Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2017

Risks and Uncertainties and Certain Significant Estimates [Policy Text Block]

Risks and Uncertainties

The earnings of the Company depend primarily on the earnings of Republic. The earnings of Republic 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 Company’s results of operations are subject to risks and uncertainties surrounding Republic’s exposure to changes in the interest rate environment. Prepayments on residential real estate mortgage and other fixed rate loans and mortgage-backed securities vary significantly and

may

cause significant fluctuations in interest margins.

Loans and Leases Receivable, Mortgage Banking Activities, Policy [Policy Text Block]

Mortgage Banking Activities and Mortgage Loans Held for Sale

Loans held for sale are originated and held until sold to permanent investors. On

July

28,

2016,

management elected to adopt the fair value option in accordance with FASB Accounting Standards Codification (“ASC”)

820,

Fair Value Measurements and Disclosures

, and record loans held for sale at fair value.

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

Derivatives, Policy [Policy Text Block]

Interest Rate Lock Commitments

(“IRLCs”)

Mortgage loan commitments known as interest rate locks that relate to the origination of a mortgage that will be held for sale upon funding are considered derivative instruments under the derivatives and hedging accounting guidance FASB ASC

815,

Derivatives and Hedging

. Loan commitments that are derivatives are recognized at fair value on the balance sheet as other assets and as other liabilities with changes in their fair values recorded as mortgage banking income in non-interest income in the statements of income. Outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of issuance through the date of loan funding, cancellation or expiration. Loan commitments generally range between

and

days; however, the borrower is not obligated to obtain the loan. Republic is subject to fallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs. Republic uses best efforts commitments to substantially eliminate these risks. The valuation of the IRLCs issued by Republic includes the value of the servicing released premium. Republic sells loans servicing released, and the servicing released premium is included in the market price. See Note

Derivatives and Risk Management Activities.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

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

Significant estimates are made by management in determining the allowance for loan losses, carrying values of other real estate owned, assessment of other than temporary impairment (“OTTI”) of investment securities, fair value of financial instruments, (see “Note

7”

below), and the realization of deferred income tax assets. Consideration is given to a variety of factors in establishing these estimates.

In estimating the allowance for loan losses, management considers current economic conditions, past loss experience, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews and regulatory examinations, borrowers’ perceived financial and managerial strengths, the adequacy of underlying collateral, if collateral dependent, or present value of future cash flows, and other relevant and qualitative risk factors. Subsequent to foreclosure, an estimate for the carrying value of other real estate owned is normally determined through valuations that are periodically performed by management and the assets are carried at the lower of carrying amount or fair value, less the cost to sell. Because the allowance for loan losses and carrying value of other real estate owned are dependent, to a great extent, on the general economy and other conditions that

may

be beyond the Company’s and Republic’s control, the estimates of the allowance for loan losses and the carrying values of other real estate owned could differ materially in the near term.

In estimating OTTI of investment securities, securities are evaluated on at least a quarterly basis and more frequently when market conditions warrant such an evaluation, to determine whether a decline in their value is other-than-temporary. To determine whether a loss in value is other-than-temporary, management utilizes criteria such as the reasons underlying the decline, the magnitude and duration of the decline, the intent to hold the security and the likelihood of the Company not being required to sell the security prior to an anticipated recovery in the fair value. The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospect for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of investment. Once a decline in value is determined to be other-than-temporary, the portion of the decline related to credit impairment is charged to earnings.

