387 $ 5,297 $ 5,387 $ 5,297

Fair value adjustments are recorded as loan ~~advisory~~ and servicing fees on the statement of income. Servicing fee income, not including fair value adjustments, totaled ~~$468,000~~$498,000 and ~~$458,000~~$486,000 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. Servicing fee income, not including fair value adjustments, totaled $1.4 million and ~~$1.3~~$1.5 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

Total loans in the amount of $204.3 million at September 30, 2019 and $204.4 million at December 31, 2018 were serviced for others.

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, ~~2017~~2019 and ~~2016:~~2018:

	Three Months Ended September 30, 2019					Three Months Ended September 30, 2018
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities		Corporate Bonds			Trust Preferred Securities		Corporate Bonds
Balance, July 1^st	$	-	$	2,999		$	547	$	3,083
Unrealized gains (losses)		-		(108	)		-		102
Proceeds from sales		-		-			-		-
Realized losses		-		-			-		-
Balance, September 30^th	$	-	$	2,891		$	547	$	3,185

	Nine Months Ended September 30, 2019					Nine Months Ended September 30, 2018
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities		Corporate Bonds			Trust Preferred Securities		Corporate Bonds
Balance, January 1^st	$	-	$	3,069		$	489	$	3,086
Unrealized gains (losses)		-		(178	)		58		99
Proceeds from sales		-		-			-		-
Realized losses		-		-			-		-
Balance, September 30^th	$	-	$	2,891		$	547	$	3,185

Three Months Ended
September 30, 2017

Three Months Ended
September 30, 2016

Level 3 Investments Only
(dollars in thousands)
Trust Preferred Securities Corporate Bonds Trust Preferred Securities Corporate Bonds
Balance, July 1^st
$ 968 $ 3,079 $ 1,755 $ 2,870
Unrealized gains (losses) 140 (54 ) (62 ) 63
Paydowns - - - -
Proceeds from sales - - - -
Realized losses - - - -
Impairment charges on Level 3 - - (2 ) -
Balance, September 30th $ 1,108 $ 3,025 $ 1,691 $ 2,933

Nine Months Ended
September 30, 2017

Nine Months Ended
September 30, 2016

Level 3 Investments Only
(dollars in thousands)
Trust Preferred Securities Corporate Bonds Trust Preferred Securities Corporate Bonds
Balance, January 1st $ 1,820 $ 2,971 $ 1,883 $ 2,834
Unrealized gains (losses) 806 54 (185 ) 99
Paydowns - - - -
Proceeds from sales (970 ) - - -
Realized losses (548 ) - - -
Impairment charges on Level 3 - - (7 ) -
Balance, September 30th $ 1,108 $ 3,025 $ 1,691 $ 2,933

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, ~~2017~~2019 and December 31, ~~2016~~2018 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, 2019
Impaired loans	$	5,823	$	-	$	-	$	5,823
Other real estate owned		5,726		-		-		5,726

December 31, 2018
Impaired loans	$	5,955	$	-	$	-	$	5,955
Other real estate owned		1,114		-		-		1,114

(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, 2017:
Impaired loans $ 7,161 $ - $ - $ 7,161
Other real estate owned 7,468 - - 7,468

December 31, 2016:
Impaired loans $ 9,110 $ - $ - $ 9,110
Other real estate owned 8,563 - - 8,563

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

	Quantitative Information about Level 3 Fair Value Measurements
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
September 30, 2019
Corporate bonds	$	2,891	Discounted Cash Flows	Discount Rate	(7.14%)

SBA servicing assets	$	4,504	Discounted Cash Flows	Conditional Prepayment Rate	(13.28%)

				Discount Rate	(11.00%)

Impaired loans	$	5,823	Appraised Value of Collateral (1)	Liquidation expenses (2)	9%	-	20%	(12%) (3)

Other real estate owned	$	5,726	Appraised Value of Collateral (1)	Liquidation expenses (2)	7%	-	25%	(14%) (3)

			Sales Price	Liquidation expenses (2)	(22%) (3)
December 31, 2018
Corporate bonds	$	3,069	Discounted Cash Flows	Discount Rate	(8.24%)

SBA servicing assets	$	4,785	Discounted Cash Flows	Conditional Prepayment Rate	(10.31%)

				Discount Rate	(11.50%)

Impaired loans	$	5,955	Appraised Value of Collateral (1)	Liquidation expenses (2)	11%	-	24%	(13%) (3)

Other real estate owned	$	1,114	Appraised Value of Collateral (1)	Liquidation expenses (2)	(7%) (3)

Quantitative Information about Level 3 Fair Value Measurements
Asset Description Fair Value Valuation Technique Unobservable Input Range (Weighted Average)
September 30, 2017
Corporate bonds $ 3,025
Discounted
Cash Flows
Discount Rate (5.57%)

Trust preferred securities $ 1,108
Discounted
Cash Flows
Discount Rate 7.62% - 7.85% (7.71%)

SBA servicing assets $ 5,387
Discounted
Cash Flows

Conditional
Prepayment Rate

(6.70%)

Discount Rate (10.25%)

Impaired loans $ 7,161 Appraised Value of Collateral (1) Liquidation expenses (2) 10% - 28% (14%) (3)

Other real estate owned

$

7,468

Appraised Value of Collateral (1)

Liquidation expenses (2)

14% - 22% (15%) (3)

Sales Price Liquidation expenses (2) 7% - 13% (13%) (3)

December 31, 2016
Corporate bonds $ 2,971
Discounted
Cash Flows
Discount Rate (4.68%)

Trust preferred securities $ 1,820
Discounted
Cash Flows
Discount Rate 8.85% - 9.35% (9.08%)

SBA servicing assets $ 5,352
Discounted
Cash Flows

Conditional
Prepayment Rate

(6.12%)

Discount Rate (10.00%)

Impaired loans $ 9,110
Appraised Value of Collateral (1)

Liquidation expenses (2)

7% - 20% (11%) (3)

Sales Price Liquidation expenses (2) (7%) (3)

Other real estate owned

$

8,563

Appraised Value of Collateral (1)

Liquidation expenses (2)

5% - 76% (17%) (3)

Sales Price Liquidation expenses (2) 7% - 8% (7%) (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)	The range and weighted average of qualitative factors such as economic conditions and estimated liquidation expenses are presented as a percent of the appraised value.

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

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~~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~~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 ~~certain assets and liabilities of~~ the ~~Company~~Company’s financial instruments at September 30, ~~2017~~2019 and December 31, ~~2016.~~

~~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.~~

2018.

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'~~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~~management’s best estimate is used. ~~Management's~~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~~Company’s U.S. government and agency securities, corporate bonds, asset backed securities, and municipal ~~obligations.~~obligations held in the investment securities portfolio. 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~~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~~Republic has one Level 3 investment ~~securities~~ classified as available for sale ~~are comprised of various issues of trust preferred securities and~~which is 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, 2017 and December 31, 2016. Financial information on the issuers was also obtained from Bloomberg, the FDIC, 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.

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~~corporate bond included in Level 3 ~~investment securities classified as available for sale is a corporate bond~~was transferred from Level 2 in 2010 ~~that~~and 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~~issuer’s financial statements. The issuer is a ~~"well capitalized"~~“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.

~~SBA Loans Held For Sale (Carried at Lower of Cost or Fair Value)~~

The fair values of SBA loans held for sale is determined, when possible, using quoted secondary-market prices and are classified within Level 3 of the fair value hierarchy. If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for the specific attributes of that loan. The Company did not write down any loans held for sale during the three months ended September 30, 2017 and the year ended December 31, 2016.

Mortgage Loans Held for Sale (Carried at Fair Value)

The fair value of mortgage loans held for sale is determined by obtaining prices at which they could be sold in the principal market at the measurement date and are classified within Level 2 of the fair value hierarchy. ~~In 2016,~~ Republic elected to adopt the fair value option for its mortgage loans held for sale portfolio in order to more accurately reflect their economic value. All mortgage loans held for sale originated subsequent to the election date are carried at fair value. All loans held for sale originated prior to the election date were sold prior to December 31, 2016. Interest income on loans held for sale, which totaled ~~$277,000~~$142,000 and ~~$577,000~~$398,000 for three and nine months ended September 30, 2019, respectively, and $389,000 and $914,000 for the three and nine months ended September 30, ~~2017 ,~~2018, respectively, ~~and $89,000 for the three and nine months ended September 30, 2016,~~ are included in interest and fees in the statements of income.

The following table reflects the difference between the carrying amount of mortgage loans held for sale, measured at fair value and the aggregate unpaid principal amount that Republic is contractually entitled to receive at maturity as of September 30, ~~2017~~2019 and December 31, ~~2016 (dollars~~2018.

(dollars in thousands)	September 30, 2019		December 31, 2018

Carrying Amount	$	18,734	$	20,887

Aggregate Unpaid Principal Balance	$	18,203	$	20,071

Excess Carrying Amount Over Aggregate Unpaid Principal Balance	$	531	$	816

Changes in ~~thousands):~~

Mortgage loans held for sale
Carrying
Amount
Aggregate Unpaid Principal Balance Excess Carrying Amount Over Aggregate Unpaid Principal Balance

September 30, 2017 $ 41,411 $ 40,212 $ 1,199

December 31, 2016 $ 23,911 $ 23,428 $ 483

the excess carrying amount over aggregate unpaid principal balance are recorded in the statement of income in mortgage banking income. Republic did not have any mortgage loans held for sale recorded at fair value that were 90 or more days past due and on non-accrual at September 30, ~~2017~~2019 and December 31, ~~2016.~~

2018.

Interest Rate Lock Commitments ~~("IRLC"~~(“IRLC”)

The Company determines the value of IRLCs by comparing the market price to the price locked in with the customer, adding fees or points to be collected at closing, subtracting commissions to be paid at closing, and subtracting estimated remaining loan origination costs to the bank based on the processing status of the loan. The Company also considers pull-through as it determines the fair value of ~~Republic's~~IRLCs. Factors that affect pull-through rates include the origination channel, current mortgage interest rates in the market versus the interest rate incorporated in the IRLC, ~~instruments are based upon~~the purpose of the mortgage (purchase versus financing), the stage of completion of the underlying ~~loans measured at fair value on a recurring basis~~application and underwriting process, and the ~~probability of such commitments being exercised. Due to observable market data inputs used by Republic,~~time remaining until the IRLC expires. IRLCs are classified within Level 2 of the valuation hierarchy.

Best Efforts Forward Loan Sales Commitments

Best efforts forward loan sales commitments are classified within Level 2 of the valuation hierarchy. Best efforts forward loan sales commitments fix the forward sales price that will be realized upon the sale of mortgage loans into the secondary market. Best efforts forward loan sales commitments are entered into for loans at the time the borrower commitment is made. These best efforts forward loan sales commitments are valued using the committed price to the counterparty against the current market price of the interest rate lock commitment or mortgage loan held for sale.

Mandatory Forward Loan Sales Commitments

Fair values for mandatory forward loan sales commitments are based on fair values of the underlying mortgage loans and the probability of such commitments being exercised. Due to the observable inputs used by Republic, best efforts mandatory loan sales commitments are classified within Level 2 of the valuation hierarchy.

~~Loans Receivable (Carried at Cost)~~

The fair values of loans receivable, excluding all nonaccrual loans and accruing loans deemed impaired with specific loan allowances, 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~~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. Fair value is determined through valuations periodically performed by third-party appraisers, and the real estate is carried at the lower of its carrying amount or fair value less estimated costs to sell. Any declines in the fair value of the real estate properties below the initial cost basis are recorded through a valuation expense. At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, these assets are carried at current fair value and classified within Level 3 of the fair value hierarchy.

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. An updated fair value is obtained from an independent third party on a quarterly basis and adjustments are presented as loan ~~advisory~~ and servicing fees on the statement of ~~operations.~~income. The valuation begins with the projection of future cash flows for each asset based on their unique characteristics, the ~~Company's~~Company’s market-based assumptions for prepayment speeds and estimated losses and recoveries. The present value of the future cash flows are then calculated utilizing the ~~Company's~~Company’s market-based discount ratio assumptions. In all cases, the ~~Company's~~Company models 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 September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, 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, 2019			December 31, 2018

SBA Servicing Asset

Fair Value of SBA Servicing Asset	$	4,504		$	4,785

Composition of SBA Loans Serviced for Others
Fixed-rate SBA loans		2	%		2	%
Adjustable-rate SBA loans		98	%		98	%
Total		100	%		100	%

Weighted Average Remaining Term (years)	20.7			20.4

Prepayment Speed		13.28	%		10.31	%
Effect on fair value of a 10% increase	$	(175	)	$	(170	)
Effect on fair value of a 20% increase		(338	)		(330	)

Weighted Average Discount Rate		11.00	%		11.50	%
Effect on fair value of a 10% increase	$	(160	)	$	(186	)
Effect on fair value of a 20% increase		(309	)		(359	)

(dollars in thousands)
September 30,
2017

December 31,
2016

SBA Servicing Asset

Fair Value of SBA Servicing Asset $ 5,387 $ 5,352

Composition of SBA Loans Serviced for Others
Fixed-rate SBA loans 2% 0%
Adjustable-rate SBA loans 98% 100%
Total 100% 100%

Weighted Average Remaining Term 20.6 years 21.1 years

Prepayment Speed 6.70% 6.12%
Effect on fair value of a 10% increase $ (167) $ (161)
Effect on fair value of a 20% increase (327) (316)

Weighted Average Discount Rate 10.25% 10.00%
Effect on fair value of a 10% increase $ (225) $ (226)
Effect on fair value of a 20% increase (433) (435)

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. Restricted stock is classified within Level 2 of the fair value hierarchy.~~

~~Accrued Interest Receivable and Payable (Carried at Cost)~~

~~The carrying amounts of accrued interest receivable and accrued interest payable approximates fair value and are classified within Level 2 of the fair value hierarchy.~~

~~Deposit Liabilities (Carried at Cost)~~

The fair values disclosed for demand deposits (e.g., interest and non-interest 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. Deposit liabilities are classified within Level 2 of the fair value hierarchy.

~~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~~'sCompany’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'~~counterparties’ credit standing.

The estimated fair values of the ~~Company's~~Company’s financial instruments ~~were as follows~~ at September 30, ~~2017.~~2019 were as follows.

	Fair Value Measurements at September 30, 2019
(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	$	201,477	$	201,477	$	201,477	$	-	$	-
Investment securities available for sale		379,962		379,962		-		377,071		2,891
Investment securities held to maturity		687,425		699,054		-		699,054		-
Restricted stock		2,371		2,371		-		2,371		-
Loans held for sale		21,210		21,210		-		18,734		2,476
Loans receivable, net		1,560,913		1,530,738		-		-		1,530,738
SBA servicing assets		4,504		4,504		-		-		4,504
Accrued interest receivable		9,277		9,277		-		9,277		-
Interest rate lock commitments		506		506		-		506		-
Best efforts forward loan sales commitments		43		43		-		43		-
Mandatory forward loan sales commitments		27		27		-		27		-
Financial liabilities:
Deposits
Demand, savings and money market	$	2,522,829	$	2,522,829	$	-	$	2,522,829	$	-
Time		217,203		217,325		-		217,325		-
Subordinated debt		11,263		8,109		-		-		8,109
Accrued interest payable		1,655		1,655		-		1,655		-
Interest rate lock commitments		2		2		-		2		-
Best efforts forward loan sales commitments		126		126		-		126		-
Mandatory forward loan sales commitments		79		79		-		79		-

Off-Balance Sheet Data
Commitments to extend credit		-		-		-		-		-
Standby letters-of-credit		-		-		-		-		-

Fair Value Measurements at September 30, 2017

(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 $ 98,782 $ 98,782 $ 98,782 $ - $ -
Investment securities available for sale 377,757 377,757 - 373,624 4,133
Investment securities held to maturity 416,987 411,257 - 411,257 -
Restricted stock 1,678 1,678 - 1,678 -
Loans held for sale 41,711 41,711 - 41,411 300
Loans receivable, net 1,087,147 1,056,761 - - 1,056,761
SBA servicing assets 5,387 5,387 - - 5,387
Accrued interest receivable 6,340 6,340 - 6,340 -
Interest rate lock commitments 635 635 - 635 -
Best efforts forward loan sales commitments 13 13 - 13 -
Mandatory forward loan sales commitments 51 51 - 51 -

Financial liabilities:
Deposits
Demand, savings and money market $ 1,763,937 $ 1,763,937 $ - $ 1,763,937 $ -
Time 121,468 120,968 - 120,968 -
Subordinated debt 21,663 18,191 - - 18,191
Accrued interest payable 577 577 - 577 -
Interest rate lock commitments 1 1 - 1 -
Best efforts forward loan sales commitments 125 125 - 125 -
Mandatory forward loan sales commitments 137 137 - 137 -

Off-Balance Sheet Data
Commitments to extend credit - - - - -
Standby letters-of-credit - - - - -

The estimated fair values of the ~~Company's~~Company’s financial instruments ~~were as follows~~ at December 31, ~~2016:~~2018 were as follows:

	Fair Value Measurements at December 31, 2018
(dollars in thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for I dentical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Balance Sheet Data
Financial assets:
Cash and cash equivalents	$	72,473	$	72,473	$	72,473	$	-	$	-
Investment securities available for sale		321,014		321,014		-		317,945		3,069
Investment securities held to maturity		761,563		747,323		-		747,323		-
Restricted stock		5,754		5,754		-		5,754		-
Loans held for sale		26,291		26,291		-		20,887		5,404
Loans receivable, net		1,427,983		1,410,945		-		-		1,410,945
SBA servicing assets		4,785		4,785		-		-		4,785
Accrued interest receivable		9,025		9,025		-		9,025		-
Interest rate lock commitments		410		410		-		410		-
Best efforts forward loan sales commitments		5		5		-		5		-
Mandatory forward loan sales commitments		10		10		-		10		-
Financial liabilities:

Deposits
Demand, savings and money market	$	2,238,610	$	2,238,610	$	-	$	2,238,610	$	-
Time		154,257		152,989		-		152,989		-
Subordinated debt		11,259		8,279		-		-		8,279
Accrued interest payable		558		558		-		558		-
Interest rate lock commitments		-		-		-		-		-
Best efforts forward loan sales commitments		138		138		-		138		-
Mandatory forward loan sales commitments		230		230		-		230		-

Off-Balance Sheet Data
Commitments to extend credit		-		-		-		-		-
Standby letters-of-credit		-		-		-		-		-

Fair Value Measurements at December 31, 2016

(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 $ 34,554 $ 34,554 $ 34,554 $ - $ -
Investment securities available for sale 369,739 369,739 - 364,948 4,791
Investment securities held to maturity 432,499 425,183 - 425,183 -
Restricted stock 1,366 1,366 - 1,366 -
Loans held for sale 28,065 28,267 - 23,911 4,356
Loans receivable, net 955,817 937,944 - - 937,944
SBA servicing assets 5,352 5,352 - - 5,352
Accrued interest receivable 5,497 5,497 - 5,497 -
Interest rate lock commitments 439 439 - 439 -
Best efforts forward loan sales commitments 103 103 - 103 -
Mandatory forward loan sales commitments 229 229 - 229 -

Financial liabilities:
Deposits
Demand, savings and money market $ 1,566,506 $ 1,566,506 $ - $ 1,566,506 $ -
Time 111,164 110,988 - 110,988 -
Subordinated debt 21,881 16,286 - - 16,286
Accrued interest payable 444 444 - 444 -
Interest rate lock commitments 55 55 - 55 -
Best efforts forward loan sales commitments 125 125 - 125 -
Mandatory forward loan sales commitments 38 38 - 38 -

Off-Balance Sheet Data
Commitments to extend credit - - - - -
Standby letters-of-credit - - - - -

Note 8: Changes in ~~Accumulated~~Accumulated Other Comprehensive Income (Loss) By Component (1)

The following table presents the changes in accumulated other comprehensive loss by component for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, and the year ended December 31, ~~2016.~~2018.

