content: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, DC 20549
  
                                      FORM 10-Q
  
                    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                         THE SECURITIES EXCHANGE ACT OF 1934
  
                 For the Quarterly Period Ended: September 30, 1999
  
                           Commission File Number: 0-17007
  
                            Republic First Bancorp, Inc.
               (Exact name of registrant as specified in its charter)
  
             Pennsylvania                                     23-2486815
  -------------------------------                     ---------------------------
  (State or other jurisdiction of                     IRS Employer Identification
   incorporation or organization)                               Number
  
             1608 Walnut Street, Philadelphia, Pennsylvania     19103
             --------------------------------------------------------
               (Address of principal  executive  offices)     (Zip code)
  
                                    215-735-4422
             --------------------------------------------------------
                (Registrant's telephone number, including area code)
  
                                         N/A
             --------------------------------------------------------
                (Former name, former address and former fiscal year,
                           if changed since last report)
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the  preceding 12 months (or for such  shorter  period that the  registrant  was
  required to file such reports),  and (2) has been subject to filing requirements
  for the past 90 days.
  
                       YES  _X_                       NO __
  
                        APPLICABLE ONLY TO CORPORATE ISSUERS:
  
       Indicate the number of shares  outstanding of each of the Issuer's  classes
  of common stock, as of the latest practicable date.
  
                6,111,705 shares of Issuer's Common Stock, par value
           $0.01 per share, issued and outstanding as of October 31, 1999
  
                                    Page 1 of 42
  
                          Exhibit index appears on page 40
  
                                         1
  <PAGE>
                                  TABLE OF CONTENTS
  
                                                                              Page
  Part I:  Financial Information
  
  Item 1: Financial Statements                                                 3
  
  Item 2:   Management's Discussion and Analysis of Financial Condition and   18
            Results of Operations
  
  Item 3:  Quantitative and Qualitative Information about Market Risk         23
  
  Part II: Other Information
  
  Item 1: Legal Proceedings                                                   40
  
  Item 2: Changes in Securities and Use of Proceeds                           40
  
  Item 3: Defaults Upon Senior Securities                                     40
  
  Item 4: Submission of Matters to a Vote of Security Holders                 40
  
  Item 5: Other Information                                                   40
  
  Item 6: Exhibits and Reports on Form 8-K                                    40
  
  
                                         2
  <PAGE>
                           PART I - FINANCIAL INFORMATION
  
  
  
  Item 1:   Financial Statements (unaudited)
  
  
                                                                       Page Number
  
  
  (1)  Consolidated Balance Sheets as of September 30,1999 and
       December 31, 1998.................................................... 4
  
  (2)  Consolidated Statements of Operations for three and
       nine months ended September 30, 1999 and 1998........................ 5
  
  (3)  Consolidated Statements of Cash Flows for the nine
       months ended September 30, 1999 and 1998............................. 7
  
  (4)  Notes to Consolidated Financial Statements........................... 9
  
  
  
                                         3
  
  <PAGE>
                    Republic First Bancorp, Inc. and Subsidiaries
                             Consolidated Balance Sheets
                   as of September 30, 1999 and December 31, 1998
                                     (unaudited)
  <TABLE>
  <CAPTION>
  ASSETS:                                                                            1999                    1998
                                                                                -------------           -------------
  <S>                                                                           <C>                     <C>
  Cash and due from banks                                                       $  15,302,000           $  18,169,000
  Interest  bearing deposits with banks                                             6,024,000                 126,000
                                                                                -------------           -------------
      Total cash and cash equivalents                                              21,326,000              18,295,000
  
  Securities available for sale, at fair value                                    177,179,000             160,554,000
  Securities held to maturity at amortized cost                                    16,121,000              16,998,000
      (fair value of $16,128,000 and $16,982,000,
       respectively)
  
  Loans receivable, (net of allowance for loan losses of
       $3,051,000 and $2,395,000, respectively)                                   326,131,000             299,564,000
  Loans held for sale                                                                 447,000               7,204,000
  Premises and equipment, net                                                       4,850,000               3,990,000
  Real estate owned                                                                   643,000                 718,000
  Accrued income and other assets                                                  12,040,000               9,038,000
                                                                                -------------           -------------
  
  Total Assets                                                                  $ 558,737,000           $ 516,361,000
                                                                                =============           =============
  
  LIABILITIES AND SHAREHOLDERS' EQUITY:
  
  Liabilities:
  
  Deposits:
  Demand - non-interest-bearing                                                 $  27,793,000           $  32,537,000
  Demand - interest-bearing                                                        12,598,000              20,155,000
  Money market and savings                                                         47,939,000              35,250,000
  Time under $100,000                                                             152,953,000             169,792,000
  Time over $100,000                                                               51,250,000              25,350,000
                                                                                -------------           -------------
      Total Deposits                                                              292,533,000             283,084,000
  
  Other borrowed funds                                                            222,363,000             188,009,000
  Accrued expenses and other liabilities                                            8,184,000               8,646,000
                                                                                -------------           -------------
  
  Total Liabilities                                                               523,138,000             479,739,000
                                                                                -------------           -------------
  
  Shareholders' Equity:
  
  Common stock par value $.01 per share, 20,000,000 shares authorized;
      shares issued and outstanding 6,111,705 as of September 30, 1999
      and 5,883,188 as of December 31, 1998                                            63,000                  59,000
  Treasury stock at cost (175,172 and 219,604 shares
      at September 30, 1999 and December 31, 1998,
      respectively)                                                                (1,542,000)             (1,927,000)
  Additional paid in capital                                                       31,893,000              26,510,000
  Retained earnings                                                                10,133,000              11,996,000
  Accumulated other comprehensive income/(loss), net of tax                        (4,890,000)                (16,000)
                                                                                -------------           -------------
  Total Shareholders' Equity                                                       35,657,000              36,622,000
                                                                                -------------           -------------
  Total Liabilities and Shareholders' Equity                                    $ 558,737,000           $ 516,361,000
                                                                                =============           =============
  </TABLE>
  
                  (See notes to consolidated financial statements)
  
                                         4
  
  <PAGE>
                    Republic First Bancorp, Inc. and Subsidiaries
                        Consolidated Statements of Operations
                  For the Three and Nine Months Ended September 30,
                                     (unaudited)
  
  <TABLE>
  <CAPTION>
                                                         Quarter to Date                      Year to Date
                                                          September 30,                      September 30,
                                                          -------------                      -------------
                                                     1999              1998              1999              1998
                                                ------------      ------------      ------------      ------------
  <S>                                           <C>               <C>               <C>               <C>
  Interest income:
     Interest and fees on loans                 $  6,855,000      $  5,737,000      $ 19,670,000      $ 15,841,000
     Interest on federal funds sold                   16,000             7,000            18,000           214,000
     Interest on investments                       3,243,000         3,070,000         9,311,000         9,530,000
                                                ------------      ------------      ------------      ------------
     Total interest income                        10,114,000         8,814,000        28,999,000        25,585,000
                                                ------------      ------------      ------------      ------------
  
  Interest expense:
     Demand interest-bearing                          37,000            84,000           149,000           256,000
     Money market and savings                        433,000           322,000         1,234,000           861,000
     Time over $100,000                              698,000           373,000         1,351,000         1,155,000
     Time under $100,000                           2,202,000         2,609,000         7,035,000         7,496,000
     Other borrowed funds                          2,882,000         2,031,000         8,161,000         5,557,000
                                                ------------      ------------      ------------      ------------
     Total interest expense                        6,252,000         5,419,000        17,930,000        15,325,000
                                                ------------      ------------      ------------      ------------
  Net interest income                              3,862,000         3,395,000        11,069,000        10,260,000
                                                ------------      ------------      ------------      ------------
  Provision for loan losses                          210,000            80,000           670,000           290,000
                                                ------------      ------------      ------------      ------------
  Net interest income after provision
      for loan losses                              3,652,000         3,315,000        10,399,000         9,970,000
                                                ------------      ------------      ------------      ------------
  
  Non-interest income:
      Service fees                                   325,000           143,000           653,000           347,000
      Tax Refund Program revenue                           0                 0         2,715,000         2,383,000
      Other income                                    29,000            31,000            80,000            82,000
                                                ------------      ------------      ------------      ------------
                                                     354,000           174,000         3,448,000         2,812,000
  Non-interest expense:
     Salaries and benefits                         1,430,000         1,390,000         4,112,000         3,788,000
     Occupancy/Equipment                             460,000           369,000         1,305,000         1,101,000
     Loss from Mortgage Affiliate                          0         1,032,000                 0         1,145,000
     Other expenses                                  898,000         1,057,000         2,846,000         2,347,000
                                                ------------      ------------      ------------      ------------
                                                   2,788,000         3,848,000         8,263,000         8,381,000
                                                ------------      ------------      ------------      ------------
  
  Income/(loss) before income taxes                1,218,000          (359,000)        5,584,000         4,401,000
                                                ------------      ------------      ------------      ------------
  Provision for income taxes/(benefit)               403,000          (118,000)        1,839,000         1,457,000
     Income before cumulative effect of a
       change in accounting principle                815,000          (241,000)        3,745,000         2,944,000
     Cumulative effect of changes in
       accounting principle (Note 5)                       0           421,000           (63,000)          421,000
                                                ------------      ------------      ------------      ------------
  Net income                                    $    815,000      $    180,000      $  3,682,000      $  3,365,000
                                                ============      ============      ============      ============
  
  Net income per share-basic:
     Income before cumulative effect of a
       change in accounting principle           $       0.13     ($       0.04)     $       0.62      $       0.49
     Cumulative effect of changes in
       accounting principle (Note 5)                    0.00              0.07             (0.01)             0.07
                                                ------------      ------------      ------------      ------------
  Net Income                                    $       0.13      $       0.03      $       0.61      $       0.56
                                                ============      ============      ============      ============
  </TABLE>
  
                                         5
  
  <PAGE>
  <TABLE>
  <CAPTION>
                                                         Quarter to Date                      Year to Date
                                                          September 30,                      September 30,
                                                          -------------                      -------------
                                                     1999              1998              1999              1998
                                                ------------      ------------      ------------      ------------
  <S>                                           <C>               <C>               <C>               <C>
  Net income per share-diluted:
     Income before cumulative effect of a
       change in accounting principle           $       0.13     ($       0.04)     $       0.60      $       0.45
     Cumulative effect of changes in
       Accounting principle (Note 5)                    0.00              0.07             (0.01)             0.07
                                                ------------      ------------      ------------      ------------
  Net Income                                    $       0.13      $       0.03      $       0.59      $       0.52
                                                ============      ============      ============      ============
  </TABLE>
  
                  (See notes to consolidated financial statements)
  
  
                                         6
  <PAGE>
                   Republic First Bancorp, Inc. and Subsidiaries
                        Consolidated Statements of Cash Flows
                      For the Nine Months Ended September 30,
                                    (unaudited)
  <TABLE>
  <CAPTION>
                                                                                      1999               1998
                                                                                -------------      -------------
  <S>                                                                           <C>                <C>
  Cash flows from operating activities:
       Net income                                                               $   3,682,000      $   3,365,000
       Adjustments to reconcile net income
            to net cash provided by operating activities
        Provision for loan losses                                                     670,000            290,000
        Write down of other real estate owned                                          75,000                  0
        Depreciation and amortization                                                 688,000            482,000
        Proceeds from sale of trading securities                                            0         35,143,000
        Loss from Mortgage affiliate                                                        0         (1,145,000)
        Decrease in loans held for sale                                             6,757,000                  0
        Increase in accrued income
           and other assets                                                          (241,000)        (3,860,000)
        (Decrease)/increase in accrued expenses
           and other liabilities                                                     (462,000)         2,107,000
                                                                                -------------      -------------
       Net cash provided by/(used) in operating activities                         11,169,000        (36,382,000)
                                                                                -------------      -------------
  Cash flows from investing activities:
       Purchase of securities:
  Available for Sale                                                              (44,978,000)      (116,664,000)
             Held to Maturity                                                      (5,418,000)        (4,083,000)
       Proceeds from principal receipts, sales, and
             maturities of securities                                              27,080,000         46,021,000
       Net increase in loans                                                      (27,320,000)       (55,258,000)
       Net increase in deferred fees                                                   77,000            466,000
       Purchase of other real estate owned                                                  0                  0
       Premises and equipment expenditures                                         (1,326,000)        (1,743,000)
                                                                                -------------      -------------
  
       Net cash used in investing activities                                      (51,885,000)      (131,261,000)
                                                                                -------------      -------------
  
  Cash flows from financing activities:
       Net increase/(decrease) in demand, money
            market, and savings deposits                                              388,000          1,414,000
       Net increase/(decrease) in borrowed funds less than 90 days                (18,246,000)       (12,476,000)
       Net increase in borrowed funds greater than 90 days                         52,600,000         88,700,000
       Net increase (decrease) in time deposits                                     9,061,000         21,451,000
       Net proceeds from issued common stock                                                0                  0
       Purchase of Treasury Stock                                                  (1,028,000)           (17,000)
       Net proceeds from exercise of stock options                                    972,000             81,000
                                                                                -------------      -------------
       Net cash provided by financing activities                                   43,747,000         99,153,000
                                                                                -------------      -------------
  (Decrease)/increase in cash and cash equivalents                                  3,031,000          4,274,000
  Cash and cash equivalents, beginning of period                                   18,295,000          6,326,000
                                                                                -------------      -------------
  Cash and cash equivalents, end of period                                      $  21,326,000      $  10,600,000
                                                                                =============      =============
  Supplemental disclosure:
       Interest paid                                                            $  17,862,000      $   8,901,000
                                                                                =============      =============
       Taxes paid                                                               $   2,075,000      $           0
                                                                                =============      =============
  
  Non-cash transactions:
         Net transfers of loans to real estate owned                                        0            718,000
         Change in unrealized gain/(loss) on securities available for sale,
          net of tax                                                               (4,874,000)         1,059,000
         Change in deferred tax liability due to change in unrealized gain
        on securities available for sale                                                    0           (348,000)
  </TABLE>
  
                                         7
  <PAGE>
  <TABLE>
  <S>                                                                           <C>                <C>
       Transfer of securities from held to maturity to available for
       sale and trading                                                                     0      $ 138,861,000
                                                                                =============      =============
  </TABLE>
  
                  (See notes to consolidated financial statements)
  
                                         8
  <PAGE>
                    REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
  Note 1:  Organization
           Republic First Bancorp,  Inc. (the  "Company"),  is a two-bank  holding
  company  organized  and  incorporated  under  the  laws of the  Commonwealth  of
  Pennsylvania.  Its  wholly-owned  subsidiary,  First Republic Bank (the "Bank"),
  offers a variety of banking  services to individuals  and businesses  throughout
  the Greater  Philadelphia and South Jersey area through its offices and branches
  in Philadelphia and Montgomery Counties.
  
           The Company  opened a second  wholly-owned  banking  subsidiary  in the
  state of Delaware.  The newly formed Bank,  Republic First Bank of Delaware (the
  "Delaware  Bank") is a Delaware  State  chartered  Bank,  located at  Brandywine
  Commons II, Concord Pike and Rocky Run Parkway in Brandywine,  New Castle County
  Delaware.  The Delaware Bank opened for business on June 1, 1999 and offers many
  of the same services and financial products as First Republic Bank, described in
  Part I, Item I of the Company's 1998 Form 10-K.
  
           In the opinion of the Company,  the  accompanying  unaudited  financial
  statements  contain  all  adjustments   (including  normal  recurring  accruals)
  necessary to present fairly the financial position as of September 30, 1999, the
  results of operations for the three and nine months ended September 30, 1999 and
  1998, and the cash flows for the nine months ended  September 30, 1999 and 1998.
  These  interim  financial  statements  have been  prepared  in  accordance  with
  instructions  to  Form  10-Q.  The  interim  results  of  operations  may not be
  indicative  of the results of  operations  for the full year.  The  accompanying
  unaudited financial  statements should be read in conjunction with the Company's
  audited financial statements,  and the notes thereto,  included in the Company's
  1998 Form 10-K filed with the Securities and Exchange Commission.
  
  Note 2:  Summary of Significant Accounting Policies:
  
       Principles of Consolidation:
  
           The  consolidated  financial  statements  of the  Company  include  the
  accounts of Republic  First  Bancorp,  Inc. and its  wholly-owned  subsidiaries,
  First  Republic Bank and Republic First Bank of Delaware,  (the  "Banks").  Such
  statements have been presented in accordance with generally accepted  accounting
  principles and general  practice  within the banking  industry.  All significant
  intercompany  accounts and transactions have been eliminated in the consolidated
  financial statements.
  
       Risks and Uncertainties and Certain Significant Estimates:
  
           The earnings of the Company  depend on the  earnings of the Banks.  The
  Banks are 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 operations of the
  Banks are  subject to risks and  uncertainties  surrounding  their  exposure  to
  change in the interest rate environment.
  
           Additionally, the Company has derived income from First Republic Bank's
  participation  in a program (the "Tax Refund  Program") which  indirectly  funds
  consumer  loans  collateralized  by federal  income tax  refunds,  and  provides
  accelerated check refunds.  Approximately $2.7 million and $2.4 million in gross
  revenues  were  collected on these loans during the nine months ended  September
  30, 1999 and 1998,  respectively.  The Bank will not  participate in the program
  beyond 1999.
  
                                         9
  
  <PAGE>
  
           The  preparation of financial  statements in conformity  with generally
  accepted accounting principles requires management to make significant estimates
  and assumptions  that affect the reported  amounts of assets and liabilities and
  disclosures of contingent assets and liabilities at the date of the consolidated
  financial  statements and the reported  amounts of revenues and expenses  during
  the reporting period. Actual results could differ from those estimates.
  
           Significant  estimates  are  made  by  management  in  determining  the
  allowance for loan losses, carrying values of real estate owned and deferred tax
  assets.  Consideration  is given to a variety  of factors  in  establishing  the
  allowance   for   loan   losses,    including   current   economic   conditions,
  diversification  of the  loan  portfolio,  delinquency  statistics,  results  of
  internal loan reviews,  borrowers' perceived financial and managerial strengths,
  the adequacy of underlying collateral, if collateral dependent, or present value
  of future cash flows and other  relevant  factors.  Since the allowance for loan
  losses and carrying value of real estate owned is dependent,  to a great extent,
  on the  general  economy  and other  conditions  that may be beyond  the  Banks'
  control,  it is at least reasonably possible that the estimates of the allowance
  for loan losses and the  carrying  values of the real estate  owned could differ
  materially in the near term.
  
       Cash and Cash Equivalents:
  
           For purposes of the statements of cash flows, the Company considers all
  cash and due from banks,  interest-bearing deposits with an original maturity of
  ninety days or less and federal funds sold to be cash and cash equivalents.  The
  Bank is required to maintain  certain average reserve balances as established by
  the  Federal  Reserve  Board.  The  amounts of those  balances  for the  reserve
  computation  periods which include September 30, 1999 and December 31, 1998 were
  $989,000 and $872,000,  respectively.  These requirements were satisfied through
  the  restriction  of vault cash and  balances  at the  Federal  Reserve  Bank of
  Philadelphia.
  
       Investment Securities:
  
           Debt and equity  securities are classified in one of three  categories,
  as applicable,  and accounted for as follows:  debt securities which the Company
  has the  positive  intent and  ability to hold to  maturity  are  classified  as
  "securities  held to  maturity"  and are reported at  amortized  cost;  debt and
  equity  securities  that are bought and sold in the near term are  classified as
  "trading" and are reported at fair market value with unrealized gains and losses
  included in earnings;  and debt and equity  securities  not classified as either
  held to  maturity  and/or  trading  securities  are  classified  as  "securities
  available  for sale" and are reported at fair market  value with net  unrealized
  gains and losses,  net of tax, reported as a separate component of shareholders'
  equity.  Securities are adjusted for  amortization  of premiums and accretion of
  discounts  over  the  life of the  related  security  on a level  yield  method.
  Securities available for sale include those management intends to use as part of
  its asset-liability matching strategy or that may be sold in response to changes
  in interest  rates or other  factors.  Realized  gains and losses on the sale of
  investment securities are recognized using the specific  identification  method.
  As described in Note 5, the Company  transferred  $106.4  million of  securities
  from held to maturity to available for sale and $32.5 million of securities from
  held to maturity to the trading  category  during the third quarter of 1998. The
  Company sold the securities transferred to the trading category during the third
  quarter and realized a gain on the sale of these securities of $421,000,  net of
  income taxes, as a cumulative effect of a change in accounting.  The Company did
  not realize any gains on trading  securities prior to or after the third quarter
  of  1998.  Additionally,  the  Bank  had no  securities  classified  as  trading
  securities, as of the end of any period reported herein.
  
                                         10
  
  <PAGE>
  
       Loans:
  
           Loans are stated at the principal amount  outstanding,  net of deferred
  loan  fees and  costs.  The  amortization  of  deferred  loan fees and costs are
  accounted for by a method which  approximates  level yield. Any unamortized fees
  or costs associated with loans which pay down in full are immediately recognized
  in  the  Company's  operations.  Income  is  accrued  on  the  principal  amount
  outstanding.
  
           Loans,   including   impaired  loans,   are  generally   classified  as
  non-accrual  if they are past due as to  maturity  or  payment of  principal  or
  interest for a period of more than 90 days,  unless such loans are  well-secured
  and in the process of collection.  Loans that are on a current payment status or
  past due less than 90 days may also be classified as non-accrual if repayment in
  full of principal and/or interest is in doubt.
  
           Loans may be returned to accrual status when all principal and interest
  amounts  contractually  due  are  reasonably  assured  of  repayment  within  an
  acceptable  period  of  time,  and  there is a  sustained  period  of  repayment
  performance (generally a minimum of six months) of interest and principal by the
  borrower, in accordance with the contractual terms.
  
           While a loan is  classified as  non-accrual  or as an impaired loan and
  the future collectibility of the recorded loan balance is doubtful,  collections
  of interest  and  principal  are  generally  applied as a reduction to principal
  outstanding.  When the future  collectibility  of the  recorded  loan balance is
  expected, interest income may be recognized on a cash basis. In the case where a
  non-accrual  loan had been partially  charged off,  recognition of interest on a
  cash basis is limited to that which would have been  recognized  on the recorded
  loan balance at the contractual  interest rate. Cash interest receipts in excess
  of that amount are recorded as recoveries to the allowance for loan losses until
  prior charge-offs have been fully recovered.
  
       Loans Held for Sale:
  
           Loans  held for sale are  carried  at the  lower of  aggregate  cost or
  market value. The Bank currently  services all loans classified as held for sale
  and servicing is released when such loans are sold. Market values were estimated
  using the present  value of the  estimated  cash  flows,  using  interest  rates
  currently  being  offered for loans with  similar  terms to borrowers of similar
  credit  quality.  Gains  and  losses  on loans  held for  sale are  included  in
  non-interest  income. The Company did not realize any gains or losses during the
  first, second and third quarters of 1999 or 1998.
  
       Allowance for Loan Losses:
  
           The  allowance for loan losses is  established  through a provision for
  loan losses charged to operations.  Loans are charged against the allowance when
  management  believes that the  collectibility of the loan principal is unlikely.
  Recoveries on loans previously charged off are credited to the allowance.
  
           The allowance is an amount that management believes will be adequate to
  absorb known and inherent loan losses on existing loans, based on evaluations of
  the collectibility of loans and prior loan loss experience. The evaluations take
  into  consideration such factors as changes in the nature and volume of the loan
  portfolio,  overall  portfolio  quality,  review of specific  problem loans, the
  results  of  the  most  recent  regulatory   examination  and  current  economic
  conditions and trends that may affect the borrower's ability to pay.
  
           The Company  considers  residential  mortgage  loans with balances less
  than $250,000 and consumer loans,  including home equity lines of credit,  to be
  small  balance   homogeneous  loans.  These  loan  categories  are  collectively
  evaluated for impairment. Jumbo mortgage loans, those with balances greater than
  $250,000,  commercial  business  loans  and  commercial  real  estate  loans are
  individually  measured  for  impairment  based on the present  value of expected
  
                                         11
  
  <PAGE>
  
  future cash flows discounted at the historical  effective  interest rate, except
  that all collateral  dependent  loans are measured for  impairment  based on the
  fair market value of the collateral.
  
       Premises and Equipment:
  
           Premises and equipment are stated at cost less accumulated depreciation
  and amortization. Depreciation of furniture and equipment is calculated over the
  estimated  useful life of the asset using the  straight-line  method.  Leasehold
  improvements  are amortized over the shorter of their estimated  useful lives or
  terms of their respective leases, using the straight-line method.
  
           Repairs and maintenance are charged to current  operations as incurred,
  and renewals and betterments are capitalized.
  
       Real Estate Owned:
  
           Real estate owned  consists of  foreclosed  assets and is stated at the
  lower of cost or estimated  fair market value less  estimated  costs to sell the
  property.  Costs to maintain other real estate owned, or  deterioration in value
  of the  properties  are  recognized  as period  expenses.  There is no valuation
  allowance  associated  with the  Company's  other real estate  portfolio for the
  periods presented.
  
       Income Taxes:
  
           Deferred  income taxes are  established  for the temporary  differences
  between the financial  reporting basis and the tax basis of the Company's assets
  and  liabilities  at the tax rates  expected to be in effect when the  temporary
  differences  are  realized  or settled.  In  addition,  a deferred  tax asset is
  recorded to reflect the future benefit of net operating loss carryforwards.  The
  deferred  tax assets may be reduced by a valuation  allowance  if it is probable
  that some portion or all of the deferred tax assets will not be realized.
  
       Earnings Per Share:
  
           Earnings per share ("EPS") 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  ("CSE").
  Common stock  equivalents  consist of dilutive stock options granted through the
  Company's  stock option plan.  The following  table is a  reconciliation  of the
  numerator and  denominator  used in  calculating  basic and diluted EPS.  Common
  stock  equivalents which are anti-dilutive are not included for purposes of this
  calculation.  At September 30, 1999 and 1998, there were 138,610 and 54,301 CSEs
  which were  antidilutive,  respectively.  These  shares may be  dilutive  in the
  future.
  
           The Company paid a 10% stock  dividend on March 18, 1999 as well as two
  six for five stock splits  effected in the form of a 20% stock dividend on March
  27, 1998 and April 15, 1997. All relevant  financial  data contained  herein has
  been  retroactively  restated as if the  dividend and splits had occurred at the
  beginning of each period presented herein.
  
                                         12
  <PAGE>
        The  following  table is a comparison of EPS for the three and nine months
  ended September 30, 1999 and 1998.
  
  <TABLE>
  <CAPTION>
                                                         Quarter to Date                              Year to Date
                                                  1999                    1998                 1999                 1998
                                          ---------------------------------------------------------------------------------------
  <S>                                     <C>         <C>        <C>         <C>        <C>        <C>     <C>        <C>
  Income before cumulative effect of a
  change in accounting principle
  (numerator for both calculations)          $815,000             ($241,000)            $3,745,000         $2,943,000
                                          ---------------------------------------------------------------------------------------
  
                                             Shares   Per Share     Shares   Per Share    Shares   Per Share  Shares   Per Share
                                          ---------   ---------     ------   ---------    ------   ---------  ------   ---------
  Weighted average shares
     For period                             6,086,569             6,100,958              5,971,786          6,085,817
  Basic EPS                                             $ 0.13                ($ 0.04)              $ 0.63              $ 0.49
  Add common stock equivalents
    Representing dilutive stock options       175,525               372,819                267,689            411,634
                                            ---------             ---------              ---------          ---------
  Effect on basic EPS and CSE                            (0.00)                  0.00                (0.03)              (0.04)
                                                       -------                -------               ------              ------
  Equals total weighted average
       Shares and CSE (diluted)             6,262,094             6,473,777              6,239,475          6,497,451
                                            =========             =========              =========          =========
  Diluted EPS                                          $  0.13                ($ 0.04)              $ 0.60              $ 0.45
                                                       =======                =======               ======              ======
  </TABLE>
  
           The impact of the cumulative effect of a change in accounting principle
  on the  quarter-to-date  and  the  year-to-date  1998  EPS was to  increase  the
  numerator  by $421,000  and the  resulting  basic and diluted EPS by $0.07.  The
  impact  of the  cumulative  effect of a change in  accounting  principle  on the
  year-to-date  1999 EPS was to lower the  numerator by $63,000 and the  resulting
  basic and diluted EPS by $0.01.
  
