2020

(Dollars in thousands, except per share data)

	June 30, 2021 (unaudited)			December 31, 2020
ASSETS
Cash and due from banks	$	16,371		$	29,746
Interest bearing deposits with banks		750,328			745,554
Cash and cash equivalents		766,699			775,300

Investment securities available for sale, at fair value		764,736			528,508
Investment securities held to maturity, at amortized cost (fair value of $1,061,638 and $836,972, respectively)		1,057,842			814,936
Equity securities		9,241			9,039
Restricted stock, at cost		3,510			3,039
Mortgage loans held for sale, at fair value		11,971			50,387
Other loans held for sale		2,437			2,983
Loans receivable (net of allowance for credit losses of $16,110 and $12,975, respectively)		2,505,313			2,632,367
Premises and equipment, net		123,675			123,170
Other real estate owned, net		852			1,188
Accrued interest receivable		14,644			16,120
Operating lease right-of-use asset		78,174			72,946
Other assets		38,344			35,752
Total Assets	$	5,377,438		$	5,065,735

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Demand – non-interest bearing	$	1,258,162		$	1,006,876
Demand – interest bearing		1,945,833			1,776,995
Money market and savings		1,168,516			1,043,519
Time deposits		187,357			186,361
Total Deposits		4,559,868			4,013,751
Other borrowings		387,509			633,866
Accrued interest payable		593			926
Other liabilities		13,013			20,232
Operating lease liability		84,740			77,576
Subordinated debt		11,274			11,271
Total Liabilities		5,056,997			4,757,622

Commitments and contingencies (see note 3)		-			-

Shareholders’ Equity
Preferred stock, par value $0.01 per share; liquidation preference $25.00 per share; 10,000,000 shares authorized; share issued 2,000,000 as of June 30, 2021 and December 31, 2020; shares outstanding 2,000,000 as of June 30, 2021 and December 31, 2020		20			20
Common stock, par value $0.01 per share: 100,000,000 shares authorized; shares issued 59,414,998 as of June 30, 2021 and 59,388,623 as of December 31, 2020; shares outstanding 58,886,153 as of June 30, 2021 and 58,859,778 as of December 31, 2020		594			594
Additional paid in capital		323,442			322,321
Retained earnings / accumulated deficit		3,167			(8,085	)
Treasury stock at cost (503,408 shares as of June 30, 2021 and December 31, 2020)		(3,725	)		(3,725	)
Stock held by deferred compensation plan (25,437 shares as of June 30, 2021 and December 31, 2020)		(183	)		(183	)
Accumulated other comprehensive loss		(2,874	)		(2,829	)
Total Shareholders’ Equity		320,441			308,113
Total Liabilities and Shareholders’ Equity	$	5,377,438		$	5,065,735

~~(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 Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~

2020

(Dollars in thousands, except per share data)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Interest income:
Interest and fees on taxable loans	$	28,033	$	22,183	$	57,500	$	41,806
Interest and fees on tax-exempt loans		427		554		863		1,104
Interest and dividends on taxable investment securities		6,752		5,053		13,145		11,854
Interest and dividends on tax-exempt investment securities		78		19		153		39
Interest on federal funds sold and other interest-earning assets		64		50		113		339
Total interest income		35,354		27,859		71,774		55,142
Interest expense:
Demand- interest bearing		3,282		2,856		6,540		6,277
Money market and savings		932		1,431		2,050		3,214
Time deposits		427		1,033		966		2,254
Other borrowings		74		112		147		216
Total interest expense		4,715		5,432		9,703		11,961
Net interest income		30,639		22,427		62,071		43,181
Provision for loan losses		0		1,000		3,000		1,950
Net interest income after provision for loan losses		30,639		21,427		59,071		41,231
Non-interest income:
Loan and servicing fees		660		764		1,293		1,235
Mortgage banking income		2,908		3,389		7,472		5,847
Gain on sales of SBA loans		633		269		1,394		918
Service fees on deposit accounts		3,260		2,328		7,220		4,392
Gain on sale of investment securities		2		1,640		2		2,481
Other non-interest income		217		34		574		96
Total non-interest income		7,680		8,424		17,955		14,969
Non-interest expenses:
Salaries and employee benefits		14,855		13,177		29,576		26,558
Occupancy		3,831		3,312		7,608		6,734
Depreciation and amortization		2,015		2,242		4,309		4,117
Legal		294		253		511		549
Other real estate owned expenses		493		75		591		357
Appraisal and other loan expenses		545		539		1,259		961
Advertising		119		288		290		669
Data processing		1,762		1,567		3,519		3,141
Insurance		299		281		634		557
Professional fees		763		756		1,571		1,390
Debit card processing		798		899		1,784		1,724
Regulatory assessments and costs		881		675		1,607		1,305
Taxes, other		783		283		1,105		486
Other operating expenses		3,081		2,317		5,502		5,388
Total non-interest expense		30,519		26,664		59,866		53,936
Income before provision for income taxes		7,800		3,187		17,160		2,264
Provision for income taxes		1,866		675		4,158		345
Net income	$	5,934	$	2,512	$	13,002	$	1,919
Preferred stock dividends		875		0		1,750		0
Net income available to common shareholders	$	5,059	$	2,512	$	11,252	$	1,919
Net income per share:
Basic earnings per common share	$	0.09	$	0.04	$	0.19	$	0.03
Diluted earnings per common share	$	0.08	$	0.04	$	0.17	$	0.03

~~(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

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~

2020

(Dollars in thousands)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

Net income	$	5,934		$	2,512		$	13,002		$	1,919

Other comprehensive income, net of tax
Unrealized gains (losses) on securities (pre-tax $7,949, $1,089, ($1,559), and $5,463, respectively)		5,937			813			(1,161	)		4,077
Reclassification adjustment for securities gains (pre-tax ($2), ($1,640), ($2), and ($2,481), respectively)		(1	)		(1,224	)		(1	)		(1,852	)
Net unrealized gains (losses) on securities		5,936			(411	)		(1,162	)		2,225
Amortization of net unrealized holding losses to income during the period (pre-tax $660, $646, $1,498, and $1,055 respectively)		489			482			1,117			787

Total other comprehensive income (loss)		6,425			71			(45	)		3,012

Total comprehensive income	$	12,359		$	2,583		$	12,957		$	4,931

~~(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 ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~

2020

(Dollars in thousands)

(unaudited)

	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities
Net income	$	13,002		$	1,919
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		3,000			1,950
Writedown of other real estate owned		350			0
Depreciation and amortization		4,309			4,117
Stock based compensation		1,029			1,056
Gain on sale of investment securities		(2	)		(2,481	)
Fair value adjustment on equity securities		(202	)		0
Amortization of premiums on investment securities		4,291			3,610
Accretion of discounts on retained SBA loans		(455	)		(429	)
Fair value adjustments on SBA servicing assets		298			158
Proceeds from sales of SBA loans originated for sale		13,350			15,179
SBA loans originated for sale		(11,428	)		(12,639	)
Gains on sales of SBA loans originated for sale		(1,376	)		(918	)
Proceeds from sales of mortgage loans originated for sale		276,657			148,131
Mortgage loans originated for sale		(232,663	)		(158,637	)
Fair value adjustment for mortgage loans originated for sale		1,824			(589	)
Gains on mortgage loans originated for sale		(7,661	)		(3,822	)
Amortization of debt issuance costs		3			3
Non-cash expense related to leases		204			255
Increase in accrued interest receivable and other assets		(443	)		(6,190	)
Net (decrease) increase in accrued interest payable and other liabilities		(6,519	)		3,117
Net cash provided by (used in) operating activities		57,568			(6,210	)

Cash flows from investing activities
Purchase of investment securities available for sale		(308,819	)		(16,906	)
Purchase of investment securities held to maturity		(378,895	)		0
Proceeds from the sale of securities available for sale		0			92,804
Proceeds from the paydown, maturity, or call of securities available for sale		68,905			84,036
Proceeds from the paydown, maturity, or call of securities held to maturity		135,327			88,476
Net purchase of restricted stock		(471	)		(1,043	)
Net decrease (increase) in loans		124,341			(793,800	)
Net proceeds from sale of other real estate owned		155			586
Premises and equipment expenditures		(4,814	)		(8,310	)
Net cash used in investing activities		(364,271	)		(554,157	)

Cash flows from financing activities
Proceeds from exercise of stock options		92			23
Increase in demand, money market and savings deposits		545,121			657,924
Net increase (decrease) in time deposits		996			(13,133	)
Net (repayment) increase in other borrowings		(246,357	)		438,478
Preferred stock dividends paid		(1,750	)		0
Net cash provided by financing activities		298,102			1,083,292

Net (decrease) increase in cash and cash equivalents		(8,601	)		522,925
Cash and cash equivalents, beginning of year		775,300			168,319
Cash and cash equivalents, end of period	$	766,699		$	691,244

Supplemental disclosures
Interest paid	$	9,370		$	11,734
Income taxes paid	$	6,905		$	0
Addition to other real estate owned	$	168		$	0

~~(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 Six Months Ended June 30, 2021 and 2020

(Dollars in thousands)

(unaudited)

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

Balance April 1, 2021	$	20	$	594	$	322,861	$	(1,892	)	$	(3,725	)	$	(183	)	$	(9,299	)	$	308,376
Net income								5,934												5,934
Preferred stock dividends paid (1)								(875	)											(875	)
Other comprehensive income, net of tax																	6,425			6,425
Stock based compensation						532														532
Options exercised (12,875 shares)						49														49

Balance June 30, 2021	$	20	$	594	$	323,442	$	3,167		$	(3,725	)	$	(183	)	$	(2,874	)	$	320,441

Balance January 1, 2021	$	20	$	594	$	322,321	$	(8,085	)	$	(3,725	)	$	(183	)	$	(2,829	)	$	308,113
Net income								13,002												13,002
Preferred stock dividends paid (2)								(1,750	)											(1,750	)
Other comprehensive loss, net of tax																	(45	)		(45	)
Stock based compensation						1,029														1,029
Options exercised (26,375 shares)						92														92

Balance June 30, 2021	$	20	$	594	$	323,442	$	3,167		$	(3,725	)	$	(183	)	$	(2,874	)	$	320,441

Balance April 1, 2020	$	0	$	594	$	272,639	$	(12,809	)	$	(3,725	)	$	(183	)	$	(4,400	)	$	252,116

Net income								2,512												2,512
Other comprehensive income, net of tax																	71			71
Stock based compensation						479														479

Balance June 30, 2020	$	0	$	594	$	273,118	$	(10,297	)	$	(3,725	)	$	(183	)	$	(4,329	)	$	255,178

Balance January 1, 2020	$	0	$	594	$	272,039	$	(12,216	)	$	(3,725	)	$	(183	)	$	(7,341	)	$	249,168
Net income								1,919												1,919
Other comprehensive income, net of tax																	3,012			3,012
Stock based compensation						1,056														1,056
Options exercised (8,000 shares)						23														23

Balance June 30, 2020	$	0	$	594	$	273,118	$	(10,297	)	$	(3,725	)	$	(183	)	$	(4,329	)	$	255,178

(1)

Dividends per share of $0.44 were declared and paid on preferred stock for the three months ended June 30, 2021

(2)

Dividends per share of $0.88 were declared and paid on preferred stock for the six months ended June 30, 2021

(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~~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,~~ In 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, Florida, and ~~Florida.~~ New York. In 2018, Oak Mortgage was merged into Republic and restructured as a division of 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~~10-Q and Article 10 of SEC Regulation ~~S-X.~~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~~six month ~~periods~~period ended ~~September~~June 30, ~~2017~~ 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2021.

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~~

The coronavirus (“COVID-19”) outbreak and ~~Mortgage Loans Held~~the public health response to contain it have resulted in unprecedented economic and financial market conditions. In response to these conditions, the Board of Governors of the Federal Reserve System (“Federal Reserve”) reduced the federal funds target range by 150 basis points to 0.00% to 0.25% in March 2020. The Federal Reserve has taken additional steps to bolster the economy by promoting liquidity in certain securities markets and providing funding sources for ~~Sale~~

~~Loans held for sale are originated~~small and ~~held until sold to permanent investors. On July 28, 2016, management elected to adopt~~mid-sized businesses, as well as, state and local governments as they work through the ~~fair value option in accordance with FASB Accounting Standards Codification ("ASC") 820,~~ ~~Fair Value Measurements and Disclosures, and record loans held for sale at fair value.~~

cash flow stresses caused by the COVID-19 pandemic.

The fair value is determined on a recurring basis by utilizing quoted prices from dealers in such securities. Gains and losses on loan sales are recorded in non-interest income and direct loan origination costs are recognized when incurred and are included in non-interest expenseeconomic downturn that began in the ~~statements~~U.S. as a result of ~~income.~~

~~Interest Rate Lock Commitments ("IRLCs"~~the government-mandated business closures and stay-at-home orders significantly impacted the labor market, consumer spending, business investment and profitability. As a result, the President signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)

~~Mortgage loan commitments known as interest rate locks that relate~~, which was the largest economic stimulus package in the nation’s history in an effort to lessen the ~~origination~~impact of ~~a mortgage that will be held~~COVID-19 on consumers and businesses. Among other measures, the CARES Act authorized funding for ~~sale upon funding are considered derivative instruments under~~ the ~~derivatives~~Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) to provide loans to small businesses to keep employees on their payroll and ~~hedging accounting guidance FASB ASC 815,~~ ~~Derivatives~~to make other eligible payments to sustain their operation in the near term. In December 2020, the Economic Aid Act was signed into law, which extended certain provisions of the CARES Act and ~~Hedging. Loan commitments that are derivatives are recognized at fair value on the balance sheet as other assets~~provides additional support and financial assistance for small businesses, non-profit organizations and other liabilities with changes in their fair values recorded as mortgage banking income 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 servicing released, and the servicing released premium is included in the market price. See Note 11 Derivatives and Risk Management Activities.

~~Use of Estimates~~

entities.

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

Mortgage Banking Activities and Mortgage Loans Held for Sale

Mortgage loans held for sale are originated and held until sold to permanent investors. Management elected to adopt the fair value option in accordance with FASB Accounting Standards Codification (“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. Changes in fair value are reflected in mortgage banking income 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”)

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 interest rate lock commitments (“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 12 Derivatives and Risk Management Activities for further detail of IRLCs.

Use of 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~~June 30, ~~2017,~~ 2021, 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. Compensation cost for all option awards is calculated and recognized over the vesting period of the option awards. If the service conditions are not met, the Company reverses previously recorded compensation expense upon forfeiture. The Company’s accounting policy election is to recognize forfeitures as they occur. At ~~September~~June 30, ~~2017,~~ 2021, the maximum number of common shares issuable under the 2014 Plan was ~~5.9~~6.4 million shares. During the ~~nine~~six months ended ~~September~~June 30, ~~2017, 906,500 options~~2021, 530,013 stock units were granted under the 2014 Plan with a fair value of ~~$3,188,984.~~

$1.74 million.

On April 27, 2021 the Company’s shareholders approved the 2021 Equity Incentive Plan of Republic First Bancorp, Inc. (the “2021 Plan”), under which the Company may grant options, restricted stock, stock units, or stock appreciation rights to the Company’s employees, directors, independent contractors, and consultants. Under the terms of the 2021 Plan, the maximum number of shares which may be issued or awarded is 7.5 million shares of common stock. As of June 30, 2021, 0 shares have been granted under the 2021 Plan.

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 and 2016 are as follows:~~

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 volatility is based on Bloomberg's five and one-half to seven year volatility calculation for "FRBK" stock.~~

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

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

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016, 526,624 options~~2020, 634,635 shares and ~~487,550 options~~907,790 shares vested, respectively. Expense is recognized ratably over the period required to vest. At ~~September~~June 30, ~~2017,~~ 2021, the intrinsic value of the ~~3,038,450~~5,613,724 options outstanding was ~~$12,954,271,~~$2.1 million, while the intrinsic value of the ~~1,379,848~~3,833,260 exercisable (vested) options was ~~$7,764,313.~~$1.0 million. At June 30, 2020, the intrinsic value of the 5,997,450 options outstanding was $102,000, while the intrinsic value of the 3,403,375 exercisable (vested) options was $102,000. During the ~~nine~~six months ended ~~September~~June 30, ~~2017, 186,850~~2021, 26,375 options were exercised ~~with~~resulting in cash ~~received~~receipts of ~~$615,226~~$92,000 and ~~14,100~~259,326 options were forfeited with a weighted average grant date fair value of ~~$53,246.~~$487,533. During the ~~nine~~six months ended ~~September~~June 30, ~~2016, 80,375~~2020, 8,000 options were exercised ~~with~~resulting in cash ~~received~~receipts of ~~$226,271~~$23,000 and ~~38,550~~179,625 options were forfeited with a weighted average grant date fair value of ~~$55,920.~~

$340,931.

Information regarding stock based compensation for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 is set forth below:

	2021		2020
Stock based compensation expense recognized	$	785,724	$	1,056,000
Number of unvested stock options		1,780,464		2,594,075
Fair value of unvested stock options	$	2,986,049	$	4,900,923
Amount remaining to be recognized as expense	$	2,353,785	$	3,578,456

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~~$2,353,785 will be recognized ratably as expense through ~~July~~May 2024.

The Company granted stock units under the 2014 Plan during the six month period ended June 30, 2021.

The compensation expense for the stock units is recognized based on the market price of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures.

