2021

(Dollars in thousands, except per share data)

	June 30, 2022 (unaudited)			December 31, 2021
ASSETS
Cash and due from banks	$	16,423		$	14,072
Interest bearing deposits with banks		69,733			104,812
Cash and cash equivalents		86,156			118,884
Investment securities available for sale, at fair value		1,111,672			1,075,366
Investment securities held to maturity, at amortized cost (fair value of $1,400,045 and $1,647,360, respectively)		1,600,085			1,660,292
Equity securities		6,793			9,173
Restricted stock, at cost		15,528			3,510
Mortgage loans held for sale, at fair value		5,670			8,538
Other loans held for sale		4,759			5,224
Loans receivable (net of allowance for credit losses of $19,127 and $18,964, respectively)		2,731,556			2,488,401
Premises and equipment, net		130,498			127,440
Other real estate owned, net		230			360
Accrued interest receivable		16,381			15,073
Operating lease right-of-use asset		75,271			75,627
Other assets		72,283			38,768
Total Assets	$	5,856,882		$	5,626,656
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Demand – non-interest bearing	$	1,425,659		$	1,404,360
Demand – interest bearing		2,294,931			2,283,779
Money market and savings		1,342,883			1,305,096
Time deposits		149,553			197,945
Total Deposits		5,213,026			5,191,180
Other borrowings		292,500			-
Accrued interest payable		498			550
Other liabilities		22,954			17,636
Operating lease liability		81,700			81,770
Subordinated debt		11,281			11,278
Total Liabilities		5,621,959			5,302,414
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; shares issued 1,471,000 as of June 30, 2022 and 2,000,000 as of December 31, 2021; shares outstanding 1,471,000 as of June 30, 2022 and 2,000,000 as of December 31, 2021		15			20
Common stock, par value $0.01 per share: 100,000,000 shares authorized; shares issued 64,284,805 as of June 30, 2022 and 59,471,998 as of December 31, 2021; shares outstanding 63,755,960 as of June 30, 2022 and 58,943,153 as of December 31, 2021		643			595
Additional paid in capital		326,031			324,618
Retained earnings		20,474			13,591
Treasury stock at cost (503,408 shares as of June 30, 2022 and December 31, 2021)		(3,725	)		(3,725	)
Stock held by deferred compensation plan (25,437 shares as of June 30, 2022 and December 31, 2021)		(183	)		(183	)
Accumulated other comprehensive loss		(108,332	)		(10,674	)
Total Shareholders’ Equity		234,923			324,242
Total Liabilities and Shareholders’ Equity	$	5,856,882		$	5,626,656

~~(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~~2022 and ~~2016~~

2021

(Dollars in thousands, except per share data)

(unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2022			2021		2022			2021
Interest income:
Interest and fees on taxable loans	$	26,994		$	28,033	$	52,651		$	57,500
Interest and fees on tax-exempt loans		557			427		968			863
Interest and dividends on taxable investment securities		14,248			6,752		27,445			13,145
Interest and dividends on tax-exempt investment securities		340			78		483			153
Interest on federal funds sold and other interest-earning assets		85			64		125			113
Total interest income		42,224			35,354		81,672			71,774
Interest expense:
Demand- interest bearing		2,528			3,282		4,738			6,540
Money market and savings		779			932		1,574			2,050
Time deposits		222			427		468			966
Other borrowings		295			74		352			147
Total interest expense		3,824			4,715		7,132			9,703
Net interest income		38,400			30,639		74,540			62,071
Provision for credit losses		(380	)		-		240			3,000
Net interest income after provision for credit losses		38,780			30,639		74,300			59,071
Non-interest income:
Loan and servicing fees		694			660		1,189			1,293
Mortgage banking income		888			2,908		2,003			7,472
Gain on sales of SBA loans		684			633		1,211			1,394
Service fees on deposit accounts		3,108			3,260		6,575			7,220
Gain on sale or call of investment securities		-			2		-			2
Other non-interest income		(501	)		217		(1,758	)		574
Total non-interest income		4,873			7,680		9,220			17,955
Non-interest expenses:
Salaries and employee benefits		16,349			14,855		30,881			29,576
Occupancy		3,468			3,831		7,400			7,608
Depreciation and amortization		2,149			2,015		4,262			4,309
Legal		6,859			294		7,326			511
Other real estate owned		(111	)		493		92			591
Appraisal and other loan expenses		54			545		387			1,259
Advertising		233			119		444			290
Data processing		1,136			1,762		4,035			3,519
Insurance		169			299		481			634
Professional fees		1,055			763		2,020			1,571
Debit card processing		906			798		1,732			1,784
Regulatory assessments and costs		1,077			881		2,189			1,607
Taxes, other		790			783		1,314			1,105
Other operating expenses		3,653			3,081		6,882			5,502
Total non-interest expense		37,787			30,519		69,445			59,866
Income before provision for income taxes		5,866			7,800		14,075			17,160
Provision for income taxes		1,368			1,866		3,458			4,158
Net income	$	4,498		$	5,934	$	10,617		$	13,002
Preferred stock dividends		644			875		1,510			1,750
Net income available to common shareholders	$	3,854		$	5,059	$	9,107		$	11,252
Net income per share
Basic earnings per common share	$	0.06		$	0.09	$	0.15		$	0.19
Diluted earnings per common share	$	0.06		$	0.08	$	0.14		$	0.17

~~(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 (Loss) Income

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~

2021

(Dollars in thousands)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

Net income	$	4,498		$	5,934		$	10,617		$	13,002

Other comprehensive (loss) income, net of tax
Unrealized (losses) gains on securities (pre-tax $(62,512), $7,949, ($131,318), and ($1,559), respectively)		(46,654	)		5,937			(98,006	)		(1,161	)
Reclassification adjustment for securities gains (pre-tax ($-), ($2), ($-), and ($2), respectively)		-			(1	)		-			(1	)
Net unrealized (losses) gains on securities		(46,654	)		5,936			(98,006	)		(1,162	)
Amortization of net unrealized holding losses to income during the period (pre-tax $212, $660, $466, and $1,498 respectively)		158			489			348			1,117

Total other comprehensive (loss) income		(46,496	)		6,425			(97,658	)		(45	)

Total comprehensive (loss) income	$	(41,998	)	$	12,359		$	(87,041	)	$	12,957

~~(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~~2022 and ~~2016~~

2021

(Dollars in thousands)

(unaudited)

	_{Six Months Ended June 30,}
	2022			2021
Cash flows from operating activities
Net income	$	10,617		$	13,002
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		240			3,000
Write-down of other real estate owned		86			350
Depreciation and amortization		4,262			4,309
Stock based compensation		829			1,029
Gain on sale or call of investment securities		-			(2	)
Fair value adjustment on equity securities		2,380			(202	)
Amortization of premiums on investment securities		2,834			4,291
Accretion of discounts on retained SBA loans		(612	)		(455	)
Fair value adjustments on SBA servicing assets		670			298
Proceeds from sales of SBA loans originated for sale		12,436			13,350
SBA loans originated for sale		(10,760	)		(11,428	)
Gains on sales of SBA loans originated for sale		(1,211	)		(1,376	)
Proceeds from sales of mortgage loans originated for sale		60,356			276,657
Mortgage loans originated for sale		(56,513	)		(232,663	)
Fair value adjustment for mortgage loans originated for sale		190			1,824
Gains on mortgage loans originated for sale		(1,582	)		(7,661	)
Amortization of debt issuance costs		3			3
Non-cash expense related to leases		286			204
Repayment of operating lease liabilities		(2,774	)		(2,767	)
Increase in accrued interest receivable and other assets		(2,435	)		(443	)
Net increase (decrease) in accrued interest payable and other liabilities		8,116			(3,752	)
Net cash provided by operating activities		27,418			57,568

Cash flows from investing activities
Purchase of investment securities available for sale		(247,895	)		(308,819	)
Purchase of investment securities held to maturity		(51,145	)		(378,895	)
Proceeds from the paydown, maturity, or call of securities available for sale		79,116			68,905
Proceeds from the paydown, maturity, or call of securities held to maturity		110,140			135,327
Net purchase of restricted stock		(12,018	)		(471	)
Net increase (decrease) in loans		(244,816	)		124,341
Net proceeds from sale of other real estate owned		329			155
Premises and equipment expenditures		(7,320	)		(4,814	)
Net cash used in investing activities		(373,609	)		(364,271	)

Cash flows from financing activities
Proceeds from exercise of stock options		627			92
Increase in demand, money market and savings deposits		70,238			545,121
Net increase (decrease) in time deposits		(48,392	)		996
Net (repayment) increase in other borrowings		292,500			(246,357	)
Preferred stock dividends paid		(1,510	)		(1,750	)
Net cash provided by financing activities		313,463			298,102

Net (decrease) in cash and cash equivalents		(32,728	)		(8,601	)
Cash and cash equivalents, beginning of year		118,884			775,300
Cash and cash equivalents, end of period	$	86,156		$	766,699

Supplemental disclosures
Interest paid	$	7,070		$	9,370
Income taxes paid	$	3,190		$	6,905
Non-cash transfers from loans receivable to other real estate owned	$	285		$	168
Non-cash transfers from loans held for sale to loans receivable	$	476		$	-
Lease liabilities arising from obtaining right-of-use assets	$	2,687		$	8,122

~~(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, 2022 and 2021

(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, 2022	$	15		$	643	$	325,479		$	16,620		$	(3,725	)	$	(183	)	$	(61,836	)	$	277,013
Net income										4,498												4,498
Preferred stock dividends paid (1)										(644	)											(644	)
Other comprehensive loss, net of tax																			(46,496	)		(46,496	)
Stock based compensation							540															540
Units vested (9,564 shares)					-		-															-
Options exercised (3,725 shares)							12															12

Balance June 30, 2022	$	15		$	643	$	326,031		$	20,474		$	(3,725	)	$	(183	)	$	(108,332	)	$	234,923

Balance January 1, 2022	$	20		$	595	$	324,618		$	13,591		$	(3,725	)	$	(183	)	$	(10,674	)	$	324,242
Adjustment for adoption of ASC 2016-13, net of tax										(2,224	)											(2,224	)
Net income										10,617												10,617
Preferred stock dividends paid (2)										(1,510	)											(1,510	)
Other comprehensive loss, net of tax																			(97,658	)		(97,658	)
Stock based compensation							829															829
Conversion of preferred stock to common stock (529,000 shares and 4,408,324 shares)		(5	)		44		(39	)														-
Units vested (176,475 shares)					2		(2	)														-
Options exercised (228,008 shares)					2		625															627

Balance June 30, 2022	$	15		$	643	$	326,031		$	20,474		$	(3,725	)	$	(183	)	$	(108,332	)	$	234,923

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

(1)	Dividends per share of $0.44 and $0.44 were declared and paid on preferred stock for the three months ended June 30, 2022 and June 30, 2021

(2)	Dividends per share of $0.88 and $0.88 were declared and paid on preferred stock for the six months ended June 30, 2022 and 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~~The wholly owned subsidiary, Republic First Bank, ~~which~~ does business under the name of Republic Bank ~~("Republic"~~(“Republic”). Republic is a Pennsylvania ~~state chartered~~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~~branch locations in Philadelphia, Montgomery, Delaware and Bucks in Pennsylvania, Camden, Burlington, Atlantic and Gloucester, ~~Counties.~~ ~~On July 28,~~ New Jersey and New York County. 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. In 2018,Oak Mortgage was merged with and into Republic and restructured as a division of Republic. The Oak Mortgage name is ~~headquartered in Marlton, NJ~~still utilized for marketing and ~~is licensed to do business in Pennsylvania, Delaware, New Jersey, and Florida.~~ 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~~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"~~(“U.S. 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 month periods~~six-month period ended ~~September~~June 30, ~~2017~~ 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2022 or for any other period.

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 for Sale~~

~~Loans held for sale are originated~~the public health response to contain it resulted in unprecedented economic and ~~held until sold to permanent investors. On July 28, 2016, management elected to adopt~~financial market conditions around the ~~fair value option~~world that has affected daily living and negatively impacted the global economy. Additionally, more recent geopolitical (including the conflict in ~~accordance with FASB Accounting Standards Codification ("ASC") 820,~~ ~~Fair Value Measurements~~Ukraine), inflationary pressures, and ~~Disclosures, and record loans held for sale at fair value.~~

The fair value is determined on a recurring basis by utilizing quoted prices from dealers in such securities. Gains and losses on loan sales are recorded in non-interest income and 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~~hikes by the Board of Governors of the Federal Reserve System (“Federal Reserve”) have added even further uncertainty to the ~~origination~~overall economic environment. In response to the conditions initially surrounding the COVID-19 outbreak, the Federal Reserve reduced the federal funds target range by 150 basis points to 0.00% to 0.25% as of March 2020. Conversely, during the first half of 2022, the federal funds target range increased by 150 basis points to a ~~mortgage that will be held~~range of 1.50% - 1.75% to curb inflation, with continued increases planned.

The effects of the COVID-19 pandemic, geopolitical conflict, inflationary pressures, and higher interest rates may meaningfully impact loan production, income levels, and the measurement of certain significant estimates such the allowance for ~~sale upon funding are considered derivative instruments under~~credit losses. Moreover, if in a period of economic contraction, elevated levels of credit losses and reduced interest income may occur. The extent to which the ~~derivatives and hedging accounting guidance FASB ASC 815,~~ ~~Derivatives and Hedging. Loan commitments that are derivatives are recognized at fair value~~economic environment has a further impact on the ~~balance sheet~~Company's business, results of operations, and financial condition, as ~~other assets~~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 current economic environment and actions taken by governmental authorities and other ~~liabilities with changes~~third parties in ~~their fair values recorded as mortgage banking income in non-interest income in~~response to the ~~statements of income. Outstanding IRLCs are subject to interest rate risk~~COVID-19 pandemic, geopolitical conflict, 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~~

inflationary pressure.

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

Significant estimates are made by management in determining the allowance for ~~loan~~credit losses ~~carrying values of other real estate owned, assessment of other than temporary impairment ("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.

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 in 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 11: Derivatives and Risk Management Activities for further detail of IRLCs.

Use of Estimates

Significant estimates are made by management in determining the allowance for credit losses for in-scope financial instruments including investments of debt securities, loans, unfunded commitments, 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~~credit losses, management considers current economic conditions, past loss experience, ~~diversification~~composition 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~~credit 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~~credit losses and the carrying values of other real estate owned could differ materially in the near term.

~~In estimating OTTI~~

The Company adopted ASU 2016-13,Financial Instruments-Credit Losses (Topic 326): Measurement of ~~investment securities, securities~~Credit Losses on Financial Instruments for their current expected credit losses (“CECL”) effective January 1, 2022. Our implementation process included, among other things, assessment and documentation of governance and reporting processes and related internal controls; model development, documentation and validation; and the incorporation of qualitative adjustments for model limitations. ASU 2016-13 lists several credit loss methods that 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 criteriaacceptable such as ~~the reasons underlying the decline, the magnitude~~a discounted cash flow method, loss-rate method and ~~duration~~probability of ~~the decline, the intent~~default/loss given default (“PD/LGD”). We contracted with a third-party vendor to ~~hold the security and the likelihood of the Company not being required to sell the security prior to an anticipated recovery~~assist us in the ~~fair value. The term "other-than-temporary" is not intended~~application of ASU 2016-13 and utilize various methodologies such as Vintage, Cohort, and Weighted Average Remaining Maturity to ~~indicate that~~estimate the ~~decline is permanent, but indicates that the prospect~~allowance for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of investment. Once a decline in value is determined to be other-than-temporary, the portion of the decline related to credit ~~impairment is charged to earnings.~~

losses.

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. AnThe establishment of or 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 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,~~ 2022, the only grants outstanding 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.~~

2015.

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 awards is calculated and recognized over the vesting period of the 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,~~ 2022, the maximum number of common shares issuable under the 2014 Plan was ~~5.9~~6.5 million shares. During the ~~nine~~six months ended ~~September~~June 30, ~~2017, 906,500 options~~2022, 714,167 stock units were granted under the 2014 Plan with a fair value of ~~$3,188,984.~~

$3.7 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, 2022, no 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~~ 2022 and ~~2016, 526,624 options~~2021, 837,209 shares and ~~487,550 options~~634,635 shares vested, respectively. Expense is recognized ratably over the period required to vest. ~~At September~~On June 30, ~~2017,~~ 2022, the intrinsic value of the ~~3,038,450~~4,986,181 options outstanding was ~~$12,954,271,~~$1.2 million, while the intrinsic value of the ~~1,379,848~~4,278,625 exercisable (vested) options was ~~$7,764,313.~~$851,000. On June 30, 2021, the intrinsic value of the 5,613,724 options outstanding was $2.1 million, while the intrinsic value of the 3,833,260 exercisable (vested) options was $1.0 million. During the ~~nine~~six months ended ~~September~~June 30, ~~2017, 186,850~~2022, 228,008 options were exercised ~~with~~resulting in cash ~~received~~receipts of ~~$615,226~~$627,000 and ~~14,100~~118,586 options were forfeited with a weighted average grant date fair value of ~~$53,246.~~$227,000. During the ~~nine~~six months ended ~~September~~June 30, ~~2016, 80,375~~2021, 26,375 options were exercised ~~with~~resulting in cash ~~received~~receipts of ~~$226,271~~$92,000 and ~~38,550~~259,326 options were forfeited with a weighted average grant date fair value of ~~$55,920.~~

$487,533.

Information regarding stock ~~based~~option compensation for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2022 and ~~2016~~2021 is set forth below:

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

	2022		2021
Stock based compensation expense recognized	$	223,000	$	785,724
Number of unvested stock options		707,556		1,780,464
Fair value of unvested stock options	$	368,935	$	2,986,049
Amount remaining to be recognized as expense	$	500,238	$	2,353,785

The remaining unrecognized expense amount of ~~$2,966,049~~$500,238 will be recognized ratably as expense through ~~July~~ December 2024.

