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

Certain statements in this report may be considered to be "forward-looking statements" as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995, such as statements that include the words "may," "believes," "expect," "estimate," "project," "anticipate," "should," "intend," "probability," "risk," "target," "objective" and similar expressions or variations on such expressions. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. For example, risks and uncertainties can arise with changes in: general economic conditions, including their impact on capital expenditures; new service and product offerings by competitors and price pressures; and similar items. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof, except as may be required by applicable laws or regulations. Readers should carefully review the risk factors described in other documents the Company files from time to time with the SEC, including the Company's Annual Report on Form 10-K for the year ended December 31, 2008, Quarterly Reports on Form 10-Q, and any Current Reports on Form 8-K, as well as other filings.

Financial Condition:

March 31, 2009 Compared to December 31, 2008

Assets decreased $40.6 million to $911.4 million at March 31, 2009, compared to $952.0 million at December 31, 2008. This decrease reflected a $32.9 million decrease in loans receivable and an $8.1 million decrease in cash and cash equivalents.

Loans:

The loan portfolio represents the Company's largest asset category and is its most significant source of interest income. The Company's lending strategy is focused on small and medium size businesses and professionals that seek highly personalized banking services. Gross loans decreased $32.8 million, to $750.3 million at March 31, 2009, compared to $783.1 million at December 31, 2008. Substantially all of the decrease resulted from decreases in commercial and construction loans. The loan portfolio consists of secured and unsecured commercial loans including commercial real estate, construction loans, residential mortgages, automobile loans, home improvement loans, home equity loans and lines of credit, overdraft lines of credit and others. Commercial loans typically range between $250,000 and $5,000,000 but customers may borrow significantly larger amounts up to our legal lending limit, which was approximately $15.0 million at March 31, 2009. Individual customers may have several loans that are secured by different collateral, which were in total subject to that lending limit.

Investment Securities:

Investment securities available-for-sale are investments which may be sold in response to changing market and interest rate conditions, and for liquidity and other purposes. The Company's investment securities available-for-sale consist primarily of U.S. Government Agency issued mortgage-backed securities, municipal securities, corporate bonds, and trust preferred securities. Available-for-sale securities totaled $79.4 million at March 31, 2009, compared to $83.0 million at year-end 2008. At both

March 31, 2009 and December 31, 2008, the portfolio had net unrealized losses of $2.2 million.

Investment securities held-to-maturity are investments for which there is the intent and ability to hold the investment to maturity. These investments are carried at amortized cost. The held-to-maturity portfolio consists primarily of debt securities and stocks. At March 31, 2009 and year-end 2008, securities held to maturity totaled $198,000 for both periods.

Restricted Stock:

Republic is a member of the Federal Home Loan Bank of Pittsburgh ("FHLB") and, as such, had been required to maintain stock in FHLB in proportion to its outstanding FHLB advances, prior to the FHLB suspension of dividend payments in 2008. Since that suspension of dividend payments, the restricted stock has been frozen, therefore, at both March 31, 2009 and December 31, 2008, FHLB stock totaled $6.7 million.

Republic is also required to maintain stock in Atlantic Central Bankers Bank ("ACBB") as a condition of a rarely used contingency line of credit. At both March 31, 2009 and December 31, 2008, ACBB stock totaled $143,000.

Cash and Cash Equivalents:

Cash and due from banks, interest bearing deposits and federal funds sold comprise this category which consists of the Company's most liquid assets. The aggregate amount in these three categories decreased by $8.1 million, to $26.3 million at March 31, 2009, from $34.4 million at December 31, 2008, primarily reflecting a $14.3 million decrease in federal funds sold partially offset by a $6.3 million increase in due from banks.

Fixed Assets:

The balance in premises and equipment, net of accumulated depreciation, was $15.4 million at March 31, 2009, compared to $14.2 million at December 31, 2008, reflecting primarily branch expansion.

Other Real Estate Owned:

Other real estate owned amounted to $10.0 million at March 31, 2009 compared to $8.6 million at December 31, 2008, primarily reflecting a transfer from loans of $2.8 million, partially offset by two writedowns totaling $1.3 million.