The following table details the Stock Units for the three months ended June 30, 2021:

	Number of Units			Weighted Average Grant Date Fair Value
Beginning balance		520,350		$	3.34
Granted		9,663			3.82
Vested		0			0
Forfeited		(5,150	)		3.34
Ending balance		524,863		$	3.35

Information regarding stock unit compensation for the six months ended June 30, 2021 and 2020 is set forth below:

	2021		2020
Stock based compensation expense recognized	$	243,835	$	0
Number of unvested stock units		524,863		0
Fair value of unvested stock units	$	1,757,692	$	0
Amount remaining to be recognized as expense	$	1,513,857	$	0

The remaining unrecognized expense amount of $1,513,857 will be recognized ratably as expense through May 2025.

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~~common shares issuable through the ~~trust~~conversion of the Company's preferred ~~securities issued in 2008. In~~stock for 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~~six months ended ~~September~~June 30, ~~2017~~ 2021 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.

June 30, 2020.

The calculation of EPS for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 is as follows (in thousands, except per share amounts):

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Net income attributable to basic common shareholders	$	5,059	$	2,512	$	11,252	$	1,919

Weighted average shares outstanding		58,875		58,851		58,868		58,849

Basic earnings per common share	$	0.09	$	0.04	$	0.19	$	0.03

Net income attributable to diluted common shareholders	$	5,934	$	2,512	$	13,002	$	1,919

Weighted average shares outstanding (including dilutive CSEs)		76,167		58,883		75,984		58,911

Diluted earnings per common share	$	0.08	$	0.04	$	0.17	$	0.03

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,

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

(in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Anti-dilutive securities

Share based compensation awards		5,514		5,965		5,689		5,936

Convertible preferred stock		0		0		0		0

Total anti-dilutive securities		5,514		5,965		5,689		5,936

Recent Accounting Pronouncements

ASU ~~2014-09~~

2016-13

In ~~May 2014,~~ June 2016, the FASB issued ASU 2014-09, "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. The Company's revenue is comprised of net interest income and noninterest 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, the majority of our revenues will not be affected. The Company is currently assessing our revenue contracts related to revenue streams that are within the scope of the standard including loan fees, service fees on deposit accounts, and other categories of non-interest income. We are continuing to evaluate specific contracts, but have not identified material changes to the timing or amount 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.

~~ASU 2016-01~~

~~In January~~ 2016 ~~the FASB issued Accounting Standards Update ("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 Company has evaluated this ASU and it is not expected to have a significant impact on its financial condition or results of operations.

~~ASU 2016-02~~

~~In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-02,~~ ~~Leases.~~ From the 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 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 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 convey risks and rewards or control, an operating lease results. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital 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. 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.

~~ASU 2016-13~~

~~In June 2016, the FASB issued ASU 2016-13,~~ 13,Financial Instruments-Credit Losses (Topic ~~326)~~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. ~~For the Company, this update will be effective for interim and annual periods beginning after December 15, 2019.~~ The Company has ~~not yet determined~~evaluated 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 have been run parallel to the calculations under existing guidance to assess and evaluate the potential impact to the Company’s financial statements. The new model includes different assumptions used to calculate credit losses, such as estimating losses over the estimated life of a financial asset and considers expected future changes in macroeconomic conditions. The Company was initially required to adopt this ASU on January 1, 2020. The Company elected to defer the adoption of this ASU ~~2016-13 will have~~as permitted by Section 4014 of the CARES Act, which allowed financial institutions to postpone adoption until the earlier of (i) the date on which the national emergency concerning the COVID-19 outbreak declared under the National Emergencies Relief Act terminates or (ii) December 31, 2020. The Economic Aid Act approved in December 2020 extended the option to defer this ASU until January 1, 2021 or January 1, 2022. The Company has chosen to defer adoption until January 1, 2022. While based on the ~~consolidated financial statements.~~parallel calculations run to date, the Company does not anticipate a material increase to the allowance for credit losses at the present time, the impact on the date of adoption is unknown.

ASU ~~2016-15~~

2020-04

In ~~August 2016,~~ March 2020, the FASB issued ASU ~~2016-15, Statement~~2020-04,Reference Rate Reform (Topic 848): Facilitation of ~~Cash Flows (Topic 230).~~ the Effects of Reference Rate Reform on Financial Reporting. The ASU ~~addresses classification~~provides optional guidance for a limited period of time to ease the potential burden in accounting for (or derecognizing the effects of) reference rate reform on financial reporting. Specifically, the amendments provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain ~~cash receipts~~criteria are met. These relate only to those contracts, hedging relationships, and ~~cash payments in~~other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The ASU became effective March 12, 2020 and can be adopted anytime during the ~~statement~~period of ~~cash flows. The new guidance is effective on~~ January 1, ~~2018, on~~2020 through December 31, 2022. The Company is currently evaluating the impact of this guidance. There is only one relationship that has LIBOR pricing with a ~~retrospective basis, with early adoption permitted. This new accounting guidance will result in some changes in classification in~~maturity date beyond December 31, 2022. The loan documentation for 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 relationship contains language for an alternative pricing index when LIBOR is no longer available.

ASU ~~the Company has determined that the adoption of ASU 2016-15 will not have a material impact on the Company's financial statements.~~

~~ASU-2017-01~~

2021-01

In January ~~2017,~~ 2021, the FASB issued ASU ~~2017-01, Business Combinations~~2021-01,Reference Rate Reform (Topic ~~805).~~ 848): Scope. The ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the ~~definition~~discounting transition, including derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result 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 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.reference rate reform. The ASU isbecame effective ~~for public business entities in annual periods beginning after~~ as of March 12, 2020 and can be adopted anytime during the period of January 1, 2020 through 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. 31, 2022. The Company ~~has not yet determined~~is currently evaluating the impact of this guidance. There is only one relationship that has LIBOR pricing with a maturity date beyond December 31, 2022. The loan documentation for the ~~adoption of ASU 2017-01 will have 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~~relationship contains language for ~~goodwill impairments by eliminating step 2 from the goodwill impairment test. Instead, if "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 ASUalternative pricing index when LIBOR is ~~effective for annual~~no longer available.

Note 3: Commitments and any interim impairment tests for periods beginning after December 15, 2019. The Company has not yet determined the impact the adoption of ASU 2017-04 will have 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 have on the consolidated financial statements.

~~Note 3: Legal Proceedings~~

Contingencies

The Company and Republic are from time to time ~~parties~~a party (plaintiff or defendant) to lawsuits that are 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. Republic does 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, and equity securities at ~~September~~June 30, ~~2017~~ 2021 and December 31, ~~2016~~ 2020 is as follows:

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

	At June 30, 2021
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Government agencies	$	29,341	$	477	$	(953	)	$	28,865
Collateralized mortgage obligations		302,361		2,910		(1,930	)		303,341
Agency mortgage-backed securities		274,845		818		(2,624	)		273,039
Municipal securities		7,926		420		0			8,346
Corporate bonds		150,502		1,426		(783	)		151,145
Investment securities available for sale	$	764,975	$	6,051	$	(6,290	)	$	764,736

Held to maturity
U.S. Government agencies	$	75,102	$	3,030	$	0		$	78,132
Collateralized mortgage obligations		405,773		8,447		(6,275	)		407,945
Agency mortgage-backed securities		576,967		3,589		(4,995	)		575,561
Investment securities held to maturity	$	1,057,842	$	15,066	$	(11,270	)	$	1,061,638

Equity securities (1)								$	9,241

(1)

Equity securities consist of investments in non-cumulative preferred stock.

	At December 31, 2020
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Government agencies	$	32,312	$	0	$	(426	)	$	31,886
Collateralized mortgage obligations		218,232		3,584		(270	)		221,546
Agency mortgage-backed securities		149,325		1,204		(1	)		150,528
Municipal securities		8,201		24		0			8,225
Corporate bonds		119,118		595		(3,390	)		116,323
Investment securities available for sale	$	527,188	$	5,407	$	(4,087	)	$	528,508

Held to maturity
U.S. Government agencies	$	82,093	$	4,185	$	0		$	86,278
Collateralized mortgage obligations		363,363		12,687		(231	)		375,819
Agency mortgage-backed securities		369,480		5,640		(245	)		374,875
Investment securities held to maturity	$	814,936	$	22,512	$	(476	)	$	836,972

Equity securities (1)								$	9,039

(1)

Equity securities consist of investments in non-cumulative preferred stock.

The following table presents investment securities by stated maturity at ~~September~~June 30, ~~2017.~~ 2021. 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 $ 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.~~

	Available for Sale				Held to Maturity
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year or less	$	13,702	$	13,689	$	407	$	409
After 1 year to 5 years		80,532		81,480		67,361		70,054
After 5 years to 10 years		52,386		52,913		7,334		7,669
After 10 years		41,149		40,274		0		0
Collateralized mortgage obligations		302,361		303,341		405,773		407,945
Agency mortgage-backed securities		274,845		273,039		576,967		575,561
Total	$	764,975	$	764,736	$	1,057,842	$	1,061,638

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. Equity securities consist of investments in non-cumulative preferred stock. 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~~June 30, ~~2017~~ 2021 and December 31, ~~2016.~~ 2020. 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.

No There were no impairment charges (credit losses) ~~were incurred on trust preferred securities during the three~~ recorded at June 30, 2021 and nine month periods ended September 30, 2017. Impairment charges on trust preferred securities for the three month period ended 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.

December 31, 2020.

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

(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~~ as of June 30, 2021 and ~~held to maturity section:~~

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 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, 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

December 31, 2020:

	At June 30, 2021
	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	$	37,672	$	477	$	28,866	$	476	$	66,538	$	953
Collateralized mortgage obligations		132,556		1,930		0		0		132,556		1,930
Agency mortgage-backed securities		181,253		2,624		0		0		181,253		2,624
Municipal securities		0		0		0		0		0		0
Corporate bonds		13,069		84		32,301		699		45,370		783
Investment Securities Available for Sale	$	364,550	$	5,115	$	61,167	$	1,175	$	425,717	$	6,290

	At June 30, 2021
	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	$	0	$	0	$	0	$	0	$	0	$	0
Collateralized mortgage obligations		206,750		6,271		999		4		207,749		6,275
Agency mortgage-backed securities		378,258		4,995		0		0		378,258		4,995
Investment Securities Held to Maturity	$	585,008	$	11,266	$	999	$	4	$	586,007	$	11,270

	At December 31, 2020
	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	$	0	$	0	$	31,886	$	426	$	31,886	$	426
Collateralized mortgage obligations		99,497		270		0		0		99,497		270
Agency mortgage-backed securities		20,934		1		0		0		20,934		1
Municipal securities		0		0		0		0		0		0
Corporate bonds		4,559		39		54,649		3,351		59,208		3,390
Investment Securities Available for Sale	$	124,990	$	310	$	86,535	$	3,777	$	211,525	$	4,087

	At December 31, 2020
	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	$	0	$	0	$	0	$	0	$	0	$	0
Collateralized mortgage obligations		62,603		231		0		0		62,603		231
Agency mortgage-backed securities		54,537		245		0		0		54,537		245
Investment Securities Held to Maturity	$	117,140	$	476	$	0	$	0	$	117,140	$	476

Unrealized losses on securities in the investment portfolio amounted to ~~$14.7~~$17.6 million with a total fair value of ~~$628.4 million~~$1.0 billion as of ~~September~~June 30, ~~2017~~ 2021 compared to unrealized losses of ~~$19.1~~$4.6 million with a total fair value of ~~$595.0~~$328.7 million as of December 31, ~~2016.~~ 2020. 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~~six U.S. Government agency securities, ~~fifty-seven~~twenty collateralized mortgage obligations and ~~twenty-one~~twenty-six agency mortgage-backed securities that were in an unrealized loss position at ~~September~~June 30, ~~2017.~~ 2021. 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~~June 30, ~~2017.~~2021.

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~~June 30, ~~2017, there were ten~~2021, 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~~June 30, ~~2017,~~ 2021, 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 sixseven 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 on the trust preferred securities are primarily the result~~ Four of the ~~secondary market~~corporate bonds are with three of the largest U.S. financial institutions. The financial institutions for ~~such securities becoming inactive and~~all seven corporate bonds are ~~also considered temporary at this time. The following table provides additional detail about the trust preferred securities held in the portfolio as of September 30, 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

well capitalized.

There were no0 proceeds from the sale of ~~investment~~ securities during the three or six months ended ~~September~~June 30, ~~2017.~~ 2021. Proceeds ~~from~~associated with the sale of ~~investment~~ securities available for sale during the ~~nine~~three months ended ~~September~~June 30, ~~2017 was $21.2~~2020 were $65.9 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 and gross losses of $24,000 were realized on these sales. The tax provision applicable to the net gains of $1.6 million for the ~~nine~~three months ended ~~September~~June 30, ~~2016 was $235,000.~~2020 amounted to $416,000. Proceeds associated with the sale of securities available for sale during the six months ended June 30, 2020 were $92.8 million. The tax provision applicable to the net gains of $2.5 million for the six months ended June 30, 2020 amounted to $629,000.

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~~June 30, ~~2017~~ 2021 and December 31, ~~2016:~~

(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

2020:

(dollars in thousands)	June 30, 2021			December 31, 2020

Commercial real estate	$	736,293		$	705,748
Construction and land development		160,945			142,821
Commercial and industrial		212,003			200,188
Owner occupied real estate		478,548			475,206
Consumer and other		94,119			102,368
Residential mortgage		459,712			395,174
Paycheck protection program		394,224			636,637
Total loans receivable		2,535,844			2,658,142
Deferred fees (net)		(14,421	)		(12,800	)
Allowance for loan losses		(16,110	)		(12,975	)
Net loans receivable	$	2,505,313		$	2,632,367

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, residential mortgages, and ~~residential mortgages.~~loans issued under the Paycheck Protection Program (“PPP”). PPP loans are fully guaranteed by the U.S. Government and as such have no allowance associated with them. 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 ~~and nine~~ months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016:~~2020:

(dollars in thousands)	Commercial Real Estate		Construction and Land Development		Commercial and Industrial			Owner Occupied Real Estate			Consumer and Other			Residential Mortgage			Paycheck Protection Program		Unallocated			Total

Three months ended June 30, 2021
Allowance for loan losses:
Beginning balance:	$	5,640	$	1,081	$	1,736		$	2,429		$	745		$	3,956		$	0	$	504		$	16,091
Charge-offs		0		0		(61	)		0			(12	)		0			0		0			(73	)
Recoveries		0		0		43			0			49			0			0		0			92
Provisions (credits)		279		52		(215	)		11			(65	)		314			0		(376	)		0
Ending balance	$	5,919	$	1,133	$	1,503		$	2,440		$	717		$	4,270		$	0	$	128		$	16,110

Three months ended June 30, 2020
Allowance for loan losses:
Beginning balance:	$	3,402	$	834	$	1,442		$	1,859		$	634		$	1,912		$	0	$	134		$	10,217
Charge-offs		0		0		(51	)		(48	)		(43	)		(50	)		0		0			(192	)
Recoveries		0		2		10			1			2			0			0		0			15
Provisions (credits)		330		116		30			183			82			393			0		(134	)		1,000
Ending balance	$	3,732	$	952	$	1,431		$	1,995		$	675		$	2,255		$	0	$	0		$	11,040

The following tables provide the activity in and ending balances of the allowance for loan losses by loan portfolio class at and for the six months ended June 30, 2021 and 2020:

(dollars in thousands)	Commercial Real Estate		Construction and Land Development		Commercial and Industrial			Owner Occupied Real Estate			Consumer and Other			Residential Mortgage			Paycheck Protection Program		Unallocated			Total

Six months ended June 30, 2021
Allowance for loan losses:

Beginning balance:	$	4,394	$	948	$	1,367		$	2,374		$	723		$	3,025		$	0	$	144		$	12,975
Charge-offs		0		0		(60	)		0			(47	)		0			0		0			(107	)
Recoveries		0		0		150			40			52			0			0		0			242
Provisions (credits)		1,525		185		46			26			(11	)		1,245			0		(16	)		3,000
Ending balance	$	5,919	$	1,133	$	1,503		$	2,440		$	717		$	4,270		$	0	$	128		$	16,110

Six months ended June 30, 2020
Allowance for loan losses:

Beginning balance:	$	3,043	$	688	$	931		$	2,292		$	590		$	1,705		$	0	$	17		$	9,266
Charge-offs		0		0		(51	)		(48	)		(65	)		(50	)		0		0			(214	)
Recoveries		0		2		27			1			8			0			0		0			38
Provisions (credits)		689		262		524			(250	)		142			600			0		(17	)		1,950
Ending balance	$	3,732	$	952	$	1,431		$	1,995		$	675		$	2,255		$	0	$	0		$	11,040

(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~~June 30, ~~2017~~ 2021 and December 31, ~~2016:~~

(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

2020:

(dollars in thousands)	Commercial Real Estate		Construction and Land Development		Commercial and Industrial		Owner Occupied Real Estate		Consumer and Other		Residential Mortgage		Paycheck Protection Program		Unallocated		Total

June 30, 2021

Allowance for loan losses:
Individually evaluated for impairment	$	1,071	$	0	$	53	$	230	$	0	$	0	$	0	$	0	$	1,354
Collectively evaluated for impairment		4,848		1,133		1,450		2,210		717		4,270		0		128		14,756
Total allowance for loan losses	$	5,919	$	1,133	$	1,503	$	2,440	$	717	$	4,270	$	0	$	128	$	16,110