        Treasury Stock
  
           Effective  June 21,  1999,  the  Company's  stock  repurchase  program,
  originally  announced on August 24, 1998 and  established for the period through
  and  including  June 30,  1999 has been  extended  to  December  31,  1999.  The
  aggregate  amount  of stock  to be  repurchased  will be  determined  by  market
  conditions,  but will not exceed 4.9% of the  Company's  issued and  outstanding
  stock, or  approximately  297,000 shares.  As of September 30, 1999,  there were
  54,916 shares repurchased pursuant to rule 10b-18 of the Securities and Exchange
  Commission.  There were also an  additional  279,088  shares  purchased in block
  transaction  purchases,  that are not  included as part of the stock  repurchase
  program specified under rule 10b-18. The exercise of 158,832 options were funded
  from such block transaction purchases.
  
  
        Comprehensive Income
  
           The  following  table  displays net income and the  components of other
  comprehensive  income to arrive at total comprehensive  income. For the Company,
  the only  components  of other  comprehensive  income are those  related to SFAS
  Statement No. 115 available for sale securities.
  
                                         13
  <PAGE>
  
  <TABLE>
  <CAPTION>
  (dollar amounts in thousands)                              Three months ended        Nine months ended
                                                                September 30,            September 30,
                                                            --------------------     --------------------
                                                              1999         1998        1999         1998
                                                            -------      -------     -------      -------
  <S>                                                       <C>          <C>         <C>          <C>
  Net income                                                $   815      $   180     $ 3,682      $ 3,364
  
  Other comprehensive income, net of tax:
      Unrealized gains/(losses) on securities:
           Unrealized holding losses during the period       (1,545)         705      (4,874)         703
           Less:  Reclassification adjustment for gains
                Included in net income                            0            0           0            0
                                                            -------      -------     -------      -------
  Comprehensive (loss)/income                               ($  730)     $   885     ($1,192)     $ 4,067
                                                            =======      =======     =======      =======
  </TABLE>
  
  
  Note 3:  Legal Proceedings
  
           The Company and the Banks are from time to time a party  (plaintiff  or
  defendant)  to lawsuits  that are in the normal  course of  business.  While any
  litigation  involves  an element of  uncertainty,  management,  after  reviewing
  pending actions with its legal counsel,  is of the opinion that the liability of
  the Company and the Banks,  if any,  resulting from such actions will not have a
  material  effect on the  financial  condition  or results of  operations  of the
  Company and the Banks.
  
  Note 4:  Recent Accounting Pronouncements:
  
        Accounting for Derivative Instruments and Hedging Activities
  
           In June 1998,  the FASB  issued  Statement  No.  133,  "Accounting  for
  Derivative  Instruments  and Hedging  Activities"  ("Statement  No. 133").  This
  Statement  standardizes  the accounting for  derivative  instruments,  including
  certain derivative  instruments embedded in other contracts,  and those used for
  hedging activities,  by requiring that an entity recognize those items as assets
  or liabilities  in the statement of financial  position and measure them at fair
  value. The statement categorized derivatives used for hedging purposes as either
  fair value hedges, cash flow hedges, foreign currency fair value hedges, foreign
  currency cash flow hedges, or hedges of certain foreign currency exposures.  The
  statement  generally  provides for matching of gain or loss  recognition  on the
  hedging  instrument with the recognition of the changes in the fair value of the
  hedged asset or liability that are  attributable  to the hedged risk, so long as
  the hedge is effective. Prospective application of Statement No. 133, as amended
  by Statement No. 137, is required for all fiscal years  beginning after June 15,
  2000, however earlier application is permitted.  Currently, the Company does not
  use any derivative  instruments,  nor does it engage in any hedging  activities.
  The Company  adopted  Statement No. 133 effective July 1, 1998,  which permitted
  the  Company  to  transfer   certain   securities   originally   designated   as
  held-to-maturity,   to  available-for-sale  and  trading.  A  portion  of  these
  securities  were  subsequently  sold  during  the  third  quarter  of  1998.  In
  accordance  with  Statement  No.  133,  the Company  recorded  the gross gain of
  $628,000  as a  cumulative  change in  accounting  principle,  net of a $207,000
  provision for income tax.
  
                                         14
  
  <PAGE>
  
        Reporting on the Costs of Start-Up Activities
  
           In April 1998, the American  Institute of Certified Public  Accountants
  issued Statement of Position 98-5, Reporting on the Costs of Start-Up Activities
  ("SOP 98-5").  This statement  requires costs of startup  activities,  including
  organization  costs,  to be expensed as incurred.  SOP 98-5 is effective for the
  Company's  financial  statements for fiscal years  beginning  after December 15,
  1998.  As of  December  31,  1998 the Company  had  deferred  costs  relating to
  start-up activities of $94,000,  remaining in the balance of other assets in the
  Consolidated  Balance Sheets.  The Company adopted SOP 98-5 effective January 1,
  1999, and accordingly,  expensed $94,000 of costs of start-up  activities in the
  first quarter of 1999.
  
  
  Note 5:  Cumulative Effect of a Change in Accounting Principle
  
  The  Company   adopted  SFAS  Statement  No.  133   "Accounting  for  Derivative
  Instruments  and  Hedging  Activities"  on July 1, 1998.  As  permitted  by SFAS
  Statement No. 133, the Company  transferred  $106.4  million of securities  from
  held to maturity to available for sale and $32.5 million of securities from held
  to maturity to the trading category. The Company sold the securities transferred
  to the trading category during the third quarter 1998 and realized a gain on the
  sale of these  securities  of  $421,000,  net of income  taxes,  as a cumulative
  effect of a change in accounting principle. The Company sold these securities as
  part of a  portfolio-restructuring  program, which reduced the Company's risk of
  prepayment on its mortgage-backed  securities portfolio due to the sharp decline
  in interest rates during the third quarter of 1998.
  
  During the first quarter of 1999, the Company expensed $94,000 which represented
  all of its  business  start-up  costs,  upon the  adoption of the  Statement  of
  Position  98-5  "Reporting  on the Costs of Startup  Activities",  on January 1,
  1999.  This  resulted  in a $63,000  charge,  net of an income  tax  benefit  of
  $31,000,  which was recorded as a  cummulative  effect of a change in accounting
  principle.
  
  Note 6:  Segment Reporting
  
           The Company's  reportable segments represent strategic  businesses that
  offer  different  products and  services.  The  segments are managed  separately
  because  each   segment  has  unique   operating   characteristics,   management
  requirements and marketing strategies.
  
           Republic  First  Bancorp has four  reportable  segments;  two community
  banking segments, its mortgage banking affiliate and the Tax Refund Program. The
  community  banking segments are primarily  comprised of the results of operation
  and  financial  condition of the Company's  wholly owned  banking  subsidiaries,
  First  Republic Bank and Republic First Bank of Delaware.  The mortgage  banking
  segment  represents  the  Company's  equity  investment  in  Fidelity  Bond  and
  Mortgage, a mortgage banking operation which services and originates residential
  mortgage loans.  Such investment is accounted for as an equity investment as the
  Company does not have control over Fidelity  Bond and  Mortgage.  The Tax Refund
  Program  enables the Bank to provide  accelerated  check  refunds  ("ACRs")  and
  refund  anticipation  loan ("RALs") on a national  basis to customers of Jackson
  Hewitt, a national tax preparation firm.
  
           The accounting policies of the segments are the same as those described
  in Note 2. The  Company  evaluates  the  performance  of the  community  banking
  segment  based upon income  before the  provision  for income  taxes,  return on
  equity and return on average assets.  The mortgage  banking segment is evaluated
  based upon  return on average  equity  and the Tax Refund  Program is  evaluated
  based upon income before provision for income taxes.
  
                                         15
  
  <PAGE>
  
           The  Tax  Refund  Program  and  the  mortgage  banking  affiliate  were
  developed  as business  segments to further  expand the  Company's  products and
  services offered to consumers and businesses.
  
           The segment information presented below reflects that the Delaware Bank
  originated in 1999, and that the Company's  investment in their Mortgage Banking
  Affiliate was reduced to $0 as of December 31, 1998.  Accordingly,  the Mortgage
  Banking Affiliate no longer represents a segment in 1999.
  
  <TABLE>
  <CAPTION>
                                                   As of and for the nine months ended September 30,
                                                                  (dollars in thousands)
  
                                                          1999                                         1998
                                       First                    Tax                First       Mortgage     Tax
                                     Republic     Delaware     Refund             Republic      Banking    Refund
                                       Bank         Bank      Program   Total       Bank       Affiliate   Program    Total
  <S>                                 <C>      <C>           <C>       <C>        <C>        <C>         <C>        <C>
  External customer revenues:
  
      Interest Income                 $28,924        $75          $0    $28,999    $25,649         $0          $0    $25,649
  
      Other Income                        730          3       2,715      3,448        433          0       2,349      2,782
  
  Total external customer revenues     29,654         78       2,715     32,447     26,082          0       2,349     28,431
  
  
  Intersegment revenues:
  
      Interest Income                       0          0           0          0          0          0           0          0
  
      Other Income                         25          0           0         25          0          0           0          0
  
  Total intersegement revenues             25          0           0         25          0          0           0          0
  
  
  Total Revenue                        29,679         78       2,715     32,472     26,082          0       2,349     28,431
  
  
  Depreciation and amortization           672         16           0        688        482          0           0        482
  
  Other operating expenses -
  external                             25,557        443         150     26,150     22,299      1,145         105     23,549
  
  Other operating expenses -
  intersegment                              0         25           0         25          0          0           0          0
  
  Segment expenses                     26,229        484         150     26,863     22,781      1,145         105     24,031
  
  Segment income before taxes
  and extraordinary items              $3,425      ($406)     $2,565     $5,584     $3,301     (1,145)     $2,244     $4,400
  
  Segment assets                     $552,474     $6,263          $0   $558,737   $480,093       $662          $0   $480,755
  
  Capital expenditures                   $341       $986          $0     $1,327     $1,745         $0          $0     $1,745
  
  </TABLE>
  
                                         16
  <PAGE>
  <TABLE>
  <CAPTION>
                                                           As of and for the three months ended September 30,
                                                                     (dollars in thousands)
  
                                                            1999                                            1998
                                        First                      Tax                 First        Mortgage      Tax
                                      Republic       Delaware     Refund              Republic      Banking     Refund
                                        Bank           Bank      Program   Total        Bank       Affiliate    Program     Total
  <S>                                  <C>        <C>           <C>       <C>         <C>         <C>          <C>         <C>
  
  External customer revenues:
  
     Interest Income                   $10,071          $43          $0     $10,114      $8,814           $0          $0       $8,814
  
     Other Income                          332            3           0         335         174            0           0          174
  
  Total external customer revenues      10,403           46           0      10,449       8,988            0           0        8,988
  
  
  Intersegment revenues:
  
     Interest Income                         0            0           0           0           0            0           0            0
  
     Other Income                           19            0           0          19           0            0           0            0
  
  Total intersegement revenues              19            0           0          19           0            0           0            0
  
  
  Total Revenue                         10,422           46           0      10,468       8,988            0           0        8,988
  
  Depreciation and amortization            192           13           0         205         267            0           0          267
  
  Other operating expenses -
  external                               8,766          260           0       9,026       8,048        1,032           0        9,080
  
  Other operating expenses -
  intersegment                               0           19           0          19           0            0           0            0
  
  Segment expenses                       8,958          292           0       9,250       8,315        1,032           0        9,347
  
  Segment income before taxes and
  extraordinary items                   $1,464        ($246)         $0      $1,218        $673      ($1,032)         $0        ($359)
  
  Segment assets                      $552,474       $6,263          $0    $558,737    $480,093         $662          $0     $480,755
  
  Capital expenditures                    $238         $149          $0        $387        $495           $0          $0         $495
  </TABLE>
  
                                         17
  <PAGE>
  
  ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
           The  following  is   management's   discussion   and  analysis  of  the
  significant changes in the Company's results of operations, financial condition,
  and capital  resources  presented  in the  accompanying  consolidated  financial
  statements of Republic First  Bancorp,  Inc. This  discussion  should be read in
  conjunction   with  the  accompanying   notes  to  the  consolidated   financial
  statements.
  
           Certain   statements   in  this   document  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  cas 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 no 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.  Readers should carefully review the risk factors  described in
  other  documents  the Company  files from time to time with the  Securities  and
  Exchange  Commission,  including the Company's  Annual Report on Form 10-KSB for
  the year ended December 31, 1998,  Quarterly  Reports on Form 10-Q, filed by the
  Company in 1999,  and any Current  Reports on Form 8-K filed by the Company,  as
  well as similar filings.
  
  Quarter Ended September 30, 1999 Compared to September 30, 1998
  
  Results of Operations:
  
  Overview
  
           The  Company's  net income  increased  $635,000,  to  $815,000  for the
  quarter ended  September 30, 1999, from $180,000 for the quarter ended September
  30,  1998.  This  increase  was  primarily  the  result  of a write  down of the
  Company's  equity  investment in its mortgage  banking  affiliate of $1,032,000,
  partially offset by gains recognized on trading  securities of $628,000,  during
  the third  quarter of 1998.  Diluted  earnings  per share for the quarter  ended
  September 30, 1999 was $0.13 compared to $0.03,  for the quarter ended September
  30, 1998, primarily due to the increase in net income.
  
  Analysis of Net Interest Income
  
           Historically,  the Company's  earnings have depended primarily upon the
  Bank'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 Company's net interest income increased $467,000, or 13.8%, to $3.9
  million  for the quarter  ended  September  30,  1999 from $3.4  million for the
  quarter  ended  September  30, 1998.  The  increase in net  interest  income was
  
                                         18
  
  <PAGE>
  
  primarily due to an increase in average interest-earning assets of $87.7 million
  due  primarily to increased  commercial  and real estate loan  production.  This
  increase  was  partially  offset by a decrease in the  average  rate of interest
  earning assets of 40 basis points,  from 8.04% as of September 30, 1998 to 7.64%
  as of  September  30, 1999.  This  decrease was mainly due to the sale of higher
  yielding investment securities during the third quarter of 1998.
  
           The Company's total interest income  increased $1.3 million,  or 14.7%,
  to $10.1 million for the quarter ended  September 30, 1999 from $8.8 million for
  the quarter ended September 30, 1998.  Interest and fees on loans increased $1.1
  million, or 19.5%, to $6.9 million for the quarter ended September 30, 1999 from
  $5.7 million for the quarter  ended  September  30, 1998.  This increase was due
  primarily to an increase in average  loans  outstanding  for the period of $72.6
  million. Interest and dividend income on securities increased $173,000, or 5.6%,
  to $3.2 million for the quarter  ended  September 30, 1999 from $3.1 million for
  the quarter  ended  September 30, 1998.  This increase in investment  income was
  primarily the result of an increase in the average  balance of securities  owned
  by $14.3 million,  or 7.8% to $197.7 million for the quarter ended September 30,
  1999 from $183.4 million for the quarter ended September 30, 1998.
  
           The Company's total interest expense increased  $833,000,  or 15.4%, to
  $6.3 million for the quarter ended  September 30, 1999 from $5.4 million for the
  quarter ended  September  30, 1998.  This increase was due to an increase in the
  volume of average  interest-bearing  liabilities of $82.9 million,  or 21.0%, to
  $477.0 million for the quarter ended  September 30, 1999 from $394.2 million for
  the quarter ended September 30, 1998. The average rate paid on  interest-bearing
  liabilities  decreased 31 basis points to 5.20% for the quarter ended  September
  30, 1999 from 5.51% for the quarter  ended  September  30, 1998 due primarily to
  the decrease in average rates paid on other borrowed funds and deposit accounts.
  
           Interest  expense on time  deposits  decreased  $82,000  or 2.7%.  This
  decrease  was  primarily  due to a  decrease  in the  average  rate paid on time
  deposit  of 38  basis  points  from  6.17%  at  September  30,  1998 to 5.79% at
  September 30, 1999. The average volume of certificates  of deposit  increased by
  $4.8  million,  or 2.4%, to $198.6  million for the quarter ended  September 30,
  1999 from $193.8 million for the quarter ended September 30, 1998.
  
           Interest expense on FHLB advances and overnight federal funds purchased
  was $2.9  million  for the quarter  ended  September  30, 1999  compared to $2.0
  million for the quarter ended  September  30, 1998.  This increase was due to an
  increase  in the  average  volume of other  borrowed  funds of $70.3  million to
  $219.0 million for the quarter ended  September 30, 1999 from $148.7 million for
  the quarter ended  September 30, 1998.  This increase was partially  offset by a
  decrease in the  average  rate of interest  paid on other  borrowed  funds of 26
  basis points from 5.48% at September 30, 1998 to 5.22% at September 30, 1999. At
  September 30, 1999, FHLB advances funded purchases of securities and origination
  of loans as part of an ongoing  leveraged  funding program  designed to increase
  earnings while also managing interest rate risk and liquidity.
  
  Provision for Loan Losses
  
           The  provision  for loan losses is charged to  operations  to bring the
  total allowance for loan losses to a level considered appropriate by management.
  The level of the allowance  for loan losses is  determined  by management  based
  upon its  evaluation of the known as well as inherent risks within the Company's
  loan portfolio. Management's periodic evaluation is based upon an examination of
  the portfolio, past loss experience, current economic conditions, the results of
  the  most  recent  regulatory  examinations  and  other  relevant  factors.  The
  provision  for loan  losses was  $210,000  and $80,000  for the  quarters  ended
  September 30, 1999 and 1998, respectively.  This increase is due primarily to an
  increase  in loans  outstanding  of $62.2  million  from  September  30, 1998 to
  September 30, 1999.
  
                                         19
  
  <PAGE>
  
  Non-Interest Income
  
           Total  non-interest  income  increased  $180,000  to  $354,000  for the
  quarter ended  September 30, 1999 from $174,000 for the quarter ended  September
  30, 1998. This increase is due primarily to an increase in service fee income of
  $182,000  related  to  deposit  accounts  as well as  non-recurring  pre-payment
  penalties and expired commitment fees on loans.
  
  Non-Interest Expenses
  
           Total non-interest expenses decreased $1.1 million, to $2.8 million for
  the quarter  ended  September  30, 1999 from $3.8 million for the quarter  ended
  September 30, 1998.  This decrease was due primarily to the Company's write down
  of its  equity  interest  in its  mortgage  banking  affiliate  during the third
  quarter of 1998 for $1,032,000.
  
           Salaries and benefits increased  $40,000,  or 2.9%, to $1.4 million for
  the quarter  ended  September  30, 1999 from $1.3 million for the quarter  ended
  September 30, 1998.  Occupancy  and equipment  expenses  increased  $91,000,  or
  24.7%,  to $460,000 for the quarter  ended  September 30, 1999 from $369,000 for
  the quarter ended  September 30, 1998.  These increases were due primarily to an
  increase in staff and costs  related to the opening of the Delaware Bank on June
  1, 1999.
  
           Other  non-interest  expense  decreased  $159,000,  to $898,000 for the
  quarter ended  September 30, 1999 from  $1,057,000  for the same period in 1998.
  This was mainly due to an decrease in legal  expenses  associated  with loans in
  workout, advertising costs and MAC expenses.
  
  Provision for Income Taxes
  
           The  provision  for income taxes  increased to $403,000 for the quarter
  ended  September  30,  1999 from a benefit of  $118,000  for the  quarter  ended
  September  30,  1998.  This  increase  is the result of the  increase in pre-tax
  income in 1999 from a pre-tax loss in 1998. In 1998 the Company  recorded income
  tax expense of $207,000 in connection with the Cumulative  Effect of a Change in
  Accounting Principle upon the adoption of SFAS Statement No. 133.
  
  
  Nine Months Ended September 30, 1999 Compared to September 30, 1998
  
  Results of Operations:
  
  Overview
  
           The Company's net income increased  $318,000,  or 9.5%, to $3.7 million
  for the nine months ended  September  30,  1999,  from $3.4 million for the nine
  months ended September 30, 1998.  Diluted earnings per share for the nine months
  ended September 30, 1999 was $0.59 compared to $0.52,  for the nine months ended
  September 30, 1998, due to the increase in net income.
  
  Analysis of Net Interest Income
  
           Historically,  the Company's  earnings have depended primarily upon the
  Banks' net interest income,  which is the difference  between interest earned on
  interest-earning assets and interest paid on interest-bearing  liabilities.  Net
  
                                         20
  
  <PAGE>
  
  interest  income is  affected  by  changes in the mix of the volume and rates of
  interest-earning assets and interest-bearing liabilities.
  
           The Company's net interest income increased $809,000, or 7.9%, to $11.1
  million for the nine months ended  September 30, 1999 from $10.3 million for the
  nine months ended  September 30, 1998.  The increase in net interest  income was
  primarily due to an increase in average interest-earning assets of $85.8 million
  due to increased  commercial and real estate loan production.  This increase was
  partially offset by a decrease in the average rate on interest earning assets of
  45 basis  points,  from 7.96% as of September  30, 1998 to 7.51% as of September
  30, 1999. This decrease was mainly due to the sale of higher yielding investment
  securities during the third quarter of 1998.
  
           The Company's total interest income  increased $3.4 million,  or 13.1%,
  to $29.0 million for the nine months ended September 30, 1999 from $25.6 million
  for the  nine  months  ended  September  30,  1998.  Interest  and fees on loans
  increased  $3.8  million,  or 24.2%,  to $19.7 million for the nine months ended
  September  30, 1999 from $15.8  million for the nine months ended  September 30,
  1998.  This  increase  was  due  primarily  to  an  increase  in  average  loans
  outstanding  for the period of $81.9  million.  Interest and dividend  income on
  securities  decreased  $219,000,  or 2.30%,  to $9.3 million for the nine months
  ended  September 30, 1999 from $9.6 million for the nine months ended  September
  30, 1998.  This  decrease in  investment  income was the result of a decrease in
  yield on the  securities  portfolio of 34 basis points due primarily to the sale
  of higher yielding investment securities during the third and fourth quarters of
  1998, partially offset by an increase in the average balance of securities owned
  of $5.3 million,  to $192.7 million for the nine months ended September 30, 1999
  from $187.4 million for the nine months ended September 30, 1998.
  
           The Company's total interest expense increased $2.6 million,  or 17.0%,
  to $17.9 million for the nine months ended September 30, 1999 from $15.3 million
  for the nine months  ended  September  30,  1998.  This  increase  was due to an
  increase in the volume of average interest-bearing liabilities of $88.3 million,
  or 23.7%,  to $460.2  million for the nine months ended  September 30, 1999 from
  $372.0  million for the nine months ended  September 30, 1998.  The average rate
  paid on interest-bearing  liabilities decreased 30 basis points to 5.21% for the
  nine  months  ended  September  30,  1999 from 5.51% for the nine  months  ended
  September  30, 1998 due primarily to the decrease in average rates paid on other
  borrowings and certain deposit accounts.
  
           Interest  expense on time  deposits  decreased  $266,000 or 3.1%.  This
  decrease was primarily due to a decrease in the average rate of interest paid on
  time  deposits  26 basis  points  from 6.12% at  September  30, 1998 to 5.86% at
  September 30, 1999. The average volume of certificates  of deposit  increased in
  the amount of $2.2 million, or 1.2%, to $191.2 million for the nine months ended
  September 30, 1999 from $189.0  million for the nine months ended  September 30,
  1998.
  
           Interest expense on FHLB advances and overnight federal funds purchased
  was $8.2 million for the nine months ended  September  30, 1999 compared to $5.6
  million for the nine months ended  September 30, 1998.  This increase was due to
  an increase in the average  volume of other  borrowed  funds of $74.4 million to
  $210.3 million for the nine months ended  September 30, 1999 from $135.9 million
  for the nine months ended September 30, 1998. This increase was partially offset
  by a decrease in the average rate of interest  paid on other  borrowed  funds 28
  basis points from 5.47% at September 30, 1998 to 5.19% at September 30, 1999. At
  September 30, 1999, FHLB advances funded purchases of securities and origination
  of loans as part of an ongoing  leveraged  funding program  designed to increase
  earnings while also managing interest rate risk and liquidity.
  
                                         21
  <PAGE>
  
  Provision for Loan Losses
  
           The  provision  for loan losses is charged to  operations  to bring the
  total allowance for loan losses to a level considered appropriate by management.
  The level of the allowance  for loan losses is  determined  by management  based
  upon its  evaluation of the known as well as inherent risks within the Company's
  loan portfolio. Management's periodic evaluation is based upon an examination of
  the portfolio, past loss experience, current economic conditions, the results of
  the  most  recent  regulatory  examinations  and  other  relevant  factors.  The
  provision  for loan losses was  $670,000  and $290,000 for the nine months ended
  September 30, 1999 and 1998, respectively.  This increase is due primarily to an
  increase  in loans  outstanding  of $62.9  million  from  September  30, 1998 to
  September 30, 1999.
  
  Non-Interest Income
  
           Total non-interest  income increased $666,000 or 23.9%, to $3.4 million
  for the nine months  ended  September  30,  1999 from $2.8  million for the nine
  months ended  September  30, 1998.  This was mainly  attributable  to a $366,000
  increase in revenues  related to the Tax Refund Program,  as well as an increase
  in service fee income related to deposit  accounts and  pre-payment  penalty and
  forfeited commitment fees on loans
  
  Non-Interest Expenses
  
           Total  non-interest  expenses  decreased  $119,000,  or  1.42%  to $8.3
  million for the nine months ended  September  30, 1999 from $8.4 million for the
  nine months ended September 30, 1998.  Salaries and benefits increased $323,000,
  or 8.5%, to $4.1 million for the nine months ended  September 30, 1999 from $3.8
  million for the nine months  ended  September  30,  1998.  The  increase was due
  primarily  to an  increase  in  staff as a result  of the  addition  of a branch
  banking office, as well as the opening of the Delaware Bank.
  
           Occupancy and equipment expenses increased $204,000,  or 18.5%, to $1.3
  million for the nine months ended  September  30, 1999 from $1.1 million for the
  nine months  ended  September  30, 1998 as a result of the  addition of a branch
  banking office, as well as the opening of the Delaware Bank on June 1, 1999.
  
           Other non-interest expense increased $499,000,  to $2.8 million for the
  nine months  ended  September  30, 1999 from $2.3 million for the same period in
  1998. This was mainly due to the accrual of a legal settlement for $233,000. The
  Company  also  recorded a  write-down  of its only  property  held in other real
  estate  owned,  of  $75,000,  during the first  quarter of 1999.  The  remaining
  expenses were due to growth of the Company and business development costs.
  
  Provision for Income Taxes
  
           The provision for income taxes  increased  $382,000,  or 26.2%, to $1.8
  million for the nine months ended  September  30, 1999 from $1.5 million for the
  nine months ended  September 30, 1998. This increase is mainly the result of the
  increase  in pre-tax  income  from 1998 to 1999.  The  Company  also  recorded a
  $31,000 income tax benefit in 1999 in connection with the Cumulative Effect of a
  Change in  Accounting  Principle,  upon the  adoption  of SOP 98-5.  In 1998 the
  Company  recorded  income  tax  expense  of  $207,000  in  connection  with  the
  Cummulative  Effect of a Change in  Accounting  Principle,  upon the adoption of
  FASB Statement No. 133.
  
