##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|þ |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

Or

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to

Commission File Number: 0-15734

REPUBLIC BANCORP INC.
(Exact name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Michigan                                                       |  | 38-2604669                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     
|1070 East Main Street, Owosso, Michigan                        |  | 48867                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(989) 725-7337
(Registrants telephone number, including area code)

(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 such
filing requirements for the past 90 days.

þ Yes          o No

Indicate by check whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act).

þ Yes          o 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.

|                                              |                            |  |                   |  | 
|--------------------------------------------- | -------------------------- |  | ----------------- |  | 
|Common Stock Outstanding as of July 31, 2003: |                            |  |                   | 
|                                              | Common Stock, $5 Par Value |  | 57,419,908 Shares





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TABLE OF CONTENTS



|                                                   |                                                                                               |                                                                                             |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                    
|                                                   | Item 1. Financial Statements                                                                 
|                                                   |                                                                                               | Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002                      
|                                                   |                                                                                               | Consolidated Statements of Income for the Three and Six Months Ended June 30, 2003 and 2002
|                                                   |                                                                                               | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002      
|                                                   |                                                                                               | Notes to Consolidated Financial Statements                                                 
|                                                   | Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
|                                                   | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                   | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                        
|                                                   | Item 1. Legal Proceedings                                                                    
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                         
|Computation of Ratios of Earnings to Fixed Charges
|Certification of CEO Pursuant to Section 302      
|Certification of CFO Pursuant to Section 302      
|Certification of CEO Pursuant to Section 906      
|Certification of CFO Pursuant to Section 906      



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##### Table of Contents



INDEX

|          |  |                                                                                             |  |      
|--------- |  | ------------------------------------------------------------------------------------------- |  | -----
|PART I    |  | FINANCIAL INFORMATION                                                                       |  |      
|          |  |                                                                                             |  |      
|Item 1.   |  | Financial Statements (Unaudited)                                                            |  |      
|          |  |                                                                                             |  |      
|          |  | Consolidated Balance Sheets as of June 30, 2003
and December 31, 2002                       |  | 3    
|          |  |                                                                                             |  |      
|          |  | Consolidated Statements of Income for the Three and Six
Months Ended June 30, 2003 and 2002 |  | 4    
|          |  |                                                                                             |  |      
|          |  | Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2003 and 2002       |  | 5    
|          |  |                                                                                             |  |      
|          |  | Notes to Consolidated Financial Statements                                                  |  | 6-9  
|          |  |                                                                                             |  |      
|Item 2.   |  | Managements Discussion and Analysis of
Results of Operations and Financial Condition       |  | 10-21
|          |  |                                                                                             |  |      
|Item 3.   |  | Quantitative and Qualitative Disclosures About Market Risk                                  |  | 22   
|          |  |                                                                                             |  |      
|Item 4.   |  | Controls and Procedures                                                                     |  | 23   
|          |  |                                                                                             |  |      
|PART II   |  | OTHER INFORMATION                                                                           |  |      
|          |  |                                                                                             |  |      
|Item 1.   |  | Legal Proceedings                                                                           |  | 24   
|          |  |                                                                                             |  |      
|Item 6.   |  | Exhibits and Reports on Form 8-K                                                            |  | 24   
|          |  |                                                                                             |  |      
|SIGNATURE |  | 25                                                                                         

2



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PART I  FINANCIAL INFORMATION
ITEM 1  Financial Statements

REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                                                                                                              |                                   |                                            |           |             |           |   |              |           |           | 
|----------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ------------------------------------------ | --------- | ----------- | --------- | - | ------------ | --------- | --------- | 
|                                                                                                                              |                                   |                                            |           | June 30,    |           |   | December 31, |          
|(Dollars in thousands)                                                                                                        |                                   | 2003                                       |           |             | 2002      |  
|                                                                                                                              |                                   |                                            |           |             |           |  
|                                                                                                                              |                                   |                                            |           | (Unaudited) |           |   |              |           |          
|ASSETS                                                                                                                        |                                   |                                            |           |             |           |   |              |          
|Cash and cash equivalents                                                                                                     |                                   | $                                          | 89,976    |             |           | $ | 75,625       |          
|Mortgage loans held for sale                                                                                                  |                                   |                                            | 479,753   |             |           |   | 660,999      |          
|Securities available for sale (amortized cost of
$366,534 and $247,573, respectively)                                         |                                   |                                            | 372,232   |             |           |   | 248,931      |          
|Loans                                                                                                                         |                                   |                                            | 3,954,998 |             |           |   | 3,656,543    |          
|                                                                                                                              | Less allowance for loan losses    |                                            |           | (38,269     | )         |   |              | (36,077   | )        
|                                                                                                                              |                                   |                                            |           |             |           |  
|Net loans                                                                                                                     |                                   |                                            | 3,916,729 |             |           |   | 3,620,466    |          
|Premises and equipment                                                                                                        |                                   |                                            | 27,084    |             |           |   | 27,790       |          
|Bank owned life insurance                                                                                                     |                                   |                                            | 89,192    |             |           |   | 87,192       |          
|Other assets                                                                                                                  |                                   |                                            | 55,989    |             |           |   | 57,192       |          
|                                                                                                                              |                                   |                                            |           |             |           |  
|                                                                                                                              |                                   | Total assets                               |           | $           | 5,030,955 |   |              | $         | 4,778,195 | 
|                                                                                                                              |                                   |                                            |           |             |           |  
|LIABILITIES                                                                                                                   |                                   |                                            |           |             |           |   |              |          
|Noninterest-bearing deposits                                                                                                  |                                   | $                                          | 298,832   |             |           | $ | 260,634      |          
|Interest-bearing deposits:                                                                                                    |                                   |                                            |           |             |           |   |              |          
|                                                                                                                              | NOW accounts                      |                                            |           | 179,855     |           |   |              | 176,366   |          
|                                                                                                                              | Savings and money market accounts |                                            |           | 972,034     |           |   |              | 910,863   |          
|                                                                                                                              | Certificates of deposit           |                                            |           | 1,365,833   |           |   |              | 1,440,409 |          
|                                                                                                                              |                                   |                                            |           |             |           |  
|                                                                                                                              |                                   | Total interest-bearing deposits            |           |             | 2,517,722 |   |              |           | 2,527,638 | 
|                                                                                                                              |                                   |                                            |           |             |           |  
|                                                                                                                              |                                   | Total deposits                             |           |             | 2,816,554 |   |              |           | 2,788,272 | 
|Federal funds purchased and other short-term borrowings                                                                       |                                   |                                            | 266,499   |             |           |   | 209,070      |          
|Short-term FHLB advances                                                                                                      |                                   |                                            | 405,000   |             |           |   | 305,000      |          
|Long-term FHLB advances                                                                                                       |                                   |                                            | 1,042,804 |             |           |   | 1,002,943    |          
|Accrued expenses and other liabilities                                                                                        |                                   |                                            | 98,836    |             |           |   | 76,682       |          
|Long-term debt                                                                                                                |                                   |                                            |          |             |           |   | 13,500       |          
|                                                                                                                              |                                   |                                            |           |             |           |  
|                                                                                                                              |                                   | Total liabilities                          |           |             | 4,629,693 |   |              |           | 4,395,467 | 
|Trust preferred securities                                                                                                    |                                   |                                            | 50,000    |             |           |   | 50,000       |          
|SHAREHOLDERS EQUITY                                                                                                          |                                   |                                            |           |             |           |   |              |          
|Preferred stock, $25 stated value: $2.25 cumulative
and convertible; 5,000,000 shares authorized,
none issued and outstanding |                                   |                                            |          |             |           |   |             |          
|Common stock, $5 par value, 75,000,000 shares
authorized; 57,377,000 and 57,441,000, issued and
outstanding, respectively     |                                   |                                            | 286,883   |             |           |   | 287,207      |          
|Capital surplus                                                                                                               |                                   |                                            | 38,081    |             |           |   | 40,633       |          
|Unearned compensation  restricted stock                                                                                      |                                   |                                            | (2,357    | )           |           |   | (368         | )        
|Retained earnings                                                                                                             |                                   |                                            | 24,952    |             |           |   | 4,373        |          
|Accumulated other comprehensive income                                                                                        |                                   |                                            | 3,703     |             |           |   | 883          |          
|                                                                                                                              |                                   |                                            |           |             |           |  
|                                                                                                                              | Total shareholders equity        |                                            |           | 351,262     |           |   |              | 332,728   |          
|                                                                                                                              |                                   |                                            |           |             |           |  
|                                                                                                                              |                                   | Total liabilities and shareholders equity |           | $           | 5,030,955 |   |              | $         | 4,778,195 | 
|                                                                                                                              |                                   |                                            |           |             |           |  

See notes to consolidated financial statements.

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REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |        |         |   |         |        |         | 
|------------------------------------------------------------------------- | ------------------------- | ------------------------ | ------ | ------------------ | ------ | - | ---------------- | ------ | ------ | - | ------- | ------ | ------- | - | ------- | ------ | ------- | 
|                                                                          |                           |                          |        | Three Months Ended |        |   | Six Months Ended |       
|                                                                          |                           |                          |        | June 30,           |        |   | June 30,         |       
|                                                                          |                           |                          |        |                    |        |   |                  |       
|(In thousands, except per share data)                                     |                           | 2003                     |        |                    | 2002   |   |                  | 2003   |        |   | 2002    |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Interest Income:                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |        |         |   |         |       
|Loans, including fees                                                     |                           | $                        | 62,944 |                    |        | $ | 64,288           |        |        | $ | 125,880 |        |         | $ | 133,315 |       
|Investment securities                                                     |                           |                          | 3,898  |                    |        |   | 5,563            |        |        |   | 6,712   |        |         |   | 10,071  |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|                                                                          |                           | Total interest income    |        |                    | 66,842 |   |                  |        | 69,851 |   |         |        | 132,592 |   |         |        | 143,386 | 
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Interest Expense:                                                         |                           |                          |        |                    |        |   |                  |        |        |   |         |        |         |   |         |       
|Deposits                                                                  |                           |                          | 14,432 |                    |        |   | 19,064           |        |        |   | 29,926  |        |         |   | 39,704  |       
|Short-term borrowings                                                     |                           |                          | 958    |                    |        |   | 857              |        |        |   | 1,776   |        |         |   | 1,640   |       
|FHLB advances                                                             |                           |                          | 14,512 |                    |        |   | 13,653           |        |        |   | 28,311  |        |         |   | 27,861  |       
|Long-term debt                                                            |                           |                          |       |                    |        |   | 241              |        |        |   | 39      |        |         |   | 483     |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|                                                                          |                           | Total interest expense   |        |                    | 29,902 |   |                  |        | 33,815 |   |         |        | 60,052  |   |         |        | 69,688  | 
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Net interest income                                                       |                           |                          | 36,940 |                    |        |   | 36,036           |        |        |   | 72,540  |        |         |   | 73,698  |       
|Provision for loan losses                                                 |                           |                          | 3,000  |                    |        |   | 2,400            |        |        |   | 6,000   |        |         |   | 4,800   |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Net interest income after provision for loan losses                       |                           |                          | 33,940 |                    |        |   | 33,636           |        |        |   | 66,540  |        |         |   | 68,898  |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Noninterest Income:                                                       |                           |                          |        |                    |        |   |                  |        |        |   |         |        |         |   |         |       
|Mortgage banking income                                                   |                           |                          | 10,455 |                    |        |   | 8,140            |        |        |   | 20,191  |        |         |   | 15,662  |       
|Service charges                                                           |                           |                          | 2,735  |                    |        |   | 2,017            |        |        |   | 5,387   |        |         |   | 4,006   |       
|Gain on sale of securities                                                |                           |                          | 432    |                    |        |   | 417              |        |        |   | 880     |        |         |   | 818     |       
|Income from bank owned life insurance                                     |                           |                          | 1,320  |                    |        |   |                 |        |        |   | 2,615   |        |         |   |        |       
|Other noninterest income                                                  |                           |                          | 555    |                    |        |   | 1,423            |        |        |   | 1,285   |        |         |   | 2,088   |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|                                                                          |                           | Total noninterest income |        |                    | 15,497 |   |                  |        | 11,997 |   |         |        | 30,358  |   |         |        | 22,574  | 
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Noninterest Expense:                                                      |                           |                          |        |                    |        |   |                  |        |        |   |         |        |         |   |         |       
|Salaries and employee benefits                                            |                           |                          | 16,040 |                    |        |   | 12,950           |        |        |   | 30,455  |        |         |   | 26,877  |       
|Occupancy expense of premises                                             |                           |                          | 2,496  |                    |        |   | 2,485            |        |        |   | 5,139   |        |         |   | 4,972   |       
|Equipment expense                                                         |                           |                          | 1,721  |                    |        |   | 1,665            |        |        |   | 3,426   |        |         |   | 3,345   |       
|Other noninterest expense                                                 |                           |                          | 6,444  |                    |        |   | 5,757            |        |        |   | 12,063  |        |         |   | 11,460  |       
|Dividends on trust preferred securities and
preferred stock of subsidiary |                           |                          | 1,075  |                    |        |   | 1,755            |        |        |   | 2,150   |        |         |   | 3,511   |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|                                                                          | Total noninterest expense |                          |        | 27,776             |        |   |                  | 24,612 |        |   |         | 53,233 |         |   |         | 50,165 |        
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Income before income taxes                                                |                           |                          | 21,661 |                    |        |   | 21,021           |        |        |   | 43,665  |        |         |   | 41,307  |       
|Provision for income taxes                                                |                           |                          | 6,503  |                    |        |   | 6,487            |        |        |   | 13,354  |        |         |   | 12,655  |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Net income                                                                |                           | $                        | 15,158 |                    |        | $ | 14,534           |        |        | $ | 30,311  |        |         | $ | 28,652  |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Basic earnings per share                                                  |                           | $                        | .26    |                    |        | $ | .25              |        |        | $ | .53     |        |         | $ | .49     |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Diluted earnings per share                                                |                           | $                        | .26    |                    |        | $ | .24              |        |        | $ | .52     |        |         | $ | .48     |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Average common shares outstanding  diluted                               |                           |                          | 58,287 |                    |        |   | 59,562           |        |        |   | 58,294  |        |         |   | 59,367  |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       
|Cash dividends declared per common share                                  |                           | $                        | .085   |                    |        | $ | .077             |        |        | $ | .170    |        |         | $ | .155    |       
|                                                                          |                           |                          |        |                    |        |   |                  |        |        |   |         |       

See notes to consolidated financial statements.