Loans receivable:
Loans evaluated individually	$	4,335		0	$	2,560	$	4,066	$	1,224	$	749	$	0	$	0	$	12,934
Loans evaluated collectively		731,958		160,945		209,443		474,482		92,895		458,963		394,224		0		2,522,910
Total loans receivable	$	736,293	$	160,945	$	212,003	$	478,548	$	94,119	$	459,712	$	394,224	$	0	$	2,535,844

(dollars in thousands)	Commercial Real Estate		Construction and Land Development		Commercial and Industrial		Owner Occupied Real Estate		Consumer and Other		Residential Mortgage		Paycheck Protection Program		Unallocated		Total

December 31, 2020

Allowance for loan losses:
Individually evaluated for impairment	$	418	$	0	$	51	$	122	$	0	$	0	$	0	$	0	$	591
Collectively evaluated for impairment		3,976		948		1,316		2,252		723		3,025		0		144		12,384
Total allowance for loan losses	$	4,394	$	948	$	1,367	$	2,374	$	723	$	3,025	$	0	$	144	$	12,975

Loans receivable:
Loans evaluated individually	$	9,048		0	$	2,963	$	3,955	$	1,302	$	701	$	0	$	0	$	17,969
Loans evaluated collectively		696,700		142,821		197,225		471,251		101,066		394,473		636,637		0		2,640,173
Total loans receivable	$	705,748	$	142,821	$	200,188	$	475,206	$	102,368	$	395,174	$	636,637	$	0	$	2,658,142

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~~June 30, ~~2017~~ 2021 and December 31, ~~2016:~~

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

2020:

	June 30, 2021						December 31, 2020
(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	$	321	$	323	$	-	$	5,033	$	5,040	$	-
Construction and land development		0		0		-		0		0		-
Commercial and industrial		2,297		2,297		-		2,608		2,794		-
Owner occupied real estate		3,003		3,152		-		3,198		3,407		-
Consumer and other		1,224		1,476		-		1,302		1,556		-
Residential mortgage		749		816		-		701		768		-
Paycheck protection program		0		0		-		0		0		-
Total	$	7,594	$	8,064	$	-	$	12,842	$	13,565	$	-

With an allowance recorded:
Commercial real estate	$	4,014	$	4,535	$	1,071	$	4,015	$	4,536	$	418
Construction and land development		0		0		0		0		0		0
Commercial and industrial		263		402		53		355		371		51
Owner occupied real estate		1,063		1,082		230		757		775		122
Consumer and other		0		0		0		0		0		0
Residential mortgage		0		0		0		0		0		0
Paycheck protection program		0		0		0		0		0		0
Total	$	5,340	$	6,019	$	1,354	$	5,127	$	5,682	$	591

Total:
Commercial real estate	$	4,335	$	4,858	$	1,071	$	9,048	$	9,576	$	418
Construction and land development		0		0		0		0		0		0
Commercial and industrial		2,560		2,699		53		2,963		3,165		51
Owner occupied real estate		4,066		4,234		230		3,955		4,182		122
Consumer and other		1,224		1,476		0		1,302		1,556		0
Residential mortgage		749		816		0		701		768		0
Paycheck protection program		0		0		0		0		0		0
Total	$	12,934	$	14,083	$	1,354	$	17,969	$	19,247	$	591

The following table presents additional information regarding the ~~Company's~~Company’s impaired loans for ~~the~~ `the three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~September~~June 30, ~~2016:~~2020:

	Three Months Ended June 30,
	2021				2020
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$	322	$	0	$	6,546	$	68
Construction and land development		0		0		0		0
Commercial and industrial		2,297		0		2,479		0
Owner occupied real estate		3,009		8		2,982		6
Consumer and other		1,239		5		1,149		5
Residential mortgage		725		0		812		1
Paycheck protection program		0		0		0		0
Total	$	7,592	$	13	$	13,968	$	80

With an allowance recorded:
Commercial real estate	$	4,015	$	0	$	4,147	$	0
Construction and land development		0		0		0		0
Commercial and industrial		263		0		614		0
Owner occupied real estate		1,065		0		1,191		10
Consumer and other		0		0		0		0
Residential mortgage		0		0		20		1
Paycheck protection program		0		0		0		0
Total	$	5,343	$	0	$	5,972	$	11

Total:
Commercial real estate	$	4,337	$	0	$	10,693	$	68
Construction and land development		0		0		0		0
Commercial and industrial		2,560		0		3,093		0
Owner occupied real estate		4,074		8		4,173		16
Consumer and other		1,239		5		1,149		5
Residential mortgage		725		0		832		2
Paycheck protection program		0		0		0		0
Total	$	12,935	$	13	$	19,940	$	91

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~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~September~~June 30, ~~2016:~~2020:

	Six Months Ended June 30,
	2021				2020
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$	494	$	2	$	6,459	$	138
Construction and land development		0		0		0		0
Commercial and industrial		2,298		0		2,603		1
Owner occupied real estate		2,882		31		2,831		8
Consumer and other		1,180		13		1,177		7
Residential mortgage		714		0		790		1
Paycheck protection program		0		0		0		0
Total	$	7,568	$	46	$	13,860	$	155

With an allowance recorded:
Commercial real estate	$	4,014	$	0	$	4,146	$	0
Construction and land development		0		0		0		0
Commercial and industrial		266		0		520		0
Owner occupied real estate		1,070		0		1,500		16
Consumer and other		0		0		0		0
Residential mortgage		0		0		40		1
Paycheck protection program		0		0		0		0
Total	$	5,350	$	0	$	6,206	$	17

Total:
Commercial real estate	$	4,508	$	2	$	10,605	$	138
Construction and land development		0		0		0		0
Commercial and industrial		2,564		0		3,123		1
Owner occupied real estate		3,952		31		4,331		24
Consumer and other		1,180		13		1,177		7
Residential mortgage		714		0		830		2
Paycheck protection program		0		0		0		0
Total	$	12,918	$	46	$	20,066	$	172

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~~June 30, ~~2017~~ 2021 and December 31, ~~2016:~~

(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

2020

(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 June 30, 2021
Commercial real estate	$	56	$	0	$	4,383	$	4,439	$	731,854	$	736,293	$	0
Construction and land development		0		0		0		0		160,945		160,945		0
Commercial and industrial		0		0		2,560		2,560		209,443		212,003		0
Owner occupied real estate		0		2,921		3,186		6,107		472,441		478,548		3
Consumer and other		1		2		1,237		1,240		92,879		94,119		13
Residential mortgage		0		0		1,681		1,681		458,031		459,712		980
Paycheck protection program		0		0		0		0		394,224		394,224		0
Total	$	57	$	2,923	$	13,047	$	16,027	$	2,519,817	$	2,535,844	$	996

(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, 2020
Commercial real estate	$	0	$	97	$	4,421	$	4,518	$	701,230	$	705,748	$	0
Construction and land development		0		0		0		0		142,821		142,821		0
Commercial and industrial		1,648		0		2,963		4,611		195,577		200,188		0
Owner occupied real estate		581		813		2,859		4,253		470,953		475,206		0
Consumer and other		92		28		1,302		1,422		100,946		102,368		0
Residential mortgage		0		0		1,313		1,313		393,861		395,174		612
Paycheck protection program		0		0		0		0		636,637		636,637		0
Total	$	2,321	$	938	$	12,858	$	16,117	$	2,642,025	$	2,658,142	$	612

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~~June 30, ~~2017~~ 2021 and December 31, ~~2016:~~2020:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
At June 30, 2021:
Commercial real estate	$	731,910	$	0	$	4,383	$	0	$	736,293
Construction and land development		160,945		0		0		0		160,945
Commercial and industrial		209,443		0		2,560		0		212,003
Owner occupied real estate		474,242		240		4,066		0		478,548
Consumer and other		92,895		0		1,224		0		94,119
Residential mortgage		459,011		0		701		0		459,712
Paycheck protection program		394,224		0		0		0		394,224
Total	$	2,522,670	$	240	$	12,934	$	0	$	2,535,844

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
At December 31, 2020:
Commercial real estate	$	701,151	$	80	$	4,517	$	0	$	705,748
Construction and land development		142,821		0		0		0		142,821
Commercial and industrial		197,225		0		2,963		0		200,188
Owner occupied real estate		470,732		519		3,955		0		475,206
Consumer and other		101,066		0		1,302		0		102,368
Residential mortgage		394,473		0		701		0		395,174
Paycheck protection program		636,637		0		0		0		636,637
Total	$	2,644,105	$	599	$	13,438	$	0	$	2,658,142

(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~~June 30, ~~2017~~ 2021 and December 31, ~~2016:~~

(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

2020:

(dollars in thousands)	June 30, 2021		December 31, 2020

Commercial real estate	$	4,383	$	4,421
Construction and land development		0		0
Commercial and industrial		2,560		2,963
Owner occupied real estate		3,183		2,859
Consumer and other		1,224		1,302
Residential mortgage		701		701
Paycheck protection program		0		0
Total	$	12,051	$	12,246

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately ~~$127,000~~$166,000 and ~~$372,000~~$355,000 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~ 2021, respectively, and ~~$271,000~~$173,000 and ~~$784,000~~$397,000 for the ~~nine~~three and six months ended ~~September~~June 30, ~~2016,~~ 2020, 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.

Pursuant to the CARES Act, loan modifications made between March 1, 2020 and the earlier of i) December 30, 2020 or ii) 60 days after the President declares a termination of the COVID-19 national emergency are not classified as TDRs if the related loans were not more than 30 days past due as of December 31, 2019. In December 2020, the Economic Aid Act was signed into law which amended certain sections of the CARES Act. This amendment extended the period to suspend the requirements under TDR accounting guidance to the earlier of i) January 1, 2022 or ii) 60 days after the President declares a termination of the national emergency related to the COVID-19 pandemic. As of June 30, 2021, deferrals declined to one customer relationship with an outstanding balance of $2.1 million, or less than 0.1% of total loans outstanding. At December 31, 2020, twenty-one customers with outstanding balance of $16 million, were deferring loan payments. As of June 30, 2021, there were 0 deferral requests that were for deferment of principal balances only compared to approximately $4 million at December 31, 2020. The one remaining deferral request was to defer both principal and interest payments. As of June 30, 2021, the 1 deferral was a fourth deferral with outstanding balances of $2.1 million. At December 31, 2020, deferrals were comprised of the following categories: 90 day deferrals amounted to eight customers with outstanding balances of $3 million and second deferrals amounted to 13 customers with outstanding balances of $13 million.

The following table summarizes ~~the balance of~~information with regard to outstanding ~~TDRs September~~troubled debt restructurings at June 30, ~~2017~~ 2021 and December 31, ~~2016:~~

(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

25

2020:

(dollars in thousands)	Number of Loans		Accrual Status		Non-Accrual Status		Total TDRs
June 30, 2021
Commercial real estate		0	$	0	$	0	$	0
Construction and land development		0		0		0		0
Commercial and industrial		0		0		0		0
Owner occupied real estate		0		0		0		0
Consumer and other		0		0		0		0
Residential mortgage		0		0		0		0
Paycheck protection program		0		0		0		0
Total		0	$	0	$	0	$	0

December 31, 2020
Commercial real estate		1	$	4,530	$	0	$	4,530
Construction and land development		0		0		0		0
Commercial and industrial		0		0		0		0
Owner occupied real estate		0		0		0		0
Consumer and other		0		0		0		0
Residential mortgage		0		0		0		0
Paycheck protection program		0		0		0		0
Total		1	$	4,530	$	0	$	4,530

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~~Company’s 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~~

There were 0 loan modifications made during the three and six months ended ~~September~~June 30, ~~2017.~~

~~The Company modified one commercial~~ 2021 and ~~industrial loan during the nine months ended September~~June 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~~ 2020 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 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 no0 TDRs that subsequently defaulted during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~ 2021. There were no0 TDRs that subsequently defaulted during the year ended December 31, ~~2016.~~2020. The loan classified as a TDR at December 31, 2020 was repaid in full during the second quarter of 2021.

There was one residential mortgage in the process of foreclosure as of June 30, 2021 and December 31, 2020. There was no other real estate owned relating to residential real estate at June 30, 2021 and December 31, 2020.

Note 7: Other Borrowings

The following is a summary of other borrowings by type.

June 30, 2021

December 31, 2020

(dollars in thousands)

Balance at

End of Period

Weighted Average Interest Rate at End of Period

Balance at

End of Period

Weighted Average Interest Rate at End of Period

Other borrowings

Paycheck Protection Program

Liquidity Facility borrowings

387,509

0.35%

633,866

0.35%

As part of the CARES Act, the Federal Reserve Bank of Philadelphia offered secured discounted borrowings to banks that originated PPP loans through the Paycheck Protection Program Liquidity Facility or PPPLF program. At June 30, 2021, the Company pledged $388 million of PPP loans to the Federal Reserve Bank of Philadelphia to borrow $388 million of funds at a rate of 0.35%. The Company pledged $634 million of PPP loans to the Federal Reserve Bank of Philadelphia to borrow $634 million of funds at a rate of 0.35% at December 31, 2020.

Note 8: 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~~June 30, ~~2017~~ 2021 and December 31, ~~2016~~ 2020 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

June 30, 2021
Assets:

U.S. Government agencies	$	28,865	$	0	$	28,865	$	0
Collateralized mortgage obligations		303,341		0		303,341		0
Agency mortgage-backed securities		273,039		0		273,039		0
Municipal securities		8,346		0		8,346		0
Corporate bonds		151,145		0		148,542		2,603
Investment securities available for sale	$	764,736		0	$	762,133	$	2,603
Equity securities		9,241		9,241		0		0

Mortgage Loans Held for Sale	$	11,971	$	0	$	11,971	$	0
SBA Servicing Assets		4,641		0		0		4,641
Interest Rate Lock Commitments		804		0		804		0
Best Efforts Forward Loan Sales Commitments		2		0		2		0
Mandatory Forward Loan Sales Commitments		2		0		2		0

Liabilities:

Interest Rate Lock Commitments		0		0		0		0
Best Efforts Forward Loan Sales Commitments		267		0		267		0
Mandatory Forward Loan Sales Commitments		112		0		112		0

December 31, 2020
Assets:

U.S. Government agencies	$	31,886	$	0	$	31,886	$	0
Collateralized mortgage obligations		221,546		0		221,546		0
Agency mortgage-backed securities		150,528		0		150,528		0
Municipal securities		8,225		0		8,225		0
Corporate bonds		116,323		0		113,692		2,631
Investment securities available for sale	$	528,508		0	$	525,877	$	2,631
Equity securities		9,039		9,039		0		0

Mortgage Loans Held for Sale	$	50,387	$	0	$	50,387	$	0
SBA Servicing Assets		4,626		0		0		4,626
Interest Rate Lock Commitments		1,580		0		1,580		0
Best Efforts Forward Loan Sales Commitments		2		0		2		0
Mandatory Forward Loan Sales Commitments		0		0		0		0

Liabilities:

Interest Rate Lock Commitments		0		0		0		0
Best Efforts Forward Loan Sales Commitments		612		0		612		0
Mandatory Forward Loan Sales Commitments		800		0		800		0

(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 inrelated to the SBA servicing ~~assets~~asset balance for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016:~~

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

2020:

	Three Months Ended June 30,
(dollars in thousands)	2021			2020
Beginning balance, April 1^st	$	4,617		$	4,644
Additions		134			77
Fair value adjustments		(110	)		(117	)
Ending balance, June 30^th	$	4,641		$	4,604

	Six Months Ended June 30,
(dollars in thousands)	2021			2020
Beginning balance, January 1^st	$	4,626		$	4,447
Additions		313			315
Fair value adjustments		(298	)		(158	)
Ending balance, June 30^th	$	4,641		$	4,604

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~~$574,000 and ~~$458,000~~$482,000 for the three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, respectively. Servicing fee income, not including fair value adjustments, totaled ~~$1.4~~$1.1 million and ~~$1.3 million~~$912,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, respectively.

Total loans in the amount of $214.5 million at June 30, 2021 and $208.7 million at December 31, 2020 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)3) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016:~~

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

2020:

	Three Months Ended June 30,
	2021			2020
Level 3 Investments Only (dollars in thousands)	Corporate Bonds			Corporate Bonds
Balance, April 1^st	$	2,620		$	2,649
Unrealized gains (losses)		(17	)		16
Proceeds from sales		0			0
Realized losses		0			0
Balance, June 30^th	$	2,603		$	2,665

	Six Months Ended June 30,
	2021			2020
Level 3 Investments Only (dollars in thousands)	Corporate Bonds			Corporate Bonds
Balance, January 1^st	$	2,631		$	2,819
Unrealized gains (losses)		(28	)		(154	)
Proceeds from sales		0			0
Realized losses		0			0
Balance, June 30^th	$	2,603		$	2,665

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at ~~September~~June 30, ~~2017~~ 2021 and December 31, ~~2016~~ 2020 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, 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

(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
June 30, 2021
Impaired loans	$	4,130	$	0	$	0	$	4,130
Other real estate owned		488		0		0		488

December 31, 2020
Impaired loans	$	5,678	$	0	$	0	$	5,678
Other real estate owned		364		0		0		364

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

Quantitative Information about Level 3 Fair Value Measurements
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)

	Quantitative Information about Level 3 Fair Value Measurements
Asset Description	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
June 30, 2021
Corporate bonds	$	2,603	Discounted Cash Flows	Discount Rate		(3.38%)

SBA servicing assets	$	4,641	Discounted Cash Flows	Conditional Prepayment Rate		(14.14%)
				Discount Rate		(10.00%)

Impaired loans	$	4,130	Appraised Value of Collateral (1)	Liquidation expenses (2)		1%	-	20%	(19%)	(3)

Other real estate owned	$	488	Appraised Value of Collateral (1)	Liquidation expenses (2)		2%	-	6%	(6%)	(3)

December 31, 2020
Corporate bonds	$	2,631	Discounted Cash Flows	Discount Rate		(3.48%)

SBA servicing assets	$	4,626	Discounted Cash Flows	Conditional Prepayment Rate		(13.22%)
				Discount Rate		(10.00%)

Impaired loans	$	5,678	Appraised Value of Collateral (1)	Liquidation expenses (2)		0%	-	23%	(12%)	(3)

Other real estate owned	$	364	Appraised Value of Collateral (1)	Liquidation expenses (2)		7%	-	16%	(13%)	(3)

~~(1)~~

(1)

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

~~(2)~~

(2)

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

~~(3)~~

(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~~ the Company’s financial instruments at June 30, 2021 and ~~liabilities of the Company at September 30, 2017 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.~~

2020.