                                         22
  <PAGE>
  Financial Condition:
  
  September 30, 1999 Compared to December 31, 1998
  
           Total assets  increased  $42.4  million,  or 8.2%, to $558.8 million at
  September  30, 1999 from $516.4  million at December 31,  1998.  The increase in
  assets  was the  result of higher  levels of loans and  securities,  which  were
  funded by a net increase in other borrowed  funds.  Net loans  (including  loans
  held for sale) increased $19.8 million,  or 6.1%, to $326.6 million at September
  30,  1999 from  $306.8  million at  December  31,  1998.  Investment  securities
  increased  $15.7 million,  or 8.9%, to $193.3 million at September 30, 1999 from
  $177.6 million at December 31, 1998.
  
           Cash and due from banks,  interest-bearing  deposits, and federal funds
  sold are all  liquid  funds.  The  aggregate  amount in these  three  categories
  increased by $3.0 million, or 16.6%, to $21.3 million at September 30, 1999 from
  $18.3 million at December 31, 1998.
  
           Premises and  equipment,  net of  accumulated  depreciation,  increased
  $860,000 to $4.9 million at  September  30, 1999 from $4.0 at December 31, 1998.
  The increase was mainly  attributable to the  construction and furnishing of the
  Delaware Bank.
  
           Total liabilities  increased $43.4 million,  or 9.0%, to $523.1 million
  at September 30, 1999 from $479.7  million at December 31, 1998.  Deposits,  the
  Company's  primary  source  of funds,  increased  $9.5  million,  3.4% to $292.6
  million at September  30, 1999 from $283.1  million at December  31,  1998.  The
  aggregate  of  transaction  accounts,  which  include  demand,  money market and
  savings  accounts,  increased  $446,000,  to $88.4 million at September 30, 1999
  from $87.9 million at December 31, 1998.  Certificates  of deposit  increased by
  $9.1  million,  or 4.6%,  to $204.2  million at  September  30, 1999 from $195.1
  million at December 31, 1998.
  
           Other  borrowed  funds were  $222.4  million at  September  30, 1999 as
  compared to $188.0  million at December 31, 1998. The increase was primarily the
  result of the Company's  leveraged funding strategy of utilizing  short-term and
  long-term FHLB advances to purchase  investment  securities and to fund new loan
  originations.
  
  
  ITEM 3:   QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
  
  Interest Rate Risk Management
  
           Interest  rate risk  management  involves  managing the extent to which
  interest-sensitive  assets and  interest-sensitive  liabilities are matched. The
  Bank  typically  defines   interest-sensitive   assets  and   interest-sensitive
  liabilities  as those  that  reprice  within  one year or less.  Maintaining  an
  appropriate  match is a method of avoiding  wide  fluctuations  in net  interest
  margin during periods of changing interest rates.
  
           The difference between interest-sensitive assets and interest-sensitive
  liabilities is known as the  "interest-sensitivity  gap" ("GAP"). A positive GAP
  occurs when  interest-sensitive  assets  exceed  interest-sensitive  liabilities
  repricing   in  the  same  time   periods,   and  a  negative  GAP  occurs  when
  interest-sensitive liabilities exceed interest-sensitive assets repricing in the
  same time periods.  A negative GAP ratio  suggests that a financial  institution
  may be better  positioned to take  advantage of declining  interest rates rather
  than increasing interest rates, and a positive GAP ratio suggests the converse.
  
           Static gap analysis  describes  interest rate sensitivity at a point in
  time.  However, it alone does not accurately measure the magnitude of changes in
  net interest income since changes in interest rates do not impact all categories
  
                                         23
  
  <PAGE>
  
  of assets and liabilities  equally or simultaneously.  Interest rate sensitivity
  analysis also involves assumptions on certain categories of assets and deposits.
  For purposes of interest rate sensitivity  analysis,  assets and liabilities are
  stated at either their  contractual  maturity,  estimated  likely call date,  or
  earliest repricing opportunity.  Mortgage-backed securities and amortizing loans
  are  scheduled  based  on their  anticipated  cash  flow  which  also  considers
  prepayments  based  on  historical  data  and  current  market  trends.  Savings
  accounts, including passbook, statement savings, money market, and NOW accounts,
  do not have a stated maturity or repricing term and can be withdrawn or repriced
  at any time. This may impact the Company's margin if more expensive  alternative
  sources of deposits  are  required to fund loans or deposit  runoff.  Management
  projects the repricing  characteristics  of these  accounts  based on historical
  performance and  assumptions  that it believes  reflect their rate  sensitivity.
  Therefore,  for purposes of the gap analysis,  these deposits are not considered
  to reprice simultaneously. Accordingly, a portion of the deposits are moved into
  time brackets exceeding one year.
  
           Shortcomings  are inherent in a simplified and static GAP analysis that
  may result in an institution  with a negative GAP having  interest rate behavior
  associated with an asset-sensitive balance sheet. For example,  although certain
  assets and liabilities may have similar maturities or periods to repricing, they
  may react in different degrees to changes in market interest rates. Furthermore,
  repricing   characteristics   of  certain  assets  and   liabilities   may  vary
  substantially  within a given time period.  In the event of a change in interest
  rates,  prepayment and early withdrawal levels could also deviate  significantly
  from those  assumed in  calculating  GAP in the  manner  presented  in the table
  below.
  
           The Bank attempts to manage its assets and liabilities in a manner that
  stabilizes   net  interest   income  under  a  broad  range  of  interest   rate
  environments.  Management uses gap analysis and simulation  models to attempt to
  monitor efforct of its interest sensitive assets and liablilitis. Adjustments to
  the mix of assets and liabilities are made  periodically in an effort to provide
  dependable and steady growth in net interest  income  regardless of the behavior
  of interest rates.
  
           The  following  tables  present a summary of the Bank's  interest  rate
  sensitivity  GAP at September 30, 1999.  For purposes of these tables,  the Bank
  has  used  assumptions  based on  industry  data and  historical  experience  to
  calculate  the  expected  maturity  of  loans  because,  statistically,  certain
  categories of loans are prepaid before their maturity date,  even without regard
  to interest rate fluctuations.  Additionally certain prepayment assumptions were
  made with regard to investment  securities based upon the expected prepayment of
  the underlying collateral of the mortgage backed securities.
  
                                         24
  <PAGE>
  <TABLE>
  <CAPTION>
                                                         Republic First Bancorp
                                                         Interest Sensitive Gap
  (dollars in thousands)                                 as of December 31, 1998
  
                                       0 - 90      91 - 180    181 - 365     1 - 2        2 - 3
                                        Days         Days        Days        Years        Years
                                        ----         ----        ----        -----        -----
  <S>                                <C>         <C>          <C>          <C>          <C>
  Interest sensitive assets:
  
  Securities and interest
     bearing balances due
     from banks                      $  32,862   $  10,185    $  18,202    $  28,690    $  20,906
       Average interest rate              6.53%       7.00%        7.01%        7.03%        7.04%
  Loans receivable (1)                  91,885       9,453       18,526       39,278       33,195
       Average interest rate              8.53%       8.33%        8.33%        8.19%        8.20%
  
  Total                                124,747      19,638       36,728       67,968       54,101
                                     ---------   ---------    ---------    ---------    ---------
  Cumulative total                   $ 124,747   $ 144,385    $ 181,113    $ 249,081    $ 303,182
                                     =========   =========    =========    =========    =========
  
  Interest sensitive liabilities:
  
  Demand interest bearing            $   2,320   $     457    $   1,476    $   1,829    $   1,829
       Average interest rate              2.50%       2.50%        2.50%        2.50%        2.50%
  Savings accounts                         675          63          128          255          255
       Average interest rate              2.50%       2.50%        2.50%        2.50%        2.50%
  Money market accounts                 19,687         652        1,305        2,610        2,610
       Average interest rate              4.42%       2.75%        2.75%        2.75%        2.75%
  FHLB borrowings                       40,609       7,400           --           --           --
       Average interest rate              5.00%       6.32%        0.00%        0.00%        0.00%
  Time deposits                         35,549      26,134       86,620       39,424        2,885
       Average interest rate              5.51%       5.70%        5.82%        6.43%        5.93%
  
  Totals                             $  98,840   $  34,706    $  89,529    $  44,118    $   7,579
                                     ---------   ---------    ---------    ---------    ---------
  Cumulative total                   $  98,840   $ 133,546    $ 223,075    $ 267,193    $ 274,772
                                     =========   =========    =========    =========    =========
  
  Interest Rate
     sensitivity GAP                 $  25,907   $ (15,068)   $ (52,801)   $  23,850    $  46,522
  
  Cumulative GAP                     $  25,907   $  10,839    $ (41,962)   $ (18,112)   $  28,410
  
  Interest Sensitive Assets/
     Interest Sensitive Liabilities        1.3x        1.1x         0.8x         0.9          1.1
  
  Cumulative GAP/
     Total Earning Assets                  5.3%        2.2%        -8.7%        -3.7%         5.9%
  
  Total earning assets               $ 484,446
                                     =========
  
  Off balance sheet items
     notional value:
  Commitments to
     extend credit                   $     430   $  21,534
                                     ---------   ---------
  Average interest rate                   7.75%       8.25%
  </TABLE>
  
  
  <TABLE>
  <CAPTION>
                                        3 - 4      4 - 5      More than 5
                                         Years      Years         Years       Total     Fair Value
                                         -----      -----         -----       -----     ----------
  <S>                                  <C>         <C>          <C>         <C>        <C>
  Interest sensitive assets:
  
  Securities and interest
     bearing balances due
     from banks                        $  15,855   $  12,038    $  38,940   $ 177,678  $ 177,662
       Average interest rate                7.03%       7.02%        6.94%
  Loans receivable (1)                    31,220      29,488       53,723     306,768    311,775
       Average interest rate                8.23%       8.27%        7.55%
  
  Total                                   47,075      41,526       92,663     484,446    485,613
                                       ---------   ---------    ---------   ---------  ---------
  Cumulative total                     $ 350,257   $ 391,783    $ 484,446
                                       =========   =========    =========
  
  Interest sensitive liabilities:
  
  Demand interest bearing              $   1,829   $   1,829    $   8,586   $  20,155     20,155
       Average interest rate                2.50%       2.50%        2.50%
  Savings accounts                           255         255        1,280       3,166      3,166
       Average interest rate                2.50%       2.50%        2.50%
  Money market accounts                    2,610       2,610           --      32,084     32,084
       Average interest rate                2.75%       2.75%        0.00%
  FHLB borrowings                         40,000      50,000       50,000     188,009    191,684
       Average interest rate                5.59%       4.99%        5.15%
  Time deposits                            2,262       2,262            6     195,142    188,009
       Average interest rate                5.92%       5.92%        5.30%
  
  Totals                               $  46,956   $  56,956    $  59,872     438,556    435,098
                                       ---------   ---------    ---------   ---------  ---------
  Cumulative total                     $ 321,728   $ 378,684    $ 438,556
                                       =========   =========    =========
  
  Interest Rate
     sensitivity GAP                   $     119   $ (15,430)   $  32,791   $  45,890
  
  Cumulative GAP                       $  28,529   $  13,099    $  45,890
  
  Interest Sensitive Assets/
     Interest Sensitive Liabilities          1.1         1.0x         1.1x
  
  Cumulative GAP/
     Total Earning Assets                    5.9%        2.7%         9.5%
  
  Total earning assets
  
  
  Off balance sheet items
     notional value:
  Commitments to
     extend credit                                                          $  21,534  $     220
                                                                            ---------  ---------
  Average interest rate
  <FN>
  (1) Includes loans held for sale
  </FN>
  </TABLE>
  
                                         25
  <PAGE>
  <TABLE>
  <CAPTION>
                                                      Republic First Bancorp
                                                      Interest Sensitive Gap
  (dollars in thousands)                             as of September 30, 1999
  
                                      0 - 90      91 - 180     181 - 365     1 - 2        2 - 3
                                       Days         Days         Days        Years        Years
                                       ----         ----         ----        -----        -----
  <S>                               <C>          <C>          <C>          <C>          <C>
  Interest Sensitive Assets:
  
  Securities and interest
     bearing balances due
     from banks                     $  33,152    $   7,989    $  15,469    $  27,008    $  25,337
       Average interest rate             5.41%        6.37%        6.38%        6.47%        6.47%
  Loans receivable (1)                108,321       11,931       22,022       42,851       36,915
       Average interest rate             8.48%        8.07%        8.04%        8.03%        8.13%
  
  Total                               141,473       19,920       37,491       69,859       62,252
                                    ---------    ---------    ---------    ---------    ---------
  Cumulative Totals                 $ 141,473    $ 161,393    $ 198,884    $ 268,743    $ 330,995
                                    =========    =========    =========    =========    =========
  Interest Sensitive Liabilities:
  
  Demand Interest Bearing           $   4,810    $     281    $     568    $   1,156    $   1,183
       Average interest rate             1.25%        1.25%        1.25%        1.25%        1.25%
  Savings Accounts                      1,316          102          206          419          428
       Average interest rate             2.00%        2.00%        2.00%        2.00%        2.00%
  Money Market Accounts                 7,616        2,153        4,317        5,885        5,957
       Average interest rate             3.73%        4.69%        4.69%        4.69%        4.69%
  Time Deposits                        58,704       35,367       38,784       64,969        1,944
       Average interest rate             5.51%        5.80%        5.59%        5.60%        5.77%
  FHLB Borrowings                      87,363       25,000       25,000       42,500       17,500
       Average interest rate             5.33%        5.29%        4.82%        5.68%        5.58%
  
  Total                               159,810       62,903       68,875      114,928       27,012
                                    ---------    ---------    ---------    ---------    ---------
  Cumulative Totals                 $ 159,810    $ 222,713    $ 291,588    $ 406,516    $ 433,528
                                    =========    =========    =========    =========    =========
  
  Interest Rate
      sensitivity GAP               $ (18,337)   $ (42,983)   $ (31,384)   $ (45,069)   $  35,240
  
  Cumulative GAP                    $ (18,337)   $ (61,320)   $ (92,704)   $(137,773)   $(102,533)
  
  Interest Sensitive Assets/
    Interest Sensitive Liabilities      88.53%       31.67%       54.43%       60.79%      230.46%
  
  Cumulative GAP/
    Total Earning Assets                -3.49%      -11.66%      -17.63%      -26.20%      -19.50%
  
  Total Earning Assets              $ 525,901
                                    =========
  
  Off balance sheet items
     notional value:
  Commitments to
     extend credit                  $     404    $  23,160
                                    ---------    ---------
  Average interest rate                  7.75%        8.25%
  </TABLE>
  
  <TABLE>
  <CAPTION>
                                       3 - 4        4 - 5    More than 5
                                       Years        Years       Years       Total     Fair Value
                                       -----        -----       -----       -----     ----------
  <S>                               <C>          <C>          <C>         <C>        <C>
  Interest Sensitive Assets:
  
  Securities and interest
     bearing balances due
     from banks                     $  12,273    $  10,937    $  67,158   $ 199,323  $ 199,623
       Average interest rate             6.52%        6.52%        6.53%
  Loans receivable (1)                 31,140       28,476       44,922     326,578    328,676
       Average interest rate             8.15%        8.01%        7.38%
  
  Total                                43,413       39,413      112,080     525,901    528,299
                                    ---------    ---------    ---------   ---------  ---------
  Cumulative Totals                 $ 374,408    $ 413,821    $ 525,901
                                    =========    =========    =========
  Interest Sensitive Liabilities:
  
  Demand Interest Bearing           $   1,210    $   1,238    $   2,151   $  12,598  $  12,598
       Average interest rate             1.25%        1.25%        1.25%
  Savings Accounts                        438          449    $     779       4,137      4,137
       Average interest rate             2.00%        2.00%        2.00%
  Money Market Accounts                 6,030        6,105    $   5,737      43,801     43,801
       Average interest rate             4.69%        4.69%        4.69%
  Time Deposits                         1,486        2,941            7     204,202    204,669
       Average interest rate             5.90%        5.69%        5.41%
  FHLB Borrowings                      25,000           --           --     222,363    222,476
       Average interest rate             5.72%        0.00%        0.00%
  
  Total                                34,165       10,733        8,675     487,101    487,681
                                    ---------    ---------    ---------   ---------  ---------
  Cumulative Totals                 $ 467,693    $ 478,426    $ 487,101
                                    =========    =========    =========
  
  Interest Rate
      sensitivity GAP               $   9,248    $  28,680    $ 103,405
  
  Cumulative GAP                    $ (93,285)   $ (64,605)   $  38,800
  
  Interest Sensitive Assets/
    Interest Sensitive Liabilities     127.07%      367.21%     1291.99%
  
  Cumulative GAP/
    Total Earning Assets               -17.74%     -12.28%         7.38%
  
  Total Earning Assets
  
  
  Off balance sheet items
     notional value:
  Commitments to
     extend credit                                                        $  23,564  $     236
                                                                          ---------  ---------
  Average interest rate
  <FN>
  (1) Includes loans held for sale.
  </FN>
  </TABLE>
                                         26
  <PAGE>
  
  Capital Resources
  
           The Company is required to comply  with  certain  "risk-based"  capital
  adequacy  guidelines  issued by the FRB and the  FDIC.  The  risk-based  capital
  guidelines  assign varying risk weights to the individual assets held by a bank.
  The guidelines also assign weights to the "credit-equivalent" amounts of certain
  off-balance  sheet  items,  such as  letters  of credit  and  interest  rate and
  currency swap contracts.  Under these  guidelines,  banks are expected to meet a
  minimum target ratio for  "qualifying  total capital" to weighted risk assets of
  8%,  at least  one-half  of  which  is to be in the  form of  "Tier 1  capital".
  Qualifying  total  capital is divided into two separate  categories  or "tiers".
  "Tier 1  capital"  includes  common  stockholders'  equity,  certain  qualifying
  perpetual  preferred  stock and  minority  interests  in the equity  accounts of
  consolidated  subsidiaries,  less goodwill, "Tier 2 capital" components (limited
  in the aggregate to one-half of total qualifying  capital)  includes  allowances
  for credit losses (within limits),  certain excess levels of perpetual preferred
  stock and certain types of "hybrid" capital  instruments,  subordinated debt and
  other preferred stock. Applying the federal guidelines,  the ratio of qualifying
  total capital to  weighted-risk  assets,  was 13.08% and 12.54% at September 30,
  1999 and December 31, 1998 , respectively, and as required by the guidelines, at
  least  one-half of the  qualifying  total  capital  consisted  of Tier l capital
  elements.  Tier l risk-based  capital  ratios on September 30, 1999 and December
  31, 1998 was 12.15% and 11.76%,  respectively.  At December 31, 1998,  and 1997,
  the Company exceeded the requirements for risk-based capital adequacy under both
  federal and Pennsylvania State guidelines.
  
           Under  FRB  and  FDIC  regulations,  a  bank  is  deemed  to  be  "well
  capitalized"  when it has a "leverage  ratio" ("Tier l capital to total assets")
  of at least 5%, a Tier l capital to  weighted-risk  assets ratio of at least 6%,
  and a total capital to weighted-risk  assets ratio of at least 10%. At September
  30,  1999 and  December  31,  1998 , the  leverage  ratio was  7.33% and  7.50%,
  respectively.  Accordingly,  at September  30, 1999 and  December 31, 1998,  the
  Company was considered "well capitalized" under FRB and FDIC regulations.
  
           The  Company's  shareholders'  equity  as of  September  30,  1999  and
  December 31, 1998 was $35,657,000 and $36,622,000,  respectively. Book value per
  share of the Company's common stock decreased from $6.22 as of December 31, 1998
  to $5.83 as of September 30, 1999.  These  decreases  were  attributable  to the
  change in unrealized  losses of $4.9 million on available  for sale  securities,
  partially  offset  by net  income  of  $3,682,000.  Regulatory  Restrictions  on
  Dividends
  
           Dividend  payments  by the  Bank  to the  Company  are  subject  to the
  Pennsylvania Banking Code of 1965 (the "Banking Code"), the Federal Reserve Act,
  and the Federal Deposit  Insurance Act (the "FDIA").  Under the Banking Code, no
  dividends  may be  paid  except  from  "accumulated  net  earnings"  (generally,
  undivided profits).  Under the FRB's regulations,  the Bank cannot pay dividends
  that exceed its net income from the current and the preceding  two years.  Under
  the FDIA,  an insured bank may pay no dividends if the bank is in arrears in the
  payment of any insurance assessment due to the FDIC. Under current banking laws,
  the Bank would be limited to $10.9 million year to date of dividends in 1999.
  
           State and federal regulatory authorities have adopted standards for the
  maintenance of adequate levels of capital by banks.  Adherence to such standards
  futher limits the ability of the Bank to pay dividends to the Company.
  
           Other  regulatory  requirments and policies may also affect the payment
  of dividends to the Company by the Bank. If, in the opinion of the FRB, the Bank
  is engaged in, or is about to engage in, an unsafe or unsound  practive  (which,
  depending on the financial  condition of the Bank,  could include the payment of
  dividends),  the FRB may require,  after notice and hearing, that the Bank cease
  and  desist  from  such  practice.  The FRB has  formal  and  informal  policies
  
                                         27
  
  <PAGE>
  
  providing  that insured banks and bank holding  companies  should  generally pay
  dividends only out of current operating earnings.
  
  
  Regulatory Capital Requirements
  
           Federal banking  agencies impose three minimum capital  requirements on
  the Company's risk-based capital ratios based on total capital, "Tier 1 capital,
  and a leverage capital ratio. 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 of
  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.
  
           The following table presents the Company's capital regulatory ratios at
  September 30, 1999 and December 31, 1998:
  
  <TABLE>
  <CAPTION>
                                                                                           To be well
                                                                  For capital          Capitalized under FRB
                                         Actual               Adequacy purposes         capital guidelines
  
  (dollars in thousands)          Amount        Ratio        Amount       Ratio       Amount         Ratio
                                  ------        -----        ------       -----       ------         -----
  <S>                            <C>            <C>         <C>            <C>        <C>            <C>
  As of September 30, 1999:
  
  Total  risk based capital      $43,348        13.08%      $26,523        8.00%      $33,153        10.00%
  Tier I capital                  40,297        12.15        13,261        4.00        19,892         6.00
  Tier I (leveraged) capital      40,297         7.33        27,492        5.00        27,492         5.00
  
  As of December 31, 1998:
  
  Total  risk based capital      $38,784        12.54%      $24,746        8.00%      $30,932        10.00%
  Tier I capital                  36,389        11.76        12,373        4.00        18,559         6.00
  Tier I (leveraged) capital      36,389         7.50        24,263        5.00        24,263         5.00
  </TABLE>
  
  
           Management believes that the Company meets as of September 30, 1999 and
  December 31, 1998, all capital adequacy  requirements to which it is subject. As
  of September 30, 1999 and December 31, 1998, the most recent  notification  from
  the Federal Reserve Bank categorized the Company as well  capitalized  under the
  regulatory  framework for prompt  corrective  action provisions of section 3b of
  the Federal  deposit  Insurance Act. There are no  calculations  or events since
  that  notification,  that  management  believes would have changed the Company's
  category.
  
           The  Company's  ability to maintain the  required  levels of capital is
  substantially  dependent  upon the  success of the Banks  capital  and  business
  plans,  the impact of future economic  events on the Banks' loan customers,  the
  
                                         28
  
  <PAGE>
  
  Banks' ability to manage its interest rate risk and control its growth and other
  operating expenses.
  
           In  addition to the above  minimum  capital  requirements,  the Federal
  Reserve  Bank  approved  a rule that  became  effective  on  December  19,  1992
  implementing  a statutory  requirement  that  federal  banking  regulators  take
  specified "prompt corrective action" when an insured institution's capital level
  falls below certain levels.  The rule defines five capital  categories  based on
  several  of the above  capital  ratios.  The Banks  currently  exceed the levels
  required for a bank to be classified as "well capitalized". However, the Federal
  Reserve Bank may consider other criteria when determining such  classifications,
  which consideration could result in a downgrading in such classifications.
  
  
  Liquidity
  
           Financial  institutions  must  maintain  liquidity  to meet  day-to-day
  requirements   of   depositors   and   borrowers,   take   advantage  of  market
  opportunities,  and provide a cushion against unforeseen needs.  Liquidity needs
  can be met by either reducing assets or increasing liabilities. Sources of asset
  liquidity  are  provided by cash and  amounts  due from banks,  interest-bearing
  deposits with banks, and federal funds sold.
  
           The Company's liquid assets totaled $21.3 million at September 30, 1999
  compared to $18.3 million at December 31, 1998.  Maturing and repaying loans are
  another source of asset liquidity.  At September 30, 1999, the Company estimated
  that an  additional  $63.8 million of loans will mature or repay in the next one
  year period ending September 30, 2000.
  
           Liquidity can be met by attracting  deposits  with  competitive  rates,
  buying federal funds or utilizing the  facilities of the Federal  Reserve System
  or the Federal Home Loan Bank System. At September 30, 1999, the Banks had $43.4
  million in unused lines of credit  available to it under  informal  arrangements
  with  correspondent  banks compared to $55.5 million at December 31, 1998. These
  lines of credit  enable  the Banks to  purchase  funds for  short-term  needs at
  current market rates.
  
           At  September  30,  1999,  the  Company  had  outstanding   commitments
  (including  unused  lines of credit and  letters  of  credit) of $23.2  million.
  Certificates  of deposit  which are  scheduled to mature within one year totaled
  $129.8  million at September  30, 1999,  and  borrowings  that are  scheduled to
  mature  within  the  same  period  amounted  to  $133.8  million.   The  Company
  anticipates  that it will have  sufficient  funds  available to meet its current
  commitments.
  
           The Banks'  target  and actual  liquidity  levels  are  determined  and
  managed based on Management's  comparison of the maturities and marketability of
  the Bank's  interest-earning  assets with its  projected  future  maturities  of
  deposits and other liabilities. Management currently believes that floating rate
  commercial loans,  short-term market  instruments,  such as 2-year United States
  Treasury Notes, adjustable rate mortgage-backed  securities issued by government
  agencies,  and federal funds, are the most  appropriate  approach to satisfy the
  Bank's  liquidity  needs.  The Bank has  established  a line of credit  from its
  correspondent,  in the amount of $7.5 million,  to assist in managing the Bank's
  liquidity position. Additionally, the Bank has established a line of credit with
  the Federal Home Loan Bank of Pittsburgh  with a maximum  borrowing  capacity of
  approximately  $258.2  million.  As of Spetember 30, 1999 and December 31, 1998,
  the Company had  borrowed  $222.4 and $180.5,  respectively,  under its lines of
  credit.
  
           The  Company's  Board of Directors  has  appointed  an  Asset/Liability
  Committee   (ALCO)  to  assist   Management  in   establishing   parameters  for
  investments.  The  Asset/Liability  Committee  is  responsible  for managing the
  liquidity  position  and interest  sensitivity  of the Banks.  Such  committee's
  primary  objective is to maximize net interest  margin in an ever  changing rate
  
                                         29
  
  <PAGE>
  
  environment,   while   balancing  the  Banks'   interest-sensitive   assets  and
  liabilities and providing adequate liquidity for projected needs.
  