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REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

|                                                                   |                                                                                             |                                                                   |                                                     |   |            |          |          |   |           |          |  
|------------------------------------------------------------------ | ------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | --------------------------------------------------- | - | ---------- | -------- | -------- | - | --------- | -------- | -
|Six Months Ended June 30 (In thousands)                            |                                                                                             | 2003                                                              |                                                     |   | 2002       |         
|                                                                   |                                                                                             |                                                                   |                                                     |   |            |         
|Cash Flows From Operating Activities:                              |                                                                                             |                                                                   |                                                     |   |            |          |          |  
|Net income                                                         |                                                                                             | $                                                                 | 30,311                                              |   |            | $        | 28,652   |  
|                                                                   | Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |                                                                   |                                                     |   |            |          |          |   |          
|                                                                   |                                                                                             | Depreciation and amortization                                     |                                                     |   | 5,750      |          |          |   | 4,586     |         
|                                                                   |                                                                                             | Net gains on sale of securities available for sale                |                                                     |   | (880       | )        |          |   | (818      | )       
|                                                                   |                                                                                             | Net gains on sale of commercial and residential real estate loans |                                                     |   | (2,516     | )        |          |   | (3,225    | )       
|                                                                   |                                                                                             | Proceeds from sale of mortgage loans held for sale                |                                                     |   | 1,561,896  |          |          |   | 1,437,819 |         
|                                                                   |                                                                                             | Origination of mortgage loans held for sale                       |                                                     |   | (1,380,650 | )        |          |   | (886,804  | )       
|                                                                   |                                                                                             | Net (increase) decrease in other assets                           |                                                     |   | (10,058    | )        |          |   | 12,928    |         
|                                                                   |                                                                                             | Net increase (decrease) in other liabilities                      |                                                     |   | 22,154     |          |          |   | (50,857   | )       
|                                                                   |                                                                                             | Other, net                                                        |                                                     |   | (233       | )        |          |   | (506      | )       
|                                                                   |                                                                                             |                                                                   |                                                     |   |            |         
|                                                                   |                                                                                             |                                                                   | Total adjustments                                   |   |            | 195,463  |          |   |           | 513,123  |  
|                                                                   |                                                                                             |                                                                   |                                                     |   |            |         
|                                                                   |                                                                                             |                                                                   | Net cash provided by operating activities           |   |            | 225,774  |          |   |           | 541,775  |  
|                                                                   |                                                                                             |                                                                   |                                                     |   |            |         
|Cash Flows From Investing Activities:                              |                                                                                             |                                                                   |                                                     |   |            |          |          |  
|Proceeds from sale of securities available for sale                |                                                                                             |                                                                   | 41,940                                              |   |            |          | 83,238   |  
|Proceeds from maturities/payments of securities available for sale |                                                                                             |                                                                   | 103,927                                             |   |            |          | 14,934   |  
|Purchases of securities available for sale                         |                                                                                             |                                                                   | (264,568                                            | ) |            |          | (192,590 | )
|Proceeds from sale of commercial and residential real estate loans |                                                                                             |                                                                   | 89,256                                              |   |            |          | 115,874  |  
|Net increase in loans made to customers                            |                                                                                             |                                                                   | (381,428                                            | ) |            |          | (202,069 | )
|                                                                   |                                                                                             |                                                                   |                                                     |   |            |         
|                                                                   |                                                                                             |                                                                   | Net cash used in investing activities               |   |            | (410,873 | )        |   |           | (180,613 | )
|                                                                   |                                                                                             |                                                                   |                                                     |   |            |         
|Cash Flows From Financing Activities:                              |                                                                                             |                                                                   |                                                     |   |            |          |          |  
|Net increase (decrease) in total deposits                          |                                                                                             |                                                                   | 28,282                                              |   |            |          | (79,080  | )
|Net increase in short-term borrowings                              |                                                                                             |                                                                   | 57,429                                              |   |            |          | 7,000    |  
|Net increase (decrease) in short-term FHLB advances                |                                                                                             |                                                                   | 100,000                                             |   |            |          | (360,000 | )
|Proceeds from long-term FHLB advances                              |                                                                                             |                                                                   | 100,000                                             |   |            |          | 76,952   |  
|Payments on long-term FHLB advances                                |                                                                                             |                                                                   | (60,139                                             | ) |            |          |         |  
|Payments on long-term debt                                         |                                                                                             |                                                                   | (13,500                                             | ) |            |          |         |  
|Net proceeds from issuance of common shares                        |                                                                                             |                                                                   | 6,056                                               |   |            |          | 4,310    |  
|Repurchase of common shares                                        |                                                                                             |                                                                   | (8,892                                              | ) |            |          | (4,724   | )
|Dividends paid on common shares                                    |                                                                                             |                                                                   | (9,786                                              | ) |            |          | (9,051   | )
|                                                                   |                                                                                             |                                                                   |                                                     |   |            |         
|                                                                   |                                                                                             |                                                                   | Net cash provided by (used in) financing activities |   |            | 199,450  |          |   |           | (364,593 | )
|                                                                   |                                                                                             |                                                                   |                                                     |   |            |         
|Net increase (decrease) in cash and cash equivalents               |                                                                                             |                                                                   | 14,351                                              |   |            |          | (3,431   | )
|Cash and cash equivalents at beginning of period                   |                                                                                             |                                                                   | 75,625                                              |   |            |          | 76,734   |  
|                                                                   |                                                                                             |                                                                   |                                                     |   |            |         
|Cash and cash equivalents at end of period                         |                                                                                             | $                                                                 | 89,976                                              |   |            | $        | 73,303   |  
|                                                                   |                                                                                             |                                                                   |                                                     |   |            |         

See notes to consolidated financial statements.

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REPUBLIC BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1  Basis of Presentation
The accompanying unaudited consolidated financial statements of Republic
Bancorp Inc. and Subsidiaries (the Company) have been prepared in accordance
with accounting principles generally accepted in the United States (GAAP) for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes necessary for a comprehensive presentation of
financial position, results of operations and cash flow activity required by
accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all normal recurring
adjustments necessary for a fair presentation of results have been included.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2002.

Note 2  Principles of Consolidation
The consolidated financial statements include the accounts of the parent
company, Republic Bancorp Inc., its wholly-owned banking subsidiary, Republic
Bank (including its wholly-owned subsidiaries Quincy Investment Services, Inc.,
CAS Properties, Inc., Republic Bank Real Estate Finance, LLC and Republic
Management Company, Inc.) and Republic Capital Trust I. The consolidated
financial statements as of June 30, 2002, also include the accounts of Republic
Banks wholly-owned subsidiary, D&N Capital Corporation. On July 22, 2002, the
Company redeemed all 1,210,000 issued and outstanding shares of D&N Capital
Corporations 9.0% Noncumulative Preferred Stock, Series A (liquidation
preference $25.00 per share) at a redemption price of $25.00 per share, plus
accrued dividends of $0.1375 per share, for cash. Therefore, the consolidated
balance sheet as of June 30, 2003 does not include D&N Capital Corporation.
All significant intercompany accounts and transactions have been eliminated in
consolidation.

Mortgage servicing rights totaling $2.9 million at June 30, 2002 have been
reclassified to other assets to conform to the current year presentation. In
addition, for a consistent presentation, dividends on trust preferred
securities and preferred stock of subsidiary for the three and six months ended
June 30, 2002 have been reclassified to noninterest expense.

Note 3  Consolidated Statements of Cash Flows
Supplemental disclosures of cash flow information for the six months ended June
30, include:

|                                 |                  |      |   |        |      |  |   |        | 
|-------------------------------- | ---------------- | ---- | - | ------ | ---- |  | - | ------ | 
|(In thousands)                   |                  | 2003 |   |        | 2002 | 
|                                 |                  |      |   |        |      | 
|Cash paid during the period for: |                  |      |   |        |      |  |   |       
|                                 | Interest         |      | $ | 58,340 |      |  | $ | 69,607 | 
|                                 | Income taxes     |      | $ | 14,740 |      |  | $ | 12,984 | 
|Non-cash investing activities:   |                  |      |   |        |      |  |   |       
|                                 | Loan charge-offs |      | $ | 4,681  |      |  | $ | 4,737  | 

Note 4  Comprehensive Income
The following table sets forth the computation of comprehensive income:

|                                                                                                                    |  |                    |        |   |                  |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                    |  | Three Months Ended |        |   | Six Months Ended |  
|                                                                                                                    |  | June 30,           |        |   | June 30,         |  
|                                                                                                                    |  |                    |        |   |                  |  
|(In thousands)                                                                                                      |  | 2003               |        |   | 2002             |   |        | 2003 |  |   | 2002   |  
|                                                                                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  
|Net income                                                                                                          |  | $                  | 15,158 |   |                  | $ | 14,534 |      |  | $ | 30,311 |   |  | $ | 28,652 |  
|Unrealized holding gains on securities, net of tax                                                                  |  | $                  | 3,345  |   |                  | $ | 3,770  |      |  | $ | 3,392  |   |  | $ | 4,655  |  
|Reclassification adjustment for gains included in net income,
net of tax of $151, $146, $308 and $286, respectively |  |                    | (281   | ) |                  |   | (271   | )    |  |   | (572   | ) |  |   | (532   | )
|                                                                                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  
|Net unrealized gains on securities, net of tax                                                                      |  |                    | 3,064  |   |                  |   | 3,499  |      |  |   | 2,820  |   |  |   | 4,123  |  
|                                                                                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  
|Comprehensive income                                                                                                |  | $                  | 18,222 |   |                  | $ | 18,033 |      |  | $ | 33,131 |   |  | $ | 32,775 |  
|                                                                                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  

Note 5  Intangible Assets
The following table summarizes the Companys core deposit intangible asset which is subject to amortization:

|                               |                          |                |   |        |               |  |   |        |       | 
|------------------------------ | ------------------------ | -------------- | - | ------ | ------------- |  | - | ------ | ----- | 
|(Dollars in thousands)         |                          | June 30, 2003  |   |        | Dec. 31, 2002 | 
|                               |                          |                |   |        |               | 
|Core Deposit Intangible Asset: |                          |                |   |        |               |  |   |       
|                               | Gross carrying amount    |                | $ | 10,475 |               |  | $ | 10,475 |      
|                               | Accumulated amortization |                |   | (5,402 | )             |  |   | (4,907 | )    
|                               |                          |                |   |        |               | 
|                               |                          | Net book value |   | $      | 5,073         |  |   | $      | 5,568 | 
|                               |                          |                |   |        |               | 

6



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##### Table of Contents



Note 5  Intangible Assets (Continued)
Amortization expense on the core deposit intangible asset totaled $247,500 for
each of the quarters ended June 30, 2003 and 2002, and $990,000 for the year
ended December 31, 2002. The Company expects core deposit intangible
amortization expense to be $990,000 for each of the years ending December 31,
2003 and 2004. The Company expects core deposit intangible amortization
expense for the year ended December 31, 2005 to be $936,000 and for each of the
years ended December 31, 2006 and 2007 to be $823,000, respectively.

Note 6  Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:

|                                                                                                      |                                |                            |               |                                  |        |                    |            |      |                  |         |            |   |        |         |            |   |        |         |         | 
|----------------------------------------------------------------------------------------------------- | ------------------------------ | -------------------------- | ------------- | -------------------------------- | ------ | ------------------ | ---------- | ---- | ---------------- | ------- | ---------- | - | ------ | ------- | ---------- | - | ------ | ------- | ------- | 
|                                                                                                      |                                |                            |               |                                  |        | Three Months Ended |            |      | Six Months Ended |        
|                                                                                                      |                                |                            |               |                                  |        | June 30,           |            |      | June 30,         |        
|                                                                                                      |                                |                            |               |                                  |        |                    |            |      |                  |        
|(Dollars in thousands, except per share data)                                                         |                                | 2003                       |               |                                  | 2002   |                    |            | 2003 |                  |         | 2002       |  
|                                                                                                      |                                |                            |               |                                  |        |                    |            |      |                  |         |            |  
|Numerator for basic and diluted earnings per share:                                                   |                                |                            |               |                                  |        |                    |            |      |                  |         |            |   |        |         |            |  
|                                                                                                      |                                | Net income                 |               | $                                | 15,158 |                    |            | $    | 14,534           |         |            | $ | 30,311 |         |            | $ | 28,652 |        
|Denominator for basic earnings per share 
weighted-average shares                                    |                                |                            | 57,459,138    |                                  |        |                    | 58,493,862 |      |                  |         | 57,499,791 |   |        |         | 58,411,081 |  
|                                                                                                      | Effect of dilutive securities: |                            |               |                                  |        |                    |            |      |                  |         |            |   |        |         |            |   |       
|                                                                                                      |                                |                            | Stock options |                                  |        | 770,372            |            |      |                  | 995,086 |            |   |        | 733,638 |            |   |        | 888,627 |        
|                                                                                                      |                                |                            | Warrants      |                                  |        | 57,542             |            |      |                  | 72,565  |            |   |        | 60,953  |            |   |        | 67,002  |        
|                                                                                                      |                                |                            |               |                                  |        |                    |            |      |                  |         |            |  
|                                                                                                      |                                |                            |               | Dilutive potential common shares |        |                    | 827,914    |      |                  |         | 1,067,651  |   |        |         | 794,591    |   |        |         | 955,629 | 
|                                                                                                      |                                |                            |               |                                  |        |                    |            |      |                  |         |            |  
|Denominator
for diluted earnings per share  adjusted
weighted-average shares for assumed conversions |                                |                            | 58,287,052    |                                  |        |                    | 59,561,513 |      |                  |         | 58,294,382 |   |        |         | 59,366,710 |  
|                                                                                                      |                                |                            |               |                                  |        |                    |            |      |                  |         |            |  
|                                                                                                      |                                | Basic earnings per share   |               | $                                | .26    |                    |            | $    | .25              |         |            | $ | .53    |         |            | $ | .49    |        
|                                                                                                      |                                |                            |               |                                  |        |                    |            |      |                  |         |            |  
|                                                                                                      |                                | Diluted earnings per share |               | $                                | .26    |                    |            | $    | .24              |         |            | $ | .52    |         |            | $ | .48    |        
|                                                                                                      |                                |                            |               |                                  |        |                    |            |      |                  |         |            |  

Note 7  Segment Information
The Companys operations are managed as three major business segments: (1)
commercial banking, (2) retail banking, and
(3) mortgage banking. The commercial banking segment consists of commercial
lending to small- and medium-sized companies, primarily in the form of
commercial real estate and Small Business Administration (SBA) loans. The
retail banking segment consists of home equity lending, other consumer lending
and the deposit-gathering function. Deposits and loan products are offered
through 82 retail branch offices of Republic Bank, which are staffed by
personal bankers and loan originators. The mortgage banking segment is
comprised of mortgage loan production. Mortgage loan production is conducted
in 56 offices of Republic Bank. Treasury and Other is comprised of balance
sheet management activities that include the securities portfolio, residential
real estate mortgage portfolio loans and outside funding. Treasury and Other
also includes unallocated corporate expenses such as corporate overhead,
including accounting, data processing, human resources and operation costs.

In 2003, the allocated capital to the retail banking segment was decreased to
5% of total deposits compared to 10% in 2002. All prior period amounts have
been restated to conform to the current year presentation.