Bank Owned Life Insurance:

The balance of bank owned life insurance amounted to $12.2 million at March 31, 2009 and $12.1 million at December 31, 2008. The income earned on these policies is reflected in non-interest income.

Other Assets:

Other assets increased by $1.5 million to $15.5 million at March 31, 2009, from $14.0 million at December 31, 2008, reflecting a $2.0 million increase in current income tax assets, a $565,000 increase in prepaid expenses, partially offset by the collection of $1.1 million in short-term receivables collected in the first quarter of 2009.

Deposits:

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

Total deposits increased by $40.0 million to $779.1 million at March 31, 2009 from $739.2 million at December 31, 2008. Average transaction account balances increased 4.0% or $13.3 million

more than the prior year period to $346.3 million in the first quarter of 2009. Period end time deposits increased $6.1 million, or 1.5% to $399.7 million at March 31, 2009, compared to $393.7 million at the prior year-end.

Short-Term Borrowings and FHLB Advances:

Short-term borrowings and FHLB advances are used to supplement deposits as a source of funds. Republic had $25.0 million FHLB advances at March 31, 2009 and December 31, 2008. These FHLB advances mature June, 2010. Republic had no short-term borrowings (overnight) at March 31, 2009 compared to $77.3 million at the prior year-end.

Subordinated Debt:

Subordinated debt, which is comprised of the subordinated debentures supporting the common and capital, or trust preferred, securities of the Company's unconsolidated capital trusts, amounted to $22.5 million at March 31, 2009 and December 31, 2008.

Shareholders' Equity:

Total shareholders' equity decreased $2.8 million to $76.5 million at March 31, 2009, compared to $79.3 million at December 31, 2008, primarily due to the $3.8 million net loss recorded in first quarter 2009.

Three Months Ended March 31, 2009 and March 31, 2008 Results of Operations:

Overview

The Company reported a net loss of $3.8 million, or $(0.35) per diluted share, for the three months ended March 31, 2009, compared to a $2.8 million net loss, or $(0.27) per diluted share, for the comparable prior year period. There was a $3.7 million, or 24.8%, decrease in total interest income, reflecting a 127 basis point decrease in the yield on average loans outstanding while interest expense decreased $3.3 million, reflecting a 173 basis point decrease in the rate on average interest-bearing deposits outstanding and a 73 basis point decrease in the rate on average borrowings outstanding. Net interest income for the three months ended March 31, 2009 decreased $364,000 compared to the comparable period of 2008. The provision for loan losses in the first quarter of 2009 decreased to $4.8 million, compared to $5.8 million in the first quarter of 2008. In both periods, the provision for loan losses reflected additional specific reserves on certain loans. Non-interest income decreased $13,000 to $652,000 in first quarter 2009 compared to $665,000 in first quarter 2008. Non-interest expenses increased $2.0 million to $8.5 million compared to $6.4 million in the first quarter of 2008, primarily due to increases in salaries and employee benefits expense of $828,000, $406,000 in other real estate owned related expenses, $362,000 in professional fees, $162,000 in legal fees and $119,000 in regulatory assessments and costs. Return on average assets and average equity from continuing operations of (1.66)% and (19.41)% respectively, in the first quarter of 2009 compared to (1.16)% and (13.90)% respectively for the same period in 2008.

Analysis of Net Interest Income

Historically, the Company's earnings have depended primarily upon Republic's net interest income, which is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income is affected by changes in the mix of the volume and rates of interest-earning assets and interest-bearing liabilities. The following table provides an analysis of net interest income, setting forth for the periods
(i) average assets, liabilities, and shareholders' equity, (ii) interest income earned on interest-earning assets and interest expense on interest-bearing liabilities, (iii) annualized average yields earned on interest-earning assets and average rates on interest-bearing liabilities, and (iv) Republic's annualized net interest margin (net interest income as a percentage of

average total interest-earning assets). Averages are computed based on daily balances. Non-accrual loans are included in average loans receivable. Yields are adjusted for tax equivalency first quarter 2009 and 2008.

