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 financial statements including the 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:

September 30, 2009 Compared to December 31, 2008

Assets increased $471,000 to $952.5 million at September 30, 2009, compared to $952.0 million at December 31, 2008. This increase reflected a $42.6 million increase in cash and cash equivalents, a $19.1 million increase in investment securities, and a $10.5 million increase in premises and equipment offset by a $77.6 million decrease in loans receivable.

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 $73.4 million, to $709.7 million at September 30, 2009, compared to $783.1 million at December 31, 2008. Substantially all of the decrease resulted from a decrease in commercial real estate loans as a result of the Company's ongoing effort to reduce exposure to commercial real estate and reposition its portfolio.

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 bank pooled trust preferred securities. Available-for-sale securities totaled $102.1 million at September 30, 2009, compared to $83.0 million at year-end 2008. At September 30, 2009 and December 31, 2008, the portfolio had net unrealized losses of $818,000 and $2.2 million, respectively.

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 September 30, 2009 and year-end 2008, securities held to maturity totaled $160,000 and $198,000 respectively.

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 notwithstanding paydown of those 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 September 30, 2009 and December 31, 2008, FHLB stock totaled $6.7 million.

Management evaluates the restricted stock for impairment in accordance with guidance under ASC 942-10 Financial Services - Depository and Lending. Management's determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge is necessary related to the restricted stock as of September 30, 2009 and December 31, 2008.

Republic is also required to maintain stock in Atlantic Central Bankers Bank ("ACBB"), which is also classified as restricted, as a condition of a rarely used contingency line of credit. At both September 30, 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 increased by $42.6 million, to $77.0 million at September 30, 2009, from $34.4 million at December 31, 2008, primarily reflecting a $34.7 million increase in cash and due from banks.

Fixed Assets:

The balance in premises and equipment, net of accumulated depreciation, was $24.7 million at September 30, 2009, compared to $14.2 million at December 31, 2008, reflecting primarily renovations on existing store locations as well as future store expansion.

Other Real Estate Owned:

Other real estate owned amounted to $10.8 million at September 30, 2009 compared to $8.6 million at December 31, 2008, primarily reflecting two transfers related to loans of $4.1 million, partially offset by write-downs totaling $1.4 million and proceeds from sales totaling $361,000.

Bank Owned Life Insurance:

The balance of bank owned life insurance amounted to $12.3 million at September 30, 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 $4.0 million to $17.9 million at September 30, 2009, from $14.0 million at December 31, 2008, primarily driven by a $4.7 million increase in current income tax assets.

Deposits:

Deposits, which include non-interest and interest-bearing demand deposits, money market, savings and time deposits including some brokered deposits, are the Company'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 $84.5 million to $823.6 million at September 30, 2009 from $739.2 million at December 31, 2008. Average transaction account balances increased $87.4 million, or 25.4%, to $431.0 million in the third quarter of 2009. Period end time deposits decreased $12.6 million, or 3.2%, to $381.1 million at September 30, 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 September 30, 2009 and December 31, 2008. These FHLB advances mature June 2010. Republic had no short-term borrowings (overnight) at September 30, 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 September 30, 2009 and December 31, 2008.

Shareholders' Equity:

Total shareholders' equity decreased $6.5 million to $72.8 million at September 30, 2009, compared to $79.3 million at December 31, 2008, primarily due to the $9.0 million net loss recorded in the first nine months of 2009.

Three Months Ended September 30, 2009 and September 30, 2008

Results of Operations:

Overview

The Company reported net income of $185,000, or $0.02 per diluted share, for the three months ended September 30, 2009, compared to a $1.5 million net income, or $0.14 per diluted share, for the comparable prior year period. There was a $2.8 million, or 20.8%, decrease in total interest income, reflecting a 101 basis point decrease in the yield on average loans outstanding while interest expense decreased $2.0 million, driven by a 110 basis point decrease in the rate on average interest-bearing deposits outstanding. Net interest income for the three months ended September 30, 2009 decreased $813,000 compared to the quarter ended September 30, 2008. The provision for loan losses in the third quarter of 2009 increased to $150,000, compared to $43,000 in the third quarter of 2008, primarily reflecting an increase in specific reserves on impaired loans. Non-interest income decreased to $250,000 in third quarter 2009 compared to $672,000 in third quarter 2008. Non-interest expenses increased $692,000 to $6.7 million compared to $6.0 million in the third quarter of 2008, primarily due to a $775,000 increase in salaries and employee benefits expense. Return on average assets and average equity was 0.08% and 1.02% respectively, in the third quarter of 2009 compared to 0.65% and 7.76% 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 in third quarter 2009 and 2008.