The following table presents the financial results of each business segment for
the three and six months ended June 30, 2003 and 2002.

|                                            |                     |            |        |       |        |   |        |          |  |   |           |       |  |              |          |         |   |   |        |        | 
|------------------------------------------- | ------------------- | ---------- | ------ | ----- | ------ | - | ------ | -------- |  | - | --------- | ----- |  | ------------ | -------- | ------- | - | - | ------ | ------ | 
|                                            |                     |            |        |       |        |   |        |          |  |   |           |       |  |              | Treasury |         |   |   |        |       
|(In thousands)                              |                     | Commercial |        |       | Retail |   |        | Mortgage |  |   | and Other |       |  | Consolidated |         
|                                            |                     |            |        |       |        |   |        |          |  |   |           |       |  |              |         
|For the Three Months Ended June 30, 2003    |                     |            |        |       |        |   |        |          |  |   |           |       |  |              |          |         |   |   |        |       
|Net interest income from external customers |                     | $          | 22,514 |       |        | $ | (7,846 | )        |  | $ | 7,477     |       |  | $            | 14,795   |         |   | $ | 36,940 |       
|Internal funding                            |                     |            | (8,966 | )     |        |   | 34,164 |          |  |   | (3,327    | )     |  |              | (21,871  | )       |   |   |       |       
|                                            |                     |            |        |       |        |   |        |          |  |   |           |       |  |              |         
|Net interest income                         |                     |            | 13,548 |       |        |   | 26,318 |          |  |   | 4,150     |       |  |              | (7,076   | )       |   |   | 36,940 |       
|Provision for loan losses                   |                     |            | 2,508  |       |        |   | 473    |          |  |   | 69        |       |  |              | (50      | )       |   |   | 3,000  |       
|Noninterest income                          |                     |            | 355    |       |        |   | 2,864  |          |  |   | 12,735    |       |  |              | (457     | )       |   |   | 15,497 |       
|Noninterest expense                         |                     |            | 2,385  |       |        |   | 7,836  |          |  |   | 7,390     |       |  |              | 10,165   |         |   |   | 27,776 |       
|                                            |                     |            |        |       |        |   |        |          |  |   |           |       |  |              |         
|                                            | Income before taxes |            |        | 9,010 |        |   |        | 20,873   |  |   |           | 9,426 |  |              |          | (17,648 | ) |   |        | 21,661 | 
|Income taxes                                |                     |            | 3,215  |       |        |   | 7,447  |          |  |   | 3,299     |       |  |              | (7,458   | )       |   |   | 6,503  |       
|                                            |                     |            |        |       |        |   |        |          |  |   |           |       |  |              |         
|Net income                                  |                     | $          | 5,795  |       |        | $ | 13,426 |          |  | $ | 6,127     |       |  | $            | (10,190  | )       |   | $ | 15,158 |       
|                                            |                     |            |        |       |        |   |        |          |  |   |           |       |  |              |         
|Depreciation and amortization               |                     | $          | 30     |       |        | $ | 745    |          |  | $ | 704       |       |  | $            | 965      |         |   | $ | 2,444  |       
|Capital expenditures                        |                     | $          | 6      |       |        | $ | 431    |          |  | $ | 258       |       |  | $            | 500      |         |   | $ | 1,195  |       
|Net identifiable assets (in millions)       |                     | $          | 1,457  |       |        | $ | 2,790  |          |  | $ | 630       |       |  | $            | 154      |         |   | $ | 5,031  |       
|Return on equity(1)                         |                     |            | 15.98  | %     |        |   | 40.39  | %        |  |   | 85.65     | %     |  |              | n/m      |         |   |   | 17.46  | %     
|Return on assets                            |                     |            | 1.60   | %     |        |   | 1.92   | %        |  |   | 4.28      | %     |  |              | n/m      |         |   |   | 1.25   | %     
|Efficiency ratio                            |                     |            | 17.15  | %     |        |   | 26.85  | %        |  |   | 43.77     | %     |  |              | n/m      |         |   |   | 51.34  | %     

7



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##### Table of Contents



Note 7  Segment Information (Continued)

|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |          |         |   |   |        |        | 
|------------------------------------------- | ------------------- | ---------- | ------- | ------ | ------ | - | ------- | -------- |  | - | --------- | ----- |  | ------------ | -------- | ------- | - | - | ------ | ------ | 
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              | Treasury |         |   |   |        |       
|(In thousands)                              |                     | Commercial |         |        | Retail |   |         | Mortgage |  |   | and Other |       |  | Consolidated |         
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |         
|For the Three Months Ended June 30, 2002    |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |          |         |   |   |        |       
|Net interest income from external customers |                     | $          | 24,157  |        |        | $ | (12,089 | )        |  | $ | 6,627     |       |  | $            | 17,341   |         |   | $ | 36,036 |       
|Internal funding                            |                     |            | (10,957 | )      |        |   | 37,937  |          |  |   | (3,311    | )     |  |              | (23,669  | )       |   |   |       |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |         
|Net interest income                         |                     |            | 13,200  |        |        |   | 25,848  |          |  |   | 3,316     |       |  |              | (6,328   | )       |   |   | 36,036 |       
|Provision for loan losses                   |                     |            | 941     |        |        |   | 426     |          |  |   |          |       |  |              | 1,033    |         |   |   | 2,400  |       
|Noninterest income                          |                     |            | 786     |        |        |   | 2,089   |          |  |   | 6,948     |       |  |              | 2,174    |         |   |   | 11,997 |       
|Noninterest expense                         |                     |            | 2,196   |        |        |   | 7,623   |          |  |   | 6,522     |       |  |              | 6,516    |         |   |   | 22,857 |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |         
|                                            | Income before taxes |            |         | 10,849 |        |   |         | 19,888   |  |   |           | 3,742 |  |              |          | (11,703 | ) |   |        | 22,776 | 
|Preferred stock dividend                    |                     |            |        |        |        |   |        |          |  |   |          |       |  |              | 1,755    |         |   |   | 1,755  |       
|Income taxes                                |                     |            | 3,970   |        |        |   | 7,270   |          |  |   | 1,310     |       |  |              | (6,063   | )       |   |   | 6,487  |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |         
|Net income                                  |                     | $          | 6,879   |        |        | $ | 12,618  |          |  | $ | 2,432     |       |  | $            | (7,395   | )       |   | $ | 14,534 |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |         
|Depreciation and amortization               |                     | $          | 37      |        |        | $ | 792     |          |  | $ | 588       |       |  | $            | 1,050    |         |   | $ | 2,467  |       
|Capital expenditures                        |                     | $          | 6       |        |        | $ | 196     |          |  | $ | 156       |       |  | $            | 501      |         |   | $ | 859    |       
|Net identifiable assets (in millions)       |                     | $          | 1,409   |        |        | $ | 2,782   |          |  | $ | 312       |       |  | $            | (146     | )       |   | $ | 4,357  |       
|Return on equity(1)                         |                     |            | 19.77   | %      |        |   | 39.72   | %        |  |   | 49.00     | %     |  |              | n/m      |         |   |   | 18.12  | %     
|Return on assets                            |                     |            | 1.98    | %      |        |   | 1.81    | %        |  |   | 2.45      | %     |  |              | n/m      |         |   |   | 1.34   | %     
|Efficiency ratio                            |                     |            | 15.70   | %      |        |   | 27.29   | %        |  |   | 63.54     | %     |  |              | n/m      |         |   |   | 48.00  | %     

|                                            |                     |            |         |        |        |   |         |          |  |   |           |        |  |              |          |         |   |   |        |        | 
|------------------------------------------- | ------------------- | ---------- | ------- | ------ | ------ | - | ------- | -------- |  | - | --------- | ------ |  | ------------ | -------- | ------- | - | - | ------ | ------ | 
|                                            |                     |            |         |        |        |   |         |          |  |   |           |        |  |              | Treasury |         |   |   |        |       
|(In thousands)                              |                     | Commercial |         |        | Retail |   |         | Mortgage |  |   | and Other |        |  | Consolidated |         
|                                            |                     |            |         |        |        |   |         |          |  |   |           |        |  |              |         
|For the Six Months Ended June 30, 2003      |                     |            |         |        |        |   |         |          |  |   |           |        |  |              |          |         |   |   |        |       
|Net interest income from external customers |                     | $          | 45,455  |        |        | $ | (16,581 | )        |  | $ | 15,881    |        |  | $            | 27,785   |         |   | $ | 72,540 |       
|Internal funding                            |                     |            | (18,300 | )      |        |   | 69,073  |          |  |   | (7,236    | )      |  |              | (43,537  | )       |   |   |       |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |        |  |              |         
|Net interest income                         |                     |            | 27,155  |        |        |   | 52,492  |          |  |   | 8,645     |        |  |              | (15,752  | )       |   |   | 72,540 |       
|Provision for loan losses                   |                     |            | 4,562   |        |        |   | 704     |          |  |   | 137       |        |  |              | 597      |         |   |   | 6,000  |       
|Noninterest income                          |                     |            | 687     |        |        |   | 5,538   |          |  |   | 27,160    |        |  |              | (3,027   | )       |   |   | 30,358 |       
|Noninterest expense                         |                     |            | 4,692   |        |        |   | 15,583  |          |  |   | 14,711    |        |  |              | 18,247   |         |   |   | 53,233 |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |        |  |              |         
|                                            | Income before taxes |            |         | 18,588 |        |   |         | 41,743   |  |   |           | 20,957 |  |              |          | (37,623 | ) |   |        | 43,665 | 
|Income taxes                                |                     |            | 6,632   |        |        |   | 14,893  |          |  |   | 7,335     |        |  |              | (15,506  | )       |   |   | 13,354 |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |        |  |              |         
|Net income                                  |                     | $          | 11,956  |        |        | $ | 26,850  |          |  | $ | 13,622    |        |  | $            | (22,117  | )       |   | $ | 30,311 |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |        |  |              |         
|Depreciation and amortization               |                     | $          | 62      |        |        | $ | 1,512   |          |  | $ | 1,349     |        |  | $            | 2,827    |         |   | $ | 5,750  |       
|Capital expenditures                        |                     | $          | 9       |        |        | $ | 1,020   |          |  | $ | 358       |        |  | $            | 1,037    |         |   | $ | 2,424  |       
|Net identifiable assets (in millions)       |                     | $          | 1,457   |        |        | $ | 2,790   |          |  | $ | 630       |        |  | $            | 154      |         |   | $ | 5,031  |       
|Return on equity(1)                         |                     |            | 16.46   | %      |        |   | 40.53   | %        |  |   | 94.62     | %      |  |              | n/m      |         |   |   | 17.67  | %     
|Return on assets                            |                     |            | 1.65    | %      |        |   | 1.92    | %        |  |   | 4.73      | %      |  |              | n/m      |         |   |   | 1.28   | %     
|Efficiency ratio                            |                     |            | 16.85   | %      |        |   | 26.85   | %        |  |   | 41.09     | %      |  |              | n/m      |         |   |   | 50.07  | %     

|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |          |         |   |   |        |        | 
|------------------------------------------- | ------------------- | ---------- | ------- | ------ | ------ | - | ------- | -------- |  | - | --------- | ----- |  | ------------ | -------- | ------- | - | - | ------ | ------ | 
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              | Treasury |         |   |   |        |       
|(In thousands)                              |                     | Commercial |         |        | Retail |   |         | Mortgage |  |   | and Other |       |  | Consolidated |         
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |         
|For the Six Months Ended June 30, 2002      |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |          |         |   |   |        |       
|Net interest income from external customers |                     | $          | 48,452  |        |        | $ | (25,928 | )        |  | $ | 18,407    |       |  | $            | 32,767   |         |   | $ | 73,698 |       
|Internal funding                            |                     |            | (21,711 | )      |        |   | 77,664  |          |  |   | (9,202    | )     |  |              | (46,751  | )       |   |   |       |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |         
|Net interest income                         |                     |            | 26,741  |        |        |   | 51,736  |          |  |   | 9,205     |       |  |              | (13,984  | )       |   |   | 73,698 |       
|Provision for loan losses                   |                     |            | 2,223   |        |        |   | 730     |          |  |   |          |       |  |              | 1,847    |         |   |   | 4,800  |       
|Noninterest income                          |                     |            | 1,076   |        |        |   | 4,087   |          |  |   | 14,254    |       |  |              | 3,157    |         |   |   | 22,574 |       
|Noninterest expense                         |                     |            | 4,647   |        |        |   | 15,811  |          |  |   | 13,711    |       |  |              | 12,485   |         |   |   | 46,654 |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |         
|                                            | Income before taxes |            |         | 20,947 |        |   |         | 39,282   |  |   |           | 9,748 |  |              |          | (25,159 | ) |   |        | 44,818 | 
|Preferred stock dividend                    |                     |            |        |        |        |   |        |          |  |   |          |       |  |              | 3,511    |         |   |   | 3,511  |       
|Income taxes                                |                     |            | 7,504   |        |        |   | 14,008  |          |  |   | 3,412     |       |  |              | (12,269  | )       |   |   | 12,655 |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |         
|Net income                                  |                     | $          | 13,443  |        |        | $ | 25,274  |          |  | $ | 6,336     |       |  | $            | (16,401  | )       |   | $ | 28,652 |       
|                                            |                     |            |         |        |        |   |         |          |  |   |           |       |  |              |         
|Depreciation and amortization               |                     | $          | 71      |        |        | $ | 1,590   |          |  | $ | 1,147     |       |  | $            | 1,778    |         |   | $ | 4,586  |       
|Capital expenditures                        |                     | $          | 18      |        |        | $ | 243     |          |  | $ | 298       |       |  | $            | 665      |         |   | $ | 1,224  |       
|Net identifiable assets (in millions)       |                     | $          | 1,409   |        |        | $ | 2,782   |          |  | $ | 312       |       |  | $            | (146     | )       |   | $ | 4,357  |       
|Return on equity(1)                         |                     |            | 19.58   | %      |        |   | 39.24   | %        |  |   | 44.61     | %     |  |              | n/m      |         |   |   | 18.13  | %     
|Return on assets                            |                     |            | 1.96    | %      |        |   | 1.78    | %        |  |   | 2.23      | %     |  |              | n/m      |         |   |   | 1.29   | %     
|Efficiency ratio                            |                     |            | 16.71   | %      |        |   | 28.32   | %        |  |   | 58.45     | %     |  |              | n/m      |         |   |   | 48.88  | %     



(1) Capital is allocated as a percentage of assets of 10% and 5% for the
commercial and mortgage banking segments, respectively and is allocated as a
percentage of deposits of 5% for the retail segment.
n/m  Not meaningful

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Note 8  Bank Owned Life Insurance
On July 31, 2002, Republic Bank purchased $85 million of separate account bank
owned life insurance to fund future employee benefit costs. Increases in the
cash surrender value resulting from investment returns are recorded in
noninterest income.

Note 9  Stock Based Compensation
Effective January 1, 2003, the Company adopted the fair value method of
recording stock options under SFAS 123. In accordance with the transitional
guidance of SFAS 148, the fair value method of accounting for stock options
will be applied prospectively to awards granted subsequent to January 1, 2003.
In the first six months of 2003, the Company generally issued restricted stock
in lieu of stock option grants. As a result, the GAAP income statement impact
associated with expensing stock options in the first six months of 2003 was
immaterial. The income statement impact from expensing stock options is
expected to be immaterial for the remainder of 2003.

The following table presents net income and earnings per share had compensation
cost for the Companys stock-based compensation plans been determined in
accordance with SFAS No. 123 for all outstanding and unvested awards for the
three and six months ended June 30, 2003 and 2002.

|                                                                                                                                            |  |                    |        |   |                  |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                                            |  | Three Months Ended |        |   | Six Months Ended |  
|                                                                                                                                            |  | June 30,           |        |   | June 30,         |  
|                                                                                                                                            |  |                    |        |   |                  |  
|(Dollars in thousands, except per share data)                                                                                               |  | 2003               |        |   | 2002             |   |        | 2003 |  |   | 2002   |  
|                                                                                                                                            |  |                    |        |   |                  |   |        |      |  |   |        |  
|Net income (as reported)                                                                                                                    |  | $                  | 15,158 |   |                  | $ | 14,534 |      |  | $ | 30,311 |   |  | $ | 28,652 |  
|Add: Stock-based employee compensation expense included
in reported net income, net of related tax effects                                  |  |                    | 215    |   |                  |   | 285    |      |  |   | 806    |   |  |   | 533    |  
|Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects |  |                    | (418   | ) |                  |   | (659   | )    |  |   | (1,234 | ) |  |   | (1,179 | )
|                                                                                                                                            |  |                    |        |   |                  |   |        |      |  |   |        |  
|Net income (pro forma)                                                                                                                      |  | $                  | 14,955 |   |                  | $ | 14,160 |      |  | $ | 29,883 |   |  | $ | 28,006 |  
|                                                                                                                                            |  |                    |        |   |                  |   |        |      |  |   |        |  
|Basic earnings per share (as reported)                                                                                                      |  | $                  | .26    |   |                  | $ | .25    |      |  | $ | .53    |   |  | $ | .49    |  
|Basic earnings per share (pro forma)                                                                                                        |  |                    | .26    |   |                  |   | .24    |      |  |   | .52    |   |  |   | .48    |  
|Diluted earnings per share (as reported)                                                                                                    |  | $                  | .26    |   |                  | $ | .24    |      |  | $ | .52    |   |  | $ | .48    |  
|Diluted earnings per share (pro forma)                                                                                                      |  |                    | .26    |   |                  |   | .24    |      |  |   | .51    |   |  |   | .47    |  

Note 10  Legal Proceedings
D&N Bank, a federally insured institution acquired by the Company in May 1999
and merged into Republic Bank in December 2000, is a plaintiff, along with
approximately 120 other institutions, in a currently pending claim and an
appeal in the United States Court of Appeals for the Federal Circuit seeking
substantial damages as a result of the 1989 Financial Institutions Reform,
Recovery and Enforcement Acts mandatory phase-out of the regulatory capital
treatment of supervisory goodwill. On July 25, 2003, the Bank filed an appeal
through a Petition for Rehearing En Bancwith the United States Court of
Appeals for the Federal Circuit of the decision of the Court of Federal Claims
granting summary judgment to the government on D&N Banks contract claims,
which a Panel of the Court of Appeals affirmed on June 17, 2003. The ultimate
outcome of this matter cannot be determined at this time, however, an adverse
ruling as it relates to the Company would not have a material adverse effect on
the Companys consolidated financial position, results of operations or
liquidity.