Investment Securities

The fair value of investment 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)1), or matrix pricing (Level 2)2), which is a mathematical technique used widely in the industry to value ~~debt~~investment 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)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 fair value of equity securities (carried at fair value) is determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1).

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,~~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~~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~~$281,000 and ~~$577,000~~$194,000 for three and six months ended June 30, 2021, respectively, and $166,000 and $249,000 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 ,~~ 2020, 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~~June 30, ~~2017~~ 2021 and December 31, ~~2016 (dollars~~2020.

	Carrying Amount		Aggregate Unpaid Principal Balance		Excess Carrying Amount Over Aggregate Unpaid Principal Balance
June 30, 2021	$	11,971	$	11,518	$	453

December 31, 2020	$	50,387	$	48,109	$	2,278

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 operations in mortgage banking income. At June 30, 2021, Republic had three mortgage loans held for sale recorded at fair value that was 90 or more days past due and on non-accrual. 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 and~~ December 31, ~~2016.~~

2020.

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

The Company determines the value of IRLC’s 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~~IRLC’s. 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~~June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, 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~~June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, 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,
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)

(dollars in thousands)	June 30, 2021			December 31, 2020

SBA Servicing Asset

Fair Value of SBA Servicing Asset	$	4,641		$	4,626

Composition of SBA Loans Serviced for Others
Fixed-rate SBA loans		1	%		2	%
Adjustable-rate SBA loans		99	%		98	%
Total		100	%		100	%

Weighted Average Remaining Term (in years)		20.0			20.0

Prepayment Speed		14.14	%		13.22	%
Effect on fair value of a 10% increase	$	(175	)	$	(170	)
Effect on fair value of a 20% increase		(339	)		(329	)

Weighted Average Discount Rate		10.00	%		10.00	%
Effect on fair value of a 10% increase	$	(148	)	$	(152	)
Effect on fair value of a 20% increase		(288	)		(295	)

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 at June 30, 2021 were as ~~follows at September 30, 2017.~~follows.

	Fair Value Measurements at June 30, 2021
(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	$	766,699	$	766,699	$	766,699	$	0	$	0
Investment securities available for sale		764,736		764,736		0		762,133		2,603
Investment securities held to maturity		1,057,842		1,061,638		0		1,061,638		0
Equity securities		9,241		9,241		9,241		0		0
Restricted stock		3,510		3,510		0		3,510		0
Loans held for sale		14,408		14,408		0		11,971		2,437
Loans receivable, net		2,505,313		2,504,844		0		0		2,504,844
SBA servicing assets		4,641		4,641		0		0		4,641
Accrued interest receivable		14,644		14,644		0		14,644		0
Interest rate lock commitments		804		804		0		804		0
Best efforts forward loan sales commitments		2		2		0		2		0
Mandatory forward loan sales commitments		2		2		0		2		0

Financial liabilities:
Deposits
Demand, savings and money market	$	4,372,511	$	4,372,511	$	0	$	4,372,511	$	0
Time		187,357		188,006		0		188,006		0
Subordinated debt		11,274		8,506		0		0		8,506
Other borrowings		387,509		387,509		0		387,509		0
Accrued interest payable		593		593		0		593		0
Interest rate lock commitments		0		0		0		0		0
Best efforts forward loan sales commitments		267		267		0		267		0
Mandatory forward loan sales commitments		112		112		0		112		0

Off-Balance Sheet Data
Commitments to extend credit		0		0		0		0		0
Standby letters-of-credit		0		0		0		0		0

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 at December 31, 2020 were as ~~follows at December 31, 2016:~~follows:

	Fair Value Measurements at December 31, 2020
(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	$	775,300	$	775,300	$	775,300	$	0	$	0
Investment securities available for sale		528,508		528,508		0		525,877		2,631
Investment securities held to maturity		814,936		836,972		0		836,972		0
Equity securities		9,039		9,039		9,039		0		0
Restricted stock		3,039		3,039		0		3,039		0
Loans held for sale		53,370		53,370		0		50,387		2,983
Loans receivable, net		2,632,367		2,618,104		0		0		2,618,104
SBA servicing assets		4,626		4,626		0		0		4,626
Accrued interest receivable		16,120		16,120		0		16,120		0
Interest rate lock commitments		1,580		1,580		0		1,580		0
Best efforts forward loan sales commitments		2		2		0		2		0
Mandatory forward loan sales commitments		0		0		0		0		0

Financial liabilities:
Deposits
Demand, savings and money market	$	3,827,390	$	3,827,390	$	0	$	3,827,390	$	0
Time		186,361		187,292		0		187,292		0
Subordinated debt		11,271		8,026		0		0		8,026
Other borrowings		633,866		633,866		0		633,866		0
Accrued interest payable		926		926		0		926		0
Interest rate lock commitments		0		0		0		0		0
Best efforts forward loan sales commitments		612		612		0		612		0
Mandatory forward loan sales commitments		800		800		0		800		0

Off-Balance Sheet Data
Commitments to extend credit		0		0		0		0		0
Standby letters-of-credit		0		0		0		0		0

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 8:9: Changes in Accumulated Other Comprehensive ~~Loss~~Income (Loss) By Component ~~(1)~~

(1)

The following table presents the changes in accumulated other comprehensive loss by component for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, and the year ended December 31, ~~2016.~~

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 )

2020.

	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, 2021	$	985		$	(3,814	)	$	(2,829	)
Unrealized gain on securities		(1,161	)		0			(1,161	)
Amounts reclassified from accumulated other comprehensive income to net income (2)		(1	)		1,117			1,116
Net current-period other comprehensive income		(1,162	)		1,117			(45	)
Total change in accumulated other comprehensive income		(1,162	)		1,117			(45	)
Balance June 30, 2021	$	(177	)	$	(2,697	)	$	(2,874	)

Balance January 1, 2020	$	(1,275	)	$	(6,066	)	$	(7,341	)
Unrealized gain on securities		4,077			0			4,077
Amounts reclassified from accumulated other comprehensive income to net income (2)		(1,852	)		787			(1,065	)
Net current-period other comprehensive income		2,225			787			3,012
Total change in accumulated other comprehensive income		2,225			787			3,012
Balance June 30, 2020	$	950		$	(5,279	)	$	(4,329	)

Balance January 1, 2020	$	(1,275	)	$	(6,066	)	$	(7,341	)
Unrealized gain on securities		4,320			0			4,320
Amounts reclassified from accumulated other comprehensive income to net income (2)		(2,060	)		2,252			192
Net current-period other comprehensive income		2,260			2,252			4,512
Total change in accumulated other comprehensive income		2,260			2,252			4,512
Balance December 31, 2020	$	985		$	(3,814	)	$	(2,829	)

~~(1)~~

(1)

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

~~(2)~~

(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.~~Income.

Note ~~9: Business Combination~~

~~Oak Mortgage~~10: Shareholders’ Equity

On August 26, 2020, the Company ~~LLC~~completed an offering of 2,000,000 shares of 7.00% Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share (the “Series A Preferred Stock”), at a price of $25.00 per share. The Company received net proceeds of $48.3 million from the offering, after deducting offering costs. The Company will pay dividends on the Series A Preferred Stock when and if declared by its board of directors or an authorized committee thereof. If declared, dividends will be due and payable at a rate of 7.00% per annum, payable quarterly in arrears on March 1, June 1, September 1, and December 1 of each year. During the three month and six month period ended June 30, 2021, $875,000 and $1.8 million were declared and paid on preferred stock compared to $923,000 during the three month period ended December 31, 2020.

Holders of shares of Series A Preferred Stock may convert such shares at any time and from time to time into shares of the Company’s common stock at a conversion price of $3.00 per share of our common stock, subject to adjustment upon certain events. At any time after August 26, 2025, the Company may cause the outstanding shares of Series A Preferred Stock to convert into shares of common stock if the price of the common stock exceeds 125% of the Conversion Price then applicable to the Series A Preferred Stock for at least 20 trading days in a period of 30 consecutive trading days.

Note 11: Goodwill and Other Intangibles

In connection with the review of our financial condition in light of the COVID-19 pandemic, we evaluated our assets, including goodwill and other intangibles for potential impairment on an interim basis at the end of each quarter during 2020. Goodwill was written off as a result of an interim test completed as of September 30, 2020. This was a complete write-off of all goodwill on the balance sheet.

In 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: Goodwill and Other Intangibles~~

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

	Three Months Ended June 30,
(dollars in thousands)	2021		2020
Balance, April 1st	$	0	$	5,011
Additions/Adjustments		0		0
Amortization		0		0
Balance, June 30th	$	0	$	5,011
Amortization Period (in years)		N/A	Indefinite

	Six Months Ended June 30,
(dollars in thousands)	2021		2020
Balance, January 1st	$	0	$	5,011
Additions/Adjustments		0		0
Amortization		0		0
Balance, June 30^th	$	0	$	5,011
Amortization Period (in years)		N/A	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:~~12: 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~~six months ended ~~September~~June 30, ~~2017.~~ 2021 and the six months ended June 30, 2020. 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~~June 30, ~~2017~~ 2021 and December 31, ~~2016 (in~~2020 (in thousands):

June 30, 2021	Balance Sheet Presentation	Fair Value		Notional Amount

Asset derivatives:

IRLC’s	Other Assets	$	804	$	28,327
Best efforts forward loan sales commitments	Other Assets		2		1,086
Mandatory forward loan sales commitments	Other Assets		2		499

Liability derivatives:

IRLC’s	Other Liabilities	$	0	$	0
Best efforts forward loan sales commitments	Other Liabilities		267		27,241
Mandatory forward loan sales commitments	Other Liabilities		112		11,378

December 31, 2020	Balance Sheet Presentation	Fair Value		Notional Amount

Asset derivatives:

IRLC’s	Other Assets	$	1,580	$	48,223
Best efforts forward loan sales commitments	Other Assets		2		2,069
Mandatory forward loan sales commitments	Other Assets		0		0

Liability derivatives:

IRLC’s	Other Liabilities	$	0	$	0
Best efforts forward loan sales commitments	Other Liabilities		612		46,154
Mandatory forward loan sales commitments	Other Liabilities		800		48,373

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 for derivative instruments not designated as hedging instruments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and 2020 (in thousands):

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)

	Income Statement Presentation	Three Months Ended June 30, 2021 Gain/(Loss)			Six Months Ended June 30, 2021 Gain/(Loss)

Asset derivatives:

IRLCs	Mortgage banking income	$	(42	)	$	(776	)
Best efforts forward loan sales commitments	Mortgage banking income		(237	)		0
Mandatory forward loan sales commitments	Mortgage banking income		(384	)		2

Liability derivatives:

IRLCs	Mortgage banking income	$	14		$	0
Best efforts forward loan sales commitments	Mortgage banking income		(89	)		345
Mandatory forward loan sales commitments	Mortgage banking income		(73	)		688

	Income Statement Presentation	Three Months Ended June 30, 2020 Gain/(Loss)			Six Months Ended June 30, 2020 Gain/(Loss)

Asset derivatives:

IRLCs	Mortgage banking income	$	1,114		$	1,280
Best efforts forward loan sales commitments	Mortgage banking income		(1,049	)		4
Mandatory forward loan sales commitments	Mortgage banking income		(271	)		(2	)

Liability derivatives:

IRLCs	Mortgage banking income	$	718		$	0
Best efforts forward loan sales commitments	Mortgage banking income		(596	)		(521	)
Mandatory forward loan sales commitments	Mortgage banking income		(297	)		(243	)

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)~~(1) estimated costs to complete and originate the loan, and ~~(2)~~(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 13: Revenue Recognition

The following table presents non-interest income, segregated by revenue streams that are in-scope and out-of-scope of ASC 606, “Revenue from Contracts with Customers”, for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended June 30,
(dollars in thousands)	2021		2020
Non-interest income
In-scope of Topic 606
Service charges on deposit accounts	$	3,260	$	2,328
Other non-interest income		217		34
Non-interest income (in-scope of Topic 606)		3,477		2,362
Non-interest income (out-of-scope of Topic 606)		4,203		6,062
Total non-interest income	$	7,680	$	8,424

	Six Months Ended June 30,
(dollars in thousands)	2021		2020
Non-interest income
In-scope of Topic 606
Service charges on deposit accounts	$	7,220	$	4,392
Other non-interest income		574		96
Non-interest income (in-scope of Topic 606)		7,794		4,488
Non-interest income (out-of-scope of Topic 606)		10,161		10,481
Total non-interest income	$	17,955	$	14,969

Note 14: Leases

We have operating lease agreements for certain land, buildings, and equipment. In some instances, a lease may contain renewal options to extend the term of the lease. We do not have any short-term leases in the calculation of the right-of-use assets and lease liability obligations. The most significant assumption related to the Company’s lease application of ASC 842 was the discount rate assumption. Since most of the lease agreements do not provide an implicit interest rate, 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.

At June 30, 2021, the Company had forty-four operating lease agreements, which include operating leases for twenty branch locations, seven offices that are used for general office space, and seventeen operating leases for equipment. Two of the real property operating leases did not include one or more options to extend the lease term. Eight of the operating leases for branch locations are land leases where the Company is responsible for the construction of the building on the property. The forty-four operating leases have maturity dates ranging from December 2021 to August 2059 most of which include options for multiple five and ten year extensions which the Company is reasonably certain to exercise. No operating leases include variable lease payments that are based on an index or rate, such as the CPI. The weighted average remaining operating lease term for these leases is 19.1 years as of June 30, 2021. The weighted average operating lease discount rate was 3.34% at June 30, 2021.

At June 30, 2020, the Company had forty operating lease agreements, which include operating leases for eighteen branch locations, seven offices that are used for general office space, and fifteen operating leases for equipment. Two of the real property operating leases did not include one or more options to extend the lease term. Five of the operating leases for branch locations are land leases where the Company is responsible for the construction of the building on the property. The forty operating leases have maturity dates ranging from December 2020 to August 2059 most of which include options for multiple five and ten year extensions which the Company is reasonably certain to exercise. No operating leases include variable lease payments that are based on an index or rate, such as the CPI. The weighted average remaining operating lease term for these leases is 19.7 years as of June 30, 2020. The weighted average operating lease discount rate was 3.58% at June 30, 2020.

The following tables presents operating lease costs net of sublease income for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020
(dollars in thousands)
Operating lease cost	$	2,137	$	1,917
Sublease income		0		0
Total lease cost	$	2,137	$	1,917

	Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
(dollars in thousands)
Operating lease cost	$	4,274	$	3,834
Sublease income		0		0
Total lease cost	$	4,274	$	3,834

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 June 30, 2021 and 2020.

	June 30, 2021			June 30, 2020
(dollars in thousands)
Operating lease payments due:
Within one year	$	8,207		$	6,675
One to three years		15,264			11,571
Three to five years		14,931			10,110
More than five years		81,629			72,394
Total undiscounted cash flows		120,031			100,750
Discount on cash flows		(35,291	)		(31,704	)
Total operating lease liability obligations	$	84,740		$	69,046

The following tables presents cash and non-cash activities for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,041	$	1,835

Non-cash investing and financing activities
Additions to Operating leases – right of use asset
New operating lease liability obligation	$	8	$	49

	Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,070	$	3,579

Non-cash investing and financing activities
Additions to Operating leases – right of use asset
New operating lease liability obligation	$	8,122	$	189

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~~2020 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~~

Executive Summary

Republic First Bancorp, Inc. was organized and ~~Legislation~~

~~The Dodd-Frank Wall Street Reform~~incorporated under the laws of the Commonwealth of Pennsylvania in 1987 and ~~Consumer Protection Act~~is the holding company for Republic First Bank, which does business under the name Republic Bank. We offer a variety of ~~2010 (the "Dodd-Frank Act") has~~credit and ~~will continue~~depository banking services to ~~have~~individuals and businesses primarily in Greater Philadelphia, Southern New Jersey and New York City through our offices and branch locations in those markets. We commonly refer to our branch locations as stores to reflect our retail oriented approach to customer service and convenience.

As of June 30, 2021, we serve our customers through 32 store locations, in addition to 4 loan offices that specialize in commercial, small business and residential mortgage lending. Our stores are open 7 days a ~~broad impact~~week, 361 days a year, with extended lobby and drive-thru hours providing customers with some of the most convenient hours compared to any bank in the markets which we operate. We offer free checking, free coin counting, and ATM/Debit cards issued on the ~~financial services industry, including significant regulatory~~spot. We also provide access to more than 55,000 surcharge free ATM machines worldwide through the Allpoint network to our customers. Our commitment to deliver best in class customer service not only applies to our store locations, but includes by phone, online and ~~compliance changes including, among other things, (i) enhanced resolution authority of troubled~~mobile options as well. Our business model is built on customer loyalty and ~~failing banks~~engagement, understanding customer needs 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,offering the financial products and services ~~sector. Additionally,~~to help them achieve their goals and objectives.

