<PAGE>   1


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

                                   FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)

For the fiscal year ended                                     Commission File
   December 31, 1996                                            No. 0-27652

                           REPUBLIC BANCSHARES, INC.
             (Exact Name of Registrant As Specified In Its Charter)

         FLORIDA                                                59-3347653
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                              Identification No.)

111 2nd Avenue N.E., St. Petersburg, FL                            33701
   (Address of Principal Office)                                (Zip Code)


                                 (813) 823-7300
              (Registrant's Telephone Number, Including Area Code)

       Securities registered pursuant to Section 12 (b) of the Act:  None
          Securities registered pursuant to Section 12 (g) of the Act:

                              Title of each Class
                         Common Stock, par value $2.00

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.
                    Yes   X                       No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.[x]

As of February 28, 1997, there were 4,183,507 shares of the Registrant's Common
Stock, par value $2.00 per share, issued and outstanding.  Accordingly, the
aggregate market value of the voting stock held by non-affiliates of the
Registrant was $61,968,000.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders are incorporated by reference into Parts I, II, III, and IV of
this report.



<PAGE>   2





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<PAGE>   3

                               TABLE OF CONTENTS

                                     PART I
<TABLE>
<S>         <C>                                                                                                        <C>
ITEM 1.     BUSINESS

            Background and Prior Operating History  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
            Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
            Business of Republic Bancshares, Inc..  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
            Branch Banking Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
            Sources of Funds  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
            Lending and Loan Portfolio Purchase Activities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
            Asset Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
            Investment Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
            Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
            Market Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
            Supervision and Regulation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
            Effects of Inflation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
            Changes in Accounting Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

ITEM 2.     PROPERTIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
ITEM 3.     LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

                                                         PART II

ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
ITEM 6.     SELECTED CONSOLIDATED FINANCIAL DATA  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS

            Years Ended December 31, 1996 and 1995  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
            Years Ended December 31, 1995 and 1994  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
            Asset/Liability Management and Liquidity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  38

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND DISCLOSURE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41

                                                         PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT  . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
ITEM 11.    EXECUTIVE COMPENSATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  . . . . . . . . . . . . . . . . . . . . .  42
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42

                                                         PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
            REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43

</TABLE>
<PAGE>   4





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<PAGE>   5


                                     PART I

ITEM 1.  BUSINESS

Republic Bancshares, Inc. (the "Company") is the parent company of Republic
Bank (the "Bank"), a Florida-chartered commercial bank organized on December
13, 1973.  The Company provides a broad range of financial services through its
subsidiary bank which is the largest independent bank headquartered on the west
coast of Florida.  At December 31, 1996, there were 32 banking offices in
Pasco, Pinellas, Manatee and Sarasota counties.  On January 7, 1997, a branch
office was opened in Spring Hill, Florida (Hernando County), increasing the
number to 33.  At year-end, total assets were $907,868,000, total loans were
$742,994,000, total deposits were $827,980,000 and total stockholders' equity
was $54,319,000.  The Company is regulated by the Federal Reserve Board ("FRB")
and the Bank is regulated by the Florida Department of Banking and Finance
("Department") and the Federal Deposit Insurance Corporation ("FDIC").
Deposits are insured by the FDIC. The Bank is a member of the Federal Home Loan
Bank of Atlanta ("FHLB") (see Item 1 - "Supervision and Regulation").

BACKGROUND AND PRIOR OPERATING HISTORY OF THE BANK

On May 28, 1993, William R. Hough and John W. Sapanski (the "Controlling
Stockholders") acquired from the prior controlling stockholder over 99% of the
outstanding common stock for $4,450,000 (the "Change in Control") and made an
additional capital infusion of $3,500,000 to meet regulatory capital
requirements.  The transaction was accounted for using purchase or push-down
accounting treatment, which established a new accounting basis.  The assets and
liabilities were restated from historical cost to their fair market values as
of May 28, 1993, premises and equipment totaling $1,432,000 were written off,
and the historical equity capital balances were not carried forward.  The
excess of fair market value of assets acquired and liabilities assumed exceeded
the cost of acquisition by $5,862,000, which resulted in the creation of
"negative goodwill" in that amount.  That negative goodwill was accreted to
income over a 26 month period from May 28, 1993 through July 31, 1995, the
weighted average life of the earning assets at the change of control.

On December 17, 1993, twelve branch offices in Pinellas, Manatee and Sarasota
counties were purchased from CrossLand Savings, FSB ("CrossLand"), a federal
stock savings bank and deposit liabilities of $327,706,000 were assumed.
CrossLand was paid $11,474,000 for the branch offices and related furniture,
fixtures, equipment, and other assets, plus a $1,966,000 premium (sixty
one-hundredths of one percent - 0.60%) on the dollar amount of the deposits
assumed.  Concurrently, performing and non-performing loans secured by real
estate and ORE amounting to $201,621,000 were also purchased from CrossLand.
These transactions increased total assets to $531,312,000 and total deposits to
$494,316,000 at December 31, 1993.

In December 1993, 1,398,200 shares of common stock were sold in an initial
public offering at a price of $8.00 per share.  Net proceeds, after deducting
commissions to the sales agent and other offering expenses, totaled
$10,310,325.  In addition, 75,000 shares of Series A non-cumulative convertible
perpetual preferred stock were sold for a purchase price of $6,600,000 (or
$88.00 per share).  In June 1995, an offering of 800,000 shares of the common
stock was completed through a combined subscription rights and public offering
at $12.50 per share with net proceeds totaling $9,137,000.

On February 27, 1996, the shareholders approved a reorganization under which
the Bank became a wholly-owned subsidiary of the Company.  All holders of
shares of the Bank's common and preferred Stock received one share of the
Company's $2.00 par value common stock ("Company Common Stock") for each share
of the Bank's common stock held of record and one share of the Company's $20.00
par value noncumulative convertible perpetual preferred stock ("Company
Preferred Stock") for each share of the Bank's preferred stock held of record.
Holders of outstanding options to purchase or acquire the Bank's common stock
received options to purchase an equal number of shares of Company common stock.





                                       1
<PAGE>   6

RECENT DEVELOPMENTS

On December 19, 1996, the Company announced that an agreement had been reached
for the acquisition of Firstate Financial, F.A. ("Firstate"), a thrift
institution headquartered in Orlando, Florida, for a cash purchase price of
$5,501,000.  Firstate is not publicly traded.  The agreement has been approved
by the FRB; approvals by the Department and FDIC are pending.  At December 31,
1996, Firstate had total assets of $103,624,000 and total deposits of
$84,842,000.  Firstate currently maintains a branch office in downtown Orlando
and an office in Winter Park, Florida.  The acquisition will be accounted for
using purchase accounting rules.

On March 10, 1997, the Company and F.F.O. Financial Group, Inc., St. Cloud,
Florida ("FFO") announced their boards of directors had executed a letter of
intent for the combination of the two companies.  FFO has 11 branch offices in
Osceola, Orange and Brevard counties with total assets at December 31, 1996 of
$316,949,000 and total deposits of $286,927,000.  Mr. William R. Hough,
president of an investment banking firm in St. Petersburg, Florida, owns a
controlling interest in both the company and F.F.O. Financial Groups, Inc.
Under the terms of the letter of intent, the Company will exchange shares of
Company Common Stock for all of the 8,430,000 outstanding shares of FFO common
stock at a ratio of 0.29 share of the Company for each share of FFO.  In the
event that the product of the exchange ratio and the average closing price of
the Company Common Stock on each of the twenty consecutive trading days ending
on the third business day preceding the effective date of the transaction is
below $4.10, the exchange ratio will be adjusted for decreases in the price of
the Company Common Stock; however, in no event will the exchange ratio exceed
0.30.  FFO has the right to terminate the agreement if the average of the
Company's stock price is less than $13.50.  Either party has the right to
terminate the agreement if the merger does not occur by November 1, 1997.
Outstanding options for FFO common stock will be converted into options for
Company Common Stock on the same basis.  The transaction will be accounted for
as a corporate reorganization under which the controlling shareholder's
interest in FFO will be carried forward at its historical cost while the
minority interest in FFO will be recorded at fair value.  The transaction is
subject to completion of a definitive agreement, shareholder approval by the
parties, approval by various regulatory authorities, and receipt of opinion
that the transaction qualifies as a tax-free reorganization.

BUSINESS OF REPUBLIC BANCSHARES, INC.

The Company's objective is the continued development of its commercial and
retail-oriented banking business and a diversified loan and investment
portfolio that is responsive to changes in interest rates and meets the needs
of the communities it serves.  During 1996, the Company expanded its
residential lending activities to include a mortgage banking division which has
eight loan production offices in Florida, a wholesale lending unit, and an
office in Boston, Massachusetts.  As of December 31, 1996, 54.6% of its loan
portfolio was invested in one-to-four family residential first mortgage loans;
9.2% in other residential first mortgage loans (primarily secured by
multi-family properties); 32.9% in commercial real estate, construction/land
development, and other business loans; and 3.3% in consumer loans, consisting
of home equity loans as well as extensions of credit for other household
purposes such as automobile loans and secured personal loans.  Since the Change
in Control, a large portion of the growth in the loan portfolio has occurred as
a result of loan portfolio purchases.  However, the Company's portfolio lending
activities remain concentrated in Florida.  As of December 31, 1996,
approximately 71.6%  ($531,831,000) of the loan portfolio was either made to
borrowers within Florida or was secured by real estate located within Florida.
(See "-- Lending and Loan Portfolio Purchase Activities").

BRANCH BANKING ACTIVITIES

During the year ended December 31, 1994, the Company opened two branches in
Pinellas County, bringing the total number of branches from 19 at year-end 1993
to 21 branch offices at year-end 1994.  During 1995, the Company opened eleven
branch facilities, eight of which are located in Pinellas County and three in
Pasco County.  Also, in 1995, the Company purchased a branch office, and
assumed $12,633,000 in deposits held at the branch, from a financial
institution in Clearwater, Florida, and paid a premium of $647,000, or 5.12%,
on the deposit balances.  The facility was closed on May 26, 1995 and its
operations were consolidated with a nearby branch office.  At December 31, 1996
there were a total of 32 branch offices, including 20 in Pinellas, three in
Pasco, seven in





                                       2
<PAGE>   7

Manatee, and two in Sarasota Counties.  On January 7, 1997, a branch was opened
in Spring Hill, Florida (Hernando County) increasing the number to 33.

SOURCES OF FUNDS

Deposit accounts are the primary source of funds for lending, investment, and
other general business purposes.  In addition to deposits, funds are derived
from loan repayments and loan sales.  Scheduled loan payments on the
residential loan portfolio are a relatively stable source of funds, while
residential loan prepayments, deposit in-flows and out-flows are significantly
influenced by general interest rate and money market conditions.  Funding needs
may be supplemented through borrowings from the FHLB, which are secured by a
blanket lien on the portfolio of residential loans.  Management believes that
current funding requirements can be met through retail deposits, without
reliance on brokered deposits.  To the extent there are requirements for
short-term financing beyond liquid assets, the Company intends to rely on
repurchase agreements, FHLB advances, and other traditional money market
sources of funding.  For additional discussion of asset/liability management
policies and strategies, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Asset/Liability Management".

A full range of deposit services is offered, including checking and other
transaction accounts, savings accounts, and time deposits.  At December 31,
1996, the Company had no brokered deposits, and time deposits in amounts of
$100,000 or more constituted 5.96% of total deposits.

The following table sets forth the principal types of deposit accounts offered
and the aggregate amounts of such accounts at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
                                                           Weighted
                                                            Average                                  Percent of
                                                          Interest Rate        Amount              Total Deposits
                                                          -------------        ------              --------------
<S>                                                        <C>                <C>                    <C>
Noninterest bearing                                        0.00%              $ 50,060                 6.1%
Interest checking                                          1.09                 87,639                10.6
Passbook savings                                           4.87                219,611                26.5
Statement savings                                          1.98                 26,340                 3.2
Money market                                               2.08                 32,665                 3.9
                                                                              --------
Time deposits with original maturities of:
  One year or less                                         5.00                112,362                13.6
  Over 1 year through 5 years                              5.49                201,496                24.3
  Over 5 years                                             6.24                 97,807                11.8
                                                                              --------                ----
  Total time deposits (1)                                  5.42                411,665                49.7
                                                                              --------               -----
Total deposits                                             4.23%              $827,980               100.0%
                                                                              ========               =====
</TABLE>

(1)  Includes time deposits in amounts of $100,000 or more of $49,323,000.

At December 31, 1996, scheduled maturities of total time deposits were as
follows (in thousands):

<TABLE>
<CAPTION>
                   Year ended                                               Percent of
                  December 31,                    Amount               Total Time Deposits
                  ------------                    ------               -------------------
                     <S>                        <C>                        <C>
                     1997                       $ 267,124                   64.9%
                     1998                          47,398                   11.5
                     1999                          33,043                    8.0
                     2000                          35,463                    8.6
                     2001                          28,637                    7.0
                                                ---------                  -----
                     Thereafter                 $ 411,665                  100.0%
                                                =========                  =====


</TABLE>



                                       3
<PAGE>   8

LENDING AND LOAN PORTFOLIO PURCHASE ACTIVITIES

The Company originates a full range of lending products for its portfolio and
real estate-secured loans for sale in the secondary market.  Portfolio lending
efforts are focused on customers located along the west coast and in central
Florida.  During 1995, the Company opened commercial loan production offices in
central and southwest Florida.  The portfolio objective is to maintain a
one-to-four family, primarily adjustable rate, residential loan portfolio of at
least 50% of its total loans and to achieve, over time, a level of
approximately 10% of its total loan portfolio in consumer loans, consisting of
home equity loans as well as extensions of credit for other household purposes
such as automobile loans and secured personal loans.  The approximate 40%
remainder of the loan portfolio will consist of commercial real estate loans,
multifamily residential loans, and other business loans.

In April 1996, the Company started a mortgage banking division which has eight
offices in Florida, a wholesale lending operation, and an office in Boston,
Massachusetts.  Substantially all of the loans generated by the mortgage
banking division are intended for sale into the secondary market on both a
whole loan basis or by delivery into marketable securities, depending upon
individual loan characteristics.  The Company's mortgage banking division has
also begun to originate home improvement and debt consolidation loans secured
by junior liens on real estate.  The Company plans to begin selling these loans
to investors in 1997.

For 1996, originations of residential mortgage loans totaled $203,306,000,
including $141,016,000 in fixed rate loans and $62,290,000 of adjustable rate
loans.  Sales of residential loans totaled $106,132,000 for 1996.  Residential
loans originated amounted to $76,600,000 for 1995.

Originations of commercial real estate and commercial (business) loans totaled
$207,399,000 for 1996 compared to $141,765,000 for 1995.  To-date, such loan
originations have been for portfolio purposes but the Company intends to
originate and sell into the secondary market a portion of its commercial real
estate loans originated during 1997, collecting fee income on the sale and
retaining the servicing of these loans.

The Company purchased loans totaling approximately $193,495,000 in connection
with the Purchase and Assumption.  Loan purchases totaled $157,449,000,
$102,263,000, and $8,183,000 in years 1994, 1995 and 1996, respectively, for an
approximate aggregate total of $461,390,000 in loan purchases.  Further real
estate loan purchases may be considered if loan pools with acceptable yield,
satisfactory creditworthiness, and other characteristics become available for
bid.  However, during 1995 and 1996, loan originations were the  predominate
source of growth in the loan portfolio and this is expected to continue for the
foreseeable future.

The following tables set forth information concerning the loan portfolio, based
on total dollars and percent of portfolio, by collateral type as of the dates
indicated (in thousands):


<TABLE>
<CAPTION>
Based on total dollars:                                      At December 31,
-----------------------                 -------------------------------------------------------------------
                                           1996           1995            1994         1993        1992
                                           ----           ----            ----         ----        ----
<S>                                      <C>             <C>          <C>          <C>          <C>
Real estate mortgage loans:
  One-to-four family residential         $ 419,605       $ 388,221    $ 293,146    $ 153,587    $   7,797
  Multifamily residential                   68,337          75,127       60,795       36,735        4,461
  Commercial real estate                   182,298         153,193      112,050       86,457       65,072
  Construction/land development             27,050          13,974       16,095        9,561        5,256
                                          --------      ----------   ----------   ----------   ----------

Total real estate mortgage loans           697,290         630,515      482,086      286,340       82,586

Commercial (business) loans                 34,427          29,687       24,579       18,581       17,546
Consumer loans                               9,983           6,847        6,426        7,509        8,374
Other loans                                  1,294           2,367        3,244        4,053        2,209
                                         ---------      ----------   ----------   ----------   ----------
Total loans                                742,994         669,416      516,335      316,483      110,715
Less:
 Allowance for loan losses                  13,134          14,910        7,065        6,539        1,958
                                         ---------      ----------   ----------   ----------   ----------
Loans, net of allowance                  $ 729,860       $ 654,506    $ 509,270    $ 309,944    $ 188,757
                                         =========       =========    =========    =========    =========


</TABLE>



                                       4
<PAGE>   9

At December 31, 1996 and 1995, the balance of loans purchased included in
portfolio totals amounted to $286,517,000 and $354,724,000, respectively.  The
balance of loans held for sale included in the portfolio at December 31, 1996
and 1995 were $36,590,000 and $4,711,000, respectively.


<TABLE>
<CAPTION>
Based on percent of portfolio:                                      At December 31,
------------------------------            -------------------------------------------------------------
                                            1996           1995           1994         1993        1992
                                            ----           ----           ----         ----        ----
<S>                                         <C>          <C>             <C>          <C>          <C>
Real estate mortgage loans:
 One-to-four family residential              56.5%        58.0%           56.8%        48.5%         7.0%
 Multifamily residential                      9.2         11.2            11.8         11.6          4.0
 Commercial real estate                      24.6         22.9            21.7         27.3         58.8
 Construction/land development                3.6          2.1             3.1          3.0          4.7
                                            -----        -----           -----        -----        -----

Total real estate mortgage loans             93.9         94.2            93.4         90.4         74.5

Commercial (business) loans                   4.6          4.4             4.8          5.9         15.8
Consumer loans                                1.3          1.0             1.2          2.4          7.6
Other loans                                    .2           .4              .6          1.3          2.1
                                            -----        -----           -----        -----        -----

Total loans                                 100.0%       100.0%          100.0%       100.0%       100.0%
                                            =====        =====           =====        =====        =====

</TABLE>
The following table sets forth the contractual amortization of real estate and
commercial loans at December 31, 1996 and 1995 (in thousands).  Loans having no
stated schedule of repayments and no stated maturity are reported as due in
one- year or less.  The table also sets forth the dollar amount of loans
scheduled to mature after one year, according to their interest rate
characteristics (in thousands):
<TABLE>
<CAPTION>
                                                      December 31, 1996                        December 31, 1995
                                                   --------------------------            ----------------------------
Type of loan:                                       Real Estate    Commercial            Real Estate       Commercial
                                                    -----------    ----------            -----------       ----------
<S>                                                <C>                <C>                  <C>                <C>
Amounts due:
  One year or less                                 $  60,246          $15,740              $ 50,189           $12,751
  After one through five years                       151,492           16,580               136,011            14,756
  More than five years
                                                     485,552            2,107               444,315             2,180
                                                   ---------          -------              --------           -------
Total                                              $ 697,290          $34,427              $630,515           $29,687
                                                   =========          =======              ========           =======

Interest rate terms on
  amounts due after one year:
  Adjustable                                       $ 446,710          $12,053              $416,854           $ 8,488
  Fixed                                              190,334            6,634               163,472             8,448
                                                   ---------          -------              --------           -------
Total                                              $ 637,044          $18,687              $580,326           $16,936
                                                   =========          =======              ========           =======


</TABLE>
Credit Decisions; Credit Administration

The loan approval process provides for various levels of lending authority to
loan officers, the Officers' Loan Committee, and the Chairman and Chief
Executive Officer.  In addition, loans in excess of $1,500,000 require the
approval of the Board of Directors' Loan Committee or a majority of the full
Board prior to funding.  Loan purchases are generally made subject to the same
underwriting standards as loan originations.  All loan purchases must be
approved in advance of funding by the Chief Executive Officer, and are reported
to the full Board following purchase.  Purchases of pools of residential loans
have contained delinquent loans which have been generally purchased at a
discount to their face value.

To assure consistency in underwriting policies and procedures, the supervision
of all credit decision functions has been centralized.  Commercial real estate
loans are underwritten with minimum thresholds established for loan-to-value
ratios, debt service coverage and capitalization rate.  The Company, in making
real estate development loans, endeavors to emphasize loans secured by
properties that have measurable and reliable cash flow.  The





                                       5
<PAGE>   10

Company's business lending is based on a strategy of extending credit to the
local business community, and policy has been to make loans for corporate and
commercial purposes that must satisfy certain cash flow requirements.

The loan portfolio is managed on an ongoing basis pursuant to written portfolio
management strategies, guidelines for underwriting standards and risk
assessment, and procedures for ongoing identification and management of credit
deterioration.  Regular portfolio reviews are undertaken to estimate loss
exposure and ascertain compliance with policies (see -- "Asset Quality").

Real Estate Lending Standards

Real estate lending is defined as extensions of credit secured by liens on
interests in real estate or made for the purpose of financing the construction
of a building or other improvements to real estate, regardless of whether a
lien has been taken on the property.  Applicable regulations require that
comprehensive written real estate lending policies be adopted and maintained
that are consistent with safe and sound banking practices.  These lending
policies must reflect consideration of the Interagency Guidelines for Real
Estate Lending Policies adopted by the federal banking agencies in December
1992 (the "Guidelines").  Pursuant to the mandates of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), the Guidelines set
forth regulations prescribing standards for real estate lending, which the
Company has incorporated into its lending policy.

The policy addresses certain lending considerations set forth in the
Guidelines, including loan-to-value ("LTV") limits, loan administration
procedures, underwriting standards, portfolio diversification standards and
documentation, approval, and reporting requirements.  The LTV ratio framework,
with an LTV ratio being the total amount of credit to be extended divided by
the appraised value or purchase price of the property at the time the credit is
originated, has been established for each category of real estate loans.  The
Company's policy, among other things, establishes the following LTV limits: raw
land (65%); land development (75%); construction (commercial, multifamily and
non-residential) (80%); and improved property (85%).  For portfolio purposes,
loans on one-to-four family residential (owner occupied) mortgages where the
LTV exceeds 95% are not made, and any LTV ratio in excess of 80% generally
requires appropriate insurance or additional security from readily marketable
collateral.  Loans with an LTV higher than 95% may be made if saleable to
investors at an acceptable premium.  The policy is reviewed and approved by the
Board of Directors at least annually.

ASSET QUALITY

Allowance/Provision for Loan Losses

The allowance for loan losses represents management's estimate of an amount
adequate to provide for potential losses inherent in the loan portfolio.
However, it is likely that there are additional risks of future losses which
cannot be quantified precisely or attributed to particular loans or classes of
loans.  Because those risks include general economic trends as well as
conditions affecting individual borrowers, management's judgment of the reserve
is necessarily approximate and imprecise.  The allowance is also subject to
regulatory examinations and determinations as to adequacy, which may take into
account such factors as the methodology used to calculate the allowance and the
size of the allowance in comparison to peers identified by the regulatory
agencies.

The Company maintains a loan loss policy that is both consistent with policies
established by the FDIC and commensurate with historical loss experience.
Provisions for loan losses charged to expense during each period will be the
result of management's assessment of the adequacy of the allowance when
compared to the inherent risk of the portfolio.  As part of the risk assessment
for loans purchased in the Purchase and Assumption and for loans purchased
during 1994, 1995 and 1996, management allocated a portion of the discount on
such loan purchases to the allowance in amounts which are consistent with loan
loss policy guidelines.  Amounts resulting from discount allocation to the
allowance are available to absorb potential losses only on those purchased
loans and are not available for losses from other loans.  To the extent that
losses in certain pools or portfolios of loans exceed the loan loss allowance
and any remaining unamortized loan discount allocated to such pool or
portfolio, or available as a general allowance, the Company would have to
recognize a loss to the extent of such shortfall in the then-current period.





                                       6
<PAGE>   11

Management conducts an ongoing evaluation and grading of its loan portfolio
according to an eight point rating system.  The loan ratings serve as a
guideline in assessing the risk level of a particular loan and provide a basis
for the establishment of the overall allowance.  The Loan Review Department
independently rates loans and, on a quarterly basis, meets with senior
management and the loan officers to discuss all loans which have been
identified for potential credit quality problems.  The Loan Review Department
also reports its findings to the Directors' Audit Committee to ensure
independence of the loan grading function.