9



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ITEM 2: Managements Discussion and Analysis of Financial Condition and Results of Operations

EARNINGS PERFORMANCE

The Company reported net income for the quarter ended June 30, 2003 of $15.2
million. This compares to net income of $14.5 million for the second quarter
of 2002. Diluted earnings per share for the second quarter of 2003 were $.26,
up 7% from $.24 earned in 2002. Annualized returns on average assets and
shareholders equity for the quarter ended June 30, 2003 were 1.25% and 17.46%,
respectively.

Net income for the six months ended June 30, 2003 was $30.3 million, compared
to net income of $28.7 million earned for the same period in 2002. For the six
month period ended June 30, 2003, diluted earnings per share were $0.52, an
increase of 8% over the $0.48 earned in 2002. Annualized returns on average
assets and shareholders equity for the first six months of 2003 were 1.28% and
17.67%, respectively.

RESULTS OF OPERATIONS

Net Interest Income
The following discussion should be read in conjunction with Table I and Table
II on the following two pages, which identify and quantify the components
impacting net interest income for the three and six months ended June 30, 2003
and 2002.

Net interest income, on a fully taxable equivalent (FTE) basis, was $37.7
million for the second quarter of 2003 compared to $37.2 million for the second
quarter of 2002. The increase was primarily the result of an increase in the
Companys average interest-earning assets of $442 million. The average
mortgage loans held for sale balance increased $113 million, or 44% for the
second quarter of 2003 compared to 2002 and the average portfolio loan balance
increased $413 million, or 12% during the second quarter of 2003 compared to
2002. The increase in interest-earning assets was offset by a decrease in
securities available for sale of $84 million. Average total interest bearing
liabilities increased $471 million for the second quarter of 2003 compared to
2002 primarily due to a $119 million increase in total average interest-bearing
deposits, a $211 million increase in short-term borrowings and short-term FHLB
advances and a $154 million increase in long-term FHLB advances.

The net interest margin (FTE) was 3.24% for the quarter ended June 30, 2003, a
decrease of 29 basis points from 3.53% in 2002. The decrease in the margin was
due to the Companys yield on earning assets decreasing more than the decline
in interest-bearing liabilities primarily as a result of the Companys asset
sensitive position in the declining interest rate environment.

For the six months ended June 30, 2003, net interest income (FTE) was $73.7
million, compared to $76.1 million for the first half of 2002. The decrease
was primarily the result of a decrease in the Companys net interest margin.
The net interest margin (FTE) for the six months ended June 30, 2003, declined
30 basis points to 3.23% from 3.53% for the comparable period in 2002. The
decrease in the margin was due to the Companys yield on earning assets
decreasing more than the decline in interest-bearing liabilities.

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##### Table of Contents



Table I  Quarterly Net Interest Income and Rate/Volume Analysis (FTE)

|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |        |         |      |      |  |  | 
|------------------------------------------------------------ | -------------------------------------- | ------------------------------------------ | ------------------------------------- | -------------------------------------- | --------- | ------------------ | ------ | ------ | ------------------ |  | ------- | ------- | ------- | -------- | --------- | --------- | --------- | - | ---------- | ------ | ------ | ------ | ------- | ---- | ---- |  |  | 
|                                                             |                                        |                                            |                                       |                                        |           | Three Months Ended |        |        | Three Months Ended | 
|                                                             |                                        |                                            |                                       |                                        |           | June 30, 2003      |        |        | June 30, 2002      | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    | 
|                                                             |                                        |                                            |                                       |                                        |           | Average            |        |        |                    |  |         |         | Average |          |           | Average   |           |   |            |        |        |        | Average |     
|(Dollar amounts in thousands)                                |                                        | Balance                                    |                                       |                                        | Interest  |                    |        | Rate   |                    |  | Balance |         |         | Interest |           |           | Rate      |  
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |  
|Average Assets:                                              |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |        |         |     
|Short-term investments                                       |                                        | $                                          | 338                                   |                                        |           | $                  | 1      |        |                    |  | 0.61    | %       |         | $        | 1,080     |           |           | $ | 4          |        |        |        | 1.32    | %   
|Mortgage loans held for sale                                 |                                        |                                            | 371,728                               |                                        |           |                    | 5,247  |        |                    |  | 5.65    |         |         |          | 258,254   |           |           |   | 4,284      |        |        |        | 6.64    |     
|Securities available for sale                                |                                        |                                            | 345,646                               |                                        |           |                    | 4,635  |        |                    |  | 5.38    |         |         |          | 429,551   |           |           |   | 6,723      |        |        |        | 6.28    |     
|Portfolio loans(1):                                          |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |        |         |     
|                                                             | Commercial loans                       |                                            |                                       | 1,468,123                              |           |                    |        | 22,733 |                    |  |         | 6.13    |         |          |           | 1,412,915 |           |   |            | 24,455 |        |        |         | 6.85 |     
|                                                             | Residential real estate mortgage loans |                                            |                                       | 1,879,731                              |           |                    |        | 26,115 |                    |  |         | 5.56    |         |          |           | 1,517,138 |           |   |            | 25,222 |        |        |         | 6.65 |     
|                                                             | Installment loans                      |                                            |                                       | 582,712                                |           |                    |        | 8,849  |                    |  |         | 6.09    |         |          |           | 587,731   |           |   |            | 10,327 |        |        |         | 7.05 |     
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |  
|                                                             |                                        | Total loans, net of unearned income        |                                       |                                        | 3,930,566 |                    |        |        | 57,697             |  |         |         | 5.85    |          |           |           | 3,517,784 |   |            |        | 60,004 |        |         |      | 6.80 | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |  
|                                                             |                                        | Total interest-earning assets              |                                       |                                        | 4,648,278 |                    |        |        | 67,580             |  |         |         | 5.80    |          |           |           | 4,206,669 |   |            |        | 71,015 |        |         |      | 6.73 | 
|Allowance for loan losses                                    |                                        |                                            | (37,986                               | )                                      |           |                    |        |        |                    |  |         |         |         |          | (29,641   | )         |           |   |            |        |        |        |         |     
|Cash and due from banks                                      |                                        |                                            | 65,150                                |                                        |           |                    |        |        |                    |  |         |         |         |          | 58,175    |           |           |   |            |        |        |        |         |     
|Other assets                                                 |                                        |                                            | 164,785                               |                                        |           |                    |        |        |                    |  |         |         |         |          | 99,858    |           |           |   |            |        |        |        |         |     
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |       
|                                                             |                                        | Total assets                               |                                       | $                                      | 4,840,227 |                    |        |        |                    |  |         |         |         |          |           | $         | 4,335,061 |   |            |        |        |        |         |      |      | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |       
|Average Liabilities and Shareholders Equity:                |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |        |         |     
|Interest-bearing demand deposits                             |                                        | $                                          | 179,959                               |                                        |           | $                  | 161    |        |                    |  | 0.36    | %       |         | $        | 161,398   |           |           | $ | 262        |        |        |        | 0.65    | %   
|Savings deposits                                             |                                        |                                            | 953,788                               |                                        |           |                    | 3,285  |        |                    |  | 1.38    |         |         |          | 843,004   |           |           |   | 3,861      |        |        |        | 1.84    |     
|Time deposits                                                |                                        |                                            | 1,408,252                             |                                        |           |                    | 10,986 |        |                    |  | 3.13    |         |         |          | 1,418,331 |           |           |   | 14,941     |        |        |        | 4.23    |     
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |  
|                                                             | Total interest-bearing deposits        |                                            |                                       | 2,541,999                              |           |                    |        | 14,432 |                    |  |         | 2.28    |         |          |           | 2,422,733 |           |   |            | 19,064 |        |        |         | 3.16 |     
|Short-term borrowings                                        |                                        |                                            | 283,163                               |                                        |           |                    | 958    |        |                    |  | 1.34    |         |         |          | 183,828   |           |           |   | 857        |        |        |        | 1.84    |     
|Short-term FHLB advances                                     |                                        |                                            | 275,330                               |                                        |           |                    | 1,037  |        |                    |  | 1.49    |         |         |          | 163,758   |           |           |   | 1,410      |        |        |        | 3.41    |     
|Long-term FHLB advances                                      |                                        |                                            | 1,031,727                             |                                        |           |                    | 13,475 |        |                    |  | 5.17    |         |         |          | 877,881   |           |           |   | 12,243     |        |        |        | 5.52    |     
|Long-term debt                                               |                                        |                                            |                                      |                                        |           |                    |       |        |                    |  |        |         |         |          | 13,500    |           |           |   | 241        |        |        |        | 7.15    |     
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |  
|                                                             |                                        | Total interest-bearing liabilities         |                                       |                                        | 4,132,219 |                    |        |        | 29,902             |  |         |         | 2.88    |          |           |           | 3,661,700 |   |            |        | 33,815 |        |         |      | 3.68 | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |       
|Noninterest-bearing deposits                                 |                                        |                                            | 273,858                               |                                        |           |                    |        |        |                    |  |         |         |         |          | 230,346   |           |           |   |            |        |        |        |         |     
|Other liabilities                                            |                                        |                                            | 36,980                                |                                        |           |                    |        |        |                    |  |         |         |         |          | 43,408    |           |           |   |            |        |        |        |         |     
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |       
|                                                             |                                        | Total liabilities                          |                                       |                                        | 4,443,057 |                    |        |        |                    |  |         |         |         |          |           |           | 3,935,454 |   |            |        |        |        |         |      |      | 
|Trust preferred securities and preferred
stock of subsidiary |                                        |                                            | 50,000                                |                                        |           |                    |        |        |                    |  |         |         |         |          | 78,719    |           |           |   |            |        |        |        |         |     
|Shareholders equity                                         |                                        |                                            | 347,170                               |                                        |           |                    |        |        |                    |  |         |         |         |          | 320,888   |           |           |   |            |        |        |        |         |     
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |       
|                                                             |                                        | Total liabilities and shareholders equity |                                       | $                                      | 4,840,227 |                    |        |        |                    |  |         |         |         |          |           | $         | 4,335,061 |   |            |        |        |        |         |      |      | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |       
|Net interest income/rate spread (FTE)                        |                                        |                                            |                                       |                                        |           | $                  | 37,678 |        |                    |  | 2.92    | %       |         |          |           |           |           | $ | 37,200     |        |        |        | 3.05    | %   
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |       
|Net interest margin (FTE)                                    |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  | 3.24    | %       |         |          |           |           |           |   |            |        |        |        | 3.53    | %   
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |       
|                                                             |                                        |                                            | Increase (decrease) due to change in: |                                        | Volume(2) |                    |        |        |                    |  |         | Rate(2) |         |          |           |           |           |   | Net Change |        |        |        |         |     
|                                                             |                                        |                                            | Short-term investments                |                                        | $         | (2                 | )      |        |                    |  |         |         | $       | (1       | )         |           |           |   |            |        | $      | (3     | )       |      |      |  | 
|                                                             |                                        |                                            | Mortgage loans held for sale          |                                        |           | 1,673              |        |        |                    |  |         |         |         | (710     | )         |           |           |   |            |        |        | 963    |         |      |      |  | 
|                                                             |                                        |                                            | Securities available for sale         |                                        |           | (1,205             | )      |        |                    |  |         |         |         | (883     | )         |           |           |   |            |        |        | (2,088 | )       |      |      |  | 
|                                                             |                                        |                                            | Portfolio loans(1):                   |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |        |        |         |      |      |  | 
|                                                             |                                        |                                            |                                       | Commercial loans                       |           |                    | 911    |        |                    |  |         |         |         |          | (2,633    | )         |           |   |            |        |        |        | (1,722  | )    |      |  |  | 
|                                                             |                                        |                                            |                                       | Residential real estate mortgage loans |           |                    | 5,434  |        |                    |  |         |         |         |          | (4,541    | )         |           |   |            |        |        |        | 893     |      |      |  |  | 
|                                                             |                                        |                                            |                                       | Installment loans                      |           |                    | (87    | )      |                    |  |         |         |         |          | (1,391    | )         |           |   |            |        |        |        | (1,478  | )    |      |  |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |       
|                                                             |                                        |                                            |                                       | Total loans, net of unearned income    |           |                    | 6,258  |        |                    |  |         |         |         |          | (8,565    | )         |           |   |            |        |        |        | (2,307  | )    |      |  |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |       
|                                                             |                                        |                                            |                                       | Total interest income                  |           |                    | 6,724  |        |                    |  |         |         |         |          | (10,159   | )         |           |   |            |        |        |        | (3,435  | )    |      |  |  | 
|                                                             |                                        |                                            | Interest-bearing demand deposits      |                                        |           | 27                 |        |        |                    |  |         |         |         | (128     | )         |           |           |   |            |        |        | (101   | )       |      |      |  | 
|                                                             |                                        |                                            | Savings deposits                      |                                        |           | 470                |        |        |                    |  |         |         |         | (1,046   | )         |           |           |   |            |        |        | (576   | )       |      |      |  | 
|                                                             |                                        |                                            | Time deposits                         |                                        |           | (106               | )      |        |                    |  |         |         |         | (3,849   | )         |           |           |   |            |        |        | (3,955 | )       |      |      |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |       
|                                                             |                                        |                                            |                                       | Total interest-bearing deposits        |           |                    | 391    |        |                    |  |         |         |         |          | (5,023    | )         |           |   |            |        |        |        | (4,632  | )    |      |  |  | 
|                                                             |                                        |                                            | Short-term borrowings                 |                                        |           | 373                |        |        |                    |  |         |         |         | (272     | )         |           |           |   |            |        |        | 101    |         |      |      |  | 
|                                                             |                                        |                                            | Short-term FHLB advances              |                                        |           | 656                |        |        |                    |  |         |         |         | (1,029   | )         |           |           |   |            |        |        | (373   | )       |      |      |  | 
|                                                             |                                        |                                            | Long-term FHLB advances               |                                        |           | 2,033              |        |        |                    |  |         |         |         | (801     | )         |           |           |   |            |        |        | 1,232  |         |      |      |  | 
|                                                             |                                        |                                            | Long-term debt                        |                                        |           | (241               | )      |        |                    |  |         |         |         |         |           |           |           |   |            |        |        | (241   | )       |      |      |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |       
|                                                             |                                        |                                            |                                       | Total interest expense                 |           |                    | 3,212  |        |                    |  |         |         |         |          | (7,125    | )         |           |   |            |        |        |        | (3,913  | )    |      |  |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |       
|                                                             |                                        |                                            |                                       | Net interest income                    |           | $                  | 3,512  |        |                    |  |         |         |         | $        | (3,034    | )         |           |   |            |        |        | $      | 478     |      |      |  |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                    |        |        |                    |  |         |         |         |          |           |           |           |   |            |        |       



| |  | (1) Non-accrual loans and overdrafts are included in average balances.                                                       
| |  | -----------------------------------------------------------------------------------------------------------------------------
|
| |  | (2) Rate/volume variances are proportionately allocated to rate and volume
based on the absolute value of the change in each.