                                For the three months ended                     For the three months ended
                                      March 31, 2009                                 March 31, 2008

                                         Interest                                       Interest
(Dollars in
thousands)                Average        Income/         Yield/          Average        Income/         Yield/
Interest-earning
assets:                   Balance        Expense        Rate (1)         Balance        Expense        Rate (1)
Federal funds sold
and other interest-
earning assets          $     3,726     $        3            0.33 %   $    12,271     $       96            3.15 %
Investment securities
and
restricted stock             90,966          1,190            5.23 %        87,545          1,313            6.00 %
Loans receivable            770,562          9,990            5.26 %       817,702         13,453            6.62 %
Total
interest-earning
assets                      865,254         11,183            5.24 %       917,518         14,862            6.51 %
Other assets                 51,229                                         42,977
Total assets            $   916,483                                    $   960,495

Interest-bearing
liabilities:
Demand - non-interest
bearing                 $    77,527                                    $    83,393
Demand -
interest-bearing             42,087     $       65            0.63 %        41,993     $      146            1.40 %
Money market &
savings                     226,663          1,101            1.97 %       207,571          1,667            3.23 %
Time deposits               394,742          2,501            2.57 %       384,040          4,440            4.65 %
Total deposits              741,019          3,667            2.01 %       716,997          6,253            3.51 %
Total
interest-bearing
deposits                    663,492          3,667            2.24 %       633,604          6,253            3.97 %
Other borrowings             87,726            603            2.79 %       151,552          1,326            3.52 %
Total
interest-bearing
liabilities             $   751,218     $    4,270            2.31 %   $   785,156     $    7,579            3.88 %
Total deposits and
other borrowings            828,745          4,270            2.09 %       868,549          7,579            3.51 %
Non interest-bearing
other liabilites              9,184                                         11,558
Shareholders' equity         78,554                                         80,388
Total liabilities and
shareholders' equity    $   916,483                                    $   960,495

Net interest income
(2)                                     $    6,913                                     $    7,283
Net interest spread                                           2.93 %                                         2.63 %

Net interest margin
(2)                                                           3.24 %                                         3.19 %

(1) Yields on investments are calculated basd on amortized cost.
(2) Net interest income and net interest margin are presented on a tax equivalent basis. Net interest income has been increased over the financial statement amount by $55 and $61 in first quarter 2009 and 2008, 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 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.

                                             Three months ended March 31, 2009
                                                   versus March 31, 2008
                                                     Due to change in:
      (Dollars in thousands)              Volume             Rate           Total
      Interest earned on:
      Federal funds sold and other
       interest-earning assets           $      (7 )     $        (86 )    $    (93 )
      Securities                                44               (167 )        (123 )
      Loans                                   (611 )           (2,852 )      (3,463 )
      Total interest-earning assets           (574 )           (3,105 )      (3,679 )

      Interest expense of
      Deposits
      Interest-bearing demand deposits           -                 81            81
      Money market and savings                 (93 )              659           566
      Time deposits                            (68 )            2,007         1,939
      Total deposit interest expense          (161 )            2,747         2,586
      Other borrowings                         439                284           723
      Total interest expense                   278              3,031         3,309
      Net interest income                $    (296 )     $        (74 )    $   (370 )

The Company's tax equivalent net interest margin increased 5 basis points to 3.24% for the three months ended March 31, 2009, compared to 3.19% for the prior year comparable period.

While yields on interest-earning assets decreased 127 basis points to 5.24% in first quarter 2009 from 6.51% in first quarter 2008, the rate on total deposits and other borrowings decreased 142 basis points to 2.09% from 3.51% between those respective periods. The decrease in yields on assets and rates on deposits and borrowings was primarily due to repricing assets and liabilities as a result of actions taken by the Federal Reserve since September 2007.

The Company's tax equivalent net interest income decreased $370,000, or 5.1%, to $6.9 million for the three months ended March 31, 2009, from $7.3 million for the prior year comparable period. As shown in the Rate Volume table above, the decrease in net interest income was due primarily to a decrease in average interest earning assets. Average interest-earning assets amounted to $865.3 million for first quarter 2009 and $917.5 million for first quarter 2008. The $52.3 million decrease resulted primarily from a reduction in loans of $47.1 million.