                                        For the three months ended                            For the three months ended
                                            September 30, 2009                                    September 30, 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            $      26,250       $          28                  0.42 %   $     8,568     $       45            2.09 %
Investment securities
and
restricted stock                 82,039               1,036                  5.05 %        92,525          1,334            5.77 %
Loans receivable                733,767               9,705                  5.25 %       775,642         12,208            6.26 %
Total
interest-earning
assets                          842,056              10,769                  5.07 %       876,735         13,587            6.17 %
Other assets                     86,881                                                    57,371
Total assets              $     928,937                                               $   934,106

Interest-bearing
liabilities:
Demand - non-interest
bearing                   $      86,206                                               $    71,990
Demand -
interest-bearing                 48,148       $          78                  0.64 %        31,090     $       68            0.87 %
Money market &
savings                         296,642               1,366                  1.83 %       240,554          1,625            2.69 %
Time deposits                   369,863               1,963                  2.11 %       381,820          3,216            3.35 %
Total deposits                  800,859               3,407                  1.69 %       725,454          4,909            2.69 %
Total
interest-bearing
deposits                        714,653               3,407                  1.90 %       653,464          4,909            2.99 %
Other borrowings                 47,476                 501                  4.19 %       122,709          1,005            3.26 %
Total
interest-bearing
liabilities               $     762,129       $       3,908                  2.03 %   $   776,173     $    5,914            3.03 %
Total deposits and
other borrowings                848,335               3,908                  1.83 %       848,163          5,914            2.77 %
Non interest-bearing
other liabilites                  8,897                                                     7,393
Shareholders' equity             71,705                                                    78,550
Total liabilities and
shareholders' equity      $     928,937                                               $   934,106

Net interest income
(2)                                           $       6,861                                           $    7,673
Net interest spread                                                          3.04 %                                         3.14 %

Net interest margin
(2)                                                                          3.23 %                                         3.48 %

(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 $56 and $55 in third 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 September 30, 2009
                                             versus September 30, 2008
                                                 Due to change in:
(Dollars in thousands)               Volume             Rate              Total
Interest earned on:
Federal funds sold and other
 interest-earning assets           $       19       $         (36 )     $     (17 )
Securities                               (134 )              (164 )          (298 )
Loans                                    (554 )            (1,949 )        (2,503 )
Total interest-earning assets            (669 )            (2,149 )        (2,818 )

Interest expense of
Deposits
Interest-bearing demand deposits          (28 )                18             (10 )
Money market and savings                 (258 )               517             259
Time deposits                              63               1,190           1,253
Total deposit interest expense           (223 )             1,725           1,502
Other borrowings                          794                (290 )           504
Total interest expense                    571               1,435           2,006
Net interest income                $      (98 )     $        (714 )     $    (812 )

The Company's tax equivalent net interest margin decreased 25 basis points to 3.23% for the three months ended September 30, 2009, compared to 3.48% for the prior year comparable period.

While yields on interest-earning assets decreased 110 basis points to 5.07% in third quarter 2009 from 6.17% in third quarter 2008, the rate on total deposits and other borrowings decreased 94 basis points to 1.83% from 2.77% 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 $812,000, or 10.6%, to $6.9 million for the three months ended September 30, 2009, from $7.7 million for the prior year comparable period. The decrease in net interest income was due primarily to a decrease in average interest earning assets. Average interest-earning assets amounted to $842.1 million for third quarter 2009 and $876.7 million for third quarter 2008. The $34.7 million decrease resulted primarily from a reduction in loans of $41.9 million.

The Company's total tax equivalent interest income decreased $2.8 million, or 20.7%, to $10.8 million for the three months ended September 30, 2009, from $13.6 million for the prior year comparable period. Interest and fees on loans decreased $2.5 million, or 20.5%, to $9.7 million for the three months ended September 30, 2009, from $12.2 million for the prior year comparable period. The decrease was due primarily to the 101 basis point decline in the yield on loans, as variable rate loans in our portfolio repriced to lower interest rates, primarily as a result of actions taken by the Federal Reserve. Tax equivalent interest and dividends on investment securities decreased $298,000 to $1.0 million for the three months ended September 30, 2009, from $1.3 million for the prior year comparable period. This decrease reflected a 72 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 $17,000, or 37.8%, reflecting decreases in short-term market interest rates.

The Company's total interest expense decreased $2.0 million, or 33.9%, to $3.9 million for the three months ended September 30, 2009, from $5.9 million for the prior year comparable period. Interest-bearing liabilities averaged $762.1 million for the three months ended September 30, 2009, compared to $776.2 million for the prior

year comparable period, or a decrease of $14.0 million. The decrease primarily reflected reduced funding requirements due to a decrease in loans. Average deposit balances increased $75.4 million while there was a $75.2 million decrease in average other borrowings. The average rate paid on interest-bearing liabilities decreased 100 basis points to 2.03% for the three months ended September 30, 2009. Interest expense on time deposit balances decreased $1.3 million to $2.0 million in third quarter 2009, from $3.2 million in the comparable prior year period, primarily reflecting lower rates. Money market and savings interest expense decreased $259,000 to $1.4 million in third quarter 2009. An increase in average balances for money market and savings deposits of $56.1 million, or 23.3%, was more than offset by a decrease of 86 basis points to 1.83% for the three months ended September 30, 2009. Accordingly, rates on total interest-bearing deposits decreased 110 basis points in third quarter 2009 compared to third quarter 2008.