11



---



##### Table of Contents



Table II  Year-to-Date Net Interest Income and Rate/Volume Analysis (FTE)

|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |        |         |      |      |  |  | 
|------------------------------------------------------------ | -------------------------------------- | ------------------------------------------ | ------------------------------------- | -------------------------------------- | --------- | ----------------------------- | ------ | ------ | ----------------------------- |  | ------- | ------- | ------- | -------- | --------- | --------- | --------- | - | ---------- | ------ | ------- | ------ | ------- | ---- | ---- |  |  | 
|                                                             |                                        |                                            |                                       |                                        |           | Six
Months EndedJune 30, 2003 |        |        | Six
Months EndedJune 30, 2002 | 
|                                                             |                                        |                                            |                                       |                                        |           | Average                       |        |        |                               |  |         |         | Average |          |           | Average   |           |   |            |        |         |        | Average |     
|(Dollar amounts in thousands)                                |                                        | Balance                                    |                                       |                                        | Interest  |                               |        | Rate   |                               |  | Balance |         |         | Interest |           |           | Rate      |  
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |  
|Average Assets:                                              |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |        |         |     
|Short-term investments                                       |                                        | $                                          | 282                                   |                                        |           | $                             | 2      |        |                               |  | 1.09    | %       |         | $        | 924       |           |           | $ | 8          |        |         |        | 1.80    | %   
|Mortgage loans held for sale                                 |                                        |                                            | 404,546                               |                                        |           |                               | 11,517 |        |                               |  | 5.69    |         |         |          | 411,163   |           |           |   | 13,715     |        |         |        | 6.67    |     
|Securities available for sale                                |                                        |                                            | 308,540                               |                                        |           |                               | 7,891  |        |                               |  | 5.16    |         |         |          | 398,415   |           |           |   | 12,451     |        |         |        | 6.30    |     
|Portfolio loans(1):                                          |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |        |         |     
|                                                             | Commercial loans                       |                                            |                                       | 1,471,111                              |           |                               |        | 45,891 |                               |  |         | 6.20    |         |          |           | 1,394,752 |           |   |            | 49,071 |         |        |         | 7.00 |     
|                                                             | Residential real estate mortgage loans |                                            |                                       | 1,784,837                              |           |                               |        | 50,528 |                               |  |         | 5.66    |         |          |           | 1,505,893 |           |   |            | 49,820 |         |        |         | 6.62 |     
|                                                             | Installment loans                      |                                            |                                       | 585,274                                |           |                               |        | 17,944 |                               |  |         | 6.18    |         |          |           | 586,146   |           |   |            | 20,709 |         |        |         | 7.12 |     
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |  
|                                                             |                                        | Total loans, net of unearned income        |                                       |                                        | 3,841,222 |                               |        |        | 114,363                       |  |         |         | 5.95    |          |           |           | 3,486,791 |   |            |        | 119,600 |        |         |      | 6.85 | 
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |  
|                                                             |                                        | Total interest-earning assets              |                                       |                                        | 4,554,590 |                               |        |        | 133,773                       |  |         |         | 5.87    |          |           |           | 4,297,293 |   |            |        | 145,774 |        |         |      | 6.78 | 
|Allowance for loan losses                                    |                                        |                                            | (37,251                               | )                                      |           |                               |        |        |                               |  |         |         |         |          | (29,463   | )         |           |   |            |        |         |        |         |     
|Cash and due from banks                                      |                                        |                                            | 64,716                                |                                        |           |                               |        |        |                               |  |         |         |         |          | 59,090    |           |           |   |            |        |         |        |         |     
|Other assets                                                 |                                        |                                            | 164,601                               |                                        |           |                               |        |        |                               |  |         |         |         |          | 103,181   |           |           |   |            |        |         |        |         |     
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |       
|                                                             |                                        | Total assets                               |                                       | $                                      | 4,746,656 |                               |        |        |                               |  |         |         |         |          |           | $         | 4,430,101 |   |            |        |         |        |         |      |      | 
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |       
|Average Liabilities and Shareholders Equity:                |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |        |         |     
|Interest-bearing demand deposits                             |                                        | $                                          | 178,200                               |                                        |           | $                             | 347    |        |                               |  | 0.39    | %       |         | $        | 158,834   |           |           | $ | 504        |        |         |        | 0.64    | %   
|Savings deposits                                             |                                        |                                            | 941,722                               |                                        |           |                               | 7,033  |        |                               |  | 1.51    |         |         |          | 838,077   |           |           |   | 7,556      |        |         |        | 1.82    |     
|Time deposits                                                |                                        |                                            | 1,429,920                             |                                        |           |                               | 22,546 |        |                               |  | 3.18    |         |         |          | 1,463,308 |           |           |   | 31,644     |        |         |        | 4.36    |     
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |  
|                                                             | Total interest-bearing deposits        |                                            |                                       | 2,549,842                              |           |                               |        | 29,926 |                               |  |         | 2.37    |         |          |           | 2,460,219 |           |   |            | 39,704 |         |        |         | 3.25 |     
|Short-term borrowings                                        |                                        |                                            | 263,253                               |                                        |           |                               | 1,776  |        |                               |  | 1.34    |         |         |          | 176,597   |           |           |   | 1,640      |        |         |        | 1.85    |     
|Short-term FHLB advances                                     |                                        |                                            | 227,072                               |                                        |           |                               | 1,730  |        |                               |  | 1.52    |         |         |          | 249,127   |           |           |   | 3,860      |        |         |        | 3.08    |     
|Long-term FHLB advances                                      |                                        |                                            | 1,012,054                             |                                        |           |                               | 26,581 |        |                               |  | 5.22    |         |         |          | 862,739   |           |           |   | 24,001     |        |         |        | 5.53    |     
|Long-term debt                                               |                                        |                                            | 1,125                                 |                                        |           |                               | 39     |        |                               |  | 6.93    |         |         |          | 13,500    |           |           |   | 483        |        |         |        | 7.15    |     
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |  
|                                                             |                                        | Total interest-bearing liabilities         |                                       |                                        | 4,053,346 |                               |        |        | 60,052                        |  |         |         | 2.97    |          |           |           | 3,762,182 |   |            |        | 69,688  |        |         |      | 3.71 | 
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |       
|Noninterest-bearing deposits                                 |                                        |                                            | 262,403                               |                                        |           |                               |        |        |                               |  |         |         |         |          | 229,156   |           |           |   |            |        |         |        |         |     
|Other liabilities                                            |                                        |                                            | 37,844                                |                                        |           |                               |        |        |                               |  |         |         |         |          | 43,922    |           |           |   |            |        |         |        |         |     
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |       
|                                                             |                                        | Total liabilities                          |                                       |                                        | 4,353,593 |                               |        |        |                               |  |         |         |         |          |           |           | 4,035,260 |   |            |        |         |        |         |      |      | 
|Trust preferred securities and preferred
stock of subsidiary |                                        |                                            | 50,000                                |                                        |           |                               |        |        |                               |  |         |         |         |          | 78,719    |           |           |   |            |        |         |        |         |     
|Shareholders equity                                         |                                        |                                            | 343,063                               |                                        |           |                               |        |        |                               |  |         |         |         |          | 316,122   |           |           |   |            |        |         |        |         |     
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |       
|                                                             |                                        | Total liabilities and shareholders equity |                                       | $                                      | 4,746,656 |                               |        |        |                               |  |         |         |         |          |           | $         | 4,430,101 |   |            |        |         |        |         |      |      | 
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |       
|Net interest income/rate spread (FTE)                        |                                        |                                            |                                       |                                        |           | $                             | 73,721 |        |                               |  | 2.90    | %       |         |          |           |           |           | $ | 76,086     |        |         |        | 3.07    | %   
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |       
|Net interest margin (FTE)                                    |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  | 3.23    | %       |         |          |           |           |           |   |            |        |         |        | 3.53    | %   
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |        |        
|                                                             |                                        |                                            | Increase (decrease) due to change in: |                                        | Volume(2) |                               |        |        |                               |  |         | Rate(2) |         |          |           |           |           |   | Net Change |        |         |        |         |     
|                                                            
|                                                             |                                        |                                            | Short-term investments                |                                        | $         | (4                            | )      |        |                               |  |         |         | $       | (2       | )         |           |           |   |            |        | $       | (6     | )       |      |      |  | 
|                                                             |                                        |                                            | Mortgage loans held for sale          |                                        |           | (217                          | )      |        |                               |  |         |         |         | (1,981   | )         |           |           |   |            |        |         | (2,198 | )       |      |      |  | 
|                                                             |                                        |                                            | Securities available for sale         |                                        |           | (2,530                        | )      |        |                               |  |         |         |         | (2,030   | )         |           |           |   |            |        |         | (4,560 | )       |      |      |  | 
|                                                             |                                        |                                            | Portfolio loans(1):                   |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |         |        |         |      |      |  | 
|                                                             |                                        |                                            |                                       | Commercial loans                       |           |                               | 2,584  |        |                               |  |         |         |         |          | (5,764    | )         |           |   |            |        |         |        | (3,180  | )    |      |  |  | 
|                                                             |                                        |                                            |                                       | Residential real estate mortgage loans |           |                               | 8,505  |        |                               |  |         |         |         |          | (7,797    | )         |           |   |            |        |         |        | 708     |      |      |  |  | 
|                                                             |                                        |                                            |                                       | Installment loans                      |           |                               | (31    | )      |                               |  |         |         |         |          | (2,734    | )         |           |   |            |        |         |        | (2,765  | )    |      |  |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |        
|                                                             |                                        |                                            |                                       | Total loans, net of unearned income    |           |                               | 11,058 |        |                               |  |         |         |         |          | (16,295   | )         |           |   |            |        |         |        | (5,237  | )    |      |  |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |        
|                                                             |                                        |                                            |                                       | Total interest income                  |           |                               | 8,307  |        |                               |  |         |         |         |          | (20,308   | )         |           |   |            |        |         |        | (12,001 | )    |      |  |  | 
|                                                             |                                        |                                            | Interest-bearing demand deposits      |                                        |           | 57                            |        |        |                               |  |         |         |         | (214     | )         |           |           |   |            |        |         | (157   | )       |      |      |  | 
|                                                             |                                        |                                            | Savings deposits                      |                                        |           | 873                           |        |        |                               |  |         |         |         | (1,396   | )         |           |           |   |            |        |         | (523   | )       |      |      |  | 
|                                                             |                                        |                                            | Time deposits                         |                                        |           | (707                          | )      |        |                               |  |         |         |         | (8,391   | )         |           |           |   |            |        |         | (9,098 | )       |      |      |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |        
|                                                             |                                        |                                            |                                       | Total interest-bearing deposits        |           |                               | 223    |        |                               |  |         |         |         |          | (10,001   | )         |           |   |            |        |         |        | (9,778  | )    |      |  |  | 
|                                                             |                                        |                                            | Short-term borrowings                 |                                        |           | 664                           |        |        |                               |  |         |         |         | (528     | )         |           |           |   |            |        |         | 136    |         |      |      |  | 
|                                                             |                                        |                                            | Short-term FHLB advances              |                                        |           | (317                          | )      |        |                               |  |         |         |         | (1,813   | )         |           |           |   |            |        |         | (2,130 | )       |      |      |  | 
|                                                             |                                        |                                            | Long-term FHLB advances               |                                        |           | 3,967                         |        |        |                               |  |         |         |         | (1,387   | )         |           |           |   |            |        |         | 2,580  |         |      |      |  | 
|                                                             |                                        |                                            | Long-term debt                        |                                        |           | (429                          | )      |        |                               |  |         |         |         | (15      | )         |           |           |   |            |        |         | (444   | )       |      |      |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |        
|                                                             |                                        |                                            |                                       | Total interest expense                 |           |                               | 4,108  |        |                               |  |         |         |         |          | (13,744   | )         |           |   |            |        |         |        | (9,636  | )    |      |  |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |        
|                                                             |                                        |                                            |                                       | Net interest income                    |           | $                             | 4,199  |        |                               |  |         |         |         | $        | (6,564    | )         |           |   |            |        |         | $      | (2,365  | )    |      |  |  | 
|                                                             |                                        |                                            |                                       |                                        |           |                               |        |        |                               |  |         |         |         |          |           |           |           |   |            |        |        



| |  | (1) Non-accrual loans and overdrafts are included in average balances.                                                       
| |  | -----------------------------------------------------------------------------------------------------------------------------
|
| |  | (2) Rate/volume variances are proportionately allocated to rate and volume
based on the absolute value of the change in each.

12



---



##### Table of Contents



Noninterest Income
Total noninterest income increased $3.5 million, or 29%, for the quarter ended
June 30, 2003, compared to the same period in 2002. The increase was primarily
due to higher levels of service charges, mortgage banking income, and income
from bank owned life insurance. Service charges were $2.7 million for the
second quarter of 2003, an increase of $718,000, or 36%, due primarily to an
increase in service fees. Mortgage banking income increased due to higher
levels of loan fundings of loans sold into the secondary market offset by lower
gross margins. Additionally, the Company had income of $1.3 million from bank
owned life insurance, which is used to fund future employee benefit costs.

For the six months ended June 30, 2003, total noninterest income increased $7.8
million, or 34%, compared to the same period in 2002. This increase was also
primarily due to higher levels of service charges, mortgage banking income and
income from bank owned life insurance.

Mortgage Banking Income
The Company closed $1.3 billion in single-family residential mortgage loans in
the second quarter of 2003, an increase of 96% compared to $668 million closed
in the same period last year. During the first half of 2003, mortgage loan
closings were $2.30 billion, an increase of 66% compared to $1.38 billion for
the comparable period in 2002. Mortgage loan volumes during 2003 increased
primarily due to the decrease in interest rates which resulted in a higher
level of mortgage refinance activity. Refinancings for the second quarter of
2003 represented approximately 71% of total closings compared to 38% in the
second quarter of 2002. During the first half of 2003, refinancings
represented 73% of total closings compared to 48% for the first half of 2002.

For the three months ended June 30, 2003, mortgage banking income increased
$2.3 million, or 28%, to $10.5 million from $8.1 million a year earlier. The
increase is primarily due to higher funding levels of loans sold into the
secondary market. Mortgage loans held for sale fundings were $702 million
during the second quarter of 2003 compared to $596 million in the prior year.
The ratio of mortgage loan production income to mortgage loans held for sale
fundings was 2.00% for the second quarter of 2003, compared to 2.15% for the
second quarter 2002.

For the six months ended June 30, 2003, mortgage banking income increased $4.5
million, or 29%, compared to the first half of 2002. The increase is primarily
due to higher funding levels of loans sold into the secondary market and an
improved ratio of mortgage loan production income to mortgage loans held for
sale fundings. For the six months ended June 30, 2003, mortgage loans held for
sale fundings totaled $1.56 billion compared to $1.48 billion during the first
six months of 2002. The ratio of mortgage production revenue to mortgage loans
held for sale fundings was 1.98% for the first six months of 2003, compared to
1.95% for the comparable period in 2002.