Various loan purchases were made totaling $157,449,000 during 1994,
$102,263,000 during 1995 and $8,183,000 in 1996 and a portion of the discount
on those purchased loans was allocated to the allowance in amounts consistent
with the Company's loan loss policy guidelines.  In 1995 such allocation
included $7,189,000 related solely to one particular portfolio purchase, in the
aggregate principal amount of $48,061,000 (the "March 1995 Purchase").  At
December 31, 1996 the principal balance of the March 1995 Purchase had declined
to $39,863,000 and the allowance allocated to this purchase was reduced to
$5,855,000.  This was principally the result of charges to the reserve for
loans which were nonperforming when acquired and subsequently taken into
foreclosure and recorded at their fair value.  The Company's history of
administering this loan purchase indicates that the expected loss rate on the
remaining loans in this portfolio will be less than the amount remaining in the
allowance.  Consequently, the Company reallocated $1,500,000 from the allowance
to discount in the fourth quarter of 1996, reducing the December 31, 1996
allowance allocated to the March 1995 Purchase to $4,355,000.  The overall
allowance also included $1,043,000 allocated to loans purchased from CrossLand,
$1,752,000 allocated to other loan purchases, and $5,984,000 allocated to
originated loans.  At December 31, 1996, the amount of unaccreted discount on
purchased loans which had not been allocated to the allowance totaled
$4,731,000.

Activity to the allowance during 1996 included a $1,800,000 provision for loan
losses, loan charge-offs (net of recoveries) of $1,844,000, and $1,732,000
allocated from the allowance to loan discount.  The net charge-off amount for
1996 included $1,014,000 assessed against the allowance for loans acquired in
the March 1995 Purchase as properties securing certain nonperforming loans
which were purchased at a substantial discount were acquired through
foreclosure and recorded at their fair value.




                   [Balance of page intentionally left blank]





                                       7
<PAGE>   12

The following table sets forth information concerning the activity in the
allowance for loan losses during the periods indicated (in thousands):

<TABLE>
<CAPTION>
                                                                             Seven         Five
                                                                             Months        Months
                                                                             Ended         Ended          Year Ended
                                        Years Ended December 31,         December 31,     May 31,        December 31
                                       1996        1995       1994           1993           1993            1992
                                       ----        ----       ----           ----           ----            ----

<S>                                 <C>          <C>        <C>            <C>             <C>            <C>
Allowance at beginning
 of period                          $ 14,910     $ 7,065   $ 6,539         $ 1,866         $ 1,958        $ 2,180
Loan discount (net) allocated
 to/(from) the allowance for
 loans acquired in the:
 Purchase and Assumption                               -      (757)          4,046             N/A            N/A
 Loans purchased in 1994                (202)          -     1,400               -               -              -
 Loans purchased in 1995              (1,541)      7,658         -               -               -              -
 Loans purchased in 1996                  11           -         -               -               -              -
                                     -------      ------    ------          ------          ------      ---------
  Total loan discount allocated
   to/(from) the allowance            (1,732)      7,658       643           4,046               -              -

Charge-offs:
------------
Residential loans (1-4 family)         1,700         275        94               -               -             96
Commercial real estate/
  multi-family                            51         907     1,472             115              43            356
Commercial (business)                    249         558       304              28             439            375
Consumer and other loans                 119         207         -              65              50             64
                                     -------      ------    ------          ------          ------        -------
Total charge-offs                      2,110       1,947     1,870             208             532            891

Recoveries:
-----------
Residential loans (1-4 family)             1           7         -               1               1              2
Commercial real estate/
  multi-family                            35         379       113              19               1              1
Commercial loans (business)              168          53        64              91              44             95
Consumer and other loans                  62          10         1              15              15             51
                                     -------      ------    ------          ------          ------         ------
Total recoveries                         266         449       178             126              61            149

Net charge-offs                        1,844       1,498     1,692              82             471            742

Provisions for loan losses             1,800       1,685     1,575             709             379            520
                                     -------      ------    ------          ------          ------         ------

Allowance at end of period          $ 13,134    $ 14,910   $ 7,065         $ 6,539         $ 1,866        $ 1,958
                                     =======     =======    ======          ======          ======         ======


Charges to allocated loan discount       .21%        .13%      .32%            .00%            .00%            .00%
Other net charge-offs                    .06         .12       .11             .12             .43             .69
                                         ---         ---       ---             ---             ---             ---
Total net charge-offs to average loans   .27%        .25%      .43%            .12%            .43%            .69%
                                         ===         ====      ===             ===             ===             ===

</TABLE>

The table on the following page (in thousands) sets forth the allocation of the
allowance based on management's subjective estimates.  The amount allocated to
a particular segment should not be construed as the only amount available for
future charge-offs that might occur within that segment.  In addition, the
amounts allocated by segment may not be indicative of future charge-off trends.
The allocation of the allowance may change from year to year should management
determine that the risk characteristics of the loan portfolio and off-balance
sheet commitments have changed.





                                       8
<PAGE>   13


<TABLE>
<CAPTION>
                                                  1996                                     1995
                                       ---------------------------                --------------------------
Allowance Allocation                    Amount          Percent                    Amount          Percent
--------------------                   -------         ---------                  -------         ----------

<S>                                    <C>                 <C>                    <C>              <C>
Performing/not classified:
Residential loans:
  March 1995 Purchase                  $  4,171             5.3  %                $  5,960           6.4  %
  All other residential                   1,788            48.3                        669          49.1
Commercial (business)                       340             4.6                        351           4.7
Commercial real estate                    2,622            35.5                      2,718          32.5
Consumer & other                            488             3.2                        343           2.1
                                       --------        --------                   --------         -----
      Subtotal                            9,409            96.9                   $ 10,041          94.8

Non-performing/classified:
Special mention                             124              .8                        306           2.3
Substandard & nonperforming               2,476             2.2                      3,476           2.8
Doubtful                                    601              .1                        123           0.1
Loss                                          -               -                          -             -
                                      ---------        --------                   --------         -----
      Subtotal                            3,201             3.1                      3,905           5.2

Off balance sheet risk                      434               -                        250             -
Unallocated                                  90               -                        714             -
                                      ---------        --------                  ---------        ------
      Total                           $  13,134           100.0  %               $  14,910        100.00  %
                                      =========          ======                  =========        ======

</TABLE>

Nonperforming Assets

Nonperforming assets include (i) non-accrual loans (loans 90 days or more
delinquent and restructured loans that have not yet demonstrated a sufficient
payment history to warrant being returned to performing status), (ii) accruing
loans 90 days or more delinquent that are deemed by management to be adequately
secured and in the process of collection, and (iii) ORE (i.e., real estate
acquired through foreclosure or deed in lieu of foreclosure).  All delinquent
loans are reviewed on a regular basis and are placed on non-accrual status
when, in the opinion of management, the possibility  of collecting additional
interest is deemed insufficient to warrant further accrual.  As a matter of
policy, interest is not accrued on loans past due 90 days or more unless the
loan is both well secured and in process of collection.  When a loan is placed
in non-accrual status, interest accruals cease and uncollected accrued interest
is reversed and charged against current income.  Additional interest income on
such loans is recognized only when received.

Loans classified as non-accrual totaled $15,351,000 at December 31, 1996
compared to $13,554,000 at December 31, 1995, an increase of $1,797,000.

At December 31, 1996, the Company had nonperforming assets (including loans
classified as non-accrual) of $22,827,000 or 2.51% of total assets. The ratio
of non-performing assets to total assets was 2.93% at year-end 1995 and 3.59%
at year- end 1994.  Accruing loans which were 90 days past due amounted to
$113,000 at December 31, 1996 and primarily consisted of loans in process of
renewal.  For additional information see "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Comparison of Balance
Sheets at December 31, 1996 and 1995".



                                       9
<PAGE>   14

The following table sets forth information regarding the components of
nonperforming assets at the dates indicated (in thousands):

<TABLE>
<CAPTION>
Non-Performing Assets:                                            At December 31,
                                           ----------------------------------------------------------------
                                            1996            1995         1994         1993            1992
                                            ----            ----         ----         ----            ----
<S>                                       <C>            <C>           <C>         <C>            <C>
Non-accrual loans:
Residential loans (1-4 family)            $  7,366       $ 9,540(1)    $ 9,062      $ 3,707       $     35
Multi-family residential                        55           129         1,160       10,200              0
Commercial real estate                       6,162         3,082         1,515        1,464          2,965
Commercial (business)                        1,604           308           591          620            529
Home equity and consumer                       164           495           620            0             10
                                          --------      --------       -------      -------       --------
Total non-accrual loans                     15,351        13,554        12,948       15,991          3,539
ORE acquired through foreclosure             7,363         8,064         9,278        9,569          9,190
Accruing loans 90 days
 past due                                      113         1,876           293          725             22
                                          --------       -------       -------      -------       --------
Nonperforming assets                      $ 22,827       $23,494       $22,519      $26,285       $ 12,751
                                          ========       =======       =======      =======       ========

Nonperforming loans
 to loans                                     2.19%           2.32%        2.56%         5.28%         3.22%

Nonperforming assets
 to total assets                              2.51%           2.93%        3.59%         4.95%         7.55%
</TABLE>

(1) Net of $184,000 and $950,000 of loan loss allowances at December 31, 1996
and 1995, respectively, allocated to nonaccrual loans acquired in the March
1995 Purchase.

For additional information concerning policy on allowance for loan losses see
"Business -- Asset Quality -- Allowance/Provision for Loan Losses".


Other Real Estate Acquired Through Foreclosure

All ORE assets are recorded at the lower of cost or estimated fair value based
on appraisal information which is updated when a property is taken into ORE and
annually, where appropriate.  As of December 31, 1996, in no case did the book
value of any ORE property exceed 90% of the most current available appraisal
value.  The following table sets forth information regarding the Company's ORE
balances, net of allowances, as of the dates indicated (in thousands):

<TABLE>
<CAPTION>
                                                                         At December 31,
                                                       -----------------------------------------------------
                                                         1996         1995       1994        1993       1992
                                                        -----        -----       ----        ----       ----
<S>                                                    <C>          <C>       <C>         <C>        <C>

Vacant undeveloped residential land                    $ 1,277      $ 1,717   $ 2,358     $ 2,450    $ 2,454
Vacant developed residential lots                          254          265       434         600      1,644
Residential houses                                       2,541          860     1,313         795        800
Vacant commercial undeveloped land                          79           79       248         155        155
Commercial land developed for sale                       3,200        4,308     4,516       1,746      2,991
Income-producing commercial buildings                       12          150         0       3,534        324
Vacant commercial buildings                                  -          685       409         289        822
                                                       -------      -------   -------     -------    -------
Total ORE                                              $ 7,363      $ 8,064   $ 9,278     $ 9,569    $ 9,190
                                                       =======      =======   =======     =======    =======

ORE to total assets                                       .81%        1.01%     1.48%       1.80%      5.44%
                                                         ====         ====      ====        ====       ====

</TABLE>


                                       10
<PAGE>   15

At December 31, 1996, ORE properties with book values in excess of $1.0 million
were as follows:

-   A tract of land in Holiday, Florida, carried at $3,200,000, that has been
developed as a shopping center site.  This tract was obtained in 1988 through
foreclosure in connection with a $1,800,000 loan.  The tract contains wetlands,
some of which were required to be filled, and the resultant permitting process
took approximately five years to complete.  During that time, over $2,000,000
was spent in engineering, environmental, and legal costs and approximately
$500,000 for the purchase of several additional parcels of land required for
mitigation purposes pursuant to the permit requirements.  The Company is
offering for sale the completed shopping center sites and other commercial pad
sites.  One shopping center site was sold to a developer who constructed the
retail space for the anchor tenants, Publix and Walgreens.  The Company
presently operates a branch banking facility on the tract.  Federal regulations
had required the Bank to dispose of the tract no later than December 31, 1996
but the FDIC has approved an extension of the holding period to December 19,
1997.  While the current appraisal indicates that the fair market value of the
tract exceeds book value, a sale to a party other than an end-user could result
in proceeds below the current book value.

-    A 41.66% undivided interest in a 973-acre parcel of undeveloped
residential land in Pasco County, Florida.  This interest was acquired through
foreclosure in 1990 and is carried on the Company's books at $1,277,000.  The
entire parcel (which includes both the Company's undivided interest and that of
the other owners) was appraised at $4,700,000 in January 1997.  The Company is
negotiating to sell approximately two-thirds of the property to a governmental
agency.

Troubled Debt Restructurings

A troubled debt restructuring ("TDR") is a situation in which the creditor
allows the debtor certain concessions that would not normally be allowed, such
as modifying the terms of the debt to a basis more favorable than those offered
to other creditors or accepting third-party receivables in lieu of the debt.
At December 31, 1996 and 1995, the loan portfolio included TDRs amounting to
$2,516,000 and $1,673,000, respectively.

INVESTMENT ACTIVITIES

State law requires that a specified minimum amount of liquid assets be
maintained, based on the level of deposits, which are subject to certain
restrictions.  At all times during 1996, the amount of liquid assets maintained
exceeded the regulatory minimum.  For additional information related to the
Company's investment portfolio, see Note 2, Investment Securities and Note 3,
Mortgage Backed Securities, of the Notes to the Consolidated Financial
Statements.

EMPLOYEES

At December 31, 1996, there were 637 full-time equivalent employees compared to
418 at December 31, 1995, none of whom were represented by a union or other
collective bargaining agreement.  The year-to-year increase is primarily the
result of the mortgage banking expansion.  The Company makes use of part-time
and flex-time employees in connection with its branch operations.  One of the
Company's primary operating principles is to nurture its staff through, among
other things, fair compensation, a good working environment, and career
development and enhancement opportunities.  Management considers its relations
with its employees to be good.

MARKET AREA

All of the Company's branch offices are located in the two Tampa Bay
Metropolitan Statistical Areas which include Hernando, Hillsborough, Manatee,
Pasco, Pinellas and Sarasota Counties.  At December 31, 1996, there were 32
branch offices, including 3 offices in Pasco County, 20 offices in Pinellas
County, 7 offices in Manatee County, and 2 offices in Sarasota County.  On
January 7, 1997 the Company opened a branch office in Spring Hill, Hernando
county, bringing the total number of offices to 33.  As a multi-office
institution, the Company's market area encompasses all of the counties in which
it operates.  The Company also operates 10 loan production offices in Pinellas,
Lee, Orange, Palm Beach and Polk counties in Florida and an office in Boston,
Massachusetts.





                                       11
<PAGE>   16

A Metropolitan Statistical Area ("MSA"), as defined by the U.S. Census Bureau,
is a geographic area with a significant population nucleus, along with any
adjacent communities that have a high degree of economic and social integration
with that nucleus.  Two MSAs anchor the west coast of Florida; Tampa-St.
Petersburg-Clearwater, which includes Hillsborough, Hernando, Pasco and
Pinellas counties, and Sarasota-Bradenton, comprised of Manatee and Sarasota
counties.  As of January 1, 1996, the latest estimates available, the Tampa-St.
Petersburg MSA had a population of 2.2 million, ranking it 23rd in the nation.
Sarasota-Bradenton had a population of 539,000, ranking it among the top 100
Metro areas at 95th.  Together the two MSAs had a combined population of two
and three-fourths million residents which would rank about 12th in the United
States.  The economic base of Florida is supported by a large and growing
segment of retirees, tourism, which contributes to the economic base throughout
the year, and light industry.

The market area served by the Company is highly competitive with 279 branch
offices of banks and savings and loan institutions operating in Pinellas
County, 90 in Pasco County, 81 in Manatee County, and 132 in Sarasota County,
as of September 30, 1996, the most recent date that comparative data was
available.  The largest commercial banking institutions in Florida operate in
each of the three counties.  As in most market areas, competition for deposits
also exists from money market funds and credit unions.  Competition for
mortgage loans is extremely strong from specialized lenders, other mortgage
bankers and independent brokers capable of selling qualified mortgage loans to
the highest bidder.  Similarly, consumers can choose from a wide range of
suppliers of personal credit, including credit card companies, consumer finance
companies and credit unions.

With total deposits of $783,188,000 as of September 30, 1996, the Company
ranked 13th among banks and 24th among all depository institutions in the state
of Florida in terms of deposits held.  Ranked by deposits, the Company was the
15th largest in Pasco County, the 7th largest in Pinellas County, the 5th
largest in Manatee County and the 14th largest in Sarasota County.  As the
table below indicates, market share ranges from six percent in Manatee County
to one percent in Pasco.

                           Branch Deposits by County
                               September 30, 1996
                                ($ in millions)

<TABLE>
<CAPTION>
                                         The Company                   Total                        The Company
                                         -----------                  -------                       -----------
   <S>                                      <C>                      <C>                               <C>

   Pasco                                    $  42                    $  3,899                          1.1%
   Pinellas                                   502                      12,787                          3.9
   Manatee                                    167                       2,770                          6.0
   Sarasota                                    72                       5,860                          1.2
                                            -----                    --------                          ---
       Total                                $ 783                    $ 25,316                          3.1%
                                            =====                    ========                          ===
</TABLE>



                                       12
<PAGE>   17

SUPERVISION AND REGULATION

The Company and the Bank are extensively regulated under both federal and state
law.  The following is a brief summary of certain statutes, rules, and
regulations affecting the Company and the Bank.  This summary is qualified in
its entirety by reference to the particular statutory and regulatory provisions
referred to below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the Company's business.  Supervision,
regulation, and examination of the Company and the Bank by the bank regulatory
agencies are intended primarily for the protection of depositors rather than
stockholders.

The Company is a bank holding company, registered with the Board of Governors
of the Federal Reserve System ("Federal Reserve") under the Bank Holding
Company Act of 1956, as amended ("BHC Act").  As such, Republic and its
subsidiaries are subject to the supervision, examination, and reporting
requirements of the BHC Act and the regulations of the Federal Reserve.

The BHC Act requires every bank holding company to obtain the prior approval of
the Federal Reserve before:  (i) it may acquire direct or indirect ownership or
control of any voting shares of any bank if, after such acquisition, the bank
holding company will directly or indirectly own or control more than five
percent (5%) of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of the bank; or (iii) it may merge or consolidate with any other bank
holding company.

The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community served.  The Federal Reserve is also required to consider the
financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the communities
to be served.  Considerations of financial resources generally focuses on
capital adequacy, and consideration of convenience and needs issues includes
the parties' performance under the Community Reinvestment Act of 1977 (the
"CRA").

The BHC Act generally prohibits Republic from engaging in activities other than
banking or managing or controlling banks or other permissible subsidiaries and
from acquiring or retaining direct or indirect control of any company engaged
in any activities other than those activities determined by the Federal Reserve
to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto.  In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public, such
as greater convenience, increased competition, or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest, or unsound banking
practices.  For example, factoring accounts receivable, acquiring or servicing
loans, leasing personal property, conducting discount securities brokerage
activities, performing certain data processing services, acting as agent or
broker in selling credit life insurance and certain other types of insurance in
connection with credit transactions, and performing certain insurance
underwriting activities all have been determined by the Federal Reserve to be
permissible activities of bank holding companies.  The BHC Act does not place
territorial limitations on permissible nonbanking activities of bank holding
companies.  Despite prior approval, the Federal Reserve has the power to order
a bank holding company or its subsidiaries to terminate any activity or to
terminate its ownership or control of any subsidiary when it has reasonable
cause to believe that continuation of such activity or such ownership or
control constitutes a serious risk to the financial safety, soundness, or
stability of any bank subsidiary of that bank holding company.

The Bank is organized as a Florida-chartered commercial bank and is regulated
and supervised by the  Department.  In addition, the Bank is regulated and
supervised by the FDIC, which serves as its primary federal regulator.
Accordingly, the Department and the FDIC conduct regular examinations of the
Bank, reviewing the adequacy of the loan loss reserves, quality of loans and
investments, propriety of management practices,





                                       13
<PAGE>   18

compliance with laws and regulations, and other aspects of the Bank's
operations.  In addition to these regular examinations, the Bank must furnish
to the FDIC quarterly reports containing detailed financial statements and
schedules.

Federal and Florida banking laws and regulations govern all areas of the
operations of the Bank, including reserves, loans, mortgages, capital,
issuances of securities, payment of dividends, and establishment of branches.
As its primary federal regulator, the FDIC has authority to impose penalties,
initiate civil and administrative actions, and take other steps intended to
prevent the Bank from engaging in unsafe or unsound practices.  The Bank is a
member of the Bank Insurance Fund and, as such, deposits in the Bank are
insured by the FDIC to the maximum extent permissible by law.

The Bank also is subject to the provisions of the CRA.  Under the CRA, the Bank
has a continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire communities, including
low- and moderate-income neighborhoods.  The CRA does not establish specific
lending requirements or programs for financial institutions nor does it limit
the Bank's discretion to develop the types of products and services that it
believes are best suited to its particular communities, consistent with the
CRA.  The CRA requires the appropriate federal bank regulatory agency (in the
case of the Bank, the FDIC), in connection with its regular examination of a
bank, to assess the Bank's record in meeting the credit needs of the community
serviced by the bank, including low- and moderate-income neighborhoods.  The
FDIC's assessment of the Bank's record is made available to the public.
Further, such assessment is required whenever the Bank applies to, among other
things, establish a new branch office that will accept deposits, relocate an
existing office or merge or consolidate with, or acquire the assets of or
assume the liabilities of, a federally-regulated financial institution.  In the
case where Republic applies for approval to acquire a bank or other bank
holding company, the Federal Reserve will also assess the CRA records of the
Bank.  The Bank received a "Satisfactory" CRA rating in its most recent
examination.

In April 1995, the federal banking agencies adopted amendments revising their
CRA regulations, with a phase-in schedule applicable to various provisions.
Among other things, the amended CRA regulations, when fully implemented on July
1, 1997, will substitute for the prior process-based assessment factors a new
evaluation system that will rate an institution based on its actual performance
in meeting community needs.  In particular, the system will focus on three
tests:  (i) a lending test, to evaluate the institution's record of making
loans in its service areas; (ii) an investment test, to evaluate the
institution's record of investing in community development projects; and (iii)
a service test, to evaluate the institution's delivery of services through its
branches, Aims and other offices.  The amended CRA regulations also clarify how
an institution's CRA performance will be considered in the application process.
Republic does not anticipate that the revised CRA regulations will have any
material impact on the Bank's operations or that they will have any impact on
the Bank's CRA rating.

Capital Requirements

The Company and the Bank is required to comply with the capital adequacy
standards established by the Federal Reserve (for the Company), and the FDIC
(for the Bank).  There are three basic measures of capital adequacy for banks
that have been promulgated by the Federal Reserve; two risk-based measures and
a leverage measure.  All applicable capital standards must be satisfied for a
bank holding company to be considered in compliance.

The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets.  Assets and off-balance-sheet items
are assigned to broad risk categories each with appropriate weights.  The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.

Under Federal Reserve policy, bank holding companies are expected to act as a
sources of financial strength to, and to commit resources to support, their
subsidiary banks.  This support may be required at times when, absent such
Federal Reserve policy, the holding company may not be inclined to provide it.
In addition, any capital loans by a bank holding company to any bank subsidiary
are subordinate in right of payment to deposits and to





                                       14
<PAGE>   19

certain other indebtedness of such subsidiary bank.  In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a subsidiary bank
will be assumed by the bankruptcy trustee and entitled to a priority payment.

Payment of Dividends

As a Florida-chartered commercial bank, the Bank is subject to the laws of
Florida as to the payment of dividends.  Under the Florida Financial
Institutions Code, the prior approval of the Department is required if the
total of all dividends declared by a bank in any calendar year will exceed the
sum of the bank's net profits for that year and its retained net profits for
the preceding two years.

Under Federal law, if, in the opinion of the federal banking regulator, a bank
or thrift under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such
regulation may require, after notice and hearing, that such institution cease
and desist from such practice.  The federal banking agencies have indicated
that paying dividends that deplete a depository institution's capital base to
an inadequate level would be an unsafe and unsound banking practice.  Under the
Prompt Corrective Action regulations adopted by the federal banking agencies in
December 1992, a depository institution may not pay any dividend to its holding
company if payment would cause it to become undercapitalized or if it already
is undercapitalized.

Due to the Bank's anticipated continued growth and management's intent to
maintain certain regulatory capital levels, dividend payments on the Company's
common stock are not expected in the foreseeable future.