	Unrealized Gains (Losses) on Available- For-Sale Securities			Unrealized Holding Losses on Securities Transferred From Available-For-Sale To Held-To-Maturity			Total
(dollars in thousands)
Balance January 1, 2019	$	(4,736	)	$	(7,191	)	$	(11,927	)
Unrealized gain on securities		4,456			-			4,456
Amounts reclassified from accumulated other comprehensive income to net income (2)		(894	)		841			(53	)
Net current-period other comprehensive income		3,562			841			4,403
Total change in accumulated other comprehensive income		3,562			841			4,403
Balance September 30, 2019	$	(1,174	)	$	(6,350	)	$	(7,524	)

Balance January 1, 2018	$	(7,150	)	$	(359	)	$	(7,509	)
Reclassification due to the adoption of ASU 2018-02		(1,562	)		(78	)		(1,640	)
Unrealized loss on securities		(9,536	)		-			(9,536	)
Amounts reclassified from accumulated other comprehensive income to net income (2)		1			83			84
Net current-period other comprehensive income (loss)		(9,535	)		83			(9,452	)
Total change in accumulated other comprehensive income (loss)		(11,097	)		5			(11,092	)
Balance September 30, 2018	$	(18,247	)	$	(354	)	$	(18,601	)

Balance January 1, 2018	$	(7,150	)	$	(359	)	$	(7,509	)
Reclassification due to the adoption of ASU 2018-02		(1,562	)		(78	)		(1,640	)
Unrealized gain on securities		3,927			-			3,927
Net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity		-			(6,855	)		(6,855	)
Amounts reclassified from accumulated other comprehensive income to net income (2)		49			101			150
Net current-period other comprehensive income (loss)		3,976			(6,754	)		(2,778	)
Total change in accumulated other comprehensive income (loss)		2,414			(6,832	)		(4,418	)
Balance December 31, 2018	$	(4,736	)	$	(7,191	)	$	(11,927	)

Unrealized Gains (Losses) on Available-For-Sale Securities
Unrealized Holding Losses on Securities Transferred From Available-For-Sale To Held-To-Maturity
Total

(dollars in thousands)
Balance January 1, 2017 $ (6,831 ) $ (463 ) $ (7,294 )
Unrealized gain on securities 1,676 - 1,676
Amounts reclassified from accumulated other comprehensive income to net income (2) 39 83 122
Net current-period other comprehensive income 1,715 83 1,798
Balance September 30, 2017 $ (5,116 ) $ (380 ) $ (5,496 )

Balance January 1, 2016 $ (2,562 ) $ (603 ) $ (3,165 )
Unrealized loss on securities 2,170 - 2,170
Amounts reclassified from accumulated other comprehensive income to net income (2) (416 ) 85 (331 )
Net current-period other comprehensive income (loss) 1,754 85 1,839
Balance September 30, 2016 $ (808 ) $ (518 ) $ (1,326 )

Balance January 1, 2016 $ (2,562 ) $ (603 ) $ (3,165 )
Unrealized loss on securities (3,853 ) - (3,853 )
Amounts reclassified from accumulated other comprehensive income to net income (2) (416 ) 140 (276 )
Net current-period other comprehensive income (loss) (4,269 ) 140 (4,129 )
Balance December 31, 2016 $ (6,831 ) $ (463 ) $ (7,294 )

(1)

All amounts are net of tax. Amounts in parentheses indicate reductions to other comprehensive income.

(2)

Reclassification amounts are reported as gains on sales of investment securities, impairment losses, and amortization of net unrealized losses on the Consolidated Statement of Operations.

~~Note 9: Business Combination~~

~~Oak Mortgage Company, LLC~~

On July 28, 2016, Republic acquired all of the issued and outstanding limited liability company interests of Oak Mortgage Company, LLC ("Oak Mortgage") and, as a result, Oak Mortgage became a wholly owned subsidiary of Republic on that date. The aggregate cash purchase price paid to the Sellers for their limited liability company interests at closing was $7.1 million, $1.0 million of which was deposited in an escrow account to be disbursed one year from closing subject to adjustment for any covered indemnity claims under the Purchase Agreement. Escrow funds were disbursed in the third quarter of 2017. The purchase price was subject to certain post-closing adjustments.

In connection with the Oak Mortgage acquisition, the following table details the consideration paid, the initial estimated fair value of identifiable assets acquired and liabilities assumed as of the date of the acquisition, the subsequent adjustments to estimates, the final valuation of the fair value of identifiable assets acquired and liabilities assumed as of the date of the acquisition, and the resulting goodwill recorded (in thousands):

Consideration paid: Original Estimates Adjustments to Estimates
Final
Valuation

Cash $ 7,136 $ - $ 7,136
Equity instruments 202 - 202
Deferred additional purchase price 500 - 500

Value of consideration $ 7,838 $ - $ 7,838

Assets acquired:

Cash and cash equivalents $ 1,223 $ - $ 1,223
Loans held for sale 20,871 - 20,871
Loans receivable 1,132 - 1,132
Premises and equipment 103 - 103
Derivative assets 1,508 - 1,508
Intangible assets – non compete agreements 104 - 104
Other assets 125 - 125
Total assets 25,066 - 25,066

Liabilities assumed:

Warehouse lines of credit 19,666 - 19,666
Derivative liabilities 412 - 412
Other liabilities 2,042 119 2,161
Total liabilities 22,120 119 22,239

Net assets acquired 2,946 (119 ) 2,827

Goodwill resulting from acquisition of Oak Mortgage $ 4,892 $ 119 $ 5,011

~~As of December 31, 2016, the estimates of fair values of the assets acquired and liabilities assumed in the acquisition of Oak Mortgage were finalized.~~

The following table presents unaudited pro forma information, in thousands, as if the acquisition of Oak Mortgage by the Company had been completed on January 1, 2016. The pro forma information does not necessarily reflect the results of operations that would have occurred had Oak Mortgage been acquired by the Company at the beginning of 2016. The pro forma financial information does not include the impact of possible business model changes, nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies or other factors.

(dollars in thousands)
Three Months Ended
September 30, 2016

Nine Months Ended
September 30, 2016

Total revenues $ 15,755
$
52,610

Net income $ 1,259 $ 4,462

Note ~~10:~~9: Goodwill and Other Intangibles

The ~~Company's~~Company completed an annual impairment test for goodwill as of July 31, 2019. Future impairment testing will be conducted each year as of July 31, unless a triggering event occurs in the interim that would suggest impairment, in which case it would be tested as of the date of the triggering event. During the nine months ended September 30, 2019 and 2018, there was no goodwill impairment recorded. There can be no assurance that future impairment assessments or tests will not result in a charge to earnings.

The Company’s goodwill and intangible assets related to the acquisition of Oak Mortgage in July 2016 is detailed below:

	Three Months Ended September 30,
(dollars in thousands)	2019		2018
Balance, July 1st	$	5,011	$	5,011
Additions/Adjustments		-		-
Amortization		-		-
Balance, September 30th	$	5,011	$	5,011
Amortization Period (in years)	Indefinite		Indefinite

	Nine Months Ended September 30,
(dollars in thousands)	2019		2018
Balance, January 1st	$	5,011	$	5,011
Additions/Adjustments		-		-
Amortization		-		-
Balance, September 30^th	$	5,011	$	5,011
Amortization Period (in years)	Indefinite		Indefinite

(dollars in thousands)
Balance
December 31, 2016

Additions/
Adjustments
Amortization
Balance
September 30,
2017
Amortization Period (in years)

Goodwill $ 5,011 $ - $ - $ 5,011 Indefinite
Non-compete agreements 61 - (61) - 1
Total $ 5,072 $ - $ (61) $ 5,011

Note ~~11:~~10: Derivatives and Risk Management Activities

Republic did not have any derivative instruments designated as hedging instruments, or subject to master netting and collateral agreements for the nine months ended September 30, ~~2017.~~2019 and September 30, 2018. The following table summarizes the amounts recorded in ~~Republic's~~Republic’s statement of financial condition for derivatives not designated as hedging instruments as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 (in thousands):

September 30, 2019	Balance Sheet Presentation	Fair Value		Notional Amount
Asset derivatives:
IRLCs	Other Assets	$	506	$	29,205
Best efforts forward loan sales commitments	Other Assets		43		10,622
Mandatory forward loan sales commitments	Other Assets		27		6,948

Liability derivatives:
IRLCs	Other Liabilities	$	2	$	810
Best efforts forward loan sales commitments	Other Liabilities		126		19,393
Mandatory forward loan sales commitments	Other Liabilities		79		11,132

December 31, 2018	Balance Sheet Presentation	Fair Value		Notional Amount
Asset derivatives:
IRLCs	Other Assets	$	410	$	16,966
Best efforts forward loan sales commitments	Other Assets		5		1,639
Mandatory forward loan sales commitments	Other Assets		10		865

Liability derivatives:
IRLCs	Other Liabilities	$	-	$	-
Best efforts forward loan sales commitments	Other Liabilities		138		15,327
Mandatory forward loan sales commitments	Other Liabilities		230		18,980

September 30, 2017

Balance Sheet
Presentation

Fair
Value

Notional
Amount

Asset derivatives:

IRLC's Other Assets $ 635 $ 32,137
Best efforts forward loan sales commitments Other Assets 13 4,219
Mandatory forward loan sales commitments Other Assets 51 6,791

Liability derivatives:

IRLC's Other Liabilities $ 1 $ 308
Best efforts forward loan sales commitments Other Liabilities 125 28,226
Mandatory forward loan sales commitments Other Liabilities 137 31,509

December 31, 2016

Balance Sheet
Presentation

Fair
Value

Notional
Amount

Asset derivatives:

IRLC's Other Assets $ 439 $ 20,792
Best efforts forward loan sales commitments Other Assets 103 8,586
Mandatory forward loan sales commitments Other Assets 229 18,373

Liability derivatives:

IRLC's Other Liabilities $ 55 $ 6,757
Best efforts forward loan sales commitments Other Liabilities 125 18,963
Mandatory forward loan sales commitments Other Liabilities 38 5,024

The following tables ~~summarizes~~summarize the amounts recorded in ~~Republic's~~Republic’s statement of ~~income~~operations for derivative instruments not designated as hedging instruments for the three and nine months ended September 30, ~~2017~~2019 and 2018 (in thousands):

	Statement of Operations Presentation	Three Months Ended September 30, 2019 Gain/(Loss)			Nine Months Ended September 30, 2019 Gain/(Loss)
Asset derivatives:
IRLCs	Mortgage banking income	$	(201	)	$	96
Best efforts forward loan sales commitments	Mortgage banking income		26			38
Mandatory forward loan sales commitments	Mortgage banking income		27			17

Liability derivatives:
IRLCs	Mortgage banking income	$	(2	)	$	(2	)
Best efforts forward loan sales commitments	Mortgage banking income		81			12
Mandatory forward loan sales commitments	Mortgage banking income		148			151

	Statement of Operations Presentation	Three Months Ended September 30, 2018 Gain/(Loss)			Nine Months Ended September 30, 2018 Gain/(Loss)

Asset derivatives:
IRLCs	Mortgage banking income	$	(297	)	$	54
Best efforts forward loan sales commitments	Mortgage banking income		7			3
Mandatory forward loan sales commitments	Mortgage banking income		13			-

Liability derivatives:
IRLCs	Mortgage banking income	$	3		$	1
Best efforts forward loan sales commitments	Mortgage banking income		120			3
Mandatory forward loan sales commitments	Mortgage banking income		198			92

Three Months Ended
September 30, 2017

Nine Months Ended
September 30,
2017

Income Statement
Presentation
Gain/(Loss) Gain/(Loss)

Asset derivatives:

IRLC's Mortgage banking income $ (126) $ 196
Best efforts forward loan sales commitments Mortgage banking income (8) (90)
Mandatory forward loan sales commitments Mortgage banking income 47 (178)

Liability derivatives:

IRLC's Mortgage banking income $ - $ 54
Best efforts forward loan sales commitments Mortgage banking income 38 -
Mandatory forward loan sales commitments Mortgage banking income 12 (99)

Three and Nine Months Ended September 30, 2016
Income Statement
Presentation
Gain/(Loss)

Asset derivatives:

IRLC's Mortgage banking income $ (454)
Best efforts forward loan sales commitments Mortgage banking income (26)
Mandatory forward loan sales commitments Mortgage banking income -

Liability derivatives:

IRLC's Mortgage banking income $ 14
Best efforts forward loan sales commitments Mortgage banking income 11
Mandatory forward loan sales commitments Mortgage banking income (294)

The fair value of ~~Republic's~~Republic’s IRLCs, best efforts forward loan sales commitments, and mandatory forward loan sales commitments are based upon the estimated value of the underlying mortgage loan (determined consistent with ~~"Loans~~“Loans Held for ~~Sale"~~Sale”), adjusted for (1) estimated costs to complete and originate the loan, and (2) the estimated percentage of IRLCs that will result in a closed mortgage loan. The valuation of the IRLCs issued by Republic includes the value of the servicing released premium. Republic sells loans servicing released, and the servicing released premium is included in the market price.

Note 11: Revenue Recognition

On January 1, 2018, the Company adopted ASU 2014-09 “Revenue from Contracts with Customers” (Topic 606) and all subsequent ASUs that modified Topic 606. As stated in Note 2 Summary of Significant Accounting Policies, the implementation of the new standard did not have a material impact on the measurement of recognition of revenue. Management determined that a cumulative effect adjustment to opening retained earnings was not deemed necessary. Results for reporting periods beginning January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and investments. In addition, certain non-interest income streams such as gains on sales of residential mortgage and SBA loans, income associated with servicing assets, and loan fees, including residential mortgage originations to be sold and prepayment and late fees charged across all loan categories are also not in scope of the new guidance. Topic 606 is applicable to non-interest revenue streams such as service charges on deposit accounts. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Non-interest revenue streams in-scope of Topic 606 are discussed below.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), ATM fees, NSF fees, and other deposit related fees.

The Company’s performance obligation for account analysis fees and monthly services fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided, which is typically one month. Revenue is recognized at month end after the completion of the service period and payment for these service charges on deposit accounts is primarily received through a direct charge to customers’ accounts.

ATM fees, NSF fees, and other deposit related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and the related revenue recognized, at a point in time. Payment for these service charges are received immediately through a direct charge to customers’ accounts.

For the Company, there are no other material revenue streams within the scope of Topic 606.

The following tables present non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine months ended September 30, 2019 and 2018.

	Three Months Ended September 30,
(dollars in thousands)	2019		2018
Non-interest income
In-scope of Topic 606
Service charges on deposit accounts	$	1,990	$	1,386
Other non-interest income		46		29
Non-interest income (in-scope of Topic 606)		2,036		1,415
Non-interest income (out-of-scope of Topic 606)		4,518		3,716
Total non-interest income	$	6,554	$	5,131

	Nine Months Ended September 30,
(dollars in thousands)	2019		2018
Non-interest income
In-scope of Topic 606
Service charges on deposit accounts	$	5,450	$	3,887
Other non-interest income		175		107
Non-interest income (in-scope of Topic 606)		5,625		3,994
Non-interest income (out-of-scope of Topic 606)		12,900		11,440
Total non-interest income	$	18,525	$	15,434

Contract Balances

A contract assets balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s non-interest revenue streams are largely based on transaction activity, or standard month-end revenue accruals. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term contracts with customers, and therefore, does not experience significant contract balances. As of September 30, 2019 and December 31, 2018, the Company did not have any significant contract balances.

Contract Acquisition Costs

In connection with the adoption of Topic 606, an entity is required to capitalize, and subsequently amortize as an expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the assets that would have resulted from capitalizing these costs would have been amortized in one year or less. Upon adoption of Topic 606, the Company did not capitalize any contract acquisition cost.

Note 12: Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The FASB issued this ASU to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The new standard was adopted by the Company on January 1, 2019. ASU 2016-02 provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at the beginning of either the earliest period presented or as of the beginning of the period of adoption. The Company elected to apply ASU 2016-02 as of the beginning of the period of adoption (January 1, 2019) and will not restate comparative periods. Adoption of ASU 2016-02 resulted in the recognition of total operating lease liability obligations totaling $35.1 million and the recognition of operating lease right-of-use assets totaling $34.2 million at the date of adoption. The initial balance sheet gross up upon adoption was related to operating leases on land and buildings for twenty-three lease agreements. The Company has no finance leases or material subleases for which it is the lessor of property or equipment. The Company has elected to apply the package of practical expedients allowed by the new standard under which the Company need not reassess whether any expired or existing contracts are leases or contain leases, the Company need not reassess the lease classification for any expired or existing lease, and the Company need not reassess initial direct costs for any existing leases.

At January 1, 2019, the Company had thirty-four operating leases for real property, which includes operating leases for fifteen branch stores, eight offices that are used for general office space, and eleven operating leases for equipment. All of the real property operating leases include one of more options to extend the lease term. Five of the operating leases for branch stores are a lease for the land under the building and the Company owns the leasehold improvements.

At September 30, 2019, the Company had thirty-seven operating lease agreements, which include operating leases for seventeen branch stores, eight offices that are used for general office space, and twelve operating leases for equipment. Sixteen of the real property operating leases did not include one of more options to extend the lease term. Five of the operating leases for branch stores are a lease for the land under the building and the Company owns the leasehold improvements. The thirty-nine operating leases have maturity dates ranging from December 2019 to December 2058 which includes options for multiple five and ten year extensions which the Company is reasonably certain to exercise. The weighted average remaining operating lease term for these leases is 19.1 years as of September 30, 2019.