In evaluating the Company’s ability to recover deferred tax assets, management considers all available positive and negative evidence, including the past operating results and forecasts of future taxable income. In determining future taxable income, management makes assumptions for the amount of taxable income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require management to make judgments about the future taxable income and are consistent with the plans and estimates used to manage the business. Any reduction in estimated future taxable income

may

require management to record a valuation allowance against the deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in the period and could have a significant impact on future earnings.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

The Company has a Stock Option and Restricted Stock Plan (“the

2005

Plan”), under which the Company granted options, restricted stock or stock appreciation rights to the Company’s employees, directors, and certain consultants. The

2005

Plan became effective on

November

14,

1995,

and was amended and approved at the Company’s

2005

annual meeting of shareholders. Under the terms of the

2005

Plan,

1.5

million shares of common stock, plus an annual increase equal to the number of shares needed to restore the maximum number of shares that could be available for grant under the

2005

Plan to

1.5

million shares, were available for such grants. As of

March

31,

2017,

the only grants under the

2005

Plan were option grants. The

2005

Plan provided that the exercise price of each option granted equaled the market price of the Company’s stock on the date of the grant. Options granted pursuant to the

2005

Plan vest within

one

four

years and have a maximum term of

years. The

2005

Plan terminated on

November

14,

2015

in accordance with the terms and conditions specified in the Plan agreement.

April

29,

2014

the Company’s shareholders approved the

2014

Republic First Bancorp, Inc. Equity Incentive Plan (the

“2014

Plan”), under which the Company

may

grant options, restricted stock, stock units, or stock appreciation rights to the Company’s employees, directors, independent contractors, and consultants. Under the terms of the

2014

Plan,

2.6

million shares of common stock, plus an annual adjustment to be no less than

10%

of the outstanding shares or such lower number as the Board of Directors

may

determine, are available for such grants. At

March

31,

2017,

the maximum number of shares of common shares issuable under the

2014

Plan was

5.9

million. During the

three

months ended

March

31,

2017,

893,000

options were granted under the

2014

Plan with a weighted average grant date fair value of

$3,122,517.

The Company utilizes the Black-Scholes option pricing model to calculate the estimated fair value of each stock option granted on the date of the grant. A summary of the assumptions used in the Black-Scholes option pricing model for the

three

months ended

March

31,

2017

and

2016

are as follows:

	201 7				201 6
Dividend yield (1)			0.0%				0.0%
Expected volatility (2)		45.50%	to	50.09%		47.59%	to	52.54%
Risk-free interest rate (3)		1.89%	to	2.26%		1.23%	to	1.82%
Expected life (4) (in years)		5.5	to	7.0		5.5	to	7.0
Assumed forfeiture rate (5)			6.0%				10.0%

(1)

A dividend yield of

0.0%

is utilized because cash dividends have never been paid.

(2)

Expected volatility is based on Bloomberg’s

five

and

one

-half to

seven

year volatility calculation for “FRBK” stock.

(3)

The risk-free interest rate is based on the

five

seven

year Treasury bond.

(4)

The expected life reflects a

year vesting period, the maximum

ten

year term and review of historical behavior.

(

)

Forfeiture rate is determined through forfeited and expired options as a percentage of options granted over the current

three

year period.

During the

three

months ended

March

31,

2017

and

2016,

478,374

options and

470,300

options vested, respectively. Expense is recognized ratably over the period required to vest. At

March

31,

2017,

the intrinsic value of the

3,121,500

options outstanding was

$10,534,698,

while the intrinsic value of the

1,423,648

exercisable (vested) options was

$6,685,120.

March

31,

2016,

the intrinsic value of the

2,491,175

options outstanding was

$1,985,387,

while the intrinsic value of the

1,236,949

exercisable (vested) options was

$1,252,381.

During the

three

months ended

March

31,

2017,

94,800

options were exercised with cash received of

$291,981

and

9,600

options were forfeited with a weighted average grant date fair value of

$43,581.

During the

three

months ended

March

31,

2016,

250

options were exercised with cash received of

$488

and

6,050

options were forfeited with a weighted average grant date fair value of

$0.

Information regarding stock based compensation for the

three

months ended

March

31,

2017

and

2016

is set forth below:

	201 7		201 6
Stock based compensation expense recognized	$	302,000	$	171,000
Number of unvested stock options		1,697,852		1,254,226
Fair value of unvested stock options	$	4,583,209	$	2,418,303
Amount remaining to be recognized as expense	$	3,935,014	$	1,690,057

The remaining unrecognized expense amount of

$3,935,014

will be recognized ratably as expense through

February

2021.