           Management  presently  believes  that the  effect  on the  Banks of any
  future  rise in interest  rates,  reflected  in higher  cost of funds,  would be
  detrimental  since the amount of the Banks' interest bearing  liabilities  which
  would reprice,  are greater than the Banks' interest  earning assets which would
  reprice,  over the next twelve  months.  However,  a decrease in interest  rates
  generally  could  have a positive  effect on the Banks,  due again to the timing
  difference between repricing the Banks' liabilities,  primarily  certificates of
  deposit and other borrowed  funds,  and the largely  automatic  repricing of its
  existing  interest-earning  assets.  As of September 30, 1999, 27% of the Banks'
  interest-bearing  deposits  were to mature,  and be  repriceable,  within  three
  months, and an additional 14% were to mature,  and be repriceable,  within three
  to six months.
  
  Since  the  assets  and  liabilities  of  the  Company  have  diverse  repricing
  characteristics that influence net interest income, management analyzes interest
  sensitivity through the use of gap analysis and simulation models. Interest rate
  sensitivity  management seeks to minimize the effect of interest rate changes on
  net interest  margins and interest  rate spreads,  and to provide  growth in net
  interest income through periods of changing interest rates.
  
  Securities Portfolio
  
           At September 30, 1999,  the Company had identified  certain  investment
  securities  that  are  being  held for  indefinite  periods  of time,  including
  securities that will be used as part of the Company's 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 and are intended to increase the flexibility of the Company's
  asset/liability   management.   Available-for-sale   securities  consist  of  US
  Government Agency securities and other  investments.  The book and market values
  of securities  available-for-sale  were $184.6  million and $177.2 million as of
  September 30, 1999. The net unrealized loss on securities available-for-sale, as
  of this date, was $7.4 million.
  
           The following  table  represents the carrying and estimated fair values
  of Investment Securities at September 30, 1999.
  
  <TABLE>
  <CAPTION>
                                                       Gross           Gross
                                 Amortized           Unrealized     Unrealized
  Available-for-Sale                Cost               Gain            Loss          Fair Value
                               ----------------------------------------------------------------
  <S>                          <C>                   <C>          <C>              <C>
  Mortgage-backed              $181,688,000          $31,000      ($7,427,000)     $174,292,000
  U.S. Government Agencies        2,900,000            9,000          (22,000)        2,887,000
                               ----------------------------------------------------------------
  Total Available-for-Sale     $184,588,000          $40,000      ($7,449,000)     $177,179,000
                               ----------------------------------------------------------------
  
                                                       Gross           Gross
                                 Amortized           Unrealized      Unrealized
  Held-to-Maturity                  Cost               Gain             Loss         Fair Value
                               ----------------------------------------------------------------
  
  Mortgage-backed                  $939,000          $15,000               $0          $954,000
  US Government Agencies          1,895,000            1,000           (9,000)        1,887,000
  Other                          13,287,000                0                0        13,287,000
                               ----------------------------------------------------------------
  Total Held-to-Maturity        $16,121,000          $16,000          ($9,000)      $16,128,000
                               ----------------------------------------------------------------
  </TABLE>
  
                                         30
  <PAGE>
  
  Loan Portfolio
  
           The Company's loan portfolio  consists of commercial loans,  commercial
  real estate loans,  commercial loans secured by one-to-four  family  residential
  property,  as well  as  residential,  home  equity  loans  and  consumer  loans.
  Commercial  loans  are  primarily  term  loans  made  to   small-to-medium-sized
  businesses and professionals for working capital purposes. The majority of these
  commercial loans are  collateralized by real estate and further secured by other
  collateral and personal  guarantees.  The Company's  commercial  loans generally
  range from $250,000 to $1,000,000 in amount.
  
           The Company's net loans  increased  $19.8  million,  or 6.5%, to $326.6
  million at September  30, 1999 from $306.8  million at December 31, 1998,  which
  were primarily funded by an increase in other borrowed funds.
  
  The following table sets forth the Company's gross loans by major categories for
  the periods indicated:
  
  <TABLE>
  <CAPTION>
  (dollars in thousands)                As of September 30, 1999         As of December 31, 1998
                                      ------------------------------------------------------------
                                      Balance           % of Total     Balance          % of Total
                                      ------------------------------------------------------------
  <S>                                  <C>                 <C>        <C>                 <C>
  Real Estate:
      1-4 Family (1)                  $145,895              44.3%     $133,158             43.1%
      Multi-Family                      23,502               7.1        21,800              7.0
      Commercial Real Estate           120,784              36.6       110,385             35.7
                                      ------------------------------------------------------------
  Total Real Estate                    290,181              88.0       265,343             85.8
  
  Commercial                            37,566              11.4        42,644             13.8
  Other                                  1,882               0.6         1,176              0.4
                                      ------------------------------------------------------------
  Total Loans (1)                      329,629             100.0%      309,163            100.0%
  
  Less allowance for loan losses        (3,051)                         (2,395)
                                      --------                        --------
  
  Net loans                           $326,578                        $306,768
                                      ========                        ========
  <FN>
  (1)      Includes loans held for sale
  </FN>
  </TABLE>
  
  Credit Quality
  
           The Company's  written  lending  policies  require  underwriting,  loan
  documentation,  and credit  analysis  standards  to be met prior to funding.  In
  addition,  a senior loan  officer  reviews all loan  applications.  The Board of
  Directors  reviews the status of loans  monthly to ensure that proper  standards
  are maintained.
  
           Loans, including impaired loans, are generally classified as nonaccrual
  if they are past due as to maturity or payment of principal  and/or interest for
  a period of more than 90 days,  unless  such loans are  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 nonaccrual if repayment in full of
  principal and/or interest is in doubt.
  
                                         31
  <PAGE>
  
           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  (generally a minimum of six months) by the borrower,  in accordance
  with the contractual terms of the loan.
  
           While a loan is classified as nonaccrual or as an impaired loan and the
  future  collectability of the recorded loan balance is doubtful,  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. In the case where a
  nonaccrual  loan had been  partially  charged off,  recognition of interest on a
  cash basis is limited to that which would have been  recognized on the remaining
  recorded loan balance at the contractual  interest rate. Cash interest  receipts
  in excess of that amount are recorded as  recoveries  to the  allowance for loan
  losses until prior charge-offs have been fully recovered.
  
           The following summary shows information concerning loan delinquency and
  other non-performing assets at the dates indicated.
  
  <TABLE>
  <CAPTION>
                                                         September 30,       December 31,
                                                             1999               1998
                                                        ------------------------------
  <S>                                                   <C>                <C>
            Loans accruing, but past due 90 days
              or more                                      $586,000           $121,000
            Non-accrual loans                             1,061,000          1,002,000
                                                        ------------------------------
            Total non-performing loans (1)                1,647,000          1,123,000
            Foreclosed real estate                          643,000            718,000
                                                        ------------------------------
            Total non-performing assets (2)              $2,290,000         $1,841,000
                                                        ==============================
  
  
            Non-performing loans as a percentage
               of total loans net of unearned
               income (3)                                      0.50%              0.36%
            Non-performing assets as a percentage
               of total assets                                 0.41%              0.36%
  <FN>
  (1)      Non-performing  loans  are  comprised  of  (i)  loans  that  are  on  a
           nonaccrual basis; (ii) accruing loans that are 90 days or more past due
           and (iii) restructured loans.
  (2)      Non-performing   assets  are  composed  of  non-performing   loans  and
           foreclosed real estate (assets acquired in foreclosure).
  (3)      Includes loans held for sale
  </FN>
  </TABLE>
  
           Total  non-performing  loans  increased  by $524,000 to  $1,647,000  at
  September 30, 1999 from  $1,123,000 at December 31, 1998.  Total non  performing
  assets increased by $449,000 at September 30, 1999 to $2,290,000 from $1,841,000
  at December 31, 1998.
  
           At  September  30, 1999,  the Company had no foreign  loans and no loan
  concentrations  exceeding 10% of total loans except for credits extended to real
  estate  agents and  managers in the  aggregate  amount of $82.6  million,  which
  represented 25.3% of gross loans receivable.  Loan concentrations are considered
  to exist when there are amounts loaned to a multiple number of borrowers engaged
  
                                         32
  
  <PAGE>
  
  in similar activities that would cause them to be similarly impacted by economic
  or other conditions.
  
           Real estate  owned is  initially  recorded at the lower or cost or fair
  value,  net of  estimated  selling  costs  at the  date  of  foreclosure.  After
  foreclosure,  management  periodically  performs  valuations  and any subsequent
  deteriations  in fair  value,  and all other  revenue and  expenses  are charged
  against operating expenses in the period in which they occur.
  
           Potential   problem  loans  consist  of  loans  that  are  included  in
  performing  loans, but for which potential credit problems of the borrowers have
  caused  management to have serious doubts as to the ability of such borrowers to
  continue to comply with present  repayment  terms.  At September  30, 1999,  all
  identified potential problem loans are included in the preceding table.
  
           The Company had no credit exposure to "highly  leveraged  transactions"
  at September 30, 1999, as defined by the FRB.
  
  Allowance for Loan Losses
  
           A detailed analysis of the Company's  allowance for loan losses for the
  nine months  ended  September  30,  1999,  and 1998 and the twelve  months ended
  December 31, 1998:
  
  
  <TABLE>
  <CAPTION>
                                                         For the nine months  For the twelve months    For the nine months
                                                                ended                  ended                    ended
                                                          September 30, 1999     December 31, 1998      September 30, 1998
                                                          ------------------  ----------------------   -------------------
  
  <S>                                                        <C>                   <C>                   <C>
            Balance at beginning of period ............         $2,395,000            $2,028,000            $2,028,000
            Charge-offs:
                 Commercial ...........................             27,000                76,000                55,000
                 Real estate ..........................                  0                     0                     0
                 Consumer .............................             97,000                34,000                     0
                                                              ------------          ------------          ------------
  
                     Total charge-offs ................            124,000               110,000                55,000
                                                              ------------          ------------          ------------
            Recoveries:
                 Commercial ...........................             93,000                13,000                48,000
                 Real estate ..........................                  0                     0                     0
                 Consumer .............................             17,000                94,000                13,000
                                                              ------------          ------------          ------------
  
                     Total recoveries .................            110,000               107,000                61,000
                                                              ------------          ------------          ------------
  
            Net charge-offs/(recoveries) ..............             14,000                 3,000                (6,000)
                                                              ------------          ------------          ------------
            Provision for loan losses .................            670,000               370,000               290,000
                                                              ------------          ------------          ------------
  
                 Balance at end of period .............         $3,051,000            $2,395,000            $2,324,000
                                                              ============          ============          ============
  
                 Average loans outstanding (1)(2) .....       $318,770,000          $248,479,000          $236,874,000
                                                              ============          ============          ============
  
  
            As a percent of average loans (1)(2):
                 Net charge-offs ......................               0.01%                 0.00%                 0.00%
                 Provision for loan losses ............               0.21%                 0.15%                 0.12%
                 Allowance for loan losses ............               0.96%                 0.96%                 0.98%
            Allowance for loan losses to:
                 Total loans, net of unearned income ..               0.93%                 0.77%                 0.87%
                 Total non-performing loans ...........             185.25%               213.27%               141.79%
  <FN>
  (1) Includes nonaccruing loans.
  (2) Includes loans held for sale.
  </FN>
  </TABLE>
  
                                         33
  
  <PAGE>
  
           Management makes a monthly determination as to an appropriate provision
  from  earnings  necessary  to  maintain  an  allowance  for loan  losses that is
  adequate based upon the loan portfolio  composition,  classified  problem loans,
  and general economic conditions.  The Company's Board of Directors  periodically
  reviews the status of all nonaccrual and impaired loans and loans  criticized by
  the Company's  regulators  and internal loan review  officer.  The internal loan
  review officer  reviews both the loan portfolio and the overall  adequacy of the
  loan loss  reserve.  During  the review of the loan loss  reserve,  the Board of
  Directors  considers  specific  loans,  pools of similar  loans,  and historical
  charge-off  activity.  The sum of these  components is compared to the loan loss
  reserve balance. Any additions deemed necessary to the loan loss reserve balance
  are charged to operations.
  
           The Company has an existing  loan review  program,  which  monitors the
  loan  portfolio on an ongoing  basis.  Loan review is conducted by a loan review
  officer  and is  reported  quarterly  to the  Board of  Directors.  The Board of
  Directors reviews the finding of the loan review program on a monthly basis.
  
           Determining the  appropriate  level of the allowance for loan losses at
  any given date is difficult,  particularly  in a continually  changing  economy.
  However, there can be no assurance that, if asset quality deteriorates in future
  periods, additions to the allowance for loan losses will not be required.
  
           The Company's management considers the entire allowance for loan losses
  to be  adequate,  however,  to comply with  regulatory  reporting  requirements,
  management  has  allocated  the  allowance for loan losses as shown in the table
  below into components by loan type at each period end. Through such allocations,
  management  does not  intend  to  imply  that  actual  future  charge-offs  will
  necessarily  follow the same  pattern or that any  portion of the  allowance  is
  restricted.
  
  <TABLE>
  <CAPTION>
                                                                  At September 30, 1999            At December 31, 1998
                                                                  ---------------------            --------------------
                                                                           Percent of Loans                  Percent of Loans
                                                                           In Each Category                  In Each Category
                                                              Amount          To Loans (1)      Amount          to Loans (1)
                                                              ------          ------------      ------          ------------
  <S>                                                       <C>                <C>           <C>                 <C>
            Allocation of allowance for loan losses:
                 Commercial                                 $1,849,000           55.17%       $1,638,000           56.33%
                 Residential real estate                       419,000           44.26%          391,000           43.07%
                 Consumer and other                             91,000            0.57%           71,000            0.60%
                 Unallocated                                   692,000                           295,000
                                                            ----------                        ----------
                     Total                                   3,051,000          100.00%       $2,395,000          100.00%
                                                            ==========                        ==========
  </TABLE>
  
           The unallocated  allowance  increased $397,000 to $692,000 at September
  30, 1999 from $295,000 at December 31, 1998. This increase is due primarily to a
  recent increase in non-performing loans of $524,000 to $1.6 million at September
  30, 1999 from $1.1 million at December  31, 1998,  and to the growth of the loan
  portfolio.
  
  (1)      Includes loans held for sale
  
                                         34
  
  <PAGE>
  
           The Company had delinquent  loans as of September 30, 1999 and December
  31, 1998 as follows;  (i) 30 to 59 days past due,  consisted of commercial,  and
  consumer and home equity loans in the aggregate principal amount of $398,000 and
  $1.2  million  respectively;  and  (ii) 60 to 89 days  past  due,  consisted  of
  commercial and consumer loan in the aggregate  principal  amount of $2.0 million
  and $386,000 respectively. In addition, the Company has classified certain loans
  as  substandard  and  doubtful  (as those terms are defined in  applicable  Bank
  regulations).  At September  30, 1999 and December 31, 1998,  substandard  loans
  totaled approximately $899,000 and $1,382,000  respectively;  and doubtful loans
  totaled approximately $334,000 and $0 respectively.
  
  Deposit Structure
  
           Total deposits at September 30, 1999 consisted of  approximately  $27.8
  million in non-interest-bearing demand deposits,  approximately $12.6 million in
  interest-bearing  demand  deposits,   approximately  $48.0  million  in  savings
  deposits  and  money  market  accounts,  approximately  $153.0  million  in time
  deposits  under  $100,000,  and  approximately  $51.2  million in time  deposits
  greater than $100,000.  In general,  the Bank pays higher interest rates on time
  deposits over $100,000 in principal  amount.  Due to the nature of time deposits
  and changes in the interest  rate market  generally,  it should be expected that
  the Company's deposit liabilities may fluctuate from period-to-period.
  
           The following  table is a distribution of the balances of the Company's
  average deposit  balances and the average rates paid therein for the nine months
  ended September 30, 1999 and the year ended December 31, 1998.
  
  <TABLE>
  <CAPTION>
                                                                              Deposit Table
                                                       For the nine months  ended       For the twelve months ended
                                                            September 30, 1999                December 31, 1998
                                                     ------------------------------   ------------------------------
                                                        Average                         Average
                                                        Balance             Rate        Balance              Rate
  <S>                                                 <C>                   <C>        <C>                   <C>
            Non-interest-bearing balances             $29,627,000           0.00%      $31,260,000           0.00%
                                                     ==============================================================
  
            Money market and savings deposits         $44,870,000           3.68%      $41,157,000           2.85%
            Time deposits                             191,234,000           5.86       191,829,000           6.09
            Demand deposits, interest-bearing          13,844,000           1.44        13,727,000           2.50
                                                     --------------------------------------------------------------
            Total interest-bearing deposits          $249,948,000           5.23%     $246,713,000           5.35%
                                                     ==============================================================
  </TABLE>
  
  
                                         35
  
  <PAGE>
  
  The following is a breakdown, by contractual  maturities,  of the Company's time
  deposits  issued in  denominations  of $100,000 or more as of September 30, 1999
  and December 31, 1998.
  
  <TABLE>
  <CAPTION>
                                                              September 30,       December 31,
                                                                  1999               1998
                                                           ---------------------------------
  <S>                                                         <C>                <C>
            Maturing in:
                 Three months or less                         $13,175,000        $14,229,000
                 Over three months through six months          10,127,000          7,756,000
                 Over six months through twelve months          8,796,000          3,365,000
                 Over twelve months                            22,754,000                  0
                                                           ---------------------------------
            Total                                             $54,852,000        $25,350,000
                                                           =================================
  </TABLE>
  
  Commitments
  
           In the normal course of its business,  the Company makes commitments to
  extend credit and issues standby letters of credit.  Generally, such commitments
  are provided as a service to its  customers.  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 may require 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
  requirement.  The  Company  evaluates  each  customer's  creditworthiness  on  a
  case-by-case  basis.  The type and  amount  of  collateral  obtained,  if deemed
  necessary upon extension of credit, are based on Management's  credit evaluation
  of the borrower. Standby letters of credit are conditional commitments issued to
  guarantee  the  performance  of a customer  to a third  party.  The credit  risk
  involved in issuing  standby  letters of credit is essentially  the same as that
  involved in extending loan  facilities to customers and is based on Management's
  evaluation  of the  creditworthiness  of the  borrower  and the  quality  of the
  collateral.  At September 30, 1999 and December 31, 1998, firm loan  commitments
  approximated  $23.2 million and $20.1 million  respectively  and  commitments of
  standby letters of credit approximated $1,455,000 and $1,912,000, respectively.
  
  
  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  financial  results is the  Company's  need and ability to react to
  changes in interest  rates.  As  discussed  previously,  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.
  
  Year 2000 Issue
  
           The following section contains forward-looking statements which involve
  risks and uncertainties. The actual impact on the Company of the year 2000 issue
  could  materially  differ from that which is anticipated in the forward  looking
  statements as a result of certain factors identified below.
  
                                         36
  
  <PAGE>
  
           Many existing  computer programs use only two digits to identify a year
  in  the  date  field.   These  programs  were  designed  and  developed  without
  considering the impact of the upcoming change in the century.  If not corrected,
  many computer  applications  could fail or create erroneous results by or at the
  Year  2000.   The  Year  2000  issue   affects   virtually   all  companies  and
  organizations.
  
           The  Company  is  subject  to  various  regulations  and  oversight  by
  regulatory  authorities,  including the Federal  Reserve Bank, the  Pennsylvania
  Department  of Banking and the Federal  Deposit  Insurance  Corporation  (FDIC).
  These  regulatory  agencies have  coordinated  various  regulatory  examinations
  focusing on the year 2000  issues,  and report their  findings to the  Company's
  management and the Board of Directors.
  
     Company's State of Readiness
  
           The  Company's  management  is committed to ensuring that the Company's
  daily operations  suffer little impact as a result of the date change at the end
  of the century.  The Company is  following  the Federal  Financial  Institutions
  Examination Council's (FFIEC), Interagency Guidelines. The guidelines identify a
  process in which year 2000 issues are addressed, such as awareness,  assessment,
  remediation, testing and implementation.
  
           The Company has identified  key areas for which  management is focusing
  its efforts.  These areas include data center, desktop environment and networks,
  branch  environment and services,  financial  applications,  facilities,  legal,
  insurance, and outside services. For each of these areas identified, the Company
  is employing a process which will compile  inventories of all  identified  areas
  which  could be  affected  by the year 2000,  including  information  technology
  ("IT") systems and non-information technology systems such as phone systems, fax
  machines and alarm  systems.  A testing  schedule is defined and the  identified
  systems are tested, and results evaluated. A remedy process is then defined, and
  implemented  and testing is  performed  again.  The  process is  repeated  until
  repairs are complete.
  
           All identified  critical  applications  have been tested.  Non-critical
  testing  validation  and repair were  performed and  completed  during the first
  quarter of 1999.
  
           The  Company  has  relationships   with  third  parties  including  its
  borrowers, which are also subject to the year 2000 uncertainties. Management has
  identified  relationships  which are  considered  material,  and  would  have an
  adverse  effect on the Bank and the Company if such third  parties were not year
  2000  compliant.   Management  has  solicited  year  2000   certifications  from
  significant  vendors,  and also  completed its own year 2000 due  diligence.  No
  borrower or third party vendor has given the Company a response  that  indicates
  that they will not be year 2000  compliant.  However,  one  borrower  has yet to
  receive a year 2000  certification  from a major  supplier of business,  and the
  bank is closely monitoring the situation.  It is anticipated that all identified
  third party vendors will be compliant,  however,  no assurance can be given with
  regard to their compliance with year 2000. Also, no assurances can be given that
  a third party vendor or borrower will not have a material  effect on the Company
  or Bank, due to their non-compliance with the year 2000 issue.
  
           While no assurance  can be given to actual system  operations  upon the
  turn of the  century,  based upon  information  currently  known to it, and upon
  consideration  of its testing efforts to date,  management  believes that in the
  worse case  scenario,  the Company  will suffer  only a slight  interruption  of
  business, as a result of minor application failures of its IT and non-IT systems
  and  software  as a  result  of the  year  2000.  However,  if  the  appropriate
  modifications  are not made, or are not  completed on a timely  basis,  the year
  2000 issue could have a material  impact on the  operations  of the Bank and the
  Company.
  
                                         37
  
  <PAGE>
  
     Costs of Year 2000
  
           The Company has spent  approximately  $175,000 and  estimates  that the
  future dollar cost to the Company to be in  compliance  with the year 2000 issue
  will range from $25,000 to $50,000 by December 31, 1999. These costs include new
  equipment and software purchases,  in addition to testing  applications prior to
  the year 2000.
  
     Risks of the Company's Year 2000 Issues
  
           Management  believes that it has addressed the major areas with respect
  to Year 2000 compliance. Management also believes its progress of remedying year
  2000  issues is being  completed  according  to plan.  However,  there can be no
  assurances that the Company will not be impacted by Year 2000 complications.
  
     Contingency Plans
  
           The  Company  has  prepared  contingency  plans for each  major area of
  business   identified   above.  The  plans  will  utilize  in  part  alternative
  procedures, other third party vendors and manual intervention, to compensate for
  the loss of certain computer  systems.  As of September 30, 1999, all such plans
  have been substantially completed.
  
  Recent Accounting Pronouncements:
  
     Accounting for Derivative Instruments and Hedging Activities
  
           In June 1998,  the FASB  issued  Statement  No.  133,  "Accounting  for
  Derivative  Instruments  and Hedging  Activities"  ("Statement  No. 133").  This
  Statement  standardizes  the accounting for  derivative  instruments,  including
  certain derivative  instruments embedded in other contracts,  and those used for
  hedging activities,  by requiring that an entity recognize those items as assets
  or liabilities  in the statement of financial  position and measure them at fair
  value. The statement categorized derivatives used for hedging purposes as either
  fair value hedges, cash flow hedges, foreign currency fair value hedges, foreign
  currency cash flow hedges, or hedges of certain foreign currency exposures.  The
  statement  generally  provides for matching of gain or loss  recognition  on the
  hedging  instrument with the recognition of the changes in the fair value of the
  hedged asset or liability that are  attributable  to the hedged risk, so long as
  the hedge is effective. Prospective application of Statement No. 133, as amended
  by statement No. 137, is required for all fiscal years  beginning after June 15,
  2000, however earlier application is permitted.  Currently, the Company does not
  use any derivative  instruments,  nor does it engage in any hedging  activities.
  The Company  adopted  Statement No. 133 effective July 1, 1998,  which permitted
  the  Company  to  transfer   certain   securities   originally   designated   as
  held-to-maturity,   to  available-for-sale  and  trading.  A  portion  of  these
  securities  were  subsequently  sold  during  the  third  quarter  of  1998.  In
  accordance  with  Statement  No.  133,  the Company  recorded  the gross gain of
  $628,000  as a  cumulative  change in  accounting  principle,  net of a $207,000
  provision for income tax.
  
                                         38
  
  <PAGE>
  
     Reporting on the Costs of Start-Up Activities
  
           In April 1998, the American  Institute of Certified Public  Accountants
  issued Statement of Position 98-5, Reporting on the Costs of Start-Up Activities
  ("SOP 98-5").  This statement  requires costs of startup  activities,  including
  organization  costs,  to be expensed as incurred.  SOP 98-5 is effective for the
  Company's  financial  statements for fiscal years  beginning  after December 15,
  1998.  As of  December  31,  1998 the Company  had  deferred  costs  relating to
  start-up activities of $94,000,  remaining in the balance of other assets in the
  Consolidated  Balance Sheets.  The Company adopted SOP 98-5 effective January 1,
  1999, and accordingly,  expensed $94,000 of costs of start-up  activities in the
  first  quarter of 1999.  This  amount,  net of tax, is presented as a cumulative
  effect  of a change  in  account  principle  in the  consolidated  statement  of
  operations.
  
  
                                         39
  <PAGE>
  
  Part II  Other Information
  
  
  Item 1: Legal Proceedings
  
           The Company and the Banks are from time to time a party  (plaintiff  or
  defendant)  to lawsuits  that are in the normal  course of  business.  While any
  litigation  involves  an element of  uncertainty,  management,  after  reviewing
  pending actions with its legal counsel,  is of the opinion that the liability of
  the Company and the Banks,  if any,  resulting from such actions will not have a
  material  effect on the  financial  condition  or results of  operations  of the
  Company and the Banks.
  
  
  Item 2:  Changes in Securities and use of proceeds
           None
  
  Item 3:  Defaults upon Senior Securities
           None
  
  Item 4:  Submission of Matters to a Vote of Security Holders
           None
  
  Item 5:  Other Information
           None
  
  Item 6:  Exhibits and Reports on Form 8-K
  
          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 an
  annual report on Form 10-K)
  
                      Exhibit No.
                      ------------------------------------------------------------
  
                      3(a)      Amended and Restated  Articles of Incorporation of
                                the Company, as amended.*
  
                      3(b)      Amended and Restated Bylaws of the Company. *
  
                      4(b)(i)   Amended and Restated  Articles of Incorporation of
                                the Company, as amended.*
  
                      4(b)(ii)  Amended and Restated Bylaws of the Company.*
  
                      10        Amended and Restated Material Contracts.- None
  
                      10(a)     Amended and Restated Employment  Agreement between
                                the Company and Zvi H. Muscal.*
  
                      10(b)     Agreement  and Plan of Merger by and  between  the
                                Company and Republic  Bancorporation,  Inc.  dated
                                November 17, 1996.*
  
                                         40
  
  <PAGE>
  
                      10(c)     Employment  agreement between the Company and Jere
                                A. Young.**
  
                      10(d)     Employment   agreement  between  the  Company  and
                                Robert D. Davis.**
  
                      10(e)     Agreement   between   the  Company  and  Harry  D.
                                Madonna.**
  
                      11        Computation of Per Share Earnings
                                See  footnote  No.  2  to  Notes  to  Consolidated
                                Financial Statements under Earnings per Share.
  