The discount rate used in determining the operating lease liability obligation for each individual lease was the assumed incremental borrowing rate for the Company that corresponded with the remaining lease term as of January 1, 2019 for leases that existed at adoption and as of the lease commencement date for leases subsequently entered in to. The weighted average operating lease discount rate was 3.58% as of September 30, 2019.

The following table presents operating lease costs net of sublease income for the three and nine months ended September 30, 2019.

	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
(dollars in thousands)
Operating lease cost	$	1,890		$	4,920
Sublease income		(80	)		(241	)
Total lease cost	$	1,810		$	4,679

The following table presents a maturity analysis of total operating lease liability obligations and reconciliation of the undiscounted cash flows to total operating lease liability obligations at September 30, 2019.

	September 30, 2019
(dollars in thousands)
Operating lease payments due:
Within one year	$	6,962
One to three years		11,806
Three to five years		10,106
More than five years		72,030
Total undiscounted cash flows		100,904
Discount on cash flows		(31,258	)
Total operating lease liability obligations	$	69,646

The following table presents cash and non-cash activities for the three and nine months ended September 30, 2019.

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,706	$	3,755

Non-cash investing and financing activities
Additions to Operating leases – right of use asset
New operating lease liability obligation	$	101	$	72,457

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

The following is ~~management's~~management’s discussion and analysis of our 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.

We may from time to time make written or oral "forward-looking statements", including statements contained in this ~~presentation.~~quarterly report. 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; the adequacy of our allowance for loan losses and our methodology for determining such allowance; adverse changes in our loan portfolio and credit risk-related losses and expenses; concentrations within our loan portfolio, including our exposure to commercial real estate loans, and to our primary service area; changes in interest rates; our ability to identify, negotiate, secure and develop new store locations and renew, modify, or terminate leases or dispose of properties for existing store locations effectively; 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; deposit flows; loan demand; the regulatory environment, including evolving banking industry standards, changes in legislation or regulation; ~~impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act;~~ our securities portfolio and the valuation of our securities; accounting principles, policies and guidelines as well as estimates and assumptions used in the preparation of our financial statements; rapidly changing technology; litigation liabilities, including costs, expenses, settlements and judgments; and other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services. You should carefully review the risk factors described in the Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 and other documents we file from time to time with the Securities and Exchange Commission. The words ~~"would~~"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 are intended to identify forward-looking statements. All such statements are made in good faith by us pursuant to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of us, except as may be required by applicable law or regulations.

~~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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. For information regarding our updated capital requirements, see "Regulatory Matters" below.

Financial Condition

Assets

Total assets increased by ~~$217.6~~$332.6 million ~~or 11.3%,~~ to ~~$2.1~~$3.09 billion at September 30, ~~2017,~~2019, compared to ~~$1.9~~$2.75 billion at December 31, ~~2016 as a result of the continued branding success with "The Power of Red is Back" growth and expansion strategy.~~

2018.

Cash and Cash Equivalents

Cash and due from banks and interest bearing deposits ~~with banks~~ comprise this category, which consists of our most liquid assets. The aggregate amount inof these ~~three~~two categories increased by ~~$64.2~~$129.0 million to ~~$98.8~~$201.5 million at September 30, ~~2017 compared to $34.6~~2019, from $72.5 million at December 31, ~~2016. The increase in cash was~~2018 primarily ~~driven by the~~as a result of an increase in deposit ~~balances during the period ended September 30, 2017.~~

balances.

Loans Held for Sale

Loans held for sale are comprised of loans guaranteed by the U.S. Small Business Administration ~~("SBA"~~(“SBA”) which we usually originate with the intention of selling in the future and residential mortgage loans originated ~~by Republic's subsidiary, Oak Mortgage Company,~~ which we also intend to sell in the future. Total SBA loans held for sale were ~~$300,000~~$2.5 million at September 30, ~~2017~~2019 as compared to ~~$4.2~~$5.4 million at December 31, ~~2016.~~2018. Residential mortgage loans held for sale ~~totaled $41.4~~were $18.7 million at September 30, ~~2017~~2019 compared to ~~$23.9~~$20.9 million at December 31, 2016. The increase in the balance of residential mortgage loans held for sale was driven by an increase in the volume of loans originated along with the timing of closings which pushed a number of sales into the fourth quarter.2018. Loans held for sale, as a percentage of total Company assets, were ~~1.9%~~less than 1% at September 30, ~~2017.~~

2019.

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 sized 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, 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 ~~$27.0~~$34.4 million at September 30, ~~2017.~~2019. Loans made to one individual customer, even if secured by different collateral, are aggregated for purposes of the lending limit.

Loans ~~receivable~~ increased ~~$130.4~~$132.9 million, or ~~13.5%~~9%, to ~~$1.1~~$1.6 billion at September 30, ~~2017,~~2019, versus ~~$965.0 million~~$1.4 billion at December 31, ~~2016.~~2018. This growth was the result of an increase in loan demand inacross our residential mortgage, commercial real estate, ~~construction and development,~~ owner occupied real estate, and consumer and other categories driven by the successful execution of our relationship banking strategy which focuses on delivering high levels of customer service.

Investment Securities

Investment securities considered available-for-sale are investments that 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 Small Business Administration (“SBA”) bonds, U.S. Government agency collateralized mortgage obligations ~~(CMO)~~(“CMO”), agency mortgage-backed securities ~~(MBS)~~(“MBS”), municipal securities, and corporate ~~bonds, asset-backed securities (ABS), and pooled trust preferred securities (CDO).~~bonds. Available-for-sale securities totaled ~~$377.8~~$380.0 million at September 30, ~~2017,~~2019, compared to ~~$369.7~~$321.0 million at December 31, ~~2016.~~2018. The increase was primarily due to the purchase of securities totaling ~~$53.1~~$150.7 million partially offset by proceeds from the ~~sales~~sale of securities totaling $53.6 million and paydowns of securities ~~held in the portfolio~~ totaling ~~$46.8~~$41.6 million during the first nine months of ~~2017.~~2019. At September 30, ~~2017,~~2019, the portfolio had a net unrealized loss of ~~$8.0~~$1.3 million compared to a net unrealized loss of ~~$10.7~~$5.7 million at December 31, ~~2016.~~2018. The change in value of the investment portfolio was driven by a decrease in market interest rates which drove an increase in ~~the fair~~ value of the ~~bonds held~~securities classified as available-for-sale in our portfolio during the first nine months of ~~2017.~~

2019.

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 U.S. Government agency Small Business Investment Company bonds ~~(SBIC)~~(“SBIC”) and ~~Small Business Administration (SBA)~~SBA bonds, ~~CMO's~~CMOs and ~~MBS's.~~ TheMBSs. The fair value of securities held-to-maturity totaled ~~$411.3~~$699.1 million and ~~$425.2~~$747.3 million at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. The decrease was primarily due to paydowns of securities totaling $73.9 million partially offset by an increase of $25.8 million in the ~~receipt~~value of ~~principal payments on CMO and MBS~~ securities held in the portfolio ~~totaling $36.6 million partially offset by the purchase of securities totaling $22.0 million~~ during the first nine months of ~~2017.~~

2019. The change in value of the investment portfolio was driven by a decrease in market interest rates which drove an increase in value of the securities classified as held-to-maturity in our portfolio during the first nine months of 2019.

Restricted Stock

Restricted stock, which represents a required investment in the capital stock of correspondent banks related to available credit facilities, is carried at cost as of September 30,~~, 2017~~ 2019 and December 31, ~~2016.~~2018. As of those dates, restricted stock consisted of investments in the capital stock of the Federal Home Loan Bank of Pittsburgh ~~("FHLB"~~(“FHLB”) and Atlantic Community Bankers Bank ~~("ACBB"~~(“ACBB”).

At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the investment in FHLB ~~of Pittsburgh~~ capital stock totaled ~~$1.5~~$2.2 million and ~~$1.2~~$5.6 million, respectively. The ~~increase~~decrease was due to a ~~higher~~lower required investment in FHLB stock during ~~2017.~~the first nine months of 2019. At both September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, ACBB capital stock totaled $143,000. Both the FHLB and ACBB have issued dividend payments in 2019.

Premises and Equipment

The balance of premises and equipment increased to $111.6 million at September 30, 2019 from $87.7 million at December 31, 2018. The increase was primarily due to premises and equipment expenditures of $28.6 million less depreciation and amortization expenses of $4.7 million during the first nine months of ~~2017.~~

2019. A new store was opened in New York City during the third quarter of 2019 bringing the total store count to twenty-eight as of September 30, 2019. There are also multiple sites in various stages of development for future store locations.

Expansion into New York City began in 2019. The Company opened its first store located at 14^th Street & 5^th Avenue in Manhattan in July 2019. A second store location at 51^st Street & 3^rd Avenue in Manhattan opened in November 2019.

Other Real Estate Owned

The balance of other real estate owned ~~decreased to $9.2~~was $6.7 million at September 30, ~~2017 from $10.2~~2019 and $6.2 million at December 31, ~~2016,~~ 2018. The increase was primarily due to additions of $1.1 million partially offset by sales and writedowns totaling $640,000.

Operating Leases – Right of Use Asset

Accounting Standards Codification Topic 842, also known as ASC 842 and ASU 2016-02, is the new lease accounting standard published by the FASB. ASC 842 represents a significant modification to the accounting treatment for leases, with the most significant change being that most leases, including operating leases, will now be capitalized on the balance sheet. Under the previous guidance (ASC 840), FASB permitted operating leases to be reported only in the footnotes of corporate financial statements. Under ASC 842, the only leases that are exempt from the capitalization requirement are short-term leases less than or equal to twelve months in length.

The right-of-use asset is valued as the initial amount of ~~$777,000~~the lease liability obligation adjusted for any initial direct costs, prepaid or accrued rent, and ~~sales totaling $357,000 on existing foreclosed properties during the nine months ended~~any lease incentives. At September 30, ~~2017.~~

2019, the balance of the operating lease right-of-use asset was $65.9 million.

Goodwill

Goodwill ~~resulting from~~is reviewed for impairment annually as of July 31 and between annual tests when events and circumstances indicate that impairment may have occurred. Impairment is a condition that exists when the ~~acquisition~~carrying amount of ~~Oak Mortgage~~goodwill exceeds the reporting unit’s fair value.

We early adopted Accounting Standards Update ("ASU") 2017-04, Simplifying the Test for Goodwill Impairment during our annual goodwill impairment review in 2018. The new rules under this guidance provide that the goodwill impairment charge will be the amount by which the reporting unit's carrying amount exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

At July ~~2016 amounted~~31, 2019, the Company elected to ~~$5.0 million at~~perform a Step One analysis to review goodwill for impairment. The results of the Step One analysis indicated that the carrying value of the reporting unit did not exceed its fair value. Based on our quantitative assessment, we determined that there was no evidence of impairment on the balance of goodwill. As of September 30, ~~2017~~2019 and December 31, ~~2016.~~

2018, goodwill totaled $5.0 million.

Deposits

Deposits, which include non-interest and interest-bearing demand deposits, money market, savings and time deposits, are ~~Republic's~~Republic’s major source of funding. Deposits are generally solicited from our 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 increased by ~~$207.7~~$347.2 million ~~or 12.4%,~~ to ~~$1.9~~$2.7 billion at September 30, ~~2017~~2019 from ~~$1.7~~$2.4 billion at December 31, ~~2016.~~2018. The increase was the result of significant growth in all deposit categories, led by strong growth in demand deposit ~~balances and time deposit balances partially offset by decreases in money market and savings~~ balances. We constantly focus our efforts on the growth of deposit balances through the successful execution of our relationship banking model which is based upon a high level of customer service and satisfaction. We are also in the midst of an aggressive expansion and relocation plan which we refer to as "The Power of Red is Back". Over the last three years, we have opened eleven new store locations and have several more in various stages of construction and development. This strategy has also allowed us to build a stable core-deposit base and nearly eliminate our dependence upon the more volatile sources of funding found in brokered and ~~public fund certificates~~wholesale deposits.

We are also in the midst of ~~deposit.~~

~~Shareholders'~~an aggressive expansion plan which we refer to as “The Power of Red is Back”. During 2018, we opened new stores in Gloucester Township, Evesboro, and Somers Point in NJ and Fairless Hills in PA. In the current year, we have opened stores in Lumberton, NJ, Feasterville, PA, and at 14^th Street & 5^th Avenue and 51^st Street & 3^rd Avenue in Manhattan. We have several more in various stages of construction and development including sites in New York City.

Short-term Borrowings

As of September 30, 2019, we had no short-term borrowings with the FHLB compared to $91.4 million at December 31, 2018. The short-term borrowings were paid off in 2019 as a result of growth in deposit balances.

Operating Lease Liability Obligation

The operating lease liability obligation is calculated as the present value of the lease payments, using the discount rate specified in the lease, or if that is not available, our incremental borrowing rate. At September 30, 2019, the balance of the operating lease liability obligation was $69.6 million.

Shareholders’ Equity

Total ~~shareholders'~~shareholders’ equity increased ~~$10.1~~$5.7 million to ~~$225.2~~$250.8 million at September 30, ~~2017~~2019 compared to ~~$215.1~~$245.2 million at December 31, ~~2016.~~2018. The increase ~~was primarily due to net income of $6.2 million recognized~~ during the first nine months of ~~2017, an increase of $2.2~~2019 was primarily due to a $4.4 million ~~related to the issuance of stock based compensation, stock option exercises and securities conversion, and the reduction~~decrease in accumulated other comprehensive losses associated with an increase in the market value of the investment securities ~~portfolio.~~portfolio, an adjustment for stock based compensation in the amount of $2.0 million, and stock option exercises of $261,000 partially offset by a net loss of $1.0 million. The shift in market value of the securities portfolio ~~resulting in accumulated other comprehensive losses of $5.5 million at September 30, 2017 compared to accumulated other comprehensive losses of $7.3 million at December 31, 2016~~ was primarily driven by a decrease in market interest rates which drove an increase in the ~~fair~~market value of the securities held in our portfolio.

Results of Operations

Three Months Ended September 30, ~~2017~~2019Compared to Three Months Ended September30, ~~2016~~

2018

We reported a net loss of $1.8 million, or ($0.03) per diluted share, for the three months ended September 30, 2019 and compared to net income of $2.3 million, or $0.04 per diluted share for the three months ended September 30, ~~2017, compared to~~2018. The decrease in net income of ~~$1.3~~$4.1 million ~~or $0.03 per diluted share, for the three months ended September 30, 2016. The increase in net income~~ was primarily driven by the growth in ~~interest-earning assets along with~~non-interest expense year over year. The increase in expense was driven by the addition of five new store locations over the last twelve months, including our first store located in New York City. The expansion into New York City has also required us to hire a ~~residential mortgage~~ lending ~~division.~~

and management team and support group in this new market. During 2019 we have also experienced a flat and, at times, an inverted yield curve which has resulted in minimal growth in net interest income despite the addition of more than $300 million in interest earning assets.

Net interest income was $19.4 million for the three month period ended September 30, ~~2017 was $15.7 million~~2019 compared to ~~$11.8~~$19.1 million for the three months ended September 30, ~~2016.~~2018. Interest income increased ~~$4.3~~$2.7 million, or ~~32%~~11%, due to ~~$17.9 million for the three months ended September 30, 2017 compared to $13.6 million for the three months ended September 30, 2016 primarily as a~~ ~~result of a $288.1 million~~an increase in average ~~investment securities balances~~loans receivable and ~~a $149.8 million increase in average loan balances.~~federal funds sold and other interest earning assets. Interest expense increased ~~$376,000~~$2.4 million, or ~~21%~~55%, ~~to $2.2 million for the three months ended September 30, 2017 compared to $1.8 million for the three months ended September 30, 2016. This increase was~~ primarily due to an increase in average deposit balances and the average rate paid on deposit balances.

~~We did not record~~ The net interest margin decreased by 32 basis points to 2.82% during the third quarter of 2019 compared to 3.14% during the third quarter of 2018. Compression in the net interest margin was driven by flattening of the yield curve resulting in a ~~provision for loan losses for~~rapid increase in our cost of funds and a decline in the ~~three months ended September 30, 2017.~~ yield on interest earning assets.

We recorded a provision for loan losses in the amount of ~~$607,000~~$450,000 for the three months ended September 30, ~~2016~~2019 and a provision for loan losses in the amount of $500,000 for the three months ended September 30, 2018. This decrease was primarily due to ~~an increase~~a decline in the allowance required for loans individually evaluated for impairment.

Non-interest income increased by ~~$636,000~~$1.4 million to ~~$5.8~~$6.6 million during the three months ended September 30, ~~2017~~2019 compared to $5.1 million during the three months ended September 30, ~~2016.~~2018. The increase during the three months ended September 30, ~~2017~~2019 was primarily due to increases in ~~mortgage banking income,~~ service fees on deposit accounts and ~~loan advisory and service fees partially offset by a decrease in~~gains on the ~~gain on~~ sale of ~~SBA loans.~~

investment securities.

Non-interest expenses increased ~~by $4.2~~$7.0 million to ~~$19.2~~$27.8 million during the three months ended September 30, ~~2017~~2019 compared to ~~$15.0~~$20.8 million during the three months ended September 30, ~~2016.~~2018. This increase was primarily driven by higher salaries, employee benefits, and occupancy and equipment expenses associated with the addition of new stores related to our expansion strategy which we refer to as ~~"The~~“The Power of Red is ~~Back",~~Back”. Annual merit increases contributed to the increase in salaries and employee benefit costs. We have also incurred costs related to our expansion into New York City as ~~well as the addition of the Oak Mortgage residential mortgage~~we hire a management and lending team and commence rent payments for our store locations. Our first store in New York City opened at 14^th Street & 5^th Avenue in Manhattan in July 2019. Construction was completed on a second store location at 51^st Street & 3^rd Avenue in November 2019.

We recorded a benefit for income taxes in the ~~third quarter~~amount of ~~2016.~~

$516,000 during the three months ended September 30, 2019 compared to a $622,000 provision for income taxes during the three months ended September 30, 2018.

Return on average assets and average equity from continuing operations was ~~0.45%~~(0.24%) and ~~4.11%~~(2.88%), respectively, during the three months ended September 30, ~~2017~~2019 compared to ~~0.32%~~0.36% and ~~4.49%~~3.90%, respectively, for the three months ended September 30, ~~2016.~~

2018.