Earnings Per Share, Policy [Policy Text Block]

Earnings per Share

Earnings per share (“EPS”) consist of

two

separate components: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for each period presented. Diluted EPS is calculated by dividing net income by the weighted average number of common shares outstanding plus dilutive common stock equivalents (“CSEs”). CSEs consist of dilutive stock options granted through the Company’s stock option plans and convertible securities related to the trust preferred securities issued in

2008.

In the diluted EPS computation, the after tax interest expense on the trust preferred securities issuance is added back to the net income. For the

three

months ended

March

31,

2017

and

2016,

the effect of CSEs (convertible securities related to the trust preferred securities only) and the related add back of after tax interest expense was considered anti-dilutive and therefore was not included in the EPS calculations.

The calculation of EPS for the

three

months ended

March

31,

2017

and

2016

is as follows (in thousands, except per share amounts):

	Three Months Ended March 31,
	2017		2016

Net income - basic and diluted	$	1,787	$	1,085

Weighted average shares outstanding		56,824		37,837

Net income per share – basic	$	0.03	$	0.03

Weighted average shares outstanding (including dilutive CSEs)		58,048		38,269

Net income per share – diluted	$	0.03	$	0.03

The following is a summary of securities that could potentially dilute basic earnings per common share in future periods that were not included in the computation of diluted earnings per common share because to do so would have been anti-dilutive for the periods presented.

	Three Months Ended March 31,
(in thousands)	2017		2016

Anti-dilutive securities

Share based compensation awards		1,897		2,059

Convertible securities		1,625		1,662

Total anti-dilutive securities		3,522		3,721

During the

three

months ended

March

31,

2017,

$240,000

of subordinated debt was converted to

36,922

shares of Company common stock.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

ASU

2014

May

2014,

the FASB issued ASU

2014

09,

“Revenue from Contracts with Customers (Topic

660):

Summary and Amendments that Create Revenue from Contracts with Customers (Topic

606)

and Other Assets and Deferred Costs – Contracts with Customers (Subtopic

340

40).”

The purpose of this guidance is to clarify the principles for recognizing revenue. The guidance in this update supersedes the revenue recognition requirements in ASC Topic

605,

Revenue Recognition, and most industry-specific guidance throughout the industry topics of the codification. For public companies, early adoption of the update was effective for interim and annual periods beginning after

December

15,

2016.

For public companies that elect to defer the update, adoption will be effective for interim and annual periods beginning after

December

15,

2017.

The Company expects that the most significant impact related to the standard’s expected disclosure requirements will be the disaggregation of revenue. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements, but does not expect a material impact. In

August

2015,

the FASB issued ASU

2015

14,

Revenue from

Contracts with The Company (Topic

606):

Deferral of the Effective Date

. The guidance in this ASU is now effective for annual reporting periods beginning after

December

15,

2017,

including interim reporting periods within that reporting period. The Company has evaluated this ASU and it does not have a significant impact on its financial condition or results of operations.

ASU

2016

January

2016,

the FASB issued Accounting Standards Update ("ASU") No.

2016

01,

Financial Instruments - Overall.

The guidance in this ASU among other things,

(1)

requires equity investments with certain exceptions, to be measured at fair value with changes in fair value recognized in net income,

(2)

simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment,

(3)

eliminates the requirement for public businesses entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet,

(4)

requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes,

(5)

requires an entity to present separately in other comprehensive income the portion of the change in fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments,

(6)

requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and

(7)

clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. The guidance in this ASU is effective for fiscal years beginning after

December

15,

2017,

including interim periods within those fiscal years. The Company has evaluated this ASU and it does not have a significant impact on its financial condition or results of operations.

ASU

2016

February

2016,

the FASB issued Accounting Standards Update ("ASU") No.

2016

02,

Leases.