                      21        Subsidiaries of the Company.
  
                                First  Republic Bank (the "Bank"),  a wholly-owned
                                subsidiary,  commenced  operations  on November 3,
                                1988.  The  Bank is a  commercial  bank  chartered
                                pursuant  to  the  laws  of  the  Commonwealth  of
                                Pennsylvania. Republic First Bank of Delaware (the
                                "Delaware Bank") is also a wholly-owned subsidiary
                                of the Company,  commenced  operations  on June 1,
                                1999.  The  Delaware  Bank  is a  commercial  bank
                                chartered  pursuant  to the  laws of the  State of
                                Delaware.  The Bank and the Delaware Bank are both
                                members of the  Federal  Reserve  System and their
                                primary federal regulators are the Federal Reserve
                                Board of Governors.
  
                      27        Financial Data Schedule.
  
           All other  schedules  and  exhibits  are omitted  because  they are not
  applicable  or because  the  required  information  is set out in the  financial
  statements or the notes hereto.
  
           *Incorporated by reference from the Registration  Statement on Form S-4
  of the Company, as amended, Registration No. 333-673 filed April 29, 1996.
  
           **Incorporated by reference in the Company's Form 10-K, filed March 25,
  1999.
  
  Reports on Form 8-K
  
  None
  
                                         41
  <PAGE>
  
                                     SIGNATURES
  
           Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
  the  Issuer  has duly  caused  this  report to be  signed  on its  behalf by the
  undersigned thereunto duly authorized.
  
  
  
                                             Republic First Bancorp, Inc.
  
  
  
  
                                             /s/ Jere A. Young
                                             -------------------------------------
                                             Jere A. Young
                                             President and Chief Executive Officer
  
  
  
                                             /s/ George S. Rapp
                                             -------------------------------------
                                             George S. Rapp
                                             Executive Vice President and
                                             Chief Financial Officer
  
  Dated:  November 15, 1999
  
  
                                         42
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 150044}]
metadata_filer: {"company-data": {"conformed-name": "REPUBLIC FIRST BANCORP INC", "cik": "0000834285", "assigned-sic": "6022", "irs-number": "232486815", "state-of-incorporation": "PA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-17007", "film-number": "99755596"}, "business-address": {"street1": "1608 WALNUT ST", "street2": "STE 1000", "city": "PHILADELPHIA", "state": "PA", "zip": "19103", "phone": "2157354422"}, "mail-address": {"street1": "1608 WALNUT ST", "street2": "STE 1000", "city": "PHILADELPHIA", "state": "PA", "zip": "19103"}, "former-company": [{"former-conformed-name": "FIRST REPUBLIC BANCORP INC /DE/", "date-changed": "19960617"}, {"former-conformed-name": "EXECUFIRST BANCORP INC", "date-changed": "19920703"}, {"former-conformed-name": "FIRST EXECUTIVE BANCORP INC", "date-changed": "19881113"}]}
text: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, DC 20549
  
                                      FORM 10-Q
  
                    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                         THE SECURITIES EXCHANGE ACT OF 1934
  
                 For the Quarterly Period Ended: September 30, 1999
  
                           Commission File Number: 0-17007
  
                            Republic First Bancorp, Inc.
               (Exact name of registrant as specified in its charter)
  
             Pennsylvania                                     23-2486815
  -------------------------------                     ---------------------------
  (State or other jurisdiction of                     IRS Employer Identification
   incorporation or organization)                               Number
  
             1608 Walnut Street, Philadelphia, Pennsylvania     19103
             --------------------------------------------------------
               (Address of principal  executive  offices)     (Zip code)
  
                                    215-735-4422
             --------------------------------------------------------
                (Registrant's telephone number, including area code)
  
                                         N/A
             --------------------------------------------------------
                (Former name, former address and former fiscal year,
                           if changed since last report)
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the  preceding 12 months (or for such  shorter  period that the  registrant  was
  required to file such reports),  and (2) has been subject to filing requirements
  for the past 90 days.
  
                       YES  _X_                       NO __
  
                        APPLICABLE ONLY TO CORPORATE ISSUERS:
  
       Indicate the number of shares  outstanding of each of the Issuer's  classes
  of common stock, as of the latest practicable date.
  
                6,111,705 shares of Issuer's Common Stock, par value
           $0.01 per share, issued and outstanding as of October 31, 1999
  
                                    Page 1 of 42
  
                          Exhibit index appears on page 40
  
                                         1
  TABLE OF CONTENTS
  
                                                                              Page
  Part I:  Financial Information
  
  Item 1: Financial Statements                                                 3
  
  Item 2:   Management's Discussion and Analysis of Financial Condition and   18
            Results of Operations
  
  Item 3:  Quantitative and Qualitative Information about Market Risk         23
  
  Part II: Other Information
  
  Item 1: Legal Proceedings                                                   40
  
  Item 2: Changes in Securities and Use of Proceeds                           40
  
  Item 3: Defaults Upon Senior Securities                                     40
  
  Item 4: Submission of Matters to a Vote of Security Holders                 40
  
  Item 5: Other Information                                                   40
  
  Item 6: Exhibits and Reports on Form 8-K                                    40
  
                                         2
  PART I - FINANCIAL INFORMATION
  
  Item 1:   Financial Statements (unaudited)
  
                                                                       Page Number
  
  (1)  Consolidated Balance Sheets as of September 30,1999 and
       December 31, 1998.................................................... 4
  
  (2)  Consolidated Statements of Operations for three and
       nine months ended September 30, 1999 and 1998........................ 5
  
  (3)  Consolidated Statements of Cash Flows for the nine
       months ended September 30, 1999 and 1998............................. 7
  
  (4)  Notes to Consolidated Financial Statements........................... 9
  
                                         3
  Republic First Bancorp, Inc. and Subsidiaries
                             Consolidated Balance Sheets
                   as of September 30, 1999 and December 31, 1998
                                     (unaudited)
  ASSETS:                                                                            1999                    1998
                                                                                -------------           -------------
  Cash and due from banks                                                       $  15,302,000           $  18,169,000
  Interest  bearing deposits with banks                                             6,024,000                 126,000
                                                                                -------------           -------------
      Total cash and cash equivalents                                              21,326,000              18,295,000
  
  Securities available for sale, at fair value                                    177,179,000             160,554,000
  Securities held to maturity at amortized cost                                    16,121,000              16,998,000
      (fair value of $16,128,000 and $16,982,000,
       respectively)
  
  Loans receivable, (net of allowance for loan losses of
       $3,051,000 and $2,395,000, respectively)                                   326,131,000             299,564,000
  Loans held for sale                                                                 447,000               7,204,000
  Premises and equipment, net                                                       4,850,000               3,990,000
  Real estate owned                                                                   643,000                 718,000
  Accrued income and other assets                                                  12,040,000               9,038,000
                                                                                -------------           -------------
  
  Total Assets                                                                  $ 558,737,000           $ 516,361,000
                                                                                =============           =============
  
  LIABILITIES AND SHAREHOLDERS' EQUITY:
  
  Liabilities:
  
  Deposits:
  Demand - non-interest-bearing                                                 $  27,793,000           $  32,537,000
  Demand - interest-bearing                                                        12,598,000              20,155,000
  Money market and savings                                                         47,939,000              35,250,000
  Time under $100,000                                                             152,953,000             169,792,000
  Time over $100,000                                                               51,250,000              25,350,000
                                                                                -------------           -------------
      Total Deposits                                                              292,533,000             283,084,000
  
  Other borrowed funds                                                            222,363,000             188,009,000
  Accrued expenses and other liabilities                                            8,184,000               8,646,000
                                                                                -------------           -------------
  
  Total Liabilities                                                               523,138,000             479,739,000
                                                                                -------------           -------------
  
  Shareholders' Equity:
  
  Common stock par value $.01 per share, 20,000,000 shares authorized;
      shares issued and outstanding 6,111,705 as of September 30, 1999
      and 5,883,188 as of December 31, 1998                                            63,000                  59,000
  Treasury stock at cost (175,172 and 219,604 shares
      at September 30, 1999 and December 31, 1998,
      respectively)                                                                (1,542,000)             (1,927,000)
  Additional paid in capital                                                       31,893,000              26,510,000
  Retained earnings                                                                10,133,000              11,996,000
  Accumulated other comprehensive income/(loss), net of tax                        (4,890,000)                (16,000)
                                                                                -------------           -------------
  Total Shareholders' Equity                                                       35,657,000              36,622,000
                                                                                -------------           -------------
  Total Liabilities and Shareholders' Equity                                    $ 558,737,000           $ 516,361,000
                                                                                =============           =============
  (See notes to consolidated financial statements)
  
                                         4
  Republic First Bancorp, Inc. and Subsidiaries
                        Consolidated Statements of Operations
                  For the Three and Nine Months Ended September 30,
                                     (unaudited)
  Quarter to Date                      Year to Date
                                                          September 30,                      September 30,
                                                          -------------                      -------------
                                                     1999              1998              1999              1998
                                                ------------      ------------      ------------      ------------
  Interest income:
     Interest and fees on loans                 $  6,855,000      $  5,737,000      $ 19,670,000      $ 15,841,000
     Interest on federal funds sold                   16,000             7,000            18,000           214,000
     Interest on investments                       3,243,000         3,070,000         9,311,000         9,530,000
                                                ------------      ------------      ------------      ------------
     Total interest income                        10,114,000         8,814,000        28,999,000        25,585,000
                                                ------------      ------------      ------------      ------------
  
  Interest expense:
     Demand interest-bearing                          37,000            84,000           149,000           256,000
     Money market and savings                        433,000           322,000         1,234,000           861,000
     Time over $100,000                              698,000           373,000         1,351,000         1,155,000
     Time under $100,000                           2,202,000         2,609,000         7,035,000         7,496,000
     Other borrowed funds                          2,882,000         2,031,000         8,161,000         5,557,000
                                                ------------      ------------      ------------      ------------
     Total interest expense                        6,252,000         5,419,000        17,930,000        15,325,000
                                                ------------      ------------      ------------      ------------
  Net interest income                              3,862,000         3,395,000        11,069,000        10,260,000
                                                ------------      ------------      ------------      ------------
  Provision for loan losses                          210,000            80,000           670,000           290,000
                                                ------------      ------------      ------------      ------------
  Net interest income after provision
      for loan losses                              3,652,000         3,315,000        10,399,000         9,970,000
                                                ------------      ------------      ------------      ------------
  
  Non-interest income:
      Service fees                                   325,000           143,000           653,000           347,000
      Tax Refund Program revenue                           0                 0         2,715,000         2,383,000
      Other income                                    29,000            31,000            80,000            82,000
                                                ------------      ------------      ------------      ------------
                                                     354,000           174,000         3,448,000         2,812,000
  Non-interest expense:
     Salaries and benefits                         1,430,000         1,390,000         4,112,000         3,788,000
     Occupancy/Equipment                             460,000           369,000         1,305,000         1,101,000
     Loss from Mortgage Affiliate                          0         1,032,000                 0         1,145,000
     Other expenses                                  898,000         1,057,000         2,846,000         2,347,000
                                                ------------      ------------      ------------      ------------
                                                   2,788,000         3,848,000         8,263,000         8,381,000
                                                ------------      ------------      ------------      ------------
  
  Income/(loss) before income taxes                1,218,000          (359,000)        5,584,000         4,401,000
                                                ------------      ------------      ------------      ------------
  Provision for income taxes/(benefit)               403,000          (118,000)        1,839,000         1,457,000
     Income before cumulative effect of a
       change in accounting principle                815,000          (241,000)        3,745,000         2,944,000
     Cumulative effect of changes in
       accounting principle (Note 5)                       0           421,000           (63,000)          421,000
                                                ------------      ------------      ------------      ------------
  Net income                                    $    815,000      $    180,000      $  3,682,000      $  3,365,000
                                                ============      ============      ============      ============
  
  Net income per share-basic:
     Income before cumulative effect of a
       change in accounting principle           $       0.13     ($       0.04)     $       0.62      $       0.49
     Cumulative effect of changes in
       accounting principle (Note 5)                    0.00              0.07             (0.01)             0.07
                                                ------------      ------------      ------------      ------------
  Net Income                                    $       0.13      $       0.03      $       0.61      $       0.56
                                                ============      ============      ============      ============
  5
  Quarter to Date                      Year to Date
                                                          September 30,                      September 30,
                                                          -------------                      -------------
                                                     1999              1998              1999              1998
                                                ------------      ------------      ------------      ------------
  Net income per share-diluted:
     Income before cumulative effect of a
       change in accounting principle           $       0.13     ($       0.04)     $       0.60      $       0.45
     Cumulative effect of changes in
       Accounting principle (Note 5)                    0.00              0.07             (0.01)             0.07
                                                ------------      ------------      ------------      ------------
  Net Income                                    $       0.13      $       0.03      $       0.59      $       0.52
                                                ============      ============      ============      ============
  (See notes to consolidated financial statements)
  
                                         6
  Republic First Bancorp, Inc. and Subsidiaries
                        Consolidated Statements of Cash Flows
                      For the Nine Months Ended September 30,
                                    (unaudited)
  1999               1998
                                                                                -------------      -------------
  Cash flows from operating activities:
       Net income                                                               $   3,682,000      $   3,365,000
       Adjustments to reconcile net income
            to net cash provided by operating activities
        Provision for loan losses                                                     670,000            290,000
        Write down of other real estate owned                                          75,000                  0
        Depreciation and amortization                                                 688,000            482,000
        Proceeds from sale of trading securities                                            0         35,143,000
        Loss from Mortgage affiliate                                                        0         (1,145,000)
        Decrease in loans held for sale                                             6,757,000                  0
        Increase in accrued income
           and other assets                                                          (241,000)        (3,860,000)
        (Decrease)/increase in accrued expenses
           and other liabilities                                                     (462,000)         2,107,000
                                                                                -------------      -------------
       Net cash provided by/(used) in operating activities                         11,169,000        (36,382,000)
                                                                                -------------      -------------
  Cash flows from investing activities:
       Purchase of securities:
  Available for Sale                                                              (44,978,000)      (116,664,000)
             Held to Maturity                                                      (5,418,000)        (4,083,000)
       Proceeds from principal receipts, sales, and
             maturities of securities                                              27,080,000         46,021,000
       Net increase in loans                                                      (27,320,000)       (55,258,000)
       Net increase in deferred fees                                                   77,000            466,000
       Purchase of other real estate owned                                                  0                  0
       Premises and equipment expenditures                                         (1,326,000)        (1,743,000)
                                                                                -------------      -------------
  
       Net cash used in investing activities                                      (51,885,000)      (131,261,000)
                                                                                -------------      -------------
  
  Cash flows from financing activities:
       Net increase/(decrease) in demand, money
            market, and savings deposits                                              388,000          1,414,000
       Net increase/(decrease) in borrowed funds less than 90 days                (18,246,000)       (12,476,000)
       Net increase in borrowed funds greater than 90 days                         52,600,000         88,700,000
       Net increase (decrease) in time deposits                                     9,061,000         21,451,000
       Net proceeds from issued common stock                                                0                  0
       Purchase of Treasury Stock                                                  (1,028,000)           (17,000)
       Net proceeds from exercise of stock options                                    972,000             81,000
                                                                                -------------      -------------
       Net cash provided by financing activities                                   43,747,000         99,153,000
                                                                                -------------      -------------
  (Decrease)/increase in cash and cash equivalents                                  3,031,000          4,274,000
  Cash and cash equivalents, beginning of period                                   18,295,000          6,326,000
                                                                                -------------      -------------
  Cash and cash equivalents, end of period                                      $  21,326,000      $  10,600,000
                                                                                =============      =============
  Supplemental disclosure:
       Interest paid                                                            $  17,862,000      $   8,901,000
                                                                                =============      =============
       Taxes paid                                                               $   2,075,000      $           0
                                                                                =============      =============
  
  Non-cash transactions:
         Net transfers of loans to real estate owned                                        0            718,000
         Change in unrealized gain/(loss) on securities available for sale,
          net of tax                                                               (4,874,000)         1,059,000
         Change in deferred tax liability due to change in unrealized gain
        on securities available for sale                                                    0           (348,000)
  7
  Transfer of securities from held to maturity to available for
       sale and trading                                                                     0      $ 138,861,000
                                                                                =============      =============
  (See notes to consolidated financial statements)
  
                                         8
  REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
  Note 1:  Organization
           Republic First Bancorp,  Inc. (the  "Company"),  is a two-bank  holding
  company  organized  and  incorporated  under  the  laws of the  Commonwealth  of
  Pennsylvania.  Its  wholly-owned  subsidiary,  First Republic Bank (the "Bank"),
  offers a variety of banking  services to individuals  and businesses  throughout
  the Greater  Philadelphia and South Jersey area through its offices and branches
  in Philadelphia and Montgomery Counties.
  
           The Company  opened a second  wholly-owned  banking  subsidiary  in the
  state of Delaware.  The newly formed Bank,  Republic First Bank of Delaware (the
  "Delaware  Bank") is a Delaware  State  chartered  Bank,  located at  Brandywine
  Commons II, Concord Pike and Rocky Run Parkway in Brandywine,  New Castle County
  Delaware.  The Delaware Bank opened for business on June 1, 1999 and offers many
  of the same services and financial products as First Republic Bank, described in
  Part I, Item I of the Company's 1998 Form 10-K.
  
           In the opinion of the Company,  the  accompanying  unaudited  financial
  statements  contain  all  adjustments   (including  normal  recurring  accruals)
  necessary to present fairly the financial position as of September 30, 1999, the
  results of operations for the three and nine months ended September 30, 1999 and
  1998, and the cash flows for the nine months ended  September 30, 1999 and 1998.
  These  interim  financial  statements  have been  prepared  in  accordance  with
  instructions  to  Form  10-Q.  The  interim  results  of  operations  may not be
  indicative  of the results of  operations  for the full year.  The  accompanying
  unaudited financial  statements should be read in conjunction with the Company's
  audited financial statements,  and the notes thereto,  included in the Company's
  1998 Form 10-K filed with the Securities and Exchange Commission.
  
  Note 2:  Summary of Significant Accounting Policies:
  
       Principles of Consolidation:
  
           The  consolidated  financial  statements  of the  Company  include  the
  accounts of Republic  First  Bancorp,  Inc. and its  wholly-owned  subsidiaries,
  First  Republic Bank and Republic First Bank of Delaware,  (the  "Banks").  Such
  statements have been presented in accordance with generally accepted  accounting
  principles and general  practice  within the banking  industry.  All significant
  intercompany  accounts and transactions have been eliminated in the consolidated
  financial statements.
  
       Risks and Uncertainties and Certain Significant Estimates:
  
           The earnings of the Company  depend on the  earnings of the Banks.  The
  Banks are 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 operations of the
  Banks are  subject to risks and  uncertainties  surrounding  their  exposure  to
  change in the interest rate environment.
  
           Additionally, the Company has derived income from First Republic Bank's
  participation  in a program (the "Tax Refund  Program") which  indirectly  funds
  consumer  loans  collateralized  by federal  income tax  refunds,  and  provides
  accelerated check refunds.  Approximately $2.7 million and $2.4 million in gross
  revenues  were  collected on these loans during the nine months ended  September
  30, 1999 and 1998,  respectively.  The Bank will not  participate in the program
  beyond 1999.
  
                                         9
  The  preparation of financial  statements in conformity  with generally
  accepted accounting principles requires management to make significant estimates
  and assumptions  that affect the reported  amounts of assets and liabilities and
  disclosures of contingent assets and liabilities at the date of the consolidated
  financial  statements and the reported  amounts of revenues and expenses  during
  the reporting period. Actual results could differ from those estimates.
  
           Significant  estimates  are  made  by  management  in  determining  the
  allowance for loan losses, carrying values of real estate owned and deferred tax
  assets.  Consideration  is given to a variety  of factors  in  establishing  the
  allowance   for   loan   losses,    including   current   economic   conditions,
  diversification  of the  loan  portfolio,  delinquency  statistics,  results  of
  internal loan reviews,  borrowers' perceived financial and managerial strengths,
  the adequacy of underlying collateral, if collateral dependent, or present value
  of future cash flows and other  relevant  factors.  Since the allowance for loan
  losses and carrying value of real estate owned is dependent,  to a great extent,
  on the  general  economy  and other  conditions  that may be beyond  the  Banks'
  control,  it is at least reasonably possible that the estimates of the allowance
  for loan losses and the  carrying  values of the real estate  owned could differ
  materially in the near term.
  
       Cash and Cash Equivalents:
  
           For purposes of the statements of cash flows, the Company considers all
  cash and due from banks,  interest-bearing deposits with an original maturity of
  ninety days or less and federal funds sold to be cash and cash equivalents.  The
  Bank is required to maintain  certain average reserve balances as established by
  the  Federal  Reserve  Board.  The  amounts of those  balances  for the  reserve
  computation  periods which include September 30, 1999 and December 31, 1998 were
  $989,000 and $872,000,  respectively.  These requirements were satisfied through
  the  restriction  of vault cash and  balances  at the  Federal  Reserve  Bank of
  Philadelphia.
  
       Investment Securities:
  
           Debt and equity  securities are classified in one of three  categories,
  as applicable,  and accounted for as follows:  debt securities which the Company
  has the  positive  intent and  ability to hold to  maturity  are  classified  as
  "securities  held to  maturity"  and are reported at  amortized  cost;  debt and
  equity  securities  that are bought and sold in the near term are  classified as
  "trading" and are reported at fair market value with unrealized gains and losses
  included in earnings;  and debt and equity  securities  not classified as either
  held to  maturity  and/or  trading  securities  are  classified  as  "securities
  available  for sale" and are reported at fair market  value with net  unrealized
  gains and losses,  net of tax, reported as a separate component of shareholders'
  equity.  Securities are adjusted for  amortization  of premiums and accretion of
  discounts  over  the  life of the  related  security  on a level  yield  method.
  Securities available for sale include those management intends to use as part of
  its asset-liability matching strategy or that may be sold in response to changes
  in interest  rates or other  factors.  Realized  gains and losses on the sale of
  investment securities are recognized using the specific  identification  method.
  As described in Note 5, the Company  transferred  $106.4  million of  securities
  from held to maturity to available for sale and $32.5 million of securities from
  held to maturity to the trading  category  during the third quarter of 1998. The
  Company sold the securities transferred to the trading category during the third
  quarter and realized a gain on the sale of these securities of $421,000,  net of
  income taxes, as a cumulative effect of a change in accounting.  The Company did
  not realize any gains on trading  securities prior to or after the third quarter
  of  1998.  Additionally,  the  Bank  had no  securities  classified  as  trading
  securities, as of the end of any period reported herein.
  
                                         10
  Loans:
  
           Loans are stated at the principal amount  outstanding,  net of deferred
  loan  fees and  costs.  The  amortization  of  deferred  loan fees and costs are
  accounted for by a method which  approximates  level yield. Any unamortized fees
  or costs associated with loans which pay down in full are immediately recognized
  in  the  Company's  operations.  Income  is  accrued  on  the  principal  amount
  outstanding.
  
           Loans,   including   impaired  loans,   are  generally   classified  as
  non-accrual  if they are past due as to  maturity  or  payment of  principal  or
  interest for a period of more than 90 days,  unless such loans are  well-secured
  and in the process of collection.  Loans that are on a current payment status or
  past due less than 90 days may also be classified as non-accrual if repayment in
  full of principal and/or interest is in doubt.
  
           Loans may be returned to accrual status when all principal and interest
  amounts  contractually  due  are  reasonably  assured  of  repayment  within  an
  acceptable  period  of  time,  and  there is a  sustained  period  of  repayment
  performance (generally a minimum of six months) of interest and principal by the
  borrower, in accordance with the contractual terms.
  
           While a loan is  classified as  non-accrual  or as an impaired loan and
  the future collectibility of the recorded loan balance is doubtful,  collections
  of interest  and  principal  are  generally  applied as a reduction to principal
  outstanding.  When the future  collectibility  of the  recorded  loan balance is
  expected, interest income may be recognized on a cash basis. In the case where a
  non-accrual  loan had been partially  charged off,  recognition of interest on a
  cash basis is limited to that which would have been  recognized  on the recorded
  loan balance at the contractual  interest rate. Cash interest receipts in excess
  of that amount are recorded as recoveries to the allowance for loan losses until
  prior charge-offs have been fully recovered.
  
       Loans Held for Sale:
  
           Loans  held for sale are  carried  at the  lower of  aggregate  cost or
  market value. The Bank currently  services all loans classified as held for sale
  and servicing is released when such loans are sold. Market values were estimated
  using the present  value of the  estimated  cash  flows,  using  interest  rates
  currently  being  offered for loans with  similar  terms to borrowers of similar
  credit  quality.  Gains  and  losses  on loans  held for  sale are  included  in
  non-interest  income. The Company did not realize any gains or losses during the
  first, second and third quarters of 1999 or 1998.
  
       Allowance for Loan Losses:
  
           The  allowance for loan losses is  established  through a provision for
  loan losses charged to operations.  Loans are charged against the allowance when
  management  believes that the  collectibility of the loan principal is unlikely.
  Recoveries on loans previously charged off are credited to the allowance.
  
           The allowance is an amount that management believes will be adequate to
  absorb known and inherent loan losses on existing loans, based on evaluations of
  the collectibility of loans and prior loan loss experience. The evaluations take
  into  consideration such factors as changes in the nature and volume of the loan
  portfolio,  overall  portfolio  quality,  review of specific  problem loans, the
  results  of  the  most  recent  regulatory   examination  and  current  economic
  conditions and trends that may affect the borrower's ability to pay.
  
           The Company  considers  residential  mortgage  loans with balances less
  than $250,000 and consumer loans,  including home equity lines of credit,  to be
  small  balance   homogeneous  loans.  These  loan  categories  are  collectively
  evaluated for impairment. Jumbo mortgage loans, those with balances greater than
  $250,000,  commercial  business  loans  and  commercial  real  estate  loans are
  individually  measured  for  impairment  based on the present  value of expected
  
                                         11
  future cash flows discounted at the historical  effective  interest rate, except
  that all collateral  dependent  loans are measured for  impairment  based on the
  fair market value of the collateral.
  
       Premises and Equipment:
  
           Premises and equipment are stated at cost less accumulated depreciation
  and amortization. Depreciation of furniture and equipment is calculated over the
  estimated  useful life of the asset using the  straight-line  method.  Leasehold
  improvements  are amortized over the shorter of their estimated  useful lives or
  terms of their respective leases, using the straight-line method.
  
           Repairs and maintenance are charged to current  operations as incurred,
  and renewals and betterments are capitalized.
  
       Real Estate Owned:
  
           Real estate owned  consists of  foreclosed  assets and is stated at the
  lower of cost or estimated  fair market value less  estimated  costs to sell the
  property.  Costs to maintain other real estate owned, or  deterioration in value
  of the  properties  are  recognized  as period  expenses.  There is no valuation
  allowance  associated  with the  Company's  other real estate  portfolio for the
  periods presented.
  
       Income Taxes:
  
           Deferred  income taxes are  established  for the temporary  differences
  between the financial  reporting basis and the tax basis of the Company's assets
  and  liabilities  at the tax rates  expected to be in effect when the  temporary
  differences  are  realized  or settled.  In  addition,  a deferred  tax asset is
  recorded to reflect the future benefit of net operating loss carryforwards.  The
  deferred  tax assets may be reduced by a valuation  allowance  if it is probable
  that some portion or all of the deferred tax assets will not be realized.
  
       Earnings Per Share:
  
           Earnings per share ("EPS") 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  ("CSE").
  Common stock  equivalents  consist of dilutive stock options granted through the
  Company's  stock option plan.  The following  table is a  reconciliation  of the
  numerator and  denominator  used in  calculating  basic and diluted EPS.  Common
  stock  equivalents which are anti-dilutive are not included for purposes of this
  calculation.  At September 30, 1999 and 1998, there were 138,610 and 54,301 CSEs
  which were  antidilutive,  respectively.  These  shares may be  dilutive  in the
  future.
  