The Company's total tax equivalent interest income decreased $3.7 million, or 24.8%, to $11.2 million for the three months ended March 31, 2009, from $14.9 million for the prior year comparable period. Interest and fees on loans decreased $3.5 million, or 25.7%, to $10.0 million for the three months ended March 31, 2009, from $13.5 million for the prior year comparable period. The decrease was due primarily to the 136 basis point decline in the yield on loans, as variable rate loans in our portfolio repriced to lower interest rates, as a result of actions taken by the Federal Reserve. Tax equivalent interest and dividends on investment securities decreased $123,000 to $1.2 million for the three months ended March 31, 2009, from $1.3 million for the prior year comparable period. This decrease reflected a 77 basis point decline in the yield of investment securities primarily resulting from the discontinuation of dividends on FHLB stock. Interest on federal funds sold and other interest-earning assets decreased $93,000, or 96.8%, reflecting decreases in short-term market interest rates.

The Company's total interest expense decreased $3.3 million, or 43.7%, to $4.3 million for the three months ended March 31, 2009, from $7.6 million for the prior year comparable period. Interest-bearing liabilities averaged $751.2 million for the three months ended March 31, 2009, compared to $785.2 million for the prior year comparable period, or a decrease of $33.9 million. The decrease primarily

reflected reduced funding requirements due to a decrease in loans. Average deposit balances increased $24.0 million while there was a $63.8 million decrease in average other borrowings. The average rate paid on interest-bearing liabilities decreased 157 basis points to 2.31% for the three months ended March 31, 2009. Interest expense on time deposit balances decreased $1.9 million to $2.5 million in first quarter 2009, from $4.4 million in the comparable prior year period, reflecting lower rates. Money market and savings interest expense decreased $566,000 to $1.1 million in first quarter 2008, from $1.7 million in the comparable prior year period. The majority of the decrease in interest expense on deposits reflected the impact of the lower short-term interest rate environment. Accordingly, rates on total interest-bearing deposits decreased 173 basis points in first quarter 2009 compared to first quarter 2008.

Interest expense on other borrowings decreased $723,000 to $603,000 in first quarter 2009, primarily as a result of the lower average balances. Average other borrowings, primarily overnight FHLB borrowings, decreased $63.8 million, or 42.1%, between those respective periods. Rates on overnight borrowings reflected the lower short-term interest rate environment as the rate of other borrowings decreased to 2.79% in first quarter 2009, from 3.52% in the comparable prior year period. Interest expense on other borrowings also includes the interest on $22.5 million of subordinated debt.

Provision for Loan Losses

The provision for loan losses is charged to operations in an amount necessary to bring the total allowance for loan losses to a level that reflects the known and estimated inherent losses in the portfolio. The provision for loan losses amounted to $4.8 million in first quarter 2009 compared to $5.8 million in first quarter 2008.

The $4.8 million provision for loan losses in first quarter 2009 includes an increase of $2.8 million in the allowance for loan losses to cover the actual amounts charged off for nineteen loans in the quarter. The amounts charged off were based on management's revised estimates of collection and/or underlying collateral values. The balance of the provision in first quarter 2009 reflects management's judgment of the further deterioration of the business economy and in particular the real estate sector in Republic's market area. At March 31, 2009, approximately 85% of the allowance for loan losses is identified for specific loans.

The first quarter 2008 provision reflected $5.7 million of charges to increase reserves on specific loans primarily comprised of the following. A $1.3 million charge was taken on a New Jersey residential development shore property, notwithstanding higher appraisals, and reflected the most up to date potential buyer indications. A $600,000 charge was taken on a residential development property in New Jersey, also proximate to the shore, based upon the same factors. A $1.7 million charge was taken for a borrower with loans secured by multiple commercial properties which, notwithstanding higher appraisals, was based on the most current efforts to market the properties. A $1.3 million charge was taken on a suburban Philadelphia residential development property, notwithstanding higher appraisals, based on the most recent potential buyer indications. A $450,000 charge was taken on a Philadelphia city residential development, based on the most recent realtor indications. In each case the charges were based on a more rapid disposition than initially planned. The residential property charges reflected the most up to date April, 2008 information, in which markets showed deterioration in what is typically the beginning of the peak buying season.