Current Economic Environment

The coronavirus (“COVID-19”) outbreak and the ~~Dodd-Frank Act establishes a new framework for systemic risk oversight within~~public health response to contain it have resulted in unprecedented economic and financial market conditions over the ~~financial system~~last eighteen months. In response to ~~be distributed among new and existing federal regulatory agencies, including~~these conditions, the ~~Financial Stability Oversight Council, the Consumer Financial Protection Bureau,~~Board of Governors of the Federal Reserve System (“Federal Reserve”) reduced the ~~Office of~~federal funds target range by 150 basis points to 0.00% to 0.25% in March 2020. It has remained at that level through the ~~Comptroller of~~period ended June 30, 2021. The Federal Reserve has taken additional steps to bolster the ~~Currency,~~economy by promoting liquidity in certain securities markets and providing funding sources for small and mid-sized businesses, as well as, state and local governments as they work through the ~~FDIC. A summary of certain provisions of~~cash flow stresses caused by the ~~Dodd-Frank Act is set forth~~COVID-19 pandemic.

The economic downturn that began 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 million, or 11.3%, to $2.1 billion at September 30, 2017, compared to $1.9 billion at December 31, 2016~~U.S. as a result of the ~~continued branding~~government-mandated business closures and stay-at-home orders significantly impacted the labor market, consumer spending, business investment and profitability. As a result, the President signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) in March 2020 which is the largest economic stimulus package in the nation’s history in an effort to lessen the impact of COVID-19 on consumers and businesses. Among other measures, the CARES Act authorized funding for the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) to provide loans to small businesses to keep employees on their payroll and to make other eligible payments to sustain their operation in the near term. In December 2020, the Economic Aid Act was signed into law, which extended certain provisions of the CARES Act and provides additional support and financial assistance for small businesses, non-profit organizations, and other entities. These actions, along with other stimulus programs, enacted by federal, state and local government agencies have provided stability as vaccines continue to become more widely available and governmental restrictions are slowly lifted. The U.S. economy is showing signs of recovery following the severe economic contraction experienced during 2020. However, economic activity remains below pre-pandemic levels, unemployment remains elevated, and the possibility of a resurgence of the COVID virus remains a possibility.

In a period of economic contraction, elevated levels of loan losses and lost interest income may occur. The Company continues to accrue interest on loans modified in accordance with the CARES Act. To the extent those borrowers are unable to resume normal contractual payments, the Company could experience additional losses of principal and interest. The extent to which the COVID-19 pandemic has a further impact the Company's business, results of operations, and financial condition, as well as the Company's regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic.

COVID-19 Response Efforts

Republic is committed to providing the financial resources necessary to support the economic recovery in our market. We took an active role in participating in the first round of the (“PPP”). We quickly developed a process to accept PPP loan applications not only from our valued small business customers, but from non-customers throughout our community as well. During the first round of the PPP program, we processed and obtained SBA approval for nearly 5,000 PPP loan applications resulting in more than $680 million in loans. We are now assisting the recipients of those loans through the application process for forgiveness of the outstanding loan balance with the SBA. In addition, we processed applications for the second round of the PPP program which was authorized by the Economic Aid Act in December 2020. In the first and second quarter of 2021 we originated nearly $270 million in additional PPP loans and received approval from the SBA on more than 2,500 applications in this second round.

Since the pandemic started, we also took a number of steps to mitigate the potential spread of the coronavirus and to assist our customers, employees and other members of the community during this crisis. During this time, we have:

●

Put procedures and supplies in place at all of our store locations such as plastic shields, public notices, hand sanitizer, etc., in accordance with CDC guidelines. While temporarily closed for a period of time, all of our store lobbies have been re-opened for all transactions including new account openings.

●

Encouraged customers to utilize our online, mobile and telephone banking systems. In addition, we continue to offer more than 55,000 surcharge free ATM machines to all of our customers.

●

Directed our commercial lenders to maintain contact with their customers to discuss the impact of the current economic conditions on their business and to develop a plan for assistance if required.

●

Implemented a work from home policy for all employees whose primary responsibilities can be completed in this manner.

●

Initiated additional preventative measures by providing guidance and proper supplies to all employees to support appropriate hygiene and social distancing.

Loss Mitigation and Loan Portfolio Analysis

We took a proactive approach to analyze and prepare for the potential challenges to be faced as the effects of the COVID-19 pandemic continue to impact our customers. A detailed analysis of loan concentrations and segments that may present the areas of highest risk was prepared and continues to be closely monitored. Our commercial lending team initiated contact with a majority of our loan customers to discuss the impact that this pandemic crisis had on their businesses to date and the expected ramifications that could be felt in the future. We executed loan modifications and initiated payment deferrals for all customers that had an immediate need for assistance.

Pursuant to the CARES Act, loan modifications made between March 1, 2020 and the earlier of i) December 30, 2020 or ii) 60 days after the President declares a termination of the COVID-19 national emergency are not classified as TDRs if the related loans were not more than 30 days past due as of December 31, 2019. In December 2020, the Economic Aid Act was signed into law which amended certain sections of the CARES Act. This amendment extended the period to suspend the requirements under TDR accounting guidance to the earlier of i) January 1, 2022 or ii) 60 days after the President declares a termination of the national emergency related to the COVID-19 pandemic. As of June 30, 2021, deferrals declined to one customer relationship with an outstanding balance of $2.1 million, or less than 0.1% of total loans outstanding. At December 31, 2020, twenty-one customers with outstanding balances of $16 million, were deferring loan payments. As of June 30, 2021, there were no deferral requests that were for deferment of principal balances only compared to approximately $4 million at December 31, 2020. The one remaining deferral request was to defer both principal and interest payments. As of June 30, 2021, the one deferral was a fourth deferral request with outstanding balances of $2.1 million. At December 31, 2020, deferrals were comprised of the following categories: 90 day deferrals amounted to eight customers with outstanding balances of $3 million and second deferrals amounted to thirteen customers with outstanding balances of $13 million.

As a result of the recent changes in economic conditions, we have increased the qualitative factors for certain components of our allowance for loan loss calculation. We have also taken into consideration the probable impact that the various stimulus initiatives provided through the CARES Act, along with other government programs, may have to assist borrowers during this period of economic stress. We believe the combination of ongoing communication with our customers, loan to values on underlying collateral, loan payment deferrals, increased focus on risk management practices, and access to government programs such as the PPP should help mitigate potential future period losses. We will closely monitor all key economic indicators and our internal asset quality metrics as the effects of the coronavirus pandemic continue to impact our customer base. Based on the incurred loss methodology currently utilized by Republic, the provision for loan losses and charge-offs may be impacted in future periods, but more time is needed to fully understand the magnitude and severity of the economic downturn and the full impact on our loan portfolio.

CARES Act and Related Recent Legislation

The CARES Act. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted to address the economic effects of the COVID-19 pandemic. Among other things, the CARES Act provides for the following:

•

Paycheck Protection Program (“PPP”). The CARES Act appropriated $349 billion for “paycheck protection loans” through the PPP. The amount appropriated was subsequently increased to $659 billion. Loans under the PPP that meet U.S. Small Business Administration (“SBA”) requirements may be forgiven in certain circumstances, and are 100% guaranteed by the SBA. In conjunction with the PPP, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) has created a lending facility for qualified financial institutions. The Paycheck Protection Program Liquidity Facility (“PPPLF”) will extend credit to depository institutions with a term equal to the term of the pledged loans at an interest rate of 0.35%. Only loans issued under the PPP can be pledged as collateral to access the facility. The Company participated in both the PPP loan program and the PPPLF in 2020 and 2021.

•

Troubled Debt Restructuring Relief. From March 1, 2020 through the earlier of December 31, 2020 or 60 days after the termination date of the national emergency declared by the President on March 13, 2020 concerning the COVID–19 outbreak (the “national emergency”), a financial institution may elect to suspend the requirements under accounting principles generally accepted in the U.S. for loan modifications related to the COVID–19 pandemic that would otherwise be categorized as a troubled debt restructured (“TDR”), including impairment accounting. This TDR relief is applicable for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. Financial institutions are required to maintain records of the volume of loans involved in modifications to which TDR relief is applicable. The Company elected to exclude modifications meeting these requirements from TDR classification.

•

CECL Delay. Banks, savings associations, credit unions, bank holding companies and their affiliates are not required to comply with the Financial Accounting Standards Board Accounting Standards Update No. 2016–13 (“Measurement of Credit Losses on Financial Instruments”), including the current expected credit losses methodology for estimating allowances for credit losses (“CECL”), from the date of the law’s enactment until the earlier of the end of the national emergency or December 31, 2020. On March 27, 2020, the Federal Reserve, the Federal Deposit Insurance Corporation (the “FDIC”), and the Office of the Comptroller of the Currency issued an interim final rule that allows banking organizations that are required to adopt CECL this year to mitigate the estimated cumulative regulatory capital effects for up to two years. The relief afforded by the CARES Act and interim final rule is in addition to the three-year transition period already in place. The Company has elected to delay the adoption of CECL.

•

Forbearance. The CARES Act codified in part guidance from state and federal regulators and government-sponsored enterprises, including the 60-day suspension of foreclosures on federally-backed mortgages and requirements that servicers grant forbearance to borrowers affected by COVID-19.

The Economic Aid Act. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Non-profits and Venues Act (the “Economic Aid Act”) became law. The Economic Aid Act reauthorized lending by the U.S. Small Business Administration under the Paycheck Protection Program of the CARES Act to eligible first-time borrowers and also to certain borrowers that previously received first draw PPP loans. The Economic Aid Act allocated an additional $286 billion for PPP loans. The Act also amended or revised certain PPP requirements, including borrower eligibility criteria, expanded permitted uses of PPP loans, and revised loan forgiveness procedures. Under the Economic Aid Act, the SBA had authority to make PPP loans until March 31, 2021; that application deadline was extended to May 31, 2021 as a result of passage of the Paycheck Protection Extension Act on March 25, 2021, and the SBA was also provided with an additional 60 days to complete processing of applications received by May 31, 2021. The Economic Aid Act also extended the provisions of the CARES Act described above (i) permitting financial institutions to suspend TDR assessment and reporting requirements under generally accepted accounting principles until the earlier of 60 days after the date that the President terminates the COVID-19 national emergency or January 1, 2022 and (ii) exempting insured depository institutions, bank holding companies, and any of their affiliates from compliance with CECL, until the earlier of the first day of an eligible financial institution’s fiscal year that begins after the COVID-19 national emergency is terminated or January 1, 2022.

Financial Condition

Assets

Total assets increased by $312 million to $5.4 billion at June 30, 2021, compared to $5.1 billion at December 31, 2020. The ongoing success with ~~"The Power~~our expansion strategy has resulted in a significant increase in new business relationships and account openings during the first six months of ~~Red is Back" growth~~2021. Total assets increased primarily due to a $479 million increase in investment securities partially offset by a $127 million decrease in loans receivable which was driven by the forgiveness and ~~expansion strategy.~~

repayment of PPP loan balances.

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~~decreased by ~~$64.2~~$8.6 million to ~~$98.8~~$767 million at ~~September~~June 30, ~~2017 compared to $34.6~~2021, from $775 million at December 31, ~~2016. The increase in cash was primarily driven by the increase in deposit balances during the period ended September 30, 2017.~~

2020.

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~~$2.4 million at ~~September~~June 30, ~~2017~~2021 as compared to ~~$4.2~~$3.0 million at December 31, ~~2016.~~2020. Residential mortgage loans held for sale ~~totaled $41.4~~were $12.0 million at ~~September~~June 30, ~~2017~~2021 compared to ~~$23.9~~$50.4 million at December 31, ~~2016.~~2020. The ~~increase~~reduction in ~~the balance of~~ residential mortgage loans held for sale was ~~driven by an increase in the volume~~a result of ~~loans originated along with~~ the timing of loan closings ~~which pushed a number~~and subsequent sales as of ~~sales into the fourth quarter.~~June 30, 2021. Loans held for sale, as a percentage of total ~~Company~~ assets, were ~~1.9%~~less than 1% at ~~September~~June 30, ~~2017.~~2021.

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~~$45.0 million at ~~September~~June 30, ~~2017.~~2021. 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~~decreased $127 million, or ~~13.5%~~5%, to ~~$1.1~~$2.5 billion at ~~September~~June 30, ~~2017,~~2021, versus ~~$965.0~~$2.6 billion at December 31, 2020. Due to our proactive approach in assisting PPP loan customers with the submission of forgiveness applications, PPP loans decreased $242 million to $394 million at June 30, 2021 compared to $637 million at December 31, ~~2016.~~2020. Total loans excluding PPP loans increased by $115 million at June 30, 2021 compared to December 31, 2020. This growth was primarily the result of ~~an increase in~~ ~~loan demand in residential mortgage, commercial real estate, construction and development, owner occupied real estate, and consumer categories driven by~~ the successful execution of our relationship banking ~~strategy~~model which ~~focuses on customer service.~~

has driven a steady flow in quality loan demand. We also expect many of the new business relationships that grew from our success with PPP to provide significant opportunities for commercial loan growth in future periods.

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 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~~$764.7 million at ~~September~~June 30, ~~2017,~~2021, compared to ~~$369.7~~$528.5 million at December 31, ~~2016.~~2020. The increase was primarily due to the purchase of securities totaling ~~$53.1~~$308.8 million partially offset by the ~~sales and paydowns~~paydown, maturity, or call, of securities ~~held in the portfolio~~ totaling ~~$46.8~~$68.9 million during the first ~~nine~~six months of ~~2017.~~2021. At ~~September~~June 30, ~~2017,~~2021, the portfolio had a net unrealized loss of ~~$8.0 million~~$239,000 compared to a net unrealized ~~loss~~gain of ~~$10.7~~$1.3 million at December 31, ~~2016.~~2020. The change in value of the investment portfolio was driven by ~~a decrease~~an increase in market interest rates which ~~drove an increase~~resulted in a decrease in the ~~fair~~ value of the ~~bonds held~~securities available-for-sale in our portfolio during the first ~~nine~~six months of ~~2017.~~

2021.

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~~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 million~~$1.1 billion and ~~$425.2~~$837.0 million at ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively. The ~~decrease~~increase was primarily due to the ~~receipt~~purchase of ~~principal payments on CMO and MBS~~investment securities held ~~in the portfolio~~to maturity totaling ~~$36.6~~$378.9 million partially offset by the ~~purchase~~paydown, maturity, or call of securities totaling ~~$22.0~~$135.3 million during the first ~~nine~~six months of ~~2017.~~2021.

Equity securities consist of investments in the preferred stock of domestic banks. Equity securities are held at fair value. The fair value of equity securities totaled $9.2 million at June 30, 2021 compared to $9.0 million at December 31, 2020.

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~~June 30,~~, 2017~~ 2021 and December 31, ~~2016.~~2020. 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~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, the investment in FHLB of Pittsburgh capital stock totaled ~~$1.5~~$3.4 million and ~~$1.2~~$2.9 million, respectively. ~~The increase was due to a higher required investment in FHLB stock during 2017.~~ At both ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, ACBB capital stock totaled $143,000. Both the FHLB and ACBB issued dividend payments during the ~~nine~~second quarter of 2021.

Premises and Equipment

The balance of premises and equipment increased to $123.7 million at June 30, 2021 from $123.2 million at December 31, 2020. The increase was primarily due to premises and equipment expenditures of $4.8 million less depreciation and amortization expenses of $4.3 million during the first six months of ~~2017.~~

2021. A new store was opened in Deptford, NJ in June 2021 bringing the total store count to thirty-two at June 30, 2021 compared to thirty-one locations at December 31, 2020. There are also sites in various stages of development for future store locations.

Other Real Estate Owned

~~The~~

At June 30, 2021 and December 31, 2020, the balance of other real estate owned ~~decreased to $9.2~~was $852,000 and $1.2 million, ~~at September 30, 2017 from $10.2 million at December 31, 2016,~~ ~~primarily due to writedowns in~~respectively.

Operating Leases – Right of Use Asset

Under ASC 842, 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 September~~any lease incentives. At June 30, ~~2017.~~

~~Goodwill~~

~~Goodwill resulting from the acquisition of Oak Mortgage in July 2016 amounted to $5.0 million at September 30, 2017~~2021 and December 31, ~~2016.~~

2020, the balance of operating leases – right-of-use asset was $78.2 million and $72.9 million, respectively.

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~~$546.1 million ~~or 12.4%,~~ to ~~$1.9~~$4.6 billion at ~~September~~June 30, ~~2017~~2021 from ~~$1.7~~$4.0 billion at December 31, ~~2016. The increase was the result of growth in demand deposit balances and time deposit balances partially offset by decreases in money market and savings balances.~~2020. 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~~internet certificates of deposit. Our participation in the PPP loan program resulted in significant growth in new deposit relationships over the last twelve months. Many of those applicants were so pleased with their experience during the PPP process that they chose to move their primary banking relationship to Republic.

Other Borrowings

At June 30, 2021 and December 31, 2020, we borrowed $387.5 million and $633.9 million, respectively, through the Paycheck Protection Program Liquidity Facility (“PPPLF”) provided by the Federal Reserve Bank at a rate of 35 basis points. The borrowings were repaid in full during the first week following each quarter end.

~~Shareholders'~~

Operating Lease Liability Obligation

Under ASC 842, 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 June 30, 2021 and December 31, 2020, the balance of the operating lease liability obligation was $84.7 million and $77.6 million, respectively.