Mortgage banking income includes fee revenue derived from the loan origination
process (e.g., points collected), gains on the sale of mortgage loans and the
related mortgage servicing rights released concurrently with the underlying
loans sold (mortgage loan production income), net of commissions, incentives
and deferred mortgage loan origination costs and fees for mortgage loans held
for sale and residential portfolio loans as accounted for under FASB Statement
No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating
or Acquiring Loans and Initial Direct Costs of Leases(SFAS 91). Mortgage loan
production income totaled $14.1 million and $12.8 million for the second
quarter of 2003 and 2002, respectively, and $30.9 million and $28.0 million for
the six months ended June 30, 2003 and 2002, respectively. Commissions and
incentives paid were $12.1 million and $6.6 million for the second quarters of
2003 and 2002, respectively, and $20.3 million and $12.0 million for the six
months ended June 30, 2003 and 2002, respectively. For the second quarter of
2003, the SFAS 91 credit to mortgage banking income totaled $6.7 million
compared to a SFAS 91 credit of $37,000 for the second quarter of 2002. For
the first half of 2003, the SFAS 91 credit totaled $7.4 million compared to a
SFAS 91 debit of $2.8 million for the first half of 2002.

Mortgage banking income also includes gains on sales of mortgage portfolio
loans totaling $1.8 million and $1.9 million for the second quarters of 2003
and 2002, respectively, and $2.2 million and $2.5 million for the six months
ended June 30, 2003 and 2002, respectively. Mortgage loan portfolio sales
totaled $65.9 million and $63.5 million for the second quarters of 2003 and
2002, respectively, and $83.7 million and $102.1 million for the six months
ended June 20, 2003 and 2002, respectively.

During the quarter ended June 30, 2003, the Company had mortgage loan applications of $1.8 billion and at June 30, 2003, the Companys mortgage loan pipeline of applications in
process was $991 million. Subsequently, the composite 30-year fixed mortgage
interest rate has increased over 100 basis points from historic lows reached
during the quarter ended June 30, 2003. Consequently, the Company anticipates
that mortgage applications for the quarter ended September 30, 2003 will range
from $800 to $900 million.

13



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##### Table of Contents



Noninterest Expense
Total noninterest expense for the quarter ended June 30, 2003 increased $3.2
million, to $27.8 million compared to $24.6 million for the second quarter of
2002 due primarily to an increase in salaries and employee benefits. Total
noninterest expense for the six months ended June 30, 2003, increased $3.0
million to $53.2 million compared to $50.2 million in 2002 due primarily to an
increase in salaries and employee benefits, partially offset by a decrease in
dividends on preferred stock of subsidiary resulting from the 2002 redemption
of D&N Capital Corporation 9% Noncumulative Preferred Stock. The increase in
salaries and employee benefits for the quarter and six months ended June 30,
2003 reflects a higher level of incentive accruals driven by the strong results
for each business line and above peer group results in earnings per share and
return on equity for the Company.

BALANCE SHEET ANALYSIS

ASSETS

At June 30, 2003, the Company had $5.03 billion in total assets, an increase of
$253 million, or 5%, from $4.78 billion at December 31, 2002. The increase is
primarily the result of an increase in the Companys total portfolio loans and
securities available for sale, partially offset by a decrease in mortgage loans
held for sale.

Securities
Investment securities available for sale increased $123 million, to $372
million, representing 7.4% of total assets at June 30, 2003. At December 31,
2002, the investment securities portfolio totaled $249 million, or 5.2% of
total assets. During the first half of 2003, the Company sold $41.1 million of
investment securities and realized gross gains and losses on the sales of
available for sale securities of $918,388 and $38,019, respectively. During
the first half of 2003, the Company had $44.9 million of government agency
securities that were called prior to the maturity date.

The Companys investment securities portfolio serves as a secondary source of
earnings and contributes to the management of interest rate risk and liquidity
risk. The debt securities portfolio is comprised primarily of municipal
securities and government agency securities. Fixed rate securities within the
portfolio, excluding municipal securities, totaled $65.8 million and $65.7
million at June 30, 2003 and December 31, 2002, respectively.

The following table details the composition, amortized cost and fair value of
the Companys investment securities portfolio at June 30, 2003:

|                                    |                                     |                       |         |                               |         |   |            |        |       |            |       |     |      |           |         |         |         | 
|----------------------------------- | ----------------------------------- | --------------------- | ------- | ----------------------------- | ------- | - | ---------- | ------ | ----- | ---------- | ----- | --- | ---- | --------- | ------- | ------- | ------- | 
|                                    |                                     |                       |         | Securities Available for Sale |        
|                                    |                                     |                       |         |                               |        
|                                    |                                     |                       |         |                               |         |   |            | Gross  |       |            | Gross |     |      | Estimated |        
|                                    |                                     |                       |         | Amortized                     |         |   | Unrealized |        |       | Unrealized |       |     | Fair |          
|(In thousands)                      |                                     | Cost                  |         |                               | Gains   |   |            | Losses |       |            | Value |    
|                                    |                                     |                       |         |                               |         |   |            |        |       |            |       |    
|Debt Securities:                    |                                     |                       |         |                               |         |   |            |        |       |            |       |     |      |           |         |        
|                                    | Government agency securities        |                       | $       | 86,903                        |         |   | $          | 549    |       |            | $     |    |      |           | $       | 87,452  |        
|                                    | Collateralized mortgage obligations |                       |         | 15,391                        |         |   |            |       |       |            |       | 144 |      |           |         | 15,247  |        
|                                    | Mortgage-backed securities          |                       |         | 5,572                         |         |   |            | 145    |       |            |       | 30  |      |           |         | 5,687   |        
|                                    | Municipal and other securities      |                       |         | 179,134                       |         |   |            | 5,344  |       |            |       | 166 |      |           |         | 184,312 |        
|                                    |                                     |                       |         |                               |         |   |            |        |       |            |       |    
|                                    |                                     | Total debt securities |         |                               | 287,000 |   |            |        | 6,038 |            |       |     | 340  |           |         |         | 292,698 | 
|Investment in FHLB                  |                                     |                       | 79,534  |                               |         |   |           |        |       |            |      |     |      |           | 79,534  |        
|                                    |                                     |                       |         |                               |         |   |            |        |       |            |       |    
|Total securities available for sale |                                     | $                     | 366,534 |                               |         | $ | 6,038      |        |       | $          | 340   |     |      | $         | 372,232 |        
|                                    |                                     |                       |         |                               |         |   |            |        |       |            |       |    

Certain securities having a carrying value of approximately $6.0 million and
$76.9 million at June 30, 2003 and December 31, 2002, respectively, were
pledged to secure FHLB advances and public deposits as required by law.

Mortgage Loans Held for Sale
Mortgage loans held for sale were $480 million at June 30, 2003, a decrease of
$181 million from $661 million at December 31, 2002. The decrease was
primarily due to a decrease in residential mortgage loan closings during the
second quarter of 2003 of $1.3 billion compared to $1.4 billion closed during
the fourth quarter of 2002 (loans closed generally remain in loans held for
sale for 30 to 60 days after closing). In addition, $326 million of mortgage
loan closings during the second quarter 2003 were portfolio loan closings
compared to $235 million during the fourth quarter of 2002.

Portfolio Loans
Total portfolio loans were $3.95 billion at June 30, 2003, an increase of $298
million from $3.66 billion at December 31, 2002. The increase was primarily
due to increases in the residential real estate mortgage loan balance. The
residential portfolio loan balance increased $300 million during the first half
of 2003 due to the addition of $761 million of fixed rate and variable rate
residential loan closings which were offset by $461 million in mortgage principal
payments and paid-off residential loans. During the six months ended June 30,
2003 and 2002, the Company closed $20.9 million and $25.1 million in Small
Business Administration (SBA) loans, respectively. The Company sold $3.0
million and $10.5 million of the guaranteed portion of SBA loans in the first
six months of 2003 and 2002, respectively, resulting in corresponding gains of
$291,000 and $750,000, respectively.

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Portfolio Loans (Continued)
The commercial portfolio loan balance at June 30, 2003 was $1.48 billion,
compared to $1.47 billion at December 31, 2002.

The consumer direct installment loan portfolio increased $5.3 million during
the first half of 2003 due to an increase in home equity loan closings. The
consumer indirect installment loan portfolio decreased $14.7 million during the
first half of 2003 due to the anticipated pay-off of these loans.

The following table provides further information regarding the Companys loan
portfolio:

|                                  |                                 |                   |                        |                         |         |               |         |        |                   |       |           |           |         |           |         |      |      |       |      | 
|--------------------------------- | ------------------------------- | ----------------- | ---------------------- | ----------------------- | ------- | ------------- | ------- | ------ | ----------------- | ----- | --------- | --------- | ------- | --------- | ------- | ---- | ---- | ----- | ---- | 
|                                  |                                 |                   |                        |                         |         | June 30, 2003 |         |        | December 31, 2002 |      
|                                  |                                 |                   |                        |                         |         |               |         |        |                   |      
|(Dollars in thousands)            |                                 | Amount            |                        |                         | Percent |               |         | Amount |                   |       | Percent   |          
|                                  |                                 |                   |                        |                         |         |               |         |        |                   |       |           |          
|Commercial loans:                 |                                 |                   |                        |                         |         |               |         |        |                   |       |           |           |         |           |         |     
|                                  | Commercial and industrial       |                   | $                      | 44,352                  |         |               |         | 1.1    | %                 |       | $         | 48,509    |         |           |         | 2.0  | %   
|                                  | Commercial real estate mortgage |                   |                        | 1,432,456               |         |               |         | 36.2   |                   |       |           | 1,420,758 |         |           |         | 37.4 |     
|                                  |                                 |                   |                        |                         |         |               |         |        |                   |       |           |          
|                                  |                                 |                   | Total commercial loans |                         |         | 1,476,808     |         |        |                   | 37.3  |           |           |         | 1,469,267 |         |      |      | 39.4  |     
|Residential real estate mortgages |                                 |                   | 1,894,246              |                         |         |               | 47.9    |        |                   |       | 1,593,929 |           |         |           | 43.7    |     
|Installment loans:                |                                 |                   |                        |                         |         |               |         |        |                   |       |           |           |         |           |         |     
|                                  |                                 | Consumer direct   |                        |                         | 561,782 |               |         |        | 14.2              |       |           |           | 556,507 |           |         |      | 14.4 |      
|                                  |                                 | Consumer indirect |                        |                         | 22,162  |               |         |        | 0.6               |       |           |           | 36,840  |           |         |      | 2.5  |      
|                                  |                                 |                   |                        |                         |         |               |         |        |                   |       |           |          
|                                  |                                 |                   |                        | Total installment loans |         |               | 583,944 |        |                   |       | 14.8      |           |         |           | 593,347 |      |      |       | 16.9 | 
|                                  |                                 |                   |                        |                         |         |               |         |        |                   |       |           |          
|                                  |                                 |                   | Total portfolio loans  |                         | $       | 3,954,998     |         |        |                   | 100.0 | %         |           | $       | 3,656,543 |         |      |      | 100.0 | %   
|                                  |                                 |                   |                        |                         |         |               |         |        |                   |       |           |          

Credit Quality
The Company attempts to minimize credit risk in the loan portfolio by focusing
primarily on real estate-secured lending (i.e., commercial real estate mortgage
and construction loans, residential real estate mortgage and construction loans
and home equity loans). As of June 30, 2003, such loans comprised
approximately 97% of total portfolio loans. The Companys general policy is to
originate conventional residential real estate mortgages with loan-to-value
ratios of 80% or less; SBA-secured loans or real estate-secured commercial
loans with loan-to-value ratios of 75% or less and secured by personal
guarantees; and home equity loans with combined first and second mortgages with
loan-to-value ratios of 85% or less.

The Company originates primarily conventional mortgage loans secured by
residential properties which conform to the underwriting guidelines for sale to
the Federal National Mortgage Association (Fannie Mae) and the Federal Home
Loan Mortgage Corporation (Freddie Mac), or for conversion to mortgage-backed
securities issued by the Government National Mortgage Association (GNMA).

The majority of the Companys commercial loans are secured by real estate and
are generally made to small and medium-size businesses. These loans are made
at rates based on the prevailing prime interest rate of Republic Bank, as well
as fixed rates for terms generally ranging from three to five years.
Managements emphasis on real estate-secured lending and adherence to
conservative underwriting standards is reflected in the Companys historically
low net charge-offs.

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##### Table of Contents



Non-Performing Assets
Non-performing assets consist of non-accrual loans and other real estate owned
(OREO). OREO represents real estate properties acquired through foreclosure or
by deed in lieu of foreclosure. Commercial loans, residential real estate
mortgage loans and installment loans are generally placed on non-accrual status
when principal or interest is 90 days or more past due, unless the loans are
well-secured and in the process of collection. In all cases, loans may be
placed on non-accrual status earlier when, in the opinion of management,
reasonable doubt exists as to the full, timely collection of interest or
principal.

The following table summarizes the Companys non-performing assets and 90-day
past due loans:

|                                                            |                         |                                                        |                                      |       |          |        |   |              |        |        | 
|----------------------------------------------------------- | ----------------------- | ------------------------------------------------------ | ------------------------------------ | ----- | -------- | ------ | - | ------------ | ------ | ------ | 
|                                                            |                         |                                                        |                                      |       | June 30, |        |   | December 31, |       
|(Dollars in thousands)                                      |                         | 2003                                                   |                                      |       | 2002     |       
|                                                            |                         |                                                        |                                      |       |          |       
|Non-Performing Assets:                                      |                         |                                                        |                                      |       |          |        |   |             
|                                                            | Non-accrual loans:      |                                                        |                                      |       |          |        |   |              |       
|                                                            |                         | Commercial                                             |                                      | $     | 16,696   |        |   | $            | 19,167 |       
|                                                            |                         | Residential real estate mortgages                      |                                      |       | 10,534   |        |   |              | 15,215 |       
|                                                            |                         | Installment                                            |                                      |       | 1,523    |        |   |              | 2,876  |       
|                                                            |                         |                                                        |                                      |       |          |       
|                                                            |                         |                                                        | Total non-accrual loans              |       |          | 28,753 |   |              |        | 37,258 | 
|                                                            | Restructured loans      |                                                        |                                      |      |          |        |   | 2,309        |       
|                                                            | Other real estate owned |                                                        |                                      | 3,456 |          |        |   | 2,904        |       
|                                                            |                         |                                                        |                                      |       |          |       
|                                                            |                         |                                                        | Total non-performing assets          |       | $        | 32,209 |   |              | $      | 42,471 | 
|                                                            |                         |                                                        |                                      |       |          |       
|Non-performing assets as a percentage of:                   |                         |                                                        |                                      |       |          |        |   |             
|                                                            |                         | Portfolio loans and OREO                               |                                      |       | .81      | %      |   |              | 1.16   | %     
|                                                            |                         | Portfolio loans, mortgage loans held for
sale and OREO |                                      |       | .73      | %      |   |              | .98    | %     
|                                                            |                         | Total assets                                           |                                      |       | .64      | %      |   |              | .89    | %     
|Loans past due 90 days or more and still accruing interest: |                         |                                                        |                                      |       |          |        |   |             
|                                                            | Commercial              |                                                        | $                                    |      |          |        | $ |             |       
|                                                            | Residential real estate |                                                        |                                      |      |          |        |   |             |       
|                                                            | Installment             |                                                        |                                      |      |          |        |   |             |       
|                                                            |                         |                                                        |                                      |       |          |       
|                                                            |                         |                                                        | Total loans past due 90 days or more |       | $        |       |   |              | $      |       | 
|                                                            |                         |                                                        |                                      |       |          |       

At June 30, 2003, approximately $23.4 million, or .53% of total loans were
30-89 days delinquent, compared to $26.5 million, or .61%, at December 31,
2002. The Company also maintains a watch list for loans identified as
requiring a higher level of monitoring by management because of one or more
characteristics, such as economic conditions, industry trends, nature of
collateral, collateral margin, payment history or other factors. As of June
30, 2003, total loans on the watch list, excluding those categorized as
non-accrual loans, were $45.7 million, or 1.16% of total portfolio loans,
compared to $33.3 million, or .90% of total portfolio loans at December 31,
2002. The increase of total loans on the watch list, which is primarily due to
an increase in commercial loans, may result in an increase in commercial
delinquencies, non-accrual loans or restructured loans in the second half of
2003.