Deposit Insurance

The Bank is subject to FDIC deposit insurance assessments.  In 1994, the Bank
became subject to a new risk-based assessment system for insured depository
institutions that takes into account the risks attributable to different
categories and concentrations of assets and liabilities.  The new system
assigns an institution to one of three capital categories: (i) well
capitalized; (ii) adequately capitalized; and (iii) undercapitalized.  An
institution is also assigned, by the FDIC, to one of three supervisory
subgroups within each capital group.  The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation provided to the
FDIC by the institution's primary federal regulator and information which the
FDIC determines to be relevant to the institution's financial condition and the
risk posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor).  An institution's
insurance assessment rate is then determined based on the capital category and
supervisory category to which it is assigned.  Under the final risk-based
assessment system, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied.  Assessment rates on deposits for an institution
in the highest category (i.e., "well capitalized" and "healthy") are less than
assessment rates on deposits for an institution in the lowest category (i.e.,
"undercapitalized" and "substantial supervisory concern").

The Bank, as a state-chartered commercial bank, is a member of the Bank
Insurance Fund (the "BIF").  However, as part of a deposit assumption
transaction with CrossLand Savings, FSB in December 1993, the Bank acquired
$327,706,000 in deposits insured by the Savings Association Insurance Fund (the
"SAIF") and thereby became a so-called Oakar bank.  Based on that deposit
assumption, the Bank is required to pay insurance premiums to the FDIC on a
substantial portion of its deposits at the SAIF assessment rate notwithstanding
its status as a BIF member.  As of December 31, 1996, the most recent
measurement date for assessment purposes, approximately 59% of the Bank's
deposits were treated as SAIF-insured deposits, with the remaining 41% of
deposits being assessed at the BIF rate.  The Bank's ratio of SAIF- and
BIF-assessed deposits will increase somewhat following Republic's planned
acquisitions in 1997 of Firstate Financial, F.A. and FFO Financial Group, Inc.
and its wholly-owned subsidiary First Federal Savings and Loan Association of
Osceola County.

Until recently, the FDIC had established separate risk-based assessment
schedules for the BIF and the SAIF.  In November 1995, the FDIC established the
current assessment schedule for BIF-assessed deposits, with assessment rates
ranging from zero percent to 0.27 percent (or 27 basis points) of deposits.  In
December 1996, following





                                       15
<PAGE>   20

enactment of federal legislation to recapitalize the SAIF (described below),
the FDIC adopted the same assessment schedule, effective October 1, 1996 for
the Bank, for SAIF-assessed deposits.  During 1996, the Bank paid $8,800 in
insurance assessments to the BIF and $796,800 to the SAIF.  The Bank realized
savings of approximately $194,000 in insurance premiums costs during the fourth
quarter of 1996 resulting from the new SAIF assessment schedule, and additional
savings of approximately $400,000 are anticipated in 1997.

As part of the omnibus budget legislation passed last fall, Congress enacted
the Deposit Insurance Funds Act of 1996 (the "Funds Act").  With certain
exceptions, the Funds Act imposed a one-time special assessment on
SAIF-assessable deposits held by all depository institutions in an aggregate
amount that would cause the SAIF to meet its designated reserves-to-deposits
ratio of 1.25 percent.  Pursuant to the Funds Act, the Bank on November 27,
1996 paid a special assessment to the SAIF of $2,539,000.  This assessment was
determined by taking the Bank's SAIF-assessable deposits as of March 31, 1995
and multiplying that amount by a 0.657 percent (or 65.7 basis point) assessment
rate that the FDIC had calculated would be necessary to capitalize fully the
SAIF.  (A lower assessment rate was imposed on certain Oakar banks, but the
Bank did not qualify for the reduction.)

Prior to enactment of the Funds Act, the SAIF assessments were used to pay
interest on bonds issued by the Financing Corporation (the "FICO") in the late
1980s to fund the resolution of troubled thrifts, and only insurance payments
by SAIF-member institutions were available to satisfy FICO's interest payment
obligations.  A second provision of the Funds Act severs the linkage that had
existed between the SAIF and the FICO funding requirements, authorizing the
FICO to impose its own assessments separate and apart from any insurance fund
assessment.  The Funds Act also shifts a portion of the FICO funding
obligations to BIF-member institutions beginning in 1997.  Through the end of
1999, the FICO assessment rate on BIF-assessable deposits is required by the
statute to be one-fifth of the SAIF rate.  Thereafter, FICO assessment rates
for members of both insurance funds will presumably be equalized.

Currently, the BIF assessment rate is 0.013 percent (or 1.3 basis points) and
the SAIF assessment rate if 0.0648 percent or (6.48 basis points).  For the
first half of 1997, the Bank has been assessed a semiannual FICO payment
payment obligation of $192,480, $176,449 of which was attributable to the
Bank's SAIF-assessable deposits and the balance of which was attributable to
its BIF-assessable deposits.

Federal Reserve System

The Federal Reserve Board regulations require banks to maintain
non-interest-earning reserves against their transaction accounts (primarily NOW
and regular checking accounts).  The new Federal Reserve Board regulations that
will go into effect on April 1, 1997 will generally require that reserves be
maintained against aggregate transaction accounts as follows: for accounts
aggregating $49.3 million or less (subject to adjustment by the Federal Reserve
Board) the reserve requirement is 3.0%; and for accounts greater than $49.3
million, the reserve requirement is $1,479,000 plus 10.0% (subject to
adjustment by the Federal Reserve Board between 8.0% and 14.0%) against that
portion of total transaction accounts in excess of $49.3 million.  The first
$4.4 million of otherwise reservable balances (subject to adjustments by the
Federal Reserve Board) are exempted from the reserve requirements.  The Bank
anticipates that it will be in compliance with the foregoing requirements.  The
balances maintained to meet the reserve requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements imposed by the
Department.  Because required reserves must be maintained in the form of either
vault cash, a noninterest-bearing account at a Federal Reserve Bank or a
pass-through account as defined by the Federal Reserve Board, the effect of
this reserve requirement is to reduce the Bank's interest-earning assets.  FHLB
System members also are authorized to borrow from the Federal Reserve "discount
window", but Federal Reserve Board regulations require institutions to exhaust
all FHLB sources before borrowing from a Federal Reserve Bank.





                                       16
<PAGE>   21

Monetary Policy and Economic Controls

The banking business is affected not only by general economic conditions, but
also by the monetary policies of the Board of Governors of the Federal Reserve
System ("Federal Reserve").  Changes in the discount rate on member bank
borrowing, availability of borrowing at the "discount window," open market
operations, the imposition of changes in reserve requirements against bank
deposits and the imposition of and changes in reserve requirements against
certain borrowings by banks and their affiliates are some of the instruments of
monetary policy available to the Federal Reserve.  The monetary policies have
had a significant effect on the operating results of commercial banks and are
expected to continue to do so in the future.  The monetary policies of the
Federal Reserve are influenced by various factors, including inflation,
unemployment and short- and long-term changes in the international trade
balance and in the fiscal policies of the United States Government.  Future
monetary policies and the effect of such policies on the future business and
earnings of the Bank cannot be predicted.

EFFECTS OF INFLATION

As a financial institution, the majority of the Company's assets are monetary
in nature and, therefore, differ greatly from those of most industrial or
commercial companies that have significant investments in fixed assets.  The
effects of inflation on the financial condition and results of operations,
therefore, are less significant than the effects of changes in interest rates.
The most significant effect of inflation is on noninterest expense, which tends
to rise during periods of general inflation.

CHANGES IN ACCOUNTING STANDARDS

The Financial Accounting Standards Board ("FASB") recently adopted or issued
proposals and guidelines that may have a significant impact on the accounting
practices of commercial enterprises in general and financial institutions in
particular.

In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights", which requires that a mortgage banking enterprise recognize as a
separate asset the right to service mortgage loans for others, regardless of
the manner in which such servicing rights are acquired.  Moreover, this
statement requires that the total cost of acquiring mortgage loans be allocated
to the servicing rights and the loans based on their relative fair values, if
practicable.  This standard is effective for fiscal years beginning after
December 15, 1995 but earlier implementation is encouraged.  Management
implemented SFAS No. 122 beginning July 1, 1995.  The impact upon the results
of operations of the Bank was not material.

During 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities", which is
effective for the Company's fiscal year beginning January 1, 1997.  SFAS 125
provides standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings.  The impact of the adoption
of SFAS 125 upon the results of operations of the Company is not expected to be
material.





                                       17
<PAGE>   22

ITEM 2.     PROPERTIES

At December 31, 1996, the Company had 32 branch offices, of which thirteen are
leased and nineteen are owned.  In addition, there were 10 loan production
offices and 1 loan operations center which were leased.  There is one leased
facility used for warehouse purposes.  Substantially all furniture, fixtures
and equipment items are owned.  The following table shows the name, location
and lease expiration date (if applicable) for each facility as of December 31,
1996:

<TABLE>
<CAPTION>

Location                                       Ownership/Lease Expiration Date
--------                                       --------------------------------

<S>                                            <C>
Pinellas County:
----------------

Corporate Headquarters and Branch
111 Second Avenue N.E.                         December 13, 2004 with 3 options
St. Petersburg, Florida  33701                 remaining of five years each

Main Office Drive-Up                           October 31, 2004
201 Second Avenue South
St. Petersburg, Florida  33701

Countryside Office                             March 8, 2005 with 2 options of five years each
28050 U.S. 19 North
Clearwater, Florida  34621

Northwood Office                               February 28, 2006
3024 Enterprise Road
Clearwater, Florida  34619

Missouri Office                                December 31, 2000
1235 Missouri Avenue
Clearwater, Florida  34616

Highland Avenue Office                         Facility Owned
1831 Highland Avenue North
Clearwater, Florida  34615

ICOT Office                                    December 31, 1998 with 1 option remaining of five years
5801 Ulmerton Road
Clearwater, Florida  34620

Seminole Office                                October 1, 1997, renews for 10 years (Ground lease)
8000 113rd Street North
Seminole, Florida  33772-4801

Palm Harbor Office                             October 31, 1997 with 2 options of five years each
33920 US 19 North
Palm Harbor, Florida  34684

Largo Office                                   February 28, 1999 with 1 option of five years
10500 Ulmerton Road E, #816
Largo, Florida  34641

Pinellas Park Office                           Facility owned
7600 66th Street North
Pinellas Park, Florida  33781


</TABLE>



                                       18
<PAGE>   23


<TABLE>
<CAPTION>

Location                                       Ownership/Lease Expiration Date
--------                                       --------------------------------

<S>                                            <C>
Pinellas County (continued):
----------------------------

St. Petersburg Office                          Facility owned
100  34th St. North
St. Petersburg, Florida  33713

Oldsmar Office                                 April 1, 2001
3711 Tampa Road
Oldsmar, Florida  34677

Dunedin Office                                 Facility owned
1478 Main Street
Dunedin, Florida  34698

Belleair Bluffs Office                         Facility owned
401 N. Indian Rocks Road
Belleair Bluffs, Florida 33770

Caladesi Office                                Facility owned
2678 Bayshore Blvd.
Dunedin, Florida  33774

Walsingham Office                              Facility owned
14141 Walsingham Road
Largo, Florida  34644

Pinellas Point Office                          Facility owned
3000 54th Avenue South
St. Petersburg, Florida  33712

Tyrone Office                                  December 31, 2004 with 2 options of five years each
6900 22nd Avenue North
St. Petersburg, Florida  33710

Northeast Office                               December 31, 1999
250 37th Avenue North
St. Petersburg, Florida  33704

East Lake Woodlands                            March 31, 1997 with 1 option of five years
3412 East Lake Road
Palm Harbor, Florida  34685

Clearwater Loan Production Office              October 31, 2006
28051 US 19 North, Suite G
Clearwater, Florida  34621

Clearwater Loan Operations Center              August 31, 1998
28059 US Highway 19 North, Suite 203
Clearwater, Florida  34621

Pasco County:
-------------

Holiday Office                                 December 31, 1999 with 1 option of five years
4649 Sunray Drive
Holiday, Florida  34691


</TABLE>



                                       19
<PAGE>   24


<TABLE>
<CAPTION>

Location                                       Ownership/Lease Expiration Date
--------                                       --------------------------------

<S>                                            <C>
Pasco County (continued)
------------------------

Holiday Drive-up                               Facility owned
4649-A Sunray Drive
Holiday, Florida  34691


New Port Richey Office                         Facility owned
6500 Massachusetts Avenue
New Port Richey, Florida  34653

Gulfview Square Mall Office                    April 30, 2005 with 3 options of five years each
9501 U.S. 19 North
Port Richey, Florida  34668

Manatee County:
---------------

Pavilion Office                                Facility owned
1301 Sixth Avenue West
Bradenton, Florida  34205

Bayshore Office                                Facility owned
6204  14th Street West
Bradenton, Florida  34207

Westside Office                                Facility owned
5905 Manatee Avenue West
Bradenton, Florida  34209

Ironwood Office                                Facility owned
4302 Cortez Road West
Bradenton, Florida  34210

Mt. Vernon Office                              Facility owned
9819 Cortez Road West
Bradenton, Florida  34210

53rd Avenue Office                             Facility owned
415  53rd Avenue
Bradenton, Florida  34207

Ellenton Office                                Facility owned
3510 U.S. Highway 301
Ellenton, Florida  34222

Sarasota County:
----------------

Sarasota Office and Loan Production Office     Facility owned
1100 S. Tamiami Trail
Sarasota, Florida 34236

Venice Office                                  Facility owned
400 Venice By-pass North
Venice, Florida  34292



</TABLE>


                                       20
<PAGE>   25

<TABLE>
<CAPTION>

Location                                       Ownership/Lease Expiration Date
--------                                       --------------------------------
<S>                                            <C>
Lee County
----------

Bonita Springs                                 June 30, 1998 with 1 option of two years
Loan Production Office
24830 Burnt Pine Drive, Suite 2
Bonita Springs, Florida  34134

Ft. Myers Loan Production Office               October 31, 1998
12681 New Brittany Blvd.
Ft. Myers, Florida  33907

Cape Coral Loan Production Office              April 30, 1998
3501 Del Prado Blvd., Suite 302
Cape Coral, Florida

Orange County
-------------

Orlando Loan Production Office                 May 31, 1997
1000 Legion Place
Suite 1625, Gateway Center
Orlando, Florida  32801

Hillsborough County
-------------------

Tampa Loan Production Office                   Commencing August 15, 1996 on a month-to-month basis
3802 Ehrlich Road, Suite 108                   (90-day notice required)
Tampa, Florida  33624

Polk County
-----------

Lakeland Loan Production Office                October 31, 1999
1506 South Florida Avenue
Lakeland, Florida  33803

Palm Beach County
-----------------

West Palm Beach Loan Production Office         August 31, 1999
1645 Palm Beach Lakes Blvd., Suite 480
West Palm Beach, Florida  33401

Boston, Massachusetts
---------------------

Boston Loan Production Office                  Yearly - No expiration date
137 Newbury Street
Boston, Massachusetts 02116

Atlanta, Georgia
----------------

Satellite Loan Production Office               Month-to-month basis
1900 Emery NW, Suite 115
Atlanta, Georgia  30318


</TABLE>



                                       21
<PAGE>   26

<TABLE>
<CAPTION>

Location                                       Ownership/Lease Expiration Date
--------                                       --------------------------------
<S>                                            <C>
Non-banking Facilities:
-----------------------

Warehouse                                      February 15, 2000
2718 24th Street North
St. Petersburg, Florida  33713

Location opened in January, 1997:
---------------------------------

Hernando County
---------------

Spring Hill Office                             February 1, 2007 with 3 options of 5 years each
5331 Spring Hill Drive
Spring Hill, Florida  34606


</TABLE>



                   [Balance of page intentionally left blank]





                                       22
<PAGE>   27

ITEM 3.     LEGAL PROCEEDINGS

The Company is a party to various legal proceedings in the ordinary course of
its business.  Based on information presently available, management believes
that the ultimate outcome in such other proceedings, in the aggregate, will not
have any material adverse effect on the Company's financial position.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Information required by this item is incorporated by reference from the
Company's Proxy Statement for its 1997 Annual Meeting.



                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Trading Market

Since December 29, 1993, (date first listed) through April 23, 1995, the
Company's Common Stock was listed on the Nasdaq Small-Cap Market ("Small-Cap
Market") under the symbol "REPB".  Since April 24, 1995, the Common Stock has
been listed on the Nasdaq National Market ("National Market") under the same
symbol.  Subsequent to completion of the offering on December 17, 1993, but
prior to the listing of the Common Stock on the Small-Cap Market, the Company's
stock was not actively traded.  The high, low and closing bids for the Common
Stock on the Nasdaq Small-Cap Market for the period December 29, 1993 through
April 23, 1995, and for the Nasdaq National Market for the period April 24,
1995 through December 31, 1996 were as follows:

<TABLE>
<CAPTION>
                                                                  High             Low           Closing
                                                                  ----             ---           -------
        <S>                                                       <C>             <C>            <C>
        December 29, 1993 to December 31, 1993                     9 1/2           8 1/2          9 1/4
        Year ended December 31, 1994                              13               9 1/4         11
        Quarter Ended March 31, 1995                              12 1/2          12             12
        Quarter Ended June 30, 1995                               13 3/4          11 3/4         13 5/8
        Quarter Ended September 30, 1995                          15 3/4          13 3/16        15 1/4
        Quarter Ended December 31, 1995                           15 1/4          13 3/4         14 1/4
        Quarter ended March 31, 1996                              14 1/4          13 1/4         13 3/8
        Quarter ended June 30, 1996                               14 15/16        12 1/4         12 5/16
        Quarter ended September 30, 1996                          12 7/8          11 3/4         12 7/8
        Quarter ended December 31, 1996                           15 1/2          13 5/8         15 1/8
</TABLE>

These over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily reflect actual
transactions.

Stockholders

As of December 31, 1996, the Company had approximately 1,070 beneficial owners
of the Common Stock.

Dividends

The Company has not paid dividends on its common stock during the years 1993 -
1996.  The timing and the extent to which dividends are paid by the Company in
the future will be determined by the Board of Directors in light of
then-existing circumstances, including the Company's rate of growth,
profitability, financial condition and existing and anticipated capital
requirements, the amount of funds legally available for the payment of cash
dividends, regulatory constraints and such other factors as the Board
determines relevant.  Dividends on the





                                       23
<PAGE>   28

Company Common Stock may be paid in any quarter only to the extent that funds
for such payments are available after all required dividend payments for such
quarter on the Company Preferred Stock have been made.  Further, the Company
cannot declare or pay dividends on Company Common Stock unless, from the date
of such declaration or payment, the Company retains cash, cash equivalents or
marketable securities in an amount sufficient to cover the next two consecutive
semi- annual interest payments that will be due and payable on its convertible
subordinated debentures.

Under the prompt corrective action provisions of FDICIA, the Bank is prohibited
from paying any dividend that would cause it to become an undercapitalized
institution.  Under Florida law, the Bank is limited in the amount of dividends
that it may declare and pay without the prior approval of the Department to the
aggregate of its net profits during the period in which the dividend is
declared combined with its retained net profits from the preceding two years
(less any required transfers to surplus) and is generally precluded from paying
any dividend if, (i) its net income from the current year combined with the
retained net income from the preceding two years is a loss or (ii) such payment
would cause the capital accounts of the Bank to fall below the minimum amount
required by law, regulation, order or any written agreement with the Department
or another state or federal regulatory agency.  See Item 1. "Business --
Supervision and Regulation -- Payment of Dividends."





                   [Balance of page intentionally left blank]





                                       24
<PAGE>   29

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated operating data, per share data, balance
sheet data and selected financial ratios as of and for each of the years ended
December 31, 1992, 1994, 1995, and 1996, the seven month period ended December
31, 1993, and the five month period ended May 31, 1993 were derived from the
consolidated financial statements which have been audited by Arthur Andersen
LLP, independent certified public accountants.  The selected consolidated
operating data, per share data, balance sheet data, selected financial ratios
and other data as of and for the seven-month period ended December 31, 1994 and
the five month period ended May 31, 1994, are derived from unaudited
consolidated financial statements.  Financial data for those interim periods
include all adjustments, consisting of normal accruals, that management
considers necessary for a fair presentation of financial condition and results
of operations for such interim periods.  In light of the significant
mark-to-market adjustments and other adjusting entries to its financial
statements that were made following the change in control on May 28, 1993,
management believes that the usefulness of comparisons between (i) the
financial statements and the financial data derived therefrom as of the dates
and for the periods prior to June 1, 1993, and (ii) the financial statements
and the financial data derived therefrom as of the dates and for the periods
since June 1, 1993, may be limited.  In addition, subsequent to consummation of
the initial public offering and the Purchase and Assumption in December 1993,
the Company has operated in a significantly different manner from that which it
had previously operated.  Accordingly, the financial results for periods prior
to the Purchase and Assumption differ significantly from periods since then.
The following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements, related notes and other financial
information presented elsewhere.




                   [Balance of page intentionally left blank]





                                       25
<PAGE>   30

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
                                   - TABLE 1
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                                                                        Seven Months
                                                                    Years Ended December 31,           Ended  Dec. 31,
                                                               ---------------------------------  ------------------------
                                                                 1996        1995          1994       1994         1993
                                                                 ----        ----          ----       ----         ----
                                                                                                  (unaudited)
<S>                                                          <C>         <C>          <C>         <C>           <C>
OPERATING DATA:
 Interest income                                             $   66,947  $   57,863   $   37,115  $   23,684  $     7,331
 Interest expense                                                32,926      30,001       16,871      10,711        3,110
                                                             ----------  ----------   ----------  ----------   ----------
 Net interest income                                             34,021      27,862       20,244      12,973        4,221
 Loan loss provision                                              1,800       1,685        1,575       1,263          709
                                                             ----------  ----------   ----------  ----------   ----------
 Net interest income after loan loss provision                   32,221      26,177       18,669      11,710        3,512
 Other noninterest income                                         4,409       2,751        2,612       1,758        1,411
 Gain on sale of ORE held for investment                          1,207           -            -           -
 General and administrative ("G&A") expenses                     27,352      22,119       14,916       9,308        3,700
 SAIF special assessment                                          2,539           -            -           -            -
 Provision for losses on ORE                                      1,611           -           10          10           20
 Other noninterest expense                                          319         739        1,691       1,417          600
                                                             ----------  ----------   ---------- -----------  -----------

 Net income before income taxes & goodwill accretion              6,016       6,070        4,664       2,733          603
 Accretion of negative goodwill                                       -       1,578        2,705       1,578        1,579
                                                             ----------  ----------   ---------- -----------  -----------
 Net income before income taxes                                   6,016       7,648        7,369       4,311        2,182
 Income tax provision                                             2,232       1,875          468         268            0
                                                             ----------  ----------   ---------- -----------  -----------
 Net income                                                  $    3,784  $    5,773   $    6,901 $     4,043  $     2,182
                                                             ==========  ==========   ========== ===========  ===========
PER SHARE DATA:
 "Core" earnings per share                                   $     1.13  $      .92   $     1.02 $      0.60  $      0.32
 Gain on sale of ORE held for investment                            .15           -            -                        -
 SAIF special assessment                                           (.32)          -            -                        -
 Provision for losses on ORE                                       (.20)          -            -           -         (.01)
 Negative goodwill accretion                                          -         .34         0.65        0.38         0.81
                                                             ----------  ----------  ----------- -----------  -----------
 Total earnings per share                                    $      .76  $     1.26  $      1.67 $      0.98  $      1.12
                                                             ==========  ==========  =========== ===========  ===========
 Weighted average shares outstanding                          4,952,937   4,564,534    4,136,790   4,141,322    1,951,231
BALANCE SHEET DATA (AT PERIOD-END):
 Total assets                                                $  907,868  $  801,995  $   626,445 $   626,445  $   531,312
 Investment & mortgage backed securities                         94,401      64,801       40,271      40,271       37,382
 Loans, net of unearned income                                  742,994     669,416      516,335     516,335      316,483
 Allowance for loan losses                                       13,134      14,910        7,065       7,065        6,539
 Deposits                                                       827,980     743,105      583,885     583,885      494,316
 Negative goodwill                                                    -           -        1,578       1,578        4,283
 Stockholders' equity                                            54,319      50,903       36,165      36,165       29,454
SELECTED FINANCIAL RATIOS:
 Return on average assets                                           .45%        .77%        1.25%       1.20%        1.99%
 Return on average assets - "Core"                                  .64         .56          .76         .73         0.55
 Return on average equity                                          7.31       13.47        21.34       20.68        39.17
 Return on average equity - "Core"                                10.37        9.79        12.97       12.61        10.39
 Net interest spread                                               3.96        3.67         3.78        4.06         3.45
 Net interest margin                                               4.28        3.95         3.96        4.25         4.22
 G&A expense to average assets                                     3.28        2.96         2.74        2.79         3.94
 G&A efficiency ratio                                             68.98       72.25        63.92       62.02        65.70
 Non-accrual loans to loans                                        2.15        2.04         2.51        2.51         5.05
 Nonperforming assets to total assets                              2.50        2.93         3.59        3.59         4.95
 Loan loss allowance to loans(2)                                   1.86        2.24         1.37        1.37         2.07
 Loan loss allowance to non-performing loans(2)                   85.94       90.47        53.36       53.36        39.12
OTHER DATA (AT PERIOD-END):
 Number of full service offices                                      32          32          21          21            19
 Number of full-time equivalent employees                           637         421         300         300           179
---------------------------------------------
</TABLE>

(1)  "Core" earnings per share and ratios exclude the effect of the SAIF
special assessment, provisions for losses on ORE, the gain on sale of the
headquarters building, and negative goodwill accretion.
(2)  See "Business -- Asset Quality" for a discussion of the allocation and
availability of loan loss reserves among portfolios of loans within the Bank.