The Company granted stock units under the 2014 Plan during the six-month period ended June 30, 2022 and 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 and six months ended June 30, 2022 and June 30, 2021:

	Three Months Ended June 30, 2022					Three Months Ended June 30, 2021
	Number of Units			Weighted Average Grant Date Fair Value		Number of Units			Weighted Average Grant Date Fair Value
Beginning balance		1,035,936		$	4.68		515,550		$	3.34
Granted		5,084			4.56		9,663			3.82
Vested		(9,564	)		5.26		-			-
Forfeited		(18,014	)		4.40		(350	)		3.34
Ending balance		1,013,442		$	4.60		524,863		$	3.35

	Six Months Ended June 30, 2022					Six Months Ended June 30, 2021
	Number of Units			Weighted Average Grant Date Fair Value		Number of Units			Weighted Average Grant Date Fair Value
Beginning balance		516,513		$	3.36		-		$	-
Granted		714,167			5.25		530,013			3.35
Vested		(176,475	)		3.88		-			-
Forfeited		(40,763	)		3.42		(5,150	)		3.34
Ending balance		1,013,442		$	4.60		524,863		$	3.35

Information regarding stock unit compensation for the six months ended June 30, 2022 and 2021 is set forth below:

	2022		2021
Stock based compensation expense recognized	$	606,000	$	243,835
Number of unvested stock units		1,013,442		524,863
Fair value of unvested stock units	$	3,799,733	$	1,757,692
Amount remaining to be recognized as expense	$	4,104,128	$	1,513,857

The remaining unrecognized expense amount of $4,104,128 will be recognized ratably as expense through June 2026.

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~~options/units granted through the ~~Company's~~Company’s stock option plans ~~and convertible securities related to~~for the trust preferred securities issued in 2008. In the diluted EPS computation, the after tax interest expense on the trust preferred securities issuance is added back to net income. For the three and ninesix months ended ~~September~~June 30, ~~2017~~ 2022 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, 2021.

The calculation of EPS for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2022 and ~~2016~~2021 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,
	2022		2021		2022		2021

Net income attributable to basic common shareholders	$	3,854	$	5,059	$	9,107	$	11,252

Weighted average shares outstanding		63,748		58,875		61,501		58,868

Net income per share – basic	$	0.06	$	0.09	$	0.15	$	0.19

Preferred stock dividends	$	644	$	875	$	1,510	$	1,750

Net income attributable to diluted common shareholders	$	4,498	$	5,934	$	10,617	$	13,002

Weighted average shares outstanding (including dilutive CSEs)		76,546		76,167		75,889		75,984

Net income per share – diluted	$	0.06	$	0.08	$	0.14	$	0.17

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

Anti-dilutive options are those options with weighted average exercise prices in excess of the weighted average market value for the periods presented.

(in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Anti-dilutive securities

Share based compensation awards		5,444		5,514		5,273		5,689

Convertible preferred stock		-		-		-		-

Total anti-dilutive securities		5,444		5,514		5,273		5,689

Recent Accounting Pronouncements

ASU ~~2014-09~~

~~In May 2014,~~ 2016-13

On January 1, 2022, the ~~FASB issued~~Company adopted 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,~~ -13Financial 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, Financial Instruments-Credit~~Credit Losses (Topic ~~326)~~326): Measurement of Credit Losses on Financial ~~Instruments.~~Instruments (“ASU 2016-13”) (“ASC 326”), as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The ~~ASU requires an organization to measure all~~measurement of expected credit losses ~~for~~under the CECL methodology is applicable to financial assets ~~held~~measured at ~~the reporting date based on historical experience, current conditions,~~amortized cost, including loan receivables and ~~reasonable and supportable forecasts. Financial institutions~~held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other ~~organizations will now use forward-looking information~~similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. In addition, ASC 326 made changes 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 available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities ~~and purchased financial assets with credit deterioration. For the Company, this update~~management does not intend to sell or believes that it is more likely than not they will be ~~effective~~required to sell.

Section 4014 of the CARES Act provided financial institutions with optional temporary relief from having to comply with ASU 2016-13, including the CECL methodology for ~~interim and annual periods beginning after December 15, 2019. The Company has not yet determined~~estimating the ~~impact the adoption of ASU 2016-13 will have~~allowance for credit losses. This temporary relief was set to expire on the ~~consolidated financial statements.~~

~~ASU 2016-15~~

~~In August 2016,~~earlier of the ~~FASB issued ASU 2016-15, Statement~~date on which the national emergency concerning COVID-19 terminated or December 31, 2020, with adoption being effective retrospectively as of ~~Cash Flows (Topic 230). The ASU addresses classification~~January 1, 2020.

Section 540 of ~~certain cash receipts and cash payments~~the Consolidated Appropriations Act, 2021, amended Section 4014 of the CARES Act by extending the relief period provided in the ~~statement of cash flows.~~CARES Act. The ~~new guidance is effective on January 1, 2018, on a retrospective basis, with early adoption permitted. This new accounting guidance~~Consolidated Appropriations Act, 2021, modified the CARES Act so that temporary relief will ~~result in some changes in classification in the Consolidated Statement of Cash Flows, which the Company does not expect will be significant, and will not have a material impact~~expire on the ~~consolidated financial statements. Due to the current nature~~earlier of the Company's operations and financial assets and liabilities in relation to the cash flow classifications impacted by the ASU, the Company has determined that the adoption of ASU 2016-15 will not have a material impact on the Company's financial statements.

~~ASU-2017-01~~

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805). The ASU clarifies the definition of a business in ASC 805. The FASB issued the ASU in response to stakeholder feedback that the definition of a business in ASC 805 is being applied too broadly. In addition, stakeholders said that analyzing transactions under the current definition is difficult and costly. Concerns about the definition of a business were among the primary issues raised in connection with the Financial Accounting Foundation's post-implementation review report on FASB Statement No. 141(R), Business Combinations (codified in ASC 805). The amendments in the ASU are intended to make application of the guidance more consistent and cost-efficient. The ASU is effective for public business entities in annual periods beginning after December 15, 2017, including interim periods therein. For all other entities, the ASU is effective in annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The ASU must be applied prospectively on or after the effective date, and no disclosures for a change in accounting principle are required at transition. Early adoption is permitted for transactions (i.e., acquisitions or dispositions) that occurred before the issuance date or effective date of the standard if the transactions were not reported in financial statements that have been issued or made available for issuance. The Company has not yet determined the impact 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 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 ASU is effective for annual 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 beginningfirst day of the fiscal year that ~~includes that interim period.~~ begins after the date on which the national emergency concerning COVID-19 terminates or January 1, 2022.

The Company elected to delay the implementation of ASU 2016-13 following the approval of the CARES Act and continued to use the incurred loss methodology for estimating the allowance for credit losses in 2020 and 2021. ASU 2016-13 requires financial institutions to calculate an allowance utilizing a reasonable and supportable forecast period which the Company has ~~not yet determined~~established as a one-year period. In the ~~impact~~unprecedented circumstances surrounding the COVID-19 pandemic and the response thereto, the Company believed that adopting ASU 2016-13 in the first quarter of 2020 would have added an unnecessary level of subjectivity and volatility to the calculation of the allowance for credit losses. With the approval of the Consolidated Appropriations Act, 2021, management elected to further delay adoption of ASU ~~2017-08 will have~~2016-13 to January 1, 2022. This allowed the Company to utilize the CECL standard for the entire year of adoption.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet (OBS) credit exposures. Results for reporting periods beginning after January 1, 2022 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net decrease to retained earnings of $2.2 million as of January 1, 2022 for the cumulative effect of adopting ASC 326.

The following table illustrates the impact of ASC 326.

	January 1, 2022
	As Reported				Impact of
	Under		Pre-ASC 326		ASC 326
(In thousands)	ASC 326		Adoption		Adoption
Assets:
Loans	$	2,514,123	$	2,514,123	$	-

ACL on Loans:
Commercial real estate	$	5,892	$	5,802	$	90
Construction and land development		1,841		1,544		297
Commercial and industrial		2,316		2,856		(540	)
Owner occupied real estate		5,207		3,158		2,049
Consumer and other		663		629		34
Residential mortgage		6,025		4,922		1,103
Paycheck protection program		-		-		-
Unallocated		-		53		(53	)
Total ACL on Loans	$	21,944	$	18,964	$	2,980

Liabilities:
ACL on off-balance sheet commitments	$	-	$	-	$	-

Tax effect	$	-	$	-	$	756

Shareholders' equity:	$	-	$	-	$	2,224

ASU 2020-04

In March 2020, the FASB issued ASU 2020-04,Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional guidance for a limited period of time to ease the ~~consolidated~~potential burden in accounting for (or derecognizing the effects of) reference rate reform on financial ~~statements.~~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 criteria are met. These relate only to those contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The ASU became effective as of March 12, 2020 and can be adopted anytime during the period of January 1, 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 maturity date beyond December 31, 2022. The loan documentation for the relationship contains language for an alternative pricing index when LIBOR is no longer available.

ASU 2021-01

In January 2021, the FASB issued ASU 2021-01,Reference Rate Reform (Topic 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 discounting transition, including derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The ASU became effective as of March 12, 2020 and can be adopted anytime during the period of January 1, 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 maturity date beyond December 31, 2022. The loan documentation for the relationship contains language for an alternative pricing index when LIBOR is no longer available.

Note 3: ~~Legal Proceedings~~

Commitments and 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, except as noted below.

On March 8, 2022, George E. Norcross, III, Gregory B. Braca, and Philip Norcross filed a complaint in the Court of Common Pleas of Philadelphia County (Commerce Program) against the Company and Company directors Vernon W. Hill II, Theodore J. Flocco, Jr., Brian Tierney, and Barry Spevak. The complaint seeks, among other things, declaratory and injunctive relief enjoining the Company and the individual defendants from implementing any amendments to the Company’s executive employment agreements until after the Company’s 2022 annual meeting of shareholders or taking any other actions outside the ordinary course of business, including executing or extending any related party agreements or any agreements obligating the incurrence of expenses related to the opening of new branches and the renovation of existing branches, without the affirmative vote of a majority of independent directors.

On March 29, 2022, George E. Norcross, III filed suit in the Philadelphia Court of Common Pleas to compel the Company to make available for inspection the books and records as is required under Pennsylvania law.

As of the date of this filing, Mr. Norcross has filed papers with the Court dismissing the actions without prejudice.

On September 19, 2022, a complaint was filed in the Court of Common Pleas in Philadelphia, Pennsylvania against the Company and its current Interim Chief Executive Officer and director and two other current directors. The lawsuit is styled Vernon Hill et al. v. Lisa Jacobs, et al., Case No.220901684. The two plaintiffs, the former Chairman of the Board and Chief Executive Officer of the Company and a former director of the Company, allege defamation, defamation per se and false light against the three individual defendants. The former Chairman of the Board and Chief Executive Officer also alleges a breach of his employment agreement by the Company. The complaint seeks certain reimbursement payments and compensatory and (as against the individual defendants) punitive damages. The matter is in its early stages and, accordingly, the Company is still assessing the potential outcomes and materiality of the matter. On November 21, 2022, the defendants all filed Preliminary Objections to the Complaint. Plaintiffs’ response to those objections are due in the latter part of December. The Company plans to defend itself vigorously.

The Company is aware that on November 22, 2022, shareholders George E. Norcross, III, Gregory B. Braca and Philip A. Norcross filed a complaint in the same Philadelphia Court of Common Pleas against the Company and its directors. The lawsuit, captioned George E. Norcross, III, et al. v. Republic First Bancorp, Inc. Case No.221102195, complains generally that the Company and its Board have acted in violation of their fiduciary duties by rejecting Plaintiffs’ efforts to nominate Mr. Braca as a director candidate at the upcoming annual meeting of shareholders, scheduled for January 2023. The Company rejected that attempted nomination on grounds that the plaintiff who made the nomination was not a stockholder of record, as the Company’s By-Laws require. Plaintiffs seek injunctive and declaratory relief that includes a demand that the Court waive enforcement of the Company’s By-Laws, reopen the deadline for nominating director candidates or find that the defendants violated the Company’s By-Laws in connection with its appointment of director Benjamin Duster to fill a vacancy on the Board. On December 6, 2022, plaintiffs filed a motion for preliminary injunction and asked defendants to accept service of the complaint, which they have done. The parties are awaiting a conference with the court to set a schedule for proceedings related to plaintiffs’ motion. Given the procedural posture and its early stage, the Company cannot predict potential outcomes of the matter or plaintiffs’ motion; however, the defendants deny the alleged wrongdoing and intend to defend the matter vigorously.

On November 28, 2022, Plaintiffs Vernon Hill (“Hill”) and Interarch, Inc. (“Interarch”) filed an action in the United States District Court for the Eastern District of Pennsylvania, captioned Hill and Interarch v. Republic First Bancorp, Inc. et al., No.2:22-cv-04735. Hill is a former Republic First Bancorp, Inc. (“Republic”) board chair and Chief Executive Officer and a former Republic director. Interarch, owned by Hill’s wife, Shirley Hill, provided certain branding and architecture services to Republic. Plaintiffs Hill and Interarch bring claims against Defendants Republic and two Republic employees (who are former Interarch employees), Rodney Dean (“Dean”) and John Chessa (“Chessa”). Plaintiff Interarch brings claims for copyright infringement (against Republic), misappropriation of trade secrets under federal and state law (against all Defendants), tortious interference (against Republic), breach of contract (against Republic), breach of the duty of loyalty (against Dean and Chessa), unfair competition (against Republic), and a request for a declaratory judgment relating to these claims (against all Defendants). Hill, in turn, brings a claim for trademark infringement (against Republic), and Hill and Interarch together bring a claim for unjust enrichment (against Republic). This matter is in its early stages, and Republic is assessing the potential outcome and materiality of this matter. The Company intends to defend itself vigorously in this matter.

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.~~

branches. 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, ~~at September~~and equity securities as of June 30, ~~2017~~ 2022 and December 31, ~~2016~~ 2021 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

	June 30, 2022
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized / Unrecognized Losses			Fair Value
Available for sale
U.S. Government agencies	$	20,990	$	-	$	(939	)	$	20,051
Collateralized mortgage obligations		396,163		-		(45,387	)		350,776
Agency mortgage-backed securities		552,319		1		(67,560	)		484,760
Municipal securities		52,291		3		(3,676	)		48,618
Corporate bonds		232,833		247		(25,613	)		207,467
Investment securities available for sale	$	1,254,596	$	251	$	(143,175	)	$	1,111,672

Held to maturity
U.S. Government agencies	$	56,226	$	-	$	(3,012	)	$	53,214
Collateralized mortgage obligations		385,744		134		(37,123	)		348,755
Agency mortgage-backed securities		1,158,115		426		(160,465	)		998,076
Investment securities held to maturity	$	1,600,085	$	560	$	(200,600	)	$	1,400,045

Equity securities (1)								$	6,793

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

	December 31, 2021
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized / Unrecognized Losses			Fair Value
Available for sale
U.S. Government agencies	$	25,671	$	-	$	(743	)	$	24,928
Collateralized mortgage obligations		375,570		989		(5,010	)		371,549
Agency mortgage-backed securities		446,740		254		(5,511	)		441,483
Municipal securities		6,596		344		-			6,940
Corporate bonds		232,395		1,480		(3,409	)		230,466
Investment securities available for sale	$	1,086,972	$	3,067	$	(14,673	)	$	1,075,366

Held to maturity
U.S. Government agencies	$	66,438	$	1,549	$	-		$	67,987
Collateralized mortgage obligations		400,424		4,607		(8,803	)		396,228
Agency mortgage-backed securities		1,193,430		2,295		(12,580	)		1,183,145
Investment securities held to maturity	$	1,660,292	$	8,451	$	(21,383	)	$	1,647,360

Equity securities (1)								$	9,173

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

The following table presents investment securities by stated maturity ~~at September~~as of June 30, ~~2017.~~ 2022. 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	$	36,208	$	31,845	$	-	$	-
After 1 year to 5 years		96,034		92,702		56,226		53,214
After 5 years to 10 years		67,655		63,394		-		-
After 10 years		106,217		88,195		-		-
Collateralized mortgage obligations		396,163		350,776		385,744		348,755
Agency mortgage-backed securities		552,319		484,760		1,158,115		998,076
Total investment securities	$	1,254,596	$	1,111,672	$	1,600,085	$	1,400,045

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 and~~ 2022 or December 31, ~~2016.~~ 2021. There ~~were~~was 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 adoption of CECL on 1/1/22 resulted in no impact to the HTM securities portfolio, as the Company’s entire portfolio consists of securities ultimately guaranteed by various agencies or government-sponsored enterprises and carries zero risk of nonpayment.

The Company ~~regularly~~ evaluates investment securities that are in an ~~unrealized~~unrealized/unrecognized loss position on a quarterly basis and more frequently when warranted 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") 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.~~asset. Accounting standards require the evaluation of the ~~expected~~discounted cash flows ~~to be received~~when estimating expected credit losses 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 credit-related impairment charges ~~(credit losses) were incurred on trust preferred securities~~recognized in net income during the ~~three and nine month periods~~six months ended ~~September~~June 30, ~~2017. Impairment charges on trust preferred securities for~~2022 or the ~~three month period~~year 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, 2021.