Provision and Allowance for Loan Losses
The allowance for loan losses represents the Companys estimate of probable
credit losses related to specifically identified loans as well as probable
credit losses inherent in the remainder of the loan portfolio that have been
incurred as of the balance sheet date. The allowance for loan losses is
maintained at an adequate level through additions to the provision for loan
losses. An appropriate level of the risk allocated allowance is determined
based on the application of risk percentages to graded loans by categories.
Specific reserves are established for individual loans when deemed necessary by
management. In addition, management considers other factors when determining
the allowance, including loan quality, changes in the size and character of the
loan portfolio, consultation with regulatory authorities, amount of
nonperforming loans, delinquency trends and economic conditions and industry
trends.

It must be understood, however, that inherent risks and uncertainties related
to the operation of a financial institution require management to rely on
estimates, appraisals and evaluations of loans to prepare the Companys
financial statements. Changes in economic conditions and the financial
prospects of borrowers may result in abrupt changes to the estimates,
appraisals or evaluations used. In addition, if actual circumstances and
losses differ substantially from managements assumptions and estimates, the
allowance for loan losses may not be sufficient to absorb all future losses,
and net income could be significantly impacted.

During the six months ended June 30, 2003, the Company recorded provision for
loan losses of $6.0 million, an increase of $1.2 million from the comparable
period in 2002. The increase in 2003 was deemed necessary by management as a
result of higher non-accrual commercial loan balances and higher
commercial loan charge-off ratios in the first half of 2003 as
compared to the first half of 2002 as well as the increase in the loan portfolio balance as compared to June 30,
2002. The Company anticipates that the provision for loan losses
and net charge-offs for the quarter ended September 30, 2003 to be in the range
of amounts recorded during each of the first two quarters of 2003.

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##### Table of Contents



Provision and Allowance for Loan Losses (Continued)
The following table provides an analysis of the allowance for loan losses:

|                                                                                             |                                            |                 |        |                  |        |   |        |        |        |  
|-------------------------------------------------------------------------------------------- | ------------------------------------------ | --------------- | ------ | ---------------- | ------ | - | ------ | ------ | ------ | -
|                                                                                             |                                            |                 |        | Six Months Ended |       
|                                                                                             |                                            |                 |        | June 30,         |       
|                                                                                             |                                            |                 |        |                  |       
|(Dollars in thousands)                                                                       |                                            | 2003            |        |                  | 2002   |  
|                                                                                             |                                            |                 |        |                  |        |  
|Allowance for loan losses:                                                                   |                                            |                 |        |                  |        |   |        |       
|Balance at January 1                                                                         |                                            | $               | 36,077 |                  |        | $ | 29,157 |       
|                                                                                             | Loans charged off                          |                 |        | (4,681           | )      |   |        | (4,737 | )     
|                                                                                             | Recoveries of loans previously charged off |                 |        | 873              |        |   |        | 650    |       
|                                                                                             |                                            |                 |        |                  |        |  
|                                                                                             |                                            | Net charge-offs |        |                  | (3,808 | ) |        |        | (4,087 | )
|                                                                                             | Provision charged to expense               |                 |        | 6,000            |        |   |        | 4,800  |       
|                                                                                             |                                            |                 |        |                  |        |  
|Balance at June 30                                                                           |                                            | $               | 38,269 |                  |        | $ | 29,870 |       
|                                                                                             |                                            |                 |        |                  |        |  
|Annualized net charge-offs as a percentage of average loans
(including loans held for sale)  |                                            |                 | .18    | %                |        |   | .21    | %     
|Allowance for loan losses as a percentage of total portfolio loans
outstanding at period-end |                                            |                 | .97    | %                |        |   | .84    | %     
|Allowance for loan losses as a percentage of non-performing
loans                            |                                            |                 | 133.10 | %                |        |   | 103.44 | %     

SFAS No. 114, Accounting By Creditors for Impairment of a Loan, as amended by
SFAS No. 118, considers a loan impaired when it is probable that payment of
principal and interest will not be collected in accordance with the contractual
terms of the original loan agreement. Consistent with this definition, all
non-accrual and restructured loans (with the exception of residential mortgage
and consumer installment loans) are impaired. An impaired loan for which it is
deemed necessary to record a specific allocated allowance may be written down
to the fair value of the underlying collateral via a direct charge-off against
the allowance for loan losses at the time it is determined the loan balance
exceeds the fair value of the collateral. Those impaired loans not requiring a
specific allocated allowance represent loans for which the fair value of the
underlying collateral equaled or exceeded the recorded investment in the loan.
All impaired loans were evaluated using the fair value of the underlying
collateral as the measurement method.

Off-Balance Sheet Instruments
In the normal course of business, the Company becomes a party to transactions
involving financial instruments with off-balance sheet risk to meet the
financing needs of its customers and to manage its own exposure to interest
rate risk. These financial instruments include commitments to extend credit,
standby letters of credit and forward commitments to sell mortgage loans that
are not reflected in the consolidated financial statements. The contractual
amounts of these instruments express the extent of the Companys involvement in
these transactions as of the balance sheet date. These instruments involve, to
varying degrees, elements of credit risk, market risk and liquidity risk in
excess of the amount recognized in the consolidated balance sheets. However,
they do not represent unusual risks for the Company and management does not
anticipate any significant losses to arise from these transactions.

Commitments to extend credit are legally binding agreements to lend cash to a
customer as long as there is no breach of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require the payment of a fee. Commitments to fund
loan applications with agreed-upon rates subject the Company to market risk due
to fluctuations in interest rates. Standby letters of credit guarantee the
performance of a customer to a third party. The Company issues these
guarantees primarily to support public and private borrowing arrangements, real
estate construction projects, bond financing and similar transactions.

The credit risk associated with commitments to extend credit and standby
letters of credit is essentially the same as that involved with direct lending.
Therefore, these instruments are subject to the Companys loan review and
approval procedures and credit policies. Based upon managements credit
evaluation of the counterparty, the Company may require the counterparty to
provide collateral as security for the agreement, including real estate,
accounts receivable, inventories, and investment securities. The maximum
credit risk associated with these instruments equals their contractual amounts
and assumes that the counterparty defaults and the collateral proves to be
worthless. The total contractual amounts of commitments to extend credit and
standby letters of credit do not necessarily represent future cash
requirements, since many of these agreements may expire without being drawn
upon. At June 30, 2003 and December 31, 2002, no liability is recorded for the
commitments to extend credit or the standby letters of credit.

At June 30, 2003, the Company had outstanding $541 million of commitments to
fund residential real estate loan applications with agreed-upon rates (Interest
Rate Lock Commitments). Interest Rate Lock Commitments and holding residential
mortgage loans for sale to the secondary market exposes the Company to interest
rate risk during the period from application to when the loan is sold to the
investors. To minimize this exposure to interest rate risk, the Company enters
into firm commitments to sell such mortgage loans and Interest Rate Lock
Commitments at specified future dates to various third parties.

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##### Table of Contents



Off-Balance Sheet Instruments (Continued)
At June 30, 2003, the Company had outstanding mandatory forward commitments to
sell $974 million of residential mortgage loans, which includes put options on
10-year treasury futures with a notional amount of $5 million. These mandatory
forward commitments covered $459 million of mortgage loans held for sale and
$515 million of Interest Rate Lock Commitments. These outstanding forward
commitments to sell mortgage loans are expected to settle in the third quarter
of 2003 without producing any material gains or losses.

The Company implemented FAS 133, as amended effective January 1, 2001. For the
quarter ended June, 2003, the impact of FAS 133 on net income was immaterial.

The following table presents the contractual amounts of the Companys
off-balance sheet financial instruments outstanding at June 30, 2003 and
December 31, 2002.

|                                                                    |                                                                               |      |          |         |      |              |   |         | 
|------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ---- | -------- | ------- | ---- | ------------ | - | ------- | 
|                                                                    |                                                                               |      | June 30, |         |      | December 31, |  
|(In thousands)                                                      |                                                                               | 2003 |          |         | 2002 |             
|                                                                    |                                                                               |      |          |         |      |             
|Financial instruments whose contract amounts represent credit risk: |                                                                               |      |          |         |      |              |   |        
|                                                                    | Commitments to fund residential real estate loans                             |      | $        | 516,826 |      |              | $ | 340,615 | 
|                                                                    | Commitments to fund commercial real estate loans                              |      |          | 248,336 |      |              |   | 142,332 | 
|                                                                    | Other unused commitments to extend credit, primarily revolving
consumer loans |      |          | 387,518 |      |              |   | 374,692 | 
|                                                                    | Standby letters of credit                                                     |      |          | 47,967  |      |              |   | 46,480  | 
|Financial instruments subject to interest rate risk:                |                                                                               |      |          |         |      |              |   |        
|                                                                    | Residential real estate loan applications with agreed-upon rates              |      |          | 541,033 |      |              |   | 181,042 | 
|                                                                    | Forward commitments to sell residential real estate mortgage loans            |      |          | 973,900 |      |              |   | 789,037 | 

LIABILITIES

Total liabilities were $4.63 billion at June 30, 2003, a $234 million, or 5%
increase from $4.40 billion at December 31, 2002. This increase was primarily
due to increases in core deposits, federal funds purchased and short-term and
long-term FHLB advances.

Deposits
Total deposits increased $28 million, or 1%, to $2.82 billion at June 30, 2003
from $2.79 billion at December 31, 2002. Noninterest bearing deposits
increased $38.2 million, or 15%; NOW and savings and money market accounts
increased $64.7 million, or 6%; and certificates of deposit decreased $74.6
million, or 5%, for the period.

Short-Term Borrowings
Short-term borrowings with maturities of less than one year, along with the
related average balances and interest rates for the six months ended June 30,
2003 and the year ended December 31, 2002, were as follows:

|                            |                             |         |               |         |         |                   |         |         |             |  |         |        |   |         |         |         |        |             |         |         |  |         |      |      |  
|--------------------------- | --------------------------- | ------- | ------------- | ------- | ------- | ----------------- | ------- | ------- | ----------- |  | ------- | ------ | - | ------- | ------- | ------- | ------ | ----------- | ------- | ------- |  | ------- | ---- | ---- | -
|                            |                             |         | June 30, 2003 |         |         | December 31, 2002 |        
|                            |                             |         |               |         |         |                   |        
|                            |                             |         |               |         |         |                   |         |         |             |  | Average |        |   |         |         |         |        |             |         |         |  | Average |     
|                            |                             |         | Ending        |         |         | Average           |         |         | Rate During |  |         | Ending |   |         | Average |         |        | Rate During |        
|(Dollars in thousands)      |                             | Balance |               |         | Balance |                   |         | Period  |             |  | Balance |        |   | Balance |         |         | Period |            
|                            |                             |         |               |         |         |                   |         |         |             |  |         |        |   |         |         |         |        |            
|Federal funds purchased     |                             | $       | 266,000       |         |         | $                 | 262,967 |         |             |  | 1.34    | %      |   | $       | 208,500 |         |        | $           | 201,621 |         |  |         | 1.77 | %   
|Other short-term borrowings |                             |         | 499           |         |         |                   | 286     |         |             |  | 1.07    |        |   |         | 570     |         |        |             | 508     |         |  |         | 1.38 |     
|                            |                             |         |               |         |         |                   |         |         |             |  |         |        |   |         |         |         |        |            
|                            | Total short-term borrowings |         | $             | 266,499 |         |                   | $       | 263,253 |             |  |         | 1.34   | % |         | $       | 209,070 |        |             | $       | 202,129 |  |         |      | 1.75 | %
|                            |                             |         |               |         |         |                   |         |         |             |  |         |        |   |         |         |         |        |            

At June 30, 2003 and December 31, 2002, other short-term borrowings consisted
of treasury, tax and loan (TT&L) demand notes.

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##### Table of Contents



FHLB Advances
Republic Bank routinely utilizes FHLB advances, both on a short- and long-term
basis, to provide funding for mortgage loans held for sale and to minimize the
interest rate risk associated with certain fixed rate commercial and
residential mortgage portfolio loans and fixed rate investment securities.
These advances are generally secured under a blanket security agreement by
first mortgage loans and investment securities with an aggregate book value
equal to at least 145% of the advances.

FHLB advances outstanding at June 30, 2003 and December 31, 2002, were as
follows:

|                         |       |         |               |           |            |                   |         |         |        |   |            |           |  |         |      |      |  
|------------------------ | ----- | ------- | ------------- | --------- | ---------- | ----------------- | ------- | ------- | ------ | - | ---------- | --------- |  | ------- | ---- | ---- | -
|                         |       |         | June 30, 2003 |           |            | December 31, 2002 |        
|                         |       |         |               |           |            |                   |        
|                         |       |         |               |           |            |                   | Average |         |        |   |            |           |  | Average |     
|                         |       |         | Ending        |           |            | Rate At           |         |         | Ending |   |            | Rate At   | 
|(Dollars in thousands)   |       | Balance |               |           | Period-End |                   |         | Balance |        |   | Period-End |          
|                         |       |         |               |           |            |                   |         |         |        |   |            |          
|Short-term FHLB advances |       | $       | 405,000       |           |            |                   | 1.36    | %       |        | $ | 305,000    |           |  |         | 1.33 | %   
|Long-term FHLB advances  |       |         | 1,042,804     |           |            |                   | 5.13    |         |        |   | 1,002,943  |           |  |         | 5.30 |     
|                         |       |         |               |           |            |                   |         |         |        |   |            |          
|                         | Total |         | $             | 1,447,804 |            |                   |         | 4.08    | %      |   | $          | 1,307,943 |  |         |      | 4.37 | %
|                         |       |         |               |           |            |                   |         |         |        |   |            |          

The long-term FHLB advances have original maturities ranging from July 2003 to
October 2017.

CAPITAL
Shareholders equity was $351 million at June 30, 2003, an $18 million, or 6%,
increase from $333 million at December 31, 2002. This increase primarily
resulted from the retention of $20.5 million in earnings after the payment of
dividends. Capital was utilized through the repurchase of 707,500 shares of
common stock during the first six months of 2003 which more than offset an
increase in accumulated other comprehensive income and the issuance of common
shares through the exercise of stock options and shares granted to employees
under the incentive stock plan.

The Company is subject to regulatory capital requirements administered by
federal banking agencies. Capital adequacy guidelines require minimum capital
ratios of 8.00% for Total risk-based capital, 4.00% for Tier 1 risk-based
capital and 3.00% for Tier 1 leverage. To be considered well-capitalized under
the regulatory framework, minimum capital ratios of 10.00% for Total risk-based
capital, 6.00% for Tier 1 risk-based capital and 5.00% for Tier 1 leverage must
be maintained.