Nine Months Ended September 30, 2019Compared to Nine Months Ended September 30, 2018

We reported a net loss of $1.0 million, or ($0.02) per diluted share, for the nine months ended September 30, ~~2017~~2019 compared to ~~September 30, 2016~~

~~We reported~~ net income of ~~$6.2~~$6.5 million, or $0.11 per diluted share, for the nine months ended September 30, ~~2017 compared to~~2018. The decrease in net income of ~~$3.4~~$7.5 million ~~or $0.09 per diluted share, for the nine months ended September 30, 2016. The increase in net income~~ was primarily driven by the growth in ~~interest-earning assets along with~~non-interest expense year over year. The increase in expense was driven by the addition of five new store locations over the last twelve months, including our first store located in New York City. The expansion into New York City has also required us to hire a ~~residential mortgage~~ lending ~~division.~~

Net interest income for the nine months ended September 30, ~~2017 increased $10.5 million to $45.2~~2019 was $57.9 million as compared to ~~$34.7~~$55.9 million for the nine months ended September 30, ~~2016.~~2018. Interest income increased ~~$11.8~~$11.2 million, or ~~30%~~17%, due ~~primarily~~ to ~~increases~~an increase in average ~~investment securities balances~~loans receivable and the average yield earned on loan balances. Interest expense increased ~~$1.3~~$9.2 million, or ~~27%~~85%, primarily due to ~~$6.2~~an increase in average deposit balances and the average rate paid on deposit balances. The net interest margin decreased by 26 basis points to 2.92% during nine months ended September 30, 2019 compared to 3.18% during the nine months ended September 30, 2018. Compression in the net interest margin was driven by flattening of the yield curve resulting in a more rapid increase in our cost of funds compared to the yield on interest earning assets.

We recorded a provision for loan losses of $750,000 for the nine months ended September 30, 2019 compared to a provision for loan losses of $1.7 million for the nine months ended September 30, ~~2017 compared to $4.9 million for the nine months ended September 30, 2016.~~2018. This ~~increase~~decrease was primarily due to ~~an increase in average interest bearing deposits.~~

~~We recorded~~ a provision for loan losses of $500,000 for the nine months ended September 30, 2017 due to an increase in the allowance required for loans collectively evaluated for impairment driven by an increase in total loans outstanding. We recorded a provision for loan losses of $1.6 million for the nine months ended September 30, 2016 primarily due to an increasedecline in the allowance required for loans individually evaluated for impairment.

Non-interest income increased ~~by $4.5~~$3.1 million to ~~$15.1~~$18.5 million during the nine months ended September 30, ~~2017 as~~2019 compared to ~~$10.6~~$15.4 million during the nine months ended September 30, ~~2016.~~2018. The increase during the nine months ended September 30, ~~2017~~2019 was primarily due to increases in ~~mortgage banking income,~~ service fees on deposit accounts and ~~loan advisory and servicing fees partially offset by decreases in the gain~~gains on the ~~sale~~sales of ~~SBA loans and the gain (loss) on the sale of~~investment securities.

Non-interest expenses increased ~~$13.3~~$15.3 million to ~~$53.7~~$77.0 million during the nine months ended September 30, ~~2017~~2019 as compared to ~~$40.3~~$61.7 million during the nine months ended September 30, ~~2016. The~~2018. This increase was primarily driven by higher salaries, employee benefits, and occupancy and equipment expenses associated with the addition of new stores related to our expansion strategy which we refer to as ~~"The~~“The Power of Red is ~~Back",~~Back”. Annual merit increases contributed to the increase in salaries and employee benefit costs. We have incurred costs related to our expansion into New York City as ~~well as, the addition of the Oak Mortgage residential mortgage~~we hire a management and lending team and commence rent payments for our store locations. Our first store in New York City opened at 14^th Street & 5^th Avenue in Manhattan in July 2019. Construction was completed on a second store location at 51^st Street & 3^rd Avenue in November 2019.

We recorded a benefit for income taxes in the ~~third quarter~~amount of ~~2016.~~

$319,000 during the nine months ended September 30, 2019 compared to a $1.5 million provision for income taxes during the nine months ended September 30, 2018.

Return on average assets and average equity from continuing operations were ~~0.41%~~(0.05%) and ~~3.74%~~(0.55%), respectively, during the nine months ended September 30, ~~2017~~2019 compared to ~~0.30%~~0.35% and ~~3.93%~~3.73%, respectively, for the nine months ended September 30, ~~2016.~~

2018.

Analysis of Net Interest Income

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

measure, using a rate of 21% in 2019 and 21% in 2018.

Average Balances and Net Interest Income

For the three months ended
September 30, 2017

For the three months ended
September 30, 2016

(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 $ 56,316 $ 181 1.28 % $ 114,260 $ 149 0.52 %
Investment securities and restricted stock 765,678 4,805 2.51 % 477,601 2,858 2.39 %
Loans receivable 1,115,920 13,136 4.67 % 966,106 10,848 4.47 %
Total interest-earning assets 1,937,914 18,122 3.71 % 1,557,967 13,855 3.54 %

Other assets 122,513 103,826

Total assets $ 2,060,427 $ 1,661,793

Interest-earning liabilities:
Demand – non-interest bearing $ 381,380 $ 282,571
Demand – interest bearing 692,423 772 0.44 % 533,222 553 0.41 %
Money market & savings 613,506 788 0.51 % 583,256 677 0.46 %
Time deposits 109,878 312 1.13 % 104,701 301 1.14 %
Total deposits 1,797,187 1,872 0.41 % 1,503,750 1,531 0.41 %

Total interest-bearing deposits 1,415,807 1,872 0.52 % 1,221,179 1,531 0.50 %

Other borrowings 30,220 338 4.44 % 29,938 303 4.03 %

Total interest-bearing liabilities 1,446,027 2,210 0.61 % 1,251,117 1,834 0.58 %

Total deposits and other borrowings 1,827,407 2,210 0.48 % 1,533,688 1,834 0.48 %

Non-interest-bearing other liabilities 9,179 9,247
Shareholders' equity 223,841 118,858

Total liabilities and shareholders' equity $ 2,060,427 $ 1,661,793
Net interest income ⁽²⁾
$ 15,912 $ 12,021
Net interest spread 3.10 % 2.96 %

Net interest margin ⁽²⁾
3.26 % 3.07 %

	For the three months ended September 30, 2019							For the three months ended September 30, 2018
(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	$	146,446	$	777		2.10	%	$	29,163	$	153		2.08	%
Investment securities and restricted stock ⁽²⁾		1,055,154		6,743		2.56	%		1,018,910		6,676		2.62	%
Loans receivable ⁽²⁾		1,540,834		18,816		4.84	%		1,390,894		16,873		4.81	%
Total interest-earning assets		2,742,434		26,336		3.81	%		2,438,967		23,702		3.86	%
Other assets		247,682							135,139
Total assets	$	2,990,116						$	2,574,106

Interest-earning liabilities:
Demand – non-interest bearing	$	563,691						$	513,292
Demand – interest bearing		1,168,404		3,752		1.27	%		861,607		1,948		0.90	%
Money market & savings		702,547		1,814		1.02	%		699,081		1,308		0.74	%
Time deposits		208,624		1,123		2.14	%		126,378		386		1.21	%
Total deposits		2,643,266		6,689		1.00	%		2,200,358		3,642		0.66	%
Total interest-bearing deposits		2,079,575		6,689		1.28	%		1,687,066		3,642		0.86	%
Other borrowings		14,037		137		3.87	%		127,150		770		2.40	%
Total interest-bearing liabilities		2,093,612		6,826		1.29	%		1,814,216		4,412		0.96	%
Total deposits and other borrowings		2,657,303		6,826		1.02	%		2,327,508		4,412		0.75	%
Non-interest bearing other liabilities		81,872							10,363
Shareholders’ equity		250,941							236,235
Total liabilities and shareholders’ equity	$	2,990,116						$	2,574,106
Net interest income ⁽²⁾			$	19,510						$	19,290
Net interest spread						2.52	%						2.90	%
Net interest margin ⁽²⁾						2.82	%						3.14	%

⁽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, a ~~non-GAAP~~Non-GAAP measure. Net interest income has been increased over the financial statement amount by ~~$200~~$128 and ~~$235~~$144 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, 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.

Average Balances and Net Interest Income

For the nine months ended
September 30, 2017

For the nine months ended
September 30, 2016

(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 $ 36,431 $ 312 1.15 % $ 78,094 $ 299 0.51 %
Investment securities and restricted stock 785,121 14,850 2.52 % 458,496 8,615 2.51 %
Loans receivable 1,063,581 36,944 4.64 % 925,110 31,339 4.53 %
Total interest-earning assets 1,885,133 52,106 3.70 % 1,461,700 40,253 3.68 %

Other assets 112,018 95,054

Total assets $ 1,997,151 $ 1,556,754

Interest-earning liabilities:
Demand – non-interest bearing $ 355,432 $ 270,503
Demand – interest bearing 657,722 2,075 0.42 % 476,134 1,471 0.41 %
Money market & savings 607,822 2,218 0.49 % 572,347 1,923 0.45 %
Time deposits 107,881 903 1.12 % 82,738 625 1.01 %
Total deposits 1,728,857 5,196 0.40 % 1,401,722 4,019 0.38 %

Total interest-bearing deposits 1,373,425 5,196 0.51 % 1,131,219 4,019 0.47 %

Other borrowings 39,408 1,046 3.55 % 29,947 898 4.01 %

Total interest-bearing liabilities 1,412,833 6,242 0.59 % 1,161,166 4,917 0.57 %

Total deposits and other borrowings 1,768,265 6,242 0.47 % 1,431,669 4,917 0.46 %

Non-interest-bearing other liabilities 8,628 7,957
Shareholders' equity 220,258 117,128

Total liabilities and shareholders' equity $ 1,997,151 $ 1,556,754
Net interest income ⁽²⁾
$ 45,864 $ 35,336
Net interest spread 3.11 % 3.11 %

Net interest margin ⁽²⁾
3.25 % 3.23 %

	For the nine months ended September 30, 2019							For the nine months ended September 30, 2018
(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	$	96,245	$	1,631		2.27	%	$	27,625	$	388		1.88	%
Investment securities and restricted stock ⁽²⁾		1,069,304		21,347		2.66	%		1,027,614		20,001		2.60	%
Loans receivable ⁽²⁾		1,506,482		55,408		4.92	%		1,310,750		46,795		4.77	%
Total interest-earning assets		2,672,031		78,386		3.92	%		2,365,989		67,184		3.80	%
Other assets		218,947							130,344
Total assets	$	2,890,978						$	2,496,333

Interest-earning liabilities:
Demand – non-interest bearing	$	533,922						$	475,659
Demand – interest bearing		1,142,515		11,896		1.39	%		866,397		4,754		0.73	%
Money market & savings		691,876		4,894		0.95	%		695,386		3,454		0.66	%
Time deposits		179,936		2,608		1.94	%		127,281		1,121		1.18	%
Total deposits		2,548,249		19,398		1.02	%		2,164,723		9,329		0.58	%
Total interest-bearing deposits		2,014,327		19,398		1.29	%		1,689,064		9,329		0.74	%
Other borrowings		26,836		681		3.39	%		90,160		1,528		2.27	%
Total interest-bearing liabilities		2,041,163		20,079		1.32	%		1,779,224		10,857		0.82	%
Total deposits and other borrowings		2,575,085		20,079		1.04	%		2,254,883		10,857		0.64	%
Non-interest bearing other liabilities		67,182							9,534
Shareholders’ equity		248,711							231,916
Total liabilities and shareholders’ equity	$	2,890,978						$	2,496,333
Net interest income ⁽²⁾			$	58,307						$	56,327
Net interest spread						2.60	%						2.98	%
Net interest margin ⁽²⁾						2.92	%						3.18	%

⁽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, a ~~non-GAAP~~Non-GAAP measure. Net interest income has been increased over the financial statement amount by ~~$666~~$414 and ~~$662~~$403 for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, 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.

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, ~~2017,~~2019, as compared to the three and nine months ended September 30, ~~2016.~~2018. 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, 2017 vs. 2016

For the nine months ended
September 30, 2017 vs. 2016

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 $ (191 ) $ 223 $ 32 $ (358 ) $ 371 $ 13
Securities 1,804 143 1,947 6,178 57 6,235
Loans 1,652 636 2,288 4,651 954 5,605
Total interest-earning assets 3,265 1,002 4,267 10,471 1,382 11,853

Interest expense:
Deposits
Interest-bearing demand deposits 181 38 219 573 31 604
Money market and savings 32 79 111 115 180 295
Time deposits 16 (5 ) 11 211 67 278
Total deposit interest expense 229 112 341 899 278 1,177
Other borrowings (4 ) 39 35 43 105 148
Total interest expense 225 151 376 942 383 1,325
Net interest income $ 3,040 $ 851 $ 3,891 $ 9,529 $ 999 $ 10,528

	For the three months ended September 30, 2019 vs. 2018									For the nine months ended September 30, 2019 vs. 2018
	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	$	633		$	(9	)	$	624		$	1,163		$	80		$	1,243
Securities		229			(162	)		67			832			514			1,346
Loans		1,696			247			1,943			6,873			1,740			8,613
Total interest-earning assets		2,558			76			2,634			8,868			2,334			11,202

Interest expense:
Deposits
Interest-bearing demand deposits		996			808			1,804			2,875			4,267			7,142
Money market and savings		(9	)		515			506			(60	)		1,500			1,440
Time deposits		425			312			737			763			724			1,487
Total deposit interest expense		1,412			1,635			3,047			3,578			6,491			10,069
Other borrowings		(765	)		132			(633	)		(1,317	)		470			(847	)
Total interest expense		647			1,767			2,414			2,261			6,961			9,222
Net interest income	$	1,911		$	(1,691	)	$	220		$	6,607		$	(4,627	)	$	1,980

Net Interest Income and Net Interest Margin

Net interest income, on a fully tax-equivalent basis, a non-GAAP measure, for the three months ended September 30, ~~2017~~2019 increased ~~by $3.9 million,~~$220,000, or ~~32%~~1%, over the same period in ~~2016.~~2018. Interest income ~~on a fully tax-equivalent basis,~~ on interest-earning assets totaled ~~$18.1~~$26.3 million and ~~$13.9~~$23.7 million for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The increase in interest income earned was primarily the result of ~~a $288.1 million~~an increase in the average ~~investment securities~~ balances of loans receivable and ~~a $149.8 million increase in average loan balances for the three months ended September 30, 2017 as compared to September 30, 2016.~~federal funds sold and other interest-bearing deposits. Total interest expense for the three months ended September 30, ~~2017~~2019 increased ~~$376,000,~~by $2.4 million, or ~~21%~~55%, to ~~$2.2~~$6.8 million from ~~$1.8~~$4.4 million ~~over~~for the same period in ~~2016.~~2018. Interest expense on deposits increased by $3.0 million, or 84%, for the three months ended September 30, ~~2017 increased by $341,000, or 23%, over~~2019 versus the same period in ~~2016.~~

2018 due to increases in average deposit balances and higher rates. Interest expense on other borrowings decreased by $633,000 for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018 due to a decrease in overnight borrowings. The flattening of the yield curve has resulted in a rapid increase in the cost of interest bearing liabilities and a decline in the yield on interest earning assets. The Federal Reserve increased the Fed Funds borrowing rate by 25 basis points on three separate occasions during 2018 which has impacted rates on the short end of the yield curve which typically impacts deposit rates. During the third quarter of 2019, the Fed Funds rate was reduced by 25 basis points on two occasions which has resulted in a decline in the cost of interest bearing liabilities on a linked quarter basis.

Net interest income, on a fully tax-equivalent basis, a non-GAAP measure, for the nine months ended September 30, ~~2017~~2019 increased ~~by $10.5~~$2.0 million, or ~~30%~~4%, over the same period in ~~2016.~~2018. Interest income ~~on a fully tax-equivalent basis,~~ on interest-earning assets totaled ~~$52.1~~$78.4 million and ~~$40.3~~$67.2 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The increase in interest income earned was primarily the result of ~~a $326.6 million~~an increase in the average ~~investment securities~~ balances of loans receivable and ~~a $138.5 million increase in~~the average yield earned on loan ~~balances for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.~~balances. Total interest expense for the nine months ended September 30, ~~2017~~2019 increased ~~$1.3~~by $9.2 million, or ~~27%~~85%, to ~~$6.2~~$20.1 million from ~~$4.9~~$10.9 million ~~over~~for the same period in ~~2016.~~2018. Interest expense on deposits increased by $10.1 million, or 108%, for the nine months ended September 30, ~~2017 increased by $1.2 million, or 29%, over~~2019 versus the same period in ~~2016.~~

2018 due to both increases in average deposit balances and the average rate paid on deposit balances. Interest expense on other borrowings decreased by $847,000 for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 due to a decrease in average overnight borrowings. The flattening of the yield curve has resulted in a more rapid increase in the cost of interest bearing liabilities when compared to the yield on interest earning assets. The Federal Reserve increased the Fed Funds borrowing rate by 25 basis points on three separate occasions during 2018 which has impacted rates on the short end of the yield curve which typically impacts deposit rates. During the third quarter of 2019, the Fed Funds rate was reduced by 25 basis points on two occasions which has resulted in a decline in the cost of interest bearing liabilities on a linked quarter basis.

Changes in net interest income are frequently measured by two statistics: net interest rate spread and net interest margin. Net interest rate spread is the difference between the average rate earned on interest-earning assets and the average rate incurred on interest-bearing liabilities. Our net interest rate spread on a fully tax-equivalent basis was ~~3.10%~~2.52% during the three months ended September 30, ~~2017~~2019 compared to ~~2.96%~~2.90% during the ~~same period in 2016~~three months ended September 30, 2018 and was ~~3.11%~~2.60% during ~~both~~ the nine months ended September 30, ~~2017 and the~~2019 compared to 2.98% during nine months ended September 30, ~~2016.~~2018. Net interest margin represents the difference between interest income, including net loan fees earned, and interest expense, reflected as a percentage of average interest-earning assets. ~~The~~For the three months ended September 30, 2019 and September 30, 2018, the fully tax-equivalent net interest margin ~~increased to 3.26%~~was 2.82% and 3.14%, respectively. The net interest margin for the three months ended September 30, ~~2017 from 3.07% for the same period~~2019 decreased primarily due to a rate increase of 27 basis points in ~~2016 primarily as~~total deposits and other borrowings compared to a ~~result~~decrease of ~~an increase~~5 basis points in the yield on ~~loans outstanding.~~total interest earning assets. For the nine months ended September 30, ~~2017,~~2019 and September 30, 2018, the fully tax-equivalent net interest margin ~~increased~~was 2.92% and 3.18%, respectively. The net interest margin for the nine months ended September 30, 2019 decreased primarily due to ~~3.25% from 3.23% during the same period~~a rate increase of 40 basis points in ~~2016 primarily as a result~~total deposits and other borrowings offset by an increase of ~~an increase~~12 basis points in the yield on ~~loans outstanding.~~

total interest earning assets.