                                       26
<PAGE>   31

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
                                   - TABLE 2
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>


                                                               Five Months Ended            Year Ended
                                                                    May 31,                December 31,
                                                          -------------------------       ---------------
                                                              1994             1993                1992
                                                              ----            -----                ----
OPERATING DATA:                                           (unaudited)
<S>                                                         <C>           <C>                  <C>
  Interest income                                           $ 13,431      $   4,848            $  11,845
  Interest expense                                             6,160          1,970                6,054
                                                            --------      ---------            ---------
  Net interest income                                          7,271          2,878                5,791
  Loan loss provision                                            312            379                  520
                                                            --------      ---------            ---------
  Net interest income after loan loss provision                6,959          2,499                5,271
  Other noninterest income                                       854            743                1,679
  G&A expenses                                                 5,608          2,699                5,748
  Provision for losses on ORE                                      -          1,214                  230
  Other noninterest expense                                      274            443                  715
                                                            --------      ---------            ---------
  Net income (loss) before income taxes and
    goodwill accretion                                        1,931          (1,114)                  257
  Accretion of negative goodwill                              1,127               -                     -
                                                           --------       ---------            ----------
  Net income (loss) before income taxes                       3,058          (1,114)                  257
  Income tax provision (benefit)                                200               0                     0
                                                           --------       ---------            ----------
  Net income (loss)                                        $  2,858       $  (1,114)           $      257
                                                           ========       =========            ==========
PER SHARE DATA:
  "Core" earnings (loss) per share                         $   1.01       $    (.32)           $     0.36
  Provision for losses on ORE                                     -            (.68)                 (.13)
  Negative goodwill accretion                                   .66               -                     -
                                                           --------       ---------            ----------
  Total earnings (loss) per share                          $   1.67       $   (1.00)           $     0.23
                                                           ========       =========            ==========
  Weighted average shares outstanding                     4,134,420       1,117,192             1,106,459
BALANCE SHEET DATA (AT PERIOD-END):
  Total assets                                             $508,642        $168,741              $168,810
  Investment securities                                      52,571          27,433                24,276
  Loans net of unearned income                              396,144         111,292               110,715
  Allowance for loan losses                                   6,828           1,866                 1,958
  Negative goodwill                                           3,156           5,861                     -
  Deposits                                                  469,461         153,660               154,984
  Stockholder's Equity                                       32,234           8,058                12,215
SELECTED FINANCIAL RATIOS:
  Return on average assets                                     1.33%          (1.61)%                0.15%
  Return on average assets "Core"                               .81            -                     -
  Return on average equity                                    22.34          (21.75)                 2.12
  Return on average equity "Core"                             13.53            -                     -
  Net interest spread                                          3.48            4.21                  3.51
  Net interest margin                                          3.67            4.66                  3.95
  G&A expense to average assets                                2.40            6.28                  4.01
  G&A efficiency ratio                                        67.32           74.54                 76.95
  Non-accrual loans to loans                                   4.36            2.27                  3.20
  Nonperforming assets to total assets                         5.64            5.89                  7.55
  Loan loss allowance to loans (2)                             1.72            1.68                  1.77
  Loan loss allowance to non-performing loans (2)             23.58           73.03                 54.98

OTHER DATA (AT PERIOD-END):
  Number of full service offices                               19                 7                     7
  Number of full-time equivalent employees                    223                96                    90
-----------------------------------------------------
</TABLE>

(1)  "Core" earnings per share and ratios exclude the effect of the SAIF
special assessment, provisions for losses on ORE, the gain on sale of the
headquarters building, and negative goodwill accretion.
(2)  See "Business -- Asset Quality" for a discussion of the allocation and
availability of loan loss reserves among portfolios of loans within the Bank.



                                       27
<PAGE>   32

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the balance sheets and statements of
operations should be read in conjunction with Item 6. "Selected Consolidated
Financial Data" and the Consolidated Financial Statements and the related notes
included therein.

YEARS ENDED DECEMBER 31, 1996 AND 1995

COMPARISON OF BALANCE SHEETS AT DECEMBER 31, 1996 AND 1995

OVERVIEW

Total assets of the Company were $907,868,000 at December 31, 1996 and
$801,995,000 at December 31, 1995, an increase of $105,873,000.  This growth
was primarily the result of the expansion of the Company's residential loan
production capability.  Total loans increased by $73,578,000 from $669,416,000
at the end of the prior year to $742,994,000 at the end of 1996.  Total
deposits increased by $84,875,000 from $743,105,000 at year-end 1995 to
$827,980,000.

INVESTMENT SECURITIES

The Company's investment securities consisted of U.S. Treasury Bills and Notes
and a $1.5 million revenue bond with the Northern Palm Beach County Improvement
District (the "Revenue Bond").  The Revenue Bond is not an obligation of Palm
Beach County, the State of Florida, or any political subdivision, municipality
or agency, thereof.  The principal and interest are payable solely from and are
secured equally and notably by a lien upon and pledge of the proceeds of
special assessments levied by the district.  This investment is taxable for
federal income tax purposes.

LOANS

Total loans at December 31, 1996 included $706,404,000 of loans held for
portfolio and $36,590,000 held for sale, a total of $742,994,000.  The
$73,578,000 increase in total loans was primarily comprised of a $25,475,000
increase in residential loans to $405,901,000 (54.6% of total loans), and a
$41,300,000 increase in other real estate-secured loans.  At December 31, 1996,
loans secured by first liens on real estate constituted 92.0% of the total loan
portfolio.  Commercial (business) loans not secured by real estate increased
$4,740,000 while consumer loans increased $3,136,000.  Residential loan sales
for 1996 amounted to $106,132,000.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses amounted to $13,134,000 at December 31, 1996
(1.86% of loans), compared to $14,910,000 at December 31, 1995.  The total
amount of loans for determining the adequacy of the allowance includes
$467,477,000 of loans originated by the Company, purchased loans amounting to
$275,517,000, and there are $123,773,000 in unfunded loan commitments
outstanding.

The Company made various loan purchases totaling $157,449,000 during 1994,
$102,263,000 during 1995 and $8,183,000 in 1996 and has allocated a portion of
the discount on its purchased loans to the allowance in amounts consistent with
loan loss policy guidelines.  In 1995 such allocation included $7,189,000
related solely to one particular portfolio purchase, in the aggregate principal
amount of $48,061,000 (the "March 1995 Purchase").  At December 31, 1996 the
principal balance of the March 1995 Purchase had declined to $39,863,000 and
losses on certain nonperforming loans in this pool had reduced the allowance
allocated to this purchase to $5,855,000.  The Company's history of
administering this loan purchase indicates that the expected loss rate on the
remaining loans in this portfolio will be less than the amount remaining in the
allowance.  Consequently, the Company





                                       28
<PAGE>   33

reallocated $1,500,000 from the allowance to discount in the fourth quarter of
1996, reducing the  December 31, 1996 allowance allocated to the March Purchase
to $4,355,000. The overall allowance at year-end 1996 also included $1,043,000
allocated to loans purchased from CrossLand, $1,752,000 allocated to other loan
purchases, and $5,984,000 allocated to originated loans.

Activity to the allowance during 1996 included a $1,800,000 provision for loan
losses, loan charge-offs (net of recoveries) of $1,844,000, and $1,732,000
allocated from the allowance to loan discount.  The net charge-off amount for
1996 included $1,014,000 assessed against the allowance for loans acquired in
the March 1995 Purchase as properties securing certain nonperforming loans
which were purchased at a substantial discount were acquired through
foreclosure and recorded at their fair value.  At December 31, 1996 the amount
of unaccreted discount on purchased loans not allocated to allowance totaled
$4,731,000.

NONPERFORMING ASSETS

Nonperforming assets amounted to $22,645,000 or 2.50% of total assets at
December 31, 1996, as compared to $23,494,000 or 2.93% of total assets at
December 31, 1995.  Nonperforming loans totaled $15,464,000 at the end of 1996,
an increase of $34,000 from the prior year-end total of $15,430,000.  The ratio
of nonperforming loans to loans declined from 2.32% at the end of 1995 to 2.19%
at year-end 1996.  Other real estate acquired through foreclosure decreased by
$701,000 from $8,064,000 at the end of the prior year to $7,363,000 at year-end
1996.  The ratio of nonperforming assets to total assets at the end of 1996 was
2.51% compared to 2.93% at the end of 1995.

DEPOSITS

Total deposits were $827,980,000 at December 31, 1996, compared to $743,105,000
at the prior year-end, an increase of $84,875,000.  Passbook savings accounts
offered to higher-balance customers at a premium rate of 5.00% increased by
$156,537,000 and retail checking and noninterest-bearing account balances
increased $20,466,000 or 19.18%.  The Company reduced its reliance on time
deposits through a less aggressive pricing strategy which resulted in an
$83,737,000 decline in certificates of deposits and a decline in other
interest-bearing balances of $9,898,000.  At December 31, 1996, jumbo ($100,000
and over) deposits totaled $49,323,000 or 5.96% of total deposits.  There were
no brokered deposits.

CONVERTIBLE SUBORDINATED DEBT

In December 1996 the Company completed a private offering of $6,000,000 in 6%
convertible subordinated debentures due December 1, 2011 (the "Debentures").
The proceeds were used to increase the capital of the Bank and for general
corporate purposes of the Company.  The Debentures are convertible by the
holder at any time prior to maturity into shares of Company Common Stock at a
conversion price of $17.85714 per share (equivalent to a conversion rate of 56
shares per $1,000 principal amount of Debentures).  The Debentures were sold at
par and the Company incurred $213,000 in expenses associated with the offering.
The Company has the right to redeem the Debentures beginning in 2001 at 106% of
face value, with the premium declining 1% per year thereafter and without any
premium if the price of the Company's common stock equals or exceed 130% of the
conversion price for not less than 20 consecutive trading days.

STOCKHOLDERS' EQUITY

Stockholders' equity of the Company was $54,319,000 at December 31, 1996, or
6.0% of total assets compared to $50,903,000 or 6.3% of total assets at
December 31, 1995.  At December 31, 1996, the Company and the Bank's capital
ratios were all in excess of minimum regulatory guidelines for an institution
to be considered "well-capitalized".





                                       29
<PAGE>   34

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND
1995
OVERVIEW

Consolidated net income for 1996 was $3,784,000 or $.76 per share compared to
$5,773,000 or $1.26 per share for 1995.  Core net income, which excludes the
SAIF Special Assessment, provisions for losses on ORE, the gain on sale of the
former headquarters building in 1996 and negative goodwill accretion in 1995
would have been $5,622,000 or $1.13 per share for 1996 compared to $4,195,000
or $.92 per share for 1995.

NET INTEREST INCOME

Net interest income for 1996 was $34,021,000 compared to $27,862,000 for 1995.
This $6,159,000 or 22.1% increase was primarily the result of $3,943,000 in
additional income from balance sheet growth and a more favorable mix of earning
assets.  An increase in net interest spread also improved net interest income
by $2,216,000.  Interest income was $66,947,000 for 1996, an increase of
$9,084,000 over 1995.  During the same period interest expense increased by
$2,925,000 from $30,001,000 for 1995 to $32,926,000 for 1996.  Asset yield
increased 25 basis points from 8.21% for 1995 to 8.46% for 1996 and average
earning assets increased $83,647,000.  The average cost of interest-bearing
liabilities decreased 5 basis points from 4.55% to 4.50%.  Net interest spread
increased 31 basis points from 3.66% for 1995 to 3.96% for 1996 and net
interest margin, which includes the benefit of noninterest bearing funds,
increased from 3.94% for 1995 to 4.28% for 1996.

NONINTEREST INCOME

Noninterest income for 1996 was $5,616,000 compared to $2,751,000 for the same
period of 1995, an increase of $2,865,000.  The gain on sale of the former
headquarters building accounted for $1,207,000 of the increase.  Income from
the Company's expanded mortgage banking activities increased $878,000, service
fees on deposit accounts increased $211,000, loan service and other ancillary
fees increased $327,000, and net gains on sale of investments increased
$343,000.  Other sources of income increased $148,000 and merchant charge card
processing fees, a program which has been discontinued, declined $249,000.

The following table reflects the components of noninterest income for the years
ended December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
                                                             For the Years Ended December 31,
                                                     -------------------------------------------------

                                                                                              Increase
                                                       1996               1995               (Decrease)
                                                      ------             ------              ----------
<S>                                                  <C>               <C>                   <C>
Service charges on deposit accounts                  $ 1,606           $ 1,395                $  211
Mortgage banking activities                            1,002               124                   878
Loan fee income                                          604               277                   327
Other income                                             826               678                   148
Gain on sale of ORE held for investment                1,207                 -                 1,207
Net gains on sale of investments                         370                27                   343
Merchant charge card processing fees                       1               250                  (249)
                                                    --------           -------              --------
Total noninterest income                             $ 5,616           $ 2,751               $ 2,865
                                                     =======           =======               =======

</TABLE>


                                       30
<PAGE>   35

The following table summarizes the average yields earned on interest-earning
assets and the average rates paid on interest-bearing liabilities for the years
ended December 31, 1996 and 1995 (in thousands):

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                     -----------------------------------------------------------------------
                                                   1996                                 1995
                                     ---------------------------------   -----------------------------------
                                      Average                    Average      Average                  Average
                                      Balance        Interest      Rate       Balance      Interest      Rate
                                      -------        --------    -------      -------      --------    -------
<S>                                                 <C>           <C>        <C>          <C>           <C>
Summary of Average Rates
------------------------
Interest earning assets:
  Loans, net                           $704,919     $ 62,244      8.78%       $604,535    $ 52,389      8.65%
  Investment securities                  25,905        1,413      5.46          31,042       1,431      4.60
  Mortgage backed securities             20,494        1,325      6.46          13,515         827      6.12
  Interest bearing deposits in banks         79            2      2.91             290          17      5.82
  FHLB stock                              4,548          330      7.26           3,126         231      7.40
  Federal funds sold                     30,188        1,633      5.32          49,978       2,968      5.86
                                       --------     --------                  --------    --------
  Total interest-earning assets         786,133       66,947      8.46         702,486      57,863      8.21
  Non interest-earning assets            46,343                                 45,556
                                       --------                               --------
  Total assets                         $832,476                               $748,042
                                       ========                               ========
Interest-bearing liabilities:
  Interest checking                    $ 80,442          944      1.17       $  67,005       1,081      1.61
  Savings                               170,100        7,281      4.28          90,904       3,281      5.57
  Money market                           37,778          809      2.14          58,862       1,735      2.94
  Time deposits                         433,860       23,392      5.39         439,824      23,777      5.41
  FHLB advances                             956           52      5.21               -           -      -
  Other borrowings                        8,884          448      4.95           3,304         127      3.85
                                      ---------     --------                  --------    --------
  Total interest-bearing liabilities    732,020       32,926      4.50         659,899      30,001      4.55
                                                                                          --------
  Non interest-bearing liabilities       48,821                                 45,285
  Stockholders' equity                   51,635                                 42,858
                                       --------                               --------
  Total liabilities and equity         $832,476                               $748,042
                                       ========                               ========
Net interest income/net interest spread             $ 34,021      3.96%                   $ 27,862      3.66%
                                                    ========      ====                    ========      ====
Net interest margin                                               4.28%                                 3.94%
                                                                  ====                                  ====
</TABLE>

<TABLE>
<CAPTION>
                                                      Increase (Decrease) Due to (1)
                                                      ------------------------------
Changes in Net Interest Income                        Volume             Rate              Total
------------------------------                        ------             ----              -----
<S>                                                   <C>             <C>                <C>
Interest earning assets:
  Loans, net                                           $ 1,747        $ 8,108            $ 9,855
  Investment securities                                     73            (91)               (18)
  Mortgage backed securities                                49            449                498
  Interest bearing deposits in banks                        (6)            (9)               (15)
  FHLB stock                                                (4)           103                 99
  Federal funds sold                                      (244)        (1,091)            (1,335)
                                                       -------        -------            -------
   Total change in interest income                       1,615          7,469              9,084
Interest-bearing liabilities:
    Interest checking                                     (328)           191               (137)
    Savings                                                262          3,738              4,000
    Money market                                          (396)          (530)              (926)
    Time deposits                                         (212)          (173)              (385)
    FHLB advances                                            -             52                 52
    Other borrowings                                        73            248                321
                                                       -------        -------            -------
    Total change in interest expense                      (601)         3,526              2,925
                                                       -------        -------            -------
Increase (decrease) in net interest income             $ 2,216        $ 3,943            $ 6,159
                                                       =======        =======            =======
________________________
</TABLE>

(1)   Changes in net interest income due to changes in volume and rate are
      based on absolute values.


                                       31
<PAGE>   36

NONINTEREST EXPENSE

Total noninterest expenses for 1996 were $31,821,000 compared to $22,858,000
for the same period last year, an increase of $8,963,000.  Noninterest expenses
for 1996 include a $2,539,000 charge for the SAIF Special Assessment and a
$1,611,000 provision for losses on ORE.  G&A expenses for 1996, included in the
noninterest expense total, were $27,352,000 compared to $22,119,000, an
increase of $5,233,000.  The increase was primarily the result of expanding the
Company's mortgage banking activities and related administrative support units.

The following table reflects the components of noninterest expense for the
years ended December 31, 1996 and 1995 (in thousands):

<TABLE>
<CAPTION>
                                                             For the Years Ended December 31,
                                                    ---------------------------------------------------
                                                                                              Increase
                                                       1996              1995                (Decrease)
                                                      ------            ------               ----------
<S>                                                 <C>              <C>                      <C>
Salaries and benefits                               $ 14,309         $  11,251
Net occupancy expense                                  4,507             3,211                   1,296
Advertising                                              519               439                      80
Data processing fees and services                      1,451             1,152                     299
FDIC and state assessments                               949             1,566                    (617)
Other operating expense                                5,617             4,500                   1,117
                                                    --------          --------                --------
G & A expenses                                        27,352            22,119                   5,233
SAIF Special Assessment                                2,539                 -                   2,539
Provision for losses on ORE                            1,611                 -                   1,611
Other ORE expense (income)                              (172)              289                    (461)
Amortization of premium on deposits                      491               450                      41
                                                    --------          --------                --------
Total noninterest expense                           $ 31,821          $ 22,858                $  8,963
                                                    ========          ========                ========


</TABLE>

YEARS ENDED DECEMBER 31, 1995 AND 1994

COMPARISON OF BALANCE SHEETS AT DECEMBER 31, 1995 AND 1994

Overview

Total assets were $801,995,000 at December 31, 1995 compared to $626,445,000 at
year-end 1994, an increase of $175,550,000 or 28.0%.  The source of funds for
this growth included $126,591,000 in deposits from the thirteen branches opened
in the latter part of 1994 and throughout 1995.  These additional funds were
primarily invested in residential and commercial real estate-secured loans.
Total stockholders' equity increased by $14,738,000 to $50,903,000 at year- end
1995 as a result of the 1995 stock offerings and earnings retention.

Investment and Mortgage-Backed Securities

Investment securities, consisting of U.S. Treasury and federal agency
securities, were $64,801,000 at December 31, 1995 compared to $40,271,000 at
December 31, 1994, an increase of $24,530,000.  This increase included
$19,652,000 from securitizing a portion of the Company's residential loan
originations into mortgage backed securities to improve liquidity and risk
based capital ratios.

Loans

Total loans were $669,416,000 at December 31, 1995, an increase of $153,081,000
or 29.6% over the $516,335,000 total at year-end 1994.  One-to-four family
residential mortgages amounted to $388,221,000 at year-end 1995 compared to
$293,146,000 at the prior year-end, an increase of $95,075,000.  Fundings of
residential loans through direct lending activities and a correspondent/broker
network amounted to $119,703,000 and there were $100,305,000 in residential
loan purchases.  The next largest loan category, commercial real





                                       32
<PAGE>   37

estate, amounted to $153,193,000 at December 31, 1995 compared to $112,050,000
at year-end 1994, an increase of $41,143,000.  Multi-family residential loans
amounted to $75,127,000 at year-end 1995 compared to $60,795,000 at December
31, 1994.  Substantially all fundings of commercial real estate and
multi-family residential loans were through direct lending activities.

Commercial (business) loans amounted to $29,687,000 at December 31, 1995
compared to $24,579,000 at year-end 1994, an increase of $5,108,000.  Consumer
loans, consisting primarily of loans secured by second liens on residential
real estate, amounted to $6,847,000 at year-end 1995 compared to $6,426,000 at
end of the prior year, an increase of $421,000.

Allowance for Loan Losses

The allowance for loan losses amounted to $14,910,000 at December 31, 1995
(2.23% of total loans), an increase of $7,845,000 from the $7,065,000 allowance
at December 31, 1994.  This increase primarily resulted from the transfer of
$7,658,000 of discounts from purchases of various loan pools into an allowance
established for those loans.  During March 1995 the largest of those loan
purchases was made, amounting to $48,061,000 in aggregate principal amount of
seasoned, adjustable rate, residential loans (the "March 1995 Purchase") for a
cash payment of $39,889,000 with a resulting discount of $8,172,000.  The March
1995 Purchase included 941 loans amounting to $46,293,000, which were current
as to their scheduled principal and interest payments, and 34 loans amounting
to $1,768,000 which were delinquent 90 days or more.  Of this discount,
$7,189,000 was allocated to the allowance for those loans, based primarily on
management's evaluation of collateral values, with the $982,000 remainder to be
taken as a yield adjustment over the remaining life of the loans.  At December
31, 1995, the amount included in the allowance allocated to the March 1995
Purchase was $6,910,000 and such portion allocated to the allowance is
available only to absorb losses in such portfolio.  For a discussion of the use
of allocated loan loss reserves, see "Business -- Asset Quality".  Management
continually monitors the status of its purchased loans and may, at a later
date, adjust the amounts allocated between loan discount and the loan loss
reserve.  Other activity to the allowance included provisions for loan losses
of $1,685,000 (based generally on the growth in the loan portfolio), loan
charge-offs (net of recoveries) of $1,498,000, and $503,000 in discounts
allocated to allowance from other loan purchases.

Nonperforming Assets

Nonperforming assets amounted to $23,494,000 or 2.93% of total assets at
December 31, 1995, as compared to $22,519,000 or 3.59% of total assets at
December 31, 1994.  Nonperforming assets consisted of $15,430,000 of
nonperforming loans and $8,064,000 of ORE.  The $975,000 increase during the
year consisted primarily of the addition of nonperforming commercial (business)
and commercial real estate loans totaling $4,020,000, partially offset by the
removal from nonperforming status, through repayment and/or return to
performing status, of commercial (business) loans and commercial real estate
loans totaling $2,310,000.  Other reductions to nonperforming assets were in
commercial (business) loans ($115,000), consumer loans ($300,000) and ORE
($1,214,000).

Deposits

Total deposits were $743,105,000 at December 31, 1995, compared to $583,885,000
at the prior year-end, an increase of $159,220,000 or 27.3%.  Time deposits
increased $186,008,000 which was partially offset by reductions of $21,177,000
in savings accounts and $8,119,000 in money market accounts.  Of the total
increase in deposits, $126,591,000 is attributable to deposit growth at 13 new
branch locations opened in 1994 and 1995.