           The Company paid a 10% stock  dividend on March 18, 1999 as well as two
  six for five stock splits  effected in the form of a 20% stock dividend on March
  27, 1998 and April 15, 1997. All relevant  financial  data contained  herein has
  been  retroactively  restated as if the  dividend and splits had occurred at the
  beginning of each period presented herein.
  
                                         12
  The  following  table is a comparison of EPS for the three and nine months
  ended September 30, 1999 and 1998.
  Quarter to Date                              Year to Date
                                                  1999                    1998                 1999                 1998
                                          ---------------------------------------------------------------------------------------
  Income before cumulative effect of a
  change in accounting principle
  (numerator for both calculations)          $815,000             ($241,000)            $3,745,000         $2,943,000
                                          ---------------------------------------------------------------------------------------
  
                                             Shares   Per Share     Shares   Per Share    Shares   Per Share  Shares   Per Share
                                          ---------   ---------     ------   ---------    ------   ---------  ------   ---------
  Weighted average shares
     For period                             6,086,569             6,100,958              5,971,786          6,085,817
  Basic EPS                                             $ 0.13                ($ 0.04)              $ 0.63              $ 0.49
  Add common stock equivalents
    Representing dilutive stock options       175,525               372,819                267,689            411,634
                                            ---------             ---------              ---------          ---------
  Effect on basic EPS and CSE                            (0.00)                  0.00                (0.03)              (0.04)
                                                       -------                -------               ------              ------
  Equals total weighted average
       Shares and CSE (diluted)             6,262,094             6,473,777              6,239,475          6,497,451
                                            =========             =========              =========          =========
  Diluted EPS                                          $  0.13                ($ 0.04)              $ 0.60              $ 0.45
                                                       =======                =======               ======              ======
  The impact of the cumulative effect of a change in accounting principle
  on the  quarter-to-date  and  the  year-to-date  1998  EPS was to  increase  the
  numerator  by $421,000  and the  resulting  basic and diluted EPS by $0.07.  The
  impact  of the  cumulative  effect of a change in  accounting  principle  on the
  year-to-date  1999 EPS was to lower the  numerator by $63,000 and the  resulting
  basic and diluted EPS by $0.01.
  
        Treasury Stock
  
           Effective  June 21,  1999,  the  Company's  stock  repurchase  program,
  originally  announced on August 24, 1998 and  established for the period through
  and  including  June 30,  1999 has been  extended  to  December  31,  1999.  The
  aggregate  amount  of stock  to be  repurchased  will be  determined  by  market
  conditions,  but will not exceed 4.9% of the  Company's  issued and  outstanding
  stock, or  approximately  297,000 shares.  As of September 30, 1999,  there were
  54,916 shares repurchased pursuant to rule 10b-18 of the Securities and Exchange
  Commission.  There were also an  additional  279,088  shares  purchased in block
  transaction  purchases,  that are not  included as part of the stock  repurchase
  program specified under rule 10b-18. The exercise of 158,832 options were funded
  from such block transaction purchases.
  
        Comprehensive Income
  
           The  following  table  displays net income and the  components of other
  comprehensive  income to arrive at total comprehensive  income. For the Company,
  the only  components  of other  comprehensive  income are those  related to SFAS
  Statement No. 115 available for sale securities.
  
                                         13
  (dollar amounts in thousands)                              Three months ended        Nine months ended
                                                                September 30,            September 30,
                                                            --------------------     --------------------
                                                              1999         1998        1999         1998
                                                            -------      -------     -------      -------
  Net income                                                $   815      $   180     $ 3,682      $ 3,364
  
  Other comprehensive income, net of tax:
      Unrealized gains/(losses) on securities:
           Unrealized holding losses during the period       (1,545)         705      (4,874)         703
           Less:  Reclassification adjustment for gains
                Included in net income                            0            0           0            0
                                                            -------      -------     -------      -------
  Comprehensive (loss)/income                               ($  730)     $   885     ($1,192)     $ 4,067
                                                            =======      =======     =======      =======
  Note 3:  Legal Proceedings
  
           The Company and the Banks are from time to time a party  (plaintiff  or
  defendant)  to lawsuits  that are in the normal  course of  business.  While any
  litigation  involves  an element of  uncertainty,  management,  after  reviewing
  pending actions with its legal counsel,  is of the opinion that the liability of
  the Company and the Banks,  if any,  resulting from such actions will not have a
  material  effect on the  financial  condition  or results of  operations  of the
  Company and the Banks.
  
  Note 4:  Recent Accounting Pronouncements:
  
        Accounting for Derivative Instruments and Hedging Activities
  
           In June 1998,  the FASB  issued  Statement  No.  133,  "Accounting  for
  Derivative  Instruments  and Hedging  Activities"  ("Statement  No. 133").  This
  Statement  standardizes  the accounting for  derivative  instruments,  including
  certain derivative  instruments embedded in other contracts,  and those used for
  hedging activities,  by requiring that an entity recognize those items as assets
  or liabilities  in the statement of financial  position and measure them at fair
  value. The statement categorized derivatives used for hedging purposes as either
  fair value hedges, cash flow hedges, foreign currency fair value hedges, foreign
  currency cash flow hedges, or hedges of certain foreign currency exposures.  The
  statement  generally  provides for matching of gain or loss  recognition  on the
  hedging  instrument with the recognition of the changes in the fair value of the
  hedged asset or liability that are  attributable  to the hedged risk, so long as
  the hedge is effective. Prospective application of Statement No. 133, as amended
  by Statement No. 137, is required for all fiscal years  beginning after June 15,
  2000, however earlier application is permitted.  Currently, the Company does not
  use any derivative  instruments,  nor does it engage in any hedging  activities.
  The Company  adopted  Statement No. 133 effective July 1, 1998,  which permitted
  the  Company  to  transfer   certain   securities   originally   designated   as
  held-to-maturity,   to  available-for-sale  and  trading.  A  portion  of  these
  securities  were  subsequently  sold  during  the  third  quarter  of  1998.  In
  accordance  with  Statement  No.  133,  the Company  recorded  the gross gain of
  $628,000  as a  cumulative  change in  accounting  principle,  net of a $207,000
  provision for income tax.
  
                                         14
  Reporting on the Costs of Start-Up Activities
  
           In April 1998, the American  Institute of Certified Public  Accountants
  issued Statement of Position 98-5, Reporting on the Costs of Start-Up Activities
  ("SOP 98-5").  This statement  requires costs of startup  activities,  including
  organization  costs,  to be expensed as incurred.  SOP 98-5 is effective for the
  Company's  financial  statements for fiscal years  beginning  after December 15,
  1998.  As of  December  31,  1998 the Company  had  deferred  costs  relating to
  start-up activities of $94,000,  remaining in the balance of other assets in the
  Consolidated  Balance Sheets.  The Company adopted SOP 98-5 effective January 1,
  1999, and accordingly,  expensed $94,000 of costs of start-up  activities in the
  first quarter of 1999.
  
  Note 5:  Cumulative Effect of a Change in Accounting Principle
  
  The  Company   adopted  SFAS  Statement  No.  133   "Accounting  for  Derivative
  Instruments  and  Hedging  Activities"  on July 1, 1998.  As  permitted  by SFAS
  Statement No. 133, the Company  transferred  $106.4  million of securities  from
  held to maturity to available for sale and $32.5 million of securities from held
  to maturity to the trading category. The Company sold the securities transferred
  to the trading category during the third quarter 1998 and realized a gain on the
  sale of these  securities  of  $421,000,  net of income  taxes,  as a cumulative
  effect of a change in accounting principle. The Company sold these securities as
  part of a  portfolio-restructuring  program, which reduced the Company's risk of
  prepayment on its mortgage-backed  securities portfolio due to the sharp decline
  in interest rates during the third quarter of 1998.
  
  During the first quarter of 1999, the Company expensed $94,000 which represented
  all of its  business  start-up  costs,  upon the  adoption of the  Statement  of
  Position  98-5  "Reporting  on the Costs of Startup  Activities",  on January 1,
  1999.  This  resulted  in a $63,000  charge,  net of an income  tax  benefit  of
  $31,000,  which was recorded as a  cummulative  effect of a change in accounting
  principle.
  
  Note 6:  Segment Reporting
  
           The Company's  reportable segments represent strategic  businesses that
  offer  different  products and  services.  The  segments are managed  separately
  because  each   segment  has  unique   operating   characteristics,   management
  requirements and marketing strategies.
  
           Republic  First  Bancorp has four  reportable  segments;  two community
  banking segments, its mortgage banking affiliate and the Tax Refund Program. The
  community  banking segments are primarily  comprised of the results of operation
  and  financial  condition of the Company's  wholly owned  banking  subsidiaries,
  First  Republic Bank and Republic First Bank of Delaware.  The mortgage  banking
  segment  represents  the  Company's  equity  investment  in  Fidelity  Bond  and
  Mortgage, a mortgage banking operation which services and originates residential
  mortgage loans.  Such investment is accounted for as an equity investment as the
  Company does not have control over Fidelity  Bond and  Mortgage.  The Tax Refund
  Program  enables the Bank to provide  accelerated  check  refunds  ("ACRs")  and
  refund  anticipation  loan ("RALs") on a national  basis to customers of Jackson
  Hewitt, a national tax preparation firm.
  
           The accounting policies of the segments are the same as those described
  in Note 2. The  Company  evaluates  the  performance  of the  community  banking
  segment  based upon income  before the  provision  for income  taxes,  return on
  equity and return on average assets.  The mortgage  banking segment is evaluated
  based upon  return on average  equity  and the Tax Refund  Program is  evaluated
  based upon income before provision for income taxes.
  
                                         15
  The  Tax  Refund  Program  and  the  mortgage  banking  affiliate  were
  developed  as business  segments to further  expand the  Company's  products and
  services offered to consumers and businesses.
  
           The segment information presented below reflects that the Delaware Bank
  originated in 1999, and that the Company's  investment in their Mortgage Banking
  Affiliate was reduced to $0 as of December 31, 1998.  Accordingly,  the Mortgage
  Banking Affiliate no longer represents a segment in 1999.
  As of and for the nine months ended September 30,
                                                                  (dollars in thousands)
  
                                                          1999                                         1998
                                       First                    Tax                First       Mortgage     Tax
                                     Republic     Delaware     Refund             Republic      Banking    Refund
                                       Bank         Bank      Program   Total       Bank       Affiliate   Program    Total
  External customer revenues:
  
      Interest Income                 $28,924        $75          $0    $28,999    $25,649         $0          $0    $25,649
  
      Other Income                        730          3       2,715      3,448        433          0       2,349      2,782
  
  Total external customer revenues     29,654         78       2,715     32,447     26,082          0       2,349     28,431
  
  Intersegment revenues:
  
      Interest Income                       0          0           0          0          0          0           0          0
  
      Other Income                         25          0           0         25          0          0           0          0
  
  Total intersegement revenues             25          0           0         25          0          0           0          0
  
  Total Revenue                        29,679         78       2,715     32,472     26,082          0       2,349     28,431
  
  Depreciation and amortization           672         16           0        688        482          0           0        482
  
  Other operating expenses -
  external                             25,557        443         150     26,150     22,299      1,145         105     23,549
  
  Other operating expenses -
  intersegment                              0         25           0         25          0          0           0          0
  
  Segment expenses                     26,229        484         150     26,863     22,781      1,145         105     24,031
  
  Segment income before taxes
  and extraordinary items              $3,425      ($406)     $2,565     $5,584     $3,301     (1,145)     $2,244     $4,400
  
  Segment assets                     $552,474     $6,263          $0   $558,737   $480,093       $662          $0   $480,755
  
  Capital expenditures                   $341       $986          $0     $1,327     $1,745         $0          $0     $1,745
  16
  As of and for the three months ended September 30,
                                                                     (dollars in thousands)
  
                                                            1999                                            1998
                                        First                      Tax                 First        Mortgage      Tax
                                      Republic       Delaware     Refund              Republic      Banking     Refund
                                        Bank           Bank      Program   Total        Bank       Affiliate    Program     Total
  External customer revenues:
  
     Interest Income                   $10,071          $43          $0     $10,114      $8,814           $0          $0       $8,814
  
     Other Income                          332            3           0         335         174            0           0          174
  
  Total external customer revenues      10,403           46           0      10,449       8,988            0           0        8,988
  
  Intersegment revenues:
  
     Interest Income                         0            0           0           0           0            0           0            0
  
     Other Income                           19            0           0          19           0            0           0            0
  
  Total intersegement revenues              19            0           0          19           0            0           0            0
  
  Total Revenue                         10,422           46           0      10,468       8,988            0           0        8,988
  
  Depreciation and amortization            192           13           0         205         267            0           0          267
  
  Other operating expenses -
  external                               8,766          260           0       9,026       8,048        1,032           0        9,080
  
  Other operating expenses -
  intersegment                               0           19           0          19           0            0           0            0
  
  Segment expenses                       8,958          292           0       9,250       8,315        1,032           0        9,347
  
  Segment income before taxes and
  extraordinary items                   $1,464        ($246)         $0      $1,218        $673      ($1,032)         $0        ($359)
  
  Segment assets                      $552,474       $6,263          $0    $558,737    $480,093         $662          $0     $480,755
  
  Capital expenditures                    $238         $149          $0        $387        $495           $0          $0         $495
  17
  ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
           The  following  is   management's   discussion   and  analysis  of  the
  significant changes in the Company's results of operations, financial condition,
  and capital  resources  presented  in the  accompanying  consolidated  financial
  statements of Republic First  Bancorp,  Inc. This  discussion  should be read in
  conjunction   with  the  accompanying   notes  to  the  consolidated   financial
  statements.
  
           Certain   statements   in  this   document  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  cas 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 no 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.  Readers should carefully review the risk factors  described in
  other  documents  the Company  files from time to time with the  Securities  and
  Exchange  Commission,  including the Company's  Annual Report on Form 10-KSB for
  the year ended December 31, 1998,  Quarterly  Reports on Form 10-Q, filed by the
  Company in 1999,  and any Current  Reports on Form 8-K filed by the Company,  as
  well as similar filings.
  
  Quarter Ended September 30, 1999 Compared to September 30, 1998
  
  Results of Operations:
  
  Overview
  
           The  Company's  net income  increased  $635,000,  to  $815,000  for the
  quarter ended  September 30, 1999, from $180,000 for the quarter ended September
  30,  1998.  This  increase  was  primarily  the  result  of a write  down of the
  Company's  equity  investment in its mortgage  banking  affiliate of $1,032,000,
  partially offset by gains recognized on trading  securities of $628,000,  during
  the third  quarter of 1998.  Diluted  earnings  per share for the quarter  ended
  September 30, 1999 was $0.13 compared to $0.03,  for the quarter ended September
  30, 1998, primarily due to the increase in net income.
  
  Analysis of Net Interest Income
  
           Historically,  the Company's  earnings have depended primarily upon the
  Bank'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 Company's net interest income increased $467,000, or 13.8%, to $3.9
  million  for the quarter  ended  September  30,  1999 from $3.4  million for the
  quarter  ended  September  30, 1998.  The  increase in net  interest  income was
  
                                         18
  primarily due to an increase in average interest-earning assets of $87.7 million
  due  primarily to increased  commercial  and real estate loan  production.  This
  increase  was  partially  offset by a decrease in the  average  rate of interest
  earning assets of 40 basis points,  from 8.04% as of September 30, 1998 to 7.64%
  as of  September  30, 1999.  This  decrease was mainly due to the sale of higher
  yielding investment securities during the third quarter of 1998.
  
           The Company's total interest income  increased $1.3 million,  or 14.7%,
  to $10.1 million for the quarter ended  September 30, 1999 from $8.8 million for
  the quarter ended September 30, 1998.  Interest and fees on loans increased $1.1
  million, or 19.5%, to $6.9 million for the quarter ended September 30, 1999 from
  $5.7 million for the quarter  ended  September  30, 1998.  This increase was due
  primarily to an increase in average  loans  outstanding  for the period of $72.6
  million. Interest and dividend income on securities increased $173,000, or 5.6%,
  to $3.2 million for the quarter  ended  September 30, 1999 from $3.1 million for
  the quarter  ended  September 30, 1998.  This increase in investment  income was
  primarily the result of an increase in the average  balance of securities  owned
  by $14.3 million,  or 7.8% to $197.7 million for the quarter ended September 30,
  1999 from $183.4 million for the quarter ended September 30, 1998.
  
           The Company's total interest expense increased  $833,000,  or 15.4%, to
  $6.3 million for the quarter ended  September 30, 1999 from $5.4 million for the
  quarter ended  September  30, 1998.  This increase was due to an increase in the
  volume of average  interest-bearing  liabilities of $82.9 million,  or 21.0%, to
  $477.0 million for the quarter ended  September 30, 1999 from $394.2 million for
  the quarter ended September 30, 1998. The average rate paid on  interest-bearing
  liabilities  decreased 31 basis points to 5.20% for the quarter ended  September
  30, 1999 from 5.51% for the quarter  ended  September  30, 1998 due primarily to
  the decrease in average rates paid on other borrowed funds and deposit accounts.
  
           Interest  expense on time  deposits  decreased  $82,000  or 2.7%.  This
  decrease  was  primarily  due to a  decrease  in the  average  rate paid on time
  deposit  of 38  basis  points  from  6.17%  at  September  30,  1998 to 5.79% at
  September 30, 1999. The average volume of certificates  of deposit  increased by
  $4.8  million,  or 2.4%, to $198.6  million for the quarter ended  September 30,
  1999 from $193.8 million for the quarter ended September 30, 1998.
  
           Interest expense on FHLB advances and overnight federal funds purchased
  was $2.9  million  for the quarter  ended  September  30, 1999  compared to $2.0
  million for the quarter ended  September  30, 1998.  This increase was due to an
  increase  in the  average  volume of other  borrowed  funds of $70.3  million to
  $219.0 million for the quarter ended  September 30, 1999 from $148.7 million for
  the quarter ended  September 30, 1998.  This increase was partially  offset by a
  decrease in the  average  rate of interest  paid on other  borrowed  funds of 26
  basis points from 5.48% at September 30, 1998 to 5.22% at September 30, 1999. At
  September 30, 1999, FHLB advances funded purchases of securities and origination
  of loans as part of an ongoing  leveraged  funding program  designed to increase
  earnings while also managing interest rate risk and liquidity.
  
  Provision for Loan Losses
  
           The  provision  for loan losses is charged to  operations  to bring the
  total allowance for loan losses to a level considered appropriate by management.
  The level of the allowance  for loan losses is  determined  by management  based
  upon its  evaluation of the known as well as inherent risks within the Company's
  loan portfolio. Management's periodic evaluation is based upon an examination of
  the portfolio, past loss experience, current economic conditions, the results of
  the  most  recent  regulatory  examinations  and  other  relevant  factors.  The
  provision  for loan  losses was  $210,000  and $80,000  for the  quarters  ended
  September 30, 1999 and 1998, respectively.  This increase is due primarily to an
  increase  in loans  outstanding  of $62.2  million  from  September  30, 1998 to
  September 30, 1999.
  
                                         19
  Non-Interest Income
  
           Total  non-interest  income  increased  $180,000  to  $354,000  for the
  quarter ended  September 30, 1999 from $174,000 for the quarter ended  September
  30, 1998. This increase is due primarily to an increase in service fee income of
  $182,000  related  to  deposit  accounts  as well as  non-recurring  pre-payment
  penalties and expired commitment fees on loans.
  
  Non-Interest Expenses
  
           Total non-interest expenses decreased $1.1 million, to $2.8 million for
  the quarter  ended  September  30, 1999 from $3.8 million for the quarter  ended
  September 30, 1998.  This decrease was due primarily to the Company's write down
  of its  equity  interest  in its  mortgage  banking  affiliate  during the third
  quarter of 1998 for $1,032,000.
  
           Salaries and benefits increased  $40,000,  or 2.9%, to $1.4 million for
  the quarter  ended  September  30, 1999 from $1.3 million for the quarter  ended
  September 30, 1998.  Occupancy  and equipment  expenses  increased  $91,000,  or
  24.7%,  to $460,000 for the quarter  ended  September 30, 1999 from $369,000 for
  the quarter ended  September 30, 1998.  These increases were due primarily to an
  increase in staff and costs  related to the opening of the Delaware Bank on June
  1, 1999.
  
           Other  non-interest  expense  decreased  $159,000,  to $898,000 for the
  quarter ended  September 30, 1999 from  $1,057,000  for the same period in 1998.
  This was mainly due to an decrease in legal  expenses  associated  with loans in
  workout, advertising costs and MAC expenses.
  
  Provision for Income Taxes
  
           The  provision  for income taxes  increased to $403,000 for the quarter
  ended  September  30,  1999 from a benefit of  $118,000  for the  quarter  ended
  September  30,  1998.  This  increase  is the result of the  increase in pre-tax
  income in 1999 from a pre-tax loss in 1998. In 1998 the Company  recorded income
  tax expense of $207,000 in connection with the Cumulative  Effect of a Change in
  Accounting Principle upon the adoption of SFAS Statement No. 133.
  
  Nine Months Ended September 30, 1999 Compared to September 30, 1998
  
  Results of Operations:
  
  Overview
  
           The Company's net income increased  $318,000,  or 9.5%, to $3.7 million
  for the nine months ended  September  30,  1999,  from $3.4 million for the nine
  months ended September 30, 1998.  Diluted earnings per share for the nine months
  ended September 30, 1999 was $0.59 compared to $0.52,  for the nine months ended
  September 30, 1998, due to the increase in net income.
  
  Analysis of Net Interest Income
  
           Historically,  the Company's  earnings have depended primarily upon the
  Banks' net interest income,  which is the difference  between interest earned on
  interest-earning assets and interest paid on interest-bearing  liabilities.  Net
  
                                         20
  interest  income is  affected  by  changes in the mix of the volume and rates of
  interest-earning assets and interest-bearing liabilities.
  
           The Company's net interest income increased $809,000, or 7.9%, to $11.1
  million for the nine months ended  September 30, 1999 from $10.3 million for the
  nine months ended  September 30, 1998.  The increase in net interest  income was
  primarily due to an increase in average interest-earning assets of $85.8 million
  due to increased  commercial and real estate loan production.  This increase was
  partially offset by a decrease in the average rate on interest earning assets of
  45 basis  points,  from 7.96% as of September  30, 1998 to 7.51% as of September
  30, 1999. This decrease was mainly due to the sale of higher yielding investment
  securities during the third quarter of 1998.
  
           The Company's total interest income  increased $3.4 million,  or 13.1%,
  to $29.0 million for the nine months ended September 30, 1999 from $25.6 million
  for the  nine  months  ended  September  30,  1998.  Interest  and fees on loans
  increased  $3.8  million,  or 24.2%,  to $19.7 million for the nine months ended
  September  30, 1999 from $15.8  million for the nine months ended  September 30,
  1998.  This  increase  was  due  primarily  to  an  increase  in  average  loans
  outstanding  for the period of $81.9  million.  Interest and dividend  income on
  securities  decreased  $219,000,  or 2.30%,  to $9.3 million for the nine months
  ended  September 30, 1999 from $9.6 million for the nine months ended  September
  30, 1998.  This  decrease in  investment  income was the result of a decrease in
  yield on the  securities  portfolio of 34 basis points due primarily to the sale
  of higher yielding investment securities during the third and fourth quarters of
  1998, partially offset by an increase in the average balance of securities owned
  of $5.3 million,  to $192.7 million for the nine months ended September 30, 1999
  from $187.4 million for the nine months ended September 30, 1998.
  
           The Company's total interest expense increased $2.6 million,  or 17.0%,
  to $17.9 million for the nine months ended September 30, 1999 from $15.3 million
  for the nine months  ended  September  30,  1998.  This  increase  was due to an
  increase in the volume of average interest-bearing liabilities of $88.3 million,
  or 23.7%,  to $460.2  million for the nine months ended  September 30, 1999 from
  $372.0  million for the nine months ended  September 30, 1998.  The average rate
  paid on interest-bearing  liabilities decreased 30 basis points to 5.21% for the
  nine  months  ended  September  30,  1999 from 5.51% for the nine  months  ended
  September  30, 1998 due primarily to the decrease in average rates paid on other
  borrowings and certain deposit accounts.
  
           Interest  expense on time  deposits  decreased  $266,000 or 3.1%.  This
  decrease was primarily due to a decrease in the average rate of interest paid on
  time  deposits  26 basis  points  from 6.12% at  September  30, 1998 to 5.86% at
  September 30, 1999. The average volume of certificates  of deposit  increased in
  the amount of $2.2 million, or 1.2%, to $191.2 million for the nine months ended
  September 30, 1999 from $189.0  million for the nine months ended  September 30,
  1998.
  
           Interest expense on FHLB advances and overnight federal funds purchased
  was $8.2 million for the nine months ended  September  30, 1999 compared to $5.6
  million for the nine months ended  September 30, 1998.  This increase was due to
  an increase in the average  volume of other  borrowed  funds of $74.4 million to
  $210.3 million for the nine months ended  September 30, 1999 from $135.9 million
  for the nine months ended September 30, 1998. This increase was partially offset
  by a decrease in the average rate of interest  paid on other  borrowed  funds 28
  basis points from 5.47% at September 30, 1998 to 5.19% at September 30, 1999. At
  September 30, 1999, FHLB advances funded purchases of securities and origination
  of loans as part of an ongoing  leveraged  funding program  designed to increase
  earnings while also managing interest rate risk and liquidity.
  
                                         21
  Provision for Loan Losses
  
           The  provision  for loan losses is charged to  operations  to bring the
  total allowance for loan losses to a level considered appropriate by management.
  The level of the allowance  for loan losses is  determined  by management  based
  upon its  evaluation of the known as well as inherent risks within the Company's
  loan portfolio. Management's periodic evaluation is based upon an examination of
  the portfolio, past loss experience, current economic conditions, the results of
  the  most  recent  regulatory  examinations  and  other  relevant  factors.  The
  provision  for loan losses was  $670,000  and $290,000 for the nine months ended
  September 30, 1999 and 1998, respectively.  This increase is due primarily to an
  increase  in loans  outstanding  of $62.9  million  from  September  30, 1998 to
  September 30, 1999.
  
  Non-Interest Income
  
           Total non-interest  income increased $666,000 or 23.9%, to $3.4 million
  for the nine months  ended  September  30,  1999 from $2.8  million for the nine
  months ended  September  30, 1998.  This was mainly  attributable  to a $366,000
  increase in revenues  related to the Tax Refund Program,  as well as an increase
  in service fee income related to deposit  accounts and  pre-payment  penalty and
  forfeited commitment fees on loans
  
  Non-Interest Expenses
  
           Total  non-interest  expenses  decreased  $119,000,  or  1.42%  to $8.3
  million for the nine months ended  September  30, 1999 from $8.4 million for the
  nine months ended September 30, 1998.  Salaries and benefits increased $323,000,
  or 8.5%, to $4.1 million for the nine months ended  September 30, 1999 from $3.8
  million for the nine months  ended  September  30,  1998.  The  increase was due
  primarily  to an  increase  in  staff as a result  of the  addition  of a branch
  banking office, as well as the opening of the Delaware Bank.
  
           Occupancy and equipment expenses increased $204,000,  or 18.5%, to $1.3
  million for the nine months ended  September  30, 1999 from $1.1 million for the
  nine months  ended  September  30, 1998 as a result of the  addition of a branch
  banking office, as well as the opening of the Delaware Bank on June 1, 1999.
  