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~~

We recorded a ~~level that management believes is adequate to absorb inherent losses in the loan portfolio. We did not record a~~$450,000 provision for loan losses for the three months ended September 30, ~~2017.We recorded a~~2019 as compared to $500,000 provision for the ~~nine month period~~three months ended September 30, ~~2017. During~~2018. We recorded a $750,000 provision for loan losses for the nine ~~month period~~months ended September 30, ~~2017, an increase~~2019 as compared to $1.7 million for the nine months ended September 30, 2018. During the three and nine months ended September 30, 2019, there was a decrease in the allowance required for loans ~~collectively~~individually evaluated for ~~impairment was driven by an increase in total loans outstanding. We recorded a $607,000 provision~~impairment.

Non-Interest Income

Total non-interest income for the three ~~month period~~months ended September 30, ~~2016 and a $1.6~~2019 increased $1.4 million, ~~provision for~~or 28%, compared to the ~~nine month period~~three months ended September 30, 2016. During the nine month period ended September 30, 2016, there was an increase in the allowance for loans individually evaluated for impairment primarily as a result of a single loan relationship that moved to non-accrual status during the second quarter of 2016.

~~Nonperforming assets at September 30, 2017~~2018. Service fees on deposit accounts totaled $22.9 million, or 1.07%, of total assets, down $6.2 million, or 21%, from $29.1 million, or 1.51%, of total assets at December 31, 2016 and down $6.8 million, or 23%, from $29.8 million, or 1.72%, of total assets at September 30, 2016, due primarily to one commercial real estate loan relationship in the amount of $6.5 million which moved from non-accrual to performing status during the quarter ended September 30, 2017.

~~Non-Interest Income~~

~~Total non-interest income increased by $636,000, or 12%, to $5.8~~$2.0 million for the three months ended September 30, ~~2016, compared to $5.1 million for the three months ended September 30, 2016. Mortgage banking income~~ increased by $754,000 to $3.2 million during the three months ended September 30, 2017 from $2.4 million primarily due to gains on the sale of residential mortgage loans originated through Oak Mortgage which was acquired in the third quarter of 2016. ~~Service fees on deposit accounts totaled $1.1 million for the three months ended September 30, 2017,~~2019 which represents an increase of ~~$381,000~~$604,000 over the ~~three months ended September 30, 2016.~~same period in 2018. This increase was due to the growth in the number of customer accounts and transaction volume. Gains of $520,000 were recognized on the sale of investment securities during the three months ended September 30, 2019 compared to no gains on the sale of investment securities during the three months ended September 30, 2018. Mortgage banking income totaled $2.8 million during the three months ended September 30, 2019 which represents an increase of $217,000 from the same period in 2018. Gains on the sale of SBA loans ~~sold~~ totaled ~~$831,000~~$944,000 for the three months ended September 30, ~~2017~~2019, an increase of $128,000, compared to ~~$1.6 million~~$816,000 for the same period in 2018. Loan advisory and servicing fees totaled $257,000 for the three months ended September 30, ~~2016~~. ~~The~~2019 which represents a decrease of ~~$799,000 in gains on the sale of SBA loans was driven by a decrease in SBA loans sold during the three months ended September 30, 2017 as a result of lower origination volume.~~ ~~Loan advisory and servicing fees totaled $677,000 for the three months ended September 30, 2017 which represents an increase of $349,000~~$63,000 from the same period in ~~2016 due to higher loan volumes.~~2018.

Total non-interest income for the nine months ended September 30, 2019 increased ~~by $4.5~~$3.1 million, or ~~43%~~20%, compared to ~~$15.1~~the nine months ended September 30, 2018. Service fees on deposit accounts totaled $5.5 million for the nine months ended September 30, 2017, compared to $10.6 million for the nine months ended September 30, 2016. Mortgage banking income increased by $6.1 million to $8.6 million during the nine months ended September 30, 2017 from $2.4 million primarily due to gains on the sale of residential mortgage loans originated through Oak Mortgage which was acquired in the third quarter of 2016. Service fees on deposit accounts totaled $2.8 million for the nine months ended September 30, 20172019 which represents an increase of ~~$910,000~~$1.6 million over the same period in ~~2016.~~2018. This increase was due to the growth in the number of customer accounts and transaction volume. Gains of $1.1 million were recognized on the sale of SBA loans sold were $2.3 million during the nine months ended September 30, 2017 compared to $4.2 million in the same period of 2016 as a result of a decrease in SBA loans sold during the nine months ended September 30, 2017 as a result of lower origination volume. There were recognized losses in the amount of $61,000 on sales of investment securities during the nine months ended September 30, ~~2017 as~~2019 compared to ~~gains~~a $1,000 loss on the sale of ~~$656,000~~investment securities during the nine months ended September 30, ~~2016.~~2018. Loan ~~advisory~~ and ~~service~~servicing fees totaled ~~$1.3~~$1.2 million for the nine months ended September 30, ~~2017~~2019 which represents an increase of ~~$202,000~~$317,000 from the same period in ~~2016.~~

~~Non-interest Expenses~~

~~Three Months Ended~~2018. Mortgage banking income totaled $8.0 million for the nine months ended September 30, ~~2017~~2019, an increase of $100,000, compared to ~~Three Months Ended~~$7.9 million during the nine months ended September 30, ~~2016~~

2018.

Non-Interest Expenses

Three Months Ended September 30, 2019Compared to Three Months Ended September 30, 2018

Non-interest expenses increased $7.0 million, or 34%, for the three months ended September 30, 2019 compared to the same period in 2018. An explanation of changes in non-interest expenses for certain categories is presented in the following paragraphs.

Salaries and employee benefits increased by ~~$4.2~~$3.1 million, or 28%, for the three months ended September 30, ~~2017~~2019 compared to the same period in ~~2016. A detailed explanation of the most significant variances in non-interest expenses for the three months ended September 30, 2017 and September 30, 2016 is presented in the following paragraphs.~~

~~Salary and employee benefits expenses,~~2018 which ~~represent the largest component of non-interest expenses, increased by $2.1 million, or 27%, for the three months ended September 30, 2017 compared to the same period in 2016. This increase~~ was primarily driven by annual merit increases along with increased staffing levels related to our growth strategy of adding and ~~expansion strategy,~~relocating stores, which we refer to as ~~"The~~“The Power of Red is ~~Back"~~Back”. ~~Two new~~There were twenty-eight stores ~~were opened during the three month period ended~~open as of September 30, ~~2017. Salaries~~2019 compared to twenty-three stores at September 30, 2018. Our first store in New York City opened in July 2019.

Occupancy expense, including depreciation and ~~employee benefits also increased as a result of the acquisition of Oak Mortgage in the third quarter of 2016.~~

~~Occupancy~~amortization expenses, increased by ~~$237,000,~~$1.5 million, or ~~15%, and depreciation and amortization expense increased by $241,000, or 23%~~45%, for the three months ended September 30, ~~2017~~2019 compared to the same period last year, also as a result of our continuing growth and ~~relocation~~expansion strategy.

Other real estate ~~owned~~ expenses totaled ~~$746,000~~$799,000 during the three months ended September 30, 2019, an increase of $421,000, or 111%, compared to the same period in 2018. This increase was a result of higher costs to carry foreclosed properties and higher writedowns on foreclosed assets in the current period.

All other non-interest expenses increased by $2.0 million, or 33%, for the three months ended September 30, ~~2017, an increase of $44,000, or 6%,~~2019 compared to the same period ~~in 2016. This increase was a result of higher writedowns on foreclosed assets held in other real estate owned in the current period.~~

All other non-interest expenses increased $1.5 million, or 38%, during the three months ended September 30, 2017, compared to the same period in 2016. This increase was mainly attributable to the addition of expenses related to the residential mortgage loan operation of Oak Mortgage. Increases in advertising, data processing expense, professional fees, and other expenses resulting from our expansion strategy also contributed to the growth in other operating expenses.

~~Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016~~

For the nine months ended September 30, 2017, non-interest expenses increased by $13.3 million, or 33%, compared to the first nine months of 2016. A detailed explanation of the most significant variances in non-interest expenses is presented in the following paragraphs.

Salary expenses and employee benefits, which represent the largest component of non-interest expenses, were $27.8 million for the nine months ended September 30, 2017, an increase of $7.5 million, or 37%, compared to the same period in 2016. This increase was primarily driven by annual merit increases along with increased staffing levels related to our growth and expansion strategy, which we refer to as "The Power of Red is Back". There were twenty-two stores open as of September 30, 2017 compared to nineteen stores at September 30, 2016. In addition, another store was under construction as of September 30, 2017, which is expected to open in the fourth quarter of 2017. Salaries and employee benefits also increased as a result of the acquisition of Oak Mortgage in the third quarter of 2016.

Occupancy expenses increased by $852,000, or 19%, and depreciation and amortization expense increased by $772,000, or 27%, for the nine months ended September 30, 2017 versus the same period in 2016 also as a result of our continuing growth and relocation strategy.

Other real estate owned expenses totaled $1.7 million for the nine months ended September 30, 2017, an increase of $94,000, or 6%, from the same period of 2016 primarily as a result of higher writedowns on foreclosed assets held in other real estate owned in the current period.

All other non-interest expenses increased $4.1 million, or 37%, during the nine months ended September 30, 2017, compared to the same period in 2016. This increase was mainly attributable to the addition of expenses related to the residential mortgage loan operation of Oak Mortgage.last year. Increases in data processing, ~~expense,~~ advertising, legal, professional fees, ~~legal~~insurance, other taxes, automated teller machine expenses, and other expenses resulting from our expansion strategy also contributed to the growth in other operating expenses.

Nine Months Ended September 30, 2019Compared to Nine Months Ended September 30, 2018

Non-interest expenses increased $15.3 million, or 25%, for the nine months ended September 30, 2019 compared to the same period in 2018. An explanation of changes in non-interest expenses for certain categories is presented in the following paragraphs.

Salaries and employee benefits increased by $7.6 million, or 23%, for the nine months ended September 30, 2019 compared to the same period in 2018 which was primarily driven by annual merit increases along with increased staffing levels related to our growth strategy of adding and relocating stores, which we refer to as “The Power of Red is Back”. There were twenty-eight stores open as of September 30, 2019 compared to twenty-three stores at September 30, 2018. Our first store in New York City opened in July 2019.

Occupancy expense, including depreciation and amortization expenses, increased by $2.9 million, or 29%, for the nine months ended September 30, 2019 compared to the same period last year, also as a result of our continuing growth and expansion strategy.

Other real estate expenses totaled $1.7 million during the nine months ended September 30, 2019, an increase of $772,000, or 88%, compared to the same period in 2018. This increase was a result of higher costs to carry foreclosed properties and higher writedowns on foreclosed assets in the current period.

All other non-interest expenses increased by $4.0 million, or 22%, for the nine months ended September 30, 2019 compared to the same period last year. Increases in data processing, advertising, professional fees, automated teller machine expenses, legal, insurance, other taxes, appraisal and other loan expenses, and other expenses resulting from our expansion strategy also contributed to the growth in other operating expenses.

One key measure that management utilizes to monitor progress in controlling overhead expenses is the ratio of annualized net non-interest expenses to average ~~assets.~~assets, a non-GAAP measure. For the purposes of this calculation, net non-interest expenses equal non-interest expenses less non-interest ~~income and nonrecurring expense.~~income. For the three months ended September 30, ~~2017,~~2019, this ratio ~~equaled 2.58%~~was 2.82% compared to ~~2.36%~~2.42% for the three months ended September 30, ~~2016.~~2018. For the nine months ended September 30, ~~2017,~~2019, the ratio ~~equaled 2.58%~~was 2.70% compared to ~~2.55%~~2.48% for the nine ~~month period~~months ended September 30, ~~2016, respectively, reflecting higher net non-interest expenses~~ ~~related~~2018, respectively. The increase in this ratio was mainly due to our growth and expansion strategy which drives the addition of ~~adding and relocating~~new stores.

Another productivity measure utilized by management is the operating efficiency ~~ratio.~~ratio, a non-GAAP measure. This ratio expresses the relationship of non-interest expenses to net interest income plus non-interest income. For the three months ended September 30, ~~2017,~~2019, the operating efficiency ratio was ~~89.2%,~~107.3% compared to ~~88.7%~~85.8% for the three months ended September 30, ~~2016.~~2018. The efficiency ratio ~~equaled 89.1%~~was 100.8% for ~~both~~ the nine months ended September 30, ~~2017~~2019 compared to 86.4% for the nine months ended September 30, 2018. The increase in this ratio for three and nine months ended September 30, 2019 was due to non-interest expenses increasing at a faster rate than net interest income and non-interest income.

Provision (Benefit) for Income Taxes

We recorded a benefit for income taxes in the ~~same period in 2016. The decrease~~amount of $516,000 for the three months ended September 30, ~~2017 versus September 30, 2016 was due~~2019, compared to ~~both net interest income and non-interest income increasing at~~ a ~~slower rate than non-interest expenses.~~

~~Provision (Benefit) for Federal Income Taxes~~

~~We recorded a~~$622,000 provision ~~for income taxes of $4,000~~ for the three months ended September 30, ~~2017, compared to a $32,000 benefit for the three months ended September 30, 2016.~~2018. For the nine months ended September 30, ~~2017,~~2019, we recorded a benefit for income taxes of ~~$38,000~~$319,000 compared to a ~~$69,000 benefit~~$1.5 million provision for the nine months ended September 30, 2016. The $38,000 benefit recorded during the first nine months of 2017 was the net result of a tax provision in the amount of $1.8 million calculated on the net profit generated during the period using our normal effective tax rate, offset by an adjustment to the deferred tax asset valuation allowance in the amount of $1.8 million.2018. The effective tax rates for the ~~three-month periods~~three months ended September 30, ~~2017~~2019 and ~~2016~~2018 were ~~30%~~(22%) and ~~25%~~21%, ~~respectively, and for~~respectively. For the nine ~~month periods~~months ended September 30, ~~2017~~2019 and ~~2016~~2018, the effective tax rates were ~~29%~~(24%) and ~~24%~~19%, ~~respectively, excluding an adjustment to the deferred tax asset valuation allowance.~~

respectively.

We evaluate the carrying amount of our deferred tax assets on a quarterly basis or more frequently, if necessary, in accordance with the guidance provided in ~~Financial Accounting Standards Board (FASB)~~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 ~~is made~~ 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~~management’s evaluation of both positive and negative evidence.

In conducting the deferred tax asset analysis, we believe 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 a financial ~~institutions~~institution and ~~their~~the ability to absorb potential losses are important distinctions to be considered for bank holding companies like us. In addition, it is also important to consider that net operating loss carryforwards ~~("NOLs"~~(“NOLs”) calculated for federal income tax purposes can generally be carried back two years and carried forward for a period of twenty ~~years.~~years, for NOLs created prior to January 1, 2018. Federal NOLs generated after December 31, 2017 can be carried forward indefinitely. 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, we 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.

~~Positive~~ Based on the guidance provided in ASC 740, we believed that the positive evidence ~~evaluated when considering~~considered at September 30, 2019 and December 31, 2018 outweighed the ~~need for~~negative evidence and that it was more likely than not that all of our deferred tax assets would be realized within their life cycle. Therefore, a valuation allowance ~~included:~~

~~the improvement in earnings during the nine month period ended September 30, 2017 compared to September 30, 2016;~~

~~continued growth in interest-earning assets~~ is ~~expected and supported by the capital raise completed during the fourth quarter of 2016; and~~

~~the acquisition of a residential lending organization (Oak Mortgage Company) completed in July 2016 continues to supplement earnings growth.~~

~~Negative evidence evaluated when considering the need for a valuation allowance included:~~

~~the elevated level of non-performing asset balances primarily driven by two legacy loan relationships which may result in reduced taxable income in future periods;~~

~~the historical trend of recording significant loan loss provisions and charge-offs due to asset quality over the last several years;~~

~~the impact to profitability in recent years due to one-time or non-core items including a legal settlement and gains on the sale of investment securities;~~

past and projected future earnings are heavily dependent upon the success of the SBA Lending Team which has recently experienced reduced loan volumes and the recently acquired Mortgage Division which can be significantly impacted by a changing interest rate environment and other various economic factors;

~~limited experience with forecasting profitability and managing operations of the residential mortgage division acquired in July 2016; and~~

a high level of uncertainty exists over interest rate environment and economic decisions to be made by the recently elected administration of the Federal government which may result in compression of the Company's net interest margin causing a decline in future profitability.

~~Based on the analysis of available positive and negative evidence, we determined that a valuation allowance should be recorded as of September 30, 2017 and December 31, 2016.~~

We 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. We believe that these tax planning strategies are (a) prudent and feasible, (b) steps that we 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. We believe 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, have no present intention to implement such strategies.

required.

The net deferred tax asset balance ~~before consideration of a valuation allowance~~ was ~~$18.6~~$11.7 million as of September 30, ~~2017~~2019 and ~~$21.4~~$12.3 million as of December 31, 2016. After assessment of all available tax planning strategies, we determined that a partial valuation allowance in the amount of $10.0 million as of September 30, 2017 and $12.2 million as of December 31, 2016 should be recorded.

2018. The deferred tax asset will continue to be analyzed on a quarterly basis for changes affecting realizability. ~~When the determination is made that a valuation allowance is no longer required, it will be reduced accordingly resulting in a corresponding increase in net income.~~

Net Income and Net Income per Common Share

~~Net income~~

The net loss for the three months ended September 30, ~~2017~~2019 was ~~$2.3~~$1.8 million, ~~an increase~~a decrease of ~~$981,000,~~$4.1 million, compared to ~~$1.3~~net income of $2.3 million recorded for the three months ended September 30, ~~2016.~~

~~Net~~2018. The decrease in net income for the three months ended September 30, 2019 was due to non-interest expense driven by our expansion strategy and limited growth in net interest income caused by the flattening of the yield curve.

The net loss for the nine months ended September 30, ~~2017~~2019 was ~~$6.2~~$1.0 million, ~~an increase~~a decrease of ~~$2.7~~$7.5 million, compared to ~~$3.4~~net income of $6.5 million recorded for the nine months ended September 30, ~~2016.~~2018. The ~~increase~~decrease in net income for the nine months ended September 30, ~~2017~~2019 was due to ~~a $10.5 million increase~~non-interest expense driven by our expansion strategy and limited growth in net interest income ~~a $4.5 million increase~~caused by the flattening of the yield curve.

The changes in ~~non-interest~~interest income and interest expense were primarily caused by a ~~$1.1 million decrease~~decline in the ~~provision~~net interest margin for ~~loan losses, partially offset by~~the three and nine months ended September 30, 2019. We have experienced a ~~$13.3 million~~flat and at times an inverted yield curve which has caused the interest rates paid on deposit balances to increase inmore rapidly than rates on interest earning assets. In addition, non-interest ~~expenses.~~

expenses have grown as a result of the costs incurred to initiate our expansion into New York City.