Stockholders' Equity

Stockholders' equity was $50,903,000 at December 31, 1995, or 6.4% of total
assets compared to $36,165,000 or 5.8% of total assets at December 31, 1994.
At December 31, 1995, the Tier 1 Capital ("Leverage") ratio was





                                       33
<PAGE>   38

6.00%, the Tier 1 Risk-Based Capital ratio was 9.17%, and the Total Risk-Based
Capital ratio was 10.30%, all in excess of minimum regulatory guidelines for an
institution to be considered "well-capitalized".  On June 27, 1995, an offering
was completed to the public and the stockholders of 800,000 shares of common
stock.  The common stock was offered through a combined subscription rights
offering and an underwritten public offering.  The number of shares subscribed
for in the subscription rights offering totaled 287,049 with 512,951 shares
sold in the public offering.  The price per share was $12.50 for both
offerings.  Net proceeds were $9,137,000, after deducting advisory service
fees, soliciting dealer fees and underwriting discounts or commissions of
$612,000 and offering expenses of $251,000.

COMPARISON OF RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 1995 AND 1994

Overview

Net income for the year ended December 31, 1995 was $5,773,000 compared to
$6,901,000 for the same period of the previous year which included the
non-recurring benefit from certain income tax items and a full year's accretion
of negative goodwill.  Income tax expense was $1,875,000 for 1995 compared to
$468,000 in 1994, an increase of $1,407,000.  This was primarily due to a
$1,300,000 decrease in the deferred income tax valuation allowance in 1994
which reduced income tax expense by that amount.  Excluding the accretion of
negative goodwill, core net income was generally unchanged at $4,195,000 for
1995 compared to $4,196,000 for 1994.  Earnings per share were $1.26 for 1995
($.92 excluding negative goodwill accretion) compared to $1.67 for 1994 ($1.02
excluding negative goodwill accretion in 1994).  Return on average assets for
1995 was .77% (.56% excluding negative goodwill accretion) compared to 1.25%
and .76% in the prior year, while return on average equity was 13.47% (9.79%
excluding the negative goodwill), compared to 21.34% and 12.97% in 1994.

Analysis of Net Interest Income

Net interest income for 1995 was $27,862,000 compared to $20,244,000 for 1994.
This $7,618,000 or 37.6% increase, was primarily the result of additional
income from balance sheet growth throughout 1994 and 1995 and a more favorable
asset mix as liquid assets were redeployed into higher-yielding loans.
Interest income was $57,863,000 for 1995, an increase of $20,748,000 over 1994.
Interest expense increased by $13,130,000 from $16,871,000 for 1994 to
$30,001,000 for 1995.  Average asset yield increased 95 basis points and
average earning assets increased $192,733,000, while the average cost of
interest-bearing liabilities increased 106 basis points as a result of a more
competitive market for customer deposits during 1995.  Net interest spread
decreased 11 basis points from 3.77% for 1994 to 3.66% for 1995 while net
interest margin, which includes the benefit of noninterest bearing funds, was
generally unchanged at 3.94% for 1995 compared to 3.96% for 1994.

Provision for Loan Losses

The provision for loan losses for 1995 was $1,685,000, an increase of $110,000
over $1,575,000 for 1994.  The larger provisions in 1995 and 1994 were
primarily in response to the continued growth in the loan portfolio and
management's decision to maintain a higher loan loss allowance.





                                       34
<PAGE>   39

The following table summarizes the average yields earned on interest-earning
assets and the average rates paid on interest-bearing liabilities for the years
ended December 31, 1995 and 1994 (in thousands):

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                     ------------------------------------------------------------------------
                                                     1995                                 1994
                                     -----------------------------------   ----------------------------------
                                      Average                    Average      Average                  Average
                                      Balance        Interest      Rate       Balance      Interest      Rate
                                      -------        --------    -------      -------      --------    -------
<S>                                                 <C>           <C>         <C>         <C>           <C>
Summary of Average Rates
------------------------
Interest earning assets:
  Loans, net                           $604,535     $ 52,389      8.65%       $396,238     $32,699      8.24%
  Investment securities                  31,042        1,431      4.60          47,631       1,939      4.06
  Mortgage backed securities             13,515          827      6.12               -           -      -
  Interest bearing deposits in banks        290           17      5.82             549          16      2.98
  FHLB stock                              3,126          231      7.40             255          13      5.00
  Federal funds sold                     49,978        2,968      5.86          65,080       2,448      3.71
                                       --------     --------                  --------     -------
  Total interest-earning assets         702,486       57,863      8.21         509,753      37,115      7.26
  Non interest-earning assets            45,556                                 40,499
                                       --------                               --------
  Total assets                         $748,042                               $550,252
                                       ========                               ========
Interest-bearing liabilities:
  Interest checking                   $  67,005        1,081      1.61        $ 63,390       1,086      1.71
  Savings                                90,904        3,281      5.57          66,049       2,136      3.24
  Money market                           58,862        1,735      2.94          72,211       1,587      2.20
  Time deposits                         439,824       23,777      5.41         279,058      11,958      3.49
  FHLB advances                               -            -      -                658          36      5.52
  Other borrowings                        3,304          127      3.85           2,259          68      2.97
                                       --------     --------                  --------    --------
  Total interest-bearing liabilities    659,899       30,001      4.55         483,625      16,871      3.49
                                                    --------                              --------
  Non interest-bearing liabilities       45,285                                 34,411
  Stockholders' equity                   42,858                                 32,216
                                       --------                               --------
  Total liabilities and equity         $748,042                               $550,252
                                       ========                               ========

Net interest income/net interest spread             $ 27,862      3.66%                   $ 20,244      3.77%
                                                    ========      ====                    ========      ====
Net interest margin                                               3.94%                                 3.96%
                                                                  ====                                  ====

</TABLE>
<TABLE>
<CAPTION>
                                                      Increase (Decrease) Due to (1)
                                                      ------------------------------
Changes in Net Interest Income                        Volume             Rate              Total
------------------------------                        ------             ----              -----
<S>                                                   <C>            <C>                <C>
Interest earning assets:
  Loans, net                                          $ 18,651       $  1,038           $ 19,689
  Investment securities                                   (741)           233               (508)
  Mortgage backed securities                               827              -                827
  Interest bearing deposits in banks                       (10)            11                  1
  FHLB stock                                               210              9                219
  Federal funds sold                                      (662)         1,182                520
                                                      --------       --------           --------
   Total change in interest income                      18,275          2,473             20,748
Interest-bearing liabilities:
    Interest checking                                       60            (65)                (5)
    Savings                                              1,451           (306)             1,145
    Money market                                          (329)           477                148
    Time deposits                                        9,533          2,291             11,819
    FHLB advances                                          (18)           (18)               (36)
    Other borrowings                                        64             (5)                59
                                                      --------       --------           --------
    Total change in interest expense                    10,761          2,369             13,130
                                                      --------       --------           --------
Increase (decrease) in net interest income            $  7,514       $    104           $  7,618
                                                      ========       ========           ========
------------------------
</TABLE>
(1)   Changes in net interest income due to changes in volume and rate are
      based on absolute values.



                                       35
<PAGE>   40

Noninterest Income

Noninterest income for 1995 was $2,751,000 compared to $2,612,000 for 1994, an
increase of $139,000.  The prior year had included $315,000 from settlement of
a claim against a borrower released from bankruptcy.  Included in 1995 was a
$57,000 lease termination settlement from a lessee who had sublet space in a
building leased by the Company.  Other improvements were due to a $148,000
increase in service charge and fee income from higher deposit levels and gains
on sale of loans of $124,000.  Income from processing charge card deposits for
merchants was $250,000 in 1995 compared to $204,000 in 1994.  This program was
discontinued in August 1995.

The following table reflects the components of noninterest income for the years
ended December 31, 1995 and 1994 (in thousands):

<TABLE>
<CAPTION>
                                                                    For the Years
                                                                  Ended December 31,
                                                  -------------------------------------------------
                                                                                              Increase
                                                       1995               1994               (Decrease)
                                                      ------             ------              ----------
<S>                                                 <C>                <C>                  <C>

Service charges on deposit accounts                 $  1,395           $ 1,247              $   148
Loan fee income                                          277               368                  (91)
Merchant charge card processing fees                     250               204                   46
Gains on sales of loans                                  124                 -                  124
Other income                                             705               793                  (88)
                                                      ------             -----                -----
Total noninterest income                            $  2,751           $ 2,612               $  139
                                                      ======            ======                =====

</TABLE>

Noninterest Expense

Total noninterest expenses for 1995 were $22,858,000 compared to $16,617,000
for the same period last year, an increase of $6,241,000.  G & A expenses for
1995 were $22,119,000 compared to $14,916,000, an increase of $7,203,000.  The
primary reasons for these increases were the additional personnel and other
operating costs related to the thirteen new branches which accounted for
$2,912,000 of the increase in G & A expense, an overall expansion of the
lending and administrative functions, and a $252,000 expense to record a loss
on reimbursing credit cardholders for chargebacks.

The following table reflects the components of noninterest expense for the
years ended December 31, 1995 and 1994 (in thousands):

<TABLE>
<CAPTION>
                                                                         For the Years
                                                                       Ended December 31,
                                                      -------------------------------------------------
                                                                                              Increase
                                                          1995            1994               (Decrease)
                                                         ------          ------              ----------
<S>                                                   <C>               <C>                   <C>
Salaries and benefits                                 $ 11,251          $  7,339              $ 3,912
Net occupancy expense                                    3,211             1,308                1,903
Advertising                                                439               349                   90
Data processing fees                                     1,152             1,472                 (320)
FDIC and state assessments                               1,566             1,188                  378
Loan collection and repossession expense                   128               206                  (78)
Other operating expense                                  4,372             3,054                1,318
                                                      --------          --------              -------
G & A expenses                                          22,119            14,916                7,203
Other real estate expense (net)                            289               432                 (143)
Amortization of premium on deposits                        450             1,269                 (819)
                                                      --------          --------              -------
Total noninterest expense                             $ 22,858          $ 16,617              $ 6,241
                                                      ========          ========              =======


</TABLE>



                                       36
<PAGE>   41

Income Taxes

Income tax expense for 1995 was $1,875,000, which was net of a $177,000
reduction in the estimated amount of the valuation allowance for the deferred
tax asset and a $122,000 tax credit related to the prior year's income tax
return.  The income tax provision for the same period in 1994 was $468,000
which was net of a $1,300,000 decrease in the valuation allowance.

SELECTED QUARTERLY FINANCIAL DATA

Summarized selected quarterly financial information for the years ended
December 31, 1996 and 1995 follows (in thousands except share data):


<TABLE>
<CAPTION>
                                                                  1996
                                          ----------------------------------------------------
                                           First          Second          Third         Fourth
                                          Quarter         Quarter        Quarter        Quarter
                                          -------         -------        -------        -------
   <S>                                  <C>             <C>            <C>           <C>
   Interest income                       $ 15,862        $ 15,937       $ 16,725       $ 18,423
   Interest expense                         7,927           7,822          8,455          8,722
                                         --------        --------       --------       --------
      Net interest income                $  7,935        $  8,115       $  8,270       $  9,701
                                         ========        ========       ========       ========

      Net income                         $  1,204        $  1,269       $   (202)      $  1,513
                                         ========        ========       ========       ========

   "Core" earnings per share             $   0.26        $   0.29       $   0.26       $   0.28
   Gain on sale of ORE held
    for investment                              -               -              -              -
   SAIF special assessment                      -               -           (.32)             -
   Provision for losses on ORE               (.02)           (.03)          (.13)          (.02)
                                         --------        --------       --------       --------
      Total earnings per share           $   0.24        $   0.26       $   (.04)      $   0.30
                                         ========        ========       ========       ========


                                                                 1996
                                         ----------------------------------------------------
                                           First          Second         Third         Fourth
                                          Quarter         Quarter       Quarter        Quarter
                                          -------         -------       -------        -------

   Interest income                      $  12,490       $  14,630      $  14,842     $  11,005
   Interest expense                         6,374           7,782          7,794         5,136
                                        ---------       ---------      ---------     ---------
      Net interest income                   6,116           6,848          7,048         5,869
                                        =========       =========      =========     =========

      Net income                        $   1,523       $   1,736      $   1,831     $   1,246
                                        =========       =========      =========     =========

   "Core" earnings per share            $    0.18       $    0.25      $    0.21     $    0.25
   Accretion of negative goodwill            0.16            0.16           0.05             -
                                        ---------       ---------      ---------     ---------

      Net income per share              $    0.34       $    0.41      $    0.26     $    0.25
                                        =========       =========      =========     =========

</TABLE>


                                       37
<PAGE>   42

ASSET/LIABILITY MANAGEMENT AND LIQUIDITY

Liquidity

The Asset/Liability Management Committee ("ALCO") reviews the Company's
liquidity, which is its ability to generate sufficient cash to meet the funding
needs of current loan demand, deposit withdrawals, and other cash demands.  The
primary sources of funds consist of deposits, amortization and prepayments of
loans, and sales of investments.  The Bank is a member of the FHLB and has the
ability to borrow to supplement its liquidity needs.

At December 31, 1996, the liquidity ratio, consisting of net cash and
investments of $111,331,000 divided by net deposits and short-term liabilities
of $829,437,000, was 13.42% as compared to 12.27% at December 31, 1995.  Net
liquid assets were $35,235,000 in excess of the amount required by Florida
banking regulations.

Asset/Liability Management

One of the primary objectives is to reduce fluctuations in net interest income
caused by changes in interest rates.  To manage interest rate risk, the Board
of Directors has established interest-rate risk policies and procedures which
delegate to ALCO the responsibility to monitor and report on interest-rate
risk, devise strategies to manage interest- rate risk, monitor loan
originations and deposit activity, and approve all pricing strategies.

The management of interest rate risk is one of the most significant factors
affecting the ability to achieve future earnings.  The measure of the mismatch
of assets maturing or repricing within certain periods, and liabilities
maturing or repricing within the same period, is commonly referred to as the
"gap" for such period.  Controlling the maturity or repricing of an
institution's assets and liabilities in order to minimize interest rate risk is
commonly referred to as gap management.  "Negative gap" occurs when, during a
specific time period, an institution's liabilities are scheduled to reprice
more rapidly than its assets, so that, barring other factors affecting interest
income and expense, in periods of rising interest rates the institution's
interest expense would increase more rapidly than its interest income, and in
periods of falling interest rates the institution's interest expense would
decrease more rapidly than its interest income.  "Positive gap" occurs when an
institution's assets are scheduled to reprice more rapidly than its
liabilities, so that, barring other factors affecting interest income and
expense, in periods of falling interest rates the institution's interest income
would decrease more rapidly than its interest expense, and in periods of rising
interest rates the institution's interest income would increase more rapidly
than its interest expense.  It is common to focus on the one-year gap, which is
the difference between the dollar amount of assets and the dollar amount of
liabilities maturing or repricing within the next twelve months.

ALCO uses an industry standard computer modeling system to analyze the impact
of financial strategies prior to their implementation.  The system attempts to
simulate the asset and liability base and project future operating results
under a variety of interest rate and spread assumptions.  Through this
management tool, management can also, among other things, project the effects
of changing its asset and liability mix and modifying its balance sheet, and
identify appropriate investment opportunities.  The results of these
simulations are evaluated within the context of the interest-rate risk policy,
which sets out target levels for the appropriate level of interest-rate risk.

The policy is to maintain a cumulative one-year gap of no more than 15% of
total assets.  Management attempts to conform to this policy primarily by
managing the maturity distribution of its investment portfolio and emphasizing
loan originations and loan purchases carrying variable interest rates tied to
interest-sensitive indices.  Additionally, the Bank has joined the FHLB to
enhance its liquidity position and to provide it with the ability to utilize
long-term fixed-rate advances to improve the match between interest-earning
assets and interest-bearing liabilities in certain periods.  Currently,
off-balance-sheet hedging instruments are not used to manage overall interest
rate risk but such instruments are used to limit the exposure to changes in the
value of residential loans held for resale.  Management may expand its use of
off-balance sheet hedging instruments to manage exposure to overall interest
rate risk in the future, subject to board approval.





                                       38
<PAGE>   43

The cumulative one year gap at December 31, 1996 was a positive $17,096,000 or
1.88% (expressed as a percentage of total assets).   Management will attempt to
moderate any lengthening of the repricing structure of earning assets by
emphasizing variable-rate assets and, where appropriate, match-funding
longer-term fixed rate loans with FHLB advances.  See "Business -- Sources of
Funds".

The following table presents the anticipated maturities or repricing of
interest-earning assets and interest-bearing liabilities at December 31, 1996.
The balances shown have been derived based on the financial characteristics of
the various assets and liabilities.  Adjustable and floating-rate assets are
included in the period in which interest rates are next scheduled to adjust
rather than their scheduled maturity dates.  Fixed rate loans are shown in the
periods in which they are scheduled to be repaid according to contractual
amortization.  Where appropriate, prepayment assumptions are used to determine
the repayment amounts based on the coupon rates in the portfolio.  Repricing of
time deposits is based on their scheduled maturities.  Statement savings
deposits are assumed to reprice at 8.3% of the total balance in the first three
months, 8.3% in the four-to-six month category, 16.7% in the six-to-12 month
category, and the remaining 66.7% from one to five years.  Passbook savings
deposits are assumed to reprice equally over a 24 month period.  Repricing of
interest checking and money market accounts is assumed to occur at 10% of the
total balance for every three month interval.




                   [Balance of page intentionally left blank]





                                       39
<PAGE>   44

                         INTEREST SENSITIVITY ANALYSIS
                               DECEMBER 31, 1996
                                ($ IN THOUSANDS)


<TABLE>
<CAPTION>
                                     0-3 months           4-12 months               1-5 Years         Over 5 Years
                                   -----------------    ----------------        ----------------     -----------------
                                              Yield/               Yield/                  Yield/               Yield/
                                   Amount      Rate     Amount      Rate         Amount     Rate     Amount      Rate
                                   ------      ----     ------      ----         ------     ----     ------      ----

<S>                             <C>             <C>     <C>         <C>         <C>        <C>       <C>         <C>
Interest-earning assets:
U.S. Treasury securities
  and government agencies         $  52,471     4.77%   $   8,887    5.24%      $  11,494    5.68    $       -       -%
Revenue bonds                             -         -           -        -          1,545    8.60            -       -
Mortgage backed securities                -         -      20,004     5.50              -       -            -       -
Federal funds sold                    8,000      5.31           -        -              -       -            -       -
Interest bearing deposits
  in banks                              118      5.26           -        -              -       -            -       -
FHLB stock                                -         -           -        -              -       -        4,830    7.25
Loans                               156,218      9.00     218,604     8.20        235,880    8.75      133,760    8.11
                                  ---------             ---------               ---------            ---------
Total interest-earning
  assets                          $ 216,807      7.84   $ 247,495     7.88      $ 248,919    8.61    $ 138,590    8.08


Interest-bearing liabilities:
Deposits
  Interest checking               $   8,763      1.09   $  26,289     1.09      $  52,587    1.09    $       -       -

  Money market                        2,721      2.08       8,163     2.08         21,781    2.08            -       -

  Savings                             2,196      1.98       6,588     1.98         17,555    1.98            -       -

  Passbook Gold                      27,453      4.87      82,357     4.87        109,801    4.87            -       -

  Time deposits                      69,845      5.14     197,279     5.22        144,501    5.88           41    6.40
  Subordinated debt                       -         -           -        -              -       -        6,000    6.00
  Obligations under capital
    leases                               45      7.49         135     7.49            308    7.49            -       -

  Repurchase agreements              15,372      4.36           -        -              -       -            -       -
                                  ---------             ---------               ---------            ---------
Total interest-bearing
  liabilities                    $  126,395      4.59   $ 320,811     4.65      $ 346,533    4.40    $   6,000    6.00
                                  ---------             ---------               ---------            ---------
Excess (deficiency) of interest-
  earning assets over interest-
  bearing liabilities             $  90,412     3.25%   $ (73,316)   3.23%      $ (97,614)  4.21%    $ 132,549    2.07%
                                  =========     ====    =========   =====       =========   ====     =========    ====
Cumulative excess (deficiency)
  of interest-earning assets
  over interest-bearing
  liabilities                     $  90,358     3.25%   $  17,096    3.23%      $ (80,518)  3.59%    $  52,031    3.57%
                                  =========     ====    =========    ====       =========   ====     =========    ====
Cumulative excess (deficiency)
  of interest-earning assets
  over interest-bearing
  liabilities as a percent
  of total assets                               9.96%                1.88%                 (8.87)%                5.73%
                                                ====                 ====                  =====                  ====

</TABLE>


                                       40
<PAGE>   45

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this item is provided at pages 45 through 69 within the
Consolidated Financial Statements and notes thereto.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

There are no such items to report.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors of the Company and Bank

The information relating to the Directors of the Company and Bank appears on
pages 5 through 8 of the Company's Proxy Statement for its 1997 Annual Meeting
of Stockholders under the caption "Nominees for Director" and is incorporated
by reference.

Senior Executive Officers of the Company and Bank

The following list sets forth the name and age of each executive officer of the
Company or the Bank and all positions held by each such officer (and the period
each such position has been held), a brief account of each such officer's
business experience during the past five years and certain other information:

    John W. Sapanski (66)--Chairman of the Board, President and Chief Executive
Officer of both the Company and the Bank.  Mr. Sapanski has been Chairman of
the Board and Chief Executive Officer since June 1993.  He has 45 years of
banking experience, including service with the Dime Savings Bank in New York,
New York from 1949 to 1987 where he acted as President and Chief Operating
Officer from 1981 to 1987 and service with Florida Federal Savings Bank in St.
Petersburg, Florida ("Florida Federal") from 1988 to 1991 where he acted as
President and Chief Executive Officer from 1988 to 1991.  Mr. Sapanski was
President and Chief Executive Officer of Florida Federal at the time the OTS
placed Florida Federal in conservatorship.  Mr. Sapanski was retained by the
Resolution Trust Corporation (the "RTC"), the conservator for Florida Federal,
to assist in managing the institution in conservatorship until it was sold by
the RTC to First Union Corporation in August 1991.

    Fred Hemmer (42)--Director of the Bank, Senior Executive Vice President of
the Bank in charge of Corporate Banking and Special Assets.  Mr. Hemmer has
served as Executive Vice President since joining the Company in 1991.  He
previously served as Executive Vice President of Rutenberg Corporation, a real
estate development company based in Clearwater, Florida, from 1980 to 1991.
Mr. Hemmer is a certified public accountant and served with Arthur Andersen &
Co. from 1976 to 1980.  Mr. Hemmer is also a licensed real estate broker and
certified general contractor.

    William R. Falzone (49)--Treasurer of the Company, Executive Vice President
and Chief Financial Officer of the Bank.  Mr. Falzone joined the Company in
February 1994.  He was employed at Florida Federal Savings Bank from 1983
through 1991 where he served as Senior Vice President and Controller and as
Director of Financial Services.  Most recently, he was a Senior Consultant for
Stogniew and Associates, a nationwide consulting firm.  He has over 20 years of
banking experience and is also a certified public accountant.





                                       41
<PAGE>   46

    John W. Fischer, Jr. (48)--Executive Vice President of the Bank in charge
of Consumer Banking.  Mr. Fischer, who joined the Company in December 1993, has
over 20 years of banking experience in retail branch management, consumer and
residential lending.  Mr. Fischer formerly served as Regional Marketing
Director for Western Reserve Life in Clearwater, Regional Vice President of
Great Western Bank in Miami and Executive Vice President/Consumer Financial
Services for Florida Federal Savings Bank in St. Petersburg.  Mr. Fischer holds
a life, health, annuity and Series 7 securities license.

    Richard C. Gleitsman (43)--Executive Vice President and Chief
Administrative Officer of the Bank.  Mr. Gleitsman joined the Company in
December 1993, having previously served as Executive Vice President and
Regional Manager of CrossLand Savings Bank since 1986.  He has over 25 years of
banking experience in retail branch management, loan servicing, human
resources, data processing, and executive administration.

    Kathleen A. Reinagel (45)--Executive Vice President of the Bank in charge
of Credit and Loan Administration.  Ms.  Reinagel, who has served in her
present position with the Company since August 1993, has over 20 years of
experience in the lending field with concentration in credit and underwriting,
loan documentation, due diligence and loan review.  Ms.  Reinagel formerly
served as Vice President of WRH Mortgage, St. Petersburg, Florida and Vice
President, Department Manager of Commercial Real Estate of Florida Federal.

    Steve McWhorter (35)--Division Director in charge of the Mortgage Banking
Division.  Mr. McWhorter joined the Bank in April, 1996, having previously
served as Regional Manager of FT Mortgage Company since 1992.  He has over 14
years of experience in the mortgage banking industry.

ITEM 11.  EXECUTIVE COMPENSATION

Information required by this item which appears on pages 9 through 15 of the
Company's Proxy Statement for its 1997 Annual Meeting of Shareholders is
incorporated by reference under the caption "Executive Compensation and
Benefits" and "Certain Transactions".