Shareholders’ Equity

Total ~~shareholders'~~shareholders’ equity increased ~~$10.1~~$12.3 million to ~~$225.2~~$320.4 million at ~~September 30, 2017~~March 31, 2021 compared to ~~$215.1~~$308.1 million at December 31, ~~2016.~~2020. The increase was primarily due to net income of ~~$6.2~~$11.3 million ~~recognized~~ during the first ~~nine~~six months of 2017, an increase of $2.2 million related to the issuance of stock based compensation, stock option exercises and securities conversion, and the reduction in accumulated other comprehensive losses associated with an increase in the market value of the investment securities portfolio. 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 value of the securities held in our portfolio.

2021.

Results of Operations

Three Months Ended ~~September~~June 30,~~, 2017~~ 2021Compared to Three Months Ended ~~September~~June30,~~, 2016~~

2020

We reported net income available to common shareholders of ~~$2.3~~$5.1 million, or $0.08 per diluted share, for the three months ended June 30, 2021, compared to net income of $2.5 million or $0.04 per diluted share, for the three months ended ~~September~~June 30, ~~2017, compared to net income of $1.3 million or $0.03 per diluted share, for the three months ended September 30, 2016. The increase~~2020. Earnings in 2021 were positively impacted by our growth in net interest income ~~was primarily driven by growth in interest-earning assets along with the addition of a residential mortgage lending division.~~

and our ongoing focus on cost control initiatives to limit expense growth.

Net interest income was $30.6 million for the three month period ended ~~September~~June 30, ~~2017 was $15.7 million~~2021 compared to ~~$11.8~~$22.4 million for the three months ended ~~September~~June 30, ~~2016.~~2020. Interest income increased ~~$4.3~~$7.5 million, or ~~32%~~27%, ~~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 increase in average investment securities balances and a $149.8 million increase in average loan balances.~~ ~~Interest expense increased $376,000 or 21%, 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 loans receivable and average investment securities balances. Interest expense decreased $717,000, or 13.2%, primarily due to a decrease in the average rate paid on deposit balances.

The net interest margin increased by 10 basis points to 2.65% during the second quarter of 2021 compared to 2.55% during the second quarter of 2020.

We did not record a provision for loan losses for the three months ended ~~September~~June 30, ~~2017. We recorded a provision for loan losses in the amount of $607,000~~2021 compared to $1.0 million for the three months ended ~~September~~June 30, ~~2016 primarily due~~2020. The provision recorded is charged to operations in an ~~increase~~amount necessary to bring the total allowance for loan losses to a level that management believes is adequate to absorb inherent losses in the ~~allowance required for loans individually evaluated for impairment.~~

loan portfolio.

Non-interest income ~~increased~~decreased by ~~$636,000~~$744,000 to ~~$5.8~~$7.7 million during the three months ended ~~September~~June 30, ~~2017~~2021 compared to ~~$5.1~~$8.4 million during the three months ended ~~September~~June 30, ~~2016.~~2020. The ~~increase~~decrease during the three months ended ~~September~~June 30, ~~2017~~2021 was primarily due ~~increases in mortgage banking income, service fees on deposit accounts, and loan advisory and service fees partially offset by a decrease in~~ the gain on sale of ~~SBA loans.~~

investment securities in the second quarter of 2020 which did not recur in the second quarter of 2021.

Non-interest expenses increased ~~by $4.2~~$3.9 million to ~~$19.2~~$30.5 million during the three months ended ~~September~~June 30, ~~2017~~2021 compared to ~~$15.0~~$26.7 million during the three months ended ~~September~~June 30, ~~2016.~~2020. This increase was a result of growth in salaries and employee benefit costs, in addition to occupancy and equipment expense. Salary expense increased primarily ~~driven by higher salaries, employee~~as a result of merit increases. The cost for medical and dental benefits ~~occupancy expenses associated with~~have also returned to normal levels after a significant decline during the ~~addition of new stores related to our expansion strategy which we refer to as "The Power of Red is Back", as well as the addition~~early stages of the ~~Oak Mortgage residential mortgage lending team~~pandemic in 2020.

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

$1.9 million during the three months ended June 30, 2021 compared to $675,000 provision for income taxes during the three months ended June 30, 2020.

Return on average assets and average equity from continuing operations was ~~0.45%~~0.48% and ~~4.11%~~7.56%, respectively, during the three months ended ~~September~~June 30, ~~2017~~2021 compared to ~~0.32%~~0.26% and ~~4.49%~~3.98%, respectively, for the three months ended ~~September~~June 30, ~~2016.~~2019.

~~Nine~~

Six Months Ended ~~September~~June 30, ~~2017 compared~~2021 Compared to ~~September~~Six Months Ended June 30, ~~2016~~

2020

We reported net income available to common shareholders of ~~$6.2~~$11.3 million, or ~~$0.11~~$0.17 per diluted share, for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 compared to net income of ~~$3.4~~$1.9 million, or ~~$0.09~~$0.03 per diluted share, for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. The increase in ~~net income~~earnings year over year was primarily driven by growth in ~~interest-earning assets~~revenue along with the ~~addition of~~cost control measures implemented by management. We continue to focus on growing revenue at a ~~residential mortgage lending division.~~

greater rate than expenses as we execute our growth strategy and expand our store network.

Net interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased $10.5 million to $45.2~~2021 was $62.1 million as compared to ~~$34.7~~$43.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. Interest income increased ~~$11.8~~$16.6 million, or 30%, due primarily to increases in average investment securities balances and average loan balances. Interest expense increased $1.3 million or 27%, to $6.2 million for the nine months ended September 30, 2017 compared to $4.9 million for the nine months ended September 30, 2016. This increase was primarily due to an increase in average loans receivable and investment securities balances. We also continue to recognize the origination fees associated with PPP loans through interest ~~bearing deposits.~~

income. Interest income included $12 million in fees during the six month period ended June 30, 2021 compared to $1.5 million during the six month period ended June 30, 2020. Interest expense decreased $2.3 million, or 19%, primarily due to a decrease in the average rate paid on deposit balances. The net interest margin increased by 16 basis points to 2.80% during six months ended June 30, 2021 compared to 2.64% during the six months ended June 30, 2020.

We recorded a provision for loan losses of ~~$500,000~~$3.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 due~~2021 compared to a provision for loan losses of $2.0 million for the six months ended June 30, 2020. The provision recorded is charged to operations in an amount necessary to bring the total allowance for loan losses to a level that management believes is adequate to absorb inherent losses in the loan portfolio. The increase in the provision year over year was a result of an increase in both the allowance required for loans collectively and individually evaluated for impairment. The increase related to the allowance for loans collectively evaluated for impairment ~~driven~~was largely associated with assumptions and estimates related to the uncertainty surrounding the economic environment caused by anthe impact of the COVID-19 pandemic.

Non-interest income increased $3.0 million to $18.0 million during the six months ended June 30, 2021 compared to $15.0 million during the six months ended June 30, 2020. The increase during the six months ended June 30, 2021 was primarily due to growth in service fees on deposit accounts which increased by $2.8 million as a result of the significant growth in deposit balances and new account relationships. The recognition of revenue associated with the conversion of all ATM and debit cards to the VISA platform also contributed to the growth in service fees on deposit accounts. Mortgage banking income increased $1.6 million primarily due to the increase in ~~total loans outstanding.~~ residential mortgage loan originations.

Non-interest expenses increased $5.9 million to $59.9 million during the six months ended June 30, 2021 as compared to $53.9 million during the six months ended June 30, 2020. This increase was a result of growth in salaries and employee benefit costs, in addition to higher occupancy and equipment expense. The main cause for the increase in salary expense was merit increases. The cost for medical and dental benefits have also returned to normal levels after a significant decline during the early stages of the pandemic in 2020. Cost control measures implemented by management have had a positive effect in limiting expense growth.

We recorded a provision for ~~loan losses of $1.6 million for the nine months ended September 30, 2016 primarily due to an increase~~income taxes in the ~~allowance required for loans individually evaluated for impairment.~~

~~Non-interest income increased by $4.5 million to $15.1~~amount of $4.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2017 as~~2021 compared to ~~$10.6 million~~a $345,000 provision for income taxes during the ~~nine~~six months ended ~~September~~June 30, 2016. The increase during the nine months ended September 30, 2017 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 on the sale of SBA loans and the gain (loss) on the sale of securities.

Non-interest expenses increased $13.3 million to $53.7 million during the nine months ended September 30, 2017 as compared to $40.3 million during the nine months ended September 30, 2016. The increase was primarily driven by higher salaries, employee benefits, and occupancy expenses associated with the addition of new stores related to our expansion strategy which we refer to as "The Power of Red is Back", as well as, the addition of the Oak Mortgage residential mortgage lending team in the third quarter of 2016.

2020.

Return on average assets and average equity from continuing operations were ~~0.41%~~0.55% and ~~3.74%~~8.38%, respectively, during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 compared to ~~0.30%~~0.11% and ~~3.93%~~1.53%%, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020.

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 24% in 2021 and 21% in 2020.

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 June 30, 2021							For the three months ended June 30, 2020
(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	$	306,222	$	63		0.08	%	$	198,345	$	50		0.10	%
Investment securities and restricted stock ⁽²⁾		1,688,807		6,851		1.63	%		1,033,560		5,077		1.96	%
Loans receivable ⁽²⁾		2,658,540		28,574		4.31	%		2,335,500		22,884		3.94	%
Total interest-earning assets		4,653,569		35,488		3.06	%		3,567,405		28,011		3.16	%
Other assets		262,404							266,178
Total assets	$	4,915,973						$	3,833,583

Interest-earning liabilities:
Demand – non-interest bearing	$	1,230,690						$	984,771
Demand – interest bearing		1,963,848		3,283		0.67	%		1,397,790		2,856		0.82	%
Money market & savings		1,098,340		933		0.34	%		858,782		1,431		0.67	%
Time deposits		187,093		424		0.91	%		208,838		1,033		1.99	%
Total deposits		4,479,971		4,640		0.42	%		3,450,181		5,320		0.62	%
Total interest-bearing deposits		3,249,281		4,640		0.57	%		2,465,410		5,320		0.87	%
Other borrowings		21,104		75		1.43	%		45,474		112		0.99	%
Total interest-bearing liabilities		3,270,385		4,715		0.58	%		2,510,884		5,432		0.87	%
Total deposits and other borrowings		4,501,075		4,715		0.42	%		3,495,655		5,432		0.62	%
Non-interest bearing other liabilities		100,272							83,884
Shareholders’ equity		314,626							254,044
Total liabilities and shareholders’ equity	$	4,915,973						$	3,833,583
Net interest income ⁽²⁾			$	30,773						$	22,579
Net interest spread						2.48	%						2.29	%
Net interest margin ⁽²⁾						2.65	%						2.55	%

⁽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 measure. Net interest income has been increased over the financial statement amount by ~~$200~~$134 and ~~$235~~$152 for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, 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 six months ended June 30, 2021							For the six months ended June 30, 2020
(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	$	257,580	$	112		0.09	%	$	139,842	$	339		0.49	%
Investment securities and restricted stock ⁽²⁾		1,560,543		13,339		1.72	%		1,095,032		11,903		2.17	%
Loans receivable ⁽²⁾		2,667,572		58,593		4.43	%		2,071,941		43,203		4.19	%
Total interest-earning assets		4,485,695		72,044		3.24	%		3,306,815		55,445		3.37	%
Other assets		269,645							263,504
Total assets	$	4,755,340						$	3,570,319

Interest-earning liabilities:
Demand – non-interest bearing	$	1,159,267						$	814,686
Demand – interest bearing		1,905,731		6,541		0.69	%		1,367,718		6,277		0.92	%
Money market & savings		1,056,042		2,051		0.39	%		805,646		3,214		0.80	%
Time deposits		185,968		963		1.04	%		217,512		2,254		2.08	%
Total deposits		4,307,008		9,555		0.45	%		3,205,562		11,745		0.74	%
Total interest-bearing deposits		3,147,741		9,555		0.61	%		2,390,876		11,745		0.99	%
Other borrowings		33,513		148		0.89	%		28,713		216		1.51	%
Total interest-bearing liabilities		3,181,254		9,703		0.62	%		2,419,589		11,961		0.99	%
Total deposits and other borrowings		4,340,521		9,703		0.45	%		3,234,275		11,961		0.74	%
Non-interest bearing other liabilities		102,017							84,050
Shareholders’ equity		312,802							251,994
Total liabilities and shareholders’ equity	$	4,755,340						$	3,570,319
Net interest income ⁽²⁾			$	62,341						$	43,484
Net interest spread						2.62	%						2.38	%
Net interest margin ⁽²⁾						2.80	%						2.64	%

⁽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 measure. Net interest income has been increased over the financial statement amount by ~~$666~~$270 and ~~$662~~$303 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, 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, as compared to the three and nine months ended September 30, 2016.~~periods indicated. 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

Net interest income and net interest margin are presented on a tax equivalent basis, a non-GAAP measure.

	For the three months ended June 30, 2021 vs. 2020									For the six months ended June 30, 2021 vs. 2020
	Changes due to:									Changes due to:
(dollars in thousands)	Average Volume			Average Rate			Total Change			Average Volume			Average Rate			Total Change
Interest earned:
Federal funds sold and other interest-earning assets	$	21		$	(8	)	$	13		$	51		$	(278	)	$	(227	)
Securities		2,735			(961	)		1,774			3,979			(2,543	)		1,436
Loans		3,067			2,623			5,690			12,874			2,516			15,390
Total interest-earning assets		5,823			1,654			7,477			16,904			(305	)		16,599

Interest expense:
Deposits
Interest-bearing demand deposits		948			(521	)		427			1,847			(1,583	)		264
Money market and savings		179			(677	)		(498	)		448			(1,611	)		(1,163	)
Time deposits		(43	)		(566	)		(609	)		(163	)		(1,128	)		(1,291	)
Total deposit interest expense		1,084			(1,764	)		(680	)		2,132			(4,322	)		(2,190	)
Other borrowings		(10	)		(27	)		(37	)		8			(76	)		(68	)
Total interest expense		1,074			(1,791	)		(717	)		2,140			(4,398	)		(2,258	)
Net interest income	$	4,749		$	3,445		$	8,194		$	14,764		$	4,093		$	18,857

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~~June 30, ~~2017~~2021 increased ~~by $3.9~~$8.2 million, or ~~32%~~36%, over the same period in ~~2016.~~2020. Interest income ~~on a fully tax-equivalent basis,~~ on interest-earning assets totaled ~~$18.1 million and $13.9~~$35.5 million for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2021, an increase of $7.5 million, compared to $28.0 million for the three months ended June 30, 2020. The increase in interest income earned was primarily the result of ~~a $288.1 million~~an increase in the average balance of investment securities ~~balances~~ and ~~a $149.8~~loans receivable. In addition, $4.7 million ~~increase~~ in ~~average loan balances for~~origination fees related to PPP loans were recognized during the three months ended ~~September~~June 30, ~~2017 as~~2021 compared to ~~September~~$1.5 million during the three months ended June 30, ~~2016.~~2020. Total interest expense for the three months ended ~~September~~June 30, ~~2017 increased $376,000,~~2021 decreased by $717,000, or ~~21%, to $2.2 million from $1.8 million over the same period in 2016. Interest expense on deposits for the three months ended September 30, 2017 increased by $341,000, or 23%~~13%, over the same period in ~~2016.~~

2020. Interest expense on deposits decreased by $680,000 or 13%, for the three months ended June 30, 2021 versus the same period in 2020 due primarily to a reduction in the average rate on deposit balances caused by a lower interest rate environment. Interest expense on other borrowings decreased by $37,000 for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 due primarily to a decrease in the average rate on overnight borrowings.

Net interest income, on a fully tax-equivalent basis, a non-GAAP measure, for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 increased ~~by $10.5~~$18.9 million, or ~~30%~~43%, over the same period in ~~2016.~~2020. Interest income ~~on a fully tax-equivalent basis,~~ on interest-earning assets totaled ~~$52.1 million and $40.3~~$72.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2021, an increase of $16.6 million, compared to $55.4 million for the six months ended June 30, 2020. The increase in interest income earned was primarily the result of ~~a $326.6 million~~an increase in the average balance of loans receivable and investment ~~securities balances and a $138.5~~securities. In addition, $12 million ~~increase~~ in ~~average loan balances for~~origination fees related to PPP loans were recognized during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 compared to $1.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. Total interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased $1.3~~2021 decreased by $2.3 million, or ~~27%~~19%, ~~to $6.2 million from $4.9 million over~~for the same period in ~~2016.~~2020. Interest expense on deposits decreased by $2.2 million, or 19%, for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased by $1.2 million, or 29%, over~~2021 versus the same period in ~~2016.~~

2020 due primarily to a reduction in the average rate on deposit balances caused by a lower interest rate environment. Interest expense on other borrowings decreased by $68,000 for the six months ended June 30, 2021 as compared to the six months ended June 30, 2019 due primarily to a decrease in the average rate on overnight borrowings balances.