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~~unrealized/unrecognized losses associated with the investment portfolio, aggregated by investment category and length of time that individual securities have been in a continuous ~~unrealized~~unrealized/unrecognized loss position ~~in the available for sale~~ as of June 30, 2022 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

~~Unrealized~~December 31, 2021:

	June 30, 2022
	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	$	-	$	-	$	20,051	$	939	$	20,051	$	939
Collateralized mortgage obligations		290,660		33,621		58,991		11,766		349,651		45,387
Agency mortgage-backed securities		382,431		50,375		102,329		17,185		484,760		67,560
Municipal securities		47,536		3,676		-		-		47,536		3,676
Corporate bonds		158,736		20,682		40,485		4,931		199,221		25,613
Investment Securities Available for Sale	$	879,363	$	108,354	$	221,856	$	34,821	$	1,101,219	$	143,175

	June 30, 2022
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses

U.S. Government agencies	$	53,214	$	3,012	$	-	$	-	$	53,214	$	3,012
Collateralized mortgage obligations		166,962		15,600		169,266		21,523		336,228		37,123
Agency mortgage-backed securities		799,752		126,750		180,780		33,715		980,532		160,465

Investment Securities Held to Maturity	$	1,019,928	$	145,362	$	350,046	$	55,238	$	1,369,974	$	200,600

	December 31, 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	$	-	$	-	$	24,928	$	743	$	24,928	$	743
Collateralized mortgage obligations		188,416		2,982		57,708		2,028		246,124		5,010
Agency mortgage-backed securities		365,859		4,896		39,928		615		405,787		5,511
Municipal securities		-		-		-		-		-		-
Corporate bonds		154,436		2,281		33,351		1.128		187,787		3,409
Investment Securities Available for Sale	$	708,711	$	10,159	$	155,915	$	4,514	$	864,626	$	14,673

	December 31, 2021
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses

U.S. Government agencies	$	-	$	-	$	-	$	-	$	-	$	-
Collateralized mortgage obligations		183,376		6,719		81,994		2,084		265,370		8,803
Agency mortgage-backed securities		899,231		10,815		61,756		1,765		960,987		12,580

Investment Securities Held to Maturity	$	1,082,607	$	17,534	$	143,750	$	3,849	$	1,226,357	$	21,383

Unrealized/unrecognized losses on securities in the investment portfolio amounted to ~~$14.7~~$343.8 million with a total fair value of ~~$628.4 million~~$2.5 billion as of ~~September~~June 30, ~~2017~~ 2022 compared to ~~unrealized~~unrealized/unrecognized losses of ~~$19.1~~$36.1 million with a total fair value of ~~$595.0 million~~$2.1 billion as of December 31, ~~2016.~~ 2021. The Company believes the ~~unrealized~~unrealized/unrecognized losses presented in the tables above are ~~temporary in nature and~~ primarily related to market interest rates or limited trading activity in a 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~~unrealized/unrecognized loss position prior to maturity or recovery of the amortized cost bases.

The Company held ~~nine~~seventeen U.S. Government agency securities, ~~fifty-seven~~91 collateralized mortgage obligations and ~~twenty-one~~103 agency mortgage-backed securities that were in an ~~unrealized~~unrealized/unrecognized loss position ~~at September~~as of June 30, ~~2017.~~ 2022. 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~~losses related to credit factors on any of these securities and believes the ~~unrealized~~unrealized/unrecognized 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.~~2022.

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~~As of June 30, ~~2017, there were ten~~2022, the investment portfolio included fifteen 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~~

On June 30, ~~2017,~~ 2022, 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 sixtwenty-two 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 of the secondary market for such securities becoming inactive and are also considered temporary at this time. The following table provides additional detail about the trust preferred securities held in the portfolio as of September 30, 2017.

(dollars in thousands)
Class / Tranche Amortized Cost
Fair
Value
Unrealized Losses Lowest Credit Rating Assigned Number of Banks Currently Performing Deferrals / Defaults as % of Current Balance

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

There were no proceeds from the sale of ~~investment~~ securities during the three or six months ended ~~September~~June 30, ~~2017. Proceeds from~~2022 or June 30, 2021.

There was no allowance for credit losses recorded for debt securities available for sale at either June 30, 2022 or December 31, 2021. Additionally, for the ~~sale of investment securities during the nine~~three months and six months ended ~~September~~June 30, ~~2017 was $21.2 million. Gross gains of $487,000 were realized on these sales which were offset by gross~~2022 and 2021, there no credit-related investment impairment losses ~~of $548,000. The tax provision applicable to the net losses for the nine months ended September 30, 2017 was $22,000.~~recognized.

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 for the nine months ended September 30, 2016 was $235,000.

Note 6: Loans Receivable and Allowance for ~~Loan~~Credit Losses

The following table sets forth the ~~Company's~~Company’s gross loans by major ~~categories~~category as of ~~September~~June 30, ~~2017~~ 2022 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

2021:

(dollars in thousands)	June 30, 2022			December 31, 2021

Commercial real estate	$	827,720		$	780,311
Construction and land development		212,436			216,008
Commercial and industrial		310,783			252,376
Owner occupied real estate		552,723			526,570
Consumer and other		81,140			83,487
Residential mortgage		739,768			536,332
Paycheck protection program		29,824			119,039
Total loans receivable		2,754,394			2,514,123
Deferred costs (fees)		(3,711	)		(6,758	)
Allowance for credit losses		(19,127	)		(18,964	)
Net loans receivable	$	2,731,556		$	2,488,401

The Company disaggregates its loan portfolio into groups of loans with similar risk characteristics for purposes of estimating the allowance for ~~loan~~credit losses. The ~~Company's~~Company’s loan groups include commercial real estate, construction and land development, commercial and industrial, ~~owner occupied~~owner-occupied real estate, consumer and residential mortgages. Paycheck Protection Program (“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 30, 2017 and 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

Three months ended September 30, 2017
Allowance for loan losses:

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

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

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

(dollars in thousands)

Commercial
Real Estate
Construction and Land Development
Commercial
and
Industrial
Owner Occupied Real Estate
Consumer and Other

Residential Mortgage

Unallocated

Total

Nine months ended September 30, 2017
Allowance for loan losses:

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

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

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

~~The following tables provide a summary of the allowance for loan losses and balance of loans receivable by loan class and by impairment method as of September 30, 2017 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

A loan is considered impaired, when based on current information and events, it is probable that the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming loans, but also include internally classified accruing loans. The following table summarizes information with regard to impaired loans by loan portfolio class as of September 30, 2017 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

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

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 impaired loans for the nine months ended September 30, 2017 and September 30, 2016:~~

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~~ 2022 and December 31, ~~2016:~~2021

(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, 2022
Commercial real estate	$	256	$	-	$	825	$	1,081	$	826,639	$	827,720	$	-
Construction and land development		-		-		9,128		9,128		203,308		212,436		-
Commercial and industrial		3,502		-		305		3,807		306,976		310,783		-
Owner occupied real estate		4,139		-		3,225		7,364		545,359		552,723		-
Consumer and other		1,631		2		1,044		2,677		78,463		81,140		107
Residential mortgage		1,128		-		-		1,128		738,640		739,768		-
Paycheck protection program		2,946		-		13		2,959		26,865		29,824		13
Total	$	13,602	$	2	$	14,540	$	28,144	$	2,726,250	$	2,754,394	$	120

(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
December 31, 2021
Commercial real estate	$	-	$	-	$	4,493	$	4,493	$	775,818	$	780,311	$	-
Construction and land development		-		-		-		-		216,008		216,008		-
Commercial and industrial		-		-		2,558		2,558		249,818		252,376		-
Owner occupied real estate		-		4,139		3,714		7,853		518,717		526,570		-
Consumer and other		92		20		1,080		1,192		82,295		83,487		5
Residential mortgage		3,165		-		701		3,866		532,466		536,332		-
Paycheck protection program		1,594		547		318		2,459		116,580		119,039		318
Total	$	4,851	$	4,706	$	12,864	$	22,421	$	2,491,702	$	2,514,123	$	323

Credit Quality Indicators:

The Company places all commercial loans into various credit risk rating categories based on an assessment of the expected ability of the borrowers to properly service their debt. The assessment considers numerous factors including, but not limited to, current financial information on the borrower, historical payment experience, strength of any guarantor, nature of and value of any collateral, acceptability of the loan structure and documentation, relevant public information, and current economic trends. This credit risk rating analysis is performed when the loan is initially underwritten and then annually based on set criteria in the loan policy. The Company uses the following regulatory definitions for criticized and classified risk ratings:

Special Mention: These loans have a potential weakness that deserves Management’s close attention. If left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.

Substandard: These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: These loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions, and values.

(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

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass-rated loans.

The following table presents the classes of the loan portfolio summarized by the amortized cost basis by origination year and the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of June 30, 2022:

Loans Amortized Cost Basis by Origination Year

(dollar in thousands) June 30, 2022	2022		2021		2020		2019		2018		2017 and Prior		Revolving		Total

Commercial Real Estate
Pass	$	104,204	$	196,360	$	132,526	$	111,461	$	76,771	$	196,282	$	9,291	$	826,895
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		470		-		-		355		-		825
Doubtful		-		-		-		-		-		-		-		-
Total Commercial Real Estate	$	104,204	$	196,360	$	132,996	$	111,461	$	76,771	$	196,637	$	9,291	$	827,720

Construction & Land Development
Pass	$	20,612	$	94,032	$	60,525	$	18,532	$	56	$	6,543	$	3,008	$	203,308
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		9,128		-		-		-		-		9,128
Doubtful		-		-		-		-		-		-		-		-
Total Construction	$	20,612	$	94,032	$	69,653	$	18,532	$	56	$	6,543	$	3,008	$	212,436

Commercial & Industrial
Pass	$	75,170	$	35,686	$	17,730	$	12,599	$	12,410	$	22,447	$	134,436	$	310,478
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		305		-		305
Doubtful		-		-		-		-		-		-		-		-
Total Commercial & Industrial	$	75,170	$	35,686	$	17,730	$	12,599	$	12,410	$	22,752	$	134,436	$	310,783

Owner Occupied Real Estate
Pass	$	59,625	$	96,856	$	87,366	$	44,454	$	77,875	$	162,059	$	15,177	$	543,412
Special Mention		-		-		-		-		-		232		-		232
Substandard		-		-		-		4,131		-		4,948		-		9,079
Doubtful		-		-		-		-		-		-		-		-
Total Owner Occupied	$	59,625	$	96,856	$	87,366	$	48,585	$	77,875	$	167,239	$	15,177	$	552,723

Consumer & Other
Pass	$	2,207	$	1,943	$	1,725	$	1,844	$	1,397	$	3,782	$	67,305	$	80,203
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		113		23		801		937
Doubtful		-		-		-		-		-		-		-		-
Total Consumer & Other	$	2,207	$	1,943	$	1,725	$	1,844	$	1,510	$	3,805	$	68,106	$	81,140

Residential Mortgage
Pass	$	219,920	$	206,962	$	164,834	$	88,304	$	15,444	$	44,304	$	-	$	739,768
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Residential Mortgage	$	219,920	$	206,962	$	164,834	$	88,304	$	15,444	$	44,304	$	-	$	739,768

Paycheck Protection Program
Pass	$	-	$	28,496	$	1,328	$	-	$	-	$	-	$	-	$	29,824
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Paycheck Protection	$	-	$	28,496	$	1,328	$	-	$	-	$	-	$	-	$	29,824

Total
Pass	$	481,738	$	660,335	$	466,034	$	277,194	$	183,953	$	435,417	$	229,217	$	2,733,888
Special Mention		-		-		-		-		-		232		-		232
Substandard		-		-		9,598		4,131		113		5,631		801		20,274
Doubtful		-		-		-		-		-		-		-		-
Total Loans	$	481,738	$	660,335	$	475,632	$	281,325	$	184,066	$	441,280	$	230,018	$	2,754,394

(dollars in thousands)
30-59
Days
Past Due

60-89
Days
Past Due

Greater than 90 Days

Total
Past Due

Current

Total
Loans Receivable

Loans
Receivable
> 90 Days
and
Accruing

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

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the ~~Company's~~Company’s internal risk rating system as of ~~September 30, 2017 and~~ December 31, ~~2016:~~

(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
24

2021:

(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2021:
Commercial real estate	$	775,818	$	-	$	4,493	$	-	$	780,311
Construction and land development		216,008		-		-		-		216,008
Commercial and industrial		249,818		-		2,558		-		252,376
Owner occupied real estate		516,741		236		9,593		-		526,570
Consumer and other		82,412		-		1,075		-		83,487
Residential mortgage		535,631		-		701		-		536,332
Paycheck protection program		119,039		-		-		-		119,039
Total	$	2,495,467	$	236	$	18,420	$	-	$	2,514,123

The following table shows non-accrual loans by class as of ~~September~~June 30, ~~2017~~ 2022 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

2021:

(dollars in thousands)	June 30, 2022		December 31, 2021

Commercial real estate	$	825	$	4,493
Construction and land development		9,128		-
Commercial and industrial		305		2,558
Owner occupied real estate		3,225		3,714
Consumer and other		937		1,075
Residential mortgage		-		701
Paycheck protection program		-		-
Total	$	14,420	$	12,541

If these loans were performing under their original contractual rate, interest income on such loans would have increased approximately ~~$127,000~~$164,000 and ~~$372,000~~$355,000 for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017, respectively,~~ 2022 and ~~$271,000~~ 2021, respectively.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2022:

(dollars in thousands)	Real Estate		Business Asset		Total
Commercial real estate	$	825	$	-	$	825
Construction and land development		9,128		-		9,128
Commercial and industrial		305		-		305
Owner occupied real estate		9,079		-		9,079
Consumer and other		937		-		937
Residential mortgage		-		-		-
Paycheck protection program		-		-		-
Total	$	20,274	$	-	$	20,274

Impaired loans – Impaired loans disclosures presented below as of December 31, 2021 and ~~$784,000~~ for the ~~nine~~three and six months ended ~~September~~June 30, 2021, represent requirements prior to the adoption of CECL on January 1, 2022.

The following table summarizes information regarding impaired loans by loan portfolio class as of December 31, 2021:

	December 31, 2021
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial real estate	$	479	$	691	$	-
Construction and land development		-		-		-
Commercial and industrial		80		81		-
Owner occupied real estate		2,080		2,080		-
Consumer and other		1,075		1,422		-
Residential mortgage		701		768		-
Paycheck protection program		-		-		-
Total	$	4,415	$	5,042	$	-

With an allowance recorded:
Commercial real estate	$	4,014	$	4,536	$	992
Construction and land development		-		-		-
Commercial and industrial		2,478		2,616		1,169
Owner occupied real estate		7,513		7,532		582
Consumer and other		-		-		-
Residential mortgage		-		-		-
Paycheck protection program		-		-		-
Total	$	14,005	$	14,684	$	2,743

Total:
Commercial real estate	$	4,493	$	5,227	$	992
Construction and land development		-		-		-
Commercial and industrial		2,558		2,697		1,169
Owner occupied real estate		9,593		9,612		582
Consumer and other		1,075		1,422		-
Residential mortgage		701		768		-
Paycheck protection program		-		-		-
Total	$	18,420	$	19,726	$	2,743

The following table presents additional information regarding the Company’s impaired loans for the three and six months ended June 30, 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021				2021
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$	322	$	-	$	494	$	2
Construction and land development		-		-		-		-
Commercial and industrial		2,297		-		2,298		-
Owner occupied real estate		3,009		8		2,882		31
Consumer and other		1,239		5		1,180		13
Residential mortgage		725		-		714		-
Paycheck protection program		-		-		-		-
Total	$	7,592	$	13	$	7,568	$	46

With an allowance recorded:
Commercial real estate	$	4,015	$	-	$	4,014	$	-
Construction and land development		-		-		-		-
Commercial and industrial		263		-		266		-
Owner occupied real estate		1,065		-		1,070		-
Consumer and other		-		-		-		-
Residential mortgage		-		-		-		-
Paycheck protection program		-		-		-		-
Total	$	5,343	$	-	$	5,350	$	-

Total:
Commercial real estate	$	4,337	$	-	$	4,508	$	2
Construction and land development		-		-		-		-
Commercial and industrial		2,560		-		2,564		-
Owner occupied real estate		4,074		8		3,952		31
Consumer and other		1,239		5		1,180		13
Residential mortgage		725		-		714		-
Paycheck protection program		-		-		-		-
Total	$	12,935	$	13	$	12,918	$	46

The following tables detail activity in the allowance for credit losses for the three six months ended June 30, 2022 and the allowance for loan losses for the three and six months ended June 30, 2021. The Company adopted ASU 2016 ~~respectively.~~-13 on January 1, 2022 using the modified retrospective approach. Results for the periods beginning after January 1, 2022 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. The transition adjustment includes an increase in the allowance of $3.0 million. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

*(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

*Allowance for Credit Losses:*
Beginning balance March 31, 2022:	$	5,370		$	1,268		$	3,445		$	4,784		$	918		$	6,729	$	-	$	-	$	22,514
Charge-offs		(621	)		-			(2,161	)		(787	)		(115	)		-		-		-		(3,684	)
Recoveries		-			-			7			590			80			-		-		-		677
Provisions (credits)		104			(472	)		(147	)		(448	)		(164	)		747		-		-		(380	)
Ending balance June 30, 2022:	$	4,853		$	796		$	1,144		$	4,139		$	719		$	7,476	$	-	$	-	$	19,127

*(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

*Allowance for Credit Losses:*
Beginning balance December 31, 2021:	$	5,802		$	1,544		$	2,856		$	3,158		$	629		$	4,922	$	-	$	53		$	18,964
Day 1 effect of CECL		90			297			(540	)		2,049			34			1,103				(53	)		2,980
Charge-offs		(621	)		-			(2,161	)		(787	)		(182	)		-		-		-			(3,751	)
Recoveries		-			-			16			597			81			-		-		-			694
Provisions (credits)		(418	)		(1,045	)		973			(878	)		157			1,451		-		-			240
Ending balance June 30, 2022:	$	4,853		$	796		$	1,144		$	4,139		$	719		$	7,476	$	-	$	-		$	19,127

*(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

*Allowance for Loan Losses:*
Beginning balance March 31, 2021:	$	5,640	$	1,081	$	1,736		$	2,429	$	745		$	3,956	$	-	$	504		$	16,091
Charge-offs		-		-		(61	)		-		(12	)		-		-		-			(73	)
Recoveries		-		-		43			-		49			-		-		-			92
Provisions (credits)		279		52		(215	)		11		(65	)		314		-		(376	)		-
Ending balance June 30, 2021:	$	5,919	$	1,133	$	1,503		$	2,440	$	717		$	4,270	$	-	$	128		$	16,110

*(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

*Allowance for Loan Losses:*
Beginning balance December 31, 2020:	$	4,394	$	948	$	1,367		$	2,374	$	723		$	3,025	$	-	$	144		$	12,975
Charge-offs		-		-		(60	)		-		(47	)		-		-		-			(107	)
Recoveries		-		-		150			40		52			-		-		-			242
Provisions (credits)		1,525		185		46			26		(11	)		1,245		-		(16	)		3,000
Ending balance June 30, 2021:	$	5,919	$	1,133	$	1,503		$	2,440	$	717		$	4,270	$	-	$	128		$	16,110

Troubled Debt Restructurings

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

~~The following table summarizes~~

Pursuant to the ~~balance~~CARES Act, loan modifications made between March 1, 2020 and the earlier of ~~outstanding~~i) December 30, 2020 or ii) 60 days after the President declares a termination of the COVID-19 national emergency were not classified as TDRs ~~September~~ if the related loans were not more than 30 ~~2017 and~~ days past due as of 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

2019. In December 2020, the Economic Aid Act was signed into law, which 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 declared a termination of the national emergency related to the COVID-19 pandemic. As of June 30, 2022 and December 31, 2021, there were no loan customers deferring loan payments, and all customers that were granted deferrals to assist during the COVID pandemic have resumed contractual payments. All TDRs are considered impaired and are therefore individually evaluated for impairment in the calculation of the allowance for ~~loan~~credit 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~~credit losses. The level of any subsequent defaults will likely be affected by future economic conditions.