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by items 12 and 13 are incorporated by reference from the
Company's Proxy Statement for its 1997 Annual Meeting.





                                       42
<PAGE>   47




                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this report at pages 45
through 69.

    1.  Financial Statements
        Financial Statements of Republic Bancshares, Inc.
        Report of Independent Certified Public Accountants
        Consolidated Balance Sheets at December 31, 1996 and 1995
        Consolidated Statements Of Operations, Stockholders' Equity and Cash
           Flows for:
              Years Ended December 31, 1996, 1995, and 1994
        Notes to Consolidated Financial Statements
    2.  Financial Statement Schedules

        All required schedules are included in the financial statements or
related notes.

(b) A report on Form 8-K was filed on December 31, 1996 reporting the pending
    acquisition of Firstate Financial, F.A., discussions regarding a possible
    merger with F.F.O. Group, Inc., and completion of the sale of subordinated
    debentures.

(c) Exhibits:

    10.1   The Company's Proxy Statement for its 1997 Annual Meeting of
           Stockholders, to the extent specifically incorporated by reference.*

    *      To be filed with the SEC not later than 120 days after the end of
           the fiscal year covered by the Form 10-K.



                                       43
<PAGE>   48





                      [This page intentionally left blank]





                                       44
<PAGE>   49


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Stockholders and the Board of Directors of Republic Bancshares, Inc.:

We have audited the accompanying consolidated balance sheets of Republic
Bancshares, Inc. (a Florida corporation) and subsidiary as of December 31, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996.  These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Republic Bancshares, Inc. and
subsidiary as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.




                                         /s/ARTHUR ANDERSEN LLP


Tampa, Florida
February 7, 1997 (except with respect to the matter discussed in Note 18,
as to which the date is March 10, 1997)





                                       45
<PAGE>   50
                    REPUBLIC BANCSHARES, INC. & SUBSIDIARY
           CONSOLIDATED BALANCE SHEETS - DECEMBER 31, 1996 AND 1995
                     ($ IN THOUSANDS, EXCEPT PAR VALUES)

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,         December 31,
ASSETS                                                                                     1996                 1995
------                                                                                    ------                -----
<S>                                                                                       <C>                <C>
Cash and due from banks                                                                   $ 27,810           $  19,806
Interest bearing deposits in banks                                                             118                   2
Investment securities:
     Held to maturity (Note 2)                                                                   -               7,015
  Available for sale                                                                        74,397              38,147
Mortgage backed securities (Note 3):
  Held to maturity                                                                               -              17,112
  Available for sale                                                                        20,004               2,527
FHLB stock                                                                                   4,830               3,540
Federal funds sold                                                                           8,000              14,621
Loans held for sale (Note 4)                                                                36,590               4,711
Loans, net (Notes 4 and 5)                                                                 693,270             649,795
Premises and equipment, net (Note 6)                                                        19,715              18,991
Other real estate owned (Note 7):
  Acquired through foreclosure, net                                                          7,363               8,064
  Held for investment                                                                            -               2,498
Other assets (Note 8)                                                                       15,771              15,166
                                                                                          --------            --------
       Total assets                                                                       $907,868            $801,995
                                                                                          ========            ========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
  Deposits-
     Noninterest-bearing checking                                                        $  50,060            $ 45,641
     Interest checking                                                                      87,639              71,592
     Money market                                                                           32,665              38,535
     Savings                                                                               245,951              91,935
     Time deposits (includes $49,323 and $57,213, respectively                             411,665             495,402
       of time deposits of $100,000 or more)                                             ---------            --------
       Total deposits                                                                      827,980             743,105

  Securities sold under agreements to repurchase                                            15,372               3,072
  Subordinated debt, 6% rate, matures December 1, 2011, (Note 9)                             6,000                   -
  Other liabilities                                                                          4,197               4,915
                                                                                          --------            --------
       Total liabilities                                                                   853,549             751,092
                                                                                          --------            --------

Off-balance-sheet risk, commitments & contingencies (Note 10)

Stockholders' equity (Note 13):
  Perpetual preferred convertible stock ($20.00 par, 100,000 shares authorized,
     75,000 shares issued and outstanding.  Liquidation preference $6,600
     at December 31, 1996 and 1995.)                                                         1,500               1,500
  Common stock ($2.00 par, 20,000,000 shares authorized and 4,183,507
      shares issued and outstanding at December 31, 1996 and 1995)                           8,367               8,367
  Capital surplus                                                                           26,699              26,699
  Retained earnings                                                                         17,849              14,329
  Net unrealized gains (losses) on available-for-sale securities, net of tax effect            (96)                  8
                                                                                          --------            --------
       Total stockholders' equity                                                           54,319              50,903
                                                                                          --------            --------
       Total liabilities and stockholders' equity                                         $907,868            $801,995
                                                                                          ========            ========

</TABLE>

 The accompanying notes are an integral part of these consolidated statements.



                                       46
<PAGE>   51

                     REPUBLIC BANCSHARES, INC. & SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                             FOR THE YEARS ENDED DECEMBER 31,
                                                                      ---------------------------------------------
INTEREST INCOME:                                                          1996                1995           1994
                                                                          ----                ----           ----
<S>                                                                   <C>                <C>             <C>
  Interest and fees on loans                                          $  62,244          $  52,389        $ 32,699
  Interest on investment securities                                       1,413              1,431           1,939
  Interest on mortgage-backed securities                                  1,325                827               -
  Interest on federal funds sold                                          1,633              2,968           2,448
  Interest on other investments                                             332                248              29
                                                                      ---------          ---------       ---------
     Total interest income                                               66,947             57,863          37,115
                                                                      ---------          ---------       ---------

INTEREST EXPENSE:
  Interest on deposits                                                   32,426             29,874          16,767
  Interest on FHLB advances                                                  52                  -              36
  Interest on other borrowings                                              448                127              68
                                                                      ---------          ---------       ---------
     Total interest expense                                              32,926             30,001          16,871
                                                                      ---------          ---------       ---------
     Net interest income                                                 34,021             27,862          20,244

PROVISION FOR LOAN LOSSES (Note 5)                                        1,800              1,685           1,575
                                                                      ---------          ---------       ---------
     Net interest income after
     provision for possible loan losses                                  32,221             26,177          18,669
                                                                      ---------          ---------       ---------

NONINTEREST INCOME:
  Service charges and fees on deposits                                    1,606              1,395           1,247
  Income from mortgage banking activities                                 1,002                124               -
  Gain on sale of ORE - held for investment                               1,207                  -               -
  Securities gains, net                                                     370                 27               1
  Other operating income                                                  1,431              1,205           1,364
                                                                      ---------          ---------       ---------
     Total noninterest income                                             5,616              2,751           2,612

NONINTEREST EXPENSES:
  Salaries and employee benefits                                         14,309             11,251           7,339
  Net occupancy expense                                                   4,507              3,211           1,308
  Data processing fees                                                    1,451              1,152           1,472
  FDIC and state assessments                                                949              1,566           1,187
  Other operating expense                                                 6,136              4,939           3,610
                                                                      ---------          ---------       ---------
     Total general and administrative expenses                           27,352             22,119          14,916
  SAIF special assessment                                                 2,539                  -               -
  Provisions for losses on ORE                                            1,611                  -              10
  ORE expense, net of ORE income                                           (172)               289             422
  Amortization of premium on deposits                                       491                450           1,269
                                                                      ---------          ---------       ---------
     Total noninterest expenses                                          31,821             22,858          16,617
                                                                      ---------          ---------       ---------

Income before negative goodwill
   accretion and income taxes                                             6,016              6,070           4,664
Negative goodwill accretion (Note 1)                                          -              1,578           2,705
                                                                      ---------          ---------       ---------
Income before income taxes                                                6,016              7,648           7,369
Income tax provision (Note 8)                                             2,232              1,875             468
                                                                      ---------          ---------       ---------
NET INCOME                                                            $   3,784          $   5,773       $   6,901
                                                                      =========          =========       =========
PER SHARE DATA:
   Net income per common and common
   equivalent share (Note 14)                                         $     .76          $    1.26       $    1.67
                                                                      =========          =========       =========
   Weighted average common and common
   equivalent shares outstanding (Note 14)                            4,952,937          4,562,642       4,136,790
                                                                      =========          =========       =========

</TABLE>

 The accompanying notes are an integral part of these consolidated statements.



                                       47
<PAGE>   52


                    REPUBLIC BANCSHARES, INC. & SUBSIDIARY
               CONSOLIDATED  STATEMENTS OF STOCKHOLDERS' EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                               ($ IN THOUSANDS)

<TABLE>
<CAPTION>
                                 PERPETUAL PREFERRED                                                      NET UNREALIZED
                                  CONVERTIBLE STOCK              COMMON STOCK                             GAINS (LOSSES)
                                 -------------------          ------------------                           ON AVAILABLE
                                 SHARES                       SHARES                 CAPITAL    RETAINED     FOR SALE
                                 ISSUED       AMOUNT          ISSUED     AMOUNT      SURPLUS    EARNINGS    SECURITIES  TOTAL
                                 ------       ------          ------     ------      -------    --------    ----------  -----
<S>                               <C>       <C>            <C>         <C>          <C>         <C>          <C>       <C>
BALANCE, DECEMBER 31, 1993        75,000    $  1,500       3,365,387   $  6,731     $ 19,041    $  2,182     $  -      $ 29,454

   Net income                          -           -               -          -            -       6,901        -         6,901
   Net unrealized losses
     on available-for-sale
     securities, net of tax effect     -           -               -          -            -           -      (54)          (54)
   Proceeds from exercise of
     stock options                     -           -          14,950         30           98           -        -           128
   Dividends on preferred
     stock                             -           -               -          -            -        (264)       -          (264)
                                  ------    --------       ---------   --------     --------    --------     ----      --------
BALANCE, DECEMBER 31, 1994        75,000       1,500       3,380,337      6,761       19,139       8,819      (54)       36,165

   Net income                          -           -               -          -            -       5,773        -         5,773
   Net unrealized gains on
     available-for-sale securities,
     net of tax effect                 -           -               -          -            -           -       62            62
   Issuance of common stock            -           -         800,000      1,600        7,537           -        -         9,137
   Proceeds from exercise of
     stock options                     -           -           3,170          6           23           -        -            29
   Dividends on preferred
     stock                             -           -               -          -            -        (263)       -          (263)
                                  ------    --------       ---------   --------     --------    --------     ----      --------
BALANCE, DECEMBER 31, 1995        75,000       1,500       4,183,507      8,367       26,699      14,329        8        50,903

   Net income                          -           -               -          -            -       3,784        -         3,784
   Net unrealized loss on
     available-for-sale securities,
     net of tax effect                 -           -               -          -            -           -     (104)         (104)
   Dividends on preferred
     stock                             -           -               -          -            -        (264)       -          (264)
                                  ------    --------       ---------   --------     --------    --------     ----      --------
BALANCE, DECEMBER 31, 1996        75,000    $  1,500       4,183,507   $  8,367     $ 26,699    $ 17,849     $(96)     $ 54,319
                                  ======    ========       =========   ========     ========    ========     ====      ========
</TABLE>




 The accompanying notes are an integral part of these consolidated statements



                                      48





<PAGE>   53
                     REPUBLIC BANCSHARES, INC. & SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                ($ IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                  FOR THE YEARS ENDED
                                                                                     DECEMBER 31,
                                                                        --------------------------------------
                                                                           1996            1995          1994
                                                                           ----            ----          ----
<S>                                                                      <C>           <C>            <C>
OPERATING ACTIVITIES:
Net income                                                               $  3,784      $  5,773       $  6,901
Reconciliation of net income to net cash provided:
  Provision for loan and ORE losses                                         3,411         1,685          1,585
  Depreciation and amortization, net                                       (1,539)          (26)           129
  Amortization of premium and (accretion) of fair value, net                  553          (901)        (1,162)
  Gain on sale of loans                                                    (1,002)         (124)            -
  Gain on sale of investment securities                                      (370)          (27)            -
  Gain on sale of other real estate owned                                  (1,442)           (4)           (89)
  Capitalization of mortgage servicing                                     (1,741)           -              -
  Gain on disposal of premises and equipment                                   (2)           -              75
  Net increase in deferred tax benefit                                     (1,574)       (1,024)            -
  Net (increase) decrease in other assets                                   2,222        (3,455)        (1,887)
  Net increase (decrease) in other liabilities                               (719)        2,179           (339)
                                                                         --------      --------       --------
     Net cash provided by operating activities                              1,581         4,076          5,213
                                                                         --------      --------       --------

INVESTING ACTIVITIES:
  Net (increase) decrease in interest bearing deposits in banks              (116)          148            550
  Proceeds from sale of premises and equipment                                  -             -             13
  Proceeds from sales & maturities of:
    Investment securities held to maturity                                  7,000        24,000         18,900
    Investment securities available for sale                               72,545         3,972          6,991
    Mortgage backed securities available for sale                          21,848         9,732              -
  Purchase of investment securities held to maturity                            -             -        (19,669)
  Purchase of investment securities available for sale                   (108,636)      (33,083)       (10,989)
  Purchase of mortgage backed securities                                  (20,105)           -               -
  Principal repayment on mortgage backed securities                         4,431           714              -
  Purchase of FHLB stock                                                   (1,291)       (2,248)        (1,292)
  Net increase in loans                                                   (85,087)     (178,001)      (197,859)
  Purchase of premises and equipment                                       (2,201)       (6,282)        (3,088)
  Proceeds from sale of other real estate owned                             8,270         3,234          5,260
  Investments in other real estate owned (net)                                232           358         (7,246)
                                                                       ----------     ---------     ----------
     Net cash used in investing activities                               (103,110)     (177,456)      (208,429)
                                                                       ----------     ---------      ---------

FINANCING ACTIVITIES:
  Net increase in deposits                                                 84,875       159,212         89,551
  Net increase in repurchase agreements                                    12,301           991            916
  Proceeds from issuance of subordinated debt                               6,000             -              -
  Proceeds from issuance of common stock                                        -         9,166            128
  Dividends on perpetual preferred stock                                     (264)         (263)          (264)
                                                                        ---------    ----------      ---------
     Net cash provided by financing activities                            102,912       169,106         90,331
                                                                        ---------     ---------       --------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                                          1,383        (4,274)      (112,885)
CASH AND CASH EQUIVALENTS, beginning of period                             34,427        38,701        151,586
                                                                       ----------    ----------       --------
CASH AND CASH EQUIVALENTS, end of period                               $   35,810    $   34,427       $ 38,701
                                                                       ==========    ==========       ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Cash paid during the period for-
        Interest                                                         $ 33,031      $ 29,419       $ 16,448
        Income taxes                                                        4,144         1,516          2,222

</TABLE>

  The accompanying notes are an integral part of these consolidated statements



                                       49
<PAGE>   54


                     REPUBLIC BANCSHARES, INC. & SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1996

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation and Organization

The consolidated financial statements of Republic Bancshares, Inc. (the
Company) include the accounts of the Company, and Republic Bank (the "Bank")
and the Bank's wholly-owned subsidiaries, RBREO, Inc., Tampa Bay Equities,
Inc., VQH Development, Inc., and Republic Insurance Agency, Inc.  All
significant intercompany accounts and transactions have been eliminated.  On
November 21, 1995, the Bank's Board of Directors approved for shareholder
consideration an Amended and Restated Plan of Share Exchange and Reorganization
(the "Reorganization") under which the Bank became a wholly-owned subsidiary of
Company.  On the effective date and time of the Reorganization, all holders of
shares of the Bank's Common and Preferred Stock at the November 30, 1995 record
date received one share of Company Common Stock for each share of the Bank's
Common Stock held of record and one share of Company Preferred Stock for each
share of the Bank's Preferred Stock held of record.  Holders of outstanding
options to purchase or acquire the Bank's Common Stock received options to
purchase an equal number of shares of Company Common Stock.  All necessary
governmental and shareholder approvals for the Reorganization were received.
The Company's primary source of income is from its banking subsidiary which
operates 32 branches throughout west central Florida.  The Bank's primary
source of revenue is derived from net interest income on loans and investments
and income from mortgage banking activities.

Negative Goodwill

On May 28, 1993 (the "Purchase Date") over 99 percent of the Company's
outstanding common stock was acquired for $4,450,000 (the "Purchase Price").
Also, on May 28, 1993, 583,334 additional shares of common stock were issued
for $3,500,000.  The acquisition was accounted for by the purchase method of
accounting.  Assets and liabilities were restated based upon their fair value
as of the Purchase Date.  The excess of the restated net book value over the
Purchase Price was recorded as a reduction of the non current assets, to the
extent available.  The remaining difference was recorded as excess of fair
value over purchase price ("negative goodwill"), as follows (in thousands):

<TABLE>
      <S>                                                                                                <C>
      Adjustments to fair market value:
         Loans                                                                                           $   596
         Investment securities                                                                               161
         Time deposits                                                                                        36
      Write-off of noncurrent assets:
         Premises and equipment                                                                           (1,432)
         Other assets                                                                                        (43)
      Adjustments to equity accounts:
         Retained earnings                                                                                 1,320
         Capital surplus                                                                                   5,224
                                                                                                         -------
      Excess of fair value over purchase price                                                           $ 5,862
                                                                                                         =======
</TABLE>

The negative goodwill was accreted into income on a straight-line basis over 26
months beginning May 28, 1993 and ending July 31, 1995, which was based on the
estimated life of the loans, investments and deposits acquired.  The premiums
on loans and investment securities and the discount on demand and other time
deposits were amortized into income on a straight-line basis over periods based
on the estimated life of the related loans, securities or deposits ranging from
12 to 30 months.

Dependence on Estimates, Appraisals and Evaluations

The financial statements, in conformity with generally accepted accounting
principles, are dependent upon





                                       50
<PAGE>   55

estimates, appraisals and evaluations of loans, other real estate owned and
other assets and liabilities, and disclosure of contingent assets and
liabilities.  Changes in such estimates, appraisals and evaluations might be
required because of rapidly changing economic conditions, changing economic
prospects of borrowers and other factors.  Actual results may differ from those
estimates.

Investment Securities

Securities that the Company has both the positive intent and ability to hold to
maturity are classified as Held to Maturity and are carried at historical cost,
adjusted for amortization of premiums and accretion of discounts.  Securities
Available for Sale, which are those securities that may be sold prior to
maturity as part of asset/liability management or in response to other factors,
are carried at fair value with any valuation adjustment reported in a separate
component of stockholders' equity, net of tax effect.

Interest and dividends on investment securities and amortization of premiums
and accretion of discounts are reported in interest on investment securities.
Gains (losses) realized on sales of investment securities are generally
determined on the specific identification method and are reported under
non-interest income.

Loans

Interest on commercial and real estate loans and substantially all installment
loans is recognized monthly on the loan balance outstanding.  The Company's
policy is to discontinue accruing interest on loans 90 days or more delinquent
and restructured loans that have not yet demonstrated a sufficient payment
history, which, in the opinion of management, may be doubtful as to the
collection of interest or principal.  These loans are designated as
"non-accrual" and any accrued but unpaid interest previously recorded is
reversed against current period interest revenue.

Loan origination and commitment fees net of certain costs are deferred, and the
amount is amortized as an adjustment to the related loan's yield, generally
over the contractual life of the loan.  Unearned discounts and premiums on
loans purchased are deferred and amortized as an adjustment to interest income
on a basis that approximates level rates of return over the terms of the loan.

Hedging Contracts and Loans Held for Sale

The Company manages its interest rate market risk on the loans held for sale
and its estimated future commitments to originate and close mortgage loans for
borrowers at fixed prices ("Locked Loans") through hedging techniques which
include derivative contracts and fixed price forward delivery commitments
("Forward Commitments") to sell mortgage- backed securities or specific whole
loans to investors on a mandatory or best efforts basis.  The Company records
the inventory of loans held for sale at the lower of cost or market on an
aggregate basis after considering any market value changes in the loans held
for sale, Locked Loans, and Forward Commitments.

Mortgage Servicing Rights

On July 1, 1995, SFAS No. 122, "Accounting for Mortgage Servicing Rights, an
amendment of FASB Statement No. 65", was adopted.  SFAS No. 122 permits an
allocation of a portion of the cost of loan origination to the rights to
service mortgage loans.  Approximately $1,188,000 and $117,000 was capitalized
relating to originated mortgage servicing rights ("OMSRs") during 1996 and
1995, respectively.  As of December 31, 1996 and 1995, the unamortized portion
of these OMSRs were $1,271,000 and $113,000, respectively.  For purposes of
measuring impairment, OMSRs are stratified based on the loan type, interest
rate and maturity of the underlying loans.

Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities

The FASB has issued SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and





                                       51
<PAGE>   56

Extinguishment of Liabilities", which is effective for the Company's fiscal
year beginning January 1, 1997.  SFAS 125 provides standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings.  The impact of the adoption of SFAS 125 upon the results of
operations of the Company is not expected to be material.

Allowance for Loan Losses

The allowance for loan losses provides for risks of losses inherent in the
credit extension process.  Losses and recoveries are either charged or credited
to the allowance.  The Company's allowance is an amount that management
believes will be adequate to absorb possible losses on existing loans that may
become uncollectible, based on evaluations of the collectibility of loans and
prior loan loss experience.  The evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions that may affect the borrower's ability to pay.  The evaluations are
periodically reviewed and adjustments are recorded in the period in which
changes become known.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation and
amortization.  Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the related assets,
except for leasehold improvements for which the lesser of the estimated useful
life of the asset or the term of the lease is used.  The useful lives used in
computing depreciation and amortization are as follows:

<TABLE>
<CAPTION>
                                                                     Years
                                                                     -----
         <S>                                                        <C>
         Buildings and improvements                                     39
         Furniture and equipment                                         7
         Leasehold improvements                                     5 - 15
</TABLE>

Gains and losses on routine dispositions are reflected in current operations.
Maintenance, repairs and minor improvements are charged to operating expenses,
and major replacements and improvements are capitalized.

Other Real Estate

Other real estate owned ("ORE") represents property acquired through
foreclosure proceedings held for sale and real estate held for investment.  ORE
is carried at its fair value, net of a valuation allowance established to
reduce cost to fair value.  Losses are charged to the valuation allowance and
recoveries are credited to the allowance.  Declines in market value and gains
and losses on disposal are reflected in current operations in ORE expense.
Recoverable costs relating to the development and improvement of ORE are
capitalized whereas routine holding costs are charged to expense.  The sales of
these properties are dependent upon various market conditions.  Management is
of the opinion that such sales will result in net proceeds at least equal to
present carrying values.

Accounting for Impairment of Long-Lived Assets

The FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of," which was effective for
the Company's fiscal year beginning January 1, 1996.  SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles to be held and used
be reviewed for impairment whenever events or changes in circumstances indicate
the carrying amount of an asset may not be recoverable. If the sum of the
expected future cash flows from the use of the asset and its eventual
disposition is less than the carrying amount of the asset, an impairment loss
is recognized.  SFAS No. 121 also requires that certain assets to be disposed
of be measured at the lower of carrying amount or the net realizable value.
The impact of adopting SFAS 121 upon the results of operations of the Company
was not material.

Income Taxes

The Company follows the liability method which establishes deferred tax assets
and liabilities for the temporary



                                       52
<PAGE>   57

differences between the financial reporting bases and the tax bases of the
Company's assets and liabilities at enacted tax rates expected to be in effect
when such amounts are realized or settled. Net deferred tax assets, whose
realization is dependent on taxable earnings of future years, are recognized
when a more-likely-than-not criterion is met, that is, unless a greater than
50% probability exists that the tax benefits will not actually be realized
sometime in the future.

Effective April 1, 1995, federal regulations restricted the amount of deferred
tax assets that can be used to meet regulatory capital requirements to an
amount that the institution expects to realize within one year, or 10% of Tier
1 capital, whichever is less.

The Company and its subsidiary file consolidated tax returns with the federal
and state taxing authorities.  A tax sharing agreement exists between the
Company and the Bank whereby taxes for the Bank are computed as if the Bank
were a separate entity.  Amounts to be paid or credited with respect to current
taxes are paid to or received from the Company.

Premium on Deposits

A premium on deposits is recorded for the difference between cash received and
the carrying value of deposits acquired in purchase transactions.  This premium
is being amortized on a straight-line basis over 3 to 4 years.  Approximately
$527,000 and $1,017,000 was included in other assets in the accompanying
financial statements, as of December 31, 1996 and 1995.