           Other non-interest expense increased $499,000,  to $2.8 million for the
  nine months  ended  September  30, 1999 from $2.3 million for the same period in
  1998. This was mainly due to the accrual of a legal settlement for $233,000. The
  Company  also  recorded a  write-down  of its only  property  held in other real
  estate  owned,  of  $75,000,  during the first  quarter of 1999.  The  remaining
  expenses were due to growth of the Company and business development costs.
  
  Provision for Income Taxes
  
           The provision for income taxes  increased  $382,000,  or 26.2%, to $1.8
  million for the nine months ended  September  30, 1999 from $1.5 million for the
  nine months ended  September 30, 1998. This increase is mainly the result of the
  increase  in pre-tax  income  from 1998 to 1999.  The  Company  also  recorded a
  $31,000 income tax benefit in 1999 in connection with the Cumulative Effect of a
  Change in  Accounting  Principle,  upon the  adoption  of SOP 98-5.  In 1998 the
  Company  recorded  income  tax  expense  of  $207,000  in  connection  with  the
  Cummulative  Effect of a Change in  Accounting  Principle,  upon the adoption of
  FASB Statement No. 133.
  
                                         22
  Financial Condition:
  
  September 30, 1999 Compared to December 31, 1998
  
           Total assets  increased  $42.4  million,  or 8.2%, to $558.8 million at
  September  30, 1999 from $516.4  million at December 31,  1998.  The increase in
  assets  was the  result of higher  levels of loans and  securities,  which  were
  funded by a net increase in other borrowed  funds.  Net loans  (including  loans
  held for sale) increased $19.8 million,  or 6.1%, to $326.6 million at September
  30,  1999 from  $306.8  million at  December  31,  1998.  Investment  securities
  increased  $15.7 million,  or 8.9%, to $193.3 million at September 30, 1999 from
  $177.6 million at December 31, 1998.
  
           Cash and due from banks,  interest-bearing  deposits, and federal funds
  sold are all  liquid  funds.  The  aggregate  amount in these  three  categories
  increased by $3.0 million, or 16.6%, to $21.3 million at September 30, 1999 from
  $18.3 million at December 31, 1998.
  
           Premises and  equipment,  net of  accumulated  depreciation,  increased
  $860,000 to $4.9 million at  September  30, 1999 from $4.0 at December 31, 1998.
  The increase was mainly  attributable to the  construction and furnishing of the
  Delaware Bank.
  
           Total liabilities  increased $43.4 million,  or 9.0%, to $523.1 million
  at September 30, 1999 from $479.7  million at December 31, 1998.  Deposits,  the
  Company's  primary  source  of funds,  increased  $9.5  million,  3.4% to $292.6
  million at September  30, 1999 from $283.1  million at December  31,  1998.  The
  aggregate  of  transaction  accounts,  which  include  demand,  money market and
  savings  accounts,  increased  $446,000,  to $88.4 million at September 30, 1999
  from $87.9 million at December 31, 1998.  Certificates  of deposit  increased by
  $9.1  million,  or 4.6%,  to $204.2  million at  September  30, 1999 from $195.1
  million at December 31, 1998.
  
           Other  borrowed  funds were  $222.4  million at  September  30, 1999 as
  compared to $188.0  million at December 31, 1998. The increase was primarily the
  result of the Company's  leveraged funding strategy of utilizing  short-term and
  long-term FHLB advances to purchase  investment  securities and to fund new loan
  originations.
  
  ITEM 3:   QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
  
  Interest Rate Risk Management
  
           Interest  rate risk  management  involves  managing the extent to which
  interest-sensitive  assets and  interest-sensitive  liabilities are matched. The
  Bank  typically  defines   interest-sensitive   assets  and   interest-sensitive
  liabilities  as those  that  reprice  within  one year or less.  Maintaining  an
  appropriate  match is a method of avoiding  wide  fluctuations  in net  interest
  margin during periods of changing interest rates.
  
           The difference between interest-sensitive assets and interest-sensitive
  liabilities is known as the  "interest-sensitivity  gap" ("GAP"). A positive GAP
  occurs when  interest-sensitive  assets  exceed  interest-sensitive  liabilities
  repricing   in  the  same  time   periods,   and  a  negative  GAP  occurs  when
  interest-sensitive liabilities exceed interest-sensitive assets repricing in the
  same time periods.  A negative GAP ratio  suggests that a financial  institution
  may be better  positioned to take  advantage of declining  interest rates rather
  than increasing interest rates, and a positive GAP ratio suggests the converse.
  
           Static gap analysis  describes  interest rate sensitivity at a point in
  time.  However, it alone does not accurately measure the magnitude of changes in
  net interest income since changes in interest rates do not impact all categories
  
                                         23
  of assets and liabilities  equally or simultaneously.  Interest rate sensitivity
  analysis also involves assumptions on certain categories of assets and deposits.
  For purposes of interest rate sensitivity  analysis,  assets and liabilities are
  stated at either their  contractual  maturity,  estimated  likely call date,  or
  earliest repricing opportunity.  Mortgage-backed securities and amortizing loans
  are  scheduled  based  on their  anticipated  cash  flow  which  also  considers
  prepayments  based  on  historical  data  and  current  market  trends.  Savings
  accounts, including passbook, statement savings, money market, and NOW accounts,
  do not have a stated maturity or repricing term and can be withdrawn or repriced
  at any time. This may impact the Company's margin if more expensive  alternative
  sources of deposits  are  required to fund loans or deposit  runoff.  Management
  projects the repricing  characteristics  of these  accounts  based on historical
  performance and  assumptions  that it believes  reflect their rate  sensitivity.
  Therefore,  for purposes of the gap analysis,  these deposits are not considered
  to reprice simultaneously. Accordingly, a portion of the deposits are moved into
  time brackets exceeding one year.
  
           Shortcomings  are inherent in a simplified and static GAP analysis that
  may result in an institution  with a negative GAP having  interest rate behavior
  associated with an asset-sensitive balance sheet. For example,  although certain
  assets and liabilities may have similar maturities or periods to repricing, they
  may react in different degrees to changes in market interest rates. Furthermore,
  repricing   characteristics   of  certain  assets  and   liabilities   may  vary
  substantially  within a given time period.  In the event of a change in interest
  rates,  prepayment and early withdrawal levels could also deviate  significantly
  from those  assumed in  calculating  GAP in the  manner  presented  in the table
  below.
  
           The Bank attempts to manage its assets and liabilities in a manner that
  stabilizes   net  interest   income  under  a  broad  range  of  interest   rate
  environments.  Management uses gap analysis and simulation  models to attempt to
  monitor efforct of its interest sensitive assets and liablilitis. Adjustments to
  the mix of assets and liabilities are made  periodically in an effort to provide
  dependable and steady growth in net interest  income  regardless of the behavior
  of interest rates.
  
           The  following  tables  present a summary of the Bank's  interest  rate
  sensitivity  GAP at September 30, 1999.  For purposes of these tables,  the Bank
  has  used  assumptions  based on  industry  data and  historical  experience  to
  calculate  the  expected  maturity  of  loans  because,  statistically,  certain
  categories of loans are prepaid before their maturity date,  even without regard
  to interest rate fluctuations.  Additionally certain prepayment assumptions were
  made with regard to investment  securities based upon the expected prepayment of
  the underlying collateral of the mortgage backed securities.
  
                                         24
  Republic First Bancorp
                                                         Interest Sensitive Gap
  (dollars in thousands)                                 as of December 31, 1998
  
                                       0 - 90      91 - 180    181 - 365     1 - 2        2 - 3
                                        Days         Days        Days        Years        Years
                                        ----         ----        ----        -----        -----
  Interest sensitive assets:
  
  Securities and interest
     bearing balances due
     from banks                      $  32,862   $  10,185    $  18,202    $  28,690    $  20,906
       Average interest rate              6.53%       7.00%        7.01%        7.03%        7.04%
  Loans receivable (1)                  91,885       9,453       18,526       39,278       33,195
       Average interest rate              8.53%       8.33%        8.33%        8.19%        8.20%
  
  Total                                124,747      19,638       36,728       67,968       54,101
                                     ---------   ---------    ---------    ---------    ---------
  Cumulative total                   $ 124,747   $ 144,385    $ 181,113    $ 249,081    $ 303,182
                                     =========   =========    =========    =========    =========
  
  Interest sensitive liabilities:
  
  Demand interest bearing            $   2,320   $     457    $   1,476    $   1,829    $   1,829
       Average interest rate              2.50%       2.50%        2.50%        2.50%        2.50%
  Savings accounts                         675          63          128          255          255
       Average interest rate              2.50%       2.50%        2.50%        2.50%        2.50%
  Money market accounts                 19,687         652        1,305        2,610        2,610
       Average interest rate              4.42%       2.75%        2.75%        2.75%        2.75%
  FHLB borrowings                       40,609       7,400           --           --           --
       Average interest rate              5.00%       6.32%        0.00%        0.00%        0.00%
  Time deposits                         35,549      26,134       86,620       39,424        2,885
       Average interest rate              5.51%       5.70%        5.82%        6.43%        5.93%
  
  Totals                             $  98,840   $  34,706    $  89,529    $  44,118    $   7,579
                                     ---------   ---------    ---------    ---------    ---------
  Cumulative total                   $  98,840   $ 133,546    $ 223,075    $ 267,193    $ 274,772
                                     =========   =========    =========    =========    =========
  
  Interest Rate
     sensitivity GAP                 $  25,907   $ (15,068)   $ (52,801)   $  23,850    $  46,522
  
  Cumulative GAP                     $  25,907   $  10,839    $ (41,962)   $ (18,112)   $  28,410
  
  Interest Sensitive Assets/
     Interest Sensitive Liabilities        1.3x        1.1x         0.8x         0.9          1.1
  
  Cumulative GAP/
     Total Earning Assets                  5.3%        2.2%        -8.7%        -3.7%         5.9%
  
  Total earning assets               $ 484,446
                                     =========
  
  Off balance sheet items
     notional value:
  Commitments to
     extend credit                   $     430   $  21,534
                                     ---------   ---------
  Average interest rate                   7.75%       8.25%
  3 - 4      4 - 5      More than 5
                                         Years      Years         Years       Total     Fair Value
                                         -----      -----         -----       -----     ----------
  Interest sensitive assets:
  
  Securities and interest
     bearing balances due
     from banks                        $  15,855   $  12,038    $  38,940   $ 177,678  $ 177,662
       Average interest rate                7.03%       7.02%        6.94%
  Loans receivable (1)                    31,220      29,488       53,723     306,768    311,775
       Average interest rate                8.23%       8.27%        7.55%
  
  Total                                   47,075      41,526       92,663     484,446    485,613
                                       ---------   ---------    ---------   ---------  ---------
  Cumulative total                     $ 350,257   $ 391,783    $ 484,446
                                       =========   =========    =========
  
  Interest sensitive liabilities:
  
  Demand interest bearing              $   1,829   $   1,829    $   8,586   $  20,155     20,155
       Average interest rate                2.50%       2.50%        2.50%
  Savings accounts                           255         255        1,280       3,166      3,166
       Average interest rate                2.50%       2.50%        2.50%
  Money market accounts                    2,610       2,610           --      32,084     32,084
       Average interest rate                2.75%       2.75%        0.00%
  FHLB borrowings                         40,000      50,000       50,000     188,009    191,684
       Average interest rate                5.59%       4.99%        5.15%
  Time deposits                            2,262       2,262            6     195,142    188,009
       Average interest rate                5.92%       5.92%        5.30%
  
  Totals                               $  46,956   $  56,956    $  59,872     438,556    435,098
                                       ---------   ---------    ---------   ---------  ---------
  Cumulative total                     $ 321,728   $ 378,684    $ 438,556
                                       =========   =========    =========
  
  Interest Rate
     sensitivity GAP                   $     119   $ (15,430)   $  32,791   $  45,890
  
  Cumulative GAP                       $  28,529   $  13,099    $  45,890
  
  Interest Sensitive Assets/
     Interest Sensitive Liabilities          1.1         1.0x         1.1x
  
  Cumulative GAP/
     Total Earning Assets                    5.9%        2.7%         9.5%
  
  Total earning assets
  
  Off balance sheet items
     notional value:
  Commitments to
     extend credit                                                          $  21,534  $     220
                                                                            ---------  ---------
  Average interest rate
  (1) Includes loans held for sale
  25
  Republic First Bancorp
                                                      Interest Sensitive Gap
  (dollars in thousands)                             as of September 30, 1999
  
                                      0 - 90      91 - 180     181 - 365     1 - 2        2 - 3
                                       Days         Days         Days        Years        Years
                                       ----         ----         ----        -----        -----
  Interest Sensitive Assets:
  
  Securities and interest
     bearing balances due
     from banks                     $  33,152    $   7,989    $  15,469    $  27,008    $  25,337
       Average interest rate             5.41%        6.37%        6.38%        6.47%        6.47%
  Loans receivable (1)                108,321       11,931       22,022       42,851       36,915
       Average interest rate             8.48%        8.07%        8.04%        8.03%        8.13%
  
  Total                               141,473       19,920       37,491       69,859       62,252
                                    ---------    ---------    ---------    ---------    ---------
  Cumulative Totals                 $ 141,473    $ 161,393    $ 198,884    $ 268,743    $ 330,995
                                    =========    =========    =========    =========    =========
  Interest Sensitive Liabilities:
  
  Demand Interest Bearing           $   4,810    $     281    $     568    $   1,156    $   1,183
       Average interest rate             1.25%        1.25%        1.25%        1.25%        1.25%
  Savings Accounts                      1,316          102          206          419          428
       Average interest rate             2.00%        2.00%        2.00%        2.00%        2.00%
  Money Market Accounts                 7,616        2,153        4,317        5,885        5,957
       Average interest rate             3.73%        4.69%        4.69%        4.69%        4.69%
  Time Deposits                        58,704       35,367       38,784       64,969        1,944
       Average interest rate             5.51%        5.80%        5.59%        5.60%        5.77%
  FHLB Borrowings                      87,363       25,000       25,000       42,500       17,500
       Average interest rate             5.33%        5.29%        4.82%        5.68%        5.58%
  
  Total                               159,810       62,903       68,875      114,928       27,012
                                    ---------    ---------    ---------    ---------    ---------
  Cumulative Totals                 $ 159,810    $ 222,713    $ 291,588    $ 406,516    $ 433,528
                                    =========    =========    =========    =========    =========
  
  Interest Rate
      sensitivity GAP               $ (18,337)   $ (42,983)   $ (31,384)   $ (45,069)   $  35,240
  
  Cumulative GAP                    $ (18,337)   $ (61,320)   $ (92,704)   $(137,773)   $(102,533)
  
  Interest Sensitive Assets/
    Interest Sensitive Liabilities      88.53%       31.67%       54.43%       60.79%      230.46%
  
  Cumulative GAP/
    Total Earning Assets                -3.49%      -11.66%      -17.63%      -26.20%      -19.50%
  
  Total Earning Assets              $ 525,901
                                    =========
  
  Off balance sheet items
     notional value:
  Commitments to
     extend credit                  $     404    $  23,160
                                    ---------    ---------
  Average interest rate                  7.75%        8.25%
  3 - 4        4 - 5    More than 5
                                       Years        Years       Years       Total     Fair Value
                                       -----        -----       -----       -----     ----------
  Interest Sensitive Assets:
  
  Securities and interest
     bearing balances due
     from banks                     $  12,273    $  10,937    $  67,158   $ 199,323  $ 199,623
       Average interest rate             6.52%        6.52%        6.53%
  Loans receivable (1)                 31,140       28,476       44,922     326,578    328,676
       Average interest rate             8.15%        8.01%        7.38%
  
  Total                                43,413       39,413      112,080     525,901    528,299
                                    ---------    ---------    ---------   ---------  ---------
  Cumulative Totals                 $ 374,408    $ 413,821    $ 525,901
                                    =========    =========    =========
  Interest Sensitive Liabilities:
  
  Demand Interest Bearing           $   1,210    $   1,238    $   2,151   $  12,598  $  12,598
       Average interest rate             1.25%        1.25%        1.25%
  Savings Accounts                        438          449    $     779       4,137      4,137
       Average interest rate             2.00%        2.00%        2.00%
  Money Market Accounts                 6,030        6,105    $   5,737      43,801     43,801
       Average interest rate             4.69%        4.69%        4.69%
  Time Deposits                         1,486        2,941            7     204,202    204,669
       Average interest rate             5.90%        5.69%        5.41%
  FHLB Borrowings                      25,000           --           --     222,363    222,476
       Average interest rate             5.72%        0.00%        0.00%
  
  Total                                34,165       10,733        8,675     487,101    487,681
                                    ---------    ---------    ---------   ---------  ---------
  Cumulative Totals                 $ 467,693    $ 478,426    $ 487,101
                                    =========    =========    =========
  
  Interest Rate
      sensitivity GAP               $   9,248    $  28,680    $ 103,405
  
  Cumulative GAP                    $ (93,285)   $ (64,605)   $  38,800
  
  Interest Sensitive Assets/
    Interest Sensitive Liabilities     127.07%      367.21%     1291.99%
  
  Cumulative GAP/
    Total Earning Assets               -17.74%     -12.28%         7.38%
  
  Total Earning Assets
  
  Off balance sheet items
     notional value:
  Commitments to
     extend credit                                                        $  23,564  $     236
                                                                          ---------  ---------
  Average interest rate
  (1) Includes loans held for sale.
  26
  Capital Resources
  
           The Company is required to comply  with  certain  "risk-based"  capital
  adequacy  guidelines  issued by the FRB and the  FDIC.  The  risk-based  capital
  guidelines  assign varying risk weights to the individual assets held by a bank.
  The guidelines also assign weights to the "credit-equivalent" amounts of certain
  off-balance  sheet  items,  such as  letters  of credit  and  interest  rate and
  currency swap contracts.  Under these  guidelines,  banks are expected to meet a
  minimum target ratio for  "qualifying  total capital" to weighted risk assets of
  8%,  at least  one-half  of  which  is to be in the  form of  "Tier 1  capital".
  Qualifying  total  capital is divided into two separate  categories  or "tiers".
  "Tier 1  capital"  includes  common  stockholders'  equity,  certain  qualifying
  perpetual  preferred  stock and  minority  interests  in the equity  accounts of
  consolidated  subsidiaries,  less goodwill, "Tier 2 capital" components (limited
  in the aggregate to one-half of total qualifying  capital)  includes  allowances
  for credit losses (within limits),  certain excess levels of perpetual preferred
  stock and certain types of "hybrid" capital  instruments,  subordinated debt and
  other preferred stock. Applying the federal guidelines,  the ratio of qualifying
  total capital to  weighted-risk  assets,  was 13.08% and 12.54% at September 30,
  1999 and December 31, 1998 , respectively, and as required by the guidelines, at
  least  one-half of the  qualifying  total  capital  consisted  of Tier l capital
  elements.  Tier l risk-based  capital  ratios on September 30, 1999 and December
  31, 1998 was 12.15% and 11.76%,  respectively.  At December 31, 1998,  and 1997,
  the Company exceeded the requirements for risk-based capital adequacy under both
  federal and Pennsylvania State guidelines.
  
           Under  FRB  and  FDIC  regulations,  a  bank  is  deemed  to  be  "well
  capitalized"  when it has a "leverage  ratio" ("Tier l capital to total assets")
  of at least 5%, a Tier l capital to  weighted-risk  assets ratio of at least 6%,
  and a total capital to weighted-risk  assets ratio of at least 10%. At September
  30,  1999 and  December  31,  1998 , the  leverage  ratio was  7.33% and  7.50%,
  respectively.  Accordingly,  at September  30, 1999 and  December 31, 1998,  the
  Company was considered "well capitalized" under FRB and FDIC regulations.
  
           The  Company's  shareholders'  equity  as of  September  30,  1999  and
  December 31, 1998 was $35,657,000 and $36,622,000,  respectively. Book value per
  share of the Company's common stock decreased from $6.22 as of December 31, 1998
  to $5.83 as of September 30, 1999.  These  decreases  were  attributable  to the
  change in unrealized  losses of $4.9 million on available  for sale  securities,
  partially  offset  by net  income  of  $3,682,000.  Regulatory  Restrictions  on
  Dividends
  
           Dividend  payments  by the  Bank  to the  Company  are  subject  to the
  Pennsylvania Banking Code of 1965 (the "Banking Code"), the Federal Reserve Act,
  and the Federal Deposit  Insurance Act (the "FDIA").  Under the Banking Code, no
  dividends  may be  paid  except  from  "accumulated  net  earnings"  (generally,
  undivided profits).  Under the FRB's regulations,  the Bank cannot pay dividends
  that exceed its net income from the current and the preceding  two years.  Under
  the FDIA,  an insured bank may pay no dividends if the bank is in arrears in the
  payment of any insurance assessment due to the FDIC. Under current banking laws,
  the Bank would be limited to $10.9 million year to date of dividends in 1999.
  
           State and federal regulatory authorities have adopted standards for the
  maintenance of adequate levels of capital by banks.  Adherence to such standards
  futher limits the ability of the Bank to pay dividends to the Company.
  
           Other  regulatory  requirments and policies may also affect the payment
  of dividends to the Company by the Bank. If, in the opinion of the FRB, the Bank
  is engaged in, or is about to engage in, an unsafe or unsound  practive  (which,
  depending on the financial  condition of the Bank,  could include the payment of
  dividends),  the FRB may require,  after notice and hearing, that the Bank cease
  and  desist  from  such  practice.  The FRB has  formal  and  informal  policies
  
                                         27
  providing  that insured banks and bank holding  companies  should  generally pay
  dividends only out of current operating earnings.
  
  Regulatory Capital Requirements
  
           Federal banking  agencies impose three minimum capital  requirements on
  the Company's risk-based capital ratios based on total capital, "Tier 1 capital,
  and a leverage capital ratio. 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 of
  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.
  
           The following table presents the Company's capital regulatory ratios at
  September 30, 1999 and December 31, 1998:
  To be well
                                                                  For capital          Capitalized under FRB
                                         Actual               Adequacy purposes         capital guidelines
  
  (dollars in thousands)          Amount        Ratio        Amount       Ratio       Amount         Ratio
                                  ------        -----        ------       -----       ------         -----
  As of September 30, 1999:
  
  Total  risk based capital      $43,348        13.08%      $26,523        8.00%      $33,153        10.00%
  Tier I capital                  40,297        12.15        13,261        4.00        19,892         6.00
  Tier I (leveraged) capital      40,297         7.33        27,492        5.00        27,492         5.00
  
  As of December 31, 1998:
  
  Total  risk based capital      $38,784        12.54%      $24,746        8.00%      $30,932        10.00%
  Tier I capital                  36,389        11.76        12,373        4.00        18,559         6.00
  Tier I (leveraged) capital      36,389         7.50        24,263        5.00        24,263         5.00
  Management believes that the Company meets as of September 30, 1999 and
  December 31, 1998, all capital adequacy  requirements to which it is subject. As
  of September 30, 1999 and December 31, 1998, the most recent  notification  from
  the Federal Reserve Bank categorized the Company as well  capitalized  under the
  regulatory  framework for prompt  corrective  action provisions of section 3b of
  the Federal  deposit  Insurance Act. There are no  calculations  or events since
  that  notification,  that  management  believes would have changed the Company's
  category.
  
           The  Company's  ability to maintain the  required  levels of capital is
  substantially  dependent  upon the  success of the Banks  capital  and  business
  plans,  the impact of future economic  events on the Banks' loan customers,  the
  
                                         28
  Banks' ability to manage its interest rate risk and control its growth and other
  operating expenses.
  
           In  addition to the above  minimum  capital  requirements,  the Federal
  Reserve  Bank  approved  a rule that  became  effective  on  December  19,  1992
  implementing  a statutory  requirement  that  federal  banking  regulators  take
  specified "prompt corrective action" when an insured institution's capital level
  falls below certain levels.  The rule defines five capital  categories  based on
  several  of the above  capital  ratios.  The Banks  currently  exceed the levels
  required for a bank to be classified as "well capitalized". However, the Federal
  Reserve Bank may consider other criteria when determining such  classifications,
  which consideration could result in a downgrading in such classifications.
  
  Liquidity
  
           Financial  institutions  must  maintain  liquidity  to meet  day-to-day
  requirements   of   depositors   and   borrowers,   take   advantage  of  market
  opportunities,  and provide a cushion against unforeseen needs.  Liquidity needs
  can be met by either reducing assets or increasing liabilities. Sources of asset
  liquidity  are  provided by cash and  amounts  due from banks,  interest-bearing
  deposits with banks, and federal funds sold.
  
           The Company's liquid assets totaled $21.3 million at September 30, 1999
  compared to $18.3 million at December 31, 1998.  Maturing and repaying loans are
  another source of asset liquidity.  At September 30, 1999, the Company estimated
  that an  additional  $63.8 million of loans will mature or repay in the next one
  year period ending September 30, 2000.
  
           Liquidity can be met by attracting  deposits  with  competitive  rates,
  buying federal funds or utilizing the  facilities of the Federal  Reserve System
  or the Federal Home Loan Bank System. At September 30, 1999, the Banks had $43.4
  million in unused lines of credit  available to it under  informal  arrangements
  with  correspondent  banks compared to $55.5 million at December 31, 1998. These
  lines of credit  enable  the Banks to  purchase  funds for  short-term  needs at
  current market rates.
  
           At  September  30,  1999,  the  Company  had  outstanding   commitments
  (including  unused  lines of credit and  letters  of  credit) of $23.2  million.
  Certificates  of deposit  which are  scheduled to mature within one year totaled
  $129.8  million at September  30, 1999,  and  borrowings  that are  scheduled to
  mature  within  the  same  period  amounted  to  $133.8  million.   The  Company
  anticipates  that it will have  sufficient  funds  available to meet its current
  commitments.
  
           The Banks'  target  and actual  liquidity  levels  are  determined  and
  managed based on Management's  comparison of the maturities and marketability of
  the Bank's  interest-earning  assets with its  projected  future  maturities  of
  deposits and other liabilities. Management currently believes that floating rate
  commercial loans,  short-term market  instruments,  such as 2-year United States
  Treasury Notes, adjustable rate mortgage-backed  securities issued by government
  agencies,  and federal funds, are the most  appropriate  approach to satisfy the
  Bank's  liquidity  needs.  The Bank has  established  a line of credit  from its
  correspondent,  in the amount of $7.5 million,  to assist in managing the Bank's
  liquidity position. Additionally, the Bank has established a line of credit with
  the Federal Home Loan Bank of Pittsburgh  with a maximum  borrowing  capacity of
  approximately  $258.2  million.  As of Spetember 30, 1999 and December 31, 1998,
  the Company had  borrowed  $222.4 and $180.5,  respectively,  under its lines of
  credit.
  
           The  Company's  Board of Directors  has  appointed  an  Asset/Liability
  Committee   (ALCO)  to  assist   Management  in   establishing   parameters  for
  investments.  The  Asset/Liability  Committee  is  responsible  for managing the
  liquidity  position  and interest  sensitivity  of the Banks.  Such  committee's
  primary  objective is to maximize net interest  margin in an ever  changing rate
  
                                         29
  environment,   while   balancing  the  Banks'   interest-sensitive   assets  and
  liabilities and providing adequate liquidity for projected needs.
  
           Management  presently  believes  that the  effect  on the  Banks of any
  future  rise in interest  rates,  reflected  in higher  cost of funds,  would be
  detrimental  since the amount of the Banks' interest bearing  liabilities  which
  would reprice,  are greater than the Banks' interest  earning assets which would
  reprice,  over the next twelve  months.  However,  a decrease in interest  rates
  generally  could  have a positive  effect on the Banks,  due again to the timing
  difference between repricing the Banks' liabilities,  primarily  certificates of
  deposit and other borrowed  funds,  and the largely  automatic  repricing of its
  existing  interest-earning  assets.  As of September 30, 1999, 27% of the Banks'
  interest-bearing  deposits  were to mature,  and be  repriceable,  within  three
  months, and an additional 14% were to mature,  and be repriceable,  within three
  to six months.
  