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%~~2.48% during the three months ended ~~September~~June 30, ~~2017~~2021 compared to ~~2.96%~~2.29% during the ~~same period in 2016~~three months ended June 30, 2020 and was ~~3.11%~~2.62% during ~~both~~ the ~~nine~~six months ended ~~September~~June 30, ~~2017 and the nine~~2021 compared to 2.38% during six months ended ~~September~~June 30, ~~2016.~~2020. 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 fully tax-equivalent net interest margin increased to 3.26% for~~For the three months ended ~~September~~June 30, ~~2017 from 3.07% for the same period in 2016 primarily as a result of an increase in the yield on loans outstanding. For the nine months ended September~~2021 and June 30, ~~2017,~~2020, the fully tax-equivalent net interest margin ~~increased~~was 2.65% and 2.55%, respectively. For the six months ended June 30, 2021 and June 30, 2020, the fully tax-equivalent net interest margin was 2.80% and 2.64%, respectively.

Provision for Loan Losses

We did not record a provision for loan losses for the three months ended June 30, 2021 compared to ~~3.25% from 3.23% during~~a $1.0 million provision for the ~~same period~~three months ended June 30, 2020. An increase in ~~2016 primarily~~the allowance for loans collectively evaluated for impairment driven by loan growth was offset by a reduction in the allowance necessary for loans individually evaluated for impairment as a result of ~~an increase~~updated appraisals and reduced reserve requirements which resulted in no provision for the ~~yield on loans outstanding.~~

~~Provision for Loan Losses~~

~~The~~three month period ended June 30, 2021. We recorded a $3.0 million provision for loan losses for the six months ended June 30, 2021 compared to $2.0 million provision for the six months ended June 30, 2020. The provision recorded at the three and six months ended June 30, 2021 is charged to operations in an amount necessary to bring the total allowance for loan losses to a level that management believes is adequate to absorb inherent losses in the loan portfolio.

As a result of the changes in economic conditions caused by the pandemic, we have increased the qualitative factors for certain components included in the allowance for loan loss calculation. We ~~did~~have also taken into consideration the probable impact that the various stimulus initiatives provided through the CARES Act and Economic Aid Act, along with other government programs, may have to assist borrowers during this period of economic stress. We believe the combination of ongoing communication with our customers, loan payment deferrals, increased focus on risk management practices, and access to government programs such as the PPP Program should help mitigate potential future period losses. Although the economy has begun to demonstrate signs of recovery, many key economic indicators have not ~~record~~returned to pre-pandemic levels and the potential for a resurgence of COVID infection rates remains a possibility. Based on the incurred loss methodology currently utilized by the Bank, the provision for loan losses and charge-offs may be impacted in future periods, but more time is needed to fully understand the magnitude and severity of the economic downturn caused by the COVID pandemic and the corresponding impact on our loan portfolio.

We have elected to defer the adoption of ASU` 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as permitted by the Economic Aid Act approved in December 2020 until January 1, 2022.

Non‑Interest Income

Total non-interest income for the three months ended ~~September~~June 30, 2017.We recorded a $500,000 provision for the nine month period ended September 30, 2017. During the nine month period ended September 30, 2017, an increase in the allowance required for loans collectively evaluated for impairment was driven2021 decreased by ~~an increase in total loans outstanding. We recorded a $607,000 provision for~~$744,000, or 9%, compared to the three ~~month period~~months ended ~~September~~June 30, ~~2016 and a~~2020. Gains on the sale of investments securities decreased by $1.6 million provision for the nine month period 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 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~~ million for the three months ended ~~September~~June 30, ~~2016,~~2021 when compared to ~~$5.1~~the same period in 2020. Mortgage banking income totaled $2.9 million during the three months ended June 30, 2021, a decrease of $481,000, compared to $3.4 million during the three months ended June 30, 2020. The decrease in mortgage banking income for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 was due to a decrease in residential mortgage loan originations year over year. Loan and servicing fees totaled $660,000 for the three months ended June 30, 2021 which represents a decrease of $104,000 from the same period in 2020. Service fees on deposit accounts increased $932,000 to $3.3 million for the three months ended ~~September~~June 30, ~~2016. Mortgage banking income~~ ~~increased by $754,000~~2021 compared 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~~$2.3 million for the three months ended ~~September~~June 30, ~~2017, which represents an increase of $381,000 over the three months ended September 30, 2016.~~2020. This increase was due to the growth in the number of customer accounts and transaction volume. ~~Gains on~~Revenue related to the ~~sale~~transition of ~~SBA loans sold totaled $831,000 for~~all ATM and debit cards to the ~~three months ended September 30, 2017 compared to $1.6 million for~~VISA platform also drove the ~~three months ended September 30, 2016~~. ~~The decrease of $799,000~~increase 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 from the same period in 2016 due to higher loan volumes.~~service fees.

Total non-interest income for the six months ended June 30, 2021 increased ~~by $4.5~~$3.0 million, or ~~43%~~20%, compared to ~~$15.1 million for~~ the ~~nine~~six months ended ~~September~~June 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 2016.2020. Service fees on deposit accounts totaled ~~$2.8~~$7.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 which represents an increase of ~~$910,000~~$2.8 million over the same period in ~~2016.~~2020. This increase was due to the growth in the number of customer accounts and transaction volume. ~~Gains on~~Revenue related to the ~~sale~~transition of ~~SBA loans sold were $2.3~~all ATM and debit cards to the VISA platform also drove the increase in service fees. Mortgage banking income increased $1.6 million to $7.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 compared to ~~$4.2~~$5.8 million ~~in the same period of 2016 as a result of a decrease in SBA loans sold~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2017 as a result of lower origination volume. There were recognized losses~~2020. The increase in mortgage banking income for the ~~amount of $61,000 on sales of investment securities during the nine~~six months ended ~~September~~June 30, ~~2017 as~~2021 compared to ~~gains of $656,000 during~~ the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020 was due to an increase in residential mortgage loan originations year over year. Loan ~~advisory~~ and ~~service~~servicing fees totaled $1.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 which represents an increase of ~~$202,000~~$58,000 from the same period in ~~2016.~~

~~Non-interest~~2020. Gains on the sale of investment securities decreased by $2.5 million for the six months ended June 30, 2021 compared to the same period in 2020.

Non‑Interest Expenses

Three Months Ended ~~September~~June 30, ~~2017 compared~~2021 Compared to Three Months Ended ~~September~~June 30, ~~2016~~

2020

Non-interest expenses increased ~~by $4.2~~$3.9 million or ~~28%~~14%, to $30.5 million for the three months ended June 30, 2021 compared to $26.7 million for the three months ended June 30, 2020. An explanation of changes in non-interest expenses for certain categories is presented in the following paragraphs.

Salaries and employee benefits increased by $1.7 million, or 13%, for the three months ended ~~September~~June 30, ~~2017~~2021 compared to the same period in ~~2016.~~2020 primarily as a result of merit increases and an increase in medical and dental expenses related to our employee health plans. A ~~detailed explanation of the most significant variances~~new store in ~~non-interest expenses for the~~Deptford, NJ was opened during three months ended ~~September~~June 30, ~~2017~~2021 driving an increase in employee headcount.

Occupancy expense, including depreciation and ~~September 30, 2016 is presented in the following paragraphs.~~

~~Salary and employee benefits expenses, which represent the largest component of non-interest~~amortization expenses, increased by ~~$2.1 million,~~$292,000, or ~~27%~~5%, for the three months ended ~~September~~June 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 and expansion strategy, which we refer to as "The Power of Red is Back". Two new stores were opened during the three month period ended September 30, 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 $237,000, or 15%, and depreciation and amortization expense increased by $241,000, or 23%, for the three months ended September 30, 2017~~2021 compared to the same period last year, ~~also~~ as a result of our continuing growth and relocation strategy.

There were thirty-two stores open as of June 30, 2021 compared to thirty stores at June 30, 2020.

Other real estate ~~owned~~ expenses totaled ~~$746,000 for~~$493,000 during the three months ended ~~September~~June 30, ~~2017,~~2021, an increase of ~~$44,000,~~$418,000, or 6%557%, compared to the same period in ~~2016. This~~2020. The increase ~~was~~is primarily related to a ~~result~~writedown of ~~higher writedowns on foreclosed assets held in~~ other real estate owned inof $350,000 and higher costs on foreclosed assets during the current period.

All other non-interest expenses increased by $1.5 million, or ~~38%~~19%, ~~during~~for the three months ended ~~September~~June 30, ~~2017,~~2021 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 ~~advertising,~~other tax expenses, regulatory assessments and costs, data processing, ~~expense,~~insurance, professional fees, and other expenses ~~resulting from our expansion strategy also~~ contributed to the growth in other operating expenses.

~~Nine~~ Cost control measures implemented by management have had a positive effect in limiting expense growth.

Six Months Ended ~~September~~June 30, ~~2017~~2021 Compared to Six Months Ended June 30, 2020

Non-interest expenses increased $5.9 million, or 11%, to $59.9 million for the six months ended June 30, 2021 compared to ~~Nine Months Ended September~~$53.9 million for the six months end June 30, ~~2016~~

~~For the nine months ended September 30, 2017,~~2020. An explanation of changes in 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~~for certain categories is presented in the following paragraphs.

~~Salary expenses~~

Salaries and employee benefits ~~which represent the largest component of non-interest expenses, were $27.8~~increased by $3.0 million, or 11%, for the ~~nine~~six months ended ~~September~~June 30, ~~2017, an increase of $7.5 million, or 37%,~~2021 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 increased2020 as a result of ~~the acquisition of Oak Mortgage~~merit increases and an increase in ~~the third quarter of 2016.~~

medical and dental expenses related to our employee health plans. A new store in Deptford, NJ was opened during six months ended June 30, 2021 driving an increase in employee headcount.

Occupancy expense, including depreciation and amortization expenses, increased by ~~$852,000,~~$1.1 million, or ~~19%, and depreciation and amortization expense increased by $772,000, or 27%~~10%, for the ~~nine~~six months ended ~~September~~June 30, ~~2017 versus~~2021 compared to the same period ~~in 2016 also~~last year, as a result of our continuing growth and relocation ~~strategy~~.

strategy. There were thirty-two stores open as of June 30, 2021 compared to thirty stores at June 30, 2020.

Other real estate ~~owned~~ expenses totaled ~~$1.7 million for~~$591,000 during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, an increase of ~~$94,000,~~$234,000, or 6%66%, ~~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~~2020. The increase ~~was mainly attributable~~is primarily related to a writedown of other real estate owned of $350,000 during the current period.

All other non-interest expenses increased by $1.6 million, or 10%, for the six months ended June 30, 2021 compared to the ~~addition of expenses related to the residential mortgage loan operation of Oak Mortgage.~~same period last year. Cost control measures implemented by management have had a positive effect in limiting expense growth. Increases in other tax expense, regulatory assessments and costs, appraisal and other loan expenses, data processing, ~~expense, advertising,~~ professional fees, ~~legal expenses,~~insurance, debit card processing, and other expenses ~~resulting from our expansion strategy also~~ contributed to the growth in other operating ~~expenses.~~

expenses which were mainly associated with our growth strategy.

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~~June 30, ~~2017,~~2021, this ratio ~~equaled 2.58%~~was 1.86% compared to ~~2.36%~~1.91% for the three months ended ~~September~~June 30, ~~2016.~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, the ratio ~~equaled 2.58%~~was 1.78% compared to ~~2.55%~~2.19% for the ~~nine month period~~six months ended ~~September~~June 30, ~~2016, respectively, reflecting higher net non-interest expenses~~ ~~related~~2020, respectively. The decrease in this ratio was mainly due to ~~our growth strategy of adding and relocating stores.~~

the increase in average assets.

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~~June 30, ~~2017,~~2021, the operating efficiency ratio was ~~89.2%,~~79.6% compared to ~~88.7%~~86.4% for the three months ended ~~September~~June 30, ~~2016.~~2020. The efficiency ratio ~~equaled 89.1%~~was 74.8% for ~~both~~ the ~~nine~~six months ended ~~September~~June 30, ~~2017 and~~2021 compared to 92.8% for the ~~same period in 2016.~~six months ended June 30, 2020. The decrease for the three and six months ended ~~September~~June 30, ~~2017~~2021 versus ~~September~~June 30, ~~2016~~2020 was due to ~~both~~ net interest income and non-interest income increasing at a ~~slower~~faster rate than non-interest expenses.

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

We recorded a provision for income taxes in the amount of ~~$4,000~~$1.9 million for the three months ended ~~September~~June 30, ~~2017,~~2021, compared to a ~~$32,000 benefit~~$675,000 provision for income taxes for the three months ended ~~September~~June 30, ~~2016.~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, we recorded a ~~benefit~~provision for income taxes of ~~$38,000~~$4.2 million compared to a ~~$69,000 benefit~~provision for income taxes of $345,000 for the ~~nine~~six months ended ~~September~~June 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.2020. The effective tax rates for the ~~three-month periods~~three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were ~~30%~~24% and ~~25%~~21%, ~~respectively,~~respectively. For the six months ended June 30, 2021 and 2020, the effective tax rates were 24% and 15%, respectively. The difference in effective tax rates for both the ~~nine~~three and six month ~~periods~~period ended ~~September~~June 30, ~~2017~~2020 was a result of the impact of temporary and ~~2016 were 29% and 24%, respectively, excluding an adjustment to~~permanent differences included in the ~~deferred tax asset valuation allowance.~~

calculation of the provision for loan losses. These differences have a more significant impact on the effective rate when the income before the provision for taxes are at lower levels as was the case during 2020.

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) 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 financial institutions and their 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") for federal income tax purposes can generally be carried back two years and carried forward for a period of twenty years. In order to realize our deferred tax assets, we must generate sufficient taxable income in such future years.

In assessing the need for a valuation allowance, 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~~

The Company is in a three year cumulative profit position factoring in pre-tax GAAP income and permanent book/tax differences. Growth in interest-earning assets is expected to continue and is supported by the capital raise completed during 2020. The ratio of non-performing assets to total assets along with other credit quality metrics continue to improve. A number of cost control measures have been implemented to offset the challenges faced in growing revenue as a result of compression in the net interest margin. The Company has added fourteen store locations in the past four years and since the inception of the growth and expansion strategy in 2014, almost every new store location has met or exceeded expectations. The success of the expansion strategy, combined with the stabilization of interest rates and continued loan growth are expected to continue to support improvement in profitability going forward. As of December 31, 2020, the Company has no federal NOLs to carry forward which would have potentially been at risk of expiring in the future.

Conversely, the effects of the COVID-19 pandemic to the local and global economy may result in a significant increase in future loan loss provisions and charge-offs. Rising interest rates and a downturn in the economy could significantly decrease the volume of mortgage loan originations.

Based on the guidance provided in ASC 740, we believed that the positive evidence ~~evaluated when considering~~considered at June 30, 2021 and December 31, 2020 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~~$11.0 million as of ~~September~~June 30, ~~2017~~2021 and ~~$21.4~~$12.0 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.

2020. 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 available to common shareholders for the three months ended ~~September~~June 30, ~~2017~~2021 was ~~$2.3~~$5.1 million, an increase of ~~$981,000,~~$2.5 million, compared to ~~$1.3~~$2.5 million recorded for the three months ended ~~September~~June 30, ~~2016.~~

~~Net income for the nine months ended September 30, 2017 was $6.2 million, an increase of $2.7 million, compared to $3.4 million recorded for the nine months ended September 30, 2016.~~2020. The increase in ~~net income for the nine months ended September 30, 2017~~earnings year over year was ~~due to~~primarily driven by a ~~$10.5 million~~37% increase in net interest ~~income, a $4.5 million increase in non-interest income and a $1.1 million decrease in the provision~~income. The net interest margin increased to 2.65% for ~~loan losses, partially offset by a $13.3 million increase in non-interest expenses.~~

~~For~~ the three month period ended ~~September~~June 30, ~~2017,~~2021 compared to 2.55% for the three month period ended June 30, 2020.

Net income available to common shareholders for the six months ended June 30, 2021 was $11.3 million, an increase of $9.3 million, compared to $1.9 million recorded for the six months ended June 30, 2020. The increase in earnings year over year was primarily driven by a 43.7% increase in net interest income. In addition, the net interest margin increased to 2.80% for the six month period ended June 30, 2021 compared to 2.64% for the six month period ended June 30, 2020.

For the three month periods ended June 30, 2021 and June 30, 2020, basic net income per common share was $0.09 and $0.04 ~~compared to $0.04 for the three months ended September 30, 2016 and fully-diluted~~while 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.~~$0.08 and $0.04. For the ~~nine months~~six month periods ended ~~September~~June 30, ~~2016,~~2021 and June 30, 2020, basic ~~and fully-diluted~~ net income per common share was ~~$0.11 compared to $0.09 for the nine months ended September 30, 2016.~~$0.19 and $0.03 while diluted net income per common share was $0.17 and $0.03.

Return on Average Assets and Average Equity

Return on average assets ~~(ROA)~~(“ROA”) measures our net income in relation to our total average assets. ~~Our annualized~~The ROA for the three months ended ~~September~~June 30, ~~2017~~2021 was ~~0.45%~~0.48%, compared to ~~0.32%~~0.26% for the three months ended ~~September~~June 30, ~~2016.~~2020. The ROA for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 was ~~0.41%~~0.55% and ~~0.30%~~0.11%, respectively. Return on average equity ~~(ROE)~~(“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%~~7.56% for the three months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~4.49%~~3.98% for the three months ended ~~September~~June 30, ~~2016.~~2020. The ROE for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 was ~~3.74%~~8.38% and ~~3.93%~~1.53%, 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~~$436.7 million and ~~$215.9~~$428.9 million, and standby letters of credit of approximately ~~$11.9~~$25.6 million and ~~$5.7~~$16.6 million, at ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively. These financial instruments constitute off-balance sheet arrangements. Commitments often expire without being drawn upon. Substantially all of the ~~$266.1~~$462.3 million of commitments to extend credit at ~~September~~June 30, ~~2017~~2021 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~~The Company evaluates 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~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 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. 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 ~~the rule. Institutions that do not maintain this required capital buffer will become subject to progressively more stringent limitations on the percentage~~an amount greater than 2.5% of ~~earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management.~~

total risk-weighted assets.