For the three month period ended September 30, ~~2017,~~2019, basic and fully-diluted net ~~income~~loss per common share was ~~$0.04 compared to $0.04 for the three months ended September 30, 2016~~($0.03) and ~~fully-diluted net income per common share was $0.04~~ for the three month period ended September 30, ~~2017 compared to $0.03 for the three months ended September 30, 2016. For the nine months ended September 30, 2016,~~2018, basic and fully-diluted net income per common share was ~~$0.11 compared to $0.09~~$0.04. For the nine month period ended September 30, 2019, basic and fully-diluted net loss per common share was ($0.02) and for the nine ~~months~~month period ended September 30, ~~2016.~~

2018, basic and fully-diluted net income per common share was $0.11.

Return on Average Assets and Average Equity

Return on average assets (ROA) measures our net income in relation to our total average assets. ~~Our annualized~~The ROA for the three months ended September 30, ~~2017~~2019 was ~~0.45%~~(0.24%), compared to ~~0.32%~~0.36% for the three months ended September 30, ~~2016.~~2018. The ROA for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 was ~~0.41%~~(0.05%) and ~~0.30%~~0.35%, respectively. Return on average equity (ROE) indicates how effectively we can generate net income on the capital invested by our ~~stockholders.~~shareholders. ROE is calculated by dividing annualized net income by average stockholders' equity. The ROE was ~~4.11%~~(2.88%) for the three months September 30, 2019, compared to 3.90% for the three months ended September 30, ~~2017, compared to 4.49% for the three months ended September 30, 2016.~~2018. The ROE for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 was ~~3.74%~~(0.55%) and ~~3.93%~~3.73%, respectively.

Commitments, Contingencies and Concentrations

Financial instruments ~~whose~~with contract amounts ~~represent~~representing potential credit risk were commitments to extend credit of approximately ~~$266.1~~$316.8 million and ~~$215.9~~$286.4 million, and standby letters of credit of approximately ~~$11.9~~$14.6 million and ~~$5.7~~$13.9 million, at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. These financial instruments constitute off-balance sheet arrangements. Commitments often expire without being drawn upon. Substantially all of the ~~$266.1~~$316.8 million of commitments to extend credit at September 30, ~~2017~~2019 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 contract. Commitments generally have fixed expiration dates or other termination clauses and many require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each ~~customer's~~customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained upon extension of credit is based on ~~management's~~management’s credit evaluation of the customer. Collateral held varies but may include real estate, marketable securities, pledged deposits, equipment and accounts receivable.

Standby letters of credit are conditional commitments issued 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 extending loan commitments. The amount of collateral obtained is based on ~~management's~~management’s credit evaluation of the customer. Collateral held varies but may include real estate, marketable securities, pledged deposits, equipment and accounts receivable. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding ~~guidelines.~~guarantees. The current amount of liability as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 for guarantees under standby letters of credit issued is not material.

Regulatory Matters

We are required to comply with certain ~~"risk-based"~~“risk-based” capital adequacy guidelines issued by the ~~FRB and the FDIC.~~bank regulatory agencies. The risk-based capital guidelines assign varying risk weights to the individual assets held by a bank. The guidelines also assign weights to the ~~"credit-equivalent"~~“credit-equivalent” amounts of certain off-balance sheet items, such as letters of credit and interest rate and currency swap contracts.

~~In July 2013,~~

Under the ~~federal bank regulatory agencies adopted 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. The final rules generally implemented higher minimumrisk-based capital ~~requirements, added a new~~ratios are calculated by dividing common equity ~~tier~~Tier 1, Tier 1, and total risk-based capital, ~~requirement,~~respectively, by risk-weighted assets. Assets and ~~established criteria that instruments must meet~~off-balance sheet credit equivalents are assigned to ~~be considered common equity tier 1 capital, additional tier 1 capital or tier 2 capital.~~ one of several categories of risk-weights, based primarily on relative risk. Under ~~the final~~applicable capital rules, ~~that became effective on January 1, 2015, there was~~Republic is required to maintain a ~~requirement for a~~minimum common equity Tier 1 capital ratio requirement of 4.5%, a minimum Tier 1 capital ratio requirement of 6%, a minimum total capital requirement of 8% and a minimum leverage ratio requirement of 4%. Under the 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 ~~2.5% of risk-weighted assets which is in addition to the other~~common equity Tier 1 capital above its minimum risk-based capital ~~standards~~requirements in an amount greater than 2.5% of total risk-weighted assets. The capital conservation buffer, which is composed of common equity Tier 1 capital, began on January 1, 2016 at the ~~rule. Institutions~~0.625% level and was phased in over a three year period (increasing by that ~~do not maintain this required~~amount on each January 1, until it reached 2.5% on January 1, 2019). Implementation of the deductions and other adjustments to common equity Tier 1 capital ~~buffer will become subject to progressively more stringent limitations~~began on ~~the percentage of earnings that can be paid out in dividends or used for stock repurchases~~January 1, 2015 and ~~on the payment of discretionary bonuses to senior executive management.~~

were phased-in over a three-year period.

The following table shows the required capital ratios with the conversation buffer over the phase-in period.

Basel III Community Banks
Minimum Capital Ratio Requirements
2016 2017 2018 2019

Common equity tier 1 capital (CET1) 5.125% 5.750% 6.375% 7.000%
Tier 1 capital (to risk weighted assets) 6.625% 7.250% 7.875% 8.500%
Total capital (to risk-weighted assets) 8.625% 9.250% 9.875% 10.500%
Tier 1 capital (to average assets, leverage) 4.000% 4.000% 4.000% 6.500%

	Basel III Community Banks Minimum Capital Ratio Requirements
	2016			2017			2018			2019

Common equity Tier 1 capital (CET1)		5.125	%		5.750	%		6.375	%		7.000	%
Tier 1 capital (to risk-weighted assets)		6.625	%		7.250	%		7.875	%		8.500	%
Total capital (to risk-weighted assets)		8.625	%		9.250	%		9.875	%		10.500	%

The risk-based capital ratios measure the adequacy of a ~~bank's~~bank’s capital against the riskiness of its assets and off-balance sheet activities. Failure to maintain adequate capital is a basis for ~~"prompt~~“prompt corrective ~~action"~~action” or other regulatory enforcement action. In assessing a ~~bank's~~bank’s capital adequacy, regulators also consider other factors such as interest rate risk exposure; liquidity, funding and market risks; quality and level or earnings; concentrations of credit, quality of loans and investments; risks of any nontraditional activities; effectiveness of bank policies; and ~~management's~~management’s overall ability to monitor and control risks.

Management believes that the Company and Republic met, as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis as if all such requirements were currently in effect. In the current year, the FDIC categorized Republic as well capitalized under the regulatory framework for prompt corrective action provisions of the Federal Deposit Insurance Act. There are no calculations or events since that notification which management believes would have changed ~~Republic's~~Republic’s category.

The Company and ~~Republic's~~Republic’s ability to maintain the required levels of capital is substantially dependent upon the success of their capital and business plans, the impact of future economic events on ~~Republic's~~Republic’s loan customers and ~~Republic's~~Republic’s ability to manage its interest rate risk, growth and other operating expenses.

The following table presents the capital regulatory ratios for both Republic and the Company as of September 30, ~~2017,~~2019, and December 31, ~~2016~~2018 (dollars in thousands):

(dollars in thousands)
Actual
Minimum Capital Adequacy
Minimum Capital Adequacy with Capital Buffer
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio Amount Ratio
At September 30, 2017:

Total risk based capital
Republic $ 184,514 13.01 % $ 113,449 8.00 % $ 131,175 9.25 % $ 141,811 10.00 %
Company 251,194 17.64 % 113,895 8.00 % 131,691 9.25 % - - %
Tier one risk based capital
Republic 176,256 12.43 % 85,087 6.00 % 102,813 7.25 % 113,449 8.00 %
Company 242,936 17.06 % 85,421 6.00 % 103,217 7.25 % - - %
CET 1 risk based capital
Republic 176,256 12.43 % 63,815 4.50 % 81,541 5.75 % 92,177 6.50 %
Company 221,376 15.55 % 64,066 4.50 % 81,862 5.75 % - - %
Tier one leveraged capital
Republic 176,256 8.59 % 82,093 4.00 % 92,355 4.50 % 102,617 5.00 %
Company 242,936 11.80 % 82,394 4.00 % 92,625 4.50 % - - %

At December 31, 2016:

Total risk based capital
Republic $ 179,057 13.93 % $ 102,811 8.00 % $ 110,843 8.625 % $ 128,514 10.00 %
Company 245,043 18.99 % 103,226 8.00 % 111,290 8.625 % - - %
Tier one risk based capital
Republic 169,902 13.22 % 77,108 6.00 % 85,140 6.625 % 102,811 8.00 %
Company 235,888 18.28 % 77,419 6.00 % 85,484 6.625 % - - %

CET 1 risk based capital

Republic 169,902 13.22 % 57,831 4.50 % 65,863 5.125 % 83,534 6.50 %
Company 214,088 16.59 % 58,064 4.50 % 66,129 5.125 % - - %
Tier one leveraged capital
Republic 169,902 9.20 % 73,843 4.00 % 73,843 4.50 % 92,304 5.00 %
Company 235,888 12.74 % 74,073 4.00 % 74,073 4.50 % - - %

(dollars in thousands)	Actual					Minimum Capital Adequacy					Minimum Capital Adequacy with Capital Buffer					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
At September 30, 2019:

Total risk-based capital
Republic	$	253,326		12.98	%	$	156,113		8.00	%	$	204,898		10.50	%	$	195,141		10.00	%
Company		264,626		13.53	%		156,472		8.00	%		205,369		10.50	%		-		-	%
Tier 1 risk-based capital
Republic		244,859		12.55	%		117,085		6.00	%		165,870		8.50	%		156,113		8.00	%
Company		256,159		13.10	%		117,354		6.00	%		166,251		8.50	%		-		-	%
CET 1 risk-based capital
Republic		244,859		12.55	%		87,813		4.50	%		136,599		7.00	%		126,842		6.50	%
Company		245,159		12.53	%		88,015		4.50	%		136,913		7.00	%		-		-	%
Tier 1 leveraged capital
Republic		246,850		8.23	%		118,946		4.00	%		118,946		4.00	%		148,683		5.00	%
Company		250,843		8.60	%		119,134		4.00	%		119,134		4.00	%		-		-	%

At December 31, 2018:

Total risk-based capital
Republic	$	231,610		13.26	%	$	139,722		8.00	%	$	172,489		9.875	%	$	174,652		10.00	%
Company		262,964		15.03	%		140,009		8.00	%		172,824		9.875	%		-		-	%
Tier 1 risk-based capital
Republic		222,995		12.77	%		104,791		6.00	%		137,539		7.875	%		139,722		8.00	%
Company		254,349		14.53	%		105,007		6.00	%		137,821		7.875	%		-		-	%
CET 1 risk-based capital
Republic		222,995		12.77	%		78,594		4.50	%		111,341		6.375	%		113,524		6.50	%
Company		243,349		13.90	%		78,755		4.50	%		111,570		6.375	%		-		-	%
Tier 1 leveraged capital
Republic		222,995		8.21	%		108,685		4.00	%		108,685		4.00	%		135,857		5.00	%
Company		254,349		9.35	%		108,800		4.00	%		108,800		4.00	%		-		-	%

Dividend Policy

We have not paid any cash dividends on our common ~~stock during 2017, nor do we~~stock. We have ~~any~~no plans to pay cash dividends in ~~2017.~~2019. Our ability to pay dividends depends primarily on receipt of dividends from our 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

A financial institution must maintain and manage liquidity to ensure it has the ability to meet its financial obligations. These obligations include the payment of deposits on demand or at their contractual maturity; the repayment of borrowings as they mature; the payment of lease obligations as they become due; the ability to fund new and existing loans and other funding commitments; and the ability to take advantage of new business opportunities. Liquidity needs can be met by either reducing assets or increasing liabilities. Our most liquid assets consist of cash, ~~and~~ amounts due from ~~banks.~~

banks and federal funds sold.

Regulatory authorities require us 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, we have formed an asset/liability committee (ALCO), comprised of certain members of ~~Republic's~~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~~committee’s primary objective is to maximize net interest income while configuring ~~Republic's~~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.

Our 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. Our most liquid assets, comprised of cash and cash equivalents on the balance sheet, totaled ~~$98.8~~$201.5 million at September 30, ~~2017,~~2019, compared to ~~$34.6~~$72.5 million at December 31, ~~2016.~~2018. Loan maturities and repayments are another source of asset liquidity. At September 30, ~~2017,~~2019, Republic estimated that more than ~~$90.0~~$105.0 million of loans would mature or repay in the six-month period ending March 31, ~~2018.~~2020. Additionally, a significant portion of our investment securities are available to satisfy liquidity requirements through sales on the open market or by pledging as collateral to access credit facilities. At September 30, ~~2017,~~2019, we had outstanding commitments (including unused lines of credit and letters of credit) of ~~$278.0~~$316.8 million. Certificates of deposit scheduled to mature in one year totaled ~~$73.5~~$152.0 million at September 30, ~~2017.~~2019. We anticipate that we will have sufficient funds available to meet all 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 FHLB. We have established a line of credit with the FHLB of Pittsburgh. Our maximum borrowing capacity with the FHLB was ~~$542.4~~$815.1 million at September 30, ~~2017.~~2019. At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, we had no outstanding term borrowings with the FHLB. At September 30, ~~2017 and December 31, 2016,~~2019, we had no overnight borrowings with the FHLB and at December 31, 2018, we had outstanding ~~short-term~~overnight borrowings of $91.4 million with the FHLB. As of September 30, ~~2017,~~2019 and December 31, 2018, FHLB had issued letters of credit, on ~~Republic's~~Republic’s behalf, totaling ~~$75.0~~$100.0 million against our available credit line. We also established a contingency line of credit of $10.0 million with ACBB and a Fed Funds line of credit with Zions Bank in the amount of $15.0 million to assist in managing our liquidity position. We had no amounts outstanding against the ACBB line of credit or the Zions Fed Funds line at both September 30, ~~2017~~2019 and December 31, ~~2016.~~

2018.

Investment Securities Portfolio

At September 30, ~~2017,~~2019, we identified certain investment securities that were being held for indefinite periods of time, including securities that will be used as part of our 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~~available-for-sale and are intended to increase the flexibility of our asset/liability management. Our investment securities classified as ~~available-for-sale~~available for sale consist primarily of U.S. Government agency securities, CMOs, MBSs, municipal securities, and corporate ~~bonds, ABSs, and CDOs. Available-for-sale~~bonds. Available for sale securities totaled ~~$377.8~~$380.0 million and ~~$369.7~~$321.0 million as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. At September 30, ~~2017, the portfolio~~2019, securities classified as available for sale had a net unrealized loss of ~~$8.0~~$1.3 million and a net unrealized loss of ~~$10.7~~$5.7 million at December 31, ~~2016.~~

2018.

Loan Portfolio

Our loan portfolio consists of secured and unsecured commercial loans including commercial real estate loans, construction and land development loans, commercial and industrial loans, owner occupied real estate loans, consumer and other loans, and residential mortgages. 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~~Republic’s commercial loans typically range between $250,000 and $5.0 million, but customers may borrow significantly larger amounts up to ~~Republic's~~Republic’s legal lending limit of approximately ~~$27.0~~$34.4 million at September 30, ~~2017.~~ 2019. Individual customers may have several loans often secured by different collateral.

Credit Quality

~~Republic's~~

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~~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, any 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~~non-performing assets as of the dates indicated (dollars in thousands):

September 30,
2017

December 31,
2016
Loans accruing, but past due 90 days or more $ 2,730 $ 302
Non-accrual loans 11,020 18,594
Total non-performing loans 13,750 18,896
Other real estate owned 9,169 10,174
Total non-performing assets $ 22,919 $ 29,070

Non-performing loans as a percentage of total loans, net of unearned income⁽¹⁾
1.26%

1.96%
Non-performing assets as a percentage of total assets 1.07% 1.51%

	September 30, 2019			December 31, 2018
Loans accruing, but past due 90 days or more	$	129		$	-
Non-accrual loans		11,923			10,341
Total non-performing loans		12,052			10,341
Other real estate owned		6,653			6,223
Total non-performing assets	$	18,705		$	16,564

Non-performing loans as a percentage of total loans, net of unearned income		0.77	%		0.72	%
Non-performing assets as a percentage of total assets		0.61	%		0.60	%

Non-performing asset balances ~~decreased~~increased by ~~$6.2~~$2.1 million to ~~$22.9~~$18.7 million as of September 30, ~~2017~~2019 from ~~$29.1~~$16.6 million at December 31, 2016. Non-accrual loans decreased $7.6 million to $11.0 million at September 30, 2017, from $18.6 million at December 31, 2016. The decrease in non-accrual loans was primarily driven by one loan relationship that was returned to accrual status during the third quarter of 2017. This loan was restructured earlier in the year as a result of a reduction in tenant vacancies in the property held as collateral.2018. Loans accruing, but past due 90 days or more, ~~increased to $2.7 million~~totaled $129,000 at September 30, ~~2017 from $302,000~~2019. There were no loans accruing, but past due 90 days or more at December 31, ~~2016.~~2018. At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, all identified impaired loans are internally classified and individually evaluated for impairment in accordance with the guidance under ASC 310.

The following table presents our 30 to 89 days past due loans at September 30, ~~2017~~2019 and December 31, ~~2016.~~

(dollars in thousands) September 30, December 31,
2017 2016
30 to 59 days past due $ 1,496 $ 1,060
60 to 89 days past due 35 31
Total loans 30 to 89 days past due $ 1,531 $ 1,091

2018.

(dollars in thousands)	September 30,		December 31,
	2019		2018
30 to 59 days past due	$	176	$	1,135
60 to 89 days past due		37		1,574
Total loans 30 to 89 days past due	$	213	$	2,709

Other Real Estate Owned

The balance of other real estate owned ~~decreased to $9.2~~was $6.7 million at September 30, ~~2017 from $10.2~~2019 and $6.2 million at December 31, ~~2016.~~2018. The following table presents a reconciliation of other real estate owned for the ~~three~~nine months ended September 30, ~~2017~~2019 and the year ended December 31, ~~2016:~~

(dollars in thousands)
September 30,
2017
December 31,
2016

Beginning Balance, January 1^st
$ 10,174 $ 11,313
Additions 129 616
Valuation adjustments (777 ) (355 )
Dispositions (357 ) (1,400 )
Ending Balance $ 9,169 $ 10,174

2018:

(dollars in thousands)	September 30, 2019			December 31, 2018
Beginning Balance, January 1^st	$	6,223		$	6,966
Additions		1,071			315
Valuation adjustments		(240	)		(563	)
Dispositions		(401	)		(495	)
Ending Balance	$	6,653		$	6,223

At September 30, ~~2017,~~2019, we had no credit exposure to ~~"highly~~“highly leveraged ~~transactions"~~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. We evaluate 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 Receivables. The second component is allocated to all other loans that are not individually identified as impaired. This component is calculated for all non-impaired loans on a collective basis in accordance with ASC 450 Contingencies. The third component is an unallocated allowance to account for a level of imprecision in ~~management's~~management’s estimation process.