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

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

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

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

There were no loan modifications made during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~ 2022 or June 30, 2021 that met the criteria of a TDR.

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

After a loan is determined to be a TDR, the Company continues to track its performance under the most recent restructured terms. There were no TDRs that subsequently defaulted during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~ 2022. There were no TDRs that subsequently defaulted during the year ended December 31, ~~2016.~~

2021. The last remaining TDR on the Company’s books was paid off in full during 2021.

There were no residential mortgages in the process of foreclosure as of June 30, 2022 and December 31, 2021. There was no other real estate owned relating to residential real estate as of June 30, 2022 and December 31, 2021.

Note 7: Other Borrowings

We have established a line of credit with the Federal Home Loan Bank (“FHLB”) of Pittsburgh. Our maximum borrowing capacity with the FHLB was $1.4 billion at June 30, 2022 and $1.3 billion at December 31, 2021. At June 30, 2022, we had outstanding overnight borrowings totaling $292.5 million compared to no borrowings at December 31, 2021.

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~~as of June 30, ~~2017~~ 2022 and December 31, ~~2016~~ 2021 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, 2022
Assets:

U.S. Government agencies	$	20,051	$	-	$	20,051	$	-
Collateralized mortgage obligations		350,776		-		350,776		-
Agency mortgage-backed securities		484,760		-		484,760		-
Municipal securities		48,618		-		48,618		-
Corporate bonds		207,467		-		204,358		3,109
Investment securities available for sale	$	1,111,672			$	1,108,563	$	3,109
Equity securities		6,793		6,793		-		-

Mortgage Loans Held for Sale	$	5,670	$	-	$	5,670	$	-
SBA Servicing Assets		4,318		-		-		4,318
Interest Rate Lock Commitments		164		-		164		-
Best Efforts Forward Loan Sales Commitments		46		-		46		-
Mandatory Forward Loan Sales Commitments		43		-		43		-

Liabilities:

Interest Rate Lock Commitments		21		-		21		-
Best Efforts Forward Loan Sales Commitments		37		-		37		-
Mandatory Forward Loan Sales Commitments		6		-		6		-

December 31, 2021
Assets:

U.S. Government agencies	$	24,928	$	-	$	24,928	$	-
Collateralized mortgage obligations		371,549		-		371,549		-
Agency mortgage-backed securities		441,483		-		441,483		-
Municipal securities		6,940		-		6,940		-
Corporate bonds		230,466		-		227,841		2,625
Investment securities available for sale	$	1,075,366			$	1,072,741	$	2,625
Equity securities		9,173		9,173		-		-

Mortgage Loans Held for Sale	$	8,538	$	-	$	8,538	$	-
SBA Servicing Assets		4,705		-		-		4,705
Interest Rate Lock Commitments		378		-		378		-
Best Efforts Forward Loan Sales Commitments		5		-		5		-
Mandatory Forward Loan Sales Commitments		5		-		5		-

Liabilities:

Interest Rate Lock Commitments		-		-		-		-
Best Efforts Forward Loan Sales Commitments		96		-		96		-
Mandatory Forward Loan Sales Commitments		44		-		44		-

(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~~ 2022 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

2021:

	Three Months Ended June 30,
(dollars in thousands)	2022			2021
Beginning balance, April 1^st	$	4,568		$	4,617
Additions		178			134
Fair value adjustments		(428	)		(110	)
Ending balance, June 30^th	$	4,318		$	4,641

	Six Months Ended June 30,
(dollars in thousands)	2022			2021
Beginning balance, January 1^st	$	4,705		$	4,626
Additions		283			313
Fair value adjustments		(670	)		(298	)
Ending balance, June 30^th	$	4,318		$	4,641

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~~$502,000 and ~~$458,000~~$574,000 for the three months ended ~~September~~June 30, ~~2017~~ 2022 and ~~2016,~~2021, respectively. Servicing fee income, not including fair value adjustments, totaled ~~$1.4~~$1.0 million and ~~$1.3~~$1.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2022 and ~~2016,~~2021, respectively.

Total loans in the amount of $193.0 million as of June 30, 2022 and $218.9 million on December 31, 2021 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~~ 2022 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

2021:

	Three Months Ended June 30,
	2022		2021
Level 3 Investments Only (dollars in thousands)	Corporate Bonds		Corporate Bonds
Balance, April 1^st	$	2,644	$	2,620
Unrealized gains (losses)		465		(17	)
Proceeds from sales		-		-
Realized losses		-		-
Balance, June 30^th	$	3,109	$	2,603

	Six Months Ended June 30,
	2022		2021
Level 3 Investments Only (dollars in thousands)	Corporate Bonds		Corporate Bonds
Balance, January 1^st	$	2,625	$	2,631
Unrealized gains (losses)		484		(28	)
Proceeds from sales		-		-
Realized losses		-		-
Balance, June 30^th	$	3,109	$	2,603

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used ~~at September~~as of June 30, ~~2017~~ 2022 and December 31, ~~2016~~ 2021 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, 2022
Individually evaluated loans	$	755	$	-	$	-	$	755
Other real estate owned		230		-		-		230

December 31, 2021
Impaired loans	$	11,664	$	-	$	-	$	11,664
Other real estate owned		360		-		-		360

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

Quantitative Information about Level 3 Fair Value Measurements
Asset Description Fair Value Valuation Technique Unobservable Input Range (Weighted Average)
September 30, 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, 2022

Corporate bonds

3,109

Discounted Cash Flows

Discount Rate

(6.36%)

SBA servicing assets

4,318

Discounted Cash Flows

Conditional Prepayment Rate

(14.76%)

Discount Rate

(10.75%)

Individually evaluated loans

755

Appraised Value of Collateral (1)

Liquidation expenses (2)

13%

34%

(23%)

(3)

Other real estate owned

230

Appraised Value of Collateral (1)

Liquidation expenses (2)

(19%)

(3)

December 31, 2021

Corporate bonds

2,625

Discounted Cash Flows

Discount Rate

(3.42%)

SBA servicing assets

4,705

Discounted Cash Flows

Conditional Prepayment Rate

(13.93%)

Discount Rate

(10.00%)

Impaired loans

11,664

Appraised Value of Collateral (1)

Liquidation expenses (2)

11%

27%

(16%)

(3)

Sales Price

Liquidation expenses (2)

(12%)

(3)

Estimated Value of Insurance Proceeds (4)

Other real estate owned

360

Appraised Value of Collateral (1)

Liquidation expenses (2)

(19%)

(3)

Sales Price

Liquidation expenses (2)

(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.
(4)	The valuation technique is determined based on estimated insurance proceeds and litigation.

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 as of June 30, 2022 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.~~

2021.

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~~$215,000 and ~~$577,000~~$336,000 for three and six months ended June 30, 2022, respectively, and $194,000 and $281,000 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 ,~~ 2021, 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~~ 2022 and December 31, ~~2016 (dollars~~2021 (dollars 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

	Carrying Amount		Aggregate Unpaid Principal Balance		Excess Carrying Amount Over Aggregate Unpaid Principal Balance
June 30, 2022	$	5,670	$	5,563	$	107

December 31, 2021	$	8,538	$	8,241	$	297

Changes in the excess carrying amount over aggregate unpaid principal balance are recorded in the statement of income in mortgage banking income. As of June 30, 2022, Republic had no 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~~ as of December 31, ~~2016.~~

2021.

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~~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.

Individually Evaluated Collateral Dependent Loans ~~Receivable (Carried at Cost)~~

~~The fair values of loans receivable, excluding all nonaccrual loans and accruing loans deemed impaired with specific~~

When a loan ~~allowances, are estimated using discounted cash flow analyses, using market rates~~is individually evaluated, it is valued at the ~~balance sheet date that reflect the credit~~lower of cost or fair value. Collateral dependent loans which are individually evaluated and ~~interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity~~carried at fair value have been partially charged off 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~~receive specific allocations of the ~~fair value hierarchy.~~

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

~~Impaired~~allowance for credit losses. For collateral dependent loans, ~~are those that the Company has measured impairment based on the~~ fair ~~value of the loan's collateral. Fair~~ value is generally ~~determined~~ based ~~upon~~on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent ~~third party appraisals~~appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the ~~properties, or discounted cash flows based upon the expected proceeds. These assets~~inputs for determining fair value. Additionally, updated independent appraisals valuations 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 discountedobtained annually for all collateral ~~values if the loans are collateral dependent.~~

dependent loans.

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~~ 2022 and December 31, ~~2016,~~ 2021, 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~~is 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~~As of June 30, ~~2017~~ 2022 and December 31, ~~2016,~~ 2021, 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)	June 30, 2022			December 31, 2021

SBA Servicing Asset

Fair Value of SBA Servicing Asset	$	4,318		$	4,705

Composition of SBA Loans Serviced for Others
Fixed-rate SBA loans		3	%		4	%
Adjustable-rate SBA loans		97	%		96	%
Total		100	%		100	%

Weighted Average Remaining Term (in years)		19.8			19.6

Prepayment Speed		14.76	%		13.93	%
Effect on fair value of a 10% increase	$	(189	)	$	(204	)
Effect on fair value of a 20% increase		(364	)		(393	)

Weighted Average Discount Rate		10.75	%		10.00	%
Effect on fair value of a 10% increase	$	(143	)	$	(148	)
Effect on fair value of a 20% increase		(277	)		(288	)

(dollars in thousands)
September 30,
2017

December 31,
2016

SBA Servicing Asset

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

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

Weighted Average Remaining Term 20.6 years 21.1 years

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

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

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

~~Restricted Stock (Carried at Cost)~~

~~The carrying amount of restricted stock approximates fair value, and considers the limited marketability of such securities. Restricted stock is classified within Level 2 of the fair value hierarchy.~~

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

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

~~Deposit Liabilities (Carried at Cost)~~

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. Deposit liabilities are classified within Level 2 of the fair value hierarchy.

~~Subordinated Debt (Carried at Cost)~~

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

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

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

The estimated fair values of the ~~Company's~~Company’s financial instruments as of June 30, 2022 were as ~~follows at September 30, 2017.~~follows.

	Fair Value Measurements as of June 30, 2022
(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	$	86,156	$	86,156	$	86,156	$	-	$	-
Investment securities available for sale		1,111,672		1,111,672		-		1,108,563		3,109
Investment securities held to maturity		1,600,085		1,400,045		-		1,400,045		-
Equity securities		6,793		6,793		6,793		-		-
Restricted stock		15,528		N/A		N/A		N/A		N/A
Loans held for sale		10,429		10,429		-		5,670		4,759
Loans receivable, net		2,731,556		2,713,096		-		-		2,713,096
SBA servicing assets		4,318		4,318		-		-		4,318
Accrued interest receivable		16,381		16,381		-		16.381		-
Interest rate lock commitments		164		164		-		164		-
Best efforts forward loan sales commitments		46		46		-		46		-
Mandatory forward loan sales commitments		43		43		-		43		-

Financial liabilities:
Deposits
Demand, savings and money market	$	5,063,473	$	5,063,473	$	-	$	5,063,473	$	-
Time		149,553		144,449		-		144,449		-
Subordinated debt		11,281		9,223		-		-		9,223
Other borrowings		292,500		292,500		-		292,500		-
Accrued interest payable		498		498		-		498		-
Interest rate lock commitments		21		21		-		21		-
Best efforts forward loan sales commitments		37		37		-		37		-
Mandatory forward loan sales commitments		6		6		-		6		-

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

Fair Value Measurements at September 30, 2017

(dollars in thousands)
Carrying Amount
Fair
Value

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

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

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

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

The estimated fair values of the ~~Company's~~Company’s financial instruments as of December 31, 2021 were as ~~follows at December 31, 2016:~~follows:

	Fair Value Measurements as of December 31, 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	$	118,884	$	118,884	$	118,884	$	-	$	-
Investment securities available for sale		1,075,366		1,075,366		-		1,072,741		2,625
Investment securities held to maturity		1,660,292		1,647,360		-		1,647,360		-
Equity securities		9,173		9,173		9,173		-		-
Restricted stock		3,510		N/A		N/A		N/A		N/A
Loans held for sale		13,762		13,762		-		8,538		5,224
Loans receivable, net		2,488,401		2,475,944		-		-		2,475,944
SBA servicing assets		4,705		4,705		-		-		4,705
Accrued interest receivable		15,073		15,073		-		15,073		-
Interest rate lock commitments		378		378		-		378		-
Best efforts forward loan sales commitments		5		5		-		5		-
Mandatory forward loan sales commitments		5		5		-		5		-

Financial liabilities:
Deposits
Demand, savings and money market	$	4,993,235	$	4,993,235	$	-	$	4,993,235	$	-
Time		197,945		197,764		-		197,764		-
Subordinated debt		11,278		8,644		-		-		8,644
Accrued interest payable		550		550		-		550		-
Interest rate lock commitments		-		-		-		-		-
Best efforts forward loan sales commitments		96		96		-		96		-
Mandatory forward loan sales commitments		44		44		-		44		-

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

Fair Value Measurements at December 31, 2016

(dollars in thousands)
Carrying Amount
Fair
Value

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

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

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

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

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

(1)

The following table presents the changes in accumulated other comprehensive ~~loss~~(loss) income by component for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~ 2022 and ~~2016,~~2021, 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 )

2021.

	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 April 1, 2022	$	(60,014	)	$	(1,822	)	$	(61,836	)
Unrealized loss on securities		(46,654	)		-			(46,654	)
Amounts reclassified from accumulated other comprehensive (loss) income to net income (2)		-			158			158
Net current-period other comprehensive (loss) income		(46,654	)		158			(46,496	)
Total change in accumulated other comprehensive (loss) income		(46,654	)		158			(46,496	)
Balance June 30, 2022	$	(106,668	)	$	(1,664	)	$	(108,332	)

Balance April 1, 2021	$	(6,113	)	$	(3,186	)	$	(9,299	)
Unrealized gain on securities		5,937			-			5,937
Amounts reclassified from accumulated other comprehensive (loss) income to net income (2)		(1	)		489			488
Net current-period other comprehensive income		5,936			489			6,425
Total change in accumulated other comprehensive income		5,936			489			6,425
Balance June 30, 2021	$	(177	)	$	(2,697	)	$	(2,874	)

Balance January 1, 2022	$	(8,662	)	$	(2,012	)	$	(10,674	)
Unrealized loss on securities		(98,006	)		-			(98,006	)
Amounts reclassified from accumulated other comprehensive (loss) income to net income (2)		-			348			348
Net current-period other comprehensive (loss) income		(98,006	)		348			(97,658	)
Total change in accumulated other comprehensive (loss) income		(98,006	)		348			(97,658	)
Balance June 30, 2022	$	(106,668	)	$	(1,664	)	$	(108,332	)

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

Balance January 1, 2021	$	985		$	(3,814	)	$	(2,829	)
Unrealized loss on securities		(9,646	)		-			(9,646	)
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2)		(1	)		1,802			1,801
Net current-period other comprehensive (loss) income		(9,647	)		1,802			(7,845	)
Total change in accumulated other comprehensive (loss) income		(9,647	)		1,802			(7,845	)
Balance December 31, 2021	$	(8,662	)	$	(2,012	)	$	(10,674	)

~~(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~~

~~On July 28, 2016, Republic acquired all~~issued 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 periods ended June 30, 2022, $644,000 and $1.5 million were declared and paid on preferred stock compared to $875,000 and $1.8 million for the three and six month periods ended June 30, 2021.

Holders of shares of Series A Preferred Stock may convert such shares into shares of the ~~issued and outstanding limited liability company interests~~Company’s common stock at a conversion price of ~~Oak Mortgage Company, LLC ("Oak Mortgage") and, as a result, Oak Mortgage became a wholly owned subsidiary~~$3.00 per share 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 closingour common stock, subject to adjustment ~~for~~upon certain events. At any ~~covered indemnity claims under~~ time after August 26, 2025, the ~~Purchase Agreement. Escrow funds were disbursed in~~Company may cause the ~~third quarter~~outstanding shares of ~~2017. The purchase~~Series A Preferred Stock to convert into shares of common stock if the 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~~common stock exceeds 125% 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~~Conversion Price then applicable to the ~~acquisition~~Series A Preferred Stock for at least 20 trading days in a period of ~~Oak Mortgage in July 2016 is detailed below:~~30 consecutive trading days. During the six month period ending June 30, 2022, 529,000 preferred shares were converted to 4,408,324 common shares.