  Since  the  assets  and  liabilities  of  the  Company  have  diverse  repricing
  characteristics that influence net interest income, management analyzes interest
  sensitivity through the use of gap analysis and simulation models. Interest rate
  sensitivity  management seeks to minimize the effect of interest rate changes on
  net interest  margins and interest  rate spreads,  and to provide  growth in net
  interest income through periods of changing interest rates.
  
  Securities Portfolio
  
           At September 30, 1999,  the Company had identified  certain  investment
  securities  that  are  being  held for  indefinite  periods  of time,  including
  securities that will be used as part of the Company's 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 and are intended to increase the flexibility of the Company's
  asset/liability   management.   Available-for-sale   securities  consist  of  US
  Government Agency securities and other  investments.  The book and market values
  of securities  available-for-sale  were $184.6  million and $177.2 million as of
  September 30, 1999. The net unrealized loss on securities available-for-sale, as
  of this date, was $7.4 million.
  
           The following  table  represents the carrying and estimated fair values
  of Investment Securities at September 30, 1999.
  Gross           Gross
                                 Amortized           Unrealized     Unrealized
  Available-for-Sale                Cost               Gain            Loss          Fair Value
                               ----------------------------------------------------------------
  Mortgage-backed              $181,688,000          $31,000      ($7,427,000)     $174,292,000
  U.S. Government Agencies        2,900,000            9,000          (22,000)        2,887,000
                               ----------------------------------------------------------------
  Total Available-for-Sale     $184,588,000          $40,000      ($7,449,000)     $177,179,000
                               ----------------------------------------------------------------
  
                                                       Gross           Gross
                                 Amortized           Unrealized      Unrealized
  Held-to-Maturity                  Cost               Gain             Loss         Fair Value
                               ----------------------------------------------------------------
  
  Mortgage-backed                  $939,000          $15,000               $0          $954,000
  US Government Agencies          1,895,000            1,000           (9,000)        1,887,000
  Other                          13,287,000                0                0        13,287,000
                               ----------------------------------------------------------------
  Total Held-to-Maturity        $16,121,000          $16,000          ($9,000)      $16,128,000
                               ----------------------------------------------------------------
  30
  Loan Portfolio
  
           The Company's loan portfolio  consists of commercial loans,  commercial
  real estate loans,  commercial loans secured by one-to-four  family  residential
  property,  as well  as  residential,  home  equity  loans  and  consumer  loans.
  Commercial  loans  are  primarily  term  loans  made  to   small-to-medium-sized
  businesses and professionals for working capital purposes. The majority of these
  commercial loans are  collateralized by real estate and further secured by other
  collateral and personal  guarantees.  The Company's  commercial  loans generally
  range from $250,000 to $1,000,000 in amount.
  
           The Company's net loans  increased  $19.8  million,  or 6.5%, to $326.6
  million at September  30, 1999 from $306.8  million at December 31, 1998,  which
  were primarily funded by an increase in other borrowed funds.
  
  The following table sets forth the Company's gross loans by major categories for
  the periods indicated:
  (dollars in thousands)                As of September 30, 1999         As of December 31, 1998
                                      ------------------------------------------------------------
                                      Balance           % of Total     Balance          % of Total
                                      ------------------------------------------------------------
  Real Estate:
      1-4 Family (1)                  $145,895              44.3%     $133,158             43.1%
      Multi-Family                      23,502               7.1        21,800              7.0
      Commercial Real Estate           120,784              36.6       110,385             35.7
                                      ------------------------------------------------------------
  Total Real Estate                    290,181              88.0       265,343             85.8
  
  Commercial                            37,566              11.4        42,644             13.8
  Other                                  1,882               0.6         1,176              0.4
                                      ------------------------------------------------------------
  Total Loans (1)                      329,629             100.0%      309,163            100.0%
  
  Less allowance for loan losses        (3,051)                         (2,395)
                                      --------                        --------
  
  Net loans                           $326,578                        $306,768
                                      ========                        ========
  (1)      Includes loans held for sale
  Credit Quality
  
           The Company's  written  lending  policies  require  underwriting,  loan
  documentation,  and credit  analysis  standards  to be met prior to funding.  In
  addition,  a senior loan  officer  reviews all loan  applications.  The Board of
  Directors  reviews the status of loans  monthly to ensure that proper  standards
  are maintained.
  
           Loans, including impaired loans, are generally classified as nonaccrual
  if they are past due as to maturity or payment of principal  and/or interest for
  a period of more than 90 days,  unless  such loans are  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 nonaccrual if repayment in full of
  principal and/or interest is in doubt.
  
                                         31
  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  (generally a minimum of six months) by the borrower,  in accordance
  with the contractual terms of the loan.
  
           While a loan is classified as nonaccrual or as an impaired loan and the
  future  collectability of the recorded loan balance is doubtful,  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. In the case where a
  nonaccrual  loan had been  partially  charged off,  recognition of interest on a
  cash basis is limited to that which would have been  recognized on the remaining
  recorded loan balance at the contractual  interest rate. Cash interest  receipts
  in excess of that amount are recorded as  recoveries  to the  allowance for loan
  losses until prior charge-offs have been fully recovered.
  
           The following summary shows information concerning loan delinquency and
  other non-performing assets at the dates indicated.
  September 30,       December 31,
                                                             1999               1998
                                                        ------------------------------
  Loans accruing, but past due 90 days
              or more                                      $586,000           $121,000
            Non-accrual loans                             1,061,000          1,002,000
                                                        ------------------------------
            Total non-performing loans (1)                1,647,000          1,123,000
            Foreclosed real estate                          643,000            718,000
                                                        ------------------------------
            Total non-performing assets (2)              $2,290,000         $1,841,000
                                                        ==============================
  
            Non-performing loans as a percentage
               of total loans net of unearned
               income (3)                                      0.50%              0.36%
            Non-performing assets as a percentage
               of total assets                                 0.41%              0.36%
  (1)      Non-performing  loans  are  comprised  of  (i)  loans  that  are  on  a
           nonaccrual basis; (ii) accruing loans that are 90 days or more past due
           and (iii) restructured loans.
  (2)      Non-performing   assets  are  composed  of  non-performing   loans  and
           foreclosed real estate (assets acquired in foreclosure).
  (3)      Includes loans held for sale
  Total  non-performing  loans  increased  by $524,000 to  $1,647,000  at
  September 30, 1999 from  $1,123,000 at December 31, 1998.  Total non  performing
  assets increased by $449,000 at September 30, 1999 to $2,290,000 from $1,841,000
  at December 31, 1998.
  
           At  September  30, 1999,  the Company had no foreign  loans and no loan
  concentrations  exceeding 10% of total loans except for credits extended to real
  estate  agents and  managers in the  aggregate  amount of $82.6  million,  which
  represented 25.3% of gross loans receivable.  Loan concentrations are considered
  to exist when there are amounts loaned to a multiple number of borrowers engaged
  
                                         32
  in similar activities that would cause them to be similarly impacted by economic
  or other conditions.
  
           Real estate  owned is  initially  recorded at the lower or cost or fair
  value,  net of  estimated  selling  costs  at the  date  of  foreclosure.  After
  foreclosure,  management  periodically  performs  valuations  and any subsequent
  deteriations  in fair  value,  and all other  revenue and  expenses  are charged
  against operating expenses in the period in which they occur.
  
           Potential   problem  loans  consist  of  loans  that  are  included  in
  performing  loans, but for which potential credit problems of the borrowers have
  caused  management to have serious doubts as to the ability of such borrowers to
  continue to comply with present  repayment  terms.  At September  30, 1999,  all
  identified potential problem loans are included in the preceding table.
  
           The Company had no credit exposure to "highly  leveraged  transactions"
  at September 30, 1999, as defined by the FRB.
  
  Allowance for Loan Losses
  
           A detailed analysis of the Company's  allowance for loan losses for the
  nine months  ended  September  30,  1999,  and 1998 and the twelve  months ended
  December 31, 1998:
  For the nine months  For the twelve months    For the nine months
                                                                ended                  ended                    ended
                                                          September 30, 1999     December 31, 1998      September 30, 1998
                                                          ------------------  ----------------------   -------------------
  Balance at beginning of period ............         $2,395,000            $2,028,000            $2,028,000
            Charge-offs:
                 Commercial ...........................             27,000                76,000                55,000
                 Real estate ..........................                  0                     0                     0
                 Consumer .............................             97,000                34,000                     0
                                                              ------------          ------------          ------------
  
                     Total charge-offs ................            124,000               110,000                55,000
                                                              ------------          ------------          ------------
            Recoveries:
                 Commercial ...........................             93,000                13,000                48,000
                 Real estate ..........................                  0                     0                     0
                 Consumer .............................             17,000                94,000                13,000
                                                              ------------          ------------          ------------
  
                     Total recoveries .................            110,000               107,000                61,000
                                                              ------------          ------------          ------------
  
            Net charge-offs/(recoveries) ..............             14,000                 3,000                (6,000)
                                                              ------------          ------------          ------------
            Provision for loan losses .................            670,000               370,000               290,000
                                                              ------------          ------------          ------------
  
                 Balance at end of period .............         $3,051,000            $2,395,000            $2,324,000
                                                              ============          ============          ============
  
                 Average loans outstanding (1)(2) .....       $318,770,000          $248,479,000          $236,874,000
                                                              ============          ============          ============
  
            As a percent of average loans (1)(2):
                 Net charge-offs ......................               0.01%                 0.00%                 0.00%
                 Provision for loan losses ............               0.21%                 0.15%                 0.12%
                 Allowance for loan losses ............               0.96%                 0.96%                 0.98%
            Allowance for loan losses to:
                 Total loans, net of unearned income ..               0.93%                 0.77%                 0.87%
                 Total non-performing loans ...........             185.25%               213.27%               141.79%
  (1) Includes nonaccruing loans.
  (2) Includes loans held for sale.
  33
  Management makes a monthly determination as to an appropriate provision
  from  earnings  necessary  to  maintain  an  allowance  for loan  losses that is
  adequate based upon the loan portfolio  composition,  classified  problem loans,
  and general economic conditions.  The Company's Board of Directors  periodically
  reviews the status of all nonaccrual and impaired loans and loans  criticized by
  the Company's  regulators  and internal loan review  officer.  The internal loan
  review officer  reviews both the loan portfolio and the overall  adequacy of the
  loan loss  reserve.  During  the review of the loan loss  reserve,  the Board of
  Directors  considers  specific  loans,  pools of similar  loans,  and historical
  charge-off  activity.  The sum of these  components is compared to the loan loss
  reserve balance. Any additions deemed necessary to the loan loss reserve balance
  are charged to operations.
  
           The Company has an existing  loan review  program,  which  monitors the
  loan  portfolio on an ongoing  basis.  Loan review is conducted by a loan review
  officer  and is  reported  quarterly  to the  Board of  Directors.  The Board of
  Directors reviews the finding of the loan review program on a monthly basis.
  
           Determining the  appropriate  level of the allowance for loan losses at
  any given date is difficult,  particularly  in a continually  changing  economy.
  However, there can be no assurance that, if asset quality deteriorates in future
  periods, additions to the allowance for loan losses will not be required.
  
           The Company's management considers the entire allowance for loan losses
  to be  adequate,  however,  to comply with  regulatory  reporting  requirements,
  management  has  allocated  the  allowance for loan losses as shown in the table
  below into components by loan type at each period end. Through such allocations,
  management  does not  intend  to  imply  that  actual  future  charge-offs  will
  necessarily  follow the same  pattern or that any  portion of the  allowance  is
  restricted.
  At September 30, 1999            At December 31, 1998
                                                                  ---------------------            --------------------
                                                                           Percent of Loans                  Percent of Loans
                                                                           In Each Category                  In Each Category
                                                              Amount          To Loans (1)      Amount          to Loans (1)
                                                              ------          ------------      ------          ------------
  Allocation of allowance for loan losses:
                 Commercial                                 $1,849,000           55.17%       $1,638,000           56.33%
                 Residential real estate                       419,000           44.26%          391,000           43.07%
                 Consumer and other                             91,000            0.57%           71,000            0.60%
                 Unallocated                                   692,000                           295,000
                                                            ----------                        ----------
                     Total                                   3,051,000          100.00%       $2,395,000          100.00%
                                                            ==========                        ==========
  The unallocated  allowance  increased $397,000 to $692,000 at September
  30, 1999 from $295,000 at December 31, 1998. This increase is due primarily to a
  recent increase in non-performing loans of $524,000 to $1.6 million at September
  30, 1999 from $1.1 million at December  31, 1998,  and to the growth of the loan
  portfolio.
  
  (1)      Includes loans held for sale
  
                                         34
  The Company had delinquent  loans as of September 30, 1999 and December
  31, 1998 as follows;  (i) 30 to 59 days past due,  consisted of commercial,  and
  consumer and home equity loans in the aggregate principal amount of $398,000 and
  $1.2  million  respectively;  and  (ii) 60 to 89 days  past  due,  consisted  of
  commercial and consumer loan in the aggregate  principal  amount of $2.0 million
  and $386,000 respectively. In addition, the Company has classified certain loans
  as  substandard  and  doubtful  (as those terms are defined in  applicable  Bank
  regulations).  At September  30, 1999 and December 31, 1998,  substandard  loans
  totaled approximately $899,000 and $1,382,000  respectively;  and doubtful loans
  totaled approximately $334,000 and $0 respectively.
  
  Deposit Structure
  
           Total deposits at September 30, 1999 consisted of  approximately  $27.8
  million in non-interest-bearing demand deposits,  approximately $12.6 million in
  interest-bearing  demand  deposits,   approximately  $48.0  million  in  savings
  deposits  and  money  market  accounts,  approximately  $153.0  million  in time
  deposits  under  $100,000,  and  approximately  $51.2  million in time  deposits
  greater than $100,000.  In general,  the Bank pays higher interest rates on time
  deposits over $100,000 in principal  amount.  Due to the nature of time deposits
  and changes in the interest  rate market  generally,  it should be expected that
  the Company's deposit liabilities may fluctuate from period-to-period.
  
           The following  table is a distribution of the balances of the Company's
  average deposit  balances and the average rates paid therein for the nine months
  ended September 30, 1999 and the year ended December 31, 1998.
  Deposit Table
                                                       For the nine months  ended       For the twelve months ended
                                                            September 30, 1999                December 31, 1998
                                                     ------------------------------   ------------------------------
                                                        Average                         Average
                                                        Balance             Rate        Balance              Rate
  Non-interest-bearing balances             $29,627,000           0.00%      $31,260,000           0.00%
                                                     ==============================================================
  
            Money market and savings deposits         $44,870,000           3.68%      $41,157,000           2.85%
            Time deposits                             191,234,000           5.86       191,829,000           6.09
            Demand deposits, interest-bearing          13,844,000           1.44        13,727,000           2.50
                                                     --------------------------------------------------------------
            Total interest-bearing deposits          $249,948,000           5.23%     $246,713,000           5.35%
                                                     ==============================================================
  35
  The following is a breakdown, by contractual  maturities,  of the Company's time
  deposits  issued in  denominations  of $100,000 or more as of September 30, 1999
  and December 31, 1998.
  September 30,       December 31,
                                                                  1999               1998
                                                           ---------------------------------
  Maturing in:
                 Three months or less                         $13,175,000        $14,229,000
                 Over three months through six months          10,127,000          7,756,000
                 Over six months through twelve months          8,796,000          3,365,000
                 Over twelve months                            22,754,000                  0
                                                           ---------------------------------
            Total                                             $54,852,000        $25,350,000
                                                           =================================
  Commitments
  
           In the normal course of its business,  the Company makes commitments to
  extend credit and issues standby letters of credit.  Generally, such commitments
  are provided as a service to its  customers.  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 may require 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
  requirement.  The  Company  evaluates  each  customer's  creditworthiness  on  a
  case-by-case  basis.  The type and  amount  of  collateral  obtained,  if deemed
  necessary upon extension of credit, are based on Management's  credit evaluation
  of the borrower. Standby letters of credit are conditional commitments issued to
  guarantee  the  performance  of a customer  to a third  party.  The credit  risk
  involved in issuing  standby  letters of credit is essentially  the same as that
  involved in extending loan  facilities to customers and is based on Management's
  evaluation  of the  creditworthiness  of the  borrower  and the  quality  of the
  collateral.  At September 30, 1999 and December 31, 1998, firm loan  commitments
  approximated  $23.2 million and $20.1 million  respectively  and  commitments of
  standby letters of credit approximated $1,455,000 and $1,912,000, respectively.
  
  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  financial  results is the  Company's  need and ability to react to
  changes in interest  rates.  As  discussed  previously,  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.
  
  Year 2000 Issue
  
           The following section contains forward-looking statements which involve
  risks and uncertainties. The actual impact on the Company of the year 2000 issue
  could  materially  differ from that which is anticipated in the forward  looking
  statements as a result of certain factors identified below.
  
                                         36
  Many existing  computer programs use only two digits to identify a year
  in  the  date  field.   These  programs  were  designed  and  developed  without
  considering the impact of the upcoming change in the century.  If not corrected,
  many computer  applications  could fail or create erroneous results by or at the
  Year  2000.   The  Year  2000  issue   affects   virtually   all  companies  and
  organizations.
  
           The  Company  is  subject  to  various  regulations  and  oversight  by
  regulatory  authorities,  including the Federal  Reserve Bank, the  Pennsylvania
  Department  of Banking and the Federal  Deposit  Insurance  Corporation  (FDIC).
  These  regulatory  agencies have  coordinated  various  regulatory  examinations
  focusing on the year 2000  issues,  and report their  findings to the  Company's
  management and the Board of Directors.
  
     Company's State of Readiness
  
           The  Company's  management  is committed to ensuring that the Company's
  daily operations  suffer little impact as a result of the date change at the end
  of the century.  The Company is  following  the Federal  Financial  Institutions
  Examination Council's (FFIEC), Interagency Guidelines. The guidelines identify a
  process in which year 2000 issues are addressed, such as awareness,  assessment,
  remediation, testing and implementation.
  
           The Company has identified  key areas for which  management is focusing
  its efforts.  These areas include data center, desktop environment and networks,
  branch  environment and services,  financial  applications,  facilities,  legal,
  insurance, and outside services. For each of these areas identified, the Company
  is employing a process which will compile  inventories of all  identified  areas
  which  could be  affected  by the year 2000,  including  information  technology
  ("IT") systems and non-information technology systems such as phone systems, fax
  machines and alarm  systems.  A testing  schedule is defined and the  identified
  systems are tested, and results evaluated. A remedy process is then defined, and
  implemented  and testing is  performed  again.  The  process is  repeated  until
  repairs are complete.
  
           All identified  critical  applications  have been tested.  Non-critical
  testing  validation  and repair were  performed and  completed  during the first
  quarter of 1999.
  
           The  Company  has  relationships   with  third  parties  including  its
  borrowers, which are also subject to the year 2000 uncertainties. Management has
  identified  relationships  which are  considered  material,  and  would  have an
  adverse  effect on the Bank and the Company if such third  parties were not year
  2000  compliant.   Management  has  solicited  year  2000   certifications  from
  significant  vendors,  and also  completed its own year 2000 due  diligence.  No
  borrower or third party vendor has given the Company a response  that  indicates
  that they will not be year 2000  compliant.  However,  one  borrower  has yet to
  receive a year 2000  certification  from a major  supplier of business,  and the
  bank is closely monitoring the situation.  It is anticipated that all identified
  third party vendors will be compliant,  however,  no assurance can be given with
  regard to their compliance with year 2000. Also, no assurances can be given that
  a third party vendor or borrower will not have a material  effect on the Company
  or Bank, due to their non-compliance with the year 2000 issue.
  
           While no assurance  can be given to actual system  operations  upon the
  turn of the  century,  based upon  information  currently  known to it, and upon
  consideration  of its testing efforts to date,  management  believes that in the
  worse case  scenario,  the Company  will suffer  only a slight  interruption  of
  business, as a result of minor application failures of its IT and non-IT systems
  and  software  as a  result  of the  year  2000.  However,  if  the  appropriate
  modifications  are not made, or are not  completed on a timely  basis,  the year
  2000 issue could have a material  impact on the  operations  of the Bank and the
  Company.
  
                                         37
  Costs of Year 2000
  
           The Company has spent  approximately  $175,000 and  estimates  that the
  future dollar cost to the Company to be in  compliance  with the year 2000 issue
  will range from $25,000 to $50,000 by December 31, 1999. These costs include new
  equipment and software purchases,  in addition to testing  applications prior to
  the year 2000.
  
     Risks of the Company's Year 2000 Issues
  
           Management  believes that it has addressed the major areas with respect
  to Year 2000 compliance. Management also believes its progress of remedying year
  2000  issues is being  completed  according  to plan.  However,  there can be no
  assurances that the Company will not be impacted by Year 2000 complications.
  
     Contingency Plans
  
           The  Company  has  prepared  contingency  plans for each  major area of
  business   identified   above.  The  plans  will  utilize  in  part  alternative
  procedures, other third party vendors and manual intervention, to compensate for
  the loss of certain computer  systems.  As of September 30, 1999, all such plans
  have been substantially completed.
  
  Recent Accounting Pronouncements:
  
     Accounting for Derivative Instruments and Hedging Activities
  
           In June 1998,  the FASB  issued  Statement  No.  133,  "Accounting  for
  Derivative  Instruments  and Hedging  Activities"  ("Statement  No. 133").  This
  Statement  standardizes  the accounting for  derivative  instruments,  including
  certain derivative  instruments embedded in other contracts,  and those used for
  hedging activities,  by requiring that an entity recognize those items as assets
  or liabilities  in the statement of financial  position and measure them at fair
  value. The statement categorized derivatives used for hedging purposes as either
  fair value hedges, cash flow hedges, foreign currency fair value hedges, foreign
  currency cash flow hedges, or hedges of certain foreign currency exposures.  The
  statement  generally  provides for matching of gain or loss  recognition  on the
  hedging  instrument with the recognition of the changes in the fair value of the
  hedged asset or liability that are  attributable  to the hedged risk, so long as
  the hedge is effective. Prospective application of Statement No. 133, as amended
  by statement No. 137, is required for all fiscal years  beginning after June 15,
  2000, however earlier application is permitted.  Currently, the Company does not
  use any derivative  instruments,  nor does it engage in any hedging  activities.
  The Company  adopted  Statement No. 133 effective July 1, 1998,  which permitted
  the  Company  to  transfer   certain   securities   originally   designated   as
  held-to-maturity,   to  available-for-sale  and  trading.  A  portion  of  these
  securities  were  subsequently  sold  during  the  third  quarter  of  1998.  In
  accordance  with  Statement  No.  133,  the Company  recorded  the gross gain of
  $628,000  as a  cumulative  change in  accounting  principle,  net of a $207,000
  provision for income tax.
  
                                         38
  Reporting on the Costs of Start-Up Activities
  
           In April 1998, the American  Institute of Certified Public  Accountants
  issued Statement of Position 98-5, Reporting on the Costs of Start-Up Activities
  ("SOP 98-5").  This statement  requires costs of startup  activities,  including
  organization  costs,  to be expensed as incurred.  SOP 98-5 is effective for the
  Company's  financial  statements for fiscal years  beginning  after December 15,
  1998.  As of  December  31,  1998 the Company  had  deferred  costs  relating to
  start-up activities of $94,000,  remaining in the balance of other assets in the
  Consolidated  Balance Sheets.  The Company adopted SOP 98-5 effective January 1,
  1999, and accordingly,  expensed $94,000 of costs of start-up  activities in the
  first  quarter of 1999.  This  amount,  net of tax, is presented as a cumulative
  effect  of a change  in  account  principle  in the  consolidated  statement  of
  operations.
  
                                         39
  Part II  Other Information
  
  Item 1: Legal Proceedings
  
           The Company and the Banks are from time to time a party  (plaintiff  or
  defendant)  to lawsuits  that are in the normal  course of  business.  While any
  litigation  involves  an element of  uncertainty,  management,  after  reviewing
  pending actions with its legal counsel,  is of the opinion that the liability of
  the Company and the Banks,  if any,  resulting from such actions will not have a
  material  effect on the  financial  condition  or results of  operations  of the
  Company and the Banks.
  
  Item 2:  Changes in Securities and use of proceeds
           None
  
  Item 3:  Defaults upon Senior Securities
           None
  
  Item 4:  Submission of Matters to a Vote of Security Holders
           None
  
  Item 5:  Other Information
           None
  
  Item 6:  Exhibits and Reports on Form 8-K
  
          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 an
  annual report on Form 10-K)
  
                      Exhibit No.
                      ------------------------------------------------------------
  
                      3(a)      Amended and Restated  Articles of Incorporation of
                                the Company, as amended.*
  
                      3(b)      Amended and Restated Bylaws of the Company. *
  
                      4(b)(i)   Amended and Restated  Articles of Incorporation of
                                the Company, as amended.*
  
                      4(b)(ii)  Amended and Restated Bylaws of the Company.*
  
                      10        Amended and Restated Material Contracts.- None
  
                      10(a)     Amended and Restated Employment  Agreement between
                                the Company and Zvi H. Muscal.*
  
                      10(b)     Agreement  and Plan of Merger by and  between  the
                                Company and Republic  Bancorporation,  Inc.  dated
                                November 17, 1996.*
  
                                         40
  10(c)     Employment  agreement between the Company and Jere
                                A. Young.**
  
                      10(d)     Employment   agreement  between  the  Company  and
                                Robert D. Davis.**
  
                      10(e)     Agreement   between   the  Company  and  Harry  D.
                                Madonna.**
  
                      11        Computation of Per Share Earnings
                                See  footnote  No.  2  to  Notes  to  Consolidated
                                Financial Statements under Earnings per Share.
  
                      21        Subsidiaries of the Company.
  
                                First  Republic Bank (the "Bank"),  a wholly-owned
                                subsidiary,  commenced  operations  on November 3,
                                1988.  The  Bank is a  commercial  bank  chartered
                                pursuant  to  the  laws  of  the  Commonwealth  of
                                Pennsylvania. Republic First Bank of Delaware (the
                                "Delaware Bank") is also a wholly-owned subsidiary
                                of the Company,  commenced  operations  on June 1,
                                1999.  The  Delaware  Bank  is a  commercial  bank
                                chartered  pursuant  to the  laws of the  State of
                                Delaware.  The Bank and the Delaware Bank are both
                                members of the  Federal  Reserve  System and their
                                primary federal regulators are the Federal Reserve
                                Board of Governors.
  
                      27        Financial Data Schedule.
  
           All other  schedules  and  exhibits  are omitted  because  they are not
  applicable  or because  the  required  information  is set out in the  financial
  statements or the notes hereto.
  
           *Incorporated by reference from the Registration  Statement on Form S-4
  of the Company, as amended, Registration No. 333-673 filed April 29, 1996.
  
           **Incorporated by reference in the Company's Form 10-K, filed March 25,
  1999.
  
  Reports on Form 8-K
  
  None
  
                                         41
  SIGNATURES
  
           Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
  the  Issuer  has duly  caused  this  report to be  signed  on its  behalf by the
  undersigned thereunto duly authorized.
  
                                             Republic First Bancorp, Inc.
  
                                             /s/ Jere A. Young
                                             -------------------------------------
                                             Jere A. Young
                                             President and Chief Executive Officer
  
                                             /s/ George S. Rapp
                                             -------------------------------------
                                             George S. Rapp
                                             Executive Vice President and
                                             Chief Financial Officer
  
  Dated:  November 15, 1999
  
                                         42