We evaluate 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 determined to be insufficient and unlikely to repay the debt, we then look to the secondary repayment sources. Secondary sources are conservatively reviewed for liquidation values. Updated appraisals and financial data are obtained to substantiate current values. If the reviewed sources are deemed to be inadequate to cover the outstanding principal and any costs associated with the resolution of the troubled loan, an estimate of the deficient amount will be calculated and a specific allocation of loan loss reserve is recorded.

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

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. Our 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. Our 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.

An analysis of the allowance for loan losses for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, and the twelve months ended December 31, ~~2016~~2018 is as follows:

(dollars in thousands)
For the nine
months ended
September 30, 2017

For the twelve
months ended
December 31, 2016

For the nine
months ended
September 30, 2016

Balance at beginning of period $ 9,155 $ 8,703 $ 8,703
Charge‑offs:
Commercial real estate - - -
Construction and land development - 60 3
Commercial and industrial 1,347 143 18
Owner occupied real estate 157 1,052 954
Consumer and other 12 11 -
Residential mortgage - 10 -
Total charge‑offs 1,516 1,276 975
Recoveries:
Commercial real estate 54 6 6
Construction and land development - - -
Commercial and industrial 64 163 162
Owner occupied real estate - - -
Consumer and other 1 2 -
Residential mortgage - - -
Total recoveries 119 171 168
Net charge‑offs 1,397 1,105 807
Provision for loan losses 500 1,557 1,557
Balance at end of period $ 8,258 $ 9,155 $ 9,453

Average loans outstanding⁽¹⁾
$ 1,063,581 $ 936,492 $ 925,110
As a percent of average loans:⁽¹⁾

Net charge‑offs (annualized) 0.18 % 0.12 % 0.12 %
Provision for loan losses (annualized) 0.06 % 0.17 % 0.22 %
Allowance for loan losses 0.78 % 0.98 % 1.02 %
Allowance for loan losses to:
Total loans, net of unearned income 0.75 % 0.95 % 1.00 %
Total non‑performing loans 60.06 % 48.45 % 48.50 %

~~(1)~~

~~Includes non-accruing loans.~~

(dollars in thousands)	For the nine months ended September 30, 2019			For the twelve months ended December 31, 2018			For the nine months ended September 30, 2018

Balance at beginning of period	$	8,615		$	8,599		$	8,599
Charge-offs:
Commercial real estate		-			1,603			1,535
Construction and land development		-			-			-
Commercial and industrial		1,002			151			151
Owner occupied real estate		-			465			465
Consumer and other		117			219			213
Residential mortgage		-			-			-
Total charge-offs		1,119			2,438			2,364
Recoveries:
Commercial real estate		-			50			50
Construction and land development		-			-			-
Commercial and industrial		213			81			77
Owner occupied real estate		1			20			20
Consumer and other		7			3			2
Residential mortgage		-			-			-
Total recoveries		221			154			149
Net charge-offs/(recoveries)		898			2,284			2,215
Provision for loan losses		750			2,300			1,700
Balance at end of period	$	8,467		$	8,615		$	8,084

Average loans outstanding⁽¹⁾	$	1,506,482		$	1,340,117		$	1,310,750
As a percent of average loans:⁽¹⁾
Net charge-offs (annualized)		0.08	%		0.17	%		0.23	%
Provision for loan losses (annualized)		0.07	%		0.17	%		0.17	%
Allowance for loan losses		0.56	%		0.64	%		0.62	%
Allowance for loan losses to:
Total loans, net of unearned income		0.54	%		0.60	%		0.59	%
Total non-performing loans		70.25	%		83.31	%		59.97	%

⁽¹⁾Includes non-accruing loans.

We ~~did not record~~recorded a provision for loan losses ~~during~~of $450,000 for the three month period ended September 30, ~~2017. A provision in the amount of $500,000 was recorded~~2019 and $750,000 for the nine ~~month period~~months ended September 30, ~~2017.~~2019. We recorded a provision for loan losses of ~~$607,000~~$500,000 for the three month period ended September 30, ~~2016~~2018 and ~~$1.6~~$1.7 million for the nine ~~month period~~months ended September 30, ~~2016.~~2018. During the first nine months of ~~2017,~~2019, there was a decrease in the allowance required for loans individually evaluated for impairment partially offset by an increase in the allowance required for loans collectively evaluated for impairment that was driven by an increase in total loans outstanding. During the first nine months of 2016, there was an increase in the allowance required for loans individually evaluated for impairment primarily driven by a single loan relationship that transferred to non-performing status during the second quarter of 2016. A decrease in the appraised value of the collateral supporting this loan relationship drove the need for an increase in the loan loss provision.

impairment.

The allowance for loan losses as a percentage of non-performing loans (coverage ratio) was ~~60.06%~~70.3% at September 30, ~~2017,~~2019, compared to ~~48.45%~~83.3% at December 31, ~~2016~~2018 and ~~48.50%~~60.0% at September 30, ~~2016. The increase in this ratio at September 30, 2017 was primarily driven by the reduction in non-performing loan balances during the third quarter of 2017.~~2018. Total non-performing loans were ~~$13.8~~$12.1 million, ~~$18.9~~$10.3 million, and ~~$19.5~~$13.5 million at September 30, ~~2017,~~2019, December 31, ~~2016~~2018 and September 30, ~~2016,~~2018, respectively.

Management makes at least a quarterly determination as to an appropriate provision from earnings to maintain an allowance for loan losses that it determines is adequate to absorb inherent losses in the loan portfolio. The Board of Directors periodically reviews the status of all non-accrual and impaired loans and loans classified by the management team. The Board of Directors also considers specific loans, pools of similar loans, historical charge-off activity, economic conditions and other relevant factors in reviewing the adequacy of the allowance for loan losses. Any additions deemed necessary to the allowance for loan losses are charged to operating expenses.

We evaluate loans for impairment and potential charge-offs on a quarterly basis. Any loan rated as substandard or lower will have a collateral evaluation analysis completed in accordance with the guidance under ~~generally accepted accounting principles (GAAP)~~GAAP on impaired loans to determine if a deficiency exists. 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~~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~~borrower’s financial condition ~~are~~is also assessed when considering a charge-off. We recorded net charge-offs of $1.4 million during the nine month period ended September 30, 2017, compared to net charge-offs of $807,000 during the nine month period ended September 30, 2016. The increase in charge-offs in 2017 was primarily due to a single loan relationship which initially defaulted in 2010 and has resulted in a significant charge-off in the third quarter of 2017. The provision for loan losses associated with this loan was recorded in a prior period.

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 ~~$1.4~~$3.9 million at September 30, ~~2017~~2019 and ~~$2.4~~ $4.4 million at December 31, ~~2016.~~

2018.

The following table provides additional analysis of partially charged-off ~~loans at September 30, 2017 and December 31, 2016.~~

(dollars in thousands)
September 30,
2017

December 31,
2016

Total nonperforming loans $ 13,750 $ 18,896
Nonperforming and impaired loans with partial charge-offs 1,432 2,394

Ratio of nonperforming loans with partial charge-offs to total loans 0.13 % 0.25 %
Ratio of nonperforming loans with partial charge-offs to total nonperforming loans 10.41 % 12.67 %
Coverage ratio net of nonperforming loans with partial charge-offs 576.68 % 382.41 %

loans.

(dollars in thousands)	September 30, 2019			December 31, 2018
Total nonperforming loans	$	12,052		$	10,341
Nonperforming and impaired loans with partial charge-offs		3,927			4,387

Ratio of nonperforming loans with partial charge-offs to total loans		0.25	%		0.31	%
Ratio of nonperforming loans with partial charge-offs to total nonperforming loans		32.58	%		42.42	%
Coverage ratio net of nonperforming loans with partial charge-offs		215.61	%		196.38	%

Our charge-off policy is reviewed on an annual basis and updated as necessary. During the nine month period ended September 30, ~~2017,~~2019, there were no changes made to this policy.

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 our 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~~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, ~~2016~~2018 filed with the SEC on March ~~10, 2017.~~

14, 2019.

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~~Commission’s rules and forms and accumulated and communicated to the ~~Company's~~Company’s management, including the ~~Company's~~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~~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~~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~~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~~Company’s internal control over financial reporting ("(“Internal ~~Control"~~Control”) to determine whether any changes in Internal Control occurred during the quarter ended September 30, ~~2017~~2019 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, ~~2017.~~

2019.

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

ITEM 1A. RISK FACTORS

Significant risk factors could adversely affect the ~~Company's~~Company’s business, financial condition and results of operation. Risk factors discussing these risks can be found in Part I, ~~"Item~~“Item 1A. Risk ~~Factors"~~Factors” in the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 and Form 10-Q for the quarter ended June 30, ~~2017.~~2019. The risk factors in the ~~Company's~~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~~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.

~~None.~~

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~~S-K for quarterly reports on Form ~~10‑Q)~~10-Q).

Exhibit Number	Description	Location

3.1	Amended and Restated Articles of Incorporation of Republic First Bancorp, Inc.	Incorporated by reference to Form 10-K filed March 10, 2017

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 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~~Company’s Quarterly Report on Form 10-Q for the quarter ended September 30,~~, 2017~~, 2019, formatted in XBRL (eXtensible Business Reporting Language); (i) Consolidated Balance Sheets as of September 30,~~, 2017~~ 2019 and December 31, ~~2016,~~2018, (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018, (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30,~~, 2017~~ 2019 and ~~2016, (iii) Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017~~ ~~and 2016,~~2018, (iv) Consolidated Statements of Cash Flows for the nine months ended September 30,~~, 2017~~ 2019 and ~~2016,~~2018, (v) Consolidated Statements of Changes in ~~Shareholders'~~Shareholders’ Equity for the three and nine months ended September 30,~~, 2017~~ 2019 and ~~2016,~~2018, and (vi) Notes to Consolidated Financial Statements.

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 ~~3, 2017~~12, 2019	By:	/s/ Harry D. Madonna
		Harry D. Madonna
		President and Chief Executive Officer (principal executive officer)

Date: November ~~3, 2017~~12, 2019	By:	/s/ Frank A. Cavallaro
		Frank A. Cavallaro
		Executive Vice President and Chief Financial Officer (principal financial and accounting officer)

Pennsylvania	23-2486815
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

50 South 16^th Street, Philadelphia, Pennsylvania	19102
(Address of principal executive offices)	(Zip code)

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

Common Stock, $0.01 per share	~~56,989,764~~58,842,778
Title of Class	Number of Shares Outstanding as of November ~~2, 2017~~8, 2019

REPUBLIC FIRST BANCORP, INC. AND ~~SUBSIDIARIES~~SUBSIDIARIES
TABLE OF CONTENTS

Part I: Financial Information		Page

Item 1.	Financial Statements
	Consolidated balance sheets as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 (unaudited)	1
	Consolidated statements of ~~income~~operations for the three and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 (unaudited)	2
	Consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 (unaudited)	3
	Consolidated statements of cash flows for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 (unaudited)	4
	Consolidated statements of changes in ~~shareholders'~~shareholders’ equity for the three and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 (unaudited)	5
	Notes to consolidated financial statements (unaudited)	6

Item 2.	~~Management's~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations	42 37

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	64 58

Item 4.	Controls and Procedures	6458

Part II: Other Information

Item 1.	Legal Proceedings	6559

Item 1A.	Risk Factors	65 59

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65 59

Item 3.	Defaults Upon Senior Securities	65 59

Item 4.	Mine Safety Disclosures	65 59

Item 5.	Other Information	65 59

Item 6.	Exhibits	66 60

Signatures		67 61

	September 30, 2017			December 31, 2016
ASSETS
Cash and due from banks	$	27,181		$	19,830
Interest bearing deposits with banks		71,601			14,724
Cash and cash equivalents		98,782			34,554

Investment securities available for sale, at fair value		377,757			369,739
Investment securities held to maturity, at amortized cost (fair value of $411,257 and $425,183, respectively)		416,987			432,499
Restricted stock, at cost		1,678			1,366
Loans held for sale		41,711			28,065
Loans receivable (net of allowance for loan losses of $8,258 and $9,155, respectively)		1,087,147			955,817
Premises and equipment, net		71,715			57,040
Other real estate owned, net		9,169			10,174
Accrued interest receivable		6,340			5,497
Goodwill		5,011			5,011
Intangible asset		-			61
Other assets		25,266			24,108
Total Assets	$	2,141,563		$	1,923,931

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Demand – non-interest bearing	$	398,794		$	324,912
Demand – interest bearing		745,878			605,950
Money market and savings		619,265			635,644
Time deposits		121,468			111,164
Total Deposits		1,885,405			1,677,670
Accrued interest payable		577			444
Other liabilities		8,716			8,883
Subordinated debt		21,663			21,881
Total Liabilities		1,916,361			1,708,878

Shareholders' Equity
Preferred stock, par value $0.01 per share: 10,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, par value $0.01 per share: 100,000,000 shares authorized; shares issued 57,507,484 as of September 30, 2017 and 57,283,712 as of December 31, 2016; shares outstanding 56,978,639 as of September 30, 2017 and 56,754,867 as of December 31, 2016		575			573
Additional paid in capital		255,752			253,570
Accumulated deficit		(21,721	)		(27,888	)
Treasury stock at cost (503,408 shares as of September 30, 2017 and December 31, 2016)		(3,725	)		(3,725	)
Stock held by deferred compensation plan (25,437 shares as of September 30, 2017 and December 31, 2016)		(183	)		(183	)
Accumulated other comprehensive loss		(5,496	)		(7,294	)
Total Shareholders' Equity		225,202			215,053
Total Liabilities and Shareholders' Equity	$	2,141,563		$	1,923,931

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
Interest income:
Interest and fees on taxable loans	$	12,717	$	10,446		$	35,727		$	30,259
Interest and fees on tax-exempt loans		272		261			791			702
Interest and dividends on taxable investment securities		4,653		2,591			14,163			7,805
Interest and dividends on tax-exempt investment securities		99		173			447			526
Interest on federal funds sold and other interest-earning assets		181		149			312			299
Total interest income		17,922		13,620			51,440			39,591
Interest expense:
Demand- interest bearing		772		553			2,075			1,471
Money market and savings		788		677			2,218			1,923
Time deposits		312		301			903			625
Other borrowings		338		303			1,046			898
Total interest expense		2,210		1,834			6,242			4,917
Net interest income		15,712		11,786			45,198			34,674
Provision for loan losses		-		607			500			1,557
Net interest income after provision for loan losses		15,712		11,179			44,698			33,117
Non-interest income:
Loan and servicing fees		677		328			1,330			1,128
Mortgage banking income		3,159		2,405			8,551			2,405
Gain on sales of SBA loans		831		1,630			2,315			4,212
Service fees on deposit accounts		1,067		686			2,820			1,910
Gain (loss) on sale of investment securities		-		2			(61	)		656
Net securities impairment recognized in earnings		-		(2	)		-			(7	)
Other non-interest income		44		93			130			281
Total non-interest income		5,778		5,142			15,085			10,585
Non-interest expenses:
Salaries and employee benefits		9,829		7,731			27,800			20,334
Occupancy		1,772		1,535			5,239			4,387
Depreciation and amortization		1,292		1,051			3,588			2,816
Legal		156		158			535			312
Other real estate owned		746		702			1,704			1,610
Advertising		394		218			861			537
Data processing		785		669			2,335			1,711
Insurance		277		262			750			656
Professional fees		454		352			1,389			1,167
Regulatory assessments and costs		355		296			1,008			1,011
Taxes, other		242		243			716			495
Other operating expenses		2,863		1,796			7,729			5,287
Total non-interest expense		19,165		15,013			53,654			40,323
Income before benefit for income taxes		2,325		1,308			6,129			3,379
Provision (benefit) for income taxes		4		(32	)		(38	)		(69	)
Net income	$	2,321	$	1,340		$	6,167		$	3,448
Net income per share:
Basic	$	0.04	$	0.04		$	0.11		$	0.09
Diluted	$	0.04	$	0.03		$	0.11		$	0.09

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities
Net income	$	6,167		$	3,448
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for loan losses		500			1,557
Write down of other real estate owned		777			521
Depreciation and amortization		3,588			2,816
Stock based compensation		1,329			562
Loss (gain) on sale of investment securities		61			(656	)
Impairment charges on investment securities		-			7
Amortization of premiums on investment securities		1,788			1,172
Accretion of discounts on retained SBA loans		(859	)		(1,057	)
Fair value adjustments on SBA servicing assets		711			894
Proceeds from sales of SBA loans originated for sale		28,564			48,031
SBA loans originated for sale		(22,395	)		(43,016	)
Gains on sales of SBA loans originated for sale		(2,315	)		(4,212	)
Proceeds from sales of mortgage loans originated for sale		263,689			79,029
Mortgage loans originated for sale		(274,133	)		(82,240	)
Gains on sales of mortgage loans originated for sale		(7,056	)		(2,783	)
Amortization of intangible assets		61			17
Amortization of debt issuance costs		22			22
Increase in accrued interest receivable and other assets		(3,720	)		(726	)
Decrease in accrued interest payable and other liabilities		(34	)		(396	)
Net cash (used in) provided by operating activities		(3,255	)		2,990

Cash flows from investing activities
Purchase of investment securities available for sale		(53,052	)		(117,812	)
Purchase of investment securities held to maturity		(21,958	)		(69,792	)
Proceeds from the sale of securities available for sale		21,167			78,582
Proceeds from the paydowns, maturity, or call of securities available for sale		25,665			26,295
Proceeds from the paydowns, maturity, or call of securities held to maturity		36,629			21,106
Net (purchase) redemption of restricted stock		(312	)		1,693
Net increase in loans		(131,100	)		(70,006	)
Net proceeds from sale of other real estate owned		357			1,387
Net cash paid in acquisition		-			(5,913	)
Premises and equipment expenditures		(18,263	)		(12,122	)
Net cash used in investing activities		(140,867	)		(146,582	)

Cash flows from financing activities
Net proceeds from exercise of stock options		615			226
Net increase in demand, money market and savings deposits		197,431			291,385
Net increase in time deposits		10,304			41,549
Decrease in short-term borrowings		-			(66,666	)
Net cash provided by financing activities		208,350			266,494

Net increase in cash and cash equivalents		64,228			122,902
Cash and cash equivalents, beginning of year		34,554			27,139
Cash and cash equivalents, end of period	$	98,782		$	150,041

Supplemental disclosures
Interest paid	$	6,109		$	5,011
Income taxes paid	$	75		$	90
Non-cash transfers from loans to other real estate owned	$	129		$	616
Conversion of subordinated debt to common stock	$	240			-