(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: 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.~~ 2022 and the six months ended June 30, 2021. 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~~ 2022 and December 31, ~~2016 (in~~2021 (in thousands):

June 30, 2022	Balance Sheet Presentation	Fair Value		Notional Amount

Asset derivatives:

IRLC’s	Other Assets	$	164	$	7,945
Best efforts forward loan sales commitments	Other Assets		46		5,088
Mandatory forward loan sales commitments	Other Assets		43		4,020

Liability derivatives:

IRLC’s	Other Liabilities	$	21	$	1,462
Best efforts forward loan sales commitments	Other Liabilities		37		4,320
Mandatory forward loan sales commitments	Other Liabilities		6		1,218

December 31, 2021	Balance Sheet Presentation	Fair Value		Notional Amount

Asset derivatives:

IRLC’s	Other Assets	$	378	$	14,419
Best efforts forward loan sales commitments	Other Assets		5		3,222
Mandatory forward loan sales commitments	Other Assets		5		1,667

Liability derivatives:

IRLC’s	Other Liabilities	$	-	$	-
Best efforts forward loan sales commitments	Other Liabilities		96		11,197
Mandatory forward loan sales commitments	Other Liabilities		44		6,460

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~~2022 and 2021 (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, 2022 Gain/(Loss)			Six Months Ended June 30, 2022 Gain/(Loss)

Asset derivatives:

IRLCs	Mortgage banking income	$	57		$	(214	)
Best efforts forward loan sales commitments	Mortgage banking income		(28	)		41
Mandatory forward loan sales commitments	Mortgage banking income		(11	)		38

Liability derivatives:

IRLCs	Mortgage banking income	$	(12	)	$	(21	)
Best efforts forward loan sales commitments	Mortgage banking income		(30	)		59
Mandatory forward loan sales commitments	Mortgage banking income		(6	)		38

	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	)		-
Mandatory forward loan sales commitments	Mortgage banking income		(384	)		2

Liability derivatives:

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

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 12: Revenue from Contracts with Customers

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, 2022 and 2021.

	Three Months Ended June 30,
(dollars in thousands)	2022			2021
Non-interest income
In-scope of Topic 606
Service charges on deposit accounts	$	3,108		$	3,260
Other non-interest income		(501	)		217
Non-interest income (in-scope of Topic 606)		2,607			3,477
Non-interest income (out-of-scope of Topic 606)		2,266			4,203
Total non-interest income	$	4,873		$	7,680

	Six Months Ended June 30,
(dollars in thousands)	2022			2021
Non-interest income
In-scope of Topic 606
Service charges on deposit accounts	$	6,575		$	7,220
Other non-interest income		(1,758	)		574
Non-interest income (in-scope of Topic 606)		4,817			7,794
Non-interest income (out-of-scope of Topic 606)		4,403			10,161
Total non-interest income	$	9,220		$	17,955

Note 13: 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.

As of June 30, 2022, the Company had 44 operating lease agreements, which include operating leases for 21 branch locations, seven offices that are used for general office space, and sixteen operating leases for equipment. Four 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 44 operating leases have maturity dates ranging from July 2022 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 18.7 years as of June 30, 2022. The weighted average operating lease discount rate was 3.37% as of June 30, 2022.

As of 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% as of June 30, 2021.

The following tables presents operating lease costs net of sublease income for the three and six months ended June 30, 2022 and 2021.

	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
(dollars in thousands)
Operating lease cost	$	2,203	$	2,137
Sublease income		-		-
Total lease cost	$	2,203	$	2,137

	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
(dollars in thousands)
Operating lease cost	$	4,369	$	4,274
Sublease income		-		-
Total lease cost	$	4,369	$	4,274

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, 2022 and 2021.

	Six Months Ended June 30, 2022			Six Months Ended June 30, 2021
(dollars in thousands)
Operating lease payments due:
Within one year	$	4,292		$	8,207
One to three years		16,115			15,264
Three to five years		14,521			14,931
More than five years		80,794			81,629
Total undiscounted cash flows		115,722			120,031
Discount on cash flows		(34,022	)		(35,291	)
Total operating lease liability obligations	$	81,700		$	84,740

The following tables presents cash and non-cash activities for the three and six months ended June 30, 2022 and 2021.

	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,143	$	2,041

Non-cash investing and financing activities
Additions to Operating leases – right of use asset
New operating lease liability obligation	$	350	$	8

	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,083	$	4,070

Non-cash investing and financing activities
Additions to Operating leases – right of use asset
New operating lease liability obligation	$	2,687	$	8,122

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",~~“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 impact of the COVID-19 pandemic on our business and results of operation; geopolitical conflict and inflationary pressures including Federal Reserve interest rate hikes; the adequacy of our allowance for ~~loan~~credit 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~~loans; inflation; changes to our primary service area; changes in interest rates; our ability to identify, negotiate, secure and develop new ~~store~~branch locations and renew, modify, or terminate leases or dispose of properties for existing ~~store~~branch 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; our ability to regain compliance with Nasdaq Listing Rule 5250(c)(1); the failure to maintain current technologies; failure to attract or retain key employees; our ability to access cost-effective funding; fluctuations in real estate values; 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~~2021, 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~~incorporated under the laws of the Commonwealth of Pennsylvania in 1987 and is the holding company for Republic First Bank, which does business under the name Republic Bank. We offer a variety of credit and depository banking services to individuals and businesses primarily in Greater Philadelphia, Southern New Jersey, and New York City through our offices and branch locations in those markets.

As of June 30, 2022, we serve our customers through 34 branch locations, in addition to four loan offices that specialize in commercial, small business and residential mortgage lending. It is our goal to deliver best in class customer service across all delivery channels including not only our physical branch locations, but online and mobile options as well.

Economic Environment

The ~~Dodd-Frank Wall Street Reform~~coronavirus (“COVID-19”) outbreak and ~~Consumer Protection~~the public health response to contain it resulted in unprecedented economic and financial market conditions around the world that has affected daily living and negatively impacted the global economy. Additionally, more recent geopolitical (including the conflict in Ukraine), inflationary pressures, and interest rate hikes by the Board of Governors of the Federal Reserve System (“Federal Reserve”) have added even further uncertainty to the overall economic environment. In response to the conditions initially surrounding the COVID-19 outbreak, the Federal Reserve reduced the federal funds target range by 150 basis points to 0.00% to 0.25% as of March 2020. Conversely, during the first half of 2022, the federal funds target range increased by 150 basis points to a range of 1.50% - 1.75% to curb inflation, with continued increases planned.

The effects of the COVID-19 pandemic, geopolitical conflict, inflationary pressures, and higher interest rates may meaningfully impact loan production, income levels, and the measurement of certain significant estimates such the allowance for credit losses. Moreover, if in a period of economic contraction, elevated levels of credit losses and reduced interest income may occur. The extent to which the economic environment has a further impact on 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 current economic environment and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic, geopolitical conflict, and inflationary pressure.

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, geopolitical conflict, and inflationary pressures continue to impact our customers. A detailed analysis of loan concentrations and segments that may present the areas of highest risk has been 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 has had on their businesses to date and the expected ramifications that could be felt in the future. We have 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 ~~2010 (the "Dodd-Frank Act") has~~(i) December 30, 2020 or (ii) 60 days after the President declared a termination of the COVID-19 national emergency were 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 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 declared a termination of the national emergency related to the COVID-19 pandemic. As of March 31, 2022 and December 31, 2021, there were no loan customers deferring loan payments, and all customers that were granted deferrals to assist during the height of the COVID pandemic have resumed contractual payments.

As a result of the changes in economic conditions cited above, we increased the qualitative factors for certain components of Republic’s allowance for credit loss calculation. We also took 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 including inflationary pressure and rising interest rates. We believe the combination of ongoing communication with our customers, lower loan-to-value ratios 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 continue to ~~have a broad~~closely monitor all key economic indicators and our internal asset quality metrics as the effects of the coronavirus pandemic begin to unfold. Based on the current expected credit loss methodology currently utilized by Republic, the provision for credit 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 the financial services industry, including significant regulatory and compliance changes including, among other things, (i) enhanced resolution authority of troubled and failing banks and their holding companies; (ii) increased capital and liquidity requirements; (iii) increased regulatory examination fees; (iv) changes to assessments to be paid to the FDIC for federal deposit insurance; and (v) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector. Additionally, the Dodd-Frank Act establishes a new framework for systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Consumer Financial Protection Bureau, the Federal Reserve, the Office of the Comptroller of the Currency, and the FDIC. A summary of certain provisions of the Dodd-Frank Act is set forth in our ~~Annual Report on Form 10-K for the fiscal year ended December 31, 2016. For information regarding our updated capital requirements, see "Regulatory Matters" below.~~

loan portfolio.

Financial Condition

Assets

Total assets increased by ~~$217.6~~$230.2 million, or ~~11.3%~~4%, to ~~$2.1~~$5.9 billion ~~at September~~as of June 30, ~~2017,~~2022, compared to ~~$1.9~~$5.6 billion at December 31, ~~2016 as a result~~2021. The increase in assets was primarily due to an increase in loans receivable of 10%. In addition to the ~~continued branding~~ongoing success with ~~"The Power of Red is Back"~~our expansion strategy, the growth in assets was also driven by our participation in the PPP loan program which resulted in a significant increase in new business relationships and ~~expansion strategy.~~

deposit account openings.

Cash and Cash Equivalents

Cash and due from banks and ~~interest bearing~~interest-bearing deposits ~~with banks~~ comprise this category, which consists of our most liquid assets. The aggregate amount in these three categories ~~increased~~decreased by ~~$64.2~~$32.7 million to ~~$98.8~~$86.2 million ~~at September~~as of June 30, ~~2017~~2022 compared to ~~$34.6~~$118.9 million atas of December 31, ~~2016. The increase in~~2021 as excess cash was ~~primarily driven by the increase in deposit balances during the period ended September 30, 2017.~~

used to fund loan originations and security purchases.

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,~~both of which we intend to sell in the future. Total SBA loans held for sale were ~~$300,000 at September~~$4.8 million as of June 30, ~~2017~~2022 as compared to ~~$4.2~~$5.2 million atas of December 31, ~~2016.~~2021. Residential mortgage loans held for sale ~~totaled $41.4~~were $5.7 million at ~~September~~June 30, ~~2017 compared to $23.9~~2022, a decrease of $2.9 million, versus $8.5 million at December 31, ~~2016. The increase~~2021. A decrease in the ~~balance~~volume of residential mortgage loans originated during the six month ended June 30, 2022 due to the higher interest rate environment drove the decrease in residential mortgage loans held for sale ~~was driven by an increase in the volume of loans originated along with the timing of closings which pushed a number of sales into the fourth quarter.~~compared to December 31, 2021. Loans held for sale as a percentage of total ~~Company~~ assets were ~~1.9%~~less than 1% at ~~September~~June 30, ~~2017.~~

2022.

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 loans, 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 million at September 30, 2017.

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~~$243.2 million, or ~~13.5%~~10%, to ~~$1.1~~$2.7 billion at ~~September~~June 30, ~~2017,~~2022, versus ~~$965.0 million~~$2.5 billion at December 31, ~~2016.~~2021. Loans originated through the PPP loan program continue to be repaid or forgiven by the SBA, which offsets the growth experienced in other categories in the portfolio. Excluding the impact of the PPP loans, gross loans increased by $329.5 million, or 14%, to $2.7 billion at June 30, 2022 compared to $2.4 billion at December 31, 2021. 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.

Investment Securities

Investment securities ~~considered available-for-sale~~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~~debt securities ~~classified as available-for-sale~~ consist primarily of U.S. Government agency SBA bonds, U.S. Government agency collateralized mortgage obligations ~~(CMO)~~(“CMO”), agency mortgage-backed securities ~~(MBS)~~(“MBS”), municipal securities, and corporate ~~bonds, asset-backed~~bonds. Investment securities ~~(ABS), and pooled trust preferred securities (CDO). Available-for-sale securities~~available for sale totaled ~~$377.8 million~~$1.1 billion at ~~September~~June 30, ~~2017,~~2022 as compared to ~~$369.7 million~~$1.1 billion at December 31, ~~2016.~~2021. The $36.3 million increase was primarily due to the purchase of securities totaling ~~$53.1~~$247.9 million partially offset by the ~~sales~~paydowns, maturities, and ~~paydowns~~calls of securities ~~held in the portfolio~~ totaling ~~$46.8~~$79.1 million during the ~~first nine~~six months ~~of 2017.~~ended June 30, 2022. At ~~September~~June 30, ~~2017,~~2022, the portfolio had a net unrealized loss on available for sale securities of ~~$8.0~~$142.9 million compared to a net unrealized loss of ~~$10.7~~$11.6 million at December 31, ~~2016.~~2021. The ~~change~~$131.3 million decrease in the market value of the investment portfolio was driven by ~~a decrease~~an increase in market interest rates which drove ~~an increase~~a decrease in the ~~fair~~ value of the ~~bonds~~available for sale securities held in our portfolio ~~during~~at June 30, 2022. As interest rates are expected to continue to increase throughout 2022, management will be looking to mitigate the ~~first nine months of 2017.~~

trend on our investment portfolio with offsetting strategies and opportunities.

Investment securities held-to-maturity are investments for which there is the intent and ability to hold the investment to maturity. These investments are carried at amortized cost. The held-to-maturity portfolio consists primarily of U.S. Government agency Small Business Investment Company bonds ~~(SBIC)~~(“SBIC”) and ~~Small Business Administration (SBA)~~SBA bonds, ~~CMO's~~CMO’s and ~~MBS's.~~ TheMBS’s. The fair value of securities held-to-maturity totaled ~~$411.3 million~~$1.4 billion and ~~$425.2 million~~$1.6 billion at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. The $247.3 million decrease was primarily due to the ~~receipt~~paydowns, maturities, and calls of ~~principal payments on CMO and MBS~~ securities held in ~~the~~ portfolio totaling ~~$36.6~~$110.1 million partially offset by the purchase of securities held to maturity totaling ~~$22.0~~$51.1 million during the ~~first nine months~~six month period ended June 30, 2022. Additionally at June 30, 2022, the portfolio had a net unrecognized loss on held-to-maturity securities of ~~2017.~~

$200.0 million compared to a net unrecognized loss of $12.9 million at December 31, 2021. The $187.1 million decrease in the market value of the investment portfolio was driven by an increase in market interest rates, which drove a decrease in the value of the held-to-maturity securities held in our portfolio at June 30, 2022.

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 $6.8 million at June 30, 2022 compared to $9.2 million at December 31, 2021.

Restricted Stock

Restricted stock, which represents a required investment in the capital stock of correspondent banks related to available credit facilities, iswas carried at cost as of ~~September~~June 30,~~, 2017~~ 2022 and December 31, ~~2016.~~2021. 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~~2022 and December 31, ~~2016,~~2021, the investment in FHLB of Pittsburgh capital stock totaled ~~$1.5~~$15.4 million and ~~$1.2~~$3.4 million, respectively. ~~The increase was due to a higher required investment in FHLB stock during 2017.~~ At both ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2020, ACBB capital stock totaled $143,000. Both the FHLB and ACBB ~~issued dividend payments~~paid dividends during the ~~nine~~second quarter of 2022.

Premises and Equipment

The balance of premises and equipment increased by $3.1 million to $130.5 million at June 30, 2022 from $127.4 million at December 31, 2021. The increase was primarily due to purchases of premises and equipment totaling $7.3 million partially offset by depreciation and amortization expense of $4.3 million offset during the six months offended June 30, 2022. The total branch count was 34 at June 30, 2022 with the opening of ~~2017.~~

two new branches in Ocean City, NJ and Wayne, PA compared to 32 at December 31, 2021. The Company’s branch strategy will be a critical focus throughout 2022 and beyond.

Other Real Estate Owned

~~The~~

At June 30, 2022 and December 31, 2021, the balance of other real estate owned ~~decreased to $9.2 million at September 30, 2017 from $10.2 million at December 31, 2016,~~ ~~primarily due to writedowns in~~was $230,000 and $360,000, 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~~2022 and December 31, ~~2016.~~2021, the balance of operating leases – right-of-use asset was $75.3 million and $75.6 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~~$21.8 million ~~or 12.4%,~~ to ~~$1.9~~$5.2 billion at ~~September~~June 30, ~~2017~~2022 from ~~$1.7~~$5.2 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.~~2021. 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.

~~Shareholders'~~ Our participation in the PPP loan program also resulted in significant growth in new deposit relationships.

Other Borrowings

At June 30, 2022, we had $292.5 million in other borrowings compared to no borrowings at December 31, 2021.

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, 2022 and December 31, 2021, the balance of the operating lease liability obligation was $81.7 million and $81.8 million, respectively.

Shareholders’ Equity

Total ~~shareholders'~~shareholders’ equity ~~increased $10.1~~decreased $89.3 million to ~~$225.2~~$234.9 million at ~~September~~June 30, ~~2017~~2022 compared to ~~$215.1~~$324.2 million at December 31, ~~2016.~~2021. The ~~increase~~decrease was primarily due to ~~net income of $6.2 million recognized during~~a decrease in the ~~first nine 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~~loss of $97.7 million partially offset by an increase in ~~the market value~~retained earnings of ~~the investment securities portfolio.~~$6.9 million. The ~~shift~~decrease 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~~loss was ~~primarily driven~~exacerbated by ~~a decrease~~an increase in market interest rates which drove ~~an increase~~a decrease in the ~~fair~~market value of the securities held in our portfolio.