As of June 30, 2003, the Company met all capital adequacy requirements to which
it is subject and management does not anticipate any difficulty in meeting
these requirements on an ongoing basis. The Companys capital ratios were as
follows:

|                                           |  |          |       |   |              |  |       |  
|------------------------------------------ |  | -------- | ----- | - | ------------ |  | ----- | -
|                                           |  | June 30, |       |   | December 31, | 
|                                           |  | 2003     |       |   | 2002         | 
|                                           |  |          |       |   |              | 
|Total capital to risk-weighted assets (1)  |  |          | 12.50 | % |              |  | 12.26 | %
|Tier 1 capital to risk-weighted assets (1) |  |          | 11.38 |   |              |  | 11.18 |  
|Tier 1 capital to average assets (1)       |  |          | 8.09  |   |              |  | 7.81  |  



|(1) |  | As defined by the regulations.
|--- |  | ------------------------------

As of June 30, 2003, the Companys total risk-based capital was $429 million
and Tier 1 risk-based capital was $391 million, an excess of $86 million and
$185 million, respectively, over the minimum guidelines prescribed by
regulatory agencies for a well-capitalized institution. In addition, Republic
Bank had regulatory capital ratios in excess of the minimum levels established
for well-capitalized institutions.

ACCOUNTING AND FINANCIAL REPORTING DEVELOPMENTS

The Companys consolidated financial statements are prepared based on the
application of accounting policies, the most significant of which are described
in Note 1 to the consolidated financial statements included in the Companys
2002 Annual Report on Form 10-K. These policies require estimates and
assumptions which may prove inaccurate or subject to variations. Changes in
underlying factors, assumptions or estimates could have a material impact on
the Companys future financial condition and results of operations. The most
critical of these significant accounting policies is the policy for the
allowance for loan losses. This policy is discussed more fully on pages 38 and
39 of the Companys 2002 Annual Report on Form 10-K.

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ACCOUNTING AND FINANCIAL REPORTING DEVELOPMENTS (Continued)

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity.This
Statement establishes standards for how an issuer classifies and measures in
its statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. The requirements of the statement are effective July
1, 2003 and restatement is not permitted. Beginning July 1, 2003, SFAS 150
will require the Company to reclassify its trust preferred securities balance
of $50 million as long-term debt and the dividends paid on its trust preferred
securities as interest expense. The requirements of SFAS 150 will not impact
the Companys net income or earnings per share, however, the
reclassification to interest expense will decrease its net interest
margin by approximately 9 basis points.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation
of Variable Interest Entities. FIN 46 provides principles on how to identify
variable interest entities (VIEs), and requires the consolidation of VIEs in
which an enterprise absorbs a majority of the entitys expected losses,
receives a majority of the entitys expected residual returns, or both, as a
result of ownership, contractual or other financial interests in the entity.
Currently, entities are generally consolidated by an enterprise when it has a
controlling financial interest through ownership of a majority voting interest
in the entity. FIN 46 also requires additional disclosures by primary
beneficiaries and other significant variable interest holders. The Company
must apply the provisions of FIN 46 to its existing variable interests in a VIE
no later than July 1, 2003. The adoption of the provisions of FIN 46 is not
expected to have a material impact on the Companys financial position or
results of operations. As a result of adoption, the Company expects that it
will need to deconsolidate its trust preferred securities subsidiary.
Deconsolidation of this subsidiary will not change the classification of this
debt, but will change the description from trust preferred securities to
subordinated debt. Banking regulators announced that, until notice is given
to the contrary, this debt would continue to qualify as Tier 1 Capital.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. This interpretation expands the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees and requires the guarantor to recognize a
liability for the fair value of an obligation assumed under a guarantee. FIN
45 applies to contracts or indemnification agreements that contingently require
the guarantor to make payments to the guaranteed party based on changes in an
underlying that is related to an asset, liability, or equity security of the
guaranteed party. Guarantees subject to the disclosure requirements of FIN 45
but not to the recognition provisions include, among others, a guarantee
accounted for as a derivative instrument under SFAS 133, a parents guarantee
of debt owed to a third party by its subsidiary or vice versa, and a guarantee
which is based on performance not price. The disclosure requirements of FIN 45
are effective for the Company as of December 31, 2002, and require disclosure
of the nature of the guarantee, the maximum potential amount of future payments
that the guarantor could be required to make under the guarantee, and the
current amount of the liability, if any, for the guarantors obligation under
the guarantee. The recognition requirements of FIN 45 are to be applied
prospectively to guarantees issued or modified after December 31, 2002.
Significant guarantees that have been entered into by the Company are disclosed
in Item 2: Managements Discussion and Analysis of Financial Condition and
Results of Operations   Off-Balance Sheet Instruments. The requirements of
FIN 45 did not have a material impact on the financial position or results of
operations for the quarter ended June 30, 2003.

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FORWARD-LOOKING STATEMENTS

From time to time, the Company may publish forward-looking statements relating
to such matters as possible or assumed future results of our operations,
anticipated financial performance, business prospects, new products, and
similar matters. These forward-looking statements are subject to risks and
uncertainties. Also, when we use any of the words believes, expects,
plans, anticipates, estimates, seeks, intends, outlook, forecast,
target, project, assume, achievable, potential, strategy, goal,
trends, and variations of such words and similar expressions we are making
forward-looking statements.

We claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995 for all of
our forward-looking statements. We believe that our forward-looking statements
are reasonable. You should not place undue reliance on any such
forward-looking statements, which speak only as of the date made. You should
understand that the following important factors, in addition to those discussed
elsewhere in this Quarterly Report on Form 10-Q, or in our filings with the SEC
which are accessible on the SECs website at www.sec.gov and on our website at
www.republicbancorp.com, or in our press releases, could affect our future
results and performance. This could cause those results to differ materially
from those expressed in our forward-looking statements. Factors that might
cause such a difference include the following:



| |  |  | significantly increased competition from banking and non-banking
institutions;                                                                                                                                
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | inflation and changes in the interest rate environment that reduce
our margins or reduce the fair value of financial instruments;                                                                             
|
| |  |  | general political, industry and economic conditions, either
domestically or internationally, that are worse than expected;                                                                                    
|
| |  |  | adverse developments concerning credit quality in our business
segments that may result in increases in our provisions for credit
losses, nonperforming assets, net charge-offs and reserve for credit
losses;
|
| |  |  | adverse changes in the securities markets;                                                                                                                                                                    
|
| |  |  | legislative or regulatory changes that adversely affect our business;                                                                                                                                         
|
| |  |  | the ability to enter new markets successfully and capitalize on growth opportunities;                                                                                                                         
|
| |  |  | effects of and changes in trade, monetary and fiscal policies and
laws, including interest rate policies of the Federal Reserve board;                                                                        
|
| |  |  | timely development of and acceptance of new products and services;                                                                                                                                            
|
| |  |  | changes in consumer spending, borrowing and savings habits;                                                                                                                                                   
|
| |  |  | effect of changes in accounting policies and practices, as may be
adopted by the bank regulatory agencies and the Financial Accounting
Standards Board;                                                       
|
| |  |  | changes in our organization, compensation and benefit plans;                                                                                                                                                  
|
| |  |  | costs and effects of litigation and unexpected or adverse outcomes in such litigation; and                                                                                                                    
|
| |  |  | our success in managing risks involved in the foregoing.                                                                                                                                                      

The Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such statement is made
to reflect the occurrence of unanticipated events.

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ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

MARKET RISK MANAGEMENT

Market risk is the risk of loss arising from adverse changes in the fair value
of financial instruments due to changes in interest rates, foreign exchange
rates and equity prices. The Companys market risk exposure is composed of
interest rate risk. Interest rate risk arises in the normal course of business
to the extent that there is a difference between the amount of the Companys
interest-earning assets and interest-bearing liabilities that are
prepaid/withdrawn, reprice or mature in specified periods.

The primary objective of asset and liability management is to maintain
stability in the level of net interest income by producing an appropriate yield
and maturity mix of assets and liabilities within the interest rate risk limits
set by the Companys Asset and Liability Management Committee (ALCO) and
consistent with projected liquidity needs and capital adequacy requirements.

The Companys ALCO, which meets weekly, is responsible for reviewing the
interest rate sensitivity position of the Company and establishing policies to
monitor and limit exposure to interest rate risk. Senior management is
responsible for ensuring that the Banks asset and liability management
procedures adhere to corporate policies and risk limits established by its
respective board of directors.

The Company utilizes two complementary quantitative tools to measure and
monitor interest rate risk: static gap analysis and earnings simulation
modeling. While each of these interest rate risk measurements has limitations,
the Company believes that evaluating these measures together provides a
reasonably comprehensive view of the Companys exposure to interest rate risk.

Static Gap Analysis:Static gap analysis is utilized at the end of each month
to measure the amount of interest rate risk embedded in the balance sheet as of
a point in time. The Company undertakes this analysis by comparing the
differences in the repricing characteristics of interest-earning assets and
interest-bearing liabilities. A gap is defined as the difference between the
principal amount of interest-earning assets and interest-bearing liabilities
that reprice within a specified time period. This gap provides a general
indication of the sensitivity of the Companys net interest income to interest
rate changes. If more assets than liabilities reprice or mature in a given
period, resulting in an asset sensitive position or positive gap, increases in
market interest rates will generally benefit net interest income because
earning asset rates will reflect the changes more quickly than rates paid on
interest-bearing liabilities. Alternatively, where interest-bearing
liabilities reprice more quickly than interest-earning assets, resulting in a
liability sensitive position or negative gap, increases in market interest
rates will generally have an adverse impact on net interest income. At June
30, 2003 the Companys cumulative one-year gap was a positive 14.81% of total
earning assets.

The Companys current policy is to maintain a mix of asset and liabilities with
repricing and maturity characteristics that permit a moderate amount of
short-term interest rate risk based on current interest rate projections,
customer credit demands and deposit preferences. The Company generally
operates in a range of zero to +15% of total earning assets for the cumulative
one-year gap. Management believes that this range reduces the vulnerability of
net interest income to large shifts in market interest rates while allowing the
Company to take advantage of fluctuations in current short-term rates.
Management also believes that this range complements the Companys strong
retail mortgage banking franchise.

Earnings Simulation Modeling:On a monthly basis, Management uses an earnings
simulation model to estimate the effects of various hypothetical changes in
interest rates on the Companys projected net interest income over the ensuing
twelve-month period. The model permits management to evaluate the effects of
various parallel shifts of the U.S. Treasury yield curve, upward and downward,
on net interest income expected in a stable interest rate environment (i.e.,
base net interest income).

As of June 30, 2003, the earnings simulation model projects the following
change in net interest income from base net interest income, assuming an
immediate parallel shift in market interest rates:

|                                                          |  |  |      |   |  |  |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  
|--------------------------------------------------------- |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|Change in market interest rates in basis points           |  |  | +200 |   |  |  | +100 |   |  |  | +50  |   |  |  | -50   |   |  |  | -100  |   |  |  | -200  |  
|Change in net interest income over
the next twelve months |  |  | 5.17 | % |  |  | 3.37 | % |  |  | 1.77 | % |  |  | -0.89 | % |  |  | -1.41 | % |  |  | -6.85 | %

These projected levels are well within the Companys policy limits. These
results portray the Companys interest rate risk position as asset sensitive
for the one-year horizon. The earnings simulation model assumes that current
balance sheet totals remain constant and all maturities and prepayments of
interest-earning assets and interest-bearing liabilities are reinvested at
current market rates.

Additional quantitative and qualitative disclosures about market risk are
discussed throughout Item 2: Managements Discussion and Analysis of Financial
Condition and Results of Operations beginning on page 10 of this report.

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ITEM 4: Controls and Procedures

Internal Controls
The Company maintains a system of internal controls designed to provide
reasonable assurance that: (i) transactions are executed in accordance with
managements general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles, and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
managements general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

Under the supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and Chief Financial Officer,
the Company has evaluated the effectiveness of the design and operation of the
Companys internal controls and procedures as of the end of the period covered
by this report (the Evaluation Date). There have been no significant changes
in the Companys internal controls or in other factors that could significantly
affect these controls subsequent to the Evaluation Date.

Disclosure Controls And Procedures
The Company maintains disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed (i) to collect
the information it is required to disclose in the reports it files with the
SEC, and (ii) to process, summarize and disclose this information within the
time periods specified in the rules of the SEC. Under the supervision and with
the participation of the Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer, the Company has evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures as of the end of the period covered by this report. Based on such
evaluation, the Companys Chief Executive Officer and Chief Financial Officer
have concluded that these procedures are effective in collecting such
information and in processing, summarizing and disclosing such information.

As recommended by the SEC, and in order to enhance its disclosure controls and
procedures, the Company has appointed a disclosure committee that includes the
Companys Controller, Chief Credit Officer, Chief Ethics Officer and Principal
Risk Management Officer, Senior Vice President of Human Resources and the
Investor Relations Officer. This committees members also include officers of
Republic Bank who are involved in the flow of information regarding the
Companys financial performance, controls and financial reporting.

This committee is responsible for assessing the materiality and timeliness of
the Companys disclosures in its periodic reports and coordinating the timely
review of the Companys periodic reports by the various parties involved
(including the Companys CEO, CFO, independent accountants, internal auditors
and audit committee).

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PART II  OTHER INFORMATION









|Item 1. |  | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | In the ordinary course of business, the Company and its subsidiaries
are parties to certain routine litigation. Based on current knowledge
and after consultation with legal counsel, management believes that the
aggregate liabilities, if any, arising from such legal proceedings
would not have a material adverse effect on the Companys consolidated
financial position, results of operations or liquidity.
|       
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        |  | (a) Exhibits                                                                                                                                                                                                                                                                                                                                                                                                        

|        |  |                                                                                                                                                              
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(12)    |  | Computations of ratios of earnings to fixed charges.*                                                                                                        
|(31)(a) |  | Certification of Principal Executive Officer of Republic
Bancorp Inc. Pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302
of the Sarbanes-Oxley Act of 2002)*
|(31)(b) |  | Certification of Principal Financial Officer of Republic
Bancorp Inc. Pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302
of the Sarbanes-Oxley Act of 2002)*
|(32)(a) |  | Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of
2002).*                            
|(32)(b) |  | Certification of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of
2002)*                             



|*Filed herewith
|---------------
|               
|               
|               
|               
|               
|               
|               
|               
|               
|               

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SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                      |  |     |  |                                                                
|--------------------- |  | --- |  | ---------------------------------------------------------------
|                      |  |     |  | REPUBLIC BANCORP INC.
(Registrant)                             
|                      |  |     |  |                                                                
|Date: August 13, 2003 |  | BY: |  | /s/ Thomas F. Menacher
Thomas F. Menacher                      
|                      |  |     |  | Executive Vice President, Treasurer and
Chief Financial Officer
|                      |  |     |  | (Principal Financial and
Accounting Officer)                   

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10-Q EXHIBIT INDEX

|                |  |                                                                                                                                                              
|--------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO.     |  | DESCRIPTION                                                                                                                                                  
|                |  |                                                                                                                                                              
|(12)            |  | Computations of ratios of earnings to fixed charges.*                                                                                                        
|(31)(a)         |  | Certification of Principal Executive Officer of Republic
Bancorp Inc. Pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302
of the Sarbanes-Oxley Act of 2002)*
|(31)(b)         |  | Certification of Principal Financial Officer of Republic
Bancorp Inc. Pursuant to 15 U.S.C. 78m(a) or 78o(d) (Section 302
of the Sarbanes-Oxley Act of 2002)*
|(32)(a)         |  | Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of
2002).*                            
|(32)(b)         |  | Certification of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of
2002)*                             
|*Filed herewith