~~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%

The risk-based capital ratios measure the adequacy of a bank's capital against the riskiness of its assets and off-balance sheet activities. Failure to maintain adequate capital is a basis for "prompt corrective action" or other regulatory enforcement action. In assessing a 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 overall ability to monitor and control risks.

Management believes that the Company and Republic met, as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, all applicable capital adequacy ~~requirements~~ ~~under the Basel III Capital Rules on a fully phased-in basis as if all such requirements were currently in effect.~~ requirements. 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 category.~~

this categorization.

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~~our regulatory capital ~~regulatory~~ ratios ~~for both Republic and the Company as of September~~at June 30, ~~2017,~~2021, and December 31, ~~2016 (dollars~~2020.

(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 June 30, 2021:

Total risk-based capital
Republic	$	330,703		12.77	%	$	207,102		8.00	%	$	271,822		10.50	%	$	258,878		10.00	%
Company		345,783		13.31	%		207,874		8.00	%		272,835		10.50	%		-		-	%
Tier 1 risk-based capital
Republic		314,593		12.15	%		155,327		6.00	%		220,046		8.50	%		207,102		8.00	%
Company		329,673		12.69	%		155,906		6.00	%		220,866		8.50	%		-		-	%
CET 1 risk-based capital
Republic		314,593		12.15	%		116,495		4.50	%		181,214		7.00	%		168,271		6.50	%
Company		270,348		10.40	%		116,929		4.50	%		181,890		7.00	%		-		-	%
Tier 1 leveraged capital
Republic		316,360		6.96	%		180,765		4.00	%		180,765		4.00	%		225,956		5.00	%
Company		320,440		7.28	%		181,159		4.00	%		181,159		4.00	%		-		-	%

At December 31, 2020:

Total risk-based capital
Republic	$	298,291		12.36	%	$	193,062		8.00	%	$	253,394		10.50	%	$	241,327		10.00	%
Company		326,554		13.50	%		193,498		8.00	%		253,967		10.50	%		-		-	%
Tier 1 risk-based capital
Republic		285,316		11.82	%		144,796		6.00	%		205,128		8.50	%		193,062		8.00	%
Company		313,579		12.96	%		145,124		6.00	%		205,592		8.50	%		-		-	%
CET 1 risk-based capital
Republic		285,316		11.82	%		108,597		4.50	%		168,929		7.00	%		156,863		6.50	%
Company		254,254		10.51	%		108,843		4.50	%		169,311		7.00	%		-		-	%
Tier 1 leveraged capital
Republic		287,114		7.44	%		153,414		4.00	%		153,414		4.00	%		191,767		5.00	%
Company		308,113		8.17	%		153,621		4.00	%		153,621		4.00	%		-		-	%

Dividend Policy

On August 26, 2020, the Company completed an offering of 2,000,000 shares of 7.00% Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share (the “Series A Preferred Stock”), at a price of $25.00 per share. The Company received net proceeds of $48.3 million from the offering, after deducting offering costs. The Company will pay dividends on the Series A Preferred Stock when and if declared by its board of directors or an authorized committee thereof. If declared, dividends will be due and payable at a rate of 7.00% per annum, payable quarterly in ~~thousands):~~arrears on March 1, June 1, September 1, and December 1 of each year. During the three month and six month period ended June 30, 2021, dividends of $875,000 and $1.8 million were declared and paid on preferred stock compared to $923,000 during the three month period ended December 31, 2020.

(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 % - - %

~~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 on common stock in ~~2017.~~2021. 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~~$766.7 million at ~~September~~June 30, ~~2017,~~2021, compared to ~~$34.6~~$775.3 million at December 31, ~~2016.~~2020. Loan maturities and repayments are another source of asset liquidity. At ~~September~~June 30, ~~2017,~~2021, Republic estimated that more than ~~$90.0~~$125.0 million of loans would mature or repay in the six-month period ending ~~March~~December 31, ~~2018.~~2021. 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~~June 30, ~~2017,~~2021, we had outstanding commitments (including unused lines of credit and letters of credit) of ~~$278.0~~$462.3 million. Certificates of deposit scheduled to mature in one year totaled ~~$73.5~~$145.3 million at ~~September~~June 30, ~~2017.~~2021. 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 million~~$1.2 billion at ~~September~~June 30, ~~2017.~~2021. At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, we had no outstanding term borrowings ~~with the FHLB. At September 30, 2017~~ and ~~December 31, 2016, we had~~ no outstanding ~~short-term~~overnight borrowings with the FHLB. As of ~~September~~June 30, ~~2017,~~2021 and December 31, 2020, FHLB had issued letters of credit, on ~~Republic's~~Republic’s behalf, totaling ~~$75.0~~$150.0 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~~June 30, ~~2017~~2021 and December 31, ~~2016.~~2020. As part of the CARES Act, the Federal Reserve Bank of Philadelphia offered secured discounted borrowing capacity to banks that originated PPP loans through the Paycheck Protection Program Liquidity Facility or PPPLF program. At June 30, 2021, the Company pledged $388 million of PPP loans to the Federal Reserve Bank of Philadelphia to borrow $388 million of funds at a rate of 0.35%. At December 31, 2020, the Company pledged $634 million of PPP loans to the Federal Reserve Bank of Philadelphia to borrow $634 million of funds at a rate of 0.35%.

Investment Securities Portfolio

At ~~September~~June 30, ~~2017,~~2021, 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 SBAs, CMOs, MBSs, municipal securities, and corporate ~~bonds, ABSs, and CDOs. Available-for-sale~~bonds. Available for sale securities totaled ~~$377.8~~$764.7 million and ~~$369.7~~$528.5 million as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively. At ~~September~~June 30, ~~2017, the portfolio~~2021, securities classified as available for sale had a net unrealized loss of ~~$8.0 million~~$239,000 and a net unrealized ~~loss~~gain of ~~$10.7~~$1.3 million at December 31, ~~2016.~~

2020.

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~~$45.0 million at ~~September~~June 30, ~~2017.~~ 2021. Individual customers may have several loans often secured by different collateral.

Credit Quality

~~Republic's~~

Republic’s written lending policies require ~~specified~~specific 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 in full 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 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%

	June 30, 2021			December 31, 2020
Loans accruing, but past due 90 days or more	$	996		$	612
Non-accrual loans		12,051			12,246
Total non-performing loans		13,047			12,858
Other real estate owned		852			1,188
Total non-performing assets	$	13,899		$	14,046

Non-performing loans as a percentage of total loans, net of unearned income		0.64	%		0.49	%
Non-performing assets as a percentage of total assets		0.26	%		0.28	%

Non-performing asset balances decreased by ~~$6.2 million~~$147,000 to ~~$22.9~~$13.9 million as of ~~September~~June 30, ~~2017~~2021 from ~~$29.1~~$14.0 million at December 31, ~~2016.~~2020. Non-accrual loans decreased ~~$7.6 million~~$195,000 to ~~$11.0~~$12.0 million at ~~September~~June 30, ~~2017,~~2021, from ~~$18.6~~$12.2 million at December 31, ~~2016. The decrease~~2020 due primarily to $1.3 million in ~~non-accrual loans was primarily driven~~transfers offset by ~~one loan relationship that was returned to accrual status~~payments of $1.5 million during the ~~third quarter of 2017. This loan was restructured earlier~~six months ended June 30, 2021. There were $996,000 in ~~the year as a result of a reduction in tenant vacancies in the property held as collateral. Loans~~loans accruing, but past due 90 days or more ~~increased~~at June 30, 2021 compared to ~~$2.7 million at September 30, 2017 from $302,000~~$612,000 at December 31, ~~2016.~~2020. At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, 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~~June 30, ~~2017~~2021 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

2020.

(dollars in thousands)	June 30,		December 31,
	2021		2020
30 to 59 days past due	$	57	$	2,321
60 to 89 days past due		2,923		938
Total loans 30 to 89 days past due	$	2,980	$	3,259

Loans with payments 30 to 59 days past due decreased to $57 thousand at June 30, 2021. This decrease was driven primarily by $2.25 million in loans that are now current. Loans with payments 60 to 89 days past due increased to $2.9 million at June 30, 2021 due to the addition of a loan in the amount of $2.9 million offset by $900 thousand in loans that are now current.

Other Real Estate Owned

The balance of other real estate owned ~~decreased to $9.2 million~~was $852 thousand at ~~September~~June 30, ~~2017 from $10.2 million at~~2021 and December 31, ~~2016.~~2020. The following table presents a reconciliation of other real estate owned for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2021 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

2020:

(dollars in thousands)	June 30, 2021			December 31, 2020
Beginning Balance, January 1^st	$	1,188		$	1,730
Additions		168			233
Valuation adjustments		(350	)		(31	)
Dispositions		(154	)		(744	)
Ending Balance	$	852		$	1,188

At ~~September~~June 30, ~~2017,~~2021, we had no credit exposure to ~~"highly~~“highly leveraged ~~transactions"~~transactions” as defined by the FDIC.

Allowance for Loan Losses

We have elected to defer the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as permitted by the Economic Aid Act approved in December 2020 until January 1, 2022.

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.~~impaired pursuant to ASC 310-10 (“non-impaired loans”). This component is calculated for all non-impaired loans on a collective basis in accordance with ASC 450 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~~a 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~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, and the twelve months ended December 31, ~~2016~~2020 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 six months ended June 30, 2021			For the twelve months ended December 31, 2020			For the six months ended June 30, 2020

Balance at beginning of period	$	12,975		$	9,266		$	9,266
Charge‑offs:
Commercial real estate		-			-			-
Construction and land development		-			-			-
Commercial and industrial		60			333			51
Owner occupied real estate		-			48			48
Consumer and other		47			107			65
Residential mortgage		-			67			50
Paycheck protection program		-			-			-
Total charge‑offs		107			555			214
Recoveries:
Commercial real estate		-			-			-
Construction and land development		-			3			2
Commercial and industrial		150			48			27
Owner occupied real estate		40			1			1
Consumer and other		52			12			8
Residential mortgage		-			-			-
Paycheck protection program		-			-			-
Total recoveries		242			64			38
Net charge‑offs/(recoveries)		(135	)		491			176
Provision for loan losses		3,000			4,200			1,950
Balance at end of period	$	16,110		$	12,975		$	11,040

Average loans outstanding⁽¹⁾	$	2,667,572		$	2,359,169		$	2,071,941
As a percent of average loans:⁽¹⁾
Net charge‑offs (annualized)		(0.01	%)		0.02	%		0.02	%
Provision for loan losses (annualized)		0.23	%		0.18	%		0.19	%
Allowance for loan losses		0.61	%		0.55	%		0.53	%
Allowance for loan losses to:
Total loans, net of unearned income		0.64	%		0.49	%		0.43	%
Total non‑performing loans		123.48	%		100.91	%		86.81	%

⁽¹⁾Includes non-accruing loans.

We did not record a provision for loan losses ~~during~~ for the three month period ended ~~September~~June 30, ~~2017. A~~2021 and a $3.0 million provision ~~in the amount of $500,000~~ was recorded for the ~~nine month period~~six months ended ~~September~~June 30, ~~2017.~~2021. We recorded a provision for loan losses of ~~$607,000~~$1.0 million for the three month period ended ~~September~~June 30, ~~2016~~2020 and ~~$1.6~~$2.0 million for the ~~nine month period~~six months ended ~~September~~June 30, ~~2016. During~~2020. The provision recorded is charged to operations in an amount necessary to bring the ~~first nine months~~total allowance for loan losses to a level that management believes is adequate to absorb inherent losses in the loan portfolio.

As a result of ~~2017, there was an increase~~the changes in economic conditions caused by the pandemic, we have increased the qualitative factors for certain components included in the allowance ~~required~~ for ~~loans collectively evaluated~~loan loss calculation. We have also taken into consideration the probable impact that the various stimulus initiatives provided through the CARES Act and Economic Aid Act, along with other government programs, may have to assist borrowers during this period of economic stress. We believe the combination of ongoing communication with our customers, loan payment deferrals, increased focus on risk management practices, and access to government programs such as the PPP Program should help mitigate potential future period losses. Although the economy has begun to demonstrate signs of recovery, many key economic indicators have not returned to pre-pandemic levels and the potential for ~~impairment that was driven~~a resurgence in COVID infections remains a possibility. Based on the incurred loss methodology currently utilized by ~~an increase~~the Bank, the provision for loan losses and charge-offs may be impacted in ~~total loans outstanding. During~~future periods, but more time is needed to fully understand 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 valuemagnitude and severity of the ~~collateral supporting this~~economic downturn caused by the COVID pandemic and the corresponding impact on our loan ~~relationship drove the need for an increase in the loan loss provision.~~portfolio.

The allowance for loan losses as a percentage of non-performing loans (coverage ratio) was ~~60.06%~~123.5% at ~~September~~June 30, ~~2017,~~2021, compared to ~~48.45%~~100.9% at December 31, ~~2016~~2020 and ~~48.50%~~86.8% at ~~September~~June 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.~~2020. Total non-performing loans were ~~$13.8~~$13.0 million, ~~$18.9~~$12.9 million, and ~~$19.5~~$12.7 million at ~~September~~June 30, ~~2017,~~2021, December 31, ~~2016~~2020 and ~~September~~June 30, ~~2016,~~2020, respectively.

The increase in the coverage ratio at June 30, 2021 compared to December 31, 2020 was a result of the provision for loan losses for the six months ended June 30, 2021.

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~~$4.3 million at ~~September~~June 30, ~~2017~~2021 and ~~$2.4~~ $1.1 million at December 31, ~~2016.~~

2020.

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

(dollars in thousands)	June 30, 2021			December 31, 2020
Total nonperforming loans	$	13,047		$	12,858
Nonperforming and impaired loans with partial charge-offs		4,288			4,398

Ratio of nonperforming loans with partial charge-offs to total loans		0.17	%		0.17	%
Ratio of nonperforming loans with partial charge-offs to total nonperforming loans		32.87	%		34.20	%
Coverage ratio net of nonperforming loans with partial charge-offs		375.70	%		295.02	%

(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 %

Our charge-off policy is reviewed on an annual basis and updated as necessary. During the ~~nine~~six month period ended ~~September~~June 30, ~~2017,~~2021, 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~~2020 filed with the SEC on March ~~10, 2017.~~

11, 2021.

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~~June 30, ~~2017~~2021 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~~June 30, ~~2017.~~

2021.

Limitations on the Effectiveness of Controls

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

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

Significant risk factors could adversely affect the ~~Company's~~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 and Form 10-Q for the quarter ended June 30, 2017. The risk factors in the Company's Annual Report on Form 10-K have not materially changed.~~2020. 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.

ITEM 6. EXHIBITS

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

Exhibit Number	Description	Location

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

3.2	Amended and Restated ~~By-Laws~~By-laws of Republic First Bancorp, Inc.	Incorporated by reference to Form ~~S-1~~10-Q filed ~~April 23, 2010 (333-166286)~~May 11, 2020

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~~Vernon W. Hill, II	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~~June 30,~~, 2017~~, 2021, formatted in ~~XBRL (eXtensible Business Reporting Language);~~Inline XBRL; (i) Consolidated Balance Sheets as of ~~September~~June 30,~~, 2017~~ 2021 and December 31, ~~2016,~~2020, (ii) Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30,~~, 2017~~ 2021 and ~~2016,~~2020, (iii) Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three and ~~nine~~six months ended ~~September~~June 30,~~, 2017~~ 2021 and ~~2016,~~2020, (iv) Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30,~~, 2017~~ 2021 and ~~2016,~~2020, (v) Consolidated Statements of Changes in ~~Shareholders'~~Shareholders’ Equity for the ~~nine~~three and six months ended ~~September~~June 30,~~, 2017~~ 2021 and ~~2016,~~2020, and (vi) Notes to Consolidated Financial Statements.

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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~~August 9, 2021	By:	/s/ ~~Harry D. Madonna~~Vernon W. Hill, II
		~~Harry D. Madonna~~ Vernon W. Hill, II
		~~President and~~ Chief Executive Officer (principal executive officer)

Date: ~~November 3, 2017~~August 9, 2021	By:	/s/ Frank A. Cavallaro
		Frank A. Cavallaro
		Executive Vice President and Chief Financial Officer (principal financial and accounting officer)

6769

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~~ 58,886,153
Title of Class	Number of Shares Outstanding as of ~~November 2, 2017~~August 6, 2021

REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS

Part I: Financial Information		Page

Item 1.	Financial Statements
	Consolidated balance sheets as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (unaudited)	1 3
	Consolidated statements of income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)	2 4
	Consolidated statements of comprehensive income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)	35
	Consolidated statements of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)	4 6
	Consolidated statements of changes in ~~shareholders'~~shareholders’ equity for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)	5 7
	Notes to consolidated financial statements (unaudited)	6 8

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

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	64 66

Item 4.	Controls and Procedures	64 66

Part II: Other Information

Item 1.	Legal Proceedings	65 67

Item 1A.	Risk Factors	65 67

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65 67

Item 3.	Defaults Upon Senior Securities	65 67

Item 4.	Mine Safety Disclosures	65 67

Item 5.	Other Information	65 67

Item 6.	Exhibits	66 68

Signatures		67 69

	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

	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%

	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

	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

	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		-		-		-		-		-

	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