Stock-Based Compensation Plans

The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25).  Effective in 1996, the Company adopted the disclosure option of SFAS
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which requires
that companies not electing to account for stock-based compensation as
prescribed by the statement, disclose the pro forma effects on earnings and
earnings per share as if SFAS 123 had been adopted.  Additionally, certain
other disclosures are required with respect to stock compensation and the
assumptions used are to determine the pro forma effects of SFAS 123.

Cash Equivalents

For purposes of preparing the Consolidated Statements of Cash Flows, cash
equivalents are defined to include cash and due from banks and federal funds
sold.

Reclassifications

Certain reclassifications have been made to prior period financial statements
to conform with the 1996 financial statement presentation.





                                       53
<PAGE>   58

2.    INVESTMENT SECURITIES:

The Company's investment securities consisted primarily of U.S. Treasury Bills
and Notes.  The investment securities of the Company at December 31, 1996 and
1995 are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                            Estimated
                                                    Amortized          Unrealized          Unrealized         Market
                                                       Cost              Gains               Losses           Value
                                                    ---------          ----------          ----------       ---------
<S>                                                  <C>               <C>                 <C>              <C>
AT DECEMBER 31, 1996:
Securities available-for-sale:
 U.S. Government Treasuries                          $  72,905         $       -           $    (53)        $  72,852
 Revenue bond                                            1,545                 -                  -             1,545
                                                     ---------         ---------           --------         ---------
  Securities available-for-sale                      $  74,450         $       -           $    (53)        $  74,397
                                                     =========         =========           ========         =========
AT DECEMBER 31, 1995:
 U.S. Government Treasuries held to maturity         $   7,015         $       -           $     (6)        $   7,009
 U.S. Government Treasuries available for sale          38,121                27                 (1)           38,147
                                                     ---------         ---------           --------         ---------
  Total U.S. Treasuries & Federal Agency Notes        $ 45,136         $      27           $     (7)        $  45,156
                                                      ========         =========           ========         =========

BOOK VALUE AT DECEMBER 31:                                                                  1996               1995
                                                                                            ----               ----
   Securities held to maturity                                                            $     -            $ 7,015
   Securities available-for-sale                                                           74,397             38,147
                                                                                          -------            -------
    Total U.S. Treasuries                                                                 $74,397            $45,162
                                                                                          =======            =======

</TABLE>

The amortized cost and estimated market value of investment securities at
December 31, 1996, by contractual maturity are shown below (in thousands):

<TABLE>
<CAPTION>
                                                                   Available-for-Sale
                                                   ------------------------------------------------
                                                                        Estimated          Weighted
                                                    Amortized             Market           Average
                                                       Cost               Value             Yield
                                                     --------           ---------          -------
<S>                                                  <C>                <C>                   <C>
Due in 1 year or less                                $ 61,367           $ 61,358              4.84%
Due after 1 year through 5 years                       13,083             13,039               6.02
                                                     --------           --------
Total                                                $ 74,450           $ 74,397              5.05%
                                                     ========           ========


</TABLE>

Proceeds from sales of U.S. Treasury and Federal Agency Notes during the years
ended 1996, 1995 and 1994, were $7,545,000, $2,972,000, and $6,991,000,
respectively.  Gross losses of $0, $27,891 and $0 were realized for the years
ended December 31, 1996, 1995 and 1994.  Gross gains of $45,404, $0, and
$1,094, were realized during the years ended December 31, 1996, 1995 and 1994,
respectively.  U.S. Treasuries and Federal Agency Notes with a par value of
$19,000,000 and $8,000,000 at December 31, 1996 and 1995, respectively, were
pledged to secure public deposits and for other purposes.





                                       54
<PAGE>   59

3.   MORTGAGE BACKED SECURITIES:

Mortgage-backed securities ("MBS"), sometimes referred to as pass-through
certificates, represent an interest in a pool of loans.  The securities are
issued by three government agencies or corporations: (i) the Government
National Mortgage Association ("GNMA"), (ii) the Federal Home Loan Mortgage
Corporation ("FHLMC") and (iii) the Federal National Mortgage Association
("FNMA").  During 1996 and 1995 the Company securitized loans with a carrying
value of $6,282,000 and $30,048,000, respectively, through FHLMC.  The
Company's MBS portfolio at December 31, 1996 consisted solely of variable rate
securities issued by GNMA, and payments on those securities are backed by that
government agency.  MBS securities held to maturity are recorded at amortized
cost, while securities available-for-sale are recorded at estimated market
value.  Mortgage backed securities are summarized as follows (in thousands):
<TABLE>
<CAPTION>
                                                                                                            Estimated
                                                    Amortized          Unrealized          Unrealized         Market
                                                       Cost              Gains               Losses           Value
                                                    ---------          ----------          ----------       ---------
<S>                                                <C>              <C>                  <C>                <C>

AT DECEMBER 31, 1996:

  GNMA held to maturity                             $       -            $      -         $        -          $      -
  GNMA available for sale                              20,105                   -               (101)           20,004
                                                    ---------            --------         ----------          --------
       Total mortgage backed securities             $  20,105            $      -         $     (101)         $ 20,004
                                                    =========            ========         ==========          ========

AT DECEMBER 31, 1995:

  FHLMC held to maturity                            $  17,112            $    114         $      (20)         $ 17,206
  FHLMC available for sale                              2,540                   -                (13)            2,527
                                                    ---------            --------         ----------          --------
       Total mortgage backed securities             $  19,652            $    114         $      (33)         $ 19,733
                                                    =========            ========         ==========          ========

BOOK VALUE AT DECEMBER 31:                                     1996                         1995
                                                               ----                         ----
    Securities held to maturity                           $        -                     $ 17,112
    Securities available-for-sale                             20,004                        2,527
                                                            --------                     --------
          Total MBS                                         $ 20,004                     $ 19,639
                                                            ========                     ========

</TABLE>

At December 31, 1996 all MBS securities available for sale were scheduled to
reprice in one year or less.

The amortized cost and estimated market value of the MBS portfolio at December
31, 1996, by contractual maturity are shown below (in thousands).  Actual
maturities may differ from contractual maturities as a result of prepayments of
the underlying mortgages:

<TABLE>
<CAPTION>
                                             Available-for-Sale
                                    -------------------------------------
                                                     Estimated   Weighted
                                      Amortized      Market      Average
                                        Cost          Value       Yield
                                      ---------      --------    -------
<S>                                  <C>             <C>          <C>
Due after 10 years                   $ 20,105        $ 20,004     5.53%
                                     --------        --------
Total                                $ 20,105        $ 20,004     5.53%
                                     ========        ========



</TABLE>

During 1996, the Company sold FHLMC securities, with an amortized cost of
$15,455,000, which had previously been classified as "Held-to-Maturity",
recording net gains of $300,201, and purchased GNMA securities.  The purpose of
this transaction was to reduce the Company's capital requirements.  As a
result, and in compliance with SFAS 115 "Accounting for Certain Investments in
Debt and Equity Securities", all investment securities are classified as
"available-for-sale" as of December 31, 1996.

Proceeds from sales of MBS securities during the years ended December 31, 1996
and 1995 were $21,077,000 and $9,732,000, respectively.  Gross gains of
$354,837 and $55,038 and gross losses of $31,845 and $0, respectively, were
realized on these sales.  None of the MBS securities were pledged to secure
public deposits or for other purposes at December 31, 1996.



                                       55
<PAGE>   60

4.   LOANS AND LOANS HELD FOR SALE:

Loans at December 31, 1996 and 1995, are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                1996                  1995
                                                                               ------                ------
   <S>                                                                     <C>                   <C>
   Real estate mortgage loans:
      One-to-four family residential                                        $ 385,701             $ 386,524
      Multi-family residential                                                 70,967                77,802
      Commercial real estate                                                  182,298               153,193
      Construction/land development                                            27,050                13,974
   Commercial loans                                                            34,617                29,898
   Consumer loans                                                               9,860                 6,798
   Other loans                                                                  1,294                 2,367
                                                                           ----------            ----------
      Total gross portfolio loans                                             711,787               670,556
   Less-allowance for loan losses (Note 5)                                   (13,134)               (14,910)
   Less-premiums and unearned discounts on loans purchased                    (4,731)                (4,561)
   Less-unamortized loan fees                                                   (652)                (1,290)
                                                                           ---------             ----------
      Total loans held for portfolio                                          693,270               649,795
   Residential loans held for sale                                             36,590                 4,711
                                                                           ----------            ----------
      Total loans                                                          $  729,860            $  654,506
                                                                           ==========            ==========

</TABLE>

As of December 31, 1996, the Company had $36,590,000 of 1-4 residential
mortgage loans available for sale with a weighted average interest rate of
8.72%.   As of December 31, 1995 loans available for sale were approximately
$4,711,000, which approximated market value, with a weighted average interest
rate of 7.47%.  Mortgage loans serviced for others as of December 31, 1996 and
1995 were $120,711,000 and $39,951,000, respectively.

Loans on which interest was not being accrued totaled approximately
$15,351,000, $14,504,000, and $12,948,000 at December 31, 1996, 1995 and 1994,
respectively.  Had interest been accrued on these loans at their originally
contracted rates, interest income would have been increased by approximately
$1,138,000, $1,329,000, and $647,000 in the years ended December 31, 1996, 1995
and 1994, respectively.  Loans past due 90 days or more and still accruing
interest at December 31, 1996 and 1995, totaled approximately $113,000 and
$1,876,000, respectively.  The Company restructured loans totaling $2,516,000
and $145,000  during 1996 and 1995, respectively.

5.    ALLOWANCE FOR LOAN LOSSES:

Changes in the allowance for loan losses were as follows (in thousands):

<TABLE>
<CAPTION>
                                                      For the Years Ended December 31,
                                                 ----------------------------------------
                                                     1996            1995           1994
                                                     ----            ----           ----
<S>                                              <C>             <C>             <C>
BALANCE,
   beginning of period                           $ 14,910        $  7,065         $ 6,539
   Provision for possible
      loan losses                                   1,800           1,685           1,575
   Discount on purchased loans
      allocated to (from) loan
      loss reserve                                 (1,732)          7,658             643
   Loans charged off                               (2,110)         (1,947)         (1,870)
   Recoveries of loans
      charged off                                     266             449             178
                                                 --------       ---------       ---------
BALANCE,
   end of period                                 $ 13,134        $ 14,910        $  7,065
                                                 ========        ========        ========


</TABLE>



                                       56
<PAGE>   61

While management believes that the allowance for loan losses is adequate at
December 31, 1996, based on currently available information, future additions
to the allowance may be necessary due to changes in economic conditions,
deterioration of creditworthiness of the borrower, the value of underlying
collateral or other factors.  Additionally, the Florida Department of Banking
and Finance, the FDIC, and the Federal Reserve, as an integral part of their
regular examination process, periodically review the allowance for loan losses.
These agencies may require additions to the allowance based on their judgments
about information available to them at the time of examination.

The portion of the allowance for loan losses which arose due to the allocation
of discounts on purchased loans may only be used to absorb losses on the
related acquired loans.  As of December 31, 1996 and 1995, approximately
$7,150,000 and $10,249,000 of the reserve had arisen through an allocation of
discounts on purchased loans.

6.    PREMISES AND EQUIPMENT:

Premises and equipment at December 31, 1996 and 1995, included (in thousands):

<TABLE>
<CAPTION>
                                                                              1996                      1995
                                                                          ----------                ----------
<S>                                                                        <C>                       <C>
Land                                                                       $  4,951                  $  4,951
Buildings and improvements                                                    9,216                     8,671
Furniture and equipment                                                       7,371                     6,120
Leasehold improvements                                                        1,051                       903
Construction in progress                                                        268                        11
                                                                           --------                  --------
   Total premises and equipment                                              22,857                    20,656
Less-accumulated depreciation and amortization                              (3,142)                    (1,665)
                                                                           --------                  ---------
   Premises and equipment, net                                             $ 19,715                  $ 18,991
                                                                           ========                  ========
</TABLE>

7.    OTHER REAL ESTATE (ORE):

State banking regulations require the Company to dispose of all ORE acquired
through foreclosure within five years of acquisition, with a possibility for
additional extensions, each of up to five years.  Failure to receive additional
extensions could result in losses on ORE.  There were two ORE properties
totaling $4,477,000 at December 31, 1996, which were required to be disposed of
by year-end.  The Company has been granted an extension on these properties by
the State.  As of December 31, 1996, a third property, in the amount of
approximately $254,000, is required to be disposed of no later than December
31, 1997.  Management expects an extension will also be granted by the State on
this property if not sold.  In addition, federal banking regulations had
required the Bank to dispose of one of these properties amounting to $3,200,000
by December 31, 1996 but  the FDIC has granted an extension of the holding
period to December 19, 1997.  While the current appraisal on this property
indicates that the market value of the tract exceeds its book value, a sale to
a party other than an end-user could result in proceeds below the current book
value.

During 1995, the former headquarter building was vacated and that space was
leased to a third party.  Since that building was no longer used for banking
purposes, approximately $2,498,000 was transferred from premises and equipment
to ORE held for investment.  During 1996, this building was sold and a gain of
$1,207,000 was recorded.

Loans converted to ORE through foreclosure proceedings totaled $6,910,000, and
$2,639,000, for the years ended December 31, 1996 and 1995, respectively.
Sales of ORE that were financed by the Company totaled $3,676,000 and
$1,358,000 for the years ended December 31, 1996 and 1995, respectively.





                                       57
<PAGE>   62

Changes in the valuation allowance for ORE were as follows (in thousands):


<TABLE>
<CAPTION>
                                                     For the Years Ended December 31,
                                                --------------------------------------------
                                                    1996            1995             1994
                                                    ----            ----             ----
<S>                                             <C>               <C>                <C>

BALANCE, beginning of period                    $   966           $ 1,170            $ 1,718

   Provision                                      1,611                 -                 10

   Charge-offs                                      (63)             (204)              (558)
                                                -------           -------            -------

BALANCE, end of period                          $ 2,514           $   966            $ 1,170
                                                =======           =======            =======


</TABLE>

8.    INCOME TAXES:

Income taxes are comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                                           For the
                                                         Years Ended
                                                         December 31,
                                             ----------------------------------
                                                1996           1995        1994
                                                ----           ----        ----
   <S>                                       <C>          <C>           <C>
   Current provision                         $ 3,744      $ 2,899       $ 2,612
   Deferred benefit                           (1,512)      (1,024)       (2,144)
                                             -------      -------       -------
                                             $ 2,232      $ 1,875       $   468
                                             =======      =======       =======

</TABLE>

At December 31, 1996, the Company had approximately $670,000 of remaining
federal and $2,393,000 of state net operating loss carryforwards.  These
carryforwards expire in the years 2006 through 2008.

Following the change of ownership in 1993, recognition of net operating loss
carryforwards were limited to approximately $259,000 each year.  If the full
amount of the limitation is not used in any years, the amount not used
increases the allowable limit in the subsequent year.

Deferred tax assets and liabilities were comprised of the following at December
31, 1996 and 1995 (in thousands):

<TABLE>
<CAPTION>
                                                                             1996                     1995
                                                                           --------                 --------
   <S>                                                                     <C>                       <C>
   Gross deferred tax assets:
     Tax bases over financial bases for loans
       (loan loss reserve & discounts)                                     $  2,329                  $  1,230
     Financial amortization of premium over tax amortization                    646                       533
     Interest on non-accrual loans                                              315                       250
     Tax bases over financial bases for ORE                                   1,286                       634
     Net operating losses and tax credit carryforward                           314                       411
     Mark-to-market-loans held for sale                                         232                         -
     Other                                                                      145                       160
                                                                           --------                   -------
        Gross deferred tax asset                                              5,267                     3,218
        Gross deferred tax liabilities                                          567                        93
                                                                           --------                   -------
        Net deferred tax asset                                             $  4,700                   $ 3,125
                                                                           ========                   =======
</TABLE>

The valuation allowance for the deferred tax asset decreased by $177,000 and
$1,427,000 for the years ended December 31, 1995 and 1994, respectively.  The
net deferred tax asset increased during 1996 and 1995 by approximately $63,000
and $38,000, respectively, relating to the unrealized gain on available for
sale securities which is recorded directly to stockholders' equity.





                                       58
<PAGE>   63

The Company's effective tax rate varies from the statutory rate of 34 percent.
The reasons for this difference are as follows (in thousands):

<TABLE>
<CAPTION>
                                                    For the Years Ended December 31,
                                                ---------------------------------------
                                                  1996        1995           1994
                                                  ----        ----           ----
<S>                                             <C>         <C>           <C>
Computed "expected" tax
   provision                                    $ 2,045     $ 2,600        $ 2,505
Increase (reduction) of taxes:
   Tax-exempt interest
      income                                        (22)        (27)           (29)

   Valuation allowance                               -         (177)        (1,427)
   Amortization of excess
      of fair value over
      purchase price                                 -         (536)        (1,017)
   State taxes                                      217         216            265
   Other                                             (8)       (201)           171
                                                -------     -------       --------
      Total                                     $ 2,232     $ 1,875       $    468
                                                =======     =======       ========

</TABLE>
9.    SUBORDINATED DEBT:

On December 27, 1996, the Company issued $6,000,000 in convertible subordinated
debentures at a fixed interest rate of 6.00%, interest payable semi-annually,
with a maturity of December 1, 2011.  The Company has the right to redeem the
debentures beginning in 2001 at 106% of face value, with the premium declining
1% per year thereafter and without any premium if the price of the Company's
common stock equals or exceeds 130% of the conversion price for not less than
20 consecutive trading days.  The debentures are convertible by the holder at
any time prior to maturity into the Company's $2.00 par value common stock at a
conversion price of $17.85714 per share (equivalent to a conversion rate of 56
common shares per $1,000 principal amount of debentures).  The Company incurred
$213,000 in issuance costs which will be amortized over 36 months.

10.   OFF-BALANCE-SHEET RISK, COMMITMENTS AND CONTINGENCIES:

Concentration of Credit Risk

The Company's core customer loan origination base is located along the west
coast and in central Florida.  The majority of the Company's purchased loan
portfolio is concentrated in the states of Florida, California, Texas, and in
the northeastern United States.  At December 31, 1996 and 1995, approximately
94 percent of the Company's loan portfolio was secured by real estate.
Mortgage loans secured by 1-4 family properties comprised approximately 60 and
61 percent, respectively, of total mortgage loans at December 31, 1996 and
1995.

Off-Balance-Sheet Items

The Company enters into financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers and
to limit exposure to changes in the value of loans held for sale.  These
financial instruments include commitments to extend credit, commercial and
standby letters of credit, and forward contracts for the delivery of loans.
These instruments involve, to varying degrees, elements of credit and
interest-rate risk that are not recognized in the accompanying consolidated
balance sheets.

The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instruments discussed above is represented by the
contractual amount of those instruments.  The Company uses the same credit
policies in making commitments and conditional obligations as it does for on-
balance-sheet instruments.





                                       59
<PAGE>   64

A summary of financial instruments with off-balance-sheet risk at December 31,
1996, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                             Contractual
                                                                                                Amount
                                                                                             -----------
   <S>                                                                                       <C>
   Commitments to extend credit                                                              $  51,754
   Unfunded lines of credit                                                                     64,604
   Commercial and standby letters of credit                                                      7,415
                                                                                             ---------
      Total                                                                                  $ 123,773
                                                                                             =========

</TABLE>

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the agreement.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee.  Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.  The Company evaluates each
customer's creditworthiness on a case-by-case basis.  The amount of collateral
obtained if deemed necessary upon extension of credit is based on management's
credit evaluation of the counterparty.  Collateral held varies but may include
premises and equipment,  inventory and accounts receivable.  Unfunded lines of
credit represent the undisbursed portion of lines of credit which have been
extended to customers.

Commercial and standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a customer to a third party which
typically do not extend beyond one year.  The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers.  The Company typically holds certificates of deposit
as collateral supporting those commitments, depending on the strength of the
borrower.  Outstanding unsecured standby letters of credit at December 31,
1996, totaled approximately $1,376,000.

At December 31, 1996, in connection with managing the interest rate market risk
on its loans held for sale and Locked Loans totaling $37,416,000, the Company
had outstanding $15,000,000 (estimated fair value of $15,165,000) of Forward
Commitments which expire over the next two months, the period when the loans
are expected to be sold and Locked Loans are expected to close.

The Company reduces its risk of nonperformance under the hedging contracts by
entering into those contracts with reputable security dealers and investors and
evaluating their financial condition.  However, there is a risk that certain of
the Locked Loans do not close or are renegotiated in a declining interest rate
market and close at lower prices.  The Company reduces this risk by collecting
nonrefundable commitment fees on certain of the Locked Loans and enters into
Forward Commitments to deliver loans to investors primarily on a best efforts
basis.

Commitments

The Company has entered into a number of noncancelable operating leases
primarily for branch banking locations.  At December 31, 1996, minimum rental
commitments based on the remaining noncancelable lease terms were as follows
(in thousands):

<TABLE>
                      <S>                                       <C>
                      1997                                      $ 2,008
                      1998                                        1,809
                      1999                                        1,432
                      2000                                        1,186
                      2001                                        1,123
                      Thereafter                                  3,839
                                                                -------
                                                                 11,397
                      Less-sublease rentals                      (1,063)
                                                                -------
                                                                $10,334
                                                                =======
</TABLE>





                                       60
<PAGE>   65

Total rent expense for the years ended December 31, 1996, 1995 and 1994 was
$1,653,000, $1,009,000, and $435,000, respectively.  Total rental income from
subleases for the years ended December 31, 1996, 1995 and 1994 was $971,000,
$1,113,000, and $1,132,000, respectively.

During 1994 a capital lease obligation of approximately $981,000 was incurred
related to the leasing of data processing equipment with an implicit rate of
7.49%.  Minimum lease payments under this capital lease are approximately
$214,000 in each of the years 1997, 1998 and $107,000 in 1999.  In addition,
the Company is obligated to make processing payments in relation to its
computer facilities of approximately $966,000 in each of the years 1997 and
1998, $1,073,000 in 1999, $1,181,000 in 2000, and $197,000 in 2001.

Contingencies

The Company is subject to various other legal proceedings and claims which
arise in the normal course of business.  In the opinion of management, the
amount of liability with respect to these other proceedings would not have a
material effect on the financial statements.

11.   EMPLOYEE BENEFIT PLANS

On January 1, 1987, a retirement plan was adopted, covering substantially all
employees, which includes a 401(k) arrangement.  Each employee of the Company
automatically becomes eligible to participate in the savings plan on the
January 1 immediately following the date on which such employee attains the age
of 18 and completes six months of service.  An employee must complete 1,000
hours of service during each subsequent plan year,  and failure to complete
1,000 hours of service in a subsequent plan year will constitute a "one year
break in service" and a forfeiture of eligibility to participate in the plan.

Employees' before-tax contributions are limited based on restrictions
established by the Internal Revenue Service.  Employees also may elect to make
after-tax contributions to their account.  In each plan year, the Company will
make matching contributions to each account equal to 25% of the employees
elective contributions, but only up to the amount that does not exceed 6% of
compensation.  Beginning January 1, 1997, if the Company attains a return on
equity in excess of 10.0% for a quarterly period, the matching contribution
will be increased to 50% for that period, concurrently.  Employees are 100%
vested at all times in their contributions and regular matching contributions.
In addition, the 401(k) arrangement plan permits the Company to contribute a
discretionary amount to all of the participants for any plan year, and that
contribution will be allocated among the participants based upon their
respective shares of the total compensation paid during the plan year to all
participants eligible.  The Company's contributions were $108,900, $58,200, and
$38,500 in the years ended December 31, 1996, 1995 and 1994, respectively.

12.   FAIR VALUE OF FINANCIAL INSTRUMENTS

Generally, the Company's practice and intent is to hold its financial
instruments to maturity, unless otherwise designated.  Where available, quoted
market prices are used to determine fair value.  However, many of the Company's
financial instruments lack quoted market prices.  Although the Company has
incorporated what it considers to be appropriate estimation methodologies for
those financial instruments which lack quoted market prices, a significant
number of assumptions must be used in determining such estimated fair values.
Such assumptions include subjective assessments of current market conditions,
perceived risks associated with these financial instruments and other factors.
Different assumptions might be considered by the user of the financial
statements to be more appropriate, and the use of alternative assumptions or
estimation methodologies could have a significant effect on the resulting
estimated fair values.  The estimated fair values presented neither include nor
give effect to the values associated with the Company's business, existing
customer relationships, and branch banking network, amount other things.