From the Republic perspective, the new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than

months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement for lessees. From the landlord perspective, the new standard requires a lessor to classify leases as either sales-type, finance or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor doesn’t convey risks and rewards or control, an operating lease results. The new standard is effective for fiscal years beginning after

December

15,

2018,

including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. A modified retrospective transition approach is required for lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. After evaluating the impact of the pending adoption of the new standard on its consolidated financial statements, the Company expects an increase of assets and liabilities on the Company’s books.

ASU

2016

March

2016,

the FASB issued Accounting Standards Update (“ASU”) No.

2016

09,

Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting. ASU

2016

will amend current guidance such that all excess tax benefits and tax deficiencies related to share-based payment awards will be recognized as income tax expense or benefit in the income statement during the period in which they occur. Additionally, excess tax benefits will be classified along with other income tax cash flows as an operating activity rather than a financing activity. ASU

2016

also provides that any entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, which is the current requirement, or account for forfeitures when they occur. ASU

2016

was effective

January

2017.

It currently does not have a material impact on the financial statements, however depending upon the exercise timing of share based awards, the ASU could have a material impact on the financial statements going forward.

ASU

2016

June

2016,

the FASB issued ASU

2016

13,

Financial Instruments-Credit Losses (Topic

326):

Measurement of Credit Losses on Financial Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For the Company, this update will be effective for interim and annual periods beginning after

December

15,

2019.

The Company has not yet determined the impact the adoption of ASU

2016

will have on the consolidated financial statements.

ASU

2016

August

2016,

the FASB issued ASU

2016

15,

Statement of Cash Flows (Topic

230).

The ASU addresses classification of certain cash receipts and cash payments in the statement of cash flows. The new guidance is effective on

January

2018,

on a retrospective basis, with early adoption permitted. This new accounting guidance will result in some changes in classification in the Consolidated Statement of Cash Flows, which the Company does not expect will be significant, and will not have any impact on the consolidated financial statements.

ASU-

2017

January

2017,

the FASB issued ASU

2017

01,

Business Combinations (Topic

805).

The ASU clarifies the definition of a business in ASC

805.

The FASB issued the ASU in response to stakeholder feedback that the definition of a business in ASC

805

is being applied too broadly. In addition, stakeholders said that analyzing transactions under the current definition is difficult and costly. Concerns about the definition of a business were among the primary issues raised in connection with the Financial Accounting Foundation’s post-implementation review report on FASB Statement No.

141(R),

Business Combinations (codified in ASC

805).

The amendments in the ASU are intended to make application of the guidance more consistent and cost-efficient. The ASU is effective for public business entities in annual periods beginning after

December

15,

2017,

including interim periods therein. For all other entities, the ASU is effective in annual periods beginning after

December

15,

2018,

and interim periods within annual periods beginning after

December

15,

2019.

The ASU must be applied prospectively on or after the effective date, and no disclosures for a change in accounting principle are required at transition. Early adoption is permitted for transactions (i.e., acquisitions or dispositions) that occurred before the issuance date or effective date of the standard if the transactions were not reported in financial statements that have been issued or made available for issuance. The Company has not yet determined the impact the adoption of ASU

2017

will have on the consolidated financial statements.

ASU

2017

January

2017,

the FASB issued ASU

2017

04,

Simplifying the Test For Goodwill Impairment. The ASU simplifies the accounting for goodwill impairments by eliminating step

from the goodwill impairment test. Instead, if “the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.” For public business entities that are SEC filers, the ASU is effective for annual and any interim impairment tests for periods beginning after

December

15,

2019.

The Company has not yet determined the impact the adoption of ASU

2017

will have on the consolidated financial statements.

ASU

2017

March

2017,

the FASB issued ASU

2017

08,

Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after

December

15,

2018.

For all other entities, the ASU is effective for fiscal years beginning after

December

15,

2019,

and interim periods within fiscal years beginning after

December

15,

2020.

Earlier application is permitted for all entities, including adoption in an interim period. If an entity early adopts the ASU in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period.

The Company has not yet determined the impact the adoption of ASU

2017

will have on the consolidated financial statements.