Results of Operations

Three Months Ended ~~September~~June 30,~~, 2017~~ 2022Compared to Three Months Ended ~~September~~June30,~~, 2016~~

2021

We reported net income available to common shareholders of ~~$2.3~~$3.9 million or ~~$0.04~~$0.06 per diluted share, for the three-month period ended June 30, 2022., compared to net income of $5.1 million or $0.08 per diluted share, for the three months ended ~~September~~June 30, ~~2017,~~2021 The decrease was primarily driven by a reduction in non-interest income during the second quarter of 2022. The decrease in non-interest income was primarily driven by a decrease in mortgage banking income due to a reduction in the volume of mortgage originations given higher interest rates, coupled with a sharp increase in legal expenses in the current period.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

We reported net income available to common shareholders of $9.1 million or $0.14 per diluted share, for the six-month period ended June 30, 2022. compared to net income of ~~$1.3~~$11.3 million, or ~~$0.03~~$0.17 per diluted share, for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~2021. The decrease in earnings year over year was primarily driven by a decrease in non-interest income and an increase in ~~net~~non-interest expense offset by an increase in interest income. The decrease in non-interest income was primarily driven by ~~growth~~a decrease in ~~interest-earning assets along with~~mortgage banking income due to a reduction in the ~~addition~~volume of ~~a residential~~ mortgage ~~lending division.~~

~~Net interest income for~~originations during the ~~three~~six month period ended ~~September~~June 30, 2017 was $15.7 million compared to $11.8 million for the three months ended September 30, 2016. Interest income increased $4.3 million, or 32%, 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~~2022. The increase in ~~average investment securities balances and a $149.8 million increase in average loan balances.~~ ~~Interest~~non-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~~related to an increase in ~~average deposit balances.~~

We did not record a provision for loan losses for the three months ended September 30, 2017. We recorded a provision for loan losses in the amount of $607,000 for the three months ended September 30, 2016 primarily due to an increase in the allowance required for loans individually evaluated for impairment.

~~Non-interest income increased by $636,000 to $5.8 million~~legal expenses during the ~~three months~~six month period ended ~~September~~June 30, 2017 compared to $5.1 million during the three months ended September 30, 2016. The increase during the three months ended September 30, 2017 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.

~~Non-interest~~2022. Legal expenses increased by ~~$4.2~~$6.8 million for the six month end June 30, 2022 when compared to ~~$19.2 million~~the same period last year due to attorney fees paid and accrued for to vigorously defend itself in lawsuits arising from complaints filed during the three months ended September 30, 2017 compared to $15.0 million during the three months ended September 30, 2016. This increase was primarily driven by higher salaries, employee benefits, occupancy expenses associated with the addition of new stores related to our expansion strategy which we refer toperiod as ~~"The Power of Red is Back", as well as the addition of the Oak Mortgage residential mortgage lending team~~described in ~~the third quarter of 2016.~~

~~Return on average assets~~Note 3, Commitments and ~~average equity was 0.45% and 4.11%, respectively, during the three months ended September 30, 2017 compared to 0.32% and 4.49%, respectively, for the three months ended September 30, 2016.~~

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

We reported net income of $6.2 million, or $0.11 per diluted share, for the nine months ended September 30, 2017 compared to net income of $3.4 million, or $0.09 per diluted share, for the nine months ended September 30, 2016.Contingencies. The increase in ~~net~~interest income was primarily driven by ~~growth in interest-earning assets along with the addition of a residential mortgage lending division.~~

Net interest income for the nine months ended September 30, 2017 increased $10.5 million to $45.2 million as compared to $34.7 million for the nine months ended September 30, 2016. Interest income increased $11.8 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~~ interest ~~bearing deposits.~~and dividends on investment securities.

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

Non-interest income increased by $4.5 million to $15.1 million during the nine months ended September 30, 2017 as compared to $10.6 million during the nine months ended September 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.

Return on average assets and average equity from continuing operations were 0.41% and 3.74%, respectively, during the nine months ended September 30, 2017 compared to 0.30% and 3.93%, respectively, for the nine months ended September 30, 2016.

Analysis of Net Interest Income

~~Historically, our~~

Our earnings ~~have depended~~depend 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 23% in 2022 and 24% in 2021.

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, 2022							For the three months ended June 30, 2021
(dollars in thousands)	Average Balance		Interest Income/ Expense		Yield/ Rate⁽¹⁾			Average Balance		Interest Income/ Expense		Yield/ Rate⁽¹⁾
Interest-earning assets:
Federal funds sold and other interest-earning assets	$	96,632	$	85		0.35	%	$	306,222	$	63		0.08	%
Investment securities and restricted stock ⁽²⁾((2)		2,899,551		14,679		2.03	%		1,688,807		6,851		1.63	%
Loans receivable ⁽²⁾		2,625,902		27,699		4.23	%		2,658,540		28,574		4.31	%
Total interest-earning assets		5,622,085		42,463		3.03	%		4,653,569		35,488		3.06	%
Other assets		162,382							262,404
Total assets	$	5,784,467						$	4,915,973

Interest-earning liabilities:
Demand – non-interest bearing	$	1,400,644						$	1,230,690
Demand – interest bearing		2,419,113		2,528		0.42	%		1,963,848		3,283		0.67	%
Money market & savings		1,353,742		780		0.23	%		1,098,340		933		0.34	%
Time deposits		184,183		222		0.48	%		187,093		424		0.91	%
Total deposits		5,357,682		3,530		0.26	%		4,479,971		4,640		0.42	%
Total interest-bearing deposits		3,957,038		3,530		0.36	%		3,249,281		4,640		0.57	%
Other borrowings		69,224		294		1.70	%		21,104		75		1.43	%
Total interest-bearing liabilities		4,026,262		3,824		0.38	%		3,270,385		4,715		0.58	%
Total deposits and other borrowings		5,426,906		3,824		0.28	%		4,501,075		4,715		0.42	%
Non-interest bearing other liabilities		105,816							100,272
Shareholders’ equity		251,745							314,626
Total liabilities and shareholders’ equity	$	5,784,467						$	4,915,973
Net interest income ⁽²⁾			$	38,639						$	30,773
Net interest spread						2.65	%						2.48	%
Net interest margin ⁽²⁾						2.76	%						2.65	%

⁽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~~$239 and ~~$235~~$134 for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, 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, 2022							For the six months ended June 30, 2021
(dollars in thousands)	Average Balance		Interest Income/ Expense		Yield/ Rate⁽¹⁾			Average Balance		Interest Income/ Expense		Yield/ Rate⁽¹⁾
Interest-earning assets:
Federal funds sold and other interest-earning assets	$	116,969	$	125		0.22	%	$	257,580	$	112		0.09	%
Investment securities and restricted stock ⁽²⁾		2,858,482		28,057		1.98	%		1,560,543		13,339		1.72	%
Loans receivable ⁽²⁾		2,571,612		53,876		4.22	%		2,667,572		58,593		4.43	%
Total interest-earning assets		5,547,063		82,058		2.98	%		4,485,695		72,044		3.24	%
Other assets		191,965							269,645
Total assets	$	5,739,028						$	4,755,340

Interest-earning liabilities:
Demand – non-interest bearing	$	1,389,583						$	1,159,267
Demand – interest bearing		2,373,215		4,738		0.40	%		1,905,731		6,541		0.69	%
Money market & savings		1,359,766		1,573		0.23	%		1,056,042		2,051		0.39	%
Time deposits		189,819		468		0.50	%		185,968		963		1.04	%
Total deposits		5,312,383		6,779		0.26	%		4,307,008		9,555		0.45	%
Total interest-bearing deposits		3,922,800		6,779		0.35	%		3,147,741		9,555		0.61	%
Other borrowings		40,739		352		1.74	%		33,513		148		0.89	%
Total interest-bearing liabilities		3,963,539		7,131		0.36	%		3,181,254		9,703		0.62	%
Total deposits and other borrowings		5,353,122		7,131		0.27	%		4,340,521		9,703		0.45	%
Non-interest bearing other liabilities		108,018							102,017
Shareholders’ equity		277,888							312,802
Total liabilities and shareholders’ equity	$	5,739,028						$	4,755,340
Net interest income ⁽²⁾			$	74,927						$	62,341
Net interest spread						2.62	%						2.62	%
Net interest margin ⁽²⁾						2.72	%						2.80	%

⁽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~~$387 and ~~$662~~$270 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, 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.

	For the three months ended June 30, 2022 vs. 2021									For the six months ended June 30, 2022 vs. 2021
	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	$	(130	)	$	152		$	22		$	(150	)	$	163		$	13
Securities		6,157			1,671			7,828			12,740			1,978			14,718
Loans		(1,244	)		369			(875	)		(3,573	)		(1,144	)		(4,717	)
Total interest-earning assets		4,783			2,192			6,975			9,017			997			10,014

Interest expense:
Deposits
Interest-bearing demand deposits		477			(1,232	)		(755	)		933			(2,736	)		1,803
Money market and savings		135			(287	)		(152	)		332			(810	)		(478	)
Time deposits		(3	)		(200	)		(203	)		10			(505	)		(495	)
Total deposit interest expense		609			(1,719	)		(1,110	)		1,275			(4,051	)		(2,776	)
Other borrowings		91			128			219			54			150			204
Total interest expense		700			(1,591	)		(891	)		1,329			(3,901	)		(2,572	)
Net interest income	$	4,083		$	3,783		$	7,866		$	7,688		$	4,898		$	12,586

Net Interest Income and Net Interest Margin

Net interest income, on a fully tax-equivalent basis for the three months ended ~~September~~June 30, ~~2017~~2022 increased ~~by $3.9~~$7.9 million, or ~~32%~~26%, over the same period in ~~2016.~~2021. Interest income ~~on a fully tax-equivalent basis,~~ on interest-earning assets totaled ~~$18.1 million and $13.9~~$42.5 million for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively. The~~2022, an increase ~~in interest income was the result~~ of ~~a $288.1~~$7.0 million, ~~increase in average investment securities balances and a $149.8~~compared to $35.5 million ~~increase in average loan balances~~ for the three months ended ~~September~~June 30, ~~2017 as compared to September 30, 2016.~~2021. The most significant increase in interest-earning assets was a $1.2 billion increase in the average balance of the investment securities portfolio. Total interest expense for the three months ended ~~September~~June 30, ~~2017 increased $376,000,~~2022 decreased by $891,000, 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%~~19%, over the same period in ~~2016.~~

2021. Interest expense on deposits decreased by $1.1 million or 24%, for the three months ended June 30, 2022 versus the same period in 2021 due primarily to a 16 basis point decrease in the average cost of deposit balances, offset by a $878 billion increase in the average balance of deposits. Interest expense on other borrowings increased by $219,000 for the three months ended June 30, 2022 compared to June 30, 2021 due primarily to an increase in the average balance of overnight borrowings.

Net interest income, on a fully tax-equivalent basis for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 increased ~~by $10.5~~$12.6 million, or ~~30%~~20%, over the same period in ~~2016.~~2021. Interest income ~~on a fully tax-equivalent basis,~~ on interest-earning assets totaled ~~$52.1 million and $40.3~~$82.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2022, an increase of $10.0 million, compared to $72.0 million for the six months ended June 30, 2021. The increase in interest income earned was primarily the result of ~~a $326.6 million~~an increase in the average ~~investment securities balances and~~balance of interest earning assets, offset by a ~~$138.5 million~~26-point decrease in the average yield on interest-earning assets. The most significant increase in interest-earning assets was a $1.3 billion increase in the average ~~loan balances for~~balance of the ~~nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.~~investment portfolio. Total interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased $1.3~~2022 decreased by $2.6 million, or 27%, ~~to $6.2 million from $4.9 million over~~for the same period in ~~2016.~~2021. Interest expense on deposits ~~for the nine months ended September 30, 2017 increased~~decreased by ~~$1.2~~$2.8 million, or 29%, ~~over~~for the six months ended June 30, 2022 versus the same period in ~~2016.~~

2021 due primarily to a 19 basis point decrease in the average cost of deposit balances, offset by a $1.0 billion increase in the average balances of deposits. Interest expense on other borrowings increased by $204,000 for the six months ended June 30, 2022 as compared to June 30, 2021 due primarily to an increase in the average balance of 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%~~2.65% during the three months ended ~~September~~June 30, ~~2017~~2022 compared to ~~2.96%~~2.48% during the ~~same period in 2016~~three months ended June 30, 2020 and was ~~3.11% during both~~2.62% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~the nine months ended September~~June 30, ~~2016.~~2021. 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~~2022 and June 30, ~~2017,~~2021, the fully tax-equivalent net interest margin ~~increased~~was 2.76% and 2.65%, respectively. For the six months ended June 30, 2022 and June 30, 2021, the fully tax-equivalent net interest margin was 2.72% and 2.80%, respectively. The decrease in the net interest margin was primarily attributable to ~~3.25% from 3.23%~~the reduction in origination fees related to PPP loans recognized during the ~~same period~~period. In the second quarter of 2022, $1.3 million in ~~2016 primarily~~fees were recognized as revenue compared to $4.7 million in fees recognized during the second quarter of 2021.

Provision (Credit) for Credit Losses

We recorded a ~~result~~credit of ~~an increase in~~$380,000 for credit losses for the ~~yield on loans outstanding.~~

~~Provision~~three months ended June 30, 2022 compared to no provision for ~~Loan Losses~~

the three months ended June 30, 2021. We recorded a $240,000 provision for credit losses for the six months ended June 30, 2022 compared to $3.0 million provision for the six months ended June 30, 2021. The provision ~~for loan losses~~(credit) recorded at the three and six months ended June 30, 2022 is charged to operations in an amount necessary to bring the total allowance for ~~loan~~credit losses to a level that management believes is adequate to absorb ~~inherent~~life of loan losses in the loan portfolio. ~~We did not record a~~The decrease in the provision for credit losses was primarily driven by reduced requirements related to the allowance for credit losses (“ACL”) on loan ~~losses~~balances due to the adoption of ASU 2016-13 during the three and six month periods ended June 30, 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 driven2022 decreased by an increase in total loans outstanding. We recorded a $607,000 provision for the three month period ended September 30, 2016 and a $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 30, 2016, compared to $5.1 million for the three months ended September 30, 2016. Mortgage banking income increased by $754,000 to $3.2 million during the three months ended September 30, 2017 from $2.4 million primarily due to gains on the sale of residential mortgage loans originated through Oak Mortgage which was acquired in the third quarter of 2016. Service fees on deposit accounts totaled $1.1 million for the three months ended September 30, 2017, which represents an increase of $381,000 over the three months ended September 30, 2016. This increase was due to the growth in the number of customer accounts and transaction volume. Gains on the sale of SBA loans sold totaled $831,000 for the three months ended September 30, 2017 compared to $1.6 million for the three months ended September 30, 2016. ~~The decrease of $799,000 in gains on the sale of SBA loans was driven by a decrease in SBA loans sold during the three months ended September 30, 2017 as a result of lower origination volume.~~ ~~Loan advisory and servicing fees totaled $677,000 for the three months ended September 30, 2017 which represents an increase of $349,000 from the same period in 2016 due to higher loan volumes.~~

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

~~Non-interest Expenses~~

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

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

Salary and employee benefits expenses, which represent the largest component of non-interest expenses, increased by $2.1 million, or 27%, for the three months ended September 30, 2017 compared to the same period in 2016. This increase was primarily driven by annual merit increases along with increased staffing levels related to our growth 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 compared to the same period last year also as a result of our continuing growth and relocation strategy.

Other real estate owned expenses totaled $746,000 for the three months ended September 30, 2017, an increase of $44,000, or 6%, compared to the same period in 2016. This increase was a result of higher writedowns on foreclosed assets held in other real estate owned in the current period.

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

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

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

~~Salary expenses and employee benefits, which represent the largest component of non-interest expenses, were $27.8 million for the nine months ended September 30, 2017, an increase of $7.5~~ million, or 37%, compared to the same period in ~~2016. This increase was primarily driven by annual merit increases along with increased staffing levels related to our growth and expansion strategy, which we refer to as "The Power of Red is Back".~~ There were twenty-two stores open as of September 30, 2017 compared to nineteen stores at September 30, 2016. In addition, another store was under construction as of September 30, 2017, which is expected to open in2021. Mortgage banking income totaled $888,000 during the ~~fourth quarter of 2017. Salaries and employee benefits also increased as a result of the acquisition of Oak Mortgage in the third quarter of 2016.~~

~~Occupancy expenses increased by $852,000, or 19%, and depreciation and amortization expense increased by $772,000, or 27%, for the nine~~three months ended ~~September~~June 30, ~~2017 versus the same period in 2016 also as~~2022, which represents a ~~result~~decrease of ~~our continuing growth and relocation strategy~~.

~~Other real estate owned expenses totaled $1.7~~$2.0 million for the nine months ended September 30, 2017, an increase of $94,000, or 6%, from the same period of 2016 primarily as a result of higher writedowns on foreclosed assets held in other real estate owned in the current period.

~~All other non-interest expenses increased $4.1 million, or 37%, during the nine months ended September 30, 2017,~~ compared to the same period in ~~2016. This increase was mainly attributable~~2021. The decrease in mortgage banking income for the three months ended June 30, 2022 compared to the ~~addition~~three months ended June 30, 2021 was due to a decrease in residential mortgage loan originations due to the higher interest rate environment. Service fees on deposit accounts decreased $152,000 to $3.1 million for the three months ended June 30, 2022 compared to $3.3 million for the three months ended June 30, 2021. Gains on the sale or call of investments securities decreased by $2,000 for the three months ended June 30, 2022 when compared to the same period in 2021. Loan and servicing fees totaled $694,000 for the three months ended June 30, 2022 which represents an increase of $34,000 from the same period in 2021. Gains on the sales of SBA increased $51,000 for the three months ended June 30, 2022 to $684,000 when compared to same period in 2021.

Total non-interest income for the six months ended June 30, 2022 decreased $8.7 million, or 49%, compared to the same period in 2021. Mortgage banking income totaled $2.0 during the six months ended June 30, 2022, which represents a decrease of $5.5 million compared to the same period in 2021. The decrease in mortgage banking income for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was due to an decrease in residential mortgage loan originations year over year. Service fees on deposit accounts totaled $6.6 million for the six months ended June 30, 2022 which represents a decrease of $645,000 over the same period in 2021. Gains on the sales of SBA decreased $183,000 for the six months ended June 30, 2022 to $1.2 million when compared to same period in 2021. Loan and servicing fees totaled $1.2 million for the six months ended June 30, 2022 which represents a decrease of $104,000 from the same period in 2021. Gains on the sale of investment securities decreased by $2,000 for the six months ended June 30, 2022 compared to the same period in 2021.