The following estimates of the fair value of certain financial instruments held
by the Company include only instruments that could reasonably be evaluated.
The investment securities portfolio was evaluated using market quotes as of
December 31, 1996 and 1995.  The fair value of the loan portfolio was evaluated
using market





                                       61
<PAGE>   66

quotes for similar financial instruments, where available.  Otherwise,
discounted cash flows, after adjusting for credit deterioration, were used
based upon current rates the Company would use in extending credit with similar
characteristics.  These rates may not necessarily be the same as those which
might be used by other financial institutions for similar loans.  Cash and due
from banks and federal funds sold were valued at cost.  The fair values
disclosed for checking accounts, savings accounts, securities sold under
agreements to repurchase, and certain money market accounts are, by definition,
equal to the amount payable on demand at the reporting date, i.e., their
carrying amounts.  Fair values for time deposits are estimated using a
discounted cash flow calculation that applies current interest rates to
aggregated expected maturities.  Standby letters of credit and commitments to
extend credit were valued at book value as the majority of these instruments
are based on variable rates.

These evaluations may incorporate specific value to the Company in accordance
with its asset/liability strategies, interest rate projections and business
plans at a specific point in time and therefore, should not necessarily be
viewed as liquidation value.  They should also not be used in determining
overall value of the Company due to undisclosed and intangible aspects such as
business and franchise value, and due to changes to assumptions of interest
rates and expected cash flows which might need to be made to reflect
expectations of returns to be earned on instruments with higher credit risks.

The table below illustrates the estimated fair value of the Company's financial
instruments as of December 31 using the assumptions described above (in
thousands):
<TABLE>
<CAPTION>
                                                                                                 1996          1995
                                                                                                 ----          ----

<S>                                                                                           <C>          <C>
Cash and due from banks                                                                       $   27,810   $   19,806
                                                                                              ==========    =========
Interest bearing deposits in banks                                                                   118            2
                                                                                              ==========    =========
Investment securities                                                                             94,401       68,429
                                                                                              ==========    =========
Federal funds sold                                                                                 8,000       14,621
                                                                                              ==========    =========
Loans                                                                                            754,445      681,163
                                                                                              ==========    =========
Mortgage servicing rights                                                                          1,690          113
                                                                                              ==========    =========
Deposits                                                                                         830,562      746,904
                                                                                              ==========    =========
Securities sold under agreements to repurchase                                                    15,372        3,072
                                                                                              ==========    =========
Subordinated debt                                                                                  6,000            -
                                                                                              ==========
Standby letters of credit                                                                          7,415        6,178
                                                                                              ==========    =========
Commitments to extend credit and unfunded lines of credit                                        116,358      103,076
                                                                                              ==========     ========

</TABLE>
13.   STOCKHOLDERS' EQUITY:

Perpetual Preferred Convertible Stock

The Company has 75,000 outstanding shares of perpetual preferred convertible
stock.  The preferred stock has a liquidation preference of $88 per share and
carries a noncumulative dividend of $3.52 per year, payable quarterly.
Dividends on the preferred stock must be paid before any dividends on common
stock can be paid.  Beginning December 16, 1994 and thereafter, the preferred
stock can be converted by the holders into 10 shares of common stock for each
share of preferred stock.  The preferred stock was redeemable at the option of
the Company through December 16, 1996, at a price of $96.80 per share.  The
holders of the preferred stock vote with the holders of the common stock and
are entitled to 10 votes per share of preferred stock.

Dividends

Florida Statutes limit the amount of dividends the Bank can pay in any given
year to that year's net income plus retained net income from the two preceding
years.  Additionally, the Bank and the Company cannot pay dividends which would
cause either to be undercapitalized as defined by federal regulations.





                                       62
<PAGE>   67

1995 Rights and Public Stock Offerings

On June 27, 1995, an offering was completed to the public and to the
stockholders of 800,000 shares of the $2.00 par value Common Stock.  The Common
Stock was offered through a combined subscription Rights Offering and an
underwritten Public Offering (the "Offerings").  The number of shares
subscribed for in the Rights Offering totaled 287,049 with 512,951 shares sold
in the Public Offering.  The price per share was $12.50 for the Offerings and
net proceeds amounted to $9,137,000.

1993 Non-qualified Stock Option Plan

On May 28, 1993, the Company adopted a non-qualified stock option plan (the
Option Plan) which reserved 80,000 shares of common stock for future issuance
under the Option Plan to eligible employees of the Company.  As of December 31,
1996, 60,000 options were granted under the Option Plan and 35,000 were
outstanding.  The per share exercise price of each stock option is determined
by the Board of Directors at the date of grant.  The plan terminates in 2003 or
at the discretion of the Board of Directors.

1995 Incentive Stock Option Plan

On April 29, 1994, the shareholders approved a qualified incentive stock option
plan to certain key employees.  In connection with the Company's holding
company reorganization and share exchange in which all of the Company's
stockholders became stockholders of the Company, the Company adopted the
Republic Bancshares, Inc. 1995 Stock Option Plan (the "Plan") as a replacement
for the Company's 1994 Stock Option Plan.  The Plan was approved by the
stockholders of the Bank at the Bank's Special Meeting held on February 27,
1996.  On April 23, 1996, the shareholders approved certain amendments to the
Plan (the "Amendment").  Under the Amendment, the total number of shares that
may be purchased pursuant to the plan cannot exceed 525,000 over the life of
the plan and provides that the maximum number of options granted to any one
individual in any fiscal year under the plan cannot exceed 62,000.  There is no
limitation on the annual aggregate number of options to be granted in any
fiscal year.  Each option granted under the plan will be exercisable by the
grantee during a term, not to exceed ten years, fixed by the compensation
committee of the Board of Directors ("the Committee").  However, no more than
20% of the shares subject to such options shall vest annually beginning at date
of grant.  However, in the event of a change in control, or termination of
employment without cause, all options granted become exercisable immediately.
Options under the plan, which have been granted to the employees of the
Flagship/Capital mortgage banking division of the Company, vest at the rate of
20% at the end of each 12 month period over five years, contingent upon that
division meeting specified net income performance goals as set by the Board of
Directors.  If the performance goal for each year is not met, then the options
that would have become exercisable at the end of the 12 month period shall
expire and be null and void.  In addition, options granted to employees of this
division shall not vest and become exercisable if there is a change in control
or a termination of employment without cause, until the performance goal for at
least one year has been met.

Upon the grant of an option to a key employee, the Committee will fix the
number of shares of common stock that the grantee may purchase upon exercise of
the option, and the price at which the shares may be purchased.  The exercise
price for all options shall not be less than the fair market value.  During
1996, 1995 and 1994, options to purchase 270,900, 59,700 and 46,450 shares,
respectively, under the incentive stock option plan were granted.  Of the
options previously granted, 12,460 shares have expired through the termination
of key employees without having exercised their options, thereby making these
options available for future grants.  As of December 31, 1996, 361,470 options
remained outstanding.

Aggregate Stock Option Activity

The Company adopted SFAS 123 for disclosure purposes in 1996.  For SFAS 123
purposes, the fair value of each option grant has been estimated as of the date
of grant using the Black-Scholes option pricing model with the following
assumptions (weighted averages):  risk-free interest rate of 6.42 percent,
expected life of 7 years, dividend rate of zero percent, and expected
volatility of 23 percent.  Using these assumptions, the fair value of the stock
options granted in 1996 and 1995 is $1,583,000 and $346,900, respectively,
which would be amortized





                                       63
<PAGE>   68

as compensation expense over the vesting period of the options.  Options vest
equally over five years.  Had compensation cost been determined consistent with
SFAS 123, utilizing the assumptions detailed above, the Company's net income
and earnings per share as reported would have been the following pro forma
amounts (in thousands except share data):
<TABLE>
<CAPTION>
                                                                   1996        1995
                                                                   ----        ----
                         <S>                                      <C>         <C>
                         Net Income
                           As reported                            $3,784      $5,773
                           Pro forma                               3,588       5,730
                         Earnings per share
                           As reported                              0.76        1.26
                           Pro forma                                0.72        1.26
</TABLE>

Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that expected in future years.  A summary of the
status of the Company's stock option plans at December 31, 1996, 1995 and 1994
and for the years then ended is presented in the table and narrative below:

<TABLE>
<CAPTION>
                                                      1994                   1995                        1996
                                            ------------------------------------------------------------------------
                                                        Wtd Avg                    Wtd Avg                  Wtd Avg
                                            Shares      Ex Price     Shares       Ex Price       Shares    Ex Price
                                            -----------------------------------------------------------------------
      <S>                                  <C>           <C>        <C>         <C>             <C>         <C>
      Fixed Options
      -------------
      Outstanding - beg. of year             50,000      $ 6.44      81,500     $   8.75        131,810     $11.00
      Granted                                46,450       10.50      59,700        14.00         70,900      13.63
      Exercised                             (14,950)       6.46      (3,170)        9.58              -          -
      Forfeited                                   -           -      (6,220)       11.06         (6,240)     13.42
      Expired                                     -           -           -            -              -          -
                                           --------                --------                     -------
      Outstanding - end of year              81,500        8.75     131,810        11.00        196,470      11.87
                                           ========                ========                     =======
      Exercisable - end of year              14,340        9.41      45,112         9.07         92,530      10.29
      Wtd. avg. fair value
      of options granted                                                            5.81                      5.84

      Performance Options
      -------------------
      Outstanding - beg. of year                  -           -           -            -              -   $      -
      Granted                                     -           -           -            -        200,000      13.63
      Exercised                                   -           -           -            -              -          -
      Forfeited                                   -           -           -            -              -          -
      Expired                                     -           -           -            -              -          -
                                           --------                 -------                     -------
      Outstanding - end of year                   -           -                        -        200,000      13.63
                                           ========                 =======                     =======
      Exercisable - end of year                   -           -           -            -              -          -
      Wtd. avg. fair value
      of options granted                                                                                      5.84

</TABLE>



<TABLE>
<CAPTION>
                        Options Outstanding                                   Options Exercisable
      --------------------------------------------------   --------------------------------------------------------
                           Number       Weighted-Average          Number
         Range of        Outstanding        Remaining       Weighted-Average       Exercisable    Weighted-Average
      Exercise Prices    at 12/31/96    Contractual Life     Exercise Price        at 12/31/96     Exercise Price
      ---------------    -----------    ----------------   -------------------     -----------    ------------------
      <S>                 <C>              <C>               <C>                      <C>            <C>
       5.40-10.50          72,370          6.89 years        $  8.57                  56,630         $ 8.04
      13.63-14.00         324,100          9.21 years          13.69                  35,900          13.86

</TABLE>


                                       64
<PAGE>   69


14.   EARNINGS PER SHARE:

Net Income Per Common and Common Equivalent Share

Net income per common and common equivalent share has been computed by dividing
net income by the weighted average common and common equivalent shares
outstanding during the periods.  The weighted average common and common
equivalent shares outstanding has been adjusted to include the number of shares
that would have been outstanding if the stock options granted had been
exercised, with the proceeds being used to buy shares from the market (i.e.,
the treasury stock method) and the perpetual preferred convertible stock had
been converted to common stock at the earlier of the beginning of the year or
the issue date (i.e., the if-converted method).  Net income per common and
common equivalent shares represents both primary and fully diluted per share
information.

15.   REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are required to comply with the capital adequacy
standards established by the Federal Reserve (for the Company) and the FDIC
(for the Bank).  There are three basic measures of capital adequacy for banks
that have been promulgated by the Federal Reserve; two risk-based measures and
a leverage measure.  All applicable capital standards must be satisfied for a
bank holding company to be considered in compliance.

The minimum guidelines for the ratio ("Risk-Based Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%.  At least
half of Total Capital (i.e., 4.0% of risk-weighted assets) must comprise common
stock, minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 Capital").  The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital").
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies.  These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3.0% for banks that meet certain
specified criteria, including having the highest regulatory rating.  All other
bank holding companies generally are required to maintain a Leverage Ratio of
at least 3.0%, plus an additional cushion of 100 to 200 basis points.  The
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without
significant reliance on intangible assets.  Furthermore, the Federal Reserve
has indicated that it will consider a "tangible Tier I Capital leverage ratio"
(deducting all intangibles) and other indicators of capital strength in
evaluating proposals for expansion or new activities.

The Bank had previously undertaken in writing to the FDIC to achieve a Leverage
Ratio of at least 5.50% by September 30, 1995, which it did, and will consider
raising additional capital or reducing internal growth should the ratio fall
below that level in the future.  The Company's leverage ratio requirement
remains at 5.00%.  Other than the foregoing commitment, the Bank has not been
advised by the FDIC of any specific minimum capital ratio requirement
applicable to it.

Failure to meet capital guidelines could subject a bank or a bank holding
company to a variety of enforcement remedies, including issuance of a capital
directive, the termination of deposit insurance by the FDIC, a prohibition on
the taking of brokered deposits, and certain other restrictions on its
business.  Substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements under
the federal prompt corrective action regulations.





                                       65
<PAGE>   70


As of December 31, 1996 and 1995, the Company and the Bank were considered
"well capitalized" under the federal banking agencies for prompt corrective
action regulations.  The table which follows sets forth the amounts of capital
and capital ratios of the Company and the Bank as of December 31, 1996 and
1995, and the applicable regulatory minimums (in thousands):

<TABLE>
<CAPTION>
                                                                            COMPANY                         BANK
                                                                     --------------------        -----------------------
                                                                     AMOUNT         RATIO        AMOUNT          RATIO
                                                                     ------         -----        ------          -----
<S>                                                                 <C>            <C>            <C>           <C>
As of December 31, 1996:
RISK-BASED CAPITAL:
  Tier 1 Capital
  Actual                                                            $51,325         8.82%         $57,113        9.82%
  Minimum required to be "Adequately Capitalized"                    23,268         4.00           23,260        4.00
  Excess over minimum to be "Adequately Capitalized"                 28,057         4.82           33,853        5.82
  To be "Well Capitalized"                                           34,902         6.00           34,890        6.00
  Excess over "Well Capitalized" requirements                        16,423         2.82           22,223        3.82

  Total Capital
---------------
  Actual                                                             64,630        11.11           64,418       11.08
  Minimum required to be "Adequately Capitalized"                    46,536         8.00           46,519        8.00
  Excess over minimum to be "Adequately Capitalized"                 18,094         3.11           17,899        3.08
  To be "Well Capitalized"                                           58,170        10.00           58,149       10.00
  Excess over "Well Capitalized" requirements                         6,460         1.11            6,269        1.08

TIER 1 CAPITAL TO TOTAL ASSETS (LEVERAGE):
  Actual                                                             51,325         5.90           57,113        6.57
  Minimum required to be "Adequately Capitalized"                    34,807         4.00           34,798        4.00
  Excess over minimum to be "Adequately Capitalized"                 16,518         1.90           22,315        2.57
  To be "Well Capitalized"                                           43,509         5.00           47,848        5.50
  Excess over "Well Capitalized" requirements                         7,816         0.90%           9,265        1.07

As of December 31, 1995:
RISK-BASED CAPITAL:
  Tier 1 Capital
----------------
  Actual                                                               N/A          N/A            47,940        9.17
  Minimum required to be "Adequately Capitalized"                      N/A          N/A            20,904        4.00
  Excess over minimum to be "Adequately Capitalized"                   N/A          N/A            27,036        5.17
  To be "Well Capitalized"                                             N/A          N/A            31,356        6.00
  Excess over "Well Capitalized" requirements                          N/A          N/A            16,584        3.17

  Total Capital
---------------
  Actual                                                               N/A          N/A            53,833       10.30
  Minimum required to be "Adequately Capitalized"                      N/A          N/A            41,809        8.00
  Excess over minimum to be "Adequately Capitalized"                   N/A          N/A            12,024        2.30
  To be "Well Capitalized"                                             N/A          N/A            52,260       10.00
  Excess over "Well Capitalized" requirements                          N/A          N/A             1,573        0.30

TIER 1 CAPITAL TO TOTAL ASSETS (LEVERAGE):
  Actual                                                               N/A          N/A            47,940        6.00
  Minimum required to be "Adequately Capitalized"                      N/A          N/A            31,962        4.00
  Excess over minimum to be "Adequately Capitalized"                   N/A          N/A            15,978        2.00
  To be "Well Capitalized"                                             N/A          N/A            43,948        5.50
  Excess over "Well Capitalized" requirements                          N/A          N/A             3,992        0.50%


</TABLE>



                                       66
<PAGE>   71

16. RELATED PARTY TRANSACTIONS

William R. Hough, a director and one of the two controlling shareholders, is
President and the controlling shareholder of William R. Hough & Co., an
NASD-member investment banking firm.  In December 1996, the Company offered
$6,000,000 of convertible subordinated debentures through a private placement
on a "best efforts" basis exclusively through William R.  Hough & Co. as "Sales
Agent" for the Company.  The sales agent agreement provided for the payment to
William R. Hough & Co. of a fee of 1.50% for each $1,000 principal amount of
debentures sold to directors of the Company or their spouses and 3% for each
$1,000 of debentures sold to all others.  The total amount of fees paid to
William R. Hough & Company for the sale of the debentures was $162,000.  In
addition, the Company agreed to indemnify the sales agent against and
contribute toward certain liabilities, including liabilities under the
Securities Act, and to reimburse William R. Hough & Co. for certain expenses
and legal fees related to the sale of the debentures of approximately $51,000.

In July 1996, William R. Hough & Co. began offering sales of insurance and
mutual fund products and investment advisory services on the premises of the
Company.  The Company was paid a monthly fee of $300 for each banking office
participating in the program plus a fee of 15% of the gross commissions earned
from sales of non-insurance products.  On January 1, 1997, this agreement was
terminated and replaced with a new agreement where the Company will be paid 50%
of the net profits earned from sales of investment products on the Company's
premises.

In June 1995, in connection with a rights offering of the Company Common Stock
conducted by the Company, William R.  Hough & Co. participated as a soliciting
dealer, and as such was entitled to receive solicitation fees in an amount
equal to approximately $11,900.  William R. Hough & Co. also participated in
the selling group for the public offering of the Company Common Stock that took
place in conjunction with the rights offering.  In connection with the public
offering, William R. Hough & Co. received approximately $18,000 in discounts
and other fees.

In addition, WRH Mortgage, Inc., a related interest of William R. Hough, acted
as the Company's agent in the purchase of two loan pools from the Resolution
Trust Corporation on May 23, 1995 and was paid due diligence fees totaling
$39,997.  The Company also entered into an agreement with William R. Hough &
Co. on August 15, 1995 to periodically purchase securities under agreement to
repurchase at a rate based on the prevailing federal funds rate plus 1/8 of 1%.

Certain directors and executive officers of the Company and Bank, members of
their immediate families, and entities with which such persons are associated
are customers of the Bank.  As such, they had transactions in the ordinary
course of business with the Bank during 1996 and will have additional
transactions in the future.  All loans and commitments to lend included in
those transactions were made in the ordinary course of business, upon
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and, in
the opinion of management, have not involved more than the normal risk of
collectibility or presented other unfavorable features.





                                       67
<PAGE>   72

17. BANK HOLDING COMPANY FINANCIAL STATEMENTS:

Condensed financial statements of the Company (Republic Bancshares, Inc.) are
presented below.  Amounts shown as investment in the wholly-owned subsidiary
and equity in earnings of the subsidiary are eliminated in consolidation.

                           REPUBLIC BANCSHARES, INC.
                      PARENT-ONLY CONDENSED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          1996
                                                                                          ----
         ASSETS
         <S>                                                                           <C>

            Cash                                                                       $      0
            Investment in wholly-owned subsidiary                                        60,111
            Prepaid issuance costs-subordinated debt                                        212
                                                                                       --------
                Total                                                                  $ 60,323
                                                                                       ========

         LIABILITIES

            Subordinated debt                                                          $  6,000
            Accrued interest on subordinated debt                                             4
                                                                                       --------
                Total liabilities                                                         6,004
                                                                                       --------

         STOCKHOLDERS' EQUITY

            Perpetual preferred convertible stock                                         1,500
            Common stock                                                                  8,367
            Capital surplus                                                              26,699
            Retained earnings                                                            17,849
            Unrealized losses on available-for-sale securities                              (96)
                                                                                       --------
                Total stockholders' equity                                               54,319
                                                                                       --------

                Total                                                                  $ 60,323
                                                                                       ========

</TABLE>

<TABLE>
<CAPTION>
                                      PARENT-ONLY CONDENSED STATEMENTS OF OPERATIONS
                                                      (IN THOUSANDS)
         INCOME                                                                           1996
                                                                                          ----
            <S>                                                                        <C>
            Dividends from bank                                                        $    264
            Interest expense on subordinated debt                                            (5)
            Equity in undistributed net income
              of subsidiary                                                               3,525
                                                                                       --------
                Net Income                                                             $  3,784
                                                                                       ========

</TABLE>




                                       68
<PAGE>   73

18.      MERGERS AND ACQUISITIONS

On December 19, 1996, the Company announced that an agreement had been reached
for the acquisition of Firstate Financial, F.A. ("Firstate"), a thrift
institution headquartered in Orlando, Florida, for a cash purchase price of
$5,501,000.  Firstate is not publicly traded.  The agreement is subject to
final approval by the Department, FDIC and FRB.  At December 31, 1996, Firstate
had total assets of $103,624,000 (unaudited) and total deposits of $84,842,000
(unaudited).  Firstate currently maintains a branch office in downtown Orlando
and an office in Winter Park, Florida.  The acquisition will be accounted for
using purchase accounting rules.

On March 10, 1997, the Company and F.F.O. Financial Group, Inc., St. Cloud,
Florida ("FFO") announced their board of directors had executed a letter of
intent for the combination of the two companies.  FFO has 11 branch offices in
Osceola, Orange and Brevard counties with total assets of $316,949,000 and
total deposits of $286,927,000.  Mr. William R. Hough, president of an
investment banking firm in St. Petersburg, Florida, owns a controlling interest
in both companies.  Under the terms of the letter of intent, the Company will
exchange shares of Company Common Stock for all of the 8,430,000 outstanding
shares of FFO common stock at a ratio of 0.29 share of the Company for each
share of FFO.  In the event that the product of the exchange ratio and the
average closing price of the Company Common Stock on each of the twenty
consecutive trading days ending on the third business day preceding the
effective date of the transaction is below $4.10, the exchange ratio will be
adjusted for decreases in the price of the Company Common Stock price; however,
in no event will the exchange ratio exceed 0.30.  FFO has the right to
terminate the agreement if the average of the Company's stock price is less
than $13.50.  Either party has the right to terminate the agreement if the
merger does not occur by November 1, 1997.  Outstanding options for FFO common
stock will be converted into options for Company Common Stock on the same
basis.  The transaction will be accounted for as a corporate reorganization
under which the controlling shareholder's interest in FFO will be carried
forward at its historical cost while the minority interest in FFO will be
recorded at fair value.  The transaction is subject to completion of a
definitive agreement, shareholder approval by the parties, approval by various
regulatory authorities, receipt of opinion that the transaction qualifies as a
tax-free reorganization, and receipt of fairness opinions by each companies'
financial advisor.

The above financial information regarding Firstate and FFO was derived from
unaudited financial statements at December 31, 1996.





                                       69
<PAGE>   74

                                   SIGNATURES


Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                    REPUBLIC BANCSHARES, INC.




                                    By:/s/ John W. Sapanski
                                       -------------------------
                                        John W. Sapanski
                                        Chairman and Chief Executive Officer



                                    Date:       March 28, 1997
                                             -------------------





                                       70
<PAGE>   75


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

<TABLE>
<CAPTION>

SIGNATURE                                               DATE                             TITLE
---------                                               ----                             -----
<S>                                                <C>                      <C>

/s/John W. Sapanski                                March 28, 1997           Chairman, Chief Executive
--------------------------------------            ---------------           Officer and Director (principal
John W. Sapanski                                                            executive officer)


/s/William R. Falzone                              March 28, 1997           Treasurer (principal financial
--------------------------------------            ---------------           and accounting officer)
William R. Falzone


/s/Fred Hemmer                                     March 28, 1997           Director
--------------------------------------            ---------------
Fred Hemmer


/s/Marla Hough                                     March 28, 1997           Director
--------------------------------------            ---------------
Marla Hough


/s/William R. Hough                                March 28, 1997           Director
--------------------------------------            ---------------
William R. Hough


/s/Alfred T. May                                   March 28, 1997           Director
--------------------------------------            ---------------
Alfred T. May


/s/William J. Morrison                             March 28, 1997           Director
--------------------------------------            ---------------
William J. Morrison


</TABLE>



                                       71
<PAGE>   76


                               INDEX TO EXHIBITS




10.1     The Company's Proxy Statement for its 1997 Annual Meeting of
         Stockholders, to the extent specifically incorporated by reference

27.0     Financial Data Schedule (for SEC use only)





                                       72