Non-Interest Income

Total non-interest income decreased $13,000 to $652,000 for first quarter 2009 compared to $665,000 for the three months ended March 31, 2008, as decreases in other income of $79,000 and bank owned life insurance income of $35,000 were offset by an increase in loan advisory and service fees of $115,000. The decrease in other income was primarily due to a $100,000 legal settlement recorded in first quarter 2008 while the increase in loan advisory and servicing fees resulted from higher prepayment fee income.

Non-Interest Expenses

Total non-interest expenses increased $2.0 million or 31.6% to $8.5 million for the three months ended March 31, 2009, from $6.4 million for the prior year comparable period. Salaries and employee benefits increased $828,000 or 30.3%, to $3.6 million for the three months ended March 31, 2009, from $2.7 million for the prior year comparable period. That increase reflected additional staffing in first quarter 2009, decreased salary deferrals based on lower loan originations, as well as annual merit increases for certain individuals of up to three percent of their base salary.

Occupancy expense increased $84,000, or 13.9%, to $687,000 in first quarter 2009, compared to $603,000 in first quarter 2008. The increase reflected incremental rent increases at several branch locations as well as the corporate headquarters.

Depreciation expense increased $9,000 or 2.8% to $335,000 for the three months ended March 31, 2009, compared to $326,000 for the prior year comparable period.

Legal fees increased $162,000, or 82.2%, to $359,000 in first quarter 2009, compared to $197,000 in first quarter 2008, resulting from increased fees on a number of different matters, primarily relating to loan workouts.

Other real estate expenses increased $406,000 for the three months ended March 31, 2009 to $1.4 million compared to $1.0 million for the first quarter 2008 due to an increase of $303,000 in writedowns on properties owned and $103,000 in maintenance expenses on properties owned.

Advertising expense decreased $105,000, or 81.4%, to $24,000 in first quarter 2009, compared to $129,000 in first quarter 2008. The decrease was primarily due to lower levels of print advertising.

Data processing expense increased $56,000, or 27.6%, to $259,000 in first quarter 2009, compared to $203,000 in first quarter 2008, primarily due to system enhancements.

Insurance expense increased $70,000, or 67.3%, to $174,000 in first quarter 2009, compared to $104,000 in first quarter 2008, resulting primarily from additional levels of coverage and higher rates.

Professional fees increased $362,000, or 365.7%, to $461,000 in first quarter 2009, compared to $99,000 in first quarter 2008, resulting from increased consulting fees.

Regulatory assessments and costs expenses increased $119,000, or 228.9%, to $171,000 in first quarter 2009, compared to $52,000 in first quarter 2008, resulting from higher FDIC assessment rates.

Taxes, other decreased $9,000, or 3.4%, to $252,000 for the three months ended March 31, 2009, compared to $261,000 for the comparable prior year period.

Other expenses increased $55,000, or 7.6% to $783,000 for the three months ended March 31, 2009, from $728,000 for the prior year comparable period.

Provision for Income Taxes

The provision for income taxes decreased $420,000, to a $2.0 million benefit for the three months ended March 31, 2009, from a $1.6 million benefit for the prior year comparable period, primarily as a result of the decrease in pre-tax income. The effective tax rates for the three-month periods ended March 31, 2009 and 2008 were 35% and 36% respectively.

Commitments, Contingencies and Concentrations

Financial instruments whose contract amounts represent potential credit risk are commitments to extend credit of approximately $81.9 million and $83.1 million and standby letters of credit of approximately $5.0 million and $5.3 million at March 31, 2009, and December 31, 2008, respectively. These financial instruments constitute off-balance sheet arrangements. Commitments often expire without being drawn upon. Substantially all of the $81.9 million of commitments to extend credit at March 31, 2009 were committed as variable rate credit facilities.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment. Our commitments generally have fixed expiration dates or other termination clauses . . .