Non‑Interest Expenses

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Non-interest expenses increased $7.3 million, or 24%, to $37.8 million for the three months ended June 30, 2022 compared to $30.5 million for the same period in 2021. An explanation of changes in non-interest expenses for certain categories is presented in the following paragraphs.

Salaries and employee benefits increased by $1.5 million, or 10%, for the three months ended June 30, 2022 compared to the same period in 2021 primarily as a result of merit increases and increased staffing levels. A new branch in Wayne, PA was opened in April 2022.

Occupancy expense, including depreciation and amortization expenses, decreased by $229,000, or 4%, for the three months ended June 30, 2022 compared to the same period last year, as a result of incentives received on various leases. There were thirty-four branches open as of June 30, 2022 compared to thirty-two branches at June 30, 2021.

Other real estate owned credits totaled $111,000 during the three months ended June 30, 2022, a decrease of $604,000, or 123%, compared to the same period in 2021. The decrease is primarily related to the sale of foreclosed assets and recovery of prior other real estate owned expenses during the current period.

All other non-interest expenses increased by $6.6 million, or 71%, for the three months ended June 30, 2022 compared to the same period last year due primarily to increases in expenses related to legal expenses and salaries and employee benefits.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Non-interest expenses increased $9.6 million, or 16%, to $69.4 million for the six months ended June 30, 2022 compared to $59.9 million for the same period in 2021. An explanation of changes in non-interest expenses for certain categories is presented in the following paragraphs.

Salaries and employee benefits increased by $1.3 million, or 4%, for the six months ended June 30, 2022 compared to the same period in 2021 as a result of merit increases and increased staffing levels. New branches were opened in Ocean City, NJ and Wayne, PA during the six months ended June 30, 2022.

Occupancy expense, including depreciation and amortization expenses, decreased by $255,000, or 2%, for the six months ended June 30, 2022 compared to the same period last year, as a result of incentives received on various leases. There were thirty-four branches open as of June 30, 2022 compared to thirty-two branches at June 30, 2021.

Other real estate expenses totaled $92,000 during the six months ended June 30, 2022, a decrease of $499,000, or 84%, compared to the same period in 2021. The decrease is primarily related to the sale of foreclosed assets and recovery of prior other real estate owned expenses during the current period.

All other non-interest expenses increased by $9.0 million, or 48%, for the six months ended June 30, 2022 compared to the same period last year primarily due to the increase in legal expenses related to the ~~residential mortgage loan operation of Oak Mortgage. Increases~~named lawsuits during the period as disclosed in ~~data processing expense, advertising, professional fees, legal expenses,~~Note 3, Commitment and ~~other expenses resulting from our expansion strategy also contributed to the growth in other operating expenses.~~

Contingencies.

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. For the purposes of this calculation, net non-interest expenses equal non-interest expenses less non-interest income and ~~nonrecurring expense.~~non-recurring expenses. For the three months ended ~~September~~June 30, ~~2017,~~2022, this ratio ~~equaled 2.58%~~was 2.28% compared to ~~2.36%~~1.86% for the three months ended ~~September~~June 30, ~~2016.~~2021. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, the ratio ~~equaled 2.58%~~was 2.12% compared to ~~2.55%~~1.78% for the ~~nine~~six months ended June 30, 2021, respectively. The increase in this ratio for the three and six month period ended ~~September~~June 30, ~~2016, respectively, reflecting higher net~~2022 was mainly due to an increase in non-interest ~~expenses~~ ~~related to our growth strategy of adding and relocating stores.~~expenses.

Another productivity measure utilized by management is the ~~operating~~ efficiency ~~ratio.~~ratio, a non-GAAP measure. This ratio expresses the relationship of non-interest expenses to net interest income plus non-interest income. ~~For the three months ended September 30, 2017, the operating~~The efficiency ratio ~~was 89.2%, compared to 88.7%~~equaled 87.3% for the three months ended ~~September~~June 30, ~~2016. The efficiency ratio equaled 89.1% for both the nine months ended September 30, 2017 and the same period in 2016. The decrease~~2022, compared to 79.6% for the three months ended ~~September~~June 30, ~~2017~~2021. The efficiency ratio equaled 82.9% for the six months ended June 30, 2022, compared to 74.8% for the six months ended June 30, 2021. The increase for the three and six months ended June 30, 2022 versus ~~September~~June 30, ~~2016~~2021 was due to ~~both~~non-interest expenses increasing at a faster rate than net interest income and non-interest ~~income increasing at a slower rate than non-interest expenses.~~

income.

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

We recorded a provision for income taxes of ~~$4,000~~$1.4 million for the three months ended ~~September~~June 30, ~~2017,~~2022, compared to a ~~$32,000 benefit~~$1.9 million provision for income taxes for the three months ended ~~September~~June 30, ~~2016.~~2021. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, we recorded a ~~benefit~~provision for income taxes of ~~$38,000~~$3.5 million, compared to a ~~$69,000 benefit~~provision for income taxes of $4.2 million 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.2021. The effective tax rates for the ~~three-month periods~~three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 were ~~30% and 25%, respectively, and for the nine month periods ended September 30, 2017 and 2016 were 29%~~23% and 24%, ~~respectively, excluding an adjustment to~~respectively. For the ~~deferred~~six months ended June 30, 2022 and 2021, the effective tax ~~asset valuation allowance.~~

~~We evaluate~~rates were 25% and 24%, respectively.

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

In conducting the deferred tax asset analysis, we believe it is important to consider the unique characteristics of an industry or business. In particular, characteristics such as business model, level of capital and reserves held by 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, wethe Company carefully weighed both positive and negative evidence currently available. Judgment is required when considering the relative impact of such evidence. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which it can be objectively verified.

~~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 has occurred over the last several years and is expected to continue. As of December 31, 2021, 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 geopolitical conflict and inflationary pressures to the local and global economy may result in a significant increase in future credit loss provisions and charge-offs. Rising interest rates and a downturn in the economy could significantly decrease the volume of mortgage loan originations and have a negative impact on asset quality.

Based on the guidance provided in ASC 740, we believe that the positive evidence ~~evaluated when considering~~considered at June 30, 2022 and December 31, 2021 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.

was not required during either period.

~~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.

The net deferred tax asset balance ~~before consideration of a valuation allowance~~ was ~~$18.6~~$48.0 million as of ~~September~~June 30, ~~2017~~2022 and ~~$21.4~~$14.2 million as of December 31, ~~2016. After assessment of all available tax planning strategies, we determined that a partial valuation allowance~~2021. The increase in the ~~amount of $10.0 million as of September 30, 2017~~deferred tax asset balance is primarily related to FAS 115 and ~~$12.2 million as of December 31, 2016 should be recorded.~~

the unrealized losses in the investment portfolio. The deferred tax asset will continue to be analyzed on a quarterly basis for changes affecting realizability. ~~When~~

Preferred Dividends

Dividends of $644,000 and $1.5 million were declared and paid on 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.~~

Company’s outstanding preferred stock during the three and six months ended June 30, 2022 compared to $875,000 and $1.8 million for the three and six months ended June 30, 2022.

Net Income and Net Income per Common Share

Net income available to common shareholders for the three months ended ~~September~~June 30, ~~2017~~2022 was ~~$2.3~~$3.9 million, ~~an increase~~a decrease of ~~$981,000,~~$1.2 million, compared to ~~$1.3~~a net income available to common shareholders of $5.1 million recorded for the three months ended ~~September~~June 30, ~~2016.~~

~~Net income for the nine months ended September 30, 2017~~2021. The decrease in earnings year over year was ~~$6.2 million, an increase of $2.7 million, compared to $3.4 million recorded for the nine months ended September 30, 2016.~~primarily driven by a 37% decrease in non-interest income. The ~~increase in net income for the nine months ended September 30, 2017 was due to a $10.5 million increase in~~ net interest ~~income, a $4.5 million increase in non-interest income and a $1.1 million decrease in the provision~~margin increased to 2.76% 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,~~2022 compared to 2.65% for the three month period ended June 30, 2021. For the three month ended June 30, 2022, basic and fully diluted net income per common share was ~~$0.04~~$0.06 and $0.06, respectively, compared to ~~$0.04~~basic and fully diluted net income per common share of $0.09 and $0.08 for the ~~three~~same period in 2021.

Net income available to common shareholders for the six months ended ~~September~~June 30, ~~2016~~2022 was $9.1 million, a decrease of $2.1 million, compared to a net income available to common shareholders of $11.3 million recorded for the six months ended June 30, 2021. The decrease in earnings year over year was primarily driven by a 49% decrease in non-interest income. In addition, the net interest margin decreased to 2.72% for the six month period ended June 30, 2022 compared to 2.80% for the six month period ended June 30, 2021. For the six month ended June 30, 2022, basic and ~~fully-diluted~~fully diluted net income per common share was ~~$0.04 for the three month period ended September 30, 2017~~$0.15 and $0.14, respectively, compared to ~~$0.03 for the three months ended September 30, 2016. For the nine months ended September 30, 2016,~~ basic and ~~fully-diluted~~fully diluted net income per common share ~~was $0.11 compared to $0.09~~of $0.19 and $0.17 for the ~~nine months ended September 30, 2016.~~

same period in 2021.

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~~2022 was ~~0.45%~~0.31%, compared to ~~0.32%~~0.48% for the three months ended ~~September~~June 30, ~~2016.~~2021. The ROA for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 was ~~0.41%~~0.37% and ~~0.30%~~0.55%, 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%~~7.17% for the three months ended ~~September~~June 30, ~~2017,~~2022, compared to ~~4.49%~~7.56% for the three months ended ~~September~~June 30, ~~2016.~~2021. The ROE for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 was ~~3.74%~~7.70% and ~~3.93%~~8.38%, 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~~$614.4 million and ~~$215.9~~$549.8 million, and standby letters of credit of approximately ~~$11.9~~$17.9 million and ~~$5.7~~$18.0 million, at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. These financial instruments constitute off-balance sheet arrangements. Commitments often expire without being drawn upon. Substantially all of the ~~$266.1~~$614.4 million of commitments to extend credit at ~~September~~June 30, ~~2017~~2022 were committed as variable rate credit facilities.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses, and many require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each ~~customer's~~customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained upon extension of credit is based on ~~management's~~management’s credit evaluation of the customer. Collateral held varies but may include real estate, marketable securities, pledged deposits, equipment, and accounts receivable.

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

The exposure to credit loss for the ~~proceeds obtained through a liquidation~~Company in the event of ~~such collateral would be sufficient~~nonperformance by the other party to ~~cover~~ the ~~maximum potential amount of future payments required under the corresponding guidelines. The current amount of liability as of September 30, 2017~~financial instrument for loan commitments and ~~December 31, 2016 for guarantees under~~ standby letters of credit ~~issued~~ is ~~not material.~~

represented by the contractual amount of those instruments. The Company uses the same allowance for credit loss policies for evaluating expected losses associated with commitments and standby letters of credit as it does for on-balance sheet instruments.

Regulatory Matters

We are required to comply with certain ~~"risk-based"~~“risk-based” capital adequacy guidelines issued by the ~~FRB~~Federal Reserve 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.~~

~~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.

total risk-weighted assets.

Management believes that the Company and Republic met, as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, 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,~~2022, and December 31, ~~2016 (dollars~~2021.

(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, 2022:

Total risk based capital
Republic	$	362,129		10.81	%	$	268,096		8.00	%	$	351,876		10.50	%	$	335,120		10.00	%
Company		369,064		10.97	%		269,073		8.00	%		353,158		10.50	%		-		-	%
Tier one risk based capital
Republic		343,002		10.24	%		201,072		6.00	%		284,852		8.50	%		268,096		8.00	%
Company		349,937		10.40	%		201,805		6.00	%		285,890		8.50	%		-		-	%
CET 1 risk based capital
Republic		343,002		10.24	%		150,804		4.50	%		234,584		7.00	%		217,828		6.50	%
Company		303,842		9.03	%		151,354		4.50	%		235,439		7.00	%		-		-	%
Tier one leveraged capital
Republic		238,988		5.83	%		235,319		4.00	%		235,319		4.00	%		294,148		5.00	%
Company		234,923		5.94	%		235,748		4.00	%		235,748		4.00	%		-		-	%

At December 31, 2021:

Total risk based capital
Republic	$	347,030		11.43	%	$	242,787		8.00	%	$	318,658		10.50	%	$	303,484		10.00	%
Company		360,175		11.83	%		243,591		8.00	%		319,713		10.50	%		-		-	%
Tier one risk based capital
Republic		328,066		10.81	%		182,091		6.00	%		257,962		8.50	%		242,787		8.00	%
Company		341,211		11.21	%		182,693		6.00	%		258,816		8.50	%		-		-	%
CET 1 risk based capital
Republic		328,066		10.81	%		136,568		4.50	%		212,439		7.00	%		197,265		6.50	%
Company		281,886		9.26	%		137,020		4.50	%		213,142		7.00	%		-		-	%
Tier one leveraged capital
Republic		322,097		5.85	%		224,247		4.00	%		224,247		4.00	%		280,309		5.00	%
Company		324,242		6.08	%		224,656		4.00	%		224,656		4.00	%		-		-	%

Dividend Policy

On August 26, 2020, the Company issued 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):~~

(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~~

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, 2022, dividends of $644,000 and $1.5 million were declared and paid on preferred stock compared to $875,000 and $1.8 million for the three and six month period ended June 30, 2021.

We have not paid any cash dividends on our common ~~stock during 2017, nor do we~~stock. We have ~~any~~no current plans to pay cash dividends on common stock in ~~2017.~~2022. 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 and available for sale securities.

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)~~(“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~~$86.2 million at ~~September~~June 30, ~~2017,~~2022, compared to ~~$34.6~~$118.9 million at December 31, ~~2016.~~2021. Loan maturities and repayments are another source of asset liquidity. At ~~September~~June 30, ~~2017,~~2022, Republic estimated that more than ~~$90.0~~$165.0 million of loans would mature or repay in the six-month period ending ~~March~~December 31, ~~2018.~~2022. 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,~~2022, we had outstanding commitments (including unused lines of credit and letters of credit) of ~~$278.0~~$614.4 million. Certificates of deposit scheduled to mature in one year totaled ~~$73.5~~$121.1 million at ~~September~~June 30, ~~2017.~~2022. 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~~$1.4 billion at ~~September~~June 30, ~~2017.~~2022. At ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, we had no outstanding term borrowings with the FHLB. At ~~September~~June 30, ~~2017~~2022, we had outstanding overnight borrowings totaling $292.5 million. We had no outstanding overnight borrowings at December 31, 2021. As of June 30, 2022 and December 31, ~~2016, we had no outstanding short-term borrowings with the FHLB. As of September 30, 2017,~~2021, FHLB had issued letters of credit, on ~~Republic's~~Republic’s behalf, totaling ~~$75.0~~$100.0 million against our available credit line. We also established a contingency line of credit of $10.0 million with ACBB and a Fed Funds line of credit with Zions Bank in the amount of $15.0 million to assist in managing our liquidity position. We had no amounts outstanding against the ACBB line of credit or the Zions Fed Funds line at both ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~

2021.

Investment Securities Portfolio

At ~~September~~June 30, ~~2017,~~2022, 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 million and $369.7 million as of September~~$1.1 billion at both June 30, ~~2017~~2022 and December 31, ~~2016, respectively.~~2021. At ~~September~~June 30, ~~2017, the portfolio~~2022, securities classified as available for sale had a net unrealized loss of ~~$8.0~~$142.9 million and a net unrealized loss of ~~$10.7~~$11.6 million at December 31, ~~2016.~~

2021.

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~~$51.2 million at ~~September~~June 30, ~~2017.~~ 2022. 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~~credit 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, 2022			December 31, 2021
Loans accruing, but past due 90 days or more	$	120		$	323
Non-accrual loans		14,420			12,541
Total non-performing loans		14,540			12,864
Other real estate owned		230			360
Total non-performing assets	$	14,770		$	13,224

Non-performing loans as a percentage of total loans, net of unearned income		0.53	%		0.51	%
Non-performing assets as a percentage of total assets		0.25	%		0.24	%

Non-performing asset balances ~~decreased~~increased by ~~$6.2~~$1.6 million to ~~$22.9~~$14.8 million as of ~~September~~June 30, ~~2017~~2022 from ~~$29.1~~$13.2 million at December 31, ~~2016.~~2021. Non-accrual loans ~~decreased $7.6~~increased $1.9 million to ~~$11.0~~$14.4 million at ~~September~~June 30, ~~2017,~~2022, from ~~$18.6~~$12.5 million at December 31, ~~2016. The decrease~~2021. There were $120,000 in ~~non-accrual~~ loans was primarily driven by one loan relationship that was returned to accrual status during the third quarter of 2017. This loan was restructured earlier in the year as a result of a reduction in tenant vacancies in the property held as collateral. Loans accruing, but past due 90 days or more ~~increased~~at June 30, 2022 compared to ~~$2.7 million at September 30, 2017 from $302,000~~$323,000 at December 31, ~~2016. At September 30, 2017 and December 31, 2016, all identified impaired loans are internally classified and individually evaluated for impairment in accordance with the guidance under ASC 310.~~2021.

The following table presents our 30 to 89 days past due loans at ~~September~~June 30, ~~2017~~2022 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

2021.

(dollars in thousands)	June 30,		December 31,
	2022		2020
30 to 59 days past due	$	13,602	$	4,851
60 to 89 days past due		2		4,706
Total loans 30 to 89 days past due	$	13,604	$	9,557

Loans with payments 30 to 59 days past due increased to $13.6 million at June 30, 2022 from $4.9 million at December 31, 2021. Loans with payments 60 to 89 days past due decreased to $2,000 at June 30, 2022 from $4.7 million at December 31, 2021.