	Common Stock		Additional Paid in Capital		Accumulated Deficit			Treasury Stock			Stock Held by Deferred Compensation Plan			Accumulated Other Comprehensive Loss			Total Shareholders' Equity

Balance January 1, 2017	$	573	$	253,570	$	(27,888	)	$	(3,725	)	$	(183	)	$	(7,294	)	$	215,053

Net income						6,167												6,167
Other comprehensive income, net of tax															1,798			1,798
Stock based compensation				1,329														1,329
Conversion of subordinated debt to common stock (36,922 shares)				240														240
Options exercised (186,850 shares)		2		613														615

Balance September 30, 2017	$	575	$	255,752	$	(21,721	)	$	(3,725	)	$	(183	)	$	(5,496	)	$	225,202


Balance January 1, 2016	$	384	$	152,897	$	(32,833	)	$	(3,725	)	$	(183	)	$	(3,165	)	$	113,375

Net income						3,448												3,448
Other comprehensive income, net of tax															1,839			1,839
Stock based compensation				764														764
Options exercised (80,375 shares)				226														226

Balance September 30, 2016	$	384	$	153,887	$	(29,385	)	$	(3,725	)	$	(183	)	$	(1,326	)	$	119,652

	September 30, 2017		September 30, 2016
Stock based compensation expense recognized	$	1,329,000	$	764,000
Number of unvested stock options		1,658,602		1,316,476
Fair value of unvested stock options	$	4,553,854	$	2,608,986
Amount remaining to be recognized as expense	$	2,966,049	$	1,284,071

	At September 30, 2017
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Collateralized mortgage obligations	$	244,170	$	73	$	(4,239	)	$	240,004
Agency mortgage-backed securities		43,906		3		(1,107	)		42,802
Municipal securities		15,600		130		(71	)		15,659
Corporate bonds		66,659		97		(2,427	)		64,329
Asset-backed securities		13,858		1		(4	)		13,855
Trust preferred securities		1,545		-		(437	)		1,108
Total securities available for sale	$	385,738	$	304	$	(8,285	)	$	377,757

U.S. Government agencies	$	104,446	$	105	$	(1,710	)	$	102,841
Collateralized mortgage obligations		179,928		512		(2,413	)		178,027
Agency mortgage-backed securities		131,613		22		(2,246	)		129,389
Other securities		1,000		-		-			1,000
Total securities held to maturity	$	416,987	$	639	$	(6,369	)	$	411,257

	At December 31, 2016
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Collateralized mortgage obligations	$	230,252	$	145	$	(5,632	)	$	224,765
Agency mortgage-backed securities		37,973		32		(1,295	)		36,710
Municipal securities		26,825		151		(429	)		26,547
Corporate bonds		66,718		8		(1,978	)		64,748
Asset-backed securities		15,565		-		(416	)		15,149
Trust preferred securities		3,063		-		(1,243	)		1,820
Total securities available for sale	$	380,396	$	336	$	(10,993	)	$	369,739

U.S. Government agencies	$	98,538	$	8	$	(2,238	)	$	96,308
Collateralized mortgage obligations		202,990		793		(2,553	)		201,230
Agency mortgage-backed securities		129,951		1		(3,327	)		126,625
Other securities		1,020		-		-			1,020
Total securities held to maturity	$	432,499	$	802	$	(8,118	)	$	425,183

	Available for Sale				Held to Maturity
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year or less	$	1,154	$	1,160	$	1,000	$	1,000
After 1 year to 5 years		10,603		10,675		6,038		6,046
After 5 years to 10 years		60,860		59,395		98,408		96,795
After 10 years		25,045		23,721		-		-
Collateralized mortgage obligations		244,170		240,004		179,928		178,027
Agency mortgage-backed securities		43,906		42,802		131,613		129,389
Total	$	385,738	$	377,757	$	416,987	$	411,257

	At September 30, 2017
	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	$	106,932	$	1,875	$	85,469	$	2,364	$	192,401	$	4,239
Agency mortgage-backed securities		37,066		994		5,064		113		42,130		1,107
Municipal securities		4,278		24		2,591		47		6,869		71
Corporate bonds		19,638		362		32,935		2,065		52,573		2,427
Asset backed securities		-		-		6,006		4		6,006		4
Trust preferred securities		-		-		1,108		437		1,108		437
Total Available for Sale	$	167,914	$	3,255	$	133,173	$	5,030	$	301,087	$	8,285

(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 2018 and beyond			Cumulative OTTI Life to Date
TPREF Funding II	Class B Notes	$	725	$	489	$	(236	)		C		19		29	%		0.42	%	$	274
ALESCO Preferred Funding V	Class C1 Notes		820		619		(201	)		C		39		14			0.49			180
Total		$	1,545	$	1,108	$	(437	)				58		21	%				$	454

(dollars in thousands)	September 30, 2017			December 31, 2016

Commercial real estate	$	415,532		$	378,519
Construction and land development		93,657			61,453
Commercial and industrial		163,085			174,744
Owner occupied real estate		297,880			276,986
Consumer and other		71,888			63,660
Residential mortgage		53,384			9,682
Total loans receivable		1,095,426			965,044
Deferred fees		(21	)		(72	)
Allowance for loan losses		(8,258	)		(9,155	)
Net loans receivable	$	1,087,147		$	955,817

(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, 2017
Allowance for loan losses:

Beginning balance:	$	3,171	$	580		$	2,496		$	1,598		$	544		$	238	$	827		$	9,454
Charge-offs		-		-			(1,195	)		(49	)		(4	)		-		-			(1,248	)
Recoveries		47		-			5			-			-			-		-			52
Provisions (credits)		381		69			(85	)		87			11			85		(548	)		-
Ending balance	$	3,599	$	649		$	1,221		$	1,636		$	551		$	323	$	279		$	8,258

Three months ended September 30, 2016
Allowance for loan losses:

Beginning balance:	$	3,293	$	365		$	3,136		$	1,366		$	324		$	11	$	266		$	8,761
Charge-offs		-		(3	)		-			-			-			-		-			(3	)
Recoveries		-		-			88			-			-			-		-			88
Provisions (credits)		9		137			(79	)		251			16			31		242			607
Ending balance	$	3,302	$	499		$	3,145		$	1,617		$	340		$	42	$	508		$	9,453

With an allowance recorded:
Commercial real estate	$	6,389	$	6,403	$	1,834	$	6,898	$	6,912	$	1,277
Construction and land development		-		-		-		-		-		-
Commercial and industrial		1,363		1,380		337		3,225		5,892		1,624
Owner occupied real estate		1,019		1,019		190		1,704		1,704		274
Consumer and other		347		377		218		603		627		293
Residential mortgage		-		-		-		-		-		-
Total	$	9,118	$	9,179	$	2,579	$	12,430	$	15,135	$	3,468

Total:
Commercial real estate	$	13,393	$	13,410	$	1,834	$	19,245	$	19,260	$	1,277
Construction and land development		-		-		-		-		-		-
Commercial and industrial		3,852		7,783		337		5,180		9,003		1,624
Owner occupied real estate		3,490		3,652		190		2,325		2,437		274
Consumer and other		1,267		1,613		218		1,290		1,603		293
Residential mortgage		-		-		-		130		130		-
Total	$	22,002	$	26,458	$	2,579	$	28,170	$	32,433	$	3,468

	Three Months Ended September 30,
	2017						2016
(dollars in thousands)	Average Recorded Investment			Interest Income Recognized			Average Recorded Investment			Interest Income Recognized
With no related allowance recorded:
Commercial real estate		$	7,024		$	106		$	12,188		$	65
Construction and land development			-			-			22			-
Commercial and industrial			2,366			8			1,611			9
Owner occupied real estate			2,313			17			665			3
Consumer and other			923			9			1,027			5
Residential mortgage			-			-			-			-
Total		$	12,626		$	140		$	15,513		$	82

With an allowance recorded:
Commercial real estate	$	6,391	$	4	$	6,058	$	19
Construction and land development		-		-		43		-
Commercial and industrial		2,118		16		3,607		18
Owner occupied real estate		1,100		8		1,977		9
Consumer and other		346		2		278		2
Residential mortgage		-		-		-		-
Total	$	9,955	$	30	$	11,963	$	48

Total:
Commercial real estate	$	13,415	$	110	$	18,246	$	84
Construction and land development		-		-		65		-
Commercial and industrial		4,484		24		5,218		27
Owner occupied real estate		3,413		25		2,642		12
Consumer and other		1,269		11		1,305		7
Residential mortgage		-		-		-		-
Total	$	22,581	$	170	$	27,476	$	130

With an allowance recorded:
Commercial real estate	$	6,575	$	13	$	3,844	$	43
Construction and land development		-		-		15		-
Commercial and industrial		2,710		50		3,389		56
Owner occupied real estate		1,437		22		2,205		23
Consumer and other		438		8		252		7
Residential mortgage		-		-		-		-
Total	$	11,160	$	93	$	9,705	$	129

Total:
Commercial real estate	$	16,232	$	284	$	15,798	$	240
Construction and land development		-		-		87		-
Commercial and industrial		4,859		76		5,186		86
Owner occupied real estate		3,156		68		2,852		29
Consumer and other		1,275		25		1,153		18
Residential mortgage		33		1		-		-
Total	$	25,555	$	454	$	25,076	$	373

(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, 2017
Commercial real estate		$	129		$	-		$	8,975		$	9,104		$	406,428		$	415,532		$	2,538
Construction and land development			-			-			-			-			93,657			93,657			-
Commercial and industrial			767			-			2,100			2,867			160,218			163,085			-
Owner occupied real estate			451			-			1,816			2,267			295,613			297,880			192
Consumer and other			149			35			859			1,043			70,845			71,888			-
Residential mortgage			-			-			-			-			53,384			53,384			-
Total		$	1,496		$	35		$	13,750		$	15,281		$	1,080,145		$	1,095,426		$	2,730

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
At September 30, 2017:
Commercial real estate	$	407,787	$	838	$	6,907	$	-	$	415,532
Construction and land development		93,657		-		-		-		93,657
Commercial and industrial		158,304		929		3,572		280		163,085
Owner occupied real estate		294,390		-		3,490		-		297,880
Consumer and other		70,621		-		1,267		-		71,888
Residential mortgage		53,257		127		-		-		53,384
Total	$	1,078,016	$	1,894	$	15,236	$	280	$	1,095,426

(dollars in thousands)	Number of Loans		Accrual Status		Non-Accrual Status		Total TDRs
September 30, 2017
Commercial real estate		1	$	6,486	$	-	$	6,486
Construction and land development		-		-		-		-
Commercial and industrial		2		1,184		349		1,533
Owner occupied real estate		1		243		-		243
Consumer and other		-		-		-		-
Residential mortgage		-		-		-		-
Total		4	$	7,913	$	349	$	8,262

December 31, 2016
Commercial real estate		1	$	5,669	$	-	$	5,669
Construction and land development		-		-		-		-
Commercial and industrial		2		228		349		577
Owner occupied real estate		-		-		-		-
Consumer and other		-		-		-		-
Residential mortgage		-		-		-		-
Total		3	$	5,897	$	349	$	6,246

(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, 2017
Assets:

Collateralized mortgage obligations	$	240,004	$	-	$	240,004	$	-
Agency mortgage-backed securities		42,802		-		42,802		-
Municipal securities		15,659		-		15,659		-
Corporate bonds		64,329		-		61,304		3,025
Asset-backed securities		13,855		-		13,855		-
Trust Preferred Securities		1,108		-		-		1,108
Securities Available for Sale	$	377,757	$	-	$	373,624	$	4,133

Mortgage Loans Held for Sale	$	41,411	$	-	$	41,411	$	-
SBA Servicing Assets		5,387		-		-		5,387
Interest Rate Lock Commitments		635		-		635		-
Best Efforts Forward Loan Sales Commitments		13		-		13		-
Mandatory Forward Loan Sales Commitments		51		-		51		-

Liabilities:

Interest Rate Lock Commitments		1		-		1		-
Best Efforts Forward Loan Sales Commitments		125		-		125		-
Mandatory Forward Loan Sales Commitments		137		-		137		-

December 31, 2016
Assets:

Collateralized mortgage obligations	$	224,765	$	-	$	224,765	$	-
Agency mortgage-backed securities		36,710		-		36,710		-
Municipal securities		26,547		-		26,547		-
Corporate bonds		64,748		-		61,777		2,971
Asset-backed securities		15,149		-		15,149		-
Trust Preferred Securities		1,820		-		-		1,820
Securities Available for Sale	$	369,739	$	-	$	364,948	$	4,791

Mortgage Loans Held for Sale	$	23,911	$	-	$	23,911	$	-
SBA Servicing Assets		5,352		-		-		5,352
Interest Rate Lock Commitments		439		-		439		-
Best Efforts Forward Loan Sales Commitments		103		-		103		-
Mandatory Forward Loan Sales Commitments		229		-		229		-

Liabilities:

Interest Rate Lock Commitments		55		-		55		-
Best Efforts Forward Loan Sales Commitments		125		-		125		-
Mandatory Forward Loan Sales Commitments		38		-		38		-

	Three Months Ended September 30, 2017					Three Months Ended September 30, 2016
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities		Corporate Bonds			Trust Preferred Securities			Corporate Bonds
Balance, July 1^st	$	968	$	3,079		$	1,755		$	2,870
Unrealized gains (losses)		140		(54	)		(62	)		63
Paydowns		-		-			-			-
Proceeds from sales		-		-			-			-
Realized losses		-		-			-			-
Impairment charges on Level 3		-		-			(2	)		-
Balance, September 30th	$	1,108	$	3,025		$	1,691		$	2,933

	Nine Months Ended September 30, 2017					Nine Months Ended September 30, 2016
Level 3 Investments Only (dollars in thousands)	Trust Preferred Securities			Corporate Bonds		Trust Preferred Securities			Corporate Bonds
Balance, January 1st	$	1,820		$	2,971	$	1,883		$	2,834
Unrealized gains (losses)		806			54		(185	)		99
Paydowns		-			-		-			-
Proceeds from sales		(970	)		-		-			-
Realized losses		(548	)		-		-			-
Impairment charges on Level 3		-			-		(7	)		-
Balance, September 30th	$	1,108		$	3,025	$	1,691		$	2,933

	Quantitative Information about Level 3 Fair Value Measurements
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
September 30, 2017
Corporate bonds	$	3,025	Discounted Cash Flows	Discount Rate	(5.57%)

Trust preferred securities	$	1,108	Discounted Cash Flows	Discount Rate	7.62% - 7.85% (7.71%)

SBA servicing assets	$	5,387	Discounted Cash Flows	Conditional Prepayment Rate	(6.70%)
				Discount Rate	(10.25%)

Impaired loans	$	7,161	Appraised Value of Collateral (1)	Liquidation expenses (2)	10% - 28% (14%) (3)

Other real estate owned	$	7,468	Appraised Value of Collateral (1)	Liquidation expenses (2)	14% - 22% (15%) (3)
			Sales Price	Liquidation expenses (2)	7% - 13% (13%) (3)

December 31, 2016
Corporate bonds	$	2,971	Discounted Cash Flows	Discount Rate	(4.68%)

Trust preferred securities	$	1,820	Discounted Cash Flows	Discount Rate	8.85% - 9.35% (9.08%)

SBA servicing assets	$	5,352	Discounted Cash Flows	Conditional Prepayment Rate	(6.12%)
				Discount Rate	(10.00%)

Impaired loans	$	9,110	Appraised Value of Collateral (1)	Liquidation expenses (2)	7% - 20% (11%) (3)
			Sales Price	Liquidation expenses (2)	(7%) (3)

Other real estate owned	$	8,563	Appraised Value of Collateral (1)	Liquidation expenses (2)	5% - 76% (17%) (3)
			Sales Price	Liquidation expenses (2)	7% - 8% (7%) (3)

Mortgage loans held for sale	Carrying Amount		Aggregate Unpaid Principal Balance		Excess Carrying Amount Over Aggregate Unpaid Principal Balance

September 30, 2017	$	41,411	$	40,212	$	1,199

December 31, 2016	$	23,911	$	23,428	$	483

	Unrealized Gains (Losses) on Available-For-Sale Securities			Unrealized Holding Losses on Securities Transferred From Available-For-Sale To Held-To-Maturity			Total
(dollars in thousands)
Balance January 1, 2017	$	(6,831	)	$	(463	)	$	(7,294	)
Unrealized gain on securities		1,676			-			1,676
Amounts reclassified from accumulated other comprehensive income to net income (2)		39			83			122
Net current-period other comprehensive income		1,715			83			1,798
Balance September 30, 2017	$	(5,116	)	$	(380	)	$	(5,496	)

Balance January 1, 2016	$	(2,562	)	$	(603	)	$	(3,165	)
Unrealized loss on securities		2,170			-			2,170
Amounts reclassified from accumulated other comprehensive income to net income (2)		(416	)		85			(331	)
Net current-period other comprehensive income (loss)		1,754			85			1,839
Balance September 30, 2016	$	(808	)	$	(518	)	$	(1,326	)

Balance January 1, 2016	$	(2,562	)	$	(603	)	$	(3,165	)
Unrealized loss on securities		(3,853	)		-			(3,853	)
Amounts reclassified from accumulated other comprehensive income to net income (2)		(416	)		140			(276	)
Net current-period other comprehensive income (loss)		(4,269	)		140			(4,129	)
Balance December 31, 2016	$	(6,831	)	$	(463	)	$	(7,294	)

Consideration paid:	Original Estimates		Adjustments to Estimates			Final Valuation
Cash	$	7,136	$	-		$	7,136
Equity instruments		202		-			202
Deferred additional purchase price		500		-			500

Value of consideration	$	7,838	$	-		$	7,838

Assets acquired:

Cash and cash equivalents	$	1,223	$	-		$	1,223
Loans held for sale		20,871		-			20,871
Loans receivable		1,132		-			1,132
Premises and equipment		103		-			103
Derivative assets		1,508		-			1,508
Intangible assets – non compete agreements		104		-			104
Other assets		125		-			125
Total assets		25,066		-			25,066

Liabilities assumed:

Warehouse lines of credit		19,666		-			19,666
Derivative liabilities		412		-			412
Other liabilities		2,042		119			2,161
Total liabilities		22,120		119			22,239

Net assets acquired		2,946		(119	)		2,827

Goodwill resulting from acquisition of Oak Mortgage	$	4,892	$	119		$	5,011

(dollars in thousands)	Balance December 31, 2016		Additions/ Adjustments		Amortization		Balance September 30, 2017		Amortization Period (in years)

Goodwill	$	5,011	$	-	$	-	$	5,011	Indefinite
Non-compete agreements		61		-		(61)		-	1
Total	$	5,072	$	-	$	(61)	$	5,011