Interest expense on other borrowings decreased $504,000 to $501,000 in third quarter 2009, primarily as a result of the lower average balances. Average other borrowings, primarily overnight FHLB borrowings, decreased $75.2 million, or 61.3%, between those respective periods. With the increase in money market and savings deposits in third quarter 2009, other borrowings included primarily term borrowings and subordinated debt. With the decrease in lower cost overnight borrowings in the third quarter 2009, the rate on other borrowings increased 93 basis points to 4.19%, from 3.26% in the comparable prior year period.

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 $150,000 in third quarter 2009 compared to $43,000 in third quarter 2008.

The $150,000 provision for loan losses in third quarter 2009 was primarily due to an increase in specific reserves on impaired loans. At September 30, 2009, approximately 56% of the allowance for loan losses is identified for specific loans.

Non-Interest Income

Total non-interest income decreased $422,000 to $250,000 for third quarter 2009 compared to $672,000 for the three months ended September 30, 2008, primarily due to $242,000 in impairment charges on bank pooled trust preferred securities recorded in third quarter 2009 and a decrease of $120,000 in other non-interest income.

Non-Interest Expenses

Total non-interest expenses increased $692,000 or 11.5% to $6.7 million for the three months ended September 30, 2009, from $6.0 million for the prior year comparable period. Salaries and employee benefits increased $775,000 or 33.4%, to $3.1 million for the three months ended September 30, 2009, from $2.3 million for the prior year comparable period. That increase reflected additional staffing in third quarter 2009, as well as annual merit increases.

Provision for Income Taxes

The provision for income taxes decreased $686,000, to $20,000 for the three months ended September 30, 2009, from a $706,000 for the prior year comparable period, primarily as a result of the decrease in pre-tax income. The effective tax rates for those periods were 10% and 32% respectively.

Nine Months Ended September 30, 2009 compared to September 30, 2008

Results of Operations:

Overview

The Company had a net loss of $9.0 million or $0.85 per diluted share for the nine months ended September 30, 2009, compared to a net loss of $56,000, or $0.01 per diluted share for the comparable prior year period. There was an $8.9 million, or 21.3%, decrease in total interest income, reflecting a 107 basis point decrease in the yield on average loans outstanding while interest expense decreased $7.5 million, reflecting a 135 basis point decrease in the rate on average interest-bearing deposits outstanding. Accordingly, net interest income decreased $1.4 million between the periods. The provision for loan losses in the first nine months of 2009 increased to

$13.2 million, compared to $5.9 million provision expense in the first nine months of 2008, reflecting additional reserves on certain loans. Non-interest income decreased $889,000 to $1.3 million in the first nine months of 2009 compared to $2.2 million in the first nine months of 2008. Non- interest expenses increased $3.9 million to $22.4 million compared to $18.5 million in the first nine months of 2008, primarily due to increases of $2.0 million in salaries and employee benefits expense, $738,000 in professional fees and $698,000 in regulatory assessments and costs. Return on average assets and average equity was (1.31)% and (15.95)% respectively, in the first nine months of 2009 compared to (0.01)% and (0.09)% respectively for the same period in 2008.

 Analysis of Net Interest Income

                                           For the nine months ended                                           For the nine months ended
                                              September 30, 2009                                                  September 30, 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              $  13,393             $       50                   0.50 %           $  10,478             $      199                   2.54 %
Investment securities
and
restricted stock               86,379                  3,335                   5.15 %              87,506                  3,814                   5.81 %
Loans receivable              750,550                 29,558                   5.27 %             796,782                 37,821                   6.34 %
Total
interest-earning
assets                        850,322                 32,943                   5.18 %             894,766                 41,834                   6.25 %
Other assets                   72,651                                                              51,915
Total assets                $ 922,973                                                           $ 946,681

Interest-bearing
liabilities:
Demand - non-interest
bearing                     $  81,625                                                           $  76,487
Demand -
interest-bearing               44,930             $      218                   0.65 %              34,760             $      283                   1.09 %
Money market &
savings                       268,481                  3,841                   1.91 %             219,877                  4,663                   2.83 %
Time deposits                 382,497                  6,644                   2.32 %             402,235                 11,825                   3.93 %
Total deposits                777,533                 10,703                   1.84 %             733,359                 16,771                   3.05 %
Total
interest-bearing
. . .