Other Real Estate Owned

The balance of other real estate owned ~~decreased to $9.2 million~~was $230,000 at ~~September~~June 30, ~~2017 from $10.2 million~~2022 and $360,000 at December 31, ~~2016.~~2021. The following table presents a reconciliation of other real estate owned for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 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

2021:

(dollars in thousands)	June 30, 2022			December 31, 2021
Beginning Balance, January 1^st	$	360		$	1,188
Additions		285			360
Valuation adjustments		(86	)		(722	)
Dispositions		(329	)		(466	)
Ending Balance	$	230		$	360

At ~~September~~June 30, ~~2017,~~2022, we had no credit exposure to ~~"highly~~“highly leveraged ~~transactions"~~transactions” as defined by the FDIC.

Allowance for ~~Loan~~Credit Losses

On January 1, 2022, the Company adopted ASU 2016-13 (Topic 326), which replaced the incurred loss methodology with CECL for financial instruments measured at amortized cost and other commitments to extend credit. The allowance for ~~loan~~credit losses is a valuation allowance for ~~probable~~management’s estimate of expected credit losses ~~inherent~~ in the loan portfolio. ~~We evaluate the need~~The process to ~~establish an allowance against loan~~determine expected credit losses utilizes analytic tools and management judgement and is reviewed on a quarterly basis. When ~~an increase in this allowance~~management is ~~necessary,~~reasonably certain that a ~~provision for~~ loan ~~losses~~balance is ~~charged to earnings. The allowance for loan losses consists of three components. The first component is allocated to~~not fully collectable, an individually evaluated ~~loans found~~analysis is completed whereby a specific reserve may be established or a full or partial charge off is recorded against the allowance. Subsequent recoveries, if any, are credited to ~~be impaired and is calculated in accordance with ASC 310~~ ~~Receivables. The second component is allocated to all other loans that are not individually identified as impaired. This component is calculated for all non-impaired loans on~~the allowance. Management estimates the allowance balance via 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 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~~quantitative analysis which considers available information from internal and external ~~factors~~sources related to past loan loss and prepayment experience and current conditions as well as the incorporation of reasonable and supportable forecasts. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. Also included in ~~determining whether~~the allowance for credit losses are qualitative reserves that are expected, but, in the management’s assessment, may not be adequately represented in the quantitative analysis. The allowance is available for any loan ~~relationships have deteriorated. Any loan rated as substandard or lower will have an individual collateral evaluation analysis prepared to determine if~~that, in management’s judgment, should be charged off.

Management evaluates 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 resolutionvariety of ~~the troubled loan, an estimate of the deficient amount will be calculated and a specific allocation of loan loss reserve is recorded.~~

factors including available published economic information in arriving at its forecast. Factors considered in the calculation of the allowance for ~~non-impaired loans~~credit losses 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~~as well as external ~~factors.~~factors, such as competition, legal and regulatory requirements. Historical loss experience is analyzed by reviewing charge-offs over a ~~three year~~life of loan period to determine loss rates consistent with the loan categories depicted in the allowance for ~~loan~~credit loss table below.

The factors supporting the allowance for ~~loan~~credit losses do not diminish the fact that the entire allowance for ~~loan~~credit 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~~credit losses. The allowance for ~~loan~~credit losses is subject to review by banking ~~regulators.~~regulators along with the Audit Committee and Board of Directors. Our primary bank regulators regularly conduct examinations of the allowance for ~~loan~~credit losses and make assessments regarding the adequacy and the methodology employed in their determination.

An analysis of the allowance for ~~loan~~credit losses for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, and the twelve months ended December 31, ~~2016~~2021 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, 2022			For the twelve months ended December 31, 2021			For the six months ended June 30, 2021

Balance at beginning of period	$	18,964		$	12,975		$	12,975
CECL Day 1 Adjustment		2,980			-			-
Balance at beginning of period (as adjusted)		21,944			-			-
Charge‑offs:
Commercial real estate		621			311			-
Construction and land development		-			-			-
Commercial and industrial		2,161			61			60
Owner occupied real estate		787			-			-
Consumer and other		182			117			47
Residential mortgage		-			-			-
Paycheck protection program		-			-			-
Total charge‑offs		3,751			489			107
Recoveries:
Commercial real estate		-			33			-
Construction and land development		-			-			-
Commercial and industrial		16			462			150
Owner occupied real estate		597			64			40
Consumer and other		81			169			52
Residential mortgage		-			-			-
Paycheck protection program		-			-			-
Total recoveries		694			728			242
Net charge‑offs/(recoveries)		3,057			(239	)		(135	)
Provision for credit losses		240			5,750			3,000
Balance at end of period	$	19,127		$	18,964		$	16,110

Average loans outstanding⁽¹⁾	$	2,571,612		$	2,577,498		$	2,667,572
As a percent of average loans:⁽¹⁾
Net charge‑offs (annualized)		0.24	%		(0.01%	)		(0.01%	)
Provision for loan losses (annualized)		0.02	%		0.22	%		0.23	%
Allowance for loan losses		0.74	%		0.74	%		0.61	%
Allowance for credit losses to:
Total loans, net of unearned income		0.69	%		0.79	%		0.64	%
Total non‑performing loans		131.55	%		147.42	%		123.48	%

⁽¹⁾Includes non-accruing loans.

We recorded a credit of $380,000 to the provision for credit losses for the three month period ended June 30, 2022 and a $240,000 provision was recorded for the six months ended June 30, 2022. We did not record a provision for ~~loan~~credit 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. We~~2021. The provision recorded is charged to operations in an amount necessary to bring the total allowance for credit losses to a ~~provision for loan~~level that management believes is adequate to absorb expected losses of $607,000 for the three month period ended September 30, 2016 and $1.6 million for the nine month period ended September 30, 2016. During the first nine months of 2017, there was an increase in the allowance required for loans collectively evaluated for impairment that was driven by an increase in total loans outstanding. During the first nine months of 2016, there was an increase in the allowance required for loans individually evaluated for impairment primarily driven by a single loan relationship that transferred to non-performing status during the second quarter of 2016. A decrease in the appraised value of the collateral supporting this loan relationship drove the need for an increase in the loan ~~loss provision.~~portfolio.

The allowance for ~~loan~~credit losses as a percentage of non-performing loans (coverage ratio) was ~~60.06%~~131.55% at ~~September~~June 30, ~~2017,~~2022, compared to ~~48.45%~~147.4% at December 31, ~~2016~~2021 and ~~48.50%~~123.5% 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.~~2021. Total non-performing loans were ~~$13.8~~$14.5 million, ~~$18.9~~$12.9 million, and ~~$19.5~~$13.0 million at ~~September~~June 30, ~~2017,~~2022, December 31, ~~2016~~2021 and ~~September~~June 30, ~~2016,~~2021, respectively.

The decrease in the coverage ratio at June 30, 2022 compared to December 31, 2021 was a result of an increase in the non-performing loans for the six months ended June 30, 2022.

Management makes at least a quarterly determination as to an appropriate provision ~~from earnings~~ to maintain an allowance for ~~loan~~credit losses that it determines is adequate to absorb ~~inherent~~life of loan credit 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, reasonable and supportable forecast of future credit losses, and other relevant factors in reviewing the adequacy of the allowance for ~~loan~~credit losses. Any additions deemed necessary to the allowance for ~~loan~~credit losses are charged to operating expenses.

We evaluate loans for ~~impairment~~payment delinquency 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) on impaired loans~~Company policy to determine if ~~a deficiency exists.~~any further adjustments need to be made to the allowance for expected credit losses. Our credit monitoring process assesses the ultimate collectability of an outstanding loan balance from all potential sources. When a loan is ~~determined~~expected to be uncollectible it is charged-off against the allowance for ~~loan~~credit 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~~collateral dependent loans can significantly reduce the coverage ratio and other credit loss statistics due to the fact that the balance of the allowance for ~~loan~~credit losses will be reduced while still carrying the remainder of a non-performing loan ~~balance in the impaired loan category.~~balance. The amount of non-performing loans for which partial charge-offs have been recorded amounted to ~~$1.4 million~~$615,000 at ~~September~~June 30, ~~2017~~2022 and ~~$2.4~~ $4.2 million at December 31, ~~2016.~~

2021.

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

(dollars in thousands)
September 30,
2017

December 31,
2016

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

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

loans.

(dollars in thousands)	June 30, 2022			December 31, 2021
Total nonperforming loans	$	14,540		$	12,864
Nonperforming and impaired loans with partial charge-offs		615			4,242

Ratio of nonperforming loans with partial charge-offs to total loans		0.02	%		0.17	%
Ratio of nonperforming loans with partial charge-offs to total nonperforming loans		4.23	%		32.98	%
Coverage ratio net of nonperforming loans with partial charge-offs		3108.07	%		447.05	%

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,~~2022, 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~~2021 filed with the SEC on ~~March 10, 2017.~~

October 25, 2022.

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 not effective atdue to the ~~reasonable assurance level.~~

identification of the following material weaknesses:

●

A failure to maintain an effective control environment, which resulted in deficiencies in the communication of certain relevant information to the Board of Directors of the Company, including information related to branch expenditures.

●

A failure to design and maintain effective controls over the review, analysis and approval of related party transactions.

●

A failure to maintain effective controls over the implementation of FASB’s accounting standard, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, specifically, with regard to the quantification and review of the transition adjustment from the incurred loss model to the Current Expected Loss Model (“CECL”).

Changes in Internal Controls Over Financial Reporting

Management and the Board of Directors have been actively engaged in taking action to remediate the material weaknesses noted above. Such changes, all of which were made subsequent to the quarter ended June 30, 2022, include:

●

the appointment of Harry D. Madonna as Executive Chair of the Board and Interim Chief Executive Officer of the Company;

●

the re-appointment of a Lead Independent Director of the Company;

●

the restructuring of the Board of Directors to strengthen its risk and financial reporting oversight functions, including the addition of one new independent director with extensive public company and financial reporting experience;

●

reconstitution of the membership of the committees of the Board of Directors and the appointment of new committee chairs;

●

more frequent meetings of the Board of Directors and its committees;

●

the active encouragement by management, with the assistance of the Chairman and the rest of the Board, of an open and collaborative culture, to set an appropriate “tone at the top”;

●

the enhancement of information to be provided by management to the Board of Directors, specifically with regard to any potential branch expansion opportunities and anticipated expenses associated therewith;

●

the enhancement of the Company’s policies and procedures for the identification, review and reporting of existing related party transactions and the discontinuation of many future transactions with related parties; and

●

the implementation of design controls related to CECL and the Allowance for Credit Losses, which includes hiring an external consultant to assist with the continued refinement and testing of design features and controls.

Other than the actions described above, during the fiscal quarter ended June 30, 2022, there were no change in our internal controls over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that have materially affected or are reasonably likely to materially affect the Company's internal controls over financial reporting.

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~~2022 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.~~

2022. Management and the Board of Directors continue to be actively engaged in taking action to remediate the material weaknesses noted above.

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.~~Republic, except as noted below.

On March 8, 2022, George E. Norcross, III, Gregory B. Braca, and Philip Norcross filed a complaint in the Court of Common Pleas of Philadelphia County (Commerce Program) against the Company and Company directors Vernon W. Hill II, Theodore J. Flocco, Jr., Brian Tierney, and Barry Spevak. The complaint seeks, among other things, declaratory and injunctive relief enjoining the Company and the individual defendants from implementing any amendments to the Company’s executive employment agreements until after the Company’s 2022 annual meeting of shareholders or taking any other actions outside the ordinary course of business, including executing or extending any related party agreements or any agreements obligating the incurrence of expenses related to the opening of new branches and the renovation of existing branches, without the affirmative vote of a majority of independent directors.

On March 29, 2022, George E. Norcross, III filed suit in the Philadelphia Court of Common Pleas to compel the Company to make available for inspection the books and records as is required under Pennsylvania law.

As of the date of this filing, Mr. Norcross has filed papers with the Court dismissing the actions without prejudice.

On September 19, 2022, a complaint was filed in the Court of Common Pleas in Philadelphia, Pennsylvania against the Company and its current Interim Chief Executive Officer and director and two other current directors. The lawsuit is styled Vernon Hill et al. v. Lisa Jacobs, et al., Case No. 220901684. The two plaintiffs, the former Chairman of the Board and Chief Executive Officer of the Company and a former director of the Company, allege defamation, defamation per se and false light against the three individual defendants. The former Chairman of the Board and Chief Executive Officer also alleges a breach of his employment agreement by the Company. The complaint seeks certain reimbursement payments and compensatory and (as against the individual defendants) punitive damages. On November 21, 2022, the defendants all filed Preliminary Objections to the Complaint. Plaintiffs’ response to those objections are due in the latter part of December. The matter is in its early stages and, accordingly, the Company is still assessing the potential outcomes and materiality of the matter. The Company plans to defend itself vigorously.

The Company is aware that on November 22, 2022, shareholders George E. Norcross, III, Gregory B. Braca and Philip A. Norcross filed a complaint in the same Philadelphia Court of Common Pleas against the Company and its directors. The lawsuit, captioned George E. Norcross, III, et al. v. Republic First Bancorp, Inc. Case No. 221102195, complains generally that the Company and its Board have acted in violation of their fiduciary duties by rejecting Plaintiffs’ efforts to nominate Mr. Braca as a director candidate at the upcoming annual meeting of shareholders, scheduled for January 2023. The Company rejected that attempted nomination on grounds that the plaintiff who made the nomination was not a stockholder of record, as the Company’s By-Laws require. Plaintiffs seek injunctive and declaratory relief that includes a demand that the Court waive enforcement of the Company’s By-Laws, reopen the deadline for nominating director candidates or find that the defendants violated the Company’s By-Laws in connection with its appointment of director Benjamin Duster to fill a vacancy on the Board. On December 6, 2022, plaintiffs filed a motion for preliminary injunction and asked defendants to accept service of the complaint, which they have done. The parties are awaiting a conference with the court to set a schedule for proceedings related to plaintiffs’ motion. Given the procedural posture and its early stage, the Company cannot predict potential outcomes of the matter or plaintiffs’ motion; however, the defendants deny the alleged wrongdoing and intend to defend the matter vigorously.

On November 28, 2022, Plaintiffs Vernon Hill (“Hill”) and Interarch, Inc. (“Interarch”) filed an action in the United States District Court for the Eastern District of Pennsylvania, captioned Hill and Interarch v. Republic First Bancorp, Inc. et al., No. 2:22-cv-04735. Hill is a former Republic First Bancorp, Inc. (“Republic”) board chair and Chief Executive Officer and a former Republic director. Interarch, owned by Hill’s wife, Shirley Hill, provided certain branding and architecture services to Republic. Plaintiffs Hill and Interarch bring claims against Defendants Republic and two Republic employees (who are former Interarch employees), Rodney Dean (“Dean”) and John Chessa (“Chessa”). Plaintiff Interarch brings claims for copyright infringement (against Republic), misappropriation of trade secrets under federal and state law (against all Defendants), tortious interference (against Republic), breach of contract (against Republic), breach of the duty of loyalty (against Dean and Chessa), unfair competition (against Republic), and a request for a declaratory judgment relating to these claims (against all Defendants). Hill, in turn, brings a claim for trademark infringement (against Republic), and Hill and Interarch together bring a claim for unjust enrichment (against Republic). This matter is in its early stages, and Republic is assessing the potential outcome and materiality of this matter. The Company intends to defend itself vigorously.

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.~~2021. 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	Furnished herewith

32.2	Section 1350 Certification of ~~Frank A. Cavallaro~~Jonathan D. Hill	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~~, 2022, formatted in ~~XBRL (eXtensible Business Reporting Language);~~Inline XBRL; (i) Consolidated Balance Sheets as of ~~September~~June 30,~~, 2017~~ 2022 and December 31, ~~2016,~~2021, (ii) Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30,~~, 2017~~ 2022 and ~~2016,~~2021, (iii) Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three and ~~nine~~six months ended ~~September~~June 30,~~, 2017~~ 2022 and ~~2016,~~2021, (iv) Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30,~~, 2017~~ 2022 and ~~2016,~~2021, (v) Consolidated Statements of Changes in ~~Shareholders'~~Shareholders’ Equity for the ~~nine~~three and six months ended ~~September~~June 30,~~, 2017~~ 2022 and ~~2016,~~2021, 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~~December 12, 2022	By:	/s/ Harry D. Madonna
		Harry D. Madonna
		~~President and~~ Interim Chief Executive Officer (principal executive officer)

Date: ~~November 3, 2017~~December 12, 2022	By:	/s/ ~~Frank A. Cavallaro~~Jonathan D. Hill
		~~Frank A. Cavallaro~~ Jonathan D. Hill
		~~Executive~~ Senior Vice President and Interim Chief Financial Officer (principal financial and accounting officer)

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

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

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

Common Stock, $0.01 per share	~~56,989,764~~ 63,788,564
Title of Class	Number of Shares Outstanding as of ~~November 2, 2017~~December 8, 2022

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~~2022 (unaudited) and December 31, ~~2016 (unaudited)~~2021	1 3
	Consolidated statements of income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (unaudited)	2 4
	Consolidated statements of comprehensive (loss) income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (unaudited)	35
	Consolidated statements of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (unaudited)	4 6
	Consolidated statements of changes in ~~shareholders'~~shareholders’ equity for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (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 43

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	64 62

Item 4.	Controls and Procedures	64 62

Part II: Other Information

Item 1.	Legal Proceedings	65 63

Item 1A.	Risk Factors	65 64

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65 64

Item 3.	Defaults Upon Senior Securities	65 64

Item 4.	Mine Safety Disclosures	65 64

Item 5.	Other Information	65

Item 6.	Exhibits	66 65

Signatures		67 66

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended June 30, 2022.

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

	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

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	)